<PAGE> 1
FILED PURSUANT TO RULE 424(b)(5)
REGISTRATION NO. 333-20911
PROSPECTUS SUPPLEMENT
(To Prospectus Dated March 26, 1997)
$2,000,000,000 [WORLDCOM, INC. LOGO]
WORLDCOM, INC.
$600,000,000 7.55% SENIOR NOTES DUE 2004
$1,100,000,000 7.75% SENIOR NOTES DUE 2007
$300,000,000 7.75% SENIOR NOTES DUE 2027
The 7.55% Senior Notes Due 2004 (the "Notes Due 2004"), which will mature on
April 1, 2004, the 7.75% Senior Notes Due 2007 (the "Notes Due 2007"), which
will mature on April 1, 2007, and the 7.75% Senior Notes Due 2027 (the "Notes
Due 2027"), which will mature on April 1, 2027 (collectively, with the Notes Due
2004 and the Notes Due 2007, the "Notes"), are being offered by WorldCom, Inc.
("WorldCom" or the "Company"). Interest on the Notes will be payable
semiannually on April 1 and October 1 of each year, commencing October 1, 1997.
Each holder of the Notes Due 2027 may require the Company to repurchase all or a
portion of the Notes Due 2027 owned by such holder on April 1, 2009 at a
purchase price equal to 100% of the principal amount thereof. See "Description
of the Notes -- Purchase at Option of Holder."
The Notes Due 2004 and the Notes Due 2007 will be redeemable, as a whole or in
part, at the option of the Company, at any time or from time to time, and the
Notes Due 2027 will be redeemable, as a whole or in part, at the option of the
Company, at any time and from time to time beginning April 2, 2009, at
respective redemption prices equal to the greater of (i) 100% of the principal
amount of the Notes to be redeemed or (ii) the sum of the present values of the
Remaining Scheduled Payments (as defined herein) discounted at the Treasury Rate
(as defined herein) plus 15 basis points for the Notes Due 2004 or plus 20 basis
points for the Notes Due 2007 and the Notes Due 2027, plus in the case of each
of clause (i) and (ii) accrued interest to the date of redemption. See
"Description of the Notes -- Optional Redemption."
Each of the Notes Due 2004, the Notes Due 2007 and the Notes Due 2027 will be
represented by one or more Global Securities registered in the name of a nominee
of The Depository Trust Company, as Depositary. See "Description of the
Notes -- Delivery and Form; -- Same-Day Settlement and Payment."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT COMPANY(1)(2)
<S> <C> <C> <C>
Per Note Due 2004............................ 99.834% .875% 98.959%
Total........................................ $599,004,000 $5,250,000 $593,754,000
Per Note Due 2007............................ 99.842% .875% 98.967%
Total........................................ $1,098,262,000 $9,625,000 $1,088,637,000
Per Note Due 2027............................ 99.977% .875% 99.102%
Total........................................ $299,931,000 $2,625,000 $297,306,000
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from April 1, 1997 to date of delivery.
(2) Before deducting expenses payable by the Company estimated at $810,000.
The Notes are offered subject to receipt and acceptance by the Underwriters, to
prior sale and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the Notes will be made in book-entry form through the
facilities of The Depository Trust Company on or about April 1, 1997.
SALOMON BROTHERS INC
GOLDMAN, SACHS & CO.
CREDIT SUISSE FIRST BOSTON
NATIONSBANC CAPITAL MARKETS, INC.
The date of this Prospectus Supplement is March 26, 1997.
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
PURCHASES OF THE NOTES TO STABILIZE THEIR MARKET PRICE AND PURCHASES OF THE
NOTES TO COVER SOME OR ALL OF A SHORT POSITION IN THE NOTES MAINTAINED BY THE
UNDERWRITERS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
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<PAGE> 3
THE COMPANY
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.
On December 31, 1996, WorldCom, through a wholly owned subsidiary, merged
with MFS Communications Company, Inc. ("MFS"). MFS provides telecommunications
services and systems for business and government customers. MFS is a leading
provider of alternative local network access facilities via digital fiber optic
cable networks that it has installed in and around approximately 41 United
States cities, and in several major European cities. MFS also provides domestic
and international long distance telecommunications services via its network
platform, which consists of MFS-owned transmission and switching facilities, and
network capacity leased from 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 to businesses, professionals and online
services providers. UUNET provides both dedicated and dial-up Internet access,
and other applications and services which include Web server hosting and
integration services, client software and security products, training and
network integration and consulting services.
Prospective investors should carefully consider the information, including
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
Prospectus and this Prospectus Supplement.
S-3
<PAGE> 4
USE OF PROCEEDS
The net proceeds of the offering are estimated to be $1,978,887,000. The
Company intends to use the net proceeds of the offering to pay down a portion of
its indebtedness under the Company's $3.75 billion five-year revolving credit
facility (the "Credit Facility") and for other corporate purposes. The Credit
Facility matures on June 30, 2001, and indebtedness outstanding thereunder bears
interest at variable rates, including a Base Rate (as defined in the Credit
Facility) or the LIBOR rate plus applicable margin. The applicable margin for a
LIBOR rate borrowing varies from .35% to .875% based upon a specified financial
test. As of March 26, 1997, the outstanding indebtedness under the Credit
Facility bore interest at a weighted average rate of 6.0% per annum.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of December 31, 1996, and as adjusted to give effect to the sale by
the Company of the Notes offered hereby (as if such sale occurred on such date).
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------
ACTUAL AS ADJUSTED
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Short-term debt:
Current maturities of long-term
debt............................... $ 22,424 $ 22,424
=========== ===========
Long-term debt:
7.55% Senior Notes Due 2004........... -- 600,000
7.75% Senior Notes Due 2007........... -- 1,100,000
7.75% Senior Notes Due 2027........... -- 300,000
Other long-term debt, less current
portion............................... 4,803,581 2,824,694
----------- -----------
Total long-term debt.......... 4,803,581 4,824,694
----------- -----------
Shareholders' investment:
Series A Preferred Stock, par value
$.01 per share; 94,992 shares
authorized, issued and
outstanding........................ 1 1
Series B Preferred Stock, par value
$.01 per share; 15,000,000 shares
authorized; 12,699,948 shares
issued and outstanding............. 127 127
Preferred Stock, par value $.01 per
share; 34,905,008 shares
authorized; none issued and
outstanding........................ -- --
Common Stock, par value $.01 per
share; 2,500,000,000 shares
authorized; 885,080,264 shares
issued and outstanding............. 8,851 8,851
Additional paid-in capital............ 14,855,881 14,855,881
Unrealized holding gain on marketable
equity securities.................. 28,832 28,832
Retained earnings (deficit)........... (1,933,716) (1,933,716)
----------- -----------
Total shareholders'
investment.................. 12,959,976 12,959,976
----------- -----------
Total capitalization........ $17,763,557 $17,784,670
=========== ===========
</TABLE>
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<PAGE> 5
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes supplements
and, to the extent inconsistent therewith, replaces the description of the
general terms and provisions of the Senior Securities set forth in the
accompanying Prospectus under "Description of Debt Securities" to which
reference is hereby made.
CERTAIN TERMS OF THE NOTES DUE 2004
The Notes Due 2004 are a series of Debt Securities described in the
accompanying Prospectus, which will be Senior Securities, will be limited to
$600 million aggregate principal amount and will mature on April 1, 2004.
Reference should be made to the accompanying Prospectus for a detailed summary
of additional provisions of the Notes Due 2004 and of the Senior Indenture dated
as of March 1, 1997 (the "Indenture") between the Company and Mellon Bank, N.A.,
as trustee (the "Trustee"), under which the Notes Due 2004 will be issued.
The Notes Due 2004 will bear interest at the rate of 7.55% per annum from
April 1, 1997, payable semiannually in arrears on April 1 and October 1 of each
year, commencing October 1, 1997, to the persons in whose names the Notes Due
2004 are registered at the close of business on the preceding March 15 or
September 15, each a record date, as the case may be. Principal of and interest
on the Notes Due 2004 will be payable (and the Notes Due 2004 may be presented
for repayment) at the office or agency of the Company maintained for such
purposes in New York, New York. Interest will be computed on the basis of a
360-day year consisting of twelve 30-day months.
The Notes Due 2004 will not be subject to any sinking fund.
CERTAIN TERMS OF THE NOTES DUE 2007
The Notes Due 2007 are a series of Debt Securities described in the
accompanying Prospectus, which will be Senior Securities, will be limited to
$1.1 billion aggregate principal amount and will mature on April 1, 2007.
Reference should be made to the accompanying Prospectus for a detailed summary
of additional provisions of the Notes Due 2007 and of the Indenture under which
the Notes Due 2007 will be issued.
The Notes Due 2007 will bear interest at the rate of 7.75% per annum from
April 1, 1997, payable semiannually in arrears on April 1 and October 1 of each
year, commencing October 1, 1997, to the persons in whose names the Notes Due
2007 are registered at the close of business on the preceding March 15 or
September 15, each a record date, as the case may be. Principal of and interest
on the Notes Due 2007 will be payable (and the Notes Due 2007 may be presented
for repayment) at the office or agency of the Company maintained for such
purposes in New York, New York. Interest will be computed on the basis of a
360-day year consisting of twelve 30-day months.
The Notes Due 2007 will not be subject to any sinking fund.
CERTAIN TERMS OF THE NOTES DUE 2027
The Notes Due 2027 are a series of Debt Securities described in the
accompanying Prospectus, which will be Senior Securities, will be limited to
$300 million aggregate principal amount and will mature on April 1, 2027.
Reference should be made to the accompanying Prospectus for a detailed summary
of additional provisions of the Notes Due 2027 and of the Indenture under which
the Notes Due 2027 will be issued.
The Notes Due 2027 will bear interest at the rate of 7.75% per annum from
April 1, 1997, payable semiannually in arrears on April 1 and October 1 of each
year, commencing October 1, 1997, to the persons in whose names the Notes Due
2027 are registered at the close of business on the preceding March 15 or
September 15, each a record date, as the case may be. Principal of and interest
on the Notes Due 2027 will be payable (and the Notes Due 2027 may be presented
for repayment) at the office
S-5
<PAGE> 6
or agency of the Company maintained for such purposes in New York, New York.
Interest will be computed on the basis of a 360-day year consisting of twelve
30-day months.
The Notes Due 2027 will not be subject to any sinking fund.
