<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 20, 1996
FILE NO. 333-02593
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
<TABLE>
<S> <C> <C>
MCI COMMUNICATIONS CORPORATION DELAWARE 52-0886267
MCI CAPITAL I DELAWARE 52-6793953
MCI CAPITAL II DELAWARE TO BE APPLIED FOR
MCI CAPITAL III DELAWARE TO BE APPLIED FOR
MCI CAPITAL IV DELAWARE TO BE APPLIED FOR
(EXACT NAME OF REGISTRANT AS (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
SPECIFIED IN ITS CHARTER) OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
1801 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20006
(202) 872-1600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
MICHAEL H. SALSBURY
EXECUTIVE VICE PRESIDENT
AND
GENERAL COUNSEL
MCI COMMUNICATIONS CORPORATION
1801 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20006
(202) 872-1600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
PETER S. KOLEVZON ROBERT H. CRAFT, JR.
SULLIVAN & CROMWELL
KRAMER, LEVIN,
1701 PENNSYLVANIA AVENUE, N.W.
NAFTALIS & FRANKEL
919 THIRD AVENUE WASHINGTON, D.C. 20006
NEW YORK, NEW YORK 10022 (202) 956-7500
(212) 715-9100
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, check the following
box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MCI Communications
Corporation Junior
Subordinated Deferrable
Interest Debentures(2)
------------------------------------------------------------------------------------
MCI Capital I, II, III
and IV Preferred
Securities............
------------------------------------------------------------------------------------
MCI Communications
Corporation Guarantee
with respect to
Preferred
Securities(3)(4)
------------------------------------------------------------------------------------
Total ................ $750,000,000(5) 100% $750,000,000(5) $258,621(6)
</TABLE>
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(1) Estimated solely for the purpose of computing the registration fee.
(2) The Junior Subordinated Deferrable Interest Debentures will be purchased
by MCI Capital I, II, III and IV with the proceeds of the sale of the
Preferred Securities.
(3) No separate consideration will be received for the MCI Communications
Corporation Guarantee.
(4) This Registration Statement is deemed to cover the MCI Communications
Corporation Junior Subordinated Deferrable Interest Debentures, the rights
of holders of the MCI Communications Corporation Junior Subordinated
Deferrable Interest Debentures under the Indenture, the rights of holders
of MCI Capital I, II, III and IV Preferred Securities under each Trust
Agreement, the rights of holders of the Preferred Securities under the
Guarantees, the Expense Agreement entered into by MCI Communications
Corporation under each Trust Agreement and certain backup undertakings as
described herein.
(5) Such amount represents the principal amount of Junior Subordinated
Deferrable Interest Debentures issued at their principal amount and the
issue price rather than the principal amount of Junior Subordinated
Deferrable Interest Debentures issued at an original issue discount. Such
amount also represents the initial public offering price of the MCI
Capital I, II, III and IV Preferred Securities. No separate consideration
will be received for any MCI Communications Corporation Guarantees or MCI
Communications Corporation Junior Subordinated Deferrable Interest
Debentures in connection with an issuance of Preferred Securities by MCI
Capital I, II, III or IV.
(6) Previously paid.
----------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE PROSPECTUS TO +
+WHICH IT RELATES SHALL CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN +
+OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN +
+WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO +
+REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 20, 1996
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 1996
24,000,000 PREFERRED SECURITIES
MCI CAPITAL I
% CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES, SERIES A (QUIPS SM )*
(LIQUIDATION PREFERENCE $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT THE SERIES A ISSUER HAS FUNDS AS SET FORTH HEREIN BY
MCI COMMUNICATIONS CORPORATION
----------
The % Cumulative Quarterly Income Preferred Securities, Series A (the
"Series A QUIPS"), offered hereby represent undivided beneficial interests in
the assets of MCI Capital I, a trust formed under the laws of the State of
Delaware (the "Series A Issuer"). MCI Communications Corporation, a Delaware
corporation ("MCI"), will be the owner of all of the beneficial interests
represented by common securities of the Series A Issuer ("Series A Common
Securities"). Wilmington Trust Company is the Property Trustee of the Series A
Issuer. The Series A Issuer exists for the sole purpose of issuing the
(Continued on next page)
----------
SEE "RISK FACTORS" BEGINNING ON PAGE S-4 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE SERIES A QUIPS.
----------
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 TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
<TABLE>
<CAPTION>
PROCEEDS TO
THE SERIES A
INITIAL PUBLIC UNDERWRITING ISSUER(2)
OFFERING PRICE COMMISSION(1) (3)
-------------- ------------- ------------
<S> <C> <C> <C>
Per Series A QUIPS.................... $ (2) $
Total (4)............................. $ (2) $
</TABLE>
-----
(1) The Series A Issuer and MCI have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting".
(2) In view of the fact that the proceeds of the sale of the Series A QUIPS
will be used to purchase the Series A QUIDS, the Underwriting Agreement
provides that MCI will pay to the Underwriters, as compensation
("Underwriters' Compensation") for their arranging the investment therein
of such proceeds, $ per Series A QUIPS (or $ in the aggregate).
See "Underwriting".
(3) Expenses of the offering, which are payable by MCI, are estimated to be
$1,000,000.
(4) The Series A Issuer has granted the Underwriters an option exercisable for
15 days to purchase up to an additional 3,600,000 Series A QUIPS at the
initial public offering price per Series A QUIPS solely to cover over-
allotments, if any. If such option is exercised in full, the total initial
public offering price and proceeds to the Series A Issuer will be $
and $ , respectively, and the total Underwriters' Compensation paid by
MCI for arranging the investment will be $ . See "Underwriting".
----------
The Series A QUIPS offered hereby are offered severally by the Underwriters,
as specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that the
Series A QUIPS will be ready for delivery in book-entry form only through the
facilities of The Depository Trust Company in New York, New York, on or about
, 1996, against payment therefor in immediately available funds.
-----
* QUIPS and QUIDS are servicemarks of Goldman, Sachs & Co.
GOLDMAN, SACHS & CO. MERRILL LYNCH & CO.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
LEHMAN BROTHERS
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
LEGG MASON WOOD WALKER, INCORPORATED
----------
The date of this Prospectus Supplement is , 1996.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES A
QUIPS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
(Continued from previous page)
Series A QUIPS and the Series A Common Securities and investing the proceeds
thereof in % Junior Subordinated Deferrable Interest Debentures, Series A
(the "Series A QUIDS" SM), to be issued by MCI. The Series A QUIDS will mature
on , 2026, which date may be extended to a date not later than ,
2045 if certain conditions are met. The Series A QUIPS will have a preference
under certain circumstances with respect to cash distributions and amounts
payable on liquidation, redemption or otherwise over the Series A Common
Securities. See "Description of QUIPS--Subordination of Common Securities" in
the accompanying Prospectus.
Holders of the Series A QUIPS will be entitled to receive preferential
cumulative cash distributions accruing from the date of original issuance and
payable quarterly in arrears on the last day of March, June, September and
December of each year, commencing June 30, 1996, at the annual rate of % of
the liquidation preference of $25 per Series A QUIPS ("Distributions"). MCI
has the right to defer payment of interest on the Series A QUIDS at any time
or from time to time for a period not exceeding 20 consecutive quarters with
respect to each deferral period (each, an "Extension Period"), provided that
no Extension Period may extend beyond the Stated Maturity (as defined herein)
of the Series A QUIDS. Upon the termination of any such Extension Period and
the payment of all amounts then due on any Interest Payment Date (as defined
herein), MCI may elect to begin a new Extension Period subject to the
requirements set forth herein. If interest payments on the Series A QUIDS are
so deferred, Distributions on the Series A QUIPS will also be deferred and MCI
will not be permitted, subject to certain exceptions set forth herein, to
declare or pay any cash distributions with respect to MCI's capital stock or
debt securities that rank pari passu with or junior to the Series A QUIDS.
During an Extension Period, interest on the Series A QUIDS will continue to
accrue (and the amount of Distributions to which holders of the Series A QUIPS
are entitled will accumulate at the rate of % per annum, compounded
quarterly) and holders of Series A QUIPS will be required to accrue interest
income for United States federal income tax purposes. See "Certain Terms of
Series A QUIDS--Option to Extend Interest Payment Period" and "Certain Federal
Income Tax Consequences--Original Issue Discount".
MCI has, through the Series A Guarantee, the Trust Agreement, the Series A
QUIDS, the Indenture and the Expense Agreement (each, as defined herein),
taken together, fully, irrevocably and unconditionally guaranteed all of the
Series A Issuer's obligations under the Series A QUIPS. The Series A Guarantee
of MCI guarantees the payment of Distributions and payments on liquidation or
redemption of the Series A QUIPS, but only in each case to the extent of funds
held by the Series A Issuer, as described herein (the "Series A Guarantee").
See "Description of Guarantees" in the accompanying Prospectus. If MCI does
not make interest payments on the Series A QUIDS held by the Series A Issuer,
the Series A Issuer will have insufficient funds to pay Distributions on the
Series A QUIPS. The Series A Guarantee does not cover payment of Distributions
when the Series A Issuer does not have sufficient funds to pay such
Distributions. In such event, a holder of Series A QUIPS may institute a legal
proceeding directly against MCI to enforce payment of such Distributions to
such holder. The obligations of MCI under the Series A Guarantee and the
Series A QUIDS are subordinate and junior in right of payment to all Senior
Debt (as defined in "Description of QUIDS--Subordination" in the accompanying
Prospectus) of MCI.
S-2
<PAGE>
The Series A QUIPS are subject to mandatory redemption, in whole or in part,
upon repayment of the Series A QUIDS at maturity or their earlier redemption
in an amount equal to the amount of related Series A QUIDS maturing or being
redeemed at a redemption price equal to the aggregate liquidation preference
of such Series A QUIPS plus accumulated and unpaid Distributions thereon to
the date of redemption. The Series A QUIDS are redeemable prior to maturity at
the option of MCI (i) on or after , 2001, in whole at any time or in
part from time to time, at a redemption price equal to the accrued and unpaid
interest on the Series A QUIDS so redeemed to the date fixed for redemption,
plus 100% of the principal amount thereof or (ii) at any time, in whole (but
not in part), upon the occurrence and continuation of a Special Event (as
defined herein), at a redemption price equal to the accrued and unpaid
interest on the Series A QUIDS so redeemed to the date fixed for redemption,
plus 100% of the principal amount thereof, in each case subject to the further
conditions described under "Description of QUIDS--Redemption" and "Description
of Corresponding QUIDS--Optional Redemption" in the accompanying Prospectus.
At any time, MCI will have the right to terminate the Series A Issuer and
cause the Series A QUIDS to be distributed to the holders of the Series A
QUIPS in liquidation of the Series A Issuer. If MCI elects to liquidate the
Series A Issuer and thereby causes the Series A QUIDS to be distributed to
holders of the Series A QUIPS in liquidation of the Series A Issuer, MCI shall
have the right to shorten or extend the maturity of such Series A QUIDS,
provided that it can extend the maturity only if certain conditions are met.
See "Certain Terms of Series A QUIPS--Special Event Redemption or Distribution
of Series A QUIDS".
The Series A QUIDS are subordinate and junior in right of payment to all
Senior Debt of MCI. As of March 31, 1996, MCI had approximately $4 billion
aggregate principal amount of Senior Debt outstanding. The terms of the Series
A QUIDS place no limitation on the amount of Senior Debt that may be incurred
by MCI. MCI is a non-operating holding company and almost all of the operating
assets of MCI and its consolidated subsidiaries are owned by such
subsidiaries. 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. Accordingly, the
Series A QUIDS will be subordinated to all Senior Debt of MCI and effectively
subordinated to all existing and future liabilities of MCI's subsidiaries, and
holders of Series A QUIDS should look only to the assets of MCI for payments
on Series A QUIDS. See "Description of QUIDS--Subordination" in the
accompanying Prospectus.
In the event of the termination of the Series A Issuer, after satisfaction
of the creditors of the Series A Issuer as provided by applicable law, the
holders of the Series A QUIPS will be entitled to receive a liquidation
preference of $25 per Series A QUIPS plus accumulated and unpaid Distributions
thereon to the date of payment, which may be in the form of a distribution of
such amount in Series A QUIDS, subject to certain exceptions. See "Description
of QUIPS--Liquidation Distribution Upon Termination" in the accompanying
Prospectus.
The Series A QUIPS have been approved for quotation, subject to official
notice of issuance, on the Nasdaq National Market. If the Series A QUIDS are
distributed to the holders of Series A QUIPS upon the liquidation of the
Series A Issuer, MCI will use its best efforts to list the Series A QUIDS on
the Nasdaq National Market or the New York Stock Exchange or such other stock
exchanges, if any, on which the Series A QUIPS are then listed.
The Series A QUIPS will be represented by global certificates registered in
the name of The Depository Trust Company ("DTC") or its nominee. Beneficial
interests in the Series A QUIPS will be shown on, and transfers thereof will
be effected only through, records maintained by participants in DTC. Except as
described in the accompanying Prospectus, Series A QUIPS in certificated form
will not be issued in exchange for the global certificates. See "Description
of QUIPS--Book-Entry Issuance" in the accompanying Prospectus.
S-3
<PAGE>
The following information supplements and should be read in conjunction with
the information contained in the accompanying Prospectus. As used herein, (i)
the "Indenture" means the Junior Subordinated Indenture, as amended and
supplemented from time to time, including the First Supplemental Indenture
relating to the Series A QUIDS, between MCI and Wilmington Trust Company, as
trustee (the "Debenture Trustee"), and (ii) the "Trust Agreement" means the
Amended and Restated Trust Agreement among MCI, as Depositor, Wilmington Trust
Company, as Property Trustee (the "Property Trustee") and Delaware Trustee
(the "Delaware Trustee"), the Administrative Trustees named therein
(collectively, with the Property Trustee and Delaware Trustee, the "Issuer
Trustees") and the Holders as defined therein. Each of the other capitalized
terms used in this Prospectus Supplement and not otherwise defined in this
Prospectus Supplement has the meaning set forth in this Prospectus Supplement
or in the accompanying Prospectus.
RISK FACTORS
Prospective purchasers of the Series A QUIPS should carefully review the
information contained elsewhere in this Prospectus Supplement and in the
accompanying Prospectus and should particularly consider the following
matters.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE SERIES A GUARANTEE AND THE
SERIES A QUIDS
The obligations of MCI under the Series A Guarantee issued by MCI for the
benefit of the holders of Series A QUIPS are unsecured and rank subordinate
and junior in right of payment to all Senior Debt of MCI. The obligations of
MCI under the Series A QUIDS are subordinate and junior in right of payment to
all such Senior Debt. At March 31, 1996, the Senior Debt of MCI aggregated
approximately $4 billion. MCI is a non-operating holding company and almost
all of the operating assets of MCI and its consolidated subsidiaries are owned
by such subsidiaries. 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. Accordingly, the
Series A QUIDS will be effectively subordinated to all existing and future
liabilities of MCI's subsidiaries, and holders of Series A QUIDS should look
only to the assets of MCI for payments on the Series A QUIDS. Neither the
Indenture, the Series A Guarantee nor the Trust Agreement places any
limitation on the amount of secured or unsecured debt, including Senior Debt,
that may be incurred by MCI. See "Description of Guarantees--Status of the
Guarantees" and "Description of QUIDS--Subordination" in the accompanying
Prospectus.
The ability of the Series A Issuer to pay amounts due on the Series A QUIPS
is solely dependent upon MCI making payments on the Series A QUIDS as and when
required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
MCI has the right under the Indenture to defer the payment of interest on
the Series A QUIDS at any time or from time to time for a period not exceeding
20 consecutive quarters with respect to each Extension Period, provided that
no Extension Period may extend beyond the Stated Maturity of the Series A
QUIDS. As a consequence of any such deferral, quarterly Distributions on the
Series A QUIPS by the Series A Issuer will be deferred (and the amount of
Distributions to which holders of the Series A QUIPS are entitled will
accumulate additional Distributions thereon at the rate of % per annum,
compounded quarterly from the relevant payment date for such Distributions)
during any such Extension Period. During any such Extension Period, MCI may
not, and may not permit any subsidiary of MCI to, (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of MCI's capital stock or (ii) make
any payment of principal, interest or premium, if any, on or repay, repurchase
or redeem any debt securities of MCI (including
S-4
<PAGE>
other QUIDS) that rank pari passu with or junior in interest to the Series A
QUIDS or make any guarantee payments with respect to any guarantee by MCI of
the debt securities of any subsidiary of MCI if such guarantee ranks pari
passu or junior in interest to the Series A QUIDS (other than (a) dividends or
distributions in Common Stock of MCI, (b) redemptions or purchases of any
rights pursuant to MCI's Preferred Stock Rights Plan, or any successor to such
Preferred Stock Rights Plan, and the declaration of a dividend of such rights
or the issuance of Preferred Stock under such plans in the future, (c)
payments under any Guarantee, (d) purchases of Common Stock related to the
issuance of Common Stock under any of MCI's benefit plans for its directors,
officers or employees and (e) purchases of Common Stock required to prevent
the loss or secure the renewal or reinstatement of any government license or
franchise held by MCI or any of its subsidiaries). Prior to the termination of
any such Extension Period, MCI may further extend the interest payment period,
provided that no Extension Period may exceed 20 consecutive quarters or extend
beyond the Stated Maturity of the Series A QUIDS. Upon the termination of any
Extension Period and the payment of all amounts then due on any Interest
Payment Date, MCI may elect to begin a new Extension Period subject to the
above requirements. See "Certain Terms of Series A QUIPS--Distributions" and
"Certain Terms of Series A QUIDS--Option to Extend Interest Payment Period".
Should an Extension Period occur, a holder of Series A QUIPS will continue
to accrue income (in the form of original issue discount) in respect of its
pro rata share of the Series A QUIDS held by the Series A Issuer for United
States federal income tax purposes. As a result, a holder of Series A QUIPS
will include such income in gross income for United States federal income tax
purposes in advance of the receipt of cash, and will not receive the cash
related to such income from the Series A Issuer if the holder disposes of the
Series A QUIPS prior to the record date for the payment of Distributions. See
"Certain Federal Income Tax Consequences--Original Issue Discount" and "--Sale
or Redemption of Series A QUIPS".
MCI has no current intention of exercising its right to defer payments of
interest by extending the interest payment period on the Series A QUIDS.
However, should MCI elect to exercise such right in the future, the market
price of the Series A QUIPS is likely to be affected. A holder that disposes
of its Series A QUIPS during an Extension Period, therefore, might not receive
the same return on its investment as a holder that continues to hold its
Series A QUIPS. In addition, as a result of the existence of MCI's right to
defer interest payments, the market price of the Series A QUIPS (which
represent preferred undivided beneficial interests in the Series A QUIDS) may
be more volatile than the market prices of other securities on which original
issue discount accrues that are not subject to such deferrals.
SPECIAL EVENT REDEMPTION
Upon the occurrence and continuation of a Special Event (as defined below),
MCI has the right to redeem the Series A QUIDS in whole (but not in part) at
the redemption price within 90 days following the occurrence of such Special
Event and thereby cause a mandatory redemption of the Series A QUIPS and
Series A Common Securities.
A "Special Event" means a Tax Event or an Investment Company Event. A "Tax
Event" means the receipt by the Series A Issuer of an opinion of counsel,
rendered by a law firm having a national tax and securities practice, to the
effect that, as a result of any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative pronouncement or
judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or such pronouncement or decision is
announced on or after the date of issuance of the Series A QUIPS under the
Trust Agreement, there is more than an insubstantial risk that (i) the Series
A Issuer is, or will be within 90 days of the date thereof, subject to United
States federal income tax with respect to income received or accrued on the
Series A QUIDS,
S-5
<PAGE>
(ii) interest payable by MCI on such Series A QUIDS is not, or within 90 days
of the date thereof, will not be, deductible by MCI, in whole or in part, for
United States federal income tax purposes, or (iii) the Series A Issuer is, or
will be within 90 days of the date thereof, subject to more than a de minimis
amount of other taxes, duties or other governmental charges. "Investment
Company Event" means the receipt by the Series A Issuer of an opinion of
counsel, rendered by a law firm having a recognized national tax and
securities practice, to the effect that, as a result of the occurrence of a
change in law or regulation or a change in interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority (a "Change in 1940 Act Law"), the Series A Issuer is or
will be considered an "investment company" that is required to be registered
under the Investment Company Act of 1940, as amended, which Change in 1940 Act
Law becomes effective on or after the date of original issuance of the Series
A QUIPS.
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill"), the
revenue portion of President Clinton's budget proposal, was released. The Bill
would, among other things, generally deny interest deductions for interest on
an instrument, issued by a corporation, that has a maximum weighted average
maturity of more than 40 years. The Bill would also generally deny interest
deductions for interest on an instrument, issued by a corporation, that has a
maximum term of more than 20 years and that is not shown as indebtedness on
the separate balance sheet of the issuer or, where the instrument is issued to
a related party (other than a corporation), where the holder or some other
related party issues a related instrument that is not shown as indebtedness on
the issuer's consolidated balance sheet. For purposes of determining the
weighted average maturity or the term of an instrument, any right to extend
would be treated as exercised. The above-described provisions of the Bill were
proposed to be effective generally for instruments issued on or after December
7, 1995. If either provision were to apply to the Series A QUIDS, MCI would be
unable to deduct interest on the Series A QUIDS. However, on March 29, 1996,
the Chairmen of the Senate Finance and House Ways and Means Committees issued
a joint statement to the effect that it was their intention that the effective
date of the President's legislative proposals, if adopted, will be no earlier
than the date of appropriate Congressional action. MCI believes that, under
current law, it will be able to deduct interest on the Series A QUIDS. There
can be no assurance, however, that current or future legislative proposals or
final legislation will not affect the ability of MCI to deduct interest on the
Series A QUIDS. Such a change could give rise to a Tax Event, which may permit
MCI to cause a redemption of the Series A QUIPS, as described more fully in
the accompanying Prospectus under "Description of QUIPS--Redemption or
Exchange--Special Event Redemption or Distribution of Corresponding QUIDS".
Such a tax law change would not alter the United States federal income tax
consequences of the purchase, ownership and disposition of the Series A QUIPS.
See "Certain Federal Income Tax Consequences."
There can be no assurance as to the market prices for Series A QUIPS or
Series A QUIDS that may be distributed in exchange for Series A QUIPS if a
liquidation of the Series A Issuer occurs. Accordingly, the Series A QUIPS
that an investor may purchase, whether pursuant to the offer made hereby or in
the secondary market, or the Series A QUIDS that a holder of Series A QUIPS
may receive on liquidation of the Series A Issuer, may trade at a discount to
the price that the investor paid to purchase the Series A QUIPS offered
hereby. In addition, because MCI has the right to shorten or extend the
maturity of the Series A QUIDS upon the termination of the Series A Issuer and
the distribution of Series A QUIDS to holders of Series A QUIPS, there can be
no assurance that MCI will not exercise its option to change the maturity of
the Series A QUIDS upon such an event. Because holders of Series A QUIPS may
receive Series A QUIDS on termination of the Series A Issuer prospective
purchasers of Series A QUIPS are also making an investment decision with
regard to the Series A QUIDS and should carefully review all the information
regarding the Series A QUIDS contained herein. See "Description of the QUIPS--
Redemption or Exchange--Special Event Redemption or Distribution of
Corresponding QUIDS" and "Description of the Corresponding QUIDS--General" in
the accompanying Prospectus.
S-6
<PAGE>
RIGHTS UNDER THE SERIES A GUARANTEE
The Series A Guarantee will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). Wilmington
Trust Company will act as the indenture trustee under the Series A Guarantee
(the "Guarantee Trustee") for the purposes of compliance with the Trust
Indenture Act and will hold the Series A Guarantee for the benefit of the
holders of the Series A QUIPS. Wilmington Trust Company will also act as
Debenture Trustee for the Series A QUIDS and as Property Trustee and Delaware
Trustee under the Trust Agreement. The Series A Guarantee guarantees to the
holders of the Series A QUIPS the following payments, to the extent not paid
by the Series A Issuer: (i) any accumulated and unpaid Distributions required
to be paid on the Series A QUIPS, to the extent that the Series A Issuer has
funds on hand available therefor at such time, (ii) the redemption price with
respect to any Series A QUIPS called for redemption, to the extent that the
Series A Issuer has funds on hand available therefor at such time, and (iii)
upon a voluntary or involuntary dissolution, winding-up or liquidation of the
Series A Issuer (unless the Series A QUIDS are distributed to holders of the
Series A QUIPS), the lesser of (a) the aggregate of the liquidation preference
and all accrued and unpaid Distributions to the date of payment to the extent
that the Series A Issuer has funds on hand available therefor at such time and
(b) the amount of assets of the Series A Issuer remaining available for
distribution to holders of the Series A QUIPS. The holders of not less than a
majority in aggregate liquidation amount of the Series A QUIPS have the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Guarantee Trustee in respect of the Series A Guarantee
or to direct the exercise of any trust power conferred upon the Guarantee
Trustee under the Series A Guarantee. Any holder of the Series A QUIPS may
institute a proceeding directly against MCI to enforce its rights under the
Series A Guarantee without first instituting a proceeding against the Series A
Issuer, the Guarantee Trustee or any other person or entity. If MCI were to
default on its obligation to pay amounts payable under the Series A QUIDS, the
Series A Issuer would lack funds for the payment of Distributions or amounts
payable on redemption of the Series A QUIPS or otherwise, and, in such event,
holders of the Series A QUIPS would not be able to rely upon the Series A
Guarantee for payment of such amounts. Instead, in the event a Debenture Event
of Default shall have occurred and be continuing and such event is
attributable to the failure of MCI to pay interest on or principal of the
Series A QUIDS on the payment date on which such payment is due and payable,
then a holder of Series A QUIPS may directly institute a proceeding for
enforcement of payment to such holder of the interest on or principal of such
Series A QUIDS having a principal amount equal to the aggregate liquidation
preference of the Series A QUIPS of such holder (a "Direct Action"). In
connection with such Direct Action, MCI will be subrogated to the rights of
such holder of Series A QUIPS under the Trust Agreement to the extent of any
payment made by MCI to such holder of Series A QUIPS in such Direct Action.
Holders of Series A QUIPS will not be able to exercise directly any other
remedy available to the holders of Series A QUIDS or assert directly any other
rights in respect of the Series A QUIDS. See "Description of QUIPS--
Enforcement of Certain Rights of Holders of QUIPS", "Description of
Guarantees" and "Description of QUIDS--Debenture Events of Default" in the
accompanying Prospectus. The Trust Agreement provides that each holder of
Series A QUIPS by acceptance thereof agrees to the provisions of the Series A
Guarantee and the Indenture.
LIMITED VOTING RIGHTS
Holders of Series A QUIPS will generally have limited voting rights relating
only to the modification of the Series A QUIPS and the dissolution, winding-up
or liquidation of the Series A Issuer. Holders of Series A QUIPS will not be
entitled to vote to appoint, remove or replace the Property Trustee or the
Delaware Trustee, which voting rights are vested exclusively in the holder of
the Series A Common Securities except upon the occurrence of certain events
described herein. The Issuer Trustees and MCI may amend the Trust Agreement
without the consent of holders of Series A QUIPS to ensure that the Series A
Issuer will be classified for United States federal income tax purposes as a
grantor trust even if such action adversely affects the interests of such
holders. See "Description of QUIPS--Voting Rights; Amendment of Each Trust
Agreement" and "--Removal of Issuer Trustees" in the accompanying Prospectus.
S-7
<PAGE>
TRADING CHARACTERISTICS OF SERIES A QUIPS
The Series A Issuer intends to list the Series A QUIPS on the Nasdaq National
Market. The Series A QUIPS may trade at prices that do not fully reflect the
value of accrued but unpaid interest with respect to the underlying Series A
QUIDS. A holder of Series A QUIPS that disposes of its Series A QUIPS between
record dates for payments of Distributions will nevertheless be required to
include in income as ordinary income an amount equal to the accrued but unpaid
interest on the Series A QUIDS through the date of disposition and to add such
amount to its adjusted tax basis in the Series A QUIPS disposed of. Such holder
will recognize a capital loss to the extent the selling price (which may not
fully reflect the value of accrued but unpaid interest) is less than its
adjusted tax basis (which will include accrued but unpaid interest). Subject to
certain limited exceptions, capital losses cannot be applied to offset ordinary
income for United States federal income tax purposes. See "Certain Federal
Income Tax Consequences--Sale or Redemption of Series A QUIPS".
CHANGES IN INDUSTRY; COMPETITION; CAPITAL EXPENDITURES
The communications 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 telecommunications 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 communications 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
Telecommunications 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 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.
MCI anticipates that it will continue to make substantial capital
expenditures in the future. It also may make acquisitions, some of which may be
significant, and the funding for which may be generated from internally
generated funds, the incurrence of indebtedness, the issuance of equity or a
combination thereof. The incurrence of indebtedness to fund capital
expenditures or acquisitions and/or the assumption of indebtedness in
connection with such acquisitions, which in each case would be senior to the
Series A QUIPS and the Series A QUIDS, could result in a downgrading of MCI's
credit rating, and, as a result, have an adverse effect upon the market value
of the Series A QUIPS and the Series A QUIDS.
S-8
<PAGE>
MCI CAPITAL I
MCI Capital I is a statutory business trust formed under Delaware law
pursuant to (i) the Trust Agreement executed by MCI, as Depositor, Wilmington
Trust Company, as Property Trustee and Delaware Trustee, and the
Administrative Trustees named therein, and (ii) the filing of a certificate of
trust with the Delaware Secretary of State on April 17, 1996. The Series A
Issuer's business and affairs are conducted by the Issuer Trustees: Wilmington
Trust Company, as Property Trustee and Delaware Trustee, and two individual
Administrative Trustees who are employees or officers of or affiliated with
MCI. The Series A Issuer exists for the exclusive purposes of (i) issuing and
selling the Series A QUIPS and Series A Common Securities, (ii) using the
proceeds from the sale of Series A QUIPS and Series A Common Securities to
acquire Series A QUIDS issued by MCI and (iii) engaging in only those other
activities necessary, convenient or incidental thereto. Accordingly, the
Series A QUIDS will be the sole assets of the Series A Issuer, and payments
under the Series A QUIDS will be the sole revenue of the Series A Issuer. All
of the Series A Common Securities will be owned by MCI. The Series A Common
Securities will rank pari passu, and payments will be made thereon pro rata,
with the Series A QUIPS, except that upon the occurrence and continuance of an
event of default under the Trust Agreement resulting from an Event of Default
under the Indenture, the rights of MCI as holder of the Series A Common
Securities to payment in respect of Distributions and payments upon
liquidation, redemption or otherwise will be subordinated to the rights of the
holders of the Series A QUIPS. See "Description of QUIPS--Subordination of
Common Securities" in the accompanying Prospectus. MCI will acquire Series A
Common Securities in an aggregate liquidation amount equal to 3% of the total
capital of the Series A Issuer. The Series A Issuer has a term of 55 years,
but may terminate earlier as provided in the Trust Agreement. The principal
executive office of the Series A Issuer is 1801 Pennsylvania Avenue, N.W.,
Washington, D.C. 20006, Attention: Secretary, and its telephone number is
(202) 872-1600. See "The Issuers" in the accompanying Prospectus.
MCI COMMUNICATIONS CORPORATION
MCI Communications Corporation ("MCI"), a Delaware corporation organized in
1968, has its principal executive offices at 1801 Pennsylvania Avenue, N.W.,
Washington, D.C. 20006, and its telephone number is (202) 872-1600. MCI is a
registered service mark of MCI Communications Corporation.
MCI 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.
The communication services industry is in the process of substantial change,
providing significant opportunities and risks to its participants. Evolving
and newly developed technology, emerging significant competition in the market
for long-distance and local telecommunication services, as well as the
increasing desire of customers to have most or all of their various
communication needs fulfilled by one supplier, are causing companies,
including MCI, which offer services primarily in one part of the communication
services market, to offer, either directly or through alliances with others,
new services to complement their primary services offerings.
S-9
<PAGE>
MCI expects that this expansion into new services will continue and is
likely to accelerate as a result of the enactment of the Telecommunications
Act in February 1996. Among other things, the Telecommunications Act (i) opens
the local services market, currently dominated by the RBOCs, to competition by
requiring the RBOCs to sell separately their local services and network
elements, such as interconnection and local loops, to their new competitors;
(ii) allows the RBOCs to provide long-distance telecommunication services in
their respective regions once they comply with certain requirements that are
intended to promote competition for local services; and (iii) allows the RBOCs
to offer long-distance telecommunication services outside their respective
regions immediately.
MCI believes that it is positioning itself to capitalize on the
opportunities that should be available in the communication services markets.
MCI's investment in ventures and developing markets will enable it to offer a
variety of local, wireless, information technology and multimedia services.
These services, combined with the continued growth and strength of MCI's core
business, should enable MCI to compete effectively in these markets and
against the RBOCs and any others that seek to enter the long-distance
telecommunication services market.
MCI anticipates that continued substantial capital expenditures will be
required to compete effectively in these markets. Competition from AT&T Corp.,
the RBOCs and others significantly larger than MCI, in financial and other
resources, will be intense. Due to the rapidly changing nature of these
markets and the other factors summarized above, it is not possible to predict
the level of its future success, but MCI believes that it will compete
effectively in providing its services.
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. As of March 31, 1996, MCI had approximately $4 billion
aggregate principal amount of Senior Debt outstanding. The Series A QUIDS will
be effectively subordinated to all existing and future liabilities of MCI's
subsidiaries, and holders of the Series A QUIDS should look only to the assets
of MCI for payments on the Series A QUIDS. Neither the Indenture, the Series A
Guarantee nor the Trust Agreement will place any limitation on the amount of
secured or unsecured debt, including Senior Debt, that may be incurred by MCI.
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.
USE OF PROCEEDS
All of the proceeds from the sale of Series A QUIPS will be invested by the
Series A Issuer in Series A QUIDS. MCI intends that the proceeds from the sale
of such Series A QUIDS 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.
S-10
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of MCI and
its subsidiaries as of March 31, 1996 and as adjusted to give effect to the
consummation of the offering of the Series A QUIPS, without giving effect to
any exercise of the Underwriters' over-allotment option. The following data
should be read in conjunction with the consolidated financial statements and
notes thereto of MCI and its subsidiaries incorporated herein by reference.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
-----------------------
AS
ACTUAL ADJUSTED
---------- -----------
(IN MILLIONS)
<S> <C> <C>
DEBT (1):
Secured debt:
Capital lease obligations............................ $ 552 $ 552
Other secured obligations............................ 38 38
---------- ----------
Total secured debt................................. 590 590
Unsecured debt:
Senior notes, net.................................... 1,486 1,486
Senior debentures, net............................... 884 884
Commercial paper and bank credit facility
borrowings.......................................... 919 919
Other unsecured debt................................. 172 172
---------- ----------
Total unsecured debt............................... 3,461 3,461
---------- ----------
Total debt....................................... $ 4,051 $ 4,051
========== ==========
Company Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trust Holding Solely Junior
Subordinated Debentures of the Company(2)............. -- 600
STOCKHOLDERS' EQUITY:
Class A common stock, $.10 par value, authorized 500
million shares, issued 136 million shares........... $ 14 $ 14
Common stock, $.10 par value, authorized 2 billion
shares, issued 593 million shares................... 60 60
Additional paid in capital........................... 6,421 6,421
Retained earnings.................................... 4,358 4,358
Treasury stock, at cost, 38 million shares........... (897) (897)
---------- ----------
Total stockholders' equity......................... 9,956 9,956
---------- ----------
Total capitalization............................. $14,007 $ 14,607
========== ==========
</TABLE>
--------
(1) See Note 9 of Notes to Consolidated Financial Statements on pages 22
through 24 of MCI's 1995 Annual Report to Stockholders, which is included
in Exhibit 13 to MCI's Annual Report on Form 10-K for the year ended
December 31, 1995, for additional information concerning MCI's debt and
capital lease obligations, which are obligations of subsidiaries of MCI
that are guaranteed by MCI. Interest rates on capital lease obligations,
on a weighted average basis, approximated 8.8% per annum at March 31,
1996.
(2) As described herein, all of the assets of the Series A Issuer will be $
of % Junior Subordinated Deferrable Interest Debentures, Series A, issued
by MCI to the Series A Issuer. The Series A QUIDS will mature on ,
2026, which date may be extended to a date not later than , 2045 if
certain conditions are met. MCI owns all of the Series A Common Securities
of the Series A Issuer.
S-11
<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, the Series A Issuer will be treated as a
subsidiary of MCI and, accordingly, the accounts of the Series A Issuer will
be included in the consolidated financial statements of MCI. The Series A
QUIPS will be presented as a separate line item in the consolidated balance
sheet of MCI and appropriate disclosures about the Series A QUIPS, the Series
A Guarantee and the Series A QUIDS will be included in the notes to the
consolidated financial statements. For financial reporting purposes, MCI will
record Distributions payable on the Series A QUIPS as an expense.
SELECTED FINANCIAL INFORMATION
The following selected financial data for the five years ended December 31,
1995 are derived from the consolidated audited financial statements of MCI and
its subsidiaries. The following selected financial data for the periods ended
and as of March 31, 1996 and 1995 have been derived from financial statements
of the Company that have not been audited, but that, in the opinion of the
management of the Company, reflect all adjustments necessary for the fair
presentation of such data for the interim periods. The results of operations
for the quarter ended March 31, 1996 are not necessarily indicative of the
results of operations for the full year. The following amounts should be read
in conjunction with the consolidated financial statements and notes thereto of
MCI incorporated herein by reference to MCI's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995 and Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996.
SELECTED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<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>
INCOME STATEMENT DATA:
Revenue................. $ 4,491 $ 3,561 $ 15,265 $ 13,338 $ 11,921 $10,562 $ 9,491
Total operating
expenses............... 3,910 3,131 (14,147) (11,882) (10,653) (9,351) (8,400)
Income from operations.. 581 430 1,118 1,456 1,268 1,211 1,091
Equity in income
(losses) of affiliated
companies.............. (55) (29) (187) (4) (2) (2) (1)
Income before
extraordinary item..... 295 244 548 795 627 609 551
------- ------- -------- -------- -------- ------- -------
Net income.............. $ 295 $ 244 $ 548 $ 795 $ 582 $ 609 $ 551
======= ======= ======== ======== ======== ======= =======
Earnings applicable to
common stockholders.... $ 295 $ 244 $ 548 $ 794 $ 581 $ 589 $ 522
======= ======= ======== ======== ======== ======= =======
Earnings per common and
common equivalent
share.................. $ .42 $ .36 $ .80 $ 1.32 $ 1.04 $ 1.11 $ 1.00
Cash dividends per
share.................. -- -- .05 .05 .05 .05 .05
BALANCE SHEET DATA (AT
PERIOD END):
Gross investment in
property and
equipment.............. $16,357 $14,099 $ 15,547 $ 13,408 $ 11,618 $10,316 $ 9,684
Total assets............ 19,983 16,839 19,301 16,366 11,276 9,678 8,834
Long-term debt.......... 3,579 2,936 3,444 2,997 2,366 3,432 3,104
Stockholders' equity.... 9,956 9,239 9,602 9,004 4,713 3,150 2,959
CASH FLOW DATA:
Cash from operating
activities............. $ 670 $ 535 $ 2,979 $ 2,355 $ 1,978 $ 1,726 $ 1,271
Capital expenditures for
property and
equipment.............. 782 713 2,866 2,897 1,733 1,272 1,377
Acquisition
(disposition) of
businesses and
investment in
affiliates and News
Corp................... 12 27 2,737 284 8 (22) --
</TABLE>
S-12
<PAGE>
CERTAIN TERMS OF SERIES A QUIPS
GENERAL
The following summary of certain terms and provisions of the Series A QUIPS
supplements the description of the terms and provisions of the QUIPS set forth
in the accompanying Prospectus under the heading "Description of QUIPS", to
which description reference is hereby made. This summary of certain terms and
provisions of the Series A QUIPS does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the Trust
Agreement. The form of the Trust Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus Supplement and accompanying
Prospectus is a part.
DISTRIBUTIONS
The Series A QUIPS represent undivided beneficial interests in the assets of
the Series A Issuer, and Distributions on each Series A QUIPS will be payable
at the annual rate of % of the stated liquidation preference of $25,
payable quarterly in arrears on March 31, June 30, September 30 and December
31 of each year. Distributions will accumulate from , 1996, the date of
original issuance. The first Distribution payment date for the Series A QUIPS
will be June 30, 1996. The amount of Distributions payable for any period will
be computed on the basis of a 360-day year of twelve 30-day months. In the
event that any date on which Distributions are payable on the Series A QUIPS
is not a Business Day, then payment of the Distributions payable on such date
will be made on the next succeeding day that is a Business Day (and without
any additional Distributions or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year,
such payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on the date such payment was
originally payable. See "Description of QUIPS--Distributions" in the
accompanying Prospectus.
So long as no Event of Default under the Indenture has occurred and is
continuing, MCI has the right under the Indenture to defer the payment of
interest on the Series A QUIDS at any time or from time to time for a period
not exceeding 20 consecutive quarters with respect to each Extension Period,
provided that no Extension Period may extend beyond the Stated Maturity of the
Series A QUIDS. As a consequence of any such election, quarterly Distributions
on the Series A QUIPS will be deferred by the Series A Issuer during any such
Extension Period. Distributions to which holders of the Series A QUIPS are
entitled will accumulate additional Distributions thereon at the rate per
annum of % thereof, compounded quarterly from the relevant payment date for
such Distributions. The term "Distributions" as used herein shall include any
such additional Distributions. During any such Extension Period, MCI may not,
and may not permit any subsidiary of MCI to, (i) declare or pay any dividends
or distributions on, or redeem, purchase, acquire, or make a liquidation
payment with respect to, any of MCI's capital stock or (ii) make any payment
of principal, interest or premium, if any, on or repay, repurchase or redeem
any debt securities of MCI (including other QUIDS) that rank pari passu with
or junior in interest to the Series A QUIDS or make any guarantee payments
with respect to any guarantee by MCI of the debt securities of any subsidiary
of MCI if such guarantee ranks pari passu or junior in interest to the Series
A QUIDS (other than (a) dividends or distributions in Common Stock of MCI, (b)
redemptions or purchases of any rights pursuant to MCI's Preferred Stock
Rights Plan, or any successor to such Preferred Stock Rights Plan, and the
declaration of a dividend of such rights or the issuance of Preferred Stock
under such plans in the future, (c) payments under any Guarantee, (d)
purchases of Common Stock related to the issuance of Common Stock under any of
MCI's benefit plans for its directors, officers or employees and (e) purchases
of Common Stock required to prevent the loss or secure the renewal or
reinstatement of any government license or franchise held by MCI or any of its
subsidiaries). Prior to the termination of any such Extension Period, MCI may
further extend the interest payment period, provided that no Extension Period
may exceed 20 consecutive quarters or extend beyond the Stated Maturity of the
Series A QUIDS. Upon the termination of any such Extension Period and the
payment of all amounts then due on any Interest Payment Date, MCI may
S-13
<PAGE>
elect to begin a new Extension Period. See "Certain Terms of the Series A
QUIDS--Option to Extend Interest Payment Period" and "Certain Federal Income
Tax Consequences--Original Issue Discount".
MCI has no current intention of exercising its right to defer payments of
interest by extending the interest payment period on the Series A QUIDS.
REDEMPTION
Upon the repayment or redemption, in whole or in part, of the Series A
QUIDS, whether at Stated Maturity or upon earlier redemption as provided in
the Indenture, the proceeds from such repayment or redemption shall be applied
by the Property Trustee to redeem a Like Amount (as defined in the
accompanying Prospectus) of the Series A QUIPS and Series A Common Securities,
upon not less than 30 nor more than 60 days notice prior to the date fixed for
repayment or redemption, at a redemption price (the "Redemption Price"), with
respect to the Series A QUIPS, equal to the aggregate liquidation preference
of such Series A QUIPS plus accumulated and unpaid Distributions thereon to
the date of redemption (the "Redemption Date"). See "Description of QUIPS--
Redemption or Exchange" in the accompanying Prospectus and "Certain Terms of
Series A QUIDS--Redemption".
MCI will have the right to redeem the Series A QUIDS (i) on or after ,
2001, in whole at any time or in part from time to time, at a redemption price
equal to the accrued and unpaid interest on the Series A QUIDS so redeemed to
the date fixed for redemption, plus 100% of the principal amount thereof or
(ii) at any time, in whole (but not in part), upon the occurrence and
continuation of a Tax Event or an Investment Company Event (each as defined in
the accompanying Prospectus, and as so collectively defined, a "Special
Event"), at a redemption price equal to the accrued and unpaid interest on the
Series A QUIDS so redeemed to the date fixed for redemption, plus 100% of the
principal amount thereof, in each case subject to conditions described under
"Description of QUIDS--Redemption" and "Description of Corresponding QUIDS--
Optional Redemption" in the accompanying Prospectus.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION OF SERIES A QUIDS
If a Special Event shall occur and be continuing, MCI will have the right to
redeem the Series A QUIDS in whole (but not in part) and thereby cause a
mandatory redemption of the Series A QUIPS in whole (but not in part) at the
Redemption Price within 90 days following the occurrence of such Special
Event. At any time, MCI will have the right to terminate the Series A Issuer
and, after satisfaction of the liabilities of creditors of the Series A Issuer
as provided by applicable law, cause the Series A QUIDS to be distributed to
the holders of the Series A QUIPS in liquidation of the Series A Issuer. Under
current United States federal income tax law and interpretations and assuming,
as expected, the Series A Issuer is treated as a grantor trust, a distribution
of the Series A QUIDS should not be a taxable event to holders of the Series A
QUIPS. Should there be a change in law, a change in legal interpretation, a
Special Event or other circumstances, however, the distribution could be a
taxable event to holders of the Series A QUIPS. See "Certain Federal Income
Tax Consequences--Distribution of Series A QUIDS to Holders of Series A
QUIPS". If MCI does not elect either option described above, the Series A
QUIPS will remain outstanding until the repayment of the Series A QUIDS.
If MCI elects to liquidate the Series A Issuer and thereby causes the Series
A QUIDS to be distributed to holders of the Series A QUIPS in liquidation of
the Series A Issuer, MCI shall have the right to shorten or extend the
maturity of such Series A QUIDS, provided that it can extend the maturity only
if certain conditions are met. See "Description of QUIPS--Redemption or
Exchange--Extension of Maturity of Corresponding QUIDS" in the accompanying
Prospectus and "Certain Terms of Series A QUIDS--General".
LIQUIDATION VALUE
The amount payable on the Series A QUIPS in the event of any liquidation of
the Series A Issuer is $25 per Series A QUIPS plus accumulated and unpaid
Distributions, which may be in the form of a distribution of such amount in
Series A QUIDS, subject to certain exceptions. See "Description of QUIPS--
Liquidation Distribution Upon Termination" in the accompanying Prospectus.
S-14
<PAGE>
CERTAIN TERMS OF SERIES A QUIDS
GENERAL
The following summary of certain terms and provisions of the Series A QUIDS
supplements the description of the terms and provisions of the Corresponding
QUIDS set forth in the accompanying Prospectus under the headings "Description
of QUIDS" and "Description of Corresponding QUIDS", to which description
reference is hereby made. The summary of certain terms and provisions of the
Series A QUIDS set forth below does not purport to be complete and is subject
to, and qualified in its entirety by reference to, the Indenture. The
Indenture has been filed as an exhibit to the Registration Statement of which
this Prospectus Supplement and accompanying Prospectus is a part.
Concurrently with the issuance of the Series A QUIPS, the Series A Issuer
will invest the proceeds thereof and the consideration paid by MCI for the
Series A Common Securities in the Series A QUIDS issued by MCI. The Series A
QUIDS will bear interest at the annual rate of % of the principal amount
thereof, payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year (each, an "Interest Payment Date"), commencing June
30, 1996, to the person in whose name each Series A QUIDS is registered,
subject to certain exceptions, at the close of business on the Business Day
next preceding such Interest Payment Date. It is anticipated that, until the
liquidation, if any, of the Series A Issuer, each Series A QUIDS will be held
in the name of the Property Trustee in trust for the benefit of the holders of
the Series A QUIPS. The amount of interest payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months. In the event
that any date on which interest is payable on the Series A QUIDS is not a
Business Day, then payment of the interest payable on such date will be made
on the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on the date such payment was originally payable. Accrued
interest that is not paid on the applicable Interest Payment Date will bear
additional interest on the amount thereof (to the extent permitted by law) at
the rate per annum of % thereof, compounded quarterly. The term "interest"
as used herein shall include quarterly interest payments, interest on
quarterly interest payments not paid on the applicable Interest Payment Date
and Additional Sums (as defined below), as applicable.
The Series A QUIDS will be issued as a series of QUIDS under the Indenture.
The Series A QUIDS will mature on , 2026, which date may be extended at any
time at the election of MCI for one or more periods, but in no event to a date
later than , 2045 (such date, as it may be extended, the "Stated
Maturity"), provided that at the time such election is made and at the time of
extension (i) MCI is not in bankruptcy, otherwise insolvent or in liquidation,
(ii) MCI is not in default in the payment of any interest or principal on the
Series A QUIDS, (iii) the Series A Issuer is not in arrears on payments of
Distributions on the Series A QUIPS and no deferred Distributions are
accumulated, (iv) the Series A QUIDS are rated not less than BBB- by Standard
& Poor's Ratings Services or Baa3 by Moody's Investors Service, Inc. or the
equivalent by any other nationally recognized statistical rating organization
and (v) the extended Stated Maturity is no later than the 49th anniversary of
the initial issuance of the Series A QUIPS; provided, however, that, if MCI
exercises its right to liquidate the Series A Issuer and distribute the Series
A QUIDS, effective upon such exercise the Stated Maturity of the Series A
QUIDS may be changed to any date elected by MCI that is (i) no earlier than
the date five years after the initial issuance of the Series A QUIPS and (ii)
no later than the date 30 years (plus an extended term of up to an additional
19 years if the above-referenced conditions are satisfied) after the date of
the initial issuance of the Series A QUIPS.
The Series A QUIDS will be unsecured and will rank junior and be subordinate
in right of payment to all Senior Debt of MCI. See "Description of QUIDS--
Subordination" in the accompanying Prospectus. MCI is a non-operating holding
company and almost all of the operating assets of MCI
S-15
<PAGE>
and its consolidated subsidiaries are owned by such subsidiaries. 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. Accordingly, the Series A QUIDS will be
subordinated to all Senior Debt of MCI and effectively subordinated to all
existing and future liabilities of MCI's subsidiaries, and holders of Series A
QUIDS should look only to the assets of MCI for payments on the Series A
QUIDS. The Indenture does not limit the incurrence or issuance of other
secured or unsecured debt of MCI, whether under the Indenture or any existing
or other indenture that MCI may enter into in the future or otherwise,
including MCI's Senior and Subordinated Indentures entered into with Citibank,
N.A. and Bankers Trust Company, respectively. See "Description of QUIDS--
Subordination" in the accompanying Prospectus.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Event of Default under the Indenture has occurred and is
continuing, MCI has the right under the Indenture to defer the payment of
interest at any time or from time to time for a period not exceeding 20
consecutive quarters with respect to each Extension Period, provided that no
Extension Period may extend beyond the Stated Maturity of the Series A QUIDS.
At the end of such Extension Period, MCI must pay all interest then accrued
and unpaid (together with interest thereon at the annual rate of %,
compounded quarterly, to the extent permitted by applicable law). During an
Extension Period, interest will continue to accrue and holders of Series A
QUIDS (or holders of Series A QUIPS while such series is outstanding) will be
required to accrue interest income for United States federal income tax
purposes. See "Certain Federal Income Tax Consequences--Original Issue
Discount".
During any such Extension Period, MCI may not, and may not permit any
subsidiary of MCI to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any
of MCI's capital stock or (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities of MCI
(including other QUIDS) that rank pari passu with or junior in interest to the
Series A QUIDS or make any guarantee payments with respect to any guarantee by
MCI of the debt securities of any subsidiary of MCI if such guarantee ranks
pari passu or junior in interest to the Series A QUIDS (other than (a)
dividends or distributions in common stock of MCI, (b) redemptions or
purchases of any rights pursuant to MCI's Preferred Stock Rights Plan, or any
successor to such Preferred Stock Rights Plan, and the declaration of a
dividend of such rights or the issuance of Preferred Stock under such plans in
the future, (c) payments under any Guarantee, (d) purchases of Common Stock
related to the issuance of Common Stock under any of MCI's benefit plans for
its directors, officers or employees and (e) purchases of Common Stock
required to prevent the loss or secure the renewal or reinstatement of any
government license or franchise held by MCI or any of its subsidiaries). Prior
to the termination of any such Extension Period, MCI may further extend the
interest payment period, provided that no Extension Period may exceed 20
consecutive quarters or extend beyond the Stated Maturity of the Series A
QUIDS. Upon the termination of any such Extension Period and the payment of
all amounts then due on any Interest Payment Date, MCI may elect to begin a
new Extension Period subject to the above requirements. No interest shall be
due and payable during an Extension Period, except at the end thereof. MCI
must give the Property Trustee, the Administrative Trustees and the Debenture
Trustee notice of its election of such Extension Period at least one Business
Day prior to the earlier of (i) the date the Distributions on the Series A
QUIPS would have been payable except for the election to begin such Extension
Period or (ii) the date the Administrative Trustees are required to give
notice to the Nasdaq National Market or other applicable self-regulatory
organization or to holders of such Series A QUIPS of the record date or the
date such Distributions are payable, but in any event not less than one
Business Day prior to such record date. The Debenture Trustee shall give
notice of MCI's election to begin a new Extension Period to the holders of the
Series A QUIPS. See "Description of QUIDS--Option to Extend Interest Payment
Period" in the accompanying Prospectus.
S-16
<PAGE>
ADDITIONAL SUMS
If the Series A Issuer is required to pay any additional taxes, duties or
other governmental charges ("Additional Sums") as a result of a Tax Event, MCI
will pay as additional amounts on the Series A QUIDS such amounts as shall be
required so that the Distributions payable by the Series A Issuer shall not be
reduced as a result of any such additional taxes, duties or other governmental
charges, subject to the conditions described under "Description of QUIPS--
Redemption or Exchange--Special Event Redemption or Distribution of
Corresponding QUIDS" in the accompanying Prospectus.
REDEMPTION
The Series A QUIDS are redeemable prior to maturity at the option of MCI (i)
on or after , 2001, in whole at any time or in part from time to time, at a
redemption price equal to the accrued and unpaid interest on the Series A
QUIDS so redeemed to the date fixed for redemption, plus 100% of the principal
amount thereof or (ii) at any time in whole (but not in part), upon the
occurrence and continuation of a Special Event, at a redemption price equal to
the accrued and unpaid interest on the Series A QUIDS so redeemed to the date
fixed for redemption, plus 100% of the principal amount thereof, in each case
subject to the further conditions described under "Description ofQUIDS--
Redemption" and "Description of Corresponding QUIDS--Optional Redemption" in
the accompanying Prospectus.
DISTRIBUTIONS OF SERIES A QUIDS
Under certain circumstances involving the termination of the Series A
Issuer, Series A QUIDS may be distributed to the holders of the Series A QUIPS
in liquidation of the Series A Issuer after satisfaction of liabilities to
creditors of the Series A Issuer as provided by applicable law. If distributed
to holders of Series A QUIPS in liquidation, the Series A QUIDS will initially
be issued in the form of one or more global securities and DTC, or any
successor depositary for the Series A QUIPS, will act as depositary for the
Series A QUIDS. It is anticipated that the depositary arrangements for the
Series A QUIDS would be substantially identical to those in effect for the
Series A QUIPS. If the Series A QUIDS are distributed to the holders of Series
A QUIPS upon the liquidation of the Series A Issuer, MCI will use its best
efforts to list the Series A QUIDS on the Nasdaq National Market or the New
York Stock Exchange or such other stock exchanges, if any, on which the Series
A QUIPS are then listed. There can be no assurance as to the market price of
any Series A QUIDS that may be distributed to the holders of Series A QUIPS.
For a description of DTC and the terms of the depositary matters, see
"Description of QUIPS--Book-Entry Issuance" in the accompanying Prospectus.
REGISTRATION OF SERIES A QUIDS
A global security shall be exchangeable for Series A QUIDS registered in the
names of persons other than DTC or its nominee only if (i) DTC notifies MCI
that it is unwilling or unable to continue as a depository for such global
security and no successor depository shall have been appointed, or if at any
time DTC ceases to be a clearing agency registered under the Securities
Exchange Act of 1934, as amended, at a time when DTC is required to be so
registered to act as such depository, (ii) MCI in its sole discretion
determines that such global security shall be so exchangeable, or (iii) there
shall have occurred and be continuing an Event of Default with respect to such
global security. Any global security that is exchangeable pursuant to the
preceding sentence shall be exchangeable for definitive certificates
registered in such names as DTC shall direct. It is expected that such
instructions will be based upon directions received by DTC from its
Participants (as defined in the accompanying Prospectus) with respect to
ownership of beneficial interests in such global security. In the event that
Series A QUIDS are issued in definitive form, such Series A QUIDS will be in
denominations of $25 and integral multiples thereof and may be transferred or
exchanged at the offices described below.
S-17
<PAGE>
Payments on Series A QUIDS represented by a global security will be made to
DTC, as the depositary for the Series A QUIDS. In the event Series A QUIDS are
issued in definitive form, principal and interest will be payable, the
transfer of the Series A QUIDS will be registrable, and Series A QUIDS will be
exchangeable for Series A QUIDS of other denominations of a like aggregate
principal amount, at the corporate office of the Debenture Trustee in
Wilmington, Delaware, or at the offices of any paying agent or transfer agent
appointed by MCI, provided that payment of interest may be made at the option
of MCI by check mailed to the address of the persons entitled thereto or by
wire transfer. In addition, if the Series A QUIDS are issued in certificated
form, the record dates for payment of interest will be the 15th day of the
last month of each calendar quarter. For a description of DTC and the terms of
the depositary arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "Description of QUIPS--
Book-Entry Issuance" in the accompanying Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal income tax
consequences of the purchase, ownership and disposition of Series A QUIPS.
This summary only addresses the tax consequences to a person that acquires
Series A QUIPS on their original issue at their original offering price and
that is (i) an individual citizen or resident of the United States, (ii) a
corporation or partnership organized in or under the laws of the United States
or any state thereof or the District of Columbia or (iii) an estate or trust
the income of which is subject to United States federal income tax regardless
of source (a "United States Person"). This summary does not address all tax
consequences that may be applicable to a United States Person that is a
beneficial owner of Series A QUIPS, nor does it address the tax consequences
to (i) persons that are not United States Persons, (ii) persons that may be
subject to special treatment under United States federal income tax law, such
as banks, insurance companies, thrift institutions, regulated investment
companies, real estate investment trusts, tax-exempt organizations and dealers
in securities or currencies, (iii) persons that will hold Series A QUIPS as
part of a position in a "straddle" or as part of a "hedging," "conversion" or
other integrated investment transaction for federal income tax purposes, (iv)
persons whose functional currency is not the United States dollar or (v)
persons that do not hold Series A QUIPS as capital assets.
The statements of law or legal conclusion set forth in this summary
constitute the opinion of Kramer, Levin, Naftalis & Frankel, special counsel
to MCI and the Series A Issuer. This summary is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, Internal
Revenue Service rulings and pronouncements and judicial decisions now in
effect, all of which are subject to change at any time. Such changes may be
applied retroactively in a manner that could cause the tax consequences to
vary substantially from the consequences described below, possibly adversely
affecting a beneficial owner of Series A QUIPS. In particular, legislation has
been proposed that could adversely affect MCI's ability to deduct interest on
the Series A QUIDS, which may in turn permit MCI to cause a redemption of the
Series A QUIPS. See "--Possible Tax Law Changes". The authorities on which
this summary is based are subject to various interpretations and it is
therefore possible that the federal income tax treatment of the purchase,
ownership and disposition of Series A QUIPS may differ from the treatment
described below.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN
LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX CONSEQUENCES
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF SERIES A QUIPS, AS WELL AS THE
EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
CLASSIFICATION OF THE SERIES A ISSUER
Under current law and assuming compliance with the terms of the Trust
Agreement and certain other documents, the Series A Issuer will be classified
as a grantor trust and not as an association
S-18
<PAGE>
taxable as a corporation for United States federal income tax purposes. As a
result, each beneficial owner of Series A QUIPS (a "Securityholder") will be
treated as owning an undivided beneficial interest in the Series A QUIDS.
Accordingly, each Securityholder will be required to include in its gross
income its pro rata share of the original issue discount accrued with respect
to the Series A QUIDS whether or not cash is actually distributed to the
Securityholders. See "--Original Issue Discount." No amount included in income
with respect to the Series A QUIPS will be eligible for the dividends-received
deduction.
ORIGINAL ISSUE DISCOUNT
Under the Indenture, MCI has the right to defer the payment of interest on
the Series A QUIDS at any time or from time to time for a period not exceeding
20 consecutive quarters with respect to each Extension Period, provided that
no Extension Period may extend beyond the Stated Maturity of the Series A
QUIDS. Because of this option, all interest payable on the Series A QUIDS will
be treated as "original issue discount" ("OID") for federal income tax
purposes. Accordingly, a Securityholder will recognize income (in the form of
OID) on a daily basis under a constant yield method over the term of the
Series A QUIDS (including during any Extension Period), regardless of the
receipt of cash with respect to the period to which such income is
attributable. (Subsequent uses of the term "interest" in this summary shall
include income in the form of OID.)
As a result, Securityholders of record during an Extension Period will
include interest in gross income in advance of the receipt of cash, and any
Securityholders who dispose of Series A QUIPS prior to the record date for the
payment of Distributions following such Extension Period will include interest
in gross income but will not receive any cash related thereto from the Series
A Issuer. Any amount of OID included in a Securityholder's gross income
(whether or not during an Extension Period) will increase such
Securityholder's tax basis in its Series A QUIPS, and the amount of
Distributions received by a Securityholder will reduce such Securityholder's
tax basis in its Series A QUIPS.
DISTRIBUTION OF SERIES A QUIDS TO HOLDERS OF SERIES A QUIPS
Under current law, a distribution by the Series A Issuer of the Series A
QUIDS as described under the caption "Certain Terms of Series A QUIPS--
Redemption or Exchange--Special Event Redemption or Distribution of
Corresponding QUIDS" will be non-taxable and will result in the Securityholder
receiving directly his pro rata share of the Series A QUIDS previously held
indirectly through the Series A Issuer, with a holding period and aggregate
tax basis equal to the holding period and aggregate tax basis such
Securityholder had in its Series A QUIPS before such distribution. A
Securityholder will accrue interest in respect of Series A QUIDS received from
the Series A Issuer in the manner described above under "--Original Issue
Discount".
SALES OR REDEMPTION OF SERIES A QUIPS
Gain or loss will be recognized by a Securityholder on a sale of Series A
QUIPS (including a redemption for cash) in an amount equal to the difference
between the amount realized and the Securityholder's adjusted tax basis in the
Series A QUIPS sold or so redeemed. Gain or loss recognized by a
Securityholder on Series A QUIPS held for more than one year will generally be
taxable as long-term capital gain or loss.
The Series A QUIPS may trade at a price that does not fully reflect the
value of accrued but unpaid interest with respect to the underlying Series A
QUIDS. A Securityholder that disposes of its Series A QUIPS between record
dates for payments of Distributions will nevertheless be required to include
in income as ordinary income accrued but unpaid interest on the Series A QUIDS
through the date of disposition and to add such amount to its adjusted tax
basis in its Series A QUIPS disposed
S-19
<PAGE>
of. Such Securityholder will recognize a capital loss on the disposition of
its Series A QUIPS to the extent the selling price (which may not fully
reflect the value of accrued but unpaid interest) is less than the
Securityholder's adjusted tax basis in the Series A QUIPS (which will include
accrued but unpaid interest). Subject to certain limited exceptions, capital
losses cannot be applied to offset ordinary income for federal income tax
purposes.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of OID accrued on the Series A QUIPS held of record by United
States Persons (other than corporations and other exempt Securityholders) will
be reported to the Internal Revenue Service. "Backup" withholding at a rate of
31% will apply to payments of interest to non-exempt United States Persons
unless the Securityholder furnishes its taxpayer identification number in the
manner prescribed in applicable Treasury Regulations, certifies that such
number is correct, certifies as to no loss of exemption from backup
withholding and meets certain other conditions.
Payment of the proceeds from the disposition of Series A QUIPS to or through
the United States office of a broker is subject to information reporting and
backup withholding unless the holder or beneficial owner establishes an
exemption from information reporting and backup withholding.
Any amounts withheld from a Securityholder under the backup withholding
rules will be allowed as a refund or a credit against such Securityholder's
United States federal income tax liability, provided the required information
is furnished to the Internal Revenue Service.
POSSIBLE TAX LAW CHANGES
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill"), the
revenue portion of President Clinton's budget proposal, was released. The Bill
would, among other things, generally deny interest deductions for interest on
an instrument, issued by a corporation, that has a maximum weighted average
maturity of more than 40 years. The Bill would also generally deny interest
deductions for interest on an instrument, issued by a corporation, that has a
maximum term of more than 20 years and that is not shown as indebtedness on
the separate balance sheet of the issuer or, where the instrument is issued to
a related party (other than a corporation), where the holder or some other
related party issues a related instrument that is not shown as indebtedness on
the issuer's consolidated balance sheet. For purposes of determining the
weighted average maturity or the term of an instrument, any right to extend
would be treated as exercised. The above-described provisions of the Bill were
proposed to be effective generally for instruments issued on or after December
7, 1995. If either provision were to apply to the Series A QUIDS, MCI would be
unable to deduct interest on the Series A QUIDS. However, on March 29, 1996,
the Chairmen of the Senate Finance and House Ways and Means Committees issued
a joint statement to the effect that it was their intention that the effective
date of the President's legislative proposals, if adopted, will be no earlier
than the date of appropriate Congressional action. MCI believes that, under
current law, it will be able to deduct interest on the Series A QUIDS. There
can be no assurance, however, that current or future legislative proposals or
final legislation will not affect the ability of MCI to deduct interest on the
Series A QUIDS. Such a change could give rise to a Tax Event, which may permit
MCI to cause a redemption of the Series A QUIPS, as described more fully in
the accompanying Prospectus under "Description of QUIPS--Redemption or
Exchange--Special Event Redemption or Distribution of Corresponding QUIDS".
Such a tax law change would not alter the United States federal income tax
consequences of the purchase, ownership and disposition of Series A QUIPS.
S-20
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
MCI and the Series A Issuer have agreed that the Series A Issuer will sell to
each of the Underwriters named below, and each of such Underwriters, for whom
Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Dean
Witter Reynolds Inc., A.G. Edwards & Sons, Inc., Lehman Brothers Inc.,
PaineWebber Incorporated, Prudential Securities Incorporated and Smith Barney
Inc. are acting as representatives, has severally agreed to purchase from the
Series A Issuer the respective number of Series A QUIPS set forth opposite its
name below:
<TABLE>
<CAPTION>
NUMBER OF
SERIES A
UNDERWRITER QUIPS
----------- ----------
<S> <C>
Goldman, Sachs & Co. .............................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................
Dean Witter Reynolds Inc. ........................................
A.G. Edwards & Sons, Inc. ........................................
Lehman Brothers Inc. .............................................
PaineWebber Incorporated..........................................
Prudential Securities Incorporated................................
Smith Barney Inc. ................................................
Legg Mason Wood Walker, Incorporated..............................
----------
Total........................................................... 24,000,000
==========
</TABLE>
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Underwriters are committed to take and pay for all such Series A QUIPS
offered hereby, if any are taken.
The Underwriters propose to offer the Series A QUIPS in part directly to the
public at the initial public offering price set forth on the cover page of
this Prospectus Supplement and in part to certain securities dealers at such
price less a concession of $ per Series A QUIPS. The Underwriters may allow,
and such dealers may reallow, a concession not to exceed $ per Series A
QUIPS to certain brokers and dealers. After the Series A QUIPS are released
for sale to the public, the offering price and other selling terms may from
time to time be varied by the representatives.
S-21
<PAGE>
The Series A Issuer has granted the Underwriters an option exercisable for
15 days after the date of this Prospectus Supplement to purchase up to an
aggregate of 3,600,000 additional Series A QUIPS solely to cover over-
allotments, if any. If the Underwriters exercise their over-allotment option,
the Underwriters have severally agreed, subject to certain conditions, to
purchase approximately the same percentage thereof that the number of Series A
QUIPS to be purchased by each of them, as shown in the foregoing table, bears
to the 24,000,000 Series A QUIPS offered.
In view of the fact that the proceeds from the sale of the Series A QUIPS
will be used to purchase the Series A QUIDS issued by MCI, the Underwriting
Agreement provides that MCI will pay as Underwriters' Compensation for the
Underwriters' arranging the investment therein of such proceeds an amount of
$ per Series A QUIPS for the accounts of the several Underwriters.
MCI and the Series A Issuer have agreed that, during the period beginning
from the date of the Underwriting Agreement and continuing to and including
the earlier of (i) the termination of trading restrictions on the Series A
QUIPS, as determined by the Underwriters, and (ii) 30 days after the closing
date, they will not offer, sell, contract to sell or otherwise dispose of any
QUIPS, any other beneficial interests in the assets of the Series A Issuer, or
any preferred securities or any other securities of the Series A Issuer or MCI
which are substantially similar to the Series A QUIPS, including any guarantee
of such securities, or any securities convertible into or exchangeable for or
representing the right to receive securities, preferred securities or any such
substantially similar securities of either the Series A Issuer or MCI, without
the prior written consent of the representatives, except for the Series A
QUIPS offered in connection with the offering.
Prior to this offering, there has been no public market for the Series A
QUIPS. The Series A QUIPS have been approved for quotation on the Nasdaq
National Market, subject to official notice of issuance. The representatives
of the Underwriters have advised MCI that they intend to make a market in the
Series A QUIPS prior to commencement of trading on the Nasdaq National Market,
but are not obligated to do so 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 Series A QUIPS.
MCI and the Series A Issuer have agreed to indemnify the several
Underwriters against and contribute toward certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
Certain of the Underwriters or their affiliates have provided from time to
time, and expect to provide in the future, investment or commercial banking
services to MCI and its affiliates, for which such Underwriters or their
affiliates have received or will receive customary fees and commissions.
LEGAL OPINIONS
Certain matters of Delaware law relating to the legality of the Series A
QUIPS, the validity of the Trust Agreement and the formation of the Series A
Issuer will be passed upon by Richards, Layton & Finger, special Delaware
Counsel to MCI and the Series A Issuer. The legality of the Series A Guarantee
and the Series A QUIDS will be passed upon for MCI by Kramer, Levin, Naftalis
& Frankel, and for the Underwriters by Sullivan & Cromwell, New York, New
York. Certain matters relating to United States federal income tax
considerations will be passed upon for MCI by Kramer, Levin, Naftalis &
Frankel.
S-22
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 20, 1996
$750,000,000
MCI COMMUNICATIONS MCI CAPITAL I
CORPORATION MCI CAPITAL II
JUNIOR SUBORDINATED MCI CAPITAL III
DEFERRABLE MCI CAPITAL IV
INTEREST DEBENTURES PREFERRED SECURITIES GUARANTEED TO THE EXTENT
THE ISSUER HAS FUNDS AS SET FORTH HEREIN BY
MCI COMMUNICATIONS CORPORATION
MCI Communications Corporation, a Delaware corporation ("MCI"), may from time
to time offer in one or more series or issuances its junior subordinated
deferrable interest debentures (the "QUIDS"). The QUIDS will be unsecured and
subordinate and junior in right of payment to Senior Debt (as defined in
"Description of QUIDS--Subordination") of MCI. If provided in an accompanying
Prospectus Supplement, MCI will have the right to defer payments of interest on
any series of QUIDS at any time or from time to time for such number of
consecutive interest payment periods (which shall not extend beyond the
maturity of the QUIDS) with respect to each deferral period as may be specified
in such Prospectus Supplement (each, an "Extension Period"). See "Description
of QUIDS--Option to Extend Interest Payments".
