<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1997
REGISTRATION NO. 333-27345
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
WORLDCOM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA 4813 58-1521612
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
OF INCORPORATION OR
ORGANIZATION)
515 EAST AMITE STREET
JACKSON, MISSISSIPPI 39201-2702
(601) 360-8600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
BERNARD J. EBBERS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
WORLDCOM, INC.
515 EAST AMITE STREET
JACKSON, MISSISSIPPI 39201-2702
(601) 360-8600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
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P. BRUCE BORGHARDT, ESQ. R. RANDALL WANG, ESQ. ALLAN G. SPERLING, ESQ.
GENERAL COUNSEL-- NICK H. VARSAM, ESQ. CLEARY, GOTTLIEB, STEEN
CORPORATE DEVELOPMENT BRYAN CAVE LLP &
WORLDCOM, INC. 211 NORTH BROADWAY HAMILTON
10777 SUNSET OFFICE DRIVE, SUITE 330 SUITE 3600 ONE LIBERTY PLAZA
ST. LOUIS, MO 63127 ST. LOUIS, MO 63102 NEW YORK, NY 10006
(314) 909-4100 (314) 259-2000 (212) 225-2260
</TABLE>
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement is declared effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 4, 1997
PROSPECTUS AND CONSENT SOLICITATION
[LOGO OF WORLDCOM APPEARS HERE]
WORLDCOM, INC.
OFFERS TO EXCHANGE
$ 9 3/8% SENIOR NOTES OF WORLDCOM, INC. DUE JANUARY 15, 2004 FOR ANY AND
ALL OUTSTANDING
9 3/8% SENIOR DISCOUNT NOTES OF MFS COMMUNICATIONS COMPANY, INC. DUE JANUARY
15, 2004
$ 8 7/8% SENIOR NOTES OF WORLDCOM, INC. DUE JANUARY 15, 2006 FOR ANY AND
ALL OUTSTANDING
8 7/8% SENIOR DISCOUNT NOTES OF MFS COMMUNICATIONS COMPANY, INC. DUE JANUARY
15, 2006
AND
CONSENT SOLICITATIONS
WorldCom, Inc. ("WorldCom" or the "Company") hereby offers, upon the terms and
subject to the conditions set forth in this Prospectus and Consent Solicitation
(together, the "Prospectus") and the accompanying Letters of Transmittal and
Consent (each a "Letter of Transmittal"), to exchange (i) $ principal amount
of its 9 3/8% Senior Notes due January 15, 2004 ("WorldCom 2004 Notes") for
each $1,000 principal amount at stated maturity of outstanding 9 3/8% Senior
Discount Notes due January 15, 2004 ("MFS 2004 Notes") of MFS Communications
Company, Inc., a wholly owned subsidiary of WorldCom ("MFS"), properly tendered
for exchange and accepted and (ii) $ principal amount of its 8 7/8% Senior
Notes due January 15, 2006 ("WorldCom 2006 Notes" and, together with the
WorldCom 2004 Notes, the "WorldCom Notes") for each $1,000 principal amount at
stated maturity of outstanding 8 7/8% Senior Discount Notes due January 15,
2006 ("MFS 2006 Notes" and, together with the MFS 2004 Notes, the "MFS Notes")
of MFS properly tendered for exchange and accepted (each such offer, an
"Exchange Offer," and collectively, the "Exchange Offers"). Interest on the
WorldCom Notes will accrue from , 1997 (the "Interest Accrual Date") at the
stated rate therefor. The principal amount of WorldCom Notes offered in
exchange for the applicable series of MFS Notes is equal to the Accreted Value
(as defined herein) of such MFS Notes as of the Interest Accrual Date. The
Accreted Value as of the Interest Accrual Date of the MFS 2004 Notes is $
per $1,000 principal amount at stated maturity and the Accreted Value as of
such date of the MFS 2006 Notes is $ per $1,000 principal amount at
stated maturity.
Concurrently with the Exchange Offers, WorldCom is soliciting consents
("Consents") from each registered holder of the MFS 2004 Notes and the MFS 2006
Notes (each such holder, a "Holder," and collectively, the "Holders") to
certain amendments (the "Proposed Amendments") to the Indenture dated as of
January 15, 1994 (as supplemented by a First Supplemental Indenture thereto
dated as of March 31, 1995, the "1994 Indenture") and the Indenture dated as of
January 15, 1996 (as supplemented by a First Supplemental Indenture thereto
dated as of January 15, 1996, the "1996 Indenture" and, together with the 1994
Indenture, the "MFS Indentures"), under which the MFS Notes were issued (each
such solicitation, a "Consent Solicitation," and collectively, the "Consent
Solicitations").
(cover page continues)
EACH EXCHANGE OFFER WILL EXPIRE AT 11:59 P.M., NEW YORK CITY TIME, ON ,
1997, UNLESS EXTENDED (SUCH TIME AND DATE, AS EXTENDED, THE "EXPIRATION DATE"
WITH RESPECT TO SUCH EXCHANGE OFFER). TENDERS OF MFS NOTES MAY NOT BE WITHDRAWN
(AND THE RELATED CONSENTS THEREBY REVOKED) AT ANY TIME AFTER 11:59 P.M., NEW
YORK CITY TIME, ON , 1997, UNLESS THE APPLICABLE EXCHANGE OFFER IS
EXTENDED AND CONTAINS NEW TERMS MATERIALLY ADVERSE TO THE TENDERING HOLDERS
THEREOF.
SEE "RISK FACTORS" COMMENCING ON PAGE 17 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED IN EVALUATING THE EXCHANGE OFFERS AND CONSENT SOLICITATIONS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE JOINT DEALER MANAGERS FOR THE EXCHANGE OFFERS AND CONSENT SOLICITATIONS
ARE:
SALOMON BROTHERS INC GOLDMAN, SACHS & CO.
For assistance in connection with the Exchange Offers, please contact the
appropriate party listed on the back cover hereof.
The date of this Prospectus and Consent Solicitation is , 1997.
<PAGE>
(cover page continued)
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the Letters of Transmittal, to pay each Holder
who gives a valid Consent on or prior to the Expiration Date a cash fee in an
amount equal to (i) with respect to such Holder's MFS 2004 Notes, 0. % of the
Accreted Value, as of the Interest Accrual Date, of the MFS 2004 Notes and
(ii) with respect to such Holder's MFS 2006 Notes, 0. % of the Accreted
Value, as of the Interest Accrual Date, of the MFS 2006 Notes, in either case,
with respect to which such Consent has been given (each such cash payment, a
"Consent Payment"). HOLDERS OF MFS NOTES OF EITHER SERIES MAY GIVE THEIR
CONSENT TO THE PROPOSED AMENDMENTS APPLICABLE TO THAT SERIES ONLY BY TENDERING
SUCH MFS NOTES IN THE APPLICABLE EXCHANGE OFFER AND WILL BE DEEMED TO HAVE
GIVEN SUCH CONSENT BY SO TENDERING. Consents from Holders of a majority in
aggregate principal amount outstanding of MFS Notes of a series (the
"Requisite Consent") must be received in order to amend the MFS Indenture
governing that series as described herein, except with respect to the
modification of the term "Change of Control," which requires Consents from
Holders of not less than 75% of the aggregate principal amount outstanding of
MFS Notes of a series (the "Supermajority Consent"). As used herein, "Accreted
Value" shall have the meaning given such term in the applicable MFS Indenture.
See "The Proposed Amendments--Certain Definitions." The amounts indicated in
this Prospectus as the Accreted Value of either series of MFS Notes as of the
Interest Accrual Date are the sum of (i) the initial issue price of such MFS
Notes plus (ii) the portion of the original issue discount applicable to such
MFS Notes accreted from and including the original issue date thereof and to
but excluding the Interest Accrual Date.
The obligation of the Company to consummate either Exchange Offer and to make
any Consent Payments with respect to either series of MFS Notes is conditional
upon, among other things, the receipt of the Requisite Consent to the Proposed
Amendments with respect to both series of MFS Notes. See "The Exchange
Offers--Conditions to the Exchange Offers" and "The Consent Solicitations--
Consent Payments." The Company will not consummate the Exchange Offer with
respect to the MFS 2004 Notes if less than $ of principal amount of
WorldCom 2004 Notes would be issued in such Exchange Offer and will not
consummate the Exchange Offer with respect to the MFS 2006 Notes if less than
$ of principal amount of WorldCom 2006 Notes would be issued in such
Exchange Offer.
WorldCom Notes will be issued only in denominations of $1,000 and integral
multiples thereof. If the aggregate principal amount of WorldCom Notes that
otherwise would be issued in exchange for the MFS Notes of a series tendered
by a Holder and accepted by the Company pursuant to the Exchange Offers is not
an integral multiple of $1,000, such principal amount will be reduced to the
nearest such multiple and the Company will pay to such Holder an amount in
cash equal to the reduction of such principal amount. WorldCom Notes to be
exchanged for MFS Notes pursuant to the Exchange Offers will be delivered, and
cash payments will be made on the third business day following the Expiration
Date, or as soon as possible thereafter (the "Exchange Date").
The WorldCom Notes will be senior, unsecured obligations of the Company, will
rank pari passu in right of payment with all other existing and future senior,
unsecured indebtedness of the Company and will rank senior in right of payment
to any future subordinated obligations of the Company. The WorldCom Notes will
be structurally subordinated to all obligations of the Company's subsidiaries,
including any MFS Notes not exchanged for WorldCom Notes in the Exchange
Offers. See "Risk Factors--Certain Considerations Relating to Holders
Tendering in the Exchange Offers--Structural Subordination of the WorldCom
Notes" and "Description of the WorldCom Notes--Ranking."
The financial terms of the WorldCom 2004 Notes and the WorldCom 2006 Notes
will be substantially identical in all material respects to the financial
terms of the MFS 2004 Notes and the MFS 2006 Notes, respectively, except that:
(i) the MFS Notes are the sole obligations of MFS, and the WorldCom Notes will
be the sole obligations of WorldCom; (ii) the MFS 2004 Notes and MFS 2006
Notes were originally issued at a discount and, except as described below, the
principal amount thereof accretes in value until January 15, 1999 and January
15, 2001, respectively, while the WorldCom Notes will have a fixed principal
amount; (iii) except as described below, no cash interest accrues on the MFS
2004 Notes and the MFS 2006 Notes until January 15, 1999 and January 15, 2001,
respectively, while interest will begin to accrue on the WorldCom Notes on the
Interest Accrual Date and will be payable in cash semi-annually in arrears on
each January 15 and July 15, commencing July 15, 1997; and (iv) overdue
principal and premium, if any, and interest on the overdue principal and any
overdue premium of the MFS 2004 Notes and the MFS 2006 Notes bear interest at
the rate of 10 3/8% and 9 7/8% per annum, respectively, while overdue
principal and premium, if any, and interest on the overdue principal and any
overdue premium of the WorldCom 2004 Notes and the WorldCom 2006 Notes will
bear interest at 9 3/8% and 8 7/8% per annum, respectively. The covenants and
certain other terms in the WorldCom Indenture (as defined herein) will be
substantially less restrictive than those that are currently in the MFS
Indentures. [MFS may elect, pursuant to the MFS Indentures, to commence the
accrual of cash interest on the MFS Notes beginning on July 15, 1997, at which
time the outstanding principal amount of each of the MFS Notes at their
respective stated maturities will be reduced to the Accreted Value of such MFS
Notes as of such date, and cash interest will be payable on each interest
payment date thereafter, beginning January 15, 1998.] See "The Exchange
Offers--Description of Differences Between the MFS Notes and the WorldCom
Notes."
The Company does not intend to list the WorldCom Notes on any national
securities exchange. The Dealer Managers currently plan to make a market in
the WorldCom Notes. However, there can be no assurance that the Dealer
Managers will make such a market or that any active market in the WorldCom
Notes will develop or be maintained.
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, OR ANY UNDERWRITER, AGENT OR DEALER. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCE, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
AVAILABLE INFORMATION
Each of WorldCom and MFS is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information filed by each of WorldCom and MFS may
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices located at Northeast
Regional Office, Seven World Trade Center, Suite 1300, New York, New York
10048 and Midwest Regional Office, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials can also be
obtained by mail from the Public Reference Section of the Commission,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a Web site that contains reports, proxy and
information statements and other materials that are filed through the
Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system.
This Web site can be accessed at http://www.sec.gov. Shares of the Company's
Common Stock are listed on the Nasdaq National Market and the reports, proxy
statements and other information filed by WorldCom also can be inspected at
the offices of the National Association of Securities Dealers, Inc. (the
"NASD"), at 1735 K Street, N.W., Washington, D.C. 20006. Upon completion of
the Exchange Offers, application (on Form 15) to the Commission promptly will
be made to deregister the common stock of MFS under the Exchange Act. As a
result of such deregistration and the effectiveness of the Proposed
Amendments, MFS no longer will be obligated to file periodic reports with the
Commission. See "The Proposed Amendments."
This Prospectus constitutes a part of a registration statement on Form S-4
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by WorldCom with the Commission under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the WorldCom Notes
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Reference is made
to such Registration Statement and to the exhibits relating thereto for
further information with respect to WorldCom, the WorldCom Notes, MFS and the
MFS Notes. Any statements contained herein concerning the provisions of
certain documents are not necessarily complete, and in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission for a more
complete description of the matter involved. Each such statement is qualified
in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by WorldCom (formerly
Resurgens Communications Group, Inc.) under File No. 0-11258 (formerly File
No. 1-10415) and by MFS under File No. 33-72594 (formerly File No. 0-21594)
pursuant to the Exchange Act are incorporated herein by reference:
(a)(1) WorldCom's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (the "WorldCom 1996 Form 10-K");
(2) WorldCom's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997; and
3
<PAGE>
(3) WorldCom's Current Reports on Form 8-K dated August 25, 1996 (filed
August 26, 1996 and as amended on Forms 8-K/A filed November 4, 1996 and
November 20, 1996), December 31, 1996 (filed January 15, 1997), March 18,
1997 (filed March 24, 1997) and March 26, 1997 (filed April 2, 1997).
(b)(1) MFS' Annual Report on Form 10-K for the year ended December 31,
1996;
(2) MFS' Quarterly Report on Form 10-Q for the quarter ended March 31,
1997;
(3) MFS' Current Report on Form 8-K dated January 20, 1997 (filed January
24, 1997); and
(4) MFS' Form 10 dated May 16, 1997 (filed May 16, 1997).
All documents filed by WorldCom and MFS with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof and prior to the termination of the offering of any securities offered
hereby shall be deemed to be incorporated by reference into this Prospectus
and to be a part hereof from the date of filing of such documents. See
"Available Information." Any statement contained herein, or in a document
incorporated or deemed to be incorporated herein by reference, shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
incorporated or deemed to be incorporated herein by reference, which statement
is also incorporated herein by reference, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. COPIES OF THESE DOCUMENTS (EXCLUDING EXHIBITS
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO THE
INFORMATION INCORPORATED HEREIN) WILL BE PROVIDED BY FIRST CLASS MAIL WITHOUT
CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS IS DELIVERED UPON WRITTEN OR
ORAL REQUEST BY SUCH PERSON TO WORLDCOM, INC., 515 EAST AMITE STREET, JACKSON,
MISSISSIPPI 39201-2702, ATTENTION: STEPHANIE Q. SCOTT, DIRECTOR OF FINANCIAL
REPORTING (TELEPHONE: (601) 360-8600). IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY , 1997.
TABLE OF CONTENTS
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AVAILABLE INFORMATION....................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................. 3
PROSPECTUS SUMMARY.......................................................... 5
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS................... 17
RISK FACTORS................................................................ 17
THE EXCHANGE OFFERS......................................................... 20
Purpose of the Exchange Offers............................................. 20
Terms of the Exchange Offers............................................... 20
Conditions of the Exchange Offers and the Consent Solicitations............ 21
Certain Consequences to Holders Not Tendering in the Exchange Offers....... 23
Expiration Date; Extensions; Amendments.................................... 23
Effect of Tender........................................................... 23
Acceptance of MFS Notes for Exchange; Delivery of WorldCom Notes........... 24
Procedures for Tendering................................................... 24
Proper Execution and Delivery of Letters of Transmittal.................... 26
Withdrawal of Tenders and Revocation of Consents........................... 28
Exchange Agent............................................................. 28
Information Agent.......................................................... 29
Dealer Managers............................................................ 29
Other Fees and Expenses; Transfer Taxes.................................... 29
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Description of Differences Between the MFS Notes and the WorldCom Notes... 30
THE CONSENT SOLICITATIONS.................................................. 47
Required Consents......................................................... 47
Consent Payment........................................................... 47
THE PROPOSED AMENDMENTS.................................................... 49
Provisions to be Deleted.................................................. 49
Provisions to be Revised.................................................. 52
Definition to be Revised if Supermajority Consent is Obtained from Holders
of Each Series of MFS Notes.............................................. 54
Certain Definitions....................................................... 55
DESCRIPTION OF THE WORLDCOM NOTES.......................................... 63
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................... 75
United States Holders...................................................... 75
Tax Consequences of the Exchange Offers and Consent Solicitations......... 75
Basis and Holding Period.................................................. 76
Non U.S. Holders.......................................................... 77
INFORMATION REGARDING WORLDCOM............................................. 78
INFORMATION REGARDING MFS.................................................. 78
CERTAIN RELATED TRANSACTIONS............................................... 78
ACCOUNTING TREATMENT OF EXCHANGE OFFERS.................................... 78
LEGAL MATTERS.............................................................. 78
EXPERTS.................................................................... 78
</TABLE>
4
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PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified in its
entirety by, and should be read in conjunction with, the more detailed
financial information and Consolidated Financial Statements (including the
notes thereto) incorporated by reference in this Prospectus. In particular,
prospective purchasers should carefully consider the information set forth
under "Cautionary Statement Regarding Forward-Looking Statements" and "Risk
Factors."
WORLDCOM
WorldCom is one of the four largest long distance telecommunications
companies in the United States. The Company provides telecommunications
services to business, government, telecommunications companies and consumer
customers, through its network of fiber optic cables, digital microwave, and
fixed and transportable satellite earth stations.
WorldCom is one of the first major facilities-based telecommunications
companies with the capability to provide businesses with high quality local,
long distance, Internet, data and international communications services over
its global networks. With service to points throughout the nation and the
world, WorldCom provides telecommunications products and services including:
switched and dedicated long distance and local products, 800 services, calling
cards, domestic and international private lines, broadband data services, debit
cards, conference calling, advanced billing systems, enhanced fax and data
connections, high speed data communications, facilities management, local
access to long distance companies, local access to ATM-based backbone service
and interconnection via Network Access Points to Internet service providers.
WorldCom's principal executive offices are located at 515 East Amite Street,
Jackson, Mississippi 39201-2702, and its telephone number is (601) 360-8600.
MFS
MFS provides communications services domestically and internationally in the
form of: (i) dedicated special access and private line circuits, local switched
service and high speed data communications to large business customers; (ii)
single source integrated local and long distance switched services, high speed
data communications services and facilities management to medium and small
businesses; (iii) local access to long distance companies; (iv) local access,
ATM-based backbone service and interconnection via Network Access Points to
Internet service providers; and (v) a comprehensive range of Internet-based
services. MFS provides communications services by utilizing its international
network platform, which consists of MFS-owned transmission and switching
facilities and network capacity leased from the other carriers primarily in the
United States and Western Europe.
On August 12, 1996, MFS acquired UUNET Technologies, Inc. ("UUNET") through a
merger of a subsidiary of MFS with and into UUNET. UUNET is a leading worldwide
provider of a comprehensive range of Internet access options, applications, and
consulting services tailored to meet the needs of businesses and professionals.
UUNET makes available to customers a variety of products and services,
including dedicated and dial-up Internet access, Web server hosting and content
development services, client software and security products and training, all
of which can be integrated by UUNET through its network integration and
consulting services. UUNET enables Internet users to purchase access,
applications and services, including integration services, through a single
source. UUNET's products and services are supported by a technical staff that
is highly experienced in Internet
5
<PAGE>
operations and services. UUNET's network operations center monitors traffic
across UUNET's network 24 hours per day, seven days per week.
MFS provides network systems integration services primarily through MFS
Network Technologies, Inc. ("MFS Network Technologies"). Initially created to
design and build MFS' networks in a high quality and cost-effective manner, MFS
Network Technologies provides network systems integration services for MFS and
third parties which desire to deploy sophisticated networks, including
intelligent transportation systems, voice and data networks, interactive
distance learning networks, security systems and combined cable television-
telephone networks.
The principal executive offices of MFS are located at 11808 Miracle Hills
Drive, Omaha, Nebraska 68154, a telephone number is (402) 231-3000.
WORLDCOM/MFS MERGER
On December 31, 1996, WorldCom, through a wholly owned subsidiary, merged
with MFS (the "MFS Merger"). As a result of the MFS Merger, each share of MFS
common stock was converted into the right to receive 2.1 shares of WorldCom
common stock (the "Common Stock") or approximately 471.0 million shares of
Common Stock in the aggregate. Each share of MFS Series A 8% Cumulative
Convertible Preferred Stock ("MFS Series A Preferred Stock") was converted into
the right to receive one share of Series A 8% Cumulative Convertible Preferred
Stock of WorldCom ("WorldCom Series A Preferred Stock") or 94,992 shares of
WorldCom Series A Preferred Stock in the aggregate. Each share of MFS Series B
Convertible Preferred Stock was converted into the right to receive one share
of Series B Convertible Preferred Stock of WorldCom ("WorldCom Series B
Preferred Stock") or approximately 12.7 million shares of WorldCom Series B
Preferred Stock in the aggregate. In addition, each depositary share
representing 1/100th of a share of MFS Series A Preferred Stock was exchanged
for a depositary share representing 1/100th of a share of WorldCom Series A
Preferred Stock. Upon effectiveness of the MFS Merger, the then outstanding and
unexercised options and warrants exercisable for shares of MFS common stock
were converted into options and warrants, respectively, exercisable for shares
of Common Stock having substantially the same terms and conditions as the MFS
options and warrants, except that (i) the exercise price and the number of
shares issuable upon exercise were divided and multiplied, respectively, by 2.1
and (ii) the holders of each then outstanding and unexercised MFS "Shareworks
Plus Award" granted under the MFS 1993 Stock Plan instead received the cash
value of such award in accordance with the terms of such plan.
As a result of the MFS Merger, MFS became a wholly-owned subsidiary of
WorldCom. Operationally and financially, WorldCom has been integrating MFS into
the WorldCom organization. The Exchange Offers are an element of such
integration efforts. Subsequent to the MFS Merger, WorldCom filed a shelf
registration statement with the Commission (the "Shelf Registration Statement")
in order to register and issue debt securities having an aggregate initial
offering price of up to $3 billion. Pursuant to the WorldCom Indenture and the
Shelf Registration Statement, WorldCom issued and sold senior notes having an
aggregate principal amount of $2.0 billion, (the "April WorldCom Notes") on
April 1, 1997. The April WorldCom Notes contain covenants that are
substantially identical to the WorldCom Notes offered hereby.
6
<PAGE>
THE EXCHANGE OFFERS
TERMS OF THE EXCHANGE
OFFERS...................... The Company hereby offers, upon the terms and
subject to the conditions set forth in this
Prospectus and in the Letters of Transmittal, to:
(i) exchange $ principal amount of WorldCom
2004 Notes for each $1,000 principal amount at
stated maturity of outstanding MFS 2004 Notes
properly tendered for exchange and accepted; and
(ii) exchange $ principal amount of
WorldCom 2006 Notes for each $1,000 principal
amount at stated maturity of outstanding MFS 2006
Notes properly tendered for exchange and
accepted.
The principal amount of WorldCom Notes offered in
each Exchange Offer for MFS Notes is equal to the
Accreted Value of such MFS Notes as of the
Interest Accrual Date, and interest on such
WorldCom Notes will accrue from the Interest
Accrual Date at the stated interest rate on such
WorldCom Notes.
As of the Interest Accrual Date, the Accreted
Value of the MFS 2004 Notes is $ per $1,000
principal amount at stated maturity and the
Accreted Value of the MFS 2006 Notes is $
per $1,000 principal amount at stated maturity.
See "The Exchange Offers."
WorldCom Notes will be issued only in
denominations of $1,000 and integral multiples
thereof. If the aggregate principal amount of
WorldCom Notes that otherwise would be issued in
exchange for the MFS Notes of a series tendered
by a Holder and accepted by the Company pursuant
to the Exchange Offers is not an integral
multiple of $1,000, such principal amount will be
reduced to the nearest such multiple and the
Company will pay to such Holder an amount in cash
equal to the reduction of such principal amount.
CONSENT SOLICITATIONS;
CONSENT PAYMENT........ Concurrently with the Exchange Offers, WorldCom
is soliciting Consents to the Proposed Amendments
to the 1994 Indenture and the 1996 Indenture from
each Holder of the MFS 2004 Notes and the MFS
2006 Notes, respectively. HOLDERS OF MFS NOTES OF
EITHER SERIES MAY GIVE THEIR CONSENT TO THE
PROPOSED AMENDMENTS APPLICABLE TO THAT SERIES
ONLY BY TENDERING SUCH MFS NOTES IN THE
APPLICABLE EXCHANGE OFFER AND WILL BE DEEMED TO
HAVE GIVEN SUCH CONSENT BY SO TENDERING. Consents
from Holders of a majority in aggregate principal
amount outstanding of MFS Notes of a series (the
"Requisite Consent") must be received in order to
amend the MFS Indenture governing that series as
described herein, except with respect to the
modification of the term
7
<PAGE>
"Change of Control" which requires Consents from
Holders of not less than 75% of the aggregate
principal amount outstanding of MFS Notes of a
series (the "Supermajority Consent"). See "The
Consent Solicitations" and "The Proposed
Amendments." The Company hereby offers, upon the
terms and subject to the conditions set forth in
this Prospectus and in the Letters of
Transmittal, to pay each Holder who gives a valid
Consent on or prior to the Expiration Date a cash
fee in an amount equal to (i) with respect to
such Holder's MFS 2004 Notes, 0. % of the
Accreted Value as of the Interest Accrual Date of
the MFS 2004 Notes and (ii) with respect to such
Holder's 2006 Notes, 0. % of the Accreted Value
as of the Interest Accrual Date of the MFS 2006
Notes, in either case, with respect to which
Consent has been given. See "The Consent
Solicitations--Consent Payment."
CONDITIONS TO THE EXCHANGE
OFFERS AND CONSENT The obligation of the Company to consummate an
SOLICITATIONS.......... Exchange Offer and to make any Consent Payments
with respect to either series of MFS Notes is
conditioned upon, among other things, the receipt
of the Requisite Consent to the Proposed
Amendments with respect to both series of MFS
Notes. See "The Exchange Offers--Conditions to
the Exchange Offers" and "The Consent
Solicitations."
The Company will not consummate the Exchange
Offer with respect to the MFS 2004 Notes if less
than $ of principal amount of WorldCom 2004
Notes would be issued in such Exchange Offer and
will not consummate the Exchange Offer with
respect to the MFS 2006 Notes if less than $
of principal amount of WorldCom 2006 Notes would
be issued in such Exchange Offer.
BACKGROUND AND REASONS FOR
THE EXCHANGE OFFERS AND THE
CONSENT SOLICITATIONS.......
Since the MFS Merger, WorldCom has been
operationally and financially integrating MFS
into the WorldCom organization, which integration
includes creating a single, more efficient,
consolidated credit entity. The Exchange Offers
are an element of this integration effort, and
the Proposed Amendments are expected to provide
greater financial and operating flexibility to
the fully integrated organization. See "The
Proposed Amendments."
CERTAIN CONSEQUENCES TO
HOLDERS TENDERING IN THE
EXCHANGE OFFERS.............
Holders who participate in the Exchange Offers
will receive WorldCom Notes. The WorldCom Notes
will be senior, unsecured obligations of WorldCom
and rank pari passu with all existing and future
senior, unsecured indebtedness of
8
<PAGE>
WorldCom. The terms of the WorldCom Notes and the
MFS Notes will be substantially similar in all
material respects except that: (i) the MFS Notes
are the sole obligations of MFS, and the WorldCom
Notes will be the sole obligations of WorldCom;
(ii) the MFS 2004 Notes and MFS 2006 Notes were
originally issued at a discount and, except as
described below, the principal amount thereof
accretes in value until January 15, 1999 and
January 15, 2001, respectively, while the
WorldCom Notes will have a fixed principal
amount; (iii) except as described below, no cash
interest accrues on the MFS 2004 Notes and the
MFS 2006 Notes until January 15, 1999 and January
15, 2001, respectively, while interest will begin
to accrue on the WorldCom Notes on the Interest
Accrual Date and will be payable in cash semi-
annually in arrears on each January 15 and July
15, commencing July 15, 1997; and (iv) overdue
principal and premium, if any, and interest on
the overdue principal and any overdue premium of
the MFS 2004 Notes and the MFS 2006 Notes bear
interest at the rate of 10 3/8% and 9 7/8% per
annum, respectively, while overdue principal and
premium, if any, and interest on the overdue
principal and any overdue premium of the WorldCom
2004 Notes and the WorldCom 2006 Notes will bear
interest at 9 3/8% and 8 7/8% per annum,
respectively. In addition, the covenants and
certain other terms in the WorldCom Indenture
will be substantially less restrictive than those
currently contained in the MFS Indentures. [MFS
may elect, pursuant to the MFS Indentures, to
commence the accrual of cash interest on the MFS
Notes beginning on July 15, 1997, at which time
the outstanding principal amount of each of the
MFS Notes at their respective stated maturities
will be reduced to the Accreted Value of such MFS
Notes as of such date, and cash interest will be
payable on each interest payment date thereafter,
beginning January 15, 1998.] See "The Exchange
Offers--Description of Differences Between the
MFS Notes and the WorldCom Notes."
CERTAIN CONSEQUENCES TO
HOLDERS NOT TENDERING IN
THE EXCHANGE OFFERS.........
Consummation of the Exchange Offers and the
adoption of the Proposed Amendments with respect
to the MFS Notes will have certain consequences
to Holders of the MFS Notes who elect not to
tender in the Exchange Offers, including, without
limitation, that the covenants and certain other
terms set forth in the MFS Indentures, as
proposed to be amended, with respect to the MFS
Notes will be substantially less restrictive, and
afford less protection to such Holders, than
those in the existing MFS Indentures. The
Proposed Amendments would, among other things,
eliminate (i) the covenants in each of the 1994
Indenture and the 1996 Indenture that (a)
restrict the ability of MFS and its restricted
subsidiaries to incur debt,
9
<PAGE>
incur liens, enter into sale and leaseback
transactions, make restricted payments (including
payment of dividends) or enter into transactions
with affiliates and (b) restrict the ability of
restricted subsidiaries of MFS to issue equity
securities, to encumber the ability to pay
dividends, and make certain loans or transfers of
property to the Company and (ii) the separate
financial reporting requirements contained in the
MFS Indentures. If a Supermajority Consent with
respect to a series of MFS Notes is received, the
Proposed Amendments would also limit the
circumstances in which a Change of Control will
be deemed to occur and consequently limit the
need for MFS to offer to repurchase such series
of MFS Notes. See "The Proposed Amendments." In
addition, the trading market for unexchanged MFS
Notes could become more limited due to the
reduction in the amount of the MFS Notes
outstanding after the Exchange Offers, which may
adversely affect the market price and price
volatility of such MFS Notes. See "Risk Factors--
Certain Considerations Relating to Holders Not
Tendering in the Exchange Offers."
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS..............
The receipt of WorldCom Notes, Consent Payments
and other cash, if any, pursuant to the Exchange
Offers and Consent Solicitations will be a
taxable transaction for United States federal
income tax purposes. See "Certain Federal Income
Tax Consequences."
EXPIRATION DATE.............
The Exchange Offers will expire at 11:59 p.m.,
New York City time, on , 1997, unless the
Exchange Offers (or either of them) are extended
by the Company in its sole discretion, in which
case the term "Expiration Date," with respect to
an Exchange Offer, will mean the latest date and
time to which such Exchange Offer is extended.
See "The Exchange Offers--Expiration Date;
Extensions; Amendments."
SPECIAL CONSIDERATIONS FOR
BENEFICIAL OWNERS...........
