<PAGE>
As filed with the Securities and Exchange Commission on April 14, 1999
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------
FIRSTWORLD COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0521976
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
-----------------------
7100 E. BELLEVIEW AVENUE, SUITE 210
GREENWOOD VILLAGE, COLORADO 80111
(303) 874-8010
(Address of principal executive offices, including zip code, and telephone
number)
THE 1999 EQUITY INCENTIVE PLAN OF FIRSTWORLD COMMUNICATIONS, INC.
(Full title of the plans)
-----------------------
JEFFREY L. DYKES Copies to:
General Counsel DAVID A. HAHN, ESQ.
FIRSTWORLD COMMUNICATIONS, INC. LATHAM & WATKINS
7100 E. BELLEVIEW AVENUE, SUITE 210 701 "B" STREET, SUITE 2100
GREENWOOD VILLAGE, COLORADO 80111 SAN DIEGO, CALIFORNIA 92101
(303) 874-8010 (619) 236-1234
(Name, address, including zip code, and
telephone number,
including area code, of agent for service)
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==========================================================================================================================
<S> <C> <C> <C> <C>
Title of Securities Amount Proposed Maximum Proposed Maximum Amount of
to be Registered to be Offering Price Aggregate Offering Registration
Registered(1) Per Share Price Fee
- --------------------------------------------------------------------------------------------------------------------------
Series B Common Stock, 5,000,000 $.45 - $7.50(2) $14,058,090(2) $3,909
$.0001 par value
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 416(a), this Registration Statement shall also cover
any additional shares of the Registrant's Series B Common Stock that
become issuable under The 1999 Equity Incentive Plan of FirstWorld
Communications, Inc. by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without receipt
of consideration that increases the number of the Registrant's
outstanding shares of common stock.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(h)(1). The price per share and
aggregate offering price are based upon (a) the actual exercise price,
for shares issuable pursuant to options which the Registrant intends to
grant under The 1999 Equity Incentive Plan of FirstWorld Communications,
Inc. immediately following the effectiveness of this Registration
Statement and (b) the book value as of December 31, 1998, for shares
available for grant under The 1999 Equity Incentive Plan of FirstWorld
Communications, Inc. The following chart shows the calculation of the
registration fee:
<TABLE>
<CAPTION>
Type of Shares Number of Shares Offering Price per Share Aggregate Offering Price
- -------------- ---------------- ------------------------ ------------------------
<S> <C> <C> <C>
Series B Common Stock issuable pursuant to options that the
Registrant intends to grant under The 1999 Equity Incentive
Plan of FirstWorld Communications, Inc. 1,874,300 $ 6.00-7.50 $ 12,651,525
Series B Common Stock available for grant under The 1999
Equity Incentive Plan of FirstWorld Communications, Inc. 3,125,700 $ 0.45 $ 1,406,565
</TABLE>
Options granted under The 1999 Equity Incentive Plan of FirstWorld
Communications, Inc. vest in four equal installments of 25% of the shares
subject to the option on each of the first four anniversaries of the vesting
start date. The exercise price of options which the Registrant intends to
grant under The 1999 Equity Incentive Plan of FirstWorld Communications, Inc.
immediately after the effectiveness of this Registration Statement is $6.00
for the first installment, $6.50 for the second installment, $7.00 for the
third installment and $7.50 for the fourth and final installment.
<PAGE>
PART I
ITEM 1. PLAN INFORMATION.
Not required to be filed with this Registration Statement.
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION.
Not required to be filed with this Registration Statement.
PART II
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
There are hereby incorporated by reference in this Registration
Statement the following documents and information heretofore filed with the
Securities and Exchange Commission:
(a) the Registrant's Annual Report on Form 10-K for the
fiscal year ended September 30, 1998 filed pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act");
(b) the Registrant's Quarterly Report on Form 10-Q for the
transition period from October 1, 1998 to December 31, 1998 filed
pursuant to Section 13 of the Exchange Act;
(c) the Registrant's Current Report on Form 8-K, filed on
March 29, 1999, pursuant to Section 13 of the Exchange Act;
(d) the Registrant's Current Report on Form 8-K, filed on
January 20, 1999, pursuant to Section 13 of the Exchange Act;
(e) the Registrant's Current Report on Form 8-K, filed on
December 15, 1998, pursuant to Section 13 of the Exchange Act;
(f) the Registrant's Current Report on Form 8-K, filed on
November 3, 1998, pursuant to Section 13 of the Exchange Act; and
(g) the description of the Registrant's Series B Common Stock
contained in the Registrant's Registration Statement on Form 8-A filed
on October 8, 1998, pursuant to Section 12(g) of the Exchange Act.