MCI Capital I, MCI Capital II, MCI Capital III and MCI Capital IV, each a
trust formed under the laws of the State of Delaware (each, an "Issuer", and
collectively, the "Issuers"), may severally offer, from time to time, preferred
securities (the "QUIPS") representing preferred undivided beneficial interests
in the assets of such Issuer. MCI will be the owner of the common securities
(the "Common Securities") of each Issuer. The payment of periodic cash
distributions ("Distributions") with respect to the QUIPS of each Issuer and
payments on liquidation or redemption with respect to such QUIPS, in each case
to the extent of funds held by such Issuer, are each irrevocably guaranteed by
MCI as described herein (each, a "Guarantee"). See "Description of Guarantees".
The obligations of MCI under each Guarantee will be subordinate and junior in
right of payment to all Senior Debt of MCI. Concurrently with the issuance by
an Issuer of its QUIPS, such Issuer will invest the proceeds thereof and any
contributions made by MCI in respect of MCI's purchase of the Common Securities
in a corresponding series of MCI's QUIDS (the "Corresponding QUIDS") with terms
corresponding to the terms of that Issuer's QUIPS. The Corresponding QUIDS will
be the sole assets of each Issuer, and payments under the Corresponding QUIDS
and the Expense Agreement (as defined herein) will be the only revenue of each
Issuer. MCI may redeem the Corresponding QUIDS (and cause the redemption of the
related QUIPS) or may terminate each Issuer and cause the Corresponding QUIDS
to be distributed to the holders of QUIPS in liquidation of their interests in
such Issuer. See "Description of QUIPS--Liquidation Distribution Upon
Termination".
Holders of the QUIPS will be entitled to receive preferential cumulative cash
Distributions accumulating from the date of original issuance and payable
periodically as specified in an accompanying Prospectus Supplement. If provided
in an accompanying Prospectus Supplement, MCI will have the right to defer
payments of interest on any series of Corresponding QUIDS at any time or from
time to time for one or more Extension Periods (which shall not extend beyond
the Stated Maturity of the Corresponding QUIDS). If interest payments are so
deferred, Distributions on the corresponding series of QUIPS will also be
deferred, and MCI will not be permitted, subject to certain exceptions set
forth herein, to declare or pay any cash distributions with respect to MCI's
capital stock or debt securities that rank pari passu with or junior to the
Corresponding QUIDS. During an Extension Period, interest on the Corresponding
QUIDS will continue to accrue (and the amount of Distributions to which holders
of the QUIPS are entitled will accumulate at the rate per annum set forth in
the related Prospectus Supplement). See "Description of QUIPS--Distributions".
Taken together, MCI's obligations under each series of QUIDS, the Indenture,
the related Trust Agreement, the related Expense Agreement and the related
Guarantee (each, as defined herein), in
(Continued on next page)
-----------
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 TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
The date of this Prospectus is May , 1996.
<PAGE>
(Continued from previous page)
the aggregate, provide a full, irrevocable and unconditional guarantee of
payments of distributions and other amounts due on the related series of
QUIPS. See "Relationship Among the QUIPS, the Corresponding QUIDS and the
Guarantees--Full and Unconditional Guarantee".
The QUIDS and QUIPS may be offered in amounts, at prices and on terms to be
determined at the time of offering, provided that the aggregate initial public
offering price of all QUIDS (other than Corresponding QUIDS) and QUIPS issued
pursuant to the Registration Statement of which this Prospectus forms a part
shall not exceed $750,000,000. Certain specific terms of the QUIDS or QUIPS in
respect of which this Prospectus is being delivered will be described in an
accompanying Prospectus Supplement, including without limitation and where
applicable and to the extent not set forth herein, (a) in the case of QUIDS,
the specific designation, aggregate principal amount, denominations, maturity
(including any extension thereof), interest payment dates, interest rate
(which may be fixed or variable) or method of calculating interest, if any,
applicable Extension Period or interest deferral terms, if any, place or
places where principal, premium, if any, and interest, if any, will be
payable, terms of redemption, if any, sinking fund provisions, if any, terms
for conversion or exchange, if any, into other securities, initial offering or
purchase price, methods of distribution and any other special terms, and (b)
in the case of QUIPS, the identity of the Issuer, specific title, aggregate
amount, stated liquidation preference, number of securities, Distribution rate
or method of calculating such rate, applicable Extension Period or
Distribution deferral terms, if any, place or places where Distributions will
be payable, any terms of redemption, exchange, initial offering or purchase
price, methods of distribution and any other special terms.
The Prospectus Supplement also will contain information, as applicable,
about certain United States federal income tax consequences relating to the
QUIDS or QUIPS.
The QUIDS and QUIPS may be sold to or through underwriters, through dealers,
remarketing firms or agents or directly to purchasers. See "Plan of
Distribution". The names of any underwriters, dealers, remarketing firms or
agents involved in the sale of QUIDS or QUIPS in respect of which this
Prospectus is being delivered and any applicable fee, commission or discount
arrangements with them will be set forth in a Prospectus Supplement. The
Prospectus Supplement will state whether the QUIDS or QUIPS will be listed on
any national securities exchange or the Nasdaq National Market. If the QUIDS
or QUIPS are not listed on any national securities exchange or the Nasdaq
National Market, there can be no assurance that there will be a liquid
secondary market for the QUIDS or QUIPS.
This Prospectus may not be used to consummate sales of QUIDS or QUIPS unless
accompanied by a Prospectus Supplement.
----------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
OR ANY ACCOMPANYING PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY MCI, ANY OF THE ISSUERS OR ANY UNDERWRITER, DEALER OR AGENT.
NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR
IN ANY ACCOMPANYING PROSPECTUS SUPPLEMENT IS CORRECT AS OF ANY DATE SUBSEQUENT
TO THE DATE HEREOF OR THEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF MCI SINCE THE DATE HEREOF OR THEREOF. NEITHER THIS PROSPECTUS NOR ANY
ACCOMPANYING PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES 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 ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
MCI International, Inc. provides telecommunication services between the
United States and Cuba pursuant to an operating agreement with Empressa de
Telecomunications de Cuba, S.A. pursuant to an authorization of the United
States Department of the Treasury under the Office of Foreign Assets Control
License C-16420. This information is accurate as of the date of this
Prospectus. Current information concerning MCI's business dealings with the
government of Cuba or with any person or affiliate located in Cuba may be
obtained from the Florida Department of Banking and Finance, The Capitol,
Tallahassee, Florida 32399-0350, telephone (904) 488-9805.
2
<PAGE>
AVAILABLE INFORMATION
MCI is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (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 MCI with the Commission pursuant to the informational requirements of
the Exchange Act may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, and at the following Regional Offices
of the Commission: Chicago Regional Office, Suite 1400, Citicorp Center, 14th
Floor, 500 West Madison Street, Chicago, Illinois 60661; and New York Regional
Office, 7 World Trade Center, 13th Floor, Suite 1300, New York, New York
10048. Copies of such material can be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549.
MCI and the Issuers have filed with the Commission a Registration Statement
on Form S-3 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered hereby. This
Prospectus and the accompanying Prospectus Supplement omit, in accordance with
the rules and regulations of the Commission, certain of the information
contained in the Registration Statement. Reference is hereby made to the
Registration Statement and the exhibits and the financial statements, notes
and schedules filed as a part thereof or incorporated by reference therein for
further information with respect to MCI, the Issuers and the securities
offered hereby. Statements contained herein concerning the provisions of any
document are not necessarily complete and, in each instance, where a copy of
such document has been filed as an exhibit to the Registration Statement or
otherwise has been filed with the Commission, reference is made to the copy so
filed. Each such statement is qualified in its entirety by such reference.
No separate financial statements of any Issuer have been included herein.
MCI and the Issuers do not consider that such financial statements would be
material to holders of the QUIPS because each Issuer is a newly formed special
purpose entity, has no operating history or independent operations and is not
engaged in and does not propose to engage in any activity other than holding
as trust assets the Corresponding QUIDS of MCI and issuing the QUIPS and
Common Securities. See "The Issuers", "Description of QUIPS", "Description of
Guarantees" and "Description of Corresponding QUIDS".
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
MCI's Annual Report on Form 10-K for the fiscal year ended December 31, 1995
and Quarterly Report on Form 10-Q for the quarter ended March 31, 1996,
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 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. Any statement
contained herein, or in a document all or a portion of which is incorporated
or deemed to be incorporated by reference herein, shall be deemed to be
modified or superseded for purposes of the Registration Statement and this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of the Registration Statement or this
Prospectus.
MCI will provide without charge to any person to whom a copy of this
Prospectus is delivered, upon written or oral request of such person, a copy
of any and all of the documents that have been or
3
<PAGE>
may be incorporated by reference herein (other than exhibits to such documents
which are not specifically incorporated by reference into such documents).
Such requests should be directed to the Secretary, MCI Communications
Corporation, 1801 Pennsylvania Avenue, N.W., Washington, D.C. 20006
(telephone: (202) 872-1600).
MCI COMMUNICATIONS CORPORATION
MCI Communications Corporation ("MCI"), a Delaware corporation organized in
1968, has its principal executive offices at 1801 Pennsylvania Avenue, N.W.,
Washington, D.C. 20006 and its telephone number is (202) 872-1600. MCI is a
registered service mark of MCI Communications Corporation.
MCI 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 this 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.
The communication services industry is in the process of substantial change,
providing significant opportunities and risks to its participants. Evolving
and newly developed technology, emerging significant competition in the market
for long-distance and local telecommunication services, as well as the
increasing desire of customers to have most or all of their various
communication needs fulfilled by one supplier, are causing companies,
including MCI, which offer services primarily in one part of the communication
services market, to offer, either directly or through alliances with others,
new services to complement their primary services offerings.
MCI expects that this expansion into new services will continue and is
likely to accelerate as a result of the enactment of the Telecommunications
Act of 1996 (the "Telecommunications Act") in February 1996. Among other
things, the Telecommunications Act (i) opens the local services market,
currently dominated by the Regional Bell Operating Companies (the "RBOCs"), to
competition by requiring the RBOCs to sell separately their local services and
network elements, such as interconnection and local loops, to their new
competitors; (ii) allows the RBOCs to provide long-distance telecommunication
services in their respective regions once they comply with certain
requirements that are intended to promote competition for local services; and
(iii) allows the RBOCs to offer long-distance telecommunication services
outside their respective regions immediately.
MCI believes that it is positioning itself to capitalize on the
opportunities that should be available in the communication services markets.
MCI's investment in ventures and developing markets will enable it to offer a
variety of local, wireless, information technology and multimedia services.
These services, combined with the continued growth and strength of MCI's core
business, should enable MCI to compete effectively in these markets and
against the RBOCs and any others that seek to enter the long-distance
telecommunication services market. There can be no assurance, however, that
MCI will be able to do so.
MCI anticipates that continued substantial capital expenditures will be
required to compete effectively in these markets. Competition from AT&T Corp.,
the RBOCs and others significantly larger than MCI, in financial and other
resources, will be intense. Due to the rapidly changing nature of these
markets and the other factors summarized above, it is not possible to predict
the level of its future success, but MCI believes that it will compete
effectively in providing its services.
4
<PAGE>
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. As of March 31, 1996, MCI had approximately $4 billion
aggregate principal amount of Senior Debt outstanding. The QUIDS will be
effectively subordinated to all existing and future liabilities of MCI's
subsidiaries, and holders of the QUIDS should look only to the assets of MCI
for payments on the QUIDS. Neither the Indenture, the Guarantees nor the Trust
Agreements will place any limitation on the amount of secured or unsecured
debt, including Senior Debt, that may be incurred by MCI.
THE ISSUERS
Each Issuer is a statutory business trust formed under Delaware law pursuant
to (i) a trust agreement executed by MCI, as sponsor of the Issuer, and the
Delaware Trustee (as defined herein) of such Issuer and (ii) the filing of a
certificate of trust with the Delaware Secretary of State. Each trust
agreement will be amended and restated in its entirety (each, as so amended
and restated, a "Trust Agreement") substantially in the form filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
Each Trust Agreement will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). Each Issuer
exists for the exclusive purposes of (i) issuing and selling its QUIPS and
Common Securities, (ii) using the proceeds from the sale of such QUIPS and
Common Securities to acquire a corresponding series of Corresponding QUIDS
issued by MCI and (iii) engaging in only those other activities necessary,
convenient or incidental thereto. Accordingly, the Corresponding QUIDS will be
the sole assets of each Issuer, and payments under the Corresponding QUIDS and
the Expense Agreement will be the sole revenue of each Issuer.
All of the Common Securities will be owned by MCI. The Common Securities of
an Issuer will rank pari passu, and payments will be made thereon pro rata,
with the QUIPS of such Issuer, except that upon the occurrence and continuance
of an event of default under a Trust Agreement resulting from a Debenture
Event of Default (as defined herein), the rights of MCI as holder of the
Common Securities to payment in respect of Distributions and payments upon
liquidation, redemption or otherwise will be subordinated to the rights of the
holders of the QUIPS of such Issuer. See "Description of QUIPS--Subordination
of Common Securities". MCI will acquire Common Securities in an aggregate
liquidation amount equal to not less than 3% of the total capital of each
Issuer.
Unless otherwise specified in the applicable Prospectus Supplement, each
Issuer has a term of approximately 55 years, but may terminate earlier as
provided in the applicable Trust Agreement. Each Issuer's business and affairs
are conducted by its trustees, which will be appointed by MCI as holder of the
Common Securities.
Unless otherwise specified in the applicable Prospectus Supplement, the
trustees shall be Wilmington Trust Company, as the Property Trustee (the
"Property Trustee") and as the Delaware Trustee (the "Delaware Trustee"), and
two individual trustees (the "Administrative Trustees") who are employees or
officers of or affiliated with MCI (collectively, the "Issuer Trustees").
Wilmington Trust Company, as Property Trustee, will act as sole indenture
trustee under each Trust Agreement for purposes of compliance with the Trust
Indenture Act. Wilmington Trust Company will also act as trustee under the
Guarantees and the Indenture (each as defined herein). See "Description of
Guarantees" and "Description of QUIDS". The holder of the Common Securities,
or the holders of a majority in liquidation preference of the QUIPS if any
Debenture Event of Default has occurred and is continuing, will be entitled to
appoint, remove or replace the Property Trustee and/or the Delaware Trustee.
In no event will the holders of the QUIPS have the right to vote to appoint,
remove or replace the Administrative Trustees; such voting rights are vested
exclusively in the holder of the Common Securities. The duties and obligations
of each Issuer Trustee are governed by the applicable Trust Agreement. MCI
will pay all fees and expenses related to each Issuer and the offering of the
QUIPS and will pay, directly or indirectly, all ongoing costs, expenses and
liabilities of each Issuer. The
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<PAGE>
principal executive office of each Issuer is 1801 Pennsylvania Avenue, N.W.,
Washington, D.C. 20006, Attention: Secretary, and its telephone number is
(202) 872-1600.
USE OF PROCEEDS
Except as otherwise set forth in the applicable Prospectus Supplement, MCI
intends to use the proceeds from the sale of its QUIDS (including
Corresponding QUIDS issued to the Issuers in connection with the investment by
the Issuers of all of the proceeds from the sale of QUIPS) for general
corporate purposes.
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 years 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.
DESCRIPTION OF QUIDS
The QUIDS are to be issued in one or more series under a Junior Subordinated
Indenture, as supplemented from time to time (as so supplemented, the
"Indenture"), between MCI and Wilmington Trust Company, as trustee (the
"Debenture Trustee"). This summary of certain terms and provisions of the
QUIDS and the Indenture does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, the Indenture, the form of which
is filed as an exhibit to the Registration Statement of which this Prospectus
forms a part, and to the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Whenever particular defined terms of the Indenture (as
supplemented or amended from time to time) are referred to herein or in a
Prospectus Supplement, such defined terms are incorporated herein or therein
by reference.
GENERAL
Each series of QUIDS will rank pari passu with all other series of QUIDS,
and will be unsecured and subordinate and junior in right of payment to the
extent and in the manner set forth in the Indenture to all Senior Debt (as
defined below) of MCI. See "--Subordination". MCI is a non-operating holding
company and almost all of the operating assets of MCI and its consolidated
subsidiaries are owned by such subsidiaries. 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. Accordingly, the QUIDS will be effectively subordinated to all
existing and future liabilities of MCI's subsidiaries, and holders of QUIDS
should look only to the assets of MCI for payments on the QUIDS. Except as
otherwise provided in the applicable Prospectus Supplement, the Indenture does
not limit the incurrence or issuance of other secured or unsecured debt of
MCI, whether under the Indenture or any existing or other indenture that MCI
may enter into in the future or otherwise, including MCI's Senior and
Subordinated Indentures entered into with Citibank, N.A. and Bankers Trust
Company, respectively. See "--Subordination" and the Prospectus Supplement
relating to any offering of Securities.
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<PAGE>
The QUIDS will be issuable in one or more series pursuant to an indenture
supplemental to the Indenture or a resolution of MCI's board of directors or a
committee thereof.
The applicable Prospectus Supplement or Prospectus Supplements will describe
the following terms of the QUIDS: (1) the title of the QUIDS; (2) any limit
upon the aggregate principal amount of the QUIDS; (3) the date or dates on
which the principal of the QUIDS is payable or the method of determination
thereof; (4) the rate or rates, if any, at which the QUIDS shall bear
interest, the Interest Payment Dates on which any such interest shall be
payable, the right, if any, of MCI to defer or extend an Interest Payment
Date, and the Regular Record Date for any interest payable on any Interest
Payment Date or the method by which any of the foregoing shall be determined;
(5) the place or places where, subject to the terms of the Indenture as
described below under "Payment and Paying Agents", the principal of and
premium, if any, and interest on the QUIDS will be payable and where, subject
to the terms of the Indenture as described below under "Denominations,
Registration and Transfer", the QUIDS may be presented for registration of
transfer or exchange and the place or places where notices and demands to or
upon MCI in respect of the QUIDS and the Indentures may be made ("Place of
Payment"); (6) any period or periods within or date or dates on which, the
price or prices at which and the terms and conditions upon which QUIDS may be
redeemed, in whole or in part, at the option of MCI or a holder thereof; (7)
the obligation or the right, if any, of MCI or a holder thereof to redeem,
purchase or repay the QUIDS and the period or periods within which, the price
or prices at which, the currency or currencies (including currency unit or
units) in which and the other terms and conditions upon which the QUIDS shall
be redeemed, repaid or purchased, in whole or in part, pursuant to such
obligation; (8) the denominations in which any QUIDS shall be issuable if
other than denominations of $25 and any integral multiple thereof; (9) if
other than in U.S. Dollars, the currency or currencies (including currency
unit or units) in which the principal of and premium, if any, and interest, if
any, on the QUIDS shall be payable, or in which the QUIDS shall be
denominated; (10) any additions, modifications or deletions in the Events of
Default or covenants of MCI specified in the Indenture with respect to the
QUIDS; (11) if other than the principal amount thereof, the portion of the
principal amount of QUIDS that shall be payable upon declaration of
acceleration of the maturity thereof; (12) any additions or changes to the
Indenture with respect to a series of QUIDS as shall be necessary to permit or
facilitate the issuance of such series in bearer form, registrable or not
registrable as to principal, and with or without interest coupons; (13) any
index or indices used to determine the amount of payments of principal of and
premium, if any, on the QUIDS and the manner in which such amounts will be
determined; (14) the terms and conditions relating to the issuance of a
temporary Global Security representing all of the QUIDS of such series and the
exchange of such temporary Global Security for definitive QUIDS of such
series; (15) subject to the terms described under "Global QUIDS", whether the
QUIDS of the series shall be issued in whole or in part in the form of one or
more Global Securities and, in such case, the Depositary for such Global
Securities, which Depositary shall be a clearing agency registered under the
Exchange Act; (16) the appointment of any Paying Agent or Agents; (17) the
terms and conditions of any obligation or right of MCI or a holder to convert
or exchange the QUIDS into QUIPS or other securities; and (18) any other terms
of the QUIDS not inconsistent with the provisions of the Indenture.
QUIDS may be sold at a substantial discount below their stated principal
amount, bearing no interest or interest at a rate which at the time of
issuance is below market rates. Certain United States federal income tax
consequences and special considerations applicable to any such QUIDS will be
described in the applicable Prospectus Supplement.
If the purchase price of any of the QUIDS is payable in one or more foreign
currencies or currency units or if any QUIDS are denominated in one or more
foreign currencies or currency units or if the principal of, premium, if any,
or interest, if any, on any QUIDS is payable in one or more foreign currencies
or currency units, the restrictions, elections, certain United States federal
income tax consequences, specific terms and other information with respect to
such issue of QUIDS and such foreign currency or currency units will be set
forth in the applicable Prospectus Supplement.
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<PAGE>
If any index is used to determine the amount of payments of principal of,
premium, if any, or interest on any series of QUIDS, special United States
federal income tax, accounting and other considerations applicable thereto
will be described in the applicable Prospectus Supplement.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement, the
QUIDS will be issuable only in registered form without coupons in
denominations of $25 and any integral multiple thereof. QUIDS of any series
will be exchangeable for other QUIDS of the same issue and series, of any
authorized denominations, of a like aggregate principal amount, of the same
Original Issue Date and Stated Maturity and bearing the same interest rate.
QUIDS may be presented for exchange as provided above, and may be presented
for registration of transfer (with the form of transfer endorsed thereon, or a
satisfactory written instrument of transfer, duly executed), at the office of
the appropriate Securities Registrar or at the office of any transfer agent
designated by MCI for such purpose with respect to any series of QUIDS and
referred to in the applicable Prospectus Supplement, without service charge
and upon payment of any taxes and other governmental charges as described in
the Indenture. MCI will appoint the Debenture Trustee as Securities Registrar
under the Indenture. If the applicable Prospectus Supplement refers to any
transfer agents (in addition to the Securities Registrar) initially designated
by MCI with respect to any series of QUIDS, MCI may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, provided that MCI maintains a
transfer agent in each Place of Payment for such series. MCI may at any time
designate additional transfer agents with respect to any series of QUIDS.
In the event of any redemption, neither MCI nor the Debenture Trustee shall
be required to (i) issue, register the transfer of or exchange QUIDS of any
series during a period beginning at the opening of business 15 days before the
day of selection for redemption of QUIDS of that series and ending at the
close of business on the day of mailing of the relevant notice of redemption
or (ii) transfer or exchange any QUIDS so selected for redemption, except, in
the case of any QUIDS being redeemed in part, any portion thereof not to be
redeemed.
GLOBAL QUIDS
The QUIDS of a series may be issued in whole or in part in the form of one
or more Global QUIDS that will be deposited with, or on behalf of, a
depositary (the "Depositary") identified in the Prospectus Supplement relating
to such series. Global QUIDS may be issued only in fully registered form and
in either temporary or permanent form. Unless and until it is exchanged in
whole or in part for the individual QUIDS represented thereby, a Global QUIDS
may not be transferred except as a whole by the Depositary for such Global
QUIDS to a nominee of such Depositary or by a nominee of such Depositary to
such Depositary or another nominee of such Depositary or by the Depositary or
any nominee to a successor Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series of
QUIDS will be described in the Prospectus Supplement relating to such series.
MCI anticipates that the following provisions will generally apply to
depositary arrangements.
Upon the issuance of a Global QUIDS and the deposit of such Global QUIDS
with or on behalf of the Depositary, the Depositary for such Global QUIDS or
its nominee will credit on its book-entry registration and transfer system the
respective principal amounts of the individual QUIDS represented by such
Global QUIDS to the accounts of persons that have accounts with such
Depositary ("Participants"). Such accounts shall be designated by the dealers,
underwriters or agents with respect to such QUIDS or by MCI if such QUIDS are
offered and sold directly by MCI. Ownership of beneficial
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interests in a Global QUIDS will be limited to Participants or persons that
may hold interests through Participants. Ownership of beneficial interests in
such Global QUIDS will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the applicable Depositary or its
nominee (with respect to interests of Participants) and the records of
Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests
in a Global QUIDS.
So long as the Depositary for a Global QUIDS, or its nominee, is the
registered owner of such Global QUIDS, such Depositary or such nominee, as the
case may be, will be considered the sole owner or holder of the QUIDS
represented by such Global QUIDS for all purposes under the Indenture
governing such QUIDS. Except as provided below, owners of beneficial interests
in a Global QUIDS will not be entitled to have any of the individual QUIDS of
the series represented by such Global QUIDS registered in their names, will
not receive or be entitled to receive physical delivery of any such QUIDS of
such series in definitive form and will not be considered the owners or
holders thereof under the Indenture.
Payments of principal of and premium, if any, and interest on individual
QUIDS represented by a Global QUIDS registered in the name of a Depositary or
its nominee will be made to the Depositary or its nominee, as the case may be,
as the registered owner of the Global QUIDS representing such QUIDS. None of
MCI, the Debenture Trustee, any Paying Agent or the Securities Registrar for
such QUIDS will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the Global QUIDS representing such QUIDS or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
MCI expects that the Depositary for a series of QUIDS or its nominee, upon
receipt of any payment of principal, premium, if any, or interest in respect
of a permanent Global QUIDS representing any of such QUIDS, immediately will
credit Participants' accounts with payments in amounts proportionate to their
respective beneficial interest in the principal amount of such Global QUIDS
representing such QUIDS as shown on the records of such Depositary or its
nominee. MCI also expects that payments by Participants to owners of
beneficial interests in such Global QUIDS held through such Participants will
be governed by standing 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". Such payments will be the responsibility of such
Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of QUIDS is at any time unwilling, unable or
ineligible to continue as depositary and a successor depositary is not
appointed by MCI within 90 days, MCI will issue individual QUIDS of such
series in exchange for the Global QUIDS representing such series of QUIDS. In
addition, MCI may at any time and in its sole discretion, subject to any
limitations described in the Prospectus Supplement relating to such QUIDS,
determine not to have any QUIDS of such series represented by one or more
Global QUIDS and, in such event, will issue individual QUIDS of such series in
exchange for the Global QUIDS representing such series of QUIDS. Further, if
MCI so specifies with respect to the QUIDS of a series, an owner of a
beneficial interest in a Global QUIDS representing QUIDS of such series may,
on terms acceptable to MCI, the Debenture Trustee and the Depositary for such
Global QUIDS, receive individual QUIDS of such series in exchange for such
beneficial interests, subject to any limitations described in the Prospectus
Supplement relating to such QUIDS. In any such instance, an owner of a
beneficial interest in a Global QUIDS will be entitled to physical delivery of
individual QUIDS of the series represented by such Global QUIDS equal in
principal amount to such beneficial interest and to have such QUIDS registered
in its name. Individual QUIDS of such series so issued will be issued in
denominations, unless otherwise specified by MCI, of $25 and integral
multiples thereof.
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PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of and premium, if any, and any interest on QUIDS will be made at
the office of the Debenture Trustee in the City of New York or at the office
of such Paying Agent or Paying Agents as MCI may designate from time to time
in the applicable Prospectus Supplement, except that at the option of MCI
payment of any interest may be made (i) by check mailed to the address of the
Person entitled thereto as such address shall appear in the Securities
Register or (ii) by transfer to an account maintained by the Person entitled
thereto as specified in the Securities Register, provided that proper transfer
instructions have been received by the Regular Record Date. Unless otherwise
indicated in the applicable Prospectus Supplement, payment of any interest on
QUIDS will be made to the Person in whose name such QUIDS is registered at the
close of business on the Regular Record Date for such interest, except in the
case of Defaulted Interest. MCI may at any time designate additional Paying
Agents or rescind the designation of any Paying Agent; however MCI will at all
times be required to maintain a Paying Agent in each Place of Payment for each
series of QUIDS.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or then
held by MCI in trust, for the payment of the principal of and premium, if any,
or interest on any QUIDS and remaining unclaimed for two years after such
principal and premium, if any, or interest has become due and payable shall,
at the request of MCI, be repaid to MCI and the holder of such QUIDS shall
thereafter look, as a general unsecured creditor, only to MCI for payment
thereof.
REDEMPTION
Unless otherwise indicated in the applicable Prospectus Supplement, QUIDS
will not be subject to any sinking fund.
Unless otherwise indicated in the applicable Prospectus Supplement, MCI may,
at its option, redeem the QUIDS of any series in whole at any time or in part
from time to time. QUIDS in denominations larger than $25 may be redeemed in
part but only in integral multiples of $25. Except as otherwise specified in
the applicable Prospectus Supplement, the redemption price for any QUIDS so
redeemed shall equal any accrued and unpaid interest thereon to the redemption
date, plus the principal amount thereof.
Except as otherwise specified in the applicable Prospectus Supplement, if a
Debenture Tax Event (as defined below) in respect of a series of QUIDS shall
occur and be continuing, MCI may, at its option, redeem such series of QUIDS
in whole (but not in part) at any time within 90 days of the occurrence of
such Debenture Tax Event, at a redemption price equal to 100% of the principal
amount of such QUIDS then outstanding plus accrued and unpaid interest to the
date fixed for redemption.
"Debenture Tax Event" means the receipt by MCI of an opinion of counsel,
rendered by a law firm having a recognized national tax and securities
practice, to the effect that, as a result of any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or which pronouncement or
decision is announced on or after the date of issuance of the applicable
series of QUIDS under the Indenture, there is more than an insubstantial risk
that interest payable by MCI on such series of QUIDS is not, or within 90 days
of the date of such opinion, will not be, deductible by MCI, in whole or in
part, for United States federal income tax purposes.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each Holder of QUIDS to be redeemed at
its registered address. Unless MCI defaults in payment of the redemption
price, on and after the redemption date interest ceases to accrue on such
QUIDS or portions thereof called for redemption.
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OPTION TO EXTEND INTEREST PAYMENT DATE
If provided in the applicable Prospectus Supplement, MCI shall have the
right at any time and from time to time during the term of any series of QUIDS
to defer payment of interest for such number of consecutive interest payment
periods as may be specified in the applicable Prospectus Supplement (each, an
"Extension Period"), subject to the terms, conditions and covenants, if any,
specified in such Prospectus Supplement, provided that such Extension Period
may not extend beyond the Stated Maturity of such series of QUIDS. Certain
United States federal income tax consequences and special considerations
applicable to any such QUIDS will be described in the applicable Prospectus
Supplement.
During such Extension Period MCI may not, and may not permit any subsidiary
of MCI to, (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of MCI's
capital stock or (ii) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities of MCI that rank
pari passu with or junior in interest to the QUIDS or make any guarantee
payments with respect to any guarantee by MCI of the debt securities of any
subsidiary of MCI if such guarantee ranks pari passu or junior in interest to
the Series A QUIDS (other than (a) dividends or distributions in common stock
of MCI, (b) redemptions or purchases of any rights pursuant to MCI's Preferred
Stock Rights Plan, or any successor to such Preferred Stock Rights Plan, and
the declaration of a dividend of such rights or the issuance of Preferred
Stock under such plans in the future, (c) payments under any Guarantee, (d)
purchases of Common Stock related to the issuance of Common Stock under any of
MCI's benefit plans for its directors, officers or employees and (e) purchases
of Common Stock required to prevent the loss or secure the renewal or
reinstatement of any government license or franchise held by MCI or any of its
subsidiaries).
MODIFICATION OF INDENTURE
From time to time MCI and the Debenture Trustee may, without the consent of
the holders of any series of QUIDS, amend, waive or supplement the Indenture
for specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies (provided that any such action does not materially
adversely affect the interest of the holders of any series of QUIDS or, in the
case of Corresponding QUIDS, the holders of the corresponding series of QUIPS
so long as they remain outstanding) and qualifying, or maintaining the
qualification of, the Indenture under the Trust Indenture Act. The Indenture
contains provisions permitting MCI and the Debenture Trustee, with the consent
of the holders of not less than a majority in principal amount of each
outstanding series of QUIDS affected, to modify the Indenture in a manner
affecting the rights of the holders of such series of the QUIDS; provided that
no such modification may, without the consent of the holder of each
outstanding QUIDS so affected, (i) change the stated maturity of any series of
QUIDS, or reduce the principal amount thereof, or reduce the rate or extend
the time of payment of interest thereon (except such change or extension as is
contemplated hereby) or (ii) reduce the percentage of principal amount of
QUIDS of any series, the holders of which are required to consent to any such
modification of the Indenture, provided that, in the case of Corresponding
QUIDS, so long as any of the related series of QUIPS remain outstanding, no
such modification may be made that adversely affects the holders of such QUIPS
in any material respect, and no termination of the Indenture may occur, and no
waiver of any Debenture Event of Default or compliance with any covenant under
the Indenture may be effective, without the prior consent of the holders of at
least a majority of the aggregate liquidation preference of such QUIPS unless
and until the principal of the Corresponding QUIDS and all accrued and unpaid
interest thereon have been paid in full and certain other conditions are
satisfied.
In addition, MCI and the Debenture Trustee may execute, without the consent
of any holder of QUIDS, any supplemental Indenture for the purpose of creating
any new series of QUIDS.
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DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to a series of QUIDS that has occurred and is continuing
constitutes a "Debenture Event of Default" with respect to such series of
QUIDS:
(i) failure for 30 days to pay any interest on such series of the QUIDS,
when due (subject to the deferral of any due date in the case of an
Extension Period); or
(ii) failure to pay any principal or premium, if any, on such series of
QUIDS when due whether at maturity, upon redemption by declaration or
otherwise; or
(iii) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice to
MCI from the Debenture Trustee or the holders of at least 25% in aggregate
outstanding principal amount of such series of outstanding QUIDS; or
(iv) certain events in bankruptcy, insolvency or reorganization of MCI.
The holders of a majority in aggregate outstanding principal amount of such
series of QUIDS have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee.
The Debenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of such series of QUIDS may declare the principal
due and payable immediately upon a Debenture Event of Default, and, in the
case of Corresponding QUIDS, should the Debenture Trustee or such holders of
such Corresponding QUIDS fail to make such declaration, the holders of at
least 25% in aggregate liquidation preference of the related series of QUIPS
shall have such right. The holders of a majority in aggregate outstanding
principal amount of such series of QUIDS may annul such declaration and waive
the default if the default (other than the non-payment of the principal of
such series of QUIDS which has become due solely by such acceleration) has
been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration has been deposited with the
Debenture Trustee and, in the case of Corresponding QUIDS, should the holders
of such Corresponding QUIDS fail to annul such declaration and waive such
default, the holders of a majority in aggregate liquidation preference of the
related series of QUIPS shall have such right.
The holders of a majority in aggregate outstanding principal amount of the
QUIDS affected thereby may, on behalf of the holders of all the QUIDS, waive
any past default, except a default in the payment of principal or interest
(unless such default has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Debenture Trustee) or a default in respect of a
covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each outstanding QUIDS and, in the case
of Corresponding QUIDS, should the holders of such Corresponding QUIDS fail to
annul such declaration and waive such default, the holders of a majority in
aggregate liquidation preference of the related series of QUIPS shall have
such right. MCI is required to file annually with the Debenture Trustee a
certificate as to whether or not MCI is in compliance with all the conditions
and covenants applicable to it under the Indenture.
In case a Debenture Event of Default shall occur and be continuing as to a
series of Corresponding QUIDS, the Property Trustee will have the right to
declare the principal of and the interest on such Corresponding QUIDS and any
other amounts payable under the Indenture, to be forthwith due and payable and
to enforce its other rights as a creditor with respect to such Corresponding
QUIDS.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF QUIPS
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of MCI to pay interest or principal on
the related QUIDS on the date such interest or principal
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is otherwise payable, a holder of QUIPS may institute a Direct Action (as
defined below under "Description of QUIPS--Enforcement of Certain Rights by
Holders of QUIPS") for payment after the respective due date specified in the
related QUIDS. MCI may not amend the Indenture to remove the foregoing right
to bring a Direct Action without the prior written consent of the holders of
all of the QUIPS. Notwithstanding any payment made to such holder of QUIPS by
MCI in connection with a Direct Action, MCI shall remain obligated to pay the
principal of or interest on the related QUIDS held by the Issuer or the
Property Trustee and MCI shall be subrogated to the rights of the holder of
such QUIPS with respect to payments on the QUIPS to the extent of any payments
made by MCI to such holder in any Direct Action. The holders of QUIPS will not
be able to exercise directly any other remedy available to the holders of the
related QUIDS.
The holders of the QUIPS would not be able to exercise directly any remedies
other than those set forth in the preceding paragraph available to the holders
of the QUIDS unless the Property Trustee or the Debenture Trustee, acting for
the benefit of the Property Trustee, fails to do so for 60 days. In such
event, the holders of at least 25% in aggregate liquidation preference of the
outstanding QUIPS would have such right to institute proceedings.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that MCI shall not consolidate with or merge into any
other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, and no Person shall consolidate
with or merge into MCI or convey, transfer or lease its properties and assets
substantially as an entirety to MCI, unless (i) in case MCI consolidates with
or merges into another Person or conveys, transfers or leases its properties
and assets substantially as an entirety to any Person, the successor Person is
organized under the laws of the United States or any state or the District of
Columbia, and such successor Person expressly assumes MCI's obligations on the
QUIDS issued under the Indenture; (ii) immediately after giving effect
thereto, no Debenture Event of Default, and no event which, after notice or
lapse of time or both, would become a Debenture Event of Default, shall have
happened and be continuing; (iii) in the case of Corresponding QUIDS, such
transaction is permitted under the related Trust Agreement or Guarantee and
does not give rise to any breach or violation of the related Trust Agreement
and Guarantee, and (iv) certain other conditions as prescribed in the
Indenture are met.
The general provisions of the Indenture do not afford holders of the QUIDS
protection in the event of a highly leveraged or other transaction involving
MCI that may adversely affect holders of the QUIDS.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all QUIDS not
previously delivered to the Debenture Trustee for cancellation (i) have become
due and payable or (ii) will become due and payable at their Stated Maturity
within one year, and MCI deposits or causes to be deposited with the Debenture
Trustee trust funds, in trust, for the purpose and in an amount in the
currency or currencies in which the QUIDS are payable sufficient to pay and
discharge the entire indebtedness on the QUIDS not previously delivered to the
Debenture Trustee for cancellation, for the principal and premium, if any, and
interest to the date of the deposit or to the Stated Maturity, as the case may
be, then the Indenture will cease to be of further effect (except as to MCI's
obligations to pay all other sums due pursuant to the Indenture and to provide
the officers' certificates and opinions of counsel described therein), and MCI
will be deemed to have satisfied and discharged the Indenture.
CONVERSION OR EXCHANGE
Unless otherwise indicated in the applicable Prospectus Supplement, the
QUIDS of any series may be convertible or exchangeable into QUIPS or other
securities. The specific terms on which
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QUIDS of any series may be so converted or exchanged will be set forth in the
applicable Prospectus Supplement. Such terms may include provisions for
conversion or exchange, either mandatory, at the option of the holder, or at
the option of MCI, in which case the number of shares of QUIPS or other
securities to be received by the Holders of QUIDS would be calculated as of a
time and in the manner stated in the applicable Prospectus Supplement.
SUBORDINATION
In the Indenture, MCI has covenanted and agreed that any QUIDS issued
thereunder will be subordinate and junior in right of payment to all Senior
Debt to the extent provided in the Indenture. Upon any payment or distribution
of assets to creditors upon any liquidation, dissolution, winding-up,
reorganization, assignment for the benefit of creditors, marshaling of assets
or any bankruptcy, insolvency, debt restructuring or similar proceedings in
connection with any insolvency or bankruptcy proceeding of MCI, the holders of
Senior Debt will first be entitled to receive payment in full of principal of
and premium, if any, and interest, if any, on such Senior Debt before the
holders of QUIDS or, in the case of Corresponding QUIDS, the Property Trustee
on behalf of the holders, will be entitled to receive or retain any payment in
respect of the principal of and premium, if any, or interest, if any, on the
QUIDS.
In the event of the acceleration of the maturity of any QUIDS, the holders of
all Senior Debt outstanding at the time of such acceleration will first be
entitled to receive payment in full of all amounts due thereon (including any
amounts due upon acceleration) before the holders of QUIDS will be entitled to
receive or retain any payment in respect of the principal of or premium, if
any, or interest, if any, on the QUIDS.
No payments on account of principal (or premium, if any) or interest, if any,
in respect of the QUIDS may be made if there shall have occurred and be
continuing a default in any payment with respect to Senior Debt, or an event of
default with respect to any Senior Debt resulting in the acceleration of the
maturity thereof, or if any judicial proceeding shall be pending with respect
to any such default.
"Debt" means with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; and (vi) every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable, directly or indirectly, as
obligor or otherwise.
"Senior Debt" means the principal of (and premium, if any) and interest, if
any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to MCI whether or not such claim for
post-petition interest is allowed in such proceeding), on Debt, whether
incurred on or prior to the date of the Indenture or thereafter incurred,
unless, in the instrument creating or evidencing the same or pursuant to which
the same is outstanding, it is provided that such obligations are not superior
in right of payment to the QUIDS or to other Debt which is pari passu with, or
subordinated to, the QUIDS; provided, however, that Senior Debt shall not be
deemed to include
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(i) any Debt of MCI which when incurred and without respect to any election
under Section 1111 (b) of the Bankruptcy Code, was without recourse to MCI,
(ii) any Debt of MCI to any of its subsidiaries, (iii) Debt to any employee of
MCI, (iv) any liability for taxes, and (v) indebtedness or monetary obligations
to trade creditors or assumed by MCI or any of its subsidiaries in the ordinary
course of business in connection with the obtaining of materials or services.
MCI is a non-operating holding company and almost all of the operating assets
of MCI and its consolidated subsidiaries are owned by such subsidiaries.
Accordingly, the QUIDS will be effectively subordinated to all existing and
future liabilities of MCI's subsidiaries. Holders of QUIDS should look only to
the assets of MCI for payments of interest and principal and premium, if any,
on the QUIDS.
The Indenture places no limitation on the amount of additional Senior Debt
that may be incurred by MCI. The communications services business is capital
intensive, and MCI anticipates that from time to time it will incur substantial
additional indebtedness constituting Senior Debt.
The Indenture provides that the foregoing subordination provisions, insofar
as they relate to any particular issue of QUIDS, may be changed prior to such
issuance. Any such change would be described in the applicable Prospectus
Supplement.
GOVERNING LAW
The Indenture and the QUIDS will be governed by and construed in accordance
with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of QUIDS, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities which might be incurred
thereby. The Debenture Trustee is not required to expend or risk its own funds
or otherwise incur personal financial liability in the performance of its
duties if the Debenture Trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it.
DESCRIPTION OF QUIPS
Pursuant to the terms of the Trust Agreement for each Issuer, the Issuer
Trustees on behalf of such Issuer will issue the QUIPS and the Common
Securities. The QUIPS of a particular issue will represent preferred undivided
beneficial interests in the assets of the related Issuer and the holders
thereof will be entitled to a preference in certain circumstances with respect
to Distributions and amounts payable on redemption or liquidation over the
Common Securities of such Issuer, as well as other benefits as described in the
corresponding Trust Agreement. This summary of certain provisions of the QUIPS
and each Trust Agreement does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all the provisions of each Trust
Agreement, including the definitions therein of certain terms, and the Trust
Indenture Act. Wherever particular defined terms of a Trust Agreement (as
supplemented or amended from time to time) are referred to herein or in a
Prospectus Supplement, such defined terms are incorporated herein or therein by
reference. The form of each Trust Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. Each of the
Issuers is a legally separate entity and the assets of one are not available to
satisfy the obligations of any of the others.
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GENERAL
The QUIPS of an Issuer will rank pari passu, and payments will be made
thereon pro rata, with the Common Securities of that Issuer except as described
under "--Subordination of Common Securities". Legal title to the Corresponding
QUIDS will be held by the Property Trustee in trust for the benefit of the
holders of the related QUIPS and Common Securities. Each Guarantee Agreement
executed by MCI for the benefit of the holders of an Issuer's QUIPS (each, the
"Guarantee") will be a guarantee on a subordinated basis with respect to the
related QUIPS but will not guarantee payment of Distributions or amounts
payable on redemption or liquidation of such QUIPS when the related Issuer does
not have funds on hand available to make such payments. See "Description of
Guarantees".
DISTRIBUTIONS
Each Issuer's QUIPS represent preferred undivided beneficial interests in the
assets of such Issuer, and the Distributions on each QUIPS will be payable at a
rate specified in the Prospectus Supplement for such QUIPS. The amount of
Distributions payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months unless otherwise specified in the applicable
Prospectus Supplement. Distributions to which holders of QUIPS are entitled
will accumulate additional Distributions at the rate per annum if and as
specified in the applicable Prospectus Supplement. The term "Distributions" as
used herein includes any such additional Distributions unless otherwise stated.
Distributions on the QUIPS will be cumulative, will accrue from the date of
original issuance and will be payable on such dates as specified in the
applicable Prospectus Supplement. In the event that any date on which
Distributions are payable on the QUIPS is not a Business Day (as defined
below), payment of the Distribution payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect to any such delay) except that, if such Business Day is in
the next succeeding calendar year, payment of such Distribution shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such date (each date on which Distributions are payable in
accordance with the foregoing, a "Distribution Date"). A "Business Day" shall
mean any day other than a Saturday or a Sunday, or a day on which banking
institutions in The City of New York are authorized or required by law or
executive order to remain closed or a day on which the corporate trust office
of the Property Trustee or the Debenture Trustee (as defined herein) is closed
for business.
If provided in the applicable Prospectus Supplement, MCI has the right under
the Indenture, pursuant to which it will issue the Corresponding QUIDS, to
defer the payment of interest at any time or from time to time on any series of
the Corresponding QUIDS for a period which will be specified in such Prospectus
Supplement relating to such series (each, an "Extension Period"), provided that
no Extension Period may extend beyond the Stated Maturity of such series of
QUIDS. As a consequence of any such extension, Distributions on the
corresponding QUIPS would be deferred (but the QUIPS would continue to
accumulate additional Distributions thereon at the rate per annum set forth in
the Prospectus Supplement for such QUIPS) by the Issuer of such QUIPS during
any such Extension Period. During such Extension Period MCI may not, and may
not permit any subsidiary of MCI to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of MCI's capital stock or (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of MCI that rank pari passu with or junior in interest to the
Corresponding QUIDS or make any guarantee payments with respect to any
guarantee by MCI of the debt securities of any subsidiary of MCI if such
guarantee ranks pari passu or junior in interest to the Series A QUIDS (other
than (a) dividends or distributions in Common Stock of MCI, (b) redemptions or
purchases of any rights pursuant to MCI's Preferred Stock Rights Plan, or any
successor to such Preferred Stock Rights Plan, and the declaration of a
dividend of such rights or the issuance of Preferred Stock under such plans in
the future, (c) payments under any
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Guarantee, (d) purchases of Common Stock related to the issuance of Common
Stock under any of MCI's benefit plans for its directors, officers or employees
and (e) purchases of Common Stock required to prevent the loss or secure the
renewal or reinstatement of any government license or franchise held by MCI or
any of its subsidiaries).
The revenue of each Issuer available for distribution to holders of its QUIPS
will be limited to payments under the Corresponding QUIDS in which the Issuer
will invest the proceeds from the issuance and sale of its QUIPS and its Common
Securities. See "Description of Corresponding QUIDS". If MCI does not make
interest payments on such Corresponding QUIDS, the Property Trustee will not
have funds available to pay Distributions on the related QUIPS. The payment of
Distributions (if and to the extent the Issuer has funds legally available for
the payment of such Distributions and cash sufficient to make such payments) is
guaranteed by MCI on a limited basis as set forth herein under "Description of
Guarantees".
Distributions on the QUIPS will be payable to the holders thereof as they
appear on the register of such Issuer on the relevant record dates, which, as
long as the QUIPS remain in book-entry form, will be one Business Day prior to
the relevant Distribution Date. Subject to any applicable laws and regulations
and the provisions of the applicable Trust Agreement, each such payment will be
made as described under "--Book-Entry Issuance". In the event any QUIPS are not
in book-entry form, the relevant record date for such QUIPS shall be a date at
least 15 days prior to the relevant Distribution Date, as specified in the
applicable Prospectus Supplement.
REDEMPTION OR EXCHANGE
MANDATORY REDEMPTION. Upon the repayment or redemption, in whole or in part,
of any Corresponding QUIDS, whether at maturity or upon earlier redemption as
provided in the Indenture, the proceeds from such repayment or redemption shall
be applied by the Property Trustee to redeem a Like Amount (as defined below)
of the related QUIPS and the Common Securities, upon not less than 30 nor more
than 60 days notice, at a redemption price (the "Redemption Price"), with
respect to the Common Securities, equal to the aggregate liquidation preference
of such QUIPS plus accumulated and unpaid Distributions thereon to the date of
redemption (the "Redemption Date") and the related amount of the premium, if
any, paid by MCI upon the concurrent redemption of such Corresponding QUIDS.
See "Description of Corresponding QUIDS--Optional Redemption". If less than all
of any series of Corresponding QUIDS are to be repaid or redeemed on a
Redemption Date, then the proceeds from such repayment or redemption shall be
allocated to the redemption pro rata of the related QUIPS and the Common
Securities. The amount of premium, if any, paid by MCI upon the redemption of
all or any part of any series of any Corresponding QUIDS to be repaid or
redeemed on a Redemption Date shall be allocated to the redemption pro rata of
the related QUIPS and the Common Securities.
MCI will have the right to redeem any series of Corresponding QUIDS (i) in
whole at any time or in part from time to time, subject to the conditions
described under "Description of Corresponding QUIDS--Optional Redemption", (ii)
at any time, in whole (but not in part), upon the occurrence of a Tax Event or
an Investment Company Event (each as defined below, a "Special Event") and
subject to the further conditions described under "Description of Corresponding
QUIDS--Optional Redemption", or (iii) as may be otherwise specified in the
applicable Prospectus Supplement.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION OF CORRESPONDING QUIDS. If a Special
Event in respect of a series of QUIPS and Common Securities shall occur and be
continuing, MCI has the right to redeem the Corresponding QUIDS in whole (but
not in part) and thereby cause a mandatory redemption of such QUIPS and Common
Securities in whole (but not in part) at the Redemption Price within 90 days
following the occurrence of such Special Event. At any time, MCI has the right
to terminate the related Issuer and, after satisfaction of liabilities to
creditors of such Issuer as provided by
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applicable law, cause such Corresponding QUIDS to be distributed to the holders
of such QUIPS and Common Securities in liquidation of the Issuer. If MCI does
not elect either option described above, the applicable series of QUIPS will
remain outstanding and, in the event a Tax Event has occurred and is
continuing, Additional Sums (as defined below) may be payable on the
Corresponding QUIDS.
EXTENSION OF MATURITY OF CORRESPONDING QUIDS. If provided in the applicable
Prospectus Supplement, MCI shall have the right to extend or shorten the
maturity of any series of Corresponding QUIDS at the time that MCI exercises
its right to elect to liquidate the related Issuer and cause such Corresponding
QUIDS to be distributed to the holders of such QUIPS and Common Securities in
liquidation of the Issuer, provided that it can extend the maturity only if
certain conditions specified in the applicable Prospectus Supplement are met at
the time such election is made and at the time of such extension.
"Additional Sums" means the additional amounts as may be necessary in order
that the amount of Distributions then due and payable by an Issuer on the
outstanding QUIPS and Common Securities of the Issuer shall not be reduced as a
result of any additional taxes, duties and other governmental charges to which
the Issuer has become subject as a result of a Tax Event.
"Investment Company Event" means the receipt by the applicable Issuer of an
opinion of counsel, rendered by a law firm having a recognized national tax and
securities practice, to the effect that, as a result of the occurrence of a
change in law or regulation or a change in interpretation or application of law
or regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), the applicable Issuer is or will be
considered an "investment company" that is required to be registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act"),
which Change in 1940 Act Law becomes effective on or after the date of original
issuance of the series of QUIPS issued by the applicable Issuer.
"Like Amount" means (i) with respect to a redemption of any series of QUIPS,
QUIPS of such series and the Common Securities having a Liquidation Amount (as
defined below) equal to that portion of the principal amount of Corresponding
QUIDS to be contemporaneously redeemed in accordance with the Indenture
allocated 3% to the Common Securities and 97% to the QUIPS of such series and
the proceeds of which will be used to pay the Redemption Price of such QUIPS
and to redeem such Common Securities, and (ii) with respect to a distribution
of Corresponding QUIDS to holders of any series of QUIPS and the Common
Securities in connection with a dissolution or liquidation of the related
Issuer, Corresponding QUIDS having a principal amount equal to the Liquidation
Amount of the QUIPS and the Common Securities of the holder to whom such
Corresponding QUIDS are distributed. "Liquidation Amount" means the stated
amount of $25 per QUIPS and Common Security.
"Tax Event" means the receipt by the applicable Issuer of an opinion of
counsel, rendered by a law firm having a national tax and securities practice,
to the effect that, as a result of any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative pronouncement or
judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or which pronouncement or decision is
announced on or after the date of issuance of the QUIPS under the related Trust
Agreement, there is more than an insubstantial risk that (i) the applicable
Issuer is, or will be within 90 days of the date of such opinion, subject to
United States federal income tax with respect to income received or accrued on
the corresponding series of Corresponding QUIDS, (ii) interest payable by MCI
on such series of Corresponding QUIDS is not, or within 90 days of the date of
such opinion, will not be, deductible by MCI, in whole or in part, for United
States federal income tax purposes, or (iii) the applicable Issuer is, or will
be within 90 days of the date of such opinion, subject to more than a de
minimis amount of other taxes, duties or other governmental charges.
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After the liquidation date fixed for any distribution of Corresponding QUIDS
for any series of QUIPS (i) such series of QUIPS will no longer be deemed to be
outstanding, (ii) The Depository Trust Company ("DTC") or its nominee, as the
record holder of such series of QUIPS, will receive a registered global
certificate or certificates representing the Corresponding QUIDS to be
delivered upon such distribution and (iii) any certificates representing such
series of QUIPS not held by DTC or its nominee will be deemed to represent the
Corresponding QUIDS having a principal amount equal to the stated liquidation
preference of such series of QUIPS, and bearing accrued and unpaid interest in
an amount equal to the accrued and unpaid Distributions on such series of QUIPS
until such certificates are presented to the Administrative Trustees or their
agent for transfer or reissuance.
There can be no assurance as to the market prices for the QUIPS or the
Corresponding QUIDS that may be distributed in exchange for QUIPS if a
dissolution and liquidation of an Issuer were to occur. Accordingly, the QUIPS
that an investor may purchase, or the Corresponding QUIDS that the investor may
receive on dissolution and liquidation of an Issuer, may trade at a discount to
the price that the investor paid to purchase the QUIPS offered hereby.
REDEMPTION PROCEDURES
QUIPS redeemed on each Redemption Date shall be redeemed at the Redemption
Price with the applicable proceeds from the contemporaneous redemption of the
Corresponding QUIDS. Redemptions of the QUIPS shall be made and the Redemption
Price shall be payable on each Redemption Date only to the extent that the
related Issuer has funds on hand available for the payment of such Redemption
Price. See also "--Subordination of Common Securities".
If an Issuer gives a notice of redemption in respect of its QUIPS, then, by
12:00 noon, New York City time, on the Redemption Date, to the extent funds are
available, the Property Trustee will deposit irrevocably with DTC funds
sufficient to pay the applicable Redemption Price and will give DTC irrevocable
instructions and authority to pay the Redemption Price to the holders of such
QUIPS. See "--Book-Entry Issuance". If such QUIPS are no longer in book-entry
form, the Issuer, to the extent funds are available, will irrevocably deposit
with the paying agent for such QUIPS funds sufficient to pay the applicable
Redemption Price and will give such paying agent irrevocable instructions and
authority to pay the Redemption Price to the holders thereof upon surrender of
their certificates evidencing such QUIPS. Notwithstanding the foregoing,
Distributions payable on or prior to the Redemption Date for any QUIPS called
for redemption shall be payable to the holders of such QUIPS on the relevant
record dates for the related Distribution Dates. If notice of redemption shall
have been given and funds deposited as required, then upon the date of such
deposit, all rights of the holders of such QUIPS so called for redemption will
cease, except the right of the holders of such QUIPS to receive the Redemption
Price, but without interest on such Redemption Price, and such QUIPS will cease
to be outstanding. In the event that any date fixed for redemption of QUIPS is
not a Business Day, then payment of the Redemption Price payable on such date
will be made on the next succeeding day which is a Business Day (and without
any interest or other payment in respect of any such delay), except that, if
such Business Day falls in the next calendar year, such payment will be made on
the immediately preceding Business Day. In the event that payment of the
Redemption Price in respect of QUIPS called for redemption is improperly
withheld or refused and not paid either by the Issuer or by MCI pursuant to the
Guarantee as described under "Description of Guarantees", Distributions on such
QUIPS will continue to accrue at the then applicable rate, from the Redemption
Date originally established by the Issuer for such QUIPS to the date such
Redemption Price is actually paid, in which case the actual payment date will
be the date fixed for redemption for purposes of calculating the Redemption
Price.
Subject to applicable law (including, without limitation, United States
federal securities law), MCI or its subsidiaries may at any time and from time
to time purchase outstanding QUIPS by tender, in the open market or by private
agreement.
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Payment of the Redemption Price on the QUIPS and any distribution of
Corresponding QUIDS to holders of QUIPS shall be made to the applicable
recordholders thereof as they appear on the register for such QUIPS on the
relevant record date, which shall be one Business Day prior to the relevant
Redemption Date or liquidation date, as applicable; provided, however, that in
the event that any QUIPS are not in book-entry form, the relevant record date
for such QUIPS shall be a date at least 15 days prior to the Redemption Date or
liquidation date, as applicable, as specified in the applicable Prospectus
Supplement.
If less than all of the QUIPS and Common Securities issued by an Issuer are
to be redeemed on a Redemption Date, then the aggregate Liquidation Amount of
such QUIPS and Common Securities to be redeemed shall be allocated pro rata
among the QUIPS and the Common Securities. The particular QUIPS to be redeemed
shall be selected on a pro rata basis not more than 60 days prior to the
Redemption Date by the Property Trustee from the outstanding QUIPS not
previously called for redemption, by such method as the Property Trustee shall
deem fair and appropriate and which may provide for the selection for
redemption of portions (equal to $25 or an integral multiple of $25 in excess
thereof) of the liquidation preference of QUIPS of a denomination larger than
$25. The Property Trustee shall promptly notify the trust registrar in writing
of the QUIPS selected for redemption and, in the case of any QUIPS selected for
partial redemption, the liquidation preference thereof to be redeemed. For all
purposes of each Trust Agreement, unless the context otherwise requires, all
provisions relating to the redemption of QUIPS shall relate, in the case of any
QUIPS redeemed or to be redeemed only in part, to the portion of the aggregate
liquidation preference of QUIPS which has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of QUIDS to be redeemed at its
registered address. Unless MCI defaults in payment of the Redemption Price, on
and after the Redemption Date interest ceases to accrue on such QUIDS or
portions thereof called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, each Issuer's QUIPS
and Common Securities, as applicable, shall be made pro rata based on the
Liquidation Amount of such QUIPS and Common Securities; provided, however, that
if on any Distribution Date or Redemption Date a Debenture Event of Default
shall have occurred and be continuing, no payment of any Distribution on, or
Redemption Price of, any of the Issuer's Common Securities, and no other
payment on account of the redemption, liquidation or other acquisition of such
Common Securities, shall be made unless payment in full in cash of all
accumulated and unpaid Distributions on all of the Issuer's outstanding QUIPS
for all Distribution periods terminating on or prior thereto, or in the case of
payment of the Redemption Price the full amount of such Redemption Price on all
of the Issuer's outstanding QUIPS then called for redemption, shall have been
made or provided for, and all funds available to the Property Trustee shall
first be applied to the payment in full in cash of all Distributions on, or
Redemption Price of, the Issuer's QUIPS then due and payable.
In the case of any Event of Default resulting from a Debenture Event of
Default, MCI as holder of such Issuer's Common Securities will be deemed to
have waived any right to act with respect to any such Event of Default under
the applicable Trust Agreement until the effect of all such Events of Default
with respect to such QUIPS have been cured, waived or otherwise eliminated.
Until any such Events of Default under the applicable Trust Agreement with
respect to the QUIPS have been so cured, waived or otherwise eliminated, the
Property Trustee shall act solely on behalf of the holders of such QUIPS and
not on behalf of MCI as holder of the Issuer's Common Securities, and only the
holders of such QUIPS will have the right to direct the Property Trustee to act
on their behalf.
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LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to each Trust Agreement, each Issuer shall automatically terminate
upon expiration of its term and shall terminate on the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of MCI; (ii) the
distribution of a Like Amount of the Corresponding QUIDS to the holders of its
QUIPS and Common Securities, if MCI, as Depositor, has given written direction
to the Property Trustee to terminate such Issuer (which direction is optional
and wholly within the discretion of MCI, as Depositor); (iii) the redemption of
all of the Issuer's QUIPS and Common Securities following a Special Event; (iv)
the redemption of all of the Issuer's QUIPS as described under "Description of
QUIPS--Redemption or Exchange--Mandatory Redemption"; and (v) the entry by a
court of competent jurisdiction of an order for the dissolution of the Issuer.
If an early termination occurs as described in clause (i), (ii) or (v) above,
the Issuer shall be liquidated by the Issuer Trustees as expeditiously as the
Issuer Trustees determine to be possible by distributing, after satisfaction of
liabilities to creditors of such Issuer as provided by applicable law, to the
holders of such QUIPS and Common Securities a Like Amount of the Corresponding
QUIDS, unless such distribution is determined by the Property Trustee not to be
practical, in which event such holders will be entitled to receive out of the
assets of the Issuer available for distribution to holders, after satisfaction
of liabilities to creditors of such Issuer as provided by applicable law, an
amount equal to, in the case of holders of QUIPS, the aggregate of the
liquidation preference plus accrued and unpaid Distributions thereon to the
date of payment (such amount being the "Liquidation Distribution"). If such
Liquidation Distribution can be paid only in part because such Issuer has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then the amounts payable directly by such Issuer on its QUIPS
shall be paid on a pro rata basis. The holder(s) of such Issuer's Common
Securities will be entitled to receive distributions upon any such liquidation
pro rata with the holders of its QUIPS, except that if a Debenture Event of
Default has occurred and is continuing, the QUIPS shall have a priority over
the Common Securities. A supplemental Indenture may provide that if an early
termination occurs as described in clause (v) above, the Corresponding QUIDS
may be subject to optional redemption in whole (but not in part).
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under each
Trust Agreement (an "Event of Default") with respect to the QUIPS issued
thereunder (whatever the reason for such Event of Default and whether it shall
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(i) the occurrence of a Debenture Event of Default under the Indenture
(see "Description of QUIDS--Debenture Events of Default"); or
(ii) default by the Property Trustee in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days; or
(iii) default by the Property Trustee in the payment of any Redemption
Price of any QUIPS or Common Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Issuer Trustees in such Trust Agreement
(other than a covenant or warranty a default in the performance of which or
the breach of which is dealt with in clause (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the defaulting Issuer
Trustee or Trustees by the holders of at least 25% in aggregate liquidation
preference of the outstanding QUIPS of the applicable Issuer, a written
notice specifying such default or breach and requiring it to be remedied
and stating that such notice is a "Notice of Default" under such Trust
Agreement; or
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(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by MCI to appoint a
successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of such Issuer's QUIPS, the
Administrative Trustees and MCI, as Depositor, unless such Event of Default
shall have been cured or waived. MCI, as Depositor, and the Administrative
Trustees are required to file annually with the Property Trustee a certificate
as to whether or not they are in compliance with all the conditions and
covenants applicable to them under each Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the QUIPS
shall have a preference over the Common Securities upon termination of each
Issuer as described above. See "--Liquidation Distribution Upon Termination".
The existence of an Event of Default does not entitle the holders of QUIPS to
accelerate the maturity thereof.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF QUIPS
If an Event of Default has occurred and is continuing, then the holders of
QUIPS would rely on the enforcement by the Debenture Trustee of its rights as
a holder of the related QUIDS against MCI. Notwithstanding the foregoing, if
an Event of Default has occurred and is continuing and such event is
attributable to the failure of MCI to pay interest or principal on the related
QUIDS on the date such interest or principal is otherwise payable (or in the
case of redemption, on the redemption date), then a holder of QUIPS may
directly institute a proceeding against MCI for enforcement of payment to such
holder of the principal of or interest on the related QUIDS having a principal
amount equal to the aggregate liquidation preference of the QUIPS of such
holder (a "Direct Action") after the respective due date specified in the
related QUIDS. In connection with such Direct Action, MCI will be subrogated
to the rights of such holder of QUIPS under the Trust Agreement to the extent
of any payment made by MCI to such holder of QUIPS in such Direct Action.
REMOVAL OF ISSUER TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing,
the Property Trustee and the Delaware Trustee may be removed at such time by
the holders of a majority in Liquidation Amount of the outstanding QUIPS. In
no event will the holders of the QUIPS have the right to vote to appoint,
remove or replace the Administrative Trustees, which voting rights are vested
exclusively in MCI as the holder of the Common Securities. No resignation or
removal of an Issuer Trustee and no appointment of a successor trustee shall
be effective until the acceptance of appointment by the successor trustee in
accordance with the provisions of the applicable Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the Trust Property
may at the time be located, MCI, as the holder of the Common Securities, and
the Administrative Trustees shall have power to appoint one or more persons
either to act as a co-trustee, jointly with the Property Trustee, of all or
any part of such Trust Property, or to act as separate trustee of any such
property, in either case with such powers as may be provided in the instrument
of appointment, and to vest in such person or persons in such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of the applicable Trust Agreement. In case a Debenture Event of
Default has occurred and is continuing, the Property Trustee alone shall have
power to make such appointment.
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MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any corporation into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which such Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of such Trustee, shall be the successor of such Trustee under each
Trust Agreement, provided such corporation shall be otherwise qualified and
eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE ISSUERS
An Issuer may not merge with or into, consolidate, amalgamate, or be replaced
by, or convey, transfer or lease its properties and assets substantially as an
entirety to any corporation or other Person, except as described below. An
Issuer may, at the request of MCI, with the consent of the Administrative
Trustees and without the consent of the holders of the QUIPS, merge with or
into, consolidate, amalgamate, be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to a trust organized as such
under the laws of any State; provided that (i) such successor entity either (a)
expressly assumes all of the obligations of such Issuer with respect to the
QUIPS or (b) substitutes for the QUIPS other securities having substantially
the same terms as the QUIPS (the "Successor Securities") so long as the
Successor Securities rank the same as the QUIPS rank in priority with respect
to distributions and payments upon liquidation, redemption and otherwise, (ii)
MCI expressly appoints a trustee of such successor entity possessing the same
powers and duties as the Property Trustee as the holder of the Corresponding
QUIDS, (iii) the Successor Securities are listed, or any Successor Securities
will be listed upon notification of issuance, on any national securities
exchange or other organization on which the QUIPS are then listed, if any, (iv)
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not cause the QUIPS (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
holders of the QUIPS (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose identical to that of the
Issuer, (vii) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer, or lease, MCI has received an opinion from independent
counsel to the Issuer experienced in such matters to the effect that (a) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease
does not adversely affect the rights, preferences and privileges of the holders
of the QUIPS (including any Successor Securities) in any material respect and
(b) following such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, neither the Issuer nor such successor entity
will be required to register as an investment company under the Investment
Company Act, and (viii) MCI or any permitted successor or assignee owns all of
the Common Securities of such successor entity and guarantees the obligations
of such successor entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, an Issuer shall not,
except with the consent of holders of 100% in aggregate liquidation preference
of the QUIPS, consolidate, amalgamate, merge with or into, be replaced by or
convey, transfer or lease its properties and assets substantially as an
entirety to any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause
the Issuer or the successor entity to be classified as other than a grantor
trust for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF EACH TRUST AGREEMENT
Except as provided below and under "Description of Guarantees--Amendments and
Assignment" and as otherwise required by law and the applicable Trust
Agreement, the holders of the QUIPS will have no voting rights.
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Each Trust Agreement may be amended from time to time by MCI and the Issuer
Trustees, without the consent of the holders of the QUIPS (i) to cure any
ambiguity, correct or supplement any provisions in such Trust Agreement that
may be inconsistent with any other provision, or to make any other provisions
with respect to matters or questions arising under such Trust Agreement that
shall not be inconsistent with the other provisions of such Trust Agreement, or
(ii) to modify, eliminate or add to any provisions of such Trust Agreement to
such extent as shall be necessary to ensure that the Issuer will be classified
for United States federal income tax purposes as a grantor trust at all times
that any QUIPS and Common Securities are outstanding or to ensure that the
Issuer will not be required to register as an "investment company" under the
Investment Company Act, provided, however, that in the case of clause (i), such
action shall not adversely affect in any material respect the interests of any
holder of QUIPS or Common Securities, and any amendments of such Trust
Agreement shall become effective when notice thereof is given to the holders of
QUIPS and Common Securities. Each Trust Agreement may be amended by the Issuer
Trustees and MCI with (i) the consent of holders representing not less than a
majority (based upon Liquidation Amounts) of the outstanding QUIPS and Common
Securities and (ii) receipt by the Issuer Trustees of an opinion of counsel to
the effect that such amendment or the exercise of any power granted to the
Issuer Trustees in accordance with such amendment will not affect the Issuer's
status as a grantor trust for United States federal income tax purposes or the
Issuer's exemption from status of an "investment company" under the Investment
Company Act, provided, further that without the consent of each holder of QUIPS
and Common Securities, such Trust Agreement may not be amended to (i) change
the amount or timing of any Distribution on the QUIPS and Common Securities or
otherwise adversely affect the amount of any Distribution required to be made
in respect of the QUIPS and Common Securities as of a specified date or (ii)
restrict the right of a holder of QUIPS and Common Securities to institute suit
for the enforcement of any such payment on or after such date.
So long as any Corresponding QUIDS are held by the Property Trustee, the
Issuer Trustees shall not (i) direct the time, method and place of conducting
any proceeding for any remedy available to the Debenture Trustee or executing
any trust or power conferred on the Property Trustee with respect to such
Corresponding QUIDS, (ii) waive any past default that is waiveable under
Section 513 of the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the QUIDS shall be due and payable or
(iv) consent to any amendment, modification or termination of the Indenture or
such Corresponding QUIDS, where such consent shall be required, without, in
each case, obtaining the prior approval of the holders of a majority in
aggregate liquidation preference of all outstanding QUIPS; provided, however,
that where a consent under the Indenture would require the consent of each
holder of Corresponding QUIDS affected thereby, no such consent shall be given
by the Property Trustee without the prior consent of each holder of the
corresponding QUIPS. The Issuer Trustees shall not revoke any action previously
authorized or approved by a vote of the holders of the QUIPS except by
subsequent vote of the holders of the QUIPS. The Property Trustee shall notify
each holder of record of the QUIPS of any notice of default with respect to the
Corresponding QUIDS. In addition to obtaining the foregoing approvals of the
holders of the QUIPS, prior to taking any of the foregoing actions, the Issuer
Trustees shall obtain an opinion of counsel experienced in such matters to the
effect that the Issuer will not be classified as a corporation for United
States federal income tax purposes on account of such action.
Any required approval of holders of QUIPS may be given at a meeting of
holders of QUIPS convened for such purpose or pursuant to written consent. The
Property Trustee will cause a notice of any meeting at which holders of QUIPS
are entitled to vote, or of any matter upon which action by written consent of
such holders is to be taken, to be given to each holder of record of QUIPS in
the manner set forth in the applicable Trust Agreement.
No vote or consent of the holders of QUIPS will be required for an Issuer to
redeem and cancel its QUIPS in accordance with the applicable Trust Agreement.
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Notwithstanding that holders of QUIPS are entitled to vote or consent under
any of the circumstances described above, any of the QUIPS that are owned by
MCI, the Issuer Trustees or any affiliate of MCI or any Issuer Trustees, shall,
for purposes of such vote or consent, be treated as if they were not
outstanding.
PAYMENT AND PAYING AGENCY
Payments in respect of the QUIPS shall be made to DTC, which shall credit the
relevant accounts at DTC on the applicable Distribution Dates or, if any
Issuer's QUIPS are not held by DTC, such payments shall be made by check mailed
to the address of the holder entitled thereto as such address shall appear on
the Register. Unless otherwise specified in the applicable Prospectus
Supplement, the paying agent (the "Paying Agent") shall initially be the
Property Trustee and any co-paying agent chosen by the Property Trustee and
acceptable to the Administrative Trustees and MCI. The Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' written notice to the
Property Trustee and MCI. In the event that the Property Trustee shall no
longer be the Paying Agent, the Administrative Trustees shall appoint a
successor (which shall be a bank or trust company acceptable to the
Administrative Trustees and MCI) to act as Paying Agent.
BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for all of the QUIPS. The QUIPS will be
issued only as fully-registered securities registered in the name of Cede & Co.
(DTC's nominee). One or more fully-registered global certificates will be
issued for the QUIPS of each Issuer, representing in the aggregate the total
number of such Issuer's QUIPS, and will be deposited with DTC.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to the DTC system is also available to
others such as securities brokers and dealers, banks and trust companies that
clear through or maintain custodial relationships with Direct Participants,
either directly or indirectly ("Indirect Participants"). The rules applicable
to DTC and its Participants are on file with the Commission.
Purchases of QUIPS within the DTC system must be made by or through Direct
Participants, which will receive a credit for the QUIPS on DTC's records. The
ownership interest of each actual purchaser of each QUIPS ("Beneficial Owner")
is in turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the Beneficial
Owners purchased QUIPS. Transfers of ownership interests in the QUIPS are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in QUIPS, except in the event that use of the book-
entry system for the QUIPS of such Issuer is discontinued.
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DTC has no knowledge of the actual Beneficial Owners of the QUIPS; DTC's
records reflect only the identity of the Direct Participants to whose accounts
such QUIPS are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Redemption notices shall be sent to Cede & Co. as the registered holder of
the QUIPS. If less than all of an Issuer's QUIPS are being redeemed, DTC's
current practice is to determine by lot the amount of the interest of each
Direct Participant to be redeemed.
Although voting with respect to the QUIPS is limited to the holders of record
of the QUIPS, in those instances in which a vote is required, neither DTC nor
Cede & Co. will itself consent or vote with respect to QUIPS. Under its usual
procedures, DTC would mail an omnibus proxy (the "Omnibus Proxy") to the
Property Trustee as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants
to whose accounts such QUIPS are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Conveyance of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners and the voting rights of Direct
Participants, Indirect Participants and Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Distribution payments on the QUIPS will be made by the Property Trustee to
DTC. DTC's practice is to credit Direct Participants' accounts on the relevant
payment date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payments on
such payment date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices and will be the
responsibility of such Participant and not of DTC, the Property Trustee, the
Issuer thereof or MCI, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of Distributions to DTC is the
responsibility of the Property Trustee, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursements of such payments
to the Beneficial Owners is the responsibility of Direct and Indirect
Participants.
DTC may discontinue providing its services as securities depositary with
respect to any of the QUIPS at any time by giving reasonable notice to the
Property Trustee and MCI. In the event that a successor securities depositary
is not obtained, definitive QUIPS certificates representing such QUIPS are
required to be printed and delivered. MCI, at its option, may decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor depositary). After a Debenture Event of Default, the holders of a
majority in liquidation preference of QUIPS may determine to discontinue the
system of book-entry transfers through DTC. In any such event, definitive
certificates for such Issuer's QUIPS will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Issuers and MCI believe to be accurate,
but the Issuers and MCI assume no responsibility for the accuracy thereof.
Neither the Issuers nor MCI has any responsibility for the performance by DTC
or its Participants of their respective obligations as described herein or
under the rules and procedures governing their respective operations.
REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable Prospectus Supplement, the
Property Trustee will act as registrar and transfer agent for the QUIPS.
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Registration of transfers of QUIPS will be effected without charge by or on
behalf of each Issuer, but upon payment of any tax or other governmental
charges that may be imposed in connection with any transfer or exchange. The
Issuers will not be required to register or cause to be registered the transfer
of their QUIPS after such QUIPS have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of an
Event of Default, undertakes to perform only such duties as are specifically
set forth in each Trust Agreement and, after such Event of Default, must
exercise the same degree of care and skill as a prudent person would exercise
or use in the conduct of his or her own affairs. Subject to this provision, the
Property Trustee is under no obligation to exercise any of the powers vested in
it by the applicable Trust Agreement at the request of any holder of QUIPS
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby. If no Event of Default has occurred
and is continuing and the Property Trustee is required to decide between
alternative causes of action, construe ambiguous provisions in the applicable
Trust Agreement or is unsure of the application of any provision of the
applicable Trust Agreement, and the matter is not one on which holders of QUIPS
are entitled under such Trust Agreement to vote, then the Property Trustee
shall take such action as is directed by MCI and if not so directed, shall take
such action as it deems advisable and in the best interests of the holders of
the QUIPS and the Common Securities and will have no liability except for its
own bad faith, negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Issuers in such a way that no Issuer will be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States federal income tax purposes and so that the Corresponding
QUIDS will be treated as indebtedness of MCI for United States federal income
tax purposes. In this connection, MCI and the Administrative Trustees are
authorized to take any action, not inconsistent with applicable law, the
certificate of trust of each Issuer or each Trust Agreement, that MCI and the
Administrative Trustees determine in their discretion to be necessary or
desirable for such purposes, as long as such action does not materially
adversely affect the interests of the holders of the related QUIPS.
Holders of the QUIPS have no preemptive or similar rights.
No Issuer may borrow money or issue debt or mortgage or pledge any of its
assets.
DESCRIPTION OF GUARANTEES
Each Guarantee will be executed and delivered by MCI concurrently with the
issuance by each Issuer of its QUIPS for the benefit of the holders from time
to time of such QUIPS. Wilmington Trust Company will act as indenture trustee
("Guarantee Trustee") under each Guarantee for the purposes of compliance with
the Trust Indenture Act and each Guarantee will be qualified as an Indenture
under the Trust Indenture Act. This summary of certain provisions of the
Guarantees does not purport to be complete and is subject to, and qualified in
its entirety by reference to, all of the provisions of each Guarantee,
including the definitions therein of certain terms, and the Trust Indenture
Act. The form of the Guarantee has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. Reference in this summary to
QUIPS means that Issuer's QUIPS to which a Guarantee relates. The Guarantee
Trustee will hold each Guarantee for the benefit of the holders of the related
Issuer's QUIPS.
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GENERAL
MCI will irrevocably agree to pay in full on a subordinated basis, to the
extent set forth herein, the Guarantee Payments (as defined below) to the
holders of the QUIPS, as and when due, regardless of any defense, right of set-
off or counterclaim that such Issuer may have or assert other than the defense
of payment. The following payments with respect to the QUIPS, to the extent not
paid by or on behalf of the related Issuer (the "Guarantee Payments"), will be
subject to the Guarantee: (i) any accumulated and unpaid Distributions required
to be paid on such QUIPS, to the extent that such Issuer has funds on hand
available therefor at such time, (ii) the Redemption Price with respect to any
QUIPS called for redemption to the extent that such Issuer has funds on hand
available therefor at such time, or (iii) upon a voluntary or involuntary
dissolution, winding up or liquidation of such Issuer (unless the Corresponding
QUIDS are distributed to holders of such QUIPS), the lesser of (a) the
Liquidation Distribution and (b) the amount of assets of such Issuer remaining
available for distribution to holders of QUIPS. MCI's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts by
MCI to the holders of the applicable QUIPS or by causing the Issuer to pay such
amounts to such holders.
Each Guarantee will be an irrevocable guarantee on a subordinated basis of
the related Issuer's obligations under the QUIPS, but will apply only to the
extent that such related Issuer has funds sufficient to make such payments, and
is not a guarantee of collection.
If MCI does not make interest payments on the Corresponding QUIDS held by the
Issuer, the Issuer will not be able to pay Distributions on the QUIPS and will
not have funds legally available therefor. Each Guarantee will rank subordinate
and junior in right of payment to all Senior Debt of MCI. See "--Status of the
Guarantees". MCI is a non-operating holding company and almost all of the
operating assets of MCI and its consolidated subsidiaries are owned by such
subsidiaries. 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. Accordingly, MCI's
obligations under the Guarantees will be effectively subordinated to all
existing and future liabilities of MCI's subsidiaries, and claimants should
look only to the assets of MCI for payments thereunder. Except as otherwise
provided in the applicable Prospectus Supplement, the Guarantees do not limit
the incurrence or issuance of other secured or unsecured debt of MCI, whether
under the Indenture or any existing or other indenture that MCI may enter into
in the future or otherwise, including MCI's Senior and Subordinated Indentures
entered into with Citibank, N.A. and Bankers Trust Company, respectively.
MCI has, through the applicable Guarantee, the applicable Trust Agreement,
the QUIDS, the Indenture and the Expense Agreement, taken together, fully,
irrevocably and unconditionally guaranteed all of the Issuer's obligations
under the QUIPS. No single document standing alone or operating in conjunction
with fewer than all of the other documents constitutes such guarantee. It is
only the combined operation of these documents that has the effect of providing
a full, irrevocable and unconditional guarantee of the Issuer's obligations
under the QUIPS. See "Relationship Among the QUIPS, the QUIDS and the
Guarantees--General".
STATUS OF THE GUARANTEES
Each Guarantee will constitute an unsecured obligation of MCI and will rank
subordinate and junior in right of payment to all Senior Debt.
Each Guarantee will rank pari passu with all other Guarantees issued by MCI.
Each Guarantee will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Guarantor to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). Each
Guarantee will be held for the benefit of the holders of the related QUIPS.
Each Guarantee will not be discharged except by payment
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of the Guarantee Payments in full to the extent not paid by the Issuer or upon
distribution to the holders of the QUIPS of the Corresponding QUIDS. None of
the Guarantees places a limitation on the amount of additional Senior Debt that
may be incurred by MCI. The communication services business is capital
intensive and MCI anticipates that from time to time it will incur substantial
additional indebtedness constituting Senior Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the related QUIPS (in which case no vote will be
required), no Guarantee may be amended without the prior approval of the
holders of not less than a majority of the aggregate liquidation preference of
such outstanding QUIPS. The manner of obtaining any such approval will be as
set forth under "Description of the QUIPS--Voting Rights; Amendment of Each
Trust Agreement". All guarantees and agreements contained in each Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
MCI and shall inure to the benefit of the holders of the related QUIPS then
outstanding.
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure of MCI
to perform any of its payment or other obligations thereunder. The holders of
not less than a majority in aggregate Liquidation Amount of the related QUIPS
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of such
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under such Guarantee.
Any holder of the QUIPS may institute a legal proceeding directly against MCI
to enforce its rights under such Guarantee without first instituting a legal
proceeding against the Issuer, the Guarantee Trustee or any other person or
entity.
MCI, as guarantor, is required to file annually with the Guarantee Trustee a
certificate as to whether or not MCI is in compliance with all the conditions
and covenants applicable to it under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
default by MCI in performance of any Guarantee, undertakes to perform only such
duties as are specifically set forth in each Guarantee and, after default with
respect to any Guarantee, must exercise the same degree of care and skill as a
prudent person would exercise or use in the conduct of his or her own affairs.
Subject to this provision, the Guarantee Trustee is under no obligation to
exercise any of the powers vested in it by any Guarantee at the request of any
holder of any QUIPS unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby.
TERMINATION OF THE GUARANTEE
Each Guarantee will terminate and be of no further force and effect upon full
payment of the Redemption Price of the related QUIPS, upon full payment of the
amounts payable upon liquidation of the related Issuer or upon distribution of
Corresponding QUIDS to the holders of the related QUIPS. Each Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of the related QUIPS must restore payment of any sums paid
under such QUIPS or such Guarantee.
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GOVERNING LAW
Each Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
THE EXPENSE AGREEMENT
Pursuant to an Expense Agreement entered into by MCI under each Trust
Agreement (the "Expense Agreement"), MCI will irrevocably and unconditionally
guarantee to each person or entity to whom the Issuer becomes indebted or
liable, the full payment of any costs, expenses or liabilities of the Issuer,
other than obligations of the Issuer to pay to the holders of any QUIPS or
other similar interests in the Issuer the amounts due such holders pursuant to
the terms of the QUIPS or such other similar interests, as the case may be.
DESCRIPTION OF CORRESPONDING QUIDS
The Corresponding QUIDS are to be issued in one or more series under the
Indenture with terms corresponding to the terms of the related QUIPS. See
"Description of QUIDS". This summary of certain terms and provisions of, or
relating to, Corresponding QUIDS and the Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Indenture, the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, and to the Trust Indenture
Act. Whenever particular defined terms of the Indenture (as supplemented or
amended from time to time) are referred to herein or in a Prospectus
Supplement, such defined terms are incorporated herein or therein by reference.
GENERAL
Concurrently with the issuance of each Issuer's QUIPS, such Issuer will
invest the proceeds thereof and the consideration paid by MCI for the Common
Securities in a series of Corresponding QUIDS issued by MCI to such Issuer.
Each series of Corresponding QUIDS will be in the principal amount equal to the
aggregate stated Liquidation Amount of the related QUIPS plus MCI's concurrent
investment in the Common Securities and will rank pari passu with all other
series of QUIDS. The Corresponding QUIDS will be unsecured and subordinate and
junior in right of payment to the extent and in the manner set forth in the
Indenture to all Senior Debt of MCI. See "Description of QUIDS--Subordination"
and the Prospectus Supplement relating to any offering of related QUIPS.
OPTIONAL REDEMPTION
Unless otherwise specified in the applicable Prospectus Supplement, MCI may,
at its option, redeem the Corresponding QUIDS of any series in whole at any
time or in part from time to time. Except as otherwise set forth in the
applicable Prospectus Supplement, the redemption price for any Corresponding
QUIDS so redeemed shall be equal to any accrued and unpaid interest thereon to
the date fixed for redemption, plus the principal amount thereof. See
"Description of QUIDS--Redemption".
If a Special Event in respect of an Issuer shall occur and be continuing, MCI
may, at its option, redeem the Corresponding QUIDS at any time within 90 days
of the occurrence of such Special Event, in whole but not in part, subject to
the provisions of the Indenture. The redemption price for any Corresponding
QUIDS shall be equal to 100% of the principal amount of such Corresponding
QUIDS then outstanding plus accrued and unpaid interest to the date fixed for
redemption.
For so long as the applicable Issuer is the holder of all the outstanding
series of Corresponding QUIDS, the proceeds of any such redemption will be used
by the Issuer to redeem the corresponding
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QUIPS in accordance with their terms. MCI may not redeem a series of
Corresponding QUIDS in part unless all accrued and unpaid interest has been
paid in full on all outstanding Corresponding QUIDS of such series for all
interest periods terminating on or prior to the Redemption Date.
CERTAIN COVENANTS OF MCI
MCI will covenant in the Indenture as to each series of Corresponding QUIDS
that if and so long as (i) the Issuer of the related series of QUIPS and Common
Securities is the holder of all such Corresponding QUIDS, (ii) a Tax Event in
respect of such Issuer has occurred and is continuing and (iii) MCI has
elected, and has not revoked such election, to pay Additional Sums in respect
of such QUIPS and Common Securities, MCI will pay to such Issuer such
Additional Sums. MCI will also covenant, as to each series of Corresponding
QUIDS, that it will not, and will not permit any subsidiary of MCI to, (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire,
or make a liquidation payment with respect to, any of MCI's capital stock or
(ii) make any payment of principal, interest or premium, if any, on or repay or
repurchase or redeem any debt securities (including other Corresponding QUIDS)
that rank pari passu with or junior in interest to the Corresponding QUIDS or
make any guarantee payments with respect to the foregoing (other than (a)
dividends or distributions in Common Stock of MCI, (b) redemptions or purchases
of any rights pursuant to MCI's Preferred Stock Rights Plan, or any successor
to such Preferred Stock Rights Plan, and the declaration of a dividend of such
rights or the issuance of Preferred Stock under such plans in the future, (c)
payments under any Guarantee, (d) purchases of Common Stock related to the
issuance of Common Stock under any of MCI's benefit plans for its directors,
officers or employees and (e) purchases of Common Stock required to prevent the
loss or secure the renewal or reinstatement of any government license or
franchise held by MCI or any of its subsidiaries) if at such time (i) there
shall have occurred any event of which MCI has actual knowledge that (a) with
the giving of notice or the lapse of time, or both, would constitute an "Event
of Default" under the Indenture with respect to Corresponding QUIDS of such
series and (b) in respect of which MCI shall not have taken reasonable steps to
cure, (ii) MCI shall be in default with respect to its payment of any
obligations under the related Guarantee or (iii) MCI shall have given notice of
its selection of an Extension Period as provided in the Indenture with respect
to Corresponding QUIDS of such series and shall not have rescinded such notice,
or such Extension Period, or any extension thereof, shall be continuing. MCI
will also covenant, as to each series of Corresponding QUIDS, (i) to maintain
directly or indirectly 100% ownership of the Common Securities of the Issuer to
which Corresponding QUIDS have been issued, provided that certain successors
which are permitted pursuant to the Indenture may succeed to MCI's ownership of
the Common Securities, (ii) not to voluntarily terminate, wind-up or liquidate
any Issuer, except (a) in connection with a distribution of Corresponding QUIDS
to the holders of the QUIPS in liquidation of such Issuer or (b) in connection
with certain mergers, consolidations or amalgamations permitted by the related
Trust Agreement, and (iii) to use its reasonable efforts, consistent with the
terms and provisions of the related Trust Agreement, to cause such Issuer to
remain classified as a grantor trust and not as an association taxable as a
corporation for United States federal income tax purposes.
RELATIONSHIP AMONG THE QUIPS,
THE CORRESPONDING QUIDS AND THE GUARANTEES
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the QUIPS (to the extent
the Issuer has funds available for the payment of such Distributions) are
irrevocably guaranteed by MCI as and to the extent set forth under "Description
of Guarantees". Taken together, MCI's obligations under each series of QUIDS,
the Indenture, the related Trust Agreement, the related Expense Agreement and
the related Guarantee provide, in the aggregate, a full, irrevocable and
unconditional guarantee of payments of distributions and other amounts due on
the related series of QUIPS. No single document
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standing alone or operating in conjunction with fewer than all of the other
documents constitutes such guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Issuer's obligations under the QUIPS. If and to
the extent that MCI does not make payments on any series of Corresponding
QUIDS, such Issuer will not pay Distributions or other amounts due on related
QUIPS. The Guarantees do not cover payment of Distributions when the related
Issuer does not have sufficient funds to pay such Distributions. In such
event, a holder of a series of QUIPS may institute a legal proceeding directly
against MCI to enforce payment of such Distributions to such holder after the
respective due dates. The obligations of MCI under each Guarantee are
subordinate and junior in right of payment to all Senior Debt of MCI.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on each
series of Corresponding QUIDS, such payments will be sufficient to cover
Distributions and other payments due on the related QUIPS, primarily because
(i) the aggregate principal amount of each series of Corresponding QUIDS will
be equal to the sum of the aggregate stated liquidation amount of the related
QUIPS and related Common Securities; (ii) the interest rate and interest and
other payment dates on each series of Corresponding QUIDS will match the
Distribution rate and Distribution and other payment dates for the related
QUIPS; (iii) MCI shall pay for all and any costs, expenses and liabilities of
such Issuer except the Issuer's obligations to holders of its QUIPS under such
QUIPS; and (iv) each Trust Agreement further provides that the Issuer will not
engage in any activity that is not consistent with the limited purposes of
such Issuer.
Notwithstanding anything to the contrary in the Indenture, MCI has the right
to set-off any payment it is otherwise required to make thereunder with and to
the extent MCI has theretofore made, or is concurrently on the date of such
payment making, a payment under the related Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF QUIPS
A holder of any related QUIPS may institute a legal proceeding directly
against MCI to enforce its rights under the related Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, the related
Issuer or any other person or entity.
A default or event of default under any Senior Debt of MCI will not
constitute a default or Event of Default under the Indenture. However, in the
event of payment defaults under, or acceleration of, Senior Debt of MCI, the
subordination provisions of the Indenture provide that no payments may be made
in respect of the Corresponding QUIDS until such Senior Debt has been paid in
full or any payment default thereunder has been cured or waived. Failure to
make required payments on any series of Corresponding QUIDS would constitute
an Event of Default under the Indenture.
LIMITED PURPOSE OF ISSUERS
Each Issuer's QUIPS evidence a beneficial interest in such Issuer, and each
Issuer exists for the sole purpose of issuing its QUIPS and Common Securities
and investing the proceeds thereof in Corresponding QUIDS. A principal
difference between the rights of a holder of a QUIPS and a holder of a
Corresponding QUIDS is that a holder of a Corresponding QUIDS is entitled to
receive from MCI the principal amount of and interest accrued on Corresponding
QUIDS held, while a holder of QUIPS is entitled to receive Distributions from
such Issuer (or from MCI under the applicable Guarantee) if and to the extent
such Issuer has funds available for the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
any Issuer involving the liquidation of the Corresponding QUIDS, the holders
of the related QUIPS will be entitled to receive,
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<PAGE>
out of assets held by such Issuer, the Liquidation Distribution in cash. See
"Description of QUIPS--Liquidation Distribution Upon Termination". Upon any
voluntary or involuntary liquidation or bankruptcy of MCI, the Property
Trustee, as holder of the Corresponding QUIDS, would be a subordinated creditor
of MCI, subordinated in right of payment to all Senior Debt, but entitled to
receive payment in full of principal and interest before any stockholders of
MCI receive payments or distributions. Since MCI is the guarantor under each
Guarantee and has agreed to pay for all costs, expenses and liabilities of each
Issuer (other than the Issuer's obligations to the holders of its QUIPS), the
positions of a holder of such QUIPS and a holder of such Corresponding QUIDS
relative to other creditors and to stockholders of MCI in the event of
liquidation or bankruptcy of MCI would be substantially the same.
PLAN OF DISTRIBUTION
The QUIDS and the QUIPS may be sold in a public offering to or through
underwriters or dealers designated from time to time. MCI and each Issuer may
sell its QUIDS and QUIPS as soon as practicable after effectiveness of the
Registration Statement of which the Prospectus is a part. The names of any
underwriters or dealers involved in the sale of the QUIDS and QUIPS in respect
of which this Prospectus is delivered, the amount or number of QUIDS and QUIPS
to be purchased by any such underwriters and any applicable commissions or
discounts will be set forth in the Prospectus Supplement.
Underwriters may offer and sell QUIDS and QUIPS at a fixed price or prices,
which may be changed, or 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. In connection with the sale of QUIPS, underwriters may be
deemed to have received compensation from MCI and/or the applicable Issuer in
the form of underwriting discounts or commissions and may also receive
commissions. Underwriters may sell QUIDS and QUIPS to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters.
Any underwriting compensation paid by MCI and/or the applicable Issuer to
underwriters in connection with the offering of QUIDS and QUIPS, and any
discounts, concessions or commissions allowed by such underwriters to
participating dealers, will be described in a Prospectus Supplement.
Underwriters and dealers participating in the distribution of QUIDS and QUIPS
may be deemed to be underwriters, and any discounts and commissions received by
them and any profit realized by them on resale of such QUIDS and QUIPS may be
deemed to be underwriting discounts and commissions, under the Securities Act.
Underwriters and dealers may be entitled, under agreement with MCI and the
applicable Issuer, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act, and to
reimbursement by MCI for certain expenses.
In connection with the offering of the QUIPS of any Issuer, such Issuer may
grant to the underwriters an option to purchase additional QUIPS to cover over-
allotments, if any, at the initial public offering price (with an additional
underwriting commission), as may be set forth in the accompanying Prospectus
Supplement. If such Issuer grants any over-allotment option, the terms of such
over-allotment option will be set forth in the Prospectus Supplement for such
QUIPS.
Underwriters and dealers may engage in transactions with, or perform services
for, MCI and/or the applicable Issuer and/or any of their affiliates in the
ordinary course of business.
The QUIDS and the QUIPS will be new issues of securities and will have no
established trading market. Any underwriters to whom QUIDS and QUIPS are sold
for public offering and sale may make a market in such QUIDS and QUIPS, but
such underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. Such QUIDS and QUIPS may or may not be
listed on a national securities exchange or the Nasdaq National Market, as set
forth in the
33
<PAGE>
applicable Prospectus Supplement. No assurance can be given as to the liquidity
of or the existence of trading markets for any QUIDS or QUIPS.
LEGAL OPINIONS
Unless otherwise set forth in the applicable Prospectus Supplement, certain
matters of Delaware law relating to the legality of the QUIPS, the validity of
the Trust Agreements and the formation of the Issuers will be passed upon by
Richards, Layton & Finger, special Delaware counsel to MCI and the Issuers. The
legality of the Guarantees and QUIDS will be passed upon for MCI by Kramer,
Levin, Naftalis & Frankel, New York, New York, and for the Underwriters by
Sullivan & Cromwell, New York, New York. Certain matters relating to United
States federal income tax considerations will be passed upon for MCI by Kramer,
Levin, Naftalis & Frankel.
EXPERTS
The audited consolidated financial statements of MCI and subsidiaries
incorporated herein by reference to MCI's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995 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.
34
<PAGE>
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PRO-
SPECTUS SUPPLEMENT AND THE PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF MCI
COMMUNICATIONS CORPORATION SINCE THE DATE HEREOF OR THAT THE INFORMATION CON-
TAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-----------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors............ S-4
MCI Capital I........... S-9
MCI Communications
Corporation............ S-9
Ratio of Earnings to
Fixed Charges.......... S-10
Use of Proceeds......... S-10
Capitalization.......... S-11
Accounting Treatment.... S-12
Selected Financial
Information............ S-12
Certain Terms of Series
A QUIPS................ S-13
Certain Terms of Series
A QUIDS................ S-15
Certain Federal Income
Tax Consequences....... S-18
Underwriting............ S-21
Legal Opinions.......... S-22
PROSPECTUS
Available Information... 3
Incorporation of Certain
Information by
Reference.............. 3
MCI Communications
Corporation............ 4
The Issuers............. 5
Use of Proceeds......... 6
Ratio of Earnings to
Fixed Charges.......... 6
Description of QUIDS.... 6
Description of QUIPS.... 15
Description of
Guarantees............. 27
Description of
Corresponding QUIDS.... 30
Relationship Among the
QUIPS, the
Corresponding QUIDS and
the Guarantees......... 31
Plan of Distribution.... 33
Legal Opinions.......... 34
Experts................. 34
</TABLE>
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
24,000,000 PREFERRED SECURITIES
MCI CAPITAL I
% CUMULATIVE QUARTERLY
INCOME PREFERRED SECURITIES,
SERIES A (QUIPS SM)
GUARANTEED TO THE EXTENT THE SERIES A
ISSUER HAS FUNDS AS SET FORTH
HEREIN BY
MCI COMMUNICATIONS
CORPORATION
-----------
[MCI LOGO APPEARS HERE]
-----------
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
LEHMAN BROTHERS
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
REPRESENTATIVES OF THE UNDERWRITERS
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with the issuance and distribution of
the Securities covered by this Registration Statement, other than underwriting
discounts and commissions, are as follows:
<TABLE>
<S> <C>
(a)SEC registration fee (actual)................................. $ 258,621
(b)Printing fees and expenses.................................... 300,000
(c)Legal fees and expenses....................................... 250,000
(d)Accounting fees and expenses.................................. 50,000
(e)Blue Sky fees and expenses.................................... 15,500
(f)Nasdaq National Market Listing Fee............................ 50,000
(g)Rating Agency Fees............................................ 40,000
(h)Trustees' Fees................................................ 10,000
(i)Other......................................................... 25,879
----------
Total........................................................ $1,000,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
MCI has in effect an insurance policy covering officers' and directors'
legal liability containing a maximum limit of $50 million per loss per policy
year, including legal fees and expenses, with retained liability for each loss
of $2,000,000 for MCI.
MCI's Restated Certificate of Incorporation, at Section 8, provides as
follows:
(a) No director of this corporation shall be personally liable to this
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director; provided that this provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to this corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
General Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit.
If the General Corporation Law of the State of Delaware is amended after
approval by the stockholders of this paragraph (a) to authorize corporate
action further limiting or eliminating the personal liability of directors,
then the liability of a director of this Corporation shall be limited or
eliminated to the fullest extent permitted by the General Corporation Law
of the State of Delaware, as so amended. No amendment or repeal of this
paragraph (a) shall apply to or have any effect on the liability or alleged
liability of any director of this corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment or
repeal.
(b) This corporation shall, to the fullest extent permitted by Delaware
law, as in effect from time to time, indemnify all persons who are or were
directors, officers and employees of this corporation or any wholly-owned
subsidiary, and all such directors, officers and employees who, at the
request of this corporation, are or were at any time serving any other
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise in any capacity. This corporation may also indemnify all
other persons to the fullest extent permitted by Delaware law.
The General Corporation Law of the State of Delaware, at Section 145,
provides, in pertinent part, that a corporation may indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation), by reason of
II-1
<PAGE>
the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as the
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere plea or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful. In addition, the indemnification of expenses (including
attorneys' fees) is allowed in derivative actions, except no indemnification
is allowed in respect to any claim, issue or matter as to which any such
person has been adjudged to be liable to the corporation, unless and only to
the extent that the Court of Chancery or the court in which such action or
suit was brought decides that indemnification is proper. To the extent that
any such person succeeds on the merits or otherwise, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection therewith. The determination that the person to be
indemnified met the applicable standard of conduct, if not made by a court, is
made by the directors of the corporation by a majority vote of the directors
not party to such an action, suit or proceeding even though less than a quorum
or, if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion or by the stockholders.
Expenses may be paid in advance upon the receipt of undertakings to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. A corporation
may purchase indemnity insurance.
The above described indemnification and advancement of expenses, unless
otherwise provided when authorized or ratified, continue as to a person who
has ceased to be a director, officer, employee or agent and inure to the
benefit of such person's heirs, executors and administrators.
MCI has indemnification agreements with each of its directors which have
been approved by stockholders. The indemnification under the indemnification
agreements differs from that provided in Section 8 of MCI's Certificate of
Incorporation in the following ways: (i) MCI is obligated to advance
litigation expenses to an indemnitee, subject to reimbursement if the
Reviewing Party (as defined in the indemnification agreements) determines that
the director would not be permitted such indemnification under applicable
laws; (ii) MCI must prove that the applicable standard of conduct has not been
met for indemnification if MCI denies protection to a director; (iii) upon a
potential change in control (as defined in the indemnification agreements) MCI
is required to contribute an amount sufficient to pay all claims for which the
indemnitee is entitled to be indemnified to a trust for the benefit of the
indemnitee (subject to an overall maximum amount on such trust); (iv) a
subsequent board of directors, hostile to an indemnitee entitled to
indemnification, will not have the right to make a final determination that
the indemnitee has not met the required standard of care; and (v) the period
of time in which MCI may sue an indemnitee for an action is limited to two
years from the date of accrual of such cause of action.
Reference is made to the Underwriting Agreement Basic Provisions which is
filed as Exhibit 1.01 to this Registration Statement.
Under the Trust Agreements, MCI will agree to indemnify each of the Trustees
of the Issuer or any predecessor Trustee for the Issuer, and to hold the
Trustees harmless against, any loss, damage, claims, liability or expense
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the Trust Agreements,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers
or duties under the Trust Agreements.
II-2
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the Registrants pursuant to the foregoing
provisions, or otherwise, the Registrants have been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrants of expenses incurred or paid by a director, officer or
controlling person of the Registrants in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrants
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
1.01 Proposed form of Underwriting Agreement Basic Provisions for Preferred
Securities.
3.01 Restated Certificate of Incorporation of MCI (incorporated herein by
reference to Exhibit 3(a) to MCI's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994).
3.02 By-Laws of MCI, as amended (incorporated herein by reference to Exhibit
3(ii) to MCI's Registration Statement on Form S-3, Registration No. 33-
57155).
4.01 Junior Subordinated Indenture between MCI and Wilmington Trust Company,
as Debenture Trustee.
4.02* Certificate of Trust of MCI Capital I.
4.03* Trust Agreement of MCI Capital I.
4.04* Certificate of Trust of MCI Capital II.
4.05* Trust Agreement of MCI Capital II.
4.06* Certificate of Trust of MCI Capital III.
4.07* Trust Agreement of MCI Capital III.
4.08* Certificate of Trust of MCI Capital IV.
4.09* Trust Agreement of MCI Capital IV.
4.10 Form of Amended and Restated Trust Agreement (Agreements for MCI
Capital I, MCI Capital II, MCI Capital III and MCI Capital IV are
substantially identical except for names and dates).
4.11 Form of Preferred Security Certificate for MCI Capital I, MCI Capital
II, MCI Capital III and MCI Capital IV (included as Exhibit E of
Exhibit 4.10 hereto).
4.12 Form of Guarantee Agreement (Agreements in respect of MCI Capital I,
MCI Capital II, MCI Capital III and MCI Capital IV are substantially
identical except for names and dates).
4.13 Form of Supplemental Indenture between MCI and Wilmington Trust
Company, as Debenture Trustee (Supplemental Indentures for MCI Capital
I, MCI Capital II, MCI Capital III and MCI Capital IV are substantially
identical except for names and dates).
5.01 Opinion of Kramer, Levin, Naftalis & Frankel, relating to the legality
of the Junior Subordinated Debentures and the Guarantees.
5.02 Opinion of Richards, Layton & Finger, special Delaware counsel,
relating to the legality of the Preferred Securities of MCI Capital I,
MCI Capital II, MCI Capital III and MCI Capital IV.
8.01 Opinion of Kramer, Levin, Naftalis & Frankel, as to certain United
States federal income tax matters.
12.01 Statement Re: Computation of Ratio of Earnings to Fixed Charges
(Incorporated by reference to Exhibit 12 to MCI's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1996).
23.01 Consent of Price Waterhouse LLP.
23.02 Consent of Kramer, Levin, Naftalis & Frankel (included in Exhibit 5.01
hereto).
23.03 Consent of Richards, Layton & Finger, special Delaware counsel
(included in Exhibit 5.02 hereto).
23.04 Consent of Kramer, Levin, Naftalis & Frankel (included in Exhibit 8.01
hereto).
25.01* Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 of Wilmington Trust Company, as Trustee for the Junior
Subordinated Indenture.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
25.02* Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 of Wilmington Trust Company, as Property Trustee for the
Amended and Restated Trust Agreement of MCI Capital I.
25.03* Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 of Wilmington Trust Company, as Guarantee Trustee for the
Guarantee for MCI Capital I.
25.04* Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 of Wilmington Trust Company, as Property Trustee for the
Amended and Restated Trust Agreement of MCI Capital II.
25.05* Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 of Wilmington Trust Company, as Guarantee Trustee for the
Guarantee for MCI Capital II.
25.06* Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 of Wilmington Trust Company, as Property Trustee for the
Amended and Restated Trust Agreement of MCI Capital III.
25.07* Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 of Wilmington Trust Company, as Guarantee Trustee for the
Guarantee for MCI Capital III.
25.08* Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 of Wilmington Trust Company, as Property Trustee for the
Amended and Restated Trust Agreement of MCI Capital IV.
25.09* Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 of Wilmington Trust Company, as Guarantee Trustee for the
Guarantee for MCI Capital IV.
</TABLE>
--------
* Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement;
(i)To include any prospectus required by Section 10(a)(3) of the Securities
Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") that are incorporated by reference
in the Registration Statement.
II-4
<PAGE>
(2) That, for purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(3) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(4) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(5) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section 13(a)
or 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, MCI
COMMUNICATIONS CORPORATION CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE
THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF WASHINGTON AND DISTRICT
OF COLUMBIA ON MAY 20, 1996.
MCI Communications Corporation
By: /s/ Bert C. Roberts, Jr.
----------------------------------
BERT C. ROBERTS, JR. CHAIRMAN
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING OFFICERS AND DIRECTORS
OF MCI COMMUNICATIONS CORPORATION ON MAY 20, 1996 IN THE CAPACITIES INDICATED
BELOW.
SIGNATURE TITLE
--------- -----
/s/ Bert C. Roberts, Jr. Principal Executive Officer,
------------------------------------- Director
BERT C. ROBERTS, JR.
/s/ Douglas L. Maine Principal Financial
------------------------------------- Officer
DOUGLAS L. MAINE
/s/ James M. Schneider Principal Accounting Officer
-------------------------------------
JAMES M. SCHNEIDER
/s/ Clifford L. Alexander, Jr. Director
-------------------------------------
CLIFFORD L. ALEXANDER, JR.
/s/ Judith C. Areen Director
-------------------------------------
JUDITH C. AREEN
/s/ Michael H. Bader Director
-------------------------------------
MICHAEL H. BADER
/s/ Sir Peter L. Bonfield Director
-------------------------------------
SIR PETER L. BONFIELD
II-6
<PAGE>
SIGNATURE TITLE
--------- -----
/s/ Richard M. Jones Director
-------------------------------------
RICHARD M. JONES
/s/ Gordon S. Macklin Director
-------------------------------------
GORDON S. MACKLIN
/s/ Alfred T. Mockett Director
-------------------------------------
ALFRED T. MOCKETT
/s/ K. Rupert Murdoch Director
-------------------------------------
K. RUPERT MURDOCH
Director
-------------------------------------
DR. ALAN W. RUDGE
/s/ Richard B. Sayford Director
-------------------------------------
RICHARD B. SAYFORD
/s/ Gerald H. Taylor Director
-------------------------------------
GERALD H. TAYLOR
/s/ Judith Whittaker Director
-------------------------------------
JUDITH WHITTAKER
/s/ John R. Worthington Director
-------------------------------------
JOHN R. WORTHINGTON
II-7
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, MCI CAPITAL I,
MCI CAPITAL II, MCI CAPITAL III AND MCI CAPITAL IV CERTIFY THAT THEY HAVE
REASONABLE GROUNDS TO BELIEVE THAT THEY MEET ALL OF THE REQUIREMENTS FOR
FILING ON FORM S-3 AND HAVE DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON THEIR BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF WASHINGTON AND DISTRICT OF COLUMBIA ON MAY 20, 1996.
MCI Capital I
(Registrant)
By: MCI Communications Corporation,
as Depositor
By:/s/ Jonelle St. John
----------------------------------
Jonelle St. John
Vice President and Treasurer
MCI Capital II
(Registrant)
By: MCI Communications Corporation,
as Depositor
By:/s/ Jonelle St. John
----------------------------------
Jonelle St. John
Vice President and Treasurer
MCI Capital III
(Registrant)
By: MCI Communications Corporation,
as Depositor
By:/s/ Jonelle St. John
----------------------------------
Jonelle St. John
Vice President and Treasurer
MCI Capital IV
(Registrant)
By: MCI Communications Corporation,
as Depositor
By:/s/ Jonelle St. John
----------------------------------
Jonelle St. John
Vice President and Treasurer
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ------
<C> <S> <C>
1.01 Proposed form of Underwriting Agreement Basic Provisions for
Preferred Securities.........................................
3.01 Restated Certificate of Incorporation of MCI (incorporated
herein by reference to Exhibit 3(a) to MCI's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994).......
3.02 By-Laws of MCI, as amended (incorporated herein by reference
to Exhibit 3(ii) to MCI's Registration Statement on Form S-3,
Registration No. 33-57155)...................................
4.01 Junior Subordinated Indenture between MCI and Wilmington
Trust Company, as Debenture Trustee..........................
4.02* Certificate of Trust of MCI Capital I........................
4.03* Trust Agreement of MCI Capital I.............................
4.04* Certificate of Trust of MCI Capital II.......................
4.05* Trust Agreement of MCI Capital II............................
4.06* Certificate of Trust of MCI Capital III......................
4.07* Trust Agreement of MCI Capital III...........................
4.08* Certificate of Trust of MCI Capital IV.......................
4.09* Trust Agreement of MCI Capital IV............................
4.10 Form of Amended and Restated Trust Agreement (Agreements for
MCI Capital I, MCI Capital II, MCI Capital III and MCI
Capital IV are substantially identical except for names and
dates).......................................................
4.11 Form of Preferred Security Certificate for MCI Capital I, MCI
Capital II, MCI Capital III and MCI Capital IV (included as
Exhibit E of Exhibit 4.10 hereto)............................
4.12 Form of Guarantee Agreement (Agreements in respect of MCI
Capital I, MCI Capital II, MCI Capital III and MCI Capital IV
are substantially identical except for names and dates)......
4.13 Form of Supplemental Indenture between MCI and Wilmington
Trust Company, as Debenture Trustee (Supplemental Indentures
for MCI Capital I MCI Capital II MCI Capital III and MCI
Capital IV are substantially identical except for names and
dates).......................................................
5.01 Opinion of Kramar, Levin, Naftalis & Frankel, relating to the
legality of the Junior Subordinated Debentures and the
Guarantees...................................................
5.02 Opinion of Richards, Layton & Finger, special Delaware
counsel, relating to the legality of the Preferred Securities
of MCI Capital I, MCI Capital II, MCI Capital III and MCI
Capital IV...................................................
8.01 Opinion of Kramer, Levin, Naftalis & Frankel, as to certain
United States federal income tax matters.....................
12.01 Statement Re: Computation of Ratio of Earnings to Fixed
Charges (Incorporated by reference to Exhibit 12 to MCI's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1996)........................................................
23.01 Consent of Price Waterhouse LLP..............................
23.02 Consent of Kramer, Levin, Naftalis & Frankel (included in
Exhibit 5.01 hereto).........................................
23.03 Consent of Richards, Layton & Finger, special Delaware
counsel (included in Exhibit 5.02 hereto)....................
23.04 Consent of Kramer, Levin, Naftalis & Frankel (included in
Exhibit 8.01 hereto).........................................
25.01* Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of Wilmington Trust Company, as Trustee
for the Junior Subordinated Indenture........................
25.02* Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of Wilmington Trust Company, as
Property Trustee for the Amended and Restated Trust Agreement
of MCI Capital I.............................................
25.03* Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of Wilmington Trust Company, as
Guarantee Trustee for the Guarantee for MCI Capital I........
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ------
<C> <S> <C>
25.04* Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of Wilmington Trust Company, as
Property Trustee for the Amended and Restated Trust Agreement
of MCI Capital II............................................
25.05* Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of Wilmington Trust Company, as
Guarantee Trustee for the Guarantee for MCI Capital II.......
25.06* Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of Wilmington Trust Company, as
Property Trustee for the Amended and Restated Trust Agreement
of MCI Capital III...........................................
25.07* Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of Wilmington Trust Company, as
Guarantee Trustee for the Guarantee for MCI Capital III......
25.08* Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of Wilmington Trust Company, as
Property Trustee for the Amended and Restated Trust Agreement
of MCI Capital IV............................................
25.09* Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of Wilmington Trust Company, as
Guarantee Trustee for the Guarantee for MCI Capital IV.......
</TABLE>
--------
* Previously filed.
<PAGE>
Exhibit 1.01
S&C Draft of May 18, 1996
May __, 1996
MCI CAPITAL I
MCI CAPITAL II
MCI CAPITAL III
MCI CAPITAL IV
Cumulative Quarterly Income Preferred Securities
(liquidation amount $25 per preferred security)
guaranteed to the extent set forth in the Guarantee by
MCI COMMUNICATIONS CORPORATION
UNDERWRITING AGREEMENT BASIC PROVISIONS
---------------------------------------
From time to time MCI Capital I, MCI Capital II, MCI Capital III or
MCI Capital IV, each a statutory business trust formed under the laws of the
State of Delaware (each a "Trust" and collectively, the "Trusts"), and MCI
Communications Corporation, a Delaware corporation, as depositor of each trust
and as guarantor (the "Guarantor"), propose to issue and sell certain of the
Trusts' preferred securities (the "Securities") representing undivided
beneficial interests in the assets of such Trusts, guaranteed by the Guarantor
to the extent set forth in the guarantee agreement (the "Guarantee Agreement")
identified in the Terms Agreement (as defined below).
The Trusts and the Guarantor propose to enter into one or more Terms
Agreements (each a "Terms Agreement") in the form of Annex I hereto, with such
additions and deletions as the parties thereto may determine, and, subject to
the terms and conditions stated herein and therein, which shall provide that the
Trust identified in the applicable Terms Agreement (such Trust being the
"Designated Trust" with respect to such Terms Agreement) shall issue and sell
the Securities to the firms named in Schedule I to the applicable Terms
Agreement (such firms constituting the "Underwriters" with respect to such Terms
Agreement and the Securities specified therein).
The Securities specified in such Terms Agreement are referred to as
the "Firm Designated Securities" with respect to such Terms Agreement. If so
specified in such Terms Agreement, the Designated Trust may grant the
Underwriters the right to purchase at their election an additional number of
Securities, specified as provided in such Terms Agreement as provided in Section
2(b) hereof (the "Optional Designated Securities"). The Firm Designated
Securities and any Optional Designated Securities are collectively called the
"Designated Securities." The proceeds of the sale of the Designated Securities
and of
<PAGE>
common securities of the Trust (the "Common Securities") sold to the Guarantor
are to be invested in junior subordinated deferrable interest debentures of the
Guarantor (the "Subordinated Debentures"), to be issued pursuant to a junior
subordinated indenture to be dated as of May __, 1996 (the "Indenture") between
the Guarantor and Wilmington Trust Company, as trustee. The Designated
Securities may be exchangeable into Subordinated Debentures, as specified in
Schedule II to such Terms Agreement. Pursuant to the Guarantee Agreement
identified in the Terms Agreement relating to any particular issuance of
Designated Securities, the Designated Securities will be guaranteed by the
Guarantor to the extent set forth in such Terms Agreement (the "Guarantee").
The terms and rights of any particular issuance of Designated
Securities shall be as specified in the Terms Agreement relating thereto and in
or pursuant to the amended and restated trust agreement (the "Trust Agreement")
identified in such Terms Agreement.
Particular sales of Designated Securities may be made from time to
time to the Underwriters of such Designated Securities, for whom the firms
designated as representatives of the Underwriters of such Securities in the
Terms Agreement relating thereto will act as representatives (the
"Representatives"). The term "Representatives" may also refer to a single firm
acting as sole representative of the Underwriters and to Underwriters who act
without any firm being designated as their representative. These Underwriting
Agreement Basic Provisions (this "Agreement") shall not be construed as an
obligation of any Trust to issue or sell any of the Securities or as an
obligation of any of the Underwriters to purchase any of the Securities. The
obligation of any Trust to issue and sell any of the Securities and the
obligation of any of the Underwriters to purchase any of the Securities shall be
evidenced by the Terms Agreement with respect to the Designated Securities
specified therein. Each Terms Agreement shall specify the aggregate number of
the Firm Designated Securities, the maximum number of Optional Designated
Securities, if any, the initial public offering price of such Firm and Optional
Designated Securities or the manner of determining such price, the terms of the
Designated Securities, including the terms on which, and terms of the securities
into which, the Designated Securities will be exchangeable, the purchase price
to the Underwriters of such Designated Securities, the names of the Underwriters
of such Designated Securities, the names of the Representatives of such
Underwriters, the number of such Designated Securities to be purchased by each
of the
2
<PAGE>
Underwriters and the commission, if any, payable to the Underwriters with
respect thereto and shall set forth the date, time and manner of delivery of
such Firm Designated Securities and Optional Designated Securities, if any, and
payment therefor. The Terms Agreement shall also specify (to the extent not set
forth in the registration statement and prospectus with respect thereto) the
terms of such Designated Securities. A Terms Agreement shall be in the form of
an executed writing (which may be in counterparts), and may be evidenced by an
exchange of telegraphic communications or any other rapid transmission device
designed to produce a written record of communications transmitted. The
obligations of the Underwriters under each Terms Agreement shall be several and
not joint.
SECTION 1. Representations and Warranties.
------------------------------
Each of the Trusts and the Guarantor, jointly and severally,
represents and warrants to each of the Underwriters that:
(i) Due Organization and Qualification. Each Trust has been duly
----------------------------------
organized and is validly existing as a business trust in good standing
under the laws of the State of Delaware, with power and authority to own,
lease and operate its properties and conduct its business as described in
the Prospectus (as defined below); the Guarantor has been duly incorporated
and is validly existing as a corporation in good standing under the laws of
Delaware, with corporate power and authority to own, lease and operate its
properties and conduct its business as described in the Prospectus; and the
Guarantor is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure to so qualify or be in good
standing would not have a material adverse effect on the condition,
financial or otherwise, or the earnings or business affairs of the
Guarantor and its subsidiaries considered as one enterprise.
(ii) Subsidiaries. Each subsidiary of the Guarantor which is a
------------
significant subsidiary (each, a "Significant Subsidiary"), as defined in
Rule 405 of Regulation C of the regulations promulgated under the
Securities Act of 1933, as amended (the "1933 Act"), has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has corporate
power
3
<PAGE>
and authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus, and is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure to so qualify or be in good standing would not have a
material adverse effect on the condition, financial or otherwise, or the
earnings or business affairs of the Guarantor and its subsidiaries
considered as one enterprise; all the outstanding beneficial interests in
the Designated Trust have been duly and validly authorized and issued, are
fully paid and non-assessable and conform to the descriptions thereof
contained in the Prospectus; and all of the issued and outstanding capital
stock of each Significant Subsidiary has been duly authorized and validly
issued, is fully paid and non-assessable and all such shares owned by the
Guarantor, directly or through subsidiaries, are owned free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim or
security (except for any lien or encumbrance permitted pursuant to Article
VI of the Revolving Credit Agreement, dated as of July 8, 1994, among the
Guarantor and Bank of America National Trust and Savings Association, as
agent for the financial institutions party thereto, Articles X and XII of
the indentures, dated as of October 15, 1989 and February 17, 1995, between
the Guarantor and Citibank, N.A. and the indentures, dated as of October
15, 1989, between the Guarantor and Bankers Trust Company, as trustee).
(iii) Registration Statement and Prospectus. A registration statement
-------------------------------------
on Form S-3 (File No. 333-02593) in respect of the Securities, the
Subordinated Debentures and the Guarantees has been filed with the
Securities and Exchange Commission (the "Commission"); such registration
statement and any post-effective amendment thereto, each in the form
heretofore delivered or to be delivered to the Representatives and,
excluding exhibits to such registration statement, but including all
documents incorporated by reference in the prospectus included therein, to
the Representatives for each of the other Underwriters, have been declared
effective by the Commission in such form; no other document with respect to
such registration statement or document incorporated by reference therein
has heretofore been filed, or transmitted for filing, with the Commission
(other than
4
<PAGE>
prospectuses filed pursuant to Rule 424(b) of the rules and regulations of
the Commission under the 1933 Act (the "1933 Act Regulations"), each in the
form heretofore delivered to the Representatives); no stop order suspending
the effectiveness of such registration statement has been issued and no
proceeding for that purpose has been initiated or threatened by the
Commission (any preliminary prospectus or preliminary prospectus supplement
included in such registration statement or filed with the Commission
pursuant to Rule 424(a) under the 1933 Act is hereinafter called a
"Preliminary Prospectus"; the various parts of such registration statement,
including (i) the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the 1933 Act in accordance with Section 3(a)
hereof and deemed by virtue of Rule 430A under the 1933 Act to be part of
the registration statement at the time it was declared effective, (ii) all
exhibits to the registration statement, and (iii) the documents
incorporated by reference in the prospectus contained in the registration
statement at the time such part of the registration statement became
effective but excluding Forms T-1, each as amended at the time such part of
the registration statement became effective, are hereinafter collectively
called the "Registration Statement"; the prospectus relating to the
Securities, the Subordinated Debentures and the Guarantees, in the form in
which it has most recently been filed, or transmitted for filing, with the
Commission on or prior to the date of the applicable Terms Agreement, is
hereinafter called the "Prospectus"; any reference herein to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to the
applicable form under the 1933 Act, as of the date of such Preliminary
Prospectus or Prospectus, as the case may be; any reference to any
amendment or supplement to any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include any documents filed after the date
of such Preliminary Prospectus or Prospectus, as the case may be, under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and
incorporated by reference in such Preliminary Prospectus or Prospectus, as
the case may be; any reference to any amendment to the Registration
Statement shall be deemed to refer to and include any annual report of the
Guarantor filed pursuant to Section 13(a) or 15(d) of the 1934 Act after
the effective date of the Registration Statement that is incorporated by
reference in the Registration Statement; and any reference to the
Prospectus as
5
<PAGE>
amended or supplemented shall be deemed to refer to the Prospectus as
amended or supplemented in relation to the applicable Designated Securities
in the form in which it is filed with the Commission pursuant to Rule
424(b) under the 1933 Act in accordance with Section 3(a) hereof, including
any documents incorporated by reference therein as of the date of such
filing); the Registration Statement and the Prospectus conform, and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the 1933 Act and the Trust Indenture Act of 1939, as amended (the "1939
Act"), and the rules and regulations of the Commission thereunder; and the
Registration Statement and any amendment thereto, as of the applicable
effective date, do not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and the
Prospectus and any amendment or supplement thereto, as of the applicable
filing date, do not and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading.
(iv) Incorporated Documents. The documents incorporated by reference
----------------------
in the Prospectus, when they became effective or were filed with the
Commission, as the case may be, conformed in all material respects to the
requirements of the 1933 Act or the 1934 Act, as applicable, and the rules
and regulations of the Commission promulgated thereunder (the "1934 Act
Regulations"), and none of such documents contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; and any further
documents so filed and incorporated by reference in the Prospectus or any
further amendment or supplement thereto, when such documents become
effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the 1933 Act or the
1934 Act, as applicable, and the 1934 Act Regulations and will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading.
6
<PAGE>
(v) Accountants. The accountants who certified the financial
-----------
statements of the Guarantor and its subsidiaries included in or
incorporated by reference in the Prospectus are independent public
accountants as required by the 1933 Act and the 1933 Regulations.
(vi) Financial Statements. The financial statements of the Guarantor
--------------------
and its consolidated subsidiaries included or incorporated by reference in
the Registration Statement and the Prospectus present fairly in all
material respects the consolidated financial position of the Guarantor and
its consolidated subsidiaries as of the dates indicated and the
consolidated results of their operations for the periods specified; and,
except as stated therein, said financial statements have been prepared in
conformity with generally accepted accounting principles in the United
States applied on a consistent basis.
(vii) Material Changes. Since the respective date as of which
----------------
information is given in the Registration Statement and the Prospectus,
except as otherwise stated therein or contemplated thereby, there has not
been any change in the capital stock (other than pursuant to MCI's benefit
plans for its officers, directors or employees and as required to prevent
the loss or secure the renewal or reinstatement of any governmental license
or franchise held by MCI or any of its subsidiaries) or long-term debt of
the Guarantor or any of its subsidiaries in excess of $____________ or any
material adverse change in the condition, financial or otherwise, or
earnings or business affairs of the Guarantor and its consolidated
subsidiaries, considered as one business enterprise, whether or not arising
in the normal course of business.
(viii) No Defaults. Neither the Guarantor nor any of its subsidiaries
-----------
is in violation of its charter or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease
or other instrument to which it is a party or by which it or its properties
are bound, except where such violation or default would not have a material
adverse effect on the condition, financial or otherwise, or earnings or
business affairs of the Guarantor and its consolidated subsidiaries
considered as one enterprise; and the execution and delivery of any
applicable Terms Agreement to which this Agreement is attached and of which
it forms a part and the consummation of the transactions contemplated
herein
7
<PAGE>
and therein have been duly authorized by all necessary corporate action and
do not conflict with or constitute a breach of, or default under, or result
in the creation, imposition or violation of any lien, charge or encumbrance
upon any property or assets of the Guarantor or any of its subsidiaries
pursuant to, (A) the charter or by-laws of the Guarantor, (B) any law,
administrative regulation or administrative or court order or decree
applicable to the Guarantor, (C) any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which the Guarantor or any
such subsidiary is a party or by which it or any of them is bound or to
which any of the property or assets of the Guarantor or any such subsidiary
is subject, where such conflict, breach or default, or lien, charge or
encumbrance has a material adverse effect on the condition, financial or
otherwise, or the earnings or business affairs of the Guarantor and its
subsidiaries considered as one enterprise.
(ix) Legal Proceedings; Contracts. Except as set forth or
----------------------------
incorporated by reference in the Prospectus, there is no action, suit or
proceeding before or by any court or governmental agency or body, domestic
or foreign, now pending, or, to the knowledge of the Guarantor, threatened
against or affecting the Guarantor or any of its subsidiaries, which might,
in the opinion of the Guarantor, result in any material adverse change in
the condition, financial or otherwise, or earnings or business affairs of
the Guarantor and its consolidated subsidiaries considered as one
enterprise, or materially and adversely affect the properties or assets
thereof or materially and adversely affect the Guarantor's ability to
consummate the transactions contemplated by (a) the applicable Terms
Agreement to which this Agreement is attached and of which it forms a part
or (b) the Guarantor Agreements (as defined below); and there are no
contracts or documents of the Guarantor or any of its subsidiaries which
are required to be filed as exhibits to the Registration Statement by the
1933 Act or by the 1933 Act Regulations which have not been so filed or
incorporated by reference as exhibits thereto.
(x) No Authorization, Approval or Consent Required. No authorization,
----------------------------------------------
approval, consent, order or decree of any court or governmental authority
is necessary in connection with (a) the issuance and sale of the Securities
and the Common Securities by any applicable Trust, (b) the purchase of the
Subordinated Debentures by such Trust, (c) the issuance of the
8
<PAGE>
Guarantees or the Subordinated Debentures by the Guarantor, or (d) the
consummation by any applicable Trust or the Guarantor of the transactions
contemplated by (I) any Terms Agreement to which this Agreement is attached
and of which it forms a part (II), any Overallotment Option (as defined in
Section 2(b) hereof), or (III) any Guarantor Agreement, except such as have
been, or will have been, prior to each Time of Delivery (as defined in
Section 2(c) hereof), obtained under the 1933 Act and the 1939 Act and such
consents, approvals, authorizations, registrations or qualifications as may
be required under state securities or Blue Sky laws.
(xi) Regulatory Certificates, Authorities and Permits. The Guarantor
------------------------------------------------
and its subsidiaries possess such certificates, authorities or permits
issued by the appropriate state, federal or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them, except where
the failure to possess such certificates, authorities or permits would not
have a material adverse effect on the condition, financial or otherwise, or
the earnings or business affairs of the Guarantor and its subsidiaries
considered as one enterprise; and neither the Guarantor nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially and adversely affect the
condition, financial or otherwise, or the earnings or business affairs of
the Guarantor and its subsidiaries considered as one enterprise.
(xii) Authorization and Validity of the Securities. The Securities
--------------------------------------------
have been duly and validly authorized, and, when (a) the Firm Designated
Securities are issued and delivered pursuant to the Terms Agreement with
respect to such Designated Securities to which this Agreement is attached
and of which it forms a part and, (b) in the case of any Optional
Designated Securities, which such Optional Designated Securities are issued
and delivered pursuant to Overallotment Options with respect to such
Securities, such Designated Securities will be duly and validly issued and
fully paid and non-assessable beneficial interests in the Designated Trust,
entitled to the benefits provided by the applicable Trust Agreement, which
Trust Agreement will be substantially in the form filed as an exhibit to
the Registration Statement; and the Securities conform in
9
<PAGE>
all material respects to the description thereof contained in the
Registration Statement, and the Designated Securities will conform in all
material respects to the description thereof contained in the Prospectus as
amended or supplemented with respect to such Designated Securities.
(xiii) Limitation of Personal Liability. The holders of the Securities
--------------------------------
(the "Securityholders") will be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware.
(xiv) Authorization and Validity of the Common Securities. The Common
---------------------------------------------------
Securities of each Trust have been duly authorized on behalf of each such
Trust by the depositor thereof and upon delivery by each such Trust to the
Guarantor against payment therefor as set forth in the Trust Agreement,
will be duly and validly issued and non-assessable beneficial interests in
such Trust and will conform in all material respects to the description
thereof contained in the Prospectus; the issuance of the Common Securities
is not subject to preemptive or other similar rights; the Common Securities
conform in all material respects to the description thereof contained in
the Registration Statement; and at each Time of Delivery, all of the issued
and outstanding Common Securities of each Designated Trust will be directly
owned by the Guarantor, or a person into which the Guarantor has merged or
with which the Guarantor has been consolidated pursuant to Section 8.01 of
the Indenture, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity.
(xv) Authorization and Validity of the Subordinated Debentures and the
-----------------------------------------------------------------
Guarantees. The Subordinated Debentures have been duly authorized and, when
----------
issued and delivered pursuant to the Indenture, will have been duly
executed, authenticated, issued and delivered and will constitute valid and
legally binding obligations of the Guarantor entitled to the benefits of
the Indenture, which will be substantially in the form filed as an exhibit
to the Registration Statement; the Guarantees have been duly authorized
and, when issued and delivered pursuant to each Guarantee Agreement, will
have been duly issued and delivered and will constitute valid and legally
binding obligations of the Guarantor entitled to the benefits of the
applicable Guarantee Agreement, which will be
10
<PAGE>
substantially in the form filed as an exhibit to the Registration
Statement; the Indenture, the Trust Agreements and the Guarantee Agreements
(collectively, the "Guarantor Agreements") have been duly authorized and
duly qualified under the 1939 Act and, when executed and delivered by the
Guarantor and, (a) in the case of each Guarantee Agreement, by the
Guarantee Trustee (as defined in the Guarantee Agreement), (b) in the case
of each Trust Agreement, by the Trustees (as defined in the Trust
Agreement) and, (c) in the case of the Indenture, by the trustee named
therein (the "Debenture Trustee"), will constitute valid and legally
binding instruments, enforceable in accordance with their respective terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors'
rights and to general equity principles; and the Guarantees, the
Subordinated Debentures and the Guarantor Agreements will conform in all
material respects to the descriptions thereof in the Prospectus.
(xvi) No Conflicts With Respect to the Securities. Neither (a) the
-------------------------------------------
issue and sale of the Securities by the applicable Trust, (b) the
compliance by such Trust with all of the provisions of any Terms Agreement
to which this Agreement is attached and of which it forms a part, each
Overallotment Option, if any, the Designated Securities and each Trust
Agreement, (c) the execution, delivery and performance by the applicable
Trust of the Trust Agreement, nor (d) the consummation of the transactions
contemplated herein or therein will conflict with or constitute a breach
of, or default under, or result in the creation, imposition or violation of
any lien, charge or encumbrance upon any property or assets of such Trust
pursuant to, (A) the Trust Agreement of such Trust, (B) any law,
administrative regulation or administrative or court order or decree
applicable to such Trust, (C) any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which such Trust is a party
or by which such Trust is bound or to which any of the property or assets
of such Trust is subject, where, in each such case, such conflict, breach
or default, or lien, charge or encumbrance would have a material adverse
effect on the condition, financial or otherwise, or the earnings or
business affairs of such Trust.
(xvii) No Conflicts With Respect to the Guarantees and the Subordinated
----------------------------------------------------------------
Debentures. Neither (a) the issuance by the Guarantor of the Guarantees
----------
and the
11
<PAGE>
Subordinated Debentures, (b) the compliance by the Guarantor with all of
the provisions of any Terms Agreement to which this Agreement is attached
and forms a part and each Overallotment Option, if any, the Guarantees, the
Subordinated Debentures and the Guarantor Agreements, (c) the execution,
delivery and performance by the Guarantor of the Guarantor Agreements, nor
(d) the consummation of the transactions contemplated herein or therein
will conflict with or constitute a breach of, or default under, or result
in the creation, imposition or violation of any lien, charge or encumbrance
upon any property or assets of the Guarantor or any of its subsidiaries
pursuant to, (A) the charter or by-laws of the Guarantor, (B) any law,
administrative regulation or administrative or court order or decree
applicable to the Guarantor, (C) any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which the Guarantor or any
such subsidiary is a party or by which it or any of them is bound or to
which any of the property or assets of the Guarantor or any such subsidiary
is subject, where, in each such case, such conflict, breach or default, or
lien, charge or encumbrance would have a material adverse effect on the
condition, financial or otherwise, or the earnings or business affairs of
the Guarantor and its subsidiaries considered as one enterprise.
(xviii) 1940 Act. Neither any Trust nor the Guarantor is and, after
--------
giving effect to the offering and sale of the Securities, will be, an
"investment company" or an entity "controlled" by an "investment company",
as such terms are defined in the Investment Company Act of 1940, as amended
(the "1940 Act").
(xix) Authorization of this Agreement and the Terms Agreement. The
-------------------------------------------------------
Terms Agreement to which this Agreement is attached and of which it forms a
part, as of the date of such Terms Agreement, will have been duly
authorized, executed and delivered by the Guarantor and the Designated
Trust.
(xx) Doing Business With Cuba. The Guarantor and its affiliates have
------------------------
complied, and as of the date of any Terms Agreement to which this Agreement
is attached and forms a part will comply, with all of the provisions of
Section 517.075, Florida Statutes, and all rules and regulations
promulgated thereunder, relating to Issuers doing business in Cuba.
12
<PAGE>
SECTION 2. Purchase and Sale.
-----------------
(a) Upon the execution of the Terms Agreement applicable to any
Designated Securities and authorization by the Representatives of the release of
the Firm Designated Securities, the several Underwriters propose to offer the
Firm Designated Securities for sale upon the terms and conditions set forth in
the Prospectus as amended or supplemented in relation to the applicable
Designated Securities.
(b) The Designated Trust may specify in the Terms Agreement
applicable to any Designated Securities that the Designated Trust thereby grants
to the Underwriters the right (an "Overallotment Option") to purchase at their
election up to the number of Optional Designated Securities set forth in such
Terms Agreement, on the terms set forth in the paragraph next above, for the
sole purpose of covering over-allotments in the sale of the Firm Designated
Securities. Any such election to purchase Optional Designated Securities may be
exercised by written notice from the Representatives to the Designated Trust and
the Guarantor, given within a period specified in the Terms Agreement, setting
forth the aggregate number of Optional Designated Securities to be purchased and
the date on which such Optional Designated Securities are to be delivered, as
determined by the Representatives, but in no event earlier than the First Time
of Delivery (as defined in Section 2(c) hereof) or, unless the Representatives,
the Designated Trust and the Guarantor otherwise agree in writing, earlier than
or later than the respective number of business days after the date of such
notice set forth in such Terms Agreement.
The number of Optional Designated Securities to be added to the number
of Firm Designated Securities to be purchased by each Underwriter as set forth
in Schedule I to the Terms Agreement applicable to such Designated Securities
shall be, in each case, the number of Optional Designated Securities which the
Designated Trust and the Guarantor have been advised by the Representatives have
been attributed to such Underwriter; provided that, if the Designated Trust and
the Guarantor have not been so advised, the number of Optional Designated
Securities to be so added shall be, in each case, that proportion of Optional
Designated Securities which the number of Firm Designated Securities to be
purchased by such Underwriter under such Terms Agreement bears to the aggregate
number of Firm Designated Securities (rounded as the Representatives may
determine to the nearest 100 securities). The total number of Designated
Securities to be purchased by all the Underwriters pursuant to such Terms
Agreement shall be the aggregate number of Firm
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<PAGE>
Designated Securities set forth in Schedule I to such Terms Agreement plus the
aggregate number of Optional Designated Securities which the Underwriters elect
to purchase.
(c) Certificates for the Firm Designated Securities and the Optional
Designated Securities to be purchased by each Underwriter pursuant to the Terms
Agreement relating thereto, in the form specified in such Terms Agreement, and
in such authorized denominations and registered in such names as the
Representatives may request upon at least forty-eight hours' prior notice to the
Designated Trust and the Guarantor, shall be delivered by or on behalf of the
Designated Trust to the Representatives for the account of such Underwriter,
against payment by such Underwriter or on its behalf of the purchase price
therefor by wire transfer of Federal funds to an account designated by the
Designated Trust, payable to the order of the Designated Trust in the funds
specified in such Terms Agreement, (i) with respect to the Firm Designated
Securities, all in the manner and at the place and time and date specified in
such Terms Agreement or at such other place and time and date as the
Representatives, the Designated Trust and the Guarantor may agree upon in
writing, such time and date being herein called the "First Time of Delivery" and
(ii) with respect to the Optional Designated Securities, if any, in the manner
and at the time and date specified by the Representatives in the written notice
given by the Representatives of the Underwriters' election to purchase such
Optional Designated Securities, or at such other time and date as the
Representatives, the Designated Trust and the Guarantor may agree upon in
writing, such time and date, if not the First Time of Delivery, herein called
the "Second Time of Delivery". Each such time and date for delivery is herein
called a "Time of Delivery".
SECTION 3. Covenants of the Designated Trust and the Guarantor.
---------------------------------------------------
Each of the Designated Trust and the Guarantor, jointly and severally,
agrees with each of the Underwriters of any Designated Securities:
(a) Preparation of Prospectus Supplement. To prepare the Prospectus
------------------------------------
as amended and supplemented in relation to the applicable Designated
Securities in a form approved by the Representatives and to file such
Prospectus pursuant to Rule 424(b) under the 1933 Act not later than the
Commission's close of business on the second business day following the
execution and delivery of the Terms Agreement relating to the
14
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applicable Designated Securities or, if applicable, such earlier time as
may be required by Rule 424(b); to make no further amendment or any
supplement to the Registration Statement or Prospectus as amended or
supplemented after the date of the Terms Agreement relating to such
Securities and prior to any Time of Delivery for such Securities which
shall be disapproved by the Representatives for such Securities promptly
after reasonable notice thereof.
(b) Certain Events. To advise the Representatives promptly of any
--------------
such amendment or supplement after any Time of Delivery for such Securities
and furnish the Representatives with copies thereof; and for so long as the
delivery of a prospectus is required in connection with the offering or
sale of such Securities, to advise the Representatives, promptly after it
receives notice thereof, (i) of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed with
the Commission, (ii) of the issuance by the Commission of any stop order or
of any order preventing or suspending the use of any prospectus relating to
the Securities, (iii) of the suspension of the qualification of such
Securities or the Subordinated Debentures issuable upon exchange of the
Securities for offering or sale in any jurisdiction, (iv) of the initiation
or threatening of any proceeding for any such purpose, or (v) of any
request by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information; and, in
the event of the issuance of any such stop order or of any such order
preventing or suspending the use of any prospectus relating to the
Securities or suspending any qualification, promptly to use its best
efforts to obtain the withdrawal of such order.
(c) Copies of Registration Statement and Prospectus. To furnish the
-----------------------------------------------
Underwriters with copies of the Prospectus as amended or supplemented in
such quantities as the Representatives may from time to time reasonably
request.
(d) Revisions of Prospectus -- Material Changes. If the delivery of a
-------------------------------------------
prospectus is required at any time in connection with the offering or sale
of the Securities or the Subordinated Debentures issuable upon exchange of
the Securities and if at such time any event shall have occurred as a
result of which the
15
<PAGE>
Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made when such Prospectus is delivered, not
misleading, or, if for any other reason it shall be necessary during such
same period to amend or supplement the Prospectus or to file under the 1934
Act any document incorporated by reference in the Prospectus in order to
comply with the 1933 Act, the 1934 Act or the 1939 Act, to notify the
Representatives and upon their request to file such document and to prepare
and furnish without charge to each Underwriter and to any dealer in
securities as many copies as the Representatives may from time to time
reasonably request of an amended Prospectus or a supplement to the
Prospectus which will correct such statement or omission or effect such
compliance.
(e) Earnings Statement. In the case of the Guarantor, to make
------------------
generally available to its security holders as soon as practicable, but in
any event not later than eighteen months after the effective date of the
Registration Statement (as defined in Rule 158(c) under the 1933 Act), an
earnings statement of the Guarantor and its subsidiaries (which need not be
audited) complying with Section 11(a) of the 1933 Act and the 1933 Act
Rules and Regulations (including, at the option of the Guarantor, Rule
158).
(f) Blue Sky Qualifications. Promptly from time to time to take such
-----------------------
action as the Representatives may reasonably request to qualify such
Securities or the Subordinated Debentures issuable upon exchange of the
Securities for offering and sale under the securities laws of such
jurisdictions as the Representatives may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution
of such Securities, provided that in connection therewith neither the
Designated Trust nor the Guarantor shall be required to qualify as a
foreign trust or corporation or to file a general consent to service of
process in any jurisdiction.
(g) 1934 Act Filings. In the case of the Guarantor, to file promptly
----------------
all reports and any definitive proxy or information statements required to
be filed by the Guarantor with the Commission pursuant to Sections 13(a),
13(c), 14 or 15(d) of the 1934 Act for so long as the delivery of a
prospectus is required
16
<PAGE>
in connection with the offering or sale of such Securities.
(h) Stand-Off Agreement. During the period beginning from the date
-------------------
of the Terms Agreement for such Designated Securities and continuing to and
including the later of (i) the termination of trading restrictions for such
Designated Securities, as notified to the Designated Trust and the
Guarantor by the Representatives and (ii) 30 days after the last Time of
Delivery for such Designated Securities, not to offer, sell, contract to
sell or otherwise dispose of, except as provided hereunder, any Securities,
any other beneficial interests in the assets of the Designated Trust, or
any preferred securities or any other securities of the Designated Trust or
the Guarantor, as the case may be, that are substantially similar to such
Designated Securities (including any guarantee of such securities) or any
securities that are convertible into or exchangeable for, or that represent
the right to receive Securities, other beneficial interests of the
Designated Trust preferred securities or any such substantially similar
securities of either the Designated Trust or the Guarantor (including any
guarantee of such securities) without the prior written consent of the
Representatives.
