<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 15, 1998
Pre-Effective Amendment No. 1 to Registration Statement No. 333-45067
Post-Effective Amendment No. 1 to Registration Statement No. 333-20911
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
----------------------------
WORLDCOM, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
GEORGIA 58-1521612
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
</TABLE>
515 EAST AMITE STREET
JACKSON, MISSISSIPPI 39201-2702
(Address of principal executive offices)
Registrant's telephone number including area code: (601) 360-8600
----------------------------
<TABLE>
<S> <C>
Copies of all correspondence to:
P. BRUCE BORGHARDT, ESQ. R. RANDALL WANG, ESQ.
GENERAL COUNSEL - CORPORATE DEVELOPMENT DENIS P. MCCUSKER, ESQ.
WORLDCOM, INC. BRYAN CAVE LLP
10777 SUNSET OFFICE DRIVE, SUITE 330 ONE METROPOLITAN SQUARE
ST. LOUIS, MISSOURI 63127 211 NORTH BROADWAY, SUITE 3600
(314) 909-4100 ST. LOUIS, MISSOURI 63102-2750
(Name, address, including zip code, and telephone (314) 259-2000
number, including area code, of agent for service)
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the 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, please 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. [X]
AMENDING THE PROSPECTUS AND PROVIDING CERTAIN EXHIBITS
PURSUANT TO RULE 429, THE PROSPECTUS CONTAINED HEREIN WILL ALSO BE USED
IN CONNECTION WITH REGISTRATION STATEMENT NO. 333-20911 FILED BY THE REGISTRANT
ON FORM S-3 ON JANUARY 31, 1997. THIS PRE-EFFECTIVE AMENDMENT NO. 1 TO
REGISTRATION STATEMENT NO. 333-45067 ALSO CONSTITUTES POST-EFFECTIVE AMENDMENT
NO. 1 TO REGISTRATION STATEMENT NO. 333- 20911, WHICH SHALL BECOME EFFECTIVE
CONCURRENTLY WITH THE EFFECTIVENESS OF REGISTRATION STATEMENT NO. 333-45067 AND
IN ACCORDANCE WITH SECTION 8(C) OF THE SECURITIES ACT OF 1933.
================================================================================
<PAGE> 2
[LOGO]
PROSPECTUS
WORLDCOM, INC.
DEBT SECURITIES
WorldCom, Inc. (the "Company" or "WorldCom") may offer from time to time,
in one or more series, debentures, notes, bonds, or other obligations ("Debt
Securities"), all having an aggregate initial public offering price not to
exceed U.S. $6,000,000,000 or the equivalent thereof in one or more foreign
currencies, foreign currency units, or composite currencies, including European
Currency Units. The Debt Securities may be offered separately or as units with
other securities, in separate series in amounts, at prices, and on terms to be
determined at or prior to the time of sale. The Debt Securities will be direct
unsecured obligations of the Company.
The specific terms of the Debt Securities with respect to which this
Prospectus is being delivered will be set forth in a supplement to this
Prospectus (a "Prospectus Supplement"), together with the terms of the offering
and sale of the Debt Securities and the initial offering price and the net
proceeds to the Company from the sale thereof. The Prospectus Supplement will
include, among other things: the specific designation; aggregate principal
amount; ranking; authorized denomination; maturity; rate or method of
calculation of interest and dates for payment thereof; any index or formula for
determining the amount of any principal, premium, or interest payment; any
exchange, redemption, prepayment, or sinking fund provisions; the currency or
currency unit in which principal, premium, or interest is payable; whether the
securities are issuable in registered form or in the form of global securities;
and the designation of the trustee acting under the applicable indenture. The
Prospectus Supplement will also contain information, where applicable, about
material United States federal income tax considerations relating to, and any
listings on a securities exchange of, the Debt Securities covered by such
Prospectus Supplement.
The Company may sell the Debt Securities directly to purchasers, through
agents designated from time to time, or through underwriters or dealers, on
terms determined by market conditions at the time of sale. If any agents,
underwriters, or dealers are involved in the sale of the Debt Securities, the
names of such agents, underwriters, or dealers and any applicable commissions
or discounts and the net proceeds to the Company from such sale will be set
forth in the applicable Prospectus Supplement.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF DEBT SECURITIES
UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------
The date of this Prospectus is June 15, 1998.
<PAGE> 3
NO DEALER, SALESPERSON, OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER,
AGENT, OR DEALER. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE THEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THEREOF. THIS PROSPECTUS AND ANY RELATED PROSPECTUS
SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
Available Information . . . . . . . . . . . . . 2 Ratio Of Earnings To Fixed Charges . . . . . . 6
Incorporation Of Certain Documents Plan Of Distribution . . . . . . . . . . . . . 17
By Reference . . . . . . . . . . . . . . . . . 3
Global Clearance, Settlement And Tax
Cautionary Statement Regarding Documentation Procedures . . . . . . . . . . . 18
Forward-Looking Statements . . . . . . . . . . 3
Certain United States Federal Income Tax
The Company . . . . . . . . . . . . . . . . . . 4 Documentation Requirements . . . . . . . . . . 21
Recent Developments . . . . . . . . . . . . . . 4 Experts . . . . . . . . . . . . . . . . . . . . 23
Use Of Proceeds . . . . . . . . . . . . . . . . 6
</TABLE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements, and other information filed by the Company can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's Regional Offices at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, Suite
1300, New York, New York 10048. Copies of such materials can also be obtained
at prescribed rates from the Public Reference Section of the Commission,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains an Internet Web site (http://www.sec.gov) that contains
reports, proxy and information statements, and other materials that are filed
electronically through the Commission's Electronic Data Gathering, Analysis,
and Retrieval (EDGAR) system. In addition, material filed by the Company can
be inspected at the offices of the National Association of Securities Dealers,
Inc. (the "NASD"), at 1735 K Street, N.W., Washington, DC 20006.
This Prospectus constitutes a part of a registration statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Debt Securities offered hereby.
This Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. Any statements
contained in this Prospectus and the accompanying Prospectus Supplement as to
the contents of any contract or other document are not necessarily complete,
and in each instance reference is made to the copy of such contract or other
document filed or incorporated by reference as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference and the exhibits and the schedules thereto. For further information
pertaining to the Company and the Debt Securities offered hereby, reference is
made to the Registration Statement and such exhibits and schedules thereto,
which may be inspected without charge at, and copies thereof may be obtained at
prescribed rates from, the Public Reference Branch of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549.
"WorldCom" is a service mark of the Company.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company
(formerly Resurgens Communications Group, Inc. ("Resurgens")) under File No.
0-11258 (formerly File No. 1-10415) pursuant to the Exchange Act are
incorporated herein by reference and shall be deemed to be a part hereof:
2
<PAGE> 4
(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; and
(3) WorldCom's Current Reports on Form 8-K dated August 25, 1996
(filed August 26, 1996, and as amended on Forms 8-K/A filed November 4,
1996, 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, on Form 8-K/A-2 filed on January 28, 1998 and on Form 8-K/A-3 filed
on May 28, 1998), January 29, 1998 (filed February 12, 1998), and May 28,
1998 (filed May 28, 1998).
All documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act on or after the date of
this Prospectus and prior to the termination of the offering of the Debt
Securities offered hereby shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. See
"Available Information." Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any subsequently filed document which also
is or is deemed to be incorporated by reference herein or in any Prospectus
Supplement modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
References in this Prospectus to the "Company" include WorldCom and/or
its direct and indirect subsidiaries.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN AND MAY NOT BE DELIVERED HEREWITH, AS INDICATED ABOVE. THE
COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY OF THIS
PROSPECTUS HAS BEEN DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY OF ANY OR ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH ARE INCORPORATED
HEREIN BY REFERENCE (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS THEY ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). REQUESTS FOR SUCH
COPIES SHOULD BE DIRECTED TO STEPHANIE Q. SCOTT, DIRECTOR OF FINANCIAL
REPORTING, WORLDCOM, INC., 515 EAST AMITE STREET, JACKSON, MISSISSIPPI
39201-2702; TELEPHONE NUMBER (601) 360-8600.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The following statements are or may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995:
(i) certain statements, including possible or assumed future results
of operations of WorldCom, MCI Communications Corporation ("MCI") and the
combined companies contained in "Recent Developments," including certain
statements incorporated by reference herein 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, the recently
completed merger of a wholly owned subsidiary of WorldCom with and into
CompuServe Corporation (the "CompuServe Merger"), the recently
completed transactions contemplated by the Purchase and Sale Agreement
entered into by WorldCom with America Online, Inc. (the "AOL
Transaction") or the recently completed merger of a wholly owned
acquisition subsidiary of WorldCom with and into Brooks Fiber Properties,
Inc. (the "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, WorldCom's degree of financial
leverage, risks associated with debt service requirements and interest rate
fluctuations, risks associated with acquisitions and the integration thereof,
risks of international business, dependence on availability of transmission
facilities, regulation risks including the impact of
3
<PAGE> 5
the Telecommunications Act of 1996, contingent liabilities, and the impact of
competitive services and pricing, as well as other risks referenced from time
to time in WorldCom's filings with the Commission, including the WorldCom 1997
Form 10-K. Potential purchasers of Debt Securities 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.
THE COMPANY
WorldCom, Inc. is one of the largest telecommunications companies in the
United States, serving local, long distance and Internet customers,
domestically and internationally. The Company provides telecommunications
services to business, government, telecommunications companies and consumer
customers, through its network of fiber optic cables, digital microwave, and
fixed and transportable satellite earth stations.
WorldCom is one of the first major facilities-based telecommunications
companies with the capability to provide businesses with high quality local,
long distance, Internet, data, and international communications services over
its global networks. With service to points throughout the nation and the
world, WorldCom provides telecommunications products and services including:
switched and dedicated long distance and local products, 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,
and interconnection via Network Access Points to Internet Service Providers
("ISPs"). In addition, WorldCom's subsidiary, UUNET, is an international ISP.
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 common stock of
WorldCom, par value $0.01 ("WorldCom Common Stock"), subject to adjustment in
certain circumstances as set forth in materials filed by WorldCom with the
Commission (the "MCI Offer"). 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 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
4
<PAGE> 6
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 assurance as to the ultimate result of the suit.