All documents filed by the Registrant pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date this Registration
Statement is filed with the Commission and prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold shall be deemed
to be incorporated by reference in this Registration Statement and to be a part
of it from the respective dates of filing of such documents. Any statement
contained in a document incorporated or deemed to be 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 which also is or is deemed to be
2
<PAGE>
incorporated by reference herein modifies or supersedes such 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.
Six Latham & Watkins attorneys own an aggregate of 57,351 shares of
Series B Common Stock, warrants to purchase an aggregate of 9,634 shares of
Series B Common Stock and options to purchase 20,000 shares of Series B Common
Stock. John C. Stiska, one of the Registrant's directors, accepted an of-counsel
position with Latham & Watkins in July 1998. Latham & Watkins provides legal
services to the Registrant.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The General Corporation Law of the State of Delaware (the "DGCL")
permits a Delaware corporation to indemnify officers, directors, employees and
agents for actions taken in good faith and in a manner they reasonably believed
to be in, or not opposed to, the best interests of the corporation, and with
respect to any criminal action, which they had no reasonable cause to believe
was unlawful. The DGCL also provides that a corporation may advance the expenses
of defense (upon receipt of a written undertaking to reimburse the corporation
if it is ultimately determined that such individual is not entitled to
indemnification) and must reimburse a successful defendant for expenses,
including attorneys' fees, actually and reasonably incurred. The DGCL further
provides that indemnification may not be made for any claim, issue or matter as
to which a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation, except
only to the extent a court determines that the person is entitled to indemnify
for such expenses that such court deems proper. The DGCL also permits a
corporation to purchase and maintain liability insurance for its directors and
officers.
The Registrant's Certificate of Incorporation and bylaws provide that
the Registrant shall, to the fullest extent permitted by Section 145 of the
DGCL, as the same may be amended and supplemented from time to time, indemnify
all directors and officers and all other persons whom it has authority to
indemnify under Section 145 of the DGCL. Such limitation of liability does not
affect the availability of equitable remedies such as injunctive relief or
rescission. The Registrant has entered into indemnification agreements with its
officers and directors containing provisions which may require the Registrant,
among other things, to indemnify the officers and directors against certain
liabilities that may arise by reason of their status or service as directors or
officers (other than liabilities arising from willful misconduct of a culpable
nature), and to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified. The Registrant maintains
insurance on behalf of its directors and officers, insuring them against
liabilities that they may incur in such capacities or arising out of such
status.
3
<PAGE>
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
The Exhibit Index immediately preceding the exhibits is incorporated
herein by reference.
ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant 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 this 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 this
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
end 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 this
Registration Statement or any material change to such
information in this Registration Statement;
PROVIDED, HOWEVER, that the undertakings set forth in paragraphs
(a)(1)(i) and (a)(1)(ii) above do not apply if the Registration
Statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to
the Commission by the Registrant pursuant to Section 13 or 15(d) of the
Exchange Act that are incorporated by reference in this 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.
4
<PAGE>
(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.
(b) The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 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 this 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 Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant 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 Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
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 Registrant 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.
5
<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 the City of Greenwood Village, State of Colorado, on this 14th
day of April 1999.
FirstWorld Communications, Inc.
