1995 Performance Option Plan - WorldCom Inc., MFS Communications Co. Inc., and UUNET Technologies Inc.
1995 PERFORMANCE OPTION PLAN
(AMENDED AND RESTATED AS OF DECEMBER 31, 1996)
INTRODUCTION AND HISTORY OF PLAN
Effective August 12, 1996, MFS Communications Company, Inc. ('MFS')
acquired UUNET Technologies, Inc., a Delaware corporation ('UUNET') through a
merger of a subsidiary of MFS with and into UUNET. As a result of the merger,
MFS assumed sponsorship of this Plan. Effective December 31, 1996, MFS then
merged with and into WorldCom, Inc. ('WorldCom') pursuant to a Merger
Agreement. As a result of the merger, WorldCom assumed sponsorship of the
Plan, and the Plan was amended and restated to redesignate the Plan as
sponsored by WorldCom effective December 31, 1996. Under the terms of the
Merger Agreement, rights to acquire stock of MFS outstanding under the Plan
before December 31, 1996 were substituted with rights to acquire stock of
WorldCom, as adjusted for the merger exchange ratio of 2.1 shares of stock of
WorldCom for each outstanding share of MFS stock. Except as adjusted for this
exchange ratio, all rights of Participants under the Plan before December 31,
1996 are preserved hereunder. This amended and restated Plan incorporates
changes in the Plan due to this merger but retains provisions relating to prior
dates for historical purposes. The amended and restated Plan is intended to
change the Plan as required as a result of the merger but is not otherwise
intended to effect substantive amendments to the Plan beyond those required by
1. PURPOSES OF THE PLAN.
The purposes of this Plan are to attract and retain the best available
personnel, to provide additional incentive to the Employees of the Company and
to promote the success of the Company's business. All Options granted
hereunder shall be Nonqualified Stock Options.
As used herein, the following definitions shall apply:
(a) 'Board' shall mean the Board of Directors of the Company.
(b) 'Code' shall mean the Internal Revenue Code of 1986, as amended.
(c) 'Committee' shall mean the Compensation Committee of the Board.
(d) 'Common Stock' shall mean the Common Stock of the Company, par
value $0.01 per share.
(e) 'Company' shall mean WorldCom, Inc., a Georgia corporation.
(f) 'Continuous Status as an Employee' shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by the Committee;
provided, that such leave is for a period of not more than 90 days or
reemployment upon the expiration of such leave is guaranteed by contract or
(g) 'Employee' shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute 'employment'' by the Company.
(h) 'Executive Officer' shall have the meaning set forth in Rule 3b-7
(or any successor rule) under the Exchange Act.
(i) 'Incentive Stock Option' shall mean an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(j) 'Nonqualified Stock Option' shall mean an Option not intended to
qualify as an Incentive Stock Option.
(k) 'Option' shall mean a stock option granted pursuant to the Plan.
(l) 'Optioned Stock' shall mean the Common Stock subject to an
(m) 'Optionee' shall mean an Employee who receives an Option.
(n) 'Parent' shall mean a 'parent corporation,' whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(o) '1995 Performance Goal' shall mean that the Company's 1995 pre-
tax profit shall be at least $1.5 million.
(p) 'Plan' shall mean this WorldCom/MFS/UUNET 1995 Performance Option
Plan, as amended from time to time.
(q) 'Share' shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(r) 'Subsidiary' shall mean a 'subsidiary corporation,' whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN.
Subject to the provisions of Section 10 of the Plan, the maximum
aggregate number of shares under the Plan is 338,478 shares of Common Stock.
The Shares may be authorized, but unissued, or reacquired Common Stock. If an
Option should expire or become unexercisable for any reason without having been
exercised in full, then the unpurchased Shares which were subject thereto shall
not become available for future grant or sale under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) Procedure. The Plan shall be administered by the Committee. The
Committee shall continue to serve until otherwise directed by the Board.
Members of the Board who are either eligible for Options or have been granted
Options may not act upon the granting of an Option. Notwithstanding the
foregoing, if and in any event the Company registers any class of any equity
security pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the 'Exchange Act'), from the effective date of such registration this
Plan shall be administered in accordance with the disinterested administration
requirements of Rule 16b-3 promulgated by the Securities and Exchange
Commission (such rule, including any successor rule, shall be referred to as
'Rule 16b-3'), or any successor rule thereto. Subject to the foregoing, from
time to time the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, and fill vacancies however caused.
