<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
MCI WORLDCOM, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No 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:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(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):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] 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:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
Preliminary Copy
515 EAST AMITE STREET
JACKSON, MISSISSIPPI 39201-2702
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Jackson, Mississippi
April 23, 1999
The annual meeting of the shareholders of MCI WORLDCOM, Inc., a Georgia
corporation (the "Company"), will be held on Thursday, May 20, 1999, at 10:00
a.m. local time, at 500 Clinton Center Drive, Clinton, Mississippi, for the
purposes of:
1. electing a Board of seventeen (17) directors;
2. considering and acting upon a proposal to amend the Company's Second
Amended and Restated Articles of Incorporation, as amended, to increase
the number of authorized shares of common stock, par value $.01 per
share, from 2,500,000,000 to 5,000,000,000;
3. considering and acting upon a proposal to approve the Company's 1999
Stock Option Plan; and
4. 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 and Series B
Convertible Preferred Stock at the close of business on April 1, 1999, 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 1998
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> 3
Preliminary Copy
MCI 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 MCI
WORLDCOM, Inc., a Georgia corporation ("MCI WorldCom" or the "Company"), for use
at the annual meeting of the Company's shareholders to be held at 500 Clinton
Center Drive, Clinton, Mississippi, on Thursday, May 20, 1999, 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 1, 1999
(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 proxy
statements and proxies to shareholders will occur on or about April 23, 1999.
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 14, 1998, the Company acquired MCI Communications
Corporation ("MCI"), pursuant to the merger (the "MCI Merger") of MCI with and
into a wholly owned subsidiary of the Company. Immediately prior to September
15, 1998, the Company was named WorldCom, Inc. ("WorldCom").
COMPANY SECURITIES
On the Record Date, there were issued and outstanding _____________
shares of common stock of the Company (the "Common Stock") and __________ shares
of Series B Convertible Preferred Stock of the Company (the "Series B Preferred
Stock").
The holders of record of shares of Common Stock as of the close of
business on the Record Date 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 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 B Preferred Stock are entitled
to vote on the basis of one vote per such share held. The shares of Series B
Preferred Stock do not carry cumulative voting rights. The presence, either in
person or by proxy, of the holders of record of shares representing a majority
of the votes entitled to be cast on a matter by the voting group is necessary to
constitute a quorum of that voting group for action on that matter. Once a share
is represented for any purpose at a meeting, the holder is deemed present for
quorum purposes for the remainder of the meeting. Abstentions and broker
non-votes will be counted for purposes of determining whether a quorum is
present.
<PAGE> 4
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 2000 Annual Meeting of the
Company's shareholders and until their successors have been duly
elected and qualified;
(2) FOR the amendment of Article Four, Section A, of the Company's Second
Amended and Restated Articles of Incorporation, as amended (the
"Articles of Incorporation"), to increase the number of authorized
shares of Common Stock from 2,500,000,000 to 5,000,000,000;
(3) FOR the approval of the Company's 1999 Stock Option Plan; and
(4) in their discretion on the transaction of such other business as
properly may come before the meeting or any adjournments or
postponements thereof.
Shares of Common Stock held in the MCI ESOP and 401(k) Plan and Western
Union International, Inc. 401(k) Plan for Collectively Bargained Employees (the
"MCI Plans"), will be voted by Mellon Bank, N.A. ("Mellon") as trustee of the
MCI Plans. Participants in the MCI Plans should indicate their voting
instructions for each action to be taken under proxy. All instructions must be
received prior to May 15, 1999 in order to be counted. All voting instructions
from MCI Plan participants will be kept confidential. MCI Plan shares will not
be voted if the MCI Plan participant fails to provide voting instructions for
any of the actions to be taken under proxy.
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>
Name and Address of Beneficial Amount and Nature of Existing
Owner Beneficial Ownership(1) Percent of Class(1)
------------------------------ ----------------------------- -------------------
<S> <C> <C>
FMR Corp. 150,448,738(2) 8.1%
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
- -----------------------------
(1) Based upon _____________ shares of Common Stock issued and outstanding
as of the Record Date.
(2) Based upon shares owned as of December 31, 1998, as provided by FMR
Corp. on its Statement on Schedule 13G. Edward C. Johnson 3d, Chairman
of FMR Corp., together with various trusts for the benefit of Johnson
family members, form a controlling group with respect to FMR Corp.
Amount includes 139,402,835 shares beneficially owned by Fidelity
Management & Research Company ("Fidelity"), a wholly owned subsidiary
of FMR Corp., as a result of acting as investment adviser to various
investment companies and as a result of acting as sub-advisor to
Fidelity American Special Situations Trust ("FASST"). The investment
advisor of FASST is Fidelity Investment Services Limited, a subsidiary
of Fidelity International Limited ("FIL"). Each
2
<PAGE> 5
of Edward C. Johnson 3d, FMR Corp., through its control of Fidelity,
and the funds has sole power to dispose of these 139,402,835 shares.
Neither FMR Corp., nor Edward C. Johnson 3d has the sole power to vote
or direct the voting of the shares owned directly by the Fidelity
funds, which power resides with the funds' Boards of Trustees. Fidelity
carries out the voting of the shares under written guidelines
established by the funds' Boards of Trustees. FIL, FMR Corp., through
its control of Fidelity, and FASST each has sole power to vote and
dispose of the 27,000 shares held by FASST. Edward C. Johnson 3d and
FMR Corp., each has sole dispositive power over 8,800,976 shares and
sole power to vote or direct the voting of 6,773,605 shares, and no
power to vote or to direct the voting of 2,027,371 shares of Common
Stock owned by institutional accounts as reported above. As a result of
its serving as investment manager of institutional account(s), FMR
Corp., through its control of Fidelity Management Trust Company, has
voting and dispositive power over 8,800,976 shares of Common Stock.
FIL, Pembroke Hall, 42 Crownlane, Hamilton, Bermuda, has voting and
dispositive power over 2,244,927 shares of Common Stock, which includes
27,000 shares owned by FASST, as a result of its serving as investment
adviser to various non-United States investment companies and certain
institutional investors.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of Common
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 MCI WorldCom. No person listed on the following table is the beneficial owner
of any shares of Series B Preferred Stock. Each director or executive officer
has sole voting and investment power over the shares listed opposite his or her
name except as set forth in the footnotes hereto.
<TABLE>
<CAPTION>
Number of Shares
Name of Beneficial Owner Beneficially Owned (1) Percent of Class (1)
- --------------------------------------------------- --------------------------- --------------------
<S> <C> <C>
Clifford L. Alexander, Jr.......................... 0 *
James C. Allen..................................... 281,929(2) *
Judith Areen....................................... 54,459(3) *
Carl J. Aycock..................................... 692,956(4) *
Max E. Bobbitt..................................... 261,292(5) *
Stephen M. Case.................................... 5,000(6) *
Bernard J. Ebbers.................................. 17,139,195(7) *
Francesco Galesi................................... 3,198,848(8) *
Stiles A. Kellett, Jr.............................. 4,051,816(9) *
Gordon S. Macklin.................................. 42,292(10) *
John A. Porter..................................... 4,210,488(11) *
Timothy F. Price................................... 338,247(12) *
Bert C. Roberts, Jr................................ 667,709(13) *
John W. Sidgmore................................... 3,039,946(14) *
Scott D. Sullivan.................................. 870,237(15) *
Gerald H. Taylor................................... 214,427(16) *
Lawrence C. Tucker................................. 43,268(17) *
Juan Villalonga.................................... 0 *
All Directors and Current Executive
Officers as a Group (18 persons)................. 35,112,109(12) 1.9%
</TABLE>
- ---------------------
* Less than one percent.
(1) Based upon [____________] 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.
3
<PAGE> 6
(2) Includes 684 shares owned by Mr. Allen's spouse, as to which beneficial
ownership is disclaimed; and 13,372 shares held in a revocable trust as
to which Mr. Allen is a co-trustee; and 5,000 shares purchasable upon
exercise of options.
(3) Includes 49,756 shares purchasable upon exercise of options. All of the
shares beneficially owned by Ms. Areen were obtained upon consummation
of the MCI Merger.
(4) Includes 5,576 shares owned by Mr. Aycock's spouse; 60,780 shares
purchasable upon exercise of options; and 2,208 shares held as
custodian for children.
(5) Includes 43,512 shares purchasable upon exercise of options; and
108,890 shares as to which Mr. Bobbitt shares voting and investment
power with his spouse.
(6) Consists of 5,000 shares purchasable upon exercise of options.
(7) Includes 23,701 shares held as custodian for children; and 4,075,696
shares purchasable upon exercise of options.
(8) Includes 2,985,336 shares owned by Rotterdam Ventures, Inc., of which
Mr. Galesi is sole shareholder; and 43,512 shares purchasable upon
exercise of options.
(9) Includes 16,000 shares owned by Mr. Kellett's spouse; 1,900,000 shares
owned by family partnerships, as to which Mr. Kellett is the general
partner; 40,500 shares owned by a partnership as to which Mr. Kellett
is the general partner; 85,816 shares purchasable upon exercise of
options; and 9,500 shares purchasable upon exercise of options held by
Mr. Kellett's spouse.
(10) Consists of 42,292 shares owned by a family trust as to which Mr.
Macklin is sole trustee and beneficiary. Does not include 3,980 shares
owned solely by Mr. Macklin's spouse, in which shares he disclaims
beneficial ownership. All of the shares beneficially owned by Mr.
Macklin were obtained upon consummation of the MCI Merger.
(11) Includes 3,586,632 shares owned by a limited partnership as to which
Mr. Porter is the sole shareholder and the sole director of the sole
general partner and also the sole limited partner; 173,646 shares held
as custodian or trustee for minor children; 76,064 shares purchasable
upon exercise of options; 992 shares purchasable upon exercise of
options held by Mr. Porter's children; 992 shares purchasable upon
exercise of options held by one of Mr. Porter's sons for the benefit of
Mr. Porter's grandchildren; 79,748 shares held in trust for son of
majority age, as to which beneficial ownership is disclaimed; 274,000
shares held in a trust of which Mr. Porter is sole trustee with sole
voting and dispositive power; and 3,750 shares held in trust for
employees of Mr. Porter.
(12) Includes 290,281 shares purchasable upon exercise of options. Does not
include 1,243 shares held by Mrs. Price as custodian for the benefit of
their minor children or 3,681 shares held in trusts for children, in
which shares Mr. Price disclaims beneficial ownership. All of the
shares beneficially owned by Mr. Price were obtained upon consummation
of the MCI Merger.
(13) Includes 100,000 shares owned by a limited partnership in which Mr.
Roberts is a general partner; and 5,000 shares held by the Strebor
Family Foundation. Does not include 108,707 shares held by Mr. Roberts'
spouse in which shares Mr. Roberts disclaims beneficial ownership. All
of the shares beneficially owned by Mr. Roberts were obtained upon
consummation of the MCI Merger.
4
<PAGE> 7
(14) Includes 901,047 shares purchasable upon exercise of options; 2,136
shares held in a trust of which Mr. Sidgmore is sole trustee with sole
voting and dispositive power; and 27,651 restricted shares as to which
Mr. Sidgmore does not have dispositive power. See "Employment
Agreements."
(15) Includes 866,666 shares purchasable upon exercise of options.
(16) Includes 80,854 shares purchasable upon exercise of options. All of the
shares beneficially owned by Mr. Taylor were obtained upon consummation
of the MCI Merger.
(17) Consists of 43,268 shares purchasable upon exercise of options.
(18) Includes 6,638,736 shares purchasable upon exercise of options.
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 eighteen. Gerald H. Taylor, whose term expires at the
1999 Annual Meeting, is not standing for re-election and will retire from the
Board as of the 1999 Annual Meeting, at which time the number of directors will
be reduced to seventeen. Accordingly, seventeen directors are to be elected at
the 1999 Annual Meeting as hereinafter provided.
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.
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 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 Articles of Incorporation,
holders of shares of Common Stock and Series B Preferred Stock currently are
entitled to vote as a single class in the election of the seventeen directors at
the annual meeting. Each outstanding share of Common Stock is entitled to one
vote 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 MCI Merger, WorldCom agreed
to cause the Board of Directors, as of the effective time of the MCI Merger, to
consist of seventeen members, consisting of eleven members designated by
WorldCom from among directors of WorldCom and six members designated by MCI from
among directors of MCI. Following effectiveness of the MCI Merger, the Board of
Directors consisted of the current directors other than Mr. Villalonga, who was
subsequently appointed to the Board of Directors, as described below.
