<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 16, 1997
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
WORLDCOM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA 4813 58-1521612
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
OF INCORPORATION OR
ORGANIZATION)
515 EAST AMITE STREET
JACKSON, MISSISSIPPI 39201-2702
(601) 360-8600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
BERNARD J. EBBERS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
WORLDCOM, INC.
515 EAST AMITE STREET
JACKSON, MISSISSIPPI 39201-2702
(601) 360-8600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
P. BRUCE BORGHARDT, ESQ. R. RANDALL WANG, ESQ. ALLAN G. SPERLING, ESQ.
GENERAL COUNSEL-- NICK H. VARSAM, ESQ. CLEARY, GOTTLIEB, STEEN
CORPORATE DEVELOPMENT BRYAN CAVE LLP &
WORLDCOM, INC. 211 NORTH BROADWAY HAMILTON
10777SUNSET OFFICE DRIVE, SUITE 330 SUITE 3600 ONE LIBERTY PLAZA
ST. LOUIS, MO 63127 ST. LOUIS, MO 63102 NEW YORK, NY 10006
(314) 909-4100 (314) 259-2000 (212) 225-2260
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement is declared effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 3/8% Senior Notes due
January 15, 2004...... $787,529,000 100.0% $716,367,880 $217,082
- ---------------------------------------------------------------------------------------------
8 7/8% Senior Notes due
January 15, 2006...... $910,475,000 100.0% $696,764,667 $211,141
</TABLE>
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- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 16, 1997
PROSPECTUS AND CONSENT SOLICITATION
[LOGO OF WORLDCOM APPEARS HERE]
OFFERS TO EXCHANGE
$[ ] 9 3/8% SENIOR NOTES OF WORLDCOM, INC. DUE JANUARY 15, 2004 FOR ALL
OUTSTANDING 9 3/8% SENIOR DISCOUNT NOTES OF MFS COMMUNICATIONS COMPANY, INC.
DUE JANUARY 15, 2004
$[ ] 8 7/8% SENIOR NOTES OF WORLDCOM, INC. DUE JANUARY 15, 2006 FOR ALL
OUTSTANDING 8 7/8% SENIOR DISCOUNT NOTES OF MFS COMMUNICATIONS COMPANY, INC.
DUE JANUARY 15, 2006
AND
CONSENT SOLICITATION
WorldCom, Inc. ("WorldCom" or the "Company") hereby offers, upon the terms and
subject to the conditions set forth in this Prospectus and Consent Solicitation
(together, the "Prospectus") and the accompanying Letters of Transmittal and
Consent (each a "Letter of Transmittal"), to exchange: (i) $864.97 principal
amount of its 9 3/8% Senior Notes due January 15, 2004 ("WorldCom 2004 Notes")
for each $1,000 principal amount at stated maturity of outstanding 9 3/8%
Senior Discount Notes due January 15, 2004 ("MFS 2004 Notes") of MFS
Communications Company, Inc., a Delaware corporation and wholly owned
subsidiary of WorldCom ("MFS"), properly tendered for exchange and accepted and
(ii) $732.59 principal amount of its 8 7/8% Senior Notes due January 15, 2006
("WorldCom 2006 Notes" and, together with the WorldCom 2004 Notes, the
"WorldCom Notes") for each $1,000 principal amount at stated maturity of
outstanding 8 7/8% Senior Discount Notes due January 15, 2006 ("MFS 2006 Notes"
and, together with the MFS 2004 Notes, the "MFS Notes") of MFS properly
tendered for exchange and accepted (each such offer being referred to
individually as an "Exchange Offer" and collectively as the "Exchange Offers").
As of June 15, 1997 (the "Interest Accrual Date"), the Accreted Value (as
defined herein) of MFS 2004 Notes will be $864.97 per $1,000 principal amount
at stated maturity and the Accreted Value of MFS 2006 Notes will be $732.59 per
$1,000 principal amount at stated maturity.
Concurrently with the Exchange Offers, WorldCom is soliciting (the "Consent
Solicitation") consents ("Consents") from each registered holder of the MFS
2004 Notes and the MFS 2006 Notes (a "Holder" and collectively, "Holders") to
certain amendments to the Indenture dated as of January 15, 1994 (as
supplemented by First Supplemental Indenture dated as of March 31, 1995, the
"1994 Indenture") and the Indenture dated as of January 15, 1996 (as
supplemented by First Supplemental Indenture dated as of January 15, 1996, the
"1996 Indenture"), respectively (the "MFS Indentures"), under which the MFS
Notes have been issued.
(cover page continues)
THE EXCHANGE OFFERS WILL EXPIRE AT 11:59 P.M., NEW YORK CITY TIME, ON ,
1997, UNLESS EITHER OR BOTH ARE EXTENDED (SUCH TIME AND DATE OF EXPIRATION FOR
AN EXCHANGE OFFER, AS THE SAME MAY BE EXTENDED, THE "EXPIRATION DATE" WITH
RESPECT THERETO). TENDERS OF MFS NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO
11:59 P.M., NEW YORK CITY TIME, ON , 1997. WITHDRAWAL OF TENDERED MFS
NOTES WILL BE DEEMED A REVOCATION OF THE CONSENT TO WHICH SUCH TENDERED MFS
NOTES RELATE. TENDERS OF MFS NOTES MAY NOT BE WITHDRAWN AT ANY TIME AFTER 11:59
P.M., NEW YORK CITY TIME, ON , 1997, UNLESS AN EXCHANGE OFFER EXTENDED
EXCHANGE AND CONTAINS NEW TERMS MATERIALLY ADVERSE TO THE TENDERING HOLDERS.
SEE "RISK FACTORS" COMMENCING ON PAGE 17 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED IN EVALUATING THE EXCHANGE OFFERS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE JOINT DEALER MANAGERS FOR THE EXCHANGE OFFERS ARE:
SALOMON BROTHERS INC GOLDMAN, SACHS & CO.
For assistance in connection with the Exchange Offers, please contact the
appropriate party listed on the back cover hereof.
The date of this Prospectus is , 1997.
<PAGE>
(cover page continued)
The Company hereby offers, upon the terms and subject to the conditions set
forth in the Exchange Offers, to pay each Holder who gives a valid Consent on
or prior to the Expiration Date a cash fee in an amount equal to 0. % of the
Accreted Value of such Holder's MFS Notes with respect to which Consent has
been given (each such cash payment, a "Consent Payment"). HOLDERS OF MFS NOTES
OF EITHER SERIES WHO TENDER IN AN EXCHANGE OFFER WILL BE DEEMED, AS A
CONDITION TO A VALID TENDER, TO HAVE GIVEN THEIR CONSENT TO THE PROPOSED
AMENDMENTS APPLICABLE TO THAT SERIES. Holders may not deliver Consents without
tendering their MFS Notes in the Exchange Offer. Consents from Holders of a
majority in aggregate principal amount outstanding of MFS Notes of a series
(the "Requisite Consent") must be received in order to amend the MFS Indenture
governing that series as described herein, except with respect to the
modification of the term "Change of Control," which requires Consents from
Holders of 75% of the aggregate principal amount outstanding of MFS Notes of a
series (the "Supermajority Consents"). The obligation of the Company to
consummate an Exchange Offer and to make any Consent payments with respect to
either series of MFS Notes is conditional upon, among other things, the
receipt of the Requisite Consent to the Proposed Amendments with respect to
both series of MFS Notes. See "The Exchange Offers--Conditions to the Exchange
Offers" and "The Consent Solicitation--Consent Payments." The Company will
consummate the Exchange Offer with respect to the MFS 2004 Notes only if not
less than $ of principal amount of WorldCom 2004 Notes would be issued in
such Exchange Offer and will consummate the Exchange Offer with respect to the
MFS 2006 Notes only if not less than $ of principal amount of WorldCom 2006
Notes would be issued in such Exchange Offer.
Interest on the WorldCom Notes issued in exchange for the MFS Notes will
accrue from the Interest Accrual Date at the applicable interest rate on such
WorldCom Notes. If the aggregate Accreted Value of the MFS Notes of a series
tendered by a Holder and accepted by the Company pursuant to the Exchange
Offers would result in the issuance of WorldCom Notes of a series in a
principal amount that is not an integral multiple of $1,000, such principal
amount will be reduced to the nearest such multiple and the Company will pay
to such Holder an amount in cash equal to the reduction of such principal
amount. WorldCom Notes to be exchanged for MFS Notes pursuant to the Exchange
Offers will be delivered, and cash payments will be made by check (in New York
Clearing House funds), on the third business day following the Expiration
Date, or as soon as possible thereafter (the "Exchange Date"). As used herein,
"Accreted Value" shall have the meaning given such term in the applicable MFS
Indenture as determined as of the Interest Accrual Date. WorldCom Notes will
be issued only in denominations of $1,000 and integral multiples thereof.
The WorldCom Notes will be senior, unsecured obligations of the Company, will
rank pari passu in right of payment with all other existing and future senior,
unsecured indebtedness of the Company and will rank senior in right of payment
to any future subordinated obligations of the Company. The WorldCom Notes will
be structurally subordinated to all obligations of the Company's subsidiaries,
including any MFS Notes not exchanged for WorldCom Notes in the Exchange
Offers. See "Risk Factors--Certain Considerations Relating to Holders
Tendering in the Exchange Offers--Structural Subordination of the WorldCom
Notes" and "Description of the WorldCom Notes--Ranking."
The WorldCom 2004 Notes and the WorldCom 2006 Notes will be entitled to the
benefits of and governed by the Senior Indenture dated as of March 1, 1997
between WorldCom and Mellon Bank, N.A., as Trustee (as supplemented and
described herein, the "WorldCom Indenture"). The financial terms of the
WorldCom 2004 Notes and the WorldCom 2006 Notes will be substantially similar
in all material respects to the financial terms of the MFS 2004 Notes and the
MFS 2006 Notes, respectively, except that: (i) the MFS Notes are the sole
obligations of MFS, and the WorldCom Notes will be the sole obligations of
WorldCom; and (ii) the MFS Notes were originally issued at a discount and,
except as described below, no cash interest accrues on the MFS 2004 Notes and
the MFS 2006 Notes until January 15, 1999 and January 15, 2001, respectively,
while interest will begin to accrue on the WorldCom Notes on the Interest
Accrual Date and will be payable in cash semi-annually in arrears on each
January 15 and July 15, commencing July 15, 1997. The covenants and certain
other terms in the WorldCom Indenture will be substantially less restrictive
that those that are in the MFS Indentures. MFS may elect, pursuant to the MFS
Indentures and subject to the consummation of the Exchange Offers, to commence
the accrual of cash interest on the MFS Notes beginning on July 15, 1997, at
which time the outstanding principal amount of each of the MFS Notes at their
respective stated maturities will be reduced to the Accreted Value of such MFS
Notes as of such date, and cash interest will be payable on each interest
payment date thereafter, beginning January 15, 1998. See "The Exchange
Offers--Description of Differences Between the MFS Notes and the WorldCom
Notes."
The WorldCom 2004 Notes and the WorldCom 2006 Notes will be redeemable, at the
option of the Company at any time, in whole or in part, on or after January
15, 1999 and January 15, 2001, respectively, at the applicable redemption
prices set forth herein, plus accrued and unpaid interest, if any, to the date
of redemption. See "Description of the WorldCom Notes--Optional Redemption."
The Company does not intend to list the WorldCom Notes on any national
securities exchange. The Joint Dealer Managers currently plan to make a market
in the WorldCom Notes. However, there can be no assurance that the Joint
Dealer Managers will make such a market or that any active market in the
WorldCom Notes will develop or be maintained.
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, OR ANY UNDERWRITER, AGENT OR DEALER. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCE, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
AVAILABLE INFORMATION
Each of WorldCom and MFS is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information filed by each of WorldCom and MFS may
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices located at Northeast
Regional Office, Seven World Trade Center, Suite 1300, New York, New York
10048 and Midwest Regional Office, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials can also be
obtained from the Public Reference Section of the Commission, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site that contains reports, proxy and information
statements and other materials that are filed through the Commission's
Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. This Web
site can be accessed at http://www.sec.gov. Shares of the Company's Common
Stock are listed on the Nasdaq National Market and the reports, proxy
statements and other information filed by WorldCom also can be inspected at
the offices of the National Association of Securities Dealers, Inc. (the
"NASD"), at 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus constitutes a part of a registration statement on Form S-4
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by WorldCom with the Commission under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the WorldCom Notes
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Reference is made
to such Registration Statement and to the exhibits relating thereto for
further information with respect to WorldCom, the WorldCom Notes, MFS and the
MFS Notes. Any statements contained herein concerning the provisions of
certain documents are not necessarily complete, and in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission for a more
complete description of the matter involved. Each such statement is qualified
in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by WorldCom (formerly
Resurgens Communications Group, Inc.) under File No. 0-11258 (formerly File
No. 1-10415) and by MFS under File No. 33-72594 (formerly File No. 0-21594)
pursuant to the Exchange Act are incorporated herein by reference:
(a)(1) WorldCom's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (the "WorldCom 1996 Form 10-K");
3
<PAGE>
(2) WorldCom's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997; and
(3) WorldCom's Current Reports on Form 8-K dated August 25, 1996 (filed
August 26, 1996 and as amended on Forms 8-K/A filed November 4, 1996 and
November 20, 1996), December 31, 1996 (filed January 15, 1997), March 18,
1997 (filed March 24, 1997) and March 26, 1997 (filed April 2, 1997).
(b)(1) MFS' Annual Report on Form 10-K for the year ended December 31,
1996 (the "MFS 1996 Form 10-K");
(2) MFS' Quarterly Report on Form 10-Q for the quarter ended March 31,
1997; and
(3) MFS' Current Report on Form 8-K dated January 20, 1997 (filed January
24, 1997)).
All documents filed by WorldCom and MFS with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof and prior to the termination of the offering of any securities offered
hereby shall be deemed to be incorporated by reference into this Prospectus
and to be a part hereof from the date of filing of such documents. See
"Available Information." Any statement contained herein, or in a document
incorporated or deemed to be incorporated herein by reference, shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
incorporated or deemed to be incorporated herein by reference, which statement
is also incorporated herein by reference, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. COPIES OF THESE DOCUMENTS (EXCLUDING EXHIBITS
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO THE
INFORMATION INCORPORATED HEREIN) WILL BE PROVIDED BY FIRST CLASS MAIL WITHOUT
CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS IS DELIVERED UPON WRITTEN OR
ORAL REQUEST BY SUCH PERSON TO WORLDCOM, INC., 515 EAST AMITE STREET, JACKSON,
MISSISSIPPI 39201-2702, ATTENTION: STEPHANIE Q. SCOTT, DIRECTOR OF FINANCIAL
REPORTING (TELEPHONE: (601) 360-8600). IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY , 1997.
4
<PAGE>
PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified in its
entirety by, and should be read in conjunction with, the more detailed
financial information and Consolidated Financial Statements (including the
notes thereto) included and incorporated by reference in this Prospectus. In
particular, prospective purchasers should carefully consider the information
set forth under "Cautionary Statement Regarding Forward-Looking Statements" and
"Risk Factors."
WORLDCOM
WorldCom is one of the four largest long distance telecommunications
companies in the United States. The Company provides telecommunications
services to business, government, telecommunications companies and consumer
customers, through its network of fiber optic cables, digital microwave, and
fixed and transportable satellite earth stations.
WorldCom is one of the first major facilities-based telecommunications
companies with the capability to provide businesses with high quality local,
long distance, Internet, data and international communications services over
its global networks. With service to points throughout the nation and the
world, WorldCom provides telecommunications products and services including:
switched and dedicated long distance and local products, 800 services, calling
cards, domestic and international private lines, broadband data services, debit
cards, conference calling, advanced billing systems, enhanced fax and data
connections, high speed data communications, facilities management, local
access to long distance companies, local access to ATM-based backbone service
and interconnection via Network Access Points to Internet service providers.
WorldCom's principal executive offices are located at 515 East Amite Street,
Jackson, Mississippi 39201-2702, and its telephone number is (601) 360-8600.
MFS
MFS provides communications services domestically and internationally in the
form of: (i) dedicated special access and private line circuits, local switched
service and high speed data communications to large business customers; (ii)
single source integrated local and long distance switched services, high speed
data communications services and facilities management to medium and small
businesses; (iii) local access to long distance companies; (iv) local access,
ATM-based backbone service and interconnection via Network Access Points to
Internet service providers; and (v) a comprehensive range of Internet-based
services. MFS provides communications services by utilizing its international
network platform, which consists of MFS-owned transmission and switching
facilities and network capacity leased from the other carriers primarily in the
United States and Western Europe.
On August 12, 1996, MFS acquired UUNET Technologies, Inc. ("UUNET") through a
merger of a subsidiary of MFS with and into UUNET. UUNET is a leading worldwide
provider of a comprehensive range of Internet access options, applications, and
consulting services tailored to meet the needs of businesses and professionals.
UUNET makes available to customers a variety of products and services,
including dedicated and dial-up Internet access, Web server hosting and content
development services, client software and security products and training, all
of which can be integrated by UUNET through its network integration and
consulting services. UUNET enables Internet users to purchase access,
applications and services, including integration services, through a single
source. UUNET's products and services are supported by a technical staff that
is highly experienced in Internet
5
<PAGE>
operations and services. UUNET's network operations center monitors traffic
across UUNET's network 24 hours per day, seven days per week.
MFS provides network systems integration services primarily through MFS
Network Technologies, Inc. ("MFS Network Technologies"). Initially created to
design and build MFS' networks in a high quality and cost-effective manner, MFS
Network Technologies provides network systems integration services for MFS and
third parties which desire to deploy sophisticated networks, including
intelligent transportation systems, voice and data networks, interactive
distance learning networks, security systems and combined cable television-
telephone networks.
The principal executive offices of MFS are located at 11808 Miracle Hills
Drive, Omaha, Nebraska 68154, a telephone number is (402) 231-3000.
WORLDCOM/MFS MERGER
On December 31, 1996, WorldCom, through a wholly owned subsidiary, merged
with MFS (the "MFS Merger"). As a result of the MFS Merger, each share of MFS
common stock was converted into the right to receive 2.1 shares of WorldCom
common stock (the "Common Stock") or approximately 471.0 million WorldCom
common shares in the aggregate. Each share of MFS Series A 8% Cumulative
Convertible Preferred Stock ("MFS Series A Preferred Stock") was converted into
the right to receive one share of Series A 8% Cumulative Convertible Preferred
Stock of WorldCom ("WorldCom Series A Preferred Stock") or 94,992 shares of
WorldCom Series A Preferred Stock in the aggregate. Each share of MFS Series B
Convertible Preferred Stock was converted into the right to receive one share
of Series B Convertible Preferred Stock of WorldCom ("WorldCom Series B
Preferred Stock") or approximately 12.7 million shares of WorldCom Series B
Preferred Stock in the aggregate. In addition, each depositary share
representing 1/100th of a share of MFS Series A Preferred Stock was exchanged
for a depositary share representing 1/100th of a share of WorldCom Series A
Preferred Stock. Upon effectiveness of the MFS Merger, the then outstanding and
unexercised options and warrants exercisable for shares of MFS common stock
were converted into options and warrants, respectively, exercisable for shares
of Common Stock having substantially the same terms and conditions as the MFS
options and warrants, except that (i) the exercise price and the number of
shares issuable upon exercise were divided and multiplied, respectively, by 2.1
and (ii) the holders of each then outstanding and unexercised MFS "Shareworks
Plus Award" granted under the MFS 1993 Stock Plan instead received the cash
value of such award in accordance with the terms of such plan.
As a result of the MFS Merger, MFS became a wholly-owned subsidiary of
WorldCom. Operationally and financially, WorldCom has been integrating MFS into
the WorldCom organization. The Exchange Offers are an element of such
integration efforts. Subsequent to the MFS Merger, WorldCom filed a shelf
registration statement with the Commission (the "Shelf Registration Statement")
in order to register and issue debt securities having an aggregate initial
offering price of up to $3 billion. Pursuant to the WorldCom Indenture and the
Shelf Registration Statement, WorldCom issued and sold $600,000,000 7.55%
Senior Notes due 2004, $1,100,000,000 7.75% Senior Notes due 2007 and
$300,000,000 7.75% Senior Notes due 2027 (collectively, the "WorldCom Senior
Notes") on April 1, 1997. The WorldCom Senior Notes contain covenants that are
less restrictive than those contained in the MFS Notes.
6
<PAGE>
THE EXCHANGE OFFERS
TERMS OF THE EXCHANGE The Company hereby offers, upon the terms and
OFFERS...................... subject to the conditions set forth herein and in
the Letters of Transmittal, to:
(i) exchange $864.97 principal amount of WorldCom
2004 Notes for each $1,000 principal amount at
stated maturity of outstanding MFS 2004 Notes
properly tendered for exchange and accepted (the
"2004 Exchange Offer"); and
(ii) exchange $732.59 principal amount of
WorldCom 2006 Notes for each $1,000 principal
amount at stated maturity of outstanding MFS 2006
Notes properly tendered for exchange and accepted
(the "2004 Exchange Offer").
As of the Interest Accrual Date, the Accreted
Value of MFS 2004 Notes will be $864.97 per
$1,000 principal amount at stated maturity and
the Accreted Value of MFS 2006 Notes will be
$732.59 per $1,000 principal amount at stated
maturity. See "The Exchange Offers."
CONSENT SOLICITATION;
CONSENT PAYMENT............. Concurrently with the Exchange Offers, WorldCom
is soliciting Consents to the Proposed Amendments
to the 1994 Indenture and the 1996 Indenture from
each registered Holder of the MFS 2004 Notes and
the MFS 2006 Notes, respectively. Consents from
Holders of a majority in aggregate principal
amount outstanding of MFS Notes of a series must
be received in order to amend the MFS Indenture
governing that series as described herein, except
with respect to the modification of the term
"Change of Control," which requires Consents from
registered holders of 75% of the aggregate
principal amount outstanding of MFS Notes of a
series. See "The Consent Solicitation" and "The
Proposed Amendments." The Company hereby offers,
upon the terms and subject to the conditions set
forth in the Exchange Offers, to pay each Holder
who gives a valid Consent on or prior to the
Expiration Date a cash fee in an amount equal to
0. % of the Accreted Value as of the Interest
Accrual Date of such Holder's MFS Notes with
respect to which Consent has been given. See "The
Consent Solicitation--Consent Payment."
CONDITIONS TO THE EXCHANGE
OFFERS AND CONSENT The obligation of the Company to consummate an
SOLICITATION................ Exchange Offer and to make any Consent Payments
with respect to either series of MFS Notes is
conditional upon, among other things, the receipt
of the Requisite Consent to the Proposed
Amendments with respect to both series of MFS
Notes. See "The Exchange Offers--Conditions to
the Exchange Offers" and "The Consent
Solicitation."
7
<PAGE>
The Company will consummate the Exchange Offer
with respect to the MFS 2004 Notes only if not
less than $ of principal amount of WorldCom
2004 Notes would be issued in such Exchange Offer
and will consummate the Exchange Offer with
respect to the MFS 2006 Notes only if not less
than $ of principal amount of WorldCom 2006
Notes would be issued in such Exchange Offer.
Except for the requirements of applicable federal
and state securities laws, there are no federal
or state regulatory requirements to be complied
with or obtained by the Company or MFS in
connection with the Exchange Offers.
BACKGROUND AND REASONS FOR
THE EXCHANGE OFFERS AND THE
CONSENT SOLICITATION........
As a follow-up to the MFS Merger, WorldCom has
determined that it will be more efficient to
adjust its capital structure in order to create
one consolidated credit entity. In addition, by
obtaining the Requisite Consent to amend the MFS
Indentures contemplated by the Consent
Solicitation, WorldCom will eliminate certain
restrictive covenants and the separate reporting
requirements contained in the MFS Indentures. MFS
EXPRESSES NO OPINION AND IS REMAINING NEUTRAL
TOWARD THE EXCHANGE OFFERS AND THE CONSENT
SOLICITATION.