By: /s/ SHELDON S. OHRINGER
------------------------------------
SHELDON S. OHRINGER
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND DIRECTOR
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Jeffrey L. Dykes his true and lawful
attorney-in-fact, acting alone, 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
and any registration statement filed pursuant to Rule 462(b) under the
Securities Act 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, hereby ratifying and confirming all that
said attorney-in-fact or his substitute, may 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 by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ SHELDON S. OHRINGER President, Chief Executive April 14, 1999
- ----------------------------- Officer and Director
Sheldon S. Ohringer (Principal Executive Officer)
/s/ PAUL C. ADAMS Vice President, Finance, Treasurer, April 14, 1999
- ----------------------------- Assistant Secretary and
Paul C. Adams acting Chief Financial
Officer (Principal Financial
and Accounting Officer)
/s/ DONALD L. STURM Chairman of the Board April 14, 1999
- -----------------------------
Donald L. Sturm
/s/ C. KEVIN GARLAND Director April 14, 1999
- -----------------------------
C. Kevin Garland
/s/ RODNEY D. MALCOLM Director April 14, 1999
- -----------------------------
Rodney D. Malcolm
/s/ JAMES O. SPITZENBERGER Director April 14, 1999
- -----------------------------
James O. Spitzenberger
/s/ MELANIE STURM Director April 14, 1999
- -----------------------------
Melanie Sturm
/s/ JOHN C. STISKA Director April 14, 1999
- -----------------------------
John C. Stiska
</TABLE>
6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
-------
<S> <C>
4.1 The 1999 Equity Incentive Plan of FirstWorld Communications, Inc. (the "1999 Plan")
4.2 Form of Incentive Stock Option Agreement of FirstWorld Communications, Inc. under
the 1999 Plan
4.3 Form of Non-Qualified Stock Option Agreement of FirstWorld Communications, Inc.
under the 1999 Plan
4.4 Form of Stock Appreciation Right Award Agreement of FirstWorld Communications, Inc.
under the 1999 Plan
5.1 Opinion of Latham & Watkins.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Latham & Watkins (included in Exhibit 5.1 hereto).
24.1 Power of Attorney (included on signature page hereto).
</TABLE>
7
<PAGE>
THE 1999 EQUITY INCENTIVE PLAN
OF
FIRSTWORLD COMMUNICATIONS, INC.
FirstWorld Communications, Inc., a Delaware corporation (the
"COMPANY"), has adopted The 1999 Equity Incentive Plan of FirstWorld
Communications, Inc. (the "PLAN"), effective March 8, 1999, for the benefit
of its eligible employees and consultants.
The purposes of this Plan are as follows:
(1) To provide an additional incentive for key Employees
and consultants to further the growth, development and financial success of
the Company by personally benefiting through the ownership of Company stock
which recognizes such growth, development and financial success.
(2) To enable the Company to obtain and retain the services
of key Employees and consultants considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company which will reflect the growth, development and financial success of
the Company.
ARTICLE I.
DEFINITIONS
1.1. GENERAL. Wherever the following terms are used in this
Plan they shall have the meanings specified below, unless the context clearly
indicates otherwise.
1.2. AFFILIATE. "Affiliate" shall mean, with respect to any
Person, any Person that, directly or indirectly, controls, or is controlled
by or is under common control with such Person. For the purpose of this
definition, "control" (including the terms "controlling," "controlled by" and
"under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities or by contract or agency or otherwise.
1.3. AWARD. "Award" shall mean an Option or a Stock
Appreciation Right which may be awarded or granted under the Plan
(collectively, "AWARDS").
1.4. AWARD LIMIT. "Award Limit" shall mean 500,000 shares
of Common Stock, as adjusted pursuant to Section 9.3.
1.5. BOARD. "Board" shall mean the Board of Directors of
the Company.
1.6. CHANGE OF CONTROL "Change of Control" shall mean (i)
the sale, transfer, exchange or other disposition of all or substantially all
of the assets of the Company except for a transaction the principal purpose
of which is to change the state in which the Company is incorporated, to form
a holding company or to effect a similar reorganization as to
1
<PAGE>
form whereupon this Plan and all Options are assumed by the successor entity
or (ii) the transfer, or related transfers, of fifty-one percent (51%) or
more of the total combined voting power of the Company's outstanding
securities to a person or persons different from those who held such
securities immediately prior to such transfer or related transfers, PROVIDED
THAT transfers of voting securities between or among Enron Capital & Trade
Resources Corp., a Delaware corporation, Donald L. Sturm or their respective
Affiliates shall not be considered transfers that are subject to this clause
(ii) and PROVIDED FURTHER, THAT acquisitions of voting securities by Enron
Capital & Trade Resources Corp., a Delaware corporation, Donald L. Sturm or
their respective Affiliates shall not be considered transfers that are
subject to this clause (ii).
1.7. CODE. "Code" shall mean the Internal Revenue Code of
1986, as amended.
1.8. COMMITTEE. "Committee" shall mean the Compensation
Committee of the Board, or another committee of the Board, appointed as
provided in Section 8.1.
1.9. COMMON STOCK. "Common Stock" shall mean the Series B
Common Stock, $0.0001 par value per share, of the Company, and any equity
security of the Company issued or authorized to be issued in the future, but
excluding any preferred stock and any warrants, options or other rights to
purchase Common Stock.
