<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 25, 1996
WORLDCOM, INC.
(Exact name of registrant as specified in charter)
Georgia 0-11258 58-1521612
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
515 East Amite Street, Jackson, Mississippi 39201-2702
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 601-360-8600
Not Applicable
(Former name or former address, if changed from last report)
<PAGE>2
Item 5. Other Events
On August 25, 1996, WorldCom, Inc. (the "Company") executed an
Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which a
wholly owned subsidiary of the Company (the "Acquisition Subsidiary") will be
merged with and into MFS Communications Company, Inc. ("MFS"), a Delaware
corporation (the "Merger"). Pursuant to the Merger Agreement, (i) each share of
Common Stock of MFS will be converted into and represent the right to receive
2.1 shares of common stock, par value $.01 per share, of the Company, (ii) each
share of Series A 8% Cumulative Convertible Preferred Stock, par value $.01 per
share, of MFS will be converted into and represent the right to receive one (1)
share of Series A 8% Cumulative Convertible Preferred Stock, par value $.01 per
share, of the Company, and (iii) each share of Series B Convertible Preferred
Stock, par value $.01 per share, of MFS will be converted into and represent the
right to receive one (1) share of Series B Convertible Preferred Stock, par
value $.01 per share, of the Company. The parties have agreed that the structure
of the Merger may, by mutual agreement, be modified such that in lieu of the
Acquisition Subsidiary merging with and into MFS, MFS may merge with and into
WorldCom, or such other structure as the parties may agree to implement. The
description of the Merger Agreement contained herein is qualified in its
entirety by reference to the Merger Agreement, which is attached hereto as
Exhibit 2.1 and is incorporated herein by reference.
On August 25, 1996, the Company and MFS entered into an agreement (the
"Services Agreement") pursuant to which, in the event the Merger Agreement is
terminated under certain specified circumstances, the party terminating the
Merger Agreement will be entitled to receive from the other party certain
telecommunications services. The description of the Services Agreement
contained herein is qualified in its entirety by reference to the Services
Agreement, which is attached hereto as Exhibit 10.1 and is incorporated herein
by reference.
On August 25, 1996, pursuant to Stock Option Agreements, dated as of
August 25, 1996, between the Company and MFS (the "Option Agreements"), the
Company granted an option to MFS to purchase up to 81,224,137 or approximately
19.9% of the currently outstanding shares of Common Stock of the Company with an
exercise price of $26.375 per share and MFS granted an option to WorldCom to
purchase up to 43,953,073 or approximately 19.9% of the currently outstanding
shares of common stock of MFS with an exercise price of $55.3875 per share,
which options become exercisable upon the occurrence of certain events. The
description of the Option Agreements contained herein is qualified in its
entirety by reference to the Option Agreements, which are attached hereto as
Exhibit 2.2 and Exhibit 99.1, respectively, and are incorporated herein by
reference.
On August 26, 1996, the Company and MFS issued a press release
relating to the execution of the Merger Agreement. A copy of the press release
is attached hereto as Exhibit 99.2 and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of businesses acquired:
None.
(b) Pro Forma financial information:
None.
(c) Exhibits:
<PAGE>3
2.1 Agreement and Plan of Merger, dated as of August 25,
1996, among WorldCom, Inc., a Georgia corporation
("WorldCom"), HIJ Corp., a Delaware corporation and a
wholly owned subsidiary of WorldCom, and MFS
Communications Company, Inc., a Delaware corporation.*
2.2 Stock Option Agreement, dated as of August 25,
1996, between WorldCom, Inc. and MFS Communications
Company, Inc.
10.1 Agreement, dated as of August 25, 1996, between
WorldCom, Inc. and MFS Communications Company, Inc.
99.1 Stock Option Agreement, dated as of August 25,
1996, between WorldCom, Inc. and MFS Communications
Company, Inc.
99.2 Press Release of WorldCom, Inc. and MFS
Communications Company, Inc., dated August 26, 1996.
- --------
* The Registrant hereby agrees to furnish supplementally a copy of
any omitted schedules to this Agreement to the Securities and
Exchange Commission upon its request.
<PAGE>4
SIGNATURES
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 hereunto duly authorized.
WORLDCOM, INC.
/s/ Charles T. Cannada
Charles T. Cannada
Senior Vice President
August 25, 1996
<PAGE>5
EXHIBIT INDEX
Exhibit
2.1 Agreement and Plan of Merger, dated as of August 25, 1996, among
WorldCom, Inc., a Georgia corporation ("WorldCom"), HIJ Corp., a
Delaware corporation and a wholly owned subsidiary of WorldCom and MFS
Communications Company, Inc., a Delaware corporation.
2.2 Stock Option Agreement, dated as of August 25, 1996, between
WorldCom, Inc. and MFS Communications Company, Inc.
10.1 Agreement, dated as of August 25, 1996, between WorldCom, Inc. and MFS
Communications Company, Inc.
99.1 Stock Option Agreement, dated as of August 25, 1996, between
WorldCom, Inc. and MFS Communications Company, Inc.
99.2 Press Release of WorldCom, Inc. and MFS Communications Company, Inc.,
dated August 26, 1996
<PAGE>1
AGREEMENT AND PLAN OF MERGER
By and Among
WorldCom, Inc.,
HIJ Corp.
and
MFS Communications Company, Inc.
Dated As Of
August 25, 1996
<PAGE>2
Table of Contents
Page
ARTICLE I TERMS OF THE MERGER . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Merger Consideration . . . . . . . . . . . . . . . . . . . 2
1.4 Stockholders' Rights upon Merger . . . . . . . . . . . . . 3
1.5 Surrender and Exchange of Shares . . . . . . . . . . . . . 4
1.6 Options and Warrants . . . . . . . . . . . . . . . . . . . 5
1.7 Certificate of Incorporation . . . . . . . . . . . . . . . 7
1.8 Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.9 [Intentionally left blank] . . . . . . . . . . . . . . . . 7
1.10 Other Effects of Merger . . . . . . . . . . . . . . . . . . 7
1.11 Registration Statement; Prospectus/Proxy Statement . . . . 7
1.12 Tax-Free Reorganization . . . . . . . . . . . . . . . . . . 9
1.13 Additional Actions . . . . . . . . . . . . . . . . . . . . 9
1.14 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . 9
1.15 Alternative Structure . . . . . . . . . . . . . . . . . . . 10
ARTICLE II REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF
MFS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1 Organization and Good Standing . . . . . . . . . . . . . . 11
2.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . 11
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 12
2.4 Authorization; Binding Agreement . . . . . . . . . . . . . 13
2.5 Governmental Approvals . . . . . . . . . . . . . . . . . . 13
2.6 No Violations . . . . . . . . . . . . . . . . . . . . . . . 14
2.7 Securities Filings and Litigation . . . . . . . . . . . . . 14
2.8 MFS Financial Statements . . . . . . . . . . . . . . . . . 15
2.9 Absence of Certain Changes or Events . . . . . . . . . . . 16
2.10 Compliance with Laws . . . . . . . . . . . . . . . . . . . 16
2.11 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.12 Finders and Investment Bankers . . . . . . . . . . . . . . 16
2.13 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . 17
2.15 Taxes and Returns . . . . . . . . . . . . . . . . . . . . . 18
2.16 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . 19
2.17 Takeover Statutes . . . . . . . . . . . . . . . . . . . . . 19
2.18 MFS Rights Plan . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE III REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF
WORLDCOM . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.1 Organization and Good Standing . . . . . . . . . . . . . . 19
3.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . 20
3.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 20
3.4 Authorization; Binding Agreement . . . . . . . . . . . . . 21
3.5 Governmental Approvals . . . . . . . . . . . . . . . . . . 22
3.6 No Violations . . . . . . . . . . . . . . . . . . . . . . . 22
3.7 Securities Filings and Litigation . . . . . . . . . . . . . 22
3.8 WorldCom Financial Statements . . . . . . . . . . . . . . . 23
3.9 Absence of Certain Changes or Events . . . . . . . . . . . 24
3.10 Compliance with Laws . . . . . . . . . . . . . . . . . . . 24
3.11 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . 24
<PAGE>3
3.12 Finders and Investment Bankers . . . . . . . . . . . . . . 24
3.13 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . 25
3.15 Taxes and Returns . . . . . . . . . . . . . . . . . . . . . 25
3.16 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . 26
3.17 Takeover Statutes and Charter . . . . . . . . . . . . . . . 26
3.18 WorldCom Rights Plan . . . . . . . . . . . . . . . . . . . 26
ARTICLE IV ADDITIONAL COVENANTS OF MFS . . . . . . . . . . . . . . . . 26
4.1 Conduct of Business of MFS and MFS Subsidiaries . . . . . 26
4.2 Notification of Certain Matters . . . . . . . . . . . . . . 28
4.3 Access and Information . . . . . . . . . . . . . . . . . . 29
4.4 Stockholder Approval . . . . . . . . . . . . . . . . . . . 29
4.5 Reasonable Business Efforts . . . . . . . . . . . . . . . . 30
4.6 Public Announcements . . . . . . . . . . . . . . . . . . . 30
4.7 Compliance . . . . . . . . . . . . . . . . . . . . . . . . 30
4.8 No Solicitation . . . . . . . . . . . . . . . . . . . . . . 30
4.9 SEC and Stockholder Filings . . . . . . . . . . . . . . . . 33
4.10 Tax Opinion Certification . . . . . . . . . . . . . . . . . 33
4.11 Affiliate Agreements . . . . . . . . . . . . . . . . . . . 33
4.12 Takeover Statutes . . . . . . . . . . . . . . . . . . . . . 33
4.13 Comfort Letters . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE V ADDITIONAL COVENANTS OF WORLDCOM . . . . . . . . . . . . . 34
5.1 Conduct of Business of WorldCom and the WorldCom
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 34
5.2 Notification of Certain Matters . . . . . . . . . . . . . . 35
5.3 Access and Information . . . . . . . . . . . . . . . . . . 36
5.4 Shareholder Approval . . . . . . . . . . . . . . . . . . . 36
5.5 Reasonable Business Efforts . . . . . . . . . . . . . . . . 36
5.6 Public Announcements . . . . . . . . . . . . . . . . . . . 37
5.7 Compliance . . . . . . . . . . . . . . . . . . . . . . . . 37
5.8 No Solicitation . . . . . . . . . . . . . . . . . . . . . . 37
5.9 SEC and Shareholder Filings . . . . . . . . . . . . . . . . 39
5.10 Tax Opinion Certificates . . . . . . . . . . . . . . . . . 39
5.11 Board Representation . . . . . . . . . . . . . . . . . . . 40
5.12 Employee Benefit Plans . . . . . . . . . . . . . . . . . . 40
5.13 Indemnification . . . . . . . . . . . . . . . . . . . . . . 41
5.14 Takeover Statutes . . . . . . . . . . . . . . . . . . . . . 41
5.15 Comfort Letters . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VI CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . 42
6.1 Conditions to Each Party's Obligations . . . . . . . . . . 42
6.1.1 Stockholder Approval . . . . . . . . . . . . . . . 42
6.1.2 No Injunction or Action . . . . . . . . . . . . . 42
6.1.3 Governmental Approvals . . . . . . . . . . . . . . 42
6.1.4 HSR Act . . . . . . . . . . . . . . . . . . . . . 43
6.1.5 Required Consents . . . . . . . . . . . . . . . . 43
6.1.6 Registration Statement . . . . . . . . . . . . . . 44
6.1.7 Blue Sky . . . . . . . . . . . . . . . . . . . . . 44
6.1.8 Tax Opinion . . . . . . . . . . . . . . . . . . . 44
6.1.9 Quotation of WorldCom Stock . . . . . . . . . . . 44
<PAGE>4
6.2 Conditions to Obligations of MFS . . . . . . . . . . . . . 44
6.2.1 WorldCom Representations and Warranties . . . . . 44
6.2.2 Performance by WorldCom . . . . . . . . . . . . . 44
6.2.3 No Material Adverse Change . . . . . . . . . . . . 45
6.2.4 Certificates and Other Deliveries . . . . . . . . 45
6.2.5 Opinion of WorldCom Counsel . . . . . . . . . . . 45
6.2.6 Election of Nominees . . . . . . . . . . . . . . . 45
6.3 Conditions to Obligations of WorldCom . . . . . . . . . . . 45
6.3.1 MFS Representations and Warranties . . . . . . . . 45
6.3.2 Performance by MFS . . . . . . . . . . . . . . . . 46
6.3.3 No Material Adverse Change . . . . . . . . . . . . 46
6.3.4 Certificates and Other Deliveries . . . . . . . . 46
6.3.5 Opinion of MFS Counsel . . . . . . . . . . . . . . 46
6.3.6 Affiliate Agreements . . . . . . . . . . . . . . . 46
ARTICLE VII TERMINATION AND ABANDONMENT . . . . . . . . . . . . . . . . 47
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . 47
7.2 Effect of Termination and Abandonment . . . . . . . . . . . 50
7.3 Procedure Upon Termination . . . . . . . . . . . . . . . . 51
7.4 Services Agreement . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 52
8.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 52
8.2 Amendment and Modification . . . . . . . . . . . . . . . . 53
8.3 Waiver of Compliance; Consents . . . . . . . . . . . . . . 53
8.4 Survival of Representations and Warranties . . . . . . . . 53
8.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.6 Binding Effect; Assignment . . . . . . . . . . . . . . . . 54
8.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 55
8.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 55
8.10 Interpretation . . . . . . . . . . . . . . . . . . . . . . 55
8.11 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 55
8.12 Severability . . . . . . . . . . . . . . . . . . . . . . . 56
8.13 Specific Performance . . . . . . . . . . . . . . . . . . . 56
8.14 Third Parties . . . . . . . . . . . . . . . . . . . . . . . 56
8.15 Schedules and Disclosure Letters . . . . . . . . . . . . . . 56
<PAGE>5
LIST OF SCHEDULES
Schedule Description
2.1 MFS Jurisdictions of Organization and Qualification
2.2 Rights and Restrictions with respect to MFS Stock
2.3 MFS Subsidiaries
2.6 MFS Required Approvals
2.9 MFS Subsequent Events
2.13 MFS Material Contracts
2.14(a) MFS Employee Benefit Plans
2.14(b) Severance Obligations
2.15 MFS Tax Matters
3.2 Rights and Restrictions with respect to WorldCom Stock
3.3 WorldCom Subsidiaries
3.14 WorldCom Employee Benefit Plans
3.15 WorldCom Tax Matters
4.11 Form of MFS Affiliate Agreement
5.12(b) Schedule of Benefit Plans with Change in Control Provisions
6.2.5 Opinion of Counsel to WorldCom
6.3.5 Opinion of Counsel to MFS
<PAGE>6
GLOSSARY OF DEFINED TERMS
Term Page Where
Defined
Acquisition Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Alternative Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Change in Control Agreements . . . . . . . . . . . . . . . . . . . . . . . 40
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Delaware Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Enforceability Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . 13
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Final Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Governmental Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 13
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
MFS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
MFS Acquisition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 31
MFS Ancillary Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 13
MFS Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
MFS Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
MFS Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
MFS Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 15
MFS Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . 11
MFS Material Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
MFS Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
MFS Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
MFS Outperformance Options . . . . . . . . . . . . . . . . . . . . . . . . 6
MFS Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
MFS Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
MFS Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
MFS Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
MFS Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
MFS Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
MFS Securities Filings . . . . . . . . . . . . . . . . . . . . . . . . . . 15
MFS Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
<PAGE>7
MFS Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
MFS Superior Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
MFS Takeover Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
MFS Tax Opinion Certificate . . . . . . . . . . . . . . . . . . . . . . . . 33
MFS Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Multiemployer Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
NASD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Nominees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Prospectus/Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . 7
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Securities Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Series A Preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Series B Preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Series C Preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Surviving Corporation Common Stock . . . . . . . . . . . . . . . . . . . . 3
Surviving Corporation Material Adverse Effect . . . . . . . . . . . . . . . 44
Takeover Statute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
WorldCom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
WorldCom Acquisition Agreement . . . . . . . . . . . . . . . . . . . . . . 38
WorldCom Ancillary Agreements . . . . . . . . . . . . . . . . . . . . . . . 21
WorldCom Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
WorldCom Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 22
WorldCom Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 23
WorldCom Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . 20
WorldCom Material Contract . . . . . . . . . . . . . . . . . . . . . . . . 24
WorldCom Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 1
WorldCom Outperformance Options . . . . . . . . . . . . . . . . . . . . . . 6
WorldCom Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
WorldCom Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . 20
WorldCom Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . 2
WorldCom Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
WorldCom Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 26
WorldCom Securities Filings . . . . . . . . . . . . . . . . . . . . . . . . 23
WorldCom Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
WorldCom Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
WorldCom Superior Proposal . . . . . . . . . . . . . . . . . . . . . . . . 39
WorldCom Takeover Proposal . . . . . . . . . . . . . . . . . . . . . . . . 38
WorldCom Tax Opinion Certificate . . . . . . . . . . . . . . . . . . . . . 40
<PAGE>8
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is made and
entered into as of August 25, 1996, by and among WorldCom, Inc., a Georgia
corporation ("WorldCom"), HIJ Corp., a Delaware corporation and wholly owned
subsidiary of WorldCom ("Acquisition Subsidiary"), and MFS Communications
Company, Inc., a Delaware corporation ("MFS").
Recitals
A. The respective Boards of Directors of MFS, Acquisition
Subsidiary and WorldCom have approved the merger (the "Merger") of Acquisition
Subsidiary with and into MFS in accordance with the laws of the State of
Delaware and the provisions of this Agreement.
B. MFS, Acquisition Subsidiary and WorldCom desire to make certain
representations, warranties and agreements in connection with, and establish
various conditions precedent to, the Merger.
C. As a condition and inducement to WorldCom and Acquisition
Subsidiary entering into this Agreement, concurrently with the execution and
delivery of this Agreement, MFS has granted an option to WorldCom to purchase
common stock of MFS pursuant to a Stock Option Agreement with WorldCom (the
"MFS Option Agreement").
D. As a condition and inducement to MFS entering into this
Agreement, concurrently with the execution and delivery of this Agreement,
WorldCom has granted an option to MFS to purchase common stock of WorldCom
pursuant to a Stock Option Agreement with MFS (the "WorldCom Option
Agreement").
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements hereinafter set forth,
the parties hereto agree as follows:
ARTICLE I
TERMS OF THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions of
this Agreement, the Merger shall be consummated in accordance with the
Delaware General Corporation Law (the "Delaware Code"). At the Effective Time
(as defined in Section 1.2, below), upon the terms and subject to the
conditions of this Agreement, Acquisition Subsidiary shall be merged with and
into MFS in accordance with the Delaware Code and the separate existence of
Acquisition Subsidiary shall thereupon cease, and MFS, as the surviving
corporation in the Merger (the "Surviving Corporation"), shall continue its
corporate existence under the laws of the State of Delaware as a subsidiary of
WorldCom. The parties shall prepare and execute a certificate of merger (the
<PAGE>9
"Certificate of Merger") in order to comply in all respects with the
requirements of the Delaware Code and with the provisions of this Agreement.
1.2 Effective Time. The Merger shall become effective at the time
of the filing of the Certificate of Merger with the Secretary of State of
Delaware in accordance with the applicable provisions of the Delaware Code or
at such later time as may be specified in the Certificate of Merger. The
Certificate of Merger shall be filed as soon as practicable after all of the
conditions set forth in this Agreement have been satisfied or waived by the
party or parties entitled to the benefit of the same. WorldCom and MFS shall
mutually determine the time of such filing and the place where the closing of
the Merger (the "Closing") shall occur. The time when the Merger shall become
effective is herein referred to as the "Effective Time" and the date on which
the Effective Time occurs is herein referred to as the "Closing Date."
1.3 Merger Consideration. (a) Subject to the provisions of this
Agreement and any applicable backup or other withholding requirements, each of
the issued and outstanding shares (the "MFS Shares") of common stock, par
value $.01 per share, of MFS (the "MFS Common Stock"), together with the
associated preferred stock purchase rights issued under the MFS Rights
Agreement (as hereinafter defined) (the "MFS Rights"), as of the Effective
Time shall be converted into the right to receive, and there shall be paid and
issued as hereinafter provided, in exchange for each of the MFS Shares and MFS
Rights, 2.1 shares (the "Exchange Ratio") of the common stock of WorldCom, par
value $.01 per share, together with the associated preferred stock purchase
rights issued under the WorldCom Rights Agreement (as hereinafter defined)
(the "WorldCom Stock"), subject to payment of cash in lieu of any fractional
share as hereinafter provided (the "Merger Consideration"). The Exchange
Ratio shall be subject to appropriate adjustment in the event of a stock
split, stock dividend or recapitalization after the date of this Agreement
applicable to shares of the WorldCom Stock or the MFS Common Stock.
(b) Subject to the provisions of this Agreement and any applicable
backup or other withholding requirements, each of the issued and outstanding
shares (the "MFS Preferred Shares") of Series A Preferred (as hereinafter
defined) and Series B Preferred (as hereinafter defined) (other than any
Dissenting Shares (as hereinafter defined)), as of the Effective Time shall be
converted into the right to receive and there shall be paid and issued as
hereinafter provided, in exchange for each share of Series A Preferred and
Series B Preferred one (1) share of Series A 8% Cumulative Convertible
Preferred Stock of WorldCom and one (1) share of Series B Convertible
Preferred Stock of WorldCom, respectively (collectively, "WorldCom Preferred
Stock") (and, as a result, each depositary share representing a 1/100 interest
in
<PAGE>10
a share of MFS Series A Preferred shall be converted into the right to receive
a depositary share representing a 1/100 interest in a share of Series A 8%
Cumulative Convertible Preferred Stock of WorldCom. The terms of the WorldCom
Preferred Stock shall be substantially the same as the terms of the
corresponding MFS Preferred Shares (with such stock being convertible at the
same conversion price into the same number of shares of WorldCom Stock, in
each case, as adjusted for the Exchange Ratio and otherwise on terms
substantially similar to the terms of the corresponding MFS Preferred Shares
with appropriate adjustments for dates of issuance or anniversary), except
that each share of Series B Preferred (i) shall be entitled to one vote per
share on all matters presented to WorldCom shareholders, voting together with
the WorldCom Stock and such other voting rights as may be required by law, and
(ii) at the discretion of WorldCom, may contain corresponding restrictions on
transfer, and in the case of both series of WorldCom Preferred Stock, with
such changes as shall be appropriate to reflect previous adjustments effected
pursuant to the terms of the MFS Preferred Shares and the requirements of
Georgia Law.
(c) No fractional shares of WorldCom Stock shall be issued pursuant
to the Merger nor will any fractional share interest involved entitle the
holder thereof to vote, to receive dividends or to exercise any other rights
of a shareholder of WorldCom. In lieu thereof, any person who would otherwise
be entitled to a fractional share of WorldCom Stock pursuant to the provisions
hereof shall receive an amount in cash equal to the value of such fractional
share. The value of such fractional share shall be the product of such
fraction (rounded down to the nearest hundredth of a share) multiplied by
$26.375, subject to appropriate adjustment in the event of a stock split,
stock dividend or recapitalization after the date of this Agreement applicable
to shares of the WorldCom Stock.
(d) Each share of MFS Common Stock or MFS Preferred Stock held in
the treasury of MFS or by a wholly owned subsidiary of MFS shall be cancelled
as of the Effective Time and no Merger Consideration shall be payable with
respect thereto.
(e) Subject to the provisions of this Agreement, at the Effective
Time, the shares of Acquisition Subsidiary common stock outstanding
immediately prior to the Merger shall be converted, by virtue of the Merger
and without any action on the part of the holder thereof, into one share of
the common stock of the Surviving Corporation (the "Surviving Corporation
Common Stock"), which one share of the Surviving Corporation Common Stock
shall constitute all of the issued and outstanding capital stock of the
Surviving Corporation and shall be owned by WorldCom.
1.4 Stockholders' Rights upon Merger. Upon consummation of the
Merger, the certificates which theretofore
<PAGE>11
represented MFS Shares or MFS Preferred Shares (other than Dissenting Shares)
(the "Certificates") shall cease to represent any rights with respect thereto,
and, subject to applicable law and this Agreement, shall only represent the
right to receive the Merger Consideration including the amount of cash, if
any, payable in lieu of fractional shares of WorldCom Stock into which the MFS
Shares or MFS Preferred Shares, as the case may be, have been converted
pursuant to this Agreement. MFS represents and warrants neither the holders
of the shares of MFS Stock nor the holders of shares of Series A Preferred are
entitled to appraisal rights under applicable Law (as hereinafter defined) or
the Certificate of Incorporation of MFS provided the conditions of Section
262(b)(1) of the Delaware Code are satisfied and the provisions of Section
262(b)(2) of the Delaware Code are not applicable.
1.5 Surrender and Exchange of Shares. (a) Prior to the Closing
Date, WorldCom shall appoint The Bank of New York or another agent mutually
acceptable to WorldCom and MFS to act as exchange agent (the "Exchange Agent")
for the Merger. Promptly after the Effective Time, WorldCom shall make
available, or cause to be made available, to the Exchange Agent such
certificates evidencing such number of shares of WorldCom Stock and WorldCom
Preferred Stock and such amount of cash, as and when necessary, in order to
enable the Exchange Agent to effect the exchange of certificates and make the
cash payments in respect of fractional shares contemplated by Section 1.5(c)
below.
(b) On the Closing Date, WorldCom shall instruct the Exchange Agent
to mail to each holder of record of a Certificate within five business days of
receiving from MFS a list of such holders of record, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as WorldCom may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for
certificates representing the Merger Consideration.
(c) After the Effective Time, each holder of a MFS Share or MFS
Preferred Share (other than Dissenting Shares) shall surrender and deliver the
Certificates to the Exchange Agent together with a duly completed and executed
transmittal letter. Upon such surrender and delivery, the holder shall
receive a certificate representing the number of whole shares of WorldCom
Stock or WorldCom Preferred Stock into which such holder's MFS Shares or MFS
Preferred Shares have been converted pursuant to this Agreement, subject to
payment of cash in lieu of any fractional share. Until so surrendered and
exchanged, each outstanding Certificate after the Effective Time shall be
deemed for all purposes to evidence the right to receive that number of whole
shares of WorldCom Stock or WorldCom Preferred Stock into
<PAGE>12
which the MFS Shares or MFS Preferred Shares (other than Dissenting Shares)
have been converted pursuant to this Agreement, subject to payment of cash in
lieu of any factional share; provided, however, that no dividends or other
distributions, if any, in respect of the shares of WorldCom Stock or WorldCom
Preferred Stock, declared after the Effective Time and payable to holders of
record after the Effective Time, shall be paid to the holders of any
unsurrendered Certificates until such Certificates and transmittal letters are
surrendered and delivered as provided herein. Subject to applicable Law,
after the surrender and exchange of Certificates, the record holders thereof
will be entitled to receive any such dividends or other distributions without
interest thereon, which theretofore have become payable with respect to the
number of shares of WorldCom Stock or WorldCom Preferred Stock for which such
Certificates were exchangeable. Holders of any unsurrendered Certificates
shall not be entitled to vote WorldCom Stock or WorldCom Preferred Stock until
such Certificates are exchanged pursuant to this Agreement.
