-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ByQYK26MvlznKQhn35fyKVpjNXZULU0wwjdxwpRntVlb6tTB6zuBcc/KzVwZex5R xeaa5QkW2zoG1yj68I9kFA== 0001005477-02-000180.txt : 20020413 0001005477-02-000180.hdr.sgml : 20020413 ACCESSION NUMBER: 0001005477-02-000180 CONFORMED SUBMISSION TYPE: SC TO-I PUBLIC DOCUMENT COUNT: 22 FILED AS OF DATE: 20020117 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: WORLDCOM INC/GA// CENTRAL INDEX KEY: 0000723527 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 581521612 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-I SEC ACT: 1934 Act SEC FILE NUMBER: 005-36706 FILM NUMBER: 2511693 BUSINESS ADDRESS: STREET 1: 500 CLINTON CENTER DRIVE CITY: CLINTON STATE: MS ZIP: 39056 BUSINESS PHONE: 6014605600 FORMER COMPANY: FORMER CONFORMED NAME: LDDS COMMUNICATIONS INC /GA/ DATE OF NAME CHANGE: 19930916 FORMER COMPANY: FORMER CONFORMED NAME: MCI WORLDCOM INC DATE OF NAME CHANGE: 19980914 FORMER COMPANY: FORMER CONFORMED NAME: WORLDCOM INC /GA/ DATE OF NAME CHANGE: 19970127 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: WORLDCOM INC/GA// CENTRAL INDEX KEY: 0000723527 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 581521612 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-I BUSINESS ADDRESS: STREET 1: 500 CLINTON CENTER DRIVE CITY: CLINTON STATE: MS ZIP: 39056 BUSINESS PHONE: 6014605600 FORMER COMPANY: FORMER CONFORMED NAME: LDDS COMMUNICATIONS INC /GA/ DATE OF NAME CHANGE: 19930916 FORMER COMPANY: FORMER CONFORMED NAME: MCI WORLDCOM INC DATE OF NAME CHANGE: 19980914 FORMER COMPANY: FORMER CONFORMED NAME: WORLDCOM INC /GA/ DATE OF NAME CHANGE: 19970127 SC TO-I 1 d02-35651.txt TENDER OFFER STATEMENT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE TO (RULE 14D-100) TENDER OFFER STATEMENT UNDER SECTION 14(D)(1) OR 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 WORLDCOM, INC. (Name of Subject Company (Issuer)) WORLDCOM, INC. (Names of Filing Persons (Issuer)) OPTIONS TO PURCHASE WORLDCOM GROUP COMMON STOCK, PAR VALUE $.01 PER SHARE, GRANTED UNDER WORLDCOM, INC. 1997 STOCK OPTION PLAN (Title of Class of Securities) 98157D106 (UNDERLYING WORLDCOM GROUP COMMON STOCK, PAR VALUE $.01 PER SHARE) (CUSIP Number of Class of Securities) Scott D. Sullivan WorldCom, Inc. 500 Clinton Center Drive Clinton, Mississippi 39056 (601) 460-5600 (Name, address and telephone number of person authorized to receive notices and communications on behalf of filing persons) COPY TO: R. Randall Wang, Esq. Bryan Cave LLP One Metropolitan Square 211 North Broadway, Suite 3600 St. Louis, Missouri 63102 (314) 259-2000 CALCULATION OF FILING FEE
- -------------------------------------------------------------------------------- TRANSACTION VALUATION* AMOUNT OF FILING FEE - -------------------------------------------------------------------------------- $126,998,886 $11,684 - --------------------------------------------------------------------------------
* Estimated for purposes of calculating the amount of the filing fee only. The filing fee calculation assumes that options to purchase 124,958,613 shares of WorldCom group common stock of WorldCom, Inc. having an aggregate value of $126,998,886 as of January 16, 2002 will be cancelled pursuant to this offer. The aggregate value of such options was calculated based on the Black-Scholes option pricing model. The amount of the filing fee, calculated in accordance with Rule 0-11 of the Securities Exchange Act of 1934, as amended. |_| Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: Filing Party: Form or Registration No.: Date Filed: |_| Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: |_| third-party tender offer subject to Rule 14d-1. |X| issuer tender offer subject to Rule 13e-4. |_| going-private transaction subject to Rule 13e-3. |_| amendment to Schedule 13D under Rule 13d-2. Check the following box if the filing is a final amendment reporting the results of the tender offer: |_| ITEM 1. SUMMARY TERM SHEET. The information set forth under "Summary Term Sheet" in the Offer to Exchange dated January 17, 2002 (the "Offer to Exchange"), attached hereto as Exhibit (a)(1)(A), is incorporated herein by reference. ITEM 2. SUBJECT COMPANY INFORMATION. (a) The name of the issuer is WorldCom, Inc., a Georgia corporation (the "Company"), and the address of its principal executive office is 500 Clinton Center Drive, Clinton, Mississippi 39056. The Company's telephone number is (601) 460-5600. (b) This Tender Offer Statement on Schedule TO relates to an offer by the Company to certain current U.S. WorldCom group employees, excluding those persons described below, to exchange all outstanding options to purchase shares of the Company's WorldCom group common stock, par value $.01 per share ("WorldCom group stock"), which were originally granted under the WorldCom, Inc. 1997 Stock Option Plan, as amended (the "1997 plan") on January 4, 1999, January 18, 2000 and April 24, 2000 for new nonqualified stock options (the "New Options") (the "Stock Option Exchange Program"). Employees that elect to exchange any eligible options must exchange all eligible outstanding options (the options submitted for exchange, the "Cancelled Options"). The New Options will be granted by the Company under the 1997 plan, and upon the terms and conditions described in the Offer to Exchange and the related Election to Participate attached hereto as Exhibits (a)(1)(A), (a)(1)(B) and (a)(1)(C). Only current employees of the WorldCom group are eligible to participate in the Stock Option Exchange Program. The excluded persons are the board of directors and executive officers of the Company as well as employees residing outside of the United States, WorldCom group employees who are currently on a leave of absence that began prior to August 1, 2001, and WorldCom group employees who do not hold any outstanding options granted by WorldCom on January 4, 1999, January 18, 2000 or April 24, 2000. The number of shares subject to the New Options will equal the number of shares subject to the Cancelled Options. The exercise price of the New Options will equal the closing sales price of the WorldCom group stock as reported on The Nasdaq National Market on the day on which the New Options are granted. The information set forth in the Offer to Exchange under "Summary Term Sheet," "Introduction," Section 1 ("Number of Options; Expiration Date"), Section 5 ("Acceptance of Options for Exchange and Issuance of New Options") and Section 8 ("Source and Amount of Consideration; Terms of New Options") is incorporated herein by reference. (c) The information set forth in the Offer to Exchange under Section 7 ("Price Range of WorldCom group stock Underlying the Options") is incorporated herein by reference. No trading market exists for the options to purchase WorldCom group stock that are subject to the Offer to Exchange. ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON. (a) The Company is also the filing person. The Company's address and telephone number are set forth in Item 2(a) above. The information set forth in the Offer to Exchange under Section 3 ("Procedures for Electing to Participate in the Stock Option Exchange Program") and Section 10 ("Interests of Directors and Executive Officers; Transactions and Arrangements Concerning the Options"), which contains information regarding the identity and address of the directors and executive officers of the Company, is incorporated herein by reference. ITEM 4. TERMS OF THE TRANSACTION. (a) The following sections of the Offer to Exchange contain a description of the material terms of the Stock Option Exchange Program and are incorporated herein by reference: o "Summary Term Sheet"; o "Introduction"; o Section 1 ("Number of Options; Expiration Date"); o Section 3 ("Procedures for Electing to Participate in the Stock Option Exchange Program"); o Section 4 ("Withdrawal Rights"); o Section 5 ("Acceptance of Options for Exchange and Issuance of New Options"); o Section 6 ("Conditions of the Stock Option Exchange Program"); 2 o Section 8 ("Source and Amount of Consideration; Terms of New Options"); o Section 11 ("Status of Options Acquired by us in the Stock Option Exchange Program; Accounting Consequences of the Stock Option Exchange Program"); o Section 12 ("Legal Matters; Regulatory Approvals"); o Section 13 ("Material U.S. Federal Income Tax Consequences"); and o Section 14 ("Extension of the Stock Option Exchange Program; Termination; Amendment"). (b) Directors and executive officers of the Company are not eligible to participate in the Stock Option Exchange Program. ITEM 5. PAST CONTRACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS. (e) The information set forth in the Offer to Exchange under Section 10 ("Interests of Directors and Executive Officers; Transaction and Arrangements Concerning the Options") is incorporated herein by reference. ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS. (a) The information set forth in the Offer to Exchange under Section 2 ("Purpose of the Stock Option Exchange Program") is incorporated herein by reference. (b) The shares of WorldCom group stock which are subject to the Cancelled Options will be returned to the pool of shares available for grants of new options under the 1997 plan. The information set forth in the Offer to Exchange under Section 11 ("Status of Options Acquired by us in the Stock Option Exchange Program; Accounting Consequences of the Stock Option Exchange Program") is incorporated herein by reference. (c) The information set forth in the Offer to Exchange under Section 2 ("Purpose of the Stock Option Exchange Program") is incorporated herein by reference. ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a) The information set forth in the Offer to Exchange under Section 8 ("Source and Amount of Consideration; Terms of New Options") is incorporated herein by reference. (b) Not applicable. (c) Not applicable. ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) The information set forth in the Offer to Exchange under Section 10 ("Interests of Directors and Executive Officers; Transactions and Arrangements Concerning the Options") is incorporated herein by reference. (b) The information set forth in the Offer to Exchange under Section 10 ("Interests of Directors and Executive Officers; Transactions and Arrangements Concerning the Options") is incorporated herein by reference. ITEM 9. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED. (a) Not applicable. ITEM 10. FINANCIAL STATEMENTS. (a) The information included in Item 8 of the Company's annual report on Form 10-K for its fiscal year ended December 31, 2000 filed with the Securities and Exchange Commission on March 30, 2001, as amended by Form 10-K/A filed with the Securities and Exchange Commission on April 26, 2001 (File No. 000-11258), and Item 1 of the Company's quarterly report set forth in the quarterly report on Form 10-Q for its fiscal quarter ended September 30, 2001 filed with the Securities and Exchange Commission on November 14, 2001 (File No. 000-11258), is incorporated herein by reference. 3 (b) Not applicable. ITEM 11. ADDITIONAL INFORMATION. (a) The directors and executive officers of the Company are not eligible to participate in the Stock Option Exchange Program. The information set forth in the Offer to Exchange under Section 10 ("Interests of Directors and Executive Officers; Transaction and Arrangements Concerning the Options") and Section 12 ("Legal Matters; Regulatory Approvals") is incorporated herein by reference. To the knowledge of the Company, no material legal proceedings relating to the tender offer are pending. (b) Not applicable ITEM 12. EXHIBITS. (a)(1)(A) Offer to Exchange, dated January 17, 2002. (a)(1)(B) Form of Election to Participate for option holders submitting on the web site. (a)(1)(C) Form of Election to Participate for option holders unable to access or use the web site. (a)(1)(D) Form of Notice of Withdrawal for option holders submitting on the web site. (a)(1)(E) Form of Notice of Withdrawal for option holders unable to access or use the web site. (a)(1)(F) Form of Letter from Human Resources to Eligible Option Holders dated January 17, 2002. (a)(1)(G) Form of Letter from Stock Option Department dated January 17, 2002 to WorldCom group employees on leave of absence who are eligible for option exchange. (a)(1)(H) Form of Letter from Stock Option Department dated January 17, 2002 to eligible persons receiving paper forms of exchange. (a)(1)(I) Form of Confirmation to Offerees of Receipt of Election to Participate for option holders submitting on the web site. (a)(1)(J) Form of Confirmation to Offerees of Receipt of Election to Participate for option holders unable to access or use the web site. (a)(1)(K) Form of Confirmation to Offerees of Receipt of Notice of Withdrawal for option holders submitting on the web site. (a)(1)(L) Form of Confirmation to Offerees of Receipt of Notice of Withdrawal for option holders unable to access or use the web site. (a)(1)(M) Form of Press Release dated January 17, 2002. (a)(1)(N) Form of web site welcome page. (a)(1)(O) Form of web site pop-up box appearing after the option holder has read and "clicks" to submit the Election to Participate or Notice of Withdrawal. (a)(1)(P) Form of presentation regarding Domestic Worldcom Group Stock Option Exchange Program Overview. (a)(1)(Q) Offering Circular for the WorldCom, Inc. 1997 Stock Option Plan, as amended. (a)(1)(R) Those portions of the Company's annual report on Form 10-K for its fiscal year ended December 31, 2000, filed with the Securities and Exchange Commission on March 30, 2001, as amended by Form 10-K/A filed with the Securities and Exchange Commission on April 26, 2001. (Incorporated by Reference). 4 (a)(1)(S) The Company's quarterly report on Form 10-Q for its fiscal quarter ended September 30, 2001, filed with the Securities and Exchange Commission on November 14, 2001. (Incorporated by Reference). (d)(1)(A) The Company's 1997 Stock Option Plan, as amended. (d)(1)(B) Form of Stock Option Agreement in connection with the replacement grant for the all-employee option programs under the 1997 plan. (d)(1)(C) Form of Stock Option Agreement in connection with the replacement grant for the management option programs under the 1997 plan. (d)(1)(D) Form of Stock Option Agreement in connection with the replacement grant for the April 24, 2000 grant under the 1997 plan. ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3. (a) Not applicable. 5 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. WORLDCOM, INC. By: /s/ Scott D. Sullivan ------------------------------------ Scott D. Sullivan Chief Financial Officer Dated: January 17, 2002 6 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION (a)(1)(A) Offer to Exchange, dated January 17, 2002. (a)(1)(B) Form of Election to Participate for option holders submitting on the web site. (a)(1)(C) Form of Election to Participate for option holders unable to access or use the web site. (a)(1)(D) Form of Notice of Withdrawal for option holders submitting on the web site. (a)(1)(E) Form of Notice of Withdrawal for option holders unable to access or use the web site. (a)(1)(F) Form of Letter from Human Resources to Eligible Option Holders dated January 17, 2002. (a)(1)(G) Form of Letter from Stock Option Department dated January 17, 2002 to WorldCom group employees on leave of absence who are eligible for option exchange. (a)(1)(H) Form of Letter from Stock Option Department dated January 17, 2002 to eligible persons receiving paper forms of exchange. (a)(1)(I) Form of Confirmation to Offerees of Receipt of Election to Participate for option holders submitting on the web site. (a)(1)(J) Form of Confirmation to Offerees of Receipt of Election to Participate for option holders unable to access or use the web site. (a)(1)(K) Form of Confirmation to Offerees of Receipt of Notice of Withdrawal for option holders submitting on the web site. (a)(1)(L) Form of Confirmation to Offerees of Receipt of Notice of Withdrawal for option holders unable to access or use the web site. (a)(1)(M) Form of Press Release dated January 17, 2002. (a)(1)(N) Form of web site welcome page. (a)(1)(O) Form of web site pop-up box appearing after the option holder has read and "clicks" to submit the Election to Participate or Notice of Withdrawal. (a)(1)(P) Form of presentation regarding Domestic WorldCom Group Stock Option Exchange Program Overview. (a)(1)(Q) Offering Circular for the WorldCom, Inc. 1997 Stock Option Plan, as amended. (a)(1)(R) Those portions of the Company's annual report on Form 10-K for its fiscal year ended December 31, 2000, filed with the Securities and Exchange Commission on March 30, 2001, as amended by Form 10-K/A filed with the Securities and Exchange Commission on April 26, 2001. (Incorporated by Reference). (a)(1)(S) The Company's quarterly report on Form 10-Q for its fiscal quarter ended September 30, 2001, filed with the Securities and Exchange Commission on November 14, 2001. (Incorporated by Reference). (d)(1)(A) The Company's 1997 Stock Option Plan, as amended. (d)(1)(B) Form of Stock Option Agreement in connection with the replacement grant for the all-employee option programs under the 1997 plan. (d)(1)(C) Form of Stock Option Agreement in connection with the replacement grant for the management option programs under the 1997 plan. 7 (d)(1)(D) Form of Stock Option Agreement in connection with the replacement grant for the April 24, 2000 grant under the 1997 plan. 8 EX-99.(A)(1)(A) 3 ex99-a1a.txt OFFER TO EXCHANGE EXHIBIT (a)(1)(A) This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933, as amended. WORLDCOM, INC. OFFER TO EXCHANGE CERTAIN OUTSTANDING OPTIONS TO PURCHASE WORLDCOM GROUP COMMON STOCK UNDER THE WORLDCOM, INC. 1997 STOCK OPTION PLAN, AS AMENDED THE OFFER AND WITHDRAWAL RIGHTS EXPIRE ON FEBRUARY 14, 2002 AT 12:00 MIDNIGHT, EASTERN STANDARD TIME, UNLESS THE OFFER IS EXTENDED WorldCom, Inc. ("WorldCom," "we," "us" or the "Company") is offering to certain current U.S. WorldCom group employees, excluding those persons described below, the right to exchange certain outstanding options to purchase shares of our WorldCom group common stock, par value $.01 per share ("WorldCom group stock"), for new nonqualified stock options with a new exercise price, new expiration date and new vesting schedule (the "Stock Option Exchange Program"). Eligible options are those which were originally granted by WorldCom under the WorldCom, Inc. 1997 Stock Option Plan, as amended, which we refer to as the "1997 plan," on January 4, 1999, January 18, 2000 and April 24, 2000. The current exercise price per share of the options granted on January 4, 1999 is $45.1433, for the January 18, 2000 option grants, $43.1243 and for the April 24, 2000 option grants, $38.7634. The new stock options will be granted under the 1997 plan. The excluded persons are our board of directors and executive officers, as well as employees residing outside the United States and WorldCom group employees who are currently on a leave of absence that began prior to August 1, 2001. We are making this offer upon the terms and subject to the conditions set forth in this Offer to Exchange and in the Election to Participate. New options will be granted on the first trading day that is at least six months and one day after the date we cancel the options accepted for exchange, which we currently anticipate to be on or about August 15, 2002, which we refer to as the "replacement grant date." Some key features of the new options will include: o the number of shares subject to each new option will be equal to the number of shares subject to each of your corresponding cancelled options; o the exercise price of the new options will equal the closing sales price of our WorldCom group stock as reported on The Nasdaq National Market on the replacement grant date; o the new options will be nonqualified stock options; o the term of the new options will be ten years from the replacement grant date, subject to earlier termination as provided in the plan and the new stock option agreements governing such options; o the new options will vest and, subject to the provisions of the 1997 plan and the new stock option agreements, will be exercisable as follows: one-third (1/3) the number of shares covered by the new options on and after January 1, 2003, another one-third (1/3) of such shares on and after January 1, 2004, and the remaining one-third (1/3) of such shares on and after January 1, 2005; and o the other terms and conditions of the new options will be substantially similar to those of the cancelled options. A copy of the 1997 plan is attached as an exhibit to the Schedule TO filed with the Securities and Exchange Commission and is available at the internal web site created for the Stock Option Exchange Program (http://stockoption2002.wcomnet.com). For eligible employees who cannot use the web site, the Stock Option Department will mail to you copies of the Offer to Exchange and related documents so that you may participate in the Stock Option Exchange Program. We are making the offer upon the terms and subject to the conditions set forth in the Offer to Exchange and in the related Election to Participate. The Stock Option Exchange Program is not conditioned upon a minimum number of options being elected for exchange. If you elect to participate in the Stock Option Exchange Program, you must elect to exchange all outstanding options you hold which were originally granted by WorldCom on January 4, 1999, January 18, 2000 and April 24, 2000. We are implementing the Stock Option Exchange Program because many of our WorldCom group employees have outstanding stock options with exercise prices significantly above the current and recent trading prices of our WorldCom group stock. We believe that the Stock Option Exchange Program will provide renewed incentives to our WorldCom group employees and that, for many eligible employees, the exchange will create a better opportunity to obtain value from their options. We are offering this program on a voluntary basis to allow our eligible employees to choose whether to keep their current stock options at their current exercise prices, or to cancel those options for new options. Since we anticipate that generally no stock options will otherwise be granted to WorldCom group employees in 2002, except possibly to certain WorldCom group employees who are not eligible to participate in the Stock Option Exchange Program, eligible employees who do not participate will not receive a stock option grant in 2002. ALTHOUGH OUR BOARD OF DIRECTORS HAS APPROVED THE STOCK OPTION EXCHANGE PROGRAM, NEITHER WE NOR OUR BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO WHETHER YOU SHOULD EXCHANGE OR REFRAIN FROM EXCHANGING YOUR OPTIONS. THE DECISION TO PARTICIPATE IS AN INDIVIDUAL ONE BASED ON A VARIETY OF FACTORS. YOU MUST MAKE YOUR OWN DECISION WHETHER TO EXCHANGE YOUR OPTIONS, AND YOU SHOULD CONSULT WITH YOUR PERSONAL ADVISORS, INCLUDING INVESTMENT OR TAX ADVISORS, IF YOU HAVE QUESTIONS ABOUT YOUR FINANCIAL OR TAX SITUATION. Shares of our WorldCom group stock are quoted on The Nasdaq National Market under the symbol "WCOM". On January 16, 2002, the closing sales price of our WorldCom group stock as reported on The Nasdaq National Market was $13.51 per share. We recommend that you obtain current market quotations for our WorldCom group stock before deciding whether to exchange your options. You should direct questions about the Stock Option Exchange Program or requests for assistance or for additional or paper copies of this Offer to Exchange or the Election to Participate to our Stock Option Department by e-mail at stock-options@wcom.com, or by telephone at (601) 460-8001 (vnet: 460-8001) or toll free at 1-877-999-7780. IMPORTANT If you wish to participate in the Stock Option Exchange Program, you must submit the Election to Participate found on our internal web site created for this Stock Option Exchange Program (http://stockoption2002.wcomnet.com) in accordance with its instructions before 12:00 midnight, Eastern Standard Time, on February 14, 2002, unless the offer is extended. If at all possible, we prefer that you submit the Election to Participate on the web site. ONLY IF YOU ARE UNABLE TO USE OR ACCESS THE WEB SITE, SHOULD YOU FOLLOW THESE ALTERNATIVE PROCEDURES: At your request, the Stock Option Department will mail to you copies of the documents so that you may participate in the Stock Option Exchange Program. If you wish to exchange your options, you must complete and sign the Election to Participate in accordance with its instructions, and deliver it and any other required documents to WorldCom, Inc., Stock Option Department, 500 Clinton Center Drive, Clinton, Mississippi 39056 or by fax to (601) 460-5669 (vnet: 460-5669). Delivery will be at your expense. Please allow sufficient time to ensure that we receive these documents by the deadline of 12:00 midnight, Eastern Standard Time, on February 14, 2002, unless the offer is extended. If you do not properly submit the Election to Participate, whether via our web site or otherwise, by February 14, 2002, unless the offer is extended, we will treat your failure to submit the Election to Participate as an election not to participate in the Stock Option Exchange Program. We are not aware of any jurisdiction where the implementation of the Stock Option Exchange Program violates applicable law. If we become aware of any jurisdiction where the implementation of the Stock Option Exchange Program violates applicable law, we will make a good faith effort to comply with such law. If, after such good faith effort, we cannot comply with such law, the Stock Option Exchange Program will not be made available to, nor will elections to exchange options be accepted from or on behalf of, the option holders residing in such jurisdiction. We have not authorized any person to make any recommendation on our behalf as to whether you should elect to exchange or refrain from exchanging your options pursuant to the Stock Option Exchange Program. You should rely only on the information contained in this document or to which we have referred you. We have not authorized anyone to give you any information or to make any representations in connection with the Stock Option Exchange Program other than the information and representations contained in this document or in the Election to Participate. If anyone makes any recommendation or representation to you or gives you any information, you must not rely upon that recommendation, representation or information as having been authorized by us. THIS OFFER TO EXCHANGE HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THE OFFER TO EXCHANGE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. January 17, 2002 TABLE OF CONTENTS Page ---- SUMMARY TERM SHEET................................................................................................1 INTRODUCTION......................................................................................................8 1. NUMBER OF OPTIONS; EXPIRATION DATE.............................................................................9 2. PURPOSE OF THE STOCK OPTION EXCHANGE PROGRAM..................................................................10 3. PROCEDURES FOR ELECTING TO PARTICIPATE IN THE STOCK OPTION EXCHANGE PROGRAM...................................11 4. WITHDRAWAL RIGHTS.............................................................................................12 5. ACCEPTANCE OF OPTIONS FOR EXCHANGE AND ISSUANCE OF NEW OPTIONS................................................12 6. CONDITIONS OF THE STOCK OPTION EXCHANGE PROGRAM...............................................................14 7. PRICE RANGE OF WORLDCOM GROUP STOCK UNDERLYING THE OPTIONS....................................................16 8. SOURCE AND AMOUNT OF CONSIDERATION; TERMS OF NEW OPTIONS......................................................16 9. INFORMATION CONCERNING WORLDCOM; FACTORS THAT YOU SHOULD CONSIDER WHEN MAKING YOUR DECISION.............................................................................................17 10. INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND ARRANGEMENTS CONCERNING THE OPTIONS...........................................................................................22 11. STATUS OF OPTIONS ACQUIRED BY US IN THE STOCK OPTION EXCHANGE PROGRAM; ACCOUNTING CONSEQUENCES OF THE STOCK OPTION EXCHANGE PROGRAM.....................................................23 12. LEGAL MATTERS; REGULATORY APPROVALS..........................................................................23 13. MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES................................................................24 14. EXTENSION OF THE STOCK OPTION EXCHANGE PROGRAM; TERMINATION; AMENDMENT.......................................24 15. FEES AND EXPENSES............................................................................................25 16. ADDITIONAL INFORMATION.......................................................................................25 17. MISCELLANEOUS................................................................................................27