1.10. COMPANY. "Company" shall mean FirstWorld
Communications, Inc., a Delaware corporation.
1.11. DIRECTOR. "Director" shall mean a member of the Board.
1.12. DISABILITY. "Disability" shall mean, with respect to
any Optionee, (i) the suffering of any mental or physical illness, disability
or incapacity that shall in all material aspects preclude such Optionee from
performing his or her employment or consultant duties or (ii) the absence of
such Optionee from his or her employment or consultant duties by reason of
any mental or physical illness, disability or incapacity for a period of six
(6) months during any twelve (12) month period; PROVIDED, HOWEVER, in either
case, that such illness, disability or incapacity shall be reasonably
determined to be of a permanent nature by the Committee.
1.13. EMPLOYEE. "Employee" shall mean any officer or other
employee (as defined in accordance with Section 3401(c) of the Code) of the
Company, or of any corporation which is a Subsidiary.
1.14. EXCHANGE ACT. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
1.15. FAIR MARKET VALUE. "Fair Market Value" of a share of
Common Stock as of a given date shall be: (i) the closing price of a share of
Common Stock on the principal exchange on which shares of Common Stock are
then trading, if any (or as reported on any composite index which includes
such principal exchange), on the trading day previous to such date, or if
shares were not traded on the trading day previous to such date, then on the
next preceding date on which a trade occurred; or (ii) if Common Stock is not
traded on an exchange
2
<PAGE>
but is quoted on NASDAQ or a successor quotation system, the mean between the
closing representative bid and asked prices for the Common Stock on the
trading day previous to such date as reported by NASDAQ or such successor
quotation system; or (iii) if Common Stock is not publicly traded on an
exchange and not quoted on NASDAQ or a successor quotation system, the Fair
Market Value of a share of Common Stock shall be established by the Board
acting in good faith, giving predominate weight to the earnings history, book
value and prospects of the Company in light of market and industry conditions
generally.
1.16. HOLDER. "Holder" shall mean a person who has been
granted or awarded an Award
1.17. INCENTIVE STOCK OPTION. "Incentive Stock Option" shall
mean an option which conforms to the applicable provisions of Section 422 of
the Code and which is designated as an Incentive Stock Option by the
Committee.
1.18. INDEPENDENT DIRECTOR. "Independent Director" shall
mean a member of the Board who is not an Employee of the Company.
1.19. NON-QUALIFIED STOCK OPTION. "Non-Qualified Stock
Option" shall mean an Option which is not designated as an Incentive Stock
Option by the Committee.
1.20. OPTION. "Option" shall mean a stock option granted
under Article III of this Plan. An Option granted under this Plan shall, as
determined by the Committee, be either a Non-Qualified Stock Option or an
Incentive Stock Option; PROVIDED, HOWEVER, that Options granted to
consultants shall be Non-Qualified Stock Options.
1.21. OPTION SHARES. "Option Shares" shall mean shares of
Common Stock acquired by Optionees through the exercise of Options under this
Plan.
1.22. OPTIONEE. "Optionee" shall mean an Employee or
consultant granted an Option under this Plan.
1.23. PERSON. "Person" shall mean a corporation, an
association, a partnership, a trust, a limited liability company, an
organization, a business or an individual.
1.24. PLAN. "Plan" shall mean The 1999 Equity Incentive Plan
of FirstWorld Communications, Inc.
1.25. PUBLIC OFFERING. "Public Offering" shall mean the
Company's initial offering of equity securities on Form S-1 (or a successor
form).
1.26. RELATED PERSON. "Related Person" shall mean: (a) in
the event of a Person's death, such Person's executors, administrators,
testamentary trustees, legatees or
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<PAGE>
beneficiaries or the executors, administrators, testamentary trustees,
legatees or beneficiaries of a Person who has become a holder of Options or
Option Shares in accordance with the terms of this Plan; or (b) a revocable
trust or custodianship the beneficiaries of which may include only such
Person, spouse or lineal descendants by blood or adoption.
1.27. RULE 16B-3. "Rule 16b-3" shall mean that certain Rule
16b-3 under the Exchange Act, as such Rule may be amended from time to time.
1.28. SECURITIES ACT. "Securities Act" shall mean the
Securities Act of 1933, as amended.