RANKING
At December 31, 1996, the aggregate amount of indebtedness of the Company
that would have ranked pari passu with the Notes was approximately $3.28
billion, which represents the amount outstanding under the Credit Facility on
that date. The 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
December 31, 1996, the aggregate amount of such obligations of the Company's
subsidiaries (excluding intercompany indebtedness) was approximately $2.78
billion; of this amount, (i) $685.8 million represented the accreted value of
MFS's 9 3/8% Senior Discount Notes due 2004 and (ii) $674.5 million represented
the accreted value of MFS's 8 7/8% Senior Discount Notes due 2006.
PURCHASE AT OPTION OF HOLDER
Each Holder of the Notes Due 2027 will have the right to require the
Company to repurchase all or a portion of the Notes Due 2027 owned by such
Holder (the "Put Option") on April 1, 2009 (the "Put Option Exercise Date") at a
purchase price equal to 100% of the principal amount of the Notes Due 2027
tendered by such Holder plus accrued interest thereon. On and after the Put
Option Exercise Date, interest will cease to accrue on the Notes Due 2027 or any
portion thereof tendered for repayment. On or before the Put Option Exercise
Date, the Company shall deposit with a paying agent (or the Trustee) money
sufficient to pay the principal of and any accrued interest on the Notes Due
2027 to be tendered for repayment. On and after the Put Option Exercise Date,
interest will cease to accrue on the Notes Due 2027 or any portion thereof
tendered for repayment.
A Holder must provide the Company with notice of its intention to exercise
the Put Option during the period from and including February 1, 2009 through and
including March 1, 2009. Such notice, once given, will be irrevocable unless
waived by the Company.
The Company will comply with the provisions of Rule 13e-4, Rule 14e-1 and
any other tender offer rules under the Securities Exchange Act of 1934 if
required and will file Schedule 13E-4 or any other schedule if required
thereunder in connection with any offer by the Company to purchase the Notes Due
2027.
Book-Entry Notes. So long as the Notes Due 2027 are held under the
book-entry only system referred to below under " -- Delivery and Form," The
Depository Trust Company ("DTC"), its nominee, Cede & Co. or any of DTC's Direct
or Indirect Participants as registered Holders of the Notes Due 2027, will be
entitled to tender the Notes Due 2027 on the Put Option Exercise Date for
repayment and any such tenders will be effected by means of DTC's Repayment
Option Procedures. During the period from and including February 1, 2009 to and
including March 1, 2009 or, if such March 1, 2009 is not a business day, the
next succeeding business day, DTC will receive instructions from its
Participants (acting on behalf of owners of beneficial interests in the Notes
Due 2027) to tender the Notes Due 2027 for repayment under DTC's Repayment
Option Procedures. Such tenders for repayment will be made by DTC by means of a
book-entry credit of the Notes Due 2027 to the account of the Trustee, provided
that DTC receives instructions from tendering Participants by Noon on March 1,
2009. Promptly after the recording of any such book-entry credit, DTC will
provide the Trustee an Agent Put Daily Activity Report in accordance with its
Repayment Option Procedures, identifying the Notes Due 2027 and the aggregate
principal amount thereof as to which such tenders for repayment have been made.
OWNERS OF BENEFICIAL INTERESTS IN NOTES DUE 2027 WHO WISH TO EFFECTUATE THE
TENDER AND REPAYMENT OF SUCH NOTES DUE 2027 MUST INSTRUCT THEIR RESPECTIVE DTC
PARTICIPANT OR PARTICIPANTS A REASONABLE PERIOD OF TIME IN ADVANCE OF MARCH 1,
2009.
Certificated Notes. If at any time the use of a book-entry only system
through DTC (or any successor securities depository) is discontinued with
respect to the Notes Due 2027 as a result of the circum-
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<PAGE> 7
stances described in the accompanying Prospectus under "Description of Debt
Securities -- Book-Entry Debt Securities," tenders for repayment of such Notes
on the Put Option Exercise Date shall be made according to the following
procedures. The Trustee must receive at the principal office of the Trustee in
New York City, during the period from and including February 1, 2009 to and
including March 1, 2009, or if such March 1, 2009 is not a business day, the
next succeeding business day, (i) the Notes Due 2027 with the form entitled
"Option to Elect Repayment" on the reverse of the Note Due 2027 duly completed,
or (ii) a telegram, telex, facsimile transmission or letter from a member of a
national securities exchange or the National Association of Securities Dealers,
Inc., or a commercial bank or a trust company in the United States of America,
setting forth the name of the registered Holder of the Note Due 2027, the
principal amount of the Note Due 2027, the principal amount of the Note Due 2027
to be repaid, the certificate number or a description of the tenor and terms of
the Notes Due 2027, a statement that the option to elect repayment is being
exercised thereby and a guarantee that the Note Due 2027 to be repaid with the
form entitled "Option to Elect Repayment" on the reverse of the Note Due 2027
duly completed will be received by the Trustee not later than five business days
after the date of such telegram, telex, facsimile transmission or letter and
such Note Due 2027 and form duly completed are received by the Trustee by such
fifth business day. Any such notice received by the Trustee during the period
from and including February 1, 2009 to and including March 1, 2009 shall be
irrevocable, unless waived by the Company. All questions as to the validity,
eligibility (including time of receipt) and the acceptance of any Note Due 2027
for repayment will be determined by the Company, whose determination will be
final and binding.
OPTIONAL REDEMPTION
The Notes Due 2004 and the Notes Due 2007 will be redeemable, as a whole or
in part, at the option of the Company, at any time or from time to time, and the
Notes Due 2027 will be redeemable, as a whole or in part, at the option of the
Company, at any time or from time to time beginning April 2, 2009, on at least
30 days but not more than 60 days prior notice mailed to the registered address
of each holder of Notes, at respective redemption prices equal to the greater of
(i) 100% of the principal amount of the Notes to be redeemed or (ii) the sum of
the present values of the Remaining Scheduled Payments (as defined below)
discounted, on a semiannual basis (assuming a 360-day year consisting of twelve
30-day months), at the Treasury Rate (as defined below) plus 15 basis points for
the Notes Due 2004 or plus 20 basis points for the Notes Due 2007 and the Notes
Due 2027, plus in the case of each of clause (i) and (ii) accrued interest to
the date of redemption.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity (computed as of the
second business day immediately preceding such redemption date) of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes Due 2004 or the Notes Due 2007, as the case may
be, to be redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of corporate
debt securities of comparable maturity to the remaining term of such Notes.
"Independent Investment Banker" means one of the Reference Treasury Dealers
appointed by the Company.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) the average
of the Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest of such Reference Treasury Dealer Quotations,
or (B) if the Trustee obtains fewer
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<PAGE> 8
than four such Reference Treasury Dealer Quotations, the average of all such
quotations. "Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 3:30 p.m., New York
City time on the third business day preceding such redemption date.
"Reference Treasury Dealer" means each of Salomon Brothers Inc, Goldman,
Sachs & Co., Credit Suisse First Boston and NationsBanc Capital Markets, Inc.
and their respective successors; provided, however, that if any of the foregoing
shall cease to be a primary U.S. Government securities dealer in New York City
(a "Primary Treasury Dealer"), the Company shall substitute therefor another
nationally recognized investment banking firm that is a Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to each Note to be
redeemed, the remaining scheduled payments of the principal thereof and interest
thereon that would be due after the related redemption date but for such
redemption; provided, however, that, if such redemption date is not an interest
payment date with respect to such Note, the amount of the next succeeding
scheduled interest payment thereon will be reduced by the amount of interest
accrued thereon to such redemption date.
On and after the redemption date, interest will cease to accrue on the
Notes or any portion thereof called for redemption. On or before the redemption
date, the Company shall deposit with a paying agent (or the Trustee) money
sufficient to pay the redemption price of and accrued interest on the Notes to
be redeemed on such date. If less than all of the Notes Due 2004 or the Notes
Due 2007 are to be redeemed, the Notes to be redeemed shall be selected by the
Trustee by such method as the Trustee shall deem fair and appropriate.
DELIVERY AND FORM
The Notes Due 2004, the Notes Due 2007 and the Notes Due 2027 initially
will be represented by one or more global securities ("Global Securities")
deposited with DTC and registered in the name of the nominee of DTC, except as
set 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 in the accompanying Prospectus under "Description of Debt
Securities -- Book-Entry Debt Securities," no Beneficial Owner of a Note shall
be entitled to receive a definitive certificate representing a 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 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.
A further description of the Depository's procedures with respect to the
Global Securities representing the Notes is set forth in the accompanying
Prospectus under "Description of Debt Securities -- Book-Entry Debt Securities."
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. So long as the Notes are represented by the Global Securities,
all payments of principal and interest will be made by the Company in
immediately available funds.
The Notes will trade in DTC's Same-Day Funds Settlement System until
maturity, and secondary market trading activity in the 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 Notes.
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<PAGE> 9
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement,
the Company has agreed to sell to each of the Underwriters named below, and each
of the Underwriters has severally agreed to purchase, the principal amount of
Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT PRINCIPAL AMOUNT
UNDERWRITERS OF NOTES DUE 2004 OF NOTES DUE 2007 OF NOTES DUE 2027
------------ ----------------- ----------------- -----------------
<S> <C> <C> <C>
Salomon Brothers Inc...................... $276,000,000 $ 506,000,000 $138,000,000
Goldman, Sachs & Co....................... 156,000,000 286,000,000 78,000,000
Credit Suisse First Boston Corporation.... 84,000,000 154,000,000 42,000,000
NationsBanc Capital Markets, Inc. ........ 84,000,000 154,000,000 42,000,000
------------ -------------- ------------
Total........................... $600,000,000 $1,100,000,000 $300,000,000
============ ============== ============
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Notes are subject to certain
conditions precedent, that the Underwriting Agreement may be terminated under
certain circumstances, and that the Underwriters will be obligated to purchase
all of the Notes if any are purchased.
The Company has been advised by the Underwriters that the Underwriters
propose initially to offer the Notes to the public at the public offering prices
set forth on the cover page of this Prospectus Supplement and to certain dealers
at such prices less concessions not in excess of .450%, in the case of the Notes
Due 2004, and not in excess of .500%, in the case of the Notes Due 2007 and the
Notes Due 2027, of the principal amount thereof. The Underwriters may allow, and
such dealers may reallow, concessions not in excess of .250% of the principal
amount of the Notes on sales to other dealers. After the initial public
offering, the public offering prices and such concessions may be changed.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or contribute to payments the Underwriters
may be required to make in respect thereof.
