<PAGE>
As filed with the Securities and Exchange Registration No. 333-________
Commission on October 30, 1998
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
EARTHLINK NETWORK, INC.
(Exact name of issuer as specified in its charter)
Delaware 58-2389244
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3100 New York Drive
Suite 210
Pasadena, California 91107
(Address of principal executive offices)
-------------------
EARTHLINK NETWORK, INC.
Stock Option Agreements and Warrants
(Full Title of the Plans)
-------------------
Kirsten L. Hansen
Secretary and Director of Legal Affairs
Earthlink Network, Inc
3100 New York Drive
Suite 210
Pasadena, California 91107
(626) 296-2400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed maximum Proposed maximum
Title of securities Amount to be offering price aggregate Amount of
to be registered registered per share(1) offering price(1) registration fee
- ------------------- ------------ ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Common Stock, $.01 1,000,000 $36.75 $36,750,000 $10,217
par value.......... shares
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the registration fee.
This amount was calculated pursuant to Rule 457(c) on the basis of $36.75 per
share, which was the average of the high and low prices of the Registrant's
Common Stock on October 26, 1998, as reported in The Wall Street Journal.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Explanation Statement
This Registration Statement on Form S-8 is being filed to register
shares ("Shares") of EarthLink Network, Inc., a Delaware corporation (the
"Company"), common stock, $.01 par value per share ("Common Stock") granted
under certain stock options and warrants awarded to certain employees,
directors and officers of the Company (collectively, the "Options"). This
Registration Statement on Form S-8 registers 1,000,000 Shares issuable upon
exercise of the Options, which have not been registered to date. The number
of shares and the exercise price for the options and warrants described below
have been modified to reflect the Company's stock splits.
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Item 1. Plan Information.
The following sets forth information pertaining to options granted to
four (4) officers and directors of the Company and warrants granted to two
(2) directors of the Company, which grants were made independent of the
Company's Stock Option Plan:
a. Non-Statutory Stock Option granted to Leland C. Thoburn, Vice
President, Business Affairs, for the purchase of 100,000 shares of the
Company's Common Stock. The option is for a ten year term ending on
November 30, 2005 for an exercise price of $2.42 per share. The
option vests quarterly beginning March 1, 1996, and vests on the first
day of each third calendar month through September 1, 2000 as long as
the holder remains an employee of the Company. Upon termination of
employment, the holder has the right to exercise the option, to the
extent the option has vested within 30 days of termination. In the
case of the death or disability of the holder, the holder or his
estate has the right to exercise the option within 180 days subsequent
to the death or disability of the holder. The option is
nontransferable, other than by will or by the laws of descent.
The option is exercisable by execution of a Stock Purchase Agreement
which shall be delivered to the Secretary of the Company, accompanied
by payment of the aggregate Option price by check payable to the
Company. The number of shares covered by the Option and the exercise
price per share are adjusted for any increase or decrease in the
number of shares issued as a result of a stock split, reverse stock
split, combination, reclassification or payment of stock dividend or
any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company, excluding
conversion of convertible securities. Upon a proposed dissolution,
liquidation or sale of all or substantially all of the assets of the
Company, merger or reorganization of the Company with or into another
corporation of which the Company is not the surviving entity the
Company's Board of Directors will make provisions for the assumption
of the option by the successor entity or shall give the holder a
period to exercise the option before it terminates.
b. Non-Statutory Stock Option granted to Robert E. Johnson, Vice
President of OEM Channel Sales, for the purchase of 100,000 shares of
the Company's Common Stock. The option is for a ten year term ending
on November 30, 2005 for an exercise price of $0.91 per share. The
option vests quarterly beginning September 19, 1995, and vests on the
first day of each third calendar month through March 19, 2000 as long
as the holder remains an employee of the Company. Upon termination of
employment, the holder has the right to exercise the option, to the
extent the option has vested within 30 days of termination. In the
case of the death or disability of the holder, the holder or his
estate has the right to exercise the option within 180 days subsequent
to the death or disability of the holder. The option is
nontransferable, other than by will or by the laws of descent.
I-1
<PAGE>
The option is exercisable by execution of a Stock Purchase Agreement
which shall be delivered to the Secretary of the Company, accompanied
by payment of the aggregate Option price by check payable to the
Company. The number of shares covered by the Option and the exercise
price per share are adjusted for any increase or decrease in the
number of shares issued as a result of a stock split, reverse stock
split, combination, reclassification or payment of stock dividend or
any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company, excluding
conversion of convertible securities. Upon a proposed dissolution,
liquidation or sale of all or substantially all of the assets of the
Company, merger or reorganization of the Company with or into another
corporation of which the Company is not the surviving entity the
Company's Board of Directors will make provisions for the assumption
of the option by the successor entity or shall give the holder a
period to exercise the option before it terminates.
c. Warrants to purchase shares of the Company's Common Stock. The
Warrants are for a five year term ending on January 12, 2001 for an
exercise price of $2.42 per share. The Warrants vest in five equal
annual installments of twenty thousand (20,000) shares, with vesting
beginning on January 12, 1997, with an additional installment vesting
each anniversary provided that the holder remains a director of the
Company. The Warrants were granted as follows:
1. To Linwood A. Lacy, Jr. for 100,000 Shares; and
2. to Robert M. Kavner for 100,000 Shares.
The Warrants may be exercised by surrender of the Warrant certificate
at the principal office of the Company by check of the then applicable
Warrant Price. The number of shares subject to the Warrants and the
Warrant Price is subject to adjustment upon conversion, merger or
reclassification, subdivision or combination of shares, certain
dividends and distributions.
d. Non-Statutory Stock Option granted to Sky D. Dayton, Founder and
Chairman of the Board of Directors, for the purchase of 500,000
shares of Common Stock of the Company. The option is for a ten year
term ending on June 18, 2005, for an exercise price of $0.91 per
share. The option vests in twenty quarterly installments commencing
three months after the date of grant, as long as the holder remains
an employee of the Company or the agreement is not otherwise
terminated. Upon termination of employment, the holder has the
right to exercise the option within 30 days of termination, to the
extent the option has vested. In the case of the death or
disability of the holder, the holder or his estate has the right to
exercise the option within 180 days subsequent to the death or
disability of the holder. The option is nontransferable other than
by will or by the laws of descent.
The option is exercisable by execution of a Stock Purchase Agreement
which shall be delivered to the Secretary of the Company, accompanied
by payment of the aggregate Option price by check payable to the
Company. The number of shares covered by the Option and the exercise
price per share are adjusted for any increase or decrease in the
number of shares issued as a result of a stock split, reverse stock
split, combination, reclassification or payment of stock dividend or
any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company, excluding
conversion of convertible securities. Upon a proposed dissolution,
liquidation or sale of all or substantially all of the assets of the
Company, merger or reorganization of the Company with or into another
corporation of which the Company is not the surviving entity the
Company's Board of Directors will make provisions for the assumption
of the option by the successor entity or shall give the holder a
period to exercise the option before it terminates.
e. Non-Statutory Stock Option granted to Grayson L. Hoberg, Vice
President, Finance and Administration, and Chief Financial Officer,
for the purchase of 100,000 shares of Common Stock of the Company. The
option is for a ten year term ending on November 6, 2007, for an
exercise price of $8.00 per share. The option vests in twenty
quarterly installments commencing three months after the date of
grant, as long as the holder remains an employee or the
I-2
<PAGE>
agreement is not otherwise terminated. Upon termination of employment,
the holder has the right to exercise the option within 30 days of
termination, to the extent the option has vested. In the case of the
death or disability of the holder, the holder or his estate has the
right to exercise the option within 180 days subsequent to the death
or disability of the holder. The option is nontransferable other than
by will or by the laws of descent.
The option is exercisable by execution of a Stock Purchase Agreement
which shall be delivered to the Secretary of the Company, accompanied
by payment of the aggregate Option price by check payable to the
Company. The number of shares covered by the Option and the exercise
price per share are adjusted for any increase or decrease in the
number of shares issued as a result of a stock split, reverse stock
split, combination, reclassification or payment of stock dividend or
any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company, excluding
conversion of convertible securities. Upon a proposed dissolution,
liquidation or sale of all or substantially all of the assets of the
Company, merger or reorganization of the Company with or into another
corporation of which the Company is not the surviving entity the
Company's Board of Directors will make provisions for the assumption
of the option by the successor entity or shall give the holder a
period to exercise the option before it terminates.
The Options described above are not subject to the Employee Retirement
Income Security Act of 1974, as amended.
Item 2. Registrant Information and Employee Plan Annual Information.
Not required to be filed with the Commission.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents, filed by the Company with the Commission are
incorporated herein by reference and made a part hereof:
(i) The Company's Annual Report on Form 10-K for the year ended
December 31, 1997;
(ii) The Company's Current Report on Form 8-K, dated August 13, 1998;
(iii) The Company's Quarterly Report on Form 10-Q dated August 14,
1998
(iv) The Company's Quarterly Report on Form 10-Q dated May 15, 1998;
(v) The Company's Current Report on Form 8-K dated February 17,
1998;
(vi) The description of the Company's Common Stock, $.01 par value
per share, contained in the Company's Registration Statement on
Form 8-A filed on January 9, 1997 (Registration No. 000-20799).
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), prior to the filing of a post-effective amendment which
indicates that all securities offered have been sold or which reregisters all
securities then remaining unsold,
II-1
<PAGE>
shall be deemed to be incorporated by reference in the Registration Statement
and to be part hereof from the date of filing of such documents. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Registration Statement to the extent
that a statement contained herein or in any other subsequently filed document
that is incorporated by reference herein modifies or supersedes such earlier
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
Under Section 145 of the General Corporation Law of the State of Delaware,
as amended, the Registrant has the power to indemnify directors and officers
under certain prescribed circumstances and subject to certain limitations
against certain costs and expenses, including attorneys' fees actually and
reasonably incurred in connection with any action, suit or proceeding, whether
civil, criminal, administrative or investigative, to which any of them is a
party by reason of his or her being a director or officer of the Registrant if
it is determined that he acted in accordance with the applicable standard of
conduct set forth in such statutory provision.
Article XII of the Registrant's By-laws generally permits indemnification
of directors and officers to the fullest extent authorized by the General
Corporation Law of the State of Delaware. In addition, the Company maintains
customary directors' and officers' liability insurance.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Registrant
pursuant to the foregoing provisions, the Registrant has been informed that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits.
The following exhibits are filed with or incorporated by reference into
this Registration Statement pursuant to Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
4.1 Amended and Restated Certificate of Incorporation (incorporated
herein by reference to Exhibit 3.1 of the Registrant's
Registration Statement on Form S-4, Reg. No. 333-52507).
4.2 Bylaws (incorporated herein by reference to Exhibit 3.2 of the
Registrant's Registration Statement on Form S-4, Reg. No.
333-52507).
4.3 Specimen Stock Certificate (incorporated herein by reference to
Exhibit 4.2 of the Registrant's Registration Statement on Form
S-1, Reg. No. 333-15781).
4.4 Non-Statutory Stock Option Agreement for Leland C. Thoburn.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
4.5 Non-Statutory Stock Option Agreement for Robert E. Johnson
4.6 Warrant for Linwood A. Lacy, Jr.
4.7 Warrant for Robert M. Kavner.
4.8 Non-Statutory Stock Option Agreement for Sky D. Dayton.
4.9 Non-Statutory Stock Option Agreement for Grayson L. Hoberg.
5 Opinion of Hunton & Williams as counsel.
23.1 Consent of counsel (included in Exhibit 5).
23.2 Consent of PricewaterhouseCoopers, LLP independent accountants.
24 Power of Attorney (see signature pages to this Registration
Statement).
</TABLE>
Item 9. Undertakings.
(a) The Company hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent
no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
2. That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-3
<PAGE>
(b) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Pasadena, California on this 29th day of October, 1998.
EARTHLINK NETWORK, INC.
By: /s/ Charles G. Betty
------------------------------
Charles G. Betty
President, Chief
Executive Officer
and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Charles G. Betty and Grayson L. Hoberg as
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each of said attorneys-in-fact and agents, full power
and authority to do and perform each and every act and thing required or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each of said attorneys-in-fact and agents, or their substitutes, could
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below on October 29, 1998 by the following persons in
the capacities indicated.
<TABLE>
<S> <C>
/s/ Charles G. Betty President, Chief Executive Officer and Director
- ------------------------ (principal executive officer)
Charles G. Betty
/s/ Grayson L. Hoberg Vice President, Finance and Chief Financial
- ------------------------ Officer (principal financial and principal
Grayson L. Hoberg accounting officer)
/s/ Sky D. Dayton Chairman of the Board of Directors
- ------------------------
Sky D. Dayton
/s/ Sidney Azeez Director
- ------------------------
Sidney Azeez
/s/ Robert M. Kavner Director
- ------------------------
Robert M. Kavner
/s/ Linwood A. Lacy, Jr. Director
- ------------------------
Linwood A. Lacy, Jr.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
/s/ Paul McNulty Director
- ------------------------
Paul McNulty
/s/ Kevin M. O'Donnell Director
- ------------------------
Kevin M. O'Donnell
/s/ William T. Esrey Director
- ------------------------
William T. Esrey
/s/ Reed E. Slatkin Director
- ------------------------
Reed E. Slatkin
/s/ Patti S. Manuel Director
- ------------------------
Patti S. Manuel
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
4.1 Amended and Restated Certificate of Incorporation (incorporated
herein by reference to Exhibit 3.1 of the Registrant's
Registration Statement on Form S-4, Reg. No. 333-52507).
4.2 Bylaws (incorporated herein by reference to Exhibit 3.2 of the
Registrant's Registration Statement on Form S-4, Reg. No.
333-52507).
4.3 Specimen Stock Certificate (incorporated herein by reference to
Exhibit 4.2 of the Registrant's Registration Statement on Form
S-1, Reg. No. 333-15781).
4.4 Non-Statutory Stock Option Agreement for Leland C. Thoburn.
4.5 Non-Statutory Stock Option Agreement for Robert E. Johnson
4.6 Warrant for Linwood A. Lacy, Jr.
4.7 Warrant for Robert M. Kavner.
4.8 Non-Statutory Stock Option Agreement for Sky D. Dayton.
4.9 Non-Statutory Stock Option Agreement for Grayson L. Hoberg.
5 Opinion of Hunton & Williams as counsel.
23.1 Consent of counsel (included in Exhibit 5).
23.2 Consent of PricewaterhouseCoopers LLP, independent accountants.
24 Power of Attorney (see signature pages to this Registration
Statement).
</TABLE>
<PAGE>
EXHIBIT 4.4
EARTHLINK NETWORK, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
EarthLink Network, Inc., a California corporation (the "Company"), hereby grants
to Leland Thoburn (the "Optionee") an option (the "Option") to purchase a total
of 10,000 shares of Common Stock (the "Shares") of the Company, at the price and
on the terms set forth herein.
1. Nature of the Option. This Option is intended to be a nonstatutory stock
option and is not intended to be an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or to
otherwise qualify for any special tax benefits to the Optionee.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Common Stock" shall mean the Common Stock of the Company.
(c) "Continuous Employment" or "Continuous Status As An Employee" shall
mean the absence of any interruption or termination of employment or service as
an Employee by the Company or any Parent or Subsidiary of the Company which now
exists or is hereafter organized or acquired by or acquires the Company.
Continuous Employment shall not be considered interrupted in the case of
transfers between locations of the Company or between the Company, its Parent,
or any of its Subsidiaries or its successors.
(d) "Disability" shall mean the inability of the Optionee to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or has lasted or can
be expected to last for a continuous period of not less than 12 months. In
determining the Disability of an Optionee, the Board may require the Optionee to
furnish proof of the existence of Disability and may select a physician to
examine the Optionee. The final determination as to the Disability of the
Optionee shall be made by the Board.
(e) "Employee" shall mean any person, including officers and directors,
employed by the Company, its Parent, any of its Subsidiaries or its successors.
A person shall not be deemed to be employed by the Company merely because such
person is a member of the Board of Directors of the Company or a consultant to
the Company.
(f) "Optioned Stock" shall mean the Common Stock subject to this Option.
(g) "Parent" shall mean a "parent corporation," whether now or hereafter
existing, as defined in Sections 424(e) and (g) of the Code.
(h) "Subsidiary" shall mean a subsidiary corporation, whether now or
hereafter existing, as defined in Sections 424(f) and (g) of the Code.
