<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
[X] Definitive Proxy Statement Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
WORLDCOM, INC.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No Filing Fee Required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF WORLDCOM APPEARS HERE]
515 EAST AMITE STREET
JACKSON, MISSISSIPPI 39201-2702
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Jackson, Mississippi
April 21, 1997
The annual meeting of the shareholders of WorldCom, Inc., a Georgia
corporation (the "Company"), will be held on Thursday, May 22, 1997, at 10:00
a.m. local time, at 515 East Amite Street, Jackson, Mississippi, for the
purposes of:
1. electing a Board of fourteen (14) directors;
2. considering and acting upon a proposal to approve the Company's
Performance Bonus Plan; and
3. transacting such other business as properly may come before the meeting
or any adjournments or postponements thereof.
Holders of record of the Company's common stock, Series A 8% Cumulative
Convertible Preferred Stock and Series B Convertible Preferred Stock at the
close of business on April 3, 1997, will be entitled to receive notice of, and
to vote at, the meeting and any adjournment or postponement thereof.
A copy of the Company's Annual Report to Shareholders for 1996 accompanies
this notice.
By Order of the Board of
Directors
SCOTT D. SULLIVAN
Secretary
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE PROMPTLY
MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY. A RETURN ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
<PAGE>
WORLDCOM, INC.
515 EAST AMITE STREET
JACKSON, MISSISSIPPI 39201-2702
----------------
PROXY STATEMENT
----------------
SOLICITATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of WorldCom, Inc.,
a Georgia corporation ("WorldCom" or the "Company"), for use at the annual
meeting of the Company's shareholders to be held at 515 East Amite Street,
Jackson, Mississippi, on Thursday, May 22, 1997, at 10:00 a.m. local time and
at any adjournments or postponements thereof. Holders of record of the
Company's voting securities at the close of business on April 3, 1997 (the
"Record Date") will be entitled to receive notice of, and to vote at, the
meeting. Whether or not you expect to attend the meeting in person, please
return your executed proxy in the enclosed envelope and the shares represented
thereby will be voted in accordance with your wishes. The first mailing of
proxies to shareholders will occur on or about April 21, 1997. If, after
sending in your proxy, you decide to vote in person or desire to change the
voting instructions on your proxy or revoke your proxy, you may do so by
notifying the Secretary of the Company in writing of such revocation at any
time prior to the voting of the proxy, by submitting a later-dated proxy or by
attending the meeting and voting in person.
On September 15, 1993, Metromedia Communications Corporation, a Delaware
corporation, merged into Resurgens Communications Group, Inc., a Georgia
corporation ("Resurgens"). Immediately thereafter, LDDS Communications, Inc.,
a Tennessee corporation ("LDDS-TN"), merged into Resurgens, whereupon the name
of Resurgens was changed to "LDDS Communications, Inc." (the "Surviving
Corporation"). Such mergers are hereinafter referred to collectively as the
"Mergers" and individually as a "Merger." Although from a corporate law
perspective Resurgens was the survivor in both Mergers, for accounting
purposes, LDDS-TN was the survivor of the second Merger. Accordingly, unless
otherwise provided herein, all references to and information regarding the
Company contained in this Proxy Statement relate to LDDS-TN prior to the
Mergers and to the Surviving Corporation after the Mergers. At the annual
meeting of shareholders held May 25, 1995, shareholders of LDDS
Communications, Inc. voted to change the name of the Company to WorldCom,
Inc., effectively immediately.
On December 31, 1996, a wholly owned subsidiary of WorldCom merged with MFS
Communications Company, Inc. ("MFS") in a transaction accounted for as a
purchase (the "MFS Merger"). As a result of the MFS Merger, each share of MFS
common stock was converted into the right to receive 2.1 shares of common
stock of the Company (the "Common Stock") or approximately 471.0 million
shares in the aggregate. Outstanding MFS options and warrants generally were
converted on a similar basis, except for MFS Shareworks Plus Awards, which
were paid out in cash. Each share of MFS Series A 8% Cumulative Convertible
Preferred Stock was converted into the right to receive one share of Series A
8% Cumulative Convertible Preferred Stock of the Company (the "Series A
Preferred Stock"), or 94,992 shares in the aggregate. Each share of MFS
Series B Convertible Preferred Stock was converted into the right to receive
one share of Series B Convertible Preferred Stock of the Company (the "Series
B Preferred Stock"), or approximately 12.7 million shares in the aggregate. In
addition, each depositary share representing one-hundredth of a share of MFS
Series A Preferred Stock was exchanged for a depositary share representing
one-hundredth of a share of Series A Preferred Stock of the Company.
<PAGE>
COMPANY SECURITIES
On the Record Date, there were issued and outstanding 891,398,323 shares of
Common Stock, 94,992 shares of Series A Preferred Stock and 12,626,908 shares
of Series B Preferred Stock. All of the shares of Series A Preferred Stock are
held by The Bank of New York as Depositary for the holders of Series A
Depositary Shares (the "Series A Depositary Shares"). Each Series A Depositary
Share represents a one-hundredth interest in a share of Series A Preferred
Stock.
The holders of shares of Common Stock issued and outstanding are entitled to
cast one vote per share on all matters voted on by the holders of Common Stock
generally, including the election of directors, and do not have cumulative
voting rights. The holders of Series A Preferred Stock and Series B Preferred
Stock are entitled to vote together with holders of Common Stock as a single
class on issues presented to a vote of the Company's shareholders, except
under certain conditions when such holders are entitled to vote as a separate
class. The holders of Series A Preferred Stock are entitled to vote on the
basis of ten votes for each such share held. The holders of Series B Preferred
Stock are entitled to vote on the basis of one vote per such share held. The
Series A Preferred Stock will be voted by The Bank of New York in accordance
with instructions received from the holders of Series A Depositary Shares, as
described below. Consequently, holders of Series A Depositary Shares are
entitled to direct The Bank of New York with respect to one-tenth (1/10) of a
vote per Series A Depositary Share. The shares of Series A Preferred Stock and
Series B Preferred Stock do not carry cumulative voting rights.
ACTION TO BE TAKEN UNDER PROXY
SHARES WILL BE VOTED AS INSTRUCTED IN THE ACCOMPANYING PROXY ON EACH MATTER
SUBMITTED TO THE VOTE OF SHAREHOLDERS. IF ANY DULY EXECUTED PROXY IS RETURNED
WITHOUT VOTING INSTRUCTIONS, THE PERSONS NAMED AS PROXIES THEREON INTEND TO
VOTE ALL SHARES REPRESENTED BY SUCH PROXY AS FOLLOWS:
(1) FOR the election of the persons named herein as nominees for
directors of the Company to hold office until the 1998 annual meeting of
the Company's shareholders and until their successors have been duly
elected and qualified;
(2) FOR the approval of the Company's Performance Bonus Plan; and
(3) in their discretion on the transaction of such other business as
properly may come before the meeting or any adjournments or postponements
thereof.
Under the terms of the Deposit Agreement dated December 31, 1996 between the
Company and The Bank of New York, all shares of Series A Preferred Stock held
by The Bank of New York, as Depositary, will be voted or not voted as directed
by written instructions from the holders of Series A Depositary Shares, and
shares for which no instructions are received will be voted as abstentions. If
the enclosed voting instruction card (which is also the proxy card) is
executed and returned without instructions as to how it is to be voted, the
voting instruction card will be deemed to be an instruction to vote FOR the
election of the Board's nominees, FOR the approval of the Company's
Performance Bonus Plan and in the discretion of the Depositary named on the
voting card on the transaction of such other business as properly may come
before the meeting or any adjournment or postponement thereof.
2
<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES
As of the Record Date, the following persons, individually or as a group,
were known to the Company to be deemed to be the beneficial owners of more
than five percent of the issued and outstanding Common Stock, each of which
persons has sole voting and investment power over such Common Stock, except as
set forth in the footnotes hereto:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF EXISTING PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS(1)
------------------------------------ ---------------------- ----------
<S> <C> <C>
FMR Corp.................................... 70,566,021(2) 7.9%
</TABLE>
82 Devonshire Street
Boston, Massachusetts 02109
- - - --------
(1) Based upon 891,398,323 shares of Common Stock issued and outstanding plus,
as to the holder thereof only, exercise or conversion of all derivative
securities that are exercisable or convertible currently or within 60 days
after the Record Date.
(2) Based upon shares owned as of March 6, 1997, as provided by FMR Corp.,
including 60,322,566 shares beneficially owned by Fidelity Management &
Research Company ("Fidelity"), as a result of its serving as investment
adviser to various investment companies registered under Section 8 of the
Investment Company Act of 1940 and serving as investment adviser to
certain other funds which are generally offered to limited groups of
investors; 9,390,385 shares beneficially owned by Fidelity Management
Trust Company, as a result of its serving as trustee or managing agent for
various private investment accounts, primarily employee benefit plans, and
serving as investment adviser to certain other funds which are generally
offered to limited groups of investors; and 853,070 shares beneficially
owned by Fidelity International Limited, as a result of its serving as
investment adviser to various non-United States investment companies. The
number of shares beneficially owned by Fidelity includes 4,301,357 shares
issuable upon conversion of Series A Preferred Stock. The number of shares
beneficially owned by Fidelity Management Trust Company includes 267,839
shares issuable upon conversion of Series A Preferred Stock. FMR Corp. has
sole voting power with respect to 5,627,963 shares and sole dispositive
power with respect to 69,712,951 shares. Fidelity International Limited
has sole voting and dispositive power with respect to all the shares it
beneficially owns.