1.29. STOCK APPRECIATION RIGHT. "Stock Appreciation Right"
shall mean a stock appreciation right granted under Article VII of the Plan.
1.30. STOCK APPRECIATION RIGHT AWARD AGREEMENT. "Stock
Appreciation Right Award Agreement" shall mean a written agreement executed
by an authorized officer of the Company and the Holder which shall contain
such terms and conditions with respect to an Award as the Committee shall
determine, consistent with the Plan.
1.31. SUBSIDIARY. "Subsidiary" shall mean (a) any
corporation in an unbroken chain of corporations beginning with the Company
if each of the corporations other than the last corporation in the unbroken
chain then owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain, (b) any partnership in which the Company is a
general partner, (c) any limited liability company in which the Company is a
managing member or (d) any partnership or limited liability company in which
the Company possesses a fifty percent (50%) or greater interest in the total
capital or total income of such partnership.
1.32. TERMINATION OF CONSULTANCY. "Termination of
Consultancy" shall mean the time when the engagement of an Optionee as a
consultant to the Company or a Subsidiary is terminated for any reason, with
or without cause, including, but not by way of limitation, by resignation,
discharge, death, Disability or retirement; but excluding terminations where
there is a simultaneous commencement of employment with the Company or any
Subsidiary. The Committee, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Consultancy,
including, but not by way of limitation, the question of whether a
Termination of Consultancy resulted from a discharge for good cause, and all
questions of whether particular leaves of absence constitute Terminations of
Consultancy. Notwithstanding any other provision of this Plan, the Company
or any Subsidiary has an absolute and unrestricted right to terminate a
consultant's service at any time for any reason whatsoever, with or without
cause, except to the extent expressly provided otherwise in writing.
1.33. TERMINATION OF EMPLOYMENT. "Termination of Employment"
shall mean the time when the employee-employer relationship between an
Optionee and the Company or any Subsidiary is terminated for any reason, with
or without cause, including, but not by way of limitation, a termination by
resignation, discharge, death, Disability or retirement; but excluding (i)
terminations where there is a simultaneous reemployment or continuing
employment of an Optionee by the Company or any Subsidiary, (ii) at the
discretion of the Committee, terminations
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<PAGE>
which result in a temporary severance of the employee-employer relationship
and (iii) at the discretion of the Committee, terminations which are followed
by the simultaneous establishment of a consulting relationship by the Company
or a Subsidiary with the former employee. The Committee, in its absolute
discretion, shall determine the effect of all matters and questions relating
to Termination of Employment, including, but not by way of limitation, the
question of whether a Termination of Employment resulted from a discharge for
good cause, and all questions of whether particular leaves of absence
constitute Terminations of Employment; PROVIDED, HOWEVER, that, unless
otherwise determined by the Committee in its discretion, a leave of absence,
change in status from an employee to an independent contractor or other
change in the employee-employer relationship shall constitute a Termination
of Employment if, and to the extent that, such leave of absence, change in
status or other change interrupts employment for the purposes of Section
422(a)(2) of the Code and the then applicable regulations and revenue rulings
under said Section. Notwithstanding any other provision of this Plan, the
Company or any Subsidiary has an absolute and unrestricted right to terminate
an Employee's employment at any time for any reason whatsoever, with or
without cause, except to the extent expressly provided otherwise in writing.
1.34. TERMINATION FOR CAUSE. "Termination for Cause" shall
mean the time when the employee-employer or consultant-employer relationship
between an Optionee and the Company or any Subsidiary is terminated for cause,
as termination for cause is defined in the Optionee's employment or consultancy
agreement; PROVIDED, HOWEVER, that if termination for cause is not therein
defined, it shall have such meaning, in conformance with applicable law, as the
Committee shall determine is appropriate.
ARTICLE II.
SHARES SUBJECT TO PLAN
2.1. SHARES SUBJECT TO PLAN.
(a) The shares of stock subject to Options shall be Common
Stock. The aggregate number of such shares which may be issued upon exercise
of such Options under the Plan shall be 5,000,000. The shares of Common
Stock of the Company issuable upon exercise of such Options may be either
previously authorized but unissued shares or treasury shares.
(b) The maximum number of shares which may be subject to
Options granted under the Plan to any individual in any fiscal year of the
Company shall not exceed the Award Limit.