5
<PAGE> 8
INFORMATION ABOUT NOMINEES AND EXECUTIVE OFFICERS
The following states each director or nominee's and each executive
officer's age, principal occupation, present position with the Company and the
year in which each director first was elected a director (each serving
continuously since first elected except as set forth otherwise). All the current
directors are nominees, other than Mr. Taylor, as described above. References to
service with the Company prior to September 1993 include service with LDDS
Communications, Inc., a Tennessee corporation, which was the accounting, but not
legal survivor, of a three-way merger with Metromedia Communications Corporation
and Resurgens Communications Group, Inc. Unless indicated otherwise, each
individual has held his or her present position for at least five years.
CLIFFORD L. ALEXANDER, Jr., 65, has been a director of the Company
since the MCI Merger. Mr. Alexander was a director of MCI until the MCI Merger.
Mr. Alexander has been President of Alexander & Associates, Inc., management
consultants, since 1981. Mr. Alexander is also a director of Dreyfus 3rd Century
Fund, Dreyfus General Family of Funds, Mutual of America Life Insurance Company,
Dun & Bradstreet Corporation, American Home Products Corporation and IMS Health
Incorporated.
JAMES C. ALLEN, 52, has been a director of the Company since March
1998. Mr. Allen is currently an investment director and member of the general
partner of Meritage Private Equity Fund, a venture capital fund specializing in
the telecommunications industry. Mr. Allen is the former Vice Chairman and Chief
Executive Officer and a former director of Brooks Fiber Properties, Inc.
("BFP"), where he served in such capacities from 1993 until its merger with the
Company in January 1998 (the "BFP Merger"). Mr. Allen served as President and
Chief Operating Officer of Brooks Telecommunications Corporation, a founder of
BFP, from April 1993 until it was merged with BFP in January 1996. Mr. Allen
serves as a director of Metronet Communications Corp., Verio, Inc., Completel
LLC, and David Lipscomb University.
JUDITH AREEN, 54, has been a director of the Company since the MCI
Merger. Ms. Areen was a director of MCI until the MCI Merger. Ms. Areen has been
Executive Vice President for Law Center Affairs and Dean of the Law Center,
Georgetown University, since 1989. She has been a Professor of Law, Georgetown
University, since 1976.
CARL J. AYCOCK, 49, 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, 54, 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 a director of Metromedia China Corporation, a telecommunications
company. From March 1997 until June 1998, Mr. Bobbitt served as President and
Chief Executive Officer of Metromedia China Corporation. 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.
STEPHEN M. CASE, 40, has been a director of the Company since March
1998. Mr. Case, a co-founder of America Online, Inc. ("AOL"), has been Chairman
of the Board of Directors of AOL since October 1995, Chief Executive Officer of
AOL since April 1993 and a director of AOL since September 1992. Mr. Case served
as President of AOL from July 1996 until February 1998 and from January 1991 to
February 1996. Previously, he served as Executive Vice President of AOL from
September 1987 to January 1991 and Vice President, Marketing, from 1985 to
September 1987. Mr. Case is a member of the Board of Directors of the New York
Stock Exchange.
BERNARD J. EBBERS, 57, 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.
6
<PAGE> 9
FRANCESCO GALESI, 68, 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., Walden
Residential Properties, Inc., and American Real Estate Investment Corporation.
STILES A. KELLETT, JR., 55, 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.
GORDON S. MACKLIN, 70, has been a director of the Company since the
MCI Merger. Mr. Macklin was a director of MCI until the MCI Merger. Mr. Macklin
is currently a corporate financial advisor. From 1993 until 1998, Mr. Macklin
served as Chairman, White River Corporation, an information services company.
Mr. Macklin is also a director of Fund American Enterprises Holdings, Inc.,
Martek Biosciences Corporation, MedImmune, Inc., Spacehab, Inc., Real 3-D and
director, trustee or managing general partner, as the case may be, of 49 of the
investment companies in the Franklin Templeton Group of Funds. Mr. Macklin was
formerly chairman, Hambrecht and Quist Group; director, H&Q Healthcare
Investors; and President, National Association of Securities Dealers, Inc.
JOHN A. PORTER, 55, 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 Company's merger with MFS Communications Company, Inc.("MFS") in
December 1996 (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
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, XL Connect, Inc. and Inktomi, Inc.
TIMOTHY F. PRICE, 45, serves as President and Chief Executive Officer
of MCI WorldCom Communications, a business unit of the Company. Mr. Price has
served as a director of the Company since the MCI Merger. Mr. Price was a
director of MCI until the MCI Merger. Mr. Price served as President and Chief
Operating Officer of MCI from November 1996 until the MCI Merger. He has been
President and Chief Operating Officer of MCI Telecommunications Corporation, a
subsidiary of MCI ("MCIT"), since July 1995. He was an Executive Vice President
and Group President of MCIT, serving as Group President, Communication Services,
from December 1994 to July 1995. He was an Executive Vice President of MCIT,
serving as President, Business Markets, from June 1993 to December 1994. He was
a Senior Vice President of MCIT from November 1990 to June 1993, serving as
President, Business Services, from July 1992 to June 1993 and as Senior Vice
President, Consumer Markets, from November 1990 to July 1992.
BERT C. ROBERTS, JR., 56, serves as Chairman of the Board of MCI
WorldCom. Mr. Roberts has served as a director of the Company since the MCI
Merger. Mr. Roberts was a director of MCI until the MCI Merger. From 1992 until
the MCI Merger, Mr. Roberts served as Chairman of the Board of MCI. Mr. Roberts
was Chief Executive Officer of MCI from December 1991 to November 1996. He was
President and Chief Operating Officer of MCI from October 1985 to June 1992 and
President of MCIT from May 1983 to June 1992. Mr. Roberts is a director of The
News Corporation Limited, Telefonica de Espana, S.A, ("Telefonica") and Valence
Technology, Inc.
JOHN W. SIDGMORE, 47, serves as Vice Chairman of the Board of MCI
WorldCom. Mr. Sidgmore has been a director of the Company since the MFS Merger
and has served as a director of MFS since August 1996. From the MFS Merger until
the MCI Merger, Mr. Sidgmore served as Vice Chairman of the Board and Chief
Operations Officer of the Company. Mr. Sidgmore was President and Chief
Operating Officer of MFS from August 1996 until the MFS
7
<PAGE> 10
Merger. He was Chief Executive Officer of UUNET Technologies, Inc. ("UUNET")
from June 1994 until October 1998, and President of UUNET from June 1994 to
August 1996 and from January 1997 to September 1997. Mr. Sidgmore has been a
director of UUNET since June 1994. 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.
SCOTT D. SULLIVAN, 37, has been a director of the Company since 1996.
Mr. Sullivan 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 LLP.
LAWRENCE C. TUCKER, 56, has been a general partner of Brown Brothers
Harriman & Co., a private banking firm, since 1979. He is also a director of
Riverwood International Corporation, National Healthcare Corporation and VAALCO
Energy, Inc. Mr. Tucker has served as a director of the Company since May 1995,
and previously served as a director of the Company from May 28, 1992 until the
ATC Merger.
JUAN VILLALONGA, 45, has served as the Chairman and Chief Executive
Officer of Telefonica, a provider of telecommunications services in Spain, since
1996. He has been a director of MCI WorldCom since November 1998 pursuant to a
Strategic Alliance Agreement among Telefonica, MCI and MCI WorldCom. Mr.
Villalonga was previously the Chief Executive Officer of Bankers Trust Spain and
Portugal, the Chief Executive Officer of CS First Boston in Spain and a partner
at Kinsey & Co., a consulting firm, for nine years.
GERALD H. TAYLOR, 57, who is retiring as a director at the 1999 Annual
Meeting, served as Chief Executive Officer of MCI from November 1996 until the
MCI Merger. Mr. Taylor was President and Chief Operating Officer of MCI from
July 1994 to November 1996 and President and Chief Operating Officer of MCIT
from April 1994 to July 1995. Mr. Taylor was an Executive Vice President and
Group Executive of MCIT from September 1993 to April 1994. Mr. Taylor was an
Executive Vice President of MCIT, serving as President, Consumer Markets, from
November 1990 to September 1993.
INFORMATION CONCERNING BOARD OF DIRECTORS
COMMITTEES AND MEETINGS
During 1998, the Board of Directors of the Company held four meetings.
Each director attended at least 75% of the meetings of the Board of Directors
and committees on which such director served, except Stephen M. Case who missed
two of the meetings of the Board of Directors, and Clifford L. Alexander, Jr.,
who missed the Board meeting held in 1998 during his tenure.
The Board of Directors has a standing Audit Committee currently
consisting of Max E. Bobbitt (Chairman), Judith Areen, Carl J. Aycock and
Francesco Galesi. During 1998, the Audit Committee held four 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 currently consisting of Stiles A. Kellett, Jr. (Chairman), Max E.
Bobbitt, Gordon S. Macklin and Lawrence C. Tucker. The Compensation and Stock
Option Committee held six meetings during 1998. 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.
8
<PAGE> 11
The Board of Directors has a Nominating Committee currently consisting
of John A. Porter (Chairman), Clifford L. Alexander, Jr., Carl J. Aycock and
Stiles A. Kellett, Jr. The Nominating Committee did not meet during 1998. 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 which are received prior to December
25, 1999. Under the Bylaws of the Company, shareholders are entitled to nominate
persons for election as directors only if, among other things, written notice
has been given as specified therein to the Company's Secretary, 515 East Amite
Street, Jackson, Mississippi 39201-2702, not earlier than 150 days and not later
than 120 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
Effective May 1999 directors will be paid fees of $35,000 per year and
$1,000 per meeting attended of the Board plus certain expenses. Prior to May
1999, directors were 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.
Additionally, under a program to be implemented in May 1999, each
director may elect to receive some or all of his or her annual fees in the form
of Common Stock, based on the fair market value of the Common Stock at the
election date. Under this program, no more than an aggregate of 25,000 shares of
Common Stock may be issued.
Pursuant to the Company's Third Amended and Restated 1990 Stock Option
Plan (the "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, 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.
Under the 1999 Stock Option Plan, if approved by the shareholders as
proposed under "Item 3," the timing, terms and number of options awarded to
directors would be left to the discretion of the Compensation and Stock Option
Committee. The annual award of options to Directors under the 1990 Stock Option
Plan would cease upon approval of the 1999 Stock Option Plan.
EMPLOYMENT AGREEMENTS
MCI had previously entered into employment agreements (the "MCI
Employment Agreements") with, among others, Messrs. Roberts, Taylor and Price
(the "MCI Executives"), effective as of November 2, 1996, and expiring on
December 31, 1999. The obligations of MCI under the MCI Employment Agreements
were assumed by the Company upon consummation of the MCI Merger.
Pursuant to the MCI Employment Agreements, each MCI Executive receives
an annual base salary, subject to increases (but not decreases) at the
discretion of MCI. The 1998 annual salaries of certain of the Executives under
the MCI Employment Agreements were as follows: Bert C. Roberts, Jr., $1,088,462;
Gerald H. Taylor, $730,827; and Timothy F. Price, $601,154. In addition, each
MCI Executive receives an annual bonus for each fiscal year of MCI ending during
the term of the MCI Executive's employment with a minimum bonus amount of no
less than the average
9
<PAGE> 12
annual bonus earned by the MCI Executive in respect of the 1994, 1995 and 1996
fiscal years. The MCI Executive also participates in any long-term incentive
compensation plan or program maintained by MCI for senior executives of MCI and
all long-term compensation plans and programs in existence immediately prior to
the MCI Merger are, under the MCI Employment Agreements, required to be
maintained for at least two years following the MCI Merger or replaced by
programs that are no less favorable to the MCI Executives. In addition, the MCI
Executives participate in all MCI pension and welfare benefit plans and programs
which are applicable to senior executives of MCI, and all pension and welfare
benefit plans and programs in existence immediately prior to the MCI Merger are,
under the MCI Employment Agreements, required to be maintained for at least two
years following the MCI Merger or be replaced by programs that are no less
favorable to the MCI Executives.
