-----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, J0sySyswWMNaOMnO5XGARv77gAsvUQ098WYHUOzxcvu8V2rWncrxjOKrJ+Jvu+Pv MQHX2PmXmOVO05n+H/suDw== 0000950134-99-007487.txt : 19990817 0000950134-99-007487.hdr.sgml : 19990817 ACCESSION NUMBER: 0000950134-99-007487 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCI WORLDCOM INC CENTRAL INDEX KEY: 0000723527 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 581521612 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10415 FILM NUMBER: 99690823 BUSINESS ADDRESS: STREET 1: 500 CLINTON CENTER DRIVE CITY: CLINTON STATE: MS ZIP: 39056 BUSINESS PHONE: 6014605600 FORMER COMPANY: FORMER CONFORMED NAME: WORLDCOM INC /GA/ DATE OF NAME CHANGE: 19970127 FORMER COMPANY: FORMER CONFORMED NAME: LDDS COMMUNICATIONS INC /GA/ DATE OF NAME CHANGE: 19930916 FORMER COMPANY: FORMER CONFORMED NAME: RESURGENS COMMUNICATIONS GROUP INC DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q FOR QUARTER ENDED JUNE 30, 1999 1 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _______________ Commission file number: 0-11258 ------------------------------- MCI WORLDCOM, INC. (Exact name of registrant as specified in its charter) -------------------------------
Georgia 58-1521612 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
500 Clinton Center Drive, Clinton, Mississippi 39056 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code : (601) 460-5600 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of outstanding shares of the registrant's Common Stock, par value $.01 per share, was 1,873,110,367, net of treasury shares, on July 30, 1999. - -------------------------------------------------------------------------------- 2 QUARTERLY REPORT ON FORM 10-Q TABLE OF CONTENTS
Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998............................................3 Consolidated Statements of Operations for the three and six months ended June 30, 1999 and June 30, 1998...............................................................4 Consolidated Statements of Cash Flows for the six months ended June 30, 1999 and June 30, 1998...................................................................5 Notes to Consolidated Financial Statements......................................6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations..................................16 Item 3. Quantitative and Qualitative Disclosure About Market Risk......................28 PART II. OTHER INFORMATION Item 1. Legal Proceedings..............................................................29 Item 2. Changes in Securities and Use of Proceeds......................................29 Item 3. Defaults Upon Senior Securities................................................29 Item 4. Submission of Matters to a Vote of Securities Holders....................................... ..................29 Item 5. Other Information .............................................................30 Item 6. Exhibits and Reports on Form 8-K...............................................30 Signature ...............................................................................31 Exhibit Index ...............................................................................32
Page 2 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements MCI WORLDCOM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited. In Millions, Except Share Data)
June 30, December 31, 1999 1998 ---------- ---------- ASSETS Current assets: Cash and cash equivalents $ 599 $ 1,710 Accounts receivable, net of allowance for bad debts of $952 in 1999 and $897 in 1998 5,761 5,226 Deferred tax asset 2,353 2,523 Other current assets 1,383 1,180 ---------- ---------- Total current assets 10,096 10,639 ---------- ---------- Property and equipment: Transmission equipment 12,126 12,052 Communications equipment 5,642 5,256 Furniture, fixtures and other 6,281 5,986 Construction in progress 3,695 3,080 ---------- ---------- 27,744 26,374 Accumulated depreciation (3,180) (2,067) ---------- ---------- 24,564 24,307 ---------- ---------- Goodwill and other intangible assets, net 46,200 47,018 Other assets 5,713 4,437 ---------- ---------- $ 86,573 $ 86,401 ========== ========== LIABILITIES AND SHAREHOLDERS' INVESTMENT Current liabilities: Short-term debt and current maturities of long-term debt $ 5,217 $ 4,756 Accounts payable 1,999 1,737 Accrued line costs 4,186 3,903 Accrued interest 508 505 Other current liabilities 4,929 5,128 ---------- ---------- Total current liabilities 16,839 16,029 ---------- ---------- Long-term liabilities, less current portion: Long-term debt 13,550 16,083 Deferred tax liability 3,210 2,960 Other liabilities 1,492 1,852 ---------- ---------- Total long-term liabilities 18,252 20,895 ---------- ---------- Commitments and contingencies Minority interests 2,435 3,676 Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable interest debentures of the Company and other mandatorily redeemable preferred securities 798 798 Shareholders' investment: Series B preferred stock, par value $.01 per share; authorized, issued and outstanding: 11,360,334 shares in 1999 and 11,643,002 shares in 1998 (liquidation preference of $1.00 per share plus unpaid dividends) -- -- Preferred stock, par value $.01 per share; authorized: 34,905,008 shares in 1999 and 1998; none issued -- -- Common stock, par value $.01 per share; authorized: 5,000,000,000 shares; issued and outstanding: 1,871,453,800 shares in 1999 and 1,840,280,479 shares in 1998 19 18 Additional paid-in capital 51,197 49,544 Retained earnings (deficit) (2,901) (4,473) Unrealized holding gain on marketable equity securities 447 122 Cumulative foreign currency translation adjustment (328) (23) Treasury stock, at cost, 4,510,211 shares in 1999 and 1998 (185) (185) ---------- ---------- Total shareholders' investment 48,249 45,003 ---------- ---------- $ 86,573 $ 86,401 ========== ==========
The accompanying notes are an integral part of these statements. Page 3 4 MCI WORLDCOM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited. In Millions, Except Per Share Data)
For the Three Months For the Six Months Ended June 30, Ended June 30, ---------------------- ---------------------- 1999 1998 1999 1998 -------- -------- -------- -------- Revenues $ 8,944 $ 2,581 $ 17,945 $ 4,901 -------- -------- -------- -------- Operating expenses: Line costs 3,937 1,230 8,053 2,347 Selling, general and administrative 2,179 524 4,490 1,002 Depreciation and amortization 1,064 332 2,143 631 In-process research and development and other charges -- -- -- 498 -------- -------- -------- -------- Total 7,180 2,086 14,686 4,478 -------- -------- -------- -------- Operating income 1,764 495 3,259 423 Other income (expense): Interest expense (236) (108) (496) (210) Miscellaneous 48 10 16 22 -------- -------- -------- -------- Income before income taxes, minority interests and extraordinary items 1,576 397 2,779 235 Provision for income taxes 652 170 1,195 288 -------- -------- -------- -------- Income (loss) before minority interests and extraordinary items 924 227 1,584 (53) Minority interests (45) -- 20 -- -------- -------- -------- -------- Income (loss) before extraordinary items 879 227 1,604 (53) Extraordinary items (net of income taxes of $78 in 1998) -- -- -- (129) -------- -------- -------- -------- Net income (loss) 879 227 1,604 (182) Distributions on subsidiary trust and other mandatorily redeemable preferred securities 16 -- 32 -- Preferred dividend requirement -- 6 -- 13 -------- -------- -------- -------- Net income (loss) applicable to common shareholders $ 863 $ 221 $ 1,572 $ (195) ======== ======== ======== ======== Earnings (loss) per common share: Net income (loss) applicable to common shareholders before extraordinary items: Basic $ 0.46 $ 0.21 $ 0.85 $ (0.06) ======== ======== ======== ======== Diluted $ 0.45 $ 0.21 $ 0.81 $ (0.06) ======== ======== ======== ======== Extraordinary items $ -- $ -- $ -- $ (0.13) ======== ======== ======== ======== Net income (loss) applicable to common shareholders: Basic $ 0.46 $ 0.21 $ 0.85 $ (0.19) ======== ======== ======== ======== Diluted $ 0.45 $ 0.21 $ 0.81 $ (0.19) ======== ======== ======== ========
The accompanying notes are an integral part of these statements. Page 4 5 MCI WORLDCOM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited. In Millions)
For the Six Months Ended June 30, -------------------- 1999 1998 ------- ------- Cash flows from operating activities: Net income (loss) $ 1,604 $ (182) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Minority interests (20) -- Extraordinary items -- 129 In-process research and development and other charges -- 498 Depreciation and amortization 2,143 631 Provision for losses on accounts receivable 447 53 Provision for deferred income taxes 953 270 Change in assets and liabilities, net of effect of business combinations: Accounts receivable (1,219) (676) Other current assets (207) (109) Accrued line costs 238 114 Accounts payable and other current liabilities 444 (57) Other 123 (52) ------- ------- Net cash provided by operating activities 4,506 619 ------- ------- Cash flows from investing activities: Capital expenditures (3,674) (1,931) Sale of short-term investments, net -- 53 Acquisitions and related costs (450) (195) Increase in intangible assets (297) (87) Proceeds from sale of SHL 1,390 -- Proceeds from disposition of long-term assets 93 105 Increase in other assets (1,345) (158) Decrease in other liabilities (118) (12) ------- ------- Net cash used in investing activities (4,401) (2,225) ------- ------- Cash flows from financing activities: Net borrowings -- 1,354 Principal payments on debt (1,692) -- Common stock issuance 722 194 Distributions on subsidiary trust and other mandatorily redeemable preferred securities (32) -- Dividends paid on preferred stock -- (13) ------- ------- Net cash provided by (used in) financing activities (1,002) 1,535 Effect of exchange rate changes on cash (214) -- ------- ------- Net decrease in cash and cash equivalents (1,111) (71) Cash and cash equivalents at beginning of period 1,710 155 ------- ------- Cash and cash equivalents at end of period $ 599 $ 84 ======= =======
The accompanying notes are an integral part of these statements. Page 5 6 MCI WORLDCOM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (A) GENERAL References herein to the "Company" or "MCI WorldCom" refer to MCI WORLDCOM, Inc., a Georgia corporation, and its subsidiaries, which prior to September 15, 1998, was named WorldCom, Inc. ("WorldCom"). The financial statements included herein, are unaudited and have been prepared in accordance with generally accepted accounting principles for interim financial reporting and Securities and Exchange Commission ("SEC") regulations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the financial statements reflect all adjustments (of a normal and recurring nature) which are necessary to present fairly the financial position, results of operations and cash flows for the interim periods. These financial statements should be read in conjunction with the Annual Report of the Company on Form 10-K for the year ended December 31, 1998 (the "Form 10-K"). The results for the three and six month periods ended June 30, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. (B) BUSINESS COMBINATIONS On September 14, 1998, the Company acquired MCI Communications Corporation ("MCI") for approximately $40 billion, pursuant to the merger (the "MCI Merger") of MCI with and into a wholly owned subsidiary of the Company. Through the MCI Merger, the Company acquired one of the world's largest and most advanced digital networks, connecting local markets in the United States to more than 280 countries and locations worldwide. As a result of the MCI Merger, each outstanding share of MCI common stock was converted into the right to receive 1.2439 shares of MCI WorldCom common stock, par value $.01 per share (the "MCI WorldCom Common Stock"), or approximately 755 million MCI WorldCom common shares in the aggregate, and each share of MCI Class A common stock outstanding (all of which were held by British Telecommunications plc ("BT")) was converted into the right to receive $51.00 in cash or approximately $7 billion in the aggregate. The funds paid to BT were obtained by the Company from (i) available cash as a result of the Company's $6.1 billion public debt offering in August 1998; (ii) the sale of MCI's Internet backbone facilities and wholesale and retail Internet business (the "iMCI Business") to Cable and Wireless plc ("Cable & Wireless") for $1.75 billion in cash on September 14, 1998; (iii) the sale of MCI's 24.9% equity stake in Concert Communications Services ("Concert") to BT for $1 billion in cash on September 14, 1998; and (iv) availability under the Company's commercial paper program and credit facilities. Upon effectiveness of the MCI Merger, the then outstanding and unexercised options exercisable for shares of MCI common stock were converted into options exercisable for an aggregate of approximately 83 million shares of MCI WorldCom Common Stock having the same terms and conditions as the MCI options, except that the exercise price and the number of shares issuable upon exercise were divided and multiplied, respectively, by 1.2439. The MCI Merger was accounted for as a purchase; accordingly, operating results for MCI have been included from the date of acquisition. The purchase price in the MCI Merger was allocated based on estimated fair values at the date of acquisition. This resulted in an excess of purchase price over net assets acquired of which $3.1 billion was allocated to in-process research and development ("IPR&D") and $1.7 billion to developed technology, which is being depreciated over 10 years on a straight-line basis. The remaining excess has been allocated to goodwill and tradename, which are being amortized over 40 years on a straight-line basis. Page 6 7 On August 4, 1998, MCI acquired a 51.79% voting interest and a 19.26% economic interest in Embratel Participacoes S.A. ("Embratel"), Brazil's only facilities-based national communications provider, for approximately R$2.65 billion (US$2.3 billion). The purchase price will be paid in local currency installments, of which R$1.06 billion (US$916 million) was paid on August 4, 1998, R$795 million (US$442 million) was paid on August 4, 1999 and the remaining R$795 million (US$443 million at June 30, 1999) will be paid August 4, 2000. Embratel provides interstate long distance and international telecommunications services in Brazil, as well as over 40 other communications services, including leased high-speed data, satellite, Internet, frame relay and packet-switched services. Operating results for Embratel are consolidated in the accompanying consolidated financial statements and are included from the date of the MCI Merger. On January 31, 1998, MCI WorldCom acquired CompuServe Corporation ("CompuServe"), for approximately $1.3 billion, pursuant to the merger (the "CompuServe Merger") of a wholly owned subsidiary of the Company with and into CompuServe. Upon consummation of the CompuServe Merger, CompuServe became a wholly owned subsidiary of MCI WorldCom. As a result of the CompuServe Merger, each share of CompuServe common stock was converted into the right to receive 0.40625 shares of MCI WorldCom Common Stock, or approximately 37.6 million MCI WorldCom common shares in the aggregate. Prior to the CompuServe Merger, CompuServe operated primarily through two divisions: Interactive Services and Network Services. Interactive Services offered worldwide online and Internet access services for consumers, while Network Services provided worldwide network access, management and applications, and Internet service to businesses. The CompuServe Merger was accounted for as a purchase; accordingly, operating results for CompuServe have been included from the date of acquisition. On January 31, 1998, the Company also acquired ANS Communications, Inc. ("ANS"), from America Online, Inc. ("AOL"), for approximately $500 million, and has entered into five year contracts with AOL under which MCI WorldCom and its subsidiaries provide network services to AOL (collectively, the "AOL Transaction"). As part of the AOL Transaction, AOL acquired CompuServe's Interactive Services division and received a $175 million cash payment from MCI WorldCom. MCI WorldCom retained the CompuServe Network Services division. ANS provides Internet access to AOL and AOL's subscribers in the United States, Canada, the United Kingdom, Sweden and Japan. The AOL Transaction was accounted for as a purchase; accordingly, operating results for ANS have been included from the date of acquisition. The purchase price in the CompuServe Merger and AOL Transaction was allocated based on estimated fair values at the date of acquisition. This resulted in an excess of purchase price over net assets acquired of which $429 million was allocated to IPR&D. The remaining excess has been recorded as goodwill, which is being amortized over 10 years on a straight-line basis. On January 29, 1998, MCI WorldCom acquired Brooks Fiber Properties, Inc. ("BFP"), pursuant to the merger (the "BFP Merger") of a wholly owned subsidiary of MCI WorldCom, with and into BFP. Upon consummation of the BFP Merger, BFP became a wholly owned subsidiary of MCI WorldCom. BFP is a leading facilities-based provider of competitive local telecommunications services, commonly referred to as a competitive local exchange carrier, in selected cities within the United States. BFP acquires and constructs its own state-of-the-art fiber optic networks and facilities and leases network capacity from others to provide long distance carriers ("IXCs"), Internet service providers ("ISPs"), wireless carriers and business, government and institutional end users with an alternative to the incumbent local exchange carriers ("ILECs") for a broad array of high quality voice, data, video transport and other telecommunications services. Page 7 8 As a result of the BFP Merger, each share of BFP common stock was converted into the right to receive 1.85 shares of MCI WorldCom Common Stock or approximately 72.6 million MCI WorldCom common shares in the aggregate. The BFP Merger was accounted for as a pooling-of-interests; and accordingly, the Company's financial statements for periods prior to the BFP Merger have been restated to include the results of BFP for all periods presented. Upon effectiveness of the BFP Merger, the then outstanding and unexercised options and warrants exercisable for shares of BFP common stock were converted into options and warrants, respectively, exercisable for shares of MCI WorldCom Common Stock having the same terms and conditions as the BFP options and warrants, except that the exercise price and the number of shares issuable upon exercise were divided and multiplied, respectively, by 1.85. The following unaudited pro forma combined results of operations for the Company for the six months ended June 30, 1998 assumes that the MCI Merger was completed on January 1, 1998 (in millions, except per share data): Revenues $ 14,650 Loss before extraordinary items (3,228) Net loss (3,357) Loss per common share: Loss before extraordinary items $ (1.84) Net loss $ (1.91)
These pro forma amounts represent the historical operating results of MCI combined with those of the Company with appropriate preliminary adjustments which give effect to an IPR&D charge of $3.1 billion in 1998, depreciation, amortization, interest and the common shares issued. These pro forma amounts do not include amounts with respect to Embratel because it is not material to MCI WorldCom. These pro forma amounts are not necessarily indicative of operating results which would have occurred if MCI had been operated by current management during the periods presented because these amounts do not reflect cost savings related to full network optimization and the redundant effect on operating, selling, general and administrative expenses. (C) EARNINGS PER SHARE The following is a reconciliation of the numerators and the denominators of the basic and diluted per share computations for the three and six months ended June 30, 1999 and 1998 (in millions, except per share data):
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ---------------------- --------------------- 1999 1998 1999 1998 -------- -------- -------- -------- Basic Income (loss) before extraordinary items $ 879 $ 227 $ 1,604 $ (53) Distributions on subsidiary trust and other mandatorily redeemable preferred securities 16 -- 32 -- Preferred stock dividends -- 6 -- 13 -------- -------- -------- -------- Net income (loss) applicable to common shareholders before extraordinary items $ 863 $ 221 $ 1,572 $ (66) ======== ======== ======== ======== Weighted average shares outstanding 1,862 1,045 1,855 1,028 ===== ===== ===== ===== Basic earnings (loss) per share before extraordinary items $ 0.46 $ 0.21 $ .85 $ (0.06) ======== ======== ======== ========
Page 8 9
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ---------------------- --------------------- 1999 1998 1999 1998 ---- ---- ---- ---- Diluted Net income (loss) applicable to common shareholders before extraordinary items $ 863 $ 221 $ 1,572 $ (66) Add back: Preferred stock dividends -- 6 -- -- --------- --------- --------- --------- Net income (loss) applicable to common shareholders before extraordinary items $ 863 $ 227 $ 1,572 $ (66) ========= ========= ========= ========= Weighted average shares outstanding 1,862 1,045 1,855 1,028 Common stock equivalents 75 34 74 -- Common stock issuable upon conversion of preferred stock 1 22 1 -- --------- --------- --------- --------- Diluted shares outstanding 1,938 1,101 1,930 1,028 ========= ========= ========= ========= Diluted earnings (loss) per share before extraordinary items $ 0.45 $ 0.21 $ 0.81 $ (0.06) ========= ========= ========= =========
(D) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid by the Company during the six months ended June 30, 1999 and 1998 amounted to $554 million and $316 million, respectively. Income taxes paid during the six months ended June 30, 1999 and 1998 were $51 million and $7 million, respectively. In conjunction with business combinations during the six months ended June 30, 1999 and 1998, assumed assets and liabilities were as follows (in millions):
1999 1998 ------- ------- Fair value of assets acquired $ 64 $ 335 Excess of cost over net tangible assets acquired 912 1,542 Liabilities assumed (298) (384) Common stock issued (228) (1,298) ------- ------- Net cash paid $ 450 $ 195 ======= =======
Acquisition and related costs for the six months ended June 30, 1999 reflect additional costs related to the acquisitions that occurred in 1998 and smaller acquisitions completed during 1999. (E) COMPREHENSIVE INCOME The following table reflects the calculation of comprehensive income (loss) for MCI WorldCom for the three and six months ended June 30, 1999 and 1998 (in millions):
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, -------------------- -------------------- 1999 1998 1999 1998 ------- ------- ------- ------- Net income (loss) applicable to common shareholders $ 863 $ 221 $ 1,572 $ (195) ------- ------- ------- ------- Other comprehensive income (loss): Foreign currency translation losses (23) (1) (305) (9) Unrealized holding gains (losses):
Page 9 10
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, -------------------- -------------------- 1999 1998 1999 1998 ------- ------- ------- ------- Unrealized holding gains (losses) during the period 291 (44) 536 (18) Reclassification adjustment for gains included in net income (15) (13) (15) (13) ------- ------- ------- ------- Other comprehensive income (loss) before tax 253 (58) 216 (40) Income tax expense (104) 21 (196) 11 ------- ------- ------- ------- Other comprehensive income (loss) 149 (37) 20 (29) ------- ------- ------- ------- Comprehensive income (loss) applicable to common shareholders $ 1,012 $ 184 $ 1,592 $ (224) ======= ======= ======= =======
(F) SEGMENT INFORMATION Based on its organizational structure, the Company operates in five reportable segments: MCI WorldCom Communications, MCI WorldCom International Operations, Embratel, Operations and technology and Other. The Company's reportable segments represent business units that primarily offer similar products and services; however, the business units are managed separately due to the geographic dispersion of their operations. MCI WorldCom Communications provides voice, data and other types of domestic communications services including Internet services. MCI WorldCom International Operations provides voice, data, Internet and other similar types of communications services to customers primarily in Europe. Embratel provides communications services in Brazil. Operations and technology includes network operations, information services, engineering and technology, and customer service. Other includes primarily the operations of MCI Systemhouse Corp. and SHL Systemhouse Co., wholly owned subsidiaries of the Company (collectively, "SHL"), and other non-communications services. In April 1999, the Company completed the previously announced sale of SHL to Electronic Data Systems Corporation ("EDS"). The Company's chief operating decision maker utilizes revenue information in assessing performance and making overall operating decisions and resource allocations. Communications services are generally provided utilizing the Company's fiber optic networks, which do not make a distinction between the types of services. As a result, the Company does not allocate line costs or assets by segment. Profit and loss information is reported only on a consolidated basis to the chief operating decision maker and the Company's board of directors. Information about the Company's segments for the three and six months ended June 30, 1999 and 1998 is as follows (in millions):
REVENUES FROM EXTERNAL CUSTOMERS ------------------------------------------------------- FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ------------------------- ------------------------- 1999 1998 1999 1998 ---------- ---------- ---------- ---------- MCI WorldCom Communications $ 7,717 $ 2,269 $ 15,272 $ 4,319 MCI WorldCom International Operations 420 270 777 500 Operations and technology -- -- -- -- Other 120 42 523 82 Corporate -- -- -- -- ---------- ---------- ---------- ---------- Total before Embratel 8,257 2,581 16,572 4,901
Page 10 11
REVENUES FROM EXTERNAL CUSTOMERS ---------------------------------------------------- FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ---------------------- ---------------------- 1999 1998 1999 1998 -------- -------- -------- -------- Embratel 716 -- 1,402 -- Elimination of intersegment revenues (29) -- (29) -- -------- -------- -------- -------- Total $ 8,944 $ 2,581 $ 17,945 $ 4,901 ======== ======== ======== ========
The following is a reconciliation of the segment information to income before income taxes, minority interests and extraordinary items for the three and six months ended June 30, 1999 and 1998 (in millions):
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, -------------------- -------------------- 1999 1998 1999 1998 -------- -------- -------- -------- Revenues $ 8,944 $ 2,581 $ 17,945 $ 4,901 Operating expenses 7,180 2,086 14,686 4,478 -------- -------- -------- -------- Operating income 1,764 495 3,259 423 Other income (expense): Interest expense (236) (108) (496) (210) Miscellaneous 48 10 16 22 -------- -------- -------- -------- Income before income taxes, minority interests and extraordinary items $ 1,576 $ 397 $ 2,779 $ 235 ======== ======== ======== ========
(G) CONTINGENCIES The Company is involved in legal and regulatory proceedings generally incidental to its business and has included loss contingencies in other current liabilities and other liabilities for certain of these matters. In some instances, rulings by federal and some state regulatory authorities may result in increased operating costs to the Company. Except as described herein, and while the results of these various legal and regulatory matters contain an element of uncertainty, MCI WorldCom believes that the probable outcome of these matters should not have a material adverse effect on the Company's consolidated results of operations or financial position. GENERAL. MCI WorldCom is subject to varying degrees of federal, state, local and international regulation. In the United States, the Company's subsidiaries are most heavily regulated by the states, especially for the provision of local exchange services. The Company must be certified separately in each state to offer local exchange and intrastate long distance services. No state, however, subjects MCI WorldCom to price cap or rate of return regulation, nor is the Company currently required to obtain Federal Communications Commission ("FCC") authorization for installation or operation of its network facilities used for domestic services, other than licenses for specific terrestrial microwave and satellite earth station facilities that utilize radio frequency spectrum. FCC approval is required, however, for the installation and operation of its international facilities and services. MCI WorldCom is subject to varying degrees of regulation in the foreign jurisdictions in which it conducts business including authorization for the installation and operation of network facilities. Although the trend in federal, state and international regulation appears to favor increased competition, no assurance can be given that changes in current or future regulations adopted by the FCC, state or foreign regulators or legislative initiatives in the United States or abroad would not have a material adverse effect on MCI WorldCom. Page 11 12 In implementing the Telecommunications Act of 1996 (the "Telecom Act"), the FCC established nationwide rules designed to encourage new entrants to participate in the local services markets through interconnection with the ILECs, resale of ILECs' retail services and use of individual and combinations of unbundled network elements. Appeals of the FCC order adopting those rules were consolidated before the United States Court of Appeals for the Eighth Circuit (the "Eighth Circuit"). Thereafter, the Eighth Circuit held that constitutional challenges to various practices implementing cost provisions of the Telecom Act that were ordered by certain Public Utility Commissions ("PUCs") were premature; it vacated, however, significant portions of the FCC's nationwide pricing rules and an FCC rule requiring that unbundled network elements be provided on a combined basis. The United States Supreme Court (the "Supreme Court") reviewed the decision of the Eighth Circuit and on January 25, 1999, reversed the Eighth Circuit in part and reinstated, with one exception, all of the FCC local competition rules. The Court vacated and remanded to the FCC for reconsideration the rule determining which unbundled network elements must be provided by ILECs to new entrants. The Eighth Circuit is now considering the ILECs' challenges to the substance of pricing rules which it previously had found to be premature. Access charges, both interstate and intrastate, are a principal component of MCI WorldCom's telecommunications expense. Regulators have historically permitted access charges to be set at levels that are well above ILECs' costs. As a result, access charges have been a source of universal service subsidies that enable local exchange rates to be set at levels that are affordable. MCI WorldCom has actively participated in a variety of state and federal regulatory proceedings with the goal of bringing access charges to cost-based levels and to fund universal service using explicit subsidies funded in a competitively- neutral manner. On May 21, 1999, the United States Court of Appeals for the District of Columbia Circuit remanded to the FCC its recent decision to adjust its price cap regulation of ILECs to require access charges to fall 6.5% per year adjusted for inflation. On June 22, 1999, that Court stayed the effect of its decision pending a further order by the FCC justifying or modifying its decision in response to the Court's opinion. On August 5, 1999, the FCC adopted a decision that will give price cap regulated ILECs the ability to request permission to offer customer-specific pricing in the form of contract tariffs. Once implemented, this decision will allow price cap ILECs to compete against long distance carriers who have previously been able to offer contract type pricing for access arrangements. FCC officials stated that they expect price cap ILECs to be able to obtain pricing flexibility quickly for most of their dedicated transport and special access services. Some price cap ILECs serving the nation's largest cities are expected to qualify for additional pricing flexibility for all dedicated transport and special access services. The FCC has also opened a proceeding to consider additional pricing flexibility for all switched access services. On May 27, 1999, the FCC amended its prior universal service decisions in two significant respects. First, the FCC raised the funding level for universal service support to schools and libraries to $2.25 billion per year, the current maximum that FCC rules allow. This brings the total amount of federal universal service funds collected from telecommunications carriers to $4.2 billion in the current year. Second, the FCC modified its approach to subsidizing non-rural high cost areas by rejecting its prior approach of sizing the subsidy based on forward-looking cost models, and instead adopted a more complex approach that the FCC said it hoped would produce a small high cost fund. A final decision regarding the amount to be collected to support non-rural high cost areas is expected later this year. On July 30, 1999, the United States Court of Appeals for the Fifth Circuit issued a decision reversing and vacating in part portions of a June 1997 FCC universal service decision. Among other things, the Court held that the FCC may collect universal service subsidies from interstate carriers based only on interstate revenues, and that the FCC could not force the ILECs to recover their universal service contributions through interstate access charges. While access charges are likely to decrease as a result of this decision, direct assessments on interstate carriers such as MCI WorldCom are likely to increase. In August 1998, in response to petitions filed by several ILECs under the guise of Section 706 of the Telecom Act, the FCC issued its Advanced Services Order. This order clarifies that the interconnection, unbundling, and resale requirements of Section 251(c) of the Telecom Act, and the interLATA restrictions of Section 271 of this Act, apply fully to so-called "advanced telecommunications services," such as Digital Subscriber Line ("DSL"). An appeal of this Page 12 13 order by US WEST Communications Group is currently pending before the U.S. Court of Appeals for the District of Columbia Circuit. The FCC has asked the court to remand the case for further proceedings. In a companion notice, the FCC sought comment on how to implement Section 706 of the Telecom Act, which directs the FCC to (1) encourage the deployment of advanced telecommunications capability to Americans on a reasonable and timely basis, and (2) complete an inquiry concerning the availability of such services no later than February 8, 1999. The Commission's rulemaking notice included a proposal that, if adopted, would allow the ILECs the option of providing advanced services via a separate subsidiary free from the unbundling and resale obligations of Section 251(c), as well as other dominant carrier regulatory requirements. In early February 1999, the FCC issued its report to Congress, concluding that the deployment of advanced services is proceeding at a reasonable and timely pace. The FCC has not yet issued its Section 706 rulemaking order. On February 26, 1999, the FCC issued a Declaratory Ruling and Notice of Proposed Rulemaking regarding the regulatory treatment of calls to ISPs. Prior to the FCC's order, approximately thirty PUCs issued orders unanimously finding that carriers, including MCI WorldCom, are entitled to collect reciprocal compensation for completing calls to ISPs under the terms of their interconnection agreements with ILECs. Many of these PUC decisions have been appealed by the ILECs and, since the FCC's order, many have filed new cases at the PUCs or in court. Moreover, MCI WorldCom has appealed the FCC's order to the Court of Appeals for the District of Columbia Circuit. MCI WorldCom cannot predict either the outcome of these appeals and the FCC's rulemaking proceeding or whether or not the result(s) will have a material adverse impact upon its consolidated financial position or results of operations. On July 22, 1999, the Senate amended the Commerce, Justice, State and the Judiciary Fiscal Year 2000 appropriations bill to include language that prohibits the FCC from requiring entities it regulates to use any form or method of accounting that does not conform to Generally Accepted Accounting Principles established by the Financial Accounting Standards Board. On August 5, 1999, the House of Representatives adopted a similar amendment on its version of the Commerce, Justice, State, and the Judiciary appropriations bill. If agreed to in conference and enacted into law, such a provision may make it more difficult for the FCC and state regulatory commissions to detect and prevent inappropriate accounting practices by ILECs and thereby permit ILECs to engage in anti-competitive practices. Several bills have been introduced during the 106th Congress that would exclude the transmission of data services or high-speed Internet access from the Telecom Act's bar on the transmission of in-region interLATA services by the Bell Operating Companies. These bills also would make it more difficult for competitors to resell the high-speed Internet access services of the ILECs or to lease some of the network components used for the provision of such services. In 1996 and in 1997, the FCC issued decisions that would require nondominant telecommunications carriers to eliminate interstate service tariffs, except in limited circumstances. MCI WorldCom has challenged this decision in the U.S. Court of Appeals for the District of Columbia Circuit, and has successfully obtained a stay of the FCC's decision. MCI WorldCom's appeal has been held in abeyance pending FCC action with respect to petitions for reconsideration. The FCC recently issued an order addressing those petitions for reconsideration, and the U.S. Court of Appeals for the District of Columbia Circuit has approved a briefing schedule. No argument date has been set. MCI WorldCom cannot predict the ultimate outcome of its appeal. Should the FCC prevail, MCI WorldCom could no longer rely on its federal tariff to limit liability or to establish its interstate rates for customers. Per the FCC's decision, MCI WorldCom would need to develop a means to contract individually with its millions of customers in order to establish lawfully enforceable rates. In 1997 and 1998, the FCC rejected five applications filed by Bell Operating Companies ("BOCs") to provide in-region long distance service in competition with long distance carriers. Pursuant to the Telecom Act, BOCs must file, in each state in their service area, an application conforming to the requirements of section 271 of the Telecom Act if they wish to offer in-region long distance service. Among other things, the applications must demonstrate that the BOC has met a 14-point competitive checklist to open its local network to competition and demonstrate that the application is in the public interest. As of August 1999, no applications were on file with the FCC. However, BOCs in two states - Bell Atlantic Corporation in New York and SBC Corporation in Texas - have announced their intent to file applications Page 13 14 during 1999 after concluding extensive state regulatory proceedings to assess their compliance with checklist requirements. If filed, these would be the first applications to have been subjected to rigorous operational testing of readiness to meet the section 271 requirements. It is not known if the BOCs will meet their publicly-stated filing goals. The FCC must reach its decision on applications within 90 days from the date they are filed. INTERNATIONAL. In February 1997, the United States entered into a World Trade Organization Agreement (the "WTO Agreement") that is designed to have the effect of liberalizing the provision of switched voice telephone and other telecommunications services in scores of foreign countries over the next several years. The WTO Agreement became effective in February 1998. In light of the United States commitments to the WTO Agreement, the FCC implemented new rules in February 1998 that liberalize existing policies regarding (1) the services that may be provided by foreign affiliated United States international common carriers, including carriers controlled or more than 25 percent owned by foreign carriers that have market power in their home markets, and (2) the provision of alternative traffic routing. The new rules make it much easier for foreign affiliated carriers to enter the United States market for the provision of international services. In August 1997, the FCC adopted mandatory settlement rate benchmarks. These benchmarks are intended to reduce the rates that United States carriers pay foreign carriers to terminate traffic in their home countries. The FCC will also prohibit a United States carrier affiliated with a foreign carrier from providing facilities-based service to the foreign carrier's home market until and unless the foreign carrier has implemented a settlement rate at or below the benchmark. The FCC also adopted new rules that will liberalize the provision of switched services over private lines to World Trade Organization member countries. These rules allow such services on routes where 50% or more of United States billed traffic is being terminated in the foreign country at or below the applicable settlement rate benchmark or where the foreign country's rules concerning provision of international switched services over private lines are deemed equivalent to United States rules. On January 12, 1999, the FCC's benchmark rules were upheld in their entirety by the U.S. Court of Appeals for the District of Columbia Circuit. On March 11, 1999 the D. C. Circuit denied petitions for rehearing of the case. In April 1999, the FCC modified its rules to permit United States international carriers to exchange international public switched voice traffic on many routes to and from the United States outside of the traditional settlement rate and proportionate return regimes. Although the FCC's new policies and implementation of the WTO Agreement may result in lower settlement payments by MCI WorldCom to terminate international traffic, there is a risk that the payments that MCI WorldCom will receive from inbound international traffic may decrease to an even greater degree. The implementation of the WTO Agreement may also make it easier for foreign carriers with market power in their home markets to offer United States and foreign customers end-to-end services to the disadvantage of MCI WorldCom. The Company meanwhile, may continue to face substantial obstacles in obtaining from foreign governments and foreign carriers the authority and facilities to provide such end-to-end services. EMBRATEL. The 1996 General Telecommunications Law (the "General Law") provides a framework for telecommunications regulation for Embratel. Article 8 of the General Law created Agencia Nacional de Telecomunicacoes ("Anatel") to implement the General Law through development of regulations and to enforce such regulations. According to the General Law, companies wishing to offer telecommunications services to consumers are required to apply to Anatel for a concession or an authorization. Concessions are granted for the provision of services under the public regime (the "Public Regime") and authorizations are granted for the provision of services under the private regime (the "Private Regime"). The Public Regime is differentiated from the Private Regime primarily by the obligations imposed on the companies rather than the type of services offered by those companies. Service providers subject to the Public Regime (concessionaires) are subject to obligations concerning network expansion and continuity of service provision and are subject to rate regulation. These obligations and the tariff conditions are provided in the General Law and in each company's concession contract. The network expansion obligations (called universal service obligations) are also provided in the Plano Geral de Universalizacao ("General Plan on Universal Service"). The only services provided under the Public Regime are the switched fixed telephone services (local and national and international long distance) provided by Embratel and the three regional holding companies ("Teles"). All other Page 14 15 telecommunications companies, including other companies providing switched fixed telephone services ("SFTS"), operate in the Private Regime and, although they are not subject to the Public Regime, individual authorizations may contain certain specific expansion and continuity obligations. Therefore, when providing SFTS, Embratel and the Teles are subject to the Public Regime obligations provided in the General Law, in their concession contracts and in the General Plan on Universal Service, among other regulations. The main restriction imposed on these companies by the General Plan on Universal Service, is that, until December 31, 2003, the three Teles are prohibited from offering inter-regional and international long distance service, while Embratel is prohibited from offering local services. These companies can start providing the mentioned services two years sooner if they meet their network expansion obligations by December 31, 2001. Embratel and the three Teles were granted their concessions at no fee, until 2005. After 2005, the concessions may be renewed for a period of 20 years, upon the payment, every two years, of a fee equal to 2% of annual net revenues calculated based on the provision of SFTS in the prior year, excluding taxes and social contributions. Embratel also offers a number of ancillary telecommunications services pursuant to authorizations granted in the Private Regime. Such services include the provision of dedicated analog and digital lines, packet switched network services, circuit switched network services, mobile marine telecommunications, telex and telegraph, radio signal satellite retransmission and television signal satellite retransmission. Some of these services are subject to specific continuity obligations and rate conditions. All providers of telecommunications services are subject to quality and modernization obligations provided in the Plano Geral de Qualidade ("General Plan on Quality"). LITIGATION. On November 4, 1996, and thereafter, and on August 25, 1997, and thereafter, MCI and all of its directors were named as defendants in a total of 15 complaints filed in the Court of Chancery in the State of Delaware. BT was named as a defendant in 13 of the complaints. The complaints were brought by alleged stockholders of MCI, individually and purportedly as class actions on behalf of all other stockholders of MCI. In general, the complaints allege that MCI's directors breached their fiduciary duty in connection with the MCI BT Merger Agreement, dated November 3, 1996 (the "MCI BT Merger Agreement"), that BT aided and abetted those breaches of duty, that BT owes fiduciary duties to the other stockholders of MCI and that BT breached those duties in connection with the MCI BT Merger Agreement. The complaints seek damages and injunctive and other relief. One of the purported stockholder class actions pending in Delaware Chancery Court has been amended, one of the purported class actions has been dismissed with prejudice, and plaintiffs in four of the other purported stockholder class actions have moved to amend their complaints to name MCI WorldCom and TC Investments Corp., a wholly owned subsidiary of the Company, as additional defendants. These plaintiffs generally allege that the defendants breached their fiduciary duties to stockholders in connection with the MCI Merger and the agreement to pay a termination fee to WorldCom. They further allege discrimination in favor of BT in connection with the MCI Merger. The plaintiffs seek, inter alia, damages and injunctive relief prohibiting the consummation of the MCI Merger and the payment of the inducement fee to BT. Three complaints were filed in the U.S. District Court for the District of Columbia, as class actions on behalf of purchasers of MCI shares. The three cases were consolidated on April 1, 1998. On or about May 8, 1998, the plaintiffs in all three cases filed a consolidated amended complaint alleging, on behalf of purchasers of MCI's shares between July 11, 1997 and August 21, 1997, inclusive, that MCI and certain of its officers and directors failed to disclose material information about MCI, including that MCI was renegotiating the terms of the MCI BT Merger Agreement. The consolidated amended complaint seeks damages and other relief. The Company and the other defendants have moved to dismiss the consolidated amended complaint. Page 15 16 At least nine class action complaints have been filed that arise out of the FCC's decision in Halprin, Temple, Goodman and Sugrue v. MCI Telecommunications Corp., and allege that MCI WorldCom has improperly charged "Pre-Subscribed" customers "Non-Subscriber" or so-called "casual" rates for certain direct-dialed calls. Plaintiffs assert that this conduct violates the Communications Act and various state laws; they seek rebates to all affected customers and punitive damages. In response to a motion filed by MCI WorldCom, the Judicial Panel on Multi-District Litigation has consolidated these matters in the U.S. District Court for the Southern District of Illinois. The Company has moved to dismiss the state law claims and for an order staying the Communications Act claims pending the FCC's resolution of MCI WorldCom's outstanding motion for reconsideration and any subsequent appeal of the FCC decision. On September 3, 1998, WorldCom and MCI entered into a Stock Purchase Agreement ("SPA") with Cable & Wireless plc and Cable & Wireless Internet Holdings, Inc. (collectively, "C&W"), pursuant to which MCI sold the iMCI business to C&W. That transaction closed on September 14, 1998, simultaneously with the closing of the MCI Merger. On February 18, 1999, pursuant to the indemnity provisions of the SPA, C&W notified MCI WorldCom that it was claiming that MCI WorldCom had breached representations and warranties in, and had failed to comply with other provisions of, the SPA. C&W alleged that it had suffered damages of approximately $1.16 billion. As MCI WorldCom advised C&W on March 19, 1999, the Company denies these allegations. On March 31, 1999, C&W filed a complaint against MCI WorldCom in the United States District Court for the District of Delaware, alleging that MCI WorldCom had breached the SPA. In the lawsuit, C&W seeks unspecified damages and specific performance. On May 11, 1999, MCI WorldCom filed a motion to stay the litigation and to compel compliance with the dispute resolution/arbitration provisions in the SPA and affiliated agreements. On July 12, 1999, the district court entered an order compelling C&W to comply with the dispute resolution/arbitration provisions of the SPA and affiliated agreements with respect to five of the 11 claims in its complaint and denying a stay of the action. On July 29, the district court set a trial date of September 12, 2000. The Company believes that all of the complaints are without merit, and based on information currently available, MCI WorldCom presently does not expect that the above actions will have a material adverse effect on the Company's consolidated results of operations or financial position. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This Management's Discussion and Analysis of Financial Condition and Results of Operations may be deemed to include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risk and uncertainty, including financial, regulatory environment and trend projections, estimated costs to complete or possible future revenues from IPR&D programs, the likelihood of successful completion of such programs, and the outcome of year 2000 or Euro conversion efforts, as well as any statements preceded by, followed by, or that include the words "intends," "estimates," "believes," "expects," "anticipates," "should," "could," or similar expressions; and other statements contained herein regarding matters that are not historical facts. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that its expectations will be achieved. The important factors that could cause actual results to differ materially from those in the forward-looking statements herein (the "Cautionary Statements") include, without limitation: (1) uncertainties associated with the success of acquisitions and the integration thereof; (2) risks of international business; (3) the impact of technological change on the Company's business and dependence on availability of transmission facilities; (4) regulation risks including the impact of the Telecom Act; (5) contingent liabilities; (6) the impact of competitive services and pricing; (7) risks associated with year 2000 uncertainties and Euro conversion efforts; (8) risks associated with debt service requirements and interest rate fluctuations; (9) the Company's degree of financial leverage; and (10) other risks referenced from time to time in the Company's filings with the SEC, including the Form 10-K. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are Page 16 17 expressly qualified in their entirety by the Cautionary Statements. The Company does not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The following discussion and analysis relates to the financial condition and results of operations of the Company for the three and six month periods ended June 30, 1999 and 1998, after giving effect to the BFP Merger, which was accounted for as a pooling-of-interests. The information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and consolidated financial statements and notes thereto contained herein and in the Form 10-K. Unless otherwise defined, capitalized terms used herein have the meanings assigned to them in the Notes to Consolidated Financial Statements contained herein. GENERAL The Company is one of the largest telecommunications companies in the United States, serving local, long distance and Internet customers domestically and internationally. The Company's operations have grown significantly in each year of its operations as a result of internal growth, the selective acquisition of other telecommunications companies and international expansion. On September 14, 1998, the Company, through a wholly owned subsidiary, merged with MCI. Through the MCI Merger, the Company acquired one of the world's largest and most advanced digital networks, connecting local markets in the United States to more than 280 countries and locations worldwide. As a result of the MCI Merger, each share of MCI common stock was converted into the right to receive 1.2439 shares of MCI WorldCom Common Stock or approximately 755 million MCI WorldCom common shares in the aggregate, and each share of MCI Class A common stock outstanding (all of which were held by BT) was converted into the right to receive $51.00 in cash or approximately $7 billion in the aggregate. The funds paid to BT were obtained by the Company from (i) available cash as a result of the Company's $6.1 billion public debt offering in August 1998; (ii) the sale of MCI's iMCI Business to Cable & Wireless for $1.75 billion in cash on September 14, 1998; (iii) the sale of MCI's 24.9% equity stake in Concert to BT for $1 billion in cash on September 14, 1998; and (iv) availability under the Company's credit facilities and commercial paper program. The MCI Merger was accounted for as a purchase; accordingly, operating results for MCI have been included from the date of acquisition. On August 4, 1998, MCI acquired a 51.79% voting interest and a 19.26% economic interest in Embratel, Brazil's only facilities-based national communications provider, for approximately R$2.65 billion (US$2.3 billion). The purchase price will be paid in local currency installments of which R$1.06 billion (US$916 million) was paid on August 4, 1998, R$795 million (US$442 million) was paid August 4, 1999 and the remaining R$795 million (US$443 million at June 30, 1999) will be paid August 4, 2000. Embratel provides interstate long distance and international telecommunications services, as well as over 40 other communications services, including leased high-speed data, satellite, Internet, frame relay and packet-switched services. Operating results for Embratel are included from the date of the MCI Merger. On January 31, 1998, MCI WorldCom, through a wholly owned subsidiary, merged with CompuServe. As a result of the CompuServe Merger, each share of CompuServe common stock was converted into the right to receive 0.40625 shares of MCI WorldCom Common Stock, or approximately 37.6 million MCI WorldCom common shares in the aggregate. Prior to the CompuServe Merger, CompuServe operated primarily through two divisions: Interactive Services and Network Services. Interactive Services offered worldwide online and Internet access services for consumers, while Network Services provided worldwide network access, management and applications, and Internet services to business. The CompuServe Merger was accounted for as a purchase; accordingly, operating results for CompuServe have been included from the date of acquisition. Page 17 18 On January 31, 1998, MCI WorldCom also acquired ANS from AOL, and has entered into five year contracts with AOL under which MCI WorldCom and its subsidiaries will provide network services to AOL. As part of the AOL Transaction, AOL acquired CompuServe's Interactive Services Division and received a $175 million cash payment from MCI WorldCom. MCI WorldCom retained the CompuServe Network Services division. ANS provides Internet access to AOL and AOL's subscribers in the United States, Canada, the United Kingdom, Sweden and Japan. The AOL Transaction was accounted for as a purchase, accordingly, operating results for ANS have been included from the date of acquisition. In connection with the above business combinations, the Company made allocations of the purchase price to acquired IPR&D totaling $429 million in the first quarter of 1998 related to the CompuServe Merger and AOL Transaction and $3.1 billion in the third quarter of 1998 related to the MCI Merger. Management expects to continue supporting these research and development ("R&D") efforts and believes the Company has a reasonable chance of successfully completing the R&D programs. However, there is risk associated with the completion of the R&D projects and the Company cannot give any assurance that any will meet with either technological or commercial success. If none of these R&D projects are successfully developed, the sales and profitability of the Company may be adversely affected in future periods. The failure of any particular individual project in-process would not materially impact the Company's financial condition, results of operations or the attractiveness of the overall investment in MCI, CompuServe Network Services or ANS. Operating results are subject to uncertain market events and risks which are beyond the Company's control, such as trends in technology, government regulations, market size and growth, and product introduction or other actions by competitors. The integration and consolidation of MCI, CompuServe Network Services and ANS requires substantial management and financial resources. While the Company believes the early results of these efforts are encouraging, the MCI Merger, CompuServe Merger and AOL Transaction necessarily involve a number of significant risks, including potential difficulties in assimilating the technologies and services of these companies and in achieving the expected synergies and cost reduction. On January 29, 1998, MCI WorldCom, through a wholly owned subsidiary, merged with BFP in a transaction accounted for as a pooling-of-interests. BFP is a leading facilities-based provider of competitive local telecommunications services, commonly referred to as a competitive local exchange carrier, in selected cities within the United States. BFP acquires and constructs its own state-of-the-art fiber optic networks and facilities and leases network capacity from others to provide IXCs, ISPs, wireless carriers and business, government and institutional end users with an alternative to the ILECs for a broad array of high quality voice, data, video transport and other telecommunications services. The Company's strategy is to further develop as a fully integrated telecommunications company positioned to take advantage of growth opportunities in global telecommunications. Consistent with this strategy, the Company believes that transactions such as the MCI Merger, the CompuServe Merger and the AOL Transaction enhance the combined entity's opportunities for future growth, create a stronger competitor in the changing telecommunications industry and allow provision of end-to-end bundled service over global networks, which will provide new or enhanced capabilities for the Company's customers. The Company's profitability is dependent upon, among other things, its ability to achieve line costs that are less than its revenues. The principal components of line costs are access charges and transport charges. Regulators have historically permitted access charges to be set at levels that are well above ILECs' costs. As a result, access charges have been a source of universal service subsidies that enable local exchange rates to be set at levels that are affordable. MCI WorldCom has actively participated in a variety of state and federal regulatory proceedings with the goal of bringing access charges to cost-based levels and to fund universal service using explicit subsidies funded in a competitively-neutral manner. Page 18 19 On May 21, 1999, the United States Court of Appeals for the District of Columbia Circuit remanded to the FCC its recent decision to adjust its price cap regulation of ILECs to require access charges to fall 6.5% per year adjusted for inflation. On June 22, 1999, that Court stayed the effect of its decision pending a further order by the FCC justifying or modifying its decision in response to the Court's opinion. On August 5, 1999, the FCC adopted a decision that will give price cap regulated ILECs the ability to request permission to offer customer-specific pricing in the form of contract tariffs. Once implemented, this decision will allow price cap ILECs to compete against long distance carriers who have previously been able to offer contract type pricing for access arrangements. FCC officials stated that they expect price cap ILECs to be able to obtain pricing flexibility quickly for most of their dedicated transport and special access services. Some price cap ILECs serving the nation's largest cities are expected to qualify for additional pricing flexibility for all dedicated transport and special access services. The FCC has also opened a proceeding to consider additional pricing flexibility for all switched access services. On May 27, 1999, the FCC amended its prior universal service decisions in two significant respects. First, the FCC raised the funding level for universal service support to schools and libraries to $2.25 billion per year, the current maximum that FCC rules allow. This brings the total amount of federal universal service funds collected from telecommunications carriers to $4.2 billion in the current year. Second, the FCC modified its approach to subsidizing non-rural high cost areas by rejecting its prior approach of sizing the subsidy based on forward-looking cost models, and instead adopted a more complex approach that the FCC said it hoped would produce a small high cost fund. A final decision regarding the amount to be collected to support non-rural high cost areas is expected later this year. On July 30, 1999, the United States Court of Appeals for the Fifth Circuit issued a decision reversing and vacating in part portions of a June 1997 FCC universal service decision. Among other things, the Court held that the FCC may collect universal service subsidies from interstate carriers based only on interstate revenues, and that the FCC could not force the ILECs to recover their universal service contributions through interstate access charges. While access charges are likely to decrease as a result of this decision, direct assessments on interstate carriers such as MCI WorldCom are likely to increase. The Company will continue to seek to manage transport costs through effective utilization of its networks, favorable contracts with carriers and network efficiencies made possible as a result of expansion of the Company's customer base through acquisitions and internal growth. RESULTS OF OPERATIONS The following table sets forth for the periods indicated the Company's statements of operations as a percentage of its revenues for the three and six months ended June 30, 1999 and 1998:
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, -------------------- -------------------- 1999 1998 1999 1998 ------- ------- ------- ------- Revenues .............................................. 100% 100% 100% 100% Line costs ............................................ 44.0 47.6 44.9 47.9 Selling, general and administrative ................... 24.4 20.3 25.0 20.4 Depreciation and amortization ......................... 11.9 12.9 11.9 12.9 In-process research and development and other charges . -- -- -- 10.2 ------- ------- ------- ------- Operating income ...................................... 19.7 19.2 18.2 8.6 Other income (expense): Interest expense ................................... (2.6) (4.2) (2.8) (4.3) Miscellaneous ...................................... 0.5 0.4 0.1 0.5 ------- ------- ------- ------- Income before income taxes, minority interests, and extraordinary items ................................ 17.6 15.4 15.5 4.8
Page 19 20
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, -------------------- --------------------- 1999 1998 1999 1998 ------- -------- -------- -------- Provision for income taxes ................................. 7.3 6.6 6.6 5.9 ------- ------- -------- -------- Income (loss) before minority interests and extraordinary items ................................................... 10.3 8.8 8.9 (1.1) Minority interests ......................................... (0.5) -- 0.1 -- Extraordinary items ........................................ -- -- -- (2.6) Distributions on subsidiary trust and other mandatorily redeemable preferred securities ......................... 0.2 -- 0.2 -- Preferred dividend requirement ............................. -- 0.2 -- 0.3 ------- ------- -------- -------- Net income (loss) applicable to common shareholders ........ 9.6% 8.6% 8.8% (4.0)% ======= ======= ======== ========
