-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QE/NFwS7kU6xuLVd2L3crCoDc+Icg4p+RhJI9TZXgzIRaaYPo7Yav5pVn2d/3A3r LDFdfheVjhs2vKGDZV7msQ== 0000950123-96-004819.txt : 19960903 0000950123-96-004819.hdr.sgml : 19960903 ACCESSION NUMBER: 0000950123-96-004819 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19960830 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCI COMMUNICATIONS CORP CENTRAL INDEX KEY: 0000064079 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 520886267 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-11193 FILM NUMBER: 96624494 BUSINESS ADDRESS: STREET 1: 1801 PENNSYLVANIA AVE N W CITY: WASHINGTON STATE: DC ZIP: 20006 BUSINESS PHONE: 2028721600 MAIL ADDRESS: STREET 1: 1801 PENNSYVANIA AVENUE NW CITY: WASHINGTON STATE: DC ZIP: 20006 S-3 1 MCI COMMUNICATIONS CORPORATION 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 30, 1996. REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------------ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------------------ MCI COMMUNICATIONS CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 52-0886267 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.)
1801 PENNSYLVANIA AVENUE, N.W. WASHINGTON, D.C. 20006 (202) 872-1600 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ------------------------------------ MICHAEL H. SALSBURY, ESQ. GENERAL COUNSEL MCI COMMUNICATIONS CORPORATION 1801 PENNSYLVANIA AVENUE, N.W. WASHINGTON, D.C. 20006 (202) 872-1600 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------------------ Copies to: PETER S. KOLEVZON, ESQ. NORMAN D. SLONAKER, ESQ. KRAMER, LEVIN, BROWN & WOOD LLP NAFTALIS & FRANKEL ONE WORLD TRADE CENTER 919 THIRD AVENUE NEW YORK, NEW YORK 10048 NEW YORK, NEW YORK 10022
------------------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of the Registration Statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / ------------------------------------ CALCULATION OF REGISTRATION FEE - -------------------------------------------------------------------------------- PROPOSED PROPOSED AMOUNT MAXIMUM MAXIMUM TITLE OF EACH CLASS TO BE OFFERING PRICE AGGREGATE AMOUNT OF OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT* OFFERING PRICE** REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------ Debt Securities................... $1,000,000,000 100% $1,000,000,000 $344,828 - ------------------------------------------------------------------------------------------------------------------------ Common Stock, par value $0.10 per share........................... 10,000,000 shares*** -- -- --
- -------------------------------------------------------------------------------- *Estimated, pursuant to Rule 457 under the Securities Act of 1933, as amended, solely for purposes of calculating the registration fee. **This may include an additional principal amount of Debt Securities which may be issued with an original issue discount such that the aggregate initial public offering price of the Debt Securities will not exceed $1,000,000,000. The initial public offering price of any Debt Security denominated in any foreign currency or currency unit shall be the U.S. dollar equivalent thereof at the time of sale. ***Issuable upon the conversion of the Debt Securities offered hereby. This Registration Statement also covers such indeterminate number of shares of Common Stock as may be issuable as a result of the antidilution provisions of any convertible Debt Securities. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS SUPPLEMENT DATED AUGUST 30, 1996 PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED , 1996) $1,000,000,000 MCI COMMUNICATIONS CORPORATION SENIOR/SUBORDINATED MEDIUM-TERM NOTES DUE 9 MONTHS OR MORE FROM DATE OF ISSUE ------------------------------ MCI Communications Corporation (the "Company") may offer from time to time up to $1,000,000,000 (or the equivalent thereof in one or more foreign or composite currencies) aggregate principal amount of its senior or subordinated Medium-Term Notes (the "Notes" or "Medium-Term Notes"). Unless otherwise specified in an applicable pricing supplement hereto (each, a "Pricing Supplement"), the Notes will bear interest at fixed or variable rates ("Fixed Rate Notes" and "Floating Rate Notes," respectively). The applicable Pricing Supplement will specify the interest rates on Fixed Rate Notes, the method of determining the interest rates on Floating Rate Notes and whether such Floating Rate Note is a Regular Floating Rate Note, a Floating Rate/Fixed Rate Note or an Inverse Floating Rate Note, the terms of redemption, if any, at the option of the Company or repayment, if any, at the option of the holders of the Notes (the "Holders"), terms for sinking fund payments, if any, the stated maturity and other variable terms and the senior or subordinated ranking of the Notes. The terms of the Notes are subject to change by the Company, but no such change will affect any Note theretofore issued or as to which an offer to purchase has been accepted by the Company. The Notes will have maturities of 9 months or more from their dates of issue. See "Description of Medium-Term Notes." The Notes will be issued in denominations of $1,000 or integral multiples thereof, in fully registered certificated form ("Certificated Notes") or book-entry form ("Book-Entry Notes"). Each Book-Entry Note will be represented by one or more fully registered global securities (the "Global Securities") deposited with or on behalf of The Depository Trust Company (or such other depositary identified in the applicable Pricing Supplement) (the "Depositary") and registered in the name of the Depositary or the Depositary's nominee. Beneficial interests in Global Securities will be shown on, and transfers thereof will be effected only through, records maintained by the Depositary (with respect to its participants) and by its participants (with respect to beneficial owners). Owners of beneficial interests in Global Securities will be entitled to physical delivery of Notes in certificated form equal in principal amount to their respective beneficial interest only under the limited circumstances described herein. See "Description of Medium-Term Notes--Book-Entry Notes." FOR DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES, SEE "CERTAIN INVESTMENT CONSIDERATIONS" ON PAGE 2 OF THE PROSPECTUS. ------------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, THE PROSPECTUS OR ANY PRICING SUPPLEMENT RELATING HERETO. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - -------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- PRICE TO AGENTS' COMMISSIONS PROCEEDS TO PUBLIC(1) AND DISCOUNTS(2) COMPANY(2)(3) - ---------------------------------------------------------------------------------------------------------------- Per Note.............................. 100% .125%-.750% 99.250%-99.875% - ---------------------------------------------------------------------------------------------------------------- Total(4).............................. $1,000,000,000 $1,250,000-$7,500,000 $992,500,000-$998,750,000 - ----------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- (1) Unless otherwise specified in the applicable Pricing Supplement, Notes will be issued at 100% of their principal amount. (2) The Company will pay a commission to the Agents in the form of a discount, depending upon the rank and maturity of the Note, ranging from .125% to .750% (or, with respect to Notes in which the stated maturity is in excess of 30 years, such commission as shall be agreed upon by the Company and the related Agent at the time of sale) of the principal amount of any Notes sold through them as Agents and may sell Notes to the Agents, as principal, for resale to investors and other purchasers at varying prices related to prevailing market prices at the time of resale, to be determined by the related Agent or, if so specified in an applicable Pricing Supplement, for resale at a fixed offering price. Unless otherwise specified in the applicable Pricing Supplement, any Note sold to an Agent as principal shall be purchased by such Agent at a price equal to 100% of the principal amount thereof less a percentage equal to the commission applicable to an agency sale of a Note of identical rank and maturity. The Company has agreed to indemnify the Agents against or make contributions relating to certain liabilities, including liabilities under the Securities Act of 1933. (3) Before deducting expenses payable by the Company estimated at $1,050,000. (4) Or the equivalent thereof in one or more foreign or composite currencies. ------------------------------ The Notes are being offered on a continuing basis by the Company through Bear, Stearns & Co. Inc., Citicorp Securities, Inc., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities Inc. and such other agents as the Company may select from time to time (each, an "Agent" and together, the "Agents"), who have agreed to use their best efforts to solicit offers to purchase the Notes, and Notes may also be sold to the Agents, as principal, for resale to purchasers. The Company reserves the right to sell Notes directly to purchasers on its own behalf. The Notes will not be listed on any securities exchange, and there can be no assurance that the Notes will be sold, or that there will be a secondary market for the Notes or as to the liquidity of such market if one develops. The Company reserves the right to withdraw, cancel or modify the offer made hereby without notice. No termination date for the offering of Notes has been established. The Company or an Agent, if it solicits the offer on an agency basis, may reject any offer to purchase Notes in whole or in part. See "Plan of Distribution." ------------------------------ BEAR, STEARNS & CO. INC. CITICORP SECURITIES, INC. MERRILL LYNCH & CO. J.P. MORGAN & CO. ------------------------------ THE DATE OF THIS PROSPECTUS SUPPLEMENT IS , 1996. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus supplement and the accompanying prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. 3 IN CONNECTION WITH THE OFFERING OF NOTES PURCHASED BY ONE OR MORE AGENTS AS PRINCIPAL ON A FIXED PRICE BASIS, SUCH AGENT(S) MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH NOTES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. DESCRIPTION OF MEDIUM-TERM NOTES GENERAL The Notes are to be issued as one or more series of Securities (as defined in the attached Prospectus), in an aggregate principal amount not to exceed such maximum as may be established from time to time by the Board of Directors of the Company, and will be either Senior Securities or Subordinated Securities of the Company (each as defined in the attached Prospectus). Whether an offering of Notes will constitute Senior Securities ("Senior Notes") or Subordinated Securities ("Subordinated Notes") of the Company will be set forth in the applicable Pricing Supplement. The Senior Notes are to be issued under an Indenture (the "Senior Indenture") between the Company and Citibank, N.A. ("Citibank"), as Trustee, dated as of February 17, 1995, and the Subordinated Notes are to be issued under an Indenture between the Company and Bankers Trust Company ("Bankers Trust"), as Trustee, dated as of October 15, 1989, as amended by the Trust Indenture Reform Act of 1990 (the "Subordinated Indenture" and, together with the Senior Indenture, the "Indentures"), which are more fully described in the attached Prospectus. The following summaries of certain provisions of the Indentures do not purport to be complete, and are subject to, and qualified in their entirety by reference to, all of the provisions of the Indentures, including the definitions therein of certain terms. The terms and provisions set forth below will apply to each Note unless otherwise specified in the applicable Pricing Supplement. The Indentures do not limit the aggregate principal amount of Senior Securities or Subordinated Securities which may be issued thereunder. The Company may, from time to time, without the consent of the Holders, provide for the issuance of Notes or other Securities under the Indentures in addition to the $1,000,000,000 principal amount of Senior Securities and Subordinated Securities available for issuance as of the date of this Prospectus Supplement. All Senior Securities, including the Senior Notes, issued and to be issued will be unsecured and will rank pari passu (equally and ratably) with all other unsecured and unsubordinated indebtedness of the Company from time to time outstanding. All Subordinated Securities, including the Subordinated Notes, issued and to be issued will be unsecured and will be subordinated as set forth under "Description of Subordinated Securities -- Subordination" in the attached Prospectus. Neither of the Indentures limits the amount of unsecured indebtedness of the Company or any subsidiary. Nothing in the Indentures or in the terms of the Securities will prohibit the issuance by the Company of securities representing subordinated indebtedness that is senior or junior to the Subordinated Securities or will limit the payment of dividends by the Company or its acquisition of any of its equity securities. Nothing in the Indentures affords Holders of Notes protection in the event of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction involving the Company. However, the Senior Indenture does contain certain restrictive covenants with respect to the business of the Company and its subsidiaries and liens on and the sale or lease of the stock or certain assets of MCI Telecommunications Corporation, a wholly-owned subsidiary of the Company, which may make more difficult or discourage any such transaction. The consummation of any highly leveraged transaction, reorganization, restructuring, merger or similar transaction involving the Company could cause a material decline in the credit quality of the outstanding Notes. See "Description of Senior Securities - -- Covenants" in the attached Prospectus. The Company's assets consist principally of the stock in its subsidiaries. Therefore, its rights and the rights of its creditors, including the Holders, to participate in the assets of any subsidiary upon the latter's S-2 4 liquidation or recapitalization or otherwise will be subject to the prior claims of the subsidiary's creditors, except to the extent that claims of the Company itself as a creditor of the subsidiary may be recognized. The Notes will be offered on a continuing basis and will mature on any day 9 months or more from their dates of issue, as selected by the purchaser and agreed to by the Company. Unless otherwise specified in the applicable Pricing Supplement, interest-bearing Notes will either be Fixed Rate Notes or Floating Rate Notes as specified in the applicable Pricing Supplement. The Notes may also be issued with original issue discount and may or may not pay any interest. The terms of the Notes are subject to change by the Company from time to time, but no such change will affect any Note theretofore issued or as to which an offer has been accepted by the Company. Unless otherwise specified in the applicable Pricing Supplement, each Note will be issued in fully registered form as a Certificated Note or a Book-Entry Note and in denominations of $1,000 or integral multiples thereof. Unless otherwise specified in the applicable Pricing Supplement, the Notes will be denominated and payable in U.S. dollars. No service charge will be made for any registration of transfer or exchange of Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Interest rates offered by the Company with respect to the Notes may differ depending upon, among other things, the aggregate principal amount of Notes purchased in any single transaction. Notes with similar variable terms but different interest rates, as well as Notes with different variable terms, may be offered concurrently to different investors. Interest rates or formulas and other terms of Notes are subject to change by the Company from time to time, but no such change will affect any Note already issued or as to which an offer to purchase has been accepted. Book-Entry Notes may be transferred or exchanged only in accordance with the rules of the Depositary. Principal, premium, if any, and interest payments on Book-Entry Notes represented by a Global Security will be made in immediately available funds to the Depositary or its nominee, as the case may be, as the Holder of such Global Security. See "Book-Entry Notes." The principal of, and premium, if any, and interest on, Certificated Notes will be payable, the transfer of such Certificated Notes will be registerable, and such Certificated Notes will be exchangeable for Certificated Notes of the same series and rank bearing identical terms and provisions, at the office or agency of the Company in the Borough of Manhattan, The City of New York designated for such purpose. Payment of interest on any Interest Payment Date, other than interest at maturity (or on any date of redemption or repayment, if a Certificated Note is redeemed or repaid prior to maturity), may be made at the option of the Company by check mailed to the address of the Holder in whose name the applicable Certificated Note is registered as of the close of business on the related Regular Record Date (hereafter defined) as shown on the security register maintained by the Company or an agent thereof. Notwithstanding the above, a Holder of $10,000,000 (or the equivalent thereof in foreign or composite currencies) or more in aggregate principal amount of the same series of Notes (whether having identical or different terms and provisions) shall be entitled to receive payments of interest (other than at maturity or upon redemption or repayment, if applicable) by wire transfer of immediately available funds if appropriate wire transfer instructions in writing have been received by the appropriate Trustee at its corporate trust office in The City of New York on or before the Regular Record Date immediately preceding the applicable Interest Payment Date. Such wire instructions, upon receipt by the appropriate Trustee, shall remain in effect until revoked by such Holder. Principal, premium, if any, and interest payable at maturity (or upon redemption or repayment, if applicable) on each Note will be paid in immediately available funds against presentation of such Note at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York. Interest payable at maturity (or upon redemption or repayment, if applicable) will be payable to the person to whom the principal of the applicable Note shall be paid. Unless otherwise specified in the applicable Pricing Supplement, interest payable on any Interest Payment Date and at maturity (or upon redemption or repayment, if applicable) shall be the amount of interest accrued from and including the immediately preceding Interest Payment Date in respect of which S-3 5 interest has been paid or duly made available for payment (or from and including the date of issue, if no interest has been paid or duly made available for payment with respect to such Note) to but excluding such Interest Payment Date or the date of maturity (or the date of redemption or repayment, if any). As used herein, "Business Day" means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or executive order to close in The City of New York; provided, however, that, with respect to Notes denominated and/or payable in a currency or composite currency other than United States dollars, such day is also not a day on which banking institutions are authorized or required by law or executive order to close in the Principal Financial Center (hereafter defined) of the country issuing such currency or composite currency (or, in the case of the European Currency Unit ("ECU"), is not a day that appears as an ECU non-settlement day on the display designated as "ISDE" on the Reuter Monitor Money Rates Service (or a day so designated by the ECU Banking Association) or, if ECU non-settlement days do not appear on that page (and are not so designated), is not a day on which payments in ECU cannot be settled in the international interbank market); provided, further, that, with respect to Notes as to which LIBOR or LIBID is an applicable Interest Rate Basis (hereafter defined), such day is also a London Banking Day (hereafter defined). "London Banking Day" means any day (i) if the Index Currency is other than ECU, on which dealings in such Index Currency are transacted in the London interbank market or (ii) if the Index Currency is ECU, that is not designated as an ECU non-settlement day on the display designated as "ISDE" on the Reuter Monitor Money Rates Service (or a day so designated by the ECU Banking Association) or, if ECU non-settlement days do not appear on that page (and are not so designated), is not a day on which payments in ECU cannot be settled in the international interbank market. "Principal Financial Center" means the capital city of the country issuing the currency or composite currency in which any payment in respect of the Notes is to be made or, solely with respect to the calculation of LIBOR or LIBID, the Index Currency, except that with respect to United States dollars, Deutsche Marks, Dutch Guilders, Italian Lire, Swiss Francs and ECUs, the Principal Financial Center shall be The City of New York, Frankfurt, Amsterdam, Milan, Zurich and Luxembourg, respectively. REDEMPTION AT OPTION OF THE COMPANY The Notes may be subject to redemption by the Company on and after the initial redemption date, if any, fixed at the time of sale and set forth in the applicable Pricing Supplement (the "Initial Redemption Date"). If no Initial Redemption Date is indicated with respect to a Note, such Note will not be redeemable prior to maturity. On and after the Initial Redemption Date with respect to any Note, such Note will be redeemable in whole or in part in increments of $1,000 (provided that any remaining principal amount thereof is at least $1,000) at the option of the Company at a redemption price (the "Redemption Price"), determined in accordance with the following paragraph, together with interest payable thereon to the date of redemption, on notice given not more than 60 nor less than 30 days prior to the date of redemption. The Redemption Price for each Note subject to redemption at the option of the Company shall initially be equal to a certain percentage (the "Initial Redemption Percentage") of the principal amount of such Note to be redeemed and, if so provided, shall decline at each anniversary of the Initial Redemption Date with respect to such Note by a percentage (the "Annual Redemption Percentage Reduction") of the principal amount to be redeemed until the Redemption Price is 100% of such principal amount. The Initial Redemption Percentage and any Annual Redemption Percentage Reduction with respect to each Note subject to redemption prior to maturity will be fixed at the time of sale and set forth in the applicable Pricing Supplement. REPAYMENT AT OPTION OF THE HOLDER The Notes may be subject to repayment at the option of the Holders thereof in accordance with the terms of the Notes on their respective optional repayment dates, if any, fixed at the time of sale and set forth in the applicable Pricing Supplement (the "Repayment Dates"). If no Repayment Date is indicated with respect to a Note, such Note will not be repayable at the option of the Holder prior to maturity. On any Repayment Date S-4 6 with respect to any Note, such Note will be repayable in whole or in part in increments of $1,000 (provided that any remaining principal amount thereof is at least $1,000) at the option of the Holder thereof at a price equal to 100% of the principal amount to be repaid, together with interest thereon payable to the Repayment Date, upon receipt of a duly completed Note and form thereon entitled "Option to Elect Repayment" at the office or agency of the Company maintained for that purpose not more than 60 nor less than 30 days prior to the Repayment Date. Exercise of the repayment option by a Holder shall be irrevocable. While the Book-Entry Notes are represented by the Global Securities held by or on behalf of the Depositary, and registered in the name of the Depositary or the Depositary's nominee, the option for repayment may be exercised by the applicable Participant (hereafter defined) that has an account with the Depositary, on behalf of the beneficial owners of the Global Security or Securities representing such Book-Entry Notes, by delivering a written notice substantially similar to the above-mentioned form to the appropriate Trustee at its Corporate Trust Office (or such other address of which the Company shall from time to time notify the Holders), not more than 60 nor less than 30 days prior to the applicable Repayment Date. Notices of election from Participants on behalf of beneficial owners of the Global Security or Securities representing such Book-Entry Notes to exercise their option to have such Book-Entry Notes repaid must be received by the appropriate Trustee by 5:00 P.M., New York City time, on the last day for giving such notice. In order to ensure that a notice is received by the appropriate Trustee on a particular day, the beneficial owner of the Global Security or Securities representing such Book-Entry Notes must so direct the applicable Participant before such Participant's deadline for accepting instructions for that day. Different firms may have different deadlines for accepting instructions from their customers. Accordingly, each beneficial owner of the Global Security or Securities representing Book-Entry Notes should consult the Participant through which it owns its interest therein for the respective deadlines for such Participant. All notices shall be executed by a duly authorized officer of such Participant (with signature guaranteed) and shall be irrevocable. In addition, beneficial owners of the Global Security or Securities representing Book-Entry Notes shall effect delivery at the time such notices of election are given to the Depositary by causing the applicable Participant to transfer such beneficial owner's interest in the Global Security or Securities representing such Book-Entry Notes, on the Depositary's records, to the Trustee. See "-- Book-Entry Notes." If applicable, the Company will comply with the requirements of Rule 14e-1 under the Securities Exchange Act of 1934, as amended, and any other securities laws or regulations in connection with any such repayment. The Company may, in its discretion, at any time purchase Notes at any price or prices in the open market or otherwise. Notes so purchased by the Company may, at the discretion of the Company, be held, resold or surrendered to the Trustee for cancellation. INTEREST General Unless otherwise specified in the applicable Pricing Supplement, each interest-bearing Note will bear interest from its date of issue at the rate per annum, in the case of a Fixed Rate Note, or pursuant to the interest rate formula, in the case of a Floating Rate Note, specified in the applicable Pricing Supplement, until the principal thereof is paid or duly made available for payment. Interest on Fixed Rate Notes and Floating Rate Notes will be payable in arrears on each Interest Payment Date and on the Maturity Date. Unless otherwise specified in the applicable Pricing Supplement, the first payment of interest on any such Note originally issued between a Regular Record Date and the related Interest Payment Date will be made on the Interest Payment Date immediately following the next succeeding Regular Record Date to the Holder on such next succeeding Regular Record Date. FIXED RATE NOTES Unless otherwise specified in the applicable Pricing Supplement, the "Interest Payment Dates" for Senior Fixed Rate Notes will be June 1 and December 1 and at maturity (or upon redemption or repayment, if applicable). The "Regular Record Date" for Senior Fixed Rate Notes will be the May 15 or November 15 S-5 7 immediately preceding the June 1 or December 1 Interest Payment Date. Unless otherwise specified in an applicable Pricing Supplement, the "Interest Payment Dates" for Subordinated Fixed Rate Notes will be June 15 and December 15 and at maturity (or upon redemption or repayment, if applicable). The "Regular Record Date" for Subordinated Fixed Rate Notes will be the June 1 or December 1 immediately preceding the June 15 or December 15 Interest Payment Date. Unless otherwise specified in the applicable Pricing Supplement, interest on the Fixed Rate Notes will be computed on the basis of a 360-day year of twelve 30-day months. If any Interest Payment Date or the date of maturity (or the date of redemption or repayment, if any) on a Fixed Rate Note falls on a day that is not a Business Day, the required payment of principal, premium, if any, and interest shall be made on the next Business Day as if it were made on the date such payment was due, and no interest on such payment shall accrue for the period from and after such Interest Payment Date or the date of maturity (or the date of redemption or repayment, if any), as the case may be, to such next Business Day. FLOATING RATE NOTES Unless otherwise specified in the applicable Pricing Supplement, Floating Rate Notes will be issued as described below. The applicable Pricing Supplement will specify the interest terms with respect to which each Floating Rate Note is being delivered, including (i) whether such Floating Rate Note is a "Regular Floating Rate Note," a "Floating Rate/Fixed Rate Note" or an "Inverse Floating Rate Note"; (ii) the Fixed Rate Commencement Date and Fixed Interest Rate, as applicable; (iii) Interest Rate Basis or Bases; (iv) Initial Interest Rate, Interest Reset Period and Dates; (v) Regular Record Dates; (vi) Interest Payment Period and Dates; (vii) Index Maturity; (viii) Maximum Interest Rate and Minimum Interest Rate, if any; and (ix) Spread and/or Spread Multiplier, if any, each as defined below. If one or more of the applicable Interest Rate Bases is LIBOR or the CMT Rate, the applicable Pricing Supplement will also specify the Index Currency and Designated LIBOR Page or the Designated CMT Maturity Index and Designated CMT Telerate Page, respectively, as defined below. The interest rate borne by the Floating Rate Notes will be determined as follows: (i) Unless such Floating Rate Note is designated as a "Floating Rate/Fixed Rate Note," an "Inverse Floating Rate Note" or as having an Addendum relating to such interest rate attached, such Floating Rate Note will be designated as a "Regular Floating Rate Note" and, except as described below or in the applicable Pricing Supplement, will bear interest at the rate determined by reference to the applicable Interest Rate Basis or Bases (a) plus or minus the applicable Spread, if any, and/or (b) multiplied by the applicable Spread Multiplier, if any. Commencing on the first Interest Reset Date, the rate at which interest on such Regular Floating Rate Note shall be payable shall be reset as of each Interest Reset Date; provided, however, that the interest rate in effect for the period from the date of issue to the first Interest Reset Date will be the Initial Interest Rate. (ii) If such Floating Rate Note is designated as a "Floating Rate/Fixed Rate Note," then, except as described below or in the applicable Pricing Supplement, such Floating Rate/Fixed Rate Note will bear interest at the rate determined by reference to the applicable Interest Rate Basis or Bases (a) plus or minus the applicable Spread, if any, and/or (b) multiplied by the applicable Spread Multiplier, if any. Commencing on the first Interest Reset Date, and on each Interest Reset Date thereafter, the rate at which interest on such Floating Rate/Fixed Rate Note shall be payable shall be reset as of such Interest Reset Date; provided, however, that (y) the interest rate in effect for the period from the date of issue to the first Interest Reset Date will be the Initial Interest Rate and (z) the interest rate in effect commencing on the Fixed Rate Commencement Date to the date of maturity (or the date of redemption or repayment, if any) shall be the Fixed Interest Rate, if such rate is specified in the applicable Pricing Supplement, or, if no such Fixed Interest Rate is so specified, the interest rate in effect thereon on the day immediately preceding the Fixed Rate Commencement Date. (iii) If such Floating Rate Note is designated as an "Inverse Floating Rate Note," then, except as described below or in the applicable Pricing Supplement, such Inverse Floating Rate Note will bear S-6 8 interest at the Fixed Interest Rate minus the rate determined by reference to the applicable Interest Rate Basis or Bases (a) plus or minus the applicable Spread, if any, and/or (b) multiplied by the applicable Spread Multiplier, if any; provided, however, that, unless otherwise specified in the applicable Pricing Supplement, the interest rate thereon will not be less than zero. Commencing on the first Interest Reset Date, and on each Interest Reset Date thereafter, the rate at which interest on such Inverse Floating Rate Note shall be payable shall be reset as of such Interest Reset Date; provided, however, that the interest rate in effect for the period from the date of issue to the first Interest Reset Date will be the Initial Interest Rate. The "Spread" is the number of basis points to be added to or subtracted from the related Interest Rate Basis or Bases applicable to such Floating Rate Note. The "Spread Multiplier" is the percentage of the related Interest Rate Basis or Bases applicable to such Floating Rate Note by which such Interest Rate Basis or Bases will be multiplied to determine the applicable interest rate on such Floating Rate Note. The "Index Maturity" is the period to maturity of the instrument or obligation with respect to which the related Interest Rate Basis or Bases will be calculated. Notwithstanding the foregoing, if such Floating Rate Note is designated as having an Addendum attached as specified on the face thereof, such Floating Rate Note shall bear interest in accordance with the terms described in such Addendum and the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement, the interest rate with respect to each Interest Rate Basis will be determined in accordance with the applicable provisions below. Except as set forth above or in the applicable Pricing Supplement, the interest rate in effect on each day shall be (i) if such day is an Interest Reset Date, the interest rate determined as of the Interest Determination Date (hereafter defined) immediately preceding such Interest Reset Date or (ii) if such day is not an Interest Reset Date, the interest rate determined as of the Interest Determination Date immediately preceding the most recent Interest Reset Date. Interest on Floating Rate Notes will be determined by reference to (i) the CD Rate, (ii) the CMT Rate, (iii) the Commercial Paper Rate, (iv) the Federal Funds Rate, (v) LIBOR, (vi) LIBID, (vii) the Prime Rate, (viii) the Treasury Rate, or (ix) such other interest rate basis or interest rate formula as may be specified in the applicable Pricing Supplement (each, an "Interest Rate Basis"); provided, however, that the interest rate in effect on a Floating Rate Note for the period from the date of issue to the first Interest Reset Date will be the Initial Interest Rate; provided, further, that with respect to a Floating Rate/Fixed Rate Note, the interest rate commencing on the Fixed Rate Commencement Date to the Maturity Date shall be the Fixed Interest Rate, if such rate is specified in the applicable Pricing Supplement or, if no such Fixed Interest Rate is so specified, the interest rate in effect thereon on the day immediately preceding the Fixed Rate Commencement Date. The applicable Pricing Supplement will specify whether the rate of interest on the related Floating Rate Note will be reset daily, weekly, monthly, quarterly, semiannually, annually or such other specified period (each, an "Interest Reset Period") and the dates on which such rate of interest will be reset (each, an "Interest Reset Date"). Unless otherwise specified in the applicable Pricing Supplement, the Interest Reset Dates will be, in the case of Floating Rate Notes which reset: (i) daily, each Business Day; (ii) weekly, the Wednesday of each week (with the exception of weekly reset Floating Rate Notes as to which the Treasury Rate is an applicable Interest Rate Basis, which will reset the Tuesday of each week, except as described below); (iii) monthly, the third Wednesday of each month; (iv) quarterly, the third Wednesday of March, June, September and December of each year; (v) semiannually, the third Wednesday of the two months specified in the applicable Pricing Supplement; and (vi) annually, the third Wednesday of the month specified in the applicable Pricing Supplement; provided however, that, with respect to Floating Rate/Fixed Rate Notes, the rate of interest thereon will not reset after the applicable Fixed Rate Commencement Date. If any Interest Reset Date for any Floating Rate Note would otherwise be a day that is not a Business Day, such Interest Reset Date shall be postponed to the next Business Day, except that in the case of a Floating Rate Note as to which LIBOR or LIBID is an applicable Interest Rate Basis, if such Business Day is in the next succeeding calendar month, such Interest Reset Date shall be the immediately preceding Business Day. S-7 9 The interest rate applicable to each Interest Reset Period commencing on an Interest Reset Date will be the rate determined as of the applicable Interest Determination Date on or prior to the Calculation Date (hereafter defined) pertaining thereto, except if LIBOR or LIBID is an applicable Interest Rate Basis, in which case such rate will be determined on such Interest Determination Date. The "Interest Determination Date" with respect to the Commercial Paper Rate, Federal Funds Rate, Prime Rate, the CMT Rate and CD Rate will be the second Business Day immediately preceding the applicable Interest Reset Date. The "Interest Determination Date" with respect to LIBOR and LIBID will be the second London Banking Day immediately preceding the applicable Interest Reset Date, unless the Index Currency is British pounds sterling, in which case the Interest Determination Date will be the applicable Interest Reset Date. The "Interest Determination Date" with respect to the Treasury Rate will be the day of the week on which the applicable Interest Reset Date falls on which Treasury bills normally would be auctioned (Treasury Bills are normally sold at auction on Monday of each week, unless that day is a legal holiday, in which case the auction is normally held on the following Tuesday, except that such auction may be held on the preceding Friday); provided, however, that if an auction is held on the Friday of the week preceding the applicable Interest Reset Date, the related Interest Determination Date shall be such preceding Friday; and provided, further, that if an auction shall fall on the applicable Interest Reset Date, then the Interest Reset Date shall instead be the first Business Day following such auction. The "Interest Determination Date" pertaining to a Floating Rate Note the interest rate of which is determined with reference to two or more Interest Rate Bases will be the most recent Business Day which is at least two Business Days prior to the applicable Interest Reset Date on which each Interest Rate Basis shall be determinable. Each Interest Rate Basis shall be determined and compared on such date, and the applicable interest rate shall take effect on the applicable Interest Reset Date. A Floating Rate Note may also have either or both of the following: (i) a maximum numerical interest rate limit, or ceiling, on the rate of interest which may accrue during any Interest Reset Period ("Maximum Interest Rate"); and (ii) a minimum numerical interest rate limit, or floor, on the rate of interest which may accrue during any Interest Reset Period ("Minimum Interest Rate"). In addition to any Maximum Interest Rate which may be applicable to any Floating Rate Note pursuant to the above provisions, the interest rate on the Floating Rate Notes will in no event be higher than the maximum rate permitted by New York law, as the same may be modified by United States law of general application. Under present New York law, the maximum rate of interest in any Interest Reset Period is 25% per annum on a simple interest basis. This limit may not apply to Floating Rate Notes in which $2,500,000 or more has been invested. Except as provided below, the "Interest Payment Dates" for a Floating Rate Note will be, in the case of Floating Rate Notes which reset daily, weekly or monthly, on the third Wednesday of each month or on the third Wednesday of March, June, September and December, as specified in the applicable Pricing Supplement; in the case of Floating Rate Notes which reset quarterly, on the third Wednesday of March, June, September and December; in the case of Floating Rate Notes which reset semi-annually, on the third Wednesday of the two months specified in the applicable Pricing Supplement; and in the case of Floating Rate Notes which reset annually, on the third Wednesday of the month specified in the applicable Pricing Supplement; and, in each case, at maturity (or upon redemption or repayment, if applicable). The "Regular Record Date" with respect to Floating Rate Notes will be the date 15 calendar days (whether or not a Business Day) prior to the applicable Interest Payment Date. If any Interest Payment Date other than the date of maturity (or the date of redemption