Under the MCI Employment Agreements, in the event a MCI Executive's
employment is terminated by MCI (for this purpose "MCI" shall mean MCI, MCI
WorldCom and their respective affiliates) without "Cause" or by the Executive
for "Good Reason" (as each such term is defined below), the MCI Executive is to
receive (a) the Executive's accrued but unpaid salary and vacation pay, and any
unpaid bonus from the prior fiscal year, (b) a cash payment equal to three times
the sum of (x) the MCI Executive's annual base salary and (y) the greater of (A)
the average annual bonus paid to or accrued for the MCI Executive by MCI in
respect of the three calendar years preceding the termination of employment and
(B) the annual bonus paid to or accrued for the MCI Executive in respect of 1995
($1,300,000, $800,000, and $600,000 for Messrs. Roberts, Taylor and Price,
respectively), (c) continued medical, dental and life insurance coverage for the
MCI Executive and the MCI Executive's eligible dependents on the same basis as
in effect immediately prior to the MCI Executive's termination of employment
until the earlier of (x) 36 months after the MCI Executive's termination of
employment or (y) the commencement of coverage with a subsequent employer, but
only to the extent such coverage duplicates or exceeds the coverage provided by
MCI, (d) unless otherwise expressly elected by the MCI Executive prior to such
termination, payment, in a cash lump sum, of all amounts deferred by the MCI
Executive under any non-qualified plan of deferred compensation maintained by
MCI or MCI WorldCom (notwithstanding the payment provisions of any such plan to
the contrary), (e) full acceleration of vesting and exercisability of certain
equity based and cash retention awards (including, but not limited to, certain
stock options and Incentive Stock Units ("ISUs") granted to the MCI Executive
prior to the MCI Executive's termination of employment), and (f) 36 months of
age and service credit for all purposes under all defined benefit plans of MCI
(or the equivalent).
For purposes of the MCI Employment Agreements, "Cause" means: (i) a
deliberate and material breach by the MCI Executive of his duties and
responsibilities under the MCI Employment Agreement that results in material
harm to MCI, which breach is (A) either the product of willful malfeasance or
gross neglect, (B) committed in bad faith or without reasonable belief that such
breach is in, or not contrary to, the best interests of MCI and (C) not remedied
within 30 days after receipt of written notice from MCI specifying such breach;
(ii) the MCI Executive's willful and material breach of the restrictive
covenants contained in the MCI Employment Agreement which is not remedied within
30 days after receipt of written notice from MCI specifying such breach; or
(iii) the MCI Executive's plea of guilty or nolo contendre to, or nonappealable
conviction of, a felony, which conviction or plea causes material harm to the
reputation or financial position of MCI. "Good Reason" means the occurrence of
any of the following without the MCI Executive's express written consent: (i)
the assignment to the MCI Executive of any duties inconsistent with the MCI
Executive's current positions, duties, responsibilities and status with MCI, a
change in the MCI Executive's reporting responsibilities, title or offices or
any removal of the MCI Executive from or failure to elect or re-elect the MCI
Executive to any position with MCI (including membership on the Board) except in
connection with the MCI Executive's promotion or a termination of employment for
Cause; (ii) a reduction in the MCI Executive's base salary or target annual
bonus or long-term incentives, as such salary, target bonus and incentives are
increased from time to time; (iii) the failure to continue in effect any
employee benefit plan or compensation plan in which the MCI Executive
participates unless the MCI Executive is provided with participation in other
plans that provide substantially comparable benefits or the taking of any action
that would adversely affect the MCI Executive's benefits under any such plan;
(iv) any relocation of the MCI Executive's principal place of business from the
location described in the MCI Employment Agreement; (v) any reduction in fringe
benefits and perquisites provided to the MCI Executive; (vi) any material breach
by MCI of any provisions of the MCI Employment Agreement; and (vii) a failure by
MCI WorldCom to expressly assume, as of the date of the MCI Merger, all
obligations of MCI under the MCI Employment Agreement.
10
<PAGE> 13
The MCI Employment Agreements further provide that if the payments
described above constitute "parachute payments" under applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), MCI
is to pay the MCI Executive an additional amount sufficient to place the MCI
Executive in the same after-tax financial position the MCI Executive would have
been in if the MCI Executive had not incurred the excise tax imposed under
Section 4999 of the Internal Revenue Code in respect of such parachute payments.
In the event an MCI Executive's employment is terminated due to the MCI
Executive's death or "Disability" (as defined in the MCI Employment Agreements),
the MCI Employment Agreements provide that MCI is to pay to the MCI Executive
(or the MCI Executive's beneficiaries) a lump sum cash amount equal to (i) the
annual rate of the MCI Executive's annual base salary as in effect on the date
of termination, and (ii) the highest bonus paid to the MCI Executive under MCI's
annual bonus plan during the three fiscal years preceding the termination of
employment. In addition, the MCI Executive is to receive (i) the unpaid portion
of his annual base salary accrued to the date of termination and any accrued
vacation as of the date of termination, and (ii) the unpaid portion of his bonus
accrued with respect to the last full fiscal year of MCI ended prior to the date
of termination, when such bonus would otherwise be payable.
The MCI Employment Agreements contain confidentiality, non-competition
and non-solicitation clauses which provide, among other things, that the MCI
Executive is not to (i) render services to a competitor of MCI or its
affiliates, or (ii) solicit or offer employment to any employee of MCI or its
affiliates during the MCI Executive's employment with MCI or its affiliates and,
thereafter, for a period expiring on the earlier of (x) the first anniversary of
the Executive's termination of employment, and (y) the expiration of the term of
the MCI Employment Agreement.
Pursuant to an amendment to Mr. Taylor's MCI Employment Agreement, Mr.
Taylor became a director of the Company upon consummation of the MCI Merger, and
will serve as a director until the 1999 Annual Meeting. Under the amendment, Mr.
Taylor continued to be employed after the MCI Merger until his retirement on
January 1, 1999. Upon retirement, Mr. Taylor's unvested equity awards
(consisting of options to acquire 80,854 shares and awards of 29,466 shares of
Common Stock), accelerated and his deferrals of 33,683 shares previously vested
ceased and the underlying shares were distributed.
In full settlement of any compensation claims under Mr. Taylor's MCI
Employment Agreement (including payroll, bonus, and equity claims), the Company
agreed to pay Mr. Taylor 1.33 times the sum of Mr. Taylor's 1998 salary and
bonus (senior executive incentive plan plus cash equivalent of executive stock
award) or approximately $3.56 million in the aggregate in monthly installments
through December 31, 1999. Additionally, Mr. Taylor will receive three years
service credit toward his pension at retirement. The non-competition provision
of Mr. Taylor's MCI Employment Agreement will continue in force for a limited
period.
Pursuant to the terms of Mr. Sidgmore's employment agreement with
UUNET, 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 82,938 of the shares issued
remain, as of December 31, 1998, 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
MCI WorldCom or an involuntary termination other than for cause of Mr.
Sidgmore's employment, MCI 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 with
respect thereto.
11
<PAGE> 14
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"). From January 1, 1998 until September 14, 1998 the Committee was
composed of Stiles A. Kellett, Jr. (Chairman), Max E. Bobbitt and Lawrence C.
Tucker. Subsequent to September 14, 1998, the Committee has been composed of
Stiles A. Kellett, Jr. (Chairman), Max E. Bobbitt, Gordon S. Macklin and
Lawrence C. Tucker.
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 seeks to 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. The evaluation of the Chief
Executive Officer is of paramount importance in setting base salaries of other
executive officers. 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 1998, 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
generally acts 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.
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<PAGE> 15
Generally, salary increases are made retroactive to January 1 of the
current year. For 1999, executive officers' salaries were set consistent with
the policy to pay between the median and high end of the range of such salaries
at comparable companies.
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 and other performance goals. The judgment of each member
of the Committee, and of the Chief Executive Officer in the case of other
executive officers, as to the impact of the individual on the financial
performance of the Company also are considered. Based largely upon internal
growth, the successful completion of various transactions, the attainment of
quantitative performance goals and the increase in the price of the Common
Stock, the Committee awarded bonuses for 1998 which fell between the median and
high end of the range of bonuses at comparable companies.
In 1994, the Company adopted the Annual Performance Bonus Plan (the
"Annual Plan") and, in 1997, adopted the WorldCom, Inc. Performance Bonus Plan
(the "Performance Bonus Plan"). Each plan 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. Subject to attainment of the
specified performance goal(s) and the limitations with respect to the maximum
bonus payable under the applicable 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. The Company has phased out usage of the Annual Plan and anticipates
utilization of the Performance Bonus Plan for plan bonuses in the future.
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.
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<PAGE> 16
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. The
total compensation package of Mr. Ebbers is designed to be competitive while
creating awards for short- and long-term performance in line with the financial
interests of the shareholders. In 1998, the compensation package for Mr.
Ebbers was consistent with this policy.
The Company's performance bonus plans for the Chief Executive Officer
have included the Annual Plan, the Performance Bonus Plan and 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"). As
referenced above, the Company anticipates utilization of the Performance Bonus
Plan for future plan bonuses.
In 1997, the Company's stock price increased from $26.06 to $30.25 per
share. The Company had $22.39 billion in total assets as of December 31, 1997
and $7.35 billion in revenues for the year ended December 31, 1997. The
Committee established a maximum bonus for 1997 under the Annual Plan for the
Chief Executive Officer equal to $2,531,250. The Committee established specific
performance goals for 1997 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, in connection with the Performance Bonus Plan, the
Committee established a specific performance goal based on the attainment by the
Company of a specified percentage increase in consolidated pro forma gross
revenues. The specified performance goal was met in 1997 and the Committee
determined to award the Chief Executive Officer the maximum bonus with respect
to 1997 of $13.0 million. Under the Special Bonus Plan, the Committee
established a maximum bonus for 1997 of $1,500,000 and a performance goal based
on certain billings by the Company. The 1997 performance goal was achieved, and
the Committee awarded the $1,500,000 maximum allowed under the Special Bonus
Plan. At Mr. Ebbers' request, the base salary for Mr. Ebbers in 1998 remained
unchanged at $935,000.
In 1998, the Company's stock price increased from $30.25 to $71.75 per
share, and the Company increased significantly in size upon the completion of
the MCI Merger. The Company had $86.4 billion in total assets as of December 31,
1998 and $17.7 billion in revenues for the year ended December 31, 1998. The
Committee established a maximum bonus for 1998 under the Performance Bonus Plan
for the Chief Executive Officer equal to $6,046,875. It established a specific
performance goal based on the attainment by the Company of a specified
percentage increase in consolidated pro forma gross revenues. 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. Mr.
Ebbers accepted only $4,800,000 of such award. Additionally, for 1998, the
Committee established a maximum bonus under the Special Bonus Plan of $2,250,000
and a performance goal based on certain billings by the Company. The 1998
performance goal was achieved, and the Committee awarded the $2,250,000 maximum
amount allowed under the Special Bonus Plan. Also in 1998, the Committee awarded
Mr. Ebbers a non-plan bonus of $65,000. The base salary for Mr. Ebbers in 1999
was set at $1,000,000.
During 1998, 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, 1999 through January 1,
2001. 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.
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<PAGE> 17
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 persons involved, these components of the
compensation process with the quantitative measures of performance included in
the Company's performance bonus plan. 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 23, 1999
Stiles A. Kellett, Jr. (Chairman)
Max E. Bobbitt
Gordon S. Macklin
Lawrence C. Tucker
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<PAGE> 18
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
The following graph compares the cumulative five-year shareholder
return (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"). 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.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
Performance Graph for
MCI WORLDCOM, Inc.
[GRAPH]
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
MCI WORLDCOM, Inc. 100.0 80.6 146.1 216.1 274.7 651.6
S&P 500 Stocks 100.0 101.4 139.5 172.0 229.6 296.2
Nasdaq Telecommunications Stocks 100.0 83.5 109.3 111.7 165.9 273.0
SIC 4800-4899 US & Foreign
</TABLE>
NOTES:
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 level for all series was set to $100.00 on 12/31/93.