2.2. ADD-BACK OF OPTIONS AND OTHER RIGHTS. If any Option to
acquire shares of Common Stock under the Plan expires or is canceled without
having been fully exercised, the number of shares subject to such Option but
as to which such Option was not exercised prior to its expiration,
cancellation or exercise may again be available for the granting of Options
hereunder, subject to the limitations of Section 2.1. Furthermore, any
shares subject to Options which are adjusted pursuant to Section 9.3 and
become exercisable with respect to shares of stock of another corporation
shall be considered canceled and may again be available for the granting of
Options hereunder, subject to the limitations of Section 2.1. Shares of
Common Stock which are delivered by the Optionee or withheld by the Company
upon the exercise of any Option under this Plan, in payment of the exercise
price thereof, may again be available for the
5
<PAGE>
granting of Options hereunder, subject to the limitations of Section 2.1.
Notwithstanding the provisions of this Section 2.2, no shares of Common Stock
may again be available for the granting of Options if such action would cause
an Incentive Stock Option to fail to qualify as an incentive stock option
under Section 422 of the Code.
ARTICLE III.
GRANTING OF OPTIONS
3.1. ELIGIBILITY. Any Employee or consultant who is
selected by the Committee pursuant to Section 3.4(a)(i) and approved by the
Board pursuant to Section 3.4(b) shall be eligible to be granted an Option.
3.2. DISQUALIFICATION FOR STOCK OWNERSHIP. No person may be
granted an Incentive Stock Option under this Plan if such person, at the time
the Incentive Stock Option is granted, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company or any then existing Subsidiary unless such Incentive Stock
Option conforms to the applicable provisions of Section 422 of the Code.
3.3. QUALIFICATION OF INCENTIVE STOCK OPTIONS. No Incentive
Stock Option shall be granted to any person who is not an Employee.
3.4. GRANTING OF OPTIONS.
(a) Subject to the approval of the Board and the applicable
limitations of this Plan, the Committee shall from time to time:
(i) Determine which Employees are key Employees and
select from among the key Employees and consultants (including Employees
and consultants who have previously received Options or other awards
under this Plan) such of them as in its opinion should be granted
Options;
(ii) Subject to the Award Limit, determine the number
of shares to be subject to such Options granted to the selected key
Employees and consultants;
(iii) Subject to Section 3.2, determine whether such
Options are to be Incentive Stock Options or Non-Qualified Stock Options
and whether such Options are to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such
Options, consistent with this Plan; PROVIDED, HOWEVER, that the terms
and conditions of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall
include, but not be limited to, such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the
Code.
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(b) The Board shall, in its absolute discretion, approve,
disapprove or modify the Committee's selection under Section 3.4(a)(i)-(iv)
of key Employees and consultants to be granted Options and the terms and
conditions of such Options.
(c) Upon the selection of a key Employee or consultant to
be granted an Option and the approval of the Board, the Committee shall
instruct the Secretary of the Company to issue the Option and may impose such
conditions on the grant of the Option as it deems appropriate. Without
limiting the generality of the preceding sentence, the Committee may, in its
discretion and on such terms as it deems appropriate, require as a condition
on the grant of an Option to an Employee or consultant that such Employee or
consultant surrender for cancellation some or all of the unexercised Options
or other rights which have been previously granted to such Employee or
consultant under this Plan or otherwise. An Option, the grant of which is
conditioned upon such surrender, may have an option price lower (or higher)
than the exercise price of such surrendered Option or other award, may cover
the same (or a lesser or greater) number of shares as such surrendered Option
or other award, may contain such other terms as the Committee deems
appropriate, and shall be exercisable in accordance with its terms, without
regard to the number of shares, price, exercise period or any other term or
condition of such surrendered Option or other award.
(d) Any Incentive Stock Option granted under this Plan may
be modified by the Committee to disqualify such option from treatment as an
"incentive stock option" under Section 422 of the Code.
ARTICLE IV.
TERMS OF OPTIONS
4.1. OPTION AGREEMENT. Each Option shall be evidenced by a
written Stock Option Agreement (a "STOCK OPTION AGREEMENT"), which shall be
executed by the Optionee and an authorized officer of the Company and which
shall contain such terms and conditions as the Committee shall determine,
consistent with this Plan. Stock Option Agreements evidencing Options
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the Code.
Stock Option Agreements evidencing Incentive Stock Options shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 422 of the Code.