(i) Issuance of Guarantee. In the case of the Guarantor, to issue the
---------------------
Guarantee concurrently with the issue and sale of the Securities as
contemplated herein or in the Terms Agreement.
(j) Listing of Securities. To list for quotation the Securities on
---------------------
the National Association of Securities Dealers Automated Quotations
National Market ("Nasdaq National Market").
SECTION 4. Payment of Expenses.
-------------------
The Guarantor covenants and agrees with the several Underwriters that
it will pay or cause to be paid the following: (i) the fees, disbursements and
expenses of the Guarantor's counsel and accountants in connection with the
registration of the Securities, the Guarantees and the Subordinated Debentures
under the 1933 Act and all other expenses in connection with the preparation,
printing and filing of the Registration Statement, any Preliminary Prospectus
and the Prospectus and amendments and supplements thereto and the mailing and
delivering of copies thereof to the Underwriters and dealers; (ii) the cost of
printing or producing any Agreement among Underwriters, this Agreement,
17
<PAGE>
any Terms Agreement, any Guarantor Agreement, the Securities and the
Subordinated Debentures and any Blue Sky Memorandum; (iii) all reasonable
expenses in connection with the qualification of the Securities, the Guarantees
and the Subordinated Debentures for offering and sale under state securities
laws as provided in Section 3(f) hereof, including the reasonable fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky survey(s); provided that the
reasonable fees of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky survey(s) shall not exceed
$10,000; (iv) any fees charged by securities rating services for rating the
Securities and the Subordinated Debentures; (v) any filing fees incident to, and
the reasonable fees and disbursements of counsel for the Underwriters in
connection with, any required reviews by the National Association of Securities
Dealers, Inc. of the terms of the sale of the Securities and the issuance of the
Guarantees and the Subordinated Debentures; (vi) the cost of preparing the
Securities and the Subordinated Debentures; (vii) the reasonable fees and
expenses of any Trustee, Debenture Trustee and Guarantee Trustee, and any agent
of any trustee and the reasonable fees and disbursements of counsel for any
trustee in connection with any Trust Agreement, Indenture, Guarantee and the
Securities; (viii) the cost of qualifying the Securities with The Depository
Trust Company; (ix) any fees and expenses in connection with listing the
Securities for quotation on the Nasdaq National Market and the cost of
registering the Securities under Section 12 of the 1934 Act; and (x) all other
costs and expenses incident to the performance of its obligations hereunder and
under any Overallotment Options which are not otherwise specifically provided
for in this Section. It is understood, however, that, except as provided in this
Section, and Sections 6 and 8 hereof, the Underwriters will pay all of their own
costs and expenses, including the fees of their counsel, transfer taxes on
resale of any of the Securities by them, and any advertising expenses connected
with any offers they may make.
SECTION 5. Conditions of the Underwriters' Obligations.
-------------------------------------------
The obligations of the Underwriters of any Designated Securities under
the Terms Agreement relating to such Designated Securities shall be subject, in
the discretion of the Representatives, to the condition that all representations
and warranties and other statements of the Designated Trust and the Guarantor in
or incorporated by reference in the Terms Agreement relating to such Designated
Securities are, at and as of each Time of Delivery for such Designated
Securities, true and correct, the condition that the Designated Trust and the
Guarantor shall have performed
18
<PAGE>
all of their respective obligations hereunder theretofore to be performed, and
the following additional conditions:
(a) The Prospectus and the Registration Statement. The Prospectus as
---------------------------------------------
amended or supplemented in relation to such Designated Securities shall
have been filed with the Commission pursuant to Rule 424(b) within the
applicable time period prescribed for such filing by the 1933 Act Rules and
Regulations and in accordance with Section 3(a) hereof; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to the Representatives' reasonable satisfaction.
(b) Opinion of Underwriters' Counsel. Counsel for the Underwriters
--------------------------------
shall have furnished to the Representatives such opinion or opinions, dated
each Time of Delivery for such Designated Securities, with respect to the
incorporation of the Guarantor and the formation of the Designated Trust,
the validity of the Designated Securities, the Subordinated Debentures, the
Guarantee, the Registration Statement, the Prospectus as amended or
supplemented, as well as such other related matters as the Representatives
may reasonably request, and such counsel shall have received such papers
and information as they may reasonably request to enable them to pass upon
such matters.
(c) Opinion of Guarantor Counsel. Kramer, Levin, Naftalis & Frankel,
----------------------------
as special counsel for the Designated Trust and the Guarantor, shall have
furnished to the Representatives their written opinions, dated each Time of
Delivery for such Designated Securities, respectively, in form and
substance reasonably satisfactory to the Representatives, to the effect
that:
(i) The Guarantor has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware.
(ii) The Guarantor has the corporate power and authority to own,
lease and operate its properties and conduct its business as described
in the Prospectus.
19
<PAGE>
(iii) The Designated Securities have been duly authorized by the
depositor on behalf of the Designated Trust, are duly and validly
issued and non-assessable beneficial interests in the Designated Trust
and are entitled to the benefits provided by the Trust Agreement.
(iv) This Agreement and the Terms Agreement with respect to the
Designated Securities have been duly authorized, executed and
delivered by the Designated Trust and the Guarantor.
(v) Each of the Guarantor Agreements has been duly authorized,
executed and delivered by the Guarantor and (assuming each of the
Guarantor Agreements has been duly authorized, executed and delivered
by the applicable Trustee thereunder) constitutes a valid and binding
agreement of the Guarantor, enforceable against it in accordance with
its terms, except in each case that (A) enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors' rights generally and by general principles
of equity and (B) the remedy of specific performance and injunctive
and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(vi) The issue and sale of the Designated Securities being
delivered at such Time of Delivery and the compliance by the
Designated Trust with the Terms Agreement to which this Agreement is
attached and forms a part, the Designated Securities and the Trust
Agreement with respect to the Designated Securities, the purchase by
the Designated Trust of the Subordinated Debentures and the
consummation of the transactions contemplated herein and in the Trust
Agreement will not result in any violation of the provisions of the
Certificate of Trust or Trust Agreement of the Designated Trust.
(vii) The Subordinated Debentures, in the form certified by the
Guarantor to be true and correct copies, are in the forms prescribed
in or pursuant to the Indenture, have been duly and validly authorized
by the Guarantor by all necessary corporate action on the part of the
Guarantor and, when authenticated, issued and
20
<PAGE>
delivered as specified in or pursuant to the Indenture will be valid
and binding obligations of the Guarantor, enforceable against it in
accordance with their terms, except in each case that (A)
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights
generally and by general principles of equity and (B) the remedy of
specific performance and injunctive and other forms of equitable
relief are subject to certain equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(viii) The Guarantee has been duly authorized and, when issued and
delivered pursuant to the Terms Agreement to which this Agreement is
attached and forms a part, will have been duly executed, issued and
delivered and will be a valid and binding obligation of the Guarantor,
enforceable against it in accordance with its terms, except in each
case that (A) enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and by general principles of equity and
(B) the remedy of specific performance and injunctive and other forms
of equitable relief are subject to certain equitable defenses and to
the discretion of the court before which any proceeding therefor may
be brought.
(ix) The statements set forth in the Prospectus under the caption
"Description of QUIDS", "Description of QUIPS", "Description of
Guarantees", "Description of Corresponding QUIDS" and "Relationship
Among the QUIPS, the Corresponding QUIDS and the Guarantees" insofar
as they purport to summarize certain provisions of documents
specifically referred to therein, are accurate summaries of such
provisions in all material respects.
(x) The Indenture, each of the Trust Agreements and each of the
Guarantees is qualified under the 1939 Act.
(xi) The Registration Statement is effective under the 1933 Act
and, to the best of such counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement has
21
<PAGE>
been issued under the 1933 Act or proceedings therefor initiated or
threatened by the Commission.
(xii) At the time the Registration Statement became effective, the
Registration Statement (other than the financial statements and notes
thereto and related schedules and other financial and statistical data
included or incorporated by reference therein or omitted therefrom and
the Statements of Eligibility of the Trustees on Form T-1) complied as
to form in all material respects with the requirements of the 1933
Act, the 1939 Act and the regulations promulgated under each of those
Acts.
(xiii) No authorization, approval, consent, order or decree of any
United States or Delaware court or governmental authority or agency is
necessary in connection with the issue and sale of the Designated
Securities being delivered at such Time of Delivery or the issuance of
the Guarantee and the Subordinated Debentures or the consummation by
the Designated Trust or the Guarantor of the transactions contemplated
by the Terms Agreement to which this Agreement is attached and forms a
part and the Guarantor Agreements, except such as may be required
under the 1933 Act, the 1939 Act, the regulations promulgated under
each of those Acts or state securities or Blue Sky laws.
(xiv) The issuance by the Guarantor of the Guarantee and the
Subordinated Debentures, the compliance by the Guarantor with all of
the provisions of the Terms Agreement to which this Agreement is
attached and forms a part and the Guarantor Agreements, the execution,
delivery and performance by the Guarantor of the Terms Agreement to
which this Agreement is attached and forms a part and the Guarantor
Agreements and the consummation of the transactions herein and therein
contemplated will not result in any violation of the provisions of the
Guarantor's Certificate of Incorporation or By-laws.
(xv) Each document filed pursuant to the 1934 Act and
incorporated by reference in the Prospectus (other than the financial
statements and notes thereto and related schedules and other financial
data included or incorporated by
22
<PAGE>
reference therein or omitted therefrom) complied when filed as to form
in all material respects with the 1934 Act and the 1934 Act
Regulations thereunder.
(xvi) Neither the Designated Trust nor the Guarantor is an
"investment company" or an entity "controlled" by an "investment
company", as such terms are defined in the 1940 Act.
(d) Opinion of Michael H. Salsbury, Esq., Executive Vice President
--------------------------------------------------------------
and General Counsel. Michael H. Salsbury, Esq., Executive Vice President
-------------------
and General Counsel of the Guarantor, shall have furnished to the
Representatives his written opinions, dated each Time of Delivery for such
Designated Securities, respectively, in form and substance reasonably
satisfactory to the Representatives, to the effect that:
(i) To the best of such counsel's knowledge, the Guarantor is
duly qualified as a foreign corporation to transact business and is in
good standing in each jurisdiction in which such qualification is
required, except where the failure to so qualify or be in good
standing would not have a material adverse effect on the Guarantor and
its subsidiaries considered as one enterprise.
(ii) Each Significant Subsidiary of the Guarantor has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own, lease and operate its properties
and conduct its business as described in the Prospectus, and, to the
best of such counsel's knowledge, is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, except where the
failure to so qualify or be in good standing would not have a material
adverse effect on the Guarantor and its subsidiaries considered as one
enterprise; all of the issued and outstanding capital stock of each
Significant Subsidiary has been duly authorized and validly issued and
is fully paid and non-assessable, and all of such capital stock owned
by the Guarantor, directly or through subsidiaries, is owned free and
clear of
23
<PAGE>
any mortgage, pledge, lien, encumbrance, claim or equity (except for
any lien or encumbrance permitted pursuant to Article VI of the
Revolving Credit Agreement, dated as of July 8, 1994, among the
Guarantor and Bank of America National Trust and Savings Association,
as agent for the financial institutions party thereto, Articles X and
XII of the indentures, dated as of October 15, 1989 and February 17,
1995, between the Guarantor and Citibank, N.A. and the indentures,
dated as of October 15, 1989, between the Guarantor and Bankers Trust
Guarantor, as trustee).
(iii) To the best of such counsel's knowledge, there are no legal
or governmental proceedings pending or threatened which are required
to be disclosed in the Prospectus, other than those disclosed therein,
and all pending legal or governmental proceedings to which the
Guarantor or any subsidiary is a party or of which any of their
property is the subject which are not described in the Prospectus,
including ordinary routine litigation incidental to the business, are,
in the aggregate, not material to the Guarantor and its subsidiaries
considered as one enterprise.
(iv) To the best of such counsel's knowledge, there are no
contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments or documents required to be described or referred to
in the Registration Statement or to be filed as exhibits thereto other
than those described or referred to therein or filed or incorporated
by reference as exhibits thereto, the descriptions thereof or
references thereto are correct in all material respects, and no
default exists in the due performance or observance by the Guarantor
of any material obligation, agreement, covenant or condition contained
in any contract, indenture, mortgage, loan agreement, note, lease or
other instrument so described, referred to, filed or incorporated by
reference which would have a material adverse effect on the Guarantor
and its subsidiaries considered as one enterprise.
(v) The issue and sale of the Designated Securities being
delivered at such Time of Delivery and the compliance by the
Designated Trust with all of the provisions of the Terms Agreement to
which this Agreement is attached and
24
<PAGE>
forms a part, the Designated Securities and the Trust Agreement with
respect to the Designated Securities, the purchase by the Designated
Trust of the Subordinated Debentures and the consummation of the
transactions contemplated herein and in the Trust Agreement will not
conflict with or constitute a breach of, or default under, or result
in the creation or imposition of any lien, charge or encumbrance upon
any material property or assets of the Designated Trust pursuant to,
any material contract, indenture, mortgage, loan agreement, note,
lease or other instrument known to such counsel and to which such
Designated Trust is a party or by which it is bound or to which any of
the material property or assets of such Designated Trust is subject,
or any material United States or Delaware law, administrative
regulation or administrative or court order or decree known to such
counsel to be applicable to such Designated Trust of any United States
or Delaware court or governmental agency, authority or body or any
arbitrator having jurisdiction over such Designated Trust.
(vi) The issuance by the Guarantor of the Guarantee and the
Subordinated Debentures, the compliance by the Guarantor with all of
the provisions of the Terms Agreement to which this Agreement is
attached and forms a part and the Guarantor Agreements, the execution,
delivery and performance by the Guarantor of the Guarantor Agreements
and the consummation of the transactions herein and therein
contemplated will not conflict with or constitute a breach of, or
default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any material property or assets of the
Guarantor or any of its subsidiaries pursuant to, any material
contract, indenture, mortgage, loan agreement, note, lease or other
instrument known to such counsel and to which the Guarantor or any of
its subsidiaries is a party or by which it or any of them is bound or
to which any of the material property or assets of the Guarantor or
any of its subsidiaries is subject, or any material United States or
Delaware law, administrative regulation or administrative or court
order or decree known to such counsel to be applicable to the
Guarantor of any United States or Delaware court or governmental
agency,
25
<PAGE>
authority or body or any arbitrator having jurisdiction over the
Guarantor.
(e) Opinion of Counsel to the Guarantor Relating to the
---------------------------------------------------
Communications Act. Michael H. Salsbury, Esq., Executive Vice President
------------------
and General Counsel of the Guarantor or other counsel to the Guarantor
satisfactory to the Underwriters, shall have furnished to the
Representatives his written opinions, dated each Time of Delivery for such
Designated Securities, respectively, in form and substance reasonably
satisfactory to the Representatives, to the effect that:
(i) Nothing in the Communications Act of 1934, as amended, or
the Telecommunications Act of 1996 (collectively, the "Communications
Act") prevents, impairs, limits or otherwise adversely affects (A) the
due and valid authorization, execution and delivery of the Securities,
the Subordinated Debentures, the Guarantees or the Guarantor
Agreements, (B) the valid and binding nature or enforceability of any
of the provisions of the Securities, the Subordinated Debentures, the
Guarantees or the Guarantor Agreements, (C) any holder of Designated
Securities from being entitled to the benefits of any Trust Agreement
or the Guarantee Agreement, or (D) any holder of Subordinated
Debentures from being entitled to the benefits of the Indenture.
(ii) To the best of such counsel's knowledge, there are no legal
or governmental proceedings pending or threatened under the
Communications Act which are required to be disclosed in the
Prospectus, other than those disclosed therein, and all pending legal
or governmental proceedings under the Communications Act to which the
Guarantor or any subsidiary is a party or of which any of their
property is the subject which are not described in the Prospectus,
including ordinary routine litigation incidental to the business, are,
in the aggregate, not material to the Guarantor and its subsidiaries
considered as one enterprise.
(iii) Insofar as such relates to the Communications Act, no
authorization, approval, consent, order or decree of any court or
governmental authority or agency is necessary in connection with the
sale of the Designated
26
<PAGE>
Securities or the issuance of the Subordinated Debentures and the
Guarantees; and, to the best of such counsel's knowledge, the
execution and delivery of any Terms Agreement to which this Agreement
is attached and forms a part and the Guarantor Agreements and the
consummation of the transactions contemplated herein and therein do
not conflict with, violate or result in the creation or imposition of
any lien, charge or encumbrance upon any material property or assets
of the Guarantor or any of its subsidiaries pursuant to the
Communications Act or any administrative regulations thereunder.
(f) Opinion of Special Delaware Counsel to the Designated Trust.
-----------------------------------------------------------
Richards, Layton & Finger, special Delaware Counsel to the Designated Trust
and the Guarantor, shall have furnished to you, the Guarantor and the
Designated Trust their written opinion, dated the respective Time of
Delivery, in form and substance satisfactory to you, to the effect that
(i) The Designated Trust has been duly created and is validly
existing in good standing as a business trust under the Delaware
Business Trust Act, and all filings required under the laws of the
State of Delaware with respect to the creation and valid existence of
the Designated Trust as a business trust have been made.
(ii) Under the Delaware Business Trust Act and the Trust
Agreement, the Designated Trust has the power and authority to own
property and conduct its business, all as described in the Prospectus.
(iii) The Trust Agreement constitutes a valid and legally binding
obligation of the Guarantor and the Trustees, enforceable against the
Guarantor and the Trustees, in accordance with its terms, subject, as
to enforcement, to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights, to the effect of
applicable policy on the enforceability of provisions relating to
indemnification or contribution, and to general equity principles.
(iv) Under the Delaware Business Trust Act and the Trust
Agreement, the Designated Trust has
27
<PAGE>
the power and authority to (a) execute and deliver, and to perform its
obligations under the Underwriting Agreement and the Terms Agreement
and (b) issue and perform its obligations under the Designated
Securities and the Common Securities.
(v) Under the Delaware Business Trust Act and the Trust
Agreement, the execution and delivery by the Designated Trust of the
Underwriting Agreement and the Terms Agreement, and the performance by
the Designated Trust of its obligations thereunder, have been duly
authorized by all necessary action on the part of the Designated
Trust.
(vi) The Designated Securities have been duly authorized by the
Trust Agreement and are duly and validly issued and, subject to the
qualifications set forth herein, fully paid and non-assessable
beneficial interests in the assets of the Designated Trust and are
entitled to the benefits provided by the Trust Agreement; the
Securityholders, as beneficial owners of the Designated Trust, will be
entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware; provided that such
counsel may note that the Securityholders may be obligated, pursuant
to the Trust Agreement, to (a) provide indemnity and/or security in
connection with and pay taxes or governmental charges arising from
transfers or exchanges of Securities Certificates and the issuance of
replacement Securities Certificates and (b) provide security and
indemnity in connection with requests of or directions to the Property
Trustee (as defined in the Trust Agreement) to exercise its rights and
powers under the Trust Agreement.
(vii) The Common Securities have been duly authorized by the Trust
Agreement and are validly issued and represent beneficial interests in
the assets of the Designated Trust.
(viii) Under the Delaware Business Trust Act and the Trust
Agreement, the issuance of the Designated Securities and the Common
Securities is not subject to preemptive rights.
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(ix) The issuance and sale by the Designated Trust of Designated
Securities and the Common Securities, the execution, delivery and
performance by the Designated Trust of the Underwriting Agreement and
the Terms Agreement, the consummation by the Designated Trust of the
transactions contemplated thereby and compliance by the Designated
Trust with its obligations thereunder will not violate (a) any of the
provisions of the Certificate of Trust of the Designated Trust or the
Trust Agreement, or (b) any applicable Delaware law or administrative
regulation.
(x) Assuming that the Designated Trust derives no income from or
connected with sources within the State of Delaware and has no assets,
activities (other than maintaining the Delaware Trustee and the filing
of documents with the Secretary of State of the State of Delaware) or
employees in the State of Delaware, no authorization, approval,
consent or order of any Delaware court or Delaware governmental
authority or agency is required to be obtained by the Designated Trust
solely in connection with the issuance and sale of the Designated
Securities and the Common Securities (In rendering the opinion
expressed in this paragraph (x), such counsel need express no opinion
concerning the securities laws of the State of Delaware.).
(xi) Assuming that the Designated Trust derives no income from or
connected with sources within the State of Delaware and has no assets,
activities (other than maintaining the Delaware Trustee and the filing
of documents with the Secretary of State of the State of Delaware) or
employees in the State of Delaware, the Designated Trust will be
treated as a grantor trust for United States Federal income tax
purposes and the Securityholders (other than those holders of the
Securities who reside or are domiciled in the State of Delaware) will
have no liability for income taxes imposed by the State of Delaware
solely as a result of their participation in the Designated Trust, and
the Designated Trust will not be liable for any income tax imposed by
the State of Delaware.
In connection with the opinion expressed in paragraph (iii) above, such counsel
need not express an opinion with
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respect to whether the right of the Preferred Security Holders or the Common
Security Holders to institute a legal proceeding directly against any person to
enforce any right of the Property Trustee is consistent with or permitted by
Section 3816 of the Delaware Business Trust Act relating to derivative actions.
(g) Opinion of Tax Counsel to the Designated Trust. Kramer, Levin,
----------------------------------------------
Naftalis & Frankel, as tax counsel for the Designated Trust and the
Guarantor, shall have furnished to you their written opinion, dated the
respective Time of Delivery, in form and substance satisfactory to you, to
the effect that such firm confirms its opinion set forth in the Prospectus
under the caption "Certain Federal Income Tax Consequences".
(h) Rule 10b-5 Statement. In giving its opinion required by
--------------------
subsection (c) of this Section 5, Kramer, Levin, Naftalis & Frankel shall
additionally state that, although they do not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, except for those referred to in
the opinion in subsection (ix) of Section 5(c), based upon specified
participation in connection with the preparation of the Registration
Statement and the Prospectus, nothing has come to their attention that has
caused them to believe that as of its effective date, the Registration
Statement (other than the financial statements and notes thereto and
related schedules and other financial and statistical data included or
incorporated by reference therein and the Statements of Eligibility of the
Trustees on Form T-1, as to which counsel need not comment) or any further
amendment thereto made by the Designated Trust or the Guarantor prior to
such Time of Delivery contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or that, as of its date, the
Prospectus as amended or supplemented or any further amendment or
supplement thereto made by the Designated Trust or the Guarantor prior to
such Time of Delivery (other than the financial statements and notes
thereto and related schedules and other financial and statistical data
included or incorporated by reference therein as to which counsel need not
comment) contained an untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were
30
<PAGE>
made, not misleading or that, as of such Time of Delivery, the Registration
Statement (other than the financial statements and notes thereto and
related schedules and other financial and statistical data included or
incorporated by reference therein and the Statements of Eligibility of the
Trustees on Form T-1, as to which counsel need not comment) contains an
untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(i) Comfort Letter. On the date of the Terms Agreement for such
--------------
Designated Securities, at a time prior to the execution of the Terms
Agreement with respect to the Designated Securities, and at each Time of
Delivery for such Designated Securities, the independent accountants of the
Guarantor who have certified the financial statements of the Guarantor and
its subsidiaries included or incorporated by reference in the Registration
Statement shall have furnished to the Representatives a letter, dated the
effective date of the Registration Statement or the date of the most recent
report filed with the Commission containing financial statements and
incorporated by reference in the Registration Statement, if the date of
such report is later than such effective date, and a letter dated such Time
of Delivery, respectively, to the effect set forth in Annex II hereto, and
with respect to such letter dated such Time of Delivery, as to such other
matters as the Representatives may reasonably request and in form and
substance satisfactory to the Representatives.
(j) No Material Adverse Change With Respect to Guarantor. Since the
----------------------------------------------------
date of the applicable Terms Agreement or since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, there shall have been no change in the capital stock (other
than pursuant to MCI's benefit plans for its officers, directors or
employees and as required to prevent the loss or secure the renewal or
reinstatement of any governmental license or franchise held by MCI or any
of its subsidiaries) or long-term debt of the Guarantor or any of its
subsidiaries or any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of
the Guarantor and its subsidiaries considered as one enterprise, whether or
not arising in the ordinary course of business, the effect of which is in
the judgment of the
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Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Designated Securities on the terms and in the manner contemplated in the
Prospectus as amended relating to the Designated Securities.
(k) No Downgrade. On or after the date of the Terms Agreement
------------
relating to the Designated Securities the rating assigned by any nationally
recognized securities rating agency to any debt securities or preferred
stock of the Guarantor as of the date of any applicable Terms Agreement
shall not have been lowered since that date of such Terms Agreement or no
such rating agency shall have publicly announced that it has placed any
debt securities of the Guarantor on what is commonly termed a "watch list"
for possible downgrading.
(l) No Material Adverse Change With Respect to Markets. On or after
--------------------------------------------------
the date of the Terms Agreement relating to the Designated Securities there
shall not have occurred any of the following: (i) any material adverse
change in the financial markets in the United States or any outbreak or
escalation of hostilities or other national or international calamity or
crisis, the effect of which shall be such as to make it, in the reasonable
judgment of the Representative, impracticable to market the Designated
Securities or enforce contracts for the sale of the Designated Securities,
(ii) trading in any securities of the Guarantor shall have been suspended
by the Commission, the Nasdaq National Market or a national securities
exchange, (iii) trading generally on either the New York Stock Exchange or
the Nasdaq National Market shall have been suspended, or minimum or maximum
prices for trading shall have been fixed, or maximum ranges for prices for
securities shall have been required, by either of said exchanges or by
order of the Commission or any other governmental authority, or (iv) a
banking moratorium shall have been declared by either Federal or New York
authorities.
(m) Listing of Securities. The Designated Securities at each Time of
---------------------
Delivery shall have been duly listed for quotation on Nasdaq National
Market.
(n) Closing Deliveries. The Designated Trust and the Guarantor shall
------------------
have furnished or caused to be furnished to the Representatives at each
Time of Delivery for the Designated Securities certificates of
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officers of the Designated Trust and the Guarantor satisfactory to the
Representatives as to the accuracy of the representations and warranties of
the Designated Trust and the Guarantor herein at and as of such Time of
Delivery, as to the performance by the Designated Trust and the Guarantor
of all of its obligations hereunder to be performed at or prior to such
Time of Delivery, as to the matters set forth in subsections (a) and (j) of
this Section and as to such other matters as the Representatives may
reasonably request.
SECTION 6. Indemnification and Contribution.
--------------------------------
(a) The Designated Trust and the Guarantor, jointly and severally,
will indemnify and hold harmless each Underwriter against any losses, claims,
damages or liabilities, joint or several, to which such Underwriter may become
subject, under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement, the
Prospectus as amended or supplemented, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each Underwriter for any
legal or other expenses reasonably incurred by such Underwriter in connection
with investigating or defending any such action or claim as such expenses are
incurred; provided, however, that neither the Designated Trust nor the Guarantor
shall be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement, the Prospectus as amended or
supplemented, or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Designated Trust or the
Guarantor by any Underwriter of Designated Securities through the
Representatives expressly for use in the Prospectus as amended or supplemented
relating to such Securities.
(b) Each Underwriter will indemnify and hold harmless the Designated
Trust and the Guarantor against any losses, claims, damages or liabilities to
which the Designated Trust or the Guarantor may become subject, under the 1933
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged
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untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement, the Prospectus as amended or supplemented, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement, the Prospectus as amended or
supplemented, or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Designated Trust and the
Guarantor by such Underwriter through the Representatives expressly for use
therein; and will reimburse the Designated Trust and the Guarantor for any legal
or other expenses reasonably incurred by the Designated Trust or the Guarantor
in connection with investigating or defending any such action or claim as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against an indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify such indemnifying party
shall not relieve it from any liability which it may have to any indemnified
party under such subsection, unless such omission prejudices the indemnifying
party's ability to adequately defend such action or claim, or otherwise than
under such subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, which consent shall not be unreasonably withheld, be
counsel to the indemnifying party), and, after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under subsection (a) or (b) above for any legal expenses of other counsel or any
other expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
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indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include any statement as to, or an
admission of, fault, culpability or a failure to act, by or on behalf of any
indemnified party. The indemnifying party shall not be required to indemnify the
indemnified party for any amount paid or payable by the indemnifying party in
the settlement of any claim or action effected without the written consent of
the indemnifying party, which consent shall not be unreasonably withheld.
(d) If the indemnification provided for in this Section 6 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Designated Trust and the Guarantor on the one
hand and the Underwriters of the Designated Securities on the other from the
offering of the Designated Securities to which such loss, claim, damage or
liability (or action in respect thereof) relates. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give in a timely manner the notice
required under subsection (c) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Designated Trust and the Guarantor on the one hand and
the Underwriters of the Designated Securities on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Designated Trust
and the Guarantor on the one hand and such Underwriters on the other shall be
deemed to be in the same proportion as the total net proceeds from such offering
(before deducting expenses) received by the Designated Trust and the Guarantor
bear to the total underwriting
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compensation received by such Underwriters. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Designated Trust and the
Guarantor on the one hand or such Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Designated Trust, the Guarantor and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the applicable Designated Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The obligations of the
Underwriters of Designated Securities in this subsection (d) to contribute are
several in proportion to their respective underwriting obligations with respect
to such Securities and not joint.
(e) The obligations of the Designated Trust and the Guarantor under
this Section 6 shall be in addition to any liability which the Designated Trust
and the Guarantor may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter within the
meaning of the 1933 Act; and the obligations of the Underwriters under this
Section 6 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Designated Trust and the
Guarantor and to each person,
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if any, who controls the Designated Trust and the Guarantor within the meaning
of the 1933 Act.
SECTION 7. Representations, Warranties and Agreements to Survive Delivery.
--------------------------------------------------------------
The respective indemnities, agreements, representations, warranties
and other statements of the Designated Trust or the Guarantor and the several
Underwriters, as set forth in any Terms Agreement to which this Agreement is
attached and forms a part or made by or on behalf of them, respectively,
pursuant to any Terms Agreement to which this Agreement is attached and forms a
part, shall remain in full force and effect, regardless of any investigation (or
any statement as to the results thereof) made by or on behalf of any Underwriter
or any controlling person of any Underwriter, or the Designated Trust or the
Guarantor, or any officer or director or controlling person of the Designated
Trust or the Guarantor, and shall survive delivery of and payment for the
Securities.
SECTION 8. Termination of Agreement.
------------------------
If any Terms Agreement or Overallotment Option shall be terminated
pursuant to Section 9 hereof, neither the Designated Trust nor the Guarantor
shall then be under any liability to any Underwriter with respect to the Firm
Designated Securities or Optional Designated Securities with respect to which
such Terms Agreement shall have been terminated except as provided in Sections 4
and 6 hereof; but, if for any other reason, Designated Securities are not
delivered by or on behalf of the Designated Trust or the Guarantor as provided
herein, the Guarantor will reimburse the Underwriters through the
Representatives for all out-of-pocket expenses approved in writing by the
Representatives, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of such Designated Securities, but the Designated Trust or the
Guarantor shall then be under no further liability to any Underwriter with
respect to such Designated Securities except as provided in Sections 4 and 6
hereof.
SECTION 9. Default by One or More of the Underwriters.
------------------------------------------
If one or more of the Underwriters participating in an offering of
Firm Designated Securities or Optional Designated Securities shall fail at the
applicable Time of Delivery to purchase such Securities which it or they are
obligated to purchase hereunder and under the applicable
37
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Terms Agreement (the "Defaulted Securities"), then the Representatives shall
have the right, within the first 36 hours thereafter, to make arrangements for
one or more of the non-defaulting Underwriters, or any other underwriters, to
purchase all, but not less than all, of the Defaulted Securities in such amounts
as may be agreed upon and upon the terms herein set forth; if, within such first
36 hour period, the Representatives are unable to make arrangements for the
purchase of all of the Defaulted Securities, then the Designated Trust and the
Guarantor shall have the right, within the next 36 hours thereafter, to make
arrangements for any other underwriter(s) reasonably satisfactory to the non-
defaulting Underwriters to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, after such 72 hours neither the Representatives nor the
Designated Trust shall have completed such arrangements for the purchase of all
of the Defaulted Securities, then:
(a) if the aggregate principal amount of Defaulted Securities does
not exceed 10% of the aggregate principal amount of Firm Designated
Securities or the Optional Designated Securities, as the case may be, to be
purchased pursuant to such Terms Agreement, the Designated Trust and the
Guarantor shall have the right to require the non-defaulting Underwriters
named in such Terms Agreement to purchase the full amount thereof in the
proportions that their respective underwriting obligations bear to the
underwriting obligations of all non-defaulting Underwriters, or
(b) if the aggregate principal amount of Defaulted Securities exceeds
10% of the aggregate principal amount of Firm Designated Securities or the
Optional Designated Securities, as the case may be, to be purchased
pursuant to such Terms Agreement, or the Designated Trust and the Guarantor
shall not exercise their right pursuant to Section 9(a) above, the
applicable Terms Agreement shall terminate without liability on the part of
any non-defaulting Underwriter.
No action taken pursuant to this Section 9 shall relieve any
defaulting Underwriter from liability in respect of its default under this
Agreement and the applicable Terms Agreement.
In the event of any such default by any Underwriter or Underwriters as
set forth in this Section 9, either the Representatives or the Designated Trust
shall
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<PAGE>
have the right to postpone the applicable Time of Delivery for a period not
exceed seven days in order to effect any required changes in the Registration
Statement or Prospectus or in any other documents or arrangements.
SECTION 10. Notices.
-------
In all dealings hereunder, the Representatives of the Underwriters of
Designated Securities shall act on behalf of each of such Underwriters, and the
parties hereto shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of any Underwriter made or given by such
Representatives jointly or by such of the Representatives, if any, as may be
designated for such purpose in the Terms Agreement.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Representatives as set forth in the
Terms Agreement; and if to the Designated Trust or the Guarantor shall be
delivered or sent by mail, telex or facsimile transmission to the address of the
Designated Trust or the Guarantor, respectively, set forth in the Registration
Statement, Attention: Secretary; provided, however, that any notice to an
Underwriter pursuant to Section 6(c) hereof shall be delivered or sent by mail,
telex or facsimile transmission to such Underwriter at its address set forth in
its Underwriters' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Designated Trust and the Guarantor by the
Representatives upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.
SECTION 11. Parties.
-------
This Agreement and each Terms Agreement shall be binding upon, and
inure solely to the benefit of, the Underwriters, each Designated Trust, the
Guarantor and, to the extent provided in Sections 6 hereof, the officers and
directors of each Designated Trust, the Guarantor and each person who controls
any Designated Trust or the Guarantor or any Underwriter, and their respective
heirs, executors, administrators, successors and assigns, and no other person
shall acquire or have any right under or by virtue of this Agreement or any such
Terms Agreement. No purchaser of any of the Securities from any Underwriter
shall be deemed a successor or assign by reason merely of such purchase.
SECTION 12. Time of the Essence; Business Day.
---------------------------------
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Time shall be of the essence of each Terms Agreement. As used herein,
the term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
SECTION 13. Governing Law.
-------------
Each Terms Agreement to which this Agreement is attached and forms a
part shall be governed by and construed in accordance with the laws of the State
of New York.
SECTION 14. Counterparts.
------------
Each Terms Agreement may be executed by any one or more of the parties
hereto and thereto in any number of counterparts, each of which shall be deemed
to be an original, but all such respective counterparts shall together
constitute one and the same instrument.
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ANNEX I
Terms Agreement
---------------
Goldman, Sachs & Co.,
[Name(s) of Co-Representative(s),]
As Representatives of the several
Underwriters named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
, 19..
Ladies and Gentlemen:
MCI Capital I, a statutory business trust formed under the laws of the
State of Delaware (the "Designated Trust"), and MCI Communications Corporation,
a Delaware corporation (the "Guarantor"), propose, subject to the terms and
conditions stated herein and in the Underwriting Agreement Basic Provisions (the
"Underwriting Agreement Basic Provisions") of the Designated Trust, MCI Capital
II, MCI Capital III, MCI Capital IV and the Guarantor, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") the Securities
specified in Schedule II hereto (the "Designated Securities" consisting of Firm
Designated Securities and any Optional Designated Securities the Underwriters
may elect to purchase). The Designated Securities are exchangeable into debt
securities of the Guarantor (the "Subordinated Debentures"), as specified in
Schedule II to this Agreement. The Designated Securities will be guaranteed by
the Guarantor to the extent set forth in this Agreement with respect to such
Designated Securities (the "Guarantee"). Each of the provisions of the
Underwriting Agreement Basic Provisions is incorporated herein by reference in
its entirety, and shall be deemed to be a part of this Agreement to the same
extent as if such provisions had been set forth in full herein; and each of the
representations and warranties set forth therein shall be deemed to have been
made at and as of the date of this Terms Agreement, except that each
representation and warranty which refers to the Prospectus in Section 1 of the
Underwriting Agreement Basic Provisions shall be deemed to be a representation
or warranty as of the date of the Underwriting Agreement Basic Provisions in
relation to the Prospectus (as therein defined), and also a representation and
warranty as of the date of this Terms Agreement in relation to the Prospectus as
amended or supplemented relating to the Designated Securities which are the
subject of this Terms Agreement. Each reference to the
<PAGE>
Representatives herein and in the provisions of the Underwriting Agreement Basic
Provisions so incorporated by reference shall be deemed to refer to you. Unless
otherwise defined herein, terms defined in the Underwriting Agreement Basic
Provisions are used herein as therein defined. The Representatives designated to
act on behalf of the Representatives and on behalf of each of the Underwriters
of the Designated Securities pursuant to Section 10 of the Underwriting
Agreement Basic Provisions and the address of the Representatives referred to in
such Section 10 are set forth in Schedule II hereto.
An amendment to the Registration Statement or a supplement to the
Prospectus, as the case may be, relating to the Designated Securities, in the
form heretofore delivered to you is now proposed to be filed with the
Commission.
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement Basic Provisions incorporated herein by reference, (a)
the Designated Trust agrees to issue and sell to each of the Underwriters, and
each of the Underwriters agrees, severally and not jointly, to purchase from the
Designated Trust, at the time and place and at the purchase price to the
Underwriters set forth in Schedule II hereto, the number of Firm Designated
Securities set forth opposite the name of such Underwriter in Schedule I hereto
and, (b) in the event and to the extent that the Underwriters shall exercise the
election to purchase Optional Designated Securities, as provided below, the
Designated Trust agrees to issue and sell to each of the Underwriters, and each
of the Underwriters agrees, severally and not jointly, to purchase from the
Designated Trust at the purchase price to the Underwriters set forth in Schedule
II hereto that portion of the number of Optional Designated Securities as to
which such election shall have been exercised.
The Designated Trust hereby grants to each of the Underwriters the right to
purchase at their election up to the number of Optional Designated Securities
set forth opposite the name of such Underwriter in Schedule I hereto on the
terms referred to in the paragraph next above for the sole purpose of covering
over-allotments in the sale of the Firm Designated Securities. Any such election
to purchase Optional Designated Securities may be exercised by written notice
from the Representatives to the Designated Trust and the Guarantor given within
a period of 15 calendar days after the date of this Terms Agreement, setting
forth the aggregate number of Optional Designated Securities to be purchased and
the date on which such Optional Designated
2
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Securities are to be delivered, as determined by the Representatives, but in no
event earlier than the First Time of Delivery or, unless the Representatives and
the Designated Trust otherwise agree in writing, no earlier than two or later
than ten business days after the date of such notice.
If the foregoing is in accordance with your understanding, please sign and
return to us ten counterparts hereof, and upon acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof,
including the provisions of the Underwriting Agreement Basic Provisions
incorporated herein by reference, shall constitute a binding agreement between
each of the Underwriters and the Designated Trust and the Guarantor. It is
understood that your acceptance of this letter on behalf of each of the
Underwriters is or will be pursuant to the authority set forth in a form of
Agreement among Underwriters, the form of which shall be submitted to the
Designated Trust and the Guarantor for examination, upon
3
<PAGE>
request, but without warranty on the part of the Representatives as to the
authority of the signers thereof.
Very truly yours,
MCI COMMUNICATIONS CORPORATION
By: ___________________________________
Name:
Title:
MCI CAPITAL I
By: MCI Communications Corporation,
as Depositor
By: ___________________________________
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
[Name(s) of Co-Representative(s)]
As Representatives of the Underwriters
Named in Schedule I hereto
By: _________________________________
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
named on Schedule I hereto
4
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Maximum
Number
Number of of Optional
Firm Designated
Designated Securities
Securities Which
to be May be
-----
Underwriter Purchased Purchased
----------- --------- ---------
<S> <C> <C>
Goldman, Sachs & Co................
[Name(s) of Co-Representative(s)]..
[Names of other Underwriters]......
Total
</TABLE>
1
<PAGE>
SCHEDULE II
Designated Trust:
MCI Capital __
Title of Designated Securities:
____% Cumulative Quarterly Income Preferred Securities, Series __ ("QUIPS")
Aggregate principal amount:
Aggregate principal amount of Designated
Securities: $_____________
Price to Public:
100% of the principal amount of the Designated Securities
Purchase Price by Underwriters:
_______% of the principal amount of the Designated Securities
Underwriters' Compensation:
$______ per Designated Security
Specified funds for payment of purchase price:
Same-day funds
Accountants' Letter to be delivered on date of Terms Agreement:
Yes.
Trust Agreement:
Amended and Restated Trust Agreement dated as of ________ __, ____, between
the Guarantor and the Trustees named therein
Indenture:
Indenture dated as of May __, 1996, between the Guarantor and Wilmington
Trust Company, as Debenture Trustee and Supplemental Indenture No. __ dated
as of
2
<PAGE>
________ __, ____, between the Guarantor and the Debenture Trustee
(collectively the "Indenture")
Guarantee:
Guarantee Agreement dated as of ________ __, ____, between Guarantor and
Wilmington Trust Company, as Guarantee Trustee
Maturity:
________ __, ____
Interest Rate:
____%
Interest Payment Dates:
March 31, June 30, September 30 and December 31
Extension Period:
20 quarters
Redemption Provisions:
The redemption provisions set forth in Section 402 of the Trust Agreement
shall apply to the Designated Securities.
Sinking Fund Provisions:
No sinking fund provisions.
Time of Delivery:
10:00 a.m., New York City time
________ __, ____
Closing Location:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Names and addresses of Representatives:
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
3
<PAGE>
ANNEX II
Pursuant to Section 5(i) of the Underwriting Agreement Basic Provisions,
the accountants shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect
to the Designated Trust and the Guarantor and its subsidiaries within the
meaning of the 1933 Act and the 1933 Act Rules and Regulations;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included or incorporated by reference in the Registration
Statement or the Prospectus comply as to form in all material respects with
the applicable accounting requirements of the 1933 Act or the 1934 Act, as
applicable, and the related published rules and regulations thereunder;
and, if applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the consolidated interim financial statements, selected financial data, pro
forma financial information, financial forecasts and/or condensed financial
statements derived from audited financial statements of the Guarantor for
the periods specified in such letter, as indicated in their reports
thereon, copies of which have been separately furnished to the
representatives of the Underwriters (the "Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus and/or included in the Guarantor's quarterly reports on Form 10-
Q incorporated by reference into the Prospectus as indicated in their
reports thereon copies of which have been separately furnished to the
Representatives; and on the basis of specified procedures including
inquiries of officials of the Guarantor who have responsibility for
financial and accounting matters regarding whether the unaudited condensed
consolidated financial statements referred to in paragraph (vi)(A)(i) below
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the 1934 Act and the 1934 Act Rules and
Regulations, nothing came to their
<PAGE>
attention that caused them to believe that the unaudited condensed
consolidated financial statements do not comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act and
the 1934 Act and the 1934 Act Rules and Regulations;
(iv) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Guarantor for the five most recent fiscal years included in the Prospectus
and included or incorporated by reference in Item 6 of the Guarantor's
Annual Report on Form 10-K for the most recent fiscal year agrees with the
corresponding amounts (after restatement where applicable) in the audited
consolidated financial statements for such five fiscal years which were
included or incorporated by reference in the Guarantor's Annual Reports on
Form 10-K for such fiscal years;
(v) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Guarantor and its subsidiaries, inspection of
the minute books of the Guarantor and its subsidiaries since the date of
the latest audited financial statements included or incorporated by
reference in the Prospectus, inquiries of officials of the Guarantor and
its subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such letter, nothing
came to their attention that caused them to believe that:
(A) (i) the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus and/or included or incorporated by reference in
the Guarantor's Quarterly Reports on Form 10-Q incorporated by reference in
the Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the 1934 Act and the 1934 Act Rules
and Regulations, or (ii) any material modifications should be made to the
unaudited condensed consolidated statements of income, consolidated balance
sheets and consolidated statements of cash flows included in the Prospectus
or included in the Guarantor's Quarterly Reports on Form 10-Q incorporated
by reference in the Prospectus, for them
2
<PAGE>
to be in conformity with generally accepted accounting principles;
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding items
in the unaudited consolidated financial statements from which such data and
items were derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial statements
included or incorporated by reference in the Guarantor's Annual Report on
Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not included in
the Prospectus but from which were derived the unaudited condensed
financial statements referred to in clause (A) and any unaudited income
statement data and balance sheet items included in the Prospectus and
referred to in Clause (B) were not determined on a basis substantially
consistent with the basis for the audited financial statements included or
incorporated by reference in the Guarantor's Annual Report on Form 10-K for
the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Prospectus do not
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the 1933 Act Rules and Regulations
thereunder or the pro forma adjustments have not been properly applied to
the historical amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options and stock appreciation rights, upon earn-outs of performance shares
and upon conversions of convertible securities, in each case which were
outstanding on the date of the latest balance sheet included or
incorporated by reference in the Prospectus) or any increase in the
consolidated long-term debt of the Guarantor and its subsidiaries, or any
decreases in consolidated net current assets or stockholders' equity or
other items specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with amounts
shown in the latest balance sheet
3
<PAGE>
included or incorporated by reference in the Prospectus, except in each
case for changes, increases or decreases which the Prospectus discloses
have occurred or may occur or which are described in such letter; and
(F) for the period from the date of the latest financial statements
included or incorporated by reference in the Prospectus to the specified
date referred to in Clause (E) there were any decreases in consolidated net
revenues or operating profit or the total or per share amounts of
consolidated net income or other items specified by the Representatives, or
any increases in any items specified by the Representatives, in each case
as compared with the comparable period of the preceding year and with any
other period of corresponding length specified by the Representatives,
except in each case for increases or decreases which the Prospectus
discloses have occurred or may occur or which are described in such letter;
and
(vi) In addition to the examination referred to in their report(s)
included or incorporated by reference in the Prospectus and the limited
procedures, inspection of minute books, inquiries and other procedures
referred to in paragraphs (iii) and (vi) above, they have carried out
certain specified procedures, not constituting an examination in accordance
with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the
Representatives which are derived from the general accounting records of
the Guarantor and its subsidiaries, which appear in the Prospectus
(excluding documents incorporated by reference), or in Part II of, or in
exhibits and schedules to, the Registration Statement specified by the
Representatives or in documents incorporated by reference in the Prospectus
specified by the Representatives, and have compared certain of such
amounts, percentages and financial information with the accounting records
of the Guarantor and its subsidiaries and have found them to be in
agreement.
All references in this Annex II to the Prospectus shall be deemed to refer
to the Prospectus (including the documents incorporated by reference therein) as
defined in the Underwriting Agreement Basic Provisions as of the date of the
letter delivered on the date of the Terms Agreement for purposes of such letter
and to the Prospectus as amended or supplemented (including the documents
incorporated by reference therein) in relation to the applicable Designated
4
<PAGE>
Securities for purposes of the letter delivered at the Time of Delivery for such
Designated Securities.
5
<PAGE>
EXHIBIT 4.01
S&C Draft of May 14, 1996
================================================================================
MCI COMMUNICATIONS CORPORATION
to
WILMINGTON TRUST COMPANY
Trustee
JUNIOR SUBORDINATED INDENTURE
Dated as of ________ __, 1996
================================================================================
<PAGE>
MCI COMMUNICATIONS CORPORATION
Reconciliation and tie between the Trust Indenture Act of 1939
(including cross-references to provisions of Sections 310 to and including 317
which, pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended
by the Trust Reform Act of 1990, are a part of and govern the Indenture whether
or not physically contained therein) and the Junior Subordinated Indenture,
dated as of ________ __, 1996.
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C>
(S) 310 (a)(1), (2) and (5) ................................................ 609
(a)(3) .................................................. Not Applicable
(a)(4) .................................................. Not Applicable
(b) ................................................................ 608
.................................................................. 610
(c) ..................................................... Not Applicable
(S) 311 (a) ............................................................. 613(a)
(b) ............................................................. 613(b)
(b)(2) ....................................................... 703(a)(2)
............................................................ 703(a)(2)
(S) 312 (a) ................................................................ 701
............................................................... 702(a)
(b) ............................................................. 702(b)
(c) ............................................................. 702(c)
(S) 313 (a) ............................................................. 703(a)
(b) ............................................................. 703(b)
(c) ..................................................... 703(a), 703(b)
(d) ............................................................. 703(c)
(S) 314 (a)(1), (2) and (3) ................................................ 704
(a)(4) ............................................................ 1005
(b) ..................................................... Not Applicable
(c)(1) ............................................................. 102
(c)(2) ............................................................. 102
(c)(3) .................................................. Not Applicable
(d) ..................................................... Not Applicable
(e) ................................................................ 102
(f) ..................................................... Not Applicable
(S) 315 (a) ............................................................. 601(a)
(b) ................................................................ 602
............................................................ 703(a)(6)
(c) ............................................................. 601(b)
(d) ............................................................. 601(c)
(d)(1) ....................................................... 601(a)(1)
(d)(2) ....................................................... 601(c)(2)
(d)(3) ....................................................... 601(c)(3)
(e) ................................................................ 514
(S) 316 (a) ................................................................ 101
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(a)(1)(A) .......................................................... 512
(a)(1)(B) .......................................................... 513
(a)(2) .................................................. Not Applicable
(b) ................................................................ 508
(c) ............................................................. 104(f)
(S) 317 (a)(1) ............................................................. 503
(a)(2) ............................................................. 504
(b) ............................................................... 1003
(S) 318 (a) ................................................................ 107
</TABLE>
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Junior Subordinated Indenture.
-2-
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
-------------------------------------------------------
<S> <C> <C>
SECTION 101. Definitions .................................................. 1
SECTION 102. Compliance Certificate and Opinions ..........................12
SECTION 103. Forms of Documents Delivered to Trustee ......................13
SECTION 104. Acts of Holders ..............................................13
SECTION 105. Notices, Etc. to Trustee and Company .........................15
SECTION 106. Notice to Holders; Waiver ....................................15
SECTION 107. Conflict With Trust Indenture Act ............................16
SECTION 108. Effect of Headings and Table of Contents .....................16
SECTION 109. Successors and Assigns .......................................16
SECTION 110. Separability Clause ..........................................16
SECTION 111. Benefits of Indenture ........................................16
SECTION 112. Governing Law ................................................16
SECTION 113. Non-Business Days ............................................17
<CAPTION>
ARTICLE TWO
SECURITY FORMS
--------------
<S> <C> <C>
SECTION 201. Forms Generally ..............................................17
SECTION 202. Form of Face of Security .....................................18
SECTION 203. Form of Reverse of Security ..................................23
SECTION 204. Additional Provisions Required in Global Security ............27
SECTION 205. Form of Trustee's Certificate of Authentication ..............28
<CAPTION>
ARTICLE THREE
THE SECURITIES
--------------
<S> <C> <C>
SECTION 301. Title and Terms ..............................................28
SECTION 302. Denominations ................................................31
SECTION 303. Execution, Authentication, Delivery and Dating ...............31
SECTION 304. Temporary Securities .........................................33
SECTION 305. Registration, Transfer and Exchange ..........................34
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities .............36
SECTION 307. Payment of Interest; Interest Rights Preserved ...............37
SECTION 308. Persons Deemed Owners ........................................39
SECTION 309. Cancellation .................................................39
SECTION 310. Computation of Interest ......................................40
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 311. Deferrals of Interest Payment Dates ..........................40
SECTION 312. Right of Set-Off .............................................41
SECTION 313. Agreed Tax Treatment .........................................41
SECTION 314. Extension of Stated Maturity; Adjustment of Stated Upon an
Exchange .....................................................42
SECTION 315. CUSIP Numbers ................................................42
<CAPTION>
ARTICLE FOUR
SATISFACTION AND DISCHARGE
--------------------------
<S> <C> <C>
SECTION 401. Satisfaction and Discharge of Indenture ......................43
SECTION 402. Application of Trust Money ...................................44
SECTION 403. Satisfaction, Discharge and Defeasance of Securities of Any
Series .......................................................45
<CAPTION>
ARTICLE FIVE
REMEDIES
--------
<S> <C> <C>
SECTION 501. Events of Default ............................................46
SECTION 502. Acceleration of Maturity; Rescission and Annulment ...........48
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee ......................................................50
SECTION 504. Trustee May File Proofs of Claim .............................51
SECTION 505. Trustee May Enforce Claim Without Possession of Securities ...52
SECTION 506. Application of Money Collected ...............................52
SECTION 507. Limitation on Suits ..........................................53
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest .................................................54
SECTION 509. Restoration of Rights and Remedies ...........................54
SECTION 510. Rights and Remedies Cumulative ...............................55
SECTION 511. Delay or Omission Not Waiver .................................55
SECTION 512. Control by Holders ...........................................55
SECTION 513. Waiver of Past Defaults ......................................56
SECTION 514. Undertaking for Costs ........................................57
SECTION 515. Waiver of Usury, Stay or Extension Laws ......................57
<CAPTION>
ARTICLE SIX
THE TRUSTEE
-----------
<S> <C> <C>
SECTION 601. Certain Duties and Responsibilities ..........................58
SECTION 602. Notice of Defaults ...........................................59
SECTION 603. Certain Rights of Trustee ....................................60
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 604. Not Responsible for Recitals or Issuance of Securities .......61
SECTION 605. May Hold Securities ..........................................61
SECTION 606. Money Held in Trust ..........................................61
SECTION 607. Compensation and Reimbursement ...............................61
SECTION 608. Disqualification; Conflicting Interests ......................62
SECTION 609. Corporate Trustee Required; Eligibility ......................63
SECTION 610. Resignation and Removal; Appointment of Successor ............63
SECTION 611. Acceptance of Appointment by Successor .......................65
SECTION 612. Merger, Conversion, Consolidation or Succession to Business ..67
SECTION 613. Preferential Collection of Claims Against Company ............67
SECTION 614. Appointment of Authenticating Agent ..........................67
<CAPTION>
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
-------------------------------------------------
<S> <C> <C>
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders ....69
SECTION 702. Preservation of Information, Communications to Holders .......70
SECTION 703. Reports by Trustee ...........................................70
SECTION 704. Reports by Company ...........................................71
<CAPTION>
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
----------------------------------------------------
<S> <C> <C>
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms .........71
SECTION 802. Successor Person Substituted .................................72
<CAPTION>
ARTICLE NINE
SUPPLEMENTAL INDENTURES
-----------------------
<S> <C> <C>
SECTION 901. Supplemental Indentures Without Consent of Holders ...........73
SECTION 902. Supplemental Indentures with Consent of Holders ..............75
SECTION 903. Execution of Supplemental Indentures .........................76
SECTION 904. Effect of Supplemental Indentures ............................77
SECTION 905. Conformity with Trust Indenture Act ..........................77
SECTION 906. Reference in Securities to Supplemental Indentures ...........77
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE TEN
COVENANTS
---------
<S> <C> <C>
SECTION 1001. Payment of Principal, Premium and Interest ...................77
SECTION 1002. Maintenance of Office or Agency ..............................78
SECTION 1003. Money for Security Payments to be Held in Trust ..............78
SECTION 1004. Statement as to Compliance ...................................80
SECTION 1005. Waiver of Certain Covenants ..................................80
SECTION 1006. Additional Sums ..............................................81
SECTION 1007. Additional Covenants .........................................82
<CAPTION>
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
------------------------
<S> <C> <C>
SECTION 1101. Applicability of This Article ................................83
SECTION 1102. Election to Redeem; Notice to Trustee ........................83
SECTION 1103. Selection of Securities to be Redeemed .......................83
SECTION 1104. Notice of Redemption .........................................84
SECTION 1105. Deposit of Redemption Price ..................................85
SECTION 1106. Payment of Securities Called for Redemption ..................85
SECTION 1107. Company's Right of Redemption ................................86
<CAPTION>
ARTICLE TWELVE
SINKING FUNDS
-------------
<S> <C> <C>
SECTION 1201. Applicability of Article .....................................87
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities ........87
SECTION 1203. Redemption of Securities for Sinking Fund ....................88
<CAPTION>
ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
---------------------------
<S> <C> <C>
SECTION 1301. Securities Subordinate to Senior Debt ........................90
SECTION 1302. Payment Over of Proceeds Upon Dissolution, Etc. ..............90
SECTION 1303. Prior Payment to Senior Debt Upon Acceleration of Securities .92
SECTION 1304. No Payment When Senior Debt in Default .......................93
SECTION 1305. Payment Permitted If No Default ..............................94
SECTION 1306. Subrogation to Rights of Holders of Senior Debt ..............94
</TABLE>
-iv-
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 1307. Provisions Solely to Define Relative Rights ..................95
SECTION 1308. Trustee to Effectuate Subordination ..........................95
SECTION 1309. No Waiver of Subordination Provisions ........................95
SECTION 1310. Notice to Trustee ............................................96
SECTION 1311. Reliance on Judicial Order or Certificate of Liquidating
Agent ........................................................96
SECTION 1312. Trustee Not Fiduciary for Holders of Senior Debt .............97
SECTION 1313. Rights of Trustee as Holder of Senior Debt; Preservation of
Trustee's Rights .............................................97
SECTION 1314. Article Applicable to Paying Agents ..........................97
SECTION 1315. Certain Conversions or Exchanges Deemed Payment ..............97
Annex A -- Form of Trust Agreement
Annex B -- Form of Amended and Restated Trust Agreement
Annex C -- Form of Guarantee Agreement
</TABLE>
-v-
<PAGE>
JUNIOR SUBORDINATED INDENTURE, dated as of ________ __, 1996 between
MCI COMMUNICATIONS CORPORATION, a Delaware corporation (hereinafter called the
"Company") having its principal office at 1801 Pennsylvania Avenue, N.W.,
Washington, D.C. 20006, and Wilmington Trust Company, a Delaware banking
corporation duly organized and existing under the laws of the State of Delaware,
as Trustee (hereinafter called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured junior
subordinated debt securities in series (hereinafter called the "Securities") of
substantially the tenor hereinafter provided, including, without limitation,
Securities issued to evidence loans made to the Company of the proceeds from the
issuance from time to time by one or more business trusts (each an "MCI Trust",
and collectively, the "MCI Trusts") of preferred trust interests in such Trusts
(the "Preferred Securities") and common interests in such Trusts (the "Common
Securities" and, collectively with the Preferred Securities, the "Trust
Securities"), and to provide the terms and conditions upon which the Securities
are to be authenticated, issued and delivered.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities or of any
series thereof, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
-------------------------------------------------------
SECTION 101 Definitions.
------------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
<PAGE>
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and the term "generally accepted accounting principles" with
respect to any computation required or permitted hereunder shall mean such
accounting principles which are generally accepted at the date or time of
such computation; and
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in that
Article.
"Act", when used with respect to any Holder, has the meaning specified
---
in Section 104.
"Additional Interest" means the interest, if any, that shall accrue on
-------------------
any interest on the Securities of any series the payment of which has not been
made on the applicable Interest Payment Date and which shall accrue at the rate
per annum specified or determined as specified in such Security.
"Additional Sums" has the meaning specified in Section 1006.
---------------
"Additional Taxes" means the sum of any additional taxes, duties and
----------------
other governmental charges to which an MCI Trust has become subject from time to
time as a result of a Tax Event.
"Affiliate" of any specified Person means any other Person directly or
---------
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that an Affiliate of the
-------- -------
Company shall not be deemed to include any MCI Trust
-2-
<PAGE>
to which Securities have been issued. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee
--------------------
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"Board of Directors" means either the board of directors of the
------------------
Company or any committee of that board duly authorized to act hereunder.
"Board Resolution" means a copy of a resolution certified by the
----------------
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors, or such committee of the Board of Directors or officers
of the Company to which authority to act on behalf of the Board of Directors has
been delegated, and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day other than (i) a Saturday or Sunday, (ii)
------------
a day on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed or (iii) a day on which the
Corporate Trust Office of the Trustee, or, with respect to the Securities of a
series issued to an MCI Trust, the principal office of the Property Trustee
under the related Trust Agreement, is closed for business.
"Commission" means the Securities and Exchange Commission, as from
----------
time to time constituted, created under the Securities Exchange Act of 1934, or
if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties on such date.
"Common Securities" has the meaning specified in the first recital of
-----------------
this Indenture.
"Common Stock" means the common stock, $.10 par value per share, of
------------
the Company.
-3-
<PAGE>
"Company" means the Person named as the "Company" in the first
-------
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" and "Company Order" mean, respectively, the written
--------------- -------------
request or order signed in the name of the Company by its Chairman of the Board,
[its Vice Chairman], its President or a Vice President, and by its Treasurer, an
Assistant Treasurer, its Controller, its Secretary or an Assistant Secretary,
and delivered to the Trustee.
"Corporate Trust Office" means the principal office of the Trustee at
----------------------
which at any particular time its corporate trust business shall be administered.
"corporation" means a corporation, association, company, joint-stock
-----------
company or business trust.
"Debt" means, with respect to any Person, whether recourse is to all
----
or a portion of the assets of such Person and whether or not contingent, (i)
every obligation of such Person for money borrowed; (ii) every obligation of
such Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; and (vi) every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable for, directly or indirectly,
as obligor or otherwise.
"Defaulted Interest" has the meaning specified in Section 307.
------------------
"Depositary" means, with respect to the Securities of any series
----------
issuable or issued in whole or in part in the form of one or more Global
Securities, the Person designated
-4-
<PAGE>
as Depositary by the Company pursuant to Section 301 with respect to such series
(or any successor thereto).
"Discount Security" means any security which provides for an amount
-----------------
less than the principal amount thereof to be due and payable upon a declaration
of acceleration of the Maturity thereof pursuant to Section 502.
"Dollar" means the currency of the United States of America that, as
------
at the time of payment, is legal tender for the payment of public and private
debts.
"Event of Default" unless otherwise specified in the supplemental
----------------
indenture creating a series of Securities, has the meaning specified in Article
Five.
"Extension Period" has the meaning specified in Section 311.
----------------
"Foreign Currency" means any currency issued by the government of one
----------------
or more countries other than the United States of America or by any recognized
confederation or association of such governments.
"Global Security" means a Security in the form prescribed in Section
---------------
204 evidencing all or part of a series of Securities, issued to the Depositary
or its nominee for such series, and registered in the name of such Depositary or
its nominee.
"Government Obligations" means, with respect to the Securities of any
----------------------
series, securities which are (i) direct obligations of the United States of
America or (ii) obligations of a Person controlled or supervised by and acting
as an agency or instrumentality of the United States of America the payment of
which is unconditionally guaranteed by the United States of America and which,
in either case, are full faith and credit obligations of the United States of
America and are not callable or redeemable at the option of the issuer thereof
and shall also include a depository receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act of 1933, as amended) as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of such depository receipt; provided that (except as
--------
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder
-5-
<PAGE>
of such depository receipt from any amount received by the custodian in respect
of the Government Obligation or the specific payment of interest on or principal
of the Government Obligation evidenced by such depository receipt.
"Holder" means a Person in whose name a Security is registered in the
------
Securities Register.
"Junior Subordinated Payment" has the meaning specified in Section
---------------------------
1302.
"Indenture" means this instrument as originally executed or as it may
---------
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
and shall include the terms of each particular series of Securities established
as contemplated by Section 301.
"Interest Payment Date" means as to each series of Securities the
---------------------
Stated Maturity of an installment of interest on such Securities.
"Interest Rate" means the rate of interest specified or determined as
-------------
specified in each Security as being the rate of interest payable on such
Security.
"Investment Company Event" means, in respect of an MCI Trust, the
------------------------
receipt by an MCI Trust of an Opinion of Independent Counsel, rendered by a law
firm having a recognized national tax and securities practice, to the effect
that, as a result of the occurrence of a change in law or regulation or a change
in interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act Law"),
such MCI Trust is or will be considered an "investment company" that is required
to be registered under the 1940 Act, which Change in 1940 Act Law becomes
effective on or after the date of original issuance of the Preferred Securities
of such MCI Trust.
"Lien" means any mortgage, pledge, lien, security interest or other
----
encumbrance.
"Maturity", when used with respect to any Security, means the date on
--------
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
-6-
<PAGE>
"MCI Guarantee" means the guarantee by the Company of distributions on
-------------
the Preferred Securities of an MCI Trust to the extent provided in the Guarantee
Agreement, substantially in the form attached hereto as Annex C, or
substantially in such form as may be specified as contemplated by Section 301
with respect to the Securities of any series, in each case as amended from time
to time.
"MCI Trust" has the meaning specified in the first recital of this
---------
Indenture.
"1940 Act" means the Investment Company Act of 1940, as amended.
--------
"Notice of Default" has the meaning specified in Section 501(3).
-----------------
"Officers' Certificate" means a certificate signed by the Chairman and
---------------------
Chief Executive Officer, President or a Vice President, and by the Treasurer, an
Assistant Treasurer, the Controller, the Secretary or an Assistant Secretary of
the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
------------------
counsel for the Company or General Counsel of the Company.
"Opinion of Independent Counsel" means a written opinion of counsel,
------------------------------
who may be counsel for the Company.
"Original Issue Date" means the date of issuance specified as such in
-------------------
each Security.
"Outstanding" means, when used in reference to any Securities, as of
-----------
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities for whose payment money in the necessary amount has
been theretofore deposited with the Trustee or any Paying Agent in trust
for the Holders of such Securities; and
(iii) Securities in substitution for or in lieu of which other
Securities have been authenticated and delivered or which have been paid
pursuant to Sec-
-7-
<PAGE>
tion 306, unless proof satisfactory to the Trustee is presented that any
such Securities are held by Holders in whose hands such Securities are
valid, binding and legal obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
-------- -------
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction of
the Trustee the pledgee's right so to act with respect to such Securities and
that the pledgee is not the Company or any other obligor upon the Securities or
any Affiliate of the Company or such other obligor. Upon the written request of
the Trustee, the Company shall furnish to the Trustee promptly an Officers'
Certificate listing and identifying all Securities, if any, known by the Company
to be owned or held by or for the account of the Company, or any other obligor
on the Securities or any Affiliate of the Company or such obligor, and, subject
to the provisions of Section 601, the Trustee shall be entitled to accept such
Officers' Certificate as conclusive evidence of the facts therein set forth and
of the fact that all Securities not listed therein are Outstanding for the
purpose of any such determination.
"Paying Agent" means the Trustee or any Person authorized by the
------------
Company to pay the principal of or interest on any Securities on behalf of the
Company.
"Person" means any individual, corporation, partnership, joint
------
venture, association, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Place of Payment" means, with respect to the Securities of any
----------------
series, the place or places where the principal of (and premium, if any) and
interest on the Securities of such series are payable pursuant to Section 301 or
311.
-8-
<PAGE>
"Predecessor Security" of any particular Security means every previous
--------------------
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any security
authenticated and delivered under Section 306 in lieu of a lost, destroyed or
stolen Security shall be deemed to evidence the same debt as the lost, destroyed
or stolen Security.
"Preferred Securities" has the meaning specified in the first recital
--------------------
of this Indenture.
"Proceeding" has the meaning specified in Section 1302.
----------
"Property Trustee" means, in respect of any MCI Trust, the commercial
----------------
bank or trust company identified as the "Property Trustee" in the related Trust
Agreement, solely in its capacity as Property Trustee of such MCI Trust under
such Trust Agreement and not in its individual capacity, or its successor in
interest in such capacity, or any successor property trustee appointed as
therein provided.
"Redemption Date", when used with respect to any Security to be
---------------
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
-------------------
Date with respect to the Securities of a series means, unless otherwise provided
pursuant to Section 301 with respect to Securities of a series, the date which
is fifteen days next preceding such Interest Payment Date (whether or not a
Business Day).
"Responsible Officer" when used with respect to the Trustee means any
-------------------
officer of the Trustee assigned by the Trustee from time to time to administer
its corporate trust matters.
"Securities" or "Security" means any debt securities or debt security,
---------- --------
as the case may be, authenticated and delivered under this Indenture.
"Securities Register" and "Securities Registrar" have the respective
------------------- --------------------
meanings specified in Section 305.
"Senior Debt" means the principal of (and premium, if any) and
-----------
interest, if any (including interest accruing on
-9-
<PAGE>
or after the filing of any petition in bankruptcy or for reorganization relating
to the Company whether or not such claim for post-petition interest is allowed
in such proceeding), on Debt, whether incurred on or prior to the date of this
Indenture or thereafter incurred, unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are not superior in right of payment to the Securities or
to other Debt which is pari passu with, or subordinated to, the Securities,
---- -----
provided, however, that Senior Debt shall not be deemed to include (a) any Debt
-------- -------
of the Company which when incurred and without respect to any election under
Section 1111(b) of the Bankruptcy Reform Act of 1978, was without recourse to
the Company, (b) any Debt of the Company to any of its Subsidiaries, (c) Debt to
any employee of the Company, (d) any liability for taxes, (e) Debt or other
monetary obligations to trade creditors created or assumed by the Company or any
of its Subsidiaries in the ordinary course of business in connection with the
obtaining of goods, materials or services and (f) the Securities.
"Special Event" means a Tax Event or an Investment Company Event.
-------------
"Special Record Date" for the payment of any Defaulted Interest means
-------------------
a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
---------------
installment of principal thereof or interest thereon, means the date specified
pursuant to the terms of such Security as the date on which the principal of
such Security or such installment of interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding
----------
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For the purposes of this definition, "voting stock" means stock
which ordinarily has voting power for the election of directors, whether at all
times or only so long as no senior class of stock has such voting power by
reason of any contingency.
"Tax Event" means the receipt by an MCI Trust of an Opinion of
---------
Independent Counsel, rendered by a law firm having a recognized national tax and
securities practice, to the effect that, as a result of any amendment to, or
change
-10-
<PAGE>
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or which pronouncement or
decision is announced on or after the date of issuance of the Preferred
Securities of such MCI Trust, there is more than an insubstantial risk that (i)
the MCI Trust is, or will be within 90 days of the date of such Opinion of
Independent Counsel, subject to United States federal income tax with respect to
income received or accrued on the corresponding series of Securities, (ii)
interest payable by the Company on the corresponding series of Securities is
not, or within 90 days of the date of such Opinion of Independent Counsel, will
not be, deductible, in whole or in part, for United States federal income tax
purposes or (iii) the MCI Trust is, or will be within 90 days of the date of
such Opinion of Independent Counsel, subject to more than a de minimis amount of
-- -------
other taxes, duties or other governmental charges.
"Trust Agreement" means the Trust Agreement substantially in the form
---------------
attached hereto as Annex A, as amended by the form of Amended and Restated Trust
Agreement substantially in the form attached hereto as Annex B, or substantially
in such form as may be specified as contemplated by Section 301 with respect to
the Securities of any series, in each case as amended from time to time.
"Trustee" means the Person named as the "Trustee" in the first
-------
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder and,
if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee with respect to
Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C.
-------------------
(S)(S) 77aaa-77bbb), as amended and as in effect on the date as of this
Indenture, except as provided in Section 905.
"Trust Securities" has the meaning specified in the first recital of
----------------
this Indenture.
-11-
<PAGE>
"Vice President" when used with respect to the Company, means any duly
--------------
appointed vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."
