<PAGE> 1
Filed Pursuant to Rule 424(B)(2)
Registration No. 033-57155
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED FEBRUARY 17, 1995)
$300,000,000
MCI COMMUNICATIONS CORPORATION
6.95% SENIOR NOTES DUE AUGUST 15, 2006
------------------------
Interest on the 6.95% Senior Notes due August 15, 2006 (the "Notes") is
payable semi-annually on February 15 and August 15 of each year, commencing
February 15, 1997. The Notes are not subject to redemption by MCI Communications
Corporation (the "Company") or by the Holders thereof prior to maturity.
The Notes will be represented by Notes in book-entry form ("Global Notes")
registered in the name of a nominee of The Depository Trust Company ("DTC").
Beneficial interests in each Global Note will be shown on, and transfers thereof
will be effected only through, records maintained by DTC (with respect to
beneficial interests of participants) or by participants or persons that hold
interests through participants (with respect to beneficial interests of
beneficial owners). Owners of beneficial interests in the Notes will be entitled
to physical delivery of Notes in certificated form equal in principal amount to
their respective beneficial interests only under the limited circumstances
described under "Description of Notes -- Book-Entry System".
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Per Note.......................... 99.67% .65% 99.02%
- -------------------------------------------------------------------------------------------------
Total............................. $299,010,000 $1,950,000 $297,060,000
=================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from August 9, 1996.
(2) The Company has agreed to indemnify the several Underwriters against or make
contributions relating to certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriting".
(3) Before deduction of expenses payable by the Company.
------------------------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by them, subject to approval of certain
legal matters by counsel for the Underwriters and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the Global
Notes will be made through the facilities of DTC, on or about August 9, 1996,
against payment therefor in same-day funds.
------------------------
Joint Lead Managers
MERRILL LYNCH & CO. CITICORP SECURITIES, INC.
------------------------
BA SECURITIES, INC.
J.P. MORGAN & CO.
NATIONSBANC CAPITAL MARKETS, INC.
------------------------
The date of this Prospectus Supplement is August 6, 1996.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
AVAILABLE INFORMATION
In addition to the locations specified under "Available Information" in the
accompanying Prospectus, the Securities and Exchange Commission (the
"Commission") maintains a Web site at http://www.sec.gov containing reports,
proxy and information statements and other information regarding registrants,
including the Company, that file electronically with the Commission.
S-2
<PAGE> 3
THE COMPANY
MCI Communications Corporation ("MCI" or the "Company") and its
subsidiaries provide a broad range of communication services, including
long-distance telecommunication services, local and wireless services and
information technology services. The provision of long-distance
telecommunication services is the core business of MCI and its subsidiaries.
Long-distance telecommunication services comprise a wide spectrum of domestic
and international voice and data services, including long-distance telephone
services, data communication services, teleconferencing services and electronic
messaging services. During each of the last three years, more than 90% of the
operating revenues and operating income of MCI and its subsidiaries were derived
from its core business. Through its subsidiaries, MCI is the second largest
carrier of long-distance telecommunication services in the United States and the
third largest carrier of international long-distance telecommunication services
in the world.
RECENT DEVELOPMENTS
SECOND QUARTER
For the three months ended June 30, 1996, MCI reported revenue, operating
income, net income and earnings per share of $4.57 billion, $582 million, $300
million and $.43, respectively, compared to $3.71 billion, $437 million, $260
million and $.38, respectively, for the three months ended June 30, 1995. For
the six months ended June 30, 1996, MCI reported revenue, operating income, net
income and earnings per share of $9.06 billion, $1.16 billion, $595 million and
$.85, respectively, compared to $7.27 billion, $866 million, $504 million and
$.74, respectively, for the six months ended June 30, 1995.
TELECOMMUNICATIONS INDUSTRY
The communication services industry is in the process of substantial
change, providing significant risks to its participants. Evolving and newly
developed technology, emerging significant competition in the market for
long-distance and local telecommunication services, the increasing desire of
customers to have most or all of their various communications needs fulfilled by
one supplier, and the recent enactment of the Telecommunications Act of 1996
(the "Telecommunications Act") are causing companies, including MCI, which offer
services primarily in one part of the communication services market, to offer,
either directly or in alliance with others, new services to complement their
primary services offerings. There can be no assurance that MCI will be able to
compete successfully in offering these new services.
The communication services business is highly competitive and capital
intensive. The primary and most vigorous competitor in MCI's core business of
providing domestic and international long-distance telecommunication services is
the long-distance telecommunications unit of AT&T Corp., which is substantially
larger than MCI. MCI anticipates that, as a result of the 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 customer
relationships and substantial capital resources. In addition, MCI competes with
Sprint Corporation, other facilities based domestic telecommunications common
carriers and numerous resellers of long-distance telecommunication services. As
the Telecommunications Act is implemented, companies that operate primarily in a
communication services market other than the long-distance telecommunication
services market are likely to compete with MCI in the long-distance
telecommunication services market. Some of these companies have substantial
financial and other resources.
In April 1996, two separate mergers among four of the seven RBOCs were
proposed. While each of these mergers requires the approval of the U.S. Federal
Communications Commission (the "FCC"), 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.
S-3
<PAGE> 4
On August 1, 1996, the FCC announced the adoption of rules relating to the
manner in which and the price at which potential competitors in the local
services market will be able to obtain local facilities and services from the
incumbent telephone company. The FCC rules have yet to be published. It is
unclear how and when the rules will be implemented and when implemented how they
will affect MCI's ability to compete in the local services market.
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 YEAR ENDED
MARCH 31, 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
The net proceeds to be received by the Company from the sale of the Notes
offered hereby will be used for general corporate purposes, including the
repayment of short-term borrowings under the Company's Commercial Paper Program.
As of August 1, 1996, the Company's commercial paper had a weighted average
interest rate of 5.39% and a weighted average maturity of 32 days.
DESCRIPTION OF NOTES
GENERAL
The 6.95% Senior Notes due August 15, 2006 (the "Notes") will be issued in
an aggregate principal amount of $300,000,000 and will constitute a separate
series of Senior Securities (which are more fully described in the accompanying
Prospectus) to be issued under an Indenture between the Company and Citibank,
N.A., as trustee ("Citibank"), dated as of February 17, 1995 (the "Indenture").
The Indenture does not limit the aggregate principal amount of Senior Securities
which may be issued thereunder. The following summaries of certain provisions of
the Indenture and the Notes do not purport to be complete, and are subject to,
and qualified in their entirety by reference to, all of the provisions of the
Indenture and the Notes, including the definitions therein of certain terms.
All Senior Securities, including the Notes, issued and to be issued will be
unsecured and will rank pari passu (equally and ratably) with all other
unsecured and unsubordinated indebtedness of the Company from time to time
outstanding.
The Indenture does not limit the amount of unsecured indebtedness of the
Company or any subsidiary. Nothing in the Indenture or in the terms of the Notes
limits or will limit the payment of dividends by the Company or the Company's
acquisition of any of its equity securities. Nothing in the Indenture affords
Holders of Notes protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction involving the
Company. However, the Indenture does contain certain restrictive covenants with
respect to the business of the Company and its subsidiaries and liens on and the
sale or lease of the stock or certain assets of MCI Telecommunications
Corporation, a wholly-owned subsidiary of the Company ("MCI Telecom"), which may
make more difficult or discourage any such transaction. The consummation of any
highly leveraged transaction, reorganization, restructuring, merger or similar
transaction
S-4
<PAGE> 5
involving the Company could cause a material decline in the credit quality of
the outstanding Notes. See "Description of Senior Securities -- Covenants" in
the accompanying Prospectus.
MCI's assets consist principally of the stock of and advances to its
subsidiaries. Almost all of the operating assets of MCI and its consolidated
subsidiaries are owned by such subsidiaries and MCI relies primarily on interest
and dividends from such subsidiaries to meet its obligations for payment of
principal and interest on its outstanding debt obligations and corporate
expenses. Therefore, the rights of MCI and the rights of its creditors,
including the Holders of the Notes, to participate in the assets of any
subsidiary upon the latter's liquidation or recapitalization or otherwise will
be subject to the prior claims of the subsidiary's creditors, except to the
extent that claims of MCI itself as a creditor of the subsidiary may be
recognized. As of June 30, 1996, the book value of the assets of MCI Telecom,
after elimination of intercompany balances, represented more than 80% of the
consolidated assets of MCI.
The Notes will be represented by fully registered Notes in book-entry form
("Global Notes"), which will be deposited with, or on behalf of, The Depository
Trust Company ("DTC"), New York, New York, and registered in the name of DTC's
nominee. Beneficial interests in the Global Notes will be represented on the
records of DTC in denominations of $1,000 or any integral multiple thereof.
The Notes will bear interest at the rate per annum shown on the front cover
of this Prospectus Supplement from August 9, 1996 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
payable semi-annually in arrears on February 15 and August 15 of each year,
commencing on February 15, 1997, to the person in whose name the related Global
Note (or any predecessor Global Note) is registered at the close of business on
February 1 or August 1, as the case may be, next preceding such Interest Payment
Date. Interest on the Notes will be computed on the basis of a 360-day year of
twelve 30-day months.
Interest payable on any Interest Payment Date shall be the amount of
interest accrued from and including the next preceding Interest Payment Date in
respect of which interest has been paid or duly provided for (or from and
including August 9, 1996, if no interest has been paid or duly provided for with
respect to the Notes) to but excluding such Interest Payment Date. If any
Interest Payment Date or the date of maturity of the Notes falls on a day that
is not a Business Day, the required payment shall be made on the next Business
Day with the same force and effect as if it were made on the date such payment
was due and no interest shall accrue on the amount so payable for the period
from and after such Interest Payment Date or date of maturity, as the case may
be. "Business Day" means any day, other than a Saturday or Sunday, on which
banks in The City of New York are not required or authorized by law or by
executive order to close.
The principal of each Note payable on the date of maturity will be paid
against presentation of such Note at the office or agency of the Company
maintained for that purpose in the Borough of Manhattan, The City of New York,
in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts.
The Notes will not be subject to redemption prior to maturity and will not
be entitled to the benefits of any sinking fund.
The defeasance provisions contained in the Indenture will be applicable to
the Notes.
BOOK-ENTRY SYSTEM
The Global Notes will be registered in the name of DTC's nominee. Except as
set forth below, a Global Note may not be transferred except as a whole by DTC
to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or
by DTC or any such nominee to a successor of DTC or a nominee of such successor.
DTC has advised the Company and the Underwriters that it is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934, as amended. DTC was created to hold
S-5
<PAGE> 6
securities of its participants and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. DTC's
participants include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations, some of whom (and/or their representatives) own DTC. Access to
DTC's book-entry system is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. Persons who are
not participants may beneficially own securities held by DTC only through
participants.
Upon the issuance by the Company of the Global Notes, DTC will credit, on
its book-entry registration and transfer system, the respective principal
amounts of Notes to the accounts of participants. The accounts to be credited
shall be designated by the applicable Underwriter. Ownership of beneficial
interests in a Global Note will be limited to participants or persons that may
hold interests through participants. Beneficial interests in a Global Note will
be shown on, and the transfer thereof will be effected only through, records
maintained by DTC (with respect to beneficial interests of participants) or by
participants or persons that may hold interests through participants (with
respect to beneficial interests of beneficial owners). The laws of some states
require that certain purchasers of securities take physical delivery of such
securities in certificated form. Such limits and such laws may impair the
ability to transfer beneficial interests in a Global Note.
