UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1997
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number 0-6547
MCI COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 52-0886267
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1801 Pennsylvania Avenue, N.W., Washington, D.C. 20006
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (202) 872-1600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
As of March 31, 1997, the registrant had outstanding 135,998,932 shares of Class
A common stock and 551,068,389 shares of common stock.
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PAGE 2
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
FORM 10-Q
For The Quarter Ended March 31, 1997
INDEX
Page No.
--------
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Income Statements for the three months ended March 31, 1997
and 1996 3
Balance Sheets as of March 31, 1997 and December 31, 1996 4-5
Statements of Cash Flows for the three months ended
March 31, 1997 and 1996 6
Statement of Stockholders' Equity for the three months
ended March 31, 1997 7
Notes to Interim Condensed Consolidated Financial
Statements 8-10
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11-23
PART II: OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 24
SIGNATURE 25
EXHIBIT INDEX 26
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PAGE 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
INCOME STATEMENTS
(In millions, except per share amounts)
(unaudited)
Three Months Ended
March 31,
--------------------
1997 1996
------ ------
REVENUE .............................................. $ 4,883 $ 4,491
------- -------
OPERATING EXPENSES
Cost of services ................................... 2,525 2,344
Sales, operations and general ...................... 1,319 1,185
Depreciation ....................................... 453 381
------- -------
TOTAL OPERATING EXPENSES ............................. 4,297 3,910
------- -------
INCOME FROM OPERATIONS ............................... 586 581
Interest expense ..................................... (58) (50)
Interest income ...................................... 6 11
Equity in income (losses) of
affiliated companies ............................... (37) (55)
Other expense, net ................................... (3) (3)
------- -------
INCOME BEFORE INCOME TAXES ........................... 494 484
Income tax provision ................................. 184 189
Distributions on subsidiary Trust mandatorily
redeemable preferred securities ................... 15 -
------- -------
NET INCOME ........................................... $ 295 $ 295
======= =======
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE ............................ $ .42 $ .42
Weighted average number of shares
of common stock and common stock
equivalents outstanding ............................ 701 701
See accompanying Notes to Interim Condensed Consolidated Financial Statements.
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PAGE 4
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(unaudited)
March 31, December 31,
1997 1996
------- -------
(In millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents .......................... $ 199 $ 187
Marketable securities .............................. 16 161
Receivables, net of allowance for
uncollectibles of $290 and $273 million .......... 3,617 3,480
Other assets ....................................... 1,013 888
------- -------
TOTAL CURRENT ASSETS .............................. 4,845 4,716
------- -------
PROPERTY AND EQUIPMENT, net .......................... 12,493 12,174
OTHER ASSETS
Noncurrent marketable securities ................... 27 58
Other assets and deferred charges, net ............. 880 678
Investment in affiliates ........................... 668 690
Investment in News Corp. ........................... 1,350 1,350
Investment in DBS .................................. 939 893
Goodwill, net ...................................... 2,405 2,419
------- -------
TOTAL OTHER ASSETS ................................ 6,269 6,088
------- -------
TOTAL ASSETS ...................................... $23,607 $22,978
======= =======
See accompanying Notes to Interim Condensed Consolidated Financial Statements.
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PAGE 5
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(unaudited)
March 31, December 31,
1997 1996
-------- --------
(In millions)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ................................... $ 895 $ 992
Accrued telecommunications expense ................. 2,101 2,045
Other accrued liabilities .......................... 1,773 1,806
Long-term debt due within one year ................. 196 203
-------- --------
TOTAL CURRENT LIABILITIES ......................... 4,965 5,046
-------- --------
NONCURRENT LIABILITIES
Long-term debt ..................................... 4,984 4,798
Deferred taxes and other ........................... 1,969 1,723
-------- --------
TOTAL NONCURRENT LIABILITIES ...................... 6,953 6,521
-------- --------
COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED
SECURITIES OF SUBSIDIARY TRUST HOLDING SOLELY
JUNIOR SUBORDINATED DEFERRABLE INTEREST
DEBENTURES OF THE COMPANY ......................... 750 750
STOCKHOLDERS' EQUITY
Class A common stock, $.10 par value,
authorized 500 million shares, issued
136 million shares ............................... 14 14
Common stock, $.10 par value, authorized
2 billion shares, issued
593 million shares ............................... 60 60
Additional paid in capital ......................... 6,344 6,410
Retained earnings .................................. 5,526 5,231
Treasury stock, at cost,
42 and 44 million shares ......................... (1,005) (1,054)
-------- --------
TOTAL STOCKHOLDERS' EQUITY ........................ 10,939 10,661
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........ $ 23,607 $ 22,978
======== ========
See accompanying Notes to Interim Condensed Consolidated Financial Statements.
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PAGE 6
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
March 31,
------------------
1997 1996
------ ------
(In millions)
OPERATING ACTIVITIES
Receipts from customers .............................. $ 4,570 $ 4,302
Payments to suppliers and employees .................. (3,918) (3,375)
Taxes paid ........................................... (99) (206)
Interest paid ........................................ (110) (61)
Interest received .................................... 6 10
------- -------
CASH FROM OPERATING ACTIVITIES .................. 449 670
------- -------
INVESTING ACTIVITIES
Capital expenditures for property
and equipment ...................................... (740) (782)
Purchases, maturities and sales of
marketable securities, net ......................... 176 157
Investment in Direct Broadcast Satellite ............. (69) (139)
Investment in affiliates ............................. (17) (12)
Other, net ........................................... 15 (7)
------- -------
CASH USED FOR INVESTING ACTIVITIES .............. (635) (783)
------- -------
NET CASH FLOW BEFORE FINANCING ACTIVITIES ....... (186) (113)
------- -------
FINANCING ACTIVITIES
Payment of Senior Notes and other debt ............... (113) (175)
Commercial paper and bank credit facility
activity, net ...................................... 271 214
Issuance of common stock for employee plans .......... 133 142
Purchase of treasury stock ........................... (93) (115)
------- -------
CASH FROM FINANCING ACTIVITIES .................. 198 66
------- -------
Net increase (decrease) in cash and cash equivalents ... 12 (47)
Cash and cash equivalents - beginning balance .......... 187 471
------- -------
Cash and cash equivalents - ending balance ............. $ 199 $ 424
======= =======
Reconciliation of net income to cash from operating
activities:
Net income ............................................. $ 295 $ 295
Adjustments to net income:
Depreciation and amortization ........................ 467 396
Equity in (income) losses of affiliated companies .... 37 55
Deferred income tax provision ........................ 114 37
Net change in operating activity accounts other than cash and cash equivalents:
Receivables .......................................... (137) (185)
Operating accounts payable ........................... (233) 237
Other operating activity accounts .................... (94) (165)
------- -------
Cash from operating activities ......................... $ 449 $ 670
======= =======
See accompanying Notes to Interim Condensed Consolidated Financial Statements.
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PAGE 7
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' EQUITY
(unaudited)
Treas. Total
Class A Addit'l Stock, Stock-
Common Common Paid in Retained at holders'
Stock Stock Capital Earnings Cost Equity
------ ------ ------- -------- ------- -------
(In millions)
Balance at
December 31, 1996 ..... $14 $60 $ 6,410 $5,231 $(1,054) $ 10,661
Common stock issued
for employee stock
and benefit plans and
other activity
(4.5 million shares) .. - - (66) - 136 70
Net income .............. - - - 295 - 295
Treasury stock
purchased
(2.5 million shares) .. - - - - (87) (87)
--- --- ------- ------ ------- --------
Balance at
March 31, 1997 ........ $14 $60 $ 6,344 $5,526 $(1,005) $ 10,939
=== === ======= ====== ======= ========
See accompanying Notes to Interim Condensed Consolidated Financial Statements.
<PAGE>
PAGE 8
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1. GENERAL
The accompanying unaudited interim condensed consolidated financial statements
have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission (SEC). The interim condensed consolidated
financial statements include the consolidated accounts of MCI Communications
Corporation and its majority-owned subsidiaries (collectively, the company) with
all significant intercompany transactions eliminated. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair statement of the financial position, results of operations
and cash flows for the interim periods presented have been made. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles (GAAP) have
been condensed or omitted pursuant to such SEC rules and regulations. These
financial statements should be read in conjunction with the company's Annual
Report on Form 10-K for the year ended December 31, 1996.
NOTE 2. MERGER AGREEMENT WITH BRITISH TELECOMMUNICATIONS PLC
On November 3, 1996, the company entered into an Agreement and Plan of Merger
(the Merger Agreement) with British Telecommunications plc (BT), a public
limited company organized under the laws of England and Wales. As a result of
the proposed merger (the Merger), the stockholders of the company and BT will
become the owners of a combined company, renamed Concert plc (Concert). Under
the terms of the Merger Agreement, each outstanding share of the company's
common stock (other than treasury shares and shares owned by BT, including
shares of Class A common stock, all of which will be canceled upon consummation
of the Merger) will be converted into the right to receive (i) .54 American
Depositary Share (ADS) of Concert, (each ADS represents ten ordinary shares of
25 pence each of Concert, with cash being paid in lieu of fractional ADSs), and
(ii) $6.00 in cash.
In April 1997, the stockholders of the company and BT approved the Merger and on
May 14, 1997, the European Commission also approved the Merger. Completion of
the Merger, which is expected by the fall of 1997, is still subject to certain
conditions, including the receipt of required U.S. regulatory approvals. The
Merger will be accounted for under the purchase method of accounting under both
United States (U.S.) and United Kingdom (U.K.) generally accepted accounting
principles.
<PAGE>
PAGE 9
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share, which is effective
for fiscal years ending after December 15, 1997, with earlier application not
permitted. The new standard replaces the current primary and fully diluted
earnings per share calculations with basic and diluted earnings per share
calculations. Upon adoption, earnings per share will be restated for the prior
periods presented in the financial statements. Adoption of this new standard
will not have a material impact on the company's earnings per share.
NOTE 4. CONTINGENCIES
The company, in the normal course of business, is a party to a number of
lawsuits and regulatory and other proceedings. The company's management does not
expect that the results in these lawsuits and proceedings will have a material
adverse effect on the consolidated financial position or results of operations
of the company.
In December 1992, the company petitioned the United States District Court for
the District of Columbia for a declaratory ruling that certain patents being
asserted against the company by AT&T Corp. (AT&T) were invalid and that AT&T
should therefore, and for other reasons, be barred from enforcing them against
the company. AT&T counterclaimed that the company was violating certain patents.
In May 1993, AT&T and Unitel Communications Inc., a Canadian corporation in
which AT&T has an equity interest, filed a companion suit in Canada, alleging
that the company and the Stentor Group of Canadian telephone companies (with
which the company has an alliance) are infringing in Canada four of the patents
at issue in the U.S. litigation. On March 6, 1997, a Stipulation and Order
dismissing the actions in the U.S. with prejudice was entered in the United
States District Court for the District of Columbia and Consent Judgement
dismissing the matter with prejudice in Canada was entered on February 28, 1997.
On November 4, 1996 and thereafter, the company and all of its directors,
including the two directors who are also executive officers of the company and
the three directors elected by BT, were named as defendants in twelve complaints
filed in the Court of Chancery in the State of Delaware. BT was named as a
defendant in ten of the complaints. The complaints were brought by alleged
shareholders of the company, individually and purportedly as class actions on
behalf of all other stockholders of the company. The complaints allege breaches
of fiduciary duty by the company's directors in connection with
<PAGE>
PAGE 10
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
the Merger. Nine of the complaints in which BT was named as a defendant allege
that BT aided and abetted those breaches of duty. One of the complaints in which
BT was named as a defendant alleges that BT owes fiduciary duties to the other
stockholders of the company and that it breached those duties in connection with
the Merger. The complaints seek damages and other relief. The defendants believe
that the complaints are without merit and the company does not expect that the
above actions will have a material adverse effect on the consolidated financial
position or results of operations of the company.
NOTE 5. SUBSEQUENT EVENT
On April 30, 1997, the company entered into a revolving credit loan agreement
with several financial institutions, under which the company may borrow up to $4
billion. Borrowings under this agreement mature on April 28, 1998. This
agreement replaces the company's September 1996 $2 billion revolving credit loan
agreement.
<PAGE>
PAGE 11
PART I.
ITEM 2.
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
GENERAL
- -------
The following discussion and analysis provides information that management
believes is relevant to an assessment and understanding of MCI Communications
Corporation and subsidiaries' (collectively, the company) consolidated results
of operations and financial condition. The discussion should be read in
conjunction with the interim condensed consolidated financial statements and
notes thereto and the company's Annual Report on Form 10-K for the year ended
December 31, 1996.
GLOBAL MERGER AGREEMENT
- -----------------------
On November 3, 1996, the company entered into an Agreement and Plan of Merger
(the Merger Agreement) with British Telecommunications plc (BT), a public
limited company organized under the laws of England and Wales. As a result of
the proposed merger (the Merger), the stockholders of the company and BT will
become the owners of a combined company, renamed Concert plc (Concert).
- -------------------------------------------------------------------------------
Forward-looking Statements May Prove Inaccurate The company has made certain
forward-looking statements in Management's Discussion and Analysis that are
subject to risks and uncertainties. Forward-looking statements include
information concerning the possible future results of operations of the company,
its long distance telecommunication services business, its investments in
ventures and developing markets (VDM) businesses, the possible future results of
operations of the company and Concert after the Merger and statements preceded
by, followed by or that include the words "believes", "expects", "anticipates",
or similar expressions. For those statements, the company claims the protection
of the safe-harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995. The reader is cautioned that the
following important factors, in addition to those contained elsewhere in
Management's Discussion and Analysis could affect the future results of the
company, its long distance telecommunication services and VDM businesses and the
company and Concert after the Merger and could cause those results to differ
materially from the statements and information expressed in the forward-looking
statements, such as: material adverse changes in the economic conditions in the
markets served by the company; a significant delay in the expected closing of
the Merger; future regulatory actions and conditions in the company's operating
areas, including the ability of the company to obtain local facilities at
competitive rates; and competition from others in the U.S. and international
long distance markets, including the entry of the regional Bell operating
companies (RBOCs) and other companies into the long distance markets in the U.S.
For additional information about other important factors that should be
considered, the reader should read the company's Annual Report on Form 10-K for
the year ended December 31, 1996.
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PAGE 12
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Under the terms of the Merger Agreement, each outstanding share of the company's
common stock (other than treasury shares and shares owned by BT, including
shares of Class A common stock, all of which will be canceled upon consummation
of the Merger) will be converted into the right to receive (i) .54 American
Depositary Share (ADS) of Concert, (each ADS represents ten ordinary shares of
25 pence each of Concert, with cash being paid in lieu of fractional ADSs), and
(ii) $6.00 in cash.
In April 1997, the stockholders of the company and BT approved the Merger and on
May 14, 1997, the European Commission also approved the Merger. Completion of
the Merger, which is expected by the fall of 1997, is still subject to certain
conditions, including the receipt of required U.S. regulatory approvals. The
Merger will be accounted for under the purchase method of accounting under both
U.S. and U.K. GAAP. The company believes that Concert, operating with the
combined networks, financial resources, management, personnel and technical
expertise of the company and BT, will be better able to capitalize on growth
opportunities in the telecommunications industry, both domestically and
internationally. In addition, the company expects Concert will be able to derive
significant advantages from the more efficient utilization of their combined
assets, management and personnel. Under the terms of the Merger Agreement, the
company and BT will continue to sell and service customers using their own brand
names in their respective home countries.
GLOBAL ALLIANCES
- ----------------
On April 14, 1997, the company, BT and Portugal Telecom formed a strategic
alliance to provide communication services in Portugal and Latin America. The
voice products of Concert Communications Company (CCS) will be exclusively
distributed by Portugal Telecom in Portugal. The company will take a 0.5% equity
stake in Portugal Telecom later in 1997.
On April 18, 1997, the company, BT and Telefonica de Espana (Telefonica) formed
a strategic alliance to provide telecommunication services and to explore growth
opportunities in the Americas and Europe. Telefonica Internacional SA (TISA),
Telefonica's international unit, and the company will create an equally owned
Pan American joint venture, managed by TISA, called Telefonica Panamericana-MCI.
The joint venture will pursue new opportunities in the Latin American
telecommunications market. As part of the alliance, Telefonica will have an
opportunity to invest in Avantel, S.A. de C.V. (Avantel) and will form a joint
venture with MCI Systemhouse (Systemhouse) to service the Latin American systems
integration market.
<PAGE>
PAGE 13
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
TELECOMMUNICATIONS REGULATORY ENVIRONMENT
- ------------------------------------------
The Telecommunications Act of 1996 (the Act) was enacted by Congress to help
minimize legal barriers to local telephone market entry while affording
residential and business consumers protection from unfair competition by
incumbent local exchange carriers (ILECs). A company is permitted to enter the
local market by constructing new facilities, leasing unbundled network elements,
reselling local network capacity or by partnering with other new market
entrants. The Act also establishes criteria pursuant to which regional Bell
operating companies' (RBOCs) applications to provide in-region long distance
service may be approved by the Federal Communications Commission (FCC), in
consultation with the relevant state regulatory agencies as well as the
Department of Justice (DOJ).
In order to implement the Act, the FCC outlined a trilogy of issues that needed
to be resolved in order to ensure competition in the local
market-interconnection, universal service and access charge reform. On May 7,
1997, the FCC completed action on the trilogy when it rendered its access charge
and universal service reform decisions. The FCC adopted a plan that would reduce
access charges approximately $1.7 billion on an industry-wide basis, beginning
on July 1, 1997. Adjustments will be made annually as part of the LEC annual
access filing. At the same time, the FCC adopted a new universal service plan,
which includes current subsidies paid by long distance carriers and new
obligations to fund discounted services for schools, libraries, rural health
care providers and low income consumers, that will become effective on January
1, 1998 and be funded by all telecommunications carriers. The company expects to
pass the savings from access reductions on to customers, net of new universal
service obligations.
The order rendered by the United States Court of Appeals for the Eighth Circuit
(the court) staying (the Stay) key pricing provisions of the FCC's rules for
interconnection of local services with ILECs remains in effect. The company
still anticipates that the court will render its decision sometime during the
second quarter of this year. Despite the adverse impact of the Stay on local
market competition, the company has completed most of its state arbitration
proceedings and has received approval of interconnection agreements in several
states. Most of these agreements are being litigated in federal district court.
<PAGE>
PAGE 14
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
EARNINGS HIGHLIGHTS
- -------------------
Income from operations was $586 million or 12% of revenue in the first quarter
of 1997 compared to $581 million or 12.9% of revenue in the first quarter of
1996. The decrease in operating margin over the prior year is due to increases
in sales, operations and general expenses in the ventures and developing markets
businesses and depreciation expense associated with additions to the
communications system network in the long distance telecommunication services
business (core business) and local services business, which offset reductions in
telecommunications expense, primarily in international settlements. Net income
was $295 million or $0.42 per share in the first quarter of both 1997 and 1996.
CONSOLIDATED RESULTS OF OPERATIONS
- ----------------------------------
The following provides a discussion of the company's consolidated results,
comprised of its core business and ventures and developing markets (VDM)
businesses. Refer to "Enterprise Reporting" below for further discussion of
these businesses.
During the first quarter of 1997, consolidated revenue increased $392 million or
approximately 9% over first quarter of 1996 to $4,883 million. Core business
revenue increased $334 million or 8.2% to $4,384 million, while VDM revenue,
excluding sales to the core business, increased $58 million or 13% to $499
million. The increase in core business revenue was due to strong volume growth
in business markets, despite the company's move to de-emphasize the carrier
segment, and the company's continued focus on enhanced and value-added
communication service offerings to business customers. The increase in VDM
revenue was primarily due to increased revenue in Information Technology
Services over the first quarter in the prior year.
<PAGE>
PAGE 15
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Cost of services consists of telecommunications expense and costs of other
products and services primarily associated with VDM businesses.
Telecommunications expense is primarily comprised of access facilities fees paid
to ILECs and other domestic service providers, and payments made to foreign
telephone companies (international settlements) to complete calls made to
foreign countries from the U.S. by the company's customers. In VDM, costs of
other products and services include equipment, software and information
technology service costs. In the first quarter of 1997, cost of services
increased $181 million or approximately 8% over the first quarter of 1996. This
increase was fairly consistent, as a percentage, with the increase in
consolidated revenue and reflects cost efficiencies in the core business. As a
percentage of total revenue, cost of services decreased from 52.2% in the first
quarter of 1996 to 51.7% in the first quarter of 1997. In the core business,
cost of services as a percentage of revenue decreased to 50.4% in the first
quarter of 1997 from 50.9% in the first quarter of 1996, primarily due to
decreases in international settlements and more efficient network use.
Sales, operations and general expenses increased in the first quarter of 1997 by
$134 million or 11% to $1,319 million compared to $1,185 million in the first
quarter of 1996. In the core business, sales, operations and general expenses
increased 8% over the first quarter of 1996 which is consistent with the
company's core business revenue growth. As a percentage of revenue, sales,
operations and general expenses increased to 27% in the first quarter of 1997
from 26.4% in the first quarter of the prior year. This increase was primarily
due to VDM sales, operations and general expenditures associated with the
company's continued development in local services markets and Information
Technology Services and the related increases in marketing efforts and personnel
expenditures.
Depreciation expense was $453 million in the first quarter of 1997, an increase
of $72 million or 19% over depreciation expense in the same quarter in the prior
year. This increase was primarily attributable to the impact of 1996 additions
to the communications system network to increase network capacity, redundancy
and reliability, add product features and functionality and support the
company's expanding local services business.
<PAGE>
PAGE 16
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Interest expense increased $8 million or 16% over the first quarter of 1996 to
$58 million. This increase was due to higher average debt balances outstanding
due to commercial paper issuances since the end of the first quarter of 1996 for
general corporate purposes.
Interest income was $6 million in the first quarter of 1997, a $5 million
decrease from the first quarter of 1996. This decrease in interest income is due
to lower short term marketable securities balances resulting from the use of
cash to fund investments in the local services market and other general
corporate purposes.
Equity in income (losses) of affiliated companies improved $18 million in the
first quarter of 1997 to $(37) million compared to $(55) million in the first
quarter of 1996. This improvement was attributable to the operations of CCS and
the high level of operating costs incurred in the first quarter of 1996 with the
company's on-line project with The News Corporation Limited (News Corp.), offset
by continued operating losses of certain of its investments, including Avantel
and ICS Communications, Inc. As further discussed in "Enterprise Reporting"
below, due to the start-up nature and current operations of several of the
company's investments and ventures, the company expects equity in losses of
affiliated companies to continue during the remainder of 1997.
Distributions on subsidiary Trust mandatorily redeemable securities, issued in
May 1996, totaled $15 million for the first quarter of 1997.
ENTERPRISE REPORTING
- --------------------
This section segregates the performance of the company's core business from its
VDM businesses and investments. Core business services comprise a wide spectrum
of domestic and international voice and data services, including long distance
telephone, data communication, teleconferencing, Internet and electronic
messaging services. The company has invested in VDM businesses outside of its
core business through acquisitions, alliances and other strategic initiatives in
the local, information technology, wireless, international and multimedia
markets. Investments in these VDM businesses are included in the company's
financial statements as consolidated subsidiaries, unconsolidated equity
investments, or cost method investments such as News Corp.
<PAGE>
PAGE 17
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
The following information was prepared using all amounts included in the
company's interim condensed consolidated financial statements and reflects
estimates and allocations that management believes provide a reasonable basis on
which to present such information.
The following table summarizes the financial highlights of these enterprises.
SUPPLEMENTAL ENTERPRISE REPORTING DATA
Core Business VDM Businesses
Quarter ended March 31, 1997 1996 1997 1996
- --------------------------------------------------------------------------------
(In millions)
Revenue ............................ $ 4,384 $ 4,050 $ 579 $ 476
Income (loss) from
operations ....................... 653 614 (62) (33)
Equity in income (losses)
of affiliated companies .......... - - (37) (55)
Net income (loss) .................. 403 378 (103) (83)
Depreciation ....................... 412 348 41 33
Net interest, income taxes
and other expense ................ (250) (236) (4) 5
EBITDA* ............................ 1,065 962 (21) -
* EBITDA, as defined by management, includes earnings, excluding equity in
income (losses) of affiliates, other income (expense), net, and distributions on
subsidiary Trust mandatorily redeemable preferred securities, before interest,
income taxes, depreciation and amortization. EBITDA represents a measure of the
company's ability to generate cash flows and does not represent net income or
cash flows from operating, investing and financing activities as defined by
GAAP. EBITDA should be considered in addition to, but not as a substitute for,
or superior to, measures of financial performance reported in accordance with
GAAP. EBITDA is often used by analysts when evaluating the performance of a
company. Readers are cautioned that the company's definition of EBITDA may not
be comparable to similar titled measures used by other companies or analysts.
The following discussion focuses on significant financial and operational
results of the company's core business and VDM businesses.