or repayment, if any) for any Floating Rate Note would otherwise fall on a day that is not a Business Day, such Interest Payment Date will be postponed to the next Business Day, except that, in the case of a Floating Rate Note as to which LIBOR or LIBID is an applicable Interest Rate Basis, if such Business Day is in the next succeeding calendar month, such Interest Payment Date shall be the immediately preceding Business Day. If the date of maturity (or the date of redemption or repayment, if any) of any Floating Rate Note would fall on a day that is not a Business Day, the required payment of principal, premium, if any, and interest shall be made on the next Business Day as if it were made on the date such payment was due, and no interest on such payment shall accrue for the period from and after the date of maturity (or the date of redemption or repayment, if any) to such next Business Day. S-8 10 All percentages resulting from any calculation on Floating Rate Notes will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting from such calculation on Floating Rate Notes will be rounded to the nearest cent (with one-half cent being rounded upwards). With respect to a Floating Rate Note, accrued interest is calculated by multiplying the principal amount of such Floating Rate Note by an accrued interest factor. Such accrued interest factor is computed by adding the interest factor calculated for each day in the period for which accrued interest is being calculated. Unless otherwise specified in an applicable Pricing Supplement, the interest factor for each such day is computed by dividing the interest rate applicable to such day by 360 in the case of Floating Rate Notes for which the Interest Rate Basis is the CD Rate, the Commercial Paper Rate, the Federal Funds Rate, LIBOR, LIBID or the Prime Rate, or by the actual number of days in the year in the case of Floating Rate Notes for which the Interest Rate Basis is the CMT Rate or the Treasury Rate. Unless otherwise specified in the applicable Pricing Supplement, Citibank will be the "Calculation Agent" with respect to Senior Floating Rate Notes and Bankers Trust will be the "Calculation Agent" with respect to Subordinated Floating Rate Notes. Such Calculation Agent's determination of any interest rate will be final and binding in the absence of manifest error. The Company, upon notification by the appropriate Calculation Agent, will notify the appropriate Trustee of each determination of the interest rate applicable to any such Floating Rate Note promptly after such determination is made. The "Calculation Date", if applicable, pertaining to any Interest Determination Date will be the earlier of (i) the tenth calendar day after such Interest Determination Date, or, if any such day is not a Business Day, the next Business Day or (ii) the Business Day immediately preceding the Interest Payment Date or the date of maturity (or the date of redemption or repayment, if any) next succeeding such Interest Determination Date. Upon the request of the Holder of a Floating Rate Note, the appropriate Paying Agent will provide the interest rate then in effect and, if determined, the interest rate that will become effective on the next Interest Reset Date with respect to such Floating Rate Note. Requests by Holders of Senior Floating Rate Notes for interest rate information should be directed to Citibank, Corporate Trust Department, 120 Wall Street - 13th Floor, New York, New York 10043 (telephone: (212) 412-6215; telecopier: (212) 480-1614). Requests by Holders of Subordinated Floating Rate Notes for interest rate information should be directed to Bankers Trust, Corporate Trust and Agency Group, 4 Albany Street, New York, New York 10006 (telephone: 1-800-735-7777; telecopier: (615) 835-2700). COMMERCIAL PAPER RATE. Floating Rate Notes for which an applicable Interest Rate Basis is the Commercial Paper Rate will bear interest at the interest rates (calculated with reference to the Commercial Paper Rate and the Spread and/or Spread Multiplier, if any) specified in the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement, "Commercial Paper Rate" means, with respect to any Interest Determination Date relating to the applicable Floating Rate Note (a "Commercial Paper Rate Interest Determination Date"), the Money Market Yield (hereafter defined) on such date of the rate for commercial paper having the Index Maturity specified in the applicable Pricing Supplement, as such rate shall be published by the Board of Governors of the Federal Reserve System in "Statistical Release H.15(519), Selected Interest Rates", or any successor publication ("H.15(519)"), under the heading "Commercial Paper." In the event that such rate is not published by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Commercial Paper Rate Interest Determination Date, then the Commercial Paper Rate shall be the Money Market Yield on such Commercial Paper Rate Interest Determination Date of the rate for commercial paper of the specified Index Maturity as published by the Federal Reserve Bank of New York in its daily statistical release "Composite 3:30 P.M. Quotations for U.S. Government Securities" ("Composite Quotations") under the heading "Commercial Paper". If by 3:00 P.M., New York City time, on such Calculation Date such rate is not published in either H.15(519) or Composite Quotations, then the Commercial Paper Rate shall be the Money Market Yield of the arithmetic mean of the offered rates as of 11:00 A.M., New York City time, on such Commercial Paper Rate Interest Determination Date of three leading dealers of commercial paper in The City of New York (which may include the Agents or their affiliates) selected by the appropriate Calculation Agent (after consultation with the Company) for S-9 11 commercial paper of the specified Index Maturity placed for an industrial issuer whose bond rating from Standard & Poor's Corporation, Moody's Investors Service, Inc., Duff & Phelps Credit Rating Co. or another nationally recognized rating agency is the second highest investment grade bond rating given by such agency ("AA", "Aa" or the equivalent); provided, however, that if the dealers selected as aforesaid by such Calculation Agent are not quoting as mentioned in this sentence, the rate of interest in effect for the applicable period will be the rate of interest then in effect on such Commercial Paper Rate Interest Determination Date. "Money Market Yield" shall be a yield (expressed as a percentage) calculated in accordance with the following formula: Money Market Yield = D X 360 ------------------- X 100 360 - (D X M) where "D" refers to the applicable per annum rate for commercial paper quoted on a bank discount basis and expressed as a decimal, and "M" refers to the actual number of days in the interest period for which interest is being calculated. FEDERAL FUNDS RATE. Floating Rate Notes for which an applicable Interest Rate Basis is the Federal Funds Rate will bear interest at the interest rates (calculated with reference to the Federal Funds Rate and the Spread and/or Spread Multiplier, if any) specified in the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement, "Federal Funds Rate" means, with respect to any Interest Determination Date relating to the applicable Floating Rate Note (a "Federal Funds Rate Interest Determination Date"), the rate on such date for Federal Funds as published in H.15(519) under the heading "Federal Funds (Effective)" or, if not so published by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date, the Federal Funds Rate will be the rate on such Interest Determination Date as published in Composite Quotations under the heading "Federal Funds/Effective Rate." If such rate is not yet published in either H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Federal Funds Rate Interest Determination Date, the Federal Funds Rate for such Interest Determination Date will be calculated by the appropriate Calculation Agent and will be the arithmetic mean of the rates for the last transaction in overnight Federal Funds arranged by three leading brokers of Federal Funds transactions in The City of New York (which may include the Agents or their affiliates) selected by such Calculation Agent (after consultation with the Company) as of 11:00 A.M., New York City time, on such Federal Funds Rate Interest Determination Date; provided, however, that if the brokers selected as aforesaid by such Calculation Agent are not quoting as mentioned in this sentence, the rate of interest in effect for the applicable period will be the rate of interest then in effect on such Federal Funds Rate Interest Determination Date. LIBOR. Floating Rate Notes for which an applicable Interest Rate Basis is LIBOR will bear interest at the interest rates (calculated with reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified in the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement, "LIBOR" means the rate determined by the appropriate Calculation Agent in accordance with the following provisions: (i) With respect to an Interest Determination Date relating to the applicable Floating Rate Note (a "LIBOR Interest Determination Date"), LIBOR will be either: (a) if "LIBOR Reuters" is specified in the applicable Pricing Supplement, the arithmetic mean of the offered rates (unless the Designated LIBOR Page by its terms provides only for a single rate, in which case such single rate shall be used) for deposits in the Index Currency having the Index Maturity designated in such Pricing Supplement, commencing on the applicable Interest Reset Date, that appear on the Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR Interest Determination Date, if at least two such offered rates appear (unless, as aforesaid, only a single rate is required) on such Designated LIBOR Page, or (b) if "LIBOR Telerate" is specified in the applicable Pricing Supplement or if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable Pricing Supplement as the method for calculating LIBOR, the rate for deposits in the Index Currency having the Index Maturity designated in such Pricing Supplement, commencing on such Interest Reset Date, that appears on the Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR S-10 12 Interest Determination Date. If fewer than two such offered rates appear, or if no such rate appears, as applicable, LIBOR for such LIBOR Interest Determination Date will be determined as if the parties had specified the rate described in (ii) below. (ii) With respect to a LIBOR Interest Determination Date on which fewer than two offered rates appear, or no rate appears, as applicable, for the applicable Index Maturity on the applicable Designated LIBOR Page, the appropriate Calculation Agent will request the principal London offices of each of four major reference banks in the London interbank market to provide such Calculation Agent with its offered quotation for deposits in the Index Currency for the period of the Index Maturity, commencing on the applicable Interest Reset Date, to prime banks in the London interbank market at approximately 11:00 A.M., London time, on such LIBOR Interest Determination Date and in a principal amount that is representative for a single transaction in such Index Currency in such market at such time. If at least two such quotations are provided, LIBOR will be the arithmetic mean of such quotations. If fewer than two quotations are provided, LIBOR in respect of the applicable Interest Reset Date will be the arithmetic mean of the rates quoted by three major banks in the Principal Financial Center selected by the appropriate Calculation Agent (after consultation with the Company) at approximately 11:00 A.M., in the applicable Principal Financial Center, on such LIBOR Interest Determination Date for loans in such Index Currency to leading European banks, having the Index Maturity designated in the applicable Pricing Supplement and in the principal amount that is representative for a single transaction in such Index Currency in such market at such time; provided, however, that if the banks selected as aforesaid by such Calculation Agent are not quoting as mentioned in this sentence, the rate of interest in effect for the applicable period will be the rate of interest in effect on such LIBOR Interest Determination Date. "Index Currency" means the currency or composite currency specified in the applicable Pricing Supplement with respect to which LIBOR shall be calculated. If no such currency or composite currency is specified in the applicable Pricing Supplement, the Index Currency shall be United States dollars. "Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the applicable Pricing Supplement, the display on the Reuter Monitor Money Rates Service (or any successor service) for the purpose of displaying the London interbank rates of major banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is specified in the applicable Pricing Supplement or neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable Pricing Supplement as the method for calculating LIBOR, the display on the Dow Jones Telerate Service (or any successor service) for the purpose of displaying the London interbank rates of major banks for the applicable Index Currency. LIBID. Floating Rate Notes for which an applicable Interest Rate Basis is LIBID will bear interest at the interest rates (calculated with reference to LIBID and the Spread and/or Spread Multiplier, if any) specified in the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement, "LIBID" means the rate determined by the appropriate Calculation Agent in accordance with the following provisions: (i) With respect to an Interest Determination Date relating to a LIBID Note (a "LIBID Interest Determination Date"), LIBID will be determined on the basis of the bid rates quoted to prime banks in the London interbank market at approximately 11:00 A.M., London time, for deposits in United States dollars of not less than U.S. $1 million that is representative for a single transaction in such market at such time for the period of the Index Maturity specified in the applicable Pricing Supplement, commencing on the second London Banking Day immediately following such LIBID Interest Determination Date, by the London offices of four major banks in the London interbank market named on the Reuters Screen LIBO Page, as defined below, and selected by the appropriate Calculation Agent (after consultation with the Company) (the "LIBID Reference Banks"), on the LIBID Interest Determination Date. If at least two such quotations appear on the Reuters Screen LIBO Page, LIBID for such LIBID Interest Determination Date will be the arithmetic mean of such quotations as determined by the appropriate Calculation Agent. If fewer than two such quotations appear, LIBID for such LIBID Interest Determination Date will be determined as if the parties had specified the rate described in (ii) below. "Reuters Screen LIBO Page" means the display S-11 13 designated as Page "LIBO" on the Reuter Monitor Money Rates Service (or such other page as may replace the LIBO page on that service for the purpose of displaying London interbank offered rates of major banks). (ii) With respect to a LIBID Interest Determination Date on which fewer than two such quotations are provided, the appropriate Calculation Agent will request each of the LIBID Reference Banks to provide such Calculation Agent with a quotation of the bid rate quoted to such bank by the head offices of leading New York City banks for deposits in United States dollars for the period of the Index Maturity at approximately 11:00 A.M., London time, on such LIBID Interest Determination Date and in a principal amount equal to an amount of not less than U.S. $1 million that is representative for a single transaction in such market at such time. If at least two such quotations are provided, LIBID will be the arithmetic mean of such quotations. If fewer than two quotations are provided, LIBID in respect of that Interest Reset Date will be the arithmetic mean of the rates quoted by three major banks in The City of New York selected by the appropriate Calculation Agent (after consultation with the Company) at approximately 11:00 A.M., New York City time, on that LIBID Interest Determination Date for loans in U.S. dollars to leading European banks, having the Index Maturity designated in the applicable Pricing Supplement and in the principal amount equal to an amount of not less than U.S. $1 million that is representative for a single transaction in such market at such time; provided, however, that if the banks selected as aforesaid by such Calculation Agent are not quoting as mentioned in this sentence, the rate of interest in effect for the applicable period will be the rate of interest in effect on such LIBID Interest Determination Date. TREASURY RATE. Floating Rate Notes for which an applicable Interest Rate Basis is the Treasury Rate will bear interest at the interest rates (calculated with reference to the Treasury Rate and the Spread and/or Spread Multiplier, if any) specified in the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement, "Treasury Rate" means, with respect to any Interest Determination Date relating to a Treasury Rate Note (a "Treasury Rate Interest Determination Date"), the rate from the auction held on such Treasury Rate Interest Determination Date (the "Auction") of direct obligations of the United States ("Treasury bills") having the Index Maturity specified in the applicable Pricing Supplement, as such rate is published in H.15(519) under the heading "U.S. Government Securities-Treasury Bills-Auction Average (Investment)" or, if not so published by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Treasury Rate Interest Determination Date, the applicable auction average rate of such Treasury bills (expressed as a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) at such auction as otherwise announced by the United States Department of the Treasury. In the event that the results of the Auction of Treasury bills having the specified Index Maturity are not reported as provided by 3:00 P.M., New York City time, on such Calculation Date, or if no such Auction is held, then the Treasury Rate shall be calculated by the appropriate Calculation Agent and shall be a yield to maturity (expressed as a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) of the arithmetic mean of the secondary market bid rates, as of approximately 3:30 P.M., New York City time, on such Treasury Rate Interest Determination Date, of three leading primary United States government securities dealers (which may include the Agents or their affiliates) selected by such Calculation Agent (after consultation with the Company), for the issue of Treasury bills with a remaining maturity closest to the applicable Index Maturity; provided, however, that if the dealers selected as aforesaid by such Calculation Agent are not quoting as mentioned in this sentence, the rate of interest in effect for the applicable period will be the rate of interest in effect on such Treasury Rate Interest Determination Date. Treasury bills are usually sold at auction on Monday of each week unless that day is a legal holiday, in which case the auction is usually held on the following Tuesday, except that such auction may be held on the preceding Friday. PRIME RATE. Floating Rate Notes for which an applicable Interest Rate Basis is the Prime Rate will bear interest at the interest rates (calculated with reference to the Prime Rate and the Spread and/or Spread Multiplier, if any) specified in the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement, "Prime Rate" means, with respect to any Interest Determination Date relating to a Floating Rate Note for which the interest rate is determined with reference to the Prime Rate (a "Prime Rate Interest Determination Date"), the rate on such date as S-12 14 such rate is published in H.15(519) under the heading "Bank Prime Loan." If such rate is not published prior to 3:00 P.M., New York City time, on the related Calculation Date, then the Prime Rate shall be the arithmetic mean of the rates of interest publicly announced by each bank that appears on the Reuters Screen USPRIME1 Page (as hereinafter defined) as such bank's prime rate or base lending rate as in effect for such Prime Rate Interest Determination Date. If fewer than four such rates appear on the Reuters Screen USPRIME1 Page for such Prime Rate Interest Determination Date, then the Prime Rate shall be the arithmetic mean of the prime rates quoted on the basis of the actual number of days in the year divided by a 360-day year as of the close of business on such Prime Rate Interest Determination Date by three major money center banks in The City of New York selected by the Calculation Agent (after consultation with the Company). If fewer than three such quotations are so provided, then the Prime Rate shall be the arithmetic mean of three prime rates quoted on the basis of the actual number of days in the year divided by a 360-day year as of the close of business on such Prime Rate Interest Determination Date as furnished in The City of New York by the major money center banks, if any, that have provided such quotations and by a reasonable number of substitute banks or trust companies to obtain three such prime rate quotations; provided such substitute banks or trust companies are organized and doing business under the laws of the United States, or any State thereof, each having total equity capital of at least $500 million and being subject to supervision or examination by Federal or State authority, selected by the Calculation Agent (after consultation with the Company) to provide such rate or rates; provided, however, that if the banks or trust companies so selected by the Calculation Agent are not quoting as mentioned in this sentence, the Prime Rate determined as of such Prime Rate Interest Determination Date will be the Prime Rate in effect on such Prime Rate Interest Determination Date. "Reuters Screen USPRIME1 Page" means the display on the Reuter Monitor Money Rates Service (or any successor service) on the "USPRIME1" page (or such other page as may replace the USPRIME1 page on such service) for the purpose of displaying prime rates or base lending rates of major United States banks. CMT RATE. Floating Rate Notes for which an applicable Interest Rate Basis is the CMT Rate will bear interest at the interest rates (calculated with reference to the CMT Rate and the Spread and/or Spread Multiplier, if any) specified in the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate" means, with respect to any Interest Determination Date relating to a CMT Rate Note (a "CMT Rate Interest Determination Date"), the rate displayed on the Designated CMT Telerate Page under the caption " Treasury Constant Maturities Federal Reserve Board Release H.15 Mondays Approximately 3:45 P.M.," under the column for the Designated CMT Maturity Index for (i) if the Designated CMT Telerate Page is 7055, the rate on such CMT Rate Interest Determination Date and (ii) if the Designated CMT Telerate Page is 7052, the week, or the month, as applicable, ended immediately preceding the week in which the related CMT Rate Interest Determination Date occurs. If such rate is no longer displayed on the relevant page, or if not displayed by 3:00 P.M., New York City time, on the related Calculation Date, then the CMT Rate for such CMT Rate Interest Determination Date will be such treasury constant maturity rate for the Designated CMT Maturity Index as published in the relevant H.15(519). If such rate is no longer published, or if not published by 3:00 P.M., New York City time, on the related Calculation Date, then the CMT Rate for such CMT Rate Interest Determination Date will be such treasury constant maturity rate for the Designated CMT Maturity Index (or other United States Treasury rate for the Designated CMT Maturity Index) for the CMT Rate Interest Determination Date with respect to such Interest Reset Date as may then be published by either the Board of Governors of the Federal Reserve System or the United States Department of the Treasury that the appropriate Calculation Agent determines to be comparable to the rate formerly displayed on the Designated CMT Telerate Page and published in the relevant H.15(519). If such information is not provided by 3:00 P.M., New York City time, on the related Calculation Date, then the CMT Rate for the CMT Rate Interest Determination Date will be calculated by the appropriate Calculation Agent and will be a yield to maturity, based on the arithmetic mean of the secondary market closing offer side prices as of approximately 3:30 P.M., New York City time, on the CMT Rate Interest Determination Date reported, according to their written records, by three leading primary United States government securities dealers (each, a "Reference Dealer") in The City of New York (which may include the Agents or their affiliates) selected by the appropriate S-13 15 Calculation Agent (from five such Reference Dealers selected by such Calculation Agent (after consultation with the Company) and eliminating the highest quotation (or, in the event of equality, one of the highest) and the lowest quotation (or, in the event of equality, one of the lowest), for the most recently issued direct noncallable fixed rate obligations of the United States ("Treasury Notes") with an original maturity of approximately the Designated CMT Maturity Index and a remaining term to maturity of not less than such Designated CMT Maturity Index minus one year. If the appropriate Calculation Agent cannot obtain three such Treasury Note quotations, the CMT Rate for such CMT Rate Interest Determination Date will be calculated by such Calculation Agent and will be a yield to maturity based on the arithmetic mean of the secondary market offer side prices as of approximately 3:30 P.M., New York City time, on the CMT Rate Interest Determination Date of three Reference Dealers in The City of New York (from five such Reference Dealers selected by such Calculation Agent (after consultation with the Company) and eliminating the highest quotation (or, in the event of equality, one of the highest) and the lowest quotation (or, in the event of equality, one of the lowest)) for Treasury Notes with an original maturity of the number of years that is the next highest to the Designated CMT Maturity Index and a remaining term to maturity closest to the Designated CMT Maturity Index and in an amount of at least $100 million. If three or four (and not five) of such Reference Dealers are quoting as described above, then the CMT Rate will be based on the arithmetic mean of the offer prices obtained and neither the highest nor the lowest of such quotes will be eliminated; provided, however, that if fewer than three Reference Dealers selected by the appropriate Calculation Agent as aforesaid are quoting as described herein, the CMT Rate in effect for the applicable period will be the rate of interest in effect on such CMT Rate Interest Determination Date. If two Treasury Notes with an original maturity as described in the second preceding sentence have remaining terms to maturity equally close to the Designated CMT Maturity Index, the quotes for the Treasury Note with the shorter remaining term to maturity will be used. "Designated CMT Telerate Page" means the display on the Dow Jones Telerate Service on the page designated in the applicable Pricing Supplement (or any other page as may replace such page on that service for the purposes of displaying Treasury Constant Maturities as reported in H.15(519)) for the purpose of displaying Treasury Constant Maturities as reported in H.15(519). If no such page is specified in the applicable Pricing Supplement, the Designated CMT Telerate Page shall be 7052, for the most recent week. "Designated CMT Maturity Index" means the original period to maturity of the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20, or 30 years) specified in the applicable Pricing Supplement with respect to which the CMT Rate will be calculated. If no such maturity is specified in the applicable Pricing Supplement, the Designated CMT Maturity Index shall be 2 years. CD RATE. CD Floating Rate Notes for which an applicable Interest Rate Basis is the CD Rate will bear interest at the interest rates (calculated with reference to the CD Rate and the Spread and/or Spread Multiplier, if any) specified in the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement, "CD Rate" means, with respect to any Interest Determination Date relating to a CD Rate Note (a "CD Rate Interest Determination Date"), the rate on such date for negotiable certificates of deposit having the Index Maturity in the applicable Pricing Supplement as published in H.15(519) under the heading "CDs (Secondary Market)," or, if not so published by 3:00 P.M., New York City time, on or prior to the Calculation Date pertaining to such CD Rate Interest Determination Date, the CD Rate will be the rate on such CD Rate Interest Determination Date for negotiable certificates of deposit of the Index Maturity specified in the applicable Pricing Supplement as published in Composite Quotations under the heading "Certificates of Deposit." If such rate is not yet published in either H.15(519) or the Composite Quotations by 3:00 P.M., New York City time, on or prior to the Calculation Date, then the CD Rate on such CD Rate Interest Determination Date will be calculated by the appropriate Calculation Agent and will be the arithmetic mean of the secondary market offered rates as of 3:00 P.M., New York City time, on such CD Rate Interest Determination Date, of three leading nonbank dealers in negotiable U.S. dollar certificates of deposit in The City of New York selected by such Calculation Agent (after consultation with the Company) for negotiable certificates of deposit of major United States money center banks of the highest credit standing in the market for negotiable certificates of deposit with a remaining maturity closest to the Index Maturity designated in the Pricing Supplement in the denomination of S-14 16 $5,000,000; provided, however, that if the dealers selected as aforesaid by such Calculation Agent are not quoting as set forth above, the rate of interest in effect for the applicable period will be the rate of interest in effect on such CD Rate Interest Determination Date. OTHER PROVISIONS; ADDENDA Any provisions with respect to the Notes, including the specification and determination of one or more Interest Rate Bases, the calculation of the interest rate applicable to a Floating Rate Note, the Interest Payment Dates, the date of maturity, redemption and/or repayment provisions or any other term relating thereto, may be modified as specified under "Other Provisions" on the face thereof or in an Addendum relating thereto, if so specified on the face thereof and in the applicable Pricing Supplement. PAYMENTS ON AMORTIZING NOTES Notes may be issued from time to time as Amortizing Notes (as defined below). "Amortizing Notes" are Notes for which payments of principal and interest are made in equal installments over the life of the Note. Interest on each Amortizing Note will be computed on the basis of a 360-day year of twelve 30-day months. Payments with respect to Amortizing Notes will be applied first to interest due and payable thereon and then to the reduction of the unpaid principal amount thereof. A table setting forth repayment information in respect of each Amortizing Note will be provided to the original purchaser and will be available, upon request, to subsequent Holders. BOOK-ENTRY NOTES Unless otherwise specified in the applicable Pricing Supplement, the Company has established a depository arrangement with The Depository Trust Company with respect to the Book-Entry Notes, the terms of which are summarized below. Any additional or differing terms of the depository arrangement with respect to the Book-Entry Notes will be described in the applicable Pricing Supplement. Upon issuance, all Book-Entry Notes up to $200,000,000 aggregate principal amount bearing interest (if any) at the same rate or pursuant to the same formula and having the same date of issue, redemption provisions (if any), repayment provisions (if any), date of maturity and other terms will be represented by a single Global Security. Each Global Security representing Book-Entry Notes will be deposited with, or on behalf of, the Depositary and will be registered in the name of the Depositary or a nominee of the Depositary. No Global Security may be transferred except as a whole by the Depositary to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or to another nominee of such Depositary, or by such Depositary or any such nominee to a successor of such Depositary or a nominee of such successor. So long as the Depositary or its nominee is the registered owner of a Global Security, the Depositary or its nominee, as the case may be, will be the sole Holder of the Book-Entry Notes represented thereby for all purposes under the applicable Indenture. Except as otherwise provided in this section, the beneficial owners of the Global Security or Securities representing Book-Entry Notes will not be entitled to receive physical delivery of Certificated Notes and will not be considered the Holders thereof for any purposes under the applicable Indenture, and no Global Security representing Book-Entry Notes shall be exchangeable or transferable. Accordingly, each person owning a beneficial interest in a Global Security must rely on the procedures of the Depositary and, if such person is not a Participant, on the procedures of the Participant through which such person owns its interest in order to exercise any rights of a Holder under such Global Security or the applicable Indenture. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in certificated form. Such limits and such laws may impair the ability to transfer beneficial interests in a Global Security representing Book-Entry Notes. Unless otherwise specified in the applicable Pricing Supplement, each Global Security representing Book-Entry Notes is exchangeable for Certificated Notes of like rank, tenor and terms and of differing authorized denominations aggregating a like principal amount, only if (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for the Global Securities or the Depositary ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), S-15 17 and the Company fails to appoint a successor depositary within 90 days, (ii) the Company in its sole discretion determines that the Global Securities shall be exchangeable for Certificated Notes, or (iii) there shall have occurred and be continuing an Event of Default under the applicable Indenture with respect to such Notes. Upon any such exchange, the Certificated Notes shall be registered in the names of the beneficial owners of the Global Security or Securities representing Book-Entry Notes as provided by the Depositary's relevant Participants (as identified by the Depositary). The following is based on information furnished by the Depositary: The Depositary will act as securities depository for the Book-Entry Notes. The Book-Entry Notes will be issued as fully registered securities registered in the name of Cede & Co. (the Depositary's partnership nominee). One fully registered Global Security will be issued for each issue of Book-Entry Notes, each in the aggregate principal amount of such issue, and will be deposited with the Depositary. If, however, the aggregate principal amount of any issue exceeds $200,000,000 one Global Security will be issued with respect to each $200,000,000 of principal amount and an additional Global Security will be issued with respect to any remaining principal amount of such issue. The Depositary 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. The Depositary holds securities that its participants ("Participants") deposit with the Depositary. The Depositary 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 of the Depositary ("Direct Participants") include securities brokers and dealers (including the Agents), banks, trust companies, clearing corporations and certain other organizations. The Depositary is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the Depositary's 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 the Depositary and its Participants are on file with the Securities and Exchange Commission. Purchases of Book-Entry Notes under the Depositary's system must be made by or through Direct Participants, which will receive a credit for such Book-Entry Notes on the Depositary's records. The ownership interest of each actual purchaser of each Book-Entry Note represented by a Global Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from the Depositary of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which such Beneficial Owner entered into the transaction. Transfers of ownership interests in a Global Security representing Book-Entry Notes are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners of a Global Security representing Book-Entry Notes will not receive Certificated Notes representing their ownership interests therein, except in the event that use of the book-entry system for such Book-Entry Notes is discontinued. To facilitate subsequent transfers, all Global Securities representing Book-Entry Notes which are deposited with, or on behalf of, the Depositary are registered in the name of the Depositary's nominee, Cede & Co. The deposit of Global Securities with the Depositary and their registration in the name of Cede & Co. effect no change in beneficial ownership. The Depositary has no knowledge of the actual Beneficial Owners of the Global Securities representing the Book-Entry Notes; the Depositary's records reflect only the identity of the Direct Participants to whose accounts such Book-Entry Notes are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of the Beneficial Owners that are their customers. S-16 18 Conveyance of notices and other communications by the Depositary to Direct Participants, by Direct Participants to Indirect Participants and by Direct and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Neither the Depositary nor Cede & Co. will consent or vote with respect to the Global Securities representing the Book-Entry Notes. Under its usual procedures, the Depositary mails an Omnibus Proxy to the Company as soon as possible after the applicable record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Book-Entry Notes are credited on the applicable record date (identified in a listing attached to the Omnibus Proxy). Principal, premium, if any, and interest payments on the Global Securities representing the Book-Entry Notes will be made to the Depositary. The Depositary's practice is to credit Direct Participants' accounts on the applicable payment date in accordance with their respective holdings shown on the Depositary's records unless the Depositary has reason to believe that it will not receive payment on such date. Payments by Participants to Beneficial Owners will be 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 will be the responsibility of such Participant and not of the Depositary, the applicable Trustee or the Company, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and interest to the Depositary is the responsibility of the Company or the applicable Trustee, disbursement of such payments to Direct Participants shall be the responsibility of the Depositary, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. If applicable, redemption notices shall be sent to Cede & Co. If less than all of the Book-Entry Notes within an issue are being redeemed, the Depositary's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. A Beneficial Owner shall give notice of any option to elect to have its Book-Entry Notes repaid by the Company through its Participant to the applicable Trustee, and shall effect delivery of such Book-Entry Notes by causing the Direct Participant to transfer the Participant's interest in the Global Security or Securities representing such Book-Entry Notes, on the Depositary's records, to the applicable Trustee. The requirement for physical delivery of Book-Entry Notes in connection with a demand for repayment will be deemed satisfied when the ownership rights in the Global Security or Securities representing such Book-Entry Notes are transferred by Direct Participants on the Depositary's records. The Depositary may discontinue providing its services as securities depository with respect to the Book-Entry Notes at any time by giving reasonable notice to the Company or the applicable Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Certificated Notes are required to be printed and delivered. The Company may decide to discontinue the use of the system of book-entry transfers through the Depositary (or a successor securities depository). In that event, Certificated Notes will be printed and delivered. The information in this section concerning the Depositary and the Depositary's system has been obtained from sources that the Company believes to be reliable, but the Company takes no responsibility for the accuracy thereof. MULTI-CURRENCY AND INDEXED NOTES If any Note is to be denominated or payable in a currency or composite currency other than U.S. dollars, certain provisions with respect thereto will be set forth in the applicable Pricing Supplement, which will specify the foreign or composite currency in which such Note is denominated and/or payable (the "Specified Currency"), along with any other terms relating to the non-U.S. dollar denomination. S-17 