To the knowledge of the Company, 7,791 shares, or approximately 8.2% of the
94,992 outstanding shares of Series A Preferred Stock are beneficially owned
by Salomon Brothers Inc ("SBI"), a wholly owned subsidiary of Salomon Brothers
Holding Company ("SBHC") which is in turn a wholly owned subsidiary of Salomon
Inc. The principal address of SBI is Seven World Trade Center, New York, New
York 10048. As of the Record Date, the 7,791 outstanding shares of Series A
Preferred Stock owned by SBI were convertible into 2,682,238 shares of Common
Stock, representing less than one percent of the outstanding Common Stock.
3
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock and
Series B Preferred Stock, as of the Record Date, by each director, the named
executive officers and by all persons, as a group, who are currently directors
and executive officers of the Company. No person listed on the following table
is the beneficial owner of any shares of Series A Preferred Stock. Each
director or executive officer has sole voting and investment power over the
shares listed opposite his name except as set forth in the footnotes hereto.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS(1)
------------------------ -------------------- ----------
<S> <C> <C>
Carl J. Aycock............................... 721,706(2) *
Max E. Bobbitt............................... 151,292(3) *
R. Douglas Bradbury.......................... 49,017(4) *
James Q. Crowe............................... 1,009,804(5) *
Bernard J. Ebbers............................ 14,964,672(6) 1.7%
Francesco Galesi............................. 3,517,108(7) *
Richard R. Jaros............................. 784,936(8) *
Stiles A. Kellett, Jr........................ 3,102,175(9) *
David C. McCourt............................. 7,115(10) *
John A. Porter............................... 4,747,934(11) *
Walter Scott, Jr............................. 18,423,109(12) 2.1%
John W. Sidgmore............................. 3,180,354(13) *
Scott D. Sullivan............................ 3,571 *
Lawrence C. Tucker........................... 3,165,096(14) *
Roy A. Wilkens............................... 456,974(15) *
Michael B. Yanney............................ 30,759(16) *
All Directors and Current Executive Officers
as a Group (15 persons)...................... 53,858,648(17) 6.0%
</TABLE>
- - - --------
*Less than one percent.
(1) Based upon 891,398,323 shares of Common Stock issued and outstanding plus,
as to the holder thereof only, exercise or conversion of all derivative
securities that are exercisable or convertible currently or within 60 days
after the Record Date.
(2) Includes 5,576 shares owned by Mr. Aycock's spouse; 85,316 shares
purchasable upon exercise of options; and 3,312 shares held as custodian
for children.
(3) Includes 33,512 shares purchasable upon exercise of options; and 117,780
shares as to which Mr. Bobbitt shares voting and investment power with his
spouse.
(4) Includes 344 shares issuable upon conversion of WorldCom Series B
Preferred Stock; and 7,744 shares issuable pursuant to the WorldCom/MFS
1995 Deferred Stock Purchase Plan. All of the shares beneficially owned by
Mr. Bradbury were obtained upon consummation of the MFS Merger.
(5) Includes 8,511 shares issuable upon conversion of Series B Preferred
Stock; 19,070 shares issuable pursuant to the WorldCom/MFS 1995 Deferred
Stock Purchase Plan; and 349 shares held as custodian for children. All of
the shares beneficially owned by Mr. Crowe were obtained upon consummation
of the MFS Merger.
(6) Includes 36,432 shares held as custodian for children; 1,775,696 shares
purchasable upon exercise of options; and 855,448 shares owned by Mr.
Ebbers' spouse, as to which Mr. Ebbers shares voting and investment power.
(7) Consists of 3,483,596 shares owned by Rotterdam Ventures, Inc., of which
Mr. Galesi is sole shareholder; and 33,512 shares purchasable upon
exercise of options.
(8) Includes 6,449 shares issuable upon conversion of Series B Preferred
Stock; 8,400 shares held jointly with Mr. Jaros' spouse; and 15,930 shares
held as custodian for Mr. Jaros' children as to which Mr. Jaros disclaims
beneficial ownership. All of the shares beneficially owned by Mr. Jaros
were obtained upon consummation of the MFS Merger.
(9) Includes 16,000 shares owned by Mr. Kellett's spouse; 860 shares held as
custodian for minor daughter; and 85,316 shares purchasable upon exercise
of options.
4
<PAGE>
(10) Includes 95 shares issuable upon conversion of Series B Preferred Stock.
All of the shares beneficially owned by Mr. McCourt were obtained upon
consummation of the MFS Merger.
(11) Includes 165,560 shares held as custodian or trustee for minor children;
68,048 shares purchasable upon exercise of options; 218,000 shares owned
by spouse, as to which beneficial ownership is disclaimed; and 85,812
shares held in trust for son of majority age, as to which beneficial
ownership is also disclaimed.
(12) Includes 172,594 shares issuable upon conversion of Series B Preferred
Stock; 3,000,000 shares held by the Suzanne and Walter Scott Charitable
Remainer Unitrust, 72,916 shares held by the Suzanne Scott Irrevocable
Trust, and 633 shares issuable upon conversion of Series B Preferred
Stock also held by the Suzanne Scott Irrevocable Trust, in each case as
to which Mr. Scott has voting and investment power as trustee. All of the
shares beneficially owned by Mr. Scott were obtained upon consummation of
the MFS Merger.
(13) Includes 35,371 shares purchasable upon exercise of options; and 18,721
shares held in a trust of which Mr. Sidgmore is sole trustee with sole
voting and dispositive power. All of the shares beneficially owned by Mr.
Sidgmore were obtained upon consummation of the MFS Merger.
(14) A total of 3,131,828 of these shares are beneficially owned by The 1818
Fund, L.P. and The 1818 Fund II, L.P. (collectively, "The 1818 Funds").
Brown Brothers Harriman & Co. is the general and managing partner of The
1818 Funds and Mr. Tucker, as a general partner of Brown Brothers
Harriman & Co., shares voting and investment power with respect to such
securities. Also includes 33,268 shares purchasable upon exercise of
options.
(15) Includes 400,000 shares purchasable upon exercise of options.
(16) Includes 2,956 shares owned by Mr. Yanney's spouse; and 21,000 shares
beneficially owned by America First Companies L.L.C. Mr. Yanney is
President, Chairman and Chief Executive Officer of America First
Companies, L.L.C. All of the shares beneficially owned by Mr. Yanney were
obtained upon consummation of the MFS Merger.
(17) Includes 2,365,479 shares purchasable upon exercise of options or
conversion of Series B Preferred Stock.
ITEM 1. ELECTION OF DIRECTORS
The Company's Bylaws provide that the Board of Directors shall consist of
not less than three directors, with the number to be determined from time to
time by the Board of Directors. The Board of Directors has currently fixed the
number of directors at fifteen. R. Douglas Bradbury, whose term expires at the
1997 annual meeting, is not standing for re-election and will retire from the
Board as of the 1997 annual meeting, at which time the number of directors
will be reduced to fourteen. Accordingly, fourteen directors are to be elected
at the 1997 Annual Meeting as hereinafter provided. Mr. Bradbury served as
Chief Financial Officer of MFS from January 1992 until February 1997,
Executive Vice President of MFS from August 1995 to February 1997, Senior Vice
President of MFS from September 1992 to August 1995 and a director of MFS from
August 1994 to February 1997. From 1990 to 1992, Mr. Bradbury was Senior Vice
President--Corporate Affairs for MFS Telecom, Inc. ("MFS Telecom").
All nominees have indicated their willingness to serve if elected and all
nominees are currently directors of the Company. Should any nominee named
herein for election become unavailable for any reason, it is intended that the
persons named in the proxy will vote for the election of such other person in
his or her stead as may be designated by the Board of Directors. The Board of
Directors is not aware of any reason that might cause any nominee to be
unavailable. The Board of Directors recommends a vote "FOR" the election of
all of the listed nominees.
Directors are elected by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting of the shareholders at which a
quorum of the voting group involved is present. A majority of the votes
entitled to be cast in the election by the voting group constitutes a quorum
of that voting group for the election.
5
<PAGE>
Shares as to which voting authority is withheld will be considered present
for purposes of determining the presence of a quorum at the annual meeting
(unless such shares are represented at such meeting solely to object to
holding the meeting or transacting business at the meeting) but as not voted
for purposes of the election of directors. Shares as to which a broker
indicates it has no discretion to vote and which are not voted will be
considered not present at such meeting for purposes of determining the
presence of a quorum and as unvoted for the election of directors.
Pursuant to the applicable provisions of the Company's Second Amended and
Restated Articles of Incorporation, holders of shares of Common Stock, Series
A Preferred Stock and Series B Preferred Stock currently are entitled to vote
as a single class in the election of the fourteen directors at the annual
meeting. Each outstanding share of Common Stock is entitled to one vote in the
election, each holder of the Series A Preferred Stock is entitled to ten votes
for each such share held in the election and each holder of Series B Preferred
Stock is entitled to one vote for each such share held in the election.
Pursuant to the agreement relating to the MFS Merger, WorldCom agreed to
cause the Board of Directors to consist of an odd number of directors at the
effective time of the MFS Merger, with MFS being entitled to designate one
less director than WorldCom. WorldCom designated Messrs. Aycock, Bobbitt,
Ebbers, Galesi, Kellett, Porter, Sullivan and Tucker, and MFS designated
Messrs. Bradbury, Crowe, Jaros, McCourt, Scott, Sidgmore and Yanney to serve
as directors. Additionally, pursuant to such agreement, WorldCom and MFS
agreed that it was the intent of the parties that membership on the
compensation and stock option, audit and nominating committees of the Board of
Directors after the effective time of the MFS Merger would initially consist
of an equal number of designees of WorldCom and MFS.
INFORMATION ABOUT NOMINEES AND EXECUTIVE OFFICERS
The following states each nominee's and each executive officer's age,
principal occupation, present position with the Company and the year in which
each director or nominee first was elected a director (each serving
continuously since first elected except as set forth otherwise). Unless
indicated otherwise, each individual has held his or her present position for
at least five years. All references to "the Company" include for these
purposes LDDS-TN and its predecessors.