i SUMMARY TERM SHEET This section answers some of the questions that you may have about the Stock Option Exchange Program. However, it is only a summary, and you should carefully read the remainder of this Offer to Exchange and the Election to Participate because the information in this summary is not complete and because there is additional important information in the remainder of this Offer to Exchange and the Election to Participate. We have included page references to the remainder of this Offer to Exchange where you can find a more complete description of the topics summarized here. GENERAL QUESTIONS ABOUT THE STOCK OPTION EXCHANGE PROGRAM 1. WHAT IS THE STOCK OPTION EXCHANGE PROGRAM? We are offering to certain current U.S. WorldCom group employees, excluding those persons described below, the right to exchange outstanding options to purchase shares of our WorldCom group stock originally granted under the WorldCom, Inc. 1997 Stock Option Plan, as amended, which we refer to as the "1997 plan," on January 4, 1999, January 18, 2000 and April 24, 2000. We are offering to exchange those options for new nonqualified stock options with a new exercise price to be granted on the first trading day that is at least six months and one day after the date we cancel the options accepted for exchange. If, as anticipated, we cancel the options accepted for exchange on February 14, 2002, unless the offer is extended, the options will be granted on or about August 15, 2002. The excluded persons are our board of directors and executive officers, as well as employees residing outside the United States and WorldCom group employees who are currently on a leave of absence that began prior to August 1, 2001. (Page 8) 2. WHAT SECURITIES ARE WE OFFERING TO EXCHANGE? We are offering the right to exchange all outstanding options to purchase shares of WorldCom group stock originally granted by WorldCom to eligible WorldCom group employees on January 4, 1999, January 18, 2000 and April 24, 2000 under the 1997 plan for new nonqualified stock options under the 1997 plan. If you wish to participate in the Stock Option Exchange Program, you must elect to exchange all eligible outstanding options you hold. (Page 8) 3. WHY IS WORLDCOM IMPLEMENTING THE STOCK OPTION EXCHANGE PROGRAM? We are implementing the Stock Option Exchange Program because many of our WorldCom group employees have vested or unvested stock options that have exercise prices significantly above the current and recent trading prices of our WorldCom group stock. The current exercise price per share of the options granted on January 4, 1999 is $45.1433, for the January 18, 2000 option grants, $43.1243 and for the April 24, 2000 option grants, $38.7634. As a result, these options no longer serve the incentive purpose for which they were granted. We are offering this program to allow our eligible employees to choose whether to keep their current stock options at their current exercise prices, or to cancel those options in exchange for new options to purchase the same number of shares as the cancelled options at a new exercise price and with a new expiration date and new vesting schedule. Unless the offer is extended, the new options will be granted on or about August 15, 2002, which is the first trading day that is at least six months and one day from the date we cancel the options accepted for exchange. The new options will cover the same number of shares as are subject to the cancelled options. The exercise price of the new options will be equal to the closing sales price of our WorldCom group stock on the replacement grant date. The Stock Option Exchange Program is designed to provide eligible WorldCom group employees with the opportunity to hold options that over time may have a greater potential to increase in value, which we hope will create better performance incentives for these employees and increase the value of our WorldCom group stock for shareholders. (Page 10) 1 4. WHO IS ELIGIBLE TO PARTICIPATE? All current U.S. WorldCom group employees, excluding those persons described below, who hold outstanding options which were originally granted by WorldCom under the 1997 plan on January 4, 1999, January 18, 2000 and April 24, 2000 are eligible to participate in the Stock Option Exchange Program. Our board of directors and executive officers, as well as employees residing outside the United States and WorldCom group employees who are currently on a leave of absence that began prior to August 1, 2001 are not eligible to participate. (Page 8) 5. ARE OVERSEAS EMPLOYEES ELIGIBLE TO PARTICIPATE? No. Employees residing outside of the United States are not eligible to participate in the Stock Option Exchange Program. (Page 8) 6. WHAT DO I NEED TO DO TO PARTICIPATE IN THE STOCK OPTION EXCHANGE PROGRAM? To participate in the Stock Option Exchange Program, you must make a voluntary election to exchange eligible options to purchase WorldCom group stock for new nonqualified stock options. This election will become irrevocable at 12:00 midnight, Eastern Standard Time, on February 14, 2002, unless the offer is extended, and when we accept your outstanding stock options, they will be cancelled in exchange for new nonqualified stock options to be granted on the replacement grant date. To exchange your eligible options, you must submit the Election to Participate found on our internal web site created for the Stock Option Exchange Program (http://stockoption2002.wcomnet.com) by 12:00 midnight, Eastern Standard Time, on the expiration date, which is currently scheduled to be February 14, 2002. If at all possible, we prefer that you submit the Election to Participate on the web site. By submitting the Election to Participate, you are agreeing, subject to the terms and conditions of the Offer to Exchange and the Election to Participate, to tender all of the eligible options you hold in exchange for new nonqualified stock option(s). Within three business days of the receipt of your Election to Participate, the Stock Option Department expects to send you an e-mail confirming your election. Alternatively, you may check the internal web site created for the Stock Option Exchange Program (http://stockoption2002.wcomnet.com), where the Company will post the status of your election. ONLY IF YOU ARE UNABLE TO USE OR ACCESS THE WEB SITE, SHOULD YOU FOLLOW THESE ALTERNATIVE PROCEDURES: At your request, the Stock Option Department will mail to you copies of the documents so that you may participate in the Stock Option Exchange Program. If you wish to exchange your options, you must complete and sign the Election to Participate in accordance with its instructions, and deliver it and any other required documents to WorldCom, Inc., Stock Option Department, 500 Clinton Center Drive, Clinton, Mississippi 39056 or by fax to (601) 460-5669 (vnet: 460-5669). Delivery will be at your expense. Please allow sufficient time to ensure that we receive these documents by the deadline of 12:00 midnight, Eastern Standard Time, on February 14, 2002, unless the offer is extended. Within three business days of the receipt of your Election to Participate, the Stock Option Department expects to send you a confirmation. (Page 11) 7. IF I DECIDE TO PARTICIPATE IN THE STOCK OPTION EXCHANGE PROGRAM, WHAT WILL HAPPEN TO MY CURRENT OPTIONS? If you elect to participate in the Stock Option Exchange Program, all outstanding options you hold which were granted by WorldCom on January 4, 1999, January 18, 2000 and April 24, 2000, will be promptly cancelled after 12:00 midnight, Eastern Standard Time, on February 14, 2002, unless the offer is extended. (Page 12) 8. WHAT IS THE DEADLINE TO ELECT TO PARTICIPATE IN THE STOCK OPTION EXCHANGE PROGRAM? The deadline to elect to participate in the Stock Option Exchange Program is 12:00 midnight, Eastern Standard Time, on February 14, 2002, unless we extend it. This means that our Stock Option Department must have 2 received your Election to Participate before that time. We may, in our discretion, extend the deadline to participate in the Stock Option Exchange Program at any time, but we cannot assure you that the Stock Option Exchange Program will be extended or, if it is extended, for how long. If we extend the deadline to elect to participate in the Stock Option Exchange Program, we will make an announcement of the extension no later than 9:00 a.m. on the next business day following the previously scheduled expiration date. If we extend the deadline beyond that time, you must submit your Election to Participate before the extended expiration date. We reserve the right to reject any or all options elected for exchange that we determine are not in appropriate form or that we determine are unlawful to accept. Otherwise, we will accept for exchange those stock options for which you have made a proper and timely election that is not withdrawn. Subject to our rights to extend, terminate and amend the Stock Option Exchange Program, we currently expect that we will accept all such options promptly after the expiration of the deadline to elect to participate in the Stock Option Exchange Program. (Page 11) 9. WHAT WILL HAPPEN IF I DO NOT SUBMIT OR DELIVER MY FORM BY THE DEADLINE? If you do not submit or deliver your election form by the deadline, you will retain your existing options and will not participate in the Stock Option Exchange Program. Your existing stock options will remain unchanged with their original exercise prices and original terms. Please be sure to allow sufficient time to ensure receipt by us and delivery of confirmation to you before the deadline. Since we anticipate that generally no stock options will otherwise be granted to WorldCom group employees in 2002, except possibly to certain WorldCom group employees who are not eligible to participate in the Stock Option Exchange Program, eligible employees who do not participate will not receive a stock option grant in 2002. (Page 11) 10. HOW DO I WITHDRAW OPTIONS FROM THE STOCK OPTION EXCHANGE PROGRAM AFTER I HAVE TURNED IN AN ELECTION TO PARTICIPATE? To withdraw options which you previously elected to exchange, you must submit to our Stock Option Department a Notice of Withdrawal prior to 12:00 midnight, Eastern Standard Time, on February 14, 2002, unless the offer is extended. ONLY IF YOU ARE UNABLE TO USE OR ACCESS THE WEB SITE, SHOULD YOU FOLLOW THESE ALTERNATIVE PROCEDURES: At your request, the Stock Option Department will mail to you copies of the form. To withdraw options which you previously elected to exchange, you must deliver to our Stock Option Department a completed Notice of Withdrawal in the form accompanying this Offer to Exchange with the required information prior to 12:00 midnight, Eastern Standard Time, on February 14, 2002, unless the offer is extended. Please deliver your Notice of Withdrawal to WorldCom, Inc., Stock Option Department, 500 Clinton Center Drive, Clinton, Mississippi 39056 by fax to (601) 460-5669 (vnet: 460-5669). Delivery will be at the employee's expense. Please be sure to allow sufficient time to ensure receipt by us before the deadline. If you decide to re-elect to exchange options that you have previously withdrawn, you must resubmit an Election to Participate for receipt by our Stock Option Department prior to 12:00 midnight, Eastern Standard Time, on February 14, 2002, unless the offer is extended, in accordance with the election procedure described in the answer to Question 6. (Page 12) 11. DURING WHAT PERIOD OF TIME MAY I WITHDRAW OPTIONS FROM THE STOCK OPTION EXCHANGE PROGRAM? You may withdraw options from the Stock Option Exchange Program at any time before 12:00 midnight, Eastern Standard Time, on February 14, 2002. If we extend the Stock Option Exchange Program beyond that time, you may withdraw your options which you previously elected to exchange at any time until the expiration of the extended deadline. (Page 12) 3 12. AM I ELIGIBLE TO RECEIVE FUTURE GRANTS OF OPTIONS DURING THE FOLLOWING SIX-MONTH PERIOD IF I PARTICIPATE IN THE STOCK OPTION EXCHANGE PROGRAM? No. We anticipate that generally no stock options will otherwise be granted to WorldCom group employees in 2002, except possibly to certain other WorldCom group employees who are not eligible to participate in the Stock Option Exchange Program. (Page 13) 13. WHAT IF MY EMPLOYMENT AT WORLDCOM ENDS BETWEEN THE DATE OF THIS OFFER TO EXCHANGE AND THE REPLACEMENT GRANT DATE? Nothing in this Offer to Exchange modifies or changes your employment relationship with us or grants you any right to remain employed by us. You cannot revoke your Election to Participate after 12:00 midnight, Eastern Standard Time, on February 14, 2002, unless the offer is extended. If your employment with the WorldCom group is terminated by you or the WorldCom group voluntarily, involuntarily or for any reason or no reason, before your new option(s) are granted, you will not have a right to any stock options that were previously cancelled, and you will not have a right to the grant that would have been issued on the replacement grant date. THEREFORE, IF YOU ELECT TO PARTICIPATE AND YOU ARE NOT AN EMPLOYEE OF THE WORLDCOM GROUP FROM THE DATE OF THIS OFFER TO EXCHANGE THROUGH THE REPLACEMENT GRANT DATE, YOU WILL NOT RECEIVE ANY NEW OPTION(S) OR ANY OTHER CONSIDERATION IN EXCHANGE FOR YOUR CANCELLED OPTIONS. (Page 13) 14. WILL I HAVE TO PAY TAXES IF I PARTICIPATE IN THE STOCK OPTION EXCHANGE PROGRAM? If you participate in the Stock Option Exchange Program, you will not be required under current law to recognize income for United States federal income tax purposes at the time of the exchange or when the new option(s) are granted. With regard to the new option(s), the tax aspects of such option(s) will be the same as any other nonqualified stock option grant. Those consequences are described in the offering circular for the 1997 plan. (Page 24) We recommend that you consult your own tax advisor with respect to the federal, state, foreign and local tax consequences of participating in the Stock Option Exchange Program in your particular circumstances. 15. HOW SHOULD I DECIDE WHETHER OR NOT TO PARTICIPATE IN THE STOCK OPTION EXCHANGE PROGRAM? The decision to participate in the Stock Option Exchange Program must be each individual employee's personal decision, and it will depend largely on each employee's assumptions about the future overall economic environment, the performance of the overall market and companies in our sector and our own business and stock price. It will also depend on the exercise price and vesting status of your current options. (Page 22) 16. WHAT DOES THE COMPANY AND ITS BOARD OF DIRECTORS THINK OF THE STOCK OPTION EXCHANGE PROGRAM? Our board of directors approved the Stock Option Exchange Program, but neither WorldCom nor our board of directors makes any recommendation as to whether you should participate in the Stock Option Exchange Program. The decision to participate in the Stock Option Exchange Program must be each individual employee's personal decision. Our board of directors and executive officers are not eligible to participate in the Stock Option Exchange Program. 17. WHAT ARE THE CONDITIONS TO THE STOCK OPTION EXCHANGE PROGRAM? The implementation of the Stock Option Exchange Program is not conditioned upon a minimum number of options being cancelled. The Stock Option Exchange Program is subject to a number of other conditions, including the conditions described in Section 6 of this Offer to Exchange. (Pages 14-16) SPECIFIC QUESTIONS ABOUT THE CANCELLED OPTIONS 18. WHICH OPTIONS CAN BE CANCELLED? 4 Only outstanding options to purchase WorldCom group stock originally granted to eligible employees by WorldCom on January 4, 1999, January 18, 2000 and April 24, 2000 may be tendered for exchange and cancellation in connection with the Stock Option Exchange Program. (Page 8) 19. IF I HAVE MORE THAN ONE ELIGIBLE OPTION, CAN I CHOOSE WHICH OPTIONS I WANT TO CANCEL? No. If you elect to participate in the Stock Option Exchange Program you must elect to exchange and cancel all outstanding options granted to you by WorldCom on January 4, 1999, January 18, 2000 and April 24, 2000. However, you do not have to participate in the Stock Option Exchange Program. (Page 8) 20. CAN I TENDER OPTIONS THAT I HAVE ALREADY EXERCISED? No. The Stock Option Exchange Program only covers outstanding and unexercised options; it does not apply in any way to shares of WorldCom group stock already purchased upon the exercise of options. If you exercised an eligible option in its entirety, that option is no longer outstanding and therefore cannot be included in the Stock Option Exchange Program. However, if you exercised an eligible option in part, the remaining outstanding unexercised portion of the eligible option can be included in the Stock Option Exchange Program and may be tendered for exchange and cancellation. 21. CAN I CANCEL AN OPTION GRANT ONLY AS TO CERTAIN SHARES? No, you cannot cancel an outstanding option in part. For example, if you have an outstanding option for 1,000 shares granted on January 4, 1999 and an outstanding option for 500 shares granted on January 18, 2000, you could elect to cancel both or neither of these grants. You could not elect to cancel just 500 shares of the January 4, 1999 grant, or any other partial cancellation of either option grant. Likewise, if an option grant is partially vested and partially unvested, you cannot choose to cancel only the unvested portion. (Page 8) SPECIFIC QUESTIONS ABOUT THE NEW OPTIONS 22. WHEN WILL WE GRANT THE NEW OPTIONS? We will grant the new options on the replacement grant date which will be the first trading day that is at least six months and one day after the options are cancelled. If, as anticipated, we cancel options elected for exchange on February 14, 2002, the replacement grant date of the new options will be on or about August 15, 2002. If we extend the expiration date of this exchange offer, then WorldCom will also extend the replacement grant date. (Page 12) 23. WHY WON'T I RECEIVE MY NEW OPTION(S) IMMEDIATELY AFTER THE EXPIRATION DATE? If we were to grant the new options on any date which is earlier than six months and one day after the date we cancel the options accepted for exchange, we would need to record a variable accounting charge against our earnings. By deferring the grant of the new options for at least six months and one day, we will not have to record a variable accounting charge against our earnings. (Page 23) 24. WHAT WILL BE THE SHARE AMOUNT OF THE NEW OPTIONS? WorldCom group employees who participate in this program will receive new option(s) on the replacement grant date in exchange for all cancelled options. The number of shares covered by the new option(s) will be equal to the number of shares covered by the cancelled stock options for which such option(s) were exchanged. (Page 16) 5 25. WHAT WILL BE THE EXERCISE PRICE OF THE NEW OPTIONS? The exercise price of the new options will be the closing sales price of our WorldCom group stock as reported on The Nasdaq National Market on the replacement grant date. Because the replacement grant date is more than six months after the date we cancel the options accepted for exchange and the price of our WorldCom group stock on the stock market is volatile, the new options may have a higher exercise price than your current options. We recommend that you obtain current market quotations for our WorldCom group stock before deciding whether to exchange your options. (Page 17) 26. WHAT WILL BE THE VESTING SCHEDULE OF THE NEW OPTIONS? All new options granted in the Stock Option Exchange Program will have the same vesting schedule. Each new option will vest and, subject to the provisions of the 1997 plan and the new stock option agreements, will be exercisable as follows: one-third (1/3) the number of shares covered by the new options on and after January 1, 2003, another one-third (1/3) of such shares on and after January 1, 2004, and the remaining one-third (1/3) of such shares on and after January 1, 2005. Any new option you receive will not be vested, even if the option you elected to exchange for that new option was fully or partially vested. If your employment with us terminates after the date of grant of new options, you will only be able to exercise the new options to the extent they are vested and exercisable at the time of your termination. You will only have the limited time period specified in the option agreement in which to exercise your new options following your termination of employment. (Page 17) 27. WHAT WILL BE THE TERMS AND CONDITIONS OF THE NEW OPTIONS? The terms and conditions of the new options will be substantially the same as the cancelled options, except they will have a new exercise price, new expiration date and new vesting schedule. The new options will have a new ten-year term, starting on the replacement grant date. (Page 17) 28. CAN I HAVE AN EXAMPLE? The following is a representative example for a hypothetical employee. Your situation is likely to vary in significant respects.
Assumptions: 1999 GRANT ---------- Grant Date: January 4, 1999 Shares outstanding under original stock option: 386 Current stock option exercise price: $45.1433 2000 GRANT ---------- Grant Date: January 18, 2000 Shares outstanding under original stock option: 257 Current stock option exercise price: $43.1243 NEW OPTION ---------- Replacement grant date: On or about August 15, 2002, unless the Shares subject to new option(s): offer is extended 643
Based on the assumptions above, for the sake of illustrating the Stock Option Exchange Program, we would cancel your original stock options on February 14, 2002. On the replacement grant date, which would be on or about August 15, 2002, unless the offer is extended, you would receive new option(s) for 643 shares. Your new exercise price would be equal to the closing sales price of WorldCom group stock as reported on The Nasdaq National Market on the replacement grant date. Your new option(s) will vest and, subject to the provisions of the 1997 plan and the new stock option agreements, will be exercisable as follows: one-third (1/3) the number of shares covered by the new option(s) on and after January 1, 2003, another one-third (1/3) of such shares on and after January 1, 2004, and the remaining one-third (1/3) of such shares on and after January 1, 2005. 6 29. WHAT HAPPENS IF WORLDCOM IS SUBJECT TO A CHANGE IN CONTROL BEFORE THE NEW OPTIONS ARE GRANTED? If a change of control of WorldCom occurs before we issue the new options, and the acquiring company agrees to assume other outstanding options of WorldCom, we will require the acquiring company to also assume the obligation to issue options pursuant to the Stock Option Exchange Program. The Stock Option Exchange Program is designed such that employees with the right to receive options will receive similar treatment as employees holding other outstanding options. If such a change of control were to occur and the acquiring company agreed to assume our outstanding options, you would receive an option in the surviving entity provided that you remain continuously employed with the WorldCom group and the acquiring company through the replacement grant date. The number of shares covered by the option(s) that you receive would be determined by taking the number of shares of our common stock that you would have received in the absence of the change of control transaction, adjusted in the same manner as options assumed in connection with the change of control transaction. As a result, the new option(s) you receive may not cover the same number of shares as your cancelled options, but it would cover the same number of shares that your cancelled option would have covered after it was converted in the change of control. The exercise price per share of the option(s) would be the closing price of the acquiring company's stock on the replacement grant date. We cannot guarantee that the acquiring company in any change of control transaction will agree to assume existing options and therefore assume the obligation to issue options. Therefore, it is possible that you may not receive any options, securities of the surviving company or other consideration in exchange for your cancelled options if a change in control occurs before the options are granted. In addition, the announcement of a change of control transaction regarding WorldCom could have a substantial effect on our stock price, including substantial stock price appreciation, which could reduce or eliminate potential benefits provided by the Stock Option Exchange Program. In the event of a sale of some of our assets such as a division or a part of the company, the acquiring party would not be obligated to assume the obligation to issue options under the Stock Option Exchange Program. In the event of such a transaction, you would not necessarily receive options to purchase stock or securities of the acquiring company or any other consideration in exchange for your cancelled options. We reserve the right to take any action, including entering into an asset sale or similar transaction, that our board of directors believes is in the best interest of our company and our shareholders. (Pages 13-14) 30. AFTER THE GRANT OF MY NEW OPTION, WHAT HAPPENS IF I AGAIN END UP WITH AN EXERCISE PRICE THAT IS ABOVE THE CURRENT AND RECENT TRADING PRICES? We are implementing the Stock Option Exchange Program at this time due to the unusual stock market conditions that have affected many companies throughout the country. Therefore, this is intended to be a one-time offer and we do not expect to implement such a program in the future. As your stock options are valid for ten years from the date of grant, subject to continued employment, the price of our WorldCom group stock may appreciate over the long term even if the exercise price of your options is above the trading price of our WorldCom group stock for some period of time after the grant date of the new options. However, we cannot provide any assurance as to the price of our WorldCom group stock at any time in the future. 7 INTRODUCTION WorldCom is offering to certain current U.S. WorldCom group employees, excluding those persons described below, the right to exchange all outstanding options to purchase shares of our WorldCom group stock originally granted under the 1997 plan on January 4, 1999, January 18, 2000 and April 24, 2000 for new nonqualified stock options that we will grant under the 1997 plan. The excluded persons are our board of directors and executive officers, as well as employees residing outside the United States and WorldCom group employees who are currently on a leave of absence that began prior to August 1, 2001. If you wish to participate in the Stock Option Exchange Program, you must elect to exchange all eligible options you hold. We are making this offer upon the terms and subject to the conditions set forth in this Offer to Exchange and in the Election to Participate. Grants of new options will be made on the first trading day that is at least six months and one day from the date we cancel the options accepted for exchange. The Stock Option Exchange Program is not conditioned upon a minimum number of options being elected for exchange. If you elect to participate in the Stock Option Exchange Program, you must elect to exchange all outstanding options you hold which were originally granted by WorldCom on January 4, 1999, January 18, 2000 and April 24, 2000. The Stock Option Exchange Program is subject to certain conditions, which we describe in Section 6 of this Offer to Exchange. In order to receive the new option(s), you must still be employed with us on the replacement grant date, and your election to participate in the Stock Option Exchange Program does not in any way change your employment relationship with us or grant you any right to remain employed by us. In addition, we cannot guarantee you that you will receive new option(s) in the Stock Option Exchange Program if a change of control of WorldCom occurs between the cancellation of your options and the replacement grant date. We are implementing the Stock Option Exchange Program because a considerable number of our WorldCom group employees have outstanding stock options with exercise prices significantly above the current and recent trading prices of our WorldCom group stock. We believe that the Stock Option Exchange Program will provide renewed incentives to our WorldCom group employees and that, for many eligible employees, the exchange will create a better opportunity to potentially obtain value from their options. We are offering this program on a voluntary basis to allow our eligible employees to choose whether to keep their current stock options at their current exercise price, or to cancel those options for new options. As of January 16, 2002, options to purchase 303,258,274 shares of our WorldCom group stock were issued and outstanding under the 1997 plan. These options have exercise prices ranging from $15.6265 to $60.6487. As of January 16, 2002, options to purchase 124,958,613 shares of our WorldCom group stock were eligible to participate in the Stock Option Exchange Program. All options originally granted by WorldCom to eligible WorldCom group employees under the 1997 plan on January 4, 1999, January 18, 2000 and April 24, 2000 held by certain current U.S. WorldCom group employees are eligible for exchange in the Stock Option Exchange Program, except those held by: o our board of directors or executive officers; o employees residing outside the United States; or o WorldCom group employees who are currently on a leave of absence that began prior to August 1, 2001. All options we accept in this program will be cancelled. The shares of WorldCom group stock subject to those options cancelled pursuant to the Stock Option Exchange Program will be returned to the pool of shares available for grants of new options under the 1997 plan. 8 1. NUMBER OF OPTIONS; EXPIRATION DATE. Upon the terms and subject to the conditions of this Offer to Exchange, we will accept for exchange all eligible outstanding options that are properly and timely elected for exchange and not validly withdrawn in accordance with Section 4 of this Offer to Exchange before the expiration date, as defined below, for new nonqualified stock options to purchase WorldCom group stock under the 1997 plan. If your options are properly tendered and accepted for exchange, you will be entitled to receive new stock option(s) to purchase the number of shares of our WorldCom group stock that is equal to the number of shares subject to the options that you elected. The new option(s) will be subject to the terms of the 1997 plan and new option agreement(s) between us and you. Any current U.S. WorldCom group employee, excluding those persons described below, who holds outstanding stock options granted by WorldCom on January 4, 1999, January 18, 2000 and April 24, 2000 under the 1997 plan is eligible to participate in the Stock Option Exchange Program. Our board of directors and executive officers, as well as employees residing outside the United States and WorldCom group employees who are currently on a leave of absence that began prior to August 1, 2001 are excluded from participating in the Stock Option Exchange Program. Any WorldCom group employee whose employment with us has been terminated, whether voluntarily or involuntarily, is not eligible to participate in the Stock Option Exchange Program, irrespective of the effective date of such termination. IF YOU ARE NOT AN EMPLOYEE OF THE WORLDCOM GROUP FROM THE DATE YOU ELECT TO EXCHANGE YOUR OPTIONS THROUGH THE DATE WE GRANT THE NEW OPTIONS, YOU WILL NOT RECEIVE NEW OPTION(S) IN EXCHANGE FOR YOUR CANCELLED OPTIONS THAT HAVE BEEN ACCEPTED FOR EXCHANGE. YOU ALSO WILL NOT RECEIVE ANY OTHER CONSIDERATION FOR YOUR CANCELLED OPTIONS IF YOU ARE NOT AN EMPLOYEE OF THE WORLDCOM GROUP FROM THE DATE YOU ELECT TO EXCHANGE OPTIONS THROUGH THE DATE WE GRANT THE NEW OPTIONS. If you wish to participate in the Stock Option Exchange Program, you must elect to cancel all eligible outstanding options you hold. If you elect to cancel an option, it must be cancelled as to all shares that are outstanding under the option grant. An option cannot be partially cancelled. The term "expiration date" means 12:00 midnight, Eastern Standard Time, on February 14, 2002, unless and until we, in our discretion, have extended the period of time during which you may elect to participate in the Stock Option Exchange Program, in which event the term "expiration date" refers to the latest time and date on which your right to participate, as so extended, expires. See Section 14 of this Offer to Exchange for a description of our rights to extend the expiration date. We will notify you of such action, and keep the Stock Option Exchange Program open for a period of no less than ten business days after the date of such notice if we increase or decrease: o the amount of consideration offered for the options; or o the number of options eligible to be elected for exchange in the Stock Option Exchange Program, except that in the case of an increase, it must be by an amount that exceeds 2% of the shares of WorldCom group stock issuable upon exercise of the options that are subject to the Stock Option Exchange Program immediately prior to the increase. For purposes of the Stock Option Exchange Program, a "business day" means any day other than a Saturday, Sunday or U.S. federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, Eastern Time. 9 2. PURPOSE OF THE STOCK OPTION EXCHANGE PROGRAM. We issued the options outstanding under the 1997 plan to provide our WorldCom group employees an opportunity to acquire or increase their ownership stake in WorldCom, creating a stronger incentive to expend maximum effort for our growth and success and encouraging our WorldCom group employees to continue their employment with us. Many of these options, whether or not they are currently exercisable, have exercise prices that are significantly higher than the current and recent trading prices of our WorldCom group stock. We are implementing the Stock Option Exchange Program to provide our eligible WorldCom group employees with the opportunity to own options that over time may have a greater potential to increase in value, which we hope will create better performance incentives for these employees and will maximize the value of our WorldCom group stock for our shareholders. CONSIDERING THE RISKS ASSOCIATED WITH THE VOLATILE AND UNPREDICTABLE NATURE OF THE STOCK MARKET AND OUR INDUSTRY IN PARTICULAR, THERE IS NO GUARANTEE THAT THE CLOSING SALES PRICE OF OUR WORLDCOM GROUP STOCK ON THE REPLACEMENT GRANT DATE (AND THEREFORE THE EXERCISE PRICE OF ANY NEW OPTION) WILL BE LESS THAN THE EXERCISE PRICE OF YOUR EXISTING OPTION, OR THAT YOUR NEW OPTION(S) WILL INCREASE IN VALUE OVER TIME. Subject to the foregoing, and except as otherwise disclosed in this Offer to Exchange or in our filings with the Securities and Exchange Commission, we currently have no plans or proposals that relate to or would result in: o an extraordinary transaction, such as a merger, reorganization or liquidation, involving us or any of our subsidiaries that is material to us (however, we expect to consider such matters from time to time); o any purchase, sale or transfer of a material amount of the assets of us or any of our subsidiaries; o any material change in our present dividend rate or policy, or our indebtedness or capitalization; o any change in our present board of directors or executive officers, including, but not limited to, any plans or proposals to change the number or the term of directors or to fill any existing vacancies on our board of directors or to change any material term of the employment contract of any executive officer; o any other material change in our corporate structure or business; o our equity securities not being authorized for quotation in an automated quotation system operated by a national securities association; o our equity securities becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act; o the suspension of our obligation to file reports under Section 15(d) of the Securities Exchange Act; o the acquisition by any person of any of our securities or the disposition of any of our securities (other than as a result of the exercise of stock options or purchases made under our employee stock purchase plan) in an amount that is material to us; or o any changes in our articles of incorporation, bylaws of other governing instruments or any actions that could impede the acquisition of control of us. Neither we nor our board of directors makes any recommendation as to whether you should elect to participate in the Stock Option Exchange Program, nor have we authorized any person to make any such recommendation. We urge you to evaluate carefully all of the information in this Offer to Exchange and to consult 10 your own investment and tax advisors. You must make your own decision whether to elect to participate in the Stock Option Exchange Program. We understand that this will be a challenging decision for all eligible WorldCom group employees. The program does carry considerable risk, and there are no guarantees of our future performance. The decision to participate must be each individual employee's personal decision, and it will depend largely on each employee's assessment of the employee's existing stock option package and assumptions about the future overall economic environment, our stock price and our business. 