<PAGE>
(i) "Termination for Cause" shall mean termination of employment as a
result of (i) any act or acts by the Optionee constituting a felony under any
federal, state or local law; (ii) the Optionee's willful and continued failure
to perform the duties assigned to him as an Employee (iii) any material breach
by the Optionee of any agreement with the Company concerning his employment or
other understanding concerning the terms and conditions of employment by the
Company; (iv) dishonesty, gross negligence or malfeasance by the Optionee in the
performance of his duties as an Employee or any conduct by the Optionee which
involves a material conflict of interest with any business of the Company or any
affiliate of the Company; or (v) the Optionee's taking or knowingly omitting to
take any other action or actions in the performance of Optionee's duties as an
Employee without informing appropriate members of management to whom such
Optionee reports, which action or actions, in the determination of the Board,
have caused or substantially contributed to the material deterioration in the
business or financial condition of the Company or any affiliate of the Company,
taken as a whole.
3. Date of Grant; Term of Option. This Option is granted as of December 1,
1995 (the "Grant Date"), and subject to Section 8 hereof, it may not be
exercised later than November 30, 2005.
4. Option Exercise Price. The Option exercise price is $24.18 per Share.
5. Exercise of Option. This Option shall be exercisable during its term only
as follows:
(a) Right to Exercise. This Option shall vest and be exercisable in equal
quarterly installments with the first installment vesting on March 1, 1996, and
with an additional installment scheduled to vest on the first day of each third
calendar month thereafter though September, 2000, as long as the Optionee
remains in the Continuous Employment of the Company. The exact number of
installments shall be equal to that number of installments that enables this
Option to vest in full on September 1, 2000, provided that this Option has not
otherwise terminated.
(b) Method of Exercise. This Option shall be exercisable from time to time
as to all or any portion of the Shares as to which this Option is then
exercisable by execution of a stock purchase agreement in the form of Attachment
A attached hereto (the "Stock Purchase Agreement"). The Stock Purchase Agreement
shall be duly completed and signed by the Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company or such other person
as may be designated by the Company. The Stock Purchase Agreement shall be
accompanied by payment of the aggregate Option exercise price. Such payment of
the aggregate Option exercise price shall be by check payable to the Company.
The certificate or certificates for the Shares as to which this Option shall be
exercised shall be registered in the name of the Optionee (or any permitted
successor or assign) and shall be legended as required under Section 15 hereof
and/or applicable blue sky or other laws.
(c) Restrictions on Exercise. This Option may not be exercised if the
issuance of the Shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other laws or regulations. The
Company shall not be obligated to take any affirmative action in order to cause
the exercise of this Option or the issuance of shares pursuant thereto to comply
with such laws or regulations. As a condition to the exercise of this Option,
the Company may require the Optionee to make any representation and warranty to
the Company as
<PAGE>
may be required by any applicable law or regulation. This Option may not be
exercised for a fraction of a Share.
(d) Effect of Exercise. Exercise of this Option in any manner shall result
in a decrease in the number of Shares which thereafter may be available for sale
under this Option by the number of Shares as to which this Option is exercised.
6. No Rights as Shareholder. Until this Option is properly exercised in whole
or in part in accordance with the terms of Section 5 hereof, no right to vote or
receive dividends or any other rights as a shareholder shall exist with respect
to the Optioned Stock. No adjustment shall be made for a dividend or other right
for which the record date is prior to the date this Option is exercised, except
as provided in Section 10 hereof.
7. Deliver of Share Certificates. As soon as practicable after any proper
exercise of this Option, the Company shall, without transfer or issue tax to the
Optionee, deliver to the Optionee at the principal executive office of the
Company or such other place as shall be mutually agreed upon between the Company
and the Optionee, a certificate or certificates representing the Shares for
which this Option shall have been exercised. The time of issuance and delivery
of the certificate(s) representing the Shares for which this Option shall have
been exercised may be postponed by the Company for such period as may be
required by the Company, with reasonable diligence, to comply with any
applicable listing requirements of any national or regional securities exchange
or any law or regulation applicable to the issuance or delivery of such Shares.
8. Termination of Status as an Employee. If the Optionee ceases to serve as an
Employee for any reason other than death, Disability or Termination for Cause,
and thereby terminates his Continuous Status As An Employee, the Optionee shall
have the right to exercise this Option at any time within 30 days after the date
of such termination to the extent that the Optionee was entitled to exercise
this Option at the date of such termination. If the Optionee ceases to serve as
an Employee due to death or Disability, this Option may be exercised at any time
within 180 days subsequent to the death or Disability of the Optionee, in the
case of death, by the Optionee's estate or by a person who acquired the right to
exercise this Option by bequest or inheritance, or, in the case of Disability,
by the Optionee, but in any case only to the extent the Optionee was entitled to
exercise this Option at the date of such termination. If an Optionee's
Continuous Status As An Employee terminates due to his Termination for Cause,
this Option shall terminate as of the date of such Termination for Cause to the
extent not exercised as of such date. To the extent that the Optionee was not
entitled to exercise this Option at the date of termination, or to the extent
this Option is not exercised within the time specified herein, this Option shall
terminate. Notwithstanding the foregoing, this Option shall not be exercisable
after the expiration of the term set forth in Section 3 hereof.
9. Nontransferability of Option. This Option may not be sold, pledged,
assigned, hypothecated, gifted, transferred or disposed of in any manner, either
voluntarily or involuntarily by operation of law, other than by will or by the
laws of descent or distribution or as a transfer between spouses incident to a
divorce, and any such attempt may result, at the discretion of the Board, in the
termination of this Option. During the lifetime of the Optionee this Option may
be exercised only by the Optionee or his guardian. Subject to the foregoing, the
terms of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the
<PAGE>
Optionee.
10. Adjustment Upon Changes in Capitalization or Merger.
(a) Subject to any required action by the shareholders of the Company, the
number of Shares covered by this Option, as well as the exercise price per Share
of the Shares covered by this Option, 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, combination, recapitalization or
reclassification of the Common Stock, or the payment of a stock dividend (but
only on 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 (other than stock bonuses to Employees or directors); provided, however,
that the conversion of any convertible securities of the Company shall not be
deemed to have been effected without the receipt of consideration. Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no issue
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 subject to this
Option.
(b) In the event of a proposed dissolution or liquidation of the Company or
the sale of all or substantially all of the assets of the Company (other than in
the ordinary course of business), or the merger, consolidation or reorganization
of the Company with or into another corporation as a result of which the Company
is not the surviving corporation or as a result of which the outstanding Shares
are exchanged for or converted into cash or property or securities not of the
Company, the Board shall (i) make provisions for the assumption of this Option,
if then outstanding, by the successor corporation or a Parent or a Subsidiary
thereof, or (ii) declare that this Option, if then outstanding, shall terminate
as of a date fixed by the Board which is at least 30 days after the notice
thereof to the Optionee (unless such 30-day period is waived by the Optionee)
and shall give the Optionee the right to exercise this Option as to all or any
part of the shares underlying this Option to the extent then exercisable,
provided such exercise does not violate Section 8 hereof.
(c) No fractional share of Common Stock shall be issuable on account of any
action aforesaid, and the aggregate number of shares into which Shares then
covered by this Option, when changed as the result of such action, shall be
reduced to the largest number of whole shares resulting from such action, unless
the Board, in its sole discretion, shall determine to issue scrip certificates
in respect to any fractional shares, which scrip certificates, in such event,
shall be in a form and have such terms and conditions as the Board in its
discretion shall prescribe.
11. Investment Representations. Unless the Shares have been registered under
the Securities Act of 1993, in connection with the acquisition of this Option,
the Optionee represents and warrants as follows:
(a) The Optionee is acquiring this Option, and upon exercise of this
Option, he will be acquiring the Shares for investment for his own account, not
as a nominee or agent, and not with a view to, or for resale in connection with,
any distribution thereof.
<PAGE>
(b) The Optionee has a preexisting business or personal relationship with
the Company or one of its directors, officers or controlling persons and by
reason of his business or financial experience, has, and could be reasonably
assumed to have, the capacity to protect his interests in connection with the
acquisition of this Option and the Shares.
12. Reservation of Shares. The Company covenants and agrees that during the
term of this Option the Company will at all times have authorized and reserved
for the purpose of the issue upon exercise of this Option at least the maximum
number of shares of Common Stock as are issuable upon the exercise of this
Option.
13. Continuation of Employment. This Option shall not confer upon the Optionee
any right whatsoever to continue in the employment of the Company or any of its
Subsidiaries or limit or restrict in any respect the rights of the Company,
which rights are hereby expressly reserved, to terminate the Optionee's
employment and compensation at any time for any reason whatsoever, with or
without cause, in the Company's discretion and with or without notice.
14. Withholding. The Company reserves the right to withhold, in accordance with
any applicable laws, from any consideration payable to Optionee any taxes
required to be withheld by federal, state or local law as a result of the grant
or exercise of this Option or the sale or other disposition of the Shares issued
upon exercise of this Option. If the amount of any consideration payable to the
Optionee is insufficient to pay such taxes or if no consideration is payable to
the Optionee, upon the request of the Company, the Optionee shall pay to the
Company an amount sufficient for the Company to satisfy any federal, state or
local tax withholding requirements it may incur, as a result of the grant or
exercise of this Option or the sale or other disposition of the Shares issued
upon the exercise of this Option.
15. Legends. Each certificate representing the Shares shall contain such
legends as may be required under applicable blue sky laws. Unless an appropriate
registration statement is filed and becomes effective pursuant to the Securities
Act of 1993, as amended, with respect to the Shares, each certificate
representing such Shares shall also have endorsed thereon a legend substantially
as follows:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY
IN ACCORDANCE WITH THE TERMS OF A STOCK PURCHASE AGREEMENT BETWEEN THE COMPANY
AND THE REGISTERED HOLDER, OR ITS PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON
FILE WITH THE SECRETARY OF THE COMPANY."
(b) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR
IN CONNECTION WITH, THE SALE, TRANSFER OR DISTRIBUTION THEREOF. NO SUCH SALE,
TRANSFER OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATING THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED."
<PAGE>
16. Action by the Company. The existence of this Option shall not affect in any
way the right or power of the Company or its shareholders to make or authorize
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business, or any merger or consolidation
of the Company, or any issue of bonds, debentures, or any class of preferred
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding.
17. Interpretation. As a condition to the granting of this Option, the Optionee
and each person who succeeds to the Optionee's rights hereunder, agrees that any
dispute or disagreement which shall arise under or as a result of or pursuant to
this Option shall be determined by the Board in its sole discretion, and that
any such determination or interpretation of the terms of this Option by the
Board shall be final, binding and conclusive.
18. Notices. Any notice to be given to the Company pursuant to this Option
shall be addressed to the Company in care of its Secretary (or such other person
as the Company may designate from time to time) as its principal office, and any
notice to be given to the Optionee shall be delivered personally or addressed to
him at the address given beneath his signature set forth below, or at such other
address as the Optionee may hereafter designate in writing to the Company. Any
such notice shall be deemed duly given when enclosed in a properly sealed
envelope or wrapper addressed as aforesaid, registered or certified, and
deposited, postage and registry or certification fee prepaid, in a post office
or branch post office regularly maintained by the United States Postal Service.
19. Invalid Provisions. In the event that any provision of this Option is found
to be invalid or otherwise unenforceable under any applicable law, such
invalidity or enforceability shall not be construed as rendering any other
provisions contained herein as invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same extent as though the
invalid or unenforceable provision was not contained herein.
20. Governing Law. This Option shall be governed by and construed in accordance
with the laws of the State of California.
Dated as of December 1, 1995
EarthLink Network, Inc.
By: _______________________________
Sky Dayton
Title: President and CEO
<PAGE>
ACKNOWLEDGMENT
The Optionee hereby accepts this Option subject to all of the terms and
provisions hereof.
-------------------------------
Leland Thoburn
9626 Mistletoe Road
Tujunga, California 91042
THIS OPTION AND THE SECURITIES WHICH MAY BE PURCHASED UPON EXERCISE OF THIS
OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE, TRANSFER OR DISTRIBUTION
THEREOF. NO SUCH SALE, TRANSFER OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES WHICH MAY BE PURCHASED UPON EXERCISE OF THIS OPTION ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL AND MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS
OF A STOCK PURCHASE AGREEMENT TO BE ENTERED INTO BETWEEN THE HOLDER OF THIS
OPTION AND THE COMPANY UPON EXERCISE OF THIS OPTION, A COPY OF WHICH AGREEMENT
IS ON FILE WITH THE SECRETARY OF THE COMPANY.
<PAGE>
For Use Upon Exercise of Options
EARTHLINK NETWORK, INC.
STOCK PURCHASE AGREEMENT
This Agreement is made as of the __ day of ____________, 19__, by and
between EarthLink Network, Inc., a California corporation (the "Company"), and
Leland Thoburn ("Optionee"). Unless the context herein otherwise requires,
capitalized terms used herein shall have the same meaning as such capitalized
terms have under the Nonstatutory Stock Option Agreement dated as of December 1,
1995 between the Company and Optionee (the "Option Agreement").
RECITALS
A. Optionee was granted a Stock Option (the "Option") on December 1, 1995.
B. Pursuant to said Option, Optionee was granted the right to purchase
10,000 shares of the Company's common stock, as adjusted in accordance with the
Plan (the "Optioned Shares") at $24.18 per Share (the "Exercise Price"), as
adjusted in accordance with the Option Agreement.
C. Optionee has elected to exercise the Option to purchase _____ of such
Optioned Shares (herein referred to as the "Shares") under the Option Agreement.
D. As required by the Option Agreement, as a condition to Optionee's
exercise of his option, Optionee must execute this Agreement which gives the
Company the right of first refusal upon transfer.
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. Exercise of Option. Subject to the terms and conditions hereof, Optionee
hereby to exercise his Option or a portion thereof to purchase ____ Shares at
$___________ per payable in accordance with the terms and provisions of the
Option Agreement.
2. Company's Right To Repurchase Shares.
(a) If an Optionee ceases to serve as an Employee for any reason, including
death, Disability or Termination for Cause, and thereby terminates his
Continuous Status As An Employee, the Company shall have the right to repurchase
all of the Shares purchased by Optionee hereunder, at a price to be determined
as set forth below. Such right on the part of the Company shall commence upon
the last day of such Optionee's Continuous Status As An Employee (the
"Termination Date") and shall expire on the 90th day after the Termination Date.
(b) The repurchase price shall be an amount equal to the higher of the
exercise price of the Option or 100% of the Company's net book value per share
times the number of shares to be repurchased. For purposes of the foregoing
determination, the net book value shall mean the book value of the Company's
assets net of all of the Company's liabilities as determined by the Company's
accountants, in accordance with generally accepted accounting principles
consistently applied, as of the last day of the last calendar quarter prior to
the Termination Date. The
<PAGE>
repurchase price may be paid by the Company by check, evidence of cancellation
of indebtedness of Optionee to Company, or some combination thereof, as the
Company acting in its sole discretion determines.
3. Right of First Refusal. Before any Shares registered in the name of
Optionee may be sold or transferred (including transfer by operation of law),
such Shares shall first be offered to the Company at the same price, and upon
the same terms (or terms as similar as reasonably possible), in the following
manner:
(a) Optionee shall deliver a notice ("Notice") to the Company stating (i)
his bona fide intention to sell or transfer such Shares, (ii) the number of such
Shares to be sold or transferred, (iii) the price for which he proposes to sell
or transfer such Shares, and (iv) the name of the proposed purchaser or
transferee.
(b) Within 30 days after receipt of the Notice, the Company or its assignee
may elect to purchase any or all Shares to which the Notice refers, at the price
per Share and on the same terms (or terms as similar as reasonably possible)
specified in the Notice.
(c) If all or a portion of the Shares to which the Notice refers are not
elected to be purchased pursuant to paragraph 3(b) hereof, Optionee may sell the
Shares not purchased by the Company to any person named in the Notice at the
price and terms specified in the Notice or at a higher price, provided that such
sale or transfer is consummated within 60 days of the date of said Notice to the
Company, and provided, further, that any such sale is in accordance with all the
terms and conditions hereof.
In the event of any transfer by operation of law or other involuntary transfer
(including, but not limited to, by will or by the laws of descent or
distribution) where there is no price established as a matter law, the Company
shall have the right to repurchase all of the Shares purchased by Optionee
hereunder, at a price to be determined as set forth in Section 2(b) above. In
such event, Optionee or Optionee's estate shall notify the Company promptly
after the happening of the event giving rise to the involuntary transfer. Within
30 days after receipt of such Notice, the Company or its assignee may elect to
purchase any or all Shares to which the Notice refers.