19 The Notes also may be issued with the principal amount payable at maturity to be determined with reference to the exchange rate of a Specified Currency relative to an indexed currency (the "Indexed Currency") or other index, each as set forth in the applicable Pricing Supplement. Holders of such Notes may receive a principal payment at maturity (or upon redemption or repayment, if applicable) that is greater than or less than the principal amount of such Notes depending upon the relative value at maturity of the Specified Currency compared to the Indexed Currency, or as otherwise set forth in the applicable Pricing Supplement. Information as to the method for determining the principal amount of such Notes payable at maturity (or upon redemption or repayment, if applicable) and certain additional risks and tax considerations associated with investment in Indexed Notes will be set forth in the applicable Pricing Supplement. BEARER NOTES The Company also may offer from time to time Notes in bearer form ("Bearer Notes") outside the United States at varying prices and terms. Such offerings of Bearer Notes may be separate from, or simultaneous with, offerings of Notes in the United States. The Bearer Notes are not offered by this Prospectus Supplement and the accompanying Prospectus and may not be purchased by U.S. persons except, in certain limited circumstances, if the U.S. person is a financial institution, a foreign branch of a U.S. financial institution, or acquired and holds the Bearer Notes through a foreign branch of a U.S. financial institution. S-18 20 PLAN OF DISTRIBUTION The Notes are being offered on a continuing basis for sale by the Company through the Agents, which have agreed to use their best efforts to solicit offers to purchase the Notes. The Company will pay the appropriate Agent a commission which, depending on the rank and maturity of the Notes, will range from .125% to .825% of the principal amount of any Note sold through such Agent. Commissions with respect to Notes with stated maturities in excess of 30 years that are sold through the Agents will be negotiated between the Company and the applicable Agent at the time of such sale. Unless otherwise specified in the applicable Pricing Supplement, any Note sold to an Agent as principal shall be purchased by such Agent at a price equal to 100% of the principal amount thereof less a percentage equal to the commission applicable to an agency sale of a Note of identical rank and maturity. The Company may also sell Notes to the Agents, as principal, at a discount from the principal amount thereof and the Agents may later resell such Notes to purchasers at varying prices related to prevailing market prices at the time of resale as determined by the related Agent or, if so specified in the applicable Pricing Supplement, for resale at a fixed offering price. The Agents may reallow all or any portion of the discount received in connection with such purchase of Notes from the Company to dealers who sell such Notes to investors and other Purchasers. After the initial offering of Notes, the offering price (in the case of Notes to be resold on a fixed offering price basis), any concession and any discount may be changed. The Company may also sell Notes directly to purchasers on its own behalf. The Company reserves the right to withdraw, cancel or modify the offer made hereby without notice and may reject orders in whole or in part, whether placed directly by the Company or through the Agents. The Agents will have the right, in their discretion reasonably exercised, to reject in whole or in part any offer to purchase Notes received by it on an agency basis. Upon issuance, the Notes will not have an established trading market. The Notes will not be listed on any securities exchange. The Agents may from time to time purchase and sell Notes in the secondary market, but the Agents are not obligated to do so, and there can be no assurance that there will be a secondary market for the Notes or that there will be liquidity in any secondary market that may develop. From time to time, the Agents may make a market in the Notes, but the Agents are not obligated to do so and may discontinue any market-making activity at any time. The Company has agreed to indemnify each of the Agents against or to make contributions relating to certain liabilities, including liabilities under the Securities Act of 1933. The Agents may be deemed to be underwriters within the meaning of such Act. The Company has agreed to reimburse the Agents for certain of their expenses. The Agents and/or certain of their affiliates may engage in commercial and/or investment banking transactions with, and perform services for, the Company and certain of its affiliates, in the ordinary course of business. S-19 21 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED AUGUST 30, 1996 PROSPECTUS $1,000,000,000 MCI COMMUNICATIONS CORPORATION SENIOR/SUBORDINATED/CONVERTIBLE DEBT SECURITIES ------------------------ MCI Communications Corporation (the "Company" or "MCI") from time to time may offer up to $1,000,000,000 aggregate principal amount (or its equivalent in any other currency or composite currency) of its senior unsecured debt securities (the "Senior Securities"), subordinated unsecured debt securities (the "Subordinated Securities") and/or subordinated unsecured debt securities (the "Convertible Subordinated Securities") convertible into the common stock, par value $.10 per share, of the Company (the "Common Stock"), in separate series in amounts, at prices and on terms to be determined at the time of sale (the Senior Securities, the Subordinated Securities and the Convertible Subordinated Securities being herein referred to collectively as the "Securities"). The Company may sell Securities to one or more underwriters for public offering and sale by them or may sell Securities to investors directly or through agents. See "Plan of Distribution." The terms of the Securities, including, where applicable, the specific designation, rank, aggregate principal amount, denominations (which may be in United States dollars, in any other currency or in a composite currency), maturity, interest rate (which may be fixed or variable) and time of payment of interest, if any, terms for conversion, if any, terms for redemption, if any, at the option of the Company or repayment, if any, at the option of the holder, terms for sinking fund payments and other variable terms of the Securities, if any, the initial public offering price, if any, the names of, and the principal amounts to be purchased by, dealers, if any, the compensation of such dealers and the other terms in connection with the offering and sale of the Securities in respect of which this Prospectus is being delivered, are set forth in one or more accompanying Prospectus Supplements (each, 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 , 1996. 22 CERTAIN INVESTMENT CONSIDERATIONS This Prospectus does not describe all of the risks of an investment in Notes that result from such Notes being denominated or payable in or determined by reference to currency or composite currency other than United States dollars or to one or more interest rate, currency or other indices or formulas. The Company and the Agents disclaim any responsibility to advise prospective investors of such risks as they exist at the date of his Prospectus or as they change from time to time. Prospective investors should consult their own financial and legal advisors as to the risks entailed by an investment in such Notes and the suitability of investing in such Notes in light of their particular circumstances. Such Notes are not an appropriate investment for investors who are unsophisticated with respect to foreign currency transactions or transactions involving the applicable interest rate or currency index or other indices or formulas. An investment in Notes indexed, as to principal, premium and/or interest, to one or more currencies or composite currencies (including exchange rates and swap indices between currencies or composite currencies), commodities, interest rates or other indices entails significant risks that are not associated with similar investments in a conventional fixed rate or floating rate debt security. Such risks include, without limitation, the possibility that such index or indices, either directly or indirectly, may be subject to significant changes, that no interest will be payable or that interest will be paid at a rate lower than that applicable to a conventional fixed rate or floating rate debt security issued by the Company at the same time, that the repayment of principal and/or premium, if any, may occur at times other than that expected by the investor, and that the investor could lose all or a substantial portion of principal and/or premium, if any, payable on the date of maturity (or the date of redemption or repayment, if any). Such risks depend on a number of interrelated factors, including economic, financial and political events, over which the Company has no control. Additionally, if the formula used to determine the amount of principal, premium and/or interest payable with respect to such Notes contains a multiplier or leverage factor, the effect of any change in the applicable index or indices will be magnified. In recent years, values of certain indices have been highly volatile and such volatility may be expected to continue in the future. Fluctuations in the value of any particular index that have occurred in the past are not necessarily indicative, however, of fluctuations that may occur in the future. Any optional redemption feature of Notes might affect the market value of such Notes. Since the Company may be expected to redeem such Notes when prevailing interest rates are relatively low, Holders of such Notes generally will not be able to reinvest the proceeds at an effective interest rate as high as the interest rate on such Notes. The secondary market for such Notes will be affected by a number of factors independent of the creditworthiness of the Company and the value of the applicable index or indices, including the complexity and volatility of such index or indices, the method of calculating the principal, premium, if any, and/or interest in respect of such Notes, the time remaining to the maturity of such Notes, the outstanding amount of such Notes, any redemption features of such Notes, the amount of other debt securities linked to such index or indices and the level, direction and volatility of market interest rates generally. Such factors also will affect the market value of such Notes. In addition, certain Notes may be designed for specific investment objectives or strategies and, therefore, may have a more limited secondary market and experience more price volatility than conventional debt securities. Holders may not be able to sell such Notes readily or at prices that will enable them to realize their anticipated yield. No investor should purchase Notes unless such investor understands and is able to bear the risk that such Notes may not be readily saleable, that the value of such Notes will fluctuate over time and that such fluctuations may be significant. The credit ratings assigned to the Company's medium term note program are a reflection of the Company's credit status and in no way reflect the potential impact of all risks related to structure and other factors on the value of the Notes. Accordingly, prospective investors should consult their own financial and legal, including tax, advisors as to the risks entailed by an investment in the Notes and the suitability of investing in such Notes in light of their particular circumstances. 2 23 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files reports and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements and other information filed by the Company with the Commission pursuant to the informational requirements of the Exchange Act can be inspected and copied at the public reference facilities maintained by the Commission at its principal offices at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of the Commission: New York Regional Office, 7 World Trade Center, 13th Floor, New York, New York 10048: and Chicago Regional Office Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661: and copies of such material can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the Commission maintains a Web site at http://www.sec.gov containing reports, proxy and information statements and other information regarding registrants, including the Company, that file electronically with the Commission. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE MCI's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996, Current Reports on Form 8-K dated June 21, 1996 and August 8, 1996 previously filed by MCI with the Commission, are incorporated by reference in this Prospectus and shall be deemed to be a part hereof. Each document filed by MCI with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of any offering of the Securities made by this Prospectus shall be deemed to be incorporated herein by reference and to be a part hereof from the date of filing such document. MCI undertakes to provide without charge to each person to whom a Prospectus is delivered, upon the written or oral request of any such person, a copy of any and all of the documents incorporated herein by reference other than exhibits to such documents. Request for such copies should be directed to the Secretary, MCI Communications Corporation, 1801 Pennsylvania Avenue, N.W., Washington, D.C. 20006 (telephone: (202) 872-1600). THE COMPANY MCI Communications Corporation, a Delaware corporation organized in 1968, has its principal executive offices at 1801 Pennsylvania Avenue, N.W., Washington, D.C. 20006 (telephone number: (202) 872-1600). Unless the context otherwise requires, the "Company" or "MCI" means MCI Communications Corporation and its subsidiaries. MCI is a registered service mark of MCI Communications Corporation. MCI and its subsidiaries provide a broad range of communication services, including long-distance telecommunication services, local and wireless services and information technology services. The provision of long-distance telecommunication services is the core business of MCI and its subsidiaries. Long-distance telecommunication services comprise a wide spectrum of domestic and international voice and data services, including long-distance telephone services, data communication services, teleconferencing services and electronic messaging services. During each of the last three years, more than 90% of the operating revenues and operating income of MCI and its subsidiaries were derived from its core business. Through its subsidiaries, MCI is the second largest carrier of long-distance telecommunication services in the United States and the third largest carrier of international long-distance telecommunication services in the world. 3 24 RATIO OF EARNINGS TO FIXED CHARGES (UNAUDITED)(A) The following table sets forth the ratios of earnings to fixed charges for MCI and its subsidiaries for the periods indicated:
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31 ------------ ------------------------------------ 1996 1995 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- ---- ---- Ratio of Earnings to Fixed Charges.... 5.38 5.62 3.34 4.82 4.12 3.63 3.37
- --------------- (a) For purposes of this ratio, earnings are calculated by adding fixed charges (excluding capitalized interest) to income before income taxes and extraordinary item. Fixed charges consist of interest on indebtedness (including amortization of debt discount and premium) and the portion of rental expense representative of an interest factor. USE OF PROCEEDS Unless otherwise specified in the applicable Prospectus Supplement, the net proceeds to be received by the Company from the sale of the Securities will be added to its general corporate funds and will be used for general corporate purposes. Until so utilized, the net proceeds will be invested in income producing securities. THE SECURITIES EXPLANATORY STATEMENT (Applicable to Senior Securities, Subordinated Securities and Convertible Subordinated Securities) The Senior Securities are to be issued under an Indenture dated as of February 17, 1995 (the "Senior Indenture"), between the Company and Citibank, N.A., as trustee ("Citibank"), the Subordinated Securities are to be issued under an Indenture dated as of October 15, 1989 (the "Subordinated Indenture"), between the Company and Bankers Trust Company, as trustee ("Bankers Trust"), and the Convertible Subordinated Securities are to be issued under an Indenture dated as of October 15, 1989 (the "Convertible Indenture"), between the Company and Bankers Trust, as trustee. The form of Senior Indenture, the Subordinated Indenture and the Convertible Indenture (being sometimes referred to herein collectively as the "Indentures" and, individually, as an "Indenture") are filed as exhibits to the Registration Statement relating to the Securities (the "Registration Statement"). The Indentures are subject to the provisions of the Trust Indenture Reform Act of 1990, as amended. The Indentures do not limit the aggregate principal amount of the Securities which may be issued thereunder and provide that the Securities may be issued in one or more series up to the aggregate principal amount which may be authorized from time to time by the Company. The Company may, from time to time, without the consent of the holders of the Securities, provide for the issuance of Securities under the Indentures in addition to the $1,000,000,000 (or the equivalent thereof in one or more foreign or composite currencies) aggregate principal amount of Securities available for issuance as of the date of this Prospectus. The Company's assets consist principally of the stock in its subsidiaries. Therefore, its rights and the rights of its creditors, including the holders of the Securities, to participate in the assets of any subsidiary upon the latter's liquidation or recapitalization or otherwise will be subject to the prior claims of the subsidiary's creditors, except to the extent that claims of the Company itself as a creditor of the subsidiary may be recognized. The Indentures do not limit the amount of unsecured indebtedness of the Company or any subsidiary, the payment of dividends by the Company or its acquisition of any of its equity securities. 4 25 Nothing in the Indentures or in the terms of the Securities will prohibit the issuance of securities representing subordinated indebtedness that is senior or junior to the Subordinated Securities or the Convertible Subordinated Securities. Nothing in the Indentures affords holders of Securities protection in the event of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction involving the Company. However, the Senior Indenture does contain certain restrictive covenants with respect to the business of the Company and its subsidiaries and liens on and the sale or lease of the stock or certain assets of MCI Telecommunications Corporation, a wholly-owned subsidiary of the Company, which may make more difficult or discourage any such transactions. The consummation of any highly leveraged transaction, reorganization, restructuring, merger or similar transaction involving the Company could cause a material decline in the credit quality of the outstanding Securities. See "Description of Senior Securities -- Covenants." The particular terms of each series of Securities, as well as any modifications of or additions to the general terms of the Senior Securities, the Subordinated Securities or the Convertible Subordinated Securities, as described herein, which may be applicable in the case of a particular series of Securities, will be described in a Prospectus Supplement relating to such series of Securities. Accordingly, for a description of the terms of a particular series of Securities, reference must be made to both the Prospectus Supplement relating thereto and to the description of Senior Securities, Subordinated Securities or Convertible Subordinated Securities, as appropriate, set forth in this Prospectus. BEARER SECURITIES The Company also may offer from time to time securities in bearer form ("Bearer Securities") outside the United States at varying prices and terms. Such offerings of Bearer Securities may be separate from, or simultaneous with, offerings of Securities in the United States. The Bearer Securities are not offered by this Prospectus and may not be purchased by U.S. persons other than foreign branches of certain U.S. financial institutions. For purposes of this Prospectus, "U.S. person" means a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, or an estate or trust which is subject to United States income taxation regardless of its source of income. CERTAIN DEFINITIONS "Contingent Obligation" means, with respect to any Person, any direct or indirect liability of that Person with respect to any Indebtedness, lease, dividend, letter of credit or other obligation (the "primary obligations") of another Person (the "primary obligor"), including, without limitation, any obligation of such Person, whether or not contingent, (a) to purchase, repurchase or otherwise acquire such primary obligations or any property constituting direct or indirect security therefor, or (b) to advance or provide funds (i) for the payment or discharge of any such primary obligation, or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor or (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (d) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the Company in good faith. "Coupon" means any interest coupon appertaining to any Bearer Security. "Discount Security" means any Security that is issued with "original issue discount" within the meaning of Section 1273(a) of the Internal Revenue Code of 1986 and the regulations thereunder and any other Security designated by the Company as issued with original issue discount for United States federal income tax purposes. 5 26 "Disposed Assets" means all assets of MCI Telecom other than cash and cash equivalents, equity investments, franchises, licenses, permits, patents, patent applications, copyrights, trademarks, trade names, goodwill, experimental or organizational expense, and other like intangibles (but excluding rights of way treated as assets). "Indebtedness" means, with respect to any Person, (a) all obligations of such Person for borrowed money (including, with limitation, reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers' acceptances, whether or not matured); (b) all obligations evidenced by notes, bonds, debentures or similar instruments; (c) all obligations to pay for the deferred purchase price of property or services except trade accounts payable and accrued liabilities arising in the ordinary course of business; (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller under such agreement in the event of default are limited to repossession or sale of such property); (e) all obligations under leases which have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases; and (f) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is non-recourse to the credit of that Person. "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment, charge or segregated deposit arrangement, encumbrance, lien (statutory or other) or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever including, without limitation, those created by, arising under or evidenced by any conditional sale or other title retention agreement or the filing of any financing statement naming the owner of the asset to which such Lien shall relate as debtor (other than in connection with a transaction in which such asset shall have been leased by the named debtor) under the Uniform Commercial Code or comparable law of any jurisdiction. "MCI Telecom" means MCI Telecommunications Corporation, a Delaware corporation, and wholly-owned subsidiary of MCI. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, estate, unincorporated organization or government or any agency or political subdivision thereof. "Stated Maturity," when used with respect to any Security or any installment of principal (including any sinking fund payment) thereof or premium thereon or interest thereon, means the date specified in such Security or Coupon, if any, representing such installment of interest, as the date on which the principal of such Security or such installment of principal, premium or interest is due and payable. "Subsidiary," in connection with the covenants set forth below under "Description of Senior Securities -- Covenants," means, with respect to any Person, (i) a corporation of which shares of stock having ordinary voting power (other than stock having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person and (ii) any partnership of which such Person or any Subsidiary is a general partner or any partnership more than 50% of the equity interests of which are owned, directly or indirectly, by such Person or by one or more other Subsidiaries, or by such Person and one or more other Subsidiaries. EVENTS OF DEFAULT; RIGHTS UPON DEFAULT An "Event of Default" is defined in the Indentures to mean failure to pay interest when due for 30 days; failure to pay principal or premium, if any, when due; failure to make any sinking fund installment when due; failure on MCI's part to observe any of its other covenants under the Indentures (other than certain covenants solely for the benefit of holders of a different series of Securities) for a period of 90 days after notice (from the appropriate Trustee or holders of at least 25% in aggregate principal amount of the outstanding Securities of a series); and certain events of bankruptcy or reorganization of MCI. In addition, an "Event of Default" under the Senior Indenture occurs with respect to a series of Senior Securities when an event of default in respect of any Indebtedness or Contingent Obligation under which the Company or any of its subsidiaries has at the date 6 27 of such event of default outstanding at least $50,000,000, or the equivalent in another currency or currencies, aggregate principal amount of indebtedness for borrowed money, shall happen and be continuing and such Indebtedness or Contingent Obligation shall, as a result thereof, have been accelerated so that the same shall be or become due and payable prior to the date on which the same would otherwise have become due and payable, and such acceleration shall not be rescinded or annulled within 30 days after notice of such acceleration shall have been given to the Company by the Trustee under the Senior Indenture (if such event be known to it), or to the Company and the Trustee under the Senior Indenture by the holders of at least 25% in aggregate principal amount of the Outstanding Securities of such series; provided, however, that if such event of default in respect of any Indebtedness or Contingent Obligation shall be remedied or cured by the Company or waived by the holders of such Indebtedness or beneficiary or beneficiaries of such Contingent Obligation, then, unless the Securities of such series shall have been accelerated as provided in this provision, the Event of Default under this provision by reason of such provision shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of either the Trustee under the Senior Indenture or any holders of the Securities of such series. If an Event of Default with respect to Securities of any series at the time outstanding occurs and is continuing, either the appropriate Trustee or the holders of at least 25% in aggregate principal amount of the outstanding Securities of that series, by notice as provided in the appropriate Indenture, may declare the principal amount (or, if the Securities of that series are Discount Securities, such portion of the principal amount as may be specified in the terms of that series) of and all accrued but unpaid interest on all the Securities of that series to be due and payable immediately. At any time after a declaration of acceleration with respect to Securities of any series has been made, but before a judgment or decree for payment of money has been obtained by the appropriate Trustee, the holders of a majority in aggregate principal amount of the outstanding Securities of that series may, under certain circumstances, rescind and annul such acceleration. The Indentures provide that the appropriate Trustee shall, within 90 days after the occurrence of a default, give to the holders of Securities notice of all uncured defaults known to it; provided that, except in the case of default in the payment of the principal of, premium, if any, or interest on any of the Securities or in the payment of any sinking fund installment, the appropriate Trustee shall be protected in withholding such notice if in good faith it determines that the withholding of such notice is in the interest of the holders of Securities. MCI is required, pursuant to the terms of the Indentures and applicable law, to furnish each Trustee within 120 days after the close of each fiscal year a written statement of certain of MCI's officers to the effect that they have reviewed MCI's activities and its performance under the Senior Indenture, the Subordinated Indenture or the Convertible Indenture, as the case may be, and that, to the best of their knowledge, MCI has fulfilled all its obligations under such Indenture (or, if it has not, specifying the nature and status of such default). In case an Event of Default shall occur (which shall not have been cured or waived), the appropriate Trustee will be required to exercise its rights and powers under the appropriate Indenture and use in such exercise the degree of care and skill of a prudent man under the circumstances in the conduct of his own affairs. Subject to such provisions, such Trustee will be under no obligation to exercise any of its rights or powers under such Indenture at the request of any of the holders of Securities, unless they shall have offered to the Trustee reasonable security or indemnity. Except as specifically provided in the Indentures, nothing therein relieves a Trustee thereunder from liability for its own negligent action, its own negligent failure to act or its own willful misconduct. MODIFICATION OF THE INDENTURES Modifications and amendments of each of the Indentures may be made by the Company and the appropriate Trustee with the consent of the holders of a majority in principal amount of the outstanding Securities of each series affected by such modification or amendment; provided, however, that no such modification or amendment may, without the consent of the holder of each outstanding Security affected thereby, (a) change the Stated Maturity of the principal of, or any installment or principal of or interest on or sinking fund payment, on any Security, (b) reduce the principal amount of, or premium or interest on, any 7 28 Security, or (c) reduce the percentage in principal amount of outstanding Securities of any series, the consent of whose holders is required for modification or amendment of an Indenture. In addition, no modification or amendment of the Convertible Indenture may, without the consent of the holder of each Convertible Subordinated Security affected thereby, adversely affect the terms of conversion of the Convertible Subordinated Securities and no modification or amendment of the Subordinated Indenture or the Convertible Indenture may, without the written consent of each holder of Senior Indebtedness (as defined in each such Indenture as set forth below), modify, directly or indirectly, the subordination provisions therein or the definition of Senior Indebtedness in any manner that might alter or impair the subordination of the Subordinated Securities (and any Coupons appertaining thereto) or the Convertible Subordinated Securities. No modification or amendment of the Senior Indenture or the Subordinated Indenture may, without the consent of the holder of each outstanding Security affected thereby, (a) change the Stated Maturity of or reduce the amount of any payment to be made with respect to a Coupon, (b) change any obligation of the Company to pay additional interest contemplated by the Indentures, (c) reduce the amount of principal of a Discount Security payable upon acceleration of the maturity thereof, (d) change the currency in which any Security or any premium or interest thereon is denominated or payable, (e) impair the right to institute suit for the enforcement of any payment on or with respect to any Security after the Stated Maturity or date or redemption, (f) reduce the percentage in principal amount of outstanding Securities of any series, the consent of whose holders is required for waiver of compliance with certain provisions of any such Indentures or for waiver of certain defaults, (g) limit any obligation of the Company to maintain a paying agency outside the United States for payment on Bearer Securities, (h) limit the obligation of the Company to redeem certain Bearer Securities or Coupons the beneficial owners of which are required by United States law to disclose their nationality, residence or identity, or (i) modify any of the provisions set forth in this paragraph or in the preceding paragraph and regarding the waiver of past defaults except to increase any such percentage. The holders of not less than a majority in principal amount of the outstanding Securities of each series may, on behalf of all holders of Securities of that series and any Coupons appertaining thereto, waive any past default under the appropriate Indenture with respect to Securities of that series, except a default (a) in the payment of principal of, or any premium on or any interest on, any Security of such series or in the payment of a related Coupon or (b) in respect of a covenant or provision of such Indenture which cannot be modified or amended without the consent of the holder of each outstanding Security of such series affected. The Indentures will provide that in determining whether the holders of the requisite principal amount of the outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver thereunder (i) the principal amount of any Discount Security deemed to be outstanding will be the amount of the principal thereof that would be due and payable as of the date of such determination upon acceleration of the maturity thereof, and (ii) the principal amount of a Security denominated in other than U.S. dollars will be the U.S. dollar equivalent, determined on the date of original issuance of such Security, of the principal amount of such Security. A meeting may be called at any time by the appropriate Trustee, or upon the request of the Company or the holders of at least 10% in principal amount of the outstanding Securities of a series, in any such case upon notice given in accordance with the appropriate Indenture. Except as limited by the proviso in the fourth preceding paragraph and by the third preceding paragraph, any resolution presented at a meeting may be adopted by the affirmative vote of the holders of a majority in principal amount of the outstanding Securities of that series: provided, however, that, except as limited by the proviso in the fourth preceding paragraph and by the third preceding paragraph, any resolution with respect to any demand, consent, waiver or other action that may be made, given or taken by the holders of a specified percentage, which is more or less than a majority, in principal amount of outstanding Securities of a series may be adopted at a meeting by the affirmative vote of the holders of at least such specified percentage in principal amount of the outstanding Securities of that series. 8 29 THE TRUSTEES UNDER THE INDENTURES Citibank participates with a group of banks in a Revolving Credit Agreement with the Company. As of June 30, 1996, Citibank had no loans outstanding to MCI under this facility. Citicorp Securities, Inc., an affiliate of Citibank, and Citibank serve as dealer and issuing and paying agent, respectively, for MCI's commercial paper program. In addition, MCI maintains depository accounts with Citibank. Bankers Trust has been a dealer in connection with certain short-term investments made by MCI. Both Citibank and Bankers Trust are customers of MCI. Citicorp, the parent of Citibank, is one of MCI's ten largest customers by revenue. 9 30 DESCRIPTION OF SENIOR SECURITIES REFERENCE IS MADE TO THE EXPLANATORY STATEMENT COMMENCING ON PAGE 4 OF THIS PROSPECTUS The Senior Securities are to be issued under the Senior Indenture. The following description of the Senior Indenture and the Senior Securities 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 Senior Indenture and the Senior Securities, including the definitions therein of certain terms. Wherever particular sections of, or terms defined in, the Senior Indenture are referred to, such sections or defined terms are incorporated herein by reference. GENERAL The Senior Indenture provides that there may be more than one trustee under the Senior Indenture, each with respect to one or more different series of Senior Securities. In the event that there is more than one trustee under the Senior Indenture, the powers and trust obligations of each trustee as described herein shall extend only to the one or more series of Senior Securities for which it is trustee. The effect of the provisions contemplating that at a particular time there might be more than one trustee acting is that, in that event, those Senior Securities (whether of one or more than one series) for which each trustee is acting would be treated as if issued under a separate indenture. The Senior Securities will be unsecured and will rank on a parity with all other unsecured and unsubordinated indebtedness of the Company. Unless otherwise indicated in the Prospectus Supplement relating thereto, principal of and premium, if any, and interest, if any, on each series of Senior Securities will be payable, and the Senior Securities will be exchangeable and transfers thereof will be registrable, at the office of Citibank at 111 Wall Street, Fifth Floor, New York, New York 10043, provided that, unless other arrangements are made, payments of interest may be made by check mailed to the address of the person entitled thereto as it appears in the Security Register. LIMITATIONS ON CONSOLIDATION AND MERGER MCI may not, nor shall it permit MCI Telecom to, merge, consolidate or combine directly or indirectly with or into any Person, except (a) MCI Telecom may merge, consolidate or combine with or into any other Person, if immediately after giving effect thereto, (i) no Event of Default, and no event which, after notice or lapse of time or both, would constitute an Event of Default, would exist, and (ii) MCI Telecom shall be the surviving corporation in such merger, consolidation or combination, or the successor entity is a corporation organized and existing under the laws of the United States of America or any political subdivision or State thereof, and (b) MCI may merge, consolidate or combine with another entity if (i) MCI shall be the corporation surviving the merger, or the corporation into which the Company shall be merged or formed by any such consolidation is a corporation organized and existing under the laws of the United States of America or any political subdivision or State thereof and expressly assumes MCI's obligations on all the Securities and any Coupons relating thereto and under the Senior Indenture, and (ii) if immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would constitute an Event of Default, would exist. COVENANTS Maintenance of Telecommunications Business. MCI shall maintain the business of providing telecommunications services as a principal business of the Company and its Subsidiaries taken as a whole and shall cause MCI Telecom to maintain such business as its principal business. Limitation on Liens. From and after the date of the first issuance of Securities under the Senior Indenture, MCI may not directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any of the capital stock of MCI Telecom, nor shall it permit MCI Telecom to, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of its property or assets, whether owned as of such date or thereafter acquired, unless the Senior Securities then 10 31 outstanding shall be equally and ratably secured with any other obligation or indebtedness so secured, except for any of the following: (a) any Lien existing on the property of MCI Telecom on the date of the first issuance of Securities under the Senior Indenture securing Indebtedness outstanding on such date; (b) Liens for taxes, assessments or other governmental charges which are not delinquent or remain payable without material penalty, or the validity of which is contested in good faith by appropriate proceedings (to the extent that it would be appropriate to contest the levy or imposition of such tax as an alternative to payment) upon stay of execution or the enforcement thereof and for which adequate reserves or other appropriate provision has been made in accordance with generally accepted accounting principles; (c) carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other similar Liens arising in the ordinary course of business which are not material or, if material, are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings; (d) pledges or deposits in connection with workmen's compensation, unemployment insurance and other social security legislation; (e) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (f) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount, and do not materially detract from the overall value to MCI Telecom of all property and assets of MCI Telecom subject to such Liens or interfere with the ordinary conduct of the business of MCI Telecom; (g) Liens on assets which shall be acquired by MCI Telecom either directly or through the acquisition of the owner of such assets after the date of the first issuance of Securities under the Senior Indenture, if such Liens shall have existed at the time the assets or the owner of such assets were acquired and shall not have been created in anticipation thereof by or with the agreement of MCI Telecom; (h) Liens on assets (other than current assets) which shall be acquired by MCI Telecom after the date of the first issuance of Securities under the Senior Indenture, if such Liens shall have been created solely for the purpose of securing Indebtedness representing, or incurred to finance, refinance or refund, the cost of the acquisition of such assets or shall otherwise be created in anticipation of such acquisition by or with the agreement of MCI Telecom; and (i) Liens not otherwise permitted hereunder securing obligations of MCI Telecom in an aggregate amount not to exceed an amount equal to 10% of the total assets of MCI Telecom at any time, provided that, at the time any such Lien is created or incurred, the aggregate book value of the assets subject to such Lien shall not exceed an amount equal to 125% of the amount of the obligation secured by such assets. As of June 30, 1996, the book value of the assets of MCI Telecom, after elimination of intercompany balances, represented more than 80% of the consolidated assets of the Company. Limitation on Sales and Leases of Assets. From and after the date of the first issuance of Securities under the Senior Indenture, MCI may not, directly or indirectly, sell, convey, transfer or otherwise dispose of (whether in one or a series of transactions) any of the shares of capital stock of MCI Telecom, nor shall MCI permit MCI Telecom to, directly or indirectly, sell, lease, convey, transfer or otherwise dispose of (whether in one or a series of transactions) all or a material part of the assets, business or property of MCI Telecom (including, without limitation, accounts and notes receivable, with or without recourse), whether owned as of such date or thereafter acquired, or enter into any agreement to do any of the foregoing, except any of the following; (a) dispositions by MCI Telecom of obsolete or worn-out property or real property no longer used or useful in its business; (b) sales to local exchange carriers, with or without recourse, of customer receivables in the ordinary course of business; (c) dispositions of assets acquired, either directly or through the acquisition of the owner of such assets, after the date of the first issuance of Securities under the Senior Indenture, provided, that each such disposition shall be for fair and adequate consideration; and (d) dispositions (including, without limitation, sales pursuant to sale-leaseback transactions) by MCI Telecom not otherwise permitted hereunder which are made for fair market value, provided that the book value of all Disposed Assets disposed of after the date of the first issuance of Securities under the Senior Indenture does not exceed 25% of the greater of (i) the book value of the assets of MCI Telecom as of December 31, 1993 and (ii) the book value of the assets of MCI Telecom as of the date of the most recent financial statements furnished to Citibank. 