3. PROCEDURES FOR ELECTING TO PARTICIPATE IN THE STOCK OPTION EXCHANGE PROGRAM. PROPER EXCHANGE OF OPTIONS. To elect to participate in the Stock Option Exchange Program, you must submit the Election to Participate before the expiration date. Your Election Form must be received by us no later than 12:00 midnight, Eastern Standard Time, on February 14, 2002, unless the offer is extended. The Election to Participate may be found on our internal web site established for the Stock Option Exchange Program (http://stockoption2002.wcomnet.com) and may be submitted on that web site. If at all possible, we prefer that you submit the Election to Participate on the web site. ONLY IF YOU ARE UNABLE TO USE OR ACCESS THE WEB SITE, SHOULD YOU FOLLOW THESE ALTERNATIVE PROCEDURES: At your request, the Stock Option Department will mail to you copies of the documents so that you may participate in the Stock Option Exchange Program. If you wish to exchange your options, you must complete and sign the Election to Participate in accordance with its instructions, and deliver it and any other required documents to WorldCom, Inc., Stock Option Department, 500 Clinton Center Drive, Clinton, Mississippi 39056 or by fax to (601) 460-5669 (vnet: 460-5669). Delivery will be at your expense. Please allow sufficient time to ensure that we receive these documents by the deadline of 12:00 midnight, Eastern Standard Time, on February 14, 2002, unless the offer is extended. Within three business days of the receipt of your Election to Participate, the Stock Option Department expects to send you a confirmation. If you do not submit or deliver your election form by the deadline, then you will not participate in the Stock Option Exchange Program, and all stock options you currently hold will remain unchanged at their original exercise prices and terms. By submitting the Election to Participate, you are agreeing, subject to the terms and conditions of the Offer to Exchange and the Election to Participate, to tender all of the eligible options you hold in exchange for new nonqualified stock option(s). The method of delivery of all documents, including the Election to Participate and any other required documents, is at the election and risk of the electing option holder. You should allow sufficient time to ensure timely delivery. DETERMINATION OF VALIDITY; REJECTION OF OPTIONS; WAIVER OF DEFECTS; NO OBLIGATION TO GIVE NOTICE OF DEFECTS. We will determine, in our discretion, all questions as to form of documents and the validity, eligibility, including time of receipt, and acceptance of any election to participate in the Stock Option Exchange Program. Our determination of these matters will be final and binding on all parties. We reserve the right to reject any or all elections to participate in the Stock Option Exchange Program that we determine are not in appropriate form, were not received on a timely basis or that we determine are unlawful to accept. Otherwise, we will accept properly and timely elected options that are not validly withdrawn. We also reserve the right to waive any of the conditions of the Stock Option Exchange Program or any defect or irregularity in any election with respect to any particular options or any particular option holder. No election to participate in the Stock Option Exchange Program will be valid until all defects or irregularities have been cured by the electing option holder or waived by us. Neither we nor any other person is obligated to give notice of any defects or irregularities in elections, nor will anyone incur any liability for giving or failing to give any such notice. OUR ACCEPTANCE CONSTITUTES AN AGREEMENT. Your election to participate in the Stock Option Exchange Program pursuant to the procedures described above constitutes your acceptance of the terms and conditions of the Stock Option Exchange Program. Our acceptance for cancellation of the options elected for exchange by you pursuant to the Stock Option Exchange Program will constitute a binding agreement between us and you upon the terms and subject to the conditions of the Stock Option Exchange Program. 11 Subject to our rights to extend, terminate and amend the Stock Option Exchange Program, we currently expect that we will accept promptly after the expiration date all properly elected options that have not been validly withdrawn. 4. WITHDRAWAL RIGHTS. You may withdraw the options you have elected to exchange only if you comply with the provisions of this Section 4. You have the right to withdraw the options you have elected to cancel at any time before 12:00 midnight, Eastern Standard Time, on February 14, 2002. If we extend the time during which you may elect to participate in the Stock Option Exchange Program, you have the right to withdraw these options at any time until the extended period expires. In addition, you will also have the right to withdraw the option you have elected to cancel after the expiration of forty business days from the commencement of the Stock Option Exchange Program unless we have accepted your options by that time. The fortieth business day from the commencement of the Stock Option Exchange Program is March 15, 2002. To withdraw options, you must submit the Notice of Withdrawal found on our internal web site created for the Stock Option Exchange Program (http://stockoption2002.wcomnet.com) by the deadline of 12:00 midnight, Eastern Standard Time, on February 14, 2002, unless the offer is extended. The Notice of Withdrawal may be submitted on the web site and this method of delivery is preferred by us. ONLY IF YOU ARE UNABLE TO USE OR ACCESS THE WEB SITE, SHOULD YOU FOLLOW THESE ALTERNATIVE PROCEDURES TO WITHDRAW: At your request, the Stock Option Department will mail to you copies of the required form. To withdraw options, you must deliver a signed written Notice of Withdrawal with the required information included, while you still have the right to withdraw options from the Stock Option Exchange Program. We recommend that you deliver the Notice of Withdrawal to WorldCom, Inc., Stock Option Department, 500 Clinton Center Drive, Clinton, Mississippi 39056 or by fax to (601) 460-5669 (vnet: 460-5669). Delivery will be at the employee's expense. Please allow sufficient time to ensure that we receive these documents by the deadline of 12:00 midnight, Eastern Standard Time, on February 14, 2002, unless the offer is extended. A form of the Notice of Withdrawal accompanies this Offer to Exchange. The option holder who has elected to participate in the Stock Option Exchange Program and who subsequently elects to withdraw his or her options from the Stock Option Exchange Program must timely deliver a signed Notice of Withdrawal to the Stock Option Department as noted above. You may not rescind any withdrawal, and any options you withdraw will thereafter be deemed not properly elected for participation in the Stock Option Exchange Program, unless you properly re-elect those options before the expiration date by following the procedures described in Section 3 of this Offer to Exchange. Neither WorldCom nor any other person is obligated to give notice of any defects or irregularities in any Notice of Withdrawal, nor will anyone incur any liability for giving or failing to give any such notice. We will determine, in our discretion, all questions as to the form and validity, including time of receipt, of Notices of Withdrawal. Our determination of these matters will be final and binding on all parties. 5. ACCEPTANCE OF OPTIONS FOR EXCHANGE AND ISSUANCE OF NEW OPTIONS. Upon the terms and subject to the conditions of this Offer to Exchange and promptly following the expiration date, we will accept for exchange and cancel options properly elected for exchange and not validly withdrawn on or before the expiration date. If your options are properly elected for exchange on or prior to February 14, 2002 and accepted for exchange promptly thereafter, you will be granted new nonqualified stock option(s) on the replacement grant date, which will be on or about August 15, 2002. If we extend the date by which we must accept and cancel options properly elected for exchange, you will be granted new stock option(s) on the first trading day that is at least six months and one day after the extended date. 12 If we accept options you elect to exchange in the Stock Option Exchange Program, you will be ineligible until after the replacement grant date for any additional stock option grants for which you might otherwise have been eligible before the replacement grant date. This allows us to avoid incurring a compensation expense because of accounting rules that could apply to these interim option grants as a result of the Stock Option Exchange Program. Since we anticipate that generally no stock options will otherwise be granted to WorldCom group employees in 2002, except possibly to certain WorldCom group employees who are not eligible to participate in the Stock Option Exchange Program, if you do not participate, you will not receive a stock option grant in 2002. However, you are not required to participate in the Stock Option Exchange Program. Your new option(s) will entitle you to purchase the same number of shares of our WorldCom group stock that is equal to the number of shares subject to the options you elect to exchange. Your new option(s) will have an exercise price equal to the closing sales price of the WorldCom group stock on the replacement grant date. Your new option(s) will vest and, subject to the provisions of the 1997 plan and the new stock option agreements, will be exercisable as follows: one-third (1/3) the number of shares covered by the new options on and after January 1, 2003, another one-third (1/3) of such shares on and after January 1, 2004, and the remaining one-third (1/3) of such shares on and after January 1, 2005. Your new option(s) will have a ten-year term, starting on the replacement grant date, subject to continued employment. Nothing in this Offer to Exchange modifies or changes your employment relationship with us or gives you any right to remain employed by us. Therefore, if your employment with the WorldCom group is terminated by you or WorldCom voluntarily, involuntarily, or for any reason or no reason, before your new option(s) are granted, you will not have a right to any stock options that were previously cancelled, and you will not have a right to any grant of option(s) that would have been granted on the replacement grant date. If you are not an employee of the WorldCom group from the date you elect to exchange options through the date we grant the new options, you will not be eligible to receive a grant of new option(s) in exchange for your cancelled options that have been accepted for exchange. You also will not receive any other consideration for your cancelled options if you are not an employee from the date you elect to participate in the Stock Option Exchange Program through the date we grant the new options. In the event of a change of control of WorldCom occurring before we issue the new options, to the extent the acquiring company agrees to assume other outstanding options of WorldCom, we will require the acquiring company to assume the obligation to issue options pursuant to the Stock Option Exchange Program. The Stock Option Exchange Program is designed such that employees with the right to receive option(s) will receive similar treatment as employees holding other outstanding options. If such a transaction were to occur and the acquiring company agreed to assume our outstanding options, you would receive option(s) in the surviving entity provided that you remain continuously employed with the WorldCom group and the acquiring company through the replacement grant date. The amount of shares subject to the new stock option(s) you receive would be determined by taking the number of shares of our WorldCom group stock that you would have received pursuant to the options in the absence of the change of control transaction, adjusted in the same manner as options assumed in connection with the change of control transaction. As a result, the new option(s) you receive may not cover the same number of shares as your cancelled options. The exercise price per share of the option(s) would be the closing price of the acquiring company's stock on the replacement grant date. In the event of a sale of some of our assets, such as a division or a part of the company, the acquiring party would not be obligated to assume the obligation to issue options under the Stock Option Exchange Program. In the event of such a transaction, you would not receive options to purchase stock or securities of the acquiring company or any other consideration in exchange for your cancelled options. We cannot guarantee that the acquiring company in any change of control transaction would agree to assume existing options and therefore the obligation to issue options. Therefore, it is possible that you may not receive any options, securities of the surviving company or other consideration in exchange for your cancelled options if a change in control occurs before the options are granted. In addition, the announcement of a change of control transaction regarding WorldCom could have a substantial effect on our stock price, including substantial stock price appreciation, which could reduce or eliminate potential benefits provided by the Stock Option Exchange Program. 13 We reserve the right to take any action, including entering into an asset purchase or similar transaction, that our board of directors believes is in the best interest of our company and our shareholders. For purposes of the Stock Option Exchange Program, we will accept for exchange options that are validly elected for exchange and not properly withdrawn. The Stock Option Department expects to send you a confirmation by e-mail within three business days of receipt of your Election to Participate. Additionally, we will post our acceptance of your election on the internal web site created for the Stock Option Exchange Program (http://stockoption2002.wcomnet.com). Please check the web site for the status of your election. Subject to our rights to extend the expiration date, we currently expect that your new option agreement(s) will be distributed to you within three weeks of the replacement grant date. 6. CONDITIONS OF THE STOCK OPTION EXCHANGE PROGRAM. Notwithstanding any other provision of the Stock Option Exchange Program, we will not be required to accept any options submitted to us for cancellation and exchange, and we may terminate or amend the Stock Option Exchange Program, or postpone our acceptance and cancellation of any options submitted to us for cancellation and exchange, in each case, subject to certain limitations, if at any time on or after January 17, 2002 and prior to the expiration of this offer, any of the following events has occurred, or has been determined by us to have occurred, and, in our reasonable judgment in any such case, including any action or omission to act by us, we have determined prior to the expiration of this offer that the occurrence of such event or events makes it inadvisable for us to proceed with the Stock Option Exchange Program or to accept and cancel options submitted to us for exchange: (i) any action or proceeding by any government or governmental, regulatory or administrative agency, authority or tribunal or any other person, domestic or foreign, is threatened, instituted or pending before any court, authority, agency or tribunal that directly or indirectly challenges the Stock Option Exchange Program, the acquisition of some or all of the options submitted to us for exchange pursuant to the Stock Option Exchange Program, the issuance of new options, or otherwise relates in any manner to the Stock Option Exchange Program or that, in our reasonable judgment, could materially and adversely affect the business, condition (financial or other), income, operations or prospects of WorldCom or our subsidiaries, or otherwise materially impair in any way the contemplated future conduct of our business or the business of any of our subsidiaries or materially impair the benefits that we believe we will receive from the Stock Option Exchange Program; (ii) any action is threatened, pending or taken, or any approval is withheld, or any statute, rule, regulation, judgment, order or injunction is threatened, proposed, sought, promulgated, enacted, entered, amended, enforced or deemed to apply to the Stock Option Exchange Program or WorldCom or any of our subsidiaries, by any court or any authority, agency or tribunal that, in our reasonable judgment, would or might directly or indirectly: o make it illegal for us to accept some or all of the existing options for exchange and cancellation or to issue the new options for some or all of the options submitted to us for cancellation and exchange or otherwise restrict or prohibit completion of the Stock Option Exchange Program or otherwise relates in any manner to the Stock Option Exchange Program; o delay or restrict our ability, or render us unable, to accept for exchange, or issue new options for, some or all of the options elected for exchange; o materially impair the benefits that we believe we will receive from the Stock Option Exchange Program; or o materially and adversely affect the business, condition (financial or other), income, operations or prospects of WorldCom or our subsidiaries, or otherwise materially impair in any way the contemplated future conduct of our business or the business of any of our subsidiaries; 14 (iii) there has occurred: o any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market; o the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, whether or not mandatory; o the commencement or escalation of a war, armed hostilities or other international or national crisis directly or indirectly involving the United States; o any limitation, whether or not mandatory, by any governmental, regulatory or administrative agency or authority on, or any event that in our reasonable judgment might affect, the extension of credit by banks or other lending institutions in the United States; o any change in the general political, market, economic or financial conditions in the United States or abroad that could have a material adverse effect on the business, condition (financial or other), operations or prospects of WorldCom or our subsidiaries or that, in our reasonable judgment, makes it inadvisable to proceed with the Stock Option Exchange Program; o in the case of any of the foregoing existing at the time of the commencement of the Stock Option Exchange Program, a material acceleration or worsening thereof; or o any decline in either The Nasdaq National Stock Market or the Standard and Poor's Index of 500 Companies by an amount in excess of 10% measured during any time period after the close of business on January 17, 2002; (iv) there has occurred any change in generally accepted accounting standards that could or would require us for financial reporting purposes to record compensation expense against our earnings in connection with the Stock Option Exchange Program; (v) a tender or exchange offer with respect to some or all of our WorldCom group stock, or a merger or acquisition proposal involving any of the assets or securities of us or any of our subsidiaries, shall have been proposed, announced or made by another person or entity or shall have been publicly disclosed, or we shall have learned that: o any person, entity or "group," within the meaning of Section 13(d)(3) of the Securities Exchange Act, shall have acquired or proposed to acquire beneficial ownership of more than 5% of the outstanding shares of our WorldCom group stock, or any new group shall have been formed that beneficially owns more than 5% of the outstanding shares of our WorldCom group stock, other than any such person, entity or group that has filed a Schedule 13D or Schedule 13G with the Securities and Exchange Commission on or before January 17, 2002; o any such person, entity or group that has filed a Schedule 13D or Schedule 13G with the Securities and Exchange Commission on or before January 17, 2002 shall have acquired or proposed to acquire beneficial ownership of an additional 2% or more of the outstanding shares of our WorldCom group stock; or o any person, entity or group shall have filed a Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or made a public announcement reflecting an intent to acquire us or any of our subsidiaries or any of the assets or securities of us or any of our subsidiaries; or 15 (vi) any change or changes occur in the business, condition (financial or other), assets, income, operations, prospects or stock ownership of WorldCom or our subsidiaries that, in our reasonable judgment, is or may be material to WorldCom or our subsidiaries. The foregoing conditions to the Stock Option Exchange Program are for our benefit. We may assert them in our discretion regardless of the circumstances giving rise to them on or prior to the expiration date. We may waive them, in whole or in part, at any time and from time to time on or prior to the expiration date, in our discretion, whether or not we waive any other condition to the Stock Option Exchange Program. Our failure at any time to exercise any of these rights will not be deemed a waiver of any such rights. The waiver of any of these rights with respect to particular facts and circumstances will not be deemed a waiver with respect to any other facts and circumstances. Any determination we make concerning the events described in this section will be final and binding upon all persons. Please note that there are additional conditions to our obligation to make the new option grants, as described in Section 5 and Section 9 of this Offer to Exchange. 7. PRICE RANGE OF WORLDCOM GROUP STOCK UNDERLYING THE OPTIONS. Our WorldCom group stock has been quoted on The Nasdaq National Market System under the symbol "WCOM" since our recapitalization on June 7, 2001. The following table presents the high and low sales prices per share of our WorldCom group stock for the periods indicated, as reported by The Nasdaq National Market:
High Low ---- --- Fiscal 2001 Second Quarter (starting June 7, 2001).................... $18.0975 $13.2700 Third Quarter............................................. $15.9000 $11.5000 Fourth Quarter............................................ $16.0600 $11.7900 Fiscal 2002 First Quarter (through January 16, 2002).................. $15.0200 $13.0200
We recommend that you obtain current market quotations for our WorldCom group stock before deciding whether to participate in the Stock Option Exchange Program. 8. SOURCE AND AMOUNT OF CONSIDERATION; TERMS OF NEW OPTIONS. CONSIDERATION. We will issue new options to purchase WorldCom group stock under the 1997 plan in exchange for eligible outstanding options properly elected and accepted for exchange by us. The number of shares of WorldCom group stock subject to new options to be granted to each option holder will be equal to the number of shares subject to the cancelled options. The shares of WorldCom group stock subject to options cancelled pursuant to the Stock Option Exchange Program will be returned to the pool of shares available for grants of new options under the 1997 plan. Options to purchase a maximum of approximately 124,958,613 shares will be granted under the Stock Option Exchange Program, if the maximum number of eligible options are surrendered for cancellation. TERMS OF NEW OPTIONS. The new nonqualified stock options to be granted will be issued under the 1997 plan. We will issue new option agreement(s) to each option holder who receives new option(s) on the replacement grant date. Except for the new exercise price, new expiration date and new vesting schedule, the terms and conditions of the new options will be substantially the same as the cancelled options. The new options will have a new ten-year term, starting on the replacement grant date. Some key features of the new options will include: o the number of shares subject to each new option will be equal to the number of shares subject to each of your corresponding cancelled options; 16 o the exercise price of the new options will equal the closing sales price of our WorldCom group stock as reported on The Nasdaq National Market on the replacement grant date; and o the new options will vest and, subject to the provisions of the 1997 plan and the new stock option agreements, will be exercisable as follows: one-third (1/3) the number of shares covered by the new options on and after January 1, 2003, another one-third (1/3) of such shares on and after January 1, 2004, and the remaining one-third (1/3) of such shares on and after January 1, 2005. The terms and conditions of current options under the 1997 plan are set forth in the 1997 plan and the stock option agreements you entered into in connection with the grant. The terms and conditions of the 1997 plan are summarized in the offering circular relating to the 1997 plan prepared by us and previously distributed to you and is available at the internal web site created for the Stock Option Exchange Program (http://stockoption2002.wcomnet.com). The statements in this Offer to Exchange concerning the 1997 plan and the new options are merely summaries and do not purport to be complete. The statements are subject to, and are qualified in their entirety by reference to, all provisions of the 1997 plan and the forms of stock option agreement under the 1997 plan. Copies of the 1997 plan, offering circular and forms of stock option agreement are available at the internal web site created for the Stock Option Exchange Program (http://stockoption2002.wcomnet.com) or you may request copies from the Stock Option Department. For eligible employees who cannot otherwise use the web site, the Stock Option Department will mail to you copies of the documents so that you may participate in the Stock Option Exchange Program. 9. INFORMATION CONCERNING WORLDCOM; FACTORS THAT YOU SHOULD CONSIDER WHEN MAKING YOUR DECISION. OVERVIEW On June 7, 2001, WorldCom's shareholders approved a recapitalization involving the creation of two separately traded tracking stocks: o WorldCom group stock, par value $0.01 per share, which is intended to reflect the performance of the Company's data, Internet, international and commercial voice businesses and is quoted on The Nasdaq National Market under the trading symbol "WCOM", and o MCI group common stock, par value $0.01 per share, which is intended to reflect the performance of the Company's consumer, small business, wholesale long distance voice and data, wireless messaging and dial-up Internet access businesses and is quoted on The Nasdaq National Market under the trading symbol "MCIT". Through the businesses that we have realigned as the WorldCom group, which have an extensive, advanced facilities-based global communications network, we provide a broad range of integrated communications and managed network services to both U.S. and non-U.S. based corporations. Offerings include data services such as frame relay, asynchronous transfer mode and Internet protocol networks; Internet related services, including dedicated access, virtual private networks, digital subscriber lines, web centers encompassing application and server hosting and managed data services; commercial voice services; and international services. Through the businesses that we have realigned as the MCI group, we provide a broad range of retail and wholesale communications services, including long distance voice and data communications, consumer local voice communications, wireless messaging, private line services and dial-up Internet access services. Our retail services are provided to consumers and small businesses in the United States. We are the second largest carrier of long distance telecommunications services in the United States. We provide a wide range of long distance telecommunications services, including: basic long distance telephone service, dial around, collect calling, operator assistance and calling card services (including prepaid calling cards) and toll free or 800 services. We offer these 17 services individually and in combinations. Through combined offerings, we provide customers with benefits such as single billing, unified services for multi-location companies and customized calling plans. Our wholesale businesses include wholesale voice and data services provided to carrier customers and other resellers and dial-up Internet access services. The address of the principal executive office of WorldCom is 500 Clinton Center Drive, Clinton, Mississippi 39056 and its telephone number is (601) 460-5600. The information included in Item 8 of the Company's annual report on Form 10-K for its fiscal year ended December 31, 2000 filed with the Securities and Exchange Commission on March 30, 2001, as amended by Form 10-K/A filed with the Securities and Exchange Commission on April 26, 2001, and Item 1 of the Company's quarterly report set forth in the quarterly report on Form 10-Q for its fiscal quarter ended September 30, 2001 filed with the Securities and Exchange Commission on November 14, 2001, is incorporated herein by reference. See Section 16 ("Additional Information") for information on how to obtain copies of these documents. SUMMARY FINANCIAL DATA We derived the summary historical consolidated financial data presented below as of and for the years ended December 31, 2000 and 1999 from our consolidated financial statements and related notes, which include the WorldCom group and the MCI group. The summary historical consolidated financial data presented below as of and for the nine-month periods ended September 30, 2001 and 2000 have been derived from our unaudited consolidated financial statements and related notes, which also include the WorldCom group and the MCI group. Our audited consolidated financial statements for the years ended December 31, 2000 and 1999 and our unaudited consolidated financial statements for the nine-month periods ended September 30, 2001 and 2000 are incorporated herein by reference. You should read the summary financial data together with our audited and unaudited consolidated financial statements incorporated by reference in this document. In reading the following summary financial data, please note the following: o In the second quarter of 2001, WorldCom made a strategic decision to restructure its investment in Embratel (allocated to the WorldCom group). As a result of actions taken in the second quarter of 2001, the accounting principles generally accepted in the United States prohibit the continued consolidation of Embratel's results. Accordingly, we have deconsolidated Embratel's results effective January 1, 2001. o As a result of events which occurred during the second quarter of 2001, WorldCom recorded after-tax charges of $528 million ($457 million at the WorldCom group and $71 million at the MCI group) in the second quarter of 2001, related to the write-off of investments in certain publicly traded and privately held companies. o In the second quarter of 2001, WorldCom recorded an after-tax charge of $14 million ($7 million at the WorldCom group and $7 million at the MCI group) as a result of the costs associated with the tracking stock recapitalization. o In the first quarter of 2001, WorldCom recognized after-tax charges of $76 million ($47 million at the WorldCom group and $29 million at the MCI group) associated with domestic severance packages and other costs related to WorldCom's February 2001 workforce reductions. o In the first quarter of 2001, WorldCom incurred after-tax charges of $59 million (at the WorldCom group) associated with the impact of foreign currency exchange on Embratel. o Results for 2000 include a pre-tax charge of $93 million (allocated to the WorldCom group) associated with the termination of the Sprint Corporation merger agreement, including regulatory, legal, accounting and investment banking fees and other costs, and a $685 million pre-tax charge ($340 million at the WorldCom group and $345 million at the MCI group) associated with specific domestic and international wholesale accounts that were no longer deemed collectible due to bankruptcies, litigation and settlements of contractual disputes that occurred in the third quarter of 2000. o During the fourth quarter of 2000, we implemented Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements," or SAB 101, which requires certain activation and installation fee 18 revenues to be amortized over the average life of the related service rather than be recognized immediately. Costs directly related to these revenues may also be deferred and amortized over the customer contract life. As required by SAB 101, we retroactively adopted this accounting effective January 1, 2000, which resulted in a one-time expense of $85 million ($75 million at the WorldCom group and $10 million at the MCI group), net of income tax benefit of $50 million. WORLDCOM, INC.