<PAGE>
PAGE 18
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
CORE BUSINESS
- -------------
Core business revenue in the first quarter of 1997 increased $334 million or
8.2% over first quarter of 1996 to $4,384 million. Traffic grew 4% from the
first quarter of 1996, resulting in a revenue to traffic variance of 4.2% for
the first quarter of 1997. The improvement in the revenue to traffic variance
was primarily due to the continued improved mix of higher margin product sales
in the business and consumer markets, such as data, virtual data, and Personal
800 products. This improvement was offset by increased provisions for
uncollectibles during the first quarter of 1997 as a result of continued
tightened credit and collection policies.
Increases in business market revenue continued to drive the company's overall
revenue growth, with network, data and inbound product revenue accounting for a
majority of the revenue increase over the first quarter of 1996. Emerging
products, such as virtual data, Internet and prepaid card services, all with
greater than 100% growth, also contributed to the improvements in the business
market. Revenue growth in mass markets slowed due to competitive pressures and
the company's continued focus on the more profitable segments of the consumer
market. The company has selectively targeted high value customers through its
integrated package offering of inbound, outbound, wireless and Internet services
and has curtailed the use of customer acquisition promotions. While customer
churn increased slightly in the first quarter of 1997 over the first quarter of
1996, churn rates have dropped sequentially over the last several quarters due
to further focus on multiple sales of higher margin products and profitability
per customer. The company expects that through the next few quarters, total
growth trends in mass markets will continue to be impacted as the company
migrates the volatile, price-shopping customers from its base and builds a more
loyal customer base.
VENTURES AND DEVELOPING MARKETS BUSINESS
- ----------------------------------------
In the first quarter of 1997, the company continued to make investments in its
VDM businesses and strategic initiatives and expand its business opportunities
in these markets. The company invested approximately $65 million in local
services, $46 million in direct broadcast satellite (DBS) development costs and
$26 million in affiliated companies, including CCS. The company's results of
operations in these businesses and strategic initiatives are provided below.
<PAGE>
PAGE 19
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
LOCAL
- -----
The company provides switched local services to both business and residential
customers, and local fiber-optic capacity and competitive access services to the
company's core business and other businesses. The company intends to become a
single-source provider of comprehensive local wireline telecommunication
services and to compete in the local services market, while also reducing the
company's access and interconnection rates. Despite the stay of key provisions
of the FCC Interconnection Order, the company will continue to pursue revenue
and profit growth while expanding local service capabilities. As of March 31,
1997, the company had been granted authority to offer local exchange service in
30 states and had applications for such services pending in 8 other states.
Local services revenue, substantially all of which was derived from sales to the
company's core business, increased $25 million or 63% to $65 million in the
first quarter of 1997 from the same quarter in the prior year. Loss from
operations in the first quarter of 1997 was $(72) million compared to $(13)
million in the same quarter in the prior year. Net loss was $(50) million and
$(10) million, respectively, for the same periods. EBITDA was $(58) million and
$(8) million for the first quarters of 1997 and 1996, respectively. These
increases in losses and decrease in EBITDA were due to increased operating costs
associated with the company's increased investment in the local market. During
the first quarter of 1997, the company added 5 local city networks, bringing the
total number of operational local city networks to 67 in 35 cities, compared to
43 operational networks in 28 cities at the end of the first quarter of 1996. In
addition, rights of way miles increased 6% from the first quarter of 1996 to
4,145 miles while route miles increased 18% from the end of the first quarter of
1996 to 2,989 miles. Currently, the company provides switched local services in
21 markets and intends to have service operational in 30 cities by the end of
1997.
INFORMATION TECHNOLOGY SERVICES
- -------------------------------
Information Technology Services include the results of operations of Systemhouse
and Call Center Services. Revenue in the first quarter of 1997 increased $92
million to $433 million or 27% over the first quarter in the prior year. This
increase was due to increases in Systemhouse's outsourcing and systems
integration services and Call Center Services' automation and outsourcing
services. Income from operations remained the same at $15 million
<PAGE>
PAGE 20
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
for the first quarters of 1997 and 1996. Net loss in the first quarter of 1997
increased $4 million to $(15) million from $(11) million in the first quarter of
1996 and EBITDA improved to $37 million in the first quarter of 1997 from $34
million in the first quarter of the prior year.
Backlog, which includes amounts committed under executed contracts or letters of
intent, at March 31, 1997 and 1996, was approximately $2 billion and $1.5
billion, respectively, the majority from Systemhouse's largest customers. The
company expects that approximately 25% of the backlog will be delivered in the
remainder of 1997. Since revenue depends on actual usage under service contracts
which may be subject to termination under certain circumstances, actual revenue
for a particular contract may be higher or lower than the amount included in
backlog for such contract.
WIRELESS
- --------
Wireless services primarily include the operations of MCI Wireless, Inc., the
company's cellular provider, and the company's paging services. Wireless revenue
decreased $13 million from the first quarter of 1996 to $75 million in the first
quarter of 1997. This decrease was primarily due to the decrease in paging
subscribers from 548,000 in the first quarter of 1996 to 223,000 in the first
quarter of 1997 as the company continued to de-emphasize stand-alone paging
services to revise the cost and infrastructure of its paging service offerings.
These efforts coincide with the company's efforts in the consumer market to
focus on profitability per customer. As of March 31, 1997, the number of
cellular subscribers increased 14% to 425,000 from the end of the first quarter
of 1996. This increase is due to the company's focus on increased integrated
product offerings and expansion into new markets during the last three quarters
of 1996 and the first quarter of 1997. Loss from operations was $(9) million and
$(11) million and net loss was $(9) million and $(10) million for the first
quarters of 1997 and 1996, respectively. EBITDA was $(3) million and $(4)
million for the same periods.
<PAGE>
PAGE 21
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
INTERNATIONAL SERVICES
- ----------------------
CCS is a 24.9% owned international services venture with BT that provides a
broad portfolio of advanced global communication services, including virtual
network, frame relay, managed bandwidth and packet services, to multinational
business customers worldwide. CCS' distributor revenues were $165 million and
$105 million in the first quarters of 1997 and 1996, respectively. CCS' virtual
network service continues to have over 90 sites active or operational around the
world. The company's share of CCS' losses reported in accordance with U.S. GAAP
was $(6) million for the first quarter of 1997, an improvement over the $(10)
million for the same quarter in the prior year. During the first quarter of
1997, the company invested approximately $20 million in CCS. Since its launch in
July 1994, the company has invested a total of approximately $190 million in
CCS.
Avantel is the company's 44.5% owned Mexican business venture. Since its
November 1995 inception, Avantel built Mexico's first all digital fiber-optic
network, became the first company to provide alternative long distance service
in the Mexican telecommunication market competing against Telefonos de Mexico,
and launched the first branded Mexico-to-United States collect calling products
targeted to consumers and businesses. In addition, on January 1, 1997, Avantel
began offering a full range of competitive switched long distance services to
residential and business customers and now has in-place arrangements to
terminate traffic in every country in the world. During the first quarter of
1997, Avantel continued the development of its communication system in
preparation for the opening of Mexico City and an additional 38 cities to
competition in the second quarter of 1997. During the first quarter of 1997, the
company's share of Avantel's losses reported in accordance with U.S. GAAP
increased $13 million over the same quarter in the prior year to $(21) million.
The company expects to incur increasing losses on its investment during 1997 as
Avantel moves forward with its entry into the Mexican telecommunications market
and expands its service and customer bases.
MULTIMEDIA SERVICES
- -------------------
The company's investments in News Corp. and a direct broadcast satellite
comprise Multimedia Services. Dividend income on the company's $1,350 million
investment in News Corp. was approximately $15 million and $11 million for the
first quarters of 1997 and 1996, respectively.
During 1997, the company invested an additional $46 million in DBS construction
costs, bringing its total investment to $939 million, which consists of the
$682.5 million license fee and approximately $257 million in related satellite
construction and other costs.
<PAGE>
PAGE 22
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
On May 6, 1997, the company renegotiated its investment agreement with News
Corp. which included the termination of the company's remaining investment
obligation of $650 million. In addition, the company and News Corp. have formed
a joint venture, ASkyB, which will provide digital satellite services to homes
and businesses. The company will own 19.9% of ASkyB and will initially retain
ownership of its rights to the spectrum of direct broadcast satellite
frequencies (the DBS license) for which the company paid $682.5 million. Upon
FCC approval, the DBS license will be transferred to ASkyB at which time ASkyB
will pay the company a license fee of $682.5 million plus interest.
Concurrently, the company will make an investment in a subsidiary of News Corp.
for an amount equal to the license fee. This investment will be repaid on the
sixth anniversary or upon certain circumstances on the third anniversary of the
agreement. News Corp. is in discussions to combine the operations of ASkyB with
certain third parties that could further reduce the company's ownership
percentage and/or interest.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------------------------
CASH FLOWS
- ----------
Cash from operating activities decreased in the first quarter of 1997 to $449
million from the first quarter of 1996. This decrease is primarily due to
increased payments to suppliers and employees offset by an increase in receipts
from customers attributable to the increase in consolidated revenues.
Cash used for investing activities in the first quarter of 1997 decreased $148
million from the first quarter of 1996. This decrease in cash used is primarily
attributable to decreases in the investment in DBS and capital expenditures over
the first quarter of the prior year and increases in net proceeds from sales and
maturities of marketable securities.
Cash from financing activities in the first quarter of 1997 increased $132
million to $198 million from the first quarter of 1996. This increase is due to
an increase in commercial paper issuances for general corporate purposes and
decreases in maturities and repayments of Senior Notes and other debt. During
the first quarter of 1997, the company issued $2,525 million and repaid $2,254
million of commercial paper borrowings, leaving $1,693 million of such
borrowings outstanding at March 31, 1997.
CAPITAL RESOURCES AND LIQUIDITY
- -------------------------------
The company believes that it will be able to meet its current and forseeable
liquidity and capital requirements, including continued investments in its local
services and other VDM businesses, through its cash flows from operating
activities and existing debt facilities. On April 30, 1997, the company entered
into a new $4 billion credit facility that expires on April 28, 1998. This new
facility replaces a similar $2 billion credit facility.
<PAGE>
PAGE 23
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
EBITDA
- ------
Consolidated EBITDA increased to $1,039 million or 8% in the first quarter of
1997 from $962 million in the first quarter of 1996. The increase in EBITDA is
the result of the increase in consolidated revenue and the improvement in cost
of services as a percentage of consolidated revenue. EBITDA, as defined by
management, includes earnings, excluding equity in income (losses) of
affiliates, other income (expense), net, and distributions on subsidiary Trust
mandatorily redeemable preferred securities, before interest, income taxes,
depreciation and amortization. EBITDA represents a measure of the company's
ability to generate cash flows and does not represent net income or cash flows
from operating, investing and financing activities as defined by GAAP. EBITDA
should be considered in addition to, but not as a substitute for, or superior
to, measures of financial performance reported in accordance with GAAP. EBITDA
is often used by analysts when evaluating the performance of the company.
Readers are cautioned that the company's definition of EBITDA may not be
comparable to similar titled measures used by other companies or analysts.
<PAGE>
PAGE 24
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
FORM 10-Q
PART II. OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
a)Exhibits
Exhibit No. Description
- ----------- -----------
10(a) Revolving Credit Agreement.
11 Computation of Earnings per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule as of March 31, 1997.
99(a) Capitalization Schedule as of March 31, 1997.
b)Reports on Form 8-K
The company filed a Current Report on Form 8-K on February 10, 1997, which
reported pursuant to Item 7.
<PAGE>
PAGE 25
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
FORM 10-Q
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MCI COMMUNICATIONS CORPORATION
Date: May 15, 1997 Signed: /s/ David M. Case
-----------------------
David M. Case
Vice President and Controller
<PAGE>
PAGE 26
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
FORM 10-Q
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
10(a) Revolving Credit Agreement.
11 Computation of Earnings per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule as of March 31, 1997.
99(a) Capitalization Schedule as of March 31, 1997.
Exhibit 10(a)
--------------
EXECUTION COPY
$4,000,000,000
REVOLVING CREDIT AGREEMENT
dated as of April 30, 1997
Among
MCI COMMUNICATIONS CORPORATION,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Competitive Bid Agent
and Operating Agent,
CITIBANK, N.A.,
as Syndication Agent
THE CHASE MANHATTAN BANK
and
NATIONSBANK OF TEXAS, N.A.,
as Co-Documentation Agents
THE CO-AGENTS NAMED HEREIN,
and
THE SEVERAL FINANCIAL INSTITUTIONS
PARTIES HERETO
Arranged by
BANCAMERICA SECURITIES, INC.
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS
1.01 Defined Terms 1
1.02 Other Definitional Provisions 15
ARTICLE II
THE CREDIT FACILITIES
2.01 Commitments to Make Pro Rata Advances 15
(a) Commitments 15
(b) Types of Pro Rata Advances 16
2.02 Competitive Bid Advances 16
(a) Competitive Bid Advances 16
(b) Competitive Bid Borrowing Requests 16
(c) Offers of Competitive Bid Advances 17
(d) Responses by the Company to Offers 17
(e) Notice of Cancellation 19
(f) Notice of Acceptance 19
(g) Determining the Competitive Bid Eurodollar Rate 19
(h) Inability to Determine Competitive Bid Eurodollar Rate 20
(i) Borrowing and Reborrowing 20
(j) Repayments 21
(k) Interest 21
(l) Insufficient Competitive Bid Advances 21
2.03 Evidence of Debt 22
2.04 Procedure for Pro Rata Borrowings 22
2.05 Refunding Borrowings 23
2.06 Optional Termination or Reduction of Commitments 23
2.07 Optional Prepayments of Pro Rata Advances 24
2.08 Repayment of Advances 24
2.09 Termination Date 24
2.10 Fees 25
(a) Facility Fee 25
(b) Additional Fees 25
2.11 Interest 25
(a) Interest on Pro Rata Advances 25
<PAGE>
(b) Interest on Competitive Bid Advances 25
(c) Interest on Overdue Amounts 25
(d) Additional Interest on Eurodollar Rate Advances 25
(e) Payment of Interest on Pro Rata Advances 26
(f) Maximum Interest Rate 26
2.12 Computation of Interest, Fees and Other Amounts 26
2.13 Inability to Determine Interest Rate for Pro
Rata Advances 27
2.14 Pro Rata Treatment and Payments 28
(a) Payments by the Company 28
(b) Payments by the Banks to the Operating Agent 29
2.15 Taxes 30
2.16 Illegality 34
2.17 Requirements of Law 35
2.18 Funding Losses 37
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Corporate Existence and Power 38
3.02 Corporate Authorization; No Contravention 39
3.03 Governmental Authorization 39
3.04 Binding Effect 39
3.05 No Legal Bar 39
3.06 Litigation 40
3.07 No Default 40
3.08 ERISA Compliance 40
3.09 Use of Proceeds; Margin Regulations 41
3.10 Title to Properties 41
3.11 Taxes 42
3.12 Financial Condition 42
3.13 Environmental Matters 43
3.14 Investment Company Act 43
3.15 Communications Act 43
3.16 Senior Indebtedness 43
ARTICLE IV
CONDITIONS PRECEDENT
4.01 Conditions to Initial Advances 44
(a) Credit Agreement and the Notes 44
(b) Corporate Documents of the Company 44
(c) By-Laws of the Company 44
(d) Board Resolutions of the Company 44
(e) Incumbency Certificate for the Company 44
(f) Legal Opinion for the Company 44
(g) Payment of Fees and Expenses 45
(h) Certificate 45
(i) Financial Statements 45
(j) MCI Telecom Certificate 45
(k) Existing Agreement 45
(l) Other Documents 45
4.02 Conditions to All Advances 45
(a) Borrowing Notice 45
(b) Continuation of Representations and Warranties 46
(c) No Existing Default 46
ARTICLE V
AFFIRMATIVE COVENANTS
5.01 Financial Statements 46
5.02 Certificates; Other Information 47
5.03 Preservation of Corporate Existence, etc 48
5.04 Maintenance of Property 48
5.05 Insurance 48
5.06 Payment of Obligations 49
5.07 Compliance with Laws 49
5.08 Inspection of Property and Books and Records 49
5.09 Hazardous Materials 50
5.10 Notices 50
5.11 Consultation after GAAP Changes 51
5.12 Maintenance of Telecommunications Business 52
ARTICLE VI
NEGATIVE COVENANTS
6.01 Limitation on Liens 52
6.02 Sale or Lease of Assets 53
6.03 Consolidations and Mergers 54
6.04 Transactions with Affiliates 55
6.05 Compliance with ERISA 55
6.06 Use of Proceeds 55
6.07 Ratio of Total Liabilities to Total Capitalization 56
6.08 MCI Telecom Liabilities 56
6.09 No Restriction on Dividends of MCI Telecom 56
ARTICLE VII
EVENTS OF DEFAULT
(a) Non-Payment of Principal 57
(b) Non-Payment of Interest and Facility Fee 57
(c) Non-Payment of Other Amounts 57
(d) Representation or Warranty 57
(e) Certain Article VI Defaults 57
(f) Other Covenant Defaults 58
(g) Other Defaults 58
(h) Cross-Default 58
(i) Bankruptcy or Insolvency 59
(j) Involuntary Proceedings 59
(k) ERISA 59
(l) Monetary Judgments 60
(m) Change in Control 60
ARTICLE VIII
THE AGENTS
8.01 Appointment of the Agents 61
8.02 Delegation of Duties of the Agents 61
8.03 Liability of the Agents 61
8.04 Reliance by the Agents 62
8.05 Notice of Default 62
8.06 Credit Decision 62
8.07 Indemnification 63
8.08 Bank of America in its Individual or Separate
Capacity 64
8.09 Successor Agents 64
8.10 Syndication Agent, Co-Documentation Agents, Co-Agents 64
ARTICLE IX
MISCELLANEOUS
9.01 Amendments and Waivers 65
9.02 Notices 65
9.03 No Waiver; Cumulative Remedies 67
9.04 Costs and Expenses 67
9.05 Indemnity 68
9.06 Successors and Assigns 68
9.07 Assignments, Participations, etc. 69
9.08 Confidentiality 71
9.09 Sharing; Set-off 71
9.10 Notification of Addresses, Lending Offices, etc 72
9.11 Delivery of Documents and Notices 72
9.12 Counterparts; Effectiveness 73
9.13 Severability 73
9.14 Jurisdiction 73
9.15 Waiver of Trial by Jury 73
9.16 Governing Law 74
<PAGE>
SCHEDULES AND EXHIBITS
SCHEDULES:
SCHEDULE I Commitments
SCHEDULE II Lending Offices, Addresses for
Notices, etc. (1.01, 9.02)
SCHEDULE III Pending Litigation (3.06)
SCHEDULE IV Environmental Matters (3.13)
SCHEDULE V Existing Liens (6.01(a))
EXHIBITS:
EXHIBIT A Form of Pro Rata Note
EXHIBIT B Form of Competitive Bid Note
EXHIBIT C-1 Form of Pro Rata Borrowing Request
EXHIBIT C-2 Form of Competitive Bid Borrowing Request
EXHIBIT D Form of Competitive Bid Advance Offer
EXHIBIT E Form of Competitive Bid Advance Confirmation
EXHIBIT F-1 Form of Opinion of the General Counsel to the Company
EXHIBIT F-2 Form of Opinion of Special New York Counsel to the Company
EXHIBIT G Form of Assignment Notice and Acceptance
EXHIBIT H Form of Confidentiality Agreement
<PAGE>
REVOLVING CREDIT AGREEMENT
REVOLVING CREDIT AGREEMENT dated as of April 30, 1997, among MCI
COMMUNICATIONS CORPORATION, a Delaware corporation (the "Company"), the several
financial institutions parties to this Agreement (collectively, the "Banks";
individually, a "Bank"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
("Bank of America"), as Competitive Bid Agent and Operating Agent, CITIBANK,
N.A., as Syndication Agent, THE CHASE MANHATTAN BANK and NATIONSBANK OF TEXAS,
N.A., as Co-Documentation Agents, and the Co-Agents named herein.
WHEREAS, the Company requested BancAmerica Securities, Inc. to act as
Arranger (as hereinafter defined) to assemble a syndicate of lending
institutions to make available to the Company a revolving credit facility,
comprising a pro rata facility and a competitive bid facility; and
WHEREAS, the Banks have agreed to make available to the Company such a
revolving credit facility, upon the terms and conditions set forth in this
Agreement; and
WHEREAS, in connection with the competitive bid facility referred to in
Section 2.02 below the Banks wish to appoint Bank of America as their
competitive bid agent (in such capacity, Bank of America shall be hereinafter
referred to as the "Competitive Bid Agent"), and in connection with other
aspects of this Agreement the Banks wish to appoint Bank of America as their
operating agent (in such capacity, Bank of America shall be hereinafter referred
to as the "Operating Agent").
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
<PAGE>
1.01 Defined Terms. As used in this Agreement, the following
terms have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Absolute Bid" means a proposal for the making of one or
more Competitive Bid Advances at a fixed rate (other than Competitive Bid
Eurodollar Advances) under Section 2.02.
"Advances" means Pro Rata Advances and Competitive Bid
Advances.
"Affiliate" means, with respect to any Person, any other
Person (other than a Subsidiary) which, directly or indirectly, is in control
of, is controlled by, or is under common control with such Person. A Person
shall be deemed to control another Person if such controlling Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise. Any director, executive officer or
beneficial owner of ten percent (10%) or more of the shares of capital stock
having power to vote for the election of directors of a Person (or comparable
interests in the case of a Person other than a corporation) shall, for the
purposes of this Agreement, be deemed an Affiliate of such Person.
Notwithstanding the foregoing, under no circumstances shall either Agent or any
Bank be deemed to be an Affiliate of the Company or any Subsidiary of the
Company.
"Agents" means the Competitive Bid Agent and the Operating
Agent.
"Agreement" means this Revolving Credit Agreement, as
amended, supplemented or modified from time to time.
"Applicable Margin" means, with respect to Eurodollar Rate
Advances, 0.14% per annum.
"Arranger" means BA Securities in its capacity as arranger
of the syndication of the revolving credit facility contemplated by this
Agreement.
"Assignee" has the meaning ascribed to such term in Section
9.07(a).
"Assignment Effective Date" has the meaning ascribed to such
term in Section 9.07(a).
"Assignment Notice and Acceptance" means an assignment
notice and acceptance entered into by a Bank and an Assignee, and accepted by
the Operating Agent, in substantially the form of Exhibit G hereto.
"Availability Period" means the period from the Effective
Date to the Termination Date.
"BA Securities" means BancAmerica Securities, Inc., a
Delaware corporation and a wholly-owned subsidiary of BankAmerica Corporation.
BA Securities is a registered broker-dealer and permitted to underwrite and deal
in certain Ineligible Securities (as defined in Section 6.06(c)).
"Bank of America" means Bank of America National Trust and
Savings Association.
"Borrowing" means a Competitive Bid Borrowing or a Pro Rata
Borrowing.
"Business Day" means any day other than a Saturday, Sunday
or other day on which commercial banks in New York City or San Francisco are
authorized or required by law to close.
"Capitalized Lease Obligation" means, with respect to any
Person, a lease obligation of such Person which would be required under GAAP to
be capitalized on the books of such Person.
"COBRA" has the meaning ascribed to such term in Section
3.08.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute.
"Commitment" means, with respect to any Bank, its obligation
to make Pro Rata Advances to the Company pursuant to Section 2.01 in an
aggregate amount not to exceed at any one time outstanding the amount set forth
opposite such Bank's name on Schedule I, as such amount may be changed from time
to time as provided herein (collectively, with respect to all the Banks, the
"Commitments").
"Commitment Percentage" means, with respect to any Bank, the
percentage of the aggregate Commitments constituted by such Bank's Commitment.
"Competitive Bid Advance" means an extension of credit by
a Bank to the Company under Section 2.02.
"Competitive Bid Advance Confirmation" has the meaning
ascribed to such term in Section 2.02(d).
"Competitive Bid Advance Offer" has the meaning ascribed to
such term in Section 2.02(c).
"Competitive Bid Agent" means Bank of America in its
capacity as competitive bid agent for the Banks hereunder in connection with the
competitive bid facility established under Section 2.02, as contemplated by the
second WHEREAS clause, and any successor agent.
"Competitive Bid Borrowing" means a borrowing hereunder
consisting of one or more Competitive Bid Advances made to the Company on the
same day by one or more Banks pursuant to Section 2.02.
"Competitive Bid Borrowing Request" has the meaning ascribed
to such term in Section 2.02(b).
"Competitive Bid Eurodollar Advance" means a Competitive Bid
Advance that shall bear or bears interest based on a Competitive Bid Eurodollar
Rate.
"Competitive Bid Eurodollar Rate" means, with respect to any
Competitive Bid Eurodollar Advance, a rate of interest determined pursuant to
Section 2.02(g).
"Competitive Bid Note" means a promissory note of the
Company substantially in the form of Exhibit B hereto.
"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 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.