THREE AND SIX MONTHS ENDED JUNE 30, 1999 VS. THREE AND SIX MONTHS ENDED JUNE 30, 1998 Revenues for the three months ended June 30, 1999 increased 247% to $8.9 billion as compared to $2.6 billion for the three months ended June 30, 1998. For the six months ended June 30, 1999, revenues increased 266% to $17.9 billion versus $4.9 billion for the same period in the prior year. The increase in total revenues is attributable to the MCI Merger and Embratel transaction as well as internal growth. Results include MCI and Embratel operations from September 14, 1998 and CompuServe Network Services and ANS from February 1, 1998. Actual reported revenues by category for the three and six months ended June 30, 1999 and 1998 reflect the following changes by category (dollars in millions):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ----------------------------------- ---------------------------------- ACTUAL ACTUAL PERCENT ACTUAL ACTUAL PERCENT 1999 1998 CHANGE 1999 1998 CHANGE -------- -------- ------- -------- -------- ------- REVENUES Voice $ 5,090 $ 1,208 321 $ 10,185 $ 2,370 330 Data 1,791 536 234 3,493 1,032 238 Internet 836 525 59 1,594 917 74 International 420 270 56 777 500 55 -------- -------- -------- -------- COMMUNICATIONS SERVICES 8,137 2,539 220 16,049 4,819 233 Other 120 42 186 523 82 538 -------- -------- -------- -------- TOTAL REVENUES BEFORE EMBRATEL 8,257 2,581 220 16,572 4,901 238 Embratel 716 -- -- 1,402 -- -- Elimination of intersegment revenues (29) -- -- (29) -- -- -------- -------- -------- -------- TOTAL REPORTED REVENUES $ 8,944 $ 2,581 247 $ 17,945 $ 4,901 266 ======== ======== ======== ========
The following table provides supplemental pro forma detail for MCI WorldCom revenues. Since actual results for the six months ended June 30, 1998 do not reflect the operations of MCI and only five months of CompuServe Network Services and ANS, the pro forma results are more indicative of internal growth for the combined company. The pro forma revenues, excluding Embratel, for the three and six months ended June 30, 1999 and 1998 reflect the following changes by category (dollars in millions): Page 20 21
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, --------------------------------------- --------------------------------------- ACTUAL PRO FORMA PERCENT ACTUAL PRO FORMA PERCENT 1999 1998 CHANGE 1999 1998 CHANGE --------- --------- ------- --------- --------- ------- REVENUES Voice $ 5,090 $ 4,822 6 $ 10,185 $ 9,576 6 Data 1,791 1,387 29 3,493 2,691 30 Internet 836 525 59 1,594 999 60 International 420 270 56 777 500 55 --------- --------- --------- --------- COMMUNICATIONS SERVICES 8,137 7,004 16 16,049 13,766 17 Other 120 477 (75) 523 967 (46) --------- --------- --------- --------- TOTAL REVENUES $ 8,257 $ 7,481 10 $ 16,572 $ 14,733 12 ========= ========= ========= =========
The following discusses the revenue increases for the three and six month periods ended June 30, 1999 as compared to pro forma results for the comparable prior year period. The pro forma revenues assume that the MCI Merger, CompuServe Merger and the AOL Transaction occurred at the beginning of 1998. These pro forma revenues do not include Embratel or the iMCI Business that was sold. Changes in actual results of operations are shown in the Consolidated Statements of Operations and the foregoing tables and, as noted above, primarily reflect the MCI Merger, Embratel transaction and internal growth of the Company. Voice revenues for the second quarter and the six month period ended June 30, 1999, experienced 6% increases over the prior year pro forma amounts, driven by a gain of 10% in traffic for both periods, respectively. Voice revenues include both long distance and local domestic switched revenues. Strong long distance volume gains in domestic commercial sales channels, combined with an increasing mix of local services, were the primary contributors to this increase. Local voice revenues grew approximately 82% in the second quarter of 1999 and approximately 88% for the six months ended June 30, 1999 versus the same periods of the prior year. While the Company continued to show significant percentage gains in switched local, it was still a relatively small component of total Company revenues. Data revenues for the three and six month periods ended June 30, 1999 increased 29% and 30%, respectively, over the same pro forma period of the prior year. Data includes both long distance and local dedicated bandwidth sales. The revenue growth for data services continued to be driven by significant commercial end-user demand for high-speed data and by Internet-related growth on both a local and long-haul basis. This growth was not only being fueled by connectivity demands, but also by applications that are becoming more strategic, far reaching and complex; additionally, bandwidth consumption is driving an acceleration in growth for higher capacity circuits. Rapidly growing demand for high-speed data access has contributed to a 36% pro forma year over year local data revenue growth for the second quarter of 1999 and 38% for the six months ended June 30, 1999. As of June 30, 1999, the Company had approximately 23.6 million domestic local voice grade equivalents and over 36,000 buildings in the United States connected over its high-capacity circuits. Domestic local route miles of connected fiber exceed 8,000 and domestic long distance route miles exceed 47,000. Internet revenues for the three and six month periods ended June 30, 1999 increased 59% and 60%, respectively, over the prior year pro forma amounts. Growth was driven by both dial up and dedicated connectivity to the Internet as more and more business customers migrate their data networks and applications to Internet-based technologies. The Company has increased the capacity of its global Internet network to OC-48 in response to the increasing backbone transport requirements of both its commercial and wholesale accounts. The Company's dial access network has grown over 70% to 1.2 million modems, compared with the same period in the prior year. MCI's Internet revenues for 1998 have been excluded from the above table, due to the divestiture of MCI's Internet business on September 14, 1998. International revenues - those revenues originating outside of the United States, excluding Embratel - for the second quarter of 1999 were $420 million, an increase of 56% as compared with $270 million for the same pro forma period of the prior year. For the six month period ended June 30, 1999, international revenues increased 55% to $777 million Page 21 22 versus $500 million for the same period of the prior year. In July 1998, the pan-European network was commissioned for service and, along with the Gemini undersea cable, now provides MCI WorldCom the capability to connect from end-to-end over 7,500 buildings in Europe all over its own high-capacity circuits. The Pan-European networks and newly constructed national networks in the U.K., France, Germany and Belgium drove higher growth of enhanced data sales internationally. The resulting revenue mix shift is expected to contribute to improved margins in spite of the competitive pricing environment. Other revenues, which consist of the operations of SHL, for the second quarter of 1999 were $120 million, down 75% as compared with the pro forma second quarter of 1998. For the six month period ended June 30, 1999, other revenues decreased 46% to $523 million versus $967 million for the same period of the prior year. In April 1999, the Company completed the sale of SHL to EDS and received $1.39 billion in cash. Additionally, in February 1999, both companies agreed, in principal, to significant outsourcing contracts and a marketing relationship to explore opportunities in electronic business and networking solutions which are expected to capitalize on the individual strengths of each company. The definitive agreements for the outsourcing contracts and marketing relationship are currently being negotiated. The following discusses the actual results of operations for the three and six months ended June 30, 1999 as compared to the three and six months ended June 30, 1998. LINE COSTS. Line costs as a percentage of revenues for the second quarter of 1999 were 44.0% as compared to 47.6% reported for the same period of the prior year. On a year-to-date basis, line costs as a percentage of revenues decreased to 44.9% as compared to 47.9% reported for the same period of the prior year. Overall decreases are attributable to changes in the product mix and synergies and economies of scale resulting from network efficiencies achieved from the assimilation of MCI, CompuServe Network Services and ANS into the Company's operations. Additionally, access charge reductions that occurred in July 1998 and January 1999 reduced total line cost expense by approximately $81 million for the second quarter of 1999 and $166 million for the six months ended June 30, 1999. While access charge reductions were primarily passed through to customers, line costs as a percentage of revenues were positively affected by approximately half a percentage point for both the second quarter of 1999 and the six month period ended June 30, 1999. The Company anticipates that line costs as a percentage of revenues may continue to decline as a result of synergies and economies of scale resulting from network efficiencies achieved from the continued assimilation of the former MCI and WorldCom networks. Additionally, local revenues have increased rapidly to date and line costs related to local are primarily fixed in nature - leading to lower line costs as a percentage of revenues. SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative expenses for the second quarter of 1999 were $2.18 billion or 24.4% of revenues as compared to $524 million or 20.3% of revenues for the second quarter of 1998. On a year-to-date basis, these expenses increased to $4.49 billion or 25.0% of revenues from $1.0 billion or 20.4% of revenues reported for the six months ended June 30, 1998. The increase in selling, general and administrative expenses as a percentage of revenues for the three and six month periods ended June 30, 1999 reflects the Company's expanding operations, primarily through the MCI Merger. The Company expects to achieve additional selling, general and administrative synergies in connection with the MCI Merger through the assimilation of MCI into the Company's strategy of cost control. DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense for the second quarter of 1999 increased to $1.06 billion or 11.9% of revenues from $332 million or 12.9% of revenues for the second quarter of 1998. On a year-to-date basis, this expense increased to $2.14 billion or 11.9% of revenues from $631 million or 12.9% of revenues for the comparable 1998 period. These increases reflect increased amortization and depreciation associated with the MCI Merger, CompuServe Merger and AOL Transaction as well as additional depreciation related to capital expenditures. As a percentage of revenues, these costs decreased due to the higher revenue base. IN-PROCESS RESEARCH AND DEVELOPMENT AND OTHER CHARGES. In the first quarter of 1998, the Company recorded a pre-tax Page 22 23 charge of $38 million for employee severance, alignment charges, loss contingencies and direct merger costs associated with the BFP Merger and $31 million for the write-down of a permanently impaired asset. In connection with the CompuServe Merger and the AOL Transaction, the Company made allocations of the purchase price to acquired IPR&D totaling $429 million in the first quarter of 1998. The in-process technology acquired in the CompuServe Merger and the AOL Transaction consisted of three main R&D efforts underway at CompuServe Network Services and two main R&D efforts underway at ANS. These projects included next generation network technologies and new value-added networking applications, such as applications hosting, multimedia technologies and virtual private data networks. INTEREST EXPENSE. Interest expense in the second quarter of 1999 was $236 million or 2.6% of revenues, as compared to $108 million or 4.2% of revenues reported in the second quarter of 1998. For the six months ended June 30, 1999, interest expense was $496 million or 2.8% of revenues as compared to $210 million or 4.3% of revenues for the first six months of 1998. The increase in interest expense is attributable to higher debt levels as a result of the MCI Merger, higher capital expenditures and the 1998 fixed rate debt financings, offset by lower interest rates as a result of certain tender offers for outstanding debt in the first quarter of 1998 and slightly lower rates in effect on the Company's variable rate debt. Interest expense was favorably impacted in the second quarter of 1999 as a result of the $1.39 billion SHL sale proceeds being utilized to repay indebtedness under the Company's credit facilities and commercial paper program. For the three and six months ended June 30, 1999 and 1998, weighted average annual interest rates on the Company's long-term debt were 6.97% and 7.10%, respectively, while weighted average annual levels of borrowings were $19.82 billion and $8.27 billion, respectively. MISCELLANEOUS INCOME AND EXPENSE. Miscellaneous income for the second quarter of 1999 was $48 million or 0.5% of revenues. For the six months ended June 30, 1999, miscellaneous income was $16 million or 0.1% of revenues. Miscellaneous income includes investment income, equity in income and losses of affiliated companies, the effects of fluctuations in exchange rates for transactions denominated in foreign currencies, gains and losses on the sale of assets and other nonoperating items. Miscellaneous income and expense for the six months ended June 30, 1999, includes $169 million of foreign currency translation losses related to the impact of the local currency devaluation in Brazil and its effect on Embratel's holdings of U.S. dollar and other foreign currency denominated debt. Also included was a $28 million charge related to the redemption of certain outstanding senior notes of the Company. These amounts were somewhat offset by an $81 million gain on the sale of an equity investment, interest income of $67 million (including Embratel) and preferred dividends on News Corporation Limited ("News Corp") preferred stock of $30 million. EXTRAORDINARY ITEMS. In the first quarter of 1998, the Company recorded an extraordinary item totaling $129 million, net of income tax benefit of $78 million. The charge was recorded in connection with the tender offers and certain related refinancings of the Company's outstanding debt from the BFP Merger. NET INCOME (LOSS) APPLICABLE TO COMMON SHAREHOLDERS. For the quarter ended June 30, 1999, the Company reported net income of $863 million as compared to net income of $221 million reported in the second quarter of 1998. Diluted income per common share was $0.45 compared to $0.21 for the comparable 1998 period. For the six months ended June 30, 1999, the Company reported net income of $1.57 billion as compared to a net loss of $66 million before extraordinary items reported for the comparable prior year period. Diluted income per common share was $0.81 compared to loss per common share before extraordinary items of $0.06 for the comparable 1998 period. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 1999, the Company's total debt was $18.77 billion, a decrease of $2.07 billion from December 31, 1998. Additionally, at June 30, 1999, the Company had available liquidity of $7.07 billion under its credit facilities and commercial paper program (which is described below) and from available cash. Page 23 24 On August 5, 1999, MCI WorldCom extended its existing $7 billion 364-Day Revolving Credit and Term Loan Agreement for a successive 364-day term pursuant to an Amended and Restated 364-Day Revolving Credit and Term Loan Agreement ("Facility C Loans"). The Facility C Loans together with the $3.75 billion Amended and Restated Facility A Revolving Credit Agreement dated August 6, 1998 ("Facility A Loans") provide MCI WorldCom with aggregate credit facilities of $10.75 billion (the "Credit Facilities"). The Credit Facilities provide liquidity support for the Company's commercial paper program and will be used for other general corporate purposes. The Facility A Loans mature on June 30, 2002. The Facility C Loans have a 364-day term, which may be extended for a second successive 364-day term thereafter to the extent of the committed amounts from those lenders consenting thereto, with a requirement that lenders holding at least 51% of the committed amounts consent. Additionally, effective as of the end of such 364-day term, the Company may elect to convert up to $4 billion of the principal debt outstanding under the Facility C Loans from revolving loans to term loans with a maturity date no later than one year after the conversion. The Credit Facilities bear interest payable in varying periods, depending on the interest period, not to exceed six months, or with respect to any Eurodollar Rate borrowing, 12 months if available to all lenders, at rates selected by the Company under the terms of the Credit Facilities, including a Base Rate or Eurodollar Rate, plus the applicable margin. The applicable margin for the Eurodollar Rate borrowing varies from 0.35% to 0.75% as to Facility A Loans and from 0.225% to 0.45% as to Facility C Loans, in each case based upon the better of certain debt ratings. The Credit Facilities are unsecured but include a negative pledge of the assets of the Company and its subsidiaries (subject to certain exceptions). The Credit Facilities require compliance with a financial covenant based on the ratio of total debt to total capitalization, calculated on a consolidated basis. The Credit Facilities require compliance with certain operating covenants which limit, among other things, the incurrence of additional indebtedness by the Company and its subsidiaries, sales of assets and mergers and dissolutions, and which covenants do not restrict distributions to shareholders, provided the Company is not in default under the Credit Facilities. At June 30, 1999, the Company was in compliance with these covenants. The Facility A Loans and the Facility C Loans are subject to annual commitment fees not to exceed 0.25% and 0.15%, respectively, of any unborrowed portion of the facilities. In January 1999, the Company and one of its wholly owned subsidiaries redeemed all of its outstanding 9.375% Senior Notes due January 15, 2004 (the "Senior Notes"). Holders of the Senior Notes received 103.52% of the principal amount plus accrued and unpaid interest to January 15, 1999 of $46.875 per $1,000 aggregate principal amount of such Senior Notes. The total redemption cost of $743 million was obtained from available liquidity under the Company's credit facilities and commercial paper program. The Company recorded a $28 million charge related to the redemption. In March 1999, $300 million and $200 million of MCI senior notes, with interest rates of 6.25% and 6.37%, respectively, matured. The funds utilized to repay the maturing MCI senior notes were obtained from available liquidity under the Company's credit facilities and commercial paper program. As noted below, the Brazilian real has experienced significant devaluation against the U.S. dollar since MCI invested in Embratel in August 1998. The Company previously designated the note payable in local currency installments, resulting from the Embratel investment, as a hedge of its investment in Embratel. As of June 30, 1999, the Company recorded the change in value of the note as a reduction of the note payable with the offset through foreign currency translation adjustment in shareholders' investment. As of June 30, 1999, Embratel had $609 million of long-term debt outstanding, of which approximately $517 million was denominated in U.S. dollars and $92 million denominated in other currencies including the French Franc, Deutsche Mark, Japanese Yen and Brazilian real. The effective cost to Embratel of borrowing in foreign currencies, such as the U.S. dollar, depends principally on the exchange rate between the Brazilian real and the currencies in which its borrowings are denominated. As of June 30, 1999, the Brazilian real devalued over 30% against the U.S. dollar since December 31, 1998. As a result, the Company recorded a $169 million foreign currency loss to miscellaneous expense during the six months ended June 30, 1999. After the elimination of minority interests, this charge totaled approximately $33 million on a pretax basis. If this devaluation is sustained, or worsens, Embratel would record a similar charge to its future earnings equal to the increase in the U.S. dollar liability resulting from such devaluation. The net effect to the Company's operations would be approximately 19% of such charge after elimination of minority interests. For the six months ended June 30, 1999, the Company's cash flow from operations increased $3.89 billion to $4.51 billion from the comparable period for 1998. The increase in cash flow from operations was primarily attributable to the MCI Merger, Page 24 25 internal growth and synergies and economies of scale resulting from network efficiencies and selling, general and administrative cost savings achieved from the assimilation of recent acquisitions into the Company's operations. Cash used in investing activities for the six months ended June 30, 1999 totaled $4.40 billion and included capital expenditures of $3.67 billion. Primary capital expenditures include purchases of switching, transmission, communications and other equipment. The Company anticipates that approximately $4.2 billion to $4.7 billion will be spent during the remainder of 1999 for transmission and communications equipment, construction and other capital expenditures without regard to Embratel and including the redeployment of SHL sales proceeds. These capital expenditures also reflect the planned $1.4 billion increase for strategic initiatives. Acquisitions and related costs includes the costs associated with the MCI Merger, CompuServe Merger, AOL Transaction and smaller acquisitions completed during 1999. In July 1999, the Company received $1.4 billion in cash from the sale of the Company's interest in News Corp preferred stock. The proceeds were used to repay existing indebtedness under the Company's credit facilities and commercial paper program. This debt reduction is expected to reduce quarterly interest expense by approximately $17 million. Additionally, miscellaneous income will be reduced by $15 million per quarter due to preferred dividends which will no longer be received. Increases in interest rates on MCI WorldCom's variable rate debt would have an adverse effect upon MCI WorldCom's reported net income and cash flow. The Company believes that it will generate sufficient cash flow to service MCI WorldCom's debt and capital requirements; however, economic downturns, increased interest rates and other adverse developments, including factors beyond MCI WorldCom's control, could impair its ability to service its indebtedness. In addition, the cash flow required to service MCI WorldCom's debt may reduce its ability to fund internal growth, additional acquisitions and capital improvements. The development of the businesses of MCI WorldCom and the installation and expansion of its domestic and international networks will continue to require significant capital expenditures. Failure to have access to sufficient funds for capital expenditures on acceptable terms or the failure to achieve capital expenditure synergies may require MCI WorldCom to delay or abandon some of its plans, which could have a material adverse effect on the success of MCI WorldCom. The Company has historically utilized a combination of cash flow from operations and debt to finance capital expenditures and a mixture of cash flow, debt and stock to finance acquisitions. Absent significant capital requirements for other acquisitions, the Company believes that cash flow from operations and available liquidity, including the Company's credit facilities and commercial paper program and available cash, will be sufficient to meet the Company's capital needs for the remainder of 1999. However, the Company continues to diversify its funding sources and believes that funding needs in excess of internally generated cash flow and availability under the Company's credit facilities and commercial paper program could be met by accessing favorable debt markets. RECENTLY ISSUED ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. This statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires a company to formally document, designate and assess the effectiveness of transactions that receive hedge accounting. This statement is effective for fiscal years beginning after June 15, 1999 and cannot be applied retroactively. SFAS No. 133 must be applied to (a) derivative instruments and (b) certain derivative instruments embedded in hybrid contracts that were issued, acquired, or substantively modified after December 31, 1997 (and, at the Company's election, before January 1, 1998). The Company believes that the adoption of this standard will not have a material effect on the Company's consolidated results of operations or financial position. Page 25 26 YEAR 2000 READINESS DISCLOSURE Due to extensive use of computer technology, both MCI and WorldCom began developing strategic plans in 1996 to address their respective year 2000 issues. Since the MCI Merger, the Company has consolidated these strategies into a single program. The Company's year 2000 compliance plan is an ongoing program in which remediation strategies are being implemented by the Company's business organizations to address noncompliant computer and network systems and technology. The Company has a central project management organization that has overall responsibility for coordinating the implementation of this strategy. The remediation strategies followed by the Company's business organizations generally involve a sequence of steps that include (i) identifying computer hardware, software and network components and equipment potentially impacted by year 2000 problems; (ii) analyzing the date sensitivity of those elements; (iii) developing plans for remediation where necessary; (iv) converting non-compliant code or equipment (or, in some cases, replacing or decommissioning systems); (v) testing; and (vi) deploying and monitoring remediation solutions. These steps will vary to meet the particular needs of a business organization and, in some cases, will overlap. Testing, for example, may be performed at several stages of the remediation process. The Company's systems and network equipment that support customer voice and data traffic have been remediated and tested. Additionally, the application components that comprise the Company's major revenue products and services are year 2000 ready. This highlights the fact that the Company has met its June 30, 1999 year 2000 compliance milestone, and the Company is now focusing on the next phase of this effort. MCI WorldCom has also recently achieved several successful interoperability tests with both domestic and international carriers. In the third quarter of 1999, the Company will be primarily focused on continued integration and interoperability testing, testing of contingency plans, independent verification and validation of the work already completed and change management to achieve ongoing compliance. Finally, the Company plans to complete decommissioning projects, customer specific migrations/upgrades and selected internal and international systems. As part of its year 2000 plan, the Company is seeking confirmation from its domestic and foreign interconnecting carriers (collectively, the "Interconnecting Carriers") and major communications equipment vendors (the "Primary Vendors") that they are developing and implementing plans to become year 2000 compliant. The Company has contacted these carriers and vendors, and will continue to do so, but has not yet received enough information from certain domestic and foreign carriers to assess their year 2000 readiness. The Company has received information from its Primary Vendors regarding their year 2000 readiness. This information indicates the Primary Vendors have documented plans to become year 2000 compliant. Like all major telecommunications carriers, the Company's ability to provide service is dependent on its Interconnecting Carriers and Primary Vendors. The Company is participating in industry efforts to test interoperability of networks for industry segments as well as multiple carriers. The ATIS and Network Reliability and Interoperability Council ("NRIC") testing are examples of this effort to assess the readiness of Interconnecting Carriers for both data and voice services. The Company has completed contingency plans to address potential year 2000 related business interruptions that may occur on January 1, 2000 or thereafter. Additional detailed documentation was completed before the end of the second quarter 1999. The Company anticipates that these contingency plans will primarily address potential year 2000 problems due to unanticipated failures in systems or equipment, or potential failure of the Company's Interconnecting Carriers' and Primary Vendors' year 2000 compliance efforts. The Company is incorporating many of the recommendations of the NRIC into the contingency planning process. The Company plans to complete testing and implementation of its contingency plans by December 31, 1999. Failure to meet this target could materially impact the Company's operations. To achieve its year 2000 compliance plan, the Company is utilizing both internal and external resources to identify, correct or reprogram, and test its systems for year 2000 compliance. The Company expects to incur internal labor as well as consulting and other expenses related to infrastructure and facilities enhancements necessary to prepare its Page 26 27 systems for the year 2000. The Company's use of internal resources to achieve its year 2000 compliance plan has not had a material adverse effect on its ability to develop new products and services or to maintain and upgrade, if necessary, its existing products and services. The year 2000 costs incurred by MCI and WorldCom over the past six quarters were approximately $348 million. This level of expenditures is consistent with the planned expenditures for the related periods. The Company expects to incur approximately $190 million in costs during the remainder of 1999 to support its year 2000 compliance initiatives. The costs of the Company's year 2000 remediation efforts are based upon management's best estimates, which require assumptions about future events, availability of resources and personnel, third-party remediation actions, and other factors. There are no assurances that these estimates will be accurate, and actual amounts may differ materially based on a number of factors, including the availability and cost of resources to undertake remediation activities and the scope and nature of the work required to complete remediation. The Company is unable to determine at this time whether the consequences of year 2000 failures will have a material impact on the Company's results of operations, liquidity or financial condition due to the general uncertainty inherent in the year 2000 problem, resulting in part from the uncertainty of the year 2000 readiness of its Interconnecting Carriers and Primary Vendors, and other suppliers, as well as uncertainties related to the Company's ongoing remediation program. The Company's year 2000 compliance plan is expected to reduce significantly the Company's level of uncertainty about the year 2000 problem and, in particular, about the year 2000 compliance and readiness of its Interconnecting Carriers and Primary Vendors. The Company believes that, with the implementation of new business systems, its Interconnecting Carriers and Primary Vendors year 2000 readiness, and completion of the year 2000 compliance plan as scheduled, it will maintain normal operations. Embratel's year 2000 program began in 1997 and is managed separately from the other MCI WorldCom year 2000 programs. The Embratel year 2000 program is intended to address all its systems, infrastructure, networks and applications. Critical corporate systems and equipment are expected to complete remediation by August 31, 1999. The process is now beginning to focus on integrated testing and completion of the remaining noncritical systems. Embratel has spent approximately R$13 million of an estimated R$14 million on the year 2000 program and expects to come within the estimated costs. Embratel may, however, be affected by year 2000 problems to the extent that other entities are unsuccessful in achieving compliance. Despite preventive measures taken by Embratel, no assurances can be given that the year 2000 issue will not have an effect on the financial condition and results of operations of Embratel. Embratel is active in developing contingency plans and working with the International Telecommunications Union on interoperability testing. Statements concerning year 2000 issues which contain more than historical information may be considered forward-looking statements (as that term is defined in the Private Securities Litigation Reform Act of 1995), which are subject to risks and uncertainties. Actual results may differ materially from those expressed in the forward-looking statements, and readers are cautioned that the Company's year 2000 discussion should be read in conjunction with the Company's statement on forward-looking statements which appears at the beginning of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Page 27 28 EURO CONVERSION On January 1, 1999, certain member countries of the European Union established fixed conversion rates between their existing currencies and the European Union's common currency ("Euro"). The transition period for the introduction of the Euro will be between January 1, 1999 to July 1, 2002. All of the final rules and regulations have not yet been identified by the European Commission with regard to the Euro. The Company is currently evaluating methods to address the many issues involved with the introduction of the Euro, including the conversion of information technology systems, recalculating currency risk, recalibrating derivatives and other financial instruments, strategies concerning continuity of contracts, and impacts on the processes for preparing taxation and accounting records. At this time, the Company has not yet determined the cost related to addressing this issue and there can be no assurance as to the effect of the Euro on the consolidated financial statements. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company is exposed to the impact of interest rate changes, foreign currency fluctuations and changes in market values of investments. The Company's policy is to manage interest rates through the use of a combination of fixed and variable rate debt. Currently, the Company does not use derivative financial instruments to manage its interest rate risk. The Company has minimal cash flow exposure due to general interest rate changes for its fixed rate, long-term debt obligations. The Company does not believe a hypothetical 10% adverse rate change in the Company's variable rate debt obligations would be material to the Company's results of operations. The Company is exposed to foreign exchange rate risk primarily due to Embratel's holding of approximately $517 million in U.S. dollar denominated debt, and approximately $92 million of indebtedness indexed in other currencies including the French Franc, Deutsche Mark, Japanese Yen and Brazilian real. The potential immediate loss to the Company that would result from a hypothetical 10% change in foreign currency exchange rates based on this position would be approximately $12 million (after elimination of minority interests). During January 1999, the Brazilian government allowed its currency to trade freely against other currencies, resulting in an immediate devaluation of the Brazilian real. As of June 30, 1999, the Brazilian real had devalued over 30% against the U.S. dollar since December 31, 1998. As a result, the Company recorded a $169 million foreign currency loss to miscellaneous expense during the six months ended June 30, 1999. After the elimination of minority interests, this charge totaled approximately $33 million on a pretax basis. If this devaluation is sustained, or worsens, the future net impact to the Company's results of operations could be significant. The Company is also subject to risk from changes in foreign exchange rates for its other international operations which use a foreign currency as their functional currency and are translated into U.S. dollars. Additionally, the Company has designated the note payable in local currency installments, resulting from the Embratel investment, as a hedge of its investment in Embratel. As of June 30, 1999, the Company recorded the change in value of the note as a reduction to the note payable with the offset through foreign currency translation adjustment in shareholders' investment. The Company believes its market risk exposure with regard to its marketable equity securities is limited to changes in quoted market prices for such securities. Based upon the composition of the Company's marketable equity securities at June 30, 1999, the Company does not believe a hypothetical 10% adverse change in quoted market prices would be material to net income. Page 28 29 PART II. OTHER INFORMATION Item 1. Legal Proceedings There have been no material changes in the legal proceedings reported in the Company's Annual Report on Form 10-K for the year ended December 31, 1998, except as may be reflected in the discussion under Note G of the Notes to Consolidated Financial Statements in Part I, Item 1, above, which is hereby incorporated by reference herein. Item 2. Changes in Securities and Use of Proceeds On June 30, 1999, MCI WorldCom completed the acquisition of E. L. Acquisition, Inc., pursuant to an Agreement and Plan of Merger dated as of May 20, 1999 by and among MCI WorldCom, Purple Acquisition Subsidiary, Inc., E. L. Acquisition, Inc., and Prime One, L. P. In connection with the acquisition, MCI WorldCom made an approximate $33 million cash payment and issued a total of 2,656,151 shares of its common stock to a limited number of sophisticated investors in reliance on Section 4(2) and Regulation D under the Securities Act of 1933, as amended. Item 3. Defaults upon Senior Securities None. Item 4. Submission of Matters to a Vote of Securities Holders On May 20, 1999, the Company held the 1999 Annual Meeting of Shareholders for the purposes of: 1. electing a Board of seventeen (17) directors; 2. considering and acting upon a proposal to amend the Company's Second Amended and Restated Articles of Incorporation, as amended, to increase the number of authorized shares of common stock, par value $.01 per share, from 2,500,000,000 to 5,000,000,000; and 3. considering and acting upon a proposal to approve the Company's 1999 Stock Option Plan; The tabulation of the voting, which includes the Company's Series B Preferred Stock, is as follows: Page 29 30
Against or Abstentions or Election of Directors: For Withheld Broker Non-Votes ------------------------------------- ------------------ -------------------- ---------------------- Clifford L. Alexander, Jr. 1,370,251,846 170,137,069 0 James C. Allen 1,257,139,138 13,249,777 0 Judith Areen 1,527,117,778 13,271,137 0 Carl J. Aycock 1,527,211,011 13,177,904 0 Max E. Bobbitt 1,531,286,962 9,101,953 0 Stephen M. Case (1) 1,287,252,512 253,136,403 0 Bernard J. Ebbers 1,526,332,237 14,056,678 0 Francesco Galesi 1,530,986,406 9,402,509 0 Stiles A. Kellett, Jr. 1,531,219,675 9,169,240 0 Gordon S. Macklin 1,526,648,176 13,740,739 0 John A. Porter 1,526,969,001 13,419,914 0 Timothy F. Price 1,526,902,817 13,486,098 0 Bert C. Roberts, Jr. 1,527,017,779 13,371,136 0 John W. Sidgmore 1,527,190,016 13,198,899 0 Scott D. Sullivan 1,527,176,247 13,212,668 0 Lawrence C. Tucker 1,531,245,116 9,143,799 0 Juan Villalonga 1,526,772,718 13,616,197 0 Increase the number of authorized shares of common stock from 2,500,000,000 to 5,000,000,000 1,448,416,755 87,221,773 4,750,387 1999 Stock Option Plan 945,545,541 587,261,366 7,582,008 (1) Subsequent to May 20, 1999, Mr. Case resigned from the Company's Board of Directors.
Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K A. Exhibits See Exhibit Index. B. Reports on Form 8-K None. Page 30 31 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-Q to be signed on its behalf by Scott D. Sullivan, thereunto duly authorized to sign on behalf of the registrant and as the principal financial officer thereof. MCI WORLDCOM, Inc. By: /s/ Scott D. Sullivan ------------------------------------- Scott D. Sullivan Chief Financial Officer Dated: August 16, 1999. Page 31 32 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 4.1 Second Amended and Restated Articles of Incorporation of the Company (including preferred stock designations), as amended as of May 20, 1999 4.2 Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K dated September 14, 1998) (filed September 29, 1998)) (File No. 0-11258) 4.3 Rights Agreement dated as of August 25, 1996 between MCI WorldCom and The Bank of New York, which includes the form of Certificate of Designations, setting forth the terms of the Series 3 Junior Participating Preferred Stock, par value $.01 per share, as Exhibit A, the form of Rights Certificate as Exhibit B and the Summary of Preferred Stock Purchase Rights as Exhibit C (incorporated herein by reference to Exhibit 4 to the Company's Current Report on Form 8-K dated August 26, 1996 (as amended) (filed August 26, 1996 (File No. 0-011258)) 4.4 Amendment No. 1 to Rights Agreement dated as of May 22, 1997 by and between MCI WorldCom and The Bank of New York, as Rights Agent (incorporated herein by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated May 22, 1997 (filed June 6, 1997) File No. 0-11258)) 10.1 Amended and Restated 364-Day Revolving Credit and Term Loan Agreement among the Company and Bank of America, N.A., Administrative Agent; Bank of America Securities, LLC, Sole Lead Arranger and Book Manager; Barclays Bank PLC, The Chase Manhattan Bank, Citibank, N.A., Morgan Guaranty Trust Company of New York, and Royal Bank of Canada, Co-Syndication Agents; and the lenders named therein dated as of August 5, 1999.* 10.2 MCI WORLDCOM, Inc. 1999 Stock Option Plan (incorporated herein by reference to Exhibit A to the Company's Proxy Statement dated April 23, 1999 (File No. 0-11258)) (compensatory plan) ** 27.1 Financial Data Schedule * The registrant hereby agrees to furnish supplementally a copy of any omitted schedules to this Agreement to the Commission upon request. ** No other long-term debt securities entered into during the period covered by this report, are filed since the total amount of securities authorized under any such instrument does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to furnish a copy of such instruments to the Commission upon request.
Page 32 EX-4.1 2 AMENDED ARTICLES OF INCORPORATION 1 Exhibit 4.1 ARTICLES OF AMENDMENT TO THE SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION OF MCI WORLDCOM, INC. 1. The name of the corporation is MCI WORLDCOM, Inc. (the "Corporation"). 2. Effective the date hereof, Section A of Article Four of the Corporation's Second Amended and Restated Articles of Incorporation is amended, in its entirety, to read as follows: A. Common Stock. The authorized voting common stock of the Corporation is five billion (5,000,000,000) shares, par value $.01 per share. 3. Effective the date hereof, Section 1 of Exhibit C of the Second Amended and Restated Articles of Incorporation is amended, in its entirety, to read as follows: Section 1. Designation and Amount. There shall be a series of the Preferred Stock which shall be designated as the "Series 3 Junior Participating Preferred Stock," par value $.01 per share, and the number of shares constituting such series shall be 5,000,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series 3 Junior Participating Preferred Stock to a number less than that of the shares then outstanding plus the number of shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Company. 4. All other provisions of the Second Amended and Restated Articles of Incorporation, as previously amended, shall remain in full force and effect. 5. The amendment in Article 2, above, was duly approved by the shareholders of the Corporation in accordance with the provisions of Section 14-2-1003 of the Georgia business Corporation Code and adopted on May 20, 1999. 6. The amendment in Article 3, above, was approved and adopted by the Board of Directors of the Corporation in accordance with the provisions of Section 14-2-1002 of the Georgia Business Corporation Code. Shareholder action was not required. 2 IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed by its duly authorized officer this 20th day of May, 1999. MCI WORLDCOM, INC. By: /s/ Bernard J. Ebbers ------------------------------- Bernard J. Ebbers, President 3 ARTICLES OF AMENDMENT TO THE SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION OF WORLDCOM, INC. 1. The name of the corporation is "WorldCom, Inc. (the "Corporation"). 2. Effective the date hereof, Article One of the Corporation's Second Amended and Restated Articles of Incorporation is amended, in its entirety, to read as follows: ONE The name of this corporation is MCI WORLDCOM, Inc. This corporation is referred to hereinafter as the "Corporation." 3. All other provisions of the Second Amended and Restated Articles of Incorporation shall remain in full force and effect. 4. The foregoing amendment was approved and adopted by the Board of Directors of the Corporation in accordance with the provisions of Section 14-2-1002 of the Georgia Business Corporation Code. Shareholder action was no required. IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed by its duly authorized officer this 14th day of September, 1998. WORLDCOM, INC. /s/ Bernard J. Ebbers ----------------------------------- Bernard J. Ebbers, President 4 SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION OF WORLDCOM, INC. ONE The name of this corporation is WORLDCOM, INC. This corporation is referred to hereinafter as the "Corporation." TWO The Corporation shall have perpetual duration. THREE The Corporation has been organized as a corporation for profit pursuant to the Georgia Business Corporation Code, for the purpose of engaging in any lawful activities whatsoever. FOUR A. Common Stock. The authorized voting common stock of the Corporation is two billion five hundred million (2,500,000,000) shares, par value $.01 per share. B. Preferred Stock. The authorized preferred stock of the Corporation is fifty million (50,000,000) shares, par value $.01 per share. The Corporation, acting by its board of directors, without action by the shareholders, may, from time to time by resolution and upon the filing of such certificate or articles of amendment as may be required by the Georgia Business Corporation Code as then in effect, authorize the issuance of shares of preferred stock in one or more series, determine the preferences, limitations and relative rights of the class or of any series within the class, and designate the number of shares within that series. FIVE A series of the class of authorized preferred stock, par value $.01 per share, of the Corporation is hereby created having the designation and number of shares thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations and restrictions thereof, as are set forth on Exhibit A. SIX A series of the class of authorized preferred stock, par value $.01 per share, of the Corporation is hereby created having the designation and number of shares thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations and restrictions thereof, as are set forth on Exhibit B. SEVEN A series of the class of authorized preferred stock, par value $.01 per share, of the Corporation is hereby created having the designation and number of shares thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations and restrictions thereof, as are set forth on Exhibit C. 5 EIGHT Subject to the provisions of Article THIRTEEN, each share of common stock of the Corporation shall have unlimited voting rights and shall be entitled to receive the net assets of the Corporation upon dissolution, except as expressly provided herein. The preferred stock of the Corporation shall have such voting rights as are set forth in Exhibits A, B or C hereto or in the certificate or articles of amendment filed to authorize the issuance of shares of preferred stock in one of more series and as are provided by law. NINE Shareholders shall not have the preemptive right to acquire unissued shares of the Corporation. TEN No director of the Corporation shall be liable to the Corporation or to its shareholders for monetary damages for breach of duty of care or other duty as a director, except for liability (i) for any appropriation, in violation of his duties, of any business opportunity of the Corporation; (ii) for acts or omissions which involve intentional misconduct or a knowing violation of the law; (iii) for the types of liability set forth in section 14-2-832 of the Revised Georgia Business Corporation Code; or (iv) for any transaction from which the director received an improper personal benefit. If the Georgia Business Corporation Code is amended to authorize corporate action further limiting the personal liability of directors, then the liability of a director of the Corporation shall be limited to the fullest extent permitted by the Georgia Business Corporation Code, as so amended. Any repeal or modification of the foregoing paragraph by the shareholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing immediately prior to the time of such repeal or modification. ELEVEN (a) In addition to the requirements of the provisions of any series of preferred stock which may be outstanding, and whether or not a vote of the shareholders is otherwise required, the affirmative vote of the holders of not less than seventy percent (70%) of the Voting Stock shall be required for the approval or authorization of any Business Transaction with a Related Person, or any Business Transaction in which a Related Person has an interest (other than only a proportionate interest as a shareholder of the corporation); provided, however, that the seventy percent (70%) voting requirement shall not be applicable if (i) the Business Transaction is Duly Approved by the Continuing Directors, or (ii) all of the following conditions are satisfied: (i) the aggregate amount of cash and the fair market value of the property, securities or other consideration to be received per share (on the date of effectiveness of such Business Transaction) by holders of capital stock of the corporation (other than such Related Person) in connection with such Business Transaction is at least equal in value to such Related Person's Highest Stock Price; (ii) the consideration to be received by holders of capital stock of the Corporation in connection with such Business Transaction is in (a) cash, or (b) if the majority of the shares of any particular class or series of stock of the Corporation as to which the Related Person is the Beneficial Owner shall have been acquired for a consideration in a form other than cash, in the same form of Consideration used by the Related Person to acquire the largest number of shares of such class or series of stock; (iii) after such Related Person has become a Related Person and prior to the consummation of such Business Transaction, such Related Person shall not have become the Beneficial Owner of any additional shares of capital stock of the Corporation or securities convertible into capital stock of the Corporation, except (i) as a part of the transaction which resulted in such Related Person becoming a Related Person or (ii) as a result of a pro rata stock dividend or stock split; (iv) prior to the consummation of such Business Transaction, such Related Person shall not have, directly or indirectly, except as Duly Approved by the Continuing Directors (i) received the benefit (other than only a proportionate benefit as a shareholder of the corporation) of any loans, advances, guarantees, pledges or other financial assistance or tax credits or tax advantages provided by the Corporation or any of its subsidiaries, (ii) caused any material change in the Corporation's business or equity capital structure, including, without limitation, the issuance of shares of capital stock of the Corporation, or 6 other securities convertible into or exercisable for such shares, or (iii) caused the Corporation to fail to declare and pay at the regular date therefor quarterly cash dividends on the outstanding capital stock of the Corporation entitled to receive dividends, on a per share basis at least equal to the cash dividends being paid thereon by the corporation immediately prior to the date on which the Related Person became a Related Person; and (v) a proxy or information statement describing the proposed Business Transaction and complying with the requirements of the Securities Exchange Act of 1934, as amended (the "Act"), and the rules and regulations thereunder (or any subsequent provisions replacing the Act or such rules or regulations) shall be mailed to shareholders of the Corporation at least thirty (30) days prior to the consummation of such Business Transaction (whether or not such proxy or information statement is required to be mailed pursuant to the Act and such rules and regulations or subsequent provisions). (b) For the purpose of this Article ELEVEN: (i) The term "Affiliate", used to indicate a relationship to a specified person, shall mean a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified person. (ii) The term "Associate", used to indicate a relationship with a specified person, shall mean (A) any corporation, partnership or other organization of which such specified person is an officer or partner, (B) any trust or other estate in which such specified person has a substantial beneficial interest or as to which such specified person serves as trustee or in a similar fiduciary capacity, (C) any relative or spouse of such specified person who has the same home as such specified person or who is a director or officer of the corporation or any of its subsidiaries, and (D) any person who is a director, officer or partner of such specified person or of any corporation (other than the corporation or any wholly-owned subsidiary of the corporation), partnership or other entity which is an Affiliate of such Specified person. (iii) The term "Beneficial Owner" shall be defined by reference to Rule 13d-3 under the Act as in effect on September 15, 1993; provided, however, that any individual, corporation, partnership, group, association or other person or entity which has the right to acquire any capital stock of the corporation having voting power at any time in the future, whether such right is contingent or absolute, pursuant to any agreement, arrangement or understanding or upon exercise of conversion rights, warrants or options, or otherwise, shall be deemed the Beneficial Owner of such capital stock. (iv) The term "Business Transaction" shall mean: (A) any merger, share exchange or consolidation involving the Corporation or a subsidiary of the Corporation; (B) any sale, lease, exchange, transfer or other disposition (in one transaction or a series of related transactions), including, without limitation, a mortgage, pledge or any other security device of all or any Substantial Part of the assets either of the Corporation or of a subsidiary of the Corporation; (C) any sale, lease, exchange, transfer or other disposition (in one transaction or a series of related transactions) of all or any Substantial Part of the assets of any entity to the Corporation or a subsidiary of the Corporation; (D) the issuance, sale, exchange, transfer or other disposition (in one transaction or a series of related transactions) by the Corporation or a subsidiary of the Corporation of any securities of the Corporation or any subsidiary of the Corporation in exchange for cash, securities or other property, or a combination thereof, having an aggregate fair market value of $15 million or more; (E) any merger, share exchange or consolidation of the Corporation with any of its subsidiaries or any similar transaction in which the Corporation is not the survivor and the charter or certificate or articles of incorporation of the consolidated or surviving Corporation do not contain provisions substantially similar to those in this Article ELEVEN; (F) any recapitalization or reorganization of the Corporation or any reclassification of the securities of the Corporation (including, without limitation, any reverse stock split) or other transaction that would have the effect of increasing the voting power of a Related Person or reducing the number of shares of each class of voting securities outstanding; (G) any liquidation, spin-off, split-off, split-up or dissolution of the Corporation; and (H) any agreement, contract or other arrangement providing for any of the transactions described in this definition of Business Transaction or having a similar purpose or effect. 7 (v) The term "Continuing Director" shall mean a director who either was a member of the Board of Directors of the Corporation on September 15, 1993, or who became a director of the Corporation subsequent to such date and whose election or nomination for election by the Corporation's shareholders was Duly Approved by the Continuing Directors then on the Board, either by a specific vote or by approval of the proxy statement issued by the Corporation on behalf of the Board of Directors in which such person is named as nominee for director; provided, however, that in no event shall a director be considered a "Continuing Director" if such director is a Related Person and the Business Transaction to be voted upon is with such Related Person or is one in which such Related Person has an interest (other than only a proportionate interest as a shareholder of the Corporation). (vi) The term "Duly Approved by the Continuing Directors" shall mean an action approved by the vote of at least a majority of the Continuing Directors then on the Board; provided, however, that if the votes of such Continuing Directors in favor of such action would be insufficient to constitute an act of the Board of Directors (if a vote by the entire Board of Directors were to have been taken), then such term shall mean an action approved by the unanimous vote of the Continuing Directors so long as there are at least three (3) Continuing Directors on the Board of Directors at the time of such unanimous vote. (vii) The term "Fair Market Value", in the case of stock, means the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not on such Exchange, on the principal United States securities exchange registered under the Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Continuing Directors in good faith. (viii) The term "Highest Stock Purchase Price" shall mean the greatest of the following: (A) the highest amount of consideration paid by a Related Person for a share of capital stock of the Corporation (including any brokerage commissions, transfer taxes and soliciting dealers' fees) in the transaction which resulted in such Related Person becoming a Related Person or within two years prior to the first public announcement of the Business Transaction (the "Announcement Date"), whichever is higher; provided, however, that the Highest Stock Purchase Price calculated under this subsection (A) shall be appropriately adjusted to reflect the occurrence of any reclassification, recapitalization, stock-split, reverse stock-split or other similar corporate readjustment in the number of outstanding shares of capital stock of the Corporation between the last date upon which such Related Person paid the Highest Stock Purchase Price up to the effective date of the merger, share exchange or consolidation or the date of distribution to shareholders of the Corporation of the proceeds from the sale of substantially all of the assets of the Corporation referred to in subparagraph (i) of Section (a)(ii) of this Article ELEVEN; (B) the Fair Market Value per share of the respective classes and series of stock of the Corporation on the Announcement Date; (C) the Fair Market Value per share of the respective classes and series of stock of the Corporation on the date that the Related Person becomes a Related Person; (D) if applicable, the Fair Market Value per share determined pursuant to subsection (b)(viii)(B) or (C) of this Article ELEVEN, whichever is higher, multiplied by the ratio of (i) the highest price per share (including any brokerage commissions, transfer taxes or soliciting dealers' fees and adjusted for any subsequent stock dividends, splits, combinations, recapitalizations, reclassifications or other such reorganizations) paid to acquire any shares of such 8 respective classes and series Beneficially Owned by the Related Person within the two years prior to the Announcement Date, to (ii) the Fair Market Value per share (adjusted for any subsequent stock dividends, splits, combinations, recapitalizations, reclassifications or other such reorganizations) of shares of such respective classes and series on the first day in the two-year period ending on the Announcement Date on which such shares Beneficially Owned by the Related Person were acquired; or (E) the amount per share of any preferential payment to which holders of shares of such respective classes and series are entitled in the event of a liquidation, dissolution or winding up of the Corporation. (ix) The term "Preferred Stock" shall mean each class or series of capital stock which may from time to time be authorized in or by these Second Amended and Restated Articles of Incorporation (as amended from time to time) which is not designated as "Common Stock." (x) The phrase "property, securities or other consideration to be received", for the purpose of subparagraph (i) of Section (a)(ii) of this Article ELEVEN and in the event of a merger in which the corporation is the surviving corporation, shall include, without limitation, common stock of the Corporation retained by its shareholders (other than such Related Person). (xi) The term "Related Person" shall mean and include (A) any individual, corporation, partnership, group, association or other person or entity which, together with its Affiliates and Associates, is the Beneficial Owner of not less than ten percent (10%) of the voting power of the issued and outstanding capital stock of the Corporation entitled to vote or was the Beneficial Owner of not less than ten percent (10%) of the voting power of the issued and outstanding capital stock of the Corporation entitled to vote (x) at the time the definitive agreement providing for the Business Transaction (including any amendment thereof) was entered into, (y) at the time a resolution approving the Business Transaction was adopted by the Board of Directors of the Corporation, or (z) as of the record date for the determination of shareholders entitled to notice of and to vote on or consent to the Business Transaction, and (B) any Affiliate or Associate of any such individual, Corporation, partnership, group, association or other person or entity; provided, however, and notwithstanding any thing in the foregoing to the contrary, that the term "Related Person" shall not include the Corporation, a more than 90% owned subsidiary of the Corporation, any employee stock ownership or other employee benefit plan of either the Corporation or any more than 90% owned subsidiary of the Corporation, or any trustee of or fiduciary with respect to any such plan when acting in such capacity. (xii) The term "Substantial Part" shall mean more than twenty percent (20%) of the total assets of the entity in question, as reflected on the most recent consolidated balance sheet of such entity existing at the time the shareholders of the Corporation would be required to approve or authorize the Business Transaction involving the assets constituting any such Substantial Part. (xiii) The term "Voting Stock" shall mean all outstanding shares of capital stock of the Corporation whose holders are present at a meeting of shareholders, in person or by proxy, and which entitle their holders to vote generally in the election of directors, and considered for the purpose of this Article ELEVEN as one class. (c) For the purpose of this Article ELEVEN, so long as Continuing Directors constitute at least two-thirds (2/3) of the entire Board of Directors or the Corporation, the Board of Directors shall have the power to make a good faith determination, on the basis of information known to them, of (i) the number of shares of Voting Stock of which any person is the Beneficial Owner, (ii) whether a person is a Related Person or is an Affiliate or Associate of another, (iii) whether a person has an agreement, arrangement or understanding with another as to the matters referred to in the definition of Beneficial Owner herein, (iv) whether the assets subject to any Business Transaction constitute a Substantial Part, (v) whether any Business Transaction is with a Related Person or is one in which a Related Person has an interest (other than only a proportionate interest as a shareholder of the corporation), (vi) whether a Related Person has, directly or indirectly, received the benefits or caused any of the changes referred to in subparagraph (iv) of clause (ii) of Section (a) of this Article ELEVEN, (vii) the fair market value of any 9 consideration to be received in a Business Transaction and (viii) such other matters with respect to which a determination is required under this Article ELEVEN; and such determination by the Board of Directors shall be conclusive and binding for all purposes of this Article ELEVEN. (d) Nothing contained in this Article ELEVEN shall be construed to relieve any Related Person of any fiduciary obligation imposed by law. (e) The fact that any Business Transaction complies with the provisions of Section (a) of this Article ELEVEN shall not be construed to impose any fiduciary duty, obligation or responsibility on the Board of Directors, or any member thereof, to approve such Business Transaction or recommend its adoption of approval to the shareholders of the corporation. (f) Notwithstanding any other provisions of these Second Amended and Restated Articles of Incorporation or the Bylaws of the corporation (and notwithstanding that a lesser percentage may be permitted by law), the provisions of this Article ELEVEN may not be repealed or amended, directly or indirectly in any respect, unless such action is approved by the affirmative vote of the holders of not less than seventy percent (70%) of the Voting Stock. TWELVE The Corporation shall indemnify a director against reasonable expenses and liability incurred by him, and shall advance expenses upon receipt from the director of the written affirmation and repayment authorization required by section 14-2-853 of the Georgia Business Corporation Code, provided, however, that the Corporation shall not indemnify a director for any liability incurred by a director if he failed to act in a manner he believed in good faith to be in or not opposed to the best interests of the Corporation, or to have improperly received a personal benefit or, in the case of any criminal proceeding, if he had reasonable cause to believe his conduct was unlawful, or in the case of a proceeding by or in the right of the Corporation, in which he was adjudged liable to the Corporation, unless a court shall determine that the director is fairly and reasonably entitled to indemnification in view of all the circumstances, in which case the director shall be indemnified for reasonable expenses incurred. THIRTEEN (a) For purposes of this Article THIRTEEN, the following terms shall have the respective meanings specified below: (i) "Act" shall have the meaning set forth in paragraph (a)(ii)(v) of Article ELEVEN of these Second Amended and Restated Articles of Incorporation. (ii) "Beneficial Owner" shall have the meaning set forth in paragraph (b)(iii) of Article ELEVEN of these Second Amended and Restated Articles of Incorporation. (iii) "Closing Price" of a share of stock on any day means the highest closing sales price or bid quotation on the National Association of Securities Dealers, Inc. Automated Quotation System (including the National Market System) or any comparable system then in use, or if the class or series in question is quoted on a United States securities exchange registered under the Act, the reported closing sales price or, in case no such sale takes place, the average of the reported closing bid and asked price on such exchange, or, if no such prices or quotations are available, the fair market value on the day in question as determined by the Board of Directors in good faith. (iv) "Communications Act" shall mean the Communications Act of 1934, 47 U.S.C. SECTIONS 151 et seq., as amended. (v) "Communications Laws" shall mean the Communications Act and the regulations promulgated by the Federal Communications Commission pursuant thereto, including any amendments thereof or successor or replacement provisions thereto. 