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
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
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<PAGE> 7
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.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement,
WorldCom will use the net proceeds from the sale of the Debt Securities for
general corporate purposes, which may include the repayment of indebtedness,
acquisitions, additions to working capital, and capital expenditures.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
each of the five years ended December 31, 1997, and for the three months ended
March 31, 1997 and 1998, which ratios are based on the historical consolidated
financial statements of WorldCom. The table does not include pro forma
information reflecting the MCI/WorldCom Merger or the other proposed
transactions referred to herein, because such information is not required to be
presented herein.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Three Months Ended
Year Ended December 31, March 31,
---------------------------------------------------------------------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges . 5.10:1 0.15:1 2.53:1 N/A 2.09:1 1.57:1 N/A
Deficiency of Earnings to Fixed
Charges (in thousands) . . . .
-- $52,597 -- $2,112,834 -- -- $213,209
======= ========== ========
</TABLE>
NOTES TO COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(1) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of income (loss) from continuing operations, and fixed
charges consist of pretax interest (including capitalized interest) on
all indebtedness, amortization of debt discount and expense, and that
portion of rental expense which the Company believes to be representative
of interest. For the historical years ended December 31, 1994 and 1996,
and for the three months ended March 31, 1998, earnings were inadequate
to cover fixed charges by the amounts shown.
(2) In the first quarter of 1998, the Company recorded a $429 million charge
for in-process research and development related to the CompuServe Merger
and AOL Transaction. The charge was based on a valuation analysis of
certain technologies acquired in these transactions, including the
companies' virtual private data networks, application hosting products,
security systems, next generation network architectures, and certain
other identified research and development projects purchased in the
CompuServe Merger and AOL Transaction. At the date of the CompuServe
Merger and AOL Transaction, the technological feasibility of the acquired
technology had not yet been established and the technology had no future
alternative uses.
In addition, the Company recorded a one-time charge of $69.5 million for
employee severance, alignment charges and direct merger costs associated
with the BFP Merger.
(3) Results for 1996 include a $2.14 billion charge for in-process research
and development related to the MFS Merger. The charge is based upon a
valuation analysis of the technologies of MFS' worldwide information
system, the Internet network expansion system of UUNET, and certain other
identified research and development projects purchased in the MFS Merger.
Additionally, 1996 results include other after-tax charges of $121
million for employee severance, employee compensation charges, alignment
charges, and costs to exit unfavorable telecommunications contracts and a
$344 million after-tax write-down of operating assets within the
Company's non- core businesses. On a pretax basis, these charges totaled
$600.1 million.
6
<PAGE> 8
DESCRIPTION OF DEBT SECURITIES
The following description of the Debt Securities sets forth certain
general terms and provisions of the Indenture under which the Debt Securities
are to be issued. The particular terms of each issue of Debt Securities, as
well as any modifications or additions to such general terms that may apply in
the case of such Debt Securities, will be described in the Prospectus
Supplement relating to such Debt Securities. Accordingly, for a description of
the terms of a particular issue of Debt Securities, reference must be made to
both the Prospectus Supplement relating thereto and to the following
description.
THE INDENTURE
The Debt Securities will be issued under the Indenture, dated as of March
1, 1997, between the Company and The Chase Manhattan Bank, as successor to
Mellon Bank, N.A. as trustee, or under another indenture between the Company
and one or more other trustees to be selected by the Company (collectively, the
"Indenture" and the "Trustee").
The Indenture has been filed as an exhibit to the Registration Statement
of which this Prospectus is a part. Any amendments or modifications of the
Indenture will be filed by the Company with the Commission on a Current Report
on Form 8-K. The Indenture will be available for inspection at the offices of
the Trustee. The following description of the Indenture and summaries of
certain provisions thereof do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all provisions of the
Indenture and the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), including the definitions of certain terms in the Indenture and those
terms made a part of the Indenture by reference to the Trust Indenture Act as
in effect on the date of the Indenture. The Indenture is by its terms subject
to and governed by the Trust Indenture Act. Unless otherwise indicated,
references under this caption to sections are references to the Indenture.
Whenever particular sections or defined terms are referred to, it is intended
that such sections or defined terms shall be incorporated herein by reference.
A copy of the Indenture may be obtained from the Company.
The description of certain provisions of the Indenture described below
reflect the terms of the Indenture as they are proposed to be modified in
respect of the Debt Securities pursuant to the Board Resolutions, Officers'
Certificates and/or supplemental indentures to be delivered to the Trustee in
connection with the issuance of the several series of Debt Securities (the
"Authorizing Resolutions").
GENERAL TERMS OF DEBT SECURITIES
The Indenture provides that the Debt Securities issued thereunder may be
issued without limit as to aggregate principal amount, in one or more series,
in each case as established from time to time in or pursuant to authority
granted by a resolution of the Board of Directors of the Company or as
established in one or more supplemental indentures (Section 301 of the
Indenture). The Indenture also provides that there may be more than one
Trustee thereunder, each with respect to one or more series of Debt Securities
(Section 101 of the Indenture). Any Trustee may resign or be removed with
respect to one or more series of Debt Securities issued under the Indenture,
and a successor Trustee may be appointed to act with respect to such series
(Section 608 of the Indenture).
In the event that two or more persons are acting as Trustee with respect
to different series of Debt Securities issued under the Indenture, each such
Trustee shall be a Trustee of a trust under the Indenture separate and apart
from the trust administered by any other such Trustee (Section 609 of the
Indenture), and, except as otherwise indicated herein, any action described
herein to be taken by the Trustee may be taken by each such Trustee with
respect to, and only with respect to, the one or more series of Debt Securities
for which it is Trustee under the Indenture.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities to be offered for the following terms thereof: (1) the title
of such Debt Securities; (2) any limit on the aggregate principal amount of
such Debt Securities; (3) the purchase price of such Debt Securities (expressed
as a percentage of the principal amount); (4) the date or dates, or the method
for determining such date or dates, on which the principal (and premium, if
any) of such Debt Securities will be payable; (5) the rate or rates (which may
be fixed or variable), or the method for determining such rate or rates, at
which such Debt Securities will bear interest, if any; (6) the date or dates
from which any such interest will accrue, the Interest Payment Dates on which
any such interest will be payable, the Regular Record Dates for the interest
payable on any registered Debt Security on such Interest Payment Dates, and the
basis upon which interest shall be calculated if other than that of a 360 day
year of twelve 30-day
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months; (7) the place or places where the principal of (and premium, if any)
and interest, if any, on such Debt Securities will be payable and such Debt
Securities may be surrendered for registration of transfer or exchange; (8) the
period or periods within which, the price or prices at which, and the terms and
conditions upon which such Debt Securities may be redeemed, as a whole or in
part, at the option of the Company, if the Company is to have such an option;
(9) the obligation, if any, of the Company to redeem or purchase such Debt
Securities pursuant to any sinking fund or analogous provision or at the option
of a Holder thereof and the period or periods within which, the price or prices
at which, and the terms and conditions upon which such Debt Securities will be
redeemed or purchased, as a whole or in part, pursuant to such obligation; (10)
if other than U.S. dollars, the currency or currencies in which such Debt
Securities are denominated and payable, which may be a foreign currency or
units of two or more foreign currencies or a composite currency or currencies,
and the terms and conditions relating thereto; (11) whether the amount of
payments of principal of (and premium, if any) or interest, if any, on such
Debt Securities may be determined with reference to an index, formula, or other
method (which index, formula, or method may, but need not be, based on a
currency, currencies, currency unit or units or composite currency or
currencies) and the manner in which such amounts shall be determined; (12) any
additions, modifications, or deletions in the terms of such Debt Securities
with respect to the Events of Default set forth in the Indenture; (13) any
additions, modifications, or deletions in the terms of such Debt Securities
with respect to the other covenants set forth in the Indenture; (14) whether
such Debt Securities will be issued in certificated or book-entry form; (15)
whether such Debt Securities will be in registered or bearer form and, if in
registered form, the denominations thereof if other than $1,000 or any integral
multiple thereof and, if in bearer form, the denominations thereof if other
than $5,000 or any integral multiple thereof; and (16) any other terms of such
Debt Securities not inconsistent with the provisions of the Indenture (Section
301 of the Indenture).
Debt Securities may be issued under the Indenture as Original Issue
Discount Securities to be offered and sold at a substantial discount from the
principal amount thereof. Special U.S. federal income tax, accounting, and
other considerations applicable thereto will be described in the applicable
Prospectus Supplement.
Unless otherwise provided with respect to a series of Debt Securities,
the Debt Securities (other than those issued in global form) will be issued in
registered form without coupons in denominations of $1,000 and integral
multiples thereof or in bearer form in a denomination of $5,000 (Section 302 of
the Indenture).
No stockholder, employee, officer, director or incorporator as such,
past, present or future, of the Company shall have any personal liability in
respect of the obligations of the Company under the Indenture or the Debt
Securities by reasons of his, her or its status as such stockholder, employee,
officer, director or incorporator.
CERTIFICATED SECURITIES
Except as may be set forth in the applicable Prospectus Supplement, Debt
Securities will not be issued in certificated form. If, however, Debt
Securities are to be issued in certificated form, no service charge will be
made for any transfer or exchange of any Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith (Section 305 of the Indenture).
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued, in whole or in part, in
the form of one or more global securities (each, a "Global Security") that will
be deposited with, or on behalf of, a depository identified in the Prospectus
Supplement. Global Securities may be issued in either registered or bearer
form and in either temporary or permanent form. Unless otherwise provided in
the Prospectus Supplement, Debt Securities that are represented by a Global
Security will be issued in denominations of $1,000 and any integral multiple
thereof, and will be issued in registered form only, without coupons. Payments
of principal of, premium, if any, and interest on Debt Securities represented
by a Global Security will be made by the Company to the Trustee under the
applicable Indenture and forwarded by the Trustee to the depository.
The Company anticipates that any Global Securities will be deposited
with, or on behalf of, The Depository Trust Company, New York, New York
("DTC"), that such Global Securities will be registered in the name of DTC's
nominee, and that the following provisions will apply to the depository
arrangements with respect to any such Global Securities. Additional or
differing terms of the depository arrangements will be described in the
Prospectus Supplement relating to a particular series of Debt Securities issued
in the form of Global Securities.