The Notes are new issues of securities with no established trading market.
The Company does not intend to apply for listing of the Notes on a national
securities exchange, but has been advised by the Underwriters that the
Underwriters presently intend to make a market in the Notes, as permitted by
applicable laws and regulations. The Underwriters are not obligated, however, to
make a market in the Notes, and any such market making may be discontinued at
any time at the sole discretion of the Underwriters. Accordingly, no assurance
can be given as to the liquidity of, or the trading market for, the Notes.
In connection with the offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Notes. Such
transactions may include stabilization transactions effected in accordance with
Rule 104 of Regulation M, pursuant to which such persons may bid for or purchase
Notes for the purpose of stabilizing the market price. The Underwriters also may
create a short position for the account of the Underwriters by selling more
Notes in connection with the offering than they are committed to purchase from
the Company, and in such case may purchase Notes in the open market following
completion of the offering to cover all or a portion of such short position. Any
of the transactions described in this paragraph may result in the maintenance of
the price of the Notes at a level above that which might otherwise prevail in
the open market. None of the transactions described in this paragraph is
required, and, if they are undertaken, they may be discontinued at any time.
The Underwriters and certain of their affiliates and associates may be
customers of, have borrowing relationships with, engage in transactions with,
and/or perform services, including investment banking services, for, the Company
and its affiliates in the ordinary course of business. NationsBanc Capital
Markets, Inc., one of the Underwriters, is an affiliate of NationsBank of Texas,
N.A., the Managing Agent and Administrative Agent under the Company's Credit
Facility.
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<PAGE> 10
INFORMATION INCORPORATED BY REFERENCE
As described in the Prospectus, the Company 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
documents filed by the Company with the Commission now may also be accessed
electronically by means of the Commission's home page on the world wide web on
the Internet at "http://www.sec.gov."
All documents and reports filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of any offering of securities made by the Prospectus and this
Prospectus Supplement shall be deemed to be incorporated by reference into the
Prospectus and this Prospectus Supplement and to be a part of the Prospectus and
this Prospectus Supplement from the date of filing of such document. Any
statement contained in the Prospectus or herein, or in a document all or a
portion of which is incorporated or deemed to be incorporated by reference in
the Prospectus or herein, shall be deemed to be modified or superseded for
purposes of the Prospectus and this Prospectus Supplement to the extent that a
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Prospectus and
this Prospectus Supplement.
The Company will provide without charge to any person to whom the
Prospectus and this Prospectus Supplement is delivered, on the written or oral
request of such person, a copy of any or all of the documents incorporated by
reference herein (other than exhibits not specifically incorporated by reference
into the texts of such documents). Requests for such documents should be
directed to:
WorldCom, Inc.
515 East Amite Street
Jackson, MS 39201-2702
Telephone: (601) 360-8600
Attention: Stephanie Q. Scott,
Director of Financial Reporting
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the
Company by Bryan Cave LLP, St. Louis, Missouri. Certain legal matters in
connection with the offering contemplated herein are being passed upon for the
Company by P. Bruce Borghardt, General Counsel -- Corporate Development of the
Company, and for the Underwriters by Cleary, Gottlieb, Steen & Hamilton, New
York, New York.
S-10
<PAGE> 11
PROSPECTUS [WORLDCOM, INC. LOGO]
WORLDCOM, INC.
DEBT SECURITIES
WorldCom, Inc. (the "Company" or "WorldCom") may offer from time to time,
in one or more series, debentures, notes, bonds, or other obligations ("Debt
Securities"), which may be senior ("Senior Securities") or subordinated
("Subordinated Securities") to other indebtedness of the Company, all having an
aggregate initial public offering price not to exceed $3,000,000,000 or the
equivalent thereof in one or more foreign currencies, foreign currency units, or
composite currencies, including European Currency Units. The Debt Securities may
be offered separately or as units with other securities, in separate series in
amounts, at prices, and on terms to be determined at or prior to the time of
sale. The Debt Securities will be direct unsecured obligations of the Company.
The specific terms of the Debt Securities with respect to which this
Prospectus is being delivered will be set forth in a supplement to this
Prospectus (a "Prospectus Supplement"), together with the terms of the offering
and sale of the Debt Securities and the initial offering price and the net
proceeds to the Company from the sale thereof. The Prospectus Supplement will
include, among other things, the specific designation, aggregate principal
amount, ranking, authorized denomination, maturity, rate or method of
calculation of interest and dates for payment thereof, any index or formula for
determining the amount of any principal, premium, or interest payment, any
exchange, redemption, prepayment, or sinking fund provisions, the currency or
currency unit in which principal, premium, or interest is payable, whether the
securities are issuable in registered form or in the form of global securities,
and the designation of the trustee acting under the applicable indenture. The
Prospectus Supplement will also contain information, where applicable, about
material United States federal income tax considerations relating to, and any
listings on a securities exchange of, the Debt Securities covered by such
Prospectus Supplement.
The Company may sell the Debt Securities directly to purchasers, through
agents designated from time to time, or through underwriters or dealers on terms
determined by market conditions at the time of sale. If any agents,
underwriters, or dealers are involved in the sale of the Debt Securities, the
names of such agents, underwriters, or dealers and any applicable commissions or
discounts and the net proceeds to the Company from such sale will be set forth
in the applicable Prospectus Supplement.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF DEBT SECURITIES
UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
THE DATE OF THIS PROSPECTUS IS MARCH 26, 1997.
<PAGE> 12
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS
SUPPLEMENT 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 OR ANY PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE THEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THEREOF. THIS PROSPECTUS AND ANY RELATED PROSPECTUS
SUPPLEMENT DO 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
The Company 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"). Reports, proxy statements
and other information filed by the Company can 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 at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material can be obtained at prescribed rates from the
Public Reference Branch of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549. The Commission maintains an Internet Web site (http://www.sec.gov)
that contains reports, proxy statements and other materials filed electronically
through the Commission's Electronic Data Gathering, Analysis and Retrieval
(EDGAR) system. In addition, material filed by the Company can be inspected at
the offices of the National Association of Securities Dealers, Inc. (the
"NASD"), at 1735 K Street, N.W., Washington, DC 20006.
This Prospectus constitutes a part of a registration statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Debt Securities offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the rules
and regulations of the Commission. Any statements contained in this Prospectus
and accompanying Prospectus Supplement as to the contents of any contract or
other document are not necessarily complete, and in each instance reference is
made to the copy of such contract or other document filed or incorporated by
reference as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference and the exhibits and the schedules
thereto. For further information pertaining to the Company or the Debt
Securities offered hereby, reference is made to the Registration Statement and
such exhibits and schedules thereto, which may be inspected without charge at,
and copies thereof may be obtained at prescribed rates from, the Public
Reference Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549.
"WorldCom" is a service mark of the Company.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company (formerly
Resurgens Communications Group, Inc.) under File No. 0-11258 (formerly File No.
1-10415) pursuant to the Exchange Act are incorporated herein by reference and
shall be deemed to be a part hereof:
(1) WorldCom's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
(2) WorldCom's Report by Issuer of Securities Quoted on NASDAQ on Form
10-C dated July 12, 1996;
(3) WorldCom's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996;
2
<PAGE> 13
(4) WorldCom's Current Reports on Form 8-K dated August 25, 1996
(filed August 26, 1996) (as amended on Forms 8-K/A filed August 30, 1996,
November 4, 1996 and November 20, 1996) and dated December 31, 1996 (filed
January 15, 1997);
(5) audited financial statements as of December 31, 1994 and 1993 and
for the years then ended of the network services operations of Williams
Telecommunications Group, Inc. ("WilTel"), including WilTel, Inc., WilTel
Undersea Cable, Inc. and WilTel International Inc., which were wholly owned
subsidiaries of WilTel (collectively "WilTel Network Services"), included
in WorldCom's Current Report on Form 8-K/A dated August 22, 1994 (filed
April 19, 1995);
(6) audited financial statements as of December 31, 1995 and 1994 and
for each of the three years in the period ended December 31, 1995 of MFS
Communications Company, Inc. ("MFS") included in WorldCom's Current Report
on Form 8-K/A dated August 25, 1996 (filed November 4, 1996);
(7) audited financial statements as of December 31, 1995 and 1994 and
for each of the three years in the period ended December 31, 1995 of UUNET
Technologies, Inc. ("UUNET"), a wholly owned subsidiary of MFS, included in
WorldCom's Current Report on Form 8-K/A dated August 25, 1996 (filed
November 4, 1996);
(8) WorldCom's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996; and
(9) WorldCom's Current Report on Form 8-K dated March 18, 1997 (filed
March 24, 1997).
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act on or after the date of this
Prospectus and prior to the termination of the offering of the Debt Securities
offered hereby shall be deemed to be incorporated by reference herein 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 by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein or in any Prospectus Supplement
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.
References in this Prospectus to the "Company" include reference to
WorldCom and/or its direct and indirect subsidiaries.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN AND MAY NOT BE DELIVERED HEREWITH, AS INDICATED ABOVE. THE COMPANY WILL
PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN
DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL
OF THE DOCUMENTS REFERRED TO BELOW WHICH ARE INCORPORATED HEREIN BY REFERENCE
(OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS THEY ARE SPECIFICALLY INCORPORATED
BY REFERENCE INTO SUCH DOCUMENTS). REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED
TO STEPHANIE Q. SCOTT, DIRECTOR OF FINANCIAL REPORTING, WORLDCOM, INC., 515 EAST
AMITE STREET, JACKSON, MISSISSIPPI 39201-2702; TELEPHONE NUMBER (601) 360-8600.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in the section entitled "The Company," and
certain statements incorporated by reference from documents filed with the
Commission by the Company, 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.
3
<PAGE> 14
THE COMPANY
WorldCom, a Georgia corporation, is one of the four largest long distance
telecommunications companies in the United States based on 1995 revenues. 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, with service to points throughout the nation and the world.
WorldCom's principal executive offices are located at 515 East Amite
Street, Jackson, Mississippi 39201-2702, and its telephone number is (601)
360-8600.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the net
proceeds from the sale of the Debt Securities will be used for general corporate
purposes, which may include the repayment of indebtedness, acquisitions,
additions to working capital, and capital expenditures.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
each of the five years ended December 31, 1996, which ratios are based on the
historical consolidated financial statements of WorldCom. The table also sets
forth the pro forma combined data for the year ended December 31, 1996, which
data gives effect to the merger with MFS on December 31, 1996 (the "MFS Merger")
and MFS' acquisition of UUNET on August 12, 1996 as if such transactions had
occurred January 1, 1996. The pro forma combined data are presented for
comparative purposes only and are not intended to be indicative of actual
results had the transactions occurred as of the date indicated above nor do they
purport to indicate results which may be attained in the future.