For a Global Note, so long as DTC or its nominee is the registered owner of
such Global Note, DTC or its nominee, as the case may be, will be considered the
sole owner or Holder of the Notes represented by such Global Note for all
purposes under the Indenture. Except as provided below, owners of beneficial
interests in a Global Note will not be entitled to have Notes represented by
such Global Note registered in their names, will not receive or be entitled to
receive physical delivery of such Note in certificated form and will not be
considered the owners or Holders thereof under the Indenture.
Principal and interest payments in respect of the Notes will be made in
immediately available funds by the Company to DTC or its nominee, as the case
may be, as the Holder of the related Global Notes. Neither the Company nor the
Trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in the
Global Notes, or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests. The Company expects that DTC, upon
receipt of any payment of principal or interest in respect of the Global Notes,
will credit immediately the accounts of the related participants with payment in
amounts proportionate to their respective holdings in principal amount of
beneficial interests in such Global Notes as shown on the records of DTC. The
Company also expects that payments by participants to owners of beneficial
interests in the Global Notes will be governed by standing customer instructions
and customary practices, as is now the case, with securities held for the
accounts of customers in bearer form or registered in "street name", and will be
the responsibility of such participants. Payments to DTC in respect of the Notes
which are represented by the Global Notes shall be the responsibility of the
Company or the Trustee, disbursement of such payments to direct participants
shall be the responsibility of DTC and disbursement of such payments to
beneficial owners shall be the responsibility of direct and indirect
participants.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants and by direct and
indirect participants to beneficial owners are governed by arrangements among
them, subject to statutory or regulatory requirements as may be in effect from
time to time.
If DTC is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by the Company within 90 days, the Company
will issue Notes in certificated form in exchange for each Global Note. In
addition, the Company may at any time determine not to have Notes represented by
the Global Notes. In any such instance, owners of beneficial interests in the
Global Notes will be entitled to physical delivery of Notes in certificated form
equal in principal amount to such beneficial interest and to have such Notes
registered in their names. Notes so issued in certificated form will be issued
in denominations of $1,000 or any integral multiple thereof and will be issued
in registered form only, without coupons.
S-6
<PAGE> 7
CONCERNING THE TRUSTEE
Citibank is an affiliate of Citicorp Securities, Inc. and participates with
a group of banks in a Revolving Credit Agreement with the Company. See also "The
Securities -- The Trustees under the Indentures" in the accompanying Prospectus.
Pursuant to the Trust Indenture Act of 1939, as amended, should a default occur
with respect to the Notes when Citibank has a conflicting interest as defined
under such Act, then Citibank would be required to resign as trustee under the
Indenture within 90 days of such default, unless such default were cured, duly
waived or otherwise eliminated.
S-7
<PAGE> 8
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
Basic Provisions and the Terms Agreement dated the date hereof (collectively,
the "Underwriting Agreement"), the Company has agreed to sell each of the
Underwriters named below, and each of the Underwriters has severally agreed to
purchase, the principal amount of the Notes set forth opposite its name below.
In the Underwriting Agreement, the several Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all the Notes offered
hereby if any of the Notes are purchased. In the event of default by an
Underwriter, the Underwriting Agreement provides that, in certain circumstances,
purchase commitments of the nondefaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
UNDERWRITERS PRINCIPAL AMOUNT
------------------------------------------------------------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................... $ 60,000,000
Citicorp Securities, Inc. ................................... 60,000,000
BA Securities, Inc. ......................................... 60,000,000
J.P. Morgan Securities Inc. ................................. 60,000,000
NationsBanc Capital Markets, Inc. ........................... 60,000,000
------------
Total........................................... $300,000,000
============
</TABLE>
The Underwriters have advised the Company that they propose initially to
offer the Notes to the public at the public offering price set forth on the
cover page of this Prospectus Supplement, and to certain dealers at such price
less a concession not in excess of .4% of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of .25% of the principal amount of the Notes to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
The Company does not intend to apply for listing of the Notes on a national
securities exchange, but has been advised by the Underwriters that they intend
to make a market in the Notes. The Underwriters are not obligated, however, to
make a market in the Notes 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 Notes.
The Company has agreed to indemnify the Underwriters against or make
contributions relating to certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
In the ordinary course of their respective businesses, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Citicorp Securities, Inc., BA Securities,
Inc., J.P. Morgan Securities Inc. and NationsBanc Capital Markets, Inc. and
certain of their affiliates have engaged and may in the future engage in
commercial banking and/or investment banking transactions with the Company and
its affiliates.
LEGAL OPINIONS
The legality of the Notes will be passed upon for the Company by Kramer,
Levin, Naftalis & Frankel, New York, New York, and for the Underwriters by Brown
& Wood LLP, New York, New York.
S-8
<PAGE> 9
PROSPECTUS
$1,000,000,000
MCI COMMUNICATIONS CORPORATION
SENIOR/SUBORDINATED/CONVERTIBLE DEBT SECURITIES
------------------------
MCI Communications Corporation (the "Company" or "MCI") from time to time
may offer up to $1,000,000,000 aggregate principal amount (or its equivalent in
any other currency or composite currency) of its senior unsecured debt
securities (the "Senior Securities"), subordinated unsecured debt securities
(the "Subordinated Securities") and/or subordinated unsecured debt securities
(the "Convertible Subordinated Securities") convertible into the common stock,
par value $.10 per share, of the Company (the "Common Stock"), in separate
series in amounts, at prices and on terms to be determined at the time of sale
(the Senior Securities, the Subordinated Securities and the Convertible
Subordinated Securities being herein referred to collectively as the
"Securities"). The Company may sell Securities to one or more underwriters for
public offering and sale by them or may sell Securities to investors directly or
through agents. See "Plan of Distribution."
The terms of the Securities, including, where applicable, the specific
designation, rank, aggregate principal amount, denominations (which may be in
United States dollars, in any other currency or in a composite currency),
maturity, interest rate (which may be fixed or variable) and time of payment of
interest, if any, terms for conversion, if any, terms for redemption, if any, at
the option of the Company or repayment, if any, at the option of the holder,
terms for sinking fund payments and other variable terms of the Securities, if
any, the initial public offering price, if any, the names of, and the principal
amounts to be purchased by, dealers, if any, the compensation of such dealers
and the other terms in connection with the offering and sale of the Securities
in respect of which this Prospectus is being delivered, are set forth in one or
more accompanying Prospectus Supplements (each, a "Prospectus Supplement").
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is February 17, 1995.
<PAGE> 10
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements and other information filed by the
Company with the Commission pursuant to the informational requirements of the
Exchange Act can be inspected and copied at the public reference facilities
maintained by the Commission at its principal offices at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the Commission:
New York Regional Office, 7 World Trade Center, 13th Floor, New York, New York
10048: and Chicago Regional Office Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661: and copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
MCI's Annual Report on Form 10-K for the fiscal year ended December 31,
1993, Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994, June
30, 1994 and September 30, 1994, Current Reports on Form 8-K dated March 9,
1994, March 15, 1994, October 4, 1994 and February 16, 1995 previously filed by
MCI with the Commission, are incorporated by reference in this Prospectus and
shall be deemed to be a part hereof.
Each document filed by MCI with the Commission pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of any offering of the Securities made by this
Prospectus shall be deemed to be incorporated herein by reference and to be a
part hereof from the date of filing such document.
MCI undertakes to provide without charge to each person to whom a
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any and all of the documents incorporated herein by reference other than
exhibits to such documents. Request for such copies should be directed to the
Secretary, MCI Communications Corporation, 1801 Pennsylvania Avenue, N.W.,
Washington, D.C. 20006 (telephone: (202) 872-1600).
2
<PAGE> 11
THE COMPANY
MCI Communications Corporation, a Delaware corporation organized in 1968,
has its principal executive offices at 1801 Pennsylvania Avenue, N.W.,
Washington, D.C. 20006 (telephone number: (202) 872-1600). Unless the context
otherwise requires, the "Company" or "MCI" means MCI Communications Corporation
and its subsidiaries. MCI provides a wide spectrum of domestic and international
voice and data communications services to its customers. It is the second
largest nationwide carrier of long distance telephone services.
RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)(A)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
- ------------- ----------------------------------------
1994 1993 1993 1992 1991 1990 1989
- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
5.15 4.38 4.12 3.63 3.37 2.22 3.30
</TABLE>
- ---------------
(a) For purposes of this ratio, earnings are calculated by adding fixed charges
(excluding capitalized interest) to income before income taxes and
extraordinary item. Fixed charges consist of interest on indebtedness
(including amortization of debt discount and premium) and the portion of
rental expense representative of an interest factor.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the net
proceeds to be received by the Company from the sale of the Securities will be
added to its general corporate funds and will be used for general corporate
purposes. Until so utilized, the net proceeds will be invested in income
producing securities.
THE SECURITIES
EXPLANATORY STATEMENT
(Applicable to Senior Securities, Subordinated Securities and Convertible
Subordinated Securities)
The Senior Securities are to be issued under an Indenture dated as of
February 17, 1995, as (the "Senior Indenture"), between the Company and
Citibank, N.A., as trustee ("Citibank"), the Subordinated Securities are to be
issued under an Indenture dated as of October 15, 1989 (the "Subordinated
Indenture"), between the Company and Bankers Trust Company, as trustee ("Bankers
Trust"), and the Convertible Subordinated Securities are to be issued under an
Indenture dated as of October 15, 1989 (the "Convertible Indenture"), between
the Company and Bankers Trust, as trustee. The form of Senior Indenture, the
Subordinated Indenture and the Convertible Indenture (being sometimes referred
to herein collectively as the "Indentures" and, individually, as an "Indenture")
are filed as exhibits to the Registration Statement relating to the Securities
(the "Registration Statement"). The Indentures are subject to the provisions of
the Trust Indenture Reform Act of 1990, as amended.
The Indentures do not limit the aggregate principal amount of the
Securities which may be issued thereunder and provide that the Securities may be
issued in one or more series up to the aggregate principal amount which may be
authorized from time to time by the Company. The Company may, from time to time,
without the consent of the holders of the Securities, provide for the issuance
of Securities under the Indentures in addition to the $1,000,000,000 (or the
equivalent thereof in one or more foreign or composite currencies) aggregate
principal amount of Securities available for issuance as of the date of this
Prospectus.
The Company's assets consist principally of the stock in its subsidiaries.
Therefore, its rights and the rights of its creditors, including the holders of
the Securities, to participate in the assets of any subsidiary upon the latter's
liquidation or recapitalization or otherwise will be subject to the prior claims
of the subsidiary's
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creditors, except to the extent that claims of the Company itself as a creditor
of the subsidiary may be recognized.
The Indentures do not limit the amount of unsecured indebtedness of the
Company or any subsidiary, the payment of dividends by the Company or its
acquisition of any of its equity securities. Nothing in the Indentures or in the
terms of the Securities will prohibit the issuance of securities representing
subordinated indebtedness that is senior or junior to the Subordinated
Securities or the Convertible Subordinated Securities. Nothing in the Indentures
affords holders of Securities protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction
involving the Company. However, the Senior Indenture does contain certain
restrictive covenants with respect to the business of the Company and its
subsidiaries and liens on and the sale or lease of the stock or certain assets
of MCI Telecommunications Corporation, a wholly-owned subsidiary of the Company,
which may make more difficult or discourage any such transactions. The
consummation of any highly leveraged transaction, reorganization, restructuring,
merger or similar transaction involving the Company could cause a material
decline in the credit quality of the outstanding Securities. See "Description of
Senior Securities -- Covenants."
