PROSPECTUS SUPPLEMENT
(To Prospectus dated February 17, 1995)
MCI COMMUNICATIONS CORPORATION
$500,000,000
7 1/8% Debentures due June 15, 2027
Interest payable June 15 and December 15
ISSUE PRICE: 99.895%
The 7 1/8% Debentures due June 15, 2027 (the "Debentures") will bear interest
from June 24, 1996 at the rate of 7 1/8% per annum, payable semi-annually in
arrears on June 15 and December 15 of each year, commencing December 15, 1996.
The Debentures will not be redeemable by the Company prior to maturity. The
Debentures will be redeemable at the option of each of the Holders on June 15,
2003, at a Redemption Price equal to the principal amount thereof. To exercise
this option, a Holder must deliver a notice of exercise of the redemption option
to the Company no earlier than April 16, 2003 and no later than May 15, 2003
and, once given, such notice will be irrevocable. The Debentures will be
represented by Debentures in book-entry form ("Global Debentures") registered in
the name of a nominee of The Depository Trust Company ("DTC"). Beneficial
interests in each Global Debenture will be shown on, and transfers thereof will
be effected only through, records maintained by DTC (with respect to beneficial
interests of participants) or by participants or persons that hold interests
through participants (with respect to beneficial interests of beneficial
owners). Owners of beneficial interests in the Debentures will be entitled to
physical delivery of Debentures in certificated form equal in principal amount
to their respective beneficial interests only under the limited circumstances
described under "Description of Debentures--Book-Entry System".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
<TABLE>
<CAPTION>
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
Per Debenture 99.895% .625% 99.270%
Total $499,475,000 $3,125,000 $496,350,000
</TABLE>
(1) Plus accrued interest, if any, from June 24, 1996.
(2) The Company has agreed to indemnify the Underwriters against or make
contributions relating to certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriting".
(3) Before deduction of expenses payable by the Company.
The Debentures are offered subject to prior sale, when, as and if accepted by
the Underwriters, and subject to approval of certain legal matters by Brown &
Wood. It is expected that delivery of the Global Debentures will be made through
the facilities of DTC, on or about June 24, 1996, against payment therefor in
same-day funds.
J.P. MORGAN & CO. CITICORP SECURITIES, INC.
BEAR, STEARNS & CO. INC. MERRILL LYNCH & CO.
June 19, 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBENTURES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus Supplement or the Prospectus in connection with the offer made by
this Prospectus Supplement and the Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company or the Underwriters. Neither the delivery of this Prospectus
Supplement and the Prospectus nor any sale made hereunder and thereunder shall,
under any circumstances, create an implication that there has been no change in
the affairs of the Company since the date hereof or thereof. This Prospectus
Supplement and the Prospectus do not constitute an offer or solicitation by
anyone in any jurisdiction in which such offer or solicitation is not authorized
or in which the person making such offer or solicitation is not qualified to do
so or to anyone to whom it is unlawful to make such offer or solicitation.
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<S> <C>
The Company........................................................................... S-3
Recent Developments in the Telecommunications Industry................................ S-3
Ratio of Earnings to Fixed Charges.................................................... S-3
Use of Proceeds....................................................................... S-4
Description of Debentures............................................................. S-4
Underwriting.......................................................................... S-7
Legal Opinions........................................................................ S-8
</TABLE>
Prospectus
<TABLE>
<S> <C>
Available Information................................................................. 2
Incorporation of Certain Documents by Reference....................................... 2
The Company........................................................................... 2
Ratio of Earnings to Fixed Charges.................................................... 3
Use of Proceeds....................................................................... 3
The Securities........................................................................ 3
Description of Senior Securities...................................................... 9
Description of Subordinated Securities................................................ 11
Description of Convertible Subordinated Securities.................................... 13
Federal Income Tax Consequences....................................................... 20
Plan of Distribution.................................................................. 25
Legal Opinions........................................................................ 25
Experts............................................................................... 25
</TABLE>
S-2
<PAGE>
THE COMPANY
MCI Communications Corporation ("MCI" or the "Company") and its subsidiaries
provide a broad range of communication services, including long-distance
telecommunication services, local and wireless services and information
technology services. The provision of long-distance telecommunication services
is the core business of MCI and its subsidiaries. Long-distance
telecommunication services comprise a wide spectrum of domestic and
international voice and data services, including long-distance telephone
services, data communication services, teleconferencing services and electronic
messaging services. During each of the last three years, more than 90% of the
operating revenues and operating income of MCI and its subsidiaries were derived
from its core business. Through its subsidiaries, MCI is the second largest
carrier of long-distance telecommunication services in the United States and the
third largest carrier of international long-distance telecommunication services
in the world.
RECENT DEVELOPMENTS IN THE TELECOMMUNICATIONS INDUSTRY
The communication services industry is in the process of substantial change,
providing significant risks to its participants. Evolving and newly developed
technology, emerging significant competition in the market for long-distance and
local telecommunication services, the increasing desire of customers to have
most or all of their various communications needs fulfilled by one supplier, and
the recent enactment of the Telecommunications Act of 1996 (the
"Telecommunications Act") are causing companies, including MCI, which offer
services primarily in one part of the communication services market, to offer,
either directly or in alliance with others, new services to complement their
primary services offerings. There can be no assurance that MCI will be able to
compete successfully in offering these new services.
The communication services business is highly competitive and capital
intensive. The primary and most vigorous competitor in MCI's core business of
providing domestic and international long-distance telecommunication services is
the long-distance telecommunications unit of AT&T Corp., which is substantially
larger than MCI. MCI anticipates that, as a result of the Telecommuniations Act,
the Regional Bell Operating Companies (the "RBOCs") will eventually become
substantial competitors of MCI for long-distance telecommunication services,
especially in their local regions where they have long-standing customer
relationships and substantial capital resources. In addition, MCI competes with
Sprint Corporation, other facilities based domestic telecommunications common
carriers and numerous resellers of long-distance telecommunication services. As
the Telecommunications Act is implemented, companies that operate primarily in a
communication services market other than the long-distance telecommunication
services market are likely to compete with MCI in the long-distance
telecommunication services market. Some of these companies have substantial
financial and other resources.
In April 1996, two separate mergers among four of the seven RBOCs were
proposed. While each of these mergers requires the approval of the U.S. Federal
Communications Commission, the U.S. Department of Justice and regulatory
commissions in a number of states, MCI believes that the consummation of these
mergers could adversely affect the development of competition in local telephone
markets, and may increase the ability of the companies that result from the
mergers, each of which will have substantial financial and other resources, to
compete in other telecommunication markets, including MCI's core business of
providing long-distance telecommunication services.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges for
MCI and its subsidiaries for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------- ------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges.............. 5.46 5.53 3.34 4.82 4.12 3.63 3.37
</TABLE>
For purposes of this ratio, earnings are calculated by adding fixed charges
(excluding capitalized interest) to income before income taxes and extraordinary
item. Fixed charges consist of interest on indebtedness (including amortization
of debt discount and premium) and the portion of rental expense representative
of an interest factor.
S-3
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
Debentures offered hereby will be used for general corporate purposes, including
the repayment of short-term borrowings under the Company's Commercial Paper
Program. As of May 31, 1996, the Company's commercial paper had a weighted
average interest rate of 5.33% and a weighted average maturity of 26.97 days.
DESCRIPTION OF DEBENTURES
GENERAL
The 7 1/8% Debentures due June 15, 2027 (the "Debentures") will be issued in
an aggregate principal amount of $500,000,000 and will constitute a separate
series of Senior Securities (which are more fully described in the accompanying
Prospectus) to be issued under an Indenture between the Company and Citibank,
N.A., as trustee ("Citibank"), dated as of February 17, 1995 (the "Indenture").
The Indenture does not limit the aggregate principal amount of Senior Securities
which may be issued thereunder. The following summaries of certain provisions of
the Indenture and the Debentures do not purport to be complete, and are subject
to, and qualified in their entirety by reference to, all of the provisions of
the Indenture and the Debentures, including the definitions therein of certain
terms.
All Senior Securities, including the Debentures, issued and to be issued
will be unsecured and will rank pari passu (equally and ratably) with all other
unsecured and unsubordinated indebtedness of the Company from time to time
outstanding.
The Indenture does not limit the amount of unsecured indebtedness of the
Company or any subsidiary. Nothing in the Indenture or in the terms of the
Debentures limits or will limit the payment of dividends by the Company or the
Company's acquisition of any of its equity securities. Nothing in the Indenture
affords Holders of Debentures protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction
involving the Company. However, the Indenture does contain certain restrictive
covenants with respect to the business of the Company and its subsidiaries and
liens on and the sale or lease of the stock or certain assets of MCI
Telecommunications Corporation, a wholly-owned subsidiary of the Company ("MCI
Telecom"), which may make more difficult or discourage any such transaction. The
consummation of any highly leveraged transaction, reorganization, restructuring,
merger or similar transaction involving the Company could cause a material
decline in the credit quality of the outstanding Debentures. See "Description of
Senior Securities--Covenants" in the accompanying Prospectus.
MCI's assets consist principally of the stock of and advances to its
subsidiaries. Almost all of the operating assets of MCI and its consolidated
subsidiaries are owned by such subsidiaries and MCI relies primarily on interest
and dividends from such subsidiaries to meet its obligations for payment of
principal and interest on its outstanding debt obligations and corporate
expenses. Therefore, the rights of MCI and the rights of its creditors,
including the Holders of the Debentures, to participate in the assets of any
subsidiary upon the latter's liquidation or recapitalization or otherwise will
be subject to the prior claims of the subsidiary's creditors, except to the
extent that claims of MCI itself as a creditor of the subsidiary may be
recognized. As of March 31, 1996, the book value of the assets of MCI Telecom,
after elimination of intercompany balances, represented more than 80% of the
consolidated assets of MCI.
The Debentures will be represented by fully registered Debentures in
book-entry form ("Global Debentures"), which will be deposited with, or on
behalf of, The Depository Trust Company ("DTC"), New York, New York, and
registered in the name of DTC's nominee. Beneficial interests in the Global
Debentures will be represented on the records of DTC in denominations of $1,000
or any integral multiple thereof.
The Debentures will bear interest at the rate per annum shown on the front
cover of this Prospectus Supplement from June 24, 1996 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
payable semi-annually in arrears on June 15 and December 15 of each year,
commencing on December 15, 1996, to the person in whose name the related Global
Debenture (or any predecessor Global Debenture) is registered at the close of
business on June 1 or December 1, as the case may
S-4
<PAGE>
be, next preceeding such Interest Payment Date. Interest on the Debentures will
be computed on the basis of a 360-day year of twelve 30-day months.
Interest payable on any Interest Payment Date shall be the amount of
interest accrued from and including the next preceding Interest Payment Date in
respect of which interest has been paid or duly provided for (or from and
including June 24, 1996, if no interest has been paid or duly provided for with
respect to the Debentures) to but excluding such Interest Payment Date. If any
Interest Payment Date or the date of maturity or earlier redemption of the
Debentures falls on a day that is not a Business Day, the required payment shall
be made on the next Business Day with the same force and effect as if it were
made on the date such payment was due and no interest shall accrue on the amount
so payable for the period from and after such Interest Payment Date or date of
maturity or earlier redemption, as the case may be. "Business Day" means any
day, other than a Saturday or Sunday, on which banks in The City of New York are
not required or authorized by law or by executive order to close.
The principal of each Debenture payable on the date of maturity or earlier
redemption, as the case may be, will be paid against presentation of such
Debenture at the office or agency of the Company maintained for that purpose in
the Borough of Manhattan, The City of New York, in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts.
The defeasance provisions contained in the Indenture will be applicable to
the Debentures.