(d) At the Effective Time, the stock transfer books of MFS shall be
closed and no transfer of MFS Shares or MFS Preferred Shares shall be made
thereafter, other than transfers of MFS Shares and MFS Preferred Shares that
have occurred prior to the Effective Time. In the event that, after the
Effective Time, Certificates are presented to the Surviving Corporation, they
shall be canceled and exchanged for shares of WorldCom Stock or WorldCom
Preferred Stock or cash as provided in Section 1.3.
(e) Neither MFS nor WorldCom nor the Exchange Agent shall be liable
to any holder of MFS Shares or MFS Preferred Shares for any such shares of
WorldCom Stock or WorldCom Preferred Stock (or dividends or distributions with
respect thereto), or cash delivered to a public official pursuant to any
abandoned property, escheat or similar law, rule, regulation, statute, order,
judgment or decree.
1.6 Options and Warrants. (a) At the Effective Time, WorldCom
shall cause each holder of a then-outstanding and unexercised option (the "MFS
Options") or warrant (the "MFS Warrants") exercisable for shares of MFS Common
Stock to receive, by virtue of the Merger and without any action on the part
of the holder thereof, options or warrants, respectively, exercisable for
shares of WorldCom Stock having the same terms and conditions as the MFS
Options and MFS Warrants (including such terms and conditions as may be
incorporated by reference into the agreements evidencing MFS Options and MFS
Warrants pursuant to the plans or arrangements pursuant to which such MFS
Options and MFS Warrants were granted and taking into account the provisions
of Section 5.12(b) hereof) except that (i) the exercise price and the number
of shares issuable upon exercise shall be divided and multiplied,
respectively, by the Exchange Ratio, and (ii) MFS Options which are "MFS
Outperformance Options" (as defined in
<PAGE>13
Section 1.6(b)) shall be treated as set forth in Section 1.6(b). WorldCom
shall use all reasonable efforts to ensure that the MFS Options which
qualified as incentive stock options under Section 422 of the Code prior to
the Effective Time continue to so qualify after the Effective Time. WorldCom
shall take all corporate action necessary to reserve for issuance a sufficient
number of shares of WorldCom Stock for delivery upon the exercise of MFS
Options and MFS Warrants after the Effective Time. Immediately after the
Effective Time, WorldCom shall file or cause to be filed all registration
statements on Form S-8 or other appropriate form as may be necessary in
connection with the purchase and sale of WorldCom Stock contemplated by such
MFS Options subsequent to the Effective Time, and shall maintain the
effectiveness of such registration statements (and maintain the current status
of the prospectus or prospectuses contained therein) for so long as any of the
MFS Options registered thereunder remain outstanding. As soon as practicable
after the Effective Time, WorldCom shall qualify under applicable state
securities laws the issuance of such shares of WorldCom Stock issuable upon
exercise of MFS Options. WorldCom shall use reasonable business efforts to
cause to be taken any actions necessary on the part of WorldCom to enable
subsequent transactions in WorldCom Stock after the Effective Time pursuant to
MFS Options held by persons subject to the reporting requirements of Section
16(a) of the Securities Exchange Act to be exempt from the application of
Section 16(b) of the Securities Exchange Act, to the extent permitted
thereunder. At the Effective Time, WorldCom shall assume, by supplemental
agreement, the due and punctual performance and observance of each and every
covenant and condition of the Warrant Agreement dated as of June 8, 1993
between MFS and Gleacher & Co., Inc.
(b) At the Effective Time, WorldCom shall cause each holder of a
then-outstanding and unexercised MFS Option which is an "Outperformance
Option" awarded under the MFS 1993 Stock Plan ("MFS Outperformance Options")
to receive, by virtue of the Merger, in substitution for such MFS
Outperformance Options, awards in respect of shares of WorldCom Stock
("WorldCom Outperformance Options") which shall preserve the economic value
of, and the potential economic value associated with, each such MFS
Outperformance Option immediately prior to the Effective Time, provided that
the holder thereof executes and delivers to WorldCom an agreement reasonably
satisfactory to WorldCom relating thereto. To the greatest extent
practicable, such WorldCom Outperformance Options shall be based on the same
performance criteria applicable to the MFS Outperformance Options, giving
effect to the Merger and the transactions contemplated thereby. Each of MFS
and WorldCom hereby covenant to cooperate in good faith in order to develop
terms for each such WorldCom Outperformance Option which will effectuate the
intent and purpose of this Section 1.6(b).
<PAGE>14
1.7 Certificate of Incorporation. At and after the Effective Time,
the Certificate of Incorporation of the Surviving Corporation shall be
identical to the Certificate of Incorporation of MFS in effect at the
Effective Time (subject to any subsequent amendment).
1.8 Bylaws. Subject to Section 5.13 below, at and after the
Effective Time, the Bylaws of Acquisition Subsidiary in effect at the
Effective Time shall be the Bylaws of the Surviving Corporation (subject to
any subsequent amendment).
1.9 [Intentionally left blank].
1.10 Other Effects of Merger. The Merger shall have all further
effects as specified in the applicable provisions of the Delaware Code.
1.11 Registration Statement; Prospectus/Proxy Statement.
(a) For the purposes of (i) registering the issuance of WorldCom
Stock, the WorldCom Preferred Stock and, if required, the WorldCom
Outperformance Options, to holders of the MFS Shares, MFS Preferred Shares and
MFS Outperformance Options in connection with the Merger with the Securities
and Exchange Commission ("SEC") under the Securities Act of 1933, as amended,
and the rules and regulations thereunder (the "Securities Act"), and complying
with applicable state securities Laws, (ii) holding the meeting of MFS
stockholders to vote upon the adoption of this Agreement and the Merger and
the transactions contemplated hereby and thereby (the "MFS Proposals"), and
(iii) holding the meeting of WorldCom's shareholders to approve the amendment
of WorldCom's Articles of Incorporation to increase the number of authorized
shares of WorldCom Stock and to approve the issuance of the WorldCom Stock and
WorldCom Preferred Stock in the Merger and the other transactions contemplated
hereby and thereby (the "WorldCom Proposals"), WorldCom and MFS will cooperate
in the preparation of a registration statement on Form S-4 (such registration
statement, together with any and all amendments and supplements thereto, being
herein referred to as the "Registration Statement"), including a prospectus/
joint proxy statement satisfying all requirements of applicable state
securities Laws, the Securities Act and the Securities Exchange Act of 1934
and the rules and regulations thereunder (the "Securities Exchange Act").
Such prospectus/joint proxy statement in the form mailed by MFS and WorldCom
to their respective stockholders, together with any and all amendments or
supplements thereto, is herein referred to as the "Prospectus/Proxy
Statement."
(b) MFS will furnish WorldCom with such information concerning MFS
and its subsidiaries as is necessary in order to cause the Prospectus/Proxy
Statement, insofar as it relates to MFS and its subsidiaries, to comply with
applicable Law. None of
<PAGE>15
the information relating to MFS and its subsidiaries supplied by MFS for
inclusion in the Prospectus/Proxy Statement will be false or misleading with
respect to any material fact or will omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. MFS
agrees promptly to advise WorldCom if, at any time prior to the respective
meetings of the stockholders of MFS or WorldCom referenced herein, any
information provided by it in the Prospectus/Proxy Statement is or becomes
incorrect or incomplete in any material respect and to provide WorldCom with
the information needed to correct such inaccuracy or omission. MFS will
furnish WorldCom with such supplemental information as may be necessary in
order to cause the Prospectus/Proxy Statement, insofar as it relates to MFS
and its subsidiaries, to comply with applicable Law after the mailing thereof
to the stockholders of MFS or WorldCom.
(c) WorldCom will furnish MFS with such information concerning
WorldCom and its subsidiaries as is necessary in order to cause the
Prospectus/Proxy Statement, insofar as it relates to WorldCom and its
subsidiaries, to comply with applicable Law. None of the information relating
to WorldCom and its subsidiaries supplied by WorldCom for inclusion in the
Prospectus/Proxy Statement will be false or misleading with respect to any
material fact or will omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. WorldCom agrees
promptly to advise MFS if, at any time prior to the respective meetings of
stockholders of MFS or WorldCom referenced herein, any information provided by
it in the Prospectus/Proxy Statement is or becomes incorrect or incomplete in
any material respect and to provide MFS with the information needed to correct
such inaccuracy or omission. WorldCom will furnish MFS with such supplemental
information as may be necessary in order to cause the Prospectus/Proxy
Statement, insofar as it relates to WorldCom and its subsidiaries, to comply
with applicable Law after the mailing thereof to the stockholders of MFS or
WorldCom.
(d) MFS and WorldCom agree to cooperate in making any preliminary
filings of the Prospectus/Proxy Statement with the SEC, as promptly as
practicable, pursuant to Rule 14a-6 under the Securities Exchange Act.
(e) WorldCom will file the Registration Statement with the SEC and
appropriate materials with applicable state securities agencies as promptly as
practicable and will use all reasonable efforts to cause the Registration
Statement to become effective under the Securities Act and all such state
filed materials to comply with applicable state securities Laws. MFS
authorizes WorldCom to utilize in the Registration Statement and in all such
state filed materials, the information concerning MFS
<PAGE>16
and its subsidiaries provided to WorldCom in connection with, or contained in,
the Prospectus/Proxy Statement. WorldCom promptly will advise MFS when the
Registration Statement has become effective and of any supplements or
amendments thereto, and WorldCom will furnish MFS with copies of all such
documents. Except for the Prospectus/Joint Proxy or the preliminary
prospectus/joint proxy, neither WorldCom nor MFS shall distribute any written
material that might constitute a "prospectus" relating to the Merger, the MFS
Proposals or the WorldCom Proposals within the meaning of the Securities Act
or any applicable state securities Law without the prior written consent of
WorldCom.
1.12 Tax-Free Reorganization. The parties intend that the Merger
qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder (the
"Code"). None of the parties will knowingly take any action that would cause
the Merger to fail to qualify as a reorganization within the meaning of
Section 368(a) of the Code.
1.13 Additional Actions. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills
of sale, assignments, assurances or any other actions or things are necessary
or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of Acquisition Subsidiary or MFS or otherwise to
carry out this Agreement, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of Acquisition Subsidiary or MFS, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of
Acquisition Subsidiary or MFS, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out this Agreement.
1.14 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of MFS Series B Preferred held by a holder who has
demanded and perfected his demand for appraisal of his shares of Series B
Preferred in accordance with Section 262 of the Delaware Code and as of the
Effective Time has neither effectively withdrawn nor lost his right to such
appraisal (the "Dissenting Shares"), shall not be converted into or represent
a right to receive the Series B Convertible Preferred Stock of WorldCom
pursuant to Section 1.3 hereof, but the holder thereof shall be entitled to
only such rights as are granted by the Delaware Code.
<PAGE>17
(b) Notwithstanding the provisions of subsection (a) of this
Section 1.14, if any holder of shares of Series B Preferred who demands
appraisal of such shares under the Delaware Code shall effectively withdraw or
lose (through failure to perfect or otherwise) his right to appraisal, then as
of the Effective Time or the occurrence of such event, whichever later occurs,
such holder's shares of Series B Preferred shall automatically be converted
into and represent only the right to receive the Series B Convertible
Preferred Stock of WorldCom pursuant to Section 1.3 hereof, without any
interest thereon, upon surrender of the certificate or certificates
representing such shares of Series B Preferred.
(c) MFS shall give WorldCom (i) prompt notice of any written
demands for appraisal or payment of the fair value of any shares of Series B
Preferred, withdrawals of such demands, and any other instruments served
pursuant to the Delaware Code received by MFS and (ii) the opportunity to
direct all negotiations and proceedings with respect to demands for appraisal
under the Delaware Code. MFS shall not voluntarily make any payment with
respect to any demands for appraisal and shall not, except with the prior
written consent of WorldCom, settle or offer to settle any such demands. All
payments made to holders of Dissenting Shares shall be made by MFS. No funds
will be provided to MFS, directly or indirectly, by WorldCom or Acquisition
Subsidiary nor will WorldCom or Acquisition Subsidiary reimburse MFS, directly
or indirectly, for these payments.
1.15 Alternative Structure. Notwithstanding anything to the
contrary herein, the parties agree that the structure of the Merger as
provided herein may, by mutual agreement of MFS and WorldCom, be modified such
that, in lieu of Acquisition Subsidiary merging with and into MFS, MFS may
merge with and into WorldCom (the "Alternative Structure"), provided the
Alternative Structure (i) provides for equivalent value of consideration
(which in the case of securities, shall be freely tradeable, subject to Rule
145 promulgated under the Securities Act) for, and entails no adverse tax
consequences to, MFS's stockholders or holders of options or warrants for MFS
Shares or MFS Outperformance Options, (ii) would have no materially adverse
tax, accounting or other financial consequences for MFS, MFS's stockholders or
holders of options or warrants for MFS Shares or MFS Outperformance Options
(including without limitation an adverse effect with respect to any change in
control provisions contained therein), and (iii) would not result in any
material delay in consummation of the Merger as modified. In addition, MFS
agrees to cooperate with WorldCom in considering structures for the Merger
other than the Alternative Structure which will be implemented at the request
of WorldCom, but only with the consent of MFS, which consent shall not be
unreasonably withheld; provided, however, that in determining whether to
consent to structures other than the Alternative Structure, consent will not
<PAGE>18
be considered to be unreasonably withheld if the decision to withhold consent
is determined by considering the factors referred to in clauses (i), (ii) and
(iii) above. In the event WorldCom and MFS agree to implement the Alternative
Structure or another structure as contemplated by this Section 1.15, the
parties agree to execute an appropriate amendment to this Agreement (including
representations, warranties, covenants and other pertinent provisions to the
extent appropriate in light of the Alternative Structure or other structure)
providing for such Alternative Structure or other structure.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND CERTAIN
COVENANTS OF MFS
MFS represents, warrants and/or covenants to and with WorldCom as
follows:
2.1 Organization and Good Standing. MFS and each of the MFS
Subsidiaries is a corporation or partnership duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation
or organization and has all requisite corporate or partnership power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted. MFS and each of the MFS Subsidiaries is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the character of the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not have a material adverse effect on the business, assets
(including, but not limited to, intangible assets), prospects, condition
(financial or otherwise), properties (including, but not limited to,
intangible properties), liabilities or the results of operations of MFS and
its subsidiaries taken as a whole ("MFS Material Adverse Effect").
Schedule 2.1 attached hereto contains a complete and accurate list of the
jurisdictions of incorporation or organization and qualification or license of
MFS and the MFS Subsidiaries. MFS has heretofore made available to WorldCom
accurate and complete copies of the Certificate of Incorporation and Bylaws,
as currently in effect, of MFS. For purposes of this Agreement, the term "MFS
Subsidiary" shall mean any "Significant Subsidiary" (as such term is defined
in Rule 1-02 of Regulation S-X of the SEC) of MFS.
2.2 Capitalization. As of the date hereof, the authorized capital
stock of MFS consists of (a) 400,000,000 shares of MFS Common Stock, and
(b) 25,000,000 shares of preferred stock, as to which 95,000 shares have been
designated as Series A 8% Cumulative Convertible Preferred Stock, 15,000,000
shares have been designated as Series B Convertible Preferred
<PAGE>19
Stock and 75,000 shares have been designated as Series C Junior Participating
Preferred Stock (collectively, the "MFS Preferred Stock" and, separately, the
"Series A Preferred," "Series B Preferred," and "Series C Preferred,"
respectively). As of August 23, 1996, (a) 220,869,715 shares of MFS Common
Stock were issued and outstanding, (b) no shares of MFS Common Stock were
issued and held in the treasury of MFS, and (c) 94,492 shares of Series A
Preferred, 15,000,000 shares of Series B Preferred and no shares of Series C
Preferred were issued and outstanding. No other capital stock of MFS is
authorized or issued. All issued and outstanding shares of the MFS Common
Stock and MFS Preferred Stock are duly authorized, validly issued, fully paid
and non-assessable and were issued free of preemptive rights and in compliance
with applicable securities Laws. Except as set forth in the MFS Securities
Filings (as hereinafter defined) or on Schedule 2.2 attached hereto and as
otherwise contemplated by this Agreement, as of the date hereof there are no
outstanding rights, subscriptions, warrants, puts, calls, unsatisfied
preemptive rights, options or other agreements of any kind relating to any of
the outstanding, authorized but unissued, unauthorized or treasury shares of
the capital stock or any other security of MFS, and there is no authorized or
outstanding security of any kind convertible into or exchangeable for any such
capital stock or other security. Except as disclosed in the MFS Securities
Filings, there are no restrictions upon the transfer of or otherwise
pertaining to the securities (including, but not limited to, the ability to
pay dividends thereon) or retained earnings of MFS and the MFS Subsidiaries or
the ownership thereof other than those, if any, described on Schedule 2.2
attached hereto or those imposed by the Securities Act, the Securities
Exchange Act, applicable state securities Laws or applicable corporate Law.
2.3 Subsidiaries. Schedule 2.3 attached hereto sets forth the name
and jurisdiction of incorporation or organization of each MFS Subsidiary, each
of which is wholly owned by MFS except as otherwise indicated on said Schedule
2.3. All of the capital stock and other interests of the MFS Subsidiaries so
held by MFS are owned by it or a MFS Subsidiary as indicated on said
Schedule 2.3, free and clear of any claim, lien, encumbrance, security
interest or agreement with respect thereto. All of the outstanding shares of
capital stock in each of the MFS Subsidiaries directly or indirectly held by
MFS are duly authorized, validly issued, fully paid and non-assessable and
were issued free of preemptive rights and in compliance with applicable Laws.
Except as set forth on Schedule 2.3 attached hereto, there are no irrevocable
proxies or similar obligations with respect to such capital stock of the MFS
Subsidiaries held by MFS and no equity securities or other interests of any of
the MFS Subsidiaries are or may become required to be issued or purchased by
reason of any options, warrants, rights to subscribe to, puts, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or
<PAGE>20
exchangeable for, shares of any capital stock of any MFS Subsidiary, and there
are no contracts, commitments, understandings or arrangements by which any MFS
Subsidiary is bound to issue additional shares of its capital stock, or
options, warrants or rights to purchase or acquire any additional shares of
its capital stock or securities convertible into or exchangeable for such
shares.
2.4 Authorization; Binding Agreement. MFS has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the other agreements and documents referred to herein to
which MFS is or will be a party or a signatory (the "MFS Ancillary
Agreements") and the consummation of the transactions contemplated hereby and
thereby, including, but not limited to, the Merger have been duly and validly
authorized by MFS's Board of Directors and no other corporate proceedings on
the part of MFS or any MFS Subsidiary are necessary to authorize the execution
and delivery of this Agreement and the MFS Ancillary Agreements or to
consummate the transactions contemplated hereby or thereby (other than the
adoption of this Agreement by the stockholders of MFS in accordance with the
Delaware Code and the Certificate of Incorporation and Bylaws of MFS). This
Agreement has been duly and validly executed and delivered by MFS and
constitutes, and upon execution and delivery thereof as contemplated by this
Agreement, the MFS Ancillary Agreements will constitute, the legal, valid and
binding agreements of MFS, enforceable against MFS in accordance with its and
their respective terms, except to the extent that enforceability thereof may
be limited by applicable bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and by
principles of equity regarding the availability of remedies ("Enforceability
Exceptions").
2.5 Governmental Approvals. No consent, approval, waiver or
authorization of, notice to or declaration or filing with ("Consent") any
nation or government, any state or other political subdivision thereof, any
entity, authority or body exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
including, without limitation, any governmental or regulatory authority,
agency, department, board, commission, administration or instrumentality, any
court, tribunal or arbitrator and any self-regulatory organization
("Governmental Authority") on the part of MFS or any of the MFS Subsidiaries
is required in connection with the execution or delivery by MFS of this
Agreement and the MFS Ancillary Agreements or the consummation by MFS of the
transactions contemplated hereby or thereby other than (i) the filing of the
Certificate of Merger with the Secretary of State of Delaware in accordance
with the Delaware Code, (ii) filings with the SEC, state securities laws
administrators and the National Association of Securities Dealers, Inc.
<PAGE>21
("NASD"), (iii) Consents from the Federal Communications Commission, state
public service or utility commissions (or comparable state Governmental
Authorities) or foreign telephone administrations, (iv) filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations promulgated thereunder (the "HSR Act"), (v) such filings
as may be required in any jurisdiction where MFS is qualified or authorized to
do business as a foreign corporation in order to maintain such qualification
or authorization, and (vi) those Consents that, if they were not obtained or
made, do not or would not have a MFS Material Adverse Effect or materially and
adversely affect the ability of MFS to perform its obligations as set forth in
this Agreement or to consummate the transactions contemplated hereby.
2.6 No Violations. The execution and delivery of this Agreement
and the MFS Ancillary Agreements, the consummation of the transactions
contemplated hereby and thereby and compliance by MFS with any of the
provisions hereof or thereof will not (i) conflict with or result in any
breach of any provision of the Certificate and/or Articles of Incorporation or
Bylaws or other governing instruments of MFS or any of the MFS Subsidiaries,
(ii) except as set forth on Schedule 2.6 attached hereto, require any Consent
under or result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration or augment the performance required)
under any of the terms, conditions or provisions of any MFS Material Contract
(as hereinafter defined), (iii) result in the creation or imposition of any
lien or encumbrance of any kind upon any of the assets of MFS or any MFS
Subsidiary, or (iv) subject to obtaining the Consents from Governmental
Authorities referred to in Section 2.5, above, contravene any applicable
provision of any constitution, treaty, statute, law, code, rule, regulation,
ordinance, policy or order of any Governmental Authority or other matters
having the force of law including, but not limited to, any orders, decisions,
injunctions, judgments, awards and decrees of or agreements with any court or
other Governmental Authority ("Law") currently in effect to which MFS or any
MFS Subsidiary or its or any of their respective assets or properties are
subject, except in the case of clauses (ii), (iii) and (iv), above, for any
deviations from the foregoing which do not or would not have a MFS Material
Adverse Effect.
2.7 Securities Filings and Litigation. MFS has made available to
WorldCom true and complete copies of (i) its Annual Reports on Form 10-K, as
amended, for the years ended December 31, 1993, 1994 and 1995, as filed with
the SEC, (ii) its proxy statements relating to all of the meetings of
stockholders (whether annual or special) of MFS since May 26, 1993, as filed
with the SEC, and (iii) all other reports, statements and registration
statements and amendments thereto (including, without limitation, Quarterly
Reports on Form 10-Q and Current
<PAGE>22
Reports on Form 8-K, as amended) filed by MFS with the SEC since May 26, 1993.
The reports and statements set forth in clauses (i) through (iii), above, and
those subsequently provided or required to be provided pursuant to this
Section, are referred to collectively herein as the "MFS Securities Filings."
As of their respective dates, or as of the date of the last amendment thereof,
if amended after filing, none of the MFS Securities Filings (including all
schedules thereto and disclosure documents incorporated by reference therein),
contained or, as to MFS Securities Filings subsequent to the date hereof, will
contain any untrue statement of a material fact or omitted or, as to MFS
Securities Filings subsequent to the date hereof, will omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each of the MFS Securities Filings at the time of filing or
as of the date of the last amendment thereof, if amended after filing,
complied or, as to MFS Securities Filings subsequent to the date hereof, will
comply in all material respects with the Securities Exchange Act or the
Securities Act, as applicable. There is no action, cause of action, claim,
demand, suit, proceeding, citation, summons, subpoena, inquiry or
investigation of any nature, civil, criminal, regulatory or otherwise, in law
or in equity, by or before any court, tribunal, arbitrator or other
Governmental Authority ("Litigation") pending or, to the knowledge of MFS,
threatened against MFS or any of its subsidiaries, any officer, director,
employee or agent thereof, in his or her capacity as such, or as a fiduciary
with respect to any MFS Benefit Plan, as hereinafter defined, or otherwise
relating to MFS or any of its subsidiaries or the securities of any of them,
or any properties or rights of MFS or any of its subsidiaries or any MFS
Benefit Plan which is required to be described in any MFS Securities Filing
that is not so described. No event has occurred as a consequence of which MFS
would be required to file a Current Report on Form 8-K pursuant to the
requirements of the Securities Exchange Act as to which such a report has not
been timely filed with the SEC. Any reports, statements and registration
statements and amendments thereof (including, without limitation, Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
amended) filed by MFS with the SEC after the date hereof shall be provided to
WorldCom on the date of such filing.
2.8 MFS Financial Statements. The audited consolidated financial
statements and unaudited interim financial statements of MFS included in the
MFS Securities Filings (the "MFS Financial Statements") have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis (except as may be indicated therein or in the notes thereto)
and present fairly, in all material respects, the financial position of MFS
and its subsidiaries as at the dates thereof and the results of their
operations and cash flows for the periods then ended subject, in the case of
the unaudited
<PAGE>23
interim financial statements, to normal year-end audit adjustments, any other
adjustments described therein and the fact that certain information and notes
have been condensed or omitted in accordance with the Securities Exchange Act.
2.9 Absence of Certain Changes or Events. Except as set forth in
the MFS Securities Filings or in Schedule 2.9 attached hereto, since
December 31, 1995, through the date of this Agreement, there has not been:
(i) any event, occurrence, fact, condition, change, development or effect
("Event") that has had or could reasonably be expected to have a MFS Material
Adverse Effect; or (ii) any declaration, payment or setting aside for payment
of any dividend (except to MFS or a MFS Subsidiary and dividends required
under the present terms of the MFS Preferred Stock) or other distribution or
any redemption, purchase or other acquisition of any shares of capital stock
or securities of MFS by or from MFS.
2.10 Compliance with Laws. The business of MFS and each of its
subsidiaries has been operated in compliance with all Laws and all tariffs,
rules and regulations applicable to the regulation of the provision of
communications services including, but not limited to, information service
providers and competitive local exchange, exchange access, inter-exchange and
international telecommunications services, except for any instances of
non-compliance which do not and will not have a MFS Material Adverse Effect.
Without limiting the generality of the foregoing, neither MFS nor any of its
subsidiaries has engaged in carrying transit or indirect traffic in violation
of applicable Laws, tariffs, rules and regulations in any jurisdiction,
foreign or domestic, which violation could reasonably be expected to have a
MFS Material Adverse Effect.
2.11 Permits. (i) MFS and its subsidiaries have all permits,
certificates, licenses, approvals, tariffs and other authorizations required
in connection with the operation of their business (collectively, "MFS
Permits"), (ii) neither MFS nor any of its subsidiaries is in violation of any
MFS Permit, and (iii) no proceedings are pending or, to the knowledge of MFS,
threatened, to revoke or limit any MFS Permit, except, in each case, those the
absence or violation of which do not and will not have a MFS Material Adverse
Effect.
2.12 Finders and Investment Bankers. Neither MFS nor any of its
officers or directors has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby other than pursuant to the agreement
with Gleacher NatWest Inc., an accurate and complete copy of which agreement
has been provided to WorldCom.