The particular terms of each series of Securities, as well as any
modifications of or additions to the general terms of the Senior Securities, the
Subordinated Securities or the Convertible Subordinated Securities, as described
herein, which may be applicable in the case of a particular series of
Securities, will be described in a Prospectus Supplement relating to such series
of Securities. Accordingly, for a description of the terms of a particular
series of Securities, reference must be made to both the Prospectus Supplement
relating thereto and to the description of Senior Securities, Subordinated
Securities or Convertible Subordinated Securities, as appropriate, set forth in
this Prospectus.
BEARER SECURITIES
The Company also may offer from time to time securities in bearer form
("Bearer Securities") outside the United States at varying prices and terms.
Such offerings of Bearer Securities may be separate from, or simultaneous with,
offerings of Securities in the United States. The Bearer Securities are not
offered by this Prospectus and may not be purchased by U.S. persons other than
foreign branches of certain U.S. financial institutions. For purposes of this
Prospectus, "U.S. person" means a citizen, national or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof, or an
estate or trust which is subject to United States income taxation regardless of
its source of income.
CERTAIN DEFINITIONS
"Contingent Obligation" means, with respect to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "primary obligations") of
another Person (the "primary obligor"), including, without limitation, any
obligation of such Person, whether or not contingent, (a) to purchase,
repurchase or otherwise acquire such primary obligations or any property
constituting direct or indirect security therefor, or (b) to advance or provide
funds (i) for the payment or discharge of any such primary obligation, or (ii)
to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item, level
of income or financial condition of the primary obligor or (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (d) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect thereof. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by the Company
in good faith.
"Coupon" means any interest coupon appertaining to any Bearer Security.
"Discount Security" means any Security that is issued with "original issue
discount" within the meaning of Section 1273(a) of the Internal Revenue Code of
1986 and the regulations thereunder and any other
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Security designated by the Company as issued with original issue discount for
United States federal income tax purposes.
"Disposed Assets" means all assets of MCI Telecom other than cash and cash
equivalents, equity investments, franchises, licenses, permits, patents, patent
applications, copyrights, trademarks, trade names, goodwill, experimental or
organizational expense, and other like intangibles (but excluding rights of way
treated as assets).
"Indebtedness" means, with respect to any Person, (a) all obligations of
such Person for borrowed money (including, with limitation, reimbursement and
all other obligations with respect to surety bonds, letters of credit and
bankers' acceptances, whether or not matured); (b) all obligations evidenced by
notes, bonds, debentures or similar instruments; (c) all obligations to pay for
the deferred purchase price of property or services except trade accounts
payable and accrued liabilities arising in the ordinary course of business; (d)
all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller under such agreement in the event
of default are limited to repossession or sale of such property); (e) all
obligations under leases which have been or should be, in accordance with
generally accepted accounting principles, recorded as capital leases; and (f)
all indebtedness secured by any Lien on any property or asset owned or held by
that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is non-recourse to the credit of that Person.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, charge or segregated deposit arrangement, encumbrance, lien
(statutory or other) or preference, priority or other security interest or
preferential arrangement of any kind or nature whatsoever including, without
limitation, those created by, arising under or evidenced by any conditional sale
or other title retention agreement or the filing of any financing statement
naming the owner of the asset to which such Lien shall relate as debtor (other
than in connection with a transaction in which such asset shall have been leased
by the named debtor) under the Uniform Commercial Code or comparable law of any
jurisdiction.
"MCI Telecom" means MCI Telecommunications Corporation, a Delaware
corporation, and wholly-owned subsidiary of MCI.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, estate, unincorporated organization or
government or any agency or political subdivision thereof.
"Stated Maturity," when used with respect to any Security or any
installment of principal (including any sinking fund payment) thereof or premium
thereon or interest thereon, means the date specified in such Security or
Coupon, if any, representing such installment of interest, as the date on which
the principal of such Security or such installment of principal, premium or
interest is due and payable.
"Subsidiary," in connection with the covenants set forth below under
"Description of Senior Securities -- Covenants," means, with respect to any
Person, (i) a corporation of which shares of stock having ordinary voting power
(other than stock having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such corporation are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person and (ii) any partnership of which such Person or any Subsidiary
is a general partner or any partnership more than 50% of the equity interests of
which are owned, directly or indirectly, by such Person or by one or more other
Subsidiaries, or by such Person and one or more other Subsidiaries.
EVENTS OF DEFAULT; RIGHTS UPON DEFAULT
An "Event of Default" is defined in the Indentures to mean failure to pay
interest when due for 30 days; failure to pay principal or premium, if any, when
due; failure to make any sinking fund installment when due; failure on MCI's
part to observe any of its other covenants under the Indentures (other than
certain covenants solely for the benefit of holders of a different series of
Securities) for a period of 90 days after notice (from the appropriate Trustee
or holders of at least 25% in aggregate principal amount of the outstanding
Securities of a series); and certain events of bankruptcy or reorganization of
MCI. In addition, an "Event of Default" under
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<PAGE> 14
the Senior Indenture occurs with respect to a series of Senior Securities when
an event of default in respect of any Indebtedness or Contingent Obligation
under which the Company or any of its subsidiaries has at the date of such event
of default outstanding at least $50,000,000, or the equivalent in another
currency or currencies, aggregate principal amount of indebtedness for borrowed
money, shall happen and be continuing and such Indebtedness or Contingent
Obligation shall, as a result thereof, have been accelerated so that the same
shall be or become due and payable prior to the date on which the same would
otherwise have become due and payable, and such acceleration shall not be
rescinded or annulled within 30 days after notice of such acceleration shall
have been given to the Company by the Trustee under the Senior Indenture (if
such event be known to it), or to the Company and the Trustee under the Senior
Indenture by the holders of at least 25% in aggregate principal amount of the
Outstanding Securities of such series; provided, however, that if such event of
default in respect of any Indebtedness or Contingent Obligation shall be
remedied or cured by the Company or waived by the holders of such Indebtedness
or beneficiary or beneficiaries of such Contingent Obligation, then, unless the
Securities of such series shall have been accelerated as provided in this
provision, the Event of Default under this provision by reason of such provision
shall be deemed likewise to have been thereupon remedied, cured or waived
without further action upon the part of either the Trustee under the Senior
Indenture or any holders of the Securities of such series.
If an Event of Default with respect to Securities of any series at the time
outstanding occurs and is continuing, either the appropriate Trustee or the
holders of at least 25% in aggregate principal amount of the outstanding
Securities of that series, by notice as provided in the appropriate Indenture,
may declare the principal amount (or, if the Securities of that series are
Discount Securities, such portion of the principal amount as may be specified in
the terms of that series) of and all accrued but unpaid interest on all the
Securities of that series to be due and payable immediately. At any time after a
declaration of acceleration with respect to Securities of any series has been
made, but before a judgment or decree for payment of money has been obtained by
the appropriate Trustee, the holders of a majority in aggregate principal amount
of the outstanding Securities of that series may, under certain circumstances,
rescind and annul such acceleration.
The Indentures provide that the appropriate Trustee shall, within 90 days
after the occurrence of a default, give to the holders of Securities notice of
all uncured defaults known to it; provided that, except in the case of default
in the payment of the principal of, premium, if any, or interest on any of the
Securities or in the payment of any sinking fund installment, the appropriate
Trustee shall be protected in withholding such notice if in good faith it
determines that the withholding of such notice is in the interest of the holders
of Securities.
MCI is required, pursuant to the terms of the Indentures and applicable
law, to furnish each Trustee within 120 days after the close of each fiscal year
a written statement of certain of MCI's officers to the effect that they have
reviewed MCI's activities and its performance under the Senior Indenture, the
Subordinated Indenture or the Convertible Indenture, as the case may be, and
that, to the best of their knowledge, MCI has fulfilled all its obligations
under such Indenture (or, if it has not, specifying the nature and status of
such default).
In case an Event of Default shall occur (which shall not have been cured or
waived), the appropriate Trustee will be required to exercise its rights and
powers under the appropriate Indenture and use in such exercise the degree of
care and skill of a prudent man under the circumstances in the conduct of his
own affairs. Subject to such provisions, such Trustee will be under no
obligation to exercise any of its rights or powers under such Indenture at the
request of any of the holders of Securities, unless they shall have offered to
the Trustee reasonable security or indemnity. Except as specifically provided in
the Indentures, nothing therein relieves a Trustee thereunder from liability for
its own negligent action, its own negligent failure to act or its own willful
misconduct.
MODIFICATION OF THE INDENTURES
Modifications and amendments of each of the Indentures may be made by the
Company and the appropriate Trustee with the consent of the holders of a
majority in principal amount of the outstanding Securities of each series
affected by such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the holder of each
outstanding Security affected
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<PAGE> 15
thereby, (a) change the Stated Maturity of the principal of, or any installment
or principal of or interest on or sinking fund payment, on any Security, (b)
reduce the principal amount of, or premium or interest on, any Security, or (c)
reduce the percentage in principal amount of outstanding Securities of any
series, the consent of whose holders is required for modification or amendment
of an Indenture. In addition, no modification or amendment of the Convertible
Indenture may, without the consent of the holder of each Convertible
Subordinated Security affected thereby, adversely affect the terms of conversion
of the Convertible Subordinated Securities and no modification or amendment of
the Subordinated Indenture or the Convertible Indenture may, without the written
consent of each holder of Senior Indebtedness (as defined in each such Indenture
as set forth below), modify, directly or indirectly, the subordination
provisions therein or the definition of Senior Indebtedness in any manner that
might alter or impair the subordination of the Subordinated Securities (and any
Coupons appertaining thereto) or the Convertible Subordinated Securities.
No modification or amendment of the Senior Indenture or the Subordinated
Indenture may, without the consent of the holder of each outstanding Security
affected thereby, (a) change the Stated Maturity of or reduce the amount of any
payment to be made with respect to a Coupon, (b) change any obligation of the
Company to pay additional interest contemplated by the Indentures, (c) reduce
the amount of principal of a Discount Security payable upon acceleration of the
maturity thereof, (d) change the currency in which any Security or any premium
or interest thereon is denominated or payable, (e) impair the right to institute
suit for the enforcement of any payment on or with respect to any Security after
the Stated Maturity or date or redemption, (f) reduce the percentage in
principal amount of outstanding Securities of any series, the consent of whose
holders is required for waiver of compliance with certain provisions of any such
Indentures or for waiver of certain defaults, (g) limit any obligation of the
Company to maintain a paying agency outside the United States for payment on
Bearer Securities, (h) limit the obligation of the Company to redeem certain
Bearer Securities or Coupons the beneficial owners of which are required by
United States law to disclose their nationality, residence or identity, or (i)
modify any of the provisions set forth in this paragraph or in the preceding
paragraph and regarding the waiver of past defaults except to increase any such
percentage.
The holders of not less than a majority in principal amount of the
outstanding Securities of each series may, on behalf of all holders of
Securities of that series and any Coupons appertaining thereto, waive any past
default under the appropriate Indenture with respect to Securities of that
series, except a default (a) in the payment of principal of, or any premium on
or any interest on, any Security of such series or in the payment of a related
Coupon or (b) in respect of a covenant or provision of such Indenture which
cannot be modified or amended without the consent of the holder of each
outstanding Security of such series affected.