4.2. OPTION PRICE. Subject to this Section 4.2, the
Committee, in its discretion, may allocate a different price to each
installment of shares subject to each Option. The price per share of the
shares subject to each Option shall be set by the Committee; PROVIDED,
HOWEVER, that:
(a) Unless otherwise permitted by applicable securities
laws, such price shall be not less than eighty-five percent (85%) of the Fair
Market Value of the stock at the time the option is granted, except that the
price shall be one hundred and ten percent (110%) of the Fair Market Value of
the stock in the case of any person possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or its
Subsidiary;
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(b) In the case of Incentive Stock Options and Options
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code, such price shall not be less than one hundred
percent (100%) of the Fair Market Value of a share of Common Stock on the
date the Option is granted; and
(c) In the case of Incentive Stock Options granted to an
individual then owning (within the meaning of Section 424(d) of the Code)
more than ten percent (10%) of the total combined voting power of all classes
of stock of the Company or any Subsidiary such price shall not be less than
one hundred and ten percent (110%) of the Fair Market Value of a share of
Common Stock on the date the Option is granted.
4.3. OPTION TERM. The term of an Option shall be set by the
Committee in its discretion; PROVIDED, HOWEVER, that:
(a) No Option may have a term that extends beyond the
expiration of seven (7) years from the date the Option was granted;
(b) In the case of Incentive Stock Options, the term shall
not be more than seven (7) years from the date the Incentive Stock Option is
granted, or five (5) years from such date if the Incentive Stock Option is
granted to an individual then owning (within the meaning of Section 424(d) of
the Code) more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Subsidiary;
(c) Except as limited by requirements of Section 422 of the
Code and regulations and rulings thereunder applicable to Incentive Stock
Options, the Committee may extend the term of any outstanding Option in
connection with any Termination of Employment or Termination of Consultancy
of the Optionee, or amend any other term or condition of such Option relating
to such a termination; and
(d) Unless otherwise permitted by applicable securities laws:
(i) In the event of an Optionee's Termination of
Employment or Termination of Consultancy prior to a Public Offering for
any reason except death, Disability or Termination for Cause, the
Optionee shall have ninety (90) days from the date of such Termination
of Employment or Termination of Consultancy to exercise the Option;
(ii) In the event of an Optionee's Termination of
Employment or Termination of Consultancy after a Public Offering for any
reason except death, Disability or Termination for Cause, the Optionee
shall have thirty (30) days from the date of such Termination of
Employment or Termination of Consultancy to exercise the Option;
(iii) In the event of an Optionee's Termination of
Employment or Termination of Consultancy due to the Optionee's death or
Disability, the Optionee shall have twelve (12) months from the date of
such Termination of Employment or Termination of Consultancy to exercise
the Option; and
(iv) Notwithstanding the forgoing, if an Optionee's
Termination of Employment or Termination of Consultancy also qualifies
as a Termination for Cause,
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the Committee, in its discretion, may terminate the Optionee's right
to exercise his or her Options on the date of such termination or such
other time as the Committee, in its discretion, shall deem appropriate.
4.4. OPTION VESTING.
(a) The period during which the right to exercise an Option
in whole or in part vests in the Optionee shall be set by the Committee and
the Committee may determine that an Option may not be exercised in whole or
in part for a specified period after it is granted; PROVIDED, HOWEVER, that,
subject to Section 4.4(b), (i) unless otherwise permitted by applicable
securities laws, each Option shall become exercisable no later than four (4)
years after such Option is granted and such Option shall become exercisable
with respect to at least twenty-five percent (25%) of the shares of Common
Stock subject to such Option, as determined by the Committee in its sole
discretion, on each anniversary of the date of the grant of such Option; and
(ii) unless the Committee otherwise provides in the terms of the Stock Option
Agreement or this Plan otherwise so dictates, no Option shall be exercisable
by any Optionee who is then subject to Section 16 of the Exchange Act within
the period ending six months and one day after the date the Option is
granted; PROVIDED, FURTHER, that Options may become fully exercisable,
subject to reasonable conditions such as continued employment or consultancy,
at any time or during any period established by the Committee.
(b) No portion of an Option which is unexercisable at
Termination of Employment or Termination of Consultancy shall thereafter
become exercisable, except as may be otherwise provided by the Committee
either in the Stock Option Agreement or by action of the Committee following
the grant of the Option.