2.13 Contracts. Except as set forth in Schedule 2.13 attached
hereto, neither MFS nor any of its subsidiaries is a
<PAGE>24
party or is subject to any material note, bond, mortgage, indenture, contract,
lease, license, agreement, understanding, instrument, bid or proposal that is
required to be described in or filed as an exhibit to any MFS Securities
Filing ("MFS Material Contract") that is not so described in or filed as
required by the Securities Act or the Securities Exchange Act, as the case may
be. For purposes of this Section 2.13 and Section 3.13 below, a note, bond,
mortgage, indenture, contract, lease, license, agreement, understanding,
instrument, bid or proposal shall be considered material if it is required to
be described in or filed as an exhibit to any document filed under the
Securities Act or the Securities Exchange Act, as the case may be. MFS has
made available to WorldCom true and accurate copies of the MFS Material
Contracts. All such MFS Material Contracts are valid and binding and are in
full force and effect and enforceable against MFS or such subsidiary in
accordance with their respective terms, subject to the Enforceability
Exceptions. Except as set forth in Schedule 2.6 attached hereto, (i) no
Consent of any person is needed in order that each such MFS Material Contract
shall continue in full force and effect in accordance with its terms without
penalty, acceleration or rights of early termination by reason of the
consummation of the transactions contemplated by this Agreement, except for
Consents the absence of which would not have a MFS Material Adverse Effect,
and (ii) neither MFS nor any of its subsidiaries is in violation or breach of
or default under any such MFS Material Contract; nor to MFS's knowledge is any
other party to any such MFS Material Contract in violation or breach of or
default under any such MFS Material Contract in each case where such violation
or breach would have a MFS Material Adverse Effect.
2.14 Employee Benefit Plans. Except as set forth in
Schedule 2.14(a) attached hereto, there are no material Benefit Plans (as
defined below) maintained or contributed to by MFS or any of its subsidiaries
("MFS Benefit Plan"). A "Benefit Plan" shall include (i) an employee benefit
plan as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended, together with all regulations thereunder (" ERISA"), even
if, because of some other provision of ERISA, such plan is not subject to any
or all of ERISA's provisions, and (ii) whether or not described in the
preceding clause, any pension, profit sharing, stock bonus, deferred or
supplemental compensation, retirement, thrift, stock purchase or stock option
plan, or any other compensation, welfare, fringe benefit or retirement plan,
program, policy, course of conduct, understanding or arrangement of any kind
whatsoever, providing for benefits for or the welfare of any or all of the
current or former employees or agents of MFS or any of its subsidiaries or
their beneficiaries or dependents; provided that Benefit Plans shall not
include any multiemployer plan, as defined in Section 3(37) of ERISA (a
"Multiemployer Plan").
<PAGE>25
No MFS Benefit Plan is a defined benefit pension plan subject to
Title IV of ERISA or Section 412 of the Code. Each of the MFS Benefit Plans
has been maintained in material compliance with its terms and all applicable
Law, except where the failure to do so would not be reasonably likely to
result in a MFS Material Adverse Effect.
Neither MFS nor any of its subsidiaries contributes to, or has any
outstanding liability with respect to, any Multiemployer Plan.
Except as set forth in Schedule 2.14(b) attached hereto and except
as provided in Section 5.12(b), the consummation of the transactions
contemplated by this Agreement will not (i) entitle any individual to
severance pay, or (ii) accelerate the time of payment or vesting of benefits
or increase the amount of compensation due to any individual.
2.15 Taxes and Returns. (a) Except as disclosed in Schedule 2.15
attached hereto, MFS and each of its subsidiaries has timely filed, or caused
to be timely filed all material Tax Returns required to be filed by it, and
has paid, collected or withheld, or caused to be paid, collected or withheld,
all material amounts of Taxes required to be paid, collected or withheld,
other than such Taxes for which adequate reserves in the MFS Financial
Statements have been established or which are being contested in good faith.
Except as set forth in Schedule 2.15 attached hereto, there are no claims or
assessments pending against MFS or any of its subsidiaries for any alleged
deficiency in any Tax, and MFS has not been notified in writing of any
proposed Tax claims or assessments against MFS or any of its subsidiaries
(other than in each case, claims or assessments for which adequate reserves in
the MFS Financial Statements have been established or which are being
contested in good faith or are immaterial in amount). Except as set forth in
Schedule 2.15 attached hereto, neither MFS nor any of its subsidiaries has any
waivers or extensions of any applicable statute of limitations to assess any
material amount of Taxes. Except as set forth in Schedule 2.15 attached
hereto, there are no outstanding requests by MFS or any of its subsidiaries
for any extension of time within which to file any material Tax Return or
within which to pay any material amounts of Taxes shown to be due on any
return.
(b) To the best knowledge of MFS, there are no liens for material
amounts of Taxes on the assets of MFS or any of its subsidiaries except for
statutory liens for current Taxes not yet due and payable.
(c) For purposes of this Agreement, the term "Tax" shall mean any
federal, state, local, foreign or provincial income, gross receipts, property,
sales, use, license, excise, franchise, employment, payroll, alternative or
added minimum, ad valorem, transfer or excise tax, or any other tax, custom,
duty,
<PAGE>26
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty imposed by any Governmental Authority.
The term "Tax Return" shall mean a report, return or other information
(including any attached schedules or any amendments to such report, return or
other information) required to be supplied to or filed with a governmental
entity with respect to any Tax, including an information return, claim for
refund, amended return or declaration or estimated Tax.
2.16 Fairness Opinion. MFS's Board of Directors has received from
its financial advisors, Gleacher NatWest Inc., a written opinion addressed to
it for inclusion in the Prospectus/Proxy Statement to the effect that the
Exchange Ratio and the WorldCom Preferred Stock is fair to the holders of the
MFS Shares and the MFS Preferred Shares, respectively, from a financial point
of view.
2.17 Takeover Statutes. Assuming WorldCom and its "associates" and
"affiliates" (as defined in Section 203 of the Delaware Code) collectively
beneficially own and have beneficially owned at all times during the three
year period prior to the date hereof less than fifteen percent (15%) of the
MFS Shares outstanding (other than MFS Shares issuable pursuant to the MFS
Option Agreement), Section 203 of the Delaware Code is, and shall be,
inapplicable to the Merger, this Agreement, the MFS Option Agreement and the
transactions contemplated hereby and thereby.
2.18 MFS Rights Plan. Under the Rights Agreement between MFS and
Continental Stock Transfer & Trust Company, as Rights Agent, dated as of
September 30, 1995 and as amended as of August 24, 1996 (the "MFS Rights
Agreement"), WorldCom will not become an "Acquiring Person", no "Stock
Acquisition Date" or "Distribution Date" (as such terms are defined in the MFS
Rights Agreement) will occur, and the holders of any MFS Rights will not be
entitled to receive any benefits under the MFS Rights Agreement as a result of
the approval, execution or delivery of this Agreement, the MFS Option
Agreement or the consummation of the transactions contemplated hereby and
thereby.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND
CERTAIN COVENANTS OF WORLDCOM
WorldCom represents, warrants and/or covenants to and with MFS as
follows:
3.1 Organization and Good Standing. WorldCom, Acquisition
Subsidiary and each of the WorldCom Subsidiaries is a corporation or
partnership duly organized, validly existing and in good standing under the
laws of the jurisdiction of its
<PAGE>27
incorporation or organization and has all requisite corporate or partnership
power and authority to own, lease and operate its properties and to carry on
its business as now being conducted. WorldCom and each of the WorldCom
Subsidiaries is duly qualified or licensed and in good standing to do business
in each jurisdiction in which the character of the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not have a material adverse
effect on the business, assets (including, but not limited to, intangible
assets), prospects, condition (financial or otherwise), properties (including,
but not limited to, intangible properties), liabilities or the results of
operations of WorldCom and its subsidiaries taken as a whole ("WorldCom
Material Adverse Effect"). WorldCom has heretofore made available to MFS
accurate and complete copies of the Articles of Incorporation and Bylaws, as
currently in effect, of WorldCom. For purposes of this Agreement, the term
"WorldCom Subsidiary" shall mean any "Significant Subsidiary" (as such term is
defined in Rule 1-02 of the Registration S-X of the SEC) of WorldCom.
3.2 Capitalization. As of the date hereof, the authorized capital
stock of WorldCom consists of 750,000,000 shares of WorldCom Stock, and
50,000,000 shares of preferred stock, par value $.01 per share ("WorldCom
Preferred Shares"). As of August 23, 1996, (a) 408,161,493 shares of WorldCom
Stock were issued and outstanding, and (b) no WorldCom Preferred Shares were
outstanding. No other capital stock of WorldCom is authorized or issued. All
issued and outstanding shares of the WorldCom Stock are duly authorized,
validly issued, fully paid and non-assessable and were issued free of
preemptive rights and in compliance with applicable securities Laws. Except
as set forth in the WorldCom Securities Filings (as hereinafter defined) or on
Schedule 3.2 attached hereto, or as otherwise contemplated by this Agreement,
as of the date hereof there are no outstanding rights, subscriptions,
warrants, puts, calls, unsatisfied preemptive rights, options or other
agreements of any kind relating to any of the outstanding, authorized but
unissued, unauthorized or treasury shares of the capital stock or any other
security of WorldCom, and there is no authorized or outstanding security of
any kind convertible into or exchangeable for any such capital stock or other
security. Except as disclosed in the WorldCom Securities Filings, there are
no restrictions upon the transfer of or otherwise pertaining to the securities
(including, but not limited to, the ability to pay dividends thereon) or
retained earnings of WorldCom and the WorldCom Subsidiaries or the ownership
thereof other than those imposed by the Securities Act, the Securities
Exchange Act, applicable state securities Laws or applicable corporate Law.
3.3 Subsidiaries. Schedule 3.3 attached hereto sets forth the name
and jurisdiction of incorporation or organization
<PAGE>28
of each WorldCom Subsidiary, each of which is wholly owned by WorldCom except
as otherwise indicated on said Schedule 3.3. All of the capital stock and
other interests of the WorldCom Subsidiaries so held by WorldCom are owned by
it or a WorldCom Subsidiary as indicated on said Schedule 3.3, free and clear
of any claim, lien, encumbrance, security interest or agreement with respect
thereto. All of the outstanding shares of capital stock in each of the
WorldCom Subsidiaries held by WorldCom are duly authorized, validly issued,
fully paid and non-assessable and were issued free of preemptive rights and in
compliance with applicable Laws. Except as set forth on Schedule 3.3 attached
hereto, there are no irrevocable proxies or similar obligations with respect
to such capital stock of the WorldCom Subsidiaries held by WorldCom and no
equity securities or other interests of any of the WorldCom Subsidiaries are
or may become required to be issued or purchased by reason of any options,
warrants, rights to subscribe to, puts, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of any capital stock of any WorldCom Subsidiary, and
there are no contracts, commitments, understandings or arrangements by which
any WorldCom Subsidiary is bound to issue additional shares of its capital
stock, or options, warrants or rights to purchase or acquire any additional
shares of its capital stock or securities convertible into or exchangeable for
such shares.
3.4 Authorization; Binding Agreement. WorldCom and Acquisition
Subsidiary have all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the other agreements and
documents referred to herein to which WorldCom or Acquisition Subsidiary is or
will be a party or a signatory (the "WorldCom Ancillary Agreements") and the
consummation of the transactions contemplated hereby and thereby, including,
but not limited to, the Merger have been duly and validly authorized by the
respective Boards of Directors of WorldCom and Acquisition Subsidiary, as
appropriate, and no other corporate proceedings on the part of WorldCom,
Acquisition Subsidiary or any WorldCom Subsidiary are necessary to authorize
the execution and delivery of this Agreement and the WorldCom Ancillary
Agreements or to consummate the transactions contemplated hereby or thereby
(other than the requisite approval by the WorldCom shareholders of the
WorldCom Proposals and the sole shareholder of Acquisition Subsidiary of this
Agreement and the Merger). This Agreement has been duly and validly executed
and delivered by each of WorldCom and Acquisition Subsidiary and constitutes,
and upon execution and delivery thereof as contemplated by this Agreement, the
WorldCom Ancillary Agreements will constitute, the legal, valid and binding
agreements of WorldCom and Acquisition Subsidiary, enforceable against each of
WorldCom and Acquisition Subsidiary in accordance with its and their
respective terms, subject to the Enforceability Exceptions.
<PAGE>29
3.5 Governmental Approvals. No Consent from or with any
Governmental Authority on the part of WorldCom or any of the WorldCom
Subsidiaries is required in connection with the execution or delivery by
WorldCom of this Agreement and the WorldCom Ancillary Agreements or the
consummation by WorldCom of the transactions contemplated hereby or thereby
other than (i) filings with the SEC, state securities laws administrators, the
NASD and applicable Georgia Governmental Authorities, (ii) Consents from the
Federal Communications Commission, state public service or utility commissions
(or comparable state Governmental Authorities) or foreign telephone
administrations, (iii) filings under the HSR Act, and (iv) those Consents
that, if they were not obtained or made, do not or would not have a WorldCom
Material Adverse Effect or materially and adversely affect the ability of
WorldCom to perform its obligations set forth herein or to consummate the
transactions contemplated hereby.
3.6 No Violations. The execution and delivery of this Agreement
and the WorldCom Ancillary Agreements, the consummation of the transactions
contemplated hereby and thereby and compliance by WorldCom with any of the
provisions hereof or thereof will not (i) conflict with or result in any
breach of any provision of the Certificate and/or Articles of Incorporation or
Bylaws or other governing instruments of WorldCom or any of the WorldCom
Subsidiaries, (ii) except for compliance with the requirements under
WorldCom's Amended and Restated Credit Agreement dated as of June 28, 1996
(the "WorldCom Credit Agreement"), require any Consent under or result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination,
cancellation or acceleration or augment the performance required) under any of
the terms, conditions or provisions of any WorldCom Material Contract (as
hereinafter defined), (iii) result in the creation or imposition of any lien
or encumbrance of any kind upon any of the assets of WorldCom or any WorldCom
Subsidiary, or (iv) subject to obtaining the Consents from Governmental
Authorities referred to in Section 3.5, above, contravene any Law currently in
effect to which WorldCom or any WorldCom Subsidiary or its or any of their
respective assets or properties are subject, except in the case of clauses
(ii), (iii) and (iv), above, for any deviations from the foregoing which do
not or would not have a WorldCom Material Adverse Effect.
3.7 Securities Filings and Litigation. WorldCom has made available
to MFS true and complete copies of (i) its Annual or Transition Reports on
Form 10-K, as amended, for the years ended December 31, 1993, 1994 and 1995,
or periods included therein, as filed with the SEC, (ii) its proxy statements
relating to all of the meetings of shareholders (whether annual or special) of
WorldCom since January 1, 1993, as filed with the SEC, and (iii) all other
reports, statements and registration
<PAGE>30
statements and amendments thereto (including, without limitation, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, as amended) filed by
WorldCom with the SEC since January 1, 1993. The reports and statements set
forth in clauses (i) through (iii), above, and those subsequently provided or
required to be provided pursuant to this Section, are referred to collectively
as the "WorldCom Securities Filings"). As of their respective dates, or as of
the date of the last amendment thereof, if amended after filing, none of the
WorldCom Securities Filings (including all schedules thereto and disclosure
documents incorporated by reference therein), contained or, as to WorldCom
Securities Filings subsequent to the date hereof, will contain any untrue
statement of a material fact or omitted or, as to WorldCom Securities Filings
subsequent to the date hereof, will omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the
WorldCom Securities Filings at the time of filing or as of the date of the
last amendment thereof, if amended after filing, complied or, as to WorldCom
Securities Filings subsequent to the date hereof, will comply in all material
respects with the Securities Exchange Act or the Securities Act, as
applicable. There is no Litigation pending or, to the knowledge of WorldCom,
threatened against WorldCom or any of its subsidiaries, any officer, director,
employee or agent thereof, in his or her capacity as such, or as a fiduciary
with respect to any WorldCom Benefit Plan, as hereinafter defined, or
otherwise relating to WorldCom or any of its subsidiaries or the securities of
any of them, or any properties or rights of WorldCom or any of its
subsidiaries or any WorldCom Benefit Plan which is required to be described in
any WorldCom Securities Filing that is not so described. No event has
occurred as a consequence of which WorldCom would be required to file a
Current Report on Form 8-K pursuant to the requirements of the Securities
Exchange Act as to which such a report has not been timely filed with the SEC.
Any reports, statements and registration statements and amendments thereof
(including, without limitation, Reports on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K, as amended) filed by WorldCom with
the SEC after the date hereof shall be provided to MFS on the date of such
filing.
3.8 WorldCom Financial Statements. The audited consolidated
financial statements and unaudited interim financial statements of WorldCom
included in the WorldCom Securities Filings (the "WorldCom Financial
Statements") have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be
indicated therein or in the notes thereto) and present fairly, in all material
respects, the financial position of WorldCom and its subsidiaries as at the
dates thereof and the results of their operations and cash flows for the
periods then ended subject, in the case of the unaudited interim financial
statements, to normal year-end audit adjustments, any other adjustments
described therein and the fact
<PAGE>31
that certain information and notes have been condensed or omitted in
accordance with the Securities Exchange Act.
3.9 Absence of Certain Changes or Events. Except as set forth in
the WorldCom Securities Filings and except for the adoption of the WorldCom
Rights Agreement, since December 31, 1995, through the date of this Agreement,
there has not been: (i) any Event that has had or could reasonably be
expected to have a WorldCom Material Adverse Effect; or (ii) any declaration,
payment or setting aside for payment of any dividend (except to WorldCom or a
WorldCom Subsidiary) or other distribution or any redemption, purchase or
other acquisition of any shares of capital stock or securities of WorldCom by
or from WorldCom.
3.10 Compliance with Laws. The business of WorldCom and each of its
subsidiaries has been operated in compliance with all Laws and all tariffs,
rules and regulations applicable to the regulation of the provision of
communications services including, but not limited to, information service
providers and competitive local exchange, exchange access, inter-exchange and
international telecommunications services, except for any instances of
non-compliance which do not and will not have a WorldCom Material Adverse
Effect. Without limiting the generality of the foregoing, neither WorldCom
nor any of its subsidiaries has engaged in carrying transit or indirect
traffic in violation of applicable Laws, tariffs, rules and regulations in any
jurisdiction, foreign or domestic, which violation could reasonably be
expected to have a WorldCom Material Adverse Effect.
3.11 Permits. (i) WorldCom and its subsidiaries have all permits,
certificates, licenses, approvals, tariffs and other authorizations required
in connection with the operation of their business (collectively, "WorldCom
Permits"), (ii) neither WorldCom nor any of its subsidiaries is in violation
of any WorldCom Permit, and (iii) no proceedings are pending or, to the
knowledge of WorldCom, threatened, to revoke or limit any WorldCom Permit,
except, in each case, those the absence or violation of which do not and will
not have a WorldCom Material Adverse Effect.
3.12 Finders and Investment Bankers. Neither WorldCom nor any of
its officers or directors has employed any broker or finder other than Salomon
Brothers Inc or otherwise incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
hereby.
3.13 Contracts. Neither WorldCom nor any of its subsidiaries is a
party or is subject to any material note, bond, mortgage, indenture, contract,
lease, license, agreement, understanding, instrument, bid or proposal that is
required to be described in or filed as an exhibit to any WorldCom Securities
Filing ("WorldCom Material Contract") that is not so described in
<PAGE>32
or filed as required by the Securities Act or the Securities Exchange Act, as
the case may be. WorldCom has made available to MFS true and accurate copies
of the WorldCom Material Contracts. All such WorldCom Material Contracts are
valid and binding and are in full force and effect and enforceable against
WorldCom or such subsidiary in accordance with their respective terms, subject
to the Enforceability Exceptions. Except as referenced in Section 3.6 above,
(i) no Consent of any person is needed in order that each such WorldCom
Material Contract shall continue in full force and effect in accordance with
its terms without penalty, acceleration or rights of early termination by
reason of the consummation of the transactions contemplated by this Agreement,
except for Consents the absence of which would not have a WorldCom Material
Adverse Effect, and (ii) neither WorldCom nor any of its subsidiaries is in
violation or breach of or default under any such WorldCom Material Contract;
nor to WorldCom's knowledge is any other party to any such WorldCom Material
Contract in violation or breach of or default under any such WorldCom Material
Contract in each case where such violation or breach would have a WorldCom
Material Adverse Effect.
3.14 Employee Benefit Plans. Except as set forth in Schedule 3.14
attached hereto, there are no material Benefit Plans maintained or contributed
to by WorldCom or any of its subsidiaries ("WorldCom Benefit Plan"). No
WorldCom Benefit Plan is a defined benefit pension plan subject to Title IV of
ERISA or Section 412 of the Code. Each of the WorldCom Benefit Plans has been
maintained in material compliance with its terms and all applicable Law,
except where the failure to do so would not be reasonably likely to result in
a WorldCom Material Adverse Effect.
3.15 Taxes and Returns. (a) Except as disclosed in Schedule 3.15
attached hereto, WorldCom and each of its subsidiaries has timely filed, or
caused to be timely filed all material Tax Returns required to be filed by it,
and has paid, collected or withheld, or caused to be paid, collected or
withheld, all material amounts of Taxes required to be paid, collected or
withheld, other than such Taxes for which adequate reserves in the WorldCom
Financial Statements have been established or which are being contested in
good faith. Except as set forth in Schedule 3.15 attached hereto, there are
no claims or assessments pending against WorldCom or any of its subsidiaries
for any alleged deficiency in any Tax, and WorldCom has not been notified in
writing of any proposed Tax claims or assessments against WorldCom or any of
its subsidiaries (other than in each case, claims or assessments for which
adequate reserves in the WorldCom Financial Statements have been established
or which are being contested in good faith or are immaterial in amount).
Except as set forth in Schedule 3.15 attached hereto, neither WorldCom nor any
of its subsidiaries has any waivers or extensions of any applicable statute of
limitations to assess any material amount of Taxes. Except as
<PAGE>33
set forth in Schedule 3.15 attached hereto, there are no outstanding requests
by WorldCom or any of its subsidiaries for any extension of time within which
to file any material Tax Return or within which to pay any material amounts of
Taxes shown to be due on any return.
(b) To the best knowledge of WorldCom, there are no liens for
material amounts of Taxes on the assets of WorldCom or any of its subsidiaries
except for statutory liens for current Taxes not yet due and payable.
3.16 Fairness Opinion. WorldCom's Board of Directors has received
from its financial advisors, Salomon Brothers Inc, a written opinion addressed
to it for inclusion in the Prospectus/ Proxy Statement to the effect that the
Exchange Ratio is fair to the holders of WorldCom Stock from a financial point
of view.
3.17 Takeover Statutes and Charter. Assuming MFS and its
"associates" and "affiliates" (as defined under 14-2-1110 of the Georgia
Business Corporation Code), collectively beneficially own and have
beneficially owned at all times during the three-year period prior to the date
hereof less than 1% of the shares of WorldCom Stock outstanding (other than
shares of WorldCom Stock subject to the WorldCom Option Agreement), Section
14-2-1132 of the Georgia Business Corporation Code is, and shall be
inapplicable to the Merger, the WorldCom Option Agreement and the transactions
contemplated by this Agreement. As a result of the execution of this
Agreement and the WorldCom Option Agreement, MFS is not, and will not be, a
"Related Person" as defined in Article Ten of the Amended and Restated
Certificate of Incorporation of WorldCom.
3.18 WorldCom Rights Plan. Under the Rights Agreement between
WorldCom and The Bank of New York, dated as of the date hereof (the "WorldCom
Rights Agreement"), MFS will not become an "Acquiring Person," no "Share
Acquisition Date" or "Distribution Date" (as such terms are defined in the
WorldCom Rights Agreement) will occur, and the holders of any rights issued
pursuant to the WorldCom Rights Agreement will not be entitled to receive any
benefits under the WorldCom Rights Agreement as a result of the approval,
execution or delivery of this Agreement, the WorldCom Option Agreement or the
consummation of the transactions contemplated hereby and thereby.
ARTICLE IV
ADDITIONAL COVENANTS OF MFS
MFS represents, covenants and agrees as follows:
4.1 Conduct of Business of MFS and MFS Subsidiaries. Except as
expressly contemplated by this Agreement, during the period from the date of
this Agreement to the Effective Time, MFS shall conduct, and it shall cause
its subsidiaries to conduct,
<PAGE>34
its or their businesses in the ordinary course and consistent with past
practice, subject to the limitations contained in this Agreement, and MFS
shall, and it shall cause its subsidiaries to, use its or their reasonable
business efforts to preserve intact its business organization, to keep
available the services of its officers and employees and to maintain
satisfactory relationships with all persons with whom it does business.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement or as otherwise set forth in the MFS
Disclosure Letter (as hereinafter defined), after the date of this Agreement
and prior to the Effective Time, neither MFS nor any of its subsidiaries will,
without the prior written consent of WorldCom:
(i) amend or propose to amend its Certificate or Articles of
Incorporation or Bylaws (or comparable governing instruments) in any material
respect;
(ii) authorize for issuance, issue, grant, sell, pledge,
dispose of or propose to issue, grant, sell, pledge or dispose of any shares
of, or any options, warrants, commitments, subscriptions or rights of any kind
to acquire or sell any shares of, the capital stock or other securities of MFS
or any of its subsidiaries including, but not limited to, any securities
convertible into or exchangeable for shares of stock of any class of MFS or
any of its subsidiaries, except for the issuance of shares of MFS Common Stock
pursuant to the exercise of stock options or warrants or the conversion of
convertible securities outstanding on the date of this Agreement in accordance
with their present terms and except for the grant of employee stock options
and issuance of MFS Common Stock pursuant to the exercise thereof, in the
ordinary course of business consistent with past practice, and except for the
issuance of shares of MFS Common Stock in accordance with the terms of
acquisitions approved by WorldCom; and
(iii) split, combine or reclassify any shares of its capital
stock or declare, pay or set aside any dividend or other distribution (whether
in cash, stock or property or any combination thereof) in respect of its
capital stock, other than dividends or distributions to MFS or a subsidiary of
MFS and dividends required under the present terms of the MFS Preferred Stock,
or directly or indirectly redeem, purchase or otherwise acquire or offer to
acquire any shares of its capital stock or other securities;
(iv) other than as contemplated by its May 6, 1996 business
plans or in the ordinary course of business consistent with past practice, (a)
create, incur or assume any debt or obligations in respect of capital leases,
except refinancings of existing obligations on terms that are no less
favorable to MFS or its subsidiaries than the existing terms; (b) assume,
guarantee, endorse or otherwise become liable or responsible
<PAGE>35
(whether directly, indirectly, contingently or otherwise) for the obligations
of any person; (c) make any capital expenditures or make any loans, advances
or capital contributions to, or investments in, any other person (other than
to a MFS subsidiary and customary travel, relocation or business advances to
employees) made in the ordinary course of business consistent with past
practice; (d) acquire the stock or assets of, or merge or consolidate with,
any other person; (e) voluntarily incur any material liability or obligation
(absolute, accrued, contingent or otherwise); or (f) sell, transfer, mortgage,
pledge or otherwise dispose of, or encumber, or agree to sell, transfer,
mortgage, pledge or otherwise dispose of or encumber, any assets or
properties, real, personal or mixed material to MFS and its subsidiaries taken
as a whole other than to secure debt permitted under (a) of this clause (iv);
(v) increase in any manner the compensation of any of its
officers or employees or enter into, establish, amend or terminate any
employment, consulting, retention, change in control, collective bargaining,
bonus or other incentive compensation, profit sharing, health or other
welfare, stock option or other equity, pension, retirement, vacation,
severance, deferred compensation or other compensation or benefit plan,
policy, agreement, trust, fund or arrangement with, for or in respect of, any
shareholder, officer, director, other employee, agent, consultant or affiliate
other than as required pursuant to the terms of agreements in effect on the
date of this Agreement and such as are in the ordinary course of business
consistent with past practice;
(vi) enter into any lease or amend any lease of real property
other than in the ordinary course of business consistent with past practice;
or
(vii) consent to the transfer of any shares of the Series B
Preferred.