CARL J. AYCOCK, 48, has been a director of the Company since 1983. Mr.
Aycock served as Secretary of the Company from 1987 to 1995 and was the
Secretary and Chief Financial Officer of Master Corporation, a motel
management and ownership company, from 1989 until 1992. Subsequent to 1992,
Mr. Aycock has been self employed as a financial administrator.
MAX E. BOBBITT, 52, has been a director of the Company since 1992. Mr.
Bobbitt was a director of Advanced Telecommunications Corporation ("ATC")
until its merger with the Company in December 1992 (the "ATC Merger"). Mr.
Bobbitt is currently President and Chief Executive Officer of Metromedia Asia
Corporation, a telecommunications company. From 1996 until February 1997, Mr.
Bobbitt was President and Chief Executive Officer of Asian American
Telecommunications Corporation. Prior to 1996, Mr. Bobbitt held various
positions including President and Chief Operating Officer and director of
ALLTEL Corporation, a telecommunications company, from 1970 until January
1995.
JAMES Q. CROWE, 47, serves as Chairman of the Board of the Company. Mr.
Crowe has served as a director of the Company since the MFS Merger. Mr. Crowe
has served as Chairman of the Board of MFS since 1988 and Chief Executive
Officer since November 1991 and was President of MFS (January 1988-June 1989
and April 1990-January 1992).
BERNARD J. EBBERS, 55, has been President and Chief Executive Officer of the
Company since April 1985. Mr. Ebbers has served as a director of the Company
since 1983.
FRANCESCO GALESI, 66, has been a director of the Company since 1992. Mr.
Galesi was a director of ATC until the ATC Merger. Mr. Galesi is the Chairman
and Chief Executive Officer of the Galesi Group, which includes companies
engaged in distribution, manufacturing, real estate and telecommunications.
Mr. Galesi serves as a director of Amnex, Inc. and Walden Residential
Properties, Inc.
6
<PAGE>
RICHARD R. JAROS, 45, has been a director of the Company since the MFS
Merger and has served as a director of MFS since 1992. Mr. Jaros has been
President of Kiewit Diversified Group, Inc. ("KDG"), a coal mining and
telecommunications company, since July 1996, Executive Vice President and
Chief Financial Officer of Peter Kiewit Sons' ("PKS"), a construction and
mining company since April 1993, and was a Vice President of PKS from 1990
until 1992. Mr. Jaros was the Chairman of the Board of CalEnergy Company, Inc.
("CEC"), a geothermal energy producer, from January 1994 until May 1995 and
the President and Chief Operating Officer of CEC from 1992 until April 1993.
Mr. Jaros is a director of PKS, CEC and C-TEC Corporation ("C-TEC").
STILES A. KELLETT, JR., 53, has served as a director of the Company since
1981. Mr. Kellett has been Chairman of Kellett Investment Corp. since 1995.
From 1978 to 1995, Mr. Kellett served as Chairman of the Board of Directors of
Convalescent Services, Inc., a long-term health care company in Atlanta,
Georgia. Mr. Kellett serves as a director of Frederica Bank & Trust Company,
St. Simons Island, Georgia, and Mariner Health Group, Inc., New London,
Connecticut.
DAVID C. MCCOURT, 40, has been a director of the Company since the MFS
Merger and has served as a director of MFS since January 1992. Mr. McCourt has
served as Chairman of the Board and Chief Executive Officer of C-TEC, a
telecommunications company, since October 1993. Mr. McCourt is also the
President, as well as a director of Kiewit Telecom Holdings, Inc. Mr. McCourt
has served as President of Metropolitan Fiber Systems/McCourt, Inc., a
subsidiary of MFS Telecom, since 1988. Mr. McCourt is a director of C-TEC and
Mercom, Inc.
JOHN A. PORTER, 53, has been a director of the Company since 1988. Mr.
Porter served as Vice Chairman of the Board of the Company from September 1993
until the MFS Merger and served as Chairman of the Board of Directors of the
Company from 1988 until September 1993. From May 1995 to the present, Mr.
Porter has served as Chairman of the Board of Directors and Chief Executive
Officer of Industrial Electric Manufacturing, Inc., a manufacturer of
electrical power distribution products. Mr. Porter also serves as Chairman of
the Board of Directors of Phillips & Brooks/Gladwin, Inc., a manufacturer of
pay telephone enclosures and equipment. Mr. Porter was previously President
and sole shareholder of P.M. Restaurant Group, Inc. which filed for protection
under Chapter 11 of the United States Bankruptcy Code in March 1995.
Subsequent to March 1995, Mr. Porter sold all of his shares in P.M. Restaurant
Group, Inc. He is also a director of Uniroyal Technology Corporation,
Intelligent Electronics, Inc. and XL Connect, Inc.
WALTER SCOTT, JR., 66, has been a director of the Company since the MFS
Merger and has served as a director of MFS since January 1992. Mr. Scott has
been the Chairman of the Board and President of PKS for more than the last
five years. He also is a director of Berkshire Hathaway, Inc., Burlington
Resources, Inc., CEC, ConAgra, Inc., First Bank System, Valmont Industries,
Inc. and C-TEC.
JOHN W. SIDGMORE, 45, serves as Vice Chairman of the Board and Chief
Operations Officer of the Company. Mr. Sidgmore has been a director of the
Company since the MFS Merger and has served as a director of MFS since August
1996. Mr. Sidgmore was President and Chief Operating Officer of MFS from
August 1996 until the MFS Merger and has been Chief Executive Officer and a
director of UUNET Technologies, Inc. ("UUNET") from June 1994 to the present,
and also held the position of President of UUNET from June 1994 to August 1996
and from January 1997 to the present. From 1989 to 1994, he was President and
Chief Executive Officer of CSC Intelicom, a telecommunications software
company. Mr. Sidgmore is a director of Saville Systems PLC and EarthLink
Network, Inc.
SCOTT D. SULLIVAN, 35, serves as Chief Financial Officer and Secretary of
the Company. From the ATC Merger until December 1994, Mr. Sullivan served as
Vice President and Assistant Treasurer of the Company. From 1989 until 1992,
Mr. Sullivan served as an executive officer of two long-distance companies,
including ATC. From 1983 to 1989, Mr. Sullivan served in various capacities
with KPMG Peat Marwick LLP. Mr. Sullivan has served as a director of the
Company since March 1996.
LAWRENCE C. TUCKER, 54, is a general partner of Brown Brothers Harriman &
Co., which is the general and managing partner of The 1818 Fund, L.P. and The
1818 Fund II, L.P. He is also a director of The WellCare
7
<PAGE>
Management Group, Inc. and Riverwood International Corporation. Mr. Tucker has
served as a director of the Company since May 1995, and previously served as
director of the Company from May 28, 1992 until the ATC Merger.
MICHAEL B. YANNEY, 63, has been a director of the Company since the MFS
Merger and has served as a director of MFS since March 1993. Mr. Yanney has
been the President, Chairman and Chief Executive Officer of America First
Companies L.L.C., a bank holding company in Omaha, Nebraska, since 1984. He
also serves as a director of Burlington Northern Santa Fe Corporation, C-TEC,
Forest Oil Corporation and Mid-America Apartment Communities, Inc.
INFORMATION CONCERNING BOARD OF DIRECTORS
COMMITTEES AND MEETINGS
The composition of the Board and the committees thereof changed on December
31, 1996, the effective date of the MFS Merger. Information provided herein
regarding meetings of the Board and its committees related to the Company
prior to the MFS Merger.
During 1996, the Board of Directors of the Company held five meetings. Each
director attended at least 75% of the meetings of the Board of Directors and
committees on which such director served.
The Board of Directors has a standing Audit Committee consisting of Max E.
Bobbitt (Chairman), Francesco Galesi, David C. McCourt and Richard R. Jaros.
During 1996, the Audit Committee held two meetings. The Audit Committee
performs the following functions: (a) review of periodic financial statements,
(b) communication with independent accountants, (c) review of the Company's
internal accounting controls and (d) recommendation to the Board of Directors
as to selection of independent accountants.
The Board of Directors has a standing Compensation and Stock Option
Committee consisting of Stiles A. Kellett, Jr. (Chairman), Walter Scott, Jr.,
Lawrence C. Tucker and Michael B. Yanney. The Compensation and Stock Option
Committee held four meetings during 1996. The duties of the Compensation and
Stock Option Committee are as follows: (a) to make determinations regarding
the annual salary, bonus and other benefits of executive officers of the
Company; (b) to administer the stock option or award plans of the Company,
including a determination of the individuals to whom options or awards are
granted and the terms and provisions of options and awards under such plans;
and (c) to review and take actions, including submission of recommendations to
the Board of Directors, concerning compensation, stock plans and other
benefits for the Company's directors, officers and employees.
The Board of Directors has a Nominating Committee consisting of John A.
Porter (Chairman), Carl J. Aycock, Richard R. Jaros and Walter Scott, Jr. The
Nominating Committee did not meet during 1996. The duties of the Nominating
Committee include recommending to the Board, if so requested by the Board,
nominees for director, successors to the Chief Executive Officer in the event
there is a vacancy in that office, and nominees for committee chairpersons and
members. The Nominating Committee, if it meets, or the Board will give due
consideration to written recommendations for nominees from shareholders for
election as directors. Under the Bylaws of the Company, shareholders are
entitled to nominate persons for election as directors only if written notice
has been given as specified therein to the Company's Secretary, 515 East Amite
Street, Jackson, Mississippi 39201-2702, not later than 90 days prior to the
anniversary of the preceding year's meeting. Such notice must set forth
information about the proposed nominee and the consent of the nominee, among
other things. See "Future Proposals of Security Holders."
COMPENSATION OF DIRECTORS
WorldCom's non-employee directors are paid fees of $22,500 per year and
$1,000 per meeting attended of the Board plus certain expenses. Committee
members are paid a fee of $750 for any committee meeting attended on the same
day as a Board meeting and $1,000 for any other committee meeting attended,
plus certain expenses. The chairman of each committee receives an additional
$3,000 per year.