REDEMPTION
The Debentures will not be redeemable by the Company prior to maturity.
The Debentures will be redeemable at the option of each of the Holders on
June 15, 2003, at a Redemption Price equal to the principal amount of the
Debentures. Interest due on June 15, 2003 will be payable to Holders at the
close of business on June 1, 2003. To exercise the redemption option, a Holder
must deliver a notice of exercise of such option to the Company at the Corporate
Trust Office of the Trustee, (or such other location of which the Company shall
notify Holders) no earlier than April 16, 2003 and no later than May 15, 2003.
Any such notice of exercise of the redemption option shall be irrevocable. The
redemption option may be exercised by a Holder for less than the entire
principal amount of the Debentures held by such Holder, so long as the principal
amount that is to be redeemed is equal to $1,000 or any integral multiple
thereof.
While the Debentures are represented by the Global Debentures held by or on
behalf of DTC, and registered in the name of DTC or DTC's nominee, the
redemption option for repayment may be exercised by the applicable participant
that has an account with DTC, on behalf of the beneficial owners of the Global
Debentures, by delivering a notice thereof to the Trustee at its Corporate Trust
Office (or such other location of which the Company shall notify Holders) no
earlier than April 16, 2003 and no later than May 15, 2003. Notices of election
from participants on behalf of beneficial owners of the Global Debentures to
exercise their option to have the related Debentures redeemed must be received
by the Trustee by 5:00 P.M., New York City time, on the last day for giving such
notice. In order to ensure that a notice is received by the Trustee on a
particular day, the beneficial owner of a Global Debenture must so direct the
applicable participant before such participant's deadline for accepting
instructions for that day. Different firms may have different deadlines for
accepting instructions from their customers. Accordingly, each beneficial owner
of a Global Debenture should consult the participant through which it owns its
interest therein for the deadlines for such participant. All notices shall be
executed by a duly authorized officer of such participant (with signature
guaranteed) and shall be irrevocable. In addition, the beneficial owner of a
Global Debenture shall effect delivery at the time such notices of election are
given to DTC by causing the applicable participant to transfer such beneficial
owner's interest in such Global Debenture, on DTC's records, to the Trustee. See
"--Book-Entry System."
BOOK-ENTRY SYSTEM
The Global Debentures will be registered in the name of DTC's nominee.
Except as set forth below, a Global Debenture may not be transferred except as a
whole by DTC to a nominee of DTC or by a nominee of
S-5
<PAGE>
DTC to DTC or another nominee of DTC or by DTC or any such nominee to a
successor of DTC or a nominee of such successor.
DTC has advised the Company and the Underwriters that it is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934, as amended. DTC was created to hold securities of its participants and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. DTC's participants include securities brokers and
dealers (including the Underwriters), banks, trust companies, clearing
corporations and certain other organizations, some of whom (and/or their
representatives) own DTC. Access to DTC's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly. Persons who are not participants may beneficially own securities
held by DTC only through participants.
Upon the issuance by the Company of the Global Debentures, DTC will credit,
on its book-entry registration and transfer system, the respective principal
amounts of Debentures to the accounts of participants. The accounts to be
credited shall be designated by the applicable Underwriter. Ownership of
beneficial interests in a Global Debenture will be limited to participants or
persons that may hold interests through participants. Beneficial interests in a
Global Debenture will be shown on, and the transfer thereof will be effected
only through, records maintained by DTC (with respect to beneficial interests of
participants) or by participants or persons that may hold interests through
participants (with respect to beneficial interests of beneficial owners). The
laws of some states require that certain purchasers of securities take physical
delivery of such securities in certificated form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Debenture.
For a Global Debenture, so long as DTC or its nominee is the registered
owner of such Global Debenture, DTC or its nominee, as the case may be, will be
considered the sole owner or Holder of the Debentures represented by such Global
Debenture for all purposes under the Indenture. Except as provided below, owners
of beneficial interests in a Global Debenture will not be entitled to have
Debentures represented by such Global Debenture registered in their names, will
not receive or be entitled to receive physical delivery of such Debentures in
certificated form and will not be considered the owners or Holders thereof under
the Indenture.
Principal and interest payments in respect of the Debentures will be made in
immediately available funds by the Company to DTC or its nominee, as the case
may be, as the Holder of the related Global Debentures. Neither the Company nor
the Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Debentures, or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests. The Company expects
that DTC, upon receipt of any payment of principal or interest in respect of the
Global Debentures, will credit immediately the accounts of the related
participants with payment in amounts proportionate to their respective holdings
in principal amount of beneficial interests in such Global Debentures as shown
on the records of DTC. The Company also expects that payments by participants to
owners of beneficial interests in the Global Debentures will be governed by
standing customer instructions and customary practices, as is now the case, with
securities held for the accounts of customers in bearer form or registered in
"street name", and will be the responsibility of such participants. Payments to
DTC in respect of the Debentures which are represented by the Global Debentures
shall be the responsibility of the Company or the Trustee, disbursement of such
payments to direct participants shall be the responsibility of DTC and
disbursement of such payments to beneficial owners shall be the responsibility
of direct and indirect participants.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants and by direct and
indirect participants to beneficial owners are governed by
S-6
<PAGE>
arrangements among them, subject to statutory or regulatory requirements as may
be in effect from time to time.
If DTC is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by the Company within 90 days, the Company
will issue Debentures in certificated form in exchange for each Global
Debenture. In addition, the Company may at any time determine not to have
Debentures represented by the Global Debentures. In any such instance, owners of
beneficial interests in the Global Debentures will be entitled to physical
delivery of Debentures in certificated form equal in principal amount to such
beneficial interest and to have such Debentures registered in their names.
Debentures so issued in certificated form will be issued in denominations of
$1,000 or any integral multiple thereof and will be issued in registered form
only, without coupons.
CONCERNING THE TRUSTEE
Citibank is an affiliate of Citicorp Securities, Inc. and participates with
a group of banks in a Revolving Credit Agreement with the Company. See also "The
Securities--The Trustees under the Indentures" in the accompanying Prospectus.
Pursuant to the Trust Indenture Act of 1939, as amended, should a default occur
with respect to the Debentures when Citibank has a conflicting interest as
defined under such Act, then Citibank would be required to resign as trustee
under the Indenture within 90 days of such default, unless such default were
cured, duly waived or otherwise eliminated.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
Basic Provisions and the Terms Agreement dated the date hereof (collectively,
the "Underwriting Agreement"), the Company has agreed to sell each of the
Underwriters named below, and each of the Underwriters has severally agreed to
purchase, the principal amount of the Debentures set forth opposite its name
below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
NAME OF DEBENTURES
- -------------------------------------------------------------------- ----------------
<S> <C>
J.P. Morgan Securities Inc. ........................................ $150,000,000
Citicorp Securities, Inc. .......................................... 150,000,000
Bear, Stearns & Co. Inc. ........................................... 100,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............................................. 100,000,000
----------------
Total........................................................... $500,000,000
----------------
----------------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are obligated to take and pay for all of the Debentures if any are
taken.
The Underwriters initially propose to offer the Debentures directly to the
public at the public offering price set forth on the front cover of this
Prospectus Supplement and to certain dealers at such price less a concession not
in excess of .375% of the principal amount of the Debentures. The Underwriters
may allow, and such dealers may reallow, a concession not in excess of .250% of
the principal amount of the Debentures to certain other dealers. After the
initial public offering, the public offering price and such concessions may be
changed.
The Company does not intend to apply for listing of the Debentures on a
national securities exchange, but has been advised by the Underwriters that they
intend to make a market in the Debentures. The Underwriters are not obligated,
however, to make a market in the Debentures and may discontinue market making at
any time without notice. No assurance can be given as to the liquidity of the
trading market for the Debentures.
The Company has agreed to indemnify the Underwriters against or make
contributions relating to certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
S-7
<PAGE>
In the ordinary course of their respective businesses, J.P. Morgan
Securities Inc., Citicorp Securities, Inc., Bear, Stearns & Co. Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated and certain of their affiliates have
engaged and may in the future engage in commercial banking and/or investment
banking transactions with the Company and its affiliates.
LEGAL OPINIONS
The legality of the Debentures will be passed upon for the Company by
Kramer, Levin, Naftalis & Frankel, New York, New York, and for the Underwriters
by Brown & Wood, New York, New York.
S-8
<PAGE>
PROSPECTUS
$1,000,000,000
MCI COMMUNICATIONS CORPORATION
SENIOR/SUBORDINATED/CONVERTIBLE DEBT SECURITIES
-------------------
MCI Communications Corporation (the "Company" or "MCI") from time to time
may offer up to $1,000,000,000 aggregate principal amount (or its equivalent in
any other currency or composite currency) of its senior unsecured debt
securities (the "Senior Securities"), subordinated unsecured debt securities
(the "Subordinated Securities") and/or subordinated unsecured debt securities
(the "Convertible Subordinated Securities") convertible into the common stock,
par value $.10 per share, of the Company (the "Common Stock"), in separate
series in amounts, at prices and on terms to be determined at the time of sale
(the Senior Securities, the Subordinated Securities and the Convertible
Subordinated Securities being herein referred to collectively as the
"Securities"). The Company may sell Securities to one or more underwriters for
public offering and sale by them or may sell Securities to investors directly or
through agents. See "Plan of Distribution."
The terms of the Securities, including, where applicable, the specific
designation, rank, aggregate principal amount, denominations (which may be in
United States dollars, in any other currency or in a composite currency),
maturity, interest rate (which may be fixed or variable) and time of payment of
interest, if any, terms for conversion, if any, terms for redemption, if any, at
the option of the Company or repayment, if any, at the option of the holder,
terms for sinking fund payments and other variable terms of the Securities, if
any, the initial public offering price, if any, the names of, and the principal
amounts to be purchased by, dealers, if any, the compensation of such dealers
and the other terms in connection with the offering and sale of the Securities
in respect of which this Prospectus is being delivered, are set forth in one or
more accompanying Prospectus Supplements (each, a "Prospectus Supplement").
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------
The date of this Prospectus is February 17, 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements and other information filed by the
Company with the Commission pursuant to the informational requirements of the
Exchange Act can be inspected and copied at the public reference facilities
maintained by the Commission at its principal offices at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the Commission:
New York Regional Office, 7 World Trade Center, 13th Floor, New York, New York
10048: and Chicago Regional Office Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661: and copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
MCI's Annual Report on Form 10-K for the fiscal year ended December 31,
1993, Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994, June
30, 1994 and September 30, 1994, Current Reports on Form 8-K dated March 9,
1994, March 15, 1994, October 4, 1994 and February 16, 1995 previously filed by
MCI with the Commission, are incorporated by reference in this Prospectus and
shall be deemed to be a part hereof.
Each document filed by MCI with the Commission pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of any offering of the Securities made by this
Prospectus shall be deemed to be incorporated herein by reference and to be a
part hereof from the date of filing such document.
MCI undertakes to provide without charge to each person to whom a Prospectus
is delivered, upon the written or oral request of any such person, a copy of any
and all of the documents incorporated herein by reference other than exhibits to
such documents. Request for such copies should be directed to the Secretary, MCI
Communications Corporation, 1801 Pennsylvania Avenue, N.W., Washington, D.C.
20006 (telephone: (202) 872-1600).
THE COMPANY
MCI Communications Corporation, a Delaware corporation organized in 1968,
has its principal executive offices at 1801 Pennsylvania Avenue, N.W.,
Washington, D.C. 20006 (telephone number: (202) 872-1600). Unless the context
otherwise requires, the "Company" or "MCI" means MCI Communications Corporation
and its subsidiaries. MCI provides a wide spectrum of domestic and international
voice and data communications services to its customers. It is the second
largest nationwide carrier of long distance telephone services.