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So long as DTC or any successor depository (collectively, the
"Depository") or its nominee is the registered owner of a Global Security, the
Depository, or such nominee, as the case may be, will be considered the sole
Holder of the Debt Securities represented by such Global Security for all
purposes under the applicable Indenture. Investors' interests in the Global
Securities will be represented through financial institutions acting on their
behalf as direct and indirect participants in the Depository. Such
participants may include Morgan Guaranty Trust Company of New York, Brussels,
Belgium office or Cedel S.A. Except as provided below, owners of beneficial
interests in a Global Security will not be entitled to have Debt Securities
represented by such Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Debt Securities in certificated
form, and will not be considered the owners or Holders thereof under the
applicable Indenture. The laws of some states require that certain purchasers
of securities take physical delivery of such securities in certificated form;
accordingly, such laws may limit the transferability of beneficial interests in
a Global Security. Accordingly, each person owning a beneficial interest in a
Global Security must rely on DTC's procedures and, if such person is not a
participant, on the procedures of the participant through which such person
owns its interest, to exercise any rights of a Holder under the applicable
Indenture. If the Company requests any action of Holders or if an owner of a
beneficial interest in a Global Security desires to take any action that a
Holder is entitled to take under the applicable Indenture, DTC will authorize
the participants holding the relevant beneficial interests to give or take such
action, and such participants will otherwise act upon the instructions of
beneficial owners holding through them.
If DTC is at any time unwilling or unable to continue as depository or if
at any time DTC ceases to be a clearing agency registered under the Exchange
Act, if so required by applicable law or regulation, and, in either case, a
successor depository is not appointed by the Company within 90 days, the
Company will issue individual Debt Securities in certificated form in exchange
for the Global Securities. In addition, the Company may at any time, and in
its sole discretion, determine not to have any Debt Securities represented by
one or more Global Securities, and, in such event, will issue individual Debt
Securities in certificated form in exchange for the relevant Global Securities.
In any such instance, an owner of a beneficial interest in a Global Security
will be entitled to physical delivery of individual Debt Securities in
certificated form of like tenor and rank, equal in principal amount to such
beneficial interest and to have such Debt Securities in certificated form
registered in its name. Unless otherwise provided in the Prospectus
Supplement, Debt Securities so issued in certificated form will be issued in
denominations of $1,000 or any integral multiple thereof, and will be issued in
registered form only, without coupons.
The following is based on information furnished by DTC:
DTC will act as securities depository for the Debt Securities.
The Debt Securities will be issued as fully registered securities
registered in the name of Cede & Co. (DTC's partnership nominee).
One fully registered Debt Security certificate is issued with
respect to each $200 million of principal amount of the Debt
Securities of a series, and an additional certificate is issued with
respect to any remaining principal amount of such series.
DTC is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC holds securities
that its participants ("Participants") deposit with DTC. DTC also
facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants'
accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc., and the
NASD. Access to the DTC system is also available to others, such as
securities brokers and dealers, banks, and trust companies that
clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants
are on file with the Commission.
Purchases of Debt Securities under the DTC system must be made
by or through Direct Participants, which will receive a credit for
the Debt Securities on DTC's records. The ownership interest of
each actual purchaser of each Debt Security ("Beneficial Owner") is
in turn recorded on the Direct and Indirect
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Participants' records. A Beneficial Owner does not receive written
confirmation from DTC of its purchase, but such Beneficial Owner is
expected to receive a written confirmation providing details of the
transaction, as well as periodic statements of its holdings, from
the Direct or Indirect Participant through which such Beneficial
Owner entered into the transaction. Transfers of ownership
interests in Debt Securities are accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners.
Beneficial Owners do not receive certificates representing their
ownership interests in Debt Securities, except in the event that use
of the book-entry system for the Debt Securities is discontinued.
To facilitate subsequent transfers, the Debt Securities
deposited by Participants with DTC are registered in the name of
DTC's partnership nominee, Cede & Co. The deposit of the Debt
Securities with DTC and their registration in the name of Cede & Co.
will effect no change in beneficial ownership. DTC has no knowledge
of the actual Beneficial Owners of the Debt Securities; DTC records
reflect only the identity of the Direct Participants to whose
accounts Debt Securities are credited, which may or may not be the
Beneficial Owners. The Participants remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to
Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect Participants
to Beneficial Owners are governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in
effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than
all of the Debt Securities within an issue are being redeemed, DTC's
practice is to determine by lot the amount of interest of each
Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. consents or votes with respect to
the Debt Securities. Under its usual procedures, DTC mails a proxy
(an "Omnibus Proxy") to the issuer as soon as possible after the
record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the
Debt Securities are credited on the record date (identified on a
list attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on the Debt
Securities are made to DTC. DTC's practice is to credit Direct
Participants' accounts on the payable date in accordance with their
respective holdings as shown on DTC's records unless DTC has reason
to believe that it will not receive payment on the payable date.
Payments by Participants to Beneficial Owners are governed by
standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or
registered in "street name," and are the responsibility of such
Participant and not of DTC, the Trustee, or the Company, subject to
any statutory or regulatory requirements as may be in effect from
time to time. Payment of principal, premium, if any, and interest
to DTC is the responsibility of the Company or the Trustee.
Disbursement of such payments to Direct Participants is the
responsibility of DTC, and disbursement of such payments to the
Beneficial Owners is the responsibility of Direct and Indirect
Participants.
DTC may discontinue providing its services as securities
depository with respect to the Debt Securities at any time by giving
reasonable notice to the Company or the Trustee. Under such
circumstances, in the event that a successor securities depository
is not appointed, Debt Security certificates are required to be
printed and delivered.
The Company may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor securities
depository). In that event, Debt Security certificates will be
printed and delivered.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources (including DTC) that the Company believes
to be reliable, but the Company takes no responsibility for the accuracy
thereof.
Unless stated otherwise in the Prospectus Supplement, the underwriters or
agents with respect to a series of Debt Securities issued as Global Securities
will be Direct Participants in DTC.
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None of the Company, any underwriter or agent, the Trustee, or any
applicable paying agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
interests in a Global Security or for maintaining, supervising, or reviewing
any records relating to such beneficial interest.
MERGER
The Company may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into, any other
corporation, provided that (a) either (i) the Company shall be the continuing
corporation or (ii) the successor corporation (if other than the Company)
formed by or resulting from any such consolidation or merger or which shall
have received the transfer of such assets shall expressly assume payment of the
principal of (and premium, if any) and interest on all the Debt Securities and
the performance and observance of all the covenants and conditions of the
applicable Indenture and (b) the Company or such successor corporation shall
not immediately thereafter be in default under the applicable Indenture
(Section 801 of the Indenture). In the case of such a transaction, the
successor corporation shall succeed to and be substituted for the Company, with
the same effect as if it had been named in the Indenture as the party of the
first part (Section 802 of the Indenture).
LIMITATION ON LIENS
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, create, or suffer to be created or to exist, any Lien
(other than Permitted Liens) upon any of its Property or assets, whether now
owned or hereafter acquired, or any interest therein or any income or profits
therefrom, unless it has made or will make effective provision whereby the Debt
Securities will be secured by such Lien equally and ratably with (or prior to)
all other indebtedness of the Company or any Restricted Subsidiary secured by
such Lien for so long as any such other indebtedness of the Company or any
Restricted Subsidiary shall be so secured. Notwithstanding the foregoing, the
Company may, and may permit any Restricted Subsidiary to, issue, assume, or
guarantee indebtedness secured by Liens on Property that are not Permitted
Liens without equally and ratably securing the Debt Securities, provided that
the sum of all such indebtedness then being issued, assumed, or guaranteed
together with such indebtedness theretofore issued, assumed, or guaranteed that
remains outstanding (the "Additional Permitted Secured Indebtedness") does not
exceed 10% of the total assets of the Company and its Subsidiaries prior to the
time such indebtedness was issued, assumed, or guaranteed, as reflected in the
Company's then most recent balance sheet prepared in accordance with GAAP
(Section 1004 of the Indenture, as modified by the Authorizing Resolutions).
In respect of several series of securities (the "1997 Senior Securities")
issued by the Company in April and August, 1997 in aggregate principal amount
of approximately $3.35 billion, maturing from 2004 through 2027 (subject to
prior redemption at the option of the Company), the Indenture provides, in lieu
of the exception set forth in the immediately preceding sentence, for
Additional Permitted Secured Indebtedness not exceeding 15% of Consolidated Net
Tangible Assets prior to the time such indebtedness was issued, assumed, or
guaranteed. As long as both the Debt Securities and the 1997 Senior Securities
remain outstanding, the Company will be required to comply with both of the
limitations on Liens referred to above.
Set forth below is a summary of certain of the defined terms used herein
and defined in Section 101 of the Indenture. Reference is made to the Indenture
for the full definitions of such terms, as well as any capitalized terms used
herein for which not definitions are provided.
"Capital Lease Obligations" means indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP and the amount of such indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP. For purposes of the Indenture, a Capital Lease Obligation shall be
deemed secured by a Lien on the Property being leased.
"Capital Stock" means, with respect to any person, any and all shares or
other equivalents (however designated) of corporate stock, partnership interest
or any other participation, right, warrant, option or other interest in the
nature of an equity interest in such person, but excluding any debt security
convertible or exchangeable into such equity interest.
"Consolidated Net Tangible Assets" means the consolidated total assets of
the Company and its Subsidiaries as reflected in the Company's most recent
balance sheet prepared in accordance with GAAP, less (i) current liabilities
(excluding current maturities of long-term debt and Capital Lease Obligations)
and (ii) goodwill, trademarks, patents and minority interests of others.
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"GAAP" means United States generally accepted accounting principles as in
effect as of the date of determination, unless stated otherwise.
"Lien" means, with respect to any Property of any person, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement or zoning restriction (other than any easement
or zoning restriction not materially impairing usefulness or marketability),
encumbrance, preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever on or with respect to such
Property including any Capital Lease Obligation, conditional sale or other
title retention agreement having substantially the same economic effect as any
of the foregoing or any Sale and Leaseback Transaction.