8
<PAGE>
Pursuant to WorldCom's Third Amended and Restated 1990 Stock Option Plan,
each non-employee director receives annually a non-discretionary grant of
options to purchase 5,000 shares of Common Stock at the fair market value of
such stock on the date of grant. Such options are immediately exercisable and
expire on the earliest to occur of (a) ten years following the date of grant,
(b) three months following retirement, (c) 12 months following termination of
service due to disability or death, (d) upon cessation of service for reasons
other than retirement, death or disability, or (e) the date of consummation of
a specified change in control transaction defined generally to include the
dissolution or liquidation of the Company, a reorganization, merger or
consolidation of the Company in which the Company is not the surviving
corporation, or a sale of substantially all of the assets or 80% or more of
the outstanding stock of the Company to another entity. The exercise price may
be paid in cash or, in the discretion of the Compensation and Stock Option
Committee, the Common Stock. In the discretion of the Compensation and Stock
Option Committee, shares receivable on exercise may be withheld to pay
applicable taxes on the exercise.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Pursuant to an employment arrangement, Mr. Crowe will not have any direct
operating responsibility but will continue to serve as a director and Chairman
of the Board of the Company for the term of his employment, subject to his
nomination and election as such by the Company's shareholders. The term of Mr.
Crowe's employment continues until November 23, 1997 and may be extended by
mutual agreement. In connection with this arrangement, Mr. Crowe will receive
a base salary of $120,000 per year for certain services provided to and as
directed by the Company. In addition, Mr. Crowe's options to purchase an
aggregate of 872,562 shares of Common Stock at an exercise price of $2.869 per
share will become fully exercisable at any time after November 24, 1997 and
all shares granted under the WorldCom/MFS Employee Stock Bonus Plan and the
WorldCom/MFS 1995 Deferred Stock Purchase Plan will vest immediately.
Pursuant to the employment agreement of Mr. Sidgmore with UUNET, approximately
420,000 restricted shares of Common Stock vested as a result of the MFS
Merger. Pursuant to the terms of Mr. Sidgmore's employment agreement with
UUNET, Mr. Sidgmore's initial base salary was $220,000 per year, plus a bonus
targeted at $130,000 per year. Mr. Sidgmore received a bonus of $400,000 for
1996 under his employment agreement. If Mr. Sidgmore's employment is
terminated without cause, he will receive severance payments totaling
$300,000. Under the employment agreement, Mr. Sidgmore also received options
to purchase at $0.04 per share 4,644,635 shares of Common Stock (which options
were exercised and 414,699 of which shares issued remain subject to a right of
repurchase, which right lapses as to 13,823 shares each month). In the event
of a change in control of WorldCom or an involuntary termination other than
for cause of Mr. Sidgmore's employment, WorldCom's right of repurchase lapses
with respect to 50 percent of any of the shares subject to a right of
repurchase at the time and such right also lapses over time. If as a result of
such acceleration, Mr. Sidgmore would incur an excise tax pursuant to Section
4999 of the Internal Revenue Code or corresponding provision of applicable
state law, the Company is required to pay him when due to the applicable tax
authority an amount sufficient to pay the excise tax and any federal, state
and local taxes payment with respect to receipt thereof.
REPORT OF COMPENSATION AND STOCK OPTION COMMITTEE
ON EXECUTIVE COMPENSATION
GENERAL
The Company's executive compensation program is administered by the
Compensation and Stock Option Committee of the Board of Directors (the
"Committee"). Since the MFS Merger, the Committee has been composed of Stiles
A. Kellett, Jr. (Chairman), Walter Scott, Jr., Lawrence C. Tucker and Michael
B. Yanney. Prior to the MFS Merger, the members of the Committee were Stiles
A. Kellett, Jr. (Chairman), Silvia Kessel and Lawrence C. Tucker. None of the
Committee members are employees of the Company.
9
<PAGE>
The Company's executive compensation policy as implemented by the Committee
is designed to provide a competitive compensation program that will enable the
Company to attract, motivate, reward and retain executives who have the
skills, experience and talents required to promote the short- and long-term
financial performance and growth of the Company. The compensation policy is
based on the principle that the financial rewards to the executive must be
aligned with the financial interests of the shareholders of the Company. In
this manner, the Company will meet its ultimate responsibility to its
shareholders.
The Company's executive compensation has three elements: base salary, annual
incentive compensation and long-term incentive compensation. The Committee is
endeavoring to maximize deductibility of compensation under Section 162(m) of
the Internal Revenue Code to the extent practicable while maintaining
competitive compensation. The following is a summary of the considerations
underlying each element.
BASE SALARY
The Committee determines the salary ranges for each of the executive officer
positions of the Company, based upon the level and scope of the
responsibilities of the office and the pay levels of similarly positioned
executive officers in comparable companies. With respect to executive officers
other than the Chief Executive Officer, the evaluation of the Chief Executive
Officer is of paramount importance in setting base salaries. The Committee's
practice has been to establish base salaries for particular offices between
the median and high end of the range of such salaries at comparable companies,
in order to attract and retain the best qualified management team available.
In 1996, base salaries for executive officers were consistent with this
policy.
The comparison of compensation levels is based on surveys of various
companies both within and outside the telecommunications industry. Certain of
these companies are included in the peer group represented in the index used
for stock performance comparisons elsewhere in this Proxy Statement under the
caption "Comparison of Five-Year Cumulative Total Returns." The Committee is
satisfied that it has reasonably accurate information with respect to salary
ranges for the surveyed companies.
The Committee begins its annual compensation review in November, and it
meets in the first quarter of each year to set the compensation of the
Company's executive officers. The Committee considers (i) the Company's
performance as evidenced in changes in the price of the Common Stock during
the year as compared to changes in its industry and the broader economic
environment, (ii) the Chief Executive Officer's recommendations with respect
to a particular officer, (iii) the officer's individual performance, (iv) any
significant changes in the officer's level of responsibility and (v) each
officer's then-current salary within the range of salaries for such position.
The Committee includes significant qualitative components in evaluating the
individual performance of each executive officer. These components include the
officer's leadership, teambuilding and motivational skills, adaptability to
rapid change, and assimilation of new technical knowledge to meet the demands
of the industry's customers. In this qualitative evaluation, the Committee
exercises its collective judgment as to the officer's contributions to the
growth and success of the Company during the prior year and the expected
contributions of such officer in the future.
Generally, salary increases are made retroactive to January 1 of the current
year. For 1997, executive officers' salaries were adjusted consistent with the
policy to pay between the median and high end of the range of such salaries at
comparable companies. The Company's Board of Directors unanimously ratified
and approved the 1997 salary adjustments.
ANNUAL INCENTIVE COMPENSATION
The Company's executive officers, as well as other management employees, are
eligible to receive cash bonus awards. The key components in determining the
amount of such awards include the financial performance of the Company in the
context of the overall industry and economic environment, generally as
evidenced by changes in the Common Stock price during the prior year, as well
as the individual growth and success of the Company as measured primarily by
revenues. The judgment of each member of the Committee and, in the case of
other executive officers, of the Chief Executive Officer as to the impact of
the individual on the financial performance of the Company also are
considered. Based largely upon internal growth and the 48% increase in the
price of the Common Stock, the Committee awarded bonuses for 1996 which fell
between the median and high end of the range of bonuses at the comparable
companies.
10
<PAGE>
In 1994, the Company adopted the Annual Performance Bonus Plan (the "Annual
Plan") which relates to certain cash bonuses for the Chief Executive Officer
and such other executive officers as the Committee may determine. The bonuses
are predicated on the achievement by the Company of one or more quantitative
performance goals. The Annual Plan will continue until terminated by the
Committee. Subject to attainment of the specified performance goal(s) and the
limitations with respect to the maximum bonus payable under the Annual Plan,
the Committee exercises its judgment as to individual contributions to the
Company's performance, as set forth above under the caption "Base Salary," in
determining the actual amount of the bonus to be paid under the Annual Plan.
LONG-TERM INCENTIVE COMPENSATION
The Committee believes that long-term incentive compensation in the form of
stock options is the most direct way of making executive compensation
dependent upon increases in shareholder value. The Company's stock option
plans provide the means through which executive officers can build an
investment in Common Stock which will align such officers' economic interests
with the interests of shareholders. The value of the stock options
historically has increased as a result of increases in the price of the Common
Stock, and such options are highly valued by employees. The Committee believes
that the grant of stock options has been a particularly important component of
its success in retaining talented management employees.
The exercise price of each option has generally been the market price of the
Common Stock on the date of grant. The most recent option grants generally
provide for delayed vesting and have a term of ten years. The Committee
believes that stock options give the executive officers greater incentives
throughout the term of the options to strive to operate the Company in a
manner that directly affects the financial interests of the shareholders both
on a long-term, as well as a short-term, basis.
In determining the number of option shares to grant to executive officers,
the Committee considers on a subjective basis the same factors as it does in
determining the other components of compensation, with no single factor
accorded special weight. The recommendation of the Chief Executive Officer is
of paramount importance in determining awards to persons other than himself.
Prior option grants to the individual involved are not considered in making
new nonqualified option grants.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. Ebbers' base salary, annual incentive compensation and long-term
incentive compensation are determined by the Committee based upon the same
factors as those employed by the Committee for executive officers generally,
with exception for cash bonuses granted under the Company's performance bonus
plans. The total compensation package of Mr. Ebbers is designed to be
competitive within the industry while creating awards for short- and long-term
performance in line with the financial interests of the shareholders. In 1996,
the compensation package for Mr. Ebbers was consistent with this policy.
The Committee has approved the adoption of the proposed Performance Bonus
Plan, which adoption is subject to obtaining requisite shareholder approval.