Furthermore, MFS covenants, represents and warrants that from and
after the date of this Agreement, unless WorldCom shall otherwise expressly
consent in writing, MFS shall, and MFS shall cause each of its subsidiaries
to, use its or their reasonable business efforts to comply in all material
respects with all Laws applicable to it or any of its properties, assets or
business and maintain in full force and effect all MFS Permits necessary for,
or otherwise material to, such business.
4.2 Notification of Certain Matters. MFS shall give prompt notice
to WorldCom if any of the following occur after the date of this Agreement:
(i) any notice of, or other communication relating to, a default or Event
which, with notice or lapse of time or both, would become a default under any
MFS Material Contract which could have a MFS Material Adverse Effect;
(ii) receipt of any notice or other communication in writing from
<PAGE>36
any third party alleging that the Consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement,
provided that such Consent would have been required to have been disclosed in
this Agreement; (iii) receipt of any material notice or other communication
from any Governmental Authority (including, but not limited to, the NASD or
any securities exchange) in connection with the transactions contemplated by
this Agreement; (iv) the occurrence of an Event which could have a MFS
Material Adverse Effect; (v) the commencement or threat of any Litigation
involving or affecting MFS or any of its subsidiaries, or any of their
respective properties or assets, or, to its knowledge, any employee, agent,
director or officer, in his or her capacity as such, of MFS or any of its
subsidiaries which, if pending on the date hereof, would have been required to
have been disclosed in this Agreement or which relates to the consummation of
the Merger or any material development in connection with any Litigation
disclosed by MFS in or pursuant to this Agreement or the MFS Securities
Filings; and (vi) the occurrence of any Event that could cause a breach by MFS
of any provision of this Agreement or a MFS Ancillary Agreement, including
such a breach that could occur if such Event had taken place on or prior to
the date of this Agreement.
4.3 Access and Information. Between the date of this Agreement and
the Effective Time, MFS and its subsidiaries will give, and shall direct its
accountants and legal counsel to give, WorldCom, its lenders and their
respective authorized representatives (including, without limitation,
financial advisors, accountants and legal counsel) at all reasonable times
access as reasonably requested to all offices and other facilities and to all
contracts, agreements, commitments, books and records (including, but not
limited to, Tax Returns) of or pertaining to MFS and its subsidiaries, will
permit the foregoing to make such reasonable inspections as they may require
and will cause its officers promptly to furnish WorldCom with (a) such
financial and operating data and other information with respect to the
business and properties of MFS and its subsidiaries as WorldCom may from time
to time reasonably request, and (b) a copy of each material report, schedule
and other document filed or received by MFS or any of its subsidiaries
pursuant to the requirements of applicable securities laws or the NASD.
4.4 Stockholder Approval. As soon as practicable, MFS will take
all steps necessary to duly call, give notice of, convene and hold a meeting
of its stockholders for the purpose of approving the MFS Proposals and for
such other purposes as may be necessary or desirable in connection with
effectuating the transactions contemplated hereby. Except as otherwise
contemplated by this Agreement, the Board of Directors of MFS (i) will
recommend to the stockholders of MFS that they approve the MFS Proposals, and
(ii) will use its reasonable best efforts to obtain any necessary approval by
MFS's stockholders of the MFS
<PAGE>37
Proposals including, without limitation, voting the MFS Shares and MFS
Preferred Shares held by such Directors for such adoption and approval.
4.5 Reasonable Business Efforts. Subject to the terms and
conditions herein provided, MFS agrees to use its reasonable business efforts
to take, or cause to be taken, all actions, and to do, or cause to be done,
all things necessary, proper or advisable to consummate and make effective as
promptly as practicable the Merger and the transactions contemplated by this
Agreement including, but not limited to (i) obtaining the Consent of MFS's
lenders and others to this Agreement and the transactions contemplated hereby,
(ii) the defending of any Litigation against MFS or any of its subsidiaries
challenging this Agreement or the consummation of the transactions
contemplated hereby, (iii) obtaining all Consents from Governmental
Authorities required for the consummation of the Merger and the transactions
contemplated thereby, and (iv) timely making all necessary filings under the
HSR Act. Upon the terms and subject to the conditions hereof, MFS agrees to
use reasonable business efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary to satisfy the other
conditions of the closing set forth herein.
4.6 Public Announcements. So long as this Agreement is in effect,
MFS shall not, and shall cause its affiliates not to, issue or cause the
publication of any press release or any other announcement with respect to the
Merger, the MFS Proposals, the WorldCom Proposals, the MFS Option Agreement,
the WorldCom Option Agreement or the transactions contemplated hereby or
thereby without the consent of WorldCom, except where such release or
announcement is required by applicable Law or pursuant to any applicable
listing agreement with, or rules or regulations of, the NASD, in which case
MFS, prior to making such announcement, shall consult with WorldCom regarding
the same.
4.7 Compliance. In consummating the Merger and the transactions
contemplated hereby, MFS shall comply in all material respects with the
provisions of the Securities Exchange Act and the Securities Act and shall
comply, and/or cause its subsidiaries to comply or to be in compliance, in all
material respects, with all other applicable Laws.
4.8 No Solicitation. (a) MFS shall, and shall direct and use
reasonable efforts to cause its officers, directors, employees,
representatives and agents to, immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to a MFS
Takeover Proposal (as hereinafter defined). MFS shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
subsidiaries to, directly or indirectly, (i) solicit,
<PAGE>38
initiate or encourage (including by way of furnishing information), or take
any other action designed or reasonably likely to facilitate, any inquiries or
the making of any proposal which constitutes, or may reasonably be expected to
lead to, any MFS Takeover Proposal or (ii) participate in any discussions or
negotiations regarding any MFS Takeover Proposal; provided, however, that if,
at any time prior to the Effective Time, the Board of Directors of MFS
determines in good faith, after consultation with outside counsel, that it is
necessary to do so in order to comply with its fiduciary duties to MFS's
stockholders under applicable law, MFS may, in response to a MFS Takeover
Proposal which was not solicited subsequent to the date hereof, and subject to
compliance with Section 4.8(c), (x) furnish information with respect to MFS to
any person pursuant to a customary confidentiality agreement (as determined by
MFS after consultation with its outside counsel) and (y) participate in
negotiations regarding such MFS Takeover Proposal. Except as expressly
provided in a separate letter agreement of even date herewith agreed to by
WorldCom and MFS (the "MFS Disclosure Letter"), "MFS Takeover Proposal" means
any inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or purchase of 15% or more of the assets of MFS and its
subsidiaries or 15% or more of any class of equity securities of MFS or any of
its subsidiaries, any tender offer or exchange offer that if consummated would
result in any person beneficially owning 15% or more of any class of equity
securities of MFS or any of its subsidiaries, any merger, consolidation, share
exchange, business combination, recapitalization, liquidation, dissolution or
similar transaction involving MFS or any of its subsidiaries, other than the
transactions contemplated by this Agreement, or any other transaction the
consummation of which could reasonably be expected to impede, interfere with,
prevent or materially delay the Merger or which would reasonably be expected
to dilute materially the benefits to WorldCom of the transactions contemplated
by this Agreement.
(b) Except as set forth in this Section 4.8, neither the Board
of Directors of MFS nor any committee thereof shall (i) withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to WorldCom, the
approval or recommendation by such Board of Directors or such committee of the
MFS Proposals, (ii) approve or recommend, or propose publicly to approve or
recommend, any MFS Takeover Proposal or (iii) cause MFS to enter into any
letter of intent, agreement in principle, acquisition agreement or other
similar agreement (each, a "MFS Acquisition Agreement") related to any MFS
Takeover Proposal. Notwithstanding the foregoing, in the event that prior to
the Effective Time the Board of Directors of MFS determines in good faith,
after consultation with outside counsel, that it is necessary to do so in
order to comply with its fiduciary duties to MFS's stockholders under
applicable law, the Board of Directors of MFS may (subject to this and the
following sentences) (x) withdraw or modify its approval or recommendation
<PAGE>39
of the MFS Proposals or (y) approve or recommend a MFS Superior Proposal (as
defined below) or terminate this Agreement (and concurrently with or after
such termination, if it so chooses, cause MFS to enter into any MFS
Acquisition Agreement with respect to any MFS Superior Proposal), but in each
of the cases set forth in this clause (y), only at a time that is after the
tenth business day following WorldCom's receipt of written notice advising
WorldCom that the Board of Directors of MFS has received a MFS Superior
Proposal, specifying the material terms and conditions of such MFS Superior
Proposal and identifying the person making such MFS Superior Proposal. Any
such withdrawal or modification of the recommendation of the MFS Proposals
shall not change the approval of the Board of Directors of MFS for purposes of
causing Section 203 of the Delaware Code to be inapplicable to the MFS
Proposals and the MFS Option Agreement or the status of WorldCom as other than
an "Acquiring Person" under the MFS Rights Agreement and shall not directly or
indirectly cause a "Stock Acquisition Date" or a "Distribution Date" (as such
terms are defined in the MFS Rights Agreement) to occur. For purposes of this
Agreement, a "MFS Superior Proposal" means any bona fide proposal made by a
third party to acquire, directly or indirectly, for consideration consisting
of cash and/or securities, more than 15% of the combined voting power of the
shares of MFS Common Stock and MFS Preferred Stock then outstanding or all or
substantially all the assets of MFS and otherwise on terms which the Board of
Directors of MFS determines in its good faith judgment (based on the advice of
a financial advisor of nationally recognized reputation) to be materially more
favorable to MFS's stockholders than the Merger and for which financing, to
the extent required, is then committed or which, in the good faith judgment of
the Board of Directors of MFS, is reasonably capable of being financed by such
third party.
(c) In addition to the obligations of MFS set forth in
paragraphs (a) and (b) of this Section 4.8, MFS shall immediately advise
WorldCom orally and in writing of any request for information or of any MFS
Takeover Proposal, the material terms and conditions of such request or MFS
Takeover Proposal and the identity of the person making such request or MFS
Takeover Proposal. MFS will keep WorldCom fully informed of the status and
details (including amendments or proposed amendments) of any such request or
MFS Takeover Proposal.
(d) Nothing contained in this Section 4.8 shall prohibit MFS
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Securities Exchange Act or from making any
disclosure to MFS's stockholders if, in the good faith judgment of the Board
of Directors of MFS, after consultation with outside counsel, failure so to
disclose would be inconsistent with its fiduciary duties to MFS's stockholders
under applicable law; provided, however, neither MFS nor its Board of
Directors nor any committee thereof shall, except as permitted by Section
4.8(b), withdraw or
<PAGE>40
modify, or propose publicly to withdraw or modify, its position with respect
to the MFS Proposals or approve or recommend, or propose publicly to approve
or recommend, a MFS Takeover Proposal.
4.9 SEC and Stockholder Filings. MFS shall send to WorldCom a copy
of all material public reports and materials as and when it sends the same to
its stockholders, the SEC or any state or foreign securities commission.
4.10 Tax Opinion Certification. MFS shall execute and deliver a
certificate in a form satisfactory to the counsel of both MFS and WorldCom,
signed by an officer of MFS setting forth factual representations and
covenants that will serve as a basis for the tax opinions required pursuant to
Section 6.1.8 of this Agreement ("MFS Tax Opinion Certificate").
4.11 Affiliate Agreements. MFS shall use reasonable business
efforts to ensure that each person who is or may be an "affiliate" of MFS
within the meaning of Rule 145 promulgated under the Securities Act shall
enter into an agreement in the form attached hereto as Schedule 4.11.
4.12 Takeover Statutes. If any "fair price," "moratorium," "control
share acquisition" or other similar antitakeover statute or regulation enacted
under state or federal laws in the United States (each a "Takeover Statute"),
including, without limitation, Section 203 of the Delaware Code, is or may
become applicable to the Merger, the MFS Proposals or the MFS Option
Agreement, MFS and the members of its Board of Directors will grant such
approvals, and take such actions as are necessary so that the transactions
contemplated by this Agreement, the MFS Proposals and the MFS Option Agreement
may be consummated as promptly as practicable on the terms contemplated hereby
and thereby and otherwise act to eliminate or minimize the effects of any
Takeover Statute on any of the transactions contemplated hereby or thereby.
4.13 Comfort Letters. Upon the request of WorldCom, MFS shall use
reasonable business efforts to provide to WorldCom prior to the Effective Time
"comfort letters" from the independent certified public accountants for MFS
and its subsidiaries dated the date on which the Registration Statement, or
last amendment thereto, shall become effective, and dated the Closing Date,
addressed to the Board of Directors of each of MFS and WorldCom, covering such
matters as WorldCom shall reasonably request with respect to facts concerning
the financial condition of MFS and its subsidiaries and customary for such
certified public accountants to deliver in connection with a transaction
similar to the Merger.
<PAGE>41
ARTICLE V
ADDITIONAL COVENANTS OF WORLDCOM
WorldCom covenants and agrees as follows:
5.1 Conduct of Business of WorldCom and the WorldCom Subsidiaries.
Except as expressly contemplated by this Agreement, during the period from the
date of this Agreement to the Effective Time, WorldCom shall conduct, and it
shall cause its subsidiaries to conduct, its or their businesses in the
ordinary course and consistent with past practice, subject to the limitations
contained in this Agreement, and WorldCom shall, and it shall cause its
subsidiaries to, use its or their reasonable business efforts to preserve
intact its business organization, to keep available the services of its
officers and employees and to maintain satisfactory relationships with all
persons with whom it does business. Without limiting the generality of the
foregoing, and except as otherwise expressly provided in this Agreement or as
otherwise set forth in the WorldCom Disclosure Letter (as hereinafter
defined), after the date hereof and prior to the Effective Time, neither
WorldCom nor any of its subsidiaries will, without the prior written consent
of MFS:
(i) amend or propose to amend its Certificate or Articles of
Incorporation or Bylaws (or comparable governing instruments) in any material
respect;
(ii) authorize for issuance, issue, grant, sell, pledge,
dispose of or propose to issue, grant, sell, pledge or dispose of any shares
of, or any options, warrants, commitments, subscriptions or rights of any kind
to acquire or sell any shares of, the capital stock or other securities of
WorldCom or any of its subsidiaries including, but not limited to, any
securities convertible into or exchangeable for shares of stock of any class
of WorldCom or any of its subsidiaries, except for the issuance of shares of
WorldCom Stock pursuant to the exercise of stock options outstanding on the
date of this Agreement in accordance with their present terms and except for
the grant of employee stock options and issuance of shares of WorldCom Stock
pursuant to the exercise thereof in the ordinary course of business consistent
with past practice, and except for the issuance of shares of WorldCom Stock in
accordance with the terms of acquisitions approved by MFS, or pursuant to the
terms of rights or obligations referred to in Schedule 3.2;
(iii) split, combine or reclassify any shares of its capital
stock or declare, pay or set aside any dividend or other distribution (whether
in cash, stock or property or any combination thereof) in respect of its
capital stock, other than dividends or distributions to WorldCom or a
subsidiary of WorldCom, or directly or indirectly redeem, purchase or
otherwise acquire or offer to acquire any shares of its capital stock or other
securities;
<PAGE>42
(iv) sell, transfer, mortgage, pledge or otherwise dispose of,
or encumber, or agree to sell, transfer, mortgage, pledge or otherwise dispose
of or encumber, any assets or properties, real, personal or mixed, material to
WorldCom and its subsidiaries taken as a whole, other than in the ordinary
course of business consistent with past practice; or
(v) increase in any manner the compensation of any of its
officers or employees or enter into, establish, amend or terminate any
employment, consulting, retention, change in control, collective bargaining,
bonus or other incentive compensation, profit sharing, health or other
welfare, stock option or other equity, pension, retirement, vacation,
severance, deferred compensation or other compensation or benefit plan,
policy, agreement, trust, fund or arrangement with, for or in respect of, any
shareholder, officer, director, other employee, agent, consultant or affiliate
other than as required pursuant to the terms of agreements in effect on the
date of this Agreement and such as are in the ordinary course of business
consistent with past practice.
Furthermore, WorldCom covenants, represents and warrants that from
and after the date of this Agreement, unless MFS shall otherwise expressly
consent in writing, WorldCom shall, and WorldCom shall cause each of its
subsidiaries to, use its or their reasonable business efforts to comply in all
material respects with all Laws applicable to it or any of its properties,
assets or business and maintain in full force and effect all the WorldCom
Permits necessary for, or otherwise material to, such business.
5.2 Notification of Certain Matters. WorldCom shall give prompt
notice to MFS if any of the following occur after the date of this Agreement:
(i) any notice of, or other communication relating to, a default or Event
which, with notice or lapse of time or both, would become a default under any
WorldCom Material Contract which could have a WorldCom Material Adverse
Effect; (ii) receipt of any notice or other communication in writing from any
third party alleging that the Consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement,
provided that such Consent would have been required to have been disclosed in
this Agreement; (iii) receipt of any material notice or other communication
from any Governmental Authority (including, but not limited to the NASD or any
securities exchange) in connection with the transactions contemplated by this
Agreement; (iv) the occurrence of an Event which could have a WorldCom
Material Adverse Effect; (v) the commencement or threat of any Litigation
involving or affecting WorldCom or any of its subsidiaries or any of their
respective properties or assets, or, to its knowledge, any employee, agent,
director or officer, in his or her capacity as such, of WorldCom or any of its
subsidiaries which, if pending on the date hereof, would have been required to
have been
<PAGE>43
disclosed in this Agreement or which relates to the consummation of the Merger
or any material development in connection with any Litigation disclosed by
WorldCom in or pursuant to this Agreement or the WorldCom Securities Filings;
and (vi) the occurrence of any Event that could cause a breach by WorldCom of
any provision of this Agreement or a WorldCom Ancillary Agreement, including
such a breach that could occur if such Event had taken place on or prior to
the date of this Agreement.
5.3 Access and Information. Between the date of this Agreement and
the Effective Time, WorldCom and its subsidiaries will give, and shall direct
its accountants and legal counsel to give MFS, and their respective authorized
representatives (including, without limitation, its lenders, financial
advisors, accountants and legal counsel) at all reasonable times access as
reasonably requested to all offices and other facilities and to all contracts,
agreements, commitments, books and records (including, but not limited to, Tax
Returns) of or pertaining to WorldCom and its subsidiaries, will permit the
foregoing to make such reasonable inspections as they may require and will
cause its officers promptly to furnish MFS with (a) such financial and
operating data and other information with respect to the business and
properties of WorldCom and its subsidiaries as MFS may from time to time
reasonably request, and (b) a copy of each material report, schedule and other
document filed or received by WorldCom or any of its subsidiaries pursuant to
the requirements of applicable securities laws or the NASD.
5.4 Shareholder Approval. As soon as practicable, WorldCom will
take all steps necessary to duly call, give notice of, convene and hold a
meeting of its shareholders for the purpose of approving the WorldCom
Proposals, for such other purposes as may be necessary or desirable in
connection with effectuating the transactions contemplated hereby and for such
other purposes as WorldCom shall determine. Except as otherwise contemplated
by this Agreement, the Board of Directors of WorldCom (i) will recommend to
the shareholders of WorldCom that they approve the WorldCom Proposals, and
(ii) will use its reasonable best efforts to obtain any necessary approval by
WorldCom's shareholders of the WorldCom Proposals, including, without
limitation, voting the WorldCom Stock held by such Directors for such
approval.
5.5 Reasonable Business Efforts. Subject to the terms and
conditions herein provided, WorldCom agrees to use its reasonable business
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make
effective as promptly as practicable the Merger and the transactions
contemplated by this Agreement including, but not limited to (i) obtaining the
Consent of WorldCom's lenders to this Agreement and the transactions
contemplated hereby, (ii) the defending of any Litigation against WorldCom or
any of its subsidiaries
<PAGE>44
challenging this Agreement or the consummation of the transactions
contemplated hereby, (iii) obtaining all Consents from Governmental
Authorities required for the consummation of the Merger and the transactions
contemplated thereby, and (iv) timely making all necessary filings under the
HSR Act. Upon the terms and subject to the conditions hereof, WorldCom agrees
to use reasonable business efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary to satisfy the other
conditions of the closing set forth herein.
5.6 Public Announcements. So long as this Agreement is in effect,
WorldCom shall not, and shall cause its affiliates not to, issue or cause the
publication of any press release or any other announcement with respect to the
Merger, the WorldCom Proposals, the MFS Proposals, the WorldCom Option
Agreement, the MFS Option Agreement or the transactions contemplated hereby or
thereby without the consent of MFS, except where such release or announcement
is required by applicable Law or pursuant to any applicable listing agreement
with, or rules or regulations of, the NASD, in which case WorldCom, prior to
making such announcement, will consult with MFS regarding the same.
5.7 Compliance. In consummating the Merger and the transactions
contemplated hereby, WorldCom shall comply in all material respects with the
provisions of the Securities Exchange Act and the Securities Act and shall
comply, and/or cause its subsidiaries to comply or to be in compliance, in all
material respects, with all other applicable Laws.
5.8 No Solicitation. (a) WorldCom shall, and shall direct and use
reasonable efforts to cause its officers, directors, employees,
representatives and agents to, immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to a WorldCom
Takeover Proposal (as hereinafter defined). WorldCom shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage
(including by way of furnishing information), or take any other action
designed or reasonably likely to facilitate, any inquiries or the making of
any proposal which constitutes, or may reasonably be expected to lead to, any
WorldCom Takeover Proposal or (ii) participate in any discussions or
negotiations regarding any WorldCom Takeover Proposal; provided, however, that
if, at any time prior to the Effective Time, the Board of Directors of
WorldCom determines in good faith, after consultation with outside counsel,
that it is necessary to do so in order to comply with its fiduciary duties to
WorldCom's shareholders under applicable law, WorldCom may, in response to a
WorldCom Takeover Proposal which was not solicited subsequent to the date
hereof, and subject to compliance with Section 5.8(c), (x) furnish information
with respect to WorldCom
<PAGE>45
to any person pursuant to a customary confidentiality agreement (as determined
by WorldCom after consultation with its outside counsel) and (y) participate
in negotiations regarding such WorldCom Takeover Proposal. Except as
expressly provided in a separate letter agreement of even date herewith agreed
to by WorldCom and MFS (the "WorldCom Disclosure Letter"), "WorldCom Takeover
Proposal" means any inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase of 15% or more of the assets of
WorldCom and its subsidiaries or 15% or more of any class of equity securities
of WorldCom or any of its subsidiaries, any tender offer or exchange offer
that if consummated would result in any person beneficially owning 15% or more
of any class of equity securities of WorldCom or any of its subsidiaries, any
merger, consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or similar transaction involving WorldCom or any of
its subsidiaries, other than the transactions contemplated by this Agreement,
or any other transaction the consummation of which could reasonably be
expected to impede, interfere with, prevent or materially delay the Merger or
which would reasonably be expected to dilute materially the benefits to MFS of
the transactions contemplated by this Agreement.
(b) Except as set forth in this Section 5.8, neither the Board
of Directors of WorldCom nor any committee thereof shall (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to MFS,
the approval or recommendation by such Board of Directors or such committee of
the WorldCom Proposals, (ii) approve or recommend, or propose publicly to
approve or recommend, any WorldCom Takeover Proposal or (iii) cause WorldCom
to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, a "WorldCom Acquisition
Agreement") related to any WorldCom Takeover Proposal. Notwithstanding the
foregoing, in the event that prior to the Effective Time the Board of
Directors of WorldCom determines in good faith, after consultation with
outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to WorldCom's shareholders under applicable law, the Board of
Directors of WorldCom may (subject to this and the following sentences)
(x) withdraw or modify its approval or recommendation of the WorldCom
Proposals or (y) approve or recommend a WorldCom Superior Proposal (as defined
below) or terminate this Agreement (and concurrently with or after such
termination, if it so chooses, cause WorldCom to enter into any WorldCom
Acquisition Agreement with respect to any WorldCom Superior Proposal), but in
each of the cases set forth in this clause (y), only at a time that is after
the tenth business day following MFS's receipt of written notice advising MFS
that the Board of Directors of WorldCom has received a WorldCom Superior
Proposal, specifying the material terms and conditions of such WorldCom
Superior Proposal and identifying the person making such WorldCom Superior
Proposal. Any such withdrawal or modification of the
<PAGE>46
recommendation of the WorldCom Proposals shall not change the approval of the
Board of Directors of WorldCom for purposes of Section 14-2-1132 of the
Georgia Business Corporation Code or Article Ten of the Amended and Restated
Articles of Incorporation of WorldCom. For purposes of this Agreement, a
"WorldCom Superior Proposal" means any bona fide proposal made by a third
party to acquire, directly or indirectly, for consideration consisting of cash
and/or securities, more than 15% of the combined voting power of the shares of
WorldCom Stock and WorldCom Preferred Stock then outstanding or all or
substantially all the assets of WorldCom and otherwise on terms which the
Board of Directors of WorldCom determines in its good faith judgment (based on
the advice of a financial advisor of nationally recognized reputation) to be
materially more favorable to WorldCom's shareholders than the Merger and for
which financing, to the extent required, is then committed or which, in the
good faith judgment of the Board of Directors of WorldCom, is reasonably
capable of being financed by such third party.
(c) In addition to the obligations of WorldCom set forth in
paragraphs (a) and (b) of this Section 5.8, WorldCom shall immediately advise
MFS orally and in writing of any request for information or of any WorldCom
Takeover Proposal, the material terms and conditions of such request or
WorldCom Takeover Proposal and the identity of the persons making such request
or WorldCom Takeover Proposal. WorldCom will keep MFS fully informed of the
status and details (including amendments or proposed amendments) of any such
request or WorldCom Takeover Proposal.
(d) Nothing contained in this Section 5.8 shall prohibit
WorldCom from taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a) promulgated under the Securities Exchange Act or
from making any disclosure to WorldCom's shareholders if, in the good faith
judgment of the Board of Directors of WorldCom, after consultation with
outside counsel, failure so to disclose would be inconsistent with its
fiduciary duties to WorldCom's shareholders under applicable law; provided,
however, neither WorldCom nor its Board of Directors nor any committee thereof
shall, except as permitted by Section 5.8(b), withdraw or modify, or propose
publicly to withdraw or modify, its position with respect to the WorldCom
Proposals or approve or recommend, or propose publicly to approve or
recommend, a WorldCom Takeover Proposal.
5.9 SEC and Shareholder Filings. WorldCom shall send to MFS a copy
of all material public reports and materials as and when it sends the same to
its shareholders, the SEC or any state or foreign securities commission.
5.10 Tax Opinion Certificates. WorldCom shall execute and deliver a
certificate in form satisfactory to the counsel of MFS and WorldCom, signed by
an officer of WorldCom setting forth
<PAGE>47
factual representations and covenants that will serve as a basis for the tax
opinions required pursuant to Section 6.1.8 of this Agreement ("WorldCom Tax
Opinion Certificate").