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RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)(A)
NINE MONTHS
ENDED
SEPTEMBER
30, YEAR ENDED DECEMBER 31,
- ------------ ------------------------------------
1994 1993 1993 1992 1991 1990 1989
- ---- ---- ---- ---- ---- ---- ----
5.15 4.38 4.12 3.63 3.37 2.22 3.30
- ------------
(a) For purposes of this ratio, earnings are calculated by adding fixed charges
(excluding capitalized interest) to income before income taxes and
extraordinary item. Fixed charges consist of interest on indebtedness
(including amortization of debt discount and premium) and the portion of
rental expense representative of an interest factor.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the net
proceeds to be received by the Company from the sale of the Securities will be
added to its general corporate funds and will be used for general corporate
purposes. Until so utilized, the net proceeds will be invested in income
producing securities.
THE SECURITIES
EXPLANATORY STATEMENT
(Applicable to Senior Securities, Subordinated Securities and Convertible
Subordinated Securities)
The Senior Securities are to be issued under an Indenture dated as of
February 17, 1995, as (the "Senior Indenture"), between the Company and
Citibank, N.A., as trustee ("Citibank"), the Subordinated Securities are to be
issued under an Indenture dated as of October 15, 1989 (the "Subordinated
Indenture"), between the Company and Bankers Trust Company, as trustee ("Bankers
Trust"), and the Convertible Subordinated Securities are to be issued under an
Indenture dated as of October 15, 1989 (the "Convertible Indenture"), between
the Company and Bankers Trust, as trustee. The form of Senior Indenture, the
Subordinated Indenture and the Convertible Indenture (being sometimes referred
to herein collectively as the "Indentures" and, individually, as an "Indenture")
are filed as exhibits to the Registration Statement relating to the Securities
(the "Registration Statement"). The Indentures are subject to the provisions of
the Trust Indenture Reform Act of 1990, as amended.
The Indentures do not limit the aggregate principal amount of the Securities
which may be issued thereunder and provide that the Securities may be issued in
one or more series up to the aggregate principal amount which may be authorized
from time to time by the Company. The Company may, from time to time, without
the consent of the holders of the Securities, provide for the issuance of
Securities under the Indentures in addition to the $1,000,000,000 (or the
equivalent thereof in one or more foreign or composite currencies) aggregate
principal amount of Securities available for issuance as of the date of this
Prospectus.
The Company's assets consist principally of the stock in its subsidiaries.
Therefore, its rights and the rights of its creditors, including the holders of
the Securities, to participate in the assets of any subsidiary upon the latter's
liquidation or recapitalization or otherwise will be subject to the prior claims
of the subsidiary's creditors, except to the extent that claims of the Company
itself as a creditor of the subsidiary may be recognized.
The Indentures do not limit the amount of unsecured indebtedness of the
Company or any subsidiary, the payment of dividends by the Company or its
acquisition of any of its equity securities.
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Nothing in the Indentures or in the terms of the Securities will prohibit the
issuance of securities representing subordinated indebtedness that is senior or
junior to the Subordinated Securities or the Convertible Subordinated
Securities. Nothing in the Indentures affords holders of Securities protection
in the event of a highly leveraged transaction, reorganization, restructuring,
merger or similar transaction involving the Company. However, the Senior
Indenture does contain certain restrictive covenants with respect to the
business of the Company and its subsidiaries and liens on and the sale or lease
of the stock or certain assets of MCI Telecommunications Corporation, a
wholly-owned subsidiary of the Company, which may make more difficult or
discourage any such transactions. The consummation of any highly leveraged
transaction, reorganization, restructuring, merger or similar transaction
involving the Company could cause a material decline in the credit quality of
the outstanding Securities. See "Description of Senior Securities--Covenants."
The particular terms of each series of Securities, as well as any
modifications of or additions to the general terms of the Senior Securities, the
Subordinated Securities or the Convertible Subordinated Securities, as described
herein, which may be applicable in the case of a particular series of
Securities, will be described in a Prospectus Supplement relating to such series
of Securities. Accordingly, for a description of the terms of a particular
series of Securities, reference must be made to both the Prospectus Supplement
relating thereto and to the description of Senior Securities, Subordinated
Securities or Convertible Subordinated Securities, as appropriate, set forth in
this Prospectus.
BEARER SECURITIES
The Company also may offer from time to time securities in bearer form
("Bearer Securities") outside the United States at varying prices and terms.
Such offerings of Bearer Securities may be separate from, or simultaneous with,
offerings of Securities in the United States. The Bearer Securities are not
offered by this Prospectus and may not be purchased by U.S. persons other than
foreign branches of certain U.S. financial institutions. For purposes of this
Prospectus, "U.S. person" means a citizen, national or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof, or an
estate or trust which is subject to United States income taxation regardless of
its source of income.
CERTAIN DEFINITIONS
"Contingent Obligation" means, with respect to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "primary obligations") of
another Person (the "primary obligor"), including, without limitation, any
obligation of such Person, whether or not contingent, (a) to purchase,
repurchase or otherwise acquire such primary obligations or any property
constituting direct or indirect security therefor, or (b) to advance or provide
funds (i) for the payment or discharge of any such primary obligation, or (ii)
to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item, level
of income or financial condition of the primary obligor or (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (d) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect thereof. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by the Company
in good faith.
"Coupon" means any interest coupon appertaining to any Bearer Security.
"Discount Security" means any Security that is issued with "original issue
discount" within the meaning of Section 1273(a) of the Internal Revenue Code of
1986 and the regulations thereunder and
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any other Security designated by the Company as issued with original issue
discount for United States federal income tax purposes.
"Disposed Assets" means all assets of MCI Telecom other than cash and cash
equivalents, equity investments, franchises, licenses, permits, patents, patent
applications, copyrights, trademarks, trade names, goodwill, experimental or
organizational expense, and other like intangibles (but excluding rights of way
treated as assets).
"Indebtedness" means, with respect to any Person, (a) all obligations of
such Person for borrowed money (including, with limitation, reimbursement and
all other obligations with respect to surety bonds, letters of credit and
bankers' acceptances, whether or not matured); (b) all obligations evidenced by
notes, bonds, debentures or similar instruments; (c) all obligations to pay for
the deferred purchase price of property or services except trade accounts
payable and accrued liabilities arising in the ordinary course of business; (d)
all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller under such agreement in the event
of default are limited to repossession or sale of such property); (e) all
obligations under leases which have been or should be, in accordance with
generally accepted accounting principles, recorded as capital leases; and (f)
all indebtedness secured by any Lien on any property or asset owned or held by
that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is non-recourse to the credit of that Person.
"Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment,
charge or segregated deposit arrangement, encumbrance, lien (statutory or other)
or preference, priority or other security interest or preferential arrangement
of any kind or nature whatsoever including, without limitation, those created
by, arising under or evidenced by any conditional sale or other title retention
agreement or the filing of any financing statement naming the owner of the asset
to which such Lien shall relate as debtor (other than in connection with a
transaction in which such asset shall have been leased by the named debtor)
under the Uniform Commercial Code or comparable law of any jurisdiction.
"MCI Telecom" means MCI Telecommunications Corporation, a Delaware
corporation, and wholly-owned subsidiary of MCI.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, estate, unincorporated organization or
government or any agency or political subdivision thereof.
"Stated Maturity," when used with respect to any Security or any installment
of principal (including any sinking fund payment) thereof or premium thereon or
interest thereon, means the date specified in such Security or Coupon, if any,
representing such installment of interest, as the date on which the principal of
such Security or such installment of principal, premium or interest is due and
payable.
"Subsidiary," in connection with the covenants set forth below under
"Description of Senior Securities--Covenants," means, with respect to any
Person, (i) a corporation of which shares of stock having ordinary voting power
(other than stock having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such corporation are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person and (ii) any partnership of which such Person or any Subsidiary
is a general partner or any partnership more than 50% of the equity interests of
which are owned, directly or indirectly, by such Person or by one or more other
Subsidiaries, or by such Person and one or more other Subsidiaries.
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EVENTS OF DEFAULT; RIGHTS UPON DEFAULT
An "Event of Default" is defined in the Indentures to mean failure to pay
interest when due for 30 days; failure to pay principal or premium, if any, when
due; failure to make any sinking fund installment when due; failure on MCI's
part to observe any of its other covenants under the Indentures (other than
certain covenants solely for the benefit of holders of a different series of
Securities) for a period of 90 days after notice (from the appropriate Trustee
or holders of at least 25% in aggregate principal amount of the outstanding
Securities of a series); and certain events of bankruptcy or reorganization of
MCI. In addition, an "Event of Default" under the Senior Indenture occurs with
respect to a series of Senior Securities when an event of default in respect of
any Indebtedness or Contingent Obligation under which the Company or any of its
subsidiaries has at the date of such event of default outstanding at least
$50,000,000, or the equivalent in another currency or currencies, aggregate
principal amount of indebtedness for borrowed money, shall happen and be
continuing and such Indebtedness or Contingent Obligation shall, as a result
thereof, have been accelerated so that the same shall be or become due and
payable prior to the date on which the same would otherwise have become due and
payable, and such acceleration shall not be rescinded or annulled within 30 days
after notice of such acceleration shall have been given to the Company by the
Trustee under the Senior Indenture (if such event be known to it), or to the
Company and the Trustee under the Senior Indenture by the holders of at least
25% in aggregate principal amount of the Outstanding Securities of such series;
provided, however, that if such event of default in respect of any Indebtedness
or Contingent Obligation shall be remedied or cured by the Company or waived by
the holders of such Indebtedness or beneficiary or beneficiaries of such
Contingent Obligation, then, unless the Securities of such series shall have
been accelerated as provided in this provision, the Event of Default under this
provision by reason of such provision shall be deemed likewise to have been
thereupon remedied, cured or waived without further action upon the part of
either the Trustee under the Senior Indenture or any holders of the Securities
of such series.
If an Event of Default with respect to Securities of any series at the time
outstanding occurs and is continuing, either the appropriate Trustee or the
holders of at least 25% in aggregate principal amount of the outstanding
Securities of that series, by notice as provided in the appropriate Indenture,
may declare the principal amount (or, if the Securities of that series are
Discount Securities, such portion of the principal amount as may be specified in
the terms of that series) of and all accrued but unpaid interest on all the
Securities of that series to be due and payable immediately. At any time after a
declaration of acceleration with respect to Securities of any series has been
made, but before a judgment or decree for payment of money has been obtained by
the appropriate Trustee, the holders of a majority in aggregate principal amount
of the outstanding Securities of that series may, under certain circumstances,
rescind and annul such acceleration.
The Indentures provide that the appropriate Trustee shall, within 90 days
after the occurrence of a default, give to the holders of Securities notice of
all uncured defaults known to it; provided that, except in the case of default
in the payment of the principal of, premium, if any, or interest on any of the
Securities or in the payment of any sinking fund installment, the appropriate
Trustee shall be protected in withholding such notice if in good faith it
determines that the withholding of such notice is in the interest of the holders
of Securities.
MCI is required, pursuant to the terms of the Indentures and applicable law,
to furnish each Trustee within 120 days after the close of each fiscal year a
written statement of certain of MCI's officers to the effect that they have
reviewed MCI's activities and its performance under the Senior Indenture, the
Subordinated Indenture or the Convertible Indenture, as the case may be, and
that, to the best of their knowledge, MCI has fulfilled all its obligations
under such Indenture (or, if it has not, specifying the nature and status of
such default).