The Performance Bonus Plan, which relates to a bonus for certain executive
officers of the Company, including the Chief Executive Officer, in addition to
any bonus payable under the Annual Plan, the Special Performance Bonus Plan
adopted in 1996 relating to certain cash bonuses to the Chief Executive
Officer for 1996 through 1998 (the "Special Bonus Plan"), or any other plan,
is discussed in more detail elsewhere in this Proxy Statement.
The Committee views the Performance Bonus Plan as an important mechanism to
align the incentives of designated executive officers closely with the
Company's performance and shareholder value, and strongly recommends its
adoption by the shareholders.
During 1995, the Company's stock price increased from $9.72 to $17.63 per
share. The Company had $6.6 billion in total assets as of December 31, 1995
and $3.6 billion in revenues for the year ended December 31,
11
<PAGE>
1995. In recognition of these achievements, the Committee determined to
increase Mr. Ebbers' base salary in 1996 by 10% over his 1995 salary, to
$935,000. The Committee established a maximum bonus under the Annual Plan for
the Chief Executive Officer for 1995 equal to $1,125,000. It established
specific performance goals for 1995 based on the attainment by the Company of
specified minimum gross revenues and adjusted earnings per share of Common
Stock. The Company achieved the performance goals, and the Committee
determined to award the Chief Executive Officer the entire bonus, based on the
factors discussed above. In 1994, the Company also adopted the 1995 Special
Performance Bonus Plan (the "1995 Plan") which related to a special bonus for
the Chief Executive Officer of the Company with respect to fiscal year 1995.
The Committee established a maximum bonus under the 1995 Plan for the Chief
Executive Officer of $1,000,000, and a performance goal based on specified
minimum gross revenues of the Company in any one month. The 1995 performance
goal was achieved and the Committee awarded Mr. Ebbers the entire bonus, based
on the factors discussed above.
In 1996, the Company's stock price increased from $17.63 to $26.06 per
share, and the Company increased significantly in size upon the completion of
the MFS Merger. The Company had $19.86 billion in total assets as of December
31, 1996 and $4.49 billion in revenues for the year ended December 31, 1996.
The Committee established a maximum bonus under the Annual Plan for the Chief
Executive Officer for 1996 equal to $1,687,500. It established specific
performance goals for 1996 based on the attainment by the Company of specified
minimum gross revenues and adjusted earnings per share of Common Stock. The
Company achieved the performance goals, and the Committee determined to award
the Chief Executive Officer the entire bonus, based on the factors discussed
above. Additionally, for 1996, the Committee established a maximum bonus under
the Special Bonus Plan of $1,000,000 and a performance goal based on certain
billings by the Company. The 1996 performance goal was achieved, and the
Committee awarded the $1,000,000 maximum amount allowed under the Special
Bonus Plan. However, Mr. Ebbers accepted only $650,000 of such award. Despite
the Company's strong performance, in light of the $1.0 million compensation
deductibility limitation under Section 162(m) of the Internal Revenue Code and
Mr. Ebbers' request that his 1997 salary not be increased, the base salary for
Mr. Ebbers in 1997 will remain unchanged over the 1996 base salary of
$935,000.
During 1996, the Committee granted Mr. Ebbers options exercisable for an
aggregate of 1,200,000 shares of Common Stock, which become exercisable in
three equal annual installments beginning January 1, 1997 through January 1,
1999. The Committee believes that options appropriately compose a significant
portion of compensation for the reasons set forth above. In evaluating the
number of options awarded, the Committee did not employ a formal valuation
formula, but compared the number of options to the numbers of options awarded
by comparable companies.
CONCLUSION
The Committee intends to continue its practice of basing executive
compensation on stock price and other financial performance criteria, and on
its qualitative evaluation of individual performance. Additionally, the
Committee is augmenting, as applicable to the person(s) involved, these
components of the compensation process with the quantitative measures of
performance included in the Company's performance bonus plans. The Committee
believes that its compensation policies promote the goals of attracting,
motivating, rewarding and retaining talented executives who will maximize
value for the Company's shareholders.
THE COMPENSATION AND STOCK OPTION COMMITTEE
April 21, 1997
From May 23, 1996 to January 2, 1997: Stiles A. Kellett,
Jr. (Chairman)
Silvia Kessel (until
December 31, 1996)
Lawrence C. Tucker
From January 2, 1997 to Present: Stiles A. Kellett, Jr.
(Chairman)
Walter Scott, Jr.
Lawrence C. Tucker
Michael B. Yanney
12
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
The following graphs and tables compare cumulative five-year shareholder
returns (including reinvestment of dividends) on an indexed basis with the
Center for Research in Security Prices ("CRSP") Index for Nasdaq
Telecommunications Stocks (SIC codes 4800 through 4899--US and Foreign
Companies) and the Standard & Poor's 500 Composite Stock Price Index (the"S&P
500"), the first reflecting LDDS-TN returns prior to the Mergers and the
second reflecting the returns applicable to Resurgens prior to the Mergers. On
March 25, 1996, Standard & Poor's announced that the Company had been added to
the S&P 500. Upon a shareholder's written request to the Chief Financial
Officer of the Company, the Company will promptly provide the names of the
companies included in the CRSP Index for Nasdaq Telecommunications Stocks.
These indices are included for comparative purposes only and do not
necessarily reflect management's opinion that such indices are an appropriate
measure of the relative performance of the stock involved, and are not
intended to forecast or be indicative of possible future performance of the
Common Stock.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS
Performance Graph for WorldCom, Inc. (LDDS-TN prior to 9/15/93)
Measurement period Measurement PT -
(Fiscal Year Covered) 12/31/91 FYE 12/31/92 FYE 12/31/93 FYE 12/31/94 FYE 12/31/95 FYE 12/31/96
- - - --------------------- ---------------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
WorldCom, Inc. $ 100.0 $ 232.0 $ 386.0 $ 311.0 $ 564.0 $ 834.0
Nasdaq Telecommunica-
tions Stocks
SIS 4800 through 4899
US and Foreign $ 100.0 $ 122.8 $ 189.4 $ 158.1 $ 207.0 $ 211.5
S&P 500 Stocks $ 100.0 $ 107.7 $ 118.2 $ 119.8 $ 164.8 $ 203.2
</TABLE>
- - - --------
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day,
the preceding trading day is used.
D. The index for all series was set to $100.0 on 12/31/91.
13
<PAGE>
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS
Performance Graph for WorldCom, Inc. (Resurgens prior t 9/15/93)
Measurement period Measurement PT -
(Fiscal Year Covered) 12/31/91 FYE 12/31/92 FYE 12/31/93 FYE 12/31/94 FYE 12/31/95 FYE 12/31/96
- - - --------------------- ---------------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
WorldCom, Inc. $ 100.0 $ 163.2 $ 252.5 $ 203.5 $ 369.0 $ 545.6
Nasdaq Telecommunica-
tions Stocks
SIC 4800 through 4899
US and Foreign $ 100.0 $ 122.8 $ 189.4 $ 158.1 $ 207.0 $ 211.5
S&P 500 Stocks $ 100.0 $ 107.7 $ 118.2 $ 119.8 $ 164.8 $ 203.2
</TABLE>
- - - --------
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day,
the preceding trading day is used.
D. The index for all series was set to $100.0 on 12/31/91.
14
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation of the named executive
officers of the Company for the three years ended December 31, 1996. The table
also sets forth, for informational purposes, the Compensation paid by MFS
and/or UUNET during 1996 to Messrs. Crowe and Sidgmore, who became executive
officers of the Company upon completion of the MFS Merger.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
----------------- UNDERLYING
NAME AND PRINCIPAL SALARY OPTIONS/ ALL OTHER
POSITION YEAR ($) BONUS($) SARS (#) COMPENSATION($)
- - - ------------------ ---- ------- --------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Bernard J. Ebbers....... 1996 935,000 2,337,500(1) 1,200,000/0 4,500(2)
President and 1995 860,000 2,125,000 900,000/0 4,500
Chief Executive Officer 1994 711,000 750,000 200,000/0 4,500
James Q. Crowe (3)...... 1996 496,923 1,000,000 0/0 149,692(4)
Chief Executive
Officer,
MFS
John W. Sidgmore (3).... 1996 283,577 494,443 0/0 2,182,654(5)
President and Chief
Operating Officer,
MFS
Scott D. Sullivan....... 1996 375,000 500,000 100,000/0 4,500(2)
Chief Financial Officer 1995 294,000 225,000 240,000/0 4,500
and Secretary 1994 147,584 250,000 210,000/0 4,500
Roy A. Wilkens.......... 1996 450,000 450,000 100,000/0 1,004,500(6)
President and Chief 1995 427,500 300,000 400,000/0 1,004,500
Executive Officer,
WilTel 1994 0 0 0/0 0
</TABLE>
- - - --------
(1) Includes $1,687,500 paid under the Annual Plan and $650,000 paid under the
Special Bonus Plan. The Compensation and Stock Option Committee awarded to
Mr. Ebbers the $1,000,000 maximum amount allowed under the Special Bonus
Plan for 1996, but Mr. Ebbers accepted only $650,000 of such award.
(2) Matching contributions to the Company's 401(k) Plan.
(3) Represents compensation paid to these individuals as executive officers of
MFS and/or UUNET.
(4) Matching contributions to MFS' Deferred Stock Purchase Plan.
(5) Pursuant to option and stock purchase agreements between Mr. Sidgmore and
UUNET, upon consummation of MFS' merger with UUNET (the "UUNET
Acquisition"), the lapse of repurchase rights accelerated with respect to
50% of outstanding shares issued upon option exercise subject to a right
of repurchase as of the effective date of the UUNET Acquisition. As a
result of such acceleration, Mr. Sidgmore incurred an excise tax pursuant
to Section 4999 of the Internal Revenue Code of 1986 and corresponding
provisions of applicable state law. UUNET paid an amount (the "Transfer")
sufficient to pay (i) the excise tax and (ii) any and all federal, state
and local taxes payable with respect to the receipt of the Transfer. The
amount that UUNET paid to Mr. Sidgmore in this connection was $2,182,654.