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, ----------------------------------------------------------- 2001 2000 2000 1999 ----------------------------------------------------------- (unaudited) (in millions, except per share data) OPERATING RESULTS: Revenues........................................... $26,701 $29,456 $39,090 $35,908 Operating income .................................. 2,761 6,663 8,153 7,888 Income before cumulative effect of accounting change 1,243 3,512 4,238 4,013 Cumulative effect of accounting change............. - (85) (85) - Net income ........................................ 1,243 3,427 4,153 4,013 Distributions on mandatorily redeemable preferred securities and other preferred dividend requirements.................................... 75 49 65 72 Net income applicable to common shareholders....... 1,168 3,378 4,088 3,941 PRO FORMA (1) ----------------------------------------------------------- Earnings per common share: WorldCom group: Net income attributed to the WorldCom group before cumulative effect of accounting change: Basic......................................... 0.38 0.71 0.91 0.81 Diluted....................................... 0.38 0.69 0.90 0.78 Net income attributed to the WorldCom group: Basic......................................... 0.38 0.68 0.88 0.81 Diluted....................................... 0.38 0.67 0.87 0.78 Weighted-average shares: Basic......................................... 2,910 2,864 2,868 2,821 Diluted....................................... 2,922 2,919 2,912 2,925 MCI group: Net income attributed to the MCI group before cumulative effect of accounting change: Basic......................................... 0.56 12.52 13.61 14.58 Diluted....................................... 0.56 12.52 13.61 14.58 Net income attributed to the MCI group: Basic......................................... 0.56 12.43 13.52 14.58 Diluted....................................... 0.56 12.43 13.52 14.58 Weighted-average shares: Basic......................................... 116 115 115 113 Diluted....................................... 117 115 115 113 STATEMENT OF FINANCIAL POSITION DATA: Total current assets............................... $10,528 $9,755 $10,324 Property and equipment, net........................ 38,151 37,423 28,618 Goodwill and other intangibles..................... 50,820 46,594 47,308 Other assets....................................... 5,403 5,131 4,822 Total assets....................................... 104,902 98,903 91,072 Total current liabilities.......................... 10,807 17,673 17,209 Long-term debt..................................... 30,161 17,696 13,128 Deferred tax liability............................. 3,310 3,611 4,877 Other liabilities.................................. 632 1,124 1,223 Minority interests................................. 110 2,592 2,599 Company obligated mandatorily redeemable and other preferred securities...................... 1,975 798 798 Shareholders' investment........................... 57,907 55,409 51,238
19 Ratio of earnings to fixed charges................. 1.99:1 5.90:1 5.25:1 5.75:1
(1) The recapitalization of WorldCom was effective June 7, 2001, and each share of WorldCom stock was changed into one share of WorldCom group stock and 1/25 of a share of MCI group stock. The weighted-average shares outstanding and attributed earnings per share information including periods prior to June 7, 2001 above is pro forma and assumes the recapitalization occurred at the beginning of 1999 and the WorldCom group stock and MCI group stock existed for all periods presented. The following summary financial data of the WorldCom group and the MCI group has been presented to illustrate the financial results of the WorldCom group and the MCI group and how the financial results of these groups relate to the consolidated results of WorldCom. This information, which has been prepared in accordance with accounting principles generally accepted in the United States, should be read together with the audited financial statements of each of WorldCom, the WorldCom group and the MCI group incorporated herein by reference. We derived the summary historical statement of operations data presented below for the years ended December 31, 2000 and 1999 from the WorldCom group's and the MCI group's audited financial statements and related notes incorporated herein by reference. The summary historical statement of financial position data and other financial data as of and for the years ended December 31, 2000 and 1999 have been derived from the WorldCom audited financial statements and related notes, which include the WorldCom group and the MCI group. The summary historical financial data presented below as of and for the nine-month periods ended September 30, 2001 and 2000 have been derived from our unaudited consolidated financial statements and related notes, which include the WorldCom group and the MCI group. You should read the summary financial data together with our audited and unaudited consolidated financial statements incorporated by reference in this document. In reading the following summary financial data, please note the following: o In the second quarter of 2001, WorldCom made a strategic decision to restructure its investment in Embratel (allocated to the WorldCom group). As a result of actions taken in the second quarter of 2001, the accounting principles generally accepted in the United States prohibit the continued consolidation of Embratel's results. Accordingly, we have deconsolidated Embratel's results effective January 1, 2001. o As a result of events which occurred during the second quarter of 2001, WorldCom recorded after-tax charges of $528 million ($457 million at the WorldCom group and $71 million at the MCI group) in the second quarter of 2001, related to the write-off of investments in certain publicly traded and privately held companies. o In the second quarter of 2001, WorldCom recorded an after-tax charge of $14 million ($7 million at the WorldCom group and $7 million at the MCI group) as a result of the costs associated with the tracking stock recapitalization. o In the first quarter of 2001, WorldCom recognized after-tax charges of $76 million ($47 million at the WorldCom group and $29 million at the MCI group) associated with domestic severance packages and other costs related to WorldCom's February 2001 workforce reductions. o In the first quarter of 2001, WorldCom incurred after-tax charges of $59 million (at the WorldCom group) associated with the impact of foreign currency exchange on Embratel. o Results for 2000 include a pre-tax charge of $93 million (allocated to the WorldCom group) associated with the termination of the Sprint Corporation merger agreement, including regulatory, legal, accounting and investment banking fees and other costs, and a $685 million pre-tax charge ($340 million at the WorldCom group and $345 million at the MCI group) associated with specific domestic and international wholesale accounts that were no longer deemed collectible due to bankruptcies, litigation and settlements of contractual disputes that occurred in the third quarter of 2000. o During the fourth quarter of 2000, we implemented Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements," or SAB 101, which requires certain activation and installation fee revenues to be amortized over the average life of the related service rather than be recognized immediately. Cost directly related to these revenues may also be deferred and amortized over the customer contract life. As required by SAB 101, we retroactively adopted this accounting effective January 1, 2000, which resulted 20 in a one-time expense of $85 million ($75 million at the WorldCom group and $10 million at the MCI group), net of income tax benefit of $50 million. WORLDCOM GROUP
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, ----------------------------------------------------------- 2001 2000 2000 1999 ----------------------------------------------------------- (unaudited) (in millions) OPERATING RESULTS: Revenues........................................... $16,047 $16,894 $22,755 $19,736 Operating income .................................. 2,275 3,893 5,041 4,631 Income before cumulative effect of accounting change 1,177 2,072 2,673 2,366 Cumulative effect of accounting change............. - (75) (75) - Net income before distributions on mandatorily redeemable preferred securities and other preferred dividend requirements................. 1,177 1,997 2,598 2,366 Distributions on mandatorily redeemable preferred securities and other preferred dividend requirements.................................... 75 49 65 72 Net income......................................... 1,102 1,948 2,533 2,294 STATEMENT OF FINANCIAL POSITION DATA: Current assets..................................... $9,384 $8,092 $9,037 Property and equipment, net........................ 36,090 35,177 26,227 Goodwill and other intangibles..................... 41,018 36,685 37,252 Long-term receivable from MCI group, net........... 976 976 - Other assets....................................... 5,168 4,963 4,717 Total assets....................................... 92,636 85,893 77,233 Current liabilities................................ 7,538 14,213 12,694 Long-term debt..................................... 24,568 11,696 7,128 Deferred tax liability............................. 2,445 2,683 4,229 Other liabilities.................................. 566 965 1,047 Minority interests................................. 110 2,592 2,599 Company obligated mandatorily redeemable and other preferred securities............................ 1,975 798 798 Allocated net worth................................ 55,434 52,946 48,738 MCI GROUP NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, ----------------------------------------------------------- 2001 2000 2000 1999 ----------------------------------------------------------- (unaudited) (in millions) OPERATING RESULTS: Revenues........................................... $10,654 $12,562 $16,335 $16,172 Operating income .................................. 486 2,770 3,112 3,257 Income before cumulative effect of accounting change 66 1,440 1,565 1,647 Cumulative effect of accounting change............. - (10) (10) - Net income......................................... 66 1,430 1,555 1,647 STATEMENT OF FINANCIAL POSITION DATA: Total current assets............................... $2,015 $2,312 $2,263 Property and equipment, net........................ 2,061 2,246 2,391 Goodwill and other intangibles..................... 9,802 9,909 10,056 Other assets....................................... 235 168 105 Total assets....................................... 14,113 14,635 14,815 Current liabilities................................ 4,140 4,109 5,491 Long-term debt..................................... 5,593 6,000 6,000 Long-term payable to WorldCom group, net........... 976 976 - Deferred tax liability............................. 865 928 648 Other liabilities.................................. 66 159 176 Allocated net worth................................ 2,473 2,463 2,500
21 FACTORS THAT YOU SHOULD CONSIDER WHEN MAKING YOUR DECISION In addition to the risks referenced from time to time in our filings with the Securities and Exchange Commission, you should carefully consider the risks and uncertainties described below and the other information in this Offer to Exchange before deciding whether to participate in the Stock Option Exchange Program. THE VALUE OF OUR WORLDCOM GROUP STOCK FLUCTUATES SIGNIFICANTLY, WHICH COULD RESULT IN AN EXERCISE PRICE FOR YOUR OPTION(S) THAT IS THE SAME AS OR GREATER THAN YOUR EXISTING OPTION(S). The market price of our WorldCom group stock has been highly volatile, has been or could be affected by factors such as the announcement of new products or product enhancements by us or our competitors, technological innovation by us or our competitors, quarterly variations in our or our competitors' results of operations and announcements of expected future results, changes in prices of our or our competitors' products and services, changes in revenue and revenue growth rates for us as a whole or for specific geographic areas, business units, products or product categories, changes in the level of demand for our products and services and general market conditions or market conditions specific to particular industries. As a result, the exercise price of any option received under the Stock Option Exchange Program may be greater than the exercise price of your current options. In addition, the announcement of a change of control transaction regarding WorldCom could have a substantial effect on our WorldCom group stock price, including substantial stock price appreciation, which could reduce or eliminate any potential benefits provided by the Stock Option Exchange Program. IF YOU ARE NOT EMPLOYED BY THE WORLDCOM GROUP ON THE REPLACEMENT GRANT DATE, YOU WILL NOT RECEIVE ANY OPTION(S). In order to receive new option(s) in exchange for your cancelled options you must be employed by the WorldCom group on the replacement grant date. If you elect to participate in the Stock Option Exchange Program and are no longer a WorldCom group employee on the replacement grant date, you will not receive new option(s) or any other consideration in exchange for your cancelled options, including any shares subject to those options that may be vested at the time of cancellation. IF THERE IS A CHANGE OF CONTROL OF WORLDCOM, YOU MAY NOT RECEIVE ANY OPTION(S). In the event of a change of control of WorldCom occurring before the replacement grant date, we cannot guarantee that the acquiring company would agree to assume existing options and therefore the obligation to issue option(s) to participants in the Stock Option Exchange Program. Therefore, it is possible that you may not receive any options, securities of the surviving company or other consideration in exchange for your cancelled options if there is a change of control of WorldCom before the replacement grant date, even if you are vested with respect to some or all of the option(s) at this time. In addition, the announcement of a change of control transaction regarding WorldCom could have a substantial effect on our stock price, including substantial stock price appreciation, which could reduce or eliminate any potential benefits provided by the Stock Option Exchange Program. 10. INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND ARRANGEMENTS CONCERNING THE OPTIONS. The directors and executive officers of WorldCom and their positions and offices as of January 16, 2002 are set forth in the following table:
Name Position ---- -------- James C. Allen Director Judith Areen Director Carl J. Aycock Director Ronald R. Beaumont Chief Operating Officer - WorldCom group Max E. Bobbitt Director Bernard J. Ebbers Director, President and Chief Executive Officer Francesco Galesi Director Stiles A. Kellett, Jr. Director Gordon S. Macklin Director Bert C. Roberts, Jr. Director, Chairman of the Board 22 Name Position ---- -------- John W. Sidgmore Director, Vice Chairman of the Board Scott D. Sullivan Director, Chief Financial Officer, Treasurer and Secretary Lawrence C. Tucker Advisory Director
The address of each director and executive officer is c/o WorldCom, Inc., 500 Clinton Center Drive, Clinton, Mississippi 39056. As of January 16, 2002, our executive officers and directors (13 persons) as a group held options to purchase a total of 23,599,672 shares of our WorldCom group stock. These options represented approximately 5.9% of the shares subject to all WorldCom group options outstanding under our stock option plans as of that date. Please see our proxy statement/prospectus for our annual meeting of shareholders held on June 7, 2001 for more information regarding the compensation of directors and certain executive officers and the amount of securities that our directors and executive officers beneficially owned, for periods or as of the dates set forth in that statement. This proxy statement is available upon request as described below under Section 16 ("Additional Information.") Agreements with our executive officers and directors are described or filed in our filings with the Securities and Exchange Commission, including our quarterly and annual reports. Copies of these reports are available from us upon request and are available to the public on the web site of the Securities and Exchange Commission at http://www.sec.gov. Except as set forth in Schedule A, to the knowledge of the Company, there were no transactions in our WorldCom group stock and options to purchase WorldCom group stock involving our executive officers and directors within the 60-day period prior to the commencement of the Stock Option Exchange Program. None of our directors or executive officers is eligible to participate in the Stock Option Exchange Program. 11. STATUS OF OPTIONS ACQUIRED BY US IN THE STOCK OPTION EXCHANGE PROGRAM; ACCOUNTING CONSEQUENCES OF THE STOCK OPTION EXCHANGE PROGRAM. The shares of WorldCom group stock subject to those options cancelled pursuant to the Stock Option Exchange Program will be returned to the pool of shares available for grants of new options under the 1997 plan. We believe that we will not incur any compensation expense solely as a result of the transactions contemplated by the Stock Option Exchange Program because we will not grant any new options until a trading day that is at least six months and one day after the date that we accept and cancel options elected for exchange. Further, the exercise price of all new options will equal the closing sales price of the WorldCom group stock on the replacement grant date. We do not believe that any eligible employees were granted any options in the six months prior to January 17, 2002, which is the commencement date. However, under the applicable accounting rules, any options granted to an eligible employee within six months prior to the commencement of the Stock Option Exchange Program at an exercise price lower than the eligible options will be subject to the unfavorable variable accounting treatment. Accordingly, to avoid the unfavorable accounting treatment, we must require that any employee who was granted an option in the six months prior to the commencement date to exchange that option as a condition to participation in the Stock Option Exchange Program. If we were to grant any options before the scheduled replacement grant date to any option holder electing to cancel options, our grant of those options to the electing option holder would be treated for financial reporting purposes as a variable award. In this event, we would be required to record as compensation expense the amount by which the market value of the shares subject to the newly granted options exceeds the exercise price of those shares. This compensation expense would be amortized over the period that the newly granted options are outstanding. We would have to adjust this compensation expense periodically during the option term based on increases or decreases in the market value of the shares subject to the newly granted options. 23 12. LEGAL MATTERS; REGULATORY APPROVALS. Except as noted below, we are not aware of any license or regulatory permit that appears to be material to our business that might be adversely affected by our exchange of options and issuance of new options as contemplated by the Stock Option Exchange Program, or of any approval or other action by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for the acquisition or ownership of our options as contemplated herein. Should any such approval or other action be required, we contemplate that we will seek such approval or take such other action. We are unable to predict whether we may determine that we are required to delay the acceptance of options for exchange pending the outcome of any such matter. We cannot assure you that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that the failure to obtain any such approval or other action might not result in adverse consequences to our business. Our obligation under the Stock Option Exchange Program to accept options elected for exchange is subject to certain conditions, including the conditions described in Section 6 of this Offer to Exchange. 13. MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES. The following is a general summary of the material U.S. federal income tax consequences of the exchange of options pursuant to the Stock Option Exchange Program. This discussion is based on the Internal Revenue Code of 1986, as amended, its legislative history, Treasury regulations thereunder and administrative and judicial interpretations thereof as of the date of this Offer to Exchange, all of which are subject to change, possibly on a retroactive basis. The federal tax laws may change and the federal, state, foreign and local tax consequences for each employee will depend upon that employee's individual circumstances. This summary does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to apply in all respects to all categories of option holders. If you exchange your options for new option(s), you will not be required under current law to recognize income for United States federal income tax purposes at the time of the exchange or at the date of grant of the new option. With regard to the new nonqualified stock options, the tax aspects of such options will be the same as any other nonqualified stock option grant. For a more complete discussion of these tax aspects, please refer to the 1997 plan and the offering circular for the 1997 plan. Options granted under the Stock Option Exchange Program will be nonqualified stock options. They will not be incentive stock options. No U.S. federal taxable income is recognized by an optionee upon the grant of a nonqualified stock option. We will be entitled to a business expense deduction equal to the amount of ordinary income recognized by the optionee with respect to any exercised nonqualified stock option. The deduction will in general be allowed for the taxable year of WorldCom in which the ordinary income is recognized by the optionee. We recommend that you consult your own tax advisor with respect to the federal, state, foreign and local tax consequences of participating in the Stock Option Exchange Program in your particular circumstances. 14. EXTENSION OF THE STOCK OPTION EXCHANGE PROGRAM; TERMINATION; AMENDMENT. We expressly reserve the right, in our discretion, at any time and from time to time, and regardless of whether or not any event set forth in Section 6 of this Offer to Exchange has occurred or is deemed by us to have occurred, to extend the expiration date and thereby delay the acceptance for exchange of any options by giving oral, written or electronic notice of such extension to the option holders. We also expressly reserve the right, in our sole discretion, on or prior to the expiration date, to terminate or amend the Stock Option Exchange Program and to postpone our acceptance and cancellation of any options elected for exchange upon the occurrence of any of the conditions specified in Section 6 of this Offer to Exchange, by giving oral, written or electronic notice of such termination or postponement to the option holders. Notwithstanding the 24 foregoing, we will pay the consideration offered or return the options elected for exchange promptly after termination or withdrawal of the Stock Option Exchange Program. Subject to compliance with applicable law, we further reserve the right, in our discretion, and regardless of whether any event set forth in Section 6 of this Offer to Exchange has occurred or is deemed by us to have occurred, to amend the Stock Option Exchange Program in any respect. Amendments to the Stock Option Exchange Program may be made at any time and from time to time. In the case of an extension, the amendment must be issued no later than 9:00 a.m., on the next business day after the last previously scheduled or announced expiration date. Any amendment of the Stock Option Exchange Program will be disseminated promptly to option holders in a manner reasonably designated to inform option holders of such change. Without limiting the manner in which we may choose to disseminate any amendment of the Stock Option Exchange Program, except as required by law, we have no obligation to publish, advertise or otherwise communicate any such dissemination. If we materially change the terms of the Stock Option Exchange Program or the information concerning the Stock Option Exchange Program, or if we waive a material condition of the Stock Option Exchange Program, we will extend the expiration date to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(3) under the Securities Exchange Act. These rules require that the minimum period during which an offer must remain open following material changes in the terms of the offer or information concerning the offer, other than a change in price or a change in percentage of securities sought, will depend on the facts and circumstances, including the relative materiality of such terms or information. We will notify you of such action, and we will keep the Stock Option Exchange Program open for a period of no less than ten business days after the date of such notice if we increase or decrease: o the amount of consideration offered for the exchanged options; or o the number of options eligible to be elected for exchange in the Stock Option Exchange Program, except that in the case of an increase, it must be by an amount that exceeds 2% of the shares of WorldCom group stock issuable upon exercise of the options that are subject to the Stock Option Exchange Program immediately prior to the increase. 15. FEES AND EXPENSES. We will not pay any fees or commissions to any broker, dealer or other person for soliciting elections to exchange options pursuant to the Stock Option Exchange Program. 16. ADDITIONAL INFORMATION. We recommend that, in addition to this Offer to Exchange and Election to Participate, you review the following materials, which we have filed with the Securities and Exchange Commission, before making a decision on whether to participate in the Stock Option Exchange Program: o our annual report on Form 10-K for the fiscal year ended December 31, 2000, filed with the Securities and Exchange Commission on March 30, 2001, as amended by Form 10-K/A, filed with the Securities and Exchange Commission on April 26, 2001; o our quarterly reports on Form 10-Q for the fiscal quarters ended March 31, 2001, filed with the Securities and Exchange Commission on May 15, 2001, June 30, 2001, filed with the Securities and Exchange Commission on August 14, 2001, and September 30, 2001, filed with the Securities and Exchange Commission on November 14, 2001; 25 o our current reports on Form 8-K filed with the Securities and Exchange Commission on February 8, 2001, March 14, 2001, March 28, 2001, April 26, 2001, May 1, 2001, May 16, 2001, June 7, 2001, June 12, 2001, August 29, 2001 and September 21, 2001; o the description of our WorldCom group stock included in our registration statement on Form 8-A, which was filed with the Securities and Exchange Commission on April 25, 2001, including any amendments or reports we file for the purpose of updating that description; o our registration statements on Form S-8 relating to the 1997 plan, filed with the Securities and Exchange Commission on June 27, 1997 (Registration No. 333-30279), January 28, 1998 (Registration No. 333-45079), August 31, 1998 (Registration No. 333-62609), August 17, 1999 (Registration No. 333-85393) and June 1, 2001 (Registration No. 333-62174); and o all documents subsequently filed by us, during the pendency of the Offer to Exchange pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act after the date of this Offer to Exchange and before the termination of this offering. The Securities and Exchange Commission file number for all of these filings is 000-11258. These filings and other reports, registration statements, proxy statements and other filings can be inspected and copied at the Public Reference Room maintained by the Securities and Exchange Commission located in its offices at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain copies of all or any part of these documents from this office upon the payment of the fees prescribed by the Securities and Exchange Commission. You may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-732-0330. These filings are also available to the public on the web site of the Securities and Exchange Commission at http://www.sec.gov. Our WorldCom group stock is quoted on The Nasdaq National Market under the symbol "WCOM", and our Securities and Exchange Commission filings can be read at the following Nasdaq address: Nasdaq Operations 1735 K Street, N.W. Washington, D.C. 20006 We will also provide without charge to each person to whom a copy of this Offer to Exchange is delivered, upon the written or oral request of any such person a copy of any or all of the documents to which we have referred you, other than exhibits to such documents (unless such exhibits are specifically incorporated by reference into such documents). Requests should be directed to: WorldCom, Inc. Stock Option Department 500 Clinton Center Drive Clinton, Mississippi 39056 You may also make a request by telephone at (601) 460-8001 (vnet: 460-8001) or toll free at 1-877-999-7780 between the hours of 9:00 a.m. and 6:00 p.m., Eastern Standard Time, Monday through Friday. As you read the foregoing documents, you may find some inconsistencies in information from one document to another. If you find inconsistencies between the documents, or between a document and this Offer to Exchange, you should rely on the statements made in the most recent document. The information contained in this Offer to Exchange about WorldCom should be read together with the information contained in the documents to which we have referred you. 26 17. MISCELLANEOUS. We are not aware of any jurisdiction where the implementation of the Stock Option Exchange Program violates applicable law. If we become aware of any jurisdiction where the implementation of the Stock Option Exchange Program violates applicable law, we will make a good faith effort to comply with such law. If, after such good faith effort, we cannot comply with such law, the Stock Option Exchange Program will not be made to, nor will elections to exchange options be accepted from or on behalf of, the option holders residing in such jurisdiction. We have not authorized any person to make any recommendation on our behalf as to whether you should participate in the Stock Option Exchange Program. You should rely only on the information contained in this document or to which we have referred you. We have not authorized anyone to give you any information or to make any representations in connection with the Stock Option Exchange Program other than the information and representations contained in this document or in the Election to Participate. If anyone makes any recommendation or representation to you or gives you any information, you must not rely upon that recommendation, representation or information as having been authorized by us. 27 SCHEDULE A RECENT TRANSACTIONS IN OPTIONS OR STOCK The following table sets forth transactions in our WorldCom group stock by our executive officers and directors within the 60-day period prior to the commencement of the Stock Option Exchange Program. There were no transactions in options to purchase WorldCom group stock by such persons during that period.
NAME OF PARTY NATURE OF TRANSACTION TRANSACTION DATE NUMBER OF SHARES PRICE PER SHARE ====================== ======================== ================= ================== ================= Stiles A. Kellett, Jr. Privately negotiated 12/04/01 612,000 (1) forward sale agreement SSK Partners, L.P.(3) Privately negotiated 12/04/01 340,000 (3) forward sale agreement John W. Sidgmore Gifts 12/21/01 15,070 n/a John W. Sidgmore Gift 12/26/01 10,305 n/a
- ---------- (1) In consideration for entering into the agreement, Mr. Kellett received a total purchase price of $7,666,327.18. The agreement provides that on March 7, 2005, Mr. Kellett will deliver between two-thirds to all of the shares of WorldCom group stock which are subject to the agreement to the counter party or, at Mr. Kellett's option, the cash equivalent of such shares. The exact number of shares Mr. Kellett will deliver is dependent upon the market price of WorldCom group stock on March 7, 2005. (2) Stiles A. Kellett, Jr. is the general partner of SSK Partners, L.P. (3) In consideration for entering into the agreement, the limited partnership received a total purchase price of $4,259,070.66. The agreement provides that on March 7, 2005, the limited partnership will deliver between two-thirds to all of the shares of WorldCom group stock which are subject to the agreement to the counter party or, at the limited partnership's option, the cash equivalent of such shares. The exact number of shares to be delivered is dependent upon the market price of WorldCom group stock on March 7, 2005. EX-99.(A)(1)(B) 4 ex99a1b.txt FORM OF ELECTION TO PARTICIPATE EXHIBIT (a)(1)(B) ELECTION TO PARTICIPATE Upon the terms and conditions of the Stock Option Exchange Program described in the accompanying Offer to Exchange and this Election to Participate, I hereby tender for cancellation the options to purchase shares of WorldCom group common stock specified below (the "Cancelled Options"), which constitute all outstanding options granted to me by WorldCom, Inc. on January 4, 1999, January 18, 2000 and/or April 24, 2000:
Expiration Number of Grant Date Date Exercise Price Outstanding Shares ---------- ---- -------------- ------------------ [Total shares]
Subject to the terms and conditions of the Stock Option Exchange Program including, but not limited to, the requirement that I remain employed by the WorldCom group through the replacement grant date currently scheduled for August 15, 2002, I will be granted options on terms and conditions that correspond to those of the Cancelled Options except they will include the binding arbitration provision used beginning in 2001 and will have the following terms:
Expiration Number Grant Date Date Exercise Price of Shares Vesting - ---------- ---- -------------- --------- ------- 8/15/02 8/14/12 8/15/02 closing [Total new shares] 1/3 each year for 3 years sales price beginning January 1, 2003