CERTAIN CONSEQUENCES TO
HOLDERS TENDERING IN THE
EXCHANGE OFFERS.............
Holders who participate in the Exchange Offers
will receive WorldCom Notes. The WorldCom Notes
will be senior, unsecured obligations of WorldCom
and rank pari passu with all existing and future
senior, unsecured indebtedness of WorldCom. The
terms of the WorldCom Notes and the MFS Notes
will be substantially similar in all material
respects except that: (i) the MFS Notes are the
sole obligations of MFS, and the WorldCom Notes
will be the sole obligations of WorldCom; and
(ii) the MFS Notes were originally issued at a
discount and, except as described below, no
interest accrues on the MFS 2004 Notes and the
MFS 2006 Notes until January 15, 1999 and January
15, 2001, respectively, while interest will begin
to accrue on the WorldCom Notes on the Interest
Accrual Date and will be payable in cash semi-
annually in arrears on each January 15 and July
15, commencing July 15, 1997. In addition, the
covenants and certain other terms in the WorldCom
Indenture will be substantially less restrictive
than those contained in the MFS Indentures. MFS
may elect, pursuant to the MFS Indentures and
subject to the consummation of the Exchange
Offers, to commence the accrual of cash interest
on the MFS Notes beginning on July 15, 1997, at
which time the outstanding principal amount of
each of the MFS Notes at their respective stated
maturities will be reduced to the Accreted Value
of
8
<PAGE>
such MFS Notes as of such date, and cash interest
will be payable on each interest payment date
thereafter, beginning January 15, 1998. See "The
Exchange Offers-Description of Differences
Between the MFS Notes and the WorldCom Notes."
CERTAIN CONSEQUENCES TO
HOLDERS NOT TENDERING IN
THE EXCHANGE OFFERS.........
Consummation of the Exchange Offers and the
adoption of the Proposed Amendments with respect
to the MFS Notes will have certain consequences
to Holders of the MFS Notes who elect not to
tender in the exchange offers, including, without
limitation, that the covenants and certain other
terms with respect to the MFS Notes will be
substantially less restrictive and afford less
protection to Holders, than those currently set
forth in the 1994 Indenture and the 1996
Indenture. The Proposed Amendments would, among
other things, eliminate (i) the covenants in each
of the 1994 Indenture and the 1996 Indenture that
(a) restrict the ability of MFS and its
restricted subsidiaries to incur debt, pay
dividends, make restricted payments or enter into
transactions with affiliates and (b) restrict the
ability of restricted subsidiaries of MFS to
issue equity securities and make certain
distribution and loans to the Company or MFS and
(ii) the separate reporting requirements
contained in the MFS Indentures. See "The
Proposed Amendments." If Supermajority consents
are received, the Proposed Amendments would also
limit the circumstances in which a Change of
Control will occur and consequently the need for
MFS to offer to repurchase MFS Notes. In
addition, the trading market for unexchanged MFS
Notes could become more limited due to the
reduction in the amount of the MFS Notes
outstanding after the Exchange Offers, which may
adversely affect the market price of such MFS
Notes.
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS.............. The exchange of MFS Notes for WorldCom Notes and
cash pursuant to an Exchange Offer will be a
taxable transaction for United States federal
income tax purposes. See "Certain Federal Income
Tax Consequences."
EXPIRATION DATE............. The Exchange Offers will expire at 11:59 p.m.,
New York City time, on , 1997, unless the
Exchange Offers (or either of them) are extended
by the Company in its sole discretion, in which
case the term "Expiration Date", with respect to
an Exchange Offer will mean the latest date and
time to which such Exchange Offer is extended.
See "The Exchange Offers--Exchange Offer
Procedures--Expiration Date; Extensions;
Termination; Amendments."
9
<PAGE>
SPECIAL CONSIDERATIONS FOR
BENEFICIAL OWNERS........... Any beneficial owner whose MFS Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender such MFS Notes in the
Exchange Offers should contact such registered
Holder promptly and instruct such registered
Holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender
on such owner's own behalf, such owner must,
prior to completing and executing the Letter of
Transmittal and delivering such owner's MFS
Notes, either make appropriate arrangements to
register ownership of the MFS Notes in such
owner's name or obtain a properly completed bond
power from the registered Holder. The transfer of
registered ownership may take considerable time
and may be difficult to complete prior to the
Expiration Date. See "The Exchange Offers--
Procedures for Tendering."
PROCEDURES FOR TENDERING
MFS NOTES................... Each Holder of MFS Notes wishing to accept either
of the Exchange Offers must complete, sign and
date the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or
such facsimile, together with such MFS Notes and
any other required documentation to [ ] as
exchange agent (the "Exchange Agent"), at the
address set forth therein. By executing the
Letter of Transmittal, the Holder will represent
to and agree with the Company that, among other
things, the MFS Notes tendered therewith are held
by such Holder free and clear of all security
interests, liens, restrictions, charges,
encumbrances, conditional sale agreements or
other obligations relating to their sale or
transfer, and are not subject to any adverse
claim when the same are accepted by the Company.
See "The Exchange Offers--Procedures for
Tendering."
The proper completion, execution and delivery of
a Letter of Transmittal with respect to MFS Notes
of a series will constitute the giving of a
Consent to the Proposed Amendments for such
series.
GUARANTEED DELIVERY Holders of MFS Notes who wish to tender their MFS
PROCEDURES.................. Notes and whose MFS Notes are not immediately
available or who cannot deliver their MFS Notes,
the Letter of Transmittal or any other
documentation required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date must tender their MFS Notes
according to the guaranteed delivery procedures
set forth under "The Exchange Offers--Guaranteed
Delivery Procedures."
ACCEPTANCE OF THE MFS NOTES
AND DELIVERY OF THE
WORLDCOM NOTES; RETURN OF
MFS NOTES...................
Subject to the satisfaction or waiver of the
conditions to the Exchange Offers, the Company
will accept for exchange any
10
<PAGE>
and all MFS Notes that are properly tendered in
the Exchange Offers prior to the Expiration Date.
The WorldCom Notes issued pursuant to the
Exchange Offers will be delivered and the related
Consent Payments will be made on the third
business day following the Expiration Date, or as
soon as possible thereafter. See "The Exchange
Offers--Terms of the Exchange Offers." Any MFS
Notes not accepted for exchange for any reason
will be returned to the tendering Holder as
promptly as practicable after the expiration or
termination of the applicable Exchange Offer.
WITHDRAWAL AND REVOCATION
RIGHTS...................... Tenders of MFS Notes may be withdrawn at any time
prior to 11:59 p.m., New York City time, on ,
1997. Valid withdrawal of a tendered MFS Note
will constitute the revocation of the related
Consent. Holders may not revoke a Consent without
validly withdrawing the related MFS Note.Tenders
may not be withdrawn at any time after 11:59
p.m., New York City time, on , 1997, unless
the extended Exchange Offers contain new terms
materially adverse to the tendering Holders. See
"The Exchange Offers--Withdrawal of Tenders" and
"The Consent Solicitation."
NO DISSENTERS' RIGHTS....... Holders of MFS Notes do not have any appraisal or
dissenters' rights under the Delaware General
Corporation Law or the applicable MFS Indenture
in connection with the Exchange Offers.
NO PROCEEDS TO COMPANY...... The Company will not receive any proceeds from
the issuance of the WorldCom Notes offered hereby
and has agreed to pay the expenses of the
Exchange Offers. In consideration for issuing the
WorldCom Notes as contemplated in this
Prospectus, the Company will receive, in
exchange, MFS Notes with an Accreted Value as of
the Interest Accrual Date equal to the principal
amount of such WorldCom Notes. The MFS Notes
surrendered in exchange for the WorldCom Notes
will be retired and cancelled. Accordingly,
issuance of the WorldCom Notes will not result in
any increase in the outstanding debt of the
Company, on a consolidated basis.
JOINT DEALER MANAGER MARKET
ACTIVITY.................... The Joint Dealer Managers currently plan to make
a market in the WorldCom Notes following the
completion of the Exchange Offers and may buy and
sell WorldCom Notes on a "when and if issued"
basis prior to the completion of the Exchange
Offers. However, there can be no assurance that
the Joint Dealer Managers will engage in such
activities or that any active market in the
WorldCom Notes will develop or be maintained. See
"Risk Factors--Certain Considerations Relating to
Holders Tendering in the Exchange Offers."
EXCHANGE AGENT.............. [ ].
11
<PAGE>
DEALER MANAGERS............. Salomon Brothers Inc and Goldman, Sachs & Co.
(the "Dealer Managers"). The addresses and
telephone numbers of the Dealer Managers are set
forth on the back cover page of the Prospectus.
INFORMATION AGENT...........
[ ] (the "Information Agent"). The address and
telephone numbers of the Information Agent are
set forth on the back cover page of the
Prospectus.
TOLL FREE INFORMATION Questions concerning the terms of the Exchange
NUMBERS..................... Offers should be directed to the Dealer Managers
at 1-800-558-3745 or 1-800-828-3182. Questions
concerning tender procedures and requests for
additional copies of this Prospectus should be
directed to the Information Agent at [ ].
12
<PAGE>
THE WORLDCOM NOTES
The financial terms of the WorldCom 2004 Notes and the WorldCom 2006 Notes
will be substantially similar in all material respects to the financial terms
of the MFS 2004 Notes and the MFS 2006 Notes, respectively, except that: (i)
the MFS Notes are the sole obligations of MFS, and the WorldCom Notes will be
the sole obligations of WorldCom; and (ii) the MFS Notes were originally issued
at a discount and, except as described below, no interest accrues on the MFS
2004 Notes and the MFS 2006 Notes until January 15, 1999 and January 15, 2001,
respectively, while interest will begin to accrue on the WorldCom Notes on the
Interest Accrual Date and will be payable in cash semi-annually in arrears on
each January 15 and July 15, commencing July 15, 1997. In addition, the
covenants and certain other terms in the WorldCom Indenture will be
substantially less restrictive that those that are in the MFS Indentures. MFS
may elect, pursuant to the MFS Indentures and subject to the consummation of
the Exchange Offers, to commence the accrual of cash interest on the MFS Notes
beginning on July 15, 1997, at which time the outstanding principal amount of
each of the MFS Notes at their respective stated maturities will be reduced to
the Accreted Value of such MFS Notes as of such date, and cash interest will be
payable on each interest payment date thereafter, beginning January 15, 1998.
See "The Exchange Offers--Description of Differences Between the MFS Notes and
the WorldCom Notes." The following is a summary of certain terms of the
WorldCom Notes.
WORLDCOM NOTES
<TABLE>
<CAPTION>
MATURITY DATE INTEREST RATE INTEREST PAYMENT DATE
---------------- ------------- ---------------------------
<C> <C> <C> <S>
WorldCom 2004 Notes January 15, 2004 9 3/8% Payable semi-annually on
January 15 and July 15 each
year, commencing July 15,
1997.
WorldCom 2006 Notes January 15, 2006 8 7/8% Payable semi-annually on
January 15 and July 15 each
year, commencing July 15,
1997.
</TABLE>
ISSUER...................... WorldCom, Inc.
RANKING..................... The WorldCom Notes are senior, unsecured
obligations of the Company, rank pari passu in
right of payment with all other existing and
future senior, unsecured indebtedness of the
Company and will rank senior in right of payment
to any future subordinated obligations of the
Company. The WorldCom Notes will be structurally
subordinated to all obligations of the Company's
subsidiaries, including any MFS Notes not
exchanged for WorldCom Notes in the Exchange
Offers and including any trade payables. As of
March 31, 1997, the aggregate amount of
outstanding obligations of the Company's
subsidiaries to which the Holders of WorldCom
Notes would be structurally subordinated,
including trade payables and assuming all of the
MFS Notes are so exchanged, was approximately
$ million.
OPTIONAL REDEMPTION......... The WorldCom 2004 Notes and the WorldCom 2006
Notes will be redeemable at the option of the
Company, on or after January 15, 1999 and January
15, 2001, respectively, in
13
<PAGE>
whole at any time or in part from time to time,
at the prices set forth herein, plus accrued and
unpaid interest, if any, to the date of
redemption. See "Description of the WorldCom
Notes--Optional Redemption."
CERTAIN COVENANTS...........
The WorldCom Indenture contains certain covenants
which, subject to certain exceptions and
qualifications, restrict the ability of the
Company and its Restricted Subsidiaries to create
liens, to enter into sale and leaseback
transactions and to sell assets or merge with or
into another company. See "Description of the
WorldCom Notes-- Limitation on Liens," "--
Consolidation, Merger, Conveyance, Sale or Lease"
and "--Certain Definitions."
BOOK-ENTRY, DELIVERY AND The WorldCom Notes issued in exchange for
FORM........................ properly tendered and accepted MFS Notes will be
delivered only in book-entry form through The
Depository Trust Company ("DTC"). Accordingly,
Holders who anticipate tendering and whose MFS
Notes are not held custodially through DTC are
urged to contact promptly a bank, broker or other
intermediary that has the capability to hold
securities custodially through DTC, to arrange
for receipt of any WorldCom Notes to be delivered
pursuant to the Exchange Offers and to obtain the
information necessary to provide the required DTC
participant and account information in the
relevant Letter of Transmittal. See "The Exchange
Offers--Procedures for Tendering" and "--Book-
Entry Delivery Procedures."
For additional information regarding the WorldCom Notes, please see
"Description of the WorldCom Notes" and "Certain Federal Income Tax
Considerations."
RISK FACTORS
Prospective investors should carefully consider certain factors relating to
an investment in the WorldCom Notes. See "Cautionary Statement Regarding
Forward-Looking Statements" and "Risk Factors" beginning on page 17.
14
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table presents selected historical financial data of WorldCom,
MFS and UUNET. The historical data for each of the years in the five-year
period ended December 31, 1996 are based on the audited historical financial
statements of the respective companies, excluding UUNET for 1996 (see Note 7).
The selected financial data for each of WorldCom, MFS and UUNET for the three
month periods ended March 31, 1997 and 1996 have been obtained from unaudited
financial statements and, in the opinion of the respective managements of
WorldCom, MFS and UUNET, include all adjustments (of a normal and recurring
nature) which are necessary to present fairly the data for such periods. This
data should be read in conjunction with and is qualified in its entirety by the
consolidated financial statements of each of WorldCom, MFS and UUNET and the
related notes thereto, either included or incorporated by reference herein. See
"Available Information" and "Incorporation of Documents by Reference."
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------- ----------------------
1996 1995 1994 1993 1992 1997 1996
---------- ---------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
WORLDCOM--HISTORICAL
Revenues................ $4,485,130 $3,696,345 $2,245,663 $1,474,257 $ 948,060 $1,677,239 $1,034,060
Income (loss) from
continuing operations
(after preferred
dividend requirement):
Total.................. (2,189,804) 233,080 (151,779) 112,638 6,232 43,054 85,802
Per common share:
Primary................ (5.50) 0.64 (0.48) 0.41 0.03 0.05 0.22
Filly diluted.......... (5.50) 0.64 (0.48) 0.40 0.03 0.05 0.21
Dividends per common
share.................. -- -- -- -- -- -- --
Total assets............ 19,861,977 6,656,629 3,441,474 3,236,718 1,241,278 19,595,269 6,816,942
Long-term debt.......... 4,803,581 3,391,598 794,001 730,023 448,496 4,617,431 2,194,357
Shareholders'
investment............. 12,959,976 2,187,681 1,827,410 1,911,800 478,823 13,021,153 2,295,295
Ratio of earnings to
fixed charges.......... N/A 2.59:1 0.15:1 5.10:1 1.47:1 1.94:1 3.15:1
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------- ----------------------
1996 1995 1994 1993 1992 1997 1996
---------- ---------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
MFS--HISTORICAL
Revenues................ $1,115,006 $ 583,194 $ 286,747 $ 141,111 $ 108,707 $ 425,935 $ 186,316
Income (loss) from
continuing operations
(after preferred
dividend requirement):
Total.................. (1,867,459) (282,962) (151,201) (15,769) (13,129) (82,192) (93,296)
Per common share:
Primary................ (11.22) (2.21) (1.21) (0.15) (0.15) (0.75)
Filly diluted.......... (11.22) (2.21) (1.21) (0.15) (0.15) (0.75)
Dividends per common
share.................. -- -- -- -- -- -- --
Total assets............ 12,550,329 1,867,134 1,584,546 906,937 363,299 12,334,647 2,347,211
Long-term debt.......... 1,477,670 723,471 548,333 143 169 1,412,843 1,286,354
Shareholders' equity.... 10,287,586 830,332 770,103 811,105 298,516 10,190,119 754,582
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------- -------------------
1996 1995 1994 1993 1992 1997 1996
-------- -------- ------- ------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
UUNET--HISTORICAL
Revenues................ $129,047 $ 94,461 $33,138 $24,019 $20,396 $ $ 43,013
Income (loss) from
continuing operations
(after preferred
dividend requirement):
Total.................. (14,373) (18,257) (7,988) (2,026) 1,074 233
Per common share (pro
forma):
Primary................ (0.42) (0.63) (0.35) -- --
Filly diluted.......... (0.42) (0.63) (0.35) -- -- 0.01
Dividends per common
share.................. -- -- 0.01 -- 0.08 0.01
Total assets............ 137,610 29,625 10,585 8,285 156,278
Long-term debt.......... 13,686 15,269 3,310 974 18,045
Shareholders' equity.... 80,667 279 425 2,567 82,084
</TABLE>
NOTES TO SELECTED FINANCIAL DATA:
(1) On December 31, 1996, WorldCom completed the MFS Merger. The MFS Merger is
being accounted for as a purchase; accordingly, the operating results for
MFS are reflected from the date of acquisition.
(2) Results for 1996 include a $2.14 billion charge for in-process research and
development related to the MFS Merger. The charge is based upon a valuation
analysis of the technologies of MFS' worldwide information system, the
Internet network expansion system of UUNET, and certain other identified
research and development projects purchased in the MFS Merger. The expense
includes $1.6 billion associated with UUNET and $0.54 billion related to
MFS. Additionally, 1996 results include other after-tax charges of $121.0
million for employee severance, employee compensation charges, alignment
charges, and costs to exit unfavorable telecommunications contracts and
$343.5 million after-tax write-down of operating assets within the
Company's non-core businesses. On a pre-tax basis, these charges totaled
$600.1 million.
(3) In 1995, Metromedia Company ("Metromedia") converted its Series 1 Preferred
Stock into Common Stock, exercised warrants to acquire Common Stock and
immediately sold its position of 61,699,096 shares of Common Stock in a
public offering. In connection with the preferred stock conversion,
WorldCom made a non-recurring payment of $15.0 million to Metromedia,
representing a discount to the minimum nominal dividends that would have
been payable on the Series 1 Preferred Stock prior to the September 15,
1996 optional call date of approximately $26.6 million (which amount
includes an annual dividend requirement of $24.5 million plus accrued
dividends to such call date).
(4) As a result of the acquisitions of IDB Communications Group, Inc. ("IDB")
in 1994 (the "IDB Merger") and of Advanced Telecommunications Corporation
in 1992 (the "ATC Merger"), the Company initiated plans to reorganize and
restructure its management and operational organization and facilities to
eliminate duplicate personnel, physical facilities and service capacity, to
abandon certain products and marketing activities, and to take further
advantage of the synergies available to the combined entities. Also, during
the fourth quarter of 1993, plans were approved to reduce IDB's cost
structure and to improve productivity. Accordingly, in 1994, 1993 and 1992,
the Company charged to operations the estimated costs of such
reorganization and restructuring activities, including employee severance,
physical facility abandonment and duplicate service capacity. These costs
totaled $43.7 million in 1994, $5.9 million in 1993 and $79.8 million in
1992. Also, during 1994 and 1992, the Company incurred direct merger costs
of $15.0 million and $7.3 million, respectively, related to the IDB Merger
(in 1994) and the ATC Merger (in 1992). These costs include professional
fees, proxy solicitation costs, travel and related expenses and certain
other direct costs attributable to these mergers.
(5) Long-term debt as of December 31, 1995 includes $1.1 billion related to the
Company's previous credit facilities which were classified as a current
maturity on the December 31, 1995 balance sheet. In June 1996, WorldCom
replaced its then existing $3.41 billion credit facilities with a new $3.75
billion revolving credit facility with no reduction of principal for five
years.
(6) MFS' results for 1996 include a $1.4 biollion charge for in-process
research and development related to its acquisition of UUNET. The change is
based on a valuation analysis of the technologies of the Internet network
expansion system of UUNET and certain other identified research and
development projects purchased in the acquisition.
(7) MFS' acquisition of UUNET closed on August 12, 1996 and was accounted for
as a purchase. Therefore, the year ended December 31, 1996 column
represents UUNET's results of operations for the period from January 1,
1996 through August 12, 1996 and includes one-time merger related costs of
$15.7 million. Subsequent to August 12, 1996, the operating results of
UUNET are consolidated with MFS and are included in its balance sheet and
results of operations.
16
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in "Risk Factors," including any forecasts,
projections and synergies referred to therein, and certain statements
incorporated by reference from documents filed with the Commission by WorldCom
and MFS, including any statements contained herein or incorporated by
reference herein regarding the development of WorldCom's and MFS' businesses,
the markets for WorldCom's and MFS' services and products, anticipated capital
expenditures, regulatory reform and the effects of the MFS Merger, and other
statements contained or incorporated by reference herein regarding matters
that are not historical facts, are or may constitute forward-looking
statements (as such term is defined in the Private Securities Litigation
Reform Act of 1995). Because such statements are subject to risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause actual
results to differ materially include, but are not limited to, those discussed
under "Risk Factors."
RISK FACTORS
In addition to the other information included in this Prospectus, Holders of
the MFS Notes should carefully consider the following risk factors before
deciding to surrender MFS Notes in exchange for WorldCom Notes pursuant to the
Exchange Offers. In particular, note that this Prospectus contains forward-
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995 and that actual results could differ materially from those
contemplated by such statements. The considerations listed below are not
intended to represent a complete list of the general or specific risks that
may affect Holders who tender or fail to tender in the Exchange Offers or that
relate to the Company. It should be recognized that other risks may be
significant, now or in the future, and the risks set forth below may affect
tendering or non-tendering Holders to a greater extent than indicated.
CERTAIN CONSIDERATIONS RELATING TO HOLDERS TENDERING IN THE EXCHANGE OFFERS
Liquidity of WorldCom Notes; No Prior Public Market for WorldCom Notes
Depending on the amount of the WorldCom Notes outstanding after the Exchange
Offers, the trading market for the WorldCom Notes may be more limited than the
trading market for the MFS Notes prior to the Exchange Offer, which might
adversely affect the liquidity and market price of such WorldCom Notes. The
Company does not plan to list the WorldCom Notes on any national securities
exchange or interdealer quotation system sponsored by a national securities
association. Although the MFS Notes are not so listed, there is currently a
limited trading market for the MFS Notes. The WorldCom Notes are new
securities for which there is currently no market. While the Dealer Managers
intend to make a market for the WorldCom Notes, they are not obligated to do
so and any market making may be discontinued at any time. There can be no
assurance that an active trading market for the WorldCom Notes will develop
or, if such market develops, as to the liquidity or sustainability of any such
market.
Structural Subordination of the WorldCom Notes
WorldCom, like MFS, is a holding company which conducts a portion of its
business through its subsidiaries. The Company will be dependent to some
extent upon dividends and other payments from its subsidiaries to generate a
portion of the funds necessary to meet its obligations, including the payment
of principal and interest on the WorldCom Notes. As a result, the creditors of
the Company, including any holders of the WorldCom Notes, will effectively
rank junior to all creditors of the Company's subsidiaries, including any
Holders of MFS Notes that are not exchanged in the Exchange Offers and
notwithstanding that the WorldCom Notes will be senior obligations of the
Company. As of March 31, 1997, after giving effect to the issuance of the
WorldCom Senior Notes and assuming the
17
<PAGE>
exchange of all outstanding MFS Notes in the Exchange Offers, the aggregate
amount of obligations (consisting primarily of trade payables) of the
Company's subsidiaries to which the holders of the WorldCom Notes would have
been structurally subordinated was approximately $ and the aggregate assets
of these subsidiaries totalled approximately $ .