11 32 DESCRIPTION OF SUBORDINATED SECURITIES REFERENCE IS MADE TO THE EXPLANATORY STATEMENT COMMENCING ON PAGE 4 OF THIS PROSPECTUS The Subordinated Securities are to be issued under the Subordinated Indenture. The following description of the Subordinated 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 Subordinated Indenture, including the definitions therein of certain terms. Wherever particular sections of, or terms defined in, the Subordinated Indenture are referred to, such sections or defined terms are incorporated herein by reference. GENERAL The Subordinated Indenture provides that there may be more than one trustee under the Subordinated Indenture, each with respect to one or more different series of Subordinated Securities. In the event that there is more than one trustee under the Subordinated Indenture, the powers and trust obligations of each trustee as described herein shall extend only to the one or more series of Subordinated Securities for which it is trustee. The effect of the provisions contemplating that at a particular time there might be more than one trustee acting is that, in that event, those Subordinated Securities (whether of one or more than one series) for which each trustee is acting would be treated as if issued under a separate indenture. Unless otherwise indicated in the Prospectus Supplement relating thereto, principal of, premium, if any, and interest, if any, for each series of Subordinated Securities will be payable, and the Subordinated Securities will be exchangeable and transfers thereof will be registrable, at the office of Bankers Trust at Four Albany Street, New York, New York 10006, provided that, unless other arrangements are made, payments of interest may be made by check mailed to the address of the person entitled thereto as it appears in the Security Register. LIMITATIONS ON CONSOLIDATION, MERGER AND SALE OF ASSETS MCI may not consolidate with or merge into any other corporation, or convey, transfer or lease its properties and assets substantially as an entirety to, any Person, unless (a) the successor entity is a corporation organized and existing under the laws of the United States of America or any political subdivision or State thereof and expressly assumes MCI's obligations on all the Securities and Coupons relating thereto and under the Subordinated Indenture; and (b) after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, would occur and be continuing. SUBORDINATION The payment of the principal of, premium, if any, and interest on the Subordinated Securities will be subordinated in right of payment, as set forth in the Subordinated Indenture, to the prior payment in full of all Senior Indebtedness of MCI, whether outstanding on the date of the Subordinated Indenture or thereafter incurred. Senior Indebtedness is defined in the Subordinated Indenture as any liability or obligation of MCI (whether incurred directly by MCI, by assumption or otherwise) (i) for money borrowed (except as indicated below), or (ii) arising under a lease of property, equipment or other assets which, pursuant to generally accepted accounting principles then in effect, is classified upon the balance sheet of MCI or any subsidiary of MCI as a liability of MCI or such subsidiary, or (iii) arising under an express written guaranty by MCI of the liability or obligation of another (including any subsidiary of MCI) of the type described in clauses (i) or (ii) above, or (iv) arising under an express written guaranty by MCI of the liability or obligation of another (including any subsidiary of MCI), where the liability or obligation of MCI is, by the express terms of the guaranty, superior in right of payment to the Subordinated Securities, or (v) created, incurred or assumed by MCI in connection with the acquisition of any other business, where, but only if, the liability or obligation of MCI is, by the express terms of the agreement or instrument creating or evidencing such liability or obligation of MCI, superior in right of payment to the Subordinated Securities, unless, in each such case, it is provided in the agreement or instrument creating or evidencing such liability or obligation of MCI or pursuant to which 12 33 such liability or obligation is outstanding, that such liability or obligation is not superior in right of payment to any Subordinated Securities. Any Convertible Subordinated Securities issued under the Convertible Indenture do not constitute Senior Indebtedness with respect to the Subordinated Securities and will rank on a parity with the Subordinated Securities in right of payment. By reason of the subordination described above, in the event of insolvency, creditors of MCI who are not holders of Senior Indebtedness or of the Subordinated Securities may recover less, ratably, than holders of Senior Indebtedness, and may recover more, ratably, than the holders of the Subordinated Securities. As of June 30, 1996, the aggregate amount of Senior Indebtedness was approximately $3,908 million. See also "The Securities -- Explanatory Statement". 13 34 DESCRIPTION OF CONVERTIBLE SUBORDINATED SECURITIES REFERENCE IS MADE TO THE EXPLANATORY STATEMENT COMMENCING ON PAGE 4 OF THIS PROSPECTUS The Convertible Subordinated Securities are to be issued under the Convertible Indenture. The following description of the Convertible 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 Convertible Indenture, including the definitions therein of certain terms. Wherever particular sections of, or terms defined in, the Convertible Indenture are referred to, such sections or defined terms are incorporated herein by reference. GENERAL The Convertible Indenture provides that there may be more than one trustee under the Convertible Indenture, each with respect to one or more different series of Convertible Subordinated Securities. In the event that there is more than one trustee under the Convertible Indenture, the powers and trust obligations of each trustee as described herein shall extend only to the one or more series of Convertible Subordinated Securities for which it is trustee. The effect of the provisions contemplating that at a particular time there might be more than one trustee acting is that, in that event, those Convertible Subordinated Securities (whether of one or more than one series) for which each trustee is acting would be treated as if issued under a separate indenture. Unless otherwise indicated in the Prospectus Supplement relating thereto, principal of, premium, if any, and interest, if any, for each series of Convertible Subordinated Securities will be payable, and the Convertible Subordinated Securities will be exchangeable, transfers thereof will be registrable and may be presented for conversion, at the office of Bankers Trust at Four Albany Street, New York, New York 10006, provided that, unless other arrangements are made, payments of interest may be made by check mailed to the address of the person entitled thereto as it appears in the Security Register. LIMITATIONS ON CONSOLIDATION, MERGER AND SALE OF ASSETS MCI may not consolidate with or merge into any other corporation, or convey, transfer or lease its properties and assets substantially as an entirety to, any Person, unless (a) the successor entity is a corporation organized and existing under the laws of the United States of America or any political subdivision or State thereof and expressly assumes MCI's obligations on all the Securities and Coupons relating thereto and under the Convertible Indenture and (b) after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, would occur and be continuing. SUBORDINATION The payment of the principal of, premium, if any, and interest on the Convertible Subordinated Securities will be subordinated in right of payment, as set forth in the Convertible Indenture, to the prior payment in full of all Senior Indebtedness of MCI, whether outstanding on the date of the Subordinated Indenture or thereafter incurred. Senior Indebtedness is defined in the Convertible Indenture as any liability or obligation of MCI (whether incurred directly by MCI, by assumption or otherwise) (i) for money borrowed (except as indicated below), or (ii) arising under a lease of property, equipment or other assets which, pursuant to generally accepted accounting principles then in effect, is classified upon the balance sheet of MCI or any subsidiary of MCI as a liability of MCI or such subsidiary, or (iii) arising under an express written guaranty by MCI of the liability or obligation of another (including any subsidiary of MCI) of the type described in clauses (i) or (ii) above, or (iv) arising under an express written guaranty by MCI of the liability or obligation of another (including any subsidiary of MCI), where the liability or obligation of MCI is, by the express terms of the guaranty, superior in right of payment to the Convertible Subordinated Securities, or (v) created, incurred or assumed by MCI in connection with the acquisition of any other business, where, but only if, the liability or obligation of MCI is, by the express terms of the agreement or instrument creating or evidencing such liability or obligation of MCI, superior in right of payment to the Convertible Subordinated Securities, 14 35 unless, in each such case, it is provided in the agreement or instrument creating or evidencing such liability or obligation of MCI or pursuant to which such liability or obligation is outstanding, that such liability or obligation is not superior in right of payment to any Convertible Subordinated Securities. Any Subordinated Securities issued under the Subordinated Indenture do not constitute Senior Indebtedness with respect to the Convertible Subordinated Securities and will rank on a parity with the Convertible Subordinated Securities in right of payment. By reason of the subordination described above, in the event of insolvency, creditors of MCI who are not holders of Senior Indebtedness or of the Convertible Subordinated Securities may recover less, ratably, than holders of Senior Indebtedness, and may recover more, ratably, than the holders of the Convertible Subordinated Securities. As of June 30, 1996, the aggregate amount of Senior Indebtedness was approximately $3,908 million. See "The Securities -- Explanatory Statement". CONVERSION If any Convertible Subordinated Security is to be issued, certain terms and provisions with respect thereto will be set forth in a Convertible Subordinated Security Prospectus Supplement (a "Convertible Prospectus Supplement"). To the extent that the description set forth herein is inconsistent with such terms and provisions, such terms and provisions shall govern with respect to any Convertible Subordinated Security. Except as set forth in the applicable Convertible Prospectus Supplement, the holders of Convertible Subordinated Securities will be entitled at any time on or prior to the close of business on the date set forth in the applicable Convertible Prospectus Supplement, subject to prior redemption, to convert such Convertible Subordinated Securities or portions thereof (which are $1,000 or integral multiples thereof) into Common Stock of the Company at the conversion price set forth on the cover page of such Convertible Prospectus Supplement. No adjustment will be made on conversion of any Debenture for interest accrued thereon or for dividends on any Common Stock issued. If any Convertible Subordinated Security is converted between a record date for the payment of interest and the next succeeding interest payment date, such Convertible Subordinated Security must be accompanied by funds equal to the interest payable to the registered holder on such interest payment date on the principal amount so converted. The Company is not required to issue fractional interests in Common Stock upon conversion of Convertible Subordinated Securities and, in lieu thereof, will pay a cash adjustment based upon the market price of the Common Stock on the last business day prior to the date of conversion. In the case of Convertible Subordinated Securities called for redemption, conversion rights will expire at the close of business on the redemption date. Also except as set forth in the applicable Convertible Prospectus Supplement, the conversion price is subject to adjustment as set forth in the Convertible Indenture in certain events, including the issuance of dividends on the Company's Common Stock payable in its Common Stock: subdivisions, combinations and certain reclassifications of the Common Stock; certain consolidations, mergers and sales of the property of the Company; the issuance to all holders of Common Stock of certain rights or warrants entitling them to subscribe for Common Stock at less than the then current market price (as defined) of the Common Stock; and the distribution to all holders of Common Stock of evidences of indebtedness or of securities of the Company or of assets (other than cash dividends or cash distributions payable out of consolidated net earnings or retained earnings). No adjustment in the conversion price will be required unless such adjustment would require a change of at least 1% in the price then in effect; provided however, that any adjustment that would otherwise be required to be made shall be carried forward and taken into account in any subsequent adjustment. Except as stated above, the conversion price will not be adjusted for the issuance of Common Stock or any securities convertible into or exchangeable for Common Stock, or carrying the right to purchase any of the foregoing, in exchange for cash, property or services. The Convertible Indenture will provide that in case of the reclassification or change in the outstanding shares of Common Stock, or the consolidation or merger of the Company with or into another corporation which is effected in such a way that holders of Common Stock are entitled to receive stock, securities or property (including cash) with respect to or in exchange for Common Stock, or the sale of conveyance of its property as an entirety or substantially as an entirety to another corporation, a supplemental indenture shall be executed providing that the holder of a Convertible Subordinated Security shall have the right to convert such Convertible Subordinated Security into 15 36 the kind and amount of shares, of stock or other securities or property (including cash) receivable upon such reclassification, change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock which would have been issuable upon conversion of such Convertible Subordinated Security immediately prior thereto. Except as set forth in the applicable Convertible Prospectus Supplement, any Convertible Subordinated Securities called for redemption, unless surrendered for conversion on or before the close of business on the redemption date, are subject to being purchased from the holder of such Convertible Subordinated Securities at the redemption price by one or more broker-dealers or other purchasers who may agree with the Company to purchase such Convertible Subordinated Securities and convert them into Common Stock of the Company. In the event of a taxable distribution to holders of Common Stock which results in an adjustment of the conversion price, the holders of the Convertible Subordinated Securities may, in certain circumstances, be deemed to have received a distribution subject to Federal income tax as a dividend. See the Prospectus Supplement or Supplements relating to such Securities. DESCRIPTION OF CAPITAL STOCK MCI has authority to issue 2,550,000,000 shares of capital stock, par value $.10 per share, consisting of 2 billion shares of Common Stock, 500 million shares of Class A Common Stock ("Class A Common Stock") and 50 million shares of Preferred Stock ("Preferred Stock"). At June 30, 1996, there were 552 million shares of Common Stock outstanding (net of treasury shares), 88 million shares of Common Stock contingently issuable upon the exercise of options, 136 million shares of Class A Common Stock outstanding and no shares of Preferred Stock outstanding. The board of directors of MCI has authority (without action by its stockholders) to issue the authorized and unissued Preferred Stock in one or more series and, within certain limitations, to determine the voting rights, preferences as to dividends and in liquidation, conversion and other rights of each such series. Dividend Rights. Dividends may be paid on the Common Stock out of funds legally available therefor when, as and if declared by MCI's board of directors. Since May 1990, the board of directors has declared semi-annual cash dividends (adjusted for the effect of a two-for-one stock split in July 1993) of $.025 per share of Common Stock. The holders of Class A Common Stock are entitled to receive out of funds legally available therefor when, as and if declared by MCI's board of directors, dividends equal to the aggregate per share amount of any dividend (other than a dividend payable in shares of Common Stock) paid on the Common Stock, and MCI shall declare and pay such a dividend on the Class A Common Stock at the same times that it declares and pays any dividend on the Common Stock. Voting Rights. On all propositions except the election of directors, holders of Common Stock and Class A Common Stock may cast one vote for each share on any matter in respect of which the holders of Common Stock are entitled to vote and the holders of Common Stock and Class A Common Stock vote together as a single class. MCI's board of directors consists of twelve persons, of whom two are presently elected by the holders of Class A Common Stock. The holders of the Class A Common Stock, voting together with the holders of any series of Preferred Stock that is accorded the right (the "Class A Preferred Stock", and together with the Class A Common Stock, the "Class A Shares") as a separate class, are entitled to elect a percentage of the total number of directors (the "Class A Directors") that is equal to the percentage of the total voting power of all voting securities of MCI that is represented by the Class A Shares, except that if the Class A Shares' voting power represents between 15% and 20% of the total voting power of all voting securities, the holders of Class A Shares are entitled to elect 20% of the total number of directors. As of the date of this Prospectus, all of the outstanding shares of Class A Common Stock are owned by British Telecommunications plc ("BT"). The Class A Directors are elected for a one year term. The holders of Class A Shares may remove any Class A Director by the affirmative vote of (i) not less than four-fifths of the holders of all outstanding shares entitled to vote thereto if for cause, or (ii) not less than a majority of the outstanding shares of Class A Common Stock if without cause provided that, if less than all Class A Directors are to be removed, no Class A Director 16 37 may be removed without cause if the votes cast against such director's removal would be sufficient to elect such director if then cumulatively voted at an election of all Class A Directors. The balance of MCI's board of directors is divided into three classes, each class as nearly equal in number to the other classes as the then total number of directors (excluding the Class A Directors) permits. As of the date of this Prospectus, two of the three classes each have four directors and one class has three directors. The members of each class of directors are elected for three-year terms by the holders of Common Stock. In voting upon the election of these directors, voting is cumulative. Each holder of Common Stock has the right to cast as many votes in the aggregate as equals the number of votes to which that stockholder is entitled on other matters multiplied by the number of directors to be elected to the classes. Each holder of Common Stock may cast the whole number of votes for one candidate or may distribute votes among the candidates, as he or she chooses. The holders of Common Stock may remove any director (excluding Class A Directors) for cause by an affirmative vote of four-fifths of the outstanding shares of Common Stock. MCI's Certificate of Incorporation provides that so long as any shares of Class A Common Stock are outstanding, MCI shall not, without the written consent or affirmative vote of the holders of a majority of the shares of Class A Common Stock (a) amend its Certificate of Incorporation so as to affect adversely the rights of holders of Class A Common Stock; (b) effect any Business Combination (as defined in the Certificate of Incorporation) prior to September 30, 1998; (c) issue any series or class of capital stock having either (i) more than one vote per share (other than pursuant to the Rights Plan described below), or (ii) a class vote on any matter, except as required by Delaware corporate law or to the extent holders of Preferred Stock may have the right, voting separately as a class, to elect a number of directors upon the occurrence of a default in payment of dividends or redemption price; (d) adopt a stockholder rights plan or amendment of the Rights Plan that would adversely affect any holder of Class A Common Stock in relation to the Rights Plan; (e) issue, subject to certain exceptions, voting securities representing voting power in excess of (i) 10% of the aggregate voting power of MCI's outstanding voting securities as of the date of such issuance, or (ii) 15% of the aggregate voting power of the average number of MCI's voting securities outstanding over a rolling three-year period; (f) issue voting securities (other than issuances (i) on a pro rata basis to all holders of a class or series of capital stock, (ii) upon the exercise of Rights under the Rights Plan, or (iii) upon exercise of any option or options to purchase voting securities granted in connection with the execution of a definitive agreement providing for any business combination) to any person (other than a holder of Class A Common Stock) that beneficially owns, or as a result thereof would beneficially own, more than 5% of MCI's then outstanding voting securities, and transactions with any person that beneficially owns more than 5% of MCI's then outstanding shares of capital stock, other than transactions (i) applicable on an equal basis to all holders of a class or series of stock generally, (ii) in accordance with the Rights Plan, or (iii) relating to any business combination effected after September 30, 1998; (g) effect any single or related series of acquisitions of businesses or assets or, with certain exceptions, investments therein pursuant to which the aggregate purchase price paid will exceed 20% (or 5% if such acquisition or investment is in a business unrelated to all telecommunications and other electronic information services and equipment for the provision of such services including, without limitation, all forms of telecommunications access and egress (landline and wireless), and value-added consumer and business services generated through or as a result of underlying telecommunications services using all technology (voice, data and image) and physical transport, network intelligence, and software applications, and including, without limitation, (i) information processing, (ii) systems integration and outsourcing, (iii) transaction processing and (iv) cable television) of the market capitalization of MCI at the time MCI executes a definitive agreement to effect such acquisition or investment; (h) except for a sale of all or substantially all of the assets of MCI, effect any single or related series of sales, transfer or other dispositions or encumbrances of assets having a fair market value in excess of 15% of the aggregate fair market value of MCI's total assets at the time MCI executes a definitive agreement to effect such transaction; (i) incur indebtedness for money borrowed that would cause MCI's ratio of debt-to-total capitalization to exceed 65%; and (j) declare any extraordinary cash dividends or other distribution to holders of any class or classes, and/or any series thereof, of capital stock in excess of 5% of MCI's market capitalization at the time of such dividend or other distribution. 17 38 MCI's Certificate of Incorporation also requires the written request of the holders of not less than two-thirds of the outstanding shares entitled to vote in the elections of directors to call a special meeting of stockholders and the affirmative vote of not less than four-fifths of the outstanding shares (a) to make, alter, amend or repeal by-laws by stockholder action; or (b) to effect any changes in the provisions of the Certificate of Incorporation relating to (i) cumulative voting; (ii) the making, altering, amending or repealing of by-laws by stockholder action, and (iii) the calling of special meetings by stockholders. MCI's by-laws require that notice of any proposed nominations for election of directors (other than by the board itself) be given to MCI not less than 60 days prior to the first anniversary of the date of the last meeting of stockholders at which directors were elected. Liquidation Rights and Other Provisions. After distribution in full of the preferential amount to be distributed to the holders of any outstanding Preferred Stock upon any voluntary or involuntary liquidation, dissolution or winding-up of MCI, the holders of Common Stock and Class A Common Stock are entitled to receive pro rata, on a share-for-share basis, the remaining assets of MCI available for distribution to stockholders. The Common Stock has no preemptive or conversion rights. The Common Stock and Class A Common Stock are not redeemable (and there are no sinking fund provisions therefor), except in the event that a holder whose continued holding of such stock, in the judgment of the board of directors, may result in the loss of or failure to secure the renewal of any license or franchise from any governmental agency held by MCI to conduct its business, which license or franchise is conditioned upon some or all of the holders of the stock of MCI possessing prescribed qualifications. All outstanding shares of Common Stock are, and the shares of Common Stock issuable upon conversion of the Convertible Subordinated Securities will be, when issued pursuant to the terms of the Convertible Indenture, fully paid and not liable for further calls or assessments. The Class A Common Stock has no preemptive rights, except that if MCI issues voting securities, BT, so long as BT's aggregate voting power of all outstanding voting securities of MCI is at least 10%, will have the right, exercisable in whole or in part, to acquire from MCI an amount of such voting securities to maintain its aggregate voting power at the same percentage prior to the issuance of such voting securities; provided, however, such equity purchase right will not apply (i) to grants of any options or any other rights to acquire voting securities pursuant to MCI's employee benefit plans, (ii) upon the exercise or exchange of any Rights, (iii) to issuances of shares of Common Stock upon the conversion or exercise of any options, warrants, rights or other securities convertible into or exercisable for Common Stock that are outstanding as of September 30, 1994 to the extent that an equal number of outstanding shares of Common Stock are repurchased by MCI through open market purchases or otherwise within 90 days after the time that BT would otherwise be entitled to equity purchase rights, (iv) upon the conversion or exercise of any options, warrants, rights or other securities convertible into or exercisable for such voting securities, the issuance of which was subject to this equity purchase right, (v) to certain de minimis offerings for consideration other than cash, (vi) to the reissuance of such voting securities purchased by MCI subsequent to September 30, 1994, (vii) issuances of any voting securities to BT or any of its affiliates and (viii) any pro rata stock split, stock dividend, or other combination or reclassification of any capital stock of MCI. The Class A Common Stock is automatically converted into Common Stock on a one-for-one basis if (i) it is transferred to a party not affiliated with BT, (ii) the voting power of the Class A Common Stock becomes less than 10% of the total voting power of all outstanding voting securities of MCI, or (iii) if the holders of Class A Common Stock have transferred more than 25% of their voting securities of MCI and hold less than 15% of the total voting power of all outstanding voting securities of MCI, or upon the occurrence of certain other events. Rights Plan. On September 7, 1994, the board of directors of MCI declared a dividend of one preferred share purchase right (a "Right") for each outstanding share of Common Stock and Class A Common Stock (collectively, the "Common Shares") to the holders of record on October 11, 1994. Prior to the earlier of (i) the Distribution Date (as defined below), (ii) the redemption of the Rights and (iii) the expiration of the Rights and, in some instances, after the Distribution Date and prior to the earlier of the redemption of the Rights and the expiration of the Rights, the Rights will also be attached to all future issuances of Common Shares. Each Right entitles the registered holder to purchase from the Company one one-hundredth of a share of Series E Junior Participating Preferred Stock, par value $.10 per share (the "Preferred Shares"), of MCI at 18 39 an initial price of $100 per one one-hundredth of a Preferred Share (the "Purchase Price"), subject to adjustment. The Rights will become exercisable on the date (the "Distribution Date") that is the earlier of (i) the tenth day following a public announcement that a person or group of affiliated or associated persons have acquired beneficial ownership of 10% or more of the outstanding Common Shares (more than 20.1% of the outstanding Common Shares in the case of share acquisitions by BT), subject to certain exceptions, (an "Acquiring Person"), or (ii) 10 business days (or such later date as may be determined by action of the board of directors prior to such time as any person or group of affiliated persons becomes an Acquiring Person) following the commencement or announcement of an intention to make a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 10% or more of the outstanding Common Shares (more than 20.1% of the outstanding Common Shares in the case of a tender offer or exchange offer commenced or announced by BT). BT is not deemed an Acquiring Person solely by virtue of the shares of Class A Common Stock it presently owns. In the event that any person or group of affiliated or associated persons becomes an Acquiring Person, each holder of a Right (other than Rights beneficially owned by the Acquiring Person, which will become void), will thereafter have the right, subject to certain restrictions, to receive upon exercise in lieu of Preferred Shares that number of shares of Common Stock (or, at the option of MCI, that number of one-hundredth of Preferred Shares) determined as set forth in the Rights Plan. In the event that, after a person or group has become an Acquiring Person, MCI is acquired in a merger or other business combination transaction or 50% or more of its consolidated assets or earning power are sold, proper provision will be made so that each holder of a Right (other than Rights beneficially owned by an Acquiring Person, which will have become void) will thereafter have the right to receive, upon the exercise thereof at the then current exercise price, that number of shares of common stock of the acquiring company which at the time of such transaction will have a market value equal to two times the exercise price of the Right. The Purchase Price payable, and the number of Preferred Shares or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights, options or warrants to subscribe for or purchase Preferred Shares at a price, or securities convertible into Preferred Shares with a conversion price, less than the then current market price of the Preferred Shares, or (iii) upon the distribution to holders of the Preferred Shares of evidences of indebtedness or assets (excluding regular periodic cash dividends paid out of earnings or retained earnings or dividends payable in preferred shares) or of subscription rights or warrants (other than those referred to above). The number of outstanding Rights is subject to adjustment in the event of a stock dividend on the Common Shares payable in Common Shares or subdivisions, consolidations or combinations of the Common Shares occurring, in any such case, prior to the Distribution Date. Prior to the Distribution Date, the Rights will be transferred with and only with the Common Shares. Until the Distribution Date (or earlier redemption, exchange or expiration of the Rights), new Common Share certificates issued upon transfer or new issuances of Common Shares will contain a notation incorporating the Rights by reference. The Rights are not exercisable prior to the Distribution Date. The Rights will expire on September 30, 2004, unless extended or unless the Rights are earlier redeemed or exchanged by MCI. At any time prior to the time an Acquiring Person becomes such, the board of directors may redeem the Rights in whole, but not in part, at a price of $.01 per Right, provided that pursuant to MCI's Certificate of Incorporation, until September 30, 1998, so long as any shares of Class A Common Stock remain outstanding, such redemption will also require the affirmative vote of the holders of 75% of all the Company's outstanding voting securities. In addition, until September 30, 2004, MCI has agreed with BT that, without BT's consent, it will not redeem the Rights unless it has followed certain auction procedures. 19 40 Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of MCI, including, without limitation, the right to vote or to receive dividends. For a full description of the existing provisions of the MCI capital stock and the Rights, reference is made to the actual provisions of the Certificate of Incorporation, by-laws and Rights Plan of MCI which have been filed with the Commission as exhibits to the Registration Statement of which this Prospectus is a part. The foregoing summary of MCI's capital stock and the Rights Plan is subject to, and qualified in its entirety by, such reference. 