If you believe any of this information is incorrect or have any questions about this Election to Participate, please contact the WorldCom Stock Option Department at stock-options@wcom.com or 877-999-7780. You should receive an e-mail confirming that we have received this Election to Participate. Also, you can check the status by returning to this web site. See the following additional terms and conditions. |_| CLICK HERE TO ACCEPT THE TERMS AND CONDITIONS OF THE STOCK OPTION EXCHANGE PROGRAM AND TO ELECT TO PARTICIPATE - THE DEADLINE FOR ACCEPTANCE IS 12:00 MIDNIGHT, EASTERN STANDARD TIME, ON FEBRUARY 14, 2002. Name: Social Security No.: 1 ADDITIONAL TERMS AND CONDITIONS OF ELECTION TO PARTICIPATE 1. EXPIRATION DATE. THE OFFER TO EXCHANGE AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, EASTERN STANDARD TIME, ON FEBRUARY 14, 2002, UNLESS THE OFFER IS EXTENDED BY THE COMPANY. 2. SUBMISSION OF ELECTION TO PARTICIPATE. In order to participate, you must submit this Election to Participate on or before the Expiration Date. The electronic submission of this Election to Participate can only be made by the eligible participant. If the eligible participant is unable to submit the Election to Participate, the trustee, executor, administrator, attorney-in-fact, or another person acting in a fiduciary or representative capacity, should obtain the paper form of the Election to Participate from the Stock Option Department (contact information below) and deliver the paper form of the Election to Participate to the Stock Option Department on or prior to the Expiration Date. 3. ALL OR NOTHING TENDERS. If you intend to participate in the Stock Option Exchange Program, you must tender all of the outstanding options eligible for the Stock Option Exchange Program. If you attempt to tender only a portion of your eligible options, your entire tender will be rejected. 4. WITHDRAWAL. To validly withdraw this Election to Participate, you must properly submit a Notice of Withdrawal to the Stock Option Department on or prior to the Expiration Date. 5. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any questions or requests for assistance or additional copies of any documents relating to the Stock Option Exchange Program may be directed to: WorldCom, Inc. Attention: Stock Option Department 500 Clinton Center Drive Clinton, Mississippi 39056 facsimile: (601) 460-5669 (vnet: 460-5669) Phone: (601) 460-8001 (vnet: 460-8001) Toll free: 1-877-999-7780 e-mail: stock-options@wcom.com Copies will be furnished at the Company's expense. 6. IRREGULARITIES AND BINDING DETERMINATIONS. All questions as to the number of shares subject to options to be accepted for exchange, and the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of options will be determined by the Company in its sole discretion, which determinations shall be final and binding on all parties. The Company's interpretation of the terms and conditions of the Stock Option Exchange Program will also be final and binding on all parties. No tender of options will be deemed to be properly made until all defects and irregularities have been cured or waived by the Company. Neither the Company nor any other person is or will be obligated to give notice of any defects or irregularities in tenders, and no person will incur any liability for giving or failing to give any such notice. 7. IMPORTANT TAX INFORMATION. You should refer to Section 13 of the Offer to Exchange for a discussion of certain U.S. federal income tax consequences of the exchange of options under the Stock Option Exchange Program. You should consult with your individual tax advisors as to the consequences of participating in the Stock Option Exchange Program. 2 8. PARTICIPANT'S REPRESENTATIONS AND AGREEMENTS. By tendering the Cancelled Options, I represent and warrant that I have full power and authority to tender the Cancelled Options and that, when and to the extent the Cancelled Options are accepted for exchange by the Company, the Cancelled Options will be free and clear of all security interests, liens, restrictions, charges, encumbrances, conditional sales agreements or other obligations relating to the sale or transfer thereof (other than pursuant to the applicable option agreement with the Company) and the Cancelled Options will not be subject to any adverse claims. Upon request, I will execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the cancellation and exchange of the Cancelled Options pursuant to the Stock Option Exchange Program. I understand and acknowledge that: (1) All authority herein conferred or agreed to be conferred in this Election to Participate shall not be affected by, and shall survive, my death or incapacity, and all of my obligations hereunder shall be binding upon my heirs, personal representatives, successors and assigns. This tender is irrevocable other than through the withdrawal procedure mentioned above. (2) All Cancelled Options properly tendered on or before the Expiration Date and not properly withdrawn will, if accepted by the Company, be exchanged for new options, upon the terms and subject to the conditions of the Stock Option Exchange Program including, but not limited to, the conditions described in Sections 1 and 6 of the accompanying Offer to Exchange. (3) Once the Company has accepted the Cancelled Options for exchange, the stock option agreements evidencing such options will be terminated as of the Expiration Date. All new options will be subject to the terms and conditions of new stock option agreement(s) between the Company and me, the forms of which are included in the accompanying materials, and the related option plan. (4) I must be an employee of the WorldCom group from the date I elect to participate through the replacement grant date in order to receive the new options, and, if for any reason I do not remain an employee, I will not receive any new options or any other consideration for the Cancelled Options. (5) In the event of a change in control of the Company, and the acquiring company agrees to assume other outstanding options of WorldCom, the Company will require the acquiring company to also assume the obligation to issue option(s) pursuant to the Stock Option Exchange Program. WorldCom cannot guarantee that the acquiring company in any change of control transaction will agree to assume existing option(s) and therefore assume the obligation to issue option(s) pursuant to the Stock Option Exchange Program. Therefore, it is possible that I may not receive any option(s), securities of the surviving company or other consideration in exchange for my Cancelled Options if a change in control occurs before the option(s) are granted. (6) Under certain circumstances set forth in the Offer to Exchange, the Company may terminate or amend the Stock Option Exchange Program and/or postpone its acceptance of any Cancelled Options. (7) If I choose not to participate in the Stock Option Exchange Program, any outstanding options granted to me by WorldCom on January 4, 1999, January 18, 2000 and April 24, 2000 will remain outstanding in accordance with their terms and conditions, including their current exercise price and vesting schedule, and I will not receive an option grant in 2002. (8) The Company has advised me to consult with my own advisors as to the desirability and consequences of participating or not participating in the Stock Option Exchange Program. (9) Upon acceptance of the Cancelled Options by the Company, I, on my own behalf and on behalf of my heirs, dependents, executors, administrators and assigns, hereby release and agree to hold harmless WorldCom and its successors, assigns, affiliates, representatives, directors, officers and employees, past, present and future (collectively referred to in this Election to Participate as "Released Persons"), with respect 3 to and from any and all claims, damages, agreements, obligations, actions, suits, proceedings and liabilities of whatever kind and nature, whether now known or unknown, suspected or unsuspected (collectively referred to in this Election to Participate as "Claims"), which I now or hereafter may own or hold or at any time previously owned or held against any of the Released Persons and that relate to, arise out of or are in any way connected with the Cancelled Options. I acknowledge that I may later discover claims or facts that are in addition to or are different from those which I now know or believe to exist with respect to the Cancelled Options and/or the Claims. Nevertheless, I hereby waive any Claims relating to, arising out of or connected with the Cancelled Options that might arise as a result of such different or additional claims or facts. I fully understand the significance and consequence of this release. (10) I have not previously assigned or transferred to any person (other than WorldCom) any interest in the Cancelled Options, and I agree to defend, indemnify and hold harmless all Released Persons from and against any claim based on or in connection with any purported assignment or transfer. (11) I accept and agree to the terms and conditions of the Stock Option Exchange Program, including those in this Election to Participate and the accompanying Offer to Exchange, as the same may be amended as described in the Offer to Exchange. 4 EX-99.(A)(1)(C) 5 ex99a1c.txt FORM OF ELECTION TO PARTICIPATE EXHIBIT (a)(1)(C) ELECTION TO PARTICIPATE To: WorldCom, Inc. 500 Clinton Center Drive Clinton, Mississippi 39056 Attention: Stock Option Department Facsimile: (601) 460-5669 (vnet: 460-5669) Upon the terms and conditions of the Stock Option Exchange Program described in the accompanying Offer to Exchange and this Election to Participate, I hereby tender for cancellation the options to purchase shares of WorldCom group common stock specified below (the "Cancelled Options"), which constitute all outstanding options granted to me by WorldCom, Inc. on January 4, 1999, January 18, 2000 and/or April 24, 2000:
Expiration Number of Grant Date Date Exercise Price Outstanding Shares ---------- ---- -------------- ------------------
Subject to the terms and conditions of the Stock Option Exchange Program including, but not limited to, the requirement that I remain employed by the WorldCom group through the replacement grant date currently scheduled for August 15, 2002, I will be granted options on terms and conditions that correspond to those of the Cancelled Options except they will include the binding arbitration provision used beginning in 2001 and will have the following terms:
Expiration Number Grant Date Date Exercise Price of Shares Vesting - ---------- ---- -------------- --------- ------- 8/15/02 8/14/12 8/15/02 closing [Total new shares] 1/3 each year for 3 years sales price beginning January 1, 2003
If you believe any of this information is incorrect or have any questions about this Election to Participate, please contact the WorldCom Employee Stock Option Department at stock-options@wcom.com or 877-999-7780. See the following additional terms and conditions. SIGNATURE OF OPTION HOLDER X ---------------------------------------- Signature of Holder or Authorized Signatory Date: ____________________________, 2002 Print Name: ____________________________ Capacity: ______________________________ Address: _______________________________ Telephone No. (with area code): ________ Tax I.D./Social Security No.: __________ ======================================== E-mail address where the Stock Option Department can send confirmation of this Election to Participate ADDITIONAL TERMS AND CONDITIONS OF ELECTION TO PARTICIPATE 1. EXPIRATION DATE. THE OFFER TO EXCHANGE AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, EASTERN STANDARD TIME, ON FEBRUARY 14, 2002, UNLESS THE OFFER IS EXTENDED BY THE COMPANY. 2. DELIVERY OF ELECTION TO PARTICIPATE. To accept this offer to exchange, a properly completed and signed original of this Election to Participate (or a facsimile thereof) must be received by the Company at its address set forth on this Election to Participate on or before the Expiration Date. THE METHOD BY WHICH YOU DELIVER THE ELECTION TO PARTICIPATE IS AT YOUR OPTION, EXPENSE AND RISK, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE COMPANY. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY BY THE EXPIRATION DATE. 3. ALL OR NOTHING TENDERS. If you intend to participate in the Stock Option Exchange Program, you must tender all of the outstanding options eligible for the Stock Option Exchange Program. If you attempt to tender only a portion of your eligible options, your entire tender will be rejected. 4. SIGNATURES ON THE ELECTION TO PARTICIPATE. You must sign this Election to Participate exactly as your name appears on it. If the signature is by a trustee, executor, administrator, attorney-in-fact, or another person acting in a fiduciary or representative capacity, please set forth the signer's full title and include with this Election to Participate proper evidence satisfactory to the Company of the authority of such person to act in such capacity. You must also provide your address, telephone number and Tax I.D. or Social Security Number. 5. WITHDRAWAL. To validly withdraw this Election to Participate, you must properly submit a Notice of Withdrawal to the Stock Option Department on or prior to the Expiration Date. 6. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any questions or requests for assistance or additional copies of any documents relating to the Stock Option Exchange Program may be directed to: WorldCom, Inc. Attention: Stock Option Department 500 Clinton Center Drive Clinton, Mississippi 39056 facsimile: (601) 460-5669 (vnet: 460-5669) Phone: (601) 460-8001 (vnet: 460-8001) Toll free: 1-877-999-7780 e-mail: stock-options@wcom.com Copies will be furnished at the Company's expense. 7. IRREGULARITIES AND BINDING DETERMINATIONS. All questions as to the number of shares subject to options to be accepted for exchange, and the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of options will be determined by the Company in its sole discretion, which determinations shall be final and binding on all parties. The Company's interpretation of the terms and conditions of the Stock Option Exchange Program will also be final and binding on all parties. No tender of options will be deemed to be properly made until all defects and irregularities have been cured or waived by the Company. Neither the Company nor any other person is or will be obligated to give notice of any defects or irregularities in tenders, and no person will incur any liability for giving or failing to give any such notice. 2 8. IMPORTANT TAX INFORMATION. You should refer to Section 13 of the Offer to Exchange for a discussion of certain U.S. federal income tax consequences of the exchange of options under the Stock Option Exchange Program. You should consult with your individual tax advisors as to the consequences of participating in the Stock Option Exchange Program. 9. PARTICIPANT'S REPRESENTATIONS AND AGREEMENTS. By tendering the Cancelled Options, I represent and warrant that I have full power and authority to tender the Cancelled Options and that, when and to the extent the Cancelled Options are accepted for exchange by the Company, the Cancelled Options will be free and clear of all security interests, liens, restrictions, charges, encumbrances, conditional sales agreements or other obligations relating to the sale or transfer thereof (other than pursuant to the applicable option agreement with the Company) and the Cancelled Options will not be subject to any adverse claims. Upon request, I will execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the cancellation and exchange of the Cancelled Options pursuant to the Stock Option Exchange Program. I understand and acknowledge that: (1) All authority herein conferred or agreed to be conferred in this Election to Participate shall not be affected by, and shall survive, my death or incapacity, and all of my obligations hereunder shall be binding upon my heirs, personal representatives, successors and assigns. This tender is irrevocable other than through the withdrawal procedure mentioned above. (2) All Cancelled Options properly tendered on or before the Expiration Date and not properly withdrawn will, if accepted by the Company, be exchanged for new options, upon the terms and subject to the conditions of the Stock Option Exchange Program including, but not limited to, the conditions described in Sections 1 and 6 of the accompanying Offer to Exchange. (3) Once the Company has accepted the Cancelled Options for exchange, the stock option agreements evidencing such options will be terminated as of the Expiration Date. All new options will be subject to the terms and conditions of new stock option agreement(s) between the Company and me, the forms of which are included in the accompanying materials, and the related option plan. (4) I must be an employee of the WorldCom group from the date I elect to participate through the replacement grant date in order to receive the new options, and, if for any reason I do not remain an employee, I will not receive any new options or any other consideration for the Cancelled Options. (5) In the event of a change in control of the Company, and the acquiring company agrees to assume other outstanding options of WorldCom, the Company will require the acquiring company to also assume the obligation to issue option(s) pursuant to the Stock Option Exchange Program. WorldCom cannot guarantee that the acquiring company in any change of control transaction will agree to assume existing option(s) and therefore assume the obligation to issue option(s) pursuant to the Stock Option Exchange Program. Therefore, it is possible that I may not receive any option(s), securities of the surviving company or other consideration in exchange for my Cancelled Options if a change in control occurs before the option(s) are granted. (6) Under certain circumstances set forth in the Offer to Exchange, the Company may terminate or amend the Stock Option Exchange Program and/or postpone its acceptance of any Cancelled Options. (7) If I choose not to participate in the Stock Option Exchange Program, any outstanding options granted to me by WorldCom on January 4, 1999, January 18, 2000 and April 24, 2000 will remain outstanding in accordance with their terms and conditions, including their current exercise price and vesting schedule, and I will not receive an option grant in 2002. (8) The Company has advised me to consult with my own advisors as to the desirability and consequences of participating or not participating in the Stock Option Exchange Program. 3 (9) Upon acceptance of the Cancelled Options by the Company, I, on my own behalf and on behalf of my heirs, dependents, executors, administrators and assigns, hereby release and agree to hold harmless WorldCom and its successors, assigns, affiliates, representatives, directors, officers and employees, past, present and future (collectively referred to in this Election to Participate as "Released Persons"), with respect to and from any and all claims, damages, agreements, obligations, actions, suits, proceedings and liabilities of whatever kind and nature, whether now known or unknown, suspected or unsuspected (collectively referred to in this Election to Participate as "Claims"), which I now or hereafter may own or hold or at any time previously owned or held against any of the Released Persons and that relate to, arise out of or are in any way connected with the Cancelled Options. I acknowledge that I may later discover claims or facts that are in addition to or are different from those which I now know or believe to exist with respect to the Cancelled Options and/or the Claims. Nevertheless, I hereby waive any Claims relating to, arising out of or connected with the Cancelled Options that might arise as a result of such different or additional claims or facts. I fully understand the significance and consequence of this release. (10) I have not previously assigned or transferred to any person (other than WorldCom) any interest in the Cancelled Options, and I agree to defend, indemnify and hold harmless all Released Persons from and against any claim based on or in connection with any purported assignment or transfer. (11) I accept and agree to the terms and conditions of the Stock Option Exchange Program, including those in this Election to Participate and the accompanying Offer to Exchange, as the same may be amended as described in the Offer to Exchange. 4 EX-99.(A)(1)(D) 6 ex99a1d.txt FORM OF NOTICE OF WITHDRAWAL EXHIBIT (a)(1)(D) NOTICE OF WITHDRAWAL If you wish to withdraw your Election to Participate in WorldCom's Stock Option Exchange Program, you must notify us by clicking on the box below. Your notice of withdrawal must be received before 12:00 midnight, Eastern Standard Time, on February 14, 2002. You should receive an e-mail confirming that we have received this withdrawal. Also, you can check the status by returning to this web site. ********************************************************* By withdrawing my Election to Participate, I understand that I will not receive a replacement option, and I will keep my current option(s), which will continue to be governed by the stock option plan under which they were granted and existing option agreements with WorldCom. |_| CLICK HERE TO AGREE TO THESE TERMS AND WITHDRAW YOUR PREVIOUS ELECTION TO PARTICIPATE Name: Social Security No.: Please note that you may again elect to exchange your eligible options only by submitting a new Election to Participate prior to 12:00 midnight, Eastern Standard Time, on February 14, 2002. If you have questions, you may contact the Stock Option Department at stock-options@wcom.com or call 601-460-8001 (vnet: 460-8001) or toll free 1-877-999-7780. EX-99.(A)(1)(E) 7 ex99a1e.txt FORM OF NOTICE OF WITHDRAWAL EXHIBIT (a)(1)(E) NOTICE OF WITHDRAWAL If you wish to withdraw your Election to Participate in WorldCom's Stock Option Exchange Program, you must: 1. Complete this form, sign it, and deliver it to WorldCom, Inc., Stock Option Department, 500 Clinton Center Drive, Clinton, Mississippi 39056, by fax to (601) 460-5669 (vnet: 460-5669), as soon as possible, but in any event, for receipt before 12:00 midnight, Eastern Standard Time, on February 14, 2002. The method of delivery is at the participant's expense. 2. If you provide an e-mail address below, a confirmation that we have received this withdrawal should be sent to that address within three business days after delivery of this Notice of Withdrawal. Note that participants who return forms for receipt after February 7, 2002 may not receive timely confirmation. By withdrawing my Election to Participate, I understand that I will not receive a replacement option, and I will keep my current option(s), which will continue to be governed by the stock option plan under which they were granted and existing option agreements with WorldCom. I have completed and signed the following exactly as my name appears on the Election to Participate. Date: ______________________________ ________________________________________ Signature of Optionee ____________________________________ E-mail address where the Stock Option Name Department can send confirmation of Tax I.D./Social Security No. receipt of this Notice of Withdrawal Please note that you may again elect to exchange your eligible options only by submitting a new Election to Participate prior to 12:00 midnight, Eastern Standard Time, on February 14, 2002. If you have questions, you may contact the Stock Option Department at stock-options@wcom.com or call 601-460-8001 (vnet: 460-8001) or toll free 1-877-999-7780. EX-99.(A)(1)(F) 8 ex99a1f.txt FORM OF LETTER FROM HUMAN RESOURCES EXHIBIT (a)(1)(F) DATE: January 17, 2002 TO: Eligible U.S. WorldCom Group Employees FROM: Dennis Sickle SUBJECT: STOCK OPTION EXCHANGE PROGRAM We are pleased to announce that the WorldCom Board of Directors has approved a program whereby certain WorldCom group employees can exchange outstanding options granted by WorldCom on January 4, 1999, January 18, 2000, and April 24, 2000 for new options with a new exercise price, expiration date and vesting schedule. Subject to certain conditions, these new options will be granted on the "replacement grant date," which will be the first trading day that is at least six months and one day from the date we cancel the old options. We currently anticipate this will occur on or about August 15, 2002. The exercise price of the new options will equal the closing sales price of WorldCom group stock on the replacement grant date and these new options will vest one-third each year, beginning January 1, 2003. This voluntary exchange is designed to help restore the value of previously awarded and unexercised options granted in 1999 and 2000 and to motivate employees, like you, who have demonstrated a commitment to the continued success of WorldCom. Through this program, many of you will have the opportunity to receive double the number of shares you would typically be awarded in one year under our existing grant program, at a strike price that reflects current market conditions. This allows you to build value for yourself while you help grow the Company. Eligible employees will have from January 17 through February 14, 2002 to elect to participate in the exchange. If you are eligible and elect to participate, all of your 1999 and 2000 grants referenced above will be cancelled. To participate in the program, please access this web site: http://stockoption2002.wcomnet.com. There you will find materials on this program, including eligibility requirements, instructions on how to participate in the program, and other documents detailing the full terms and conditions of this offer. Within three business days of electronic acceptance of this offer, the Stock Option Department will send to eligible employees an e-mail confirming the electronic acceptance. The above web site also provides instructions on how to change your election by no later than February 14, 2002. The Stock Option Department will mail copies of the Offer to Exchange and related documents to eligible employees who are on a leave of absence (employees on a leave which began prior to August 1, 2001 are not eligible to participate) or cannot access the web site. Your final election must be received by the Stock Option Department no later than February 14, 2002. There will be no exceptions to this February 14th deadline, unless otherwise announced by the Company. ELIGIBLE EMPLOYEES MAY ALSO OBTAIN A PAPER COPY OF THE OFFER TO EXCHANGE OR THE RELATED DOCUMENTS. You should direct questions about this offer or requests for assistance or for paper copies of the Offer to Exchange or the related documents to the Stock Option Department, 500 Clinton Center Drive, Clinton MS 39056 or by telephone at 601-460-8001, or vnet 460-8001 or toll-free at 1-877-999-7780 between the hours of 9:00 a.m. and 6:00 p.m. Eastern Standard Time, Monday through Friday. Also contact the Stock Option Department if you are unable to access the web site or do not receive a confirmation e-mail within three business days of your election. Here's how the stock option exchange will work. If a participant currently has outstanding options for 386 shares granted in 1999 with a strike price of $45.1433 and for 257 shares granted in 2000 with a strike price of $43.1243, those options will be cancelled and the participant will receive a new grant for 643 shares at the August strike price, which will more closely reflect our stock's current market value. If an eligible employee chooses not to participate, or does not elect to participate by February 14, the current 1999 and 2000 grants will remain in place and the employee will not receive a stock option grant in 2002. The new exchange program will help fuel our Company's future growth by motivating employees to think and act like owners. In addition to our focus on future growth, we have also been proactively managing operational expenses to ensure that our Company remains competitive. Our continued success depends on it. Like other large companies, both within and outside our industry, we have been compelled to make some difficult decisions regarding employee compensation, which is one of the Company's largest expenses. This decision includes not granting merit increases to WorldCom group employees for 2002. This applies to all levels of the organization. You have shared in the ups and downs of the Company. Now more than ever, you have the ability to influence the future success of the Company through your effort and commitment. We believe the Stock Option Exchange Program provides you with the additional incentive to keep us moving ahead and to make this a great year. Together, we can help ensure WorldCom's continued success. EX-99.(A)(1)(G) 9 ex99a1g.txt FORM OF LETTER FROM STOCK OPTION DEPARTMENT EXHIBIT (a)(1)(G) PERSONAL AND CONFIDENTIAL DATE: January 17, 2002 TO: [WorldCom group employees on leave of absence who are eligible for option exchange - leave began after Aug. 1, 2001] FROM: Stock Option Department SUBJECT: EMPLOYEE STOCK OPTION EXCHANGE PROGRAM The attached communication from Dennis Sickle and related materials describe a new program whereby eligible WorldCom group employees may elect on or before February 14, 2002, to surrender outstanding options granted by WorldCom in 1999 and 2000 for cancellation. Subject to the terms and conditions of the program including, but not limited to, the continued employment requirement, new options would be granted in exchange for the cancelled options on the replacement grant date, currently scheduled for August 15, 2002. These new options would have a new exercise price, expiration date and three-year vesting schedule, commencing January 1, 2003. Enclosed, you will find complete information about the exchange program and instructions about how to participate, which you should review carefully. When you are making your decision about participating in this voluntary program, if eligible, you should also review the Company's termination/leave of absence policy in light of the continued employment requirement for the grant of a new option and exercise of such options on and after the delayed vesting dates. The following excerpt from the enclosed Offer to Exchange describes the continued employment requirement for the grant of a new option and the enclosed forms address the continued employment requirements for the vesting and exercisability of the new options. Nothing in this Offer to Exchange modifies or changes your employment relationship with us or grants you any right to remain employed by us. You cannot revoke your Election to Participate after 12:00 midnight, Eastern Standard Time, on February 14, 2002. If your employment with the WorldCom group is terminated by you or the WorldCom group voluntarily, involuntarily or for any reason or no reason, before your new option(s) are granted, you will not have a right to any stock options that were previously cancelled, and you will not have a right to the grant that would have been issued on the replacement grant date. THEREFORE, IF YOU ELECT TO PARTICIPATE AND YOU ARE NOT AN EMPLOYEE OF THE WORLDCOM GROUP FROM THE DATE OF THIS OFFER TO EXCHANGE THROUGH THE REPLACEMENT GRANT DATE, YOU WILL NOT RECEIVE ANY NEW OPTION(S) OR ANY OTHER CONSIDERATION IN EXCHANGE FOR YOUR CANCELLED OPTIONS. If you have questions about the exchange program, please contact us at 1-877-999-7780. For questions about the Company's termination/leave of absence policy, call The Source at 1-800-932-7947. Thank you. EX-99.(A)(1)(H) 10 ex99a1h.txt FORM OF LETTER FROM STOCK OPTION DEPARTMENT EXHIBIT (a)(1)(H) PERSONAL AND CONFIDENTIAL DATE: January 17, 2002 TO: [Eligible persons receiving paper forms of exchange] FROM: Stock Option Department SUBJECT: WORLDCOM STOCK OPTION EXCHANGE PROGRAM The attached communication from Dennis Sickle and related materials describe a new program whereby eligible option holders may elect on or before February 14, 2002, to surrender outstanding options granted by WorldCom in 1999 and 2000 for cancellation. Subject to the terms and conditions of the program including, but not limited to, the continued employment requirement, new options would be granted in exchange for the cancelled options on the replacement grant date, currently scheduled for August 15, 2002. These new options would have a new exercise price, expiration date and three-year vesting schedule, commencing January 1, 2003. Enclosed, you will find complete information about the exchange program and instructions about how to participate, which you should review carefully. If you have questions about the exchange program, please contact us at 1-877-999-7780. Thank you. EX-99.(A)(1)(I) 11 ex99a1i.txt FORM OF CONFIRMATION TO OFFEREES OF RECEIPT EXHIBIT (a)(1)(I) This e-mail confirms our receipt of your Election to Participate, which is your election to exchange all of your eligible options in accordance with the terms and conditions of the Stock Option Exchange Program. Your election to exchange your eligible options may only be withdrawn by properly submitting a Notice of Withdrawal to the Stock Option Department at any time prior to 12:00 midnight, Eastern Standard Time on February 14, 2002, the current expiration date of the Offer to Exchange, unless extended by WorldCom. In order to obtain and send a Notice of Withdrawal, go to the Stock Option Exchange Program web site at http://stockoption2002.wcomnet.com If you have questions, you may contact the Stock Option Department at stock-options@wcom.com or call 601-460-8001 (vnet: 460-8001) or toll free 1-877-999-7780. EX-99.(A)(1)(J) 12 ex99a1j.txt FORM OF CONFIRMATION TO OFFEREES OF RECEIPT EXHIBIT (a)(1)(J) This confirms our receipt of your Election to Participate, which is your election to exchange all of your eligible options in accordance with the terms and conditions of the Stock Option Exchange Program. Your election to exchange your eligible options may only be withdrawn by properly submitting a Notice of Withdrawal to the Stock Option Department at any time prior to 12:00 midnight, Eastern Standard Time on February 14, 2002. If you have questions, you may contact the Stock Option Department at stock-options@wcom.com or call 601-460-8001 or toll free 1-877-999-7780. EX-99.(A)(1)(K) 13 ex99a1k.txt FORM OF CONFIRMATION TO OFFEREES OF RECEIPT EXHIBIT (a)(1)(K) This e-mail confirms our receipt of your Notice of Withdrawal of your election to exchange your eligible options in the Stock Option Exchange Program. By rejecting the offer to exchange options, you are agreeing to keep your current options in accordance with their present terms and conditions and understand that you will not receive a replacement option. You may again elect to exchange your eligible options only by properly submitting a new Election to Participate prior to 12:00 midnight, Eastern Standard Time on February 14, 2002, the current expiration date of the Offer to Exchange, unless extended by WorldCom. Go to the Stock Option Exchange Program web site at http://stockoption2002.wcomnet.com for the Election to Participate and instructions for submitting it. If you have questions, you may contact the Stock Option Department at stock-options@wcom.com or call 601-460-8001 (vnet: 460-8001) or toll free 1-877-999-7780. EX-99.(A)(1)(L) 14 ex99a1l.txt FORM OF CONFIRMATION TO OFFEREES OF RECEIPT EXHIBIT (a)(1)(L) This confirms our receipt of your Notice of Withdrawal of your election to exchange your eligible options in the Stock Option Exchange Program. By rejecting the offer to exchange options, you are agreeing to keep your current options in accordance with their present terms and conditions and understand that you will not receive a replacement option. You may again elect to exchange your eligible options only by properly submitting a new Election to Participate prior to 12:00 midnight, Eastern Standard Time on February 14, 2002. If you have questions, you may contact the Stock Option Department at stock-options@wcom.com or call 601-460-8001 or toll free 1-877-999-7780. EX-99.(A)(1)(M) 15 ex99a1m.txt FORM OF PRESS RELEASE EXHIBIT (a)(1)(M) Contacts: Media: Brad Burns Investors: Scott Hamilton 1.800.644.NEWS 1.877.624.9266 IN LIEU OF 2002 ANNUAL STOCK OPTION GRANT, WORLDCOM GROUP ADOPTS EMPLOYEE STOCK OPTION EXCHANGE PROGRAM CLINTON, Miss. - January 17, 2002 - WorldCom group (NASDAQ: WCOM), the leading global business data and Internet communications provider, today announced that in lieu of its 2002 annual employee stock option grant, it is adopting a stock option exchange program for eligible employees. All WorldCom group employees will also forego merit salary increases in 2002 and experience some increase in benefits cost. This exchange program eliminates employee options that would have been granted in 2002 while enhancing employee retention and boosting incentives to grow overall shareholder value. The number of shares to be exchanged is approximately equal to the number of shares normally granted. WorldCom's Board of Directors and executive officers are not eligible to participate in the stock option exchange program. STOCK OPTION EXCHANGE PROGRAM Under the exchange program, eligible employees will have the opportunity to submit for cancellation outstanding stock options that were granted by WorldCom on January 4, 1999, January 18, 2000 and April 24, 2000. In exchange, they will receive new options for an equal number of shares expected to be granted on or about August 15, 2002, with an exercise price equal to the closing price for WorldCom group stock on that date. The new options will vest one-third each year, beginning January 1, 2003. Approximately 30,000 WorldCom group employees are eligible to participate in the stock option exchange program. Eligible employees will have until February 14, 2002, to decide whether to participate in the exchange program. WorldCom group employees will not receive an annual stock option grant or merit salary increase in 2002. The exchange program will not require a charge to WorldCom earnings, nor will it have any impact on the total number of shares under outstanding stock options. ADDITIONAL COST SAVINGS INITIATIVES In addition to the many cost-control initiatives ongoing throughout WorldCom, the elimination of merit salary increases in 2002 and other benefit cost reductions will further reduce the Company's operational expenses. WorldCom is filing a Tender Offer Statement on Schedule TO with the Securities and Exchange Commission (SEC) that provides additional information concerning the stock option exchange program. The description of the stock option exchange program in this release is not complete and is qualified in its entirety by reference to the terms and conditions of the program, which are more fully described in the Offer to Exchange and Election to Participate, each of which is being filed with the SEC as an exhibit to the Schedule TO and will be provided to eligible employees. ABOUT WORLDCOM GROUP WorldCom group (NASDAQ: WCOM) is a preeminent global communications provider for the digital generation, operating in more than 65 countries with annualized revenues of more than $20 billion. WorldCom provides the innovative technologies and services that are the foundation for business in the 21st century. For more information go to http://www.worldcom.com. FORWARD LOOKING STATEMENTS This release contains statements that are forward looking in nature and, accordingly, are subject to risks and uncertainties. These forward looking statements include statements regarding the impact of the exchange program and other actions on employee retention, incentives to grow, shareholder value and expense reductions. Factors that could cause our actual results to differ from our current expectations include our ability to successfully implement the exchange program and other measures with an attendant increase in employee retention and incentives to grow shareholder value, and expense reductions. ### EX-99.