Recognition of Income to Holders Accepting Exchange Offers
The exchange of MFS Notes for WorldCom Notes and cash pursuant to the
Exchange Offer will be a taxable transaction for United States federal income
tax purposes. See "Certain Federal Income Tax Consequences."
CERTAIN CONSIDERATIONS RELATING TO HOLDERS NOT TENDERING IN THE EXCHANGE
OFFERS
Proposed Amendments to the MFS Indentures
In the event that the Proposed Amendments are adopted with respect to a
series of the MFS Notes, the covenants and certain other terms with respect to
such series of MFS Notes will be substantially less restrictive, and will
afford less protection to Holders, than those currently set forth in the MFS
Indentures. The Proposed Amendments contemplated by the Consent Solicitation
would, among other things, eliminate the covenants in each of the 1994
Indenture and the 1996 Indenture that (a) restrict the ability of MFS and its
restricted subsidiaries to incur debt, pay dividends, make restricted payments
or enter into transactions with affiliates and (b) restrict the ability of
restricted subsidiaries of MFS to issue capacity securities and make certain
distributions and loans to the Company and MES. In addition, the Proposed
Amendments include modification of the term "Change of Control" conditioned
upon the receipt of the Supermajority Consent. See "The Proposed Amendments."
If the Requisite Consent is received with respect to a series of MFS Notes
and the Exchange Offer with respect to such series is consummated, the
relevant MFS Indenture will be amended with respect to such series as
discussed herein. Each non- exchanging Holder of such series of MFS Notes will
be bound by the Proposed Amendments even if such Holder did not consent to the
Proposed Amendments. The adoption of these new covenants would, among other
things, permit WorldCom and MFS and their subsidiaries to take actions that
could increase the credit risk with respect to MFS, and might adversely affect
the market prices of the MFS Notes or otherwise be adverse to the interests of
the holders of the MFS Notes. See "The Proposed Amendments."
Reduced Liquidity of MFS Notes
Although the Company believes that the MFS Notes trade on a negotiated basis
between certain market makers and certain Holders of the MFS Notes, no
generally reliable public pricing information for the MFS Notes is available.
The trading market for unexchanged MFS Notes could become even more limited
due to the reduction in the amount of MFS Notes outstanding after the Exchange
Offers, which might adversely affect the liquidity, market price and price
volatility of such MFS Notes. If a market for unexchanged MFS Notes develops,
such MFS Notes may trade at a discount, depending on prevailing interest
rates, the market for similar securities and other factors. However, there can
be no assurance that an active market in the unexchanged MFS Notes will
develop or be maintained and no assurance as to the prices at which the
unexchanged MFS Notes may be traded.
FAILURE TO PROPERLY TENDER MFS NOTES
The WorldCom Notes will be issued in exchange for MFS Notes only after
timely receipt by the Exchange Agent of such MFS Notes, a properly completed
and duly executed Letter of Transmittal and all other required documentation.
Therefore, Holders of MFS Notes desiring to tender such MFS Notes in exchange
for WorldCom Notes should allow sufficient time to ensure timely delivery.
Neither the Exchange Agent nor the Company is under any duty to give
notification of any defects or irregularities with respect to tenders of MFS
Notes for exchange.
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CERTAIN CONSIDERATIONS REGARDING THE BUSINESS AND OPERATIONS OF WORLDCOM
Holders should carefully consider the risk factors set forth in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996,
which is incorporated by reference into the Registration Statement and this
Prospectus. These risk factors include the following: (a) Risks of increased
financial leverage and risks related to debt service, interest rate
fluctuations, possible reduction in liquidity, dividend restrictions and other
restrictive covenants; (b) Acquisition integration; (c) Contingent
liabilities; (d) Risks of international business; (e) Risks of overseas
business operations; (f) Dependence on availability of transmission
facilities; (g) Rapid technological change and dependence upon product
development; (h) Regulation risks; (i) Competition; (j) Potential liability of
on-line service providers; (k) Dependence upon network infrastructure, risk of
system failure and security risks; and (l) anti-takeover provisions.
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THE EXCHANGE OFFERS
PURPOSE OF THE EXCHANGE OFFERS
As a follow-up to the MFS Merger, WorldCom has determined that it will be
more efficient to adjust its capital structure in order to create one
consolidated credit entity. In addition, by obtaining the Requisite Consent to
amend the MFS Indentures contemplated by the Consent Solicitation, WorldCom
will eliminate certain restrictive covenants and the separate reporting
requirements contained in the MFS Indentures. MFS EXPRESSES NO OPINION AND IS
REMAINING NEUTRAL TOWARD THE EXCHANGE OFFERS AND THE CONSENT SOLICITATION.
TERMS OF THE EXCHANGE OFFERS
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will exchange (i) $864.97
principal amount of its WorldCom 2004 Notes for each $1,000 principal amount
at stated maturity of MFS 2004 Notes validly tendered and not withdrawn prior
to the Expiration Date and (ii) $732.59 principal amount of its WorldCom 2006
Notes for each $1,000 principal amount at stated maturity of MFS 2006 Notes
validly tendered an not withdrawn prior to the Expiration Date. The Interest
Accrued Date, the Accreted Value of MFS 2004 Notes will be 864.97 per $1,000
principal amount at stated maturity and the Accreted Value of MFS 2006 Notes
will be $732.59 per $1,000 principal amount at Stated Maturity. WorldCom Notes
will be issued only in denominations of $1,000 and integral multiples thereof.
If the aggressive Accreted Value of the MFS Notes as a series tendered by a
Holder and accepted by the Company pursuant to an Exchange Offer would result
in issuance of WorldCom Notes as a series in a principal amount that is not an
integral multiple of $1,000, such principal amount will be reduced to the
nearest such multiple and the Company will pay to such Holder an amount in
cash equal to the reduction of such principal amount. WorldCom Notes to be
exchanged for MFS Notes pursuant to the Exchange Offers will be delivered, and
cash payments will be made by check (in New York Clearing House funds), on the
Exchange Date.
The financial terms of the WorldCom Notes are substantially similar in all
material respects to the financial terms of the MFS Notes except that (i) the
MFS Notes are the sole obligations of MFS, and the Worldcom Notes will be the
sole obligations of WorldCom; and (ii) the MFS Notes were originally issued at
a discount and, except as described below, no cash interest accrues on the MFS
2004 Notes and the MFS 2006 Notes until January 15, 1999 and January 15, 2001,
respectively, while interest will begin to accrue on the WorldCom Notes on the
Interest Accrual Date and will be payable in cash semi-annually in arrears on
each January 15 and July 15, commencing July 15, 1997. The covenants and
certain other terms in the WorldCom Indenture will be substantially less
restrictive than those that are in the MFS Indentures. MFS may elect, pursuant
to the MFS Indentures and subject to the consummation of the Exchange Offers,
to commence the accrual of cash interest beginning on July 15, 1997, at which
time the outstanding principal amount of each of the MFS Notes at their
respective stated maturities will be reduced to the Accreted Value of such MFS
Notes as of such date, and cash interest will be payable on each interest
payment date thereafter, beginning January 15, 1998.
As of the date of this Prospectus, $ in aggregate principal amount of the
MFS 2004 Notes was outstanding and there were approximately Holders of the
MFS 2004 Notes. Also as of the date of this Prospectus, $ in aggregate
principal amount of the MFS 2006 Notes was outstanding and there were
approximately Holders of the MFS 2006 Notes. Only a registered Holder of the
MFS Notes (or such Holder's legal representative or attorney-in-fact) as
reflected on the records of the Trustee
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under the MFS Indentures may participate in the Exchange Offers. Solely for
reasons of administration, the Company has fixed the close of business on ,
1997 for purposes of determining the persons to whom this Prospectus and the
Letter of Transmittal will be mailed initially. There will be no fixed record
date for determining registered Holders of the MFS Notes entitled to
participate in the Exchange Offers.
The Company shall be deemed to have accepted validly tendered MFS Notes
which have not been withdrawn prior to 11:59 p.m., New York City time, on ,
1997 when, and if, the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering Holders
of MFS Notes for the purposes of receiving the WorldCom Notes from the
Company.
The Company reserves the right, in its sole discretion, to purchase or make
offers for any MFS Notes that remain outstanding subsequent to the Expiration
Date. The terms of any such purchase or offers could differ from the terms of
the Exchange Offers. Any purchase or offer by the Company will not be made
except in accordance with applicable law and will in no event be made prior to
the expiration of ten business days after the Expiration Date.
Holders who tender MFS Notes in the Exchange Offers will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of MFS
Notes pursuant to the Exchange Offers. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offers. See "--Fees and Expenses."
CONDITIONS OF THE EXCHANGE OFFERS
Notwithstanding any other provisions of an Exchange Offer or Consent
Solicitation, or any extension of such Exchange Offer or Consent Solicitation,
the Company will not be required to issue WorldCom Notes or make any payments
in respect of any properly tendered MFS Notes or Consents, and may terminate
such Exchange Offer or Consent Solicitation by oral or written notice to the
Exchange Agent and the holders of such MFS Notes, or, at its option, modify or
otherwise amend such Exchange Offer or Consent Solicitation with respect to
such MFS Notes, if any of the following conditions has not been satisfied,
prior to or concurrently with the consummation of such Exchange Offer or
Consent Solicitation:
(a) receipt of the Requisite Consents with respect to both series of MFS
Notes;
(b) there shall not have been any action taken or threatened, or any
statute, rule, regulation, judgment, order, stay, decree or injunction
promulgated, enacted, entered, enforced or deemed applicable to the
Exchange Offers, the Proposed Amendments or the exchange of MFS Notes
pursuant to the Exchange Offers (the "Exchange"), by or before any court or
governmental regulatory or administrative agency or authority or tribunal,
domestic or foreign, which (i) challenges the making of the Exchange
Offers, the Proposed Amendments contemplated by the Consent Solicitation or
the Exchange, or might, directly or indirectly, prohibit, prevent, restrict
or delay consummation of the Exchange Offers, the Proposed Amendments or
the Exchange, or might otherwise adversely affect in any material manner
the Exchange Offers, the Proposed Amendments or the Exchange or (ii) in the
sole judgment of the Company, could materially adversely affect the
business, condition (financial or otherwise), income, operations,
properties, assets, liabilities or prospects of the Company and its
subsidiaries, taken as a whole, or materially impair the contemplated
benefits of the Exchange Offers, the Proposed Amendments or the Exchange to
the Company or might be material to holders of MFS Notes in deciding
whether to accept such Exchange Offers;
(c) there shall not have occurred or be likely to occur any event
affecting the business or financial affairs of the Company that, in the
sole judgment of the Company, would or might prohibit, prevent, restrict or
delay consummation of the Exchange Offers, the Proposed
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Amendments or the Exchange or that will, or is reasonably likely to,
materially impair the contemplated benefits of the Exchange Offers, the
Proposed Amendments contemplated by the Consent Solicitation or the
Exchange to the Company or might be material to holders of MFS Notes in
deciding whether to accept such Exchange Offers;
(d) there shall not have occurred (i) any general suspension of or
limitation on trading in securities on the NYSE or in the over-the-counter
market (whether or not mandatory), (ii) any material adverse change in the
price of the MFS Notes, (iii) a material impairment in the general trading
market for debt securities, (iv) a declaration of a banking moratorium or
any suspension of payments in respect of banks by federal or state
authorities in the United States (whether or not mandatory), (v) a
commencement of a war, armed hostilities or other national or international
crisis directly or indirectly relating to the United States, (vi) any
limitation (whether or not mandatory) by any governmental authority on, or
other event having a reasonable likelihood of affecting, the extension of
credit by banks or other lending institutions in the United States or (vii)
any material adverse change in United States securities or financial
markets generally, or in the case of any of the foregoing existing at the
time of the commencement of the Exchange Offers, a material acceleration or
worsening thereof; and
(e) the Trustee under the MFS Indentures (the "MFS Trustee") shall not
have objected in any respect to, or taken any action that could in the sole
judgment of the Company adversely affect the consummation of, any of the
Exchange Offers, the Exchange or the Company's ability to effect the
Proposed Amendments contemplated by the Consent Solicitation, nor shall the
MFS Trustee have taken any action that challenges the validity or
effectiveness of the procedures used by the Company in soliciting Consents
(including the form thereof) or in making the Exchange Offers or the
Exchange.
If any of the foregoing conditions are not satisfied with respect to a
particular series of MFS Notes, the Company may (i) terminate the Exchange
Offer with respect to such series of MFS Notes and return such MFS Notes to the
holders who tendered them; (ii) extend such Exchange Offer and retain all
tendered MFS Notes which have not been withdrawn prior thereto until the
Expiration Date of such Exchange Offer. (See "--Withdrawal of Tenders"; "--
Expiration Date; Extensions; Amendments"); or (iii) waive the unsatisfied
conditions with respect to such Exchange Offer and accept all MFS Notes
tendered and not previously withdrawn.
The foregoing conditions are for the sole benefit of the Company and may be
waived by the Company, in whole or in part, in its sole discretion. Any
determination made by the Company concerning an event, development or
circumstance described or referred to above shall be conclusive and binding.
Notwithstanding the foregoing, the Company will consummate the Exchange Offer
with respect to the MFS 2004 Notes only if not less than $ of principal
amount of WorldCom 2004 Notes would be issued in such Exchange Offer and will
consummate the Exchange Offer with respect to the MFS 2006 Notes only if not
less than $ of principal amount of WorldCom 2006 Notes would be issued in
such Exchange Offer.
CERTAIN CONSEQUENCES TO HOLDERS NOT TENDERING IN THE EXCHANGE OFFERS
Consummation of the Exchange Offers and the adoption of the Proposed
Amendments with respect to the MFS Notes will have certain consequences to
Holders of the MFS Notes who elect not to tender in the Exchange Offers,
including that the covenants and certain other terms with respect to the MFS
Notes will be substantially less restrictive and afford less protection to
Holders, than those currently set forth in the 1994 Indenture and the 1996
Indenture. The Proposed Amendments would, among other things, eliminate the
covenants in each of the 1994 Indenture and the 1996 Indenture that restrict
MFS' ability to incur debt, permit liens and enter into certain sale and leased
back transactions. See "The Proposed Amendments." In addition, the trading
market for unexchanged MFS Notes could become more limited due to the reduction
in the amount of the MFS Notes outstanding after the Exchange Offers, which may
adversely affect the market price of such MFS Notes.
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EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 11:59 p.m., New York City time, on ,
1997, subject to the right of the Company to extend such date for either or
both Exchange Offers in its sole discretion, in which case the term
"Expiration Date" shall mean the latest date and time with respect to any such
extended Exchange Offer to which such Exchange Offers is extended.
In order to extend the Exchange Offers, the Company will notify the Exchange
Agent of any extension by oral or written notice, mail to the registered
Holders an announcement thereof, and issue a press release or other public
announcement which shall include disclosure of the appropriate number,
aggregate principal amount and/or aggregate accreted value of each series of
MFS Notes deposited to date, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any MFS Notes, (ii) to extend the Exchange Offers or (iii) to
terminate or amend the Exchange Offers by giving oral or written notice of
such delay, extension, termination or amendment to the Exchange Agent. Any
such delay in acceptance, extension, termination or amendment will be followed
as promptly as practicable by oral or written notice thereof to the Holders.
If the Exchange Offers are amended in a manner determined by the Company to
constitute a material change, the Company will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
Holders, and the Company will extend the Exchange Offers for a period of five
to ten business days, depending upon the significance of the amendment and the
manner of disclosure to the Holders, if the Exchange Offers would otherwise
have expired during such five to ten business day period.
Without limiting the manner in which the Company may choose to make a public
announcement of any delay, extension, amendment or termination of the Exchange
Offers, the Company shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
If, prior to the Expiration Date, the Company shall increase the
consideration offered to Holders of MFS Notes pursuant to either Exchange
Offer, such increased consideration shall also be paid to all holders whose
MFS Notes have previously been exchanged pursuant to such Exchange Offer. If
the consideration is increased pursuant either Exchange Offer, such Exchange
Offer will remain open at least ten business days from the date that the
Company first gives notice of such increase. The Company does not presently
intend to increase the consideration currently offered.
Holders of the MFS Notes do not have any appraisal or dissenters' rights
under the Delaware General Corporation Law or the MFS Indentures in connection
with the Exchange Offers. The Company intends to conduct the Exchange Offers
in accordance with the applicable requirements of the Securities Act and the
Exchange Act, and the rules and regulations of the Commission thereunder.
EFFECT OF TENDER
Tenders of MFS Notes pursuant to the Exchange Offers described herein and in
the Letters of Transmittal will constitute a binding agreement between the
tendering Holder of the MFS Notes and Company upon the terms and subject to
the conditions of the Exchange Offers. The acceptance of an Exchange Offer by
a tendering Holder of MFS Notes will constitute the agreement by such Holder
to deliver good and marketable title to the tendered MFS Notes free and clear
of all liens, charges, claims encumbrances, interests and restrictions of any
kind.
PROCEDURES FOR TENDERING
Only a registered Holder of MFS Notes may tender such MFS Notes in the
Exchange Offers. To tender in the Exchange Offers, a Holder of MFS Notes must
complete, sign and date the Letter of
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Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if
required by the Letter of Transmittal, and mail or otherwise deliver such
Letter of Transmittal or such facsimile to the Exchange Agent at the address
set forth below under "--Exchange Agent" for receipt prior to the Expiration
Date. In addition, either (i) certificates for such MFS Notes must be received
by the Exchange Agent along with the Letter of Transmittal, (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
MFS Notes, if such procedure is available, into the Exchange Agent's account
at the Depository pursuant to the procedure for book-entry transfer described
below, must be received by the Exchange Agent prior to the Expiration Date or
(iii) the Holder must comply with the guaranteed delivery procedures described
below.
Any tender by a Holder that is not withdrawn prior to 11:59 p.m., New York
City time, on , 1997 will constitute an agreement between such Holder and the
Company in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF MFS NOTES, THE LETTERS OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. DO NOT SEND THE LETTER OF TRANSMITTAL OR ANY MFS NOTES TO THE
COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
Any beneficial owner(s) of the MFS Notes whose MFS Notes are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender should contact the registered Holder promptly and
instruct such registered Holder to tender on such beneficial owner's behalf.
If such beneficial owner wishes to tender on such owner's own behalf, such
owner must, prior to completing and executing the Letter of Transmittal and
delivering such owner's MFS Notes, either make appropriate arrangements to
register ownership of the MFS Notes in such owner's name or obtain a properly
completed bond power from the registered Holder. The transfer of registered
ownership may take considerable time.
Signatures on a Letter of Transmittal or notice of withdrawal described
below (see "--Withdrawal of Tenders"), as the case may be, must be guaranteed
by an Eligible Institution (as defined below) unless the MFS Notes tendered
pursuant thereto are tendered (i) by a registered Holder who has not completed
the box titled "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures
on a Letter of Transmittal are required to be guaranteed, such guarantee must
be made by a member firm of a registered national securities exchange or of
the National Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act which is a member of one of the recognized signature guarantee
programs identified in the Letter of Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
Holder of any MFS Notes listed therein, such MFS Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
Holder exactly as such registered Holder's name appears on such MFS Notes.
If the Letter of Transmittal or any MFS Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
The Exchange Agent and the Depository (as defined below) have confirmed that
any financial institution that is a participant in the Depository's system may
utilize the Depository's Automated Tender Offer Program to tender MFS Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance and withdrawal of tendered MFS Notes will be
determined by the Company in its sole discretion, which
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determination will be final and binding. The Company reserves the absolute
right to reject any and all MFS Notes not properly tendered or any MFS Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular MFS Notes. The
Company's interpretation of the terms and conditions of the Exchange Offers
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of MFS Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify Holders of
defects or irregularities with respect to tenders of MFS Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of MFS Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
While the Company has no present plan to acquire any MFS Notes that are not
tendered in the Exchange Offers, the Company reserves the right in its sole
discretion to purchase or make offers for any MFS Notes that remain outstanding
subsequent to the Expiration Date and, to the extent permitted by applicable
law, purchase MFS Notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers could
differ from the terms of the Exchange Offers.
By tendering, each Holder of MFS Notes will represent to the Company that,
among other things, the MFS Notes tendered are held by such Holder free and
clear of all security interests, liens, restrictions, charges, encumbrances,
conditional sale agreements or other obligations relating to their sale or
transfer, and not subject to any adverse claim when the same are accepted by
the Company.
Any holder whose MFS Notes have been mutilated, lost, stolen or destroyed
will be responsible for obtaining replacement securities or for arranging for
indemnification with the MFS Trustee. Holders may contact the Information Agent
for assistance with such matters.
IN ORDER FOR A TENDERING HOLDER TO BE ASSURED OF PARTICIPATING IN AN EXCHANGE
OFFER, SUCH HOLDER MUST TENDER MFS NOTES IN ACCORDANCE WITH THE PROCEDURES SET
FORTH HEREIN AND IN THE APPROPRIATE LETTER OF TRANSMITTAL PRIOR TO THE
EXPIRATION DATE. LETTERS OF TRANSMITTAL AND MFS NOTES MUST BE SENT ONLY TO THE
EXCHANGE AGENT. DO NOT SEND LETTERS OF TRANSMITTAL OR MFS NOTES TO THE COMPANY,
THE MFS TRUSTEE, THE TRUSTEE, THE INFORMATION AGENT OR THE DEALER MANAGER.
RETURN OF MFS NOTES
If any tendered MFS Notes are not accepted for any reason set forth in the
terms and conditions of the Exchange Offers or if MFS Notes are withdrawn or
are submitted for a greater principal amount than the Holders desire to
exchange, such unaccepted, withdrawn or non-exchanged MFS Notes will be
returned without expense to the tendering Holder thereof (or, in the case of
MFS Notes tendered by book-entry transfer into the Exchange Agent's account at
the Depository pursuant to the book-entry transfer procedures described below,
such MFS Notes will be credited to an account maintained with the Depository)
as promptly as practicable.
BOOK-ENTRY DELIVERY PROCEDURES.
The Exchange Agent will establish promptly an account with respect to the MFS
Notes at the Depository for purposes of the Exchange Offers. Any financial
institution that is a participant in the Depository may make a book-entry
delivery of MFS Notes by causing the Depository to transfer MFS Notes to the
Exchange Agent's account. However, although delivery of MFS Notes may be
effected through book-entry transfer at the Depository, a properly completed
and executed Letter of Transmittal, together with any other documents required
by the Letter of Transmittal, must, in any case, be transmitted to, and
received by, the Exchange Agent at its address set forth below prior to the
Expiration Date. MFS Notes will not be deemed surrendered until the Letter of
Transmittal is received
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by the Exchange Agent. DELIVERY OF A LETTER OF TRANSMITTAL TO THE DEPOSITORY
WILL NOT CONSTITUTE VALID DELIVERY TO THE EXCHANGE AGENT.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their MFS Notes and (i) whose MFS Notes are not
immediately available or (ii) who cannot deliver their MFS Notes, the Letter
of Transmittal or any other required documents to the Exchange Agent prior to
the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the Holder, the certificate number(s) of such MFS Notes and the
principal amount of MFS Notes tendered, stating that the tender is being
made thereby and guaranteeing that, within five New York Stock Exchange
trading days after the Expiration Date, the Letter of Transmittal (or a
facsimile thereof), together with the certificate(s) representing the MFS
Notes in proper form for transfer or a Book-Entry Confirmation, as the case
may be, and any other documents required by the Letter of Transmittal, will
be deposited by the Eligible Institution with the Exchange Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile thereof),
as well as the certificate(s) representing all tendered MFS Notes in proper
form for transfer and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five New York Stock
Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their MFS Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of MFS Notes may be withdrawn
at any time before 11:59 p.m., New York City time, on , 1997. Tenders of
MFS Notes may not be withdrawn at any time after 11:59 p.m., New York City
time, on , 1997, unless the applicable Exchange Offer is extended with
changes in the terms of such Exchange Offer that are materially adverse to the
tendering Holder, in which case tenders of MFS Notes may be withdrawn.