"Contractual Obligations" means, with respect to any Person,
any provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other instrument to
which such Person is a party or by which it or any of its property is bound.
"Default" means any of the events specified in Article VII,
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, event or act has been satisfied.
"DOL" means the United States Department of Labor.
"Dollars" and "$" each mean lawful currency of the United
States.
"Domestic Lending Office" means, with respect to each Bank,
the office of such Bank in the United States designated as such in Schedule II
or such other office of such Bank in the United States as such Bank may from
time to time specify to the Company and the Operating Agent.
"Effective Date" means April 30, 1997.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time and any regulation promulgated thereunder.
"ERISA Affiliate" means, with respect to the Company or any
Subsidiary, all trades or businesses (whether or not incorporated) under common
control with the Company or such Subsidiary and which, together with the Company
or any Subsidiary, are treated as a single employer under Section 414(b), 414(c)
or 414(m) of the Code.
"ERISA Event" means, with respect to the Company or any
ERISA Affiliate (a) a Reportable Event (other than a Reportable Event not
subject to the provision for 30-day notice to the PBGC under the regulations
issued under ERISA); or (b) the withdrawal of the Company or any ERISA Affiliate
from a Plan during a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA; or (c) the filing of a notice of intent
to terminate a Plan, if such Plan is underfunded, or the treatment of a Plan
amendment as a termination under Section 4041 of ERISA; or (d) the institution
of proceedings to terminate a Plan by the PBGC; or (e) the imposition of a lien
under Section 412 of the Code or Section 302 of ERISA; or (f) any other event or
condition which might reasonably be expected to constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan or to result in the imposition of any liability under Title
IV of ERISA other than PBGC premiums due but not delinquent under Section 4007
of ERISA.
"Eurocurrency Liabilities" has the meaning ascribed to such
term in Regulation D of the Federal Reserve Board.
"Eurodollar Business Day" means a day that is a Business Day
and is also a day on which banks are open for business in London and dealings in
Dollar deposits are carried on in the London interbank Eurodollar market.
"Eurodollar Lending Office" means, with respect to each
Bank, the office of such Bank designated as such in Schedule II or such other
office of such Bank as such Bank may from time to time specify to the Company
and the Operating Agent.
"Eurodollar Rate" means, with respect to each Interest
Period for Eurodollar Rate Advances comprising the same Pro Rata Borrowing, a
rate per annum equal to the average (rounded upwards, if necessary, to the
nearest whole multiple of one-sixteenth of one percent (1/16 of 1%)) of the
rates of interest per annum notified to the Operating Agent by each Reference
Bank as the rate at which Dollar deposits for such Interest Period and in an
amount comparable to the amount of the Eurodollar Rate Advance of such Reference
Bank during such Interest Period would be offered by its Eurodollar Lending
Office to major banks in the London interbank Eurodollar market at or about
11:00 a.m. (London time) on the second Eurodollar Business Day before the
commencement of such Interest Period.
"Eurodollar Rate Advance" means a Pro Rata Advance that
shall bear or bears interest based on the Eurodollar Rate.
"Eurodollar Reserve Percentage" means, with respect to the
Interest Period for any Eurodollar Rate Advance of any Bank, the reserve
percentage applicable during such Interest Period (or if more than one such
percentage shall be so applicable, the daily average of such percentages for the
days in such Interest Period for which any such percentage shall be so
applicable) under regulations issued from time to time by the Federal Reserve
Board for determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) for such Bank with respect
to liabilities or assets consisting of or including Eurocurrency Liabilities
having a term equal to such Interest Period in an amount comparable to the
amount of such Eurodollar Rate Advance.
"Event of Default" means any of the events specified in
Article VII, provided, however, that any requirement for the giving of notice,
the lapse of time, or both, or any other condition, event or act has been
satisfied.
"Existing Agreement" means the $2,000,000,000 Revolving
Credit Agreement, dated as of September 26, 1996, as amended or otherwise
modified from time to time prior to the date hereof, among the Company, Bank of
America, BA Securities and the several financial institutions parties thereto.
"Federal Funds Rate" means, for any period, the rate set
forth in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Board (including any
such successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)". If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m.
Quotations") for such day under the caption "Federal Funds Effective Rate". If
on any relevant day the appropriate rate for such previous day is not yet
published in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate
for such day will be the arithmetic mean of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York time) on that
day by each of three (3) leading brokers of Federal funds transactions in New
York City selected by the Operating Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any successor thereto.
"GAAP" means generally accepted accounting principles in the
United States in effect from time to time.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any central bank thereof and
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any corporation or
other entity owned or controlled, through stock or capital ownership or
otherwise, by any of the foregoing.
"Hazardous Materials" means those substances which are
regulated by or form the basis of liability under any Hazardous Materials Laws.
"Hazardous Materials Claims" has the meaning ascribed to
such term in Section 5.10(d).
"Hazardous Materials Laws" means the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C.ss.9601 et
seq.), the Hazardous Material Transportation Act (49 U.S.C.ss.1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C.ss.6901 et seq.), the Federal
Water Pollution Control Act (33 U.S.C.ss.1251 et seq.), the Clean Air Act (42
U.S.C.ss.1251 et seq.), the Toxic Substances Control Act (15 U.S.C.ss.2601 et
seq. and the Occupational Safety and Health Act (29 U.S.C.ss.651 et seq.), as
such laws have been amended or supplemented and any analogous future federal, or
present or future state or local, statutes and the regulations promulgated
thereunder.
"Indebtedness" means, with respect to any Person, (a) all
obligations of such Person for borrowed money (including 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 GAAP,
recorded as capital leases; and (f) all indebtedness secured by any Lien on any
property or asset owned or held by such Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
non-recourse to the credit of such Person; provided, however, that Indebtedness
shall not include obligations of a Person which are owed to a trust or other
special purpose entity all of whose common equity is beneficially owned by such
Person.
"Indemnified Liabilities" has the meaning ascribed to such
term in Section 9.05.
"Indemnified Person" has the meaning ascribed to such term
in Section 9.05.
"Indentures" means, collectively, the Subordinated
Indenture, dated as of October 15, 1989, between the Company and Bankers Trust
Company, as Trustee, and the Junior Subordinated Indenture, dated as of May 29,
1996, between the Company and Wilmington Trust Company, as Trustee, in each case
as the same may be amended or supplemented from time to time.
"Interest Payment Date" means, with respect to any Pro Rata
Advance, the last day of each Interest Period applicable to such Advance or, in
the case of a Reference Rate Advance, each February 15, May 15, August 15 and
November 15 falling after the date of such Reference Rate Advance.
"Interest Period" means:
(a) with respect to any Eurodollar Rate Advance, the period
commencing on the date of such Advance and ending on the date one (1), two (2),
three (3), six (6) or, if available to all the Banks, nine (9) or twelve (12)
months thereafter, as selected by the Company in its notice of borrowing as
provided in Section 2.04; and
(b) with respect to any Competitive Bid Advance, the period
specified for such Advance in the related Competitive Bid Borrowing Request
under Section 2.02(a);
provided that:
(i) if any Interest Period pertaining to a
Eurodollar Rate Advance or Competitive Bid Eurodollar Advance would
otherwise end on a day which is not a Eurodollar Business Day, that
Interest Period shall be extended to the next succeeding Eurodollar
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Eurodollar
Business Day;
(ii) any Interest Period pertaining to a Eurodollar
Rate Advance or Competitive Bid Eurodollar Advance shall, subject to
proviso (i) above, end on the day in the calendar month at the end of
such Interest Period that shall numerically correspond to the first day
of such Interest Period; provided, that if there shall be no such
numerically corresponding day in such last calendar month, such
Interest Period shall end on the last Eurodollar Business Day of such
calendar month;
(iii) if any Interest Period pertaining to a
Competitive Bid Advance other than a Competitive Bid Eurodollar Advance
would otherwise end on a day which is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day; and
(iv) any Interest Period that would otherwise
extend beyond the Termination Date shall end on the Termination Date.
"Lending Office" means, with respect to any Bank, a
Domestic Lending Office or Eurodollar Lending Office of such Bank.
"LIBOR Bid" means a proposal for the making of one or more
Competitive Bid Eurodollar Advances under Section 2.02.
"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
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).
"Loan Documents" means this Agreement and any Notes.
"Majority Banks" means at any time Banks having at least 51%
of the then aggregate amount of the Commitments; provided, that if the
Commitments shall have been terminated in full, but Advances shall remain
outstanding, "Majority Banks" shall mean Banks holding at least 51% of the then
aggregate unpaid amount of such outstanding Advances.
"Margin Stock" means "margin stock" as such term is defined in
Regulation U of the Federal Reserve Board.
"MCI Telecom" means MCI Telecommunications Corporation, a
Delaware corporation.
"MCI Telecom Liabilities" means, at any time, the aggregate
principal amount (without duplication) of all Indebtedness and Contingent
Obligations of MCI Telecom; provided, however, that the following shall be
excluded from Contingent Obligations for purposes of this definition:
(a) endorsements for collection or deposit in the
ordinary course of business;
(b) interest rate swap or cap agreements;
(c) obligations in respect of performance bonds and
letters of credit not supporting the payment of Indebtedness;
(d) Contingent Obligations with respect to Indebtedness
of the Company or any Subsidiary;
(e) Contingent Obligations with respect to lease
obligations;
(f) recourse obligations with respect to the sales of
customer receivables;
(g) Contingent Obligations related to obligations
of third parties (other than the Company and its Subsidiaries) not in respect
of Indebtedness and incurred in the ordinary course of business; and
(h) other Contingent Obligations of MCI Telecom in an amount,
as to each such Contingent Obligation, less than $5,000,000.
"Merger" means the merger of the Company with and into
Tadworth Corporation, a Delaware corporation and a wholly-owned subsidiary of
British Telecommunications plc, a public limited company incorporated under the
laws of England and Wales, as disclosed in the Current Report on Form 8-K, dated
November 5, 1996, filed by the Company with the Securities and Exchange
Commission.
"Multiemployer Plan" means, as to the Company or any ERISA
Affiliate, at any time, a "multiemployer plan" within the meaning of Section
4001(a)(3) of ERISA and to which the Company or any ERISA Affiliate is making,
or is obligated to make contributions or has made, or been obligated to make,
contributions.
"Notes" means any Pro Rata Notes and Competitive Bid Notes.
"Operating Agent" means Bank of America in its capacity as
operating agent for the Banks hereunder, and any successor operating agent.
"Other Taxes" has the meaning ascribed to such term in Section
2.15(b).
"Participant" has the meaning ascribed to such term in Section
9.07(b).
"Payment Office" means Bank of America NT&SA-S.F., ABA
Routing No. 121-000-358, Credit BANCONTROL Account No. 12338-15237,
Ref.: MCI Communications Corp., or such other payment office designated by
the Operating Agent and notified to the Borrower and the Banks.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
"Plan" means, with respect to the Company or any ERISA
Affiliate, at any time, an employee pension benefit plan as defined in Section
3(2) of ERISA (including a Multiemployer Plan) which is covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the Code
and is maintained for employees of the Company or any ERISA Affiliate.
"Pro Rata Advance" means an extension of credit by a Bank to
the Company under Section 2.01, which may be a Reference Rate Advance or
Eurodollar Rate Advance.
"Pro Rata Borrowing" means a borrowing hereunder consisting of
Pro Rata Advances made to the Company on the same day by the Banks pursuant to
Article II.
"Pro Rata Borrowing Request" has the meaning ascribed to such
term in Section 2.04.
"Pro Rata Note" means a promissory note of the Company
substantially in the form of Exhibit A hereto.
"Reference Banks" means Bank of America, The Bank of Nova
Scotia, The Chase Manhattan Bank, Citibank, N.A., Mellon Bank, N.A. and
NationsBank of Texas, N.A.
"Reference Rate" means the higher of:
(a) the rate of interest publicly announced from
time to time by Bank of America in San Francisco, California, as its reference
rate; and
(b) one-half of one percent (1/2 of 1%) per annum plus
the Federal Funds Rate.
The rate referred to in (a) above is a rate set by Bank of
America based upon various factors including Bank of America's costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above or below
such announced rate. Any change in such rate shall take effect at the opening of
business on the day specified in the public announcement of such change.
"Reference Rate Advance" means a Pro Rata Advance that shall
bear or bears interest based on the Reference Rate.
"Refunding Borrowing" means a Borrowing hereunder which, after
application of the proceeds thereof, results in no net increase in the aggregate
outstanding principal amount of the Advances made by the Banks.
"Reportable Event" means "reportable event" as defined in
Section 4043 of ERISA.
"Requirement of Law" means, with respect to any Person, the
certificate of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Responsible Officer" means the Chairman, the Chief Executive
Officer or the President of the Company or, with respect to financial matters,
the Chief Financial Officer, the Controller or the Treasurer of the Company.
"Right of Way Agreements" has the meaning ascribed to such
term in Section 3.10.
"Specified Amount" has the meaning ascribed to such term in
Section 2.02(d)(B).
"Subsidiary" 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. Unless
otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in
this Agreement shall refer to a Subsidiary or Subsidiaries of the Company, and
all references to the corporate form of a Subsidiary shall be deemed, in the
case of any Subsidiary that shall be a partnership, to refer to the partnership
form thereof.
"Taxes" has the meaning ascribed to such term in Section
2.15(a).
"Termination Date" means the earlier to occur of:
(a) April 28, 1998; and
(b) the date on which the Commitments shall terminate
in accordance with the provisions of this Agreement.
"Total Capital" means, at any time, the amount of the capital
stock account plus (or minus in the case of a deficit) the amount of the
additional paid-in capital and retained earnings, consolidated in accordance
with GAAP, of the Company and its consolidated Subsidiaries, after deducting the
aggregate amount of all minority interests in the capital stock and surplus of
consolidated Subsidiaries, less the aggregate net book value (after deducting
any reserves applicable thereto) of all items of the following character which
are included in the consolidated assets of the Company and its consolidated
Subsidiaries:
(a) franchises, licenses, permits, patents, patent
applications, copyrights, trademarks, trade names, service marks, goodwill,
experimental or organizational expense, and other like intangibles but excluding
rights of way treated as assets;
(b) deferred charges and prepaid expenses (other
than prepaid interest, prepaid rent, insurance and taxes);
(c) unamortized debt discount and expense;
(d) assets which are pledged or deposited as
security for or for the purpose of paying any obligations, contingent or
otherwise, which are not included in consolidated liabilities; and
(e) amounts in respect of capital stock, promissory notes and
other securities issued by the Company or one of its consolidated Subsidiaries
and held in its treasury.
"Total Liabilities" means, at any time, the aggregate
principal amount (without duplication) of all Indebtedness and Contingent
Obligations of the Company and its consolidated Subsidiaries, on a consolidated
basis; provided, however, that the following shall be excluded from Contingent
Obligations for purposes of this definition:
(a) endorsements for collection or deposit in the
ordinary course of business;
(b) interest rate swap or cap agreements;
(c) obligations in respect of performance bonds and
letters of credit not supporting the
payment of Indebtedness;
(d) Contingent Obligations with respect to Indebtedness
of the Company or any Subsidiary;
(e) Contingent Obligations with respect to lease
obligations;
(f) recourse obligations with respect to the sales of
customer receivables;
(g) Contingent Obligations related to
obligations of third parties (other than Subsidiaries) not in respect of
Indebtedness and incurred in the ordinary course of business;
(h) Contingent Obligations of any corporation that shall
become a consolidated Subsidiary after the date of this Agreement to the extent
such Contingent Obligations existed at the time of the acquisition and were not
created in anticipation thereof by or with the agreement of the Company; and
(i) other Contingent Obligations of the Company or any
consolidated Subsidiary in an amount, as to each such Contingent Obligation,
less than $5,000,000.
"Transferee" has the meaning ascribed to such term in Section
9.08.
"Unfunded Benefit Liabilities" means, with respect to any Plan
at any time, the amount (if any) by which (i) the present value of all benefit
liabilities under such Plan, determined based on actuarial assumptions used to
determine accumulated benefit obligations under Accounting Principle 87 of the
Financial Accounting Standards Board, exceeds (ii) the fair market value of all
Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan, but only to the extent that such excess
represents a potential liability of the Company or any ERISA Affiliate to the
PBGC or such Plan under Title IV of ERISA.
"United States" means the United States of America.
"Withholding Form" means Internal Revenue Service Form 4224
(or any successor thereto), Internal Revenue Service Form 1001 (or any successor
thereto), Internal Revenue Service Form W-8 (or any successor thereto), Internal
Revenue Service Form W-9 (or any successor thereto), or any other Internal
Revenue Service form pursuant to which a Person may claim an exemption from (or
reduction of) withholding of United States federal income tax on the receipt of
payment of principal, interest or fees, as the context may require.
"WUI" means Western Union International, Inc., a Delaware
corporation.
1.02 Other Definitional Provisions
(a) Unless otherwise specified herein, all terms defined in
this Agreement shall have the defined meanings when used in any certificate or
other document made or delivered pursuant hereto.
(b) All accounting terms not expressly defined herein shall be
construed, except where the context otherwise requires, and all financial
computations required under this Agreement shall be made, in accordance with
GAAP; provided, that no change in GAAP after the date of this Agreement shall
have the effect of causing a Default or Event of Default if such Default or
Event of Default would not have occurred in the absence of such change in GAAP
(except to the extent that an amendment as contemplated by Section 5.11 shall be
agreed to by the requisite parties hereto).
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section,
schedule and exhibit references are to this Agreement unless otherwise
specified. The meaning of defined terms shall be equally applicable to the
singular and plural forms of the defined terms.
(d) The term "including" is not limiting and means "including
without limitation."
ARTICLE II
THE CREDIT FACILITIES
. 2.01 Commitments to Make Pro Rata Advances
(a) Commitments. Each Bank severally agrees, on the terms and conditions
hereof, to make Pro Rata Advances to the Company from time to time on any
Business Day (or, in the case of Eurodollar Rate Advances, any Eurodollar
Business Day) during the Availability Period in an aggregate principal amount at
any one time outstanding not to exceed its Commitment Percentage of the
Commitments at such time; provided, that the aggregate principal amount of all
Pro Rata Advances and Competitive Bid Advances outstanding at any time shall not
exceed the Commitments at such time. During the Availability Period, the Company
may borrow under Sections 2.01(a) and 2.04, prepay and repay Pro Rata Advances
to the extent permitted by Sections 2.07 and 2.08 and reborrow in accordance
with Sections 2.01(a), 2.04 and 2.05 and the other terms and conditions hereof.
(b) Types of Pro Rata Advances. Each Pro Rata Borrowing shall consist of
(i) Eurodollar Rate Advances or (ii) Reference Rate Advances, provided that no
Eurodollar Rate Advance shall be made less than one month prior to the
Termination Date. Eurodollar Rate Advances shall be made by each Bank at its
Eurodollar Lending Office and Reference Rate Advances shall be made by each Bank
at its Domestic Lending Office.
. 2.02 Competitive Bid Advances
(a) Competitive Bid Advances. Each Bank severally agrees that the Company
may borrow Competitive Bid Advances under this Section 2.02 from time to time on
any Business Day (or, in the case of Competitive Bid Eurodollar Advances, any
Eurodollar Business Day) during the Availability Period in the manner set forth
below; provided, that (I) the aggregate principal amount of all Pro Rata
Advances and Competitive Bid Advances outstanding at any time shall not exceed
the Commitments at such time, (II) except as provided in Section 2.02(l), the
Company shall not request that a Competitive Bid Advance be made on the same day
on which a Pro Rata Advance is to be made hereunder, and (III) the Company may
not deliver a Competitive Bid Borrowing Request within five (5) Business Days of
any other Competitive Bid Borrowing Request hereunder; provided that the Company
and the Competitive Bid Agent may agree from time to time to a period of less
than five (5) Business Days between Competitive Bid Borrowing Requests.
(b) Competitive Bid Borrowing Requests. The Company may request Competitive
Bid Advances under this Section 2.02 to be made on any Business Day (in the case
of an Absolute Bid) or Eurodollar Business Day (in the case of a LIBOR Bid) that
is not also the day requested by the Company for a Pro Rata Advance hereunder,
except as provided in Section 2.02(l), by giving a notice substantially in the
form of Exhibit C-2 (a "Competitive Bid Borrowing Request") to the Competitive
Bid Agent, not later than (1) in the case of LIBOR Bids, 11:00 a.m. (New York
City time) at least four (4) Eurodollar Business Days prior to the date of the
proposed Competitive Bid Advances, or (2) in the case of Absolute Bids, 11:00
a.m. (New York City time) at least one (1) Business Day prior to the date of the
proposed Competitive Bid Advances, containing the information specified in
Exhibit C-2 and specifying for not more than three (3) alternative proposed
Competitive Bid Advances (A) the aggregate amount and date of the proposed
Competitive Bid Advances, which aggregate amount shall be a minimum of Five
Million Dollars ($5,000,000) or a multiple of One Million Dollars ($1,000,000)
in excess of Five Million Dollars ($5,000,000), (B) the final maturity date
thereof (which shall not be less than one (1) month in the case of a LIBOR Bid,
or seven (7) days in the case of an Absolute Bid, from the date the proposed
Competitive Bid Advances are to be made and shall not occur after the earlier of
(i) the Termination Date or (ii) the date six (6) months, in the case of a LIBOR
Bid, or one hundred eighty three (183) days, in the case of an Absolute Bid,
after the date of the requested Competitive Bid Advances), (C) the Interest
Period or Interest Periods and/or the interest payment date or dates relating
thereto and (D) any other terms to be applicable to such Competitive Bid
Advances. The Competitive Bid Agent shall in turn promptly notify each Bank of
such information.
(c) Offers of Competitive Bid Advances. Each Bank may, in its sole
discretion, elect irrevocably (except as provided in Section 2.02(h)) to offer
to make one or more Competitive Bid Advances (each in a minimum amount equal to
Five Million Dollars ($5,000,000) or a multiple of One Million Dollars
($1,000,000) in excess of Five Million Dollars ($5,000,000)) at a rate or rates
of interest (in the case of an Absolute Bid) or at a margin or margins (in the
case of a LIBOR Bid) specified by such Bank in its sole discretion by notifying
the Competitive Bid Agent by telephone, immediately confirmed by telecopier,
before (1) in the case of LIBOR Bids, 10:00 A.M. (New York City time) (if the
Bank shall be the Bank acting as the Competitive Bid Agent) or 10:15 A.M. (New
York City time) (in the case of each other Bank) three (3) Eurodollar Business
Days before the date of the proposed Competitive Bid Advance, or (2) in the case
of Absolute Bids, 9:30 A.M. (New York City time) (if the Bank shall be the Bank
acting as the Competitive Bid Agent) or 9:45 A.M. (New York City time) (in the
case of each other Bank) on the date of the proposed Competitive Bid Advances
(which notice the Competitive Bid Agent shall transmit by telephone, immediately
confirmed by telecopier, to the Company before (1) in the case of LIBOR Bids,
11:15 A.M. (New York City time) three (3) Eurodollar Business Days before the
date of the proposed Competitive Bid Advances, or (2) in the case of Absolute
Bids, 10:15 A.M. (New York City time) on the date of the proposed Competitive
Bid Advances), of the maximum amount of each Competitive Bid Advance which such
Bank would be willing to make (which maximum amount shall be at least Five
Million Dollars ($5,000,000) or a multiple of One Million Dollars ($1,000,000)
in excess of Five Million Dollars ($5,000,000)), the rate or rates of interest
or margin or margins therefor and the aggregate maximum amount of all
Competitive Bid Advances such Bank would be willing to make, provided, that no
more than two alternative interest rates or margins may be offered for each
separate maturity date of Competitive Bid Advances. Each Bank may offer to make
one or more Competitive Bid Advances in an aggregate amount in excess of such
Bank's Commitment. Each such offer shall be in substantially the form of Exhibit
D hereto (a "Competitive Bid Advance Offer").