4. Termination of Repurchase Right and Right of First Refusal. Optionee's
obligations and the Company's rights under paragraphs 2 and 3 above shall
terminate upon the earlier of (i) the first sale of Common Stock by the Company
to the public which raises an aggregate of not less than $5,000,000.00 and which
is effected pursuant to a registration statement filed with, and declared
effective by, the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Act"), or (ii) the merger or
consolidation of the Company into, or the sale of all or substantially all of
the Company's assets to, another corporation, if immediately after such merger,
consolidation or sale of assets, at least 50% of the capital stock of the
Company or such other corporation is owned by persons who are not holders of
capital stock of the Company immediately prior to such merger, consolidation or
sale.
5. Assignment. The Company may assign its rights under paragraphs 2 and 3
hereof to one or more persons, who shall have the right to so exercise such
rights in his own
<PAGE>
name and for his own account. If the exercise of any such right requires the
consent of the California Securities Commissioner or the consent of the
Securities Commissioner, or the equivalent, of another state, the parties agree
to cooperate in requesting such consent.
6. Adjustment. If, from time to time during the term of the right of first
refusal available pursuant to paragraph 3 hereof:
(a) There is any stock dividend or liquidating dividend of cash and/or
property, stock split or other change in the character or amount of any of the
outstanding securities of the Company; or
(b) There is any consolidation, merger or sale of all or substantially all
of the assets of the Company;
then, in such event, any and all new, substituted or additional securities or
other property to which Optionee is entitled by reason of his ownership of
Shares shall be immediately subject to the right of first refusal set forth in
paragraph 3 hereof, and be included in the word "Shares" for all purposes with
the same force and effect as the Shares presently subject to such right of first
refusal provided, however, if such consolidation, merger or sale of all, or
substantially all, of the assets of the Company causes a termination of the
right of first refusal set forth in paragraph 3 hereof, then such new,
substituted or additional securities or other property shall not be included in
the word "Shares" for the purposes of this paragraph).
7. Legends. All certificates representing any Shares of the Company subject
to the provisions of this Agreement shall have endorsed thereon legends in
substantially the following form unless in the opinion of the Company's counsel
such legends are no longer necessary:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY
IN ACCORDANCE WITH THE TERMS OF A STOCK PURCHASE AGREEMENT BETWEEN THE COMPANY
AND THE REGISTERED HOLDER, OR ITS PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON
FILE WITH THE SECRETARY OF THE COMPANY."
(b) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR
IN CONNECTION WITH, THE SALE, TRANSFER OR DISTRIBUTION THEREOF. NO SUCH SALE,
TRANSFER OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATING THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED."
8. Investment Representations. Unless the Shares have been registered under
the Act, in which event the Company will so advise Optionee in writing, Optionee
agrees, represents and warrants, in connection with the proposed purchase of the
Shares, as follows:
<PAGE>
(a) Optionee represents and warrants that he is purchasing the Shares
solely for Optionee's own account for investment and not with a view to, or for
resale in connection with any distribution thereof within the meaning of the
Act. Optionee further represents that he does not have any present intention of
selling, offering to sell or otherwise disposing of or distributing the Shares
or any portion thereof; and that the entire legal and beneficial interest of the
Shares Optionee is purchasing is being purchased for, and will be held for the
account of, Optionee only and neither in whole nor in part for any other person.
(b) Optionee represents and warrants that he is aware of the Company's
business affairs and financial condition and has acquired sufficient information
about the Company to reach an informed and knowledgeable decision to acquire the
Shares. Optionee further represents that he has a preexisting personal or
business relationship with the officers and directors of the Company and that
Optionee has such knowledge and experience in business and financial matters to
enable him to evaluate the risks of the prospective investment and to make an
informed investment decision with respect thereto and that he has the capacity
to protect his own interests in connection with the purchase of the Shares.
Optionee further represents and warrants that Optionee has discussed the Company
and its plans, operations and financial condition with its officers, has
received all such information as he deems necessary and appropriate to enable
Optionee to evaluate the financial risk inherent in making an investment in the
Shares and has received satisfactory and complete information concerning the
business and financial condition of the Company in response to all inquiries in
respect thereof.
(c) Optionee represents and warrants that he realizes that Optionee's
purchase of the Shares will be a speculative investment and that he is able,
without impairing Optionee's financial condition, to hold the Shares for an
indefinite period of time and to suffer a complete loss on his investment.
(d) Optionee represents and warrants that the Company has disclosed to him
or her in writing: (i) the sale of the Shares has not been registered under the
Act, and the Shares must be held indefinitely unless a transfer of them is
subsequently registered under the Act or an exemption from such registration is
available, and that the Company is under no obligation to register the Shares;
and (ii) the Company shall make a notation in its records of the aforementioned
restrictions on transfer and legends.
(e) Optionee represents and warrants that he is aware of the provisions of
Rule 144, promulgated under the Act, which, in substance, permits limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof (or an affiliate of such issuer) in a non-public offering subject
to the satisfaction of certain conditions, including among other things: the
resale occurring not less than two (2) years from the date Optionee has
purchased and paid for the Shares; the availability of certain public
information concerning the Company; the sale being through a broker in an
unsolicited "brokers' transaction" or in a transaction directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and
that any sale of the Shares may be made by Optionee, if he is an affiliate of
the Company, only in limited amounts during any three-month period not exceeding
specified limitations. Optionee further represents that Optionee understands
that at the time he wishes to sell the Shares there may be no public market upon
which to make such a sale, and that, even if such a public market then exists,
the Company may not be satisfying the current public information requirements of
<PAGE>
Rule 144, and that, in such event, he may be precluded from selling the Shares
under Rule 144 even if the two-year minimum holding period had been satisfied.
Optionee represents that he understands that in the event the applicable
requirements of Rule 144 are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
(f) Without in any way limiting Optionee's representations and warranties
set forth herein, Optionee further agrees that he shall in no event make any
disposition of all or any portion of the Shares which Optionee is purchasing
unless and until:
(i) There is then in effect a Registration Statement under the Act
covering such proposed disposition and such disposition is made in
accordance with said Registration Statement; or
(ii) Optionee shall have (x) notified the Company of the proposed
disposition and furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and (y) furnished the
Company with an opinion of his own counsel to the effect that such
disposition will not require registration of such shares under the Act, and
such opinion of his counsel shall have been concurred in by counsel for the
Company and the Company shall have advised Optionee of such concurrence.
9. Escrow. As security for his faithful performance of the terms of this
Agreement and to insure the availability for delivery of Optionee's Shares upon
exercise of the Company's right to repurchase and right of first refusal herein
provided for, Optionee agrees to deliver to and deposit with the Secretary of
the Company or the Secretary's nominee (in either case, the "Escrow Agent"), as
Escrow Agent in this transaction, two Assignment Separate From Certificates duly
endorsed (with date and number of shares blank) in the form attached hereto as
Attachment A, together with the certificate or certificates evidencing the
Shares; said documents are to be held by the Escrow Agent and delivered to said
Escrow Agent pursuant to the Joint Escrow Instructions of the Company and
Optionee set forth in Attachment B attached hereto and incorporated herein by
this reference, which instructions shall also be delivered to the Escrow Agent
at the closing hereunder.
10. Restriction on Alienation. Optionee agrees that he will not sell,
transfer, gift, pledge, hypothecate, assign or otherwise dispose of any of the
Shares or any right or interest therein, whether voluntary, by operation of law
or otherwise, without the prior written consent of the Company, except a
transfer which meets the requirements of this Agreement. Any sale, transfer,
gift, pledge, hypothecation, assignment or disposition or purported sale,
transfer or other disposition of such Shares by Optionee shall be null and void
unless the terms, conditions and provisions of this Agreement are strictly
observed.
<PAGE>
11. Lockup Agreement. Optionee, if requested by the Company and an
underwriter of Common Stock or other securities of the Company, agrees not to
sell or otherwise transfer or dispose of any Common Stock (or other securities)
of the Company held by the Optionee during the period not to exceed 180 days as
requested by the managing underwriter following the effective date of a
registration statement of the Company filed under the Securities Act of 1933, as
amended, provided that all officers and directors of the Company are required or
agreed to enter into similar agreements. Such agreement shall be in writing in a
form satisfactory to the Company and such underwriter. The Company may impose
stop-transfer instructions with respect to the shares or other securities
subject to the foregoing restriction until the end of such period.
12. Miscellaneous.
(a) The Company shall not be required (i) to transfer on its books any
Shares which shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement, or (ii) to treat as owner of such Shares
or to accord the right to vote as such owner or to pay dividends to any
transferee to whom such Shares shall have been so transferred.
(b) Subject to the provisions of this Agreement, Optionee shall, during the
term of this Agreement, exercise all rights and privileges of a stockholder of
the Company with respect to the purchased Shares.
(c) The parties agree to execute such further instruments and to take such
further action as may reasonably be necessary to carry out the intent of this
Agreement.
(d) Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to the other party hereto at his address hereinafter
shown below his signature or at such other address as such party may designate
by ten days' advance written notice to the other party hereto.
(e) This Agreement shall inure to the benefit of the successors and assigns
of the Company and, subject to all compliance with the restrictions on transfer
herein set forth, be binding upon Optionee, his heirs, executors,
administrators, and permitted successors and assigns.
(f) This Agreement shall be construed under the laws of the State of
California and constitutes the entire Agreement of the parties with respect to
the subject matter hereof superseding all prior written or oral agreements, and
no amendment or addition hereto shall be deemed effective unless agreed to in
writing by the parties hereto.
(g) Optionee agrees that, until a public market for the Shares exists, the
Shares cannot be readily purchased, sold, or evaluated in the open market, that
they have a unique and special value, and that the Company and its stockholders
would be irreparably damaged if the terms of this Agreement were not capable of
being specifically enforced, and for this reason, among others, Optionee agrees
that the Company shall be entitled to a decree of specific performance of the
terms hereof or an injunction restraining violation of this Agreement, said
<PAGE>
right to be in addition to any other remedies of the Company.
(h) If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
shall nevertheless continue in full force and effect without being impaired or
invalidated in any way and shall be construed in accordance with the purposes
and tenor and effect of this Agreement.
(i) Nothing in this Agreement shall be deemed to create any term of
employment or affect in any manner whatsoever the right or power of the Company
to terminate Optionee's employment, for any reason, with or without cause.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
EarthLink Network, Inc.,
a California corporation
By:
Title:
OPTIONEE
Address:
<PAGE>
CONSENT
The undersigned spouse of Optionee acknowledges that he/she has read the
foregoing Agreement and agrees that his interest, if any, in the Shares subject
to the foregoing Agreement shall be irrevocably bound by this Agreement and
further understands and agrees that any community property interest, if any,
shall be similarly bound by this Agreement.
Date:
Spouse of Optionee
Spouse's Name: ______________________
<PAGE>
ATTACHMENT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED____________ hereby sells, assigns and transfers unto
___________ ( ) shares of the Common Stock (the "Shares") of EarthLink Network,
Inc., a California corporation (the "Company"), standing in the undersigned's
name on the books of the Company represented by Certificate No. ________
herewith, and does hereby irrevocably constitute and appoint
__________________________________ attorney to transfer the Shares on the books
of the Company with full power of substitution in the premises.
Dated:
Signature:
<PAGE>
ATTACHMENT B For Use with Stock Options
JOINT ESCROW INSTRUCTIONS
_____________, 19__
Secretary
EarthLink Network, Inc.
3171 Los Feliz Blvd., Suite 203
Los Angeles, CA 90039
Dear _________:
As Escrow Agent for both EarthLink Network, Inc., a California corporation
(the "Company"), and the undersigned grantee of an option to purchase stock of
the Company ("Optionee"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Stock Purchase
Agreement (the "Agreement"), dated as of ____________ 199__, to which a copy of
these Joint Escrow Instructions is attached as Attachment B, in accordance with
the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") shall elect to exercise
the repurchase right set forth in Section 2 of the Agreement or the right of
first refusal set forth in Section 3 of the Agreement (collectively, "Repurchase
Rights"), the Company shall give to Optionee and you a written notice specifying
the number of shares of stock to be purchased, the exercise price, and the time
for a closing hereunder at the principal office of the Company. Optionee and the
Company hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company against the
simultaneous delivery to you of the exercise price (by check, evidence of
cancellation of indebtedness of Optionee to the Company or a promissory note, or
some combination thereof) for the number of shares of stock being purchased
pursuant to the exercise of the Repurchase Rights.
3. Optionee irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said stock as defined in the Agreement. Optionee
does hereby irrevocably constitute and appoint you as his attorney-in-fact and
agent for the term of this escrow to execute with respect to such securities all
stock certificates, stock assignments, or other documents necessary or
appropriate to make such securities negotiable and complete any transaction
herein contemplated.
4. This escrow shall terminate at such time as there are no longer any
shares of stock subject to the Repurchase Rights under the Agreement.
5. If at the time of termination of this escrow you should have in your
possession
<PAGE>
any documents, securities, or other property belonging to Optionee, you shall
deliver all of same to Optionee and shall be discharged of all further
obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Optionee while acting in good faith and
in the exercise of your own good judgment, and any act done or omitted by you
pursuant to the advice of you own attorneys shall be conclusive evidence of such
good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree of any court,
you shall not be liable to any of the parties hereto or to any other person,
firm or corporation by reason of such compliance, notwithstanding any such
order, judgment or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary or proper to advise you in connection with your
obligations hereunder and may rely upon the advice of such counsel, and the
Company shall pay such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be Secretary of the Company or if you shall resign by written
notice to each party. In the event of any such termination, the Company shall
appoint any officer or employee of the Company as successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of
<PAGE>
said securities until such dispute shall have been settled either by mutual
written agreement of the parties concerned or by a formal order, decree or
judgment of a court of competent jurisdiction after the time for appeal has
expired and no appeal has been perfected, but you shall be under no duty
whatsoever to institute or defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses, or at such other address as a party may designate by ten
(10) days advance written notice to each of the other parties hereto.
COMPANY: EarthLink Network, Inc.
3171 Los Feliz Blvd., Suite 203
Los Angeles, CA 90039
Attention: Secretary
OPTIONEE:
ESCROW AGENT: EarthLink Network, Inc.
3171 Los Feliz Blvd., Suite 203
Los Angeles, CA 90039
Attention: Secretary
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
Very truly yours,
EarthLink Network, Inc.,
a California corporation
By:
Title:
OPTIONEE
Address:
Agreed to and accepted as of the date
set forth above.
ESCROW AGENT
Secretary
<PAGE>
EXHIBIT 4.5
EARTHLINK NETWORK, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
EarthLink Network, Inc., a California corporation (the "Company"), hereby grants
to Robert Johnson (the "Optionee") an option (the "Option") to purchase a total
of 10,000 shares of Common Stock (the "Shares") of the Company, at the price and
on the terms set forth herein.
1. Nature of the Option. This Option is intended to be a nonstatutory stock
option and is not intended to be an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or to
otherwise qualify for any special tax benefits to the Optionee.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Common Stock" shall mean the Common Stock of the Company.
(c) "Continuous Employment" or "Continuous Status As An Employee" shall
mean the absence of any interruption or termination of employment or service as
an Employee by the Company or any Parent or Subsidiary of the Company which now
exists or is hereafter organized or acquired by or acquires the Company.
Continuous Employment shall not be considered interrupted in the case of
transfers between locations of the Company or between the Company, its Parent,
or any of its Subsidiaries or its successors.
(d) "Disability" shall mean the inability of the Optionee to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or has lasted or can
be expected to last for a continuous period of not less than 12 months. In
determining the Disability of an Optionee, the Board may require the Optionee to
furnish proof of the existence of Disability and may select a physician to
examine the Optionee. The final determination as to the Disability of the
Optionee shall be made by the Board.
(e) "Employee" shall mean any person, including officers and directors,
employed by the Company, its Parent, any of its Subsidiaries or its successors.
A person shall not be deemed to be employed by the Company merely because such
person is a member of the Board of Directors of the Company or a consultant to
the Company.
(f) "Optioned Stock" shall mean the Common Stock subject to this Option.
(g) "Parent" shall mean a "parent corporation," whether now or hereafter
existing, as defined in Sections 424(e) and (g) of the Code.
(h) "Subsidiary" shall mean a subsidiary corporation, whether now or
hereafter existing, as defined in Sections 424(f) and (g) of the Code.