To withdraw a tender of MFS Notes in the Exchange Offers, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 11:59 p.m., New York City time,
on , 1997. Any such notice of withdrawal must (i) specify the name of the
person having deposited the MFS Notes to be withdrawn (the "depositor"), (ii)
identify the MFS Notes to be withdrawn (including the certificate number or
numbers and principal amount of such MFS Notes) and (iii) be signed by the
holder in the same manner as the original signature on the Letter of
Transmittal by which such MFS Notes were tendered (including any required
signature guarantees). All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
in its sole discretion, whose determination shall be final and binding on all
parties. Any MFS Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offers, and no WorldCom Notes will be
issued with respect thereto unless the MFS Notes so withdrawn are validly
retendered. Properly withdrawn MFS Notes may be retendered by following one of
the procedures described above under "The Exchange Offers--Procedures for
Tendering" at any time prior to the Expiration Date.
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EXCHANGE AGENT
[ ] has been appointed as Exchange Agent for the Exchange Offers.
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notice of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
By Registered or Certified Mail: By Hand/Overnight Delivery:
[TO BE ADDED] [TO BE ADDED]
(For Eligible Institutions Only) By Facsimile:
Confirm by Telephone:
[TO BE ADDED]
[TO BE ADDED]
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, facsimile transmission, telephone or in person by
officers and regular employees of the Company and its affiliates.
The Company has retained Salomon Brothers Inc and Goldman, Sachs & Co. to
act as dealer-managers in connection with the Exchange Offers and will pay
[$ ] for soliciting acceptances of the Exchange Offers. The Company will
also pay the Exchange Agent reasonable and customary fees for its services and
will reimburse it for its reasonable, out-of-pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offers will
be paid by the Company and are estimated in the aggregate to be approximately
[$ ]. Such expenses include registration fees, fees and expenses of the
Exchange Agent and the Trustee, accounting and legal fees and printing costs,
among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of MFS Notes pursuant to the Exchange Offers. If, however, a transfer tax is
imposed for any reason other than the exchange of the MFS Notes pursuant to
the Exchange Offers, then the amount of any such transfer taxes (whether
imposed on the registered Holder or any other persons) will be payable by the
tendering Holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the
amount of such transfer taxes will be billed directly to such tendering
Holder.
CONSEQUENCE OF FAILURE TO EXCHANGE
Participation in the Exchange Offers is voluntary. Holders of the MFS Notes
are urged to consult their financial and tax advisors in making their own
decisions on what action to take. The WorldCom Notes will be issued in
exchange for MFS Notes only after timely receipt by the Exchange Agent of such
MFS Notes, a properly completed and duly executed Letter of Transmittal and
all other required documentation. Therefore, Holders of MFS Notes desiring to
tender such MFS Notes in exchange for WorldCom Notes should allow sufficient
time to ensure timely delivery. Neither the Exchange Agent nor the Company is
under any duty to give notification of defects or irregularities with respect
to tenders of MFS Notes for exchange. MFS Notes that are not tendered or are
tendered but not accepted will, following consummation of the Exchange Offers,
continue to be subject to any existing restrictions upon transfer thereof. In
addition, any Holder of MFS Notes who tenders in the Exchange Offers for the
purpose of participating in a distribution of the WorldCom Notes will be
required to comply with the registration and prospectus delivery requirements
of the Securities Act in connection
27
<PAGE>
with any resale transaction. Each broker-dealer who holds MFS Notes acquired
for its own account as a result of market-making or other trading activities
and who receives WorldCom Notes for its own account in exchange for such MFS
Notes pursuant to the Exchange Offers must acknowledge that it will deliver a
prospectus in connection with any resale of such WorldCom Notes. To the extent
that MFS Notes are tendered and accepted in the Exchange Offers, the trading
market for untendered and tendered but unaccepted MFS Notes could be adversely
affected due to the limited amount, or "float," of the MFS Notes that are
expected to remain outstanding following the Exchange Offers. Generally, a
lower "float" of a security could result in less demand to purchase such
security and could, therefore, result in lower prices for such security. For
the same reason, to the extent that a large amount of MFS Notes are not
tendered or are tendered and not accepted in the Exchange Offers, the trading
market for the WorldCom Notes could be adversely affected.
DESCRIPTION OF DIFFERENCES BETWEEN THE MFS NOTES AND THE WORLDCOM NOTES
The following is a summary comparison of the material terms of the MFS Notes
and the WorldCom Notes. Such summary does not purport to be complete and is
qualified in its entirety by reference to the WorldCom Indenture and the MFS
Indentures. Capitalized terms appearing below within the description of the
MFS Notes and which are not otherwise defined herein have the same meanings as
are given to such terms in the MFS Indentures, copies of which are exhibits to
the Registration Statement of which this Prospectus forms a part. For
additional information, see "Description of WorldCom Notes" below.
MFS NOTES WORLDCOM NOTES
ISSUER: MFS WorldCom
INTEREST ACCRUAL DATES: Interest on the MFS 2004 Interest on the WorldCom
Notes begins to accrue 2004 Notes begins to ac-
on January 15, 1999, and crue on the date they
interest on the MFS 2006 are issued and interest
Notes begins to accrue on the WorldCom 2006
on January 15, 2001. Notes begins to accrue
on the date they are is-
sued.
INTEREST PAYMENT DATES: Interest on the MFS 2004 Interest on the WorldCom
Notes is payable semi- 2004 Notes is payable
annually on January 15 semi-annually on January
and July 15 beginning on 15 and July 15 beginning
July 15, 1999, and in- on July 15, 1997, and
terest on the MFS 2006 interest on the WorldCom
Notes is payable semi- 2006 Notes is payable
annually on January 15 semi-annually on January
and July 15 beginning on 15 and July 15 beginning
July 15, 2001; provided, on July 15, 1997.
however, that MFS may
elect, subject to the
consummation of the Ex-
change Offers, to com-
mence the accrual of
cash interest beginning
on July 15, 1997, at
which time the outstand-
ing principal amount of
each of the MFS Notes at
their respective stated
maturities will be re-
duced to the Accreted
Value of such MFS Notes
as of such date, and
cash interest will be
payable on each interest
payment date thereafter,
beginning January 15,
1998.
28
<PAGE>
OPTIONAL REDEMPTION: The MFS 2004 Notes are The WorldCom 2004 Notes
not redeemable at the have the same redemption
option of MFS prior to provisions as the MFS
January 15, 1999. On or 2004 Notes, and the
after January 15, 1999, WorldCom 2006 Notes have
the MFS 2004 Notes are the same redemption pro-
redeemable at the option visions as the MFS 2006
of MFS, in whole at any Notes, except that
time or in part from WorldCom is the Issuer
time to time, at the of the WorldCom Notes
following prices (ex- and has the optional
pressed as percentages right to redeem such
of the principal amount notes.
at Stated Maturity), if
redeemed during the
twelve months beginning
January 15 of the years
indicated below, in each
case together with in-
terest accrued to the
redemption date:
YEAR PERCENTAGE
---- ----------
1999............ 103.52%
2000............ 102.34%
2001............ 101.17%
2002 and
thereafter..... 100.00%
The MFS 2006 Notes are
not redeemable at the
option of MFS prior to
January 15, 2001. On or
after January 15, 2001,
the MFS 2006 Notes will
be redeemable at the op-
tion of MFS, in whole at
any time or in part from
time to time, at the
following prices (ex-
pressed as percentages
of the principal amount
at Stated Maturity), if
redeemed during the
twelve months beginning
January 15 of the years
indicated below, in each
case together with in-
terest accrued to the
redemption date:
YEAR PERCENTAGE
---- ----------
2001............ 103.32%
2002............ 102.21%
2003............ 101.11%
2004 and
thereafter..... 100.00%
CHANGE OF CONTROL: Upon the occurrence of a None
Change of Control, each
Holder will have the
right to require MFS to
repurchase all or any
29
<PAGE>
part of such Holder's
Notes (the "Change of
Control Offer") at a
purchase price (the
"Purchase Price") in
cash equal to 101 per-
cent of the Accreted
Value thereof on any
Change of Control Pay-
ment Date occurring
prior to January 15,
2001, plus any accrued
and unpaid cash interest
not otherwise included
in Accreted Value to
such Change of Control
Payment Date, or 101
percent of the principal
amount thereof at Stated
Maturity (subject to
possible reduction as
aforesaid) on any Change
of Control Payment Date
occurring on or after
January 15, 2001, plus
accrued and unpaid in-
terest, if any, to such
Change of Control Pay-
ment Date, in accordance
with the procedures set
forth in the MFS Inden-
tures.
LIMITATION OF DEBT: MFS will not incur any None
Debt unless (i) after
giving effect to such
incurrence of Debt and
the contemporaneous ap-
plication of the pro-
ceeds thereof, no De-
fault or Event of De-
fault shall have oc-
curred and be continuing
at the time or would oc-
cur as a consequence of
the incurrence of such
Debt, and (ii) such Debt
is Permitted Debt.
LIMITATION OF DEBT AND MFS will not permit any None
PREFERRED STOCK OF of its Restricted Sub-
RESTRICTED SUBSIDIARIES: sidiaries to incur any
Debt or issue any pre-
ferred stock, except (a)
Subsidiary Vendor Debt;
(b) Debt and preferred
stock of Restricted Sub-
sidiaries outstanding as
of January 26, 1994; (c)
Debt and preferred stock
of a Restricted Subsidi-
ary issued to and held
by MFS; (d) Interest
Swap Obligations, pro-
vided that such obliga-
tions are related to
payment obligations on
Debt otherwise permitted
by the terms of this
para-
30
<PAGE>
graph, and Currency
Hedge Obligations; (e)
Debt or preferred stock
incurred in exchange
for, or the proceeds of
which are used to refi-
nance, Restricted Sub-
sidiary Debt or pre-
ferred stock referred to
in clause (a) of this
paragraph, subject to
certain exceptions; (f)
Debt or preferred stock
of MFS Telecom, which is
convertible into Capital
Stock of MFS, issued to
a Strategic Equity In-
vestor; provided, howev-
er, that the proceeds of
such Incurrence or issu-
ance are used as though
such proceeds were Net
Cash Proceeds in accor-
dance with the provi-
sions of "Limitations on
Asset Sales"; and (g)
Guarantees by Restricted
Subsidiaries of Debt of
MFS described in clause
(a) of the definition of
Permitted Debt.
LIMITATIONS ON LIENS: MFS will not, and will Same as MFS Notes, ex-
not permit any of its cept that, WorldCom may
Restricted Subsidiaries issue, assume or guaran-
to enter into, create, tee indebtedness secured
incur, assume or suffer by Liens on Property
to exist any Liens of that are not Permitted
any kind, other than Liens without equally
Permitted Liens, on or and ratably securing the
with respect to any of WorldCom Notes, provided
its Property or assets that the sum of all such
now owned or hereafter indebtedness then being
acquired, or any inter- issued, assumed or guar-
est therein or any in- anteed together with
come or profits there- such indebtedness there-
from, unless the MFS tofore issued, assumed
Notes are secured or guaranteed that re-
equally and ratably with mains outstanding does
(or prior to) such Debt not exceed 15% of the
and any and all other Consolidated Net Tangi-
Debt so secured by such ble Assets prior to the
Property or assets for time such indebtedness
so long as any and all was issued, assumed or
other Debt is so se- guaranteed.
cured.
LIMITATIONS ON SALE AND MFS will not, and will Sale and Leaseback
LEASEBACK TRANSACTIONS: not permit any of its Transactions are consid-
Restricted Subsidiaries ered Liens and are sub-
to enter into, assume, ject to the covenant re-
Guarantee or otherwise stricting the ability of
become liable with re- the Company to incur
spect to any Sale and Liens, as described
Leaseback Transaction, above.
unless (i) the obliga-
tion of MFS or such Re-
stricted Subsidiary with
respect thereto is in-
cluded as
31
<PAGE>
Debt and would be per-
mitted under other cove-
nants and any Liens
granted thereby would be
permitted by other cove-
nants, (ii) the net pro-
ceeds from such transac-
tion are at least equal
to the Fair Market Value
of such Property being
transferred, and (iii)
the Net Cash Proceeds
from such transaction
are applied in accor-
dance with other cove-
nants.
LIMITATIONS ON MFS will not, and will None
RESTRICTED PAYMENTS: not permit any of its
Restricted Subsidiaries
to make any Restricted
Payment unless, at the
time of and after giving
effect to the proposed
Restricted Payment (i)
no Default or Event of
Default shall have oc-
curred and be continuing
or shall occur as a con-
sequence thereof; (ii)
after giving effect, on
a pro forma basis, to
such Restricted Payment
and the incurrence of
any Debt the net pro-
ceeds of which are used
to finance such Re-
stricted Payment, MFS
could incur at least
$1.00 of additional Debt
pursuant to clause (h)
or (i) of the definition
of Permitted Debt; and
(iii) after giving ef-
fect to such Restricted
Payment on a pro forma
basis, the aggregate
amount expended or de-
clared for all Re-
stricted Payments on or
after January 26, 1994
does not exceed certain
formula amounts.
LIMITATIONS ON DIVIDENDS MFS will not, and will None
AND OTHER PAYMENT not permit any Re-
RESTRICTIONS AFFECTING stricted Subsidiary to
RESTRICTED SUBSIDIARIES: cause or suffer to exist
or become effective or
enter into any encum-
brance or restriction
(other than pursuant to
law or regulation) on
the ability of any Re-
stricted Subsidiary (i)
to pay dividends or make
any other distributions
in respect of its Capi-
tal Stock or pay any
Debt or other obligation
owed to MFS or
32
<PAGE>
any other Restricted
Subsidiary of MFS; (ii)
to make loans or ad-
vances to MFS or any Re-
stricted Subsidiary of
MFS; or (iii) to trans-
fer any of its Property
or assets to MFS or any
other Restricted Subsid-
iary of MFS, except cer-
tain ordinary course of
business exceptions.
LIMITATIONS ON ISSUANCE MFS (i) shall not permit None
AND SALE OF CAPITAL any Restricted Subsidi-
STOCK OF RESTRICTED ary to issue any Capital
SUBSIDIARIES: Stock other than to MFS
or a Restricted Subsidi-
ary, other than pursuant
to certain specified
agreements in existence
on January26, 1994, un-
less MFS acquires at the
same time not less than
its Proportionate Inter-
est in such issuance of
Capital Stock and (ii)
shall not permit any
Person other than MFS or
a Restricted Subsidiary
to own any Capital Stock
of any Restricted Sub-
sidiary of MFS (other
than directors' qualify-
ing shares), except for
certain transactions not
prohibited by other cov-
enants.
LIMITATION ON ASSET MFS will not, and will None
SALES: not permit any Re-
stricted Subsidiary to,
consummate an Asset Sale
unless (i) MFS or such
Restricted Subsidiary,
as the case may be, re-
ceives consideration at
the time of such Asset
Sale at least equal to
the Fair Market Value
(as evidenced by a reso-
lution of the Board of
Directors of MFS) of the
Property or assets sold
or otherwise disposed
of, (ii) at least 85
percent of the consider-
ation received by MFS or
such Restricted Subsidi-
ary for such Property or
assets consists of Cash
Proceeds (or, if less
than 85 percent, the re-
mainder of such consid-
eration consists of
Telecommunications As-
sets) and (iii) MFS or
such Restricted Subsidi-
ary, as the case may be,
33
<PAGE>
uses the Net Cash Pro-
ceeds in the manner set
forth in the next para-
graph.
Within 360 days, in the
case of the MFS 2004
Notes, or 300 days, in
the case of the MFS 2006
Notes, after any Asset
Sale, MFS or such Re-
stricted Subsidiary, as
the case may be, may at
its option (a) reinvest
an amount equal to the
Net Cash Proceeds (or
any portion thereof)
from such disposition in
Replacement Assets
and/or (b) apply an
amount equal to such Net
Cash Proceeds (or re-
maining Net Cash Pro-
ceeds) to the permanent
reduction of any Debt of
MFS ranking pari passu
with the MFS Notes (in-
cluding the MFS Notes)
or Debt of any Re-
stricted Subsidiaries of
MFS.
LIMITATIONS ON MFS will not, and will None
TRANSACTIONS WITH not permit any of its
AFFILIATES: Restricted Subsidiaries
to conduct any business
or enter into or permit
to exist any transaction
or series of related
transactions with any
Affiliate of MFS or such
Restricted Subsidiary,
as the case may be, un-
less (i) such business,
transaction or series of
related transactions is
in the best interest of
MFS or such Restricted
Subsidiary, (ii) such
business, transaction or
series of related trans-
actions is on terms no
less favorable to MFS or
such Restricted Subsidi-
ary than those that
could be obtained in a
comparable arm's-length
transaction with a Per-
son that is not such an
Affiliate and (iii) (a)
with respect to such
business, transaction or
series of related trans-
actions that has a Fair
Market Value or involves
aggregate payments equal
to, or in excess of,
$10.0 million but less
than $15.0 million, MFS
delivers to the Trustee
an Officer's
34
<PAGE>
Certificate stating that
such business, transac-
tion or series of re-
lated transactions
complies with clauses
(i) and (ii) above; and
(b) with respect to such
business, transaction or
series of related trans-
actions that has a Fair
Market Value or involves
aggregate payments equal
to, or in excess of,
$15.0 million such busi-
ness, transaction or se-
ries of transactions is
approved by a majority
of the Board of Direc-
tors.
PROVISION OF FINANCIAL Whether or not MFS is None
INFORMATION: subject to Section 13(a)
or 15(d) of the Exchange
Act, or any successor
provision thereto, MFS
shall file with the Com-
mission the annual re-
ports, quarterly reports
and other documents
which MFS would have
been required to file
with the Commission pur-
suant to such Section
13(a) or 15(d) or any
successor provision
thereto if MFS were sub-
ject thereto, such docu-
ments to be filed with
the Commission on or
prior to the respective
dates (the "Required
Filing Dates") by which
MFS would have been re-
quired to file them. MFS
shall also in any event
within 15 days of each
Required Filing Date (i)
transmit by mail to all
Holders, as their names
and addresses appear in
the Security Register,
without cost to such
Holders, and (ii) file
with the Trustee copies
of the annual reports,
quarterly reports and
other documents (without
exhibits) which MFS
would have been required
to file with the Commis-
sion pursuant to Section
13(a) or 15(d) of the
Exchange Act or any suc-
cessor provisions
thereto if MFS were sub-
ject thereto.
35
<PAGE>
CONSOLIDATION, MERGER, MFS will not, and will WorldCom may consolidate
CONVEYANCE, TRANSFER OR not permit any with, or sell, lease or
LEASE: Restricted Subsidiary convey all or
to, in any transaction substantially all of its
or series of assets to, or merge with
transactions, or into any other
consolidate with or corporation, provided
merge into any other that (a) either WorldCom
Person (other than a shall be the continuing
merger of a Restricted corporation, or the
Subsidiary into MFS in successor corporation
which MFS is the (if other than WorldCom)
continuing corporation formed by or resulting
or the merger of a from any such
Restricted Subsidiary consolidation or merger
into or with a or which shall have
Restricted Subsidiary), received the transfer of
or sell, convey, assign, such assets shall
transfer, lease or expressly assume payment
otherwise dispose of all of the principal of (and
or substantially all of premium, if any) and
the Property and assets interest on all the
of MFS and the WorldCom Notes and the
Restricted Subsidiaries performance and
taken as a whole to any observance of all the
other Person, unless: covenants and conditions
of the WorldCom
Indenture; and (b)
WorldCom or such
successor corporation
shall not immediately
thereafter be in default
under the WorldCom
Indenture.
(a) either (i) MFS shall
be the continuing
corporation or (ii) the
corporation (if other
than MFS) formed by such
consolidation or into
which MFS is merged, or
the Person which
acquires, by sale,
assignment, conveyance,
transfer, lease or
disposition, all or
substantially all of the
Property and assets of
MFS and the Restricted
Subsidiaries taken as a
whole (such corporation
or Person, the
"Surviving Entity"),
shall be a corporation
organized and validly
existing under the laws
of the United States of
America, any political
subdivision thereof or
any state thereof or the
District of Columbia,
and shall expressly
assume, by a
supplemental MFS
Indenture, the due and
punctual payment of the
principal of (and
premium, if any) and
interest on all the
Notes and the
performance of MFS'
covenants and
obligations under the
MFS Indentures;
(b) immediately before
and after giving effect
to such transaction or
series of transactions
on a pro forma basis no
Event of De-
36
<PAGE>
fault or Default shall
have occurred and be
continuing or would re-
sult therefrom;
(c) immediately after
giving effect to any
such transaction or se-
ries of transactions on
a pro forma basis as if
such transaction or se-
ries of transactions had
occurred on the first
day of the determination
period, MFS (or the Sur-
viving Entity if MFS is
not continuing) would be
permitted to incur $1.00
of additional Debt pur-
suant to paragraphs (h)
or (i) of the definition
of "Permitted Debt"; and
(d) immediately after
giving effect to such
transaction or series of
transactions on a pro
forma basis, MFS (or the
Surviving Entity if MFS
is not continuing) shall
have a Consolidated Net
Worth equal to or
greater than the Consol-
idated Net Worth of MFS
immediately prior to
such transaction.
Upon any transaction, or
series of transactions
that are of the type de-
scribed in, and are ef-
fected in accordance
with, the foregoing par-
agraph the Surviving En-
tity shall succeed to,
and be substituted for,
and may exercise every
right and power of, MFS
under the MFS Indentures
and the MFS Notes with
the same effect as if
such Surviving Entity
had been named as MFS in
the MFS Indentures; and
when a Surviving Person
duly assumes all of the
obligations and cove-
nants of MFS pursuant to
the MFS Indentures and
the MFS Notes, except in
the case of a lease, the
predecessor Person shall
be relieved of all such
obligations.
37
<PAGE>
EVENTS OF DEFAULT Each of the following is The WorldCom Notes are
an "Event of Default" subject to substantially
under the MFS Inden- similar "Events of De-
tures: fault" as are described
in paragraphs (a), (b),
(a) default in the pay- (d), (g) and (h) under
ment of any installment the MFS--Events of De-
of interest upon the fault. In addition under
Notes when it becomes the WorldCom Indenture,
due and payable, and the certain events of de-
continuance of such de- fault resulting in the
fault for a period of 30 acceleration of the ma-
days; turity of indebtedness
aggregating in excess of
(b) default in the pay- $50,000,000 under any
ment of the principal of mortgages, indentures or
(or premium, if any, on) instruments under which
any Note at its Maturi- WorldCom may have is-
ty, upon repurchase, ac- sued, or by which there
celeration, optional re- may have been secured or
demption, required re- evidenced, any other in-
purchase or otherwise or debtedness of WorldCom;
the failure to make an but only if such indebt-
offer to purchase as edness is not discharged
therein required; or such acceleration is
not rescinded or an-
(c) MFS fails to comply nulled are also consid-
with any of its cove- ered "Events of De-
nants or agreements re- fault."
lated to "Limitation on
Debt" or "Limitation on
Debt and Preferred Stock
of Restricted Subsidiar-
ies" or fails to perform
or comply with the MFS
Indentures provisions
related to "Consolida-
tion, Merger, Convey-
ance, Transfer or
Lease";
(d) default in the per-
formance, or breach, of
any covenant or warranty
of MFS in the MFS Inden-
tures and continuance of
such default or breach
for a period of 60 days
after specified written
notice thereof has been
given to MFS by the
Trustee or to MFS and
the Trustee by the Hold-
ers of at least 25 per-
cent of the aggregate
principal amount of the
Outstanding MFS Notes;
(e) Debt of MFS or any
Restricted Subsidiary is
not paid when due within
the applicable grace pe-
riod, if any, or is ac-
celerated by the holders
thereof and, in either
case, the principal
amount of such unpaid or
accelerated Debt exceeds
$10.0 million;
38
<PAGE>
(f) the entry by a court
of competent jurisdic-
tion of one or more
judgments or orders
against MFS or any Re-
stricted Subsidiary in
an uninsured or
unindemnified aggregate
amount in excess of
$10.0 million which re-
mains undischarged,
unwaived, unstayed, un-
bonded or unsatisfied
for a period of 60 con-
secutive days;
(g) certain events of
bankruptcy, insolvency,
liquidation or reorgani-
zation, or court ap-
pointment of a custodi-
an, trustee or other
similar official of MFS
or any significant re-
stricted subsidiary or
all or substantially all
of its property or prop-
erty of significant re-
stricted subsidiaries.