Any beneficial owner whose MFS Notes are held by
a broker, dealer, commercial bank, trust company
or other nominee and who wishes to tender such
MFS Notes in the Exchange Offers should contact
such nominee promptly and instruct such nominee
to tender on such beneficial owner's behalf. See
"The Exchange Offers--Procedures for Tendering."
PROCEDURES FOR TENDERING
MFS NOTES AND GIVING THE
RELATED CONSENT........
Each Holder of MFS Notes wishing to accept either
of the Exchange Offers must complete, sign and
date the appropriate Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein, and
mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with
such MFS Notes and any other required
10
<PAGE>
documentation to Harris Trust and Savings Bank,
as exchange agent, at the address set forth
therein. By executing a Letter of Transmittal,
the Holder will represent to and agree with the
Company that, among other things, the MFS Notes
tendered therewith are held by such Holder free
and clear of all security interests, liens,
restrictions, charges, encumbrances, conditional
sale agreements or other obligations relating to
their sale or transfer, and are not subject to
any adverse claim when the same are accepted by
the Company. See "The Exchange Offers--Procedures
for Tendering."
The proper completion, execution and delivery of
a Letter of Transmittal with respect to MFS Notes
of a series will constitute the giving of a
Consent to the Proposed Amendments for such
series.
The WorldCom Notes issued in exchange for
properly tendered and accepted MFS Notes will be
delivered only in book-entry form through The
Depository Trust Company ("DTC"). Accordingly,
Holders who anticipate tendering and whose MFS
Notes are not held custodially through DTC are
urged to contact promptly a bank, broker or other
intermediary that has the capability to hold
securities custodially through DTC, to arrange
for receipt of any WorldCom Notes to be delivered
pursuant to the Exchange Offers and to obtain the
information necessary to provide the required DTC
participant and account information in the
relevant Letter of Transmittal. See "The Exchange
Offers--Procedures for Tendering--Book-Entry
Delivery Procedures."
GUARANTEED DELIVERY Holders of MFS Notes who wish to tender their MFS
PROCEDURES.................. Notes and whose MFS Notes are not immediately
available or who cannot deliver their MFS Notes,
the Letter of Transmittal or any other
documentation required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date must tender their MFS Notes
according to the guaranteed delivery procedures
set forth under "The Exchange Offers--Guaranteed
Delivery Procedures."
ACCEPTANCE OF THE MFS NOTES
AND DELIVERY OF THE
WORLDCOM NOTES; RETURN OF
MFS NOTES...................
Subject to the satisfaction or waiver of the
conditions to each Exchange Offer, the Company
will accept for exchange any and all MFS Notes
that are properly tendered in such Exchange Offer
prior to the Expiration Date. The WorldCom Notes
issued pursuant to the Exchange Offers will be
delivered and the related Consent Payments will
be made on the third business day following the
Expiration Date, or as soon as possible
thereafter. See "The Exchange Offers--Terms of
the Exchange Offers." Any MFS Notes not accepted
for exchange for any reason will be returned to
the tendering Holder as promptly as practicable
after the expiration or termination of the
applicable Exchange Offer.
11
<PAGE>
WITHDRAWAL AND REVOCATION
RIGHTS......................
Tenders in an Exchange Offer may not be withdrawn
at any time after 11:59 p.m., New York City time,
on , 1997, unless such Exchange Offer is
extended and contains new terms materially
adverse to the tendering Holders thereof. Valid
withdrawal of a tendered MFS Note will constitute
the revocation of the related Consent. Holders
may not revoke a Consent without validly
withdrawing the related MFS Note. See "The
Exchange Offers--Withdrawal of Tenders" and "The
Consent Solicitations."
NO DISSENTERS' RIGHTS....... Holders of MFS Notes do not have any appraisal or
dissenters' rights under the Delaware General
Corporation Law or the applicable MFS Indenture
in connection with the Exchange Offers.
NO PROCEEDS TO COMPANY......
The Company will not receive any proceeds from
the issuance of the WorldCom Notes offered hereby
and has agreed to pay certain expenses of the
Exchange Offers. See "The Exchange Offers--
Exchange Agent," "--Information Agent," "--Dealer
Managers" and "--Other Fees and Expenses;
Transfer Taxes." WorldCom will cause the MFS
Notes surrendered in exchange for the WorldCom
Notes to be retired and cancelled. Issuance of
the WorldCom Notes will not result in any
increase in the outstanding debt of the Company,
on a consolidated basis.
DEALER MANAGER MARKET The Dealer Managers currently plan to make a
ACTIVITY............... market in the WorldCom Notes following the
completion of the Exchange Offers and may buy and
sell WorldCom Notes on a "when and if issued"
basis prior to the completion of the Exchange
Offers. However, there can be no assurance that
the Dealer Managers will engage in such
activities or that any active market in the
WorldCom Notes will develop or be maintained. See
"Risk Factors--Certain Considerations Relating to
Holders Tendering in the Exchange Offers."
EXCHANGE AGENT..............
Harris Trust and Savings Bank (the "Exchange
Agent"). The address and telephone numbers of the
Exchange Agent are set forth on the back cover
page of this Prospectus.
DEALER MANAGERS.............
Salomon Brothers Inc and Goldman, Sachs & Co.
(the "Dealer Managers"). Questions concerning the
terms of the Exchange Offers should be directed
to the Dealer Managers. The addresses and
telephone numbers of the Dealer Managers are set
forth on the back cover page of this Prospectus.
INFORMATION AGENT...........
MacKenzie Partners, Inc. (the "Information
Agent"). Questions concerning tender procedures
and requests for additional copies of this
Prospectus, the Letters of Transmittal or Notices
of Guaranteed Delivery should be directed to the
Information Agent. The address and telephone
numbers of the Information Agent are set forth on
the back cover page of this Prospectus.
12
<PAGE>
THE WORLDCOM NOTES
The financial terms of the WorldCom 2004 Notes and the WorldCom 2006 Notes
will be substantially identical in all material respects to the financial terms
of the MFS 2004 Notes and the MFS 2006 Notes, respectively, except that: (i)
the MFS Notes are the sole obligations of MFS, while the WorldCom Notes will be
the sole obligations of WorldCom; and (ii) the MFS 2004 Notes and the MFS 2006
Notes were originally issued at a discount and, except as described below, the
principal amount thereof accretes in value until January 15, 1999, and January
15, 2001, respectively, while the WorldCom Notes have a fixed principal amount;
(iii) except as described below, no cash interest accrues on the MFS 2004 Notes
and the MFS 2006 Notes until January 15, 1999 and January 15, 2001,
respectively, while interest will begin to accrue on the WorldCom Notes on the
Interest Accrual Date and will be payable in cash semi-annually in arrears on
each January 15 and July 15, commencing July 15, 1997; and (iv) overdue
principal and premium, if any, and interest on the overdue principal and any
overdue premium of the MFS 2004 Notes and the MFS 2006 Notes bear interest at
the rate of 10 3/8% and 9 7/8% per annum, respectively, while overdue principal
and premium, if any, and interest on the overdue principal and any overdue
premium of the WorldCom 2004 Notes and the WorldCom 2006 Notes will bear
interest at 9 3/8% and 8 7/8% per annum, respectively. In addition, the
covenants and certain other terms in the WorldCom Indenture will be
substantially less restrictive than those that are currently in the MFS
Indentures. [MFS may elect, pursuant to the MFS Indentures, to commence the
accrual of cash interest on the MFS Notes beginning on July 15, 1997, at which
time the outstanding principal amount of each of the MFS Notes at their
respective stated maturities will be reduced to the Accreted Value of such MFS
Notes as of such date, and cash interest will be payable on each interest
payment date thereafter, beginning January 15, 1998.] See "The Exchange
Offers--Description of Differences Between the MFS Notes and the WorldCom
Notes." The following is a summary of certain terms of the WorldCom Notes:
<TABLE>
<CAPTION>
MATURITY DATE INTEREST RATE INTEREST PAYMENT DATE
---------------- ------------- ---------------------------
<C> <C> <C> <S>
WorldCom 2004 Notes January 15, 2004 9 3/8% Payable semi-annually on
January 15 and July 15 each
year, commencing July 15,
1997.
WorldCom 2006 Notes January 15, 2006 8 7/8% Payable semi-annually on
January 15 and July 15 each
year, commencing July 15,
1997.
</TABLE>
ISSUER...................... WorldCom, Inc.
RANKING.....................
The WorldCom Notes will be senior, unsecured
obligations of the Company, rank pari passu in
right of payment with all other existing and
future senior, unsecured indebtedness of the
Company and will rank senior in right of payment
to any future subordinated obligations of the
Company. The WorldCom Notes will be structurally
subordinated to all obligations of the Company's
subsidiaries, including any MFS Notes not
exchanged for WorldCom Notes in the Exchange
Offers and including any trade payables. As of
March 31, 1997, the aggregate amount of
outstanding obligations of the Company's
subsidiaries to which the Holders of WorldCom
Notes would be structurally subordinated,
including trade payables, was approximately $
million; of this amount, $1.360 billion
represented the carrying value of the MFS Notes.
See "Risk Factors."
13
<PAGE>
The WorldCom 2004 Notes and the WorldCom 2006
OPTIONAL REDEMPTION......... Notes will be redeemable at the option of the
Company, on or after January 15, 1999 and January
15, 2001, respectively, in whole at any time or
in part from time to time, at the prices set
forth herein, plus accrued and unpaid interest,
if any, to the date of redemption. See
"Description of the WorldCom Notes--Optional
Redemption."
CERTAIN COVENANTS...........
The WorldCom 2004 Notes and the WorldCom 2006
Notes will be entitled to the benefits of and
governed by the Senior Indenture dated as of
March 1, 1997 between WorldCom and Mellon Bank,
N.A., as Trustee (as supplemented and described
herein, the "WorldCom Indenture"). The WorldCom
Indenture contains certain covenants which,
subject to certain exceptions and qualifications,
restrict the ability of the Company and its
Restricted Subsidiaries to create liens, to enter
into sale and leaseback transactions and to sell
assets or merge with or into another company. See
"Description of the WorldCom Notes--Limitation on
Liens," "--Consolidation, Merger, Conveyance,
Sale or Lease" and "--Certain Definitions."
FORM...................
The WorldCom Notes will be available only in
book-entry form through DTC.
For additional information regarding the WorldCom Notes, please see
"Description of the WorldCom Notes" and "Certain Federal Income Tax
Consequences."
RISK FACTORS
Prospective investors should carefully consider certain factors relating to
an investment in the WorldCom Notes. See "Cautionary Statement Regarding
Forward-Looking Statements" and "Risk Factors" beginning on page 17.
14
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table presents selected historical financial data of WorldCom,
MFS and UUNET. The historical data for each of the years in the five-year
period ended December 31, 1996 are based on the audited historical financial
statements of the respective companies, excluding UUNET for 1996 (see note 8 to
the table below). The selected financial data for each of WorldCom, MFS and
UUNET for the three month periods ended March 31, 1997 and 1996 have been
obtained from unaudited financial statements and, in the opinion of the
respective managements of WorldCom, MFS and UUNET, include all adjustments (of
a normal and recurring nature) which are necessary to present fairly the data
for such periods. This data should be read in conjunction with and is qualified
in its entirety by the consolidated financial statements of each of WorldCom,
MFS and UUNET and the related notes thereto, incorporated by reference herein.
See "Available Information" and "Incorporation of Certain Documents by
Reference."
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------------------- ----------------------
1996(1) 1995 1994 1993 1992 1997 1996
---------- ---------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
WORLDCOM
Revenues................ $4,485,130 $3,696,345 $2,245,663 $1,474,257 $ 948,060 $1,677,239 $1,034,060
Net income (loss) from
continuing operations
(after preferred
dividend requirement):
Total.................. (2,189,804)(2) 233,080(3) (151,779)(4) 112,638(4) 6,232(4) 43,054 85,802
Per common share:
Primary................ (5.50) 0.64 (0.48) 0.41 0.03 0.05 0.22
Fully diluted.......... (5.50) 0.64 (0.48) 0.40 0.03 0.05 0.21
Dividends per common
share.................. -- -- -- -- -- -- --
Total assets............ 19,861,977 6,656,629 3,441,474 3,236,718 1,241,278 19,595,269 6,816,942
Long-term debt.......... 4,803,581 3,391,598(5) 794,001 730,023 448,496 4,617,431 2,194,357
Shareholders'
investment............. 12,959,976 2,187,681 1,827,410 1,911,800 478,823 13,021,153 2,295,295
Ratio of earnings to
fixed charges(6)....... N/A 2.59:1 0.15:1 5.10:1 1.47:1 1.94:1 3.15:1
Deficiency of earnings
to fixed charges....... 2,066,991 -- 52,597 -- -- -- --
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------------------- ----------------------
1996 1995 1994 1993 1992 1997 1996
---------- ---------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
MFS
Revenues................ $1,115,006 $ 583,194 $ 286,747 $ 141,111 $ 108,707 $ 425,935 $ 186,316
Income (loss) from
continuing operations
(after preferred
dividend requirement):
Total.................. (1,867,459)(7) (282,962) (151,201) (15,769) (13,129) (82,192) (93,296)
Per common share:
Primary................ (11.22) (2.21) (1.21) (0.15) (0.15) (0.75)
Fully diluted.......... (11.22) (2.21) (1.21) (0.15) (0.15) (0.75)
Dividends per common
share.................. -- -- -- -- -- -- --
Total assets............ 12,550,329 1,867,134 1,584,546 906,937 363,299 12,334,647 2,347,211
Long-term debt.......... 1,477,670 723,471 548,333 143 169 1,412,843 1,286,354
Shareholders' equity.... 10,287,586 830,332 770,103 811,105 298,516 10,190,119 754,582
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------- ---------------------
1996(8) 1995 1994 1993 1992 1997(8) 1996
-------- -------- ------- ------- ------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
UUNET
Revenues................ $129,047 $ 94,461 $33,138 $24,019 $20,396 $ 43,013
Income (loss) from
continuing operations
(after preferred
dividend requirement):
Total.................. (14,373) (18,257) (7,988) (2,026) 1,074 233
Per common share (pro
forma):
Primary................ (0.42) (0.63) (0.35) -- --
Fully diluted.......... (0.42) (0.63) (0.35) -- -- 0.01
Dividends per common
share.................. -- -- 0.01 -- 0.08 0.01
Total assets............ 137,610 29,625 10,585 8,285 156,278
Long-term debt.......... 13,686 15,269 3,310 974 18,045
Shareholders' equity.... 80,667 279 425 2,567 82,084
</TABLE>
- --------
(1) On December 31, 1996, WorldCom completed the MFS Merger. The MFS Merger is
being accounted for as a purchase; accordingly, the operating results for
MFS are reflected from the date of acquisition.
(2) WorldCom's results for 1996 include a $2.14 billion charge for in-process
research and development related to the MFS Merger. The charge is based
upon a valuation analysis of the technologies of MFS' worldwide information
system, the Internet network expansion system of UUNET, and certain other
identified research and development projects purchased in the MFS Merger.
The expense includes $1.6 billion associated with UUNET and $0.54 billion
related to MFS. Additionally, 1996 results include other after-tax charges
of $121.0 million for employee severance, employee compensation charges,
alignment charges, and costs to exit unfavorable telecommunications
contracts and $343.5 million after-tax write-down of operating assets
within the Company's non-core businesses. On a pre-tax basis, these charges
totaled $600.1 million.
(3) In 1995, Metromedia Company ("Metromedia") converted its Series 1 Preferred
Stock into Common Stock, exercised warrants to acquire Common Stock and
immediately sold its position of 61,699,096 shares of Common Stock in a
public offering. In connection with the preferred stock conversion,
WorldCom made a non-recurring payment of $15.0 million to Metromedia,
representing a discount to the minimum nominal dividends that would have
been payable on the Series 1 Preferred Stock prior to the September 15,
1996 optional call date of approximately $26.6 million (which amount
includes an annual dividend requirement of $24.5 million plus accrued
dividends to such call date).
(4) As a result of the acquisitions of IDB Communications Group, Inc. ("IDB")
in 1994 (the "IDB Merger") and of Advanced Telecommunications Corporation
in 1992 (the "ATC Merger"), the Company initiated plans to reorganize and
restructure its management and operational organization and facilities to
eliminate duplicate personnel, physical facilities and service capacity, to
abandon certain products and marketing activities, and to take further
advantage of the synergies available to the combined entities. Also, during
the fourth quarter of 1993, plans were approved to reduce IDB's cost
structure and to improve productivity. Accordingly, in 1994, 1993 and 1992,
the Company charged to operations the estimated costs of such
reorganization and restructuring activities, including employee severance,
physical facility abandonment and duplicate service capacity. These costs
totaled $43.7 million in 1994, $5.9 million in 1993 and $79.8 million in
1992. Also, during 1994 and 1992, the Company incurred direct merger costs
of $15.0 million and $7.3 million, respectively, related to the IDB Merger
(in 1994) and the ATC Merger (in 1992). These costs include professional
fees, proxy solicitation costs, travel and related expenses and certain
other direct costs attributable to these mergers.
(5) Long-term debt as of December 31, 1995 includes $1.1 billion related to the
Company's previous credit facilities which were classified as a current
maturity on the December 31, 1995 balance sheet. In June 1996, WorldCom
replaced its then existing $3.41 billion credit facilities with a new $3.75
billion revolving credit facility with no reduction of principal for five
years.
(6) 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, earnings were
inadequate to cover fixed charges by the amounts shown.
(7) MFS' results for 1996 include a $1.4 billion charge for in-process research
and development related to its acquisition of UUNET. The charge is based on
a valuation analysis of the technologies of the Internet network expansion
system of UUNET and certain other identified research and development
projects purchased in the acquisition.
(8) MFS' acquisition of UUNET closed on August 12, 1996 and was accounted for
as a purchase. Therefore, the year ended December 31, 1996 under the
caption "UUNET" above represents UUNET's results of operations for the
period from January 1, 1996 through August 12, 1996 and includes one-time
merger related costs of $15.7 million. Subsequent to August 12, 1996, the
operating results of UUNET are consolidated with MFS and are included under
the caption "MFS" above in the balance sheet and results of operations of
MFS.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in "Risk Factors" and certain statements
incorporated by reference from documents filed with the Commission by WorldCom
and MFS, including any statements contained herein or incorporated by
reference herein regarding the development of WorldCom's and MFS' businesses,
the markets for WorldCom's and MFS' services and products, anticipated capital
expenditures, regulatory reform and the effects of the MFS Merger, and other
statements, including any forecasts, projections and synergies, contained or
incorporated by reference herein regarding matters that are not historical
facts, are or may constitute forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995). Such
statements are subject to risks and uncertainties and, therefore, actual
results could differ materially from those expressed or implied by such
statements. Factors that could cause actual results to differ materially (the
"Cautionary Statements") include, but are not limited to, those discussed
under "Risk Factors." All subsequent written and oral forward-looking
statements attributable to the Company, or persons acting on its behalf, are
expressly qualified in their entirety by the Cautionary Statements.
RISK FACTORS
In addition to the other information included in or incorporated by
reference into this Prospectus, Holders of the MFS Notes should carefully
consider the following risk factors before deciding to surrender MFS Notes in
exchange for WorldCom Notes pursuant to the Exchange Offers. The
considerations listed below are not intended to represent a complete list of
the general or specific risks that may affect Holders who tender or fail to
tender in the Exchange Offers or that relate to the Company. It should be
recognized that other risks may be significant, now or in the future, and the
risks set forth below may affect tendering or non-tendering Holders to a
greater extent than indicated.
CERTAIN CONSIDERATIONS RELATING TO HOLDERS TENDERING IN THE EXCHANGE OFFERS
Liquidity of WorldCom Notes; No Prior Public Market for WorldCom Notes
Upon consummation of the Exchange Offers and depending on the amount of the
WorldCom Notes outstanding after the Exchange Offers (which will be no less
than $ principal amount of WorldCom 2004 Notes and $ principal amount of
WorldCom 2006 Notes), the trading market for the WorldCom Notes may be more
limited than the trading market for the MFS Notes prior to the Exchange
Offers, which might adversely affect the liquidity and market price of such
WorldCom Notes. The Company does not plan to list the WorldCom Notes on any
national securities exchange or interdealer quotation system sponsored by a
national securities association. Although the MFS Notes are not so listed,
there is currently a limited trading market for the MFS Notes. The WorldCom
Notes are new securities for which there is currently no market. While the
Dealer Managers intend to make a market for the WorldCom Notes, they are not
obligated to do so and any market making may be discontinued at any time.
There can be no assurance that an active trading market for the WorldCom Notes
will develop or, if such market develops, as to the liquidity or
sustainability of any such market.
Structural Subordination of the WorldCom Notes
WorldCom conducts a portion of its business through its subsidiaries. The
Company is therefore dependent to some extent upon dividends and other
payments from its subsidiaries to generate a portion of the funds necessary to
meet its obligations, including the payment of principal and interest on the
WorldCom Notes. As a result, the creditors of the Company, including any
holders of the WorldCom Notes, will effectively rank junior to all creditors
of the Company's subsidiaries, including any Holders of MFS Notes that are not
exchanged in the Exchange Offers and notwithstanding that the WorldCom Notes
will be senior obligations of the Company. As of March 31, 1997, the aggregate
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amount of obligations (including trade payables) of the Company's subsidiaries
to which the holders of the WorldCom Notes would have been structurally
subordinated was approximately $ (of this amount, $1.360 billion represented
the carrying value of the MFS Notes) and the aggregate assets of these
subsidiaries totalled approximately $ . WorldCom expects that substantially
all of its business will ultimately be conducted through its subsidiaries as a
result of the transfer of operating assets to such subsidiaries. Thus, the
Company expects such amounts may increase and that the Company will become
increasingly dependent upon dividends and other payments from its subsidiaries.
Recognition of Income to Holders Accepting Exchange Offers
The receipt of WorldCom Notes, Consent Payments and other cash, if any,
pursuant to the Exchange Offers and Consent Solicitations will be a taxable
transaction for United States federal income tax purposes. See "Certain Federal
Income Tax Consequences."
CERTAIN CONSIDERATIONS RELATING TO HOLDERS NOT TENDERING IN THE EXCHANGE OFFERS
Proposed Amendments to the MFS Indentures
In the event that the Proposed Amendments are adopted with respect to a
series of the MFS Notes, the covenants and certain other terms with respect to
such series of MFS Notes will be substantially less restrictive, and will
afford less protection to Holders, than those currently set forth in the MFS
Indentures. The Proposed Amendments contemplated by the Consent Solicitation
would, among other things, eliminate the covenants in each of the 1994
Indenture and the 1996 Indenture that (a) restrict the ability of MFS and its
restricted subsidiaries to incur debt, incur liens, enter into sale and
leaseback transactions, make restricted payments (including payment of
dividends) or enter into transactions with affiliates and (b) restrict the
ability of restricted subsidiaries of MFS to issue equity securities, to
encumber the ability to pay dividends, and make certain loans or transfers of
property to the Company. In addition, the Proposed Amendments would eliminate
the separate financial reporting requirements currently contained in the MFS
Indentures and, upon receipt of a Supermajority Consent with respect to a
series of MFS Notes, would redefine the term "Change of Control" as to such
series. See "The Proposed Amendments."
In the event the Proposed Amendments are adopted with respect to a series of
MFS Notes, each non-exchanging Holder of such series of MFS Notes will be bound
by the Proposed Amendments even if such Holder did not consent to the Proposed
Amendments. The elimination or modification of the covenants contemplated in
the Proposed Amendments would, among other things, permit WorldCom and MFS and
their subsidiaries to take actions that could increase the credit risk with
respect to MFS, and might adversely affect the market prices and price
volatility of the MFS Notes or otherwise be adverse to the interests of the
holders of the MFS Notes. See "The Proposed Amendments."
Reduced Liquidity of MFS Notes
Although the Company believes there is currently a limited trading market for
the MFS Notes, no generally reliable public pricing information for the MFS
Notes is available. The trading market for unexchanged MFS Notes could become
even more limited or nonexistent due to the reduction in the amount of MFS
Notes outstanding after the Exchange Offers, which might adversely affect the
liquidity, market price and price volatility of such MFS Notes. If a market for
unexchanged MFS Notes exists or develops, such MFS Notes may trade at a
discount to the price at which such MFS Notes would trade if the amount
outstanding were not reduced, depending on prevailing interest rates, the
market for similar securities and other factors. However, there can be no
assurance that an active market in the unexchanged MFS Notes will exist,
develop or be maintained and no assurance as to the prices at which the
unexchanged MFS Notes may be traded.
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CERTAIN CONSIDERATIONS REGARDING THE BUSINESS AND OPERATIONS OF WORLDCOM
Holders should carefully consider the risk factors set forth in the WorldCom
1996 Form 10-K as supplemented by the Company's Quarterly Report on Form 10-Q
for the three months ended March 31, 1997, which are incorporated by reference
into the Registration Statement and this Prospectus. These risk factors
include the following: (a) risks of increased financial leverage and risks
related to debt service, interest rate fluctuations, possible reduction in
liquidity, dividend restrictions and other restrictive covenants; (b) risks
associated with acquisitions and the integration thereof; (c) contingent
liabilities; (d) risks of international business; (e) risks of overseas
business operations; (f) dependence on availability of transmission
facilities; (g) rapid technological change and dependence upon product
development; (h) regulation risks, including the impact of the
Telecommunications Act of 1996 and proposed and possible future regulatory
developments; (i) the impact of competition, including pricing; (j) potential
liability of on-line service providers; (k) dependence upon network
infrastructure, risks of system failure and security risks; and (l) anti-
takeover provisions.
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THE EXCHANGE OFFERS
PURPOSE OF THE EXCHANGE OFFERS
Since the MFS Merger, WorldCom has been operationally and financially
integrating MFS into the WorldCom organization, which integration includes
creating a single, more efficient, consolidated credit entity. The Exchange
Offers are an element of this integration effort, and the Proposed Amendments
are expected to provide greater financial and operating flexibility to the
fully integrated organization. See "The Proposed Amendments."
TERMS OF THE EXCHANGE OFFERS
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letters of Transmittal and in accordance with applicable law, the
Company offers to exchange (i) $ principal amount of its WorldCom 2004
Notes for each $1,000 principal amount at stated maturity of MFS 2004 Notes
validly tendered prior to the Expiration Date and not withdrawn as provided
herein and (ii) $ principal amount of its WorldCom 2006 Notes for each
$1,000 principal amount at stated maturity of MFS 2006 Notes validly tendered
prior to the Expiration Date and not withdrawn as provided herein. Interest on
the WorldCom Notes will accrue from and including the Interest Accrual Date at
the stated interest rate on such WorldCom Notes. The principal amount of
WorldCom Notes offered in exchange for the applicable series of corresponding
MFS Notes is equal to the Accreted Value of such MFS Notes as of the Interest
Accrual Date. As of the Interest Accrual Date, the Accreted Value of the MFS
2004 Notes is $ per $1,000 principal amount at stated maturity and the
Accreted Value of the MFS 2006 Notes is $ per $1,000 principal amount at
stated maturity. The amounts indicated in this Prospectus as the Accreted
Value of either series of MFS Notes as of the Interest Accrual Date are the
sum of (i) the initial issue price of such MFS Notes plus (ii) the portion of
the original issue discount applicable to such MFS Notes accreted from and
including the original issue date thereof and to but excluding the Interest
Accrual Date.
WorldCom Notes will be issued only in denominations of $1,000 and integral
multiples thereof. If the aggregate principal amount of WorldCom Notes that
otherwise would be issued in exchange for the MFS Notes of a series tendered
by a Holder and accepted by the Company pursuant to the Exchange Offers is not
an integral multiple of $1,000, such principal amount will be reduced to the
nearest such multiple and the Company will pay to such Holder an amount in
cash equal to the reduction of such principal amount. WorldCom Notes to be
exchanged for MFS Notes pursuant to the Exchange Offers will be delivered, and
cash payments will be made, on the Exchange Date.
The financial terms of the WorldCom Notes are substantially identical in all
material respects to the financial terms of the MFS Notes except that: (i) the
MFS Notes are the sole obligations of MFS, and the WorldCom Notes will be the
sole obligations of WorldCom; and (ii) the MFS 2004 Notes and the MFS 2006
Notes were originally issued at a discount and except as described below, the
principal amount thereof accretes in value until January 15, 1999 and January
15, 2001, respectively, while the WorldCom Notes have a fixed principal
amount; (iii) except as described below, no cash interest accrues on the MFS
2004 Notes and the MFS 2006 Notes until January 15, 1999 and January 15, 2001,
respectively, while interest will begin to accrue on the WorldCom Notes on the
Interest Accrual Date and will be payable in cash semi-annually in arrears on
each January 15 and July 15, commencing July 15, 1997; and (iv) overdue
principal and premium, if any, and interest on the overdue principal and any
overdue premium of the MFS 2004 Notes and the MFS 2006 Notes bear interest at
the rate of 10 3/8% and 9 7/8% per annum, respectively, while overdue
principal and premium, if any, and interest on the overdue principal and any
overdue premium of the WorldCom 2004 Notes and the WorldCom 2006 Notes will
bear interest at 9 3/8% and 8 7/8% per annum, respectively. The covenants and
certain other terms in the WorldCom Indenture will be substantially less
restrictive than those that are in the MFS Indentures. [MFS may elect,
pursuant to the MFS Indentures, to commence the accrual
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of cash interest beginning on July 15, 1997, at which time the outstanding
principal amount of each of the MFS Notes at their respective stated
maturities will be reduced to the Accreted Value of such MFS Notes as of such
date, and cash interest will be payable on each interest payment date
thereafter, beginning January 15, 1998.]
As of the date of this Prospectus, $ in aggregate principal amount at
stated maturity of the MFS 2004 Notes and $ in aggregate principal amount
at stated maturity of the MFS 2006 Notes were outstanding. Only a Holder of
the MFS Notes (or such Holder's legal representative or attorney-in-fact) as
reflected on the records of the Trustee under the MFS Indentures may
participate in the Exchange Offers and the Consent Solicitations. There will
be no fixed record date for determining Holders of the MFS Notes entitled to
participate in the Exchange Offers. Consents from Holders of a majority in
principal amount outstanding of a series of MFS Notes must be received in
order to amend the relevant MFS Indenture in the manner contemplated by the
Consent Solicitations, as described herein, except with respect to the
modification of the term "Change of Control," which requires Consents from
Holders of not less than 75% of the aggregate principal amount outstanding of
MFS Notes of such series. See "The Consent Solicitations" and "The Proposed
Amendments."
The Company reserves the right, in its sole discretion, to purchase or make
offers for any MFS Notes that remain outstanding subsequent to the Expiration
Date and, to the extent permitted by applicable law, purchase MFS Notes in the
open market, in privately negotiated transactions or otherwise. The terms of
any such purchases or offers could differ from the terms of the Exchange
Offers. Any purchase or offer by the Company will not be made except in
accordance with applicable law and will in no event be made prior to the
expiration of ten business days after the Expiration Date.
