<PAGE> 1
As Filed with the Securities and Exchange Commission on June 15, 1998
Registration No. 333-45127
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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WORLDCOM, INC.
(Exact Name Of Registrant As Specified In Its Charter)
GEORGIA 58-1521612
(State or other 515 EAST AMITE STREET (I.R.S. Employer
jurisdiction of JACKSON, MISSISSIPPI 39201-2702 Identification No.)
incorporation or (601) 360-8600
organization)
(Address, including zip code, and telephone number,
including area code of, registrant's principal executive office)
----------------------------------------
P. BRUCE BORGHARDT, ESQ.
GENERAL COUNSEL - CORPORATE DEVELOPMENT
WORLDCOM, INC.
10777 SUNSET OFFICE DRIVE, SUITE 330
ST. LOUIS, MISSOURI 63127
(314) 909-4100
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
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Approximate date of commencement of proposed sale to public: From time to
time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box.
[ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please 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> 2
PROSPECTUS
A MAXIMUM OF 595,698 SHARES OF
WORLDCOM, INC.
COMMON STOCK
________________________________________________________
This Prospectus relates to a maximum of 595,698 shares (the "Shares") of
common stock, par value $.01, of WorldCom, Inc. (the "WorldCom Common Stock"),
a Georgia corporation ("WorldCom" or the "Company"), which will be issued by
WorldCom upon exercise of certain warrants (the "Warrants"), which are
described in "Description of Warrants." The Warrants, which were initially
issued by Brooks Fiber Properties, Inc., a Delaware corporation ("BFP"), and
exercisable for shares of common stock of BFP (the "BFP Common Stock"), became
exercisable for shares of WorldCom Common Stock upon the consummation of the
merger of BV Acquisition, Inc., a wholly-owned subsidiary of WorldCom
("Acquisition Subsidiary"), with and into BFP (the "BFP Merger") on January 29,
1998, pursuant to the Amended and Restated Agreement and Plan of Merger (the
"BFP Merger Agreement"), dated as of October 1, 1997, by and among BFP,
WorldCom, and Acquisition Subsidiary.
WorldCom may receive between $6.14 and $16.78 per share in connection with
the exercise of the various Warrants. If all such Warrants are exercised,
WorldCom would receive $6,724,167 in aggregate proceeds. All expenses incurred
in connection with this offering are being borne by WorldCom. See "Description
of Warrants."
The WorldCom Common Stock is traded on The Nasdaq National Market under the
symbol "WCOM." The last reported sale price of the WorldCom Common Stock as
reported on The Nasdaq National Market on June 12, 1998, was $42 1/2 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY INVESTORS.
_______________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is June 15, 1998.
<PAGE> 3
NO PERSON HAS BEEN AUTHORIZED BY WORLDCOM TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY WORLDCOM. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER
THAN THE SHARES OF WORLDCOM COMMON STOCK TO WHICH IT RELATES OR AN OFFER OR
SOLICITATION TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
DISTRIBUTION OF THE SECURITIES OFFERED HEREBY SHALL, UNDER ANY CIRCUMSTANCES,
IMPLY OR CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
WORLDCOM OR IN THE INFORMATION SET FORTH OR INCORPORATED BY REFERENCE HEREIN
SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
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AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INCORPORATION OF DOCUMENTS BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
INFORMATION REGARDING WORLDCOM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
DESCRIPTION OF WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
DESCRIPTION OF WORLDCOM CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES . . . . . . . . . . . . . . . . . . . . . 22
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
AVAILABLE INFORMATION
WorldCom is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith file reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by WorldCom may be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices located at Northeast Regional Office, Seven World
Trade Center, Suite 1300, New York, New York 10048 and Midwest Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials can also be obtained from the Public Reference Section
of the Commission, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a Web site that contains
reports, proxy and information statements and other materials that are filed
through the Commission's Electronic Data Gathering, Analysis and Retrieval
("EDGAR") system. This Web site can be accessed at http://www.sec.gov. In
addition, material filed by WorldCom can be inspected at the offices of the
National Association of Securities Dealers, Inc. (the "NASD"), at 1735 K
Street, N.W., Washington, D.C. 20006.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by WorldCom under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Shares offered hereby. As permitted by
the rules and regulations of the Commission, this Prospectus omits certain
information contained or incorporated by reference in the Registration
Statement. Reference is made to the Registration Statement for further
information with respect to WorldCom and the WorldCom Common Stock. Statements
contained in this Prospectus as to the contents of any contract or other
document filed as an exhibit to the Registration Statement are not necessarily
complete, and in each instance reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement. Each such
statement is qualified in its entirety by such reference. For further
information, reference is hereby made to the Registration Statement.
"WorldCom" is a service mark of the Company.
<PAGE> 4
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed with the Commission by WorldCom (formerly
Resurgens Communications Group, Inc. ("Resurgens")) under File No. 0-11258
(formerly File No. 1-10415) pursuant to the Exchange Act are incorporated
herein by reference:
(1) WorldCom's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997 (the "WorldCom 1997 Form 10-K");
(2) WorldCom's Quarterly Report on Form 10-Q for the three
months ended March 31, 1998;
(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, November 20, 1996, and December 19, 1997), November
9, 1997 (filed November 12, 1997, and as amended on Forms 8-K/A-1
filed January 27, 1998 (the "January 1998 Form 8- K"), on Form
8-K/A-2 filed on January 28, 1998, and on Form 8-K/A-3 filed May 28,
1998), January 29, 1998 (filed February 12, 1998)), and May 28, 1998
(filed May 28, 1998);
(4) the description of WorldCom's (formerly Resurgens')
Common Stock as contained in Item 1 of Resurgens' Registration
Statement on Form 8-A dated December 12, 1989, as updated by the
descriptions contained in WorldCom's Registration Statement on Form
S-4 (File No. 333-16015), as declared effective by the Commission on
November 14, 1996, which includes the Joint Proxy Statement/Prospectus
dated November 14, 1996 with respect to WorldCom's Special Meeting of
Shareholders held on December 20, 1996, under the following captions:
"Description of WorldCom Capital Stock" and "Comparative Rights of
Shareholders";
(5) the description of WorldCom's Preferred Stock Purchase
Rights contained in WorldCom's Registration Statement on Form 8-A
dated August 26, 1996, as updated by WorldCom's Current Report on Form
8-K dated May 22, 1997 (filed June 6, 1997); and
(6) the description of the WorldCom Series B Convertible
Preferred Stock (the "WorldCom Series B Preferred Stock") contained in
WorldCom's Registration Statement on Form 8-A dated November 13, 1996.
All documents filed by WorldCom 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).
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The following statements are or may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"PSLRA"):
(i) certain statements, including possible or assumed future results of
operations of WorldCom, CompuServe Corporation ("CompuServe"), MCI
Communications Corporation ("MCI"), BFP, ANS Communications, Inc. ("ANS"), and
the combined companies contained in "Risk Factors" and "Information Regarding
WorldCom -- Recent Developments," including any forecasts, projections and
descriptions of anticipated cost savings or other synergies referred to
therein, and certain statements incorporated by reference from documents filed
with the Commission by WorldCom and MCI, including any statements contained
herein or therein regarding the development of possible or assumed future
results of operations of WorldCom's and MCI's businesses, the markets for
WorldCom's and MCI's services and products, anticipated capital expenditures,
regulatory developments, competition or the effects of the pending merger (the
"MCI/WorldCom Merger") of MCI with and into TC Investments Corp., a wholly
owned subsidiary of WorldCom ("Merger Sub"), the recently completed merger (the
"CompuServe Merger") of a wholly owned subsidiary of WorldCom with and into
CompuServe, the recently completed transactions (the "AOL Transaction")
contemplated by the Purchase and Sale Agreement (the "AOL Agreement") with
America Online, Inc. ("AOL") or the recently completed BFP Merger;
(ii) any statements preceded by, followed by or that include the words
"believes," "expects," "anticipates," "intends" or similar expressions; and
(iii) other statements contained or incorporated by reference herein
regarding matters that are not historical facts.
Because such statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements; factors that could cause actual results to differ
materially include, but are not limited to, those discussed under "Risk
Factors." Potential purchasers of WorldCom Common Stock are cautioned not to
place undue reliance on such statements, which speak only as of the date
thereof.
The independent public accountants have not examined or compiled the
accompanying forward-looking statements or any forecasts or other projections
referred to herein and, accordingly, do not provide any assurance with respect
to such statements.
The cautionary statements contained or referred to in this section should
be considered in connection with any subsequent written or oral forward-looking
statements that may be issued by WorldCom or persons acting on its behalf.
WorldCom does not undertake any obligation to release publicly any revisions to
such forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
RISK FACTORS
Prospective purchasers of WorldCom Common Stock pursuant to the exercise
of the Warrants should carefully consider all of the information contained in
this Prospectus, including the following factors, in evaluating WorldCom and
its business before purchasing such WorldCom Common Stock. In particular,
prospective investors should note that this Prospectus contains forward-looking
statements within the meaning of the PSLRA and that actual results could differ
materially from those contemplated by such statements. See "Cautionary
Statement Regarding Forward Looking Statements." The factors listed below
represent certain important factors the Company believes could cause such
results to differ. These factors are not intended to represent a complete list
of the general or specific risks that may affect the Company. It should be
recognized that other risks may be significant, presently or in the future, and
the risks set forth below may affect the Company to a greater extent than
indicated.
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<PAGE> 6
RISKS RELATED TO THE MCI/WORLDCOM MERGER AND OTHER ACQUISITIONS
Uncertainties in Integrating the Acquired Companies and Achieving Cost Savings
WorldCom entered into the MCI/WorldCom Merger Agreement (as defined
herein), and recently completed the BFP Merger, the CompuServe Merger and the
AOL Transaction, in each case with the expectation that the transactions will
result in certain benefits, including, without limitation, cost savings,
operating efficiencies, revenue enhancements and other synergies. See
"Information Regarding WorldCom -- Recent Developments." Achieving the benefits
of the MCI/WorldCom Merger (which would be significantly larger than previous
acquisitions completed by WorldCom), the BFP Merger, the CompuServe Merger and
the AOL Transaction, will depend in part upon the integration of the businesses
of WorldCom together with MCI, BFP, CompuServe Network Services ("CNS"), and
ANS, in an efficient manner, and there can be no assurance that this will
occur. The consolidation of operations will require substantial attention from
management. The diversion of management attention and any difficulties
encountered in the transition and integration processes could have a material
adverse effect on the revenues, levels of expenses and operating results of the
combined companies. There can be no assurance that the combined companies will
realize any of their anticipated benefits. For a discussion of other factors
and assumptions related to the synergy estimates see "Item 5. Other Events -
The MCI/WorldCom Merger - Effects of the MCI/WorldCom Merger; Estimated
Synergies" contained in the January 1998 Form 8-K incorporated herein by
reference.
Necessity of Receiving Governmental Approvals Prior to the MCI/WorldCom Merger;
Risks Associated with Failure to Obtain Approvals of Certain Governmental
Authorities
The consummation of the MCI/WorldCom Merger is conditioned upon the
expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"Hart-Scott-Rodino Act"), and confirmation from the Commission of the European
Communities (the "European Commission") by way of a decision under Council
Regulation 4064/89 (the "Merger Control Regulation") that the MCI/WorldCom
Merger does not create or strengthen a dominant position as a result of which
competition would be significantly impeded in the European common market. The
waiting period under the Hart-Scott-Rodino Act expired on March 31, 1998,
although the U.S. Department of Justice is continuing to review the
transaction. In addition, other authorizations and approvals of various
governmental agencies, both domestic and foreign, with respect to the
transactions contemplated by the MCI/WorldCom Merger Agreement, relating
primarily to the Federal Communications Commission (the "FCC"), and state
public utility or service commissions ("PUCs"), must be received prior to
consummation of the MCI/WorldCom Merger. There can be no assurance that such
authorizations, approvals or decisions will be granted, or, if granted will not
contain certain material conditions or restrictions, that an injunction will
not be issued by a court of competent jurisdiction enjoining the consummation
of the MCI/WorldCom Merger or that a challenge to the MCI/WorldCom Merger on
the grounds that it violates U.S. antitrust laws or is not compatible with the
European common market will not be made, or if a challenge is made, what the
result will be.
Consummation of the MCI/WorldCom Merger is subject to additional approvals
from certain governmental authorities. If such approvals have not been received
at such time as all other material conditions to the MCI/WorldCom Merger have
been satisfied or waived, MCI and WorldCom may nonetheless determine to
consummate the MCI/WorldCom Merger. Although MCI and WorldCom are seeking such
approvals, it is uncertain whether such approvals will be timely received from,
among others, every jurisdiction in which MCI and WorldCom are authorized to do
business. If MCI and WorldCom determine to consummate the MCI/WorldCom Merger
without having received all such approvals, no assurance can be given that any
resulting loss of business would not have a material adverse effect on the
businesses, prospects, financial condition or results of operations of WorldCom
and MCI on a combined basis. See "Item 5. Other Events -- The MCI/WorldCom
Merger -- Certain Regulatory Filings and Approvals" contained in the January
1998 Form 8-K incorporated herein by reference.
The Effect of Stock Price Fluctuations
The relative stock prices of WorldCom Common Stock in the future may vary
significantly from the prices as of the date hereof. These variances may be due
to changes in the businesses, operations, results and prospects of
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WorldCom, as well as MCI, market assessments of the likelihood that the
MCI/WorldCom Merger will be consummated and the timing thereof, the effect of
any conditions or restrictions imposed on or proposed with respect to any of
the combined companies by regulatory agencies in connection with or following
consummation of the MCI/WorldCom Merger, general market and economic
conditions, and other factors. In addition, the stock market generally has
experienced significant price and volume fluctuations. These market
fluctuations could have a material adverse effect on the market price or
liquidity of WorldCom Common Stock.