(A)(1)(N) 16 ex99a1n.txt FORM OF WEB SITE WELCOME PAGE EXHIBIT (a)(1)(N) STOCK OPTION EXCHANGE PROGRAM Welcome to the Stock Option Exchange web site. We are pleased to offer the opportunity for eligible WorldCom group employees to cancel their 1999 and 2000 stock option grants and receive new options, with a new exercise price, expiration date and vesting schedule. This voluntary program is designed to help restore the value of previously-awarded and unexercised options granted in 1999 and 2000 and to motivate employees, like you, who have demonstrated a commitment to the continued success of WorldCom. You can read all about this program by clicking on the titles below. -------------------------------------------------------------------------- HELPFUL HINTS - After you have read each document, press the "X" in the upper right hand corner of your screen to continue. In order to view or print these documents, please make sure you download and install Adobe Acrobat Reader version 5.0. To download Adobe Acrobat Reader, click HERE. Please follow the INSTRUCTIONS as given to properly install Adobe Acrobat Reader. -------------------------------------------------------------------------- HOW THE EXCHANGE PROGRAM WORKS HOW TO PARTICIPATE IN, OR WITHDRAW FROM, THE EXCHANGE PROGRAM MORE INFORMATION ABOUT THE EXCHANGE PROGRAM IF YOU HAVE QUESTIONS LOGOUT CURRENT EXCHANGE PROGRAM STATUS - -------------------------------------------------------------------------------- Name Date Status - ---- ---- ------ Today Elected to Participate No Election Received/Not Participating Withdrawn Previous Election/Not Participating - -------------------------------------------------------------------------------- STOCK OPTION EXCHANGE PROGRAM HOW THE EXCHANGE PROGRAM WORKS Here are the basics on how the program works: o You can elect to participate in the Exchange Program through February 14, 2002, via the online acceptance process available on this web site. o Outstanding stock options granted on January 4, 1999, January 18, 2000 and April 24, 2000 can be exchanged for new options with a new exercise price, expiration date and vesting schedule, subject to certain conditions. o If you properly elect to participate, all of your outstanding 1999 and 2000 options will be cancelled effective February 14, 2002. o The exercise price for the new options will equal the closing price of WorldCom group stock on the replacement grant date, which is currently scheduled for August 15, 2002. o New options will vest one-third each year for three years, beginning January 1, 2003. o Full terms and conditions of the Exchange Program are available in the MORE INFORMATION ABOUT THE EXCHANGE PROGRAM section of this site. HOW TO PARTICIPATE IN, OR WITHDRAW FROM, THE EXCHANGE PROGRAM To participate in the Exchange Program, simply click here: ELECTION TO PARTICIPATE. You will be asked to indicate your acceptance electronically. Within three business days, you should receive an e-mail confirmation of receipt from the Stock Option Department. You may also verify receipt of the Election to Participate, and any Notice of Withdrawal, by going to: YOUR CURRENT STATUS. If for any reason, you choose to withdraw your Election to Participate, you must do so no later than February 14, 2002, using the online process: NOTICE OF WITHDRAWAL. If you do not want to participate in the Exchange Program, simply exit this web site. You will retain your current options with their existing terms and conditions and will not receive a replacement option or other grant in 2002. MORE INFORMATION ABOUT THE EXCHANGE PROGRAM Additional information on the Exchange Program is available. Click on the title to view the following documents, which together contain the full terms and conditions of the Exchange Program: OFFER TO EXCHANGE (1) ELECTION TO PARTICIPATE (2) NOTICE OF WITHDRAWAL (3) FORMS OF THE STOCK OPTION AGREEMENTS TO BE ISSUED AFTER THE AUGUST GRANT DATE (4) 2 WORLDCOM, INC. 1997 STOCK OPTION PLAN (5) OFFERING CIRCULAR FOR WORLDCOM, INC. 1997 STOCK OPTION PLAN (6) SCHEDULE TO - TENDER OFFER STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (1) Detailed description of the Program (2) Used to participate in the Program (3) Used to withdraw a prior Election to Participate (4) Together with the Plan, contains the terms and conditions of the new options (5) Together with the option agreements, contains the terms and conditions of the new options (6) Summary of the Plan and options under it IF YOU HAVE ANY QUESTIONS If you have any questions about the program or would like to receive paper copies of the materials, please contact the Stock Option Department at 601-460-8001, or vnet 460-8001, or toll-free at 1-877-999-7780 between the hours of 9:00 a.m. and 6:00 p.m. Eastern Standard Time, Monday through Friday. 3 EX-99.(A)(1)(O) 17 ex99a1o.txt FORM OF WEB SITE POP-UP BOX EXHIBIT (a)(1)(O) Pop-Up Box - These will each appear after the person has read the Election to Participate and the Notice of Withdrawal and "Clicks" to sign and submit the agreement. Accept Election to Participate - -------------------------------------------------------------------------------- By Accepting, you agree to participate in the Stock Option Exchange Program. You are tendering options to be cancelled in accordance with the terms and conditions of the Stock Option Exchange Program. Press the OK button to make this election or CANCEL button to cancel this election and return to the front page. If you press the CANCEL button, your Election to Participate will NOT be submitted and you will NOT participate in the Stock Option Exchange Program unless you later properly submit an Election to Participate by 12:00 midnight, Eastern Standard Time, on February 14, 2002 (or such later date and time as designated by WorldCom). OK CANCEL - -------------------------------------------------------------------------------- Withdraw - -------------------------------------------------------------------------------- By clicking ok you are withdrawing your previous Election to Participate in the Stock Option Exchange Program. Press the OK button to submit your Notice of Withdrawal or CANCEL button to cancel this withdrawal and return to the front page. If you press the CANCEL button, your Election to Participate will remain in effect unless you later properly submit a Notice of Withdrawal by 12:00 midnight, Eastern Standard Time, on February 14, 2002 (or such later date and time as designated by WorldCom). OK CANCEL - -------------------------------------------------------------------------------- EX-99.(A)(1)(P) 18 ex99-a1p.txt FORM OF PRESENTATION EXHIBIT (a)(1)(P) [SLIDE] DOMESTIC WORLDCOM GROUP STOCK OPTION EXCHANGE PROGRAM OVERVIEW [LOGO] WORLDCOM [NOTES] > Greeting and Introduction > We're here today to learn about a new program called the Stock Option Exchange Program. > As you know, our Company has always been proud of our ability to create outstanding shareholder value. You could say we wrote the book about shareholder value. However, during the extraordinary general and telecom market conditions we have been experiencing recently, this has been a challenge. > As a Company, we needed to look at ways to balance preserving shareholder value while retaining our employee talent in a competitive market. We recognize that the driver of our Company's growth has always been you -- our employees. > To help motivate you to continue to drive that growth, the Company is offering you the chance to restore the value of some previously-awarded stock options. > Before we get into the details of the program, let's take a quick look at the current business climate. 1 [SLIDE] 1999 2000 2001 [GRAPHIC SHOWING CROOKED ARROW POINTING UP] [LOGO] WORLDCOM(SM) [NOTES] > 1999, 2000, 2001 ... For the past three years, some common themes have cut deeply across all sectors of most every industry: volatile stock market conditions, acquisitions, down-turned economy, depressed stock prices, sacrifices, restructuring, change, the dot-com implosion, recession. > WorldCom's reaction to this uncertain economic environment has been to buck many of the trends by remaining profitable, keeping core business lines stable,and attaining favorable growth in new business areas. > Recently, our industry and our Company have faced enormous challenges. Yet, despite volatile economic conditions, WorldCom is well positioned for success. > While we can't control the economy, or even the markets, by consistently striving to increase shareholder value, you can impact the company's bottom line, which in turn should affect your bottom line as an employee and a stockholder. > Many of you have outstanding stock options with exercise prices significantly above recent trading prices of our WorldCom group stock. As mentioned, today, I am pleased to introduce the Stock Option Exchange Program. We believe this program will provide renewed incentives by creating a better opportunity to obtain value from some of your options. 2 [SLIDE] STOCK OPTION EXCHANGE PROGRAM o The Program o Eligibility o Your Choices o Timelines o The Web Site o Next Steps o On the Move...Poised for Success [LOGO] WORLDCOM(SM) [NOTES] > So, let's talk about the new program. > By now, eligible WorldCom group employees should have received an e-mail from Dennis Sickle, SVP Human Resources, announcing the program and the special web site created for participants. Today, I want to share a summary about the program, eligibility requirements, your choices, more about the web site, timelines and next steps. 3 [SLIDE] STOCK OPTION EXCHANGE PROGRAM o Provides the opportunity to restore the value of some of your previously-awarded and unexercised options o Exchange 1999 and 2000 outstanding options for a new option o The new option will have the same number of shares; new exercise price and vesting schedule [LOGO] WORLDCOM(SM) [NOTES] > Here's how the Stock Option Exchange Program works: > Eligible U.S. WorldCom group employees have the opportunity to cancel their outstanding stock options granted in 1999 and 2000. > If you elect to participate, all of your outstanding 1999 and 2000 options will be cancelled after February 14, 2002. You elect to cancel and exchange all outstanding 1999 and 2000 shares - in other words, you cannot choose which ones to cancel. > The replacement grant will have the same number of shares as the cancelled options. > There will be a new exercise price and vesting schedule for the replacement grant/new option. > For now, I will continue to share information about the Stock Option Exchange Program. 4 [SLIDE] STOCK OPTION EXCHANGE PROGRAM o New options to be granted on "the replacement grant date" o First trading date at least six months and one day from date options cancelled o Anticipated to be on or about August 15, 2002 o New option exercise price to equal closing sales price of WorldCom group stock on replacement grant date o Vesting one third each year, beginning January 1, 2003 [LOGO] WORLDCOM(SM) [NOTES] > The new option -- or replacement grant -- will have a new exercise or "strike" price. That price will be set on the first trading day that is at least six months and one day after the date we cancel the options accepted for exchange. We anticipate that will be on or about August 15, 2002. That date is determined by accounting considerations. > Options granted in the Stock Option Exchange Program will vest and, subject to the provisions of the 1997 plan and the new stock option agreements, will be exercisable as follows: one-third (1/3) the number of shares covered by the new options on and after January 1, 2003, another one-third (1/3) of such shares on and after January 1, 2004, and the remaining one-third (1/3) of such shares on and after January 1, 2005. 5 [SLIDE] ELIGIBLE TO PARTICIPATE o In general, current U.S. WorldCom group employees holding outstanding options originally granted under the 1997 WorldCom plan on: o January 4, 1999 o January 18, 2000 o April 24, 2000 [LOGO] WORLDCOM(SM) [NOTES] > In general, current U.S. WorldCom group employees, who hold outstanding options which were originally granted under the 1997 plan on January 4, 1999, January 18, 2000 and April 24, 2000 are eligible to participate in the Stock Option Exchange Program. 6 [SLIDE] EXCLUDED FROM PARTICIPATION o The following are excluded from the program: o WorldCom Board of Directors and executive officers o WorldCom group employees who are currently on a leave of absence that began prior to August 1, 2001 [LOGO] WORLDCOM (SM) [NOTES] > Excluded from participating in the Stock Option Exchange Program are: o The WorldCom Board of Directors and executive officers. o WorldCom group employees who are currently on a leave of absence that began prior to August 1, 2001. 7 [SLIDE] THE CHOICE IS YOURS o Voluntary exchange o You decide whether or not to participate o Weigh the opportunity and your future expectations [GRAPHIC OMITTED SHOWING PUZZLE PIECES] [LOGO] WORLDCOM (SM) [NOTES] > This program is completely voluntary. > If you choose not to participate, you will retain your existing outstanding 1999 and 2000 options. Those options will remain unchanged, with their original exercise price and original terms. > Eligible employees who do not participate in the Stock Option Exchange Program will not receive a stock option grant in 2002. 8 [SLIDE] FAST FACTS ABOUT THE PROGRAM o Elect to participate online via special web site o February 14 deadline for final decision, no revocation after that o 1999 and 2000 options cancelled, new options issued in August o Shares received equal to shares cancelled o Vest in thirds over three years, beginning January 1, 2003 o Issue with new strike price on or about August 15, 2002 o Must remain employed by WorldCom group from election deadline through the replacement grant date [LOGO] WORLDCOM (SM) [NOTES] > Some information to keep in mind: review bullets. > Note regarding the final bullet. An eligible employee must remain a WorldCom group employee from the cancellation deadline through the replacement grant date. If an employee transfers to the MCI group during this timeframe, he/she would no longer be considered eligible. If the employee transfers to MCI group following the replacement grant date, he/she would retain any applicable options. 9 [SLIDE] TIMELINES [GRAPHIC OMITTED SHOWING CALENDAR PAGES TURNING] o Now until February 14, 2002 o Review web site information; elect to participate o Withdraw election during this timeframe o On or about August 15, 2002 o Replacement grant date o Strike price established o January 1, 2003; January 1, 2004; January 1, 2005 o Vesting dates for each third of the new option shares [LOGO] WORLDCOM (SM) [NOTES] > Your timelines are fairly simple: o From now until February 14, 2002, go to the web site, review the information available there and make your election to participate. You also have the option to change your election up to February 14. The web site provides an option to withdraw an election prior to the deadline. o On or about August 15, 2002 your replacement grant will be issued. o Vesting will occur 1/3, 1/3 and 1/3 beginning January 1, 2003. > You must remain employed with the WorldCom group from the election deadline through the replacement grant date. To remain eligible you cannot transfer to the MCI group prior to the replacement grant date. > The timeframes are driven by accounting considerations. 10 [SLIDE] HOW IT COULD WORK ... BASED ON ASSUMPTIONS o 1999 GRANT o Grant Date: January 4, 1999 o Shares outstanding under original stock option: 386 o Current stock option exercise price: $45.1433 o 2000 GRANT o Grant Date: January 18, 2000 o Shares outstanding under original stock option: 257 o Current stock option exercise price: $43.1243 o NEW OPTION o Replacement grant date: On or about August 15, 2002, unless the offer is extended o Shares subject to new option(s): 643 o Vest 1/3 each year beginning 1/1/03 [LOGO] WORLDCOM (SM) [NOTES] > Sometimes it's easier to understand a new program when there is an example provided. > The following is a representative example for a hypothetical employee. Your situation is likely to vary in significant respects. Think about the following assumptions - review chart on slide. > Based on the assumptions here, for the sake of illustrating the Stock Option Exchange Program, we would cancel your original stock options after February 14, 2002. o On the replacement grant date, which would be on or about August 15, 2002, unless the offer is extended, you would receive new option(s) for 643 shares. o Your new exercise price would be equal to the closing sales price of WorldCom group stock as reported on The Nasdaq National Market on August 15. o Your new option(s) will vest and, subject to the provisions of the 1997 plan and the new stock option agreements, will be exercisable as follows: one-third (1/3) the number of shares covered by the new option(s) on and after January 1, 2003, another one-third (1/3) of such shares on and after January 1, 2004, and the remaining one-third (1/3) of such shares on and after January 1, 2005. 11 [SLIDE] HOW IT COULD WORK ... BASED ON ASSUMPTIONS o 1999 Grant o Grant Date: January 4, 1999 o Shares outstanding under original stock option: 1857 o Current stock option exercise price: $45.1433 o 2000 Grant o Grant Date: January 18, 2000 o Shares outstanding under original stock option: 412 o Current stock option exercise price: $43.1243 o New Option o Replacement grant date: On or about August 15, 2002, unless the offer is extended o Shares subject to new option(s): 2269 o Vest 1/3 each year beginning 1/1/03 [LOGO] WORLDCOM (SM) [NOTES] > Here's another example: > This is what the replacement grant might look like for an exempt employee who received a first-time grant in 1999 and a renewal grant in 2000 and has never exercised any options. > His first-time grant options in 1999 are now 1,857 shares and the renewal in 2000 is 412 shares, for a total of 2,269 shares subject to new option. 12 [SLIDE] THE WEB SITE [GRAPHIC SHOWING COMPUTER TERMINAL] o http://stockoption2002.wcomnet.com o Review and/or print informational materials o Elect to participate or withdraw from the Stock Option Exchange Program o Receive confirmation e-mails generated through your activity on the site o Locate help contact information [LOGO]WORLDCOM(SM) [NOTES] > We've developed a web-based tool to help you through the election process. As communicated in the memo from Human Resources, the url is: http://stockoption2002.wcomnet.com. o Your TeamNet user id and password will be required for access. o Access is limited to "eligible" employees. > The site contains both instructional information on how to participate in the Stock Option Exchange Program, or how to withdraw your choice if you change your mind before February 14, 2002, as well as plan documents to use in making your choice. > The site will automatically confirm your choices through an automated e-mail arriving to your WorldCom e-mail address within three business days of your election to participate. > After you review the information located on the site, if you still have questions, you can contact the Stock Option Department through the numbers/information provided. > If for some reason you are unable to use or access the web site, at your request, the Stock Option Department will mail to you copies of the documents so that you may participate in the Stock Option Exchange Program. 13 [SLIDE] WEB SITE: QUICK LOOK [GRAPHIC SHOWING SCREEN AS DESCRIBED BELOW] [LOGO]WORLDCOM STOCK OPTION EXCHANGE PROGRAM Welcome to the Stock Option Exchange Program web site. We are pleased to offer the opportunity for eligible WorldCom group employees to cancel their 1999 and 2000 stock option grants and receive new options, with a new exercise price, expiration date and vesting schedule. This voluntary program is designed to help restore the value of previously-awarded and unexercised options granted in 1999 and 2000 and to motivate employees, like you, who have demonstrated a commitment to the continued success of WorldCom. You can read all about this program by clicking on the titles below. HELPFUL HINTS -- After you have read each document press the "X" in the upper right hand corner of your screen to continue. In order to view or print these documents, please make sure you download and install Adobe Acrobat Reader version 5.0. To download Adobe Acrobat Reader, click HERE. Please follow the INSTRUCTIONS as given to properly install Adobe Acrobat Reader. HOW THE EXCHANGE PROGRAM WORKS HOW TO PARTICIPATE IN, OR WITHDRAW FROM, THE EXCHANGE PROGRAM MORE INFORMATION ABOUT THE EXCHANGE PROGRAM IF YOU HAVE QUESTIONS LOGOUT CURRENT EXCHANGE PROGRAM STATUS: NAME DATE STATUS Your Name Here 15 Jan 2002 Election Not Received [LOGO]WORLDCOM(SM) [NOTES] > Here's a a quick look at the web site home page that you will access for the Stock Option Exchange Program. (Note: point out sections just referenced.) 14 [SLIDE] ------------------------------------------ Eligible employees access the Stock Option Exchange Web Site ------------------------------------------ | NEXT STEPS | V ------------------------------------------ Review informational material ------------------------------------------ | o Reviewing the flow V of what you do ------------------------------------------ -------------------------- next... Determine if you No ... cancel out of will participate in the program --> web site, final o February 14 is the ------------------------------------------ decision by Feb. 14 key date | -------------------------- V | o Stock Option ------------------------------------------ V Department for all Yes... Use web site to submit Election to -------------------------- questions Participate by February 14, 2002 Existing options ------------------------------------------ remain unchanged - | original exercise price V and terms ------------------------------------------ -------------------------- Receive system-generated confirmation e-mail within three days of your election ------------------------------------------ | V ------------------------------------------ 1999 and 2000 options cancelled after February 14, 2002 ------------------------------------------ | V ------------------------------------------ New options issued on or about August 15, 2002 ------------------------------------------ | V ------------------------------------------ New options vest in thirds over three years beginning January 1, 2003 ------------------------------------------
[LOGO]WORLDCOM(SM) [NOTES] > Remember, should you have any questions, be sure to contact the Stock Option Department and make your final decision by February 14, 2002. > That gives you an overview of the Stock Option Exchange Program. 15 [SLIDE] ON THE MOVE ... POISED FOR SUCCESS o Through the stock option programs, you become a shareholder o Not only can you make things happen, you can share in the benefits o Our core lines of business are stabilizing o Successful introduction and growth of new services - VPN and Web Hosting o Solid growth of Internet, data and International [LOGO]WORLDCOM(SM) [NOTES] > Through the stock option program, you become a shareholder. Not only can you make things happen, you can share in the benefits. > Your management team values you and believes in you. > You have shared in the ups and downs of the Company. Now more than ever you have the ability to influence the future success of the Company through your continued investment of time, effort and commitment. > But what continues to set us apart from the competition? What keeps us moving ahead? What will help us grow? > We are different from our competitors: o We continue to maintain revenue, build profits. o Our year-over-year rate decline slowed dramatically, helping to make our core Voice and Private Line products stable. o Our core lines of business are the most stable that they have been in three years, providing us a strong base from which to build. o Our introduction and growth of VPN and Web Hosting has been successful. - Prompting us to build specialty sales groups to drive Internet, web hosting and local. - Using our lessons learned to build a base of prospects and roll-out through Majors. o Our International operations are poised to drive a favorable amount of growth. 16 [SLIDE] WHAT SETS US APART? o We believe we have: o The premier product set o The broadest reach o Superior sales and service o The best employees [LOGO]WORLDCOM(SM) [NOTES] > Again, what sets us apart? o The premier product set. o The broadest reach. o The best sales and service. o And, most importantly, the best employees. > Indications are that 2002 should be a turn-around year for the economy. Many of the start-ups that caused the price wars and capacity gluts are gone. WorldCom is ready to lead the way. > Thank you again for helping to make all of this fact. We hope that the Stock Option Exchange Program provides you with additional incentive to keep us moving ahead and to make this a great year. 17 [SLIDE] REMINDERS o February 14, 2002 at midnight EST is the deadline for electing; withdrawing o Review the Offer to Exchange and other documents carefully o For more information: o Visit the web site, http://stockoption2002.wcomnet.com o Contact the Stock Option Department: o V-net 460-8001 o Toll-free 1-877-999-7780 o e-mail to: stock-options@wcom.com [LOGO]WORLDCOM(SM) [NOTES] > Remember, the deadline to elect to participate -- or if you elect to participate and then later change your mind --the deadline to withdraw -- is midnight Eastern time on February 14, 2002. > Review the Offer to Exchange and other documents carefully for complete details. > If you have questions or need additional information, visit the Stock Option Exchange Program web site or contact the Stock Option Department via phone or e-mail. > Thank you for your attention today. 18 EX-99.(A)(1)(Q) 19 ex99a1q.txt OFFERING CIRCULAR EXHIBIT (a)(1)(Q) OFFERING CIRCULAR THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 WORLDCOM, INC. 557,226,000 SHARES OF COMMON STOCK ($0.01 PAR VALUE PER SHARE) WORLDCOM, INC. 1997 STOCK OPTION PLAN, AS AMENDED We are offering up to 557,226,000 shares of our common stock pursuant to our 1997 Stock Option Plan, as amended. The plan is summarized beginning on page 1 of this offering circular under the heading "DESCRIPTION OF THE 1997 STOCK OPTION PLAN." This offering circular covers the shares of our common stock that we may issue under the plan, including any other shares we may issue as a result of any stock dividend, stock split, recapitalization or other similar change in our common stock. Our common stock is traded on The Nasdaq National Market under the symbol "WCOM." _______________________________________________________ We have not authorized anyone to give any information or to make any representations concerning the offering of our common stock except the information and representations which are in this offering circular, or which are referred to under the heading "WHERE YOU CAN FIND MORE INFORMATION" beginning on page 7 of this offering circular. If anyone gives or makes any other information or representation, you should not rely on it. This offering circular is not an offer to sell or a solicitation of an offer to buy any securities other than our common stock. This offering circular is not an offer to sell or a solicitation of an offer to buy our common stock in any circumstances in which an offer or solicitation is unlawful. You should not interpret the delivery of this offering circular, or any sale of common stock, as an indication that there has been no change in our affairs since the date of this offering circular. You should also be aware that the information in this offering circular may change after this date. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this offering circular is truthful or complete. Any representation to the contrary is a criminal offense. _______________________________________________________ The date of this offering circular is January 14, 2002. TABLE OF CONTENTS INFORMATION ABOUT WORLDCOM, INC................................................2 DESCRIPTION OF THE 1997 STOCK OPTION PLAN......................................2 GENERAL INFORMATION.........................................................2 ELIGIBILITY TO PARTICIPATE IN THE 1997 STOCK OPTION PLAN....................2 TYPES OF OPTIONS THAT MAY BE GRANTED UNDER THE 1997 STOCK OPTION PLAN.......2 HOW TO EXERCISE STOCK OPTIONS YOU RECEIVE UNDER THE 1997 STOCK OPTION PLAN..2 DETERMINATION OF EXERCISE PRICE.............................................3 WHEN YOU MAY EXERCISE YOUR OPTIONS AND WHEN YOUR STOCK OPTIONS LAPSE........3 CERTAIN ADJUSTMENTS ........................................................4 NON-TRANSFERABILITY OF STOCK OPTIONS........................................5 YOUR STATUS AS AN OPTIONHOLDER..............................................5 ADMINISTRATION OF THE 1997 STOCK OPTION PLAN................................6 USE OF PROCEEDS................................................................6 UNITED STATES FEDERAL INCOME TAX CONSEQUENCES..................................7 NON-QUALIFIED STOCK OPTIONS - UNITED STATES TAXPAYERS.......................7 INCOME TAX RATES ON CAPITAL GAIN AND ORDINARY INCOME - UNITED STATES TAXPAYERS...................................................................7 NON-UNITED STATES TAXPAYERS.................................................7 STATUS OF THE 1997 STOCK OPTION PLAN...........................................8 RESALE OF SHARES...............................................................8 WHERE YOU CAN FIND MORE INFORMATION............................................8 i INFORMATION ABOUT WORLDCOM, INC. WorldCom, Inc., a Georgia corporation, is the issuer of the shares of common stock covered by this offering circular. Our principal office is located at 500 Clinton Center Drive, Clinton, Mississippi 39056. Our telephone number is (601) 460-5600. Except where the context otherwise requires, any reference to "we," "us" or our company means WorldCom, Inc. and our direct and indirect subsidiaries. DESCRIPTION OF THE 1997 STOCK OPTION PLAN GENERAL INFORMATION The 1997 Stock Option Plan, as amended, is intended to provide an additional incentive to some of our employees who are not officers by increasing their proprietary interest in our business and our success. The description of the plan that follows merely summarizes the terms of the plan. This summary is subject to the provisions of the plan itself. You may obtain a copy of the plan and information regarding the plan and its administration from our company's Stock Option Department at the address listed above under the heading "INFORMATION ABOUT WORLDCOM, INC." The Stock Option Department's telephone number is (877) 999-7780 or (601) 460-8001. The plan and related agreement(s) govern your rights, not these summary descriptions. A total of 557,226,000 shares may be issued pursuant to options awarded under the plan, subject to adjustment as described below. If any options terminate, expire or are surrendered unexercised, the underlying shares may be again awarded under the plan. Any shares of common stock issued under the plan may be newly issued or may be purchased on the open market or from private sources. ELIGIBILITY TO PARTICIPATE IN THE 1997 STOCK OPTION PLAN All of our employees who are not officers are eligible to receive grants of stock options under the plan. This includes employees of our subsidiaries. The Compensation and Stock Option Committee of our Board of Directors determines which employees will receive stock options. We refer to that committee as the "Compensation Committee." TYPES OF OPTIONS THAT MAY BE GRANTED UNDER THE 1997 STOCK OPTION PLAN We may grant eligible employees non-qualified stock options. A non-qualified stock option is a stock option that does not qualify for special tax treatment as an incentive stock option under Section 422 of the United States Internal Revenue Code of 1986, as amended. HOW TO EXERCISE STOCK OPTIONS YOU RECEIVE UNDER THE 1997 STOCK OPTION PLAN Should you elect to exercise any of the stock options you receive under the plan, you must give us notice prior to the expiration or termination of the options by contacting Salomon Smith Barney, our Stock Option Plan Administrator, stating the number of shares for which the stock option is being exercised, and pay the exercise price. Salomon Smith Barney may be reached by 2 dialing 1-888-772-1748 in the United States and Canada. Outside the United States or Canada, dial 1-212-615-7905. You may pay the exercise price in one of three ways: o by delivery of payment in cash (which can be through offset from the sale proceeds), or any cash equivalent acceptable to us, o at the discretion of the Compensation Committee, by delivery of shares of our common stock, free and clear of all liens and encumbrances, having a fair market value on the date of exercise equal to the exercise price, or o at the discretion of the Compensation Committee, delivery of a combination of cash and our common stock with a combined value equal to the exercise price. If you, or any other person entitled to exercise your stock option, fails to timely pay the exercise price and accept delivery of the shares issuable upon exercise of your stock option, the Compensation Committee will have the right to terminate your stock option with respect to such shares. In addition to the payment of the exercise price, we will require you to pay an amount equal to the federal, state, local, and foreign taxes that may be required to be withheld in connection with the exercise of your stock option. We may establish procedures to allow you to have us withhold a portion of shares issuable to you upon exercise of your stock option with a fair market value equal to the withholding tax due as a result of the exercise of your stock option. We retain the right to postpone the delivery of the common stock issuable upon exercise of your stock option to the extent necessary to allow us to comply with any applicable listing requirements of any securities exchange or Nasdaq or any federal, state, local, or foreign law. DETERMINATION OF EXERCISE PRICE The exercise price for stock options you receive under the plan is set by the Compen-sation Committee. WHEN YOU MAY EXERCISE YOUR OPTIONS AND WHEN YOUR STOCK OPTIONS LAPSE The Compensation Committee determines when you may exercise the stock options granted under the plan, along with certain other aspects of the stock options you may receive under the plan, as described more fully under the heading "ADMINISTRATION OF THE 1997 STOCK OPTION PLAN" beginning on page 5 below. Unless earlier terminated, as described in this offering circular, the stock options granted to you under the plan will expire and terminate on the first to occur of the following: o except if and as otherwise may be provided in your stock option agreement, the date you cease to be our employee for any reason other than retirement, under our normal retirement policies, or death or disability, 3 o the date three months following the effective date of your retirement from our service, under our normal retirement policies, o the date one year following the date on which your service to us ceases due to death or disability, o the date of expiration of your stock option, as determined by the Compensation Committee at the time your stock option is granted, and o the date ten years and six months after the granting of your stock option. However, the Compensation Committee has the right, but not the obligation, to extend the expiration date of any of your stock options to any date up to the original expiration date. CERTAIN ADJUSTMENTS In the event of any reorganization, merger, recapitalization, reclassification, stock dividend, stock split, combination of shares or other similar transaction that results in a change in the number of outstanding shares of our common stock or those shares are exchanged for a different number or kind of shares or securities, the aggregate number of shares of common stock issuable under the plan and the shares subject to issued and outstanding options under the plan will be appropriately and proportionately adjusted by the Compensation Committee. Any adjustment made to any stock option granted to you under the plan will not change the aggregate exercise price of the unexercised portion of that stock option but will result in an appropriate adjustment in the exercise price for each share or other unit. The plan and any options granted under the plan will terminate upon completion of any of the following transactions, unless otherwise provided for as part of the transaction: o our dissolution or liquidation, o upon a reorganization, merger, or consolidation in which we are not the surviving corporation, or o upon the sale of substantially all of our assets or the transfer of more than 80% of our then outstanding common stock to another entity or person. In the event of such a termination, you may exercise any stock options that you hold effective simultaneously with the completion of the transaction that is causing the termination of the plan to the extent otherwise exercisable, giving effect to any acceleration of the stock option by reason of the completion of the transaction, and the Compensation Committee may in its discretion accelerate the time in which any stock options may be exercised before termination of the plan and the options. Alternatively, we may provide in connection with the transaction for the following: 4 o the continuance of the plan following the completion of the transaction, o the assumption of the outstanding stock options by the surviving corporation, or o the substitution for outstanding stock options of new options to purchase shares of stock of the acquiror or one of its affiliates, with appropriate adjustments as to the number and kind of shares and the option price. In that case, the plan and outstanding stock options will continue in the manner and under the terms so provided. Additionally, the Compensation Committee or our Board of Directors may amend the plan to provide that any successor or resulting entity must assume any outstanding stock options. NON-TRANSFERABILITY OF STOCK OPTIONS Except as permitted by the Compensation Committee, you may not transfer or assign the stock options you receive under the plan, except for transfers by will and the laws of intestacy. During your lifetime, only you - as the optionee - - may exercise your options. Subject to the requirements set forth in Section 9(b) of the plan, the Compensation Committee may permit you to transfer your options (without consideration, except to the extent permitted by the Compensation Committee) to: o your immediate family members, which includes your spouse, children and grandchildren, o one or more trusts established for the exclusive benefit of your immediate family members, o a partnership in which your immediate family members are the only partners, or o other persons or entities consistent with the above that the Compensation Committee permits. Subsequent transfers of the options by the recipient of your transfer are not permitted, unless the options are transferred without consideration (except to the extent permitted by the Compensation Committee) to one of the type of individuals or entities set forth in the above list. YOUR STATUS AS AN OPTIONHOLDER You will not have the rights or privileges associated with the ownership of the shares of common stock issuable to you upon exercise of your stock option until you have become the holder of record of such shares. You will become the record holder once you have exercised your stock option and we have entered your name on our shareholder record books. Your participation in the plan does not affect the terms of your employment and will not interfere with our right to terminate your employment (subject to any separate employment agreement) or to change your compensation. 