<PAGE>
(i) "Termination for Cause" shall mean termination of employment as a
result of (i) any act or acts by the Optionee constituting a felony under any
federal, state or local law; (ii) the Optionee's willful and continued failure
to perform the duties assigned to him as an Employee (iii) any material breach
by the Optionee of any agreement with the Company concerning his employment or
other understanding concerning the terms and conditions of employment by the
Company; (iv) dishonesty, gross negligence or malfeasance by the Optionee in the
performance of his duties as an Employee or any conduct by the Optionee which
involves a material conflict of interest with any business of the Company or any
affiliate of the Company; or (v) the Optionee's taking or knowingly omitting to
take any other action or actions in the performance of Optionee's duties as an
Employee without informing appropriate members of management to whom such
Optionee reports, which action or actions, in the determination of the Board,
have caused or substantially contributed to the material deterioration in the
business or financial condition of the Company or any affiliate of the Company,
taken as a whole.
3. Date of Grant; Term of Option. This Option is granted as of December 1,
1995 (the "Grant Date"), and subject to Section 8 hereof, it may not be
exercised later than November 30, 2005.
4. Option Exercise Price. The Option exercise price is $9.07 per Share.
5. Exercise of Option. This Option shall be exercisable during its term only
as follows:
(a) Right to Exercise. This Option shall vest and be exercisable in equal
quarterly installments with the first installment vesting on September 19, 1995
and with an additional installment scheduled to vest on the nineteenth day of
each third calendar month thereafter though March, 2000, as long as the Optionee
remains in the Continuous Employment of the Company. The exact number of
installments shall be equal to that number of installments that enables this
Option to vest in full on March 19, 2000, provided that this Option has not
otherwise terminated.
(b) Method of Exercise. This Option shall be exercisable from time to time
as to all or any portion of the Shares as to which this Option is then
exercisable by execution of a stock purchase agreement in the form of Attachment
A attached hereto (the "Stock Purchase Agreement"). The Stock Purchase Agreement
shall be duly completed and signed by the Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company or such other person
as may be designated by the Company. The Stock Purchase Agreement shall be
accompanied by payment of the aggregate Option exercise price. Such payment of
the aggregate Option exercise price shall be by check payable to the Company.
The certificate or certificates for the Shares as to which this Option shall be
exercised shall be registered in the name of the Optionee (or any permitted
successor or assign) and shall be legended as required under Section 15 hereof
and/or applicable blue sky or other laws.
(c) Restrictions on Exercise. This Option may not be exercised if the
issuance of the Shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other laws or regulations. The
Company shall not be obligated to take any affirmative action in order to cause
the exercise of this Option or the issuance of shares pursuant thereto to comply
with such laws or regulations. As a condition to the exercise of this Option,
the
<PAGE>
Company may require the Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation. This Option may
not be exercised for a fraction of a Share.
(d) Effect of Exercise. Exercise of this Option in any manner shall result
in a decrease in the number of Shares which thereafter may be available for sale
under this Option by the number of Shares as to which this Option is exercised.
6. No Rights as Shareholder. Until this Option is properly exercised in whole
or in part in accordance with the terms of Section 5 hereof, no right to vote or
receive dividends or any other rights as a shareholder shall exist with respect
to the Optioned Stock. No adjustment shall be made for a dividend or other right
for which the record date is prior to the date this Option is exercised, except
as provided in Section 10 hereof.
7. Deliver of Share Certificates. As soon as practicable after any proper
exercise of this Option, the Company shall, without transfer or issue tax to the
Optionee, deliver to the Optionee at the principal executive office of the
Company or such other place as shall be mutually agreed upon between the Company
and the Optionee, a certificate or certificates representing the Shares for
which this Option shall have been exercised. The time of issuance and delivery
of the certificate(s) representing the Shares for which this Option shall have
been exercised may be postponed by the Company for such period as may be
required by the Company, with reasonable diligence, to comply with any
applicable listing requirements of any national or regional securities exchange
or any law or regulation applicable to the issuance or delivery of such Shares.
8. Termination of Status as an Employee. If the Optionee ceases to serve as an
Employee for any reason other than death, Disability or Termination for Cause,
and thereby terminates his Continuous Status As An Employee, the Optionee shall
have the right to exercise this Option at any time within 30 days after the date
of such termination to the extent that the Optionee was entitled to exercise
this Option at the date of such termination. If the Optionee ceases to serve as
an Employee due to death or Disability, this Option may be exercised at any time
within 130 days subsequent to the death or Disability of the Optionee, in the
case of death, by the Optionee's estate or by a person who acquired the right to
exercise this Option by bequest or inheritance, or, in the case of Disability,
by the Optionee, but in any case only to the extent the Optionee was entitled to
exercise this Option at the date of such termination. If an Optionee's
Continuous Status As An Employee terminates due to his Termination for Cause,
this Option shall terminate as of the date of such Termination for Cause to the
extent not exercised as of such date. To the extent that the Optionee was not
entitled to exercise this Option at the date of termination, or to the extent
this Option is not exercised within the time specified herein, this Option shall
terminate. Notwithstanding the foregoing, this Option shall not be exercisable
after the expiration of the term set forth in Section 3 hereof.
9. Nontransferability of Option. This Option may not be sold, pledged,
assigned, hypothecated, gifted, transferred or disposed of in any manner, either
voluntarily or involuntarily by operation of law, other than by will or by the
laws of descent or distribution or as a transfer between spouses incident to a
divorce, and any such attempt may result, at the discretion of the Board, in the
termination of this Option. During the lifetime of the Optionee this Option may
be exercised only by the Optionee or his guardian. Subject to the foregoing, the
terms of this Option
<PAGE>
shall be binding upon the executors, administrators, heirs, successors and
assigns of the Optionee.
10. Adjustment Upon Changes in Capitalization or Merger.
(a) Subject to any required action by the shareholders of the Company, the
number of Shares covered by this Option, as well as the exercise price per Share
of the Shares covered by this Option, 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, combination, recapitalization or
reclassification of the Common Stock, or the payment of a stock dividend (but
only on 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 (other than stock bonuses to Employees or directors); provided, however,
that the conversion of any convertible securities of the Company shall not be
deemed to have been effected without the receipt of consideration. Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no issue
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 subject to this
Option.
(b) In the event of a proposed dissolution or liquidation of the Company or
the sale of all or substantially all of the assets of the Company (other than in
the ordinary course of business), or the merger, consolidation or reorganization
of the Company with or into another corporation as a result of which the Company
is not the surviving corporation or as a result of which the outstanding Shares
are exchanged for or converted into cash or property or securities not of the
Company, the Board shall (i) make provisions for the assumption of this Option,
if then outstanding, by the successor corporation or a Parent or a Subsidiary
thereof, or (ii) declare that this Option, if then outstanding, shall terminate
as of a date fixed by the Board which is at least 30 days after the notice
thereof to the Optionee (unless such 30-day period is waived by the Optionee)
and shall give the Optionee the right to exercise this Option as to all or any
part of the shares underlying this Option to the extent then exercisable,
provided such exercise does not violate Section 8 hereof.
(c) No fractional share of Common Stock shall be issuable on account of any
action aforesaid, and the aggregate number of shares into which Shares then
covered by this Option, when changed as the result of such action, shall be
reduced to the largest number of whole shares resulting from such action, unless
the Board, in its sole discretion, shall determine to issue scrip certificates
in respect to any fractional shares, which scrip certificates, in such event,
shall be in a form and have such terms and conditions as the Board in its
discretion shall prescribe.
11. Investment Representations. Unless the Shares have been registered under
the Securities Act of 1993, in connection with the acquisition of this Option,
the Optionee represents and warrants as follows:
(a) The Optionee is acquiring this Option, and upon exercise of this
Option, he will be acquiring the Shares for investment for his own account, not
as a nominee or agent, and not with a view to, or for resale in connection with,
any distribution thereof.
<PAGE>
(b) The Optionee has a preexisting business or personal relationship with
the Company or one of its directors, officers or controlling persons and by
reason of his business or financial experience, has, and could be reasonably
assumed to have, the capacity to protect his interests in connection with the
acquisition of this Option and the Shares.
12. Reservation of Shares. The Company covenants and agrees that during the
term of this Option the Company will at all times have authorized and reserved
for the purpose of the issue upon exercise of this Option at least the maximum
number of shares of Common Stock as are issuable upon the exercise of this
Option.
13. Continuation of Employment. This Option shall not confer upon the Optionee
any right whatsoever to continue in the employment of the Company or any of its
Subsidiaries or limit or restrict in any respect the rights of the Company,
which rights are hereby expressly reserved, to terminate the Optionee's
employment and compensation at any time for any reason whatsoever, with or
without cause, in the Company's discretion and with or without notice.
14. Withholding. The Company reserves the right to withhold, in accordance with
any applicable laws, from any consideration payable to Optionee any taxes
required to be withheld by federal, state or local law as a result of the grant
or exercise of this Option or the sale or other disposition of the Shares issued
upon exercise of this Option. If the amount of any consideration payable to the
Optionee is insufficient to pay such taxes or if no consideration is payable to
the Optionee, upon the request of the Company, the Optionee shall pay to the
Company an amount sufficient for the Company to satisfy any federal, state or
local tax withholding requirements it may incur, as a result of the grant or
exercise of this Option or the sale or other disposition of the Shares issued
upon the exercise of this Option.
15. Legends. Each certificate representing the Shares shall contain such
legends as may be required under applicable blue sky laws. Unless an appropriate
registration statement is filed and becomes effective pursuant to the Securities
Act of 1993, as amended, with respect to the Shares, each certificate
representing such Shares shall also have endorsed thereon a legend substantially
as follows:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY
IN ACCORDANCE WITH THE TERMS OF A STOCK PURCHASE AGREEMENT BETWEEN THE COMPANY
AND THE REGISTERED HOLDER, OR ITS PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON
FILE WITH THE SECRETARY OF THE COMPANY."
(b) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR
IN CONNECTION WITH, THE SALE, TRANSFER OR DISTRIBUTION THEREOF. NO SUCH SALE,
TRANSFER OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATING THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED."
<PAGE>
16. Action by the Company. The existence of this Option shall not affect in any
way the right or power of the Company or its shareholders to make or authorize
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business, or any merger or consolidation
of the Company, or any issue of bonds, debentures, or any class of preferred
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding.
17. Interpretation. As a condition to the granting of this Option, the Optionee
and each person who succeeds to the Optionee's rights hereunder, agrees that any
dispute or disagreement which shall arise under or as a result of or pursuant to
this Option shall be determined by the Board in its sole discretion, and that
any such determination or interpretation of the terms of this Option by the
Board shall be final, binding and conclusive.
18. Notices. Any notice to be given to the Company pursuant to this Option
shall be addressed to the Company in care of its Secretary (or such other person
as the Company may designate from time to time) as its principal office, and any
notice to be given to the Optionee shall be delivered personally or addressed to
him at the address given beneath his signature set forth below, or at such other
address as the Optionee may hereafter designate in writing to the Company. Any
such notice shall be deemed duly given when enclosed in a properly sealed
envelope or wrapper addressed as aforesaid, registered or certified, and
deposited, postage and registry or certification fee prepaid, in a post office
or branch post office regularly maintained by the United States Postal Service.
19. Invalid Provisions. In the event that any provision of this Option is found
to be invalid or otherwise unenforceable under any applicable law, such
invalidity or enforceability shall not be construed as rendering any other
provisions contained herein as invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same extent as though the
invalid or unenforceable provision was not contained herein.
20. Governing Law. This Option shall be governed by and construed in accordance
with the laws of the State of California.
Dated as of June 19, 1995
EarthLink Network, Inc.
By:
------------------------------
Sky Dayton
Its CEO
<PAGE>
ACKNOWLEDGMENT
The Optionee hereby accepts this Option subject to all of the terms and
provisions hereof.
-----------------------------
Robert Johnson
THIS OPTION AND THE SECURITIES WHICH MAY BE PURCHASED UPON EXERCISE OF THIS
OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE, TRANSFER OR DISTRIBUTION
THEREOF. NO SUCH SALE, TRANSFER OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES WHICH MAY BE PURCHASED UPON EXERCISE OF THIS OPTION ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL AND MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS
OF A STOCK PURCHASE AGREEMENT TO BE ENTERED INTO BETWEEN THE HOLDER OF THIS
OPTION AND THE COMPANY UPON EXERCISE OF THIS OPTION, A COPY OF WHICH AGREEMENT
IS ON FILE WITH THE SECRETARY OF THE COMPANY.
<PAGE>
For Use Upon Exercise of Options
EARTHLINK NETWORK, INC.
STOCK PURCHASE AGREEMENT
This Agreement is made as of the ___ day of ____________, 19 , by and
between EarthLink Network, Inc., a California corporation (the "Company"), and
Robert Johnson ("Optionee"). Unless the context herein otherwise requires,
capitalized terms used herein shall have the same meaning as such capitalized
terms have under the Nonstatutory Stock Option Agreement dated as of June 19,
1995 between the Company and Optionee (the "Option Agreement").
R E C I T A L S
A. Optionee was granted a Stock Option (the "Option") on June 19, 1995.
B. Pursuant to said Option, Optionee was granted the right to purchase
10,000 shares of the Company's common stock, as adjusted in accordance with the
Plan (the "Optioned Shares") at $9.07 per Share (the "Exercise Price"), as
adjusted in accordance with the Option Agreement.
C. Optionee has elected to exercise the Option to purchase _____ of such
Optioned Shares (herein referred to as the "Shares") under the Option Agreement.
D. As required by the Option Agreement, as a condition to Optionee's
exercise of his Option, Optionee must execute this Agreement which gives the
Company the right of first refusal upon transfer.
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. Exercise of Option. Subject to the terms and conditions hereof, Optionee
hereby agrees to exercise his Option or a portion thereof to purchase ____
Shares at $__________ per payable in accordance with the terms and provisions of
the Option Agreement.
2. Company's Right To Repurchase Shares.
(a) If an Optionee ceases to serve as an Employee for any reason, including
death, Disability or Termination for Cause, and thereby terminates his
Continuous Status As An Employee, the Company shall have the right to repurchase
all of the Shares purchased by Optionee hereunder, at a price to be determined
as set forth below. Such right on the part of the Company shall commence upon
the last day of such Optionee's Continuous Status As An Employee (the
"Termination Date") and shall expire on the 90th day after the Termination Date.
(b) The repurchase price shall be an amount equal to the higher of the
exercise price of the Option or 100% of the Company's net book value per share
times the number of shares to be repurchased. For purposes of the foregoing
determination, the net book value shall mean the book value of the Company's
assets net of all of the Company's liabilities as determined by the Company's
accountants, in accordance with generally accepted accounting principles
consistently applied, as of the last day of the last calendar quarter prior to
the Termination Date. The repurchase price may be paid by
<PAGE>
the Company by check, evidence of cancellation of indebtedness of Optionee to
Company, or some combination thereof, as the Company acting in its sole
discretion determines.
3. Right of First Refusal. Before any Shares registered in the name of
Optionee may be sold or transferred (including transfer by operation of law),
such Shares shall first be offered to the Company at the same price, and upon
the same terms (or terms as similar as reasonably possible), in the following
manner:
(a) Optionee shall deliver a notice ("Notice") to the Company stating (i)
his bona fide intention to sell or transfer such Shares, (ii) the number of such
Shares to be sold or transferred, (iii) the price for which he proposes to sell
or transfer such Shares, and (iv) the name of the proposed purchaser or
transferee.
(b) Within 30 days after receipt of the Notice, the Company or its assignee
may elect to purchase any or all Shares to which the Notice refers, at the price
per Share and on the same terms (or terms as similar as reasonably possible)
specified in the Notice.
(c) If all or a portion of the Shares to which the Notice refers are not
elected to be purchased pursuant to paragraph 3(b) hereof, Optionee may sell the
Shares not purchased by the Company to any person named in the Notice at the
price and terms specified in the Notice or at a higher price, provided that such
sale or transfer is consummated within 60 days of the date of said Notice to the
Company, and provided, further, that any such sale is in accordance with all the
terms and conditions hereof.
In the event of any transfer by operation of law or other involuntary transfer
(including, but not limited to, by will or by the laws of descent or
distribution) where there is no price established as a matter law, the Company
shall have the right to repurchase all of the Shares purchased by Optionee
hereunder, at a price to be determined as set forth in Section 2(b) above. In
such event, Optionee or Optionee's estate shall notify the Company promptly
after the happening of the event giving rise to the involuntary transfer. Within
30 days after receipt of such Notice, the Company or its assignee may elect to
purchase any or all Shares to which the Notice refers.