RISKS RELATING TO THE BUSINESSES AND OPERATIONS OF WORLDCOM
Investors should be aware that business and other risks described herein as
applicable to WorldCom are generally also applicable to MCI.
Debt Service, Interest Rate Fluctuations, Other Restrictive Covenants and
Capital Spending
In connection with the MCI/WorldCom Merger, WorldCom has agreed to pay
British Telecommunications plc ("BT") $51.00 in cash without interest for each
share of Class A common stock ("MCI Class A Common Stock") of MCI it owns, or
$6.94 billion in the aggregate. Additionally, WorldCom has paid BT a fee of
$465 million to induce BT to terminate the previously signed BT/MCI Merger
Agreement (as defined herein) and enter into the BT Agreement (as defined
herein). See "Information Regarding WorldCom -- Recent Developments -- The
MCI/WorldCom Merger." WorldCom expects to fund the remaining commitment through
a combination of commercial bank and public debt financings. The MCI/WorldCom
Merger is expected to close by mid-year 1998, and therefore funding of this
commitment is not expected to occur until the second half of 1998. Increases in
interest rates on WorldCom's debt would have an adverse effect upon WorldCom's
reported net income and cash flow. WorldCom believes that the combined
operations of WorldCom, CNS, ANS, and, upon consummation of the MCI/WorldCom
Merger, MCI, would generate sufficient cash flow to service WorldCom's debt and
capital requirements; however, economic downturns, increased interest rates and
other adverse developments, including factors beyond WorldCom's control, could
impair its ability to service its indebtedness. In addition, the cash flow
required to service WorldCom's debt may reduce its ability to fund internal
growth, additional acquisitions and capital improvements.
The development of the businesses of the combined companies and the
installation and expansion of their domestic and international networks would
continue to require significant capital expenditures. Failure to have access to
sufficient funds for capital expenditures on acceptable terms or the failure to
achieve capital expenditure synergies may require the combined company to delay
or abandon some of its plans, which could have a material adverse effect on the
success of the combined company. The Company has historically utilized a
combination of cash flow from operations and debt to finance capital
expenditures and a mixture of cash flow, debt and stock to finance
acquisitions. The Company expects to experience increased capital intensity
due to network expansion and merger related expenses as noted above and
believes that funding needs in excess of internally generated cash flow and the
Company's existing credit facilities will be met by accessing the debt markets.
The Company has filed shelf registration statements on Form S-3 with the
Commission for the sale, from time to time, of one or more series of unsecured
debt securities having an aggregate value of $6.0 billion. The Company expects
to utilize the shelf registrations in connection with the MCI/WorldCom Merger
and the $6.94 billion payment to BT during 1998. No assurance can be given
that any public financing will be available on terms acceptable to the Company.
Acquisition Integration
A major portion of WorldCom's growth in recent years has resulted from
acquisitions, which involve certain operational and financial risks.
Operational risks include the possibility that an acquisition does not
ultimately provide the benefits originally anticipated by WorldCom's
management, while WorldCom continues to incur operating expenses to provide the
services formerly provided by the acquired company. Financial risks involve the
incurrence of indebtedness as a result of the acquisition and the consequent
need to service that indebtedness. In addition, the issuance of stock in
connection with acquisitions dilutes the voting power and may dilute the
economic interests of existing shareholders. In carrying out its acquisition
strategy, WorldCom attempts to minimize the risk of unexpected liabilities and
contingencies associated with acquired businesses through planning,
investigation and
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negotiation, but there can be no assurance that it will be successful in doing
so. In addition, there can be no assurance that WorldCom will be successful in
identifying attractive acquisition candidates or completing additional
acquisitions on favorable terms.
Risks of International Business
The Company derives substantial revenues from providing international
communications services to United States commercial and carrier customers. Such
operations are subject to certain risks such as changes in United States or
foreign government regulatory policies, disruption, suspension or termination
of operating agreements, and currency fluctuations. In particular, the
Company's revenues and costs of sales are sensitive to changes in international
settlement rates and international traffic routing patterns. The rates that the
Company can charge its customers for international services may decrease in the
future due to the entry of new carriers with substantial resources,
aggressiveness on the part of new or existing carriers, the widespread resale
of international private lines to provide switched voice services, the
provision of international services via non-traditional means including the
Internet, the consummation of mergers, joint ventures and alliances among large
international carriers that facilitate targeted pricing and cost reductions,
and the rapid growth of international circuit capacity due to the deployment of
new undersea fiber optic cables and new high capacity satellite systems in the
Atlantic, Pacific and Indian Ocean regions.
Risks of Overseas Business Operations
The Company derives substantial revenues from providing services to
customers in overseas locations, particularly the United Kingdom and Germany.
Such operations are subject to certain risks such as changes in the legal and
regulatory policies of the foreign jurisdiction, local political and economic
developments, currency fluctuations, exchange controls, royalty and tax
increases, retroactive tax claims, expropriation, and import and export
regulations and other laws and policies of the United States affecting foreign
trade, investment and taxation. In addition, in the event of any dispute
arising from foreign operations, the Company may be subject to the exclusive
jurisdiction of foreign courts and may not be successful in subjecting foreign
persons or entities to the jurisdiction of the courts in the United States.
WorldCom may also be hindered or prevented from enforcing its rights with
respect to foreign governments because of the doctrine of sovereign immunity.
There can be no assurance that the laws, regulations or administrative
practices of foreign countries relating to WorldCom's ability to do business in
that country will not change. Any such change could have a material adverse
effect on WorldCom's financial condition and results of operations.
Rapid Technological Change; Dependence upon Product Development
The telecommunications industry is subject to rapid and significant changes
in technology. While WorldCom does not believe that, for the foreseeable
future, these changes will either materially or adversely affect the continued
use of fiber optic cable or materially hinder its ability to acquire necessary
technologies, the effect of technological changes, including changes relating
to emerging wireline and wireless transmission and switching technologies, on
the businesses of WorldCom cannot be predicted.
The market for the data communications products and services of UUNET
Technologies, Inc., a wholly owned subsidiary of WorldCom ("UUNET"), CNS and
ANS, including Internet access and related products, is characterized by
rapidly changing technology, evolving industry standards, emerging competition
and frequent new product and service introductions. There can be no assurance
that the Company will successfully identify new product and service
opportunities and develop and bring new products and services to market in a
timely manner. The Company also will be at risk from fundamental changes in the
way data communications, including Internet access, services are marketed and
delivered. The Company's Internet service strategy assumes that the
Transmission Control Protocol/Internet Protocol, utilizing fiber optic or
copper-based telecommunications infrastructures, will continue to be the
primary protocol and transport infrastructure for Internet- related services.
Emerging transport alternatives include wireless cable modems and satellite
delivery of Internet information; alternative open protocol and proprietary
protocol standards have been or are being developed. WorldCom's pursuit of
necessary technological advances may require substantial time and expense, and
there can be no assurance that WorldCom
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will succeed in adapting its data communications services business to alternate
access devices, conduits and protocols.
Regulation Risks
WorldCom's operating subsidiaries are subject to varying degrees of
federal, state, local and international regulation. In the United States,
WorldCom's subsidiaries are most heavily regulated by the states, especially
for the provision of local exchange services. Each such subsidiary must be
separately certified in each state to offer local exchange and intrastate long
distance services. No state, however, subjects WorldCom to price cap or rate of
return regulation, nor is WorldCom currently required to obtain FCC
authorization for installation or operation of its network facilities used for
domestic services, other than licenses for specific terrestrial microwave and
satellite earth station facilities which utilize radio frequency spectrum. FCC
approval is required, however, for the installation and operation of
international facilities and services. WorldCom is subject to varying degrees
of regulation in the foreign jurisdictions in which it conducts business
including authorization for the installation and operation of network
facilities. Although the trend in federal, state, local and international
regulation appears to favor increased competition, no assurance can be given
that changes in current or future regulations adopted by the FCC, state or
foreign regulators or legislative initiatives in the United States and abroad
would not have a material adverse effect on WorldCom.
General. On February 8, 1996, President Clinton signed the
Telecommunications Act of 1996 (the "Telecom Act"), which permits the Bell
Operating Companies (the "BOCs") to provide domestic and international long
distance services to customers located outside of the BOCs' home regions;
permits a petitioning BOC to provide domestic and international long distance
services to customers within its operating area on a state by state basis upon
a finding by the FCC that a petitioning BOC has satisfied certain criteria for
opening up its local exchange network to competition and that its provision of
long distance services would further the public interest; and removes existing
barriers to entry into local service markets. Additionally, there were
significant changes in: the manner in which carrier-to-carrier arrangements are
regulated at the federal and state level; procedures to revise universal
service standards; and penalties for unauthorized switching of customers. The
FCC has instituted and, in most instances completed, proceedings addressing the
implementation of this legislation.
In implementing the Telecom Act, the FCC established nationwide rules
designed to encourage new entrants to participate in the local services markets
through interconnection with the incumbent local exchange carriers ("ILECs"),
resale of ILECs' retail services, and use of individual and combinations of
unbundled network elements. These rules set the groundwork for the statutory
criteria governing BOC entry into the long distance market. Appeals of the FCC
order adopting those rules were consolidated before the United States Court of
Appeals for the Eighth Circuit (the "Eighth Circuit"). The Eighth Circuit found
constitutional challenges to certain practices implementing cost provisions of
the Telecom Act that were ordered by certain PUCs to be premature, but vacated
significant portions of the FCC's nationwide pricing rules and vacated an FCC
rule requiring that unbundled network elements be provided on a combined basis.
In response to requests by the Solicitor General, on behalf of the FCC, and
certain other parties, including WorldCom, the United States Supreme Court has
agreed to review the decision of the Eighth Circuit. Certain BOCs have also
raised constitutional challenges to provisions of the Telecom Act restricting
BOC provision of long distance services, manufacturing of telecommunications
equipment, electronic publishing and alarm monitoring services. On December
31, 1997, the United States District Court for the Northern District of Texas
(the "Texas District Court") ruled that these restrictions violate the Bill of
Attainder Clause of the U.S. Constitution. Currently, this decision only
applies to SBC Corporation ("SBC"), US WEST Communications Group ("US WEST"),
and Bell Atlantic Corporation ("Bell Atlantic"). At the request of various
parties, on February 11, 1998 the Texas District Court issued a stay of its
decision pending appeal. AT&T Corp. ("AT&T"), MCI, the Department of Justice,
the FCC and other parties have appealed the decision to the United States Court
of Appeals for the Fifth Circuit. BellSouth Corporation ("BellSouth") raised
the Bill of Attainder issue in its appeal before the United States Court of
Appeals for the Fifth Circuit of the electronic publishing restrictions imposed
under the Telecom Act. The Fifth Circuit held that the Telecom Act did not
constitute a Bill of Attainder in respect to BellSouth's activities in the
electronic publishing business. WorldCom cannot predict either the ultimate
outcome of these or future challenges to the Telecom Act, any related appeals
of regulatory or court decisions, or the eventual effect on its businesses or
the industry in general.
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The FCC has denied applications filed by Ameritech Corporation
("Ameritech"), SBC and BellSouth seeking authority to provide inter-local
access transport area ("interLATA") long distance service in Michigan,
Oklahoma, Louisiana and South Carolina, respectively. SBC appealed the FCC's
denial of its application covering Oklahoma to the United States Court of
Appeals for the District of Columbia Circuit. The Court has affirmed the FCC's
denial of that application. In its denial of an Ameritech application and a
BellSouth application, the FCC provided detailed guidance to applicants
regarding the obligations of the applicants, the format of future applications,
the content of future applications, and the review standards that it will apply
in evaluating any future applications. The National Association of Regulatory
Utility Commissioners and several state regulatory commissions have appealed
jurisdictional aspects of that Ameritech application denial to the Eighth
Circuit. WorldCom cannot predict either the outcome of these appeals, or the
BOCs' willingness to abide by these FCC guidelines, or the timing or outcome of
future applications submitted to the FCC. Additionally, several Regional Bell
Operating Companies ("RBOCs") have filed petitions requesting that the FCC
forbear from imposing the line of business restrictions upon their data service
offerings and the data network deployment. Other BOCs have filed or announced
their intention to file applications at the FCC for authority to provide
interLATA services. Additionally, the FCC and several PUCs are considering a
proposal that would allow BOCs electing to create separate wholesale network
and retail organizations to enter the long distance market on an accelerated
basis. WorldCom cannot predict the outcome of these proceedings or whether the
outcome will have a material impact upon its consolidated financial position or
results of operations.