The Indentures will provide that in determining whether the holders of the
requisite principal amount of the outstanding Securities have given any request,
demand, authorization, direction, notice, consent or waiver thereunder (i) the
principal amount of any Discount Security deemed to be outstanding will be the
amount of the principal thereof that would be due and payable as of the date of
such determination upon acceleration of the maturity thereof, and (ii) the
principal amount of a Security denominated in other than U.S. dollars will be
the U.S. dollar equivalent, determined on the date of original issuance of such
Security, of the principal amount of such Security.
A meeting may be called at any time by the appropriate Trustee, or upon the
request of the Company or the holders of at least 10% in principal amount of the
outstanding Securities of a series, in any such case upon notice given in
accordance with the appropriate Indenture. Except as limited by the proviso in
the fourth preceding paragraph and by the third preceding paragraph, any
resolution presented at a meeting may be adopted by the affirmative vote of the
holders of a majority in principal amount of the outstanding Securities of that
series: provided, however, that, except as limited by the proviso in the fourth
preceding paragraph and by the third preceding paragraph, any resolution with
respect to any demand, consent, waiver or other action that may be made, given
or taken by the holders of a specified percentage, which is more or less than a
majority, in principal amount of outstanding Securities of a series may be
adopted at a meeting by the affirmative vote of the holders of at least such
specified percentage in principal amount of the outstanding Securities of that
series.
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THE TRUSTEES UNDER THE INDENTURES
Citibank participates with a group of banks in a Revolving Credit Agreement
with the Company. As of September 30, 1994, Citibank had no loans outstanding to
MCI under this facility. Citicorp Securities, Inc., an affiliate of Citibank,
and Citibank serve as dealer and issuing and paying agent, respectively, for
MCI's commercial paper program. In addition, MCI maintains depository accounts
with Citibank.
Bankers Trust has been a dealer in connection with certain short-term
investments made by MCI.
Both Citibank and Bankers Trust are customers of MCI. Citicorp, the parent
of Citibank, is one of MCI's ten largest customers by revenue.
DESCRIPTION OF SENIOR SECURITIES
REFERENCE IS MADE TO THE EXPLANATORY STATEMENT ON PAGE 3 OF THIS PROSPECTUS
The Senior Securities are to be issued under the Senior Indenture. The
following description of the Senior Indenture and the Senior Securities and
summaries of certain provisions thereof do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all provisions
of the Senior Indenture and the Senior Securities, including the definitions
therein of certain terms. Wherever particular sections of, or terms defined in,
the Senior Indenture are referred to, such sections or defined terms are
incorporated herein by reference.
GENERAL
The Senior Indenture provides that there may be more than one trustee under
the Senior Indenture, each with respect to one or more different series of
Senior Securities. In the event that there is more than one trustee under the
Senior Indenture, the powers and trust obligations of each trustee as described
herein shall extend only to the one or more series of Senior Securities for
which it is trustee. The effect of the provisions contemplating that at a
particular time there might be more than one trustee acting is that, in that
event, those Senior Securities (whether of one or more than one series) for
which each trustee is acting would be treated as if issued under a separate
indenture.
The Senior Securities will be unsecured and will rank on a parity with all
other unsecured and unsubordinated indebtedness of the Company.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
principal of and premium, if any, and interest, if any, on each series of Senior
Securities will be payable, and the Senior Securities will be exchangeable and
transfers thereof will be registrable, at the office of Citibank at 111 Wall
Street, Fifth Floor, New York, New York 10043, provided that, unless other
arrangements are made, payments of interest may be made by check mailed to the
address of the person entitled thereto as it appears in the Security Register.
LIMITATIONS ON CONSOLIDATION AND MERGER
MCI may not, nor shall it permit MCI Telecom to, merge, consolidate or
combine directly or indirectly with or into any Person, except (a) MCI Telecom
may merge, consolidate or combine with or into any other Person, if immediately
after giving effect thereto, (i) no Event of Default, and no event which, after
notice or lapse of time or both, would constitute an Event of Default, would
exist, and (ii) MCI Telecom shall be the surviving corporation in such merger,
consolidation or combination, or the successor entity is a corporation organized
and existing under the laws of the United States of America or any political
subdivision or State thereof, and (b) MCI may merge, consolidate or combine with
another entity if (i) MCI shall be the corporation surviving the merger, or the
corporation into which the Company shall be merged or formed by any such
consolidation is a corporation organized and existing under the laws of the
United States of America or any political subdivision or State thereof and
expressly assumes MCI's obligations on all the Securities and any Coupons
relating thereto and under the Senior Indenture, and (ii) if immediately after
giving effect to such transaction, no Event of Default, and no event which,
after notice or lapse of time or both, would constitute an Event of Default,
would exist.
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COVENANTS
Maintenance of Telecommunications Business. MCI shall maintain the
business of providing telecommunications services as a principal business of the
Company and its Subsidiaries taken as a whole and shall cause MCI Telecom to
maintain such business as its principal business.
Limitation on Liens. From and after the date of the first issuance of
Securities under the Senior Indenture, MCI may not directly or indirectly, make,
create, incur, assume or suffer to exist any Lien upon or with respect to any of
the capital stock of MCI Telecom, nor shall it permit MCI Telecom to, directly
or indirectly, make, create, incur, assume or suffer to exist any Lien upon or
with respect to any part of its property or assets, whether owned as of such
date or thereafter acquired, unless the Senior Securities then outstanding shall
be equally and ratably secured with any other obligation or indebtedness so
secured, except for any of the following: (a) any Lien existing on the property
of MCI Telecom on the date of the first issuance of Securities under the Senior
Indenture securing Indebtedness outstanding on such date; (b) Liens for taxes,
assessments or other governmental charges which are not delinquent or remain
payable without material penalty, or the validity of which is contested in good
faith by appropriate proceedings (to the extent that it would be appropriate to
contest the levy or imposition of such tax as an alternative to payment) upon
stay of execution or the enforcement thereof and for which adequate reserves or
other appropriate provision has been made in accordance with generally accepted
accounting principles; (c) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary course
of business which are not material or, if material, are not delinquent or remain
payable without penalty or which are being contested in good faith and by
appropriate proceedings; (d) pledges or deposits in connection with workmen's
compensation, unemployment insurance and other social security legislation; (e)
deposits to secure the performance of bids, trade contracts (other than for
borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business; (f) easements, rights-of-way, restrictions and
other similar encumbrances incurred in the ordinary course of business which, in
the aggregate, are not substantial in amount, and do not materially detract from
the overall value to MCI Telecom of all property and assets of MCI Telecom
subject to such Liens or interfere with the ordinary conduct of the business of
MCI Telecom; (g) Liens on assets which shall be acquired by MCI Telecom either
directly or through the acquisition of the owner of such assets after the date
of the first issuance of Securities under the Senior Indenture, if such Liens
shall have existed at the time the assets or the owner of such assets were
acquired and shall not have been created in anticipation thereof by or with the
agreement of MCI Telecom; (h) Liens on assets (other than current assets) which
shall be acquired by MCI Telecom after the date of the first issuance of
Securities under the Senior Indenture, if such Liens shall have been created
solely for the purpose of securing Indebtedness representing, or incurred to
finance, refinance or refund, the cost of the acquisition of such assets or
shall otherwise be created in anticipation of such acquisition by or with the
agreement of MCI Telecom; and (i) Liens not otherwise permitted hereunder
securing obligations of MCI Telecom in an aggregate amount not to exceed an
amount equal to 10% of the total assets of MCI Telecom at any time, provided
that, at the time any such Lien is created or incurred, the aggregate book value
of the assets subject to such Lien shall not exceed an amount equal to 125% of
the amount of the obligation secured by such assets.
As of December 31, 1994, the book value of the assets of MCI Telecom, after
elimination of intercompany balances, represented more than 70% of the
consolidated assets of the Company.
Limitation on Sales and Leases of Assets. From and after the date of the
first issuance of Securities under the Senior Indenture, MCI may not, directly
or indirectly, sell, convey, transfer or otherwise dispose of (whether in one or
a series of transactions) any of the shares of capital stock of MCI Telecom, nor
shall MCI permit MCI Telecom to, directly or indirectly, sell, lease, convey,
transfer or otherwise dispose of (whether in one or a series of transactions)
all or a material part of the assets, business or property of MCI Telecom
(including, without limitation, accounts and notes receivable, with or without
recourse), whether owned as of such date or thereafter acquired, or enter into
any agreement to do any of the foregoing, except any of the following; (a)
dispositions by MCI Telecom of obsolete or worn-out property or real property no
longer used or useful in its business; (b) sales to local exchange carriers,
with or without recourse, of customer receivables in the ordinary course of
business; (c) dispositions of assets acquired, either directly or through the
acquisition
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<PAGE> 18
of the owner of such assets, after the date of the first issuance of Securities
under the Senior Indenture, provided, that each such disposition shall be for
fair and adequate consideration; and (d) dispositions (including, without
limitation, sales pursuant to sale-leaseback transactions) by MCI Telecom not
otherwise permitted hereunder which are made for fair market value, provided
that the book value of all Disposed Assets disposed of after the date of the
first issuance of Securities under the Senior Indenture does not exceed 25% of
the greater of (i) the book value of the assets of MCI Telecom as of December
31, 1993 and (ii) the book value of the assets of MCI Telecom as of the date of
the most recent financial statements furnished to Citibank.
DESCRIPTION OF SUBORDINATED SECURITIES
REFERENCE IS MADE TO THE EXPLANATORY STATEMENT ON PAGE 3 OF THIS PROSPECTUS
The Subordinated Securities are to be issued under the Subordinated
Indenture. The following description of the Subordinated Indenture and summaries
of certain provisions thereof do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all provisions of the
Subordinated Indenture, including the definitions therein of certain terms.
Wherever particular sections of, or terms defined in, the Subordinated Indenture
are referred to, such sections or defined terms are incorporated herein by
reference.
GENERAL
The Subordinated Indenture provides that there may be more than one trustee
under the Subordinated Indenture, each with respect to one or more different
series of Subordinated Securities. In the event that there is more than one
trustee under the Subordinated Indenture, the powers and trust obligations of
each trustee as described herein shall extend only to the one or more series of
Subordinated Securities for which it is trustee. The effect of the provisions
contemplating that at a particular time there might be more than one trustee
acting is that, in that event, those Subordinated Securities (whether of one or
more than one series) for which each trustee is acting would be treated as if
issued under a separate indenture.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
principal of, premium, if any, and interest, if any, for each series of
Subordinated Securities will be payable, and the Subordinated Securities will be
exchangeable and transfers thereof will be registrable, at the office of Bankers
Trust at Four Albany Street, New York, New York 10006, provided that, unless
other arrangements are made, payments of interest may be made by check mailed to
the address of the person entitled thereto as it appears in the Security
Register.
LIMITATIONS ON CONSOLIDATION, MERGER AND SALE OF ASSETS
MCI may not consolidate with or merge into any other corporation, or
convey, transfer or lease its properties and assets substantially as an entirety
to, any Person, unless (a) the successor entity is a corporation organized and
existing under the laws of the United States of America or any political
subdivision or State thereof and expressly assumes MCI's obligations on all the
Securities and Coupons relating thereto and under the Subordinated Indenture;
and (b) after giving effect to such transaction, no Event of Default, and no
event which, after notice or lapse of time or both, would become an Event of
Default, would occur and be continuing.