20 41 FEDERAL INCOME TAX CONSEQUENCES The following is a discussion of certain additional United States federal income tax consequences of the ownership and disposition of the Securities. The discussion only addresses the tax consequences to persons who hold the Securities as capital assets and does not deal with special classes of holders, such as dealers in securities, financial institutions, insurance companies, tax-exempt organizations or persons holding Securities as a hedge against currency risks. In addition, the discussion does not address the tax consequences of the ownership and disposition of any specific series of Securities, which consequences may be affected by the particular terms of such series of Securities, and may require additional discussion in a Prospectus Supplement relating to such series of Securities. In particular, the discussion does not address the tax consequences of Securities that are denominated in, or indexed to, currencies other than the United States dollar or Securities that are convertible into Common Stock of the Company. In all cases, persons considering the purchase of Securities should consult their own tax advisors concerning the application of United States federal income tax laws to their particular situations as well as any consequences arising under the laws of any other taxing jurisdiction. UNITED STATES HOLDER A United States Holder is a holder that is a citizen or resident of the United States, a corporation or partnership created or organized in or under the laws of the United States or any political subdivision thereof or an estate or trust the income of which is subject to United States federal income taxation regardless of its source. As used herein, the term "Non-United States Holder" means a holder that is not a United States Holder. Payments of Interest. Interest on a Security (other than interest included in the stated redemption price at maturity of a Discount Security, described below) will be taxable to a United States Holder as ordinary interest income at the time it is accrued or is paid in accordance with the United States Holder's method of accounting for tax purposes. Original Issue Discount Securities. The following summary is a general discussion of the United States federal income tax consequences to United States Holders of Securities issued at an original issue discount ("Discount Securities"). For United States federal income tax purposes, the excess of the stated redemption price at maturity of a Discount Security over its issue price (defined as the first price at which a substantial amount of the issue of Discount Securities is sold for money) will be original issue discount if such excess equals or exceeds 1/4 of 1 percent of the stated redemption price at maturity of such Discount Security multiplied by the number of complete years to its maturity. The stated redemption price at maturity of a Discount Security includes its principal amount and all payments provided by the Discount Security other than payments of "qualified stated interest". The term "qualified stated interest" generally means stated interest that is unconditionally payable in cash or property (other than debt instruments of the Company) at least annually at a single fixed rate. Special rules apply to determine qualified stated interest and original issue discount with respect to debt instruments that provide for stated interest at current values of (i) one or more qualified floating rates, (ii) a single fixed rate and one or more qualified floating rates, (iii) a single objective rate, or (iv) a single fixed rate and a single objective rate that is a qualified inverse floating rate. A "qualified floating rate" is any floating rate where variations in such rate can reasonably be expected to measure contemporaneous variations in the cost of newly borrowed funds in the currency in which the debt instrument is denominated, as well as certain multiples of a qualified floating rate. An "objective rate" is a rate that is not itself a qualified floating rate but that is determined using a single fixed formula and that is based on objective financial or economic information, provided that such information is neither within the control of the issuer (or a related party) nor unique to the circumstances of the issuer (or a related party), such as dividends, profits, or the value of the issuer's stock. A "qualified inverse floating rate" is an objective rate that is equal to a fixed rate minus a qualified floating rate, where variations in the rate can reasonably be expected to inversely reflect contemporaneous variations in the qualified floating rate. A Security which has an issue price not less than its principal amount may, nonetheless, be considered to have original issue discount. If interest is included in the 21 42 stated redemption price at maturity, it will be accounted for under the original issue discount rules, rather than the holder's method of accounting. United States Holders of Discount Securities will have to include original issue discount in income before the receipt of cash attributable to such income. The amount of original issue discount includible in income by the initial holder of a Discount Security and, subject to an adjustment, by any subsequent holder is the sum of the daily portions of original issue discount with respect to the Discount Security for each day during the taxable year or portion of the taxable year on which such holder holds the Discount Security. The daily portion is determined by allocating to each day of the relevant "accrual period" a pro rata portion of an amount equal to the excess of (i) the product of (a) the "adjusted issue price" of the Discount Security at the beginning of that accrual period, and (b) the "yield to maturity" of the Discount Security (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), over (ii) the sum of the qualified stated interest payments, if any, payable during such accrual period. For these purposes, an "accrual period" is an interval of time with respect to which the accrual of original issue discount is measured. Accrual periods may be of any length and may vary in length over the term of the debt instrument, provided that each accrual period is no longer than one year and each scheduled payment of principal or interest occurs either on the final day of an accrual period or on the first day of an accrual period. The "adjusted issue price" of the Discount Security at the beginning of any accrual period is the issue price of such Discount Security plus the accrued original issue discount for each prior accrual period, reduced by any payments made on the Discount Security other than payments of qualified stated interest. Under these rules, United States Holders may have to include in income increasingly greater amounts of original issue discount in successive accrual periods. The computation of original issue discount on a Discount Security that is subject to repayment at the option of the Holder or redemption at the option of the Company may be affected by rules presuming the option to be exercised, with the result that the original issue discount may be accrued as income over a shorter period. United States Holders may, subject to certain limitations and exceptions, elect to include in income all interest (including stated interest, acquisition discount, original issue discount, de minimis original issue discount, market discount, de minimis market discount, and unstated interest, as adjusted by any amortizable bond premium or acquisition premium) that accrues on a debt instrument by using the constant yield method applicable to original issue discount. Acquisition Premium. If a United States Holder purchases a Discount Security at a premium, i.e., at a price in excess of the adjusted issue price, the amount includible in income in each taxable year as original issue discount is reduced by an amount equal to the original issue discount (as otherwise determined) multiplied by a fraction, the numerator of which is such excess and the denominator of which is the original issue discount for the period to maturity after the Holder's purchase. If a United States Holder purchases a Discount Security at a price in excess of its stated redemption price at maturity, such excess may be deductible as amortizable bond premium (discussed below). Short-Term Obligations. In general, an individual or other cash method United States Holder of any Discount Security that matures one year or less from the date of its issuance (a "Short-Term Obligation") is not required to accrue original issue discount for United States federal income tax purposes unless it elects to do so. United States Holders who report income for federal income tax purposes under the accrual method and certain other United States Holders, including banks and dealers in securities, are required to accrue the original issue discount on such Discount Securities on a straight-line basis, unless an election is made to accrue the original issue discount under the constant yield method based on daily compounding. In the case of a United States Holder not required and not electing to include the original issue discount in income currently, any gain realized on the sale or maturity of a Short-Term Obligation will be ordinary income to the extent of the original issue discount accrued on a straight-line basis through the date of sale or maturity. United States Holders who are not required and do not elect to accrue the original issue discount on a Short-Term Obligation will be required to defer deductions for interest on borrowings allocable to such a Short-Term Obligation in an amount not exceeding the accrued discount until such accrued discount is included in income. 22 43 Amortizable Bond Premium. If a United States Holder of a Security purchases it at a cost which is in excess of its stated redemption price at maturity, the excess cost may be deductible by the purchaser as "amortizable bond premium" on a constant yield basis over the remaining term of the Security. The deduction is available only if an election is made by the purchaser or is in effect. The election applies to all debt instruments held or subsequently acquired by the electing purchaser. Amortizable bond premium must be treated as an offset to interest income on the Security acquired, rather than as a separate deduction. An electing purchaser's tax basis in a Security is reduced by the amount of bond premium amortized with respect to the Security. Market Discount. If a United States Holder of a Security (including, in some instances, an initial holder) purchases it at a "market discount" and thereafter realizes gain upon a disposition or a retirement of the Security, the lesser of such gain or the portion of the market discount that accrues on a straight-line basis (or, if the holder so elects, on a constant interest rate basis) while the Security was held by such holder will be treated as ordinary interest income at the time of such disposition or retirement. In addition, a holder may be required to include in gross income, as ordinary interest income, accrued market discount to the extent of partial principal payments received with respect to the Security. In such case, the amount of accrued market discount to be recognized at the time of the disposition or retirement of the Security will be reduced accordingly. "Market discount" is the amount by which (i) the revised issue price of a Discount Security (i.e., the issue price increased by the sum of daily portions of original issue discount for each prior accrual period), or (ii) the principal amount (or the issue price, in the case of an initial holder) of a Security not issued at a discount, exceeds the holder's basis in such Security immediately after acquisition. The market discount will be deemed to be zero, however, if it is less than 1/4 of 1 percent of the revised issue price of a Discount Security, or of the principal amount of a Security not issued at a discount, multiplied by the number of complete years from acquisition to maturity. If a holder makes a gift of a Security or disposes of a Security in certain nonrecognition transactions, accrued market discount, if any, will be recognized as if such holder had sold such Security for a price equal to its fair market value. The market discount rules also provide that a holder who acquires a Security at a market discount may be required to defer a portion of any interest expense that may otherwise be deductible on any indebtedness incurred or continued to purchase or carry such Security until the holder disposes of the Security in a taxable transaction. A holder of a Security acquired at a market discount may elect to include market discount in gross income as the discount accrues, either on a straight-line basis or on a constant interest rate basis. This current inclusion election, once made, applies to all market discount debt instruments acquired on or after the first day of the first taxable year to which the election applies and may not be revoked without the consent of the Internal Revenue Service. If a holder of a Security makes such an election, the foregoing rules with respect to the recognition of ordinary interest income on sales and other dispositions of, and on the receipt of partial principal payments on, the Securities and with respect to the deferral of interest deductions on indebtedness incurred or continued to purchase or carry such Securities would not apply. Purchase, Sale and Retirement. A United States Holder's tax basis for determining gain or loss on a sale or other disposition of a Security will generally be the United States Holder's cost increased by any original issue discount included in income (and market discount, if any, if the United States Holder elects to include the accrued market discount in income on an annual basis) and decreased by the amount of any payments, other than qualified stated interest payments, received and the amount of bond premium amortized with respect to such Security. Gain or loss on the sale or redemption of a Security will generally be long-term capital gain or loss if the Security has been held for more than one year (except to the extent that gain represents accrued interest or market discount not previously included in the United States Holder's income). Information Reporting. The amount of interest paid on the Securities and the amount of original issue discount accrued on Discount Securities held of record by United States persons (other than corporations and other exempt United States Holders) will be reported to the Internal Revenue Service. The amount of original issue discount required to be reported to the Internal Revenue Service may not be equal to the amount of 23 44 original issue discount required to be reported as taxable income by a United States Holder of such Discount Securities who is not an original purchaser. NON-UNITED STATES HOLDERS Under present United States federal income tax law, and subject to the discussion of backup withholding below, payments on the Securities by the Company or any of its Paying Agents to any non-United States Holder will not be subject to United States federal withholding tax, provided that (a) such Holder does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of the Company entitled to vote, (b) such Holder is not a controlled foreign corporation that is related to the Company through stock ownership, (c) such Holder is not a bank with respect to which the holding of the Security is treated as the extension of credit in the ordinary course of its trade or business, (d) the payment is not treated as contingent interest, excluded from the definition of portfolio interest, and (e) either (1) the beneficial owner of the Security certifies to the Company or its agent, under penalties of perjury, that it is a non-United States Holder and provides its name and address, and U.S. taxpayer identification number, if any, or (2) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "financial institution") and that holds the Securities certifies to the Company or its agent 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 furnishes the payor with a copy thereof. The certificate may be made on a United States Internal Revenue Service Form W-8 or substantially similar form. A certificate described in this paragraph is effective only with respect to interest payments and payments representing accrued original issue discount made to the certifying non-United States Holder after the issuance of the certificate in the calendar year of its issuance and the two immediately succeeding calendar years. An income tax treaty between the United States and the country of residence of a non-United States Holder (a "treaty country") may reduce the rate of, or eliminate, any United States federal withholding tax that would, notwithstanding the above, otherwise be applicable to payments to such non-United States Holder. If a non-United States Holder is engaged in a trade or business in the United States and interest and original issue discount on the Security are effectively connected with the conduct of such trade or business, and, if such non-United States Holder is resident in a treaty country, such non-United States Holder has a permanent establishment or fixed base in the United States to which such interest or original issue discount is attributable, the non-United States Holder, although exempt from the withholding tax discussed above, may be subject to United States income tax on such interest and original issue discount in the same manner as if it were a United States Holder. In addition, if such a Holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its effectively connected earnings and profits for the taxable year, as adjusted for certain items; for this purpose, interest and original issue discount on a Security will be included in earnings and profits if the interest and original issue discount are effectively connected with the conduct of the United States trade or business of the Holder. If such foreign corporate Holder is resident in a treaty country, the treaty may reduce the rate, or eliminate, the branch profits tax that would otherwise be applicable to such foreign corporate Holder. Any gain or income realized by a non-United States Holder upon retirement or disposition of a Security (not including in such gain or income amounts representing stated interest or accrued original issue discount, the U.S. tax treatment of which is described above) will not be subject to United States federal income tax if (i) such gain or income is not effectively connected with a trade or business in the United States of the Holder of such Security (or, if such non-United States Holder is resident in a treaty country and such gain is effectively connected with a United States trade or business of such non-United States Holder, the gain is not attributable to a permanent establishment or fixed base of such non-United States Holder in the United States) and (ii) in the case of an individual Holder, the Holder is not present in the United States for a period or periods aggregating 183 days in the taxable year of the retirement or disposition. 24 45 BACKUP WITHHOLDING AND INFORMATION REPORTING A 31% "backup" withholding tax and information reporting requirements apply to certain payments of interest and original issue discount on an obligation, and to proceeds of the sale of an obligation before maturity, to certain non-corporate United States Holders. The Company, and/or any paying and/or collection agent, including a broker, as the case may be, will be required to withhold from any payment that is subject to backup withholding a tax equal to 31% of such payment unless the Holder furnishes its taxpayer identification number (i.e., social security number in the case of an individual) in the manner prescribed in applicable Treasury Regulations, certifies that such number is correct, certifies (with respect to payments of interest and original issue discount) as to no loss of exemption from backup withholding, and meets certain other conditions. Backup withholding, however, in any event, generally does not apply to payments to certain "exempt recipients" such as corporations. Its applicability to non-United States Holders is discussed more fully below. Under current Treasury Regulations, backup withholding and information reporting will not apply to payments made by the Company or any paying agency thereof (in its capacity as such) to a Holder of a Security with respect to which the Holder has provided to the Company (and/or any paying and/or collection agent, including a broker) required certification of its non-United States status under penalties of perjury or has otherwise established an exemption (provided that neither the Company nor such paying agency has actual knowledge that the Holder is a United States Holder or the conditions of any other exemption are not in fact satisfied). Such certificate may be made on a United States Internal Revenue Service Form W-8 or substantially similar form. If such payment is made to the beneficial owner of a Security by the non-United States office of a foreign custodian, foreign nominee or other foreign agent of such beneficial owner, or if the non-United States office of a foreign "broker" (as defined in applicable Treasury Regulations) pays the proceeds of the sale of a Security to the seller thereof, such nominee, custodian, agent or broker is not required to backup withhold or file an information report with respect to such payment (provided that such nominee, custodian, agent or broker derives less than 50% of its gross income for certain specified periods from the conduct of a trade or business in the United States and is not a controlled foreign corporation for United States tax purposes). Payments made to the beneficial owner by the non-United States office of other custodians, nominees or agents, or the payment by the foreign office of other brokers, will not be subject to backup withholding, but will be subject to information reporting unless the custodian, nominee, agent or broker has documentary evidence in its records that the beneficial owner or seller is not or was not, as the case may be, a United States Holder and certain conditions are met or the beneficial owner or seller otherwise establishes an exemption. Payments made to the beneficial owner by the United States office of a custodian, nominee or agent, or a broker are subject to both backup withholding and information reporting unless the beneficial owner or seller certifies its non-United States status under penalties of perjury or otherwise establishes an exemption. Any amounts withheld under the backup withholding rules from a payment to a Holder would be allowed as a refund or a credit against such Holder's United States federal income tax, provided that the required information is furnished to the United States Internal Revenue Service. 25 46 PLAN OF DISTRIBUTION The Company may sell Securities to one or more underwriters for public offering and sale by them or may sell Securities to investors directly or through agents. The distribution of the Securities may be effected from time to time in one or more transactions at a fixed price or prices (which may be changed from time to time), at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. Each Prospectus Supplement will describe the method of distribution of the Securities offered thereby. In connection with the sale of the Securities, dealers may receive compensation from the Company or from purchasers of Securities for whom they may act as agents, in the form of discounts, concessions or commissions. The dealers which participate in the distribution of Securities may be deemed to be underwriters under the Securities Act of 1933 (the "Act") and any discounts or commissions received by them and any profit on the resale of Securities by them may be deemed to be underwriting discounts and commissions under the Act. Any such dealer will be identified and any such compensation will be described in the appropriate Prospectus Supplement. Under agreements entered into with the Company, underwriters, agents and dealers which participate in the distribution of Securities may be entitled to indemnification or contribution from the Company against certain liabilities, including liabilities under the Act. If so indicated in the appropriate Prospectus Supplement, the Company will authorize underwriters, dealers or other persons acting as the Company's agents to solicit offers by certain institutions to purchase Securities from the Company pursuant to contracts providing for payment and delivery on a future date. Institutions with which such contracts may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and others, but in all cases such institutions must be approved by the Company. The obligations of any purchaser under any such contract will be subject to the conditions that (1) the purchase of the Securities shall not at the time of delivery be prohibited under the laws of the jurisdiction to which such purchaser is subject, and (2) if the Securities are also being sold to dealers acting as principals for their own account, such dealers shall have purchased such Securities not sold by them for delayed delivery. The underwriters, dealers and such other persons acting as the Company's agents will not have any responsibility in respect of the validity or performance of such contracts. LEGAL OPINIONS The legality of each issue of the Securities will be passed upon for the Company by Kramer, Levin, Naftalis & Frankel, New York, New York, and for the agents or underwriters by Brown & Wood LLP, New York, New York. EXPERTS The consolidated financial statements of the Company incorporated in this Prospectus by reference to the Annual Report on Form 10-K for the fiscal year ended December 31, 1995 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. 26 47 - ------------------------------------------------------ - ------------------------------------------------------ NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE AGENTS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. ------------------ TABLE OF CONTENTS
PAGE ------ PROSPECTUS SUPPLEMENT Description of Medium-Term Notes............................ S-2 Plan of Distribution............... S-19 PROSPECTUS Certain Investment Considerations.. 2 Available Information.............. 3 Incorporation of Certain Documents by Reference..................... 3 The Company........................ 3 Ratio of Earnings to Fixed Charges.......................... 4 Use of Proceeds.................... 4 The Securities..................... 4 Description of Senior Securities... 10 Description of Subordinated Securities....................... 12 Description of Convertible Subordinated Securities.......... 14 Federal Income Tax Consequences.... 21 Plan of Distribution............... 26 Legal Opinions..................... 26 Experts............................ 26
- ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ $1,000,000,000 MCI COMMUNICATIONS CORPORATION SENIOR/SUBORDINATED MEDIUM-TERM NOTES ------------------------ PROSPECTUS SUPPLEMENT ------------------------ BEAR, STEARNS & CO. INC. CITICORP SECURITIES, INC. MERRILL LYNCH & CO. J.P. MORGAN & CO. , 1996 - ------------------------------------------------------ - ------------------------------------------------------ 48 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Estimated expenses payable in connection with the proposed sale of Debt Securities covered hereby (other than any underwriting discounts and commissions) are as follows: Securities and Exchange Commission registration fee (actual)... $ 344,828 Printing and engraving expenses................................ 75,000 Legal fees and expenses........................................ 210,000 Accounting fees and expenses................................... 130,000 Trustee's fees and expenses.................................... 35,000 Blue Sky fees and expenses (including counsel fees)............ 50,000 Rating Agency Fees............................................. 200,000 Miscellaneous.................................................. 5,172 --------- Total..................................................... $1,050,000 =========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The registrant has in effect an insurance policy covering officers' and directors' legal liability containing a maximum limit of $50 million per loss per policy year, including legal fees and expenses, with retained liability for each loss of $2,000,000 for the Company. The registrant's Certificate of Incorporation, at Section 8, provides as follows: (a) No director of this corporation shall be personally liable to this corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; provided that this provision shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to this corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law of the State of Delaware is amended after approval by the stockholders of this paragraph (a) to authorize corporate action further limiting or eliminating the personal liability of directors, then the liability of a director of this corporation shall be limited or eliminated to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended. No amendment or repeal of this paragraph (a) shall apply to or have any effect on the liability or alleged liability of any director of this corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. (b) This corporation shall, to the fullest extent permitted by Delaware law, as in effect from time to time, indemnify all persons who are or were directors, officers and employees of this corporation or any wholly-owned subsidiary, and all such directors, officers and employees who, at the request of this corporation, are or were at any time serving any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity. This corporation may also indemnify all other persons to the fullest extent permitted by Delaware law. The General Corporation Law of the State of Delaware, at Section 145, provides, in pertinent part, that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), by reason of the fact that he is or was a director, officer, employee or agent of the corporation or is or was serving another corporation, partnership, joint venture, trust or other enterprise, at the request of the corporation, against expenses (including attorney's fees), judgments, fines and amounts paid in settlement, actually and reasonably incurred by him in connection II-1 49 with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Lack of good faith, or lack of a reasonable belief that one's actions are in or not opposed to the best interest of the corporation, or with respect to any criminal action or proceeding, lack of reasonable cause to believe one's conduct was unlawful is not presumed from the termination of any action, suit or proceeding by judgment, order, settlement, conviction, or nolo contendere plea or its equivalent. In addition, the indemnification of expenses (including attorney's fees) is allowed in derivative actions, except no indemnification is allowed in respect to any claim, issue or matter as to which any such person has been adjudged to be liable to the corporation, unless and only to the extent the Court of Chancery or the court in which such action or suit was brought decides that indemnification is proper. To the extent that any such person succeeds on the merits or otherwise, he shall be indemnified against expenses (including attorneys' fees). The determination that the person to be indemnified met the applicable standard of conduct, if not made by a court, is made by the board of directors of the corporation by a majority vote of a quorum consisting of directors not party to such an action, suit or proceeding or, if a quorum is not obtainable or a disinterested quorum so directs, by independent legal counsel in a written opinion or by the stockholders. Expenses (including attorneys' fees) may be paid in advance upon the receipt of undertakings to repay. A corporation may purchase indemnity insurance. The above described indemnification and advancement of expenses, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and inure to the benefit of such person's heirs, executors and administrators. The registrant has indemnification agreements with each of its directors which have been approved by stockholders. The indemnification under the indemnification agreements differs from that provided in Section 8 of the registrant's Certificate of Incorporation in the following ways: (i) the registrant is obligated to advance litigation expenses to an indemnitee, subject to reimbursement if the Reviewing Party (as defined in the indemnification agreements) determines that the director would not be permitted such indemnification under applicable laws; (ii) the registrant must prove that the applicable standard of conduct has not been met for indemnification if the registrant denies protection to a director; (iii) upon a potential change in control (as defined in the indemnification agreements) the registrant is required to contribute an amount sufficient to pay all claims for which the indemnitee is entitled to be indemnified to a trust for the benefit of the indemnitee (subject to an overall maximum amount on such trusts); (iv) a subsequent board of directors, hostile to an indemnitee entitled to indemnification, will not have the right to make a final determination that the indemnitee has not met the required standard of care; and (v) the period of time in which the registrant may sue an indemnitee for an action is limited to two years from the date of accrual of such cause of action. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. Reference is made to the Distribution Agreement and the Underwriting Agreement Basic Provisions which are incorporated by reference as Exhibit 1(a) and 1(c), respectively, to this Registration Statement. II-2 50 ITEM 16. EXHIBITS.
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS ---------- ----------------------------------------------------------------------------- 1.(a) -- Form of Distribution Agreement (b) -- Form of Underwriting Agreement Basic Provisions. (Incorporated by reference to Exhibit 1(a) to registrant's Current Report on Form 8-K dated August 8, 1996.) 4.(a) -- Indenture, dated as of October 15, 1989, between registrant and Bankers Trust Company. (Incorporated by reference to Exhibit 4(c) to registrant's Registration Statement on Form S-3, Reg. No. 33-31600.) (b) -- Indenture, dated as of October 15, 1989, between registrant and Bankers Trust Company. (Incorporated by reference to Exhibit 4(d) to registrant's Registration Statement on (b) Form S-3, Reg. No. 33-31600.) (c) -- Supplemental Indenture, dated as of December 11, 1989, between registrant and Bankers Trust Company. (Incorporated by reference to Exhibit 4(b) to registrant's Current Report on Form 8-K dated December 11, 1989.) (d) -- Indenture, dated as of February 17, 1995, between registrant and Citibank, N.A. (Incorporated by reference to Exhibit 4(d) to registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994.) (e) -- Form of Common Stock Certificate. (Incorporated by reference to Exhibit 4(e) to registrant's Registration Statement on Form S-3, Reg. No. 33-37740.) (f) -- Form of Senior Fixed Rate Medium-Term Note. (Incorporated by reference to Exhibit 4(f) to registrant's Registration Statement on Form S-3, Reg. No. 33-57155.) (g) -- Form of Senior Floating Rate Medium-Term Note. (Incorporated by reference to Exhibit 4(g) to registrant's Registration Statement on Form S-3, Reg. No. 33-57155.) (h) -- Form of Subordinated Fixed Rate Medium-Term Note. (Incorporated by reference to Exhibit 4(g) to registrant's Registration Statement on Form S-3, Reg. No. 33-31600.) (i) -- Form of Subordinated Floating Rate Medium-Term Note. (Incorporated by reference to Exhibit 4(i) to registrant's Registration Statement on Form S-3, Reg. No. 33-31600.) (j) -- Form of Convertible Subordinated Debenture. (Incorporated by reference to Exhibit A to Exhibit 4(d) to Amendment No. 1 to registrant's Registration Statement on Form S-3, Reg. No. 33-31600.) (k) -- Rights Agreement dated as of September 30, 1994, between the registrant and Mellon Bank, N.A. (Incorporated by reference to Exhibit 4(a) to registrant's Current Report on Form 8-K dated October 4, 1994.) (l) -- Restated Certificate of Incorporation of MCI Communications Corporation filed March 28, 1995. (Incorporated by reference to Exhibit 3(a) to registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994.) (m) -- Amended and Restated By-laws of registrant. (Incorporated by reference to Exhibit 3(ii) to registrant's Registration Statement on Form S-3, Reg. No. 33-57155.) 5. -- Opinion of Messrs. Kramer, Levin, Naftalis & Frankel. 8. -- Tax Opinion of Messrs. Kramer, Levin, Naftalis & Frankel. 10.(a) -- Revolving Credit Agreement, dated as of July 8, 1994 among registrant and the banks party thereto. (Incorporated by reference to Exhibit 10(a) to registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994.) (b) -- Indenture, dated as of October 15, 1989, between registrant and Citibank, N.A. (Incorporated by reference to Exhibit 4(e) to registrant's Registration Statement on Form S-3, Reg. No. 33-31600.)
II-3 51
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS ---------- ----------------------------------------------------------------------------- 12. -- Computation of ratio of earnings to fixed charges. (Incorporated by reference to Exhibit 12 to registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.) 23.(a) -- Consent of Price Waterhouse LLP. (b) -- Consent of Messrs. Kramer, Levin, Naftalis & Frankel. (Contained in the opinions of such counsel included as Exhibit 5 and Exhibit 8 to this Registration Statement.) 25.(a) -- Statement of Eligibility on Form T-1 of Bankers Trust Company. (b) -- Statement of Eligibility on Form T-1 of Bankers Trust Company. (c) -- Statement of Eligibility on Form T-1 of Citibank, N.A.
II-4 52 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 (the "Securities Act"); (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs (i) and (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 by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") that are incorporated by reference by in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (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) That, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (5) That, for purposes of determining any liability under the Securities Act, 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. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described under Item 15 above or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the 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 Securities Act and will be governed by the final adjudication of such issue. II-5 53 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, MCI Communications Corporation 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 Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Washington and District of Columbia on August 30, 1996. MCI COMMUNICATIONS CORPORATION /s/ BERT C. ROBERTS, JR. By:------------------------------- Bert C. Roberts, Jr., Chairman Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following Officers and Directors of MCI Communications Corporation on August 30, 1996 in the capacities indicated below.
SIGNATURE TITLE --------- ----- /s/ BERT C. ROBERTS, JR. Principal Executive Officer, Director - --------------------------------------------- (Bert C. Roberts, Jr.) /s/ DOUGLAS L. MAINE Principal Financial Officer - --------------------------------------------- (Douglas L. Maine) /s/ JAMES M. SCHNEIDER Principal Accounting Officer - --------------------------------------------- (James M. Schneider) /s/ CLIFFORD L. ALEXANDER, JR. Director - --------------------------------------------- (Clifford L. Alexander, Jr.) /s/ JUDITH C. AREEN Director - --------------------------------------------- (Judith C. Areen) /s/ MICHAEL H. BADER Director - --------------------------------------------- (Michael H. Bader) /s/ SIR PETER L. BONFIELD Director - --------------------------------------------- (Sir Peter L. Bonfield) /s/ RICHARD M. JONES Director - --------------------------------------------- (Richard M. Jones) /s/ GORDON S. MACKLIN Director - --------------------------------------------- (Gordon S. Macklin) /s/ ALFRED T. MOCKETT Director - --------------------------------------------- (Alfred T. Mockett)
II-6 54
SIGNATURE TITLE - --------------------------------------------- ---------------------------------------------- /S/ K. RUPERT MURDOCH Director - --------------------------------------------- (K. Rupert Murdoch) /S/ DR. ALAN W. RUDGE Director - --------------------------------------------- (Dr. Alan W. Rudge) /S/ RICHARD B. SAYFORD Director - --------------------------------------------- (Richard B. Sayford) /S/ GERALD H. TAYLOR Director - --------------------------------------------- (Gerald H. Taylor) /S/ JUDITH WHITTAKER Director - --------------------------------------------- (Judith Whittaker) /S/ JOHN R. WORTHINGTON Director - --------------------------------------------- (John R. Worthington)
II-7 55 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS ---------- ----------------------------------------------------------------------------- 1.(a) -- Form of Distribution Agreement. (b) -- Form of Underwriting Agreement Basic Provisions. (Incorporated by reference to Exhibit 1(a) to registrant's Current Report on Form 8-K dated August 8, 1996.) 4.(a) -- Indenture, dated as of October 15, 1989, between registrant and Bankers Trust Company. (Incorporated by reference to Exhibit 4(c) to registrant's Registration Statement on Form S-3, Reg. No. 33-31600.) (b) -- Indenture, dated as of October 15, 1989, between registrant and Bankers Trust Company. (Incorporated by reference to Exhibit 4(d) to registrant's Registration Statement on (b) Form S-3, Reg. No. 33-31600.) (c) -- Supplemental Indenture, dated as of December 11, 1989, between registrant and Bankers Trust Company. (Incorporated by reference to Exhibit 4(b) to registrant's Current Report on Form 8-K dated December 11, 1989.) (d) -- Indenture, dated as of February 17, 1995, between registrant and Citibank, N.A. (Incorporated by reference to Exhibit 4(d) to registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994.) (e) -- Form of Common Stock Certificate. (Incorporated by reference to Exhibit 4(e) to registrant's Registration Statement on Form S-3, Reg. No. 33-37740.) (f) -- Form of Senior Fixed Rate Medium-Term Note. (Incorporated by reference to Exhibit 4(f) to registrant's Registration Statement on Form S-3, Reg. No. 33-57155.) (g) -- Form of Senior Floating Rate Medium-Term Note. (Incorporated by reference to Exhibit 4(g) to registrant's Registration Statement on Form S-3, Reg. No. 33-57155.) (h) -- Form of Subordinated Fixed Rate Medium-Term Note. (Incorporated by reference to Exhibit 4(g) to registrant's Registration Statement on Form S-3, Reg. No. 33-31600.) (i) -- Form of Subordinated Floating Rate Medium-Term Note. (Incorporated by reference to Exhibit 4(i) to registrant's Registration Statement on Form S-3, Reg. No. 33-31600.) (j) -- Form of Convertible Subordinated Debenture. (Incorporated by reference to Exhibit A to Exhibit 4(d) to Amendment No. 1 to registrant's Registration Statement on Form S-3, Reg. No. 33-31600.) (k) -- Rights Agreement dated as of September 30, 1994, between the registrant and Mellon Bank, N.A. (Incorporated by reference to Exhibit 4(a) to registrant's Current Report on Form 8-K dated October 4, 1994.) (l) -- Restated Certificate of Incorporation of MCI Communications Corporation filed March 28, 1995. (Incorporated by reference to Exhibit 3(a) to registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994.) (m) -- Amended and Restated By-laws of registrant. (Incorporated by reference to Exhibit 3(ii) to registrant's Registration Statement on Form S-3, Reg. No. 33-57155.) 5. -- Opinion of Messrs. Kramer, Levin, Naftalis & Frankel. 8. -- Tax Opinion of Messrs. Kramer, Levin, Naftalis & Frankel. 10.(a) -- Revolving Credit Agreement, dated as of July 8, 1994 among registrant and the banks party thereto. (Incorporated by reference to Exhibit 10(a) to registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994.) (b) -- Indenture, dated as of October 15, 1989, between registrant and Citibank, N.A. (Incorporated by reference to Exhibit 4(e) to registrant's Registration Statement on Form S-3, Reg. No. 33-31600.)
56
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS ---------- ----------------------------------------------------------------------------- 12. -- Computation of ratio of earnings to fixed charges. (Incorporated by reference to Exhibit 12 to registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.) 23.(a) -- Consent of Price Waterhouse LLP. (b) -- Consent of Messrs. Kramer, Levin, Naftalis & Frankel. (Contained in the opinions of such counsel included as Exhibit 5 and Exhibit 8 to this Registration Statement.) 25.(a) -- Statement of Eligibility on Form T-1 of Bankers Trust Company. (b) -- Statement of Eligibility on Form T-1 of Bankers Trust Company. (c) -- Statement of Eligibility on Form T-1 of Citibank, N.A.