10 (vi) "Fair Market Value" of a share of stock shall mean the average Closing Price for such share for each of the forty-five (45) most recent days during which shares of stock of such class or series shall have been traded preceding the day on which notice of redemption shall have been given pursuant to paragraph (iv) of Section (e) of this Article THIRTEEN; provided, however, that if shares of stock of such class or series are not traded on any securities exchange or in the over-the-counter market, "Fair Market Value" shall be determined by the Board of Directors in good faith; and provided, further, however, that "Fair Market Value" as to any stockholder who purchases any stock subject to redemption within one hundred twenty (120) days prior to a Redemption Date shall not (unless otherwise determined by the Board of Directors) exceed the purchase price paid for such shares. (vii) "Foreign Citizen" shall mean any of the following: (A) any alien; (B) any foreign government; (C) any representative of an alien or a foreign government; or (D) any corporation organized under the laws of any country other than the United States; and (E) any other Person falling within a class of Persons identified from time to time in the Communications Laws, including without limitation Section 310 of the Communications Act, as being within a class of Persons whose ownership of stock of a corporation holding station licenses referenced in Title III of the Communications Act is limited to a maximum percentage. (viii) "Permitted Percentage" shall mean twenty percent (20%), or such other percentage as may from time to time be specified by the Communications Laws as the maximum percentage of capital stock of a corporation holding licenses referenced in Section 310 of the Communications Act that may be owned by Foreign Citizens. (ix) "Person" shall mean an individual, partnership, corporation, trust or other entity. (x) "Redemption Date" shall mean the date fixed by the Board of Directors for the redemption of any shares of stock of the Corporation pursuant to Section (e) of this Article THIRTEEN. (xi) "Redemption Securities" shall mean any debt or equity securities of the Corporation, any Subsidiary or any other corporation, or any combination thereof, having such terms and conditions as shall be approved by the Board of Directors and which, together with any cash to be paid as part of the redemption price, in the opinion of any nationally recognized investment banking firm selected by the Board of Directors (which may be a firm which provides other investment banking, brokerage or other services to the Corporation), has a value, at the time notice of redemption is given pursuant to paragraph (d) of Section 5 of this Article THIRTEEN, at least equal to the Fair Market Value of the shares to be redeemed pursuant to this Article THIRTEEN (assuming, in the case of Redemption Securities to be publicly traded, such Redemption Securities were fully distributed and subject only to normal trading activity). (b) It is the policy of the Corporation that Foreign Citizens should own of record or Beneficially Own, directly or indirectly, individually or in the aggregate, no more than the Permitted Percentage of its from time to time outstanding shares of capital stock. If at any time Foreign Citizens, directly or indirectly, individually or in the aggregate, become the record owners or the Beneficial Owners of more than the Permitted Percentage of the capital stock of the Corporation, then the Corporation shall have the power to take the actions prescribed in this Section (b) through Section (f) of this Article THIRTEEN. The provisions of this Article THIRTEEN are intended to assure that the Corporation remains in continuous compliance with the citizenship requirements of the Communications Laws. Any amendments to the Communications Laws relating to the citizenship of station license 11 holders or their shareholders are deemed to be incorporated herein by reference. To the extent necessary to enable the Corporation to submit any proof of direct or indirect citizenship required by law or by contract with the United States government (or any agency thereof), the Corporation may require the record holders and the Beneficial Owners of capital stock to confirm their direct or indirect citizenship status from time to time, and dividends payable with respect to stock held by such record holder or owner by such Beneficial Owner may, in the discretion of the Board of Directors, be withheld until confirmation of such citizenship status is received. The Board of Directors is authorized to take such actions or make such interpretations as it may deem necessary or advisable in order to implement the policy set forth in this Section (b) including, without limitation, causing any transfer, or attempted transfer, of any shares of stock of the Corporation, the effect of which would be to cause one or more Foreign Citizens to own of record or Beneficially Own more than the Permitted Percentage of the Corporation's capital stock, to be ineffective as against the Corporation, and not registering (or permitting its transfer agent to register) such transfer or purported transfer on the stock transfer records of the Corporation. In addition, neither the Corporation (even if the transfer agent shall have recognized such transfer) nor its transfer agent shall be required to recognize the transferee or purported transferee thereof as a shareholder of the Corporation for any purpose whatsoever except to the extent necessary to effect any remedy available to the Corporation under this Article THIRTEEN. A citizenship certificate may be required from all transferees (and from any recipient upon original issuance) of capital stock of the Corporation and, if such transferee (or recipient) is acting as a fiduciary or nominee for a record owner or a Beneficial Owner, such Beneficial Owner or record owner, and registration of transfer (or original issuance) may be denied upon refusal to furnish such certificate. (a) If on any date (including any record date) the number of shares of capital stock that is owned of record or Beneficially Owned, directly or indirectly, by Foreign Citizens is in excess of the Permitted Percentage of all outstanding capital stock of the Corporation (such number of shares herein referred to as the "Excess Shares"), the Corporation shall identify a number of shares owned of record or Beneficially Owned, directly or indirectly, by Foreign Citizens equal to the number of Excess Shares. The determination of the Corporation as to those shares that constitute the Excess Shares shall be conclusive. Shares deemed to constitute such Excess Shares (so long as such excess exists) shall not be accorded any voting rights and shall not be deemed to be outstanding for purposes of determining the vote required on any matter properly brought before the shareholders of the Corporation for a vote thereon. The Corporation shall (so long as such excess exists) withhold the payment of dividends and the sharing in any other distribution (upon liquidation or otherwise) in respect of the Excess Shares. At such time as the Permitted Percentage is no longer exceeded, full voting rights shall be restored to any shares previously deemed to be Excess Shares and any dividends or distribution with respect thereto that have been withheld, without interest thereon, shall be due and paid solely to the record holders of such shares at the time the Permitted Percentage is no longer exceeded. (b) Subject to the provisions of any resolution of the Board of Directors creating any series of preferred stock or any other class of stock which has a preference over common stock with regard to dividends or upon liquidation, and subject to the procedures in the series of preferred stock of the Corporation referenced in Articles FIVE, SIX and SEVEN hereof, the Excess Shares shall be subject to redemption at any time by the Corporation by action of the Board of Directors. The terms and conditions of such redemption shall be as follows: (i) the redemption price of the shares to be redeemed pursuant to this Article THIRTEEN shall be equal to the Fair Market Value of such shares or such other redemption price as required by pertinent state or federal law pursuant to which the redemption is required; (ii) the redemption price of such shares may be paid in cash, Redemption Securities or any combination thereof; (iii) if less than all the Excess Shares are to be redeemed, the shares to be redeemed shall be selected in such manner as set forth in Section (c) of this Article THIRTEEN or as otherwise determined by the Board of Directors; (iv) at least thirty (30) days' written notice of the Redemption Date shall be given to the record holders of the Excess Shares selected to be redeemed (unless waived in writing by any such holder) provided that the Redemption Date may be the date on which written notice shall be given to record holders if the cash or Redemption Securities necessary to effect the redemption shall have been deposited in trust 12 for the benefit of such record holders and subject to immediate withdrawal by them upon surrender of the stock certificates for Excess Shares to be redeemed; (v) from and after the Redemption Date or such earlier date as mandated by pertinent state or federal law, any and all rights of whatever nature, which may be held by the record holder of Excess Shares selected for redemption (including without limitation any rights to vote or participate in dividends declared on stock of the same class or series as such shares), shall cease and terminate and they shall thenceforth be entitled only to receive the cash or Redemption Securities payable upon redemption; and (vi) such redemption shall be upon such other terms and conditions as the Board of Directors shall determine. (e) In determining the direct or indirect citizenship of owners of record or Beneficial Owners or their transferees of its capital stock, the Corporation may rely on the stock transfer records of the Corporation and the citizenship certificates given by Beneficial Owners or owners of record or their transferees or any recipients (in the case of original issuance) (in each case whether such certificates have been given on their own behalf or on behalf of others) to prove the citizenship of such owners of record, Beneficial Owners, transferees or recipients of such capital stock. The determination of the direct or indirect citizenship of owners of record, Beneficial Owners and their transferees of such capital stock may also be subject to proof in such other way or ways as the Corporation may deem reasonable. The Corporation may at any time require proof of citizenship, in addition to the citizenship certificates, of the record owner or Beneficial Owner or proposed transferees of shares of the Corporation's capital stock, and the payment of dividends may be withheld, and any application for transfer of ownership on the stock transfer records of the Corporation may be refused, until such additional proof is submitted. (f) Each provision of this Article THIRTEEN is intended to be severable from every other provision. If any provision contained in this Article THIRTEEN is held to be invalid, illegal or unenforceable, the validity, legality or enforceability of any other provision of this Article THIRTEEN shall not be affected, and this Article THIRTEEN shall be construed as if the provision held to be invalid, illegal or unenforceable had never been contained therein. ******************************************************************************** The provisions of Article FOUR, Section A of these Second Amended and Restated Articles of Incorporation were duly approved by the shareholders of the Corporation in accordance with the provisions of Sections 14-2-1007 and 14-2-1003 of the Georgia Business Corporation Code on the 20th day of December, 1996. These Second Amended and Restated Articles of Incorporation were duly adopted and authorized by the Board of Directors of the Company on November 20, 1996. 13 IN WITNESS WHEREOF, WORLDCOM, INC. has caused its duly authorized officer to execute these Second Amended and Restated Articles of Incorporation as of this 30th day of December, 1996. WORLDCOM, INC. By: /s/ Bernard J. Ebbers -------------------------- Name: Bernard J. Ebbers Title: President and Chief Executive Officer ATTEST: /s/ Scott D. Sullivan - ----------------------------- Name: Scott D. Sullivan Title: Secretary STATE OF MISSISSIPPI ) ) SS. CITY OF JACKSON ) I, Deborah A. Blackwell, a notary public, do hereby certify that on this 30th day of December, 1996, personally appeared before me Bernard J. Ebbers who, being by me first duly sworn, declared that he is the President of WorldCom, Inc., that he signed the foregoing document as President of the corporation, and that the statements therein contained are true. [SEAL] /s/ Deborah A. Blackwell ----------------------------- Notary Public My Commission Expires: 10-4-97 14 EXHIBIT A Series A 8% Cumulative Convertible Preferred Stock 1. Designation. The designation of this Series shall be Series A 8% Cumulative Convertible Preferred Stock. The number of shares of this Series shall be 94,992. The liquidation value of shares of this Series shall be $3,350.00 per share. 2. Dividends. (a) The holders of shares of this Series shall be entitled to receive, when, as and if declared by the Board of Directors of WorldCom, Inc. (the "Company") out of funds legally available therefor, cumulative preferential dividends from the issue date of such shares, at the rate per share of $268.00 per annum or $67.00 per quarter, and no more, payable quarterly for each share of this Series, payable in arrears on each February 28, May 31, August 31 and November 30, respectively (each such date being hereinafter referred to as a "Dividend Payment Date") or, if any Dividend Payment Date is not a business day, then the Dividend Payment Date shall be the next succeeding business day; provided, however, that with respect to any dividend period during which a redemption occurs, the Company may, at its option, declare accrued dividends to, and pay such dividends on, the redemption date, in which case such dividends would be payable on the redemption date in shares of the Common Stock of the Company, par value $.01 per share (the "Common Stock"), to the holders of the shares of this Series as of the record date for such dividend payment and such accrued dividends would not be included in the calculation of the related Call Price (as hereinafter defined). Each dividend on the shares of this Series shall be payable to holders of record as they appear on the stock books of the Company on such record dates as shall be fixed by the Board of Directors. The first dividend payment of $67.00 shall be for the period from the date of issuance of shares of this Series to and including February 27, 1997 and shall be payable on February 28, 1997. Dividends (or amounts equal to accrued and unpaid dividends) payable on the shares of this Series for any period other than a quarterly dividend period shall be computed on the basis of a 360-day year of twelve 30-day months. At the election of the Board of Directors of the Company, dividends may be paid in cash or in shares of Common Stock. In the event the Board of Directors of the Company elects to pay a dividend in shares of Common Stock, the number of shares of Common Stock to be issued on the Dividend Payment Date will be determined by dividing the total dividend to be paid on each share of this Series by 90% of the average of the average of the high and low sales prices of the Common Stock as reported on the Nasdaq National Market for each of the ten consecutive Trading Days (as hereinafter defined) immediately preceding the fifth business day preceding the record date for such dividend. Dividends on the shares of this Series shall accrue (whether or not the Company has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared) on a daily basis from the previous Dividend Payment Date, except that the first dividend shall accrue from the date of issuance of the shares of this Series. Dividends accumulate to the extent they are not paid on the Dividend Payment Date for the quarter for which they accrue ("Accumulated Unpaid Dividends"). Accumulated Unpaid Dividends shall not bear interest. (b) No dividend whatsoever shall be declared or paid upon, or any sum set apart for the payment of dividends upon, any shares of this Series or Parity Stock (as hereinafter defined) for any dividend period unless all dividends for all past dividend periods have been declared and paid upon, or declared and a sufficient sum set apart for the payment of such dividends upon, all shares of this Series and Parity Stock outstanding other than the Exchange Preferred (as hereinafter defined). (c) Unless full cumulative dividends on all outstanding shares of this Series and (to the extent that the amount thereof shall have become determinable) any outstanding shares of Parity Stock due for all past dividend periods shall have been declared and paid, or declared and a sufficient sum for the payment thereof set apart, then, subject to the rights of holders of shares of previously issued series of Preferred Stock: (i) no dividend (other than a dividend payable solely in Junior Stock (as hereinafter defined)) shall be declared or paid upon, or any sum set apart for the payment of dividends upon, any shares of Junior Stock; (ii) no other distribution shall be made upon any shares of Junior Stock; (iii) no shares of Junior Stock or any other series of Preferred Stock shall be purchased, redeemed or otherwise acquired for cash or other property of the Company (excluding shares of Junior Stock or Exchange Preferred) by the Company or by any Subsidiary; and (iv) no monies shall be paid into or set 15 apart or made available for a sinking or other like fund for the purchase, redemption or other acquisition for value of any shares of Junior Stock by the Company or any Subsidiary. (d) Any dividend payment made on shares of this Series shall be distributed pro rata to the holders entitled thereto and be credited first against the earliest accrued but unpaid dividend due with respect to shares of this Series. 3. Voting Rights. (a) The holders of shares of this Series shall have the right with the holders of Common Stock to vote in the election of directors of the Company and upon each other matter coming before any meeting of the shareholders of the Company on the basis of ten votes for each such share held. The holders of shares of this Series and the holders of Common Stock shall vote together as a single class except as otherwise set forth herein or as otherwise provided by law or by the Second Amended and Restated Articles of Incorporation of the Company. (b) The approval of more than two-thirds of the votes entitled to be cast by the holders of the outstanding shares of this Series (voting separately as a class), shall be required for the adoption of any amendment to the Second Amended and Restated Articles of Incorporation that materially adversely changes the rights, preferences or privileges of the shares of this Series. (c) The holders of the outstanding shares of this Series shall also have the right, voting together with the holders of any other outstanding shares of Voting Preferred Stock (as hereinafter defined) as a separate voting group, to elect two members of the Board of Directors of the Company at any time six or more quarterly dividends on any shares of Voting Preferred Stock shall be in arrears and unpaid, in whole or in part, whether or not declared and whether or not any funds shall be or have been legally available for payment thereof. For this purpose, "Voting Preferred Stock" shall mean the shares of this Series and each other series of Preferred Stock which shall have substantially similar voting rights (including voting as one voting group with other shares of Voting Preferred Stock) with respect to the election of directors upon substantially similar arrearages of dividends. In such event, the number of Directors of the Company shall be increased by two, and, unless a regular meeting of the shareholders of the Company is to be held within 60 days thereof for the purpose of electing Directors, within 30 days thereafter, the Company shall call a special meeting of the holders of the outstanding shares of Voting Preferred Stock for the purpose of electing such Directors to take place at the time specified in the notice of the meeting, to be not more than 60 days after such holders become so entitled to elect two Directors and not less than 10 days nor more than 50 days after the date on which such notice is mailed. If such special meeting shall not have been so called by the Company, or such regular meeting shall not be so held, a special meeting may be called for such purpose at the expense of the Company by the holders of not less than 10% of the outstanding shares of any series of Voting Preferred Stock; and notice of any such special meeting shall be given by the person or persons calling the same to the holders of the outstanding shares of the Voting Preferred Stock by first-class mail, postage prepaid, at their last address as shall appear on the stock transfer records of the Company. At any such special meeting the holders of the outstanding shares of Voting Preferred Stock (voting separately as a class with each share having one vote) shall elect two members of the Board of Directors of the Company. If a regular meeting of the shareholders of the Company for the purpose of electing Directors is to be held within 60 days after the time the holders of the outstanding shares of Voting Preferred Stock become so entitled to elect two Directors, then the holders of the outstanding shares of Voting Preferred Stock shall be given notice thereof in the same manner as other shareholders of the Company entitled to vote thereat; and at such regular meeting, the holders of the outstanding shares of Voting Preferred Stock (voting separately as a class with each share having one vote) shall elect two members of the Board of Directors. The right of the holders of the Voting Preferred Stock (voting separately as a class) to elect two members of the Board of Directors of the Company shall continue until such time as no dividends on any outstanding shares of Voting Preferred Stock are in arrears and unpaid, in whole or in part, at which time (i) the voting power of the holders of the outstanding shares of Voting Preferred Stock so to elect two Directors shall cease, but always subject to the same provisions of this subparagraph (c) for the vesting of such voting power upon the occurrence of each and every like arrearage of dividends, and (ii) the term of office of each member of the Board of Directors who was elected pursuant to this subparagraph (c) shall automatically expire. 16 4. Redemptions and Conversions. (a) Mandatory Conversion. On May 31, 1999 (the "Mandatory Conversion Date"), each outstanding share of this Series shall convert automatically (the "Mandatory Conversion") into shares of Common Stock at the Common Equivalent Rate (as hereinafter defined) in effect on the Mandatory Conversion Date and the right to receive, out of funds legally available therefor, an amount equal to all accrued and unpaid dividends on such share of this Series to the Mandatory Conversion Date, whether or not declared (payable in cash or in shares of Common Stock on the same basis as that used to determine dividends), subject to the right of the Company to redeem the shares of this Series on or after the Initial Redemption Date (as hereinafter defined) and prior to the Mandatory Conversion Date, as described below, and subject to the conversion of the shares of this Series at the option of the holder at any time prior to the Mandatory Conversion Date. Notwithstanding the forgoing, if the Mandatory Conversion Date occurs after a record date for a quarterly dividend and before the corresponding Dividend Payment Date, such dividend shall be paid, out of funds legally available therefor, on the Dividend Payment Date rather than on the Mandatory Conversion Date. The Common Equivalent Rate is initially four-hundred and twenty shares of Common Stock for each share of this Series. Dividends on the shares of this Series shall cease to accrue and such shares shall cease to be outstanding on the Mandatory Conversion Date. The Company shall make such arrangements as it deems appropriate for the issuance of certificates representing shares of Common Stock and for the payment (in cash or in shares of Common Stock, at the election of the Board of Directors of the Company) in respect of such accrued and unpaid dividends, if any, or cash in lieu of fractional shares, if any, in exchange for and contingent upon surrender of certificates representing the shares of this Series, provided that the Company shall give the holders of the shares of this Series such notice of any such actions as the Company deems appropriate and upon such surrender such holders shall be entitled to receive such dividends declared and paid on such shares of Common Stock subsequent to the Mandatory Conversion Date. Amounts payable in cash in respect of the shares of this series or in respect of such shares of Common Stock shall not bear interest. (b) Redemption by the Company. (i) Right to Redeem. Shares of this Series are not redeemable by the Company prior to May 31, 1998 (the "Initial Redemption Date"). At any time and from time to time on or after the Initial Redemption Date and prior to the Mandatory Conversion Date, the Company shall have the right to redeem, in whole or in part, the outstanding shares of this Series. Upon any such redemption, the Company shall deliver to the holders of shares of this Series, in accordance with the provisions of these Articles of Amendment in exchange for each share so redeemed, a number of shares of Common Stock equal to (A) the Call Price (as hereinafter defined) in effect on the date of redemption, divided by (B) the Current Market Price (as hereinafter defined) of the Common Stock determined as of the date which is one trading day prior to the public announcement of the redemption. The Call Price of each share of this Series is an amount equal to the sum of (X) $3,417.00 on and after the Initial Redemption Date through August 30, 1998, $3,400.25 on and after August 31, 1998 through November 29, 1998, $3,383.50 on and after November 30, 1998 through February 27, 1999, $3,366.75 on and after February 28, 1999 through April 29, 1999 and $3,350.00 on and after April 30, 1999 until the Mandatory Conversion Date plus (Y) all accrued and unpaid dividends thereon to the date fixed for redemption. Notwithstanding the forgoing, if the date fixed for redemption occurs after a record date for a quarterly dividend and prior to the corresponding Dividend Payment Date, such dividend shall be paid, out of funds legally available therefor, on the Dividend Payment Date and the Call Price shall not include the amount of the dividend to be so paid. Dividends on the shares of this Series shall cease to accrue and such shares shall cease to be outstanding on the date fixed for redemption. A public announcement of any call for redemption shall be made prior to the mailing of the notice of such call to holders of shares of this Series as described below. If fewer than all the outstanding shares of this Series are to be redeemed, shares to be redeemed shall be selected by the Company from outstanding shares of this Series not previously redeemed by lot or pro rata (as nearly as may be practicable) or by any other method determined by the Board of Directors of the Company in its sole discretion to be fair and proper. (ii) Current Market Price. As used in this subparagraph (b), the term "Current Market Price" per share of the Common Stock on any date of determination means the lesser of (X) the average of the average of the high and low sales prices of the Common Stock as reported on the Nasdaq National Market or any national securities exchange upon which the Common Stock is then listed, for each of the ten consecutive Trading Dates ending on and including such date of determination and (Y) the Closing Price (as hereinafter defined) of the Common Stock for such date of determination; provided, however, that, with respect to any redemption of shares of 17 this Series, if any event that results in an adjustment of the Common Equivalent Rate occurs during the period beginning on the first day of such ten-day period and ending on the applicable redemption date, the Current Market Price as determined pursuant to the foregoing shall be appropriately adjusted to reflect the occurrence of such event. (iii) Notice of Redemption. The Company shall provide notice of any redemption of the shares of this Series to holders of record of the shares of this Series to be called for redemption not less than 15 nor more than 60 days prior to the date fixed for such redemption. Such notice shall be provided by mailing notice of such redemption first class postage prepaid, to each holder of record of shares of this Series to be redeemed, at such holder's address as it appears on the stock register of the Company; provided, however, that neither failure to give such notice nor any defect therein shall affect the validity of the proceeding for the redemption of any shares of this Series to be redeemed. Each such notice shall state, as appropriate, the following and may contain such other information as the Company deems advisable: (A) the redemption date; (B) that all outstanding shares of this Series are to be redeemed or, in the case of a call for redemption of fewer than all outstanding shares of this Series, the number of such shares held by such holder to be redeemed; (C) the Call Price, the number of shares of Common Stock deliverable upon redemption of each share of this Series to be redeemed and the Current Market Price used to calculate such number of shares of Common Stock; (D) the place or places where certificates for such shares are to be surrendered for redemption; and (E) that dividends on the shares of this Series to be redeemed shall cease to accrue on such redemption date (except as otherwise provided herein). (iv) Deposit of Shares and Funds. The Company's obligation to deliver shares of Common Stock and provide funds upon redemption in accordance with this paragraph 4 shall be deemed fulfilled if, on or before a redemption date, the Company shall irrevocably deposit, with a bank or trust company, or an affiliate of a bank or trust company, having an office or agency in New York City and having a capital and surplus of at least $50,000,000, or shall set aside or make other reasonable provision for the issuance of, such number of shares of Common Stock as are required to be delivered by the Company pursuant to this paragraph 4 upon the occurrence of the related redemption (and for the payment of cash in lieu of the issuance of fractional share amounts and accrued and unpaid dividends payable in cash, if any, on the shares to be redeemed as and to the extent provided by this paragraph 4). Any interest accrued on such funds shall be paid to the Company from time to time. Any shares of Common Stock or funds so deposited and unclaimed at the end of two years from such redemption date shall be repaid and released to the Company, after which the holder or holders of such shares of this Series so called for redemption shall look only to the Company for delivery of such shares of Common Stock or funds. (v) Surrender of Certificates; Status. Each holder of shares of this Series to be redeemed shall surrender the certificates evidencing such shares (properly endorsed or assigned for transfer, if the Board of Directors of the Company shall so require and the notice shall so state) to the Company at the place designated in the notice of such redemption and shall thereupon be entitled to receive certificates evidencing shares of Common Stock and to receive any funds or shares of Common Stock payable pursuant to this paragraph (4) following such surrender and following the date of such redemption. In case fewer than all the shares represented by any such surrendered certificate are called for redemption, a new certificate shall be issued at the expense of the Company representing the unredeemed shares. If such notice of redemption shall have been given, and if on the date fixed for redemption shares of Common Stock and funds necessary for the redemption shall have been irrevocably either set aside by the Company separate and apart from its other funds or assets in trust for the account of the holders of the shares to be redeemed or converted (and so as to be and continue to be available therefor) or deposited with a bank or a trust company or an affiliate thereof as provided herein or the Company shall have made other 18 reasonable provision therefor, then, notwithstanding that the certificates evidencing any shares of this Series so called for redemption or subject to conversion shall not have been surrendered, the shares represented thereby so called for redemption shall be deemed no longer outstanding, dividends with respect to the shares so called for redemption shall cease to accrue on the date fixed for redemption (except that holders of shares of this Series at the close of business on a record date for any payment of dividends shall be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemption of such shares following such record date and prior to such Dividend Payment Date) and all rights with respect to the shares so called for redemption shall forthwith after such date cease and terminate, except for the rights of the holders to receive the shares of Common Stock and funds, if any, payable pursuant to this paragraph (4) without interest upon surrender of their certificates therefor. Holders of shares of this Series that are redeemed shall not be entitled to receive dividends declared and paid on such shares of Common Stock, and such shares of Common Stock shall not be entitled to vote, until such shares of Common Stock are issued upon the surrender of the certificates representing such shares of this Series and upon such surrender such holders shall be entitled to receive such dividends declared and paid on such shares of Common Stock subsequent to such redemption date. (c) Conversion at Option of Holder. Shares of this Series are convertible, in whole or in part, at the option of the holder thereof, at any time prior to the Mandatory Conversion Date, unless previously redeemed, into shares of Common Stock at a rate of 344.274 shares of Common Stock for each share of this Series (the "Optional Conversion Rate") (equivalent to a conversion price of $9.73 per share of Common Stock). The right to convert shares of this Series called for redemption shall terminate at the close of business on the redemption date. Conversion of shares of this Series may be effected by delivering certificates evidencing such shares, together with written notice of conversion and a proper assignment of such certificates to the Company or in blank, to the office or agency to be maintained by the Company for that purpose (and, if applicable, payment by the Company of an amount, out of funds legally available therefor (in cash or in shares of Common Stock, at the election of the Company), equal to the dividend payable on such shares), and otherwise in accordance with conversion procedures established by the Company. Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which the foregoing requirements shall have been satisfied. The conversion shall be at the Optional Conversion Rate in effect at such time and on such date. Holders of shares of this Series at the close of business on a record date for any payment of dividends shall be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the conversion of such shares following such record date and prior to such Dividend Payment Date. The Company shall make no other payment or allowance for unpaid dividends, whether or not in arrears, on converted shares of this Series or for dividends or distributions on the shares of Common Stock issued upon such conversion. (d) Common Equivalent Rate and Optional Conversion Rate Adjustments. The Common Equivalent Rate and the Optional Conversion Rate also shall be subject to adjustment from time to time as provided below in this paragraph. (i) If the Company shall: (A) pay a dividend or make a distribution with respect to its Common Stock in shares of such stock, (B) subdivide or split its outstanding shares of Common Stock into a greater number of shares, (C) combine its outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of its shares of Common Stock any shares of Common Stock of the Company, 19 then, in any such event, the Common Equivalent Rate and the Optional Conversion Rate in effect immediately prior to such event shall each be adjusted so that the holder of any shares of this Series shall thereafter be entitled to receive, upon Mandatory Conversion or upon conversion at the option of the holder, the number of shares of Common Stock of the Company which such holder would have owned or been entitled to receive immediately following any event described above had such shares of this Series been converted immediately prior to such event or any record date with respect thereto. Such adjustment shall become effective at the opening of business on the business day next following the record date for determination of shareholders entitled to receive such dividend or distribution in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, split, combination or reclassification. Such adjustment shall be made successively. (ii) If the Company shall, after the date hereof, issue rights or warrants to all holders of its Common Stock entitling them (for a period not exceeding forty-five days from the date of such issuance) to subscribe for or purchase shares of Common Stock at a price per share less than the current market price of the Common Stock, then in each case the Common Equivalent Rate and Optional Conversion Rate shall each be adjusted by multiplying the Common Equivalent Rate and the Optional Conversion Rate, in effect immediately prior to the date of issuance of such rights or warrants, by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants, immediately prior to such issuance, plus the number of additional shares of Common Stock offered for subscription or purchase pursuant to such rights or warrants, and of which the denominator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants, immediately prior to such issuance, plus the number of additional shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered for subscription or purchase pursuant to such rights or warrants would purchase at such current market price (determined by multiplying such total number of shares by the exercise price of such rights or warrants and dividing the product so obtained by such current market price). Such adjustment shall become effective at the opening of business on the business day next following the record date for the determination of shareholders entitled to receive such rights or warrants. To the extent that shares of Common Stock are not delivered after the expiration of such rights or warrants, the Common Equivalent Rate shall be readjusted to the Common Equivalent Rate which would then be in effect had the adjustments been made upon the issuance of such rights or warrants been made upon the basis of delivery of only the number of shares of Common Stock actually delivered. Such adjustment shall be made successively. (iii) If the Company shall pay a dividend or make a distribution to all holders of its Common Stock of evidences of its indebtedness, securities of a Subsidiary or other assets (excluding any dividends or distributions referred to in clause (i) above or any cash dividends other than Extraordinary Cash Distributions (as hereinafter defined)) or shall issue to all holders of its Common Stock rights or warrants to subscribe for or purchase any of its securities (other than those referred to in clause (ii) above), then in each such case, the Common Equivalent Rate and the Optional Conversion Rate shall each be adjusted by multiplying the Common Equivalent Rate and the Optional Conversion Rate in effect on the record date mentioned below, by a fraction of which the numerator shall be the current market price per share of the Common Stock on the record date for the determination of shareholders entitled to receive such dividend or distribution, and of which the denominator shall be such current market price per share of Common Stock less the fair market value (as determined by the Board of Directors of the Company, whose good faith determination shall be conclusive, and described in a resolution adopted with respect thereto) as of such record date of the portion of the assets or evidences of indebtedness so distributed or of such 20 subscription rights or warrants applicable to one share of Common Stock. Such adjustment shall become effective on the opening of business on the business day next following the record date for the determination of shareholders entitled to receive such dividend or distribution. Such adjustment shall be made successively. (iv) Any shares of Common Stock issuable in payment of a dividend shall be deemed to have been issued immediately prior to the close of business on the record date for such dividend for purposes of calculating the number of outstanding shares of Common Stock under clause (ii) above. For purposes of any computation under clause (ii) and (iii) above, the current market price per share of Common Stock at any date shall be deemed to be the average of the daily Closing Prices for the thirty consecutive Trading Dates preceding the date in question; provided, however, if any event that results in an adjustment of the Common Equivalent Rate occurs during such thirty-day period, the current market price as determined pursuant to the foregoing shall be appropriately adjusted to reflect the occurrence of such event. (v) The Company shall also be entitled to make upward adjustments in the Common Equivalent Rate, the Optional Conversion Rate and the Call Price, as the Board of Directors in its good faith discretion shall determine to be advisable, in order that any stock dividends, subdivisions of shares, distribution of rights to purchase stock or securities, or distribution of securities convertible into or exchangeable for stock (or any transaction which could be treated as any of the foregoing transactions pursuant to Section 305 of the Internal Revenue Code of 1986, as amended) hereafter made by the Company to its shareholders shall not be taxable. (vi) In any case in which clause (iii) above shall require that an adjustment as a result of any event become effective at the opening of business on the business day next following a record date and the date fixed for conversion pursuant to subparagraph (4)(c) or redemption pursuant to subparagraph (4)(b) occurs after such record date, but before the occurrence of such event, the Company may in its sole discretion, elect to defer, until after the occurrence of such event, issuing to the holder of any converted or redeemed shares of this Series the additional shares of Common Stock issuable upon such conversion or redemption over the shares of Common Stock issuable before giving effect to such adjustment. (vii) All adjustments to the Common Equivalent Rate and the Optional Conversion Rate shall be calculated to the nearest 1/1000th of a share of Common Stock (or if there is not a nearest 1/1000th of a share to the next lower 1/1000th of a share). No adjustment in the Common Equivalent Rate and the Optional Conversion Rate shall be required unless such adjustment would require an increase or decrease of at least one percent therein; provided, however, that any adjustments which by reason of this subparagraph are not required to be made shall be carried forward and taken into account in any subsequent adjustments. (e) Adjustment for Consolidation or Merger. In case of any consolidation or merger to which the Company is a party (other than a merger or consolidation in which the Company is the continuing corporation and in which the Common Stock outstanding immediately prior to the merger or consolidation remains unchanged), or in case of any sale or transfer to another corporation of the property of the Company as an entirety or substantially as an entirety, or in case of any statutory exchange of securities with another corporation (other than in connection with a merger or acquisition), proper provision shall be made so that each share of this Series shall, after consummation of such transaction, be subject to (i) conversion at the option of the holder into the kind and amount of securities, cash or other property receivable upon consummation of such transaction by a holder of the number of shares of Common Stock into which such share of this Series might have been converted immediately prior to consummation of such transaction, (ii) conversion on the Mandatory Conversion Date into the kind and amount of 21 securities, cash or other property receivable upon consummation of such transaction by a holder of the number of shares of Common Stock into which such share of this Series would have been converted if the conversion on the Mandatory Conversion Date had occurred immediately prior to the date of consummation of such transaction, and (iii) redemption on any redemption date in exchange for the kind and amount of securities, cash or other property receivable upon consummation of such transaction by a holder of the number of shares of Common Stock that would have been issuable at the Call Price in effect on such redemption date upon a redemption of such shares immediately prior to the consummation of such transaction, assuming that the public announcement of such redemption had been made on the last possible date permitted by the terms of this Series and applicable law; assuming in each case that such holder of shares of this Series failed to exercise rights of election, if any, as to the kind or amount of securities, cash or other property receivable upon consummation of such transaction (provided that if the kind or amount of securities, cash or other property receivable upon consummation of such transaction is not the same for each non-electing share, then the kind and amount of securities, cash or other property receivable upon consummation of such transaction for each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). The kind and amount of securities into which the shares of this Series shall be convertible after the consummation of such transaction shall be subject to adjustment as described in the immediately preceding subparagraph 4(d) following the date of consummation of such transaction. The Company shall not, without the affirmative vote of more than the holders of two-thirds of all the outstanding shares of this Series, become a party to any such transaction unless the terms thereof are consistent with the foregoing. (f) Notice of Adjustments. Whenever the Common Equivalent Rate and Optional Conversion Rate are adjusted as herein provided, the Company shall: (i) forthwith compute the adjusted Common Equivalent Rate and Optional Conversion Rate in accordance herewith and prepare a certificate signed by an officer of the Company setting forth the adjusted Common Equivalent Rate and the Optional Conversion Rate, the method of calculation thereof in reasonable detail and the facts requiring such adjustment and upon which such adjustment is based, which certificate shall be conclusive, final and binding evidence of the correctness of the adjustment, and file such certificate forthwith with the transfer agent for the shares of this Series and the Common Stock; and (ii) mail a notice to the holders of the outstanding shares of this Series stating that the Common Equivalent Rate and the Optional Conversion Rate have been adjusted, the facts requiring such adjustment and upon which such adjustment is based and setting forth the adjusted Common Equivalent Rate and Optional Conversion Rate, such notice to be mailed at or prior to the time the Company mails an interim statement to its shareholders covering the fiscal quarter during which the facts requiring such adjustment occurred, but in any event within 45 days of the end of such fiscal quarter. (g) Notices. In case, at any time while any of the shares of this Series are outstanding, (i) the Company shall declare a dividend (or any other distribution) on its Common Stock, excluding any cash dividends; or (ii) the Company shall authorize the issuance to all holders of its Common Stock of rights or warrants to subscribe for or purchase shares of its Common Stock or of any other subscription rights or warrants; or (iii) the Company shall authorize any reclassification of the Common Stock of the Company (other than a subdivision or combination thereof) or of any consolidation or merger to which the Company is a party and for which approval of any shareholders of the Company is required (except for a merger of the Company into a Subsidiary solely for the purpose of changing the corporate domicile of the Company to another state of the United States and in connection with which there is no 22 substantive change in the rights or privileges of any securities of the Company other than changes resulting from differences in the corporate statutes of the then existing and the new state of domicile), or of the sale or transfer of all or substantially all of the assets of the Company; or (iv) there shall be commenced the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of the shares of this Series, and shall cause to be mailed to the holders of shares of this Series at their last addresses as they shall appear on the stock register, at least 10 days before the date hereinafter specified (or the earlier of the dates hereinafter specified, in the event that more than one date is specified), a notice stating (A) the date on which a record is to be taken for the purpose of such dividend, distribution, rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined, or (B) the date on which any such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property (including cash), if any, deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. The failure to give or receive the notice required by this subparagraph (g) or any defect therein shall not affect the legality or validity of any such dividend, distribution, right or warrant or other action. (h) Effective Date of Conversions and Redemptions. The person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon any conversion or redemption shall be deemed to have become on the date of any such conversion or redemption the holder or holders of record of the shares represented thereby; provided, however, that any such surrender on any date when the stock transfer books of the Company shall be closed shall constitute the person or persons in whose name or names the certificate or certificates for such shares are to be issued as the record holder or holders thereof for all purposes at the opening of business on the next succeeding business day on which such stock transfer books are open. (i) No Fractional Shares. No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon the redemption or conversion of any shares of this Series or in respect of any dividend paid in shares of Common Stock. In lieu of any fractional share otherwise issuable in respect of all the shares of this Series of any holder which are redeemed or converted on any redemption date or upon Mandatory Conversion or any optional conversion or in respect of any dividend paid in shares of Common Stock, the Company shall, at the election of the Company, either (i) sell such fractional share, as agent for the person entitled thereto, and distribute the proceeds of such sale, net of any discounts, commissions, fees or expenses associated with such sale, to such person, all in accordance with applicable rules under the Securities Act of 1933, as amended, or (ii) pay to the person entitled thereto an amount in cash equal to the current value of such fraction, calculated to the nearest one-hundredth (1/100) of a share, to be computed (x) if the shares of this Series are listed on any national securities exchange or the Nasdaq National Market, on the basis of the last sales price (or the quoted closing bid price if there shall have been no sales) of the shares of this Series on such exchange or the Nasdaq National Market (as the case may be) on the date of any such conversion or redemption or the date of payment of any such dividend, or (y) if the shares of this Series are not so listed, on the basis of the mean between the closing bid and asked prices for the shares of this Series on the date of any such conversion or redemption or the date of payment of any such dividend, as reported by Nasdaq, or its successor, or (z) if the shares of this Series are not so listed and if there are no such closing bid and asked prices, on the basis of the fair market value per share as determined in good faith by the Board of Directors. (j) Reissuance. Shares of this Series that have been issued and reacquired in any manner, including shares purchased, exchanged, redeemed or converted, shall not be reissued as part of this Series and shall (upon compliance with any applicable provisions of the laws of the State of Georgia) have the status of authorized and unissued shares of the Preferred Stock undesignated as to series and may be redesignated and reissued as part of any series of Preferred Stock. 23 (k) Definitions. As used herein: (i) the term "business day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close or are closed because of a banking moratorium or otherwise; (ii) the term "Capital Stock" means any capital stock of any class or series (however designated) of the Company; (iii) the term "Closing Price" on any day shall mean the closing sale price regular way on such day or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices regular way, in each case on the Nasdaq National Market or, if the Common Stock is not listed or admitted to trading on the Nasdaq National Market then on the principal national securities exchange on which the Common Stock is listed or admitted to trading (which shall be the national securities exchange on which the greatest number of shares of Common Stock has been traded during the five consecutive Trading Dates ending on and including the date of determination), or, if not quoted or listed or admitted to trading on any national securities exchange or quotation system, the average of the closing bid and asked prices of the Common Stock on the over-the-counter market on the day in question as reported by the National Quotation Bureau Incorporated, or a similar generally accepted reporting service, or if not so available as determined in good faith by the Board of Directors, on the basis of such relevant factors as it in good faith considers appropriate; (iv) the term "Exchange Preferred" means the Series B Convertible Preferred Stock of the Company. (v) the term "Extraordinary Cash Distributions" means, with respect to any cash dividend or distribution paid on any date, the amount, if any, by which all cash dividends and cash distributions on the Common Stock paid during the consecutive 12-month period ending on and including such date (other than cash dividends and cash distributions for which an adjustment to the Common Equivalent Rate and the Optional Conversion Rate was previously made) exceeds, on a per share of Common Stock basis, 10% of the average daily Closing Price of the Common Stock over such 12-month period; (vi) the term "Junior Stock" means any Capital Stock ranking as to dividends or as to rights in liquidation, dissolution or winding up of the affairs of the Company junior to the shares of this Series; (vii) the term "Parity Stock" means any Capital Stock ranking as to dividends or as to rights in liquidation, dissolution or winding up the affairs of the Company equally with the shares of this Series; (viii) the term "Subsidiary" means any corporation a majority of the outstanding Voting Stock of which is owned, directly or indirectly, by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries. For this purpose, the term "Voting Stock" means stock of any class or classes (however designated) having ordinary voting power for the election of a majority of the members of the board of directors (or other governing body) of such corporation, other than stock having such powers only by reason of the happening of a contingency; 24 (ix) the term "Trading Date" shall mean a date on which the Nasdaq National Market (or any successor thereto) is open for the transaction of business. (l) Payment of Taxes. The Company shall pay any and all documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on the redemption or conversion of shares of this Series pursuant to this paragraph 4; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any registration of transfer involved in the issue or delivery of shares of Common Stock in a name other than that of the registered holder of shares of this Series redeemed or converted or to be redeemed or converted, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid. (m) Reservation of Common Stock. The Company shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock and/or its issued Common Stock held in its treasury, for the purpose of effecting any Mandatory Conversion of the shares of this Series or any conversion of the shares of this Series at the option of the holder, the full number of shares of Common Stock then deliverable upon any such conversion of all outstanding shares of this Series. 5. Liquidation Rights. (a) In the event of the liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, the holders of shares of this Series then outstanding, after payment or provision for payment of the debts and other liabilities of the Company and the payment or provision for payment of any distribution on any shares of the Company having a preference and a priority over the shares of this Series on liquidation, and before any distribution to the holders of the Common Stock, or any other stock ranking junior to the shares of this Series with respect to distributions upon liquidation, dissolution or winding up, shall be entitled to be paid out of the assets of the Company available for distribution to its shareholders, an amount per share of this Series equal to the greater of (i) the sum of (a) the liquidation value set forth in paragraph (1) above and (b) all accrued and unpaid dividends thereon to the date of liquidation, dissolution or winding up and (ii) the value of the shares of Common Stock into which such shares of this Series are convertible on the date of such liquidation, dissolution or winding up, before any payment shall be made or any assets distributed to the holders of any shares of the Company ranking junior to the shares of this Series upon liquidation. In the event the assets of the Company available for distribution to the holders of the shares of this Series upon any dissolution, liquidation or winding up of the Company shall be insufficient to pay in full the liquidation payments payable to the holders of outstanding shares of this Series and any shares of Parity Stock, then the holders of all such shares of this Series shall share ratably in such distribution of assets in accordance with the amount which would be payable on such distribution if the amounts to which the holders of outstanding shares of this Series and the holders of outstanding shares of such shares of Parity Stock are entitled were paid in full. Except as provided in this paragraph 5, holders of this Series shall not be entitled to any distribution in the event of liquidation, dissolution or winding up of the affairs of the Company. (b) For the purposes of this paragraph 5, none of the following shall be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of the Company: (i) the voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Company; (ii) the consolidation or merger of the Company with or into one or more other corporations, or other associations; (iii) the consolidation or merger of one or more corporations or other associations with or into the Company; or (iv) the participation by the Company in a share exchange. 25 6. Definition. As used herein, the term "Common Stock" shall mean any stock of any class of the Company which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which is not subject to redemption by the Company. However, shares of Common Stock issuable upon conversion of shares of this Series shall include only shares of the class designated as Common Stock as of the original date of issuance of shares of this Series, or shares of the Company of any class or classes resulting from any reclassification or reclassification thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which are not subject to redemption by the Company; provided that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from such reclassification bears to the total number of shares of all classes resulting from all such reclassification. 7. No Preemptive Rights. The holders of shares of this Series shall have no preemptive rights, including preemptive rights with respect to any shares of Capital Stock or other securities of the Company convertible into or carrying rights or options to purchase any such shares. 26 EXHIBIT B Series B Convertible Preferred Stock 1. Designation and Amount. The shares of such series shall be designated "Series B Convertible Preferred Stock" (the "Series B Preferred Stock"), and the number of shares constituting such series shall be 15,000,000. 2. Dividends. (a) The holders of Series B Preferred Stock shall be entitled to receive, when and as declared, out of the funds legally available for that purpose, dividends per share of Series B Preferred Stock at the rate of 7.75 cents per annum, payable when and as the Board of Directors (the "Board of Directors") of WorldCom, Inc. (the "Company") may determine, in cash, before any dividends shall be set apart for or paid upon the common stock of the Company, par value $.01 per share (the "Common Stock"), or any stock ranking as to dividends junior to the Series B Preferred Stock (such stock being referred to hereinafter collectively as "Junior Stock") in any year. All dividends declared upon Series B Preferred Stock shall be declared pro rata per share and shall be payable to holders of record as they appear on the stock books of the Company on such record dates as shall be fixed by the Board of Directors. Notwithstanding the foregoing, the Company may declare, set apart and pay dividends on shares of the Company's Series A 8% Cumulative Convertible Preferred Stock (the "Series A Preferred Stock") whether or not dividends have been declared, set apart or paid on the shares of Series B Preferred Stock. The Board of Directors shall not be required to declare any dividends on the Series B Preferred Stock and the failure to declare any such dividends shall not constitute a default or otherwise vest the holders of Series B Preferred Stock with any right, other than the right to receive amounts in respect of accrued but unpaid dividends pursuant to Sections 3, 5 and 7 hereof. (b) Dividends on the Series B Preferred Stock shall be cumulative and shall accrue on a daily basis, whether or not in any fiscal year there shall be net profits or surplus available for the payment of dividends in such fiscal year, so that if in any fiscal year or years, dividends in whole or in part are not paid upon the Series B Preferred Stock, unpaid dividends shall accumulate as against the holders of the Junior Stock. Accrued but unpaid dividends shall not bear interest. (c) Dividends (or amounts equal to accrued and unpaid dividends) payable on the shares of Series B Preferred Stock shall be computed on the basis of a 360-day year of twelve 30-day months. (d) The Company shall not set apart for or pay upon the Common Stock any Extraordinary Cash Dividend unless, at the same time, the Company shall have set apart for or paid upon all shares of Series B Preferred Stock an amount of cash per share of Series B Preferred Stock equal to the Extraordinary Cash Dividend that would have been paid in respect of such share if the holder of such share had converted such share into shares of Common Stock pursuant to Section 5 immediately prior to the record date for such Extraordinary Cash Dividend. For purposes of this paragraph 2(d), "Extraordinary Cash Dividend" shall mean, with respect to any cash dividend or distribution paid on any date, the amount, if any, by which all cash dividends and cash distributions on the Common Stock paid during the consecutive 12-month period ending on and including such date exceeds, on a per share of Common Stock basis, 10% of the average daily closing price of the Common Stock over such 12-month period. 3. Liquidation, Dissolution or Winding Up. (a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, no distribution shall be made (i) to the holders of Junior Stock unless, prior thereto, the holders of the Series B Preferred Stock shall have received $1.00 per share, plus an amount equal to unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of such payment and subject to the payment in full of all amounts required to be distributed to the holders of any other Preferred Stock of the Company ranking on liquidation prior and in preference to the Series B Preferred Stock (such Preferred Stock being referred to hereinafter as "Senior Preferred Stock") or (ii) to the holders of stock ranking on a parity, either as to dividends or upon liquidation with the Series B Preferred Stock, except distributions made ratably on the Series B Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such 27 liquidation. In the event the assets of the Company available for distribution to the holders of the shares of the Series B Preferred Stock upon any dissolution, liquidation or winding up of the Company shall be insufficient to pay in full the liquidation payments payable to the holders of outstanding shares of the Series B Preferred Stock and the holders of any shares of stock ranking on a parity with the Series B Preferred Stock, then the holders of all such shares of the Series B Preferred Stock shall share ratably in such distribution of assets in accordance with the amount which would be payable on such distribution if the amounts to which the holders of outstanding shares of the Series B Preferred Stock and the holders of outstanding shares of such shares of parity stock are entitled were paid in full. The Series A Preferred Stock shall rank on a parity with the Series B Preferred Stock for purposes of this paragraph 3(a). (b) The merger or consolidation of the Company into or with another company, the merger or consolidation of any other company into or with the Company, or the sale, conveyance, mortgage, pledge or lease of all or substantially all the assets of the Company shall not be deemed to be a liquidation, dissolution or winding up of the Company for purposes of this Section 3. 