SECTION 102 Compliance Certificate and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent
(including covenants, compliance with which constitutes a condition precedent),
if any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent (including covenants compliance with which
constitute a condition precedent), if any, have been complied with, except that
in the case of any such application or request as to which the furnishing of
such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than the
certificates provided pursuant to Section 1005) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
-12-
<PAGE>
SECTION 103 Forms of Documents Delivered to Trustee.
----------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104 Acts of Holders.
----------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given to or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments is or are
delivered to the Trustee, and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced
-13-
<PAGE>
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a Person acting in other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority.
(c) The fact and date of the execution by any Person of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner which the Trustee deems sufficient and in
accordance with such reasonable rules as the Trustee may determine.
(d) The ownership of Securities shall be proved by the Securities
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon the
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.
(f) The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to take any action under
this Indenture by vote or consent. Except as otherwise provided herein, such
record date shall be the later of 30 days prior to the first solicitation of
such consent or vote or the date of the most recent list of Securityholders
furnished to the Trustee pursuant to Section 701 prior to such solicitation. If
a record date is fixed, those persons who were Securityholders at such record
date (or their duly designated proxies), and only those persons, shall be
entitled to take such action by
-14-
<PAGE>
vote or consent or to revoke any vote or consent previously given, whether or
not such persons continue to be Holders after such record date, provided,
--------
however, that unless such vote or consent is obtained from the Holders (or their
-------
duly designated proxies) of the requisite principal amount of Outstanding
Securities prior to the date which is the 120th day after such record date, any
such vote or consent previously given shall automatically and without further
action by any Holder be canceled and of no further effect.
SECTION 105 Notices, Etc. to Trustee and Company.
-------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing to or
with the Trustee at its Corporate Trust office, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose (except as otherwise provided in Section 501 hereof) hereunder
if in writing and mailed, first class, postage prepaid, to the Company addressed
to it at the address of its principal office specified in the first paragraph of
this instrument or at any other address previously furnished in writing to the
Trustee by the Company.
SECTION 106 Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first class postage prepaid, to each Holder affected
by such event, at the address of such Holder as it appears in the Securities
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice.
-15-
<PAGE>
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
SECTION 107 Conflict With Trust Indenture Act.
---------------------------------
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by any of Sections 310 to 317, inclusive, of the Trust
Indenture Act through operation of Section 318(c) thereof, such imposed duties
shall control.
SECTION 108 Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109 Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 110 Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111 Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto, any Paying Agent and
their successors and assigns, the holders of Senior Debt and the Holders of the
Securities, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION 112 Governing Law.
-------------
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York.
-16-
<PAGE>
SECTION 113 Non-Business Days.
-----------------
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or the Securities) payment of interest or
principal need not be made on such date, but may be made on the next succeeding
Business Day (and no interest shall accrue for the period from and after such
Interest Payment Date, Redemption Date or Stated Maturity, as the case may be,
until such next succeeding Business Day), except that, if such Business Day is
in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day (in each case with the same force and effect
as if made on the Interest Payment Date or Redemption Date or at the Stated
Maturity).
ARTICLE TWO
SECURITY FORMS
--------------
SECTION 201 Forms Generally.
---------------
The Securities of each series and the Trustee's certificate of
authentication shall be in substantially the forms set forth in this Article, or
in such other form or forms as shall be established by or pursuant to a Board
Resolution or in one or more indentures supplemental hereto, in each case with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may be required to comply with applicable tax laws or the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such securities, as evidenced by their execution of the
Securities. If the form of Securities of any series is established by action
taken pursuant to a Board Resolution, a copy of an appropriate record of such
action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the Company
Order contemplated by Section 303 with respect to the authentication and
delivery of such Securities.
The Trustee's certificates of authentication shall be substantially in
the form set forth in this Article.
-17-
<PAGE>
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods, if required by any securities
exchange, the Nasdaq National Market or other applicable interdealer quotation
system or self-regulatory organization on which the Securities may be listed or
traded, on a steel engraved border or steel engraved borders or may be produced
in any other manner permitted by the rules of any securities exchange, the
Nasdaq National Market or other applicable interdealer quotation system or self-
regulatory organization on which the Securities may be listed or traded, all as
determined by the officers executing such Securities, as evidenced by their
execution of such securities.
SECTION 202 Form of Face of Security.
------------------------
[If the Security is a Global Security, insert - This Security is a
Global Security within the meaning of the Indenture hereinafter referred to and
is registered in the name of The Depository Trust Company (the "Depository") or
a nominee of the Depository. This Security is exchangeable for Securities
registered in the name of a person other than the Depository or its nominee only
in the limited circumstances described in the Indenture and no transfer of this
Security (other than a transfer of this Security as a whole by the Depository to
a nominee of the Depository or by a nominee of the Depository to the Depository
or another nominee of the Depository) may be registered except in limited
circumstances.
Unless this Security is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York) to MCI Communications
Corporation or its agent for registration of transfer, exchange or payment, and
any Security issued is registered in the name of Cede & Co. or such other name
as requested by an authorized representative of The Depository Trust Company and
any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.]
-18-
<PAGE>
MCI COMMUNICATIONS CORPORATION
(Title of Security)
No. __________ $_____________
CUSIP ________
MCI COMMUNICATIONS CORPORATION, a corporation organized and existing
under the laws of Delaware (hereinafter called the "Company", which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay to _______________, or registered
assigns, the principal sum of _____________ Dollars on ______ __, ____[;
provided, that the--------Company may (i) change the maturity date upon the
occurrence of an exchange of the Securities for the Trust Securities subject to
certain conditions set forth in Section 314 of the Indenture, which changed
maturity date shall in no case be earlier than ______ __, ____ or later than
_______ __, ____ and (ii) extend the maturity date subject to certain conditions
specified in Section 314 of the Indenture, which extended maturity date shall in
no case be later than _______ __, ____]. The Company further promises to pay
interest on said principal sum from ______, ___ or from the most recent interest
payment date (each such date, an "Interest Payment Date") on which interest has
been paid or duly provided for, [monthly] [quarterly] [semi-annually] [if
applicable, insert-(subject to deferral as set forth herein)] in arrears on
[insert applicable Interest Payment Dates] of each year, commencing ______, ___,
at the rate of ___% per annum, until the principal hereof shall have become due
and payable, [if applicable, insert- plus Additional Interest, if any,] until
the principal hereof is paid or duly provided for or made available for payment
[if applicable, insert- and on any overdue principal and (without duplication
and to the extent that payment of such interest is enforceable under applicable
law) on any overdue installment of interest at the rate of ___% per annum,
compounded [monthly] [quarterly] [annually]. The amount of interest payable for
any period shall be computed on the basis of [twelve 30-day months] and a [360-
day] year. The amount of interest payable for any partial period shall be
computed on the basis of the number of days elapsed in a [360-day] year of
[twelve 30-day months]. In the event that any date on which interest is payable
on this Security is not a Business Day, then a payment of the interest payable
on such date will be made on the next succeeding day which is a Business Day
(and without any interest or other payment
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<PAGE>
in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on the date the payment was originally payable. A "Business Day"
------------
shall mean any day other than (i) a Saturday or Sunday, (ii) a day on which
banking institutions in the City of New York are authorized or required by law
or executive order to remain closed or (iii) a day on which the Corporate Trust
Office of the Trustee [if applicable, insert-, or the principal office of the
Property Trustee under the Trust Agreement hereinafter referred to for MCI
Capital __,] is closed for business. The interest installment so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in the Indenture, be paid to the Person in whose name this Security (or
one or more Predecessor Securities, as defined in the Indenture) is registered
at the close of business on the Regular Record Date for such interest
installment, which shall be the [[insert definition of Regular Record Dates].
Any such interest installment not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange, the Nasdaq National Market or other applicable interdealer
quotation system or self-regulatory organization on which the Securities of this
series may be listed or traded, and upon such notice as may be required by such
exchange or other self-regulatory organization, all as more fully provided in
said Indenture.
[If applicable, insert- The Company shall have the right at any time
during the term of this Security, from time to time, to defer the payment of
interest on such Security for up to __ consecutive [monthly] [quarterly] [semi-
annual] interest payment periods with respect to each deferral period (each an
"Extension Period"), during which Extension Periods the Company shall have the
----------------
right to make partial payments of interest on any Interest Payment Date, and at
the end of which the Company shall pay all interest then accrued and unpaid
(together with Additional Interest thereon to the extent permitted by applicable
law); provided
--------
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<PAGE>
that during any such Extension Period, the Company will not, and will not permit
any Subsidiary of the Company to (i) declare or pay any dividends or
distributions or redeem, purchase, acquire or make a liquidation payment with
respect to, any of the Company's outstanding capital stock or (ii) make any
payment of principal, interest or premium, if any, on or repay, repurchase or
redeem any debt security that ranks pari passu with or junior in interest to
---- -----
this Security or make any guarantee payments with respect to the foregoing
(other than (a) dividends or distributions in Common Stock of the Company, (b)
redemptions or purchases of any rights pursuant to the Company's Preferred Stock
Rights Plan, or any successor to such Preferred Stock Rights Plan, and the
declaration of a dividend of such rights or the issuance of Preferred Stock
under such plans in the future, (c) payments under any MCI Guarantee, (d)
purchases of Common Stock related to the issuance of Common Stock under any of
the Company's benefit plans for its directors, officers or employees and (e)
purchases of Common Stock required to prevent the loss or secure the renewal or
reinstatement of any government license or franchise held by the Company or any
of its Subsidiaries). Prior to the termination of any such Extension Period, the
Company may further extend the interest payment period, provided that no
--------
Extension Period shall exceed __ consecutive [months] [quarters] [semi-annual
periods] or extend beyond the Maturity of this Security. Upon the termination of
any such Extension Period and upon the payment of all accrued and unpaid
interest and any Additional Interest then due, the Company may elect to begin a
new Extension Period, subject to the above requirements. No interest shall be
due and payable during an Extension Period except at the end thereof. The
Company shall give the Holder of this Security and the Trustee notice of its
election to begin any Extension Period at least one Business Day prior to the
Interest Payment Date [if applicable, insert- or, with respect to the Securities
issued to an MCI Trust, prior to the earlier of (i) the date the Distributions
on the Preferred Securities are payable or (ii) the date the Administrative
Trustees are required to give notice to any securities exchange, the Nasdaq
National Market or other applicable interdealer quotation system or self-
regulatory organization or to holders of such Preferred Securities of the record
date or the date such Distributions are payable, but in any event not less than
one Business Day prior to such record date].
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the
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United States, 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 [if
applicable, insert-; provided, however, that at the option of the Company
-------- -------
payment of interest may be made (i) by check mailed to the address of the Person
entitled thereto as such address shall appear in the Securities Register or (ii)
by wire transfer in immediately available funds at such place and to such
account as may be designated by the Person entitled thereto as specified in the
Securities Register].
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and subject in right of payments to the prior
payment in full of all Senior Debt, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such actions as may be
necessary or appropriate to effectuate the subordination so provided and (c)
appoints the Trustee his attorney-in-fact for any and all such purposes. Each
Holder hereof, by his acceptance hereof, waives all notice of the acceptance of
the subordination provisions contained herein and in the Indenture by each
holder of Senior Debt, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be
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<PAGE>
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
MCI COMMUNICATIONS CORPORATION
By:_______________________________
[President or Vice President]
Attest:
----------------------------------
[Secretary or Assistant Secretary]
SECTION 203 Form of Reverse of Security.
---------------------------
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
----------
series under a Junior Subordinated Indenture, dated as of ________ __, 1996
(herein called the "Indenture"), between the Company and Wilmington Trust
---------
Company, as Trustee (herein called the "Trustee", which term includes any
-------
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Trustee,
the Company and the Holders of the Securities, and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This Security is
one of the series designated on the face hereof[, limited in aggregate principal
amount to $___________].
All terms used in this Security that are defined in the Indenture [if
applicable, insert- or in the Trust Agreement, dated _________ __, ____, as
amended (the "Trust Agreement"), for MCI Capital __ among MCI Communications
Corporation, as Depositor, and the Trustees named therein] shall have the
meanings assigned to them in the Indenture [if applicable, insert- or the Trust
Agreement, as the case may be].
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<PAGE>
[If applicable, insert- On or after _________ __, ____, the Company
may at any time, at its option, subject to the terms and conditions of Article
Eleven of the Indenture, redeem this Security in whole at any time or in part
from time to time, without premium or penalty, at a redemption price equal to
100% of the principal amount thereof plus the accrued and unpaid interest [if
applicable, insert-, including Additional Interest, if any,] to the date fixed
for redemption.
[If applicable, insert- If a Special Event in respect of an MCI Trust
shall occur and be continuing, the Company may, at its option, redeem this
Security within 90 days of the occurrence of such Special Event, in whole but
not in part, subject to the provisions of Section 1107 and the other provisions
of Article Eleven of the Indenture, at a redemption price equal to 100% of the
principal amount thereof plus accrued and unpaid interest, including Additional
Interest, if any, to the date fixed for redemption.]
In the event of redemption of this Security in part only, a new
Security or Securities of this series for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.
[If the Security is not a Discount Security, - If an Event of Default
with respect to Securities of this series shall occur and be continuing, the
principal of this Security may be declared due and payable in the manner, with
the effect and subject to the conditions provided in the Indenture.]
[If the Security is a Discount Security, - If an Event of Default with
respect to Securities of this series shall occur and be continuing, an amount of
principal of this Security may be declared due and payable in the manner, with
the effect and subject to the conditions provided in the Indenture. Such amount
shall be equal to [- insert formula for determining the amount]. Upon payment
(i) of the amount of principal so declared due and payable and (ii) of interest
on any overdue principal and overdue interest (in each case to the extent that
the payment of such interest shall be legally enforceable), all of the Company's
obligations in respect of the payment of the principal of and interest, if any,
on this Security shall terminate.]
The Indenture contains provisions for satisfaction, discharge and
defeasance at any time of the
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<PAGE>
entire indebtedness of this Security upon compliance by the Company with certain
conditions set forth in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the Company and the Trustee at any time to enter into a supplemental indenture
or indentures for the purpose of modifying in any manner the rights and
obligations of the Company and of the Holders of the Securities, with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series to be affected by such supplemental
indenture. The Indenture also contains provisions permitting Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
[If the Security is not a Discount Security, - As provided in and
subject to the provisions of the Indenture, if an Event of Default with respect
the Securities of this series at the time Outstanding occurs and is continuing,
then and in every such case the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Securities of this series may declare the
principal amount of all the Securities of this series to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), provided that, in the case of the Securities of this series issued
--------
to an MCI Trust, if upon an Event of Default, the Trustee or the Holders of not
less than 25% in principal amount of the Outstanding Securities of this series
fails to declare the principal of all the Securities of this series to be
immediately due and payable, the holders of at least 25% in aggregate
liquidation amount of the corresponding series of Preferred Securities then
outstanding shall have such right by a notice in writing to the Company and the
Trustee; and upon any such declaration such principal amount of and the accrued
interest (including any Additional Interest) on all the Securities of this
series shall become immediately due and payable, provided that the payment of
--------
principal and interest (including any Additional Interest) on such
-25-
<PAGE>
Securities shall remain subordinated to the extent provided in Article Thirteen
of the Indenture.
[If the Security is a Discount Security, - As provided in and subject
to the provisions of the Indenture, if an Event of Default with respect the
Securities of this series at the time Outstanding occurs and is continuing, then
and in every such case the Trustee or the Holders of not less than such portion
of the principal amount as may be specified in the terms of this series of all
the Securities of this series to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders), provided that,
--------
in the case of the Securities of a series issued to an MCI Trust, if upon an
Event of Default, the Trustee or the Holders of not less than 25% in principal
amount of the Outstanding Securities of this series fails to declare the
principal of all the Securities of that series to be immediately due and
payable, the holders of at least 25% in aggregate liquidation amount of the
corresponding series of Preferred Securities then outstanding shall have such
right by a notice in writing to the Company and the Trustee; and upon any such
declaration such specified amount of and the accrued interest (including any
Additional Interest) on all the Securities of this series shall become
immediately due and payable, provided that the payment of principal and interest
--------
(including any Additional Interest) on such Securities shall remain subordinated
to the extent provided in Article Thirteen of the Indenture.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the
Securities Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company maintained under Section 1002 of
the Indenture duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Securities Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities of this series, of authorized denominations
and for the same aggregate principal amount, will be issued to
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<PAGE>
the designated transferee or transferees. No service charge shall be made for
any such registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Securities of this series are issuable only in registered form
without coupons in denominations of $____ and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of such series of a different authorized denomination, as
requested by the Holder surrendering the same.
The Company and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agree that for United States federal, state and local
tax purposes it is intended that this Security constitute indebtedness.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES THEREOF.
SECTION 204 Additional Provisions Required in Global Security.
-------------------------------------------------
Any Global Security issued hereunder shall, in addition to the
provisions contained in Sections 202 and 203 bear a legend in substantially the
following form:
"This Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of a Depositary
or a nominee of a Depositary. This Security is exchangeable for Securities
registered in the name of a person other than the Depositary or its nominee only
in the limited circumstances described in the Indenture and may not be
transferred except as a
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<PAGE>
whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary."
SECTION 205. Form of Trustee's Certificate of Authentication.
-------------------------------- --------------
This is one of the Securities referred to in the within mentioned
Indenture.
_________________________________
as Trustee
By: _____________________________
Authorized Officer
ARTICLE THREE
THE SECURITIES
--------------
SECTION 301. Title and Terms.
---------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution, and set forth in an Officers'
Certificate, or established in one or more indentures supplemental hereto, prior
to the issuance of Securities of a series:
(a) the title of the securities of such series, which shall
distinguish the Securities of the series from all other Securities;
(b) the limit, if any, upon the aggregate principal amount of the
Securities of such series which may be authenticated and delivered under
this Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Section 304, 305, 306, 906 or 1106);
provided, however, that the authorized aggregate principal amount of such
-------- -------
series may be increased above such amount by a Board Resolution to such
effect;
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<PAGE>
(c) the Stated Maturity or Maturities on which the principal of the
Securities of such series is payable or the method of determination
thereof;
(d) the rate or rates, if any, at which the Securities of such series
shall bear interest, if any, the rate or rates and extent to which
Additional Interest, if any, shall be payable in respect of any Securities
of such series, the Interest Payment Dates on which such interest shall be
payable, the right, pursuant to Section 311 or as otherwise set forth
therein, of the Company to defer or extend an Interest Payment Date, and
the Regular Record Date for the interest payable on any Interest Payment
Date or the method by which any of the foregoing shall be determined;
(e) the place or places where the principal of (and premium, if any)
and interest on the Securities of such series shall be payable, the place
or places where the Securities of such series may be presented for
registration of transfer or exchange, and the place or places where notices
and demands to or upon the Company in respect of the Securities of such
series may be made;
(f) the period or periods within or the date or dates on which, if
any, the price or prices at which and the terms and conditions upon which
the Securities of such series may be redeemed, in whole or in part, at the
option of the Company;
(g) the obligation or the right, if any, of the Company to redeem,
repay or purchase the Securities of such series pursuant to any sinking
fund, amortization or analogous provisions, or at the option of a Holder
thereof, and the period or periods within which, the price or prices at
which, the currency or currencies (including currency unit or units) in
which and the other terms and conditions upon which Securities of the
series shall be redeemed, repaid or purchased, in whole or in part,
pursuant to such obligation;
(h) the denominations in which any Securities of such series shall be
issuable, if other than denominations of $25 and any integral multiple
thereof;
(i) if other than Dollars, the currency or currencies (including
currency unit or units) in which the
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<PAGE>
principal of (and premium, if any) and interest, if any, on the Securities
of the series shall be payable, or in which the Securities of the series
shall be denominated;
(j) the additions, modifications or deletions, if any, in the Events
of Default or covenants of the Company set forth herein with respect to the
Securities of such series;
(k) if other than the principal amount thereof, the portion of the
principal amount of Securities of such series that shall be payable upon
declaration of acceleration of the Maturity thereof;
(l) the additions or changes, if any, to this Indenture with respect
to the Securities of such series as shall be necessary to permit or
facilitate the issuance of the Securities of such series in bearer form,
registrable or not registrable as to principal, and with or without
interest coupons;
(m) any index or indices used to determine the amount of payments of
principal of and premium, if any, on the Securities of such series or the
manner in which such amounts will be determined;
(n) the issuance of a temporary Global Security representing all of
the Securities of such series and exchange of such temporary Global
Security for definitive Securities of such series;
(o) whether the Securities of the series shall be issued in whole or
in part in the form of one or more Global Securities and, in such case, the
Depositary for such Global Securities, which Depositary shall be a clearing
agency registered under the Securities Exchange Act of 1934, as amended;
(p) the appointment of any Paying Agent or Agents for the Securities
of such series;
(q) the terms of any right to convert or exchange Securities of such
series into any other securities or property of the Company, and the
additions or changes, if any, to this Indenture with respect to the
Securities of such series to permit or facilitate such conversion or
exchange;
-30-
<PAGE>
(r) the form or forms of the Trust Agreement, Amended and Restated
Trust Agreement and Guarantee Agreement, if different from the forms
attached hereto as Annexes A, B and C, respectively;
(s) the relative degree, if any, to which the Securities of the
series shall be senior to or be subordinated to other series of Securities
in right of payment, whether such other series of Securities are
Outstanding or not; and
(t) any other terms of the Securities of such series (which terms
shall not be inconsistent with the provisions of this Indenture).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided herein or in
or pursuant to such Board Resolution and set forth in such Officers' Certificate
or in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
SECTION 302 Denominations.
-------------
The Securities of each series shall be in registered form without
coupons and shall be issuable in denominations of $25 and any integral multiple
thereof, unless otherwise specified as contemplated by Section 301.
SECTION 303 Execution, Authentication, Delivery and Dating.
----------------------------------------------
The Securities shall be executed on behalf of the Company by its
President or one of its Vice Presidents under its corporate seal reproduced or
impressed thereon and attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities may be
manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to
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<PAGE>
hold such offices at the date of such Securities. At any time and from time to
time after the execution and delivery of this Indenture, the Company may deliver
Securities executed by the Company to the Trustee for authentication.
Securities may be authenticated on original issuance from time to time and
delivered pursuant to such procedures acceptable to the Trustee ("Procedures")
as may be specified from time to time by Company Order. Procedures may
authorize authentication and delivery pursuant to oral instructions of the
Company or a duly authorized agent, which instructions shall be promptly
confirmed in writing.
Prior to the delivery of a Security in any such form to the Trustee
for authentication, the Company shall deliver to the Trustee the following:
(a) A Company Order requesting the Trustee's authentication and
delivery of all or a portion of the Securities of such series, and if less
than all, setting forth procedures for such authentication;
(b) The Board Resolution by or pursuant to which such form of
Security has been approved, and the Board Resolution, if any, by or
pursuant to which the terms of the Securities of such series have been
approved, and, if pursuant to a Board Resolution, an Officers' Certificate
describing the action taken;
(c) An Officers' Certificate dated the date such certificate is
delivered to the Trustee, stating that all conditions precedent provided
for in this Indenture relating to the authentication and delivery of
Securities in such form and with such terms have been complied with; and
(d) An Opinion of Counsel stating that (i) the form of such
Securities has been duly authorized and approved in conformity with the
provisions of this Indenture; (ii) the terms of such Securities have been
duly authorized and determined in conformity with the provisions of this
Indenture, or, if such terms are to be determined pursuant to Procedures,
as defined above, when so determined such terms shall have been duly
authorized and determined in conformity with the provisions of this
Indenture; and (iii) Securities in such form when completed by appropriate
insertions and executed and delivered by the Company to the Trustee
-32-
<PAGE>
for authentication in accordance with this Indenture, authenticated and
delivered by the Trustee in accordance with this Indenture within the
authorization as to aggregate principal amount established from time to
time by the Board of Directors and sold in the manner specified in such
Opinion of Counsel, will be the legal, valid and binding obligations of the
Company entitled to the benefits of this Indenture, subject to applicable
bankruptcy, reorganization, insolvency and similar laws generally affecting
creditors' rights, to general equitable principles and except as
enforcement thereof may be limited by (A) requirements that a claim with
respect to any Securities denominated other than in Dollars (or a Foreign
Currency or currency unit judgment in respect of such claim) be converted
into Dollars at a rate of exchange prevailing on a date determined pursuant
to applicable law or (B) governmental authority to limit, delay or prohibit
the making of payments in Foreign Currencies or currency units or payments
outside the United States, and subject to such other qualifications as such
counsel shall conclude do not materially affect the rights of Holders of
such Securities;
provided, however, that the Trustee shall be entitled to receive the documents
-------- -------
referred to in Clauses (b), (c) and (d) above only at or prior to the first
request of the Company to the Trustee to authenticate Securities of such series.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose, unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
officers, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder.
SECTION 304. Temporary Securities.
--------------------
Pending the preparation of definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
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<PAGE>
mimeographed or otherwise produced, in any denomination, substantially of the
tenor of the definitive Securities of such series in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Securities may determine, as evidenced
by their execution of such Securities.
If temporary Securities of any series are issued, the Company will
cause definitive Securities of such series to be prepared without unreasonable
delay. After the preparation of definitive Securities, the temporary Securities
shall be exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for that purpose
without charge to the Holder. Upon surrender for cancellation of any one or
more temporary Securities, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of the same series of authorized denominations having the
same Original Issue Date and Stated Maturity and having the same terms as such
temporary Securities. Until so exchanged, the temporary Securities shall in all
respects be entitled to the same benefits under this Indenture as definitive
Securities.
SECTION 305. Registration, Transfer and Exchange.
-----------------------------------
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Securities and
of transfers of Securities. Such register is herein sometimes referred to as
the "Securities Register." The Trustee is hereby appointed "Securities
Registrar" for the purpose of registering Securities and transfers of Securities
as herein provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated for that purpose the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of the same
series of any authorized denominations, of a like aggregate principal amount, of
the same Original Issue Date and Stated Maturity and having the same terms.
At the option of the Holder, Securities may be exchanged for other
Securities of the same series of any
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authorized denominations, of a like aggregate principal amount, of the same
Original Issue Date and Stated Maturity and having the same terms, upon
surrender of the Securities to be exchanged at such office or agency. Whenever
any securities are so surrendered for exchange, the Company shall execute, and
the Trustee shall authenticate and deliver, the Securities which the Holder
making the exchange is entitled to receive.
All Securities issued upon any transfer or exchange of Securities
shall be the valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Securities
surrendered upon such transfer or exchange.
Every Security presented or surrendered for transfer or exchange shall
(if so required by the Company or the Securities Registrar) be duly endorsed, or
be accompanied by a written instrument of transfer in form satisfactory to the
Company and the Securities Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing.
No service charge shall be made to a Holder for any transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Securities.
Notwithstanding any of the foregoing, any Global Security of a series
shall be exchangeable pursuant to this Section 305 for Securities registered in
the names of Persons other than the Depositary for such Security or its nominee
only if (i) such Depositary notifies the Company that it is unwilling or unable
to continue as Depositary for such Global Security or if at any time such
Depositary ceases to be a clearing agency registered under the Securities
Exchange Act of 1934, as amended, (ii) the Company executes and delivers to the
Trustee a Company Order that such Global Security shall be so exchangeable or
(iii) there shall have occurred and be continuing an Event of Default with
respect to the Securities of such series. Any Global Security that is
exchangeable pursuant to the preceding sentence shall be exchangeable for
Securities registered in such names as such Depositary shall direct.
Notwithstanding any other provision in this Indenture, a Global
Security may not be transferred except as a whole by the Depositary with respect
to such Global Security
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to a nominee of such Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary.
Neither the Company nor the Trustee shall be required, pursuant to the
provisions of this Section, (a) to issue, transfer or exchange any Security of
any series during a period beginning at the opening of business 15 days before
the day of selection for redemption of Securities pursuant to Article Eleven and
ending at the close of business on the day of mailing of notice of redemption or
(b) to transfer or exchange any Security so selected for redemption in whole or
in part, except, in the case of any Security to be redeemed in part, any portion
thereof not to be redeemed.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If any mutilated Security is surrendered to the Trustee together with
such security or indemnity as may be required by the Company or the Trustee to
save each of them harmless, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security of the same issue
and series of like tenor and principal amount, having the same Original Issue
Date and Stated Maturity and bearing the same Interest Rate as such mutilated
Security, and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and to the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security, and (ii) such security or indemnity as may be required by them to save
each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute and upon its request the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of the same issue and series of like tenor and principal amount, having the same
Original Issue Date and Stated Maturity and bearing the same Interest Rate as
such destroyed, lost or stolen Security, and bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
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<PAGE>
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security of any series which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date, shall be
paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest in respect of Securities of such series, except that, unless
otherwise provided in the Securities of such series, interest payable on the
Stated Maturity of a Security shall be paid to the Person to whom principal is
paid. The initial payment of interest on any Security of any series which is
issued between a Regular Record Date and the related Interest Payment Date shall
be payable as provided in such Security or in the Board Resolution pursuant to
Section 301 with respect to the related series of Securities.
Any interest on any Security which is payable, but is not timely paid
or duly provided for, on any Interest Payment Date for Securities of such series
(herein called "Defaulted Interest"), shall forthwith cease to be payable to the
registered Holder on the relevant Regular Record Date by virtue of having been
such Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in Clause (1) or (2) below:
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(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities of such series in respect of
which interest is in default (or their respective Predecessor Securities)
are registered at the close of business on a Special Record Date for the
payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security and the date of the
proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
Clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first class, postage
prepaid, to each Holder of a Security of such series at the address of such
Holder as it appears in the Securities Register not less than 10 days prior
to such Special Record Date. The Trustee may, in its discretion, in the
name and at the expense of the Company, cause a similar notice to be
published at least once in a newspaper, customarily published in the
English language on each Business Day and of general circulation in the
Borough of Manhattan, The City of New York, but such publication shall not
be a condition precedent to the establishment of such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor having been mailed as aforesaid, such Defaulted
Interest shall be paid to the Persons in whose names the Securities of such
series (or their respective Predecessor Securities) are registered on such
Special Record Date and shall no longer be payable pursuant to the
following Clause (2).
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(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange, the Nasdaq National Market or other applicable
interdealer quotation system or self-regulatory organization on which the
Securities of the series in respect of which interest is in default may be
listed or traded and, upon such notice as may be required by such exchange
or other self-regulatory organization (or by the Trustee if the Securities
are not listed or traded), if, after notice given by the Company to the
Trustee of the proposed payment pursuant to this Clause, such payment shall
be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon transfer of or in exchange for or in
lieu of any other Security shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Persons Deemed Owners.
---------------------
The Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name any Security is registered as the owner of
such Security for the purpose of receiving payment of principal of and (subject
to Section 307) interest on such Security and for all other purposes whatsoever,
whether or not such Security be overdue, and neither the Company, the Trustee
nor any agent of the Company or the Trustee shall be affected by notice to the
contrary.
SECTION 309. Cancellation.
------------
All Securities surrendered for payment, redemption, transfer or
exchange shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee, and any such Securities and Securities surrendered
directly to the Trustee for any such purpose shall be promptly canceled by it.
The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly canceled by the Trustee. No Securities shall be authenticated
in lieu of or in exchange for any Securities canceled as provided in this
Section, except as expressly permitted by this Indenture. All canceled
Securities shall be destroyed by the Trustee
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and the Trustee shall deliver to the Company a certificate of such destruction.
SECTION 310. Computation of Interest.
-----------------------
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, interest on the Securities of each series for any
period shall be computed on the basis of a 360-day year of twelve 30-day months
and interest on the Securities of each series for any partial period shall be
computed on the basis of the number of days elapsed in a 360-day year of twelve
30-day months.
SECTION 311. Deferrals of Interest Payment Dates.
-----------------------------------
If specified as contemplated by Section 301 with respect to the
Securities of a particular series, the Company shall have the right, at any time
during the term of such series, from time to time to defer the payment of
interest on such Securities for such period or periods as may be specified as
contemplated by Section 301 (each, an "Extension Period"), during which
----------------
Extension Periods the Company shall have the right to make partial payments of
interest on any Interest Payment Date. No Extension Period shall end on a date
other than an Interest Payment Date. At the end of any such Extension Period
the Company shall pay all interest then accrued and unpaid on the Securities
(together with Additional Interest thereon, if any, at the rate specified for
the Securities of such series to the extent permitted by applicable law),
provided, however, that during any such Extension Period, the Company shall not,
-------- -------
and shall cause any Subsidiary not to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock, or (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities that rank pari passu with or junior in interest to the
---- -----
Securities of such series or make any guarantee payments with respect to the
foregoing (other than (a) dividends or distributions in Common Stock of the
Company, (b) redemptions or purchases of any rights pursuant to the Company's
Preferred Stock Rights Plan, or any successor to such Preferred Stock Rights
Plan, and the declaration of a dividend of such rights or the issuance of
Preferred Stock under such plans in the future, (c) payments under any MCI
Guarantee, (d) purchases of Common Stock related to the issuance of Common Stock
under any of the Company's benefit plans for its directors, officers or
employees and (e) purchases of Common Stock
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required to prevent the loss or secure the renewal or reinstatement of any
government license or franchise held by the Company or any of its Subsidiaries).
Prior to the termination of any such Extension Period, the Company may further
extend the interest payment period, provided that no Extension Period shall
--------
exceed the period or periods specified in such Securities or extend beyond the
Maturity of such Securities. Upon termination of any Extension Period and upon
the payment of all accrued and unpaid interest and any Additional Interest then
due on any Interest Payment Date, the Company may elect to begin a new Extension
Period, subject to the above requirements. No interest shall be due and payable
during an Extension Period, except at the end thereof. The Company shall give
the Holders of the Securities of such series and the Trustee notice of its
election to begin any such Extension Period at least one Business Day prior to
the Interest Payment Date or, with respect to the Securities of a series issued
to an MCI Trust, prior to the earlier of (i) the date the Distributions on the
Preferred Securities of such MCI Trust are payable or (ii) the date the
Administrative Trustees of such MCI Trust are required to give notice to any
securities exchange, the Nasdaq National Market or other applicable interdealer
quotation system or self-regulatory organization or to holders of such Preferred
Securities of the record date or the date such Distributions are payable, but in
any event not less than one Business Day prior to such record date.
The Trustee shall promptly give notice of the Company's election to
begin any such Extension Period to the Holders of the outstanding Securities of
such series.
SECTION 312. Right of Set-Off.
----------------
With respect to the Securities of a series issued to an MCI Trust,
notwithstanding anything to the contrary in the Indenture, the Company shall
have the right to set-off any payment it is otherwise required to make
thereunder in respect of any such Security to the extent the Company has
theretofore made, or is concurrently on the date of such payment making, a
payment under the MCI Guarantee relating to such Security.
SECTION 313. Agreed Tax Treatment.
--------------------
Each Security issued hereunder shall provide that the Company and, by
its acceptance of a Security or a beneficial interest therein, the Holder of,
and any Person
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that acquires a beneficial interest in, such Security agree that for United
States federal, state and local tax purposes it is intended that such Security
constitute indebtedness.
SECTION 314. Extension of Stated Maturity; Adjustment of Stated Maturity Upon
----------------------------------------------------------------
an Exchange.
-----------
If specified as contemplated by Section 301 with respect to the
Securities of a particular series, the Company shall have the right to (a)
change the Maturity Date of the Securities of such series upon the liquidation
of an MCI Trust and the exchange of such Securities for the Preferred Securities
of such MCI Trust and (b) extend the Stated Maturity for the Securities of such
series; provided, that at time any election to extend the Maturity Date is made
--------
and at the time of such extension (i) the Company is not in bankruptcy,
otherwise insolvent or in liquidation, (ii) the Company is not in default in the
payment of any interest or principal on the Securities of such series and no
deferred interest payments thereon have accrued, (iii) the applicable MCI Trust
is not in arrears on payments of Distributions on its Preferred Securities and
no deferred Distributions thereon are accumulated, (iv) the Securities are rated
not less than BBB- by Standard & Poor's Ratings Services or Baa3 by Moody's
Investors Service, Inc. or the equivalent by any other nationally recognized
statistical rating organization and (v) the extended Stated Maturity is no later
than the 49th anniversary of the initial issuance of the Preferred Securities of
the applicable MCI Trust; and provided, further, that, if the Company exercises
--------- -------
its right to liquidate an MCI Trust and exchange the Securities of such series
for the Preferred Securities of such MCI Trust as specified in clause (a) above,
any changed Stated Maturity of the Securities of such series shall be (A) no
earlier than the date five years after the initial issuance of the Preferred
Securities of the applicable MCI Trust and (B) no later than the date 30 years
(plus an extended term of up to an additional 19 years if the above-referenced
conditions are satisfied) after the date of the initial issuance of the
Preferred Securities of the applicable MCI Trust.
SECTION 315. CUSIP Numbers.
-------------
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
--------
state that no representation is made as to the
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correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
--------------------------
SECTION 401. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall cease to be of further effect (except as to (i)
any surviving rights of transfer, substitution and exchange of Securities, (ii)
rights hereunder of Holders to receive payments of principal of (and premium, if
any) and interest on the Securities and other rights, duties and obligations of
the Holders as beneficiaries hereof with respect to the amounts, if any,
deposited with the Trustee pursuant to this Article IV and (iii) the rights and
obligations of the Trustee hereunder), and the Trustee, on demand of and at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 306 and (ii) Securities
for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust, as provided in Section 1003) have
been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year of the date of deposit,
and the Company, in the case of clause (i) or (ii) above, has
deposited or caused to be deposited
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with the Trustee as trust funds in trust for such purpose an amount
in the currency or currencies in which the Securities of such series
are payable sufficient to pay and discharge the entire indebtedness
on such Securities not theretofore delivered to the Trustee for
cancellation, for principal (and premium, if any) and interest
(including any Additional Interest) to the date of such deposit (in
the case of Securities which have become due and payable) or to the
Stated Maturity;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 or money or Government
Obligations deposited with the Trustee pursuant to Section 403, or received by
the Trustee in respect of Government Obligations deposited with the Trustee
pursuant to Section 403, shall be held in trust and applied by the Trustee, in
accordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (and premium, if any) and interest for the
payment of which such money or obligations have been deposited with or received
by the Trustee; provided, however, such moneys need not be segregated from other
-------- -------
funds except to the extent required by law.
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SECTION 403. Satisfaction, Discharge and Defeasance of Securities of Any
-----------------------------------------------------------
Series.
------
Unless otherwise provided in the Board Resolution adopted pursuant to
Section 301 establishing the terms of the Securities of any series, the Company
shall be deemed to have paid and discharged the entire indebtedness on all the
Outstanding Securities of any such series and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of such indebtedness, when
(1) with respect to all Outstanding Securities of such series,
(A) the Company has irrevocably deposited or caused to be irrevocably
deposited with the Trustee as trust funds in trust for such purpose an
amount sufficient to pay and discharge the entire indebtedness on all
Outstanding Securities of such series for principal (and premium, if any)
and interest (including any Additional Interest) to the Stated Maturity or
any Redemption Date as contemplated by the penultimate paragraph of this
Section 403, as the case may be; or
(B) the Company has irrevocably deposited or caused to be irrevocably
deposited with the Trustee as obligations in trust for such purpose an
amount of Government Obligations as will, in the written opinion of
independent public accountants delivered to the Trustee, together with
predetermined and certain income to accrue thereon, without consideration
of any reinvestment thereof, be sufficient to pay and discharge when due
the entire indebtedness on all Outstanding Securities of such series for
principal (and premium, if any) and interest (including any Additional
Interest) to the Stated Maturity or any Redemption Date as contemplated by
the penultimate paragraph of this Section 403, as the case may be; and
(2) the Company has paid or caused to be paid all other sums payable
with respect to the Outstanding Securities of such series; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of the
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entire indebtedness on all Outstanding Securities of any such series have
been complied with.
Any deposits with the Trustee referred to in Section 403(1) above
shall be irrevocable and shall be made under the terms of an escrow trust
agreement in form and substance reasonably satisfactory to the Trustee. If any
Outstanding Securities of such series are to be redeemed prior to their Stated
Maturity, whether pursuant to any optional redemption provisions or in
accordance with any mandatory sinking fund requirement, the applicable escrow
trust agreement shall provide therefor and the Company shall make such
arrangements as are satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company. If
the Securities of such series are not to become due and payable at their Stated
Maturity or upon call for redemption within one year of the date of deposit,
then the Company shall give, not later than the date of such deposit, notice of
such deposit to the Holders of Securities of such series.
Upon the satisfaction of the conditions set forth in this Section 403
with respect to all the Outstanding Securities of any series, the terms and
conditions of such series, including the terms and conditions with respect
thereto set forth in this Indenture, shall no longer be binding upon, or
applicable to, the Company; provided, that the Company shall not be discharged
--------
from any payment obligations in respect of Securities of such series which are
deemed not to be Outstanding under clause (iii) of the definition thereof if
such obligations continue to be valid obligations of the Company under
applicable law.
ARTICLE FIVE
REMEDIES
--------
SECTION 501. Events of Default.
-----------------
"Event of Default", wherever used herein with respect to the
Securities of any series, means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest upon any Security of that
series, including any Additional
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Interest in respect thereof, when it becomes due and payable, and
continuance of such default for a period of 30 days (subject to the
deferral of any due date in the case of an Extension Period); or
(2) default in the payment of the principal of (or premium, if any,
on) any Security of that series at its Maturity; or
(3) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Company in this Indenture (other than a
covenant or warranty a default in the performance of which or the breach of
which is elsewhere in this Section specifically dealt with), and
continuance of such default or breach for a period of 90 days after there
has been given, by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Securities of that series a written
notice specifying such default or breach and requiring it to be remedied;
or
(4) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment
or composition of or in respect of the Company under any applicable federal
or state bankruptcy, insolvency, reorganization or other similar law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Company or of any substantial part of its
property or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a period
of 60 consecutive days; or
(5) the institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under any
applicable federal or state bankruptcy, insolvency, reorganization or other
similar law, or the consent by it to the filing of any such petition or to
the appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company or of any substantial part of
its property, or the making by it of an assignment for the benefit of
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creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due and its willingness to be adjudicated a
bankrupt, or the taking of corporate action by the Company in furtherance
of any such action; or
(6) any other Event of Default with respect to Securities of that
series.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default with respect to Securities of any series at the
time Outstanding occurs and is continuing, then and in every such case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series 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 all the
Securities of that series to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders), provided that,
--------
in the case of the Securities of a series issued to an MCI Trust, if, upon an
Event of Default, the Trustee or the Holders of not less than 25% in principal
amount of the Outstanding Securities of that series fail to declare the
principal of all the Securities of that series to be immediately due and
payable, the holders of at least 25% in aggregate liquidation amount of the
corresponding series of Preferred Securities then outstanding shall have such
right by a notice in writing to the Company and the Trustee; and upon any such
declaration such principal amount (or specified amount) of and the accrued
interest (including any Additional Interest) on all the Securities of such
series shall become immediately due and payable, provided that the payment of
--------
principal and interest (including any Additional Interest) on such Securities
shall remain subordinated to the extent provided in Article Thirteen.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if:
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(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue installments of interest (including any
Additional Interest) on all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities of
that series which have become due otherwise than by such declaration
of acceleration and interest thereon at the rate borne by the
Securities, and
(C) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series
which has become due solely by such acceleration, have been cured or waived
as provided in Section 513.
The holders of a majority in aggregate outstanding principal amount of
the Securities of a series affected thereby may, on behalf of the holders of all
the Securities of such series, waive any past default, except a default in the
payment of principal or interest (unless such default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Trustee) or a default
in respect of a covenant or provision which under this Indenture cannot be
modified or amended without the consent of the holder of each outstanding
Security of such series and, in the case of Securities of a series issued to an
MCI Trust, should the holders of such Securities fail to annul such declaration
and waive such default, the holders of a majority in aggregate liquidation
preference of the related series of Preferred Securities shall have such right.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Upon receipt by the Trustee of written notice declaring such an
acceleration, or rescission and annulment thereof, with respect to Securities of
a series all or part of which is represented by a Global Security, a record date
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shall be established for determining Holders of Outstanding Securities of such
series entitled to join in such notice, which record date shall be at the close
of business on the day the Trustee receives such notice. The Holders on such
record date, or their duly designated proxies, and only such Persons, shall be
entitled to join in such notice, whether or not such Holders remain Holders
after such record date; provided, that, unless such declaration of acceleration,
--------
or rescission and annulment, as the case may be, shall have become effective by
virtue of the requisite percentage having joined in such notice prior to the day
which is 90 days after such record date, such notice of declaration of
acceleration, or rescission and annulment, as the case may be, shall
automatically and without further action by any Holder be canceled and of no
further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of
a Holder, from giving, after expiration of such 90-day period, a new written
notice of declaration of acceleration, or rescission and annulment thereof, as
the case may be, that is identical to a written notice which has been canceled
pursuant to the proviso to the preceding sentence, in which event a new record
-------
date shall be established pursuant to the provisions of this Section 502.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
---------------------------------------------------------------
The Company covenants that if:
(1) default is made in the payment of any installment of interest
(including any Additional Interest) on any Security when such interest
becomes due and payable and such default continues for a period of 30 days,
or
(2) default is made in the payment of the principal of (and premium,
if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal, including any sinking fund payment or
analogous obligations (and premium, if any) and interest (including any
Additional Interest); and, in addition thereto, all amounts owing the Trustee
under Section 607.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trust-
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ee of an express trust, may institute a judicial proceeding for the collection
of the sums so due and unpaid, and may prosecute such proceeding to judgment or
final decree, and may enforce the same against the Company or any other obligor
upon the Securities and collect the moneys adjudged or decreed to be payable in
the manner provided by law out of the property of the Company or any other
obligor upon the Securities, wherever situated.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors,
(a) the Trustee (irrespective of whether the principal of the
Securities of any series shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand on the Company for the payment of overdue
principal (and premium, if any) or interest (including any Additional
Interest)) shall be entitled and empowered, by intervention in such
proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal
(and premium, if any) and interest (including any Additional Interest)
owing and unpaid in respect to the Securities and to file such other
papers or documents as may be necessary or advisable and to take any
and all actions as are authorized under the Trust Indenture Act in
order to have the claims of the Holders and any predecessor to the
Trustee under Section 607 and of the Holders allowed in any such
judicial proceedings; and
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(ii) and in particular, the Trustee shall be authorized to
collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same in
accordance with Section 506; and
(b) any custodian, receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee for
distribution in accordance with Section 506, and in the event that the
Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it and any predecessor
Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; provided, however,
-------- -------
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors' or
other similar committee.
SECTION 505. Trustee May Enforce Claim Without Possession of Securities.
----------------------------------------------------------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of all the amounts owing the Trustee and any
predecessor Trustee under Section 607, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
------------------------------
Any money or property collected or to be applied by the Trustee with
respect to a series of Securities pursuant to this Article shall be applied in
the following order, at the date or dates fixed by the Trustee and, in
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case of the distribution of such money or property on account of principal (or
premium, if any) or interest (including any Additional Interest), upon
presentation of the Securities and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any
predecessor Trustee under Section 607;
SECOND: To the payment of the amounts then due and unpaid upon such
series of Securities for principal (and premium, if any) and interest (including
any Additional Interest), in respect of which or for the benefit of which such
money has been collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such series of Securities for
principal (and premium, if any) and interest (including any Additional
Interest), respectively; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto.
SECTION 507. Limitation on Suits.
-------------------
No Holder of any Securities of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture
or for the appointment of a receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) or for any other remedy hereunder,
unless:
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that
series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
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(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing itself of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Securities, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all such Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and
----------------------------------------------------------------
Interest.
--------
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right which is absolute and unconditional to receive
payment of the principal of (and premium, if any) and (subject to Section 307)
interest (including any Additional Interest) on such Security on the respective
Stated Maturities expressed in such Security and to institute suit for the
enforcement of any such payment, and such right shall not be impaired without
the consent of such Holder. In the case of Securities of a series issued to an
MCI Trust, any holder of the corresponding series of Preferred Securities shall
have the right set forth in the preceding sentence to directly institute a
proceeding for enforcement of payment of the principal of (and premium, if any)
and (subject to Section 307) interest (including any Additional Interest) on any
Security to such holder of the principal amount of or interest on the Securities
having a principal amount equal to the aggregate liquidation preference of the
corresponding series of Preferred Securities of such Holder.
SECTION 509. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the
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Company, the Trustee and the Holders shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided in the last paragraph of Section 306, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
----------------------------
Except as otherwise provided in the last paragraph of Section 306, no
delay or omission of the Trustee or of any Holder of any Security to exercise
any right or remedy accruing upon any Event of Default shall impair any such
right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee
or to the Holders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Holders, as the case may be.
SECTION 512. Control by Holders.
------------------
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series, provided that:
--------
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
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(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) subject to the provisions of Section 601, the Trustee shall have
the right to decline to follow such direction if the Trustee in good faith
shall, by a Responsible Officer or Officers of the Trustee, determine that
the proceeding so directed would be unjustly prejudicial to the Holders not
joining in any such direction or would involve the Trustee in personal
liability.
Upon receipt by the Trustee of any written notice directing the time,
method or place of conducting any such proceeding or exercising any such trust
or power, with respect to Securities of a series all or part of which is
represented by a Global Security, a record date shall be established for
determining Holders of Outstanding Securities of such series entitled to join in
such notice, which record date shall be at the close of business on the day the
Trustee receives such notice. The Holders on such record date, or their duly
designated proxies, and only such Persons, shall be entitled to join in such
notice, whether or not such Holders remain Holders after such record date;
provided, that, unless the Holders of a majority in principal amount of the
--------
Outstanding Securities of such series shall have joined in such notice prior to
the day which is 90 days after such record date, such notice shall automatically
and without further action by any Holder be canceled and of no further effect.
Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from
giving, after expiration of such 90-day period, a new notice identical to a
notice which has been canceled pursuant to the proviso to the preceding
-------
sentence, in which event a new record date shall be established pursuant to the
provisions of this Section 512.
SECTION 513. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder and its consequences
with respect to such series, except a default:
(1) in the payment of the principal of (or premium, if any) or
interest (including any Additional Interest) on any Security of such
series, or
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(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Securities of
any series, or to any suit instituted by any Holder for the enforcement of the
payment of the principal of (or premium, if any) or interest (including any
Additional Interest) on any Security on or after the respective Stated
Maturities expressed in such Security.
SECTION 515. Waiver of Usury, Stay or Extension Laws.
---------------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
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ARTICLE SIX
THE TRUSTEE
-----------
SECTION 601. Certain Duties and Responsibilities.
-----------------------------------
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provisions
hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in
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good faith in accordance with the direction of Holders pursuant to Section
512 relating to the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture with respect to the
Securities of such series.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if there shall be reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
SECTION 602. Notice of Defaults.
------------------
Within 90 days after actual knowledge by a Responsible Officer of the
Trustee of the occurrence of any default hereunder with respect to the
Securities of any series, the Trustee shall transmit by mail to all Holders of
Securities of such series, as their names and addresses appear in the Securities
Register, notice of such default hereunder known to the Trustee, unless such
default shall have been cured or waived; provided, however, that, except in the
-------- -------
case of a default in the payment of the principal of (or premium, if any) or
interest (including any Additional Interest) on any Security of such series, the
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee or a trust committee of directors
and/or Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders of Securities of
such series; and provided, further, that, in the case of any default of the
-------- -------
character specified in Section 501(3), no such notice to Holders of Securities
of such series shall be given until at least 30 days after the occurrence
thereof. For the purpose of this Section, the term "default" means any event
which is, or after notice or lapse of time or both would become, an Event of
Default with respect to Securities of such series.
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SECTION 603. Certain Rights of Trustee.
-------------------------
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
Security or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, indenture,
Security or other paper or document, but the Trustee in its discretion may make
such inquiry or investigation into such facts or matters as it may see fit, and,
if the Trustee shall determine to make such inquiry or investigation, it shall
be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney; and
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(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
------------------------------------------------------
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the use
or application by the Company of the Securities or the proceeds thereof.
SECTION 605. May Hold Securities.
-------------------
The Trustee, any Paying Agent, Securities Registrar or any other agent
of the Company, in its individual or any other capacity, may become the owner or
pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal
with the Company with the same rights it would have if it were not Trustee,
Paying Agent, Securities Registrar or such other agent.
SECTION 606. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
SECTION 607. Compensation and Reimbursement.
------------------------------
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder in such amounts as the Company
and the Trustee shall agree from time to time (which compensation shall not
be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
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(2) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to
its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense (including the reasonable compensation and
the expenses and disbursements of its agents and counsel) incurred without
negligence or bad faith, arising out of or in connection with the
acceptance or administration of this trust or the performance of its duties
hereunder, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of
its powers or duties hereunder. This indemnification shall survive the
termination of this Agreement.
To secure the Company's payment obligations in this Section, the
Company and the Holders agree that the Trustee shall have a lien prior to the
Securities on all money or property held or collected by the Trustee. Such lien
shall survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 501(4) or (5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Reform Act of 1978 or a successor statute.
SECTION 608. Disqualification; Conflicting Interests.
---------------------------------------
The Trustee for the Securities of any series issued hereunder shall be
subject to the provisions of Section 310(b) of the Trust Indenture Act. Nothing
herein shall prevent the Trustee from filing with the Commission the application
referred to in the second to last paragraph of Section 310(b) of the Trust
Indenture Act.
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SECTION 609. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be
(a) a corporation organized and doing business under the laws of the
United States of America or of any State, Territory or the District of
Columbia, authorized under such laws to exercise corporate trust powers and
subject to supervision or examination by federal, state, territorial or
District of Columbia authority, or
(b) a corporation or other Person organized and doing business under
the laws of a foreign government that is permitted to act as Trustee
pursuant to a rule, regulation or order of the Commission, authorized under
such laws to exercise corporate trust powers, and subject to supervision or
examination by authority of such foreign government or a political
subdivision thereof substantially equivalent to supervision or examination
applicable to United States institutional trustees,
in either case having a combined capital and surplus of at least $50,000,000,
subject to supervision or examination by federal or state authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then,
for the purpose of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article. Neither the Company nor any Person directly or indirectly
controlling, controlled by or under common control with the Company shall serve
as Trustee for the Securities of any series issued hereunder.
SECTION 610. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611.
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(b) The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the Company. If an
instrument of acceptance by a successor Trustee shall not have been delivered to
the Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series, delivered to the Trustee and to
the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, acting under authority of a Board
Resolution, may remove the Trustee, or (ii) subject to Section 514, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause with
respect to the Securities of one or more series, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee with
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respect to the Securities of that or those series. If, within one year after
such resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any series shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment, become the successor Trustee with respect to the Securities
of such series and supersede the successor Trustee appointed by the Company. If
no successor Trustee with respect to the Securities of any series shall have
been so appointed by the Company or the Holders and accepted appointment in the
manner hereinafter provided, any Holder who has been a bona fide Holder of a
Security for at least six months may, subject to Section 514, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
(f) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any series
by mailing written notice of such event by first-class mail, postage prepaid, to
the Holders of Securities of such series as their names and addresses appear in
the Securities Register. Each notice shall include the name of the successor
Trustee with respect to the Securities of such series and the address of its
Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
--------------------------------------
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
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(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts, and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but, on request of the Company or any successor Trustee, such
retiring Trustee shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all rights, powers and trusts referred to
in paragraph (a) or (b) of this Section, as the case may be.
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(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
-----------------------------------------------------------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated, and in case any
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor Trustee or in
the name of such successor Trustee, and in all cases the certificate of
authentication shall have the full force which it is provided anywhere in the
Securities or in this Indenture that the certificate of the Trustee shall have.
SECTION 613. Preferential Collection of Claims Against Company.
-------------------------------------------------
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
SECTION 614. Appointment of Authenticating Agent.
-----------------------------------
The Trustee may appoint an Authenticating Agent or Agents with respect
to one or more series of Securities which shall be authorized to act on behalf
of the Trustee to authenticate Securities of such series issued upon original
issue and upon exchange, registration of transfer or partial redemption thereof,
and Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be
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valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. Wherever reference is made in this Indenture to the authentication
and delivery of Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at all times
be a corporation organized and doing business under the laws of the United
States of America, or of any State, Territory or the District of Columbia,
authorized under such laws to act as Authenticating Agent, having a combined
capital and surplus of not less than $50,000,000 and subject to supervision or
examination by federal or state authority. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section the combined capital and surplus of such Authenticating Agent
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time an Authenticating Agent
shall cease to be eligible in accordance with the provisions of this Section,
such Authenticating Agent shall resign immediately in the manner and with the
effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of an Authenticating Agent shall be the successor
Authenticating Agent hereunder, provided such corporation shall be otherwise
eligible under this Section, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided
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in Section 106 to all Holders of Securities of the series with respect to which
such Authenticating Agent will serve. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all the rights,
powers and duties of its predecessor hereunder, with like effect as if
originally named as an Authenticating Agent. No successor Authenticating Agent
shall be appointed unless eligible under the provision of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 607.
If an appointment with respect to one or more series is made pursuant
to this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities referred to in the within mentioned
Indenture.
_________________________
_________________________
As Trustee
By: ____________________
As Authenticating Agent
By: ____________________
Authorized Officer
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
-------------------------------------------------
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
---------------------------------------------------------
The Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not more than 15 days after January 15 and July
15, a list, in such form as the Trustee
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may reasonably require, of the names and addresses of the Holders as of such
January 1 and July 1, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished, excluding from any such list names and addresses received by the
Trustee in its capacity as Securities Registrar.
SECTION 702. Preservation of Information, Communications to Holders.
------------------------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Securities
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided in the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of the
disclosure of information as to the names and addresses of the Holders made
pursuant to the Trust Indenture Act.
SECTION 703. Reports by Trustee.
------------------
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act, at the times and in the manner provided pursuant thereto.
(b) Reports so required to be transmitted at stated intervals of not
more than 12 months shall be transmitted no later than July 15 in each calendar
year, commencing with the first July 15 after the first issuance of Securities
under this Indenture.
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(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange or
self-regulatory organization upon which the Securities are listed or traded and
also with the Commission. The Company will notify the Trustee whenever the
Securities are listed or traded on any stock exchange or self-regulatory
organization.
SECTION 704. Reports by Company.
------------------
The Company shall file with the Trustee and with the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided in the Trust Indenture Act; provided that any
--------
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
shall be filed with the Trustee within 15 days after the same is required to be
filed with the Commission. Notwithstanding that the Company may not be required
to remain subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company shall continue to file with the
Commission and provide the Trustee with the annual reports and the information,
documents and other reports which are specified in Sections 13 and 15(d) of the
Securities Exchange Act of 1934. The Company also shall comply with the other
provisions of Trust Indenture Act Section 314(a).
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
----------------------------------------------------
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
----------------------------------------------------
The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and no Person shall consolidate with or merge into the
Company or convey, transfer or lease its properties and assets substantially as
an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially
as an entirety to any Person, the Person formed by such consolidation or
into which the Company is merged or the Person which
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acquires by conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety shall be a corporation,
partnership or trust, shall be organized and existing under the laws of the
United States of America or any State or the District of Columbia, and
shall expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of (and premium, if any) and interest
(including any Additional Interest) on all the Securities and the
performance of every covenant of this Indenture on the part of the Company
to be performed or observed;
(2) immediately 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, shall have happened and be continuing;
(3) in the case of the Securities of a series issued to an MCI Trust,
such consolidation, merger, conveyance, transfer or lease is permitted
under the related Trust Agreement and MCI Guarantee and does not give rise
to any breach or violation of the related Trust Agreement or MCI Guarantee;
and
(4) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Independent Counsel each stating that such consolidation,
merger, conveyance, transfer or lease and any such supplemental indenture
complies with this Article and that all conditions precedent herein
provided for relating to such transaction have been complied with; and the
Trustee, subject to Section 601, may rely upon such Officers' Certificate
and Opinion of Independent Counsel as conclusive evidence that such
transaction complies with this Section 801.
SECTION 802. Successor Person Substituted.
----------------------------
Upon any consolidation or merger by the Company with or into any other
Person, or any conveyance, transfer or lease by the Company of its properties
and assets substantially as an entirety to any Person in accordance with Section
801, the successor Person formed by such consolidation or into which the Company
is merged or to which such conveyance, transfer or lease is made shall succeed
to, and be substituted for, and may exercise every right and
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power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; and in the event of any
such conveyance, transfer or lease the Company shall be discharged from all
obligations and covenants under the Indenture and the Securities and may be
dissolved and liquidated.
Such successor Person may cause to be signed, and may issue either in
its own name or in the name of the Company, any or all of the Securities
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee; and, upon the order of such successor Person
instead of the Company and subject to all the terms, conditions and limitations
in this Indenture prescribed, the Trustee shall authenticate and shall deliver
any Securities which previously shall have been signed and delivered by the
officers of the Company to the Trustee for authentication pursuant to such
provisions and any Securities which such successor Person thereafter shall cause
to be signed and delivered to the Trustee on its behalf for the purpose pursuant
to such provisions. All the Securities so issued shall in all respects have the
same legal rank and benefit under this Indenture as the Securities theretofore
or thereafter issued in accordance with the terms of this Indenture as though
all of such Securities had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form may be made in the Securities thereafter to
be issued as may be appropriate.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
-----------------------
SECTION 901. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company, and
the assumption by any such
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successor of the covenants of the Company herein and in the Securities
contained; or
(2) to convey, transfer, assign, mortgage or pledge any property to
or with the Trustee or to surrender any right or power herein conferred
upon the Company; or
(3) to establish the form or terms of Securities of any series as
permitted by Sections 201 or 301; or
(4) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Company; or
(5) to add any additional Events of Default; or
(6) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only
--------
when there is no Security Outstanding of any series created prior to the
execution of such supplemental indenture which is entitled to the benefit
of such provision; or
(7) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture, provided that such action pursuant to this clause (7)
--------
shall not materially adversely affect the interest of the Holders of
Securities of any series or, in the case of the Securities of a series
issued to an MCI Trust and for so long as any of the corresponding series
of Preferred Securities shall remain outstanding, the holders of such
Preferred Securities; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to the requirements
of Section 611(b); or
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(9) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act.
SECTION 902. Supplemental Indentures with Consent of Holders.
-----------------------------------------------
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities of such series under this Indenture; provided, however,
-------- -------
that no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Security affected thereby,
(1) except to the extent permitted by Section 311 or as otherwise
specified as contemplated by Section 301 with respect to the extension of
the interest payment period of the Securities of any series, change the
Stated Maturity of the principal of, or any instalment of interest
(including any Additional Interest) on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or reduce any
premium payable upon the redemption thereof, or reduce the amount of
principal of a Discount Security that would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section
502, or change the place of payment where, or the coin or currency in
which, any Security or interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption, on or after the
date fixed for redemption thereof), or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture, or
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(3) modify any of the provisions of this Section, Section 513 or
Section 1005, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Security affected thereby; or
(4) modify the provisions in Article Thirteen of this Indenture with
respect to the subordination of Outstanding Securities of any series in a
manner adverse to the Holders thereof;
provided that, in the case of the Securities of a series issued to an MCI Trust,
--------
so long as any of the corresponding series of Preferred Securities remains
outstanding, no such amendment shall be made that adversely affects the holders
of such Preferred Securities, and no termination of this Indenture shall occur,
and no waiver of any Event of Default or compliance with any covenant under this
Indenture shall be effective, without the prior consent of the holders of at
least a majority of the aggregate liquidation preference of such Preferred
Securities then outstanding unless and until the principal (and premium, if any)
of the Securities of such series and all accrued and unpaid interest (including
any Additional Interest) thereon have been paid in full; and provided, further
-------- -------
that in the case of the Securities of a series issued to an MCI Trust, so long
as any of the corresponding series of Preferred Securities remains outstanding,
no amendment shall be made to Section 508 under this Indenture without the prior
consent of the holders of each Preferred Security then outstanding unless and
until the principal (and premium, if any) of the Securities of such series and
all accrued and unpaid interest (including any Additional Interest) thereon have
been paid in full.
A supplemental indenture that changes or eliminates any covenant or
other provision of this Indenture that has expressly been included solely for
the benefit of one or more particular series of Securities, or which modifies
the rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
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SECTION 903. Execution of Supplemental Indentures.
------------------------------------
In executing or accepting the additional trusts created by any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Independent Counsel stating that the
execution of such supplemental indenture is authorized or permitted by this
Indenture, and that all conditions precedent have been complied with. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Company, bear a notation in form approved by the Company as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities of such series.
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ARTICLE TEN
COVENANTS
---------
SECTION 1001. Payment of Principal, Premium and Interest.
------------------------------------------
The Company covenants and agrees for the benefit of each series of
securities that it will duly and punctually pay the principal of (and premium,
if any) and interest on the Securities of that series in accordance with the
terms of such Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
-------------------------------
The Company will maintain in each Place of Payment for any series, an
office or agency where Securities of that series may be presented or surrendered
for payment and an office or agency where Securities may be surrendered for
transfer or exchange and where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The Company
initially appoints the Trustee, acting through its Corporate Trust Office, as
its agent for said purposes. The Company will give prompt written notice to the
Trustee of any change in the location of any such office or agency. If at any
time the Company shall fail to maintain such office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all of such purposes, and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
-------- -------
relieve the Company of its obligation to maintain an office or agency in each
Place of Payment for Securities of any series for such purposes. The Company
will give prompt written notice to the Trustee of any such designation and any
change in the location of any such office or agency.
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SECTION 1003. Money for Security Payments to be Held in Trust.
-----------------------------------------------
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of (and premium, if any) or interest on any of the Securities of such
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided, and will promptly notify the Trustee of its
failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to 10:00 a.m. New York City time on each due date of the principal of or
interest on any Securities, deposit with a Paying Agent a sum sufficient to pay
the principal (and premium, if any) or interest so becoming due, such sum to be
held in trust for the benefit of the Persons entitled to such principal and
premium (if any) or interest, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest;
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent; and
(4) comply with the provisions of the Trust Indenture Act applicable
to it as a Paying Agent.
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The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by the Company or any Paying Agent to
the Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall (unless otherwise required by mandatory provision of applicable escheat or
abandoned or unclaimed property law) be paid on Company Request to the Company,
or (if then held by the Company) shall (unless otherwise required by mandatory
provision of applicable escheat or abandoned or unclaimed property law) be
discharged from such trust; and the Holder of such Security shall thereafter, as
an unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
-------- -------
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 1004. Statement as to Compliance.
--------------------------
The Company shall deliver to the Trustee, within 120 days after the
end of each calendar year of the Company ending after the date hereof, an
Officers' Certificate covering the preceding calendar year, stating whether or
not to the best knowledge of the signers thereof the Company is in default in
the performance, observance or fulfillment of or compliance with any of the
terms, provisions, covenants and conditions of this Indenture, and if the
Company shall be in default, specifying all such defaults and the nature
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and status thereof of which they may have knowledge. For the purpose of this
Section 1004, compliance shall be determined without regard to any grace period
or requirement of notice provided pursuant to the terms of this Indenture.
SECTION 1005. Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with any
covenant or condition as specified as contemplated by Section 301 with respect
to the Securities of any series, if before or after the time for such compliance
the Holders of at least a majority in principal amount of the Outstanding
Securities of such series shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company in respect of any such covenant
or condition shall remain in full force and effect.
SECTION 1006. Additional Sums.
---------------
In the case of the Securities of a series issued to an MCI Trust,
except as otherwise specified as contemplated by Section 301, in the event that
(i) an MCI Trust is the Holder of all of the Outstanding Securities of such
series, (ii) a Tax Event in respect of such MCI Trust shall have occurred and be
continuing and (iii) the Company shall not have (x) redeemed the Securities of
such series pursuant to Section 1107(b) or (y) terminated such MCI Trust
pursuant to Section 902(b) of the related Trust Agreement, the Company shall pay
to such MCI Trust (and its permitted successors or assigns under the related
Trust Agreement) for so long as such MCI Trust (or its permitted successor or
assignee) is the registered holder of any Securities of such series, such
additional amounts as may be necessary in order that the amount of distributions
(including any Additional Amounts (as defined in the Trust Agreement)) then due
and payable by such MCI Trust on the related Preferred Securities and Common
Securities that at any time remain outstanding in accordance with the terms
thereof shall not be reduced as a result of any Additional Taxes (the
"Additional Sums"). Whenever in this Indenture or the Securities there is a
----------------
reference in any context to the payment of principal of or interest on the
Securities, such mention shall be deemed to include mention of the payments of
the Additional Sums provided for in this paragraph to the extent that, in such
context, Additional Sums are, were or
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would be payable in respect thereof pursuant to the provisions of this paragraph
and express mention of the payment of Additional Sums (if applicable) in any
provisions hereof shall not be construed as excluding Additional Sums in those
provisions hereof where such express mention is not made, provided, however,
-------- -------
that the extension of an interest payment period pursuant to Section 311 or the
Securities shall not extend the payment of any Additional Sums that may be due
and payable during such interest payment period.
SECTION 1007. Additional Covenants.
--------------------
The Company covenants and agrees with each Holder of Securities of a
series issued to an MCI Trust that it will not, and it will not permit any
Subsidiary of the Company to, (a) declare or pay any dividends or distributions
on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any shares of the Company's capital stock, or (b) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities that rank pari passu with or junior to the Securities of such series
---- -----
or make any guarantee payments with respect to the foregoing (other than (a)
dividends or distributions in Common Stock of the Company, (b) redemptions or
purchases of any rights pursuant to the Company's Preferred Stock Rights Plan,
or any successor to such Preferred Stock Rights Plan, and the declaration of a
dividend of such rights or the issuance of Preferred Stock under such plans in
the future, (c) payments under any MCI Guarantee, (d) purchases of Common Stock
related to the issuance of Common Stock under any of the Company's benefit plans
for its directors, officers or employees and (e) purchases of Common Stock
required to prevent the loss or secure the renewal or reinstatement of any
government license or franchise held by the Company or any of its Subsidiaries)
if at such time (i) there shall have occurred any event of which the Company has
actual knowledge that (a) with the giving of notice or the lapse of time or
both, would constitute an Event of Default hereunder and (b) in respect of which
the Company shall not have taken reasonable steps to cure, (ii) the Company
shall be in default with respect to its payment of any obligations under the
related MCI Guarantee or (iii) the Company shall have given notice of its
election to begin an Extension Period as provided herein and shall not have
rescinded such notice, or such period, or any extension thereof, shall be
continuing.
The Company also covenants with each Holder of Securities of a series
issued to an MCI Trust (i) to
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maintain directly or indirectly 100% ownership of the Common Securities of such
MCI Trust; provided, however, that any permitted successor of the Company
-------- -------
hereunder may succeed to the Company's ownership of such Common Securities, (ii)
not to voluntarily terminate, wind-up or liquidate such MCI Trust, except (a) in
connection with a distribution of the Securities of such series to the holders
of Preferred Securities in liquidation of such MCI Trust or (b) in connection
with certain mergers, consolidations or amalgamations permitted by the related
Trust Agreement and (iii) to use its reasonable efforts, consistent with the
terms and provisions of such Trust Agreement, to cause such MCI Trust to remain
classified as a grantor trust and not as an association taxable as a corporation
for United States federal income tax purposes.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
------------------------
SECTION 1101. Applicability of This Article.
-----------------------------
Redemption of Securities (whether by operation of a sinking fund or
otherwise) as permitted or required by any form of Security issued pursuant to
this Indenture shall be made in accordance with such form of Security and this
Article; provided, however, that if any provision of any such form of Security
-------- -------
shall conflict with any provision of this Article, the provision of such form of
Security shall govern. Except as otherwise set forth in the form of Security for
such series, each Security shall be subject to partial redemption only in the
amount of $25 or, in the case of the Securities of a series issued to an MCI
Trust, $25, or integral multiples thereof.
SECTION 1102. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities shall be
evidenced by or pursuant to a Board Resolution. In case of any redemption at the
election of the Company of less than all of the Securities of any particular
series and having the same terms, the Company shall, not less than 30 nor more
than 60 days prior to the date fixed for redemption (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such date and of
the principal amount of Securities of that series to be redeemed. In the case of
any redemption of Securities prior to the expiration of any restriction on
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such redemption provided in the terms of such Securities, the Company shall
furnish the Trustee with an Officers' Certificate and an Opinion of Independent
Counsel evidencing compliance with such restriction.
SECTION 1103. Selection of Securities to be Redeemed.