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------------
YEARS ENDED DECEMBER 31,
-------------------------------------------------
1992 1993 1994 1995 1996
------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges............ 1.47:1 5.10:1 0.15:1 2.59:1 N/A
Deficiency of Earnings to Fixed Charges
(in thousands).............................. -- -- 52,597 -- 2,066,991
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED
------------------
YEAR ENDED
DECEMBER 31,
1996
------------------
<S> <C>
Ratio of Earnings to Fixed Charges.......................... N/A
Deficiency of Earnings to Fixed Charges (in thousands)...... 2,754,007
</TABLE>
NOTES TO COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
(1) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of income (loss) from continuing operations, and fixed
charges consist of pre-tax interest (including capitalized interest) on all
indebtedness, amortization of debt discount and expense and that portion of
rental expense which the Company believes to be representative of interest.
For the historical years ended December 31, 1994 and 1996 and the pro forma
combined period ended December 31, 1996, earnings were inadequate to cover
fixed charges by the amounts shown.
(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 million
for employee severance, employee compensation charges, alignment charges,
and costs to exit unfavorable telecommunications contracts and a $344
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.
4
<PAGE> 15
DESCRIPTION OF DEBT SECURITIES
The following description of the Debt Securities sets forth certain general
terms and provisions of the Indentures under which the Debt Securities are to be
issued. The particular terms of each issue of Debt Securities, as well as any
modifications or additions to such general terms that may apply in the case of
such Debt Securities, will be described in the Prospectus Supplement relating to
such Debt Securities. Accordingly, for a description of the terms of a
particular issue of Debt Securities, reference must be made to both the
Prospectus Supplement relating thereto and to the following description.
THE INDENTURES
Senior Securities, if issued in the future, will be issued under an
Indenture (the "Senior Indenture") between the Company and one or more trustees
to be selected by the Company (collectively, the "Senior Trustee"). Subordinated
Securities, if issued in the future, will be issued under an Indenture (the
"Subordinated Indenture") between the Company and one or more trustees to be
selected by the Company (the "Subordinated Trustee"). The Senior Indenture and
the Subordinated Indenture are sometimes referred to herein collectively as the
"Indentures" and individually as an "Indenture." The Senior Trustee and the
Subordinated Trustee are sometimes referred to herein as the "Trustee."
The Indentures have been filed as exhibits to the Registration Statement of
which this Prospectus is a part. Each Indenture will be available for inspection
at the offices of the Trustee. The following description of the Indentures and
summaries of certain provisions thereof do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all provisions
of the respective Indentures. All section references appearing herein are to
sections of the applicable Indenture or Indentures, and capitalized terms
defined in the Indentures are used herein as therein defined (unless otherwise
defined herein).
GENERAL TERMS OF DEBT SECURITIES
Each Indenture provides that the Debt Securities issued thereunder may be
issued without limit as to aggregate principal amount, in one or more series, in
each case as established from time to time in or pursuant to authority granted
by a resolution of the Board of Directors of the Company or as established in
one or more indentures supplemental to such Indenture (Section 301 of the
Indentures). Each Indenture also provides that there may be more than one
Trustee under such Indenture, each with respect to one or more series of Debt
Securities. Any Trustee under either Indenture may resign or be removed with
respect to one or more series of Debt Securities issued under such Indenture,
and a successor Trustee may be appointed to act with respect to such series
(Section 608 of the Indentures).
In the event that two or more persons are acting as Trustee with respect to
different series of Debt Securities issued under the same Indenture, each such
Trustee shall be a Trustee of a trust under such Indenture separate and apart
from the trust administered by any other such Trustee (Section 609 of the
Indentures), and, except as otherwise indicated herein, any action described
herein to be taken by the Trustee may be taken by each such Trustee with respect
to, and only with respect to, the one or more series of Debt Securities for
which it is Trustee under such Indenture.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities to be offered for the following terms thereof: (1) the title of
such Debt Securities; (2) any limit on the aggregate principal amount of such
Debt Securities; (3) the purchase price of such Debt Securities (expressed as a
percentage of the principal amount); (4) the date or dates, or the method for
determining such date or dates, on which the principal (and premium, if any) of
such Debt Securities will be payable; (5) the rate or rates (which may be fixed
or variable), or the method by which such rate or rates shall be determined, at
which such Debt Securities will bear interest, if any; (6) the date or dates
from which any such interest will accrue, the Interest Payment Dates on which
any such interest will be payable, the Regular Record Dates for the interest
payable on any registered Security on such Interest Payment Dates, and the basis
upon which interest shall be calculated if other than that of a 360 day year of
twelve 30-day months; (7) the place or places where the
5
<PAGE> 16
principal of (and premium, if any) and interest, if any, on such Debt Securities
will be payable and such Debt Securities may be surrendered for registration of
transfer or exchange; (8) the period or periods within which, the price or
prices at which and the terms and conditions upon which such Debt Securities may
be redeemed, as a whole or in part, at the option of the Company, if the Company
is to have such an option; (9) the obligation, if any, of the Company to redeem
or purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a Holder thereof, and the period or periods within
which, the price or prices at which and the terms and conditions upon which such
Debt Securities will be redeemed or purchased, as a whole or in part, pursuant
to such obligation; (10) if other than U.S. dollars, the currency or currencies
in which such Debt Securities are denominated and payable, which may be a
foreign currency or units of two or more foreign currencies or a composite
currency or currencies, and the terms and conditions relating thereto; (11)
whether the amount of payments of principal of (and premium, if any) or
interest, if any, on such Debt Securities may be determined with reference to an
index, formula or other method (which index, formula or method may, but need not
be, based on a currency, currencies, currency unit or units or composite
currency or currencies) and the manner in which such amounts shall be
determined; (12) any additions, modifications or deletions in the terms of such
Debt Securities with respect to the Events of Default set forth in the
respective Indentures; (13) any additions, modifications or deletions in the
terms of such Debt Securities with respect to the other covenants set forth in
the respective Indentures; (14) whether such Debt Securities will be issued in
certificated or book-entry form; (15) whether such Debt Securities will be in
registered or bearer form and, if in registered form, the denominations thereof
if other than $1,000 or any integral multiple thereof and, if in bearer form,
the denominations thereof if other than $5,000 or any integral multiple thereof;
and (16) any other terms of such Debt Securities not inconsistent with the
provisions of the respective Indentures (Section 301 of the Indentures).
Debt Securities may be issued under the Indentures as Original Issue
Discount Securities to be offered and sold at a substantial discount from the
principal amount thereof. Special U.S. federal income tax, accounting and other
considerations applicable thereto will be described in the applicable Prospectus
Supplement.
Unless otherwise provided with respect to a series of Debt Securities, the
Debt Securities (other than those issued in global form) will be issued in
registered form in denominations of $1,000 and integral multiples thereof or in
bearer form in a denomination of $5,000 (Section 302 of the Indentures).
CERTIFICATED SECURITIES
Except as may be set forth in the applicable Prospectus Supplement, Debt
Securities will not be issued in certificated form. If, however, Debt Securities
are to be issued in certificated form, no service charge will be made for any
transfer or exchange of any Debt Securities, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith (Section 305 of the Indentures).
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (each, a "Global Security") that will be
deposited with, or on behalf of, a depository identified in the Prospectus
Supplement. Global Securities may be issued in either registered or bearer form
and in either temporary or permanent form. Unless otherwise provided in the
Prospectus Supplement, Debt Securities that are represented by a Global Security
will be issued in denominations of $1,000 and any integral multiple thereof, and
will be issued in registered form only, without coupons. Payments of principal
of, premium, if any, and interest on Debt Securities represented by a Global
Security will be made by the Company to the Trustee under the applicable
Indenture, and then forwarded to the depository.
The Company anticipates that any Global Securities will be deposited with,
or on behalf of, The Depository Trust Company, New York, New York ("DTC"), that
such Global Securities will be registered in the name of DTC's nominee, and that
the following provisions will apply to the depository arrangements with respect
to any such Global Securities. Additional or differing terms of the depository
arrangements will be
6
<PAGE> 17
described in the Prospectus Supplement relating to a particular series of Debt
Securities issued in the form of Global Securities.
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 Debt Securities 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 Debt Securities
represented by such Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Debt Securities 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 Company will
issue individual Debt Securities in certificated form in exchange for the Global
Securities. In addition, the Company may at any time, and in its sole
discretion, determine not to have any Debt Securities represented by one or more
Global Securities, and, in such event, will issue individual Debt Securities 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 Debt Securities in certificated form
of like tenor and rank, equal in principal amount to such beneficial interest
and to have such Debt Securities in certificated form registered in its name.
Unless otherwise provided in the Prospectus Supplement, Debt Securities 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 Debt Securities. The
Debt Securities will be issued as fully registered securities registered in
the name of Cede & Co. (DTC's partnership nominee). One fully registered
Debt Security certificate is issued with respect to each $200 million of
principal amount of the Debt Securities 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.
7
<PAGE> 18
Purchases of Debt Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Debt
Securities on DTC's records. The ownership interest of each actual
purchaser of each Debt Security ("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 Debt Securities
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 Debt Securities, except in the
event that use of the book-entry system for the Debt Securities is
discontinued.
To facilitate subsequent transfers, the Debt Securities are registered
in the name of DTC's partnership nominee, Cede & Co. The deposit of the
Debt Securities 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 Debt Securities; DTC records reflect only
the identity of the Direct Participants to whose accounts Debt Securities
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.
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
Debt Securities 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 Debt
Securities. 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 Debt Securities are credited on
the record date (identified on a list attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on the Debt
Securities 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 Debt Securities 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, Debt
Security 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, Debt Security certificates will be printed and delivered.
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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 be
reliable, but the Company takes no responsibility for the accuracy thereof.
Unless stated otherwise in the Prospectus Supplement, the underwriters or
agents with respect to a series of Debt Securities issued as Global Securities
will be Direct Participants in DTC.
None of the Company, any underwriter or agent, the applicable 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.
MERGER
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 Debt Securities and the performance and observance
of all the covenants and conditions of the applicable Indenture; and (b) the
Company or such successor corporation shall not immediately thereafter be in
default under the applicable 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 Debt
Securities 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 Debt Securities, 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 (Section 1004 of
the Indentures).