In case an Event of Default shall occur (which shall not have been cured or
waived), the appropriate Trustee will be required to exercise its rights and
powers under the appropriate Indenture
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and use in such exercise the degree of care and skill of a prudent man under the
circumstances in the conduct of his own affairs. Subject to such provisions,
such Trustee will be under no obligation to exercise any of its rights or powers
under such Indenture at the request of any of the holders of Securities, unless
they shall have offered to the Trustee reasonable security or indemnity. Except
as specifically provided in the Indentures, nothing therein relieves a Trustee
thereunder from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct.
MODIFICATION OF THE INDENTURES
Modifications and amendments of each of the Indentures may be made by the
Company and the appropriate Trustee with the consent of the holders of a
majority in principal amount of the outstanding Securities of each series
affected by such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the holder of each
outstanding Security affected thereby, (a) change the Stated Maturity of the
principal of, or any installment or principal of or interest on or sinking fund
payment, on any Security, (b) reduce the principal amount of, or premium or
interest on, any Security, or (c) reduce the percentage in principal amount of
outstanding Securities of any series, the consent of whose holders is required
for modification or amendment of an Indenture. In addition, no modification or
amendment of the Convertible Indenture may, without the consent of the holder of
each Convertible Subordinated Security affected thereby, adversely affect the
terms of conversion of the Convertible Subordinated Securities and no
modification or amendment of the Subordinated Indenture or the Convertible
Indenture may, without the written consent of each holder of Senior Indebtedness
(as defined in each such Indenture as set forth below), modify, directly or
indirectly, the subordination provisions therein or the definition of Senior
Indebtedness in any manner that might alter or impair the subordination of the
Subordinated Securities (and any Coupons appertaining thereto) or the
Convertible Subordinated Securities.
No modification or amendment of the Senior Indenture or the Subordinated
Indenture may, without the consent of the holder of each outstanding Security
affected thereby, (a) change the Stated Maturity of or reduce the amount of any
payment to be made with respect to a Coupon, (b) change any obligation of the
Company to pay additional interest contemplated by the Indentures, (c) reduce
the amount of principal of a Discount Security payable upon acceleration of the
maturity thereof, (d) change the currency in which any Security or any premium
or interest thereon is denominated or payable, (e) impair the right to institute
suit for the enforcement of any payment on or with respect to any Security after
the Stated Maturity or date or redemption, (f) reduce the percentage in
principal amount of outstanding Securities of any series, the consent of whose
holders is required for waiver of compliance with certain provisions of any such
Indentures or for waiver of certain defaults, (g) limit any obligation of the
Company to maintain a paying agency outside the United States for payment on
Bearer Securities, (h) limit the obligation of the Company to redeem certain
Bearer Securities or Coupons the beneficial owners of which are required by
United States law to disclose their nationality, residence or identity, or (i)
modify any of the provisions set forth in this paragraph or in the preceding
paragraph and regarding the waiver of past defaults except to increase any such
percentage.
The holders of not less than a majority in principal amount of the
outstanding Securities of each series may, on behalf of all holders of
Securities of that series and any Coupons appertaining thereto, waive any past
default under the appropriate Indenture with respect to Securities of that
series, except a default (a) in the payment of principal of, or any premium on
or any interest on, any Security of such series or in the payment of a related
Coupon or (b) in respect of a covenant or provision of such Indenture which
cannot be modified or amended without the consent of the holder of each
outstanding Security of such series affected.
The Indentures will provide that in determining whether the holders of the
requisite principal amount of the outstanding Securities have given any request,
demand, authorization, direction, notice, consent or waiver thereunder (i) the
principal amount of any Discount Security deemed to be outstanding will be the
amount of the principal thereof that would be due and payable as of the date of
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such determination upon acceleration of the maturity thereof, and (ii) the
principal amount of a Security denominated in other than U.S. dollars will be
the U.S. dollar equivalent, determined on the date of original issuance of such
Security, of the principal amount of such Security.
A meeting may be called at any time by the appropriate Trustee, or upon the
request of the Company or the holders of at least 10% in principal amount of the
outstanding Securities of a series, in any such case upon notice given in
accordance with the appropriate Indenture. Except as limited by the proviso in
the fourth preceding paragraph and by the third preceding paragraph, any
resolution presented at a meeting may be adopted by the affirmative vote of the
holders of a majority in principal amount of the outstanding Securities of that
series: provided, however, that, except as limited by the proviso in the fourth
preceding paragraph and by the third preceding paragraph, any resolution with
respect to any demand, consent, waiver or other action that may be made, given
or taken by the holders of a specified percentage, which is more or less than a
majority, in principal amount of outstanding Securities of a series may be
adopted at a meeting by the affirmative vote of the holders of at least such
specified percentage in principal amount of the outstanding Securities of that
series.
THE TRUSTEES UNDER THE INDENTURES
Citibank participates with a group of banks in a Revolving Credit Agreement
with the Company. As of September 30, 1994, Citibank had no loans outstanding to
MCI under this facility. Citicorp Securities, Inc., an affiliate of Citibank,
and Citibank serve as dealer and issuing and paying agent, respectively, for
MCI's commercial paper program. In addition, MCI maintains depository accounts
with Citibank.
Bankers Trust has been a dealer in connection with certain short-term
investments made by MCI.
Both Citibank and Bankers Trust are customers of MCI. Citicorp, the parent
of Citibank, is one of MCI's ten largest customers by revenue.
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DESCRIPTION OF SENIOR SECURITIES
REFERENCE IS MADE TO THE EXPLANATORY STATEMENT ON PAGE 3 OF THIS PROSPECTUS
The Senior Securities are to be issued under the Senior Indenture. The
following description of the Senior Indenture and the Senior Securities and
summaries of certain provisions thereof do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all provisions
of the Senior Indenture and the Senior Securities, including the definitions
therein of certain terms. Wherever particular sections of, or terms defined in,
the Senior Indenture are referred to, such sections or defined terms are
incorporated herein by reference.
GENERAL
The Senior Indenture provides that there may be more than one trustee under
the Senior Indenture, each with respect to one or more different series of
Senior Securities. In the event that there is more than one trustee under the
Senior Indenture, the powers and trust obligations of each trustee as described
herein shall extend only to the one or more series of Senior Securities for
which it is trustee. The effect of the provisions contemplating that at a
particular time there might be more than one trustee acting is that, in that
event, those Senior Securities (whether of one or more than one series) for
which each trustee is acting would be treated as if issued under a separate
indenture.
The Senior Securities will be unsecured and will rank on a parity with all
other unsecured and unsubordinated indebtedness of the Company.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
principal of and premium, if any, and interest, if any, on each series of Senior
Securities will be payable, and the Senior Securities will be exchangeable and
transfers thereof will be registrable, at the office of Citibank at 111 Wall
Street, Fifth Floor, New York, New York 10043, provided that, unless other
arrangements are made, payments of interest may be made by check mailed to the
address of the person entitled thereto as it appears in the Security Register.
LIMITATIONS ON CONSOLIDATION AND MERGER
MCI may not, nor shall it permit MCI Telecom to, merge, consolidate or
combine directly or indirectly with or into any Person, except (a) MCI Telecom
may merge, consolidate or combine with or into any other Person, if immediately
after giving effect thereto, (i) no Event of Default, and no event which, after
notice or lapse of time or both, would constitute an Event of Default, would
exist, and (ii) MCI Telecom shall be the surviving corporation in such merger,
consolidation or combination, or the successor entity is a corporation organized
and existing under the laws of the United States of America or any political
subdivision or State thereof, and (b) MCI may merge, consolidate or combine with
another entity if (i) MCI shall be the corporation surviving the merger, or the
corporation into which the Company shall be merged or formed by any such
consolidation is a corporation organized and existing under the laws of the
United States of America or any political subdivision or State thereof and
expressly assumes MCI's obligations on all the Securities and any Coupons
relating thereto and under the Senior Indenture, and (ii) if immediately after
giving effect to such transaction, no Event of Default, and no event which,
after notice or lapse of time or both, would constitute an Event of Default,
would exist.
COVENANTS
Maintenance of Telecommunications Business. MCI shall maintain the business
of providing telecommunications services as a principal business of the Company
and its Subsidiaries taken as a whole and shall cause MCI Telecom to maintain
such business as its principal business.
Limitation on Liens. From and after the date of the first issuance of
Securities under the Senior Indenture, MCI may not directly or indirectly, make,
create, incur, assume or suffer to exist any Lien upon or with respect to any of
the capital stock of MCI Telecom, nor shall it permit MCI Telecom to, directly
or indirectly, make, create, incur, assume or suffer to exist any Lien upon or
with respect to any part of its property or assets, whether owned as of such
date or thereafter acquired, unless the Senior
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Securities then outstanding shall be equally and ratably secured with any other
obligation or indebtedness so secured, except for any of the following: (a) any
Lien existing on the property of MCI Telecom on the date of the first issuance
of Securities under the Senior Indenture securing Indebtedness outstanding on
such date; (b) Liens for taxes, assessments or other governmental charges which
are not delinquent or remain payable without material penalty, or the validity
of which is contested in good faith by appropriate proceedings (to the extent
that it would be appropriate to contest the levy or imposition of such tax as an
alternative to payment) upon stay of execution or the enforcement thereof and
for which adequate reserves or other appropriate provision has been made in
accordance with generally accepted accounting principles; (c) carriers',
warehousemen's, mechanics', landlords', materialmen's, repairmen's or other
similar Liens arising in the ordinary course of business which are not material
or, if material, are not delinquent or remain payable without penalty or which
are being contested in good faith and by appropriate proceedings; (d) pledges or
deposits in connection with workmen's compensation, unemployment insurance and
other social security legislation; (e) deposits to secure the performance of
bids, trade contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of business; (f) easements,
rights-of-way, restrictions and other similar encumbrances incurred in the
ordinary course of business which, in the aggregate, are not substantial in
amount, and do not materially detract from the overall value to MCI Telecom of
all property and assets of MCI Telecom subject to such Liens or interfere with
the ordinary conduct of the business of MCI Telecom; (g) Liens on assets which
shall be acquired by MCI Telecom either directly or through the acquisition of
the owner of such assets after the date of the first issuance of Securities
under the Senior Indenture, if such Liens shall have existed at the time the
assets or the owner of such assets were acquired and shall not have been created
in anticipation thereof by or with the agreement of MCI Telecom; (h) Liens on
assets (other than current assets) which shall be acquired by MCI Telecom after
the date of the first issuance of Securities under the Senior Indenture, if such
Liens shall have been created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost of the
acquisition of such assets or shall otherwise be created in anticipation of such
acquisition by or with the agreement of MCI Telecom; and (i) Liens not otherwise
permitted hereunder securing obligations of MCI Telecom in an aggregate amount
not to exceed an amount equal to 10% of the total assets of MCI Telecom at any
time, provided that, at the time any such Lien is created or incurred, the
aggregate book value of the assets subject to such Lien shall not exceed an
amount equal to 125% of the amount of the obligation secured by such assets.
As of December 31, 1994, the book value of the assets of MCI Telecom, after
elimination of intercompany balances, represented more than 70% of the
consolidated assets of the Company.