CONDITIONS OF THE EXCHANGE OFFERS AND CONSENT SOLICITATIONS
Notwithstanding any other provisions of an Exchange Offer or Consent
Solicitation, or any extension of such Exchange Offer or Consent Solicitation,
the Company will not be required to issue WorldCom Notes or make any payments
in respect of any properly tendered MFS Notes or properly given Consents, and
may terminate such Exchange Offer or Consent Solicitation or, at its option,
modify, extend or otherwise amend such Exchange Offer or Consent Solicitation
with respect to such MFS Notes, if any of the following conditions has not
been satisfied, prior to or concurrently with the consummation of such
Exchange Offer or Consent Solicitation:
(a) receipt of the Requisite Consents with respect to both series of MFS
Notes;
(b) there shall not have been any action taken or threatened, or any
statute, rule, regulation, judgment, order, stay, decree or injunction
promulgated, enacted, entered, enforced or deemed applicable to the
Exchange Offers, the exchange of MFS Notes pursuant to the Exchange Offers
(the "Exchange"), the Consent Solicitations or the Proposed Amendments by
or before any court or governmental regulatory or administrative agency or
authority tribunal, domestic or foreign, which (i) challenges the making of
the Exchange Offers, the Exchange, the Consent Solicitations or the
Proposed Amendments or might, directly or indirectly, prohibit, prevent,
restrict or delay consummation of, or might otherwise adversely affect in
any material manner, the Exchange Offers, the Exchange, the Consent
Solicitations or the Proposed Amendments or (ii) in the sole judgment of
the Company, could materially adversely affect the business, condition
(financial or otherwise), income, operations, properties, assets,
liabilities or prospects of the Company and its subsidiaries, taken as a
whole, or materially impair the contemplated benefits of the Exchange
Offers, the Exchange, the Consent Solicitations or the Proposed Amendments
to the Company or might be material to holders of MFS Notes in deciding
whether to accept such Exchange Offers and give such Consents;
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(c) there shall not have occurred or be likely to occur any event
affecting the business or financial affairs of the Company that, in the
sole judgment of the Company, would or might prohibit, prevent, restrict or
delay consummation of the Exchange Offers, the Exchange, the Consent
Solicitations or the Proposed Amendments or that will, or is reasonably
likely to, materially impair the contemplated benefits of the Exchange
Offers, the Exchange, the Consent Solicitations or the Proposed Amendments
to the Company or might be material to Holders of MFS Notes in deciding
whether to accept such Exchange Offers and give the related Consent;
(d) there shall not have occurred (i) any general suspension of or
limitation on trading in securities on the NYSE or in the over-the-counter
market (whether or not mandatory), (ii) any material adverse change in the
prices of the MFS Notes, (iii) a material impairment in the general trading
market for debt securities, (iv) a declaration of a banking moratorium or
any suspension of payments in respect of banks by federal or state
authorities in the United States (whether or not mandatory), (v) a
commencement of a war, armed hostilities or other national or international
crisis directly or indirectly relating to the United States, (vi) any
limitation (whether or not mandatory) by any governmental authority on, or
other event having a reasonable likelihood of affecting, the extension of
credit by banks or other lending institutions in the United States or (vii)
any material adverse change in United States securities or financial
markets generally, or in the case of any of the foregoing existing at the
time of the commencement of the Exchange Offers, a material acceleration or
worsening thereof; and
(e) the Trustee under the MFS Indentures (the "MFS Trustee") shall not
have objected in any respect to, or taken any action that could in the sole
judgment of the Company adversely affect the consummation of, any of the
Exchange Offers, the Exchange, the Consent Solicitations or the Company's
ability to effect the Proposed Amendments nor shall the MFS Trustee have
taken any action that challenges the validity or effectiveness of the
procedures used by the Company in soliciting Consents (including the form
thereof) or in making the Exchange Offers, the Exchange or the Consent
Solicitations.
If any of the foregoing conditions are not satisfied with respect to a
particular series of MFS Notes, the Company may (i) terminate the Exchange
Offer and the Consent Solicitation with respect to such series of MFS Notes
and return all tendered MFS Notes of such series to the Holders thereof; (ii)
extend such Exchange Offer and Consent Solicitation and retain all tendered
MFS Notes and Consents until the Expiration Date, as extended, of such
Exchange Offer and Consent Solicitation, subject, however, to the withdrawal
rights of Holders, see "--Withdrawal of Tenders" and "--Expiration Date;
Extensions; Amendments"; or (iii) waive the unsatisfied conditions with
respect to such Exchange Offer and Consent Solicitations and accept all MFS
Notes tendered and not previously withdrawn.
The foregoing conditions are for the sole benefit of the Company and may be
waived by the Company, in whole or in part, in its sole discretion. Any
determination made by the Company concerning an event, development or
circumstance described or referred to above shall be conclusive and binding.
Notwithstanding the foregoing, the Company will not consummate the Exchange
Offer with respect to the MFS 2004 Notes if less than $ of principal amount
of WorldCom 2004 Notes would be issued in such Exchange Offer and will not
consummate the Exchange Offer with respect to the MFS 2006 Notes if less than
$ of principal amount of WorldCom 2006 Notes would be issued in such
Exchange Offer.
Except for the requirements of applicable federal and state securities laws,
there are no federal or state regulatory requirements to be complied with or
obtained by the Company or MFS in connection with the Exchange Offers.
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CERTAIN CONSEQUENCES TO HOLDERS NOT TENDERING IN THE EXCHANGE OFFERS
Consummation of the Exchange Offers and the adoption of the Proposed
Amendments with respect to the MFS Notes will have certain consequences to
Holders of the MFS Notes who elect not to tender in the Exchange Offers,
including, without limitation, that the covenants and certain other terms set
forth in the MFS Indentures, as proposed to be amended, with respect to the
MFS Notes will be substantially less restrictive, and afford less protection
to such Holders, than those in the existing MFS Indentures. See "Risk
Factors--Certain Considerations Relating to Holders Not Tendering in the
Exchange Offers."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 11:59 p.m., New York City time, on
, 1997, subject to the right of the Company to extend such date and time
for either or both Exchange Offers in its sole discretion, in which case the
term "Expiration Date" shall mean, with respect to any such extended Exchange
Offer, the latest date and time to which such Exchange Offer is extended.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any MFS Notes, (ii) to extend the Exchange Offers or (iii) to
terminate or amend the Exchange Offers by giving oral or written notice of
such delay, extension, termination or amendment to the Exchange Agent. Any
such delay in acceptance, extension, termination or amendment will be followed
as promptly as practicable by a public announcement thereof which, in the case
of an extension, will be made no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date. If the
Exchange Offers are amended in a manner determined by the Company to
constitute a material change, the Company will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
Holders, and the Company will extend the Exchange Offers for a period of five
to ten business days, depending upon the significance of the amendment and the
manner of disclosure to the Holders, if the Exchange Offers would otherwise
have expired during such five to ten business day period. Any change in the
consideration offered to Holders of MFS Notes pursuant to either Exchange
Offer shall be paid to all Holders whose MFS Notes have previously been
tendered pursuant to such Exchange Offer.
Without limiting the manner in which the Company may choose to make a public
announcement of any delay, extension, amendment or termination of the Exchange
Offers, the Company shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency, including, without limitation,
the Dow Jones News Service.
EFFECT OF TENDER
Tenders of MFS Notes pursuant to the Exchange Offers described herein and in
the Letters of Transmittal will constitute a binding agreement between the
tendering Holder of the MFS Notes and Company upon the terms and subject to
the conditions of the Exchange Offers. The acceptance of an Exchange Offer by
a tendering Holder of MFS Notes will constitute the agreement by such Holder
to deliver good and marketable title to the tendered MFS Notes free and clear
of all liens, charges, claims encumbrances, interests and restrictions of any
kind.
Tendering Holders of MFS Notes will not be required to pay any fee or
commission to the Dealer Managers. However, if a tendering Holder handles the
transaction through its broker, dealer, commercial bank, trust company or
other institution, such Holder may be required to pay brokerage fees or
commissions. Holders of the MFS Notes do not have any appraisal or dissenters'
rights under the Delaware General Corporation Law or the MFS Indentures in
connection with the Exchange Offers. The Company intends to conduct the
Exchange Offers in accordance with the applicable requirements of the
Securities Act and the Exchange Act, and the rules and regulations of the
Commission thereunder.
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ACCEPTANCE OF MFS NOTES FOR EXCHANGE; DELIVERY OF WORLDCOM NOTES
The Company shall be deemed to have accepted validly tendered MFS Notes and
properly given Consents which have not been withdrawn or revoked as provided
in this Prospectus when, and if, the Company has given oral or written notice
thereof to the Exchange Agent. Subject to the terms and conditions of the
Exchange Offers, delivery of WorldCom Notes, Consent Payments and other cash,
if any for MFS Notes so accepted will be made by the Exchange Agent on the
Exchange Date as soon as practicable after receipt of such notice. The
Exchange Agent will act as agent for the Holders for the purpose of receiving
MFS Notes from and transmitting Consent Payments and WorldCom Notes to the
Holders thereof. If any tendered MFS Notes are not accepted for any reason set
forth in the terms and conditions of the Exchange Offers or if MFS Notes are
withdrawn or are submitted for a greater principal amount than the Holder
thereof desires to exchange, such unaccepted, withdrawn or non-exchanged MFS
Notes will be returned without expense to the tendering Holder thereof as
promptly as practicable.
PROCEDURES FOR TENDERING
To tender in the Exchange Offers, a Holder of MFS Notes must complete, sign
and date the applicable Letter of Transmittal, or a facsimile thereof, have
the signatures thereon guaranteed if required by the Letter of Transmittal,
and mail or otherwise deliver such Letter of Transmittal or such facsimile to
the Exchange Agent at the address set forth below under "--Exchange Agent" for
receipt prior to the Expiration Date. In addition, either (i) certificates for
such MFS Notes must be received by the Exchange Agent along with the
applicable Letter of Transmittal, (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such MFS Notes, if such procedure is
available, into the Exchange Agent's account at DTC pursuant to the procedure
for book-entry transfer described below, must be received by the Exchange
Agent prior to the Expiration Date or (iii) the Holder must comply with the
guaranteed delivery procedures described below.
Any tender by a Holder (and subsequent acceptance of such tender by the
Company) that is not withdrawn prior to 11:59 p.m., New York City time, on
, 1997 will constitute an agreement between such Holder and the Company
in accordance with the terms and subject to the conditions set forth herein
and in the applicable Letter of Transmittal.
Any beneficial owner(s) of the MFS Notes whose MFS Notes are held by a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such nominee promptly and instruct such nominee to
tender on such beneficial owner's behalf. If such beneficial owner wishes to
tender on such owner's own behalf, such owner must, prior to completing and
executing the applicable Letter of Transmittal and delivering such owner's MFS
Notes, either make appropriate arrangements to register ownership of the MFS
Notes in such owner's name or obtain a properly completed bond power from its
nominee. The transfer of registered ownership may take considerable time and
be difficult to complete prior to the Expiration Date.
All WorldCom Notes will be delivered only in book-entry form through DTC.
Accordingly, Holders who anticipate tendering other than through DTC are urged
to contact promptly a bank, broker or other intermediary (that has the
capability to hold securities custodially through DTC) to arrange for receipt
of any WorldCom Notes to be delivered pursuant to the Exchange Offers and to
obtain the information necessary to provide the required DTC participant and
account information in the applicable Letter of Transmittal.
The YELLOW Letter of Transmittal must be used to tender MFS 2004 Notes. The
BLUE Letter of Transmittal must be used to tender MFS 2006 Notes. Holders who
wish to tender from both series must complete a separate Letter of Transmittal
in respect of each series of MFS Notes tendered.
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Tender of MFS Notes Held in Physical Form.
A Holder of MFS Notes held in physical form must follow the following
instructions to tender MFS Notes in either of the Exchange Offers: (i)
complete and sign the applicable Letter of Transmittal in accordance with the
instructions set forth therein; (ii) deliver the properly completed and
executed Letter of Transmittal and the MFS Notes in physical form to the
Exchange Agent at the address set forth on the back cover page of this
Prospectus on or prior to 11:59 p.m., New York City time, on the Expiration
Date. THE PROPER COMPLETION, EXECUTION AND DELIVERY OF A LETTER OF TRANSMITTAL
WITH RESPECT TO PARTICULAR MFS NOTES WILL CONSTITUTE THE GIVING OF A CONSENT
TO THE PROPOSED AMENDMENTS WITH RESPECT TO SUCH MFS NOTES.
Book-Entry Delivery Procedures for Holders Tendering MFS Notes held with
DTC.
A beneficial owner of MFS Notes held by a nominee with DTC must follow the
following instructions to tender MFS Notes in either of the Exchange Offers:
(i) call such owner's nominee and inform such nominee of such owner's interest
in tendering such owner's MFS Notes pursuant to the Exchange Offers; (ii)
instruct such nominee to effect a book-entry transfer of all MFS Notes to be
tendered in the Exchange Offers by such owner into the Exchange Agent's
account at DTC; (iii) instruct such nominee to complete and sign the
applicable Letter of Transmittal in accordance with the instructions set forth
therein; (v) instruct such nominee to deliver the properly completed and
executed Letter of Transmittal (or a facsimile thereof) to the Exchange Agent
on or prior to the Expiration Date. THE PROPER COMPLETION, EXECUTION AND
DELIVERY OF A LETTER OF TRANSMITTAL WITH RESPECT TO PARTICULAR MFS NOTES WILL
CONSTITUTE THE GIVING OF A CONSENT TO THE PROPOSED AMENDMENTS WITH RESPECT TO
SUCH MFS NOTES.
The Exchange Agent will establish promptly an account with respect to the
MFS Notes at DTC for purposes of the Exchange Offers. Any financial
institution that is a participant in DTC may make a book-entry delivery of MFS
Notes by causing DTC to transfer MFS Notes to the Exchange Agent's account.
However, although delivery of MFS Notes may be effected through book-entry
transfer at DTC, a properly completed and executed Letter of Transmittal,
together with any other documents required by the Letter of Transmittal, must,
in any case, be transmitted to, and received by, the Exchange Agent at its
address set forth below prior to the Expiration Date, or the guaranteed
delivery procedures described below must be complied with. MFS Notes will not
be deemed surrendered until the Letter of Transmittal and signature
guarantees, if any, is received by the Exchange Agent. DELIVERY OF A LETTER OF
TRANSMITTAL TO DTC WILL NOT CONSTITUTE VALID DELIVERY TO THE EXCHANGE AGENT.
Guaranteed Delivery Procedures.
Holders who wish to tender their MFS Notes and (i) whose MFS Notes are not
immediately available or (ii) who cannot deliver their MFS Notes, the Letter
of Transmittal or any other required documents to the Exchange Agent prior to
the Expiration Date, may effect a tender if:
(a) The tender is made by or through a firm or other entity identified in
Rule 17Ad-15 under the Exchange Act, including (as such terms are defined
therein): (i) a bank; (ii) a broker, dealer, municipal securities dealer,
municipal securities broker, government securities dealer or government
securities broker; (iii) a credit union; (iv) a national securities
exchange, registered securities association or clearing agency; or (v) a
savings institution that is a participant in a Securities Transfer
Association recognized program (an "Eligible Institution");
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
substantially in the form provided by the Company setting forth the name
and address of the Holder, the certificate number(s) of such MFS Notes and
the principal amount
25
<PAGE>
of MFS Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within two New York Stock Exchange trading days after
the Expiration Date, the Letter of Transmittal (or a facsimile thereof),
together with the certificate(s) representing the MFS Notes in proper form
for transfer or a Book-Entry Confirmation, as the case may be, and any
other documents required by the Letter of Transmittal, will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile thereof),
as well as the certificate(s) representing all tendered MFS Notes in proper
form for transfer and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within two New York Stock
Exchange trading days after the Expiration Date.
Upon request to the Information Agent, a Notice of Guaranteed Delivery will
be sent to Holders who wish to tender their MFS Notes according to the
guaranteed delivery procedures set forth above.
PROPER EXECUTION AND DELIVERY OF LETTERS OF TRANSMITTAL
THE METHOD OF DELIVERY OF MFS NOTES, THE LETTERS OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO AND RECEIPT BY THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. DO NOT SEND THE LETTER OF TRANSMITTAL OR ANY MFS
NOTES TO ANYONE OTHER THAN THE EXCHANGE AGENT.
Signatures on a Letter of Transmittal or notice of withdrawal described
below (see "--Withdrawal of Tenders and Revocation of Consents"), as the case
may be, must be guaranteed by an Eligible Institution unless the MFS Notes
tendered pursuant thereto are tendered (i) by a Holder who has not completed
the box entitled "Special Delivery Instructions" or "Special Issuance and
Payment Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution. In the event that signatures on a Letter of
Transmittal are required to be guaranteed, such guarantee must be made by a
member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an Eligible
Institution.
The YELLOW Letter of Transmittal must be used to tender MFS 2004 Notes. The
BLUE Letter of Transmittal must be used to tender MFS 2006 Notes. Holders who
wish to tender from both series must complete a separate Letter of Transmittal
in respect of each series of MFS Notes tendered.
If the Letter of Transmittal is signed by the Holder(s) of MFS Notes
tendered thereby, the signature(s) must correspond with the name(s) as written
on the face of the MFS Notes without alteration, enlargement or any change
whatsoever. If any of the MFS Notes tendered thereby are held by two or more
Holders, all such Holders must sign the Letter of Transmittal. If any of the
MFS Notes tendered thereby are registered in different names on different MFS
Notes, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If the certificates for WorldCom Notes issued pursuant to the Exchange
Offers are to be registered in the name of, or payments are to be made to, a
person other than the signatory on the Letter of Transmittal, or if MFS Notes
that are not tendered for exchange pursuant to the Exchange Offers are to be
returned to a person other than the Holder thereof, then certificates for such
MFS Notes must be endorsed or accompanied by an appropriate instrument of
transfer, signed exactly as the name of the
26
<PAGE>
registered owner appears on the certificates, with the signatures on the
certificates or instruments of transfer guaranteed by an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the Holder of
any MFS Notes listed therein, such MFS Notes must be properly endorsed or
accompanied by a properly completed bond power, signed by such Holder exactly
as such Holder's name appears on such MFS Notes.
If the Letter of Transmittal or any MFS Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may utilize DTC's Automated Tender Offer
Program to tender MFS Notes.
No alternative, conditional, irregular or contingent tenders or consents
will be accepted. By executing the Letter of Transmittal (or facsimile
thereof), the tendering Holders of MFS Notes waive any right to receive any
notice of the acceptance for exchange of their MFS Notes.
Tendering Holders should indicate in the applicable box in the Letter of
Transmittal the name and address to which payments and/or substitute
certificates evidencing MFS Notes for amounts not tendered or not exchanged
are to be issued or sent, if different from the name and address of the person
signing the Letter of Transmittal. If no such instructions are given, such
payments, WorldCom Notes or MFS Notes not tendered or not exchanged, as the
case may be, will be returned to such tendering Holder.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance and withdrawal of tendered MFS Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and
all MFS Notes determined by it not to be in proper form or not to be properly
tendered or any MFS Notes the Company's acceptance of which would, in the
opinion of counsel for the Company, be unlawful. The Company also reserves the
right to waive, in its sole discretion, any defects, irregularities or
conditions of tender as to particular MFS Notes, whether or not waived in the
case of other MFS Notes. The Company's interpretation of the terms and
conditions of the Exchange Offers and the Consent Solicitations (including the
instructions in the Letters of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of MFS Notes must be cured within such time as the Company shall
determine. Although the Company intends to notify Holders of defects or
irregularities with respect to tenders of MFS Notes, neither the Company, the
Exchange Agent nor any other person will be under any duty to give such
notification or shall incur any liability for failure to give any such
notification. Tenders of MFS Notes will not be deemed to have been made until
such defects or irregularities have been cured or waived.
By tendering, each Holder of MFS Notes will represent to and agree with the
Company that, among other things, the MFS Notes tendered are held by such
Holder free and clear of all security interests, liens, restrictions, charges,
encumbrances, conditional sale agreements or other obligations relating to
their sale or transfer, and not subject to any adverse claim when the same are
accepted by the Company.
Any holder whose MFS Notes have been mutilated, lost, stolen or destroyed
will be responsible for obtaining replacement securities or for arranging for
indemnification with the MFS Trustee. Holders may contact the Information
Agent for assistance with such matters.
27
<PAGE>
IN ORDER FOR A TENDERING HOLDER TO BE ASSURED OF PARTICIPATING IN AN
EXCHANGE OFFER, SUCH HOLDER MUST TENDER MFS NOTES IN ACCORDANCE WITH THE
PROCEDURES SET FORTH HEREIN AND IN THE APPROPRIATE LETTER OF TRANSMITTAL PRIOR
TO THE EXPIRATION DATE. LETTERS OF TRANSMITTAL AND MFS NOTES MUST BE SENT ONLY
TO THE EXCHANGE AGENT. DO NOT SEND LETTERS OF TRANSMITTAL OR MFS NOTES TO THE
COMPANY, THE TRUSTEE OF THE MFS INDENTURES, THE TRUSTEE OF THE WORLDCOM
INDENTURE, THE INFORMATION AGENT OR THE DEALER MANAGERS.
WITHDRAWAL OF TENDERS AND REVOCATION OF CONSENTS
Except as otherwise provided herein, tenders of MFS Notes may be withdrawn
at any time prior to 11:59 p.m., New York City time, on , 1997. Tenders of
MFS Notes may not be withdrawn at any time after 11:59 p.m., New York City
time, on , 1997, unless the applicable Exchange Offer is extended with
changes in the terms of such Exchange Offer that are materially adverse to the
tendering Holder, in which case tenders of MFS Notes may be withdrawn under
the conditions described in the extension. The withdrawal of tendered MFS
Notes will be deemed to be a revocation of the Consents related to such MFS
Notes.
Withdrawal of MFS Notes Held in Physical Form.
To withdraw a tender of MFS Notes in the Exchange Offers, a Holder of MFS
Notes held in physical form must provide a written or facsimile transmission
notice of withdrawal to the Exchange Agent at its address set forth herein
prior to 11:59 p.m., New York City time, on , 1997, or such later time,
if any, specified in an extension of the applicable Exchange Offer. Any such
notice of withdrawal must (i) specify the name of the person who tendered the
MFS Notes to be withdrawn, (ii) identify the MFS Notes to be withdrawn
(including the certificate number or numbers and aggregate principal amount of
such MFS Notes), (iii) be signed by the Holder in the same manner as the
original signature on the Letter of Transmittal by which such MFS Notes were
tendered (including any required signature guarantees) and (iv) if such MFS
Notes are held by a new beneficial owner, include evidence satisfactory to the
Company that the person withdrawing the tender has succeeded to the beneficial
ownership of the MFS Notes. A purported notice of withdrawal which lacks any
of the required information will not be an effective withdrawal of a tender
previously made.
Withdrawal of MFS Notes Held with DTC.
To withdraw a tender of MFS Notes in the Exchange Offers, a beneficial owner
of MFS Notes held with DTC must: (i) call such owner's nominee and instruct
such nominee to withdraw such tender of MFS Notes by debiting the Exchange
Agent's account at DTC of all MFS Notes to be withdrawn; and (ii) instruct
such nominee to provide a written, telegraphic or facsimile transmission
notice of withdrawal to the Exchange Agent at its address set forth herein
prior to 11:59 p.m., New York City time, on , 1997, or such later time,
if any, specified in an extension of the applicable Exchange Offer. Such
notice of withdrawal must: (A) specify the name of the person who tendered the
MFS Notes; (B) specify the aggregate principal amount of MFS Notes to be
withdrawn; (C) specify the number of the account at DTC to be credited with
the withdrawn MFS Notes; and (D) if such MFS Notes are held by a new
beneficial owner, evidence satisfactory to the Company that the person
withdrawing the tender has succeeded to the beneficial ownership of the MFS
Notes. A purported notice of withdrawal which lacks any of the required
information will not be an effective withdrawal of a tender previously made.
All questions as to the validity, form and eligibility (including time of
receipt) of any such notices of withdrawal will be determined by the Company,
in its sole discretion, whose determination shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
withdrawals of tenders of MFS Notes must be cured within such time as the
Company shall determine. Neither the
28
<PAGE>
Company, the Exchange Agent nor any other person will be under any duty to
give notification of any such defect or irregularity or shall incur any
liability for failure to give any such notification. Withdrawals of tenders of
MFS Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any MFS Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offers,
and no WorldCom Notes will be issued with respect thereto unless the MFS Notes
so withdrawn are validly retendered. Properly withdrawn MFS Notes may be
retendered by following one of the procedures described above under "The
Exchange Offers--Procedures for Tendering" at any time prior to the Expiration
Date.
EXCHANGE AGENT
Harris Trust and Savings Bank has been appointed Exchange Agent for the
Exchange Offers. Letters of Transmittal, Notices of Guaranteed Delivery and
all correspondence in connection with the
Exchange Offers should be sent or delivered by each Holder or a beneficial
owner's broker, dealer, commercial bank, trust company or other nominee to the
Exchange Agent at the addresses and telephone numbers set forth on the back
cover page of this Prospectus. The Company will pay the Exchange Agent
reasonable and customary fees for its services and will reimburse it for its
reasonable, out-of-pocket expenses in connection therewith.
INFORMATION AGENT
MacKenzie Partners, Inc. has been appointed as Information Agent for the
Exchange Offers and the Consent Solicitations, and will receive customary
compensation for its services. Requests for assistance or additional copies of
this Prospectus, the Letters of Transmittal or the Notices of Guaranteed
Delivery may be directed to the Information Agent at the address and telephone
numbers set forth on the back cover page of this Prospectus. Holders of MFS
Notes may also contact their broker, dealer, commercial bank or trust company
for assistance concerning the Exchange Offers.
DEALER MANAGERS
The Company has retained Salomon Brothers Inc and Goldman, Sachs & Co. to
act as Dealer Managers in connection with the Exchange Offers and will pay a
predetermined amount to the Dealer Managers for soliciting acceptances of the
Exchange Offers, subject to consummation of the Exchange Offers. The
obligations of the Dealer Managers to perform such function are subject to
certain conditions. The Company has agreed to indemnify the Dealer Managers
against certain liabilities, including certain liabilities under the federal
securities laws, or to contribute to payments that the Dealer Managers may be
required to make in respect thereof. Any questions regarding the Exchange
Offers may be directed to the Dealer Managers at the addresses and telephone
numbers set forth on the back cover page of this Prospectus.
The Dealer Managers currently plan to make a market in the WorldCom Notes
following the completion of the Exchange Offers and may buy and sell WorldCom
Notes on a "when and if issued" basis prior to the completion of the Exchange
Offers. However, there can be no assurance that the Dealer Managers will
engage in such activities or that any active market in the WorldCom Notes will
develop or be maintained. See "Risk Factors--Certain Considerations Relating
to Holders Tendering in the Exchange Offers."
OTHER FEES AND EXPENSES; TRANSFER TAXES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, facsimile transmission, telephone or in person by
the Dealer Managers and the Information Agent, as well as by officers and
regular employees of the Company and its affiliates.
29
<PAGE>
Tendering Holders of MFS Notes will not be required to pay any fee or
commission to the Dealer Managers. However, if a tendering Holder handles the
transaction through its broker, dealer, commercial bank, trust company or
other institution, such Holder may be required to pay brokerage fees or
commissions.
The Company will pay all transfer taxes, if any, applicable to the exchange
of MFS Notes pursuant to the Exchange Offers. If, however, WorldCom Notes
and/or substitute MFS Notes for amounts not tendered or not exchanged are to
be delivered to, or are to be registered in the name of, any person other than
the Holder of MFS Notes tendered, or if tendered MFS Notes are registered in
the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of the MFS Notes pursuant to an Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered Holder or any other
persons) will be payable by the tendering Holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the
appropriate Letter of Transmittal, the amount of such transfer taxes will be
billed directly to such tendering Holder and/or withheld from any payments due
with respect to the MFS Notes tendered by such Holder.
DESCRIPTION OF DIFFERENCES BETWEEN THE MFS NOTES AND THE WORLDCOM NOTES
The following is a summary comparison of the material terms of the MFS Notes
and the WorldCom Notes. The description of the MFS Notes reflects the MFS
Notes as currently constituted and does not reflect any changes to the
covenants and other terms of the MFS Notes that may be effected pursuant to
the Consent Solicitations. Such summary does not purport to be complete and is
qualified in its entirety by reference to the WorldCom Indenture and the MFS
Indentures. Capitalized terms appearing below within the descriptions of the
MFS Notes and the WorldCom Notes and which are not otherwise defined herein
have the same meanings as are given to such terms in the MFS Indentures and
the WorldCom Indenture, respectively, copies of which are exhibits to the
Registration Statement of which this Prospectus forms a part. Definitions of
certain capitalized terms relating to the MFS Indentures are set forth under
"The Proposed Amendments--Certain Definitions." Whenever particular sections
or defined terms are referred to, it is intended that such sections or defined
terms shall be incorporated by reference. For additional information,
regarding the WorldCom Notes and for definitions of capitalized terms used
with respect to the WorldCom Notes but not heretofore defined, see
"Description of the WorldCom Notes" below.
----------------------------------------------------------------
MFS NOTES WORLDCOM NOTES
- -------------------------------------------------------------------------------
ISSUER: MFS WorldCom
INTEREST Interest on the MFS 2004 Notes Interest on the WorldCom
PAYMENT is payable semi-annually on Notes will accrue from the
DATES: January 15 and July 15 begin- Interest Accrual Date. In-
ning on July 15, 1999, and in- terest on the WorldCom 2004
terest on the MFS 2006 Notes Notes is payable semi-annu-
is payable semi-annually on ally on January 15 and July
January 15 and July 15 begin- 15 beginning on July 15,
ning on July 15, 2001; provid- 1997, and interest on the
ed, however, that MFS may WorldCom 2006 Notes is pay-
elect to commence the accrual able semi-annually on Janu-
of cash interest beginning on ary 15 and July 15 beginning
July 15, 1997, at which time on July 15, 1997. (Sections
the outstanding principal 2(a)(iv) and 2(b)(iv) of
amount of each of the MFS WorldCom Indenture)
Notes at their respective
stated maturities will be re-
duced to the Accreted Value of
such MFS Notes as of such
date, and cash interest will
be payable on each interest
payment date thereafter, be-
ginning January 15, 1998.
(Section 301 of 1994 Inden-
ture, Section 2(a)(iv) of 1996
Indenture)
- -------------------------------------------------------------------------------
30
<PAGE>
Continuation of Description of Differences Between the MFS Notes and the
WorldCom Notes
----------------------------------------------------------------
MFS NOTES WORLDCOM NOTES
- --------------------------------------------------------------------------------
OPTIONAL The MFS 2004 Notes are not
REDEMPTION: redeemable at the option of The WorldCom 2004 Notes have
MFS prior to January 15, the same redemption provisions
1999. On or after January 15, as the MFS 2004 Notes, and the
1999, the MFS 2004 Notes are WorldCom 2006 Notes have the
redeemable at the option of same redemption provisions as
MFS, in whole at any time or the MFS 2006 Notes, except
in part from time to time, at that WorldCom is the Issuer of
the following prices (ex- the WorldCom Notes and has the
pressed as percentages of the optional right to redeem such
principal amount at Stated notes. (Sections 2(a)(vi) and
Maturity), if redeemed during 2(b)(vi) of the WorldCom In-
the twelve months beginning denture)
January 15 of the years indi-
cated below, in each case to-
gether with interest accrued
to the redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1999.................. 103.52%
2000.................. 102.34%
2001.................. 101.17%
2002 and thereafter... 100.00%
</TABLE>
(Sections 203 and 301 of 1994
Indenture)
The MFS 2006 Notes are not
redeemable at the option of
MFS prior to January 15,
2001. On or after January 15,
2001, the MFS 2006 Notes will
be redeemable at the option
of MFS, in whole at any time
or in part from time to time,
at the following prices (ex-
pressed as percentages of the
principal amount at Stated
Maturity), if redeemed during
the twelve months beginning
January 15 of the years indi-
cated below, in each case to-
gether with interest accrued
to the redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001.................. 103.32%
2002.................. 102.21%
2003.................. 101.11%
2004 and thereafter... 100.00%
</TABLE>
(Section 2(a)(vi) of 1996 In-
denture)
CHANGE OF Upon the occurrence of a None
CONTROL: Change of Control, each
Holder will have the right
- --------------------------------------------------------------------------------
31
<PAGE>
Continuation of Description of Differences Between the MFS Notes and the
WorldCom Notes
----------------------------------------------------------------
MFS NOTES WORLDCOM NOTES
- --------------------------------------------------------------------------------
to require MFS to repurchase
all or any part of such Hold-
er's Notes at a purchase price
in cash equal to 101 percent
of the Accreted Value thereof
on any Purchase Date occurring
prior to January 15, 1999, in
the case of the MFS 2004
Notes, and prior to January
15, 2001, in the case of the
MFS 2006 Notes, plus any ac-
crued and unpaid cash interest
not otherwise included in Ac-
creted Value to such Purchase
Date, or 101 percent of the
principal amount thereof at
Stated Maturity (subject to
possible reduction as provided
in the MFS Indentures) on any
Purchase Date occurring on or
after January 15, 1999 and
January 15, 2001, respective-
ly, plus accrued and unpaid
interest, if any, to such Pur-
chase Date, in accordance with
the procedures set forth in
the MFS Indentures. (Section
1013 of 1994 Indenture; Sec-
tion 5(r) of 1996 Indenture)
LIMITATION OF None
DEBT: MFS will not incur any Debt
unless (i) after giving effect
to such incurrence of Debt and
the contemporaneous applica-
tion of the proceeds thereof,
no Default or Event of Default
shall have occurred and be
continuing at the time or
would occur as a consequence
of the incurrence of such
Debt, and (ii) such Debt is
Permitted Debt. (Section 1008
of 1994 Indenture; Section
5(e) of 1996 Indenture)
LIMITATION OF MFS will not permit any of its None
DEBT AND Restricted Subsidiaries to in-
PREFERRED cur any Debt or issue any pre-
STOCK OF ferred stock, except (a) Sub-
RESTRICTED sidiary Vendor Debt; (b) Debt
SUBSIDIARIES: and preferred stock of Re-
stricted Subsidiaries out-
standing as of January 26,
1994; (c) Debt and preferred
stock of a Restricted Subsidi-
ary issued to and held by MFS;
(d) Interest Swap Obligations,
provided that such obligations
are related to payment obliga-
tions on Debt otherwise per-
mitted by the terms of this
paragraph, and Currency Hedge
Obligations;
- --------------------------------------------------------------------------------
32
<PAGE>
Continuation of Description of Differences Between the MFS Notes and the
WorldCom Notes
----------------------------------------------------------------
MFS NOTES WORLDCOM NOTES
- -------------------------------------------------------------------------------
(e) Debt or preferred stock
incurred in exchange for, or
the proceeds of which are used
to refinance, Restricted Sub-
sidiary Debt or preferred
stock referred to in clause
(a) of this paragraph, subject
to certain exceptions; (f)
Debt or preferred stock of MFS
Telecom, which is convertible
into Capital Stock of MFS, is-
sued to a Strategic Equity In-
vestor; provided, however,
that the proceeds of such
incurrence or issuance are
used as though such proceeds
were Net Cash Proceeds in ac-
cordance with the provisions
of "Limitations on Asset
Sales" (described below); and
(g) Guarantees by Restricted
Subsidiaries of Debt of MFS
described in clause (a) of the
definition of Permitted Debt.