(d) Responses by the Company to Offers. The Company shall, in turn, by (1)
in the case of LIBOR Bids, 11:45 A.M. (New York City time) three (3) Eurodollar
Business Days before the date of the proposed Competitive Bid Advances, or (2)
in the case of Absolute Bids, 10:30 A.M. (New York City time) on the date of the
proposed Competitive Bid Advances, either
(A) cancel such Competitive Bid Borrowing Request by giving
the Competitive Bid Agent notice by telephone to that effect
immediately confirmed in writing, or
(B) accept one or more of the offers made by any Bank or Banks
pursuant to paragraph (b) above, in its sole discretion, by giving
notice by telephone to the Competitive Bid Agent of the amount of each
Competitive Bid Advance (which amount shall be equal to or less than
the maximum amount notified to the Company by the Competitive Bid Agent
on behalf of such Bank for such Competitive Bid Advance pursuant to
paragraph (c) above but shall be at least equal to Five Million Dollars
($5,000,000) (unless a lower amount is agreed to by the Company, the
Competitive Bid Agent and the Bank whose offer is being accepted) or a
multiple of One Million Dollars ($1,000,000) in excess of Five Million
Dollars ($5,000,000)) to be made by each Bank, and reject any remaining
offers made by Banks pursuant to paragraph (b) above by giving the
Competitive Bid Agent notice to that effect; provided, that (i) the
aggregate principal amount of offered Competitive Bid Advances accepted
by the Company shall not exceed the aggregate principal amount of the
Competitive Bid Advances requested by it; and (ii) subject to the
remainder of this Section 2.02(d) (B), if the Company is to accept any
of such offers, it must accept offers strictly based upon pricing and
no other criteria whatsoever. If two or more Banks submit offers at
identical pricing and the Company shall accept any of such offers but
does not wish (or is not permitted under (i) above) to borrow the total
amount offered by such Banks, the Company shall accept offers from all
of such Banks in amounts allocated among them pro rata according to the
amounts offered by such Banks. If the interest rate for any Competitive
Bid Advance offered by any Bank shall exceed the maximum interest rate
permitted by law for loans of less than an amount specified by law (the
"Specified Amount"), then (x) the Company may accept all or a portion
(not less than the Specified Amount) of such Competitive Bid Advance
offered by any other Bank to the extent it shall deem necessary or
advisable to cause the aggregate principal amount of Competitive Bid
Advances to be made to equal the aggregate principal amount of
Competitive Bid Advances requested by the Company and (y) the Company
may not accept a portion of a Competitive Bid Advance from any Bank
which is less than the Specified Amount for such Competitive Bid
Advance. Notwithstanding anything to the contrary in this Section
2.02(d)(B), the amount of the Competitive Bid Advance to be made by any
Bank may be rounded to the nearest One Hundred Thousand Dollars
($100,000) in the discretion of the Competitive Bid Agent. Each such
notice of acceptance by the Company shall be confirmed in writing, in
substantially the form of Exhibit E hereto (a "Competitive Bid Advance
Confirmation").
Failure to give any such notice shall be deemed to be a cancellation by
the Company of such Competitive Bid Borrowing Request.
(e) Notice of Cancellation. If the Company shall cancel or be deemed to
cancel a Competitive Bid Borrowing Request pursuant to paragraph (d) above, the
Competitive Bid Agent shall give prompt notice thereof to the Banks and the
Competitive Bid Advances requested thereby shall not be made.
(f) Notice of Acceptance. If the Company shall accept one or more of the
offers made by any Bank or Banks pursuant to paragraph (d) above, the
Competitive Bid Agent shall in turn notify by telephone by (1) in the case of
LIBOR Bids, 12:30 P.M. (New York City time) three (3) Eurodollar Business Days
before the date of such proposed Competitive Bid Advances, or (2) in the case of
Absolute Bids, 10:45 A.M. (New York City time) on the date of the proposed
Competitive Bid Advances, in each case with confirmation by telex or telecopier,
(A) each Bank which has made an offer as described in paragraph (c) above of the
date and aggregate amount of such Competitive Bid Advances and whether or not
any offer or offers made by such Bank pursuant to paragraph (c) above shall have
been accepted by the Company, and (B) each Bank which is to make a Competitive
Bid Advance of the amount of each Competitive Bid Advance to be made by such
Bank and the terms of each such Competitive Bid Advance. The Competitive Bid
Agent will send concurrently to the Operating Agent a copy of each such
confirmation telex and will send to the Operating Agent (i) by 5:00 P.M. (New
York City time) two (2) Eurodollar Business Days before the date of any proposed
Competitive Bid Eurodollar Advances, a listing of each LIBOR Bid accepted, and
(ii) by 11:00 A.M. (New York City time) on the date of any other proposed type
of Competitive Bid Advances, a listing of each Absolute Bid accepted. Each Bank
which is to make a Competitive Bid Advance shall, prior to 12:00 Noon (New York
City time) on the date of such Competitive Bid Advance specified in the notice
received from the Competitive Bid Agent pursuant to the preceding sentence, make
available to the Operating Agent at the Payment Office such Bank's Competitive
Bid Advance in same day funds. After receipt by the Operating Agent of such
funds and subject to the provisions of Article IV, the Operating Agent will make
such funds available to the Company as soon as practicable on such date in
accordance with the prior instructions of the Company and in like funds as
received by the Operating Agent. Promptly after each Competitive Bid Advance is
made, (x) the Operating Agent will notify the Competitive Bid Agent and each
Bank of the amount of such Competitive Bid Advance and (y) the Competitive Bid
Agent will notify each Bank of the range of bids submitted and the highest bid
accepted, with respect to the related Competitive Bid Borrowing.
(g) Determining the Competitive Bid Eurodollar rate. If the Company shall
accept, pursuant to paragraph (d)(B) above, one or more of the offers made by
any Bank or Banks to make a Competitive Bid Eurodollar Advance, the Competitive
Bid Agent will solicit from the Reference Banks information for determining the
Competitive Bid Eurodollar Rate applicable to such Competitive Bid Eurodollar
Advance. The Competitive Bid Eurodollar Rate for the Interest Period of any
Competitive Bid Eurodollar Advance shall be determined in the manner in which
the Eurodollar Rate would be determined for such Interest Period if such Advance
were a Eurodollar Rate Advance to be made by the applicable Reference Bank but
with the margin set forth in the offer of the relevant Bank. Each Reference Bank
agrees promptly to furnish to the Competitive Bid Agent information for the
purpose of determining the relevant Competitive Bid Eurodollar Rate. If any of
the Reference Banks shall not furnish such timely information to the Competitive
Bid Agent for determination of such Competitive Bid Eurodollar Rate, the
Competitive Bid Agent shall, subject to the provisions of clause (h) below,
determine such Competitive Bid Eurodollar Rate on the basis of timely
information furnished by the remaining Reference Banks. The Competitive Bid
Agent shall as soon as practicable notify the Company and the relevant Banks of
each determination of a Competitive Bid Eurodollar Rate; provided, that any
failure to do so shall not relieve the Company of any liability hereunder. Each
determination of an interest rate by the Competitive Bid Agent pursuant to this
paragraph (g) shall be conclusive and binding on the Company and the Banks in
the absence of manifest error. The Competitive Bid Agent shall, at the request
of the Company or any relevant Bank, deliver to the Company or such Bank, as the
case may be, a statement showing the quotations used by the Competitive Bid
Agent in determining any interest rate pursuant to this paragraph (g).
(h) Inability to Determine Competitive Bid Eurodollar Rate. If, on or
before any date on which a Competitive Bid Eurodollar Rate is to be determined
pursuant to paragraph (g) above, (i) the Competitive Bid Agent shall receive
notice from two or more Reference Banks that, because of reasons affecting
generally the London interbank Eurodollar market, deposits in Dollars are not
being offered by such Reference Banks to prime banks in the London interbank
Eurodollar market for the applicable Interest Period or in the applicable
amounts or (ii) the Competitive Bid Agent shall receive notice at least one day
prior to the proposed borrowing date from the Banks which are obligated to make
at least 66-2/3% of the relevant Competitive Bid Eurodollar Advances that such
Competitive Bid Eurodollar Rate will not adequately reflect the cost to such
Banks of making, funding or maintaining for the applicable Interest Period the
Competitive Bid Eurodollar Advances to which such Interest Period shall relate,
the Competitive Bid Agent shall forthwith give notice of such event to the
Company and to each relevant Bank, whereupon such Competitive Bid Eurodollar
Advances shall not be made.
(i) Borrowing and Reborrowing. Within the limits and on the conditions set
forth in this Section 2.02, the Company may from time to time borrow under this
Section 2.02, repay pursuant to paragraph (j) below and reborrow under this
Section 2.02.
(j) Repayments. The Company shall repay to the Operating Agent, at the
Payment Office and otherwise in accordance with Section 2.14, for account of
each Bank which shall have made a Competitive Bid Advance and on the date for
the repayment thereof (as specified by the Company in the related Competitive
Bid Borrowing Request delivered pursuant to paragraph (b) above) the principal
amount of such Competitive Bid Advance. The Company shall not have the right to
prepay any Competitive Bid Advance.
(k) Interest. The Company shall pay to the Operating Agent, at the Payment
Office and otherwise in accordance with Section 2.14, for account of each Bank
which shall have made a Competitive Bid Advance, interest on the unpaid
principal amount of such Competitive Bid Advance from the date of such
Competitive Bid Advance to the date the principal of such Competitive Bid
Advance shall become due, at the rate of interest for such Competitive Bid
Advance specified therefor in the notice with respect thereto delivered pursuant
to paragraph (c) above, or calculated pursuant to paragraph (g) above with
respect to Competitive Bid Eurodollar Advances, payable on the interest payment
date or dates specified by the Company for such Competitive Bid Advance in the
related Competitive Bid Borrowing Request delivered pursuant to paragraph (b)
above.
(l) Insufficient Competitive Bid Advances. If the aggregate principal
amount of offered Competitive Bid Advances accepted by the Company shall be less
than the aggregate principal amount of the Competitive Bid Advances requested by
the Company for the date designated in a Competitive Bid Borrowing Request, the
Company may borrow a Reference Rate Advance (in an amount equal to the
difference between the aggregate principal amount of the Competitive Bid
Advances requested by the Company and the aggregate principal amount of
Competitive Bid Advances accepted by the Company for such date) under the
Commitments on the terms and conditions hereof on the date designated in such
Competitive Bid Borrowing Request, by giving the Operating Agent irrevocable
notice in a Pro Rata Borrowing Request (which notice must be received by the
Operating Agent prior to 11:00 A.M., New York City time) on the date designated
in such Competitive Bid Borrowing Request. Upon receipt of such notice from the
Company, the Operating Agent shall promptly notify each Bank thereof and of the
amount of such Bank's portion of the respective Pro Rata Borrowing. Subject to
the provisions of Section 2.05, each Bank will make the amount of its pro rata
share of each Borrowing available to the Operating Agent for the account of the
Company at the Payment Office by 12:00 noon (New York City time) on the
borrowing date requested by the Company in funds immediately available to the
Operating Agent. Unless any applicable condition specified in Article IV has not
been satisfied, the proceeds of all such Advances will then be made available to
the Company by the Operating Agent at the Payment Office by crediting the
account of the Company in accordance with the Company's payment instructions
with the aggregate of the amounts made available to the Operating Agent by the
Banks and in like funds as received by the Operating Agent.
2.03 Evidence of Debt Each Bank, with respect to amounts payable to it
hereunder, and the Operating Agent, with respect to all amounts payable
hereunder, shall maintain on its books in accordance with its usual practice,
loan accounts and control accounts, respectively, setting forth each Advance,
the applicable interest rate and the amounts of principal, interest and other
sums paid and payable by the Company from time to time hereunder with respect
thereto. In the case of any dispute, action or proceeding relating to any amount
payable hereunder, the entries in each such account shall constitute prima facie
evidence of the accuracy of the information so recorded. In case of a
discrepancy between the entries in the Operating Agent's books and any Bank's
books, such Bank's books shall be considered correct in the absence of manifest
error. The obligation to repay a Pro Rata Advance or a Competitive Bid Advance
shall also be evidenced by a Pro Rata Note or a Competitive Bid Note, as the
case may be.
2.04 Procedure for Pro Rata Borrowings
(a) The Company may make Pro Rata Borrowings under the
Commitments on any Business Day (or, in the case of any Pro Rata Borrowing
consisting of Eurodollar Rate Advances, on any Eurodollar Business Day) during
the Availability Period, provided, that the Company shall give the Operating
Agent irrevocable notice in the form of Exhibit C-1 (a "Pro Rata Borrowing
Request") (which notice must be received by the Operating Agent prior to 11:00
A.M., New York City time) (i) three (3) Eurodollar Business Days prior to the
requested borrowing date for Interest Periods less than or equal to six (6)
months or four (4) Eurodollar Business Days prior to the requested borrowing
date for Interest Periods greater than six (6) months, in the case of Eurodollar
Rate Advances, and (ii) one (1) Business Day prior to the requested borrowing
date, in the case of Reference Rate Advances (except as otherwise provided in
Section 2.02(l)), specifying:
(A) the amount of the Pro Rata Borrowing, which shall be in an
aggregate minimum principal amount of Ten Million Dollars ($10,000,000)
or any multiple of One Million Dollars ($1,000,000) in excess thereof;
(B) the requested borrowing date;
(C) whether the Pro Rata Borrowing is to be
comprised of Eurodollar Rate Advances or Reference Rate Advances;
and
(D) in the case of Eurodollar Rate Advances, the duration of
the Interest Period applicable to such Advances included in such
notice, subject to the definition of Interest Period. If the notice
shall fail to specify the duration of the Interest Period for any
Borrowing comprised of Eurodollar Rate Advances, such Interest Period
shall be three (3) months, subject to the definition of Interest
Period.
(b) Upon receipt of such notice from the Company, the
Operating Agent shall promptly notify each Bank thereof and of the amount of
such Bank's portion of the respective Pro Rata Borrowing.
(c) Subject to the provisions of Section 2.05, each Bank will
make the amount of its pro rata share of each Borrowing available to the
Operating Agent for the account of the Company at the Payment Office by 11:00
A.M. (New York City time) on the borrowing date requested by the Company in
funds immediately available to the Operating Agent. Unless any applicable
condition specified in Article IV has not been satisfied, the proceeds of all
such Advances will then be made available to the Company by the Operating Agent
at the Payment Office by crediting the account of the Company on the books of
the Payment Office with the aggregate of the amounts made available to the
Operating Agent by the Banks and in like funds as received by the Operating
Agent.
(d) The provisions of Section 2.04(a) notwithstanding, if the
Company shall not have given a timely notice of a Pro Rata Borrowing to be made
on the last day of any Interest Period for outstanding Eurodollar Rate Advances,
then unless the Operating Agent shall have received notice that the Company
elects not to make a Pro Rata Borrowing on such day (such notice to have been
received at least one (1) Business Day prior to such day) the Operating Agent
shall be deemed to have received a notice of borrowing from the Company
requesting Reference Rate Advances to be made on such day in an amount equal to
the amount of such outstanding Advances (reduced to the extent necessary to
reflect any reductions of the Commitments on or prior to such day).
2.05 Refunding Borrowings. If any Bank makes a new Advance on a day on
which the Company is to repay all or any part of any outstanding Advance from
such Bank, such Bank shall apply the proceeds of its new Advance to make such
repayment, and only an amount equal to the difference, if any, between the
amount being borrowed and the amount being repaid shall be made available by
such Bank to the Operating Agent as provided in Section 2.04 or remitted by the
Company to the Operating Agent as provided in Section 2.14, as the case may be.
2.06 Optional Termination or Reduction of Commitments. During the
Availability Period, the Company may, upon not less than three (3) Business
Days' prior notice to the Operating Agent, terminate the Commitments or
permanently reduce the Commitments by an aggregate minimum amount of Ten Million
Dollars ($10,000,000) or any multiple of One Million Dollars ($1,000,000) in
excess thereof, provided that (i) no such reduction or termination shall be
permitted if, after giving effect thereto and to any prepayments of the Advances
made on the effective date thereof, the then outstanding principal amount of the
Advances would exceed the amount of the Commitments then in effect and (ii) once
reduced or terminated pursuant to this Section 2.06, the Commitments may not be
reinstated. If the Commitments are terminated in their entirety pursuant to this
Section 2.06, all fees accrued to but not including the effective date of such
termination shall be payable on the effective date of such termination without
any premium or penalty.
2.07 Optional Repayments of Pro Rata Advances. The Company may (i) upon at
least two (2) Business Days' notice to the Operating Agent, prepay Reference
Rate Advances, in whole or in part, without premium or penalty, and (ii) subject
to Section 2.18, prepay Eurodollar Rate Advances upon at least three (3)
Eurodollar Business Days' irrevocable notice to the Operating Agent, specifying
the date and amount of prepayment and whether the prepayment is of Eurodollar
Rate Advances or Reference Rate Advances, or a combination thereof, and if a
combination thereof the amount of prepayment allocable to each. Upon receipt of
such notice, the Operating Agent shall promptly notify each Bank thereof. If
such notice shall be given, the Company shall make such prepayment and the
payment amount specified in such notice shall be due and payable on the date
specified therein, together with accrued interest to such date on the amount
prepaid unless, notwithstanding the irrevocability of its notice of prepayment,
the Company shall notify the Operating Agent prior to the date of such
prepayment that such prepayment will not be made (in which case such amount
shall not be due and payable on such date and the provisions of Section 2.18
shall apply). Prepayments shall be in a minimum amount equal to Ten Million
Dollars ($10,000,000) and in multiples of One Million Dollars ($1,000,000) in
excess thereof.
2.08 Repayment of Advances. Each Pro Rata Advance shall mature, and the
principal amount thereof shall be due and payable, on the Interest Payment Date
for such Pro Rata Advance (which shall in no event be later than the Termination
Date); provided, that each Reference Rate Advance shall mature, and the
principal amount thereof shall be due and payable on, the Termination Date. Each
Competitive Bid Advance shall mature, and the principal amount thereof shall be
due and payable, on a date determined as specified in Section 2.02(j).
2.09 Termination Date
(a) The Commitments shall terminate on the Termination Date,
and any Advances then outstanding (together with accrued interest thereon) shall
be due and payable on such date without premium or penalty. Upon termination of
the Commitments pursuant to this Section 2.09, all fees and other amounts owing
hereunder or otherwise accrued to but not including the effective date of such
termination shall be payable on the effective date of such termination without
premium or penalty.
(b) The Commitments once terminated pursuant to this
Section 2.09 may not be reinstated.
2.10 Fees
(a) Facility Fee. The Company will pay to the Operating Agent, for the
account of each Bank, a facility fee equal to 0.035% per annum and such facility
fee shall begin to accrue from and including the Effective Date to but excluding
the Termination Date on the sum of the daily average amounts of such Bank's
Commitment, regardless of utilization, payable (A) quarterly in arrears on each
February 15, May 15, August 15 and November 15, commencing on May 15, 1997 and
(B) on the Termination Date.
(b) Additional Fees. The Company will pay (i) to each Agent an agency fee
payable in the amounts and on the dates separately agreed between such Agent and
the Company, and (ii) to the Arranger, an arrangement fee in the amount and on
the date separately agreed between BA Securities and the Company.
2.11 Interest
(a) Interest on Pro Rata Advances. Each Pro Rata Advance shall bear
interest on the unpaid principal amount thereof from the date of such Pro Rata
Advance until it shall become due at a rate per annum equal to (i) the
Eurodollar Rate for the Interest Period therefor plus the Applicable Margin, in
the case of each Eurodollar Rate Advance, and (ii) the Reference Rate in effect
from time to time, in the case of each Reference Rate Advance.
(b) Interest on Competitive Bid Advances. Each Competitive Bid Advance
shall bear interest from the date of such Competitive Bid Advance until the date
it shall become due at a rate of interest determined as specified in Section
2.02(k).
(c) Interest on Overdue Amounts. If all or a portion of the principal
amount of any Advance, any interest thereon or any other amount payable
hereunder shall not be paid when due (whether at stated maturity, by
acceleration or otherwise), such overdue principal amount, such interest (to the
extent permitted by applicable law) or such other amount, as the case may be,
shall, without limiting the rights of any of the Banks under Article VII, bear
interest at a rate per annum equal to the Reference Rate in effect from time to
time plus 2% until paid in full and shall be payable on demand.
(d) Additional Interest on Eurodollar Rate Advances. The Company shall pay to
each Bank, upon written notice from such Bank at least fifteen (15) days prior
to the relevant Interest Payment Date, as long as such Bank shall, pursuant to
regulations of the Federal Reserve Board, maintain reserves with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities,
additional interest on the unpaid principal amount of each Eurodollar Rate
Advance of such Bank, from the date of such Advance until such principal amount
shall be paid in full, at an interest rate per annum equal at all times to the
remainder obtained by subtracting (i) the Eurodollar Rate for the Interest
Period for such Advance from (ii) the rate obtained by dividing the Eurodollar
Rate for such Interest Period by a percentage equal to 100% minus the Eurodollar
Reserve Percentage of such Bank for such Interest Period, payable on the
Interest Payment Date for such Advance. If a Bank shall fail to give such notice
at least fifteen (15) days prior to the relevant Interest Payment Date, such
additional interest shall be payable fifteen (15) days from receipt of such
notice. Such additional interest shall be determined by such Bank in accordance
with this Section 2.11(d) and reported to the Company through the Operating
Agent.
(e) Payment of Interest on Pro Rata Advances. Interest on each Pro Rata
Advance shall be payable in arrears on each Interest Payment Date with respect
thereto; provided, that with respect to any Eurodollar Rate Advance which shall
become due more than three months after the date of such Advance, the Company
shall also pay interest on the dates falling three, six and nine months, as the
case may be, after the date of such Advance. Interest shall also be payable on
the date of any prepayment of Advances for the portion of the Advances so
prepaid and upon payment (including prepayment) in full thereof and, if payable
under Section 2.11(c), interest shall be payable on demand.
(f) Maximum Interest Rate. Anything herein or in any Note to the contrary
notwithstanding, the obligations of the Company to any Bank hereunder or under
any Note shall be subject to the limitation that payments of interest shall not
be required for any period for which interest is computed hereunder, to the
extent (but only to the extent) that contracting for or receiving such payment
by such Bank would be contrary to the provisions of any law applicable to such
Bank limiting the highest rate of interest that may be lawfully contracted for,
charged or received by such Bank, and in such event the Company shall pay such
Bank interest at the highest rate permitted by applicable law.
2.12 Computation of Interest, Fees and Other Amounts
(a) All interest payable hereunder with respect to Reference
Rate Advances shall be calculated on the basis of a year of 365/366 days for the
actual days elapsed. All other interest, fees and other amounts payable
hereunder shall be calculated on the basis of a 360 day year for the actual days
elapsed. The Operating Agent shall, as soon as practicable, notify the Company
and the Banks of each determination of a Eurodollar Rate, provided that any
failure to do so shall not relieve the Company of any liability under this
Agreement. Any change in the interest rate applicable to an Advance (including
the rate for additional interest payable pursuant to Section 2.11(d)) resulting
from a change in the Eurodollar Reserve Percentage or the Reference Rate shall
become effective as of the opening of business on the day on which such change
in the Eurodollar Reserve Percentage or the Reference Rate shall become
effective. The Operating Agent shall, as soon as practicable, notify the Company
and the Banks of the effective date and the amount of each such change;
provided, that any failure to give any such notice shall not relieve the Company
of any liability under this Agreement.
(b) Each determination of an interest rate by the Operating
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Company and the Banks in the absence of manifest error; and each
determination by a Bank of an amount payable by the Company under Section
2.11(d) shall be conclusive and binding on the Company in the absence of
manifest error.
(c) If any Reference Bank's Commitment shall terminate
(otherwise than upon termination of all the Commitments) or for any reason
whatsoever such Reference Bank shall cease to be a Bank hereunder, such
Reference Bank shall thereupon cease to be a Reference Bank, and if, as a result
of the foregoing, there shall only be one Reference Bank remaining, then the
Majority Banks shall select a Bank, acceptable to the Operating Agent and the
Company, to be a Reference Bank, and the Operating Agent shall, by notice to the
Company and the Banks, designate such Bank as a Reference Bank so that there
shall at all times be at least two (2) Reference Banks; provided that such
designated Bank agrees to be a Reference Bank.
(d) Each Reference Bank shall use its best efforts to furnish
quotations of rates to the Operating Agent as contemplated hereby. If any of the
Reference Banks shall be unable or otherwise fails to supply such rates to the
Operating Agent upon its request, the rate of interest shall be determined on
the basis of the quotations of the remaining Reference Banks or Reference Bank.
2.13 Inability to Determine Interest Rate for Pro Rata Advances. In the
event that (a) any two (2) Reference Banks or the Operating Agent or the
Majority Banks shall have determined (which determination shall be conclusive
and binding upon the Company) that for any reason, adequate and reasonable means
do not exist for ascertaining the Eurodollar Rate for any requested Interest
Period with respect to a proposed Pro Rata Advance that the Company has
requested be made as a Eurodollar Rate Advance, or (b) any two (2) Reference
Banks or the Operating Agent or the Majority Banks shall determine (which
determination shall be conclusive and binding upon the Company) that the
Eurodollar Rate applicable pursuant to Section 2.11(a) for any requested
Interest Period with respect to a proposed Pro Rata Advance that the Company has
requested be made as a Eurodollar Rate Advance does not adequately and fairly
reflect the cost to the Majority Banks of funding such Pro Rata Advance, the
Operating Agent shall forthwith give notice of such determination to the Company
and each Bank at least one day prior to the proposed borrowing date for such
Eurodollar Rate Advance. If such notice shall be given, such requested
Eurodollar Rate Advance shall be made as a Reference Rate Advance. Until such
notice shall have been withdrawn by the Operating Agent, no further Eurodollar
Rate Advances may be requested by the Company.