Limitation on Sales and Leases of Assets. From and after the date of the
first issuance of Securities under the Senior Indenture, MCI may not, directly
or indirectly, sell, convey, transfer or otherwise dispose of (whether in one or
a series of transactions) any of the shares of capital stock of MCI Telecom, nor
shall MCI permit MCI Telecom to, directly or indirectly, sell, lease, convey,
transfer or otherwise dispose of (whether in one or a series of transactions)
all or a material part of the assets, business or property of MCI Telecom
(including, without limitation, accounts and notes receivable, with or without
recourse), whether owned as of such date or thereafter acquired, or enter into
any agreement to do any of the foregoing, except any of the following; (a)
dispositions by MCI Telecom of obsolete or worn-out property or real property no
longer used or useful in its business; (b) sales to local exchange carriers,
with or without recourse, of customer receivables in the ordinary course of
business; (c) dispositions of assets acquired, either directly or through the
acquisition of the owner of such assets, after the date of the first issuance of
Securities under the Senior Indenture, provided, that each such disposition
shall be for fair and adequate consideration; and (d) dispositions (including,
without limitation, sales pursuant to sale-leaseback transactions) by MCI
Telecom not otherwise permitted hereunder which are made for fair market value,
provided that the book value of all Disposed Assets disposed of after the date
of the first issuance of Securities under the Senior Indenture does not exceed
25% of the greater of (i) the book value of the assets of MCI Telecom as of
December 31, 1993 and (ii) the book value of the assets of MCI Telecom as of the
date of the most recent financial statements furnished to Citibank.
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DESCRIPTION OF SUBORDINATED SECURITIES
REFERENCE IS MADE TO THE EXPLANATORY STATEMENT ON PAGE 3 OF THIS PROSPECTUS
The Subordinated Securities are to be issued under the Subordinated
Indenture. The following description of the Subordinated Indenture and summaries
of certain provisions thereof do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all provisions of the
Subordinated Indenture, including the definitions therein of certain terms.
Wherever particular sections of, or terms defined in, the Subordinated Indenture
are referred to, such sections or defined terms are incorporated herein by
reference.
GENERAL
The Subordinated Indenture provides that there may be more than one trustee
under the Subordinated Indenture, each with respect to one or more different
series of Subordinated Securities. In the event that there is more than one
trustee under the Subordinated Indenture, the powers and trust obligations of
each trustee as described herein shall extend only to the one or more series of
Subordinated Securities for which it is trustee. The effect of the provisions
contemplating that at a particular time there might be more than one trustee
acting is that, in that event, those Subordinated Securities (whether of one or
more than one series) for which each trustee is acting would be treated as if
issued under a separate indenture.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
principal of, premium, if any, and interest, if any, for each series of
Subordinated Securities will be payable, and the Subordinated Securities will be
exchangeable and transfers thereof will be registrable, at the office of Bankers
Trust at Four Albany Street, New York, New York 10006, provided that, unless
other arrangements are made, payments of interest may be made by check mailed to
the address of the person entitled thereto as it appears in the Security
Register.
LIMITATIONS ON CONSOLIDATION, MERGER AND SALE OF ASSETS
MCI may not consolidate with or merge into any other corporation, or convey,
transfer or lease its properties and assets substantially as an entirety to, any
Person, unless (a) the successor entity is a corporation organized and existing
under the laws of the United States of America or any political subdivision or
State thereof and expressly assumes MCI's obligations on all the Securities and
Coupons relating thereto and under the Subordinated Indenture; and (b) after
giving effect to such transaction, no Event of Default, and no event which,
after notice or lapse of time or both, would become an Event of Default, would
occur and be continuing.
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the
Subordinated Securities will be subordinated in right of payment, as set forth
in the Subordinated Indenture, to the prior payment in full of all Senior
Indebtedness of MCI, whether outstanding on the date of the Subordinated
Indenture or thereafter incurred. Senior Indebtedness is defined in the
Subordinated Indenture as any liability or obligation of MCI (whether incurred
directly by MCI, by assumption or otherwise) (i) for money borrowed (except as
indicated below), or (ii) arising under a lease of property, equipment or other
assets which, pursuant to generally accepted accounting principles then in
effect, is classified upon the balance sheet of MCI or any subsidiary of MCI as
a liability of MCI or such subsidiary, or (iii) arising under an express written
guaranty by MCI of the liability or obligation of another (including any
subsidiary of MCI) of the type described in clauses (i) or (ii) above, or (iv)
arising under an express written guaranty by MCI of the liability or obligation
of another (including any subsidiary of MCI), where the liability or obligation
of MCI is, by the express terms of the guaranty, superior in right of payment to
the Subordinated Securities, or (v) created, incurred or assumed by MCI in
connection with the acquisition
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of any other business, where, but only if, the liability or obligation of MCI
is, by the express terms of the agreement or instrument creating or evidencing
such liability or obligation of MCI, superior in right of payment to the
Subordinated Securities, unless, in each such case, it is provided in the
agreement or instrument creating or evidencing such liability or obligation of
MCI or pursuant to which such liability or obligation is outstanding, that such
liability or obligation is not superior in right of payment to the Subordinated
Securities. Any Convertible Subordinated Securities issued under the Convertible
Indenture do not constitute Senior Indebtedness with respect to the Subordinated
Securities and will rank on a parity with the Subordinated Securities in right
of payment. As of September 30, 1994, the aggregate amount of Senior
Indebtedness was approximately $3,108 million. See also "The
Securities-Explanatory Statement".
By reason of the subordination described above, in the event of insolvency,
creditors of MCI who are not holders of Senior Indebtedness or of the
Subordinated Securities may recover less, ratably, than holders of Senior
Indebtedness, and may recover more, ratably, than the holders of the
Subordinated Securities.
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DESCRIPTION OF CONVERTIBLE SUBORDINATED SECURITIES
REFERENCE IS MADE TO THE EXPLANATORY STATEMENT ON PAGE 3 OF THIS PROSPECTUS
The Convertible Subordinated Securities are to be issued under the
Convertible Indenture. The following description of the Convertible Indenture
and summaries of certain provisions thereof do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, all
provisions of the Convertible Indenture, including the definitions therein of
certain terms. Wherever particular sections of, or terms defined in, the
Convertible Indenture are referred to, such sections or defined terms are
incorporated herein by reference.
GENERAL
The Convertible Indenture provides that there may be more than one trustee
under the Convertible Indenture, each with respect to one or more different
series of Convertible Subordinated Securities. In the event that there is more
than one trustee under the Convertible Indenture, the powers and trust
obligations of each trustee as described herein shall extend only to the one or
more series of Convertible Subordinated Securities for which it is trustee. The
effect of the provisions contemplating that at a particular time there might be
more than one trustee acting is that, in that event, those Convertible
Subordinated Securities (whether of one or more than one series) for which each
trustee is acting would be treated as if issued under a separate indenture.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
principal of, premium, if any, and interest, if any, for each series of
Convertible Subordinated Securities will be payable, and the Convertible
Subordinated Securities will be exchangeable, transfers thereof will be
registrable and may be presented for conversion, at the office of Bankers Trust
at Four Albany Street, New York, New York 10006, provided that, unless other
arrangements are made, payments of interest may be made by check mailed to the
address of the person entitled thereto as it appears in the Security Register.
LIMITATIONS ON CONSOLIDATION, MERGER AND SALE OF ASSETS
MCI may not consolidate with or merge into any other corporation, or convey,
transfer or lease its properties and assets substantially as an entirety to, any
Person, unless (a) the successor entity is a corporation organized and existing
under the laws of the United States of America or any political subdivision or
State thereof and expressly assumes MCI's obligations on all the Securities and
Coupons relating thereto and under the Convertible Indenture and (b) after
giving effect to such transaction, no Event of Default, and no event which,
after notice or lapse of time or both, would become an Event of Default, would
occur and be continuing.
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the
Convertible Subordinated Securities will be subordinated in right of payment, as
set forth in the Convertible Indenture, to the prior payment in full of all
Senior Indebtedness of MCI, whether outstanding on the date of the Subordinated
Indenture or thereafter incurred. Senior Indebtedness is defined in the
Convertible Indenture as any liability or obligation of MCI (whether incurred
directly by MCI, by assumption or otherwise) (i) for money borrowed (except as
indicated below), or (ii) arising under a lease of property, equipment or other
assets which, pursuant to generally accepted accounting principles then in
effect, is classified upon the balance sheet of MCI or any subsidiary of MCI as
a liability of MCI or such subsidiary, or (iii) arising under an express written
guaranty by MCI of the liability or obligation of another (including any
subsidiary of MCI) of the type described in clauses (i) or (ii) above, or (iv)
arising under an express written guaranty by MCI of the liability or obligation
of another (including any subsidiary of MCI), where the liability or obligation
of MCI is, by the express terms of the guaranty, superior in right of payment to
the Convertible Subordinated Securities, or (v) created,
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incurred or assumed by MCI in connection with the acquisition of any other
business, where, but only if, the liability or obligation of MCI is, by the
express terms of the agreement or instrument creating or evidencing such
liability or obligation of MCI, superior in right of payment to the Convertible
Subordinated Securities, unless, in each such case, it is provided in the
agreement or instrument creating or evidencing such liability or obligation of
MCI or pursuant to which such liability or obligation is outstanding, that such
liability or obligation is not superior in right of payment to any Convertible
Subordinated Securities. Any Subordinated Securities issued under the
Subordinated Indenture do not constitute Senior Indebtedness with respect to the
Convertible Subordinated Securities and will rank on a parity with the
Convertible Subordinated Securities in right of payment.
By reason of the subordination described above, in the event of insolvency,
creditors of MCI who are not holders of Senior Indebtedness or of the
Convertible Subordinated Securities may recover less, ratably, than holders of
Senior Indebtedness, and may recover more, ratably, than the holders of the
Convertible Subordinated Securities. As of September 30, 1994, the aggregate
amount of Senior Indebtedness was approximately $3,108 million. See "The
Securities-Explanatory Statement".
CONVERSION
If any Convertible Subordinated Security is to be issued, certain terms and
provisions with respect thereto will be set forth in a Convertible Subordinated
Security Prospectus Supplement (a "Convertible Prospectus Supplement"). To the
extent that the description set forth herein is inconsistent with such terms and
provisions, such terms and provisions shall govern with respect to any
Convertible Subordinated Security.
Except as set forth in the applicable Convertible Prospectus Supplement, the
holders of Convertible Subordinated Securities will be entitled at any time on
or prior to the close of business on the date set forth in the applicable
Convertible Prospectus Supplement, subject to prior redemption, to convert such
Convertible Subordinated Securities or portions thereof (which are $1,000 or
integral multiples thereof) into Common Stock of the Company at the conversion
price set forth on the cover page of such Convertible Prospectus Supplement. No
adjustment will be made on conversion of any Debenture for interest accrued
thereon or for dividends on any Common Stock issued. If any Convertible
Subordinated Security is converted between a record date for the payment of
interest and the next succeeding interest payment date, such Convertible
Subordinated Security must be accompanied by funds equal to the interest payable
to the registered holder on such interest payment date on the principal amount
so converted. The Company is not required to issue fractional interests in
Common Stock upon conversion of Convertible Subordinated Securities and, in lieu
thereof, will pay a cash adjustment based upon the market price of the Common
Stock on the last business day prior to the date of conversion. In the case of
Convertible Subordinated Securities called for redemption, conversion rights
will expire at the close of business on the redemption date.
Also except as set forth in the applicable Convertible Prospectus
Supplement, the conversion price is subject to adjustment as set forth in the
Convertible Indenture in certain events, including the issuance of dividends on
the Company's Common Stock payable in its Common Stock: subdivisions,
combinations and certain reclassifications of the Common Stock; certain
consolidations, mergers and sales of the property of the Company; the issuance
to all holders of Common Stock of certain rights or warrants entitling them to
subscribe for Common Stock at less than the then current market price (as
defined) of the Common Stock; and the distribution to all holders of Common
Stock of evidences of indebtedness or of securities of the Company or of assets
(other than cash dividends or cash distributions payable out of consolidated net
earnings or retained earnings). No adjustment in the conversion price will be
required unless such adjustment would require a change of at least 1% in the
price then in effect; provided however, that any adjustment that would otherwise
be required to be made shall be carried forward and taken into account in any
subsequent adjustment. Except as stated above, the conversion price will not be
adjusted for the issuance of Common Stock or any securities convertible into
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or exchangeable for Common Stock, or carrying the right to purchase any of the
foregoing, in exchange for cash, property or services. The Convertible Indenture
will provide that in case of the reclassification or change in the outstanding
shares of Common Stock, or the consolidation or merger of the Company with or
into another corporation which is effected in such a way that holders of Common
Stock are entitled to receive stock, securities or property (including cash)
with respect to or in exchange for Common Stock, or the sale of conveyance of
its property as an entirety or substantially as an entirety to another
corporation, a supplemental indenture shall be executed providing that the
holder of a Convertible Subordinated Security shall have the right to convert
such Convertible Subordinated Security into the kind and amount of shares, of
stock or other securities or property (including cash) receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of shares of Common Stock which would have been issuable upon
conversion of such Convertible Subordinated Security immediately prior thereto.