16
<PAGE> 19
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation of the named executive
officers of the Company for the three years ended December 31, 1998. The table
also sets forth, for informational purposes, the compensation paid by MCI during
1998 to Messrs. Roberts and Price, who became executive officers of the Company
upon completion of the MCI Merger and the compensation paid by MFS and/or UUNET
during 1996 to Mr. Sidgmore, who became an executive officer of the Company upon
completion of the MFS Merger.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
---------------------------
ANNUAL COMPENSATION
--------------------------------------
SECURITIES ALL
OTHER RESTRICTED UNDERLYING OTHER
ANNUAL STOCK OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION($) AWARD(S)($) (#) ($)
- --------------------------------------- ---- ---------- ------------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bernard J. Ebbers 1998 935,000 7,115,000(1) 54,444(3) -- 1,200,000/0 4,800(5)
President and Chief Executive 1997 935,000 17,031,250 -- -- 1,200,000/0 4,800
Officer 1996 935,000 2,337,500 -- -- 1,200,000/0 4,500
Bert C. Roberts Jr. 1998 1,088,462 9,380,950(2) 1,995,548(3) 1,785,883(4) 411,950/0 769,472(6)
Chairman of the Board
Timothy F. Price 1998 601,154 7,331,700(2) 306,643(3) 999,117(4) 491,525/0 6,231(6)
President and Chief Executive Officer
MCI WorldCom Communications
John W. Sidgmore(7) 1998 500,000 2,000,000 -- -- 600,000/0 4,800(5)
Vice Chairman of the Board 1997 500,000 0 -- -- 1,000,000/0 962,050
1996 283,577 494,443 -- -- 0/0 2,182,654
Scott D. Sullivan 1998 500,000 2,000,000 -- -- 600,000/0 4,800(5)
Chief Financial Officer and Secretary 1997 500,000 3,500,000 -- -- 1,000,000/0 4,800
1996 375,000 500,000 -- -- 100,000/0 4,500
</TABLE>
(1) Includes $2,250,000 paid under the Special Bonus Plan and $4,800,000
paid under the Performance Bonus Plan. The Compensation and Stock
Option Committee awarded to Mr. Ebbers the $6,046,875 maximum amount
allowed under the Performance Bonus Plan for 1998, but Mr. Ebbers
accepted only $4,800,000 of such award.
(2) Includes the remaining cash retention bonus paid in connection with the
MCI Merger, to Messrs. Roberts and Price of $7.0 million and $6.0
million, respectively. See "Certain Relationships and Related
Transactions."
(3) Includes the imputed value of personal use of the Company airplane of
$54,444 for Mr. Ebbers and $21,650 for Mr. Roberts; and the annuity
premium and taxes paid of $1,937,355 for Mr. Roberts and $306,643 for
Mr. Price as the result of the purchase of an annuity to discharge
MCI's Supplemental Pension Plan's obligation to the MCI Executive. The
amounts reduce dollar for dollar the actual amount of pension to be
paid to the executive upon retirement. All other perquisites and other
personal benefits are less than $50,000 in the aggregate and have
therefore been excluded.
(4) During 1998, Messrs. Roberts and Price were awarded ISUs totaling
45,704 and 25,444, respectively (as adjusted to reflect Common Stock of
the Company). The ISUs, which are an unfunded promise
17
<PAGE> 20
to deliver shares of stock in the future, were awarded under MCI's
Executive Stock Award Program ("ESA"). Under the ESA, cash target
awards were set for each MCI Executive salary range and awards
determined based on certain performance criteria. Cash awards are
converted to ISUs by dividing the cash award amount by the stock price
on the date the awards are determined. ISUs granted under the ESA vest
ratably over a three year period. All outstanding restricted shares and
ISUs awarded prior to November 9, 1997, were accelerated upon
consummation of the MCI Merger. As of December 31, 1998, the total
number (and value of) nonvested ISUs are as follows: Mr. Roberts,
45,704 ($3,279,262) and Mr. Price, 25,444 ($1,825,607). See "Certain
Relationships and Related Transactions."
(5) Matching contributions to the Company's 401(k) Plan.
(6) Includes matching contributions to the MCI 401(k) plan of $4,288 for
Mr. Roberts and $6,231 for Mr. Price; and $765,184 for premiums paid by
the Company for executive life insurance on behalf of Mr. Roberts.
Excludes $15,031,119 for Mr. Roberts in connection with the vesting of
MCI restricted shares upon consummation of the MCI Merger and $627,385
for Mr. Roberts and $8,525,307 for Mr. Price in connection with the
vesting of MCI ISUs upon consummation of the MCI Merger, as well as the
value of stock options that vested upon consummation of the MCI Merger,
as described in "Certain Relationships and Related Transactions."
(7) As of December 31, 1998, the total number (and value) of restricted
stock holdings of Mr. Sidgmore was 82,938 ($5,950,802). See "Employment
Agreements."
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning stock option
grants made in the fiscal year ended December 31, 1998 to the individuals named
in the Summary Compensation Table. The table also sets forth, for informational
purposes, MCI stock options awarded to Messrs. Roberts and Price. Upon
effectiveness of the MCI Merger, the then outstanding and unexercised options
exercisable for shares of MCI common stock were converted into options
exercisable for shares of Common Stock having the same terms and conditions as
MCI options, except that the exercise price and the number of shares issuable
upon exercise were divided and multiplied, respectively, by 1.2439. There were
no grants of stock appreciation rights ("SARs") to said individuals during the
year.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATE OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM (5)
---------------------------------------------------------------- -----------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR (3) ($/SH) (4) DATE 5% ($) 10% ($)
- ----------------------------------- -------------- --------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Bernard J. Ebbers.................. 1,200,000(1) 3.8 29.9375 01/02/08 22,593,039 61,980,198
Bert C. Roberts, Jr................ 111,951(2) 0.7 38.1863(2) 02/04/08 2,688,521 6,813,240
299,999(2) 2.0 40.2000(2) 08/31/08 7,584,444 19,220,470
Timothy F. Price................... 71,525(2) 0.4 38.1863(2) 02/04/08 1,717,684 4,352,949
420,000(2) 0.8 40.2000(2) 08/31/08 10,618,257 26,908,748
John W. Sidgmore................... 600,000(1) 1.9 29.9375 01/02/08 11,296,520 51,650,165
Scott D. Sullivan.................. 600,000(1) 1.9 29.9375 01/02/08 11,296,520 51,650,165
</TABLE>
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<PAGE> 21
(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 unless the
Compensation and Stock Option Committee determines otherwise, upon the
consummation of a specified change of control transaction. The options
may be transferred to certain family members and related entities with
the consent of the Committee. The options for Messrs. Ebbers, Sidgmore
and Sullivan become exercisable in three equal annual installments
beginning January 1, 1999 through January 1, 2001, but vesting may be
accelerated upon the consummation of a specified change of control
transaction as determined by the Committee.
(2) Amounts shown have been adjusted to reflect the conversion of MCI stock
options into MCI WorldCom stock options in the MCI Merger. Options
granted to Messrs. Roberts and Price in February 1998 (first line)
terminate on the earlier of their expiration date or ten years after
grant or, generally three months after termination for reasons other
than retirement or five years after termination of employment on
retirement, in certain circumstances, and become exercisable to the
extent of one-third of the shares covered thereby on each of the first,
second and third anniversary of the grant. Vesting may be accelerated
upon a reorganization event or upon a tender offer for 30% or more of
the Company's voting stock by a third party in accordance with plan
provisions. Options granted to Messrs. Roberts and Price in August 1998
(second line) terminate on the earlier of their expiration date or ten
years after grant or, generally, immediately on termination for reasons
other than disability or death; or twelve months after termination for
disability or death and become exercisable in four installments: 10% on
January 1, 1999, 30% on January 1, 2000, 30% on January 1, 2001 and 30%
on January 1, 2002.
(3) Based on total options granted to WorldCom employees during 1998 for
Messrs. Ebbers, Sidgmore and Sullivan. For Messrs. Roberts and Price,
percentage is based on total options granted to MCI employees during
1998.
(4) 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 valued at the closing quoted selling price on the date of
exercise, or a combination of cash and Common Stock.
(5) 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.
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 1998 and options held at December
31, 1998, 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, 1998
("in-the-money" options).
19
<PAGE> 22
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-
UNEXERCISED OPTIONS AT FY-END (#) MONEY OPTIONS AT FY-END ($)(2)
--------------------------------- -----------------------------
SHARES VALUE
ACQUIRED ON REALIZED
NAME EXERCISE (#) ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- ------------ ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bernard J. Ebbers.................. - - 2,875,696 2,400,000 163,668,210 108,325,000
Bert C. Roberts Jr................. 993,254(3) 23,202,005 151,135 411,950 6,867,934 13,222,459
Timothy F. Price................... - - 224,464 491,525 10,920,354 15,651,644
John W. Sidgmore................... - - 367,220 1,268,151 17,509,700 55,678,587
Scott D. Sullivan.................. - - 433,333 1,366,667 21,074,985 62,762,515
</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 $71.75 per share, which was the closing price of
Common Stock on December 31, 1998.
(3) Options exercised prior to the MCI Merger; amount shown has been
adjusted to reflect the conversion of MCI common stock into MCI
WorldCom Common Stock in the MCI Merger.
PENSION PLANS
As a result of the MCI Merger, the Company has a noncontributory
defined benefit pension plan (the "Qualified Plan") and a supplemental
nonqualified defined benefit plan (the "Supplemental Plan" and, together with
the Qualified Plan, the "MCI Pension Plans"). The Qualified Plan covers
substantially all MCI employees who became MCI WorldCom employees as of the MCI
Merger. The Qualified Plan was frozen as of January 1, 1999. MCI employees who
were participants as of January 1, 1999 will not have any further compensation
credits added to their accounts, however, interest credits and vesting service
will continue to accrue. The Supplemental Plan covers only MCI's key executives,
including Messrs. Roberts, Price and Taylor, who work at least 1,000 hours in a
year. No employee contributions are required for participation in the MCI
Pension Plans. Retirement benefits are based upon the employee's compensation
during the employee's employment with MCI or a participating subsidiary.
Compensation used to calculate benefits includes bonuses (including
bonuses invested in ISUs) but does not include compensation related to fringe
benefits, stock options or restricted stock. During 1998, compensation for the
purposes of calculating pension benefits for the Qualified Plan was limited by
Section 401(a)(17) of the Internal Revenue Code, to $160,000. The Supplemental
Plan pays the incremental benefit attributable to that part of the employee's
compensation which exceeds the Internal Revenue Code limitation in any plan
year.
Participants are fully vested upon the earlier of five years of service
or upon reaching age 65 while employed by MCI or a participating subsidiary.
There is no partial vesting. Normal retirement age is 65, but an employee may
elect to receive an actuarially-reduced pension at or after age 55 with five
years of service with MCI or a participating subsidiary. In addition, the
Supplemental Plan permits MCI to grant additional service and additional pension
amounts to selected employees.
For MCI employees employed after January 1, 1989, the MCI Pension Plans
provide a normal retirement benefit for each year of credited service equal to
1% of the compensation earned by the employee during that year up to the Social
Security "covered compensation" level plus an additional 1.5% of compensation
earned over that level. However, employees employed on or before January 1, 1993
were credited with an updated past service benefit which provides a benefit of
1% of the employee's average annual compensation (for the years 1990, 1991 and
1992) up to
20
<PAGE> 23
$21,000 and 1.5% of such compensation over $21,000 for such years multiplied by
the employee's service through December 31, 1992. For employees employed on or
after January 1, 1994, the MCI Pension Plans provide a future service benefit
for each subsequent year of credited service equal to a flat 1.8% of the
employee's eligible compensation. Effective January 1, 1996, MCI adopted a Part
II to the Qualified Plan ("Part II") which changed the manner in which pension
benefits will be determined. Prior to January 1, 1996, pension benefits were
determined as noted above ("Part I"). Part II is a defined benefit pension plan.
Under Part II, an initial account balance has been established for each
participant equal to the actuarial equivalent of the participant's prior
accruals under the Qualified Plan. Participants employed on or after January 1,
1996 receive compensation credits and interest credits to their accounts.
Compensation credits are a designated percent of pay, based on the participant's
age, according to the following schedule: employees younger than age 25, 2.0%;
age 25-29; 2.5%; age 30-34; 3.0%; age 35-39, 4.0%; age 40-44, 5.0%; age 45-54,
6.0%; and age 55 or older, 6.5%. Part II guarantees a minimum interest credit of
4% per year on the prior year's account balance. For 1998, the guaranteed
interest credit is 6.0%. Part II Participants who were age 50 or older with 5
years of service as of December 31, 1995 will accrue a pension benefit equal to
the greater of benefits calculated under Part I or Part II until the plan year
ended December 31, 2000 for each year they are employed by MCI.
Benefits payable from tax qualified plans are further limited by
Section 415 of the Internal Revenue Code; in 1998, the annual maximum benefit
from the Qualified Plan was limited to $130,000. When the pension formula would
result in an executive receiving a benefit above the applicable limit, the
Supplemental Plan assumes an obligation to pay the incremental portion above
such limit.
As of December 31, 1998, Messrs. Roberts, Taylor and Price, upon normal
retirement, would be entitled to annual retirement benefits from the MCI Pension
Plans of approximately $581,961, $276,465and $111,091, respectively.