(Section 1009 of 1994 Inden-
ture; Section 5(f) of 1996 In-
denture)
LIMITATIONS
ON LIENS: MFS will not, and will not Same as MFS Notes, except
permit any of its Restricted that, WorldCom may issue,
Subsidiaries to enter into, assume or guarantee indebt-
create, incur, assume or suf- edness secured by Liens on
fer to exist any Liens of any Property that are not Per-
kind, other than Permitted mitted Liens without equally
Liens, on or with respect to and ratably securing the
any of its Property or assets WorldCom Notes, provided
now owned or hereafter ac- that the sum of all such in-
quired, or any interest debtedness then being is-
therein or any income or prof- sued, assumed or guaranteed
its therefrom, unless the MFS together with such indebted-
Notes are secured equally and ness theretofore issued, as-
ratably with (or prior to) sumed or guaranteed that re-
such Debt and any and all mains outstanding does not
other Debt so secured by such exceed 15% of the Consoli-
Property or assets for so long dated Net Tangible Assets
as any and all other Debt is prior to the time such in-
so secured. (Section 1012 of debtedness was issued, as-
1994 Indenture; Section 5(g) sumed or guaranteed. (Sec-
of 1996 Indenture) tion 1004 of WorldCom Inden-
ture)
LIMITATIONS
ON SALE AND MFS will not, and will not Sale and Leaseback Transac-
LEASEBACK permit any of its Restricted tions are considered Liens
TRANSACTIONS: Subsidiaries to enter into, and are subject to the cove-
assume, Guarantee or otherwise nant restricting the ability
become liable with respect to of the Company to incur
any Sale and Leaseback Trans- Liens, as described above.
action, unless (i) the obliga- (Section 1004 of WorldCom
tion of MFS or such Restricted Indenture)
Subsidiary with respect
thereto is included as Debt
and would be permitted under
other covenants and any Liens
granted thereby would be
permitted by
- -------------------------------------------------------------------------------
33
<PAGE>
Continuation of Description of Differences Between the MFS Notes and the
WorldCom Notes
----------------------------------------------------------------
MFS NOTES WORLDCOM NOTES
- --------------------------------------------------------------------------------
other covenants, (ii) the net
proceeds from such transaction
are at least equal to the Fair
Market Value of such Property
being transferred, and (iii)
the Net Cash Proceeds from
such transaction are applied
in accordance with other cove-
nants. (Section 1016 of 1994
Indenture; Section 5(h) of
1996 Indenture)
LIMITATIONS None
ON RESTRICTED MFS will not, and will not
PAYMENTS: permit any of its Restricted
Subsidiaries to make any Re-
stricted Payment unless, at
the time of and after giving
effect to the proposed Re-
stricted Payment (i) no De-
fault or Event of Default
shall have occurred and be
continuing or shall occur as a
consequence thereof; (ii) af-
ter giving effect, on a pro
forma basis, to such Re-
stricted Payment and the
incurrence of any Debt the net
proceeds of which are used to
finance such Restricted Pay-
ment, MFS could incur at least
$1.00 of additional Debt pur-
suant to clause (h) or (i) of
the definition of Permitted
Debt; and (iii) after giving
effect to such Restricted Pay-
ment on a pro forma basis, the
aggregate amount expended or
declared for all Restricted
Payments on or after January
26, 1994 does not exceed cer-
tain formula amounts. (Section
1010 of 1994 Indenture; Sec-
tion 5(i) of 1996 Indenture)
LIMITATIONS MFS will not, and will not None
ON DIVIDENDS permit any Restricted Subsidi-
AND OTHER ary to cause or suffer to ex-
PAYMENT ist or become effective or en-
RESTRICTIONS ter into any encumbrance or
AFFECTING restriction (other than pursu-
RESTRICTED ant to law or regulation) on
SUBSIDIARIES: the ability of any Restricted
Subsidiary (i) to pay divi-
dends or make any other dis-
tributions in respect of its
Capital Stock or pay any Debt
or other obligation owed to
MFS or any other Restricted
Subsidiary of MFS; (ii) to
make loans or advances to MFS
or any Restricted Subsidiary
of MFS; or (iii) to transfer
any of its Property or assets
to MFS or any other Restricted
Subsidiary
- --------------------------------------------------------------------------------
34
<PAGE>
Continuation of Description of Differences Between the MFS Notes and the
WorldCom Notes
----------------------------------------------------------------
MFS NOTES WORLDCOM NOTES
- --------------------------------------------------------------------------------
of MFS, except certain ordi-
nary course of business excep-
tions. (Section 1014 of 1994
Indenture; Section 5(j) of
1996 Indenture)
LIMITATIONS None
ON ISSUANCE MFS (i) shall not permit any
AND SALE OF Restricted Subsidiary to issue
CAPITAL STOCK any Capital Stock other than
OF RESTRICTED to MFS or a Restricted Subsid-
SUBSIDIARIES: iary, other than pursuant to
certain specified agreements
in existence on January 26,
1994, unless MFS acquires at
the same time not less than
its Proportionate Interest in
such issuance of Capital Stock
and (ii) shall not permit any
Person other than MFS or a Re-
stricted Subsidiary to own any
Capital Stock of any Re-
stricted Subsidiary of MFS
(other than directors' quali-
fying shares), except for cer-
tain transactions not prohib-
ited by other covenants. (Sec-
tion 1018 of 1994 Indenture;
Section 5(k) of 1996 Inden-
ture)
MFS will not, and will not None
LIMITATIONS permit any Restricted Subsidi-
ON ASSET ary to, consummate an Asset
SALES: Sale unless (i) MFS or such
Restricted Subsidiary, as the
case may be, receives consid-
eration at the time of such
Asset Sale at least equal to
the Fair Market Value (as evi-
denced by a resolution of the
Board of Directors of MFS) of
the Property or assets sold or
otherwise disposed of, (ii) at
least 85 percent of the con-
sideration received by MFS or
such Restricted Subsidiary for
such Property or assets con-
sists of Cash Proceeds (or, if
less than 85 percent, the re-
mainder of such consideration
consists of Telecommunications
Assets) and (iii) MFS or such
Restricted Subsidiary, as the
case may be, uses the Net Cash
Proceeds in the manner set
forth in the next paragraph.
Within 360 days, in the case
of the MFS 2004 Notes, or 300
days, in the case of the MFS
2006 Notes, after any Asset
Sale, MFS or such Restricted
Subsidi-
- --------------------------------------------------------------------------------
35
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WorldCom Notes
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MFS NOTES WORLDCOM NOTES
- --------------------------------------------------------------------------------
ary, as the case may be, may
at its option (a) reinvest an
amount equal to the Net Cash
Proceeds (or any portion
thereof) from such disposition
in Replacement Assets and/or
(b) apply an amount equal to
such Net Cash Proceeds (or re-
maining Net Cash Proceeds) to
the permanent reduction of any
Debt of MFS ranking pari passu
with the MFS Notes (including
the MFS Notes) or Debt of any
Restricted Subsidiaries of
MFS. Any Net Cash Proceeds
from any Asset Sale that are
not used to reinvest in Re-
placement Assets and/or repay
any pari passu Debt of MFS as
described above constitute
"Excess Proceeds."
When the aggregate amount of
Excess Proceeds exceeds $5.0
million, MFS must offer to
purchase to the extent of such
Excess Proceeds on a pro rata
basis from all Holders of the
MFS Notes (and any unsecured
Debt of MFS ranking pari passu
with the MFS Notes and
containing similar provisions
requiring MFS to purchase such
Debt) the MFS Notes (and such
other Debt) at a purchase
price equal to 100 percent of
the Accreted Value thereof on
any Purchase Date occurring
prior to January 15, 1999, in
the case of the MFS 2004
Notes, and January 15, 2001,
in the case of the MFS 2006
Notes, plus any accrued and
unpaid interest not otherwise
included in Accreted Value to
such Purchase Date, or 100
percent of the principal
amount thereof at Stated
Maturity (subject to possible
reduction as provided in the
MFS Indentures) on any
Purchase Date occurring on or
after January 15, 1999, in the
case of the MFS 2004 Notes,
and January 15, 2001, in the
case of the MFS 2006 Notes,
plus accrued and unpaid
interest, if any, to such
Purchase Date, in accordance
with the procedures set forth
in the MFS Indentures.
(Section 1015 of 1994
Indenture; Section 5(l) of
1996 Indenture)
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36
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WorldCom Notes
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MFS NOTES WORLDCOM NOTES
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LIMITATIONS None
ON MFS will not, and will not
TRANSACTIONS permit any of its Restricted
WITH Subsidiaries to conduct any
AFFILIATES: business or enter into or per-
mit to exist any transaction
or series of related transac-
tions with any Affiliate of
MFS or such Restricted Subsid-
iary, as the case may be, un-
less (i) such business, trans-
action or series of related
transactions is in the best
interest of MFS or such Re-
stricted Subsidiary, (ii) such
business, transaction or se-
ries of related transactions
is on terms no less favorable
to MFS or such Restricted Sub-
sidiary than those that could
be obtained in a comparable
arm's-length transaction with
a Person that is not such an
Affiliate and (iii) (a) with
respect to such business,
transaction or series of re-
lated transactions that has a
Fair Market Value or involves
aggregate payments equal to,
or in excess of, $10.0 million
but less than $15.0 million,
MFS delivers to the Trustee an
Officer's Certificate stating
that such business, transac-
tion or series of related
transactions complies with
clauses (i) and (ii) above;
and (b) with respect to such
business, transaction or se-
ries of related transactions
that has a Fair Market Value
or involves aggregate payments
equal to, or in excess of,
$15.0 million such business,
transaction or series of
transactions is approved by a
majority of the Board of Di-
rectors. (Section 1011 of 1994
Indenture; Section 5(m) of
1996 Indenture)
PROVISION OF Whether or not MFS is subject None
FINANCIAL to Section 13(a) or 15(d) of
INFORMATION: the Exchange Act, or any suc-
cessor provision thereto, MFS
shall file with the Commission
the annual reports, quarterly
reports and other documents
which MFS would have been re-
quired to file with the Com-
mission pursuant to such Sec-
tion 13(a) or 15(d) or any
successor provision thereto if
MFS were subject thereto, such
documents to be filed with the
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37
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WorldCom Notes
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MFS NOTES WORLDCOM NOTES
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Commission on or prior to the
respective dates (the
"Required Filing Dates") by
which MFS would have been
required to file them. MFS
shall also in any event within
15 days of each Required
Filing Date (i) transmit by
mail to all Holders, as their
names and addresses appear in
the Security Register, without
cost to such Holders, and (ii)
file with the Trustee copies
of the annual reports,
quarterly reports and other
documents (without exhibits)
which MFS would have been
required to file with the
Commission pursuant to Section
13(a) or 15(d) of the Exchange
Act or any successor
provisions thereto if MFS were
subject thereto. (Section 1017
of 1994 Indenture; Section
5(n) of 1996 Indenture)
CONSOLIDATION, MFS will not, and will not
MERGER, permit any Restricted WorldCom may consolidate
CONVEYANCE, Subsidiary to, in any with, or sell, lease or
TRANSFER OR transaction or series of convey all or substantially
LEASE: transactions, consolidate with all of its assets to, or
or merge into any other Person merge with or into any other
(other than a merger of a corporation, provided that
Restricted Subsidiary into MFS (a) either WorldCom shall be
in which MFS is the continuing the continuing corporation,
corporation or the merger of a or the successor corporation
Restricted Subsidiary into or (if other than WorldCom)
with a Restricted Subsidiary), formed by or resulting from
or sell, convey, assign, any such consolidation or
transfer, lease or otherwise merger or which shall have
dispose of all or received the transfer of
substantially all of the such assets shall expressly
Property and assets of MFS and assume payment of the
the Restricted Subsidiaries principal of (and premium,
taken as a whole to any other if any) and interest on all
Person, unless: the WorldCom Notes and the
performance and observance
of all the covenants and
conditions of the WorldCom
Indenture; and (b) WorldCom
or such successor
corporation shall not
immediately thereafter be in
default under the WorldCom
Indenture. (Section 801 of
WorldCom Indenture)
(a) either (i) MFS shall be
the continuing corporation or
(ii) the corporation (if other
than MFS) formed by such
consolidation or into which
MFS is merged, or the Person
which acquires, by sale,
assignment, conveyance,
transfer, lease or
disposition, all or
substantially all of the
Property and assets of MFS and
the Restricted Subsidiaries
taken as a whole (such
corporation or Person, the
"Surviving Entity"), shall be
a corporation organized and
validly existing under the
laws of the
- --------------------------------------------------------------------------------
38
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Continuation of Description of Differences Between the MFS Notes and the
WorldCom Notes
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MFS NOTES WORLDCOM NOTES
- --------------------------------------------------------------------------------
United States of America, any
political subdivision thereof
or any state thereof or the
District of Columbia, and
shall expressly assume, by a
supplemental MFS Indenture,
the due and punctual payment
of the principal of (and
premium, if any) and interest
on all the Notes and the
performance of MFS' covenants
and obligations under the MFS
Indentures;
(b) immediately before and
after giving effect to such
transaction or series of
transactions on a pro forma
basis no Event of Default or
Default shall have occurred
and be continuing or would
result therefrom;
(c) immediately after giving
effect to any such transac-
tion or series of transac-
tions on a pro forma basis as
if such transaction or series
of transactions had occurred
on the first day of the de-
termination period, MFS (or
the Surviving Entity if MFS
is not continuing) would be
permitted to incur $1.00 of
additional Debt pursuant to
paragraphs (h) or (i) of the
definition of "Permitted
Debt"; and
(d) immediately after giving
effect to such transaction or
series of transactions on a
pro forma basis, MFS (or the
Surviving Entity if MFS is
not continuing) shall have a
Consolidated Net Worth equal
to or greater than the Con-
solidated Net Worth of MFS
immediately prior to such
transaction.
Upon any transaction, or se-
ries of transactions that are Upon any transaction effected
of the type described in, and in accordance with the forego-
are effected in accordance ing paragraph and upon any
with, the foregoing paragraph such assumption by the succes-
the Surviving Entity shall sor corporation, such succes-
succeed to, and be substi- sor corporation shall succeed
tuted for, and may exercise to and be substituted for
every right and power of, MFS WorldCom with the same effect
under the MFS Indentures and as if it had been named as
the MFS Notes with the same WorldCom in the WorldCom In-
effect as if such Surviving denture, and WorldCom, except
Entity had been named as MFS in the case of a lease, will
in the MFS Indentures; and be relieved of any further ob-
when a Surviving Person duly ligations un
assumes
- --------------------------------------------------------------------------------
39
<PAGE>
Continuation of Description of Differences Between the MFS Notes and the
WorldCom Notes
----------------------------------------------------------------
MFS NOTES WORLDCOM NOTES
- --------------------------------------------------------------------------------
all of the obligations and der the WorldCom Indenture
covenants of MFS pursuant to and the WorldCom Notes.
the MFS Indentures and the MFS (Section 802 of WorldCom In-
Notes, except in the case of a denture)
lease, the predecessor Person
shall be relieved of all such
obligations. (Sections 801 and
802 of 1994 Indenture; Sec-
tion 7 of 1996 Indenture)
EVENTS OF Each of the following is an
DEFAULT "Event of Default" under the The WorldCom Notes are sub-
MFS Indentures: ject to substantially simi-
lar "Events of Default" as
are described in paragraphs
(a) default in the payment of (a), (b), (d), (g) and (h)
any installment of interest under "MFS Notes--Events of
upon the MFS Notes when it be- Default". In addition under
comes due and payable, and the the WorldCom Indenture, cer-
continuance of such default tain events of default re-
for a period of 30 days; sulting in the acceleration
of the maturity of indebted-
(b) default in the payment of ness aggregating in excess
the principal of (or premium, of $50,000,000 under any
if any, on) any MFS Note at mortgages, indentures or in-
its Maturity, upon repurchase, struments under which
acceleration, optional redemp- WorldCom may have issued, or
tion, required repurchase or by which there may have been
otherwise or the failure to secured or evidenced, any
make an offer to purchase as other indebtedness of
therein required; WorldCom; but only if such
indebtedness is not dis-
(c) MFS fails to comply with charged or such acceleration
any of its covenants or agree- is not rescinded or annulled
ments related to "Limitation are also considered "Events
on Debt" or "Limitation on of Default." (Section 501 of
Debt and Preferred Stock of WorldCom Indenture)
Restricted Subsidiaries" or
fails to perform or comply
with the MFS Indentures provi-
sions related to "Consolida-
tion, Merger, Conveyance,
Transfer or Lease";
(d) default in the perfor-
mance, or breach, of any cove-
nant or warranty of MFS in the
MFS Indentures and continuance
of such default or breach for
a period of 60 days after
specified written notice
thereof has been given to MFS
by the Trustee or to MFS and
the Trustee by the Holders of
at least 25 percent of the ag-
gregate principal amount of
the Outstanding MFS Notes;
(e) Debt of MFS or any Re-
stricted Subsidiary is not
paid when due within the ap-
plicable grace period, if any,
or is accelerated by the hold-
ers thereof and, in
- --------------------------------------------------------------------------------
40
<PAGE>
Continuation of Description of Differences Between the MFS Notes and the
WorldCom Notes
----------------------------------------------------------------
MFS NOTES WORLDCOM NOTES
- -------------------------------------------------------------------------------
either case, the principal
amount of such unpaid or ac-
celerated Debt exceeds $10.0
million;
(f) the entry by a court of
competent jurisdiction of one
or more judgments or orders
against MFS or any Restricted
Subsidiary in an uninsured or
unin- demnified aggregate
amount in excess of $10.0 mil-
lion which remains undis-
charged, unwaived, unstayed,
unbonded or unsatisfied for a
period of 60 consecutive days;
(g) and (h) certain events of
bankruptcy, insolvency, liqui-
dation or reorganization, or
court appointment of a custo-
dian, trustee or other similar
official of MFS or any signif-
icant restricted subsidiary or
all or substantially all of
its property or property of
significant restricted subsid-
iaries. (Section 501 of 1994
Indenture; Section 4(a) of
1996 Indenture)
If any Event of Default (other If an Event of Default under
than an Event of Default spec- the WorldCom Indenture with
ified in clauses (g) and (h) respect to WorldCom Notes at
above) occurs and is continu- the time outstanding occurs
ing, then and in every such and is continuing, then in
case the Trustee or the Hold- every such case the Trustee
ers of not less than 25 per- or the holders of not less
cent of the outstanding aggre- than 25 percent in principal
gate principal amount at amount of the outstanding
Stated Maturity (subject to WorldCom Notes may declare
reduction as aforesaid) of MFS the principal amount of all
Notes may declare the Default of the WorldCom Notes of
Amount and any accrued and un- that series (or of all
paid interest on all MFS Notes WorldCom Notes then out-
then Outstanding to be immedi- standing under the WorldCom
ately due and payable, by a Indenture, as the case may
notice in writing to MFS (and be) to be due and payable
to the Trustee if given by immediately by written no-
Holders), and upon any such tice thereof to WorldCom
declaration, such Default (and to the Trustee if given
Amount and any accrued inter- by the holders). However, at
est will become and be immedi- any time after such a decla-
ately due and payable. If any ration of acceleration with
Event of Default specified in respect to WorldCom Notes
clause (g) or (h) above oc- (or of all WorldCom Notes
curs, the Accreted Value and then outstanding under the
accrued interest, if any, on WorldCom Indenture, as the
the MFS Notes then Outstanding case may be) has been made,
shall become immediately due but before a judgment or de-
and payable without any decla- cree for payment of
ration or other act on the
part
- -------------------------------------------------------------------------------
41
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Continuation of Description of Differences Between the MFS Notes and the
WorldCom Notes
----------------------------------------------------------------
MFS NOTES WORLDCOM NOTES
- -------------------------------------------------------------------------------
of the Trustee or any Holder. the money due has been ob-
Until and including January tained by the Trustee prior
15, 1999, in the case of the to the Stated Maturity
MFS 2004 Notes, or January 15, thereof, the holders of a
2001, in the case of the MFS majority in principal amount
2006 Notes, the "Default of outstanding WorldCom
Amount" shall equal the Ac- Notes may, subject to cer-
creted Value of the MFS Notes tain conditions, rescind and
as of such date. On or after annul such acceleration if
January 15, 1999, in the case all Events of Default, other
of the MFS 2004 Notes, or Jan- than the non-payment of ac-
uary 15, 2001, in the case of celerated principal (or
the MFS 2006 Notes, the De- specified portion thereof),
fault Amount shall equal 100 with respect to WorldCom
percent of the principal Notes of such series (or of
amount thereof at the Stated all WorldCom Notes then out-
Maturity (subject to reduction standing under the WorldCom
as aforesaid) thereof. Under Indenture, as the case may
certain circumstances, the be) have been cured or
Holders of a majority in prin- waived as provided in the
cipal amount at Stated Matu- WorldCom Indenture. The
rity (subject to reduction as WorldCom Indenture also pro-
aforesaid) of the Outstanding vides that the holders of
MFS Notes by notice to MFS and not less than a majority in
the Trustee may rescind an ac- principal amount of the out-
celeration and its conse- standing WorldCom Notes of
quences. (Section 502 of 1994 any series issued thereunder
Indenture; Section 5(b) of (or of all WorldCom Notes
1996 Indenture) then outstanding under the
WorldCom Indenture, as the
case may be) may waive cer-
tain past defaults with re-
spect to such series and its
consequences. (Sections 502
and 513 of WorldCom
Indenture)
AMENDMENT AND MFS and the Trustee may, at
SUPPLEMENT: any time and from time to Same as MFS, except that
time, without notice or con- WorldCom and the Trustee
sent of any Holder, enter into may, at any time and from
one or more MFS Indentures time to time, without notice
supplemental to either of the or consent of any Holder,
MFS Indentures (1) to evi- also enter into one or more
dence the succession of an- indentures supplemental to
other Person to MFS and the the WorldCom Indenture sup-
assumption by such successor plement any of the provi-
of the covenants of MFS under sions of the WorldCom Inden-
the MFS Indentures and con- ture to such extent as shall
tained in the MFS Notes, be necessary to permit or
(2) to add to the covenants of facilitate the defeasance
MFS, for the benefit of the and discharge of the
Holders, or to surrender any WorldCom Notes; provided
right or power conferred upon that any such action shall
MFS by the MFS Indentures, (3) not adversely affect the in-
to add any additional Events terests of the Holders of
of Default, (4) to provide for the WorldCom Notes. (Section
uncertificated MFS Notes in 901 of WorldCom Indenture)
addition to or in place of
certificated MFS Notes, (5) to
change or eliminate any of the
provisions of the MFS In-
dentures, provided
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42
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Continuation of Description of Differences Between the MFS Notes and the
WorldCom Notes
----------------------------------------------------------------
MFS NOTES WORLDCOM NOTES
- -------------------------------------------------------------------------------
that any such change or elimi-
nation will become effective
only when there is not Out-
standing any Note created
prior to the execution of such
supplemental MFS Indenture
which is entitled to the bene-
fit of such provision, (6) to
evidence and provide for the
acceptance of appointment un-
der the MFS Indentures by a
successor Trustee, (7) to se-
cure the MFS Notes, (8) to
cure any ambiguity, to correct
or supplement any provision in
the MFS Indentures which may
be defective or inconsistent
with any other provision
therein or to add any other
provisions with respect to
matters or questions arising
under the MFS Indentures; pro-
vided such actions will not
adversely affect the interests
of the Holders in any material
respect, or (9) to comply with
the requirements of the Com-
mission in order to effect or
maintain the qualification of
the MFS Indentures under the
Trust Company Indenture Act.
(Section 901 of 1994 Inden-
ture; Section 8(a) of 1996 In-
denture)
With the consent of the Hold- The WorldCom Indenture also
ers of not less than a major- generally requires the
ity in principal amount at consent of the holders of at
Stated Maturity (subject to least a majority in
reduction as aforesaid) of the principal amount of
Outstanding MFS Notes, MFS and outstanding WorldCom Notes
the Trustee may enter into one to supplement or amend the
or more MFS Indentures supple- WorldCom Indenture, except
mental to the MFS Indentures as described above and
for the purpose of adding any except that the consent of
provisions to or changing in the Holder of each
any manner or eliminating any Outstanding WorldCom Note is
of the provisions of the MFS required to (1) change the
Indentures or the modifying in Stated Maturity of the
any manner of the rights of principal of, or any
the Holders; provided, howev- installment of principal of
er, that no such supplemental or interest on, any WorldCom
MFS Indenture will, without Note, or reduce the
the consent of the Holder of principal amount thereof, or
each Outstanding Note, (1) rate or amount of interest
change the Stated Maturity of thereon that would be due
the principal of, or any in- and payable upon Maturity
stallment of interest on, any thereof, or adversely affect
Note, or reduce the principal any right of repayment at
amount thereof (or premium, if the option of the Holder of
any), or the interest thereon any WorldCom Note, or change
that would be due and payable any Place of Payment where,
upon Maturity thereof, or or the currency in which,
any
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43
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Continuation of Description of Differences Between the MFS Notes and the
WorldCom Notes
----------------------------------------------------------------
MFS NOTES WORLDCOM NOTES
- -------------------------------------------------------------------------------
reduce the Default Amount that WorldCom Note or the inter-
would be due and payable on est thereon is payable, or
acceleration of the Maturity impair the right to insti-
thereof provided in the MFS tute suit for the enforce-
Indentures or change the place ment of any such payment on
of payment where, or the coin or after the Stated Maturity
or currency in which, any Note thereof, (2) reduce the per-
or any premium or interest centage in principal amount
thereon is payable, or impair of the Outstanding WorldCom
the right to institute suit Notes, the consent of whose
for the enforcement of any Holders is required for any
such payment on or after the such supplemental indenture,
Stated Maturity thereof, (2) or the consent of whose
reduce the percentage in prin- Holders is required for any
cipal amount at Stated Matu- waiver with respect to such
rity of the Outstanding MFS notes (or compliance with
Notes, the consent of whose certain provisions of the
Holders is necessary for any WorldCom Indenture or cer-
such supplemental MFS Inden- tain defaults thereunder and
ture or required for any their consequences) provided
waiver of compliance with cer- for in the WorldCom Inden-
tain provisions of the MFS In- ture, or reduce the require-
dentures or certain Defaults ments of the WorldCom Inden-
thereunder, (3) modify the ob- ture for quorum or voting,
ligations of MFS to make of- or (3) to modify the provi-
fers to purchase MFS Notes sions regarding "Supplemen-
upon a Change of Control or tal Indentures with Consent
from the proceeds of Asset of Holders" or "Waiver of
Sales, (4) subordinate in Past Defaults", except to
right of payment, or otherwise increase any such percentage
subordinate, the MFS Notes to or to provide that certain
any other indebtedness, (5) provisions of the WorldCom
modify any provisions of the Indenture cannot be modified
MFS Indentures relating to the or waived without the unani-
calculation of Accreted Value mous consent of the Holders
or (6) modify any of the pro- of the WorldCom Notes. (Sec-
visions of this paragraph (ex- tion 902 of WorldCom Inden-
cept to increase any percent- ture)
age set forth herein); provid-
ed, further, that the consent The WorldCom Indenture does
of the Holders of not less not have any provisions that
than 75 percent of the princi- require the consent of the
pal amount at Stated Maturity Holders of not less than 75
(subject to reduction as percent in principal amount
aforesaid) of the Outstanding of Outstanding WorldCom
MFS Notes is required to make Notes.
any amendment to the covenant
described under "Change of
Control." (Section 902 of 1994
Indenture; Section 8(b) of
1996 Indenture)
SATISFACTION MFS may terminate its obliga-
AND DISCHARGE tions under the MFS Indentures Same as MFS (Sections 401
OF THE when (i) either (A) all Out- and 1401-1405 of WorldCom
INDENTURES; standing Notes have been de- Indenture)
COVENANT livered to the Trustee for
DEFEASANCE: cancellation or (B) all such
MFS Notes not theretofore de-
livered to the Trustee for
cancellation have become due
and payable, will become due
and payable within one year or
are to be called for redemp-
tion within one year under ir-
revocable arrangements satis-
factory to the Trustee for the
giving of notice of redemption
by the
- -------------------------------------------------------------------------------
44
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WorldCom Notes
----------------------------------------------------------------
MFS NOTES WORLDCOM NOTES
- --------------------------------------------------------------------------------
Trustee in the name, and at
the expense, of MFS, and MFS
has irrevocably deposited or
caused to be deposited with
the Trustee funds in an amount
sufficient to pay and dis-
charge the entire indebtedness
on the MFS Notes, not thereto-
fore delivered to the Trustee
for cancellation, for princi-
pal of, premium, if any, and
interest to the date of de-
posit or Stated Maturity or
date of redemption; (ii) MFS
has paid or caused to be paid
all sums payable by MFS under
the MFS Indentures; and (iii)
MFS has delivered an Officer's
Certificate and an Opinion of
Counsel relating to compliance
with the conditions set forth
in the MFS Indentures. (Sec-
tion 401 of 1994 Indenture;
Section 3(a) of 1996 Inden-
ture)
MFS will be deemed to have
paid and discharged the entire
Debt on the MFS Notes and the
MFS Indentures shall cease to
be of further effect as to all
outstanding MFS Notes (except
as to (i) rights of registra-
tion of transfer, substitution
and exchange of MFS Notes and
MFS' right of optional redemp-
tion, (ii) rights of Holders
to receive payments of princi-
pal of, premium, if any, and
interest on the MFS Notes (but
not the Change of Control Re-
purchase Price of the MFS
Notes) and any rights of the
Holders with respect to such
amounts, (iii) the rights, ob-
ligations and immunities of
the Trustee under the MFS In-
dentures and (iv) certain
other specified provisions in
the MFS Indentures (the fore-
going exceptions (i) through
(iv) are collectively referred
to as the "Reserved Rights"))
after the irrevocable deposit
by MFS with the Trustee, in
trust for the benefit of the
Holders, at any time prior to
the Stated Maturity of the MFS
Notes, of (A) money in an
amount, (B) U.S. Government
Obligations which through the
payment of interest and prin-
cipal will
- --------------------------------------------------------------------------------
45
<PAGE>
Continuation of Description of Differences Between the MFS Notes and the
WorldCom Notes
----------------------------------------------------------------
MFS NOTES WORLDCOM NOTES
- --------------------------------------------------------------------------------
provide, not later than one
day before the due date of
payment in respect of the MFS
Notes, money in an amount, or
(C) a combination thereof,
sufficient to pay and dis-
charge the principal of and
interest on the MFS Notes then
outstanding on the dates on
which any such payments are
due in accordance with the
terms of the MFS Indentures
and of the MFS Notes. Defea-
sance may only be deemed to
occur if certain conditions
are satisfied, including,
among other things, delivery
by MFS to the Trustee of an
opinion of outside counsel ac-
ceptable to the Trustee to the
effect that, among other
things, (i) the deposit, de-
feasance and discharge will
not be deemed, or result in, a
taxable event for federal in-
come tax purposes, with re-
spect to the Holders and (ii)
MFS' deposit will not result
in the Trust or the Trustee
being subject to regulation
under the Investment Company
Act of 1940. (Sections 1201-
1206 of 1994 Indenture; Sec-
tion 6 of 1996 Indenture)
- --------------------------------------------------------------------------------
46
<PAGE>
THE CONSENT SOLICITATIONS
Concurrently with the Exchange Offers, the Company is soliciting Consents
from the Holders to the Proposed Amendments to the 1994 Indenture (under which
the MFS 2004 Notes were issued) and the 1996 Indenture (under which the MFS
2006 were issued). The proper completion, execution and delivery of a Letter
of Transmittal by a Holder tendering MFS Notes pursuant to an Exchange Offer
will constitute the Consent of such tendering Holder to the Proposed
Amendments with respect to such Notes. Holders may not deliver Consents
without tendering their MFS Notes in the Exchange Offers.