EX-1.A 2 DISTRIBUTION AGREEMENT 1 EXHIBIT 1(A) MCI COMMUNICATIONS CORPORATION Senior and/or Subordinated Medium-Term Notes Due 9 Months or more from Date of Issue DISTRIBUTION AGREEMENT [DATE] [NAMES AND ADDRESSES OF AGENTS] Dear Sirs: MCI Communications Corporation, a Delaware corporation (the "Company"), confirms its agreement with [NAMES OF AGENTS] (each, an "Agent", and collectively, the "Agents") with respect to the issue and sale by the Company of its Senior Medium-Term Notes (the "Senior Notes") and Subordinated Medium-Term Notes (the "Subordinated Notes", and collectively with the Senior Notes, the "Notes"). The Senior Notes are to be issued pursuant to an indenture, dated as of February 17, 1995 (the "Senior Indenture"), between the Company and Citibank, N.A., as trustee (the "Senior Trustee"). The Subordinated Notes are to be issued pursuant to an indenture, dated as of October 15, 1989 (the "Subordinated Indenture", and collectively with the Senior Indenture, the "Indentures"), between the Company and Bankers Trust Company, as trustee (the "Subordinated Trustee", and collectively with the Senior Trustee, the "Trustees"). As of the date hereof, the Company has made available for issuance up to U.S. $1,000,000,000 aggregate principal amount (or its equivalent, based upon the applicable exchange rate at the time of issuance, in such foreign currency or currency unit as the Company shall designate at the time of issuance) of Notes through or to the Agents pursuant to the terms of this Agreement. It is understood, however, that the Company may from time to time authorize the issuance of additional Notes and that such Notes may be distributed through or sold to the Agents pursuant to the terms of this Agreement, all as though the issuance of such Notes were authorized as of the date hereof. This Agreement provides for the sale of Notes through the Agents acting as agents of the Company in soliciting purchases of the Notes, or (as may from time to time be agreed to by the Company and one or more Agents) to such Agent or Agents as principal for resale to investors and other purchasers. Subject to (a) the terms and conditions stated herein and (b) the reservation by the Company of the right to sell Notes directly 2 to purchasers on its own behalf in those jurisdictions where it is authorized to do so and to appoint, upon 7 days prior written notice to the Agents, additional persons to serve as Agents hereunder (provided that each such additional person agrees to be bound by all of the terms and conditions of this Agreement (including the schedule of commissions set forth in Schedule A hereto)), the Company hereby (i) appoints the Agents as the exclusive agents of the Company for the purpose of soliciting purchases of the Notes from the Company by others and (ii) agrees that whenever the Company determines to sell Notes directly to one or more of the Agents as principal for resale to others, it will enter into a Terms Agreement (as hereafter defined) relating to such sale in accordance with the provisions of Section 2(b) hereof. Each Agent will make reasonable efforts to assist the Company in obtaining performance by each purchaser whose offer to purchase Notes from the Company has been solicited by such Agent as agent and accepted by the Company, but such Agent shall not have any liability to the Company in the event any such purchase is not consummated for any reason. The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (No. 333-_____) for the registration of debt securities, including the Notes, and common stock, par value $0.10 per share, under the Securities Act of 1933, as amended (the "1933 Act"), and the offering thereof from time to time in accordance with Rule 415 of the rules and regulations of the Commission under the 1933 Act (the "1933 Act Regulations"). Such registration statement has been declared effective by the Commission and the Indentures have been qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act"). Such registration statement (and any further registration statements which may be filed by the Company for the purpose of registering additional debt securities and in connection with which this Agreement is included as an exhibit) and the prospectus constituting a part thereof, and any prospectus supplement relating to the Notes, including all documents incorporated therein by reference, as from time to time amended or supplemented by the filing of documents pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"), the 1933 Act or otherwise, are referred to herein as the "Registration Statement" and the "Prospectus", respectively, except that if any revised prospectus shall be provided to the Agents by the Company for use in connection with the offering of the Notes which is not required to be filed by the Company pursuant to Rule 424(b) of the 1933 Act Regulations, the term "Prospectus" shall refer to such revised prospectus from and after the time it is first provided to each Agent for such use. The Company may accept offers to purchase Notes through or from a person other than an Agent, provided that (i) the Company shall not have solicited such offers, (ii) the Company and such person shall have executed an agreement with respect to such 2 3 purchases having the same terms and conditions (including, without limitation, commission and discount rates) with respect to such purchases as the terms and conditions that would apply to such purchases under this Agreement if such person were an Agent hereunder (which may be accomplished by incorporating by reference in such agreement the terms and conditions of this Agreement) and (iii) the Company shall notify the Agents prior to the execution of any such agreement and shall provide the Agents with a copy of such agreement promptly following the execution thereof. SECTION 1. Representations and Warranties. (a) The Company represents and warrants to each of the Agents as of the date hereof, as of the date of each acceptance by the Company of an offer for the purchase of Notes (whether through an Agent as agent or to an Agent as principal), as of the date of each delivery of Notes (whether through an Agent as agent or to an Agent as principal) (the date of each such delivery to an Agent as principal being hereafter referred to as a "Settlement Date"), and as of the times referred to in Section 6(a) hereof (each of the times referenced above being referred to hereafter as a "Representation Date"), as follows: (i) Due Incorporation and Qualification. The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the state of its incorporation with corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus; and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not have a material adverse effect on the condition, financial or otherwise, or the earnings or business affairs of the Company and its subsidiaries considered as one enterprise. (ii) Subsidiaries. Each subsidiary of the Company which is a significant subsidiary, as defined in Rule 405 of Regulation C of the 1933 Act Regulations (each, a "Significant Subsidiary"), has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus, and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would 3 4 not have a material adverse effect on the condition, financial or otherwise, or the earnings or business affairs of the Company and its subsidiaries considered as one enterprise; and all of the issued and outstanding capital stock of each Significant Subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and all such shares owned by the Company, directly or through subsidiaries, are owned free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or security (except for any lien or encumbrance pursuant to the Indentures, the Revolving Credit Agreement, dated as of July 8, 1994, between the Company and Bank of America National Trust and Savings Association, as agent for the financial institutions party thereto, the Indenture, dated as of October 15, 1989, between the Company and Bankers Trust Company, as trustee, the Indenture, dated as of October 15, 1989, between the Company and Citibank, N.A., as trustee, and the Junior Subordinated Indenture, dated as of May 29, 1996, between the Company and Wilmington Trust Company, as trustee). (iii) Registration Statement and Prospectus. At the time the Registration Statement became effective, the Registration Statement complied, and as of the applicable Representation Date will comply, in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and the 1939 Act and the rules and regulations of the Commission promulgated thereunder. The Registration Statement, at the time it became effective, did not, and at each time thereafter at which any amendment to the Registration Statement becomes effective and any Annual Report on Form 10-K is filed by the Company with the Commission and as of the applicable Representation Date will not, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and the Prospectus, as of the date hereof, does not, and as of the applicable Representation Date will not, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement or the Prospectus made in reliance upon and in conformity with information furnished to the Company in writing by any Agent expressly for use in the Registration Statement or the Prospectus or to that part of the Registration Statement which constitutes the Statements of Eligibility of the Trustees on Form T-1. (iv) Incorporated Documents. The documents incorporated by reference in the Prospectus, at the time they were or hereafter are filed with the Commission, complied and will 4 5 comply, as the case may be, in all material respects with the requirements of the 1934 Act and the rules and regulations promulgated thereunder (the "1934 Act Regulations"), and, when read together and with the other information in the Prospectus, did not and will not, as the case may be, include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were or are made, not misleading. (v) Accountants. The accountants who certified the financial statements included or incorporated by reference in the Prospectus are independent public accountants as required by the 1933 Act and the 1933 Act Regulations. (vi) Financial Statements. The financial statements of the Company and its consolidated subsidiaries included or incorporated by reference in the Registration Statement and the Prospectus present fairly in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of the dates indicated and the consolidated results of their operations for the periods specified; and, except as stated therein, said financial statements have been prepared in conformity with generally accepted accounting principles in the United States applied on a consistent basis. (vii) Material Changes. Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as otherwise stated therein or contemplated thereby, there has been no material adverse change in the condition, financial or otherwise, or in the earnings or business affairs of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business. (viii) No Defaults. Neither the Company nor any of its subsidiaries is in violation of its charter or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which it is a party or by which it or any of them or their properties is bound, except where such violation or default would not have a material adverse effect on the condition, financial or otherwise, or in the earnings or business affairs of the Company and its subsidiaries considered as one enterprise; and the execution and delivery of this Agreement and the Indentures and the consummation of the transactions contemplated herein and therein have been duly authorized by all necessary corporate action and do not conflict with or constitute a breach of, or default under, or 5 6 result in the creation or imposition or violation of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, (A) the charter or by-laws of the Company, (B) any law, administrative regulation or administrative or court order or decree applicable to the Company, or (C) any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which the Company or any such subsidiary is a party or by which it or any of them is bound or to which any of the property or assets of the Company or any such subsidiary is subject where, in the case of clause (C), such conflict, breach or default, or creation, imposition or violation, would have a material adverse effect on the condition, financial or otherwise, or the earnings or business affairs of the Company and its subsidiaries considered as one enterprise. (ix) Legal Proceedings; Contracts. Except as included or incorporated by reference in the Prospectus, there is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened against or affecting the Company or any of its subsidiaries, which might, in the opinion of the Company, result in any material adverse change in the condition, financial or otherwise, or in the earnings or business affairs of the Company and its subsidiaries considered as one enterprise, or might materially and adversely affect the properties or assets thereof or might materially and adversely affect the consummation of the transactions contemplated by this Agreement or the Indentures; and there are no contracts or documents of the Company or any of its subsidiaries which are required to be filed as exhibits to the Registration Statement by the 1933 Act or by the 1933 Act Regulations which have not been so filed or incorporated by reference as exhibits thereto. (x) No Authorization, Approval or Consent Required. No authorization, approval, consent, order or decree of any court or governmental authority or agency is necessary in connection with the sale by the Company of the Notes, except those which have been obtained prior to the sale of such Notes. (xi) Regulatory Certificates, Authorities and Permits. The Company and its subsidiaries possess such certificates, authorities or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct the business now operated by them, except where the failure to possess such certificates, authorities or permits would not have a material adverse effect on the condition, financial or otherwise, or the earnings or business affairs of the Company and its subsidiaries considered as one enterprise; and neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation 6 7 or modification of any such certificate, authority or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would materially and adversely affect the condition, financial or otherwise, or the earnings or business affairs of the Company and its subsidiaries considered as one enterprise. (xii) Authorization and Validity of Indentures. Each of the Indentures has been duly and validly authorized, executed and delivered by the Company and (assuming each of the Indentures has been duly authorized, executed and delivered by the applicable Trustee) constitutes a valid and binding agreement of the Company, enforceable against it in accordance with its terms, except in each case that enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and by general principles of equity, and except further as enforceability thereof may be limited by (A) requirements that a claim with respect to any Note denominated other than in U.S. dollars (or a foreign currency or foreign currency unit judgment in respect of such claim) be converted into U.S. dollars at a rate of exchange prevailing on a date determined pursuant to applicable law or (B) any statute, law, judgment, decree, order, regulation or rule of any court or governmental authority that limits, delays or prohibits the making of payments in a foreign currency or currency unit or payments outside the United States. (xiii) Authorization and Validity of the Notes. The Notes have been duly authorized for issuance and sale pursuant to this Agreement and, when issued, authenticated and delivered pursuant to the provisions of this Agreement and the applicable Indenture against payment of the consideration therefor specified pursuant to this Agreement, the Notes (a) will constitute valid and binding obligations of the Company, enforceable against it in accordance with their terms, except as enforceability thereof may be limited by bankruptcy, insolvency or other similar laws affecting creditors' rights generally or by general principles of equity, and except further as enforceability thereof may be limited by (A) requirements that a claim with respect to any Note denominated other than in U.S. dollars (or a foreign currency or currency unit judgment in respect of such claim) be converted into U.S. dollars at a rate of exchange prevailing on a date determined pursuant to applicable law or (B) any statute, law, judgment, decree, order, regulation or rule of any court or governmental authority that limits, delays or prohibits the making of payments in a foreign currency or currency unit or payments outside the United States, (b) will be substantially in the forms heretofore delivered to the Agents, and the Notes and the applicable Indenture conform in all material respects to all statements relating thereto contained in the Prospectus, 7 8 and (c) will be entitled to the benefits provided by the applicable Indenture. (xiv) Authorization of this Agreement. This Agreement has been duly authorized, executed and delivered by the Company. (xv) Doing Business with Cuba. The Company has complied, and as of each Representation Date will comply, with all of the provisions of Section 517.075 of the Florida Statutes, and all rules and regulations promulgated thereunder, relating to issuers doing business in Cuba. (b) Additional Certification. Any certificate signed by any officer of the Company and delivered to the Agents or to counsel for the Agents in connection with an offering of Notes shall be deemed a representation and warranty by the Company to the Agents or the applicable Agent or Agents, as the case may be, as to the matters covered thereby as of the date of such certificate and, except as otherwise may be provided in such certificate, at each Representation Date subsequent thereto with respect to such offering or sale of Notes. SECTION 2. Solicitations as Agent; Purchases as Principal. (a) Solicitations as Agent. On the basis of the representations and warranties contained herein, and subject to the terms and conditions set forth herein, each of the Agents agrees, as an agent of the Company, to use its best efforts to solicit offers to purchase the Notes upon the terms and conditions set forth herein and in the Prospectus. The Agents are not authorized to appoint sub-agents in connection with such solicitations. The Company reserves the right, in its sole discretion, to suspend solicitation of purchases of the Notes through the Agents, as agents, commencing at any time for any period of time or permanently. Upon receipt of instructions from the Company, the Agents will forthwith suspend solicitation of purchases on behalf of the Company until such time as the Company has advised the Agents that such solicitation may be resumed. The Agents acknowledge that the Company reserves the right to sell Notes directly to purchasers on its own behalf and through other persons in accordance with the terms and conditions set forth herein, in the case of any such sale not resulting from a solicitation made by any Agent, no commission will be payable to any Agent with respect to such sale. The Company agrees to pay each Agent a commission, in the form of a discount, equal to the applicable percentage of the principal amount of each Senior Note or Subordinated Note, as the case may be, sold by the Company as a result of a solicitation made by such Agent as set forth in Schedule A hereto. Commissions with respect 8 9 to Notes sold through an Agent having maturities in excess of 30 years shall be agreed upon by the Company and such Agent at the time of the related sale. All Notes sold through an Agent as agent will be sold at 100% of their principal amount unless otherwise agreed to by the Company and the applicable Agent. As agent, each Agent is authorized to solicit offers to purchase the Notes. Each Agent shall communicate to the Company, orally or in writing, each reasonable offer to purchase Notes received by such Agent as agent. Each Agent shall have the right, in its discretion reasonably exercised, to reject any offer to purchase Notes received by such Agent which it does not deem reasonable, and any such rejection shall not be deemed a breach of such Agent's agreement contained herein. The Company shall have the sole right to accept offers to purchase Notes and may reject any such offer in whole or in part. (b) Purchases as Principal. Each sale of Notes to one or more Agents as principal shall be made in accordance with the terms contained herein and pursuant to a separate agreement which will provide for the sale of such Notes to, and the purchase and reoffering thereof by, such Agent or Agents. Each such separate agreement (which may be an oral agreement between the applicable Agent or Agents and the Company confirmed in writing, which may be by facsimile transmission) is herein referred to as a "Terms Agreement". Unless the context otherwise requires, each reference contained herein to "this Agreement" shall be deemed to include any applicable Terms Agreement. Each such Terms Agreement, whether oral (and confirmed in writing, which may be by facsimile transmission) or in writing, shall be with respect to such information (as applicable) as is specified in Exhibit A hereto. Each Agent's commitment to purchase Notes pursuant to any applicable Terms Agreement shall be deemed to have been made on the basis of the representations and warranties of the Company contained herein and shall be subject to the terms and conditions set forth herein. Each Terms Agreement shall specify the principal amount of Notes to be purchased by the applicable Agent or Agents pursuant thereto, the price to be paid to the Company for such Notes (which, if not as specified in such Terms Agreement, shall be at a discount equivalent to the applicable commission set forth in Schedule A hereto), the time and place of delivery of and payment for such Notes, any provisions relating to a default by one or more applicable Agents and such other provisions (including further terms of the Notes) as may be mutually agreed upon. The applicable Agent or Agents may utilize a selling or dealer group in connection with the resale of the Notes purchased as principal and may reallow all or any portion of the discount received by such Agent or Agents from the Company. The applicable Terms Agreement shall also specify the requirements for the officers' certificates, opinions of counsel, comfort letter and stand-off agreement pursuant to Sections 6(a), 6(b), 6(c) and 3(j) hereof. 9 10 (c) Administrative Procedures. The purchase price, interest rate or formula, stated maturity date and other terms of the Notes shall be agreed upon by the Company and the applicable Agent or Agents at the time of pricing such Notes. Except as may be otherwise agreed, the Notes will be issued in denominations of U.S. $1,000 or integral multiples thereof. Administrative procedures with respect to the sale of the Notes shall be agreed upon from time to time by the Company, the Agents and the Trustees (the "Administrative Procedures"). The Company and the Agents agree, and the Company agrees to use its best efforts to cause each of the Trustees to agree, to perform the respective duties and obligations specifically provided to be performed by them herein and in the Administrative Procedures, as applicable. SECTION 3. Covenants of the Company. The Company covenants with each Agent as follows: (a) Notice of the Certain Events. The Company will notify each Agent immediately of (i) the effectiveness of any amendment to the Registration Statement, (ii) the transmittal to the Commission for filing of any supplement to the Prospectus or any document to be filed pursuant to the 1934 Act which will be incorporated by reference in the Prospectus, (iii) the receipt of any comments from the Commission with respect to the Registration Statement or the Prospectus, (iv) any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information, and (v) the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose. The Company will make every reasonable effort to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment. (b) Notice of Certain Proposed Filings. The Company will give each Agent notice of its intention to file or prepare any additional registration statement with respect to the registration of additional Notes, any amendment to the Registration Statement or any amendment or supplement to the Prospectus (other than a Pricing Supplement (as hereafter defined) relating solely to the establishment of the specific terms of Notes sold through or to another Agent), whether by the filing of documents pursuant to the 1934 Act, the 1933 Act or otherwise, and will furnish each Agent with copies of any such amendment or supplement or other documents proposed to be filed or used a reasonable time in advance of such proposed filing or use, as the case may be, and will not file or use any such amendment, supplement or other document to which the Agents shall reasonably object. (c) Copies of the Registration Statement and the Prospectus. The Company will deliver to each Agent as many conformed copies of 10 11 the Registration Statement (as originally filed) and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein and documents incorporated by reference in the Prospectus) as such Agent may reasonably request. The Company will furnish to each Agent as many copies of the Prospectus (as amended or supplemented) as such Agent shall reasonably request so long as such Agent is required to deliver a Prospectus in connection with sales or solicitations of offers to purchase the Notes. (d) Revisions of Prospectus -- Material Changes. Except as otherwise provided in subsection (k) of this Section 3, if any event shall occur or condition exist as a result of which it is necessary, in the reasonable opinion of counsel for the Agents or counsel for the Company, to further amend or supplement the Prospectus in order that the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a purchaser, not misleading or if it shall be necessary, in the opinion of either such counsel, to amend or supplement the Registration Statement or the Prospectus in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, then, after receipt by the Company of any such opinion, immediate notice shall be given, and confirmed in writing, to each Agent to cease the solicitation of offers to purchase the Notes in the capacity as agent and to cease sales of any Notes the Agents may then own as principal, and the Company will promptly prepare and file with the Commission such amendment or supplement, whether by filing documents pursuant to the 1934 Act, the 1933 Act or otherwise, as may be necessary to correct such untrue statement or omission or to make the Registration Statement and the Prospectus comply with such requirements. (e) Prospectus Revisions -- Periodic Financial Information. Except as otherwise provided in subsection (k) of this Section 3, on or prior to the date on which there shall be released to the general public interim financial statement information related to the Company with respect to each of the first three quarters of any fiscal year or preliminary financial statement information with respect to any fiscal year, the Company shall furnish such information to each Agent, confirmed in writing, and promptly after such release shall cause the Prospectus to be amended or supplemented to include or incorporate by reference capsule financial information with respect thereto and corresponding information for the comparable period of the preceding fiscal year, as well as such other information and explanations as shall be necessary for an understanding thereof or as shall be required by the 1933 Act or the 1933 Act Regulations. (f) Prospectus Revisions -- Audited Financial Information. Except as otherwise provided in subsection (k) of this Section 3, 11 12 on or prior to the date on which there shall be released to the general public financial information included in or derived from the audited financial statements of the Company for the preceding fiscal year, the Company shall cause the Registration Statement and the Prospectus to be amended, whether by the filing of documents pursuant to the 1934 Act, the 1933 Act or otherwise, to include or incorporate by reference such audited financial statements and the report or reports, and consent or consents to such inclusion or incorporation by reference, of the independent accountants with respect thereto, as well as such other information as shall be required by the 1933 Act or the 1933 Act Regulations. (g) Earnings Statements. The Company will make generally available to its security holders as soon as practicable, but not later than 90 days after the close of the period covered thereby, an earnings statement (in form complying with the provisions of Rule 158 under the 1933 Act) covering each twelve month period beginning, in each case, not later than the first day of the Company's fiscal quarter next following the "effective date" (as defined in such Rule 158) of the Registration Statement with respect to each sale of Notes. (h) Blue Sky Qualifications. The Company will endeavor, in cooperation with the Agents, to qualify the Notes for offering and sale under the applicable securities laws of such states and other jurisdictions of the United States as the Agents may designate, and will maintain such qualifications in effect for as long as may be required for the distribution of the Notes; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation in any jurisdiction in which it is not so qualified. The Company will file such statements and reports as may be required by the laws of each jurisdiction in which the Notes have been qualified as provided above. The Company will promptly advise the Agents of the receipt by the Company of any notification with respect to the suspension of the qualification of the Notes for sale in any such state or jurisdiction or the initiating or the threatening of any proceeding for such purpose. (i) 1934 Act Filings. The Company, during the period when the Prospectus is required to be delivered under the 1933 Act, will file all documents required to be filed with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act on or before the time such documents are required to be filed. (j) Stand-Off Agreement. If required pursuant to the terms of a Terms Agreement, between the date of any Terms Agreement and the Settlement Date with respect to such Terms Agreement, the Company will not, without the prior written consent of the applicable Agent or Agents, as the case may be, offer or sell, or enter into any agreement to sell, any debt securities of the Company (other than the Notes that are to be sold pursuant to such 12 13 Terms Agreement, commercial paper in the ordinary course of business and borrowings under the Company's revolving credit facilities). (k) Suspension of Certain Obligations. The Company shall not be required to comply with the provisions of subsections (d), (e) or (f) of this Section 3 during any period from the time (i) the Agents shall have suspended solicitation of purchases of the Notes in their capacity as agents pursuant to a request from the Company and (ii) the Agents shall not then hold any Notes purchased as principal, to the time the Company shall determine that solicitation of purchases of the Notes should be resumed or shall subsequently enter into a Terms Agreement with one or more of the Agents. (l) Preparation of Pricing Supplements. The Company shall prepare, with respect to any Notes sold through or to an Agent pursuant to this Agreement, a supplement to the Prospectus (each, a "Pricing Supplement"), in a form previously approved by the Agents, and will file such Pricing Supplement pursuant to Rule 424(b)(3) under the 1933 Act not later than the close of business of the Commission on the fifth business day after the date on which such Pricing Supplement is first used. SECTION 4. Payment of Expenses. Except as may otherwise be provided in a Terms Agreement, the Company will pay all expenses incident to the performance of its obligations under this Agreement, including: (a) The preparation and filing of the Registration Statement and all amendments thereto and the Prospectus and any amendments or supplements thereto; (b) The preparation, filing and reproduction of this Agreement; (c) The preparation, printing, issuance and delivery of the Notes, including any fees and expenses relating to the issuance of Notes in book-entry form; (d) The fees and disbursements of the Company's accountants and counsel, of the Trustees and their counsel, and of any calculation agent or exchange rate agent; (e) The reasonable fees and disbursements of counsel to the Agents incurred from time to time in connection with the transactions contemplated hereby; (f) The qualification of the Notes under securities laws in accordance with the provisions of Section 3(h), including 13 14 the reasonable fees and disbursements of counsel to the Agents in connection therewith and in connection with the preparation of any Blue Sky Survey and any Legal Investment Survey up to a maximum of $10,000 in the aggregate, and filing fees; (g) The printing and delivery to each Agent in quantities as hereinabove stated of copies of the Registration Statement and any amendment thereto, and of the Prospectus and any amendments or supplements thereto, and the delivery by an Agent of the Prospectus and any amendments or supplements thereto in connection with solicitations or confirmations of sales of Notes; (h) The preparation, reproduction and delivery to each Agent of copies of the Indentures; (i) Any fees charged by rating agencies for the rating of the Notes; (j) The fees and expenses, if any, incurred with respect to any filing with the National Association of Securities Dealers, Inc.; (k) Any advertising and other out-of-pocket expenses of an Agent incurred with the approval of the Company; and (l) The cost of providing any CUSIP or other identification numbers for the Notes. SECTION 5. Conditions of Obligations. The obligations of each Agent to solicit offers to purchase the Notes as agent of the Company, the obligations of any purchaser of the Notes sold through each Agent as agent and the obligation of an Agent to purchase Notes as principal will be subject at all times to the accuracy of the representations and warranties on the part of the Company herein and to the accuracy of the statements of the Company's officer made in any certificate furnished pursuant to the provisions hereof, to the performance and observance in all material respects by the Company of all covenants and agreements herein contained and to the following additional conditions precedent: (a) Legal Opinions. On the date hereof, the Agents shall have received the following legal opinions, dated as of the date hereof and in form and substance reasonably satisfactory to the Agents: (1) Opinion of Company Counsel. The opinion of Kramer, Levin, Naftalis & Frankel, counsel to the Company, to the effect that: 14 15 (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware. (ii) The Company has the corporate power and authority to own, lease and operate its properties and conduct its business as described in the Prospectus. (iii) This Agreement (and, if the opinion is being given pursuant to Section 6(b) hereof on account of the Company having entered into a Terms Agreement, the applicable Terms Agreement) has been duly authorized, executed and delivered by the Company. (iv) Each of the Indentures has been duly and validly authorized, executed and delivered by the Company and (assuming each of the Indentures has been duly authorized, executed and delivered by the applicable Trustee thereunder) constitutes a valid and binding agreement of the Company, enforceable against it in accordance with its terms, except in each case that (A) enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and by general principles of equity and (B) the remedy of specific performance and injunctive and other forms of equitable relief are subject to certain equitable defenses and to the discretion of the court before which any proceeding therefor may be brought, and except further as enforceability thereof may be limited by (Y) requirements that a claim with respect to any Note denominated other than in U.S. dollars (or a foreign currency or foreign currency unit judgment in respect of such claim) be converted into U.S. dollars at a rate of exchange prevailing on a date determined pursuant to applicable law or (Z) any statute, law, judgment, decree, order, regulation or rule of any court or governmental authority that limits, delays or prohibits the making of payments in a foreign currency or currency unit or payments outside the United States. (v) The Notes, in the forms certified by the Company to be true and correct copies, are in the forms prescribed in or pursuant to the applicable Indenture, have been duly and validly authorized by the Company by all necessary corporate action and, when completed, executed and authenticated as specified in or pursuant to the applicable Indenture and delivered against payment of the consideration therefor determined in accordance with this Agreement and any applicable Terms Agreement, will be valid and binding obligations of the Company, enforceable against it in accordance with their terms, 15 16 except in each case that (A) enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and by general principles of equity and (B) the remedy of specific performance and injunctive and other forms of equitable relief are subject to certain equitable defenses and to the discretion of the court before which any proceeding therefor may be brought, and except further as enforceability thereof may be limited by (Y) requirements that a claim with respect to any Notes denominated other than in U.S. dollars (or a foreign currency or foreign currency unit judgment in respect of such claim) be converted into U.S. dollars at a rate of exchange prevailing on a date determined pursuant to applicable law or (Z) any statute, law, judgment, decree, order, regulation or rule of any court or governmental authority that limits, delays or prohibits the making of payments in a foreign currency or currency unit or payments outside the United States, and each holder of Notes will be entitled to the benefits of the applicable Indenture. (vi) The statements in the Prospectus under the captions "Description of Medium-Term Notes", "The Securities", "Description of Senior Securities", "Description of Subordinated Securities" and "Federal Income Tax Consequences", insofar as they purport to summarize certain provisions of documents specifically referred to therein, are accurate summaries of such provisions in all material respects. (vii) Each of the Indentures is qualified under the 1939 Act. (viii) The Registration Statement is effective under the 1933 Act and, to the best of such counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission. (ix) At the time the Registration Statement became effective, the Registration Statement (other than the financial statements and notes thereto and related schedules and other financial and statistical data included or incorporated by reference therein or omitted therefrom and the Statements of Eligibility of the Trustees on Form T-1) complied as to form in all material respects with the requirements of the 1933 Act, the 1939 Act and the regulations promulgated under each of those Acts. 16 17 (x) No authorization, approval, consent, order or decree of any United States or Delaware court or governmental authority or agency is necessary in connection with the sale of the Notes, except such as may be required under the 1933 Act, the 1939 Act, the regulations promulgated under each of those Acts or state securities or Blue Sky laws. (xi) Each document filed pursuant to the 1934 Act and incorporated by reference in the Prospectus (other than the financial statements and notes thereto and related schedules and other financial and statistical data included or incorporated by reference therein or omitted therefrom) complied when filed as to form in all material respects with the 1934 Act and the 1934 Act Regulations thereunder. (xii) The execution and delivery of this Agreement, any applicable Terms Agreement and the Indentures and the consummation of the transactions contemplated herein and therein do not conflict with or result in any violation of the provisions of the charter or by-laws of the Company. (2) Opinion of the General Counsel of the Company . The opinion of the General Counsel of the Company, to the effect that: (i) To the best of such counsel's knowledge, the Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, except where the failure to so qualify or be in good standing would not have a material adverse effect on the Company and its subsidiaries considered as one enterprise. (ii) Each Significant Subsidiary of the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own, lease and operate its properties and conduct its business as described in the Prospectus, and, to the best of such counsel's knowledge, is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, except where the failure to so qualify or be in good standing would not have a material adverse effect on the Company and its subsidiaries considered as one enterprise; all of the issued and outstanding capital stock of each Significant Subsidiary has been duly authorized and validly issued 17 18 and is fully paid and non-assessable, and all of such capital stock owned by the Company, directly or through subsidiaries, is owned free and clear of any mortgage, pledge, lien, encumbrance, claim or equity (except for any lien or encumbrance pursuant to the Indentures, the Revolving Credit Agreement, dated as of July 8, 1994, between the Company and Bank of America National Trust and Savings Association, as agent for the financial institutions party thereto, the Indenture, dated as of October 15, 1989, between the Company and Bankers Trust Company, as trustee, the Indenture, dated as of October 15, 1989, between the Company and Citibank, N.A., as trustee, and the Junior Subordinated Indenture, dated as of May 29, 1996, between the Company and Wilmington Trust Company, as trustee). (iii) To the best of such counsel's knowledge, there are no legal or governmental proceedings pending or threatened which are required to be disclosed in the Prospectus, other than those disclosed therein, and all pending legal or governmental proceedings to which the Company or any subsidiary is a party or of which any of their property is the subject which are not described in the Prospectus, including ordinary