2.14 Pro Rata Treatment and Payments
(a) Payments by the Company
(i) Except as otherwise specifically provided in this
Agreement, all payments (including prepayments) to be made by the
Company on account of principal, interest and fees shall be made
without set-off or counterclaim and shall be made to the Operating
Agent for the account of the Banks to which such payments shall be
owing, pro rata in accordance with the respective amounts then payable,
at the Payment Office in Dollars and in immediately available funds no
later than 11:00 A.M. (New York City time). The Operating Agent shall
distribute such payments to the Banks to which such payments shall be
owing promptly upon receipt on the date of receipt and in like funds as
received. Any payment that shall be received by the Operating Agent
later than 11:00 A.M. (New York City time) shall be deemed to have been
received on the immediately succeeding Business Day.
(ii) If any payment (other than a payment of principal of or
interest on a Eurodollar Rate Advance or Competitive Bid Eurodollar
Advance, which shall be due on the last day of the applicable Interest
Period) shall be stated to be payable on a day that shall not be a
Business Day, such payment shall be due on the next succeeding Business
Day, and such extension of time shall in such case be included in the
computation of interest or fees, as the case may be.
(iii) Except as provided in Section 2.04(d), unless the
Operating Agent shall have received notice from the Company prior to
the date on which any payment shall be due to the Banks hereunder that
the Company will not make such payment in full, the Operating Agent may
assume that the Company has made such payment in full to the Operating
Agent on such date and the Operating Agent may (but it shall not be
required to), in reliance upon such assumption, cause to be distributed
to each Bank on such due date an amount equal to the amount then due to
such Bank. If and to the extent that the Company shall not have made
such payment in full to the Operating Agent, each Bank shall repay to
the Operating Agent forthwith on demand the amount distributed to such
Bank, together with interest thereon for each day, from the date such
amount shall have been distributed to such Bank until the date such
Bank shall repay such amount to the Operating Agent, at the Federal
Funds Rate as in effect on such day.
(iv) The Operating Agent shall, as soon as practicable,
notify the Company of the amounts of principal, interest and fees
payable by the Company under this Agreement; provided, that the failure
to give any such notice shall not relieve the Company of any liability
under this Agreement.
. (b) Payments by the Banks to the Operating Agent
(i) On the date of each Pro Rata Borrowing, each Bank shall
make available to the Operating Agent in immediately available funds
for the account of the Company an amount equal to such Bank's
Commitment Percentage of any Pro Rata Borrowing as provided in Section
2.04.
(ii) Subject to the provisions of Section 2.04, the
Operating Agent may (unless notified to the contrary by a Bank prior to
a borrowing date) assume, with respect to each Pro Rata Borrowing, that
each Bank has made available an amount equal to such Bank's Commitment
Percentage of such Pro Rata Borrowing to the Operating Agent on such
borrowing date, and the Operating Agent may (but it shall not be
required to), in reliance upon such assumption, make available to the
Company a corresponding amount. If and to the extent that such Bank
shall not have made such amount available to the Operating Agent and
the Operating Agent in such circumstances makes available such amount
to the Company, such Bank shall make such amount available to the
Operating Agent within two (2) Business Days after such borrowing date,
together with interest at the Federal Funds Rate for each day from and
including such borrowing date. A certificate of the Operating Agent
submitted to any Bank with respect to any amounts owing under this
Section 2.14(b) shall be conclusive, absent manifest error. If an
amount equal to such Bank's Commitment Percentage of such Pro Rata
Borrowing shall not be made available to the Operating Agent by such
Bank within two (2) Business Days after such borrowing date, the
Company shall pay such amount, on demand, to the Operating Agent, with
interest thereon, from such borrowing date to the date of payment to
the Operating Agent, at the interest rate per annum applicable at the
time to the Advances comprising such Pro Rata Borrowing (but no such
payment by the Company shall be deemed to be a prepayment of an Advance
for purposes of Section 2.18).
(iii) Nothing in this Section 2.14(b) shall relieve any Bank
of its obligation to make available an amount equal to its Commitment
Percentage of any Pro Rata Advance, but no Bank shall be responsible
for the failure of any other Bank to make the Pro Rata Advance to be
made by such other Bank on the date of any Pro Rata Borrowing.
. 2.15 Taxes
(a) Subject to Section 2.15(g), any and all payments by the
Company to the Banks or the Agents under this Agreement or any Notes shall be
made free and clear of, and without deduction or withholding for, any and all
present or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, excluding, in the case of each Bank
and each Agent, such taxes (including income taxes or franchise taxes) as shall
be imposed on or measured by the net income of such Bank or such Agent by the
jurisdiction under the laws of which such Bank or Agent, as the case may be, is
organized or maintains a Lending Office or by any political subdivision thereof
(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "Taxes").
(b) In addition, the Company agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made hereunder or under any Notes
or from the execution, delivery or registration of, or otherwise with respect
to, this Agreement or any Notes (hereinafter referred to as "Other Taxes").
(c) Subject to Section 2.15(g), the Company will indemnify
and hold harmless each Bank and each Agent for the full amount of Taxes or Other
Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.15), as well as any recording or filing fees paid
in connection with this Agreement or any other Loan Document, paid by such Bank
or such Agent, as the case may be, and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes or recording or filing fees
were correctly or legally asserted. This indemnification shall be made within
thirty (30) days from the date such Bank or such Agent, as the case may be,
shall make written demand therefor.
(d) If the Company shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Bank or Agent, then, subject to Section 2.15(g),
(i) the sum payable shall be increased as may be necessary
so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.15) such
Bank or Agent, as the case may be, receives an amount equal to the sum
it would have received had no such deductions been made,
(ii) the Company shall make such deductions, and
(iii) the Company shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with
applicable law.
Notwithstanding any other provision of this Agreement, if any Bank is entitled
to a reduction in the applicable withholding tax solely by reason of a filing of
a Withholding Form, the Company may withhold from any interest payment to such
Bank an amount equivalent to the applicable withholding tax after taking into
account such reduction. If the forms or other documentation required by Section
2.15(f) are not delivered to the Operating Agent, then the Company may withhold
from any interest payment to such Bank not providing such forms or other
documentation an amount equivalent to the applicable withholding tax. In
addition, the Company may also withhold from periodic payments to such Bank
(other than principal payments), to the extent the United States withholding tax
is not eliminated by obtaining a Withholding Form.
(e) Within thirty (30) days after the date of any payment by
the Company of Taxes or Other Taxes, the Company will furnish to the Operating
Agent the original or a certified copy of a receipt evidencing payment thereof,
or other evidence of payment satisfactory to the Operating Agent.
(f) Each Bank which shall be a foreign person (a person
other than a United States person for United States Federal income tax purposes)
hereby agrees that:
(i) it shall, no later than the Effective Date (or, in the
case of a Bank which shall become a party hereto pursuant to Section
9.07 after the Effective Date, the date upon which such Bank shall
become a party hereto) deliver to the Operating Agent two (2) accurate
and complete signed originals of the relevant Withholding Form
indicating that such Bank is on the date of delivery thereof entitled
to receive payments of principal, interest and fees for the account of
its Lending Office or Lending Offices under this Agreement free from
(or at a reduced rate of) withholding of United States Federal income
tax (and, if any political subdivision of the United States shall
impose similar withholding requirements with respect to payments to
such Bank under this Agreement and such Bank shall receive notice from
the Company of the same, such Bank shall deliver any applicable forms
to the Operating Agent promptly after receipt of such notice);
(ii) if at any time such Bank shall change its Lending
Office or Lending Offices or select an additional Lending Office as
herein provided, it shall, at the same time or reasonably promptly
thereafter, deliver to the Operating Agent in replacement for, or in
addition to, the Withholding Forms previously delivered by it hereunder
two (2) accurate and complete signed originals of the relevant
Withholding Form, indicating that such Bank is on the date of delivery
thereof entitled to receive payments of principal, interest and fees
for the account of such changed or additional Lending Office under this
Agreement free from (or at a reduced rate of) withholding of United
States Federal income tax;
(iii) it shall, before or promptly after the occurrence of
any event (including the passing of time but excluding any event
mentioned in (ii) above) requiring a change in the most recent
Withholding Form previously delivered by such Bank and if the delivery
of the same be lawful, deliver to the Operating Agent two (2) accurate
and complete original signed copies of the relevant Withholding Form in
replacement for the forms previously delivered by such Bank;
(iv) if such Bank claims exemption from (or a reduced rate
of) withholding tax under a United States tax treaty by providing a
Withholding Form and such Bank sells or grants a participation of all
or part of its rights under this Agreement, such Bank shall notify the
Operating Agent of the percentage amount in which it is no longer the
beneficial owner under this Agreement. To the extent of this percentage
amount, the Operating Agent shall treat such Bank's Withholding Form as
no longer in compliance with this Section 2.15(f). In the event a Bank
claiming exemption (other than pursuant to a treaty) from United States
withholding tax by filing a Withholding Form with the Operating Agent,
sells or grants a participation in its rights under this Agreement,
such Bank agrees to undertake sole responsibility for complying with
the withholding tax requirements imposed by Sections 1441 and 1442 of
the Code;
(v) if the Internal Revenue Service or any authority of the
United States of America or other jurisdiction successfully asserts a
claim that the Operating Agent or the Company did not properly withhold
tax from amounts paid to or for the account of any Bank (because the
appropriate form was not delivered or was not properly executed, or
because such Bank failed to notify the Operating Agent of a change in
circumstances which rendered the exemption from withholding tax
ineffective), such Bank shall indemnify the Operating Agent and/or the
Company, as applicable, fully for all amounts paid, directly or
indirectly, by the Operating Agent and/or the Company, as applicable,
as tax or otherwise, including penalties and interest, and including
any taxes imposed by any jurisdiction on the amounts payable to the
Operating Agent and/or the Company, as applicable under this paragraph
(f), together with all costs, expenses and attorneys' fees (including
the reasonable allocated costs for in-house staff counsel); and
(vi) it shall, promptly upon the Operating Agent's or the
Company's reasonable request to that effect, deliver to the Operating
Agent such other forms or similar documentation as may be required from
time to time by any applicable law, treaty, rule or regulation in order
to establish such Bank's tax status for withholding purposes.
(g) The Company will not be required to pay any additional
amounts in respect of United States Federal income tax pursuant to Section
2.15(d)(i), (ii) and (iii) to any Bank for the account of any Lending Office of
such Bank:
(i) if the obligation to pay such additional amounts would
not have arisen but for a failure by such Bank to comply with its
obligations, if any, under Section 2.15(f) in respect of such Lending
Office; or
(ii) if such Bank shall have delivered to the Company a
Withholding Form in respect of such Lending Office pursuant to Section
2.15(f) and such Bank shall not at any time be entitled to exemption
from deduction or withholding of United States Federal income tax in
respect of payments by the Company hereunder for the account of such
Lending Office for any reason other than a change in United States law
or regulations or any applicable tax treaty or regulations or in the
official interpretation of any such law, treaty or regulations by any
Governmental Authority charged with the interpretation or
administration thereof (whether or not having the force of law) after
the date of delivery of such Withholding Form.
(h) If, at any time, the Company shall request any Bank to
deliver any forms or other documentation pursuant to Section 2.15(f)(vi), then
the Company shall, on demand of such Bank through the Operating Agent, reimburse
such Bank for any reasonable costs or expenses incurred by such Bank in the
preparation or delivery of such forms or other documentation.
(i) Any Bank requesting payment under this Section 2.15
shall notify the Company by providing the Company with written details of the
relevant Taxes or Other Taxes or recording or filing fees as promptly as
practicable under the circumstances with a view to avoiding or mitigating any
Taxes or Other Taxes or recording or filing fees that shall be capable of being
avoided or mitigated.
(j) If the Company shall be required to pay additional
amounts to any Bank pursuant to Section 2.15(d), then such Bank shall use its
best efforts (consistent with legal and regulatory restrictions) to change the
jurisdiction of its Lending Office so as to eliminate any such additional
payment by the Company which may thereafter accrue if, in the judgment of such
Bank, such change shall not otherwise be disadvantageous to such Bank.
(k) Each Bank also agrees to take any other action
(including properly claiming the benefit of any exemption from or reduction of
such Taxes) which in its judgment is reasonable to avoid or reduce any Taxes or
Other Taxes (including penalties, interest, additions to tax and expenses) that
might otherwise be payable; provided that such Bank shall not be required to (i)
take any action which in the reasonable judgment of such Bank could directly or
indirectly result in any increased cost or expense or in any loss of opportunity
to such Bank unless the Company shall have provided to such Bank indemnity or
reimbursement therefor in form and substance reasonably satisfactory to such
Bank or (ii) claim or apply any tax credit or deduction against or in respect of
such Taxes.
(l) The Operating Agent shall, (i) promptly after receiving
from any Bank any form or other document required under this Section 2.15, send
a copy thereof to the Company and (ii) promptly after receiving from the Company
any document required under this Section 2.15 in respect of any Bank, send a
copy thereof to such Bank.
(m) The obligations of the Company under this Section 2.15
shall not apply to Taxes or Other Taxes arising in respect of Competitive Bid
Advances except to the extent that such Taxes or Other Taxes shall be the
subject of Section 2.17.
(n) Notwithstanding anything in Section 2.15(c) to the
contrary, the Company shall not be liable to any Bank for any fees or
liabilities under this Section 2.15 resulting from any delay in paying any Taxes
or Other Taxes or recording or filing fees, if such fees or liabilities accrued
after the Company has paid to such Bank the full amount of such Taxes or Other
Taxes and any and all such fees or liabilities accrued to the date of such
payment by the Company.
(o) The agreements and obligations of the Company contained
in this Section 2.15 shall survive for ten (10) years after the termination of
the Commitments and the payment of the Advances and all other amounts payable
under this Agreement.
. 2.16 Illegality
(a) If the introduction of any Requirement of Law or any
change therein or in the interpretation or application thereof shall make it
unlawful for any Bank to make or maintain Eurodollar Rate Advances or
Competitive Bid Eurodollar Advances, then on notice thereof by such Bank to the
Company through the Operating Agent, the Commitment of such Bank hereunder to
make Eurodollar Rate Advances and the obligation, if any, of such Bank under a
LIBOR Bid made under Section 2.02 to make Competitive Bid Eurodollar Advances
shall forthwith be suspended until such notifying Bank shall have notified the
Operating Agent and the Company that the circumstances giving rise to such
determination no longer exist (and if such notifying Bank shall determine that
such circumstances no longer exist it shall so notify the Operating Agent and
the Company promptly after determining the same). During such period of
suspension as to any Bank, any Pro Rata Borrowing consisting of Eurodollar Rate
Advances by other Banks shall, if the Company shall so request, include a
Reference Rate Advance rather than a Eurodollar Rate Advance by the Bank subject
to such suspension.
(b) If it shall be unlawful to maintain any Eurodollar Rate
Advance or Competitive Bid Eurodollar Advance until the maturity date thereof,
the Company shall prepay such Eurodollar Rate Advance or Competitive Bid
Eurodollar Advance, and shall pay to such Bank such amounts, if any, as may be
required pursuant to Section 2.18, no later than the last day on which such
Advance could be lawfully maintained. Concurrently with any prepayment of any
Eurodollar Rate Advance pursuant hereto to any Bank, the Company may borrow from
such Bank a Reference Rate Advance for a period ending on the same day as the
then current Interest Period for the Eurodollar Rate Advance so prepaid.
(c) Before giving any notice pursuant to this Section 2.16,
the affected Bank shall use its best efforts to designate a new Lending Office
if such designation will avoid the need for giving such notice or making such
demand and will not, in the judgment of such Bank, subject such Bank to
additional costs or otherwise be disadvantageous to such Bank.
. 2.17 Requirements of Law
(a) In the event that any Requirement of Law or any change
therein or in the interpretation or application thereof by any Governmental
Authority or compliance by any Bank with any directive, guideline or request
from any Governmental Authority of or in the United States, the United Kingdom
or the jurisdiction in which such Bank shall maintain its headquarters or any
Lending Office, whether or not having the force of law:
(i) shall after the date hereof subject any Bank to any tax
or taxes (including Taxes) of any kind whatsoever (except for taxes on
or measured by the overall net income of such Bank or its applicable
Lending Office and taxes otherwise unrelated to the transactions
contemplated by this Agreement) with respect to this Agreement, any
Note or any Eurodollar Rate Advances or Competitive Bid Advances made
by it, or change the basis of taxation of payments to such Bank of
principal, fees, interest or any other amount payable hereunder (other
than with respect to taxes unrelated to the transactions contemplated
by this Agreement); or
(ii) shall after the date hereof impose, modify or hold
applicable any reserve, special deposit, compulsory loan or similar
requirement (other than reserve requirements to which Section 2.11(d)
shall apply) against assets held by, deposits in or other liabilities
for the account of, advances or loans by, or other credit extended by,
or any other acquisition of funds by, any office of such Bank which are
not otherwise included in the determination of the interest rate
applicable to any Competitive Bid Advance and are not included within
the scope of paragraph (i) of this Section 2.17(a),
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making, renewing or maintaining any Eurodollar Rate
Advance or Competitive Bid Advance or to reduce the amount received or
receivable hereunder by such Bank (or its Lending Office) by or in an amount
that such Bank shall deem material, then, within thirty (30) days after demand
by such Bank (with a copy to the Operating Agent), the Company shall promptly
pay such Bank any additional amounts necessary to compensate such Bank for such
additional cost or reduction. A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by any such Bank to the Company and
containing a description of the applicable Requirement of Law, interpretation,
application, directive, guideline or request and a calculation of such
additional amounts shall be conclusive in the absence of manifest error. If the
Company shall be required to pay any amount to any Bank pursuant to this Section
2.17(a), then such Bank shall use its best efforts (consistent with legal and
regulatory restrictions) to change the jurisdiction of its Lending Office so as
to eliminate any such payment by the Company which may thereafter accrue if, in
the judgment of such Bank, such change shall not otherwise be disadvantageous to
such Bank. This covenant shall survive for five (5) years (or, in the case of
the matters referred to in (i) above, ten (10) years) after the termination of
the Commitments and payment of the Advances and all other amounts payable under
this Agreement.
(b) If any Bank shall have determined that the introduction
of or any change in any applicable law, rule or regulation regarding capital
adequacy, or any change in administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or the compliance by any Bank (or its Lending Office) or
any corporation controlling such Bank with any request, guideline or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, whether introduced, adopted,
promulgated or issued before, on or after the date hereof, affects or would
affect the amount of capital required or expected to be maintained by such Bank
or any corporation controlling such Bank and such Bank (taking into
consideration such Bank's or such corporation's policies with respect to capital
adequacy and such Bank's or such corporation's desired return on capital)
determines that the amount of such capital is increased or such Bank's or such
corporation's return on capital is reduced as a consequence of such Bank's
obligations under this Agreement, then, upon demand of such Bank, the Company
shall immediately pay to such Bank, from time to time as specified by such Bank,
additional amounts sufficient to compensate such Bank or such corporation for
such increase or reduction, as the case may be. A certificate as to any
additional amounts payable pursuant to the foregoing sentence submitted by any
such Bank to the Company and containing a description of such law, rule,
regulation, change, request, guideline or directive and a calculation of such
additional amounts shall be conclusive in the absence of manifest error. The
Company shall pay such Bank the amount shown as due on any such certificate
within thirty (30) days after its receipt of the same. This covenant shall
survive for five (5) years after the termination of the Commitments and payment
of the Advances and all other amounts payable under this Agreement.
(c) In the event that the Company becomes obligated to pay
additional amounts to any Bank pursuant to Section 2.17(b) then, unless such
Bank has theretofore removed or cured the conditions creating the cause for such
obligation to pay such additional amounts, after payment by the Company of all
amounts owing to such Bank under Section 2.17(b), the Company may designate a
Bank (not similarly affected under Section 2.17(b)) or another bank which is
willing to become a Bank and is acceptable (which acceptance shall not be
unreasonably withheld) to the Operating Agent (such Bank or bank being herein
called a "Replacement Bank") to purchase the Advances of such Bank and such
Bank's rights hereunder, without recourse to or warranty by, or expense to, such
Bank for a purchase price equal to the outstanding principal amount of the
Advances payable to such Bank plus any accrued but unpaid interest on such
Advances and accrued but unpaid fees and any other amounts payable to such Bank
under this Agreement, and to assume the obligations of such Bank hereunder
pursuant to Section 9.07(a), and, upon such purchase, such Bank shall no longer
be a party hereto or have any rights hereunder and shall be relieved of all
obligations to the Company hereunder (except for such rights as survive
repayment of the Advances), and the Replacement Bank shall succeed to the rights
(except for such rights of the assigning Bank as survive repayment of the
Advances) and obligations of such Bank hereunder.
2.18 Funding Losses. The Company agrees to reimburse each Bank and hold
such Bank harmless from any loss or expense which such Bank may sustain or incur
as a direct consequence of:
(a) default by the Company in the payment when due of the
principal amount of or interest on any Eurodollar Rate Advance or Competitive
Bid Advance of such Bank,
(b) failure by the Company to make a Borrowing (except to
the extent that any Bank shall fail to perform its obligation to make funds
available to the Company for such Borrowing) after the Company has given (or is
deemed to have given) a notice of borrowing in accordance with Section 2.02 or
2.04,
(c) failure by the Company to make any prepayment of
an Advance after the Company has given a notice in accordance with Section
2.07, and/or
(d) the making by the Company of a prepayment of
a Eurodollar Rate Advance or a Competitive Bid Advance on a day which is not
the last day of the Interest Period with respect thereto,
including an amount equal to the excess, if any, as reasonably determined by
such Bank, of (i) its cost of obtaining funds for the Advance not paid when due,
or not borrowed or prepaid as scheduled, or prepaid on a day other than the last
day of its Interest Period (based on the Eurodollar Rate or Competitive Bid
Eurodollar Rate or interest rate based on an Absolute Bid, as applicable) for
the period from the date of such nonpayment, failure to borrow or prepay, or
prepayment, as the case may be, to the last day of the Interest Period for such
Advance (or, in the case of a failure to borrow, the Interest Period for such
Advance which would have commenced on the date of such failure) over (ii) the
amount of interest (as reasonably determined by such Bank) that would be
realized by such Bank in reemploying the funds so prepaid or not paid, borrowed
or prepaid for such period or Interest Period, as the case may be. A certificate
of any Bank setting forth any amount or amounts which such Bank shall be
entitled to receive pursuant to this Section shall be delivered to the Company,
together with a reasonable explanation thereof, and shall be conclusive absent
manifest error. The Company shall pay such Bank the amount shown as due on any
such certificate within thirty (30) days after its receipt of the same. This
covenant shall survive for two (2) years after termination of the Commitments
and payment of the Advances and all other amounts payable under this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to each Agent and each Bank
that:
3.01 Corporate Existence and Power.. Each of the Company and its
Subsidiaries:Power
(a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(b) has the corporate power and authority and the
legal right to own and operate its property, to lease any property it
operates as lessee and to conduct the business in which it is currently
engaged;
(c) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification; and
(d) is in compliance with all Requirements of Law,
except, in the case of the Company or Subsidiaries of the Company and in each
case referred to in paragraph (c) or paragraph (d), to the extent that the
failure to do so would not have a material adverse effect on the business,
operations, properties or condition (financial or otherwise) of the Company and
its Subsidiaries taken as a whole.
3.02 Corporate Authorization; No Contravention. The execution, delivery and
performance by the Company of this Agreement and the Notes and the performance
by the Company of its obligations hereunder:
(a) are within the corporate power and authority
of the Company and have been duly authorized by all necessary corporate
action; and
(b) do not contravene the terms of the Company's
Restated Certificate of Incorporation or Amended and Restated By-Laws, or
any amendment thereof.
3.03 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery, performance or (with respect to any Governmental Authority
of the United States charged with regulating telecommunications) enforcement
against the Company of this Agreement or the Notes, except such governmental
authorizations which have been duly obtained and are in full force and effect.
3.04 Binding Effect. This Agreement, and the Notes when executed,
constitute the legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
3.05 No Legal Bar. The execution, delivery and performance of this
Agreement and the Notes, the borrowings hereunder and the use of the proceeds
thereof as presently contemplated, will not violate any Requirement of Law or
any Contractual Obligation of the Company and will not, pursuant to any
Requirement of Law or Contractual Obligation, result in, or require, the
creation or imposition of any Lien on any property or revenues of the Company or
any of its Subsidiaries to an extent that is material in relation to the Company
and its Subsidiaries taken as a whole.
3.06 Litigation
(a) Except as set forth in Schedule III, there are no
actions, suits, proceedings, claims or disputes pending or, to the best
knowledge of the Company, threatened or contemplated at law, in equity, in
arbitration or before any Governmental Authority against the Company or any of
its Subsidiaries or any of their respective properties:
(i) with respect to this Agreement or any Note or
any other transaction contemplated hereby or thereby; or
(ii) which have a reasonable possibility of being determined
adversely to the Company or such Subsidiary and if so determined would
have a material adverse effect on the business, operations, properties
or financial condition of the Company and its Subsidiaries taken as a
whole or could have a material adverse effect on the ability of the
Company to perform its obligations under this Agreement and the Notes.