--------------------------------------
If less than all the Securities of any series are to be redeemed
(unless all the Securities of such series and of a specified tenor are to be
redeemed or unless such redemption affects only a single Security), the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of a portion of the principal amount of any Security of such series,
provided that the unredeemed portion of the principal amount of any Security
--------
shall be in an authorized denomination (which shall not be less than the minimum
authorized denomination) for such Security. If less than all the Securities of
such series and of a specified tenor are to be redeemed (unless such redemption
affects only a single Security), the particular Securities to be redeemed shall
be selected not more than 60 days prior to the Redemption Date by the Trustee,
from the Outstanding Securities of such series and specified tenor not
previously called for redemption in accordance with the preceding sentence.
The Trustee shall promptly notify the Company in writing of the
Securities selected for partial redemption and the principal amount thereof to
be redeemed. For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security which has been or is to be
redeemed. If the Company shall so direct, Securities registered in the name of
the Company, any Affiliate or any Subsidiary thereof shall not be included in
the Securities selected for redemption.
SECTION 1104. Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not later than the thirtieth day, and not earlier than the
sixtieth day, prior to the date fixed for redemption, to each Holder of
Securities to
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be redeemed, at the address of such Holder as it appears in the Securities
Register.
With respect to Securities of each series to be redeemed, each notice
of redemption shall state:
(a) the date fixed for redemption for Securities of such series;
(b) the redemption price at which Securities of such series are to be
redeemed;
(c) if less than all Outstanding Securities of such particular series
and having the same terms are to be redeemed, the identification (and, in the
case of partial redemption, the respective principal amounts) of the particular
Securities to be redeemed;
(d) that on the date fixed for redemption, the redemption price at
which such Securities are to be redeemed will become due and payable upon each
such Security or portion thereof, and that interest thereon, if any, shall cease
to accrue on and after said date;
(e) the place or places where such Securities are to be surrendered
for payment of the redemption price at which such Securities are to be redeemed;
and
(f) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall not be
irrevocable. The notice if mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice. In any case, a failure to give such notice by mail or any
defect in the notice to the Holder of any Security designated for redemption as
a whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security.
SECTION 1105. Deposit of Redemption Price.
---------------------------
Prior to 10:00 a.m. New York City time on the redemption date
specified in the notice of redemption given as provided in Section 1104, the
Company will deposit with the Trustee or with one or more paying agents an
amount of
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money sufficient to redeem on the redemption date all the Securities so called
for redemption at the applicable redemption price.
SECTION 1106. Payment of Securities Called for Redemption.
-------------------------------------------
If any notice of redemption has been given as provided in Section
1104, the Securities or portion of Securities with respect to which such notice
has been given shall become due and payable on the date and at the place or
places stated in such notice at the applicable redemption price. On presentation
and surrender of such Securities at a place of payment in said notice specified,
the said securities or the specified portions thereof shall be paid and redeemed
by the Company at the applicable redemption price.
Upon presentation of any Security redeemed in part only, the Company
shall execute and the Trustee shall authenticate and deliver to the Holder
thereof, at the expense of the Company, a new Security or Securities of the same
series, of authorized denominations, in aggregate principal amount equal to the
unredeemed portion of the Security so presented and having the same Original
Issue Date, Stated Maturity and terms. If a Global Security is so surrendered,
such new Security will also be a new Global Security.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal of and premium, if any, on such
Security shall, until paid, bear interest from the Redemption Date at the rate
prescribed therefor in the Security.
SECTION 1107. Company's Right of Redemption.
-----------------------------
(a) Unless otherwise specified as contemplated by Section 301 with
respect to the Securities of a particular series and notwithstanding any
additional redemption rights that may be so specified, the Company may, at its
option, redeem the Securities of any series after their date of issuance in
whole at any time or in part from time to time, subject to the provisions of
this clause (a) and the other provisions of this Article Eleven. Unless
otherwise specified as contemplated by Section 301 with respect to the
Securities of a particular series, the redemption price for any Security so
redeemed pursuant to this clause (a) shall be equal to 100% of the principal
amount of such Securities plus any accrued and unpaid interest, including any
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Additional Interest, to the date fixed for redemption. The Company shall not
redeem the Securities in part unless all accrued and unpaid interest (including
any Additional Interest) has been paid in full on all Securities Outstanding for
all interest periods terminating on or prior to the date fixed for redemption.
(b) In the case of the Securities of a series issued to an MCI Trust,
except as otherwise specified as contemplated by Section 301, if a Special Event
in respect of such MCI Trust shall occur and be continuing, the Company may, at
its option, redeem the Securities of such series within 90 days of the
occurrence of such Special Event, in whole but not in part, subject to the
provisions of this clause (b) and the other provisions of this Article Eleven.
The redemption price for any Security so redeemed pursuant to this clause (b)
shall be equal to 100% of the principal amount of such Securities then
Outstanding plus accrued and unpaid interest, including any Additional Interest,
to the date fixed for redemption.
ARTICLE TWELVE
SINKING FUNDS
-------------
SECTION 1201. Applicability of Article.
------------------------
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of any series except as otherwise specified as
contemplated by Section 301 for such Securities.
The minimum amount of any sinking fund payment provided for by the
terms of any Securities of any series is herein referred to as a "mandatory
sinking fund payment", and any sinking fund payment in excess of such minimum
amount which is permitted to be made by the terms of such Securities of any
series is herein referred to as an "optional sinking fund payment". If provided
for by the terms of any Securities of any series, the cash amount of any sinking
fund payment may be subject to reduction as provided in Section 1202. Each
sinking fund payment shall be applied to the redemption of Securities of any
series as provided for by the terms of such Securities.
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SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.
-----------------------------------------------------
In lieu of making all or any part of a mandatory sinking fund payment
with respect to any Securities of a series in cash, the Company may at its
option, at any time no more than 16 months and no less than 30 days prior to the
date on which such sinking fund payment is due, deliver to the Trustee
Securities of such series (together with the unmatured Coupons, if any,
appertaining thereto) theretofore purchased or otherwise acquired by the
Company, except Securities of such series that have been redeemed through the
application of mandatory or optional sinking fund payments pursuant to the terms
of the Securities of such series, accompanied by a Company Order instructing the
Trustee to credit such obligations and stating that the Securities of such
series were originally issued by the Company by way of bona fide sale or other
negotiation for value; provided that the Securities to be so credited have not
--------
been previously so credited. The Securities to be so credited shall be received
and credited for such purpose by the Trustee at the redemption price for such
Securities, as specified in the Securities so to be redeemed, for redemption
through operation of the sinking fund and the amount of such sinking fund
payment shall be reduced accordingly.
SECTION 1203. Redemption of Securities for Sinking Fund.
-----------------------------------------
Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
such Securities pursuant to the terms of such Securities, the portion thereof,
if any, which is to be satisfied by payment of cash in the currency in which the
Securities of such series are payable (except as provided pursuant to Section
301) and the portion thereof, if any, which is to be satisfied by delivering and
crediting Securities pursuant to Section 1202 and will also deliver to the
Trustee any Securities to be so delivered. Such Certificate shall be irrevocable
and upon its delivery the Company shall be obligated to make the cash payment or
payments therein referred to, if any, on or before the succeeding sinking fund
payment date. In the case of the failure of the Company to deliver such
Certificate (or, as required by this Indenture, the Securities and coupons, if
any, specified in such Certificate), the sinking fund payment due on the
succeeding sinking fund payment date for such series shall be paid
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entirely in cash and shall be sufficient to redeem the principal amount of the
Securities of such series subject to a mandatory sinking fund payment without
the right to deliver or credit securities as provided in Section 1202 and
without the right to make the optional sinking fund payment with respect to such
series at such time.
Any sinking fund payment or payments (mandatory or optional) made in
cash plus any unused balance of any preceding sinking fund payments made with
respect to the Securities of any particular series shall be applied by the
Trustee (or by the Company if the Company is acting as its own Paying Agent) on
the sinking fund payment date on which such payment is made (or, if such payment
is made before a sinking fund payment date, on the sinking fund payment date
immediately following the date of such payment) to the redemption of Securities
of such series at the redemption price specified in such Securities with respect
to the sinking fund. Any sinking fund moneys not so applied or allocated by the
Trustee (or by the Company if the Company is acting as its own Paying Agent,
segregated and held in trust as provided in Section 1003) for such series and
together with such payment (or such amount so segregated) shall be applied in
accordance with the provisions of this Section 1203. Any and all sinking fund
moneys with respect to the Securities of any particular series held by the
Trustee (or if the Company is acting as its own Paying Agent, segregated and
held in trust as provided in Section 1003) on the last sinking fund payment date
with respect to Securities of such series and not held for the payment or
redemption of particular Securities of such series shall be applied by the
Trustee (or by the Company if the Company is acting as its own Paying Agent),
together with other moneys, if necessary, to be deposited (or segregated)
sufficient for the purpose, to the payment of the principal of the Securities of
such series at Maturity. The Trustee shall select the Securities to be redeemed
upon such sinking fund payment date in the manner specified in Section 1103 and
cause notice of the redemption thereof to be given in the name of and at the
expense of the Company in the manner provided in Section 1104. Such notice
having been duly given, the redemption of such Securities shall be made upon the
terms and in the manner stated in Section 1106. On or before each sinking fund
payment date, the Company shall pay to the Trustee (or, if the Company is acting
as its own Paying Agent, the Company shall segregate and hold in trust as
provided in Section 1003) in cash a sum in the currency in which Securities of
such series are payable (except as provided pursuant to Section 301) equal
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to the principal and any interest accrued to the redemption date for Securities
or portions thereof to be redeemed on such sinking fund payment date pursuant to
this Section 1203.
Neither the Trustee nor the Company shall redeem any Securities of a
series with sinking fund moneys or mail any notice of redemption of Securities
of such series by operation of the sinking fund for such series during the
continuance of a default in payment of interest, if any, on any Securities of
such series or of any Event of Default (other than an Event of Default occurring
as a consequence of this paragraph) with respect to the Securities of such
series, except that if the notice of redemption shall have been provided in
accordance with the provisions hereof, the Trustee (or the Company if the
Company is then acting as its own Paying Agent) shall redeem such Securities if
cash sufficient for that purpose shall be deposited with the Trustee (or
segregated by the Company) for that purpose in accordance with the terms of this
Article Twelve. Except as aforesaid, any moneys in the sinking fund for such
series at the time when any such default or Event of Default shall occur and any
moneys thereafter paid into such sinking fund shall, during the continuance of
such default or Event of Default, be held as security for the payment of the
Securities and coupons, if any, of such series; provided, however, that in case
-------- -------
such default or Event of Default shall have been cured or waived herein, such
moneys shall thereafter be applied on the next sinking fund payment date for the
Securities of such series on which such moneys may be applied pursuant to the
provisions of this Section 1203.
ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
---------------------------
SECTION 1301. Securities Subordinate to Senior Debt.
-------------------------------------
The Company covenants and agrees, and each Holder of a Security, by
its acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article, the payment of the
principal of (and premium, if any) and interest (including any Additional
Interest) on each and all of the Securities are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of all
amounts then due and payable in respect of all Senior Debt.
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SECTION 1302. Payment Over of Proceeds Upon Dissolution, Etc.
----------------------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company (each such event, if any, herein
sometimes referred to as a "Proceeding"), then the holders of Senior Debt shall
be entitled to receive payment in full of principal of (and premium, if any) and
interest, if any, on such Senior Debt, or provision shall be made for such
payment in cash or cash equivalents or otherwise in a manner satisfactory to the
holders of Senior Debt, before the Holders of the Securities are entitled to
receive or retain any payment or distribution of any kind or character, whether
in cash, property or securities (including any payment or distribution which may
be payable or deliverable by reason of the payment of any other Debt of the
Company (including any series of the Securities) subordinated to the payment of
the Securities, such payment or distribution being hereinafter referred to as a
"Junior Subordinated Payment"), on account of principal of (or premium, if any)
or interest (including any Additional Interest) on the Securities or on account
of the purchase or other acquisition of Securities by the Company or any
Subsidiary and to that end the holders of Senior Debt shall be entitled to
receive, for application to the payment thereof, any payment or distribution of
any kind or character, whether in cash, property or securities, including any
Junior Subordinated Payment, which may be payable or deliverable in respect of
the Securities in any such Proceeding.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any Junior Subordinated
Payment, before all Senior Debt is paid in full or payment thereof is provided
for in cash or cash equivalents or otherwise in a manner satisfactory to the
holders of Senior Debt, and if such fact shall, at or prior to the time of such
payment or distribution, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event such payment or distribution shall be
paid over or delivered forthwith to the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee, agent or other Person making payment
or distribution of assets of the Company for application to the payment of all
Senior Debt remaining unpaid, to the extent necessary to pay all Senior
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Debt in full, after giving effect to any concurrent payment or distribution to
or for the holders of Senior Debt.
For purposes of this Article only, the words "any payment or
distribution of any kind or character, whether in cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment which securities are subordinated in
right of payment to all then outstanding Senior Debt to substantially the same
extent as the Securities are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the sale of
all or substantially all of its properties and assets as an entirety to another
Person or the liquidation or dissolution of the Company following the sale of
all or substantially all of its properties and assets as an entirety to another
Person upon the terms and conditions set forth in Article Eight shall not be
deemed a Proceeding for the purposes of this Section if the Person formed by
such consolidation or into which the Company is merged or the Person which
acquires by sale such properties and assets as an entirety, as the case may be,
shall, as a part of such consolidation, merger, or sale comply with the
conditions set forth in Article Eight.
SECTION 1303. Prior Payment to Senior Debt Upon Acceleration of Securities.
------------------------------------------------------------
In the event that any Securities are declared due and payable before
their Maturity, then and in such event the holders of the Senior Debt
outstanding at the time such Securities so become due and payable shall be
entitled to receive payment in full of all amounts due on or in respect of such
Senior Debt (including any amounts due upon acceleration), or provision shall be
made for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Debt, before the Holders of the Securities
are entitled to receive any payment or distribution of any kind or character,
whether in cash, properties or securities (including any Junior Subordinated
Payment) by the Company on account of the principal of (or premium, if any) or
interest (including any Additional Interest) on the Securities or on account of
the purchase or other acquisition of Securities by the Company or any
Subsidiary; provided, however, that nothing in this Section shall prevent the
-------- -------
satisfaction of any sinking fund
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payment in accordance with this Indenture or as otherwise specified as
contemplated by Section 301 for the Securities of any series by delivering and
crediting pursuant to Section 1202 or as otherwise specified as contemplated by
Section 301 for the Securities of any series Securities which have been acquired
(upon redemption or otherwise) prior to such declaration of acceleration.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 1302 would be applicable.
SECTION 1304. No Payment When Senior Debt in Default.
--------------------------------------
(a) In the event and during the continuation of any default in the
payment of principal of (or premium, if any) or interest on any Senior Debt, or
in the event that any event of default with respect to any Senior Debt shall
have occurred and be continuing and shall have resulted in such Senior Debt
becoming or being declared due and payable prior to the date on which it would
otherwise have become due and payable, unless and until such event of default
shall have been cured or waived or shall have ceased to exist and such
acceleration shall have been rescinded or annulled, or (b) in the event any
judicial proceeding shall be pending with respect to any such default in payment
or such event or default, then no payment or distribution of any kind or
character, whether in cash, properties or securities (including any Junior
Subordinated Payment) shall be made by the Company on account of principal of
(or premium, if any) or interest (including any Additional Interest), if any, on
the Securities or on account of the purchase or other acquisition of Securities
by the Company or any Subsidiary; provided, however, that nothing in this
-------- -------
Section shall prevent the satisfaction of any sinking fund payment in accordance
with this Indenture or as otherwise specified as contemplated by Section 301 for
the Securities of any series by delivering and crediting pursuant to Section
1202 or as otherwise specified as contemplated by Section 301 for the Securities
of any series Securities
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which have been acquired (upon redemption or otherwise) prior to such default in
payment or event of default.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 1302 would be applicable.
SECTION 1305. Payment Permitted If No Default.
-------------------------------
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Securities shall prevent (a) the Company, at any time except during
the pendency of any Proceeding referred to in Section 1302 or under the
conditions described in Sections 1303 and 1304, from making payments at any time
of principal of (and premium, if any) or interest on the Securities, or (b) the
application by the Trustee of any money or Government Obligations deposited with
it hereunder to the payment of or on account of the principal of (and premium,
if any) or interest (including any Additional Interest) on the Securities or the
retention of such payment by the Holders, if, at the time of such application by
the Trustee, it did not have knowledge that such payment would have been
prohibited by the provisions of this Article.
SECTION 1306. Subrogation to Rights of Holders of Senior Debt.
-----------------------------------------------
Subject to the payment in full of all Senior Debt, or the provision
for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Debt, the Holders of the Securities shall
be subrogated to the extent of the payments or distributions made to the holders
of such Senior Debt pursuant to the provisions of this Article (equally and
ratably with the holders of all indebtedness of the Company which by its express
terms is subordinated to Senior Debt of the Company to substantially the same
extent as the Securities are subordinated to the Senior Debt and is entitled to
like rights of subrogation by reason of any payments or
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distributions made to holders of such Senior Debt) to the rights of the holders
of such Senior Debt to receive payments and distributions of cash, property and
securities applicable to the Senior Debt until the principal of (and premium, if
any) and interest on the Securities shall be paid in full. For purposes of such
subrogation or assignment, no payments or distributions to the holders of the
Senior Debt of any cash, property or securities to which the Holders of the
Securities or the Trustee would be entitled except for the provisions of this
Article, and no payments over pursuant to the provisions of this Article to the
holders of Senior Debt by Holders of the Securities or the Trustee, shall, as
among the Company, its creditors other than holders of Senior Debt, and the
Holders of the Securities, be deemed to be a payment or distribution by the
Company to or on account of the Senior Debt.
SECTION 1307. Provisions Solely to Define Relative Rights.
-------------------------------------------
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Debt on the other hand. Nothing contained in
this Article or elsewhere in this Indenture or in the Securities is intended to
or shall (a) impair, as between the Company and the Holders of the Securities,
the obligations of the Company, which are absolute and unconditional, to pay to
the Holders of the Securities the principal of (and premium, if any) and
interest (including any Additional Interest) on the Securities as and when the
same shall become due and payable in accordance with their terms; or (b) affect
the relative rights against the Company of the Holders of the Securities and
creditors of the Company other than their rights in relation to the holders of
Senior Debt; or (c) prevent the Trustee or the Holder of any Security from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture including, without limitation, filing and voting claims in any
Proceeding, subject to the rights, if any, under this Article of the holders of
Senior Debt to receive cash, property and securities otherwise payable or
deliverable to the Trustee or such Holder.
SECTION 1308. Trustee to Effectuate Subordination.
-----------------------------------
Each Holder of a Security by his or her acceptance thereof authorizes
and directs the Trustee on his or her behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination
-95-
<PAGE>
provided in this Article and appoints the Trustee his or her attorney-in-fact
for any and all such purposes.
SECTION 1309. No Waiver of Subordination Provisions.
-------------------------------------
No right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance by
the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof that any such holder may have or be
otherwise charged with.
SECTION 1310. Notice to Trustee.
-----------------
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities. Notwithstanding the provisions of
this Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Debt or from any trustee, agent or representative
therefor (whether or not the facts contained in such notice are true); provided,
--------
however, that if the Trustee shall not have received the notice provided for in
-------
this Section at least two Business Days prior to the date upon which by the
terms hereof any monies may become payable for any purpose (including, without
limitation, the payment of the principal of (and premium, if any) or interest
(including any Additional Interest) on any Security), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power and
authority to receive such monies and to apply the same to the purpose for which
they were received and shall not be affected by any notice to the contrary which
may be received by it within two Business Days prior to such date.
SECTION 1311. Reliance on Judicial Order or Certificate of Liquidating Agent.
--------------------------------------------------------------
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee, subject to the provisions of Article Six, and the
Holders of the Securities
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<PAGE>
shall be entitled to rely upon any order or decree entered by any court of
competent jurisdiction in which such Proceeding is pending, or a certificate of
the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee
for the benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Trustee or to the Holders of Securities, for the
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Debt and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article.
SECTION 1312. Trustee Not Fiduciary for Holders of Senior Debt.
------------------------------------------------
The Trustee, in its capacity as trustee under this Indenture, shall
not be deemed to owe any fiduciary duty to the holders of Senior Debt and shall
not be liable to any such holders if it shall in good faith mistakenly pay over
or distribute to Holders of Securities or to the Company or to any other Person
cash, property or securities to which any holders of Senior Debt shall be
entitled by virtue of this Article or otherwise.
SECTION 1313. Rights of Trustee as Holder of Senior Debt; Preservation of
-----------------------------------------------------------
Trustee's Rights.
----------------
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Debt which may at
any time be held by it, to the same extent as any other holder of Senior Debt,
and nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder.
SECTION 1314. Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee.
-97-
<PAGE>
SECTION 1315. Certain Conversions or Exchanges Deemed Payment.
-----------------------------------------------
For the purposes of this Article only, (a) the issuance and delivery
of junior securities upon conversion or exchange of Securities shall not be
deemed to constitute a payment or distribution on account of the principal of
(or premium, if any) or interest (including any Additional Interest) on
Securities or on account of the purchase or other acquisition of Securities, and
(b) the payment, issuance or delivery of cash, property or securities (other
than junior securities) upon conversion or exchange of a Security shall be
deemed to constitute payment on account of the principal of such security. For
the purposes of this Section, the term "junior securities" means (i) shares of
any stock of any class of the Company and (ii) securities of the Company which
are subordinated in right of payment to all Senior Debt which may be outstanding
at the time of issuance or delivery of such securities to substantially the same
extent as, or to a greater extent than, the Securities are so subordinated as
provided in this Article.
* * * *
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to
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<PAGE>
be an original, but all such counterparts shall together constitute but one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
MCI COMMUNICATIONS CORPORATION
By:___________________________
Attest:
___________________________
WILMINGTON TRUST COMPANY, as
Trustee
By:___________________________
-99-
<PAGE>
State of :
: ss.
County of :
On the _____ day of _________, ___ before me personally came
__________, to me known, who being duly sworn, did depose and say that he/she is
______ of MCI Communications Corporation, one of the corporations described in
and which executed the foregoing instrument; that the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by authority of the Board of Directors of said corporation, and that he
signed his name thereto by like authority.
______________________________
Notary Public
My Commission Expires:
State of :
: ss.
County of :
On the _____ day of _______, ____ before me personally came
__________, to me known, who being duly sworn, did depose and say that he/she is
_________ of The Wilmington Trust Company, a Delaware banking corporation,
described in and which executed the foregoing instrument; that he knows the seal
of said association; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
association, and that he signed his name thereto by like authority.
______________________________
Notary Public
My Commission Expires:
-100-
<PAGE>
===============================================================================
AMENDED AND RESTATED
TRUST AGREEMENT
among
MCI COMMUNICATIONS CORPORATION, as Depositor,
Wilmington Trust Company, as Property Trustee
and Delaware Trustee,
and
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
Dated as of ________ __, 1996
MCI CAPITAL I
===============================================================================
<PAGE>
MCI Capital I
Certain Sections of this Trust Agreement relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Trust Agreement
Act Section
<S> <C> <C> <C>
(S) 310 (a)(1).......................................... 807
(a)(2).......................................... 807
(a)(3).......................................... 809
(a)(4).......................................... 207(a)(ii)
(b)............................................. 808
(S) 311 (a)............................................. 813
(b)............................................. 813
(S) 312 (a)............................................. 507
(b)............................................. 507
(c)............................................. 507
(S) 313 (a)............................................. 814(a)
(a)(4).......................................... 814(b)
(b)............................................. 814(b)
(c)............................................. 1008
(d)............................................. 814(c)
(S) 314 (a)............................................. 815
(b)............................................. Not Applicable
(c)(1).......................................... 816
(c)(2).......................................... 816
(c)(3).......................................... Not Applicable
(d)............................................. Not Applicable
(e)............................................. 101, 816
(S) 315 (a)............................................. 801(a), 803(a)
(b)............................................. 802, 1008
(c)............................................. 801(a)
(d)............................................. 801, 803
(e)............................................. Not Applicable
(S) 316 (a)............................................. Not Applicable
(a)(1)(A)....................................... Not Applicable
(a)(1)(B)....................................... Not Applicable
(a)(2).......................................... Not Applicable
(b)............................................. Not Applicable
(c)............................................. 607
(S) 317 (a)(1).......................................... Not Applicable
(a)(2).......................................... Not Applicable
(b)............................................. 509
(S) 318 (a)............................................. 1010
---------------
</TABLE>
Note: This reconciliation and tie sheet shall not, for any purpose, be
deemed to be a part of the Trust Agreement.
-i-
<PAGE>
TABLE OF CONTENTS
-----------------
Page
ARTICLE I
Defined Terms
SECTION 101. Definitions.................................... 2
ARTICLE II
Establishment of the Trust
SECTION 201. Name........................................... 13
SECTION 202. Office of the Delaware Trustee; Principal
Place of Business.............................. 13
SECTION 203. Initial Contribution of Trust Property;
Organizational Expenses........................ 13
SECTION 204. Issuance of the Preferred Securities........... 13
SECTION 205. Issuance of the Common Securities;
Subscription and Purchase of Debentures........ 14
SECTION 206. Declaration of Trust........................... 15
SECTION 207. Authorization to Enter into Certain
Transactions................................... 15
SECTION 208. Assets of Trust................................ 20
SECTION 209. Title to Trust Property........................ 20
ARTICLE III
Payment Account
SECTION 301. Payment Account................................... 20
ARTICLE IV
Distributions; Redemption
SECTION 401. Distributions..................................... 20
SECTION 402. Redemption........................................ 21
SECTION 403. Subordination of Common Securities................ 24
SECTION 404. Payment Procedures................................ 25
SECTION 405. Tax Returns and Reports........................... 25
SECTION 406. Payment of Taxes, Duties, Etc. of the Trust....... 25
SECTION 407. Payments under Indenture.......................... 26
ARTICLE V
Trust Securities Certificates
SECTION 501. Initial Ownership.............................. 26
SECTION 502. The Trust Securities Certificates.............. 26
-i-
<PAGE>
SECTION 503. Execution and Delivery of Trust Securities
Certificates...................................... 27
SECTION 504. Registration of Transfer and Exchange of
Preferred Securities Certificates................. 27
SECTION 505. Mutilated, Destroyed, Lost or Stolen Trust
Securities Certificates........................... 28
SECTION 506. Persons Deemed Securityholders.................... 29
SECTION 507. Access to List of Securityholders' Names and
Addresses......................................... 29
SECTION 508. Maintenance of Office or Agency................... 29
SECTION 509. Appointment of Paying Agent....................... 30
SECTION 510. Ownership of Common Securities by Depositor....... 31
SECTION 511. Book-Entry Preferred Securities Certificates;
Common Securities Certificate..................... 31
SECTION 512. Notices to Clearing Agency........................ 32
SECTION 513. Definitive Preferred Securities Certificates...... 32
SECTION 514. Rights of Securityholders......................... 33
ARTICLE VI
Acts of Securityholders; Meetings; Voting
SECTION 601. Limitations on Voting Rights...................... 34
SECTION 602. Notice of Meetings................................ 35
SECTION 603. Meetings of Preferred Securityholders............. 36
SECTION 604. Voting Rights..................................... 36
SECTION 605. Proxies, etc...................................... 36
SECTION 606. Securityholder Action by Written Consent.......... 37
SECTION 607. Record Date for Voting and Other Purposes......... 37
SECTION 608. Acts of Securityholders........................... 37
SECTION 609. Inspection of Records............................. 39
ARTICLE VII
Representations and Warranties
SECTION 701. Representations and Warranties of the Bank,
the Property Trustee and the Delaware Trustee..... 39
SECTION 702. Representations and Warranties of Depositor....... 40
-ii-
<PAGE>
ARTICLE VIII
The Trustees
SECTION 801. Certain Duties and Responsibilities............ 41
SECTION 802. Certain Notices................................ 43
SECTION 803. Certain Rights of Property Trustee............. 43
SECTION 804. Not Responsible for Recitals or Issuance of
Securities..................................... 46
SECTION 805. May Hold Securities............................ 46
SECTION 806. Compensation; Indemnity; Fees.................. 46
SECTION 807. Corporate Property Trustee Required;
Eligibility of Trustees........................ 47
SECTION 808. Conflicting Interests.......................... 48
SECTION 809. Co-Trustees and Separate Trustee............... 48
SECTION 810. Resignation and Removal; Appointment of
Successor...................................... 50
SECTION 811. Acceptance of Appointment by Successor......... 52
SECTION 812. Merger, Conversion, Consolidation or
Succession to Business......................... 53
SECTION 813. Preferential Collection of Claims Against
Depositor or Trust............................. 53
SECTION 814. Reports by Property Trustee.................... 54
SECTION 815. Reports to the Property Trustee................ 54
SECTION 816. Evidence of Compliance with Conditions
Precedent...................................... 55
SECTION 817. Number of Trustees............................. 55
SECTION 818. Delegation of Power............................ 55
ARTICLE IX
Termination, Liquidation and Merger
SECTION 901. Termination Upon Expiration Date............... 56
SECTION 902. Early Termination.............................. 56
SECTION 903. Termination.................................... 57
SECTION 904. Liquidation.................................... 57
SECTION 905. Mergers, Consolidations, Amalgamations or
Replacements of the Trust...................... 59
ARTICLE X
Miscellaneous Provisions
SECTION 1001. Limitation of Rights of Securityholders........ 60
SECTION 1002. Amendment...................................... 60
SECTION 1003. Separability................................... 62
SECTION 1004. GOVERNING LAW.................................. 62
SECTION 1005. Payments Due on Non-Business Day............... 62
SECTION 1006. Successors..................................... 63
-iii-
<PAGE>
SECTION 1007. Headings....................................... 63
SECTION 1008. Reports, Notices and Demands................... 63
SECTION 1009. Agreement Not to Petition...................... 64
SECTION 1010. Trust Indenture Act; Conflict with Trust
Indenture Act.................................. 64
SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT,
GUARANTEE AND INDENTURE........................ 65
Exhibit A Certificate of Trust
Exhibit B Form of Certificate Depository Agreement
Exhibit C Form of Common Securities Certificate
Exhibit D Form of Expense Agreement
Exhibit E Form of Preferred Securities
-iv-
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT, dated as of ________ __, 1996,
among (i) MCI Communications Corporation, a Delaware corporation (including
any successors or assigns, the "Depositor"), (ii) Wilmington Trust Company, a
Delaware banking corporation duly organized and existing under the laws of the
State of Delaware, as property trustee and Delaware trustee (in each such
capacity, the "Property Trustee" and "Delaware Trustee," respectively, and, in
its separate corporate capacity and not in its capacity as Property Trustee or
Delaware Trustee, the "Bank"), (iii) Douglas L. Maine, an individual, and
Jonelle St. John, an individual, each of whose address is c/o MCI
Communications Corporation, 1801 Pennsylvania Avenue, N.W., Washington, D.C.
20006 (each, an "Administrative Trustee" and, collectively, the
"Administrative Trustees" and, collectively with the Property Trustee and
Delaware Trustee, the "Trustees") and (iv) the several Holders, as hereinafter
defined.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Depositor and the Delaware Trustee have heretofore duly
declared and established a business trust pursuant to the Delaware Business
Trust Act by the entering into of that certain Trust Agreement, dated as of
April 17, 1996 (the "Original Trust Agreement"), and by the execution and
filing by the Delaware Trustee with the Secretary of State of the State of
Delaware of the Certificate of Trust, filed on April 17, 1996, attached as
Exhibit A; and
WHEREAS, the Depositor and the Delaware Trustee desire to amend and
restate the Original Trust Agreement in its entirety as set forth herein to
provide for, among other things, (i) the issuance of the Common Securities by
the Trust to the Depositor, (ii) the issuance and sale of the Preferred
Securities by the Trust pursuant to the Underwriting Agreement, (iii) the
acquisition by the Trust from the Depositor of all of the right, title and
interest in the Debentures and (iv) the appointment of the Administrative
Trustees;
NOW THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, each party, for the benefit of the other parties
and for the benefit of the Securityholders, hereby amends and restates the
Original Trust Agreement in its entirety and agrees as follows:
<PAGE>
ARTICLE I
---------
Defined Terms
-------------
SECTION 101. Definitions.
-----------
For all purposes of this Trust Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case
may be, of this Trust Agreement; and
(d) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 608.
---
"Additional Amount" means, with respect to Trust Securities of a
-----------------
given Liquidation Amount and/or a given period, the amount of Additional
Interest (as defined in the Indenture) paid by the Depositor on a Like Amount
of Debentures for such period.
"Additional Sums" has the meaning specified in Section 1007 of the
---------------
Indenture.
"Administrative Trustee" means each of Douglas L. Maine and Jonelle
----------------------
St. John, each solely in such person's capacity as Administrative Trustee of
the Trust formed and continued hereunder and not in such person's individual
capacity, or such Administrative Trustee's successor in interest in such
capacity, or any successor trustee appointed as herein provided.
"Affiliate" of any specified Person means any other Person directly
---------
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
2
<PAGE>
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Bank" has the meaning specified in the preamble to this Trust
----
Agreement.
"Bankruptcy Event" means, with respect to any Person:
----------------
(a) the entry of a decree or order by a court having jurisdiction in
the premises judging such Person a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement,
adjudication or composition of or in respect of such Person under any
applicable federal or state bankruptcy, insolvency, reorganization or
other similar law, or appointing a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of such Person or of
any substantial part of its property or ordering the winding-up or
liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 60 consecutive days; or
(b) the institution by such Person of proceedings to be adjudicated
a bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under any
applicable federal or state bankruptcy, insolvency, reorganization or
other similar law, or the consent by it to the filing of any such
petition or to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or similar official) of such Person or of any
substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due and its
willingness to be adjudicated a bankrupt, or the taking of corporate
action by such Person in furtherance of any such action.
"Bankruptcy Laws" has the meaning specified in Section 1009.
---------------
"Board Resolution" means a copy of a resolution certified by the
----------------
Secretary or an Assistant Secretary of the Depositor to have been duly adopted
by the Depositor's Board
3
<PAGE>
of Directors, or such committee of the Board of Directors or officers of the
Company to which authority to act on behalf of the Board of Directors has been
delegated, and to be in full force and effect on the date of such
certification, and delivered to the Trustees.
"Book-Entry Preferred Securities Certificates" means a beneficial
--------------------------------------------
interest in the Preferred Securities Certificates, ownership and transfers of
which shall be made through book entries by a Clearing Agency as described in
Section 511.
"Business Day" means a day other than (a) a Saturday or Sunday, (b) a
------------
day on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed, or (c) a day on which the
Property Trustee's Corporate Trust Office or the Corporate Trust Office of the
Debenture Trustee is closed for business.
"Certificate Depository Agreement" means the agreement among the
--------------------------------
Trust, the Depositor and The Depository Trust Company, as the initial Clearing
Agency, dated as of the Closing Date, relating to the Trust Securities
Certificates, substantially in the form attached as Exhibit B, as the same may
be amended and supplemented from time to time.
"Clearing Agency" means an organization registered as a "clearing
---------------
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended. The Depository Trust Company will be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Closing Date" means the First Time of Delivery, which date is also
------------
the date of execution and delivery of this Trust Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Commission" means the Securities and Exchange Commission, as from
----------
time to time constituted, created under the Securities Exchange Act of 1934,
as amended, or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now
4
<PAGE>
assigned to it under the Trust Indenture Act, then the body performing such
duties at such time.
"Common Security" means an undivided beneficial interest in the
---------------
assets of the Trust, having a Liquidation Amount of $25 and having the rights
provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"Common Securities Certificate" means a certificate evidencing
-----------------------------
ownership of Common Securities, substantially in the form attached as Exhibit
C.
"Corporate Trust Office" means the principal office of the Property
----------------------
Trustee located in Wilmington, Delaware.
"Debenture Event of Default" means an "Event of Default" as defined
--------------------------
in the Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to
-------------------------
be redeemed under the Indenture, the date fixed for redemption under the
Indenture.
"Debenture Tax Event" means a "Tax Event" as defined in the
-------------------
Indenture.
"Debenture Trustee" means Wilmington Trust Company, a Delaware
-----------------
banking corporation organized under the laws of the State of Delaware and any
successor thereto.
"Debentures" means the aggregate principal amount of the Depositor's
----------
____% Junior Subordinated Deferrable Interest Debentures, Series A, issued
pursuant to the Indenture.
"Definitive Preferred Securities Certificates" means either or both
--------------------------------------------
(as the context requires) of (a) Preferred Securities Certificates issued as
Book-Entry Preferred Securities Certificates as provided in Section 511(a) and
(b) Preferred Securities Certificates issued in certificated, fully registered
form as provided in Section 513.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
---------------------------
Delaware Code, 12 Del. C. (S) 3801, et seq., as it may be amended from time to
-- ---
time.
"Delaware Trustee" means the commercial bank or trust company
----------------
identified as the "Delaware Trustee" in the preamble to this Trust Agreement
solely in its capacity as
5
<PAGE>
Delaware Trustee of the Trust formed and continued hereunder and not in its
individual capacity, or its successor in interest in such capacity, or any
successor trustee appointed as herein provided.
"Depositor" has the meaning specified in the preamble to this Trust
---------
Agreement.
"Distribution Date" has the meaning specified in Section 401(a).
-----------------
"Distributions" means amounts payable in respect of the Trust
-------------
Securities as provided in Section 401.
"Event of Default" means any one of the following events (whatever
----------------
the reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Property Trustee in the payment of any
Distribution when it becomes due and payable, and continuation of such
default for a period of 30 days; or
(c) default by the Property Trustee in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Trustees in this Trust Agreement
(other than a covenant or warranty a default in the performance of which
or the breach of which is dealt with in clause (b) or (c) above) and
continuation of such default or breach for a period of 60 days after
there has been given, by registered or certified mail, to the defaulting
Trustee or Trustees by the Holders of at least 25% in aggregate
liquidation preference of the Outstanding Preferred Securities a written
notice specifying such default or breach and requiring it to be remedied
and stating that such notice is a "Notice of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the
Property Trustee and the failure by the Depositor to appoint a successor
Property Trustee within 60 days thereof.
6
<PAGE>
"Expense Agreement" means the Agreement as to Expenses and
-----------------
Liabilities between the Depositor and the Trust, substantially in the form
attached as Exhibit D, as amended from time to time.
"Expiration Date" has the meaning specified in Section 901.
---------------
"First Time of Delivery" has the meaning specified in the
----------------------
Underwriting Agreement.
"Guarantee" means the Guarantee Agreement executed and delivered by
---------
the Depositor and Wilmington Trust Company, as trustee, contemporaneously with
the execution and delivery of this Trust Agreement, for the benefit of the
holders of the Preferred Securities, as amended from time to time.
"Indenture" means the Junior Subordinated Indenture, dated as of
---------
________ __, 1996, as supplemented by a Supplemental Indenture No. 1, dated as
of ________ __, 1996, between the Depositor and the Debenture Trustee, as
trustee, as amended or supplemented from time to time.
"Investment Company Event" means the receipt by the Trust of an
------------------------
Opinion of Counsel, rendered by a law firm having a recognized national tax
and securities practice, to the effect that, as a result of the occurrence of
a change in law or regulation or a change in interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority (a "Change in 1940 Act Law"), the Trust is or will be
considered an "investment company" that is required to be registered under the
1940 Act, which Change in 1940 Act Law becomes effective on or after the date
of original issuance of the Preferred Securities under this Trust Agreement.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
----
trust, adverse ownership interest, hypothecation, assignment, security
interest or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust
-----------
Securities, Trust Securities having a Liquidation Amount equal to the
principal amount of Debentures to be contemporaneously redeemed in accordance
with the Indenture the proceeds of which will be used to pay the Redemption
Price of such Trust Securities and (b) with respect to a distribution of
Debentures to Holders of Trust Securities in connection with a dissolution or
liquidation
7
<PAGE>
of the Trust, Debentures having a principal amount equal to the
Liquidation Amount of the Trust Securities of the Holder to whom such
Debentures are distributed.
"Liquidation Amount" means the stated amount of $25 per Trust
------------------
Security.
"Liquidation Date" means the date on which Debentures are to be
----------------
distributed to Holders of Trust Securities in connection with a termination
and liquidation of the Trust pursuant to Section 904(a).
"Liquidation Distribution" has the meaning specified in Section
------------------------
904(d).
"1940 Act" means the Investment Company Act of 1940, as amended.
--------
"Officers' Certificate" means a certificate signed by the Chairman
---------------------
and Chief Executive Officer, President or a Vice President, and by the
Treasurer, an Assistant Treasurer, the Controller, the Secretary or an
Assistant Secretary, of the Depositor, and delivered to the appropriate
Trustee. One of the officers signing an Officers' Certificate given pursuant
to Section 816 shall be the principal executive, financial or accounting
officer of the Depositor. Any Officers' Certificate delivered with respect to
compliance with a condition or covenant provided for in this Trust Agreement
shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be
------------------
counsel for the Trust, the Property Trustee or the Depositor or General
Counsel of the
8
<PAGE>
Depositor, and who shall be reasonably acceptable to the Property Trustee.
"Original Trust Agreement" has the meaning specified in the recitals
------------------------
to this Trust Agreement.
"Outstanding", when used with respect to Preferred Securities, means,
-----------
as of the date of determination, all Preferred Securities theretofore executed
and delivered under this Trust Agreement, except:
------
(a) Preferred Securities theretofore cancelled by the Property
Trustee or delivered to the Property Trustee for cancellation;
(b) Preferred Securities for whose payment or redemption money in
the necessary amount has been theretofore deposited with the Property
Trustee or any Paying Agent for the Holders of such Preferred Securities;
provided that, if such Preferred Securities are to be redeemed, notice of
--------
such redemption has been duly given pursuant to this Trust Agreement; and
(c) Preferred Securities which have been paid or in exchange for or
in lieu of which other Preferred Securities have been executed and
delivered pursuant to Section 504, 505, 511 and 513;
provided, however, that in determining whether the Holders of the requisite
-------- -------
Liquidation Amount of the Outstanding Preferred Securities have given any
request, demand, authorization, direction, notice, consent or waiver
hereunder, Preferred Securities owned by the Depositor, any Trustee or any
Affiliate of the Depositor or any Trustee shall be disregarded and deemed not
to be Outstanding, except that (a) in determining whether any Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Preferred Securities that such Trustee knows
to be so owned shall be so disregarded and (b) the foregoing shall not apply
at any time when all of the outstanding Preferred Securities are owned by the
Depositor, one or more of the Trustees and/or any such Affiliate. Preferred
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the
Administrative Trustees the pledgee's right so to act with respect to such
Preferred Securities and that the pledgee is not the Depositor or any
Affiliate of the Depositor.
9
<PAGE>
"Owner" means each Person who is the beneficial owner of a Book-Entry
-----
Preferred Securities Certificate as reflected in the records of the Clearing
Agency or, if a Clearing Agency Participant is not the Owner, then as
reflected in the records of a Person maintaining an account with such Clearing
Agency (directly or indirectly, in accordance with the rules of such Clearing
Agency).
"Paying Agent" means any paying agent or co-paying agent appointed
------------
pursuant to Section 509 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate
---------------
trust account maintained by the Property Trustee with the Bank in its trust
department for the benefit of the Securityholders in which all amounts paid in
respect of the Debentures will be held and from which the Property Trustee
shall make payments to the Securityholders in accordance with Sections 401 and
402.
"Person" means any individual, corporation, partnership, joint
------
venture, trust, limited liability company or corporation, unincorporated
organization or government or any agency or political subdivision thereof.
"Preferred Security" means an undivided beneficial interest in the
------------------
assets of the Trust, having a Liquidation Amount of $25 and having the rights
provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"Preferred Securities Certificate" means a certificate evidencing
--------------------------------
ownership of Preferred Securities, substantially in the form attached as
Exhibit E.
"Property Trustee" means the commercial bank or trust company
----------------
identified as the "Property Trustee" in the preamble to this Trust Agreement
solely in its capacity as Property Trustee of the Trust heretofore formed and
continued hereunder and not in its individual capacity, or its successor in
interest in such capacity, or any successor property trustee appointed as
herein provided.
"Redemption Date" means, with respect to any Trust Security to be
---------------
redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; provided that each Debenture Redemption Date and the stated
--------
maturity of the Debentures shall be a Redemption Date for a Like Amount of
Trust Securities.
10
<PAGE>
"Redemption Price" means, with respect to any Trust Security, the
----------------
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, plus the related amount of the premium,
if any, paid by the Depositor upon the concurrent redemption of a Like Amount
of Debentures, allocated on a pro rata basis (based on Liquidation Amounts)
among the Trust Securities.
"Relevant Trustee" shall have the meaning specified in Section 810.
----------------
"Second Time of Delivery" has the meaning specified in the
-----------------------
Underwriting Agreement.
"Securities Register" and "Securities Registrar" have the respective
------------------- --------------------
meanings specified in Section 504.
"Securityholder" or "Holder" means a Person in whose name a Trust
-------------- ------
Security or Securities is registered in the Securities Register; any such
Person shall be deemed to be a beneficial owner within the meaning of the
Delaware Business Trust Act.
"Special Event" means a Tax Event or an Investment Company Event.
-------------
"Tax Event" means the receipt by the Trust of an Opinion of Counsel,
---------
rendered by a law firm having a national tax and securities practice, to the
effect that, as a result of any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative pronouncement or
judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or which pronouncement or decision is
announced on or after the date of issuance of the Preferred Securities under
this Trust Agreement, there is more than an insubstantial risk that (i) the
Trust is, or will be within 90 days after the date of such Opinion of Counsel,
subject to United States federal income tax with respect to income received or
accrued on the Debentures, (ii) interest payable by the Depositor on the
Debentures is not, or within 90 days after the date of such Opinion of
Counsel, will not be, deductible by the Depositor, in whole or in part, for
United States federal income tax purposes or (iii) the Trust is, or will be
within 90 days after the date of such Opinion of Counsel, subject to more than
a de minimis amount of other taxes, duties, assessments or other governmental
charges.
11
<PAGE>
"Time of Delivery" means, collectively, the First Time of Delivery
----------------
and the Second Time of Delivery.
"Trust" means the Delaware business trust created and continued
-----
hereby and identified on the cover page to this Trust Agreement.
"Trust Agreement" means this Amended and Restated Trust Agreement, as
---------------
the same may be modified, amended or supplemented in accordance with the
applicable provisions hereof, including all exhibits hereto, including, for
all purposes of this Trust Agreement and any such modification, amendment or
supplement, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this Trust Agreement and any such modification, amendment
or supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
-------------------
force at the date as of which this instrument was executed; provided, however,
-------- -------
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Debentures, (b) the rights of the
--------------
Property Trustee under the Guarantee, (c) any cash on deposit in, or owing to,
the Payment Account and (d) all proceeds and rights in respect of the
foregoing and any other property and assets for the time being held or deemed
to be held by the Property Trustee pursuant to the trusts of this Trust
Agreement.
"Trust Security" means any one of the Common Securities or the
--------------
Preferred Securities.
"Trust Securities Certificate" means any one of the Common Securities
----------------------------
Certificates or the Preferred Securities Certificates.
"Trustees" means, collectively, the Property Trustee, the Delaware
--------
Trustee and the Administrative Trustees.
"Underwriting Agreement" means the Terms Agreement, dated as of
----------------------
________ __, 1996, among the Trust, the Depositor and the Underwriters named
therein, incorporating the Underwriting Agreement Basic Provisions of the
Trust.
12
<PAGE>
ARTICLE II
----------
Establishment of the Trust
--------------------------
SECTION 201. Name.
----
The Trust created and continued hereby shall be known as "MCI
Capital I," as such name may be modified from time to time by the
Administrative Trustees following written notice to the Holders of Trust
Securities and the other Trustees, in which name the Trustees may conduct the
business of the Trust, make and execute contracts and other instruments on
behalf of the Trust and sue and be sued.
SECTION 202. Office of the Delaware Trustee; Principal Place of Business
-----------------------------------------------------------
The address of the Delaware Trustee in the State of Delaware is c/o
Wilmington Trust Company, 1100 North Market Street, Wilmington 19890,
Delaware, Attention: Corporate Trust Administration, or such other address in
the State of Delaware as the Delaware Trustee may designate by written notice
to the Securityholders and the Depositor. The principal executive office of
the Trust is c/o MCI Communications Corporation, 1801 Pennsylvania Avenue,
N.W., Washington, D.C. 20006.
SECTION 203. Initial Contribution of Trust Property; Organizational
------------------------------------------------------
Expenses
--------
The Property Trustee acknowledges receipt in trust from the
Depositor in connection with the Original Trust Agreement of the sum of $10,
which constituted the initial Trust Property. The Depositor shall pay
organizational expenses of the Trust as they arise or shall, upon request of
any Trustee, promptly reimburse such Trustee for any such expenses paid by
such Trustee. The Depositor shall make no claim upon the Trust Property for
the payment of such expenses.
SECTION 204. Issuance of the Preferred Securities
------------------------------------
On _____ __, 1996 the Depositor, on behalf of the Trust and pursuant
to the Original Trust Agreement, executed and delivered the Underwriting
Agreement. Contemporaneously with the execution and delivery of this Trust
Agreement, an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 502 and deliver to the Underwriters named in the
Underwriting Agreement Preferred Securities Certificates, registered in the
name of the nominee of the initial Clearing Agency, in an aggregate amount of
__________ Preferred Securities having an
13
<PAGE>
aggregate Liquidation Amount of $___________, against receipt of the aggregate
purchase price of such Preferred Securities of $___________, which amount such
Administrative Trustee shall promptly deliver to the Property Trustee. If
there is a Second Time of Delivery, an Administrative Trustee, on behalf of
the Trust, shall execute in accordance with Section 502 and deliver to the
Underwriters named in the Underwriting Agreement Preferred Securities
Certificates, registered in the name of the nominee of the initial Clearing
Agency, in an aggregate amount of up to __________ Preferred Securities having
an aggregate Liquidation Amount of up to $___________, against receipt of the
aggregate purchase price of such Preferred Securities of 96.85% of the
Liquidation Amount thereof, which amount such Administrative Trustee shall
promptly deliver to the Property Trustee.
SECTION 205. Issuance of Common Securities; Subscription and Purchase of
-----------------------------------------------------------
Debentures.
----------
Contemporaneously with the execution and delivery of this Trust
Agreement, an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 502 and deliver to the Depositor Common Securities
Certificates, registered in the name of the Depositor, in an aggregate amount
of _______ Common Securities having an aggregate Liquidation Amount of
$__________ against payment by the Depositor of such amount.
Contemporaneously therewith, an Administrative Trustee, on behalf of the
Trust, shall subscribe to and purchase from the Depositor Debentures,
registered in the name of the Trust and having an aggregate principal amount
equal to $___________, and, in satisfaction of the purchase price for such
Debentures, the Property Trustee, on behalf of the Trust, shall deliver to the
Depositor the sum of $___________. If there is a Second Time of Delivery, an
Administrative Trustee, on behalf of the Trust, shall execute in accordance
with Section 502 and deliver to the Depositor Common Securities Certificates,
registered in the name of the Depositor, in an aggregate amount of up to
_______ Common Securities having an aggregate Liquidation Amount of up to
$__________ against payment by the Depositor of such amount.
Contemporaneously therewith, an Administrative Trustee, on behalf of the
Trust, shall subscribe to and purchase from the Depositor Debentures,
registered in the name of the Trust and having an aggregate principal amount
of up to $___________, and, in satisfaction of the purchase price for such
Debentures, the Property Trustee, on behalf of the Trust, shall deliver to the
Depositor the amount received from one of the Administrative Trustees pursuant
to the last sentence of Section 204.
14
<PAGE>
SECTION 206. Declaration of Trust
--------------------
The exclusive purposes and functions of the Trust are (a) to issue
and sell Trust Securities and use the proceeds from such sale to acquire the
Debentures and (b) to engage in those activities necessary, convenient or
incidental thereto. The Depositor hereby appoints the Trustees as trustees of
the Trust, to have all the rights, powers and duties to the extent set forth
herein, and the Trustees hereby accept such appointment. The Property Trustee
hereby declares that it will hold the Trust Property in trust upon and subject
to the conditions set forth herein for the benefit of the Securityholders.
The Administrative Trustees shall have all rights, powers and duties set forth
herein and in accordance with applicable law with respect to accomplishing the
purposes of the Trust. The Delaware Trustee shall not be entitled to exercise
any powers, nor shall the Delaware Trustee have any of the duties and
responsibilities, of the Property Trustee or the Administrative Trustees set
forth herein. The Delaware Trustee shall be one of the Trustees of the Trust
for the sole and limited purpose of fulfilling the requirements of Section
3807 of the Delaware Business Trust Act.
SECTION 207. Authorization to Enter into Certain Transactions
------------------------------------------------
(a) The Trustees shall conduct the affairs of the Trust in
accordance with the terms of this Trust Agreement. Subject to the
limitations set forth in paragraph (b) of this Section, and in accordance
with the following provisions (i) and (ii), the Administrative Trustees
shall have the authority to enter into all transactions and agreements
determined by the Trustees to be appropriate in exercising the authority,
express or implied, otherwise granted to the Trustees under this Trust
Agreement, and to perform all acts in furtherance thereof, including
without limitation, the following:
(i) As among the Trustees, each Administrative Trustee shall have
the power and authority to act on behalf of the Trust with respect to
the following matters:
(A) the issuance and sale of the Trust Securities;
(B) to cause the Trust to enter into, and to execute,
deliver and perform on behalf of the Trust, the Expense Agreement
and the Certificate Depository Agreement and such other agreements
as
15
<PAGE>
may be necessary or desirable in connection with the purposes and
function of the Trust;
(C) assisting in the registration of the Preferred
Securities under the Securities Act of 1933, as amended, and under
state securities or blue sky laws, and the qualification of this
Trust Agreement as a trust indenture under the Trust Indenture Act;
(D) assisting in the listing of the Preferred
Securities upon such national securities exchange, the Nasdaq
National Market or such other interdealer quotation system or self-
regulatory organization as shall be determined by the Depositor and
the registration of the Preferred Securities under the Securities
Exchange Act of 1934, as amended, and the preparation and filing of
all periodic and other reports and other documents pursuant to the
foregoing;
(E) the sending of notices (other than notices of
default) and other information regarding the Trust Securities and
the Debentures to the Securityholders in accordance with this Trust
Agreement;
(F) the appointment of a Paying Agent, authenticating
agent and Securities Registrar in accordance with this Trust
Agreement;
(G) registering transfer of the Trust Securities in
accordance with this Trust Agreement;
(H) to the extent provided in this Trust Agreement,
the winding-up of the affairs of and liquidation of the Trust and
the preparation, execution and filing of the certificate of
cancellation with the Secretary of State of the State of Delaware;
(I) unless otherwise determined by the Depositor, the
Property Trustee or the Administrative Trustees, or as otherwise
required by the Delaware Business Trust Act or the Trust Indenture
Act, to execute on behalf of the Trust (either acting alone or
together with any or all of the Administrative Trustees) any
documents that the Administrative Trustees have the power to execute
pursuant to this Trust Agreement; and
16
<PAGE>
(J) the taking of any action incidental to the
foregoing as the Trustees may from time to time determine is
necessary or advisable to give effect to the terms of this Trust
Agreement for the benefit of the Securityholders (without
consideration of the effect of any such action on any particular
Securityholder).
(ii) As among the Trustees, the Property Trustee shall have
the power, duty and authority to act on behalf of the Trust with respect
to the following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any
other payments made in respect of the Debentures in the Payment
Account;
(D) the distribution of amounts owed to the
Securityholders in respect of the Trust Securities;
(E) the exercise of all of the rights, powers and
privileges of a holder of the Debentures;
(F) the sending of notices of default and other
information regarding the Trust Securities and the Debentures to the
Securityholders in accordance with this Trust Agreement;
(G) the distribution of the Trust Property in
accordance with the terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement,
the winding-up of the affairs of and liquidation of the Trust and
the preparation, execution and filing of the certificate of
cancellation with the Secretary of State of the State of Delaware;
(I) after an Event of Default the taking of any
action incidental to the foregoing as the Property Trustee may from
time to time determine is necessary or advisable to give effect to
the terms of this Trust Agreement and protect and
17
<PAGE>
conserve the Trust Property for the benefit of the Securityholders
(without consideration of the effect of any such action on any
particular Securityholder);
(J) registering transfers of the Trust Securities in
accordance with this Trust Agreement; and
(K) except as otherwise provided in this Section
207(a)(ii), the Property Trustee shall have none of the duties,
liabilities, powers or the authority of the Administrative Trustees
set forth in Section 207(a)(i).
(b) So long as this Trust Agreement remains in effect, the
Trust (or the Trustees acting on behalf of the Trust) shall not undertake
any business, activities or transaction except as expressly provided herein
or contemplated hereby. In particular, the Trustees shall not (i) acquire
any investments or engage in any activities not authorized by this Trust
Agreement, (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off
or otherwise dispose of any of the Trust Property or interests therein,
including to Securityholders, except as expressly provided herein, (iii)
take any action that would cause the Trust to fail or cease to qualify as a
"grantor trust" for United States federal income tax purposes, (iv) incur
any indebtedness for borrowed money or issue any other debt or (v) take or
consent to any action that would result in the placement of a Lien on any
of the Trust Property. The Administrative Trustees shall defend all claims
and demands of all Persons at any time claiming any Lien on any of the
Trust Property adverse to the interest of the Trust or the Securityholders
in their capacity as Securityholders.
(c) In connection with the issue and sale of the Preferred
Securities, the Depositor shall have the right and responsibility to assist
the Trust with respect to, or effect on behalf of the Trust, the following
(and any actions taken by the Depositor in furtherance of the following
prior to the date of this Trust Agreement are hereby ratified and confirmed
in all respects):
(i) the preparation and filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration
statement on the appropriate form in relation to the Preferred Securities
and the Debentures, including any amendments thereto;
18
<PAGE>
(ii) the determination of the states in which to take
appropriate action to qualify or register for sale all or part of the
Preferred Securities and the determination of any and all such acts,
other than actions which must be taken by or on behalf of the Trust, and
the advice to the Trustees of actions they must take on behalf of the
Trust, and the preparation for execution and filing of any documents to
be executed and filed by the Trust or on behalf of the Trust, as the
Depositor deems necessary or advisable in order to comply with the
applicable laws of any such states;
(iii) the preparation for filing by the Trust and execution on
behalf of the Trust of an application to the New York Stock Exchange or
any other national stock exchange or the Nasdaq National Market for
listing upon notice of issuance of any Preferred Securities;
(iv) the preparation for filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration
statement on Form 8-A relating to the registration of the Preferred
Securities under Section 12(b) or 12(g) of the Exchange Act, including
any amendments thereto;
(v) the negotiation of the terms of, and the execution and
delivery of, the Underwriting Agreement providing for the sale of the
Preferred Securities; and
(vi) the taking of any other actions necessary or desirable
to carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the
Administrative Trustees are authorized and directed to conduct the affairs
of the Trust and to operate the Trust so that the Trust will not be deemed
to be an "investment company" required to be registered under the 1940 Act,
or taxed as a corporation for United States federal income tax purposes and
so that the Debentures will be treated as indebtedness of the Depositor for
United States federal income tax purposes. In this connection, the
Depositor and the Administrative Trustees are authorized to take any
action, not inconsistent with applicable law, the Certificate of Trust or
this Trust Agreement, that each of the Depositor and the Administrative
Trustees determines in their discretion to be necessary or desirable for
such purposes, as long as such action does not adversely affect in any
material respect the interests of the holders of the Preferred Securities.
19
<PAGE>
SECTION 208. Assets of Trust
---------------
The assets of the Trust shall consist of the Trust Property.
SECTION 209. Title to Trust Property
-----------------------
Legal title to all Trust Property shall be vested at all times in
the Property Trustee (in its capacity as such) and shall be held and
administered by the Property Trustee for the benefit of the Securityholders in
accordance with this Trust Agreement.
ARTICLE III
-----------
Payment Account
---------------
SECTION 301. Payment Account
---------------
(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and any agent of the
Property Trustee shall have exclusive control and sole right of withdrawal
with respect to the Payment Account for the purpose of making deposits in
and withdrawals from the Payment Account in accordance with this Trust
Agreement. All monies and other property deposited or held from time to
time in the Payment Account shall be held by the Property Trustee in the
Payment Account for the exclusive benefit of the Securityholders and for
distribution as herein provided, including (and subject to) any priority of
payments provided for herein.
(b) The Property Trustee shall deposit in the Payment Account,
promptly upon receipt, all payments of principal of or interest on, and any
other payments or proceeds with respect to, the Debentures. Amounts held
in the Payment Account shall not be invested by the Property Trustee
pending distribution thereof.
ARTICLE IV
----------
Distributions; Redemption
-------------------------
SECTION 401. Distributions
-------------
(a) Distributions on the Trust Securities shall be cumulative,
and will accumulate whether or not there are funds of the Trust available
for the payment of Distributions. Distributions shall accrue from ________
__, 1996, and, except in the event that the Depositor exercises its right
to defer the payment of interest on the Debentures pursuant to the
Indenture, shall be payable quarterly in
20
<PAGE>
arrears on March 31, June 30, September 30 and December 31 of each year,
commencing on June 30, 1996. If any date on which a Distribution is
otherwise payable on the Trust Securities is not a Business Day, then the
payment of such Distribution shall be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect of
any such delay) except that, if such Business Day is in the next succeeding
calendar year, payment of such Distribution shall be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date (each date on which distributions are
payable in accordance with this Section 401(a) a "Distribution Date").
(b) The Trust Securities represent undivided beneficial
interests in the Trust Property, and, the Distributions on the Trust
Securities shall be payable at a rate of ____% per annum of the Liquidation
Amount of the Trust Securities. The amount of Distributions payable for
any full period shall be computed on the basis of a 360-day year of twelve
30-day months. The amount of Distributions for any partial period shall be
computed on the basis of the number of days elapsed in a 360-day year of
twelve 30-day months. The amount of Distributions payable for any period
shall include the Additional Amounts, if any.
(c) Distributions on the Trust Securities shall be made by the
Property Trustee from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on hand
and available in the Payment Account for the payment of such Distributions.
(d) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on
the Securities Register for the Trust Securities on the relevant record
date, which shall be one Business Day prior to such Distribution Date;
provided, however, that in the event that the Preferred Securities do not
-------- -------
remain in book-entry-only form, the relevant record date shall be the date
15 days prior to the relevant Distribution Date.
SECTION 402. Redemption
----------
(a) On each Debenture Redemption Date and on the stated
maturity of the Debentures, the Trust will be required to redeem a Like
Amount of Trust Securities at the Redemption Price.
21
<PAGE>
(b) Notice of redemption shall be given by the Property Trustee
by first-class mail, postage prepaid, mailed not less than 30 nor more than
60 days prior to the Redemption Date to each Holder of Trust Securities to
be redeemed, at such Holder's address appearing in the Security Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust
Securities are to be redeemed, the identification and the total
Liquidation Amount of the particular Trust Securities to be
redeemed; and
(v) that on the Redemption Date the Redemption Price
will become due and payable upon each such Trust Security to be
redeemed and that distributions thereon will cease to accrue on and
after said date.
(c) The Trust Securities redeemed on each Redemption Date shall
be redeemed at the Redemption Price with the proceeds from the
contemporaneous redemption of Debentures. Redemptions of the Trust
Securities shall be made and the Redemption Price shall be payable on each
Redemption Date only to the extent that the Trust has funds then on hand
and available in the Payment Account for the payment of such Redemption
Price.
(d) If the Property Trustee gives a notice of redemption in
respect of any Preferred Securities, then, by 12:00 noon, New York City
time, on the Redemption Date, subject to Section 402(c), the Property
Trustee will, so long as the Preferred Securities are in book-entry-only
form, irrevocably deposit with the Clearing Agency for the Preferred
Securities funds sufficient to pay the applicable Redemption Price and will
give such Clearing Agency irrevocable instructions and authority to pay the
Redemption Price to the holders thereof. If the Preferred Securities are
no longer in book-entry-only form, the Property Trustee, subject to Section
402(c), will irrevocably deposit with the Paying Agent funds sufficient to
pay the applicable Redemption Price and will give the Paying Agent
irrevocable instructions and authority to pay the Redemption Price to the
Holders thereof upon surrender of their Preferred Securities Certificates.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for
22
<PAGE>
any Trust Securities called for redemption shall be payable to the Holders
of such Trust Securities as they appear on the Register for the Trust
Securities on the relevant record dates for the related Distribution Dates.
If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, all rights of Securityholders
holding Trust Securities so called for redemption will cease, except the
right of such Securityholders to receive the Redemption Price and any
Distribution payable on or prior to the Redemption Date, but without
interest, and such Securities will cease to be outstanding. In the event
that any date on which any Redemption Price is payable is not a Business
Day, then payment of the Redemption Price payable on such date will be made
on the next succeeding day that is a Business Day (and without any interest
or other payment in respect of any such delay), except that, if such
Business Day falls in the next calendar year, such payment will be made on
the immediately preceding Business Day, in each case, with the same force
and effect as if made on such date. In the event that payment of the
Redemption Price in respect of any Trust Securities called for redemption
is improperly withheld or refused and not paid either by the Trust or by
the Depositor pursuant to the Guarantee, Distributions on such Trust
Securities will continue to accrue, at the then applicable rate, from the
Redemption Date originally established by the Trust for such Trust
Securities to the date such Redemption Price is actually paid, in which
case the actual payment date will be the date fixed for redemption for
purposes of calculating the Redemption Price.
(e) Payment of the Redemption Price on the Trust Securities
shall be made to the recordholders thereof as they appear on the Securities
Register for the Trust Securities on the relevant record date, which shall
be one Business Day prior to the relevant Redemption Date; provided,
--------
however, that in the event that the Preferred Securities do not remain in
-------
book-entry-only form, the relevant record date shall be the date fifteen
days prior to the relevant Redemption Date.
(f) Subject to Section 403(a), if less than all the Outstanding
Trust Securities are to be redeemed on a Redemption Date, then the
aggregate Liquidation Amount of Trust Securities to be redeemed shall be
allocated on a pro rata basis (based on Liquidation Amounts) among the
Common Securities and the Preferred Securities. The particular Preferred
Securities to be redeemed shall be selected on a pro rata basis (based upon
Liquidation Amounts) not more than 60 days prior to the Redemption Date by
the Property Trustee from the Outstanding Preferred Securities not
23
<PAGE>
previously called for redemption, by such method (including, without
limitation, by lot) as the Property Trustee shall deem fair and appropriate
and which may provide for the selection for redemption of portions (equal
to $25 or an integral multiple of $25 in excess thereof) of the Liquidation
Amount of Preferred Securities of a denomination larger than $25. The
Property Trustee shall promptly notify the Security Registrar in writing of
the Preferred Securities selected for redemption and, in the case of any
Preferred Securities selected for partial redemption, the Liquidation
Amount thereof to be redeemed. For all purposes of this Trust Agreement,
unless the context otherwise requires, all provisions relating to the
redemption of Preferred Securities shall relate, in the case of any
Preferred Securities redeemed or to be redeemed only in part, to the
portion of the Liquidation Amount of Preferred Securities that has been or
is to be redeemed.
SECTION 403. Subordination of Common Securities
----------------------------------
(a) Payment of Distributions (including Additional Amounts, if
applicable) on, and the Redemption Price of, the Trust Securities, as
applicable, shall be made, subject to Section 402(f), pro rata among the
Common Securities and the Preferred Securities based on the Liquidation
Amount of the Trust Securities; provided, however, that if on any
-------- -------
Distribution Date or Redemption Date any Event of Default resulting from a
Debenture Event of Default shall have occurred and be continuing, no
payment of any Distribution (including Additional Amounts, if applicable)
on, or Redemption Price of, any Common Security, and no other payment on
account of the redemption, liquidation or other acquisition of Common
Securities, shall be made unless payment in full in cash of all accumulated
and unpaid Distributions (including Additional Amounts, if applicable) on
all Outstanding Preferred Securities for all Distribution periods
terminating on or prior thereto, or in the case of payment of the
Redemption Price the full amount of such Redemption Price on all
Outstanding Preferred Securities, shall have been made or provided for, and
all funds immediately available to the Property Trustee shall first be
applied to the payment in full in cash of all Distributions (including
Additional Amounts, if applicable) on, or the Redemption Price of,
Preferred Securities then due and payable.
(b) In the case of the occurrence of any Event of Default
resulting from a Debenture Event of Default, the Holder of Common
Securities will be deemed to have waived any right to act with respect to
any such Event of Default under this Trust Agreement until the effect of
all such
24
<PAGE>
Events of Default with respect to the Preferred Securities have been cured,
waived or otherwise eliminated. Until any such Event of Default under this
Trust Agreement with respect to the Preferred Securities has been so cured,
waived or otherwise eliminated, the Property Trustee shall act solely on
behalf of the Holders of the Preferred Securities and not the Holder of the
Common Securities, and only the Holders of the Preferred Securities will
have the right to direct the Property Trustee to act on their behalf.
SECTION 404. Payment Procedures
------------------
Payments of Distributions (including Additional Amounts, if
applicable) in respect of the Preferred Securities shall be made by check
mailed to the address of the Person entitled thereto as such address shall
appear on the Securities Register or, if the Preferred Securities are held by
a Clearing Agency, such Distributions shall be made to the Clearing Agency in
immediately available funds, which shall credit the relevant Persons' accounts
at such Clearing Agency on the applicable distribution dates. Payments in
respect of the Common Securities shall be made in such manner as shall be
mutually agreed between the Property Trustee and the Common Securityholder.
SECTION 405. Tax Returns and Reports
-----------------------
The Administrative Trustees shall prepare (or cause to be prepared),
at the Depositor's expense, and file all United States federal, state and
local tax and information returns and reports required to be filed by or in
respect of the Trust. In this regard, the Administrative Trustees shall (a)
prepare and file (or cause to be prepared and filed) the appropriate Internal
Revenue Service Form required to be filed in respect of the Trust in each
taxable year of the Trust and (b) prepare and furnish (or cause to be prepared
and furnished) to each Securityholder the appropriate Internal Revenue Service
form required to be furnished to such Securityholder or the information
required to be provided on such form. The Administrative Trustees shall
provide the Depositor and the Property Trustee with a copy of all such returns
and reports promptly after such filing or furnishing. The Trustees shall
comply with United States federal withholding and backup withholding tax laws
and information reporting requirements with respect to any payments to
Securityholders under the Trust Securities.
SECTION 406. Payment of Taxes, Duties, Etc. of the Trust.
-------------------------------------------
Upon receipt under the Debentures of Additional Sums, the Property
Trustee shall promptly pay any taxes,
25
<PAGE>
duties or governmental charges of whatsoever nature (other than withholding
taxes) imposed on the Trust by the United States or any other taxing
authority.
SECTION 407. Payments under Indenture
------------------------
Any amount payable hereunder to any Holder of Preferred Securities
(and any Owner with respect thereto) shall be reduced by the amount of any
corresponding payment such Holder (and Owner) has directly received pursuant
to Section 508 of the Indenture.
ARTICLE V
---------
Trust Securities Certificates
-----------------------------
SECTION 501. Initial Ownership
-----------------
Upon the formation of the Trust and the contribution by the
Depositor pursuant to Section 203 and until the issuance of the Trust
Securities, and at any time during which no Trust Securities are outstanding,
the Depositor shall be the sole beneficial owner of the Trust.
SECTION 502. The Trust Securities Certificates
---------------------------------
The Preferred Securities Certificates shall be issued in minimum
denominations of $25 Liquidation Amount and integral multiples of $25 in
excess thereof, and the Common Securities Certificates shall be issued in
denominations of $25 Liquidation Amount and integral multiples thereof. The
Trust Securities Certificates shall be executed on behalf of the Trust by
manual signature of at least one Administrative Trustee. Trust Securities
Certificates bearing the manual signatures of individuals who were, at the
time when such signatures shall have been affixed, authorized to sign on
behalf of the Trust, shall be validly issued and entitled to the benefits of
this Trust Agreement, notwithstanding that such individuals or any of them
shall have ceased to be so authorized prior to the delivery of such Trust
Securities Certificates or did not hold such offices at the date of delivery
of such Trust Securities Certificates. A transferee of a Trust Securities
Certificate shall become a Securityholder, and shall be entitled to the rights
and subject to the obligations of a Securityholder hereunder, upon due
registration of such Trust Securities Certificate in such transferee's name
pursuant to Sections 504, 511 and 513.