4. Termination of Repurchase Right and Right of First Refusal. Optionee's
obligations and the Company's rights under paragraphs 2 and 3 above shall
terminate upon the earlier of (i) the first sale of Common Stock by the Company
to the public which raises an aggregate of not less than $5,000,000.00 and which
is effected pursuant to a registration statement filed with, and declared
effective by, the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Act"), or (ii) the merger or
consolidation of the Company into, or the sale of all or substantially all of
the Company's assets to, another corporation, if immediately after such merger,
consolidation or sale of assets, at least 50% of the capital stock of the
Company or such other corporation is owned by persons who are not holders of
capital stock of the Company immediately prior to such merger, consolidation or
sale.
5. Assignment. The Company may assign its rights under paragraphs 2 and 3
hereof to one or more persons, who shall have the right to so exercise such
rights in his own name and for his own account. If the exercise of any such
right requires the consent of the California Securities Commissioner or the
consent of the Securities Commissioner, or the equivalent, of another state, the
parties agree to
<PAGE>
cooperate in requesting such consent.
6. Adjustment. If, from time to time during the term of the right of first
refusal available pursuant to paragraph 3 hereof:
(a) There is any stock dividend or liquidating dividend of cash and/or
property, stock split or other change in the character or amount of any of the
outstanding securities of the Company; or
(b) There is any stock consolidation, merger, or sale of substantially all
of the assets of the Company;
then, in such event, any and all new, substituted or additional securities or
other property to which Optionee is entitled by reason of his ownership of
Shares shall be immediately subject to the right of first refusal set forth in
paragraph 3 hereof, and be included in the word "Shares" for all purposes with
the same force and effect as the Shares presently subject to such right of first
refusal (provided, however, if such consolidation, merger or sale of all, or
substantially all, of the assets of the Company causes a termination of the
right of first refusal set forth in paragraph 3 hereof, then such new,
substituted or additional securities or other property shall not be included in
the word "Shares" for the purposes of this paragraph).
7. Legends. All certificates representing any Shares of the Company subject
to the provisions of this Agreement shall have endorsed thereon legends in
substantially the following form unless in the opinion of the Company's counsel
such legends are no longer necessary:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY
IN ACCORDANCE WITH THE TERMS OF A STOCK PURCHASE AGREEMENT BETWEEN THE COMPANY
AND THE REGISTERED HOLDER, OR ITS PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON
FILE WITH THE SECRETARY OF THE COMPANY."
(b) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR
IN CONNECTION WITH, THE SALE, TRANSFER OR DISTRIBUTION THEREOF. NO SUCH SALE,
TRANSFER OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATING THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED."
8. Investment Representations. Unless the Shares have been registered under
the Act, in which event the Company will so advise Optionee in writing, Optionee
agrees, represents and warrants, in connection with the proposed purchase of the
Shares, as follows:
(a) Optionee represents and warrants that he is purchasing the Shares
solely for Optionee's own account for investment and not with a view to, or for
resale in connection with any distribution thereof within the meaning of the
Act. Optionee further represents that he does not have any present intention of
selling, offering to sell or otherwise disposing of or distributing the Shares
or any
<PAGE>
portion thereof; and that the entire legal and beneficial interest of the Shares
Optionee is purchasing is being purchased for, and will be held for the account
of, Optionee only and neither in whole nor in part for any other person.
(b) Optionee represents and warrants that he is aware of the Company's
business affairs and financial condition and has acquired sufficient information
about the Company to reach an informed and knowledgeable decision to acquire the
Shares. Optionee further represents that he has a preexisting personal or
business relationship with the officers and directors of the Company and that
Optionee has such knowledge and experience in business and financial matters to
enable him to evaluate the risks of the prospective investment and to make an
informed investment decision with respect thereto and that he has the capacity
to protect his own interests in connection with the purchase of the Shares.
Optionee further represents and warrants that Optionee has discussed the Company
and its plans, operations and financial condition with its officers, has
received all such information as he deems necessary and appropriate to enable
Optionee to evaluate the financial risk inherent in making an investment in the
Shares and has received satisfactory and complete information concerning the
business and financial condition of the Company in response to all inquiries in
respect thereof.
(c) Optionee represents and warrants that he realizes that Optionee's
purchase of the Shares will be a speculative investment and that he is able,
without impairing Optionee's financial condition, to hold the Shares for an
indefinite period of time and to suffer a complete loss on his investment.
(d) Optionee represents and warrants that the Company has disclosed to him
or her in writing: (i) the sale of the Shares has not been registered under the
Act, and the Shares must be held indefinitely unless a transfer of them is
subsequently registered under the Act or an exemption from such registration is
available, and that the Company is under no obligation to register the Shares;
and (ii) the Company shall make a notation in its records of the aforementioned
restrictions on transfer and legends.
(e) Optionee represents and warrants that he is aware of the provisions of
Rule 144, promulgated under the Act, which, in substance, permits limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof (or an affiliate of such issuer) in a non-public offering subject
to the satisfaction of certain conditions, including among other things: the
resale occurring not less than two (2) years from the date Optionee has
purchased and paid for the Shares; the availability of certain public
information concerning the Company; the sale being through a broker in an
unsolicited "brokers' transaction" or in a transaction directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and
that any sale of the Shares may be made by Optionee, if he is an affiliate of
the Company, only in limited amounts during any three-month period not exceeding
specified limitations. Optionee further represents that Optionee understands
that at the time he wishes to sell the Shares there may be no public market upon
which to make such a sale, and that, even if such a public market then exists,
the Company may not be satisfying the current public information requirements of
Rule 144, and that, in such event, he may be precluded from selling the Shares
under Rule 144 even if the two-year minimum holding period had been satisfied.
Optionee represents that he understands that in the event the applicable
requirements of Rule 144 are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an
<PAGE>
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
(f) Without in any way limiting Optionee's representations and warranties
set forth herein, Optionee further agrees that he shall in no event make any
disposition of all or any portion of the Shares which Optionee is purchasing
unless and until:
(i) There is then in effect a Registration Statement under the Act
covering such proposed disposition and such disposition is made in
accordance with said Registration Statement; or
(ii) Optionee shall have (x) notified the Company of the proposed
disposition and furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and (y) furnished the
Company with an opinion of his own counsel to the effect that such
disposition will not require registration of such shares under the Act, and
such opinion of his counsel shall have been concurred in by counsel for the
Company and the Company shall have advised Optionee of such concurrence.
9. Escrow. As security for his faithful performance of the terms of this
Agreement and to insure the availability for delivery of Optionee's Shares upon
exercise of the Company's right to repurchase and right of first refusal herein
provided for, Optionee agrees to deliver to and deposit with the Secretary of
the Company or the Secretary's nominee (in either case, the "Escrow Agent"), as
Escrow Agent in this transaction, two Assignment Separate From Certificates duly
endorsed (with date and number of shares blank) in the form attached hereto as
Attachment A, together with the certificate or certificates evidencing the
Shares; said documents are to be held by the Escrow Agent and delivered to said
Escrow Agent pursuant to the Joint Escrow Instructions of the Company and
Optionee set forth in Attachment B attached hereto and incorporated herein by
this reference, which instructions shall also be delivered to the Escrow Agent
at the closing hereunder.
10. Restriction on Alienation. Optionee agrees that he will not sell,
transfer, gift, pledge, hypothecate, assign or otherwise dispose of any of the
Shares or any right or interest therein, whether voluntary, by operation of law
or otherwise, without the prior written consent of the Company, except a
transfer which meets the requirements of this Agreement. Any sale, transfer,
gift, pledge, hypothecation, assignment or disposition or purported sale,
transfer or other disposition of such Shares by Optionee shall be null and void
unless the terms, conditions and provisions of this Agreement are strictly
observed.
11. Lockup Agreement. Optionee, if requested by the Company and an
underwriter of Common Stock or other securities of the Company, agrees not to
sell or otherwise transfer or dispose of any Common Stock (or other securities)
of the Company held by the Optionee during the period not to exceed 180 days as
requested by the managing underwriter following the effective date of a
registration statement of the Company filed under the Securities Act of 1933, as
amended, provided that all officers and directors of the Company are required or
agreed to enter into similar agreements. Such agreement shall be in writing in a
form satisfactory to the Company and such underwriter. The Company may impose
stop-transfer instructions with respect to the shares or other securities
subject to the foregoing restriction until the end of such period.
<PAGE>
12. Miscellaneous.
(a) The Company shall not be required (i) to transfer on its books any
Shares which shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement, or (ii) to treat as owner of such Shares
or to accord the right to vote as such owner or to pay dividends to any
transferee to whom such Shares shall have been so transferred.
(b) Subject to the provisions of this Agreement, Optionee shall, during the
term of this Agreement, exercise all rights and privileges of a stockholder of
the Company with respect to the purchased Shares.
(c) The parties agree to execute such further instruments and to take such
further action as may reasonably be necessary to carry out the intent of this
Agreement.
(d) Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to the other party hereto at his address hereinafter
shown below his signature or at such other address as such party may designate
by ten days' advance written notice to the other party hereto.
(e) This Agreement shall inure to the benefit of the successors and assigns
of the Company and, subject to all compliance with the restrictions on transfer
herein set forth, be binding upon Optionee, his heirs, executors,
administrators, and permitted successors and assigns.
<PAGE>
(f) This Agreement shall be construed under the laws of the State of
California and constitutes the entire Agreement of the parties with respect to
the subject matter hereof superseding all prior written or oral agreements, and
no amendment or addition hereto shall be deemed effective unless agreed to in
writing by the parties hereto.
(g) Optionee agrees that, until a public market for the Shares exists, the
Shares cannot be readily purchased, sold, or evaluated in the open market, that
they have a unique and special value, and that the Company and its stockholders
would be irreparably damaged if the terms of this Agreement were not capable of
being specifically enforced, and for this reason, among others, Optionee agrees
that the Company shall be entitled to a decree of specific performance of the
terms hereof or an injunction restraining violation of this Agreement, said
right to be in addition to any other remedies of the Company.
(h) If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
shall nevertheless continue in full force and effect without being impaired or
invalidated in any way and shall be construed in accordance with the purposes
and tenor and effect of this Agreement.
(i) Nothing in this Agreement shall be deemed to create any term of
employment or affect in any manner whatsoever the right or power of the Company
to terminate Optionee's employment, for any reason, with or without cause.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
EarthLink Network, Inc.,
a California corporation
By:
Title:
OPTIONEE
Address:
<PAGE>
CONSENT
The undersigned spouse of Optionee acknowledges that he/she has read the
foregoing Agreement and agrees that his interest, if any, in the Shares subject
to the foregoing Agreement shall be irrevocably bound by this Agreement and
further understands and agrees that any community property interest, if any,
shall be similarly bound by this Agreement.
Date:
Spouse of Optionee
Spouse's Name:
<PAGE>
ATTACHMENT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ___________________ hereby sells, assigns and transfers
unto and transfers unto _______________ (_____) shares of the Common Stock (the
"Shares") of EarthLink Network, Inc., a California corporation (the "Company"),
standing in the undersigned's name on the books of the Company represented by
Certificate No. ________ herewith, and does hereby irrevocably constitute and
appoint __________________________________ attorney to transfer the Shares on
the books of the Company with full power of substitution in the premises.
Dated:
Signature:
<PAGE>
ATTACHMENT B
JOINT ESCROW INSTRUCTIONS
_______________199__
Secretary
EarthLink Network, Inc.
3171 Los Feliz Blvd., Suite 203
Los Angeles, CA 90039
Dear _________:
As Escrow Agent for both EarthLink Network, Inc., a California corporation
(the "Company"), and the undersigned grantee of an option to purchase stock of
the Company ("Optionee"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Stock Purchase
Agreement (the "Agreement"), dated as of ____________ 199__, to which a copy of
these Joint Escrow Instructions is attached as Attachment B, in accordance with
the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") shall elect to exercise
the repurchase right set forth in Section 2 of the Agreement or the right of
first refusal set forth in Section 3 of the Agreement (collectively, "Repurchase
Rights"), the Company shall give to Optionee and you a written notice specifying
the number of shares of stock to be purchased, the exercise price, and the time
for a closing hereunder at the principal office of the Company. Optionee and the
Company hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company against the
simultaneous delivery to you of the exercise price (by check, evidence of
cancellation of indebtedness of Optionee' to the Company or a promissory note,
or some combination thereof) for the number of shares of stock being purchased
pursuant to the exercise of the Repurchase Rights.
3. Optionee irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said stock as defined in the Agreement. Optionee
does hereby irrevocably constitute and appoint you as his attorney-in-fact and
agent for the term of this escrow to execute with respect to such securities all
stock certificates, stock assignments, or other documents necessary or
appropriate to make such securities negotiable and complete any transaction
herein contemplated.
4. This escrow shall terminate at such time as there are no longer any
shares of stock subject to the Repurchase Rights under the Agreement.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Optionee,
you shall deliver all of same to Optionee and shall be discharged of all further
obligations hereunder.
<PAGE>
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Optionee while acting in good faith and
in the exercise of your own good judgment, and any act done or omitted by you
pursuant to the advice of you own attorneys shall be conclusive evidence of such
good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree of any court,
you shall not be liable to any of the parties hereto or to any other person,
firm or corporation by reason of such compliance, notwithstanding any such
order, judgment or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary or proper to advise you in connection with your
obligations hereunder and may rely upon the advice of such counsel, and the
Company shall pay such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be Secretary of the Company or if you shall resign by written
notice to each party. In the event of any such termination, the Company shall
appoint any officer or employee of the Company as successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
dispute shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
<PAGE>
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses, or at such other address as a party may designate by ten
(10) days advance written notice to each of the other parties hereto.
<TABLE>
<S> <C>
COMPANY: EarthLink Network, Inc.
3171 Los Feliz Blvd., Suite 203
Los Angeles, CA 90039
Attention: Secretary
OPTIONEE:
ESCROW AGENT: EarthLink Network, Inc.
3171 Los Feliz Blvd., Suite 203
Los Angeles, CA 90039
Attention: Secretary
</TABLE>
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
<PAGE>
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
Very truly yours,
EarthLink Network, Inc.,
a California corporation
By:
Title:
OPTIONEE
Address:
Agreed to and accepted as of the date
set forth above.
ESCROW AGENT
Secretary
<PAGE>
EarthLink Network, Inc.
Initial Public Offering of Common Stock
Lock-Up Agreement
May 28, 1996
UBS Securities, LLC
Piper Jaffray, Inc.
Cruttenden Roth, Inc.
As Representatives of the several underwriters
c/o UBS Securities, LLC
299 Park Avenue
New York, New York 10171
Dear Sirs:
This letter is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement"), between EarthLink
Network, Inc., a Delaware corporation (the "Company"), and each of you as
representatives of a group of Underwriters named therein, relating to an
underwritten public offering of Common Stock, no par value (the "common Stock"),
of the Company.
In order to induce you and the other Underwriters to enter into the Underwriting
Agreement, the undersigned agrees not to offer, sell or otherwise dispose of any
shares of Common Stock of the Company beneficially owned by the undersigned, any
options or warrants to acquire shares of Common Stock or any securities
exchangeable for or convertible into shares of Common Stock for a period of 180
days following the day on which the Underwriting Agreement is executed without
the prior written consent of UBS Securities LLC.
If for any reason the Underwriting Agreement shall be terminated prior to the
Closing Date (as defined in the Underwriting Agreement), the agreement set forth
above shall likewise be terminated.
Very Truly Yours
By:
-----------------------------
Name:
-----------------------------
Address:
--------------------------
- ----------------------------------
<PAGE>
EXHIBIT 4.6
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION
WITH, THE SALE, TRANSFER OR DISTRIBUTION THEREOF. NO SUCH SALE, TRANSFER OR
DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATING THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED.
Warrants to Purchase
100,000 Shares of Common Stock
EARTHLINK NETWORK, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF CALIFORNIA
Void after January 12, 2001
The Warrants evidenced by this certificate (this "Certificate") have been
issued for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged.
This Certificate evidences the right of Lindwood A. Lacy, Jr. (the "Holder"
or "Lacy") to purchase 100,000 shares of the Common Stock (the "Shares") of
EarthLink Network, Inc., a California corporation (the "Company"), at a price of
Two Dollars and Forty-Two Cents ($2.42) per Share; subject, however, to the
terms and conditions hereinafter set forth.