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, 1998, all Section 16(a) filing requirements applicable to Reporting
Persons were complied with, except that Messrs. Ebbers, Kellett and Taylor each
filed one late report covering one, two and two transaction(s), respectively.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AOL TRANSACTION. Pursuant to the agreement relating to the Company's
acquisition of ANS Communications, Inc. ("ANS") from AOL on January 31, 1998
(the "AOL Agreement"), the Company agreed to cause Stephen M. Case, Chairman of
the Board and Chief Executive Officer of AOL, to be appointed to the Company's
Board of Directors. Mr. Case made such request and was appointed to the Board in
March 1998. Pursuant to the agreement, the Company acquired ANS for
approximately $500 million and entered into the contracts described below. As
part of the transaction, AOL acquired CompuServe Corporation's Interactive
Services division and received a $175 million cash payment from the Company.
AOL and the Company and/or certain of the Company's subsidiaries are
currently parties to certain agreements regarding the provision of dial-up and
leased line access to AOL. Upon closing of the AOL Agreement, the Company, AOL
and ANS entered into a Master Agreement for Data Communications which has an
initial term expiring December 31, 2002, subject to extension by AOL in certain
circumstances. The agreement provides that ANS will (i) continue to maintain and
operate portions of AOL's dial-up member access network; (ii) install, activate,
maintain and operate additional modems for AOL's dial-up network in the United
States and Canada; and (iii) provide AOL with Internet access. AOL committed to
purchase from ANS specified percentages of its incremental modem requirements
each year,
21
<PAGE> 24
subject to ANS fulfilling certain obligations. The fees for the foregoing
services are based on several factors, including certain fixed base prices, the
prices offered by ANS to its non-affiliated customers, prices paid by AOL to, or
offered to AOL by, other significant suppliers of modems and modem services,
and, if AOL provides such services to itself, AOL's cost. The fees are subject
to adjustment twice per year and include certain agreed-upon discounts. AOL,
UUNET and the surviving corporation of the Company's merger with CompuServe
Corporation ("CompuServe") also entered into a Network Services Agreement on
January 31, 1998, which has an initial term expiring December 31, 2002, subject
to extension by AOL in certain circumstances. Under this agreement, such
surviving corporation provides AOL with capacity on the CompuServe network, and
AOL committed to use the network for specified portions of its requirements. The
fees paid by AOL are based on several factors, including certain fixed base
prices, the prices offered to AOL by other significant suppliers of network
capacity, and such surviving corporation's actual cost to provide the network
capacity. Expenditures by AOL under all of such agreements during 1998 were $538
million.
The AOL Agreement included customary representations and warranties,
and provisions for each of AOL and MCI WorldCom to indemnify the other for
certain losses and expenses, subject to specified time limits and minimum
amounts. AOL and ANS also entered into a Noncompetition and Nonsolicitation
Agreement under which (i) AOL agreed to certain limitations on its business
activities in the network services business, (ii) the Company agreed that
CompuServe will be subject to certain limitations in the online services
business, and (iii) each of the parties agreed to certain restrictions on its
rights to solicit or otherwise deal with customers, suppliers, employees,
independent contractors, agents or representatives of the other.
BFP MERGER. In the BFP Merger, effective as of January 29, 1998, each
outstanding share of BFP common stock was converted into the right to receive
1.85 shares of MCI WorldCom Common Stock or approximately 72.6 million shares in
the aggregate. In connection with the negotiation and approval of the BFP merger
agreement, Mr. Ebbers indicated his expectation that the WorldCom Board would
consider the nomination of an individual designated by the BFP Board of
Directors (who was expected to be Mr. James C. Allen) for election as a director
of WorldCom following the effective time of the BFP Merger. The BFP Merger
resulted in the vesting of Mr. Allen's 66,667 shares of BFP stock options
exercisable at $12.50 per share, which options were converted into options
exercisable for Common Stock having the same terms and conditions, except that
the exercise price and number of shares issuable upon exercise were divided and
multiplied, respectively, by 1.85. As of November 30, 1997, Mr. Allen
beneficially owned 319,885 shares of BFP Common Stock. Each of Mr. Allen's
shares of BFP common stock was converted into 1.85 shares of Common Stock in the
BFP Merger. Pursuant to a Change in Control Severance Agreement entered into as
of April 8, 1997, Mr. Allen received a $2,075,158 payment upon his termination
as Vice Chairman and Chief Executive Officer of BFP in February 1998. Mr. Allen
is also entitled to continuation of medical insurance benefits for a three-year
period, and is subject to certain non-competition and non-solicitation
provisions.
MCI MERGER. In the MCI Merger, each outstanding share of MCI common
stock was converted into the right to receive 1.2439 shares of MCI WorldCom
Common Stock, or approximately 755 million shares in the aggregate and each
share of MCI Class A common stock (held by British Telecommunications plc) was
converted into the right to receive $51 in cash or approximately $7 billion in
the aggregate. As of the effective time of the MCI Merger, in exchange for
shares of MCI common stock held by them, Messrs. Macklin, Price, Roberts and
Taylor and Ms. Areen acquired 46,272; 53,198; 615,515; 262,982 and 4,703 shares
of Common Stock, respectively (including shares acquired by family members,
benefit plans and other affiliated entities), excluding shares in respect of MCI
restricted shares and ISUs, based upon the exchange ratio in the MCI Merger.
Pursuant to the MCI Merger, all unvested and unpaid MCI Restricted Shares and
ISUs outstanding on the date of execution of the agreement relating to the MCI
Merger (the "MCI Merger Agreement"), became fully vested and (unless voluntarily
deferred) paid. Accordingly, Messrs. Roberts, Taylor and Price acquired 356,954,
34,315 and 19,303, respectively, fully vested MCI WorldCom shares in respect of
MCI restricted shares and ISUs. In addition, pursuant to the MCI Merger, all
options to acquire MCI common stock, which were granted prior to November 7,
1997, became fully vested and exercisable immediately if not previously vested,
and converted into options to acquire Common Stock based on the exchange ratio
in the merger. Accordingly, Messrs. Price, Roberts and Taylor and Ms. Areen
acquired fully vested options to acquire 224,464, 151,135, 109,153 and 49,756
shares, respectively, of Common Stock and Messrs. Alexander, Macklin, Price,
Roberts and Taylor and Ms. Areen
22
<PAGE> 25
acquired options subject to existing vesting requirements to acquire 49,756,
49,756, 491,525, 411,950 and 80,854 shares, respectively, of Common Stock.
In connection with the MCI Merger, a cash retention award pool of up to
approximately $170 million was created to provide retention incentives for MCI
senior executives, including Messrs. Roberts, Taylor and Price, who received
$10.5 million, $9.5 million and $9.0 million, respectively. One-third of the
retention incentive was paid in December 1997 and the remainder was paid upon
consummation of the MCI Merger.
Pursuant to the MCI Merger Agreement, from and after the effective time
of the MCI Merger (the "MCI Merger Effective Time"), the surviving corporation
in the MCI Merger is to cause to be maintained in effect in its certificate of
incorporation and bylaws (i) for a period of six years after the MCI Effective
Time, the then current provisions regarding indemnification of officers and
directors contained in the MCI Restated Certificate of Incorporation and the MCI
Bylaws, and (ii) for a period of six years, the then current policies of
directors' and officers' liability insurance and fiduciary liability insurance
maintained by MCI with respect to claims arising from facts or events that
occurred on or before the MCI Effective Time, except that in no event is the
surviving corporation to be required to expend in any one year an amount in
excess of 200% of the annual premiums then paid by MCI for such insurance, and,
if the annual premiums of such insurance coverage exceed such amount, the
surviving corporation is to obtain a policy with the greatest coverage available
for a cost not exceeding such amount.
Pursuant to the MCI Merger Agreement, the Company originally agreed
that the Company's Board of Directors, as of the MCI Effective Time, would
consist of fifteen members, eight of whom would be designated by WorldCom from
among the directors of WorldCom, five of whom would be designated by MCI from
among the directors of MCI and two of whom would be directors designated by
WorldCom from among then pending acquisitions of WorldCom; provided that the
persons designated by each party are reasonably acceptable to the other party.
See, however, "Item 1. Election of Directors."
The Company also agreed to cause Bert C. Roberts, Jr. to be appointed
Chairman of MCI WorldCom, and to cause the senior management of MCI WorldCom to
be as previously agreed between the parties. Pursuant to the MCI Merger
Agreement, Bernard J. Ebbers continued to serve as the President and Chief
Executive Officer of MCI WorldCom. In addition, Timothy F. Price, formerly
President and Chief Operating Officer of MCI, became President and Chief
Executive Officer of MCI WorldCom Communications, a business unit of the
Company; John W. Sidgmore, formerly Vice Chairman and Chief Operations Officer
of WorldCom, became Vice Chairman of MCI WorldCom; and Scott D. Sullivan
continued to serve as Chief Financial Officer of MCI WorldCom.
Prior to the MCI Merger, the Company and MCI were parties to certain
interconnection or other service agreements with each other and certain of their
affiliates in the ordinary course of their businesses, which agreements have
been amended from time to time. In fiscal 1998, MCI and its subsidiaries and
WorldCom and its subsidiaries engaged in transactions aggregating approximately
$588 million prior to the MCI Merger.
TELEFONICA. During 1998, the Company entered into a strategic alliance
with Telefonica to create strategic business ventures which will enter the
telecommunications markets in Europe and the Americas. The joint venture was
formed to target fast growing Latin American communications markets, and to
establish a state-of-the-art Pan American network to provide customers a
portfolio of integrated communications services. Telefonica's Chairman and Chief
Executive Officer, Juan Villalonga, was named as a director of MCI WorldCom
pursuant to this strategic alliance agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From January 1, 1998 until September 14, 1998, the Committee was
composed of Stiles A. Kellett, Jr. (Chairman), Max E. Bobbitt, and Lawrence C.
Tucker. Subsequent to September 14, 1998, the Committee was composed of Stiles
A. Kellett, Jr., Max E. Bobbitt, Gordon S. Macklin and Lawrence C. Tucker. See
"Certain Relationships and Related Transactions" regarding Mr. Macklin and the
MCI Merger.
23
<PAGE> 26
ITEM 2. APPROVAL OF AMENDMENT TO SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION, AS AMENDED, TO INCREASE AUTHORIZED
SHARES OF COMMON STOCK
The Board of Directors has proposed an amendment to the Articles of
Incorporation (the "Amendment") and directed that the Amendment be submitted to
the shareholders for approval. The Amendment would increase the number of
authorized shares of Common Stock from 2,500,000,000 to 5,000,000,000.
The full text of the proposed resolution and Amendment related to Item
2 is as follows:
"RESOLVED, that Section A of Article Four of the Second
Amended and Restated Articles of Incorporation, as amended, of the
Company be further amended by deleting said Section A in its entirety
and substituting in lieu thereof a new Section A of Article Four that
reads as follows:
'A. Common Stock. The authorized voting common stock of the
Corporation is five billion (5,000,000,000) shares, par value $.01 per
share.'"
On April 1, 1999, there were ____________, shares of Common Stock
issued and outstanding. This number does not include ________ shares reserved
for issuance under outstanding options and warrants to purchase shares of Common
Stock or _________ shares issuable upon conversion of the Series B Preferred
Stock. As of such date, therefore, there were _________ shares of authorized
Common Stock not reserved for such purposes and available for issuance. Holders
of Common Stock and currently outstanding preferred stock have no preemptive
rights to acquire additional issuances of shares of Common Stock or preferred
stock. Additionally, there were _____ shares of authorized preferred stock, of
which ________ shares of Series B Preferred Stock were outstanding.
The Board of Directors has deemed it advisable and in the best
interests of the Company to amend Article Four of the Articles of Incorporation
to increase the authorized number of shares of Common Stock to 5,000,000,000.
The purpose of such increase is to place the Company in a position where it will
continue to have a sufficient number of shares of authorized and unissued Common
Stock which can be issued for or in connection with such corporate purposes as
may, from time to time, be considered advisable by the Board of Directors.
Having such shares available for issuance in the future will give the Company
greater flexibility and will allow such shares to be issued as determined by the
Board of Directors of the Company without the expense and delay of a special
shareholders' meeting to approve such additional authorized capital stock. Such
corporate purposes could include, without limitation: (a) issuance in connection
with any desirable acquisitions which may be presented to the Company, (b) the
payment of stock dividends or issuance pursuant to stock splits, (c) the
issuance of Common Stock upon exercise of options granted under the Company's
various stock option plans or in connection with other employee benefit plans,
(d) the issuance of Common Stock upon the conversion of any preferred stock, the
exercise of warrants or the conversion of other securities convertible into
Common Stock which may be outstanding from time to time, and (e) issuance in
connection with an offering to raise capital for the Company.