5 ADMINISTRATION OF THE 1997 STOCK OPTION PLAN The Compensation Committee of our Board of Directors administers the plan. The Compensation Committee consists of members of our Board of Directors who are elected as directors, appointed as committee members, and serve at the pleasure of our Board. The Compensation Committee has the sole power to do the following: o adjust the number and kind of shares of stock covered by the plan in the event of a change in the number or kind of issued and outstanding shares of stock, whether as the result of a stock dividend, stock split, recapitalization, or other event, o adopt, amend, and rescind any rules relating to the plan and its administration, o correct any defect, supply any omission, and reconcile any inconsistency in the plan or any stock option agreement entered into pursuant to the plan, o determine the employees to whom options will be granted, o determine the terms and conditions of all stock options granted pursuant to the plan, o construe and interpret the plan and options granted under it, o determine the time or times stock options may be exercised, o determine the number of shares which may be exercised at any one time, o determine the date on which stock options granted pursuant to the plan will terminate, and o decide all questions of policy that may arise in the administration of the plan. All determinations and interpretations made by the Compensation Committee are conclusive and binding on all optionees and their legal representatives and beneficiaries. The plan will terminate on January 2, 2007, unless it is earlier terminated. Our Board may amend or terminate the plan at any time. With certain exceptions for adjustments, no amendment or termination may adversely change any stock options previously granted without the consent of the optionee. The plan and our obligations to issue or transfer shares of our common stock under the plan are subject to all applicable securities laws and regulations. 6 USE OF PROCEEDS We may use all proceeds received by us under the plan for any corporate purpose. UNITED STATES FEDERAL INCOME TAX CONSEQUENCES The following is a summary of the United States federal income tax consequences that generally will arise with respect to your participation in the plan and with respect to the sale of common stock acquired upon exercise of the stock options you receive under the plan. For precise advice as to any specific transaction or set of circumstances, you should consult with your own tax and legal advisors. You should also consult with your own tax and legal advisors regarding the application of any state, local, and foreign taxes and any federal gift, estate and inheritance taxes. NON-QUALIFIED STOCK OPTIONS - UNITED STATES TAXPAYERS If you receive a non-qualified stock option, you will not recognize income at the time of the grant of the stock option; however, you will recognize ordinary income upon the exercise of your non-qualified stock option. The amount of ordinary income you will recognize equals the difference between (i) the fair market value of the stock on the date of exercise of the stock option, and (ii) the amount of cash paid for the stock. If you exercise your non-qualified stock option, we will be entitled to deduct as compensation an amount equal to the amount included in your gross income. INCOME TAX RATES ON CAPITAL GAIN AND ORDINARY INCOME - UNITED STATES TAXPAYERS If you hold the shares of common stock you receive upon exercise of your stock options for less than twelve months, upon the disposition of those shares, the income you receive will be treated as a short-term capital gain and will be taxed as ordinary income at a maximum rate of 38.6% (applicable for calendar years 2002 and 2003). Phaseouts of personal exemptions and reductions of allowable itemized deductions at higher levels of income may result in slightly higher marginal tax rates. If you hold all or some portion of the shares of common stock you received upon exercise of your stock options for twelve months or more, upon the disposition of those shares you will receive long-term capital gain tax treatment at a maximum rate of 20%. For holding periods beginning after December 31, 2000, gains on shares of common stock you have held for more than five years are subject to a reduced rate of 18%. Ordinary compensation income will also be subject to the Medicare tax and, under certain circumstances, the social security tax. NON-UNITED STATES TAXPAYERS If you are subject to the tax laws of any country other than the United States, you should consult your own tax and legal advisors to determine the tax and legal consequences of accepting an option grant, exercising your stock options or selling any of the shares of our common stock that you receive upon exercise of your stock option. 7 STATUS OF THE 1997 STOCK OPTION PLAN We believe that the plan is not subject to the Employee Retirement Income Security Act of 1974. RESALE OF SHARES Resale restrictions are imposed on you if you are deemed to be our "affiliate" under the Securities Act of 1933 and its rules and regulations. If you are an affiliate, you may not sell shares acquired under the plan unless we have registered your shares under the Securities Act of 1933 for resale or an exemption from registration under the Securities Act of 1933 is available. Rule 144 under the Securities Act of 1933 provides an exemption from registration if specified requirements are met, including certain limitations on the manner of sale and the number of shares that may be sold (holding period limitations will not apply). If you think you may be an affiliate, we urge you to contact your legal advisor before attempting to transfer any of your common stock. You will also need to comply with our other policies concerning trading in our common stock or other securities that may be in effect from time to time. WHERE YOU CAN FIND MORE INFORMATION We have filed with the Securities and Exchange Commission a registration statement on Form S-8 to register the plan under the Securities Act of 1933. As allowed by Securities and Exchange Commission rules, this offering circular does not contain all of the information set forth in the registration statement. Our descriptions in this offering circular concerning the contents of any contract, agreement or other documents, including the plan, are not necessarily complete. For those contracts, agreements or other documents that we filed as exhibits to the registration statement, you should read the exhibit for a more complete understanding of the document or subject matter involved. Because we are subject to the informational requirements of the Securities Exchange Act of 1934, we file reports, proxy statements and other information with the Securities and Exchange Commission. You may read and copy the registration statement, including the attached exhibits and schedules, and any reports, proxy statements or other information that we file at the Commission's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can request copies of these documents by writing to the Commission and paying a duplicating charge. Please call the Commission at 1-800-732-0330 for further information on the operation of its public reference room. The Commission also makes our filings available to the public on its Internet site (http://www.sec.gov). In addition, you may inspect such filings at the offices of The Nasdaq National Market at 1735 K Street, N.W., Washington, D.C. 20006. The Commission allows us to "incorporate by reference" information into this offering circular, which means that we can disclose important information to you by referring you to other documents that we have filed separately with the Commission (File No. 0-11258). You should 8 consider the incorporated information as if we had reproduced it in this offering circular, except for any information directly superseded by information contained in this offering circular. We incorporate by reference into this offering circular, the following documents, which contain important information about us and our business and financial results: o Our Annual Report on Form 10-K for the fiscal year ended December 31, 2000, as amended; o Our Quarterly Report on Form 10-Q for the quarters ended March 31, 2001, June 30, 2001, and September 30, 2001; o Our Current Report on Form 8-K dated February 8, 2001 (filed February 8, 2001), Form 8-K dated March 14, 2001 (filed March 14, 2001), Form 8-K dated March 28, 2001 (filed March 28, 2001), Form 8-K dated April 26, 2001 (filed April 26, 2001), Form 8-K dated May 1, 2001 (filed May 1, 2001), Form 8-K dated May 9, 2001 (filed May 16, 2001), Form 8-K dated June 7, 2001 (filed June 7, 2001), Form 8-K dated June 12, 2001 (filed June 12, 2001), Form 8-K dated August 29, 2001 (filed August 29, 2001) and Form 8-K dated September 21, 2001 (filed September 21, 2001); and o The description of our common stock as contained in Item 1 of the Registration Statement on Form 8-A, dated April 25, 2001, including any amendments or reports we file for the purpose of updating that description. We may file additional documents with the Securities and Exchange Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 on or before the date this offering terminates. The Securities and Exchange Commission allows us to incorporate by reference into this offering circular those documents. You should consider any statement contained in this offering circular (or in a document incorporated into this offering circular) to be modified or superseded to the extent that a statement in a subsequently filed document modifies or supersedes such statement. We will provide you with copies of any of the documents incorporated by reference into this offering circular (other than exhibits attached to those documents), without charge. Please direct your written or oral request to our Investor Relations Department at the address listed above under the heading "INFORMATION ABOUT WORLDCOM, INC." The telephone number for our Investor Relations Department is (877) 624-9266 or (601) 460-5700. We will also provide you without charge the following: o all documents containing the information required in a prospectus by Part I of Form S-8; o our Annual Report to Shareholders for our last fiscal year (or other permitted document containing our audited financial statements for that year); and 9 o all reports, proxy statements and other communications that we distribute to our shareholders generally. These documents can also be accessed via our Internet site (http://www.wcom.com). 10 EX-99.(D)(1)(A) 20 ex99d1a.txt THE COMPANY'S 1997 STOCK OPTION PLAN EXHIBIT (d)(1)(A) WORLDCOM, INC. 1997 STOCK OPTION PLAN (AS AMENDED THROUGH JUNE 8, 2001) 1. PURPOSE OF THE PLAN The WorldCom, Inc. 1997 Stock Option Plan, as amended (the "Plan"), is intended to provide additional incentive to certain valued and trusted employees who are not officers of WorldCom, Inc., a Georgia corporation, or its subsidiaries (WorldCom, Inc. and/or its subsidiaries, as the context may require, is/are referred to herein as the "Company"), by encouraging them to acquire shares of the $0.01 par value common stock of the Company (the "Stock") through options to purchase Stock granted pursuant to the Plan ("Options"), thereby increasing such 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 non-qualified options. Each 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 appointed by the Board of Directors of the Company (the "Committee"). The Committee shall have the sole 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 and on their legal representatives and beneficiaries; and 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. 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 five hundred fifty-seven million two-hundred twenty-six thousand (557,226,000) 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. 4. PERSONS ELIGIBLE FOR OPTIONS All employees who are not officers of the Company shall be eligible to receive the grant of Options under the Plan. The Committee shall determine the employees to whom Options shall be granted, the time or times such Options shall be granted, the number of shares to be subject to each Option and the times when each Option may be exercised. 1 5. PURCHASE PRICE The purchase price of each share of Stock covered by each Option shall be set from time to time in the total discretion of the Committee. 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, death or disability; (ii) the date which is three months following the effective date of the Optionee's retirement from the Company's service; (iii) the date which is one year following the date on which the Optionee's service with the Company ceases due to death or disability; (iv) the date of expiration of the Option determined by the Committee at the time the Option is granted; and (v) the date ten (10) years and six (6) months after the granting of the Option; provided, however, that the Committee shall have the right, but not the obligation, to extend the expiry of the Options held by an Optionee whose service with the Company has ceased for any reason to a date up to the end of their original terms. 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 or 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. "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 quoted on the National Association of Securities Dealers automated quotation system ("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 quoted on NASDAQ, the closing quoted selling price of the Stock on the date of grant of the Option, as reported by 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. 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. The Company shall issue a separate certificate or certificates of Stock for each Option exercised by an Optionee. b. In the Committee's discretion, determined at the time the Option is granted, 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 2 listing requirements of any national securities exchange or the National Association of Securities Dealers, Inc. 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. NONTRANSFERABILITY OF OPTIONS a. 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. b. Notwithstanding the provisions of paragraph 9(a) hereof, the Committee may, in its discretion, authorize all or a portion of the Options previously granted or to be granted to an Optionee to be on terms which permit transfer by such Optionee to (i) the spouse, children or grandchildren of the Optionee ("Immediate Family Members"), (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members, (iii) a partnership in which such Immediate Family Members are the only partners, or (iv) other persons or entities in the discretion of the Committee consistent with the foregoing, to the extent expressly permitted by the Committee; provided that (x) there may be no consideration for any such transfer, except to the extent expressly permitted by the Committee, (y) the Option Agreement pursuant to which such Options are granted must be approved by the Committee, and must expressly set forth transferability restrictions in a manner consistent with this paragraph 9, and (z) subsequent transfers of transferred Options shall be prohibited except those in accordance with subparagraph (a) of this paragraph. Following transfer, any such Options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of paragraphs 2(a), 7, 8, 9(a) and 14(c) hereof, the term "Optionee" shall be deemed to refer to the transferee. The events of retirement or termination or cessation of employment, engagement or service under paragraph 6 hereof shall continue to be applied with respect to the original Optionee, following which the Options shall be exercisable by the transferee only to the extent, and for the periods specified therein. 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. 11. RESTRICTIONS ON SHARES If the Company shall be advised by counsel that certain requirements under 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 3 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, combination of shares, or other similar transaction, the aggregate number of shares of Stock subject to the Plan as provided in paragraph 3, above, and the shares of Stock 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. 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 corporations as a result of which the Company is not the surviving corporation, 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 with new options to purchase the stock of a successor corporation, 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; 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 corporation 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, with respect to any shares at the time not subject to Options, suspend or terminate the Plan or amend or revise the terms of the Plan. b. Subject to the provisions in paragraph 13, above, the Plan shall terminate on January 2, 2007, being ten (10) years from the date of the adoption of the Plan by the Board of Directors. c. Subject to the provisions in paragraph 13, above, no amendment, suspension or termination of this Plan shall, without the consent of the Optionee, alter or impair any rights or obligations under any Option granted to such Optionee under the Plan. 15. EFFECTIVE DATE OF PLAN The Plan shall become effective upon adoption by the Board of Directors of the Company. 16. TERM OF PLAN No Option shall be granted pursuant to the Plan after January 2, 2007. 4 EX-99.(D)(1)(B) 21 ex99d1b.txt FORM OF STOCK OPTION AGREEMENT EXHIBIT (d)(1)(B) STOCK OPTION AGREEMENT AND ARBITRATION AGREEMENT THIS AGREEMENT IS MADE in Clinton, Mississippi, by and between the employee whose name appears below (the "Employee") and WorldCom, Inc. (the "Company"). The Company has implemented the WorldCom, Inc. 1997 Stock Option Plan which, together with any amendments thereto, is hereinafter referred to as the "Plan". The Company, acting through the Compensation and Stock Option Committee of the Board of Directors (the "Committee"), has granted to the Employee the option to purchase from the Company shares of WorldCom group $0.01 par value common stock (the "Common Stock") described below (the "Option"), subject to the provisions of the Plan and the terms and conditions of this Agreement. The Company and the Employee wish to provide for binding arbitration of employment-related disputes, as hereinafter provided. References herein to employment with the Company shall be deemed to also include employment with a subsidiary or other affiliate of the Company unless otherwise determined by or as directed by the Committee. NOW, THEREFORE, in consideration of the recitals and the provisions thereof, the Company and the Employee hereby agree as follows: The Company grants to the Employee and the Employee accepts the Option on the terms and conditions contained herein and in the Plan. The terms, conditions and agreements on pages 2 through 4 of this Agreement are incorporated herein by reference.
GRANT EXPIRATION NUMBER OF OPTION PRICE GRANT ID EMPLOYEE DATE DATE SHARES PER SHARE [grantid] [First_Name][Last_Name] [SSNGlobal_ID]
The Option shall vest and, subject and pursuant to the provisions of the Plan and this Agreement, shall be exercisable to the extent of one-third (1/3) the number of shares of Common Stock originally covered hereby (the "Option Shares") on and after January 1, 2003, another one-third (1/3) of the Option Shares on and after January 1, 2004, and the remaining one-third (1/3) of the Option Shares on and after January 1, 2005, subject to appropriate adjustment pursuant to the Plan and provided, as to vesting of the Option Shares, the Employee must be employed by the Company on the applicable vesting date. Notwithstanding the foregoing, the Option shall vest and, subject and pursuant to the provisions of the Plan and this Agreement, shall be exercisable with respect to all of the Option Shares to the extent not previously exercised immediately upon (A) any termination by the Company of the Employee's employment with the Company by reason of the Employee's disability, or (B) the Employee's death. Any determination of whether or not the Employee's employment with the Company was terminated by reason of the Employee's disability shall be made by or as directed by the Committee. The Option shall terminate and lapse as to any shares which do not vest pursuant to the provisions hereof. IN WITNESS WHEREOF, the Company and the Employee have duly executed this Agreement as of _________, 2002, with respect to the grant of the Option and the binding arbitration of employment-related disputes. THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. EMPLOYEE: WORLDCOM, INC. SAMPLE ___________________________________ ________________________________________ By: Bernard J. Ebbers, President and CEO 1 CERTAIN TERMS AND CONDITIONS REGARDING STOCK OPTIONS 1. GRANT OF OPTION. Pursuant to the Plan, the Company hereby grants to the Employee the Option set forth on page 1 of this Agreement, upon the terms and conditions set forth herein and in the Plan. 2. TIME OF EXERCISE. This Option shall become exercisable as set forth on page 1 hereof. 3. TERM. This Option shall terminate at the earliest of: (a) 5:00 p.m. Central time on the expiration date indicated on page 1; (b) one (1) year following the Employee's death; (c) one (1) year following the termination by the Company of the Employee's employment with the Company by reason of disability; (d) three (3) months following the termination of the Employee's employment with the Company by reason of retirement (under normal Company policies); or (e) any other termination date specified in or pursuant to the Plan. Upon termination of the Employee's employment with the Company for any reason other than as set forth above, the Option or the unexercised portion thereof shall terminate. 4. WHO MAY EXERCISE. The Option and all rights thereunder shall be non-assignable and non-transferable, except to the extent that the holder's legatees, personal representatives or distributees in the event of the Employee's death may be permitted to exercise them as set forth herein or except as otherwise provided in or pursuant to the Plan. Any attempted transfer, assignment, pledge, hypothecation or other disposition of the Option except as provided herein or in accordance with the Plan shall be null and void and without effect. In the event of the death or disability of the Employee, the Option or the unexercised portion thereof may be exercised to the extent that the Employee or permitted transferee or assign was entitled to do so at the date of the Employee's death or disability (giving effect to the vesting provisions on page 1 hereof) by the Employee, his personal representative, executor, administrator, heirs, devisees or permitted transferee or assign, as applicable, but in no event after the expiration of the term of the Option as specified in Section 3, above. 5. OTHER RESTRICTIONS ON EXERCISE. The Company may postpone the issuance of shares and impose other restrictions upon any exercise of the Option or other options including, without limitation, if necessary until admission of such shares to listing on any stock exchange and completion of registration and qualification of such shares under any applicable state, federal or foreign law, rule or regulation. 6. MANNER OF EXERCISE. To exercise the Option, the Employee (or, if applicable, the persons designated in Section 4, above) shall comply with procedures as may be established from time to time by the Company. Such exercise shall be accompanied by full payment of the option price and, if applicable, any federal, state, local or foreign taxes required to be withheld pursuant to the Plan, in cash (including certified or bank cashier's check or the equivalent) or, in the discretion of the Committee, by delivery of Common Stock or any combination of cash and Common Stock. Only whole shares of Common Stock may be purchased. 7. RIGHTS AS SHAREHOLDER. The Employee or permitted transferee or assign shall have no rights as a shareholder with respect to any shares covered by the Option until the issuance of a certificate or certificates for such shares. 8. ADJUSTMENTS. The number and kind of securities subject to the Option and other options to purchase Common Stock and the per share purchase price with respect thereto are subject to adjustment by the Committee upon the happening of certain events, as described in the Plan. 9. NO OBLIGATION. Neither the granting of the Option nor any term or provision of this Agreement or the Plan shall constitute or be evidence of any understanding or obligation, express or implied, on the part of the Company or others to employ the Employee for any specified period or at any specified compensation or to make subsequent grants of stock options to the Employee, which are in the sole and absolute discretion of the Company. 10. ADMINISTRATION OF PLAN AND AGREEMENT. Except as otherwise provided herein, the Option and the exercise thereof are subject to the terms and conditions of the Plan, the receipt of a copy of which the Employee acknowledges by virtue of acceptance hereof. Determinations by the Committee hereunder or under the Plan including, without limitation, a determination by the Committee of any question which may arise with respect to the interpretation, construction or application of the provisions of the Option, this Agreement or the Plan shall be final, conclusive and binding. The Committee may establish, amend and revoke rules and regulations relating to the Plan and its administration as the Committee may deem advisable. 2 AGREEMENT TO ARBITRATE EMPLOYMENT-RELATED DISPUTES A. The Employee and the Company agree that, at the option of either party, any allegation, claim, cause of action, demand or dispute (hereafter collectively referred to as a "Dispute"), directly or indirectly related to the Employee's employment with the Company or termination of such employment including, but not limited to, any Dispute directly or indirectly related to options or rights to acquire stock of the Company granted pursuant to this Agreement or any other agreement(s) shall be resolved through impartial binding arbitration. In the event that either party demands arbitration, the Employee and the Company agree that the proceeding shall be the exclusive, final and binding forum for the ultimate resolution of a Dispute, subject to any rights of appeal that either party may have under the Federal Arbitration Act and/or under applicable state law dealing with the review of arbitration decisions. This agreement to arbitrate applies to all employment-related Disputes including, but not limited to, those under Title VII of the Civil Rights Act of 1964, the Employee Retirement Income Security Act, the Age Discrimination in Employment Act, the Fair Labor Standards Act, the Americans with Disabilities Act, the Family and Medical Leave Act, any wage and hour or wage payment law, or any other federal, state or local law, regulation or ordinance regarding employment or termination of employment. It also applies to, among others, all Disputes for breach of contract or wrongful discharge, breach of express or implied promises or covenants of good faith and fair dealing, intentional or negligent infliction of emotional distress, defamation, claims regarding stock or options to acquire stock, commissions, bonuses, or any other compensation or benefits, and any other claim related to the Employee's employment or termination of employment. B. The Employee and the Company agree that neither party may pursue an action against the other in a court of law regarding any employment-related Dispute, except for claims involving Workers' Compensation benefits or unemployment benefits. The Employee and the Company further agree that, by executing this Agreement, they are waiving the right to have Disputes subject to arbitration under this Agreement decided by a jury. The parties also agree that the arbitration requirement set forth herein is fully enforceable under the Federal Arbitration Act, and that a judgment upon any such award may be entered in any court of competent jurisdiction. This agreement to arbitrate does not alter any substantive rights that the parties may have under law, including the Employee's statutory right to file a charge with an administrative agency for investigative purposes or other action by the agency not inconsistent with this Agreement. Nor does this agreement to arbitrate limit or restrict the Employee's ability to participate or assist any agency in its investigation, processing or handling of any such charge. This agreement to arbitrate transfers each party's right to seek relief from either a judge or a jury to an impartial arbitrator. With respect to any Dispute pertaining to stock options or rights, the Arbitrator shall be governed by the terms and conditions contained in the applicable plan(s) and related agreement(s) consistent with applicable law. Nothing in this agreement to arbitrate shall adversely affect or diminish the rights, power and authority of the Committee or the Board of Directors of the Company with respect to stock options or rights and the related plans and agreements including, without limitation, the interpretation, construction or application of the applicable provisions, the creation, amendment or revocation of rules and regulations or the plan itself, the making of determinations, the taking of other actions or the final, binding and conclusive nature of the foregoing. The arbitrator may not substitute his/her judgment for any such Committee determination or action. C. In the event that the Employee or the Company initially elects to file suit in any court, the other party will have forty-five (45) days from the date that it is formally served with a summons and copy of the suit to notify the party filing suit of the non-filing party's demand for arbitration. Under such circumstances, the action must be dismissed by consent of the parties or by the court on motion, and arbitration commenced with the American Arbitration Association ("AAA"). If no lawsuit has been instituted, either the Employee or the Company may initiate arbitration by serving a written demand for arbitration upon the other party and the AAA. The demand must be served within six (6) months of the events giving rise to the Dispute, unless an applicable statute provides for a longer period for filing an initial claim, in which case such longer period shall apply. Any Dispute for which such a demand is not timely made will be deemed waived. D. The arbitration will be conducted in accordance with the American Arbitration Association National Rules for the Resolution of Employment Disputes (the "AAA Rules"), in effect on the date the demand for arbitration is made, except as modified by this Agreement. A copy of the AAA Rules may be obtained by written request to the Company. The Dispute shall be heard and determined by one arbitrator, who is either a retired judge or a licensed lawyer, experienced in arbitrating or adjudicating employment-related disputes. He or she shall also be a member of the National Academy of Arbitrators. Either party, upon request at the close of hearing, shall be given leave to file a post-hearing brief. The time for filing the brief shall be set by the arbitrator. The arbitrator shall issue a written award with Findings of Fact and Conclusions of Law, and may grant any remedy or relief that would have been available to the parties had the matter been heard in court. Unless the parties otherwise agree, the arbitration shall be heard within twenty-five (25) miles of the Employee's residence at the time of the hearing. The Company will pay the expenses of the arbitrator, including required travel, as well as any filing or administrative fees required by AAA for the cost of providing services. The arbitrator shall have the authority consistent with the AAA Rules to order such discovery as the arbitrator considers necessary to explore the issues in the Dispute. The parties shall bear their own attorneys' fees and costs related to any Dispute and the arbitration thereof. However, if any party prevails on a statutory claim which affords the prevailing party attorneys' fees, or if there is a written agreement between the parties providing for fees, the arbitrator may award reasonable attorneys' fees to the prevailing party. 3 E. The parties understand and agree that this agreement regarding arbitration shall not prevent either party from pursuing equitable or injunctive relief in a judicial forum for any Disputes relating to the enforcement of rights dealing with non-solicitation or no-hire of employees, non-solicitation or disruption of relations with respect to customers or vendors, non-disclosure, confidentiality, trade secrets, inventions, patents, copyrights, trademarks, service marks or any other matter relating to restrictive covenants or unfair competition. All other remedies, whether related to the application for equitable or injunctive relief or independent thereof, shall be subject to mandatory and binding arbitration in accordance with this Agreement. F. The Employee acknowledges that the phrases "termination without cause" or "termination with cause," as used in the applicable stock option plan(s) and/or agreement(s), have particular meaning relating solely to the options involved. These terms do not in any way limit, modify or supersede the employment at-will relationship that exists between the Employee and the Company. This Agreement is not intended, and shall not be construed, to create any contract of employment, express or implied. G. The Employee has been advised of his/her right to consult with counsel at no expense to the Company prior to entering into this Agreement. Employee further agrees that he or she has had sufficient time to seek legal consultation. H. This agreement to arbitrate shall survive the termination of the parties' employment relationship and the expiration of any stock or benefit plan or program. It can be modified only by a writing signed by the parties, which specifically states their intent to modify this agreement to arbitrate. I. Any notice, demand or request under this agreement to arbitrate shall be sent or delivered to the Employee at the Employee's most recent address in the Company's records and to the Company at 1133 19th Street, N.W., Washington, D.C. 20036, attn: Chief Legal Counsel, or to such other address as a party may direct by notice to the other party, and shall be deemed given, made or served when delivered in person or on the next business day when sent by overnight courier or on the second succeeding business day when sent by registered or certified mail (postage prepaid, return receipt requested). 4 EX-99.(D)(1)(C) 22 ex99d1c.txt FORM OF STOCK OPTION AGREEMENT EXHIBIT (d)(1)(C) STOCK OPTION AGREEMENT AND ARBITRATION AGREEMENT THIS AGREEMENT IS MADE in Clinton, Mississippi, by and between the employee whose name appears below (the "Employee") and WorldCom, Inc. (the "Company"). The Company has implemented the WorldCom, Inc. 1997 Stock Option Plan which, together with any amendments thereto, is hereinafter referred to as the "Plan". The Company, acting through the Compensation and Stock Option Committee of the Board of Directors (the "Committee"), has granted to the Employee the option to purchase from the Company shares of WorldCom group $0.01 par value common stock ("Common Stock") described below (the "Option"), subject to the provisions of the Plan and the terms and conditions of this Agreement. The Company and the Employee wish to provide for binding arbitration of employment-related disputes, as hereinafter provided. References herein to employment with the Company shall be deemed to also include employment with a subsidiary or other affiliate of the Company unless otherwise determined by or as directed by the Committee. NOW, THEREFORE, in consideration of the recitals and the provisions hereof, the Company and the Employee hereby agree as follows: The Company grants to the Employee and the Employee accepts the Option on the terms and conditions contained herein and in the Plan. The terms, conditions and agreements on pages 2 through 4 of this Agreement are incorporated herein by reference.