1. Term of Warrants. The Warrants may be exercised only during the period
commencing on January 12, 1996 through the close of business on January 12, 2001
(the "Warrant Term"), and may be exercised only in accordance with the terms and
conditions hereinafter set forth.
2. Exercise of Warrants. The Warrants shall be exercisable as follows:
(a) Right to Exercise. The Warrants shall vest and become exercisable
cumulatively in five (5) equal annual installments of Twenty Thousand
(20,000) shares each with the first of such installments vesting on
January 12, 1997 and an additional installment vesting on each anniversary
thereafter provided that on the date of each such vesting Lacy is a
director of the Company and has continuously served in such capacity since
the date hereof.
(b) Method of Exercise; Payment; Issuance of New Warrants; Transfer
and Exchange. The Warrants may be exercised by the Holder, in whole or in
part, by the surrender of this Certificate, properly endorsed, at the
principal office of the Company, and by the payment to the Company by check
of the then applicable Warrant Price (as such term is hereinafter defined).
In the event of any exercise of the Warrants, certificates for the Shares
so purchased shall be delivered to the Holder within a reasonable time
after the Warrants shall have been so exercised, and unless the Warrants
have expired, a new certificate representing the right to purchase the
<PAGE>
number of Shares, if any, with respect to which this Certificate shall not
then have been exercised shall also be issued to the Holder within such
time. All such new certificates shall be dated the date hereof and shall be
identical to this Certificate except as to the number of Shares issuable
pursuant thereto.
(c) Restrictions on Exercise. The Warrants may not be exercised if
the issuance of the Shares upon such exercise would constitute a violation
of any applicable federal or state securities laws or other laws or
regulations. As a condition to the exercise of the Warrants, the Company
may require the Holder to make such representations and warranties to the
Company as may be required by applicable law or regulation.
3. Stock Fully Paid; Reservation of Shares. The Company covenants and
agrees that all Shares will, upon issuance and payment in accordance herewith,
be fully paid, validly issued and nonassessable. The Company further covenants
and agrees that during the Warrant Term the Company will at all times have
authorized and reserved for the purpose of the issue upon exercise of the
Warrants at least the maximum number of Shares as are issuable upon the exercise
of the Warrants.
4. Adjustment of Purchase Price and Number of Shares. The number and kind
of securities purchasable upon the exercise of the Warrants and the Warrant
Price shall be subject to adjustment from time to time upon the happening of
certain events, as follows:
(a) Consolidation, Merger or Reclassification. If the Company at any
time while the Warrants remain outstanding and unexpired shall consolidate
with or merge into any other corporation, or sell all or substantially all
of its assets to another corporation, or reclassify or in any manner change
the securities then purchasable upon the exercise of the Warrants (any of
which shall constitute a "Reorganization"), then lawful and adequate
provision shall be made whereby this Certificate shall thereafter evidence
the right to purchase such number and kind of securities and other property
as would have been issuable or distributable on account of such
Reorganization upon or with respect to the securities which were
purchasable or would have become purchasable under the Warrants immediately
prior to the Reorganization. The Company shall not effect any such
Reorganization unless prior to or simultaneously with the consummation
thereof the successor corporation (if other than the Company) resulting
from such Reorganization shall assume by written instrument executed and
mailed or delivered to the Holder, at the last address of the Holder
appearing on the books of the Company, the obligation to deliver to the
Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, the Holder may be entitled to purchase.
Notwithstanding anything in this Section 4(a) to the contrary, the prior
two sentences shall be inoperative and of no force and effect if upon the
completion of any such Reorganization the shareholders of the Company
immediately prior to such event do not own at least 50% of the equity
interest of the corporation resulting from such Reorganization, and those
Warrants which are unexercised shall expire on the completion of such
Reorganization, if the notice required by Section 4(e) hereof has been duly
given.
(b) Subdivision or Combination of Shares. If the Company at any time
while the Warrants remain outstanding and unexpired shall subdivide or
combine its Common Stock, the Warrant Price shall be adjusted to a price
determined by multiplying the Warrant Price in effect immediately prior to
such subdivision or combination by a fraction (i) the numerator of which
shall be the total number of shares of Common Stock outstanding immediately
prior to .such subdivision or combination and (ii) the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
after such subdivision or combination.
<PAGE>
(c) Certain Dividends and Distributions. If the Company at any time
while the Warrants are outstanding and unexpired shall take a record of the
holders of its Common Stock for the purpose of:
(i) Stock Dividends. Entitling them to receive a dividend
payable in, or other distribution without consideration of, Common
Stock, then the Warrant Price shall be adjusted to that price
determined by multiplying the Warrant Price in effect immediately
prior to each dividend or distribution by a fraction (A) the
numerator of which shall be the total number of shares of Common
Stock outstanding immediately prior to such dividend or distribution,
and (B) the denominator of which shall be the total number of shares
of Common Stock outstanding immediately after such dividend or
distribution; or
(ii) Distribution of Assets, Securities, etc. Making any
distribution without consideration with respect to its Common Stock
(other than a cash dividend) payable otherwise than in its Common
Stock, the Holder shall, upon the exercise thereof, be entitled to
receive, in addition to the number of Shares receivable thereupon, and
without payment of any additional consideration therefor such assets
or securities as would have been payable to him as owner of that
number of Shares receivable by exercise of the Warrants had he been
the Holder of record of such Shares on the record date for such
distribution; and an appropriate provision therefor shall be made a
part of any such distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the
Warrant Price pursuant to Subsections (b) or (c) (i) of this Section 4, the
number of Shares purchasable hereunder shall be adjusted to that number
determined by multiplying the number of Shares purchasable upon the
exercise of the Warrants immediately prior to such adjustment by a
fraction, the numerator of which shall be the Warrant Price immediately
prior to such adjustment and the denominator of which shall be the Warrant
Price immediately following such adjustment.
(e) Notice. In case at any time:
(i) The Company shall pay any dividend payable in stock upon its
Common Stock or make any distribution, excluding a cash dividend, to
the holders of its Common Stock;
(ii) The Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any
class or other rights;
(iii) There shall be any reclassification of the Common Stock of
the Company, or consolidation or merger of the Company with, or sale
of all or substantially all of its assets to, another corporation; or
(iv) There shall he a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to the
Holder at least 10 days' prior written notice (or, in the event of notice
pursuant to Section 4 (e) (iii), at least 30 days' prior written notice)
of the date on which the books of the Company shall close or a record shall
be taken for such dividend, distribution or subscription rights or for
determining rights to vote in respect to any such reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up.
Such notice in accordance with the foregoing clause shall also specify,
in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto,
and such notice in accordance with the foregoing clause shall also
<PAGE>
specify the date on which the holders of Common Stock shall he entitled to
exchange their Common Stock for securities or other property deliverable
upon such reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be. Each such written notice
shall be given by first-class mail, postage prepaid, addressed to the
Holder hereof at the address of the Holder as shown on the books of the
Company.
(f) No Change in Certificate. The form of this Certificate need not
be changed because of any adjustment in the Warrant Price or in the number
of Shares purchasable on its exercise. The Warrant Price or the number of
Shares shall be considered to have been so changed as of the close of
business on the date of adjustment.
5. Fractional Shares. No fractional Shares will be issued in connection
with any subscription hereunder but, in lieu of such fractional Shares, the
Company shall make a cash payment therefor upon the basis of the fair market
value of the Shares.
6. Nontransferability of Warrants. The Warrants may be exercised during
the lifetime of the Holder only by the Holder, and may not be sold, pledged,
assigned, hypothecated, gifted, transferred or disposed of in any manner, in
whole or in part, either voluntarily or involuntarily by operation of law, other
than by will or the laws of descent or distribution, without the prior written
consent of the Company, which consent may be granted or withheld by the Company
in its sole discretion.
7. No Rights as Shareholder. The Holder of the Warrants, as such, shall
not be entitled to vote or receive dividends or be considered a shareholder of
the Company for any purpose, nor shall anything in this Certificate be construed
to confer on the Holder hereof, as such, any rights of a shareholder of the
Company or any right to vote, give or withhold consent to any corporate action,
to receive notice of meetings of shareholders, to receive dividends or
subscription rights or otherwise.
8. Definitions. As used in this Certificate:
(a) "Warrants" shall mean the rights evidenced by this Certificate.
(b) "Warrant Price" shall mean Two Dollars and Forty-Two Cents
($2.42), as adjusted in accordance with Section 4 hereof.
Dated as of January 12, 1996.
EARTHLINK NETWORK, INC.
By:
------------------------------------
Sky Dayton, President
Attest:
- ----------------------------------
- ----------------------------------, Secretary
<PAGE>
EARTHLINK NETWORK, INC.
SUBSCRIPTION FORM
(To be completed and signed only upon exercise of the Warrants)
TO: EarthLink Network, Inc.
3171 Los Feliz Blvd., Suite 203
Los Angeles, CA 90039
Attention: Secretary
The undersigned, the holder and registered owner of the attached Warrants,
hereby irrevocably and unconditionally elects to exercise such Warrants and to
purchase ___________* shares of EarthLink Network, Inc. Common Stock pursuant
to the terms and conditions thereof, and herewith tenders a check in the amount
of $__________ in full payment of the purchase price for such shares, and
requests that the certificate(s) for such shares be issued in the name of an
delivered to:
(Please print name and address)
----------------------------------
----------------------------------
----------------------------------
Dated: Signature:
---------------------------- ------------------------
_________________
* Insert here the number of shares called for on the face of the Warrants
(or in the case of partial exercise, that portion as to which the Warrants is
being exercised), without making any adjustment for additional Common Stock or
any other securities or property which, under the adjustment provisions of the
Warrants, may be deliverable upon exercise.
<PAGE>
EXHIBIT 4.7
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECUIIITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND
HAVE BEEN ACQIRRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION
WITH, THE SALE, TRANSFER OR DISTRIBUTION THEREOF. NO SUCH SALE, TRANSFER OR
DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATING THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQIRRED.
Warrants to Purchase
100,000 Shares of Common Stock
EARTHLINK NETWORK, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF CALIFORNIA
Void after January 12, 2001
The Warrants evidenced by this certificate (this "Certificate") have been
issued for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged.
This Certificate evidences the right of Robert Kavner ("Holder" or
"Kavner") 100,000 shares of the Common Stock (the "Shares") of EarthLink
Network, Inc., a California corporation (the "Company"), at a price of Two
Dollars and Forty-Two Cents ($2.42) per Share; subject, however, to the terms
and conditions hereinafter set forth.
1. Term of Warrants. The Warrants may be exercised only during the period
commencing on January 12, 1996 through the close of business on January 12,
2001 (the "Warrant Term"), and may be exercised only in accordance with the
terms and conditions hereinafter set forth.
2. Exercise of Warrants. The Warrants shall be exercisable as follows:
a) Right to Exercise. The Warrants shall vest and become exercisable
cumulatively in five (5) equal annual installments of Twenty Thousand
(20,000) shares each with the first of such installments vesting on
January 12, 1997 and an additional installment vesting on each
anniversary thereafter provided that on the date of each such vesting
Kavner is a director of the Company and has continually served in such
capacity since the date hereof.
b) Method of Exercise: Payment: Issuance of New Warrants: Transfer and
Exchange. The Warrants may be exercised by the Holder, in whole or in
part, by the surrender of this Certificate, properly endorsed, at the
principal office of the Company, and by the payment to the Company by
check of the then applicable Warrant Price (as such term is
hereinafter defined). In the event of any exercise of the Warrants,
certificates for the Shares so purchased shall be delivered to the
Holder within a reasonable time after the Warrants shall have been so
exercised, and unless the Warrants have expired, a new certificate
representing the right to purchase the number of Shares, if any, with
respect to which this Certificate shall not then have been exercised
shall also be issued to the Holder within such time. All such new
certificates shall be dated the date hereof and
<PAGE>
shall be identical to this Certificate except as to the number of
Shares issuable pursuant thereto.
c) Restrictions on Exercise. The Warrants may not be exercised if the
issuance of the Shares upon such exercise would constitute a violation
of any applicable federal or state securities laws or other laws or
regulations. As a condition to the exercise of the Warrants, the
Company may require the Holder to make such representations and
warranties to the Company as may be required by applicable law or
regulation.
3. Stock Fully Paid: Reservation of Shares. The Company covenants and agrees
that all Shares will, upon issuance and payment m accordance herewith, be
fully paid, validly issued and nonassessable. The Company further covenants
and agrees that during the Warrant Term the Company will at all times have
authorized and reserved for the purpose of the issue upon exercise of the
Warrants at least the maximum number of Shares as are issuable upon the
exercise of the Warrants.
4. Adjustment of Purchase Price and Number of Shares. The number and kind of
securities purchasable upon the exercise of the Warrants and the Warrant
Price shall be subject to adjustment form time to time upon the happening
of certain events, as follows:
a) Consolidation Merger or Reclassification. If the Company at any time
while the Warrants remain outstanding and unexpired shall consolidate
with or merge into any other corporation, or sell all or substantially
all of its assets to another corporation, or reclassify or in any
manner change the securities then purchasable upon the exercise of the
Warrants (any of which shall constitute a "Reorganization"), then
lawful and adequate provision shall be make whereby this Certificate
shall thereafter evidence the right to purchase such number and kind
of securities and other property as would have been issuable or
distributable on account of such Reorganization upon or with respect
to the securities which were purchasable or would have become
purchasable under the Warrants immediately prior to the
Reorganization. The company shall not effect any such Reorganization
unless prior to or simultaneously with the consummation thereof the
successor corporation (if other than the Company) resulting from such
Reorganization shall assume by written instrument executed and mailed
or delivered to the Holder, at the last address of the Holder
appearing on the books of the Company, the obligation to deliver to
the Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the Holder may be entitled
to purchase. Notwithstanding anything in this Section 4(a) to the
contrary, the prior two sentences shall be inoperative and of no force
and effect if upon the completion of any such Reorganization the
shareholders of the Company immediately prior to such event do not own
at least 50% of the equity interest of the corporation resulting from
such Reorganization, and those Warrants which are unexercised shall
expire on the completion of such Reorganization, if the notice
required by Section 4(e) hereof has been duly given.
b) Subdivision or Combination of Shares. If the Company at any time while
the Warrants remain outstanding and unexpired shall subdivide or
combine its Common Stock, the Warrant Price shall be adjusted to a
price determined by multiplying the Warrant Price in effect
immediately prior to such subdivision or combination by a fraction (i)
the numerator of which shall be the total number of shares of Common
Stock outstanding immediately prior to such subdivision or combination
and (ii) the denominator of which shall be the total number of shares
of Common Stock outstanding immediately after such subdivision or
combination.
<PAGE>
c) Certain Dividends and Distributions. If the Company at any time while
the Warrants are outstanding and unexpired shall take a record of the
holders of its Common Stock for the purpose of:
i) Stock Dividends. Entitling them to receive a dividend payable in,
or other distribution without consideration of, Common Stock,
then the Warrant Price shall be adjusted to that Price determined
by multiplying the Warrant Price in effect immediately prior to
each dividend or distribution by a fraction (A) the numerator of
which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution,
and (B) the denominator of which shall be the total number of
shares of Common Stock outstanding immediately after such
dividend or distribution; or
ii) Distribution of Assets, Securities. etc. Making any distribution
without consideration with respect to its Common Stock (other
than a cash dividend) payable otherwise than in its Common Stock,
the Holder shall, upon the exercise thereof, be entitled to
receive, in addition to the number of Shares receivable
thereupon, and without payment of any additional consideration
therefor, such assets or securities as would have been payable to
him as owner of that number of Shares receivable by exercise of
the Warrants had he been the Holder of record of such Shares on
the record date for such distribution; and an appropriate
provision therefor shall be made a part of any such distribution.
d) Adjustment of Number of Shares. Upon each adjustment in the Warrant
Price pursuant to Subsections (b) or (c) (i) of this section 4, the
number of Shares purchasable hereunder shall be adjusted to that
number determined by multiplying the number of Shares purchasable
upon the exercise of the Warrants immediately prior to such
adjustment by a fraction, the numerator of which shall be the
Warrant Price immediately prior to such adjustment and the
denominator of which shall be the Warrant Price immediately
following such adjustment.
e) Notice. In case at any time:
i) The Company shall pay any dividend payable in stock upon its
Common Stock or make any distribution, excluding a cash dividend,
to the holders of its Common Stock;
ii) The Company shall offer for subscription pro rata to the holders
of its Common Stock any additional shares of stock of any class
or other rights;
iii) There shall be any reclassification of the Common Stock of the
Company, or consolidation or merger of the Company with, or sale
of all or substantially all of its assets to, another
corporation; or
iv) There shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
v) then, in any one or more of such cases, the Company shall give to
the Holder at least 10 days' prior written notice (or, in the
event of notice pursuant to Section 4 (e) (iii), at least 30
days' prior written notice) of the date on which the books of the
Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to
vote in respect to any such reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up. Such notice
in accordance with the foregoing clause shall also specify, in
the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock shall be
entitled thereto, and such notice in
<PAGE>
accordance with the foregoing clause shall also specify the date
on which the holders of Common Stock shall be entitled to
exchange their Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, as the case may be.