"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.
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"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 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
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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.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Senior Indenture. The Senior Indenture provides that, except as may be
provided with respect to any particular series of Debt Securities, the following
events are Events of Default with respect to any series of Debt Securities
issued thereunder: (a) default for 30 days in the payment of any installment of
interest on any Debt Security of such series; (b) default in the payment of the
principal of (or premium, if any, on) any Debt Security of such series at its
Maturity; (c) default in making a sinking fund payment required for any Debt
Security of such series; (d) default in the performance of any other covenant of
the Company in the Senior Indenture (other than a covenant included in the
Senior Indenture solely for the benefit of a series of Debt Securities issued
thereunder other than such series), continued for 60 days after written notice
as provided in the Senior 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 Debt Securities 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 Debt Securities (Section 501 of the Senior Indenture).
The Senior Trustee may withhold notice to the Holders of any series of Debt
Securities 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 Debt
Security of such series or in the payment of any sinking fund installment in
respect of any Debt Security of such series) if the Responsible Officers of the
Senior Trustee consider such withholding to be in the interest of such Holders
(Section 601 of the Senior Indenture).
If an Event of Default under the Senior Indenture with respect to Debt
Securities of any series issued thereunder at the time Outstanding occurs and is
continuing, then in every such case the Senior Trustee or the Holders of not
less than 25% in principal amount of the Outstanding Debt Securities of that
series may declare the principal amount (or, if the Debt Securities of that
series are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms thereof) of all of the Debt Securities
of that series to be due and payable immediately by written notice thereof to
the Company (and to the Senior Trustee if given by the Holders). However, at any
time after such a declaration of acceleration with respect to Debt Securities of
such series (or of all Debt Securities then Outstanding under the Senior
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 Senior Trustee prior to
the Stated Maturity thereof, the Holders of a majority in principal amount of
Outstanding Debt Securities of such series (or of all Debt Securities then
Outstanding under the Senior Indenture, as the case may be) 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
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respect to Debt Securities of such series (or of all Debt Securities then
Outstanding under the Senior Indenture, as the case may be) have been cured or
waived as provided in the Senior Indenture (Section 502 of the Senior
Indenture). The Senior Indenture also provides that the Holders of not less than
a majority in principal amount of the Outstanding Debt Securities of any series
issued thereunder (or of all Debt Securities then Outstanding under the Senior
Indenture, as the case may be) may waive certain past defaults with respect to
such series and its consequences (Section 513 of the Senior Indenture).
Reference is made to the Prospectus Supplement relating to any series of Debt
Securities issued under the Senior Indenture which are Original Issue Discount
Securities for the particular provisions relating to acceleration of a portion
of the principal amount of such Original Issue Discount Securities upon the
occurrence of an Event of Default and the continuation thereof. Within 120 days
after the close of each fiscal year, the Company must file with the Senior
Trustee a statement, signed by specified officers, stating whether or not such
officers have knowledge of any default under the Senior Indenture and, if so,
specifying each such default and the nature and status thereof (Section 1006 of
the Senior Indenture).
Subject to provisions in the Senior Indenture relating to its duties in
case of default, the Senior Trustee is under no obligation to exercise any of
its rights or powers under the Senior Indenture at the request or direction of
any Holders of any series of Debt Securities then Outstanding under the Senior
Indenture, unless such Holders shall have offered to the Senior Trustee
reasonable security or indemnity (Section 602 of the Senior Indenture). Subject
to such provisions for indemnification and certain limitations contained in the
Senior Indenture, the Holders of not less than a majority in principal amount of
the Outstanding Debt Securities of any series issued thereunder (or of all Debt
Securities then Outstanding under the Senior 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 Senior Trustee, or of exercising any
trust or power conferred upon the Senior Trustee (Section 512 of the Senior
Indenture).
Subordinated Indenture. The Subordinated Indenture provides that, except as
may be provided with respect to any particular series of Debt Securities, the
following events are Events of Default with respect to any series of Debt
Securities issued thereunder: (a) default for 30 days in the payment of any
installment of interest on any Debt Security of such series; (b) default in the
payment of the principal of (or premium, if any, on) any Debt Security of such
series at its Maturity; (c) default in making a sinking fund payment required
for any Debt Security of such series; (d) default in the performance of any
other covenant of the Company in the Subordinated Indenture (other than a
covenant included in the Subordinated Indenture solely for the benefit of a
series of Debt Securities issued thereunder other than such series), continued
for 60 days after written notice as provided in the Subordinated 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 Debt Securities 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 relating to the 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 Debt Securities
(Section 501 of the Subordinated Indenture).
As with the Senior Indenture, the Subordinated Trustee may withhold notice
to the Holders of any series of Debt Securities issued under the Subordinated
Indenture 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 Debt
Security of such series or in the payment of any sinking fund installment in
respect of any Debt Security of such series) if the Responsible Officers of the
Subordinated Trustee consider such withholding to be in the interest of such
Holders (Section 601 of the Subordinated Indenture).
If an Event of Default under the Subordinated Indenture with respect to
Debt Securities of any series issued thereunder at the time outstanding occurs
and is continuing, then in every such case the Subordinated Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Debt
Securities of that series may declare the principal amount (or, if the Debt
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount as may be specified in the terms thereof) of all of the
Debt
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Securities of that series to be due and payable immediately by written notice
thereof to the Company (and to the Subordinated Trustee if given by the
Holders). However, at any time after such a declaration of acceleration with
respect to Debt Securities of such series (or of all Debt Securities then
Outstanding under the Subordinated 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 Subordinated Trustee prior to the Stated Maturity thereof, the Holders of
a majority in principal amount of Outstanding Debt Securities of such series (or
of all Debt Securities then Outstanding under the Subordinated Indenture, as the
case may be) may, subject to certain conditions, rescind and annul such
acceleration if all Events of Default, other than the non-payment of accelerated
principal (on specified portion thereof), with respect to Debt Securities of
such series (or of all Debt Securities then Outstanding under the Subordinated
Indenture, as the case may be) have been cured or waived as provided in such
Indenture (Section 502 of the Subordinated Indenture). The Subordinated
Indenture also provides that the Holders of not less than a majority in
principal amount of the Outstanding Debt Securities of such series issued
thereunder (or of all Debt Securities then Outstanding under the Subordinated
Indenture, as the case may be) may waive certain past defaults with respect to
such series and its consequences (Section 513 of the Subordinated Indenture).
Reference is made to the Prospectus Supplement relating to any series of Debt
Securities issued under the Subordinated Indenture which are Original Issue
Discount Securities for the particular provisions relating to acceleration of a
portion of the principal amount of such Original Issue Discount Securities upon
the occurrence of an Event of Default and the continuation thereof. Within 120
days after the close of each fiscal year, the Company must file with the
Subordinated Trustee a statement, signed by specified officers, stating whether
or not such officers have knowledge of any default under the Subordinated
Indenture and, if so, specifying each such default and the nature and status
thereof (Section 1004 of the Subordinated Indenture).
Subject to provisions in the Subordinated Indenture relating to its duties
in case of default, the Subordinated Trustee is under no obligation to exercise
any of its rights or powers under the Subordinated Indenture at the request or
direction of any Holders of any series of Debt Securities then Outstanding under
the Subordinated Indenture, unless such Holders shall have offered to the
Subordinated Trustee reasonable security or indemnity (Section 602 of the
Subordinated Indenture). Subject to such provisions for indemnification and
certain limitations contained in the Subordinated Indenture, the Holders of not
less than a majority in principal amount of the Outstanding Debt Securities of
any series issued thereunder (or of all Debt Securities then Outstanding under
the Subordinated 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 Subordinated Trustee, or of exercising any trust or power conferred upon
the Subordinated Trustee (Section 512 of the Subordinated Indenture).
MODIFICATION OF THE INDENTURES
Senior Indentures. Modifications and amendments of the Senior Indenture may
be made only with the consent of the Holders of not less than a majority in
aggregate principal amount of all Outstanding Debt Securities under the Senior
Indenture which are affected by the modifications or amendment; provided that no
such modification or amendment may, without the consent of the Holder of each
such Debt Security affected thereby, (a) change the Stated Maturity of the
principal of (or premium, if any, on), or any installment of interest on, any
such Debt Security; (b) reduce the principal amount of, or the rate or amount of
interest on, or any premium payable on redemption of, any such Debt Security, or
reduce the amount of principal of an Original Issue Discount Security that would
be due and payable upon declaration of acceleration of the Maturity thereof or
would be provable in bankruptcy, or adversely affect any right of repayment of
the Holder of any such Debt Security; (c) change the Place of Payment, or the
coin or currency, for payment of principal of, premium, if any, or interest on
any such Debt Security; (d) impair the right to institute suit for the
enforcement of any payment on or with respect to any such Debt Security; or (e)
reduce the above-stated percentage of Outstanding Debt Securities of any series
necessary to modify or amend the Senior Indenture or to waive compliance with
certain provisions thereof or certain defaults and consequences thereunder
(Section 902 of the Senior Indenture). The Senior Indenture also contains
provisions permitting the Company and the Senior Trustee to amend the Senior
Indenture without the consent of the holders of any Senior Securities in certain
limited circumstances, such as to evidence the succession of another entity to
the
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Company and the assumption by such successor of the covenants of the Company
contained in the Senior Indenture, to secure the Securities and to cure any
ambiguity, to correct or supplement any provision in the Senior Indenture which
may be inconsistent with any other provision of the Senior Indenture (Section
901 of the Senior Indenture).