The authorized shares of Common Stock in excess of those presently
issued will be available for issuance at such times and for such purposes as the
Board of Directors may deem advisable without further action by the Company's
shareholders, except as may be required by the Articles of Incorporation and
applicable laws and regulations. Any future issuance of shares will be subject
to the rights of holders of shares of any then outstanding preferred stock.
The Amendment, if adopted, may have the result of making it more
difficult for any persons or group of persons, other than the current principal
shareholders and management, to acquire control of the Company by expanding the
ability of the Company to issue shares and thereby dilute the voting power of
any person or group that might accumulate shares in order to attempt to effect a
change in control. Although the Amendment might have such effect, the Amendment
has been proposed by the Board of Directors for the reasons set forth above and
not for anti-takeover reasons. The Company is not aware of any present effort to
accumulate shares of Common Stock or to attempt to change control of the
Company. The Company has no present plans to issue additional shares of Common
Stock either
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to the current principal shareholders, the directors, the executive officers or
any other person or entity except under the Company's stock option plans or
pursuant to the conversion or exercise of outstanding preferred stock, warrants
and convertible securities or in connection with certain acquisitions, any of
which would not be expected to result in the issuance of shares in excess of
those currently authorized but unissued. However, the Company is frequently
engaged in discussions relating to potential acquisitions, some of which could
result in agreements requiring the issuance of certain of the additional shares
to be authorized.
The Articles of Incorporation contain provisions (a) requiring a 70%
vote for approval of certain business combinations with certain 10% shareholders
unless approved by a majority of the continuing Board of Directors or certain
minimum price, procedural and other requirements are met; (b) restricting
aggregate beneficial ownership of the capital stock of the Company by certain
foreign shareholders to 20% of the total outstanding capital stock, and
subjecting excess shares to redemption; and (c) authorizing the Board of
Directors to issue preferred stock in one or more classes without any action on
the part of shareholders. In addition, the Company has entered into a
shareholder rights plan, which would cause substantial dilution to a person or
group that attempts to acquire the Company on terms not approved by the Board of
Directors. Further, the Bylaws of the Company (a) contain requirements regarding
nomination by shareholders of persons for election as directors or proposals of
other business by shareholders summarized below under "Future Proposals of
Security Holders," and (b) restrict the calling of special meetings by
shareholders to those owning not less than 40% of the votes to be cast. These
provisions may have an anti-takeover effect.
If approved by the shareholders as hereinafter provided, the Amendment
will become effective upon the filing of articles of amendment relating thereto
with the Secretary of State of Georgia, which will occur as soon as reasonably
practicable following such approval. The approval of the Amendment requires a
majority of the votes entitled to be cast on the Amendment by the holders of
Common Stock and Series B Preferred Stock as a single class. Each outstanding
share of Common Stock is entitled to one vote and each holder of Series B
Preferred Stock is entitled to one vote for each such share held. Consequently,
any shares not voted on the Amendment (whether by abstention or broker non-
votes) will have the same effect as votes against the Amendment.
The Board of Directors recommends a vote "FOR" approval of the
Amendment.
ITEM 3. APPROVAL OF THE 1999 STOCK OPTION PLAN
The Board of Directors has adopted the Company's 1999 Stock Option Plan
(the "1999 Plan") and directed that the 1999 Plan be submitted to the
shareholders for approval. The 1999 Plan will become effective only if the
shareholders approve the 1999 Plan at the annual meeting. A copy of the 1999
Plan is attached as exhibit A to this Proxy Statement and the following
description of the plan is qualified in its entirety by reference to Exhibit A.
As of April 1, 1999, _______ additional shares remain available for
future awards under the Company's existing stock option plans, plus any shares
underlying any of the _____ outstanding options which terminate, expire or are
surrendered without being exercised in full, which thereupon become available
for grant. The purpose of the 1999 Plan is to provide additional incentive to
certain valued and trusted directors and employees of the Company and its
subsidiaries or other affiliates by encouraging them to acquire shares of Common
Stock of the Company through options to purchase Common Stock granted pursuant
to the 1999 Plan, thereby increasing such directors' and employees' proprietary
interest in the Company and providing them with an increased personal interest
in the continued success and progress of the Company, the result of which will
promote both the interests of the Company and its shareholders. If the 1999 Plan
is approved, the existing stock option plans will remain in effect for future
awards; however, the annual award of options to directors under the 1990 Stock
Option Plan would cease.
The 1999 Plan provides for the granting of options to purchase a
maximum of seventy-five million (75,000,000) shares of Common Stock. If any
options granted under the 1999 Plan terminate, expire or are surrendered without
having been exercised in full, the number of shares of Common Stock not
purchased shall again be available for grant. If the number of outstanding
shares of Common Stock are increased or decreased, or such shares are exchanged
for a different number or kind of shares of the Company through reorganization,
merger, recapitalization,
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<PAGE> 28
reclassification, stock dividend, stock split, reverse stock split, combination
of shares or other similar transaction, the aggregate number of shares of Common
Stock subject to the 1999 Plan, the maximum number of shares that may be granted
to an Optionee during any calendar year, or the number or kind of shares subject
to options will be appropriately and proportionately adjusted by the Committee.
In the event the Committee determines that any dividend or other distribution
(whether in the form of cash, shares of Common Stock, other securities, or other
property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, or exchange
of shares of Common Stock or other securities of the Company, issuance of
warrants or other rights to purchase shares of Common Stock or other securities
of the Company, or other similar transaction or event affects the shares of
Common Stock or other securities or property then covered by options such that
an adjustment other than as described above is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the 1999 Plan and options granted thereunder, then the
Committee will, in such manner as it may deem equitable, adjust any or all of
(i) the number and kind of shares of stock (or other securities or property)
which thereafter may be made the subject of options, (ii) the number and kind of
shares of stock (or other securities or property) subject to outstanding
options, or, if deemed appropriate, make provision for a cash payment to the
holders of outstanding options, and (iv) the aggregate number of shares of
Common Stock or number and kind of other securities or property subject to the
1999 Plan and the maximum number of shares or other securities or property under
options that may be granted to an optionee during any calendar year under the
1999 Plan.
The 1999 Plan will be administered by the Committee, which is required
to be composed of two or more directors and which determines the grantees and
the terms of all options. The Committee has the exclusive authority to determine
the employees and directors to whom awards may be granted, the time or times
such award may be granted and to determine the amount and the terms and
conditions of the award made to each participant. The Committee is also
authorized to interpret and administer the 1999 Plan, establish, amend and
revoke rules and regulations relating to the 1999 Plan, determine the terms and
conditions to which awards are subject and make all determinations in connection
with the 1999 Plan as it may deem necessary or appropriate. Except as prohibited
by law or as is impermissible to obtain desired treatment under applicable law
or rule, the Committee is permitted to allocate or delegate all or any portion
of its powers and responsibilities to any one or more of its members or to any
person(s).
All directors and employees of the Company and its subsidiaries or
other affiliates will be eligible to participate in the 1999 Plan. The Company
is unable to determine the number of individuals who are likely to participate
in the 1999 Plan; however, it is likely that options will be awarded to
directors and executive officers of the Company. An option enables the employee
or director ("Optionee") to purchase shares of Common Stock at a specified
exercise price. No Optionee may be granted during any calendar year under the
1999 Plan options to purchase more than two million (2,000,000) shares of Common
Stock. An Optionee, if he or she is otherwise eligible, may be granted
additional awards.
Incentive stock options ("ISOs") and nonqualified stock options
("NQOs") may be granted under the 1999 Plan. The exercise price per share of an
ISO may not be less than the fair market value of the Common Stock at the time
the option is granted, except in the case of an ISO awarded to a ten percent
shareholder, in which case the purchase price may not be less than 110% of the
fair market value. The exercise price per share of an NQO will be set from time
to time by the Committee. "Fair market value" is generally the closing sales
price of the Common Stock on The Nasdaq National Market as reported by The Wall
Street Journal. On April ____, 1999, the closing sales price of the Common Stock
was $ ____ per share. In order to obtain the shares, a participant must pay the
full exercise price to the Company, to the Company at the time of exercise,
together with an amount equal to any taxes required to be withheld in connection
with such exercise. In the discretion of the Committee, the exercise price may
be paid in any combination of cash and/or Common Stock, valued at the "fair
market value" of such shares on the date of the Optionee's notice of exercise.
Such additional or different procedures or requirements for the exercise of
options may be established from time to time by or as directed by the Committee.
No person may be granted ISOs under the Option Plan that are first exercisable
during any calendar year for shares having an aggregate fair market value as of
the date of grant of more than $100,000 or such other amount as may be specified
in the Internal Revenue Code.
Subject to earlier termination as described in the 1999 Plan, any
outstanding option will terminate automatically upon the earlier of (i) the
cessation of the employment of the Optionee by the Company for any reason other
than retirement under normal Company policies, death or disability or, as to
options received as a director, the cessation of
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<PAGE> 29
service as a director of the Company other than by reason of death or
disability; (ii) the date which is three months following the effective date of
the Optionee's retirement from the Company's service under normal Company
policies; (iii) the date which is one year following the date on which the
Optionee's service with the Company (as an employee or a director, as
applicable) ceases due to death or disability; (iv) the date of expiration or
termination of the option determined by the Committee at the time the option is
granted; and (v) the tenth (10th) annual anniversary date of the granting of the
option, or, if when an ISO is granted the Optionee owns more than ten percent of
the total combined voting power of all classes of stock of the Company, then on
the fifth (5th) such anniversary. The Committee has the discretion to extend the
expiration of any options held by an Optionee whose service with the Company as
an employee or director has ceased for any reason to a date up to the end of
their original terms. Except as otherwise determined by the Committee, no option
may be assigned or transferred either voluntarily or by operation of law, other
than by will or the laws of descent and distribution.
ISOs are intended to qualify for favorable Federal income tax treatment
under Section 422 of the Internal Revenue Code. An Optionee will not realize any
income, nor will the Company be entitled to a deduction, at the time an ISO is
granted. If an Optionee does not dispose of the shares acquired on the exercise
of an ISO within one year after the transfer of such shares to him or within two
years from the date the ISO was granted to him, for Federal income tax purposes:
(a) the Optionee will not recognize any income at the time of exercise of his
ISO; (b) the amount by which the fair market value of the shares at the time of
exercise exceeds the exercise price is an item of tax preference subject to the
alternative minimum tax on individuals; and (c) the difference between the
exercise price and the amount realized upon the sale of the shares by the
Optionee will be treated as long-term capital gain or loss. The Company will not
be entitled to a deduction upon the exercise of an ISO. Except in the case of a
disposition following the death of an Optionee and certain other very limited
exceptions, if the stock acquired pursuant to an ISO is not held for the minimum
periods described above, the excess of the fair market value of the stock at the
time of exercise over the amount paid for the stock generally will be taxed as
ordinary income to the Optionee in the year of disposition. The Company is
entitled to a deduction for Federal income tax purposes at the time and in the
amount of which income is taxed to the Optionee as ordinary income by reason of
the sale of stock acquired upon the exercise of an ISO.
An Optionee will not realize any income at the time a NQO is granted,
nor will the Company be entitled to a deduction at that time. Upon exercise of a
NQO, the Optionee will recognize ordinary income (whether the exercise price is
paid in cash or by the surrender of previously owned Common Stock), in an amount
equal to the difference between the exercise price and the fair market value of
the shares to which the NQO pertains. In the discretion of the Committee, the
Optionee may authorize the Company to withhold shares of stock to satisfy the
Optionee's tax withholding liability incurred on exercise of the option. The
Company will be entitled to a tax deduction in an amount of ordinary income
realized by the Optionee.
With certain exceptions, Section 162(m) of the Internal Revenue Code
limits the deduction to the Company for compensation paid to the Chief Executive
Officer of the Company or any one of the other four highest paid executive
officers who are employed by the Company on the last day of the Company's
taxable year. However, compensation paid to such individuals will not be subject
to such deduction limit if it is considered "qualified performance-based
compensation" (within the meaning of Section 162(m)). The Company has structured
the 1999 Plan with the intention that compensation resulting from options
granted under the plan will be so qualified and deductible without regard to the
limitations otherwise imposed by Section 162(m), provided that the exercise
price of NQOs is at least equal to the fair market value of the Common Stock on
the date of grant.
Under certain circumstances, accelerated vesting or exercise of options
granted to the 1999 Plan participants under the plan in connection with a
"change in control" of the Company might be deemed an "excess parachute payment"
for purposes of the golden parachute payment provisions of Section 280G of the
Internal Revenue Code. To the extent it is so considered, the plan participant
would be subject to an excise tax equal to 20% of the amount of the excess
parachute payment, and the Company would be denied a tax deduction for the
excess parachute payment.