26
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SECTION 503. Execution and Delivery of Trust Securities Certificates
-------------------------------------------------------
At each Time of Delivery, the Administrative Trustees shall cause
Trust Securities Certificates, in an aggregate Liquidation Amount as provided
in Sections 204 and 205, to be executed on behalf of the Trust and delivered
to or upon the written order of the Depositor, signed by its chairman of the
board, its president, any executive vice president, senior vice president or
any vice president, treasurer or assistant treasurer or controller without
further corporate action by the Depositor, in authorized denominations.
SECTION 504. Registration of Transfer and Exchange of Preferred Securities
-------------------------------------------------------------
Certificates
------------
The Depositor shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 508, a register or registers for the
purpose of registering Trust Securities Certificates and transfers and
exchanges of Preferred Securities Certificates (the "Securities Register") in
which, the registrar designated by the Depositor (the "Securities Registrar"),
subject to such reasonable regulations as it may prescribe, shall provide for
the registration of Preferred Securities Certificates and Common Securities
Certificates (subject to Section 510 in the case of the Common Securities
Certificates) and registration of transfers and exchanges of Preferred
Securities Certificates as herein provided. The Bank shall be the initial
Securities Registrar.
Upon surrender for registration of transfer of any Preferred
Securities Certificate at the office or agency maintained pursuant to Section
508, the Administrative Trustees or any one of them shall execute and deliver,
in the name of the designated transferee or transferees, one or more new
Preferred Securities Certificates in authorized denominations of a like
aggregate Liquidation Amount dated the date of execution by such
Administrative Trustee or Trustees. The Securities Registrar shall not be
required to register the transfer of any Preferred Securities that have been
called for redemption. At the option of a Holder, Preferred Securities
Certificates may be exchanged for other Preferred Securities Certificates in
authorized denominations of the same class and of a like aggregate Liquidation
Amount upon surrender of the Preferred Securities Certificates to be exchanged
at the office or agency maintained pursuant to Section 508.
27
<PAGE>
Every Preferred Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Property Trustee and the
Securities Registrar duly executed by the Holder or his attorney duly
authorized in writing. Each Preferred Securities Certificate surrendered for
registration of transfer or exchange shall be cancelled and subsequently
disposed of by the Property Trustee in accordance with its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Preferred Securities Certificates, but the Securities Registrar
may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer or exchange of
Preferred Securities Certificates.
SECTION 505. Mutilated, Destroyed, Lost or Stolen Trust Securities
-----------------------------------------------------
Certificates
------------
If (a) any mutilated Trust Securities Certificate shall be
surrendered to the Securities Registrar, or if the Securities Registrar
shall receive evidence to its satisfaction of the destruction, loss or
theft of any Trust Securities Certificate and (b) there shall be delivered
to the Securities Registrar and the Administrative Trustees such security
or indemnity as may be required by them to save each of them harmless, then
in the absence of notice that such Trust Securities Certificate shall have
been acquired by a bona fide purchaser, the Administrative Trustees, or any
one of them, on behalf of the Trust shall execute and make available for
delivery, in exchange for or in lieu of any such mutilated, destroyed, lost
or stolen Trust Securities Certificate, a new Trust Securities Certificate
of like class, tenor and denomination. In connection with the issuance of
any new Trust Securities Certificate under this Section, the Administrative
Trustees or the Securities Registrar may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith. Any duplicate Trust Securities
Certificate issued pursuant to this Section shall constitute conclusive
evidence of an undivided beneficial interest in the assets of the Trust, as
if originally issued, whether or not the lost, stolen or destroyed Trust
Securities Certificate shall be found at any time.
28
<PAGE>
SECTION 506. Persons Deemed Securityholders
------------------------------
The Administrative Trustees or the Securities Registrar shall treat
the Person in whose name any Trust Securities Certificate shall be registered
in the Securities Register as the owner of such Trust Securities Certificate
for the purpose of receiving distributions and for all other purposes
whatsoever, and neither the Trustees nor the Securities Registrar shall be
bound by any notice to the contrary.
SECTION 507. Access to List of Securityholders' Names and Addresses
------------------------------------------------------
The Administrative Trustees or the Depositor shall furnish or cause
to be furnished (a) to the Property Trustee, semi-annually on or before
January 15 and July 15 in each year, a list, in such form as the Property
Trustee may reasonably require, of the names and addresses of the
Securityholders as of the most recent Record Date and (b) to the Property
Trustee, promptly after receipt by any Administrative Trustee or the Depositor
of a request therefor from the Property Trustee in order to enable the
Property Trustee to discharge its obligations under this Trust Agreement, in
each case to the extent such information is in the possession or control of
the Administrative Trustees or the Depositor and is not identical to a
previously supplied list or has not otherwise been received by the Property
Trustee in its capacity as Securities Registrar. The rights of
Securityholders to communicate with other Securityholders with respect to
their rights under this Trust Agreement or under the Trust Securities, and the
corresponding rights of the Trustee shall be as provided in the Trust
Indenture Act. Each Holder, by receiving and holding a Trust Securities
Certificate, and each Owner shall be deemed to have agreed not to hold the
Depositor, the Property Trustee or the Administrative Trustees accountable by
reason of the disclosure of its name and address, regardless of the source
from which such information was derived.
SECTION 508. Maintenance of Office or Agency
-------------------------------
The Administrative Trustees shall maintain an office or offices or
agency or agencies where Preferred Securities Certificates may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Trustees in respect of the Trust Securities Certificates may be
served. The Administrative Trustees initially designate MCI Communications
Corporation, 1801 Pennsylvania Avenue, N.W., Washington, D.C. 20006,
Attention: Treasurer, as the office for such purposes. The
29
<PAGE>
Administrative Trustees shall give prompt written notice to the Depositor and
to the Securityholders of any change in the location of the Securities
Register or any such office or agency.
SECTION 509. Appointment of Paying Agent.
---------------------------
The Paying Agent shall make distributions to Securityholders from
the Payment Account and shall report the amounts of such distributions to the
Property Trustee and the Administrative Trustees. Any Paying Agent shall have
the revocable power to withdraw funds from the Payment Account for the purpose
of making the distributions referred to above. The Administrative Trustees
may revoke such power and remove the Paying Agent if such Trustees determine
in their sole discretion that the Paying Agent shall have failed to perform
its obligations under this Trust Agreement in any material respect. The
Paying Agent shall initially be the Bank, and any co-paying agent chosen by
the Bank and acceptable to the Administrative Trustees and the Depositor. Any
Person acting as Paying Agent shall be permitted to resign as Paying Agent
upon 30 days' written notice to the Administrative Trustees, the Property
Trustee and the Depositor. In the event that the Bank shall no longer be the
Paying Agent or a successor Paying Agent shall resign or its authority to act
be revoked, the Administrative Trustees shall appoint a successor that is
acceptable to the Property Trustee and the Depositor to act as Paying Agent
(which shall be a bank or trust company). The Administrative Trustees shall
cause such successor Paying Agent or any additional Paying Agent appointed by
the Administrative Trustees to execute and deliver to the Trustees an
instrument in which such successor Paying Agent or additional Paying Agent
shall agree with the Trustees that as Paying Agent, such successor Paying
Agent or additional Paying Agent will hold all sums, if any, held by it for
payment to the Securityholders in trust for the benefit of the Securityholders
entitled thereto until such sums shall be paid to such Securityholders. The
Paying Agent shall return all unclaimed funds to the Property Trustee and upon
removal of a Paying Agent such Paying Agent shall also return all funds in its
possession to the Property Trustee. The provisions of Sections 801, 803 and
806 shall apply to the Bank also in its role as Paying Agent, for so long as
the Bank shall act as Paying Agent and, to the extent applicable, to any other
paying agent appointed hereunder. Any reference in this Agreement to the
Paying Agent shall include any co-paying agent unless the context requires
otherwise.
30
<PAGE>
SECTION 510. Ownership of Common Securities by Depositor.
-------------------------------------------
At each Time of Delivery, the Depositor shall acquire and retain
beneficial and record ownership of the Common Securities. To the fullest
extent permitted by law, other than a transfer in connection with a
consolidation or merger of the Depositor into another corporation, or any
conveyance, transfer or lease by the Depositor of its properties and assets
substantially as an entirety to any Person, pursuant to Section 801 of the
Indenture, any attempted transfer of the Common Securities shall be void. The
Administrative Trustees shall cause each Common Securities Certificate issued
to the Depositor to contain a legend stating "THIS CERTIFICATE IS NOT
TRANSFERABLE".
SECTION 511. Book-Entry Preferred Securities Certificates; Common Securities
---------------------------------------------------------------
Certificate.
-----------
(a) The Preferred Securities Certificates, upon original
issuance, will be issued in the form of a typewritten Preferred Securities
Certificate or Certificates representing Book-Entry Preferred Securities
Certificates, to be delivered to The Depository Trust Company, the initial
Clearing Agency, by, or on behalf of, the Trust. Such Preferred Securities
Certificate or Certificates shall initially be registered on the Securities
Register in the name of Cede & Co., the nominee of the initial Clearing
Agency, and no beneficial owner will receive a Definitive Preferred
Securities Certificate representing such beneficial owner's interest in
such Preferred Securities, except as provided in Section 513. Unless and
until Definitive Preferred Securities Certificates have been issued to
beneficial owners pursuant to Section 513:
(i) the provisions of this Section 511(a) shall be in full
force and effect;
(ii) the Securities Registrar and the Trustees shall be
entitled to deal with the Clearing Agency for all purposes of this Trust
Agreement relating to the Book-Entry Preferred Securities Certificates
(including the payment of the Liquidation Amount of and Distributions on
the Book-Entry Preferred Securities and the giving of instructions or
directions to Owners of Book-Entry Preferred Securities) as the sole
Holder of Book-Entry Preferred Securities and shall have no obligations
to the Owners thereof;
(iii) to the extent that the provisions of this Section 511
conflict with any other provisions of this
31
<PAGE>
Trust Agreement, the provisions of this Section 511 shall control; and
(iv) the rights of the Owners of the Book-Entry Preferred
Securities Certificates shall be exercised only through the Clearing
Agency and shall be limited to those established by law and agreements
between such Owners and the Clearing Agency and/or the Clearing Agency
Participants. Pursuant to the Certificate Depository Agreement, unless
and until Definitive Preferred Securities Certificates are issued
pursuant to Section 513, the initial Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and transmit
payments on the Preferred Securities to such Clearing Agency
Participants.
(b) A single Common Securities Certificate representing the
Common Securities shall be issued to the Depositor in the form of a
definitive Common Securities Certificate.
SECTION 512. Notices to Clearing Agency.
--------------------------
To the extent that a notice or other communication to the Owners is
required under this Trust Agreement, unless and until Definitive Preferred
Securities Certificates shall have been issued to Owners pursuant to Section
513, the Trustees shall give all such notices and communications specified
herein to be given to Owners to the Clearing Agency, and shall have no
obligations to the Owners.
SECTION 513. Definitive Preferred Securities Certificates.
--------------------------------------------
If (a) the Depositor advises the Trustees in writing that the
Clearing Agency is no longer willing or able to properly discharge its
responsibilities with respect to the Preferred Securities Certificates, and
the Depositor is unable to locate a qualified successor, (b) the Depositor at
its option advises the Trustees in writing that it elects to terminate the
book-entry system through the Clearing Agency, or (c) after the occurrence of
a Debenture Event of Default, Owners of Preferred Securities Certificates
representing beneficial interests aggregating at least a majority of the
Liquidation Amount advise the Property Trustee in writing that the
continuation of a book-entry system through the Clearing Agency is no longer
in the best interest of the Owners of Preferred Securities Certificates, then
the Property Trustee shall notify the Clearing Agency and the Clearing Agency
shall notify all Owners of Preferred Securities Certificates and the other
Trustees of the
32
<PAGE>
occurrence of any such event and of the availability of the Definitive
Preferred Securities Certificates to Owners of such class or classes, as
applicable, requesting the same. Upon surrender to the Property Trustee of the
typewritten Preferred Securities Certificate or Certificates representing the
Book-Entry Preferred Securities Certificates by the Clearing Agency,
accompanied by registration instructions, the Administrative Trustees, or any
one of them, shall execute the Definitive Preferred Securities Certificates in
accordance with the instructions of the Clearing Agency. Neither the
Securities Registrar nor the Trustees shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Preferred Securities Certificates, the Trustees shall recognize the Holders of
the Definitive Preferred Securities Certificates as Securityholders. The
Definitive Preferred Securities Certificates shall be printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Administrative Trustees, as evidenced by the execution thereof by the
Administrative Trustees or any one of them.
SECTION 514. Rights of Securityholders.
-------------------------
(a) The legal title to the Trust Property is vested exclusively in
the Property Trustee (in its capacity as such) in accordance with Section 209,
and the Securityholders shall not have any right or title therein other than
the undivided beneficial interest in the assets of the Trust conferred by
their Trust Securities and they shall have no right to call for any partition
or division of property, profits or rights of the Trust except as described
below. The Trust Securities shall be personal property giving only the rights
specifically set forth therein and in this Trust Agreement. The Trust
Securities shall have no preemptive or similar rights and when issued and
delivered to Securityholders against payment of the purchase price therefor
will be fully paid and nonassessable by the Trust. The Holders of the Trust
Securities, in their capacities as such, shall be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the
State of Delaware.
(b) For so long as any Preferred Securities remain Outstanding, if,
upon a Debenture Event of Default, the Debenture Trustee fails or the holders
of not less than 25% in principal amount of the outstanding Debentures fail to
declare the principal of all of the Debentures to be immediately due and
payable, the Holders of at least 25% in
33
<PAGE>
Liquidation Amount of the Preferred Securities then Outstanding shall have
such right by a notice in writing to the Depositor and the Debenture Trustee;
and upon any such declaration such principal amount of and the accrued
interest on all of the Debentures shall become immediately due and payable,
provided that the payment of principal and interest on such Debentures shall
remain subordinated to the extent provided in the Indenture.
(c) For so long as any Preferred Securities remain Outstanding, to
the fullest extent permitted by law and subject to the terms of this Trust
Agreement, if, upon a Debenture Event of Default specified in Section 501(1)
or 501(2) of the Indenture, any Holder of Preferred Securities shall have the
right to directly institute a proceeding for enforcement of payment to such
Holder of the principal amount of or interest on the Debentures having a
principal amount equal to the Liquidation Amount of the Preferred Securities
of such Holder (a "Direct Action"). In connection with such Direct Action,
the rights of the Holders of the Common Securities will be subrogated to the
rights of any Holder of the Preferred Securities to the extent of any payment
made by the Depositor to such Holder of Preferred Securities in such Direct
Action. Except as set forth in this Section 514(c), the Holders of Preferred
Securities will not be able to exercise directly any other remedy available to
the holders of the Debentures or assert directly any other rights in respect
of the Debentures.
ARTICLE VI
-----------
Acts of Securityholders; Meetings; Voting
-----------------------------------------
SECTION 601. Limitations on Voting Rights
----------------------------
(a) Except as provided in this Section, in Sections 810 and
1002 and in the Indenture and as otherwise required by law, no Holder of
Preferred Securities shall have any right to vote or in any manner
otherwise control the administration, operation and management of the Trust
or the obligations of the parties hereto, nor shall anything herein set
forth, or contained in the terms of the Trust Securities Certificates, be
construed so as to constitute the Securityholders from time to time as
partners or members of an association.
(b) So long as any Debentures are held by the Property Trustee,
the Trustees shall not (i) direct the time, method and place of conducting
any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred on the Debenture Trustee with
respect to such Debentures, (ii) waive any past default
34
<PAGE>
which is waiveable under Section 513 of the Indenture, (iii) exercise any
right to rescind or annul a declaration that the principal of all the
Debentures shall be due and payable or (iv) consent to any amendment,
modification or termination of the Indenture or the Debentures, where such
consent shall be required, without, in each case, obtaining the prior
approval of the Holders of at least a majority in Liquidation Amount of all
Outstanding Preferred Securities; provided, however, that where a consent
-------- -------
under the Indenture would require the consent of each Holder of Debentures
affected thereby, no such consent shall be given by the Property Trustee
without the prior written consent of each Holder of Preferred Securities.
The Trustees shall not revoke any action previously authorized or approved
by a vote of the Holders of Preferred Securities, except by a subsequent
vote of the Holders of Preferred Securities. The Property Trustee shall
notify all Holders of the Preferred Securities of any notice of default
received from the Debenture Trustee with respect to the Debentures. In
addition to obtaining the foregoing approvals of the Holders of the
Preferred Securities, prior to taking any of the foregoing actions, the
Trustees shall, at the expense of the Depositor, obtain an Opinion of
Counsel experienced in such matters to the effect that the Trust will not
be classified as an association taxable as a corporation for United States
federal income tax purposes on account of such action.
(c) If any proposed amendment to the Trust Agreement provides
for, or the Trustees otherwise propose to effect, (i) any action that would
adversely affect in any material respect the powers, preferences or special
rights of the Preferred Securities, whether by way of amendment to the
Trust Agreement or otherwise, or (ii) the dissolution, winding-up or
termination of the Trust, other than pursuant to the terms of this Trust
Agreement, then the Holders of Outstanding Preferred Securities as a class
will be entitled to vote on such amendment or proposal and such amendment
or proposal shall not be effective except with the approval of the Holders
of at least a majority in Liquidation Amount of the Outstanding Preferred
Securities. No amendment to this Trust Agreement may be made if, as a
result of such amendment, the Trust would be classified as an association
taxable as a corporation for United States federal income tax purposes.
35
<PAGE>
SECTION 602. Notice of Meetings.
------------------
Notice of all meetings of the Preferred Securityholders, stating the
time, place and purpose of the meeting, shall be given by the Property Trustee
pursuant to Section 1008 to each Preferred Securityholder of record, at his
registered address, at least 15 days and not more than 90 days before the
meeting. At any such meeting, any business properly before the meeting may be
so considered whether or not stated in the notice of the meeting. Any
adjourned meeting may be held as adjourned without further notice.
SECTION 603. Meetings of Preferred Securityholders.
-------------------------------------
No annual meeting of Securityholders is required to be held. The
Administrative Trustees, however, shall call a meeting of Securityholders to
vote on any matter upon the written request of the Preferred Securityholders
of record of 25% of the Preferred Securities (based upon their Liquidation
Amount) and the Administrative Trustees or the Property Trustee may, at any
time in their discretion, call a meeting of Preferred Securityholders to vote
on any matters as to which Preferred Securityholders are entitled to vote.
Preferred Securityholders of record of 50% of the Outstanding
Preferred Securities (based upon their Liquidation Amount), present in person
or by proxy, shall constitute a quorum at any meeting of Securityholders.
If a quorum is present at a meeting, an affirmative vote by the
Preferred Securityholders of record present, in person or by proxy, holding
more than a majority of the Preferred Securities (based upon their Liquidation
Amount) held by the Preferred Securityholders of record present, either in
person or by proxy, at such meeting shall constitute the action of the
Securityholders, unless this Trust Agreement requires a greater number of
affirmative votes.
SECTION 604. Voting Rights
-------------
Securityholders shall be entitled to one vote for each $25 of
Liquidation Amount represented by their Trust Securities in respect of any
matter as to which such Securityholders are entitled to vote.
36
<PAGE>
SECTION 605. Proxies, etc.
-------------
At any meeting of Securityholders, any Securityholder entitled to
vote thereat may vote by proxy, provided that no proxy shall be voted at any
meeting unless it shall have been placed on file with the Administrative
Trustees, or with such other officer or agent of the Trust as the
Administrative Trustees may direct, for verification prior to the time at
which such vote shall be taken. Pursuant to a resolution of the Property
Trustee, proxies may be solicited in the name of the Property Trustee or one
or more officers of the Property Trustee. Only Securityholders of record
shall be entitled to vote. When Trust Securities are held jointly by several
persons, any one of them may vote at any meeting in person or by proxy in
respect of such Trust Securities, but if more than one of them shall be
present at such meeting in person or by proxy, and such joint owners or their
proxies so present disagree as to any vote to be cast, such vote shall not be
received in respect of such Trust Securities. A proxy purporting to be
executed by or on behalf of a Securityholder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving invalidity
shall rest on the challenger. No proxy shall be valid more than three years
after its date of execution.
SECTION 606. Securityholder Action by Written Consent.
----------------------------------------
Any action which may be taken by Securityholders at a meeting may be
taken without a meeting if Securityholders holding more than a majority of all
Outstanding Trust Securities (based upon their Liquidation Amount) entitled to
vote in respect of such action (or such larger proportion thereof as shall be
required by any express provision of this Trust Agreement) shall consent to
the action in writing.
SECTION 607. Record Date for Voting and Other Purposes
-----------------------------------------
For the purposes of determining the Securityholders who are entitled
to notice of and to vote at any meeting or by written consent, or to
participate in any distribution on the Trust Securities in respect of which a
record date is not otherwise provided for in this Trust Agreement, or for the
purpose of any other action, the Administrative Trustees may from time to time
fix a date, not more than 90 days prior to the date of any meeting of
Securityholders or the payment of a distribution or other action, as the case
may be, as a record date for the determination of the identity of the
Securityholders of record for such purposes.
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SECTION 608. Acts of Securityholders
-----------------------
Any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Trust Agreement to be
given, made or taken by Securityholders or Owners may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Securityholders or Owners in person or by an agent duly appointed in
writing; and, except as otherwise expressly provided herein, such action shall
become effective when such instrument or instruments are delivered to an
Administrative Trustee. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as
the "Act" of the Securityholders or Owners signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Trust
Agreement and (subject to Section 801) conclusive in favor of the Trustees, if
made in the manner provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual
signing such instrument or writing acknowledged to him the execution thereof.
Where such execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the execution of any
such instrument or writing, or the authority of the Person executing the same,
may also be proved in any other manner which any Trustee receiving the same
deems sufficient.
The ownership of Preferred Securities shall be proved by the
Securities Register.
Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Securityholder of any Trust Security shall bind
every future Securityholder of the same Trust Security and the Securityholder
of every Trust Security issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof in respect of anything done, omitted or
suffered to be done by the Trustees or the Trust in reliance thereon, whether
or not notation of such action is made upon such Trust Security.
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Without limiting the foregoing, a Securityholder entitled hereunder
to take any action hereunder with regard to any particular Trust Security may
do so with regard to all or any part of the Liquidation Amount of such Trust
Security or by one or more duly appointed agents each of which may do so
pursuant to such appointment with regard to all or any part of such
liquidation amount.
If any dispute shall arise between the Securityholders and the
Administrative Trustees or among such Securityholders or Trustees with respect
to the authenticity, validity or binding nature of any request, demand,
authorization, direction, consent, waiver or other Act of such Securityholder
or Trustee under this Article VI, then the determination of such matter by the
Property Trustee shall be conclusive with respect to such matter.
A Securityholder may institute a legal proceeding directly against
the Depositor under the Guarantee to enforce its rights under the Guarantee
without first instituting a legal proceeding against the Guarantee Trustee (as
defined in the Guarantee), the Trust or any person or entity.
SECTION 609. Inspection of Records
---------------------
Upon reasonable notice to the Administrative Trustees and the
Property Trustee, the records of the Trust shall be open to inspection by
Securityholders during normal business hours for any purpose reasonably
related to such Securityholder's interest as a Securityholder.
ARTICLE VII
Representations and Warranties
------------------------------
SECTION 701. Representations and Warranties of the Bank, the Property
--------------------------------------------------------
Trustee and the Delaware Trustee.
---------------------------------
The Bank, the Property Trustee and the Delaware Trustee, each
severally on behalf of and as to itself, hereby represents and warrants for
the benefit of the Depositor and the Securityholders that:
(a) the Bank is a Delaware banking corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware;
(b) the Bank has full corporate power, authority and legal
right to execute, deliver and perform its
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obligations under this Trust Agreement and has taken all necessary action
to authorize the execution, delivery and performance by it of this Trust
Agreement;
(c) this Trust Agreement has been duly authorized, executed and
delivered by the Bank and constitutes the valid and legally binding
agreement of the Bank enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;
(d) the execution, delivery and performance by the Bank of this
Trust Agreement has been duly authorized by all necessary corporate or
other action on the part of the Bank, the Property Trustee and the
Delaware Trustee and does not require any approval of stockholders of the
Bank and such execution, delivery and performance will not (i) violate
the Bank's charter or by-laws, (ii) violate any provision of, or
constitute, with or without notice or lapse of time, a default under, or
result in the creation or imposition of, any Lien on any properties
included in the Trust Property pursuant to the provisions of, any
indenture, mortgage, credit agreement, license or other agreement or
instrument to which the Property Trustee, the Bank or the Delaware
Trustee is a party or by which it is bound, or (iii) violate any law,
governmental rule or regulation of the United States or the State of
Delaware, as the case may be, governing the banking or trust powers of
the Bank, the Property Trustee or the Delaware Trustee (as appropriate in
context) or any order, judgment or decree applicable to the Property
Trustee, the Bank or the Delaware Trustee;
(e) neither the authorization, execution or delivery by the
Bank of this Trust Agreement nor the consummation of any of the
transactions by the Bank, the Property Trustee or the Delaware Trustee
(as appropriate in context) contemplated herein or therein requires the
consent or approval of, the giving of notice to, the registration with or
the taking of any other action with respect to any governmental authority
or agency under any existing federal law governing the banking or trust
powers of the Bank, the Property Trustee or the Delaware Trustee, as the
case may be, under the laws of the United States or the State of
Delaware;
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(f) there are no proceedings pending or, to the best of each of
the Bank's, the Property Trustee's and the Delaware Trustee's knowledge,
threatened against or affecting the Bank, the Property Trustee or the
Delaware Trustee in any court or before any governmental authority,
agency or arbitration board or tribunal which, individually or in the
aggregate, would materially and adversely affect the Trust or would
question the right, power and authority of the Bank, the Property Trustee
or the Delaware Trustee, as the case may be, to enter into or perform its
obligations as one of the Trustees under this Trust Agreement.
SECTION 702. Representations and Warranties of Depositor.
-------------------------------------------
The Depositor hereby represents and warrants for the benefit of the
Securityholders that:
(a) the Trust Securities Certificates issued at each Time of
Delivery on behalf of the Trust have been duly authorized and will have
been duly and validly executed, issued and delivered by the Trustees
pursuant to the terms and provisions of, and in accordance with the
requirements of, this Trust Agreement and the Securityholders will be, as
of such date, entitled to the benefits of this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable
by the Trust (or the Trustees on behalf of the Trust) under the laws of
the State of Delaware or any political subdivision thereof in connection
with the execution, delivery and performance by the Bank, the Property
Trustee or the Delaware Trustee, as the case may be, of this Trust
Agreement.
ARTICLE VIII
------------
The Trustees
------------
SECTION 801. Certain Duties and Responsibilities
-----------------------------------
(a) The duties and responsibilities of the Trustees shall be as
provided by this Trust Agreement and, in the case of the Property Trustee,
by the Trust Indenture Act. Notwithstanding the foregoing, no provision of
this Trust Agreement shall require the Trustees to expend or risk their own
funds or otherwise incur any financial liability in the performance of any
of their duties hereunder, or in the exercise of any of their rights or
powers, if they shall have reasonable grounds for believing that repayment
of such funds or adequate indemnity against such risk or liability
41
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is not reasonably assured to it. Whether or not therein expressly so
provided, every provision of this Trust Agreement relating to the conduct
or affecting the liability of or affording protection to the Trustees shall
be subject to the provisions of this Section. Nothing in this Trust
Agreement shall be construed to release the Property Trustee from liability
for its own negligent action, its own negligent failure to act, or its own
willful misconduct. To the extent that, at law or in equity, an
Administrative Trustee has duties (including fiduciary duties) and
liabilities relating thereto to the Trust or to the Securityholders, such
Administrative Trustee shall not be liable to the Trust or to any
Securityholder for such Trustee's good faith reliance on the provisions of
this Trust Agreement. The provisions of this Trust Agreement, to the extent
that they restrict the duties and liabilities of the Administrative
Trustees otherwise existing at law or in equity, are agreed by the
Depositor and the Securityholders to replace such other duties and
liabilities of the Administrative Trustees.
(b) All payments made by the Property Trustee or a Paying Agent
in respect of the Trust Securities shall be made only from the revenue and
proceeds from the Trust Property and only to the extent that there shall be
sufficient revenue or proceeds from the Trust Property to enable the
Property Trustee or a Paying Agent to make payments in accordance with the
terms hereof. Each Securityholder, by its acceptance of a Trust Security,
agrees that it will look solely to the revenue and proceeds from the Trust
Property to the extent legally available for distribution to it as herein
provided and that the Trustees are not personally liable to it for any
amount distributable in respect of any Trust Security or for any other
liability in respect of any Trust Security. This Section 801(b) does not
limit the liability of the Trustees expressly set forth elsewhere in this
Trust Agreement or, in the case of the Property Trustee, in the Trust
Indenture Act.
(c) No provision of this Trust Agreement shall be construed to
relieve the Property Trustee from liability for its own negligent action,
its own negligent failure to act, or its own willful misconduct, except
that:
(i) the Property Trustee shall not be liable for any error
of judgment made in good faith by an authorized officer of the Property
Trustee, unless it shall be proved that the Property Trustee was
negligent in ascertaining the pertinent facts;
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(ii) the Property Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a majority
in Liquidation Amount of the Trust Securities relating to the time,
method and place of conducting any proceeding for any remedy available to
the Property Trustee, or exercising any trust or power conferred upon the
Property Trustee under this Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and the
Payment Account shall be to deal with such Property in a similar manner
as the Property Trustee deals with similar property for its own account,
subject to the protections and limitations on liability afforded to the
Property Trustee under this Trust Agreement and the Trust Indenture Act;
(iv) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree
with the Depositor, and money held by the Property Trustee need not be
segregated from other funds held by it except in relation to the Payment
Account maintained by the Property Trustee pursuant to Section 301 and
except to the extent otherwise required by law; and
(v) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the Depositor
with their respective duties under this Trust Agreement, nor shall the
Property Trustee be liable for the default or misconduct of the
Administrative Trustees or the Depositor.
SECTION 802. Certain Notices.
----------------
Within five Business Days after the occurrence of any Event of
Default actually known to the Property Trustee, the Property Trustee shall
transmit, in the manner and to the extent provided in Section 1008, notice of
such Event of Default to the Securityholders, the Administrative Trustees and
the Depositor, unless such Event of Default shall have been cured or waived.
Within five Business Days after the receipt of notice of the
Depositor's exercise of its right to defer the payment of interest on the
Debentures pursuant to the Indenture, the Administrative Trustee shall
transmit, in the manner and to the extent provided in Section 1008, notice of
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such exercise to the Securityholders and the Property Trustee, unless such
exercise shall have been revoked.
SECTION 803. Certain Rights of Property Trustee.
-----------------------------------
Subject to the provisions of Section 801:
(a) the Property Trustee may rely and shall be protected in
acting or refraining from acting in good faith upon any resolution,
Opinion of Counsel, certificate, written representation of a Holder or
transferee, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) if (i) in performing its duties under this Trust Agreement
the Property Trustee is required to decide between alternative courses of
action or (ii) in construing any of the provisions of this Trust
Agreement the Property Trustee finds the same ambiguous or inconsistent
with any other provisions contained herein or (iii) the Property Trustee
is unsure of the application of any provision of this Trust Agreement,
then, except as to any matter as to which the Preferred Securityholders
are entitled to vote under the terms of this Trust Agreement, the
Property Trustee shall deliver a notice to the Depositor requesting
written instructions of the Depositor as to the course of action to be
taken and the Property Trustee shall take such action, or refrain from
taking such action, as the Property Trustee shall be instructed in
writing to take, or to refrain from taking, by the Depositor; provided,
--------
however, that if the Property Trustee does not receive such instructions
-------
of the Depositor within ten Business Days after it has delivered such
notice, or such reasonably shorter period of time set forth in such
notice (which to the extent practicable shall not be less than two
Business Days), it may, but shall be under no duty to, take or refrain
from taking such action not inconsistent with this Trust Agreement as it
shall deem advisable and in the best interests of the Securityholders, in
which event the Property Trustee shall have no liability except for its
own bad faith, negligence or willful misconduct;
(c) any direction or act of the Depositor or the Administrative
Trustees contemplated by this Trust
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Agreement shall be sufficiently evidenced by an Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the
Property Trustee shall deem it desirable that a matter be established
before undertaking, suffering or omitting any action hereunder, the
Property Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
rely upon an Officers' Certificate which, upon receipt of such request,
shall be promptly delivered by the Depositor or the Administrative
Trustees;
(e) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or securities
laws) or any rerecording, refiling or reregistration thereof;
(f) the Property Trustee may consult with counsel (which
counsel may be counsel to the Depositor or any of its Affiliates, and may
include any of its employees) and the advice of such counsel shall be
full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon and in accordance with such advice; the Property Trustee shall
have the right at any time to seek instructions concerning the
administration of this Trust Agreement from any court of competent
jurisdiction;
(g) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Trust Agreement
at the request or direction of any of the Securityholders pursuant to
this Trust Agreement, unless such Securityholders shall have offered to
the Property Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with
such request or direction;
(h) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, approval, bond, debenture, note or other evidence of
indebtedness or other paper or document, unless requested in writing to
do so by one or more Securityholders, but the Property Trustee may make
such
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further inquiry or investigation into such facts or matters as it
may see fit;
(i) the Property Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through its agents or attorneys, provided that the Property Trustee shall
--------
be responsible for its own negligence or recklessness with respect to
selection of any agent or attorney appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the
Property Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder the Property Trustee (i) may request instructions from the
Holders of the Trust Securities which instructions may only be given by
the Holders of the same proportion in Liquidation Amount of the Trust
Securities as would be entitled to direct the Property Trustee under the
terms of the Trust Securities in respect of such remedy, right or action,
(ii) may refrain from enforcing such remedy or right or taking such other
action until such instructions are received, and (iii) shall be protected
in acting in accordance with such instructions; and
(k) except as otherwise expressly provided by this Trust
Agreement, the Property Trustee shall not be under any obligation to take
any action that is discretionary under the provisions of this Trust
Agreement.
No provision of this Trust Agreement shall be deemed to impose any duty or
obligation on the Property Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Property Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Property
Trustee shall be construed to be a duty.
SECTION 804. Not Responsible for Recitals or Issuance of Securities.
------------------------------------------------------
The recitals contained herein and in the Trust Securities
Certificates shall be taken as the statements of the Trust, and the Trustees
do not assume any responsibility for their correctness. The Trustees shall
not be
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accountable for the use or application by the Depositor of the proceeds
of the Debentures.
SECTION 805. May Hold Securities.
-------------------
Except as provided in the definition of the term "Outstanding" in
Article I, any Trustee or any other agent of any Trustee or the Trust, in its
individual or any other capacity, may become the owner or pledgee of Trust
Securities and, subject to Sections 808 and 813, may otherwise deal with the
Trust with the same rights it would have if it were not a Trustee or such
other agent.
SECTION 806. Compensation; Indemnity; Fees.
-----------------------------
The Depositor agrees:
(a) to pay to the Trustees from time to time reasonable
compensation for all services rendered by them hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to
reimburse the Trustees upon request for all reasonable expenses,
disbursements and advances incurred or made by the Trustees in accordance
with any provision of this Trust Agreement (including the reasonable
compensation and the expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(c) to indemnify each of the Trustees or any predecessor
Trustee for, and to hold the Trustees harmless against, any loss, damage,
claims, liability, penalty or expense incurred without negligence or bad
faith on its part, arising out of or in connection with the acceptance or
administration of this Trust Agreement, including the costs and expenses
of defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
No Trustee may claim any lien or charge on any Trust Property as a
result of any amount due pursuant to this Section 806.
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SECTION 807. Corporate Property Trustee Required; Eligibility of
---------------------------------------------------
Trustees
--------
(a) There shall at all times be a Property Trustee hereunder
with respect to the Trust Securities. The Property Trustee shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such
and has a combined capital and surplus of at least $50,000,000. If any
such Person publishes reports of condition at least annually, pursuant to
law or to the requirements of its supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Person shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the
Property Trustee with respect to the Trust Securities shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
(b) There shall at all times be one or more Administrative
Trustees hereunder with respect to the Trust Securities. Each
Administrative Trustee shall be either a natural person who is at least 21
years of age or a legal entity that shall act through one or more persons
authorized to bind that entity.
(c) There shall at all times be a Delaware Trustee with
respect to the Trust Securities. The Delaware Trustee shall either be (i)
a natural person who is at least 21 years of age and a resident of the
State of Delaware or (ii) a legal entity with its principal place of
business in the State of Delaware and that otherwise meets the requirements
of applicable Delaware law that shall act through one or more persons
authorized to bind such entity.
SECTION 808. Conflicting Interests.
---------------------
If the Property Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Property Trustee shall
either eliminate such interest or resign, to the extent and in the manner
provided by, and subject to the provisions of, the Trust Indenture Act and
this Trust Agreement.
SECTION 809. Co-Trustees and Separate Trustee.
--------------------------------
Unless an Event of Default shall have occurred and be continuing, at
any time or times, for the purpose of meeting the legal requirements of the
Trust Indenture Act or of any jurisdiction in which any part of the Trust
Property
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<PAGE>
may at the time be located, the Depositor and the Administrative Trustees,
by agreed action of the majority of such Trustees, shall have power to
appoint, and upon the written request of the Administrative Trustees, the
Depositor shall for such purpose join with the Administrative Trustees in the
execution, delivery and performance of all instruments and agreements
necessary or proper to appoint, one or more Persons approved by the Property
Trustee either to act as co-trustee, jointly with the Property Trustee, of all
or any part of such Trust Property, or to the extent required by law to act as
separate trustee of any such property, in either case with such powers as may
be provided in the instrument of appointment, and to vest in such Person or
Persons in the capacity aforesaid, any property, title, right or power deemed
necessary or desirable, subject to the other provisions of this Section. If
the Depositor does not join in such appointment within 15 days after the
receipt by it of a request so to do, or in case a Debenture Event of Default
has occurred and is continuing, the Property Trustee alone shall have power to
make such appointment. Any co-trustee or separate trustee appointed pursuant
to this Section shall either be (i) a natural person who is at least 21 years
of age and a resident of the United States or (ii) a legal entity with its
principal place of business in the United States that shall act through one or
more persons authorized to bind such entity.
Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged and
delivered by the Depositor.
Every co-trustee or separate trustee shall, to the extent permitted
by law, but to such extent only, be appointed subject to the following terms,
namely:
(a) The Trust Securities shall be executed and delivered and
all rights, powers, duties and obligations hereunder in respect of the
custody of securities, cash and other personal property held by, or
required to be deposited or pledged with, the Trustees specified
hereunder, shall be exercised, solely by such Trustees and not by such
co-trustee or separate trustee.
(b) The rights, powers, duties and obligations hereby
conferred or imposed upon the Property Trustee in respect of any property
covered by such appointment
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<PAGE>
shall be conferred or imposed upon and exercised or performed by the
Property Trustee or by the Property Trustee and such co-trustee or
separate trustee jointly, as shall be provided in the instrument
appointing such co-trustee or separate trustee, except to the extent that
under any law of any jurisdiction in which any particular act is to be
performed, the Property Trustee shall be incompetent or unqualified to
perform such act, in which event such rights, powers, duties and
obligations shall be exercised and performed by such co-trustee or
separate trustee.
(c) The Property Trustee at any time, by an instrument in
writing executed by it, with the written concurrence of the Depositor,
may accept the resignation of or remove any co-trustee or separate
trustee appointed under this Section, and, in case a Debenture Event of
Default has occurred and is continuing, the Property Trustee shall have
power to accept the resignation of, or remove, any such co-trustee or
separate trustee without the concurrence of the Depositor. Upon the
written request of the Property Trustee, the Depositor shall join with
the Property Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate
trustee so resigned or removed may be appointed in the manner provided in
this Section.
(d) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Property
Trustee or any other trustee hereunder.
(e) The Property Trustee shall not be liable by reason of any
act of a co-trustee or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee shall
be deemed to have been delivered to each such co-trustee and separate
trustee.
SECTION 810. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
No resignation or removal of any Trustee (the "Relevant Trustee")
and no appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the successor Trustee
in accordance with the applicable requirements of Section 811.
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Subject to the immediately preceding paragraph, the Relevant Trustee
may resign at any time with respect to the Trust Securities by giving written
notice thereof to the Securityholders. If the instrument of acceptance by the
successor Trustee required by Section 811 shall not have been delivered to the
Relevant Trustee within 30 days after the giving of such notice of
resignation, the Relevant Trustee may petition, at the expense of the Company,
any court of competent jurisdiction for the appointment of a successor
Relevant Trustee with respect to the Trust Securities.
Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by Act of the Common
Securityholder. If a Debenture Event of Default shall have occurred and be
continuing, the Property Trustee or the Delaware Trustee, or both of them, may
be removed at such time by Act of the Holders of a majority in Liquidation
Amount of the Preferred Securities, delivered to the Relevant Trustee (in its
individual capacity and on behalf of the Trust). An Administrative Trustee
may be removed by the Common Securityholder at any time.
If any Trustee shall resign, be removed or become incapable of
acting as Trustee, or if a vacancy shall occur in the office of any Trustee
for any cause, at a time when no Debenture Event of Default shall have
occurred and be continuing, the Common Securityholder, by Act of the Common
Securityholder delivered to the retiring Trustee, shall promptly appoint a
successor Trustee or Trustees with respect to the Trust Securities and the
Trust, and the successor Trustee shall comply with the applicable requirements
of Section 811. If the Property Trustee or the Delaware Trustee shall resign,
be removed or become incapable of continuing to act as the Property Trustee or
the Delaware Trustee, as the case may be, at a time when a Debenture Event of
Default shall have occurred and be continuing, the Preferred Securityholders,
by Act of the Securityholders of a majority in Liquidation Amount of the
Preferred Securities then Outstanding delivered to the retiring Relevant
Trustee, shall promptly appoint a successor Relevant Trustee or Trustees with
respect to the Trust Securities and the Trust, and such successor Trustee
shall comply with the applicable requirements of Section 811. If an
Administrative Trustee shall resign, be removed or become incapable of acting
as Administrative Trustee, at a time when a Debenture Event of Default shall
have occurred and be continuing, the Common Securityholder, by Act of the
Common Securityholder delivered to the Administrative Trustee, shall promptly
appoint a successor Administrative
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<PAGE>
Trustee or Administrative Trustees with respect to the Trust Securities and
the Trust, and such successor Administrative Trustee or Administrative
Trustees shall comply with the applicable requirements of Section 811. If no
successor Relevant Trustee with respect to the Trust Securities shall have
been so appointed by the Common Securityholder or the Preferred
Securityholders and accepted appointment in the manner required by Section
811, any Securityholder who has been a Securityholder of Trust Securities for
at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of
a successor Relevant Trustee with respect to the Trust Securities.
The Property Trustee shall give notice of each resignation and each
removal of a Trustee and each appointment of a successor Trustee to all
Securityholders in the manner provided in Section 1008 and shall give notice
to the Depositor. Each notice shall include the name of the successor
Relevant Trustee and the address of its Corporate Trust Office if it is the
Property Trustee.
Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee or a Delaware Trustee who
is a natural person dies or becomes, in the opinion of the Depositor,
incompetent or incapacitated, the vacancy created by such death, incompetence
or incapacity may be filled by (a) the unanimous act of remaining
Administrative Trustees if there are at least two of them or (b) otherwise by
the Depositor (with the successor in each case being a Person who satisfies
the eligibility requirement for Administrative Trustees set forth in Section
807).
SECTION 811. Acceptance of Appointment by Successor.
--------------------------------------
In case of the appointment hereunder of a successor Trustee such
successor Trustee so appointed shall execute, acknowledge and deliver to the
Trust and to the retiring Trustee an instrument accepting such appointment,
and thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, on the request of the Depositor or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and if the Property Trustee is the
resigning Trustee shall duly assign,
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<PAGE>
transfer and deliver to the successor Trustee all property and money held by
such retiring Property Trustee hereunder.
In case of the appointment hereunder of a successor Relevant Trustee
with respect to the Trust Securities and the Trust, the retiring Relevant
Trustee and each successor Relevant Trustee with respect to the Trust
Securities shall execute and deliver an amendment hereto wherein each
successor Relevant Trustee shall accept such appointment and which (a) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Trust Securities and the Trust and (b) shall add to or change any of the
provisions of this Trust Agreement as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one
Relevant Trustee, it being understood that nothing herein or in such amendment
shall constitute such Relevant Trustees co-trustees of the same trust and that
each such Relevant Trustee shall be trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder administered by any
other such Relevant Trustee and upon the execution and delivery of such
amendment the resignation or removal of the retiring Relevant Trustee shall
become effective to the extent provided therein and each such successor
Relevant Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Relevant
Trustee with respect to the Trust Securities and the Trust; but, on request of
the Trust or any successor Relevant Trustee such retiring Relevant Trustee
shall duly assign, transfer and deliver to such successor Relevant Trustee all
Trust Property, all proceeds thereof and money held by such retiring Relevant
Trustee hereunder with respect to the Trust Securities and the Trust.
Upon request of any such successor Relevant Trustee, the Trust shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Relevant Trustee all such rights, powers and
trusts referred to in the first or second preceding paragraph, as the case may
be.
No successor Relevant Trustee shall accept its appointment unless at
the time of such acceptance such successor Relevant Trustee shall be qualified
and eligible under this Article.
53
<PAGE>
SECTION 812. Merger, Conversion, Consolidation or Succession to Business.
-----------------------------------------------------------
Any corporation into which the Property Trustee or the Delaware
Trustee may be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to
which such Relevant Trustee shall be a party, or any corporation succeeding to
all or substantially all the corporate trust business of such Relevant
Trustee, shall be the successor of such Relevant Trustee hereunder, provided
such corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto.
SECTION 813. Preferential Collection of Claims Against Depositor or Trust.
------------------------------------------------------------
If and when the Property Trustee or the Delaware Trustee shall be or
become a creditor of the Depositor or the Trust (or any other obligor upon the
Debentures or the Trust Securities), the Property Trustee or the Delaware
Trustee, as the case may be, shall be subject to and shall take all actions
necessary in order to comply with the provisions of the Trust Indenture Act
regarding the collection of claims against the Depositor or Trust (or any such
other obligor).
SECTION 814. Reports by Property Trustee.
---------------------------
(a) Not later than July 15 of each year commencing with July 15,
1997, the Property Trustee shall transmit to all Securityholders in accordance
with Section 1008, and to the Depositor, a brief report dated as of such
December 31 with respect to:
(i) its eligibility under Section 807 or, in lieu thereof,
if to the best of its knowledge it has continued to be eligible under
said Section, a written statement to such effect;
(ii) a statement that the Property Trustee has complied with
all of its obligations under this Trust Agreement during the twelve-month
period (or, in the case of the initial report, the period since the
Closing Date) ending with such December 31 or, if the Property Trustee
has not complied in any material respect with such obligations, a
description of such noncompliance; and
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<PAGE>
(iii) any change in the property and funds in its possession
as Property Trustee since the date of its last report and any action
taken by the Property Trustee in the performance of its duties hereunder
which it has not previously reported and which in its opinion materially
affects the Trust Securities.
(b) In addition, the Property Trustee shall transmit to
Securityholders such reports concerning the Property Trustee and its actions
under this Trust Agreement as may be required pursuant to the Trust Indenture
Act at the times and in the manner provided pursuant thereto.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Property Trustee with each national
securities exchange, the Nasdaq National Market or such other interdealer
quotation system or self-regulatory organization upon which the Trust
Securities are listed or traded, with the Commission and with the Depositor.
SECTION 815. Reports to the Property Trustee.
-------------------------------
The Depositor and the Administrative Trustees on behalf of the Trust
shall provide to the Property Trustee such documents, reports and information
as required by Section 314 of the Trust Indenture Act (if any) and the
compliance certificate required by Section 314(a) of the Trust Indenture Act
in the form, in the manner and at the times required by Section 314 of the
Trust Indenture Act.
SECTION 816. Evidence of Compliance with Conditions Precedent.
------------------------------------------------
Each of the Depositor and the Administrative Trustees on behalf of
the Trust shall provide to the Property Trustee such evidence of compliance
with any conditions precedent, if any, provided for in this Trust Agreement
that relate to any of the matters set forth in Section 314(c) of the Trust
Indenture Act. Any certificate or opinion required to be given by an officer
pursuant to Section 314(c)(1) of the Trust Indenture Act shall be given in the
form of an Officers' Certificate.
SECTION 817. Number of Trustees.
------------------
(a) The number of Trustees shall be four, provided that the Holder
of all of the Common Securities by written instrument may increase or decrease
the number of Administrative Trustees. The Property Trustee and the Delaware
Trustee may be the same person.
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(b) If a Trustee ceases to hold office for any reason and the
number of Administrative Trustees is not reduced pursuant to Section 817(a),
or if the number of Trustees is increased pursuant to Section 817(a), a
vacancy shall occur. The vacancy shall be filled with a Trustee appointed in
accordance with Section 810.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not
operate to annul the Trust. Whenever a vacancy in the number of
Administrative Trustees shall occur, until such vacancy is filled by the
appointment of an Administrative Trustee in accordance with Section 810, the
Administrative Trustees in office, regardless of their number (and
notwithstanding any other provision of this Agreement), shall have all the
powers granted to the Administrative Trustees and shall discharge all the
duties imposed upon the Administrative Trustees by this Trust Agreement.
SECTION 818. Delegation of Power.
-------------------
(a) Any Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21
his or her power for the purpose of executing any documents contemplated in
Section 207(a), including any registration statement or amendment thereto
filed with the Commission, or making any other governmental filing.
(b) The Administrative Trustees shall have power to delegate from
time to time to such of their number or to the Depositor the doing of such
things and the execution of such instruments either in the name of the Trust
or the names of the Administrative Trustees or otherwise as the Administrative
Trustees may deem expedient, to the extent such delegation is not prohibited
by applicable law or contrary to the provisions of the Trust, as set forth
herein.
ARTICLE IX
Termination, Liquidation and Merger18.
-------------------------------------
SECTION 901. Termination Upon Expiration Date.
-------------------------------
Unless earlier terminated, the Trust shall automatically terminate
on _________ __, 2051 (the "Expiration Date"), following the distribution of
the Trust Property in accordance with Section 904.
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<PAGE>
SECTION 902. Early Termination.
-----------------
The first to occur of any of the following events is an "Early
Termination Event":
(a) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor;
(b) the written direction to the Property Trustee from the
Depositor at any time (which direction is optional and wholly within the
discretion of the Depositor) to terminate the Trust and distribute the
Debentures in exchange for the Preferred Securities;
(c) the redemption of all of the Preferred Securities in
connection with the redemption of all of the Debentures; and
(d) the entry of an order for dissolution of the Trust by a
court of competent jurisdiction.
SECTION 903. Termination.
-----------
The respective obligations and responsibilities of the Trustees and
the Trust created and continued hereby shall terminate upon the latest to
occur of the following: (a) the distribution by the Property Trustee to
Securityholders upon the liquidation of the Trust pursuant to Section 904, or
upon the redemption of all of the Trust Securities pursuant to Section 402, of
all amounts required to be distributed hereunder upon the final payment of the
Trust Securities; (b) the payment of any expenses owed by the Trust; and (c)
the discharge of all administrative duties of the Administrative Trustees,
including the performance of any tax reporting obligations with respect to the
Trust or the Securityholders.
SECTION 904. Liquidation.
-----------
(a) If an Early Termination Event specified in clause (a), (b)
or (d) of Section 902 occurs or upon the Expiration Date, the Trust shall
be liquidated by the Trustees as expeditiously as the Trustees determine to
be possible by distributing, after satisfaction of liabilities to creditors
of the Trust as provided by applicable law, to each Securityholder a Like
Amount of Debentures, subject to Section 904(d). Notice of liquidation
shall be given by the Property Trustee by first-class mail, postage
prepaid, mailed not later than 30 nor more than 60 days prior to the
Liquidation Date to each Holder of Trust Securities at such
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<PAGE>
Holder's address appearing in the Securities Register. All notices of
liquidation shall:
(i) state the Liquidation Date;
--------------------------
(ii) state that from and after the Liquidation Date, the
Trust Securities will no longer be deemed to be Outstanding and any Trust
Securities Certificates not surrendered for exchange will be deemed to
represent a Like Amount of Debentures; and
(iii) provide such information with respect to the mechanics by
which Holders may exchange Trust Securities Certificates for Debentures,
or if Section 904(d) applies receive a Liquidation Distribution, as the
Administrative Trustees or the Property Trustee shall deem appropriate.
(b) Except where Section 902(c) or 904(d) applies, in order to
effect the liquidation of the Trust and distribution of the Debentures to
Securityholders, the Property Trustee shall establish a record date for
such distribution (which shall be not more than 45 days prior to the
Liquidation Date) and, either itself acting as exchange agent or through
the appointment of a separate exchange agent, shall establish such
procedures as it shall deem appropriate to effect the distribution of
Debentures in exchange for the Outstanding Trust Securities Certificates.
(c) Except where Section 902(c) or 904(d) applies, after the
Liquidation Date, (i) the Trust Securities will no longer be deemed to be
Outstanding, (ii) certificates representing a Like Amount of Debentures
will be issued to holders of Trust Securities Certificates, upon surrender
of such certificates to the Administrative Trustees or their agent for
exchange, (iii) the Depositor shall use its reasonable efforts to have the
Debentures listed on the New York Stock Exchange or on such other stock
exchange, interdealer quotation system or self-regulatory organization as
the Preferred Securities are then listed or traded, (iv) any Trust
Securities Certificates not so surrendered for exchange will be deemed to
represent a Like Amount of Debentures, accruing interest at the rate
provided for in the Debentures from the last Distribution Date on which a
Distribution was made on such Trust Securities Certificates until such
certificates are so surrendered (and until such certificates are so
surrendered, no payments of interest or principal will be made to holders
of Trust Securities Certificates with respect to such Debentures), and (v)
all rights of Securityholders holding Trust Securities will cease, except
the right of such
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<PAGE>
Securityholders to receive Debentures upon surrender of Trust Securities
Certificates.
(d) In the event that, notwithstanding the other provisions of
this Section 904, whether because of an order for dissolution entered by a
court of competent jurisdiction or otherwise, distribution of the
Debentures in the manner provided herein is determined by the Property
Trustee not to be practical, the Trust Property shall be liquidated, and
the Trust shall be dissolved, wound-up or terminated, by the Property
Trustee in such manner as the Property Trustee determines. In such event,
on the date of the dissolution, winding-up or other termination of the
Trust, Securityholders will be entitled to receive out of the assets of the
Trust available for distribution to Securityholders, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, an
amount equal to the Liquidation Amount per Trust Security plus accumulated
and unpaid Distributions thereon to the date of payment (such amount being
the "Liquidation Distribution"). If, upon any such dissolution, winding-up
or termination, the Liquidation Distribution can be paid only in part
because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then, subject to the next succeeding
sentence, the amounts payable by the Trust on the Trust Securities shall be
paid on a pro rata basis (based upon Liquidation Amounts). The holder of
the Common Securities will be entitled to receive Liquidation Distributions
upon any such dissolution, winding-up or termination pro rata (determined
as aforesaid) with Holders of Preferred Securities, except that, if a
Debenture Event of Default has occurred and is continuing, the Preferred
Securities shall have a priority over the Common Securities.
SECTION 905. Mergers, Consolidations, Amalgamations or Replacements of
---------------------------------------------------------
the Trust.
---------
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except pursuant
to this Section 905. At the request of the Depositor, with the consent of the
Administrative Trustees and without the consent of the holders of the
Preferred Securities, the Trust may merge with or into, consolidate,
amalgamate, or be replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to a trust organized as such under the
laws of any state; provided, that (i) such successor entity either (a)
--------
expressly assumes all of the obligations of the Trust with respect to the
Preferred
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<PAGE>
Securities or (b) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities
(the "Successor Securities") so long as the Successor Securities rank the same
as the Preferred Securities rank in priority with respect to distributions and
payments upon liquidation, redemption and otherwise, (ii) the Depositor
expressly appoints a trustee of such successor entity possessing the same
powers and duties as the Property Trustee as the holder of the Debentures,
(iii) the Successor Securities are listed or traded, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which the Preferred Securities
are then listed or traded, if any, (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause the
Preferred Securities (including any Successor Securities) to be downgraded by
any nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not adversely affect the rights, preferences and privileges of the holders of
the Preferred Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose identical to that of the
Trust, (vii) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the Depositor has received an Opinion of
Counsel to the effect that (a) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the
rights, preferences and privileges of the holders of the Preferred Securities
(including any Successor Securities) in any material respect, and (b)
following such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, neither the Trust nor such successor entity will be
required to register as an investment company under the 1940 Act and (viii)
the Depositor owns all of the Common Securities of such successor entity and
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee. Notwithstanding
the foregoing, the Trust shall not, except with the consent of holders of 100%
in Liquidation Amount of the Preferred Securities, consolidate, amalgamate,
merge with or into, be replaced by or convey, transfer or lease its properties
and assets substantially as an entirety to any other entity or permit any
other entity to consolidate, amalgamate, merge with or into, or replace it if
such consolidation, amalgamation, merger, replacement, conveyance, transfer or
lease would cause the Trust or the successor entity to be classified as other
than a grantor trust for United States federal income tax purposes.
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ARTICLE X
---------
Miscellaneous Provisions
------------------------
SECTION 1001. Limitation of Rights of Securityholders.
---------------------------------------
The death or incapacity of any person having an interest, beneficial
or otherwise, in Trust Securities shall not operate to terminate this Trust
Agreement, nor entitle the legal representatives or heirs of such person or
any Securityholder for such person, to claim an accounting, take any action or
bring any proceeding in any court for a partition or winding-up of the
arrangements contemplated hereby, nor otherwise affect the rights, obligations
and liabilities of the parties hereto or any of them.
SECTION 1002. Amendment.
---------
(a) This Trust Agreement may be amended from time to time by
the Trustees and the Depositor, without the consent of any Securityholders,
(i) to cure any ambiguity, correct or supplement any provision herein which
may be inconsistent with any other provision herein, or to make any other
provisions with respect to matters or questions arising under this Trust
Agreement, which shall not be inconsistent with the other provisions of
this Trust Agreement, or (ii) to modify, eliminate or add to any provisions
of this Trust Agreement to such extent as shall be necessary to ensure that
the Trust will be classified for United States federal income tax purposes
as a grantor trust at all times that any Trust Securities are outstanding
or to ensure that the Trust will not be required to register as an
investment company under the 1940 Act; provided, however, that in the case
-------- -------
of clause (i), such action shall not adversely affect in any material
respect the interests of any Securityholder, and any amendments of this
Trust Agreement shall become effective when notice thereof is given to the
Securityholders.
(b) Except as provided in Section 1002(c) hereof, any provision
of this Trust Agreement may be amended by the Trustees and the Depositor
with (i) the consent of Securityholders representing not less than a
majority (based upon Liquidation Amounts) of the Trust Securities then
Outstanding and (ii) receipt by the Trustees of an Opinion of Counsel to
the effect that such amendment or the exercise of any power granted to the
Trustees in accordance with such amendment will not affect the Trust's
status as a grantor trust for United States federal income tax purposes or
the Trust's exemption from status of an investment company under the 1940
Act.
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(c) In addition to and notwithstanding any other provision in
this Trust Agreement, without the consent of each affected Securityholder
(such consent being obtained in accordance with Section 603 or 606 hereof),
this Trust Agreement may not be amended to (i) change the amount or timing
of any Distribution on the Trust Securities or otherwise adversely affect
the amount of any Distribution required to be made in respect of the Trust
Securities as of a specified date or (ii) restrict the right of a
Securityholder to institute suit for the enforcement of any such payment on
or after such date; notwithstanding any other provision herein, without the
unanimous consent of the Securityholders (such consent being obtained in
accordance with Section 603 or 606 hereof), this paragraph (c) of this
Section 1002 may not be amended.
(d) Notwithstanding any other provisions of this Trust
Agreement, no Trustee shall enter into or consent to any amendment to this
Trust Agreement which would cause the Trust to fail or cease to qualify for
the exemption from status of an investment company under the 1940 Act or
fail or cease to be classified as a grantor trust for United States federal
income tax purposes.
(e) Notwithstanding anything in this Trust Agreement to the
contrary, without the consent of the Depositor, this Trust Agreement may
not be amended in a manner which imposes any additional obligation on the
Depositor.
(f) In the event that any amendment to this Trust Agreement is
made, the Administrative Trustees shall promptly provide to the Depositor a
copy of such amendment.
(g) Neither the Property Trustee nor the Delaware Trustee shall
be required to enter into any amendment to this Trust Agreement which
affects its own rights, duties or immunities under this Trust Agreement.
The Property Trustee shall be entitled to receive an Opinion of Counsel and
an Officers' Certificate stating that any amendment to this Trust Agreement
is in compliance with this Trust Agreement.
SECTION 1003 Separability.
------------
In case any provision in this Trust Agreement or in the Trust
Securities Certificates shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
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<PAGE>
SECTION 1004. GOVERNING LAW.
-------------
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE
SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST
AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
SECTION 1005. Payments Due on Non-Business Day.
--------------------------------
If the date fixed for any payment on any Trust Security shall be a
day that is not a Business Day, then such payment need not be made on such
date but may be made on the next succeeding day that is a Business Day (except
as otherwise provided in Sections 401(a) and 402(d)), with the same force and
effect as though made on the date fixed for such payment, and no interest
shall accrue thereon for the period after such date.
SECTION 1006 Successors.
----------
This Trust Agreement shall be binding upon and shall inure to the
benefit of any successor to the Depositor, the Trust or the Relevant Trustee,
including any successor by operation of law. Except in connection with a
consolidation, merger or sale involving the Depositor that is permitted under
Article Eight of the Indenture and pursuant to which the assignee agrees in
writing to perform the Depositor's obligations hereunder, the Depositor shall
not assign its obligations hereunder.
SECTION 1007. Headings.
--------
The Article and Section headings are for convenience only and shall
not affect the construction of this Trust Agreement.
SECTION 1008. Reports, Notices and Demands.
----------------------------
Any report, notice, demand or other communication which by any
provision of this Trust Agreement is required or permitted to be given or
served to or upon any Securityholder or the Depositor may be given or served
in writing by deposit thereof, first-class postage prepaid, in the United
States mail, hand delivery or facsimile transmission, in each case, addressed,
(a) in the case of a Preferred Securityholder, to such Preferred
Securityholder as such Securityholder's name and address may appear on the
Securities Register; and (b) in the case of the Common Securityholder or the
Depositor, to MCI Communications Corporation, 1801 Pennsylvania Avenue, N.W.,
Washington,
63
<PAGE>
D.C. 20006, Attention: Treasurer, facsimile no.: (202) 887-2198.
Any notice to Preferred Securityholders shall also be given to such owners as
have, within two years preceding the giving of such notice, filed their names
and addresses with the Property Trustee for that purpose. Such notice, demand
or other communication to or upon a Securityholder shall be deemed to have
been sufficiently given or made, for all purposes, upon hand delivery, mailing
or transmission.
Any notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
the Trust, the Property Trustee or the Administrative Trustees shall be given
in writing addressed (until another address is published by the Trust) as
follows: (a) with respect to the Property Trustee to Wilmington Trust
Company, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
Corporate Trust Department; (b) with respect to the Delaware Trustee, to
Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware
19890, Attention: Corporate Trust Department; and (c) with respect to the
Administrative Trustees, to them at the address above for notices to the
Depositor, marked "Attention: Administrative Trustees of MCI Capital I." Such
notice, demand or other communication to or upon the Trust or the Property
Trustee shall be deemed to have been sufficiently given or made only upon
actual receipt of the writing by the Trust or the Property Trustee.
SECTION 1009. Agreement Not to Petition.
-------------------------
Each of the Trustees and the Depositor agree for the benefit of the
Securityholders that, until at least one year and one day after the Trust has
been terminated in accordance with Article IX, they shall not file, or join in
the filing of, a petition against the Trust under any bankruptcy, insolvency,
reorganization or other similar law (including, without limitation, the United
States Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise join in
the commencement of any proceeding against the Trust under any Bankruptcy Law.
In the event the Depositor takes action in violation of this Section 1009, the
Property Trustee agrees, for the benefit of Securityholders, that at the
expense of the Depositor, it shall file an answer with the bankruptcy court or
otherwise properly contest the filing of such petition by the Depositor
against the Trust or the commencement of such action and raise the defense
that the Depositor has agreed in writing not to take such action and should be
stopped and precluded therefrom and such other defenses, if any, as counsel
for the Trustee or the Trust may assert. The provisions of this Section 1009
shall survive the termination of this Trust Agreement.
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<PAGE>
SECTION 1010. Trust Indenture Act; Conflict with Trust Indenture Act.
------------------------------------------------------
(a) This Trust Agreement is subject to the provisions of the
Trust Indenture Act that are required to be part of this Trust Agreement
and shall, to the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a
trustee for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts
with another provision hereof which is required to be included in this
Trust Agreement by any of the provisions of the Trust Indenture Act, such
required provision shall control. If any provision of this Trust Agreement
modifies or excludes any provision of the Trust Indenture Act which may be
so modified or excluded, the latter provision shall be deemed to apply to
this Trust Agreement as so modified or excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust
Agreement shall not affect the nature of the Securities as equity
securities representing undivided beneficial interests in the assets of the
Trust.
SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND
-----------------------------------------------------
INDENTURE.
---------
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST
THEREIN BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT
ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE
UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A
BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF
THIS TRUST AGREEMENT AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER
TERMS OF THE GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT
OF THE TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND
PROVISIONS OF THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE
AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS.
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MCI COMMUNICATIONS CORPORATION
By: _________________________
Name:
Title:
WILMINGTON TRUST COMPANY
as Property Trustee
and Delaware Trustee
By: _______________________
Name:
Title:
By: _________________________
as Administrative Trustee
By: _________________________
as Administrative Trustee
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<PAGE>
EXHIBIT A
CERTIFICATE OF TRUST OF
MCI CAPITAL I
THIS Certificate of Trust of MCI Capital I (the "Trust"), dated as
of April 17, 1996, is being duly executed and filed by Wilmington Trust
Company, a Delaware banking corporation, as trustee, to form a business trust
under the Delaware Business Trust Act (12 Del. C. (S) 3801 et seq.).
1. Name. The name of the business trust formed hereby is MCI
----
Capital I.
2. Delaware Trustee. The name and business address of the trustee
----------------
of the Trust in the State of Delaware are Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attn:
Corporate Trust Administration.
3. Effective Date. This Certificate of Trust shall be effective
--------------
upon filing with the Secretary of State.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
WILMINGTON TRUST COMPANY,
as trustee
By_________________________
Name: Donald G. MacKelcan
Title: Assistant Vice President
1
<PAGE>
EXHIBIT B
_________ ___, 1996
The Depository Trust Company,
55 Water Street, 49th Floor,
New York, New York 10041-0099.
Attention:________________________
General Counsel's Office
Re: MCI Capital I ____% Cumulative Quarterly Income Preferred Securities,
---------------------------------------------------------------------
Series A
--------
Ladies and Gentlemen:
The purpose of this letter is to set forth certain matters relating to the
issuance and deposit with The Depository Trust Company ("DTC") of the MCI
Capital I ___% Cumulative Quarterly Income Preferred Securities, Series A (the
"Preferred Securities"), of MCI Capital I, a Delaware business trust (the
"Issuer"), formed pursuant to a Trust Agreement between MCI Communications
Corporation ("MCI") and Wilmington Trust Company, as Trustee. The payment of
distributions on the Preferred Securities and payments due upon liquidation of
Issuer or redemption of the Preferred Securities, to the extent the Issuer has
funds available for the payment thereof, are guaranteed by MCI to the extent set
forth in a Guarantee Agreement dated ________ __, 1996 by MCI with respect to
the Preferred Securities. MCI and the Issuer propose to sell the Preferred
Securities to certain Underwriters (the "Underwriters") pursuant to an
Underwriting Agreement dated _________ __, 1996 by and among the Underwriters,
the Issuer and MCI, and the Underwriters wish to take delivery of the Preferred
Securities through DTC. Wilmington Trust Company is acting as transfer agent and
registrar with respect to the Preferred Securities (the "Transfer Agent and
Registrar").
To induce DTC to accept the Preferred Securities as eligible for deposit at
DTC, and to act in accordance with DTC's rules with respect to the Preferred
Securities, the Issuer, the Transfer Agent and Registrar and DTC agree among
each other as follows:
1. Prior to the closing of the sale of the Preferred Securities to the
Underwriters, which is expected to occur on or about ________ __, 1996, there
shall be deposited with DTC one or more global certificates (individually and
collectively, the "Global Certificate")
1
<PAGE>
registered in the name of DTC's Preferred Securities nominee, Cede & Co.,
representing an aggregate of __________ Preferred Securities and bearing the
following legend:
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to Issuer or its
agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, Cede & Co., has an interest herein.
2. The Amended and Restated Trust Agreement of the Issuer provides for the
voting by holders of the Preferred Securities under certain limited
circumstances. The Issuer shall establish a record date for such purposes and
shall, to the extent possible, give DTC notice of such record date not less than
15 calendar days in advance of such record date.
3. In the event of a stock split, conversion, recapitalization,
reorganization or any other similar transaction resulting in the cancellation of
all or any part of the Preferred Securities outstanding, the Issuer or the
Transfer Agent and Registrar shall send DTC a notice of such event at least 5
business days prior to the effective date of such event.
4. In the event of distribution on, or an offering or issuance of rights
with respect to, the Preferred Securities outstanding, the Issuer or the
Transfer Agent and Registrar shall send DTC a notice specifying: (a) the amount
of and conditions, if any, applicable to the payment of any such distribution or
any such offering or issuance of rights; (b) any applicable expiration or
deadline date, or any date by which any action on the part of the holders of
Preferred Securities is required; and (c) the date any required notice is to be
mailed by or on behalf of the Issuer to holders of Preferred Securities or
published by or on behalf of the Issuer (whether by mail or publication, the
"Publication Date"). Such notice shall be sent to DTC by a secure means
(e.g., legible telecopy, registered or certified mail, overnight delivery) in a
2
<PAGE>
timely manner designed to assure that such notice is in DTC's possession no
later than the close of business on the business day before the Publication
Date. The Issuer or the Transfer Agent and Registrar will forward such notice
either in a separate secure transmission for each CUSIP number or in a secure
transmission of multiple CUSIP numbers (if applicable) that includes a manifest
or list of each CUSIP number submitted in that transmission. (The party sending
such notice shall have a method to verify subsequently the use of such means and
the timeliness Of such notice.) The Publication Date shall be not less than 30
calendar days nor more than 60 calendar days prior to the payment of any such
distribution or any such offering or issuance of rights with respect to the
Preferred Securities. After establishing the amount of payment to be made on the
Preferred Securities, the Issuer or the Transfer Agent and Registrar will notify
DTC's Dividend Department of such payment 5 business days prior to payment date.
Notices to DTC's Dividend Department by telecopy shall be sent to (212) 709-
1723. Such notices by mail or by any other means shall be sent to:
Manager, Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
The Issuer or the Transfer Agent and Registrar shall confirm DTC's receipt
of such telecopy by telephoning the Dividend Department at (212) 709-1270.
5. In the event of a redemption by the Issuer of the Preferred
Securities, notice specifying the terms of the redemption and the Publication
Date of such notice shall be sent by the Issuer or the Transfer Agent and
Registrar to DTC not less than 30 calendar days prior to such event by a secure
means in the manner set forth in paragraph 4. Such redemption notice shall be
sent to DTC's Call Notification Department at (516) 227-4164 or (516) 227-4190,
and receipt of such notice shall be confirmed by telephoning (516) 227-4070.
Notice by mail or by any other means shall be sent to:
Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, New York 11530-4719
6. In the event of any invitation to tender the Preferred Securities,
notice specifying the terms of the
3
<PAGE>
tender and the Publication Date of such notice shall be sent by the Issuer or
the Transfer Agent and Registrar to DTC by a secure means and in a timely manner
as described in paragraph 4. Notices to DTC pursuant to this paragraph and
notices of other corporate actions (including mandatory tenders, exchanges and
capital changes), shall be sent, unless notification to another department is
expressly provided for herein, by telecopy to DTC's Reorganization Department at
(212) 709-1093 or (212) 709-1094 and receipt of such notice shall be confirmed
by telephoning (212) 709-6884, or by mail or any other means to:
Manager, Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
7. All notices and payment advices sent to DTC shall contain the CUSIP
number or numbers of the Preferred Securities and the accompanying designation
of the Preferred Securities, which, as of the date of this letter, is "MCI
Capital I ___% Cumulative Quarterly Income Preferred Securities, Series A".