On May 7, 1997, the FCC announced that it will issue a series of orders
that will reform Universal Service Subsidy allocations and adopted various
reforms to the existing rate structure for interstate access services provided
by the ILECs that are designed to reduce access charges, over time, to more
economically efficient levels and rate structures. It also affirmed that
information service providers (including, among others, Internet service
providers ("ISPs")) should not be subject to existing access charges ("ISP
Exemption"). Petitions for reconsideration of, among other things, the access
service and ISP Exemption related actions were filed before the FCC and appeals
taken to various United States Courts of Appeals. On reconsideration, the FCC
in significant part affirmed the access charge and ISP Exemption actions and
the court appeals have been consolidated before the Eighth Circuit. Also,
several state agencies have started proceedings to address the reallocation of
implicit subsidies contained in the access rates and retail service rates to
state universal service funds. Access charges are a principal component of
WorldCom's telecommunication expense. Additionally, modification of the ISP
Exemption could have an adverse effect on the Company's Internet-related
services business. WorldCom cannot predict either the outcome of these appeals
or whether or not the result(s) will have a material impact upon its
consolidated financial position or results of operations.
The FCC issued on December 24, 1996, a Notice of Inquiry to seek comment on
whether it should consider various actions relating to interstate information
services and the Internet. The FCC recognized that these services and recent
technological advances may be constrained by current regulatory practices that
have their foundations in traditional circuit switched telecommunications
services and technologies. Based upon this and other proceedings, the FCC may
permit telecommunications companies, BOCs, or others to increase the scope or
reduce the cost of their Internet access services. WorldCom cannot predict the
effect that the Notice of Inquiry, the Telecom Act or any future legislation,
regulation or regulatory changes may have on its consolidated financial
position or results of operations.
International. In December 1996, the FCC adopted a new policy that makes it
easier for United States international carriers to obtain authority to route
international public switched voice traffic to and from the United States
outside of the traditional settlement rate and proportionate return regimes. In
February 1997, the United States entered into a World Trade Organization
Agreement (the "WTO Agreement") that should have the effect of liberalizing the
provision of switched voice telephone and other telecommunications services in
scores of foreign countries over the next several years. The WTO Agreement
became effective in February 1998. In order to comply with United States
commitments to the WTO Agreement, the FCC implemented new rules in February
1998 that liberalize existing policies regarding (i) the services that may be
provided by foreign affiliated United States international common carriers,
including carriers controlled or more than 25 percent owned by foreign carriers
that have market power in their home markets, and (ii) the provision of
international switched voice services outside of
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the traditional settlement rate and proportionate return regimes. The new rules
make it much easier for foreign affiliated carriers to enter the United States
market for the provision of international services.
In August 1997, the FCC adopted mandatory settlement rate benchmarks. These
benchmarks are intended to reduce the rates that United States carriers pay
foreign carriers to terminate traffic in their home countries. The FCC will
also prohibit a United States carrier affiliated with a foreign carrier from
providing facilities-based service to the foreign carrier's home market until
and unless the foreign carrier has implemented a settlement rate within the
benchmark. The FCC also adopted new rules that will liberalize the provision of
switched services over private lines to World Trade Organization member
countries, by allowing such services on routes where 50% or more of United
States billed traffic is being terminated in the foreign country at or below
the applicable settlement rate benchmark or where the foreign country's rules
concerning provision of international switched services over private lines are
deemed equivalent to United States rules.
Although the FCC's new policies and implementation of the WTO Agreement may
result in lower costs to WorldCom to terminate international traffic, there is
a risk that the revenues that WorldCom will receive from inbound international
traffic may decrease to an even greater degree. The implementation of the WTO
Agreement may also make it easier for foreign carriers with market power in
their home markets to offer United States and foreign customers end-to-end
services to the disadvantage of WorldCom, which may continue to face
substantial obstacles in obtaining from foreign governments and foreign
carriers the authority and facilities to provide such end-to-end services.
Further, many foreign carriers have challenged, in court and at the FCC, the
FCC's order adopting mandatory settlement rate benchmarks. If the FCC's
settlement rate benchmark order was overturned, it could accelerate the
full-fledged entry of foreign carriers into the United States, and make it more
advantageous for foreign carriers to route international traffic into the
United States at low, cost-based termination rates, while United States
carriers would continue to have little choice but to route international
traffic into most foreign countries at much higher, above cost, settlement
rates.
Competition
Virtually every aspect of the telecommunications industry is extremely
competitive, and WorldCom expects that competition will intensify in the
future. WorldCom (including UUNET, CNS, ANS and BFP) faces significant
competition from carriers and other companies with greater market share and
financial resources. WorldCom competes domestically with incumbent providers,
which have historically dominated local telecommunications, and with long
distance carriers, for the provision of long distance services. Sometimes the
incumbent provider offers both local and long distance services. The ILECs
presently have numerous advantages as a result of their historic monopoly
control over local exchanges. A continuing trend toward business combinations
and alliances in the telecommunications industry may create significant new
competitors to WorldCom. Many of WorldCom's existing and potential competitors
have financial, personnel and other resources significantly greater than those
of WorldCom. WorldCom also faces competition from one or more competitors in
every area of their businesses, including competitive access providers
operating fiber optic networks, in some cases in conjunction with the local
cable television operator. Several competitors have announced the deployment of
nationwide fiber networks using advanced state-of-the-art technologies. AT&T
and Sprint Corporation ("Sprint") have indicated their intention to offer local
telecommunications services in major United States markets using their own
facilities, including in AT&T's case, the announced acquisition of the
facilities and business of Teleport Communications Group, Inc., or by resale of
the local exchange carriers' or other providers' services. In addition,
WorldCom competes with equipment vendors and installers and telecommunications
management companies with respect to certain portions of their businesses.
Overseas, WorldCom competes with incumbent providers, some of which still
have special regulatory status and the exclusive rights to provide certain
services, and virtually all of which have historically dominated their local,
domestic long distance and international services business. These incumbent
providers have numerous advantages, including existing facilities, customer
loyalty and substantial financial resources. WorldCom also competes with other
service providers, many of which are affiliated with incumbent providers in
other countries. Typically, WorldCom must devote extensive resources to
obtaining regulatory approvals necessary to operate overseas, and then to
obtaining access to and interconnection with the incumbent's network on a
non-discriminatory
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basis.
WorldCom may also be subject to additional competition due to the
development of new technologies and increased availability of domestic and
international transmission capacity. For example, even though fiber optic
networks, such as that of WorldCom, are now widely used for long distance
transmission, it is possible that the desirability of such networks could be
adversely affected by changing technology. The telecommunications industry is
in a period of rapid technological evolution, marked by the introduction of new
product and service offerings and increasing satellite and fiber optic
transmission capacity for services similar to those provided by WorldCom.
WorldCom cannot predict which of many possible future product and service
offerings will be important to maintain its competitive position or what
expenditures will be required to develop and provide such products and
services. For most of the Company's communications services, the factors
critical to consumers' choice of a service provider are cost, ease of use,
speed of installation, quality, reputation, and in some cases geography and
network size.
Under the Telecom Act and ensuing federal and state regulatory initiatives,
barriers to local exchange competition are being removed. The introduction of
such competition, however, also establishes, in part, the predicate for the
BOCs to provide in-region interexchange long distance services if the
constitutionality of the Telecom Act is upheld. The BOCs are currently allowed
to offer certain "incidental" long distance service in-region and to offer
out-of-region long distance services. Once the BOCs are allowed to offer
in-region long distance services, they could be in a position to offer single
source local and long distance service similar to that being offered by
WorldCom. WorldCom expects that the increased competition made possible by
regulatory reform will result in certain additional pricing and margin
pressures in the domestic telecommunications services business. Such of the
additional pressures as may result from BOC provision of in-region
interexchange long distance services may be accelerated if the ruling of the
Texas District Court on the constitutionality of the Telecom Act's restrictions
is ultimately upheld on appeal.
WorldCom also competes in offering data communications services, including
Internet access and related services. This is also an extremely competitive
business, and WorldCom expects that competition will intensify in the future.
WorldCom believes that the ability to compete successfully in this arena
depends on a number of factors, including: industry presence; the ability to
execute a rapid expansion strategy; the capacity, reliability and security of
its network infrastructure; ease of access to and navigation on the Internet;
the pricing policies of its competitors and suppliers; the timing of the
introduction of new products and services by WorldCom and its competitors; the
Company's ability to support industry standards; and industry and general
economic trends. The success of WorldCom will depend heavily upon its ability
to provide high quality data communication services, including Internet
connectivity and value- added Internet services at competitive prices.
Major telecommunications companies have expanded their current services to
compete fully in offering data communication services, including Internet
access and value-added and data communications services, and WorldCom expects
additional telecommunications companies to continue to compete in this arena.
WorldCom believes that new competitors, including large computer hardware,
software, media and other technology and communications companies will also
offer data communications services, resulting in even greater competition for
the combined company. Certain companies, including AT&T, GTE Corporation
("GTE"), Intermedia Communications, Inc., Teleport Communications Group, Qwest
Communications, PSINet, Inc., IXC Communications, Inc. and Williams
Communications have obtained or expanded their Internet access products and
services as a result of network deployment, acquisitions and strategic
investments. Such acquisitions may permit WorldCom's competitors to devote
greater resources to the development and marketing of new competitive products
and services and the marketing of existing competitive products and services.
WorldCom expects these acquisitions and strategic investments to increase, thus
creating significant new competitors to the Company. In addition, WorldCom
expects new companies, such as Level 3, to enter this arena and provide
additional competition for the Company's service offerings.
As the Company continues to expand voice and data communications operations
outside of the United States, the Company will be forced to compete with and
buy services from incumbent providers, some of which are government-owned
and/or still have special regulatory status and the exclusive rights to provide
certain essential
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services. The Company will also encounter competition from companies whose
operating styles are substantially different from those that they usually
encounter. For example, in Europe, WorldCom's subsidiaries compete directly
with: (1) telecommunications companies, such as BT, Deutsche Telekom AG and
others; (2) global telecommunications alliances such as Global One (Deutsche
Telekom AG, France Telecom and Sprint), Unisource/Uniworld (AT&T, Telia AB of
Sweden, PTT Telecom Netherlands, and Swisscom) and others; and (3) other
Internet access providers, such as Demon Internet Limited. Foreign competitors
may also possess a better understanding of their local areas and may have
better working relationships with, or control of, local telecommunications
companies. There can be no assurance that the Company can obtain similar levels
of local knowledge, and failure to obtain that knowledge could place the
Company at a serious competitive disadvantage.
Anti-Takeover Provisions
The Second Amended and Restated Articles of Incorporation of WorldCom (the
"WorldCom Articles") contain provisions (a) requiring a 70% vote for approval
of certain business combinations with certain 10% shareholders unless approved
by a majority of the continuing members of the WorldCom Board of Directors or
unless certain minimum price, procedural and other requirements are met, (b)
restricting aggregate beneficial ownership of the capital stock of WorldCom by
foreign shareholders to 20% of the total outstanding capital stock, and
subjecting excess shares to redemption, and (c) authorizing WorldCom's Board of
Directors to issue preferred stock in one or more classes without any action on
the part of shareholders. In addition, WorldCom has entered into a Rights
Agreement between WorldCom and The Bank of New York, as Rights Agent (the
"Rights Agent"), dated as of August 25, 1996, as amended (the "WorldCom Rights
Agreement"), which would cause substantial dilution to a person or group that
attempts to acquire WorldCom on terms not approved by WorldCom's Board of
Directors. Further, the WorldCom Restated Bylaws (the "WorldCom Bylaws") (a)
contain requirements regarding advance notice of nomination of directors by
shareholders and (b) restrict the calling of special meetings by shareholders
to those owning shares representing not less than 40% of the votes to be cast.
These provisions, including the WorldCom Rights Agreement, may have an
"anti-takeover" effect. See "Description of WorldCom Capital Stock."
USE OF PROCEEDS
If the Warrants are exercised in full, WorldCom would receive aggregate
proceeds of $6,724,167. WorldCom will use the net proceeds for general
corporate purposes.
PLAN OF DISTRIBUTION
The Shares will be issued and sold upon the exercise of Warrants by the
Holders thereof. No underwriter, broker, salesperson or other person will
receive any commission or other compensation in connection with the sale of the
Shares offered hereby. The total number of Shares which may be sold hereunder
upon exercise of the Warrants will be 595,698, based on the estimated BFP
Exchange Ratio (as defined below). The Company will pay all expenses related
to this Prospectus (and the Registration Statement of which this Prospectus is
part), estimated to be approximately $20,000.
INFORMATION REGARDING WORLDCOM
The following briefly describes the businesses of WorldCom, as well as
information regarding the MCI/WorldCom Merger. Additional information regarding
WorldCom and such proposed transactions is contained in its filings with the
Commission pursuant to the Exchange Act. See "Available Information" and
"Incorporation of Documents by Reference."
BUSINESS OF WORLDCOM
WorldCom is one of the largest telecommunications companies in the United
States, serving local, long distance, and Internet customers domestically and
internationally. WorldCom 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.