4. Voting. (a) Each issued and outstanding share of Series B Preferred Stock shall be entitled to one vote per share with respect to any and all matters presented to the shareholders of the Company for their action or consideration. Except as provided by law and by the provisions of paragraph 4(b) below, holders of Series B Preferred Stock shall vote together with the holders of Common Stock as a single class. (b) The Company shall not amend, alter or repeal the preferences, special rights or other powers or terms of the Series B Preferred Stock so as to affect adversely the Series B Preferred Stock, without the written consent or affirmative vote of the holders of at least a majority of the then outstanding aggregate number of shares of Series B Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class. For this purpose, the authorization or issuance of any series of preferred stock with preference or priority over, or being on a parity with the Series B Preferred Stock as to the right to receive either dividends or amounts distributable upon liquidation, dissolution or winding up of the Company shall not be deemed to affect adversely the Series B Preferred Stock. 5. Optional Conversion. (a) Each share of Series B Preferred Stock may be converted at any time, unless previously redeemed, at the option of the holder thereof, in the manner hereinafter provided, into fully paid and nonassessable shares of Common Stock at the rate of 0.0973912 shares (or an effective initial conversion price of $10.268 per share of Common Stock) of Common Stock for each one share of Series B Preferred Stock surrendered for conversion, or at such other rate as may then be effective following adjustment pursuant to Section 6 hereof (the "Conversion Rate"). (b) The Company shall not issue fractions of shares of Common Stock upon conversion of Series B Preferred Stock or scrip in lieu thereof. If any fraction of a share of Common Stock would, except for the provisions of this paragraph 5(b), be issuable upon conversion of any Series B Preferred Stock, the Company shall in lieu thereof at the election of the Company, either (i) sell such fractional share, as agent for the person entitled thereto, and distribute the proceeds of such sale, net of any discounts, commissions, fees or expenses associated with such sale, to such person, all in accordance with all applicable rules under the Securities Act of 1933, as amended, or (ii) pay to the person entitled thereto an amount in cash equal to the current value of such fraction, calculated to the nearest one-hundredth (1/100) of a share, to be computed (x) if the Common Stock is listed on any national securities exchange or the Nasdaq National Market, on the basis of the last sales price (or the quoted closing bid price if there shall have been no sales) of the Common Stock on such exchange or the Nasdaq National Market (as the case may be) on the date of conversion, or (y) if the Common Stock is not so listed, on the basis of the mean between the closing bid and asked prices for the Common Stock on the date of conversion as reported by Nasdaq, or its successor, or (z) if the Common Stock is not so listed and if there are no such closing bid and asked prices, on the basis of the fair market value per share as determined by the Board of Directors. (c) In order to exercise the conversion privilege, the holder of any Series B Preferred Stock to be converted shall surrender his, her or its certificate or certificates therefore to the principal office of the transfer 28 agent for the Series B Preferred Stock (or if no transfer agent be at the time appointed, then the Company at its principal office), and shall give written notice to the Company at such office that the holder elects to convert the Series B Preferred Stock represented by such certificates, or any number thereof. Such notice shall also state the name or names (with address) in which the certificate or certificates for shares of Common Stock that shall be issuable on such conversion shall be issued. If so required by the Company, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Company. The date of receipt by the transfer agent (or by the Company if the Company serves as its own transfer agent) of the certificates and notice shall be the conversion date (the "Conversion Date"). As soon as practicable after receipt of such notice and the surrender of the certificate or certificates for Series B Preferred Stock as aforesaid, the Company shall cause to be issued and delivered at such office to such holder, or on such holder's written order, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof and cash as provided in paragraph 5(b) in respect of any fraction of a share of Common Stock otherwise issuable upon such conversion. (d) The Company shall at all times when the Series B Preferred Stock shall be outstanding reserve and keep available out of its authorized but unissued stock, for the purposes of effecting the conversion of the Series B Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series B Preferred Stock. (e) Shares of Series B Preferred Stock may not be converted after the close of business on the business day preceding the date fixed for redemption of such shares pursuant to Section 7. (f) Upon any such conversion, the Company shall pay, out of funds legally available therefor, to the person entitled thereto an amount equal to all accrued but unpaid dividends to, but not including, the Conversion Date in respect of the shares of Series B Preferred Stock surrendered for conversion, which amount shall be payable, at the election of the Company, in cash or shares of Common Stock. In the event the Company elects to pay such amount in shares of Common Stock, the number of shares of Common Stock to be issued in respect of unpaid dividends on each share of Series B Preferred Stock surrendered for conversion shall, subject to paragraph 5(b), be determined by dividing (x) the total amount of accrued but unpaid dividends to be paid on each such share of Series B Preferred Stock by (y) the Fair Market Value of a share of Common Stock. For purposes hereof, the term "Fair Market Value" shall mean (i) if the Common Stock is listed on any national securities exchange or the Nasdaq National Market, the average of the last sales price (or the quoted closing bid price if there shall have been no sales) of the Common Stock on such exchange or the Nasdaq National Market (as the case may be) for a period of 30 trading days prior to the Conversion Date, or (ii) if the Common Stock is not so listed, on the basis of the average of the mean between the closing bid and asked prices for the Common Stock for each day in the 30 trading day period prior to the Conversion Date, as reported by Nasdaq, or its successor, or (iii) if the Common Stock is not so listed and if there are no such closing bid and asked prices, on the basis of the fair market value per share as determined by the Board of Directors. (g) All shares of Series B Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any, to receive notices and to vote, shall forthwith cease and terminate except only the right of the holder thereof to receive shares of Common Stock in exchange therefor and payment of any accrued and unpaid dividends thereon. Any shares of Series B Preferred Stock so converted shall be retired and canceled and shall not be reissued, and the Company may from time to time take such appropriate action as may be necessary to reduce the authorized Series B Preferred Stock accordingly. 6. Adjustment Provisions. (a) In case the Company shall at any time (x) subdivide (whether by stock dividend, stock split or otherwise) its outstanding shares of Common Stock into a greater number of shares or (y) combine its outstanding shares of Common Stock into a smaller number of shares, the Conversion Rate in effect immediately prior thereto shall be proportionately adjusted so that the holder of any shares of Series B Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of capital stock of the Company which the holder would have owned or have been entitled to receive after the happening of any of the events described above, had such shares of Series B Preferred Stock been converted immediately prior to the happening of such event. 29 In case the Company shall at any time prior to March 23, 1999 subdivide (whether by stock dividend, stock split or otherwise) its outstanding shares of Common Stock into a greater number of shares (each a "Subdivision"), the voting rights of each share of Series B Preferred Stock shall be adjusted to provide that the percentage of the aggregate voting power of the Common Stock represented by the Series B Preferred Stock, shall be the same as such percentage immediately prior to such Subdivision, with the holder of each share of Series B Preferred Stock being entitled to the number of votes proportionate to such adjustment. The adjustment made pursuant to this paragraph 4(a) shall become effective immediately after the effective date of the event requiring such adjustment and shall be made by the Board of Directors of the Company, whose judgment shall be final, binding and conclusive absent manifest error. Such adjustment made pursuant to this paragraph 6(a) shall become effective immediately after the effective date of the event requiring such adjustment. (b) If any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another company, or the sale of all or substantially all of its assets to another company shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities, cash or other property with respect to or in exchange for Common Stock, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be made whereby the holders of the Series B Preferred Stock shall have the right to acquire and receive upon conversion of the Series B Preferred Stock, which right shall be prior to the rights of the holders of Junior Stock (but after and subject to the rights of holders of Senior Preferred Stock, if any, and on parity with the rights of holders of Series A Preferred Stock), such shares of stock, securities, cash or other property issuable or payable (as part of the reorganization, reclassification, consolidation, merger or sale) with respect to or in exchange for such number of outstanding shares of the Company's Common Stock as would have been received upon conversion of the Series B Preferred Stock at the Conversion Rate then in effect. The Company will not effect any such consolidation, merger or sale, unless prior to the consummation thereof the successor company (if other than the Company) resulting from such consolidation or merger or the company purchasing such assets shall assume by written instrument mailed or delivered to the holders of the Series B Preferred Stock at the last address of each such holder appearing on the books of the Company, the obligation to deliver to each such holder such shares of stock, securities, cash or other property as, in accordance with the foregoing provisions, such holder may be entitled to purchase. (c) In the event that: (1) the Company shall declare any dividend upon its Common Stock payable in stock or make any special dividend or other distribution to the holders of its Common Stock, or (2) there shall be any capital reorganization or reclassification of the capital stock of the Company, including any subdivision or combination of its outstanding shares of Common Stock, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another company, or (3) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in accordance with such event, the Company shall give to the holders of the Series B Preferred Stock: (i) at least twenty (20) days prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend or distribution or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up; and (ii) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, at least twenty (20) days prior written notice of the date when the same shall take place. A notice in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend or distribution, the date on which the holders of Common Stock shall be entitled thereto, and a notice in accordance 30 with the foregoing clause (ii) shall also specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification consolidation, merger, sale, dissolution, liquidation or winding up, as the case may be. Each such written notice shall be sent by mail, first class, postage prepaid, addressed to the holders of the Series B Preferred Stock at the address of each such holder as shown on the books of the Company. (d) If any event occurs as to which, in the opinion of the Board of Directors of the Company, the provisions of this Section 6 are not strictly applicable or if strictly applicable would not fairly protect the rights of the holders of the Series B Preferred Stock in accordance with the essential intent and principles of such provisions, then the Board of Directors shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such rights as aforesaid, but in no event shall any adjustment have the effect of decreasing the Conversion Rate as otherwise determined pursuant to any of the provisions of this Section 6 except in the case of a combination of shares of a type contemplated in paragraph 6(a) and then in no event to a rate less than the Conversion Rate as adjusted pursuant to paragraph 6(a). (e) Whenever the Conversion Rate shall be adjusted pursuant to this Section 6, the Company shall forthwith file at each office designated for the conversion of Series B Preferred Stock, a statement, signed by the Chairman of the Board, the President, any Vice President or Treasurer of the Company, showing in reasonable detail the facts requiring such adjustment and the Conversion Rate that will be effective after such adjustment. The Company shall also cause a notice setting forth any such adjustments to be sent by mail, first class, postage prepaid, to each record holder of Series B Preferred Stock at his or its address appearing on the stock register. If such notice relates to an adjustment resulting from an event referred to in paragraph 6(c), such notice shall be included as part of the notice required to be mailed and published under the provisions of paragraph 6(c) hereof. 7. Redemption. The Company shall have the right to redeem shares of Series B Preferred Stock pursuant to the following provisions: (a) The Company shall not have any right to redeem shares of the Series B Preferred Stock prior to September 30, 2001. Thereafter, the Company shall have the right, at its sole option and election, out of funds legally available therefor, to redeem the shares of Series B Preferred Stock, in whole or in part, at any time and from time to time at a redemption price of $1.00 per share plus an amount equal to all accrued and unpaid dividends thereon (the "Redemption Price"), whether or not declared, to the redemption date; provided, that any amount due in respect of all or any portion of the Redemption Price, including accrued dividends, may be paid in cash or shares of Common Stock as determined by the Board of Directors. In the event the Board of Directors elects to pay any portion of the Redemption Price in shares of Common Stock, the number of shares of Common Stock to be issued shall be determined in accordance with the provisions of paragraph 5(f). (b) If less than all of the Series B Preferred Stock at the time outstanding is to be redeemed, the shares so to be redeemed shall be selected by lot, pro-rata or in such other manner as the Board of Directors may determine to be fair and proper. (c) Notice of any redemption of the Series B Preferred Stock (including notice of whether such redemption shall be paid in cash or shares of Common Stock) shall be mailed at least 30 days, but not more than 60 days prior to the date fixed for redemption to each holder of Series B Preferred Stock to be redeemed, at such holder's address as it appears on the books of the Company. In order to facilitate the redemption of the Series B Preferred Stock, the Board of Directors may fix a record date for the determination of holders of Series B Preferred Stock to be redeemed, or may cause the transfer books of the Company to be closed for the transfer of the Series B Preferred Stock, not more than 60 days prior to the date fixed for such redemption. (d) On the redemption date specified in the notice given pursuant to paragraph 7(c), the Company shall, and at any time after such notice shall have been mailed and before such redemption date the Company may, deposit for the pro-rata benefit of the holders of the shares of the Series B Preferred Stock so called for redemption, funds in an amount equal to the portion of the Redemption Price, if any, to be paid in cash with a bank or trust company in the Borough of Manhattan, The City of New York, having a capital and surplus of at least 31 $50,000,000. Any monies so deposited by the Company and unclaimed at the end of one (1) year from the date designated for such redemption shall revert to the general funds of the Company. After such reversion, any such bank or trust company shall, upon demand, pay over to the Company such unclaimed amounts and thereupon such bank or trust company shall be relieved of all responsibility in respect thereof to such holder and such holder shall look only to the Company for the payment of the redemption price. Any interest accrued on funds so deposited pursuant to this paragraph 7(d) shall be paid from time to time to the Company for its own account. (e) Upon the deposit of funds pursuant to paragraph 7(d) in respect of shares of the Series B Preferred Stock called for redemption, or, in the event that the Board of Directors elects to pay all or part of the Redemption Price in shares of Common Stock, on the date fixed for redemption, notwithstanding that any certificates for such shares shall not have been surrendered for cancellation, the shares represented thereby shall no longer be deemed outstanding, the rights to receive dividends thereon shall cease to accrue from and after the date of redemption designated in the notice of redemption and all rights of the holders of the shares of the Series B Preferred Stock called for redemption shall cease and terminate, excepting only the right to receive the Redemption Price therefor and the right to convert such shares into shares of Common Stock until the close of business on the business day preceding the redemption date, as provided in Section 5. 8. Reissuance. Shares of this Series that have been issued and reacquired in any manner including shares purchased, exchanged, redeemed or converted shall not be reissued as part of this Series and shall upon compliance with any applicable provisions of the laws of the State of Georgia have the status of authorized and unissued shares of the Preferred Stock undesignated as to series and may be redesignated and reissued as part of any series of Preferred Stock. 32 EXHIBIT C Series 3 Junior Participating Preferred Stock Section 1. Designation and Amount. There shall be a series of the Preferred Stock which shall be designated as the "Series 3 Junior Participating Preferred Stock," par value $.01 per share, and the number of shares constituting such series shall be 2,500,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series 3 Junior Participating Preferred Stock to a number less than that of the shares then outstanding plus the number of shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Company. Section 2. Dividends and Distributions. (A) Subject to the rights of the holders of any shares of any series of preferred stock of the Company ranking prior and superior to the Series 3 Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series 3 Junior Participating Preferred Stock, in preference to the holders of shares of Common Stock, par value $.01 per share of the Company (the "Common Stock"), and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on any regular quarterly dividend payment date as shall be established by the Board of Directors (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series 3 Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $10.00 or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series 3 Junior Participating Preferred Stock. In the event the Company shall at any time after August 25, 1996 (the "Rights Declaration Date") declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series 3 Junior Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Company shall declare a dividend or distribution on the Series 3 Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share on the Series 3 Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series 3 Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series 3 Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be 33 cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series 3 Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may, in accordance with applicable law, fix a record date for the determination of holders of shares of Series 3 Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than such number of days prior to the date fixed for the payment thereof as may be allowed by applicable law. Section 3. Voting Rights. The holders of shares of Series 3 Junior Participating Preferred Stock shall have the following voting rights: (A) Each share of Series 3 Junior Participating Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Company. In the event the Company shall at any time after the Rights Declaration Date declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes to which holders of shares of Series 3 Junior Participating Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in the Company's Second Amended and Restated Articles of Incorporation, as amended, or by law, the holders of shares of Series 3 Junior Participating Preferred Stock, the holders of shares of Common Stock, and the holders of shares of any other capital stock of the Company having general voting rights, shall vote together as one class on all matters submitted to a vote of stockholders of the Company. (C) Except as otherwise set forth herein or in the Company's Second Amended and Restated Articles of Incorporation, as amended, and except as otherwise provided by law, holders of Series 3 Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. (A) Whenever dividends or distributions payable on the Series 3 Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series 3 Junior Participating Preferred Stock outstanding shall have been paid in full, the Company shall not: (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series 3 Junior Participating Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series 3 Junior Participating Preferred Stock, except dividends paid ratably on the Series 3 Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) except as permitted in Section 4(A)(iv) below, redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series 3 Junior Participating Preferred Stock, provided that the Company may at any time redeem, purchase or otherwise acquire shares of any such parity stock in 34 exchange for shares of any stock of the Company ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series 3 Junior Participating Preferred Stock; and (iv) purchase or otherwise acquire for consideration any shares of Series 3 Junior Participating Preferred Stock, or any shares of stock ranking on a parity with the Series 3 Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series 3 Junior Participating Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. The Company shall cause all such shares upon their cancellation to be authorized but unissued shares of Preferred Stock which may be reissued as part of a new series of Preferred Stock, subject to the conditions and restrictions on issuance set forth herein. Section 6. Liquidation, Dissolution or Winding Up. (A) Subject to the rights of the holders of any shares of any series of Preferred Stock of the Company ranking prior and superior to the Series 3 Junior Participating Preferred Stock with respect to liquidation, upon any liquidation (voluntary or otherwise), dissolution or winding up of the Company, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series 3 Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series 3 Junior Participating Preferred Stock shall have received $1,000.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series 3 Liquidation Preference"). Following the payment of the full amount of the Series 3 Liquidation Preference, no additional distributions shall be made to the holders of shares of Series 3 Junior Participating Preferred Stock, unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series 3 Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set forth in subparagraph C below to reflect such events as stock dividends, and subdivisions, combinations and consolidations with respect to the Common Stock) (such number in clause (ii) being referred to as the "Adjustment Number"). Following the payment of the full amount of the Series 3 Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series 3 Junior Participating Preferred Stock and Common Stock, respectively, holders of Series 3 Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Series 3 Junior Participating Preferred Stock and Common Stock, on a per share basis, respectively. (B) In the event there are not sufficient assets available to permit payment in full of the Series 3 Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Series 3 Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. (C) In the event the Company shall at any time after the Rights Declaration Date declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such 35 case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In case the Company shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series 3 Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Company shall at any time after the Rights Declaration Date declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series 3 Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that are outstanding immediately prior to such event. Section 8. Redemption. The shares of Series 3 Junior Participating Preferred Stock shall not be redeemable. Section 9. Ranking. The Series 3 Junior Participating Preferred Stock shall rank junior to all other series of the Company's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. Section 10. Fractional Shares. Series 3 Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series 3 Junior Participating Preferred Stock. EX-10.1 3 AMENDED/RESTATED 364-DAY REVOLVING CREDIT & TERM 1 EXHIBIT 10.1 AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT among MCI WORLDCOM, INC., Borrower BANK OF AMERICA, N.A. Administrative Agent BANC OF AMERICA SECURITIES, LLC, Sole Lead Arranger and Book Manager BARCLAYS BANK PLC, THE CHASE MANHATTAN BANK, CITIBANK, N.A., MORGAN GUARANTY TRUST COMPANY OF NEW YORK, and ROYAL BANK OF CANADA, Co-Syndication Agents and THE LENDERS NAMED HEREIN, Lenders $7,000,000,000 DATED AS OF AUGUST 5, 1999 2 TABLE OF CONTENTS
PAGE SECTION 1 DEFINITIONS AND TERMS...........................................................................1 1.1 Definitions.....................................................................................1 1.2 Number and Gender of Words; Other References...................................................15 1.3 Accounting Principles..........................................................................15 SECTION 2 BORROWING PROVISIONS...........................................................................15 2.1 The Facility...................................................................................15 2.2 Swing Line Subfacility.........................................................................16 2.3 Competitive Bid Subfacility....................................................................19 2.4 Optional Renewal of Commitments................................................................21 2.5 Conversion to Term Loans.......................................................................23 2.6 Termination of Commitments.....................................................................24 2.7 Borrowing Procedure............................................................................24 SECTION 3 TERMS OF PAYMENT...............................................................................25 3.1 Loan Accounts, Notes, and Payments.............................................................25 3.2 Interest and Principal Payments................................................................25 3.3 Interest Options...............................................................................26 3.4 Quotation of Rates.............................................................................26 3.5 Default Rate...................................................................................27 3.6 Interest Recapture.............................................................................27 3.7 Interest Calculations..........................................................................27 3.8 Maximum Rate...................................................................................27 3.9 Interest Periods...............................................................................28 3.10 Conversions....................................................................................28 3.11 Order of Application...........................................................................28 3.12 Sharing of Payments, Etc.......................................................................29 3.13 Offset.........................................................................................29 3.14 Booking Borrowings.............................................................................29 3.15 Increased Cost and Reduced Return..............................................................29 3.16 Limitation on Types of Loans...................................................................31 3.17 Illegality.....................................................................................31 3.18 Treatment of Affected Loans....................................................................31 3.19 Compensation; Replacement of Lenders...........................................................32 3.20 Taxes..........................................................................................32 SECTION 4 FEES...........................................................................................34 4.1 Treatment of Fees..............................................................................34 4.2 Fees of Administrative Agent and Arranger......................................................34 4.3 Commitment Fees................................................................................34 SECTION 5 CONDITIONS PRECEDENT...........................................................................34 5.1 Conditions Precedent to Closing................................................................34 5.2 Conditions Precedent to Each Borrowing.........................................................34 SECTION 6 REPRESENTATIONS AND WARRANTIES.................................................................35 6.1 Purpose of Credit Facility.....................................................................35 6.2 Existence, Good Standing, Authority, and Authorizations........................................35 6.3 Authorization and Contravention................................................................36 AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT
i 3 6.4 Binding Effect.................................................................................36 6.5 Financial Statements..........................................................................36 6.6 Litigation, Claims, Investigations.............................................................36 6.7 Taxes..........................................................................................36 6.8 Environmental Matters.........................................................................36 6.9 ERISA Compliance...............................................................................37 6.10 Properties; Liens..............................................................................37 6.11 Government Regulations.........................................................................37 6.12 No Default.....................................................................................37 6.13 Senior Indebtedness............................................................................37 6.14 Year 2000 Compliance...........................................................................37 SECTION 7 COVENANTS......................................................................................38 7.1 Use of Proceeds................................................................................38 7.2 Books and Records..............................................................................38 7.3 Items to be Furnished..........................................................................38 7.4 Inspections....................................................................................39 7.5 Taxes..........................................................................................39 7.6 Payment of Obligations.........................................................................39 7.7 Maintenance of Existence, Assets, and Business.................................................40 7.8 Insurance......................................................................................40 7.9 Preservation and Protection of Rights..........................................................40 7.10 Employee Benefit Plans.........................................................................40 7.11 Environmental Laws.............................................................................40 7.12 Debt...........................................................................................40 7.13 Liens..........................................................................................41 7.14 Transactions with Affiliates...................................................................42 7.15 Compliance with Laws and Documents.............................................................42 7.16 Assignment.....................................................................................42 7.17 Permitted Distributions........................................................................42 7.18 Restrictions on Subsidiaries...................................................................43 7.19 Sale of Assets.................................................................................43 7.20 Mergers and Dissolutions; Sale of Capital Stock................................................43 7.21 Designation of Unrestricted Companies..........................................................43 7.22 Financial Covenant.............................................................................43 7.23 Year 2000 Compliance...........................................................................44 SECTION 8 DEFAULT........................................................................................44 8.1 Payment of Obligation..........................................................................44 8.2 Covenants......................................................................................44 8.3 Debtor Relief..................................................................................44 8.4 Judgments and Attachments......................................................................44 8.5 Misrepresentation..............................................................................44 8.6 Change of Control..............................................................................44 8.7 Default Under Other Agreements.................................................................45 8.8 Employee Benefit Plans.........................................................................45 8.9 Default Under Facility A.......................................................................45 8.10 Validity and Enforceability of Loan Papers.....................................................46 SECTION 9 RIGHTS AND REMEDIES............................................................................46 9.1 Remedies Upon Default..........................................................................46 9.2 Company Waivers................................................................................46 AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT
ii 4 9.3 Performance by Administrative Agent............................................................46 9.4 Delegation of Duties and Rights................................................................47 9.5 Not in Control.................................................................................47 9.6 Course of Dealing..............................................................................47 9.7 Cumulative Rights..............................................................................47 9.8 Application of Proceeds........................................................................47 9.9 Certain Proceedings............................................................................47 9.10 Limitation of Rights...........................................................................48 9.11 Expenditures by Lenders........................................................................48 9.12 INDEMNIFICATION................................................................................48 SECTION 10 AGREEMENT AMONG LENDERS........................................................................49 10.1 Administrative Agent...........................................................................49 10.2 Expenses.......................................................................................51 10.3 Proportionate Absorption of Losses.............................................................51 10.4 Delegation of Duties; Reliance.................................................................51 10.5 Limitation of Liability........................................................................51 10.6 Default; Collateral............................................................................52 10.7 Limitation of Liability........................................................................52 10.8 Relationship of Lenders........................................................................52 10.9 Benefits of Agreement..........................................................................53 10.10 Co-Syndication Agents..........................................................................53 SECTION 11 MISCELLANEOUS..................................................................................53 11.1 Headings.......................................................................................53 11.2 Nonbusiness Days...............................................................................53 11.3 Communications.................................................................................53 11.4 Form and Number of Documents...................................................................53 11.5 Exceptions to Covenants........................................................................53 11.6 Survival.......................................................................................54 11.7 Governing Law..................................................................................54 11.8 Invalid Provisions.............................................................................54 11.9 Entirety.......................................................................................54 11.10 Jurisdiction; Venue; Service of Process; Jury Trial............................................54 11.11 Amendments, Consents, Conflicts, and Waivers...................................................55 11.12 Multiple Counterparts..........................................................................56 11.13 Successors and Assigns; Assignments and Participations.........................................56 11.14 Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances....................58 11.15 Confidentiality................................................................................59 11.16 Restatement of Existing Agreement..............................................................59 AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT
iii 5 SCHEDULES AND EXHIBITS Schedule 2.1 - Lenders and Committed Sums Schedule 2.2 - Swing Line Lenders and Swing Line Committed Sums Schedule 5.1 - Conditions Precedent to Closing Schedule 7.12 - Existing Debt Schedule 7.14 - Transactions with Affiliates Exhibit A-1 - Form of Amended and Restated Revolving Note Exhibit A-2 - Form of Amended and Restated Competitive Bid Note Exhibit A-3 - Form of Amended and Restated Swing Line Note Exhibit A-4 - Form of Term Note Exhibit B-1 - Form of Notice of Borrowing Exhibit B-2 - Form of Notice of Conversion Exhibit B-3 - Form of Term Conversion Request Exhibit B-4 - Form of Competitive Bid Request Exhibit B-5 - Form of Notice to Lenders of Competitive Bid Request Exhibit B-6 - Form of Competitive Bid Exhibit B-7 - Form of Swing Line Borrowing Request Exhibit C - Form of Administrative Questionnaire Exhibit D - Form of Compliance Certificate Exhibit E - Form of Assignment and Acceptance Agreement Exhibit F-1 - Form of Opinion of General Counsel of Borrower Exhibit F-2 - Form of Opinion of Special New York Counsel AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT iv 6 AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT THIS AGREEMENT is entered into as of August 5, 1999, among MCI WORLDCOM, INC. (formerly known as WORLDCOM, INC.), a Georgia corporation ("BORROWER"), certain Lenders (hereinafter defined), the Co-Syndication Agents (hereinafter defined), and BANK OF AMERICA, N.A., as a Lender and as Administrative Agent (hereinafter defined) for itself and the other Lenders. RECITALS A. Borrower has entered into the 364-Day Revolving Credit and Term Loan Agreement (as renewed, extended, or amended to date, the "EXISTING AGREEMENT") dated as of August 6, 1998, with Bank of America, N.A., formerly known as Bank of America National Trust and Savings Association, successor by merger to Bank of America, N.A., formerly known as NationsBank, N.A.(in its capacity as "Administrative Agent" thereunder and as a lender) and certain other lenders party thereto (together with Bank of America, N.A., the "EXISTING 364-DAY FACILITY LENDERS"), providing for, among other things, a revolving credit and term loan facility in the aggregate principal amount of $7,000,000,000. B. Subject to the terms and conditions set forth below, Borrower and Lenders desire to entirely amend, modify, and restate the Existing Agreement in order, among other things, to (i) extend the Termination Date to August 3, 2000 and (ii) provide for an increase in the Commitment Fee and Utilization Fee (hereinafter defined). C. The amendment and restatement of the Existing Agreement hereunder is not intended by the parties to constitute either a novation or a discharge or satisfaction of the indebtedness and obligations under the Existing Agreement, which indebtedness and obligations under the Existing Agreement shall remain outstanding hereunder on the terms and conditions hereinafter provided. In consideration of the foregoing and the mutual covenants contained herein, Borrower, Bank of America, N.A. (in its capacity as Administrative Agent under this Agreement and the Existing Agreement), and Lenders agree that, effective upon the Closing Date, the Existing Agreement is amended and restated in its entirety, as follows: SECTION 1 DEFINITIONS AND TERMS. 1.1 Definitions. As used herein: 364-DAY FACILITY means the revolving credit and term loan facility (including any extension of the facility as permitted herein) described in and subject to the limitations of this Agreement. ACCOUNTS RECEIVABLE FINANCING means any transaction or series of transactions that may be entered into by any Consolidated Company pursuant to which such Consolidated Company may sell, convey, grant a security interest in, or otherwise transfer, undivided percentage interests in the Receivables Program Assets; provided that, for purposes of determinations made pursuant to SECTIONS 7.13(G) and 7.19(D), any Accounts Receivable Financing involving a sale of Receivables Program Assets to the Receivables Subsidiary by any Restricted Company and a subsequent substantially concurrent resale of such Receivables Program Assets, or an interest therein, to a third party shall be treated as a single Accounts Receivable Financing transaction. ACCOUNTS RECEIVABLE FINANCING AMOUNT means, with respect to any Accounts Receivable Financing and without duplication, the aggregate outstanding principal amount of the undivided percentage interests in the Receivables Program Assets, representing Rights to be paid a specified principal amount from such Receivables Program Assets. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 7 ADJUSTED EURODOLLAR RATE means, for any Eurodollar Rate Borrowing for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by the Administrative Agent to be equal to the quotient obtained by dividing (a) the Eurodollar Rate for such Eurodollar Rate Borrowing for such Interest Period by (b) 1 minus the Reserve Requirement for such Eurodollar Rate Borrowing for such Interest Period. ADMINISTRATIVE AGENT means Bank of America, N.A. and its permitted successor or successors as administrative agent and arranging agent for Lenders under this Agreement. ADMINISTRATIVE QUESTIONNAIRE means an Administrative Questionnaire substantially in the form of EXHIBIT C hereto, which each Lender shall complete and provide to Administrative Agent. AFFILIATE of any Person means any other individual or entity who directly or indirectly controls, or is controlled by, or is under common control with, such Person, and, for purposes of this definition only, "control," "controlled by," and "under common control with" mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of voting securities, by contract, or otherwise). AGENTS means, collectively, Administrative Agent and Co-Syndication Agents under this Agreement. AGREEMENT means this Amended and Restated 364-Day Revolving Credit and Term Loan Agreement and all Exhibits and Schedules hereto, as each may be amended, modified, supplemented, or restated from time to time. ALTERNATE RATE means on any date of determination, for any Swing Line Borrowing, the sum of (i) the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Dow Jones Markets Page 3750 (or any successor page) as the London interbank offered rate for 30-day deposits in Dollars at approximately 11:00 a.m. Dallas, Texas time on the date of such Swing Line Borrowing plus (ii) the Applicable Margin for Eurodollar Rate Borrowings in effect on such date of determination. If for any reason such rate is not available, the term "Alternate Rate" shall mean for any Swing Line Borrowing, the sum of (i) the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for 30-day deposits in Dollars at approximately 11:00 a.m., Dallas, Texas time, on the date of such Swing Line Borrowing; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%) plus (ii) the Applicable Margin for Eurodollar Rate Borrowings in effect on such date of determination. ALTERNATE RATE SWING LINE BORROWING has the meaning as defined in SECTION 2.2(A). APPLICABLE LENDING OFFICE means, for each Lender and for each Type of Borrowing, the "Lending Office" of such Lender (or an Affiliate of such Lender) designated on SCHEDULE 2.1 attached hereto or such other office that such Lender (or an Affiliate of such Lender) may from time to time specify to Administrative Agent and Borrower by written notice in accordance with the terms hereof. APPLICABLE MARGIN means the lowest percentage set forth in the table below for the Type of Borrowing or Commitment Fees (as the case may be) which corresponds to Borrower's conformity, on any date of determination, with the ratings (or implied ratings) established by both S&P and Moody's applicable to Borrower's senior, unsecured, non-credit-enhanced, long term indebtedness for borrowed money ("INDEX DEBT"): AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 2 8
- ---------------------------------------------------------------------------------------------------------- APPLICABLE MARGIN ============================================================= EURODOLLAR RATINGS BASE RATE RATE COMMITMENT BORROWINGS BORROWINGS FEES ============================================ ==================== ==================== =================== Category 1 A or higher by S&P; 0.0000% 0.2250% 0.0600% A2 or higher by Moody's - -------------------------------------------- -------------------- -------------------- ------------------- Category 2 A- by S&P; 0.0000% 0.2500% 0.0700% A3 by Moody's - -------------------------------------------- -------------------- -------------------- ------------------- Category 3 BBB+ by S&P; 0.0000% 0.3500% 0.1000% Baa1 by Moody's - -------------------------------------------- -------------------- -------------------- ------------------- Category 4 BBB by S&P; 0.0000% 0.4000% 0.1250% Baa2 by Moody's - -------------------------------------------- -------------------- -------------------- ------------------- Category 5 0.0000% 0.4500% 0.1500% BBB- or lower by S&P; Baa3 or lower by Moody's - -------------------------------------------- -------------------- -------------------- -------------------
(a) For purposes of determining the Applicable Margin, (i) if neither Moody's nor S&P shall have in effect a rating for Index Debt (other than by reason of the circumstances referred to in the last sentence of this paragraph), then both such rating agencies will be deemed to have established ratings for Index Debt in Category 5; (ii) if only one of Moody's or S&P shall have in effect a rating for Index Debt, Borrower and the Lenders will negotiate in good faith to agree upon another rating agency to be substituted by an agreement for the rating agency which shall not have a rating in effect, and in the absence of such agreement the Applicable Margin will be determined by reference to the available rating; (iii) if the ratings established by Moody's and S&P shall differ by one Category, the Applicable Margin shall be determined by reference to the numerically lower Category: (for example, if the rating from S&P is in Category 1 and the rating from Moody's is in Category 2, the Applicable Margin shall be determined by reference to Category 1); (iv) if the ratings established by Moody's and S&P shall differ by more than one Category, the Applicable Margin shall be determined by reference to the Category that is one numerical Category lower than the numerically higher of the two Categories corresponding to the ratings established by the two rating agencies: (for example, if the rating from S&P is in Category 2 and the rating from Moody's is in Category 5, the Applicable Margin shall be determined by reference to Category 4); and (v) if any rating established by Moody's or S&P shall be changed (other than as a result of a change in the rating system of either Moody's or S&P), such change shall be effective as of the date on which such change is first announced by the rating agency making such change. If the rating system of either Moody's or S&P shall change prior to the payment in full of the Obligation and the cancellation of all commitments to lend hereunder, Borrower and the Lenders shall negotiate in good faith to amend the references to specific ratings in this definition to reflect such changed rating system. If both Moody's and S&P shall cease to be in the business of rating corporate debt obligations, Borrower and the Lenders shall negotiate in good faith to agree upon a substitute rating agency and to amend the references to specific ratings in this definition to reflect the ratings used by such substitute rating agency. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 3 9 (b) On any date of determination of the Applicable Margin for Eurodollar Rate Borrowings, if the sum of the "Facility A Commitment Usage" (as such term is defined in the Facility A Agreement) and the Principal Debt exceeds an amount equal to 331/3% (but less than 662/3%) of the Total Commitment, then the Applicable Margin for Eurodollar Rate Borrowings shall be increased by 0.100% (the "UTILIZATION FEE"); provided that, if the sum of the "Facility A Commitment Usage" (as such term is defined in the Facility A Agreement) and the Principal Debt equals or exceeds an amount equal to 662/3% of the Total Commitment, then such Utilization Fee shall be increased to 0.200%. ARRANGER means Banc of America Securities LLC, and its successors and assigns in its capacity as "Sole Lead Arranger" under the Loan Papers. AUTHORIZATIONS means all filings, recordings, and registrations with, and all validations or exemptions, approvals, orders, authorizations, consents, franchises, licenses, certificates, and permits from, any Governmental Authority (including, without limitation, the FCC and applicable PUCs), including without limitation, any of the foregoing authorizing or permitting the acquisition, construction, or operation of network facilities or any other telecommunications system. BANK OF AMERICA means Bank of America, N.A., in its individual capacity as a Lender and its successors and assigns. BASE RATE means, for any day, the rate per annum equal to the higher of (a) the Federal Funds Rate for such day plus one-half of one percent (.5%) and (b) the Prime Rate for such day. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or Federal Funds Rate. BASE RATE BORROWING means a Borrowing bearing interest at the sum of the Base Rate plus the Applicable Margin for Base Rate Borrowings. BORROWER is defined in the preamble to this Agreement. BORROWING means any amount disbursed (a) by one or more Lenders to Borrower under the Loan Papers (whether under the Competitive Bid Subfacility, the Swing Line Subfacility, or otherwise), whether such amount constitutes an original disbursement of funds or the continuation of an amount outstanding, or (b) by any Lender in accordance with, and to satisfy the obligations of any Restricted Company under, any Loan Paper. BORROWING DATE is defined in SECTION 2.7(A). BUSINESS DAY means (a) for all purposes, any day other than Saturday, Sunday, and any other day on which commercial banking institutions are required or authorized by Law to be closed in Dallas, Texas, or New York, New York and (b) in addition to the foregoing, in respect of any Eurodollar Rate Borrowing, a day on which dealings in United States dollars are conducted in the London interbank market and commercial banks are open for international business in London. CAPITAL LEASE means any capital lease or sublease which should be capitalized on a balance sheet in accordance with GAAP. CLOSING DATE means the date upon which this Agreement has been executed by Borrower, Lenders, and Administrative Agent, and all conditions precedent specified in SECTION 5.1 have been satisfied or waived. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 4 10 CO-SYNDICATION AGENTS means Barclays Bank PLC, The Chase Manhattan Bank, Citibank, N.A., Morgan Guaranty Trust Company of New York, and Royal Bank of Canada. CODE means the Internal Revenue Code of 1986, as amended, together with rules and regulations promulgated thereunder. COMMITMENT means an amount (subject to availability, reduction, or cancellation as provided in this Agreement) equal to $7,000,000,000. COMMITMENT FEE is defined in SECTION 4.3. COMMITTED SUM means, on any date of determination for any Lender, the amount stated beside its name on the most recently amended SCHEDULE 2.1 to the Agreement (which amount is subject to availability, increase, reduction, or cancellation in accordance with this Agreement.) COMPETITIVE BID means an offer by a Lender to fund a Borrowing under the Competitive Bid Subfacility pursuant to SECTION 2.3. COMPETITIVE BID NOTE means a promissory note in substantially the form of EXHIBIT A-2 and all renewals and extensions of all or any part thereof. COMPETITIVE BID RATE means, as to any Competitive Bid made by a Lender pursuant to SECTION 2.3, (a) in the case of a Eurodollar Rate Borrowing, the margin which shall be added to or subtracted from the Adjusted Eurodollar Rate, and (b) in the case of a Fixed Rate Borrowing, the fixed rate of interest, in each case offered by the Lender making such Competitive Bid. COMPETITIVE BID REQUEST means a request for Competitive Bids made pursuant to SECTION 2.3(B) substantially in the form of EXHIBIT B-4. COMPETITIVE BID SUBFACILITY means a subfacility of this 364-Day Facility as described in and subject to the limitations of SECTION 2.3. COMPETITIVE BORROWING means any Borrowing under the Competitive Bid Subfacility. COMPLIANCE CERTIFICATE means a certificate signed by a Responsible Officer, substantially in the form of EXHIBIT D. CONSEQUENTIAL LOSS means any loss or expense which any Lender may reasonably incur in respect of a Eurodollar Rate Borrowing or a Fixed Rate Borrowing as a consequence of (a) any failure or refusal of Borrower (for any reasons whatsoever other than a default by Administrative Agent or a Lender) to accept or utilize such Borrowing after Borrower shall have requested it under this Agreement, or (b) any prepayment or payment of such Borrowing or conversion of such Borrowing to a Borrowing of another Type, in each case, prior to the last day of the Interest Period therefor. CONSOLIDATED COMPANIES means, at any date of determination thereof, Borrower and each of its Subsidiaries (including the Unrestricted Subsidiaries). CONSOLIDATED NET WORTH means, for any period, the consolidated stockholders' equity of the Restricted Companies as determined in accordance with GAAP. CURRENT FINANCIALS means, at the time of any determination thereof, the more recently delivered to Lenders of (a) the Financial Statements of Borrower for the fiscal year ended December 31, 1998, and the AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 5 11 three-month period ended March 31, 1999, calculated on a consolidated basis for Borrower and the Consolidated Companies; or (b) the Financial Statements required to be delivered under SECTION 7.3(A) or 7.3(B), as the case may be, calculated on a consolidated basis for the Consolidated Companies. DEBT means (without duplication), for any Person, the sum of the following: (a) all liabilities, obligations, and indebtedness of such Person which in accordance with GAAP should be classified upon such Person's balance sheet as liabilities in respect of (i) money borrowed, including, without limitation, the Principal Debt, (ii) obligations of such Person under Capital Leases, and (iii) obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations, and obligations under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (b) all obligations of the type referred to in CLAUSES (A)(I) through (A)(III) preceding of other Persons for the payment of which such Person is responsible or liable as obligor, guarantor, or otherwise; (c) all obligations of the type referred to in CLAUSES (A)(I) through CLAUSE (A)(III) and CLAUSE (B) preceding of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured; (d) the face amount of all letters of credit and banker's acceptances issued for the account of such Person, and without duplication, all drafts drawn and unpaid thereunder; and (e) obligations arising under any Accounts Receivable Financing which in accordance with GAAP should be classified upon such Person's balance sheet as liabilities; provided, however, that Debt shall not include obligations of Borrower which are owed to a trust or other special purpose entity, all of whose common equity is beneficially owned by Borrower, so long as such obligations are held by such trusts or their representatives and are subordinate in right of payment to the Obligation. DEBTOR RELIEF LAWS means the Bankruptcy Code of the United States of America and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, fraudulent transfer or conveyance, suspension of payments or similar Laws from time to time in effect affecting the Rights of creditors generally. DEFAULT is defined in SECTION 8. DEFAULT RATE means a per annum rate of interest equal from day to day to the lesser of (a) the sum of the Base Rate plus the Applicable Margin for Base Rate Borrowings plus 2% and (b) the Maximum Rate. DETERMINING LENDERS means for all purposes under the Loan Papers (i) on any date of determination occurring prior to the earlier of the Term Conversion Date or the Termination Date, those Lenders who collectively hold at least 51% of the Commitment; and (ii) on any date of determination occurring on or after the earlier of the Termination Date or the Term Conversion Date, those Lenders who collectively hold at least 51% of the Principal Debt. DISTRIBUTION for any Person means, with respect to any shares of any capital stock or other equity securities issued by such Person, (a) the retirement, redemption, purchase, or other acquisition for value of any such securities, (b) the declaration or payment of any dividend on or with respect to any such securities, and (c) any other payment by such Person with respect to such securities. DOLLARS and the symbol $ shall mean lawful money of the United States of America. ELIGIBLE ASSIGNEE means (a) a Lender; (b) an Affiliate of a Lender (so long as such assignment is not made in conjunction with the sale of such Affiliate); and (c) any other Person approved by Administrative Agent (which approval will not be unreasonably withheld or delayed by Administrative Agent) and, unless a Default has occurred and is continuing at the time any assignment is effected in accordance with SECTION 11.13, Borrower, such approval not to be unreasonably withheld or delayed by Borrower and such approval to be deemed given by Borrower if no objection is received by the assigning Lender and the Administrative Agent AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 6 12 from Borrower within five Business Days after notice of such proposed assignment has been provided by the assigning Lender to Borrower; provided, however, that neither Borrower nor any Affiliate of Borrower shall qualify as an Eligible Assignee. EMPLOYEE PLAN means an employee pension benefit plan covered by Title IV of ERISA and established or maintained by Borrower or any ERISA Affiliate, but not including any Multiemployer Plan. ENVIRONMENTAL LAW means any applicable Law that relates to (a) the condition or protection of air, groundwater, surface water, soil, or other environmental media, (b) the environment, including natural resources or any activity which affects the environment, (c) the regulation of any pollutants, contaminants, wastes, substances, and Hazardous Substances, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.) ("CERCLA"), the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.) ("RCRA"), the Clean Water Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42 U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et seq.), the Safe Drinking Water Act (42 U.S.C. ss. 201 and ss. 300f et seq.) and the Rivers and Harbors Act (33 U.S.C. ss. 401 et seq.), the Oil Pollution Act (33 U.S.C. ss. 2701 et seq.) and analogous state and local Laws, as any of the foregoing may have been and may be amended or supplemented from time to time, and any analogous future enacted or adopted Law, or (d) the Release or threatened Release of Hazardous Substances. ERISA means the Employee Retirement Income Security Act of 1974, as amended, and the regulations and rulings thereunder. ERISA AFFILIATE means, with respect to Borrower or any of its Subsidiaries, any company, trade, or business (whether or not incorporated) which, for purposes of Title IV of ERISA, is a member of Borrower's controlled group or which is under common control with Borrower within the meaning of Section 414(b), (c) or (m) of the Code. EURODOLLAR RATE means, for any Eurodollar Rate Borrowing for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Dow Jones Markets Page 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the term "Eurodollar Rate" shall mean, for any Eurodollar Rate Borrowing for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%). EURODOLLAR RATE BORROWING means, as the case may be, either (a) a Borrowing (other than a Competitive Borrowing) bearing interest at the sum of the Adjusted Eurodollar Rate plus the Applicable Margin for Eurodollar Rate Borrowings or (b) a Competitive Borrowing bearing interest at the sum of the Adjusted Eurodollar Rate plus or minus the margin indicated for such Competitive Borrowing in the related Competitive Bid. EXHIBIT means an exhibit to this Agreement unless otherwise specified. EXISTING AGREEMENT is defined in the Recitals to this Agreement. EXISTING 364-DAY LENDERS is defined in the Recitals of this Agreement. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 7 13 EXISTING DEBT means on any date of determination, (a) the secured and unsecured Debt of Borrower and its Restricted Subsidiaries existing on August 6, 1998 and described in PART A of SCHEDULE 7.12, (b) on and after September 14, 1998 (the "MCI Merger Date" under the Existing Agreement), the secured and unsecured Debt of MCI and its Subsidiaries existing on that date and described in PART B of SCHEDULE 7.12, and (c) renewals, extensions, and refinancings of any of the Existing Debt described in CLAUSES (A) and (B) to the extent that the principal amount under (or the maximum principal amount that may be borrowed under) such Existing Debt is not increased on or after the Closing Date. FACILITY A means the credit facility described in and subject to the limitations of the Facility A Agreement. FACILITY A AGREEMENT means the Amended and Restated Facility A Revolving Credit Agreement dated August 6, 1998, among Borrower, NationsBank, N.A., predecessor in interest to Bank of America, N.A., as "Administrative Agent" thereunder, and the lenders party thereto (as the same may be amended, modified, supplemented, or restated from time to time). FACILITY A COMMITMENT means an amount (subject to availability, reduction, or cancellation as provided in the Facility A Agreement) equal to $3,750,000,000. FCC means the Federal Communications Commission and any successor regulatory body. FEDERAL FUNDS RATE means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined (which determination shall be conclusive and binding, absent manifest error) by Administrative Agent to be equal to the weighted average of the rates on overnight Federal funds transactions with member banks of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to the Administrative Agent (in its individual capacity) on such day on such transactions as determined by the Administrative Agent (which determination shall be conclusive and binding, absent manifest error). FINANCIAL HEDGE means either (a) a swap, collar, floor, cap, or other contract which is intended to reduce or eliminate the risk of fluctuations in interest rates, or (b) a foreign exchange, currency hedging, commodity hedging, or other contract which is intended to reduce or eliminate the market risk of holding currency or a commodity in either the cash or futures markets, which Financial Hedge under either CLAUSE (A) or CLAUSE (B) is entered into by any Restricted Company with any Lender or an Affiliate of any Lender or any other Person under the Laws of a jurisdiction in which such contracts are legal and enforceable (except as enforceability may be limited by applicable Debtor Relief Laws and general principles of equity). FINANCIAL STATEMENTS means balance sheets, statements of operations, statements of shareholders' investments, and statements of cash flows prepared in accordance with GAAP, which statements of operations and statements of cash flows shall be in comparative form to the corresponding period of the preceding fiscal year, and which balance sheets and statements of shareholders' investments shall be in comparative form to the prior fiscal year-end figures. FIXED RATE BORROWING means any Competitive Borrowing made from a Lender pursuant to SECTION 2.3 based upon an actual percentage rate per annum offered by such Lender, expressed as a decimal (to no more than four decimal places) and accepted by Borrower. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 8 14 GAAP means generally accepted accounting principles of the Accounting Principles Board of the American Institute of Certified Public Accountants and the Financial Accounting Standards Board which (a) with respect to the covenant contained in SECTION 7.22 (and, to the extent used in or relating to such covenant, any defined terms), are in effect on the date hereof, and (b) for all other purposes hereunder, are applicable from time to time. GOVERNMENTAL AUTHORITY means any (a) local, state, municipal, or federal judicial, executive, or legislative instrumentality, (b) private arbitration board or panel, or (c) central bank. GRANTING BANK has the meaning specified in SECTION 11.13(H). HAZARDOUS SUBSTANCE means (a) any substance that is designated, defined or classified as a hazardous waste, hazardous material, pollutant, contaminant or toxic or hazardous substance under any Environmental Law, including without limitation, any hazardous substance within the meaning of Section 101(14) of CERCLA, (b) petroleum, oil, gasoline, natural gas, fuel oil, motor oil, waste oil, diesel fuel, jet fuel, and other petroleum hydrocarbons, (c) regulated asbestos and asbestos-containing materials in any form, (d) polychlorinated biphenyls, or (e) urea formaldehyde foam. INDENTURES means any indentures or other agreements pursuant to which notes, debentures, bonds, or debt securities are issued by any Restricted Company, including, without limitation, the following: Indenture dated as of March 1, 1997, between Borrower and The Chase Manhattan Trust Company, N.A., as successor trustee; Indenture dated as of January 23, 1996 between MFS Communications Company, Inc. and IBJ Schroder Bank & Trust Co., as trustee; Indenture dated as of February 26, 1996, between Brooks Fiber Properties, Inc. and The Bank of New York, as trustee; and Indenture dated as of May 29, 1997, between Brooks Fiber Properties, Inc. and The Bank of New York, as trustee, Indenture dated as of October 15, 1989, between MCI and Citibank, N.A., as trustee; Indenture dated as of February 17, 1995, between MCI and Citibank, N.A., as trustee; and Junior Subordinated Indenture dated as of May 29, 1996, between MCI and Wilmington Trust Company, as trustee, in each case as the same have been or may be amended, modified, supplemented or restated from time to time. INTEREST PERIOD is determined in accordance with SECTION 3.9. LAWS means all applicable statutes, laws, treaties, ordinances, tariff requirements, rules, regulations, orders, writs, injunctions, decrees, judgments, opinions, or interpretations of any Governmental Authority. LENDERS means, on any date of determination, the financial institutions named on SCHEDULE 2.1 (as the same may be amended from time to time by Administrative Agent to reflect the assignments made in accordance with SECTION 11.13(C) of this Agreement), and subject to the terms and conditions of this Agreement, their respective successors and assigns, but not any Participant who is not otherwise a party to this Agreement. LIEN means any lien, mortgage, security interest, pledge, assignment, charge, title retention agreement, or encumbrance of any kind, and any other Right of or arrangement with any creditor (other than under or relating to subordination or other intercreditor arrangements) to have its claim satisfied out of any property or assets, or the proceeds therefrom, prior to the general creditors of the owner thereof. LITIGATION means any action by or before any Governmental Authority. LOAN PAPERS means (a) this Agreement, certificates delivered pursuant to this Agreement, and Exhibits and Schedules hereto, (b) all agreements, documents, or instruments in favor of Agents or Lenders (or Administrative Agent on behalf of Lenders) delivered pursuant to this Agreement or otherwise delivered in AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 9 15 connection with all or any part of the Obligation, and (c) all renewals, extensions, or restatements of, or amendments or supplements to, any of the foregoing. MATERIAL ADVERSE EVENT means any set of one or more circumstances or events which, individually or collectively, could reasonably be expected to result in any (a) material impairment of the ability of any Restricted Company to perform any of its payment or other material obligations under the Loan Papers or the ability of Administrative Agent or any Lender to enforce any such obligations or any of their respective Rights under the Loan Papers, (b) material and adverse effect on the business, properties, condition (financial or otherwise) or results of operations of the Restricted Companies, in each case considered as a whole, or (c) material and adverse effect on the business, properties, condition (financial or otherwise) or results of operations of the Consolidated Companies, in each case considered as a whole. The phrase "could be a Material Adverse Event" (and any similar phrase herein) means that there is a material probability of such Material Adverse Event occurring, and the phrase "could not be a Material Adverse Event" (and any similar phrase herein) means that there is not a material probability of such Material Adverse Event occurring. MATERIAL SUBSIDIARY means, for purposes of SECTION 8.3, any Subsidiary of Borrower (or any group of Subsidiaries of Borrower) that individually or collectively own 10% or more of the book value of the consolidated assets of the Restricted Companies determined as of the date of, and with respect to, the Current Financials and the related Compliance Certificate. MAXIMUM AMOUNT and MAXIMUM RATE respectively mean, for each Lender, the maximum non-usurious amount and the maximum non-usurious rate of interest which, under applicable Law, such Lender is permitted to contract for, charge, take, reserve, or receive on the Obligation. MCI means MCI Communications Corporation. MOODY'S means Moody's Investors Service, Inc. or any successor thereto. MULTIEMPLOYER PLAN means a multiemployer plan as defined in Sections 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code to which any Restricted Company or any ERISA Affiliate is making, or has made, or is accruing, or has accrued, an obligation to make contributions. NOTES means, at the time of any determination thereof, all outstanding and unpaid Revolving Notes, Competitive Bid Notes, Term Notes, and the Swing Line Notes. NOTICE OF BORROWING is defined in SECTION 2.7(A). NOTICE OF CONVERSION is defined in SECTION 3.10. OBLIGATION means all present and future indebtedness, liabilities, and obligations, and all renewals and extensions thereof, or any part thereof, now or hereafter owed to any Agent, or any Lender by any Restricted Company arising from, by virtue of, or pursuant to any Loan Paper, together with all interest accruing thereon, fees, costs, and expenses (including, without limitation, all reasonable attorneys' fees and expenses incurred in the enforcement or collection thereof) payable under the Loan Papers. PARTICIPANT is defined in SECTION 11.13(E). PBGC means the Pension Benefit Guaranty Corporation, or any successor thereof, established pursuant to ERISA. PERCENTAGE PART means, at the time of any determination, the proportion which any Swing Line Lender's Swing Line Committed Sum bears to the Swing Line Commitment then in effect. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 10 16 PERMITTED SUCCESSOR CORPORATION means any corporation into which Borrower is merged or consolidated, so long as: (a) immediately after giving effect to such merger or consolidation, the surviving corporation shall have then-effective ratings (or implied ratings) published by Moody's and S&P applicable to such surviving corporation's senior, unsecured, non-credit-enhanced, long term Debt, equal to or higher than BBB- by S&P, and Baa3 by Moody's; (b) such surviving corporation shall be a corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia, and shall expressly assume all of Borrower's obligations for the due and punctual payment of the Obligation and the performance or observance of the Loan Papers; (c) immediately after giving effect to such merger or consolidation, no Default or Potential Default shall have occurred and be continuing; (d) Borrower shall have delivered to Administrative Agent a certificate signed by a Responsible Officer of Borrower and a written opinion of counsel satisfactory to the Administrative Agent (and its counsel), each stating that such merger or consolidation complies with the requirements for a Permitted Successor Corporation and that all conditions precedent herein provided for relating to such merger or consolidation have been satisfied; (e) No "Change of Control" (as described in SECTION 8.6) has occurred as a result of such merger or consolidation; and (f) on and prior to the closing of any such merger or consolidation, such merger and consolidation shall have been approved and recommended by the Board of Directors of Borrower. PERSON means any individual, entity, or Governmental Authority. POTENTIAL DEFAULT means the occurrence of any event or existence of any circumstance which, with the giving of notice or lapse of time or both, would become a Default. PRIME RATE means the per annum rate of interest established from time to time by Bank of America, N.A. as its prime rate, which rate may not be the lowest rate of interest charged by Bank of America, N.A. to its customers. PRINCIPAL DEBT means, on any date of determination, the aggregate unpaid principal balance of all Borrowings under this Agreement. PRO RATA or PRO RATA PART means on any date of determination for any Lender, (a) at any time prior to the earlier of the Termination Date or the Term Conversion Date, the proportion that such Lender's Committed Sum bears to the Commitment, or (b) at any time on or after the earlier of the Termination Date or the Term Conversion Date, the proportion that the Principal Debt owed to such Lender bears to the Principal Debt owed to all Lenders; provided that with respect to any principal or interest payments on any Competitive Borrowing, Pro Rata or Pro Rata Part means the proportion that the outstanding principal amount or accrued and unpaid interest (as the case may be) owed to any Lender participating in such Competitive Borrowing bears to the total principal amount outstanding or accrued and unpaid interest (as the case may be) owed to all Lenders participating in such Competitive Borrowing. PUC means any state or local regulatory agency or Governmental Authority that exercises jurisdiction over the rates or services or the ownership, construction, or operation of network facilities or AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 11 17 telecommunications systems or over Persons who own, construct, or operate network facilities or telecommunications systems. QUOTED SWING LINE BORROWINGS has the meaning as defined in SECTION 2.2(A). QUOTED SWING LINE RATE has the meaning as defined in SECTION 2.2(A). RECEIVABLES means all Rights of any Consolidated Company (as a "Seller" under Receivables Documents) to payments (whether constituting accounts, chattel paper, instruments, general intangibles, or otherwise, and including the Right to payment of any interest or finance charges) with respect to dedicated telecommunications services provided by any such Consolidated Company to its customers between designated customer premises. RECEIVABLES DOCUMENTS means one or more receivables purchase agreements entered into by one or more Consolidated Companies and each other instrument, agreement, and document entered into by such Consolidated Companies evidencing Accounts Receivable Financings. RECEIVABLES PROGRAM ASSETS means (a) all Receivables in which undivided percentage interests are transferred by any Consolidated Company pursuant to the Receivables Documents, (b) all Receivables Related Assets with respect to the Receivables described in CLAUSE (A) of this definition, and (c) all collections (including recoveries) and other proceeds of the assets described in the foregoing clauses. RECEIVABLES RELATED ASSETS means (a) any Rights arising under the documentation governing or relating to Receivables (including Rights in respect of Liens securing such Receivables and other credit support in respect of such Receivables), (b) any proceeds of such Receivables and any lockboxes or accounts in which such proceeds are deposited, and (c) spread accounts and other similar accounts (and any amounts on deposit therein) established in connection with an Accounts Receivable Financing. RECEIVABLES SUBSIDIARY means a special purpose Wholly-owned Subsidiary created in connection with the transactions contemplated by an Accounts Receivable Financing, which Subsidiary engages in no activities, has no material liabilities, or owns no other assets, other than those incidental to such Accounts Receivable Financing. REGISTER is defined in SECTION 11.13(C). REGULATION D means Regulation D of the Board of Governors of the Federal Reserve System, as amended. REGULATION U means Regulation U of the Board of Governors of the Federal Reserve System, as amended. RELEASE means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposal, deposit, dispersal, migrating, or other movement into the air, ground, or surface water, or soil. REPORTABLE EVENT shall have the meaning specified in Section 4043 of ERISA or the regulations issued thereunder in connection with an Employee Plan, excluding events for which the notice requirement is waived under applicable PBGC regulations other than those events described in sections 4043.21, 4043.24 and 4043.28 of such regulations, including each such provision as it may subsequently be renumbered. REPRESENTATIVES means representatives, officers, directors, employees, attorneys, and agents. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 12 18 RESERVE REQUIREMENT means, at any time, the maximum rate at which reserves (including, without limitation, any marginal, special, supplemental, or emergency reserves) are required to be maintained under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) by member banks of the Federal Reserve System against, in the case of Eurodollar Rate Borrowings, "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by such member banks with respect to (a) any category of liabilities which includes deposits by reference to which the Adjusted Eurodollar Rate is to be determined, or (b) any category of extensions of credit or other assets which include Eurodollar Rate Borrowings. The Adjusted Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve Requirement. RESPONSIBLE OFFICER means the chairman, president, chief executive officer, chief financial officer, senior vice president, or treasurer of Borrower, or, for all purposes under the Loan Papers other than SECTION 8.6, any other officer designated from time to time by the Board of Directors of Borrower, which designated officer is acceptable to Administrative Agent. RESTRICTED COMPANIES, at any time of determination thereof, means Borrower and the Restricted Subsidiaries. RESTRICTED SUBSIDIARIES means each of the Subsidiaries of Borrower (other than the Unrestricted Subsidiaries). REVOLVING NOTE means a promissory note in substantially the form of EXHIBIT A-1, and all renewals and extensions of all or any part thereof. RIGHTS means rights, remedies, powers, privileges, and benefits. RIGHTS OF WAY means the easements, rights of way, and other rights entitling the Restricted Companies to own, use, operate, and maintain the network facilities. S&P means Standard & Poor's Rating Group, a division of McGraw Hill, Inc., a New York corporation. SPC has the meaning specified in SECTION 11.13(H). SCHEDULE means, unless specified otherwise, a schedule attached to this Agreement, as the same may be supplemented and modified from time to time in accordance with the terms of the Loan Papers. SOLVENT means, as to a Person, that (a) the aggregate fair market value of such Person's assets exceeds its liabilities (whether contingent, subordinated, unmatured, unliquidated, or otherwise), (b) such Person has sufficient cash flow to enable it to pay its Debts as they mature, and (c) such Person does not have unreasonably small capital to conduct such Person's businesses. SUBSIDIARY of any Person means any entity of which an aggregate of more than 50% (in number of votes) of the stock (or equivalent interests) is owned of record or beneficially, directly or indirectly, by such Person. SWING LINE BORROWING means any Borrowing under the Swing Line Subfacility, including Alternate Rate Swing Line Borrowings and Quoted Swing Line Borrowings. SWING LINE COMMITMENT means an amount (subject to availability, reduction, or cancellation as herein provided) equal to $175,000,000. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 13 19 SWING LINE COMMITTED SUM means, on any date of determination for any Swing Line Lender, the amount stated beside its name on the most-recently amended SCHEDULE 2.2 to this Agreement (which amount is subject to availability, increase, reduction, or cancellation in accordance with this Agreement). SWING LINE LENDERS means, collectively, Bank of America, those Lenders listed on SCHEDULE 2.2, and any Lender designated by Borrower as a "Swing Line Lender" pursuant to and in accordance with SECTION 2.2(G), and their respective permitted successors and assigns. SWING LINE NOTE means a promissory note in substantially the form of EXHIBIT A-3, and all renewals and extensions of all or any part thereof. SWING LINE PRINCIPAL DEBT means, on any date of determination, that portion of the Principal Debt outstanding under the Swing Line Subfacility. SWING LINE SUBFACILITY means the subfacility under this 364-Day Facility described in, and subject to the limitations of, SECTION 2.2. TAXES means, for any Person, taxes, assessments, or other governmental charges or levies imposed upon such Person, its income, or any of its properties, franchises, or assets. TERM CONVERSION DATE means the date upon which the Principal Debt is converted to a Term Loan in accordance with SECTION 2.5. TERM CONVERSION REQUEST is defined in SECTION 2.5(A). TERM LOAN means loans made by Lenders pursuant to SECTION 2.5. TERM LOAN MATURITY DATE has the meaning set forth in SECTION 2.5. TERM NOTE means a promissory note in substantially the form of EXHIBIT A-4, and all renewals and extensions of all or any part thereof. TERMINATION DATE means the earlier of (a) August 3, 2000, as such date may be extended pursuant to SECTION 2.4, and (b) the effective date of any other termination or cancellation of Lenders' Commitments to lend under, and in accordance with, this Agreement. TOTAL CAPITALIZATION means, on any date of determination, the sum of Total Debt and Consolidated Net Worth. TOTAL COMMITMENT means, on any date of determination, the sum of the Facility A Commitment and the Commitment. TOTAL DEBT means (without duplication) all Debt of the Restricted Companies; provided that, in determining "Total Debt," Debt arising under the 8.00% Junior Subordinated Deferrable Interest Debentures (the "DEBENTURES") issued by MCI pursuant to Supplemental Indenture No. 1 to the Junior Subordinated Indenture dated as of May 29, 1996, between MCI and Wilmington Trust Company, as Trustee (as the same have been or may be amended, modified, supplemented, or restated, but not increased from time to time) shall not be included, so long as no "Event of Default" under such Debentures or the related Indenture has occurred and is continuing on any date of determination. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 14 20 TYPE means any type of Borrowing determined with respect to the interest option applicable thereto. UNREFUNDED SWING LINE BORROWINGS has the meaning set forth in SECTION 2.2(D). UNRESTRICTED SUBSIDIARIES, at any time of determination thereof, shall mean (a) the Receivables Subsidiary and (b) any Subsidiary of Borrower designated as an "Unrestricted Subsidiary" from time to time in accordance with SECTION 7.21. UNRESTRICTED SUBSIDIARY, at any time of determination, shall mean any of the Unrestricted Subsidiaries. UTILIZATION FEE has the meaning set forth in CLAUSE (B) of the definition of "Applicable Margin" in this SECTION 1.1. VOTING STOCK shall mean securities (as such term is defined in Section 2(1) of the Securities Act of 1933, as amended) of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate directors (or Persons performing similar functions). WHOLLY-OWNED when used in connection with any Subsidiary shall mean a Subsidiary of which all of the issued and outstanding shares of stock (except shares required as directors' qualifying shares) shall be owned by Borrower or one or more of its Wholly-owned Subsidiaries. 1.2 Number and Gender of Words; Other References. Unless otherwise specified, in the Loan Papers (a) where appropriate, the singular includes the plural and vice versa, and words of any gender include each other gender, (b) heading and caption references may not be construed in interpreting provisions, (c) monetary references are to currency of the United States of America, (d) section, paragraph, annex, schedule, exhibit, and similar references are to the particular Loan Paper in which they are used, (e) references to "telecopy," "facsimile," "fax," or similar terms are to facsimile or telecopy transmissions, (f) references to "including" mean including without limiting the generality of any description preceding that word, (g) the rule of construction that references to general items that follow references to specific items are limited to the same type or character of those specific items is not applicable in the Loan Papers, (h) references to any Person include that Person's heirs, personal representatives, successors, trustees, receivers, and permitted assigns, (i) references to any Law include every amendment or supplement to it, rule and regulation adopted under it, and successor or replacement for it, and (j) references to any Loan Paper or other document include every renewal and extension of it, amendment and supplement to it, and replacement or substitution for it. 1.3 Accounting Principles. All accounting and financial terms used in the Loan Papers and the compliance with each financial covenant therein shall be determined in accordance with GAAP, and, all accounting principles shall be applied on a consistent basis so that the accounting principles in a current period are comparable in all material respects to those applied during the preceding comparable period. SECTION 2 BORROWING PROVISIONS. 2.1 The Facility. (a) Subject to and in reliance upon the terms, conditions, representations, and warranties in the Loan Papers, each Lender severally and not jointly agrees to lend to Borrower such Lender's Pro Rata Part of one or more Borrowings under this Agreement not to exceed such Lender's Committed Sum under this Agreement, which, subject to the Loan Papers, Borrower may borrow, repay, and reborrow under this Agreement; provided that (i) each such Borrowing must occur on a Business Day and no later than the Business Day immediately preceding the Termination Date; (ii) each such Borrowing shall be in an amount not less than (A) $5,000,000 or a greater integral multiple of AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 15 21 $1,000,000 (if a Base Rate Borrowing), (B) $10,000,000 or a greater integral multiple of $1,000,000 (if a Eurodollar Rate Borrowing), (C) $5,000,000 or a greater integral multiple of $1,000,000 (if a Competitive Borrowing), or (D) $1,000,000 or an integral multiple of $250,000 if in excess thereof (if a Swing Line Borrowing); and (iii) on any date of determination, the Principal Debt shall never exceed the Commitment. (b) On the Closing Date, this Agreement amends and restates the Existing Agreement; provided, however, that the execution and delivery of this Agreement and the other Loan Papers shall not in any circumstances be deemed to have terminated, extinguished, or discharged the Debt (if any) under the Existing Agreement all of which Debt (if any) shall continue under and be governed by this Agreement and the other Loan Papers. On the Effective Date, each Lender shall advance its respective Pro Rata Share of the first Borrowing (if any), which may be netted against its outstandings under the Existing Agreement and shall be used to repay all outstanding Debt (if any) under the Existing Agreement due the Existing 364-Day Lenders which are not Lenders under this Agreement. (c) Lenders hereby agree among themselves (and Borrower hereby consents to such agreement) that, concurrently with the Closing Date, there shall be deemed to have occurred assignments and assumptions with respect to the Obligation, liens, rights, and obligations under this Agreement and the other Loan Papers (including, without limitation, the Commitment and the Principal Debt) such that, after giving effect to such assignments and assumptions, the Lender's Committed Sum and the Commitment percentage are as stated on SCHEDULE 2.1, and the Lenders hereby make such assignments and assumptions. The Lenders shall make all appropriate payments and adjustments among themselves to effectuate the appropriate purchase price for and other amounts payable with respect to such assignments and assumptions. 2.2 Swing Line Subfacility. (a) Subject to the terms and conditions hereof and relying upon the representations and warranties herein set forth, each Swing Line Lender agrees, severally and not jointly, on and after the Closing Date and until the earlier of the Business Day immediately preceding the Termination Date or the termination of the Swing Line Committed Sum of such Swing Line Lender, (i) to make available to Borrower requested Swing Line Borrowings ("QUOTED SWING LINE BORROWINGS") on the basis of quoted interest rates (each, a "QUOTED SWING LINE RATE") furnished by such Swing Line Lender from time to time in its discretion to Borrower (through Administrative Agent) and accepted by Borrower in its discretion and (ii) to lend to Borrower such Swing Line Lender's Percentage Part of any requested Swing Line Borrowing ("ALTERNATE RATE SWING LINE BORROWINGS"), bearing interest at a rate equal to the Alternate Rate; provided that, (A) the aggregate Swing Line Principal Debt outstanding on any date of determination shall not exceed the Swing Line Commitment; (B) on any date of determination, the Principal Debt shall never exceed the Commitment; (C) at the time of such Swing Line Borrowing, no Default or Potential Default shall have occurred and be continuing; (D) no Swing Line Borrowing may be made on any date on which a Borrowing under this Agreement pursuant to SECTION 2.1 is being made; (E) no additional Swing Line Borrowings shall be made at any time after any Lender has refused, notwithstanding the requirements of SECTIONS 2.2(C) and (D), to either fund a Borrowing under this Agreement or to purchase a participation in the Swing Line Principal Debt as required in such Sections (such unavailability of the Swing Line Subfacility shall continue until such funding or purchase shall occur or until the Swing Line Principal Debt has been repaid); and (F) at any time after Lenders are deemed to have purchased a participation in any Unrefunded Swing Line Borrowing pursuant to SECTION 2.2(d), such Unrefunded Swing Line Borrowings shall bear interest at the Default Rate. On any date of determination, (i) as a result of Quoted Swing Line Borrowings, the Swing Line Principal Debt owed to any Swing Line Lender may exceed such Swing Line Lender's Swing Line Committed Sum and (ii) as a result of Swing Line Borrowings, the Principal Debt owed to any Swing Line Lender may exceed its Commitment. Each AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 16 22 Quoted Swing Line Borrowing shall be made only by the Swing Line Lender furnishing the relevant Quoted Swing Line Rate. Each Alternate Rate Swing Line Borrowing shall be made by all Swing Line Lenders ratably in accordance with their respective Percentage Parts. Swing Line Borrowings shall be made in a minimum aggregate principal amount of $1,000,000 or an integral multiple of $250,000 if in excess thereof (or an aggregate principal amount equal to the remaining balance of the available Swing Line Commitment). Each Swing Line Lender shall make the portion of each Swing Line Borrowing to be made by it available to Borrower by means of a credit to the general deposit account of Borrower with Administrative Agent or by a wire transfer, at the expense of Borrower, to an account designated in writing by Borrower, in each case by 2:30 p.m, Dallas, Texas time, on the date such Swing Line Borrowing is requested to be made pursuant to SECTION 2.2(B) below, in immediately available funds. Borrower may borrow, prepay, and reborrow Swing Line Borrowings on or after the Closing Date and prior to the Termination Date (or such earlier date on which the Swing Line Commitment shall terminate in accordance herewith) on the terms and subject to the conditions and limitations set forth herein. (b) Borrowings under the Swing Line Subfacility shall be subject to those terms and conditions applicable to Borrowings as set forth in SECTIONS 5.2(C), (D), (E), and (F). Borrower shall give Administrative Agent telephonic, written, or telecopy notice substantially in the form of EXHIBIT B-7 (provided that, in the case of telephonic notice, such notice shall be promptly confirmed by telecopy) no later than 1:30 p.m., Dallas, Texas time (or, in the case of a proposed Quoted Swing Line Borrowing, 11:00 a.m., Dallas, Texas time), on the day of a proposed Swing Line Borrowing. Such notice shall be delivered on a Business Day, shall be irrevocable (subject, in the case of Quoted Swing Line Borrowings, to receipt by Borrower of Quoted Swing Line Rates acceptable to it) and shall refer to this Agreement and shall specify the requested Borrowing Date (which shall be a Business Day) and the amount of such requested Swing Line Borrowing. Administrative Agent shall promptly advise the Swing Line Lenders of any notice received from Borrower pursuant to this SECTION 2.2(B). In the event that Borrower accepts a Quoted Swing Line Rate in respect of a requested Quoted Swing Line Borrowing, Borrower shall notify Administrative Agent (which shall in turn notify the relevant Swing Line Lender) of such acceptance no later than 1:30 p.m., Dallas, Texas time, on the relevant Borrowing Date. (c) Upon the occurrence of a Default or in the event that any Swing Line Borrowing shall be outstanding for more than five Business Days, Administrative Agent shall, on behalf of Borrower (which hereby irrevocably directs and authorizes Administrative Agent to act on its behalf), request a Base Rate Borrowing from the Lenders, including the Swing Line Lenders (and each Lender shall fund its Pro Rata Part of), in an amount sufficient to repay the Swing Line Principal Debt outstanding under such Swing Line Borrowing; provided that, such Borrowings under this Agreement shall be made notwithstanding Borrower's noncompliance with SECTION 5.2. Each Lender will remit its Pro Rata Part of such Borrowing to Administrative Agent for the account of the Swing Line Lenders at the office of Administrative Agent prior to 12:00 Noon, Dallas, Texas time, in funds immediately available on the Business Day next succeeding the date such notice is given. The proceeds of such Borrowings under this Agreement shall be immediately applied to repay such Swing Line Borrowing. (d) If, for any reason, Borrowings under this Agreement may not be (as determined by Administrative Agent in its sole discretion), or are not, made pursuant to SECTION 2.2(C) to repay any Swing Line Borrowing as required by such Section, then, effective on the date such Borrowing under this Agreement would otherwise have been made, each Lender severally, unconditionally, and irrevocably agrees that it shall be deemed to have purchased an undivided participating interest in such Swing Line Borrowings ("UNREFUNDED SWING LINE BORROWINGS") to the extent of such Lender's Pro Rata Part thereof. Each Lender shall fund a Borrowing under this Agreement or a participation in the Unrefunded Swing Line Borrowings no later than the close of business on the date notice of such funding requirement is given by Administrative Agent if such notice was given prior to 12:00 noon, AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 17 23 Dallas, Texas time, on any Business Day, or if made at any other time, on the next Business Day following the date of such notice. All such amounts payable by any Lender under this SECTION 2.2(D) shall include interest thereon from the date on which such payment is payable by such Lender to, but not including, the date such amount is paid by such Lender to Administrative Agent, at the Federal Funds Rate. If such Lender does not promptly pay such amount upon Administrative Agent's demand therefor, and until such time as such Lender makes the required payment, each Swing Line Lender shall be deemed to continue to have outstanding its ratable portion of the Swing Line Principal Debt in the amount of such unpaid obligation. Each payment by Borrower of all or any part of any Swing Line Borrowings shall be paid to Administrative Agent for the benefit of the applicable Swing Line Lender (in the case of a Quoted Swing Line Borrowing) or (in the case of Alternate Rate Swing Line Borrowings) for the benefit of the Swing Line Lenders and those Lenders who hold funded participations in such Unrefunded Swing Line Borrowings under this SECTION 2.2(D); provided that, with respect to any such participation, all interest on the Swing Line Principal Debt to which such participation relates, accruing prior to the date of funding such participation, shall be payable solely to Administrative Agent for the account of the Swing Line Lenders (and all Lenders holding funded participations in any Unrefunded Swing Line Borrowing prior to such date). Subject to SECTION 3.12, any Lender holding a participation in any Unrefunded Swing Line Borrowing may exercise any and all Rights of banker's lien, setoff, or counterclaim with respect to any and all moneys owing by Borrower to such Lender by reason thereof as fully as if such Lender had extended such Borrowing under this Agreement directly to Borrower in the amount of such participation. (e) Whenever, at any time after any Swing Line Lender has received from any Lender such Lender's participating interest in any Swing Line Borrowing, such Swing Line Lender receives any payment on account thereof, such Swing Line Lender will promptly distribute to such Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's participating interest was outstanding and funded); provided, however, that in the event that such payment received by such Swing Line Lender is required to be returned, such Lender will return to such Swing Line Lender any portion thereof previously distributed by such Swing Line Lender to it. (f) Notwithstanding anything to the contrary in this Agreement, each Lender's obligation to fund the Borrowings referred to in SECTION 2.2(C) and to purchase and fund participating interests pursuant to SECTION 2.2(D) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any setoff, counterclaim, recoupment, defense, or other right which such Lender or Borrower may have against any Swing Line Lender, Borrower, or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Potential Default or a Default or the failure to satisfy any of the conditions specified in SECTION 5; (iii) any adverse change in the condition (financial or otherwise) of Borrower or any of its Subsidiaries; (iv) any breach of this Agreement by Borrower or any Lender; or (v) any other circumstance, happening, or event whatsoever, whether or not similar to any of the foregoing. (g) Upon written or telecopy notice to the Swing Line Lenders and to Administrative Agent, Borrower may at any time terminate, or from time to time reduce in part or increase (with the approval of the relevant Swing Line Lender), the Swing Line Committed Sum of any Swing Line Lender, so long as the Swing Line Commitment is not increased. At any time when there shall be fewer than seven Swing Line Lenders, Borrower may appoint from among the Lenders a new Swing Line Lender, subject to the prior consent of such new Swing Line Lender and prior notice to Administrative Agent, so long as at no time shall there be more than seven Swing Line Lenders. Notwithstanding anything to the contrary in this Agreement, (i) if any Alternate Rate Swing Line Borrowings shall be outstanding at the time of any termination, reduction, increase, or appointment pursuant to the preceding two sentences, Borrower shall on the date thereof prepay or borrow Alternate Rate Swing Line Borrowings to the extent necessary to ensure that at all times the AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 18 24 outstanding Alternate Rate Swing Line Borrowings held by the Swing Line Lenders shall be ratable according to the respective Swing Line Committed Sums of the Swing Line Lenders and (ii) in no event may the aggregate Swing Line Committed Sums of the Swing Line Lenders exceed the Swing Line Commitment then in effect. On the date of any termination or reduction of Swing Line Committed Sums pursuant to this SECTION 2.2(G), Borrower shall pay or prepay so much of the Swing Line Principal Debt as shall be necessary in order that, after giving effect to such termination or reduction, (i) the aggregate outstanding principal amount of the Alternate Rate Swing Line Borrowings of any Swing Line Lender will not exceed the Swing Line Committed Sum of such Swing Line Lender and (ii) the aggregate outstanding principal amount of all Swing Line Borrowings will not exceed the Swing Line Commitment then in effect. (h) Borrower may prepay any Swing Line Borrowing in whole or in part at any time without premium or penalty; provided that, Borrower shall have given the Administrative Agent written or telecopy notice (or telephone notice promptly confirmed in writing or by telecopy) of such prepayment not later than 9:30 a.m., Dallas, Texas time, on the Business Day designated by Borrower for such prepayment; and provided further that, each partial prepayment shall be in a minimum principal amount of $1,000,000 or an integral multiple of $250,000 if in excess thereof. Each notice of prepayment under this SECTION 2.2(H) shall specify the prepayment date and the principal amount of each Swing Line Borrowing (or portion thereof) to be prepaid, shall be irrevocable, and shall commit Borrower to prepay such Swing Line Borrowing (or portion thereof) by the amount stated therein on the date stated therein. All accrued interest on Swing Line Borrowings is payable quarterly in arrears. Each payment of principal of or interest on Alternate Rate Swing Line Borrowings shall be allocated, as between the Swing Line Lenders, ratably in accordance with their respective Swing Line Committed Sums. 2.3 Competitive Bid Subfacility. (a) In addition to Borrowings under this Agreement otherwise provided for herein, but subject to the terms and conditions of the Loan Papers, Borrower may, as set forth in this SECTION 2.3, request Lenders to make offers to make Competitive Borrowings under this Agreement. Lenders may, but shall have no obligation to, make any such offers, and Borrower may, but shall have no obligation to, accept any such offers. Any Competitive Borrowings made available to Borrower hereunder shall be subject, however, to the conditions that (i) on any date of determination: the aggregate principal outstanding under all Competitive Borrowings under this Agreement made by all Lenders shall not exceed the Commitment then in effect; (ii) on any date of determination, the Principal Debt shall not exceed the Commitment; and (iii) each Borrowing under the Competitive Bid Subfacility in respect of this Agreement must occur on a Business Day and prior to the Business Day immediately preceding the Termination Date. (b) In order to request Competitive Bids, Borrower shall deliver a Competitive Bid Request to Administrative Agent (i) not later than 10:00 a.m. Dallas, Texas time on the fourth Business Day preceding the Borrowing Date for any requested Competitive Borrowing that will be comprised of Eurodollar Rate Borrowings, or (ii) not later than 10:00 a.m. Dallas, Texas time one Business Day before the Borrowing Date for any requested Competitive Borrowing that will be comprised of Fixed Rate Borrowings. A Competitive Bid Request that does not conform substantially to the format of EXHIBIT B-4 may be rejected by Administrative Agent, and Administrative Agent shall promptly notify Borrower of such rejection. Each Competitive Bid Request shall refer to this Agreement and shall specify (i) whether the Competitive Borrowing then being requested will be comprised of Eurodollar Rate Borrowings or Fixed Rate Borrowings, (ii) the Borrowing Date of such Competitive Borrowing (which shall be a Business Day) and the aggregate principal amount thereof (which shall not be less than $5,000,000 or a greater integral multiple of $1,000,000), and (iii) the Interest Period with respect thereto (which may not be more than six months and which may not AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 19 25 extend beyond the Termination Date). Promptly after its receipt of a Competitive Bid Request that is not rejected as aforesaid, Administrative Agent shall notify Lenders of the Competitive Bid Request on a form substantially similar to EXHIBIT B-5 hereto, pursuant to which the Lenders are invited to bid, subject to the terms and conditions of this Agreement, to make Competitive Borrowings pursuant to such Competitive Bid Request. Notwithstanding the foregoing, Administrative Agent shall have no obligation to invite any Lender to make a Competitive Bid pursuant to this SECTION 2.3 until such Lender has delivered a completed Administrative Questionnaire to Administrative Agent. (c) Each Lender may make one or more Competitive Bids to Borrower responsive to each respective Competitive Bid Request. Each Competitive Bid by a Lender must be received by Administrative Agent substantially in the form of EXHIBIT B-6, (i) no later than 11:00 a.m. Dallas, Texas time on the third Business Day preceding the Borrowing Date for any requested Competitive Borrowing that will be comprised of Eurodollar Rate Borrowings, or (ii) prior to 10:00 a.m. Dallas, Texas time on the Borrowing Date for any requested Competitive Borrowing that will be comprised of Fixed Rate Borrowings. Competitive Bids that do not conform substantially to the format of EXHIBIT B-6 may be rejected by Administrative Agent after conferring with, and upon the instruction of, Borrower, and Administrative Agent shall notify the appropriate Lender of such rejection as soon as practicable. Each Competitive Bid shall refer to this Agreement and shall (x) specify the principal amount (which shall be in a minimum principal amount of $5,000,000 or a greater integral multiple of $1,000,000 and which may equal the entire principal amount of the Competitive Borrowing requested by Borrower and may exceed such Lender's Committed Sum under this Agreement, subject to the limitations set forth in SECTION 2.3(A) hereof) of the Competitive Borrowing such Lender is willing to make to Borrower, (y) specify the Competitive Bid Rate at which such Lender is prepared to make its Competitive Borrowing, and (z) confirm the Interest Period with respect thereto specified by Borrower in its Competitive Bid Request. A Competitive Bid submitted by a Lender pursuant to this SECTION 2.3(C) shall be irrevocable. (d) Administrative Agent shall promptly notify Borrower of all Competitive Bids made and the Competitive Bid Rate and the principal amount of each Competitive Borrowing in respect of which a Competitive Bid was made and the identity of the Lender that made each bid. (e) Borrower may, subject only to the provisions of this SECTION 2.3(E), accept or reject any or all of the Competitive Bids for this Agreement referred to in SECTION 2.3(C); provided, however, that the aggregate amount of the Competitive Bids so accepted by Borrower may not exceed the principal amount of the Competitive Borrowing requested by Borrower (subject to the further limitations of SECTION 2.3(A) hereof). Borrower shall notify Administrative Agent whether and to what extent it has decided to accept or reject any or all of the bids referred to in SECTION 2.3(C), (i) not later than 10:45 a.m. Dallas, Texas time three Business Days before the Borrowing Date specified for a proposed Competitive Borrowing that is deemed a Eurodollar Rate Borrowing or (ii) not later than 11:00 a.m., Dallas, Texas time on the day specified for a proposed Competitive Borrowing that is deemed a Fixed Rate Borrowing; provided, however, that (w) the failure by Borrower to give such notice shall be deemed to be a rejection of all the bids referred to in SECTION 2.3(C), (x) Borrower shall not accept a bid under this Agreement in the same or lower principal amount made at a particular Competitive Bid Rate if Borrower has decided to reject a bid made at a lower Competitive Bid Rate, (y) if Borrower shall accept bids made at a particular Competitive Bid Rate but shall be restricted by other conditions hereof from borrowing the principal amount of the Competitive Borrowing in respect of which bids at such Competitive Bid Rate have been made, then Borrower shall accept a ratable portion of each bid made at such Competitive Bid Rate based as nearly as possible on the respective principal amounts of the Competitive Borrowing for which such bids were made, and (z) no bid shall be accepted for a Competitive Borrowing under this Agreement unless the aggregate principal amount to be funded pursuant to all accepted bids under this Agreement shall be in a minimum amount of $5,000,000 or a greater integral multiple of $1,000,000 for each respective Lender whose bid is AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 20 26 accepted. Notwithstanding the foregoing, if it is necessary for Borrower to accept a ratable allocation of the bids for this Agreement made in response to a Competitive Bid Request (whether pursuant to the events specified in CLAUSE (Y) above or otherwise) and the available principal amount of the Competitive Borrowing to be allocated among the Lenders submitting Competitive Bids is not sufficient to enable Competitive Borrowings to be allocated to each such Lender in a minimum principal amount of $5,000,000 or a greater integral multiple of $1,000,000, then Borrower shall select the Lenders to be allocated such Competitive Borrowings and shall round allocations up or down to the next higher or lower multiple of $500,000 as it shall deem appropriate. A notice given by Borrower pursuant to this SECTION 2.3(E) shall be irrevocable. (f) Administrative Agent shall promptly notify each bidding Lender whether or not its Competitive Bid has been accepted (which notice to those Lenders whose Competitive Bids have been accepted will be given within one hour from the time such bid was accepted by Borrower and shall further indicate in what amount and at what Competitive Bid Rate), and each successful bidder will thereupon become bound, subject to the other applicable conditions hereof, to advance the Competitive Borrowing in respect of which its bid has been accepted. After completing the notifications referred to in the immediately preceding sentence, Administrative Agent shall notify each bidding Lender of the aggregate principal amount of all Competitive Bids under this Agreement accepted for and the range of Competitive Bid Rates submitted in connection with that Competitive Borrowing. (g) If Administrative Agent shall at any time elect to submit a Competitive Bid in its capacity as a Lender, it shall submit such bid directly to Borrower one-half hour earlier than the latest time at which the other Lenders are required to submit their bids to Administrative Agent pursuant to SECTION 2.3(C). (h) Each Competitive Borrowing shall be due and payable on the last day of the applicable Interest Period; provided that if Borrower fails to repay any Competitive Borrowing on such day, Borrower shall be deemed to have given a Notice of Borrowing requesting the Lenders to make a Base Rate Borrowing under this Agreement in the amount of such Competitive Borrowing, subject to satisfaction of the conditions specified in SECTIONS 2.1 and 5.2; provided that failure to repay such Competitive Borrowing on the last day of the applicable Interest Period shall not constitute a failure to satisfy such conditions. 2.4 Optional Renewal of Commitments. (a) Optional Renewal Procedures. Borrower may request that the Termination Date be extended for all or a portion of the Commitment to a date which is no later than the 364th day after the then-current Termination Date; provided that, (i) any such extension request shall be made in writing (an "EXTENSION REQUEST") by Borrower and delivered to Administrative Agent no more than 60 days prior to (but no later than 30 days prior to) the then-current Termination Date; (ii) no more than one such Extension Request may be made by Borrower; and (iii) no Extension Request may be made after the Term Conversion Date or which would have the effect of extending the Termination Date to a date later than the last day of the second 364-day period following the Closing Date. Promptly upon receipt of an Extension Request, Administrative Agent shall notify Lenders of such request. (i) Lenders' Response to Extension Request. Lenders may, at their option, accept or reject such Extension Request by giving written notice to Administrative Agent delivered no earlier than 30 days prior to (but no later than 25 days prior to) the then-effective Termination Date (such 25th day being the "RESPONSE DATE"). If any Lender shall fail to give such notice to Administrative Agent by the Response Date, such Lender shall be deemed to AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 21 27 have rejected the requested extension. If the Extension Request is not consented to by Determining Lenders by the Response Date, the Extension Request will be rejected, and this Commitment will terminate on the then-effective Termination Date (unless prior to such Termination Date, Borrower elects to convert the Principal Debt, or a portion thereof, in accordance with SECTION 2.5 hereof). If Determining Lenders consent to the Extension Request by the Response Date, the Termination Date for those Lenders consenting to the extension (for purposes of this SECTION 2.4(A), the "ACCEPTING LENDERS") shall be automatically extended to the date which is the 364th day after the then-current Termination Date; provided that (i) the Termination Date may never be extended on any one date for a period greater than 364 days; and (ii) no more than one such 364-day extension of the Termination Date may be granted by Determining Lenders. (ii) Additional Procedures to Extend the Rejected Amount. If the Extension Request is consented to by Determining Lenders, but fewer than all Lenders (any Lender not consenting to the Extension Request being referred to in this SECTION 2.4(A) as a "REJECTING LENDER"), then Administrative Agent shall, within 48 hours of making such determination, notify the Accepting Lenders and Borrower of the aggregate Committed Sums held by the Rejecting Lenders (as used in this SECTION 2.4(A), the "REJECTED AMOUNT"). Each Accepting Lender shall have the Right, but not the obligation, to elect to increase its respective Committed Sum by an amount not to exceed the Rejected Amount, which election shall be made by notice from each Accepting Lender to the Administrative Agent given not later than ten days after the date notified by Administrative Agent, specifying the amount of such proposed increase in such Accepting Lender's Committed Sum. If the aggregate amount of the proposed increases in the Committed Sums of all Accepting Lenders making such an election does not equal or exceed the Rejected Amount, then Borrower shall have the Right to add one or more financial institutions (which are not Rejecting Lenders and which are Eligible Assignees) as Lenders (as used in this SECTION 2.4(A), a "PURCHASING LENDER") to replace such Rejecting Lenders, which Purchasing Lenders shall have aggregate Committed Sums not greater than those of the Rejecting Lenders (less any increases in the Committed Sums of Accepting Lenders, as described in the following CLAUSE (III)). The transfer of Committed Sums and outstanding Borrowings from Rejecting Lenders to Purchasing Lenders or Accepting Lenders shall take place on the effective date of, and pursuant to the execution, delivery, and acceptance of, Assignment and Acceptance Agreements in accordance with the procedures set forth in SECTION 11.13(B). (iii) Adjustments to, and Terminations of, Commitments. (A) If less than 100% (but more than 51%) of the Commitment is extended (whether by virtue of Borrower's failure to request an extension of the full Commitment or by virtue of any Lender not consenting to any Extension Request), then the Commitment shall automatically be reduced on the Termination Date on which the applicable approved extension is effective by an amount equal to (as the case may be) (i) the portion of the Commitment not requested to be extended by Borrower in its Extension Request (which terminated portion of the Commitment shall be allocated Pro Rata among the Lenders) or (ii) the amount of the Rejected Amount (to the extent not replaced by Accepting Lenders or Purchasing Lenders pursuant to the procedures set forth in the foregoing SECTION 2.4(A)(II)). Each Rejecting Lender shall have no further obligation or Committed Sum following the Termination Date on which the applicable approved extension is effective, other than any obligation accruing prior to such date as provided herein. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 22 28 (B) If the aggregate amount of the proposed increases in the Committed Sums of all Accepting Lenders making an election to increase their respective Committed Sums is in excess of the Rejected Amount, then (i) the Rejected Amount shall be allocated pro rata among such Accepting Lenders based on the respective amounts of the proposed increases to Committed Sums elected by such Accepting Lenders; and (ii) the respective Committed Sums of each such Accepting Lender shall be increased by the respective amount allocated pursuant to CLAUSE (I) of this SECTION 2.4(A)(III)(B), such that, after giving effect to the approved extensions and all such terminations and increases, no reduction will occur in the aggregate amount of the Commitment. (C) If the aggregate amount of the proposed increases to the Committed Sums of all Accepting Lenders making such an election to so increase their respective Committed Sums equals the Rejected Amount, then the respective Committed Sums of such Accepting Lenders shall be increased by the respective amounts of their proposed increases, such that, after giving effect to the approved extensions and all such terminations and increases, no reduction will occur in the aggregate amount of the Commitment. (D) If the aggregate amount of the proposed increases to the Committed Sums of all Accepting Lenders making such an election is less than the Rejected Amount, then (i) the respective Committed Sums of each such Accepting Lender shall be increased by the respective amount of its proposed increase; and (ii) the amount of the Commitment shall be reduced by the amount of the Rejected Amount (to the extent not replaced by the Accepting Lenders or the Purchasing Lenders, if any). (b) No Obligation to Renew. Borrower acknowledges that (i) neither Administrative Agent nor any Lender has made any representations to Borrower regarding its intent to agree to any extensions set forth in this Section, (ii) neither Administrative Agent nor any Lender shall have any obligation to extend the Commitment (or any portion thereof), and (iii) Administrative Agent's and Lenders' agreement to one or more extensions shall not commit Administrative Agent or the Lenders to any additional extensions. 2.5 Conversion to Term Loans. Borrower shall have the option to convert up to $4,000,000,000 of the Principal Debt outstanding on the Termination Date (after giving effect to any loan repayments on or prior to the Termination Date) to a Term Loan maturing no later than one year after the Term Conversion Date (the "TERM LOAN MATURITY DATE"); provided, however, that no Term Loan Conversion may be made on any date on which all or any portion of the Commitment is available to be borrowed as revolving Borrowings under the 364-Day Facility. Such Term Loan conversion is subject to and on the terms and conditions set forth below: (a) No sooner than 90 days (and not later than 10 days) preceding the Termination Date, Borrower shall deliver to Administrative Agent a Term Conversion Request in substantially the form of EXHIBIT B-3 (a "TERM CONVERSION REQUEST"), which, among other things, shall (i) specify Borrower's election to make such conversion to a Term Loan, and (ii) specify the Type of Borrowing or Borrowings to which the Principal Debt shall be converted and the Interest Periods therefor (if applicable) on the Term Conversion Date; and (b) No Default or Potential Default shall exist on either the date such Term Conversion Request is delivered or on the Term Conversion Date; and no Default or Potential Default shall exist after giving effect to the Term Loan conversion. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 23 29 2.6 Termination of Commitments. (a) Without premium or penalty, and upon giving not less than three (3) Business Days prior written and irrevocable notice to Administrative Agent, Borrower may permanently terminate in whole or in part the unused portion of the Commitment; provided that: (a) each partial termination shall be in an amount of not less than $5,000,000 or a greater integral multiple of $1,000,000; (b) the amount of the Commitment may not be reduced below the Principal Debt then outstanding; and (c) each reduction shall be allocated Pro Rata among the Lenders in accordance with their respective Pro Rata Parts. Promptly after receipt of such notice of termination or reduction, Administrative Agent shall notify each Lender of the proposed cancellation or reduction. Such termination or partial reduction of the Commitment shall be effective on the Business Day specified in Borrower's notice (which date must be at least three (3) Business Days after Borrower's delivery of such notice). In the event that the Commitment is reduced to zero at a time when there is no outstanding Principal Debt, this Agreement shall be terminated to the extent specified in SECTION 11.14, and all commitment fees and other fees then earned and unpaid hereunder and all other amounts of the Obligation relating to this Agreement then due and owing shall be immediately due and payable, without notice or demand by Administrative Agent or any Lender. The Swing Line Commitment shall be automatically and permanently reduced from time to time on the date of each reduction in the Commitment such that the Swing Line Commitment does not exceed the Commitment after giving effect to such reduction of the Commitment. Each reduction in the Swing Line Commitment will be allocated among Swing Line Lenders in accordance with their respective Percentage Parts. 2.7 Borrowing Procedure. The following procedures apply to Borrowings under this Agreement (other than Competitive Borrowings, Swing Line Borrowings, and Borrowings pursuant to SECTION 2.2(D)): (a) Each Borrowing shall be made on Borrower's notice (a "NOTICE OF BORROWING," substantially in the form of EXHIBIT B-1) to Administrative Agent requesting that Lenders fund a Borrowing on a certain date (the "BORROWING DATE"), which notice (i) shall be irrevocable and binding on Borrower, (ii) shall specify the Borrowing Date, amount, Type, and (for a Borrowing comprised of Eurodollar Rate Borrowings) Interest Period, and (iii) must be received by Administrative Agent no later than 10:00 a.m. Dallas, Texas time on the third Business Day preceding the Borrowing Date for any Eurodollar Rate Borrowing or on the Business Day immediately preceding the Borrowing Date for any Base Rate Borrowing. Administrative Agent shall timely notify each Lender with respect to each Notice of Borrowing. (b) Each Lender shall remit its Pro Rata Part of each requested Borrowing to Administrative Agent's principal office in Dallas, Texas, in funds which are or will be available for immediate use by Administrative Agent by 1:00 p.m. Dallas, Texas time on the Borrowing Date therefor. Subject to receipt of such funds, Administrative Agent shall (unless to its actual knowledge any of the conditions precedent therefor have not been satisfied by Borrower or waived by Determining Lenders) make such funds available to Borrower by causing such funds to be deposited to Borrower's account as designated to Administrative Agent by Borrower. Notwithstanding the foregoing, unless Administrative Agent shall have been notified by a Lender prior to a Borrowing Date that such Lender does not intend to make available to Administrative Agent such Lender's Pro Rata Part of the applicable Borrowing, Administrative Agent may assume that such Lender has made such proceeds available to Administrative Agent on such date, as required herein, and Administrative Agent may (unless to its actual knowledge any of the conditions precedent therefor have not been satisfied by Borrower or waived by Determining Lenders), in reliance upon such assumption (but shall not be required to), make available to Borrower a corresponding amount in accordance with the foregoing terms, but, if such corresponding amount is not in fact made available to Administrative Agent by such Lender on such Borrowing Date, Administrative Agent shall be entitled to recover such corresponding amount on demand (i) from such Lender, together with interest at the Federal Funds Rate during the period commencing on the date such corresponding amount was made available to Borrower and ending on (but excluding) the date Administrative Agent recovers such corresponding amount from such Lender, or (ii) if such Lender fails to pay such corresponding amount forthwith AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 24 30 upon such demand, then from Borrower, together with interest at a rate per annum equal to the applicable rate for such Borrowing during the period commencing on such Borrowing Date and ending on (but excluding) the date Administrative Agent recovers such corresponding amount from Borrower. No Lender shall be responsible for the failure of any other Lender to make its Pro Rata Part of any Borrowing. SECTION 3 TERMS OF PAYMENT. 3.1 Loan Accounts, Notes, and Payments. (a) Principal Debt owed to each Lender shall be evidenced by one or more loan accounts or records maintained by such Lender in the ordinary course of business. The loan accounts or records maintained by the Administrative Agent (including, without limitation, the Register) and each Lender shall be conclusive evidence absent manifest error of the amount of the Borrowings made by Borrower from each Lender under this Agreement (and subfacilities thereunder) and the interest and principal payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of Borrower under the Loan Papers to pay any amount owing with respect to the Obligation. (b) Upon the request of any Lender made through the Administrative Agent, the Principal Debt owed to such Lender may be evidenced by one or more of the following Notes (as the case may be): (i) a Revolving Note (with respect to Principal Debt, prior to the Term Conversion Date, other than under the Swing Line Subfacility or the Competitive Bid Subfacility); (ii) a Competitive Bid Note (with respect to Principal Debt arising and outstanding under the Competitive Bid Subfacility under this 364-Day Facility); (iii) a Swing Line Note (with respect to Principal Debt arising under the Swing Line Subfacility); and (iv) a Term Note (with respect to Principal Debt on and after the Term Conversion Date). (c) All payments of principal, interest, and other amounts to be made by Borrower under this Agreement and the other Loan Papers shall be made to Administrative Agent at its principal office in Dallas, Texas in Dollars and in funds which are or will be available for immediate use by Administrative Agent by 12:00 noon Dallas, Texas time on the day due, without setoff, deduction, or counterclaim. Subject to the definition of "Interest Period" herein, whenever any payment under this Agreement or any other Loan Paper shall be stated to be due on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time in such case shall be included in the computation of interest and fees, as applicable and as the case may be. Payments made after 12:00 noon, Dallas, Texas, time shall be deemed made on the Business Day next following. Administrative Agent shall pay to each Lender any payment of principal, interest, or other amount to which such Lender is entitled hereunder on the same day Administrative Agent shall have received the same from Borrower; provided such payment is received by Administrative Agent prior to 12:00 noon Dallas, Texas time, and otherwise before 12:00 noon Dallas, Texas time on the Business Day next following. If and to the extent Administrative Agent shall not make such payments to Lenders when due as set forth in the preceding sentence, such unpaid amounts shall accrue interest, payable by Administrative Agent, at the Federal Funds Rate from the due date until (but not including) the date on which Administrative Agent makes such payments to Lenders. 