Each such written notice shall be given by first-class mail,
postage prepaid, addressed to the Holder hereof at the address of
the Holder as shown on the books of the Company.
f) No Change in Certificate. The form of this Certificate need not be
changed because of any adjustment in the Warrant Price or in the
number of Shares purchasable on it exercise. The Warrant Price or the
number of Shares shall be considered to have been so changed as of the
close of business on the date of adjustment.
5. Fractional Shares. No fractional Shares will be issued in connection with
any subscription hereunder but, in lieu of such fractional Shares, the
Company shall make a cash payment therefor upon the basis of the fair
market value of the Shares.
6. Nontransferabilitv of Warrants. The Warrants may be exercised during the
lifetime of the Holder only by the Holder, and may not be sold, pledged,
assigned, hypothecated, gifted, transferred or disposed of in any manner,
in whole or in part, either voluntarily or involuntarily by operation of
law, other than by will or the laws of descent or distribution, without the
prior written consent of the Company, which consent may be granted or
withheld by the Company in its sole discretion.
7. No Rights as Shareholder. The Holder of the Warrants, as such, shall not be
entitled to vote or receive dividends or be considered a shareholder of the
Company for any purpose, nor shall anything in this Certificate be
construed to confer on the Holder hereof, as such, any rights of a
shareholder of the Company or any right to vote, give or withhold consent
to any corporate action, to receive notice of meetings of shareholders, to
receive dividends or subscription rights or otherwise.
8. Definitions. As used in this Certificate:
a) "Warrants" shall mean the rights evidenced by this Certificate.
b) "Warrant Price" shall mean Two Dollars and Forty-Two Cents ($2.42) as
adjusted in accordance with Section 4 hereof.
Dated as of January 12, 1996.
EARTHLINK NETWORK, INC.
By:
------------------------------------
Sky Dayton, President
Attest:
- ---------------------------------
January 12, 1996
<PAGE>
EARTHLINK NETWORK, INC.
SUBSCRJPTION FORM
(To be completed and signed only upon exercise of the Warrants)
TO: EarthLink Network, Inc.
3171 Los Feliz Blvd., Suite 203
Los Angeles, CA 90039
Attention: Secretary
The undersigned, the holder and registered owner of the attached Warrants,
hereby irrevocably and unconditionally elects to exercise such Warrants and to
purchase _____* shares of EarthLink Network, Inc. Common Stock pursuant to the
terms and conditions thereof, and herewith tenders a check in the amount of
$_________ in full payment of the purchase price for such shares, and requests
that the certificate(s) for such shares be issued in the name of and delivered
to:
(Please print name and address)
- ----------------------------------
- ----------------------------------
- ----------------------------------
Dated: Signature:
---------------------------- -----------------------------
- ----------
* Insert here the number of shares called for on the face of the Warrants
(or in the case of partial exercise, that portion as to which the Warrants is
being exercised), without making any adjustment for additional Common Stock or
any other securities or property which, under the adjustment provisions of the
Warrants, may be deliverable upon exercise.
<PAGE>
EXHIBIT 4.8
EARTHLINK NETWORK, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
EarthLink Network, Inc., a California corporation (the "Company"), hereby grants
to Sky Dayton (the "Optionee") an option (the "Option") to purchase a total of
50,000 shares of Common Stock (the "Shares") of the Company, at the price and on
the terms set forth herein.
1. Nature of the Option. This Option is intended to be a non-statutory stock
option and is not intended to be an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or to
otherwise qualify for any special tax benefits to the Optionee.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Common Stock" shall mean the Common Stock of the Company.
(c) "Continuous Employment" or "Continuous Status As An Employee"
shall mean the absence of any interruption or termination of employment or
service as an Employee by the Company or any Parent or Subsidiary of the
Company which now exists or is hereafter organized or acquired by or
acquires the Company. Continuous Employment shall not be considered
interrupted in the case of transfers between locations of the Company or
between the Company, its Parent, or any of its Subsidiaries or its
successors.
(d) "Disability" shall mean the inability of the Optionee to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
has lasted or can be expected to last for a continuous period of not less
than 12 months. In determining the Disability of an Optionee, the Board may
require the Optionee to furnish proof of the existence of Disability and
may select a physician to examine the Optionee. The final determination as
to the Disability of the Optionee shall be made by the Board.
(e) "Employee" shall mean any person, including officers and
directors, employed by the Company, its Parent, any of its Subsidiaries or
its successors. A person shall not be deemed to be employed by the Company
merely because such person is a member of the Board of Directors of the
Company or a consultant to the Company.
(f) "Optioned Stock" shall mean the Common Stock subject to this
Option.
(g) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Sections 424(e) and (g) of the Code.
(h) "Subsidiary" shall mean a subsidiary corporation, whether now or
hereafter existing, as defined in Sections 424(f) and (g) of the Code.
(i) "Termination for Cause" shall mean termination of employment as a
result of (i) any act or acts by the Optionee constituting a felony under
any federal, state or local law; (ii) the Optionee's
<PAGE>
willful and continued failure to perform the duties assigned to him as an
Employee (iii) any material breach by the Optionee of any agreement with
the Company concerning his employment or other understanding concerning the
terms and conditions of employment by the Company; (iv) dishonesty, gross
negligence or malfeasance by the Optionee in the performance of his duties
as an Employee or any conduct by the Optionee which involves a material
conflict of interest with any business of the Company or any affiliate of
the Company; or (v) the Optionee's taking or knowingly omitting to take any
other action or actions in the performance of Optionee's duties as an
Employee without informing appropriate members of management to whom such
Optionee reports, which action or actions, in the determination of the
Board, have caused or substantially contributed to the material
deterioration in the business or financial condition of the Company or any
affiliate of the Company, taken as a whole.
3. Date of Grant; Term of Option. This Option is granted as of June 19, 1995
(the "Grant Date"), and subject to Section 8 hereof, it may not be exercised
later than June 18, 2005.
4. Option Exercise Price. The Option exercise price is $9.07 per Share.
5. Exercise of Option. This Option shall be exercisable during its term only
as follows:
(a) Right to Exercise. This Option shall vest and be exercisable in
equal quarterly installments with the first installment vesting on
September 19, 1995, and with an additional installment scheduled to vest on
the nineteenth day of each third calendar month thereafter though March,
2000, as long as the Optionee remains in the Continuous Employment of the
Company. The exact number of installments shall be equal to that number of
installments that enables this Option to vest in full on March 19, 2000,
provided that this Option has not otherwise terminated.
(b) Method of Exercise. This Option shall be exercisable from time to
time as to all or any portion of the Shares as to which this Option is then
exercisable by execution of a stock purchase agreement in the form of
Attachment A attached hereto (the "Stock Purchase Agreement"). The Stock
Purchase Agreement shall be duly completed and signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company or such other person as may be designated by the Company. The Stock
Purchase Agreement shall be accompanied by payment of the aggregate Option
exercise price. Such payment of the aggregate Option exercise price shall
be by check payable to the Company. The certificate or certificates for the
Shares as to which this Option shall be exercised shall be registered in
the name of the Optionee (or any permitted successor or assign) and shall
be legended as required under Section 15 hereof and/or applicable blue sky
or other laws.
(c) Restrictions on Exercise. This Option may not be exercised if the
issuance of the Shares upon such exercise would constitute a violation of
any applicable federal or state securities laws or other laws or
regulations. The Company shall not be obligated to take any affirmative
action in order to cause the exercise of this Option or the issuance of
shares pursuant thereto to comply with such laws or regulations. As a
condition to the exercise of this Option, the Company may require the
Optionee to make any representation and warranty to the Company as may be
required by any applicable law or regulation. This Option may not be
exercised for a fraction of a Share.
(d) Effect of Exercise. Exercise of this Option in any manner shall
result in a decrease in the number of Shares which thereafter may be
available for sale under this Option by the number of Shares as to which
this Option is exercised.
<PAGE>
6. No Rights as Shareholder. Until this Option is properly exercised in whole
or in part in accordance with the terms of Section 5 hereof, no right to vote or
receive dividends or any other rights as a shareholder shall exist with respect
to the Optioned Stock. No adjustment shall be made for a dividend or other right
for which the record date is prior to the date this Option is exercised, except
as provided in Section 10 hereof.
7. Deliver of Share Certificates. As soon as practicable after any proper
exercise of this Option, the Company shall, without transfer or issue tax to the
Optionee, deliver to the Optionee at the principal executive office of the
Company or such other place as shall be mutually agreed upon between the Company
and the Optionee, a certificate or certificates representing the Shares for
which this Option shall have been exercised. The time of issuance and delivery
of the certificate(s) representing the Shares for which this Option shall have
been exercised may be postponed by the Company for such period as may be
required by the Company, with reasonable diligence, to comply with any
applicable listing requirements of any national or regional securities exchange
or any law or regulation applicable to the issuance or delivery of such Shares.
8. Termination of Status as an Employee. If the Optionee ceases to serve as an
Employee for any reason other than death, Disability or Termination for Cause,
and thereby terminates his Continuous Status As An Employee, the Optionee shall
have the right to exercise this Option at any time within 30 days after the date
of such termination to the extent that the Optionee was entitled to exercise
this Option at the date of such termination. If the Optionee ceases to serve as
an Employee due to death or Disability, this Option may be exercised at any time
within 180 days subsequent to the death or Disability of the Optionee, in the
case of death, by the Optionee's estate or by a person who acquired the right to
exercise this Option by bequest or inheritance, or, in the case of Disability,
by the Optionee, but in any case only to the extent the Optionee was entitled to
exercise this Option at the date of such termination. If an Optionee's
Continuous Status As An Employee terminates due to his Termination for Cause,
this Option shall terminate as of the date of such Termination for Cause to the
extent not exercised as of such date. To the extent that the Optionee was not
entitled to exercise this Option at the date of termination, or to the extent
this Option is not exercised within the time specified herein, this Option shall
terminate. Notwithstanding the foregoing, this Option shall not be exercisable
after the expiration of the term set forth in Section 3 hereof.
9. Nontransferability of Option. This Option may not be sold, pledged,
assigned, hypothecated, gifted, transferred or disposed of in any manner, either
voluntarily or involuntarily by operation of law, other than by will or by the
laws of descent or distribution or as a transfer between spouses incident to a
divorce, and any such attempt may result, at the discretion of the Board, in the
termination of this Option. During the lifetime of the Optionee this Option may
be exercised only by the Optionee or his guardian. Subject to the foregoing, the
terms of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
10. Adjustment Upon Changes in Capitalization or Merger.
(a) Subject to any required action by the shareholders of the Company, the
number of Shares covered by this Option, as well as the exercise price per Share
of the Shares covered by this Option, 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, combination, recapitalization or
reclassification of the Common Stock, or the payment of a stock dividend (but
only on the Common Stock) or any other
<PAGE>
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company (other than stock bonuses to
Employees or directors); provided, however, that the conversion of any
convertible securities of the Company shall not be deemed to have been effected
without the receipt of consideration. Such adjustment shall be made by the
Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issue 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 subject to this Option.
(b) In the event of a proposed dissolution or liquidation of the Company or
the sale of all or substantially all of the assets of the Company (other than in
the ordinary course of business), or the merger, consolidation or reorganization
of the Company with or into another corporation as a result of which the Company
is not the surviving corporation or as a result of which the outstanding Shares
are exchanged for or converted into cash or property or securities not of the
Company, the Board shall (i) make provisions for the assumption of this Option,
if then outstanding, by the successor corporation or a Parent or a Subsidiary
thereof, or (ii) declare that this Option, if then outstanding, shall terminate
as of a date fixed by the Board which is at least 30 days after the notice
thereof to the Optionee (unless such 30-day period is waived by the Optionee)
and shall give the Optionee the right to exercise this Option as to all or any
part of the shares underlying this Option to the extent then exercisable,
provided such exercise does not violate Section 8 hereof.
(c) No fractional share of Common Stock shall be issuable on account of any
action aforesaid, and the aggregate number of shares into which Shares then
covered by this Option, when changed as the result of such action, shall be
reduced to the largest number of whole shares resulting from such action, unless
the Board, in its sole discretion, shall determine to issue scrip certificates
in respect to any fractional shares, which scrip certificates, in such event,
shall be in a form and have such terms and conditions as the Board in its
discretion shall prescribe.
11. Investment Representations. Unless the Shares have been registered under
the Securities Act of 1993, in connection with the acquisition of this Option,
the Optionee represents and warrants as follows:
(a) The Optionee is acquiring this Option, and upon exercise of this
Option, he will be acquiring the Shares for investment for his own account, not
as a nominee or agent, and not with a view to, or for resale in connection with,
any distribution thereof.
(b) The Optionee has a preexisting business or personal relationship with
the Company or one of its directors, officers or controlling persons and by
reason of his business or financial experience, has, and could be reasonably
assumed to have, the capacity to protect his interests in connection with the
acquisition of this Option and the Shares.
12. Reservation of Shares. The Company covenants and agrees that during the
term of this Option the Company will at all times have authorized and reserved
for the purpose of the issue upon exercise of this Option at least the maximum
number of shares of Common Stock as are issuable upon the exercise of this
Option.
13. Continuation of Employment. This Option shall not confer upon the Optionee
any right
<PAGE>
whatsoever to continue in the employment of the Company or any of its
Subsidiaries or limit or restrict in any respect the rights of the Company,
which rights are hereby expressly reserved, to terminate the Optionee's
employment and compensation at any time for any reason whatsoever, with or
without cause, in the Company's discretion and with or without notice.
14. Withholding. The Company reserves the right to withhold, in accordance with
any applicable laws, from any consideration payable to Optionee any taxes
required to be withheld by federal, state or local law as a result of the grant
or exercise of this Option or the sale or other disposition of the Shares issued
upon exercise of this Option. If the amount of any consideration payable to the
Optionee is insufficient to pay such taxes or if no consideration is payable to
the Optionee, upon the request of the Company, the Optionee shall pay to the
Company an amount sufficient for the Company to satisfy any federal, state or
local tax withholding requirements it may incur, as a result of the grant or
exercise of this Option or the sale or other disposition of the Shares issued
upon the exercise of this Option.
15. Legends. Each certificate representing the Shares shall contain such
legends as may be required under applicable blue sky laws. Unless an appropriate
registration statement is filed and becomes effective pursuant to the Securities
Act of 1993, as amended, with respect to the Shares, each certificate
representing such Shares shall also have endorsed thereon a legend substantially
as follows:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF A STOCK PURCHASE AGREEMENT
BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR ITS PREDECESSOR IN
INTEREST, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY."
(b) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE, AND HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE, TRANSFER OR
DISTRIBUTION THEREOF. NO SUCH SALE, TRANSFER OR DISTRIBUTION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED."
16. Action by the Company. The existence of this Option shall not affect in any
way the right or power of the Company or its shareholders to make or authorize
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business, or any merger or consolidation
of the Company, or any issue of bonds, debentures, or any class of preferred
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding.
17. Interpretation. As a condition to the granting of this Option, the Optionee
and each person who succeeds to the Optionee's rights hereunder, agrees that any
dispute or disagreement which shall arise under or as a result of or pursuant to
this Option shall be determined by the Board in its sole discretion, and that
any such determination or interpretation of the terms of this Option by the
Board shall be final, binding and conclusive.
<PAGE>
18. Notices. Any notice to be given to the Company pursuant to this Option
shall be addressed to the Company in care of its Secretary (or such other person
as the Company may designate from time to time) as its principal office, and any
notice to be given to the Optionee shall be delivered personally or addressed to
him at the address given beneath his signature set forth below, or at such other
address as the Optionee may hereafter designate in writing to the Company. Any
such notice shall be deemed duly given when enclosed in a properly sealed
envelope or wrapper addressed as aforesaid, registered or certified, and
deposited, postage and registry or certification fee prepaid, in a post office
or branch post office regularly maintained by the United States Postal Service.