(b) To the best knowledge of the Company, no injunction,
writ, temporary restraining order or other order of any nature has been issued
by any court or other Governmental Authority purporting to enjoin or restrain
the execution, delivery and performance of this Agreement or any Note or
directing that the transactions provided for herein not be consummated as herein
provided.
3.07 No Default. No event has occurred and is continuing or would result
from the incurring of obligations by the Company under this Agreement or any
other Loan Document which constitutes a Default or an Event of Default. Neither
the Company nor any of its Subsidiaries is in default under or with respect to
any Contractual Obligation or any order of any court, arbitrator or Governmental
Authority in any respect which, individually or together with all such defaults,
could be materially adverse to the business, operations, property or financial
or other condition of the Company and its Subsidiaries taken as a whole or which
could materially adversely affect the ability of the Company to perform its
obligations under this Agreement and the Notes.
. 3.08 ERISA Compliance
(a) No ERISA Event has occurred or is reasonably
expected to occur with respect to any Plan;
(b) Schedule B (Actuarial Information) to the most recent
annual report (Form 5500 Series for 1994) with respect to each Plan, copies of
which have been filed with the Internal Revenue Service, is complete and
accurate in all material respects and fairly presents the funding status of such
Plan, and since the date of such Schedule B there has been no material adverse
change in such funding status;
(c) Neither the Company nor any ERISA Affiliate has
incurred or reasonably expects to incur any withdrawal liability under ERISA
to any Multiemployer Plan; and
(d) Neither the Company nor any ERISA Affiliate maintains or
has established any welfare benefit plan within the meaning of Section 3(1) of
ERISA which provides for continuing benefits or coverage for any participant or
any beneficiary of a participant after such participant's termination of
employment, except (i) health care benefits for twenty-four (24) months for
covered dependents following the death of a participant in the MCI
Communications Corporation Health and Welfare Plan, (ii) as may be required by
the Consolidated Budget Reconciliation Act of 1985, as amended ("COBRA"), and
the regulations thereunder, (iii) at the expense of the participant or the
beneficiary of the participant, (iv) welfare benefit plans maintained by WUI for
retiree participants presently numbering up to 326, and (v) severance pay plans
covering employees of the Company and its Subsidiaries; and the Company and each
of its ERISA Affiliates that maintains a welfare benefit plan within the meaning
of Section 3(1) of ERISA has complied in all material respects with the notice
and continuation coverage requirements of COBRA and the regulations thereunder;
to the extent that (a), (b), (c) or (d), as the case may be, would have a
material adverse effect on the business, operations, properties or financial or
other condition of the Company and its Subsidiaries taken as a whole or could
have a material adverse effect on the ability of the Company to perform its
obligations under this Agreement and the Notes.
3.09 Use of Proceeds; Margin Regulations. The proceeds of the Advances
shall be used for general corporate purposes, including possible liquidity
support for the issuance of commercial paper by the Company. No portion of the
Advances will be used, directly or indirectly, in any manner which might cause
such Advances or the application of the proceeds thereof to violate Regulation
U, Regulation T or Regulation X of the Federal Reserve Board as in effect on the
date of such Advances. Following the application of the proceeds of each
Advance, not more than twenty-five percent (25%) of the value of the assets
(either of the Company only or of the Company and its Subsidiaries on a
consolidated basis) subject to the provisions of Section 6.01 or 6.02 will be
Margin Stock.
3.10 Title to Properties. Except as set forth in the second and third
sentences of this Section 3.10, each of the Company and its Subsidiaries has
good record and marketable title in fee simple to, or valid leasehold interests
or other valid rights in, all their respective properties, except for such
defects in title as could not, individually or in the aggregate, have a
materially adverse effect on the business, operations, property, prospects or
financial condition of the Company and its Subsidiaries taken as a whole or the
ability of the Company to perform its obligations under this Agreement or the
Notes. Significant portions of the fiber optic systems which comprise a material
part of the communications system of the Company and its Subsidiaries are
constructed in or on real property (primarily devoted to railways, powerlines,
pipelines and highways) to which the Company and certain of its Subsidiaries
have been granted various rights pursuant to easement, license or other
agreements (collectively, the "Right of Way Agreements"), which Right of Way
Agreements generally do not contain warranties of title in favor of the Company
or any of its Subsidiaries. Neither the Company nor any such Subsidiary has
performed any investigation into the title of the grantors of such rights in and
to such real property or into the sufficiency of such title to enable such
grantors to grant such rights to the Company and such Subsidiaries under the
Right of Way Agreements. The properties of the Company and its Subsidiaries are
free and clear of all security interests, Liens or rights of others, except as
permitted by Section 6.01.
3.11 Taxes. The Company and its Subsidiaries have filed all material
Federal and other tax returns and reports required to be filed and have paid all
material Federal and other taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable except those for which adequate reserves have been
provided in accordance with GAAP.
3.12 Financial Condition
(a) The audited consolidated balance sheet of the Company
and its Subsidiaries as of December 31, 1996 and the related consolidated income
statement and statement of cash flows for the fiscal year ended on such date,
accompanied by the opinion thereon of Price Waterhouse LLP, independent
accountants:
(i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except
as otherwise noted therein;
(ii) are complete and accurate in all material respects and
a fair presentation of the financial condition of the Company and its
Subsidiaries as of the date thereof and of the results of operations
for the period covered thereby; and
(iii) show all material indebtedness and other liabilities,
direct or contingent, of the Company and its Subsidiaries as of the
date thereof (including liabilities for taxes and material commitments)
to the extent required under GAAP to be disclosed therein.
(b) Since December 31, 1996, there has been no material
adverse change in the business, operations, properties or condition (financial
or otherwise) or prospects of the Company and its Subsidiaries taken as a whole
from those set forth in the financial statements referred to in Section 3.12(a).
3.13 Environmental Matters. Except as set forth in Schedule IV, to the best
knowledge of the Company after reasonable inquiry:
(a) the operations of the Company and each of its
Subsidiaries comply in all material respects with all applicable Hazardous
Materials Laws;
(b) none of the operations of the Company or any of its
Subsidiaries is the subject of federal or state investigation evaluating whether
any remedial action, involving expenditures, is needed to respond to a release
of any Hazardous Materials into the environment; and
(c) neither the Company nor any of its Subsidiaries has
any material contingent liability in connection with any release of any
Hazardous Materials into the environment,
except, in each case referred to above, to the extent that any noncompliance,
remedial action or liability would not have a material adverse effect on the
business, operations, properties or condition (financial or otherwise) of the
Company and its Subsidiaries taken as a whole.
3.14 Investment Company Act. The Company is not an "investment company", or
a company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
3.15 Communications Act. Neither any Bank nor either of the Agents nor any
Affiliate of any thereof will become, solely by reason of entering into this
Agreement or the consummation of any of the transactions contemplated thereby,
subject to regulation under (a) the Communications Act of 1934, as amended, the
Telecommunications Act of 1996, as amended, or the rules, regulations and
policies of the Federal Communications Commission under either thereof (except
for direct or derivative obligations to furnish nonburdensome information
routinely required of similarly situated Persons) or (b) any other present
Federal or state laws relating to communications services or the use or
operation of apparatus for the transmission of energy, communications or signals
by radio.
3.16 Senior Indebtedness. All of the obligations of the Company under this
Agreement and the Notes shall constitute "Senior Indebtedness" or "Senior Debt",
as defined in the respective Indentures and such obligations shall rank prior in
right of payment, to the extent and in the manner set forth in the respective
Indentures, to the payment of the Company's obligations under, or under any
securities or evidences of indebtedness issued pursuant to the terms and
provisions of, the respective Indentures. The obligations of the Company under
this Agreement and the Notes shall rank senior to or at least pari passu with
all other unsecured indebtedness of the Company now or hereafter existing.
ARTICLE IV
CONDITIONS PRECEDENT
4.01 Conditions to Initial Advances. The obligation of each Bank to make
the initial Advance hereunder is subject to the condition that the Operating
Agent shall have received on or before the first borrowing date all of the
following, in form and substance satisfactory to the Operating Agent, its
counsel and the Banks and in sufficient copies for each Bank:
(a) Credit Agreement and the Notes. This Agreement, the Pro Rata Notes and
the Competitive Bid Notes executed and delivered by a Responsible Officer;
(b) Corporate Documents of the Company. Certified copies of the Restated
Certificate of Incorporation of the Company together with a good standing
certificate from the Secretary of State of Delaware, each dated a recent date
prior to the Effective Date;
(c) By-Laws of the Company. Copies of the Amended and Restated By-Laws of
the Company certified as of the Effective Date as true and complete by its
Secretary or an Assistant Secretary;
(d) Board Resolutions of the Company. Certified copies of the resolutions
of the Board of Directors of the Company approving and authorizing the
execution, delivery and performance by the Company of this Agreement and the
Notes and authorizing the borrowing of Advances, certified as of the Effective
Date by the Secretary or an Assistant Secretary of the Company;
(e) Incumbency Certificate for the Company. A certificate of the Secretary
or Assistant Secretary of the Company certifying as of the Effective Date the
names and true signatures of the officers of the Company authorized to execute,
deliver and perform this Agreement and any Notes and to deliver notices and
requests and other documents to be delivered on behalf of the Company hereunder;
(f) Legal Opinion for the Company. An opinion of the General Counsel to the
Company, dated the Effective Date and substantially in the form of Exhibit F-1,
and an opinion of Kramer, Levin, Naftalis & Frankel, special New York counsel to
the Company, dated the Effective Date and substantially in the form of Exhibit
F-2, but in each case also covering such other matters incident to the
transactions contemplated by this Agreement as the Operating Agent shall
reasonably require;
(g) Payment of Fees and Expenses. Evidence that the fees payable to the
Agents and to the Arranger, as provided in Section 2.10, and any costs, expenses
and allocated cost payable under Section 9.04(a) and billed at least fifteen
(15) days prior to the Effective Date, have been paid on the Effective Date;
(h) Certificate. A certificate signed by a Responsible Officer, dated as of
the Effective Date, stating that:
(i) the representations and warranties of the
Company contained in Article III are true and correct on and as of
such date, as though made on and as of such date; and
(ii) no event has occurred and is continuing,
or would result from the initial Borrowing, which would
constitute a Default or Event of Default;
(i) Financial Statements. Copies of all financial statements referred to in
Section 3.12(a);
(j) MCI Telecom Certificate. A certificate signed by a Responsible Officer
on behalf of the Company stating that the aggregate book value of the assets of
MCI Telecom (net of intercompany receivables) was equal to at least
$15,000,000,000 as of December 31, 1996;
(k) Existing Agreement. Evidence that (i) the principal of and accrued and
unpaid interest on all "Advances" (as defined in the Existing Agreement), if
any, outstanding under the Existing Agreement, and all accrued but unpaid
facility fees under the Existing Agreement, have been paid in full and (ii) the
commitments of the financial institutions party to the Existing Agreement have
been terminated, in each case, on or before the Effective Date; and
(l) Other Documents. Such other approvals, opinions or documents as the
Operating Agent or the Majority Banks may reasonably request.
4.02 Conditions to All Advances. The obligation of each Bank to make any
Advance to be made by it hereunder (including its initial Advance and any
Competitive Bid Advance that such Bank shall have agreed to make pursuant to
Section 2.02) is subject to the satisfaction of the following conditions
precedent on the relevant borrowing date:
(a) Borrowing Notice. In the case of each Pro Rata Borrowing, the Operating
Agent shall have received, or be deemed to have received, a notice of borrowing,
as required by Section 2.04(a).
(b) Continuation of Representations and Warranties. The representations and
warranties of the Company contained in Article III (except, (i) in the case of
any Borrowing other than the initial Pro Rata Borrowing, the representations and
warranties of the Company contained in Section 3.12(b) and (ii) in the case of a
Refunding Borrowing other than any by which a Competitive Bid Borrowing shall be
refinanced by a Pro Rata Borrowing, the representations and warranties of the
Company contained in Sections 3.06, 3.07, 3.08, 3.13 and 3.15) shall be true and
correct on and as of such borrowing date with the same effect as if made on and
as of such borrowing date.
(c) No Existing Default. No Default or Event of Default shall have occurred
and be continuing on the borrowing date with respect to such Advance or after
giving effect to the Advance to be made on such borrowing date, except in the
case of a Refunding Borrowing (other than any by which a Competitive Bid
Borrowing is refinanced by a Pro Rata Borrowing) provided that the Commitments
have not been terminated by the Majority Banks pursuant to Article VII.
Each borrowing by the Company hereunder shall constitute a representation and
warranty by the Company hereunder as of the date of each such borrowing that the
conditions in this Section 4.02 have been satisfied.
ARTICLE V
AFFIRMATIVE COVENANTS
The Company hereby covenants and agrees that, so long as any Bank shall
have any Commitment hereunder, or any Advance or other amount payable hereunder
shall remain unpaid, unless the Majority Banks waive compliance in writing:
5.01 Financial Statements. The Company shall deliver to the Operating
Agent, with copies for each Bank in form and substance reasonably satisfactory
to them:
(a) as soon as available, but not later than one hundred
(100) days after the end of each fiscal year of the Company, a copy of the
audited consolidated balance sheet of the Company and its consolidated
Subsidiaries as of the end of such year and the related consolidated income
statement and statement of cash flows for such fiscal year, setting forth in
each case in comparative form the figures as of the end of and for the previous
year, all in reasonable detail and accompanied by the report of Price Waterhouse
LLP or another nationally recognized independent public accounting firm, which
report shall state that such consolidated financial statements fairly present
the financial condition and results of operations of the Company and its
consolidated Subsidiaries in respect of such fiscal year in conformity with GAAP
applied on a basis consistent with prior years, except as otherwise noted
therein.
(b) as soon as available, but in any event not later than
fifty-five (55) days after the end of each of the first three fiscal quarters of
each fiscal year of the Company, a copy of the unaudited consolidated balance
sheet of the Company and its consolidated Subsidiaries as of the end of such
quarter and the related consolidated income statement and statement of cash
flows for such quarter and (in the case of the second and third quarters) for
the period from the beginning of the current fiscal year to the end of such
quarter, setting forth in each case in comparative form the figures for the
corresponding dates or periods of the previous year, all in reasonable detail
and certified on behalf of the Company by an appropriate Responsible Officer as
being complete and correct in all material respects and fairly presenting, in
accordance with GAAP except as otherwise noted therein, the consolidated
financial condition and results of operations of the Company and its
consolidated Subsidiaries in respect of such quarter, subject to changes
resulting from normal year-end audit adjustments.
5.02 Certificates; Other Information. The Company shall furnish to the
Operating Agent, with copies for each Bank:
(a) concurrently with the delivery of the financial
statements referred to in Sections 5.01(a) and 5.01(b), a certificate of a
Responsible Officer on behalf of the Company (i) stating that, to the best of
such officer's knowledge, no Default or Event of Default has occurred and is
continuing except as specified in such certificate, and (ii) setting forth in
reasonable detail the calculations required to establish whether the Company was
in compliance with Section 6.07; provided, however, that such certificate shall
not be required to include such calculations if, as of the date of the
applicable financial statements, the ratio referred to in Section 6.07 is less
than or equal to 0.60 to 1.00;
(b) promptly after the same are sent, copies of all
financial statements and reports which the Company sends to its stockholders,
and promptly after the same are filed, copies of all financial statements and
all publicly available regular, periodic or special reports which the Company
shall make to, or file with, the Securities and Exchange Commission or any
successor or analogous Governmental Authority;
(c) promptly and in any event within five (5) Business Days
after receipt thereof by the Company or any ERISA Affiliate from a Multiemployer
Plan, a copy of each notice received by the Company or any ERISA Affiliate
asserting a withdrawal liability pursuant to Section 4202 of ERISA with respect
to the Company or any ERISA Affiliate;
(d) annually, concurrently with the delivery of the
financial statements referred to in Section 5.01(a), a certificate of a
Responsible Officer on behalf of the Company stating that the aggregate book
value of the assets of MCI Telecom (net of intercompany receivables) as of the
last day of the applicable fiscal year was equal to at least $15,000,000,000;
and
(e) promptly, such additional financial and other
information as the Operating Agent or the Majority Banks may from time to time
reasonably request.
5.03 Preservation of Corporate Existence, etc. The Company shall, and shall
cause each of its Subsidiaries to:
(a) preserve and maintain in full force and effect
its corporate existence and good standing under the laws of its respective
state of incorporation;
(b) preserve and maintain in full force and effect all
rights, privileges, qualifications, rights of way, licenses and franchises
necessary or desirable in the normal conduct of its business; and
(c) comply with all of its Contractual Obligations,
except, (i) as permitted by Section 6.03, (ii) in the case of Subsidiaries in
each case referred to in paragraphs (a), (b) and (c) above, and in the case of
the Company in each case referred to in paragraphs (b) and (c) above, to the
extent that failure to do so would not, in the aggregate, have a material
adverse effect on the business, operations or financial or other condition of
the Company and its Subsidiaries taken as a whole or on the ability of the
Company to pay and perform its obligations under this Agreement and the Notes
and (iii) the Company may liquidate or dissolve Subsidiaries which have no
significant assets and do not function or produce any goods or services.
5.04 Maintenance of Property. The Company shall, and shall cause each of
its Subsidiaries to, maintain and preserve all of its property which is used or
useful in its business in good working order and condition, ordinary wear and
tear excepted, and make all necessary repairs thereto and renewals and
replacements thereof, except where the failure to do so would not, in the
aggregate, have a material adverse effect on the business, operations, property
or financial or other condition of the Company and its Subsidiaries taken as a
whole or on the ability of the Company to pay and perform its obligations under
this Agreement and the Notes.
5.05 Insurance. The Company shall, and shall cause each of its Subsidiaries
to, maintain or cause to be maintained, with financially sound and reputable
insurers, insurance with respect to its properties and business against loss or
damage of the kinds customarily insured against by Persons engaged in the same
or similar business, of such types and in such amounts as are customarily
carried under similar circumstances by such other Persons, including workers'
compensation insurance, public liability insurance, property and casualty
insurance and (to the extent required by law) flood insurance on its improved
real estate, except where the failure to do so would not, in the aggregate, have
a material adverse effect on the business, operations, property or financial or
other condition of the Company and its Subsidiaries taken as a whole or on the
ability of the Company to pay and perform its obligations under this Agreement
and the Notes.
5.06 Payment of Obligations. The Company shall, and shall cause each of its
Subsidiaries to, pay and discharge, as the same shall become due and payable,
all their respective obligations and liabilities, including all tax liabilities,
assessments and governmental charges or levies upon it or its properties or
assets, unless the same are being contested in good faith by appropriate
proceedings and adequate reserves in accordance with GAAP are being maintained
by the Company or such Subsidiary, except where the failure to do so would not,
in the aggregate, have a material adverse effect on the business, operations,
property or financial or other condition of the Company and its Subsidiaries
taken as a whole or on the ability of the Company to pay and perform its
obligations under this Agreement and the Notes.
5.07 Compliance with Laws. The Company shall, and shall cause each of its
Subsidiaries to, comply in all material respects with all Requirements of Law of
any Governmental Authority having jurisdiction over it or its business, except
such
(a) as may be contested in good faith or as to which a
bona fide dispute may exist, or
(b) as to which such failure to comply would not have a
material adverse effect on the business, operations, properties, assets or
condition (financial or otherwise) of the Company and its Subsidiaries taken as
a whole or on the ability of the Company to pay and perform its obligations
under this Agreement and the Notes.
5.08 Inspection of Property and Books and Records. The Company shall, and
shall cause each of its Subsidiaries to, maintain adequate books of record and
account in which entries that are full, true and correct in all material
respects in conformity with GAAP consistently applied (with such exceptions as
may be noted in the financial statements provided to the Operating Agent
pursuant to Section 5.01 or in notices provided to the Operating Agent pursuant
to Section 5.10(h)) shall be made of all financial transactions, assets and
business of the Company and such Subsidiaries. After the occurrence of any
Default or Event of Default, the Company shall, and shall cause each of its
Subsidiaries to, permit representatives of the Operating Agent or any Bank to
visit and inspect any of their respective properties, to examine their
respective corporate, financial and operating records and make copies thereof or
abstracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective directors, officers and independent public
accountants, all at the expense of the Company, at any time (during normal
business hours) and as often as may be desired, without advance notice to the
Company.
5.09 Hazardous Materials. The Company shall, and shall cause each of its
Subsidiaries to, conduct its operations and keep and maintain its property in
compliance with all Hazardous Materials Laws, except where the failure to do so
would not, in the aggregate, have a material adverse effect on the business,
operations, property or financial or other condition of the Company and its
Subsidiaries taken as a whole or on the ability of the Company to pay and
perform its obligations under this Agreement and the Notes.
5.10 Notices. The Company shall promptly give notice to the Operating
Agent:
(a) of the occurrence of any Default or Event of Default of
which any officer responsible for any part of the business of the Company and
its Subsidiaries involved in such Default or Event of Default shall have
knowledge, specifying the nature of such Default or Event of Default, the period
of existence thereof and the action that the Company has taken or proposes to
take with respect thereto;
(b) of any (i) default or event of default under any
material Contractual Obligation of the Company or any of its Subsidiaries or
(ii) dispute, litigation, investigation, proceeding or suspension which may
exist at any time between the Company or any of its Subsidiaries and any
Governmental Authority if such default or event of default or an adverse
determination of such dispute, litigation, investigation, proceeding or
suspension could materially adversely affect the ability of the Company to pay
and perform its obligations under this Agreement and the Notes;
(c) of the commencement of, or any material development in,
any litigation or proceeding (excluding any proceeding with respect to a
proposed or non-final tax assessment) affecting the Company or any Subsidiary
(i) which, if adversely determined, could have a material adverse effect on the
business, operations or financial or other condition of the Company and its
Subsidiaries taken as a whole or the ability of the Company to pay and perform
its obligations under any Loan Document; or (ii) in which the relief sought is
an injunction or other stay of the performance of any Loan Document;
(d) upon, but in no event later than fifteen (15) days
after, becoming aware of (i) any and all enforcement, cleanup, removal or other
governmental or regulatory actions instituted, completed or threatened against
the Company or any Subsidiary or any of their properties pursuant to any
applicable Hazardous Materials Laws, (ii) all claims made or threatened by any
third party against the Company or any Subsidiary with respect to or because of
its or their property relating to damage, responsibility, contribution, cost
recovery compensation, loss or injury resulting from any Hazardous Materials
(the matters set forth in clauses (i) and (ii) above are hereinafter referred to
as "Hazardous Materials Claims"), and (iii) any environmental or similar
condition on any real property adjoining or in the vicinity of the property of
the Company or any Subsidiary that could reasonably be anticipated to cause such
property or any part thereof to be subject to any restrictions on the ownership,
occupancy, transferability or use of such property under any Hazardous Materials
Laws; provided, that no notice of any such action, claim or condition shall be
required under this paragraph (d) unless it could have a material adverse effect
on the business, operations, properties or condition (financial or otherwise) of
the Company and its Subsidiaries taken as a whole or on the ability of the
Company to pay and perform its obligations under this Agreement and the Notes;
(e) of any other litigation or proceeding affecting the
Company or any of its Subsidiaries which the Company would be required to report
to the Securities and Exchange Commission pursuant to the Securities Exchange
Act of 1934, as amended, within four (4) days after reporting the same to the
Securities and Exchange Commission;
(f) of any ERISA Event affecting the Company or any ERISA
Affiliate promptly after the occurrence thereof (but in no event more than ten
(10) days after the Company shall obtain knowledge of such ERISA Event) together
with (i) a certificate of the Company setting forth the details of such ERISA
Event and the action which the Company or such ERISA Affiliate proposes to take
with respect thereto, (ii) a copy of any notice with respect to such ERISA Event
that may be required to be filed with the PBGC, or (iii) any notice delivered by
the PBGC to the Company or any ERISA Affiliate with respect to such ERISA Event;
and
(g) of any change in GAAP that would materially
affect the calculation of the financial covenant in Section 6.07.
Each notice pursuant to this Section shall be accompanied by a statement by a
Responsible Officer setting forth details of the occurrence referred to therein
and describing the action which the Company proposes to take with respect
thereto.
5.11 Consultation after GAAP Changes. The Company shall, promptly after
delivering any notice pursuant to Section 5.10(h), consult in good faith with
the Operating Agent and the Banks as to the appropriateness of amending any of
the covenants contained in Article VI to reflect the changes in GAAP described
in such notice; provided, that neither the Company nor the Operating Agent nor
any Bank shall be obligated to agree to any such amendment.
5.12 Maintenance of Telecommunications Business. The Company shall maintain
the business of providing telecommunications services as a major business of the
Company and its Subsidiaries taken as a whole and shall cause MCI Telecom to
maintain such business as its principal business.