3.2 Interest and Principal Payments. (a) Interest on each Eurodollar Rate Borrowing or on each Fixed Rate Borrowing shall be due and payable as it accrues on the last day of its respective Interest Period and on the Termination Date and the Term Loan Maturity Date, as applicable; provided that if any Interest Period is a period greater than three (3) months, then accrued interest shall also be due and payable on each date that is AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 25 31 a multiple of three (3) months after the commencement of such Interest Period. Interest on each Base Rate Borrowing shall be due and payable as it accrues on each March 31, June 30, September 30, and December 31, and on the Termination Date and Term Loan Maturity Date. (b) To the extent that the Principal Debt is not converted to a Term Loan on or prior to the Termination Date, Borrower shall pay on such Termination Date all outstanding Principal Debt not so converted to a Term Loan, together with all accrued and unpaid interest and fees. (c) To the extent any portion of the Principal Debt is converted to a Term Loan, the Principal Debt outstanding under the Term Loan shall be due and payable in a single installment on the Term Loan Maturity Date. (d) On any date of determination, if the Principal Debt exceeds the Commitment then in effect, or if the Swing Line Principal Debt exceeds the Swing Line Commitment then in effect, then Borrower shall make a mandatory prepayment of the Principal Debt in at least the amount of such excess, together with (i) all accrued and unpaid interest on the principal amount so prepaid and (ii) any Consequential Loss arising as a result thereof. (e) After giving Administrative Agent advance written notice of the intent to prepay, Borrower may voluntarily prepay all or any part of the Principal Debt from time to time and at any time, in whole or in part, without premium or penalty; provided that: (i) such notice must be received by Administrative Agent by 12:00 noon Dallas, Texas time on (A) the third Business Day preceding the date of prepayment of a Eurodollar Rate Borrowing, and (B) one Business Day preceding the date of prepayment of a Base Rate Borrowing; (ii) each such partial prepayment must be in a minimum amount of at least $5,000,000 or a greater integral multiple of $1,000,000 thereof (if a Eurodollar Rate Borrowing or a Base Rate Borrowing), or $250,000 or an integral multiple thereof (if a Swing Line Borrowing); (iii) all accrued interest on the Obligation must also be paid in full, to the date of such prepayment; (iv) Borrower shall pay any related Consequential Loss within ten (10) days after demand therefor; and (v) notwithstanding the provisions of this SECTION 3.2(D), prepayments of any Swing Line Borrowing shall be made in accordance with SECTION 2.2(H). Each notice of prepayment shall specify the prepayment date, the facility or the subfacility hereunder being prepaid, the Type of Borrowing(s) and amount(s) of such Borrowing(s) to be prepaid and shall constitute a binding obligation of Borrower to make a prepayment on the date stated therein. Notwithstanding the foregoing, Borrower shall not voluntarily prepay any Competitive Borrowing prior to the last day of the Interest Period therefor. 3.3 Interest Options. Except where specifically otherwise provided, Borrowings shall bear interest at a rate per annum equal to the lesser of (a) as to the respective Type of Borrowing (as designated by Borrower in accordance with this Agreement), the Base Rate plus the Applicable Margin for Base Rate Borrowings, the Adjusted Eurodollar Rate plus the Applicable Margin for Eurodollar Rate Borrowings, the Adjusted Eurodollar Rate plus the Competitive Bid Rate for Eurodollar Rate Borrowings under the Competitive Bid Subfacility, the Quoted Swing Line Rate, or the Alternate Rate, as the case may be, and (b) the Maximum Rate. Each change in the Base Rate, the Maximum Rate, the Quoted Swing Line Rate, or the Alternate Rate, subject to the terms of this Agreement, will become effective, without notice to Borrower or any other Person, upon the effective date of such change. 3.4 Quotation of Rates. It is hereby acknowledged that a Responsible Officer or other appropriately designated employee of Borrower may call Administrative Agent on or before the date on which a Notice of Borrowing is to be delivered by Borrower in order to receive an indication of the rates then in effect, but such indicated rates shall neither be binding upon Administrative Agent or Lenders nor affect the rate of interest which thereafter is actually in effect when the Notice of Borrowing is given. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 26 32 3.5 Default Rate. At the option of Determining Lenders and to the extent permitted by Law, all past-due Principal Debt and accrued interest thereon shall bear interest from maturity (stated or by acceleration) at the Default Rate until paid, regardless whether such payment is made before or after entry of a judgment; provided that the Default Rate shall automatically apply in the case of SECTION 2.2(A) where the Default Rate is specified. 3.6 Interest Recapture. If the designated rate applicable to any Borrowing exceeds the Maximum Rate, the rate of interest on such Borrowing shall be limited to the Maximum Rate, but any subsequent reductions in such designated rate shall not reduce the rate of interest thereon below the Maximum Rate until the total amount of interest accrued thereon equals the amount of interest which would have accrued thereon if such designated rate had at all times been in effect. In the event that at maturity (stated or by acceleration), or at final payment of the Principal Debt, the total amount of interest paid or accrued is less than the amount of interest which would have accrued if such designated rates had at all times been in effect, then, at such time and to the extent permitted by Law, Borrower shall pay an amount equal to the difference between (a) the lesser of the amount of interest which would have accrued if such designated rates had at all times been in effect and the amount of interest which would have accrued if the Maximum Rate had at all times been in effect, and (b) the amount of interest actually paid or accrued on the Principal Debt. 3.7 Interest Calculations. (a) All payments of interest shall be calculated on the basis of actual number of days (including the first day but excluding the last day) elapsed but computed as if each calendar year consisted of 360 days in the case of a Eurodollar Rate Borrowing, a Fixed Rate Borrowing, Base Rate Borrowings calculated with reference to the Federal Funds Rate or Swing Line Borrowings accruing interest at the Quoted Swing Line Rate or the Alternate Rate (unless such calculation would result in the interest on the Borrowings exceeding the Maximum Rate in which event such interest shall be calculated on the basis of a year of 365 or 366 days, as the case may be) and 365 or 366 days, as the case may be, in the case of a Base Rate Borrowing calculated with reference to Prime Rate. All interest rate determinations and calculations by Administrative Agent shall be conclusive and binding absent manifest error. (b) The provisions of this Agreement relating to calculation of the Base Rate, the Adjusted Eurodollar Rate, the Quoted Swing Line Rate, the Alternate Rate, and Competitive Bid Rates are included only for the purpose of determining the rate of interest or other amounts to be paid hereunder that are based upon such rate. 3.8 Maximum Rate. Regardless of any provision contained in any Loan Paper, no Lender shall ever be entitled to contract for, charge, take, reserve, receive, or apply, as interest on the Obligation, or any part thereof, any amount in excess of the Maximum Rate, and, if Lenders ever do so, then such excess shall be deemed a partial prepayment of principal and treated hereunder as such and any remaining excess shall be refunded to Borrower. In determining if the interest paid or payable exceeds the Maximum Rate, Borrower and Lenders shall, to the maximum extent permitted under applicable Law, (a) treat all Borrowings as but a single extension of credit (and Lenders and Borrower agree that such is the case and that provision herein for multiple Borrowings is for convenience only), (b) characterize any nonprincipal payment as an expense, fee, or premium rather than as interest, (c) exclude voluntary prepayments and the effects thereof, and (d) amortize, prorate, allocate, and spread the total amount of interest throughout the entire contemplated term of the Obligation; provided that, if the Obligation is paid and performed in full prior to the end of the full contemplated term thereof, and if the interest received for the actual period of existence thereof exceeds the Maximum Amount, Lenders shall refund such excess, and, in such event, Lenders shall not, to the extent permitted by Law, be subject to any penalties provided by any Laws for contracting for, charging, taking, reserving, or receiving interest in excess of the Maximum Amount. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 27 33 3.9 Interest Periods. When Borrower requests any Eurodollar Rate Borrowing or a Fixed Rate Borrowing, Borrower may elect the interest period (each an "INTEREST PERIOD") applicable thereto, which shall be, at Borrower's option, one, two, three, or six months or, if available to all Lenders, nine or twelve months (in respect of any Eurodollar Rate Borrowing) and any period of up to six (6) months (with respect to any Fixed Rate Borrowing); provided, however, that: (a) the initial Interest Period for a Eurodollar Rate Borrowing shall commence on the date of such Borrowing (including the date of any conversion thereto), and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period applicable thereto expires; (b) if any Interest Period for a Eurodollar Rate Borrowing begins on a day for which there is no numerically corresponding Business Day in the calendar month at the end of such Interest Period, such Interest Period shall end on the next Business Day immediately following what otherwise would have been such numerically corresponding day in the calendar month at the end of such Interest Period (unless such date would be in a different calendar month from what would have been the month at the end of such Interest Period, or unless there is no numerically corresponding day in the calendar month at the end of the Interest Period; whereupon, such Interest Period shall end on the last Business Day in the calendar month at the end of such Interest Period); (c) no Interest Period may be chosen with respect to any portion of the Principal Debt which would extend beyond the scheduled repayment date (including any dates on which mandatory prepayments are required to be made) for such portion of the Principal Debt; and (d) no more than an aggregate of ten (10) Interest Periods shall be in effect at one time. 3.10 Conversions. Borrower may (a) convert a Eurodollar Rate Borrowing on the last day of an Interest Period to a Base Rate Borrowing, (b) convert a Base Rate Borrowing at any time to a Eurodollar Rate Borrowing, and (c) elect a new Interest Period (in the case of a Eurodollar Rate Borrowing), by giving notice (a "NOTICE OF CONVERSION," substantially in the form of EXHIBIT B-2) of such intent no later than 10:00 a.m. Dallas, Texas time on the third Business Day prior to the date of conversion or the last day of the Interest Period, as the case may be (in the case of a conversion to a Eurodollar Rate Borrowing or an election of a new Interest Period), and no later than 10:00 a.m. Dallas, Texas time one Business Day prior to the last day of the Interest Period (in the case of a conversion to a Base Rate Borrowing); provided that the principal amount converted to, or continued as, a Eurodollar Rate Borrowing shall be in an amount not less than $10,000,000 or a greater integral multiple of $1,000,000. Administrative Agent shall timely notify each Lender with respect to each Notice of Conversion. Absent Borrower's Notice of Conversion or election of a new Interest Period, a Eurodollar Rate Borrowing shall be deemed converted to a Base Rate Borrowing effective as of the expiration of the Interest Period applicable thereto. No Eurodollar Rate Borrowing may be either made or continued as a Eurodollar Rate Borrowing, and no Base Rate Borrowing may be converted to a Eurodollar Rate Borrowing, if the interest rate for such Eurodollar Rate Borrowing would exceed the Maximum Rate. 3.11 Order of Application. (a) So long as no Default or Potential Default has occurred and is continuing, payments and prepayments of the Obligation shall be applied in the order and manner as Borrower may direct; provided that, each such payment or prepayment (other than payments of fees payable solely to Administrative Agent or a specific Lender) shall be allocated to each Lender in the proportion that the Principal Debt owed to such Lender bears to the Principal Debt owed to all Lenders under the 364-Day Facility (or Subfacility thereunder) in respect of which such payment was made. (b) If a Default or Potential Default has occurred and is continuing (or if Borrower fails to give directions as permitted under SECTION 3.11(a)), any payment or prepayment (including proceeds from the exercise of any Rights) shall be applied in the following order: (i) to the ratable payment of all fees and reasonable expenses for which Agents or Lenders have not been paid or reimbursed in accordance with the Loan Papers; (as used in this SECTION 3.11(b)(i), a "ratable payment" for any Lender or any Agent shall be, on any date of determination, that proportion which the portion of the total fees and indemnities AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 28 34 owed to such Lender or Agent bears to the total aggregate fees and indemnities owed to all Lenders and Agents on such date of determination); (ii) to the Pro Rata payment of all accrued and unpaid interest on the Principal Debt; (iii) to the ratable payment of the Swing Line Principal Debt which is due and payable and which remains unfunded by any Borrowing under this Agreement; provided that, such payments shall be allocated among the Swing Line Lenders and the Lenders which have funded their participation in the Swing Line Principal Debt; (iv) to the Pro Rata payment of the remaining Principal Debt in such order as Determining Lenders may elect (provided that, Determining Lenders will apply such proceeds in an order that will minimize any Consequential Loss); and (v) to the payment of the remaining Obligation in the order and manner Determining Lenders deem appropriate. Subject to the provisions of SECTION 10 and provided that Administrative Agent shall in any event not be bound to inquire into or to determine the validity, scope, or priority of any interest or entitlement of any Lender and may suspend all payments or seek appropriate relief (including, without limitation, instructions from Determining Lenders or an action in the nature of interpleader) in the event of any doubt or dispute as to any apportionment or distribution contemplated hereby, Administrative Agent shall promptly distribute such amounts to each Lender in accordance with this Agreement and the related Loan Papers. 3.12 Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, or otherwise, including, without limitation, as a result of exercising its Rights under SECTION 3.13) which is in excess of its ratable share of any such payment, such Lender shall purchase from the other Lenders such participations as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and the purchase price restored to the extent of such recovery. Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this section may to the fullest extent permitted by Law, exercise all of its Rights of payment (including the Right of offset) with respect to such participation as fully as if such Lender were the direct creditor of Borrower in the amount of such participation. 3.13 Offset. Upon the occurrence and during the continuance of a Default, each Lender shall be entitled to exercise (for the benefit of all Lenders in accordance with SECTION 3.12) the Rights of offset and/or banker's Lien against each and every account and other property, or any interest therein, which Borrower may now or hereafter have with, or which is now or hereafter in the possession of, such Lender to the extent of the full amount of the Obligation owed to such Lender. 3.14 Booking Borrowings. To the extent permitted by Law, any Lender may make, carry, or transfer its Borrowings at, to, or for the account of any of its branch offices or the office of any of its Affiliates; provided that no Affiliate shall be entitled to receive any greater payment under SECTION 3.15 than the transferor Lender would have been entitled to receive with respect to such Borrowings. 3.15 Increased Cost and Reduced Return. (a) If, after the date hereof, the adoption of any applicable Law or any change in any applicable Law, or any change in the interpretation or administration thereof by any Governmental AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 29 35 Authority, or compliance by any Lender (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such Governmental Authority: (i) shall subject such Lender (or its Applicable Lending Office) to any Tax with respect to any Eurodollar Rate Borrowing, its Notes, or its obligation to loan Eurodollar Rate Borrowings, or change the basis of taxation of any amounts payable to such Lender (or its Applicable Lending Office) under the Loan Papers in respect of any Eurodollar Rate Borrowings (other than with respect to Taxes imposed on the overall net income of such Lender by any jurisdiction and other than liabilities, interest, and penalties incurred as a result of the gross negligence or wilful misconduct of such Lender); (ii) shall impose, modify, or deem applicable any reserve, special deposit, assessment, or similar requirement (other than the Reserve Requirement utilized in the determination of the Adjusted Eurodollar Rate) relating to any extensions of credit or other assets of, or any deposits with or other liabilities or commitments of, such Lender (or its Applicable Lending Office), including the commitment of such Lender hereunder; or (iii) shall impose on such Lender (or its Applicable Lending Office) or the London interbank market any other condition affecting the Loan Papers or any of such extensions of credit or liabilities or commitments; and the result of any of the foregoing is to increase the actual cost to such Lender (or its Applicable Lending Office) of making, converting into, continuing, or maintaining any Eurodollar Rate Borrowings or to reduce any sum received or receivable by such Lender (or its Applicable Lending Office) under the Loan Papers with respect to any Eurodollar Rate Borrowing, then Borrower shall pay to such Lender on demand such amount or amounts as will compensate such Lender for such increased cost or reduction as provided in SECTION 3.15(C) below. If any Lender requests compensation by Borrower under this SECTION 3.15(A), Borrower may, by notice to such Lender (with a copy to Administrative Agent), suspend the obligation of such Lender to loan or continue Borrowings of the Type with respect to which such compensation is requested, or to convert Borrowings of any other Type into Borrowings of such Type, until the event or condition giving rise to such request ceases to be in effect (in which case the provisions of SECTION 3.18 shall be applicable); provided, that such suspension shall not affect the Right of such Lender to receive the compensation so requested. (b) If, after the date hereof, any Lender shall have determined that the adoption of any applicable Law regarding capital adequacy or any change therein or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority has or would have the effect of reducing the rate of return by an amount deemed by it to be material on the capital of such Lender or any corporation controlling such Lender as a consequence of such Lender's obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change, request, or directive (taking into consideration its policies with respect to capital adequacy), then from time to time upon demand Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. (c) Each Lender shall promptly notify Borrower and Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the reasonable judgment of such Lender, be otherwise disadvantageous to it. Any Lender claiming AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 30 36 compensation under this Section shall furnish to Borrower and Administrative Agent a statement setting forth in reasonable detail the additional amount or amounts to be paid hereunder which shall be presumed correct in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. 3.16 Limitation on Types of Loans. If on or prior to the first day of any Interest Period for any Eurodollar Rate Borrowing: (a) Administrative Agent determines (which determination shall be conclusive absent manifest error) that by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period; or (b) Determining Lenders determine (which determination shall be conclusive absent manifest error) and notify Administrative Agent that the Adjusted Eurodollar Rate will not adequately and fairly reflect the cost to the Lenders of funding Eurodollar Rate Borrowings for such Interest Period; then Administrative Agent shall give Borrower prompt notice thereof specifying the relevant amounts or periods, and so long as such condition remains in effect, the Lenders shall be under no obligation to fund additional Eurodollar Rate Borrowings, continue Eurodollar Rate Borrowings, or to convert Base Rate Borrowings into Eurodollar Rate Borrowings, and Borrower shall, on the last day(s) of the then current Interest Period(s) for the outstanding Eurodollar Rate Borrowings, either prepay such Borrowings or convert such Borrowings into Base Rate Borrowings in accordance with the terms of this Agreement. 3.17 Illegality. Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for any Lender or its Applicable Lending Office to make, maintain, or fund Eurodollar Rate Borrowings hereunder, then such Lender shall promptly notify Borrower thereof and such Lender's obligation to make or continue Eurodollar Rate Borrowings and to convert other Base Rate Borrowings into Eurodollar Rate Borrowings shall be suspended until such time as such Lender may again make, maintain, and fund Eurodollar Rate Borrowings (in which case the provisions of SECTION 3.18 shall be applicable); provided that, such Lender will use best efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office so as to eliminate any illegality, if such change, in the reasonable judgment of such Lender, is not otherwise disadvantageous to such Lender. 3.18 Treatment of Affected Loans. If the obligation of any Lender to fund Eurodollar Rate Borrowings or to continue, or to convert Base Rate Borrowings into Eurodollar Rate Borrowings, shall be suspended pursuant to SECTIONS 3.15, 3.16, or 3.17 hereof, such Lender's Eurodollar Rate Borrowings shall be automatically converted into Base Rate Borrowings on the last day(s) of the then current Interest Period(s) for Eurodollar Rate Borrowings (or, in the case of a conversion required by SECTION 3.17 hereof, on such earlier date as such Lender may specify to Borrower with a copy to Administrative Agent) and, unless and until such Lender gives notice as provided below that the circumstances specified in SECTIONS 3.15, 3.16, or 3.17 hereof that gave rise to such conversion no longer exist: (a) to the extent that such Lender's Eurodollar Rate Borrowings have been so converted, all payments and prepayments of principal that would otherwise be applied to such Lender's Eurodollar Rate Borrowings shall be applied instead to its Base Rate Borrowings; and (b) all Borrowings that would otherwise be made or continued by such Lender as Eurodollar Rate Borrowings shall be made or continued instead as Base Rate Borrowings, and all Borrowings of such Lender that would otherwise be converted into Eurodollar Rate Borrowings shall be converted instead into (or shall remain as) Base Rate Borrowings. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 31 37 If such Lender gives notice to Borrower (with a copy to Administrative Agent) that the circumstances specified in SECTIONS 3.15, 3.16, or 3.17 hereof that gave rise to the conversion of such Lender's Eurodollar Rate Borrowings pursuant to this SECTION 3.18 no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Eurodollar Rate Borrowings made by other Lenders are outstanding, such Lender's Base Rate Borrowings shall be automatically converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Eurodollar Rate Borrowings, to the extent necessary so that, after giving effect thereto, all Eurodollar Rate Borrowings held by the Lenders and by such Lender are held Pro Rata (as to principal amounts, Types, and Interest Periods) in accordance with their respective Commitments. 3.19 Compensation; Replacement of Lenders. (a) Upon the request of any Lender, Borrower shall pay to such Lender such amount or amounts as shall be sufficient (in the reasonable opinion of such Lender) to compensate it for any Consequential Loss; provided that, in each case, the Person claiming such Consequential Loss has furnished Borrower with a reasonably detailed statement of such loss, which statement shall be conclusive in the absence of manifest error. (b) If any Lender requests compensation under SECTION 3.15 or if Borrower is required to pay additional amounts to or for the account of any Lender pursuant to SECTION 3.20 (collectively, "ADDITIONAL AMOUNTS"), then Borrower may, at its sole expense and effort, upon written notice to such Lender and Administrative Agent, require such Lender to assign and delegate, without recourse, all its interests, Rights, and obligations under this Agreement and the other Loan Papers (other than any outstanding Competitive Borrowings held by such Lender) to an Eligible Assignee that shall assume such obligations; provided that, (i) Borrower shall have received the prior written consent of Administrative Agent to any such assignment; (ii) such Lender shall have received payment from Borrower of any Additional Amounts owed to such Lender by Borrower for periods prior to the replacement of such Lender and any actual costs incurred as a result of such replacement of a Lender; (iii) such assignment will result in reduction or elimination of the Additional Amounts; and (iv) such assignment and acceptance shall be made in accordance with, and subject to the requirements and restrictions contained in, SECTION 11.13(B). A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling such Borrowing to require such assignment and delegation cease to apply. 3.20 Taxes. (a) Any and all payments by Borrower to or for the account of any Lender or Administrative Agent hereunder or under any other Loan Paper shall be made free and clear of and without deduction for any and all present or future Taxes, excluding, in the case of each Lender and Administrative Agent, Taxes imposed on its income and franchise Taxes imposed on it by any jurisdiction and other liabilities, interest, and penalties incurred as a result of the gross negligence or wilful misconduct of such Lender or Administrative Agent (all such Non-Excluded Taxes referred to as "NON-EXCLUDED TAXES"). If Borrower shall be required by law to deduct any Non-Excluded Taxes from or in respect of any sum payable under this Agreement or any other Loan Paper to any Lender or Administrative Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this SECTION 3.20) such Lender or Administrative Agent receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions, (iii) Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, and (iv) Borrower shall furnish to Administrative Agent, at its address listed in SCHEDULE 2.1, the original or a certified copy of a receipt evidencing payment thereof. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 32 38 (b) In addition, Borrower agrees to pay any and all present or future stamp or documentary taxes and any other excise or property Taxes which arise from any payment made under this Agreement or any other Loan Paper or from the execution or delivery of, or otherwise with respect to, this Agreement or any other Loan Paper (hereinafter referred to as "OTHER TAXES"). (c) BORROWER AGREES TO INDEMNIFY EACH LENDER AND ADMINISTRATIVE AGENT FOR THE FULL AMOUNT OF NON-EXCLUDED TAXES THAT SHOULD HAVE BEEN WITHHELD BY BORROWER AND OTHER TAXES (INCLUDING, WITHOUT LIMITATION, ANY NON-EXCLUDED TAXES THAT SHOULD HAVE BEEN WITHHELD BY BORROWER OR OTHER TAXES IMPOSED OR ASSERTED BY ANY JURISDICTION ON AMOUNTS PAYABLE UNDER THIS SECTION 3.20) PAID BY SUCH LENDER OR ADMINISTRATIVE AGENT (AS THE CASE MAY BE) AND ANY LIABILITY (INCLUDING PENALTIES, INTEREST, AND EXPENSES OTHER THAN THOSE INCURRED AS A RESULT OF THE GROSS NEGLIGENCE OR WILFUL MISCONDUCT OF SUCH LENDER OR ADMINISTRATIVE AGENT) ARISING THEREFROM OR WITH RESPECT THERETO. (d) Each Lender organized under the Laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Lender listed on the signature pages hereof and on or prior to the date on which it becomes a Lender in the case of each other Lender, and from time to time thereafter, including, without limitation, upon the expiration or obsolescence of any previously delivered form or upon the written request of Borrower or Administrative Agent (but only so long as such Lender remains lawfully able to do so) shall provide Borrower and Administrative Agent with (i) Internal Revenue Service Form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States, (ii) Internal Revenue Service Form W-8 or W-9, as appropriate, or any successor form prescribed by the Internal Revenue Service, and (iii) any other form or certificate required by any taxing authority (including any certificate required by Sections 871(h) and 881(c) of the Code), certifying that such Lender is entitled to an exemption from or a reduced rate of tax on payments pursuant to this Agreement or any of the other Loan Papers. (e) For any period with respect to which a Lender has failed to provide Borrower and Administrative Agent with the appropriate form pursuant to SECTION 3.20(d) (unless such failure is due to a change in Law occurring subsequent to the date on which a form originally was required to be provided), such Lender shall not be entitled to indemnification under this SECTION 3.20 with respect to Taxes imposed by the United States; provided, however, that should a Lender, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, Borrower shall take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes. (f) If Borrower is required to pay additional amounts to or for the account of any Lender pursuant to this SECTION 3.20, then such Lender will use best efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Lender, is not otherwise disadvantageous to such Lender. (g) Within thirty (30) days after the date of any payment of Non-Excluded Taxes or Other Taxes, Borrower shall furnish to Administrative Agent the original or a certified copy of a receipt evidencing such payment. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 33 39 (h) Without prejudice to the survival of any other agreement of Borrower hereunder, the agreements and obligations of Borrower contained in this SECTION 3.20 shall survive the termination of the Commitment and the payment in full of the Obligation. SECTION 4 FEES. 4.1 Treatment of Fees. Except as otherwise provided by Law, the fees described in this SECTION 4: (a) do not constitute compensation for the use, detention, or forbearance of money, (b) are in addition to, and not in lieu of, interest and expenses otherwise described in this Agreement, (c) shall be payable in accordance with SECTION 3.1, (d) shall be non-refundable, (e) shall, to the fullest extent permitted by Law, bear interest, if not paid when due, at the Default Rate, and (f) shall be calculated on the basis of actual number of days (including the first day, but excluding the last day) elapsed, but computed as if each calendar year consisted of 360 days, unless such computation would result in interest being computed in excess of the Maximum Rate in which event such computation shall be made on the basis of a year of 365 or 366 days, as the case may be. 4.2 Fees of Administrative Agent and Arranger. Borrower shall pay to Administrative Agent or Arranger, as the case may be, solely for their respective accounts, the fees described in that certain separate letter agreement dated as of June 22, 1999 (as thereafter amended or modified from time to time), among Borrower, Administrative Agent, and Arranger, which payments shall be made on the dates specified, and in amounts calculated in accordance with, such letter agreement. 4.3 Commitment Fees. Following the Closing Date, Borrower shall pay to Administrative Agent, for the ratable account of Lenders, a commitment fee ("COMMITMENT FEE"), payable in installments in arrears, on each March 31, June 30, September 30, and December 31 and on the Termination Date or the Term Conversion Date, in each case, commencing September 30, 1999. Each installment shall be in an amount equal to the Applicable Margin designated in SECTION 1.1 for Commitment Fees multiplied by the amount by which (i) the average daily Commitment exceeds (ii) the average daily Principal Debt, in each case during the period from and including the last payment date to and excluding the payment date for such installment; provided that each such installment shall be calculated in accordance with SECTION 4.1(F). Solely for the purposes of this SECTION 4.3, (i) determinations of the average daily Principal Debt shall exclude the Principal Debt of all Competitive Borrowings and Swing Line Borrowings; and (ii) "ratable" shall mean, for any period of calculation, with respect to any Lender, that proportion which (x) the average daily unused Committed Sum of such Lender during such period bears to (y) the amount of the average daily unused Commitment during such period. SECTION 5 CONDITIONS PRECEDENT. 5.1 Conditions Precedent to Closing. This Agreement shall not become effective unless and until (a) Administrative Agent has received all of the agreements, documents, instruments, and other items described on SCHEDULE 5.1, and (b) there has been no change in the consolidated financial condition of the Consolidated Companies from that shown in the respective Current Financials of such companies which could be a Material Adverse Event. 5.2 Conditions Precedent to Each Borrowing. In addition to the conditions stated in SECTION 5.1 (except SECTION 5.1(B)), Lenders will not be obligated to fund (as opposed to continue or convert) any Borrowing (including any Competitive Borrowing or Swing Line Borrowing), as the case may be, unless on the date of such Borrowing (and after giving effect thereto), as the case may be: (a) Administrative Agent shall have timely received therefor a Notice of Borrowing or Notice of Competitive Borrowing as the case may be; AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 34 40 (b) Administrative Agent shall have received, as applicable, the fees provided for in SECTION 4.3 hereof or any fees then payable as provided for in SECTION 4.2, if applicable; (c) all of the representations and warranties of any Consolidated Company set forth in the Loan Papers are true and correct in all material respects (except to the extent that (i) the representations and warranties speak to a specific date or (ii) the facts on which such representations and warranties are based have been changed by transactions contemplated or permitted by the Loan Papers); (d) no Default or Potential Default shall have occurred and be continuing; (e) the funding of such Borrowing is permitted by Law; and (f) all matters related to such Borrowing must be satisfactory to Determining Lenders and their respective counsel in their reasonable determination, and upon the reasonable request of Administrative Agent, Borrower shall deliver to Administrative Agent evidence substantiating any of the matters in the Loan Papers which are necessary to enable Borrower to qualify for such Borrowing. Each Notice of Borrowing delivered to Administrative Agent shall constitute the representation and warranty by Borrower to Administrative Agent that the statements in CLAUSES (C) and (D) above are true and correct in all respects. Each condition precedent in this Agreement is material to the transactions contemplated in this Agreement, and time is of the essence in respect of each thereof. Subject to the prior approval of Determining Lenders, Lenders may fund any Borrowing without all conditions being satisfied, but, to the extent permitted by Law, the same shall not be deemed to be a waiver of the requirement that each such condition precedent be satisfied as a prerequisite for any subsequent funding unless Determining Lenders specifically waive each such item in writing. SECTION 6 REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Administrative Agent and Lenders as follows: 6.1 Purpose of Credit Facility. Borrower will use all proceeds of Borrowings for general corporate purposes of the Restricted Companies, including, without limitation, liquidity support for commercial paper. No Restricted Company is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any "margin stock" within the meaning of Regulation U. No part of the proceeds of any Borrowing will be used, directly or indirectly, for a purpose which violates any Law, including, without limitation, the provisions of Regulations T, U, and X (as enacted by the Board of Governors of the Federal Reserve System, as amended). "Margin Stock" (as defined in Regulation U) constitutes less than 25% of those assets of the Restricted Companies which are subject to any limitation on sale, pledge, or other similar restrictions hereunder. 6.2 Existence, Good Standing, Authority, and Authorizations. Each Restricted Company is duly organized, validly existing, and in good standing under the Laws of its jurisdiction of organization. Except where failure could not be a Material Adverse Event, each Restricted Company (a) is duly qualified to transact business and is in good standing in each jurisdiction where the nature and extent of its business and properties require the same, and (b) possesses all requisite authority, power, licenses, approvals, permits, Authorizations, and franchises to use its assets and conduct its business as is now being, or is contemplated herein to be, conducted, except where failure could not be a Material Adverse Event. No Authorization is required to authorize, or is required in connection with, the execution, delivery, legality, validity, binding effect, performance, or enforceability of the Loan Papers (including any change of control occurring as a result thereof) consummated on or prior to the date this representation or warranty (or reconfirmation thereof) is made under the Loan Papers, except those Authorizations the failure of which to be obtained or made could AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 35 41 not be a Material Adverse Event. The Restricted Companies have obtained all Authorizations of the FCC and any applicable PUC necessary to conduct their businesses, and all such Authorizations are in full force and effect, without conditions, except such conditions as are generally applicable to holders of such Authorizations. There are no violations of any such Authorizations which could, individually or collectively, be a Material Adverse Event, nor are there any proceedings pending or, to the knowledge of Borrower, threatened against the Restricted Companies to revoke or limit any such Authorization which could, individually or collectively, be a Material Adverse Event, and Borrower has no knowledge that any such Authorizations will not be renewed in the ordinary course, except for any nonrenewals that could not be a Material Adverse Event. 6.3 Authorization and Contravention. The execution, delivery, and performance by Borrower of each Loan Paper and its obligations thereunder (a) are within the corporate power of Borrower, (b) will have been duly authorized by all necessary corporate action on the part of Borrower when such Loan Paper is executed and delivered, (c) require no action by or in respect of, consent of, or filing with, any Governmental Authority, which action, consent, or filing has not been taken or made on or prior to the Closing Date, (d) will not violate any provision of the charter or bylaws of Borrower, (e) will not violate any provision of Law applicable to it, other than such violations which individually or collectively could not be a Material Adverse Event, (f) will not violate any material written or oral agreements, contracts, commitments, or understandings to which it is a party, other than such violations which could not be a Material Adverse Event, and (g) will not result in the creation or imposition of any Lien on any asset of any Consolidated Company that is material in relation to the Consolidated Companies taken as a whole. 6.4 Binding Effect. Upon execution and delivery by all parties thereto, each Loan Paper will constitute a legal, valid, and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as enforceability may be limited by applicable Debtor Relief Laws and general principles of equity. 6.5 Financial Statements. The Current Financials were prepared in accordance with GAAP and present fairly, in all material respects, the consolidated financial condition, results of operations, and cash flows of the Consolidated Companies as of and for the portion of the fiscal year ending on the date or dates thereof (subject only to normal year-end audit adjustments). There were no material liabilities, direct or indirect, fixed or contingent, of the Consolidated Companies as of the date or dates of the Current Financials which are required under GAAP to be reflected therein or in the notes thereto, and are not so reflected. 6.6 Litigation, Claims, Investigations. No Restricted Company is subject to, or aware of the threat of, any Litigation which is reasonably likely to be determined adversely to any Restricted Company, and, if so adversely determined, could (individually or collectively with other Litigation) be a Material Adverse Event. There are no judgments, decrees, or orders of any Governmental Authority outstanding against any Restricted Company that could be a Material Adverse Event. 6.7 Taxes. All Tax returns of each Consolidated Company required to be filed have been filed (or extensions have been granted) prior to delinquency, except for any such returns for which the failure to so file could not be a Material Adverse Event, and all Taxes imposed upon each Consolidated Company which are due and payable have been paid prior to delinquency, other than Taxes for which the criteria for Liens permitted under SECTION 7.13(F) have been satisfied or for which nonpayment thereof could not constitute a Material Adverse Event. 6.8 Environmental Matters. No Consolidated Company (a) knows of any environmental condition or circumstance, such as the presence or Release of any Hazardous Substance, on any property presently or previously owned by any Consolidated Company that could be a Material Adverse Event, (b) knows of any violation by any Consolidated Company of any Environmental Law, except for such violations that could not be a Material Adverse Event, or (c) knows that any Consolidated Company is under any obligation to remedy any violation of any Environmental Law, except for such obligations that could not be a Material Adverse AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 36 42 Event; provided, however, that each Consolidated Company (x) to the best of its knowledge, has in full force and effect all environmental permits, licenses, and approvals required to conduct its operations and is operating in substantial compliance thereunder, and (y) has taken prudent steps to determine that its properties and operations are not in violation of any Environmental Law. 6.9 ERISA Compliance. (a) No Employee Plan has incurred an accumulated funding deficiency, as defined in section 302 of ERISA and section 412 of the Code, (b) neither Borrower nor any ERISA Affiliate has incurred material liability which is currently due and remains unpaid under Title IV of ERISA to the PBGC or to an Employee Plan in connection with any such Employee Plan, (c) neither Borrower nor any ERISA Affiliate has withdrawn in whole or in part from participation in a Multiemployer Plan, (d) Borrower has not engaged in any "prohibited transaction" (as defined in section 406 of ERISA or section 4975 of the Code) which would be a Material Adverse Event, and (e) no Reportable Event has occurred which is likely to result in the termination of an Employee Plan. The present value of all benefit liabilities within the meaning of Title IV of ERISA under each Employee Plan (based on those actuarial assumptions used to fund such Employee Plan) did not, as of the last annual valuation date for the 1997 plan year of such Plan, exceed the value of the assets of such Employee Plan, and the total present values of all benefit liabilities within the meaning of Title IV of ERISA of all Employee Plans (based on the actuarial assumptions used to fund each such Plan) did not, as of the respective annual valuation dates for the 1997 plan year of each such Plan, exceed the value of the assets of all such plans. 6.10 Properties; Liens. Each Restricted Company has good and marketable title to (or, in the case of Rights of Way, the right to use) all its property reflected on the Current Financials, except for (a) property that is obsolete, (b) property that has been disposed of in the ordinary course of business, (c) property with title defects or failures in title which would not be a Material Adverse Event, or (d) as otherwise permitted by the Loan Papers. Except for Liens permitted in SECTION 7.13, there is no Lien on any property of any Restricted Company, and the execution, delivery, performance, or observance of the Loan Papers will not require or result in the creation of any Lien on such property. 6.11 Government Regulations. No Restricted Company is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, or any other Law (other than Regulations T, U, and X of the Board of Governors of the Federal Reserve System and the requirements of any PUC or public service commission) which regulates the incurrence of Debt. 6.12 No Default. No event has occurred and is continuing or would result from the incurring of obligations by Borrower under this Agreement or any other Loan Paper which constitutes a Default or a Potential Default. No Restricted Company is in default under or with respect to any material written or oral agreements, contracts, commitments, or understandings to which any Restricted Company is party which could, individually or together with all such defaults, be a Material Adverse Event. 6.13 Senior Indebtedness. All of the Obligation constitutes "senior indebtedness" or "senior debt" (or ranks at least pari passu with other senior and unsubordinated indebtedness) under the terms of the Indentures to which Borrower is a party or any other unsecured senior Debt or secured or unsecured subordinated Debt of Borrower. 6.14 Year 2000 Compliance. Borrower has (i) initiated a review and assessment of all areas within its and each of its Subsidiaries' business and operations that could be adversely affected by the "Year 2000 Problem" (that is, the risk that computer applications used by the Borrower or any of its Subsidiaries may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999), (ii) developed a plan and time line for addressing the Year 2000 Problem on a timely basis, and (iii) to date, implemented in all material respects that plan in accordance with that timetable. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 37 43 SECTION 7 COVENANTS. Borrower covenants and agrees (and agrees to cause each other Restricted Company and Consolidated Company to the extent any covenant is applicable to such Restricted Company or Consolidated Company) to perform, observe, and comply with each of the following covenants, from the Closing Date and so long thereafter as Lenders are committed to fund Borrowings under this Agreement and thereafter until the payment in full of the Principal Debt and payment in full of all other interest, fees, and other amounts of the Obligation then due and owing, unless Borrower receives a prior written consent to the contrary by Administrative Agent as authorized by Determining Lenders: 7.1 Use of Proceeds. Borrower shall use the proceeds of Borrowings only for the purposes represented herein. 7.2 Books and Records. The Consolidated Companies shall maintain books, records, and accounts necessary to prepare financial statements in accordance with GAAP (with such exceptions as may be noted in the Current Financials provided to Administrative Agent). 7.3 Items to be Furnished. Borrower shall cause the following to be furnished to Administrative Agent for delivery to Lenders: (a) Promptly after preparation, and no later than 110 days after the last day of each fiscal year of Borrower, Financial Statements showing the consolidated financial condition and results of operations calculated for the Consolidated Companies (or in lieu thereof the Form 10-K of the Consolidated Companies filed with the Securities and Exchange Commission for such fiscal year), accompanied by: (i) the unqualified opinion of a firm of nationally-recognized independent certified public accountants, based on an audit using generally accepted auditing standards, that such Financial Statements (calculated with respect to the Consolidated Companies) were prepared in accordance with GAAP and present fairly the consolidated financial condition and results of operations of the Consolidated Companies; (ii) a certificate from such accounting firm to Administrative Agent indicating that during its audit it obtained no knowledge of any Default or Potential Default or, if it obtained such knowledge, the nature and period of existence thereof; and (iii) a Compliance Certificate with respect to such Financial Statements. (b) Promptly after preparation, and no later than 65 days after the last day of each fiscal quarter of Borrower (other than the fourth fiscal quarter of each fiscal year), Financial Statements showing the consolidated financial condition and results of operations calculated for the Consolidated Companies (or in lieu thereof the Form 10-Q of the Consolidated Companies filed with the Securities and Exchange Commission for such fiscal quarter), accompanied by a Compliance Certificate with respect to such Financial Statements. (c) Notice, promptly after Borrower knows or has reason to know of (i) the existence and status of any Litigation which could be a Material Adverse Event, or of any order or judgment for the payment of money which (individually or collectively) is in excess of $100,000,000, or any warrant of attachment, sequestration or similar proceeding against a Consolidated Company's assets having a value (individually or collectively) of $100,000,000; (ii) any other Litigation affecting the Restricted Companies which Borrower would be required to report to the Securities and Exchange Commission pursuant to the Securities and Exchange Act of 1934, as amended, within four Business Days after reporting the same to the Securities and Exchange Commission; (iii) a Default or Potential Default, specifying the nature thereof and what action Borrower or any other Consolidated Company has taken, AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 38 44 is taking, or proposes to take with respect thereto; (iv) the receipt by any Consolidated Company of any notice from any Governmental Authority of the expiration without renewal, termination, material modification or suspension of, or institution of any proceedings to terminate, materially modify, or suspend, any Authorization granted by the FCC or any applicable PUC, or any other Authorization which any Consolidated Company is required to hold in order to operate its business in compliance with all applicable Laws, other than such expirations, terminations, suspensions, or modifications which individually or in the aggregate would not constitute a Material Adverse Event; (v) a default or event of default under any material agreement of any Restricted Company which could be a Material Adverse Event; (vi) the receipt by any Consolidated Company of notice of any violation or alleged violation of any Environmental Law, which violation or alleged violation could individually or collectively with other such violations or allegations, constitute a Material Adverse Event; or (vii) (A) the occurrence of a Reportable Event that, alone or together with any other Reportable Event, could reasonably be expected to result in liability of Borrower to the PBGC in an aggregate amount exceeding $100,000,000; (B) any expressed statement in writing on the part of the PBGC of its intention to terminate any Employee Plan or Plans; (C) Borrower's or an ERISA Affiliate's becoming obligated to file with the PBGC a notice of failure to make a required installment or other payment with respect to an Employee Plan; or (D) the receipt by Borrower or an ERISA Affiliate from the sponsor of a Multiemployer Plan of either a notice concerning the imposition of withdrawal liability in an aggregate amount exceeding $100,000,000 or of the impending termination or reorganization of such Multiemployer Plan. (d) Promptly after the filing thereof, a true, correct, and complete copy of each material report and registration statement filed with the Securities and Exchange Commission, including, without limitation, each Form 10-K, Form 10-Q, and Form 8-K filed by or on behalf of Borrower or any Consolidated Company with the Securities and Exchange Commission. (e) Promptly upon request therefor by Administrative Agent or Lenders holding, in the aggregate, at least 25% of the Commitment (prior to the Term Conversion Date) or 25% of the Principal Debt (on and after the Term Conversion Date) (through Administrative Agent), such information (not otherwise required to be furnished under the Loan Papers) respecting the business affairs, assets, and liabilities of the Consolidated Companies, and such opinions, certifications and documents, in addition to those mentioned in this Agreement, as reasonably requested. 7.4 Inspections. On and after the occurrence of any Potential Default or Default, the Consolidated Companies shall allow Administrative Agent or any Lender (or their respective Representatives) to inspect any of their properties, to review reports, files, and other records and to make and take away copies thereof, to conduct tests or investigations, and to discuss any of their affairs, conditions, and finances with the Consolidated Companies' other creditors, directors, officers, employees, other representatives, and independent accountants, from time to time, during reasonable business hours, as often as may be desired, and all at the expense of Borrower. 7.5 Taxes. Each Consolidated Company (a) shall promptly pay when due any and all Taxes other than Taxes the applicability, amount, or validity of which is being contested in good faith by lawful proceedings diligently conducted, and against which reserve or other provision required by GAAP has been made, and in respect of which levy and execution of any lien securing same have been and continue to be stayed, and (b) shall not, directly or indirectly, use any portion of the proceeds of any Borrowing to pay the wages of employees unless a timely payment to or deposit with the appropriate Governmental Authorities of all amounts of Tax required to be deducted and withheld with respect to such wages is also made. 7.6 Payment of Obligations. Borrower shall pay the Obligation in accordance with the terms and provisions of the Loan Papers. Each Restricted Company shall promptly pay (or renew and extend) all of its AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 39 45 material obligations as the same become due (unless such obligations [other than the Obligation arising under the Loan Papers] are being contested in good faith by appropriate proceedings). 7.7 Maintenance of Existence, Assets, and Business. Except as otherwise permitted by SECTION 7.20, each Restricted Company shall at all times: (a) maintain its existence and good standing in the jurisdiction of its organization and its authority to transact business in all other jurisdictions where the failure to so maintain its authority to transact business could be a Material Adverse Event; (b) maintain all licenses, permits, and franchises necessary for its business where the failure to so maintain could be a Material Adverse Event; (c) keep all of its assets which are useful in and necessary to its business in good working order and condition (ordinary wear and tear excepted) and make all necessary repairs thereto and replacements thereof, except where the failure to do so would not be a Material Adverse Event; and (d) do all things necessary to obtain, renew, extend, and continue in effect all Authorizations issued by the FCC or any applicable PUC which may at any time and from time to time be necessary for the Consolidated Companies to operate their businesses in compliance with applicable Law, where the failure to so renew, extend, or continue in effect could be a Material Adverse Event. 7.8 Insurance. Each Consolidated Company shall, at its cost and expense, maintain insurance with financially sound and reputable insurers, in such amounts, and covering such risks, as shall be ordinary and customary for similar companies in the industry, except where the failure to so maintain would not be a Material Adverse Event. 7.9 Preservation and Protection of Rights. Each Consolidated Company shall perform such acts and duly authorize, execute, acknowledge, deliver, file, and record any additional agreements, documents, instruments, and certificates as Administrative Agent or Determining Lenders may reasonably deem necessary or appropriate in order to preserve and protect the Rights of Administrative Agent and Lenders under any Loan Paper. 7.10 Employee Benefit Plans. Borrower shall not directly or indirectly, engage in any "prohibited transaction" (as defined in section 406 of ERISA or section 4975 of the Code), and Borrower and its ERISA Affiliates shall not, directly or indirectly, (a) incur any "accumulated funding deficiency" as such term is defined in section 302 of ERISA with respect to any Employee Plan, (b) permit any Employee Plan to be subject to involuntary termination proceedings pursuant to Title IV of ERISA, or (c) fully or partially withdraw from any Multiemployer Plan, if such prohibited transaction, accumulated funding deficiency, termination proceeding, or withdrawal would result in liability on the part of Borrower in excess of $100,000,000. 7.11 Environmental Laws. Each Consolidated Company shall (a) conduct its business so as to comply with all applicable Environmental Laws and shall promptly take corrective action to remedy any non-compliance with any Environmental Law, except where the failure to so comply or correct would not be a Material Adverse Event; (b) shall promptly investigate and remediate any known Release or threatened Release of any Hazardous Substance on any property owned by any Consolidated Company or at any facility operated by any Consolidated Company to the extent and degree necessary to comply with Law and to assure that any Release or threatened Release does not result in a substantial endangerment to human health or the environment, except where the failure to do so would not be a Material Adverse Event; and (c) establish and maintain a management system designed to ensure compliance with applicable Environmental Laws and minimize financial and other risks to each Consolidated Company arising under applicable Environmental Laws or as a result of environmentally-related injuries to Persons or property. 7.12 Debt. No Restricted Company shall, directly or indirectly, create, incur, or suffer to exist any direct, indirect, fixed, or contingent liability for any Debt, other than: (a) The Obligation; AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 40 46 (b) Existing Debt; (c) Debt arising under Facility A; (d) Debt incurred by any Restricted Company under any Financial Hedge with any Lender or an Affiliate of any Lender; (e) Debt between Restricted Companies, so long as any such inter-company Debt owed by Borrower to any other Restricted Company is unsecured; or Debt of any Restricted Company to the Receivables Subsidiary; and (f) Debt of any Restricted Company not otherwise permitted by this SECTION 7.12, so long as (i) no Default or Potential Default exists on the date any such Debt is created, incurred, or assumed or arises after giving effect to such Debt incurrence; and (ii) if such Debt is secured, on the date any such secured Debt is created, incurred, or assumed, the principal amount of such secured Debt when aggregated with the principal amount of all other secured Debt of the Restricted Companies incurred in accordance with this SECTION 7.12(F) does not exceed 10% of the book value of the consolidated assets of the Restricted Companies determined as of the date of, and with respect to, the Current Financials and the related Compliance Certificate. Notwithstanding anything in this SECTION 7.12 to the contrary, the aggregate principal amount of all Debt of the Restricted Subsidiaries may not exceed, on any date of determination, the sum of (i) 10% of the book value of the consolidated assets of the Restricted Companies, determined as of the date of the most-recently delivered consolidated Financial Statements of Borrower and the related Compliance Certificate, plus (ii) the principal amount of all Existing Debt of MCI and its Subsidiaries on and after September 14, 1998 (the "MCI Merger Date" under the Existing Agreement) (as renewed, refinanced, or extended but not increased). 7.13 Liens. No Restricted Company will, directly or indirectly, create, incur, or suffer or permit to be created or incurred or to exist any Lien upon any of its assets, except: (a) Liens securing Debt permitted to be incurred or outstanding under SECTION 7.12(b) and SECTION 7.12(f), so long as (i) with respect to Liens securing Existing Debt, such Liens are limited to the assets securing such Existing Debt on August 6, 1998 (in the case of Existing Debt described in PART A of SCHEDULE 7.12) or on September 14, 1998 (the "MCI Merger Date" under the Existing Agreement) (in the case of Existing Debt described in PART B of SCHEDULE 7.12), (ii) no Default or Potential Default exists on the date any such Lien is granted or created, (iii) the aggregate amount of all Debt secured by such Liens does not exceed the aggregate amount of secured Debt permitted by SECTIONS 7.12(b) and 7.12(f)(ii); and (iv) the aggregate amount of Debt of Restricted Subsidiaries secured by such Liens does not exceed the amount of Restricted Subsidiary Debt permitted under SECTION 7.12; (b) Pledges or deposits made to secure payment of worker's compensation, or to participate in any fund in connection with worker's compensation, unemployment insurance, pensions, or other social security programs, and reasonable and customary reserves established in connection with the sale of Receivables permitted under SECTION 7.19(d); (c) Good-faith pledges or deposits made to secure performance of bids, tenders, insurance, or other contracts (other than for the repayment of borrowed money), or leases, or to secure statutory obligations, surety or appeal bonds, or indemnity, performance, or other similar bonds as all such Liens arise in the ordinary course of business of the Restricted Companies; AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 41 47 (d) Encumbrances consisting of zoning restrictions, easements, or other restrictions on the use of real property, none of which impair in any material respect the use of such property by the Person in question in the operation of its business, and none of which is violated by existing or proposed structures or land use; (e) If no Lien has been agreed to or filed in any jurisdiction, (i) claims and Liens for Taxes not yet due and payable, (ii) mechanic's Liens and materialmen's Liens for services or materials and similar Liens incident to construction and maintenance of real property, in each case for which payment is not yet due and payable, (iii) landlord Liens for rental not yet due and payable, and (iv) Liens of warehousemen and carriers and similar Liens securing obligations that are not yet due and payable; (f) The following, so long as the validity or amount thereof is being contested in good faith and by appropriate and lawful proceedings diligently conducted, reserve or other appropriate provision (if any) required by GAAP shall have been made, levy and execution thereon have been stayed and continue to be stayed, and they do not in the aggregate materially detract from the value of the property of the Person in question, or materially impair the use thereof in the operation of its business: (i) claims and Liens for Taxes (other than Liens relating to Environmental Laws or ERISA); (ii) claims and Liens upon, and defects of title to, real or personal property, including any attachment of personal or real property or other legal process prior to adjudication of a dispute of the merits; (iii) claims and Liens of mechanics, materialmen, warehousemen, carriers, landlords, or other like Liens; and (iv) adverse judgments on appeal; (g) Liens on the Receivables Program Assets created pursuant to any Receivables Documents evidencing Accounts Receivable Financing permitted by SECTION 7.19(D); and (h) Any attachment or judgment Lien not constituting a Default or Potential Default. 7.14 Transactions with Affiliates. Except for those transactions listed on SCHEDULE 7.14, no Restricted Company shall enter into any material transaction with any of its Affiliates (excluding transactions among or between Restricted Companies), other than (i) transactions in the ordinary course of business and upon fair and reasonable terms not materially less favorable than such Restricted Company could obtain or could become entitled to in an arm's-length transaction with a Person that was not its Affiliate and (ii) sales and contributions of Receivables Program Assets from Borrower or certain Restricted Subsidiaries to the Receivables Subsidiary pursuant to an Accounts Receivable Financing permitted by SECTION 7.19(D); provided, that, for the purposes hereof, determinations of materiality shall be made in the good faith judgment of Borrower with respect to the Restricted Companies taken as a whole. 7.15 Compliance with Laws and Documents. No Restricted Company shall violate the provisions of any Laws applicable to it, including, without limitation, all rules and regulations promulgated by the FCC or any applicable PUC, or any material written or oral agreement, contract, commitment, or understanding to which it is a party, if such violation alone, or when aggregated with all other such violations, could be a Material Adverse Event; no Consolidated Company shall violate the provisions of its charter or bylaws, or modify, repeal, replace, or amend any provision of its charter or bylaws, if such action could adversely affect the Rights of Lenders. 7.16 Assignment. Without the express written consent of all Lenders, Borrower shall not assign or transfer any of its Rights, duties, or obligations under any of the Loan Papers. 7.17 Permitted Distributions. Borrower may not, directly or indirectly, declare, make, or pay any Distributions if any Default or Potential Default exists or will exist after giving effect to any such Distribution. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 42 48 Any Distribution permitted hereunder is permitted only to the extent such Distribution is made in accordance with applicable Law and constitutes a valid, non-voidable transaction. 7.18 Restrictions on Subsidiaries. No Restricted Subsidiary shall, directly or indirectly, enter into or permit to exist any material arrangement or agreement (other than the Loan Papers) which directly or indirectly prohibits any such Restricted Subsidiary from (a) declaring, making, or paying, directly or indirectly, any Distribution to Borrower or any other Restricted Subsidiary, (b) paying any Debt owed to Borrower or any other Restricted Subsidiary, (c) making loans, advances, or investments to Borrower or any other Restricted Subsidiary, or (d) transferring any of its property or assets to Borrower or any other Restricted Subsidiary. 