Except as set forth in the applicable Convertible Prospectus Supplement, any
Convertible Subordinated Securities called for redemption, unless surrendered
for conversion on or before the close of business on the redemption date, are
subject to being purchased from the holder of such Convertible Subordinated
Securities at the redemption price by one or more broker-dealers or other
purchasers who may agree with the Company to purchase such Convertible
Subordinated Securities and convert them into Common Stock of the Company.
In the event of a taxable distribution to holders of Common Stock which
results in an adjustment of the conversion price, the holders of the Convertible
Subordinated Securities may, in certain circumstances, be deemed to have
received a distribution subject to Federal income tax as a dividend. See the
Prospectus Supplement or Supplements relating to such Securities.
DESCRIPTION OF CAPITAL STOCK
MCI has authority to issue 2,550,000,000 shares of capital stock, par value
$.10 per share, consisting of 2 billion shares of Common Stock, 500 million
shares of Class A Common Stock ("Class A Common Stock") and 50 million shares of
Preferred Stock ("Preferred Stock"). At September 30, 1994, there were 544
million shares of Common Stock outstanding (net of treasury shares), 83 million
shares of Common Stock contingently issuable upon the exercise of options, 136
million shares of Class A Common Stock outstanding and no shares of Preferred
Stock outstanding. The board of directors of MCI has authority (without action
by its stockholders) to issue the authorized and unissued Preferred Stock in one
or more series and, within certain limitations, to determine the voting rights,
preferences as to dividends and in liquidation, conversion and other rights of
each such series.
Dividend Rights. Dividends may be paid on the Common Stock out of funds
legally available therefor when, as and if declared by MCI's board of directors.
Since May 1990, the board of directors has declared semi-annual cash dividends
(adjusted for the effect of a two-for-one stock split in July 1993) of $.025 per
share of Common Stock. The holders of Class A Common Stock are entitled to
receive out of funds legally available therefor when, as and if declared by
MCI's board of directors, dividends equal to the aggregate per share amount of
any dividend (other than a dividend payable in shares of Common Stock) paid on
the Common Stock, and MCI shall declare and pay such a dividend on the Class A
Common Stock at the same times that it declares and pays any dividend on the
Common Stock.
Voting Rights. On all propositions except the election of directors, holders
of Common Stock and Class A Common Stock may cast one vote for each share on any
matter in respect of which the holders of Common Stock are entitled to vote and
the holders of Common Stock and Class A Common Stock vote together as a single
class.
MCI's board of directors consists of twelve persons, of whom two are
presently elected by the holders of Class A Common Stock. The holders of the
Class A Common Stock, voting together with the
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holders of any series of Preferred Stock that is accorded the right (the "Class
A Preferred Stock", and together with the Class A Common Stock, the "Class A
Shares") as a separate class, are entitled to elect a percentage of the total
number of directors (the "Class A Directors") that is equal to the percentage of
the total voting power of all voting securities of MCI that is represented by
the Class A Shares, except that if the Class A Shares' voting power represents
between 15% and 20% of the total voting power of all voting securities, the
holders of Class A Shares are entitled to elect 20% of the total number of
directors. As of the date of this Prospectus, all of the outstanding shares of
Class A Common Stock are owned by British Telecommunications plc ("BT"). The
Class A Directors are elected for a one year term. The holders of Class A Shares
may remove any Class A Director by the affirmative vote of (i) not less than
four-fifths of the holders of all outstanding shares entitled to vote thereto if
for cause, or (ii) not less than a majority of the outstanding shares of Class A
Common Stock if without cause provided that, if less than all Class A Directors
are to be removed, no Class A Director may be removed without cause if the votes
cast against such director's removal would be sufficient to elect such director
if then cumulatively voted at an election of all Class A Directors.
The balance of MCI's board of directors is divided into three classes, each
class as nearly equal in number to the other classes as the then total number of
directors (excluding the Class A Directors) permits. As of the date of this
Prospectus, two of the three classes each have three directors and one class has
four directors. The members of each class of directors are elected for
three-year terms by the holders of Common Stock. In voting upon the election of
these directors, voting is cumulative. Each holder of Common Stock has the right
to cast as many votes in the aggregate as equals the number of votes to which
that stockholder is entitled on other matters multiplied by the number of
directors to be elected to the classes. Each holder of Common Stock may cast the
whole number of votes for one candidate or may distribute votes among the
candidates, as he or she chooses. The holders of Common Stock may remove any
director (excluding Class A Directors) for cause by an affirmative vote of four-
fifths of the outstanding shares of Common Stock.
MCI's Certificate of Incorporation provides that so long as any shares of
Class A Common Stock are outstanding, MCI shall not, without the written consent
or affirmative vote of the holders of a majority of the shares of Class A Common
Stock (a) amend its Certificate of Incorporation so as to affect adversely the
rights of holders of Class A Common Stock; (b) effect any Business Combination
(as defined in the Certificate of Incorporation) prior to September 30, 1998;
(c) issue any series or class of capital stock having either (i) more than one
vote per share (other than pursuant to the Rights Plan described below), or (ii)
a class vote on any matter, except as required by Delaware corporate law or to
the extent holders of Preferred Stock may have the right, voting separately as a
class, to elect a number of directors upon the occurrence of a default in
payment of dividends or redemption price; (d) adopt a stockholder rights plan or
amendment of the Rights Plan that would adversely affect any holder of Class A
Common Stock in relation to the Rights Plan; (e) issue, subject to certain
exceptions, voting securities representing voting power in excess of (i) 10% of
the aggregate voting power of MCI's outstanding voting securities as of the date
of such issuance, or (ii) 15% of the aggregate voting power of the average
number of MCI's voting securities outstanding over a rolling three-year period;
(f) issue voting securities (other than issuances (i) on a pro rata basis to all
holders of a class or series of capital stock, (ii) upon the exercise of Rights
under the Rights Plan, or (iii) upon exercise of any option or options to
purchase voting securities granted in connection with the execution of a
definitive agreement providing for any business combination) to any person
(other than a holder of Class A Common Stock) that beneficially owns, or as a
result thereof would beneficially own, more than 5% of MCI's then outstanding
voting securities, and transactions with any person that beneficially owns more
than 5% of MCI's then outstanding shares of capital stock, other than
transactions (i) applicable on an equal basis to all holders of a class or
series of stock generally, (ii) in accordance with the Rights Plan, or (iii)
relating to any business combination effected after September 30, 1998; (g)
effect any single or related series of acquisitions of businesses or assets or,
with certain exceptions, investments therein pursuant to which the aggregate
purchase price paid will exceed 20% (or 5% if such acquisition or investment is
in a business unrelated to all telecommunications and other electronic
information services
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and equipment for the provision of such services including, without limitation,
all forms of telecommunications access and egress (landline and wireless), and
value-added consumer and business services generated through or as a result of
underlying telecommunications services using all technology (voice, data and
image) and physical transport, network intelligence, and software applications,
and including, without limitation, (i) information processing, (ii) systems
integration and outsourcing, (iii) transaction processing and (iv) cable
television) of the market capitalization of MCI at the time MCI executes a
definitive agreement to effect such acquisition or investment; (h) except for a
sale of all or substantially all of the assets of MCI, effect any single or
related series of sales, transfer or other dispositions or encumbrances of
assets having a fair market value in excess of 15% of the aggregate fair market
value of MCI's total assets at the time MCI executes a definitive agreement to
effect such transaction; (i) incur indebtedness for money borrowed that would
cause MCI's ratio of debt-to-total capitalization to exceed 65%; and (j) declare
any extraordinary cash dividends or other distribution to holders of any class
or classes, and/or any series thereof, of capital stock in excess of 5% of MCI's
market capitalization at the time of such dividend or other distribution.
MCI's Certificate of Incorporation also requires the written request of the
holders of not less than two-thirds of the outstanding shares entitled to vote
in the elections of directors to call a special meeting of stockholders and the
affirmative vote of not less than four-fifths of the outstanding shares (a) to
make, alter, amend or repeal by-laws by stockholder action; or (b) to effect any
changes in the provisions of the Certificate of Incorporation relating to (i)
cumulative voting; (ii) the making, altering, amending or repealing of by-laws
by stockholder action, and (iii) the calling of special meetings by
stockholders. MCI's by-laws require that notice of any proposed nominations for
election of directors (other than by the board itself) be given to MCI not less
than 60 days prior to the first anniversary of the date of the last meeting of
stockholders at which directors were elected.
Liquidation Rights and Other Provisions. After distribution in full of the
preferential amount to be distributed to the holders of any outstanding
Preferred Stock upon any voluntary or involuntary liquidation, dissolution or
winding-up of MCI, the holders of Common Stock and Class A Common Stock are
entitled to receive pro rata, on a share-for-share basis, the remaining assets
of MCI available for distribution to stockholders.
The Common Stock has no preemptive or conversion rights. The Common Stock
and Class A Common Stock are not redeemable (and there are no sinking fund
provisions therefor), except in the event that a holder whose continued holding
of such stock, in the judgment of the board of directors, may result in the loss
of or failure to secure the renewal of any license or franchise from any
governmental agency held by MCI to conduct its business, which license or
franchise is conditioned upon some or all of the holders of the stock of MCI
possessing prescribed qualifications. All outstanding shares of Common Stock
are, and the shares of Common Stock issuable upon conversion of the Convertible
Subordinated Securities will be, when issued pursuant to the terms of the
Convertible Indenture, fully paid and not liable for further calls or
assessments.
The Class A Common Stock has no preemptive rights, except that if MCI issues
voting securities, BT, so long as BT's aggregate voting power of all outstanding
voting securities of MCI is at least 10%, will have the right, exercisable in
whole or in part, to acquire from MCI an amount of such voting securities to
maintain its aggregate voting power at the same percentage prior to the issuance
of such voting securities; provided, however, such equity purchase right will
not apply (i) to grants of any options or any other rights to acquire voting
securities pursuant to MCI's employee benefit plans, (ii) upon the exercise or
exchange of any Rights, (iii) to issuances of shares of Common Stock upon the
conversion or exercise of any options, warrants, rights or other securities
convertible into or exercisable for Common Stock that are outstanding as of
September 30, 1994 to the extent that an equal number of outstanding shares of
Common Stock are repurchased by MCI through open market purchases or otherwise
within 90 days after the time that BT would otherwise be entitled to equity
purchase rights, (iv) upon the conversion or exercise of any options, warrants,
rights or other securities convertible into
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or exercisable for such voting securities, the issuance of which was subject to
this equity purchase right, (v) to certain de minimis offerings for
consideration other than cash, (vi) to the reissuance of such voting securities
purchased by MCI subsequent to September 30, 1994, (vii) issuances of any voting
securities to BT or any of its affiliates and (viii) any pro rata stock split,
stock dividend, or other combination or reclassification of any capital stock of
MCI. The Class A Common Stock is automatically converted into Common Stock on a
one-for-one basis if (i) it is transferred to a party not affiliated with BT,
(ii) the voting power of the Class A Common Stock becomes less than 10% of the
total voting power of all outstanding voting securities of MCI, or (iii) if the
holders of Class A Common Stock have transferred more than 25% of their voting
securities of MCI and hold less than 15% of the total voting power of all
outstanding voting securities of MCI, or upon the occurrence of certain other
events.