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the
Subordinated Securities will be subordinated in right of payment, as set forth
in the Subordinated Indenture, to the prior payment in full of all Senior
Indebtedness of MCI, whether outstanding on the date of the Subordinated
Indenture or thereafter incurred. Senior Indebtedness is defined in the
Subordinated Indenture as any liability or obligation of MCI (whether incurred
directly by MCI, by assumption or otherwise) (i) for money borrowed (except as
indicated below), or (ii) arising under a lease of property, equipment or other
assets which, pursuant to generally
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accepted accounting principles then in effect, is classified upon the balance
sheet of MCI or any subsidiary of MCI as a liability of MCI or such subsidiary,
or (iii) arising under an express written guaranty by MCI of the liability or
obligation of another (including any subsidiary of MCI) of the type described in
clauses (i) or (ii) above, or (iv) arising under an express written guaranty by
MCI of the liability or obligation of another (including any subsidiary of MCI),
where the liability or obligation of MCI is, by the express terms of the
guaranty, superior in right of payment to the Subordinated Securities, or (v)
created, incurred or assumed by MCI in connection with the acquisition of any
other business, where, but only if, the liability or obligation of MCI is, by
the express terms of the agreement or instrument creating or evidencing such
liability or obligation of MCI, superior in right of payment to the Subordinated
Securities, unless, in each such case, it is provided in the agreement or
instrument creating or evidencing such liability or obligation of MCI or
pursuant to which such liability or obligation is outstanding, that such
liability or obligation is not superior in right of payment to the Subordinated
Securities. Any Convertible Subordinated Securities issued under the Convertible
Indenture do not constitute Senior Indebtedness with respect to the Subordinated
Securities and will rank on a parity with the Subordinated Securities in right
of payment. As of September 30, 1994, the aggregate amount of Senior
Indebtedness was approximately $3,108 million. See also "The
Securities-Explanatory Statement".
By reason of the subordination described above, in the event of insolvency,
creditors of MCI who are not holders of Senior Indebtedness or of the
Subordinated Securities may recover less, ratably, than holders of Senior
Indebtedness, and may recover more, ratably, than the holders of the
Subordinated Securities.
DESCRIPTION OF CONVERTIBLE SUBORDINATED SECURITIES
REFERENCE IS MADE TO THE EXPLANATORY STATEMENT ON PAGE 3 OF THIS PROSPECTUS
The Convertible Subordinated Securities are to be issued under the
Convertible Indenture. The following description of the Convertible Indenture
and summaries of certain provisions thereof do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, all
provisions of the Convertible Indenture, including the definitions therein of
certain terms. Wherever particular sections of, or terms defined in, the
Convertible Indenture are referred to, such sections or defined terms are
incorporated herein by reference.
GENERAL
The Convertible Indenture provides that there may be more than one trustee
under the Convertible Indenture, each with respect to one or more different
series of Convertible Subordinated Securities. In the event that there is more
than one trustee under the Convertible Indenture, the powers and trust
obligations of each trustee as described herein shall extend only to the one or
more series of Convertible Subordinated Securities for which it is trustee. The
effect of the provisions contemplating that at a particular time there might be
more than one trustee acting is that, in that event, those Convertible
Subordinated Securities (whether of one or more than one series) for which each
trustee is acting would be treated as if issued under a separate indenture.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
principal of, premium, if any, and interest, if any, for each series of
Convertible Subordinated Securities will be payable, and the Convertible
Subordinated Securities will be exchangeable, transfers thereof will be
registrable and may be presented for conversion, at the office of Bankers Trust
at Four Albany Street, New York, New York 10006, provided that, unless other
arrangements are made, payments of interest may be made by check mailed to the
address of the person entitled thereto as it appears in the Security Register.
LIMITATIONS ON CONSOLIDATION, MERGER AND SALE OF ASSETS
MCI may not consolidate with or merge into any other corporation, or
convey, transfer or lease its properties and assets substantially as an entirety
to, any Person, unless (a) the successor entity is a corporation organized and
existing under the laws of the United States of America or any political
subdivision or State thereof and expressly assumes MCI's obligations on all the
Securities and Coupons relating thereto and under
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the Convertible Indenture and (b) after giving effect to such transaction, no
Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, would occur and be continuing.
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the
Convertible Subordinated Securities will be subordinated in right of payment, as
set forth in the Convertible Indenture, to the prior payment in full of all
Senior Indebtedness of MCI, whether outstanding on the date of the Subordinated
Indenture or thereafter incurred. Senior Indebtedness is defined in the
Convertible Indenture as any liability or obligation of MCI (whether incurred
directly by MCI, by assumption or otherwise) (i) for money borrowed (except as
indicated below), or (ii) arising under a lease of property, equipment or other
assets which, pursuant to generally accepted accounting principles then in
effect, is classified upon the balance sheet of MCI or any subsidiary of MCI as
a liability of MCI or such subsidiary, or (iii) arising under an express written
guaranty by MCI of the liability or obligation of another (including any
subsidiary of MCI) of the type described in clauses (i) or (ii) above, or (iv)
arising under an express written guaranty by MCI of the liability or obligation
of another (including any subsidiary of MCI), where the liability or obligation
of MCI is, by the express terms of the guaranty, superior in right of payment to
the Convertible Subordinated Securities, or (v) created, incurred or assumed by
MCI in connection with the acquisition of any other business, where, but only
if, the liability or obligation of MCI is, by the express terms of the agreement
or instrument creating or evidencing such liability or obligation of MCI,
superior in right of payment to the Convertible Subordinated Securities, unless,
in each such case, it is provided in the agreement or instrument creating or
evidencing such liability or obligation of MCI or pursuant to which such
liability or obligation is outstanding, that such liability or obligation is not
superior in right of payment to any Convertible Subordinated Securities. Any
Subordinated Securities issued under the Subordinated Indenture do not
constitute Senior Indebtedness with respect to the Convertible Subordinated
Securities and will rank on a parity with the Convertible Subordinated
Securities in right of payment.
By reason of the subordination described above, in the event of insolvency,
creditors of MCI who are not holders of Senior Indebtedness or of the
Convertible Subordinated Securities may recover less, ratably, than holders of
Senior Indebtedness, and may recover more, ratably, than the holders of the
Convertible Subordinated Securities. As of September 30, 1994, the aggregate
amount of Senior Indebtedness was approximately $3,108 million. See "The
Securities-Explanatory Statement".
CONVERSION
If any Convertible Subordinated Security is to be issued, certain terms and
provisions with respect thereto will be set forth in a Convertible Subordinated
Security Prospectus Supplement (a "Convertible Prospectus Supplement"). To the
extent that the description set forth herein is inconsistent with such terms and
provisions, such terms and provisions shall govern with respect to any
Convertible Subordinated Security.
Except as set forth in the applicable Convertible Prospectus Supplement,
the holders of Convertible Subordinated Securities will be entitled at any time
on or prior to the close of business on the date set forth in the applicable
Convertible Prospectus Supplement, subject to prior redemption, to convert such
Convertible Subordinated Securities or portions thereof (which are $1,000 or
integral multiples thereof) into Common Stock of the Company at the conversion
price set forth on the cover page of such Convertible Prospectus Supplement. No
adjustment will be made on conversion of any Debenture for interest accrued
thereon or for dividends on any Common Stock issued. If any Convertible
Subordinated Security is converted between a record date for the payment of
interest and the next succeeding interest payment date, such Convertible
Subordinated Security must be accompanied by funds equal to the interest payable
to the registered holder on such interest payment date on the principal amount
so converted. The Company is not required to issue fractional interests in
Common Stock upon conversion of Convertible Subordinated Securities and, in lieu
thereof, will pay a cash adjustment based upon the market price of the Common
Stock on the last business day prior to the date of conversion. In the case of
Convertible Subordinated Securities called for redemption, conversion rights
will expire at the close of business on the redemption date.
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<PAGE> 21
Also except as set forth in the applicable Convertible Prospectus
Supplement, the conversion price is subject to adjustment as set forth in the
Convertible Indenture in certain events, including the issuance of dividends on
the Company's Common Stock payable in its Common Stock: subdivisions,
combinations and certain reclassifications of the Common Stock; certain
consolidations, mergers and sales of the property of the Company; the issuance
to all holders of Common Stock of certain rights or warrants entitling them to
subscribe for Common Stock at less than the then current market price (as
defined) of the Common Stock; and the distribution to all holders of Common
Stock of evidences of indebtedness or of securities of the Company or of assets
(other than cash dividends or cash distributions payable out of consolidated net
earnings or retained earnings). No adjustment in the conversion price will be
required unless such adjustment would require a change of at least 1% in the
price then in effect; provided however, that any adjustment that would otherwise
be required to be made shall be carried forward and taken into account in any
subsequent adjustment. Except as stated above, the conversion price will not be
adjusted for the issuance of Common Stock or any securities convertible into or
exchangeable for Common Stock, or carrying the right to purchase any of the
foregoing, in exchange for cash, property or services. The Convertible Indenture
will provide that in case of the reclassification or change in the outstanding
shares of Common Stock, or the consolidation or merger of the Company with or
into another corporation which is effected in such a way that holders of Common
Stock are entitled to receive stock, securities or property (including cash)
with respect to or in exchange for Common Stock, or the sale of conveyance of
its property as an entirety or substantially as an entirety to another
corporation, a supplemental indenture shall be executed providing that the
holder of a Convertible Subordinated Security shall have the right to convert
such Convertible Subordinated Security into the kind and amount of shares, of
stock or other securities or property (including cash) receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of shares of Common Stock which would have been issuable upon
conversion of such Convertible Subordinated Security immediately prior thereto.
Except as set forth in the applicable Convertible Prospectus Supplement,
any Convertible Subordinated Securities called for redemption, unless
surrendered for conversion on or before the close of business on the redemption
date, are subject to being purchased from the holder of such Convertible
Subordinated Securities at the redemption price by one or more broker-dealers or
other purchasers who may agree with the Company to purchase such Convertible
Subordinated Securities and convert them into Common Stock of the Company.
In the event of a taxable distribution to holders of Common Stock which
results in an adjustment of the conversion price, the holders of the Convertible
Subordinated Securities may, in certain circumstances, be deemed to have
received a distribution subject to Federal income tax as a dividend. See the
Prospectus Supplement or Supplements relating to such Securities.
DESCRIPTION OF CAPITAL STOCK
MCI has authority to issue 2,550,000,000 shares of capital stock, par value
$.10 per share, consisting of 2 billion shares of Common Stock, 500 million
shares of Class A Common Stock ("Class A Common Stock") and 50 million shares of
Preferred Stock ("Preferred Stock"). At September 30, 1994, there were 544
million shares of Common Stock outstanding (net of treasury shares), 83 million
shares of Common Stock contingently issuable upon the exercise of options, 136
million shares of Class A Common Stock outstanding and no shares of Preferred
Stock outstanding. The board of directors of MCI has authority (without action
by its stockholders) to issue the authorized and unissued Preferred Stock in one
or more series and, within certain limitations, to determine the voting rights,
preferences as to dividends and in liquidation, conversion and other rights of
each such series.