(b) Powers of the Committee. Subject to the provisions of the Plan,
the Committee shall have the authority, in its discretion: (i) to grant
Nonqualified Stock Options; (ii) to determine, upon review of relevant
information and in accordance with Section 7 of the Plan, the fair market value
of the Common Stock; (iii) to determine the exercise price per share of Options
to be granted, which exercise price shall be determined in accordance with
Section 7 of the Plan; (iv) to determine the Employees to whom, and the time or
times at which, Options shall be granted and the number of shares to be
represented by such Options; (iv) to interpret the Plan; (v) to prescribe,
amend and rescind rules and regulations relating to the Plan; (vi) to determine
the terms and provisions of each Option granted and, with the consent of the
holder thereof, modify or amend any provisions (including provisions relating
to exercise price) of any Option; (vii) to accelerate or defer (with the
consent of the Optionee) the exercise date of any Option, consistent with the
provisions of the Plan; (viii) to authorize any person to execute on behalf of
the Company any instrument required to effectuate the grant of an Option
previously granted by the Committee; and (ix) to make all other determinations
deemed necessary or advisable for the administration of the Plan.
(c) Effect of Committee's Decision. All decisions, determinations and
interpretations of the Committee shall be final and binding on all Optionees.
(a) Options. Options may be granted to all Employees.
(b) Employment Relationship. The Plan shall not confer upon any
Optionee any right with respect to continuation of employment by the Company,
nor shall it interfere in any way with his or her right or the Company's right
to terminate his or her employment or services at any time, with or without
6. TERM OF PLAN.
The Plan shall become effective upon the earlier to occur of its
adoption by the Board or its approval by vote of the holders of a majority of
the outstanding shares of the Company entitled to vote on the adoption of the
Plan. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 12 of the Plan.
7. EXERCISE PRICE AND CONSIDERATION.
(a) The per Share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Committee.
(b) For purposes of the Plan, the value of Common Stock of the
Company shall be determined as follows:
(i) If the stock of the Company is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market, its fair market value shall be the closing sales price
for such stock or the closing bid if no sales were reported, as quoted on such
system or exchange (or the largest such exchange) for the date the value is to
be determined (or if there are no sales for such date, then for the last
preceding business day on which there were sales), as reported in the Wall
Street Journal or similar publication.
(ii) If the stock of the Company is regularly quoted by a
recognized securities dealer but selling prices are not reported, its fair
market value shall be the mean between the high bid and low asked prices for
the stock on the date the value is to be determined (or if there are no quoted
prices for the date of grant, then for the last preceding business day on which
there were quoted prices).
(iii) In the absence of an established market for the stock, the
fair market value thereof shall be determined in good faith by the Committee,
with reference to the Company's net worth, prospective earning power,
dividend-paying capacity, and other relevant factors, including the goodwill of
the Company, the economic outlook
in the Company's industry, the Company's position in the industry and its
management, and the values of stock of other corporations in the same or a
similar line of business.
(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Committee and may consist entirely of cash, check, promissory note, other
Shares of Common Stock which (i) either have been owned by the Optionee for
more than six (6) months on the date of surrender or were not acquired directly
or indirectly, from the Company, and (ii) have a fair market value on the date
of surrender equal to the aggregate exercise price of the Shares as to which
said Option shall be exercised, or any combination of such methods of payment,
or such other consideration and method of payment for the issuance of Shares to
the extent permitted under applicable law.
(a) Term of Option. The term of each Option shall be ten (10) years
from the date of grant thereof.
(b) Exercise of Option.
(i) Procedure for Exercise; Rights as a Stockholder. Any
Option granted hereunder shall be exercisable in full for 100 percent of the
Shares subject to such Option outstanding under the Plan on December 31, 2004;
provided, that Options held by any Employee as of December 31, 1995, shall
become exercisable in full on March 31, 1996 if the Committee determines that
the 1995 Performance Goal shall have been met.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Committee, consist of any
consideration and method of payment allowable under Section 7 of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. The Company shall issue (or cause to be issued) such stock certificate
promptly upon exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised. An Option may not be exercised for a fraction of a Share.