"Permitted Liens" means (i) Liens existing on the date of the Indenture;
(ii) Liens on Property existing at the time of acquisition thereof or to secure
the payment of all or any part of the purchase price thereof or to secure any
indebtedness incurred prior to, at the time of or within 270 days after the
acquisition of such Property for the purpose of financing all or any part of
the purchase price thereof; (iii) Liens securing indebtedness owing by a
Restricted Subsidiary to the Company or any wholly-owned Subsidiary of the
Company; (iv) Liens on Property of any entity, or on the stock, indebtedness or
other obligations of such entity, existing at the time (a) such entity becomes
a Restricted Subsidiary, (b) such entity is merged into or consolidated with
the Company or a Restricted Subsidiary or (c) the Company or a Restricted
Subsidiary acquires all or substantially all of the assets of such entity;
provided that no such Lien extends to any other Property; (v) Liens on Property
to secure any indebtedness incurred to provide funds for all or any part of the
cost of development of or improvements to such Property; (vi) Liens on the
Property of the Company or any of its Subsidiaries securing (a) nondelinquent
performance of bids or contracts (other than for borrowed money, obtaining of
advances or credit or the securing of debt), (b) contingent obligations on
surety and appeal bonds and (c) other nondelinquent obligations of a like
nature, in each case, incurred in the ordinary course of business; (vii) Liens
securing Capital Lease Obligations, provided that (a) any such Lien attaches to
the Property within 270 days after the acquisition thereof and (b) such Lien
attaches solely to the Property so acquired; (viii) Liens arising solely by
virtue of any statutory or common law provision relating to banker's liens,
rights of set-off or similar rights and remedies as to deposit account or other
funds, provided that such deposit account is not a dedicated cash collateral
account and is not subject to restrictions against access by the Company in
excess of those set forth by regulations promulgated by the Federal Reserve
Board and such deposit account is not intended by the Company or any Subsidiary
to provide collateral to the depository institution; (ix) pledges or deposits
under worker's compensation laws, unemployment insurance laws or similar
legislation; (x) statutory and tax Liens for sums not yet due or delinquent or
which are being contested or appealed in good faith by appropriate proceedings;
(xi) Liens arising solely by operation of law and in the ordinary course of
business, such as mechanics', materialmen's, warehousemen's and carriers' Liens
and Liens of landlords or of mortgages of landlords, on fixtures and movable
Property located on premises leased in the ordinary course of business; (xii)
Liens on personal Property, other than shares of stock or indebtedness of any
Restricted Subsidiary, to secure loans maturing not more than one year from the
date of the creation thereof and on accounts receivable associated with a
receivables financing program of the Company or any of its Subsidiaries; and
(xiii) any renewal, extension or replacement (in whole or in part) for any Lien
permitted pursuant to exceptions (i) through (xii) above or of any indebtedness
secured thereby, provided that such extension, renewal or replacement Lien
shall be limited to all or any part of the same Property that secured the Lien
extended, renewed or replaced (plus improvements on such Property).
"Property" means, with respect to any person, any interest of such person
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, including, without limitation, Capital Stock in any other person
(but excluding Capital Stock or other securities issued by such first mentioned
person).
"Receivables Subsidiary" means a special purpose wholly owned Subsidiary
created in connection with any transactions that may be entered into by the
Company or any of its Subsidiaries pursuant to which the Company or any of its
Subsidiaries may sell, convey, grant a security interest in or otherwise
transfer undivided percentage interests in its receivables.
"Restricted Subsidiary" means any Subsidiary of the Company if (i) such
Subsidiary has substantially all of its Property in the United States (other
than its territories and possessions) and (ii) at the end of the most recent
fiscal quarter of the Company, the aggregate amount, determined in accordance
with GAAP consistently applied, of securities of, loans and advances to, and
other investments in, such Subsidiary held by the Company and its other
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Subsidiaries exceeded 10% of the Company's Consolidated Net Tangible Assets;
provided, however, that the term Restricted Subsidiary shall not include (a)
any Subsidiary acquired by the Company subsequent to the date of the Indenture
unless and until such time as such corporation is designated by the Company as
a "Restricted Subsidiary" or otherwise similarly treated under the Company's $5
billion five-year revolving credit facility or any other agreement of the
Company for indebtedness for borrowed money or (b) any Receivables Subsidiary.
(Section 101 of the Indenture as modified by the Authorizing Resolutions). In
respect of the 1997 Senior Securities, in lieu of the exception described in
clause (a) above, the Indenture excludes from the definition of Restricted
Subsidiary any of MFS or its Subsidiaries unless and until such time as such
corporation is designated by the Company as a "Restricted Subsidiary" or
otherwise similarly treated under the Company's $5 billion five-year revolving
credit facility or any other agreement of the Company for indebtedness for
borrowed money. As long as both the Debt Securities and the 1997 Senior
Securities remain outstanding, the Company will be required to comply with
provisions relating to Restricted Subsidiaries as applicable for purposes of
both the Debt Securities and the 1997 Senior Securities.
"Sale and Leaseback Transaction" means, with respect to any person, any
direct or indirect arrangement pursuant to which Property is sold or
transferred by such person or a Restricted Subsidiary of such person and is
thereafter leased back from the purchaser or transferee thereof by such person
or one of its Restricted Subsidiaries.
"Subsidiary" means a corporation a majority of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or one or more
other Subsidiaries of the Company. For the purposes of this definition,
"voting stock" means stock having voting power for the election of directors,
whether at all times or only so long as no senior class of stock has such
voting power by reason of any contingency.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are Events of Default
with respect to any series of Debt Securities issued thereunder: (a) default
for 30 days in the payment of any installment of interest on any Debt Security
of such series; (b) default in the payment of the principal of (or premium, if
any, on) any Debt Security of such series at its Maturity; (c) default in
making a sinking fund payment required for any Debt Security of such series;
(d) default in the performance of any other covenant of the Company in the
Indenture (other than a covenant included in the Indenture solely for the
benefit of a series of Debt Securities issued thereunder other than such
series), continued for 90 days after written notice as provided in the
Indenture (which notice period is 60 days in respect of the 1997 Senior
Securities); (e) certain events of bankruptcy, insolvency, or reorganization,
or court appointment of a receiver, liquidator, or trustee of the Company or
all or substantially all of its property; and (f) any other Event of Default
provided with respect to a particular series of Debt Securities (Section 501 of
the Indenture, as modified by the Authorizing Resolutions). In respect of the
1997 Senior Securities, the Indenture also includes within the meaning of
Events of Default certain events of default resulting in the acceleration of
the maturity of indebtedness aggregating in excess of $50,000,000 under any
mortgages, indentures (including the Indenture), or instruments under which the
Company may have issued, or by which there may have been secured or evidenced,
any other indebtedness (including debt securities of any other series issued
under the Indenture) of the Company, but only if such indebtedness is not
discharged or such acceleration is not rescinded or annulled. Accordingly, if
such events were to occur, the principal amount of the 1997 Senior Securities
may be declared to be due and payable at a time when the Debt Securities would
not be so declared to be due and payable, and such acceleration in respect of
the 1997 Senior Securities may adversely affect the ability of the Company to
make required payments in respect of the Debt Securities.
Within 90 days after the occurrence of any default with respect to any
series of Debt Securities, the Trustee shall transmit notice of such default
(unless cured or waived) known to the Trustee to the Holders of such Debt
Securities; provided, that the Trustee may withhold notice to the Holders of
any series of Debt Securities of any default with respect to such series
(except a default in the payment of the principal of (or premium, if any) or
interest on any Debt Security of such series or in the payment of any sinking
fund installment in respect of any Debt Security of such series) if the
Responsible Officers of the Trustee consider such withholding to be in the
interest of such Holders (Section 601 of the Indenture).
If an Event of Default under the Indenture with respect to Debt
Securities of any series issued thereunder at the time Outstanding occurs and
is continuing, then in every such case the Trustee or the Holders of not less
than 25% in principal amount of the Outstanding Debt Securities of that series
may declare the principal amount (or, if the
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Debt Securities of that series are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms thereof) of
all of the Debt Securities of that series to be due and payable immediately by
written notice thereof to the Company (and to the Trustee if given by the
Holders) (Section 502 of the Indenture). However, at any time after such a
declaration of acceleration with respect to Debt Securities of such series (or
of all Debt Securities then Outstanding under the Indenture, as the case may
be) has been made, but before a judgment or decree for payment of the money due
has been obtained by the Trustee prior to the Stated Maturity thereof, the
Holders of a majority in principal amount of Outstanding Debt Securities of
such series (or of all Debt Securities then Outstanding under the Indenture, as
the case may be) may, subject to certain conditions, rescind and annul such
acceleration if all Events of Default, other than the non-payment of
accelerated principal (or specified portion thereof), with respect to Debt
Securities of such series (or of all Debt Securities then Outstanding under the
Indenture, as the case may be) have been cured or waived as provided in the
Indenture (Section 502 of the Indenture). The Indenture also provides that the
Holders of not less than a majority in principal amount of the Outstanding Debt
Securities of any series issued thereunder (or of all Debt Securities then
Outstanding under the Indenture, as the case may be) may waive certain past
defaults with respect to such series and its consequences (Section 513 of the
Indenture). Reference is made to the Prospectus Supplement relating to any
series of Debt Securities issued under the Indenture which are Original Issue
Discount Securities for the particular provisions relating to acceleration of a
portion of the principal amount of such Original Issue Discount Securities upon
the occurrence of an Event of Default and the continuation thereof. Within 120
days after the close of each fiscal year, the Company must file with the
Trustee a statement, signed by specified officers, stating whether or not such
officers have knowledge of any default under the Indenture and, if so,
specifying each such default and the nature and status thereof (Section 1006 of
the Indenture).
Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any Holders of any
series of Debt Securities then Outstanding under the Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
(Section 602 of the Indenture). Subject to such provisions for indemnification
and certain limitations contained in the Indenture, the Holders of not less
than a majority in principal amount of the Outstanding Debt Securities of any
series issued thereunder (or of all Debt Securities then Outstanding under the
Indenture, as the case may be) shall have the right to direct the time, method,
and place of conducting any proceeding for any remedy available to the Trustee,
or of exercising any trust or power conferred upon the Trustee (Section 512 of
the Indenture).