Dividend Rights. Dividends may be paid on the Common Stock out of funds
legally available therefor when, as and if declared by MCI's board of directors.
Since May 1990, the board of directors has declared semi-annual cash dividends
(adjusted for the effect of a two-for-one stock split in July 1993) of $.025 per
share of Common Stock. The holders of Class A Common Stock are entitled to
receive out of funds legally available therefor when, as and if declared by
MCI's board of directors, dividends equal to the aggregate per share amount of
any dividend (other than a dividend payable in shares of Common Stock) paid on
the
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Common Stock, and MCI shall declare and pay such a dividend on the Class A
Common Stock at the same times that it declares and pays any dividend on the
Common Stock.
Voting Rights. On all propositions except the election of directors,
holders of Common Stock and Class A Common Stock may cast one vote for each
share on any matter in respect of which the holders of Common Stock are entitled
to vote and the holders of Common Stock and Class A Common Stock vote together
as a single class.
MCI's board of directors consists of twelve persons, of whom two are
presently elected by the holders of Class A Common Stock. The holders of the
Class A Common Stock, voting together with the holders of any series of
Preferred Stock that is accorded the right (the "Class A Preferred Stock", and
together with the Class A Common Stock, the "Class A Shares") as a separate
class, are entitled to elect a percentage of the total number of directors (the
"Class A Directors") that is equal to the percentage of the total voting power
of all voting securities of MCI that is represented by the Class A Shares,
except that if the Class A Shares' voting power represents between 15% and 20%
of the total voting power of all voting securities, the holders of Class A
Shares are entitled to elect 20% of the total number of directors. As of the
date of this Prospectus, all of the outstanding shares of Class A Common Stock
are owned by British Telecommunications plc ("BT"). The Class A Directors are
elected for a one year term. The holders of Class A Shares may remove any Class
A Director by the affirmative vote of (i) not less than four-fifths of the
holders of all outstanding shares entitled to vote thereto if for cause, or (ii)
not less than a majority of the outstanding shares of Class A Common Stock if
without cause provided that, if less than all Class A Directors are to be
removed, no Class A Director may be removed without cause if the votes cast
against such director's removal would be sufficient to elect such director if
then cumulatively voted at an election of all Class A Directors.
The balance of MCI's board of directors is divided into three classes, each
class as nearly equal in number to the other classes as the then total number of
directors (excluding the Class A Directors) permits. As of the date of this
Prospectus, two of the three classes each have three directors and one class has
four directors. The members of each class of directors are elected for
three-year terms by the holders of Common Stock. In voting upon the election of
these directors, voting is cumulative. Each holder of Common Stock has the right
to cast as many votes in the aggregate as equals the number of votes to which
that stockholder is entitled on other matters multiplied by the number of
directors to be elected to the classes. Each holder of Common Stock may cast the
whole number of votes for one candidate or may distribute votes among the
candidates, as he or she chooses. The holders of Common Stock may remove any
director (excluding Class A Directors) for cause by an affirmative vote of
four-fifths of the outstanding shares of Common Stock.
MCI's Certificate of Incorporation provides that so long as any shares of
Class A Common Stock are outstanding, MCI shall not, without the written consent
or affirmative vote of the holders of a majority of the shares of Class A Common
Stock (a) amend its Certificate of Incorporation so as to affect adversely the
rights of holders of Class A Common Stock; (b) effect any Business Combination
(as defined in the Certificate of Incorporation) prior to September 30, 1998;
(c) issue any series or class of capital stock having either (i) more than one
vote per share (other than pursuant to the Rights Plan described below), or (ii)
a class vote on any matter, except as required by Delaware corporate law or to
the extent holders of Preferred Stock may have the right, voting separately as a
class, to elect a number of directors upon the occurrence of a default in
payment of dividends or redemption price; (d) adopt a stockholder rights plan or
amendment of the Rights Plan that would adversely affect any holder of Class A
Common Stock in relation to the Rights Plan; (e) issue, subject to certain
exceptions, voting securities representing voting power in excess of (i) 10% of
the aggregate voting power of MCI's outstanding voting securities as of the date
of such issuance, or (ii) 15% of the aggregate voting power of the average
number of MCI's voting securities outstanding over a rolling three-year period;
(f) issue voting securities (other than issuances (i) on a pro rata basis to all
holders of a class or series of capital stock, (ii) upon the exercise of Rights
under the Rights Plan, or (iii) upon exercise of any option or options to
purchase voting securities granted in connection with the execution of a
definitive agreement providing for any business combination) to any person
(other than a holder of Class A Common Stock) that beneficially owns, or as a
result thereof would beneficially own, more than 5% of MCI's then outstanding
voting securities, and transactions with any person that beneficially owns more
than 5% of MCI's then outstanding shares of capital stock, other than
transactions (i) applicable on an equal basis to all holders
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<PAGE> 23
of a class or series of stock generally, (ii) in accordance with the Rights
Plan, or (iii) relating to any business combination effected after September 30,
1998; (g) effect any single or related series of acquisitions of businesses or
assets or, with certain exceptions, investments therein pursuant to which the
aggregate purchase price paid will exceed 20% (or 5% if such acquisition or
investment is in a business unrelated to all telecommunications and other
electronic information services and equipment for the provision of such services
including, without limitation, all forms of telecommunications access and egress
(landline and wireless), and value-added consumer and business services
generated through or as a result of underlying telecommunications services using
all technology (voice, data and image) and physical transport, network
intelligence, and software applications, and including, without limitation, (i)
information processing, (ii) systems integration and outsourcing, (iii)
transaction processing and (iv) cable television) of the market capitalization
of MCI at the time MCI executes a definitive agreement to effect such
acquisition or investment; (h) except for a sale of all or substantially all of
the assets of MCI, effect any single or related series of sales, transfer or
other dispositions or encumbrances of assets having a fair market value in
excess of 15% of the aggregate fair market value of MCI's total assets at the
time MCI executes a definitive agreement to effect such transaction; (i) incur
indebtedness for money borrowed that would cause MCI's ratio of debt-to-total
capitalization to exceed 65%; and (j) declare any extraordinary cash dividends
or other distribution to holders of any class or classes, and/or any series
thereof, of capital stock in excess of 5% of MCI's market capitalization at the
time of such dividend or other distribution.
MCI's Certificate of Incorporation also requires the written request of the
holders of not less than two-thirds of the outstanding shares entitled to vote
in the elections of directors to call a special meeting of stockholders and the
affirmative vote of not less than four-fifths of the outstanding shares (a) to
make, alter, amend or repeal by-laws by stockholder action; or (b) to effect any
changes in the provisions of the Certificate of Incorporation relating to (i)
cumulative voting; (ii) the making, altering, amending or repealing of by-laws
by stockholder action, and (iii) the calling of special meetings by
stockholders. MCI's by-laws require that notice of any proposed nominations for
election of directors (other than by the board itself) be given to MCI not less
than 60 days prior to the first anniversary of the date of the last meeting of
stockholders at which directors were elected.
Liquidation Rights and Other Provisions. After distribution in full of the
preferential amount to be distributed to the holders of any outstanding
Preferred Stock upon any voluntary or involuntary liquidation, dissolution or
winding-up of MCI, the holders of Common Stock and Class A Common Stock are
entitled to receive pro rata, on a share-for-share basis, the remaining assets
of MCI available for distribution to stockholders.
The Common Stock has no preemptive or conversion rights. The Common Stock
and Class A Common Stock are not redeemable (and there are no sinking fund
provisions therefor), except in the event that a holder whose continued holding
of such stock, in the judgment of the board of directors, may result in the loss
of or failure to secure the renewal of any license or franchise from any
governmental agency held by MCI to conduct its business, which license or
franchise is conditioned upon some or all of the holders of the stock of MCI
possessing prescribed qualifications. All outstanding shares of Common Stock
are, and the shares of Common Stock issuable upon conversion of the Convertible
Subordinated Securities will be, when issued pursuant to the terms of the
Convertible Indenture, fully paid and not liable for further calls or
assessments.
The Class A Common Stock has no preemptive rights, except that if MCI
issues voting securities, BT, so long as BT's aggregate voting power of all
outstanding voting securities of MCI is at least 10%, will have the right,
exercisable in whole or in part, to acquire from MCI an amount of such voting
securities to maintain its aggregate voting power at the same percentage prior
to the issuance of such voting securities; provided, however, such equity
purchase right will not apply (i) to grants of any options or any other rights
to acquire voting securities pursuant to MCI's employee benefit plans, (ii) upon
the exercise or exchange of any Rights, (iii) to issuances of shares of Common
Stock upon the conversion or exercise of any options, warrants, rights or other
securities convertible into or exercisable for Common Stock that are outstanding
as of September 30, 1994 to the extent that an equal number of outstanding
shares of Common Stock are repurchased by MCI through open market purchases or
otherwise within 90 days after the time that BT would otherwise be entitled to
equity purchase rights, (iv) upon the conversion or exercise of any options,
warrants, rights or other
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securities convertible into or exercisable for such voting securities, the
issuance of which was subject to this equity purchase right, (v) to certain de
minimis offerings for consideration other than cash, (vi) to the reissuance of
such voting securities purchased by MCI subsequent to September 30, 1994, (vii)
issuances of any voting securities to BT or any of its affiliates and (viii) any
pro rata stock split, stock dividend, or other combination or reclassification
of any capital stock of MCI. The Class A Common Stock is automatically converted
into Common Stock on a one-for-one basis if (i) it is transferred to a party not
affiliated with BT, (ii) the voting power of the Class A Common Stock becomes
less than 10% of the total voting power of all outstanding voting securities of
MCI, or (iii) if the holders of Class A Common Stock have transferred more than
25% of their voting securities of MCI and hold less than 15% of the total voting
power of all outstanding voting securities of MCI, or upon the occurrence of
certain other events.
Rights Plan. On September 7, 1994, the board of directors of MCI declared
a dividend of one preferred share purchase right (a "Right") for each
outstanding share of Common Stock and Class A Common Stock (collectively, the
"Common Shares") to the holders of record on October 11, 1994. Prior to the
earlier of (i) the Distribution Date (as defined below), (ii) the redemption of
the Rights and (iii) the expiration of the Rights and, in some instances, after
the Distribution Date and prior to the earlier of the redemption of the Rights
and the expiration of the Rights, the Rights will also be attached to all future
issuances of Common Shares. Each Right entitles the registered holder to
purchase from the Company one one-hundredth of a share of Series E Junior
Participating Preferred Stock, par value $.10 per share (the "Preferred
Shares"), of MCI at an initial price of $100 per one one-hundredth of a
Preferred Share (the "Purchase Price"), subject to adjustment.
The Rights will become exercisable on the date (the "Distribution Date")
that is the earlier of (i) the tenth day following a public announcement that a
person or group of affiliated or associated persons have acquired beneficial
ownership of 10% or more of the outstanding Common Shares (more than 20.1% of
the outstanding Common Shares in the case of share acquisitions by BT), subject
to certain exceptions, (an "Acquiring Person"), or (ii) 10 business days (or
such later date as may be determined by action of the board of directors prior
to such time as any person or group of affiliated persons becomes an Acquiring
Person) following the commencement or announcement of an intention to make a
tender offer or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of 10% or more of the outstanding
Common Shares (more than 20.1% of the outstanding Common Shares in the case of a
tender offer or exchange offer commenced or announced by BT). BT is not deemed
an Acquiring Person solely by virtue of the shares of Class A Common Stock it
presently owns.