5.11 Board Representation. WorldCom's Board of Directors will take
action to cause the number of directors comprising the full Board of Directors
of WorldCom at the Effective Time to consist of an odd number of directors,
with MFS being entitled to designate one less director than WorldCom (the
"Nominees"). It is the intent of the parties that membership on the
compensation and stock option, audit and nominating committees of WorldCom's
Board of Directors shall initially consist of an equal number of designees of
WorldCom and MFS.
5.12 Employee Benefit Plans.
(a) Benefit Plans. After the Effective Time, WorldCom shall
arrange for each employee participating in any of the Benefit Plans of MFS or
an MFS subsidiary as are in effect on the date hereof to participate in any
counterpart Benefit Plans of WorldCom in accordance with the eligibility
criteria thereof, provided that (i) such participants shall receive full
credit for years of service with MFS or any of its subsidiaries prior to the
Merger for all purposes for which such service was recognized under the
Benefit Plan of MFS or such subsidiary including, but not limited to,
recognition of service for eligibility, vesting, and, to the extent not
duplicative of benefits received under such Benefit Plan of MFS or such
subsidiary, the amount of benefits, (ii) such participants shall participate
in the Benefit Plans of WorldCom on terms no less favorable than those offered
by WorldCom to similarly situated employees of WorldCom; and (iii) WorldCom
shall cause any and all pre-existing condition limitations (to the extent such
limitations did not apply to a pre-existing condition under MFS' Benefit
Plans) and eligibility waiting periods under any group health plans to be
waived with respect to such participants and their eligible dependents.
(b) Change in Control Provisions. Except with respect to MFS
Outperformance Options, which shall be treated as described in Section 1.6(b)
above, WorldCom and MFS hereby acknowledge that the Merger and the
consummation of the transactions contemplated under this Agreement will be
treated as a "Change in Control" for purposes of each of the applicable MFS
Benefit Plans and each applicable employment, severance or similar agreement
applicable to any employee of MFS or any of its subsidiaries listed on
Schedule 5.12(b) attached hereto (collectively, "Change in Control
Agreements") and agree to abide by the provisions of any Benefit Plans and
Change in Control Agreements which relate to a Change in Control, including,
but not limited to, the accelerated vesting and/or payment of equity-based
awards.
<PAGE>48
(c) Treatment under Section 280G of the Code. With respect to
any income tax filing relating to Sections 280G or 4999 of the Code, WorldCom
hereby agrees that it shall take, and shall cause its subsidiaries to take,
the position that none of the execution of this Agreement, the approval of
this Agreement by stockholders of MFS, or the consummation of the Merger shall
constitute a change in the ownership or effective control of MFS or a change
in the ownership of a substantial portion of the assets of MFS within the
meaning of Section 280G of the Code, and further agrees that, consistent with
such position, it shall not withhold from any amounts payable to any MFS
employee by reason of consummation of the transactions contemplated hereby
(including by reason of any termination of employment of any such employee
within specified periods following the Effective Time) any amounts in respect
of the excise tax described in Section 4999 of the Code unless, as a result of
a change in relevant "authority" (as such term is defined in Treasury
Regulation 1.6662-(4)(d)(3)(iii) for purposes of Section 6662 of the Code)
which occurs after the date hereof, such position ceases to be supported by a
good faith interpretation of relevant authority (as so defined).
5.13 Indemnification. The indemnification provisions of the By-laws
and the Certificate of Incorporation of the Surviving Corporation shall not be
amended, repealed or otherwise modified for a period of six years after the
Closing Date in any manner that would adversely affect the rights thereunder
of individuals who immediately prior to the Closing Date were directors,
officers, agents or employees of MFS unless otherwise required by applicable
Law. From and after the Effective Time, WorldCom and the Surviving
Corporation shall jointly and severally indemnify, defend and hold harmless
the directors, officers and agents of MFS as provided in MFS's Certificate of
Incorporation, By-Laws or indemnification agreements, as in effect as of the
date hereof, with respect to matters occurring through the Closing Date. To
the extent available, WorldCom agrees to cause the Surviving Corporation to
maintain in effect for not less than three years after the Closing Date
policies of directors' and officers' liability insurance comparable to those
maintained by MFS with carriers comparable to MFS's existing carriers and
containing terms and conditions which are no less advantageous in any material
respect to the officers, directors and employees of MFS; provided, however,
that the Surviving Corporation shall not be required to pay an annual premium
for such insurance in excess of two times the last annual premium paid prior
to the date hereof, but in such case shall purchase as much coverage as
possible for such amount.
5.14 Takeover Statutes. If any Takeover Statute, including, without
limitation, Section 14-2-1132 of the Georgia Business Corporation Code, is or
may become applicable to the Merger, the WorldCom Proposals or the WorldCom
Option Agreement, WorldCom and the members of its Board of Directors will
grant
<PAGE>49
such approvals, and take such actions as are necessary so that the
transactions contemplated by this Agreement, the WorldCom Proposals and the
WorldCom Option Agreement may be consummated as promptly as practicable on the
terms contemplated hereby and thereby and otherwise act to eliminate or
minimize the effects of any Takeover Statute on any of the transactions
contemplated hereby or thereby.
5.15 Comfort Letters. Upon the request of MFS, WorldCom shall use
reasonable business efforts to provide to MFS prior to the Effective Time
"comfort letters" from the independent certified public accountants for
WorldCom and its subsidiaries, dated the date on which the Registration
Statement, or last amendment thereto, shall become effective, and dated the
Closing Date, addressed to the Board of Directors of each of MFS and WorldCom,
covering such matters as MFS shall reasonably request with respect to facts
concerning the financial condition of WorldCom and its subsidiaries and
customary for such certified public accountants to deliver in connection with
a transaction similar to the Merger.
ARTICLE VI
CONDITIONS
6.1 Conditions to Each Party's Obligations. The respective
obligations of each party to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Effective Time of the following
conditions:
6.1.1 Stockholder Approval. The MFS Proposals shall have been
approved at or prior to the Effective Time by the requisite vote of
the stockholders of MFS in accordance with the Delaware Code and the
WorldCom Proposals shall have been approved by the requisite vote of
the shareholders of WorldCom in accordance with applicable Law and
the rules and regulations of the NASD.
6.1.2 No Injunction or Action. No order, statute, rule,
regulation, executive order, stay, decree, judgment or injunction
shall have been enacted, entered, promulgated or enforced by any
court or other Governmental Authority which prohibits or prevents
the consummation of the Merger which has not been vacated, dismissed
or withdrawn by the Effective Time. MFS and WorldCom shall use
their reasonable best efforts to have any of the foregoing vacated,
dismissed or withdrawn by the Effective Time.
6.1.3 Governmental Approvals. All Consents of any
Governmental Authority required for the consummation of the Merger
and the transactions
<PAGE>50
contemplated by this Agreement shall have been obtained by Final
Order (as hereafter defined), except as may be waived by WorldCom and
MFS or those Consents the failure of which to obtain will not have a
Surviving Corporation Material Adverse Effect (as defined below).
The term "Final Order" with respect to any Consent of a Governmental
Authority shall mean an action by the appropriate Governmental
Authority as to which: (i) no request for stay by such Governmental
Authority of the action is pending, no such stay is in effect, and,
if any deadline for filing any such request is designated by statute
or regulation, it has passed; (ii) no petition for rehearing or
reconsideration of the action is pending before such Governmental
Authority, and no appeal or comparable administrative remedy with
such or any other Governmental Authority is pending before such
Governmental Authority, and the time for filing any such petition,
appeal or administrative remedy has passed; (iii) such Governmental
Authority does not have the action under reconsideration on its own
motion and the time for such reconsideration has passed; and (iv) no
appeal to a court, or request for stay by a court, of the
Governmental Authority action is pending or in effect, and if any
deadline for filing any such appeal or request is designated by
statute or rule, it has passed.
6.1.4 HSR Act. Any waiting period applicable to the Merger
under the HSR Act shall have expired or earlier termination thereof
shall have been granted and no action, suit, proceeding or
investigation shall have been instituted by either the United States
Department of Justice or the Federal Trade Commission to prevent the
consummation of the transactions contemplated by this Agreement or to
modify or amend such transactions in any material manner, or if any
such action, suit, proceeding or investigation shall have been
instituted, it shall have been withdrawn or a final judgment shall
have been entered against such Department or Commission, as the case
may be.
6.1.5 Required Consents. Any required Consents of any person
to the Merger or the transactions contemplated hereby, including,
without limitation, the Consents of the respective lenders of
WorldCom and MFS, shall have been obtained and be in full force and
effect, except for those the failure of which to obtain will not have
a material adverse effect on the business, assets (including, but not
limited to, intangible assets), prospects, condition (financial or
otherwise), properties (including, but not limited to, intangible
properties), liabilities or the result of operations of the Surviving
Corporation and its
<PAGE>51
subsidiaries taken as a whole ("Surviving Corporation Material Adverse
Effect") or a WorldCom Material Adverse Effect.
6.1.6 Registration Statement. The Registration Statement
shall have been declared effective and no stop order suspending the
effectiveness of the Registration Statement shall have been issued
and no action, suit, proceeding or investigation for that purpose
shall have been initiated or threatened by any Governmental
Authority.
6.1.7 Blue Sky. WorldCom shall have received all state
securities law authorizations necessary to consummate the
transactions contemplated hereby.
6.1.8 Tax Opinion. WorldCom shall have received an opinion
from WorldCom's tax counsel and MFS shall have received an opinion
from MFS's tax counsel substantially to the effect that, if the
Merger is consummated in accordance with the provisions of this
Agreement, under current Law, for federal income tax purposes, the
Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code.
6.1.9 Quotation of WorldCom Stock. The shares of WorldCom
Stock comprising the Merger Consideration shall have been approved
for quotation on The Nasdaq Stock Market.
6.2 Conditions to Obligations of MFS. The obligation of MFS to
effect the Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following additional conditions, any one or more of
which may be waived by MFS:
6.2.1 WorldCom Representations and Warranties. The
representations and warranties of WorldCom contained in this
Agreement that are modified by materiality or WorldCom Material
Adverse Effect shall be true and correct in all respects and those
that are not so modified shall be true and correct in all material
respects, on the date hereof and, except for changes not prohibited
by this Agreement, as of the Effective Time as if made at the
Effective Time.
6.2.2 Performance by WorldCom. WorldCom shall have performed
and complied with all of the covenants and agreements in all
material respects and satisfied in all material respects all of the
conditions required by this Agreement to be performed or complied
with or satisfied by WorldCom at or prior to the Effective Time.
<PAGE>52
6.2.3 No Material Adverse Change. There shall not have
occurred after the date hereof any Event that has or reasonably
could be expected to have a WorldCom Material Adverse Effect.
6.2.4 Certificates and Other Deliveries. WorldCom shall have
delivered to MFS (i) a certificate executed on its behalf by its
President or another authorized officer to the effect that the
conditions set forth in Subsections 6.2.1, 6.2.2 and 6.2.3, above,
have been satisfied; (ii) a certificate of existence from the
Secretary of State of the State of Georgia stating that WorldCom is
a validly existing corporation; (iii) duly adopted resolutions of
the Board of Directors of each of WorldCom and the Board of
Directors and stockholder of Acquisition Subsidiary approving the
execution, delivery and performance of this Agreement, the WorldCom
Ancillary Agreements and the instruments contemplated hereby and
thereby, and of the WorldCom shareholders approving the WorldCom
Proposals, each certified by its Secretary; (iv) the duly executed
WorldCom Tax Opinion Certificate; (v) the supplemental agreement
referred to in the last sentence of Section 1.6(a) hereof; and
(vi) such other documents and instruments as MFS reasonably may
request.
6.2.5 Opinion of WorldCom Counsel. MFS shall have received an
opinion of counsel to WorldCom, in form and substance reasonably
satisfactory to MFS, covering the matters set forth in
Schedule 6.2.5 attached hereto.
6.2.6 Election of Nominees. WorldCom shall have taken all
action necessary to cause the Nominees to become members of the
Board of Directors of WorldCom as of the Effective Time.
6.3 Conditions to Obligations of WorldCom. The obligations of
WorldCom to effect the Merger shall be subject to the fulfillment at or prior
to the Effective Time of the following additional conditions, any one or more
of which may be waived by WorldCom:
6.3.1 MFS Representations and Warranties. The representations
and warranties of MFS contained in this Agreement that are modified
by materiality or MFS Material Adverse Effect shall be true and
correct in all respects, and those that are not so modified shall be
true and correct in all material respects, on the date hereof and,
except for changes not prohibited by this Agreement, as of the
Effective Time as if made at the Effective Time.
<PAGE>53
6.3.2 Performance by MFS. MFS shall have performed and
complied with all the covenants and agreements in all material
respects and satisfied in all material respects all the conditions
required by this Agreement to be performed or complied with or
satisfied by MFS at or prior to the Effective Time.
6.3.3 No Material Adverse Change. There shall have not
occurred after the date hereof any Event that has or reasonably
could be expected to have a MFS Material Adverse Effect or a
Surviving Corporation Material Adverse Effect.
6.3.4 Certificates and Other Deliveries. MFS shall have
delivered, or caused to be delivered, to WorldCom (i) a certificate
executed on its behalf by its Chairman or another duly authorized
officer to the effect that the conditions set forth in Subsections
6.3.1, 6.3.2 and 6.3.3, above, have been satisfied; (ii) a
certificate of good standing from the Secretary of State of the
State of Delaware stating that MFS is a validly existing corporation
in good standing; (iii) duly adopted resolutions of the Board of
Directors and stockholders of MFS approving the execution, delivery
and performance of this Agreement, the MFS Proposals, the MFS
Ancillary Agreements and the instruments contemplated hereby and
thereby, certified by the Secretary of MFS; (iv) a true and complete
copy of the Certificate of Incorporation certified by the Secretary
of State of the State of Delaware, and a true and complete copy of
the Bylaws of MFS certified by the Secretary thereof; (v) the duly
executed MFS Tax Opinion Certificate; and (vi) such other documents
and instruments as WorldCom reasonably may request.
6.3.5 Opinion of MFS Counsel. WorldCom shall have received
the opinion of counsel to MFS, in form and substance reasonably
satisfactory to MFS, covering the matters set forth in
Schedule 6.3.5 attached hereto.
6.3.6 Affiliate Agreements. Each person who is or may be an
"affiliate" of MFS within the meaning of Rule 145 of the rules and
regulations of the SEC promulgated under the Securities Act shall
have entered into an agreement in the form attached hereto as
Schedule 4.11.
<PAGE>54
ARTICLE VII
TERMINATION AND ABANDONMENT
7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the
stockholders of MFS and the shareholders of WorldCom described herein:
(a) by mutual written consent of WorldCom and MFS;
(b) by either WorldCom or MFS if:
(i) the Merger shall not have been
consummated on or prior to the first anniversary
of the date hereof; provided, however, that the
right to terminate this Agreement pursuant to
this Section 7.1(b)(i) shall not be available to
any party whose failure to perform any of its
obligations under this Agreement results in the
failure of the Merger to be consummated by such
time;
(ii) the approval of MFS's stockholders
required by Section 6.1.1 shall not have been
obtained at a meeting duly convened therefor or
at any adjournment or postponement thereof;
(iii) the approval of WorldCom's
shareholders as required by Section 6.1.1 shall
not have been obtained at a meeting duly
convened therefor or at any adjournment or
postponement thereof; or
(iv) any Governmental Authority shall have
issued an order, decree or ruling or taken any
other action permanently enjoining, restraining
or otherwise prohibiting the consummation of the
Merger and such order, decree or ruling or other
action shall have become final and
nonappealable;
(c) by WorldCom, if MFS shall have breached in any
material respect any of its
<PAGE>55
representations, warranties, covenants or other agreements contained
in this Agreement, which breach or failure to perform is incapable of
being cured or has not been cured within 20 days after the giving of
written notice to MFS;
(d) by WorldCom in accordance with Section 5.8(b),
provided that it has complied with all provisions thereof,
including the notice provisions therein, and that it
complies with applicable requirements relating to the
payment (including the timing of any payment) of the
Termination Fee;
(e) by WorldCom, if Section 4.8 shall be breached by
MFS in any material respect and MFS shall have failed to
promptly terminate the activity giving rise to such breach
and use best efforts to cure such breach upon notice
thereof from WorldCom, or MFS shall breach Section 4.8 by
failing to promptly notify WorldCom as required
thereunder;
(f) by WorldCom if (i) the Board of Directors of MFS
or any committee thereof shall have withdrawn or modified
in a manner adverse to WorldCom its approval or
recommendation of the MFS Proposals, or failed to
reconfirm its recommendation within fifteen business days
after a written request to do so, or approved or
recommended any MFS Takeover Proposal or (ii) the Board of
Directors of MFS or any committee thereof shall have
resolved to take any of the foregoing actions;
(g) by WorldCom, if MFS or any of its officers,
directors, employees, representatives or agents shall take
any of the actions referenced in the proviso to the second
sentence of Section 4.8(a);
(h) by MFS, if WorldCom shall have breached in any
material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement,
which breach or failure to perform is incapable of being
cured or has not been cured within 20 days after the
giving of written notice to WorldCom;
<PAGE>56
(i) by MFS in accordance with Section 4.8(b),
provided that it has complied with all provisions thereof,
including the notice provisions therein, and that it
complies with applicable requirements relating to the
payment (including the timing of any payment) of the
Termination Fee;
(j) by MFS, if Section 5.8 shall be breached by
WorldCom in any material respect and WorldCom shall have
failed to promptly terminate the activity giving rise to
such breach and use best efforts to cure such breach upon
notice thereof from MFS, or WorldCom shall breach Section
5.8 by failing to promptly notify MFS as required
thereunder;
(k) by MFS if (i) the Board of Directors of WorldCom
or any committee thereof shall have withdrawn or modified
in a manner adverse to MFS its approval or recommendation
of the WorldCom Proposals, or failed to reconfirm its
recommendation within fifteen business days after a
written request to do so, or approved or recommended any
WorldCom Takeover Proposal or (ii) the Board of Directors
of WorldCom or any committee thereof shall have resolved
to take any of the foregoing actions;
(l) by MFS, if WorldCom or any of its officers,
directors, employees, representatives or agents shall take
any of the actions referenced in the proviso to the second
sentence of Section 5.8(a); or
(m) by MFS, if any person (other than MFS or any of
its affiliates or associates) shall have acquired
beneficial ownership (as such term is defined in Rule 13d-
3 promulgated under the Securities Exchange Act) or any
"group" (as such term is defined in Section 13(d)(3) of
the Securities Exchange Act) (other than a group of which
MFS or any of its affiliates or associates is a member)
shall have been formed which beneficially owns, 25% or
more of the voting power of WorldCom.
The party desiring to terminate this Agreement pursuant to the
preceding paragraphs (b), (c), (d), (e), (f), (g), (h),
<PAGE>57
(i), (j), (k), (l) or (m) shall give written notice of such termination to the
other party in accordance with Section 8.5 below.
7.2 Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement and the abandonment of the Merger pursuant to
this Article VII, this Agreement (other than as set forth in this Section 7.2,
Section 7.3, Section 7.4, Section 8.1 and Section 8.7) shall become void and
of no effect with no liability on the part of any party hereto (or of any of
its directors, officers, employees, agents, legal or financial advisors or
other representatives); provided, however, that no such termination shall
relieve any party hereto from any liability for any breach of this Agreement.
(b) In the event that (A) this Agreement is terminated by
either WorldCom or MFS pursuant to Section 7.1(b)(ii) above; (B) a bona fide
MFS Takeover Proposal shall have been made known to MFS or any of its
subsidiaries and made known to its stockholders generally or has been made
directly to its stockholders generally or any Person shall have publicly
announced an intention (whether or not conditional) to make a bona fide MFS
Takeover Proposal and such MFS Takeover Proposal or announced intention shall
not have been withdrawn and thereafter this Agreement is terminated by either
WorldCom or MFS pursuant to Section 7.1(b)(i), or (C) this Agreement is
terminated (x) by MFS pursuant to Section 7.1(i) or (y) by WorldCom pursuant
to Section 7.1(e), (f) or (g), then MFS shall promptly, but in no event later
than two days after the date of such termination, pay WorldCom a fee equal to
$350 million (the "Termination Fee"), payable by wire transfer of same day
funds; provided, however, that no Termination Fee shall be payable to WorldCom
pursuant to a termination by WorldCom pursuant to Section 7.1(g) unless and
until within 18 months of such termination, MFS or any of its subsidiaries
enters into any MFS Acquisition Agreement or consummates any MFS Takeover
Proposal. MFS acknowledges that the agreements contained in this Section
7.2(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, WorldCom would not enter into
this Agreement; accordingly, if MFS fails to promptly pay the amount due
pursuant to this Section 7.2(b), and, in order to obtain such payment,
WorldCom commences a suit which results in a judgment against MFS for the
Termination Fee set forth in this paragraph (b), MFS shall also pay to
WorldCom its costs and expenses (including attorneys' fees) in connection with
such suit, together with interest on the amount of the Termination Fee at the
prime rate of Citibank N.A. in effect on the date such payment was required to
be made. In the event of a termination by WorldCom pursuant to Section
7.1(g), MFS shall promptly pay upon WorldCom's request all out-of-pocket
charges and expenses incurred by WorldCom in connection with this Agreement
and the transactions contemplated hereby in an amount not to exceed $10
<PAGE>58
million, which payments shall be credited against any Termination Fee that may
subsequently become payable.
(c) In the event that (A) this Agreement is terminated by
either WorldCom or MFS pursuant to Section 7.1(b)(iii) above, (B) a bona fide
WorldCom Takeover Proposal shall have been made known to WorldCom or any of
its subsidiaries and made known to its shareholders generally or has been made
directly to its shareholders generally or any Person shall have publicly
announced an intention (whether or not conditional) to make a bona fide
WorldCom Takeover Proposal and such WorldCom Takeover Proposal or announced
intention shall not have been withdrawn and thereafter this Agreement is
terminated by either WorldCom or MFS pursuant to Section 7.1(b)(i), or
(C) this Agreement is terminated (x) by WorldCom pursuant to Section 7.1(d) or
(y) by MFS pursuant to Section 7.1(j), (k), (l) or (m), then WorldCom shall
promptly, but in no event later than two days after the date of such
termination, pay MFS the Termination Fee, payable by wire transfer of same day
funds; provided, however, that no Termination Fee shall be payable to MFS
pursuant to a termination by MFS pursuant to Section 7.1(l) unless and until
within 18 months of such termination, WorldCom or any of its subsidiaries
enters into any WorldCom Acquisition Agreement or consummates any WorldCom
Takeover Proposal. WorldCom acknowledges that the agreements contained in
this Section 7.2(c) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, MFS would not enter into
this Agreement; accordingly, if WorldCom fails to promptly pay the amount due
pursuant to this Section 7.2(c), and, in order to obtain such payment, MFS
commences a suit which results in a judgment against WorldCom for the
Termination Fee set forth in this paragraph (c), WorldCom shall also pay to
MFS its costs and expenses (including attorneys' fees) in connection with such
suit, together with interest on the amount of the Termination Fee at the prime
rate of Citibank N.A. in effect on the date such payment was required to be
made. In the event of a termination by MFS pursuant to Section 7.1(l),
WorldCom shall promptly pay upon MFS's request all out-of-pocket charges and
expenses incurred by MFS in connection with this Agreement and the
transactions contemplated hereby in an amount not to exceed $10 million, which
payments shall be credited against any Termination Fee that may subsequently
become payable.
7.3 Procedure Upon Termination. In the event of termination and
abandonment pursuant to this Article VII, this Agreement shall terminate and
the Merger shall be abandoned without further action by MFS or WorldCom,
provided that the agreements contained in Sections 7.2, 8.1 and 8.7 hereof
shall remain in full force and effect. If this Agreement is terminated as
provided herein, each party shall use its reasonable best efforts to redeliver
all documents, work papers and other material (including any copies thereof)
of any other party relating to the transactions contemplated hereby, whether
<PAGE>59
obtained before or after the execution hereof, to the party furnishing the
same. Nothing contained in this Agreement shall relieve any party from any
liability for any inaccuracy, misrepresentation or breach of this Agreement
prior to termination.
7.4 Services Agreement. In the event that this Agreement is
terminated under circumstances in which either WorldCom or MFS is entitled to
receive the Termination Fee pursuant to Section 7.2 hereof, the party entitled
to receive the Termination Fee shall also be entitled to receive, at its sole
election, the services described in that agreement of even date herewith
between MFS and WorldCom, on the terms and conditions described in such
agreement.
ARTICLE VIII
MISCELLANEOUS
8.1 Confidentiality. Unless (i) otherwise expressly provided in
this Agreement, (ii) required by applicable Law or any listing agreement with,
or the rules and regulations of, any applicable securities exchange or the
NASD, (iii) necessary to secure any required Consents as to which the other
party has been advised, or (iv) consented to in writing by WorldCom and MFS,
any information or documents furnished in connection herewith shall be kept
strictly confidential by MFS, WorldCom and their respective officers,
directors, employees and agents. Prior to any disclosure pursuant to the
preceding sentence, the party intending to make such disclosure shall consult
with the other party regarding the nature and extent of the disclosure.
Nothing contained herein shall preclude disclosures to the extent necessary to
comply with accounting, SEC and other disclosure obligations imposed by
applicable Law. To the extent required by such disclosure obligations,
WorldCom or MFS, after consultation with the other party, may file with the
SEC a Report on Form 8-K pursuant to the Securities Exchange Act with respect
to the Merger, which report may include, among other things, financial
statements and pro forma financial information with respect to the other
party. In connection with any filing with the SEC of a registration statement
or amendment thereto under the Securities Act, MFS or WorldCom, after
consultation with the other party, may include a prospectus containing any
information required to be included therein with respect to the Merger,
including, but not limited to, financial statements and pro forma financial
information with respect to the other party, and thereafter distribute said
prospectus. WorldCom and MFS shall cooperate with the other and provide such
information and documents as may be required in connection with any such
filings. In the event the Merger is not consummated, each party shall return
to the other any documents furnished by the other and all copies thereof any
of them may have made and will hold in absolute confidence any information
obtained from the other party except to the extent (i) such party is required
to disclose such information by
<PAGE>60
Law or such disclosure is necessary or desirable in connection with the
pursuit or defense of a claim, (ii) such information was known by such party
prior to such disclosure or was thereafter developed or obtained by such party
independent of such disclosure, or (iii) such information becomes generally
available to the public or is otherwise no longer confidential. Prior to any
disclosure of information pursuant to the exception in clause (i) of the
preceding sentence, the party intending to disclose the same shall so notify
the party which provided the same in order that such party may seek a
protective order or other appropriate remedy should it choose to do so.
8.2 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by a written agreement among MFS, WorldCom and
Acquisition Subsidiary.
8.3 Waiver of Compliance; Consents. Any failure of MFS on the one
hand, or WorldCom on the other hand, to comply with any obligation, covenant,
agreement or condition herein may be waived by WorldCom on the one hand, or
MFS on the other hand, only by a written instrument signed by the party
granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf
of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in
this Section 8.3.
8.4 Survival of Representations and Warranties. The respective
representations, warranties, covenants and agreements of MFS and WorldCom
contained herein or in any certificates or other documents delivered prior to
or at the Closing shall survive the execution and delivery of this Agreement,
notwithstanding any investigation made or information obtained by the other
party, but shall terminate at the Effective Time, except for those contained
in Sections 5.11, 5.12 and 5.13, above and except for the agreements delivered
pursuant to Section 6.3.6 hereof and the certificates referred to in Sections
6.2.4(iv) and 6.3.4(v) hereof.