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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, dedicated and dial-up
Internet access, resale cellular services, 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,
web server hosting and integration services and interconnection via Network
Access Points ("NAPs") to ISPs.
WorldCom's principal executive offices are located at 515 East Amite
Street, Jackson, Mississippi 39201-2702, and its telephone number is (601)
360-8600.
RECENT DEVELOPMENTS
The MCI/WorldCom Merger
On October 1, 1997, WorldCom announced its intention to commence an
exchange offer to acquire all of the outstanding shares of MCI common stock,
par value $.10 per share ("MCI Common Stock"), for $41.50 of WorldCom Common
Stock, subject to adjustment in certain circumstances as set forth in materials
filed by WorldCom with the Commission. On November 9, 1997, WorldCom entered
into an Agreement and Plan of Merger (the "MCI/WorldCom Merger Agreement") with
MCI and MCI Merger Sub, providing for the MCI/WorldCom Merger, with MCI Merger
Sub surviving as a wholly owned subsidiary of WorldCom. As a result of the
MCI/WorldCom Merger, the separate corporate existence of MCI will cease, and
MCI Merger Sub (which will be renamed "MCI Communications Corporation") will
succeed to all the rights and be responsible for all the obligations of MCI in
accordance with the Delaware General Corporation Law. Subject to the terms and
conditions of the MCI/WorldCom Merger Agreement, each share of MCI Common Stock
outstanding immediately prior to the effective time of the MCI/WorldCom Merger
(the "MCI/WorldCom Effective Time"), other than shares owned by WorldCom or
held by MCI, will be converted into the right to receive that number of shares
of WorldCom Common Stock equal to the MCI Exchange Ratio (as defined below),
and each share of MCI Class A Common Stock, par value $.10 per share
outstanding immediately prior to the MCI/WorldCom Effective Time will be
converted into the right to receive $51.00 in cash, without interest thereon.
The "MCI Exchange Ratio" means the quotient (rounded to the nearest 1/10,000)
determined by dividing $51.00 by the average of the high and low sales prices
of WorldCom Common Stock (the "MCI/WorldCom Average Price") as reported on The
Nasdaq National Market on each of the 20 consecutive trading days ending with
the third trading day immediately preceding the MCI/WorldCom Effective Time;
provided, however, that the MCI Exchange Ratio will not be less than 1.2439 or
greater than 1.7586. Cash will be paid in lieu of the issuance of any
fractional share of WorldCom Common Stock in the MCI/WorldCom Merger.
Based on the number of shares MCI Common Stock outstanding as of January
20, 1998 and assumed MCI Exchange Ratios of 1.2439 and 1.7586, approximately
710,554,160 shares and 1,004,566,722 shares, respectively, of Common Stock
would be issued in the MCI/WorldCom Merger. In addition, as of December 31,
1997, outstanding options to purchase shares of MCI Common Stock would be
converted in the MCI/WorldCom Merger to options to acquire an aggregate of
approximately 86,491,688 shares and 122,280,154 shares, respectively, of Common
Stock, and the exercise price would be adjusted to reflect the MCI Exchange
Ratio, so that, on exercise, the holders would receive, in the aggregate, the
same number of shares of Common Stock as they would have received had they
exercised prior to the MCI/WorldCom Merger, at the same exercise price.
The MCI/WorldCom Merger was approved by the MCI stockholders and the
WorldCom shareholders at separate meetings held on March 11, 1998. The
MCI/WorldCom Merger is also subject to approvals from the FCC, the Department
of Justice and various state government bodies. In addition, the MCI/WorldCom
Merger is subject to approval by the Commission of the European Communities
(the "European Commission"). WorldCom anticipates that the MCI/WorldCom Merger
will close in mid- 1998.
In addition, GTE Corporation and three of its subsidiaries filed suit in
the U.S. District Court for the District of Columbia against WorldCom and MCI
seeking to enjoin the pending merger on the grounds that it violates U.S.
antitrust laws. WorldCom believes that the complaint is without merit, although
there can be no assurances as to the ultimate result of the suit.
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Termination of the MCI/WorldCom Merger Agreement by MCI or WorldCom under
certain conditions will require MCI to pay WorldCom $750 million as a
termination fee and to reimburse WorldCom the $450 million alternative
transaction fee paid by WorldCom to British Telecommunications plc ("BT").
Further, termination of the MCI/WorldCom Merger Agreement by MCI or WorldCom
under certain conditions will require WorldCom to pay MCI $1.635 billion as a
termination fee.
Pursuant to an agreement (the "BT Agreement") among MCI, WorldCom and BT,
the prior merger agreement between BT and MCI (the "BT/MCI Merger Agreement")
was terminated, and WorldCom agreed to pay BT an alternative transaction fee of
$450 million and expenses of $15 million payable to BT in accordance with the
BT/MCI Merger Agreement. These fees were paid on November 12, 1997. WorldCom
also agreed to pay to BT an additional payment of $250 million in the event
that WorldCom is required to make the $1.635 billion payment to MCI in
accordance with the MCI/WorldCom Merger Agreement. In addition, pursuant to the
BT Agreement, BT voted (or caused to be voted) its shares of MCI Class A Common
Stock in favor of the MCI/WorldCom Merger Agreement and the approval of the
other transactions contemplated by the MCI/WorldCom Merger Agreement.
The foregoing description of the MCI/WorldCom Merger Agreement and the BT
Agreement and the transactions contemplated thereby does not purport to be
complete and is qualified in its entirety by reference to such agreements,
copies of which are attached to the WorldCom 1997 Form 10-K and incorporated by
reference herein. Additional information regarding such agreements and the
transactions contemplated thereby is also contained under the caption "The
MCI/WorldCom Merger" contained in WorldCom's Current Report on Form 8-K/A-1
dated November 9, 1997 (filed January 27, 1998), which is incorporated by
reference herein.
Divestiture of MCI Internet Backbone
On May 28, 1998, MCI announced that it entered into a letter of intent with
Cable & Wireless PLC ("Cable & Wireless") to sell its Internet backbone and
service business for $625 million in cash. Under the terms of the proposed
agreement, MCI would sell to Cable & Wireless its Internet backbone service
business, comprising all of its 22 domestic nodes, 15,000 interconnection ports,
more than 40 ongoing peering agreements, and equipment dedicated to supporting
the network including routers and switches. Cable & Wireless would acquire and
assume support for MCI's contracts with its ISP customers, whose business is
primarily re-selling Internet access. Additionally, MCI would provide the
underlying telecommunications transport services supporting the Cable & Wireless
backbone and would provide additional services as required by Cable & Wireless
and MCI would use Cable & Wireless's backbone services to support certain
non-ISP customers. The agreement sets forth certain revenue and traffic
guarantees for Cable & Wireless.
MCI's residential and non-ISP commercial customers (who are not resellers
of Internet services) would not be affected by the Cable & Wireless transaction,
and MCI would continue to provide non-Internet services to its ISP customers.
Residential and commercial customers would continue to receive MCI services
exactly as they do today from the same access facilities, under the same terms
of their contracts and with support from their existing account teams. For a
period of at least two years, underlying Internet services for MCI's existing
customers would be provided on the Cable & Wireless network, MCI would continue
to provide Intranet, web-hosting and other value-added Internet services to its
customer base.
The completion of the acquisition of MCI's Internet backbone service
business by Cable & Wireless is subject to certain conditions precedent which
must be met by December 31, 1998 or the agreement will terminate. The
conditions precedent include (i) the receipt of certain government approvals of
the acquisition itself, including that of the U.S. Department of Justice
("DOJ") and (ii) satisfaction of the conditions precedent to the MCI/WorldCom
Merger which include the receipt of approvals of the DOJ, the European
Commission and the FCC. The second of these conditions precedent requires,
among other things, that the proposed sale of MCI's Internet backbone service
business to Cable & Wireless satisfies concerns the DOJ and the European
Commission have raised in the context of their review of the MCI/WorldCom
Merger about the combination of MCI's and WorldCom's Internet businesses. MCI
and WorldCom are currently in discussions with the DOJ and the European
Commission to address their concerns.
On June 10, 1998, Cable & Wireless filed a civil action in the United
States District Court for the District of Columbia ("DC District Court")
seeking, in essence, to compel compliance with certain provisions of the
agreement. On June 12, 1998, the DC District Court denied Cable & Wireless'
motion for a temporary restraining order enforcing certain provisions of the
agreement. The ruling, however, was without prejudice to the right of Cable &
Wireless to seek injunctive relief at some future point.
DESCRIPTION OF WARRANTS
The following summary, which describes certain material provisions of the
Warrants, does not purport to be complete and is subject in all respects to,
and is qualified in its entirety by, reference to such Warrants, copies of the
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forms of which are filed as exhibits to this Registration Statement.
GENERAL. In connection with the BFP Merger, each share of the BFP Common
Stock was converted into a number of shares of WorldCom Common Stock equal to
the BFP Exchange Ratio. Upon consummation of the BFP Merger, the Warrants,
which were exercisable for 322,000 shares of BFP Common Stock, became
exercisable for WorldCom Common Stock and the holders thereof (the "Holders")
are entitled to purchase, in the aggregate, 595,698 shares of WorldCom Common
Stock, based on the BFP Exchange Ratio of 1.85. The price at which a Holder of
a Warrant may purchase a share of WorldCom Common Stock (the "Purchase Price")
and the number of shares of WorldCom Common Stock issuable on exercise of the
Warrants were adjusted to reflect the BFP Exchange Ratio, so that, on exercise
of the Warrants, the Holders of the Warrants will receive, in the aggregate,
the same number of shares of WorldCom Common Stock as if they had exercised
their rights under the Warrants prior to the BFP Merger, at the same aggregate
exercise price. The Purchase Prices are subject to certain adjustments, which
are described below.
The Warrants were issued pursuant to two different forms of warrants. One
form of warrant is set forth in Exhibit 4.15 to this Registration Statement and
the Warrants issued pursuant to that form are referred to herein as the "Series
A Warrants." The other form of warrant is set forth in Exhibit 4.16 to this
Registration Statement and the Warrants issued pursuant to that form are
referred to herein as the "Series B Warrants." The Warrants are exercisable
for various periods ending between March 31, 1998 and December 21, 1999,
depending on the specific terms of the individual Warrants.
ADJUSTMENT. The number of shares of WorldCom Common Stock issuable upon
the exercise of a Warrant and the Purchase Price thereof are subject to
adjustment from time to time upon the occurrence of certain events, including,
without limitation: (1) the subdivision, by any stock split, stock dividend,
recapitalization, or otherwise, of WorldCom's Common Stock into a greater
number of shares or the combination, by reverse stock split or otherwise, of
WorldCom Common Stock into a smaller number of shares; (2) any reorganization,
reclassification, consolidation, merger, sale of all or substantially all of
WorldCom's assets to another person, or other transaction that is affected in
such a manner that Holders of WorldCom Common Stock are entitled to receive,
either directly or upon subsequent liquidation, stock, securities, or assets
with respect to or in exchange for WorldCom Common Stock (an "Organic Change");
(3) the occurrence of certain other events, of the type contemplated by the
Warrant but not expressly provided for by its provisions. The Series B Warrants
require, in addition to the adjustments described in the preceding sentence,
that the Purchase Price must be adjusted if certain rights or options are
granted to purchase either WorldCom Common Stock or any stock convertible into
WorldCom Common Stock, in either case, below a specified price per share.
NOTICES. WorldCom is required to give written notice of any Purchase Price
adjustment to the Holders of the Warrants, setting forth in reasonable detail
and certifying the calculation of such adjustment. WorldCom is also required
to give written notice to the Holders of the Warrants at least 20 days prior to
the date on which WorldCom closes its books or takes a record (1) with respect
to any dividend or distribution upon WorldCom Common Stock, (2) with respect to
any pro rata subscription offer to Holders of WorldCom Common Stock, and (3)
for determining voting rights with respect to an Organic Change, dissolution or
liquidation, or the date on which any Organic Change will take place.
PURCHASE RIGHTS. If at any time WorldCom grants, issues, or sells any
options, convertible securities, or rights to purchase stock, warrants,
securities, or other property (the "Purchase Rights") pro rata to each record
Holder of WorldCom Common Stock, in his, her, or its capacity as Holder of
record, then the Holder of a Warrant is entitled to acquire, in addition to the
shares of WorldCom Common Stock acquirable and receivable upon exercise of the
Warrant, and upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if such Holder had held
the number of shares of WorldCom Common Stock acquirable upon the exercise of
the Warrant immediately before the date on which a record is taken for grant,
issuance, or sale of Purchase Rights, or, if no record is taken, the date as of
which the record Holders are to be determined.
NO RIGHTS AS SHAREHOLDERS. Holders of Warrants are not entitled to vote or
receive dividends or be deemed the Holder of WorldCom Common Stock or any other
securities of WorldCom which may at any time be issuable
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on the exercise thereof. The Warrants do not confer upon the Holders, as such,
any of the rights of a shareholder of WorldCom or any right (1) to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, (2) to give or withhold consent to any corporate action
(whether upon recapitalization, issue of stock, reclassification of stock,
change of par value, consolidation, merger, conveyance, or otherwise), or (3)
except as provided above, to receive notice of meetings or to receive dividends
of subscription rights or otherwise, until the Warrants have been exercised.