In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person, each holder of a Right (other than Rights
beneficially owned by the Acquiring Person, which will become void), will
thereafter have the right, subject to certain restrictions, to receive upon
exercise in lieu of Preferred Shares that number of shares of Common Stock (or,
at the option of MCI, that number of one-hundredth of Preferred Shares)
determined as set forth in the Rights Plan.
In the event that, after a person or group has become an Acquiring Person,
MCI is acquired in a merger or other business combination transaction or 50% or
more of its consolidated assets or earning power are sold, proper provision will
be made so that each holder of a Right (other than Rights beneficially owned by
an Acquiring Person, which will have become void) will thereafter have the right
to receive, upon the exercise thereof at the then current exercise price, that
number of shares of common stock of the acquiring company which at the time of
such transaction will have a market value equal to two times the exercise price
of the Right.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred Shares, (ii) upon
the grant to holders of the Preferred Shares of certain rights, options or
warrants to subscribe for or purchase Preferred Shares at a price, or securities
convertible into Preferred Shares with a conversion price, less than the then
current market price of the Preferred Shares, or (iii) upon the distribution to
holders of the Preferred Shares of evidences of indebtedness or assets
(excluding regular periodic cash dividends paid out of earnings or retained
earnings or
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dividends payable in preferred shares) or of subscription rights or warrants
(other than those referred to above).
The number of outstanding Rights is subject to adjustment in the event of a
stock dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
Prior to the Distribution Date, the Rights will be transferred with and
only with the Common Shares. Until the Distribution Date (or earlier redemption,
exchange or expiration of the Rights), new Common Share certificates issued upon
transfer or new issuances of Common Shares will contain a notation incorporating
the Rights by reference.
The Rights are not exercisable prior to the Distribution Date. The Rights
will expire on September 30, 2004, unless extended or unless the Rights are
earlier redeemed or exchanged by MCI.
At any time prior to the time an Acquiring Person becomes such, the board
of directors may redeem the Rights in whole, but not in part, at a price of $.01
per Right, provided that pursuant to MCI's Certificate of Incorporation, until
September 30, 1998, so long as any shares of Class A Common Stock remain
outstanding, such redemption will also require the affirmative vote of the
holders of 75% of all the Company's outstanding voting securities. In addition,
until September 30, 2004, MCI has agreed with BT that, without BT's consent, it
will not redeem the Rights unless it has followed certain auction procedures.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of MCI, including, without limitation, the right to vote
or to receive dividends.
For a full description of the existing provisions of the MCI capital stock
and the Rights, reference is made to the actual provisions of the Certificate of
Incorporation, by-laws and Rights Plan of MCI which have been filed with the
Commission as exhibits to the Registration Statement of which this Prospectus is
a part. The foregoing summary of MCI's capital stock and the Rights Plan is
subject to, and qualified in its entirety by, such reference.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain United States federal
income tax consequences of the ownership and disposition of the Securities. The
discussion only addresses the tax consequences to persons who hold the
Securities as capital assets and does not deal with special classes of holders,
such as dealers in securities, financial institutions, insurance companies,
tax-exempt organizations or persons holding Securities as a hedge against
currency risks. In addition, the discussion does not address the tax
consequences of the ownership and disposition of any specific series of
Securities, which consequences may be affected by the particular terms of such
series of Securities, and may require additional discussion in a prospectus
supplement relating to such series of Securities. In particular, the discussion
does not address the tax consequences of Securities that are denominated in, or
indexed to, currencies other than the United States dollar or Securities that
are convertible into Common Stock of the Company. In all cases, persons
considering the purchase of Securities should consult their own tax advisors
concerning the application of United States federal income tax laws to their
particular situations as well as any consequences arising under the laws of any
other taxing jurisdiction.
UNITED STATES HOLDER
A United States Holder is a holder that is a citizen or resident of the
United States, a corporation or partnership created or organized in or under the
laws of the United States or any political subdivision thereof or an estate or
trust the income of which is subject to United States federal income taxation
regardless of its source. As used herein, the term "Non-United States Holder"
means a holder that is not a United States Holder.
Payments of Interest. Interest on a Security (other than interest included
in the stated redemption price at maturity of a Discount Security, described
below) will be taxable to a United States Holder as ordinary
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interest income at the time it is accrued or is paid in accordance with the
United States Holder's method of accounting for tax purposes.
Original Issue Discount Securities. The following summary is a general
discussion of the United States federal income tax consequences to United States
Holders of Securities issued at an original issue discount ("Discount
Securities").
For United States federal income tax purposes, the excess of the stated
redemption price at maturity of a Discount Security over its issue price
(defined as the first price at which a substantial amount of the issue of
Discount Securities is sold for money) will be original issue discount if such
excess equals or exceeds 1/4 of 1 percent of the stated redemption price at
maturity of such Discount Security multiplied by the number of complete years to
its maturity. The stated redemption price at maturity of a Discount Security
includes its principal amount and all payments provided by the Discount Security
other than payments of "qualified stated interest". The term "qualified stated
interest" generally means stated interest that is unconditionally payable in
cash or property (other than debt instruments of the Company) at least annually
at a single fixed rate. Special rules apply to determine qualified stated
interest and original issue discount with respect to debt instruments that
provide for stated interest at current values of (i) one or more qualified
floating rates, (ii) a single fixed rate and one or more qualified floating
rates, (iii) a single objective rate, or (iv) a single fixed rate and a single
objective rate that is a qualified inverse floating rate. A "qualified floating
rate" is any floating rate where variations in such rate can reasonably be
expected to measure contemporaneous variations in the cost of newly borrowed
funds in the currency in which the debt instrument is denominated, as well as
certain multiples of a qualified floating rate. An "objective rate" is a rate
that is not itself a qualified floating rate but which is determined using a
single fixed formula and which is based on one or more qualified floating rates,
on one or more rates where each rate would be a qualified floating rate for a
debt instrument denominated in a currency other than the currency in which the
debt instrument is denominated, on the yield or changes in the price of actively
traded personal property, or on a combination of such rates. A "qualified
inverse floating rate" is an objective rate that is equal to a fixed rate minus
a qualified floating rate, where variations in the rate can reasonably be
expected to inversely reflect contemporaneous variations in the cost of newly
borrowed funds. A Security which has an issue price not less than its principal
amount may, nonetheless, be considered to have original issue discount. If
interest is included in the stated redemption price at maturity, it will be
accounted for under the original issue discount rules, rather than the holder's
method of accounting.
United States Holders of Discount Securities will have to include original
issue discount in income before the receipt of cash attributable to such income.
The amount of original issue discount includible in income by the initial holder
of a Discount Security and, subject to an adjustment, by any subsequent holder
is the sum of the daily portions of original issue discount with respect to the
Discount Security for each day during the taxable year or portion of the taxable
year on which such holder holds the Discount Security. The daily portion is
determined by allocating to each day of the relevant "accrual period" a pro rata
portion of an amount equal to the excess of (i) the product of (a) the "adjusted
issue price" of the Discount Security at the beginning of that accrual period,
and (b) the "yield to maturity" of the Discount Security (determined on the
basis of compounding at the close of each accrual period and properly adjusted
for the length of the accrual period), over (ii) the sum of the qualified stated
interest payments, if any, payable during such accrual period. For these
purposes, an "accrual period" is an interval of time with respect to which the
accrual of original issue discount is measured. Accrual periods may be of any
length and may vary in length over the term of the debt instrument, provided
that each accrual period is no longer than one year and each scheduled payment
of principal or interest occurs either on the final day of an accrual period or
on the first day of an accrual period. The "adjusted issue price" of the
Discount Security at the beginning of any accrual period is the issue price of
such Discount Security plus the accrued original issue discount for each prior
accrual period, reduced by any payments made on the Discount Security other than
payments of qualified stated interest. Under these rules, United States Holders
may have to include in income increasingly greater amounts of original issue
discount in successive accrual periods. The computation of original issue
discount on a Discount Security that is subject to repayment at the option of
the Holder or redemption at the option of the Company may be affected by rules
presuming the option to be exercised, with the result that the original issue
discount may be accrued as income over a shorter period.
18
<PAGE> 27
Under recently proposed regulations, an "objective rate" would be redefined
(for debt instruments issued 60 days or more after the proposed regulations are
finalized) as a rate (other than a qualified floating rate) that is determined
using a single fixed formula and that is based on objective financial or
economic information, provided that such information is neither within the
control of the issuer (or a related party) nor unique to the circumstances of
the issuer (or a related party), such as dividends, profits, or the value of the
issuer's stock. The proposed regulations would also clarify certain other
provisions affecting Discount Securities.
United States Holders may, subject to certain limitations and exceptions,
elect to include in income all interest (including stated interest, acquisition
discount, original issue discount, de minimis original issue discount, market
discount, de minimis market discount, and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium) that accrues on a debt
instrument by using the constant yield method applicable to original issue
discount.
Acquisition Premium. If a United States Holder purchases a Discount
Security at a premium, i.e., at a price in excess of the adjusted issue price,
the amount includible in income in each taxable year as original issue discount
is reduced by an amount equal to the original issue discount (as otherwise
determined) multiplied by a fraction, the numerator of which is such excess and
the denominator of which is the original issue discount for the period to
maturity after the Holder's purchase. If a United States Holder purchases a
Discount Security at a price in excess of its stated redemption price at
maturity, such excess may be deductible as amortizable bond premium (discussed
below).
Short-Term Obligations. In general, an individual or other cash method
United States Holder of any Discount Security that matures one year or less from
the date of its issuance (a "Short-Term Obligation") is not required to accrue
original issue discount for United States federal income tax purposes unless it
elects to do so. United States Holders who report income for federal income tax
purposes under the accrual method and certain other United States Holders,
including banks and dealers in securities, are required to accrue the original
issue discount on such Discount Securities on a straight-line basis, unless an
election is made to accrue the original issue discount under the constant yield
method based on daily compounding. In the case of a United States Holder not
required and not electing to include the original issue discount in income
currently, any gain realized on the sale or maturity of a Short-Term Obligation
will be ordinary income to the extent of the original issue discount accrued on
a straight-line basis through the date of sale or maturity. United States
Holders who are not required and do not elect to accrue the original issue
discount on a Short-Term Obligation will be required to defer deductions for
interest on borrowings allocable to such a Short-Term Obligation in an amount
not exceeding the accrued discount until such accrued discount is included in
income.
Amortizable Bond Premium. If a United States Holder of a Security
purchases it at a cost which is in excess of its stated redemption price at
maturity, the excess cost may be deductible by the purchaser as "amortizable
bond premium" on a constant yield basis over the remaining term of the Security.
The deduction is available only if an election is made by the purchaser or is in
effect. The election applies to all debt instruments held or subsequently
acquired by the electing purchaser. Amortizable bond premium must be treated as
an offset to interest income on the Security acquired, rather than as a separate
deduction. An electing purchaser's tax basis in a Security is reduced by the
amount of bond premium amortized with respect to the Security.