GRANT EXPIRATION NUMBER OF OPTION PRICE GRANT ID EMPLOYEE DATE DATE SHARES PER SHARE [grantid] [First_Name][Last_Name] [SSNGlobal_ID]
The Option shall vest and, subject and pursuant to the provisions of the Plan and this Agreement, shall be exercisable to the extent of one-third (1/3) the number of shares of Common Stock originally covered hereby (the "Option Shares") on and after January 1, 2003, another one-third (1/3) of the Option Shares on and after January 1, 2004, and the remaining one-third (1/3) of the Option Shares on and after January 1, 2005, subject to appropriate adjustment pursuant to the Plan and provided, as to vesting of the Option Shares, the Employee must be employed by the Company on the applicable vesting date. Notwithstanding the foregoing, the Option shall vest and, subject and pursuant to the provisions of the Plan and this Agreement, shall be exercisable with respect to all of the Option Shares to the extent not previously exercised immediately upon (A) any Change of Control (as hereinafter defined) of the Company following the date hereof, (B) any termination by the Company of the Employee's employment with the Company by reason of the Employee's disability or without cause, or (C) the Employee's death. Any determination of whether or not the Employee's employment with the Company was terminated by reason of the Employee's disability or without cause shall be made by or as directed by the Committee. For purposes of the vesting and exercisability of the Option Shares, unless otherwise determined by the Committee, the Employee's employment with the Company shall be deemed terminated with cause (not without cause) if, among other things, such termination occurs by reason of the elimination, relocation or consolidation of the Employee's position or function and the declination by the Employee to serve the Company in another position or function or at another location available within the Company. The Option shall terminate and lapse as to any shares which do not vest pursuant to the provisions hereof. IN WITNESS WHEREOF, the Company and the Employee have duly executed this Agreement as of __________, 2002, with respect to the grant of the Option and the binding arbitration of employment-related disputes. THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. EMPLOYEE: WORLDCOM, INC. SAMPLE ___________________________________ ________________________________________ By: Bernard J. Ebbers, President and CEO 1 CERTAIN TERMS AND CONDITIONS REGARDING STOCK OPTIONS 1. GRANT OF OPTION. Pursuant to the Plan, the Company hereby grants to the Employee the Option set forth on page 1 of this Agreement, upon the terms and conditions set forth herein and in the Plan. 2. TIME OF EXERCISE. This Option shall become exercisable as set forth on page 1 hereof. 3. TERM. This Option shall terminate at the earliest of: (a) 5:00 p.m. Central time on the expiration date indicated on page 1; (b) one (1) year following the Employee's death; (c) one (1) year following the termination by the Company of the Employee's employment with the Company by reason of disability or without cause; (d) three (3) months following the termination of the Employee's employment with the Company by reason of retirement (under normal Company policies); or (e) any other termination date specified in or pursuant to the Plan, provided the provisions of clause (i) of Section 6 of the Plan shall not apply in the case of cessation of employment due to termination thereof by the Company without cause, which shall be governed by the provisions hereof. Upon termination of the Employee's employment with the Company for any reason other than as set forth above, the Option or the unexercised portion thereof shall terminate. 4. WHO MAY EXERCISE. The Option and all rights thereunder shall be non-assignable and non-transferable, except to the extent that the holder's legatees, personal representatives or distributees in the event of the Employee's death may be permitted to exercise them as set forth herein or except as otherwise provided in or pursuant to the Plan. Any attempted transfer, assignment, pledge, hypothecation or other disposition of the Option except as provided herein or in accordance with the Plan shall be null and void and without effect. In the event of the death or disability of the Employee, the Option or the unexercised portion thereof may be exercised to the extent that the Employee or permitted transferee or assign was entitled to do so at the date of the Employee's death or disability (giving effect to the vesting provisions on page 1 hereof) by the Employee, his personal representative, executor, administrator, heirs, devisees or permitted transferee or assign, as applicable, but in no event after the expiration of the term of the Option as specified in Section 3, above. 5. OTHER RESTRICTIONS ON EXERCISE. The Company may postpone the issuance of shares and impose other restrictions upon any exercise of the Option or other options including, without limitation, if necessary until admission of such shares to listing on any stock exchange and completion of registration and qualification of such shares under any applicable state, federal or foreign law, rule or regulation. 6. MANNER OF EXERCISE. To exercise the Option, the Employee (or, if applicable, the persons designated in Section 4, above) shall comply with procedures as may be established from time to time by the Company. Such exercise shall be accompanied by full payment of the option price and, if applicable, any federal, state, local or foreign taxes required to be withheld pursuant to the Plan, in cash (including certified or bank cashier's check or the equivalent) or, in the discretion of the Committee, by delivery of Common Stock or any combination of cash and Common Stock. Only whole shares of Common Stock may be purchased. 7. RIGHTS AS SHAREHOLDER. The Employee or permitted transferee or assign shall have no rights as a shareholder with respect to any shares covered by the Option until the issuance of a certificate or certificates for such shares. 8. ADJUSTMENTS. The number and kind of securities subject to the Option and other options to purchase Common Stock and the per share purchase price with respect thereto are subject to adjustment by the Committee upon the happening of certain events, as described in the Plan. 9. NO OBLIGATION. Neither the granting of the Option nor any term or provision of this Agreement or the Plan shall constitute or be evidence of any understanding or obligation, express or implied, on the part of the Company or others to employ the Employee for any specified period or at any specified compensation or to make subsequent grants of stock options to the Employee, which are in the sole and absolute discretion of the Company. 10. ADMINISTRATION OF PLAN AND AGREEMENT. Except as otherwise provided herein, the Option and the exercise thereof are subject to the terms and conditions of the Plan, the receipt of a copy of which the Employee acknowledges by virtue of acceptance hereof. Determinations by the Committee hereunder or under the Plan including, without limitation, a determination by the Committee of any question which may arise with respect to the interpretation, construction or application of the provisions of the Option, this Agreement or the Plan shall be final, conclusive and binding. The Committee may establish, amend and revoke rules and regulations relating to the Plan and its administration as the Committee may deem advisable. 11. CHANGE OF CONTROL DEFINED. For purposes of this Agreement, a "Change of Control" shall mean any transaction or series of related transactions after the date hereof which result in (A) a transfer of more than fifty percent (50%) of the outstanding equity securities of the Company (by voting power) by one or more shareholders of the Company, other than transfers pursuant to a merger or consolidation of the Company, (B) any sale of all or substantially all of the assets of the Company, or (C) any merger or consolidation of the Company with or into any other entity, where more than fifty percent (50%) of the outstanding equity securities of the surviving or resulting entity (by voting power) are directly or indirectly controlled by persons other than shareholders of the Company immediately prior to such merger or consolidation. All percentages referenced herein shall be determined on a fully diluted basis. The following transactions shall not constitute, or be considered in determining, a Change of Control: (A) any acquisition of securities by the Company, or (B) any acquisition of securities by any employee benefit plan or related trust sponsored or maintained by the Company. 2 AGREEMENT TO ARBITRATE EMPLOYMENT-RELATED DISPUTES A. The Employee and the Company agree that, at the option of either party, any allegation, claim, cause of action, demand or dispute (hereafter collectively referred to as a "Dispute"), directly or indirectly related to the Employee's employment with the Company or termination of such employment including, but not limited to, any Dispute directly or indirectly related to options or rights to acquire stock of the Company granted pursuant to this Agreement or any other agreement(s) shall be resolved through impartial binding arbitration. In the event that either party demands arbitration, the Employee and the Company agree that the proceeding shall be the exclusive, final and binding forum for the ultimate resolution of a Dispute, subject to any rights of appeal that either party may have under the Federal Arbitration Act and/or under applicable state law dealing with the review of arbitration decisions. This agreement to arbitrate applies to all employment-related Disputes including, but not limited to, those under Title VII of the Civil Rights Act of 1964, the Employee Retirement Income Security Act, the Age Discrimination in Employment Act, the Fair Labor Standards Act, the Americans with Disabilities Act, the Family and Medical Leave Act, any wage and hour or wage payment law, or any other federal, state or local law, regulation or ordinance regarding employment or termination of employment. It also applies to, among others, all Disputes for breach of contract or wrongful discharge, breach of express or implied promises or covenants of good faith and fair dealing, intentional or negligent infliction of emotional distress, defamation, claims regarding stock or options to acquire stock, commissions, bonuses, or any other compensation or benefits, and any other claim related to the Employee's employment or termination of employment. B. The Employee and the Company agree that neither party may pursue an action against the other in a court of law regarding any employment-related Dispute, except for claims involving Workers' Compensation benefits or unemployment benefits. The Employee and the Company further agree that, by executing this Agreement, they are waiving the right to have Disputes subject to arbitration under this Agreement decided by a jury. The parties also agree that the arbitration requirement set forth herein is fully enforceable under the Federal Arbitration Act, and that a judgment upon any such award may be entered in any court of competent jurisdiction. This agreement to arbitrate does not alter any substantive rights that the parties may have under law, including the Employee's statutory right to file a charge with an administrative agency for investigative purposes or other action by the agency not inconsistent with this Agreement. Nor does this agreement to arbitrate limit or restrict the Employee's ability to participate or assist any agency in its investigation, processing or handling of any such charge. This agreement to arbitrate transfers each party's right to seek relief from either a judge or a jury to an impartial arbitrator. With respect to any Dispute pertaining to stock options or rights, the Arbitrator shall be governed by the terms and conditions contained in the applicable plan(s) and related agreement(s) consistent with applicable law. Nothing in this agreement to arbitrate shall adversely affect or diminish the rights, power and authority of the Committee or the Board of Directors of the Company with respect to stock options or rights and the related plans and agreements including, without limitation, the interpretation, construction or application of the applicable provisions, the creation, amendment or revocation of rules and regulations or the plan itself, the making of determinations, the taking of other actions or the final, binding and conclusive nature of the foregoing. The arbitrator may not substitute his/her judgment for any such Committee determination or action. C. In the event that the Employee or the Company initially elects to file suit in any court, the other party will have forty-five (45) days from the date that it is formally served with a summons and copy of the suit to notify the party filing suit of the non-filing party's demand for arbitration. Under such circumstances, the action must be dismissed by consent of the parties or by the court on motion, and arbitration commenced with the American Arbitration Association ("AAA"). If no lawsuit has been instituted, either the Employee or the Company may initiate arbitration by serving a written demand for arbitration upon the other party and the AAA. The demand must be served within six (6) months of the events giving rise to the Dispute, unless an applicable statute provides for a longer period for filing an initial claim, in which case such longer period shall apply. Any Dispute for which such a demand is not timely made will be deemed waived. D. The arbitration will be conducted in accordance with the American Arbitration Association National Rules for the Resolution of Employment Disputes (the "AAA Rules"), in effect on the date the demand for arbitration is made, except as modified by this Agreement. A copy of the AAA Rules may be obtained by written request to the Company. The Dispute shall be heard and determined by one arbitrator, who is either a retired judge or a licensed lawyer, experienced in arbitrating or adjudicating employment-related disputes. He or she shall also be a member of the National Academy of Arbitrators. Either party, upon request at the close of hearing, shall be given leave to file a post-hearing brief. The time for filing the brief shall be set by the arbitrator. The arbitrator shall issue a written award with Findings of Fact and Conclusions of Law, and may grant any remedy or relief that would have been available to the parties had the matter been heard in court. Unless the parties otherwise agree, the arbitration shall be heard within twenty-five (25) miles of the Employee's residence at the time of the hearing. The Company will pay the expenses of the arbitrator, including required travel, as well as any filing or administrative fees required by AAA for the cost of providing services. The arbitrator shall have the authority consistent with the AAA Rules to order such discovery as the arbitrator considers necessary to explore the issues in the Dispute. The parties shall bear their own attorneys' fees and costs related to any Dispute and the arbitration thereof. However, if any party prevails on a statutory claim which affords the prevailing party attorneys' fees, or if there is a written agreement between the parties providing for fees, the arbitrator may award reasonable attorneys' fees to the prevailing party. 3 E. The parties understand and agree that this agreement regarding arbitration shall not prevent either party from pursuing equitable or injunctive relief in a judicial forum for any Disputes relating to the enforcement of rights dealing with non-solicitation or no-hire of employees, non-solicitation or disruption of relations with respect to customers or vendors, non-disclosure, confidentiality, trade secrets, inventions, patents, copyrights, trademarks, service marks or any other matter relating to restrictive covenants or unfair competition. All other remedies, whether related to the application for equitable or injunctive relief or independent thereof, shall be subject to mandatory and binding arbitration in accordance with this Agreement. F. The Employee acknowledges that the phrases "termination without cause" or "termination with cause," as used in the applicable stock option plan(s) and/or agreement(s), have particular meaning relating solely to the options involved. These terms do not in any way limit, modify or supersede the employment at-will relationship that exists between the Employee and the Company. This Agreement is not intended, and shall not be construed, to create any contract of employment, express or implied. G. The Employee has been advised of his/her right to consult with counsel at no expense to the Company prior to entering into this Agreement. Employee further agrees that he or she has had sufficient time to seek legal consultation. H. This agreement to arbitrate shall survive the termination of the parties' employment relationship and the expiration of any stock or benefit plan or program. It can be modified only by a writing signed by the parties, which specifically states their intent to modify this agreement to arbitrate. I. Any notice, demand or request under this agreement to arbitrate shall be sent or delivered to the Employee at the Employee's most recent address in the Company's records and to the Company at 1133 19th Street, N.W., Washington, D.C. 20036, attn: Chief Legal Counsel, or to such other address as a party may direct by notice to the other party, and shall be deemed given, made or served when delivered in person or on the next business day when sent by overnight courier or on the second succeeding business day when sent by registered or certified mail (postage prepaid, return receipt requested). 4 EX-99.(D)(1)(D) 23 ex99d1d.txt FORM OF STOCK OPTION AGREEMENT EXHIBIT (d)(1)(D) STOCK OPTION AGREEMENT AND ARBITRATION AGREEMENT THIS AGREEMENT IS MADE in Clinton, Mississippi, by and between the employee whose name appears below (the "Employee") and WorldCom, Inc. (the "Company"). The Company has implemented the WorldCom, Inc. 1997 Stock Option Plan which, together with any amendments thereto, is hereinafter referred to as the "Plan". The Company, acting through the Compensation and Stock Option Committee of the Board of Directors (the "Committee"), has granted to the Employee the option to purchase from the Company shares of WorldCom group $0.01 par value common stock (the "Common Stock") described below (the "Option"), subject to the provisions of the Plan and the terms and conditions of this Agreement. The Company and the Employee wish to provide for binding arbitration of employment-related disputes, as hereinafter provided. References herein to employment with the Company shall be deemed to also include employment with a subsidiary or other affiliate of the Company unless otherwise determined by or as directed by the Committee. NOW, THEREFORE, in consideration of the recitals and the provisions thereof, the Company and the Employee hereby agree as follows: The Company grants to the Employee and the Employee accepts the Option on the terms and conditions contained herein and in the Plan. The terms, conditions and agreements on pages 2 through 4 of this Agreement are incorporated herein by reference.
GRANT EXPIRATION NUMBER OF OPTION PRICE GRANT ID EMPLOYEE DATE DATE SHARES PER SHARE [grantid] [First_Name][Last_Name] [SSNGlobal_ID]
The Option shall vest and, subject and pursuant to the provisions of the Plan and this Agreement, shall be exercisable to the extent of one-third (1/3) the number of shares of Common Stock originally covered hereby (the "Option Shares") on and after January 1, 2003, another one-third (1/3) of the Option Shares on and after January 1, 2004, and the remaining one-third (1/3) of the Option Shares on and after January 1, 2005, subject to appropriate adjustment pursuant to the Plan and provided, as to vesting of the Option Shares, the Employee must be employed by the Company on the applicable vesting date. Notwithstanding the foregoing, the Option shall vest and, subject and pursuant to the provisions of the Plan and this Agreement, shall be exercisable with respect to all of the Option Shares to the extent not previously exercised immediately upon (A) any termination by the Company of the Employee's employment with the Company by reason of the Employee's disability, or (B) the Employee's death. Any determination of whether or not the Employee's employment with the Company was terminated by reason of the Employee's disability shall be made by or as directed by the Committee. The Option shall terminate and lapse as to any shares which do not vest pursuant to the provisions hereof. IN WITNESS WHEREOF, the Company and the Employee have duly executed this Agreement as of ________, 2002, with respect to the grant of the Option and the binding arbitration of employment-related disputes. THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. EMPLOYEE: WORLDCOM, INC. SAMPLE ___________________________________ ________________________________________ By: Bernard J. Ebbers, President and CEO 1 CERTAIN TERMS AND CONDITIONS REGARDING STOCK OPTIONS 1. GRANT OF OPTION. Pursuant to the Plan, the Company hereby grants to the Employee the Option set forth on page 1 of this Agreement, upon the terms and conditions set forth herein and in the Plan. 2. TIME OF EXERCISE. This Option shall become exercisable as set forth on page 1 hereof. 3. TERM. This Option shall terminate at the earliest of: (a) 5:00 p.m. Central time on the expiration date indicated on page 1; (b) one (1) year following the Employee's death; (c) one (1) year following the termination by the Company of the Employee's employment with the Company by reason of disability; (d) three (3) months following the termination of the Employee's employment with the Company by reason of retirement (under normal Company policies); or (e) any other termination date specified in or pursuant to the Plan. Upon termination of the Employee's employment with the Company for any reason other than as set forth above, the Option or the unexercised portion thereof shall terminate. 4. WHO MAY EXERCISE. The Option and all rights thereunder shall be non-assignable and non-transferable, except to the extent that the holder's legatees, personal representatives or distributees in the event of the Employee's death may be permitted to exercise them as set forth herein or except as otherwise provided in or pursuant to the Plan. Any attempted transfer, assignment, pledge, hypothecation or other disposition of the Option except as provided herein or in accordance with the Plan shall be null and void and without effect. In the event of the death or disability of the Employee, the Option or the unexercised portion thereof may be exercised to the extent that the Employee or permitted transferee or assign was entitled to do so at the date of the Employee's death or disability (giving effect to the vesting provisions on page 1 hereof) by the Employee, his personal representative, executor, administrator, heirs, devisees or permitted transferee or assign, as applicable, but in no event after the expiration of the term of the Option as specified in Section 3, above. 5. OTHER RESTRICTIONS ON EXERCISE. The Company may postpone the issuance of shares and impose other restrictions upon any exercise of the Option or other options including, without limitation, if necessary until admission of such shares to listing on any stock exchange and completion of registration and qualification of such shares under any applicable state, federal or foreign law, rule or regulation. 6. MANNER OF EXERCISE. To exercise the Option, the Employee (or, if applicable, the persons designated in Section 4, above) shall comply with procedures as may be established from time to time by the Company. Such exercise shall be accompanied by full payment of the option price and, if applicable, any federal, state, local or foreign taxes required to be withheld pursuant to the Plan, in cash (including certified or bank cashier's check or the equivalent) or, in the discretion of the Committee, by delivery of Common Stock or any combination of cash and Common Stock. Only whole shares of Common Stock may be purchased. 7. RIGHTS AS SHAREHOLDER. The Employee or permitted transferee or assign shall have no rights as a shareholder with respect to any shares covered by the Option until the issuance of a certificate or certificates for such shares. 8. ADJUSTMENTS. The number and kind of securities subject to the Option and other options to purchase Common Stock and the per share purchase price with respect thereto are subject to adjustment by the Committee upon the happening of certain events, as described in the Plan. 9. NO OBLIGATION. Neither the granting of the Option nor any term or provision of this Agreement or the Plan shall constitute or be evidence of any understanding or obligation, express or implied, on the part of the Company or others to employ the Employee for any specified period or at any specified compensation or to make subsequent grants of stock options to the Employee, which are in the sole and absolute discretion of the Company. 10. ADMINISTRATION OF PLAN AND AGREEMENT. Except as otherwise provided herein, the Option and the exercise thereof are subject to the terms and conditions of the Plan, the receipt of a copy of which the Employee acknowledges by virtue of acceptance hereof. Determinations by the Committee hereunder or under the Plan including, without limitation, a determination by the Committee of any question which may arise with respect to the interpretation, construction or application of the provisions of the Option, this Agreement or the Plan shall be final, conclusive and binding. The Committee may establish, amend and revoke rules and regulations relating to the Plan and its administration as the Committee may deem advisable. 2 AGREEMENT TO ARBITRATE EMPLOYMENT-RELATED DISPUTES A. The Employee and the Company agree that, at the option of either party, any allegation, claim, cause of action, demand or dispute (hereafter collectively referred to as a "Dispute"), directly or indirectly related to the Employee's employment with the Company or termination of such employment including, but not limited to, any Dispute directly or indirectly related to options or rights to acquire stock of the Company granted pursuant to this Agreement or any other agreement(s) shall be resolved through impartial binding arbitration. In the event that either party demands arbitration, the Employee and the Company agree that the proceeding shall be the exclusive, final and binding forum for the ultimate resolution of a Dispute, subject to any rights of appeal that either party may have under the Federal Arbitration Act and/or under applicable state law dealing with the review of arbitration decisions. This agreement to arbitrate applies to all employment-related Disputes including, but not limited to, those under Title VII of the Civil Rights Act of 1964, the Employee Retirement Income Security Act, the Age Discrimination in Employment Act, the Fair Labor Standards Act, the Americans with Disabilities Act, the Family and Medical Leave Act, any wage and hour or wage payment law, or any other federal, state or local law, regulation or ordinance regarding employment or termination of employment. It also applies to, among others, all Disputes for breach of contract or wrongful discharge, breach of express or implied promises or covenants of good faith and fair dealing, intentional or negligent infliction of emotional distress, defamation, claims regarding stock or options to acquire stock, commissions, bonuses, or any other compensation or benefits, and any other claim related to the Employee's employment or termination of employment. B. The Employee and the Company agree that neither party may pursue an action against the other in a court of law regarding any employment-related Dispute, except for claims involving Workers' Compensation benefits or unemployment benefits. The Employee and the Company further agree that, by executing this Agreement, they are waiving the right to have Disputes subject to arbitration under this Agreement decided by a jury. The parties also agree that the arbitration requirement set forth herein is fully enforceable under the Federal Arbitration Act, and that a judgment upon any such award may be entered in any court of competent jurisdiction. This agreement to arbitrate does not alter any substantive rights that the parties may have under law, including the Employee's statutory right to file a charge with an administrative agency for investigative purposes or other action by the agency not inconsistent with this Agreement. Nor does this agreement to arbitrate limit or restrict the Employee's ability to participate or assist any agency in its investigation, processing or handling of any such charge. This agreement to arbitrate transfers each party's right to seek relief from either a judge or a jury to an impartial arbitrator. With respect to any Dispute pertaining to stock options or rights, the Arbitrator shall be governed by the terms and conditions contained in the applicable plan(s) and related agreement(s) consistent with applicable law. Nothing in this agreement to arbitrate shall adversely affect or diminish the rights, power and authority of the Committee or the Board of Directors of the Company with respect to stock options or rights and the related plans and agreements including, without limitation, the interpretation, construction or application of the applicable provisions, the creation, amendment or revocation of rules and regulations or the plan itself, the making of determinations, the taking of other actions or the final, binding and conclusive nature of the foregoing. The arbitrator may not substitute his/her judgment for any such Committee determination or action. C. In the event that the Employee or the Company initially elects to file suit in any court, the other party will have forty-five (45) days from the date that it is formally served with a summons and copy of the suit to notify the party filing suit of the non-filing party's demand for arbitration. Under such circumstances, the action must be dismissed by consent of the parties or by the court on motion, and arbitration commenced with the American Arbitration Association ("AAA"). If no lawsuit has been instituted, either the Employee or the Company may initiate arbitration by serving a written demand for arbitration upon the other party and the AAA. The demand must be served within six (6) months of the events giving rise to the Dispute, unless an applicable statute provides for a longer period for filing an initial claim, in which case such longer period shall apply. Any Dispute for which such a demand is not timely made will be deemed waived. D. The arbitration will be conducted in accordance with the American Arbitration Association National Rules for the Resolution of Employment Disputes (the "AAA Rules"), in effect on the date the demand for arbitration is made, except as modified by this Agreement. A copy of the AAA Rules may be obtained by written request to the Company. The Dispute shall be heard and determined by one arbitrator, who is either a retired judge or a licensed lawyer, experienced in arbitrating or adjudicating employment-related disputes. He or she shall also be a member of the National Academy of Arbitrators. Either party, upon request at the close of hearing, shall be given leave to file a post-hearing brief. The time for filing the brief shall be set by the arbitrator. The arbitrator shall issue a written award with Findings of Fact and Conclusions of Law, and may grant any remedy or relief that would have been available to the parties had the matter been heard in court. Unless the parties otherwise agree, the arbitration shall be heard within twenty-five (25) miles of the Employee's residence at the time of the hearing. The Company will pay the expenses of the arbitrator, including required travel, as well as any filing or administrative fees required by AAA for the cost of providing services. The arbitrator shall have the authority consistent with the AAA Rules to order such discovery as the arbitrator considers necessary to explore the issues in the Dispute. The parties shall bear their own attorneys' fees and costs related to any Dispute and the arbitration thereof. However, if any party prevails on a statutory claim which affords the prevailing party attorneys' fees, or if there is a written agreement between the parties providing for fees, the arbitrator may award reasonable attorneys' fees to the prevailing party. 3 E. The parties understand and agree that this agreement regarding arbitration shall not prevent either party from pursuing equitable or injunctive relief in a judicial forum for any Disputes relating to the enforcement of rights dealing with non-solicitation or no-hire of employees, non-solicitation or disruption of relations with respect to customers or vendors, non-disclosure, confidentiality, trade secrets, inventions, patents, copyrights, trademarks, service marks or any other matter relating to restrictive covenants or unfair competition. All other remedies, whether related to the application for equitable or injunctive relief or independent thereof, shall be subject to mandatory and binding arbitration in accordance with this Agreement. F. The Employee acknowledges that the phrases "termination without cause" or "termination with cause," as used in the applicable stock option plan(s) and/or agreement(s), have particular meaning relating solely to the options involved. These terms do not in any way limit, modify or supersede the employment at-will relationship that exists between the Employee and the Company. This Agreement is not intended, and shall not be construed, to create any contract of employment, express or implied. G. The Employee has been advised of his/her right to consult with counsel at no expense to the Company prior to entering into this Agreement. Employee further agrees that he or she has had sufficient time to seek legal consultation. H. This agreement to arbitrate shall survive the termination of the parties' employment relationship and the expiration of any stock or benefit plan or program. It can be modified only by a writing signed by the parties, which specifically states their intent to modify this agreement to arbitrate. I. Any notice, demand or request under this agreement to arbitrate shall be sent or delivered to the Employee at the Employee's most recent address in the Company's records and to the Company at 1133 19th Street, N.W., Washington, D.C. 20036, attn: Chief Legal Counsel, or to such other address as a party may direct by notice to the other party, and shall be deemed given, made or served when delivered in person or on the next business day when sent by overnight courier or on the second succeeding business day when sent by registered or certified mail (postage prepaid, return receipt requested). 4 -----END PRIVACY-ENHANCED MESSAGE-----