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.
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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
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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
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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.
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1997 Stock Option Plan - WorldCom Inc.
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