METHOD OF EXERCISE. The Warrants may be exercised in whole, but not in
part, on or after the date of the Warrant by executing the Form of Election to
Purchase (the "Form"), which is attached to the Warrant, and returning the
executed Form to WorldCom. The issuance of certificates for shares of WorldCom
Common Stock upon exercise of a Warrant is to be made without charge to the
Holder of the Warrant for any issuance tax or other cost incurred by WorldCom
in connection with such exercise and related issuance. The Warrants may be paid
for either in cash or, at the option of the Warrant Holder, in shares of
WorldCom Common Stock having a market price on the date of exercise equal to
the aggregate Purchase Price of the shares of WorldCom Common Stock being
purchased upon exercise of the Warrant.
DESCRIPTION OF WORLDCOM CAPITAL STOCK
The following summary is a description of the material terms of WorldCom
capital stock, does not purport to be complete and is subject in all respects
to the applicable provisions of the Georgia Business Corporation Code (the
"GBCC"), the WorldCom Articles, the WorldCom Bylaws, the Deposit Agreement
(referred to below), and the WorldCom Rights Agreement. The WorldCom Articles,
the WorldCom Bylaws, the Deposit Agreement and the WorldCom Rights Agreement
are included in or incorporated by reference as exhibits to the Registration
Statement of which this Prospectus is a part.
The authorized capital stock of WorldCom consists of 2,500,000,000 shares
of common stock, par value $.01 per share, and 50,000,000 shares of preferred
stock, par value $.01 per share. As of March 31, 1998, there were 1,028,976,222
shares of WorldCom Common Stock, 94,992 shares of WorldCom Series A Preferred
Stock (which were redeemed for or converted into shares of WorldCom Common
Stock on or prior to May 31, 1998, as discussed below) and 12,237,025 shares
of WorldCom Series B Preferred Stock issued and outstanding.
COMMON STOCK
All of the outstanding shares of WorldCom Common Stock are fully paid and
nonassessable. Subject to the prior rights of the holders of preferred stock
which may be issued and outstanding, the holders of WorldCom Common Stock are
entitled to receive dividends as and when declared by the Board of Directors
out of funds legally available therefor, and, in the event of the dissolution
of WorldCom, to share ratably in all assets remaining after payment of
liabilities and satisfaction of the liquidation preferences of the holders of
WorldCom preferred stock, as provided in the WorldCom Articles. Each holder of
WorldCom Common Stock is entitled to one vote for each share held of record on
all matters presented to a vote at a shareholders' meeting, including the
election of directors. Holders of WorldCom Common Stock have no cumulative
voting rights or preemptive rights to purchase or subscribe for any stock or
other securities and there are no conversion rights or redemption or sinking
fund provisions with respect to such stock. Additional shares of authorized
WorldCom Common Stock may be issued without shareholder approval.
The transfer agent and registrar for the WorldCom Common Stock is The Bank
of New York, 101 Barclay Street -- 12W, New York, NY 10286.
PREFERRED STOCK
The authorized but unissued preferred stock of WorldCom is available for
issuance from time to time at the discretion of the WorldCom Board of Directors
without shareholder approval. The WorldCom Board of Directors has the authority
to prescribe for each series of preferred stock it establishes the number,
designation, preferences, limitations and relative rights of the shares of such
series, subject to applicable law and the provisions of any
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outstanding series of preferred stock. The terms of any series of preferred
stock including, but not limited to, dividend rate, redemption price,
liquidation rights, sinking fund provisions, conversion rights and voting
rights, and any corresponding effect on other shareholders, will be dependent
largely on factors existing at the time of issuance. Such terms and effects
could include restrictions on dividends on the WorldCom Common Stock if
dividends on the preferred stock are in arrears, dilution of the voting power
of other shareholders to the extent a series of the preferred stock has voting
rights, and reduction of amounts available on liquidation as a result of any
liquidation preference granted to any series of preferred stock.
SERIES A PREFERRED STOCK AND DEPOSITARY SHARES
On May 15, 1998, the Company announced that it elected to redeem on May 31,
1998 (the "Redemption Date"), all of the outstanding shares of WorldCom Series
A Preferred Stock and related Depositary Shares. On the Redemption Date, each
Depositary Share will be redeemed for 0.79511 shares of WorldCom Common Stock.
The Company will pay cash in lieu of any fractional share of WorldCom Common
Stock. The Depositary Shares are convertible into 3.44274 shares of WorldCom
Common Stock for each Depositary Share plus payment of unpaid dividends at any
time prior to the close of business on the Redemption Date. Accordingly,
WorldCom expects that all of the holders of Depositary Shares will convert
their shares into WorldCom Common Stock prior to redemption.
From and after the Redemption Date, (i) dividends on the WorldCom Series A
Preferred Stock and the Depositary Shares shall cease to accrue, (ii) the
WorldCom Series A Preferred Stock and the Depositary Shares shall no longer be
deemed to be outstanding and (iii) all rights of the holders of Receipts
evidencing Depositary Shares shall cease (except the rights to receive the
shares of WorldCom Common Stock and cash in lieu of any fractional shares
thereof payable upon such redemption, without interest thereon, upon surrender
of Receipts evidencing Depositary Shares).
The Call Price per Share of WorldCom Series A Preferred Stock and the
Current Market Price per share of WorldCom Common Stock used for purposes of
determining the exchange rate were $3,417.00 and $42.975 respectively. The
Current Market Price is the lesser of (i) the average of the high and low sales
prices of the WorldCom Common Stock as reported on The Nasdaq National Market
for the 10 consecutive trading days ending on and including the date of
determination, which was May 14, 1998, or (ii) the closing price of the
WorldCom Common Stock on The Nasdaq National Market on the date of
determination. The number of shares of WorldCom Common Stock to be exchanged
for each outstanding share of WorldCom Series A Preferred Stock is the result
of dividing the Call Price by the Current Market Price.
SERIES B PREFERRED STOCK
The following description of WorldCom Series B Convertible Preferred Stock
does not purport to be complete and is subject to, and qualified in its
entirety by, the provisions of the WorldCom Articles.
Dividends
The holders of WorldCom Series B Preferred Stock are entitled to receive
when, as and if declared by the Board of Directors out of funds legally
available therefor, cumulative dividends from the issue date of the WorldCom
Series B Preferred Stock, accruing at the rate per share of $.0775 per annum,
payable when and as the WorldCom Board of Directors may determine, in cash,
before any dividends shall be set apart for or paid upon the WorldCom Common
Stock or any other stock ranking as to dividends junior to the WorldCom Series
B Preferred Stock in any year. Notwithstanding the foregoing, WorldCom may
declare, set apart and pay dividends on shares of the WorldCom Series A
Preferred Stock whether or not dividends have been declared, set apart or paid
on the shares of WorldCom Series B Preferred Stock. Dividends are only payable
in cash, except for payment of accrued but unpaid dividends upon conversion,
redemption or liquidation of the WorldCom Series B Preferred Stock, as the case
may be, as described below.
WorldCom is not permitted to set apart for or pay upon the WorldCom Common
Stock any Extraordinary Cash Dividend (as defined below) unless, at the same
time, WorldCom shall have set apart for or paid upon all shares of
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WorldCom Series B Preferred Stock an amount of cash per share of WorldCom
Series B Preferred Stock equal to the Extraordinary Cash Dividend that would
have been paid in respect of such share if the holder of such share of WorldCom
Series B Preferred Stock had converted such share into shares of WorldCom
Common Stock immediately prior to the record date for such Extraordinary Cash
Dividend. The term "Extraordinary Cash Dividend" means, with respect to any
cash dividend or distribution paid on any date, the amount, if any, by which
all cash dividends and cash distributions on the WorldCom Common Stock paid
during the consecutive 12-month period ending on and including such date
exceeds, on a per share of WorldCom Common Stock basis, 10% of the average
daily closing price of the WorldCom Common Stock over such 12- month period.
Conversion at Option of Holder
The shares of WorldCom Series B Preferred Stock are convertible, in whole
or in part, at the option of the holder thereof, at any time, unless previously
redeemed, into shares of WorldCom Common Stock at a rate of 0.0973912 shares of
WorldCom Common Stock for each share of WorldCom Series B Preferred Stock
(equivalent to an initial conversion price of $10.268 per share of WorldCom
Common Stock), subject to adjustment for certain capital events (the "Series B
Conversion Rate"), and the holder will also be entitled to receive accrued and
unpaid dividends payable in cash or, at the option of WorldCom, in shares of
WorldCom Common Stock, based on the Fair Market Value thereof (as defined in
the WorldCom Articles).
Adjustment for Consolidation or Merger
In the case of certain mergers, consolidations or other capital
transactions, certain customary provisions are required to be made relating to
the terms of conversion and redemption applicable to the WorldCom Series B
Preferred Stock in order to protect the interests of the holders thereof.
Right to Redeem WorldCom Series B Preferred Stock
The WorldCom Series B Preferred Stock is not redeemable by WorldCom prior
to September 30, 2001. Thereafter, WorldCom has the right to redeem the shares
of WorldCom Series B Preferred Stock, in whole or in part, at a redemption
price of $1.00 per share plus an amount equal to all accrued and unpaid
dividends thereon (the "Redemption Price"); provided, that all or any portion
of the Redemption Price may be paid in shares of WorldCom Common Stock as
determined by the WorldCom Board of Directors based on the Fair Market Value
thereof (as defined in the WorldCom Articles).
Liquidation Rights
In the event of the liquidation, dissolution, or winding up of the business
of WorldCom, the holders of WorldCom Series B Preferred Stock are entitled to
receive a liquidation preference for each share of WorldCom Series B Preferred
Stock in an amount equal to the sum of $1.00 plus all accrued and unpaid
dividends thereon to the date of liquidation, dissolution or winding up.
Voting Rights
Each share of WorldCom Series B Preferred Stock is entitled to one vote per
share with respect to all matters voted on at a shareholders' meeting,
including the election of directors. The holders of the WorldCom Series B
Preferred Stock and the holders of WorldCom Common Stock (and WorldCom Series A
Preferred Stock) will vote together as a single class, unless otherwise
provided by law or the WorldCom Articles. The approval of at least a majority
of the votes entitled to be cast by the holders of issued and outstanding
shares of WorldCom Series B Preferred Stock is required to adversely change the
rights, preferences or privileges of the WorldCom Series B Preferred Stock. For
this purpose, the authorization or issuance of any series of preferred stock
with preference or priority over, or being on a parity with the WorldCom Series
B Preferred Stock as to the right to receive either dividends or amounts
distributable upon liquidation, dissolution or winding up of WorldCom shall not
be deemed to affect adversely the WorldCom Series B Preferred Stock. In case
WorldCom shall at any time prior to March 23, 1999 subdivide (whether by stock
dividend, stock split or otherwise) the outstanding shares of WorldCom Common
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Stock into a greater number of shares (each a "Subdivision"), the voting rights
of each share of WorldCom Series B Preferred Stock will be adjusted to provide
that the percentage of the aggregate voting power of the WorldCom Common Stock
represented by the WorldCom Series B Preferred Stock shall be the same as such
percentage immediately prior to such Subdivision, with the holder of each share
of WorldCom Series B Preferred Stock being entitled to the number of votes
proportionate to such adjustment. Such adjustments made pursuant to a
Subdivision will become effective immediately after the effective date of the
Subdivision.
WORLDCOM SERIES 3 PREFERRED STOCK
In connection with the issuance of the WorldCom Rights (as hereinafter
defined), the WorldCom Board of Directors has authorized 2,500,000 shares of
preferred stock to be issued as Series 3 Junior Participating Preferred Stock
(the "WorldCom Series 3 Preferred Stock"), a description of the terms of which
is set forth below under "-- Preferred Stock Purchase Rights."
PREFERRED STOCK PURCHASE RIGHTS
On August 25, 1996, WorldCom entered into the WorldCom Rights Agreement,
and the WorldCom Board of Directors authorized the issuance of one preferred
share purchase right (a "WorldCom Right") for each outstanding share of
WorldCom Common Stock outstanding as of September 6, 1996 and issued thereafter
until the Distribution Date, as defined in the WorldCom Rights Agreement (the
"WorldCom Distribution Date"). Each WorldCom Right entitles the registered
holder to purchase from WorldCom one one-thousandth of a share of Series 3
Preferred Stock at an initial price of $160.00 per one one-thousandth of such
share, subject to adjustment as described in the WorldCom Rights Agreement.
The WorldCom Rights will be evidenced by the WorldCom Common Stock until,
and a WorldCom Distribution Date will occur upon, the earlier of ten business
days following public disclosure or the date on which WorldCom first determines
that certain persons or groups (a "WorldCom Acquiring Person") have become the
beneficial owner of 15% or more of the outstanding shares of voting stock of
WorldCom (the "Stock Acquisition Date") or ten business days (or such later
date as may be determined by action of the WorldCom Board of Directors but not
later than the Stock Acquisition Date) following the commencement of a tender
offer or exchange offer that would result in certain persons or groups becoming
a WorldCom Acquiring Person. Pursuant to the WorldCom Rights Agreement, as
amended, the WorldCom Rights are not exercisable until the WorldCom
Distribution Date and will expire, if not previously exercised, on September 6,
2001, unless such final expiration date is extended (subject to shareholder
approval) or unless the WorldCom Rights are earlier redeemed or exchanged by
WorldCom.