See "Employment Agreements and Termination of Employment Arrangements."
(6) Includes $1,000,000 received by Mr. Wilkens in connection with the
termination of certain contract rights with Williams Telecommunications
Group, Inc. and $4,500 in matching contributions to the Company's 401(k)
Plan. In connection with the WilTel Acquisition, the Company assumed the
employment agreement among Mr. Wilkens, Williams and Williams
Telecommunications Group, Inc. (the "Agreement"). Mr. Wilkens resigned
from the Company in January 1997, at which time the Agreement was
terminated.
15
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning stock option grants
made in the fiscal year ended December 31, 1996, to the individuals named in
the Summary Compensation Table. There were no grants of SARs to said
individuals during the year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- - - -----------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED FOR OPTION TERM(3)
OPTIONS TO EMPLOYEES EXERCISE OR BASE EXPIRATION ---------------------
NAME GRANTED (#)(1) IN FY PRICE ($/SH)(2) DATE 5% ($) 10% ($)
---- -------------- --------------- ---------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Bernard J. Ebbers....... 1,200,000 20.8% 17.875 01/01/06 13,489,790 34,185,776
James Q. Crowe.......... -- -- -- -- -- --
John W. Sidgmore........ -- -- -- -- -- --
Scott D. Sullivan....... 100,000 1.7% 17.875 01/01/06 1,124,149 2,848,815
Roy A. Wilkens.......... 100,000 1.7% 17.875 01/01/06 1,124,149 2,848,815
</TABLE>
- - - --------
(1) The options terminate on the earlier of their expiration date or ten years
after grant or, generally, immediately on termination for reasons other
than retirement, disability, death or without cause; three months after
termination of employment on retirement; 12 months after termination for
disability, death or without cause; or upon the consummation of a
specified change of control transaction.
Mr. Ebbers' option becomes exercisable in three equal annual installments
beginning January 1, 1997 through January 1, 1999. Mr. Sullivan's option
becomes exercisable January 1, 1999. Pursuant to Mr. Wilkens' separation
agreement with the Company, and assuming his compliance with the terms
thereof, 50,000 shares under such option will vest and become exercisable
on January 31, 1998. Additionally, Mr. Wilkens' options may be exercised
through February 10, 1998.
(2) The exercise price may be paid in cash or, in the discretion of the
Company's Compensation and Stock Option Committee, by shares of Common
Stock already owned or to be issued pursuant to the exercise, valued at
the closing quoted selling price on the date of exercise, or a combination
of cash and Common Stock.
(3) The indicated 5% and 10% rates of appreciation are provided to comply with
Securities and Exchange Commission regulations and do not necessarily
reflect the views of the Company as to the likely trend in the stock
price. Actual gains, if any, on stock option exercises and the sale of
Common Stock holdings will be dependent on, among other things, the future
performance of the Common Stock and overall stock market conditions. There
can be no assurance that the amounts reflected in this table will be
achieved.
16
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The following table sets forth information concerning the number and value
realized as to options exercised during 1996 and options held at December 31,
1996, by the individuals named in the Summary Compensation Table and the value
of those options held at such date. The options exercised were not exercised
as SARs and no SARs were held at year end. All options had exercise prices
lower than the fair market value of the Common Stock on December 31, 1996
("in-the-money" options).
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FY-END (#) FY-END ($)(2)
ACQUIRED ON VALUE --------------------------- -------------------------
NAME EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bernard J. Ebbers....... -- -- 1,075,696 1,800,000 18,172,348 17,362,500
James Q. Crowe.......... 1,680,000 34,280,400 937,701(3) 872,562 21,748,568 20,237,767
John W. Sidgmore........ -- -- 35,371 -- 734,774 --
Scott D. Sullivan....... -- -- 273,028(4) 300,000 4,497,392 3,331,250
Roy A. Wilkens (5)...... -- -- 400,000 50,000 6,287,000 409,375
</TABLE>
- - - --------
(1) Based upon the difference between the closing price on the date of
exercise and the option exercise price.
(2) Based upon a price of $26.0625 per share, which was the closing price of
Common Stock on December 31, 1996.
(3) Subsequent to December 31, 1996, Mr. Crowe exercised his then exercisable
options and sold the underlying shares of Common Stock.
(4) Subsequent to December 31, 1996, Mr. Sullivan exercised his then
exercisable options and sold the underlying shares of Common Stock.
(5) Giving effect to the provisions of Mr. Wilkens' separation agreement.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires directors,
executive officers and 10% or greater shareholders of the Company ("Reporting
Persons") to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of equity securities of the
Company. To the Company's knowledge, based solely on its review of the copies
of such reports furnished to the Company and written representations that
certain reports were not required, during the year ended December 31, 1996,
all Section 16(a) filing requirements applicable to Reporting Persons were
complied with, except that Mr. Galesi filed one late report covering four
transactions.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of December 31, 1996, Messrs. Bradbury, Crowe and Sidgmore held 52,500,
200,000 and 25,000 MFS Shareworks Plus Awards, respectively. Such awards were
paid out on January 9, 1997 in connection with the MFS Merger. The value
received from such awards was $6.4 million, $20.3 million and $1.0 million,
respectively.
Additionally, in accordance with the WorldCom/MFS 1992 Stock Option Plan,
upon the termination of Mr. Bradbury as Chief Financial Officer of MFS on
February 28, 1997, all of Mr. Bradbury's options to purchase an aggregate of
749,725 shares of Common Stock at an exercise price of $2.869 per share were
immediately vested. Mr. Bradbury subsequently exercised all such options and
sold the underlying shares of Common Stock.
17
<PAGE>
Prior to the MFS Merger, WorldCom and MFS were parties to certain
interconnection or other service agreements entered into with each other and
certain of their affiliates in the ordinary course of their businesses. In
fiscal 1996, WorldCom received revenues from MFS and/or UUNET of $88.4
million. Each of WorldCom, MFS and UUNET believe that the terms and conditions
of such interconnection or other services agreements were no less favorable to
WorldCom, MFS or UUNET than those that would have been available to WorldCom,
MFS or UUNET in comparable, arm's-length transactions at the dates of such
agreements.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the MFS Merger, the Company's Compensation and Stock Option
Committee was composed of Stiles A. Kellett, Jr. (Chairman), Silvia Kessel and
Lawrence C. Tucker. Subsequent to the MFS Merger, the members of the Company's
Compensation and Stock Option Committee have been Stiles A. Kellett, Jr.
(Chairman), Walter Scott, Jr., Lawrence C. Tucker and Michael B. Yanney.
ITEM 2. APPROVAL OF THE WORLDCOM, INC. PERFORMANCE BONUS PLAN
Under Section 162(m) of the Internal Revenue Code, the Company generally may
not deduct for federal income tax purposes certain employee compensation that
would otherwise be deductible to the extent that such compensation exceeds
$1.0 million for any such individual in any fiscal year. However, compensation
that is "performance based" (as defined in Section 162(m)) is not subject to
the deductibility limitations.
The Compensation and Stock Option Committee of the Company's Board of
Directors determined to develop a performance bonus plan for implementation
beginning in 1997, in addition to the existing Annual Plan approved by the
shareholders in 1994, the Special Bonus Plan approved by the shareholders in
1996 which is scheduled to expire after 1998, or any other plan of the
Company. Accordingly, the Committee has approved the adoption of the WorldCom,
Inc. Performance Bonus Plan (the "Performance Bonus Plan") for certain
executive officers of the Company and has recommended that the Performance
Bonus Plan be submitted to the shareholders for adoption. It is anticipated
that, if approved by the shareholders, the Performance Bonus Plan will be used
in lieu of the Annual Plan for 1998 and subsequent years. The Performance
Bonus Plan is intended to qualify as a "performance-based" compensation plan
for purposes of Section 162(m). In the event shareholders do not approve the
Performance Bonus Plan, the plan will not be effective. However, the
Compensation and Stock Option Committee may consider an alternative program to
provide designated executives with additional incentive compensation based on
performance. Without shareholder approval, any alternative incentive
compensation would not qualify for the exclusion from the $1.0 million
compensation limit under Section 162(m).
Cash bonuses under the Performance Bonus Plan are predicated on the
achievement by the Company of one or more quantitative performance goals.
Subject to attainment of the specified performance goal(s) and the limitation
with respect to the maximum bonus payable under the Performance Bonus Plan,
cash awards under the Performance Bonus Plan will be made based on the
Committee's subjective assessment of individual contributions. The Committee
believes the Performance Bonus Plan will enable the Company to attract,
motivate, reward and retain executives to promote the financial performance
and growth of the Company, without limiting the Company's ability to deduct
compensation awarded under the Performance Bonus Plan for federal income tax
purposes.
A copy of the Performance Bonus Plan is attached as Exhibit A to this Proxy
Statement. Following is a description of the material features of the
Performance Bonus Plan, which is qualified in its entirety by reference to
Exhibit A.
Administration. The Performance Bonus Plan will be administered by the
Compensation and Stock Option Committee of the Company, such other committee
as may be designated by the Board of Directors of the Company or a
subcommittee of the committee involved as may be designated by said committee
(hereinafter
18
<PAGE>
such committee or subcommittee, as applicable, is referred to as the
"Committee"). The Committee will be comprised solely of two or more outside
directors of the Company (as defined in Section 162(m)(4)(C)(i) of the
Internal Revenue Code and the regulations thereunder). The Committee, subject
to the approval of the full Board of Directors if so determined by the
Committee or the Board of Directors, has sole and complete discretion and
authority with respect to the Performance Bonus Plan and its application. The
Committee is currently comprised of Stiles A. Kellett, Jr. (Chairman), Walter
Scott, Jr., Lawrence C. Tucker and Michael B. Yanney.