8. Distribution payments or other cash payments with respect to the
Preferred Securities evidenced by the Global Certificate shall be received by
Cede & Co., as nominee of DTC, or its registered assigns in next day funds on
each payment date (or in accordance with existing arrangements between the
Issuer or the Transfer Agent and Registrar and DTC). Such payments shall be
made payable to the order of Cede & Co., and shall be addressed as follows:
NDFS Redemption Department
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
9. DTC may by prior written notice direct the Issuer and the Transfer
Agent and Registrar to use any other telecopy number or address of DTC as the
number or address to which notices or payments may be sent.
10. In the event of a conversion, redemption, or any other similar
transaction (e.g., tender made and accepted in response to the Issuer's or the
- -
Transfer Agent and Registrar's invitation) necessitating a reduction in the
aggregate number of Preferred Securities outstanding evidenced by the Global
Certificate, DTC, in its discretion:
4
<PAGE>
(a) may request the Issuer or the Transfer Agent and Registrar to issue and
countersign a new Global Certificate; or (b) may make an appropriate notation on
the Global Certificate indicating the date and amount of such reduction.
11. DTC may discontinue its services as a securities depositary with
respect to the Preferred Securities at any time by giving at least 90 days'
prior written notice to the Issuer and the Transfer Agent and Registrar (at
which time DTC will confirm with the Issuer or the Transfer Agent and Registrar
the aggregate number of Preferred Securities deposited with it) and discharging
its responsibilities with respect thereto under applicable law. Under such
circumstances, the Issuer may determine to make alternative arrangements for
book-entry settlement for the Preferred Securities, make available one or more
separate global certificates evidencing Preferred Securities to any Participant
having Preferred Securities credited to its DTC account, or issue definitive
Preferred Securities to the beneficial holders thereof, and in any such case,
DTC agrees to cooperate fully with the Issuer and the Transfer Agent and
Registrar and to return the Global Certificate, duly endorsed for transfer as
directed by the Issuer or the Transfer Agent and Registrar, together with any
other documents of transfer reasonably requested by the Issuer or the Transfer
Agent and Registrar.
12. In the event that the Issuer determines that beneficial owners of
Preferred Securities shall be able to obtain definitive Preferred Securities,
the Issuer or the Transfer Agent and Registrar shall notify DTC of the
availability of certificates. In such event, the Issuer or the Transfer Agent
and Registrar shall issue, transfer and exchange certificates in appropriate
amounts, as required by DTC and others, and DTC agrees to cooperate fully with
the Issuer and the Transfer Agent and Registrar and to return the Global
Certificate, duly endorsed for transfer as directed by the Issuer or the
Transfer Agent and Registrar, together with any other documents of transfer
reasonably requested by the Issuer or the Transfer Agent and Registrar.
13. This letter may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
5
<PAGE>
Nothing herein shall be deemed to require the Transfer Agent and Registrar
to advance funds on behalf of MCI Capital I.
Very truly yours,
MCI CAPITAL I
(As Issuer)
By:______________________
Administrative Trustee
By___________________________
Name:
Title:
_____________________________
(As Transfer Agent and Registrar)
By___________________________
Name:
Title:
RECEIVED AND ACCEPTED:
THE DEPOSITORY TRUST COMPANY
By__________________________
Authorized Officer
6
<PAGE>
EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE
Certificate Number Number of Common Securities
C-1
Certificate Evidencing Common Securities
of
MCI Capital I
___% Common Securities
(liquidation amount $25 per Common Security)
MCI Capital I, a statutory business trust formed under the laws of the
State of Delaware (the "Trust"), hereby certifies that MCI Communications
Corporation (the "Holder") is the registered owner of ____________________
____________________ (________) common securities of the Trust representing
undivided beneficial interests in the assets of the Trust and designated the
____% Common Securities (liquidation amount $25 per Common Security) (the
"Common Securities"). In accordance with Section 510 of the Trust Agreement (as
defined below) the Common Securities are not transferable and any attempted
transfer hereof shall be void. The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities are set forth in, and this certificate and the Common Securities
represented hereby are issued and shall in all respects be subject to the terms
and provisions of, the Amended and Restated Trust Agreement of the Trust dated
as of _________ __, 1996, as the same may be amended from time to time (the
"Trust Agreement") including the designation of the terms of the Common
Securities as set forth therein. The Trust will furnish a copy of the Trust
Agreement to the Holder without charge upon written request to the Trust at its
principal place of business or registered office.
1
<PAGE>
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this ______ day of ________, ____.
MCI CAPITAL I
By___________________________
Name:
Administrative Trustee
2
<PAGE>
EXHIBIT D
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT dated as of ____________ __ 1996, between MCI Communications
Corporation, a Delaware corporation ("MCI"), and MCI Capital I, a Delaware
business trust (the "Trust").
WHEREAS, the Trust intends to issue its Common Securities (the "Common
Securities") to and receive Debentures from MCI and to issue and sell ____%
Cumulative Quarterly Income Preferred Securities (the "Preferred Securities")
with such powers, preferences and special rights and restrictions as are set
forth in the Amended and Restated Trust Agreement of the Trust dated as of
________ __, 1996 as the same may be amended from time to time (the "Trust
Agreement");
WHEREAS, MCI will directly or indirectly own all of the Common Securities
of Trust and will issue the Debentures;
NOW, THEREFORE, in consideration of the purchase by each holder of the
Preferred Securities, which purchase MCI hereby agrees shall benefit MCI and
which purchase MCI acknowledges will be made in reliance upon the execution and
delivery of this Agreement, MCI and Trust hereby agree as follows:
ARTICLE I
Section 1.1. Guarantee by MCI.
----------------
Subject to the terms and conditions hereof, MCI hereby irrevocably and
unconditionally guarantees to each person or entity to whom the Trust is now or
hereafter becomes indebted or liable (the "Beneficiaries") the full payment,
when and as due, of any and all Obligations (as hereinafter defined) to such
Beneficiaries. As used herein, "Obligations" means any costs, expenses or
liabilities of the Trust, other than obligations of the Trust to pay to holders
of any Preferred Securities or other similar interests in the Trust the amounts
due such holders pursuant to the terms of the Preferred Securities or such other
similar interests, as the case may be. This Agreement is
1
<PAGE>
intended to be for the benefit of, and to be enforceable by, all such
Beneficiaries, whether or not such Beneficiaries have received notice hereof.
Section 1.2. Term of Agreement.
-----------------
This Agreement shall terminate and be of no further force and effect upon
the later of (a) the date on which full payment has been made of all amounts
payable to all holders of all the Preferred Securities (whether upon redemption,
liquidation, exchange or otherwise) and (b) the date on which there are no
Beneficiaries remaining; provided, however, that this Agreement shall continue
-------- -------
to be effective or shall be reinstated, as the case may be, if at any time any
holder of Preferred Securities or any Beneficiary must restore payment of any
sums paid under the Preferred Securities, under any Obligation, under the
Guarantee Agreement dated the date hereof by MCI and Wilmington Trust Company as
guarantee trustee or under this Agreement for any reason whatsoever. This
Agreement is continuing, irrevocable, unconditional and absolute.
Section 1.3. Waiver of Notice.
----------------
MCI hereby waives notice of acceptance of this Agreement and of any
Obligation to which it applies or may apply, and MCI hereby waives presentment,
demand for payment, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
Section 1.4. No Impairment.
-------------
The obligations, covenants, agreements and duties of MCI under this
Agreement shall in no way be affected or impaired by reason of the happening
from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all or any
portion of the Obligations or for the performance of any other obligation
under, arising out of, or in connection with, the obligations;
(b) any failure, omission, delay or lack of diligence on the part of
the Beneficiaries to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Beneficiaries with respect to the
Obligations or any action on the part of the Trust granting indulgence or
extension of any kind; or
2
<PAGE>
(c) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the Trust
or any of the assets of the Trust.
There shall be no obligation of the Beneficiaries to give notice to, or obtain
the consent of, MCI with respect to the happening of any of the foregoing.
Section 1.5. Enforcement.
-----------
A Beneficiary may enforce this Agreement directly against MCI and MCI
waives any right or remedy to require that any action be brought against the
Trust or any other person or entity before proceeding against MCI.
Section 1.6. Subrogation.
-----------
MCI shall be subrogated to all (if any) rights of the Trust in respect of
any amounts paid to the Beneficiaries by MCI under this Agreement; provided,
--------
however, that MCI shall not (except to the extent required by mandatory
-------
provisions of law) be entitled to enforce or exercise any rights which it may
acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Agreement, if, at the
time of any such payment, any amounts are due and unpaid under this Agreement.
ARTICLE II
Section 2.1. Binding Effect.
--------------
All guarantees and agreements contained in this Agreement shall bind the
successors, assigns, receivers, trustees and representatives of MCI and shall
inure to the benefit of the Beneficiaries.
Section 2.2. Amendment.
---------
So long as there remains any Beneficiary or any Preferred Securities of any
series are outstanding, this Agreement shall not be modified or amended in any
manner adverse to such Beneficiary or to the holders of the Preferred
Securities.
Section 2.3. Notices.
-------
3
<PAGE>
Any notice, request or other communication required or permitted to be
given hereunder shall be given in writing by delivering the same against receipt
therefor by facsimile transmission (confirmed by mail), telex or by registered
or certified mail, addressed as follows (and if so given, shall be deemed given
when mailed or upon receipt of an answer-back, if sent by telex):
MCI Capital I
c/o Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware
Facsimile No.: (302) 651-8882
Attention: Corporate Trust Department
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Facsimile No.: (202) 887-2198
Attention: Treasurer
Section 2.4 This agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of New York.
THIS AGREEMENT is executed as of the day and year first above written.
MCI COMMUNICATIONS CORPORATION
By:_________________________
Name:
Title:
MCI CAPITAL I
By:_________________________
Name:
Administrative Trustee
4
<PAGE>
EXHIBIT E
IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT - This
Preferred Security is a Global Certificate within the meaning of the Trust
Agreement hereinafter referred to and is registered in the name of The
Depository Trust Company (the "Depository") or a nominee of the Depository.
This Preferred Security is exchangeable for Preferred Securities registered in
the name of a person other than the Depository or its nominee only in the
limited circumstances described in the Trust Agreement and no transfer of this
Preferred Security (other than a transfer of this Preferred Security as a whole
by the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository) may be
registered except in limited circumstances.
Unless this Preferred Security is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York) to MCI Capital I or
its agent for registration of transfer, exchange or payment, and any Preferred
Security issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of The Depository Trust Company and
any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
Certificate Number Number of Preferred Securities
P-
CUSIP NO.
Certificate Evidencing Preferred Securities
of
MCI Capital I
___% Cumulative Quarterly Income Preferred Securities,
Series A
(liquidation amount $25 per Preferred Security)
MCI Capital I, a statutory business trust formed under the laws of the
State of Delaware (the "Trust"), hereby certifies that ____________________ (the
"Holder") is the registered owner of ______ (______) preferred securities of the
Trust representing an undivided beneficial interest in the assets of the Trust
and designated the MCI Capital I ____% Cumulative Quarterly Income Preferred
Securities, Series A (liquidation amount $25 per Preferred Security) (the
"Preferred Securities"). The Preferred Securities are
1
<PAGE>
transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer as provided in Section 504 of the Trust Agreement (as
defined below). The designations, rights, privileges, restrictions, preferences
and other terms and provisions of the Preferred Securities are set forth in, and
this certificate and the Preferred Securities represented hereby are issued and
shall in all respects be subject to the terms and provisions of, the Amended and
Restated Trust Agreement of the Trust dated as of ________ __, 1996, as the same
may be amended from time to time (the "Trust Agreement") including the
designation of the terms of Preferred Securities as set forth therein. The
Holder is entitled to the benefits of the Guarantee Agreement entered into by
MCI Communications Corporation, a Delaware corporation, and Wilmington Trust
Company, as guarantee trustee, dated as of ________ __, 1996 (the "Guarantee"),
to the extent provided therein. The Trust will furnish a copy of the Trust
Agreement and the Guarantee to the Holder without charge upon written request to
the Trust at its principal place of business or registered office.
2
<PAGE>
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this ___________ day of __________, ____.
MCI CAPITAL I
By:______________________________
Name:
Administrative Trustee
3
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security to:
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
agent to transfer this Preferred Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date:_____________
Signature:___________________________
(Sign exactly as your name appears on the other side of this Preferred Security
Certificate)
Signature(s) Guaranteed:
-------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
4
<PAGE>
Exhibit 4.12
S&C Draft of May 14, 1996
-------------------------------------------------------------------------------
GUARANTEE AGREEMENT
Between
MCI Communications Corporation
(as Guarantor)
and
Wilmington Trust Company
(as Trustee)
dated as of
_______ __, 1996
<PAGE>
CROSS-REFERENCE TABLE/*/
<TABLE>
<CAPTION>
Section of Section of
Trust Indenture Act Guarantee
of 1939, as amended Agreement
--------------------- ----------------
<S> <C>
310(a) .................. 401(a)
310(b) .................. 401(c), 208
310(c) .................. Inapplicable
311(a) .................. 202(b)
311(b) .................. 202(b)
311(c) .................. Inapplicable
312(a) .................. 202(a)
312(b) .................. 202(b)
313 .................. 203
314(a) .................. 204
314(b) .................. Inapplicable
314(c) .................. 205
314(d) .................. Inapplicable
314(e) .................. 101, 205, 302
314(f) .................. 201, 302
315(a) .................. 301(d)
315(b) .................. 207
315(c) .................. 301
315(d) .................. 301(d)
316(a) .................. 101, 206, 504
316(b) .................. 503
316(c) .................. 802
317(a) .................. Inapplicable
317(b) .................. Inapplicable
318(a) .................. 201(b)
318(b) .................. 201
318(c) .................. 201(a)
</TABLE>
------------------
/*/This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
DEFINITIONS
SECTION 101. Definitions......................................... 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 201. Trust Indenture Act; Application.................... 6
SECTION 202. List of Holders..................................... 6
SECTION 203. Reports by the Guarantee Trustee.................... 6
SECTION 204. Periodic Reports to Guarantee Trustee............... 7
SECTION 205. Evidence of Compliance with Conditions
Precedent........................................... 7
SECTION 206. Events of Default; Waiver........................... 7
SECTION 207. Event of Default; Notice............................ 7
SECTION 208. Conflicting Interests............................... 8
ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 301. Powers and Duties of the Guarantee
Trustee............................................. 8
SECTION 302. Certain Rights of Guarantee Trustee................. 10
SECTION 303. Indemnity........................................... 13
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 401. Guarantee Trustee; Eligibility......................... 13
SECTION 402. Appointment, Removal and Resignation
of the Guarantee Trustee............................... 14
ARTICLE V
GUARANTEE
SECTION 501. Guarantee.............................................. 15
SECTION 502. Waiver of Notice and Demand............................ 15
SECTION 503. Obligations Not Affected............................... 15
SECTION 504. Rights of Holders...................................... 16
SECTION 505. Guarantee of Payment................................... 17
SECTION 506. Subrogation............................................ 17
SECTION 507. Independent Obligations................................ 17
-i-
<PAGE>
ARTICLE VI
COVENANTS AND SUBORDINATION
Page
----
SECTION 601. Subordination............................... 18
SECTION 602. Pari Passu Guarantees....................... 18
ARTICLE VII
TERMINATION
SECTION 701. Termination................................. 18
ARTICLE VIII
MISCELLANEOUS
SECTION 801. Successors and Assigns 18
SECTION 802. Amendments................................. 19
SECTION 803. Notices.................................... 19
SECTION 804. Benefit.................................... 20
SECTION 805. Interpretation............................. 20
SECTION 806. GOVERNING LAW.............................. 21
-ii-
<PAGE>
GUARANTEE AGREEMENT
-------------------
This GUARANTEE AGREEMENT, dated as of _______ __, 1996, is executed and
delivered by MCI Communications Corporation, a Delaware corporation (the
"Guarantor"), and Wilmington Trust Company, a Delaware banking corporation
organized under the laws of the State of Delaware, as trustee (the "Guarantee
Trustee"), for the benefit of the Holders (as defined herein) from time to time
of the Preferred Securities (as defined herein) of MCI Capital I, a Delaware
statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the "Trust
Agreement"), dated as of ________ __, 1996 among the Issuer Trustees named
therein, the Guarantor, as Depositor, and the Holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing __________ of its ____% Cumulative Quarterly Income Preferred
Securities, Series A (liquidation preference $25 per preferred security) (the
"Preferred Securities") representing preferred undivided beneficial interests in
the assets of the Issuer and having the terms set forth in the Trust Agreement;
WHEREAS, the Preferred Securities will be issued by the Issuer and the
proceeds thereof, together with the proceeds from the issuance of the Issuer's
Common Securities (as defined below), will be used to purchase the Debentures
(as defined in the Trust Agreement) of the Guarantor which will be deposited
with Wilmington Trust Company, as Property Trustee under the Trust Agreement, as
trust assets; and
WHEREAS, as incentive for the Holders to purchase Preferred Securities the
Guarantor desires irrevocably and unconditionally to agree, to the extent set
forth herein, to pay to the Holders of the Preferred Securities the Guarantee
Payments (as defined herein) and to make certain other payments on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for
the benefit of the Holders from time to time of the Preferred Securities.
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 101. Definitions.
-----------
As used in this Guarantee Agreement, the terms set forth below shall,
unless the context otherwise requires, have the following meanings. Capitalized
or otherwise defined terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Trust Agreement as in effect on the date
hereof.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person, provided, however, that an Affiliate of the
-------- -------
Guarantor shall not be deemed to include the Issuer. For the purposes of this
definition, "control" when used with respect to any specified Person means the
-------
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
----------- ----------
correlative to the foregoing.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer.
"Debt" means, with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; and (vi) every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has
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<PAGE>
guaranteed or is responsible or liable for, directly or indirectly, as obligor
or otherwise.
"Event of Default" means a default by the Guarantor on any of its payment
or other obligations under this Guarantee Agreement; provided, however, that,
-------- -------
except with respect to a default in payment of any Guarantee Payments, the
Guarantor shall have received notice of default and shall not have cured such
default within 60 days after receipt of such notice.
"Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Preferred Securities, to the extent not paid or
made by or on behalf of the Issuer: (i) any accrued and unpaid Distributions (as
defined in the Trust Agreement) required to be paid on the Preferred Securities,
to the extent the Issuer shall have funds on hand available therefor at such
time, (ii) the redemption price, including all accrued and unpaid Distributions
to the date of redemption (the "Redemption Price"), with respect to the
Preferred Securities called for redemption by the Issuer to the extent the
Issuer shall have funds on hand available therefor at such time, and (iii) upon
a voluntary or involuntary termination, winding-up or liquidation of the Issuer,
unless Debentures are distributed to the Holders, the lesser of (a) the
aggregate of the liquidation preference of $25 per Preferred Security plus
accrued and unpaid Distributions on the Preferred Securities to the date of
payment to the extent the Issuer shall have funds on hand available to make such
payment at such time and (b) the amount of assets of the Issuer remaining
available for distribution to Holders in liquidation of the Issuer (in either
case, the "Liquidation Distribution").
"Guarantee Trustee" means Wilmington Trust Company, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee Agreement and thereafter means each such
Successor Guarantee Trustee.
"Holder" means any holder, as registered on the books and records of the
Issuer, of any Preferred Securities; provided, however, that in determining
-------- -------
whether the holders of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor, the Guarantee Trustee or any Affiliate of the Guarantor
or the Guarantee Trustee.
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<PAGE>
"Indenture" means the Junior Subordinated Indenture dated as of ______ __,
1996, as supplemented and amended between the Guarantor and Wilmington Trust
Company, as trustee.
"List of Holders" has the meaning specified in Section 202(a).
"Majority in liquidation preference of the Securities" means, except as
provided by the Trust Indenture Act, a vote by the Holder(s), voting separately
as a class, of more than 50% of the liquidation preference of all then
outstanding Preferred Securities issued by the Issuer.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chairman and Chief Executive Officer, President or a Vice
President, and by the Treasurer, an Assistant Treasurer, the Controller, the
Secretary or an Assistant Secretary of such Person, and delivered to the
Guarantee Trustee. Any Officers' Certificate delivered with respect to
compliance with a condition or covenant provided for in this Guarantee Agreement
shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
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<PAGE>
"Responsible Officer" means, with respect to the Guarantee Trustee,
any Senior Vice President, any Vice President, any Assistant Vice President, the
Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, any
Trust Officer or Assistant Trust Officer or any other officer of the Corporate
Trust Department of the Guarantee Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of that officer's knowledge of and
familiarity with the particular subject.
"Senior Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Guarantor whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of this Guarantee or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Guarantee or to other Debt which is pari
passu with, or subordinated to, the Guarantee; provided, however, that Senior
-------- -------
Debt shall not be deemed to include (a) any Debt of the Guarantor which when
incurred and without respect to any election under Section 1111(b) of the
Bankruptcy Reform Act of 1978, was without recourse to the Guarantor, (b) any
Debt of the Guarantor to any of its Subsidiaries, (c) Debt to any employee of
the Guarantor, (d) any liability for taxes, (e) Debt or other monetary
obligations to trade creditors created or assumed by the Guarantor or any of its
Subsidiaries in the ordinary course of business in connection with the obtaining
of goods, materials or services and (f) Debt issued under the Indenture and (g)
the Guarantee.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 401.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
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ARTICLE II
TRUST INDENTURE ACT
SECTION 201. Trust Indenture Act; Application.
--------------------------------
(a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed
duties shall control.
SECTION 202. List of Holders.
---------------
(a) The Guarantor shall furnish or cause to be furnished to the
Guarantee Trustee (a) semiannually, on or before January 15 and July 15 of
each year, a list, in such form as the Guarantee Trustee may reasonably
require, of the names and addresses of the Holders ("List of Holders") as
of a date not more than 15 days prior to the delivery thereof, and (b) at
such other times as the Guarantee Trustee may request in writing, within 30
days after the receipt by the Guarantor of any such request, a List of
Holders as of a date not more than 15 days prior to the time such list is
furnished, in each case to the extent such information is in the possession
or control of the Guarantor and is not identical to a previously supplied
list of Holders or has not otherwise been received by the Guarantee Trustee
in its capacity as such. The Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b) The Guarantee Trustee shall comply with its obligations under
Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture
Act.
SECTION 203. Reports by the Guarantee Trustee.
--------------------------------
Not later than July 15 of each year, commencing July 15, 1997, the
Guarantee Trustee shall provide to the Holders such reports as are required by
Section 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The
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Guarantee Trustee shall also comply with the requirements of Section 313(d) of
the Trust Indenture Act.
SECTION 204. Periodic Reports to Guarantee Trustee.
-------------------------------------
The Guarantor shall provide to the Guarantee Trustee, the Securities
and Exchange Commission and the Holders such documents, reports and information,
if any, as required by Section 314 of the Trust Indenture Act and the compliance
certificate required by Section 314 of the Trust Indenture Act in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.
SECTION 205. Evidence of Compliance with Conditions Precedent.
------------------------------------------------
The Guarantor shall provide to the Guarantee Trustee such evidence of
compliance with such conditions precedent, if any, provided for in this
Guarantee Agreement that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer pursuant to Section 314(c)(1) may be given in the form of an
Officers' Certificate.
SECTION 206. Events of Default; Waiver.
-------------------------
The Holders of a Majority in liquidation preference of the Preferred
Securities may, on behalf of the Holders, waive any past Event of Default and
its consequences. Upon such waiver, any such Event of Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Guarantee Agreement, but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent therefrom.
SECTION 207. Event of Default; Notice.
------------------------
(a) The Guarantee Trustee shall, within 90 days after the occurrence
of an Event of Default, transmit by mail, first class postage prepaid, to
the Holders, notices of all Events of Default known to the Guarantee
Trustee, unless such defaults have been cured before the giving of such
notice, provided, that, except in the case of a default in the payment of a
Guarantee Payment, the Guarantee Trustee shall be protected in withholding
such notice if and so long as the Board of
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Directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Guarantee Trustee in good faith determines that
the withholding of such notice is in the interests of the Holders.
(b) The Guarantee Trustee shall not be deemed to have knowledge of
any Event of Default unless the Guarantee Trustee shall have received
written notice, or a Responsible Officer charged with the administration of
the Trust Agreement shall have obtained written notice, of such Event of
Default.
SECTION 208. Conflicting Interests.
---------------------
The Trust Agreement shall be deemed to be specifically described in
this Guarantee Agreement for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 301. Powers and Duties of the Guarantee Trustee.
------------------------------------------
(a) This Guarantee Agreement shall be held by the Guarantee Trustee
for the benefit of the Holders, and the Guarantee Trustee shall not
transfer this Guarantee Agreement to any Person except a Holder exercising
his or her rights pursuant to Section 504(iv) or to a Successor Guarantee
Trustee on acceptance by such Successor Guarantee Trustee of its
appointment to act as Successor Guarantee Trustee. The right, title and
interest of the Guarantee Trustee shall automatically vest in any Successor
Guarantee Trustee, upon acceptance by such Successor Guarantee Trustee of
its appointment hereunder, and such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of
the Holders.
(c) The Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have
occurred, shall
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undertake to perform only such duties as are specifically set forth in this
Guarantee Agreement, and no implied covenants shall be read into this
Guarantee Agreement against the Guarantee Trustee. In case an Event of
Default has occurred (that has not been cured or waived pursuant to Section
206), the Guarantee Trustee shall exercise such of the rights and powers
vested in it by this Guarantee Agreement, and use the same degree of care
and skill in its exercise thereof, as a prudent person would exercise or
use under the circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action,
its own negligent failure to act or its own willful misconduct, except
that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Guarantee Trustee
shall be determined solely by the express provisions of this
Guarantee Agreement, and the Guarantee Trustee shall not be
liable except for the performance of such duties and obligations
as are specifically set forth in this Guarantee Agreement; and
(B) in the absence of bad faith on the part of the
Guarantee Trustee, the Guarantee Trustee may conclusively rely,
as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Guarantee Trustee and conforming to the
requirements of this Guarantee Agreement; but in the case of any
such certificates or opinions that by any provision hereof or of
the Trust Indenture Act are specifically required to be furnished
to the Guarantee Trustee, the Guarantee Trustee shall be under a
duty to examine the same to determine whether or not they conform
to the requirements of this Guarantee Agreement;
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(ii) the Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was
negligent in ascertaining the pertinent facts upon which such judgment
was made;
(iii) the Guarantee Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
Majority in liquidation preference of the Preferred Securities
relating to the time, method and place of conducting any proceeding
for any remedy available to the Guarantee Trustee, or exercising any
trust or power conferred upon the Guarantee Trustee under this
Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties
or in the exercise of any of its rights or powers, if the Guarantee
Trustee shall have reasonable grounds for believing that the repayment
of such funds or liability is not reasonably assured to it under the
terms of this Guarantee Agreement or adequate indemnity against such
risk or liability is not reasonably assured to it.
SECTION 302. Certain Rights of Guarantee Trustee.
-----------------------------------
(a) Subject to the provisions of Section 301:
(i) The Guarantee Trustee may rely and shall be fully protected
in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document reasonably believed by it to be genuine and
to have been signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Guarantee Agreement shall be
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<PAGE>
sufficiently evidenced by an Officers' Certificate unless otherwise
prescribed herein.
(iii) Whenever, in the administration of this Guarantee
Agreement, the Guarantee Trustee shall deem it desirable that a matter
be proved or established before taking, suffering or omitting to take
any action hereunder, the Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad faith on
its part, request and rely upon an Officers' Certificate which, upon
receipt of such request from the Guarantee Trustee, shall be promptly
delivered by the Guarantor.
(iv) The Guarantee Trustee may consult with legal counsel, and
the written advice or opinion of such legal counsel with respect to
legal matters shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted to be taken by it
hereunder in good faith and in accordance with such advice or opinion.
Such legal counsel may be legal counsel to the Guarantor or any of its
Affiliates and may be one of its employees. The Guarantee Trustee
shall have the right at any time to seek instructions concerning the
administration of this Guarantee Agreement from any court of competent
jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee
Agreement at the request or direction of any Holder, unless such
Holder shall have provided to the Guarantee Trustee such adequate
security and indemnity as would satisfy a reasonable person in the
position of the Guarantee Trustee, against the costs, expenses
(including attorneys' fees and expenses) and liabilities that might be
incurred by it in complying with such request or direction, including
such reasonable advances as may be requested by the Guarantee Trustee;
provided that, nothing contained in this Section 302(a)(v) shall be
taken to relieve the Guarantee Trustee, upon the occurrence of an
Event of Default, of its obligation to exercise the rights and powers
vested in it by this Guarantee Agreement.
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<PAGE>
(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit.
(vii) The Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through its agents or attorneys, and the Guarantee Trustee shall
not be responsible for any misconduct or negligence on the part of any
such agent or attorney appointed with due care by it hereunder.
(viii) Whenever in the administration of this Guarantee
Agreement the Guarantee Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or taking
any other action hereunder, the Guarantee Trustee (A) may request
instructions from the Holders, (B) may refrain from enforcing such
remedy or right or taking such other action until such instructions
are received, and (C) shall be protected in acting in accordance with
such instructions.
(b) No provision of this Guarantee Agreement shall be deemed to impose
any duty or obligation on the Guarantee Trustee to perform any act or acts
or exercise any right, power, duty or obligation conferred or imposed on it
in any jurisdiction in which it shall be illegal, or in which the Guarantee
Trustee shall be unqualified or incompetent in accordance with applicable
law, to perform any such act or acts or to exercise any such right, power,
duty or obligation. No permissive power or authority available to the
Guarantee Trustee shall be construed to be a duty to act in accordance with
such power and authority.
SECTION 303. Indemnity.
---------
The Guarantor agrees to indemnify the Guarantee Trustee for, and to
hold it harmless against, any loss, liability or expense incurred without
negligence or bad
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faith on the part of the Guarantee Trustee, arising out of or in connection with
the acceptance or administration of this Guarantee Agreement, including the
costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The Guarantee Trustee will not claim or exact any lien or charge on
any Guarantee Payments as a result of any amount due to it under this Guarantee
Agreement.
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 401. Guarantee Trustee; Eligibility.
------------------------------
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of
at least $50,000,000, and shall be a corporation meeting the
requirements of Section 310(c) of the Trust Indenture Act. If such
corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the supervising or examining
authority, then, for the purposes of this Section and to the extent
permitted by the Trust Indenture Act, the combined capital and surplus
of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 401(a), the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section
402(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act,
the Guarantee Trustee and Guarantor shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act.
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SECTION 402. Appointment, Removal and Resignation of the Guarantee Trustee.
-------------------------------------------------------------
(a) Subject to Section 402(b), the Guarantee Trustee may be appointed
or removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until a Successor
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Guarantee Trustee and
delivered to the Guarantor.
(c) The Guarantee Trustee appointed hereunder shall hold office until
a Successor Guarantee Trustee shall have been appointed or until its
removal or resignation. The Guarantee Trustee may resign from office
(without need for prior or subsequent accounting) by an instrument in
writing executed by the Guarantee Trustee and delivered to the Guarantor,
which resignation shall not take effect until a Successor Guarantee Trustee
has been appointed and has accepted such appointment by instrument in
writing executed by such Successor Guarantee Trustee and delivered to the
Guarantor and the resigning Guarantee Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 402 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition, at the expense of the Guarantor, any court
of competent jurisdiction for appointment of a Successor Guarantee Trustee.
Such court may thereupon, after prescribing such notice, if any, as it may
deem proper, appoint a Successor Guarantee Trustee.
ARTICLE V
GUARANTEE
SECTION 501. Guarantee.
---------
The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by or on behalf of the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim which the Issuer may have or assert. The
Guarantor's obligation to make a
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Guarantee Payment may be satisfied by direct payment of the required amounts by
the Guarantor to the Holders or by causing the Issuer to pay such amounts to the
Holders.
SECTION 502. Waiver of Notice and Demand.
---------------------------
The Guarantor hereby waives notice of acceptance of the Guarantee
Agreement and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the
Guarantee Trustee, Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
SECTION 503. Obligations Not Affected.
------------------------
The obligations, covenants, agreements and duties of the Guarantor
under this Guarantee Agreement shall in no way be affected or impaired by reason
of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Preferred Securities
to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions (other than an extension of time for payment
of Distributions that results from the extension of any interest payment
period on the Debentures as so provided in the Indenture), Redemption
Price, Liquidation Distribution or any other sums payable under the terms
of the Preferred Securities or the extension of time for the performance of
any other obligation under, arising out of, or in connection with, the
Preferred Securities;
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership,
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insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment of debt of, or
other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute
a legal or equitable discharge or defense of a guarantor, it being the
intent of this Section 503 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain the
consent of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 504. Rights of Holders.
-----------------
The Guarantor expressly acknowledges that: (i) this Guarantee
Agreement will be deposited with the Guarantee Trustee to be held for the
benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce this
Guarantee Agreement on behalf of the Holders; (iii) the Holders of a Majority in
liquidation preference of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee in respect of this Guarantee Agreement or exercising any
trust or power conferred upon the Guarantee Trustee under this Guarantee
Agreement; and (iv) any Holder may institute a legal proceeding directly against
the Guarantor to enforce its rights under this Guarantee Agreement, without
first instituting a legal proceeding against the Guarantee Trustee, the Issuer
or any other Person.
SECTION 505. Guarantee of Payment.
--------------------
This Guarantee Agreement creates a guarantee of payment and not of
collection. This Guarantee Agreement will not be discharged except by payment
of the Guarantee Payments in full (without duplication of amounts theretofore
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paid by the Issuer) or upon distribution of Debentures to Holders as provided in
the Trust Agreement.
SECTION 506. Subrogation.
-----------
The Guarantor shall be subrogated to all (if any) rights of the
Holders against the Issuer in respect of any amounts paid to the Holders by the
Guarantor under this Guarantee Agreement and shall have the right to waive
payment by the Issuer pursuant to Section 501; provided, however, that the
-------- -------
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or exercise any rights which it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in all cases
as a result of payment under this Guarantee Agreement, if, at the time of any
such payment, any amounts are due and unpaid under this Guarantee Agreement. If
any amount shall be paid to the Guarantor in violation of the preceding
sentence, the Guarantor agrees to hold such amount in trust for the Holders and
to pay over such amount to the Holders.
SECTION 507. Independent Obligations.
-----------------------
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Preferred
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
Agreement notwithstanding the occurrence of any event referred to in subsections
(a) through (g), inclusive, of Section 503 hereof.
ARTICLE VI
COVENANTS AND SUBORDINATION
SECTION 601. Subordination.
-------------
This Guarantee Agreement will constitute an unsecured obligation of
the Guarantor and will rank subordinate and junior in right of payment to all
Senior Debt of the Guarantor.
SECTION 602. Pari Passu Guarantees.
---------------------
This Guarantee Agreement shall rank pari passu with any similar
Guarantee Agreements issued by the Guaran-
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tor on behalf of the holders of Preferred Securities issued by MCI Capital II,
MCI Capital III and MCI Capital IV.
ARTICLE VII
TERMINATION
SECTION 701. Termination.
-----------
This Guarantee Agreement shall terminate
and be of no further force and effect upon (i) full payment of the Redemption
Price of all Preferred Securities, (ii) the distribution of Debentures to the
Holders in exchange for all of the Preferred Securities or (iii) full payment of
the amounts payable in accordance with the Trust Agreement upon liquidation of
the Issuer. Notwithstanding the foregoing, this Guarantee Agreement will
continue to be effective or will be reinstated, as the case may be, if at any
time any Holder must restore payment of any sums paid with respect to Preferred
Securities or this Guarantee Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 801. Successors and Assigns.
----------------------
All guarantees and agreements contained in this Guarantee Agreement
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Preferred
Securities then outstanding. Except in connection with a consolidation, merger
or sale involving the Guarantor that is permitted under Article Eight of the
Indenture and pursuant to which the assignee agrees in writing to perform the
Guarantor's obligations hereunder, the Guarantor shall not assign its
obligations hereunder.
SECTION 802. Amendments.
----------
Except with respect to any changes which do not adversely affect the
rights of the Holders in any material respect (in which case no consent of the
Holders will be required), this Guarantee Agreement may only be amended with the
prior approval of the Holders of not less than a Majority in liquidation
preference of all the outstanding Preferred Securities. The provisions of
Article VI
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of the Trust Agreement concerning meetings of the Holders shall apply to the
giving of such approval.
SECTION 803. Notices.
-------
Any notice, request or other communication required or permitted to be
given hereunder shall be in writing, duly signed by the party giving such
notice, and delivered, telecopied or mailed by first class mail as follows:
(a) if given to the Guarantor, to the address set forth below or
such other address, facsimile number or to the attention of such other
Person as the Guarantor may give notice of to the Holders:
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Facsimile No.: (202) 887-2198
Attention: Treasurer
with a copy to:
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Facsimile No.: (202) 887-2047
Attention: General Counsel
(b) if given to the Issuer, in care of the Guarantee Trustee, at the
Issuer's (and the Guarantee Trustee's) address set forth below or such
other address, facsimile number or to the attention of such other Person as
the Guarantee Trustee on behalf of the Issuer may give notice to the
Holders:
MCI Capital I
c/o MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Facsimile No: (202) 887-2198
Attention: Treasurer
-19-
<PAGE>
with a copy to:
Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890
Facsimile No.: (302) 651-8882
Attention: Corporate Trust Department
(c) if given to any Holder, at the address set forth on the books and
records of the Issuer.
All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 804. Benefit.
-------
This Guarantee Agreement is solely for the benefit of the Holders and
is not separately transferable from the Preferred Securities.
SECTION 805. Interpretation.
--------------
In this Guarantee Agreement, unless the context otherwise requires:
(a) capitalized terms used in this Guarantee Agreement but not
defined in the preamble hereto have the respective meanings assigned to
them in Section 101;
(b) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;
(c) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or
amended from time to time;
(d) all references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified;
-20-
<PAGE>
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Guarantee Agreement unless otherwise defined in this
Guarantee Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice versa;
and
(g) the masculine, feminine or neuter genders used herein shall
include the masculine, feminine and neuter genders.
SECTION 806. GOVERNING LAW.
-------------
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
-21-
<PAGE>
THIS GUARANTEE AGREEMENT is executed as of the day and year first
above written.
MCI COMMUNICATIONS CORPORATION
By: ________________________________________
Name:
Title:
WILMINGTON TRUST COMPANY, as
Guarantee Trustee
By: _______________________________________
Name:
Title:
-22-
<PAGE>
Exhibit 4.13
S&C Draft of May 14, 1996
================================================================================
MCI COMMUNICATIONS CORPORATION
to
WILMINGTON TRUST COMPANY, as Trustee
------------------------------------
SUPPLEMENTAL INDENTURE No. 1
Dated as of __________ ___, 1996
------------------------------------
____% Junior Subordinated Deferrable Interest Debentures
Series A
$___________
================================================================================
<PAGE>
MCI COMMUNICATIONS CORPORATION
SUPPLEMENTAL INDENTURE NO. 1
$____________
______% Junior Subordinated Deferrable Interest Debentures
Series A
SUPPLEMENTAL INDENTURE No. 1, dated as of ________ __, 1996,
between MCI COMMUNICATIONS CORPORATION, a Delaware corporation (the "Company"),
and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as Trustee (the
"Trustee").
Recitals
--------
The Company has heretofore executed and delivered to the Trustee a
Junior Subordinated Indenture, dated as of ________ __, 1996 (the "Indenture"),
providing for the issuance from time to time of series of the Company's
Securities.
Section 301 of the Indenture provides for various matters with respect
to any series of Securities issued under the Indenture to be established in an
indenture supplemental to the Indenture.
Section 901(3) of the Indenture provides for the Company and the
Trustee to enter into an indenture supplemental to the Indenture to establish
the form or terms of Securities of any series as provided by Sections 201 and
301 of the Indenture.
For and in consideration of the premises and the issuance of the
series of Securities provided for herein, it is mutually covenanted and agreed,
for the equal and proportionate benefit of the Holders of the Securities of such
series, as follows:
ARTICLE 1
Relation to Indenture; Definitions
Section 1.1. This Supplemental Indenture No. 1 constitutes an integral
part of the Indenture.
<PAGE>
Section 1.2. For all purposes of this Supplemental Indenture No. 1:
(1) Capitalized terms used herein without definition shall have the
meanings specified in the Indenture or in the Amended and Restated Trust
Agreement, dated as of ________ __, 1996, among the Company, as Depositor,
Wilmington Trust Company, as Property Trustee and Delaware Trustee, and the
Administrative Trustees named therein, as the case may be;
(2) All references herein to Articles and Sections, unless otherwise
specified, refer to the corresponding Articles and Sections of this
Supplemental Indenture No. 1; and
(3) The terms "herein", "hereof", "hereunder" and other words of
similar import refer to this Supplemental Indenture No. 1.
ARTICLE 2
The Series of Securities
Section 2.1. Title of the Securities. There shall be a series of
-----------------------
Securities designated the "____% Junior Subordinated Deferrable Interest
Debentures, Series A" (the "Securities").
Section 2.2. Limitation on Aggregate Principal Amount; Date of
-------------------------------------------------
Securities. The aggregate principal amount of the Securities shall be limited
----------
to $___________; provided, however, that the authorized aggregate principal
-------- -------
amount of the Securities may be increased above such amount by a Board
Resolution to such effect. Each Security shall be dated the date of its
authentication.
Section 2.3. Principal Payment Date. The principal amount of the
----------------------
Securities Outstanding (together with any accrued and unpaid interest (including
any Additional Interest) thereon) shall be payable in a single installment on
________ __, 2026; provided, that the Company may (i) change the maturity date
--------
upon the occurrence of an exchange of the Securities for the Preferred
Securities subject to certain conditions set forth in Section 314 of the
Indenture, which changed maturity date shall in no case be earlier than ______
__, 2001 or later than _______ __, 2045 and (ii) extend the maturity date
subject to certain conditions specified in Section 314 of the Indenture, which
-2-
<PAGE>
extended maturity date shall in no case be later than _______ __, 2045.
Section 2.4. Interest and Interest Rates. The rate of interest on
---------------------------
each Security shall be ____% per annum, accruing from ________ __, 1996 and,
subject to Section 2.5, interest shall be payable, quarterly in arrears, on
March 31, June 30, September 30 and December 31 of each year (each such date, an
"Interest Payment Date"), commencing June 30, 1996. The rate of any Additional
Interest that shall accrue on each Security shall be at the same rate per annum.
The amount of interest payable for any period shall be computed on the basis of
a 360-day year of twelve 30-day months. The amount of interest payable for any
partial period shall be computed on the basis of the number of days elapsed in a
360-day year of twelve 30-day months. In the event that any date on which
interest is payable on a Security is not a Business Day, then a payment of the
interest payable on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the date such payment was
originally payable. The interest installment so payable, and punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name such Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest
installment, which, if such Security is a Global Security issued to the
Depositary, shall be the close of business on the Business Day next preceding
such Interest Payment Date. The interest so payable on any Security which is
not punctually paid or duly provided for on any Interest Payment Date shall
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name such Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange,
the Nasdaq National Market or other applicable interdealer quotation system or
self-regulatory organization on which the Securities may be listed, and upon
such notice as may be required by such exchange or other self-regulatory
organization, all as more fully provided in the Indenture.
-3-
<PAGE>
Section 2.5. Extension of Interest Payment Period. (a) The Company
------------------------------------
shall have the right, at any time during the term of the Securities, from time
to time, to defer the payment of interest on the Securities for up to 20
consecutive quarters with respect to each deferred period (each, an "Extension
Period"), during which Extension Periods the Company shall have the right to
make partial payments of interest on any Interest Payment Date. At the end of
any such Extension Period the Company shall pay all interest then accrued and
unpaid on the Securities (together with Additional Interest thereon, if any, at
the annual rate of ____%, compounded quarterly, to the extent permitted by
applicable law), provided, that during any such Extension Period, the Company
--------
will not, and will not permit any Subsidiary of the Company to (i) declare or
pay any dividends or distributions or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's outstanding capital
stock or (ii) make any payment of principal, interest or premium, if any, on or
repay, repurchase or redeem any debt security that ranks pari passu with or
---- -----
junior in interest to the Securities or make any guarantee payments with respect
to the foregoing (other than (a) dividends or distributions in Common Stock of
the Company, (b) redemptions or purchases of any rights pursuant to the
Company's Preferred Stock Rights Plan, or any successor to such Preferred Stock
Rights Plan, and the declaration of a dividend of such rights or the issuance of
Preferred Stock under such plans in the future, (c) payments under any MCI
Guarantee, (d) purchases of Common Stock related to the issuance of Common Stock
under any of the Company's benefit plans for its directors, officers or
employees and (e) purchases of Common Stock required to prevent the loss or
secure the renewal or reinstatement of any government license or franchise held
by the Company or any of its Subsidiaries). Prior to the termination of any
such Extension Period, the Company may further extend the interest payment
period, provided that no Extension Period shall exceed 20 consecutive quarters
--------
or extend beyond the Maturity of the Securities. Upon termination of any such
Extension Period and upon the payment of all accrued and unpaid interest and any
Additional Interest then due, the Company may elect to begin a new Extension
Period, subject to the above requirements. No interest shall be due and payable
during an Extension Period, except at the end thereof. The Company shall give
the Holders of the Securities and the Property Trustee, the Administrative
Trustees and the Trustee notice of its election to begin or continue any such
Extension Period at least one Business Day prior to the earlier of (i) the date
the Distributions on the Preferred Securities are payable or (ii) the date the
Administrative Trustees are required to give notice to any securities exchange,
the Nasdaq National Market or other
-4-
<PAGE>
applicable interdealer quotation system or self-regulatory organization or to
holders of such Preferred Securities of the record date or the date such
Distributions are payable, but in any event not less than one Business Day prior
to such record date. The Trustee shall promptly give notice of the Company's
election to begin or continue any such Extension Period to the holders of the
outstanding Preferred Securities.
Section 2.6. Place of Payment. The Place of Payment where the
----------------
Securities may be presented or surrendered for payment, where the Securities may
be surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities and the Indenture
may be served shall be the Corporate Trust Office of the Trustee.
Section 2.7. Redemption. At any time on or after ________ __, 2001,
----------
the Company may, at its option, subject to the terms and conditions of Article
Eleven of the Indenture, redeem the Securities in whole at any time or in part
from time to time, without premium or penalty, at a redemption price equal to
100% of the principal amount thereof plus the accrued and unpaid interest,
including Additional Interest, if any, to the date fixed for redemption.
If a Special Event in respect of MCI Capital I shall occur and be
continuing, the Company may, at its option, redeem the Securities within 90 days
of the occurrence of such Special Event, in whole but not in part, subject to
the provisions of Article Eleven of the Indenture. The redemption price for any
Security so redeemed shall be equal to 100% of the principal amount thereof plus
accrued and unpaid interest, including Additional Interest, if any, to the date
fixed for redemption.
Section 2.8. Exchange. At any time, the Company may terminate MCI
--------
Capital I and cause the Securities to be distributed to Holders of the Trust
Securities in liquidation of MCI Capital I.
Section 2.9. Denomination. The Securities shall be in registered
------------
form without coupons and shall be issuable in denominations of $25 and integral
multiples thereof.
Section 2.10. Currency. Principal and interest on the Securities
--------
shall be payable in Dollars.
-5-
<PAGE>
Section 2.11. Form of Securities. The Securities shall be
------------------
substantially in the form attached as Exhibit A hereto.
Section 2.12. Securities Registrar and Paying Agent. The Trustee
-------------------------------------
shall initially serve as Securities Registrar and Paying Agent.
Section 2.13. Sinking Fund Obligations. The Company has no
------------------------
obligation to redeem or purchase any Securities pursuant to any sinking fund or
analogous requirement or upon the happening of a specified event or at the
option of a Holder thereof.
ARTICLE 3
Miscellaneous Provisions
Section 3.1. The Indenture, as supplemented and amended by this
Supplemental Indenture No. 1, is in all respects hereby adopted, ratified and
confirmed.
Section 3.2. This Supplemental Indenture No. 1 may be executed in
any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
SECTION 3.3. THIS SUPPLEMENTAL INDENTURE NO. 1 AND EACH SECURITY
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK
AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. 1 to be duly executed, as of the day and year first written above.
MCI COMMUNICATIONS CORPORATION
By: _______________________
Name:
Title:
Attest: _______________________
WILMINGTON TRUST COMPANY, as
Trustee
By: _______________________
Name:
Title:
-7-
<PAGE>
Exhibit A
---------
[FORM OF FACE OF SECURITY]
IF THE SECURITY IS TO BE A GLOBAL SECURITY - This Security is a Global
Security within the meaning of the Indenture hereinafter referred to and is
registered in the name of The Depository Trust Company (the "Depository") or a
nominee of the Depository. This Security is exchangeable for Securities
registered in the name of a person other than the Depository or its nominee only
in the limited circumstances described in the Indenture and no transfer of this
Security (other than a transfer of this Security as a whole by the Depository to
a nominee of the Depository or by a nominee of the Depository to the Depository
or another nominee of the Depository) may be registered except in limited
circumstances.
Unless this Security is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York) to MCI Communications
Corporation or its agent for registration of transfer, exchange or payment, and
any Security issued is registered in the name of Cede & Co. or such other name
as requested by an authorized representative of The Depository Trust Company and
any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
MCI COMMUNICATIONS CORPORATION
____% Junior Subordinated Deferrable Interest Debentures
Series A
No. __________ $_____________
CUSIP ________
MCI COMMUNICATIONS CORPORATION, a corporation organized and existing
under the laws of Delaware (hereinafter called the "Company", which term
-------
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay to _______________, or registered
assigns, the principal sum of __________________ Dollars on ________ __, 2026;
provided, that the Company may (i) change the maturity date upon the occurrence
--------
of an exchange of the Securities for the Trust Securities subject to certain
conditions set forth in Section 314 of the Indenture, which changed maturity
date
<PAGE>
shall in no case be earlier than ______ __, 2001 or later than _______ __, 2045
and (ii) extend the maturity date subject to certain conditions specified in
Section 314 of the Indenture, which extended maturity date shall in no case be
later than _______ __, 2045. The Company further promises to pay interest on
said principal sum from ________ __, 1996 or from the most recent interest
payment date (each such date, an "Interest Payment Date") on which interest has
---------------------
been paid or duly provided for, quarterly (subject to deferral as set forth
herein) in arrears on March 31, June 30, September 30 and December 31 of each
year, commencing June 30, 1996, at the rate of ____% per annum, until the
principal hereof shall have become due and payable, plus Additional Interest, if
any, until the principal hereof is paid or duly provided for or made available
for payment and on any overdue principal and (without duplication and to the
extent that payment of such interest is enforceable under applicable law) on any
overdue installment of interest at the rate of ____% per annum, compounded
quarterly. The amount of interest payable for any period will be computed on
the basis of twelve 30-day months and a 360-day year. The amount of interest
payable for any partial period shall be computed on the basis of the number of
days elapsed in a 360-day year of twelve 30-day months. In the event that any
date on which interest is payable on this Security is not a Business Day, then a
payment of the interest payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date the payment was originally payable. A "Business Day" shall mean any
------------
day other than (i) a Saturday or Sunday, (ii) a day on which banking
institutions in the City of New York are authorized or required by law or
executive order to remain closed or (iii) a day on which the Corporate Trust
Office of the Trustee or the principal office of the Property Trustee under the
Trust Agreement hereinafter referred to for MCI Capital I, is closed for
business. The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities, as defined in the Indenture) is registered at the close of business
on the Regular Record Date for such interest installment, which shall be the
close of business on the Business Day next preceding such Interest Payment Date.
Any such interest installment not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Security (or one or more
Predecessor
-2-
<PAGE>
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities of this series may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture.
The Company shall have the right at any time during the term of this
Security, from time to time, to defer the payment of interest on such Security
for up to 20 consecutive quarters with respect to each deferral period (each an
"Extension Period"), during which Extension Periods the Company shall have the
----------------
right to make partial payments of interest on any Interest Payment Date, and at
the end of which the Company shall pay all interest then accrued and unpaid
(together with Additional Interest thereon to the extent permitted by applicable
law); provided that during any such Extension Period, the Company will not, and
--------
will not permit any Subsidiary of the Company to (i) declare or pay any
dividends or distributions or redeem, purchase, acquire or make a liquidation
payment with respect to, any of the Company's outstanding capital stock or (ii)
make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt security that ranks pari passu with or junior in
---- -----
interest to this Security or make any guarantee payments with respect to the
foregoing (other than (a) dividends or distributions in Common Stock of the
Company, (b) redemptions or purchases of any rights pursuant to the Company's
Preferred Stock Rights Plan, or any successor to such Preferred Stock Rights
Plan, and the declaration of a dividend of such rights or the issuance of
Preferred Stock under such plans in the future, (c) payments under any MCI
Guarantee, (d) purchases of Common Stock related to the issuance of Common Stock
under any of the Company's benefit plans for its directors, officers or
employees and (e) purchases of Common Stock required to prevent the loss or
secure the renewal or reinstatement of any government license or franchise held
by the Company or any of its Subsidiaries). Prior to the termination of any
such Extension Period, the Company may further extend the interest payment
period, provided that no Extension Period shall exceed 20 consecutive quarters
--------
or extend beyond the Maturity of this Security. Upon the termination of any
such Extension Period and upon the payment of all accrued and unpaid interest
and any Additional Interest then due, the Company may elect to begin a new
Extension Period, subject to the above requirements. No interest shall be due
and payable during an Extension Period except at the end
-3-
<PAGE>
thereof. The Company shall give the Holder of this Security and the Trustee
notice of its election to begin or continue an Extension Period at least one
Business Day prior to the earlier of (i) the date the Distributions on the
Preferred Securities are payable or (ii) the date the Administrative Trustees
are required to give notice to any securities exchange, the Nasdaq National
Market or other applicable interdealer quotation system or self-regulatory
organization or to holders of such Preferred Securities of the record date or
the date such Distributions are payable, but in any event not less than one
Business Day prior to such record date.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the United States, 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; provided, however, that at the option of the Company payment of
-------- -------
interest may be made (i) by check mailed to the address of the Person entitled
thereto as such address shall appear in the Securities Register or (ii) by wire
transfer in immediately available funds at such place and to such account as may
be designated by the Person entitled thereto as specified in the Securities
Register.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and subject in right of payments to the prior
payment in full of all Senior Debt, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such actions as may be
necessary or appropriate to effectuate the subordination so provided and (c)
appoints the Trustee his attorney-in-fact for any and all such purposes. Each
Holder hereof, by his acceptance hereof, waives all notice of the acceptance of
the subordination provisions contained herein and in the Indenture by each
holder of Senior Debt, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be
-4-
<PAGE>
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
MCI COMMUNICATIONS CORPORATION
By:___________________________
[President or Vice President]
Attest:
----------------------------------
[Secretary or Assistant Secretary]
This is one of the Securities referred to in the within mentioned
Indenture.
WILMINGTON TRUST COMPANY,
as Trustee
By:___________________________
Authorized Officer
-5-
<PAGE>
[FORM OF REVERSE OF SECURITY]
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
----------
series under a Junior Subordinated Indenture, dated as of ________ __, 1996
(herein called the "Indenture"), between the Company and Wilmington Trust
---------
Company, as Trustee (herein called the "Trustee", which term includes any
-------
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Trustee,
the Company and the Holders of the Securities, and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This Security is
one of the series designated on the face hereof, limited in aggregate principal
amount to $___________.
All terms used in this Security that are defined in the Indenture or in
the Amended and Restated Trust Agreement, dated as of ________ __, 1996 (the
"Trust Agreement"), for MCI Capital I among MCI Communications Corporation, as
----------------
Depositor, and the Trustees named therein, shall have the meanings assigned to
them in the Indenture or the Trust Agreement, as the case may be.
On or after ________ __, 2001, the Company may at any time, at its
option, subject to the terms and conditions of Article Eleven of the Indenture,
redeem this Security in whole at any time or in part from time to time, without
premium or penalty, at a redemption price equal to 100% of the principal amount
thereof plus the accrued and unpaid interest, including Additional Interest, if
any, to the date fixed for redemption.
If a Special Event in respect of MCI Capital I shall occur and be
continuing, the Company may, at its option, redeem this Security within 90 days
of the occurrence of such Special Event, in whole but not in part, subject to
the provisions of Section 1107 and the other provisions of Article Eleven of the
Indenture. The redemption price for any Security so redeemed shall be equal to
100% of the principal amount thereof plus accrued and unpaid interest, including
Additional Interest, if any, to the date fixed for redemption.
In the event of redemption of this Security in part only, a new Security
or Securities of this series for the unredeemed portion hereof will be issued in
the name of the Holder hereof upon the cancellation hereof.
-6-
<PAGE>
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner, with the effect and subject to the
conditions provided in the Indenture.
The Indenture contains provisions for satisfaction, discharge and
defeasance at any time of the entire indebtedness of this Security upon
compliance by the Company with certain conditions set forth in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
Company and the Trustee at any time to enter into a supplemental indenture or
indentures for the purpose of modifying in any manner the rights and obligations
of the Company and of the Holders of the Securities, with the consent of the
Holders of not less than a majority in principal amount of the Outstanding
Securities of each series to be affected by such supplemental indenture. The
Indenture also contains provisions permitting Holders of specified percentages
in principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, if an
Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series may declare the principal amount (or, if the
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount as may be specified in the terms of that series) of all
the Securities of that series to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders), provided that,
--------
in the case of the Securities of a series issued to an MCI Trust, if upon an
Event of Default, the Trustee or the Holders of not less than 25% in principal
amount of the Outstanding Securities of that series fail to declare the
principal of all the Securities of that series to be immediately due and
payable, the holders of at least 25% in aggregate liquidation amount of the
corresponding series of
-7-
<PAGE>
Preferred Securities then outstanding shall have such right by a notice in
writing to the Company and the Trustee; and upon any such declaration such
principal amount (or specified amount) of and the accrued interest (including
any Additional Interest) on all the Securities of such series shall become
immediately due and payable, provided that the payment of principal and interest
--------
(including any Additional Interest) on such Securities shall remain subordinated
to the extent provided in Article Thirteen of the Indenture.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Securities
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company maintained under Section 1002 of the Indenture
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Securities Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees. No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
The Securities of this series are issuable only in registered form
without coupons in denominations of $25 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of such series of a different authorized denomination, as
requested by the Holder surrendering the same.
-8-
<PAGE>
The Company and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agree that for United States federal, state and local
tax purposes it is intended that this Security constitute indebtedness.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES THEREOF.
-9-
<PAGE>
[LETTERHEAD OF KRAMER, LEVIN, NAFTALIS & FRANKEL APPEARS HERE]
May 20, 1996
The Underwriters, as defined below
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
We have acted as special counsel to MCI Communications Corporation, a
Delaware corporation ("MCI"), and MCI Capital I, a statutory business trust
organized under the laws of the State of Delaware, in connection with the Terms
Agreement (the "Terms Agreement"), to be entered into among MCI, MCI Capital I,
and the representatives of the Underwriters named in Schedule I thereto (the
"Underwriters"), and the Underwriting Agreement Basic Provisions incorporated
therein (the Terms Agreement and the Underwriting Agreement Basic Provisions, in
the form filed as Exhibit 1.01 to the Registration Statement (as defined below),
together, the "Underwriting Agreement"), relating to the issuance and sale by
MCI Capital I of its Cumulative Quarterly Income Preferred Securities, Series A
(the "Designated Securities"). The proceeds of the sale of the Designated
Securities are to be invested in Junior Subordinated Deferrable Interest
Debentures, Series A of MCI, which will be issued under the Junior Subordinated
Indenture, between MCI and Wilmington Trust Company, as trustee, in the form
filed as Exhibit 4.01 to the Registration Statement (as defined below), as
supplemented by Supplemental Indenture No. 1, between MCI and Wilmington Trust
Company, as trustee, in the form filed as Exhibit 4.13 to the Registration
Statement (as defined below), (such Junior Subordinated Debenture and
Supplemental Indenture No. 1, together, the "Indenture"). Certain capitalized
terms which are used in this opinion without definition are used with the
respective meanings given to them in the Underwriting Agreement.
<PAGE>
Kramer, Levin, Naftalis & Frankel
The Underwriters, as defined below
c/o Goldman, Sachs & Co.
May 20, 1996
Page 2
We have also acted as special counsel to MCI and MCI Capital I in
connection with the preparation and filing with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "1933 Act"), of a
Registration Statement on Form S-3 (Registration No. 333-02593), as amended (the
"Registration Statement"), including the Preliminary Prospectus, dated May 20,
1996, and the Preliminary Prospectus Supplement, dated May 20, 1996, relating to
the issuance of the Designated Securities (such Preliminary Prospectus and
Preliminary Prospectus Supplement, together the "Prospectus").
Pursuant to Section 5(g) of the Underwriting Agreement, you have
requested that we render the opinion set forth below. In rendering such
opinion, we have examined and relied upon the representations and warranties as
to factual matters made in or pursuant to the documents referred to above
(including exhibits thereto) and upon the originals, or copies certified or
otherwise identified to our satisfaction, of such records, documents,
certificates, or other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. We have not,
however, undertaken any independent investigation of any factual matter set
forth in any of the foregoing. We have also assumed (i) the due execution and
delivery of the Amended and Restated Trust Agreement of MCI Capital I in the
form of Exhibit 4.10 to the Registration Statement (the "Trust Agreement"), that
the Trust Agreement is valid and enforceable in accordance with its terms, and
that MCI Capital I will at all times comply with the Delaware Business Trust Act
and the terms of the Trust Agreement, and (ii) the due execution and delivery of
the Indenture in the form of Exhibits 4.01 and 4.13 to the Registration
Statement, that the Indenture is valid and enforceable in accordance with its
terms, and that the parties thereto will at all times comply with the Trust
Indenture Act of 1939, as amended, and the terms of the Indenture. Our opinion
addresses only the United States federal income tax consequences to a person
that acquires Designated Securities on their original issue at the original
offering price and that is (i) an individual citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any state thereof or the District of Columbia, or (iii) an
estate or trust the income of which is subject to United States federal income
tax regardless of source.
Subject to the foregoing and the qualifications and limitations set
forth herein, we hereby confirm that the statements set forth in the Prospectus
under the caption "Certain Federal Income Tax Consequences," to the extent that
such statements relate to matters of law or legal conclusion, constitute the
opinion of Kramer, Levin, Naftalis & Frankel.
This opinion is based on the relevant law in effect (or, in the case
of Proposed Treasury Regulations, proposed) and the relevant facts that exist as
of the date hereof. No
<PAGE>
Kramer, Levin, Naftalis & Frankel
The Underwriters, as defined below
c/o Goldman, Sachs & Co.
May 20, 1996
Page 3
assurance can be given that the law or facts will not change, and we have not
undertaken to advise you or any other person with respect to any event
subsequent to the date hereof.
This opinion is addressed solely to you and no other person may rely
on it, provided, that we hereby consent to the filing of this opinion as an
--------
exhibit to the Registration Statement and to the use of our name under the
caption "Certain Federal Income Tax Consequences" and "Legal Opinions" in the
Prospectus. In giving such consent, we do not thereby concede that we are
within the category of persons whose consent is required under Section 7 of the
1933 Act or the Rules and Regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
KRAMER, LEVIN, NAFTALIS & FRANKEL
<PAGE>
[Letterhead of Richards, Layton & Finger]
May 20, 1996
MCI Capital I
c/o MCI Communications Corporation
1133 19th St., N.W.
Washington, D.C. 20036
Re: MCI Capital I
-------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for MCI Capital I, a
Delaware business trust (the "Trust"), in connection with the matters set forth
herein. At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
(a) The Certificate of Trust of the Trust, dated April 17, 1996 (the
"Certificate"), as filed in the office of the Secretary of State of the State of
Delaware (the "Secretary of State") on April 17, 1996;
(b) The Trust Agreement of the Trust, dated as of April 17, 1996,
among MCI Communications Corporation, a Delaware corporation ("MCI
Communications"), and the trustees of the Trust named therein;
<PAGE>
MCI Capital I
c/o MCI Communications Corporation
May 20, 1996
Page 2
(c) The Registration Statement (the "Registration Statement") on Form
S-3, including a preliminary prospectus (the "Prospectus"), relating to the
Cumulative Quarterly Income Preferred Securities of the Trust, Series A,
representing preferred undivided beneficial interests in the Trust (each, a
"Preferred Security" and collectively, the "Preferred Securities"), as filed by
MCI Communications, the Trust and others as set forth therein with the
Securities and Exchange Commission on April 17, 1996;
(d) A form of Amended and Restated Trust Agreement of the Trust, to
be entered into among MCI Communication, the trustees of the Trust named
therein, and the holders, from time to time, of undivided beneficial interests
in the Trust (the "Trust Agreement"), attached as an exhibit to the Registration
Statement; and
(e) A Certificate of Good Standing for the Trust, dated May 20,
1996, obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined are
used as defined in the Trust Agreement.
For purposes of this opinion, we have not reviewed any documents other
than the documents listed above, and we have assumed that there exists no
provision in any document that we have not reviewed that bears upon or is
inconsistent with the opinions stated herein. We have conducted no independent
factual investigation of our own but rather have relied solely upon the
foregoing documents, the statements and information set forth therein and the
additional matters recited or assumed herein, all of which we assumed to be
true, complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Trust
Agreement constitutes the entire agreement among the parties thereto with
respect to the subject matter thereof, including with respect to the creation,
operation and termination of the Trust, and that the Trust Agreement and the
Certificate are in full force and effect and have not been amended, (ii) except
to the extent provided in paragraph 1 below, the due creation or due
organization or due formation, as the case
<PAGE>
MCI Capital I
c/o MCI Communications Corporation
May 20, 1996
Page 3
may be, and valid existence in good standing of each party to the documents
examined by us under the laws of the jurisdiction governing its creation,
organization or formation, (iii) the legal capacity of natural persons who are
parties to the documents examined by us, (iv) that each of the parties to the
documents examined by us has the power and authority to execute and deliver, and
to perform its obligations under, such documents, (v) the due authorization,
execution and delivery by all parties thereto of all documents examined by us,
(vi) the receipt by each Person to whom a Preferred Security is to be issued by
the Trust (collectively, the "Preferred Security Holders") of a Preferred
Security Certificate for each Preferred Security and the payment for the
Preferred Security acquired by it, in accordance with the Trust Agreement and
the Registration Statement, and (vii) that the Preferred Securities are issued
and sold to the Preferred Security Holders in accordance with the Trust
Agreement and the Registration Statement. We have not participated in the
preparation of the Registration Statement and assume no responsibility for its
contents.
This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have not
considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto. Our opinions
are rendered only with respect to Delaware laws and rules, regulations and
orders thereunder which are currently in effect.
Based upon the foregoing, and upon our examination of such questions
of law and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and in validly existing in good
standing as a business trust under the Delaware Business Trust Act, 12 Del.C.
------
(S) 3801, et seq.
-- ---
2. The Preferred Securities will represent valid and, subject to the
qualifications set forth in paragraph 3 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust.
3. The Preferred Security Holders, as beneficial owners of the
Trust, will entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the Preferred Security
Holders may be obligated to make payments as set forth to the Trust Agreement.
<PAGE>
MCI Capital I
c/o MCI Communications Corporation
May 20, 1996
Page 4
We consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement. In addition,
we hereby consent to the use of our name under the heading "Legal Matters" in
the Prospectus. In giving the foregoing consents, we do not thereby admit that
we come within the category of Persons whose consent is requires under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder. Except as stated above, without
our prior written consent, this opinion may be furnished or quoted to, or relied
upon by, any other Person for any purpose.
Very truly yours,
RICHARDS, LAYTON & FINGER
EAM/cbd
<PAGE>
[Kramer, Levin, Naftalis & Frankel Letterhead]
May 20, 1996
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Dear Sirs:
We have acted as counsel to you, MCI Communications Corporation, a
Delaware corporation (the "Company"), in connection with the preparation and
filing with the Securities and Exchange Commission (the "Commission") of a
Registration Statement on Form S-3 (File No. 333-02593), as amended (the
"Registration Statement"), under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the proposed issuance and sale from time to time
of up to $750,000,000 in aggregate principal amount of (i) the Company's Junior
Subordinated Deferrable Interest Debentures (the "Debentures"), each series of
which will be issued pursuant to a Junior Subordinated Indenture (the
"Indenture") to be entered into between the Company and Wilmington Trust
Company, as Trustee (the "Debenture Trustee"), as such Indenture will be
supplemented, in connection with the issuance of each such series, by a
supplemental indenture creating such series (each, a "Supplemental Indenture"
and, collectively, the "Supplemental Indentures"), (ii) preferred securities
(the "Preferred Securities") of MCI Capital I, MCI Capital II, MCI Capital III
and MCI Capital IV, each a
<PAGE>
MCI Communications Corporation
May 20, 1996
Page 2
trust formed under the laws of the State of Delaware (each, an "Issuer" and,
collectively, the "Issuers"), and (iii) the Company's guarantees with respect to
the Preferred Securities (each, a "Guarantee" and, collectively, the
"Guarantees"), each of which Guarantees will be issued pursuant to a guarantee
agreement between the Company and the Trustee thereunder (each, a "Guarantee
Agreement" and, collectively, the "Guarantee Agreements"). Capitalized terms
used but not otherwise defined herein shall have the meanings ascribed to them
in the Registration Statement.
We have examined the originals, photocopies or conformed copies of all
such records of the Company and all such agreements, certificates of public
officials, certificates of officers and representatives of the Company and such
other documents as we have deemed relevant and necessary as a basis for the
opinion hereinafter expressed. In such examinations, we have assumed the
genuineness of all signatures on original documents and the conformity to the
originals of all copies submitted to us as conformed copies or photocopies. As
to various questions of fact material to our opinion, we have relied upon
representations, state ments or certificates of officers and representatives of
the Company, the Issuers and others. Based on the foregoing, it is our opinion
that:
1. The Debentures, when (i) issued and duly executed and
authenticated in accordance with the terms of (a) the Indenture and (b) the
applicable Supplemental Indenture creating such series of Debentures, in the
forms filed as Exhibits 4.01 and 4.13, respectively, to the Registration
Statement (and assuming the due authorization, execution and delivery of the
Indenture and the applicable Supplemental Indenture by each of the parties
thereto), and (ii) delivered against payment therefor, will be legally issued
and will constitute binding obligations of the Company.
2. The Guarantees, when issued pursuant to the applicable Guarantee
Agreement, in the form filed as Exhibit 4.12 of the Registration Statement (and
assuming the due authorization, execution and delivery of the applicable
Guarantee Agreement by each of the parties thereto), will be legally issued and
will constitute binding obligations of the Company.
We are members of the Bar of the State of New York and are not members
of the bar of any other state. We are not expressing any opinion as to any
matter relating to the laws of any jurisdiction other than the State of New
York, the General Corporation Law of the State of Delaware and the federal law
of the United States of America, and we assume no
<PAGE>
MCI Communications Corporation
May 20, 1996
Page 3
responsibility as to the applicability of the laws of any other jurisdiction to
the subject transaction or the effect of such laws thereon.
In rendering the foregoing opinion, we have not expressed, explicitly
or implicitly, any opinion as to proceedings before the Federal Communications
Commission or matters arising under the Communications Act of 1934 or any
similar state or local statute regulating communications.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Opinions" in the Prospectus forming a part of the Registration Statement. In
giving such consent, we do not thereby concede that we are within the category
of persons whose consent is required under Section 7 of the Securities Act or
the rules and regulations promulgated thereunder.
We are delivering this opinion to the Company, and no person other
than the Company may rely upon it without our prior written consent.
Very truly yours,
KRAMER, LEVIN, NAFTALIS & FRANKEL
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Amendment No. 1 to the Registration Statement on Form
S-3 of our report dated January 29, 1996, which appears on page 29 of the 1995
Annual Report to Stockholders of MCI Communications Corporation, which is
incorporated by reference in MCI Communications Corporation's Annual Report on
Form 10-K for the year ended December 31, 1995. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears on page 30 of such Annual Report on Form 10-K. We also consent to
the reference to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Washington, D.C.
May 20, 1996