REQUIRED CONSENTS
Consents from Holders of a majority in principal amount outstanding of a
series of MFS Notes must be received in order to amend the relevant MFS
Indenture in the manner contemplated by the Consent Solicitations as described
herein, except with respect to the modification of the term "Change of
Control," which requires Consents from Holders of not less than 75% of the
aggregate principal amount outstanding of MFS Notes of a series. Among other
things, the Proposed Amendments would eliminate (i) the covenants in each of
the 1994 Indenture and the 1996 Indenture that (a) restrict the ability of MFS
and its restricted subsidiaries to incur debt, incur liens, enter into sale
and leaseback transactions, make restricted payments (including payment of
dividends) or enter into transactions with affiliates and (b) restrict the
ability of restricted subsidiaries of MFS to issue equity securities, to
encumber the ability to pay dividends and make certain loans or transfers of
property to the Company or MFS and (ii) the separate financial reporting
requirements contained in the MFS Indentures, and, subject to receipt of a
Supermajority Consent, would redefine the events constituting a "Change of
Control" under the MFS Indentures. See "The Proposed Amendments." Among other
conditions, receipt of the Requisite Consent with respect to both series of
MFS Notes and the lack of any objection by the MFS Trustee as to MFS' ability
to effect the Proposed Amendments are conditions to consummation of each
Exchange Offer by the Company. See "The Exchange Offers--Conditions to the
Exchange Offers."
If the Requisite Consent or the Supermajority Consent, as the case may be,
is received with respect to a series of MFS Notes and the Exchange Offer with
respect to such series is consummated, then MFS and the MFS Trustee will
execute a supplemental indenture setting forth the Proposed Amendments in
respect of the MFS Notes of such series and the MFS Indenture, as so
supplemented, will become operative on the Exchange Date. Each non-exchanging
Holder of such series of MFS Notes will be bound by such supplemental
indenture even if such Holder did not give its Consent. Each of the MFS
Indentures, without giving effect to the Proposed Amendments, will remain in
effect until the Proposed Amendments with respect thereto become operative on
the Exchange Date. If the Exchange Offer for a series of MFS Notes is
terminated or withdrawn, the Proposed Amendments in respect of such series
will never become operative. See "The Proposed Amendments."
Consents may be revoked at any time prior to 11:59 p.m., New York City time,
on , 1997 by the withdrawal of a tender of MFS Notes in accordance with the
instructions for such withdrawal (see "The Exchange Offer--Withdrawal of
Tenders and Revocation of Consents"). Any withdrawal of a tender of MFS Notes
shall also be deemed to be a revocation of the related Consent. Tenders of MFS
Notes may not be withdrawn and Consents may not be revoked at any time after
11:59 p.m., New York City time, on , 1997, unless the applicable Exchange
Offer is extended with changes in the terms of such Exchange Offer that are
materially adverse to the tendering Holder, in which case tenders of MFS Notes
may be withdrawn under the conditions described in the extension.
CONSENT PAYMENT
On the Exchange Date, the Company will pay each Holder who gives a valid
Consent on or prior to the Expiration Date a Consent Payment equal to (i) with
respect to such Holder's MFS 2004 Notes, 0. % of the Accreted Value, as of the
Interest Accrual Date, of the MFS 2004 Notes and (ii) with
47
<PAGE>
respect to such Holder's MFS 2006 Notes, 0. % of the Accreted Value, as of the
Interest Accrual Date, of the MFS 2006 Notes, in either case, for which
Consents have been validly delivered on or prior to the Expiration Date. If,
on or prior to the Expiration Date, a Holder's MFS Notes are not validly
tendered and the related Consents are not validly given pursuant to an
Exchange Offer and Consent Solicitation, such Holder will not receive a
Consent Payment even if the Proposed Amendments become effective with respect
to such Holder's MFS Notes.
HOLDERS OF MFS NOTES OF EITHER SERIES MAY GIVE THEIR CONSENT TO THE PROPOSED
AMENDMENTS APPLICABLE TO THAT SERIES ONLY BY TENDERING SUCH MFS NOTES IN THE
APPLICABLE EXCHANGE OFFER AND WILL BE DEEMED TO HAVE GIVEN SUCH CONSENT BY SO
TENDERING. THE PROPER COMPLETION, EXECUTION AND DELIVERY OF A LETTER OF
TRANSMITTAL WITH RESPECT TO A PARTICULAR SERIES OF MFS NOTES WILL CONSTITUTE
THE DELIVERY OF A CONSENT WITH RESPECT TO SUCH MFS NOTES.
48
<PAGE>
THE PROPOSED AMENDMENTS
WorldCom is soliciting the Consent of the Holders of MFS Notes to the
Proposed Amendments. The 1994 Indenture and the 1996 Indenture contain
substantially similar covenants and terms. What follows are summaries of (i)
the covenants and terms proposed to be eliminated from each of the MFS
Indentures pursuant to the Consent Solicitations and (ii) the covenants and
terms proposed to be substantially revised pursuant to the Consent
Solicitations (collectively, the "Proposed Amendments"). Capitalized terms
appearing below which are not otherwise defined herein have the same meanings
as are given to such terms in the MFS Indentures, copies of which have been
filed as exhibits to the Registration Statement of which this Prospectus forms
a part. The definition of certain capitalized terms used herein are set forth
under "--Certain Definitions " below. The summaries do not purport to be
complete and are qualified in their entirety by reference to the 1994
Indenture, the 1996 Indenture and the forms of the supplemental indenture to
each of the 1994 Indenture and the 1996 Indenture that contain the Proposed
Amendments with respect to the MFS Notes (and that are to be executed in
respect of each series of MFS Notes by MFS and the MFS Trustee in the event
the Requisite Consent or the Supermajority Consent, as the case may be, with
respect to such series is obtained). The form of each such supplemental
indenture has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. Whenever particular sections or defined terms
are referred to, it is intended that such sections or defined terms shall be
incorporated by reference.
PROVISIONS TO BE DELETED
Pursuant to the Consent Solicitations, the Company is proposing to eliminate
the following from each of the MFS Indentures with respect to each series of
MFS Notes:
Limitation on Debt. MFS will not, directly or indirectly, incur any Debt
unless (i) after giving effect to such incurrence of Debt and the
contemporaneous application of the proceeds thereof, no Default or Event of
Default shall have occurred and be continuing at the time or would occur as a
consequence of the incurrence of such Debt, and (ii) such Debt is Permitted
Debt. (Section 1008 of 1994 Indenture; Section 5(e) of 1996 Indenture)
Limitation of Debt and Preferred Stock of Restricted Subsidiaries. MFS will
not permit any of its Restricted Subsidiaries to incur, directly or
indirectly, any Debt or issue any preferred stock, except (a) Subsidiary
Vendor Debt; (b) Debt and preferred stock of Restricted Subsidiaries
outstanding as of January 26, 1994; (c) Debt and preferred stock of a
Restricted Subsidiary issued to and held by MFS; (d) Interest Swap
Obligations, provided that such obligations are related to payment obligations
on Debt otherwise permitted by the terms of this covenant, and Currency Hedge
Obligations; (e) Debt or preferred stock incurred in exchange for, or the
proceeds of which are used to refinance, Restricted Subsidiary Debt or
preferred stock referred to in clause (a) of this paragraph, provided that (i)
the principal amount of such Debt or the liquidation value of such preferred
stock so incurred does not exceed the principal amount or liquidation value of
the Debt or preferred stock being exchange or refinanced, and (ii) the Debt or
preferred stock so incurred has a stated maturity or final redemption date (if
any) no earlier than the stated maturity or final redemption date (if any) of,
and an Average Life that is no less than that of, the Debt or preferred stock
being exchanged or refinanced; provided, further, that the Debt or preferred
stock so incurred has no greater seniority and covenants not materially more
restrictive in the aggregate than those of the Debt or preferred stock being
exchanged or refinanced; (f) Debt or preferred stock of MFS Telecom, which is
convertible into Capital Stock of MFS, issued to a Strategic Equity Investor;
provided, however, that the proceeds of such incurrence or issuance are used
as though such proceeds were Net Cash Proceeds in accordance with the
provisions of the covenant described under "The Exchange Offers--Description
of Differences Between the MFS Notes and the WorldCom Notes-MFS Notes--
Limitations on Asset Sales;" and (g) Guarantees by Restricted Subsidiaries of
Debt of the Company described in clause (a) of the definition of Permitted
Debt. (Section 1009 of 1994 Indenture; Section 5(f) of 1996 Indenture)
49
<PAGE>
Limitation on Liens. MFS will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into, create, incur, assume or
suffer to exist any Liens of any kind, other than Permitted Liens, on or with
respect to any of its Property or assets now owned or hereafter acquired, or
any interest therein or any income or profits therefrom, unless the Notes are
secured equally and ratably with (or prior to) such Debt and any and all other
Debt so secured by such Property or assets for so long as any and all other
Debt is so secured. (Section 1012 of 1994 Indenture; Section 5(g) of 1996
Indenture)
Limitations on Sale and Leaseback Transactions. MFS will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into, assume, Guarantee or otherwise become liable with respect to any Sale
and Leaseback Transaction, unless (i) the obligation of MFS or such Restricted
Subsidiary with respect thereto is included as Debt and would be permitted
under the covenants described above under "--Limitation on Debt" or "--
Limitation of Debt and Preferred Stock of Restricted Subsidiaries,"
respectively, and any Liens granted thereby would be permitted by the covenant
described above under "--Limitation on Liens," (ii) the net proceeds from such
transaction are at least equal to the Fair Market Value of such Property being
transferred, and (iii) the Net Cash Proceeds from such transaction are applied
in accordance with the covenant described under "The Exchange Offers--
Description of Differences Between the MFS Notes and the WorldCom Notes--MFS
Notes--Limitations on Asset Sales." (Section 1016 of 1994 Indenture; Section
5(h) of 1996 Indenture)
Limitations on Restricted Payments. MFS will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, make any Restricted
Payment unless, at the time of and after giving effect to the proposed
Restricted Payment (i) no Default or Event of Default shall have occurred and
be continuing or shall occur as a consequence thereof; (ii) after giving
effect, on a pro forma basis, to such Restricted Payment and the incurrence of
any Debt the net proceeds of which are used to finance such Restricted
Payment, MFS could incur at least $1.00 of additional Debt pursuant to clause
(h) or (i) of the definition of Permitted Debt; and (iii) after giving effect
to such Restricted Payment on a pro forma basis, the aggregate amount expended
or declared for all Restricted Payments on or after January 26, 1994 does not
exceed the sum of (A) 50 percent of the Consolidated Net Income of MFS (or, if
Consolidated Net Income shall be a deficit, minus 100 percent of such deficit)
for the period (taken as one accounting period) beginning on the last day of
the fiscal quarter immediately preceding January 26, 1994 and ending on the
last day of the fiscal quarter immediately preceding the date of such
Restricted Payment, and (B) 100 percent of the aggregate net cash proceeds
received by MFS subsequent to January 26, 1994 from the issuance or sale
(other than to a Restricted Subsidiary or a Joint Venture) of shares of its
Qualified Capital Stock, including Qualified Capital Stock issued upon
conversion of convertible Debt and from the exercise of options, warrants or
rights to purchase such Qualified Capital Stock. (Section 1010 of 1994
Indenture; Section 5(i) of 1996 Indenture)
The foregoing limitations do not prevent MFS from (i) paying a dividend on
its Capital stock at any time within 60 days after the declaration thereof if,
on the declaration date, MFS could have paid such dividend in compliance with
the Indenture, and (ii) making Permitted Investments; provided that any
Permitted Investments made pursuant to clause (a) of the definition of
Permitted Investments will be deemed to be Restricted Payments for the
purposes of clause (iii) of the preceding paragraph.
For purposes of this covenant, if a particular Restricted Payment involves a
non-cash payment, including a distribution of assets, then such Restricted
Payment shall be deemed to be an amount equal to the cash portion of such
Restricted Payment, if any, plus an amount equal to the Fair Market Value of
the non-cash portion of such Restricted Payment as determined by the Board of
Directors, whose good faith determination shall be conclusive and evidenced by
a Board Resolution.
Not later than the date of making any Restricted Payment, MFS shall deliver
to the Trustee an Officers' Certificate stating that such Restricted Payment
is permitted and setting forth the basis upon
50
<PAGE>
which the required calculations were computed, which calculations may be based
upon MFS' latest available financial statements.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. MFS will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, cause or suffer to exist or become effective or enter
into any encumbrance or restriction (other than pursuant to law or regulation)
on the ability of any Restricted Subsidiary (i) to pay dividends or make any
other distributions in respect of its Capital Stock or pay any Debt or other
obligation owed to MFS or any other Restricted Subsidiary of MFS; (ii) to make
loans or advances to MFS or any Restricted Subsidiary of MFS; or (iii) to
transfer any of its Property or assets to MFS or any other Restricted
Subsidiary of MFS, except:
(a) any encumbrance or restriction pursuant to an agreement in effect at
the Issue Date;
(b) any encumbrance or restriction pursuant to an agreement relating to
an acquisition of Property, so long as the encumbrances or restrictions in
any such agreement relate solely to the Property so acquired (and are not
or were not created in anticipation of or in connection with the
acquisition thereof);
(c) any encumbrance or restriction relating to any Debt of any Restricted
Subsidiary at the date on which such Restricted Subsidiary was acquired by
MFS or any Restricted Subsidiary (other than Debt issued by such Restricted
Subsidiary in connection with or in anticipation of its acquisition);
(d) any encumbrance or restriction pursuant to an agreement effecting a
permitted refinancing of Debt issued pursuant to an agreement referred to
in the foregoing clauses (a) through (c), or permitted replacement or
increase of Debt referred to in the foregoing clause (a), so long as the
encumbrances and restrictions contained in any such refinancing agreement
are not materially more restrictive than the encumbrances and restrictions
contained in such agreements;
(e) customary provisions restricting subletting or assignment of any
lease of MFS or any Restricted Subsidiary or provisions in agreements that
restrict the assignment of such agreement or any rights thereunder; and
(f) any restriction on the sale or other disposition of assets or
property securing Debt as a result of a Permitted Lien on such assets or
Property. (Section 1014 of 1994 Indenture; Section 5(j) of 1996 Indenture)
Limitations on Issuance and Sale of Capital Stock of Restricted
Subsidiaries. MFS (i) shall not permit any Restricted Subsidiary to issue any
Capital Stock other than to MFS or a Restricted Subsidiary, other than
pursuant to certain specified agreements in existence on January 26, 1994,
unless MFS acquires at the same time not less than its Proportionate Interest
in such issuance of Capital Stock and (ii) shall not permit any Person other
than MFS or a Restricted Subsidiary to own any Capital Stock of any Restricted
Subsidiary of MFS (other than directors' qualifying shares), except for (a)
Capital Stock of a Restricted Subsidiary sold in a transaction not prohibited
by the covenant described under "The Exchange Offers--Description of
Differences Between the MFS Notes and the WorldCom Notes--MFS Notes--
Limitations on Asset Sales," provided that such Restricted Subsidiary would
remain a Restricted Subsidiary, (b) Capital Stock issued as permitted by
clause (i) above, (c) Capital Stock issued and outstanding on January 26, 1994
and held by Persons other than MFS or any of its Restricted Subsidiaries, (d)
Capital Stock of a Restricted Subsidiary issued and outstanding prior to the
time that such Person becomes a Restricted Subsidiary so long as such Capital
Stock was not issued in contemplation of such Person's becoming a Restricted
Subsidiary of MFS or otherwise being acquired by MFS and (e) an issuance of
preferred stock permitted under the covenant described above under "--
Limitation on Debt and Preferred Stock of Restricted Subsidiaries." (Section
1018 of 1994 Indenture; Section 5(k) of 1996 Indenture)
51
<PAGE>
Limitations on Transactions with Affiliates. MFS will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, conduct
any business or enter into or permit to exist any transaction or series of
related transactions (including, but not limited to, the purchase, sale or
exchange of Property, the making of any Investment, the giving of any
Guarantee or the rendering of any service) with any Affiliate of MFS or such
Restricted Subsidiary, as the case may be, unless (i) such business,
transaction or series of related transactions is in the best interest of MFS
or such Restricted Subsidiary, (ii) such business, transaction or series of
related transactions is on terms no less favorable to MFS or such Restricted
Subsidiary than those that could be obtained in a comparable arm's-length
transaction with a Person that is not such an Affiliate and (iii) (a) with
respect to such business, transaction or series of related transactions that
has a Fair Market Value or involves aggregate payments equal to, or in excess
of, $10.0 million but less than $15.0 million, MFS delivers to the Trustee an
Officer's Certificate stating that such business, transaction or series of
related transactions complies with clauses (i) and (ii) above; and (b) with
respect to such business, transaction or series of related transactions that
has a Fair Market Value or involves aggregate payments equal to, or in excess
of, $15.0 million such business, transaction or series of transactions is
approved by a majority of the Board of Directors (including a majority of the
Disinterested Directors), which approval is set forth in a resolution
delivered to the Trustee certifying that, in good faith, the Board of
Directors believes that such business, transaction or series of transactions
complies with clauses (i) and (ii) above. (Section 1011 of 1994 Indenture;
Section 5(m) of 1996 Indenture)
Provision of Financial Information. Whether or not MFS is subject to Section
13(a) or 15(d) of the Exchange Act, or any successor provision thereto, MFS
shall file with the Commission the annual reports, quarterly reports and other
documents which MFS would have been required to file with the Commission
pursuant to such Section 13(a) or 15(d) or any successor provision thereto if
MFS were subject thereto, such documents to be filed with the Commission on or
prior to the respective dates (the "Required Filing Dates") by which MFS would
have been required to file them. MFS shall also in any event (a) within 15
days of each Required Filing Date (i) transmit by mail to all Holders, as
their names and addresses appear in the Security Register, without cost to
such Holders, and (ii) file with the Trustee copies of the annual reports,
quarterly reports and other documents (without exhibits) which MFS would have
been required to file with the Commission pursuant to Section 13(a) or 15(d)
of the Exchange Act or any successor provisions thereto if MFS were subject
thereto and (b) if filing such documents by MFS with the Commission is not
permitted under the Exchange Act, promptly upon written request supply copies
of such documents (without exhibits) to any prospective Holder. (Section 1017
of 1994 Indenture; Section 5(n) of 1996 Indenture)
PROVISIONS TO BE REVISED
Pursuant to the Consent Solicitations, WorldCom is proposing to
substantially revise the definition of "Event of Default" contained in the MFS
Indentures with respect to each series of MFS Notes.
Events of Default. Each of the following is an "Event of Default" under the
MFS Indentures:
(a) default in the payment of any installment of interest upon the Notes
when it becomes due and payable, and the continuance of such default for a
period of 30 days;
(b) default in the payment of the principal of (or premium, if any, on)
any Note at its Maturity, upon repurchase, acceleration, optional
redemption, required repurchase (including pursuant to a Change of Control
Offer or an offer as described under "Certain Covenants--Limitations on
Asset Sales") or otherwise or the failure to make an offer to purchase as
therein required;
(c) MFS fails to comply with any of its covenants or agreements contained
in "--Provisions to be Deleted--Limitation on Debt" or "--Limitation on
Debt and Preferred Stock of Restricted Subsidiaries" or fails to perform or
comply with the Indenture provisions described under "The Exchange Offers--
Description of Differences Between the MFS Notes and the WorldCom Notes--
MFS Notes--Consolidation, Merger, Conveyance, Transfer or Lease";
52
<PAGE>
(d) default in the performance, or breach, of any covenant or warranty of
MFS in the Indenture (other than a covenant or warranty a default in whose
performance or whose breach is specifically dealt with in (a), (b) or (c)
above) and continuance of such default or breach for a period of 60 days
after specified written notice thereof has been given to MFS by the Trustee
or to MFS and the Trustee by the Holders of at least 25 percent of the
aggregate principal amount of the Outstanding Notes;
(e) Debt of MFS or any Restricted Subsidiary is not paid when due within
the applicable grace period, if any, or is accelerated by the holders
thereof and, in either case, the principal amount of such unpaid or
accelerated Debt exceeds $10.0 million;
(f) the entry by a court of competent jurisdiction of one or more
judgments or orders against MFS or any Restricted Subsidiary in an
uninsured or unindemnified aggregate amount in excess of $10.0 million
which remains undischarged, unwaived, unstayed, unbonded or unsatisfied for
a period of 60 consecutive days;
(g) the entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of MFS or any Significant Restricted
Subsidiary in an involuntary case or proceeding under U.S. bankruptcy laws,
as now or hereafter constituted, or any other applicable federal, state, or
foreign bankruptcy, insolvency, or other similar law or (ii) a decree or
order adjudging MFS or any Significant Restricted Subsidiary a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of
MFS or any Significant Restricted Subsidiary under U.S. bankruptcy laws, as
now or hereafter constituted, or any other applicable federal, state, or
foreign bankruptcy, insolvency, or similar law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of MFS or any Significant Restricted Subsidiary or of any
substantial part of the Property or assets of MFS of any Significant
Restricted Subsidiary, or ordering the winding up or liquidation of the
affairs of MFS or any Significant Restricted Subsidiary, and the
continuance of any such decree or order for relief or any such other decree
or order unstayed and in effect for a period of 60 consecutive days; or
(h) (i) the commencement by MFS or any Significant Restricted Subsidiary
of a voluntary case or proceeding under U.S. bankruptcy laws, as now or
hereafter constituted, or any other applicable federal, state, or foreign
bankruptcy, insolvency or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or (ii) the consent
by MFS or any Significant Restricted Subsidiary to the entry of a decree or
order for relief in respect of MFS or any Significant Restricted Subsidiary
in an involuntary case or proceeding under U.S. bankruptcy laws, as now or
hereafter constituted, or any other applicable federal, state, or foreign
bankruptcy, insolvency, or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against MFS or any Significant
Restricted Subsidiary, or (iii) the filing by MFS or any Significant
Restricted Subsidiary of a petition or answer or consent seeking
reorganization or relief under U.S. bankruptcy laws, as now or hereafter
constituted, or any other applicable federal, state, or foreign bankruptcy,
insolvency or other similar law, or (iv) the consent by MFS or any
Significant Restricted Subsidiary to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of MFS or any
Significant Restricted Subsidiary or of any substantial part of the
Property or assets of MFS or any Significant Restricted Subsidiary, or the
making by MFS or any Significant Restricted Subsidiary of an assignment for
the benefit of creditors, or (v) the admission by MFS or any Significant
Restricted Subsidiary in writing of its inability to pay its debts
generally as they become due, or (vi) the taking of corporate action by MFS
or any Significant Restricted Subsidiary in furtherance of any such action.
(Section 501 of 1994 Indenture; Section 4(a) of 1996 Indenture)
The above referenced provision defining "Event of Default" is the existing
provision within the MFS Indenture that will be replaced with the definition
of Event of Default substantially similar to that set forth in the WorldCom
Indenture. For a summary of such provision, see "Description of the WorldCom
Notes--Events of Default; Notice and Waiver."
53
<PAGE>
DEFINITION TO BE REVISED IF SUPERMAJORITY CONSENT IS OBTAINED FROM HOLDERS OF
EACH SERIES OF MFS NOTES
Pursuant to the Consent Solicitations, the Company is proposing to
substantially revise the definition of "Change of Control" contained in the
MFS Indentures with respect to each series of MFS Notes only if Consents from
the Holders of at least 75% of the aggregate principal amount outstanding of
MFS Notes are received.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), other than Peter Kiewit Sons, Inc., a Delaware
corporation ("PKS"), or its Affiliates (in the case of the 1994 Indenture
only), the Employee Group or an underwriter engaged in a firm commitment
underwriting on behalf of MFS, is or becomes the "beneficial owner" (as
such term is used in Rules 13d-3 and 13d-5 under the Exchange Act) plus all
shares that such person or group has the right to acquire, whether such
right is exercisable immediately or only after a passage of time, directly
or indirectly, of more than 35 percent of the total voting power of the
Voting Stock of MFS and, in addition, beneficially owns more shares in MFS
than beneficially owned by PKS (in the case of the 1994 Indenture only) and
the Employee Group; or
(b) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with
any new directors whose election by the Board of Directors or whose
nomination for election by the stockholders of MFS was approved by a vote
of a majority of the directors of MFS then still in office who were either
directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute
66 2/3 percent of the Board of Directors then in office; or
(c) MFS shall cease to own, directly or indirectly, at least 51 percent
of the outstanding Capital Stock of MFS Telecom; provided, however, that
any sale, conveyance or transfer of Capital Stock of MFS Telecom must be to
a Strategic Equity Investor; or
(d) MFS sells, conveys, transfers or leases (either in one transaction or
a series of related transactions) all or substantially all of its assets to
a Person other than a Restricted Subsidiary; or
(e) MFS or a Subsidiary sells, conveys, transfers or leases (either in
one transaction or a series of related transactions) all or substantially
all of the assets of MFS Telecom to a Person other than the Company or a
Restricted Subsidiary. (Section 101 of 1994 Indenture; Section 1(d) of 1996
Indenture)
The above referenced definition of "Change of Control" is the existing
definition within the MFS Indenture that will be replaced with the following
definition of Change of Control only if the Supermajority Consent is received.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), other than WorldCom, Inc. or its Affiliates, or
an underwriter engaged in a firm commitment underwriting on behalf of MFS,
is or becomes the "beneficial owner" (as such term is used in Rules 13d-3
and 13d-5 under the Exchange Act) plus all shares that such person or group
has the right to acquire, whether such right is exercisable immediately or
only after a passage of time, directly or indirectly, of more than 50
percent of the total voting power of the Voting Stock of MFS and, in
addition, beneficially owns more shares in MFS than beneficially owned by
WorldCom, Inc.; or
(b) MFS sells, conveys, transfers or leases (either in one transaction or
a series of related transactions) all or substantially all of its assets to
a Person other than an Affiliate.
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CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the MFS
Indentures. Reference is made to the applicable MFS Indenture (Section 101 of
1994 Indenture; Sections 101 and 1(d) of 1996 Indenture) for the full
definition of all such terms, as well as any capitalized terms used herein for
which no definition is provided.
"Accreted Value" of any outstanding MFS Note as of or to any date of
determination means an amount equal to the sum of (i) the issue price of such
MFS Note as determined in accordance with Section 1273 of the Internal Revenue
Code (the "Code") as in effect on the date such MFS Note was first issued plus
(ii) the aggregate of the portions of the original issue discount (the excess
of the amounts considered as part of the "stated redemption price at maturity"
of such MFS Note within the meaning of Section 1273(a)(2) of the Code or any
successor provisions, whether denominated as principal or interest, over the
issue price of such MFS Note) that shall theretofore have accrued pursuant to
Section 1272 of the Code (without regard to Section 1272(a)(7) of the Code)
from the date of issue of such MFS Note (a) for each six-month or shorter
period ending January 15 or July 15 prior to the date of determination and (b)
for the shorter period, if any, from the end of the immediately preceding six-
month or shorter period, as the case may be, to the date of determination,
plus (iii) accrued and unpaid interest to the date such Accreted Value is paid
(without duplication of any amount set forth in (ii) above), minus all amounts
theretofore paid in respect of such MFS Note which amounts are considered as
part of the "stated redemption price at maturity" of such MFS Note within the
meaning of Section 1273(a)(2) of the Code or any successor provisions (whether
such amounts paid were denominated principal or interest).
"Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by,
such Person. As used in this definition, "control" (including, with its
correlative meanings, "controlled by" and "under common control with") shall
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies of such Person (whether through ownership
of securities or partnership or other ownership interest, by contract or
otherwise), provided that, in any event, (a) any Person which owns directly or
indirectly 10 percent or more of the securities having ordinary voting power
for the election of directors or other governing body of a corporation or 10
percent or more of the partnership or other ownership interests of any other
Person (other than as a limited partner of such other Person) will be deemed
to control such corporation or other Person and (b) each Unrestricted
Subsidiary shall be deemed to be an Affiliate of MFS and of each other
Subsidiary. Notwithstanding the foregoing, no individual shall be deemed to be
an Affiliate of a Person solely by reason of his or her being an officer or
director (or equivalent) of such Person and neither MFS nor any of its
Restricted Subsidiaries shall be deemed to be Affiliates of each other.
"Asset Sale" means, with respect to any Person, any transfer, conveyance,
sale, lease or other disposition (including, without limitation, dispositions
pursuant to any consolidation or merger, but excluding any Sale and Leaseback
Transaction) by such Person or any of its Restricted Subsidiaries to any
Person other than to such Person or its Restricted Subsidiaries in any single
transaction or series of transactions of (i) shares of Capital Stock or other
ownership interests of another Person (other than directors' qualifying
shares) or (ii) any other Property or assets of such Person or any of its
Restricted Subsidiaries other than sales of Property or assets in the ordinary
course of business and consistent with past practices. For purposes of this
definition, any series of related transactions that, if effected as a single
transaction, would constitute an Asset Sale, shall be deemed to be a single
Asset Sale when the last such transaction which is a part thereof is effected.
The term "Asset Sale" (i) when used with respect to MFS, shall not include any
asset disposition permitted as described above in "The Exchange Offers--
Description of Differences Between the MFS Notes and the WorldCom Notes--
Consolidation, Merger, Conveyance, Transfer or Lease" which constitutes a
disposition of all or substantially all of the assets of MFS and the
Restricted Subsidiaries taken as a whole, (ii) shall
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exclude any Asset Sale of less than or equal to $1.0 million, (iii) shall
exclude sales of Investments defined in clause (b) of the definition of
Permitted Investments and (iv) shall exclude the sale, conveyance, disposition
or other transfer of the Capital Stock of an Unrestricted Subsidiary or other
Investment described in clause (iv) of the definition of Restricted Payment,
provided that such Investment was permitted by the terms of the applicable MFS
indenture.
"Average Life" means, as of any date, with respect to any Debt security, the
quotient obtained by dividing (i) the sum of the products of (x) the number of
years from such date to the dates of each scheduled principal payment
(including any sinking fund or mandatory redemption payment requirements) of
such Debt security multiplied in each case by (y) the amount of such principal
payment by (ii) the sum of all such principal payments.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in the Borough of Manhattan,
The City of New York are authorized or obligated by law or executive order to
close.
"Capital Lease Obligation" of any Person means the obligation to pay rent or
other payment amounts under a lease of (or other Debt arrangement conveying
the right to use) real or personal property of such Person which is required
to be classified and accounted for as a capital lease or a liability on the
face of a balance sheet of such Person in accordance with GAAP and the stated
maturity thereof shall be the date of the last payment of rent or any amount
due under such lease prior to the first day upon which such lease may be
terminated by the lessee without payment of a penalty.