Upon the occurrence of a WorldCom Distribution Date, each holder of a
WorldCom Right, except for a WorldCom Acquiring Person, has the right to
acquire, upon exercise of the WorldCom Right, WorldCom Common Stock having a
value equal to two times the exercise price of the WorldCom Right. If a person
becomes a WorldCom Acquiring Person and (i) WorldCom is acquired in a merger or
other business combination transaction in which either WorldCom is not the
surviving corporation or WorldCom Common Stock is exchanged or changed, or (ii)
50% or more of WorldCom's assets or earnings power is sold in one or several
transactions, each holder of a WorldCom Right, except for a WorldCom Acquiring
Person, would acquire, upon exercise of the WorldCom Right, such number of
shares of the acquiring company's common stock as shall be equal to the result
obtained by multiplying the then current exercise price for a WorldCom Right by
the number one one- thousandths of a share of WorldCom Series 3 Preferred Stock
for which a WorldCom Right is then exercisable and dividing that product by 50%
of the then current market price per share of the common stock of the acquiring
company on the date of such merger or other business combination transaction.
If a person or group acquires more than 15% but less than 50% of the
outstanding WorldCom Common Stock, WorldCom can exchange each WorldCom Right,
except those held by such person or group, for one share of WorldCom Common
Stock.
The WorldCom Series 3 Preferred Stock will be nonredeemable and junior to
any other series of WorldCom preferred stock (unless otherwise provided in the
terms of such WorldCom preferred stock). Each share of
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WorldCom Series 3 Preferred Stock will have a preferential dividend in an
amount equal to 1,000 times any dividend declared on each share of WorldCom
Common Stock. In the event of liquidation, the holders of the WorldCom Series 3
Preferred Stock will receive a preferred liquidation payment equal to the
greater of $1,000 or 1,000 times the payment made per share of WorldCom Common
Stock. Each share of WorldCom Series 3 Preferred Stock will have 1,000 votes,
voting together with the WorldCom Common Stock. In the event of any merger,
consolidation or other transaction in which shares of WorldCom Common Stock are
converted or exchanged, each share of WorldCom Series 3 Preferred Stock will be
entitled to receive 1,000 times the amount and type of consideration received
per share of WorldCom Common Stock. The rights of the WorldCom Series 3
Preferred Stock as to dividends, liquidation and voting, and in the event of
mergers and consolidations, are protected by customary antidilution provisions.
At any time prior to the time a WorldCom Acquiring Person becomes such,
WorldCom may redeem the WorldCom Rights in whole, but not in part, at a price
of $.01 per WorldCom Right. The redemption of the WorldCom Rights may be made
effective at such time, on such basis and with such conditions as the WorldCom
Board of Directors, in its sole discretion, may establish. Immediately upon any
redemption of the WorldCom Rights, the right to exercise the WorldCom Rights
will terminate, and the only right of the holders of the WorldCom Rights will
be to receive the redemption price.
The terms of the WorldCom Rights may be amended by the WorldCom Board of
Directors without the consent of the holders of the WorldCom Rights, including
an amendment to lower certain thresholds described above to not less than the
greater of (i) any percentage greater than the largest percentage of the voting
power of all securities of WorldCom then known to WorldCom to be beneficially
owned by any person or group and (ii) 10%, except that from and after such time
as any person or group of affiliated or associated persons becomes a WorldCom
Acquiring Person no such amendment may adversely affect the interests of the
holders of the WorldCom Rights.
The WorldCom Rights have certain anti-takeover effects. The WorldCom Rights
will cause substantial dilution to a person or group that attempts to acquire
or merge with WorldCom in certain circumstances. Accordingly, the existence of
the WorldCom Rights may deter certain potential acquirors from making certain
takeover proposals or tender offers. The WorldCom Rights should not interfere
with any merger or other business combination approved by the WorldCom Board of
Directors since WorldCom may redeem the WorldCom Rights as described above.
CERTAIN CHARTER AND BYLAW PROVISIONS
ELECTION OF DIRECTORS. Under Georgia law, directors, unless their terms
are staggered pursuant to the corporation's articles of incorporation or a
bylaw adopted by the shareholders, are elected at each annual shareholder
meeting, and vacancies on the board of directors may be filled by the
shareholders or directors, unless the articles of incorporation or a bylaw
approved by the shareholders provides otherwise. The articles of incorporation
may authorize the election of certain directors by one or more classes or
series of shares. The articles of incorporation or the bylaws also may allow
the shareholders or the board of directors to fix or change the number of
directors. Currently, the WorldCom Bylaws provide that the number of members of
the WorldCom Board of Directors shall be fixed by the WorldCom Board of
Directors but shall not be less than three. Neither the WorldCom Articles nor
the WorldCom Bylaws provide for a staggered board of directors. Subject to
certain restrictions, nominations to the WorldCom Board of Directors may be
made by either the Board or shareholders if, in the case of nominations by
shareholders, notice thereof is delivered to WorldCom not later than 90 days
prior to the anniversary date of the immediately preceding annual meeting of
WorldCom shareholders. Under Georgia law, shareholders do not have cumulative
voting rights for the election of directors unless the articles of
incorporation so provide. The WorldCom Articles do not provide for cumulative
voting.
SPECIAL MEETINGS OF SHAREHOLDERS. Georgia law permits the board of
directors or any person authorized in the corporation's articles of
incorporation or bylaws to call special meetings of shareholders. Except in the
case of a corporation having 100 or fewer shareholders of record, a special
meeting may also be called by at least 25% or such greater or lesser percentage
of all the votes entitled to be cast on any issue proposed to be considered at
the special meeting as may be provided in the corporation's articles of
incorporation or bylaws. The WorldCom Bylaws provide that a special meeting may
be called by the WorldCom Board of Directors, the President of WorldCom or
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the holders of not less than 40% of all the votes entitled to be cast on the
issue proposed to be considered at the proposed special meeting.
SPECIAL REDEMPTION PROVISIONS. Under the GBCC, a corporation may acquire
its own shares of capital stock, subject to the requirement that at all times
the corporation must have authorized: (i) at least one or more classes of
shares that together have unlimited voting rights; and (ii) at least one or
more classes of shares (which may be the same class or classes as those with
unlimited voting rights) that together are entitled to receive the net assets
of the corporation upon dissolution. In addition, a corporation's acquisition
of its own shares of capital stock is deemed a "distribution" under Georgia law
and, accordingly, is subject to the restrictions on distributions set forth in
the corporation's articles of incorporation and Section 14-2-640 of the GBCC.
The WorldCom Articles contain provisions permitting WorldCom to redeem
shares of its capital stock from certain foreign shareholders in order to
enable it to continue to hold certain common carrier radio licenses. These
provisions are intended to cause WorldCom to remain in compliance with the
Communications Act of 1934, as amended, and the regulations of the FCC
promulgated thereunder. Under these provisions, at such time as the percentage
of capital stock owned by foreign shareholders or certain affiliates thereof
exceeds 20%, WorldCom has the right to redeem the excess shares held by such
persons at the fair market value thereof. Following any determination that such
excess shares exist, such excess shares shall not be deemed outstanding for
purposes of determining the vote required on any matter brought to the
attention of the shareholders of WorldCom and such excess shares shall have no
right to receive any dividends or other distributions, including distributions
in liquidation. If such shares are traded on a national securities exchange or
in the over-the-counter market, such fair market value is the average closing
price for the 45 trading days immediately preceding the date of redemption. If
such shares are not so traded, such fair market value shall be established by
the WorldCom Board of Directors. In the event there is a foreign shareholder
who acquired shares within 120 days of the date of redemption, however, the
redemption price shall not exceed the price per share paid by such shareholder.
At least 30 days' notice of redemption must be given, and the redemption price
may be paid in cash, securities or any combination thereof. WorldCom may
require confirmation of citizenship from any record or beneficial owner of
shares of its capital stock, and from any transferee thereof, as a condition to
the registration or transfer of those shares.
BUSINESS COMBINATION RESTRICTIONS. Under Georgia law, Georgia corporations
may adopt a provision in their bylaws requiring that Business Combinations be
approved by a special vote of the board of directors and/or the shareholders
unless certain fair pricing criteria are met. Georgia corporations may also
adopt a provision in their articles of incorporation or bylaws which requires
that Business Combinations with Interested Shareholders be approved by a super-
majority vote. These provisions, neither of which has been adopted by WorldCom,
are described below. Also described below is the business combination
restriction contained in the WorldCom Articles.
Georgia's fair price statute authorizes a corporation to adopt a bylaw
provision which requires special approval by the board of directors and/or
shareholders for Business Combinations unless certain fair price criteria are
met. Generally, for purposes of this statute, "Business Combinations" are
defined to include mergers, sales of 10% or more of the corporation's assets
out of the ordinary course of business, liquidations, and certain issuances of
securities, involving the corporation and any Interested Shareholder. For
purposes of this statute, an "Interested Shareholder" is defined as a person or
entity that is the beneficial owner of 10% or more of the voting power of the
corporation's voting stock, or a person or entity that is an affiliate of the
corporation and, at any time within the two-year period immediately prior to
the date in question, was the beneficial owner of 10% or more of the then
outstanding voting power of the corporation's voting stock. To satisfy
Georgia's fair price statute, a Business Combination with an Interested
Shareholder must meet one of three criteria: (i) the transaction must be
approved unanimously by the "Continuing Directors" (directors who served as
directors immediately prior to the date the Interested Shareholder first became
an Interested Shareholder and who are not affiliates or associates of the
Interested Shareholder or his affiliates), provided that the Continuing
Directors constitute at least three members of the board of directors at the
time of such approval; (ii) the transaction must be recommended by at least
two-thirds of the Continuing Directors and approved by a majority of the votes
entitled to be cast by holders of voting shares, excluding shares beneficially
owned by the Interested Shareholder who is, or whose affiliate is, a party to
the Business Combination; or (iii) the terms of the transaction must meet
statutory fair pricing criteria and certain other tests intended to assure that
all shareholders receive a fair price and equivalent consideration for their
shares
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regardless of when they sell to the acquiring party.
Georgia's business combination statute authorizes a "resident domestic
corporation" to adopt a bylaw provision which prohibits Business Combinations
with Interested Shareholders occurring within five years of the date a person
first becomes an Interested Shareholder, unless special approval of the
transaction is obtained. For purposes of this statute, Business Combination is
defined to include mergers, sales of 10% or more of the corporation's net
assets, and certain issuances of securities, all involving the corporation and
any Interested Shareholder. Interested Shareholder has the same definition as
under the Georgia fair price statute. With limited exceptions, any Business
Combination with an Interested Shareholder within five years of the date such
person first became an Interested Shareholder requires approval in one of three
ways: (i) prior to such person becoming an Interested Shareholder, the
corporation's board of directors must have approved the Business Combination or
the transaction which resulted in the shareholder becoming an Interested
Shareholder; (ii) the Interested Shareholder must acquire at least 90% of the
outstanding voting stock of the corporation (other than shares owned by
officers, directors and their affiliates and associates) in the same
transaction in which such person becomes an Interested Shareholder; or (iii)
subsequent to becoming an Interested Shareholder, such person acquires
additional shares resulting in ownership of at least 90% of the outstanding
shares (other than shares owned by officers, directors and their affiliates and
associates), and obtains the approval of the Business Combination by the
holders of a majority of the shares entitled to vote thereon, exclusive of
shares held beneficially by the Interested Shareholder and its affiliates (and
shares owned by officers, directors and their affiliates and associates).