8.5 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given when delivered in
person, by facsimile, receipt confirmed, or on the next business day when sent
by overnight courier or on the second succeeding business day when sent by
registered or certified mail (postage prepaid, return receipt requested) to
the respective parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
<PAGE>61
(i) if to MFS, to:
11808 Miracle Hills Drive
Omaha, Nebraska 68154
Attention: Terrence J. Ferguson, Esq.
Telecopy: (402) 231-3545
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022
Attention: John S. D'Alimonte, Esq. and
Steven J. Gartner, Esq.
Telecopy: 212-821-8111
and
(ii) if to WorldCom or Acquisition Subsidiary, to:
515 East Amite Street
Jackson, Mississippi 39201
Attention: Bernard J. Ebbers
Telecopy: (601) 360-8616
with copies to:
WorldCom, Inc.
10777 Sunset Office Drive, Suite 330
St. Louis, Missouri 63127
Attention: P. Bruce Borghardt, Esq.
Telecopy: (314) 909-4101
and
Bryan Cave LLP
One Metropolitan Square
211 North Broadway, Suite 3600
St. Louis, Missouri 63102
Attention: Don G. Lents, Esq. and
R. Randall Wang, Esq.
Telecopy: (314) 259-2020
8.6 Binding Effect; Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto prior to the Effective Time without
the prior written consent of the other party hereto, except that Acquisition
Subsidiary may assign to WorldCom or any other direct subsidiary of WorldCom
any and all rights, interests and
<PAGE>62
obligations of Acquisition Subsidiary under this Agreement; provided that any
assignment by Acquisition Subsidiary of any or all of its rights, interests
and obligations under this Agreement to WorldCom shall require that the Merger
contemplated by this Agreement shall then be structured as a direct merger of
MFS with and into WorldCom or any other structure approved by MFS.
8.7 Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs or expenses, subject to the rights of such party
contemplated under Section 7.2, above.
8.8 Governing Law. This Agreement shall be deemed to be made in,
and in all respects shall be interpreted, construed and governed by and in
accordance with the internal laws of, the State of Delaware, except as
otherwise required by the Georgia Business Corporation Code.
8.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.10 Interpretation. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. As used in this Agreement, (i) the term
"person" shall mean and include an individual, a partnership, a joint venture,
a corporation, a limited liability company, a trust, an association, an
unincorporated organization, a Governmental Authority and any other entity;
(ii) the term "affiliate," with respect to any person, shall mean and include
any person controlling, controlled by or under common control with such
person; and (iii) the term "subsidiary" of any specified person shall mean any
corporation 50 percent or more of the outstanding voting power of which, or
any partnership, joint venture, limited liability company or other entity
50 percent or more of the total equity interest of which, is directly or
indirectly owned by such specified person.
8.11 Entire Agreement. This Agreement and the documents or
instruments referred to herein including, but not limited to, the Schedules
attached hereto and the Disclosure Letters referred to herein, which Schedules
and Disclosure Letters are incorporated herein by reference, embody the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises,
representations, warranties, covenants, or undertakings, other than those
expressly set forth or referred to herein. This Agreement supersedes all
prior agreements and the
<PAGE>63
understandings between the parties with respect to such subject matter.
8.12 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable in a jurisdiction, such provision shall
be modified or deleted, as to the jurisdiction involved, only to the extent
necessary to render the same valid, legal and enforceable, and the validity,
legality and enforceability of the remaining provisions hereof shall not in
any way be affected or impaired thereby nor shall the validity, legality or
enforceability of such provision be affected thereby in any other
jurisdiction.
8.13 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. Accordingly, the parties further agree that each party
shall be entitled to an injunction or restraining order to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other right or remedy to which such party may be entitled
under this Agreement, at law or in equity.
8.14 Third Parties. Nothing contained in this Agreement or in any
instrument or document executed by any party in connection with the
transactions contemplated hereby shall create any rights in, or be deemed to
have been executed for the benefit of, any person or entity that is not a
party hereto or thereto, or, a successor or permitted assign of such a party;
provided however, that the parties hereto specifically acknowledge that the
provisions of Sections 5.12 and 5.13, above, are intended to be for the
benefit of, and shall be enforceable by, the employees, officers and directors
of MFS and/or the MFS Subsidiaries affected thereby and their heirs and
representatives.
8.15 Schedules and Disclosure Letters. MFS and WorldCom acknowledge
that the Schedules to this Agreement, the MFS Disclosure Letter and the
WorldCom Disclosure Letter (i) relate to certain matters concerning the
disclosures required and transactions contemplated by this Agreement, (ii) are
qualified in their entirety by reference to specific provisions of this
Agreement, (iii) are not intended to constitute and shall not be construed as
indicating that such matter is required to be disclosed, nor shall such
disclosure be construed as an admission that such information is material with
respect to MFS or WorldCom, as the case may be, except to the extent required
by this Agreement, and (iv) disclosure of the information contained in one MFS
or WorldCom Schedule shall be deemed as proper disclosure for all MFS or
WorldCom Schedules, as the case may be.
<PAGE>64
IN WITNESS WHEREOF, WorldCom, Acquisition Subsidiary and MFS have
caused this Agreement to be signed and delivered by their respective duly
authorized officers as of the date first above written.
WORLDCOM, INC.
By /s/ Bernard J. Ebbers
Name: Bernard J. Ebbers
Title: President and
Chief Executive Officer
HIJ CORP.
By /s/ Bernard J. Ebbers
Name: Bernard J. Ebbers
Title: President and
Chief Executive Officer
MFS COMMUNICATIONS COMPANY, INC.
By /s/ James Q. Crowe
Name: James Q. Crowe
Title: Chairman of the Board and
Chief Executive Officer
<PAGE>1
EXECUTION COPY
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of August 25, 1996 (the "Agreement"),
by and between WorldCom, Inc., a Georgia corporation ("WorldCom"), and MFS
Communications Company, Inc., a Delaware corporation ("MFS").
RECITALS
(A) Merger Agreement. WorldCom, MFS and HIJ Corp., a Delaware
corporation and wholly owned subsidiary of WorldCom ("Acquisition Subsidiary"),
have entered into an Agreement and Plan of Merger dated as of the date
hereof (the "Merger Agreement"), which provides, upon the terms and
subject to the conditions set forth therein, for the merger of Acquisition
Subsidiary with and into MFS (the "Merger"); and
(B) Condition to Merger Agreement. As a condition and inducement to
MFS' pursuit of the transactions contemplated by the Merger Agreement, and in
consideration therefor, WorldCom has agreed to grant MFS the Option (as
hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, and intending to be legally bound hereby, WorldCom and
MFS, agree as follows:
1. Defined Terms. Capitalized terms which are used
but not defined herein shall have the meanings ascribed to such terms in the
Merger Agreement.
2. Grant of Option. Subject to the terms and
conditions set forth herein, WorldCom hereby grants to MFS an irrevocable
option (the "Option") to purchase a number of shares of common stock,
par value $.01 per share ("WorldCom Common"), of WorldCom up to 81,224,137 of
such shares (as adjusted as set forth herein, the "Option Shares", which
shall include the Option Shares before and after any transfer of such Option
Shares, and which represents 19.9% of the issued and outstanding shares of
WorldCom Common as of the date hereof), at a purchase price per Option Share
(as adjusted as set forth herein, the "Purchase Price") equal to $26.375.
3. Exercise of Option.
(a) Provided that no preliminary or
permanent injunction or other order against the delivery of shares covered
by the Option issued by any court of competent jurisdiction in the United
States shall be in effect, Holder may exercise the Option, in whole or in
part, at any time and from time to time following the occurrence of a
Purchase Event (as hereinafter defined); provided that the Option shall
terminate and be of no further force or effect as follows:
(A) If the Merger is consummated, upon the Effective
Date;
<PAGE>2
(B) If the Merger Agreement is terminated for any reason and a
Purchase Event has occurred prior to such termination, eighteen (18) months
after the occurrence of such Purchase Event;
(C) If the Merger Agreement is terminated pursuant to Sections
7.1(a), 7.1(b), 7.1(c), 7.1(e), 7.1(f), 7.1(g) or 7.1(i) and a Purchase Event
has not occurred prior to such termination, upon such termination;
(D) If the Merger Agreement is terminated for any reason other
than those enumerated in clause (C) above and a Purchase Event has not occurred
prior to such termination, eighteen (18) months after such termination; and
(E) Three years from the date hereof if the Merger has not
been consummated and the Merger Agreement has not been terminated by such date.
provided, however, that any purchase of shares upon exercise of the Option shall
be subject to compliance with applicable law. The term "Holder" shall mean the
holder or holders of the Option from time to time, and which is initially MFS.
(b) As used herein, a "Purchase Event" means
any of the following events:
(i) WorldCom shall have recommended
to its stockholders, or WorldCom or any person (other than MFS or
any affiliate or associate of MFS) shall have publicly proposed or
publicly announced, a bona fide WorldCom Takeover Proposal that
shall not have been withdrawn at the time of the exercise of the
Option; or
(ii) any person (other than MFS or
any affiliate or associate of MFS) shall have acquired
beneficial ownership (as such term is defined in Rule 13d-3
promulgated under the Securities Exchange Act) of or the right to
acquire beneficial ownership of, or any "group" (as such term is
defined in Section 13(d)(3) of the Securities Exchange Act), other
than a group of which MFS or any affiliate or associate of MFS is
a member, shall have been formed which beneficially owns, or has
the right to acquire beneficial ownership of, 15% or more of the
voting power of WorldCom; or
(iii) WorldCom's Board of Directors
shall have withdrawn or modified in a manner adverse to MFS the
recommendation of WorldCom's Board of Directors with respect to
the WorldCom Proposals.
As used in this Agreement, "person" shall have the meaning specified
in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act.
(c) WorldCom shall notify Holder promptly
in writing of the occurrence of any Purchase Event, it being understood
that the giving of such notice by WorldCom shall not be a condition to the
right of Holder to exercise the Option.
(d) In the event Holder wishes to exercise
the Option, it shall send to WorldCom a written notice (the date of which
being herein referred to as the "Notice Date")
<PAGE>3
specifying (i) the total number of Option Shares it intends
to purchase pursuant to such exercise and (ii) a place and date not earlier
than three (3) business days nor later than fifteen (15) business days
from the Notice Date for the closing (the "Closing") of such purchase (the
"Closing Date"). If prior notification to or approval of any governmental
regulatory agency is required in connection with such purchase, WorldCom
shall cooperate with Holder in the filing of the required notice or
application for approval and the obtaining of such approval and the Closing
shall occur immediately following such regulatory approvals (and any mandatory
waiting periods). Any exercise of the Option shall be deemed to occur on the
Notice Date relating thereto.
(e) Holder, which is initially MFS, by this
Agreement, with respect to any Option Shares acquired by it on or prior to
the record date for the meeting of shareholders of WorldCom called to
consider the WorldCom Proposals, does hereby constitute and appoint WorldCom,
or any nominee of WorldCom, with full power of substitution, from the date
hereof to the earlier to occur of the termination of the Merger Agreement or
the Effective Time, as its true and lawful attorney and proxy (its "Proxy"),
for and in its name, place and stead, to vote each of such Option Shares as its
Proxy, at every annual, special or adjourned meeting of the shareholders of
WorldCom, including the right to sign its name (as stockholder) to any
consent, certificate or other document relating to WorldCom that the law of
the State of Georgia may permit or require:
(i) in favor of the WorldCom
Proposals; and
(ii) against any proposal for any
recapitalization, merger (other than the Merger), sale of assets
or other business combination between WorldCom and any person or
entity (other than MFS) or any other action or agreement that
would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of MFS under the
Merger Agreement or which could result in any of the conditions
to the Merger Agreement not being fulfilled.
THIS POWER OF ATTORNEY IS IRREVOCABLE, IS GRANTED
IN CONSIDERATION OF WORLDCOM AND ACQUISITION SUBSIDIARY ENTERING INTO THE
MERGER AGREEMENT AND IS COUPLED WITH AN INTEREST SUFFICIENT IN LAW TO
SUPPORT AN IRREVOCABLE POWER. This appointment shall revoke all prior powers
of attorney and proxies appointed by Holder at any time with respect to the
Option Shares and no subsequent powers of attorney or proxies will be
appointed by Holder, or be effective, with respect thereto during the term of
this Agreement.
Holder shall perform such further acts and execute
such further documents and instruments as may reasonably be required to
vest in WorldCom the power to carry out and give effect to the provisions
of this Agreement.
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall
(i) pay to WorldCom, in immediately available funds by wire transfer to a
bank account designated by WorldCom, an amount equal to the Purchase Price
multiplied by the number of Option Shares to be purchased on such Closing Date,
and (ii) present this Agreement to WorldCom at the address of WorldCom
specified in
<PAGE>4
Section 11(f) and WorldCom shall mark and return this
Agreement to Holder to reflect the exercise of this Option.
(b) At each Closing, simultaneously with the
delivery of immediately available funds, and presentation of this
Agreement as provided in Section 4(a), (i) WorldCom shall deliver to Holder
(A) a certificate or certificates representing the Option Shares to be
purchased at such Closing, which Option Shares shall be free and clear of all
liens, fully paid and nonassessable and subject to no preemptive rights,
and (B) an executed new agreement with the same terms as this Agreement
evidencing the right to purchase the balance of the Option Shares
purchasable hereunder, if any, and the remaining rights of the Holder, and
(ii) Holder shall deliver to WorldCom a letter agreeing that Holder shall not
offer to sell or otherwise dispose of such Option Shares in violation of
applicable federal and state law or of the provisions of this Agreement.
(c) In addition to any other legend that
is required by applicable law, certificates for the Option Shares
delivered at each Closing shall be endorsed with a restrictive legend which
shall read substantially as follows:
THE TRANSFER AND VOTING OF THE STOCK REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF
1933, AS AMENDED AND A STOCK OPTION AGREEMENT DATED AS OF AUGUST
25, 1996. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER
HEREOF WITHOUT CHARGE UPON RECEIPT BY WORLDCOM OF A WRITTEN REQUEST
THEREFOR.
It is understood and agreed that the portion of the above legend relating
to restrictions on transfer shall be removed by delivery of
substitute certificate(s) without such legend if Holder shall have delivered
to WorldCom a copy of a letter from the staff of the SEC, or an opinion of
counsel in form and substance reasonably satisfactory to WorldCom and its
counsel, to the effect that such legend is not required for purposes of
the Securities Act. It is understood and agreed that the portion of the
above legend relating to voting shall be removed upon expiration or
termination of the proxy referred to in Section 3(e) hereof.
(d) Upon the giving by Holder to WorldCom of
the written notice of exercise of the Option provided for under Section
3(e), the tender of the applicable purchase price in immediately available
funds and the tender of this Agreement to WorldCom, Holder shall be deemed to
be the holder of record of the shares of WorldCom Common issuable upon such
exercise, notwithstanding that the stock transfer books of WorldCom
shall then be closed or that certificates representing such shares of
WorldCom Common shall not then be actually delivered to Holder. WorldCom
shall pay all expenses, and any and all United States federal, state, and
local taxes and other charges that may be payable in connection with the
preparation, issuance and delivery of stock certificates under this Section
in the name of Holder or its assignee, transferee, or designee.
(e) WorldCom agrees (i) that it shall at all
times maintain, free from preemptive rights, sufficient authorized but
unissued or treasury shares of WorldCom Common so that the Option may be
exercised without additional authorization of WorldCom Common after giving
<PAGE>5
effect to all other options, warrants, convertible
securities and other rights to purchase WorldCom Common, (ii) that it will
not, by charter amendment or through reorganization, consolidation, merger,
dissolution or sale of assets, or by any other voluntary act, avoid or seek to
avoid the observance or performance of any of the covenants, stipulations
or conditions to be observed or performed hereunder by WorldCom, and
(iii) promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification, reporting and
waiting period requirements, (B) in the event prior approval of or notice
to any governmental regulatory agency is necessary before the Option may be
exercised, cooperating fully with Holder in preparing such applications or
notices and providing such information to such Governmental Authority as it
may require and (C) adopting, amending, redeeming or taking such other action
with respect to any Rights Agreement adopted on or after the date hereof so
as to preclude MFS from becoming an "Acquiring Person" and to preclude a
"Share Acquisition Date" or a "Distribution Date" (or similar events) from
occurring thereunder in order to permit Holder to exercise the Option and
WorldCom duly and effectively to issue shares of the WorldCom Common pursuant
hereto, as long as, after giving effect to the exercise of the Option (or any
part thereof), Holder would not own beneficially (within the meaning of Rule
13d-3 under the Securities Exchange Act) more than 17.5% of the issued and
outstanding WorldCom Common.
5. Representations and Warranties of WorldCom.
WorldCom hereby represents and warrants to MFS (and Holder, if different from
MFS) as follows:
(a) Corporate Authority. WorldCom has full
corporate power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby; the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of WorldCom, and no other corporate proceedings on the part of
WorldCom are necessary to authorize this Agreement or to consummate the
transactions so contemplated; this Agreement has been duly and validly executed
and delivered by WorldCom.
(b) Beneficial Ownership. To the best
knowledge of WorldCom, as of the date of this Agreement, no person or group
has beneficial ownership of more than 10% of the issued and outstanding shares
of WorldCom Common.
(c) Shares Reserved for Issuance; Capital
Stock. WorldCom has taken all necessary corporate action to authorize and
reserve and permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms, will have
reserved for issuance upon the exercise of the Option, that number of shares of
WorldCom Common equal to the maximum number of shares of WorldCom Common at any
time and from time to time purchasable upon exercise of the Option, and all
such shares, upon issuance pursuant to the Option, will be duly authorized,
validly issued, fully paid and nonassessable, and will be delivered free and
clear of all claims, liens, encumbrances, and security interests (other
than those created by this Agreement) and not subject to any preemptive rights.
(d) No Violations. The execution, delivery
and performance of this Agreement does not or will not, and the
consummation by WorldCom of any of the transactions contemplated hereby
will not, constitute or result in (A) a breach or violation of, or a default
under, its certificate
<PAGE>6
of incorporation or by-laws, or the comparable
governing instruments of any of its subsidiaries, or (B) a breach or
violation of, or a default under, any agreement, lease, contract, note,
mortgage, indenture, arrangement or other obligation of it or any of its
subsidiaries (with or without the giving of notice, the lapse of time or
both) or under any law, rule, ordinance or regulation or judgment, decree,
order, award or governmental or non-governmental permit or license to which
it or any of its subsidiaries is subject, that would, in any case give any
other person the ability to prevent or enjoin WorldCom's performance under this
Agreement in any material respect.
6. Representations and Warranties Of MFS. MFS hereby
represents and warrants to WorldCom as follows:
(a) Corporate Authority. MFS has full
corporate power and authority to enter into this Agreement and, subject to
obtaining the approvals referred to in this Agreement, to consummate the
transactions contemplated by this Agreement; the execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part of MFS and this Agreement has been duly executed and delivered by MFS.
(b) Investment Representations.
(i) MFS is acquiring the Option and
the Option Shares (collectively, the "Securities") for its own
account for investment only, and not with a view to, or for sale in
connection with, any distribution of the Securities in violation
of the Securities Act, or any rule or regulation under the
Securities Act.
(ii) MFS has had such opportunity as
it deems adequate to obtain from representatives of WorldCom such
information as is necessary to permit MFS to evaluate the merits and
risks of its investment in WorldCom.
(iii) MFS has sufficient experience in
business, financial and investment matters to be able to evaluate
the risks involved in the purchase of the Securities and to make an
informed investment decision with respect to such purchase.
(iv) MFS acknowledges that (1) the
Securities have not been registered under the Securities Act and
are "restricted securities" within the meaning of Rule 144 under
the Securities Act and (2) the Securities cannot be sold,
transferred or otherwise disposed of unless they are subsequently
registered under the Securities Act or an exemption from registration
is then available.
7. Adjustment upon Changes in MFS Capitalization, etc.
(a) In the event of any change in the
WorldCom Common by reason of a stock dividend, stock split,
split-up, recapitalization, combination, exchange of shares or similar
transaction, the type and number of shares or securities subject to the
Option, and the Purchase Price therefor, shall be adjusted appropriately,
and proper provision shall be made in the agreements governing such
transaction so that Holder shall receive, upon exercise of the Option,
<PAGE>7
the number and class of shares or other securities or
property that Holder would have received in respect of WorldCom Common if the
Option had been exercised immediately prior to such event, or the record date
therefor, as applicable. If any additional shares of WorldCom Common are
issued after the date of this Agreement (other than pursuant to an event
described in the first sentence of this Section 7(a), upon exercise of any
option to purchase WorldCom Common outstanding on the date hereof or upon
conversion into WorldCom Common of any convertible security of WorldCom
outstanding on the date hereof), the number of shares of WorldCom Common
subject to the Option shall be adjusted so that, after such issuance, it,
together with any shares of WorldCom Common previously issued pursuant hereto,
equals 19.9% of the number of shares of WorldCom Common then issued and
outstanding, without giving effect to any shares subject to or issued pursuant
to the Option. No provision of this Section 7 shall be deemed to affect or
change, or constitute authorization for any violation of, any of the
covenants or representations in the Merger Agreement.
(b) In the event that WorldCom shall enter
into an agreement (i) to consolidate with or merge into any person, other
than MFS or one of its subsidiaries, and shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) to permit any
person, other than MFS or one of its subsidiaries, to merge into WorldCom
and WorldCom shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of WorldCom Common
shall be changed into or exchanged for stock or other securities of WorldCom or
any other person or cash or any other property or the outstanding shares of
WorldCom Common immediately prior to such merger shall after such merger
represent less than 50% of the outstanding shares and share equivalents of
the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than MFS or one of
its subsidiaries, then, and in each such case, the agreement governing
such transaction shall make proper provisions so that the Option shall,
upon the consummation of any such transaction and upon the terms and conditions
set forth herein, be converted into, or exchanged for, an option to acquire the
number and class of shares or other securities or property that Holder would
have received in respect of WorldCom Common if the Option had been exercised
immediately prior to such consolidation, merger, sale or transfer, or the
record date therefor, as applicable.
8. Registration Rights.
(a) Demand Registration Rights. WorldCom
shall, subject to the conditions of 8(c) below, if requested by Holder,
including MFS and any permitted transferee acquiring at least 10% of the
shares of WorldCom Common represented by the Option on the date hereof
(each, a "Selling Shareholder"), as expeditiously as possible prepare and
file a registration statement under the Securities Act if such registration
is necessary in order to permit the sale or other disposition of any or all
shares of WorldCom Common or other securities that have been acquired by
or are issuable to the Selling Shareholder upon exercise of the Option in
accordance with the intended method of sale or other disposition stated by
the Selling Shareholder in such request, including without limitation a
"shelf" registration statement under Rule 415 under the Securities Act or any
successor provision, and WorldCom shall use its best efforts to qualify
such shares or other securities for sale under any applicable state securities
laws, provided, however, that WorldCom shall not be required to consent to
general jurisdiction or qualify to do business in any state where it is not
otherwise required to so consent to such jurisdiction or to so qualify to do
business.
<PAGE>8
(b) Additional Registration Rights. If
WorldCom at any time after the exercise of the Option proposes to register
any shares of WorldCom Common under the Securities Act, WorldCom will
promptly give written notice to the Selling Shareholders of its intention
to do so and, upon the written request of any Selling Shareholder given
within thirty (30) days after receipt of any such notice (which request
shall specify the number of shares of WorldCom Common intended to be included
in such public offering by the Selling Shareholder), WorldCom will cause
all such shares for which a Selling Shareholder requests participation in
such registration, to be so registered and included in such public
offering, provided, however, that WorldCom may elect to not cause any such
shares to be so registered (i) if such public offering is to be
underwritten and the underwriters in good faith object for valid
business reasons, or (ii) in the case of a registration solely to implement
an employee benefit plan or a registration filed on Form S-4 of the
Securities Act or any successor Form; provided, further, however, that such
election pursuant to (i) may only be made two times. If some but not all the
shares of WorldCom Common, with respect to which WorldCom shall have
received requests for registration pursuant to this Section 8(b), shall
be excluded from such registration, WorldCom shall make appropriate
allocation of shares to be registered among the Selling Shareholders desiring
to register their shares pro rata in the proportion that the number of
shares requested to be registered by each such Selling Shareholder bears
to the total number of shares requested to be registered by all such
Selling Shareholders then desiring to have WorldCom Common registered for
sale.
(c) Conditions to Required Registration.
WorldCom shall use all reasonable efforts to cause each registration
statement referred to in Section 8(a) above to become effective and to obtain
all consents or waivers of other parties which are required therefor and to
keep such registration statement effective; provided, however, that
WorldCom may delay any registration of Option Shares required pursuant to
Section 8(a) above for a period not exceeding ninety (90) days provided
WorldCom shall in good faith determine that any such registration would
adversely affect WorldCom (provided that this right may not be exercised more
than once during any twelve month period), and WorldCom shall not be
required to register Option Shares under the Securities Act pursuant to
Section 8(a) above:
(i) on more than one occasion during
any calendar year;
(ii) within ninety (90) days after the
effective date of a registration referred to in Section 8(b)
above pursuant to which the Selling Shareholder or Selling
Shareholders concerned were afforded the opportunity to register
such shares under the Securities Act and such shares were registered
as requested;
(iii) unless a request therefor is
made to WorldCom by Selling Shareholders that hold at least
25% or more of the aggregate number of Option Shares (including
shares of WorldCom Common issuable upon exercise of the Option)
then outstanding; or
(iv) if all the Option Shares proposed
to be registered could be sold by the Selling Shareholders in a
90-day period in accordance with Rule 144.
In addition to the foregoing, WorldCom shall not be required
to maintain the
<PAGE>9
effectiveness of any registration statement after the expiration of six
(6) months from the effective date of such registration statement. WorldCom
shall use all reasonable efforts to make any filings, and take all steps,
under all applicable state securities laws to the extent necessary to permit
the sale or other disposition of the Option Shares so registered in
accordance with the intended method of distribution for such shares;
provided, however, that WorldCom shall not be required to consent to general
jurisdiction or qualify to do business in any state where it is not
otherwise required to so consent to such jurisdiction or to so qualify to do
business.
(d) Expenses. Except where applicable
state law prohibits such payments, WorldCom will pay all expenses
(including without limitation registration fees, qualification fees, blue sky
fees and expenses (including the fees and expenses of counsel), legal
expenses, including the reasonable fees and expenses of one counsel to the
holders whose Option Shares are being registered (not to exceed $15,000),
printing expenses and the costs of special audits or "cold comfort" letters,
expenses of underwriters, excluding discounts and commissions but
including liability insurance if WorldCom so desires or the underwriters
so require, and the reasonable fees and expenses of any necessary special
experts) in connection with each registration pursuant to Section 8(a) or
8(b) above (including the related offerings and sales by holders of Option
Shares) and all other qualifications, notifications or exemptions pursuant
to Section 8(a) or 8(b) above.