Market Discount. If a United States Holder of a Security (including, in
some instances, an initial holder) purchases it at a "market discount" and
thereafter realizes gain upon a disposition or a retirement of the Security, the
lesser of such gain or the portion of the market discount that accrues on a
straight-line basis (or, if the holder so elects, on a constant interest rate
basis) while the Security was held by such holder will be treated as ordinary
interest income at the time of such disposition or retirement. In addition, a
holder may be required to include in gross income, as ordinary interest income,
accrued market discount to the extent of partial principal payments received
with respect to the Security. In such case, the amount of accrued market
discount to be recognized at the time of the disposition or retirement of the
Security will be reduced accordingly.
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<PAGE> 28
"Market discount" is the amount by which (i) the revised issue price of a
Discount Security (i.e., the issue price increased by the sum of daily portions
of original issue discount for each prior accrual period), or (ii) the principal
amount (or the issue price, in the case of an initial holder) of a Security not
issued at a discount, exceeds the holder's basis in such Security immediately
after acquisition. The market discount will be deemed to be zero, however, if it
is less than 1/4 of 1 percent of the revised issue price of a Discount Security,
or of the principal amount of a Security not issued at a discount, multiplied by
the number of complete years from acquisition to maturity. If a holder makes a
gift of a Security or disposes of a Security in certain nonrecognition
transactions, accrued market discount, if any, will be recognized as if such
holder had sold such Security for a price equal to its fair market value. The
market discount rules also provide that a holder who acquires a Security at a
market discount may be required to defer a portion of any interest expense that
may otherwise be deductible on any indebtedness incurred or continued to
purchase or carry such Security until the holder disposes of the Security in a
taxable transaction.
A holder of a Security acquired at a market discount may elect to include
market discount in gross income as the discount accrues, either on a
straight-line basis or on a constant interest rate basis. This current inclusion
election, once made, applies to all market discount debt instruments acquired on
or after the first day of the first taxable year to which the election applies
and may not be revoked without the consent of the Internal Revenue Service. If a
holder of a Security makes such an election, the foregoing rules with respect to
the recognition of ordinary interest income on sales and other dispositions of,
and on the receipt of partial principal payments on, the Securities and with
respect to the deferral of interest deductions on indebtedness incurred or
continued to purchase or carry such Securities would not apply.
Purchase, Sale and Retirement. A United States Holder's tax basis for
determining gain or loss on a sale or other disposition of a Security will
generally be the United States Holder's cost increased by any original issue
discount included in income (and market discount, if any, if the United States
Holder elects to include the accrued market discount in income on an annual
basis) and decreased by the amount of any payments, other than qualified stated
interest payments, received and the amount of bond premium amortized with
respect to such Security. Gain or loss on the sale or redemption of a Security
will generally be long-term capital gain or loss if the Security has been held
for more than one year (except to the extent that gain represents accrued
interest or market discount not previously included in the United States
Holder's income).
Information Reporting. The amount of interest paid on the Securities and
the amount of original issue discount accrued on Discount Securities held of
record by United States persons (other than corporations and other exempt United
States Holders) will be reported to the Internal Revenue Service. The amount of
original issue discount required to be reported to the Internal Revenue Service
may not be equal to the amount of original issue discount required to be
reported as taxable income by a United States Holder of such Discount Securities
who is not an original purchaser.
NON-UNITED STATES HOLDERS
Under present United States federal income tax law, and subject to the
discussion of backup withholding below, payments on the Securities by the
Company or any of its Paying Agents to any non-United States Holder will not be
subject to United States federal withholding tax, provided that (a) such Holder
does not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote, (b) such Holder
is not a controlled foreign corporation that is related to the Company through
stock ownership, (c) such Holder is not a bank with respect to which the holding
of the Security is treated as the extension of credit in the ordinary course of
its trade or business, (d) the payment is not treated as contingent interest,
excluded from the definition of portfolio interest, and (e) either (1) the
beneficial owner of the Security certifies to the Company or its agent, under
penalties of perjury, that it is a non-United States Holder and provides its
name and address, and U.S. taxpayer identification number, if any, or (2) a
securities clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"financial institution") and that holds the Securities certifies to the Company
or its agent under penalties of perjury that such statement has been received
from the beneficial owner by it or by a financial institution between it and the
beneficial owner and furnishes the payor with a copy thereof. The certificate
may be made on a United States Internal Revenue Service Form W-8 or
substantially
20
<PAGE> 29
similar form. A certificate described in this paragraph is effective only with
respect to interest payments and payments representing accrued original issue
discount made to the certifying non-United States Holder after the issuance of
the certificate in the calendar year of its issuance and the two immediately
succeeding calendar years.
If a non-United States Holder is engaged in a trade or business in the
United States and interest and original issue discount on the Security are
effectively connected with the conduct of such trade or business, the non-United
States Holder, although exempt from the withholding tax discussed above, may be
subject to United States income tax on such interest and original issue discount
in the same manner as if it were a United States Holder. In addition, if such a
Holder is a foreign corporation, it may be subject to a branch profits tax equal
to 30% of its effectively connected earnings and profits for the taxable year,
as adjusted for certain items; for this purpose, interest and original issue
discount on a Security will be included in earnings and profits if the interest
and original issue discount are effectively connected with the conduct of the
United States trade or business of the Holder.
Any gain or income realized by a non-United States Holder upon retirement
or disposition of a Security (not including in such gain or income amounts
representing stated interest or accrued original issue discount, the U.S. tax
treatment of which is described above) will not be subject to United States
federal income tax if (i) such gain or income is not effectively connected with
a trade or business in the United States of the Holder of such Security and (ii)
in the case of an individual Holder, the Holder is not present in the United
States for a period or periods aggregating 183 days in the taxable year of the
retirement or disposition.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A 31% "backup" withholding tax and information reporting requirements apply
to certain payments of interest and original issue discount on an obligation,
and to proceeds of the sale of an obligation before maturity, to certain
non-corporate United States Holders. The Company, and/or any paying and/or
collection agent, including a broker, as the case may be, will be required to
withhold from any payment that is subject to backup withholding a tax equal to
31% of such payment unless the Holder furnishes its taxpayer identification
number (i.e., social security number in the case of an individual) in the manner
prescribed in applicable Treasury Regulations, certifies that such number is
correct, certifies (with respect to payments of interest and original issue
discount) as to no loss of exemption from backup withholding, and meets certain
other conditions. Backup withholding, however, in any event, generally does not
apply to payments to certain "exempt recipients" such as corporations. Its
applicability to non-United States Holders is discussed more fully below.
Under current Treasury Regulations, backup withholding and information
reporting will not apply to payments made by the Company or any paying agency
thereof (in its capacity as such) to a Holder of a Security with respect to
which the Holder has provided to the Company (and/or any paying and/or
collection agent, including a broker) required certification of its non-United
States status under penalties of perjury or has otherwise established an
exemption (provided that neither the Company nor such paying agency has actual
knowledge that the Holder is a United States Holder or the conditions of any
other exemption are not in fact satisfied). Such certificate may be made on a
United States Internal Revenue Service Form W-8 or substantially similar form.
If such payment is made to the beneficial owner of a Security by the non-United
States office of a foreign custodian, foreign nominee or other foreign agent of
such beneficial owner, or if the non-United States office of a foreign "broker"
(as defined in applicable Treasury Regulations) pays the proceeds of the sale of
a Security to the seller thereof, such nominee, custodian, agent or broker is
not required to backup withhold or file an information report with respect to
such payment (provided that such nominee, custodian, agent or broker derives
less than 50% of its gross income for certain specified periods from the conduct
of a trade or business in the United States and is not a controlled foreign
corporation for United States tax purposes). Payments made to the beneficial
owner by the non-United States office of other custodians, nominees or agents,
or the payment by the foreign office of other brokers, will not be subject to
backup withholding, but will be subject to information reporting unless the
custodian, nominee, agent or broker has documentary evidence in its records that
the beneficial owner or seller is not or was not, as the case may be, a United
States Holder and certain conditions are met or the beneficial owner or seller
otherwise establishes an
21
<PAGE> 30
exemption. Payments made to the beneficial owner by the United States office of
a custodian, nominee or agent, or a broker are subject to both backup
withholding and information reporting unless the beneficial owner or seller
certifies its non-United States status under penalties of perjury or otherwise
establishes an exemption.
Any amounts withheld under the backup withholding rules from a payment to a
Holder would be allowed as a refund or a credit against such Holder's United
States federal income tax, provided that the required information is furnished
to the United States Internal Revenue Service.
PLAN OF DISTRIBUTION
The Company may sell Securities to one or more underwriters for public
offering and sale by them or may sell Securities to investors directly or
through agents.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices (which may be changed from time
to time), at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. Each Prospectus
Supplement will describe the method of distribution of the Securities offered
thereby.
In connection with the sale of the Securities, dealers may receive
compensation from the Company or from purchasers of Securities for whom they may
act as agents, in the form of discounts, concessions or commissions. The dealers
which participate in the distribution of Securities may be deemed to be
underwriters under the Securities Act of 1933 (the "Act") and any discounts or
commissions received by them and any profit on the resale of Securities by them
may be deemed to be underwriting discounts and commissions under the Act. Any
such dealer will be identified and any such compensation will be described in
the appropriate Prospectus Supplement.
Under agreements entered into with the Company, underwriters, agents and
dealers which participate in the distribution of Securities may be entitled to
indemnification or contribution from the Company against certain liabilities,
including liabilities under the Act.
If so indicated in the appropriate Prospectus Supplement, the Company will
authorize underwriters, dealers or other persons acting as the Company's agents
to solicit offers by certain institutions to purchase Securities from the
Company pursuant to contracts providing for payment and delivery on a future
date. Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the conditions that (1) the purchase
of the Securities shall not at the time of delivery be prohibited under the laws
of the jurisdiction to which such purchaser is subject, and (2) if the
Securities are also being sold to dealers acting as principals for their own
account, such dealers shall have purchased such Securities not sold by them for
delayed delivery. The underwriters, dealers and such other persons acting as the
Company's agents will not have any responsibility in respect of the validity or
performance of such contracts.
LEGAL OPINIONS
The legality of each issue of the Securities will be passed upon for the
Company by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, New York, New York,
and for the agents or underwriters by Brown & Wood, New York, New York.
EXPERTS
The consolidated financial statements of the Company incorporated in this
Prospectus by reference to the Annual Report on Form 10-K for the fiscal year
ended December 31, 1993 have been so incorporated in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
22
<PAGE> 31
====================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION, OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER
OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Available Information................. S-2
The Company........................... S-3
Recent Developments................... S-3
Ratio of Earnings to Fixed Charges.... S-4
Use of Proceeds....................... S-4
Description of Notes.................. S-4
Underwriting.......................... S-8
Legal Opinions........................ S-8
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 3
Ratio of Earnings to Fixed Charges.... 3
Use of Proceeds....................... 3
The Securities........................ 3
Description of Senior Securities...... 8
Description of Subordinated
Securities.......................... 10
Description of Convertible
Subordinated Securities............. 11
Federal Income Tax Consequences....... 17
Plan of Distribution.................. 22
Legal Opinions........................ 22
Experts............................... 22
</TABLE>
====================================================
====================================================
$300,000,000
MCI COMMUNICATIONS
CORPORATION
6.95% SENIOR NOTES
DUE AUGUST 15, 2006
---------------------------
PROSPECTUS SUPPLEMENT
---------------------------
MERRILL LYNCH & CO.
CITICORP SECURITIES, INC.
BA SECURITIES, INC.
J.P. MORGAN & CO.
NATIONSBANC CAPITAL MARKETS, INC.
AUGUST 6, 1996
====================================================