19. Invalid Provisions. In the event that any provision of this Option is found
to be invalid or otherwise unenforceable under any applicable law, such
invalidity or enforceability shall not be construed as rendering any other
provisions contained herein as invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same extent as though the
invalid or unenforceable provision was not contained herein.
20. Governing Law. This Option shall be governed by and construed in accordance
with the laws of the State of California.
Dated as of June 19, 1995 Earthlink Network, Inc.
By:
Title:
<PAGE>
ACKNOWLEDGEMENT
The Optionee hereby accepts this Option subject to all of the terms and
provisions hereof.
---------------------------------------
Sky Dayton
4326 Cahuenga Boulevard
#8
Toluca Lake, California 91602
THIS OPTION AND THE SECURITES WHICH MAY BE PURCHASED UPON EXERCISE OF THIS
OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE, TRANSFER OR DISTRIBUTION
THEREOF. NO SUCH SALE, TRANSFER OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES WHICH MAY BE PURCHASED UPON EXERCISE OF THIS OPTION ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL AND MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS
OF A STOCK PURCHASE AGREEMENT TO BE ENTERED INTO BETWEEN THE HOLDER OF THIS
OPTION AND THE COMPANY UPON EXERCISE OF THIS OPTION, A COPY OF WHICH AGREEMENT
IS ON FILE WITH THE SECRETARY OF THE COMPANY.
<PAGE>
EXHIBIT 4.9
EARTHLINK NETWORK, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
EarthLink Network, Inc., a Delaware corporation (the "Company"), hereby grants
to Grayson Hoberg (the "Optionee") an option (the "Option") to purchase a total
of 50,000 shares of Common Stock (the "Shares") of the Company, at the price an
on the terms set forth herein.
1. Nature of the Option. This Option is intended to be a nonstatutory stock
option and is not intended to be an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or to
otherwise qualify for any special tax benefits to the Optionee.
2. Definitions. As used herein, the following definitions shall apply.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Common Stock" shall mean the Common Stock of the Company.
(c) "Continuous Employment" or "Continuous Status As An Employee"
shall mean the absence of any interruption or termination of employment or
Service as an Employee by the Company or any Parent or Subsidiary of the
Company which now exists or is hereafter organized or acquired by or
acquires the Company. Continuous Employment shall not be considered
interrupted in the case of transfers between locations of the Company or
between the Company, its parent, or any of its Subsidiaries or its
successors.
(d) "Disability" shall mean the inability of the Optionee to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which Can be expected to result in death or
has lasted or can be expected to last for a continuous period of not less
than 12 months. In determining the Disability of an Optionee, the Board may
require the Optionee to furnish proof of the existence of Disability and
may select a physician to examine the Optionee. The final determination as
to the Disability of the Optionee shall be made by the Board.
(e) "Employee" shall mean any person, including officers and
directors, employed by the Company, its Parent, any of its Subsidiaries or
its successors. A person shall not be deemed to be employed by the Company
merely because such person is a member of the Board of Directors of the
Company or a consultant to the Company.
(f) "Optioned Stock" shall mean the Common Stock subject to this
Option.
(g) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Sections 424(e) and (g) of the Code.
(h) "Subsidiary" shall mean a subsidiary corporation, whether now or
hereafter existing, as defined in Sections 424(f) and (g) of the Code.
(i) "Termination for Cause" shall mean termination of employment as a
result of (i) any act or acts by the Optionee constituting a felony under
any federal, state or local law; (ii) the Optionee's willful and continued
failure to perform the duties assigned to him as an Employee; (iii) any
material breach by the Optionee of any agreement with the Company
concerning his employment or other understanding concerning the terms and
conditions of employment by the Company; (iv) dishonesty, gross negligence
or malfeasance by the Optionee in the performance of Optionee's duties as
an Employee without informing appropriate members of management to whom
such Optionee reports, which action or actions, in the determination of the
Board, have caused or substantially contributed to the material
deterioration in the business or financial condition of the Company or any
affiliate of the Company, taken as a whole.
3. Date of Grant; Term ot Option. This Option is granted as of November 7,
1997 (the "Grant Date"), and subject to Section 8 hereof, it may not be
exercised later than November 6, 2007.
<PAGE>
4. Option Exercise Price. The Option exercise price is $16.00 per Share.
5. Exercise of Option. This Option shall he exercisable during its term only
as follows;
(a) Right to Exercise. This Option shall vest and be exercisable,
cumulatively in twenty equal quarterly installments commencing three months
after the date of grant and continuing to vest as to one additional
installment every quarter thereafter as long as the Optionee remains an
Employee or this Agreement is otherwise terminated.
(a) Method of Exercise. This Option shall he exercisable from time to
time as to all or any portion of the Shares as to which this Option is then
exercisable by execution of a stock purchase agreement in the form of
Attachment A attached hereto (the "Stock Purchase Agreement"). The Stock
Purchase Agreement shall be duly completed and signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company or such other person as may be designated by the Company. The Stock
Purchase Agreement shall be accompanied by payment of the aggregate Option
exercise price. Such payment of the aggregate Option exercise price shall
be by check payable to the Company. The certificate or certificates for the
Shares as to which this Option shall be exercised shall be registered in
the name of the Optionee (or any permitted successor or assign) and shall
be legended as required under Section 15 hereof and/or applicable blue sky
or other laws.
(b) Restriction on Exercise. This Option may not be exercised if the
issuance of the Shares upon such exercise would constitute a violation of
any applicable federal or state securities laws or other laws or
regulations. The Company shall not be obligated to take any affirmative
action in order to cause the exercised of this Option or the issuance of
shares pursuant thereto to comply with such laws or regulations. As a
condition to the exercise of this Option, the Company may require the
Optionee to make any representation and warranty to the Company as may be
required by any applicable law or regulation. This Option may not be
exercised for a fraction of a Share.
(c) Effect of Exercise. Exercise of this Option in any manner shall
result in a decrease in the number of Shares which thereafter may be
available for sale under this Option by the number of Shares as to which
this Option is exercised.
6. No Rights as Shareholder. Until this Option is properly exercised in whole
or in part in accordance with the terms of Section 5 hereof, no right to vote or
receive dividends or any other rights as a shareholder shall exist with respect
to the Optioned Stock. No adjustment shall be made for a dividend or other right
for which the record date is prior to the date this Option is exercised, except
as provided in Section 10 hereof.
7. Deliver of Share Certificates. As soon as practicable after any proper
exercise of this Option, the Company shal1, without transfer or issue tax to the
Optionee, deliver to the Optionee at the principal executive office of the
Company or such other place as shall be mutually agreed upon between the Company
and the Optionee, a certificate or certificates representing the Shares for
which this Option shall have been exercised. The time of issuance and delivery
of the certificate(s) representing the Shares for which this Option shall have
been exercised may be postponed by the Company for such period as may be
required by the Company, with reasonable diligence, to comply with any
applicable listing requirements of any national or regional securities exchange
or any law or regulation applicable to the issuance or delivery of such Shares.
8. Termination of Status as an Employee. If the Optionee ceases to serve as an
employee for any reason other than death, Disability or Termination for Cause,
and thereby terminates his Continuous Status as an Employee, the Optionee shall
have the right to exercise this Option at any time within 30 days after the date
of such termination. If the Optionee ceases to serve as an Employee due to death
or Disability, this Option may be exercised at any time within 180 days
subsequent to the death or Disability of the Optionee, in the case of death, by
the Optionee's estate or by a person who acquired the right to exercise this
Option be bequest or inheritance, or, in the case or Disability by the Optionee,
but in any case only to the extent the Optionee was entitled to exercise this
Option at the date of such termination. If an Optionee's Continuous Status as an
Employee terminates, due to his Termination for Cause, this Option shall
terminate as of the date of such Termination for Cause to the extent not
exercised as of such date. To the extent that the Optionee was not entitled to
exercise this Option at the date of termination, or to the extent this
<PAGE>
Option is not exercised within the time specified herein, this Option shall
terminate. Notwithstanding the foregoing, this Option shall not be exercisable
after the expiration of the term set forth in Section hereof.
9. Nontransferability of Option. This Option may not be sold, pledged,
assigned, hypothecated, gifted, transferred or disposed of in any manner, either
voluntarily or involuntarily by operation of law, other than by will or by the
laws of descent or distribution or as a transfer between spouses incident to a
divorce, and any such attempt may result, at the discretion of the Board, in the
termination of this Option. During the lifetime of the Optionee this Option may
be exercised only by the Optionee or his guardian. Subject to the foregoing, the
terms of this Option shall be binding upon the executors, administrators, heirs,
successors assigns of the Optionee.
10. Adjustment Upon Changes in Capitalization or Merger.
(a) Subject to any required action by the shareholders of the Company, the
number of Shares covered by this Option, as well as the exercise price per Share
of the Shares covered by this Option, 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, combination, recapitalization or
reclassification of the Common Stock, or the payment of a stock dividend (but
only on 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 (other than stock bonuses to employees or directors); provided, however,
that the conversion of any convertible securities of the Company shall not be
deemed to have been effected without the receipt of consideration. Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no issue
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 of price of Shares subject to this
Option.
(b) In the event of a proposed dissolution or liquidation of the Company or
the sale of all or substantially all of the assets of the Company (other than in
the ordinary course of business), or the merger, consolidation or reorganization
of the Company with or into another corporation as a result of which the Company
is not the surviving corporation or as a result of which the outstanding Shares
are exchanged for or converted into cash or property or securities not of the
Company, the Board shall (i) make provisions for the assumption of this Option,
if then outstanding, by the successor corporation or a Parent of a Subsidiary
thereof, or (ii) declare that this Option, if then outstanding, shall terminate
as of a date fixed by the Board which is at least 30 days after the notice
thereof to the Optionee (unless such 30 day period is waived by the Optionee)
and shall give the Optionee the right to exercise this Option as to all or any
part of the shares underlying this Option to the extent then exercisable,
provided such exercise does not violate Section 8 hereof.
(c) No fractional share of Common Stock shall be issuable on account of any
action aforesaid, and the aggregate number of shares into which Shares then
covered by this Option, when changed as the result of such action, shall be
reduced to the largest number of whole shares resulting from such action, unless
the board, in its sole discretion, shall determine to issue scrip certificates
in respect to any fractional shares, which scrip certificates, in such event,
shall be in a form and have such terms and conditions as the Board in its
discretion shall prescribe.
11. Investment Representations. Unless the Shares have been registered under
the Securities Act of 1993, in connection with the acquisition of this Option,
the Optionee represents and warrants as follows:
(a) The Optionee is acquiring this Option, and upon exercise of this
Option, he will be acquiring the Shares for investment for his own account,
not as a nominee or agent, and not with a view to, or for resale in
connection with, any distribution thereof.
(b) The Optionee has a preexisting business or personal relationship
with the Company or one of its directors, officers or controlling persons
and by reason of his business or financial experience, has, and could be
reasonably assumed to have the capacity to protect his interests in
connection with the acquisition of this Option and the Shares.
12. Reservation of Shares. The Company covenants and agrees that during the
term of this Option the Company will at all times have authorized and reserved
for the purposes of the issue upon exercise of this Option at least the maximum
number of shares of Common Stock as are issuable upon the exercise of this
Option.
<PAGE>
13. Continuation of Employment. This Option shall not confer upon the Optionee
any right whatsoever to continue in the employment of the Company or any of its
Subsidiaries or limit or restrict in any respect the rights of the Company,
which rights are hereby expressly reserved, to terminate the Optionee's
employment and compensation at any time for any reason whatsoever, with or
without cause, in the Company's discretion and with or without notice
14. Withholding. The Company reserves the right to withhold, in accordance with
any applicable laws, from any Consideration payable to Optionee any taxes
required to be withheld by federal, state or local laws as a result of the grant
or exercise of this Option or the sale or other disposition of the Shares issued
upon exercise of this Option. If the amount of any consideration payable to the
Optionee is insufficient to pay such taxes or if no consideration is payable to
the Optionee, upon the request of the Company, the Optionee shall pay to the
Company an amount sufficient for the Company to satisfy any federal, state or
local tax withholding requirements it may incur, as a result of the grant or
exercise of this Option or the sale or other disposition of the Shares issued
upon the exercise of this Option.
15. Legends. Each certificate representing the Shares shall contain such
legends as may be required under applicable blue sky laws. Unless an appropriate
registration statement is filed and becomes effective pursuant to the Securities
Act of 1993, as amended, with respect to the Shares, each certificate
representing such Shares shall also have endorsed thereon a legend substantially
as follows:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE, AND HAVE BEEN ACQUIRED FOR INVESTMENT AN NOT WITH A VIEW
TO, OR IN CONNECTION WITH, THE SALE, TRANSFER OR DISTRIBUTION THEREOF. NO
SUCH SALE, TRANSFER OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATING THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
16. Action by the Company. The existence of this Option shall not affect in any
way the right or power of the Company or its shareholders to make or authorize
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business, or any merger or consolidation
of the Company, or any issue of bonds, debentures, or any class of preferred
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer ot all or any
part of its assets or business, or any other corporate act or proceeding.
17. Interpretation. As a condition to the granting of this Option, the Optionee
and each person who succeeds to the Optionee's rights hereunder, agrees that any
dispute or disagreement which shall arise under or as a result of or pursuant to
this Option shall be determined by the Board in its sole discretion, and that
any such determination or interpretation of the terms of this Option by the
Board shall be final, binding and conclusive.
18. Notices. Any notice to be given to the Company pursuant to this Option
shall be addressed to the Company in care of its Secretary (or such other person
as the Company may designate from time to time) as its principal office, and any
notice to be given to the Optionee shall be delivered personally or addressed to
him at the address given beneath his signature set forth below, or at such other
address as the Optionee may hereafter designate in writing to the Company. Any
such notice shall be deemed duly given when enclosed in a properly sealed
envelope or wrapper addressed as aforesaid, registered or certified, and
deposited, postage and registry or certification fee prepaid, in a post office
or branch post office regularly maintained by the United State Postal Service.
19. Invalid Provisions. In the event that any provision of this Option is found
to be invalid or otherwise unenforceable under any applicable law, such
invalidity or enforceability shall not be construed as rendering any other
provisions contained herein as invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same extent as though the
invalid or unenforceable provision was not contained herein.
<PAGE>
20. Governing Law. This Option shall be governed by and construed in accordance
with the laws of the State of California.
Dated as of November 7, 1997
EarthLink Network, Inc.
By:______________________________
Name: ___________________________
Title:___________________________
<PAGE>
ACKNOWLEDGMENT
The Optionee hereby accepts this Option subject to all of the terms and
provisions hereof.
----------------------------------
Name:
----------------------------------
Address:
---------------------------------
City, State:
-----------------------------
THE SHARES WHICH MAY BE PURCHASED UPON EXERCISE OF THIS OPTION ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL AND MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS
OF A STOCK PURCHASE AGREEMENT TO BE ENTERED INTO BETWEEN THE HOLDER OF THIS
OPTION AND THE COMPANY UPON EXERCISE OF THIS OPTION, A COPY OF WHICH AGREEMENT
IS ON FILE WITH THE SECRETARY OF THE COMPANY.
<PAGE>
EXHIBIT 5
File No.: 51241.14
October 30, 1998
Earthlink Network, Inc.
3100 New Park Drive
Suite 210
Pasadena, California 91107
Re: Earthlink Network, Inc. Registration Statement on Form S-8
----------------------------------------------------------
Ladies and Gentlemen:
We have served as counsel for Earthlink Network, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended, pursuant to the Company's Registration
Statement on Form S-8 (the "Registration Statement"), of 1,000,000 shares (the
"Shares") of the Company's authorized common stock, $.01 par value per share,
under certain stock options and warrants granted to certain employees and
directors of the Company (the "Options").
We have examined and are familiar with originals or copies (certified or
otherwise identified to our satisfaction) of such documents, corporate records
and other instruments relating to the organization of the Company and to the
authorization and issuance of the Shares subject to the Options, as appropriate,
as we have deemed necessary and advisable.
Based upon the foregoing and having regard for such legal consideration as
we deem relevant, it is our opinion that the Shares will be, when issued in
accordance with the terms of the Options, legally issued, fully paid and
non-assessable.
We do hereby consent to the filing of this Opinion as Exhibit 5 to the
Registration Statement.
Very truly yours,
/s/ Hunton & Williams
----------------------
Hunton & Williams
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated January 29, 1998 appearing on page
F-2 of EarthLink Network, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1997.
PricewaterhouseCoopers LLP
/s/ PricewaterhouseCoopers LLP
----------------------------------
Century City, California
October 27, 1998