Participants. Participants in the Performance Bonus Plan include the Chief
Executive Officer and such other executive officers of the Company as the
Committee determines (the "Executive Group"). For 1997, the Committee has
determined that the Executive Group shall consist of the Chief Executive
Officer and the Chief Financial Officer of the Company. Over time, based on
its experience with the Performance Bonus Plan and compensation-related
considerations, the Committee may expand the number of participants to include
other executive officers of the Company. The Company currently has four
executive officers, including the Chief Executive Officer and the Chief
Financial Officer. Unless otherwise determined by the Committee, in order to
be eligible for a bonus under the Performance Bonus Plan, participants must be
employed by the Company at the time of the Committee's certification to the
Board that the performance goal(s) have been met.
Determination of Bonus. The award of a bonus under the Performance Bonus
Plan in any given year is conditioned on the achievement by the Company of one
or more specific performance goals for such year or shorter period as
determined by the Committee. Each year, not later than the latest date
permissible under Section 162(m) of the Internal Revenue Code, the Committee
will establish a particular performance goal or goals (which may differ for
each participant) based on one or more of the following measures of the
Company's financial performance for such year or shorter period selected by
the Committee (on an actual or pro forma basis): (i) return on net assets,
(ii) return on equity, (iii) revenues, (iv) return on revenues, (v) cash flow,
(vi) the market value of the Common Stock, (vii) earnings and (viii) billings
by the Company under one or more service agreements with its customer(s).
After the end of each year or period, the Committee will determine whether the
particular performance target(s) established for such year or period have been
satisfied as derived from the relevant financial statements (prepared in
accordance with generally accepted accounting principles consistently applied
in accordance with past accounting practices) or, in the case of customer
billings, from invoices sent by the Company. The Committee believes that the
award of bonuses based on any of the performance criteria provided in the
Performance Bonus Plan will further the Company's philosophy that executive
compensation be aligned with the financial interests of the Company's
shareholders.
Subject to the attainment of the performance goal(s) established by the
Committee, the Committee has discretion to determine the specific amount of
any award made under the Performance Bonus Plan for each participant, up to
the maximum bonus for such participant.
The Committee has established a specific performance goal for 1997 based on
the attainment by the Company of a specified percentage increase in
consolidated pro forma gross revenues. In addition, the Committee has
determined that if the specified performance target is met, the maximum bonus
with respect to 1997 will be $13.0 million for the Chief Executive Officer and
$3.5 million for the Chief Financial Officer. After certifying that the goal
has been met, the Committee will determine whether a participant will receive
his maximum bonus or some lesser amount (or no bonus at all).
The Committee will establish a maximum bonus amount for each participant in
the Performance Bonus Plan with respect to each year after 1997. The maximum
such bonus for any participant shall be the greater of $1.0 million or 150% of
the aggregate amount of bonuses awarded for the prior year to such
participant, excluding any bonus under the Performance Bonus Plan with respect
to 1997, or, if the person did not hold the relevant office during the entire
prior year, the greater of $1.0 million or 150% of the aggregate amount of
bonuses awarded for the prior year, excluding any bonus under the Performance
Bonus Plan with respect to 1997, to the person(s) holding such office during
the prior year.
19
<PAGE>
If and as determined by the Committee, participants may elect to receive, in
accordance with rules and regulations established from time to time by the
Committee, shares of Common Stock and/or options to acquire shares of Common
Stock in lieu of some or all of any bonus otherwise to be awarded under the
Performance Bonus Plan. The Company may give a participant the right to defer,
in accordance with rules and regulations established from time to time by the
Committee, the receipt of some or all such participant's bonus under the
Performance Bonus Plan.
Termination and Amendment. Subject to adoption of the Performance Bonus Plan
by the shareholders, the Performance Bonus Plan will be in effect until
terminated by the Committee, which it may do at any time. The Committee also
may amend the Performance Bonus Plan from time to time, with or without
notice. Section 162(m) currently requires shareholder approval of certain
material amendments to the Performance Bonus Plan, such as a change in the
method of determining the maximum amount of the participant's bonus and a
change in the class of persons eligible to participate in the Performance
Bonus Plan.
* * * * *
The Committee believes that the Performance Bonus Plan establishes
appropriate objective guidelines for establishing special incentive
compensation for certain of the Company's executive officers. As noted in the
"Report of Compensation and Stock Option Committee on Executive Compensation"
above, the Committee will continue to consider qualitative or other factors
not included in the Performance Bonus Plan in making executive compensation
decisions, including base salary and annual and long-term incentive award
determinations.
A majority of the affirmative votes cast by the holders of the shares of
Common Stock, Series A Preferred Stock and Series B Preferred Stock, voting as
a single class, represented in person or by proxy at a meeting where a quorum
is present, is required to adopt the Performance Bonus Plan. A majority of the
votes entitled to be cast in the election constitutes a quorum. Shares voted
to "abstain" will be considered to be present for purposes of establishing a
quorum but will have no effect on the vote. Shares as to which a broker
indicates it lacks authority to vote on Item 2 and which are not voted will be
considered not present for purposes of determining the existence of a quorum
and the requisite vote.
The Board of Directors recommends a vote "FOR" adoption of the Performance
Bonus Plan.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP ("Arthur Andersen") has been selected as the Company's
independent accountant for 1997. Representatives of Arthur Andersen are
expected to attend the annual meeting and will have the opportunity to make a
statement, if they so desire, and respond to appropriate questions from
shareholders.
REPORT ON FORM 10-K
A copy of the Company's Report on Form 10-K for the period ended December
31, 1996, filed with the Securities and Exchange Commission (including related
financial statements and schedules) is available to shareholders without
charge, upon written request to Scott D. Sullivan, Secretary, WorldCom, Inc.,
515 East Amite Street, Jackson, Mississippi 39201-2702.
FUTURE PROPOSALS OF SECURITY HOLDERS
All proposals of security holders intended to be presented at the 1998
annual meeting of shareholders must be received by the Company not later than
December 22, 1997, for inclusion in the Company's 1998 proxy statement and
form of proxy relating to the 1998 annual meeting. Upon timely receipt of any
such proposal, the Company will determine whether or not to include such
proposal in the proxy statement and proxy in accordance with applicable
regulations and provisions governing the solicitation of proxies.
20
<PAGE>
Under the Bylaws of the Company, shareholders entitled to vote in the
election of directors may nominate one or more persons for election as
directors only if written notice of such shareholder's intent to make such
nomination or nominations has been given either by personal delivery or by
United States mail, postage prepaid, to the Secretary of the Company not later
than 90 days prior to the anniversary date of the immediately preceding annual
meeting. Such notice must set forth: (a) the name and address of the
shareholder who intends to make the nomination and of the person or persons to
be nominated; (b) a representation that the shareholder is a holder of record
of stock of the Company entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) a description of all arrangements or
understandings between the shareholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder; (d) such other information
regarding each nominee proposed by such shareholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission; and (e) the consent of each nominee to
serve as a director of the Company if so elected.
OTHER BUSINESS
The Company knows of no business to be brought before the annual meeting
other than as set forth above. If other matters properly come before the
meeting, it is the intention of the persons named in the solicited proxy to
vote the proxy on such matters in accordance with their best judgment.
MISCELLANEOUS
The Company will pay the cost of soliciting proxies in connection with the
1997 annual meeting. In addition to solicitation by use of the mails, certain
directors, officers and regular employees of the Company may solicit the
return of proxies by telephone, facsimile or other means, or personal
interview, and may request brokerage houses and custodians, nominees and
fiduciaries to forward soliciting material to their principals and will agree
to reimburse them for their reasonable out-of-pocket expenses. In addition,
the Company may retain MacKenzie Partners to assist with the solicitation of
proxies, the estimated cost of which would be approximately $7,500, plus
expenses.
Shareholders are urged to mark, sign and send in their proxies without
delay.
By Order of the Board of Directors
Scott D. Sullivan
Secretary
Jackson, Mississippi
April 21, 1997
21
<PAGE>
EXHIBIT A
WORLDCOM, INC.
PERFORMANCE BONUS PLAN
I. PURPOSE.
The WorldCom, Inc. Performance Bonus Plan (the "Plan") is established to
provide a bonus for certain executive personnel who are instrumental in the
profitability of WorldCom, Inc. (the "Company"). Any bonus under the Plan
shall be in addition to any other bonus payable to a participant. The efficacy
of this Plan and the payment of any bonus hereunder are expressly contingent
on approval of the Plan by the shareholders of the Company.
II. ADMINISTRATION.
The Plan is administered by the Compensation and Stock Option Committee of
the Company, such other committee as may be designated by the Board of
Directors of the Company or a subcommittee of the committee involved as may be
designated by said committee (hereinafter such committee or subcommittee, as
applicable, is referred to as the "Committee"). The Committee shall be
comprised solely of two or more outside directors of the Company (as defined
in Section 162(m)(4)(C)(i) of the Internal Revenue Code of 1986, as amended,
and the regulations thereunder (the "Code")). The Committee, subject to the
approval of the full Board of Directors if so determined by the Committee or
the Board of Directors, has sole and complete discretion and authority with
respect to the Plan and its application.
III. ELIGIBILITY FOR PARTICIPATION.
The Plan establishes a participating group of eligible employees comprised
of the Chief Executive Officer of the Company and such other executive
officers of the Company, if any, as the Committee may determine as hereinafter
provided (the "Executive Group"). The Committee, in its sole discretion, shall
determine the identity of eligible employees assigned to the Executive Group
(hereinafter a "Participant"). Unless otherwise determined by the Committee,
in order to be eligible to participate in this Plan, a person must be employed
by the Company at the time of the Committee's certification described in
Article IV, below.