Subordinated Indenture. Modifications and amendments of the Subordinated
Indenture may be made only with the consent of the Holders of not less than a
majority in aggregate principal amount of all Outstanding Debt Securities under
the Subordinated Indenture which are affected by the modifications or amendment;
provided that no such modification or amendment may, without the consent of the
Holder of each such Debt Security affected thereby, (a) change the Stated
Maturity of the principal of (or premium if any, on), or any installment of
interest on, any such Debt Security; (b) reduce the principal amount of, or the
rate or amount of interest on, or any premium payable on redemption of, any such
Debt Security, or reduce the amount of principal of an Original Issue Discount
Security that would be due and payable upon declaration of acceleration of the
Maturity thereof or would be provable in bankruptcy, or adversely affect any
right of repayment of the Holder of any such Debt Security; (c) change the Place
of Payment, or the coin or currency, for payment of principal of, premium, if
any, or interest on any such Debt Security; (d) impair the right to institute
suit for the enforcement of any payment on or with respect to any such Debt
Security; (e) reduce the above-stated percentage of Outstanding Debt Securities
of any series necessary to modify or amend the Subordinated Indenture or to
waive compliance with certain provisions thereof or certain defaults and
consequences thereunder; or (f) subordinate the indebtedness evidenced by any
such Debt Security to any indebtedness of the Company other than Senior
Indebtedness (as defined in the Subordinated Indenture) (Section 902 of the
Subordinated Indenture). The Subordinated Indenture also contains provisions
permitting the Company and the Subordinated Trustee to amend the Subordinated
Indenture without the consent of the holders of any Subordinated Securities in
certain limited circumstances, such as to evidence the succession of another
entity to the Company and the assumption by such successor of the covenants of
the Company contained in the Subordinated Indenture, to secure the Securities
and to cure any ambiguity, to correct or supplement any provision in the
Subordinated Indenture which may be inconsistent with any other provision of the
Subordinated Indenture (Section 901 of the Subordinated Indentures).
DEFEASANCE AND COVENANT DEFEASANCE
The Indentures provide that, unless the provisions of Article Fourteen
thereof are made inapplicable to the Debt Securities of or within any series and
any related coupons pursuant to Section 301 of either Indenture, the Company may
elect either (a) to defease and be discharged from any and all obligations with
respect to such Debt Securities and any related coupons (except for the
obligation to pay Additional Amounts, if any, upon the occurrence of certain
events of tax, assessment or governmental charge with respect to payments on
such Debt Securities and the obligations to register the transfer or exchange of
such Debt Securities and any related coupons, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities and any related coupons, to maintain
an office or agency in respect of such Debt Securities and any related coupons
and to hold moneys for payment in trust) ("defeasance") (Section 1402 of the
Indentures) or (b) to be released from its obligations with respect to any
covenant, and any omission to comply with such obligations shall not constitute
a default or an Event of Default with respect to such Debt Securities and any
related coupons ("covenant defeasance") (Section 1403 of the Indentures), in
either case upon the irrevocable deposit by the Company with the relevant
Trustee (or other qualifying trustee), in trust, of an amount, in such currency
or currencies, currency unit or units or composite currency or currencies in
which such Debt Securities and any related coupons are then specified as payable
at Stated Maturity, or Government Obligations (as defined below), or both,
applicable to such Debt Securities and any related coupons (with such
applicability being determined on the basis of the currency, currency unit or
composite currency in which such Debt Securities are then specified as payable
at Stated Maturity) which through the payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium, if any) and interest, if any, on such Debt
Securities and any related coupons, and any mandatory sinking fund or analogous
payments thereon, on the scheduled due dates therefor.
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Such a trust may only be established if, among other things, the Company
has delivered to the relevant Trustee an Opinion of Counsel (as specified in the
Indentures) to the effect that the Holders of such Debt Securities and any
related coupons will not recognize income, gain or loss for U.S. federal income
tax purposes as a result of such defeasance or covenant defeasance and will be
subject to U.S. 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 had not occurred, and such Opinion of Counsel, in the case of
defeasance under clause (a) above, must refer to and be based upon a ruling of
the Internal Revenue Service or a change in applicable United States federal
income tax law occurring after the date of the Indenture (Section 1404 of the
Indentures).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a Person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or such government which issued the foreign
currency in which the Debt Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt; provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt (Section 101 of the Indentures).
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(a) the Holder of a Debt Security of such series is entitled to, and does, elect
pursuant to the terms of such Debt Security to receive payment in a currency,
currency unit or composite currency other than that in which such deposit has
been made in respect of such Debt Security, or (b) the currency, currency unit
or composite currency in which such deposit has been made in respect of any Debt
Security of such series ceases to be used by its government of issuance, the
indebtedness represented by such Debt Security shall be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium, if any) and interest, if any, on such Debt Security as they become
due out of the proceeds yielded by converting the amount so deposited in respect
of such Debt Security into the currency, currency unit or composite currency in
which such Debt Security becomes payable as a result of such election or such
cessation of usage based on the applicable Market Exchange Rate (Section 1405 of
the Indentures). Unless otherwise provided in the applicable Prospectus
Supplement, all payments of principal of (and premium, if any) and interest, if
any, and Additional Amounts, if any, on any Debt Security that is payable in a
foreign currency, currency unit or composite currency that ceases to be used by
its government of issuance shall be made in U.S. dollars (Section 312 of the
Indentures).
In the event the Company effects covenant defeasance with respect to any
Debt Securities and any related coupons and such Debt Securities and any related
coupons are declared due and payable because of the occurrence of any Event of
Default other than the Events of Default described in clauses (d) and (g) under
"Events of Default, Notice and Waiver -- Senior Indenture" and in clauses (d)
and (g) under "Events of Default, Notice and Waiver -- Subordinated Indenture,"
the amount in such currency, currency unit or composite currency in which such
Debt Securities and any related coupons are payable, and Government Obligations
on deposit with the relevant Trustee, will be sufficient to pay amounts due on
such Debt Securities and any related coupons at the time of their Stated
Maturity but may not be sufficient to pay amounts due on such Debt Securities
and any related coupons at the time of the acceleration resulting from such
Event of Default. However, the Company would remain liable to make payment of
such amounts due at the time of acceleration.
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The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series and any related coupons.
SENIOR SECURITIES
Senior Securities are to be issued under the Senior Indenture. Each series
of Senior Securities will constitute Senior Indebtedness and will rank equally
with each other series of Senior Securities and other Senior Indebtedness. All
subordinated debt (including, but not limited to, all Subordinated Securities
issued under the Subordinated Indenture) will be subordinated to the Senior
Securities and other Senior Indebtedness.
SUBORDINATION OF SUBORDINATED SECURITIES
Subordinated Indenture. The payment of the principal of (and premium, if
any) and interest on the Subordinated Securities will be subordinated as set
forth in the Subordinated Indenture to the Senior Indebtedness of the Company,
whether outstanding on the date of the Subordinated Indenture or thereafter
incurred (Section 1601 of the Subordinated Indenture). The applicable Prospectus
Supplement for each issuance of Subordinated Securities will set forth the
aggregate amount of outstanding indebtedness of the Company as of the most
recent practicable date that by the terms of such indebtedness would be senior
to and pari passu to the offered Subordinated Securities.
Ranking. No class of Subordinated Securities is subordinated to any other
class of subordinated debt securities. See "Subordination Provisions" below.
Subordination Provisions. In the event (a) of any distribution of assets of
the Company upon any dissolution, winding up, liquidation or reorganization of
the Company, whether in bankruptcy, insolvency, reorganization or receivership
proceedings or upon an assignment for the benefit of creditors or any other
marshalling of the assets and liabilities of the Company or otherwise, except a
distribution in connection with a merger or consolidation or a conveyance or
transfer of all or substantially all of the properties of the Company which
complies with the requirements of Article Eight of the Subordinated Indenture,
or (b) that a default shall have occurred and be continuing with respect to the
payment of principal of (or premium, if any) or interest on any Senior
Indebtedness, or (c) that the principal of the Subordinated Securities of any
series issued under the Subordinated Indenture (or in the case of Original Issue
Discount Securities, the portion of the principal amount thereof referred to in
Section 502 of the Subordinated Indenture) shall have been declared due and
payable pursuant to Section 502 of the Subordinated Indenture, and such
declaration shall not have been rescinded and annulled as provided in said
Section 502, then:
(1) in a circumstance described in the foregoing clause (a) or (b) the
holders of all Senior Indebtedness, and in the circumstance described in
the foregoing clause (c) the holders of all Senior Indebtedness outstanding
at the time the principal of such Subordinated Securities issued under the
Subordinated Indenture (or in the case of Original Issue Discount
Securities, such portion of the principal amount) shall have been so
declared due and payable, shall first be entitled to receive payment of the
full amount due thereon in respect of principal, premium (if any) and
interest, or provision shall be made for such payment in money or money's
worth, before the Holders of any of the Subordinated Securities are
entitled to receive any payment on account of the principal of (or premium,
if any) or interest on the indebtedness evidenced by the Subordinated
Securities;
(2) if upon any payment or distribution contemplated in clause (1)
after giving effect to the subordination provisions contemplated therein
there shall remain any amounts of cash, property or securities of the
Company available for payment or distribution in respect of Subordinated
Securities, then the amount of such cash, property or securities shall be
shared ratably among the Holders of all Subordinated Securities issued
under the Subordinated Indenture and any subordinated indebtedness ranking
on a parity therewith;
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(3) any payment by, or distribution of assets of, the Company of any
kind or character, whether in cash, property or securities (other than
certain subordinated securities of the Company issued in a reorganization
or readjustment), to which the Holders of any of the Subordinated
Securities would be entitled except for the provisions of Article Sixteen
of the Subordinated Indenture shall be paid or delivered by the person
making such payment or distribution directly to the holders of Senior
Indebtedness (as provided in clauses (1) and (2) above), or their
representatives on their behalf, ratably according to the aggregate amounts
remaining unpaid on account of such Senior Indebtedness, to the extent
necessary to make payment in full of all Senior Indebtedness (as provided
in clauses (1) and (2) above) remaining unpaid after giving effect to any
concurrent payment or distribution (or provision therefor) to the holders
of such Senior Indebtedness, before any payment or distribution is made to
the Holders of the Subordinated Securities; and
(4) in the event that, notwithstanding the foregoing, any payment by,
or distribution of assets of, the Company of any kind or character is
received by the Holders of any of the Subordinated Securities issued under
the Subordinated Indenture before all Senior Indebtedness is paid in full,
such payment or distribution shall be paid over to the holders of such
Senior Indebtedness or their representatives on their behalf, ratably as
aforesaid, for application to the payment of all such Senior Indebtedness
remaining unpaid until all such Senior Indebtedness shall have been paid in
full, after giving effect to any concurrent payment or distribution (or
provision therefor) to the holders of such Senior Indebtedness.
By reason of such subordination in favor of the holders of Senior
Indebtedness in the event of insolvency of the Company, certain general
creditors of the Company, including holders of Senior Indebtedness, may recover
more, ratably, than the Holders of the Subordinated Securities upon such
insolvency.