ARTICLE VI
NEGATIVE COVENANTS
The Company hereby covenants and agrees that, so long as any Bank shall
have any Commitment hereunder, or any Advance or other amount payable hereunder
shall remain unpaid, unless the Majority Banks waive compliance in writing:
6.01 Limitation on Liens. The Company shall 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 now owned or
hereafter acquired, except for:
(a) any Lien existing on the property of MCI Telecom on the
date of this Agreement and set forth in Schedule V securing Indebtedness
outstanding on such date (or the refinancing or refunding of such Indebtedness);
(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 GAAP;
(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 workers'
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 acquired by MCI Telecom either directly
or through the acquisition of the owner of such assets after the date of this
Agreement, if such Liens shall have existed at the time such assets or the owner
of such assets was 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) acquired by
MCI Telecom after the date of this Agreement 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.
6.02 Sale or Lease of Assets. The Company shall 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 the Company 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 accounts and notes receivable, with or without recourse),
whether now owned or hereafter acquired, or enter into any agreement to do any
of the foregoing, except:
(a) dispositions by MCI Telecom of obsolete or
worn-out property or real property no longer used or useful in its business;
(b) sales to local exchange carriers, with or without
recourse, of customer receivables in the ordinary course of business;
(c) dispositions of assets acquired, either directly or
through the acquisition of the owner of such assets, after the date of this
Agreement; provided, that each such disposition shall be for fair and adequate
consideration; and
(d) dispositions (including 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 (as
hereinafter defined) disposed of pursuant to this Section 6.02(d) after the date
of this Agreement does not exceed 20% of the greater of (i) the book value of
the assets of MCI Telecom as of December 31, 1996 and (ii) the book value of the
assets of MCI Telecom as of the date of the most recent financial statements
furnished to the Operating Agent pursuant to Section 5.01.
For purposes of Section 6.02(d), the term "Disposed Assets" shall mean
all assets of MCI Telecom other than cash and cash equivalents, equity
investments, intercompany receivables (but only if the receivables in question
are being transferred to the Company or any of its Subsidiaries), 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).
6.03 Consolidations and Mergers. The Company shall 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, or transfer assets to, any other Person, if immediately after giving
effect thereto, (i) no Default or Event of Default would exist, and (ii) MCI
Telecom shall be the surviving corporation in such merger, consolidation or
combination;
(b) the Company may enter into the Merger, provided that (i)
the surviving corporation in the Merger assumes all of the Company's obligations
under the Credit Agreement and the Notes pursuant to an agreement or instrument
satisfactory in form and substance to the Majority Banks and (ii) immediately
after giving effect to the Merger, no Default or Event of Default would exist;
and
(c) subject to clause (m) of Article VII, the Company may
merge, consolidate or combine with another entity if (i) the Company shall be
the corporation surviving the merger, or the corporation into which the Company
shall be merged or formed by any such consolidation shall assume the Company's
obligations hereunder and under the Notes in an agreement or instrument
satisfactory in form and substance to the Majority Banks and (ii) immediately
after giving effect thereto, no Default or Event of Default would exist.
6.04 Transactions with Affiliates. The Company shall not, nor shall it
permit any of its Subsidiaries to, enter into any transaction with any Affiliate
of the Company or of any such Subsidiary that would be material in relation to
the Company and its Subsidiaries taken as a whole except pursuant to the
reasonable requirements of the business of the Company or such Subsidiary and
upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would obtain in a comparable arm's-length transaction with a
Person not an Affiliate of the Company or such Subsidiary.
6.05 Compliance with ERISA. The Company shall not directly or indirectly
and shall not permit any ERISA Affiliate to directly or indirectly (i) terminate
any Plan subject to Title IV of ERISA so as to result in any material (in the
opinion of the Majority Banks) liability of the Company or any ERISA Affiliate
to the PBGC, (ii) permit to exist any ERISA Event, or any other event or
condition, which would present the risk of a material (in the opinion of the
Majority Banks) liability of the Company or any ERISA Affiliate, or (iii) make a
complete or partial withdrawal (within the meaning of ERISA Section 4201 from
any Multiemployer Plan so as to result in any material (in the opinion of the
Majority Banks) liability of the Company or any ERISA Affiliate, (iv) enter into
any new Plan or modify any existing Plan so as to increase its obligations
thereunder (except in the ordinary course of business consistent with past
practice or as a result of an acquisition of a corporation for appropriate
consideration) which could result in any material(in the opinion of the Majority
Banks) liability of the Company or any ERISA Affiliate, or (v) permit the
present value of all nonforfeitable accrued benefits under each Plan (using the
actuarial assumptions required under Accounting Principle 87 of the Financial
Accounting Standards Board upon termination of a Plan) materially (in the
opinion of the Majority Banks) to exceed the fair market value of Plan assets
allocable to such benefits, all determined (in the case of (iv) and (v)) as of
the most recent valuation date for each such Plan and, as to materiality (in the
case of (i), (ii), (iii), (iv) and (v)), determined in relation to the Company
and its Subsidiaries taken as a whole.
6.06 Use of Proceeds
(a) Upon receipt thereof, the Company shall use the proceeds
of all Advances solely for the general corporate purposes of the Company
consistent with the representations and warranties and covenants contained in
this Agreement (including liquidity support for commercial paper issuance).
(b) The Company shall not use any portion of the Advances,
directly or indirectly: (i) in a manner which would cause such Advances or the
application of the proceeds thereof, to violate Regulation U, Regulation T or
Regulation X of the Federal Reserve Board; (ii) to buy or carry Margin Stock
unless (A) the value of all Margin Stock owned by the Company at any time shall
not exceed twenty-five percent (25%) of the aggregate value of the assets
subject to the restrictions in Sections 6.01 and 6.02 and (B) prior to the date
of the related Advance the Company shall have executed and delivered a duly
completed purpose statement (Form U-1) as required under Regulation U; or (iii)
to make an uninvited acquisition of another corporation or business enterprise.
(c) The Company shall not, directly or indirectly, use any
portion of the Advances (i) knowingly to purchase Ineligible Securities from BA
Securities during any period in which BA Securities makes a market in such
Ineligible Securities, (ii) knowingly to purchase during the underwriting or
placement period Ineligible Securities being underwritten or privately placed by
BA Securities, or (iii) to make payments of principal or interest on Ineligible
Securities underwritten or privately placed by BA Securities and issued by or
for the benefit of the Company or any Affiliate of the Company. As used in this
Section, "Ineligible Securities" means securities which may not be underwritten
or dealt in by member banks of the Federal Reserve System under Section 16 of
the Banking Act of 1933 (12 U.S.C. 24, Seventh), as amended.
6.07 Ratio of Total Liabilities to Total Capitalization. The Company shall
not permit at any time during the period from and including the Effective Date
to but excluding the Termination Date, Total Liabilities, to exceed 0.68 times
the sum of the Company's Total Capital and Total Liabilities.
6.08 MCI Telecom Liabilities. The Company shall not permit MCI Telecom to
incur, create, assume or suffer to exist any MCI Telecom Liabilities other than:
(a) Indebtedness of MCI Telecom to the Company or to
any other Subsidiary; and
(b) other MCI Telecom Liabilities in an aggregate principal
amount not to exceed an amount equal to 10% of the total assets of MCI Telecom
at any time.
6.09 No Restriction on Dividends of MCI Telecom. The Company shall not
cause or permit MCI Telecom to enter into any agreement of any nature whatsoever
that would restrict the ability of such Person to declare or make any dividend
payment or other distribution of assets, properties or cash, rights, obligations
or securities on account of any shares of any class of capital stock of such
Person, or purchase, redeem or otherwise acquire for value any shares of capital
stock of such Person or any warrants, rights or options to acquire such shares.
ARTICLE VII
EVENTS OF DEFAULT
Upon the occurrence and during the continuation of any of the following
events:
(a) Non-Payment of Principal. The Company shall fail to pay when due any
portion of the principal of any Advance and such default shall continue
unremedied for a period of three (3) Business Days; provided, that if the
Operating Agent or any Bank shall give notice to the Company of such default
prior to the end of such period, such default shall become an Event of Default
under this paragraph (a) if it shall continue unremedied beyond the day which
shall be the earlier of (i) one (1) Business Day after such notice shall be
given to the Company or (ii) the last day of such period; or
(b) Non-Payment of Interest and Facility Fee. The Company shall fail to pay
when due any portion of any interest on any Advance or any facility fee payable
hereunder and such default shall continue unremedied for a period of five (5)
Business Days; provided, that if the Operating Agent or any Bank shall give
notice to the Company of such default prior to the end of such period, such
default shall become an Event of Default under this paragraph (b) if it shall
continue unremedied beyond the day which shall be the earlier of (i) one (1)
Business Day after such notice shall be given to the Company or (ii) the last
day of such period; or
(c) Non-Payment of Other Amounts. The Company shall fail to pay when due
any portion of any other amount payable under this Agreement and not specified
in paragraph (a) or (b) above and such default shall continue unremedied for
fifteen (15) days after notice thereof shall have been given to the Company by
the Operating Agent or any Bank; or
(d) Representation or Warranty. Any representation or warranty made or
deemed made by the Company herein or which is contained in any certificate,
document or financial or other statement furnished by the Company at any time
under this Agreement shall prove to have been incorrect in any material respect
on or as of the date made or deemed made; provided, that if the Company shall be
capable of taking action that would result in such representation or warranty
becoming correct in all material respects at a later date such failure of the
representation or warranty to be correct shall not be an Event of Default under
this paragraph (c) until such failure shall continue for a period of fifteen
(15) days after notice thereof shall have been given to the Company by the
Operating Agent or any Bank; or
(e) Certain Article VI Defaults. The Company shall fail to perform or
observe any term, covenant or agreement contained in Section 6.01 (other than by
reason of an attachment or involuntary lien), 6.02, 6.03, 6.06 or 6.08; or the
Company shall fail to perform or observe any term, covenant or agreement
contained in Section 6.01 (if by reason of an attachment or involuntary Lien) or
6.07 and such default shall continue unremedied for a period of fifteen (15)
days; or
(f) Other Covenant Defaults. The Company shall fail to perform or observe
any other term, covenant or agreement contained in Article V or Article VI, and
such default shall continue unremedied for a period of thirty (30) days;
provided, that the failure to perform or observe Section 5.12 shall not be an
Event of Default until such failure shall continue unremedied for a period of
thirty (30) days after notice thereof shall have been given to the Company by
the Majority Banks; or
(g) Other Defaults. The Company shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement, and such default shall
continue unremedied for a period of fifteen (15) days after notice thereof shall
have been given to the Company by the Operating Agent or any Bank; or
(h) Cross-Default. The Company or MCI Telecom shall (i) fail to make any
payment in respect of any Indebtedness or Contingent Obligation (other than
Indebtedness hereunder or under any Notes) having an aggregate principal amount
outstanding of more than Fifty Million Dollars ($50,000,000) or the equivalent
in another currency or currencies when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise); (ii) default in the
observance or performance of any other condition or covenant or any other event
shall occur or any condition shall exist under any agreement or instrument
relating to any Indebtedness or Contingent Obligation (other than Indebtedness
hereunder or under any Notes) having an aggregate principal amount outstanding
of more than Seventy-Five Million Dollars ($75,000,000) or the equivalent in
another currency or currencies, if the effect of the event or condition referred
to in this subclause (ii) shall be to cause, or to permit the holder or holders
of such Indebtedness or beneficiary or beneficiaries of such Contingent
Obligation (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, after any required giving of notice or
lapse of time or both, such Indebtedness to be declared to be due and payable
prior to its stated maturity or such Contingent Obligation to become payable; or
(iii) default in the observance or performance of any other condition or
covenant or any other event shall occur or any condition shall exist under any
agreement or instrument relating to any Indebtedness or Contingent Obligation
(other than Indebtedness hereunder or under any Notes) having an aggregate
principal amount outstanding of more than Fifty Million Dollars ($50,000,000) or
the equivalent in another currency or currencies, if the effect of the event or
condition referred to in this subclause (iii) shall be to cause such
Indebtedness to be declared to be due and payable prior to its stated maturity
or such Contingent Obligation to become payable; or
(i) Bankruptcy or Insolvency. The Company or MCI Telecom shall (i) become
insolvent or generally fail to pay, or admit in writing its inability to pay,
its debts as they become due, subject to applicable grace periods, if any,
whether at stated maturity or otherwise, (ii) commence any proceeding or case or
file any petition or answer under any liquidation or reorganization with
creditors or any other relief under any bankruptcy, reorganization, arrangement,
insolvency, or other proceeding or case, whether Federal or State, relating to
the relief of debtors, (iii) acquiesce in the appointment of a receiver,
trustee, custodian or liquidator for itself or a substantial portion of its
property, assets or business or effect a plan or other arrangement with its
creditors, (iv) admit the material allegations of a petition filed against it in
any bankruptcy, reorganization, arrangement, insolvency or other proceeding or
case, whether Federal or State, relating to the relief of debtors, or (v) take
action to effectuate any of the foregoing; or
(j) Involuntary Proceedings. Any involuntary proceeding or case or any
involuntary petition shall be commenced or filed against the Company or MCI
Telecom under any bankruptcy, insolvency or similar law or seeking the
dissolution, liquidation or reorganization of the Company or MCI Telecom or the
appointment of a receiver, trustee, custodian or liquidator for the Company or
MCI Telecom or any writ, judgment, warrant of attachment, execution or similar
process shall be issued or levied against a substantial part of the Company's or
MCI Telecom's assets and any such proceedings or petition shall not be
dismissed, or such writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded within sixty (60) days
after commencement, filing or levy; or
(k) ERISA. (i) any ERISA Event or a failure to make a required installment
or other payment (within the meaning of Section 412(n)(1) of the Code) with
respect to a Plan shall have occurred, and, 30 days after notice thereof shall
have been given to the Company by the Operating Agent or any Bank, (A) such
ERISA Event or failure to make a required payment (if correctable) shall not
have been corrected and (B) the then Unfunded Benefit Liabilities of such Plan
exceed Fifty Million Dollars ($50,000,000) (or in the case of an ERISA Event
involving the withdrawal of a "substantial employer" (as defined in Section
4001(a)(2) of ERISA), the withdrawing employer's proportionate share of such
excess shall exceed such amount); or (ii) the Company or any ERISA Affiliate as
employer under a Multiemployer Plan shall have made a complete or partial
withdrawal from such Multiemployer Plan and the Plan sponsor of such
Multiemployer Plan shall have notified such withdrawing employer that such
employer has incurred a withdrawal liability in an amount exceeding Fifty
Million Dollars ($50,000,000) unless within thirty (30) days after such
notification either (a) such liability shall be paid, (b) the Company shall have
deposited with the Operating Agent an amount sufficient (with earnings thereon)
to pay such liability in the installments required by such Multiemployer Plan
when due, or (c) following a request for review of such notice of withdrawal
liability, the amount demanded in such notice shall be reduced to an amount less
than Fifty Million Dollars ($50,000,000); or
(l) Monetary Judgments. One or more final judgments or decrees shall be
entered by a court or courts of competent jurisdiction against the Company or
MCI Telecom involving in the aggregate a liability (not paid or fully covered by
insurance) of Fifty Million Dollars ($50,000,000), or the equivalent in another
currency or currencies, or more, and the same shall not have been discharged,
vacated, stayed or bonded pending appeal within thirty (30) days from the entry
thereof; or
(m) Change in Control. (i) Any "person" or "group" of persons (within the
meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended)
shall acquire "beneficial ownership" (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under said Act) of more
than 30% of the shares of capital stock of the Company having the power to vote
for the election of directors, or (ii) during any period of 12 consecutive
months, commencing before or after the date of this Agreement and ending after
the date of this Agreement, individuals who on the first day of such period were
directors of the Company (together with any replacement or additional directors
who shall have been nominated or elected by a majority of directors then in
office) shall cease to constitute a majority of the board of directors of the
Company; provided, however, that the consummation of the Merger shall not
constitute an Event of Default under this clause (m);
then, and in any such event,
(A) the Operating Agent shall at the request of, or may with the
consent of, the Majority Banks declare the Commitments terminated, whereupon the
Commitments shall terminate; and in addition,
(B) the Operating Agent shall at the request of, and may with the
consent of, the Majority Banks declare the unpaid principal amount of all
outstanding Advances, all interest accrued and unpaid thereon and all other
amounts payable hereunder and under the Notes to be immediately due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Company;
provided, that upon the occurrence of any event specified in clause (i) or (j)
above (in the case of such clause (j) upon the expiration of the sixty (60) day
period mentioned therein), the Commitments shall immediately terminate and the
unpaid principal amount of all outstanding Advances and all interest and other
amounts as aforesaid shall immediately become due and payable without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Company, and without any further act of the
Operating Agent or any Bank.
ARTICLE VIII
THE AGENTS
8.01 Appointment of the Agents. Each Bank hereby irrevocably (subject to
the provisions of Section 8.09) appoints, designates and authorizes each Agent
to take such action on its behalf under the provisions of this Agreement and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement, together with such powers as shall be reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement, the Agents shall not have any duties or responsibilities, except
those expressly set forth herein, or any fiduciary relationship with any Bank,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or otherwise exist against either
Agent.
8.02 Delegation of Duties of the Agents. Each Agent may execute any of its
duties under this Agreement by or through agents, employees or attorneys-in-fact
and shall be entitled to advice of counsel concerning all matters pertaining to
such duties. Neither of the Agents shall be responsible for the negligence or
misconduct of any agent or attorney-in-fact that it selects with reasonable
care.
8.03 Liability of the Agents. Neither any Agent nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be
(i) liable for any action taken or omitted to be taken by any of them under or
in connection with this Agreement (except for its own gross negligence or
willful misconduct), or (ii) responsible in any manner to any of the Banks for
any recitals, statements, representations or warranties made by the Company or
any officer thereof contained in this Agreement or in any certificate, report,
statement or other document referred to or provided for in, or received by such
Agent under or in connection with, this Agreement or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any Note or for any failure of the Company to perform its obligations hereunder
or thereunder. Neither Agent shall be under any obligation to any Bank to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any Note, or to
inspect the properties, books or records of the Company or any of its
Subsidiaries.
8.04 Reliance by the Agents. Each Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation reasonably
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including in-house counsel of such Agent or counsel to the Company),
independent accountants and other experts selected by such Agent. Each Agent may
deem and treat the holder of any Advance as the owner thereof for all purposes
unless an Assignment Notice and Acceptance with respect thereto shall have been
filed with the Operating Agent. Each Agent shall be fully justified in failing
or refusing to take any action under this Agreement unless it shall first
receive such advice or concurrence of the Majority Banks (or all of the Banks if
so required by Section 9.01) as it shall deem appropriate or it shall first be
indemnified to its satisfaction by the Banks against any and all liability and
expense (except any such liability or expense resulting from its gross
negligence or willful misconduct) which may be incurred by it by reason of
taking or continuing to take any such action. Each Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement in
accordance with a request or consent of the Majority Banks (or all of the Banks
if so required by Section 9.01) pursuant to Article IX, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Banks and all future holders of the Advances.
8.05 Notice of Default. Neither of the Agents shall be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default (except
that the Operating Agent shall be deemed to have knowledge of any Event of
Default occurring by reason of a failure by the Company to make a payment to or
through the Operating Agent under this Agreement or any Note), unless such Agent
shall have received notice from a Bank or the Company referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Operating Agent shall
receive such a notice, the Operating Agent shall give notice thereof to the
Banks. The Operating Agent shall take such action with respect to such Default
or Event of Default as shall be requested by the Majority Banks in accordance
with Article VII; provided, that unless and until the Operating Agent shall have
received such a request, the Operating Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests of
the Banks.
8.06 Credit Decision. Each Bank expressly acknowledges that neither any
Agent nor any of their respective Affiliates nor any officer, director,
employee, agent or attorney-in-fact of any of them have made any representations
or warranties to it and that no act by either of the Agents hereafter taken,
including any review of the affairs of the Company, shall be deemed to
constitute any representation or warranty by such Agent to any Bank. Each Bank
represents to the Agents that it has, independently and without reliance upon
the Agents or any other Bank, and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Company and made its own decision to make its Advances
and to enter into this Agreement. Each Bank also represents that it will,
independently and without reliance upon either of the Agents or any other Bank,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement, and to make such
investigations as it shall deem necessary to inform itself as to the business,
operations, prospects, assets, properties, financial or other condition and
creditworthiness of the Company. Except for notices, reports and other documents
expressly required to be furnished to the Banks by either of the Agents
hereunder, neither Agent shall have any duty or responsibility to provide any
Bank with any credit or other information concerning the business, operations,
prospects, properties, assets, condition (financial or otherwise) or
creditworthiness of the Company which may come into the possession of either of
the Agents or any of their respective officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
8.07 Indemnification. The Banks agree to indemnify each Agent in its
capacity as such (to the extent not reimbursed by or on behalf of the Company
and without limiting the obligation of the Company to do so), ratably according
to their respective Commitment Percentages (or, if the Commitments shall have
been terminated in full, but Advances shall remain outstanding, ratably
according to the then aggregate unpaid amount of outstanding Advances made by
them), from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including at any time following the
payment of the Advances) be imposed on, incurred by or asserted against such
Agent in any way relating to or arising out of this Agreement, or any documents
contemplated by or referred to herein or the transactions contemplated hereby or
any action taken or omitted by such Agent under or in connection with any of the
foregoing; provided, that no Bank shall be liable for the payment to such Agent
of any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
gross negligence or willful misconduct of such Agent. Without limitation of the
foregoing, each Bank agrees to reimburse each Agent (to the extent not
reimbursed by or on behalf of the Company and without limiting the obligation of
the Company to do so) promptly upon demand for its Commitment Percentage of any
out-of-pocket expenses (including reasonable attorneys' fees and the allocated
cost of staff counsel) incurred by such Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
or any Note, except to the extent such expenses result from the gross negligence
or willful misconduct of such Agent. The agreements in this Section 8.07 shall
survive the termination of the Commitments and the payment of the Advances and
all other amounts payable under this Agreement.
8.08 Bank of America in its Individual or Separate Capacity. Bank of
America and its Affiliates may make loans to, issue letters of credit for the
account of, accept deposits from, acquire equity interests in and generally
engage in any kind of business with the Company as though Bank of America were
not acting as Competitive Bid Agent and Operating Agent hereunder. With respect
to the Advances made or renewed by it, Bank of America shall have the same
rights and powers under this Agreement as any Bank and may exercise the same as
though it were not acting as Competitive Bid Agent and Operating Agent, and the
terms "Bank" and "Banks" shall include Bank of America in its individual
capacity.
8.09 Successor Agents. Each Agent may, and at the request of the Majority
Banks shall, resign as an Agent upon thirty (30) days' advance notice to the
Banks, whereupon the Majority Banks shall, after consultation with the Company,
appoint from among the Banks a successor agent for the Banks. If no successor
Agent shall have been so appointed by the Majority Banks and shall have accepted
such appointment within thirty (30) days after the retiring Agent's giving of
notice of resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, having combined capital, surplus and undivided
profits of not less than Two Hundred Million Dollars ($200,000,000) and having
its principal office or a Lending Office in the United States of America. Upon
such successor agent succeeding to the rights, powers and duties of the
resigning Agent, the term "Agent" or "Competitive Bid Agent" or "Operating
Agent" or (where applicable to its role as an Agent) "Bank of America", as the
case may be, shall mean such successor agent effective upon its appointment, and
the former Agent's rights, powers and duties as an Agent shall be terminated,
without any other or further act or deed on the part of such former Agent or any
of the parties to this Agreement or any holders of the Advances. After any
retiring Agent's resignation hereunder as an Agent, the provisions of this
Section 8.09 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was an Agent under this Agreement.
8.10 Syndication Agent, Co-Documentation Agents, Co-Agents. None of the
Banks identified on the facing page or signature pages of this Agreement as the
"syndication agent", a "co-documentation agent" or a "co-agent" shall have any
right, power, obligation, liability, responsibility or duty under this Agreement
other than those applicable to all Banks as such. Without limiting the
foregoing, none of the Banks so identified as the "syndication agent", a
"co-documentation agent" or a "co-agent" shall have or be deemed to have any
fiduciary relationship with any Bank. Each Bank acknowledges that it has not
relied, and will not rely, on any of the Banks so identified in deciding to
enter into this Agreement or in taking or not taking action hereunder.
ARTICLE IX
MISCELLANEOUS
9.01 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement and no consent with respect to any departure by the Company
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Majority Banks and the Company and such waiver shall be
effective only in the specific instance and for the specific purpose for which
given; provided, that no such waiver, amendment, or consent shall, unless in
writing and signed by all the Banks do any of the following:
(a) increase the Commitment of any Bank or subject any
Bank to any additional obligations;
(b) postpone or extend the Termination Date or any other
scheduled maturity date for any payment of principal, interest, fees or other
amounts due hereunder or under any Note;
(c) reduce the principal of, or the rate of interest
on any Advance or of any fees or other amounts payable hereunder or under
any Note;
(d) change the Commitment Percentages or the
definition of Majority Banks or the percentage of Banks required to take
any action under any Loan Document; or
(e) amend this Section 9.01;
and provided, further, that no amendment, waiver or consent shall, unless in
writing and signed by an Agent in addition to the Majority Banks, affect the
rights or duties of such Agent under this Agreement.