IV. DETERMINATION OF BONUS.
The award of a bonus to a Participant under the Plan for a particular period
is predicated on the achievement by the Company of one or more performance
goals for such period, as determined by the Committee. Not later than the
latest date permissible under Section 162(m) of the Code, for each period for
which a bonus may be paid, the Committee shall establish in writing (a) a
maximum bonus for each Participant, which shall not exceed (i) with respect to
calendar year 1997, $13,000,000 for the Chief Executive Officer or $3,500,000
for any other Participant, or (ii) with respect to any year after calendar
year 1997, the greater of $1,000,000 or 150% of the aggregate amount of
bonuses awarded for the prior year to such Participant excluding any bonus
under the Plan with respect to calendar year 1997, or, if the Participant did
not hold the relevant office during the entire prior year, the greater of
$1,000,000 or 150% of the aggregate amount of bonuses awarded for the prior
year to the person(s) holding such office during the prior year excluding any
bonus under the Plan with respect to calendar year 1997, and (b) one or more
performance goals for such period which must be met as a precondition to the
payment of a bonus. For purposes of determining the maximum bonus in
accordance herewith, the value of any shares of common stock of the Company or
options to acquire such common stock (as established by the rules and
regulations of the Committee as herein provided) received pursuant to an
election contemplated hereby in lieu of any bonus otherwise to be awarded
under the Plan and/or the amount of any bonus the receipt of which is deferred
as herein provided shall be considered a bonus awarded for the year as to
which such election or deferral
A-1
<PAGE>
relates. Such goal(s), which may differ for each Participant, shall be based
on one or more of the following measures of the Company's performance (on an
actual or pro forma basis):
1. Return on net assets,
2. Return on equity,
3. Revenues,
4. Return on revenues,
5. Cash flow,
6. Market value of the common stock of the Company,
7. Earnings, and/or
8. Billings under one or more service agreements with customer(s).
As soon as administratively feasible after the end of each relevant period,
the Committee shall convene to determine whether, in fact, the previously
established performance goal(s) has/have been met for such period. The
Committee shall certify in writing to the full Board of Directors whether the
performance goal(s) has/have been met for such period prior to payment of any
bonus.
If the Committee determines that the performance goal(s) has/have been met
for such period, each Participant may receive a bonus which shall not exceed
the maximum amount established by the Committee.
All determinations of assets, revenues, earnings, cash flow and equity shall
be derived from financial statements prepared in accordance with generally
accepted accounting principles consistently applied in accordance with past
accounting practices and all determinations of billings shall be derived from
invoices sent by the Company.
V. AMOUNT AND DISTRIBUTION OF THE BONUS.
After certifying that the performance goal or goals for a particular period
have been met, the Committee will then decide whether each Participant will
receive his or her maximum bonus or some lesser amount (or no bonus at all).
Except as otherwise provided herein, the Committee's decision regarding the
amount of a Participant's bonus shall be made in the sole discretion of the
Committee.
Unless otherwise determined by the Committee or deferred as hereinafter
referenced, distribution of bonuses determined under the preceding paragraph
shall be made as soon as practicable after the Committee's certification
described in Article IV, above; provided that any bonus hereunder with respect
to calendar year 1997 shall not be payable until on or after September 30,
1997, as the period of service for such bonus shall begin on January 1, 1997,
and not end until September 30, 1997. All bonuses hereunder shall be payable
in cash, subject to any right to elect otherwise as hereinafter referenced.
If and as determined by the Committee, a Participant may elect to receive,
in accordance with rules and regulations established from time to time by the
Committee, shares of common stock of the Company and/or options to acquire
such shares of common stock in lieu of some or all of any bonus otherwise to
be awarded under the Plan. The Company may give a Participant the right to
defer, in accordance with rules and regulations established from time to time
by the Committee, the receipt of some or all of any bonus awarded under the
Plan.
VI. CONTINUITY OF THE PLAN.
Although it is the present intention of the Company to continue the Plan in
effect for an indefinite period of time, the Company reserves the right to
terminate the Plan in its entirety at any time, with or without notice, or to
amend the Plan as it exists from time to time, with or without notice, through
resolution of the Committee.
A-2
<PAGE>
VII. MISCELLANEOUS PROVISIONS.
1. Nothing contained herein will confer upon any Participant the right to be
retained in the service of the Company nor limit the right of the Company to
discharge or otherwise deal with any Participant without regard to the
existence of the Plan.
2. The Plan shall at all times be entirely unfunded and no provision shall
at any time be made with respect to segregating assets of the Company for
payment of any bonuses hereunder. No Participant or any other person shall
have any interest in any particular assets of the Company by reason of the
right to receive a bonus under the Plan and any such Participant or any other
person shall have only the rights of a general unsecured creditor of the
Company with respect to any rights under the Plan.
3. The Plan shall be binding upon and inure to the benefit of the Company
and its successors and assigns.
4. The Plan, and the rights and obligations of the parties hereunder, shall
be governed by and construed in accordance with the internal laws of the State
of Mississippi.
IN WITNESS WHEREOF, the Compensation and Stock Option Committee of the
Company has adopted this Plan as of March 5, 1997.
WORLDCOM, INC. COMPENSATION AND STOCK
OPTION COMMITTEE
By: /s/ Stiles A. Kellett, Jr.
-----------------------
Stiles A. Kellett, Jr., Chairman
A-3
<PAGE>
PROXY/VOTING INSTRUCTION CARD
WORLDCOM, INC.
515 EAST AMITE STREET
JACKSON, MISSISSIPPI 39201-2702
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS, MAY 22, 1997
The undersigned hereby (i) with respect to all shares of Common Stock and
Series B Convertible Preferred Stock of WorldCom, Inc. (the "Company") which the
undersigned may be entitled to vote, constitutes and appoints Bernard J. Ebbers
and Scott D. Sullivan, and each of them, with full power of substitution, the
true and lawful attorneys in fact, agents and proxies of the undersigned and
(ii) with respect to all shares of Series A 8% Cumulative Convertible Preferred
Stock of the Company (or portions thereof) which the undersigned, as holder of
depositary shares thereof (the "Series A Depositary Shares"), may be entitled to
direct the voting of, directs The Bank of New York, as Depositary, in each case,
to vote at the Annual Meeting of Shareholders of WorldCom, Inc., to be held on
Thursday, May 22, 1997, commencing at 10:00 a.m. local time, at the corporate
office of the Company, 515 East Amite Street, Jackson, Mississippi 39201-2702,
and at any and all adjournments or postponements thereof, according to the
number of votes which the undersigned would possess if personally present, for
the purposes of considering and taking action upon the following, as more fully
set forth in the Proxy Statement of the Company dated April 21, 1997.
THIS PROXY/VOTING INSTRUCTION CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED
IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED OR, WITH RESPECT TO SERIES A DEPOSITARY
SHARES, THIS VOTING INSTRUCTION CARD WILL BE DEEMED AN INSTRUCTION TO VOTE, FOR
---
THE ELECTION OF ALL NOMINEES UNDER PROPOSAL 1, FOR PROPOSAL 2 AND IN THE
PROXIES' DISCRETION WITH RESPECT TO PROPOSAL 3.
WorldCom, Inc.
Post Office Box 11284
New York, NY 10203-0284
(Continued, and to be signed and dated on the reverse side.)
<PAGE>
1. ELECTION OF DIRECTORS
[_] FOR all nominees [_] WITHHOLD AUTHORITY to vote [_] *EXCEPTIONS
listed below for all nominees listed below
Nominees: Carl J. Aycock, Max E. Bobbitt, James Q. Crowe, Bernard J. Ebbers,
Francesco Galesi, Richard R. Jaros, Stiles A. Kellett, Jr., David C.
McCourt, John A. Porter, Walter Scott, Jr., John W. Sidgmore, Scott
D. Sullivan, Lawrence C. Tucker, and Michael B. Yanney
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPTIONS" BOX AND WRITE THE NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
*Exceptions
__________________________________________________________________
2. Proposal to approve the Company's Performance Bonus Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
3. In their discretion with respect to such other business as properly may come
before the meeting or any adjournments or postponements thereof.
Change of Address or
Comments Mark Here [_]
- - - -------------------------------------------------------------------------------
Please sign exactly as name(s) appear on
this proxy/voting instruction card. When
shares are held by joint tenants, both
should sign. When signing as attorney-in-
fact, executor, administrator, personal
representative, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
DATED , 19
---------------------------- --
SIGNED
---------------------------------
---------------------------------------
SIGN, DATE AND RETURN THE PROXY/VOTING INSTRUCTION CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
VOTES MUST BE INDICATED [X]
(X) IN BLACK OR BLUE INK.
<PAGE>
WORLDCOM, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS MAY 22, 1997
The enclosed material relates to shares of WORLDCOM, INC. credited to your
account in the LDDS WORLDCOM 401(k) Plan (the "Plan") on April 3, 1997. As
Trustee of the Plan, Merrill Lynch Trust Company will vote your Plan shares in
accordance with your instructions.
The enclosed "proxy" will be used solely as your instructions to Merrill Lynch
Trust Company as to how your Plan shares should be voted. Please execute and
return your instructions to the Trustee as soon as possible in the postage paid
envelope included.
MERRILL LYNCH TRUST COMPANY
<PAGE>
WORLDCOM, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS MAY 22, 1997
The enclosed material relates to shares of WORLDCOM, INC. credited to your
account in the MFS Communications Co. 401(A) Shareworks Grant Plan (the "Plan")
on April 3, 1997. As Trustee of the Plan, Merrill Lynch Trust Company will vote
your Plan shares in accordance with your instructions.
The enclosed "proxy" will be used solely as your instructions to Merrill Lynch
Trust Company as to how your Plan shares should be voted. Please execute and
return your instructions to the Trustee as soon as possible in the postage paid
envelope included.
MERRILL LYNCH TRUST COMPANY