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee
to enter into one or more indentures supplemental to the Indenture without the
consent of the holders of any Debt Securities for certain purposes, including
the following: (a) to evidence the succession of another entity to the Company
and the assumption by such entity of the covenants of the Company contained in
the Indenture, (b) to add to the covenants of the Company for the benefit of
the holders of any series of the Debt Securities (and if such covenants are to
be for the benefit of less than all series of Debt Securities, stating that
such covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power conferred upon the Company in the
Indenture; (c) to add any additional Events of Default for the benefit of the
Holders of any series of the Debt Securities (and if such Events of Default are
to be for the benefit of less than all series of Debt Securities, stating that
such Events of Default are expressly being included solely for the benefit of
such series); provided, however, that in respect of any such additional Events
of Default such supplemental indenture may provide for a particular period of
grace after default or may provide for an immediate enforcement upon such
default or may limit the remedies available to the Trustee upon such default or
may limit the right of the Holders of a majority in aggregate principal amount
of that or those series of Debt Securities to which such additional Events of
Default apply to waive such default; (d) to add to or change any of the
provisions of the Indenture to permit or facilitate the issuance of any series
of the Debt Securities in uncertificated or bearer form; (e) to change or
eliminate any provisions of the Indenture, provided that any such change or
elimination shall become effective only when there are no Outstanding Debt
Securities of any series created prior to the execution of such supplemental
indenture which is entitled to the benefit of such provision; (f) to provide
security for the Debt Securities; (g) to establish the form or terms of any
series of Debt Securities and any related coupons in accordance with the terms
and conditions of the Indenture; (h) to evidence and provide for the acceptance
and appointment of a successor Trustee with respect to any series of Debt
Securities and to add to or change any of the provisions of the Indenture to
provide for or facilitate the administration of the trusts under the
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Indenture by more than one Trustee; (i) to cure any ambiguity, to correct or
supplement any provision of the Indenture which may be defective or
inconsistent with any other provision, or to make any other provisions with
respect to matters or questions arising under the Indenture which shall not be
inconsistent with the provisions of the Indenture and which additional
provisions shall not adversely affect the interests of the Holders of any
series of the Debt Securities; or (j) to supplement any of the provisions of
the Indenture to such extent as shall be necessary to permit or facilitate the
defeasance and discharge of any series of the Debt Securities in accordance
with terms and conditions of the Indenture provided that any such action shall
not adversely affect the interests of the holders of any series of the Debt
Securities in any material respect (Section 901 of the Indenture).
The Indenture also contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than a majority in
principal amount of all the Outstanding Debt Securities under the Indenture
affected by the terms of any such supplemental indenture, to execute
supplemental indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of modifying in any
manner the rights of Holders of any series of Debt Securities, except that,
without the consent of the Holders of each such Debt Security affected thereby,
no such supplemental indenture shall (a) change the Stated Maturity of the
principal of (or premium, if any, on) or any installment of principal of or
interest on any such Debt Security; (b) reduce the principal amount of, or the
rate or amount of interest on, or any premium payable on redemption of, any
such Debt Security, or reduce the amount of principal of an Original Issue
Discount Security that would be due and payable upon declaration of
acceleration of the Maturity thereof or would be provable in bankruptcy, or
adversely affect any right of repayment of the Holder of any such Debt
Security; (c) change any obligation of the Company to pay additional amounts
pursuant to Section 1007 of the Indenture (except as otherwise contemplated by
the Indenture); (d) adversely affect any right of repayment at the option of
the Holder such Debt Security; (e) change the place of payment where, or the
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Security or any premium or interest thereon is
payable; (f) impair the right to institute suit for the enforcement of any
payment on or after the stated maturity thereof (or in the case of redemption
or repayment at the option of the Holder of such Debt Security, on or after the
Redemption Date or the Repayment Date, as the case may be) with respect to any
such Debt Security; (g) reduce the percentage in principal amount of the
Outstanding Debt Securities of any series, the consent of whose Holders is
required for any such supplemental indenture, or the consent of whose Holders
is required for any waiver with respect to such series or compliance with
certain provisions of the Indenture or certain defaults thereunder and their
consequences; (h) reduce the quorum or voting requirements as contained in the
Indenture with respect to such Debt Securities; or (i) modify any of the
provisions of the Indenture relating to supplemental indentures or waiver of
past defaults with respect to such Debt Securities except to increase any such
percentage or to provide that certain other provisions of the Indenture cannot
be modified or waived with respect to such Debt Securities without the consent
of the Holders of each such Debt Security (Section 902 of the Indenture).
A supplemental indenture which changes or eliminates any covenant or
other provision of the Indenture which has expressly been included solely for
the benefit of one or more series of the Debt Securities, or which modifies the
rights of Holders of Debt Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under the
Indenture of the Holders of Debt Securities of any other series, but shall
require the consent, in accordance with the provisions of the Indenture, of the
Holders of at least a majority of the Outstanding Debt Securities of such one
or more particular series. It is not necessary for the Holders of the Debt
Securities to approve the particular form of any proposed supplemental
indenture, but it is sufficient if such Holders approve the substance thereof
(Section 902 of the Indenture). Every supplemental indenture executed pursuant
to the Indenture will conform to the requirements of the Trust Indenture Act as
then in effect (Section 905 of the Indenture).
SATISFACTION AND DISCHARGE OF THE INDENTURE, COVENANT DEFEASANCE
The Company may, at its option, elect to have either or both of (a) the
defeasance provision of the Indenture or (b) the covenant defeasance provision
of the Indenture apply to a series of Debt Securities upon compliance with the
applicable conditions set forth in the Indenture (Section 1401 of the
Indenture). The Company shall be deemed to have been discharged from its
obligations with respect to a series of Debt Securities on the date the
conditions set forth below are satisfied (hereinafter, "defeasance"), except
for the following obligations which shall survive until otherwise terminated or
discharged pursuant to the Indenture: (i) the rights of holders of such Debt
Securities to receive, solely from the trust fund described in Section 1404 of
the Indenture, payments in respect of the principal of (and premium, if any)
and interest, if any, on such Debt Securities when such payments are due, (ii)
the
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Company's obligations with respect to such Debt Securities under Sections 305,
306, 1002 and 1003 of the Indenture and with respect to the payment of
additional amounts, if any, as contemplated by Section 1007 of the Indenture,
(iii) the rights, powers, trusts, duties and immunities of the Trustee under
the Indenture and (iv) the obligations contained in the article of the
Indenture relating to defeasance and covenant defeasance. The Company shall be
released from its obligations under any covenant with respect to such Debt
Securities on and after the date the conditions set forth below are satisfied
(hereinafter, "covenant defeasance") (Sections 1402 and 1403 of the Indenture).
The following are the conditions that must be satisfied prior to
defeasance or covenant defeasance: (a) the Company shall irrevocably have
deposited or caused to be deposited with the Trustee as trust funds in trust
for the purpose of making the following payments, money and/or Government
Obligations sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be applied by
the Trustee (or other qualifying trustee) to pay and discharge, (i) the
principal of (and premium, if any) and interest, if any, on the Debt Securities
to be defeased on the Stated Maturity of such principal or installment of
principal or interest and (ii) any mandatory sinking fund payments or analogous
payments applicable to such Debt Securities; (b) such defeasance or covenant
defeasance shall not result in a breach or violation of, or constitute a
default under, the Indenture or any other material agreement or instrument to
which the Company is a party or by which it is bound; (c) no Event of Default
or event which with notice or lapse of time or both would become an Event of
Default with respect to such Debt Securities shall have occurred and be
continuing on the date of such deposit, or if applicable, at any time during
the period ending on the 91st day after the date of such deposit; (d) the
Company shall have delivered to the Trustee an opinion of counsel to the effect
that the holders of such Debt Securities will not recognize income, gain or
loss for Federal income tax purposes as a result of such defeasance or covenant
defeasance, as applicable, and will be subject to Federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such defeasance or covenant defeasance, as applicable, had not
occurred; (e) the Company shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent to the defeasance or the covenant defeasance (as the case may be)
have been complied with and an opinion of counsel to the effect that either (i)
as a result of a deposit pursuant to subsection (a) above, registration is not
required under the Investment Company Act of 1940, as amended, by the Company,
with respect to the trust funds representing such deposit or by the Trustee for
such trust funds or (ii) all necessary registrations under said Act have been
effected; and (f) such defeasance or covenant defeasance shall be effected in
compliance with any additional or substitute terms, conditions or limitations
which may be imposed on the Company in connection therewith pursuant to Section
301 of the Indenture (Section 1404 of the Indenture).
"Government Obligations" means securities which are (i) direct
obligations of the United States of America or the government which issued the
foreign currency in which the Debt Securities of a particular series are
payable, for the payment of which its full faith and credit is pledged or (ii)
obligations of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which issued
the foreign currency in which the Debt Securities of such series are payable,
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America or such other government, which, in
either case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any such Government Obligation or a
specific payment of interest on or principal of any such Government Obligation
held by such custodian for the account of the Holder of a depository receipt;
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the Holder of such depository
receipt from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest on or principal of the
Government Obligation evidenced by such depository receipt (Section 101 of the
Indenture).
The Company may exercise its defeasance option with respect to such Debt
Securities notwithstanding its prior exercise of its covenant defeasance
option.
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because
of the occurrence of any Event of Default other than the Events of Default
described in clauses (d) and (f) under "Events of Default, Notice and Waiver",
the amount of money in which such Debt Securities are payable, and Government
Obligations on deposit with the relevant Trustee, will be sufficient to pay
amounts due on such Debt Securities at the time of their Stated Maturity but
may not be sufficient
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to pay amounts due on such Debt Securities at the time of the acceleration
resulting from such Event of Default. However, the Company would remain liable
to make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series and any related coupons.