DESIGNATION OF SENIOR INDEBTEDNESS
Senior Indebtedness is defined in the Subordinated Indenture to mean (i)
the principal of and premium, if any, and unpaid interest on indebtedness for
money borrowed, (ii) purchase money and similar obligations, (iii) obligations
under capital leases, (iv) guarantees, assumptions or purchase commitments
relating to, or other transactions as a result of which the Company is
responsible for the payment of, such indebtedness of others, (v) renewals,
extensions and refunding of any such indebtedness, (vi) interest or obligations
in respect of any such indebtedness accruing after the commencement of any
insolvency or bankruptcy proceedings; and (vii) obligations associated with
derivative products such as interest rate and currency exchange contracts,
foreign exchange contracts, commodity contracts, and similar arrangements,
unless, in each case, the instrument by which the Company incurred, assumed or
guaranteed the indebtedness or obligations described in clauses (i) through
(vii) hereof expressly provides that such indebtedness or obligation is
subordinate or junior in right of payment to any other indebtedness or
obligations of the Company. (Section 101 of the Subordinated Indenture).
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities in or outside the United States
through underwriters, through or to dealers, directly to one or more purchasers,
or through agents. The Prospectus Supplement with respect to the Debt Securities
offered hereby will set forth the terms of the offering of the Debt Securities,
including the name or names of any underwriters, dealers, or agents, the
purchase price of the Debt Securities and the proceeds to the Company from such
sale, any delayed delivery arrangements, any underwriting discounts and other
items constituting underwriters' compensation, the initial public offering
price, any discounts or concessions allowed or re-allowed or paid to dealers,
and any securities exchanges on which the Debt Securities may be listed.
If underwriters are used in the sale, the Debt Securities will be acquired
by the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The Debt
Securities may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The underwriter or underwriters with respect to a
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particular underwritten offering of Debt Securities will be named in the
Prospectus Supplement relating to such offering, and if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth on
the cover of such Prospectus Supplement. Unless otherwise set forth in the
Prospectus Supplement relating thereto, the obligations of the underwriters or
agents to purchase the Debt Securities will be subject to conditions precedent
and the underwriters will be obligated to purchase all the Debt Securities if
any are purchased. The initial public offering price and any discounts or
concessions allowed or re-allowed or paid to dealers may be changed from time to
time.
If dealers are used in the sale of Debt Securities with respect to which
this Prospectus is delivered, the Company will sell such Debt Securities to the
dealers as principals. The dealers may then resell such Debt Securities to the
public at varying prices to be determined by such dealers at the time of resale.
The names of the dealers and the terms of the transaction will be set forth in
the Prospectus Supplement relating thereto.
Debt Securities may be sold directly by the Company or through agents
designated by the Company from time to time at fixed prices, which may be
changed, or at varying prices determined at the time of sale. Any agent involved
in the offer or sale of the Debt Securities with respect to which this
Prospectus is delivered will be named, and any commissions payable by the
Company to such agent will be set forth, in the Prospectus Supplement relating
thereto. Unless otherwise indicated in the Prospectus Supplement, any such agent
will be acting on a best efforts basis for the period of its appointment.
In connection with the sale of the Debt Securities, underwriters or agents
may receive compensation from the Company or from purchasers of Debt Securities
for whom they may act as agents in the form of discounts, concessions, or
commissions. Underwriters, agents, and dealers participating in the distribution
of the Debt Securities may be deemed to be underwriters, and any discounts or
commissions received by them from the Company and any profit on the resale of
the Debt Securities by them may be deemed to be underwriting discounts or
commissions under the Securities Act.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters, or dealers to solicit offers from certain types of
institutions to purchase Debt Securities from the Company at the public offering
price set forth in the Prospectus Supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the future.
Such contracts will be subject only to those conditions set forth in the
Prospectus Supplement, and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.
Agents, dealers, and underwriters may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments that such agents, dealers, or underwriters may be
required to make with respect thereto. Agents, dealers, and underwriters may be
customers of, engage in transactions with, or perform services for the Company
in the ordinary course of business.
The Debt Securities may or may not be listed on a national securities
exchange. No assurances can be given that there will be a market for the Debt
Securities.
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
When so provided in the Prospectus Supplement, investors in the Global
Securities representing any of the Debt Securities issued hereunder may hold a
beneficial interest in such Global Securities through DTC, CEDEL or Euroclear
(as defined below) or through participants. The Global Securities may be traded
as home market instruments in both the European and U.S. domestic markets.
Initial settlement and all secondary trades will settle as set forth in the
applicable Prospectus Supplement.
Cedel Bank societe anonyme ("CEDEL") is incorporated under the laws of
Luxembourg as a professional depository. CEDEL holds securities for its
participating organizations and facilitates the clearance and settlement of
securities transactions between CEDEL participants through electronic book-entry
changes in accounts of CEDEL participants, thereby eliminating the need for
physical movement of certificates. Transactions may be settled in CEDEL in any
of 28 currencies, including United States dollars.
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CEDEL provides to its participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. CEDEL interfaces with domestic
markets in several countries. As a professional depository, CEDEL is subject to
regulation by the Luxembourg Monetary Institute. CEDEL participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include the underwriters named in any
Prospectus Supplement. Indirect access to CEDEL is also available to others,
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a CEDEL participant, either directly or
indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System and to clear and settle transactions
between Euroclear participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 32 currencies, including United
States dollars. The Euroclear System includes various other services, including
securities lending and borrowing, and interfaces with domestic markets in
several countries generally similar to the arrangements for cross-market
transfers with DTC. The Euroclear System is operated by Morgan Guaranty Trust
Company of New York, Brussels, Belgium office (the "Euroclear Operator" or
"Euroclear"), under contract with Euroclear Clearance System S.C., a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted by the
Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for the Euroclear System on
behalf of Euroclear participants. Euroclear participants include banks
(including central banks), securities brokers and dealers and other professional
financial intermediaries and may include the underwriters named in any
Prospectus Supplement. Indirect access to the Euroclear System is also available
to other firms that clear through or maintain a custodial relationship with a
Euroclear participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of Morgan Guaranty Trust
Company of New York ("Morgan") which is a member bank of the Federal Reserve
System. As such, it is regulated and examined by the Federal Reserve Board and
the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawals of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear participants, and has no record
of or relationship with persons holding through Euroclear participants.
Principal, premium, if any, and interest payments with respect to Debt
Securities held through CEDEL or Euroclear will be credited to the cash accounts
of CEDEL participants or Euroclear participants in accordance with the relevant
system's rules and procedures, to the extent received by its depository. Such
distributions will be subject to tax reporting in accordance with relevant
United States tax laws and regulations as described below. The CEDEL or the
Euroclear Operator, as the case may be, will take any other action permitted to
be taken by a holder under the relevant Indenture on behalf of a CEDEL
participant or Euroclear participant only in accordance with its relevant rules
and procedures and subject to its depository's ability to effect such actions on
its behalf through the depository.
INITIAL SETTLEMENT
All Global Securities will be registered in the name of Cede & Co. as
nominee of DTC. Investors' interests in the Global Securities will be
represented through financial institutions acting on their behalf as direct and
indirect participants in DTC. As a result, CEDEL and Euroclear will hold
positions on behalf of
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their participants through their respective depositories, Citibank and Morgan,
which in turn will hold such positions in accounts as participants of DTC.
Global Securities held through DTC will follow the settlement practices
described above. Investor securities custody accounts will be credited with
their holdings against payment on the settlement date. Global Securities held
through CEDEL or Euroclear accounts will follow the settlement procedures
applicable to conventional eurobonds, except that there will be no temporary
global security and no "lock-up" or restricted period. Global Securities will be
credited to the securities custody accounts on the settlement date against
payment.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
participants will be settled using the procedures described above.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL participants and/or Euroclear participants will be settled
using the procedures applicable to conventional eurobonds.
Trading between DTC Seller and CEDEL or Euroclear Purchaser. When
beneficial interests in the Global Securities are to be transferred from the
account of a DTC participant to the account of a CEDEL participant or a
Euroclear participant, the purchaser will send instructions to CEDEL or
Euroclear through a participant at least one business day prior to settlement.
CEDEL or Euroclear will instruct Citibank or Morgan, respectively, as the case
may be, to receive a beneficial interest in the Global Securities against
payment. Unless otherwise set forth in the Prospectus Supplement, payment will
include interest accrued on the beneficial interest in the Global Securities so
transferred from and including the last coupon payment date to and excluding the
settlement date, on the basis on which interest is calculated on the Debt
Securities. For transactions settling on the 31st of the month, payment will
include interest accrued to and excluding the first day of the following month.
Payment will then be made by Citibank or Morgan to the DTC participant's account
against delivery of the beneficial interest in the Global Securities. After
settlement has been completed, the beneficial interest in the Global Securities
will be credited to the respective clearing system and by the clearing system,
in accordance with its usual procedures, to the CEDEL or Euroclear participant's
account. The securities credit will appear the next day (European time) and the
cash debit will be back-valued to, and the interest on the beneficial interest
in Global Securities will accrue from, the value date (which would be the
preceding day when settlement occurred in New York). If settlement is not
completed on the intended value date (that is, the trade fails), the CEDEL or
Euroclear cash debit will be valued instead as of the actual settlement date.
CEDEL participants and Euroclear participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within CEDEL or Euroclear. Under this approach,
they may take on credit exposure to CEDEL or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, participants can elect not to preposition funds and allow that credit line
to be drawn upon to finance settlement. Under this procedure, CEDEL participants
or Euroclear participants purchasing beneficial interest in Global Securities
would incur overdraft charges for one day, assuming they cleared the overdraft
when the beneficial interests in the Global Securities were credited to their
accounts. However, interest on the beneficial interests in the Global Securities
would accrue from the value date. Therefore, in many cases the investment income
on the Global Securities earned during that one-day period may substantially
reduce or offset the amount of such overdraft charges, although this result will
depend on each participant's particular cost of funds.
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Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending a beneficial interest
in Global Securities to Citibank or Morgan for the benefit of CEDEL participants
or Euroclear participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC participant a cross-market transaction
will settle no differently than a trade between two DTC participants.