The WorldCom Articles contain a provision that requires the approval by the
holders of at least 70% of the voting power of the outstanding shares of any
class of stock of WorldCom entitled to vote generally in the election of
directors as a condition for Business Transactions (defined below) involving
WorldCom and a Related Person (defined below) or in which a Related Person has
an interest, unless (a) the Business Transaction is approved by at least a
majority of WorldCom's Continuing Directors (defined below) then serving on the
Board of Directors, but if the votes of such Continuing Directors would have
been insufficient to constitute an act of the Board of Directors, then such
transaction must have been approved by the unanimous vote of such Continuing
Directors so long as there were at least three such Continuing Directors
serving on the Board of Directors at the time of such unanimous vote, provided
that no such Continuing Director is a Related Person who has an interest in the
Business Transaction (other than a proportionate interest as a shareholder of
WorldCom), or (b) certain minimum price and procedural requirements are met. A
"Business Transaction" is defined to mean: (i) any merger, share exchange or
consolidation involving WorldCom or any of its subsidiaries; (ii) any sale,
lease, exchange, transfer or other disposition by WorldCom or any of its
subsidiaries of more than 20% of its assets; (iii) any sale, lease, exchange,
transfer or disposition of more than 20% of the assets of an entity to WorldCom
or a subsidiary of WorldCom; (iv) the issuance, sale, exchange, transfer or
other disposition by WorldCom or a subsidiary of WorldCom of any securities of
WorldCom or any subsidiary in exchange for cash, securities or other properties
having an aggregate fair market value of $15.0 million or more; (v) any merger,
share exchange or consolidation between WorldCom and any subsidiary of WorldCom
in which WorldCom is not the survivor and the charter of the surviving
corporation does not contain provisions similar to this provision; (vi) any
recapitalization or reorganization of WorldCom or reclassification of its
securities which would have the effect of increasing the voting power of a
Related Person; (vii) any liquidation, spin off, split off, split up or
dissolution of WorldCom; and (viii) any agreement, contract or other
arrangement providing for any of the Business Transactions defined or having a
similar purpose or effect. A "Related Person" is defined to mean a beneficial
owner which, together with its Affiliates and Associates (defined below),
beneficially owns 10% or more of WorldCom's outstanding voting stock or who had
such level of beneficial ownership: (a) at the time of entering into the
definitive agreement providing for the Business Transaction; (b) at the time of
adoption by the Board of Directors of a resolution approving such transaction;
or (c) as of the record date for the determination of shareholders entitled to
vote on or consent to the Business Transaction. A "Continuing Director" is a
director of WorldCom who either was a member of the Board of Directors on
September 15, 1993, or who became a director of WorldCom subsequent to such
date and whose election, or nomination for election by the shareholders, was
approved by at least a majority of the Continuing Directors then on the Board
of Directors. If the votes of such Continuing Directors would have been
insufficient to constitute an act of the Board of Directors, then such election
or nomination must have been approved by the unanimous vote of the Continuing
Directors so long as there were at least three such Continuing Directors on the
Board of Directors at the time of such unanimous vote. An "Affiliate" is
defined to mean a person that directly, or
21
<PAGE> 24
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, such specified person. An "Associate" is
defined to mean: (a) any corporation, partnership or other organization of
which such specified person is an officer or partner; (b) any trust or other
estate in which such specified person has a substantial beneficial interest or
as to which such specified person serves as trustee or in a similar fiduciary
capacity; (c) any relative or spouse of such specified person, or any relative
of such spouse, who has the same home as such specified person or who is a
director or officer of WorldCom or any of its subsidiaries; and (d) any person
who is a director, officer or partner of such specified person or of any
corporation (other than WorldCom or any wholly owned subsidiary of WorldCom),
partnership or other entity which is an Affiliate of such specified person.
Reference is made to the full text of the WorldCom Articles and the
WorldCom Bylaws, which are incorporated by reference as exhibits to the
Registration Statement of which this Prospectus is a part. In addition, one of
the effects of the existence of unissued and unreserved WorldCom Common Stock
and preferred stock may be to enable the Board of Directors to issue shares to
persons friendly to current management, which could render more difficult or
discourage an attempt to obtain control of WorldCom by means of a merger,
tender offer, proxy contest or otherwise, and thereby protect the continuity of
WorldCom's management and possibly deprive the shareholders of opportunities to
sell their shares of WorldCom Common Stock at prices higher than the prevailing
market prices. Such additional shares also could be used to dilute the stock
ownership of persons seeking to obtain control of WorldCom.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences
associated with the exercise of the Warrants by Holders who acquire WorldCom
Common Stock as of the date hereof. Except where noted, this summary deals
only with WorldCom Common Stock held as capital assets held by United States
Holders (as defined below) and does not deal with special situations, such as
those of dealers in securities or currencies, financial institutions, life
insurance companies, persons holding WorldCom Common Stock or the Warrants as
part of a hedging or conversion transaction or a straddle or United States
Holders whose "functional currency" is not the U.S. dollar. Furthermore, the
discussion below is based upon the provisions of the Internal Revenue Code of
1986, as amended (the "Code"), and regulations, rulings and judicial decisions
thereunder as of the date hereof, and such authorities may be repealed, revoked
or modified so as to result in federal income tax consequences different from
those discussed below.
PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF WORLDCOM
COMMON STOCK PURSUANT TO THE EXERCISE OF A WARRANT SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES ARISING UNDER THE LAWS
OF ANY OTHER TAXING JURISDICTION.
This discussion only addresses the treatment of United States Holders,
including (i) a citizen or resident of the United States, (ii) a corporation or
partnership organized in or under the laws of the United States or any state or
political subdivision thereof, (iii) an estate, other than an estate the income
of which, from sources without the United States, is not effectively connected
with the conduct of a trade or business within the United States, or (iv) trust
if (A) a court within the United States is able to exercise primary supervision
over the trust's administration and (B) one or more United States persons have
the authority to control all the trust's substantial decisions.
SALE OR OTHER TAXABLE DISPOSITION OF WARRANTS
The sale or other taxable disposition of a Warrant will result in the
recognition of gain or loss to the United States Holder in an amount equal to
the difference between (a) the amount of cash and fair market value of property
received in exchange therefor and (b) the United States Holder's adjusted tax
basis in the Warrant. Assuming that, in connection with the BFP Merger, the
conversion of BFP warrants into the Warrants was a non-taxable transaction,
then the United States Holder's adjusted tax basis in a Warrant is the same as
the United States Holder's adjusted tax basis of the BFP warrant. If the
conversion, however, were determined to be a taxable exchange, then the United
States Holder's adjusted tax basis in the Warrant would be the fair market
value of a Warrant on the date of the conversion. Any gain or loss from the
sale or other disposition of a Warrant will be a capital gain or loss if the
22
<PAGE> 25
Warrant is held as a capital asset with the meaning of Section 1221 of the
Code. Any such capital gain or loss will be a short-term, mid-term or long-term
capital gain depending on the length of time the United States Holder has owned
such Warrant. The tax consequences of such a sale or other taxable disposition
will be determined by the nature of the capital gain or loss.
Upon expiration of a Warrant, a United States Holder will recognize a loss
equal to such United States Holder's adjusted tax basis in the Warrant. If the
WorldCom Common Stock issuable upon exercise of the Warrant would have been a
capital asset of the United States Holder if acquired by the United States
Holder, such loss will be a capital loss.
EXERCISE OF WARRANT, COMMON STOCK DISPOSITION AND DIVIDENDS
As a general rule, no gain or loss will be recognized to a United States
Holder upon the exercise of a Warrant (except to the extent of cash, if any,
received in lieu of the issuance of fractional shares of WorldCom Common
Stock). The tax basis of a share of WorldCom Common Stock so acquired will be
equal to the sum of the United States Holder's adjusted tax basis in the
exercised Warrant and the exercise price, but the holding period of such share
will not include the holding period of the Warrant exercised. Instead, the
holding period of each share of WorldCom Common Stock acquired upon exercise of
a Warrant will commence upon the date of exercise. If any cash is received in
lieu of the issuance of fractional shares of WorldCom Common Stock, the United
States Holder will recognize gain or loss the amount and character of which
will be determined as if the United States Holder had received such fractional
shares and then immediately sold them for cash.
Cash dividends paid with respect to shares of WorldCom Common Stock will be
included in the gross income of the United States Holder as ordinary income to
the extent paid out of the Company's current or accumulated earnings and
profits, as determined under the Code. Distributions that exceed the earnings
and profits of the Company are treated as a non-taxable return of capital to
the extent of the United States Holder's tax basis in such Common Stock
(reducing the United States Holder's remaining basis in such shares) and, with
respect to any distributions in excess of such basis, as taxable capital gain.
Cash dividends generally are eligible for the dividends received deduction
allowed to corporations under the Code, subject to the restrictions of Sections
246 and 1059 of the Code relating to limitations on the dividends received
deduction and extraordinary dividends, respectively. Corporate Holders of
WorldCom Common Stock should consult with their own tax advisors as to the
applicability of the dividends received deduction.
EXPERTS
The consolidated financial statements of WorldCom as of December 31, 1997
and 1996, and for each of the years in the three-year period ended December 31,
1997, have been audited by Arthur Andersen LLP, independent public accountants,
as indicated in their report with respect thereto, and are included in
WorldCom's Current Report on Form 8-K dated May 28, 1998 (filed May 28, 1998),
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 and schedule of MFS as of December
31, 1996 and for the period then ended (see Note 1 to the MFS Consolidated
Financial Statements), and for the year ended December 31, 1996, included in
WorldCom's Current Report on Form 8-K/A dated August 25, 1996 (filed December
19, 1997) and incorporated by reference into this registration statement, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are incorporated herein by
reference, in reliance upon the authority of such firm as experts in accounting
and auditing in giving said reports.
The consolidated financial statements of MFS as of December 31, 1995 and
1994 and for each of the three and two 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 December 19, 1997) and incorporated by reference
into this registration statement, have been incorporated in reliance on the
reports of Coopers & Lybrand L.L.P., independent accountants, given upon the
authority of that firm as experts in accounting and auditing.
23
<PAGE> 26
The consolidated financial statements of UUNET as of December 31, 1995 and
1994 and for each of the three years in the period ended December 31, 1995,
included in WorldCom's Current Report on Form 8-K/A dated August 25, 1996
(filed November 4, 1996) and incorporated by reference into this registration
statement, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto and are
incorporated herein by reference in reliance upon the authority of said firm as
experts in giving said reports.
The consolidated financial statements of MCI, as of December 31, 1997 and
1996 and for each of the three years in the period ended December 31, 1997,
incorporated in this Prospectus by reference to WorldCom's Current Report on
Form 8- K/A-3 dated November 9, 1997 (filed May 28, 1998), have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
24
<PAGE> 27
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses (other than underwriting
discounts and commissions), which other than the SEC registration fee are
estimates, payable by WorldCom in connection with the sale and distribution of
the shares registered hereby:
<TABLE>
<S> <C>
SEC registration fee . . . . . . . . . . . . . . . . . . . $ 5,734
Accounting fees and expenses . . . . . . . . . . . . . . . $ 5,000
Legal fees and expenses . . . . . . . . . . . . . . . . . . $ 5,000
Miscellaneous expenses . . . . . . . . . . . . . . . . . . $ 4,266
-------
Total . . . . . . . . . . . . . . . $20,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 14-2-202(b)(4) of the Georgia Business Corporation Code (the
"GBCC") 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 any action taken,
or any failure to take any action, as a director, 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 or her duties, any business
opportunity of the corporation, for acts or omissions including intentional
misconduct or a knowing violation of law, receiving from any transaction 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 GBCC. 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 or
her role as a director, and does not relieve a director from liability arising
from his or her 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 GBCC 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 GBCC govern the
indemnification of directors, officers, employees, and agents. Section
14-2-851 of the GBCC permits indemnification of a director of WorldCom for
liability incurred by him or her 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 or
she is made a party by reason of being a director of WorldCom and of 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 good faith and
reasonably believed (a) in the case of conduct in his or her official capacity,
that such conduct was in the best interests of the corporation, (b) in all
other cases other than a criminal proceeding, that such conduct was at least
not opposed to the best interests of the corporation, and (c) in the case of a
criminal proceeding, that he or she had no reasonable cause to believe his or
her 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.
A Georgia corporation may not indemnify a director under Section 14-2-851
(i) in connection with a proceeding by or in the right of the corporation,
except for reasonable expenses incurred by such director in
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<PAGE> 28
connection with the proceeding provided it is determined that such director met
the relevant standard of conduct set forth above, or (ii) in connection with
any proceeding with respect to conduct for which such director was adjudged
liable on the basis that he or she received an improper personal benefit.
Prior to indemnifying a director under Section 14-2-851 of the GBCC, a
determination must be made that the director has met the relevant standard of
conduct. Such determination must be made by: (i) a majority vote of a quorum
consisting of directors not at that time parties to the suit; (ii) a duly
designated committee of directors; (iii) duly selected special legal counsel;
or (iv) a vote of the shareholders, excluding shares owned by or voted under
the control of directors who are at the time parties to the suit.
A Georgia corporation may, before final disposition of a proceeding,
advance funds to pay for or reimburse the reasonable expenses incurred by a
director who is a party to a proceeding because he or she is a director,
provided that such director delivers to the corporation a written affirmation
of his or her good faith belief that he or she met the relevant standard of
conduct described in Section 14-2-851 of the GBCC, or that the proceeding
involves conduct for which such director's liability has been properly
eliminated by action of the corporation, and a written undertaking by the
director to repay any funds advanced if it is ultimately determined that such
director was not entitled to such indemnification. Section 14-2-852 of the
GBCC provides that 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.
The GBCC also allows a Georgia corporation to indemnify directors made a
party to a proceeding without regard to the above-referenced limitations, if
authorized by the articles of incorporation or a bylaw, contract, or resolution
duly adopted by a vote of the shareholders of the corporation by a majority of
votes entitled to be cast, excluding shares owned or voted under the control of
the director or directors who are not disinterested, and to advance funds to
pay for or reimburse reasonable expenses incurred in the defense thereof,
subject to restrictions similar to the restrictions described in the preceding
paragraph; provided, however, that the corporation may not indemnify a director
adjudged liable (1) for any appropriation, in violation of his or her duties,
of any business opportunity of WorldCom, (2) for acts or omissions which
involve intentional misconduct or a knowing violation of law, (3) for unlawful
distributions under Section 14-2-832 of the GBCC, or (4) for any transaction in
which the director obtained an improper personal benefit.