If any Event of Default If an Event of Default
(other than an Event of under the WorldCom In-
Default specified in denture with respect to
clauses (g) and (h) WorldCom Notes at the
above) occurs and is time outstanding occurs
continuing, then and in and is continuing, then
every such case the in every such case the
Trustee or the Holders Trustee or the holders
of not less than 25 per- of not less than 25% in
cent of the outstanding principal amount of the
aggregate principal outstanding WorldCom
amount at Stated Matu- Notes may declare the
rity (subject to reduc- principal amount of all
tion as aforesaid) of of the WorldCom Notes of
MFS Notes may declare that series (or of all
the Default Amount and WorldCom Notes then out-
any accrued and unpaid standing under the
interest on all MFS WorldCom Indenture, as
Notes then Outstanding the case may be) to be
to be immediately due due and payable immedi-
and payable, by a notice ately by written notice
in writing to MFS (and thereof to WorldCom (and
to the Trustee if given to the Trustee if given
by Holders), and upon by the holders). Howev-
any such declaration, er, at any time after
such Default Amount and such a declaration of
any accrued interest acceleration with re-
will become and be imme- spect to WorldCom Notes
diately due and payable. (or of all WorldCom
If any Event of Default Notes then outstanding
specified in clause (g) under the WorldCom In-
or (h) above occurs, the denture, as the case may
Accreted Value and ac- be) has been made, but
crued interest, if any, before a judgment or de-
on the MFS Notes then cree for payment of the
Outstanding shall become money due has been ob-
immediately due and pay- tained by the Trustee
able without any decla- prior to the Stated Ma-
ration or other act on turity thereof, the
the part of the
39
<PAGE>
Trustee or any Holder. holders of a majority in
Until and including Jan- principal amount of out-
uary 15, 1999, in the standing WorldCom Notes
case of the MFS 2004 may, subject to certain
Notes, or January15, conditions, rescind and
2001, in the case of the annul such acceleration
MFS 2006 Notes, the "De- if all Events of De-
fault Amount" shall fault, other than the
equal the Accreted Value non-payment of acceler-
of the MFS Notes as of ated principal (or spec-
such date. On or after ified portion thereof),
January 15, 1999, in the with respect to WorldCom
case of the MFS 2004 Notes of such series (or
Notes, or January 15, of all WorldCom Notes
2001, in the case of the then outstanding under
MFS 2006 Notes, the De- the WorldCom Indenture,
fault Amount shall equal as the case may be) have
100 percent of the prin- been cured or waived as
cipal amount thereof at provided in the WorldCom
the Stated Maturity Indenture. The WorldCom
(subject to reduction as Indenture also provides
aforesaid) thereof. Un- that the holders of not
der certain circumstanc- less than a majority in
es, the Holders of a ma- principal amount of the
jority in principal outstanding WorldCom
amount at Stated Matu- Notes of any series is-
rity (subject to reduc- sued thereunder (or of
tion as aforesaid) of all WorldCom Notes then
the Outstanding MFS outstanding under the
Notes by notice to MFS WorldCom Indenture, as
and the Trustee may re- the case may be) may
scind an acceleration waive certain past de-
and its consequences. faults with respect to
such series and its con-
sequences.
AMENDMENT AND MFS and the Trustee may, Same as MFS, except that
SUPPLEMENT: at any time and from WorldCom and the Trustee
time to time, without may, at any time and
notice or consent of any from time to time, with-
Holder, enter into one out notice or consent of
or more MFS Indentures any Holder, enter into
supplemental to either one or more indentures
of the MFS Indentures supplemental to the
(1) to evidence the suc- WorldCom Indenture sup-
cession of another Per- plement any of the pro-
son to MFS and the as- visions of the WorldCom
sumption by such succes- Indenture to such extent
sor of the covenants of as shall be necessary to
MFS under the MFS Inden- permit or facilitate the
tures and contained in defeasance and discharge
the MFS Notes, (2) to of the WorldCom Notes;
add to the covenants of provided that any such
MFS, for the benefit of action shall not ad-
the Holders, or to sur- versely affect the in-
render any right or terests of the Holders
power conferred upon MFS of the WorldCom Notes.
by the MFS Indentures,
(3) to add any addi-
tional Events of De-
fault, (4) to provide
for uncertificated MFS
Notes in addition to or
in place of certificated
MFS Notes, (5) to change
or eliminate any of the
provisions of the MFS In-
40
<PAGE>
dentures, provided that
any such change or elim-
ination will become ef-
fective only when there
is not Outstanding any
Note created prior to
the execution of such
supplemental MFS Inden-
ture which is entitled
to the benefit of such
provision, (6) to evi-
dence and provide for
the acceptance of ap-
pointment under the MFS
Indentures by a succes-
sor Trustee, (7) to se-
cure the MFS Notes, (8)
to cure any ambiguity,
to correct or supplement
any provision in the MFS
Indentures which may be
defective or inconsis-
tent with any other pro-
vision therein or to add
any other provisions
with respect to matters
or questions arising un-
der the MFS Indentures;
provided such actions
will not adversely af-
fect the interests of
the Holders in any mate-
rial respect, or (9) to
comply with the require-
ments of the Commission
in order to effect or
maintain the qualifica-
tion of the MFS Inden-
tures under the Trust
Company Indenture Act.
With the consent of the
Holders of not less than
a majority in principal
amount at Stated
Maturity (subject to The WorldCom Indenture
reduction as aforesaid) also requires the
of the Outstanding MFS consent of the Holder of
Notes, MFS and the each Outstanding
Trustee may enter into WorldCom Note to (1)
one or more MFS change the Stated
Indentures supplemental Maturity of the
to the MFS Indentures principal of, or any
for the purpose of installment of principal
adding any provisions to of or interest on, any
or changing in any WorldCom Note, or reduce
manner or eliminating the principal amount
any of the provisions of thereof, or rate or
the MFS Indentures or amount of interest
the modifying in any thereon that would be
manner of the rights of due and payable upon
the Holders; provided, Maturity thereof, or
however, that no such adversely affect any
supplemental MFS right of repayment at
Indenture will, without the option of the Holder
the consent of the of any WorldCom Note, or
Holder of each change any Place of
Outstanding Note, (1) Payment where, or the
change the Stated currency in which, any
WorldCom Note or
41
<PAGE>
Maturity of the the interest thereon is
principal of, or any payable, or impair the
installment of interest right to institute suit
on, any Note, or reduce for the enforcement of
the principal amount any such payment on or
thereof (or premium, if after the Stated
any), or the interest Maturity thereof, (2)
thereon that would be reduce the percentage in
due and payable upon principal amount of the
Maturity thereof, or Outstanding WorldCom
reduce the Default Notes, the consent of
Amount that would be due whose Holders is
and payable on required for any such
acceleration of the supplemental indenture,
Maturity thereof or the consent of whose
provided in the MFS Holders is required for
Indentures or change the any waiver with respect
place of payment where, to such notes (or
or the coin or currency compliance with certain
in which, any Note or provisions of the
any premium or interest WorldCom Indenture or
thereon is payable, or certain defaults
impair the right to thereunder and their
institute suit for the consequences) provided
enforcement of any such for the WorldCom
payment on or after the Indenture, or reduce the
Stated Maturity thereof, requirements of the
(2) reduce the WorldCom Indenture for
percentage in principal quorum or voting, or (3)
amount at Stated to modify the provisions
Maturity of the regarding "Supplemental
Outstanding MFS Notes, Indentures with Consent
the consent of whose of Holders" or "Waiver
Holders is necessary for of Past Defaults",
any such supplemental except to increase any
MFS Indenture or such percentage or to
required for any waiver provide that certain
of compliance with provisions of the
certain provisions of WorldCom Indenture
the MFS Indentures or cannot be modified or
certain Defaults waived without the
thereunder, (3) modify unanimous consent of the
the obligations of MFS Holders of the WorldCom
to make offers to Notes.
purchase MFS Notes upon
a Change of Control or
from the proceeds of
Asset Sales, (4)
subordinate in right of
payment, or otherwise
subordinate, the MFS
Notes to any other
indebtedness, (5) modify
any provisions of the
MFS Indentures relating
to the calculation of
Accreted Value or
(6)modify any of the
provisions of this
paragraph (except to
increase any percentage
set forth herein);
provided, further, that
the consent of the
Holders of not less than
75 percent of the
principal amount at
Stated Maturity (subject
to reduction as
aforesaid) of the
Outstanding MFS Notes is
required to make any
amendment to the
covenant described under
"Change of Control."
The WorldCom Indenture
does not have any
provisions that require
the consent of the
Holders of not less than
75 percent in principal
amount of Outstanding
WorldCom Notes.
42
<PAGE>
SATISFACTION AND MFS may terminate its Same as MFS
DISCHARGE OF THE obligations under the
INDENTURES; COVENANT MFS Indentures when (i)
DEFEASANCE: either (A) all Outstand-
ing Notes have been de-
livered to the Trustee
for cancellation or (B)
all such MFS Notes not
theretofore delivered to
the Trustee for cancel-
lation have become due
and payable, will become
due and payable within
one year or are to be
called for redemption
within one year under
irrevocable arrangements
satisfactory to the
Trustee for the giving
of notice of redemption
by the Trustee in the
name, and at the ex-
pense, of MFS, and MFS
has irrevocably depos-
ited or caused to be de-
posited with the Trustee
funds in an amount suf-
ficient to pay and dis-
charge the entire in-
debtedness on the MFS
Notes, not theretofore
delivered to the Trustee
for cancellation, for
principal of, premium,
if any, and interest to
the date of deposit or
Stated Maturity or date
of redemption; (ii) MFS
has paid or caused to be
paid all sums payable by
MFS under the MFS Inden-
tures; and (iii) MFS has
delivered an Officer's
Certificate and an Opin-
ion of Counsel relating
to compliance with the
conditions set forth in
the MFS Indentures.
MFS will be deemed to
have paid and discharged
the entire Debt on the
MFS Notes and the MFS
Indentures shall cease
to be of further effect
as to all outstanding
MFS Notes (except as to
(i) rights of registra-
tion of transfer, sub-
stitution and exchange
of MFS Notes and MFS'
right of optional re-
demption, (ii) rights of
Holders to receive pay-
ments of principal of,
premium, if any, and in-
terest on the MFS Notes
(but not the Change of
Control Repurchase Price
of
43
<PAGE>
the MFS Notes) and any
rights of the Holders
with respect to such
amounts, (iii) the
rights, obligations and
immunities of the
Trustee under the MFS
Indentures and (iv) cer-
tain other specified
provisions in the MFS
Indentures (the forego-
ing exceptions (i)
through (iv) are collec-
tively referred to as
the "Reserved Rights"))
after the irrevocable
deposit by MFS with the
Trustee, in trust for
the benefit of the Hold-
ers, at any time prior
to the Stated Maturity
of the MFS Notes, of (A)
money in an amount, (B)
U.S. Government Obliga-
tions which through the
payment of interest and
principal will provide,
not later than one day
before the due date of
payment in respect of
the MFS Notes, money in
an amount, or (C) a com-
bination thereof, suffi-
cient to pay and dis-
charge the principal of
and interest on the MFS
Notes then outstanding
on the dates on which
any such payments are
due in accordance with
the terms of the MFS In-
dentures and of the MFS
Notes. Defeasance may
only be deemed to occur
if certain conditions
are satisfied, includ-
ing, among other things,
delivery by MFS to the
Trustee of an opinion of
outside counsel accept-
able to the Trustee to
the effect that, among
other things, (i) the
deposit, defeasance and
discharge will not be
deemed, or result in, a
taxable event for fed-
eral income tax purpos-
es, with respect to the
Holders and (ii) MFS'
deposit will not result
in the Trust or the
Trustee being subject to
regulation under the In-
vestment Company Act of
1940.
44
<PAGE>
THE CONSENT SOLICITATION
Concurrently with the Exchange Offers, the Company is soliciting Consents
from the Holders of MFS Notes 1994 Indenture (under which the MFS 2004 Notes
were issued) and the 1996 Indenture (under which the MFS 2006 issued). The
completion, execution and delivery of a Letter of Transmittal by a Holder
tendering MFS Notes pursuant Exchange Offer will constitute the Consent of
such tendering Holder to the Proposed Amendments with respect to Notes.
Holders may not deliver Consents without tendering their MFS Notes in the
Exchange Offer.
REQUIRED CONSENTS
Consents from Holders of a majority in principal amount outstanding of a
series of MFS Notes must be received in order to amend the relevant MFS
Indenture in the manner contemplated by the Consent Solicitation. Among other
revisions, the Proposed Amendments will eliminate (i) restrictive covenants
regarding limitation of debt, limitations on sale and leaseback transactions,
limitations on restricted payments and transactions with affiliates and (ii)
the separate reporting requirements contained in the MFS Indentures, and will
redefine the events constituting a "Change of Control" under the MFS
Indentures. See "The Proposed Amendments." Among other conditions, receipt of
the Requisite Consent with respect to both series of MFS Notes and the lack of
any objection by the MFS Trustee as to MFS' ability to effect the Proposed
Amendments are conditions to consummation of each Exchange Offer by the
Company. See "The Exchange Offers--Conditions to the Exchange Offers."
If the Requisite Consent or the Supermajority Consent, as the case may be,
is received with respect to a series of MFS Notes and the Exchange Offer with
respect to such series is consummated, the relevant MFS Indenture will be
amended with respect to such series as discussed herein, and MFS and the MFS
Trustee will execute a supplemental indenture in respect of the MFS Notes of
such series and the MFS Indenture, as so supplemented, will become operative
on the Exchange Date. The MFS Indentures, without giving effect to the
Proposed Amendments, will remain in effect until the Proposed Amendments
become operative on the Exchange Date. If either or both of the Exchange
Offers is or are terminated or withdrawn, the Proposed Amendments will never
become operative. See "The Proposed Amendments."
Each non-exchanging Holder of such series of MFS Notes will be bound by the
Proposed Amendments even if such Holder did not consent to the Proposed
Amendments.
Consents may be revoked at any time prior to 11:59 p.m., New York City time,
on , 1997 by the withdrawal of a tender of MFS Notes in accordance with the
instructions for such withdrawal (see "The Exchange Offer--Withdrawal of
Tender.") Any withdrawal of a tender of MFS Notes shall also be deemed to be a
revocation of the related Consent. Tenders of MFS Notes may not be withdrawn
and Consents may not be revoked at any time after 11:59 p.m., New York City
time, on , 1997, unless the applicable Exchange Offer is extended with
changes in the terms of such Exchange Offer that are materially adverse to the
tendering Holder, in which case tenders of MFS Notes may be withdrawn.
CONSENT PAYMENT
On the Exchange Date, the Company will pay each tendering Holder who validly
tendered MFS Notes on or prior to the Expiration Date a Consent Payment equal
to 0.% of the Accreted Value of such Holder's MFS Notes for which Consents
have been validly delivered on or prior to the Expiration Date. If a Holder's
MFS Notes are not validly tendered and the related Consents are not validly
delivered pursuant to an Exchange Offer and the Consent Solicitation on or
prior to the Expiration Date, such Holder will not receive a Consent Payment
even though the Proposed Amendments may be effective as to such Holder's MFS
Notes that are not exchanged in the Exchange Offer.
45
<PAGE>
HOLDERS OF MFS NOTES WHO TENDER IN AN EXCHANGE OFFER WILL BE REQUIRED, AS A
CONDITION TO A VALID TENDER, TO HAVE GIVEN THEIR CONSENT TO THE PROPOSED
AMENDMENTS CONTEMPLATED BY THE CONSENT SOLICITATION. THE PROPER COMPLETION,
EXECUTION AND DELIVERY OF A LETTER OF TRANSMITTAL WITH RESPECT TO A PARTICULAR
SERIES OF MFS NOTES WILL CONSTITUTE THE DELIVERY OF A CONSENT WITH RESPECT TO
SUCH MFS NOTES. TENDERS OF MFS NOTES MAY BE WITHDRAWN, AND CONSENTS MAY BE
REVOKED, AT ANY TIME PRIOR TO 11:59 P.M., NEW YORK CITY TIME, ON , 1997.
46
<PAGE>
THE PROPOSED AMENDMENTS
WorldCom is soliciting the Consent of the Holders of MFS Notes to the
Proposed Amendments. The 1994 Indenture and the 1996 Indenture contain
substantially similar covenants and terms. What follows are summaries of (i)
the covenants and terms proposed to be eliminated from each of the MFS
Indentures pursuant to the Consent Solicitation and (ii) the covenants and
terms proposed to be substantially revised pursuant to the Consent
Solicitation (collectively, the "Proposed Amendments"). Capitalized terms
appearing below which are not otherwise defined herein have the same meanings
as are given to such terms in the MFS Indentures, copies of which have been
filed as exhibits to the Registration Statement of which this Prospectus forms
a part. The summaries do not purport to be complete and are qualified in their
entirety by reference to the 1994 Indenture, the 1996 Indenture and the forms
of the supplemental indenture to each of the 1994 Indenture and the 1996
Indenture that contain the Proposed Amendments with respect to the MFS Notes
(and that are to be executed in respect of each series of MFS Notes by MFS and
the MFS Trustee in the event the Requisite Consent or the Supermajority
Consent, as the case may be, with respect to such series is obtained). The
form of each such supplemental indenture has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.
PROVISIONS TO BE DELETED
Pursuant to the Consent Solicitation, the Company is proposing to eliminate
the following from each of the MFS Indentures with respect to each series of
MFS Notes:
Limitation on Debt. The Company will not, directly or indirectly, incur any
Debt unless (i) after giving effect to such incurrence of Debt and the
contemporaneous application of the proceeds thereof, no Default or Event of
Default shall have occurred and be continuing at the time or would occur as a
consequence of the incurrence of such Debt, and (ii) such Debt is Permitted
Debt.
Limitation of Debt and Preferred Stock of Restricted Subsidiaries. The
Company will not permit any of its Restricted Subsidiaries to incur, directly
or indirectly, any Debt or issue any preferred stock, except (a) Subsidiary
Vendor Debt; (b) Debt and preferred stock of Restricted Subsidiaries
outstanding as of January 26, 1994; (c) Debt and preferred stock of a
Restricted Subsidiary issued to and held by the Company; (d) Interest Swap
Obligations, provided that such obligations are related to payment obligations
on Debt otherwise permitted by the terms of this covenant, and Currency Hedge
Obligations; (e) Debt or preferred stock incurred in exchange for, or the
proceeds of which are used to refinance, Restricted Subsidiary Debt or
preferred stock referred to in clause (a) of this paragraph, provided that (i)
the principal amount of such Debt or the liquidation value of such preferred
stock so incurred does not exceed the principal amount or liquidation value of
the Debt or preferred stock being exchange or refinanced, and (ii) the Debt or
preferred stock so incurred has a stated maturity or final redemption date (if
any) no earlier than the stated maturity or final redemption date (if any) of,
and an Average Life that is no less than that of, the Debt or preferred stock
being exchanged or refinanced; provided, further, that the Debt or preferred
stock so incurred has no greater seniority and covenants not materially more
restrictive in the aggregate than those of the Debt or preferred stock being
exchanged or refinanced; (f) Debt or preferred stock of MFS Telecom, which is
convertible into Capital Stock of the Company, issued to a Strategic Equity
Investor; provided, however, that the proceeds of such incurrence or issuance
are used as though such proceeds were Net Cash Proceeds in accordance with the
provisions of the covenant described under "Certain Covenants--Limitations on
Asset Sales;" and (g) Guarantees by Restricted Subsidiaries of Debt of the
Company described in clause (a) of the definition of Permitted Debt.
Limitation on Liens. The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into, create, incur,
assume or suffer to exist any Liens of any kind, other than Permitted Liens,
on or with respect to any of its Property or assets now owned or hereafter
47
<PAGE>
acquired, or any interest therein or any income or profits therefrom, unless
the Notes are secured equally and ratably with (or prior to) such Debt and any
and all other Debt so secured by such Property or assets for so long as any
and all other Debt is so secured.
Limitations on Sale and Leaseback Transactions. The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into, assume, Guarantee or otherwise become liable with respect to any
Sale and Leaseback Transaction, unless (i) the obligation of the Company or
such Restricted Subsidiary with respect thereto is included as Debt and would
be permitted under the covenants described under "Certain Covenants--
Limitation on Debt" or "--Limitation of Debt and Preferred Stock of Restricted
Subsidiaries," respectively, and any Liens granted thereby would be permitted
by the covenant described under "Certain Covenants--Limitation on Liens," (ii)
the net proceeds from such transaction are at least equal to the Fair Market
Value of such Property being transferred, and (iii) the Net Cash Proceeds from
such transaction are applied in accordance with the covenant described under
"Certain Covenants--Limitation on Asset Sales."
Limitations on Restricted Payments. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, make any
Restricted Payment unless, at the time of and after giving effect to the
proposed Restricted Payment (i) no Default or Event of Default shall have
occurred and be continuing or shall occur as a consequence thereof; (ii) after
giving effect, on a pro forma basis, to such Restricted Payment and the
incurrence of any Debt the net proceeds of which are used to finance such
Restricted Payment, the Company could incur at least $1.00 of additional Debt
pursuant to clause (h) or (i) of the definition of Permitted Debt; and (iii)
after giving effect to such Restricted Payment on a pro forma basis, the
aggregate amount expended or declared for all Restricted Payments on or after
January 26, 1994 does not exceed the sum of (A) 50 percent of the Consolidated
Net Income of the Company (or, if Consolidated Net Income shall be a deficit,
minus 100 percent of such deficit) for the period (taken as one accounting
period) beginning on the last day of the fiscal quarter immediately preceding
January 26, 1994 and ending on the last day of the fiscal quarter immediately
preceding the date of such Restricted Payment, and (B) 100 percent of the
aggregate net cash proceeds received by the Company subsequent to January 26,
1994 from the issuance or sale (other than to a Restricted Subsidiary or a
Joint Venture) of shares of its Qualified Capital Stock, including Qualified
Capital Stock issued upon conversion of convertible Debt and from the exercise
of options, warrants or rights to purchase such Qualified Capital Stock.
The foregoing limitations do not prevent the Company from (i) paying a
dividend on its Capital stock at any time within 60 days after the declaration
thereof if, on the declaration date, the company could have paid such dividend
in compliance with the Indenture, and (ii) making Permitted Investments;
provided that any Permitted Investments made pursuant to clause (a) of the
definition of Permitted Investments will be deemed to be Restricted Payments
for the purposes of clause (iii) of the preceding paragraph.