(e) Indemnification. In connection with any
registration under Section 8(a) or 8(b) above, WorldCom hereby indemnifies
the Selling Shareholders, and each underwriter thereof, including each
person, if any, who controls such Holder or underwriter within the meaning of
Section 15 of the Securities Act, against all expenses, losses, claims,
damages and liabilities caused by any untrue, or alleged untrue, statement
of a material fact contained in any registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission, or
alleged omission, to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue
statement that was included by WorldCom in any such registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) in reliance upon and in conformity with, information
furnished in writing to WorldCom by such indemnified party expressly for
use therein, and WorldCom and each officer, director and controlling person
of WorldCom shall be indemnified by such Selling Shareholders, or by such
underwriter, as the case may be, for all such expenses, losses, claims,
damages and liabilities caused by any untrue, or alleged untrue, statement,
that was included by WorldCom in any such registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) in reliance upon, and in conformity with, information
furnished in writing to WorldCom by or on behalf of such Selling Shareholder or
such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under
this Section 8(e) of notice of the commencement of any action against
such indemnified party in respect of which indemnity or reimbursement may be
sought against any indemnifying party under this Section 8(e), such
indemnified party shall notify the indemnifying party in writing of the
commencement of such action, but the failure so to notify the indemnifying
party shall not relieve it of any liability which it may otherwise have to any
indemnified party under this Section 8(e) except to the extent the
<PAGE>10
indemnified party is materially prejudiced thereby. In case notice
of commencement of any such action shall be given to the indemnifying
party as above provided, the indemnifying party shall be entitled to
participate in and, to the extent it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense of such action at
its own expense, with counsel chosen by it and reasonably satisfactory to
such indemnified party. The indemnified party shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel (other than reasonable
costs of investigation) shall be paid by the indemnified party unless (i)
the indemnifying party either agrees to pay the same, (ii) the
indemnifying party fails to assume the defense of such action with counsel
reasonably satisfactory to the indemnified party, or (iii) the indemnified
party has been advised by counsel that one or more legal defenses may be
available to the indemnifying party that may be contrary to the interest of
the indemnified party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obligation to bear
fees and expenses of such counsel. No indemnifying party shall be liable
for any settlement entered into without its consent, which consent may
not be unreasonably withheld.
If the indemnification provided for in this Section 8(e)
is unavailable to a party otherwise entitled to be indemnified in respect of
any expenses, losses, claims, damages or liabilities referred to herein,
then the indemnifying party, in lieu of indemnifying such party otherwise
entitled to be indemnified, shall contribute to the amount paid or payable by
such party to be indemnified as a result of such expenses, losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative benefits received by WorldCom, the Selling Shareholders and the
underwriters from the offering of the securities and also the relative fault of
WorldCom, the Selling Shareholders and the underwriters in connection with
the statements or omissions which resulted in such expenses, losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The amount paid or payable by a party as a result of the
expenses, losses, claims, damages and liabilities referred to above shall
be deemed to include any legal or other fees or expenses reasonably incurred
by such party in connection with investigating or defending any action or
claim, provided, however, that in no case shall any Selling Shareholder be
responsible, in the aggregate, for any amount in excess of the net offering
proceeds attributable to its Option Shares included in the offering. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Any
obligation by any Selling Shareholder to indemnify shall be several and
not joint with other holders.
In connection with any registration pursuant to Section
8(a) or 8(b) above, WorldCom and each Selling Shareholder (other than MFS)
shall enter into an agreement containing the indemnification provisions
of this Section 8(e). In the event of an underwritten public offering
pursuant to Section 8(b), the Company and the Selling Shareholders shall
enter into an underwriting agreement containing customary terms and provisions;
provided that the indemnification provisions as they relate to Selling
Shareholders shall contain substantially the same limitations as the
provisions set forth herein.
<PAGE>11
(f) Miscellaneous Reporting. WorldCom
shall comply with all reporting requirements and will do all such other
things as may be necessary to permit the expeditious sale at any time of any
Option Shares by the Selling Shareholders thereof in accordance with and to
the extent permitted by any rule or regulation promulgated by the SEC from time
to time, including, without limitation, Rule 144. WorldCom shall at its
expense provide the Selling Shareholders with any information necessary in
connection with the completion and filing of any reports or forms required
to be filed by them under the Securities Act or the Securities Exchange Act,
or required pursuant to any state securities laws or the rules of any stock
exchange.
(g) Issue Taxes. WorldCom will pay all
stamp taxes in connection with the issuance and the sale of the Option
Shares and in connection with the exercise of the Option, and will hold
the Selling Shareholders harmless, without limitation as to time, against
any and all liabilities, with respect to all such taxes.
9. Quotation; Listing. If WorldCom Common or any
other securities to be acquired in connection with the exercise of the Option
are then authorized for quotation or trading or listing on any securities
exchange, WorldCom, upon the request of Holder, will promptly file an
application, if required, to authorize for quotation or trading or
listing the shares of WorldCom Common or other securities to be acquired
upon exercise of the Option on such securities exchange and will use its best
efforts to obtain approval, if required, of such quotation or listing as soon
as practicable.
10. Division of Option. This Agreement (and the Option
granted hereby) are exchangeable, without expense, at the option of
Holder, upon presentation and surrender of this Agreement at the principal
office of WorldCom for other Agreements providing for Options of different
denominations entitling the holder thereof to purchase in the aggregate the
same number of shares of WorldCom Common purchasable hereunder. The terms
"Agreement" and "Option" as used herein include any other Agreements and
related Options for which this Agreement (and the Option granted hereby)
may be exchanged. Upon receipt by WorldCom of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, WorldCom will execute and deliver a new Agreement
of like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of WorldCom,
whether or not the Agreement so lost, stolen, destroyed or mutilated shall at
any time be enforceable by anyone.
11. Miscellaneous.
(a) Expenses. Each of the parties hereto
shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
(b) Waiver and Amendment. Any provision of
this Agreement may be waived at any time by the party that is entitled to the
benefits of such provision. This Agreement may not
<PAGE>12
be modified, amended, altered or supplemented except upon
the execution and delivery of a written agreement executed by the parties
hereto.
(c) Entire Agreement: No Third-Party
Beneficiaries; Severability. This Agreement, together with the Merger
Agreement and the other documents and instruments referred to herein and
therein, between WorldCom and MFS (i) constitute the entire agreement
and supersedes all prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof, and (ii)
is not intended to confer upon any person other than the parties hereto (other
than the indemnified parties under Section 8(e) and any transferees of the
Option Shares or any permitted transferee of this Agreement pursuant to
Section 11(h)) any rights or remedies hereunder. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction or Governmental Authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated. If for any reason such
court or Governmental Authority determines that the Option does not permit
Holder to acquire the full number of shares of WorldCom Common as provided
in Section 3 (as may be adjusted herein), it is the express intention of
WorldCom to allow Holder to acquire such lesser number of shares as may be
permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be
governed and construed in accordance with the laws of the State of Georgia
without regard to any applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive
headings contained herein are for convenience of reference only and shall
not affect in any way the meaning or interpretation of this Agreement.
(f) Notices. All notices and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally, telecopied (with confirmation) or mailed by
registered or certified mail (return receipt requested) to the parties at
the addresses set forth in the Merger Agreement (or at such other address for a
party as shall be specified by like notice).
(g) Counterparts. This Agreement and any
amendments hereto may be executed in two counterparts, each of which shall
be considered one and the same agreement and shall become effective when
both counterparts have been signed and delivered, it being understood
that both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor
any of the rights, interests or obligations hereunder or under the
Option shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
party, except that Holder may assign this Agreement to a wholly-owned
subsidiary of Holder and Holder may assign its rights hereunder in whole
or in part after the occurrence of a Purchase Event. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and
be enforceable by the parties and their respective successors and assigns.
(i) Further Assurances. In the event of any
exercise of the Option by Holder,
<PAGE>13
WorldCom and Holder shall execute and deliver all
other documents and instruments and take all other action that may be
reasonably necessary in order to consummate the transactions provided for by
such exercise.
(j) Specific Performance. The parties
hereto agree that this Agreement may be enforced by either party through
specific performance, injunctive relief and other equitable relief. Both
parties further agree to waive any requirement for the securing or posting of
any bond in connection with the obtaining of any such equitable relief and
that this provision is without prejudice to any other rights that the
parties hereto may have for any failure to perform this Agreement.
<PAGE>14
IN WITNESS WHEREOF, MFS and WorldCom have caused this Stock
Option Agreement to be signed by their respective officers thereunto duly
authorized, all as of the day and year first written above.
MFS COMMUNICATIONS COMPANY, INC.
By: /s/ James Q. Crowe
Name: James Q. Crowe
Title: Chairman of the Board and
Chief Executive Officer
WORLDCOM, INC.
By: /s/ Bernard J. Ebbers
Name: Bernard J. Ebbers
Title: President and Chief Executive
Officer
<PAGE>1
EXECUTION COPY
AGREEMENT
AGREEMENT by and between WorldCom, Inc., a Georgia corporation
("WorldCom"), and MFS Communications Company, Inc., a Delaware corporation
("MFS"), dated as of August 25, 1996.
RECITALS
A. On the date hereof, WorldCom, HIJ Corp., a wholly owned subsidiary
of WorldCom and a Delaware corporation, and MFS entered into an Agreement and
Plan of Merger (the "Merger Agreement").
B. Section 7.4 of the Merger Agreement provides that in the event that
the Merger Agreement is terminated under circumstances in which either WorldCom
or MFS is entitled to a Termination Fee (as defined in the Merger Agreement),
the party entitled to receive the Termination Fee (the "Terminating Party")
shall be entitled to receive from the other party (the "Non-Terminating Party")
certain services, on the terms and conditions described herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Services
In the event the provisions of Section 7.4 of the Merger Agreement
become applicable, the Non-Terminating Party agrees to provide communication
services on the terms described herein to the Terminating Party at Transfer Cost
(as defined below) for a period of 3 years. The commencement date of this
three-year period shall be 180 days after the date on which the Merger Agreement
is terminated.
2. Transfer Cost
(a) For purposes of this Agreement, "Transfer Cost" shall consist of
the total service long-run incremental cost ("TSLRIC") of providing a
communications service, excluding: (1) any measure of costs of capital, common
costs and profits; and (2) any retail related costs, such as sales, marketing,
billing, collection (other than carrier-to-carrier billing and collection) and
other costs associated with offering communications services directly to end
users. TSLRIC shall be based upon the forward-looking economic costs of the
total quantity of the facilities and functions that are directly attributable
to, or reasonably identifiable as incremental to, the provision of the service.
A reasonable allocation of shared costs of facilities directly attributable or
incremental to the provision of a particular service may be included in TSLRIC.
The TSLRIC shall be revised annually; and shall be computed, to the extent
possible and
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subject to the exclusions listed above, in a manner consistent with the
"Total Element Long-Run Incremental Cost" standard adopted by the FCC in 47 CFR
ss. 51.505, or any successor cost standard implemented by the FCC.
(b) The Non-Terminating Party will determine the Transfer Cost for each
type of service being provided. Should the Terminating Party wish to dispute a
Transfer Cost, it may propose a different Transfer Cost. The dispute will be
resolved by a third party who shall select the Transfer Cost which such third
party determines to be more consistent with the proper Transfer Cost as defined
above.
(c) The third party will be selected from the list in Exhibit A by
alternate deletion, beginning with the disputing party, until three remain. Each
remaining one shall be requested by the parties to submit a bid for compensation
(to be paid in equal share by the parties) for making the determination. The
lowest bidder shall be selected as arbitrator.
3. Definition of Services
Services that are to be provided by WorldCom or MFS are defined as
communication products sold by that party to an independent third party customer
under an arms' length arrangement. These services include the transport and
switching of telecommunications and data traffic, but do not include any
ancillary or value-added services such as facilities management.
4. Value of Services
The Non-Terminating Party shall provide up to $300,000,000 in services
over a 3-year period, with a maximum annual service commitment of $150,000,000.
Due to the scope of services requested, the Terminating Party shall provide to
the Non-Terminating Party a 6-month rolling forecast of requirements. For the
first 12 months of this Agreement, the Non-Terminating Party shall not be
obligated to install more than $500,000 of gross incremental service per month.
For the remaining term of this Agreement, the Non-Terminating Party shall not be
obligated to install more than $1,000,000 in gross incremental service per
month.
5. Capacity
The Non-Terminating Party will make available to the Terminating Party
up to 1/3 of all available capacity in its switches and networks. Where
sufficient capacity does not exist to satisfy the Terminating Party's
requirements, the Non-Terminating Party shall commence a good faith effort to
construct the additional capacity in a timely manner. The Non-Terminating Party
must undertake such capacity construction where the requested capacity is in a
market or route in which the Non-
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Terminating Party normally operates and the capacity is for services
offered by the Non-Terminating Party to third parties. If capacity construction
is required, the Non-Terminating Party can construct as much or as little
capacity as it sees fit to satisfy the request. Therefore, for this new
construction, the limit of 1/3 available capacity will not govern. For purposes
of this Agreement, available capacity shall be determined after taking into
account constraints placed on the delivering party by underlying service or
network suppliers. If as a result of capacity constraints, the Non-Terminating
Party is not able to deliver at least 75% of its requested installation amount
for the first 2 years (subject to the limitations in "Value of Services" above),
the Non-Terminating Party will extend the term of its obligation hereunder by 1
year.
6. Quality of Service
The quality of services provided by the Non-Terminating Party shall
generally meet standards and shall not be of materially lower quality than the
service provided to third parties purchasing similar services during the same
period of time. Should the Non-Terminating Party fail to deliver services that
meet such quality standards other than by reason of causes beyond the reasonable
control of the Non-Terminating Party, the Terminating Party shall be entitled to
service credits equal to 1/96th of a day's bill for each 15 minutes of
interrupted service. This service credit will be calculated on a
circuit-by-circuit basis. The sum of service credits cannot exceed 24 hours in
any one day, nor more than 30 days in any one calendar month. Alternatively, if
the overall quality of service provided in aggregate for one month is materially
less than the aggregate quality of service provided by the Non-Terminating Party
to its third party customers purchasing similar services for that same month
other than by reason of causes beyond the reasonable control of the
Non-Terminating Party, the Non-Terminating Party will be liable to the
Terminating Party for liquidated damages equal to the value of 1/2 times the
total bill for the month for any service with materially substandard quality.
7. Service Term
All services turned up shall be on a circuit by circuit basis. Circuit
installation and disconnect charges shall be calculated according to the
Transfer Cost definition above. Should the Terminating Party cancel service
prior to one year, the Terminating Party will be liable for any reasonable
termination charges resulting from the cancellation.
8. Termination
At the end of the 3-year term, service rates will be negotiated between
the parties. Should the parties not be able to reach agreement on a new contract
covering these services, in
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order to effect an orderly transition of service, the Non-Terminating
Party will be obligated to support all existing services for a period up to 18
months from the termination date at rates equal to those in effect at the time
for other customers purchasing similar types and quantities of services.
9. Miscellaneous
(a) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement or the Merger Agreement.
(b) This Agreement may not be modified, changed or discharged in whole
or in part, except by an agreement in writing signed by MFS and WorldCom.
(c) This Agreement will be binding upon the parties' permitted assigns.
This Agreement may not be assigned by the Terminating Party, whether by
operation of law or otherwise, without the prior written consent of the
Non-Terminating Party.
(d) No delay or omission by either party in exercising any right under
this Agreement will operate as a waiver of that or any other right. A waiver or
consent given by either party on any one occasion is effective only in that
instance and will not be construed as a bar to or waiver of any right on any
other occasion.
(e) This Agreement is governed by and will be construed in accordance
with the laws of the State of Delaware.
(f) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but both of which together shall constitute
one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
MFS COMMUNICATIONS COMPANY, INC.
By: /s/ James Q. Crowe
Name: James Q. Crowe
Title: Chairman of the Board and
Chief Executive Officer
WORLDCOM, INC.
By: /s/ Bernard J. Ebbers
Name: Bernard J. Ebbers
Title: President and
Chief Executive Officer
<PAGE>6
EXHIBIT A
Arthur Andersen
Coopers & Lybrand
Deloitte & Touche
Ernst & Young
KPMG Peat Marwick
Price Waterhouse
<PAGE>1
EXECUTION COPY
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of August 25, 1996 (the "Agreement"),
by and between WorldCom, Inc., a Georgia corporation ("WorldCom"), and MFS
Communications Company, Inc., a Delaware corporation ("MFS").
RECITALS
(A) Merger Agreement. WorldCom, MFS and HIJ Corp., a Delaware
corporation and wholly owned subsidiary of WorldCom ("Acquisition Subsidiary"),
have entered into an Agreement and Plan of Merger dated as of the date hereof
(the "Merger Agreement"), which provides, upon the terms and subject to the
conditions set forth therein, for the merger of Acquisition Subsidiary with and
into MFS (the "Merger"); and
(B) Condition to Merger Agreement. As a condition and inducement to
WorldCom's pursuit of the transactions contemplated by the Merger Agreement, and
in consideration therefor, MFS has agreed to grant WorldCom the Option (as
hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, and intending to be legally bound hereby, WorldCom and
MFS, agree as follows:
1. Defined Terms. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Merger Agreement.
2. Grant of Option. Subject to the terms and conditions set forth
herein, MFS hereby grants to WorldCom an irrevocable option (the "Option") to
purchase a number of shares of common stock, par value $.01 per share ("MFS
Common"), of MFS up to 43,953,073 of such shares (as adjusted as set forth
herein, the "Option Shares", which shall include the Option Shares before and
after any transfer of such Option Shares, and which represents 19.9% of the
issued and outstanding shares of MFS Common as of the date hereof), at a
purchase price per Option Share (as adjusted as set forth herein, the "Purchase
Price") equal to $55.3875.
3. Exercise of Option.
(a) Provided that no preliminary or permanent injunction or other
order against the delivery of shares covered by the Option issued by any court
of competent jurisdiction in the United States shall be in effect, Holder may
exercise the Option, in whole or in part, at any time and from time to time
following the occurrence of a Purchase Event (as
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hereinafter defined); provided that the Option shall terminate and be of no
further force or effect as follows:
(A) If the Merger is consummated, upon the Effective Date;
(B) If the Merger Agreement is terminated for any reason and a
Purchase Event has occurred prior to such termination, eighteen (18) months
after the occurrence of such Purchase Event;
(C) If the Merger Agreement is terminated pursuant to Sections 7.1(a),
7.1(b), 7.1(d), 7.1(h), 7.1(j), 7.1(k) or 7.1(l) and a Purchase Event has not
occurred prior to such termination, upon such termination;
(D) If the Merger Agreement is terminated for any reason other than
those enumerated in clause (C) above and a Purchase Event has not occurred prior
to such termination, eighteen (18) months after such termination; and
(E) Three years from the date hereof if the Merger has not been
consummated and the Merger Agreement has not been terminated by such date.
provided, however, that any purchase of shares upon exercise of the Option shall
be subject to compliance with applicable law. The term "Holder" shall mean the
holder or holders of the Option from time to time, and which is initially
WorldCom.
(b) As used herein, a "Purchase Event" means any of the
following events:
(i) MFS shall have recommended to its stockholders,
or MFS or any person (other than WorldCom or any affiliate or
associate of WorldCom) shall have publicly proposed or publicly
announced, a bona fide MFS Takeover Proposal that shall not
have been withdrawn at the time of the exercise of the Option;
or
(ii) any person (other than WorldCom or any affiliate
or associate of WorldCom) shall have acquired beneficial
ownership (as such term is defined in Rule 13d-3 promulgated
under the Securities Exchange Act) of or the right to acquire
beneficial ownership of, or any "group" (as such term is
defined in Section 13(d)(3) of the Securities Exchange Act),
other than a group of which WorldCom or any affiliate or
associate of WorldCom is a member, shall have been formed which
beneficially owns, or has the right to acquire beneficial
ownership of, 15% or more of the voting power of MFS; or
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(iii) MFS' Board of Directors shall have withdrawn or
modified in a manner adverse to WorldCom the recommendation of
MFS' Board of Directors with respect to the MFS Proposals.
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act.
(c) MFS shall notify Holder promptly in writing of the occurrence
of any Purchase Event, it being understood that the giving of such notice by MFS
shall not be a condition to the right of Holder to exercise the Option.
(d) In the event Holder wishes to exercise the Option, it shall
send to MFS a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three (3) business days nor later than fifteen (15) business days from the
Notice Date for the closing (the "Closing") of such purchase (the "Closing
Date"). If prior notification to or approval of any governmental regulatory
agency is required in connection with such purchase, MFS shall cooperate with
Holder in the filing of the required notice or application for approval and the
obtaining of such approval and the Closing shall occur immediately following
such regulatory approvals (and any mandatory waiting periods). Any exercise of
the Option shall be deemed to occur on the Notice Date relating thereto.
(e) Holder, which is initially WorldCom, by this Agreement, with
respect to any Option Shares acquired by it on or prior to the record date for
the meeting of stockholders of MFS called to consider the MFS Proposals, does
hereby constitute and appoint MFS, or any nominee of MFS, with full power of
substitution, from the date hereof to the earlier to occur of the termination of
the Merger Agreement or the Effective Time, as its true and lawful attorney and
proxy (its "Proxy"), for and in its name, place and stead, to vote each of such
Option Shares as its Proxy, at every annual, special or adjourned meeting of the
stockholders of MFS, including the right to sign its name (as stockholder) to
any consent, certificate or other document relating to MFS that the law of the
State of Delaware may permit or require:
(i) in favor of the MFS Proposals; and
(ii) against any proposal for any recapitalization, merger
(other than the Merger), sale of assets or other business
combination between MFS and any person or entity (other than
WorldCom or Acquisition Subsidiary or other permitted assignee
thereof under the Merger Agreement) or any other action or
agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement
of WorldCom under the Merger Agreement or which could result in
any of the conditions to the Merger Agreement not being
fulfilled.
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THIS POWER OF ATTORNEY IS IRREVOCABLE, IS GRANTED IN
CONSIDERATION OF MFS ENTERING INTO THE MERGER AGREEMENT AND IS COUPLED WITH AN
INTEREST SUFFICIENT IN LAW TO SUPPORT AN IRREVOCABLE POWER. This appointment
shall revoke all prior powers of attorney and proxies appointed by Holder at any
time with respect to the Option Shares and no subsequent powers of attorney or
proxies will be appointed by Holder, or be effective, with respect thereto
during the term of this Agreement.
Holder shall perform such further acts and execute such further
documents and instruments as may reasonably be required to vest in MFS the power
to carry out and give effect to the provisions of this Agreement.
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to MFS, in
immediately available funds by wire transfer to a bank account designated by
MFS, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date, and (ii) present this Agreement to
MFS at the address of MFS specified in Section 11(f) and MFS shall mark and
return this Agreement to Holder to reflect the exercise of this Option.
(b) At each Closing, simultaneously with the delivery of
immediately available funds, and presentation of this Agreement as provided in
Section 4(a), (i) MFS shall deliver to Holder (A) a certificate or certificates
representing the Option Shares to be purchased at such Closing, which Option
Shares shall be free and clear of all liens, fully paid and nonassessable and
subject to no preemptive rights, and (B) an executed new agreement with the same
terms as this Agreement evidencing the right to purchase the balance of the
Option Shares purchasable hereunder, if any, and the remaining rights of the
Holder, and (ii) Holder shall deliver to MFS a letter agreeing that Holder shall
not offer to sell or otherwise dispose of such Option Shares in violation of
applicable federal and state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by
applicable law, certificates for the Option Shares delivered at each Closing
shall be endorsed with a restrictive legend which shall read substantially as
follows:
THE TRANSFER AND VOTING OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS
AMENDED AND A STOCK OPTION AGREEMENT DATED AS OF AUGUST 25, 1996. A
COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT
CHARGE UPON RECEIPT BY MFS OF A WRITTEN REQUEST THEREFOR.
<PAGE>5
It is understood and agreed that the portion of the above legend relating to
restrictions on transfer shall be removed by delivery of substitute
certificate(s) without such legend if Holder shall have delivered to MFS a copy
of a letter from the staff of the SEC, or an opinion of counsel in form and
substance reasonably satisfactory to MFS and its counsel, to the effect that
such legend is not required for purposes of the Securities Act. It is understood
and agreed that the portion of the above legend relating to voting shall be
removed upon expiration or termination of the proxy referred to in Section 3(e)
hereof.
(d) Upon the giving by Holder to MFS of the written notice of
exercise of the Option provided for under Section 3(e), the tender of the
applicable purchase price in immediately available funds and the tender of this
Agreement to MFS, Holder shall be deemed to be the holder of record of the
shares of MFS Common issuable upon such exercise, notwithstanding that the stock
transfer books of MFS shall then be closed or that certificates representing
such shares of MFS Common shall not then be actually delivered to Holder. MFS
shall pay all expenses, and any and all United States federal, state, and local
taxes and other charges that may be payable in connection with the preparation,
issuance and delivery of stock certificates under this Section in the name of
Holder or its assignee, transferee, or designee.
(e) MFS agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of MFS
Common so that the Option may be exercised without additional authorization of
MFS Common after giving effect to all other options, warrants, convertible
securities and other rights to purchase MFS Common, (ii) that it will not, by
charter amendment or through reorganization, consolidation, merger, dissolution
or sale of assets, or by any other voluntary act, avoid or seek to avoid the
observance or performance of any of the covenants, stipulations or conditions to
be observed or performed hereunder by MFS, and (iii) promptly to take all action
as may from time to time be required (including (A) complying with all premerger
notification, reporting and waiting period requirements, (B) in the event prior
approval of or notice to any governmental regulatory agency is necessary before
the Option may be exercised, cooperating fully with Holder in preparing such
applications or notices and providing such information to such Governmental
Authority as it may require and (C) amending, redeeming or taking such other
action with respect to the MFS Rights Agreement so as to preclude WorldCom from
becoming an "Acquiring Person" and to preclude a "Stock Acquisition Date" or a
"Distribution Date" (or similar events) from occurring thereunder in order to
permit Holder to exercise the Option and MFS duly and effectively to issue
shares of the MFS Common pursuant hereto, as long as, after giving effect to the
exercise of the Option (or any part thereof), Holder would not own beneficially
(within the meaning of Rule 13d-3 under the Securities Exchange Act) more than
17.5% of the issued and outstanding MFS Common.
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5. Representations and Warranties of MFS. MFS hereby represents and
warrants to WorldCom (and Holder, if different from WorldCom) as follows:
(a) Corporate Authority. MFS has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby; the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of MFS, and no other corporate
proceedings on the part of MFS are necessary to authorize this Agreement or to
consummate the transactions so contemplated; this Agreement has been duly and
validly executed and delivered by MFS.
(b) Beneficial Ownership. To the best knowledge of MFS, as of the
date of this Agreement, no person or group has beneficial ownership of more than
10% of the issued and outstanding shares of MFS Common.
(c) Shares Reserved for Issuance; Capital Stock. MFS has taken
all necessary corporate action to authorize and reserve and permit it to issue,
and at all times from the date hereof through the termination of this Agreement
in accordance with its terms, will have reserved for issuance upon the exercise
of the Option, that number of shares of MFS Common equal to the maximum number
of shares of MFS Common at any time and from time to time purchasable upon
exercise of the Option, and all such shares, upon issuance pursuant to the
Option, will be duly authorized, validly issued, fully paid and nonassessable,
and will be delivered free and clear of all claims, liens, encumbrances, and
security interests (other than those created by this Agreement) and not subject
to any preemptive rights.