Trading between CEDEL or Euroclear Seller and DTC Purchaser. Due to time
zone differences in their favor, CEDEL and Euroclear participants may employ
their customary procedures to transactions in which the beneficial interest in
the Global Securities is to be transferred by the respective clearing system,
through Citibank or Morgan, to a DTC participant. The seller will send
instructions to CEDEL or Euroclear through a participant at least one business
day prior to settlement. In these cases, CEDEL or Euroclear will instruct
Citibank or Morgan, as appropriate, to deliver the beneficial interest in the
Global Securities to the DTC participant's account against payment. Payment will
include interest accrued on the beneficial interests in the Global Securities
from and including the last coupon payment date to and excluding the settlement
date on the basis on which interest is calculated on the Global Securities. For
transactions settling on the 31st of the month, payment will include interest
accrued to and excluding the first day of the following month. The payment will
then be reflected in the account of the CEDEL or Euroclear participant the
following day, and receipt of the cash proceeds in the CEDEL or Euroclear
participant's account would be back-valued to the value date (which would be the
preceding day, when settlement occurred in New York). Should the CEDEL or
Euroclear participant have a line of credit with its respective clearing system
and elect to be in debit in anticipation of receipt of the sale proceeds in its
account, the back-valuation will extinguish any overdraft charges incurred over
that one-day period. If settlement is not completed on the intended value date
(that is, the trade fails), receipt of the cash proceeds in the CEDEL or
Euroclear participant's account would instead be valued as of the actual
settlement date.
Finally, day traders that use CEDEL or Euroclear and that purchase
beneficial interests in Global Securities from DTC participants for credit to
CEDEL participants or Euroclear participants should note that these trades would
automatically fail on the sale side unless affirmative action were taken. At
least three techniques should be readily available to eliminate this potential
problem:
(1) borrowing through CEDEL or Euroclear for one day (until the
purchase side of the day trade is reflected in their CEDEL or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(2) borrowing beneficial interests in the Global Securities in the
U.S. from a DTC participant no later than one day prior to settlement,
which would give beneficial interests in the Global Securities sufficient
time to be reflected in the appropriate CEDEL or Euroclear account in order
to settle the sale side of the trade; or
(3) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC participant is at
least one day prior to the value date for the sale to the CEDEL participant
or Euroclear participant.
Although the DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of beneficial interests in Global
Securities among participants of the DTC, CEDEL and Euroclear, they are under no
obligation to perform or continue to perform such procedures and such procedures
may be discontinued at any time.
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CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities, directly or
indirectly, through CEDEL or Euroclear (or through DTC if the holder has an
address outside the U.S.) will be subject to the 30% U.S. withholding tax that
generally applies to payments of interest (including original issue discount) on
registered debt issued by U.S. persons, unless (i) each clearing system, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business in the chain of intermediaries between such
beneficial owner and the U.S. entity required to withhold tax complies with
applicable certification requirements, and (ii) such beneficial owner takes one
of the following steps to obtain an exemption or reduced tax rate:
Exemption for non-U.S. persons (Form W-8). Non-U.S. persons that are
beneficial owners (other than a beneficial owner that owns actually or
constructively 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote or a controlled foreign
corporation that is related to the Company through stock ownership) can
obtain a complete exemption from the withholding tax by filing a properly
completed Form W-8 (Certificate of Foreign Status).
Exemption for non-U.S. persons with effectively connected income (Form
4224). A non-U.S. person, including a non-U.S. corporation or bank with a
U.S. branch, that is a beneficial owner and for which the interest income
is effectively connected with its conduct of a trade or business in the
United States, can obtain an exemption from the withholding tax by filing a
properly completed Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. persons resident in treaty
countries (Form 1001). Non-U.S. persons that are beneficial owners that are
entitled to the benefits of an income tax treaty with the United States can
obtain an exemption or reduced tax rate (depending on the treaty terms) by
filing a properly completed Form 1001 (Ownership, Exemption or Reduced Rate
Certificate). If the treaty provides only for a reduced rate, withholding
tax will be imposed at that rate unless the filer alternatively files Form
W-8. Form 1001 may be filed by the beneficial owner or the beneficial
owner's agent.
Exemption for U.S. Persons (Form W-9). U.S. persons can obtain a
complete exemption from the withholding tax by filing a properly completed
Form W-9 (Request for Taxpayer Identification Number and Certification).
U.S. FEDERAL INCOME TAX REPORTING PROCEDURE
The beneficial owner of the Global Security or, in the case of a Form 1001
or a Form 4224 filer, his agent, files by submitting the appropriate form to the
entity through whom it directly holds the Global Security. For example, if the
beneficial owner is listed directly on the books of Euroclear or CEDEL as the
holder of the Debt Security, the IRS Form must be provided to Euroclear or
CEDEL, as the case may be. Each person through which a Debt Security is held
must submit, on behalf of the beneficial owner, the IRS Form (or in certain
cases a copy thereof) under applicable procedures to the person through which it
holds the Debt Security, until the IRS Form is received by the U.S. person who
would otherwise be required to withhold U.S. federal income tax from interest on
the Debt Security. For example, in the case of Debt Securities held through
Euroclear or CEDEL, the IRS Form (or a copy thereof) must be received by the
U.S. depositary of such clearing agency. Applicable procedures include, if a
beneficial owner of the Debt Security provides an IRS Form W-8 to a securities
clearing organization, bank or other financial institution (a "financial
institution") that holds the Debt Security in the ordinary course of its trade
or business on the owner's behalf, that such financial institution certify to
the person otherwise required to withhold U.S. federal income tax from such
interest, under penalties of perjury, that such statement has been received from
the beneficial owner by it or by a financial institution between it and the
beneficial owner and that it furnish the payor with a copy thereof.
As used in this section on tax documentation requirements and the following
section ("Additional U.S. Federal Tax Considerations for Non-U.S. Persons"), the
term "U.S. person" means (i) a citizen or
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resident of the United States, (ii) a corporation or partnership organized in or
under the laws of the United States or any State thereof, (iii) an estate the
income of which is subject to United States federal income taxation regardless
of its source, or (iv) a trust if (A) a U.S. court is able to exercise primary
supervision over the trust's administration and (B) one or more U.S. fiduciaries
have the authority to control all the trust's substantial decisions. The term
"United States" means the United States of America (including the States and the
District of Columbia).
ADDITIONAL U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. PERSONS
Any capital gain realized on the sale, exchange, redemption or other
disposition of Debt Securities by a non-U.S. person will not be subject to
United States federal income or withholding taxes unless, in the case of an
individual, such holder is present in the United States for 183 days or more in
the taxable year of the sale, exchange, redemption, or other disposition or
receipt and certain other conditions are met, or the gain is effectively
connected with a United States trade or business of the non-U.S. person.
Payments made on Debt Securities and proceeds from the sale of Debt
Securities received by a non-U.S. person will not be subject to a backup
withholding tax of 31% or to information reporting requirements unless, in
general, the holder fails to comply with certain reporting procedures or
otherwise fails to establish an exemption from such tax or reporting
requirements under applicable provisions of the Code. (See "Global Clearance,
Settlement and Tax Documentation Procedures -- Certain U.S. Federal Income Tax
Documentation Requirements").
On April 15, 1996, the Internal Revenue Service released proposed revisions
(the "Proposed Regulations") to the regulations interpreting the withholding
tax, information reporting and backup withholding tax rules described above. In
general, the Proposed Regulations would require certain non-U.S. persons to
provide additional information in order to establish an exemption from or reduce
the rate of withholding tax or backup withholding tax, and in particular would
require that foreign partnerships and partners of a foreign partnership provide
certain information and comply with certain certification requirements not
required under existing law. The Proposed Regulations are proposed generally to
be effective for payments made after December 31, 1997. It is not possible to
predict whether, or in what form, the Proposed Regulations ultimately will be
adopted.
Debt Securities will not be subject to United States federal estate tax as
a result of the death of a holder who is not a citizen or resident of the United
States at the time of death, unless such holder at the time of death actually or
constructively owns 10% or more of the combined voting power of all classes of
stock of the Company or, at the time of such holder's death, payments of
interest on such Debt Securities are effectively connected with the conduct by
such holder of a trade or business in the United States.
This summary does not deal with all aspects of U.S. income tax and
withholding or the application of any U.S. income or estate tax treaty that may
be relevant to foreign beneficial owners of the Global Securities, including
special categories of foreign investors who may not be eligible for exemptions
from U.S. withholding tax. Investors are advised to consult their own tax
advisors for specific tax advice concerning their holding and disposing of
beneficial interests in the Global Securities. Any additional requirements, if
applicable, will be set forth in the Prospectus Supplement.
LEGAL MATTERS
Certain legal matters in connection with the Debt Securities will be passed
upon for the Company by P. Bruce Borghardt, Esq., General Counsel -- Corporate
Development of the Company and for any underwriters or agents by a firm named in
the Prospectus Supplement relating to a particular issue of Debt Securities.
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
23
<PAGE> 34
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 statements of operations, shareholders' equity and cash
flows of IDB Communications Group, Inc. for the year ended December 31, 1993 and
the related financial statement schedule (such financial statements and
financial statement schedule have not been separately included herein or
incorporated by reference) have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference from WorldCom's Annual Report on Form 10-K for the year ended December
31, 1995, and has been so incorporated in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
The combined financial statements of WilTel Network Services, as of
December 31, 1994 and 1993 and for the years then ended, incorporated by
reference in this registration statement, have been audited by Ernst & Young
LLP, independent auditors, to the extent indicated in their report thereon, also
incorporated by reference in this registration statement. Such combined
financial statements are incorporated by reference herein in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
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, 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 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, 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.
24
<PAGE> 35
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED
IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
The Company........................... S-3
Use of Proceeds....................... S-4
Capitalization........................ S-4
Description of the Notes.............. S-5
Underwriting.......................... S-9
Information Incorporated by
Reference........................... S-10
Legal Matters......................... S-10
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Cautionary Statement Regarding
Forward-Looking Statements.......... 3
The Company........................... 4
Use of Proceeds....................... 4
Ratio of Earnings to Fixed Charges.... 4
Description of Debt Securities........ 5
Plan of Distribution.................. 17
Global Clearance, Settlement and Tax
Documentation Procedures............ 18
Legal Matters......................... 23
Experts............................... 23
</TABLE>
$2,000,000,000
WORLDCOM, INC.
$600,000,000
7.55% SENIOR NOTES DUE 2004
$1,100,000,000
7.75% SENIOR NOTES DUE 2007
$300,000,000
7.75% SENIOR NOTES DUE 2027
[WORLDCOM, INC. LOGO]
SALOMON BROTHERS INC
GOLDMAN, SACHS & CO.
CREDIT SUISSE FIRST BOSTON
NATIONSBANC CAPITAL
MARKETS, INC.
PROSPECTUS SUPPLEMENT
DATED MARCH 26, 1997