9.02 Notices. All notices, requests and other communications provided for
hereunder shall be in writing (including telegraphic, telex, telecopier or cable
communication) and mailed, telegraphed, telexed or delivered to the Company, the
Banks and the Agents as follows:
The Company: MCI Communications Corporation
1801 Pennsylvania Avenue N.W.
Washington, D.C. 20006
Attention: Tom Quinn, Assistant Treasurer
Telephone: (202) 887-2858
Telecopier: (202) 887-2846
with copy to: MCI Communications Corporation
1801 Pennsylvania Avenue N.W.
Washington, D.C. 20006
Attention: General Counsel
Telephone: (202) 887-2016
Telecopier: (202) 887-2047
The Banks: The addresses set forth opposite
their respective names in Schedule II.
The Operating
Agent: Notices pursuant to Article II
(with copies of notices pursuant to
Section 2.06 to the New York address
set forth below):
Bank of America National Trust
and Savings Association,
as Operating Agent
1455 Market Street - 12th Floor
San Francisco, California 94103
Attention: Agency Administrative
Services #5596
Telecopier: (415) 436-2700
All other notices:
Bank of America National Trust
and Savings Association,
as Operating Agent
335 Madison Avenue - 5th Floor
New York, New York 10017
Attention: Doug Bontemps
Telephone: (212) 503-8074
Telecopier: (212) 503-7984
The Competitive
Bid Agent: Notices pursuant to Article II:
Bank of America National Trust
and Savings Association,
as Competitive Bid Agent
1455 Market Street - 12th Floor
San Francisco, California 94103
Attention: Agency Administrative
Services #5596
Telecopier: (415) 436-2700
All other notices:
Bank of America National Trust
and Savings Association,
as Competitive Bid Agent
335 Madison Avenue - 5th Floor
New York, New York 10017
Attention: Doug Bontemps
Telephone: (212) 503-8074
Telecopier: (212) 503-7984
or, as to each party at such other address as shall be designated by such party
in a written notice to the other parties. All such notices and communications
shall, when mailed, telegraphed, telexed, cabled or sent by telecopier and
confirmed by telephone, be effective four (4) Business Days after deposit in the
mails, when delivered to the telegraph company, confirmed by telex answerback,
delivered to the cable company, or transmitted by telecopier and confirmed by
telephone, respectively, except that notices pursuant to Article II or VII shall
not be effective until received by the Operating Agent or Competitive Bid Agent,
as the case may be.
9.03 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of either of the Agents or any Bank, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
9.04 Costs and Expenses. The Company agrees:
(a) to pay or reimburse the Agents, within fifteen (15) days
after demand, for all their reasonable out-of-pocket costs and expenses incurred
in connection with the preparation, execution and delivery of, and any
amendment, supplement or modification to, this Agreement and any Notes and any
other documents prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and thereby, including the
reasonable fees and out-of-pocket expenses of counsel to the Agents (including
the allocated cost of in-house counsel) with respect thereto; provided, that any
demand for payment or reimbursement of any of the foregoing shall be accompanied
by an itemized statement or statements covering the related costs, expenses or
allocated cost; and
(b) to pay or reimburse each Bank and each Agent, within
fifteen (15) days after demand, for all their costs and expenses incurred in
connection with the enforcement or preservation of any rights against the
Company under this Agreement or any Note, whether related to legal actions or
proceedings, bankruptcy or reorganization proceedings or other action, including
the fees and out-of-pocket expenses of counsel (including the allocated cost of
in-house counsel) to each Agent and to each of the several Banks; provided, that
(i) any demand for payment or reimbursement of any of the foregoing shall be
accompanied by an itemized statement or statements covering the related costs,
expenses or allocated cost and (ii) no such costs or expenses shall be
reimbursed for any legal action in which the existence of any Default or Event
of Default shall have been alleged if in such action it shall have been
determined that no such Default or Event of Default existed.
9.05 Indemnity. The Company agrees to pay, and indemnify and hold harmless
each Bank, each Agent and each of their respective officers, directors, agents
and employees (each, an "Indemnified Person") from and against, any and all
other liabilities, obligations, losses, damages, penalties, judgments, costs,
expenses or disbursements of any kind or nature whatsoever (including the fees
and out-of-pocket expenses of counsel and the allocated cost of in-house
counsel) arising from any claim, action, suit or proceeding against or
investigation of such Indemnified Person with respect to the execution,
delivery, enforcement, performance and administration of this Agreement and any
other Loan Documents or otherwise related to this Agreement or the Advances or
the use of the proceeds thereof (whether or not any Indemnified Person is a
party thereto) (all the foregoing, collectively, the "Indemnified Liabilities");
provided, that the Company shall have no obligation hereunder to any Indemnified
Person with respect to Indemnified Liabilities arising from the gross negligence
or willful misconduct of such Indemnified Person. The agreements in Section 9.04
and this Section 9.05 shall survive termination of the Commitments and payment
of the Advances and all other amounts payable under this Agreement.
9.06 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, except that the Company may not (unless permitted by Section 6.03)
assign or transfer any of its rights or obligations under this Agreement without
the prior written consent of each Bank.
9.07 Assignments, Participations, etc.
(a) Any Bank (x) may, with the written consents of the
Company and the Operating Agent, which consent of the Operating Agent shall not
be unreasonably withheld, at any time assign and delegate to one (1) or more
banks or other Banks or to an Affiliate of such assigning Bank, which Affiliate
shall not itself be a bank, provided that such Affiliate has a net worth of at
least Seventy-Five Million Dollars ($75,000,000), and (y) may, with notice to
the Operating Agent and the Company but without the consent of the Company or
either of the Agents, assign and delegate to any Affiliate of such Bank which
shall itself be a bank having a combined capital, surplus and undivided profits
of at least Seventy-Five Million Dollars ($75,000,000) (each such bank, assignee
Bank or Affiliate, as the case may be, being an "Assignee"), all or any part of
the Advances or the Commitments or any other rights or obligations of such Bank
hereunder in a minimum amount of Twenty Million Dollars ($20,000,000); provided,
that the Company and the Agents shall be entitled to continue to deal solely and
directly with such assigning Bank in connection with the interests so assigned
to an Assignee until (i) the Operating Agent shall have received an Assignment
Notice and Acceptance in the form of Exhibit G duly executed by the assigning
Bank, its Assignee and the Company, (ii) the processing fees described below
shall have been paid and (iii) the assigning Bank shall have delivered to the
Operating Agent any Notes that shall be subject to such assignment. From and
after the date (an "Assignment Effective Date") on which the Operating Agent
shall notify the Company and the assigning Bank that (i), (ii) and (iii) above
shall have occurred and all consents (if any) required under the preceding
sentence shall have been given: (x) the Assignee thereunder shall be deemed to
be a party hereto and, to the extent that rights and obligations hereunder shall
have been assigned to it pursuant to such Assignment Notice and Acceptance,
shall have the rights and obligations of a Bank under the Loan Documents
(including the right to receive any facility fee payable pursuant to Section
2.10(a)); and (y) the assigning Bank shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment
Notice and Acceptance, relinquish its rights and be released from its
obligations under the Loan Documents (and, in the case of an Assignment Notice
and Acceptance covering all or its remaining portion of an assigning Bank's
rights and obligations under the Loan Documents, such Bank shall cease to be a
party thereto, except as to Sections 2.15, 2.17 and 9.05). Within ten (10)
Business Days after its receipt of notice by the Operating Agent that it has
accepted an executed Assignment Notice and Acceptance, the Company shall execute
and deliver to the Operating Agent in exchange for any surrendered Notes, a new
Pro Rata Note to the order of the Assignee in an amount equal to the Commitment
assumed by it pursuant to such Assignment Notice and Acceptance and a new
Competitive Bid Note to the order of the Assignee and, if the assigning Bank
shall have retained a portion of its Commitment hereunder, a new Pro Rata Note
to the order of the assigning Bank in an amount equal to the amount of the
Commitment retained by it hereunder. The assigning Bank or Assignee shall pay a
processing fee to the Operating Agent in the amount of Two Thousand Dollars
($2,000) in respect of each assignment. The Company shall have no responsibility
for the payment of any such fee. Notwithstanding the foregoing, any Bank,
without notice to or consent of the Company or the Operating Agent, may assign,
as collateral, any of its rights (including rights to payments of principal
and/or interest on the Notes) under this Agreement to any Federal Reserve Bank.
(b) Any Bank may at any time sell to one (1) or more banks
or other entities (each a "Participant") participating interests in any
Advances, the Commitment of such Bank or any other interest of such Bank
hereunder; provided, that (i) such Bank's obligations under this Agreement shall
in such event remain unchanged, (ii) such Bank shall remain solely responsible
for the performance of such obligations, (iii) the Company and the Agents shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement, (iv) the Company shall have
no responsibility for the cost of effecting or administering any such
participation and (v) no Bank shall transfer, grant or assign any participating
interest under which the Participant shall have rights to approve any amendment
to, or any consent or waiver with respect to this Agreement except to the extent
such amendment, consent or waiver would (A) postpone or extend the Termination
Date or the scheduled maturity date of any Advance or the date for the payment
of the principal of or interest on any Advance hereunder in which such
Participant shall be participating, (B) reduce any amount of principal of any
Advance hereunder in which such Participant shall be participating, (C) reduce
the interest rate applicable to any Advance hereunder in which such Participant
shall be participating, or (D) reduce any fees payable hereunder in which such
Participant shall be participating. In the case of any such participation, the
Participant shall not have any rights under this Agreement, or any of the Notes,
and all amounts payable by the Company hereunder shall be determined as if such
Bank had not sold such participation, except that the Company agrees that (a) if
amounts outstanding under this Agreement or any of the Notes shall be due and
unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall be deemed to have
the right of set-off in respect of its participating interest in amounts owing
under this Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a lender under this Agreement, and (b)
each Participant shall be entitled to the benefits of Sections 2.15, 2.17 and
2.18 with respect to its participating interest in the Commitments and the
Advances outstanding from time to time; provided, that no Participant shall be
entitled to receive any greater amount pursuant to such Sections than the
selling Bank would have been entitled to receive in respect of the amount of the
participating interest sold by such selling Bank to such Participant had no such
sale occurred.
9.08 Confidentiality. Each Bank agrees to take normal and reasonable
precautions and exercise due care to maintain the confidentiality of all
non-public information provided to it by the Company or by the Operating Agent
on the Company's behalf in connection with this Agreement and agrees and
undertakes that neither it nor any of its Affiliates shall use any such
information for any purpose or in any manner other than in connection with this
Agreement (for purposes of this Agreement information may be treated by any Bank
as public if such information (a) was or becomes generally available to the
public or (b) was or becomes available on a non-confidential basis from a source
other than the Company or its advisors provided that such source is not known by
such Bank to be bound by a confidentiality agreement with, or an obligation of
confidentiality to, the Company). Any Bank may disclose such information (i) at
the request of any bank regulatory authority or in connection with an
examination of such Bank by any such authority; (ii) pursuant to subpoena or
other court process, or to the extent required in connection with any litigation
between such Bank and the Company provided that such disclosure is subject to an
appropriate protective order (obtained by the Company) if such protective order
is available; (iii) when otherwise required to do so in accordance with the
provisions of any applicable law; (iv) at the express direction of any other
agency of any State of the United States of America or of any other jurisdiction
in which such Bank conducts its business; (v) to such Bank's independent
auditors and other professional advisors; (vi) to such Bank's Affiliates and
(vii) to any Participant or Assignee (each, a "Transferee") and any prospective
Transferee; provided, that (A) prior to any disclosure by a Bank pursuant to
clause (ii), (iii), (iv) or (v) such Bank shall, to the extent practicable and
lawful, provide advance notice to the Company of such disclosure and (B) any
such disclosure to a Transferee or prospective Transferee shall be subject to
the condition that (I) unless a Default shall have occurred and be continuing,
the Company shall give its prior written consent (which shall not be
unreasonably withheld) to disclosures to any particular Participant or
prospective Participant (any such consent shall apply to all such disclosures),
and (II) such Transferee or prospective Transferee shall execute and deliver to
such Bank a confidentiality agreement substantially in the form of Exhibit H and
a copy of such agreement shall be sent by such Bank to the Company prior to such
disclosure (but the sending of such copy to the Company shall not alter the
effect of any provision of Section 9.07(b)).
9.09 Sharing; Set-off
(a) If any Bank (a "benefited Bank") shall at any time
receive any payment of all or part of the principal of any of its Advances, or
of any interest thereon, or of any fee payable hereunder, whether voluntarily or
involuntarily, by set-off, pursuant to events, cases or proceedings of the
nature referred to in paragraph (i) or (j) of Article VII, or otherwise, in a
greater proportion than that of any payment to any other Bank in respect of the
principal of such other Bank's Advances, or interest thereon, or of any
corresponding fee payable to such Bank hereunder, such benefited Bank shall
purchase for cash from each such other Bank such portion of such other Bank's
Advance or Advances or interest or fees due as shall be necessary to cause such
benefited Bank to share the excess payment ratably with each of the Banks;
provided, that if all or any portion of such excess payment or benefits is
thereafter recovered by or on behalf of the Company from such benefited Bank,
such purchase shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest. The Company agrees that
each Bank so purchasing a portion of another Bank's Advance may exercise all
rights of payment (including rights of set-off) with respect to such portion as
fully as if such Bank were the direct holder of such portion.
(b) In addition to any rights and remedies of the Banks
provided by law, upon the occurrence and during the continuance of any Event of
Default each Bank shall have the right, without prior notice to the Company, any
such notice being expressly waived by the Company to the fullest extent
permitted by applicable law, to set off and apply any and all deposits (general
or special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Bank to or for the credit or the account
of the Company against any and all obligations of the Company now or hereafter
existing under this Agreement and the Notes and Advances held by such Bank
irrespective of whether or not the Operating Agent or such Bank shall have made
demand under this Agreement or any Note and although such obligations may be
unmatured. Each Bank agrees promptly to notify the Company and the Operating
Agent after any such set-off and application made by such Bank; provided, that
the failure to give such notice shall not affect the validity of such set-off
and application. The rights of each Bank under this Section 9.09 are in addition
to the other rights and remedies (including other rights of set-off) which such
Bank may have under applicable law.
9.10 Notification of Addresses, Lending Offices, etc. Each Bank shall
notify the Operating Agent in writing of any changes in the address to which
notices to such Bank should be directed, of addresses of any of its Lending
Offices, of payment instructions in respect of all payments to be made to it
hereunder and of such other administrative information as the Operating Agent
shall reasonably request.
9.11 Delivery of Documents and Notices. Promptly after receiving from the
Company any documents or notices delivered to the Operating Agent hereunder, the
Operating Agent will deliver a copy thereof to the Banks.
9.12 Counterparts; Effectiveness. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument. This Agreement shall become effective when the Operating
Agent shall have received counterparts hereof signed by all of the parties
hereto (or, in the case of any Bank from which a counterpart executed by it
shall not have been received, the Operating Agent shall have received
telegraphic, telex or other written confirmation from such Bank of execution of
a counterpart hereof by such Bank). A set of the copies of this Agreement signed
by all the parties shall be lodged with the Company and the Operating Agent.
9.13 Severability. The illegality or unenforceability of any provision of
this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
9.14 Jurisdiction. The Company hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal action
or proceeding relating to this Agreement or any Note, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive general
jurisdiction of the courts of the State of New York, the courts of the United
States of America for the Southern District of New York, and appellate courts
from any thereof;
(ii) consents that any such action or proceeding may be
brought in such courts, and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient forum and agrees not to
plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to the
Company at its address, and to the attention of the officer, set forth in
Section 9.02 or at such other address of which the Operating Agent shall have
been notified pursuant thereto; and
(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction.
9.15 Waiver of Trial by Jury. THE COMPANY, THE AGENTS AND THE BANKS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT OR PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT OR ANY OF THE NOTES IN
WHICH THE COMPANY, EITHER OF THE AGENTS OR ANY OF THE BANKS SHALL BE ADVERSE
PARTIES.
9.16 Governing Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
MCI COMMUNICATIONS CORPORATION
By:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Competitive Bid Agent
By:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Operating Agent
By:
Title:
CITIBANK, N.A.,
as Syndication Agent
By:
Title:
THE CHASE MANHATTAN BANK,
as Co-Documentation Agent
By:
Title:
NATIONSBANK OF TEXAS, N.A.,
as Co-Documentation Agent
By:
Title:
<PAGE>
THE BANK OF NEW YORK,
as Co-Agent
By:
Title:
THE BANK OF NOVA SCOTIA,
as Co-Agent
By:
Title:
THE FIRST NATIONAL BANK OF
CHICAGO, as Co-Agent
By:
Title:
MELLON BANK, N.A., as Co-Agent
By:
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Co-Agent
By:
Title:
THE BANKS:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
Title:
THE CHASE MANHATTAN BANK
By:
Title:
CITIBANK, N.A.
By:
Title:
NATIONSBANK OF TEXAS, N.A.
By:
Title:
THE BANK OF NEW YORK
By:
Title:
BANK OF NOVA SCOTIA
By:
Title:
THE FIRST NATIONAL BANK OF
CHICAGO
By:
Title:
MELLON BANK, N.A.
By:
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:
Title:
THE FUJI BANK LIMITED,
NEW YORK BRANCH
By:
Title:
THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH
By:
Title:
THE BANK OF TOKYO-MITSUBISHI,
LTD., NEW YORK BRANCH
By:
Title:
WELLS FARGO BANK, N.A.
By:
Title:
By:
Title:
COMERICA BANK
By:
Title:
THE DAI-ICHI KANGYO BANK, LTD.
By:
Title:
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS BRANCHES
By:
Title:
By:
Title:
WACHOVIA BANK OF GEORGIA, N.A.
By:
Title:
BANQUE NATIONALE DE PARIS
By:
Title:
By:
Title:
BARCLAYS BANK PLC
By:
Title:
CIBC INC.
By:
Title:
FIRST NATIONAL BANK OF MARYLAND
By:
Title:
LTCB TRUST COMPANY
By:
Title:
THE SANWA BANK LTD. -
NEW YORK BRANCH
By:
Title:
SUNTRUST BANK,
CENTRAL FLORIDA, N.A.
By:
Title:
By:
Title:
TORONTO-DOMINION (NEW YORK),
INC.
By:
Title:
THE TOYO TRUST & BANKING CO.,
LTD., NEW YORK BRANCH
By:
Title:
By:
Title:
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By:
Title:
By:
Title:
SIGNET BANK
By:
Title:
Exhibit 11
-------------
(Page 1 of 2)
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(In millions, except per share amounts)
(unaudited)
Three Months Ended
March 31,
------------------
1997 1996
Primary ..............................................
----- -----
Net income ......................................... $ 295 $ 295
===== =====
Adjustment of shares outstanding:
Weighted average shares of common stock
outstanding ...................................... 685 689
Shares of common stock issuable upon the
assumed exercise of common stock
equivalents ...................................... 73 64
Shares of common stock assumed repurchased
for treasury(a) .................................. (57) (52)
----- -----
Adjusted shares of common stock and common
stock equivalents for computation ................ 701 701
===== =====
Earnings per common and common
equivalent shares .................................. $ .42 $ .42
===== =====
(a) At an average market price of $35.62 and $28.67 for the three months ended
March 31, 1997 and 1996, respectively.
<PAGE>
Exhibit 11
-------------
(Page 2 of 2)
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(In millions, except per share amounts)
(unaudited)
Three Months Ended
March 31,
------------------
1997 1996
Assuming Full Dilution ----- -----
----------------------
Net income ......................................... $ 295 $ 295
===== =====
Adjustment of shares outstanding:
Weighted average shares of common stock
outstanding ...................................... 685 689
Shares of common stock issuable upon the
assumed exercise of common stock
equivalents ...................................... 73 64
Shares of common stock assumed repurchased
for treasury(b) .................................. (57) (49)
----- -----
Adjusted shares of common stock and common
stock equivalents for computation ................ 701 704
===== =====
Earnings per common and common
equivalent shares .................................. $ .42 $ .42
===== =====
(b) The ending market price of $35.63 was used as it is higher than the average
market price of $35.62 for the three months ended March 31, 1997. The ending
market price of $30.25 was used as it is higher than the average market price
of $28.67 for the three months ended March 31, 1996.
Exhibit 12
----------
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In millions, except ratio amounts)
(unaudited)
Three
Months
Ended
March 31, Year Ended December 31,
----------- ---------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
Earnings:
Income before
income taxes and
extraordinary item(a) $479 $484 $1,955 $ 897 $1,280 $1,045 $ 963
Add:
Fixed charges ........ 138 103 460 344 315 315 346
Less:
Capitalized interest 35 25 118 93 78 61 52
---- ---- ------ ------ ------ ------ ------
Total earnings .......$582 $562 $2,297 $1,148 $1,517 $1,299 $1,257
==== ==== ====== ====== ====== ====== ======
Fixed Charges:
Fixed charges on
indebtedness,
including amortization
of debt discount and
premium(a) ...........$108 $ 75 $ 349 $ 242 $ 231 $ 239 $ 270
Interest portion of
operating lease
rentals(b) ........... 30 28 111 102 84 76 76
---- ---- ------ ------ ------ ------ ------
Total fixed charges $138 $103 $ 460 $ 344 $ 315 $ 315 $ 346
==== ==== ====== ====== ====== ====== ======
Ratio of earnings to
fixed charges ........4.22 5.46 4.99 3.34 4.82 4.12 3.63
==== ==== ====== ====== ====== ====== ======
(a) Includes distributions on subsidiary Trust mandatorily redeemable
preferred securities.
(b) The interest portion of operating lease rentals is calculated as one third
of rent expense which represents a reasonable approximation of the interest
factor.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of MCI Communications Corporation and Subsidiaries at March 31, 1997 and
the income statement for the three months ended March 31, 1997 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000064079
<NAME> MCI Communications Corporation
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 199
<SECURITIES> 16
<RECEIVABLES> 3,907
<ALLOWANCES> 290
<INVENTORY> 0
<CURRENT-ASSETS> 4,845
<PP&E> 19,417
<DEPRECIATION> 6,924
<TOTAL-ASSETS> 23,607
<CURRENT-LIABILITIES> 4,965
<BONDS> 4,984
750
0
<COMMON> 74
<OTHER-SE> 10,865
<TOTAL-LIABILITY-AND-EQUITY> 23,607
<SALES> 0
<TOTAL-REVENUES> 4,883
<CGS> 0
<TOTAL-COSTS> 4,297
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58
<INCOME-PRETAX> 494
<INCOME-TAX> 184
<INCOME-CONTINUING> 295
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 295
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>
Exhibit 99(a)
-------------
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CAPITALIZATION SCHEDULE
(In millions)
(unaudited)
Set forth below is the capitalization of the company as of March 31, 1997:
Debt(a):
Secured debt:
Capital lease obligations .................................. $ 462
Other secured obligations .................................. 44
--------
Total secured debt ............................................ 506
--------
Unsecured debt:
Senior Notes, net .......................................... 1,561
Senior Debentures, net ..................................... 1,383
Commercial paper borrowings ................................ 1,693
Other unsecured debt ....................................... 37
--------
Total unsecured debt .......................................... 4,674
--------
Total debt ...................................................... $ 5,180
--------
Company Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trust Holding Solely
Junior Subordinated Deferrable Interest
Debentures of the Company (b) .............................. 750
--------
Stockholders' equity:
Class A common stock, $.10 par value, authorized
500 million shares, issued 136 million shares ............ $ 14
Common stock, $.10 par value, authorized 2 billion
shares, issued 593 million shares ........................ 60
Additional paid in capital ................................. 6,344
Retained earnings .......................................... 5,526
Treasury stock, at cost, 42 million shares ................. (1,005)
--------
Total stockholders' equity ...................................... 10,939
--------
Total capitalization ............................................ $ 16,869
========
(a) For additional information concerning the company's capital lease
obligations, which are obligations of subsidiaries of the company that are
guaranteed by the company, and for additional information concerning the
company's long-term debt, see Note 8 of Notes to Consolidated Financial
Statements on pages 19 and 20 company's Annual Report to Stockholders, which is
included in Exhibit 13 to the company's Annual Report on Form 10-K for the year
ended December 31, 1996. Interest rates on capital lease obligations, on a
weighted average basis, approximated 9.2% per annum at March 31, 1997.
(b) On May 29, 1996, MCI Capital I, a wholly-owned Delaware statutory business
trust (Trust), issued $750 million aggregate principal amount of 8% Cumulative
Quarterly Income Preferred Securities, Series A (preferred securities) due on
June 30, 2026. The Trust exists for the sole purpose of issuing the preferred
securities and investing the proceeds in the company's 8% Junior Subordinated
Deferrable Interest Debentures, Series A (Subordinated Debt Securities) due June
30, 2026.