(d) No Violations. The execution, delivery and performance of
this Agreement does not or will not, and the consummation by MFS of any of the
transactions contemplated hereby will not, constitute or result in (A) a breach
or violation of, or a default under, its certificate of incorporation or
by-laws, or the comparable governing instruments of any of its subsidiaries, or
(B) a breach or violation of, or a default under, any agreement, lease,
contract, note, mortgage, indenture, arrangement or other obligation of it or
any of its subsidiaries (with or without the giving of notice, the lapse of time
or both) or under any law, rule, ordinance or regulation or judgment, decree,
order, award or governmental or non-governmental permit or license to which it
or any of its subsidiaries is subject, that would, in any case give any other
person the ability to prevent or enjoin MFS' performance under this Agreement in
any material respect.
6. Representations and Warranties Of WorldCom. WorldCom hereby
represents and warrants to MFS as follows:
(a) Corporate Authority. WorldCom has full corporate power and
authority to enter into this Agreement and, subject to obtaining the approvals
referred to in this
<PAGE>7
Agreement, to consummate the transactions contemplated by this Agreement; the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of WorldCom; and this Agreement has been duly
executed and delivered by WorldCom.
(b) Investment Representations.
(i) WorldCom is acquiring the Option and the Option Shares
(collectively, the "Securities") for its own account for investment only, and
not with a view to, or for sale in connection with, any distribution of the
Securities in violation of the Securities Act, or any rule or regulation under
the Securities Act.
(ii) WorldCom has had such opportunity as it deems adequate to
obtain from representatives of MFS such information as is necessary to permit
WorldCom to evaluate the merits and risks of its investment in MFS.
(iii) WorldCom has sufficient experience in business, financial
and investment matters to be able to evaluate the risks involved in the purchase
of the Securities and to make an informed investment decision with respect to
such purchase.
(iv) WorldCom acknowledges that (1) the Securities have not been
registered under the Securities Act and are "restricted securities" within the
meaning of Rule 144 under the Securities Act and (2) the Securities cannot be
sold, transferred or otherwise disposed of unless they are subsequently
registered under the Securities Act or an exemption from registration is then
available.
7. Adjustment upon Changes in MFS Capitalization, etc.
(a) In the event of any change in the MFS Common by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction so that Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder would
have received in respect of MFS Common if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable. If
any additional shares of MFS Common are issued after the date of this Agreement
(other than pursuant to an event described in the first sentence of this Section
7(a), upon exercise of any option to purchase MFS Common outstanding on the date
hereof or upon conversion into MFS Common of any convertible security of MFS
outstanding on the date hereof), the number of shares of MFS Common subject to
the Option shall be adjusted so that, after such issuance, it, together with any
shares of MFS Common previously issued pursuant hereto, equals 19.9% of the
number
<PAGE>8
of shares of MFS Common then issued and outstanding, without giving effect to
any shares subject to or issued pursuant to the Option. No provision of this
Section 7 shall be deemed to affect or change, or constitute authorization for
any violation of, any of the covenants or representations in the Merger
Agreement.
(b) In the event that MFS shall enter into an agreement (i) to
consolidate with or merge into any person, other than WorldCom or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than WorldCom or one
of its subsidiaries, to merge into MFS and MFS shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of MFS Common shall be changed into or exchanged for stock or other
securities of MFS or any other person or cash or any other property or the
outstanding shares of MFS Common immediately prior to such merger shall after
such merger represent less than 50% of the outstanding shares and share
equivalents of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than WorldCom or one of its
subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option to acquire the number and
class of shares or other securities or property that Holder would have received
in respect of MFS Common if the Option had been exercised immediately prior to
such consolidation, merger, sale or transfer, or the record date therefor, as
applicable.
8. Registration Rights.
(a) Demand Registration Rights. MFS shall, subject to the
conditions of 8(c) below, if requested by Holder, including WorldCom and any
permitted transferee acquiring at least 10% of the shares of MFS Common
represented by the Option on the date hereof (each, a "Selling Shareholder"), as
expeditiously as possible prepare and file a registration statement under the
Securities Act if such registration is necessary in order to permit the sale or
other disposition of any or all shares of MFS Common or other securities that
have been acquired by or are issuable to the Selling Shareholder upon exercise
of the Option in accordance with the intended method of sale or other
disposition stated by the Selling Shareholder in such request, including without
limitation a "shelf" registration statement under Rule 415 under the Securities
Act or any successor provision, and MFS shall use its best efforts to qualify
such shares or other securities for sale under any applicable state securities
laws, provided, however, that MFS shall not be required to consent to general
jurisdiction or qualify to do business in any state where it is not otherwise
required to so consent to such jurisdiction or to so qualify to do business.
(b) Additional Registration Rights. If MFS at any time after the
exercise of the Option proposes to register any shares of MFS Common under the
Securities Act, MFS
<PAGE>9
will promptly give written notice to the Selling Shareholders of its intention
to do so and, upon the written request of any Selling Shareholder given within
thirty (30) days after receipt of any such notice (which request shall specify
the number of shares of MFS Common intended to be included in such public
offering by the Selling Shareholder), MFS will cause all such shares for which a
Selling Shareholder requests participation in such registration, to be so
registered and included in such public offering, provided, however, that MFS may
elect to not cause any such shares to be so registered (i) if such public
offering is to be underwritten and the underwriters in good faith object for
valid business reasons, or (ii) in the case of a registration solely to
implement an employee benefit plan or a registration filed on Form S-4 of the
Securities Act or any successor Form; provided, further, however, that such
election pursuant to (i) may only be made two times. If some but not all the
shares of MFS Common, with respect to which MFS shall have received requests for
registration pursuant to this Section 8(b), shall be excluded from such
registration, MFS shall make appropriate allocation of shares to be registered
among the Selling Shareholders desiring to register their shares pro rata in the
proportion that the number of shares requested to be registered by each such
Selling Shareholder bears to the total number of shares requested to be
registered by all such Selling Shareholders then desiring to have MFS Common
registered for sale.
(c) Conditions to Required Registration. MFS shall use all
reasonable efforts to cause each registration statement referred to in Section
8(a) above to become effective and to obtain all consents or waivers of other
parties which are required therefor and to keep such registration statement
effective; provided, however, that MFS may delay any registration of Option
Shares required pursuant to Section 8(a) above for a period not exceeding ninety
(90) days provided MFS shall in good faith determine that any such registration
would adversely affect MFS (provided that this right may not be exercised more
than once during any twelve month period), and MFS shall not be required to
register Option Shares under the Securities Act pursuant to Section 8(a) above:
(i) on more than one occasion during any calendar year;
(ii) within ninety (90) days after the effective date of a
registration referred to in Section 8(b) above pursuant to which
the Selling Shareholder or Selling Shareholders concerned were
afforded the opportunity to register such shares under the
Securities Act and such shares were registered as requested;
(iii) unless a request therefor is made to MFS by Selling
Shareholders that hold at least 25% or more of the aggregate
number of Option Shares (including shares of MFS Common issuable
upon exercise of the Option) then outstanding; or
(iv) if all the Option Shares proposed to be registered
could be sold by the Selling Shareholders in a 90-day period in
accordance with Rule 144.
<PAGE>10
In addition to the foregoing, MFS shall not be required to
maintain the effectiveness of any registration statement after the expiration of
six (6) months from the effective date of such registration statement. MFS shall
use all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares; provided, however, that MFS
shall not be required to consent to general jurisdiction or qualify to do
business in any state where it is not otherwise required to so consent to such
jurisdiction or to so qualify to do business.
(d) Expenses. Except where applicable state law prohibits such
payments, MFS will pay all expenses (including without limitation registration
fees, qualification fees, blue sky fees and expenses (including the fees and
expenses of counsel), legal expenses, including the reasonable fees and expenses
of one counsel to the holders whose Option Shares are being registered (not to
exceed $15,000), printing expenses and the costs of special audits or "cold
comfort" letters, expenses of underwriters, excluding discounts and commissions
but including liability insurance if MFS so desires or the underwriters so
require, and the reasonable fees and expenses of any necessary special experts)
in connection with each registration pursuant to Section 8(a) or 8(b) above
(including the related offerings and sales by holders of Option Shares) and all
other qualifications, notifications or exemptions pursuant to Section 8(a) or
8(b) above.
(e) Indemnification. In connection with any registration under
Section 8(a) or 8(b) above, MFS hereby indemnifies the Selling Shareholders, and
each underwriter thereof, including each person, if any, who controls such
Holder or underwriter within the meaning of Section 15 of the Securities Act,
against all expenses, losses, claims, damages and liabilities caused by any
untrue, or alleged untrue, statement of a material fact contained in any
registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission, or alleged omission, to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such expenses, losses, claims, damages or
liabilities of such indemnified party are caused by any untrue statement or
alleged untrue statement that was included by MFS in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon and in conformity with,
information furnished in writing to MFS by such indemnified party expressly for
use therein, and MFS and each officer, director and controlling person of MFS
shall be indemnified by such Selling Shareholders, or by such underwriter, as
the case may be, for all such expenses, losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement, that was included by MFS in
any such registration statement or prospectus or notification or offering
circular (including any amendments or supplements thereto) in reliance upon, and
in conformity with, information furnished in writing to MFS by or on behalf of
such Selling Shareholder or such underwriter, as the case may be, expressly for
such use.
<PAGE>11
Promptly upon receipt by a party indemnified under this Section
8(e) of notice of the commencement of any action against such indemnified party
in respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 8(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 8(e) except to the extent the indemnified party is materially prejudiced
thereby. In case notice of commencement of any such action shall be given to the
indemnifying party as above provided, the indemnifying party shall be entitled
to participate in and, to the extent it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense of such action at
its own expense, with counsel chosen by it and reasonably satisfactory to such
indemnified party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel (other than reasonable costs of investigation)
shall be paid by the indemnified party unless (i) the indemnifying party either
agrees to pay the same, (ii) the indemnifying party fails to assume the defense
of such action with counsel reasonably satisfactory to the indemnified party, or
(iii) the indemnified party has been advised by counsel that one or more legal
defenses may be available to the indemnifying party that may be contrary to the
interest of the indemnified party, in which case the indemnifying party shall be
entitled to assume the defense of such action notwithstanding its obligation to
bear fees and expenses of such counsel. No indemnifying party shall be liable
for any settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this Section 8(e) is
unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative benefits received
by MFS, the Selling Shareholders and the underwriters from the offering of the
securities and also the relative fault of MFS, the Selling Shareholders and the
underwriters in connection with the statements or omissions which resulted in
such expenses, losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable by a party as a
result of the expenses, losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim, provided, however, that in no case shall any Selling Shareholder be
responsible, in the aggregate, for any amount in excess of the net offering
proceeds attributable to its Option Shares included in the offering. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. Any obligation by any Selling
Shareholder to indemnify shall be several and not joint with other holders.
<PAGE>12
In connection with any registration pursuant to Section 8(a) or
8(b) above, MFS and each Selling Shareholder (other than WorldCom) shall enter
into an agreement containing the indemnification provisions of this Section
8(e). In the event of an underwritten public offering pursuant to Section 8(b),
the Company and the Selling Shareholders shall enter into an underwriting
agreement containing customary terms and provisions; provided that the
indemnification provisions as they relate to Selling Shareholders shall contain
substantially the same limitations as the provisions set forth herein.
(f) Miscellaneous Reporting. MFS shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by the Selling Shareholders
thereof in accordance with and to the extent permitted by any rule or regulation
promulgated by the SEC from time to time, including, without limitation, Rule
144. MFS shall at its expense provide the Selling Shareholders with any
information necessary in connection with the completion and filing of any
reports or forms required to be filed by them under the Securities Act or the
Securities Exchange Act, or required pursuant to any state securities laws or
the rules of any stock exchange.
(g) Issue Taxes. MFS will pay all stamp taxes in connection with
the issuance and the sale of the Option Shares and in connection with the
exercise of the Option, and will hold the Selling Shareholders harmless, without
limitation as to time, against any and all liabilities, with respect to all such
taxes.
9. Quotation; Listing. If MFS Common or any other securities to be
acquired in connection with the exercise of the Option are then authorized for
quotation or trading or listing on any securities exchange, MFS, upon the
request of Holder, will promptly file an application, if required, to authorize
for quotation or trading or listing the shares of MFS Common or other securities
to be acquired upon exercise of the Option on such securities exchange and will
use its best efforts to obtain approval, if required, of such quotation or
listing as soon as practicable.
10. Division of Option. This Agreement (and the Option granted hereby)
are exchangeable, without expense, at the option of Holder, upon presentation
and surrender of this Agreement at the principal office of MFS for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of MFS Common
purchasable hereunder. The terms "Agreement" and "Option" as used herein include
any other Agreements and related Options for which this Agreement (and the
Option granted hereby) may be exchanged. Upon receipt by MFS of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, MFS will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement
<PAGE>13
executed and delivered shall constitute an additional contractual obligation on
the part of MFS, whether or not the Agreement so lost, stolen, destroyed or
mutilated shall at any time be enforceable by anyone.
11. Miscellaneous.
(a) Expenses. Each of the parties hereto shall bear and pay all
costs and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) Entire Agreement: No Third-Party Beneficiaries; Severability.
This Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between WorldCom and MFS (i)
constitute the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof, and (ii) is not intended to confer upon any person other
than the parties hereto (other than the indemnified parties under Section 8(e)
and any transferees of the Option Shares or any permitted transferee of this
Agreement pursuant to Section 11(h)) any rights or remedies hereunder. If any
term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction or Governmental Authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. If for any reason such court or
Governmental Authority determines that the Option does not permit Holder to
acquire the full number of shares of MFS Common as provided in Section 3 (as may
be adjusted herein), it is the express intention of MFS to allow Holder to
acquire such lesser number of shares as may be permissible without any amendment
or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
<PAGE>14
(f) Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(with confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the addresses set forth in the Merger Agreement (or
at such other address for a party as shall be specified by like notice).
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed and
delivered, it being understood that both parties need not sign the same
counterpart.
(h) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Holder may assign this
Agreement to a wholly-owned subsidiary of Holder and Holder may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) Further Assurances. In the event of any exercise of the
Option by Holder, MFS and Holder shall execute and deliver all other documents
and instruments and take all other action that may be reasonably necessary in
order to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
<PAGE>15
IN WITNESS WHEREOF, MFS and WorldCom have caused this Stock
Option Agreement to be signed by their respective officers thereunto duly
authorized, all as of the day and year first written above.
MFS COMMUNICATIONS COMPANY, INC.
By: /s/ James Q. Crowe
Name: James Q. Crowe
Title: Chairman of the Board and
Chief Executive Officer
WORLDCOM, INC.
By: /s/ Bernard J. Ebbers
Name: Bernard J. Ebbers
Title: President and Chief Executive
Officer
<PAGE>1
[COMPANY LOGO FOR WORLDCOM] [COMPANY LOGO FOR MFS]
IMMEDIATE RELEASE
CONTACTS: Media:
WorldCom, Inc.: Gil Broyles, 212-317-1509 or 918-588-5752
MFS: Josh Howell, 212-317-2795 or 402-231-3430
UUNET: Paula Jagemann, 212-317-2984 or 703-206-5888
Investors:
WorldCom, Inc.: Charles Cannada, 212-317-1518 or 601-360-8600
MFS: Gary Brandt, 212-317-2982 or 402-231-3432
UUNET: Paula Jagemann, 212-317-2984 or 703-206-5888
WORLDCOM, INC. AND MFS ANNOUNCE MERGER TO FORM
PREMIER BUSINESS COMMUNICATIONS COMPANY
Combination of WorldCom, Inc., MFS and UUNET Brings Together The
Leading Growth Companies From Every Key Telecom Industry Segment:
Long Distance, Local, Internet and International
Analyst Conference Call, Press Conference and Analyst Meetings Scheduled
Jackson, Miss., and Omaha, Neb., August 26, 1996 - WorldCom, Inc. and
MFS Communications Company, Inc., (MFS) jointly announced today that
the two companies have executed a definitive Agreement and Plan of Merger.
Under the terms of the agreement, each share of MFS common stock will
be exchanged for 2.1 shares of WorldCom, Inc. common stock. As of Friday's
closing, the merger consideration for MFS stock is approximately $14 billion.
The merger agreement was unanimously approved by the Board of Directors of each
company and the transaction will be recommended by each board to its
shareholders for consideration at a special shareholder meeting to be called
by each company. The combined company will be known as MFS WorldCom. A brief
summary of significant terms of the merger agreement is attached.
Merger Creates Premier Business Communications Company
The merger will create one of the world's premier business
communications companies, providing a single source for a full range of local,
long distance, Internet and international service over an advanced fiber optic
network.
"Rarely in business do you have the opportunity to bring together the
premier growth companies from key segments of an industry," said Bernard
J. Ebbers, president and CEO of WorldCom, Inc. "We are creating the first
company since the breakup of AT&T to bundle together local and long distance
services carried over an international end-to-end fiber network owned or
controlled by a single company.
"The merger is especially compelling because of the unique fit between
WorldCom, Inc., MFS and UUNET.
<PAGE>2
"First, since WorldCom, Inc.'s networks will connect to MFS' city networks,
we expect to achieve significant cost savings from reduced line and access
costs. Second, the merger will eliminate duplication of capital spending
programs, including those for undersea capacity, international facilities and
MFS' planned U.S. intercity network. Third, the combined company is uniquely
positioned to take full advantage of the congressional intent behind the
Telecom Act as well as the recently released FCC Interconnection Order.
Taken together, we expect these cost savings alone, including payment
for originating and terminating both local and long distance calls, to
substantially justify the merger. However, perhaps the most exciting
opportunity for MFS WorldCom is to simultaneously increase revenue and
increase customer retention by offering a unique combination of local, long
distance and international calling and Internet based services sold by a
combined sales force of nearly 3,000 professionals."
James Q. Crowe, chairman and CEO of MFS said, "Bernie Ebbers and WorldCom, Inc.
are at the very top of all American companies in creating shareholder value. I
look forward to joining Bernie's team and helping to continue that record."
John Sidgmore, president and CEO of UUNET Technologies, Inc., said, "The
merger of MFS and UUNET combines the nation's leading provider of Internet
services to business with a state-of-the-art local fiber optic network in
the U.S. and Europe. The merger with WorldCom, Inc. adds the one missing
element, a broadband intercity network. I believe the combined company
will be the leader in assisting businesses to harness the full power of
Internet-based technologies. I am particularly excited about our combined
ability to meet the explosive demand for corporate `Intranets' utilizing
technology and facilities available from a single source."
The merged company will have current annualized revenue of approximately
$5.4 billion, with over 500,000 business customers throughout North America,
Europe and Asia. On a combined basis annualized second quarter revenues grew
at almost 30 percent over the prior year. At the heart of the combined company
will be an end-to-end fiber network with 25,000 miles of fiber in
service or under construction connecting all major metropolitan areas in the
United States.
Combined Company Organization
Bernard J. Ebbers will serve as president and CEO of MFS WorldCom with James
Q. Crowe serving as chairman of the board of MFS WorldCom, and chairman and
CEO of MFS; John Sidgmore serving as a vice chairman of MFS WorldCom, and
president and COO of MFS and CEO of UUNET; Roy Wilkens serving as a vice
chairman of MFS WorldCom, and president and CEO of WilTel Network Services;
and Royce Holland serving as vice chairman of MFS.
The combined company's board of directors will consist of an odd number
of directors with WorldCom, Inc. designating one more director than MFS.
International Opportunities
The combined company is particularly well positioned to benefit from the
global trend toward pro-competitive regulation. The combined company has
annualized second quarter international revenues of over $800 million -- up 80
percent over the last twelve months.
Ebbers said, "The combined company can capitalize on both MFS' and
WorldCom, Inc.'s leading international positions, particularly in Europe. The
opportunity to jointly sell service using MFS' local networks in France,
Germany and the United Kingdom is particularly exciting, since those countries
together make up almost two-thirds of the European telecom market."
MFS WorldCom to Use Purchase Accounting
<PAGE>3
The combined company anticipates the merger will be accounted for as a
purchase with a substantial portion of the purchase price to be allocated to
intangible assets including goodwill. It is expected that these intangible
assets will be amortized over 40 years. The actual allocation of purchase
price and selection of amortization period is subject to further evaluation.
The company believes that the merger will be value accretive in the short
term and earnings accretive in the longer term.
Treatment of MFS Bondholders
As currently structured, the transaction calls for MFS to become a wholly
owned subsidiary of MFS WorldCom. This structure may give the holders of
MFS' 9 3/8 percent Senior Discount Notes due 2004 and its 8 7/8 percent
Senior Discount Notes due 2006, upon consummation of the merger, the right
to require MFS to repurchase those notes at an amount equal to 101 percent of
the accreted amount thereof. However, MFS and WorldCom, Inc. are continuing to
evaluate alternative structures for the transaction and the implications of
those structures and, upon mutual agreement, could modify the structure in a
way which might result in the holders of MFS notes not having the right to
require repurchase of those notes.
Closing Expected in Four to Eight Months
The parties hope to complete the merger within four to eight
months. Consummation of the merger is subject to typical conditions
including approval of the stockholders of each of the companies,
Hart-Scott-Rodino clearance and approval of the Federal Communications
Commission and various state regulatory authorities.
The merger agreement provides for options on the part of each company
to purchase a number of shares of the other (equal to approximately 20
percent of the outstanding shares) under certain circumstances and also
provides for the payment of fees and the provision of communication
services in the event of termination of the merger agreement under certain
circumstances.
Uncertainties Relating To Forward Looking Statements
This press release contains forward looking statements that involve risks
and uncertainties, including the satisfaction of the conditions to the
transaction and the successful integration of WorldCom, Inc. and MFS,
competitive and regulatory risk associated with the telecommunications and
Internet industries, and other risks detailed from time to time in the SEC
reports filed by WorldCom, Inc. and MFS, including the report on Form 10-K
filed by WorldCom, Inc. for the year ending December 31, 1995, and the report
on Form 10-K filed by MFS for the year ended December 31, 1995. Actual results,
events and performance may differ materially.
Company Descriptions
Headquartered in Jackson, Mississippi, WorldCom, Inc. is one of the largest
long distance telecommunications companies in the United States, offering
domestic and international voice, data and video products and services
to business customers, other carriers and the residential market. The
company operates a nationwide digital fiber optic network and has worldwide
network capacity. The common shares of WorldCom, Inc. trade on the Nasdaq
Stock market under the symbol WCOM.
MFS is a leading provider of communication services for business and
government. Through its operating company subsidiaries, MFS provides
one-stop shopping for integrated local and long-distance services as well
as a wide range of high quality voice, data and other enhanced services
and systems specifically designed to meet the requirements of business and
government customers. MFS' common stock is traded on the Nasdaq Stock Market
under the symbol MFST. MFS is headquartered in Omaha, Nebraska.
Recently merged with MFS, UUNET is a leading national and international
provider of a comprehensive range of Internet access options, applications,
security products and consulting services to businesses, professionals,
and on-line service providers. UUNET is recognized as the first commercial
Internet Service Provider.
-30-
Summary of Significant Terms
Tax-Free Merger of MFS and WorldCom, Inc.
<PAGE>4
This summary is qualified in its entirety by the definitive merger agreement
that will be filed with the Securities and Exchange Commission. Please refer
to the agreement for a complete description of the terms of the transaction.
Consideration
WorldCom, Inc. Common Stock in a tax-free transaction (the "Transaction").
Exchange Ratio
2.1 shares of WorldCom, Inc. Common Stock per MFS Common Share. Fixed
exchange ratio. MFS Preferred Stock to be converted into similar shares
of WorldCom, Inc. Preferred Stock.
Conditions
Shareholder approval of both companies.
Federal and state regulatory and Hart-Scott-Rodino approvals.
Receipt of tax opinions.
No injunction.
No material adverse change in MFS' or WorldCom, Inc.'s business.
Options to Purchase Stock
Subject to specified conditions, each party has the option to purchase
up to 19.9 percent of the outstanding shares of the other party.
WorldCom, Inc.'s option to acquire MFS shares priced at $55.39. MFS'
option to acquire WorldCom, Inc. shares priced at $26.38.
Termination Arrangements
$350 million fee to be paid, together with an agreement to
provide telecommunications services, by the party failing to
complete the Transaction.
The telecommunications services will be provided by the party failing
to complete the Transaction, at the option of the other party, at cost
with a value not to exceed $300 million over 3 years.
Contacts (after August 26, 1996):
Media: WorldCom, Inc.: Gil Broyles, 918-590-5752 MFS: Josh Howell,
402-231-3430 UUNET: Paula Jagemann, 703-206-5888
Investors: WorldCom, Inc.: Charles Cannada, 601-360-8600 MFS:
Gary Brandt, 402-231-3432 UUNET: Paula Jagemann, 703-206-5888
EDITOR'S NOTE:
ANALYST CONFERENCE CALL SCHEDULED
WorldCom, Inc. and MFS have scheduled a joint analyst and investor conference
call on Monday, August 26, 1996 at 9 a.m. (Eastern Time) with Bernard
J.
<PAGE>5
Ebbers, president and CEO of WorldCom, Inc. and James Q. Crowe, chairman and
CEO of MFS, along with John W. Sidgmore, president and CEO of UUNET to
discuss the above announcement. Following this presentation, they will respond
to questions.
IF YOU WISH TO PARTICIPATE, PLEASE CALL 1-800-553-2599 (within the U.S.) or
303-267-1002 (international participants). PLEASE REFER TO CONFIRMATION NUMBER
128418.
Following the call, rebroadcasts will be available immediately and will
continue through Wednesday close of business, eastern time. To hear
the rebroadcast call, 1-800-696-1588 (within the U.S.) or 303-267-1037
(international participants). Please refer to confirmation number 128418.
<PAGE>6
PRESS CONFERENCE SCHEDULED
WorldCom, Inc. and MFS have scheduled a joint press conference on Monday,
August 26, 1996, at 10 a.m. (Eastern Time) in the Wedgewood Room of the Hotel
Pierre, 2 East 61st, New York, NY, with Bernard J. Ebbers, president and CEO
of WorldCom, Inc. and James Q. Crowe, chairman and CEO of MFS, along with
John W. Sidgmore, president and CEO of UUNET to discuss the above
announcement. Following some brief statements the participants will respond
to questions.
ANALYST MEETINGS SCHEDULED
WorldCom, Inc. and MFS have scheduled a series of analyst meetings
for institutional investors in Boston, New York, San Francisco and Denver
with Bernard J. Ebbers, president and CEO of WorldCom, Inc. and James Q.
Crowe, chairman and CEO of MFS, along with John W. Sidgmore, president and CEO
of UUNET to review and discuss the merger.
The meetings are scheduled as follows:
Tuesday, August 27 Meridian Hotel 7:30-9:00 a.m.
Timberlay Room
250 Franklin
Boston, MA
Tuesday, August 27 Hotel Pierre 12:30-2:00 p.m.
Grand Ballroom
2 East 61st
New York, NY
Wednesday, August 28 Park Hyatt 7:30-9:00 a.m.
Commodities Room
333 Battery Street
San Francisco, CA
Wednesday, August 28 Hyatt Hotel 2:00-3:30 p.m.
Vista Room
1750 Welton Street
Denver, CO