Section 14-2-857 of the GBCC 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, WorldCom's Bylaws, general or specific
actions by its board of directors or contract, indemnify and advance expenses
to an officer, employee or agent who is not a director to the extent that such
indemnification is consistent with public policy.
The indemnification provisions of Article X of WorldCom's Bylaws and
Article Eleven of WorldCom's Second Amended and Restated Articles of
Incorporation are consistent with the foregoing provisions of the GBCC.
However, WorldCom's Second Amended and Restated Articles of Incorporation
prohibit indemnification of a director who did not believe in good faith that
his or her actions were in, or not contrary to, WorldCom's best interests.
WorldCom's Bylaws extend the indemnification available to officers under the
GBCC to employees and agents.
ITEM 16. EXHIBITS
See Exhibit Index.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
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<PAGE> 29
(1) To file, during any period in which offers or 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 of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this registration statement (or the most
recent post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this 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 end 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
a 20 percent change in the maximum aggregate offering price set forth
in the "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 this registration
statement or any material change to such information in this
registration statement; provided, however, that paragraphs (a)(1)(i)
and (a)(1)(ii) do not apply if 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 Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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.
(3) 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.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
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.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 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 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant 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 registrant 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 whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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<PAGE> 30
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment 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 the 15th day
of June, 1998.
WORLDCOM, INC.
By: /s/ SCOTT D. SULLIVAN
-------------------------------
Scott D. Sullivan
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
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 __, 1998
---------------------------------------------
James C. Allen
/s/ Carl J. Aycock* Director June 15, 1998
---------------------------------------------
Carl J. Aycock
/s/ Max E. Bobbit* Director June 15, 1998
---------------------------------------------
Max E. Bobbitt
Director June __, 1998
---------------------------------------------
Steven M. Case
/s/ Bernard J. Ebbers* Chairman, President and Chief June 15, 1998
--------------------------------------------- Executive Officer and Director
Bernard J. Ebbers (Principal Executive Officer)
/s/ Francesco Galesi* Director June 15, 1998
---------------------------------------------
Francesco Galesi
/s/ Stiles A. Kellett, Jr.* Director June 15, 1998
---------------------------------------------
Stiles A. Kellett, Jr.
/s/ John A. Porter* Director June 15, 1998
---------------------------------------------
John A. Porter
</TABLE>
II-4
<PAGE> 31
<TABLE>
<S> <C> <C>
/s/ John W. Sidgmore* Vice Chairman of the Board, Chief June 15, 1998
--------------------------------------------- Operations Officer and Director
John W. Sidgmore
/s/ Scott D. Sullivan Chief Financial Officer and June 15, 1998
--------------------------------------------- Director (Principal Financial
Scott D. Sullivan Officer and Principal Accounting
Officer)
/s/ Lawrence C. Tucker* Director June 15, 1998
---------------------------------------------
Lawrence C. Tucker
*By: /s/ Scott D. Sullivan
----------------------------------------
Scott D. Sullivan
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 32
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
------------ -----------
<S> <C>
2.1 Amended and Restated Agreement and Plan of Merger by and among WorldCom, Inc. ("WorldCom"), BV
Acquisition, Inc. and Brooks Fiber Properties, Inc. ("BFP"), dated as of October 1, 1997 (incorporated
herein by reference to Exhibit 2.1 to BFP's Current Report on Form 8-K dated October 1, 1997 (filed
October 6, 1997) (File 0-28036))*
2.2 Purchase and Sale Agreement by and among America Online, Inc., ANS Communications, Inc. and WorldCom
dated as of September 7, 1997 (incorporated herein by reference to Exhibit 2.4 to WorldCom's Current
Report on Form 8-K dated September 7, 1997 (filed September 17, 1997) (File 0-11258))*
2.3 Agreement and Plan of Merger by and among WorldCom, TC Investments Corp. and MCI Communications
Corporation dated as of November 9, 1997 (incorporated herein by reference to Exhibit 2.1 to
WorldCom's Current Report on Form 8-K dated November 9, 1997 (filed November 12, 1997) (File 0-
11258))*
2.4 Agreement by and among British Telecommunications plc, MCI Communications Corporation and WorldCom
dated as of November 9, 1997 (incorporated herein by reference to Exhibit 99.1 to WorldCom's Current
Report on Form 8-K dated November 9, 1997 (filed November 12, 1997) (File 0-11258))*
2.5 Agreement and Plan of Merger by and among WorldCom, H&R Block, Inc., H&R Block Group, Inc., CompuServe
Corporation and Walnut Acquisition Company L.L.C., dated as of September 7, 1997 (incorporated herein
by reference to Exhibit 2.1 to WorldCom's Current Report on Form 8-K dated September 7, 1997 (filed
September 17, 1997) (File 0-11258))*
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 WorldCom's
Current report on Form 8-K, dated December 31, 1996 (File No. 0-11258))
4.2 Restated Bylaws of WorldCom (incorporated herein by reference to Exhibit 4.2 to WorldCom's Annual
Report on Form 10-K filed by WorldCom (File No. 0-11258) for the year ended December 31, 1996
4.3 Deposit Agreement between WorldCom, The Bank of New York and the holders from to time of the
Depositary Shares representing 1/100 of a share of WorldCom Series A Preferred Stock (the "WorldCom
Depositary Shares") (incorporated herein by reference to Exhibit 4.5 to WorldCom's Registration
Statement on Form S-4 (File No. 333-16015))
4.4 Form of certificate representing WorldCom Depositary Shares (attached as Exhibit A to the Deposit
Agreement filed as Exhibit 4.3 hereto)
4.5 Rights Agreement dated as of August 25, 1996 between WorldCom and The Bank of New York, which includes
the form of Certificate of Designations, setting forth the terms of the Series 3 Junior Participating
Preferred Stock, par value $.01 per share, as Exhibit A, the form of Rights Certificate as Exhibit B and
the Summary of Preferred Stock Purchase Rights as Exhibit C (incorporated herein by reference to Exhibit
4 to the Current Report on Form 8-K dated August 26, 1996 (as amended) filed by WorldCom with the
Securities and Exchange Commission on August 26, 1996 (File No. 0-11258)
4.6 Amendment No. 1 To Rights Agreement dated as of May 22, 1997 by and between WorldCom and The Bank of New
York, as Rights Agent (incorporated herein by reference to Exhibit 4.2 to WorldCom's Current Report on
Form 8-K dated May 22, 1997 (filed June 6, 1997) (File No. 0-11258))
4.7 Form of 7.55% Senior Note due 2004 (incorporated herein by reference to Exhibit 4.1 to WorldCom's
</TABLE>
II-6
<PAGE> 33
<TABLE>
<S> <C>
Current Report on Form 8-K dated March 26, 1997 (File No. 0-11258))
4.8 Form of 7.75% Senior Note due 2007 (incorporated herein by reference to Exhibit 4.2 to WorldCom's
Current Report on Form 8-K dated march 26, 1997 (File No. 0-11258))
4.9 Form of 7.75% Senior Note due 2027 (incorporated herein by reference to Exhibit 4.3 to WorldCom's
Current Report on Form 8-K dated March 26, 1997 (File No. 0-11258))
4.10 Senior Indenture dated March 1, 1997 by and between WorldCom, Inc. and Mellon Bank, N.A., as trustee
(incorporated herein by reference to Exhibit 4.6 to WorldCom's Form 10-Q for the period ended March 31,
1997) (File No. 0-11258))
4.11 Form of First Supplemental Indenture of WorldCom to Mellon Bank, N.A. relating to 9-3/8% Notes Due 2004
and 8-7/8% Senior Notes Due 2006 (including form of 9-3/8% Senior Note due 2004 attached as Exhibit A
thereto and form of 8-7/8% Senior Note Due 2006 attached as Exhibit B thereto) (incorporated herein by
reference to Exhibit 4.9 to WorldCom's Registration Statement on Form S-4 (Registration No. 333-27345))
4.12 Facility A Revolving Credit Agreement among WorldCom, Inc., NationsBank of Texas, N.A. (Managing Agent
and Administrative Agent), Bank of America NT & SA, Bank of Montreal, The Bank of New York, The Bank of
Nova Scotia, Bank of Tokyo-Mitsubishi Trust Company, Barclays Bank PLC, Canadian Imperial Bank of
Commerce, The Chase Manhattan Bank, Citibank, N.A., Credit Lyonnais New York Branch, First Union
National Bank, Fleet National Bank, The Industrial Bank of Japan, Limited, Atlanta Agency, Morgan
Guaranty Trust Company of New York, Royal Bank of Canada, and Toronto Dominion (Texas), Inc. (Agents)
and the Lenders named therein (Facility A Lenders), dated as of July 3, 1997. (Incorporated herein by
reference to Exhibit 10.1 to WorldCom's Current Report on Form 8-K dated June 30, 1997 (File No. 0-
11258))
4.13 Facility B Revolving Credit and Term Loan Agreement among WorldCom, Inc., NationsBank of Texas, N.A.
(Managing Agent and Administrative Agent), Bank of America NT & SA, Bank of Montreal, The Bank of New
York, The Bank of Nova Scotia, Bank of Tokyo-Mitsubishi Trust Company, Barclays Bank PLC, Canadian
Imperial Bank of Commerce, The Chase Manhattan Bank, Citibank, N.A., Credit Lyonnais New York Branch,
First Union National Bank, Fleet National Bank, The Industrial Bank of Japan, Limited, Atlanta Agency,
Morgan Guaranty Trust Company of New York, Royal Bank of Canada, and Toronto Dominion (Texas), Inc.
(Agents) and the Lenders named therein (Facility B Lenders), dated as of July 3, 1997. (Incorporated
herein by reference to Exhibit 10.2 to WorldCom's Current Report on Form 8-K dated June 30, 1997 (File
No. 0-11258))
4.14 364-Day Revolving Credit and Term Loan Agreement among WorldCom, Inc., Borrower, NationsBank of Texas
N.A., Administrative Agent, and the lenders named therein, dated as of February 19, 1998 (incorporated
by reference to Exhibit 10.3 to WorldCom's Annual Report on Form 10-K for the fiscal year ended December
31, 1997)
4.15 Form of Series A Warrants**
4.16 Form of Series B Warrants**
5.1 Validity Opinion of WorldCom Counsel**
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Coopers & Lybrand LLP
23.4 Consent of Arthur Andersen LLP
</TABLE>
II-7
<PAGE> 34
<TABLE>
<S> <C>
23.5 Consent of Price Waterhouse LLP
23.6 Consent of KPMG Peat Marwick LLP
23.7 Consent of WorldCom Counsel (included in Exhibit 5.1)
24.1 Power of Attorney**
</TABLE>
- ---------------
* The Registrant hereby agrees to furnish supplementally to the Commission a
copy of any omitted schedules to such Agreement upon the Commission's request.
** Previously Filed.
II-8
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-3, to be filed on or around
June 15, 1998, of our report dated May 27, 1998 on the Consolidated Financial
Statements of WorldCom, Inc. included in WorldCom Inc.'s Current Report on Form
8-K dated May 28, 1998 (filed May 28, 1998) and to all references to our Firm
included in this registration statement.
ARTHUR ANDERSEN LLP
Jackson, Mississippi,
June 12, 1998.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-3, to be filed on or around
June 15, 1998, of our reports dated February 20, 1997, on the Consolidated
Financial Statements of MFS Communications Company, Inc. included in WorldCom,
Inc.'s Current Report on Form 8-K dated August 25, 1996, as amended by Form
8-K/A filed on December 19, 1997, and to all references to our Firm included in
this registration statement.
ARTHUR ANDERSEN LLP
Omaha, Nebraska,
June 12, 1998.
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-3 (File No. 333-45127) of WorldCom, Inc. of our reports 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 each of
the three and two years in the period ended December 31, 1995 which reports are
included in WorldCom Inc.'s Current Report on Form 8-K/A dated August 25, 1996
(as amended on November 4, 1996 and December 19, 1997). We also consent to the
reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Omaha, Nebraska
June 12, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-3, to be filed on or around
June 15, 1998, 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 on November 4, 1996, and to all references to our Firm included in this
registration statement.
ARTHUR ANDERSEN LLP
Washington, D.C.,
June 12, 1998.
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Amendment No. 1 to the Registration Statement on Form
S-3 of WorldCom, Inc. (File No. 333-45127) of our report dated April 9, 1998
relating to the consolidated financial statements of MCI Communications
Corporation which report appears in WorldCom, Inc.'s Current Report on Form
8-K/A-3 dated November 9, 1997 (filed on May 28, 1998). We also consent to the
reference to us under the heading "Experts" in such Prospectus.
Price Waterhouse LLP
June 15, 1998
Washington, D.C.
<PAGE> 1
EXHIBIT 23.6
The Board of Directors
of WorldCom, Inc.:
We consent to the incorporation by reference in the registration statement on
Form S-3 of WorldCom, Inc. of our report dated February 12, 1998, with respect
to the consolidated balance sheets of Brooks Fiber Properties, Inc. and
subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1997, which report appears in
the Form 8-K of WorldCom, Inc. dated May 28, 1998.
KPMG Peat Marwick LLP
St. Louis, Missouri
June 12, 1998