routine litigation incidental to the business, are, in the aggregate, not material to the Company and its subsidiaries considered as one enterprise. (iv) To the best of such counsel's knowledge, there are no contracts, indentures, mortgages, loan agreements, notes, leases or other instruments or documents required to be described or referred to in the Registration Statement or to be filed as exhibits thereto other than those described or referred to therein or filed or incorporated by reference as exhibits thereto, the descriptions thereof or references thereto are correct in all material respects, and no default exists in the due performance or observance by the Company of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other instrument so described, referred to, filed or incorporated by reference which would have a material adverse effect on the Company and its subsidiaries considered as one enterprise. (v) To the best of such counsel's knowledge, the execution and delivery of this Agreement, any applicable Terms Agreement and the Indentures and the consummation of the transactions contemplated herein and therein do not conflict with or constitute a breach of, or default under, or result in the creation or imposition of any lien, charge or encumbrance upon any material property or 18 19 assets of the Company or any of its subsidiaries pursuant to, any material contract, indenture, mortgage, loan agreement, note, lease or other instrument known to such counsel and to which the Company or any of its subsidiaries is a party or by which it or any of them is bound or to which any of the material property or assets of the Company or any of its subsidiaries is subject, or any material United States or Delaware law, administrative regulation or administrative or court order or decree known to such counsel to be applicable to the Company of any United States or Delaware court or governmental agency, authority or body or any arbitrator having jurisdiction over the Company. (3) Opinion of Counsel to the Company Relating to the Communications Act. The opinion of the General Counsel of the Company, or other counsel to the Company satisfactory to the Agents, under the Communications Act of 1934, as amended, or the Telecommunications Act of 1996 (collectively, the "Communications Act") (as to which matters the opinions required pursuant to subsection (a)(1) (and (a)(2), if the General Counsel of the Company is not rendering the opinions required by this subsection (a)(3)) of this Section 5 shall not cover), to the effect that: (i) Nothing in the Communications Act prevents, impairs, limits or otherwise adversely affects (A) the due and valid authorization, execution and delivery of the Notes or the Indentures, (B) the valid and binding nature or enforceability of any of the provisions of the Notes or the Indentures or (C) any holder of Notes from being entitled to the benefits of the applicable Indenture. (ii) To the best of such counsel's knowledge, there are no legal or governmental proceedings pending or threatened under the Communications Act which are required to be disclosed in the Prospectus, other than those disclosed therein, and all pending legal or governmental proceedings under the Communications Act to which the Company or any subsidiary is a party or of which any of their property is the subject which are not described in the Prospectus, including ordinary routine litigation incidental to the business, are, in the aggregate, not material to the Company and its subsidiaries considered as one enterprise. (iii) Insofar as such relates to the Communications Act, no authorization, approval, consent, order or decree of any court or governmental authority or agency is necessary in connection with the sale of the Notes; and, to the best of such counsel's knowledge, the execution 19 20 and delivery of this Agreement, any applicable Terms Agreement and the Indentures and the consummation of the transactions contemplated herein and therein do not conflict with, violate or result in the creation or imposition of any lien, charge or encumbrance upon any material property or assets of the Company or any of its subsidiaries pursuant to the Communications Act or any administrative regulations thereunder. (4) Opinion of Counsel to the Agents. The opinion of Brown & Wood llp, counsel to the Agents, covering the matters referred to in subsection (a)(1) of this Section 5 under the subheadings (i) and (iii) to (ix), inclusive. (5) Rule 10b-5 Opinion. In giving their opinions required by subsection (a)(1), (a)(2), (a)(3) and (a)(4) of this Section 5, Kramer, Levin, Naftalis & Frankel, the General Counsel of the Company, counsel rendering the opinions required by subsection (a)(3) (as to any matters under the Communications Act) and Brown & Wood llp shall each additionally state that nothing has come to their attention that has caused them to believe that the Registration Statement (other than the financial statements and notes thereto and related schedules and other financial and statistical data included or incorporated by reference therein or omitted therefrom and the Statements of Eligibility of the Trustees on Form T-1, as to which counsel need not comment), at the time it became effective or (if an amendment to the Registration Statement or an Annual Report on Form 10-K has been filed by the Company with the Commission subsequent to the effectiveness of the Registration Statement) at the time such amendment became effective or at the time of the most recent such filing, or at the date of this Agreement or any applicable Terms Agreement, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus (other than the financial statements and notes thereto and related schedules and other financial and statistical data included or incorporated by reference therein or omitted therefrom, as to which counsel need not comment), as amended or supplemented at the date hereof or at the date of any applicable Terms Agreement and at the Settlement Date with respect thereto, as the case may be, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (b) Officers' Certificates. At the date hereof and at each Settlement Date with respect to any applicable Terms Agreement, there shall not have been, since the respective dates as of which 20 21 information is given in the Registration Statement and the Prospectus or since the date of such Terms Agreement, any material adverse change in the condition, financial or otherwise, or in the earnings or business affairs of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business; and on the date hereof the Agents shall have received a (1) certificate of the Chief Financial Officer and the Treasurer of the Company, dated the date hereof, to the effect that (i) there has been no such material adverse change, (ii) the other representations and warranties of the Company contained in Section 1 are true and correct with the same force and effect as though expressly made at and as of the date of such certificate, (iii) the Company has in all material respects complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the date of such certificate and (iv) to such officers' knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been initiated or threatened by the Commission and (2) a certificate of the Chief Financial Officer or the Controller, Principal Accounting Officer of the Company, dated the date hereof, to the effect that to the best of such officer's knowledge there was no material decrease, on a consolidated basis, in the net assets of the Company at a specified date not more than five days prior to the date of such certificate, as compared with the amounts shown on the most recent consolidated balance sheet of the Company incorporated by reference in the Registration Statement and the Prospectus or, during the period from the date of such balance sheet to a specified date not more than five days prior to the date of such certificate, there were no material decreases, as compared with the corresponding period in the preceding year, on a consolidated basis, in the revenue or net income of the Company, except in each such case as set forth in or contemplated by the Registration Statement and the Prospectus and except for such exceptions enumerated in such certificate as shall have been agreed to by the Agents and the Company. (c) Comfort Letter. On the date hereof, the Agents shall have received a letter from Price Waterhouse LLP, dated the date hereof and in form and substance reasonably satisfactory to the Agents, to the effect that: (i) They are independent accountants with respect to the Company and its subsidiaries within the meaning of the 1933 Act and the 1933 Act Regulations. (ii) In their opinion, the consolidated financial statements of the Company audited by them and incorporated by reference in the Registration Statement and the Prospectus comply as to form in all material respects with the applicable accounting requirements of the 1933 Act and the 1933 Act 21 22 Regulations with respect to registration statements on Form S-3 and the 1934 Act and the 1934 Act Regulations. (iii) They have performed specified procedures, not constituting an audit, including a reading of the latest available interim unaudited consolidated financial information of the Company, a reading of the minute books of the Company since the end of the most recent year with respect to which an audit report has been issued, inquiries of and discussions with certain officials of the Company responsible for financial and accounting matters with respect to the unaudited consolidated financial statements incorporated by reference in the Registration Statement and the Prospectus and the latest available interim unaudited consolidated financial information of the Company, and such other inquiries and procedures as may be specified in such letter, and on the basis of such inquiries and procedures nothing came to their attention that caused them to believe that: (A) the unaudited consolidated financial statements of the Company incorporated by reference in the Registration Statement and the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the 1934 Act and the 1934 Act Regulations or that any material modifications should be made to such unaudited consolidated financial statements for them to be in conformity with generally accepted accounting principles, (B) at the date of the latest available interim unaudited consolidated financial information, there was any decrease in the consolidated capital stock or any increase in consolidated long-term debt of the Company or any decrease in the consolidated net assets of the Company, in each case as compared with the amounts shown on the most recent consolidated balance sheet of the Company incorporated by reference in the Registration Statement and the Prospectus or, during the period from the date of such balance sheet to the date of the latest available interim unaudited consolidated financial information, there were any decreases, as compared with the corresponding period in the preceding year, in consolidated revenues or net income of the Company, except in each such case as set forth in or contemplated by the Registration Statement and the Prospectus or except for such exceptions enumerated in such letter as shall have been agreed to by the Agents and the Company or (C) at a specified date not more than five days prior to the date of such letter, there was any decrease of 5% or more in the consolidated capital stock or any increase of 5% or more in the consolidated debt of the Company consisting of commercial paper, bank borrowings or publicly registered debt, in each case as compared with the amounts shown on the most recent consolidated balance sheet of the Company, except in each such case as set forth in or contemplated by the Registration Statement and the Prospectus or except for such exceptions enumerated in such letter as shall have been agreed to by the Agents and the Company. 22 23 (iv) The letter shall also state that they have: (a) Compared the dollar amounts set forth under the columns under the captions "Capitalization" and "Selected Consolidated Financial Data" to the appropriate consolidated statements of operations included in the Company's Annual Reports to Stockholders and the quarterly reports on Form 10-Q, or to accounts in the Company's accounting records subject to its system of internal accounting controls and to schedules prepared by the Company therefrom, as appropriate; (b) Compared the dollar amounts set forth under the caption "Recent Developments", if any, to the appropriate unaudited consolidated statements of operations of the Company; and (c) Compared the ratios set forth under the caption "Ratio of Earnings to Fixed Charges" and the dollar amounts set forth under the columns in the exhibit "Computation of Ratio of Earnings to Fixed Charges" to the appropriate consolidated statements of operations and disclosures included in the Company's Annual Reports to Stockholders and the quarterly reports on Form 10-Q, or to accounts in the Company's accounting records and to schedules prepared by the Company therefrom, as appropriate, and computed the ratios set forth in the same exhibit. (v) In addition to the examination referred to in their report included or incorporated by reference in the Registration Statement and the Prospectus, and the limited procedures referred to in clauses (iii) and (iv) above, they have carried out certain other specified procedures, not constituting an audit, with respect to certain amounts, percentages and financial information which are included or incorporated by reference in the Registration Statement and the Prospectus and which are specified by the Agents, and have found such amounts, percentages and financial information to be in agreement with the relevant accounting, financial and other records of the Company and its subsidiaries identified in such letter. (d) Other Documents. On the date hereof and on each Settlement Date with respect to any applicable Terms Agreement, counsel to the Agents shall have been furnished with such documents and opinions as such counsel may reasonably require for the purpose of enabling such counsel to pass upon the issuance and sale of Notes as herein contemplated and related proceedings, or in order to evidence the accuracy and completeness of any of the 23 24 representations and warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of Notes as herein contemplated shall be reasonably satisfactory in form and substance to the Agents and to counsel to the Agents. If any condition specified in this Section 5 shall not have been fulfilled when and as required to be fulfilled, this Agreement or any applicable Terms Agreement may be terminated by the Agents or the applicable Agent or Agents, as the case may be, by notice to the Company at any time and any such termination shall be without liability of any party to any other party, except that the covenants set forth in Section 3(g) hereof, the provisions of Section 4 hereof, the indemnity and contribution agreement set forth in Sections 7 and 8 hereof, and the provisions of Sections 9, 12 and 13 hereof shall remain in effect. SECTION 6. Subsequent Documentation Requirements of the Company. The Company covenants and agrees that: (a) Subsequent Delivery of Certificates. (1) Each time that (i) the Registration Statement or the Prospectus shall be amended or supplemented (other than by any Pricing Supplement relating solely to the establishment of the specific terms of any Notes, or, unless the Agents shall otherwise specify, by an amendment or supplement which relates exclusively to an offering of debt securities other than the Notes), (ii) there is filed with the Commission any document incorporated by reference into the Prospectus (other than any proxy statement or any Current Report on Form 8-K relating exclusively to the issuance of debt securities other than the Notes, unless the Agents shall otherwise specify), (iii) if required pursuant to the terms of a Term Agreement, the Company sells Notes to one or more of the Agents pursuant to a Terms Agreement or (iv) the Company sells Notes in a form not previously certified to the Agents by the Company, the Company shall furnish or cause to be furnished to each Agent or, in the event of a sale of Notes pursuant to the terms of a Terms Agreement, only to each applicable Agent, forthwith a certificate, dated the date of effectiveness of such amendment or the date of such supplement, the date of filing such document with the Commission, or the date of such sale, as the case may be, in form reasonably satisfactory to such Agent or Agents to the effect that the statements contained in the certificate referred to in Section 5(b)(1) hereof which were last furnished to such Agent or Agents are true and correct at the time of such amendment, supplement, filing or sale, as the case may be, as though made at and as of such time (except that such statements shall be deemed to relate to the Registration Statement and the Prospectus as amended and supplemented to such time) or, in lieu of such certificate, a certificate of the same tenor as the certificate referred to in 24 25 said Section 5(b)(1), modified as necessary to relate to the Registration Statement and the Prospectus as amended and supplemented to the time of delivery of such certificate. (2) Each time that (i) the Registration Statement or the Prospectus shall be amended or supplemented to include additional financial information, (ii) there is filed with the Commission any document incorporated by reference into the Prospectus which contains additional financial information, (iii) if required pursuant to the terms of a Terms Agreement, the Company sells Notes to one or more of the Agents pursuant to a Terms Agreement or (iv) the Company sells Notes in a form not previously certified to the Agents by the Company, the Company shall furnish or cause to be furnished each Agent or, in the event of a sale of Notes pursuant to the terms of a Terms Agreement, only to each applicable Agent, a certificate, dated the date of effectiveness of such amendment or the date of such supplement, the date of filing such document with the Commission, or the date of such sale, as the case may be, in form reasonably satisfactory to such Agent or Agents, of the same tenor as the certificate referred to in Section 5(b)(2) hereof, but modified to relate to the Registration Statement and Prospectus, as amended and supplemented to the date of such letter, with such changes as may be necessary to reflect changes in the financial statements and other information derived from the accounting records of the Company. (b) Subsequent Delivery of Legal Opinions. Each time that (i) the Registration Statement or the Prospectus shall be amended or supplemented (other than by any Pricing Supplement relating solely to the establishment of the specific terms of any Notes, by an amendment or supplement providing solely for the inclusion of additional financial information, or, unless the Agents shall otherwise specify, by an amendment or supplement which relates exclusively to an offering of debt securities other than the Notes), (ii) there is filed with the Commission any document incorporated by reference into the Prospectus (other than any proxy statement, Current Report on Form 8-K or Quarterly Report on Form 10-Q, unless the Agents shall otherwise specify), (iii) if required pursuant to the terms of a Terms Agreement, the Company sells Notes to one or more Agents pursuant to a Terms Agreement or (iv) the Company sells Notes in a form not previously certified to the Agents by the Company, the Company shall furnish or cause to be furnished forthwith to each Agent or, in the event of a sale of Notes pursuant to the terms of a Terms Agreement, only to each applicable Agent, and to counsel to such Agent or Agents, a letter from each counsel last furnishing the opinion referred to in Section 5(a) hereof, dated the date of effectiveness of such amendment or the date of such supplement, the date of filing such document with the Commission, or the date of such sale, as the case may be, to the effect that such Agent or Agents may rely on such last opinion to the same extent as though it was dated the date of such letter authorizing reliance (except that statements in such 25 26 last opinion shall be deemed to relate to the Registration Statement and the Prospectus as amended and supplemented to the time of delivery of such letter authorizing reliance) or, in lieu of such letter, each such counsel, or other counsel chosen by the Company and reasonably satisfactory to such Agent or Agents, shall furnish an opinion, dated the date of effectiveness of such amendment or the date of such supplement, the date of filing such document with the Commission, or the date of such sale, as the case may be, in form reasonably satisfactory to such Agent or Agents, of the same tenor as the opinion referred to in Section 5(a) hereof, but modified, as necessary, to relate to the Registration Statement and the Prospectus as amended and supplemented to the time of delivery of such opinion. (c) Subsequent Delivery of Comfort Letters. Each time that (i) the Registration Statement or the Prospectus shall be amended or supplemented to include additional financial information, (ii) there is filed with the Commission any document incorporated by reference into the Prospectus which contains additional financial information or (iii) if required pursuant to the terms of a Terms Agreement, the Company sells Notes to one or more of the Agents pursuant to a Terms Agreement, the Company shall cause Price Waterhouse LLP, or any successor entity, or another nationally recognized independent public accounting firm chosen by the Company and reasonably satisfactory to the Agents, forthwith to furnish each Agent or, in the event of a sale of Notes pursuant to the terms of a Terms Agreement, only to each applicable Agent, a letter, dated the date of effectiveness of such amendment or the date of such supplement, the date of filing such document with the Commission, or the date of such sale, as the case may be, in form reasonably satisfactory to such Agent or Agents, of the same tenor as the portions of the letter referred to in clauses (i) and (ii) of Section 5(c) hereof but modified to relate to the Registration Statement and Prospectus as amended and supplemented to the date of such letter, and of the same general tenor as the portions of the letter referred to in clauses (iii) and (iv) of said Section 5(c) with such changes as may be necessary to reflect changes in the financial statements and other information derived from the accounting records of the Company; provided, however, that if the Registration Statement or the Prospectus is amended or supplemented solely to include financial information as of and for a fiscal quarter, Price Waterhouse LLP, or its successor entity, or such other nationally recognized independent public accounting firm, as the case may be, may limit the scope of such letter to the unaudited financial statements included in such amendment or supplement unless any other information included therein of an accounting, financial or statistical nature is of such a nature that, in the reasonable judgment of such Agent or Agents and as agreed to by the Company, which agreement shall not be unreasonably withheld, such letter should cover such other information. 26 27 SECTION 7. Indemnification. (a) Indemnification of the Agents. The Company agrees to indemnify and hold harmless each of the Agents and each person, if any, who controls any Agent within the meaning of Section 15 of the 1933 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact included in the Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever (including, subject to Section 7(c) hereof, the reasonable fees and disbursements of counsel chosen by the Agents), as incurred, reasonably incurred in investigating, preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by any of the Agents expressly for use in the Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto), or made in reliance upon the Statements of Eligibility of the Trustees filed on Form T-1 as exhibits to the Registration Statement; and provided further that if it shall ultimately be determined that one or more of the Agents is not entitled to be indemnified by the Company, 27 28 such Agent or Agents shall repay to the Company any sums paid to such Agent or Agents by the Company pursuant to this Section 7. (b) Indemnification of Company. Each Agent agrees to indemnify and hold harmless the Company, its directors, each of its officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section 7, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such Agent expressly for use in the Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto); provided, however, that if it shall ultimately be determined that the Company is not entitled to be indemnified by such Agent, the Company shall repay to such Agent any sums paid to the Company by such Agent pursuant to this Section 7. (c) General. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability which it may have otherwise than on account of this indemnity agreement. An indemnifying party may participate at its own expense in the defense of such action. In no event shall the indemnifying parties be liable for the fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. SECTION 8. Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in Section 7 is for any reason held to be unenforceable by the indemnified parties although applicable in accordance with its terms, the Company and the Agents shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by said indemnity agreement incurred by the Company and the Agents, as incurred, in such proportions that each Agent is responsible for that portion represented by the percentage that the total commissions and underwriting discounts received by such Agent bear to the total sales price received by the Company from the sale of the relevant Notes through or to such Agent, and the Company is responsible for the balance; provided, however, that no person 28 29 guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person, if any, who controls any Agent within the meaning of Section 15 of the 1933 Act shall have the same rights to contribution as such Agent, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act shall have the same rights to contribution as the Company. SECTION 9. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Agents or any controlling person of each Agent, or by or on behalf of the Company, and shall survive each delivery of and payment for any of the Notes. SECTION 10. Termination. (a) Termination of this Agreement. This Agreement (excluding any Terms Agreement) may be terminated for any reason, at any time by either the Company or any Agent upon the giving of 30 days prior written notice of such termination to the other party hereto; provided, however, that the termination of this Agreement by one Agent or by the Company as to one Agent shall terminate this Agreement only between such Agent and the Company. (b) Termination of Terms Agreement. Unless otherwise provided in a Terms Agreement, the applicable Agent or Agents may terminate any Terms Agreement, immediately upon notice to the Company, at any time at or prior to the Settlement Date relating thereto (i) if there has been, since the date of such Terms Agreement or since the respective dates as of which information is given in the Registration Statement and the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there shall have occurred any material adverse change in the financial markets in the United States or any outbreak or escalation of hostilities or other national or international calamity or crisis the effect of which shall be such as to make it, in the reasonable judgment of such Agent or Agents, impracticable to market the Notes or enforce contracts for the sale of the Notes, or (iii) if trading in any securities of the Company shall have been suspended by the 29 30 Commission or a national securities exchange, or if trading generally on either the American Stock Exchange or the New York Stock Exchange shall have been suspended, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required, by either of said exchanges or by order of the Commission or any other governmental authority, or if a banking moratorium shall have been declared by either Federal or New York authorities, or if a banking moratorium shall have been declared by the relevant authorities in the country issuing any foreign currency in which the Notes to be sold pursuant to such Terms Agreement are denominated or payable, or (iv) if the rating assigned by any nationally recognized securities rating agency to any debt securities of the Company as of the date of such Terms Agreement shall have been lowered since that date or if any such rating agency shall have publicly announced that it has placed any debt securities of the Company on what is commonly termed a "watch list" for possible downgrading, or (v) if there shall have come to any applicable Agent's attention any facts that would cause such Agent reasonably to believe that the Prospectus, at the time it was required to be delivered to a purchaser of Notes, included an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances existing at the time of such delivery, not misleading. (c) General. In the event of any such termination, neither party will have any liability to the other party hereto, except that (i) each Agent shall be entitled to any commissions earned in accordance with the third paragraph of Section 2(a) hereof, (ii) if at the time of termination (a) each Agent shall own any Notes purchased as principal or (b) an offer to purchase any of the Notes has been accepted by the Company but the time of delivery to the purchaser or his agent of the Note or Notes relating thereto has not occurred, the covenants set forth in Section 3 and 6 hereof shall remain in effect until such Notes are so resold or delivered, as the case may be, and (iii) the covenant set forth in Section 3(g) hereof, the provisions of Section 4 hereof, the indemnity and contribution agreement set forth in Sections 7 and 8 hereof, and the provision of Sections 9, 12 and 13 hereof shall remain in effect. SECTION 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or delivered by courier or transmitted by any standard form of telecommunication. Notices to the Agents shall be directed to [NAMES AND ADDRESSES OF AGENTS], respectively; and notices to the Company shall be directed to it at 1801 Pennsylvania Avenue, N.W., Washington, D.C. 20006, attention of General Counsel. 30 31 SECTION 12. Parties. This Agreement shall inure to the benefit of and be binding upon the Agents and the Company and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the parties hereto and their respective successors and the controlling persons and officers and directors referred to in Sections 7 and 8 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the parties hereto and their respective successors and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Notes shall be deemed to be a successor by reason merely of such purchase. SECTION 13. Governing Law; Jurisdiction. This Agreement and the rights and obligations of the parties created hereby shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely in such State. Any suit, action or proceeding brought by the Company against an Agent in connection with or arising under this Agreement shall be brought solely in the state or federal court of appropriate jurisdiction located in the Borough of Manhattan, The City of New York. 31 32 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument along with all counterparts will become a binding agreement between the Agents and the Company in accordance with its terms. Very truly yours, MCI COMMUNICATIONS CORPORATION By:___________________________ Title: CONFIRMED AND ACCEPTED, as of the date first above written: [NAME OF AGENT] By:______________________________________ Title: 32 33 SCHEDULE A The Company agrees to pay each Agent a commission, in the form of a discount, equal to the applicable percentage of the principal amount of each Note sold by the Company as a result of a solicitation made by such Agent, as set forth below:
PERCENT OF MATURITY RANGES PRINCIPAL AMOUNT - --------------- ---------------- From 9 months but less than 1 year........................................... .125% From 1 year but less than 18 months.......................................... .150 From 18 months but less than 2 years......................................... .200 From 2 years but less than 3 years........................................... .250 From 3 years but less than 4 years........................................... .350 From 4 years but less than 5 years........................................... .450 From 5 years but less than 6 years........................................... .500 From 6 years but less than 7 years........................................... .550 From 7 years but less than 10 years.......................................... .600 From 10 years but less than 15 years......................................... .625 From 15 years but less than 20 years......................................... .700 From 20 years to and including 30 years...................................... .750
33 34 EXHIBIT A The following terms, if applicable, shall be agreed to by one or more of the Agents and the Company pursuant to the applicable Terms Agreement: Senior/Subordinated Status: Principal Amount: $ (or principal amount of foreign currency or currency unit) Interest Rate: If Fixed Rate Note, Interest Rate: If Floating Rate Note: Interest Rate Basis or Bases: Initial Interest Rate: Initial Interest Reset Date: Interest Rate Reset Period: Interest Rate Reset Date(s): Spread and/or Spread Multiplier: Interest Payment Period: Interest Payment Date(s): Index Maturity: Maximum Interest Rate: Minimum Interest Rate: Fixed Rate Commencement Date: Fixed Interest Rate: Calculation Agent: If Redeemable: Initial Redemption Date: Initial Redemption Percentage: Annual Redemption Percentage Reduction: If Repayable: Repayment Date(s): If Indexed: Specified Currency: Indexed Currency: Base Rate: Other Index or Indices: A-1 35 Date of Stated Maturity: Purchase Price: % Settlement Date and Time: Currency of Denomination: Denomination (if other than in U.S. dollars): Currency of Payment: Additional Terms: Also, agreement as to whether the following will be required: Officer's Certificates pursuant to Section 5(a) of the Distribution Agreement. Legal Opinions pursuant to Section 5(b) of the Distribution Agreement. Comfort Letter pursuant to Section 5(c) of the Distribution Agreement. Stand-off Agreement pursuant to Section 3(j) of the Distribution Agreement. Default provisions: A-2 EX-5 3 OPINION OF KRAMER, LEVIN, NAFTALIS & FRANKEL 1 KRAMER, LEVIN, NAFTALIS & FRANKEL 9 1 9 T H I R D A V E N U E NEW YORK, N.Y. 10022 - 3852 (212) 715 - 9100 ARTHUR H. AUFSES III RICHARD MARLIN SHERWIN KAMIN THOMAS D. BALLIETT THOMAS E. MOLNER ARTHUR B. KRAMER JAY G. BARIS THOMAS H. MORELAND MAURICE N. NESSEN SAUL E. BURIAN ELLEN R. NADLER FOUNDING PARTNERS BARRY MICHAEL CASS GARY P. NAFTALIS COUNSEL THOMAS E. CONSTANCE MICHAEL J. NASSAU MICHAEL J. DELL MICHAEL S. NELSON ----- KENNETH H. ECKSTEIN JAY A. NEVELOFF CHARLOTTE M. FISCHMAN MICHAEL S. OBERMAN MARTIN BALSAM DAVID S. FRANKEL PAUL S. PEARLMAN JOSHUA M. BERMAN MARVIN E. FRANKEL SUSAN J. PENRY-WILLIAMS JULES BUCHWALD ALAN R. FRIEDMAN BRUCE RABB RUDOLPH DE WINTER CARL FRISCHLING ALLAN E. REZNICK MEYER EISENBERG MARK J. HEADLEY SCOTT S. ROSENBLUM ARTHUR D. EMIL ROBERT M. HELLER MICHELE D. ROSS MAXWELL M. RABB PHILIP S. KAUFMAN MAX J. SCHWARTZ JAMES SCHREIBER PETER S. KOLEVZON MARK B. SEGALL COUNSEL KENNETH P. KOPELMAN JUDITH SINGER MICHAEL PAUL KOROTKIN HOWARD A. SOBEL ----- KEVIN B. LEBLANG JEFFREY S. TRACHTMAN DAVID P. LEVIN D. GRANT VINGOE M. FRANCES BUCHINSKY EZRA G. LEVIN HAROLD P. WEINBERGER DEBORA K. GROBMAN LARRY M. LOEB E. LISK WYCKOFF, JR. CHRISTIAN S. HERZECA MONICA C. LORD PINCHAS MENDELSON LYNN R. SAIDENBERG JONATHAN M. WAGNER SPECIAL COUNSEL ----- FAX August 30, 1996 (212) 715-8000 ------ WRITER'S DIRECT NUMBER (212) 715-9288 MCI Communications Corporation 1801 Pennsylvania Avenue, N.W. Washington, D.C. 20006 Dear Sirs: We have acted as counsel to you, MCI Communications Corporation, a Delaware corporation (the "Company"), in connection with the preparation and filing with the Securities and Exchange Commission (the "Commission") of a Registration Statement on Form S-3 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), relating to the proposed issuance and sale by the Company from time to time of up to an aggregate of $1,000,000,000 principal amount of debt securities (the "Debt Securities") and up to on aggregate of 10,000,000 shares of common stock, par value $.10 per share (the "Common Stock"), of the Company issuable upon conversion of Convertible Debt Securities (as hereafter defined). The Debt Securities are to be issued under an Indenture, dated as of February 17, 1995, as executed between the Company and Citibank, N.A., as trustee, relating to senior Debt Securities issuable thereunder, an Indenture, dated as of October 15, 1989, between the Company and Bankers Trust Company, as trustee, relating to subordinated Debt Securities issuable thereunder that are not convertible into shares of the Common Stock, and an Indenture, dated as of October 15, 1989, between the Company and Bankers Trust Company, as trustee, relating to subordinated Debt Securities issuable thereunder (the "Convertible Debt Securities") that are convertible into shares of Common Stock (individually, an "Indenture" and collectively, the "Indentures"). 2 MCI Communications Corporation August 30, 1996 Page 2 We have examined the originals, photocopies or conformed copies of all such records of the Company and all such agreements, certificates of public officials, certificates of officers and representatives of the Company and such other documents as we have deemed relevant and necessary as a basis for the opinion hereinafter expressed. In such examinations, we have assumed the genuineness of all signatures on original documents and the conformity to the originals of all copies submitted to us as conformed copies or photocopies. As to various questions of fact material to our opinion, we have relied upon representations, statements or certificates of officers and representatives of the Company and others. Based on the foregoing, it is our opinion that: 1. When a Debt Security, in the form of one of the forms of Debt Securities included as, or incorporated by reference as, an exhibit to the Registration Statement, has had its pricing terms completed and has been duly executed and authenticated, in each case in accordance with the appropriate Indenture and the resolutions of the Board of Directors of the Company authorizing the same, and when such Debt Security has been delivered against payment therefor, such Debt Security will be legally issued and will constitute a binding obligation of the Company. 2. The shares of Common Stock issuable upon conversion of any Convertible Debt Securities, when issued in accordance with the terms of the appropriate Indenture and in accordance with the resolutions of the Board of Directors of the Company authorizing the issuance of such Convertible Debt Securities and Common Stock, will be validly issued, fully paid and non-assessable. We are members of the Bar of the State of New York and are not members of the bar of any other state. We are not expressing any opinion as to any matter relating to the laws of any jurisdiction other than the State of New York, the General Corporation Law of the State of Delaware and the federal law of the United States of America, and we assume no responsibility as to the applicability of the laws of any other jurisdiction to the subject transaction or the effect of such laws thereon. In rendering the foregoing opinion, we have not expressed, explicitly or implicitly, any opinion as to proceedings before the Federal Communications Commission or matters arising under the Communications Act of 1934, the Telecommunications Act of 1996 or any similar state or local statute regulating communications. 