7.19 Sale of Assets. No Restricted Company shall, directly or indirectly, sell, assign, transfer, or otherwise dispose of any of its assets except: (a) disposition of obsolete or worn-out property or real property no longer used or useful in its business; (b) the sale, discount, or transfer of delinquent accounts receivable in the ordinary course of business for purposes of collection; (c) sales of inventory in the ordinary course of business; (d) the sale, assignment, transfer, or other disposition of undivided percentage interests in the Receivables Program Assets pursuant to any Accounts Receivables Financing, so long as the aggregate Accounts Receivable Financing Amount payable from the Receivables Program Assets to the purchasers under all such Accounts Receivable Financings does not exceed $2,000,000,000 on any date of determination; (e) asset sales between Restricted Companies; and (f) if no Default or Potential Default then exists or arises as a result thereof, additional sales or disposition of other assets, if after giving effect to such sales or disposition, the aggregate book value of assets sold on and after August 6, 1998, does not exceed 20% of the book value of the consolidated assets of the Restricted Companies determined as of the date of, and with respect to, the Current Financials and the related Compliance Certificate. 7.20 Mergers and Dissolutions; Sale of Capital Stock. No Restricted Company will, directly or indirectly, merge or consolidate with any other Person, other than (a) mergers or consolidations by Borrower with another Person; (b) mergers or consolidations by any Restricted Subsidiary with another Person, if a Restricted Subsidiary is the surviving or resulting entity; (c) mergers or consolidations among Restricted Companies; (d) as previously approved by Determining Lenders; and (e) mergers or consolidations between Restricted Companies and Unrestricted Subsidiaries; provided that, under this SECTION 7.20, unless previously approved by Determining Lenders, (i) in any merger or consolidation involving Borrower, Borrower or a Permitted Successor Corporation must be the surviving or resulting entity, (ii) in any merger or consolidation involving a wholly-owned Restricted Subsidiary, a wholly-owned Subsidiary must be the surviving or resulting entity; and, (iii) in any merger or consolidation involving any other Restricted Company (including any acquisition effected as a merger), a Restricted Subsidiary must be the surviving or resulting entity. No Restricted Company shall liquidate, wind up, or dissolve (or suffer any liquidation or dissolution), other than (x) liquidations, wind ups, or dissolutions incident to mergers or consolidations permitted under this SECTION 7.20, or (y) liquidations, wind ups, or dissolutions of a Restricted Subsidiary if no Default or Potential Default exists or would result therefrom and its proportionate share of assets (if any) are transferred to a Restricted Company. 7.21 Designation of Unrestricted Companies. So long as no Default or Potential Default exists or arises as a result thereof, Borrower may from time to time designate a Subsidiary as an Unrestricted Subsidiary or designate an Unrestricted Subsidiary as a Restricted Subsidiary; provided that, Borrower shall (a) provide Administrative Agent written notification of such designation, and (b) deliver to Administrative Agent a Compliance Certificate demonstrating pro-forma compliance with SECTIONS 7.12 and 7.22 immediately prior to and after giving effect to such designation. 7.22 Financial Covenant. As calculated on a consolidated basis for the Restricted Companies, Borrower shall never permit the ratio of Total Debt to Total Capitalization, on any date of determination, to exceed 0.68 to 1.00. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 43 49 7.23 Year 2000 Compliance. Borrower will promptly notify the Administrative Agent in the event Borrower discovers or determines that any computer application that is material to its or any of its Subsidiaries' business and operations will not be Year 2000 compliant on a timely basis, except to the extent that such failure is not reasonably expected to be a Material Adverse Event. SECTION 8 DEFAULT. The term "DEFAULT" means the occurrence of any one or more of the following events: 8.1 Payment of Obligation. The failure or refusal of (a) Borrower to pay (i) Principal Debt within three days after the same becomes due in accordance with the Loan Papers; (ii) interest, fees, or any other part of the Obligation within five days after the same becomes due and payable in accordance with the Loan Papers; or (iii) the indemnifications and reimbursements provided for in SECTIONS 3.15, 3.19, and 3.20 within ten days after demand therefor as required by such Sections; or (b) any Restricted Company to punctually and properly perform, observe, and comply with SECTION 9.12 or with any other provision in the Loan Papers setting forth indemnification or reimbursement obligations (other than pursuant to SECTIONS 3.15, 3.19, and 3.20) of the Restricted Companies, and such failure or refusal continues for 15 days. 8.2 Covenants. The failure or refusal of Borrower (and, if applicable, any other Consolidated Company) to punctually and properly perform, observe, and comply with: (a) any covenant, agreement, or condition contained in SECTIONS 7.1, 7.12, 7.13 (other than by reason of attachment or involuntary Lien), 7.16, 7.17, and 7.19 through 7.21, (b) any covenant, agreement, or condition contained in SECTION 7.13 (if by reason of an attachment or involuntary Lien), 7.18, 7.22, and 7.23, which failure or refusal continues for 15 days; or (c) any other covenant, agreement, or condition contained in any Loan Paper (other than the covenants to pay the Obligation set forth in SECTION 8.1 and the covenants in CLAUSES (A) and (B) hereof), which failure or refusal continues for 30 days. 8.3 Debtor Relief. Borrower or any Material Subsidiary (a) shall not be Solvent, (b) fails to pay its Debts generally as they become due, (c) voluntarily seeks, consents to, or acquiesces in the benefit of any Debtor Relief Law, other than as a creditor or claimant, or (d) becomes a party to or is made the subject of any proceeding provided for by any Debtor Relief Law, other than as a creditor or claimant, that could suspend or otherwise adversely affect the Rights of Administrative Agent or any Lender granted in the Loan Papers (unless, in the event such proceeding is involuntary, the petition instituting same is dismissed within 60 days after its filing). 8.4 Judgments and Attachments. Any Restricted Company fails, within 60 days after entry, to pay, bond, or otherwise discharge any one or more judgments or orders for the payment of money (not paid or fully covered by insurance) in excess of $100,000,000 (individually or collectively) or the equivalent thereof in another currency or currencies, or any warrant of attachment, sequestration, or similar proceeding against any Restricted Company's assets having a value (individually or collectively) of $100,000,000 or the equivalent thereof in another currency or currencies, which is not either (a) stayed on appeals; (b) being diligently contested in good faith by appropriate proceedings with adequate reserves having been set aside on the books of such Restricted Company in accordance with GAAP, or (c) dismissed by a court of competent jurisdiction. 8.5 Misrepresentation. Any representation or warranty made by any Consolidated Company contained in any Loan Paper shall at any time prove to have been incorrect in any material respect when made. 8.6 Change of Control. (a) A Responsible Officer or Officers become the "beneficial owner" (as defined in Rule 13(d)(3) under the 1934 Act and herein so called) of 50% or more of the Voting Stock of Borrower; (b) any Special Shareholder or Special Shareholders become beneficial owners of 50% or more of the Voting Stock of Borrower; or (c) any other Person or two or more Persons (acting within the meaning of Rule 13(d)(3) under the 1934 Act), other than Persons described in CLAUSE (a) hereof, become the beneficial AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 44 50 owner of 20% or more of the Voting Stock of Borrower. As used herein, "Special Shareholders" shall mean (i) any Person or two or more Persons (acting within the meaning of Rule 13(d)(3) under the 1934 Act) who were on December 4, 1992 (or prior to any change in beneficial ownership were) beneficial owners of 20% or more of the Voting Stock of LDDS Communications, Inc., a Tennessee corporation and the predecessor of Borrower, or immediately prior to the merger between LDDS Communications, Inc., a Tennessee corporation, and Advanced Telecommunications Corporation, a Delaware corporation, were beneficial owners of 20% or more of the Voting Stock of either such company, and (ii) Metromedia Company, a Delaware general partnership. 8.7 Default Under Other Agreements. (a) Any default exists under any agreement to which a Restricted Company is a party, the effect of which is to cause, or to permit any Person to cause, an amount of Debt of such Restricted Company in excess (individually or collectively) of $100,000,000 (or the equivalent thereof in another currency or currencies) to become due and payable by any Restricted Company (whether by acceleration or by its terms); or (b) any default exists under any material written or oral agreement, contract, commitment, or understanding to which a Restricted Company is a party, the effect of which would be a Material Adverse Event, unless, in the case of this CLAUSE (b), and so long as, such default is being contested by such Restricted Company in good faith by appropriate proceedings, and adequate reserves in respect thereof have been established on the books of such Restricted Company to the extent required by GAAP. 8.8 Employee Benefit Plans. (a) A Reportable Event or Reportable Events, or a failure to make a required installment or other payment (within the meaning of Section 412(n)(1) of the Code), shall have occurred with respect to any Employee Plan or Plans that is expected to result in liability of Borrower to the PBGC or to a Plan in an aggregate amount exceeding $100,000,000 and, within 30 days after the reporting of any such Reportable Event to Administrative Agent or after the receipt by Administrative Agent of a statement required pursuant to SECTION 7.3(c) hereof, Administrative Agent shall have notified Borrower in writing that (i) Determining Lenders have made a reasonable determination that, on the basis of such Reportable Event or Reportable Events or the failure to make a required payment, there are grounds under Title IV of ERISA for the termination of such Employee Plan or Plans by the PBGC, or the appointment by the appropriate United States district court of a trustee to administer such Employee Plan or Plans or the imposition of a Lien pursuant to section 412(n) of the Code in favor of an Employee Plan and (ii) as a result thereof a Default exists hereunder; or (b) Borrower or any ERISA Affiliate has provided to any affected party a 60-day notice of intent to terminate an Employee Plan pursuant to a distress termination in accordance with section 4041(c) of ERISA if the liability expected to be incurred as a result of such termination will exceed $100,000,000; or (c) a trustee shall be appointed by a United States district court to administer any such Employee Plan; or (d) the PBGC shall institute proceedings (including giving notice of intent thereof) to terminate any such Employee Plan; or (e)(i) Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred withdrawal liability (within the meaning of section 4201 of ERISA) to such Multiemployer Plan, (ii) Borrower or such ERISA Affiliate does not have reasonable grounds for contesting such withdrawal liability or is not contesting such withdrawal liability in a timely and appropriate manner and (iii) the amount of such withdrawal liability specified in such notice, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with withdrawal liabilities (determined as of the date or dates of such notification), exceeds $100,000,000; or (f) Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if solely as a result of such reorganization or termination the aggregate annual contributions of Borrower and its ERISA Affiliates to all Multiemployer Plans that are then in reorganization or have been or are being terminated have been or will be increased over the amounts required to be contributed to such Multiemployer Plans for their most recently completed plan years by an amount exceeding $100,000,000. 8.9 Default Under Facility A. The occurrence and continuance of a "Default" under Facility A. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 45 51 8.10 Validity and Enforceability of Loan Papers. Any Loan Paper shall, at any time after its execution and delivery and for any reason, cease to be in full force and effect in any material respect or be declared to be null and void (other than in accordance with the terms hereof or thereof) or the validity or enforceability thereof be contested by any Restricted Company party thereto or any Restricted Company shall deny in writing that it has any or any further liability or obligations under any Loan Paper to which it is a party. SECTION 9 RIGHTS AND REMEDIES. 9.1 Remedies Upon Default. (a) If a Default exists under SECTION 8.3(C) or 8.3(D), the commitment to extend credit hereunder shall automatically terminate and the entire unpaid balance of the Obligation under this 364- Day Facility shall automatically become due and payable without any action or notice of any kind whatsoever. (b) If any Default exists, Administrative Agent may (and, subject to the terms of SECTION 10, shall upon the request of Determining Lenders) or Determining Lenders may, do any one or more of the following: (i) if the maturity of the Obligation under this 364-Day Facility Agreement has not already been accelerated under SECTION 9.1(A), declare the entire unpaid balance of the Obligation under this 364-Day Facility, or any part thereof, immediately due and payable, whereupon it shall be due and payable; (ii) terminate the commitments of Lenders to extend credit hereunder; (iii) reduce any claim to judgment; (iv) to the extent permitted by Law, exercise (or request each Lender to, and each Lender shall be entitled to, exercise) the Rights of offset or banker's Lien against the interest of Borrower in and to every account and other property of Borrower which are in the possession of Administrative Agent or any Lender to the extent of the full amount of the Obligation (to the extent permitted by Law, Borrower being deemed directly obligated to each Lender in the full amount of the Obligation for such purposes); and (v) exercise any and all other legal or equitable Rights afforded by the Loan Papers, the Laws of the State of New York, or any other applicable jurisdiction as Administrative Agent shall deem appropriate, or otherwise, including, but not limited to, the Right to bring suit or other proceedings before any Governmental Authority either for specific performance of any covenant or condition contained in any of the Loan Papers or in aid of the exercise of any Right granted to Administrative Agent or any Lender in any of the Loan Papers. 9.2 Company Waivers. To the extent permitted by Law, Borrower hereby waives presentment and demand for payment, protest, notice of intention to accelerate, notice of acceleration, and notice of protest and nonpayment, and agrees that its liability with respect to the Obligation (or any part thereof), shall not be affected by any renewal or extension in the time of payment of the Obligation (or any part thereof), by any indulgence, or by any release or change in any security for the payment of the Obligation (or any part thereof). 9.3 Performance by Administrative Agent. If any covenant, duty, or agreement of any Consolidated Company is not performed in accordance with the terms of the Loan Papers, after the occurrence and during the continuance of a Default, Administrative Agent may, at its option (but subject to the approval of Determining Lenders), perform or attempt to perform such covenant, duty, or agreement on behalf of such Consolidated Company. In such event, any amount expended by Administrative Agent in such performance or attempted performance shall be payable by the Consolidated Companies, jointly and severally, to Administrative Agent on demand, shall become part of the Obligation, and shall bear interest at the Default Rate from the date of such expenditure by Administrative Agent until paid. Notwithstanding the foregoing, it is expressly understood that Administrative Agent does not assume and shall never have, except by its express written consent, any liability or responsibility for the performance of any covenant, duty, or agreement of any Consolidated Company. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 46 52 9.4 Delegation of Duties and Rights. Lenders may perform any of their duties or exercise any of their Rights under the Loan Papers by or through their respective Representatives. 9.5 Not in Control. Nothing in any Loan Paper shall, or shall be deemed to (a) give Administrative Agent, any Agent, or any Lender the Right to exercise control over the assets (including real property), affairs, or management of any Consolidated Company, (b) preclude or interfere with compliance by any Consolidated Company with any Law, or (c) require any act or omission by any Consolidated Company that may be harmful to Persons or property. Any "Material Adverse Event" or other materiality qualifier in any representation, warranty, covenant, or other provision of any Loan Paper is included for credit documentation purposes only and shall not, and shall not be deemed to, mean that Administrative Agent, any Agent, or any Lender acquiesces in any non-compliance by any Consolidated Company with any Law or document, or that Administrative Agent, any Agent, or any Lender does not expect the Consolidated Companies to promptly, diligently, and continuously carry out all appropriate removal, remediation, and termination activities required or appropriate in accordance with all Environmental Laws. Neither the Administrative Agent nor any Lender has any fiduciary relationship with or fiduciary duty to Borrower or any Consolidated Company arising out of or in connection with the Loan Papers, and the relationship between the Administrative Agent and Lenders, on the one hand, and Borrower, on the other hand, in connection with the Loan Papers is solely that of debtor and creditor. The power of Agents and Lenders under the Loan Papers is limited to the Rights provided in the Loan Papers, which Rights exist solely to assure payment and performance of the Obligation and may be exercised in a manner calculated by Agents and Lenders in their respective good faith business judgment. 9.6 Course of Dealing. The acceptance by Administrative Agent or Lenders at any time and from time to time of partial payment on the Obligation shall not be deemed to be a waiver of any Default then existing. No waiver by Administrative Agent, Determining Lenders, or Lenders of any Default shall be deemed to be a waiver of any other then-existing or subsequent Default. No delay or omission by Administrative Agent, Determining Lenders, or Lenders in exercising any Right under the Loan Papers shall impair such Right or be construed as a waiver thereof or any acquiescence therein, nor shall any single or partial exercise of any such Right preclude other or further exercise thereof, or the exercise of any other Right under the Loan Papers or otherwise. 9.7 Cumulative Rights. All Rights available to Administrative Agent and Lenders under the Loan Papers are cumulative of and in addition to all other Rights granted to Administrative Agent and Lenders at law or in equity, whether or not the Obligation is due and payable and whether or not Administrative Agent or Lenders have instituted any suit for collection, foreclosure, or other action in connection with the Loan Papers. 9.8 Application of Proceeds. Any and all proceeds ever received by Administrative Agent or Lenders from the exercise of any Rights pertaining to the Obligation shall be applied to the Obligation in the order and manner set forth in SECTION 3.11. 9.9 Certain Proceedings. Borrower will promptly execute and deliver, or cause the execution and delivery of, all applications, certificates, instruments, registration statements, and all other documents and papers Administrative Agent or Lenders may reasonably request in connection with the obtaining of any consent, approval, registration, qualification, permit, license, or authorization of any Governmental Authority or other Person necessary or appropriate for the effective exercise of any Rights under the Loan Papers. Because Borrower agrees that Administrative Agent's and Lenders' remedies at Law for failure of Borrower to comply with the provisions of this paragraph would be inadequate and that such failure would not be adequately compensable in damages, Borrower agrees that the covenants of this paragraph may be specifically enforced. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 47 53 9.10 Limitation of Rights. Notwithstanding any other provision of this Agreement or any other Loan Paper, any action taken or proposed to be taken by Administrative Agent or any other Agent or any Lender under any Loan Paper which would affect the operational, voting, or other control of any Consolidated Company, shall be pursuant to Section 310(d) of the Communications Act of 1934 (as amended), any applicable state Law, and the applicable rules and regulations thereunder and, if and to the extent required thereby, subject to the prior consent of the FCC or any applicable PUC. 9.11 Expenditures by Lenders. Borrower shall promptly pay within fifteen (15) Business Days after request therefor (a) all reasonable costs, fees, and expenses paid or incurred by Administrative Agent incident to any Loan Paper (including, but not limited to, the reasonable fees and expenses of counsel to Administrative Agent and the allocated cost of internal counsel in connection with the negotiation, preparation, delivery, execution, coordination and administration of the Loan Papers and any related amendment, waiver, or consent) and (b) all reasonable costs and expenses of Lenders, and Administrative Agent incurred by Administrative Agent, or any Lender in connection with the enforcement of the obligations of any Restricted Company arising under the Loan Papers (including, without limitation, costs and expenses incurred in connection with any workout or bankruptcy) or the exercise of any Rights arising under the Loan Papers (including, but not limited to, reasonable attorneys' fees including allocated cost of internal counsel, court costs and other costs of collection), all of which shall be a part of the Obligation and shall bear interest at the Default Rate from the date due until the date repaid by Borrower. 9.12 INDEMNIFICATION. BORROWER, FOR ITSELF AND ON BEHALF OF THE OTHER RESTRICTED COMPANIES, INDEMNIFIES, PROTECTS, AND HOLDS ADMINISTRATIVE AGENT, EACH OTHER AGENT, AND EACH LENDER AND THEIR RESPECTIVE AFFILIATES, PARENTS, AND SUBSIDIARIES, AND EACH OF THE FOREGOING PARTIES' RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, REPRESENTATIVES, AGENTS, SUCCESSORS, ASSIGNS, AND ATTORNEYS (COLLECTIVELY, THE "INDEMNIFIED PARTIES") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS, AND PROCEEDINGS AND ALL REASONABLE AND NECESSARY COSTS, EXPENSES (INCLUDING, WITHOUT LIMITATION, ALL REASONABLE ATTORNEYS' FEES AND LEGAL EXPENSES INCLUDING ALLOCATED COST OF INTERNAL COUNSEL, AND AMOUNTS PAID IN SETTLEMENT WHETHER OR NOT SUIT IS BROUGHT), AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER, AND AMOUNTS PAID IN SETTLEMENT (THE "INDEMNIFIED LIABILITIES") WHICH MAY AT ANY TIME BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE INDEMNIFIED PARTIES, IN ANY WAY RELATING TO OR ARISING OUT OF (a) THE DIRECT OR INDIRECT RESULT OF THE VIOLATION BY ANY CONSOLIDATED COMPANY OF ANY ENVIRONMENTAL LAW, AS WELL AS ANY AMENDMENT AND SUPPLEMENT THERETO AND ANY STATE COUNTERPART THEREOF; (b) ANY CONSOLIDATED COMPANY'S GENERATION, MANUFACTURE, PRODUCTION, STORAGE, TRANSPORTATION, RELEASE, THREATENED RELEASE, DISCHARGE, DISPOSAL OR PRESENCE IN CONNECTION WITH ITS PROPERTIES OF A HAZARDOUS SUBSTANCE (INCLUDING, WITHOUT LIMITATION, (i) ALL DAMAGES ARISING FROM ANY SUCH USE, GENERATION, MANUFACTURE, PRODUCTION, STORAGE, RELEASE, THREATENED RELEASE, DISCHARGE, DISPOSAL, OR PRESENCE, OR (ii) THE COSTS OF ANY REQUIRED OR NECESSARY ENVIRONMENTAL INVESTIGATION, MONITORING, REPAIR, CLEANUP, OR DETOXIFICATION AND THE PREPARATION AND IMPLEMENTATION OF ANY CLOSURE, REMEDIAL, OR OTHER PLANS); OR (c) THE LOAN PAPERS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN OR THE USE OF PROCEEDS OF ANY BORROWING, TO THE EXTENT THAT ANY OF THE INDEMNIFIED LIABILITIES RESULTS, DIRECTLY OR INDIRECTLY, FROM ANY CLAIM MADE OR ACTION, SUIT, OR PROCEEDING COMMENCED BY OR ON BEHALF OF ANY PERSON OTHER THAN BY THE INDEMNIFIED PARTIES; (PROVIDED THAT, NONE OF THE RESTRICTED COMPANIES SHALL HAVE ANY OBLIGATION HEREUNDER TO ANY INDEMNIFIED PARTY WITH RESPECT TO ANY INDEMNIFIED LIABILITY ARISING FROM (i) THE FRAUD, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY OR ANY ASSOCIATED PERSON OF SUCH INDEMNIFIED PARTY, OR (ii) LEGAL PROCEEDINGS COMMENCED AGAINST ANY INDEMNIFIED PARTY BY ANY SECURITY HOLDER OR CREDITOR THEREOF ARISING OUT OF AND BASED UPON RIGHTS AFFORDED TO SUCH PERSON SOLELY IN SUCH CAPACITY). AS USED IN THIS PARAGRAPH, THE TERM "ASSOCIATED PERSON" MEANS, WITH RESPECT TO ANY PERSON, THE AFFILIATES, PARENTS, SUBSIDIARIES, DIRECTORS, OFFICERS, EMPLOYEES, REPRESENTATIVES, AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 48 54 AGENTS, SUCCESSORS, ASSIGNS, AND ATTORNEYS OF SUCH PERSON, OR OF ANOTHER PERSON OF WHICH SUCH PERSON IS ALSO AN ASSOCIATED PERSON. THE PROVISIONS OF AND UNDERTAKINGS AND INDEMNIFICATION SET FORTH IN THIS PARAGRAPH SHALL SURVIVE THE SATISFACTION AND PAYMENT OF THE OBLIGATION AND TERMINATION OF THIS AGREEMENT. AN INDEMNIFIED PARTY WILL PROMPTLY NOTIFY THE RESTRICTED COMPANIES UPON RECEIPT OF WRITTEN NOTICE OF ANY CLAIM, ACTION, SUIT, OR PROCEEDING MADE, COMMENCED, OR THREATENED THAT COULD GIVE RISE TO AN INDEMNIFIED LIABILITY AND AFFORD THE RESTRICTED COMPANIES FIRST RIGHT TO DEFEND OR RESOLVE THE SAME (WITH COUNSEL REASONABLY SATISFACTORY TO SUCH INDEMNIFIED PARTY); PROVIDED THAT, ANY FAILURE BY SUCH INDEMNIFIED PARTY TO GIVE SUCH NOTICE SHALL NOT RELIEVE THE RESTRICTED COMPANIES FROM THEIR OBLIGATIONS TO INDEMNIFY THE INDEMNIFIED PARTY TO THE EXTENT SUCH FAILURE DOES NOT PREJUDICE THE ABILITY OF THE RESTRICTED COMPANIES TO DEFEND OR RESOLVE ANY SUCH CLAIM, ACTION, SUIT, OR PROCEEDING. THE RESTRICTED COMPANIES SHALL NOT SETTLE ANY SUCH CLAIM OR ACTION WITHOUT THE CONSENT OF SUCH INDEMNIFIED PARTY, WHICH CONSENT WILL NOT BE UNREASONABLY WITHHELD OR DELAYED. IF THE RESTRICTED COMPANIES ASSUME ANY DEFENSE, THEY SHALL KEEP THE APPLICABLE INDEMNIFIED PARTIES FULLY ADVISED OF THE STATUS OF, AND SHALL CONSULT WITH THOSE INDEMNIFIED PARTIES BEFORE TAKING ANY MATERIAL POSITION IN RESPECT OF, THAT PROCEEDING. IF (I) COUNSEL FOR ANY INDEMNIFIED PARTY DETERMINES IN GOOD FAITH THAT THERE IS A CONFLICT WHICH REQUIRES SEPARATE REPRESENTATION FOR THE RESTRICTED COMPANIES AND SUCH INDEMNIFIED PARTY OR FOR SUCH INDEMNIFIED PARTY AND ANY OTHER INDEMNIFIED PARTY OR (II) THE RESTRICTED COMPANIES FAIL TO ASSUME OR PROCEED IN A TIMELY AND REASONABLE MANNER WITH THE DEFENSE OF SUCH ACTION OR FAIL TO EMPLOY COUNSEL REASONABLY SATISFACTORY TO SUCH INDEMNIFIED PARTY IN ANY SUCH ACTION, THEN IN EITHER SUCH EVENT THE INDEMNIFIED PARTY SHALL BE ENTITLED TO SELECT COUNSEL OF ITS OWN CHOICE TO REPRESENT THE INDEMNIFIED PARTY, AND THE RESTRICTED COMPANIES SHALL NO LONGER BE ENTITLED TO ASSUME THE DEFENSE THEREOF ON BEHALF OF SUCH INDEMNIFIED PARTY, AND SUCH INDEMNIFIED PARTY SHALL CONTINUE TO BE ENTITLED TO INDEMNIFICATION (INCLUDING, WITHOUT LIMITATION, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL INCLUDING ALLOCATED COST OF INTERNAL COUNSEL) TO THE EXTENT PROVIDED IN THIS INDEMNIFICATION PROVISION. NOTHING HEREIN SHALL PRECLUDE ANY INDEMNIFIED PARTY, AT ITS OWN EXPENSE, FROM RETAINING ADDITIONAL COUNSEL TO REPRESENT SUCH PARTY IN ANY ACTION WITH RESPECT TO WHICH INDEMNITY MAY BE SOUGHT FROM THE RESTRICTED COMPANIES HEREUNDER. NO INDEMNIFIED PARTY SHALL SETTLE ANY SUCH CLAIM OR ACTION WITHOUT THE CONSENT OF THE RESTRICTED COMPANIES, WHICH CONSENT WILL NOT BE UNREASONABLY WITHHELD OR DELAYED. SECTION 10 AGREEMENT AMONG LENDERS. 10.1 Administrative Agent. (a) Each Lender (including any Lender in its capacity as a Swing Line Lender) hereby appoints Bank of America (and Bank of America hereby accepts such appointment) as its nominee and agent, in its name and on its behalf: (i) to act as nominee for and on behalf of such Lender in and under all Loan Papers; (ii) to arrange the means whereby the funds of Lenders are to be made available to Borrower under the Loan Papers; (iii) to take such action as may be requested by any Lender under the Loan Papers (when such Lender is entitled to make such request under the Loan Papers and after such requesting Lender has obtained the concurrence of such other Lenders as may be required under the Loan Papers); (iv) to receive all documents and items to be furnished to Lenders under the Loan Papers; (v) to be the secured party, mortgagee, beneficiary, and similar party in respect of, and to receive, as the case may be, any collateral for the benefit of Lenders; (vi) to timely distribute, and Administrative Agent agrees to so distribute, to each Lender all material information, requests, documents, and items received from Borrower under the Loan Papers; (vii) to promptly distribute to each Lender its ratable part of each payment or prepayment (whether voluntary, as proceeds of collateral upon or after foreclosure, as proceeds of insurance thereon, or otherwise) in accordance with the terms of the Loan Papers; (viii) to deliver to the appropriate Persons requests, demands, approvals, AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 49 55 and consents received from Lenders; and (ix) to execute, on behalf of Lenders, such releases or other documents or instruments as are permitted by the Loan Papers or as directed by Lenders from time to time; provided, however, Administrative Agent shall not be required to take any action which exposes Administrative Agent to personal liability or which is contrary to the Loan Papers or applicable Law. (b) Administrative Agent may resign at any time as Administrative Agent under the Loan Papers by giving written notice thereof to Lenders and may be removed as Administrative Agent under the Loan Papers at any time with cause by Determining Lenders. Should the initial or any successor Administrative Agent ever cease to be a party hereto or should the initial or any successor Administrative Agent ever resign or be removed as Administrative Agent, then Determining Lenders shall elect the successor Administrative Agent from among the Lenders (other than the resigning Administrative Agent). If no successor Administrative Agent shall have been so appointed by Determining Lenders, within 30 days after the retiring Administrative Agent's giving of notice of resignation or Determining Lenders' removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of Lenders, appoint a successor Administrative Agent, which shall be a commercial bank having a combined capital and surplus of at least $1,000,000,000. Upon the acceptance of any appointment as Administrative Agent under the Loan Papers by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the Rights of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations of Administrative Agent under the Loan Papers, and each Lender shall execute such documents as any Lender may reasonably request to reflect such change in and under the Loan Papers. After any retiring Administrative Agent's resignation or removal as Administrative Agent under the Loan Papers, the provisions of this SECTION 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under the Loan Papers. (c) Administrative Agent, in its capacity as a Lender, shall have the same Rights under the Loan Papers as any other Lender and may exercise the same as though it were not acting as Administrative Agent; the term "Lender" shall, unless the context otherwise indicates, include Administrative Agent; and any resignation, or removal of by Administrative Agent hereunder shall not impair or otherwise affect any Rights which it has or may have in its capacity as an individual Lender. Each Lender and Borrower agree that Administrative Agent is not a fiduciary for Lenders or for Borrower but simply is acting in the capacity described herein to alleviate administrative burdens for both Borrower and Lenders, that Administrative Agent has no duties or responsibilities to Lenders or Borrower except those expressly set forth herein, and that Administrative Agent in its capacity as a Lender has all Rights of any other Lender. (d) Administrative Agent and its Affiliates may now or hereafter be engaged in one or more loan, letter of credit, leasing, or other financing transactions with Borrower, act as trustee or depositary for Borrower, or otherwise be engaged in other transactions with Borrower (collectively, the "OTHER ACTIVITIES") not the subject of the Loan Papers. Without limiting the Rights of Lenders specifically set forth in the Loan Papers, Administrative Agent and its Affiliates shall not be responsible to account to Lenders for such other activities, and no Lender shall have any interest in any other activities, any present or future guaranties by or for the account of Borrower which are not contemplated or included in the Loan Papers, any present or future offset exercised by Administrative Agent and its Affiliates in respect of such other activities, any present or future property taken as security for any such other activities, or any property now or hereafter in the possession or control of Administrative Agent or its Affiliates which may be or become security for the obligations of Borrower arising under the Loan Papers by reason of the general description of indebtedness secured or of property contained in any other agreements, documents or instruments related to any such other activities; provided that, if any payments in respect of such guaranties or such property or the proceeds AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 50 56 thereof shall be applied to reduction of the obligations of Borrower arising under the Loan Papers, then each Lender shall be entitled to share in such application ratably. (e) Each Lender acknowledges that, and consents to, Bank of America's also serving as the "Administrative Agent" under the Facility A Agreement. 10.2 Expenses. Upon demand by Administrative Agent, each Lender shall pay its Pro Rata Part of any reasonable expenses (including, without limitation, court costs, reasonable attorneys' fees and other costs of collection) incurred by Administrative Agent in connection with any of the Loan Papers if and to the extent Administrative Agent does not receive reimbursement therefor from other sources within 60 days after incurred; provided that each Lender shall be entitled to receive its Pro Rata Part of any reimbursement for such expenses, or part thereof, which Administrative Agent subsequently receives from such other sources. 10.3 Proportionate Absorption of Losses. Except as otherwise provided in the Loan Papers, nothing in the Loan Papers shall be deemed to give any Lender any advantage over any other Lender insofar as the Obligation arising under the Loan Papers is concerned, or to relieve any Lender from absorbing its Pro Rata Part of any losses sustained with respect to the Obligation (except to the extent such losses result from unilateral actions or inactions of any Lender that are not made in accordance with the terms and provisions of the Loan Papers). 10.4 Delegation of Duties; Reliance. Administrative Agent may perform any of its duties or exercise any of its Rights under the Loan Papers by or through its Representatives. Administrative Agent and its Representatives shall (a) be entitled to rely upon (and shall be protected in relying upon) any writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telecopy, telegram, telex or teletype message, statement, order, or other documents or conversation believed by it or them to be genuine and correct and to have been signed or made by the proper Person and, with respect to legal matters, upon opinion of counsel selected by Administrative Agent, (b) be entitled to deem and treat each Lender as the owner and holder of the Principal Debt owed to such Lender for all purposes until, subject to SECTION 11.13, written notice of the assignment or transfer thereof shall have been given to and received by Administrative Agent (and any request, authorization, consent, or approval of any Lender shall be conclusive and binding on each subsequent holder, assignee, or transferee of the Principal Debt owed to such Lender or portion thereof until such notice is given and received), (c) not be deemed to have notice of the occurrence of a Default unless a responsible officer of Administrative Agent, who handles matters associated with the Loan Papers and transactions thereunder, has actual knowledge thereof or Administrative Agent has been notified thereof by a Lender or Borrower, and (d) be entitled to consult with legal counsel (including counsel for Borrower), independent accountants and other experts selected by Administrative Agent and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts. 10.5 Limitation of Liability. (a) None of the Agents or any of their respective Representatives shall be liable for any action taken or omitted to be taken by it or them under the Loan Papers in good faith and reasonably believed by it or them to be within the discretion or power conferred upon it or them by the Loan Papers or be responsible for the consequences of any error of judgment, except for fraud, gross negligence, or willful misconduct as found in a final, non-appealable judgment by a court of competent jurisdiction; and none of the Agents or any of their respective Representatives has a fiduciary relationship with any Lender by virtue of the Loan Papers (provided that nothing herein shall negate the obligation of Administrative Agent to account for funds received by it for the account of any Lender). (b) Unless indemnified to its satisfaction against loss, cost, liability, and expense, no Agent shall be compelled to do any act under the Loan Papers or to take any action toward the AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 51 57 execution or enforcement of the powers thereby created or to prosecute or defend any suit in respect of the Loan Papers. If any Agent requests instructions from Lenders or Determining Lenders, as the case may be, with respect to any act or action (including, but not limited to, any failure to act) in connection with any Loan Paper, such Agent shall be entitled (but shall not be required) to refrain (without incurring any liability to any Person by so refraining) from such act or action unless and until it has received such instructions. In no event, however, shall any Agent or any of its respective Representatives be required to take any action which it or they determine could incur for it or them criminal or onerous civil liability. Without limiting the generality of the foregoing, no Lender shall have any right of action against any Agent as a result of such Agent's acting or refraining from acting hereunder in accordance with the instructions of Determining Lenders. (c) Agents shall not be responsible in any manner to any Lender or any Participant for, and each Lender represents and warrants that it has not relied upon Agents in respect of, (i) the creditworthiness of any Restricted Company and the risks involved to such Lender, (ii) the effectiveness, enforceability, genuineness, validity, or the due execution of any Loan Paper, (iii) any representation, warranty, document, certificate, report, or statement made therein or furnished thereunder or in connection therewith, (iv) the existence, priority, or perfection of any Lien hereafter granted or purported to be granted under any Loan Paper, or (v) observation of or compliance with any of the terms, covenants, or conditions of any Loan Paper on the part of any Restricted Company. Each Lender agrees to indemnify each Agent and its respective Representatives and hold them harmless from and against (but limited to such Lender's Pro Rata Part of) any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, reasonable expenses, and reasonable disbursements of any kind or nature whatsoever which may be imposed on, asserted against, or incurred by them in any way relating to or arising out of the Loan Papers or any action taken or omitted by them under the Loan Papers, to the extent any Agent and its respective Representatives are not reimbursed for such amounts by any Restricted Company (provided that, no Agent and its respective Representatives shall have the right to be indemnified hereunder for its or their own fraud, gross negligence, or willful misconduct as found in a final, non-appealable judgment by a court of competent jurisdiction). 10.6 Default; Collateral. Upon the occurrence and continuance of a Default, Lenders agree to promptly confer in order that Determining Lenders or Lenders, as the case may be, may agree upon a course of action for the enforcement of the Rights of Lenders; and Administrative Agent shall be entitled to refrain from taking any action (without incurring any liability to any Person for so refraining) unless and until Administrative Agent shall have received instructions from Determining Lenders. In actions with respect to any property of Borrower, Administrative Agent is acting for the ratable benefit of each Lender. Any and all agreements to subordinate (whether made heretofore or hereafter) other indebtedness or obligations of Borrower to the Obligation shall be construed as being for the ratable benefit of each Lender. If Administrative Agent acquires any security for the Obligation or any guaranty of the Obligation upon or in lieu of foreclosure, the same shall be held for the ratable benefit of all Lenders in proportion to the Principal Debt respectively owed to each Lender. 10.7 Limitation of Liability. To the extent permitted by Law, (a) no Agent (acting in its respective agent capacity) shall incur any liability to any other Lender, Agent, or Participant, except for acts or omissions resulting from its own fraud, gross negligence or wilful misconduct as found in a final, non-appealable judgment by a court of competent jurisdiction, and (b) no Agent, nor any Lender or Participant shall incur any liability to any other Person for any act or omission of any other Lender or any other Participant. 10.8 Relationship of Lenders. Nothing herein shall be construed as creating a partnership or joint venture among Agents and Lenders or among Lenders. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 52 58 10.9 Benefits of Agreement. Except for the representations and covenants in SECTION 10.1(C) in favor of Borrower, none of the provisions of this SECTION 10 shall inure to the benefit of any Restricted Company or any other Person other than Lenders and Agents; consequently, neither any Restricted Company nor any other Person shall be entitled to rely upon, or to raise as a defense, in any manner whatsoever, the failure of any Lender or Agent to comply with such provisions. 10.10 Co-Syndication Agents. None of the Lenders identified in this Agreement as a "Co-Syndication Agent" shall have any rights, powers, obligations, liabilities, responsibilities, or duties under this Agreement, other than those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders so identified as a "Co-Syndication Agent" shall have or be deemed to have any fiduciary relationship with any Lender. SECTION 11 MISCELLANEOUS. 11.1 Headings. The headings, captions, and arrangements used in any of the Loan Papers are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify, or modify the terms of the Loan Papers, nor affect the meaning thereof. 11.2 Nonbusiness Days. In any case where any payment or action is due under any Loan Paper on a day which is not a Business Day, such payment or action may be delayed until the next-succeeding Business Day, but interest and fees shall continue to accrue in respect of any payment to which they are applicable until such payment is in fact made; provided that, if in the case of any such payment in respect of a Eurodollar Rate Borrowing the next-succeeding Business Day is in the next calendar month, then such payment shall be made on the next-preceding Business Day. 11.3 Communications. Unless specifically otherwise provided, whenever any Loan Paper requires or permits any consent, approval, notice, request, or demand from one party to another, such communication must be in writing (which may be by telex or telecopy) to be effective and shall be deemed to have been given (a) if by telex, when transmitted to the telex number, if any, for such party, and the appropriate answer back is received, (b) if by telecopy, when transmitted to the telecopy number for such party (and all such communications sent by telecopy shall be confirmed promptly thereafter by personal delivery or mailing in accordance with the provisions of this section; provided, that any requirement in this parenthetical shall not affect the date on which such telecopy shall be deemed to have been delivered), (c) if by mail, on the third Business Day after it is enclosed in an envelope, properly addressed to such party, properly stamped, sealed, and deposited in the appropriate official postal service, or (d) if by any other means, when actually delivered to such party. Until changed by notice pursuant hereto, the address (and telex and telecopy numbers, if any) for Administrative Agent and each other Agent and each Lender is set forth on SCHEDULE 2.1, and for Borrower and each Restricted Company is the address set forth below. A copy of each communication to Administrative Agent shall also be sent to Haynes and Boone, L.L.P., 901 Main Street, Dallas, Texas 75202, Fax: 214/651- 5940, Attn: Karen S. Nelson; a copy of each communication to any Consolidated Company shall also be sent to MCI WORLDCOM, INC., 500 Clinton Center Drive, Clinton, MS 39056, Attn: Sunit S. Patel, Fax: 601/460-8110, and to MCI WORLDCOM, INC., 10777 Sunset Office Drive, St. Louis, MO 63127, Attn: Bruce Borghardt, Fax: 314/909-4101. 11.4 Form and Number of Documents. Each agreement, document, instrument, or other writing to be furnished under any provision of this Agreement must be in form and substance and in such number of counterparts as may be reasonably satisfactory to Administrative Agent and its counsel. 11.5 Exceptions to Covenants. No Restricted Company shall take any action or fail to take any action which is permitted as an exception to any of the covenants contained in any Loan Paper if such action or omission would result in the breach of any other covenant contained in any of the Loan Papers. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 53 59 11.6 Survival. All covenants, agreements, undertakings, representations, and warranties made in any of the Loan Papers shall survive all closings under the Loan Papers and, except as otherwise indicated, shall not be affected by any investigation made by any party. All rights of, and provisions relating to, reimbursement and indemnification of Administrative Agent, any Agent, or any Lender shall survive termination of this Agreement and payment in full of the Obligation. 11.7 Governing Law. THE LOAN PAPERS HAVE BEEN ENTERED INTO PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, AND THE LAWS (OTHER THAN CONFLICT-OF-LAWS PROVISIONS THEREOF) OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF AMERICA SHALL GOVERN THE RIGHTS AND DUTIES OF THE PARTIES TO THE LOAN PAPERS AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION OF THE LOAN PAPERS. 11.8 Invalid Provisions. If any provision in any Loan Paper is held to be illegal, invalid, or unenforceable, such provision shall be fully severable; the appropriate Loan Paper shall be construed and enforced as if such provision had never comprised a part thereof; and the remaining provisions thereof shall remain in full force and effect and shall not be affected by such provision or by its severance therefrom. Administrative Agent, Lenders, and each Restricted Company party to such Loan Paper agree to negotiate, in good faith, the terms of a replacement provision as similar to the severed provision as may be possible and be legal, valid, and enforceable. 11.9 Entirety. THE RIGHTS AND OBLIGATIONS OF THE RESTRICTED COMPANIES, LENDERS, AND ADMINISTRATIVE AGENT SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN SUCH PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN PAPERS EXECUTED BY ANY RESTRICTED COMPANY, ANY LENDER, ADMINISTRATIVE AGENT, OR ANY OTHER AGENT (TOGETHER WITH ALL FEE LETTERS AS THEY RELATE TO THE PAYMENT OF FEES AFTER THE CLOSING DATE) REPRESENT THE FINAL AGREEMENT BETWEEN THE RESTRICTED COMPANIES, LENDERS, AND/OR ADMINISTRATIVE AGENT, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN SUCH PARTIES. 11.10 Jurisdiction; Venue; Service of Process; Jury Trial. EACH PARTY HERETO, IN EACH CASE FOR ITSELF, ITS SUCCESSORS AND ASSIGNS (AND IN THE CASE OF BORROWER, FOR EACH OF ITS SUBSIDIARIES), HEREBY (a) IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN NEW YORK, AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING ARISING OUT OF OR IN CONNECTION WITH THE LOAN PAPERS AND THE OBLIGATION BY SERVICE OF PROCESS AS PROVIDED BY NEW YORK LAW, (b) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY LITIGATION ARISING OUT OF OR IN CONNECTION WITH THE LOAN PAPERS AND THE OBLIGATION BROUGHT IN ANY SUCH COURT, (c) IRREVOCABLY WAIVES ANY CLAIMS THAT ANY LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, (d) AGREES TO DESIGNATE AND MAINTAIN AN AGENT FOR SERVICE OF PROCESS IN NEW YORK, NEW YORK IN CONNECTION WITH ANY SUCH LITIGATION AND TO DELIVER TO ADMINISTRATIVE AGENT EVIDENCE THEREOF, IF REQUESTED, (e) IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH LITIGATION BY THE MAILING OF COPIES THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, AT ITS ADDRESS SET FORTH HEREIN, (f) IRREVOCABLY AGREES THAT ANY LEGAL PROCEEDING AGAINST ANY PARTY HERETO ARISING OUT OF OR IN CONNECTION WITH THE LOAN PAPERS OR THE OBLIGATION SHALL BE BROUGHT IN ONE OF THE AFOREMENTIONED COURTS, AND (g) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY LOAN PAPER OR THE TRANSACTIONS CONTEMPLATED THEREBY. The scope of each of the foregoing waivers is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 54 60 including, without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Borrower (for itself and on behalf of each of its Subsidiaries) and each other party to this Agreement acknowledge that this waiver is a material inducement to the agreement of each party hereto to enter into a business relationship, that each has already relied on this waiver in entering into this Agreement, and each will continue to rely on each of such waivers in related future dealings. Borrower (for itself and on behalf of each of its Subsidiaries) and each other party to this Agreement warrant and represent that they have reviewed these waivers with their legal counsel, and that they knowingly and voluntarily agree to each such waiver following consultation with legal counsel. THE WAIVERS IN THIS SECTION 11.10 ARE IRREVOCABLE, MEANING THAT THEY MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THESE WAIVERS SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, SUPPLEMENTS, AND REPLACEMENTS TO OR OF THIS OR ANY OTHER LOAN PAPER. In the event of Litigation, this Agreement may be filed as a written consent to a trial by the court. 11.11 Amendments, Consents, Conflicts, and Waivers. (a) Except as otherwise specifically provided, (i) this Agreement may only be amended, modified or waived by an instrument in writing executed jointly by Borrower and Determining Lenders, and, in the case of any matter affecting Administrative Agent (except removal of Administrative Agent as provided in SECTION 10), by Administrative Agent, and may only be supplemented by documents delivered or to be delivered in accordance with the express terms hereof, and (ii) the other Loan Papers may only be the subject of an amendment, modification, or waiver if Borrower and Determining Lenders, and, in the case of any matter affecting Administrative Agent (except as set forth above), Administrative Agent, have approved same. (b) Any amendment to or consent or waiver under this Agreement or any Loan Paper which purports to accomplish any of the following must be by an instrument in writing executed by Borrower and executed (or approved, as the case may be) by each Lender, and, in the case of any matter affecting Administrative Agent, by Administrative Agent: (i) extends the due date or decreases the amount of any scheduled payment of the Obligation arising under the Loan Papers beyond the date specified in the Loan Papers; (ii) reduces the interest rate or decreases the amount of interest, fees, or other sums payable to Administrative Agent or Lenders hereunder (except such reductions as are contemplated by this Agreement); (iii) changes the definition of "APPLICABLE MARGIN" (other than changes having the effect of increasing such Applicable Margin), "DETERMINING LENDERS," "PRO RATA," or "PRO RATA PART" (other than modifications to the definitions of "PRO RATA" or "PRO RATA PART" as a result of changes in the definition of "COMMITMENT"), or (iv) except as otherwise permitted by any Loan Paper, waives compliance with, amends, or releases (in whole or in part) any guaranty (if any) or releases (in whole or in part) any collateral, if any, for the Obligation; or (v) changes this CLAUSE (b), SECTION 2.8 or any other matter specifically requiring the consent of all Lenders hereunder. No amendment or waiver with respect to the definition of "TERMINATION DATE" or "TERM LOAN MATURITY DATE" may be made without the consent of all Lenders. Without the consent of such Lender, no Lender's "COMMITTED SUM"under this 364-Day Facility may be increased. (c) Any conflict or ambiguity between the terms and provisions herein and terms and provisions in any other Loan Paper shall be controlled by the terms and provisions herein. (d) No course of dealing nor any failure or delay by Administrative Agent, any Lender, or any of their respective Representatives with respect to exercising any Right of Administrative Agent or any Lender hereunder shall operate as a waiver thereof. A waiver must be in writing and signed by Administrative Agent and Determining Lenders (or by all Lenders, if required hereunder) to be effective, and such waiver will be effective only in the specific instance and for the specific purpose for which it is given. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 55 61 11.12 Multiple Counterparts. This Agreement may be executed in a number of identical counterparts, each of which shall be deemed an original for all purposes and all of which constitute, collectively, one agreement; but, in making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart. It is not necessary that each Lender execute the same counterpart so long as identical counterparts are executed by Borrower, each Lender, and Administrative Agent. This Agreement shall become effective when counterparts hereof shall have been executed and delivered to Administrative Agent by each Lender, Administrative Agent, and Borrower, or, when Administrative Agent shall have received telecopied, telexed, or other evidence satisfactory to it that such party has executed and is delivering to Administrative Agent a counterpart hereof. 11.13 Successors and Assigns; Assignments and Participations. (a) This Agreement shall be binding upon, and inure to the benefit of the parties hereto and their respective successors and assigns, except that (i) assignments by Borrower are subject to the restrictions of SECTION 7.16, and (ii) except as permitted under this Section, no Lender may transfer, pledge, assign, sell any participation in, or otherwise encumber its portion of the Obligation. (b) Each Lender may assign to one or more Eligible Assignees all or a portion of its Rights and obligations under this Agreement and the other Loan Papers (including, without limitation, all or a portion of its Borrowings, its Notes [to the extent such Principal Debt owed to such Lender is evidenced by Notes]); provided, however, that: (i) each such assignment shall be to an Eligible Assignee; (ii) except in the case of an assignment to another Lender or an assignment of all of a Lender's Rights and obligations under this Agreement and the other Loan Papers, any such partial assignment (when aggregated with the amounts of any concurrent assignments under Facility A by the assigning Lender to the same assignee) shall be in an amount at least equal to $10,000,000, but in no event shall an assigned interest in either Facility A or the 364- Day Facility be less than $1,000,000 (except in case of an assignment of all of such 364-Day Facility Lender's interest in any such facility); (iii) each such assignment by a Lender shall be of a constant, and not varying, percentage of all of its Rights and obligations under this Agreement and the Notes (to the extent the Principal Debt owed to the assigning Lender is evidenced by any Notes); provided, that notwithstanding the foregoing, assignment of any Rights and obligations of any Swing Line Lender under the Swing Line Subfacility shall be governed by SECTION 11.13(B)(VI); (iv) each such assignment shall exclude Competitive Borrowings, unless the assigning Lender is selling all of its Rights and obligations under the Loan Papers; (v) the parties to such assignment shall execute and deliver to the Administrative Agent for its acceptance an Assignment and Acceptance Agreement in the form of EXHIBIT E hereto, together with any Notes subject to such assignment (to the extent the Principal Debt owed to the assigning Lender is evidenced by any Notes) and a processing fee of $3,500; (vi) no Swing Line Lender may assign any portion of its obligations under the Swing Line Subfacility and its related portion of the Commitment, unless such assignment is being made in connection with the sale of all such Swing Line Lender's Rights and interests under the Loan Papers. AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 56 62 Upon execution, delivery, and acceptance of such Assignment and Acceptance Agreement, the assignee thereunder shall be a party hereto and, to the extent of such assignment, have the obligations, Rights, and benefits of a Lender under the Loan Papers and the assigning Lender shall, to the extent of such assignment, relinquish its rights and be released from its obligations under the Loan Papers. Upon the consummation of any assignment pursuant to this Section, but only upon the request of the assignor or assignee made through Administrative Agent, Borrower shall issue appropriate Notes to the assignor and the assignee, reflecting such assignment and acceptance. If the assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to Borrower and Administrative Agent certification as to exemption from deduction or withholding of Taxes in accordance with SECTION 3.20(d). (c) The Administrative Agent shall maintain at its address referred to in SECTION 11.3 a copy of each Assignment and Acceptance Agreement delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment, and principal amount of the Borrowings owing to, each Lender from time to time (the "REGISTER"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and Borrower, Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of the Loan Papers. The Register shall be available for inspection by Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. Upon the consummation of any assignment in accordance with this SECTION 11.13, SCHEDULE 2.1 AND SCHEDULE 2.2 shall automatically be deemed amended (to the extent required) by Administrative Agent to reflect the name, address, and respective Committed Sums of the assignor and assignee. (d) Upon its receipt of an Assignment and Acceptance Agreement executed by the parties thereto, together with any Notes subject to such assignment (to the extent the Principal Debt owed to the assigning Lender is evidenced by any Notes) and payment of the processing fee, the Administrative Agent shall, if such assignment and acceptance has been completed and is in substantially the form of EXHIBIT E hereto, (i) accept such Assignment and Acceptance Agreement, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the parties thereto. (e) Each Lender may sell participations to one or more Persons (each a "PARTICIPANT") in all or a portion of its Rights, obligations, or Rights and obligations under this Agreement and related Loan Papers (including all or a portion of its Committed Sum or its portion of Borrowings advanced under this Agreement); provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged; (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations; (iii) the Participant shall be entitled to the benefit of the yield protection provisions contained in SECTIONS 3.15, 3.19, and 3.20 (so long as Borrower shall not be obligated to pay any amount in excess of the amount that would be due to such Lender under such Sections as though no participations have been made) and the right of set-off contained in SECTION 3.13; (iv) Borrower shall continue to deal solely and directly with such Lender in connection with such Lender's Rights and obligations under this Agreement and the other Loan Papers and such Lender shall retain the sole Right to enforce the obligations of Borrower relating to Borrowings under this Agreement and its Notes (to the extent the Principal Debt owed to such Lender is evidenced by Notes) and to approve any amendment, modification, or waiver of any provision of this Agreement (other than amendments, modifications, or waivers decreasing the amount of principal of or the rate at which interest is payable on the Principal Debt, extending any scheduled principal payment date or date fixed for the payment of interest on the Principal Debt, or extending such Lender's Committed Sum); and (v) such Lender shall be solely responsible for any withholding taxes or any filing or reporting requirements relating to such participation and shall hold Borrower and Administrative Agent and their respective successors, permitted assigns, officers, directors, employees, agents, and AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 57 63 representatives harmless against the same. Except in the case of the sale of a participating interest to another Lender, the relevant participation agreement shall not permit the Participant to transfer, pledge, assign, sell participations in, or otherwise encumber its portion of the Obligation, unless the consent of the transferring Lender (which consent will not be unreasonably withheld) has been obtained. (f) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time assign and pledge all or any portion of its Borrowings and its Notes (to the extent the Principal Debt owed to such Lender is evidenced by any Notes) to any Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder. (g) Any Lender may furnish any information concerning the Consolidated Companies in the possession of such Lender from time to time to Eligible Assignees and Participants (including prospective Eligible Assignees and Participants), subject, however, to the provisions of SECTION 11.15 hereof. (h) Notwithstanding anything to the contrary contained herein, any Lender may grant (a "GRANTING BANK") to a special purpose funding vehicle (an "SPC"), identified as such in writing from time to time by the Granting Bank to Administrative Agent and Borrower, the option to provide to Borrower all or any part of any Borrowing that such Granting Bank would otherwise be obligated to make to Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Borrowing, (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Borrowing, Granting Bank shall be obligated to make such Borrowing pursuant to the terms hereof, (iii) such Granting Bank's obligations under this Agreement shall remain unchanged, and (iv) such Granting Bank shall remain solely responsible to the other parties hereto for the performance of obligations hereunder. The making of a Borrowing by an SPC hereunder shall utilize the Committed Sum of Granting Bank to the same extent, and as if, such Borrowing were made by such Granting Bank. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Bank). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other Person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any state thereof. In addition, notwithstanding anything to the contrary contained in this paragraph, any SPC may (i) without paying any processing fee therefor, assign all or a portion of its interests in any Borrowing to the Granting Bank (with notice to, but without the prior written consent of Borrower and Administrative Agent) or to any financial institutions (with notice to and the prior written consent of Borrower and Administrative Agent), in each case providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Borrowing and (ii) disclose on a confidential basis any non-public information relating to its Borrowing to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC, subject to the provisions of SECTION 11.15 hereof. 11.14 Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances. Each Restricted Company's obligations under the Loan Papers shall remain in full force and effect until termination of the Commitment and payment in full of the Principal Debt and of all interest, fees, and other amounts of the Obligation then due and owing (and termination of all outstanding LCs with any Lender, if any, unless such Lender shall otherwise consent) except that SECTIONS 3.15, 3.19, 3.20, SECTION 9, and SECTION 11, and any other provisions under the Loan Papers expressly intended to survive by the terms hereof or by the terms of the AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 58 64 applicable Loan Papers, shall survive such termination. If at any time any payment of the principal of or interest on any Note or any other amount payable by Borrower under any Loan Paper is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy, or reorganization of Borrower or otherwise, the obligations of each Restricted Company under the Loan Papers with respect to such payment shall be reinstated as though such payment had been due but not made at such time. 11.15 Confidentiality. All information furnished by or on behalf of any Restricted Company in connection with or pursuant to this Agreement or any of the Loan Papers (including but not limited to in connection with or pursuant to the negotiation, preparation or requirements hereof or thereof), which information has been identified as confidential by any Restricted Company, shall be held by Administrative Agent, each other Agent, each Lender, and each Participant (collectively, the "LENDER PARTIES") in accordance with its customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, and no Lender Party shall disclose any of such information to any other Person; provided that any Lender or Participant may make disclosure (a) to its attorneys or accountants, provided that such Lender or Participant shall direct such attorneys or accountants to maintain such information in confidence in accordance with the provisions of this SECTION 11.15, and shall be responsible if such attorneys fail to do so, (b) to any Affiliate of any Lender Party or as reasonably required by any prospective bona fide assignee or Participant in connection with the contemplated transfer of any interest in the Obligation or participation, so long as any such contemplated assignee or Participant has agreed in writing (with a copy to Borrower) to be bound by the provisions of this SECTION 11.15, (c) as required or requested by any Governmental Authority or representative thereof or as required pursuant to any Law or legal process, provided that, unless prohibited by Law or court order, such Lender or Participant shall give prior notice to Borrower of such disclosure as far in advance thereof as is practicable (other than disclosure in connection with an examination of the financial condition of such Person by a Governmental Authority), (d) in connection with proceedings to enforce the obligation of any Restricted Company under the Loan Papers, or (e) of any such information that has become generally available to the public other than through a breach of this SECTION 11.15 (or of any agreement or obligation to be bound by this SECTION 11.15) by any Lender Party, any affiliate of any Lender Party, any prospective assignee or Participant, or their respective attorneys. 