REGARDING THE TRUSTEE
The Chase Manhattan Bank, Trustee under the Indenture, is a participant
in the Company's revolving credit and term loan agreements. In addition, the
trustee may from time to time enter into other lending transactions with the
Company in the ordinary course of business.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities in or outside the United States
to or through underwriters, through or to dealers, directly to one or more
purchasers, or through agents. The Prospectus Supplement with respect to the
Debt Securities offered hereby will set forth the terms of the offering of the
Debt Securities, including the name or names of any underwriters, dealers, or
agents, the purchase price of the Debt Securities and the proceeds to the
Company from such sale, any delayed delivery arrangements, any underwriting
discounts and other items constituting underwriters' compensation, the initial
public offering price, any discounts or concessions allowed or re-allowed or
paid to dealers, and any securities exchanges on which the Debt Securities may
be listed.
If underwriters are used in the sale, the Debt Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price, at market prices prevailing at the time of sale,
at prices related to such prevailing market prices, at negotiated prices or at
varying prices determined at the time of sale. The Debt Securities may be
offered to the public either through underwriting syndicates represented by one
or more managing underwriters or directly by one or more firms acting as
underwriters or agents. The underwriter or underwriters with respect to a
particular underwritten offering of Debt Securities will be named in the
Prospectus Supplement relating to such offering, and if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth
on the cover of such Prospectus Supplement. Unless otherwise set forth in the
Prospectus Supplement relating thereto, the obligations of the underwriters or
agents to purchase the Debt Securities will be subject to conditions precedent
and the underwriters will be obligated to purchase all the Debt Securities if
any are purchased. The initial public offering price and any discounts or
concessions allowed or re-allowed or paid to dealers may be changed from time
to time.
If dealers are used in the sale of Debt Securities with respect to which
this Prospectus is delivered, the Company will sell such Debt Securities to the
dealers as principals. The dealers may then resell such Debt Securities to the
public at varying prices to be determined by such dealers at the time of
resale. The names of the dealers and the terms of the transaction will be set
forth in the Prospectus Supplement relating thereto.
Debt Securities may be sold directly by the Company or through agents
designated by the Company from time to time at fixed prices, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at varying prices determined at the time of
sale. Any agent involved in the offer or sale of the Debt Securities with
respect to which this Prospectus is delivered will be named, and any
commissions payable by the Company to such agent will be set forth, in the
Prospectus Supplement relating thereto. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a best efforts basis
for the period of its appointment.
In connection with the sale of the Debt Securities, underwriters or
agents may receive compensation from the Company or from purchasers of Debt
Securities for whom they may act as agents in the form of discounts,
concessions, or commissions. Underwriters, agents, and dealers participating
in the distribution of the Debt Securities may be deemed to be underwriters,
and any discounts or commissions received by them from the Company and any
profit on the resale of the Debt Securities by them may be deemed to be
underwriting discounts or commissions under the Securities Act.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters, or dealers to solicit offers from certain types of
institutions to purchase Debt Securities from the Company at the public
offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and
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delivery on a specified date in the future. Such contracts will be subject
only to those conditions set forth in the Prospectus Supplement, and the
Prospectus Supplement will set forth the commission payable for solicitation of
such contracts.
Agents, dealers, and underwriters may be entitled under agreements
entered into with the Company to indemnification by the Company against certain
civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments that such agents, dealers, or
underwriters may be required to make with respect thereto. Agents, dealers,
and underwriters may be customers of, engage in transactions with, or perform
services for the Company in the ordinary course of business.
The Debt Securities may or may not be listed on a national securities
exchange. No assurances can be given that there will be a market for the Debt
Securities.
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
When so provided in the Prospectus Supplement, investors in the Global
Securities representing any of the Debt Securities issued hereunder may hold a
beneficial interest in such Global Securities through DTC, CEDEL, or Euroclear
(as defined below) or through participants. The Global Securities may be
traded as home market instruments in both the European and U.S. domestic
markets. Initial settlement and all secondary trades will settle as set forth
in the applicable Prospectus Supplement.
Cedel S.A. ("CEDEL") is incorporated under the laws of Luxembourg as a
professional depository. CEDEL holds securities for its participating
organizations and facilitates the clearance and settlement of securities
transactions between CEDEL participants through electronic book-entry changes
in accounts of CEDEL participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in CEDEL in any of 28
currencies, including United States dollars. CEDEL provides to its
participants, among other things, services for safekeeping, administration,
clearance, and settlement of internationally traded securities and securities
lending and borrowing. CEDEL interfaces with domestic markets in several
countries. As a professional depository, CEDEL is subject to regulation by the
Luxembourg Monetary Institute. CEDEL participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations and may include the underwriters named in any Prospectus
Supplement. Indirect access to CEDEL is also available to others, such as
banks, brokers, dealers, and trust companies that clear through or maintain a
custodial relationship with a CEDEL participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System and to clear and settle transactions
between Euroclear participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 32 currencies, including
United States dollars. The Euroclear System includes various other services,
including securities lending and borrowing, and interfaces with domestic
markets in several countries generally similar to the arrangements for
cross-market transfers with DTC. The Euroclear System is operated by Morgan
Guaranty Trust Company of New York, Brussels, Belgium office (the "Euroclear
Operator" or "Euroclear"), under contract with Euroclear Clearance System S.C.,
a Belgian cooperative corporation (the "Cooperative"). All operations are
conducted by the Euroclear Operator, and all Euroclear securities clearance
accounts and Euroclear cash accounts are accounts with the Euroclear Operator,
not the Cooperative. The Cooperative establishes policy for the Euroclear
System on behalf of Euroclear participants. Euroclear participants include
banks (including central banks), securities brokers and dealers, and other
professional financial intermediaries and may include the underwriters.
Indirect access to the Euroclear System is also available to other firms that
clear through or maintain a custodial relationship with a Euroclear
participant, either directly or indirectly.
The Euroclear Operator is a member bank of the Federal Reserve System. As
such, it is regulated and examined by the Federal Reserve Board and the New
York State Banking Department, as well as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear
and the related Operating Procedures of the Euroclear System, and applicable
Belgian law (collectively, the "Terms and Conditions"). The Terms and
Conditions govern transfers of
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securities and cash within the Euroclear System, withdrawals of securities and
cash from the Euroclear System, and receipts of payments with respect to
securities in the Euroclear System. All securities in the Euroclear System are
held on a fungible basis without attribution of specific certificates to
specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear participants, and has no
record of or relationship with persons holding through Euroclear participants.
Principal, premium, if any, and interest payments with respect to Debt
Securities held through CEDEL or Euroclear will be credited to the cash
accounts of CEDEL participants or Euroclear participants in accordance with the
relevant system's rules and procedures, to the extent received by its
depository. Such distributions will be subject to tax reporting in accordance
with relevant United States tax laws and regulations as described below. CEDEL
or the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a holder under the relevant Indenture on behalf of a
CEDEL participant or Euroclear participant only in accordance with its relevant
rules and procedures and subject to its depository's ability to effect such
actions on its behalf through the Depository.
INITIAL SETTLEMENT
All Global Securities will be registered in the name of Cede & Co. as
nominee of DTC. Investors' interests in the Global Securities will be
represented through financial institutions acting on their behalf as direct and
indirect participants in the Depository. As a result, CEDEL and Euroclear will
hold positions on behalf of their participants through their respective
depositories, Citibank, N.A. ("Citibank") and Morgan Guaranty Trust Company of
New York ("Morgan"), which in turn will hold such positions in accounts as
participants of DTC.
Global Securities held through DTC will follow the settlement practices
described above. Investor securities custody accounts will be credited with
their holdings against payment on the settlement date. Global Securities held
through CEDEL or Euroclear accounts will follow the settlement procedures
applicable to conventional eurobonds, except that there will be no temporary
global security and no "lock-up" or restricted period. Global Securities will
be credited to the securities custody accounts on the settlement date against
payment.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
participants will be settled using the procedures described above.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL participants and/or Euroclear participants will be
settled using the procedures applicable to conventional eurobonds.
Trading between DTC Seller and CEDEL or Euroclear Purchaser. When
beneficial interests in the Global Securities are to be transferred from the
account of a DTC participant to the account of a CEDEL participant or a
Euroclear participant, the purchaser will send instructions to CEDEL or
Euroclear through a participant at least one business day prior to settlement.
CEDEL or Euroclear will instruct Citibank or Morgan, respectively, as the case
may be, to receive a beneficial interest in the Global Securities against
payment. Unless otherwise set forth in the Prospectus Supplement, payment will
include interest accrued on the beneficial interest in the Global Securities so
transferred from and including the last coupon payment date to and excluding
the settlement date, on the basis on which interest is calculated on the Debt
Securities. For transactions settling on the 31st of the month, payment will
include interest accrued to and excluding the first day of the following month.
Payment will then be made by Citibank or Morgan to the DTC participant's
account against delivery of the beneficial interest in the Global Securities.
After settlement has been completed, the beneficial interest in the Global
Securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the CEDEL or
Euroclear participant's account. The securities credit will appear the next
day (European time) and the cash debit will be back-valued to, and the interest
on the beneficial interest in Global Securities will accrue from, the value
date (which would be the preceding day when settlement occurred in New York).
If settlement is not completed on the intended value date (that is, the trade
fails), the CEDEL or Euroclear cash debit will be valued instead as of the
actual settlement date.
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CEDEL participants and Euroclear participants will need to make available
to the respective clearing systems the funds necessary to process same-day
funds settlement. The most direct means of doing so is to preposition funds
for settlement, either from cash on hand or existing lines of credit, as they
would for any settlement occurring within CEDEL or Euroclear. Under this
approach, they may take on credit exposure to CEDEL or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, participants can elect not to preposition funds and allow that credit
line to be drawn upon to finance settlement. Under this procedure, CEDEL
participants or Euroclear participants purchasing beneficial interest in Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the beneficial interests in the Global Securities were credited
to their accounts. However, interest on the beneficial interests in the Global
Securities would accrue from the value date. Therefore, in many cases the
investment income on the Global Securities earned during that one-day period
may substantially reduce or offset the amount of such overdraft charges,
although this result will depend on each participant's particular cost of
funds.
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending a beneficial
interest in Global Securities to Citibank or Morgan for the benefit of CEDEL
participants or Euroclear participants. The sale proceeds will be available to
the DTC seller on the settlement date. Thus, to the DTC participant a
cross-market transaction will settle no differently than a trade between two
DTC participants.