For purposes of this covenant, if a particular Restricted Payment involves a
non-cash payment, including a distribution of assets, then such Restricted
Payment shall be deemed to be an amount equal to the cash portion of such
Restricted Payment, if any, plus an amount equal to the Fair Market Value of
the non-cash portion of such Restricted Payment as determined by the Board of
Directors, whose good faith determination shall be conclusive and evidenced by
a Board Resolution.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the required
calculations were computed, which calculations may be based upon the Company's
latest available financial statements.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, cause or suffer
48
<PAGE>
to exist or become effective or enter into any encumbrance or restriction
(other than pursuant to law or regulation) on the ability of any Restricted
Subsidiary (i) to pay dividends or make any other distributions in respect of
its Capital Stock or pay any Debt or other obligation owed to the Company or
any other Restricted Subsidiary of the Company; (ii) to make loans or advances
to the Company or any Restricted Subsidiary of the Company; or (iii) to
transfer any of its Property or assets to the Company or any other Restricted
Subsidiary of the Company, except:
(a) any encumbrance or restriction pursuant to an agreement in effect at
the Issue Date;
(b) any encumbrance or restriction pursuant to an agreement relating to
an acquisition of Property, so long as the encumbrances or restrictions in
any such agreement relate solely to the Property so acquired (and are not
or were not created in anticipation of or in connection with the
acquisition thereof);
(c) any encumbrance or restriction relating to any Debt of any Restricted
Subsidiary at the date on which such Restricted Subsidiary was acquired by
the Company or any Restricted Subsidiary (other than Debt issued by such
Restricted Subsidiary in connection with or in anticipation of its
acquisition);
(d) any encumbrance or restriction pursuant to an agreement effecting a
permitted refinancing of Debt issued pursuant to an agreement referred to
in the foregoing clauses (a) through (c), or permitted replacement or
increase of Debt referred to in the foregoing clause (a), so long as the
encumbrances and restrictions contained in any such refinancing agreement
are not materially more restrictive than the encumbrances and restrictions
contained in such agreements;
(e) customary provisions restricting subletting or assignment of any
lease of the Company or any Restricted Subsidiary or provisions in
agreements that restrict the assignment of such agreement or any rights
thereunder; and
(f) any restriction on the sale or other disposition of assets or
property securing Debt as a result of a Permitted Lien on such assets or
Property.
Limitations on Issuance and Sale of Capital Stock of Restricted
Subsidiaries. The Company (i) shall not permit any Restricted Subsidiary to
issue any Capital Stock other than to the Company or a Restricted Subsidiary,
other than pursuant to certain specified agreements in existence on January
26, 1994, unless the Company acquires at the same time not less than its
Proportionate Interest in such issuance of Capital Stock and (ii) shall not
permit any Person other than the Company or a Restricted Subsidiary to own any
Capital Stock of any Restricted Subsidiary of the Company (other than
directors' qualifying shares), except for (a) Capital Stock of a Restricted
Subsidiary sold in a transaction not prohibited by the covenant described
under "Certain Covenants--Limitations on Asset Sales," provided that such
Restricted Subsidiary would remain a Restricted Subsidiary, (b) Capital Stock
issued as permitted by clause (i) above, (c) Capital Stock issued and
outstanding on January 26, 1994 and held by Persons other than the Company or
any of its Restricted Subsidiaries, (d) Capital Stock of a Restricted
Subsidiary issued and outstanding prior to the time that such Person becomes a
Restricted Subsidiary so long as such Capital Stock was not issued in
contemplation of such Person's becoming a Restricted Subsidiary of the Company
or otherwise being acquired by the Company and (e) an issuance of preferred
stock permitted under the covenant described under "Certain Covenants--
Limitation on Debt and Preferred Stock of Restricted Subsidiaries."
Transactions with Affiliates. The Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, conduct any
business or enter into or permit to exist any transaction or series of related
transactions (including, but not limited to, the purchase, sale or exchange of
Property, the making of any Investment, the giving of any Guarantee or the
rendering of any service) with any Affiliate of the Company or such Restricted
Subsidiary, as the case may be, unless (i) such business, transaction or
series of related transactions is in the best interest of the
49
<PAGE>
Company or such Restricted Subsidiary, (ii) such business, transaction or
series of related transactions is on terms no less favorable to the Company or
such Restricted Subsidiary than those that could be obtained in a comparable
arm's-length transaction with a Person that is not such an Affiliate and (iii)
(a) with respect to such business, transaction or series of related
transactions that has a Fair Market Value or involves aggregate payments equal
to, or in excess of, $10.0 million but less than $15.0 million, the Company
delivers to the Trustee an Officer's Certificate stating that such business,
transaction or series of related transactions complies with clauses (i) and
(ii) above; and (b) with respect to such business, transaction or series of
related transactions that has a Fair Market Value or involves aggregate
payments equal to, or in excess of, $15.0 million such business, transaction
or series of transactions is approved by a majority of the Board of Directors
(including a majority of the Disinterested Directors), which approval is set
forth in a resolution delivered to the Trustee certifying that, in good faith,
the Board of Directors believes that such business, transaction or series of
transactions complies with clauses (i) and (ii) above.
Provision of Financial Information. Whether or not the Company is subject to
Section 13(a) or 15(d) of the Exchange Act, or any successor provision
thereto, the Company shall file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been
required to file with the Commission pursuant to such Section 13(a) or 15(d)
or any successor provision thereto if the Company were subject thereto, such
documents to be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which the Company would have been required to
file them. The Company shall also in any event (a) within 15 days of each
Required Filing Date (i) transmit by mail to all Holders, as their names and
addresses appear in the Security Register, without cost to such Holders, and
(ii) file with the Trustee copies of the annual reports, quarterly reports and
other documents (without exhibits) which the Company would have been required
to file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange
Act or any successor provisions thereto if the Company were subject thereto
and (b) if filing such documents by the Company with the Commission is not
permitted under the Exchange Act, promptly upon written request supply copies
of such documents (without exhibits) to any prospective Holder.
PROVISIONS TO BE REVISED
Pursuant to the Consent Solicitation, the Company is proposing to
substantially revise each of the following provisions of the MFS Indentures
with respect to each series of MFS Notes.
Events of Default. Each of the following is an "Event of Default" under the
MFS Indentures:
(a) default in the payment of any installment of interest upon the Notes
when it becomes due and payable, and the continuance of such default for a
period of 30 days;
(b) default in the payment of the principal of (or premium, if any, on)
any Note at its Maturity, upon repurchase, acceleration, optional
redemption, required repurchase (including pursuant to a Change of Control
Offer or an offer as described under "Certain Covenants--Limitations on
Asset Sales") or otherwise or the failure to make an offer to purchase as
therein required;
(c) the Company fails to comply with any of its covenants or agreements
contained in "Certain Covenants--Limitation on Debt" or "--Limitation on
Debt and Preferred Stock of Restricted Subsidiaries" or fails to perform or
comply with the Indenture provisions described under "Consolidation,
Merger, Conveyance, Transfer or Lease";
(d) default in the performance, or breach, of any covenant or warranty of
the Company in the Indenture (other than a covenant or warranty a default
in whose performance or whose breach is specifically dealt with in (a), (b)
or (c) above) and continuance of such default or breach for a period of 60
days after specified written notice thereof has been given to the Company
by the Trustee or to the Company and the Trustee by the Holders of at least
25 percent of the aggregate principal amount of the Outstanding Notes;
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(e) Debt of the Company or any Restricted Subsidiary is not paid when due
within the applicable grace period, if any, or is accelerated by the
holders thereof and, in either case, the principal amount of such unpaid or
accelerated Debt exceeds $10.0 million;
(f) the entry by a court of competent jurisdiction of one or more
judgments or orders against the Company or any Restricted Subsidiary in an
uninsured or unindemnified aggregate amount in excess of $10.0 million
which remains undischarged, unwaived, unstayed, unbonded or unsatisfied for
a period of 60 consecutive days;
(g) the entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of the Company or any Significant
Restricted Subsidiary in an involuntary case or proceeding under U.S.
bankruptcy laws, as now or hereafter constituted, or any other applicable
federal, state, or foreign bankruptcy, insolvency, or other similar law or
(ii) a decree or order adjudging the Company or any Significant Restricted
Subsidiary a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition of
or in respect of the Company or any Significant Restricted Subsidiary under
U.S. bankruptcy laws, as now or hereafter constituted, or any other
applicable federal, state, or foreign bankruptcy, insolvency, or similar
law, or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Significant
Restricted Subsidiary or of any substantial part of the Property or assets
of the Company of any Significant Restricted Subsidiary, or ordering the
winding up or liquidation of the affairs of the Company or any Significant
Restricted Subsidiary, and the continuance of any such decree or order for
relief or any such other decree or order unstayed and in effect for a
period of 60 consecutive days; or
(h) (i) the commencement by the Company or any Significant Restricted
Subsidiary of a voluntary case or proceeding under U.S. bankruptcy laws, as
now or hereafter constituted, or any other applicable federal, state, or
foreign bankruptcy, insolvency or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or (ii) the consent
by the Company or any Significant Restricted Subsidiary to the entry of a
decree or order for relief in respect of the Company or any Significant
Restricted Subsidiary in an involuntary case or proceeding under U.S.
bankruptcy laws, as now or hereafter constituted, or any other applicable
federal, state, or foreign bankruptcy, insolvency, or other similar law or
to the commencement of any bankruptcy or insolvency case or proceeding
against the Company or any Significant Restricted Subsidiary, or (iii) the
filing by the Company or any Significant Restricted Subsidiary of a
petition or answer or consent seeking reorganization or relief under U.S.
bankruptcy laws, as now or hereafter constituted, or any other applicable
federal, state, or foreign bankruptcy, insolvency or other similar law, or
(iv) the consent by the Company or any Significant Restricted Subsidiary to
the filing of such petition or to the appointment of or taking possession
by a custodian, receiver, liquidator, assignee, trustee, sequestrator or
similar official of the Company or any Significant Restricted Subsidiary or
of any substantial part of the Property or assets of the Company or any
Significant Restricted Subsidiary, or the making by the Company or any
Significant Restricted Subsidiary of an assignment for the benefit of
creditors, or (v) the admission by the Company or any Significant
Restricted Subsidiary in writing of its inability to pay its debts
generally as they become due, or (vi) the taking of corporate action by the
Company or any Significant Restricted Subsidiary in furtherance of any such
action.
If any Event of Default (other than an Event of Default specified in clauses
(g) and (h) above) occurs and is continuing, then and in every such case the
Trustee or the Holders of not less than 25 percent of the outstanding
aggregate principal amount at Stated Maturity (subject to reduction as
aforesaid) of Notes may declare the Default Amount and any accrued and unpaid
interest on all Notes then Outstanding to be immediately due and payable, by a
notice in writing to the Company (and to the Trustee if given by Holders), and
upon any such declaration, such Default Amount and any accrued interest will
become and be immediately due and payable. If any Event of Default specified
in clause (g) or (h) above occurs, the Accreted Value and accrued interest, if
any, on the Notes then Outstanding
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shall become immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder. Until and including January 15,
2001, the "Default Amount" shall equal the Accreted Value of the Notes as of
such date. On or after January 15, 2001, the Default Amount shall equal 100
percent of the principal amount thereof at the Stated Maturity (subject to
reduction as aforesaid) thereof. Under certain circumstances, the Holders of a
majority in principal amount at Stated Maturity (subject to reduction as
aforesaid) of the Outstanding Notes by notice to the Company and the Trustee
may rescind an acceleration and its consequences.
The above referenced provision defining "Event of Default" is the existing
provision within the MFS Indenture that will be replaced with the definition
of Event of Default set forth in the WorldCom Indentures. For a summary of
such provision, see "Description of the WorldCom Notes--Events of Default;
Notice and Waiver."
DEFINITION TO BE REVISED IF SUPERMAJORITY CONSENT IS OBTAINED FROM HOLDERS OF
EACH SERIES OF MFS NOTES
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), other than PKS or its Affiliates, the Employee
Group or an underwriter engaged in a firm commitment underwriting on behalf
of the Company, is or becomes the "beneficial owner" (as such term is used
in Rules 13d-3 and 13d-5 under the Exchange Act) plus all shares that such
person or group has the right to acquire, whether such right is exercisable
immediately or only after a passage of time, directly or indirectly, of
more than 35 percent of the total voting power of the Voting Stock of the
Company and, in addition, beneficially owns more shares in the Company than
beneficially owned by PKS and the Employee Group; or
(b) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with
any new directors whose election by the Board of Directors or whose
nomination for election by the stockholders of the Company was approved by
a vote of a majority of the directors of the Company then still in office
who were either directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease for any reason
to constitute 66 2/3 percent of the Board of Directors then in office; or
(c) the Company shall cease to own, directly or indirectly, at least 51
percent of the outstanding Capital Stock of MFS Telecom; provided, however,
that any sale, conveyance or transfer of Capital Stock of MFS Telecom must
be to a Strategic Equity Investor; or
(d) the Company sells, conveys, transfers or leases (either in one
transaction or a series of related transactions) all or substantially all
of its assets to a Person other than a Restricted Subsidiary; or
(e) the Company or a Subsidiary sells, conveys, transfers or leases
(either in one transaction or a series of related transactions) all or
substantially all of the assets of MFS Telecom to a Person other than the
Company or a Restricted Subsidiary.
The above referenced definition of "Change of Control" is the existing
definition within the MFS Indenture that will be replaced with the following
definition of Change of Control only if consent from Holders of 75% of the
aggregate principal amount outstanding of MFS Notes is received.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), other than PKS or its Affiliates, the Employee
Group or an underwriter engaged in a firm commitment underwriting on behalf
of the Company, is or becomes the "beneficial owner" (as such term is used
in Rules 13d-3 and 13d-5 under the Exchange Act) plus all shares that such
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person or group has the right to acquire, whether such right is exercisable
immediately or only after a passage of time, directly or indirectly, of
more than 50 percent of the total voting power of the Voting Stock of the
Company and, in addition, beneficially owns more shares in the Company than
beneficially owned by PKS and the Employee Group; or
(b) the Company sells, conveys, transfers or leases (either in one
transaction or a series of related transactions) all or substantially all
of its assets to a Person other than an Affiliate.
DESCRIPTION OF THE WORLDCOM NOTES
The WorldCom Notes will be issued under the WorldCom Indenture, as
supplemented. The following summary of certain provisions of the WorldCom
Indenture does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"), and to all of the provisions of the WorldCom
Indenture, including the definitions of certain terms therein and those terms
made a part of the WorldCom Indenture by reference to the Trust Indenture Act
as in effect on the date of the WorldCom Indenture. The WorldCom Indenture are
by their terms subject to and governed by the Trust Indenture Act. Unless
otherwise indicated, references under this caption to sections or ""' are
references to the WorldCom Indenture. A copy of WorldCom Indenture may be
obtained from the Company. The definitions of certain capitalized terms used
in the following summary are set forth below under "--Certain Definitions".
For purposes of the description of the WorldCom Notes, the term "Company"
refers to WorldCom, Inc. and does not include its subsidiaries except for
purposes of financial data determined on a consolidated basis.
General
The WorldCom 2004 Notes will be limited in aggregate principal amount to $
million and will mature on January 15, 2004. Interest on the WorldCom 2004
Notes will accrue at the rate of 9 3/8% per annum. The WorldCom 2006 Notes
will be limited in aggregate principal amount to $ million and will mature
on January 15, 2006. Interest on the WorldCom 2006 Notes will accrue at the
rate of 8 7/8% per annum.
Interest on the WorldCom Notes will be payable semi-annually on January 15
and July 15, commencing on July 15, 1997, to the persons who are registered
holders of the WorldCom Notes at the close of business on the immediately
preceding December 31 and June 30, respectively. Interest on the WorldCom
Notes will accrue from and including the Interest Accrual Date.
Principal and interest will be payable at the office of the Paying Agent
but, at the option of the Company, interest may be paid by check mailed to the
registered holders at their registered addresses. The WorldCom Notes will be
issued without coupons and in fully registered form only, in denominations of
$1,000 and integral multiples thereof. Unless otherwise designated by the
Company, the Company's office or agency in New York will be the office of the
Trustee maintained for such purpose.
Ranking
The WorldCom Notes will be senior, unsecured obligations of the Company,
will rank pari passu in right of payment with all other existing and future
senior, unsecured indebtedness of the Company and will rank senior in right of
payment to any future subordinated obligations of the Company. The WorldCom
Notes will be structurally subordinated to any secured indebtedness of the
Company to the extent of the value of the assets securing such indebtedness
and to all obligations, including any MFS Notes not exchanged for WorldCom
Notes in the Exchange Offers, of the Company's subsidiaries. At March 31,
1997, after giving effect to the issuance and sale by WorldCom of its existing
senior notes
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on April 1, 1997, the aggregate amount of indebtedness of the Company that
would have ranked pari passu with the WorldCom Notes was approximately $
billion. The WorldCom Notes will be effectively subordinated to all
obligations, including trade payables, of the Company's subsidiaries to the
extent of the assets of such subsidiaries available to satisfy such
obligations. As of March 31, 1997, the aggregate amount of such obligations of
the Company's subsidiaries (excluding intercompany indebtedness) was
approximately $ billion; of this amount, (i) $685.8 million represented the
accreted value of the MFS 2004 Notes and (ii) $674.5 million represented the
accreted value of the MFS 2006 Notes.
Optional Redemption
The WorldCom 2004 Notes will not be redeemable at the option of the Company
prior to January 15, 1999. On or after January 15, 1999, the WorldCom 2004
Notes will be redeemable at the option of the Company, in whole at any time or
in part from time to time, at the following prices (expressed in percentages
of the principal amount thereof), if redeemed during the twelve months
beginning January 15 of the years indicated below, in each case together with
interest accrued to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1999.......................................................... 103.52%
2000.......................................................... 102.34%
2001.......................................................... 101.17%
2002 and thereafter........................................... 100.00%
</TABLE>
The WorldCom 2006 Notes will not be redeemable at the option of the Company
prior to January 15, 2001. On or after January15, 2001, the WorldCom 2006
Notes will be redeemable at the option of the Company, in whole at any time or
in part from time to time, at the following prices (expressed in percentages
of the principal amount thereof), if redeemed during the twelve months
beginning January 15 of the years indicated below, in each case together with
interest accrued to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001.......................................................... 103.32%
2002.......................................................... 102.21%
2003.......................................................... 101.11%
2004 and thereafter........................................... 100.00%
</TABLE>
If less than all of the WorldCom Notes of either series are to be redeemed,
the Trustee will select the WorldCom Notes or portions thereof in each series
to be redeemed pro rata, by lot or by any other method that the Trustee shall
deem fair and appropriate. Notice of redemption will be mailed at least 30
days but no more than 60 days before the redemption date to each Holder of
WorldCom Notes to be redeemed at its registered address. On or after the
redemption date, the WorldCom Notes shall cease to accrue interest, if the
Company makes the redemption payment.
Consolidation, Merger, Conveyance, Sale or Lease
The Company may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into any other
corporation, provided that (a) either the Company shall be the continuing
corporation, or the successor corporation (if other than the Company) formed
by or resulting from any such consolidation or merger or which shall have
received the transfer of such assets shall expressly assume payment of the
principal of (and premium, if any) and interest on all the WorldCom
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Notes and the performance and observance of all the covenants and conditions
of the WorldCom Indenture; and (b) the Company or such successor corporation
shall not immediately thereafter be in default under the WorldCom Indenture
(Section 801 of the Indentures).
Limitation on Liens
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, create, or suffer to be created or to exist, any Lien
(other than Permitted Liens) upon any of its Property or assets, whether now
owned or hereafter acquired, or any interest therein or any income or profits
therefrom, unless it has made or will make effective provision whereby the
WorldCom Notes will be secured by such Lien equally and ratably with (or prior
to) all other indebtedness of the Company or any Restricted Subsidiary secured
by such Lien for so long as any such other indebtedness of the Company or any
Restricted Subsidiary shall be so secured. Notwithstanding the foregoing, the
Company may, and may permit any Restricted Subsidiary to, issue, assume or
guarantee indebtedness secured by Liens on Property that are not Permitted
Liens without equally and ratably securing the WorldCom Notes, provided that
the sum of all such indebtedness then being issued, assumed or guaranteed
together with such indebtedness theretofore issued, assumed or guaranteed that
remains outstanding does not exceed 15% of the Consolidated Net Tangible
Assets prior to the time such indebtedness was issued, assumed or guaranteed.
Events of Default; Notice and Waiver
Each of the following is an "Event of Default" under the WorldCom
Indenture:
(a) default for 30 days in the payment of any installment of interest on
any WorldCom Note;
(b) default in the payment of the principal of (or premium, if any, on)
any WorldCom Note at its Maturity;
(c) default in making a sinking fund payment required for any WorldCom
Note of such series;
(d) default in the performance of any other covenant of the Company in
the WorldCom Indenture continued for 60 days after written notice as
provided in the WorldCom Indenture;
(e) certain events of default resulting in the acceleration of the
maturity of indebtedness aggregating in excess of $50,000,000 under any
mortgages, indentures (including the Indentures) or instruments under which
the Company may have issued, or by which there may have been secured or
evidenced, any other indebtedness (including WorldCom Notes of any other
series) of the Company, but only if such indebtedness is not discharged or
such acceleration is not rescinded or annulled;
(f) certain events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of the Company or all or
substantially all of its property; and (g) any other Event of Default
provided with respect to a particular series of WorldCom Notes (Section 501
of the Indenture).
The Trustee may withhold notice to the holders of WorldCom Notes of any
default with respect to such series (except a default in the payment of the
principal of (or premium, if any) or interest on any WorldCom Note or in the
payment of any sinking fund installment in respect of any WorldCom Note) if
the Responsible Officers of the Trustee consider such withholding to be in the
interest of such holders.
If an Event of Default under the Indenture with respect to WorldCom Notes at
the time outstanding occurs and is continuing, then in every such case the
Trustee or the holders of not less than 25% in principal amount of the
outstanding WorldCom Notes may declare the principal amount of all of the
WorldCom Notes of that series (or of all WorldCom Notes then outstanding under
the Indenture, as the case may be) to be due and payable immediately by
written notice thereof to the Company (and to
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<PAGE>
the Trustee if given by the holders). However, at any time after such a
declaration of acceleration with respect to WorldCom Notes (or of all WorldCom
Notes then outstanding under the Indenture, as the case may be) has been made,
but before a judgment or decree for payment of the money due has been obtained
by the Trustee prior to the Stated Maturity thereof, the holders of a majority
in principal amount of outstanding WorldCom Notes may, subject to certain
conditions, rescind and annul such acceleration if all Events of Default,
other than the non-payment of accelerated principal (or specified portion
thereof), with respect to WorldCom Notes of such series (or of all WorldCom
Notes then outstanding under the Indenture, as the case may be) have been
cured or waived as provided in the Indenture. The Indenture also provides that
the holders of not less than a majority in principal amount of the outstanding
WorldCom Notes of any series issued thereunder (or of all WorldCom Notes then
outstanding under the Indenture, as the case may be) may waive certain past
defaults with respect to such series and its consequences. Within 120 days
after the close of each fiscal year, the Company must file with the Trustee a
statement, signed by specified officers, stating whether or not such officers
have knowledge of any default under the Indenture and, if so, specifying each
such default and the nature and status thereof.
Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any holders of any
series of WorldCom Notes then outstanding under the Indenture, unless such
holders shall have offered to the Trustee reasonable security or indemnity.
Subject to such provisions for indemnification and certain limitations
contained in the WorldCom Indenture, the holders of not less than a majority
in principal amount of the outstanding WorldCom Notes of any series issued
thereunder (or of all Debt Securities then outstanding under the WorldCom
Indenture, as the case may be) shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the
Trustee, or of exercising any trust or power conferred upon the Trustee.
Amendment and Supplement
The WorldCom Indenture contains provisions permitting WorldCom and the
Trustee to enter into one or more indentures supplemental to the WorldCom
Indenture without the consent of the holders of the WorldCom Notes for certain
purposes, including the following: (a) to evidence the succession of another
entity to the Company and the assumption by such entity of the covenants of
the Company contained in the WorldCom Indenture and the WorldCom Notes; (b) to
add to the covenants of the Company for the benefit of the holders of the
WorldCom Notes or to surrender any right or power conferred upon the Company
in the WorldCom Indenture; (c) to add any additional Events of Default for the
benefit of the holders of the WorldCom Notes; provided, however, that in
respect of any such additional Events of Default such supplemental indenture
may provide for a particular period of grace after default or may provide for
an immediate enforcement upon such default or may limit the remedies available
to the Trustee upon such default or may limit the right of the holders of a
majority in aggregate principal amount of that or those series of WorldCom
Notes to which such additional Events of Default apply to waive such default;
(d) to add to or change any of the provisions of the WorldCom Indenture to
permit or facilitate the issuance of the WorldCom Notes in uncertificated or
bearer form; (e) to change or eliminate any provisions of the WorldCom
Indenture which do not affect the rights of any holders of securities issued
in connection with the WorldCom Indenture; (f) to provide security for the
WorldCom Notes; (g) to evidence and provide for the acceptance of an
appointment of a successor Trustee with respect to the WorldCom Notes and to
add to or change any of the provisions of the WorldCom Indenture to provide
for or facilitate the administration of the trusts under the WorldCom
Indenture by more than one Trustee; (h) to cure any ambiguity, to correct or
supplement any provision of the WorldCom Indenture which may be defective or
inconsistent with any other provision, or to make any other provisions with
respect to matters or questions arising under the WorldCom Indenture which
shall not be inconsistent with the provisions of the WorldCom Indenture and
which additional provisions shall not adversely affect the interests of the
holders of the WorldCom Notes; or (i) to supplement any
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<PAGE>
of the provisions of the WorldCom Indenture to such extent as shall be
necessary to permit or facilitate the defeasance and discharge of the WorldCom
Notes in accordance with terms and conditions of the WorldCom Indenture
provided that any such action shall not adversely affect the interests of the
holders of the WorldCom Notes.