11.16 Restatement of Existing Agreement. The parties hereto agree that, on the Closing Date, after all conditions precedent set forth in SECTION 5.1 have been satisfied or waived: (a) the Obligation (as defined herein) represents, among other things, the restatement, renewal, amendment, extension, consolidation, and modification of the "Obligation" (as defined in the Existing Agreement); (b) this Agreement is intended to, and does hereby, restate, consolidate, renew, extend, amend, modify, supersede, and replace the Existing Agreement in its entirety; and (c) the Notes, if any, executed pursuant to this Agreement amend, renew, extend, modify, replace, restate, consolidate, substitute for, and supersede in their entirety (but do not extinguish, the Debt arising under) the promissory notes issued pursuant to the Existing Agreement, if any, which existing promissory notes shall be returned to Administrative Agent promptly after the Closing Date, marked "canceled and replaced," and, thereafter, delivered by Administrative Agent to Borrower. EXECUTED on the respective dates shown on the signature pages hereto, but effective as of the Closing Date. [REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURE PAGES FOLLOW.] AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT 59 65 EXHIBIT A-1 FORM OF AMENDED AND RESTATED REVOLVING NOTE $ August 5, 1999 ------------- FOR VALUE RECEIVED, the undersigned, MCI WORLDCOM, INC., a Georgia corporation ("BORROWER"), hereby promises to pay to the order of ("LENDER"), at the offices of BANK OF AMERICA, N.A., as Administrative Agent under the Credit Agreement (as hereinafter described), on the Termination Date, the lesser of (i) ($ ) and (ii) the aggregate Principal Debt (other than under the Competitive Bid Subfacility or the Swing Line Subfacility) disbursed by Lender to Borrower and outstanding and unpaid on the Termination Date (together with accrued and unpaid interest thereon). This note has been executed and delivered under, and is subject to the terms of, the Amended and Restated 364-Day Revolving Credit and Term Loan Agreement, dated as of August 5, 1999 (as amended, modified, supplemented, or restated from time to time, the "CREDIT AGREEMENT"), among Borrower, Lender, other lenders named therein, Administrative Agent, and the other Agents, and is one of the "Notes" referred to therein. Unless defined herein, capitalized terms used herein that are defined in the Credit Agreement have the meaning given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Borrower and others now or hereafter obligated for payment of any sums due hereunder and security for the payment hereof. Without limiting the immediately preceding sentence, reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This Amended and Restated Revolving Note is an amendment, restatement, renewal, and modification (but not a novation) of, the Revolving Note (as the same may have been amended and replaced to the date hereof, the "Former Revolving Note"), which Former Revolving Note was executed and delivered by the Borrower, and payable to the order of Lender pursuant to the Existing Agreement. This Amended and Restated Revolving Note is being issued in substitution of, and supercedes and replaces, the Former Revolving Note. THE LAWS (OTHER THAN CONFLICT-OF-LAWS PROVISIONS THEREOF) OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF AMERICA SHALL GOVERN THE RIGHTS AND DUTIES OF BORROWER AND LENDER AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION HEREOF. MCI WORLDCOM, INC. By ------------------------------------- (Name) --------------------------------- (Title) -------------------------------- AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT A-1 66 EXHIBIT A-2 FORM OF AMENDED AND RESTATED COMPETITIVE BID NOTE August 5, 1999 FOR VALUE RECEIVED, the undersigned, MCI WORLDCOM, INC., a Georgia corporation ("BORROWER"), hereby promises to pay to the order of ___________ ("LENDER"), at the offices of BANK OF AMERICA, N.A., as Administrative Agent under the Credit Agreement (as hereinafter described): (1) on the last day of the Interest Period for any Competitive Borrowing disbursed by Lender to Borrower under the 364-Day Facility, which Interest Period ends prior to the Termination Date, the aggregate principal amount of such Competitive Borrowing outstanding and unpaid on such last day of such Interest Period (together with accrued and unpaid interest thereon), and (2) on the Termination Date, the aggregate principal amount of all Competitive Borrowings disbursed by Lender to Borrower under this 364-Day Facility and outstanding and unpaid on the Termination Date (together with accrued and unpaid interest thereon). This note has been executed and delivered under, and is subject to the terms of, the Amended and Restated 364-Day Revolving Credit and Term Loan Agreement, dated as of August 5, 1999 (as amended, modified, supplemented, or restated from time to time, the "CREDIT AGREEMENT"), among Borrower, Lender, other lenders named therein, Administrative Agent, and the other Agents, and is one of the "Competitive Bid Notes" referred to therein. Unless defined herein, capitalized terms used herein that are defined in the Credit Agreement have the meaning given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Borrower and others now or hereafter obligated for payment of any sums due hereunder and security for the payment hereof. Without limiting the immediately preceding sentence, reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This Amended and Restated Competitive Bid Note is an amendment, restatement, renewal, and modification (but not a novation) of, the Competitive Bid Note (as the same may have been amended and replaced to the date hereof, the "Former Competitive Bid Note"), which Former Competitive Bid Note was executed and delivered by the Borrower, and payable to the order of Lender pursuant to the Existing Agreement. This Amended and Restated Competitive Bid Note is being issued in substitution of, and supercedes and replaces, the Former Competitive Bid Note. THE LAWS (OTHER THAN CONFLICT OF LAWS PROVISIONS THEREOF) OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF AMERICA SHALL GOVERN THE RIGHTS AND DUTIES OF BORROWER AND LENDER AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION HEREOF. MCI WORLDCOM, INC. By ------------------------------------- (Name) --------------------------------- (Title) -------------------------------- AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT A-2 67 EXHIBIT A-3 FORM OF AMENDED AND RESTATED SWING LINE NOTE $ August 5, 1999 -------------- FOR VALUE RECEIVED, the undersigned, MCI WORLDCOM, INC., a Georgia corporation ("BORROWER"), hereby promises to pay to the order of ____________________ ("SWING LINE LENDER") at the offices of BANK OF AMERICA, N.A., as Administrative Agent under the Credit Agreement (as hereinafter described), on the Termination Date, the aggregate principal amount of Borrowings under the Swing Line Subfacility disbursed by Swing Line Lender to Borrower and outstanding and unpaid on the Termination Date and on such other dates as provided in the Credit Agreement (as hereinafter described) (together with accrued and unpaid interest thereon). This note has been executed and delivered under, and is subject to the terms of, the Amended and Restated 364-Day Revolving Credit and Term Loan Agreement, dated as of August 5, 1999 (as amended, modified, supplemented, or restated from time to time, the "CREDIT AGREEMENT"), among Borrower, Swing Line Lender, other lenders named therein, Administrative Agent, and the other Agents, and is one of the "Swing Line Notes" referred to therein. Unless defined herein, capitalized terms used herein that are defined in the Credit Agreement have the meaning given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, terms, and conditions of Swing Line Borrowings hereunder, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs, and other costs of collection, certain waivers by Borrower and others now or hereafter obligated for payment of any sums due hereunder and security for the payment hereof. Without limiting the immediately preceding sentence, reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This Amended and Restated Swing Line Note is an amendment, restatement, renewal, and modification (but not a novation) of, the Swing Line Note (as the same may have been amended and replaced to the date hereof, the "Former Swing Line Note"), which Former Swing Line Note was executed and delivered by the Borrower, and payable to the order of Lender pursuant to the Existing Agreement. This Amended and Restated Swing Line Note is being issued in substitution of, and supercedes and replaces, the Former Swing Line Note. THE LAWS (OTHER THAN CONFLICT OF LAWS PROVISIONS THEREOF) OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF AMERICA SHALL GOVERN THE RIGHTS AND DUTIES OF BORROWER AND THE LENDER AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION HEREOF. MCI WORLDCOM, INC. By ------------------------------------- (Name) --------------------------------- (Title) -------------------------------- AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT A-3 68 EXHIBIT A-4 FORM OF TERM NOTE $ ----------- ---------------- --, ---- FOR VALUE RECEIVED, the undersigned, MCI WORLDCOM, INC., a Georgia corporation ("BORROWER"), hereby promises to pay to the order of __________________________ (the "LENDER"), at the offices of BANK OF AMERICA, N.A., as Administrative Agent for the Lender and others as hereinafter described, on the Term Loan Maturity Date, the amount of ____________________ ($_____________) (together with accrued and unpaid interest thereon). This note has been executed and delivered under, and is subject to the terms of, the Amended and Restated 364-Day Revolving Credit and Term Loan Agreement, dated as of August 5, 1999 (as amended, modified, supplemented, or restated from time to time, the "CREDIT AGREEMENT"), among Borrower, the Lender and other lenders named therein, the Administrative Agent, and the Agents, and is a "Term Note" referred to therein. Unless defined herein, capitalized terms used herein that are defined in the Credit Agreement have the meaning given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Borrower and others now or hereafter obligated for payment of any sums due hereunder and security for the payment hereof. Without limiting the immediately preceding sentence, reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. THE LAWS (OTHER THAN CONFLICT OF LAWS PROVISIONS THEREOF) OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF AMERICA SHALL GOVERN THE RIGHTS AND DUTIES OF BORROWER AND THE LENDER AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION HEREOF. MCI WORLDCOM, INC. By ------------------------------------- (Name) --------------------------------- (Title) -------------------------------- AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT A-4 69 EXHIBIT B-1 FORM OF NOTICE OF BORROWING (OTHER THAN COMPETITIVE BORROWING OR SWING LINE BORROWING) Date: , -------------- -- ---- BANK OF AMERICA, N.A., as Administrative Agent Bank of America Plaza, 13th Floor 901 Main Street Dallas, TX 75202 Attn: Mickey McLean Fax: (214) 209-2515 Reference is made to (i) the Amended and Restated 364-Day Revolving Credit and Term Loan Agreement, dated as of August 5, 1999 (as amended, modified, supplemented, or restated from time to time, the "CREDIT AGREEMENT"), among the undersigned, the Lenders, Administrative Agent, and the other Agents. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The undersigned hereby gives you notice pursuant to the Credit Agreement that it requests a Borrowing (other than a Competitive Borrowing or Swing Line Borrowing) under the Credit Agreement, and in that connection sets forth below the terms on which such Borrowing is requested to be made: (A) Borrowing Date(1) (A) ------- (B) Amount of Borrowing(2) (B) ------- (C) Type of Borrowing(3) (C) ------- (D) For a Eurodollar Rate Borrowing, the Interest Period (D) and the last day thereof(4) ------- On the date the rate is set, please confirm the interest rate below and return by facsimile transmission to _____________________. Borrower hereby certifies that the following statements are true and correct on the date hereof, and will be true and correct on the Borrowing Date specified herein after giving effect to such Borrowing: (a) this Borrowing will not cause the Principal Debt to exceed the Commitment; (b) all of the representations and warranties of any Borrower set forth in the Loan Papers are true and correct in all material respects (except to the extent that (i) the representations and warranties speak to a specific date, or (ii) the facts on which such representations and warranties are based have been changed by transactions contemplated or permitted by the Loan Papers); (c) no Default or Potential Default has occurred and is continuing; and (d) the funding of such Borrowing is permitted by Law. AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT B-1 70 Very truly yours, MCI WORLDCOM, INC. By ------------------------------------- (Name) --------------------------------- (Title) -------------------------------- 364-Day Facility Rate: ---------------------- Confirmed by: ------------------------------- - -------------------------------------------- (1) Must be a Business Day occurring prior to the Termination Date and be at least (i) three Business Days following receipt by Administrative Agent of this Notice of Borrowing for any Eurodollar Rate Borrowing, and (ii) one Business Day following receipt by Administrative Agent of this Notice of Borrowing for any Base Rate Borrowing. (2) Not less than $5,000,000 or an integral multiple of $1,000,000 (if a Base Rate Borrowing); not less than $10,000,000 or a greater integral multiple of $1,000,000 (if a Eurodollar Rate Borrowing). (3) Eurodollar Rate Borrowing or Base Rate Borrowing. (4) Eurodollar Rate Borrowing -- 1, 2, 3, or 6 months, or, if available to all Lenders, 9 or 12 months. In no event may the Interest Period end after the Termination Date. AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT B-1 1 71 EXHIBIT B-2 FORM OF NOTICE OF CONVERSION Date: , -------------- -- ---- BANK OF AMERICA, N.A., as Administrative Agent for the Lenders as defined in the Credit Agreement referred to below Bank of America Plaza, 13th Floor 901 Main Street Dallas, TX 75202 Attn: Mickey McLean Fax: (214) 209-2515 Reference is made to the Amended and Restated 364-Day Revolving Credit and Term Loan Agreement, dated as August 5, 1999 (as amended, modified, supplemented, or restated from time to time, the "CREDIT AGREEMENT"), among the undersigned, the Lenders, the Administrative Agent and the other Agents under the Credit Agreement. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The undersigned hereby gives you notice pursuant to SECTION 3.10 of the Credit Agreement that it elects to convert a Borrowing (other than a Competitive Borrowing or Swing Line Borrowing) under the applicable Credit Agreement from one Type to another Type or elects a new Interest Period for a Eurodollar Rate Borrowing, and in that connection sets forth below the terms on which such election is requested to be made: (A) Date of conversion or last day of applicable Interest Period (1) (A) ------- (B) Type and principal amount of existing Borrowing being converted or continued (2) (B) ------- (C) New Type of Borrowing selected (or Type of Borrowing continued) (3) (C) ------- (D) For conversion to, or continuation of, a Eurodollar Rate Borrowing, Interest Period selected and the last day thereof (4) (D) ------- On the date the rate is set, please confirm the interest rate below and return by facsimile transmission to___________________. Very truly yours, MCI WORLDCOM, INC. By ------------------------------------- (Name) --------------------------------- (Title) -------------------------------- AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT B-2 72 364-Day Rate: -------------- Confirmed by: ----------------------- - ------------------------------------------- (1) Must be a Business Day at least (i) three Business Days following receipt by Administrative Agent of this Notice of Conversion from a Base Rate Borrowing to a Eurodollar Rate Borrowing or a continuation of a Eurodollar Rate Borrowing for an additional Interest Period, and (ii) one Business Day following receipt by Administrative Agent (as applicable) of this Notice of Conversion for a conversion from a Eurodollar Rate Borrowing to a Base Rate Borrowing. (2) Not less than $5,000,000 or an integral multiple of $1,000,000 (if a Base Rate Borrowing); not less than $10,000,000 or a greater integral multiple of $1,000,000 (if a Eurodollar Rate Borrowing). (3) Eurodollar Rate Borrowing or Base Rate Borrowing. (4) Eurodollar Rate Borrowing -- 1, 2, 3, or 6 months, or, if available to all Lenders 9 or 12 months. In no event may the Interest Period end after the Termination Date or the Term Loan Maturity Date, as the case may be. AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT B-2 2 73 EXHIBIT B-3 FORM OF TERM CONVERSION REQUEST , (1) -------------- -- ---- Bank of America, N.A., as Administrative Agent for the Lenders as defined in the Credit Agreement referred to below Bank of America Plaza, 13th Floor 901 Main Street Dallas, TX 75202 Attn: Mickey McLean Fax: (214) 209-2515 Reference is made to the Amended and Restated 364-Day Revolving Credit and Term Loan Agreement, dated as of August 5, 1999 (as amended, modified, supplemented, or restated from time to time, the "CREDIT AGREEMENT"), among the undersigned, the Lenders named therein, the Administrative Agent, and other Agents. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The undersigned hereby gives you notice pursuant to SECTION 2.5 of the Credit Agreement that it requests the Principal Debt be converted to a Term Loan. In connection with this request, Borrower hereby sets forth below the terms on which such conversion is requested to be made: (A) Type of Borrowing(s)(2) ------- (B) For Eurodollar Rate Borrowings, the Interest Period(s) and the last day(s) thereof(3) ------- (C) Term Conversion Date ------- On the date the rate is set, please confirm the interest rate below and return by facsimile transmission to _______________________. Borrower hereby certifies that on the Term Conversion Date specified herein and after giving effect to the Term Loan conversion, no Default or Potential Default has occurred and is continuing. Very truly yours, MCI WORLDCOM, INC. By ------------------------------------- (Name) --------------------------------- (Title) -------------------------------- AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT B-3 74 Rate: -------- Confirmed by: ------------------------- (1)This Term Conversion Request must be delivered by Borrower to Administrative Agent no sooner than 90 days (and not later than 10 days) preceding the Termination Date. (2)Eurodollar Rate Borrowing(s) or Base Rate Borrowing(s). (3)Eurodollar Rate Borrowing -- 1, 2, 3, or 6 months, or, if available to all Lenders, 9 or 12 months. In no event may the Interest Period(s) end after the Term Loan Maturity Date in effect on the date of this Term Conversion Request. AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT B-3 2 75 EXHIBIT B-4 FORM OF COMPETITIVE BID REQUEST Date: , -------------- -- ---- Bank of America, N.A., as Administrative Agent for the Lenders as defined in the Credit Agreement referred to below Bank of America Plaza, 13th Floor 901 Main Street Dallas, TX 75202 Attn: Mickey McLean Fax: (214) 209-2515 Reference is made to the Amended and Restated 364-Day Revolving Credit and Term Loan Agreement, dated as of August 5, 1999 (as amended, modified, supplemented, or restated from time to time, the "CREDIT AGREEMENT"), among the undersigned, the Lenders, Administrative Agent, and the other Agents under the Credit Agreement. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The undersigned hereby gives you notice pursuant to SECTION 2.3(B) of the Credit Agreement that it requests a Competitive Borrowing, and in that connection sets forth below the terms on which such Competitive Borrowing is requested to be made: (A) Borrowing Date of Competitive Borrowing(1) (A) ---------- (B) Principal amount of Competitive Borrowing(2) (B) ---------- (C) Type of Borrowing(3) (C) ---------- (D) Interest Period and the last day thereof(4) (D) ---------- Accompanying this notice is payment of the competitive bid fee payable to Administrative Agent for its own account pursuant to SECTION 4.2 of the Credit Agreement. Borrower hereby certifies that the following statements are true on the date hereof, and will be true on the Borrowing Date specified herein after giving effect to such Borrowing: (a) this Borrowing will not cause the Principal Debt to exceed the Commitment; (b) all of the representations and warranties of Borrower set forth in the Loan Papers are true and correct in all material respects (except to the extent that (i) the representations and warranties speak to a specific date, or (ii) the facts on which such representations and warranties are based have been changed by transactions contemplated or permitted by the Loan Papers); (c) no Default or Potential Default has occurred and is continuing; and AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT B-4 76 (d) the funding of such Borrowing is permitted by Law. Very truly yours, MCI WORLDCOM, INC. By ------------------------------------- (Name) --------------------------------- (Title) -------------------------------- - -------------------------------- (1) Must be a Business Day occurring prior to the Termination Date and be at least (i) four Business Days following receipt by Administrative Agent of this Competitive Bid Request for any Competitive Borrowing that will be comprised of Eurodollar Rate Borrowings, and (ii) one Business Day following receipt by Administrative Agent of this Competitive Bid Request for any Competitive Borrowing that will be comprised of Fixed Rate Borrowings. (2) Not less than $5,000,000 (and in integral multiples of $1,000,000 thereafter), and not greater than the unused and available portion of the Commitment. (3) Eurodollar Rate Borrowing or Fixed Rate Borrowing. (4) Eurodollar Rate Borrowing -- 1, 2, 3 or 6 months; Fixed Rate Borrowing -- up to 6 months. But in no event may the Interest Period end after the Termination Date. AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT B-4 2 77 EXHIBIT B-5 FORM OF NOTICE TO LENDERS OF COMPETITIVE BID REQUEST Date: , -------------- -- ---- [Name of Lender] [Address of Lender] Attention: ---------------------- Reference is made to (i) the Amended and Restated 364-Day Revolving Credit and Term Loan Agreement, dated as of August 5, 1999 (as amended, modified, supplemented, or restated from time to time, the "CREDIT AGREEMENT"), among MCI WORLDCOM, Inc., the Lenders, the Administrative Agent for the Lenders, and the other Agents under the Credit Agreement. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. Borrower delivered a Competitive Bid Request dated _________ __, ____, pursuant to SECTION 2.3(B) of the Credit Agreement, and in that connection you are invited to submit a Competitive Bid by [Date] / [Time]. (1) Your Competitive Bid must comply with SECTION 2.3(C) of the Credit Agreement and the terms set forth below on which the Competitive Bid Request was made: (A) Borrowing Date of Competitive Borrowing (a (A) Business Day) -------------- (B) Principal amount of Competitive Borrowing (B) -------------- (C) Type of Borrowing (C) -------------- (D) Interest Period and the last day thereof (D) -------------- Very truly yours, BANK OF AMERICA, N.A., as Administrative Agent under the Credit Agreement By --------------------------------------- Name: ------------------------------------ Title: ----------------------------------- - --------------------------- (1) The Competitive Bid must be received by the Administrative Agent (i) in the case of Eurodollar Rate Borrowings, not later than 11:00 a.m., Dallas, Texas time, three Business Days before the Borrowing Date of the proposed Competitive Borrowing, and (ii) in the case of Fixed Rate Borrowings, not later than 10:00 a.m., Dallas, Texas time, on the Borrowing Date of the proposed Competitive Borrowing. AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT B-5 78 EXHIBIT B-6 FORM OF COMPETITIVE BID Date: , -------------- -- ---- BANK OF AMERICA, N.A., as Administrative Agent for the Lenders under the Credit Agreement described below Bank of America Plaza, 13th Floor 901 Main Street Dallas, TX 75202 Attn: Mickey McLean Fax: (214) 209-2515 The undersigned, [Name of Lender] , refers to the Amended and Restated 364-Day Revolving Credit and Term Loan Agreement, dated as of August 5, 1999 (as amended, modified, supplemented, or restated from time to time, the "CREDIT AGREEMENT"), among MCI WORLDCOM, Inc. (the "BORROWER"), Lenders, Administrative Agent, and the other Agents under the Credit Agreement. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Agreement. The undersigned hereby makes a Competitive Bid pursuant to SECTION 2.3(C) of the Credit Agreement, in response to the Competitive Bid Request made by Borrower on _________, _________, and in that connection sets forth below the terms on which such Competitive Bid is made: (A) Principal Amount(1) (A) ------------- (B) Competitive Bid Rate(2) (B) ------------- (C) Interest Period and the last day thereof(3) (C) ------------- The undersigned hereby confirms that it is prepared to extend credit to Borrower upon acceptance by Borrower of this bid in accordance with SECTION 2.3(E) of the Credit Agreement. Very truly yours, [NAME OF LENDER] By ------------------------------------ Name: --------------------------------- Title: -------------------------------- - -------------------------------- (1) Not less than $5,000,000 (and in integral multiples of $1,000,000 thereafter) and which may equal the entire principal amount of the Competitive Borrowing requested by Borrower and which may exceed such Credit Lender's Committed Sum under the Credit Agreement (subject to the limitations set forth in SECTION 2.3(A) of the Credit Agreement). Multiple bids will be accepted by Administrative Agent. (2) Eurodollar Rate + _____% or - _____%, in the case of Eurodollar Rate Borrowings; or %, in the case of Fixed Rate Borrowings (in each case, expressed in the form of a decimal to no more than four decimal places). (3) The Interest Period must be the Interest Period specified in the Competitive Bid Request. AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT B-6 79 EXHIBIT B-7 FORM OF SWING LINE BORROWING REQUEST Date: , -------------- -- ---- BANK OF AMERICA, N.A., as Administrative Agent for the Lenders under the Credit Agreement described below Bank of America Plaza, 13th Floor 901 Main Street Dallas, TX 75202 Attn: Mickey McLean Fax: (214) 209-2515 Reference is made to the Amended and Restated 364-Day Revolving Credit and Term Loan Agreement dated as of August 5, 1999 (as amended, modified, supplemented, or restated, from time to time, the "CREDIT AGREEMENT"), among the undersigned, the Lenders, Administrative Agent, and the other Agents under the Credit Agreement. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The undersigned hereby gives you notice pursuant to SECTION 2.2(B) of the Credit Agreement that it requests a Swing Line Borrowing under the Credit Agreement, and in that connection sets forth below the terms on which such Swing Line Borrowing is requested to be made: (A) Date of Swing Line Borrowing (which is a (A) Business Day) --------- (B) Principal Amount of Swing Line Borrowing (1) (B) --------- (C) Interest Rate Basis (2) (C) --------- Upon acceptance of any or all of the Swing Line Borrowings made by the Swing Line Lenders in response to this request, the undersigned shall be deemed to have represented and warranted that the conditions specified in SECTION 5.2(C), (D), (E), and (F) of the Credit Agreement have been satisfied. Very truly yours, MCI WORLDCOM, INC. By ------------------------------------ Name: --------------------------------- Title: -------------------------------- - ------------------------- (1) Not less than $1,000,000 (and in integral multiples of $250,000). (2) Alternate Rate Swing Line Borrowing or Quoted Swing Line Borrowing. AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT B-7 80 EXHIBIT C FORM OF ADMINISTRATIVE QUESTIONNAIRE BORROWER: MCI WORLDCOM, Inc. 1) Name of Entity as it should appear on Signature Page: _________. Please indicate number of signature lines required for Entity ____________. 2) Name and address of Person to Receive Drafts of Loan Papers at Lender: ------------------------------------------------------------ ------------------------------------------------------------------- 3) If different from above, name and address of person to whom signature pages should be forwarded for execution: ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- 4) If different from above, name and address of person to whom signature pages should be forwarded for execution: ------------------------------------------------------------------- ------------------------------------------------------------------- -------------------------------------------------------------------
CREDIT CONTACT OPERATIONS CONTACT LEGAL COUNSEL -------------- ------------------ ------------- NAME: -------------------- ---------------------- ------------------ TITLE: -------------------- ---------------------- ------------------ ADDRESS: -------------------- ---------------------- ------------------ -------------------- ---------------------- ------------------ -------------------- ---------------------- ------------------ TELEPHONE: -------------------- ---------------------- ------------------ FACSIMILE #: -------------------- ---------------------- ------------------ ANSWERBACK: -------------------- ---------------------- ------------------
AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT C 81 PAYMENT INSTRUCTIONS FED WIRE INSTRUCTIONS PAY TO: ------------------------------------------------------------ (Name of Lender) ------------------------------------------------------------ (Address) ---------------------- --------------------------------- (City) (State) (Zip) ------------------------------------------------------------ (ABA #) (Account #) ------------------------------------------------------------ (Attention) BANK OF AMERICA PAYMENT INSTRUCTIONS PAY TO: Bank of America Dallas, Texas ABA #: 111000025 ATTENTION: Commercial Loan Operations REFERENCE: MCI WORLDCOM, Inc. ACCOUNT #: 120-2000-883 AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT C 2 82 EXHIBIT D FORM OF COMPLIANCE CERTIFICATE FOR _____ ENDED ___________, ____ Date: , -------------- -- ---- ADMINISTRATIVE AGENT: Bank of America, N.A. BORROWER: MCI WORLDCOM, Inc. This certificate is delivered under the Amended and Restated 364-Day Revolving Credit and Term Loan Agreement, dated as of August 5, 1999 (as amended, modified, supplemented, or restated from time to time, the "CREDIT AGREEMENT") among Borrower, Lenders, Administrative Agent, and the other Agents under the Credit Agreement. Capitalized terms used herein and not otherwise defined herein shall have the meaning given to such terms in the Credit Agreement. I certify to Lenders that: (a) I am a Responsible Officer of the Consolidated Companies in the position(s) set forth under my signature below; (b) the Financial Statements of the Consolidated Companies attached to this certificate were prepared in accordance with GAAP, and present fairly in all material respects the consolidated financial condition and results of operations of Consolidated Companies as of, and for the (three, six, or nine months, or fiscal year) ended on, ___________, _________ (the "SUBJECT PERIOD") [(subject only to normal year-end audit adjustments)]; (c) a review of the activities of the Consolidated Companies during the Subject Period has been made under my supervision with a view to determining whether, during the Subject Period, the Consolidated Companies have kept, observed, performed, and fulfilled all of their respective obligations under the Loan Papers, and during the Subject Period, to my knowledge (i) the Consolidated Companies kept, observed, performed, and fulfilled each and every covenant and condition of the Loan Papers (except for the deviations, if any, set forth on a schedule annexed to this certificate) in all material respects, and (ii) no Default (nor any Potential Default) has occurred which has not been cured or waived (except the Defaults or Potential Defaults, if any, described on the schedule annexed to this certificate); (d) to my knowledge, the status of compliance by the Restricted Companies with SECTION 7.22 of the Credit Agreement at the end of the Subject Period is as set forth on ANNEX I to this certificate; AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT D 83 (e) as of the date hereof, to my knowledge, the aggregate secured Debt (including, without limitation, the amounts outstanding as of the date hereof under Capital Leases) of the Restricted Companies restricted by SECTION 7.12(F) of the Credit Agreement is $_________ [which amount is equal to or less than $_______ (being 10% of the book value of the consolidated assets of the Restricted Companies as of the end of the Subject Period)]; and (f) as of the date hereof, to my knowledge, the aggregate Debt of the Restricted Subsidiaries is $_________, which amount does not exceed $_________ [(being (i) 10% of the book value of the consolidated assets of the Restricted Companies as of the end of the Subject Period) plus (ii) the principal amount of all Existing Debt of MCI and its Subsidiaries on and after September 14, 1998 (the "MCI Merger Date" under the Existing Agreement]. By ---------------------------------- (Name) ------------------------------ (Title) ----------------------------- AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT D 2 84 ANNEX I TO COMPLIANCE CERTIFICATE Status of Compliance with SECTION 7.22 of the Credit Agreement(1) (All on consolidated basis for the Restricted Companies at the end of Subject Period)
1. SECTION 7.22 - TOTAL DEBT TO TOTAL CAPITALIZATION a. Total Debt of Consolidated Companies(1) $ ------------------- b. Total Debt of Unrestricted Companies $ ------------------- c. Total Debt of Restricted Companies (Line a minus Line b) $ ------------------- d. Consolidated Net Worth of Consolidated Companies(1) $ ------------------- e. Consolidated Net Worth of Unrestricted Companies $ ------------------- f. Consolidated Net Worth of Restricted Companies (Line d minus Line e) $ ------------------- g. Total Capitalization (1) (Sum of Line c and Line f) $ ------------------- h. Ratio of Line c to Line g : ------------------- i. Maximum Ratio for Subject Period 0.68 : 1.0
- ----------------- (1)All as more particularly determined in accordance with the terms of the Credit Agreement, which control in the event of conflicts with this form. AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT D 3 85 EXHIBIT E FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT Reference is made to the Amended and Restated 364-Day Revolving Credit and Term Loan Agreement dated as of August 5, 1999 (as amended, modified, supplemented, or restated from time to time, the "CREDIT AGREEMENT") among MCI WORLDCOM, INC., a Georgia corporation ("BORROWER"), Lenders, the Co-Syndication Agents (each such term as defined in the Credit Agreement), and BANK OF AMERICA, N.A., as the Administrative Agent under the Credit Agreement ("ADMINISTRATIVE AGENT"). Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The "ASSIGNOR" and the "ASSIGNEE" referred to on SCHEDULE 1 agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, without recourse and without representation or warranty except as expressly set forth herein, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor's Rights and obligations under the Credit Agreement and the related Loan Papers as of the date hereof equal to the percentage interest specified on SCHEDULE 1 (excluding any outstanding Competitive Borrowings owed to the Assignor or any obligations to fund any Swing Line Borrowing in Assignor's capacity as a Swing Line Lender [unless the Assignor is selling all of its Rights and obligations under the Loan Papers], but including any participations by the Assignor in any Swing Line Borrowings pursuant to SECTION 2.2 of the Credit Agreement). After giving effect to such sale and assignment, the Assignor's and the Assignee's Committed Sums and the amount of the Borrowings under the Credit Agreement owing to each of them will be as set forth on SCHEDULE 1. 2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Papers or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Papers or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any party to any Loan Paper or the performance or observance by any such party of any of its obligations under the Loan Papers or any other instrument or document furnished pursuant thereto; and (iv) attaches the Notes held by the Assignor (to the extent the Principal Debt being assigned and owed to the Assignor is evidenced by Notes) and requests that Administrative Agent exchange such Notes for new Notes if so requested by either the Assignor or Assignee. Such new Notes shall be prepared in accordance with the provisions of SECTION 3.1(B) of the Credit Agreement and will reflect the respective Committed Sums of the Assignee and the Assignor after giving effect to this Assignment and Acceptance. 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the Current Financials and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Administrative Agent, the Assignor, or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes Administrative Agent to take such action as Administrative Agent on its behalf and to exercise such powers and discretion under the Credit Agreement as are delegated to Administrative Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations that by AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT E 86 the terms of the Credit Agreement are required to be performed by it as a Lender; and (vi) attaches any U.S. Internal Revenue Service or other forms required under SECTION 3.20(D) of the Credit Agreement. 4. Following the execution of this Assignment and Acceptance, it will be delivered to Administrative Agent for acceptance and recording by the Administrative Agent. The effective date for this Assignment and Acceptance (the "EFFECTIVE DATE") shall be the date of acceptance hereof by Administrative Agent, unless otherwise specified on SCHEDULE 1. 5. Upon such acceptance and recording by Administrative Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the Rights and obligations of a Lender thereunder, and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its Rights and be released from its obligations under the Credit Agreement. 6. Upon such acceptance and recording by Administrative Agent, from and after the Effective Date, Administrative Agent shall make all payments under the Credit Agreement, the Notes (to the extent the Principal Debt owed to the Assignee is evidenced by Notes), and loan accounts in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees and other fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the other Loan Papers for periods prior to the Effective Date directly between themselves. 7. Unless the Assignee is a Lender or an Affiliate of a Lender (and this sale and assignment is not made in connection with the sale of such Affiliate), this Assignment and Acceptance is conditioned upon the consent of Borrower and Administrative Agent pursuant to the definition of "Eligible Assignee" in the Credit Agreement. The execution and delivery of this Assignment and Acceptance by Borrower and Administrative Agent is evidence of this consent. 8. As contemplated by SECTION 11.13(B)(V) of the Credit Agreement, the Assignor or the Assignee (as determined between the Assignor and the Assignee) agrees to pay to Administrative Agent for its account on the Effective Date in federal funds a processing fee of $3,500. 9. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. 10. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of SCHEDULE 1 to this Assignment and Acceptance by telecopier shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. IN WITNESS WHEREOF, the Assignor and the Assignee have caused SCHEDULE 1 to this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of the date specified thereon. AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT E 2 87 SCHEDULE 1 to ASSIGNMENT AND ACCEPTANCE AGREEMENT (364-DAY FACILITY)
1. Assigned Interest:* (a) Assignor's Committed Sum prior to giving effect to the Assignment to Assignee $ ------------------- (b) Aggregate Borrowings owed to Assignor (inclusive of participations in Swing Line Borrowings, if any), immediately prior to giving effect to the assignment to Assignee $ ------------------- (c) Aggregate Borrowings owed to Assignor (exclusive of participations in Swing Line Borrowings, if any), immediately prior to giving effect to the assignment to Assignee $ ------------------- (d) Percentage Interest in Commitment and Borrowings being assigned to Assignee by Assignor (not less than $10,000,000, when aggregated with any concurrent assignments from Assignor to Assignee under Facility A and Facility B, but in no event less than $1,000,000) % ------------------- 2. Adjustments after giving effect to Assignment between Assignor and Assignee: (a) Assignor's Committed Sum $ ------------------- (b) Assignee's Committed Sum acquired from Assignor pursuant to this Assignment $ ------------------- (c) Assignor's aggregate Borrowings (inclusive of participations in Swing Line Borrowings, if any) $ ------------------- (d) Assignee's Borrowings (inclusive of Swing Line Borrowings, if any) acquired from Assignor pursuant to this Assignment $ ------------------- (e) Assignor's aggregate Borrowings (exclusive of participations in Swing Line Borrowings, if any) $ ------------------- (f) Assignee's Borrowings (exclusive of Swing Line Borrowings if any) acquired from Assignor pursuant to the Assignment $ ------------------- 3. Effective Date (if other than date of acceptance by Administrative Agent): * , -------------- --- ------
- ----------------------- * Each assignment shall exclude Competitive Borrowings and Swing Line Borrowings unless Assignor is assigning 100% of its interest under Facility A. AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT E 3 88 SCHEDULE 1 to ASSIGNMENT AND ACCEPTANCE AGREEMENT (364-DAY FACILITY) (PAGE 2 OF 2) [NAME OF ASSIGNOR], as Assignor By: ---------------------------------- Title: ------------------------------- Dated: , -------------------- -- -- [NAME OF ASSIGNEE], as Assignee By: ---------------------------------- Title: ------------------------------- Dated: , -------------------- -- -- AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT E 4 89 If SECTION 11.13(B) and CLAUSE (C) of the definition of "Eligible Assignee" of the Credit Agreement so require, Borrower and Administrative Agent consent to this Assignment and Acceptance. MCI WORLDCOM, INC., as Borrower By: ------------------------------------ Title: --------------------------------- Dated: , -------------------- -- -- BANK OF AMERICA, N.A., as Administrative Agent By: ------------------------------------ Title: --------------------------------- Dated: , -------------------- -- -- * This date should be no earlier than five Business Days after the delivery of this Assignment and Acceptance to the Administrative Agent under the Credit Agreement. AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT E 5 90 EXHIBIT F-1 FORM OF OPINION OF GENERAL COUNSEL OF BORROWER August 5, 1999 Bank of America, N.A., in its capacity as Administrative Agent Each of the Agents and the Lenders named in Schedules 2.1 to the Credit Agreement referred to below RE: CREDIT FACILITY OF MCI WORLDCOM, INC. Ladies and Gentlemen: I am the General Counsel of MCI WORLDCOM, Inc., a Georgia corporation ("BORROWER"), and have acted as counsel to Borrower and its Restricted Subsidiaries in connection with the Amended and Restated 364- Day Revolving Credit and Term Loan Agreement dated as August 5, 1999 (the "CREDIT AGREEMENT") among Borrower, the lenders named on SCHEDULE 2.1 to the Credit Agreement ("LENDERS"), Bank of America, N.A., as the "Administrative Agent" under the Credit Agreement (in such capacity, the "ADMINISTRATIVE AGENT") and the other "Agents" under the Credit Agreement. This opinion is delivered pursuant to SECTION 5.1 of the Credit Agreement and PARAGRAPH 8 of SCHEDULE 5.1 to the Credit Agreement. Unless otherwise defined, each capitalized term used herein has the meaning given to such term in the Credit Agreement. In arriving at the opinions expressed below, I or attorneys employed by Borrower and acting under my supervision have examined such corporate documents and records of the Consolidated Companies and such certificates of public officials and of officers of the Consolidated Companies, other documents, and matters of law as I deemed necessary or appropriate, including, without limitation, originals or copies (or, with respect to the Notes under the Credit Agreement (collectively, the "NOTES") only, the forms of Notes attached as Exhibits to the Credit Agreement) of (i) the Credit Agreement, and (ii) to the extent any Notes are executed and delivered on the Closing Date or immediately subsequent thereto, such Notes (all of the foregoing, collectively, the "TRANSACTION DOCUMENTS"). In rendering the opinions expressed below, I have assumed with your permission, without independent investigation or inquiry, (a) the authenticity of all documents submitted to me as originals, (b) the genuineness of all signatures on all documents that I have examined (other than those of any officer of any Consolidated Company who signed in my presence and Bernard J. Ebbers, Charles T. Cannada, Scott D. Sullivan, and any other officer signing the incumbency provisions of officers' certificates delivered in connection with the Loan Papers), (c) the conformity to authentic originals of documents submitted to me as certified, conformed or photostatic copies, and (d) compliance by the Administrative Agent, the other Agents, and the Lenders with their respective covenants and undertakings contained in the Transaction Documents. As to certain matters of New York law, I understand you will rely solely upon the opinions of Bryan Cave LLP. Based upon the foregoing, and subject to the qualifications and limitations herein contained, it is my opinion that: AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT F-1 91 1. Borrower (a) is a corporation validly existing under the Laws of its state of incorporation (based solely upon my review of existence certificates issued by such state with respect to such corporation), and (b) possesses all requisite corporate authority and power to conduct its business and execute, deliver, and comply with the terms of the Transaction Documents, which have been duly authorized and approved by all necessary corporate action and for which, to the best of my knowledge, no approval or consent of any Person or Governmental Authority is required which has not been obtained, except where the failure to obtain would not be a Material Adverse Event. 2. Each of the Transaction Documents have been duly executed and delivered by Borrower. 3. The Transaction Documents evidence the valid and legally binding obligations of Borrower, enforceable against Borrower in accordance with their terms, except as the enforcement may be limited by Debtor Relief Laws and except that the remedies available with respect thereto may be subject to general principles of equity (regardless of whether such remedies are sought in a proceeding in equity or at law). 4. The execution, delivery and performance of and compliance with the terms of the Transaction Documents will not cause Borrower to be in violation of its Second Amended and Restated Articles or Certificates of Incorporation or Bylaws. 5. The execution, delivery, and the performance of and compliance with the terms of the Transaction Documents will not cause Borrower to be in violation of any Laws applicable to it, other than such violations which will not, individually or collectively, be a Material Adverse Event. 6. No Restricted Company is involved in, nor am I aware of the threat of, any Litigation which is reasonably likely to be determined adversely to any Restricted Company and, if so adversely determined, would be a Material Adverse Event. There are no outstanding orders or judgments for the payment of money (not paid or fully covered by insurance) in excess of $100,000,000 (individually or collectively) or any warrant of attachment, sequestration, or similar proceeding against any Restricted Company's assets having a value (individually or collectively) of $100,000,000 or more, which is not either (a) stayed on appeal, (b) being diligently contested in good faith by appropriate proceedings with adequate reserves having been set aside on the books of such Restricted Company in accordance with GAAP, or (c) dismissed by a court of competent jurisdiction. 7. To the best of my knowledge, after reasonable investigation, the execution, delivery, and the performance of and compliance with the terms of the Transaction Documents will not cause Borrower to be in default under any material written or oral agreements, contracts, commitments, or understandings to which any Restricted Company is a party, other than such defaults or potential defaults which will not, individually or collectively, be a Material Adverse Event. 8. (a) No Employee Plan has incurred an accumulated funding deficiency (as defined in the Code and ERISA), (b) neither Borrower nor any ERISA Affiliate has incurred material liability which is currently due and remains unpaid to the PBGC or to an Employee Plan in connection with any such Employee Plan, (c) neither Borrower nor any ERISA Affiliate has withdrawn in whole or in part from participation in a Multiemployer Plan, (d) Borrower has not engaged in any prohibited transaction (as such term is defined in ERISA or the Code) which would be a Material Adverse Event, and (e) to the best of my knowledge, after reasonable investigation, no Reportable Event has occurred which is likely to result in the termination of any Employee Plan. This opinion is limited in all respect to the laws of the State of Georgia and the federal laws of the United States of America. AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT F-1 2 92 I note that the Transaction Documents are to be governed by the laws of the State of New York. Accordingly, for purposes of rendering this opinion as to the enforceability of the Transaction Documents, I have assumed that the substantive laws of the State of New York are identical to the substantive laws of the State of Georgia. The foregoing opinions are also subject to the following exceptions and qualifications: I express no opinion (a) with respect to the availability of the remedies of specific performance or injunction, or other remedies requiring the exercise of judicial discretion; (b) as to the effect of the compliance or noncompliance of Lenders with any state or federal laws or regulations applicable to any Lender's legal or regulatory status or the nature of such Lender's business; (c) as to the enforceability of any provisions contained in the Transaction Documents that (i) purport to make void any act in contravention thereof, (ii) purport to authorize a party to act in its sole discretion, (iii) relate to the effect of laws or regulations that may be enacted in the future, (iv) require waivers or amendments to be made only in writing or (v) purport to effect waivers of constitutional, statutory or equitable rights or the effect of applicable laws; (d) regarding the enforceability of the waivers in the Transaction Documents of the right to demand a trial by jury and with respect to selection of a venue; (e) as to the enforceability of any provisions in the Transaction Documents to the effect that the acceptance of a past due installment or other performance by Borrower shall not be deemed a waiver of the right to accelerate the indebtedness; (f) as to the enforceability of any provisions in the Transaction Documents relating to (i) set off, (ii) self help or (iii) evidentiary standards or other standards by which the Transaction Documents are to be construed; (g) with regard to any provisions of the Transaction Documents whereby a party purports to indemnify another party against its own negligence or misconduct; and (h) as to matters subject to the jurisdiction of the FCC, state public utility commissions, or any other communications or similar regulatory authorities. This opinion is addressed to you solely for your use in connection with the transactions contemplated by the Transaction Documents, and no person other than the Administrative Agent, each other Agent, each Lender, each assignee which hereafter becomes a Lender as permitted by the Credit Agreement and the law firm of Haynes and Boone, L.L.P. is entitled to rely hereon without my prior written consent. This opinion is given as of the date hereof, and I have no obligation to revise or update this opinion subsequent to the date hereof or to advise you or any other person of any matter subsequent to the date hereof which would cause me to modify this opinion in whole or in part. Very truly yours, William E. Anderson, General Counsel AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT F-1 3 93 EXHIBIT F-2 FORM OF OPINION OF SPECIAL NEW YORK COUNSEL [BRYAN CAVE] August 5, 1999 Bank of America, N.A., as Administrative Agent Each of the Agents and Lenders named on SCHEDULE 2.1 to the Credit Agreement referred to below: Ladies and Gentlemen: We have acted as special New York counsel to MCI WORLDCOM, Inc., a Georgia corporation (the "BORROWER"), in connection with the negotiation, preparation, and execution of the Amended and Restated 364- Day Revolving Credit and Term Loan Agreement (the "CREDIT AGREEMENT") dated as of August 5, 1999, by and among the Borrower, the Lenders referred to on SCHEDULE 2.1 of the Credit Agreement ("LENDERS"), Bank of America, N.A., as the "Administrative Agent" under the Credit Agreement (the "CREDIT ADMINISTRATIVE AGENT") and the other "Agents" under the Credit Agreement (collectively, "AGENTS"): This opinion is furnished to you pursuant to SECTIONS 5.1 of the Credit Agreement and PARAGRAPH 8 of SCHEDULE 5.1 of the Credit Agreement. Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Credit Agreement. For purposes of the opinions expressed herein, we have examined the following documents: (a) A copy of the Credit Agreement; (b) A copy of the form of the Notes issuable under the Credit Agreement; (c) A copy of a Secretary's Certificate for the Borrower dated as of the date hereof (the "SECRETARY'S CERTIFICATE"), including the following exhibits appended to each such Secretary's Certificate: Exhibit A Second Amended and Restated Articles of Incorporation Exhibit B Certificate of Existence Exhibit C By-Laws Exhibit D Authorizing Resolutions/Unanimous Written Consents The documents described under Paragraphs (a) and (b) above are sometimes collectively referred to herein as the "TRANSACTION DOCUMENTS". We have not made any independent investigation or inquiries as to (i) the accuracy or completeness of any factual matters contained in the exhibits or schedules to any of the Transaction Documents, (ii) any other instruments or other documents delivered by the Borrower in connection with any of the Transaction Documents, or (iii) title to, or ownership of any property, real or personal, or the compliance or non-compliance of such properties with applicable laws, regulations, and codes. AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT F-2 94 In rendering this opinion, we have assumed the accuracy of, and we have relied as to matters of fact upon, the representations and warranties made by the Borrower in the Transaction Documents insofar as they relate to factual matters and upon factual representations as to certain matters contained in the Secretary's Certificate and other certificates signed by officers of the Borrower and certain of the other Restricted Companies. We have assumed, and we have relied upon, (i) the genuineness of all signatures on documents, instruments, and certificates reviewed by us, (ii) the accuracy and authenticity of all documents, instruments, and certificates reviewed by us, (iii) the legal competence of all natural persons who are signatories thereto, (iv) the conformity to authentic original documents of all documents, instruments, and certificates submitted to us as certified, conformed or photostatic copies, and (v) the due execution and delivery of all documents (other than the Transaction Documents) where due execution and delivery are a prerequisite to the effectiveness thereof. We have further assumed that the Credit Agreement have been duly authorized, executed, and delivered by the Administrative Agent, the Agents, and the Lenders and that the Administrative Agent, the Agents, and the Lenders have the requisite corporate power and authority to execute, deliver, and perform the Credit Agreement. Based on the foregoing and in reliance thereon, and subject to the assumptions, exceptions, limitations and qualifications set forth in this opinion, we are of the opinion that: (1) Each of the Transaction Documents constitute the valid and legally binding obligation of the Borrower, enforceable against Borrower in accordance with its terms. (2) The execution, delivery, and performance by the Borrower of each of the Transaction Documents to which it is a party will not violate any applicable Law of the State of New York, except for any such violations which could not reasonably be expected to cause, either individually or in the aggregate, a Material Adverse Event. (3) The execution, delivery, and performance by Borrower of the Transaction Documents do not require the consent or authorization of, or filing with any New York Governmental Authority. (4) No Restricted Company is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (5) No Restricted Company is a "holding company" or a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. (6) No Restricted Company is subject to regulation under the Interstate Commerce Act, as amended. (7) The application of the proceeds of the Borrowings under the Credit Agreement by the Borrower in accordance with the terms of the Credit Agreement will not violate Regulation U. This opinion is subject to the additional exceptions, limitations and qualifications set forth below: Enforceability of the Transactions Documents are subject to: (1) the effect of bankruptcy, insolvency, reorganization, receivership, moratorium and other similar laws affecting the rights and remedies of creditors generally, including: AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT F-2 2 95 (a) the United States Bankruptcy Code of 1978, as amended, and thus comprehends, among others, matters of turn-over, automatic stay, avoiding powers, fraudulent transfer, preference, discharge, conversion of a non-recourse obligation into a recourse claim, limitations on ipso facto and anti-assignment clauses and the coverage of pre-petition security agreements applicable to property acquired after a petition is filed. (b) all other federal and state bankruptcy, insolvency, reorganization, receivership, moratorium, arrangement and assignment for the benefit of creditors laws that affect the rights and remedies of creditors generally. (c) state fraudulent transfer and conveyance laws. (d) judicially developed doctrines relevant to any of the foregoing laws, such as substantive consolidation of entities. (2) the effect of general principles of equity, whether applied by a court of law or equity, including principles: (a) governing the availability of specific performance, injunctive relief or other equitable remedies, which generally place the award of such remedies, subject to certain guidelines, in the discretion of the court to which application for such relief is made. (b) affording equitable defenses (e.g., waiver, laches and estoppel) against a party seeking enforcement. (c) requiring good faith and fair dealing in the performance and enforcement of a contract by the party seeking its enforcement. (d) requiring reasonableness in the performance and enforcement of an agreement by the party seeking enforcement of the contract. (e) requiring consideration of the materiality of a breach and the consequences of the breach to the party seeking enforcement. (f) requiring consideration of the impracticability or impossibility of performance at the time of attempted enforcement. (g) affording defenses based upon the unconscionability of the enforcing party's conduct after the parties have entered into the contract. (3) the effect of generally applicable rules of law that: (a) limit or affect the enforcement of provisions of a contract that purport to require waiver of the obligations of good faith, fair dealing, diligence and reasonableness. (b) provide that forum selection clauses in contracts are not necessarily binding on the court(s) in the forum selected. AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT F-2 3 96 (c) limit the availability of a remedy under certain circumstances where another remedy has been elected. (d) limit the right of a creditor to use force or cause a breach of the peace in enforcing rights. (e) limit the enforceability of provisions releasing, exculpating or exempting a party from, or requiring indemnification of a party for, liability for its own action or inaction, to the extent public policy limits the enforceability of such indemnification or the action or inaction involves gross negligence, recklessness, willful misconduct or unlawful conduct. (f) may, where less than all of a contract may be unenforceable, limit the enforceability of the balance of the contract to circumstances in which the unenforceable portion is not an essential part of the agreed exchange. (g) govern and afford judicial discretion regarding the determination of damages and entitlement to attorneys' fees and other costs. (h) may permit a party who has materially failed to render or offer performance required by the contract to cure that failure unless (A) permitting a cure would unreasonably hinder the aggrieved party from making substitute arrangements for performance, or (B) it was important in the circumstances to the aggrieved party that performance occur by the date stated in the contract. (i) limit the enforceability of any clause requiring additional interest or additional payments upon default. (j) limit the enforceability of any clause authorizing the exercise of set-off rights absent prior notice and demand. We express no opinion as to the enforceability of (i) any waiver of jury trial, or any waiver of any statutory or constitutional rights, or (ii) the choice of law provisions in any of the Transaction Documents in courts sitting in jurisdictions other than the State of New York. We express no opinion as to any titles, estates, or interests of the Borrower in and to any properties, real or personal, fee or leasehold. We express no opinion as to (x) the enforceability of any waiver of any statutory right and (y) the enforceability of the provisions found under clauses A, B, C, E, F and G of SECTION 11.10 of the Credit Agreement. With respect to our opinions provided under numbered paragraphs 4, 5 and 6 above, we have assumed that the business of the Restricted Companies is limited to the provision of long distance telecommunications services through a digital fiber optic and digital microwave network, and that the Restricted Companies, individually and collectively, are engaged in no other line of business. We express no opinion on any other matters pertaining to the transactions contemplated by or related to the Transaction Documents, except as hereinabove specifically provided, and no further or other opinion shall be implied. The opinion above is subject to each and every assumption, exception, qualification and limitation, factual or legal, set forth herein. The matters set forth herein or upon which this opinion is based are as of the date hereof, and we hereby undertake no, and disclaim any, obligation to advise the Administrative Agent, the Agents, or any Lender of any change in any matters set forth herein or any matters upon which this opinion is based. AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT F-2 4 97 We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion concerning, any laws other than the laws of the State of New York. The opinions above are subject to this limitation in all respects. We express no opinion as to any matters involving the Federal Communications Commission and state public utility commissions or analogous regulatory or governmental authorities or the laws, rules, or regulations relating to any regulatory matters affecting the companies, as we understand you will rely solely on special regulatory counsel to the Restricted Companies for such matters. This opinion is addressed solely for your use in connection with the transactions contemplated by the Credit Agreement, and no Person other than the Administrative Agent, each Agent, each Lender, each assignee which hereafter becomes a Lender in accordance with the terms of either of the Credit Agreement, and the law firm of Haynes and Boone, L.L.P., is entitled to rely hereon without our prior written consent. Very truly yours, BRYAN CAVE LLP AMENDED AND RESTATED 364-DAY FACILITY - EXHIBIT F-2 5 EX-27 4 FINANCIAL DATA SCHEDULE
5 This Schedule contains summary financial information extracted from MCI WORLDCOM, Inc.'s financial statements for the six months ended June 30, 1999, and is qualified in its entirety by reference to such financial statements. 1,000,000 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 599 0 6,713 952 0 10,096 27,744 (3,180) 86,573 16,839 13,550 798 0 19 48,230 86,573 0 17,945 0 14,686 (16) 447 496 2,779 1,195 1,584 0 0 0 1,572 0.85 0.81
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