"Capital Stock" in any Person means any and all shares, interests,
participations or other equivalents in the equity interest (however
designated) in such Person and any rights (other than Debt securities
convertible into an equity interest), warrants or options to acquire an equity
interest in such Person.
"Cash Proceeds" means, with respect to any Asset Sale by any Person or any
sale of Capital Stock by MFS, the aggregate consideration received for such
sale by such Person in the form of cash or, Eligible Cash Equivalents and, for
a period not to exceed 300 days, in the case of the MFS 2006 Notes, and 360
days, in the case of the MFS 2004 Notes, from the related Asset Sale, Debt or
Capital Stock of a Strategic Equity Investor.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person and its Restricted Subsidiaries, as determined on a
consolidated basis in accordance with GAAP, less amounts attributable to
Redeemable Capital Stock of such Person.
"Credit Agreement" means a secured or unsecured credit agreement providing
for revolving credit loans, term loans and/or letters of credit between MFS
and one or more lenders, as such agreement may be amended, modified,
supplemented, refunded or replaced from time to time.
"Debt" means at any time (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person, and
whether or not contingent, (i) any obligation of such Person for money
borrowed, (ii) any obligation of such Person evidenced by bonds, debentures,
notes, Guarantees or other similar instruments, including, without limitation,
any such obligations Incurred in connection with acquisition of Property,
assets or businesses, excluding trade accounts payable made in the ordinary
course of business, (iii) any reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities
issued for the account of such Person, (iv) any obligation of such Person
issued or assumed as the deferred purchase price of property or services (but
excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business, which in either case are not more than 60 days
overdue or which are being contested in good faith), (v) any Capital Lease
Obligation of such Person, (vi) the maximum fixed
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redemption or repurchase price of Redeemable Capital Stock of such Person at
the time of determination, (vii) any Interest Swap Obligations or Currency
Hedge Obligations of such Person at the time of determination, (viii) any
obligation to pay rent or other payment amounts of such Person with respect to
any Sale and Leaseback Transaction to which such Person is a party and (ix)
any obligation of the type referred to in clauses (i) through (viii) of this
definition of another Person and all dividends and distributions of another
Person the payment of which, in either case, such Person has Guaranteed or is
responsible or liable, directly or indirectly, as obligor, Guarantor or
otherwise. For purposes of the preceding sentence, the maximum fixed
repurchase price of any Redeemable Capital Stock that does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Redeemable Capital Stock as if such Redeemable Capital Stock were repurchased
on any date on which Debt shall be required to be determined pursuant to the
applicable MFS Indenture; provided, however, that if such Redeemable Capital
Stock is not then permitted to be repurchased, the repurchase price shall be
the book value of such Redeemable Capital Stock. The amount of Debt of any
Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability of any
Guarantees at such date; and in furtherance of the foregoing, for purposes of
calculating the amount of the MFS Notes of a series outstanding at any date,
the amount of the MFS Notes of a series shall be the Accreted Value thereof as
of such date, unless cash interest has commenced to accrue prior to January
15, 1999 pursuant to the 1994 Indenture with respect to the MFS 2004 Notes and
January 15, 2001 pursuant to the 1996 Indenture with respect to the MFS 2006
Notes, in which case the amount of the MFS 2004 Notes and the MFS 2006 Notes
outstanding will be determined pursuant to the 1994 Indenture and the 1996
Indenture, respectively, and will not include any accrued and unpaid cash
interest which would otherwise be included in Accreted Value because of clause
(iii) of the definition thereof.
"Debt to EBITDA Ratio" means, as at any date of determination, the ratio of
(i) the aggregate amount of Debt of MFS and its Restricted Subsidiaries on a
consolidated basis as at the date of determination to (ii) the aggregate
amount of EBITDA of MFS and its Restricted Subsidiaries for the four preceding
fiscal quarters for which financial information is available immediately prior
to the date of determination; provided that any Debt incurred or retired by
MFS or any of its Restricted Subsidiaries during the fiscal quarter in which
the transaction date occurs shall be calculated as if such Debt was so
incurred or retired on the first day of the fiscal quarter in which the date
of determination occurs; and provided further that (x) if the transaction
giving rise to the need to calculate the Debt to EBITDA Ratio would have the
effect of increasing or decreasing Debt or EBITDA in the future, Debt or
EBITDA shall be calculated on a pro forma basis as if such transaction had
occurred on the first day of such four fiscal quarter period preceding the
date of determination, and (y) if during such four fiscal quarter period, MFS
or any of its Restricted Subsidiaries shall have engaged in any Asset Sale,
EBITDA for such period shall be reduced by an amount equal to the EBITDA (if
positive), or increased by an amount equal to the EBITDA (if negative),
directly attributable to the assets which are the subject of such Asset Sale
and any related retirement of Debt as if such Asset Sale and related
retirement of Debt had occurred on the first day of such period or (z) if
during such four fiscal quarter period, MFS or any of its Restricted
Subsidiaries shall have acquired any material assets out of the ordinary
course of business, EBITDA shall be calculated on a pro forma basis as if such
asset acquisition and related financing had occurred on the first day of such
period.
"Debt to Total Capital Ratio" means as of the date of determination the
ratio of (i) the aggregate amount of Debt of MFS and its Restricted
Subsidiaries on a consolidated basis as at the date of determination to (ii)
the sum of (a) the total equity investment in MFS as of January 26, 1994
($947.1 million), (b) the aggregate net proceeds to MFS from the issuance of
any Qualified Capital Stock (including preferred stock) subsequent to January
26, 1994, (c) Subordinated Debt from a Control Group permitted under clause
(m) of the definition of Permitted Debt and (d) net cash proceeds from the
sales of Redeemable Capital Stock of MFS or Debt securities of MFS convertible
into Qualified Capital Stock, in either case upon conversion thereof into
Qualified Capital Stock; provided, however,
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that, for purposes of calculation of the Debt to Total Capital Ratio (i) Debt
described by clause (c) above shall not be included if such Debt shall have
been utilized to make a Permitted Investment under clause (a) of the
definition of Permitted Investments; (ii) the net cash proceeds from the sale
of Capital Stock of MFS, including Capital Stock issued upon the conversion of
convertible Debt described in clauses (b) or (d) above, shall not be included
if such proceeds have been utilized to make a Restricted Payment or a
Permitted Investment under clause (a) of the definition of Permitted
Investment and (iii) for purposes of this definition, notwithstanding the
definition of Debt, the amount of the MFS 2004 Notes shall be the principal
amount at the Stated Maturity of such MFS 2004 Notes.
"Default" means any event, act or condition the occurrence of which is, or
after notice or the passage of time or both would be, an Event of Default.
"EBITDA" means with respect to any Person for any period, the sum for such
Person for such period of Consolidated Net Income plus, to the extent
reflected in the income statement of such Person for such period from which
Consolidated Net Income is determined, without duplication, (i) Consolidated
Interest Expense, (ii) income tax expense, (iii) depreciation expense, (iv)
amortization expense and (v) any charge related to any premium or penalty paid
in connection with redeeming or retiring any Debt prior to its stated
maturity.
"Employee Group" means a group of employees of MFS, which includes the Chief
Executive Officer of MFS, who own, directly or indirectly, through an employee
stock ownership plan or similar employee stock ownership arrangement, shares
of MFS's Capital Stock.
"Fair Market Value" means total consideration received or paid in any
transaction or series of transactions as determined in good faith by the Board
of Directors.
"GAAP" means United States generally accepted accounting principles,
consistently applied, as set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board, or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession of the United
States, that are applicable to the circumstances as of the date of
determination; provided, however, that, except as otherwise specifically
provided, all calculations made for purposes of determining compliance with
the terms of the provisions of the MFS Indentures shall utilize GAAP in effect
at the time of preparation of, and in accordance with the GAAP used to
prepare, the historical financial statements of MFS on January 26, 1994.
"Guarantee" means, as applied to any obligation of another Person, (i) a
guarantee (other than by endorsement of negotiable instruments for collection
in the ordinary course of business), direct or indirect, in any manner, of any
part or all of such obligation, (ii) any direct or indirect obligation,
contingent or otherwise, of a Person guaranteeing or having the effect of
guaranteeing the obligations of any other Person in any manner and (iii) an
agreement of a Person, direct or indirect, contingent or otherwise, the
practical effect of which is to assure in any way the payment or performance
(or payment of damages in the event of non-performance) of all or any part of
such obligation of another Person (and "Guaranteed", "Guaranteeing" and
"Guarantor" shall have meanings correlative to the foregoing).
"Investment" by any Person means any direct or indirect loan, advance (or
other extension of credit) or capital contribution to (by means of any
transfer of cash or other Property to others or any other payments for
Property of services for the account or use of others), the purchase or
acquisition of any Capital Stock, bonds, notes, debentures or other securities
of, the acquisition, by purchase or otherwise, of all or substantially all of
the business or assets or stock or other evidence of beneficial ownership of,
any Person or making of any Investment in any Person. Investments shall
exclude
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accounts receivable and other extensions of trade credit on commercially
reasonable terms in accordance with normal trade practices.
"Issue Date" means the date on which the MFS Notes of a series are first
authenticated and delivered under the applicable MFS Indenture.
"Joint Venture" means a telecommunications company in which MFS holds not
more than 50 percent of the shares of Voting Stock.
"Lien" means, with respect to any Property or other asset, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement,
security interest, lien (statutory or other), charge, easement, encumbrance,
preference, priority or other security or similar agreement or preferential
arrangement of any kind or nature whatsoever on or with respect to such
Property or other asset (including, without limitation, any conditional sale
or other title retention agreement having substantially the same economic
effect as any of the foregoing).
"Maturity", when used with respect to an MFS Note, means the date on which
the principal of such MFS Note becomes due and payable as provided therein or
in the applicable MFS Indenture, whether at the Stated Maturity, on the Change
of Control Payment Date (in the case of the MFS 2006 Notes) or Purchase Date
established pursuant to the terms of the applicable MFS Indenture with regard
to a Change of Control Offer (in the case of the MFS 2006 Notes) or an Asset
Sale Offer (in the case of the MFS 2006 Notes), as applicable, or an Offer to
Purchase (in the case of the MFS 2004 Notes), or by declaration of
acceleration, call for redemption or otherwise.
"MFS Telecom" means MFS Telecom, Inc., a Delaware corporation, and its
successors (including any Restricted Subsidiary to which all or substantially
all of the assets of MFS Telecom are sold, transferred or conveyed).
"Net Cash Proceeds" means, with respect to Asset Sales of any Property or
other assets by a Person or its Restricted Subsidiaries, cash and cash
equivalents received net of (i) all reasonable out-of-pocket expenses of such
Person or such Restricted Subsidiary incurred in connection with such a sale,
including, without limitation, all legal, title and recording tax expenses,
commissions and other fees and expenses incurred (but excluding any finder's
fee or brokers' fee payable to any Affiliate of such Person) and all federal,
state, foreign and local taxes arising in connection with such an Asset Sale
that are paid or required to be accrued as liability under GAAP by such Person
or its Restricted Subsidiaries, (ii) all payments made by such Person or its
Restricted Subsidiaries on any Debt which is secured by such Properties or
other assets in accordance with the terms of any Lien upon or with respect to
such Properties or other assets or which must, by the terms of such Lien, or
in order to obtain a necessary consent to such transaction or by applicable
law, be repaid in connection with such Asset Sale, and (iii) all contractually
required distributions and other payments made to minority interest holders
(but excluding distributions and payments to Affiliates of such Person) in
Restricted Subsidiaries of such Person as a result of such transaction;
provided that, in the event that any consideration for a transaction (which
would otherwise constitute Net Cash Proceeds) is required to be held in escrow
pending determination of whether a purchase price adjustment will be made,
such consideration (or any portion thereof) shall become Net Cash Proceeds
only at such time as it is released to such Person or its Restricted
Subsidiaries from escrow, and provided that any non-cash consideration
received in connection with any transaction, which is subsequently converted
to cash, shall be deemed to be Net Cash Proceeds at such time, for purposes of
an Asset Sale and shall thereafter be applied in accordance with the covenant
described in "The Exchange Offers -- Description of Differences Between the
MFS Notes and the WorldCom Notes -- Limitation on Asset Sales."
"Permitted Debt" means (a) Debt permitted to be borrowed under the Credit
Agreement in an aggregate principal amount up to $150.0 million outstanding at
any one time; (b) Debt under Interest
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Swap Obligations, provided that such obligations are related to payment
obligations on other Permitted Debt, and Currency Hedge Obligations; (c) Debt
of MFS to any Restricted Subsidiary of MFS (but only so long as such Debt is
held by such restricted Subsidiary); (d) Guarantees and letters of credit
incurred in the ordinary course of business and consistent with industry
practices; (e) Debt outstanding under the MFS Notes of a series; (f) Debt of
MFS outstanding as of the Issue Date of the applicable series of MFS Notes
other than Debt to be repaid with the proceeds of the offering of such series
of MFS Notes; (g) Debt incurred in connection with a prepayment or redemption
of the MFS Notes of a series pursuant to a Change of Control provided that the
principal amount of such Debt does not exceed 101% of the principal amount of
the MFS Notes of a series prepaid (plus the amount of reasonable expenses
incurred in connection therewith) and that such Debt (i) has an Average Life
to Stated Maturity equal to or greater than the remaining Average Life to
Stated Maturity of the MFS Notes of a series and (ii) does not mature prior to
the Stated Maturity of the MFS Notes of a series; (h) Debt incurred on or
prior to December 31, 1998 if, after giving effect to the incurrence and
application of the proceeds thereof, the Debt to Total Capital Ratio would not
exceed 1.0; (i) Debt incurred after December 31, 1998 if after giving pro
forma effect to the incurrence and application of the proceeds thereof, the
Debt to EBITDA Ratio would not equal or exceed 5 to 1 in the case of any such
incurrence; (j) Debt incurred (including in the case of discount or paid in
kind Debt any accretion on such Debt or notes payable in respect of such Debt)
to finance the construction or acquisition of Telecommunications Assets,
provided that the net cash proceeds from the issuance of such Debt do not
exceed 100 percent of the lesser of cost or Fair Market Value of such
Telecommunications Assets constructed or acquired; (k) Debt not otherwise
permitted by this definition incurred in exchange for, or the proceeds of
which are used to refinance Debt referred to in clauses (d) through (j) of
this definition, provided that (i) such Debt is in an aggregate principal
amount not in excess of the aggregate principal amount then outstanding of the
Debt being refinanced plus any amounts related to prepayment or redemption
premiums and fees related thereto; (ii) such Debt is scheduled to mature no
earlier than the Debt being refinanced; and (iii) such Debt has an Average
Life at the time such Debt is incurred that is equal to or greater than the
Average Life of the Debt being refinanced; provided, further, that such Debt
does not have a higher relative ranking to the MFS Notes of a series than the
MFS Notes of a series have to the Debt being refinanced and the covenants
relating to such Debt are not materially more restrictive in the aggregate
than those of the Debt being refinanced; (l) Debt not otherwise described in
this definition in an amount not to exceed $25.0 million outstanding at any
one time; and (m) Subordinated Debt invested by a Control Group.
"Permitted Investments" means (a) Investments in Joint Ventures in an
aggregate amount not to exceed the sum of (i) Invested Capital, (ii) the
aggregate net cash proceeds received by MFS and its Restricted Subsidiaries as
distributions on or from the sale or disposition of any such Investments made
in Joint Ventures since January 26, 1994, and (iii) $25.0 million; (b)
Eligible Cash Equivalents; (c) Investments in assets used in the ordinary
course of business; (d) Investments in any Person as a result of which such
Person becomes a Restricted Subsidiary; (e) Investments pursuant to any
agreement or obligation of MFS or a Restricted Subsidiary, in effect on the
Issue Date, to make such Investments; (f) Investments in prepaid expenses,
negotiable instruments held for collection and lease, utility and workers'
compensation, performance and other similar deposits; (g) loans and advances
to employees made in the ordinary course of business and consistent with past
practice; (h) Interest Swap Obligations and Currency Hedge Obligations; (i)
bonds, notes, debentures or other securities received as a result of Asset
Sales permitted under the covenant limiting MFS' ability to engage in Asset
Sales as described in the applicable covenant; (j) Investments in existence at
January 26, 1994; and (k) Investments incurred in the ordinary course of
business as partial payment for constructing a network using principally
Telecommunications Assets, provided, however, that MFS and its Restricted
Subsidiaries have received at least 85 percent of the aggregate consideration
therefrom in cash or cash equivalents.
"Permitted Liens" means (a) Liens securing Debt incurred under the Credit
Agreement provided that (i) such Debt was incurred in compliance with clause
(a) of the definition of Permitted Debt; (b)
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Liens securing Debt incurred under clause (j) of the definition of Permitted
Debt and Subsidiary Vendor Debt; (c) Liens on Property of a Person existing at
the time such Person is merged with or into or consolidated with MFS or
becomes a Restricted Subsidiary (and not incurred in anticipation of such
transaction); provided that such Liens are not extended to the Property and
assets of MFS and its Restricted Subsidiaries, other than the acquired
Restricted Subsidiary; (d) Liens on Telecommunications Assets existing during
the time of the construction thereof; (e) Liens incurred to secure the
performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business consistent with industry practice; (f) Liens existing as of the Issue
Date; (g) any Lien on Property and assets of MFS in favor of the United States
of America or any state thereof, or any instrumentality of either, to secure
certain payments pursuant to any contract or statute; (h) any Lien for taxes
or assessments or other governmental charges or levies not then due and
payable (or which, if due and payable, are being contested in good faith and
for which adequate reserves are being maintained, to the extent required by
GAAP); (i) any title exception, easement or other similar Lien that does not
materially impair the use of the property subject thereto in the ordinary
course of business of MFS or any of its Restricted Subsidiaries, as
applicable; (j) any Lien to secure obligations under workmen's compensation
laws or similar legislation, including any Lien with respect to judgments
which are not currently dischargeable; (k) any statutory warehousemen's,
materialmen's or other similar Liens for sums not then due and payable (or
which, if due and payable, are being contested in good faith and with respect
to which adequate reserves are being maintained, to the extent required by
GAAP); (l) Liens on Receivables, provided that the outstanding amount of the
Debt secured by such Liens would not represent more than 80 percent of
Eligible Receivables; and (m) Liens to secure any permitted extension,
renewal, refinancing or refunding (or successive extensions, renewals,
refinancings or refundings), in whole or in part, of any Debt secured by Liens
referred to in the foregoing clauses (b) through (e); provided that such Liens
do not extend to any other Property or assets and the principal amount of the
Debt secured by such Liens is not increased.
"Person" means any individual, Corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Property" means, with respect to any Person, any interest of such Person in
any kind of property or assets, whether real, personal or mixed, or tangible
or intangible, excluding Capital Stock in any other Person.
"Redeemable Capital Stock" of any Person means any equity security of such
Person that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or otherwise (including on the
happening of an event), is required to be redeemed or is redeemable at the
option of the holder thereof, in whole or in part (including by operation of a
sinking fund), or is exchangeable for Debt, in whole or in part at any time,
prior to the Stated Maturity of the MFS Notes of a series.
"Replacement Asset" means, with respect to any Asset Sale, a Property or
asset that, as determined by the Board of Directors as evidenced by a Board
Resolution, is used or will be used in the telecommunications business of MFS
or a Restricted Subsidiary.
"Restricted Payment" means (i) a dividend or other distribution declared and
paid on the Capital Stock of MFS or to MFS' stockholders (in their capacity as
such), or declared and paid to any Person other than MFS or a Restricted
Subsidiary of MFS on the Capital Stock of any Restricted Subsidiary of MFS, in
each case, other than dividends, distributions or payments made solely in
Qualified Capital Stock of MFS or such Restricted Subsidiary, (ii) a payment
made by MFS (other than a payment made solely in Qualified Capital Stock of
MFS) or any of its Restricted Subsidiaries (other than a payment to MFS or any
Restricted Subsidiary of MFS or a payment made solely in Qualified Capital
Stock of such
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Restricted Subsidiary or of MFS) to purchase, redeem, acquire or retire any
Capital Stock of MFS or of a Restricted Subsidiary, (iii) a payment made by
MFS or of any of its Restricted Subsidiaries (other than a payment made solely
in Qualified Capital Stock of MFS) to redeem, repurchase, defease (including
an in-substance or legal defeasance) or otherwise acquire or retire for value
(including pursuant to mandatory repurchase covenants), prior to any scheduled
maturity, scheduled sinking fund or mandatory redemption payment, Debt of MFS
which is subordinate (whether pursuant to its terms or by operation of law) in
right of payment to either series of the MFS Notes and which was scheduled to
mature on or after the Stated Maturity of either series of the MFS Notes or
(iv) an Investment in any Person, including an Unrestricted Subsidiary, other
than (a) a Permitted Investment, (b) an Investment by MFS in another
Restricted Subsidiary or (c) an Investment by a Restricted Subsidiary in MFS
or a Restricted Subsidiary. For calculation purposes upon any Person becoming
a Restricted Subsidiary, all investments in that person shall not be
considered to be Restricted Payments.
"Restricted Subsidiary" of any Person means (i) any corporation other than
an Unrestricted Subsidiary more than 50% of the outstanding shares of Voting
Stock of which is owned or controlled, directly or indirectly, by such person
or (ii) any limited partnership other than an Unrestricted Subsidiary of which
such Person or any Restricted Subsidiary of such Person is a general partner
or (iii) any other Person (other than a corporation or limited partnership)
other than an Unrestricted Subsidiary in which such Person, or one or more
other Restricted Subsidiaries of such Person, or such Person and one or more
other Restricted Subsidiaries thereof, directly or indirectly, have more than
50% of the outstanding partnership or similar interests or have the power, by
contract or otherwise, to direct or cause the direction of the policies,
management and affairs thereof.
"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.
"Stated Maturity" when used with respect to an MFS Note or any installment
of interest thereon, means the date specified in such MFS Note as the fixed
date on which the principal of such MFS Note or such installment of interest
is due and payable.
"Strategic Equity Investor" means a Telecommunications Company rated
investment grade by Standard & Poor's Ratings Group and Moody's Investors
Service, Inc. and having a Total Market Capitalization (as defined) of debt
and equity of at least $10.0 billion.
"Subsidiary" means, with respect to any Person, (i) any corporation more
than 50 percent of the outstanding shares of Voting Stock of which is owned,
directly or indirectly, by such Person, or by one or more other Subsidiaries
of such Person, or by such Person and one or more other Subsidiaries of such
Person, (ii) any general partnership, joint venture or similar entity, more
than 50 percent of the outstanding partnership or similar interests of which
are owned, directly or indirectly, by such Person, or by one or more other
Subsidiaries of such Person, or by such Person and one or more other
Subsidiaries of such Person and (iii) any limited partnership of which such
Person or any Subsidiary of such Person is a general partner.
"Subsidiary Vendor Debt" means Debt incurred (which, with respect to the MFS
2006 Notes, includes in the case of discount or paid in kind Debt any
accretion on such Debt or notes payable in respect of such Debt) by a
Restricted Subsidiary to finance the construction or acquisition of
Telecommunication Assets or the acquisition of the Capital Stock of a
Restricted Subsidiary substantially all the assets of which are
Telecommunications Assets, provided that the net cash proceeds from the
issuance of such Debt do not exceed 100 percent of the lesser of cost or Fair
Market Value of such Telecommunications Assets so constructed or acquired (at
the time of incurrence
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in the case of the MFS 2004 Notes); provided, further, however, that if an
acquired Restricted Subsidiary has outstanding previously incurred Debt, such
previously incurred Debt will also constitute Subsidiary Vendor Debt if and
only if such previously incurred Debt was not incurred in contemplation of
such acquisition and all such Debt is non-recourse to MFS and its Restricted
Subsidiaries other than the acquired Restricted Subsidiary.
"Telecommunications Assets" means, with respect to any Person, any asset that
is utilized by such Person, directly or indirectly, for the design,
development, installation, integration, management or provision of
telecommunications systems and/or services, including without limitation, any
businesses or services in which MFS is currently engaged. Telecommunications
Assets shall include stock, joint venture or partnership interests where
substantially all of the assets of the entity being acquired consist of
Telecommunications Assets.
"Unrestricted Subsidiary" means (i) any Subsidiary of MFS (a) which at the
time of determination shall be an Unrestricted Subsidiary (as designated by
the Board of Directors of MFS, as provided below), (b) which shall be engaged
in the same or similar line of business as MFS and its Restricted
Subsidiaries, and (c) all the Debt of which shall be non-recourse to MFS and
its Subsidiaries other than its Unrestricted Subsidiaries and (ii) any
Subsidiary of an Unrestricted Subsidiary; provided that notwithstanding clause
(i)(c) above, MFS or a Restricted Subsidiary of MFS may guarantee, endorse,
agree to provide funds for the payment or maintenance of, or otherwise become
directly or indirectly liable with respect to, Debt of an Unrestricted
Subsidiary but only to the extent that MFS or such Restricted Subsidiary could
make an Investment in such Unrestricted Subsidiary pursuant to the covenant
described under "The Exchange Offers--Description of Differences Between the
MFS Notes and the WorldCom Notes--Limitations on Restricted Payments" and any
such Guarantee, endorsement or agreement shall be deemed an incurrence of Debt
by MFS for purposes of the covenant described under "The Exchange Offers--
Description of Differences Between the MFS Notes and the WorldCom Notes--
Limitation of Debt." The Board of Directors of MFS may designate any newly
acquired or newly formed Subsidiary to be an Unrestricted Subsidiary unless
such Subsidiary owns any capital stock of, or owns or holds any Lien on any
property of, any other Subsidiary of MFS which is not an Unrestricted
Subsidiary (other than a Subsidiary of the type referred to in clause (ii)
above).
"Voting Stock" means, with respect to any Person, securities of any class or
classes of Capital Stock in such Person entitling the holders thereof (whether
at all times or at the times that such class of Capital Stock has voting power
by reason of the happening of any contingency) to vote in the election of
members of the board of directors or comparable body of such Person.
DESCRIPTION OF THE WORLDCOM NOTES
The WorldCom Notes will be issued under the WorldCom Indenture, as
supplemented. The following summary of certain provisions of the WorldCom
Indenture does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"), and to all of the provisions of the WorldCom
Indenture, including the definitions of certain terms therein and those terms
made a part of the WorldCom Indenture by reference to the Trust Indenture Act
as in effect on the date of the WorldCom Indenture. The WorldCom Indenture are
by their terms subject to and governed by the Trust Indenture Act. Unless
otherwise indicated, references under this caption to sections are references
to the WorldCom Indenture. Whenever particular sections or defined terms are
referred to, it is intended that such sections or defined terms shall be
incorporated herein by reference. A copy of the WorldCom Indenture may be
obtained from the Company and is also filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The definitions of certain
capitalized terms used in the following summary are set forth below under "--
Certain Definitions". For purposes of the description of the
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WorldCom Notes, the term "Company" refers to WorldCom, Inc. and does not
include its subsidiaries except for purposes of financial data determined on a
consolidated basis.
General
The WorldCom 2004 Notes will be limited in aggregate principal amount to $
million and will mature on January 15, 2004. Interest on the WorldCom 2004
Notes will accrue at the rate of 9 3/8% per annum. The WorldCom 2006 Notes
will be limited in aggregate principal amount to $ million and will mature
on January 15, 2006. Interest on the WorldCom 2006 Notes will accrue at the
rate of 8 7/8% per annum.
Interest on the WorldCom Notes will be payable semi-annually on January 15
and July 15, commencing on July 15, 1997, to the persons who are registered
holders of the WorldCom Notes at the close of business on the immediately
preceding December 31 and June 30, respectively. Interest on the WorldCom
Notes will accrue from and including the Interest Accrual Date. Interest will
be calculated on the basis of a 360-day year of twelve 30-day months.
Principal and interest will be payable at one or more offices of the Paying
Agent, one of which will be in the City of New York, but, at the option of the
Company, interest may be paid by check mailed to the registered holders at
their registered addresses. The WorldCom Notes will be issued without coupons
and in fully registered form only, in denominations of $1,000 and integral
multiples thereof. Unless otherwise designated by the Company, the Trustee
shall act as Paying Agent.
Ranking
The WorldCom Notes will be senior, unsecured obligations of the Company,
will rank pari passu in right of payment with all other existing and future
senior, unsecured indebtedness of the Company and will rank senior in right of
payment to any future subordinated obligations of the Company. The WorldCom
Notes will be structurally subordinated to any secured indebtedness of the
Company to the extent of the value of the assets securing such indebtedness
and to all obligations, including any MFS Notes not exchanged for WorldCom
Notes in the Exchange Offers, of the Company's subsidiaries. At March 31,
1997, after giving effect to the issuance and sale by WorldCom of the April
WorldCom Notes, the aggregate amount of indebtedness of the Company that would
have ranked pari passu with the WorldCom Notes was approximately $ billion.
The WorldCom Notes will be effectively subordinated to all obligations,
including trade payables, of the Company's subsidiaries to the extent of the
assets of such subsidiaries available to satisfy such obligations. As of March
31, 1997, the aggregate amount of such obligations of the Company's
subsidiaries (excluding intercompany indebtedness) was approximately $
billion; of this amount, (i) $685.8 million represented the carrying value of
the MFS 2004 Notes and (ii) $674.5 million represented the carrying value of
the MFS 2006 Notes. See "Risk Factors."
Optional Redemption
The WorldCom 2004 Notes will not be redeemable at the option of the Company
prior to January 15, 1999. On or after January 15, 1999, the WorldCom 2004
Notes will be redeemable at the option of the Company, in whole at any time or
in part from time to time, at the following prices (expressed in percentages
of the principal amount thereof), if redeemed during the twelve months
beginning January 15 of the years indicated below, in each case together with
interest accrued to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1999.......................................................... 103.52%
2000.......................................................... 102.34%
2001.......................................................... 101.17%
2002 and thereafter........................................... 100.00%
</TABLE>
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The WorldCom 2006 Notes will not be redeemable at the option of the Company
prior to January 15, 2001. On or after January 15, 2001, the WorldCom 2006
Notes will be redeemable at the option of the Company, in whole at any time or
in part from time to time, at the following prices (expressed in percentages
of the principal amount thereof), if redeemed during the twelve months
beginning January 15 of the years indicated below, in each case together with
interest accrued to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001.......................................................... 103.32%
2002.......................................................... 102.21%
2003.......................................................... 101.11%
2004 and thereafter........................................... 100.00%
</TABLE>
If less than all of the WorldCom Notes of either series are to be redeemed,
the Trustee will select the WorldCom Notes or portions thereof in each series
to be redeemed pro rata, by lot or by any other method that the Trustee shall
deem fair and appropriate. (Section 1103 of the WorldCom Indenture) Notice of
redemption will be mailed at least 30 days but no more than 60 days before the
redemption date to each Holder of WorldCom Notes to be redeemed at its
registered address. (Section 1104 of the WorldCom Indenture) On or after the
redemption date, the WorldCom Notes shall cease to accrue interest, if the
Company makes the redemption payment.
Consolidation, Merger, Conveyance, Sale or Lease
The Company may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into any other
corporation, provided that (a) either the Company shall be the continuing
corporation, or the successor corporation (if other than the Company) formed
by or resulting from any such consolidation or merger or which shall have
received the transfer of such assets shall expressly assume payment of the
principal of (and premium, if any) and interest on all the WorldCom Notes and
the performance and observance of all the covenants and conditions of the
WorldCom Indenture; and (b) the Company or such successor corporation shall
not immediately thereafter be in default under the WorldCom Indenture (Section
801 of the WorldCom Indenture).
Limitation on Liens
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, create, or suffer to be created or to exist, any Lien
(other than Permitted Liens) upon any of its Property or assets, whether now
owned or hereafter acquired, or any interest therein or any income or profits
therefrom, unless it has made or will make effective provision whereby the
WorldCom Notes will be secured by such Lien equally and ratably with (or prior
to) all other indebtedness of the Company or any Restricted Subsidiary secured
by such Lien for so long as any such other indebtedness of the Company or any
Restricted Subsidiary shall be so secured. Notwithstanding the foregoing, the
Company may, and may permit any Restricted Subsidiary to, issue, assume or
guarantee indebtedness secured by Liens on Property that are not Permitted
Liens without equally and ratably securing the WorldCom Notes, provided that
the sum of all such indebtedness then being issued, assumed or guaranteed
together with such indebtedness theretofore issued, assumed or guaranteed that
remains outstanding does not exceed 15% of the Consolidated Net Tangible
Assets prior to the time such indebtedness was issued, assumed or guaranteed
(Section 1004 of the WorldCom Indenture).