Trading between CEDEL or Euroclear Seller and DTC Purchaser. Due to time
zone differences in their favor, CEDEL and Euroclear participants may employ
their customary procedures to transactions in which the beneficial interest in
the Global Securities is to be transferred by the respective clearing system,
through Citibank or Morgan, to a DTC participant. The seller will send
instructions to CEDEL or Euroclear through a participant at least one business
day prior to settlement. In these cases, CEDEL or Euroclear will instruct
Citibank or Morgan, as appropriate, to deliver the beneficial interest in the
Global Securities to the DTC participant's account against payment. Payment
will include interest accrued on the beneficial interests in the Global
Securities from and including the last coupon payment date to and excluding the
settlement date on the basis on which interest is calculated on the Global
Securities. For transactions settling on the 31st of the month, payment will
include interest accrued to and excluding the first day of the following month.
The payment will then be reflected in the account of the CEDEL or Euroclear
participant the following day, and receipt of the cash proceeds in the CEDEL or
Euroclear participant's account would be back-valued to the value date (which
would be the preceding day, when settlement occurred in New York). Should the
CEDEL or Euroclear participant have a line of credit with its respective
clearing system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over that one-day period. If settlement is not completed on
the intended value date (that is, the trade fails), receipt of the cash
proceeds in the CEDEL or Euroclear participant's account would instead be
valued as of the actual settlement date.
Finally, day traders that use CEDEL or Euroclear and that purchase
beneficial interests in Global Securities from DTC participants for credit to
CEDEL participants or Euroclear participants should note that these trades
would automatically fail on the sale side unless affirmative action were taken.
At least three techniques should be readily available to eliminate this
potential problem:
(1) borrowing through CEDEL or Euroclear for one day (until the
purchase side of the day trade is reflected in their CEDEL or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(2) borrowing beneficial interests in the Global Securities in the
United States from a DTC participant no later than one day prior to
settlement, which would give beneficial interests in the Global
Securities sufficient time to be reflected in the appropriate CEDEL or
Euroclear account in order to settle the sale side of the trade; or
(3) staggering the value dates for the buy and sell sides of the
trade so that the value date for the purchase from the DTC participant is
at least one day prior to the value date for the sale to the CEDEL
participant or Euroclear participant.
20
<PAGE> 22
Although the DTC, CEDEL, and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of beneficial interests in Global
Securities among participants of the DTC, CEDEL, and Euroclear, they are under
no obligation to perform or continue to perform such procedures and such
procedures may be discontinued at any time.
CERTAIN UNITED STATES FEDERAL INCOME TAX
DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities, directly or
indirectly, through CEDEL or Euroclear (or through DTC if the Holder has an
address outside the United States) will be subject to the 30% United States
withholding tax that generally applies to payments of interest (including
original issue discount) on registered debt issued by United States persons,
unless (i) each clearing system, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business in the
chain of intermediaries between such beneficial owner and the United States
entity required to withhold tax complies with applicable certification
requirements, and (ii) such beneficial owner takes one of the following steps
to obtain an exemption or reduced tax rate:
Exemption for non-U.S. persons (Form W-8). Non-U.S. persons that
are beneficial owners (other than a beneficial owner that owns actually
or constructively 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote or a controlled foreign
corporation that is related to the Company through stock ownership) can
obtain a complete exemption from the withholding tax by filing a properly
completed Form W-8 (Certificate of Foreign Status). If the information
shown on Form W-8 changes, a new Form W-8 must be filed within 30 days of
such change.
Exemption for non-U.S. persons with effectively connected income
(Form 4224). A non-U.S. person, including a non-U.S. corporation or bank
with a United States branch, that is a beneficial owner and for which the
interest income is effectively connected with its conduct of a trade or
business in the United States, can obtain an exemption from the
withholding tax by filing a properly completed Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States).
Exemption or reduced rate for non-U.S. persons resident in treaty
countries (Form 1001). Non-U.S. persons that are beneficial owners that
are entitled to the benefits of an income tax treaty with the United
States can obtain an exemption or reduced tax rate (depending on the
treaty terms) by filing a properly completed Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for
a reduced rate, withholding tax will be imposed at that rate unless the
filer alternatively files Form W-8. Form 1001 may be filed by the
beneficial owner or the beneficial owner's agent.
Exemption for U.S. Persons (Form W-9). United States persons can
obtain a complete exemption from the withholding tax by filing a properly
completed Form W-9 (Request for Taxpayer Identification Number and
Certification).
Treasury Regulations, which will be applicable to payments made after
1999 (with certain transition rules), provide for the unification and
simplification of certain current certification procedures. Under these
regulations, a Form W-8 will replace Forms 1001 and 4224 and become the only
form necessary to obtain a withholding exemption or reduction for non-U.S.
Holders. Further, pursuant to these new regulations, special rules permit the
shifting of primary responsibility for withholding to certain financial
intermediaries acting on behalf of beneficial owners. Although a beneficial
owner will still be required to submit a Form W-8 to such an intermediary, such
intermediary generally will not be required to forward a Form W-8 received from
such beneficial owner to the withholding agent. Both U.S. Holders and non-U.S.
Holders are urged to consult their own tax advisors with respect to these new
regulations.
21
<PAGE> 23
UNITED STATES FEDERAL INCOME TAX REPORTING PROCEDURE
The beneficial owner of the Global Security or, in the case of a Form
1001 or a Form 4224 filer, his agent, files by submitting the appropriate form
to the entity through whom it directly holds the Global Security. For example,
if the beneficial owner is listed directly on the books of Euroclear or CEDEL
as the Holder of the Debt Security, the Internal Revenue Service ("IRS") Form
must be provided to Euroclear or CEDEL, as the case may be. Each person
through which a Debt Security is held must submit, on behalf of the beneficial
owner, the IRS Form (or in certain cases a copy thereof) under applicable
procedures to the person through which it holds the Debt Security, until the
IRS Form is received by the U.S. person who would otherwise be required to
withhold U.S. federal income tax from interest on the Debt Security. For
example, in the case of Debt Securities held through Euroclear or CEDEL, the
IRS Form (or a copy thereof) must be received by the U.S. depository of such
clearing agency. Applicable procedures include, if a beneficial owner of the
Debt Security provides an IRS Form W-8 to a securities clearing organization,
bank or other financial institution (a "financial institution") that holds the
Debt Security in the ordinary course of its trade or business on the owner's
behalf, that such financial institution certify to the person otherwise
required to withhold U.S. federal income tax from such interest, under
penalties of perjury, that such statement has been received from the beneficial
owner by it or by a financial institution between it and the beneficial owner
and that it furnish the payor with a copy thereof.
As used in this section on tax documentation requirements and the
following section ("Additional United States Federal Tax Considerations for
Non-U.S. Persons"), the term "U.S. person" means (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 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) a 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 U.S. persons have the authority to control all the trust's substantial
decisions. The terms "United States" and "U.S." means the United States of
America (including the States and the District of Columbia).
ADDITIONAL UNITED STATES FEDERAL TAX CONSIDERATIONS FOR NON-U.S. PERSONS
Any capital gain realized on the sale, exchange, redemption, or other
disposition of Debt Securities by a non-U.S. person will not be subject to
United States federal income or withholding taxes unless, in the case of an
individual, such Holder is present in the United States for 183 days or more in
the taxable year of the sale, exchange, redemption, or other disposition or
receipt and certain other conditions are met, or the gain is effectively
connected with a United States trade or business of the non-U.S. person.
Payments made on Debt Securities and proceeds from the sale of Debt
Securities received by a non-U.S. person will not be subject to a backup
withholding tax of 31% or to information reporting requirements unless, in
general, the Holder fails to comply with certain reporting procedures or
otherwise fails to establish an exemption from such tax or reporting
requirements under applicable provisions of the Internal Revenue Code (see
"Certain U.S. Federal Income Tax Documentation Requirements").
Debt Securities will not be subject to United States federal estate tax
as a result of the death of a Holder who is not a citizen or resident of the
United States at the time of death, unless such Holder at the time of death
actually or constructively owns 10 percent or more of the combined voting power
of all classes of stock of the Company or, at the time of such Holder's death,
payments of interest on such Debt Securities are effectively connected with the
conduct by such Holder of a trade or business in the United States.
This summary does not deal with all aspects of U.S. income and
withholding taxes or the application of any U.S. income or estate tax treaty
that may be relevant to foreign beneficial owners of the Global Securities,
including special categories of foreign investors who may not be eligible for
exemptions from U.S. withholding tax. Investors are advised to consult their
own tax advisors for specific tax advice concerning their holding and disposing
of beneficial interests in the Global Securities. Any additional requirements,
if applicable, will be set forth in the Prospectus Supplement.
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
22
<PAGE> 24
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.
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.
23
<PAGE> 25
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 the Company in connection with the sale and distribution
of the securities registered hereby:
<TABLE>
<S> <C>
SEC registration fee . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,384,091
Printing expenses . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,000
Blue Sky fees and expenses . . . . . . . . . . . . . . . . . . . . . . $ 40,000
Trustee's fees and expenses . . . . . . . . . . . . . . . . . . . . . $ 50,000
Accountants' fees and expenses . . . . . . . . . . . . . . . . . . . . $ 30,000
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . $ 200,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,000
-----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,794,091
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 14-2-202(b)(4) of the Georgia Business Corporation Code (the
"Georgia Code") provides that a corporation's articles of incorporation may
include a provision that eliminates or limits the personal liability of
directors for monetary damages to the corporation or its shareholders for 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 Georgia Code. Section
14-2-202(b)(4) also does not eliminate or limit the rights of WorldCom or any
shareholder to seek an injunction or other nonmonetary relief in the event of a
breach of a director's duty to the corporation and its shareholders.
Additionally, Section 14-2-202(b)(4) applies only to claims against a director
arising out of his 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 Georgia Code as outlined above.
Article Ten further provides that the liability of directors of WorldCom shall
be limited to the fullest extent permitted by amendments to Georgia law.
Sections 14-2-850 to 14-2-859, inclusive, of the Georgia Code govern the
indemnification of directors, officers, employees, and agents. Section
14-2-851 of the Georgia Code permits indemnification of a director of WorldCom
for liability incurred by him 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.