3 MCI Communications Corporation August 30, 1996 Page 3 We consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name under the heading "Legal Opinions" in the Prospectus forming a part of the Registration Statement. In giving such consent, we do not thereby concede that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations promulgated thereunder. Very truly yours, Kramer, Levin, Naftalis & Frankel EX-8 4 TAX OPINION OF KRAMER, LEVIN, NAFTALIS & FRANKEL 1 KRAMER, LEVIN, NAFTALIS & FRANKEL 9 1 9 T H I R D A V E N U E NEW YORK, N.Y. 10022 - 3852 (212) 715 - 9100 ARTHUR H. AUFSES III RICHARD MARLIN SHERWIN KAMIN THOMAS D. BALLIETT THOMAS E. MOLNER ARTHUR B. KRAMER JAY G. BARIS THOMAS H. MORELAND MAURICE N. NESSEN SAUL E. BURIAN ELLEN R. NADLER FOUNDING PARTNERS BARRY MICHAEL CASS GARY P. NAFTALIS COUNSEL THOMAS E. CONSTANCE MICHAEL J. NASSAU MICHAEL J. DELL MICHAEL S. NELSON ----- KENNETH H. ECKSTEIN JAY A. NEVELOFF CHARLOTTE M. FISCHMAN MICHAEL S. OBERMAN MARTIN BALSAM DAVID S. FRANKEL PAUL S. PEARLMAN JOSHUA M. BERMAN MARVIN E. FRANKEL SUSAN J. PENRY-WILLIAMS JULES BUCHWALD ALAN R. FRIEDMAN BRUCE RABB RUDOLPH DE WINTER CARL FRISCHLING ALLAN E. REZNICK MEYER EISENBERG MARK J. HEADLEY SCOTT S. ROSENBLUM ARTHUR D. EMIL ROBERT M. HELLER MICHELE D. ROSS MAXWELL M. RABB PHILIP S. KAUFMAN MAX J. SCHWARTZ JAMES SCHREIBER PETER S. KOLEVZON MARK B. SEGALL COUNSEL KENNETH P. KOPELMAN JUDITH SINGER MICHAEL PAUL KOROTKIN HOWARD A. SOBEL ----- KEVIN B. LEBLANG JEFFREY S. TRACHTMAN DAVID P. LEVIN D. GRANT VINGOE M. FRANCES BUCHINSKY EZRA G. LEVIN HAROLD P. WEINBERGER DEBORA K. GROBMAN LARRY M. LOEB E. LISK WYCKOFF, JR. CHRISTIAN S. HERZECA MONICA C. LORD PINCHAS MENDELSON LYNN R. SAIDENBERG JONATHAN M. WAGNER SPECIAL COUNSEL ----- FAX August 30, 1996 (212) 715-8000 ------ WRITER'S DIRECT NUMBER (212) 715-7550 MCI Communications Corporation 1801 Pennsylvania Avenue, N.W. Washington, D.C. 20006 Dear Sirs: We have acted as counsel to you, MCI Communications Corporation, a Delaware corporation (the "Company"), in connection with the preparation and filing with the Securities and Exchange Commission under the Securities Act of 1933, as amended, of a Registration Statement on Form S-3 including the Prospectus, dated August 30, 1996, and the Prospectus Supplement, dated August 30, 1996 (the "Registration Statement"), relating to the proposed issuance and sale by the Company from time to time of up to an aggregate of $1,000,000,000 principal amount of debt securities (the "Securities"). The Securities are to be issued under an Indenture, dated as of February 17, 1995, between the Company and Citibank, N.A., as trustee, relating to senior Securities issuable thereunder, an Indenture, dated as of October 15, 1989, between the Company and Bankers Trust Company, as trustee, relating to subordinated Securities issuable thereunder which are not convertible into shares of common stock of the Company, and an Indenture, dated as of October 15, 1989, between the Company and Bankers Trust Company, as trustee, relating to subordinated Securities issuable thereunder which are convertible into shares of common stock, par value $.10 per share, of the Company. We have examined the originals, photocopies, or conformed copies of all such records of the Company and all such agreements, certificates of public officials, certificates of officers and representatives of the Company, and such other documents as we have deemed 2 KRAMER, LEVIN, NAFTALIS & FRANKEL MCI Communications Corporation August 30, 1996 Page 2 relevant and necessary as a basis for the opinion hereinafter expressed. In such examinations, we have assumed the genuineness of all signatures on original documents and the conformity to the originals of all copies submitted to us as conformed copies or photocopies. As to various questions of fact material to our opinion, we have relied upon representations, statements, or certificates of officers and representatives of the Company and others. Based upon the foregoing and subject to the qualifications set forth below, it is our opinion that the discussion under the caption "Federal Income Tax Consequences" in the Prospectus correctly describes certain material federal income tax consequences of to the ownership and disposition of Securities that may be issued pursuant to the Prospectus. The discussion in the Prospectus does not address the tax consequences of the ownership and disposition of any specific series of Securities that may be issued pursuant to a supplement to the Prospectus (a "Supplement"), which consequences may be affected by the particular terms of such Securities and which, if materially different from the discussion in the Prospectus, will be addressed in such Supplement. Our opinion, which is not binding on the Internal Revenue Service, is based upon existing statutory, regulatory, and judicial authority, any of which may be changed at any time with retroactive effect to the detriment of the holders of the Securities. As noted above, our opinion is based solely on the documents that we have examined, the additional information that we have obtained, and the representations that have been made to us. Our opinion cannot be relied upon if any of the facts contained in such documents, such additional information, or any of the representations made to us is, or later becomes, inaccurate. Finally, our opinion is limited to the tax matters specifically discussed under the caption "Federal Income Tax Consequences" in the Prospectus, and we have not been asked to address, nor have we addressed, any other tax consequence relating to the Securities. We consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name under the heading "Legal Opinions" in the Prospectus. Very truly yours, Kramer, Levin, Naftalis & Frankel EX-23.A 5 CONSSENT OF PRICE WATERHOUSE LLP 1 EXHIBIT 23(a) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of this Registration Statement on Form S-3 of our report dated January 29, 1996, which appears on page 29 of MCI Communications Corporation's Annual Report to Stockholders for the year ended December 31, 1995, which report is incorporated by reference to Exhibit 13 of MCI's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. We also consent to the incorporation by reference of our report on the Financial Statement Schedules which appears on page 30 of MCI's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. We also consent to the reference to us under the heading "Experts" in such Prospectus. Price Waterhouse LLP Washington, DC August 30, 1996 EX-25.A 6 STATEMENT OF ELIGIBILITY 1 - ----------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ___________ ------------------------------ BANKERS TRUST COMPANY (Exact name of trustee as specified in its charter) NEW YORK 13-4941247 (Jurisdiction of Incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification no.) FOUR ALBANY STREET NEW YORK, NEW YORK 10006 (Address of principal (Zip Code) executive offices) BANKERS TRUST COMPANY LEGAL DEPARTMENT 130 LIBERTY STREET, 31ST FLOOR NEW YORK, NEW YORK 10006 (212) 250-2201 (Name, address and telephone number of agent for service) --------------------------------- MCI COMMUNICATIONS CORPORATION (Exact name of obligor as specified in its charter) DELAWARE 52-0886267 (State or other jurisdiction of (I.R.S. employer Incorporation or organization) Identification no.) 1801 PENNSYLVANIA AVENUE, N.W. WASHINGTON, DC 20006 (Address of principal executive offices) (Zip Code) SUBORDINATED DEBT SECURITIES (Title of the indenture securities) 2 ITEM 1. GENERAL INFORMATION. Furnish the following information as to the trustee. (a) Name and address of each examining or supervising authority to which it is subject. NAME ADDRESS Federal Reserve Bank (2nd District) New York, NY Federal Deposit Insurance Corporation Washington, D.C. New York State Banking Department Albany, NY (b) Whether it is authorized to exercise corporate trust powers. Yes. ITEM 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the Trustee, describe each such affiliation. None. ITEM 3. -15. NOT APPLICABLE ITEM 16. LIST OF EXHIBITS. EXHIBIT 1 - Restated Organization Certificate of Bankers Trust Company dated August 7, 1990 and Certificate of Admendment of the Organization Certificate of Bankers Trust Company dated March 21, 1996, copy attached. EXHIBIT 2 - Certificate of Authority to commence business - Incorporated herein by reference to Exhibit 2 filed with Form T-1 Statement, Registration No. 33-21047. EXHIBIT 3 - Authorization of the Trustee to exercise corporate trust powers - Incorporated herein by reference to Exhibit 2 filed with Form T-1 Statement, Registration No. 33-21047. EXHIBIT 4 - Existing By-Laws of Bankers Trust Company, dated as amended on October 19, 1995. - Incorporated herein by reference to Exhibit 4 filed with Form T-1 Statement, Registration No. 33-65171. -2- 3 EXHIBIT 5 - Not applicable. EXHIBIT 6 - Consent of Bankers Trust Company required by Section 321(b) of the Act. - Incorporated herein by reference to Exhibit 4 filed with Form T-1 Statement, Registration No. 22-18864. EXHIBIT 7 - A copy of the latest report of condition of Bankers Trust Company dated as of June 30, 1996. EXHIBIT 8 - Not Applicable. EXHIBIT 9 - Not Applicable. -3- 4 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Bankers Trust Company, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 28th day of August, 1996. BANKERS TRUST COMPANY By: /s/ Jenna Kaufman ------------------------------ Jenna Kaufman Vice President -4- 5 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Bankers Trust Company, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 28th day of August, 1996. BANKERS TRUST COMPANY By: Jenna Kaufman ------------- Jenna Kaufman Vice President 6
Legal Title of Bank: Bankers Trust Company Call Date: 6/30/96 ST-BK: 36-4840 FFIEC 031 Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1 City, State ZIP: New York, NY 10006 11 FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3 CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS JUNE 30, 1996 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, reported the amount outstanding as of the last business day of the quarter. SCHEDULE RC--BALANCE SHEET --------------- | C400 | Dollar Amounts in Thousands | RCFD Bil Mil Thou | ASSETS | / / / / / / / / / / / / / | 1. Cash and balances due from depository institutions (from Schedule RC-A): | / / / / / / / / / / / / / | a. Noninterest-bearing balances and currency and coin(1) ............................ | 0081 1,631,000 |1.a. b. Interest-bearing balances(2) ..................................................... | 0071 2,066,000 |1.b. 2. Securities: | / / / / / / / / / / / / / | a. Held-to-maturity securities (from Schedule RC-B, column A) ....................... | 1754 0 |2.a. b. Available-for-sale securities (from Schedule RC-B, column D)...................... | 1773 3,761,000 |2.b. 3 Federal funds sold and securities purchased under agreements to resell in domestic offices| / / / / / / / / / / / / / | of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | / / / / / / / / / / / / / | a. Federal funds sold ................................................................ | 0276 5,162,000 |3.a. b. Securities purchased under agreements to resell ................................... | 0277 4,192,000 |3.b. 4. Loans and lease financing receivables: | / / / / / / / / / / / / / | a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 24,849,000 | / / / / / / / / / / / / / |4.a. b. LESS: Allowance for loan and lease losses................ ..RCFD 3123 923,000 | / / / / / / / / / / / / / |4.b. c. LESS: Allocated transfer risk reserve ................... ..RCFD 3128 0 | / / / / / / / / / / / / / |4.c. d. Loans and leases, net of unearned income, | / / / / / / / / / / / / / | allowance, and reserve (item 4.a minus 4.b and 4.c) ............................... | 2125 23,926,000 |4.d. 5. Assets held in trading accounts ........................................................ | 3545 33,052,000 |5. 6. Premises and fixed assets (including capitalized leases) ............................... | 2145 858,000 |6. 7. Other real estate owned (from Schedule RC-M) ........................................... | 2150 216,000 |7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) | 2130 271,000 |8. 9. Customers' liability to this bank on acceptances outstanding ........................... | 2155 572,000 |9. 10. Intangible assets (from Schedule RC-M) ................................................. | 2143 18,000 |10. 11. Other assets (from Schedule RC-F) ...................................................... | 2160 7,612,000 |11. 12. Total assets (sum of items 1 through 11) ............................................... | 2170 83,337,000 |12. ------------------------------
- -------------------------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held in trading accounts. 7
Legal Title of Bank: Bankers Trust Company Call Date: 6/30/96 ST-BK: 36-4840 FFIEC 031 Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-2 City, State Zip: New York, NY 10006 12 FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3 SCHEDULE RC--CONTINUED _______________________________ Dollar Amounts in Thousands | / / / / Bil Mil Thou __ | - ---------------------------------------------------------------------------------------------------------------------------------- LIABILITIES | / / / / / / / / / / / / | 13. Deposits: | / / / / / / / / / / / / | a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) | RCON 2200 9,040,000 |13.a. (1) Noninterest-bearing(1) ............................RCON 6631 3,569,000... | / / / / / / / / / / / / |13.a.(1) (2) Interest-bearing ...................................RCON 6636 5,471,000... | / / / / / / / / / / / / |13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E | / / / / / / / / / / / / | part II) | RCFN 2200 19,648,000 |13.b. (1) Noninterest-bearing ...............................RCFN 6631 494,000 | / / / / / / / / / / / / |13.b.(1) (2) Interest-bearing ..................................RCFN 6636 19,154,000 | / / / / / / / / / / / / |13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase in | / / / / / / / / / / / / | domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | / / / / / / / / / / / / | a. Federal funds purchased .................................................... | RCFD 0278 2,564,000 |14.a. b. Securities sold under agreements to repurchase ............................. | RCFD 0279 790,000 |14.b. 15. a. Demand notes issued to the U.S. Treasury ................................... | RCON 2840 0 |15.a. b. Trading liabilities ........................................................ | RCFD 3548 18,177,000 |15.b. 16. Other borrowed money: | / / / / / / / / / / / | a. With original maturity of one year or less ................................. | RCFD 2332 16,421,000 |16.a. b. With original maturity of more than one year ............................... | RCFD 2333 3,388,000 |16.b. 17. Mortgage indebtedness and obligations under capitalized leases .................... | RCFD 2910 31,000 |17. 18. Bank's liability on acceptances executed and outstanding .......................... | RCFD 2920 572,000 |18. 19. Subordinated notes and debentures ................................................. | RCFD 3200 1,227,000 |19. 20. Other liabilities (from Schedule RC-G) ............................................ | RCFD 2930 6,911,000 |20. 21. Total liabilities (sum of items 13 through 20) .................................... | RCFD 2948 78,769,000 |21. | / / / / / / / / / / / | 22. Limited-life preferred stock and related surplus .................................. | RCFD 3282 0 |22. EQUITY CAPITAL | / / / / / / / / / / / | 23. Perpetual preferred stock and related surplus ..................................... | RCFD 3838 500,000 |23. 24. Common stock ...................................................................... | RCFD 3230 1,002,000 |24. 25. Surplus (exclude all surplus related to preferred stock) .......................... | RCFD 3839 528,000 |25. 26. a. Undivided profits and capital reserves ..................................... | RCFD 3632 2,915,000 |26.a. b. Net unrealized holding gains (losses) on available-for-sale securities ..... | RCFD 8434 ( 5,000)|26.b. 27. Cumulative foreign currency translation adjustments ............................... | RCFD 3284 ( 372,000)|27. 28. Total equity capital (sum of items 23 through 27) ................................. | RCFD 3210 4,568,000 |28. 29. Total liabilities, limited-life preferred stock, and equity capital(sum of items 21, 22, | / / / / / / / / / / / | and 28) ......................................................................... | RCFD 3300 83,337,000 | -------------------------
Memorandum
To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external Number -------------- auditors as of any date during 1995 ............................................ | RCFD 6724 N/A | M.1 ------------------------- 1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank with generally accepted auditing standards by a certified performed by other external auditors (may) public accounting firm which submits a report on the bank be required by state chartering authority) 2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements conducted in accordance with generally accepted auditing by external auditors standards by a certified public accounting firm which 6 = Compilation of the bank's financial state- submits a report on the consolidated holding company ments by external auditors (but not on the bank separately) 7 = Other audit procedures (excluding tax 3 = Directors' examination of the bank conducted in preparation work) accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 8 = No external audit work
- ---------------------- (1) Including total demand deposits and noninterest-bearing time and savings deposits. 8 State of New York, Banking Department I, PETER M. PHILBIN, Deputy Superintendent of Bank of the State of New York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY UNDER SECTION 8005 OF THE BANKING LAW," dated March 20, 1996, providing for an increase in authorized capital stock from $1,351,666,670 consisting of 85,166,667 shares with a par value of $10 each designated as Common Stock and 500 shares with a par value of $1,000,000 each designated as Series Preferred Stock to $1,501,666,670 consisting of 100,166,667 shares with a par value of $10 each designated as Common Stock and 500 shares with a par value of $1,000,000 each designated as Series Preferred Stock. WITNESS, my hand and official seal of the Banking Department at the City of New York, this 21ST day of MARCH in the Year of our Lord one thousand nine hundred and NINETY-SIX. Peter M. Philbin ------------------------------ Deputy Superintendent of Banks 9 CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST Under Section 8005 of the Banking Law ----------------------------- We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing Director and an Assistant Secretary of Bankers Trust Company, do hereby certify: 1. The name of the corporation is Bankers Trust Company. 2. The organization certificate of said corporation was filed by the Superintendent of Banks on the 5th of March, 1903. 3. The organization certificate as heretofore amended is hereby amended to increase the aggregate number of shares which the corporation shall have authority to issue and to increase the amount of its authorized capital stock in conformity therewith. 4. Article III of the organization certificate with reference to the authorized capital stock, the number of shares into which the capital stock shall be divided, the par value of the shares and the capital stock outstanding, which reads as follows: "III. The amount of capital stock which the corporation is hereafter to have is One Billion, Three Hundred Fifty One Million, Six Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars ($1,351,666,670), divided into Eighty-Five Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (85,166,667) shares with a par value of $10 each designated as Common Stock and 500 shares with a par value of One Million Dollars ($1,000,000) each designated as Series Preferred Stock." is hereby amended to read as follows: "III. The amount of capital stock which the corporation is hereafter to have is One Billion, Five Hundred One Million, Six Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars ($1,501,666,670), divided into One Hundred Million, One Hundred Sixty Six Thousand, Six Hundred Sixty-Seven (100,166,667) shares with a par value of $10 each designated as Common Stock and 500 shares with a par value of One Million Dollars ($1,000,000) each designated as Series Preferred Stock." 10 6. The foregoing amendment of the organization certificate was authorized by unanimous written consent signed by the holder of all outstanding shares entitled to vote thereon. IN WITNESS WHEREOF, we have made and subscribed this certificate this 20th day of March , 1996. James T. Byrne, Jr. ----------------------------- James T. Byrne, Jr. Managing Director Lea Lahtinen ----------------------------- Lea Lahtinen Assistant Secretary State of New York ) ) ss: County of New York ) Lea Lahtinen, being fully sworn, deposes and says that she is an Assistant Secretary of Bankers Trust Company, the corporation described in the foregoing certificate; that she has read the foregoing certificate and knows the contents thereof, and that the statements herein contained are true. Lea Lahtinen ----------------------------- Lea Lahtinen Sworn to before me this 20th day of March, 1996. Sandra L. West - ---------------------------------- Notary Public SANDRA L. WEST Counterpart filed in the Notary Public State of New York Office of the Superintendent of No. 31-4942101 Banks, State of New York, Qualified in New York County This 21st day of March, 1996 Commission Expires September 19, 1996 EX-25.B 7 STATEMENT OF ELIGIBILITY 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ___________ ------------------------------ BANKERS TRUST COMPANY (Exact name of trustee as specified in its charter) NEW YORK 13-4941247 (Jurisdiction of Incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification no.) FOUR ALBANY STREET NEW YORK, NEW YORK 10006 (Address of principal (Zip Code) executive offices) BANKERS TRUST COMPANY LEGAL DEPARTMENT 130 LIBERTY STREET, 31ST FLOOR NEW YORK, NEW YORK 10006 (212) 250-2201 (Name, address and telephone number of agent for service) --------------------------------- MCI COMMUNICATIONS CORPORATION (Exact name of obligor as specified in its charter) DELAWARE 52-0886267 (State or other jurisdiction of (I.R.S. employer Incorporation or organization) Identification no.) 1801 PENNSYLVANIA AVENUE, N.W. WASHINGTON, DC 20006 (Address of principal executive offices) (Zip Code) CONVERTIBLE SUBORDINATED DEBENTURES (Title of the indenture securities) 2 ITEM 1. GENERAL INFORMATION. Furnish the following information as to the trustee. (a) Name and address of each examining or supervising authority to which it is subject. NAME ADDRESS Federal Reserve Bank (2nd District) New York, NY Federal Deposit Insurance Corporation Washington, D.C. New York State Banking Department Albany, NY (b) Whether it is authorized to exercise corporate trust powers. Yes. ITEM 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the Trustee, describe each such affiliation. None. ITEM 3. -15. NOT APPLICABLE ITEM 16. LIST OF EXHIBITS. EXHIBIT 1 - Restated Organization Certificate of Bankers Trust Company dated August 7, 1990 and Certificate of Admendment of the Organization Certificate of Bankers Trust Company dated March 21, 1996, copy attached. EXHIBIT 2 - Certificate of Authority to commence business Incorporated herein by reference to Exhibit 2 filed with Form T-1 Statement, Registration No. 33-21047. EXHIBIT 3 - Authorization of the Trustee to exercise corporate trust powers - Incorporated herein by reference to Exhibit 2 filed with Form T-1 Statement, Registration No. 33-21047. EXHIBIT 4 - Existing By-Laws of Bankers Trust Company, dated as amended on October 19, 1995. - Incorporated herein by reference to Exhibit 4 filed with Form T-1 Statement, Registration No. 33-65171. -2- 3 EXHIBIT 5 - Not applicable. EXHIBIT 6 - Consent of Bankers Trust Company required by Section 321(b) of the Act. - Incorporated herein by reference to Exhibit 4 filed with Form T-1 Statement, Registration No. 22-18864. EXHIBIT 7 - A copy of the latest report of condition of Bankers Trust Company dated as of June 30, 1996. EXHIBIT 8 - Not Applicable. EXHIBIT 9 - Not Applicable. -3- 4 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Bankers Trust Company, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 28th day of August, 1996. BANKERS TRUST COMPANY By: /s/ Jenna Kaufman _______________________________ Jenna Kaufman Vice President -4- 5 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Bankers Trust Company, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 28th day of August, 1996. BANKERS TRUST COMPANY By: Jenna Kaufman -------------------------------- Jenna Kaufman Vice President 6 Legal Title of Bank: Bankers Trust Company Call Date: 6/30/96 ST-BK: 36-4840 FFIEC 031 Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1 City, State ZIP: New York, NY 10006 11 FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS JUNE 30, 1996 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, reported the amount outstanding as of the last business day of the quarter. SCHEDULE RC--BALANCE SHEET
| C400 | Dollar Amounts in Thousands | RCFD Bil Mil Thou | ASSETS | / / / / / / / / / / / | 1. Cash and balances due from depository institutions (from Schedule RC-A): | / / / / / / / / / / / | a. Noninterest-bearing balances and currency and coin(1) ............................. | 0081 1,631,000 |1.a. b. Interest-bearing balances(2) ...................................................... | 0071 2,066,000 |1.b. 2. Securities: | / / / / / / / / / / / | a. Held-to-maturity securities (from Schedule RC-B, column A) ........................ | 1754 0 |2.a. b. Available-for-sale securities (from Schedule RC-B, column D)....................... | 1773 3,761,000 |2.b. 3 Federal funds sold and securities purchased under agreements to resell in domestic offices | / / / / / / / / / / / | of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | / / / / / / / / / / / | a. Federal funds sold.................................................................. | 0276 5,162,000 |3.a. b. Securities purchased under agreements to resell .................................... | 0277 4,192,000 |3.b. 4. Loans and lease financing receivables: | / / / / / / / / / / / | a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 24,849,000 | / / / / / / / / / / / |4.a. b. LESS: Allowance for loan and lease losses...................RCFD 3123 923,000 | / / / / / / / / / / / |4.b. c. LESS: Allocated transfer risk reserve ......................RCFD 3128 0 | / / / / / / / / / / / |4.c. d. Loans and leases, net of unearned income, | / / / / / / / / / / / | allowance, and reserve (item 4.a minus 4.b and 4.c) ................................ | 2125 23,926,000 |4.d. 5. Assets held in trading accounts .......................................................... | 3545 33,052,000 |5. 6. Premises and fixed assets (including capitalized leases) ................................. | 2145 858,000 |6. 7. Other real estate owned (from Schedule RC-M) ............................................. | 2150 216,000 |7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M).. | 2130 271,000 |8. 9. Customers' liability to this bank on acceptances outstanding ............................. | 2155 572,000 |9. 10. Intangible assets (from Schedule RC-M) ................................................... | 2143 18,000 |10. 11. Other assets (from Schedule RC-F) ........................................................ | 2160 7,612,000 |11. 12. Total assets (sum of items 1 through 11) ................................................. | 2170 83,337,000 |12.
- -------------------------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held in trading accounts. 7 Legal Title of Bank: Bankers Trust Company Call Date: 6/30/96 ST-BK: 36-4840 FFIEC 031 Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-2 City, State Zip: New York, NY 10006 12 FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
SCHEDULE RC--CONTINUED
Dollar Amounts in Thousands | / / / / /Bil Mil Thou | LIABILITIES | / / / / / / / / / / / | 13. Deposits: | / / / / / / / / / / / | a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I)... | RCON 2200 9,040,000 |13.a. (1) Noninterest-bearing(1) ............RCON 6631 3,569,000............. | / / / / / / / / / / / |13.a.(1) (2) Interest-bearing ...................RCON 6636 5,471,000............. | / / / / / / / / / / / |13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E... | / / / / / / / / / / / | part II) | RCFN 2200 19,648,000 |13.b. (1) Noninterest-bearing ...............RCFN 6631 494,000............. | / / / / / / / / / / / |13.b.(1) (2) Interest-bearing ..................RCFN 6636 19,154,000............. | / / / / / / / / / / / |13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase in | / / / / / / / / / / / | domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs:.... | / / / / / / / / / / / | a. Federal funds purchased............................................................. | RCFD 0278 2,564,000 |14.a. b. Securities sold under agreements to repurchase ..................................... | RCFD 0279 790,000 |14.b. 15. a. Demand notes issued to the U.S. Treasury ........................................... | RCON 2840 0 |15.a. b. Trading liabilities................................................................. | RCFD 3548 18,177,000 |15.b. 16. Other borrowed money: | / / / / / / / / / / / | a. With original maturity of one year or less ......................................... | RCFD 2332 16,421,000 |16.a. b. With original maturity of more than one year ....................................... | RCFD 2333 3,388,000 |16.b. 17. Mortgage indebtedness and obligations under capitalized leases .......................... | RCFD 2910 31,000 |17. 18. Bank's liability on acceptances executed and outstanding ................................ | RCFD 2920 572,000 |18. 19. Subordinated notes and debentures ....................................................... | RCFD 3200 1,227,000 |19. 20. Other liabilities (from Schedule RC-G) .................................................. | RCFD 2930 6,911,000 |20. 21. Total liabilities (sum of items 13 through 20) .......................................... | RCFD 2948 78,769,000 |21. | / / / / / / / / / / / | 22. Limited-life preferred stock and related surplus ........................................ | RCFD 3282 0 |22. EQUITY CAPITAL | / / / / / / / / / / / | 23. Perpetual preferred stock and related surplus ........................................... | RCFD 3838 500,000 |23. 24. Common stock............................................................................. | RCFD 3230 1,002,000 |24. 25. Surplus (exclude all surplus related to preferred stock) ................................ | RCFD 3839 528,000 |25. 26. a. Undivided profits and capital reserves ............................................. | RCFD 3632 2,915,000 |26.a. b. Net unrealized holding gains (losses) on available-for-sale securities ............. | RCFD 8434 (5,000) |26.b. 27. Cumulative foreign currency translation adjustments ..................................... | RCFD 3284 (372,000) |27. 28. Total equity capital (sum of items 23 through 27) ....................................... | RCFD 3210 4,568,000 |28. 29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, | / / / / / / / / / / / | and 28).................................................................................. | RCFD 3300 83,337,000 |29.
Memorandum To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the Number most comprehensive level of auditing work performed for the bank by independent external ---------- auditors as of any date during 1995....................................................... | RCFD 6724 N/A | M.1
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other with generally accepted auditing standards by a certified external auditors (may be required by state chartering public accounting firm which submits a report on the bank authority) 2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external conducted in accordance with generally accepted auditing auditors standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external submits a report on the consolidated holding company auditors (but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work) 3 = Directors' examination of the bank conducted in 8 = No external audit work accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority)
- ---------------------- (1) Including total demand deposits and noninterest-bearing time and savings deposits. 8 State of New York, Banking Department I, PETER M. PHILBIN, Deputy Superintendent of Bank of the State of New York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY UNDER SECTION 8005 OF THE BANKING LAW," dated March 20, 1996, providing for an increase in authorized capital stock from $1,351,666,670 consisting of 85,166,667 shares with a par value of $10 each designated as Common Stock and 500 shares with a par value of $1,000,000 each designated as Series Preferred Stock to $1,501,666,670 consisting of 100,166,667 shares with a par value of $10 each designated as Common Stock and 500 shares with a par value of $1,000,000 each designated as Series Preferred Stock. WITNESS, my hand and official seal of the Banking Department at the City of New York, this 21ST day of MARCH in the Year of our Lord one thousand nine hundred and NINETY-SIX. Peter M. Philbin ------------------------------ Deputy Superintendent of Banks 9 CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST Under Section 8005 of the Banking Law ----------------------------- We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing Director and an Assistant Secretary of Bankers Trust Company, do hereby certify: 1. The name of the corporation is Bankers Trust Company. 2. The organization certificate of said corporation was filed by the Superintendent of Banks on the 5th of March, 1903. 3. The organization certificate as heretofore amended is hereby amended to increase the aggregate number of shares which the corporation shall have authority to issue and to increase the amount of its authorized capital stock in conformity therewith. 4. Article III of the organization certificate with reference to the authorized capital stock, the number of shares into which the capital stock shall be divided, the par value of the shares and the capital stock outstanding, which reads as follows: "III. The amount of capital stock which the corporation is hereafter to have is One Billion, Three Hundred Fifty One Million, Six Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars ($1,351,666,670), divided into Eighty-Five Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (85,166,667) shares with a par value of $10 each designated as Common Stock and 500 shares with a par value of One Million Dollars ($1,000,000) each designated as Series Preferred Stock." is hereby amended to read as follows: "III. The amount of capital stock which the corporation is hereafter to have is One Billion, Five Hundred One Million, Six Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars ($1,501,666,670), divided into One Hundred Million, One Hundred Sixty Six Thousand, Six Hundred Sixty-Seven (100,166,667) shares with a par value of $10 each designated as Common Stock and 500 shares with a par value of One Million Dollars ($1,000,000) each designated as Series Preferred Stock." 10 6. The foregoing amendment of the organization certificate was authorized by unanimous written consent signed by the holder of all outstanding shares entitled to vote thereon. IN WITNESS WHEREOF, we have made and subscribed this certificate this 20th day of March , 1996. James T. Byrne, Jr. ----------------------------- James T. Byrne, Jr. Managing Director Lea Lahtinen ----------------------------- Lea Lahtinen Assistant Secretary State of New York ) ) ss: County of New York ) Lea Lahtinen, being fully sworn, deposes and says that she is an Assistant Secretary of Bankers Trust Company, the corporation described in the foregoing certificate; that she has read the foregoing certificate and knows the contents thereof, and that the statements herein contained are true. Lea Lahtinen ----------------------- Lea Lahtinen Sworn to before me this 20th day of March, 1996. Sandra L. West - -------------------------- Notary Public SANDRA L. WEST Counterpart filed in the Notary Public State of New York Office of the Superintendent of No. 31-4942101 Banks, State of New York, Qualified in New York County This 21st day of March, 1996 Commission Expires September 19, 1996 EX-25.C 8 STATEMENT OF ELIGIBILITY 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE Check if an application to determine eligibility of a Trustee pursuant to Section 305 (b)(2) ____ CITIBANK, N.A. (Exact name of trustee as specified in its charter) 13-5266470 (I.R.S. employer identification no.) 399 Park Avenue, New York, New York 10043 (Address of principal executive office) (Zip Code) MCI Communications Corporation (Exact name of obligor as specified in its charter) Delaware 52-0886267 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 1801 Pennsylvania Avenue, N.W. Washington, DC 20006 (Address of principal executive offices) (Zip Code) Debt Securities (Title of the indenture securities) 2 Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Name Address Comptroller of the Currency Washington, D.C. Federal Reserve Bank of New York New York, NY 33 Liberty Street New York, NY Federal Deposit Insurance Corporation Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. Item 16. List of Exhibits. List below all exhibits filed as a part of this Statement of Eligibility. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as exhibits hereto. Exhibit 1 - Copy of Articles of Association of the Trustee, as now in effect. (Exhibit 1 to T-1 to Registration Statement No. 2-79983) Exhibit 2 - Copy of certificate of authority of the Trustee to commence business. (Exhibit 2 to T-1 to Registration Statement No. 2-29577). Exhibit 3 - Copy of authorization of the Trustee to exercise corporate trust powers. (Exhibit 3 to T-1 to Registration Statement No. 2-55519) Exhibit 4 - Copy of existing By-Laws of the Trustee. (Exhibit 4 to T-1 to Registration Statement No. 33-34988) Exhibit 5 - Not applicable. 3 Exhibit 6 - The consent of the Trustee required by Section 321(b) of the Trust Indenture Act of 1939. (Exhibit 6 to T-1 to Registration Statement No. 33-19227.) Exhibit 7 - Copy of the latest Report of Condition of Citibank, N.A. (as of March 31, 1996 - attached) Exhibit 8 - Not applicable. Exhibit 9 - Not applicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee, Citibank, N.A., a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York and State of New York, on the 15th day of August, 1996. CITIBANK, N.A. By /s/Carol Ng ---------------------- Carol Ng Vice President 4 Exhibit 6 - The consent of the Trustee required by Section 321(b) of the Trust Indenture Act of 1939. (Exhibit 6 to T-1 to Registration Statement No. 33-19227.) Exhibit 7 - Copy of the latest Report of Condition of Citibank, N.A. (as of March 31, 1996 - attached) Exhibit 8 - Not applicable. Exhibit 9 - Not applicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee, Citibank, N.A., a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York and State of New York, on the 15th day of August, 1996. CITIBANK, N.A. By --------------------------- Carol Ng Vice President 5 Charter No. 1461 Comptroller of the Currency Northeastern District REPORT OF CONDITION CONSOLIDATING DOMESTIC AND FOREIGN SUBSIDIARIES OF Citibank, N.A. of New York in the State of New York, at the close of business on March 31, 1996, published in response to call made by Comptroller of the Currency, under Title 12, United States Code, Section 161. Charter Number 1461 Comptroller of the Currency Northeastern District. ASSETS
Thousands of dollars Cash and balances due from de- pository institutions: Noninterest-bearing balances and currency and coin .................................................. $ 6,263,000 Interest-bearing balances ...................................................... 11,310,000 Held-to-maturity securities .................................................... 0 Available-for-sale securities .................................................. 17,720,000 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and of its Edge and Agree- ment subsidiaries, and in IBFs: Federal funds sold ..................................................... 2,356,000 Securities purchased under agreements to resell ................................................... 345,000 Loans and lease financing receiv- ables: Loans and Leases, net of un- earned income .......................................................... $146,770,000 LESS: Allowance for loan and lease losses ....................................................... 4,381,000 LESS: Allocated transfer risk reserve .............................................. 0 ------------ Loans and leases, net of un- earned income, allowance, and reserve ............................................................ 142,389,000 Trading assets ................................................................. 26,109,000 Premises and fixed assets (includ- ing capitalized leases) ................................................ 3,467,000 Other real estate owned ........................................................ 750,000 Investments in unconsolidated subsidiaries and associated com- panies ................................................................. 1,213,000 Customers' liability to this bank on acceptances outstanding ............................................. 1,848,000 Intangible assets .............................................................. 75,000 Other assets ................................................................... 7,402,000 ------------ TOTAL ASSETS ................................................................... $221,247,000 ============ LIABILITIES Deposits: In domestic offices .................................................... $ 33,945,000 Noninterest-bearing .................................................... 11,163,000 Interest-bearing ....................................................... 22,782,000 In foreign offices, Edge and Agreement subsidiaries, and IBFs ................................................................... 125,659,000 Noninterest-bearing .................................................... 7,927,000 Interest-bearing ....................................................... 117,732,000 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: Federal funds purchased ................................................ 1,486,000 Securities sold under agreements to repurchase ......................... 441,000 Demand notes issued to the U.S. Treasury ............................... 0 Trading liabilities ............................................................ 16,175,000 Other borrowed money: With a remaining maturity of one year or less ........................................................... 8,137,000 With a remaining maturity of more than one year .......................................................... 5,260,000 Mortgage indebtedness and obli- gations under capitalized leases ....................................... 101,000 Bank's liability on acceptances ex- ecuted and outstanding ................................................. 1,876,000 Subordinated notes and debentures ..................................................................... 4,700,000 Other liabilities .............................................................. 8,310,000 ------------ TOTAL LIABILITIES .............................................................. $206,090,000 ============ Limited-life preferred stock and related surplus .................................................... 0 EQUITY CAPITAL Perpetual preffered stock and related surplus .................................................... 0 Common stock ................................................................... $ 751,000 Surplus ........................................................................ 6,830,000 Undivided profits and capital re- serves ................................................................. 8,106,000 Net unrealized holding gains (losses) on available-for-sale securities ....................................... 32,000 Cumulative foreign currency translation adjustments ................................................ (562,000) ------------ TOTAL EQUITY CAPITAL ........................................................... $ 15,157,000 ------------ TOTAL LIABILITIES, LIMITED- LIFE PREFERRED STOCK, AND EQUITY CAPITAL $221,247,000 ============
I, Roger W. Trupin, Controller of the above-named bank do hereby declare that this Report of Condition is true and correct to the best of my knowledge and belief. ROGER W. TRUPIN We, the undersigned directors, attest to the correctness of this Report of Condition. We declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions and is true and correct. PAUL J. COLLINS JOHN S. REED WILLIAM R. RHODES DIRECTORS -----END PRIVACY-ENHANCED MESSAGE-----