Rights Plan. On September 7, 1994, the board of directors of MCI declared a
dividend of one preferred share purchase right (a "Right") for each outstanding
share of Common Stock and Class A Common Stock (collectively, the "Common
Shares") to the holders of record on October 11, 1994. Prior to the earlier of
(i) the Distribution Date (as defined below), (ii) the redemption of the Rights
and (iii) the expiration of the Rights and, in some instances, after the
Distribution Date and prior to the earlier of the redemption of the Rights and
the expiration of the Rights, the Rights will also be attached to all future
issuances of Common Shares. Each Right entitles the registered holder to
purchase from the Company one one-hundredth of a share of Series E Junior
Participating Preferred Stock, par value $.10 per share (the "Preferred
Shares"), of MCI at an initial price of $100 per one one-hundredth of a
Preferred Share (the "Purchase Price"), subject to adjustment.
The Rights will become exercisable on the date (the "Distribution Date")
that is the earlier of (i) the tenth day following a public announcement that a
person or group of affiliated or associated persons have acquired beneficial
ownership of 10% or more of the outstanding Common Shares (more than 20.1% of
the outstanding Common Shares in the case of share acquisitions by BT), subject
to certain exceptions, (an "Acquiring Person"), or (ii) 10 business days (or
such later date as may be determined by action of the board of directors prior
to such time as any person or group of affiliated persons becomes an Acquiring
Person) following the commencement or announcement of an intention to make a
tender offer or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of 10% or more of the outstanding
Common Shares (more than 20.1% of the outstanding Common Shares in the case of a
tender offer or exchange offer commenced or announced by BT). BT is not deemed
an Acquiring Person solely by virtue of the shares of Class A Common Stock it
presently owns.
In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person, each holder of a Right (other than Rights
beneficially owned by the Acquiring Person, which will become void), will
thereafter have the right, subject to certain restrictions, to receive upon
exercise in lieu of Preferred Shares that number of shares of Common Stock (or,
at the option of MCI, that number of one-hundredth of Preferred Shares)
determined as set forth in the Rights Plan.
In the event that, after a person or group has become an Acquiring Person,
MCI is acquired in a merger or other business combination transaction or 50% or
more of its consolidated assets or earning power are sold, proper provision will
be made so that each holder of a Right (other than Rights beneficially owned by
an Acquiring Person, which will have become void) will thereafter have the right
to receive, upon the exercise thereof at the then current exercise price, that
number of shares of common stock of the acquiring company which at the time of
such transaction will have a market value equal to two times the exercise price
of the Right.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred Shares, (ii) upon
the grant to holders of the Preferred Shares of certain rights, options or
warrants to subscribe for or purchase Preferred Shares at a price, or securities
convertible into Preferred Shares with a conversion
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price, less than the then current market price of the Preferred Shares, or (iii)
upon the distribution to holders of the Preferred Shares of evidences of
indebtedness or assets (excluding regular periodic cash dividends paid out of
earnings or retained earnings or dividends payable in preferred shares) or of
subscription rights or warrants (other than those referred to above).
The number of outstanding Rights is subject to adjustment in the event of a
stock dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
Prior to the Distribution Date, the Rights will be transferred with and only
with the Common Shares. Until the Distribution Date (or earlier redemption,
exchange or expiration of the Rights), new Common Share certificates issued upon
transfer or new issuances of Common Shares will contain a notation incorporating
the Rights by reference.
The Rights are not exercisable prior to the Distribution Date. The Rights
will expire on September 30, 2004, unless extended or unless the Rights are
earlier redeemed or exchanged by MCI.
At any time prior to the time an Acquiring Person becomes such, the board of
directors may redeem the Rights in whole, but not in part, at a price of $.01
per Right, provided that pursuant to MCI's Certificate of Incorporation, until
September 30, 1998, so long as any shares of Class A Common Stock remain
outstanding, such redemption will also require the affirmative vote of the
holders of 75% of all the Company's outstanding voting securities. In addition,
until September 30, 2004, MCI has agreed with BT that, without BT's consent, it
will not redeem the Rights unless it has followed certain auction procedures.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of MCI, including, without limitation, the right to vote or to
receive dividends.
For a full description of the existing provisions of the MCI capital stock
and the Rights, reference is made to the actual provisions of the Certificate of
Incorporation, by-laws and Rights Plan of MCI which have been filed with the
Commission as exhibits to the Registration Statement of which this Prospectus is
a part. The foregoing summary of MCI's capital stock and the Rights Plan is
subject to, and qualified in its entirety by, such reference.
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FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain United States federal
income tax consequences of the ownership and disposition of the Securities. The
discussion only addresses the tax consequences to persons who hold the
Securities as capital assets and does not deal with special classes of holders,
such as dealers in securities, financial institutions, insurance companies,
tax-exempt organizations or persons holding Securities as a hedge against
currency risks. In addition, the discussion does not address the tax
consequences of the ownership and disposition of any specific series of
Securities, which consequences may be affected by the particular terms of such
series of Securities, and may require additional discussion in a prospectus
supplement relating to such series of Securities. In particular, the discussion
does not address the tax consequences of Securities that are denominated in, or
indexed to, currencies other than the United States dollar or Securities that
are convertible into Common Stock of the Company. In all cases, persons
considering the purchase of Securities should consult their own tax advisors
concerning the application of United States federal income tax laws to their
particular situations as well as any consequences arising under the laws of any
other taxing jurisdiction.
UNITED STATES HOLDER
A United States Holder is a holder that is a citizen or resident of the
United States, a corporation or partnership created or organized in or under the
laws of the United States or any political subdivision thereof or an estate or
trust the income of which is subject to United States federal income taxation
regardless of its source. As used herein, the term "Non-United States Holder"
means a holder that is not a United States Holder.
Payments of Interest. Interest on a Security (other than interest included
in the stated redemption price at maturity of a Discount Security, described
below) will be taxable to a United States Holder as ordinary interest income at
the time it is accrued or is paid in accordance with the United States Holder's
method of accounting for tax purposes.
Original Issue Discount Securities. The following summary is a general
discussion of the United States federal income tax consequences to United States
Holders of Securities issued at an original issue discount ("Discount
Securities").
For United States federal income tax purposes, the excess of the stated
redemption price at maturity of a Discount Security over its issue price
(defined as the first price at which a substantial amount of the issue of
Discount Securities is sold for money) will be original issue discount if such
excess equals or exceeds 1/4 of 1 percent of the stated redemption price at
maturity of such Discount Security multiplied by the number of complete years to
its maturity. The stated redemption price at maturity of a Discount Security
includes its principal amount and all payments provided by the Discount Security
other than payments of "qualified stated interest". The term "qualified stated
interest" generally means stated interest that is unconditionally payable in
cash or property (other than debt instruments of the Company) at least annually
at a single fixed rate. Special rules apply to determine qualified stated
interest and original issue discount with respect to debt instruments that
provide for stated interest at current values of (i) one or more qualified
floating rates, (ii) a single fixed rate and one or more qualified floating
rates, (iii) a single objective rate, or (iv) a single fixed rate and a single
objective rate that is a qualified inverse floating rate. A "qualified floating
rate" is any floating rate where variations in such rate can reasonably be
expected to measure contemporaneous variations in the cost of newly borrowed
funds in the currency in which the debt instrument is denominated, as well as
certain multiples of a qualified floating rate. An "objective rate" is a rate
that is not itself a qualified floating rate but which is determined using a
single fixed formula and which is based on one or more qualified floating rates,
on one or more rates where each rate would be a qualified floating rate for a
debt instrument denominated in a currency other than the currency in which the
debt instrument is denominated, on the yield or changes in the price of actively
traded personal property, or on a combination of such rates. A "qualified
inverse floating rate" is an objective rate that is equal to a fixed
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rate minus a qualified floating rate, where variations in the rate can
reasonably be expected to inversely reflect contemporaneous variations in the
cost of newly borrowed funds. A Security which has an issue price not less than
its principal amount may, nonetheless, be considered to have original issue
discount. If interest is included in the stated redemption price at maturity, it
will be accounted for under the original issue discount rules, rather than the
holder's method of accounting.
United States Holders of Discount Securities will have to include original
issue discount in income before the receipt of cash attributable to such income.
The amount of original issue discount includible in income by the initial holder
of a Discount Security and, subject to an adjustment, by any subsequent holder
is the sum of the daily portions of original issue discount with respect to the
Discount Security for each day during the taxable year or portion of the taxable
year on which such holder holds the Discount Security. The daily portion is
determined by allocating to each day of the relevant "accrual period" a pro rata
portion of an amount equal to the excess of (i) the product of (a) the "adjusted
issue price" of the Discount Security at the beginning of that accrual period,
and (b) the "yield to maturity" of the Discount Security (determined on the
basis of compounding at the close of each accrual period and properly adjusted
for the length of the accrual period), over (ii) the sum of the qualified stated
interest payments, if any, payable during such accrual period. For these
purposes, an "accrual period" is an interval of time with respect to which the
accrual of original issue discount is measured. Accrual periods may be of any
length and may vary in length over the term of the debt instrument, provided
that each accrual period is no longer than one year and each scheduled payment
of principal or interest occurs either on the final day of an accrual period or
on the first day of an accrual period. The "adjusted issue price" of the
Discount Security at the beginning of any accrual period is the issue price of
such Discount Security plus the accrued original issue discount for each prior
accrual period, reduced by any payments made on the Discount Security other than
payments of qualified stated interest. Under these rules, United States Holders
may have to include in income increasingly greater amounts of original issue
discount in successive accrual periods. The computation of original issue
discount on a Discount Security that is subject to repayment at the option of
the Holder or redemption at the option of the Company may be affected by rules
presuming the option to be exercised, with the result that the original issue
discount may be accrued as income over a shorter period.
Under recently proposed regulations, an "objective rate" would be redefined
(for debt instruments issued 60 days or more after the proposed regulations are
finalized) as a rate (other than a qualified floating rate) that is determined
using a single fixed formula and that is based on objective financial or
economic information, provided that such information is neither within the
control of the issuer (or a related party) nor unique to the circumstances of
the issuer (or a related party), such as dividends, profits, or the value of the
issuer's stock. The proposed regulations would also clarify certain other
provisions affecting Discount Securities.
United States Holders may, subject to certain limitations and exceptions,
elect to include in income all interest (including stated interest, acquisition
discount, original issue discount, de minimis original issue discount, market
discount, de minimis market discount, and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium) that accrues on a debt
instrument by using the constant yield method applicable to original issue
discount.
Acquisition Premium. If a United States Holder purchases a Discount Security
at a premium, i.e., at a price in excess of the adjusted issue price, the amount
includible in income in each taxable year as original issue discount is reduced
by an amount equal to the original issue discount (as otherwise determined)
multiplied by a fraction, the numerator of which is such excess and the
denominator of which is the original issue discount for the period to maturity
after the Holder's purchase. If a United States Holder purchases a Discount
Security at a price in excess of its stated redemption price at maturity, such
excess may be deductible as amortizable bond premium (discussed below).