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Events of Default; Notice and Waiver
Each of the following is an "Event of Default" under the WorldCom
Indenture with respect to a series of WorldCom Notes:
(a) default for 30 days in the payment of any installment of interest on
any WorldCom Note of that series;
(b) default in the payment of the principal of (or premium, if any, on)
any WorldCom Note of that series at its Maturity;
(c) default in the performance of any other covenant of the Company in
the WorldCom Indenture with respect to a WorldCom Note of that series
(other than a covenant included therein solely for the benefit of a series
other than the WorldCom Notes) continued for 60 days after written notice
as provided in the WorldCom Indenture;
(d) 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 WorldCom Indenture) or instruments
under which the Company may have issued, or by which there may have been
secured or evidenced, any other indebtedness (including any other
securities issued under the WorldCom Indenture) of the Company, but only if
such indebtedness is not discharged or such acceleration is not rescinded
or annulled; and
(e) 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 (Sections 501, 2(a) and 2(b) of the
WorldCom Indenture).
The Trustee may withhold notice to the holders of WorldCom Notes of any
default with respect to such series (except a default in the payment of the
principal of (or premium, if any) or interest on any WorldCom Note or in the
payment of any sinking fund installment in respect of any WorldCom Note) if
the Responsible Officers of the Trustee consider such withholding to be in the
interest of such holders (Section 601 of the WorldCom Indenture).
If an Event of Default under the Indenture with respect to WorldCom Notes at
the time outstanding occurs and is continuing, then in every such case the
Trustee or the holders of not less than 25% in principal amount of the
outstanding WorldCom Notes may declare the principal amount of all of the
WorldCom Notes of that series (or of all WorldCom Notes then outstanding under
the Indenture, as the case may be) to be due and payable immediately by
written notice thereof to the Company (and to the Trustee if given by the
holders). However, at any time after such a declaration of acceleration with
respect to a particular series of WorldCom Notes (or of all WorldCom Notes
then outstanding under the Indenture, as the case may be) has been made, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee prior to the Stated Maturity thereof, the holders of a majority in
principal amount of outstanding WorldCom Notes may, subject to certain
conditions, rescind and annul such acceleration if all Events of Default,
other than the non-payment of accelerated principal (or specified portion
thereof), with respect to WorldCom Notes of such series (or of all WorldCom
Notes then outstanding under the Indenture, as the case may be) have been
cured or waived as provided in the Indenture. The Indenture also provides that
the holders of not less than a majority in principal amount of the outstanding
WorldCom Notes of any series issued thereunder (or of all WorldCom Notes then
outstanding under the Indenture, as the case may be) may waive certain past
defaults with respect to such series and its consequences (Section 513 of the
WorldCom Indenture). Within 120 days after the close of each fiscal year, the
Company must file with the Trustee a statement, signed by specified officers,
stating whether or not such officers have knowledge of any default under the
Indenture and, if so, specifying each such default and the nature and status
thereof (Section 1006 of the WorldCom Indenture).
Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of
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any holders of any series of WorldCom Notes then outstanding under the
Indenture, unless such holders shall have offered to the Trustee reasonable
security or indemnity (Section 602 of the WorldCom Indenture). Subject to such
provisions for indemnification and certain limitations contained in the
WorldCom Indenture, the holders of not less than a majority in principal
amount of the outstanding WorldCom Notes of any series issued thereunder (or
of all Debt Securities then outstanding under the WorldCom Indenture, as the
case may be) shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or of
exercising any trust or power conferred upon the Trustee (Section 512 of the
WorldCom Indenture).
Amendment and Supplement
The WorldCom Indenture contains provisions permitting WorldCom and the
Trustee to enter into one or more indentures supplemental to the WorldCom
Indenture without the consent of the holders of the WorldCom Notes for certain
purposes, including the following: (a) to evidence the succession of another
entity to the Company and the assumption by such entity of the covenants of
the Company contained in the WorldCom Indenture and the WorldCom Notes; (b) to
add to the covenants of the Company for the benefit of the holders of the
WorldCom Notes or to surrender any right or power conferred upon the Company
in the WorldCom Indenture; (c) to add any additional Events of Default for the
benefit of the holders of the WorldCom Notes; provided, however, that in
respect of any such additional Events of Default such supplemental indenture
may provide for a particular period of grace after default or may provide for
an immediate enforcement upon such default or may limit the remedies available
to the Trustee upon such default or may limit the right of the holders of a
majority in aggregate principal amount of that or those series of WorldCom
Notes to which such additional Events of Default apply to waive such default;
(d) to add to or change any of the provisions of the WorldCom Indenture to
permit or facilitate the issuance of the WorldCom Notes in uncertificated or
bearer form; (e) to change or eliminate any provisions of the WorldCom
Indenture which do not affect the rights of any holders of securities issued
in connection with the WorldCom Indenture; (f) to provide security for the
WorldCom Notes; (g) to evidence and provide for the acceptance of an
appointment of a successor Trustee with respect to the WorldCom Notes and to
add to or change any of the provisions of the WorldCom Indenture to provide
for or facilitate the administration of the trusts under the WorldCom
Indenture by more than one Trustee; (h) to cure any ambiguity, to correct or
supplement any provision of the WorldCom Indenture which may be defective or
inconsistent with any other provision, or to make any other provisions with
respect to matters or questions arising under the WorldCom Indenture which
shall not be inconsistent with the provisions of the WorldCom Indenture and
which additional provisions shall not adversely affect the interests of the
holders of the WorldCom Notes; or (i) to supplement any of the provisions of
the WorldCom Indenture to such extent as shall be necessary to permit or
facilitate the defeasance and discharge of the WorldCom Notes in accordance
with terms and conditions of the WorldCom Indenture provided that any such
action shall not adversely affect the interests of the holders of the WorldCom
Notes (Section 901 of the WorldCom Indenture).
The WorldCom Indenture also contains provisions permitting WorldCom and the
Trustee, with the consent of the holders of not less than a majority in
principal amount of all the Company's outstanding securities affected by the
terms of any such supplemental indenture, to execute supplemental indentures
adding any provisions to or changing in any manner or eliminating any of the
provisions of the WorldCom Indenture or of modifying in any manner the rights
of the holders of the WorldCom Notes, except that, without the consent of the
holders of each WorldCom Note, no such supplemental indenture shall, (a)
change the Stated Maturity of the principal of (or premium, if any, on) or any
installment of principal of or interest on the WorldCom Notes; (b) reduce the
principal amount of the WorldCom Notes or the rate or amount of interest
thereon or any additional amounts payable in respect thereof pursuant to the
WorldCom Indenture or the WorldCom Notes, or any premium payable upon the
redemption thereof; (c) change any obligation of the Company to pay additional
amounts pursuant to Section 1007 of the WorldCom Indenture (except as
otherwise contemplated by the
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WorldCom Indenture); (d) adversely affect any right of repayment at the option
of the holder of the WorldCom Notes; (e) change any place of payment where, or
the currency or currencies, currency unit or units or composite currency or
currencies in which, the WorldCom Notes or any premium or the interest thereon
is payable; (f) impair the right to institute suit for the enforcement of any
such payment on or after the stated maturity thereof (or in the case of
redemption or repayment at the option of the holder of the WorldCom Notes, on
or after the Redemption Date or the Repayment Date, as the case may be); (g)
reduce the percentage in principal amount of the outstanding WorldCom Notes of
either Series, the consent of whose holders is required for any such
supplemental indenture, or the consent of whose holders is required for any
waiver with respect to such series or compliance with certain provisions of
the WorldCom Indenture or certain defaults thereunder and their consequences;
(h) reduce the quorum or voting requirements as contained in the WorldCom
Indenture; or (i) modify any of the provisions of the WorldCom Indenture
relating to supplemental indentures thereof or waiver of past defaults except
to increase any such percentage or to provide that certain other provisions of
the WorldCom Indenture cannot be modified or waived without the consent of the
holders of each WorldCom Note (Section 902 of the WorldCom Indenture).
It is not necessary for the holders of the WorldCom Notes to approve the
particular form of any proposed supplemental indenture, but it is sufficient
if such holders approve the substance thereof. Every supplemental indenture
executed pursuant to the WorldCom Indenture will conform to the requirements
of the Trust Indenture Act as then in effect. (Section 905 of the WorldCom
Indenture)
Satisfaction and Discharge of the WorldCom Indenture, Covenant Defeasance
The Company may, at its option, elect to have either or both of (a) the
defeasance provision of the WorldCom Indenture or (b) the covenant defeasance
provision of the WorldCom Indenture apply to the WorldCom Notes upon
compliance with the applicable conditions set forth in the WorldCom Indenture.
(Section 1401 of the WorldCom Indenture) The Company shall be deemed to have
been discharged from its obligations with respect to the WorldCom Notes on the
date the conditions set forth below are satisfied (hereinafter, "defeasance"),
except for the following obligations which shall survive until otherwise
terminated or discharged pursuant to the WorldCom Indenture: (i) the rights of
holders of the WorldCom Notes to receive, solely from the trust fund described
in Section 1404 of the WorldCom Indenture, payments in respect of the
principal of (and premium, if any) and interest, if any, on the WorldCom Notes
when such payments are due, (ii) the Company's obligations with respect to the
WorldCom Notes under Sections 305, 306, 1002 and 1003 of the WorldCom Notes
and with respect to the payment of additional amounts, if any, as contemplated
by Section 1007 of the WorldCom Indenture, (iii) the rights, powers, trusts,
duties and immunities of the Trustee under the WorldCom Indenture and (iv) the
obligations contained in the article of the WorldCom Indenture relating to
defeasance and covenant defeasance. The Company shall be released from its
obligations under any covenant with respect to the WorldCom Notes on and after
the date the conditions set forth below are satisfied (hereinafter, "covenant
defeasance"). (Sections 1402 and 1403 of the WorldCom Indenture)
The following are the conditions that must be satisfied prior to defeasance
or covenant defeasance: (a) the Company shall irrevocably have deposited or
caused to be deposited with the Trustee as trust funds in trust for the
purpose of making the following payments, money and/or Government Obligations
sufficient, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge, and which shall be applied by the Trustee
(or other qualifying trustee) to pay and discharge, (i) the principal of (and
premium, if any) and interest, if any, on the WorldCom Notes on the Stated
Maturity of such principal or installment of principal or interest and (ii)
any mandatory sinking fund payments or analogous payments applicable to the
WorldCom Notes; (b) such defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under, the WorldCom
Indenture or any other material agreement or instrument to which the Company
is a party or by which it is bound;
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(c) no Event of Default or event which with notice or lapse of time or both
would become an Event of Default with respect to the WorldCom Notes shall have
occurred and be continuing on the date of such deposit, or if applicable, at
any time during the period ending on the 91st day after the date of such
deposit; (d) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that the holders of the WorldCom Notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
such defeasance or covenant defeasance, as applicable, and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance or covenant defeasance,
as applicable, had not occurred; (e) the Company shall have delivered to the
Trustee an officers' certificate and an opinion of counsel, each stating that
all conditions precedent to the defeasance or the covenant defeasance (as the
case may be) have been complied with and an opinion of counsel to the effect
that either (i) as a result of a deposit pursuant to subsection (a) above,
registration is not required under the Investment Company Act of 1940, as
amended, by the Company, with respect to the trust funds representing such
deposit or by the Trustee for such trust funds or (ii) all necessary
registrations under said Act have been effected; and (f) such defeasance or
covenant defeasance shall be effected in compliance with any additional or
substitute terms, conditions or limitations which may be imposed on the
Company in connection therewith pursuant to Section 301 of the WorldCom
Indenture. (Section 1404 of the WorldCom Indenture)
WorldCom may exercise its defeasance option with respect to the WorldCom
Notes notwithstanding its prior exercise of its covenant defeasance option.
The Trustee
Mellon Bank, N.A., the Trustee under the WorldCom Indenture, from time to
time may extend credit to the Company in the ordinary course of business. The
Trustee's current address is Two Mellon Bank Center, Room 325, Pittsburgh, PA
15259. Except during the continuance of an Event of Default, the Trustee is
required to perform only such duties as are specifically set forth in the
WorldCom Indenture. During the existence of an Event of Default, the Trustee
is required to exercise such of the rights and powers vested in it by the
WorldCom Indenture, and to use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs.
The Trust Indenture Act contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any "conflicting
interest" (as defined in the Trust Indenture Act) it must eliminate such
conflict within 90 days, apply to the Commission for permission to continue or
resign.
The holders of a majority in principal amount of the outstanding WorldCom
Notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. (Section 512 of the WorldCom Indenture) The WorldCom
Indenture provides that in case an Event of Default shall occur (which shall
not be cured), the Trustee will be required, in the exercise of its power, to
use the degree of care of a prudent man in the conduct of his own affairs.
Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the WorldCom Indenture at the
request of any of the holders of the WorldCom Notes, unless such holders shall
have offered to the Trustee security and indemnity satisfactory to it against
any loss, liability or expense. (Section 602 of the WorldCom Indenture)
No Personal Liability of Stockholders, Officers or Directors
No stockholder, employee, officer, director or incorporator as such, past,
present or future of the Company shall have any personal liability in respect
of the obligations of the Company under the
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WorldCom Indenture or the WorldCom Notes by reasons of his or its status as
such stockholder, employee, officer, director or incorporator.
Delivery and Form
The WorldCom 2004 Notes and the WorldCom 2006 Notes initially will be
represented by one or more global securities ("Global Securities") deposited
with The Depository Trust Corporation ("DTC") and registered in the name of
the nominee of DTC, except 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 below, no beneficial owner of
a WorldCom Note shall be entitled to receive a definitive certificate
representing a WorldCom Note.
So long as DTC or any successor depository (collectively, the "Depository")
or its nominee is the registered holder of the Global Securities, the
Depository, or such nominee, as the case may be, will be considered to be the
sole owner or holder of the WorldCom Notes for all purposes of the Indenture.
Investors' interests in the Global Securities will be represented through
financial institutions acting on their behalf as direct and indirect
participants in the Depository. Such participants may include Morgan Guaranty
Trust Company of New York, Brussels, Belgium office ("Euroclear") or Cedel
Bank societe anonyme. Except as provided below, owners of beneficial interests
in a Global Security will not be entitled to have WorldCom Notes represented
by such Global Security registered in their names, will not receive or be
entitled to receive physical delivery of WorldCom Notes in certificated form
and will not be considered the owners or holders thereof under the WorldCom
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 WorldCom
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 WorldCom 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 WorldCom Notes 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 WorldCom Notes represented by
one or more Global Securities, and, in such event, will issue individual
WorldCom Notes in certificated form in exchange for the relevant Global
Securities. In any such instance, an owner of a beneficial interest in a
Global Security will be entitled to physical delivery of individual WorldCom
Notes in certificated form of like tenor and rank, equal in principal amount
to such beneficial interest and to have such WorldCom Notes in certificated
form registered in its name. WorldCom Notes so issued in certificated form
will be issued in denominations of $1,000 or any integral multiple thereof,
and will be issued in registered form only, without coupons.
The following is based on information furnished by DTC:
DTC will act as securities depository for the WorldCom Notes. The
WorldCom Notes will be issued as fully registered securities registered in
the name of Cede & Co. (DTC's partnership nominee). One fully registered
WorldCom Note certificate is issued with respect to each $200 million of
principal amount of the WorldCom Notes of a series, and an additional
certificate is issued with respect to any remaining principal amount of
such series.
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DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement
among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC
is owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on
file with the Commission.
Purchases of WorldCom Notes under the DTC system must be made by or
through Direct Participants, which will receive a credit for the WorldCom
Notes on DTC's records. The ownership interest of each actual purchaser of
each WorldCom Note ("Beneficial Owner") is in turn recorded on the Direct
and Indirect Participants' records. A Beneficial Owner does not receive
written confirmation from DTC of its purchase, but such Beneficial Owner is
expected to receive a written confirmation providing details of the
transaction, as well as periodic statements of its holdings, from the
Direct or Indirect Participant through which such Beneficial Owner entered
into the transaction. Transfers of ownership interests in WorldCom Notes
are accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners do not receive certificates
representing their ownership interests in WorldCom Notes, except in the
event that use of the book-entry system for the WorldCom Notes is
discontinued.
To facilitate subsequent transfers, the WorldCom Notes are registered in
the name of DTC's partnership nominee, Cede & Co. The deposit of the
WorldCom Notes with DTC and their registration in the name of Cede & Co.
will effect no change in beneficial ownership. DTC has no knowledge of the
actual Beneficial Owners of the WorldCom Notes; DTC records reflect only
the identity of the Direct Participants to whose accounts WorldCom Notes
are credited, which may or may not be the Beneficial Owners. The
Participants remain responsible for keeping account of their holdings on
behalf of their customers.
Delivery of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners are
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
WorldCom Notes within an issue are being redeemed, DTC's practice is to
determine by lot the amount of interest of each Direct Participant in such
issue to be redeemed.
Neither DTC nor Cede & Co. consents or votes with respect to the WorldCom
Notes. Under its usual procedures, DTC mails a proxy (an "Omnibus Proxy")
to the issuer as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the WorldCom Notes are credited on the
record date (identified on a list attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on the WorldCom Notes
are made to DTC. DTC's practice is to credit Direct Participants' accounts
on the payable date in accordance with their respective holdings as shown
on DTC's records unless DTC has reason to believe that it will
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not receive payment on the payable date. Payments by Participants to
Beneficial Owners are governed by standing instructions and customary
practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and are the
responsibility of such Participant and not of DTC, the applicable Trustee
or the Company, subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of principal, premium, if any, and
interest to DTC is the responsibility of the Company or the applicable
Trustee, disbursement of such payments to Direct Participants is the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the WorldCom Notes at any time by giving reasonable notice to
the Company or the applicable Trustee. Under such circumstances, in the
event that a successor securities depository is not appointed, WorldCom
Note certificates are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that
event, WorldCom Note certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources (including DTC) that the Company believes to
reliable, but the Company takes no responsibility for the accuracy thereof.
None of the Company, the Dealer Managers or any agent, the Trustee or any
applicable paying agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
interests in a Global Security, or for maintaining, supervising or reviewing
any records relating to such beneficial interest.
Same-Day Settlement and Payment
So long as the WorldCom Notes are represented by the Global Securities, all
payments of principal and interest will be made by the Company in immediately
available funds. The WorldCom Notes will trade in DTC's Same-Day Funds
Settlement System until maturity, and secondary market trading activity in the
WorldCom Notes that is effected through DTC will be required to settle in
immediately available funds. No assurance can be given as to the effect, if
any, of settlement in immediately available funds on trading activity in the
WorldCom Notes.
Certain Definitions
Set forth below is a summary of certain of the defined terms used herein and
defined in Section 101 of the WorldCom Indenture. Reference is made to the
WorldCom Indenture for the full definition of all such terms, as well as any
capitalized terms used herein for which no definition is provided.
"Capital Lease Obligations" means indebtedness represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP and the amount of such indebtedness shall
be the capitalized amount of such obligations determined in accordance with
GAAP. For purposes of this covenant, a Capital Lease Obligation shall be
deemed secured by a Lien on the Property being leased.
"Capital Stock" means, with respect to any person, any and all shares or
other equivalents (however designated) of corporate stock, partnership
interest or any other participation, right, warrant, option or other
interest in the nature of an equity interest in such person, but excluding
any debt security convertible or exchangeable into such equity interest.
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"Consolidated Net Tangible Assets" means the consolidated total assets of
the Company and its Subsidiaries as reflected in the Company's most recent
balance sheet prepared in accordance with GAAP, less (i) current
liabilities (excluding current maturities of long-term debt and Capital
Lease Obligations) and (ii) goodwill, trademarks, patents and minority
interests of others.
"GAAP" means United States generally accepted accounting principles as in
effect as of the date of determination, unless stated otherwise.
"Lien" means, with respect to any Property of any person, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement,
security interest, lien, charge, easement or zoning restriction (other than
any easement or zoning restriction not materially impairing usefulness or
marketability), encumbrance, preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever on
or with respect to such Property including any Capital Lease Obligation,
conditional sale or other title retention agreement having substantially
the same economic effect as any of the foregoing or any Sale and Leaseback
Transaction.
"Permitted Liens" means (i) Liens existing on the date of the Indenture;
(ii) Liens on Property existing at the time of acquisition thereof or to
secure the payment of all or any part of the purchase price thereof or to
secure any indebtedness incurred prior to, at the time of or within 270
days after the acquisition of such Property for the purpose of financing
all or any part of the purchase price thereof; (iii) Liens securing
indebtedness owing by a Restricted Subsidiary to the Company or any wholly-
owned Subsidiary of the Company; (iv) Liens on Property of any entity, or
on the stock, indebtedness or other obligations of such entity, existing at
the time (a) such entity becomes a Restricted Subsidiary, (b) such entity
is merged into or consolidated with the Company or a Restricted Subsidiary
or (c) the Company or a Restricted Subsidiary acquires all or substantially
all of the assets of such entity; provided that no such Lien extends to any
other Property; (v) Liens on Property to secure any indebtedness incurred
to provide funds for all or any part of the cost of development of or
improvements to such Property; (vi) Liens on the Property of the Company or
any of its Subsidiaries securing (a) nondelinquent performance of bids or
contracts (other than for borrowed money, obtaining of advances or credit
or the securing of debt), (b) contingent obligations on surety and appeal
bonds and (c) other nondelinquent obligations of a like nature, in each
case, incurred in the ordinary course of business; (vii) Liens securing
Capital Lease Obligations, provided that (a) any such Lien attaches to the
Property within 270 days after the acquisition thereof and (b) such Lien
attaches solely to the Property so acquired; (viii) Liens arising solely by
virtue of any statutory or common law provision relating to banker's liens,
rights of set-off or similar rights and remedies as to deposit account or
other funds, provided that such deposit account is not a dedicated cash
collateral account and is not subject to restrictions against access by the
Company in excess of those set forth by regulations promulgated by the
Federal 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).
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"Property" means, with respect to any person, any interest of such person
in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including, without limitation, Capital Stock in any
other person (but excluding Capital Stock or other securities issued by
such first mentioned person).
"Receivables Subsidiary" means a special purpose wholly-owned Subsidiary
created in connection with any transactions that may be entered into by the
Company or any of its Subsidiaries pursuant to which the Company or any of
its Subsidiaries may sell, convey, grant a security interest in or
otherwise transfer undivided percentage interests in its receivables.
"Restricted Subsidiary" means any Subsidiary of the Company if (i) such
Subsidiary has substantially all of its Property in the United States
(other than its territories and possessions) and (ii) at the end of the
most recent fiscal quarter of the Company, the aggregate amount, determined
in accordance with GAAP consistently applied, of securities of, loans and
advances to, and other investments in, such Subsidiary held by the Company
and its other Subsidiaries exceeded 10% of the Company's Consolidated Net
Tangible Assets; provided, however, that the term Restricted Subsidiary
shall not include (a) any of MFS Communications Company, Inc. or its
Subsidiaries unless and until such time as such corporation is designated
by the Company as a "Restricted Subsidiary" or otherwise similarly treated
under the Company's $3.75 billion five-year revolving credit facility or
any other agreement of the Company for indebtedness for borrowed money or
(b) any Receivables Subsidiary.
"Sale and Leaseback Transaction" means, with respect to any person, any
direct or indirect arrangement pursuant to which Property is sold or
transferred by such person or a Restricted Subsidiary of such person and is
thereafter leased back from the purchaser or transferee thereof by such
person or one of its Restricted Subsidiaries.
"Subsidiary" means a corporation a majority of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or one or
more other Subsidiaries of the Company. For the purposes of this
definition, "voting stock" means stock having voting power for the election
of directors, whether at all times or only so long as no senior class of
stock has such voting power by reason of any contingency.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain material U.S. federal income tax
consequences resulting from the Exchange Offers and Consent Solicitations. The
discussion is based on U.S. federal income tax laws, regulations, rulings and
decisions now in effect, all of which are subject to change possibly with
retroactive effect. The discussion assumes that as to any holder, the WorldCom
Notes and MFS Notes are capital assets as of the Exchange Date. This
discussion does not address state, local, foreign or other tax laws and does
not purport to cover all aspects of U.S. federal income taxation that may be
relevant to, or the actual tax effect that any of the matters described herein
will have on, certain holders (including insurance companies, tax-exempt
organizations, financial institutions, securities- dealers, subsequent
purchasers of WorldCom Notes and taxpayers subject to the alternative minimum
tax) who may be subject to special rules not discussed below. HOLDERS OF MFS
NOTES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL,
STATE, LOCAL AND OTHER TAX CONSEQUENCES OF THE EXCHANGE OFFERS AND CONSENT
SOLICITATIONS AND OF THE CONTINUED HOLDING AND DISPOSITION OF MFS NOTES.
UNITED STATES HOLDERS
As used herein, the term "U.S. Holder" means the beneficial owner of MFS
Notes or WorldCom Notes that is, for U.S. federal income tax purposes, (i) an
individual citizen or resident of the United States, (ii) a U.S. domestic
corporation or (iii) otherwise subject to U.S. federal income tax on a net
income basis in respect of the MFS Notes or WorldCom Notes.
Tax Consequences of the Exchange Offers and Consent Solicitations
The exchange of MFS Notes for WorldCom Notes (and cash in lieu of a WorldCom
Note in a principal amount that is not an integral multiple of $1,000) and
Consent Payments pursuant to the Exchange Offers and Consent Solicitations
will be a taxable transaction for United States federal income tax purposes.
In addition, although not entirely free from doubt, the Consent Payments
received by a U.S. Holder of MFS Notes should be treated as constituting
additional consideration received in exchange for the tendered MFS Notes.
Accordingly, a tendering U.S. Holder should generally recognize gain or loss
equal to the difference between the sum of the cash and the issue price of the
WorldCom Notes received (except to the extent of any accrued original issue
discount ("OID") on the MFS Notes not previously included in the U.S. Holder's
income, which will be taxable as ordinary interest income) and the U.S.
Holder's adjusted tax basis in the MFS Notes. Such gain or loss will be long-
term capital gain or loss if the U.S. Holder's holding period is more than one
year, and short-term capital gain or loss if the U.S. Holder's holding period
is one year or less, except such gain will be subject to tax as ordinary
income to the extent of any accrued "market discount" on the MFS Notes not
previously included in income. In general, unless a U.S. Holder acquired its
MFS Notes at their original issuance, market discount is the excess, if any,
of the "adjusted issued price," or Accreted Value, of such MFS Notes over the
U.S. Holder's tax basis therein at the time of acquisition (unless the amount
of such excess is less than a specified de minimis amount, in which case
market discount is considered zero). In general, market discount accrues on a
straight-line basis, unless a taxpayer elects to accrue market discount on a
constant-yield basis.
As illustrated above, the amount of gain or loss recognized as a result of
the exchange of the MFS Notes for WorldCom Notes and cash will depend in part
on the "issue price" of the WorldCom Notes. Where a new debt instrument is
issued in exchange for property (including an old debt instrument), the
determination of the issue price of the new debt instrument depends on whether
either the new debt instrument or the property for which it is exchanged is
"publicly traded." If neither the WorldCom Notes nor the MFS Notes are
publicly traded, the issue price of the WorldCom Notes will be their "stated
principal amount." A debt instrument's stated principal amount is the
aggregate amount of all
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payments under the debt instrument, excluding any amount of stated interest.
If, however, the WorldCom Notes are publicly traded, their issue price will be
their fair market value at the time they are issued. If the WorldCom Notes are
not publicly traded, but the MFS Notes are publicly traded, the issue price of
the WorldCom Notes will be the fair market value of the MFS Notes exchanged
therefor. For purposes of this discussion, a debt instrument is publicly
traded if (i) it is listed on a national securities exchange, an interdealer
quotation system sponsored by a national securities association (such as
NASDAQ), or a designated foreign exchange or board of trade, (ii) it is traded
either on a board of trade designated as a contract market by the Commodities
Futures Trading Commission or on an interbank market, (iii) it appears on a
"quotation medium," i.e., a system of general circulation (including a
computer listing available to subscribing brokers and dealers) that provides a
reasonable basis to determine fair market value by disseminating either recent
price quotations of one or more identified brokers, dealers or traders or
actual prices of recent sales (but not "yellow sheets") or (iv) it is a debt
instrument that is "readily quotable" in that price quotations are readily
available from dealers, brokers or traders. Newly issued debt instruments are
treated as publicly traded property at the time of their issuance if the debt
instruments are publicly traded at any time during the 60-day period ending 30
days after their issuance. Any temporary restriction on trading, a purpose of
which is to avoid characterization of debt instruments as publicly traded
property for federal income tax purposes, is ineffective regardless of whether
the temporary restriction is imposed by the issuer. If either the WorldCom
Notes or the MFS Notes are publicly traded, the WorldCom Notes may be treated
as having been issued at a discount or at a premium. U.S. Holders should
consult their tax advisors to determine how, and to what extent, any such
discount or premium, if any, will be included in such U.S. Holder's income (in
the case of any discount) or amortized (in the case of any premium).
Basis and Holding Period
A U.S. Holder's tax basis in the WorldCom Notes will equal the issue price
of the WorldCom Notes. The holding period of the WorldCom Notes will commence
on the day after the WorldCom Notes are acquired by the U.S. Holder.
Payment of Interest
Assuming the WorldCom Notes will not be issued with OID, interest on the
WorldCom Notes generally will be taxable to the U.S. Holder as ordinary income
at the time that it is paid or accrued, in accordance with the U.S. Holder's
method of accounting for U.S. federal income tax purposes.
Sale, Exchange or Redemption
In general, a U.S. Holder of a WorldCom Note will recognize gain or loss
upon the sale, exchange, redemption, retirement or other disposition of the
WorldCom Note measured by the difference between the amount realized on the
disposition (to the extent such amount does not represent accrued but unpaid
interest) and the U.S. Holder's adjusted basis in the WorldCom Note. A U.S.
Holder's adjusted basis in a WorldCom Note will generally equal the issue
price of the WorldCom Note. Such gain or loss will be capital gain or loss and
will be long-term capital gain or loss if the U.S. Holder holds the WorldCom
Note for more than one year prior to disposition, and short-term capital gain
or loss if the U.S. Holder holds the WorldCom Note for less than one year
prior to disposition.
U.S. Holders Not Tendering in an Exchange Offer
For U.S. Holders of the MFS Notes who do not elect to exchange their MFS
Notes for the WorldCom Notes pursuant to the Exchange Offers, the proposed
modifications to the MFS Notes (see "The Proposed Amendments") should not be
treated as a taxable exchange of the MFS Notes for the new MFS Notes.
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Backup Withholding
Backup withholding of U.S. federal income tax at a rate of 31% may apply to
payments made pursuant to the Exchange Offers and Consent Solicitations, to
payments of principal and interest made in respect of WorldCom Notes, and to
payments of proceeds from the sale, exchange, redemption, retirement or other
disposition of WorldCom Notes to or through certain brokers, unless, in
general, the beneficial owner of the MFS Notes or the WorldCom Notes, as the
case may be, complies with certain information reporting procedures or is an
exempt recipient. Any amount withheld from a payment to a beneficial owner
pursuant to these backup withholding rules may be allowed as a refund or
credit against the beneficial owner's U.S. federal income tax.
NON-U.S. HOLDERS
As used herein, the term "Non-U.S. Holder" means a beneficial owner of MFS
Notes or WorldCom Notes other than a U.S. Holder. For these purposes, a "Non-
U.S. Holder" will not include a nonresident alien, foreign corporation or
other foreign entity, to the extent that the income or gain with respect to
the Exchange Offers and Consent Solicitations or the WorldCom Notes is
"effectively connected with the conduct of a trade or business within the
United States." To the extent that such income or gain is "effectively
connected with the conduct of a trade or business within the United States,"
then the nonresident alien, foreign corporation or other foreign entity,
generally will be subject to tax as discussed above for U.S. Holders. Foreign
corporations may also be subject to the branch profit tax.