II-1
<PAGE> 26
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 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 Georgia
Code, 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 Georgia Code, 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 Georgia Code 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 Georgia Code 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 Georgia Code, or (4) for any transaction in which the director
obtained an improper personal benefit.
Section 14-2-857 of the Georgia Code provides that an officer of WorldCom
(but not an employee or agent generally) who is not a director has the
mandatory right of indemnification granted to directors under Section 14-2-852,
as described above. In addition, WorldCom may, as provided by WorldCom's
Second Amended and Restated Articles of Incorporation, 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 Georgia Code.
However, WorldCom's Second Amended and Restated Articles of Incorporation
prohibit indemnification of a director who did not believe in good faith that
his or her actions were in, or not contrary to, WorldCom's best interests.
WorldCom's Bylaws extend the indemnification available to officers under the
Georgia Code to employees and agents.
Reference is made to the form of Underwriting Agreement filed as Exhibit
1.1 with respect to indemnification of the Company, its directors and certain
officers by the Underwriters or by an agent, as the case may be.
ITEM 16. EXHIBITS
See Exhibit Index.
II-2
<PAGE> 27
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(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% 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 (1)(i) and (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.
(4) 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 herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(5) 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.
(6) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
II-3
<PAGE> 28
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains
a form of prospectus 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.
(7) The undersigned registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
II-4
<PAGE> 29
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 Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Jackson, State of
Mississippi, on June 15, 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 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
Carl J. Aycock* Director June 15, 1998
- -------------------------------------------
Carl J. Aycock
Max E. Bobbitt* Director June 15, 1998
- -------------------------------------------
Max E. Bobbitt
Director June ___, 1998
- -------------------------------------------
Steven M. Case
Chairman, President and
Chief Executive
Officer (Principal
Bernard J. Ebbers* Executive Officer) June 15, 1998
- -------------------------------------------
Bernard J. Ebbers
Francesco Galesi* Director June 15, 1998
- -------------------------------------------
Francesco Galesi
Stiles A. Kellett, Jr.* Director June 15, 1998
- -------------------------------------------
Stiles A. Kellett, Jr.
</TABLE>
II-5
<PAGE> 30
<TABLE>
<S> <C> <C>
John A. Porter* Director June 15, 1998
- -------------------------------------------
John A. Porter
Vice Chairman of the Board,
Chief Operations
Officer and Director
John W. Sidgmore* June 15, 1998
- -------------------------------------------
John W. Sidgmore
Chief Financial Officer and
Director (Principal
Financial Officer and
Principal Accounting
/s/ Scott D. Sullivan Officer) June 15, 1998
- -------------------------------------------
Scott D. Sullivan
Lawrence C. Tucker* Director June 15, 1998
- -------------------------------------------
Lawrence C. Tucker
*By: /s/ Scott D. Sullivan
- -------------------------------------------
Scott D. Sullivan
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 31
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
1.1 Form of Underwriting Agreement Standard Provisions for Debt Securities, with form of Terms Agreement
(incorporated by reference to Exhibit No. 1.1 to the Registrant's Registration Statement on Form S-3 No. 333-
20911, filed January 31, 1997).
2.1 Purchase and Sale Agreement by and among America Online, Inc., ANS Communications, Inc. and WorldCom, Inc.
("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))*
2.2 Amended and Restated Agreement and Plan of Merger by and among 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))*
2.3 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))*
2.6 Stockholders Agreement by and among H&R Block, Inc., H&R Block Group, Inc., and WorldCom dated as of
September 7, 1997 (incorporated herein by reference to Exhibit 2.2 to WorldCom's Current Report on Form 8-K
dated September 7, 1997 (filed September 17, 1997) (File 0-11258))*
2.7 Standstill Agreement by and among H&R Block, Inc., H&R Block Group, Inc. and WorldCom, dated as of September
7, 1997 (incorporated herein by reference to Exhibit 2.3 to WorldCom's Current Report on Form 8-K dated
September 7, 1997 (filed September 17, 1997) (File 0-11258))*
4.1 Indenture dated March 1, 1997 by and between WorldCom, Inc. and Mellon Bank, N.A., as trustee (under which The
Chase Manhattan Bank now acts as successor 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))
5.1 Validity Opinion of WorldCom Counsel (relating to Registration Statement No. 333-45067)++
5.2 Validity Opinion of WorldCom Counsel (relating to Registration Statement No. 333-20911) (incorporated herein by
reference to Exhibit 5.1 to Registration Statement No. 333-20911)
12.1 Statement re Computation of Ratio of Earnings to Fixed Charges
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
23.5 Consent of Price Waterhouse LLP
</TABLE>
II-7
<PAGE> 32
<TABLE>
<S> <C>
23.6 Consent of KPMG Peat Marwick LLP
23.7 Consent of WorldCom Counsel ++
24.1 Power of Attorney ++
25.1 Statement of Eligibility of Trustee on Form T-1 with respect to the Indenture ++
</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 12.1
WORLDCOM, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In Thousands of Dollars)
<TABLE>
<CAPTION>
For the Three Months
Year Ended December 31, Ended March 31,
----------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Pretax income (loss) from continuing operations $209,920 $(50,697) $428,178 $(2,103,259) $ 662,891 $ 78,800 $(162,184)
Fixed charges, net of capitalized interest 47,316 59,689 272,029 273,733 442,015 101,980 115,522
-------- -------- -------- ----------- ---------- -------- ---------
Earnings $257,236 $ 8,992 $700,207 $(1,829,526) $1,104,906 $180,780 $ (46,662)
======== ======== ======== =========== ========== ======== =========
Fixed Charges:
Interest cost $ 38,657 $ 49,203 $257,803 $ 262,562 $ 482,635 $103,160 $ 153,273
Amortization of financing costs 1,792 2,086 2,811 1,742 -- -- --
Interest factor of rent expense 9,967 10,300 16,298 19,004 47,280 11,820 13,274
-------- -------- -------- ----------- ---------- -------- ---------
Fixed charges $ 50,416 $ 61,589 $276,912 $ 283,308 $ 529,915 $114,980 $ 166,547
======== ======== ======== =========== ========== ======== =========
Deficiency of earnings to combined fixed charges
and preferred stock dividends $ -- $(52,597) $ -- $(2,112,834) $ -- $ -- $(213,209)
======== ======== ======== =========== ========== ======== =========
Ratio of earnings to combined fixed charges
and preferred stock dividends 5.10:1 0.15:1 2.53:1 N/A 2.09:1 1.57:1 N/A
======== ======== ======== =========== ========== ======== =========
</TABLE>
See Notes to Computation of Ratio of Earnings to Fixed Charges
<PAGE> 2
NOTES TO COMPUTATION OF RATIO OF EARNINGS TO
FIXED CHARGES
(1) In the first quarter of 1998, the Company recorded a $429 million
charge for in-process research and development related to the
CompuServe Merger and AOL Transaction. The charge was based on a
valuation analysis of certain technologies acquired in these
transactions, including the companies' virtual private data networks,
application hosting products, security systems, next generation network
architectures, and certain other identified research and development
projects purchased in the CompuServe Merger and AOL Transaction. At the
date of the CompuServe Merger and AOL Transaction, the technological
feasibility of the acquired technology had not yet been established and
the technology had no future alternative uses.
In addition, the Company recorded a one-time charge of $69.5 million
for employee severance, alignment charges and direct merger costs
associated with the BFP Merger.
(2) Results for 1996 include a $2.14 billion charge for in-process
research and development related to the MFS Merger. The charge is based
upon a valuation analysis of the technologies of MFS' worldwide
information system, the Internet network expansion system of UUNET, and
certain other identified research and development projects purchased in
the MFS Merger. The expense includes $1.6 billion associated with UUNET
and $0.54 billion related to MFS.
Additionally, 1996 results include other after-tax charges of $121
million for employee severance, employee compensation charges,
alignment charges, and costs to exit unfavorable telecommunications
contracts and $344 million after-tax write-down of operating assets
within the Company's core and non-core business. On a pre-tax basis,
these charges totaled $600.1 million.
(3) In 1995, Metromedia converted its Series I Preferred Stock into Common
Stock, exercised warrants to acquire Common Stock and immediately sold
its position of 61,699,096 shares of Common Stock in a public offering.
In connection with the preferred stock conversion, WorldCom made a
non-recurring payment of $15.0 million to Metromedia, representing a
discount to the minimum nominal dividends that would have been payable
on the Series I Preferred Stock prior to the September 15, 1996
optional call date of approximately $26.6 million (which amount
included an annual dividend requirement of $24.5 million plus accrued
dividends to such call date).
(4) As a result of the IDB Merger, the Company initiated plans to
reorganize and restructure its management and operational organization
and facilities to eliminate duplicate personnel, physical facilities
and service capacity, to abandon certain products and marketing
activities, and to take further advantage of the synergies available to
the combined entities. Also, during the fourth quarter of 1993, plans
were approved to reduce IDB's cost structure and to improve
productivity. Accordingly, in 1994 and 1993, the Company charged to
operations the estimated costs of such reorganization and restructuring
activities, including employee severance, physical facility abandonment
and duplicate service capacity. These costs totaled $43.7 million in
1994 and $5.9 million in 1993.
Also, during 1994, the Company incurred direct merger costs of $15.0
million related to the IDB Merger. These costs include professional
fees, proxy solicitation costs, travel and related expenses and certain
other direct costs attributable to the IDB Merger.
(5) In connection with certain debt refinancing, the Company recognized in
1996 and 1993 extraordinary items of approximately $4.2 million and
$7.9 million, respectively, net of income taxes, consisting of
unamortized debt discount, unamortized issuance cost and prepayment
fees. Additionally, in 1996 the Company recorded an extraordinary item
of $20.2 million, net of income taxes, related to a write-off deferred
international costs.
<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 (Pre-Effective Amendment No. 1 to Registration Statement No. 333-45067
and Post-Effective Amendment No. 1 to Registration Statement No. 333-20911) 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. (Pre-Effective Amendment No. 1 to Registration Statement
No. 333-45067 and Post-Effective Amendment No. 1 to Registration Statement No.
333-20911) 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 amendment to 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