(ii) Termination of Status as an Employee. In the event of
termination of an Optionee's Continuous Status as an Employee prior to December
31, 1995, the Option held by such Employee shall terminate upon employment
termination. If the 1995 Performance Goal shall have been met and an
Optionee's Continuous Status as an Employee terminates after December 31, 1995,
such Optionee may, but only within three (3) months after the date of such
termination (or such longer period permitted by the Committee, but in no event
later than the date of expiration of the term of such Option as set forth in
the Option Agreement) exercise the Option. If the 1995-Performance Goal shall
not have been met and an Optionee's Continuous Status as an Employee terminates
before December 31, 2004, the Option held by such Optionee shall terminate upon
employment termination. If the 1995 Performance Goal shall not have been met
and an Optionee's Continuous Status as an Employee terminates after December
31, 2004, but before the end of the Option term, such Optionee may exercise
such Option prior to the expiration of the Option term. To the extent that
such Employee or Consultant was not entitled to exercise the Option at the date
of such termination, or if such Employee or Consultant does not exercise such
Option (which such Employee or Consultant was entitled to exercise) within the
time specified herein, the Option shall terminate.
(iii) Disability of Optionee. Notwithstanding the provisions of
Section 8(b)(ii) above, in the event of termination of an Optionee's Continuous
Status as an Employee as a result of such Employee's total and permanent
disability (as defined in Section 22(e) (3) of the Code), such Employee may,
but only within six (6) months from the date of such termination (or such
longer period permitted by the Committee, but in no event later than the date
of expiration of the term of such Option as set forth in the Option Agreement),
exercise the Option to the extent such Employee was entitled to exercise it at
the date of such termination. To the extent that such Employee was not
entitled to exercise the Option at the date of termination, or if such Employee
does not exercise such Option (which such Employee was entitled to exercise)
within the time specified herein, the Option shall terminate.
(iv) Death of Optionee. In the event of the death of an
Optionee during the term of the Option who is at the time of his or her death
an Employee of the Company and who has been in Continuous Status as an Employee
since the date of grant of the Option, the Option may be exercised, at any time
within six (6) months (but in no event later than the date of expiration of the
term of such Option as set forth in the Option Agreement), by Optionee's estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that would have
accrued had the Optionee continued living and remained in Continuous Status as
an Employee six (6) months after the date of death.
9. NON-TRANSFERABILITY OF OPTIONS.
The Options may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
Subject to any required action by the stockholders of the Company, the
number of shares of Common Stock covered by each outstanding Option, and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option as well as
the price per share of Common Stock covered by each such outstanding Option or
Stock Purchase Right, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock of the Company or the payment of a stock dividend with respect
to the Common Stock or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been 'effected without receipt of
consideration. Such adjustment shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company,
the Option will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Committee. The Committee
may, in the exercise of its sole discretion in such instances, declare that any
Option shall terminate as of a date fixed by the Committee and give each
Optionee the right to exercise his or her Option as to all or any part of the
Optioned Stock, including Shares as to which the Option would not otherwise be
exercisable. In the event of a proposed sale of all or substantially all of
the assets of the Company, or the merger of the Company with or into another
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, or, in the sole discretion of the Committee, the
Committee shall, in lieu of such assumption or substitution, (a) provide for
the Optionee to have the right to exercise the Option as to all of the Optioned
Stock, including Shares as to which the Option would not otherwise be
exercisable, or (b) provide for the cancellation of such Option. If the
Committee makes an Option fully exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Committee shall
notify the Optionee that the Option shall be fully exercisable for a period of
thirty (30) days from the date of such notice, and the Option will terminate
upon the expiration of such period.
11. TIME OF GRANTING OPTIONS.
The date of grant of an Option shall, for all purposes, be the date on
which the Committee makes the determination granting such Option.
12. AMENDMENT AND TERMINATION OF THE PLAN.
(a) Amendment and Termination. The Committee may amend or terminate
the Plan from time to time in such respects as the Committee may deem
advisable. No amendment, alteration, suspension or discontinuance shall
require stockholder approval unless (i) from and after such time as the Company
registers a class of equity securities under Section 12 of the Exchange Act,
stockholder approval shall be required to meet the exemptions provided by Rule
16b-3, or any successor rule thereto, or (ii) the Committee otherwise concludes
that stockholder approval is advisable.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee
(as the case may be) and the Committee, which agreement must be in writing and
signed by the Optionee (as the case may be) and the Company.
13. CONDITION UPON ISSUANCE OF SHARES.
Shares shall not be issued pursuant to the exercise of an Option unless
the exercise of such Option and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, and the requirements of any
stock exchange upon which the Shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
14. RESERVATION OF SHARES.
The Company, during the term of this Plan, will at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan. The inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the
Company's counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect of the failure
to issue or sell such Shares as to which such requisite authority shall not
have been obtained.
Options shall be evidenced by written option agreements in such form as
the Committee shall approve.