In general, any gain or loss realized on the exchange of MFS Notes for
WorldCom Notes (and cash in lieu of a WorldCom Note in a principal amount that
is not an integral multiple of $1,000) and Consent Payments by a Non-U.S.
Holder pursuant to the Exchange Offers and Consent Solicitations 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 in the taxable year of the Exchange and certain other conditions are met.
Subject to the discussion of backup withholding below, payments of interest
on the WorldCom Notes to a Non-U.S. Holder generally will not be subject to
U.S. federal income or withholding taxes, provided that (i) such Non-U.S.
Holder does not actually or constructively own 10 percent or more of the total
combined voting power of all classes of stock of the Company, (ii) such Non-
U.S. Holder is not a controlled foreign corporation for U.S. tax purposes that
is related to the Company actually or constructively through stock ownership
and (iii) the Non-U.S. Holder certifies, under penalties of perjury, that it
is not a United States person for U.S. federal income tax purposes and
provides its name and address in accordance with applicable requirements.
Any capital gain realized on the sale, exchange, redemption, retirement or
other disposition of WorldCom Notes by a Non-U.S. Holder generally 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 in the taxable year of the Exchange and certain other conditions are met.
Payments made pursuant to the Exchange Offers and Consent Solicitations,
payments of principal and interest made in respect of WorldCom Notes and
payments of proceeds from the sale, exchange, redemption, retirement or other
disposition of WorldCom Notes to a Non-U.S. Holder generally 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 Internal
Revenue Code of 1986, as amended.
The backup withholding and information reporting rules described above are
under review by the United States Treasury and their application to the
WorldCom Notes could be changed by future regulations.
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INFORMATION REGARDING WORLDCOM
Information regarding the Company is contained in its filings with the
Commission pursuant to the Exchange Act. See "Available Information" and
"Incorporation of Certain Documents by Reference."
INFORMATION REGARDING MFS
Information regarding MFS is contained in its filings with the Commission
pursuant to the Exchange Act. See "Available Information" and "Incorporation
of Certain Documents by Reference."
CERTAIN RELATED TRANSACTIONS
During fiscal 1994, 1995 and 1996, WorldCom, MFS and/or UUNET entered into
certain interconnection or other services agreements with each other and
certain of their affiliates in the ordinary course of their businesses.
However, each of WorldCom, MFS and UUNET believe that the terms and conditions
of such interconnection or other services agreements were no less favorable to
WorldCom, MFS or UUNET than those that would have been available to WorldCom,
MFS or UUNET in comparable, arm's-length transactions at the date of such
agreements. Subsequent to the MFS Merger, WorldCom and MFS have engaged in
customary intercompany transactions, including certain intercompany
indebtedness of WorldCom to MFS represented by a subordinated demand
promissory note issued on March 4, 1997 in an amount not to exceed
$500,000,000 and bearing interest at the rate of 0.5% plus the 30-day LIBOR
rate per annum, and certain intercompany accounts receivable.
ACCOUNTING TREATMENT OF EXCHANGE OFFERS
The Exchange will be accounted for by the Company as an exchange of debt as
provided for under generally accepted accounting principles.
LEGAL MATTERS
Certain legal matters with respect to the Exchange Offers and the Consent
Solicitations will be passed upon for WorldCom by Bryan Cave LLP, St. Louis,
Missouri, and for the Dealer Managers by Cleary, Gottlieb, Steen & Hamilton,
New York, New York.
EXPERTS
The consolidated financial statements and schedule of the Company as of
December 31, 1996 and 1995, and for each of the years in the three-year period
ended December 31, 1996, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, and are incorporated herein by reference, in reliance upon
the authority of such firm as experts in accounting and auditing in giving
said reports.
The consolidated financial statements of MFS Communications Company, Inc. as
of December 31, 1996 and for the period then ended (See Note 1 to the MFS
Communications Company, Inc. Form 10-K), and for the year ended December 31,
1996, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
included in the MFS Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, and are incorporated herein by reference, in reliance upon
the authority of such firm as experts in accounting and auditing in giving
said reports.
78
<PAGE>
The consolidated financial statements of MFS as of December 31, 1995 and
1994 and for each of the three years in the period ended December 31, 1995,
included in WorldCom's Current Report on Form 8-K/A dated August 25, 1996
(filed November 4, 1996) and incorporated by reference into this registration
statement and the consolidated financial statements of MFS as of December 31,
1995 and for the two years in the period ended December 31, 1995 included in
the MFS Annual Report on Form 10-K for the fiscal year ended December 31, 1996
and incorporated by reference in this registration statement, have been
incorporated in reliance on the report of Coopers & Lybrand l.l.p.,
independent accountants, given upon the authority of that firm as experts in
accounting and auditing.
The consolidated financial statements of UUNET Technologies, Inc. as of
December 31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995, included 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.
79
<PAGE>
The Joint Dealer Managers for the Exchange Offers are:
SALOMON BROTHERS INC GOLDMAN, SACHS & CO.
Seven World Trade Center 85 Broad Street
New York, New York 10048 New York, New York 10004
(212) 783-3738 (collect)
(800) 558-3745 (toll free) (212) 902-8200 (collect)
(800) 828-3182 (toll free)
Attention: Liability Management
Group Attention: Liability Management
Group
Any questions concerning the terms of the Exchange Offers
may be directed to the Joint Dealer Managers.
The Information Agent for the Exchange Offers is:
MACKENZIE PARTNERS, INC.
Any questions concerning tender procedures or requests
for additional copies of this Prospectus, the Letters of Transmittal, or
Notices of Guaranteed Delivery
may be directed to the Information Agent.
The Exchange Agent for the Exchange Offers is:
HARRIS TRUST AND SAVINGS BANK
By Mail: Hand Delivery or Overnight Delivery: By Facsimile:
MFS Notes tendered, together with the requisite Letters of Transmittal and any
other required documents, must be delivered to the Exchange Agent.
MFS TRUSTEE: WORLDCOM TRUSTEE:
IBJ Schroder Bank & Trust Company Mellon Bank, N.A.
Two Mellon Bank Center
One State Street
Room 325
New York, New York 10004
Pittsburgh, Pennsylvania 15259
Attention: Corporate Trust and
Agencies Administration
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 14-2-202(b)(4) of the Georgia Business Corporation Code (the
"Georgia Code") provides that a corporation's articles of incorporation may
include a provision that eliminates or limits the personal liability of
directors for monetary damages to the corporation or its shareholders for
breach of their duty of care and other duties as directors; provided, however,
that the Section does not permit a corporation to eliminate or limit the
liability of a director for appropriating, in violation of his duties, any
business opportunity of the corporation, engaging in intentional misconduct or
a knowing violation of law, obtaining an improper personal benefit, or voting
for or assenting to an unlawful distribution (whether as a dividend, stock
repurchase or redemption, or otherwise) as provided in Section 14-2-832 of the
Georgia Code. Section 14-2-202(b)(4) also does not eliminate or limit the
rights of WorldCom or any shareholder to seek an injunction or other
nonmonetary relief in the event of a breach of a director's duty to the
corporation and its shareholders. Additionally, Section 14-2-202(b)(4) applies
only to claims against a director arising out of his role as a director, and
does not relieve a director from liability arising from his role as an officer
or in any other capacity.
The provisions of Article Ten of WorldCom's Second Amended and Restated
Articles of Incorporation are similar in all substantive respects to those
contained in Section 14-2-202(b)(4) of the Georgia Code as outlined above.
Article Ten further provides that the liability of directors of WorldCom shall
be limited to the fullest extent permitted by amendments to Georgia law.
Sections 14-2-850 to 14-2-859, inclusive, of the Georgia Code govern the
indemnification of directors, officers, employees, and agents. Section 14-2-
851 of the Georgia Code permits indemnification of a director of WorldCom for
liability incurred by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (including, subject to certain limitations, civil actions
brought as derivative actions by or in the right of WorldCom) in which he is
made a party by reason of being a director of WorldCom and for directors who,
at the request of WorldCom, act as directors, officers, partners, trustees,
employees or agents of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise. The Section
permits indemnification if the director acted in a manner he believed in good
faith to be in or not opposed to the best interest of WorldCom and, in
addition, in criminal proceedings, if he had no reasonable cause to believe
his conduct was unlawful. If the required standard of conduct is met,
indemnification may include judgments, settlements, penalties, fines or
reasonable expenses (including attorneys' fees) incurred with respect to a
proceeding. However, if the director is adjudged liable to WorldCom in a
derivative action or on the basis that personal benefit was improperly
received by him, the director is not entitled to indemnification by the
corporation; provided that the director may be entitled to indemnification for
reasonable expenses as determined by a court in accordance with the provisions
of Section 14-2-854, or unless WorldCom's Second Amended and Restated Articles
of Incorporation or Bylaws, or a contract or resolutions approved by
WorldCom's shareholders pursuant to Section 14-2-856, authorizes
indemnification.
Section 14-2-852 of the Georgia Code provides that unless limited by the
articles of incorporation, directors who are successful with respect to any
claim brought against them, which claim is brought because they are or were
directors of WorldCom, are entitled to mandatory indemnification against
reasonable expenses incurred in connection therewith. Conversely, if the
charges made in any action are sustained, the determination of whether the
required standard of conduct has been met will be made, in accordance with the
provisions of Section 14-2-855 of the Georgia Code, as follows: (i) by the
majority vote of a quorum of the members of the board of directors not a party
to such action at that time, (ii) if a quorum cannot be obtained, by a
committee thereof duly designated by the board of
II-1
<PAGE>
directors, consisting of two or more directors not a party to such action at
that time, (iii) by duly selected special legal counsel, or (iv) by the
shareholders, but, in such event, the shares owned by or voted under the
control of directors who are at the time parties to the proceeding may not be
voted.
Section 14-2-857 of the Georgia Code provides that an officer of WorldCom
(but not an employee or agent generally) who is not a director has the
mandatory right of indemnification granted to directors under Section 14-2-
852, as described above. In addition, WorldCom may, as provided by WorldCom's
Second Amended and Restated Articles of Incorporation, Bylaws, general or
specific actions by its board of directors, or by contract, indemnify and
advance expenses to an officer employee or agent who is not a director to the
extent that such indemnification is consistent with public policy.
The indemnification provisions of Article X of WorldCom's Bylaws and Article
Twelve of WorldCom's Second Amended and Restated Articles of Incorporation are
consistent with the foregoing provisions of the Georgia Code. However,
WorldCom's Second Amended and Restated Articles of Incorporation prohibit
indemnification of a director who did not believe in good faith that his
actions were in, or not contrary to, WorldCom's best interests. WorldCom's
Bylaws extend the indemnification available to officers under the Georgia Code
to employees and agents.
ITEM 21(A). EXHIBITS.
See Exhibit Index.
ITEM 21(B). FINANCIAL STATEMENT SCHEDULES.
All financial statement schedules of WorldCom and MFS which are required to
be included herein are included in the Annual Report of WorldCom on Form 10-K
for the fiscal year ended December 31, 1996 or the Annual Report on Form 10-K
of MFS for the fiscal year ended December 31, 1996, respectively, which are
incorporated herein by reference.
ITEM 22. UNDERTAKINGS.
(1) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the registrants of expenses incurred or paid by a
director, officer or controlling person of the registrants in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(2) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-2
<PAGE>
(3) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(4) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(5) The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers and sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs 7(a)(i) and 7(a)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or
15(d) of the Exchange Act that are incorporated by reference in the
registration statement.
(b) That for the purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF JACKSON,
STATE OF MISSISSIPPI, ON JUNE 3, 1997.
WORLDCOM, INC.
/s/ Scott D. Sullivan
By: _________________________________
Scott D. Sullivan
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
*
___________________________________________ Director June 3, 1997
CARL J. AYCOCK
*
___________________________________________ Director June 3, 1997
MAX E. BOBBITT
*
___________________________________________ Director June 3, 1997
JAMES Q. CROWE
*
___________________________________________ Director, President and June 3, 1997
Chief Executive Officer
(Principal Executive Officer)
BERNARD J. EBBERS
*
___________________________________________ Director June 3, 1997
FRANCESCO GALESI
*
___________________________________________ Director June 3, 1997
RICHARD R. JAROS
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
*
__________________________________________ Director June 3, 1997
STILES A. KELLETT, JR.
*
__________________________________________ Director June 3, 1997
DAVID C. MCCOURT
*
__________________________________________ Director June 3, 1997
JOHN A. PORTER
*
__________________________________________ Director June 3, 1997
WALTER SCOTT, JR.
*
__________________________________________ Director June 3, 1997
JOHN W. SIDGMORE
Director and Chief Financial
Officer (Principal Financial
/s/ Scott D. Sullivan Officer and Principal
__________________________________________ Accounting Officer) June 3, 1997
SCOTT D. SULLIVAN
*
__________________________________________ Director June 3, 1997
LAWRENCE C. TUCKER
*
__________________________________________
MICHAEL B. YANNEY Director June 3, 1997
/s/ Scott D. Sullivan
*By: _____________________________________
SCOTT D. SULLIVAN, ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
*1.1 Form of Dealer Manager Agreement between WorldCom, Inc. ("WorldCom")
and Salomon Brothers Inc and Goldman, Sachs & Co.
2.1 Amended and Restated Agreement and Plan of Merger by and among
WorldCom, HIJ Corp. and MFS Communications Company, Inc. ("MFS") dated
as of August 25, 1996 (attached as Appendix I to the Joint Proxy
Statement/Prospectus included in WorldCom's Registration Statement on
Form S-4 (Registration No. 333-16015) and incorporated by reference
herein)***
4.1 Second Amended and Restated Articles of Incorporation of WorldCom
(including preferred stock designations) as of December 31, 1996
(incorporated herein by reference to Exhibit 3.1 to the Current Report
on Form 8-K of WorldCom (File No. 0-11258) dated December 31, 1996
(filed January 15, 1997))
4.2 Restated Bylaws of WorldCom (incorporated herein by reference to
Exhibit 4.2 to the Annual Report on Form 10-K filed by WorldCom (File
No. 0-11258) for the fiscal year ended December 31, 1996)
4.3 Amended and Restated Credit Agreement among WorldCom, NationsBank of
Texas, N.A. (Managing Agent and Administrative Agent), Bank of America
Illinois, The Bank of New York, The Bank of Nova Scotia, Canadian
Imperial Bank of Commerce, Chemical Bank, Credit Lyonnais New York
Branch, First Union National Bank of North Carolina, The Industrial
Bank of Japan, Limited, Atlanta Agency, The First National Bank of
Chicago, The Long-Term Credit Bank of Japan, Limited, New York Branch,
Toronto Dominion (Texas), Inc., and Wachovia Bank of Georgia N.A.
(Agents) and the Lenders named therein (Lenders) dated as of June 28,
1996, (incorporated herein by reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q filed by WorldCom (File No. 0-11258) for
the quarter ended June 30, 1996)
4.4 First Amendment to Amended and Restated Credit Agreement and Consent
to MFS Acquisition (incorporated herein by reference to Exhibit 10.2
to the Annual Report on Form 10-K filed by WorldCom (File No. 0-11258)
for the fiscal year ended December 31, 1996)
4.5 Indenture of WorldCom to Mellon Bank, N.A. dated as of March 1, 1997
for Senior Debt Securities (incorporated herein by reference to
Exhibit 4.6 to the Quarterly Report on Form 10-Q filed by WorldCom
(File No. 0-11258) for the quarter ended March 31, 1997)
4.6 Form of 7.55% Senior Note due 2004 (incorporated herein by reference
to Exhibit 4.1 to the Current Report on Form 8-K dated March 26, 1997
filed by WorldCom (File No. 0-11258))
4.7 Form of 7.75% Senior Note due 2007 (incorporated herein by reference
to Exhibit 4.2 to the Current Report on Form 8-K dated March 26, 1997
filed by WorldCom (File No. 0-11258))
4.8 Form of 7.75% Senior Note due 2027 (incorporated herein by reference
to Exhibit 4.3 to the Current Report on Form 8-K dated March 26, 1997
filed by WorldCom (File No. 0-11258))
*4.9 Form of First Supplemental Indenture of WorldCom to Mellon Bank, N.A.
Relating to 9 3/8% Senior Notes Due 2004 and 8 7/8% Senior Notes Due
2006
4.10 Indenture of MFS to IBJ Schroder Bank & Trust Company dated January
15, 1994 for 9 3/8% Senior Discount Notes Due 2004 (incorporated
herein by reference to Exhibit 10.2 to MFS' Current Report on Form 8-K
dated January 26, 1994 (File No. 0-21594))
4.11 First Supplemental Indenture of MFS to IBJ Schroder Bank & Trust
Company dated as of March 31, 1995 for Due 2004 (incorporated herein
by reference to Exhibit 10.3 to MFS' Current Report on Form 8-K dated
April 27, 1995 (File No. 0-21594))
4.12 Indenture of MFS to IBJ Schroder Bank & Trust Company dated January
15, 1996 for Senior Discount Notes (incorporated herein by reference
to Exhibit 4.1 to MFS' Current Report on Form 8-K dated January 23,
1996 (File No. 0-21594))
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
4.13 First Supplemental Indenture of MFS to IBJ Schroder Bank & Trust
Company dated as of January 15, 1996 for 8 7/8% Senior Discount Notes
Due 2006 (incorporated herein by reference to Exhibit No. 4.2 to MFS'
Current Report on Form 8-K dated January 23, 1996 (File No. 0-21594))
*4.14 Form of Second Supplemental Indenture of MFS to IBJ Schroder Bank &
Trust Company for 9 3/8% Senior Discount Notes Due 2004
*4.15 Form of Second Supplemental Indenture to IBJ Schroder Bank & Trust
Company dated as of January 15, 1996 for 8 7/8% Senior Discount Notes
Due 2006
*5.1 Legality Opinion of P. Bruce Borghardt, Esq.
*8.1 Tax Opinion of Bryan Cave LLP
12.1 Statement regarding Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Coopers & Lybrand LLP
23.3 Consent of Arthur Andersen LLP
23.4 Consent of Arthur Andersen LLP
*23.5 Consent of P. Bruce Borghardt, Esq. (included in Exhibit 5.1)
*23.6 Consent of Bryan Cave LLP (included in Exhibit 8.1)
**24.1 Power of Attorney
25.1 Statement of Eligibility of Mellon Bank, N.A. on Form T-1 with respect
to the WorldCom Indenture
*99.1 Letter of Transmittal and Consent with respect to the MFS 2004 Notes
*99.2 Letter of Transmittal and Consent with respect to the MFS 2006 Notes
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
*** The Registrant hereby agrees to furnish supplementally a copy of any
omitted schedules to this Agreement to the Securities and Exchange Commission
upon its request.
II-7
<PAGE>
EXHIBIT 12.1
WORLDCOM, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE THREE
YEAR ENDED DECEMBER 31, MONTHS ENDED
----------------------------------------------- -----------------
HISTORICAL PRO FORMA MARCH 31,
----------------------------------------------- ----------- -----------------
1992 1993 1994 1995 1996 1996 1996 1997
------- -------- -------- -------- ----------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Pretax income (loss)
from continuing
operations............ $22,513 $209,920 $(50,697) $437,729 $(2,059,416) $(2,732,617) $140,970 $103,466
Fixed charges, net of
capitalized interest.. 36,608 47,316 59,689 267,057 241,397 359,719 62,193 83,536
------- -------- -------- -------- ----------- ----------- -------- --------
Earnings............... $59,121 $257,236 $8,992 $704,786 $(1,818,019) $(2,372,898) $203,163 $187,002
======= ======== ======== ======== =========== =========== ======== ========
Fixed charges:
Interest cost.......... $33,815 $38,657 $49,203 $254,099 $229,376 $353,085 59,304 88,454
Amortization of
financing costs....... 1,464 1,792 2,086 2,811 1,742 -- 713 --
Interest factor of rent
expense............... 4,833 9,967 10,300 15,030 17,854 28,024 4,454 8,081
------- -------- -------- -------- ----------- ----------- -------- --------
Fixed charges.......... $40,112 $ 50,416 $ 61,589 $271,940 $ 248,972 $ 381,109 $ 64,471 $ 96,535
======= ======== ======== ======== =========== =========== ======== ========
Deficiency of earnings
to fixed charges....... $ -- $ -- $(52,597) $ -- $(2,066,991) $(2,754,007) $ -- $ --
======= ======== ======== ======== =========== =========== ======== ========
Ratio of earnings to
fixed charges.......... 1.47:1 5.10:1 0.15:1 2.59:1 N/A N/A 3.15:1 1.94:1
</TABLE>
See Notes to Computation of Ratio of Earnings to Fixed Charges.
<PAGE>
NOTES TO COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(1) On December 31, 1996, WorldCom completed the MFS Merger. The MFS Merger is
being accounted for as a purchase; accordingly, the operating results for
MFS are included from the date of acquisition.
(2) Results for 1996 include a $2.14 billion charge for in-process research
and development related to the MFS Merger. The charge is based upon a
valuation analysis of the technologies of MFS' worldwide information
system, the Internet network expansion system of UUNET, and certain other
identified research and development projects purchased in the MFS Merger.
The expense includes $1.6 billion associated with UUNET and $0.54 billion
related to MFS.
Additionally, 1996 results include other after-tax charges of $121 million
for employee severance, employee compensation charges, alignment charges,
and costs to exit unfavorable telecommunications contracts and $344 million
after-tax write-down of operating assets within its non-core businesses. On
a pre-tax basis, these charges totaled $600.1 million.
(3) In 1995, Metromedia converted its Series 1 Preferred Stock into Common
Stock, exercised warrants to acquire Common Stock and immediately sold its
position of 61,699,096 shares of Common Stock in a public offering. In
connection with the preferred stock conversion, WorldCom made a non-
recurring payment of $15.0 million to Metromedia, representing a discount
to the minimum nominal dividends that would have been payable on the
Series 1 Preferred Stock prior to the September 15, 1996 optional call
date of approximately $26.6 million (which amount includes an annual
dividend requirement of $24.5 million plus accrued dividends to such call
date).
(4) As a result of the IDB Merger and the ATC Merger, the Company initiated
plans to reorganize and restructure its management and operational
organization and facilities to eliminate duplicate personnel, physical
facilities and service capacity, to abandon certain products and marketing
activities, and to take further advantage of the synergies available to
the combined entities. Also, during the fourth quarter of 1993, plans were
approved to reduce IDB's cost structure and to improve productivity.
Accordingly, in 1994, 1993 and 1992, the Company charged to operations the
estimated costs of such reorganization and restructuring activities,
including employee severance, physical facility abandonment and duplicate
service capacity. These costs totaled $43.7 million in 1994, $5.9 million
in 1993 and $79.8 million in 1992.
Also, during 1994 and 1992, the Company incurred direct merger costs of
$15.0 million and $7.3 million, respectively, related to the IDB Merger (in
1994) and the ATC Merger (in 1992). These costs include professional fees,
proxy solicitation costs, travel and related expenses and certain other
direct costs attributable to these mergers.
(5) In connection with certain debt refinancing, the Company recognized in
1996, 1993 and 1992 extraordinary items of approximately $4.2 million,
$7.9 million and $5.8 million, respectively, net of income taxes,
consisting of unamortized debt discount, unamortized issuance cost and
prepayment fees. Additionally, in 1996 the Company recorded an
extraordinary item of $20.2 million, net of income taxes, related to a
write-off of deferred international costs.
2
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Amendment No. 1 to Registration Statement No. 333-27345, of
our report dated February 26, 1997, included in WorldCom, Inc.'s Form 10-K for
the year ended December 31, 1996 and to all references to our Firm in this
registration statement.
ARTHUR ANDERSEN LLP
Jackson, Mississippi, June 3, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
on Form S-4 (File No. 333-27345) of WorldCom, Inc. of our report dated
February 14, 1996, on our audits of the consolidated financial statements of
MFS Communications Company, Inc. as of December 31, 1995 and for the years
ended December 31, 1995 and 1994 which report is included in MFS Communication
Company's Annual Report on Form 10-K, and of our report dated February 14,
1996, on our audits of the consolidated financial statements of MFS
Communications Company, Inc. as of December 31, 1995 and 1994 and for the
three years in the period ended December 31, 1995 which report is included in
WorldCom Inc.'s Current Report on Form 8-K/A dated August 25, 1996 (as amended
on November 4, 1996). We also consent to the reference to our firm under the
caption "Experts".
Coopers & Lybrand L.L.P.
Omaha, Nebraska
June 3, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Amendment No. 1 to Registration Statement No. 333-27345, of
our reports dated February 20, 1997, included in MFS Communications Company,
Inc.'s Form 10-K for the year ended December 31, 1996 and to all references to
our Firm in this registration statement.
ARTHUR ANDERSEN LLP
Omaha, Nebraska, June 3, 1997
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Amendment No. 1 to Registration Statement No. 333-27345, of
our report dated January 31, 1996 on the Consolidated Financial Statements of
UUNET Technologies, Inc. included in WorldCom, Inc.'s Current Report on Form 8-
K dated August 25, 1996 as amended by Form 8-K/A filed November 4, 1996 and to
all references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Washington, D.C., June 3, 1997
<PAGE>
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM T-1
_______________________
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS
TRUSTEE
_______________________
Check if an application to determine eligibility of
a Trustee pursuant to Section 305(b)(2)[_]
MELLON BANK, N.A.
(Name of Trustee)
25-0659306 U.S.
(I.R.S. Employer Identification No.) (Jurisdiction of incorporation)
One Mellon Bank Center
Pittsburgh, PA 15258-0001
(Address of Principal Executive Office)
ELAINE D. RENN
Vice President
MELLON BANK, N.A.
ONE MELLON BANK CENTER
PITTSBURGH, PENNSYLVANIA 15258-0001
(412) 234-4694
(Name, Address and Telephone Number of Agent for Service)
_______________________
WORLDCOM, INC.
(Name of Obligor)
GEORGIA
(State or Other Jurisdiction of Incorporation or Organization)
58-1521612
(I.R.S. Employer Identification No.)
515 EAST AMITE STREET, JACKSON, MISSISSIPPI 39201-2702
(Address of Principal Executive Offices)
DEBT SECURITIES
(Title of Indenture Securities)
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1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE --
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
Comptroller of the Currency Washington, D.C.
Federal Reserve Bank of Cleveland Cleveland, Ohio
Federal Deposit Insurance Corporation Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE
TRUSTEE, DESCRIBE EACH SUCH AFFILIATION.
The obligor is not an affiliate of the trustee.
ITEMS 3-15 ARE NOT APPLICABLE SINCE THE OBLIGOR IS NOT IN DEFAULT ON SECURITIES
ISSUED UNDER INDENTURES UNDER WHICH THE APPLICANT IS TRUSTEE.
16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS
STATEMENT OF ELIGIBILITY.
Exhibit 1 - Copy of articles of association of the trustee as now in
effect, filed as Exhibit 1 to trustee's statement of
eligibility and qualification, Registration No. 33-46990,
and incorporated herein by reference.
Exhibit 2 - Copy of certificate of the authority of the trustee to
commence business, copy of certificate of consolidation
with the Union Trust Company of Pittsburgh and copy of
certificate approving merger of Mellon National Bank and
Trust Company into Mellon Bank, N.A. filed as Exhibit
T1A(b) to trustee's statement of eligibility and
qualification, Registration No. 33-13020, and
incorporated herein by reference.
Exhibit 3 - Copy of certificate as to authority of the trustee to
exercise corporate trust powers, filed as Exhibit T1A(c)
to trustee's statement of eligibility and qualification,
Registration No. 33-13020, and incorporated herein by
reference.
Exhibit 4 - Copy of existing by-laws of the trustee, filed as Exhibit
4 to trustee's statement of eligibility and
qualification, Registration No. 33-46990, and
incorporated herein by reference.
Exhibit 5 - Copy of each indenture referred to in Item 4, if the
obligor is in default. Not Applicable.
Exhibit 6 - Consent of the trustee required by Section 321(b) of the
Act, filed as Exhibit T1D to trustee's statement of
eligibility and qualification, Registration No. 33-13020,
and incorporated herein by reference.
Exhibit 7 - Copy of the latest report of condition of the trustee
transmitted electronically pursuant to law or the
requirements of its supervising or examining authority.
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SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939, THE
TRUSTEE, MELLON BANK, N.A., A NATIONAL BANKING ASSOCIATION ORGANIZED AND
EXISTING UNDER THE LAWS OF THE UNITED STATES OF AMERICA, HAS DULY CAUSED THIS
STATEMENT OF ELIGIBILITY TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, ALL IN THE CITY OF PITTSBURGH, AND COMMONWEALTH OF
PENNSYLVANIA, ON THE 2ND DAY OF JUNE, 1997.
MELLON BANK, N.A.
TRUSTEE
By: /s/ Elaine D. Renn
--------------------------
Elaine D. Renn
Vice President
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EXHIBIT 7
REPORT OF CONDITION
CONSOLIDATING DOMESTIC AND FOREIGN SUBSIDIARIES OF
MELLON BANK, N.A.
FOR MARCH 31, 1997
IN THE COMMONWEALTH OF PENNSYLVANIA, AT THE CLOSE OF BUSINESS ON MARCH 31,
1997; TRANSMITTED ELECTRONICALLY IN RESPONSE TO CALL MADE BY COMPTROLLER OF THE
CURRENCY, UNDER TITLE 12, UNITED STATES CODE, SECTION 161.
CHARTER NO. 6301 NORTHEASTERN DISTRICT
STATEMENT OF RESOURCES AND LIABILITIES
(in thousands)
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ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin............................................. $ 2,720,649
Interest-bearing balances...................................................................... 979,615
Securities:
Held-to-maturity securities.................................................................... 2,140,459
Available-for-sale securities.................................................................. 3,307,982
Federal funds sold and securities purchased under agreements to resell........................... 237,232
Loans and lease financing receivables:
Loans and leases, net of unearned income....................................................... $23,309,589
LESS: Allowance for loan and lease losses..................................................... 312,644
Loans and leases, net of unearned income, allowance, and reserve............................... 22,996,945
Trading assets................................................................................... 464,892
Premises and fixed assets (including capitalized leases)......................................... 500,605
Other real estate owned.......................................................................... 46,749
Customers' liability to this bank on acceptances outstanding..................................... 271,584
Intangible assets................................................................................ 1,665,337
Other assets..................................................................................... 1,494,470
Total Assets.................................................................. 36,826,519
LIABILITIES
Deposits:
In domestic offices............................................................................ 22,926,531
Noninterest-bearing......................................................................... 6,940,906
Interest-bearing............................................................................ 15,985,625
In foreign offices, Edge and Agreement subsidiaries, and IBFs.................................. 3,504,606
Noninterest-bearing......................................................................... 41,133
Interest-bearing............................................................................ 3,463,473
Federal funds purchased and securities sold under agreements to repurchase....................... 2,608,878
Demand notes issued to the U.S. Treasury......................................................... 722,847
Trading liabilities.............................................................................. 373,562
Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases):
With remaining maturity of one year or less.................................................... 1,100,458
With remaining maturity of more than one year.................................................. 164,548
Bank's liability on acceptances executed and outstanding......................................... 271,584
Subordinated notes and debentures................................................................ 977,752
Other liabilities................................................................................ 822,613
Total Liabilities......................................................... 33,473,379
EQUITY CAPITAL
Common stock..................................................................................... 167,285
Surplus (exclude all surplus related to preferred stock)......................................... 903,801
Undivided profits and capital reserves........................................................... 2,324,743
Net unrealized holding gains (losses) on available-for-sale securities........................... (35,704)
Cumulative foreign currency translation adjustments.............................................. ( 6,985)
Total Equity Capital...................................................... 3,353,140
Total Liabilities, Limited-Life Preferred Stock, and Equity Capital....... 36,826,519
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I, Michael K. Hughey, Senior Vice President and Corporate Controller of the
above-named bank, do hereby declare that this Report of Condition is true and
correct to the best of my knowledge and belief.
Michael K. Hughey
May 8, 1997
We, the undersigned directors, attest to the correctness of this Statement
of Resources and Liabilities. We declare that it has been examined by us, and
to the best of our knowledge and belief has been prepared in conformance with
the instructions and is true and correct.
Frank V. Cahouet
W. Keith Smith
Charles A. Corry
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