Under the 1999 Plan, in the event of a "Change in Control" of the
Company, as defined below, then the 1999 Plan and outstanding options will
terminate upon the consummation of such Change in Control (provided, such
options may be exercised simultaneously with such consummation to the extent
otherwise exercisable, giving effect to any
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<PAGE> 30
acceleration thereof by reason of such consummation), and the Committee shall
have the right, but not be obligated, to accelerate the exercisability of
outstanding options prior to the Change in Control, unless provision is made in
writing in connection with such transaction for the continuance of the 1999
Plan, for the assumption of options previously granted or for the substitution
for such options of new options to purchase the stock of a successor or
resulting entity, or a parent or subsidiary thereof, with appropriate
adjustments as to number and kind of shares and option price, in which event the
1999 Plan and options will continue in the manner and under the terms so
provided. However, the Committee or Board of Directors may amend such provisions
to provide for a requirement that a successor or resulting entity assume any
outstanding options. A "Change in Control" under the plan means (i) the
dissolution or liquidation of the Company, (ii) the reorganization, merger or
consolidation of the Company with one or more entities as a result of which the
Company is not the surviving or resulting entity, (ii) the sale of substantially
all the assets of the Company, or (iv) the transfer of more than 80% of the then
outstanding shares of Common Stock to another entity or person.
The 1999 Plan will terminate on March 3, 2009. The Board of Directors
may amend or revise the 1999 Plan, provided that, if and to the extent required
by applicable law or rule, any such amendment is subject to approval by a
majority of votes cast at a meeting of shareholders at which a quorum
representing a majority of the Common Stock is present in person or by proxy or
other vote as may be required by such law or rule.
If the 1999 Plan is approved by shareholders, the Committee intends to
award to Mr. Ebbers promptly after such approval, options to purchase 300,000
shares of Common Stock with an exercise price equal to the closing price on the
date of grant. The other terms and conditions of such options are expected to be
the substantially the same as described in footnote 1 under "Executive
Compensation - Option Grants in Last Fiscal Year." In January 1999, Mr. Ebbers
received additional options to purchase 1.2 million shares of Common Stock at an
exercise price of $69.875 under the 1990 Stock Option Plan with substantially
the same terms and conditions.
The benefits or amounts that will be received by or allocated to other
participants under the 1999 Plan are not presently determinable. As discussed
above under "Item 1. Election of Directors - Compensation of Directors," the
timing, terms and numbers of future options awarded to directors will be left to
the discretion of the Compensation and Stock Option Committee.
A majority of the affirmative votes cast by the holders of record of
the shares of Common 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 approve the 1999 Plan. A majority of the votes entitled to be
cast constitutes a quorum. Abstentions and broker non-votes will be counted for
purposes of determining whether a quorum is present but as not voted. Shares as
to which a broker indicates it lacks authority to vote on Item 3 will be
considered not present for purposes of determining the existence of a quorum and
will not be voted for or against Item 3.
The Board of Directors recommends a vote "FOR" approval of the 1999
Plan.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP ("Arthur Andersen") has been selected as
the Company's independent accountants for 1999. 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, 1998, filed with the Securities and Exchange Commission (including
related financial statements and schedule) is available to shareholders without
charge, upon written request to Scott D. Sullivan, Secretary, MCI WORLDCOM,
Inc., 515 East Amite Street, Jackson, Mississippi 39201-2702.
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FUTURE PROPOSALS OF SECURITY HOLDERS
All proposals of security holders intended to be presented at the 2000
annual meeting of shareholders must be received by the Company not later than
December 25, 1999, for inclusion in the Company's 2000 proxy statement and form
of proxy relating to the 2000 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.
The Company's Bylaws contain advance notice provisions relating to
proposals of business and nominations of directors at meetings of shareholders.
Under the Bylaws, in order for a shareholder to nominate a candidate for
director at an annual meeting, timely notice of the nomination must be given to
and received by the Company in advance of the meeting. Ordinarily, such notice
must be given and received not less than 120 nor more than 150 days before the
first anniversary of the preceding year's annual meeting (or between December
22, 1999 and January 21, 2000 for the 2000 Annual Meeting); provided, however,
that in the event that the date of the annual meeting is advanced by more than
30 days or delayed by more than 60 days from such anniversary date, then such
notice must be given and received not earlier than 150 days prior to such annual
meeting and not later than the close of business on the later of the 120th day
prior to such annual meeting or the 10th day following the day on which public
announcement of such meeting is first made. In certain cases, notice may be
delivered and received later if the number of directors to be elected to the
Board of Directors is increased. The shareholder submitting the notice of
nomination must describe various matters as specified in the Bylaws, including
the name and address of each proposed nominee, his or her occupation and number
of shares held, and certain other information.
In order for a shareholder to bring other business before an annual
meeting of shareholders, timely notice must be given to and received by the
Company within the time limits described. Such notice must include a description
of the proposed business (which must otherwise be a proper subject for action by
the shareholders), the reasons therefor and other matters specified in the
Bylaws. The Board of Directors or the presiding officer at the meeting may
reject any such proposals that are not made in accordance with these procedures
or that are not a proper subject for shareholder action in accordance with
applicable law. The Articles of Incorporation and Bylaws also set forth specific
requirements and limitations applicable to nominations and proposals at special
meetings of shareholders.
A shareholder proponent must be a shareholder of the Company who was a
shareholder of record both at the time of giving of notice and at the time of
the meeting and who is entitled to vote at the meeting. Any such notice must be
given to the Secretary of the Company, whose address is 515 East Amite Street,
Jackson, Mississippi, 39201. Any shareholder desiring a copy of the Articles of
Incorporation or Bylaws will be furnished a copy without charge upon written
request to the Secretary. The time limits described above also apply in
determining whether notice is timely for purposes of Rule 14a-4(c)(1) under the
Securities Exchange Act of 1934 relating to exercise of discretionary voting
authority, and are separate from and in addition to the Securities and Exchange
Commission's requirements that a shareholder must meet to have a proposal
included in the Company's proxy statement for an annual meeting.
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.
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<PAGE> 32
MISCELLANEOUS
The Company will pay the cost of soliciting proxies in connection with
the 1999 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. The Company's transfer agent, The
Bank of New York, has agreed to assist the Company in connection with the
tabulation of proxies. In addition, the Company has retained MacKenzie Partners,
Inc. to assist with the solicitation of proxies, the estimated cost of which is
approximately $5,000, 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 23, 1999
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<PAGE> 33
EXHIBIT A
MCI WORLDCOM, INC.
1999 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The MCI WORLDCOM, Inc. 1999 Stock Option Plan (the "Plan") is intended
to provide additional incentive to certain valued and trusted directors and
employees of MCI WORLDCOM, Inc., a Georgia corporation, and its subsidiaries or
other affiliates (MCI WORLDCOM, Inc. and/or its subsidiaries and other
affiliates, as the context may require, is/are referred to herein as the
"Company"), by encouraging them to acquire shares of the $.01 par value common
stock of the Company (the "Stock") through options to purchase Stock granted
pursuant to the Plan ("Options"), thereby increasing such directors' and
employees' proprietary interest in the business of the Company and providing
them with an increased personal interest in the continued success and progress
of the Company, the result of which will promote both the interests of the
Company and its shareholders.
Options granted under the Plan will be either options intended to
qualify as incentive stock options ("ISOs") within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), or non-qualified
options ("NQOs"). Each director or employee granted an Option (an "Optionee")
shall enter into an agreement with the Company (the "Option Agreement") setting
forth the terms and conditions of the Option, as determined in accordance with
this Plan.
2. ADMINISTRATION OF PLAN
This Plan shall be administered by the Compensation and Stock Option
Committee of the Board of Directors of the Company (the "Committee"), to be
composed of two (2) or more members of the Board of Directors of the Company
who shall be appointed from time to time by the Board of Directors. The
Committee shall have the sole and absolute power:
a. subject to the provisions of the Plan, to determine the terms and
conditions of all Options; to construe and interpret the Plan and Options
granted under it; to determine the time or times an Option may be exercised,
the number of shares as to which an Option may be exercised at any one time,
and when an Option may terminate; to establish, amend and revoke rules and
regulations relating to the Plan and its administration; and to correct any
defect, supply any omission, or reconcile any inconsistency in the Plan, or in
any Option Agreement, in a manner and to the extent it shall deem necessary,
all of which determinations and interpretations made by the Committee shall be
conclusive and binding on all Optionees, any other holders of Options and on
their legal representatives and beneficiaries;
b. to determine all questions of policy and expediency that may arise
in the administration of the Plan and generally exercise such powers and
perform such acts as are deemed necessary or expedient to promote the best
interests of the Company; and
c. except to the extent prohibited by, or impermissible in order to
obtain treatment desired by the Committee under, applicable law or rule, to
allocate or delegate all or any portion of its powers and responsibilities to
any one or more of its members or to any person(s) selected by it, subject to
revocation or modification by the Committee of such allocation or delegation.
3. SHARES SUBJECT TO THE PLAN
Subject to the provisions of paragraph 13 below, the Stock which may be
issued pursuant to Options granted under the Plan shall not exceed in the
aggregate seventy-five million (75,000,000) shares. If any Options granted
under the Plan terminate, expire or are surrendered without having been
exercised in full, the number of shares of Stock not purchased under such
Options shall be available again for the purpose of the Plan.
<PAGE> 34
EXHIBIT A
4. PERSONS ELIGIBLE FOR OPTIONS
a. All directors and employees of the Company shall be eligible to
receive the grant of Options under the Plan. The Committee shall determine the
employees and directors to whom Options shall be granted, the time or times
such Options shall be granted, the type of Option to be granted, the number of
shares to be subject to each Option and the times when each Option may be
exercised; provided, however, no Optionee shall be granted during any calendar
year Options under the Plan to purchase more than two million (2,000,000)
shares of Stock. An Optionee, if he or she is otherwise eligible, may be
granted additional Options. An employee or director may be granted ISOs or NQOs
or both under the Plan; provided, however, that the grant of ISOs and NQOs to
an employee or director shall be the grant of separate Options and each ISO and
each NQO shall be specifically designated as such in accordance with the
applicable provisions of the Department of Treasury regulations.
b. With respect to the granting of ISOs only, no ISO will be granted to
an Optionee, and an attempted grant of such an ISO will be void, if the
aggregate Fair Market Value Per Share (as defined below), determined by the
Committee at the time an ISO is granted, of the Stock with respect to which the
ISO and previously granted ISOs are exercisable for the first time by such
Optionee during any calendar year (under all such plans of the Company) exceeds
$100,000.00 or such other amount as may be specified in Section 422(d) of the
Code.
5. PURCHASE PRICE
The purchase price of each share of Stock covered by each ISO shall not
be less than one hundred percent (100%) of the Fair Market Value Per Share (as
defined below) of the Stock on the date the ISO is granted; provided, however,
if when an ISO is granted the Optionee receiving the ISO owns or will be
considered to own by reason of Section 424(d) of the Code more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Company, the purchase price of the Stock covered by such ISO shall not be less
than one hundred and ten percent (110%) of the Fair Market Value Per Share of
the Stock on the date the ISO is granted. The purchase price of each share of
Stock covered by each NQO shall be set from time to time by the Committee.
"Fair Market Value Per Share" of the Stock shall mean: (i) if the Stock
is not publicly traded, the amount determined by the Committee on the date of
the grant of the Option; (ii) if the Stock is traded only otherwise than on a
securities exchange and is not reported on The Nasdaq National Market
("Nasdaq"), the closing quoted selling price of the Stock on the date of grant
of the Option as quoted in "pink sheets" published by the National Daily
Quotation Bureau; (iii) if the Stock is traded only otherwise than on a
securities exchange and is reported on Nasdaq, the closing Nasdaq reported
sales price of the Stock on the date of grant of the Option, as reported in the
Wall Street Journal; or (iv) if the Stock is admitted to trading on a
securities exchange, the closing quoted selling price of the Stock on the date
of grant of the Option, as reported in the Wall Street Journal. For purposes of
Items (i) through (iv) of this paragraph, if there were no sales on the date of
the grant of an Option, the Fair Market Value Per Share shall be determined by
the Committee in accordance with Section 20.2031-2 of the Federal Estate Tax
Regulations.