Short-Term Obligations. In general, an individual or other cash method
United States Holder of any Discount Security that matures one year or less from
the date of its issuance (a "Short-Term
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Obligation") is not required to accrue original issue discount for United States
federal income tax purposes unless it elects to do so. United States Holders who
report income for federal income tax purposes under the accrual method and
certain other United States Holders, including banks and dealers in securities,
are required to accrue the original issue discount on such Discount Securities
on a straight-line basis, unless an election is made to accrue the original
issue discount under the constant yield method based on daily compounding. In
the case of a United States Holder not required and not electing to include the
original issue discount in income currently, any gain realized on the sale or
maturity of a Short-Term Obligation will be ordinary income to the extent of the
original issue discount accrued on a straight-line basis through the date of
sale or maturity. United States Holders who are not required and do not elect to
accrue the original issue discount on a Short-Term Obligation will be required
to defer deductions for interest on borrowings allocable to such a Short-Term
Obligation in an amount not exceeding the accrued discount until such accrued
discount is included in income.
Amortizable Bond Premium. If a United States Holder of a Security purchases
it at a cost which is in excess of its stated redemption price at maturity, the
excess cost may be deductible by the purchaser as "amortizable bond premium" on
a constant yield basis over the remaining term of the Security. The deduction is
available only if an election is made by the purchaser or is in effect. The
election applies to all debt instruments held or subsequently acquired by the
electing purchaser. Amortizable bond premium must be treated as an offset to
interest income on the Security acquired, rather than as a separate deduction.
An electing purchaser's tax basis in a Security is reduced by the amount of bond
premium amortized with respect to the Security.
Market Discount. If a United States Holder of a Security (including, in some
instances, an initial holder) purchases it at a "market discount" and thereafter
realizes gain upon a disposition or a retirement of the Security, the lesser of
such gain or the portion of the market discount that accrues on a straight-line
basis (or, if the holder so elects, on a constant interest rate basis) while the
Security was held by such holder will be treated as ordinary interest income at
the time of such disposition or retirement. In addition, a holder may be
required to include in gross income, as ordinary interest income, accrued market
discount to the extent of partial principal payments received with respect to
the Security. In such case, the amount of accrued market discount to be
recognized at the time of the disposition or retirement of the Security will be
reduced accordingly.
"Market discount" is the amount by which (i) the revised issue price of a
Discount Security (i.e., the issue price increased by the sum of daily portions
of original issue discount for each prior accrual period), or (ii) the principal
amount (or the issue price, in the case of an initial holder) of a Security not
issued at a discount, exceeds the holder's basis in such Security immediately
after acquisition. The market discount will be deemed to be zero, however, if it
is less than 1/4 of 1 percent of the revised issue price of a Discount Security,
or of the principal amount of a Security not issued at a discount, multiplied by
the number of complete years from acquisition to maturity. If a holder makes a
gift of a Security or disposes of a Security in certain nonrecognition
transactions, accrued market discount, if any, will be recognized as if such
holder had sold such Security for a price equal to its fair market value. The
market discount rules also provide that a holder who acquires a Security at a
market discount may be required to defer a portion of any interest expense that
may otherwise be deductible on any indebtedness incurred or continued to
purchase or carry such Security until the holder disposes of the Security in a
taxable transaction.
A holder of a Security acquired at a market discount may elect to include
market discount in gross income as the discount accrues, either on a
straight-line basis or on a constant interest rate basis. This current inclusion
election, once made, applies to all market discount debt instruments acquired on
or after the first day of the first taxable year to which the election applies
and may not be revoked without the consent of the Internal Revenue Service. If a
holder of a Security makes such an election, the foregoing rules with respect to
the recognition of ordinary interest income on sales and other dispositions of,
and on the receipt of partial principal payments on, the Securities and with
respect to the deferral of
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interest deductions on indebtedness incurred or continued to purchase or carry
such Securities would not apply.
Purchase, Sale and Retirement. A United States Holder's tax basis for
determining gain or loss on a sale or other disposition of a Security will
generally be the United States Holder's cost increased by any original issue
discount included in income (and market discount, if any, if the United States
Holder elects to include the accrued market discount in income on an annual
basis) and decreased by the amount of any payments, other than qualified stated
interest payments, received and the amount of bond premium amortized with
respect to such Security. Gain or loss on the sale or redemption of a Security
will generally be long-term capital gain or loss if the Security has been held
for more than one year (except to the extent that gain represents accrued
interest or market discount not previously included in the United States
Holder's income).
Information Reporting. The amount of interest paid on the Securities and the
amount of original issue discount accrued on Discount Securities held of record
by United States persons (other than corporations and other exempt United States
Holders) will be reported to the Internal Revenue Service. The amount of
original issue discount required to be reported to the Internal Revenue Service
may not be equal to the amount of original issue discount required to be
reported as taxable income by a United States Holder of such Discount Securities
who is not an original purchaser.
NON-UNITED STATES HOLDERS
Under present United States federal income tax law, and subject to the
discussion of backup withholding below, payments on the Securities by the
Company or any of its Paying Agents to any non-United States Holder will not be
subject to United States federal withholding tax, provided that (a) such Holder
does not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote, (b) such Holder
is not a controlled foreign corporation that is related to the Company through
stock ownership, (c) such Holder is not a bank with respect to which the holding
of the Security is treated as the extension of credit in the ordinary course of
its trade or business, (d) the payment is not treated as contingent interest,
excluded from the definition of portfolio interest, and (e) either(1) the
beneficial owner of the Security certifies to the Company or its agent, under
penalties of perjury, that it is a non-United States Holder and provides its
name and address, and U.S. taxpayer identification number, if any, or (2) a
securities clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"financial institution") and that holds the Securities certifies to the Company
or its agent under penalties of perjury that such statement has been received
from the beneficial owner by it or by a financial institution between it and the
beneficial owner and furnishes the payor with a copy thereof. The certificate
may be made on a United States Internal Revenue Service Form W-8 or
substantially similar form. A certificate described in this paragraph is
effective only with respect to interest payments and payments representing
accrued original issue discount made to the certifying non-United States Holder
after the issuance of the certificate in the calendar year of its issuance and
the two immediately succeeding calendar years.
If a non-United States Holder is engaged in a trade or business in the
United States and interest and original issue discount on the Security are
effectively connected with the conduct of such trade or business, the non-United
States Holder, although exempt from the withholding tax discussed above, may be
subject to United States income tax on such interest and original issue discount
in the same manner as if it were a United States Holder. In addition, if such a
Holder is a foreign corporation, it may be subject to a branch profits tax equal
to 30% of its effectively connected earnings and profits for the taxable year,
as adjusted for certain items; for this purpose, interest and original issue
discount on a Security will be included in earnings and profits if the interest
and original issue discount are effectively connected with the conduct of the
United States trade or business of the Holder.
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Any gain or income realized by a non-United States Holder upon retirement or
disposition of a Security (not including in such gain or income amounts
representing stated interest or accrued original issue discount, the U.S. tax
treatment of which is described above) will not be subject to United States
federal income tax if (i) such gain or income is not effectively connected with
a trade or business in the United States of the Holder of such Security and (ii)
in the case of an individual Holder, the Holder is not present in the United
States for a period or periods aggregating 183 days in the taxable year of the
retirement or disposition.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A 31% "backup" withholding tax and information reporting requirements apply
to certain payments of interest and original issue discount on an obligation,
and to proceeds of the sale of an obligation before maturity, to certain
non-corporate United States Holders. The Company, and/or any paying and/or
collection agent, including a broker, as the case may be, will be required to
withhold from any payment that is subject to backup withholding a tax equal to
31% of such payment unless the Holder furnishes its taxpayer identification
number (i.e., social security number in the case of an individual) in the manner
prescribed in applicable Treasury Regulations, certifies that such number is
correct, certifies (with respect to payments of interest and original issue
discount) as to no loss of exemption from backup withholding, and meets certain
other conditions. Backup withholding, however, in any event, generally does not
apply to payments to certain "exempt recipients" such as corporations. Its
applicability to non-United States Holders is discussed more fully below.
Under current Treasury Regulations, backup withholding and information
reporting will not apply to payments made by the Company or any paying agency
thereof (in its capacity as such) to a Holder of a Security with respect to
which the Holder has provided to the Company (and/or any paying and/or
collection agent, including a broker) required certification of its non-United
States status under penalties of perjury or has otherwise established an
exemption (provided that neither the Company nor such paying agency has actual
knowledge that the Holder is a United States Holder or the conditions of any
other exemption are not in fact satisfied). Such certificate may be made on a
United States Internal Revenue Service Form W-8 or substantially similar form.
If such payment is made to the beneficial owner of a Security by the non-United
States office of a foreign custodian, foreign nominee or other foreign agent of
such beneficial owner, or if the non-United States office of a foreign "broker"
(as defined in applicable Treasury Regulations) pays the proceeds of the sale of
a Security to the seller thereof, such nominee, custodian, agent or broker is
not required to backup withhold or file an information report with respect to
such payment (provided that such nominee, custodian, agent or broker derives
less than 50% of its gross income for certain specified periods from the conduct
of a trade or business in the United States and is not a controlled foreign
corporation for United States tax purposes). Payments made to the beneficial
owner by the non-United States office of other custodians, nominees or agents,
or the payment by the foreign office of other brokers, will not be subject to
backup withholding, but will be subject to information reporting unless the
custodian, nominee, agent or broker has documentary evidence in its records that
the beneficial owner or seller is not or was not, as the case may be, a United
States Holder and certain conditions are met or the beneficial owner or seller
otherwise establishes an exemption. Payments made to the beneficial owner by the
United States office of a custodian, nominee or agent, or a broker are subject
to both backup withholding and information reporting unless the beneficial owner
or seller certifies its non-United States status under penalties of perjury or
otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules from a payment to a
Holder would be allowed as a refund or a credit against such Holder's United
States federal income tax, provided that the required information is furnished
to the United States Internal Revenue Service.
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PLAN OF DISTRIBUTION
The Company may sell Securities to one or more underwriters for public
offering and sale by them or may sell Securities to investors directly or
through agents.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices (which may be changed from time
to time), at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. Each Prospectus
Supplement will describe the method of distribution of the Securities offered
thereby.
In connection with the sale of the Securities, dealers may receive
compensation from the Company or from purchasers of Securities for whom they may
act as agents, in the form of discounts, concessions or commissions. The dealers
which participate in the distribution of Securities may be deemed to be
underwriters under the Securities Act of 1933 (the "Act") and any discounts or
commissions received by them and any profit on the resale of Securities by them
may be deemed to be underwriting discounts and commissions under the Act. Any
such dealer will be identified and any such compensation will be described in
the appropriate Prospectus Supplement.
Under agreements entered into with the Company, underwriters, agents and
dealers which participate in the distribution of Securities may be entitled to
indemnification or contribution from the Company against certain liabilities,
including liabilities under the Act.
If so indicated in the appropriate Prospectus Supplement, the Company will
authorize underwriters, dealers or other persons acting as the Company's agents
to solicit offers by certain institutions to purchase Securities from the
Company pursuant to contracts providing for payment and delivery on a future
date. Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the conditions that (1) the purchase
of the Securities shall not at the time of delivery be prohibited under the laws
of the jurisdiction to which such purchaser is subject, and (2) if the
Securities are also being sold to dealers acting as principals for their own
account, such dealers shall have purchased such Securities not sold by them for
delayed delivery. The underwriters, dealers and such other persons acting as the
Company's agents will not have any responsibility in respect of the validity or
performance of such contracts.
LEGAL OPINIONS
The legality of each issue of the Securities will be passed upon for the
Company by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, New York, New York,
and for the agents or underwriters by Brown & Wood, New York, New York.
EXPERTS
The consolidated financial statements of the Company incorporated in this
Prospectus by reference to the Annual Report on Form 10-K for the fiscal year
ended December 31, 1993 have been so incorporated in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
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