The WorldCom Indenture also contains provisions permitting WorldCom and the
Trustee, with the consent of the holders of not less than a majority in
principal amount of all the Company's outstanding securities affected by the
terms of any such supplemental indenture, to execute supplemental indentures
adding any provisions to or changing in any manner or eliminating any of the
provisions of the WorldCom Indenture or of modifying in any manner the rights
of the holders of the WorldCom Notes, except that without the consent of the
holders of each WorldCom Note any such supplemental indenture shall not (a)
change the Stated Maturity of the principal of (or premium, if any, on) or any
installment of principal of or interest on the WorldCom Notes, (b) reduce the
principal amount of the WorldCom Notes or the rate or amount of interest
thereon or any additional amounts payable in respect thereof pursuant to the
WorldCom Indenture or the WorldCom Notes, or any premium payable upon the
redemption thereof; (c) change any obligation of the Company to pay additional
amounts pursuant to Section 1007 of the WorldCom Indenture (except as
otherwise contemplated by the WorldCom Indenture); (d) reduce the amount of
the principal of any Original Issue Discount Securities that would be due and
payable upon a declaration of acceleration of the maturity thereof or the
amount thereof provable in bankruptcy; (e) adversely affect any right of
repayment at the option of the holder of the WorldCom Notes; (f) change any
place of payment where, or the currency or currencies, currency unit or units
or composite currency or currencies in which, the WorldCom Notes or any
premium or the interest thereon is payable; (g) impair the right to institute
suit for the enforcement of any such payment on or after the stated maturity
thereof (or in the case of redemption or repayment at the option of the holder
of the WorldCom Notes, on or after the Redemption Date or the Repayment Date,
as the case may be); (h) reduce the percentage in principal amount of the
WorldCom Notes; (i) reduce the quorum or voting requirements as contained in
the WorldCom Indenture; or (j) modify any of the provisions of the WorldCom
Indenture relating to supplemental indentures thereof except to increase any
such percentage or to provide that certain other provisions of the WorldCom
Indenture cannot be modified or waived without the consent of the holders of
each WorldCom Note.
It is not necessary for the holders of the WorldCom Notes to approve the
particular form of any proposed supplemental indenture, but it is sufficient
if such holders approve the substance thereof. Every supplemental indenture
executed pursuant to the WorldCom Indenture will conform to the requirements
of the Trust Indenture Act as then in effect.
Satisfaction and Discharge of the WorldCom Indenture, Covenant Defeasance
The Company may, at its option, elect to have either or both of (a) the
defeasance provisions of the WorldCom Indenture or (b) the covenant defeasance
provisions of the WorldCom Indenture apply to the WorldCom Notes upon
compliance with the applicable conditions set forth in the WorldCom Indenture.
The Company shall be deemed to have been discharged from its obligations with
respect to the WorldCom Notes on the date the conditions set forth below are
satisfied (hereinafter, "defeasance"), except for the following obligations
which shall survive until otherwise terminated or discharged pursuant to the
WorldCom Indenture: (i) the rights of holders of the WorldCom Notes to
receive, solely from the trust fund described in Section 1404 of the WorldCom
Indenture, payments in respect of the principal of (and premium, if any) and
interest, if any, on the WorldCom Notes when such payments are due, (ii) the
Company's obligations with respect to the WorldCom Notes under Sections 305,
306, 1002 and 1003 of the WorldCom Notes and with respect to the payment of
additional amounts, if any, as contemplated by Section 1007 of the WorldCom
Indenture, (iii) the rights, powers, trusts, duties and immunities of the
Trustee under the WorldCom Indenture and (iv) the obligations contained in the
article of the WorldCom Indenture relating to defeasance and covenant
defeasance. The Company shall be released from its obligations under any
covenant with respect to
57
<PAGE>
the WorldCom Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "covenant defeasance").
The following are the conditions that must be satisfied prior to defeasance
or covenant defeasance: (a) the Company shall irrevocably have deposited or
caused to be deposited with the Trustee as trust funds in trust for the
purpose of making the following payments, money and/or Government Obligations
sufficient, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge, and which shall be applied by the Trustee
(or other qualifying trustee) to pay and discharge, (i) the principal of (and
premium, if any) and interest, if any, on the WorldCom Notes on the Stated
Maturity of such principal or installment of principal or interest and (ii)
any mandatory sinking fund payments or analogous payments applicable to the
WorldCom Notes; (b) such defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under, the WorldCom
Indenture or any other material agreement or instrument to which the Company
is a party or by which it is bound; (c) no Event of Default or event which
with notice or lapse of time or both would become an Event of Default with
respect to the WorldCom Notes shall have occurred and be continuing on the
date of such deposit, or if applicable, at any time during the period ending
on the 91st day after the date of such deposit; (d) the Company shall have
delivered to the Trustee an opinion of counsel to the effect that the holders
of the WorldCom Notes will not recognize income, gain or loss for Federal
income tax purposes as a result of such defeasance or covenant defeasance, as
applicable, and will be subject to Federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
defeasance or covenant defeasance, as applicable, had not occurred; (e) the
Company shall have delivered to the Trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent to the
defeasance or the covenant defeasance (as the case may be) have been complied
with and an opinion of counsel to the effect that either (i) as a result of a
deposit pursuant to subsection (a) above, registration is not required under
the Investment Company Act of 1940, as amended, by the Company, with respect
to the trust funds representing such deposit or by the Trustee for such trust
funds or (ii) all necessary registrations under said Act have been effected;
and (f) such defeasance or covenant defeasance shall be effected in compliance
with any additional or substitute terms, conditions or limitations which may
be imposed on the Company in connection therewith pursuant to Section 301 of
the WorldCom Indenture.
WorldCom may exercise its defeasance option with respect to the WorldCom
Notes notwithstanding its prior exercise of its covenant defeasance option.
The Trustee
Mellon Bank, N.A., the Trustee under the WorldCom Indenture, from time to
time may extend credit to the Company in the ordinary course of business. The
Trustee's current address is Two Mellon Bank Center, Room 325, Pittsburgh, PA
15259. Except during the continuance of an Event of Default, the Trustee will
perform only such duties as are specifically set forth in the WorldCom
Indenture. During the existence of an Event of Default, the Trustee will
exercise such of the rights and powers vested in it by the WorldCom Indenture,
and use the same degree of care and skill in their exercise, as a prudent
person would exercise or use under the circumstances in the conduct of such
person's own affairs.
The WorldCom Indenture and the Trust Indenture Act contain certain
limitations on the rights of the Trustee, should it become a creditor of the
Company to obtain payment of claims in certain cases, or to realize on certain
property received in respect of any such claim as security or otherwise. The
Trustee will be permitted to engage in other transactions; however, if it
acquires any "conflicting interest" (as defined in the Trust Indenture Act) it
must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
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The holders of a majority in principal amount of the outstanding WorldCom
Notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The WorldCom Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required,
in the exercise of its power, to use the degree of care of a prudent man in
the conduct of his own affairs. Subject to such provisions, the Trustee will
be under no obligation to exercise any of its rights or powers under the
WorldCom Indenture at the request of any of the holders of the WorldCom Notes,
unless such holders shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
No Personal Liability of Stockholders, Officers or Directors
No stockholder, employee, officer, director or incorporator as such, past,
present or future of the Company shall have any personal liability in respect
of the obligations of the Company under the WorldCom Indenture or the WorldCom
Notes by reasons of his or its status as such stockholder, employee, officer
or director.
Delivery and Form
The WorldCom 2004 Notes and the WorldCom 2006 Notes initially will be
represented by one or more global securities ("Global Securities") deposited
with The Depository Trust Corporation ("DTC") and registered in the name of
the nominee of DTC, except asset forth below. Each of the Notes will be
available for purchase in denominations of $1,000 and integral multiples
thereof, in book-entry form only. Unless and until certificated Notes are
issued under the limited circumstances described below, no beneficial owner of
a WorldCom Note shall be entitled to receive a definitive certificate
representing a WorldCom Note. So long as DTC or any successor depository
(collectively, the "Depository") or its nominee is the registered holder of
the Global Securities, the Depository, or such nominee, as the case may be,
will be considered to be the sole owner or holder of the WorldCom Notes for
all purposes of the Indenture. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect participants in the Depository. Such participants may
include Morgan Guaranty Trust Company of New York, Brussels, Belgium office
("Euroclear") or Cedel Bank societe anonyme.
So long as DTC or its nominee is the registered owner of a Global Security,
DTC or its nominee, as the case may be, will be considered the sole Holder of
the WorldCom Notes represented by such Global Security for all purposes under
the applicable Indenture. Except as provided below, owners of beneficial
interests in a Global Security will not be entitled to have WorldCom Notes
represented by such Global Security registered in their names, will not
receive or be entitled to receive physical delivery of WorldCom Notes in
certificated form and will not be considered the owners or holders thereof
under the applicable Indenture. The laws of some states require that certain
purchasers of securities take physical delivery of such securities in
certificated form; accordingly, such laws may limit the transferability of
beneficial interests in a Global Security. Accordingly, each person owning a
beneficial interest in a Global Security must rely on DTC's procedures and, if
such person is not a participant, on the procedures of the participant through
which such person owns its interest, to exercise any rights of a holder under
the applicable Indenture. If the Company requests any action of holders or if
an owner of a beneficial interest in a Global Security desires to take any
action that a holder is entitled to take under the applicable Indenture, DTC
will authorize the participants holding the relevant beneficial interests to
give or take such action, and such participants will otherwise act upon the
instructions of beneficial owners holding through them.
If DTC is at any time unwilling or unable to continue as depository or if at
any time DTC ceases to be a clearing agency registered under the Exchange Act
if so required by applicable law or regulation, and, in either case, a
successor depository is not appointed by the Company within 90 days, the
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Company will issue individual WorldCom Notes in certificated form in exchange
or the Global Securities. In addition, the Company may at any time, and in its
sole discretion, determine not to have any WorldCom Notes represented by one
or more Global Securities, and, in such event, will issue individual WorldCom
Notes in certificated form in exchange for the relevant Global Securities. In
any such instance, an owner of a beneficial interest in a Global Security will
be entitled to physical delivery of individual WorldCom Notes in certificated
form of like tenor and rank, equal in principal amount to such beneficial
interest and to have such WorldCom Notes in certificated form registered in
its name. Unless otherwise provided in the Prospectus Supplement, WorldCom
Notes so issued in certificated form will be issued in denominations of $1,000
or any integral multiple thereof, and will be issued in registered form only,
without coupons.
The following is based on information furnished by DTC:
DTC will act as securities depository for the WorldCom Notes. The
WorldCom Notes will be issued as fully registered securities registered in
the name of Cede & Co. (DTC's partnership nominee). One fully registered
WorldCom Note certificate is issued with respect to each $200 million of
principal amount of the WorldCom Notes of a series, and an additional
certificate is issued with respect to any remaining principal amount of
such series.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement
among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC
is owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on
file with the Commission.
Purchases of WorldCom Notes under the DTC system must be made by or
through Direct Participants, which will receive a credit for the WorldCom
Notes on DTC's records. The ownership interest of each actual purchaser of
each WorldCom Note ("Beneficial Owner") is in turn recorded on the Direct
and Indirect Participants' records. A Beneficial Owner does not receive
written confirmation from DTC of its purchase, but such Beneficial Owner is
expected to receive a written confirmation providing details of the
transaction, as well as periodic statements of its holdings, from the
Direct or Indirect Participant through which such Beneficial Owner entered
into the transaction. Transfers of ownership interests in WorldCom Notes
are accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners do not receive certificates
representing their ownership interests in WorldCom Notes, except in the
event that use of the book-entry system for the WorldCom Notes is
discontinued.
To facilitate subsequent transfers, the WorldCom Notes are registered in
the name of DTC's partnership nominee, Cede & Co. The deposit of the
WorldCom Notes with DTC and their registration in the name of Cede & Co.
will effect no change in beneficial ownership. DTC has no knowledge of the
actual Beneficial Owners of the WorldCom Notes; DTC records reflect only
the identity of the Direct Participants to whose accounts WorldCom Notes
are credited, which may or may not be the Beneficial Owners. The
Participants remain responsible for keeping account of their holdings on
behalf of their customers.
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Delivery of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners are
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
WorldCom Notes within an issue are being redeemed, DTC's practice is to
determine by lot the amount of interest of each Direct Participant in such
issue to be redeemed.
Neither DTC nor Cede & Co. consents or votes with respect to the WorldCom
Notes. Under its usual procedures, DTC mails a proxy (an "Omnibus Proxy")
to the issuer as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the WorldCom Notes are credited on the
record date (identified on a list attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on the WorldCom Notes
are made to DTC. DTC's practice is to credit Direct Participants' accounts
on the payable date in accordance with their respective holdings as shown
on DTC's records unless DTC has reason to believe that it will not receive
payment on the payable date. Payments by Participants to Beneficial Owners
are governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form or
registered in "street name," and are the responsibility of such Participant
and not of DTC, the applicable Trustee or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal, premium, if any, and interest to DTC is the
responsibility of the Company or the applicable Trustee, disbursement of
such payments to Direct Participants is the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the WorldCom Notes at any time by giving reasonable notice to
the Company or the applicable Trustee. Under such circumstances, in the
event that a successor securities depository is not appointed, WorldCom
Note certificates are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that
event, WorldCom Note certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources (including DTC) that the Company believes to
reliable, but the Company takes no responsibility for the accuracy thereof.
None of the Company, the Dealer Managers or any agent, the Trustee or any
applicable paying agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
interests in a Global Security, or for maintaining, supervising or reviewing
any records relating to such beneficial interest.
Same-Day Settlement and Payment
So long as the WorldCom Notes are represented by the Global Securities, all
payments of principal and interest will be made by the Company in immediately
available funds. The WorldCom Notes will trade in DTC's Same-Day Funds
Settlement System until maturity, and secondary market trading activity in the
WorldCom Notes will therefore be required by DTC to settle in immediately
available funds. No assurance can be given as to the effect, if any, of
settlement in immediately available funds on trading activity in the WorldCom
Notes.
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Certain Definitions
Set forth below is a summary of certain of the defined terms used herein and
defined in the WorldCom Indenture. Reference is made to the WorldCom Indenture
for the full definition of all such terms, as well as any capitalized terms
used herein for which no definition is provided.
"Capital Lease Obligations" means indebtedness represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP and the amount of such indebtedness shall
be the capitalized amount of such obligations determined in accordance with
GAAP. For purposes of this covenant, a Capital Lease Obligation shall be
deemed secured by a Lien on the Property being leased.
"Capital Stock" means, with respect to any person, any and all shares or
other equivalents (however designated) of corporate stock, partnership
interest or any other participation, right, warrant, option or other
interest in the nature of an equity interest in such person, but excluding
any debt security convertible or exchangeable into such equity interest.
"Consolidated Net Tangible Assets" means the consolidated total assets of
the Company and its Subsidiaries as reflected in the Company's most recent
balance sheet prepared in accordance with GAAP, less (i) current
liabilities (excluding current maturities of long-term debt and Capital
Lease Obligations) and (ii) goodwill, trademarks, patents and minority
interests of others.
"GAAP" means United States generally accepted accounting principles as in
effect as of the date of determination, unless stated otherwise.
"Lien" means, with respect to any Property of any person, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement,
security interest, lien, charge, easement or zoning restriction (other than
any easement or zoning restriction not materially impairing usefulness or
marketability), encumbrance, preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever on
or with respect to such Property including any Capital Lease Obligation,
conditional sale or other title retention agreement having substantially
the same economic effect as any of the foregoing or any Sale and Leaseback
Transaction.
"Permitted Liens" means (i) Liens existing on the date of the Indenture;
(ii) Liens on Property existing at the time of acquisition thereof or to
secure the payment of all or any part of the purchase price thereof or to
secure any indebtedness incurred prior to, at the time of or within 270
days after the acquisition of such Property for the purpose of financing
all or any part of the purchase price thereof; (iii) Liens securing
indebtedness owing by a Restricted Subsidiary to the Company or any wholly-
owned Subsidiary of the Company; (iv) Liens on Property of any entity, or
on the stock, indebtedness or other obligations of such entity, existing at
the time (a) such entity becomes a Restricted Subsidiary, (b) such entity
is merged into or consolidated with the Company or a Restricted Subsidiary
or (c) the Company or a Restricted Subsidiary acquires all or substantially
all of the assets of such entity; provided that no such Lien extends to any
other Property; (v) Liens on Property to secure any indebtedness incurred
to provide funds for all or any part of the cost of development of or
improvements to such Property; (vi) Liens on the Property of the Company or
any of its Subsidiaries securing (a) nondelinquent performance of bids or
contracts (other than for borrowed money, obtaining of advances or credit
or the securing of debt), (b) contingent obligations on surety and appeal
bonds and (c) other nondelinquent obligations of a like nature, in each
case, incurred in the ordinary course of business; (vii) Liens securing
Capital Lease Obligations, provided that (a) any such Lien attaches to the
Property within 270 days after the acquisition thereof and (b) such Lien
attaches solely to the Property so acquired; (viii) Liens arising solely by
virtue of any statutory or common law provision relating to banker's liens,
rights of set-off or similar rights and remedies as to deposit account or
other funds, provided that such deposit account is not a dedicated cash
collateral account and is not subject to restrictions against access by the
Company in excess of those set forth by regulations promulgated by the
Federal
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Reserve Board and such deposit account is not intended by the Company or
any Subsidiary to provide collateral to the depository institution; (ix)
pledges or deposits under worker's compensation laws, unemployment
insurance laws or similar legislation; (x) statutory and tax Liens for sums
not yet due or delinquent or which are being contested or appealed in good
faith by appropriate proceedings; (xi) Liens arising solely by operation of
law and in the ordinary course of business, such as mechanics',
materialmen's, warehousemen's and carriers' Liens and Liens of landlords or
of mortgages of landlords on fixtures and movable Property located on
premises leased in the ordinary course of business; (xii) Liens on personal
Property, other than shares of stock or indebtedness of any Restricted
Subsidiary, to secure loans maturing not more than one year from the date
of the creation thereof and on accounts receivable associated with a
receivables financing program of the Company or any of its Subsidiaries;
and (xiii) any renewal, extension or replacement (in whole or in part) for
any Lien permitted pursuant to exceptions (i) through (xii) above or of any
indebtedness secured thereby, provided that such extension, renewal or
replacement Lien shall be limited to all or any part of the same Property
that secured the Lien extended, renewed or replaced (plus improvements on
such Property).
"Property" means, with respect to any person, any interest of such person
in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including, without limitation, Capital Stock in any
other person (but excluding Capital Stock or other securities issued by
such first mentioned person).
"Receivables Subsidiary" means a special purpose wholly-owned Subsidiary
created in connection with any transactions that may be entered into by the
Company or any of its Subsidiaries pursuant to which the Company or any of
its Subsidiaries may sell, convey, grant a security interest in or
otherwise transfer undivided percentage interests in its receivables.
"Restricted Subsidiary" means any Subsidiary of the Company if (i) such
Subsidiary has substantially all of its Property in the United States
(other than its territories and possessions) and (ii) at the end of the
most recent fiscal quarter of the Company, the aggregate amount, determined
in accordance with GAAP consistently applied, of securities of, loans and
advances to, and other investments in, such Subsidiary held by the Company
and its other Subsidiaries exceeded 10% of the Company's Consolidated Net
Tangible Assets; provided, however, that the term Restricted Subsidiary
shall not include (a) any of MFS Communications Company, Inc. or its
Subsidiaries unless and until such time as such corporation is designated
by the Company as a "Restricted Subsidiary" or otherwise similarly treated
under the Company's $3.75 billion five-year revolving credit facility or
any other agreement of the Company for indebtedness for borrowed money or
(b) any Receivables Subsidiary.
"Sale and Leaseback Transaction" means, with respect to any person, any
direct or indirect arrangement pursuant to which Property is sold or
transferred by such person or a Restricted Subsidiary of such person and is
thereafter leased back from the purchaser or transferee thereof by such
person or one of its Restricted Subsidiaries.
"Subsidiary" means a corporation a majority of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or one or
more other Subsidiaries of the Company. For the purposes of this
definition, "voting stock" means stock having voting power for the election
of directors, whether at all times or only so long as no senior class of
stock has such voting power by reason of any contingency.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material U.S. federal income tax
consequences resulting from the Exchange Offers and Consent Solicitation. The
discussion is based on U.S. federal income tax laws, regulations, rulings and
decisions now in effect, all of which are subject to change possibly with
retroactive effect. The discussion assumes that as to any Holder, the WorldCom
Notes and MFS Notes are capital assets as of the Exchange Date. This
discussion does not address state, local, foreign or other tax laws and does
not purport to cover all aspects of U.S. federal income taxation that may be
relevant to, or the actual tax effect that any of the matters described herein
will have on, certain Holders (including insurance companies, tax-exempt
organizations, financial institutions, securities- dealers, subsequent
purchasers of WorldCom Notes, taxpayers subject to the alternative minimum tax
and foreign persons who may be subject to special rules not discussed below.
HOLDERS OF MFS NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE
FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES OF THE EXCHANGE OFFER AND OF
THE CONTINUED HOLDING AND DISPOSITION OF MFS NOTES.
TAX CONSEQUENCES OF THE EXCHANGE OFFER
The exchange of MFS Notes for WorldCom Notes and cash pursuant to the
Exchange Offers will be a taxable transaction for United States federal income
tax purposes. On the Exchange Date, Holders who tender their MFS Notes
pursuant to the Exchange Offers will receive cash plus WorldCom Notes. A
tendering Holder will generally recognize gain or loss equal to the difference
between the sum of the cash and the issue price of the WorldCom Notes received
(except to the extent of any accrued OID on the MFS Notes not previously
included in the Holder's income, which will be taxable as ordinary interest
income) and the Holder's adjusted tax basis in the MFS Notes. Such gain or
loss will be long-term capital gain or loss if the Holder's holding period is
more than one year, and short-term capital gain or loss if the Holder's
holding period is one year or less.
Although not free from doubt, amounts paid in respect of the Consent Payment
should constitute additional consideration received in exchange for the
tendered MFS Notes and should therefore be treated as part of the amount
received in the Exchange in the manner described in the preceding paragraph.
There can be no assurance, however, that the Internal Revenue Service (the
"Service") will not take a contrary position.