6. DURATION OF OPTIONS
Subject to earlier termination as provided herein, any outstanding
Option and all unexercised rights thereunder shall expire and terminate
automatically upon the earlier of (i) the cessation of the employment of the
Optionee by the Company for any reason other than retirement under normal
Company policies, death or disability or, as to Options received as a director,
the cessation of service as a director of the Company other than by reason of
death or disability; (ii) the date which is three months following the
effective date of the Optionee's retirement from the Company's service under
normal Company policies; (iii) the date which is one year following the date on
which the Optionee's service with the Company (as an employee or a director, as
applicable) ceases due to death or disability; (iv) the date of expiration or
termination of the Option determined by the Committee at the time the Option is
granted; and (v) the tenth (10th) annual anniversary date of the granting of
the Option, or, if when an ISO is granted the Optionee owns (or would be
considered to own by reason of Section 424(d) of the Code) more than ten
percent (10%) of the total combined voting
-2-
<PAGE> 35
EXHIBIT A
power of all classes of stock of the Company, then on the fifth (5th) such
anniversary; provided, however, that the Committee shall have the right, but
not the obligation, to extend the expiry of some or all of the Options held by
an Optionee whose service with the Company as an employee or a director has
ceased for any reason to a date up to the end of their original terms,
notwithstanding that such Options may no longer qualify as ISOs under the Code.
7. EXERCISE OF OPTIONS
An Option may be exercisable in installments or otherwise upon such
terms as the Committee shall determine when the Option is granted. As a
condition of the exercise, in whole or in part, of any Option, the Committee
may require the Optionee to pay, in addition to the purchase price of the Stock
covered by the Option, an amount equal to any Federal, state, local and foreign
taxes that may be required to be withheld in connection with the exercise of
such Option. Notwithstanding the foregoing, the Committee may authorize the
Company's officers to establish procedures for the satisfaction of an
Optionee's withholding tax liability incurred upon exercise of an Option by
enabling the Optionee to authorize the Company to retain from the total number
of shares to be issued pursuant to such Option exercise that number of shares
(based on the then Fair Market Value Per Share as determined by the Committee)
that will satisfy the withholding tax due.
8. METHOD OF EXERCISE
a. When the right to purchase shares accrues, Options may be exercised
by giving written notice to the Company stating the number of shares for which
the Option is being exercised, accompanied by payment in full by cash, or its
equivalent, acceptable to the Company, of the purchase price for the shares
being purchased and, if applicable, any Federal, state, local or foreign taxes
required to be withheld in accordance with the provisions of paragraph 7 above.
Such additional or different procedures or requirements for the exercise of
Options may be established from time to time by or as directed by the
Committee.
b. In the Committee's discretion, payment of the purchase price for the
shares may be made in whole or in part with other shares of Stock of the
Company which are free and clear of all liens and encumbrances. The value of
the shares of Stock tendered in payment for the shares being purchased shall be
the Fair Market Value Per Share on the date of the Optionee's notice of
exercise.
c. Notwithstanding the foregoing, the Company shall have the right to
postpone the time of delivery of the shares for such period as may be required
for the Company, with reasonable diligence, to comply with any applicable
listing requirements of any national securities exchange or Nasdaq or any
Federal, state, local or foreign law. If the Optionee, or other person entitled
to exercise the Option, fails to timely accept delivery of and pay for the
shares specified in such notice, the Committee shall have the right to
terminate the Option with respect to such shares.
9. TRANSFERABILITY OF OPTIONS
Except as otherwise determined by the Committee, no Option granted
under the Plan shall be assignable or transferable by the Optionee, either
voluntarily or by operation of law, other than by will or the laws of descent
and distribution, and, during the lifetime of the Optionee, shall be
exercisable only by the Optionee.
10. CONTINUANCE OF EMPLOYMENT
Nothing contained in the Plan or in any Option granted under the Plan
shall confer upon any Optionee any rights with respect to the continuation of
employment by the Company or interfere in any way with the right of the Company
(subject to the terms of any separate employment agreement to the contrary) at
any time to terminate such employment or to increase or decrease the
compensation of the Optionee from the rate in existence at the time of the
granting of any Option.
-3-
<PAGE> 36
EXHIBIT A
11. RESTRICTIONS ON SHARES
If the Company shall be advised by counsel that certain requirements
under the Federal, state or foreign securities laws must be met before Stock
may be issued under this Plan, the Company shall notify all persons who have
been issued Options, and the Company shall have no liability for failure to
issue Stock under any exercise of Options because of delay while such
requirements are being met or the inability of the Company to comply with such
requirements.
12. PRIVILEGE OF STOCK OWNERSHIP
No person entitled to exercise any Option granted under the Plan shall
have the rights or privileges of a shareholder of the Company for any shares of
Stock issuable upon exercise of such Option until such person has become the
holder of record of such shares. No adjustment shall be made for dividends or
other rights for which the record date is prior to the date on which such
person becomes the holder of record, except as provided in paragraph 13 below.
13. ADJUSTMENT
a. If the number of outstanding shares of Stock are increased or
decreased, or such shares are exchanged for a different number or kind of
shares or securities of the Company through reorganization, merger,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, combination of shares, or other similar transaction, the aggregate
number of shares of Stock subject to the Plan as provided in paragraph 3 above,
the maximum number of shares under Options that may be granted to an Optionee
during any calendar year specified in paragraph 4(a) above, and the shares
subject to issued and outstanding Options under the Plan shall be appropriately
and proportionately adjusted by the Committee. Any such adjustment in an
outstanding Option shall be made without change in the aggregate purchase price
applicable to the unexercised portion of the Option but with an appropriate
adjustment in the price for each share or other unit of any security covered by
the Option. In the event the Committee determines that any dividend or other
distribution (whether in the form of cash, shares of Stock, other securities,
or other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of shares of Stock or other securities of the Company,
issuance of warrants or other rights to purchase shares of Stock or other
securities of the Company, or other similar transaction or event affects the
shares of Stock or other securities or property then covered by Options such
that an adjustment other than as provided in the foregoing portion of this
subparagraph (a) is appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan
and Options granted thereunder, then the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number and kind of shares of
stock (or other securities or property) which thereafter may be made the
subject of Options, (ii) the number and kind of shares of stock (or other
securities or property) subject to outstanding Options, or, if deemed
appropriate, make provision for a cash payment to the holders of outstanding
Options, and (iv) the aggregate number of shares of Stock or number and kind of
other securities or property subject to the Plan and the maximum number of
shares or other securities or property under Options that may be granted to an
Optionee during any calendar year specified in paragraph 4(a) above.
b. Notwithstanding subparagraph (a) of this paragraph, upon the
dissolution or liquidation of the Company, or upon a reorganization, merger or
consolidation of the Company with one or more entities as a result of which the
Company is not the surviving or resulting entity, or upon a sale of
substantially all of the assets of the Company or the transfer of more than 80%
of the then outstanding Stock of the Company to another entity or person, the
Plan and any Options granted under the Plan shall terminate upon the
consummation of the transaction (provided, such Options may be exercised
effective simultaneously with such consummation to the extent otherwise
exercisable, giving effect to any acceleration thereof by reason of such
consummation), and the Committee shall have the right, but shall not be
obligated, to accelerate the time in which any Option may be exercised prior to
such termination, unless provision shall be made in writing in connection with
such transaction for the continuance of the Plan, for the assumption of Options
previously granted or the substitution for such Options of new options to
purchase the stock of a successor or resulting entity, or parent or subsidiary
thereof, with appropriate adjustments as to number and kind of shares and the
option price, in which event the Plan and Options previously granted shall
continue in the manner and under the terms so provided;
-4-
<PAGE> 37
EXHIBIT A
provided, however, that the Committee or the Board of Directors shall have the
authority to amend this paragraph to provide for a requirement that a successor
or resulting entity assume any outstanding Options.
c. Adjustments under this paragraph shall be made by the Committee
whose determination as to what adjustments shall be made, and the extent
thereof, shall be final, binding and conclusive. No fractional shares of Stock
shall be issued under the Plan or in connection with any such adjustment.
14. AMENDMENT AND TERMINATION OF PLAN
a. The Board of Directors of the Company, may, from time to time,
suspend or terminate the Plan or amend or revise the terms of the Plan;
provided that if and to the extent required by applicable law or rule, any such
amendment to the Plan shall be subject to approval by a majority of votes cast
at a meeting of shareholders at which a quorum representing a majority of the
Stock is present in person or by proxy or such other vote as may be required by
such law or rule.
b. Subject to the provisions in paragraph 13 above, the Plan shall
terminate on March 3, 2009.
c. Subject to the provisions in paragraph 13 above, no amendment,
suspension or termination of this Plan shall, without the consent of the
Optionee, adversely affect the rights of such Optionee under any Option
previously granted to such Optionee under the Plan.
15. EFFECTIVE DATE OF PLAN
The Plan shall become effective upon approval by the Company's
shareholders.
16. TERM OF PLAN
No Option shall be granted pursuant to the Plan after March 3, 2009.
-5-
<PAGE> 38
PROXY/VOTING INSTRUCTION CARD
MCI 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, THURSDAY, MAY 20, 1999
The undersigned hereby, (i) with respect to all shares of Common Stock
and Series B Convertible Preferred Stock of MCI 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 Common Stock which the
undersigned, as a participant in the MCI Plans (as defined below), may be
entitled to direct the voting of, directs Mellon (as defined below), in each
case, to vote at the Annual Meeting of Shareholders of the Company, to be held
on Thursday, May 20, 1999, commencing at 10:00 a.m. local time, at 500 Clinton
Center Dr., Clinton, Mississippi, 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 23, 1999, receipt of which is hereby acknowledged.
THIS PROXY/VOTING INSTRUCTION CARD, WHEN PROPERLY EXECUTED, WILL BE
VOTED AND DEEMED AN INSTRUCTION TO MELLON (AS DEFINED BELOW) TO VOTE IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS
PROXY/VOTING INSTRUCTION CARD WILL BE VOTED, OR WITH RESPECT TO SHARES HELD IN
THE MCI PLANS (AS DEFINED BELOW) THIS PROXY/VOTING INSTRUCTION CARD WILL BE
DEEMED AN INSTRUCTION TO VOTE, FOR THE ELECTION OF ALL NOMINEES UNDER PROPOSAL
1, FOR PROPOSAL 2, FOR PROPOSAL 3 AND IN THE DISCRETION OF THE PROXIES OR
MELLON, AS THE CASE MAY BE, WITH RESPECT TO PROPOSAL 4.
Shares of Common Stock held in the MCI Communications Corporation ESOP
and 401(k) Plan and Western Union International, Inc. 401(k) Plan for
Collectively Bargained Employees (the "MCI Plans"), will be voted by Mellon
Bank, N.A. ("Mellon") as trustee of the MCI Plans. Participants in the MCI
Plans should indicate their voting instructions for each action to be taken
under proxy. All instructions must be received by Mellon prior to May 15, 1999
in order to be counted. All voting instructions from MCI Plan participants will
be kept confidential. MCI Plan shares will not be voted if the MCI Plan
participant fails to provide voting instructions for any of the actions to be
taken under proxy.
MCI WORLDCOM, Inc.
Post Office Box 11494
New York, NY 10203-0494
(Continued, and to be signed and dated
on the reverse side.)
<PAGE> 39
MCI WORLDCOM, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS MAY 20, 1999
The enclosed material relates to shares of MCI WORLDCOM, Inc. held in your
account in the WORLDCOM 401(k) Salary Savings Plan (the "Plan") on April 1,
1999. 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
prepaid envelope included.
MERRILL LYNCH TRUST COMPANY
<PAGE> 40
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS [ ] FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS
listed below for all nominees listed below
</TABLE>
Nominees: Clifford L. Alexander, Jr., James C. Allen, Judith Areen, Carl J.
Aycock, Max E. Bobbitt, Stephen M. Case, Bernard J. Ebbers, Francesco Galesi,
Stiles A. Kellett, Jr., Gordon S. Macklin, John A. Porter, Timothy F. Price,
Bert C. Roberts, Jr., John W. Sidgmore, Scott D. Sullivan, Lawrence, C. Tucker
and Juan Villalonga. (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, MARK THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN
THE SPACE PROVIDED BELOW.)
*Exceptions___________________________________________________________________
2. Proposal to amend the Company's Second Amended and Restated Articles of
Incorporation, as amended, to increase the number of authorized shares of
common stock, par value $.01 per share, from 2,500,000,000 to 5,000,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to approve the Company's 1999 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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 and 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_______
---------------------------------------
Signature of shareholder or authorized
representative
---------------------------------------
Signature (if held jointly)
SIGN, DATE AND RETURN THE PROXY/VOTING VOTES MUST BE INDICATED [X]
INSTRUCTION CARD PROMPTLY USING THE [X] IN BLACK OR BLUE INK.
ENCLOSED ENVELOPE.