As illustrated above, the amount of gain or loss recognized as a result of
the exchange of the MFS Notes for WorldCom Notes and cash will depend in part
on the "issue price" of the WorldCom Notes. Where a new debt instrument is
issued in exchange for property (including an old debt instrument), the
determination of the issue price of the new debt instrument depends on whether
either the new debt instrument or the property for which it is exchanged is
"publicly traded." If neither the WorldCom Notes nor the MFS Notes are
publicly traded, the issue price of the WorldCom Notes will be their "stated
principal amount." A debt instrument's stated principal amount is the
aggregate amount of all payments under the debt instrument, excluding any
amount of stated interest. If, however, the WorldCom Notes are publicly
traded, their issue price will be their fair market value at the time they are
issued. If the WorldCom Notes are not publicly traded, but the MFS Notes are
publicly traded, the issue price of the WorldCom Notes will be the fair market
value of the MFS Notes exchanged therefor. For purposes of this discussion, a
debt instrument is publicly traded if (i) it is listed on a national
securities exchange, an interdealer quotation system sponsored by a national
securities association (such as NASDAQ), or a designated foreign exchange or
board of trade, (ii) it is traded either on a board of trade designated as a
contract market by the Commodities Futures Trading Commission or on an
interbank market, (iii) it appears on a "quotation medium," i.e., a system of
general circulation (including a computer listing available to subscribing
brokers and dealers) that provides a reasonable basis to determine fair market
value by disseminating either recent price quotations of one or more
identified brokers, dealers or traders or actual prices of recent sales (but
not "yellow sheets") or (iv) it
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is a debt instrument that is "readily quotable" in that price quotations are
readily available from dealers, brokers or traders. Newly issued debt
instruments are treated as publicly traded property at the time of their
issuance if the debt instruments are publicly traded at any time during the
60-day period ending 30 days after their issuance. Any temporary restriction
on trading, a purpose of which is to avoid characterization of debt
instruments as publicly traded property for federal income tax purposes, is
ineffective regardless of whether the temporary restriction is imposed by the
issuer. If either the WorldCom Notes or the MFS Notes are publicly traded, the
WorldCom Notes may be treated as having been issued at a discount or at a
premium. Holders should consult their tax advisors to determine how, and to
what extent, any such discount or premium, if any, will be included in such
Holder's income (in the case of any discount) or amortized (in the case of any
premium).
BASIS AND HOLDING PERIOD
A Holder's tax basis in the WorldCom Notes will equal the issue price of the
WorldCom Notes. The holding period of the WorldCom Notes will commence on the
day after the WorldCom Notes are acquired by the Holder.
PAYMENT OF INTEREST
Assuming the WorldCom Notes will not be issued with original issue discount
("OID"), interest on the WorldCom Notes generally will be taxable to the
Holder as ordinary income at the time that it is paid or accrued, in
accordance with the Holder's method of accounting for U.S. federal income tax
purposes.
Sale, Exchange or Redemption
In general, a Holder of a WorldCom Note will recognize gain or loss upon the
sale, exchange, redemption, retirement or other disposition of the WorldCom
Note measured by the difference between the amount realized on the disposition
(to the extent such amount does not represent accrued but unpaid interest) and
the Holder's adjusted basis in the WorldCom Note. A Holder's adjusted basis in
a WorldCom Note will generally equal the issue price of the WorldCom Note.
Such gain or loss will be capital gain or loss and will be long-term capital
gain or loss if the Holder holds the WorldCom Note for more than one year
prior to disposition, and short-term capital gain or loss if the Holder holds
the WorldCom Note for less than one year prior to disposition.
HOLDERS NOT TENDERING IN AN EXCHANGE OFFER
For Holders of the MFS Notes who do not elect to exchange their MFS Notes
for the WorldCom Notes pursuant to the Exchange Offers, the proposed
modifications to the MFS Notes (see "The Proposed Amendments") should not be
treated as a taxable exchange of the MFS Notes for the new MFS Notes.
BACKUP WITHHOLDING
Backup withholding of U.S. federal income tax at a rate of 31% may apply to
payments of principal and interest made in respect of a WorldCom Note, as well
as payments of proceeds from the sale of a WorldCom Note to or through certain
brokers, unless, in general, the beneficial owner of the Note complies with
certain information reporting procedures or is an exempt recipient. Any amount
withheld from a payment to a beneficial owner pursuant to these backup
withholding rules may be allowed as a refund or credit against the beneficial
owner's U.S. federal income tax.
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INFORMATION REGARDING WORLDCOM
Information regarding the Company is contained in its filings with the
Commission pursuant to the Exchange Act. See "Available Information" and
"Incorporation by Reference."
INFORMATION REGARDING MFS
Information regarding MFS is contained in its filings with the Commission
pursuant to the Exchange Act. See "Available Information" and "Incorporation
by Reference."
ACCOUNTING TREATMENT OF EXCHANGE OFFERS
The Exchange will be accounted for by the Company as an extinguishment of
debt as provided for under generally accepted accounting principles.
LEGAL MATTERS
The validity of the WorldCom Notes will be passed upon for the Company by
Bryan Cave LLP, St. Louis, Missouri. Certain tax matters with respect to the
Exchange Offers will be passed upon for WorldCom by Bryan Cave LLP, St. Louis,
Missouri. Certain legal matters in connection with the Exchange Offers and the
Consent Solicitation will be passed upon for the Joint Dealer Managers by
Cleary, Gottlieb, Steen & Hamilton, New York, New York.
EXPERTS
The consolidated financial statements and schedule of the Company as of
December 31, 1996 and 1995, and for each of the years in the three-year period
ended December 31, 1996, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, and are incorporated herein by reference, in reliance upon
the authority of such firm as experts in accounting and auditing in giving
said reports.
The consolidated financial statements of MFS Communications Company, Inc. as
of December 31, 1996 and for the period then ended (See Note 1 to the MFS
Communications Company, Inc. Form 10-K), and for the year ended December 31,
1996, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
included in the MFS Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, and are incorporated herein by reference, in reliance upon
the authority of such firm as experts in accounting and auditing in giving
said reports.
The consolidated financial statements of MFS as of December 31, 1995 and
1994 and for each of the three years in the period ended December 31, 1995,
included in WorldCom's Current Report on Form 8-K/A dated August 25, 1996
(filed November 4, 1996) and incorporated by reference into this registration
statement and the consolidated financial statements of MFS as of December 31,
1995 and for the two years in the period ended December 31, 1995 included in
the MFS Annual Report on Form 10-K for the fiscal year ended December 31, 1996
and incorporated by reference in this registration statement, have been
incorporated in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given upon the authority of that firm as experts in
accounting and auditing.
The consolidated financial statements of UUNET Technologies, Inc. as of
December 31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995, included n WorldCom's Current Report on Form 8-K/A dated
August 25, 1996 (filed November 4, 1996) and incorporated by reference into
this registration statement, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto and are incorporated herein by reference in reliance upon the
authority of said firm as experts in giving said reports.
66
<PAGE>
The Joint Dealer Managers for the Exchange Offers are:
SALOMON BROTHERS INC GOLDMAN, SACHS & CO.
Seven World Trade Center 85 Broad Street
New York, New York 10048 New York, New York 10004
(212) 783-3738 (collect) (212) (collect)
(800) 558-3745 (toll free) (800) 828-3182 (toll free)
Attention: Liability Management Attention:
Group
Any questions concerning the terms of the Exchange Offers
may be directed to the Joint Dealer Managers.
The Information Agent for the Exchange Offers is:
Any questions concerning tender procedures or requests
for additional copies of this Prospectus, the Letters of Transmittal, or Notice
of Guaranteed Delivery
may be directed to the Information Agent.
The Exchange Agent for the Exchange Offers is:
By Mail: Hand Delivery or Overnight Delivery: By Facsimile:
MFS Notes tendered, together with the requisite Letters of Transmittal and any
other required documents, must be delivered to the Exchange Agent.
MFS TRUSTEE: WORLDCOM TRUSTEE:
IBJ Schroder Bank & Trust Company Mellon Bank, N.A.
Two Mellon Bank Center
Room 325
Pittsburgh, Pennsylvania 15259
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 14-2-202(b)(4) of the Georgia Business Corporation Code (the
"Georgia Code") provides that a corporation's articles of incorporation may
include a provision that eliminates or limits the personal liability of
directors for monetary damages to the corporation or its shareholders for
breach of their duty of care and other duties as directors; provided, however,
that the Section does not permit a corporation to eliminate or limit the
liability of a director for appropriating, in violation of his duties, any
business opportunity of the corporation, engaging in intentional misconduct or
a knowing violation of law, obtaining an improper personal benefit, or voting
for or assenting to an unlawful distribution (whether as a dividend, stock
repurchase or redemption, or otherwise) as provided in Section 14-2-832 of the
Georgia Code. Section 14-2-202(b)(4) also does not eliminate or limit the
rights of WorldCom or any shareholder to seek an injunction or other
nonmonetary relief in the event of a breach of a director's duty to the
corporation and its shareholders. Additionally, Section 14-2-202(b)(4) applies
only to claims against a director arising out of his role as a director, and
does not relieve a director from liability arising from his role as an officer
or in any other capacity.
The provisions of Article Nine of WorldCom's Amended and Restated Articles
of Incorporation are similar in all substantive respects to those contained in
Section 14-2-202(b)(4) of the Georgia Code as outlined above. Article Nine
further provides that the liability of directors of WorldCom shall be limited
to the fullest extent permitted by amendments to Georgia law.
Sections 14-2-850 to 14-2-859, inclusive, of the Georgia Code govern the
indemnification of directors, officers, employees, and agents. Section 14-2-
851 of the Georgia Code permits indemnification of a director of WorldCom for
liability incurred by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (including, subject to certain limitations, civil actions
brought as derivative actions by or in the right of WorldCom) in which he is
made a party by reason of being a director of WorldCom and for directors who,
at the request of WorldCom, act as directors, officers, partners, trustees,
employees or agents of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise. The Section
permits indemnification if the director acted in a manner he believed in good
faith to be in or not opposed to the best interest of WorldCom and, in
addition, in criminal proceedings, if he had no reasonable cause to believe
his conduct was unlawful. If the required standard of conduct is met,
indemnification may include judgments, settlements, penalties, fines or
reasonable expenses (including attorneys' fees) incurred with respect to a
proceeding. However, if the director is adjudged liable to WorldCom in a
derivative action or on the basis that personal benefit was improperly
received by him, the director is not entitled to indemnification by the
corporation; provided that the director may be entitled to indemnification for
reasonable expenses as determined by a court in accordance with the provisions
of Section 14-2-854, or unless WorldCom's Amended and Restated Articles of
Incorporation or Bylaws, or a contract or resolutions approved by WorldCom's
shareholders pursuant to Section 14-2-856, authorizes indemnification.
Section 14-2-852 of the Georgia Code provides that unless limited by the
articles of incorporation, directors who are successful with respect to any
claim brought against them, which claim is brought because they are or were
directors of WorldCom, are entitled to mandatory indemnification against
reasonable expenses incurred in connection therewith. Conversely, if the
charges made in any action are sustained, the determination of whether the
required standard of conduct has been met will be made, in accordance with the
provisions of Section 14-2-855 of the Georgia Code, as follows: (i) by the
majority vote of a quorum of the members of the board of directors not a party
to such action at that time, (ii) if a quorum cannot be obtained, by a
committee thereof duly designated by the board of
II-1
<PAGE>
directors, consisting of two or more directors not a party to such action at
that time, (iii) by duly selected special legal counsel, or (iv) by the
shareholders, but, in such event, the shares owned by or voted under the
control of directors who are at the time parties to the proceeding may not be
voted.
Section 14-2-857 of the Georgia Code provides that an officer of WorldCom
(but not an employee or agent generally) who is not a director has the
mandatory right of indemnification granted to directors under Section 14-2-
852, as described above. In addition, WorldCom may, as provided by WorldCom's
Amended and Restated Articles of Incorporation, Bylaws, general or specific
actions by its board of directors, or by contract, indemnify and advance
expenses to an officer employee or agent who is not a director to the extent
that such indemnification is consistent with public policy.
The indemnification provisions of Article X of WorldCom's Bylaws and Article
Eleven of WorldCom's Amended and Restated Articles of Incorporation are
consistent with the foregoing provisions of the Georgia Code. However,
WorldCom's Amended and Restated Articles of Incorporation prohibit
indemnification of a director who did not believe in good faith that his
actions were in, or not contrary to, WorldCom's best interests. WorldCom's
Bylaws extend the indemnification available to officers under the Georgia Code
to employees and agents.
ITEM 21(A). EXHIBITS.
See Exhibit Index.
ITEM 21(B). FINANCIAL STATEMENT SCHEDULES.
All financial statement schedules of WorldCom which are required to be
included herein are included in the Annual Report of WorldCom on Form 10-K for
the fiscal year ended December 31, 1996 which is incorporated herein by
reference.
ITEM 22. UNDERTAKINGS.
(1) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the registrants of expenses incurred or paid by a
director, officer or controlling person of the registrants in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(2) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) N/A
(4) N/A
II-2
<PAGE>
(5) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(6) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(7) The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers and sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs 7(a)(i) and 7(a)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or
15(d) of the Exchange Act that are incorporated by reference in the
registration statement.
(b) That for the purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF JACKSON, STATE OF
MISSISSIPPI, ON MAY , 1997.
WORLDCOM, INC.
/s/ Bernard J. Ebbers
By: _________________________________
Bernard J. Ebbers
President and Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Bernard J. Ebbers, Scott D. Sullivan and Charles T. Cannada and each of them
(with full power to each of them to act alone), his or her true and lawful
attorneys in fact and agents for him or her and on his or her behalf and in
his or her name, place and stead, in any and all capacities to sign any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits and any and all other documents
filed with respect thereto, with the Securities and Exchange Commission (or
any other governmental or regulatory authority), granting unto said attorneys,
and each of them, full power and authority to do and to perform each and every
act and thing requisite and necessary to be done in and about the premises in
order to effectuate the same as fully to all intents and purposes as he or she
might or could do if personally present, hereby ratifying and confirming all
that said attorneys in fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ Carl J. Aycock
___________________________________________ Director May 16, 1997
CARL J. AYCOCK
/s/ Max E. Bobbitt
___________________________________________ Director May 16, 1997
MAX E. BOBBITT
/s/ R. Douglas Bradbury
___________________________________________ Director May 16, 1997
R. DOUGLAS BRADBURY
/s/ James Q. Crowe
___________________________________________ Director May 16, 1997
JAMES Q. CROWE
/s/ Bernard J. Ebbers
___________________________________________ Director, President and May 16, 1997
Chief Executive Officer
(Principal Executive Officer)
BERNARD J. EBBERS
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ Francesco Galesi
___________________________________________ Director May 16, 1997
FRANCESCO GALESI
/s/ Richard R. Jaros
___________________________________________ Director May 16, 1997
RICHARD R. JAROS
/s/ Stiles A. Kellett, Jr.
__________________________________________ Director May 16, 1997
STILES A. KELLETT, JR.
/s/ David C. McCourt
__________________________________________ Director May 16, 1997
DAVID C. MCCOURT
/s/ John A. Porter
__________________________________________ Director May 16, 1997
JOHN A. PORTER
/s/ Walter Scott, Jr.
__________________________________________ Director May 16, 1997
WALTER SCOTT, JR.
/s/ John W. Sidgmore
__________________________________________ Director May 16, 1997
JOHN W. SIDGMORE
/s/ Scott D. Sullivan Director (Principal Financial May 16, 1997
___________________________________________ Officer and Principal
SCOTT D. SULLIVAN Accounting Officer)
/s/ Lawrence C. Tucker
__________________________________________ Director May 16, 1997
LAWRENCE C. TUCKER
/s/ Michael B. Yanney
__________________________________________ Director May 16, 1997
MICHAEL B. YANNEY
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
*1.1 Form of Dealer Manager Agreement between WorldCom, Inc. ("WorldCom")
and Salomon Brothers Inc and Goldman, Sachs & Co.
2.1 Amended and Restated Agreement and Plan of Merger by and among
WorldCom, HIJ Corp. and MFS Communications Company, Inc. ("MFS") dated
as of August 25, 1996 (attached as Appendix I to the Joint Proxy
Statement/Prospectus included in WorldCom's Registration Statement on
Form S-4 (Registration No. 333-16015) (the "MFS Registration
Statement") and incorporated by reference herein)**
4.1 Second Amended and Restated Articles of Incorporation of WorldCom
(including preferred stock designations) as of December 31, 1996
(incorporated herein by reference to Exhibit 3.1 to the Current Report
on Form 8-K of WorldCom (File No. 0-11258) dated December 31, 1996
(filed January 15, 1997))
4.2 Restated Bylaws of WorldCom (incorporated herein by reference to
Exhibit 4.2 to the Annual Report on Form 10-K filed by WorldCom (File
No. 0-11258) for the fiscal year ended December 31, 1996)
4.3 Amended and Restated Credit Agreement among WorldCom, NationsBank of
Texas, N.A. (Managing Agent and Administrative Agent), Bank of America
Illinois, The Bank of New York, The Bank of Nova Scotia, Canadian
Imperial Bank of Commerce, Chemical Bank, Credit Lyonnais New York
Branch, First Union National Bank of North Carolina, The Industrial
Bank of Japan, Limited, Atlanta Agency, The First National Bank of
Chicago, The Long-Term Credit Bank of Japan, Limited, New York Branch,
Toronto Dominion (Texas), Inc., and Wachovia Bank of Georgia N.A.
(Agents) and the Lenders named therein (Lenders) dated as of June 28,
1996, (incorporated herein by reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q filed by WorldCom (File No. 0-11258) for
the quarter ended June 30, 1996)
4.4 Indenture of WorldCom to Mellon Bank, N.A. dated as of March 1, 1997
for Senior Debt Securities (incorporated herein by reference to
Exhibit 4.1 to WorldCom's Registration Statement on Form S-3
(Registration No 333-20911))
*4.5 Form of First Supplemental Indenture of WorldCom to Mellon Bank, N.A.
for 9 3/8% Senior Notes Due 2004
*4.6 Form of Second Supplemental Indenture of WorldCom to Mellon Bank, N.A.
for 9 3/8% Senior Notes Due 2004
*4.7 Form of First Supplemental Indenture of WorldCom to Mellon Bank, N.A.
for 8 7/8% Senior Discount Notes Due 2006
*4.8 Form of Second Supplemental Indenture of WorldCom to Mellon Bank, N.A.
for 8 7/8% Senior Discount Notes Due 2006
4.9 Indenture of MFS to IBJ Schroder Bank & Trust Company dated January
15, 1994 for 9 3/8% Senior Discount Notes Due 2004 (incorporated
herein by reference to Exhibit No. to MFS' Current Report on Form 8-K
dated January 31, 1994 (File No. 0-21594)
4.10 First Supplemental Indenture of MFS to IBJ Schroder Bank & Trust
Company dated as of March 31, 1995 for Due 2004 (incorporated herein
by reference to Exhibit No. 10.3 to MFS' Current Report on Form 8-K
dated April 27, 1995 (File No. 0-21594)
4.11 Indenture of MFS to IBJ Schroder Bank & Trust Company dated January
15, 1996 for Senior Discount Notes (incorporated herein by reference
to Exhibit No. 4.1 to MFS' Current Report on Form 8-K dated January
23, 1996 (File No. 0-21594)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
4.12 First Supplemental Indenture of MFS to IBJ Schroder Bank & Trust
Company dated as of January 15, 1996 for 8 7/8% Senior Discount Notes
Due 2006 (incorporated herein by reference to Exhibit No. 4.2 to MFS'
Current Report on Form 8-K dated January 23, 1996 (File No. 0-21594)
*4.13 Form of Second Supplemental Indenture of MFS to IBJ Schroder Bank &
Trust Company for 9 3/8% Senior Discount Notes Due 2004
*4.14 Form of Second Supplemental Indenture to IBJ Schroder Bank & Trust
Company dated as of January 15, 1996 for 8 7/8% Senior Discount Notes
Due 2006
*5.1 Legality Opinion of [P. Bruce Borghardt, Esq.]
*8.1 Tax Opinion of Bryan Cave LLP
12.1 Statement regarding Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Coopers & Lybrand LLP
23.3 Consent of Arthur Andersen LLP
23.4 Consent of Arthur Andersen LLP
23.5 Consent of [P. Bruce Borghardt, Esq.] (included in Exhibit 5.1)
23.6 Consent of Bryan Cave LLP (included in Exhibit 8.1)
24.1 Power of Attorney (included in Signature Page)
25.1 Statement of Eligibility of Mellon Bank, N.A. on Form T-1 with respect
to the WorldCom Indenture (incorporated herein by reference to Exhibit
25.1 to WorldCom's Registration Statement on Form S-3 (Registration No
333-20911))
25.2 Statement of Eligibility of IBJ Schroder Bank & Trust Company on Form
T-1 with respect to the MFS Indenture (incorporated herein by
reference to Exhibit to MFS' Registration Statement on Form S-3
(Registration No. ))
*99.1 Letter of Transmittal and Consent with respect to the MFS 2004 Notes
*99.2 Letter of Transmittal and Consent with respect to the MFS 2006 Notes
</TABLE>
- --------
* To be filed by amendment.
** 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>
EXHIBIT 12.1
WORLDCOM, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHANGES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE THREE
YEAR ENDED DECEMBER 31, MONTHS ENDED
----------------------------------------------- -----------------
HISTORICAL PRO FORMA MARCH 31,
----------------------------------------------- ----------- -----------------
1992 1993 1994 1995 1996 1996 1996 1997
------- -------- -------- -------- ----------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Pretax income (loss)
from continuing
operations............ $22,513 $209,920 $(50,697) $437,729 $(2,059,416) $(2,732,617) $140,970 $103,466
Fixed charges, net of
capitalized interest.. 36,608 47,316 59,689 267,057 241,397 359,719 62,193 83,536
------- -------- -------- -------- ----------- ----------- -------- --------
Earnings............... $59,121 $257,236 $8,992 $704,786 $(1,818,019) $(2,372,898) $203,163 $187,002
======= ======== ======== ======== =========== =========== ======== ========
Fixed charges:
Interest cost.......... $33,815 $38,657 $49,203 $254,099 $229,376 $353,085 59,304 88,454
Amortization of
financing costs....... 1,464 1,792 2,086 2,811 1,742 -- 713 --
Interest factor of rent
expense............... 4,833 9,967 10,300 15,030 17,854 28,024 4,454 8,081
------- -------- -------- -------- ----------- ----------- -------- --------
Fixed charges.......... $40,112 $ 50,416 $ 61,589 $271,940 $ 248,972 $ 381,109 $ 64,471 $ 96,535
======= ======== ======== ======== =========== =========== ======== ========
Deficiency of earnings
to fixed charges....... $ -- $ -- $(52,597) $ -- $(2,066,991) $(2,754,007) $ -- $ --
======= ======== ======== ======== =========== =========== ======== ========
Ratio of earnings to
fixed charges.......... 1.47:1 5.10:1 0.15:1 2.59:1 N/A N/A 3.15:1 1.94:1
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 to be filed on or around
May 16, 1997, of our report dated February 26, 1997, included in WorldCom,
Inc.'s Form 10-K for the year ended December 31, 1996 and to all references to
our Firm in this registration statement.
ARTHUR ANDERSEN LLP
Jackson, Mississippi, May 15, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-4 (File No. 333-______) of WorldCom, Inc. of our report dated February
14, 1996, on our audits of the consolidated financial statements of MFS
Communications Company, Inc. as of December 31, 1995 and for the years ended
December 31, 1995 and 1994 which report is included in MFS Communication
Company's Annual Report on Form 10-K, and of our report dated February 14, 1996,
on our audits of the consolidated financial statements of MFS Communications
Company, Inc. as of December 31, 1995 and 1994 and for the three years in the
period ended December 31, 1995 which report is included in WorldCom Inc.'s
Current Report on Form 8-K/A dated August 25, 1996 (as amended on November 4,
1996). We also consent to the reference to our firm under the caption
"Experts".
Coopers & Lybrand L.L.P.
Omaha, Nebraska
May 16, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 to be filed on or around
May 16, 1997, of our reports dated February 20, 1997, included in MFS
Communications Company, Inc.'s Form 10-K for the year ended December 31, 1996
and to all references to our Firm in this registration statement.
ARTHUR ANDERSEN LLP
Omaha, Nebraska, May 15, 1997
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 to be filed on or around
May 16, 1997, of our report dated January 31, 1996 on the Consolidated
Financial Statements of UUNET Technologies, Inc. included in WorldCom, Inc.'s
Current Report on Form 8-K dated August 25, 1996 as amended by Form 8-K/A
filed November 4, 1996 and to all references to our Firm included in this
registration statement.
ARTHUR ANDERSEN LLP
Washington, D.C., May 15, 1997