(c) To the extent that the aggregate Fair Market Value of
stock with respect to which "incentive stock options" (within the meaning of
Section 422 of the Code, but without regard to Section 422(d) of the Code)
are exercisable for the first time by an Optionee during any calendar year
(under the Plan and all other incentive stock option plans of the Company and
any Subsidiary) exceeds $100,000, such Options shall be treated as
Non-Qualified Stock Options to the extent required by Section 422 of the
Code. The rule set forth in the preceding sentence shall be applied by
taking Options into account in the order in which they were granted. For
purposes of this Section 4.4(c), the Fair Market Value of stock shall be
determined as of the time the Option with respect to such stock is granted.
4.5. NO RIGHT TO EMPLOYMENT. Nothing in this Plan or in any
Stock Option Agreement hereunder shall confer upon any Optionee any right to
continue in the employ of (or to consult for) the Company or any Subsidiary
or shall interfere with or restrict in any way the rights of the Company or
any Subsidiary, which are hereby expressly reserved, to discharge any
Optionee at any time for any reason whatsoever, with or without good cause.
4.6. FINANCIAL STATEMENTS. To the extent required by
applicable securities laws, each Optionee shall receive financial statements
of the Company at least annually.
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ARTICLE V.
EXERCISE OF OPTIONS
5.1. PARTIAL EXERCISE. An exercisable Option may be
exercised in whole or in part. However, an Option shall not be exercisable
with respect to fractional shares and the Committee may require that, by the
terms of the Option, a partial exercise be with respect to a minimum number
of shares.
5.2. MANNER OF EXERCISE. All or a portion of an exercisable
Option shall be deemed exercised upon delivery of all of the following to the
Secretary of the Company or such Secretary's office:
(a) A written notice complying with the applicable rules
established by the Committee stating that the Option, or a portion thereof,
is exercised. The notice shall be signed by the Optionee or other person
then entitled to exercise the Option or such portion;
(b) Such representations and documents as the Committee, in
its absolute discretion, deems necessary or advisable to effect compliance
with all applicable provisions of the Securities Act and any other federal or
state securities laws or regulations. The Committee may, in its absolute
discretion, also take whatever additional actions it deems appropriate to
effect such compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer notices to agents and registrars;
(c) In the event that the Option shall be exercised
pursuant to Section 9.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the
Option; and
(d) Full cash payment to the Secretary of the Company for
the shares and for payment of any applicable withholding or other applicable
employment taxes with respect to which the Option, or portion thereof, is
exercised. However, the Committee, may in its discretion (i) allow payment,
in whole or in part, through the surrender of shares of Common Stock then
issuable upon exercise of the Option having a Fair Market Value on the date
of Option exercise equal to the aggregate exercise price of the Option or
exercised portion thereof; (ii) allow payment, in whole or in part, through
the delivery of a notice that the Optionee has placed a market sell order
with a broker with respect to shares of Common Stock then issuable upon
exercise of the Option, and that the broker has been directed to pay a
sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price and any applicable withholding or
other employment taxes; or (iii) allow payment through any combination of the
consideration provided in the foregoing subparagraphs (i) and (ii).
5.3. CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The
Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock
exchanges, if any, on which such class of stock is then listed;
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(b) The completion of any registration or other
qualification of such shares under any state or federal law, or under the
rulings or regulations of the Securities and Exchange Commission or any other
governmental regulatory body which the Committee or the Board shall, in its
absolute discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from
any state or federal governmental agency which the Committee or the Board
shall, in its absolute discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following
the exercise of the Option as the Committee or the Board may establish from
time to time for reasons of administrative convenience; and
(e) The receipt by the Company of full payment for such
shares, including payment of any applicable withholding tax.
5.4. RIGHTS AS STOCKHOLDERS. The holders of Options shall
not be, nor have any of the rights or privileges of, stockholders of the
Company in respect of any shares purchasable upon the exercise of any part of
an Option unless and until certificates representing such shares have been
issued by the Company to such holders.
ARTICLE VI.
RIGHTS AND RESTRICTIONS WITH RESPECT TO OPTION SHARES
6.1. TRANSFER RESTRICTIONS. No Optionee may transfer,
assign, pledge or otherwise encumber any Option Shares except as expressly
provided otherwise in this Article VI; PROVIDED, HOWEVER, that Option Shares
may be transferred at any time to a Related Person, provided that the Related
Person agrees in writing to be bound by the terms of this Plan.
6.2. COMPANY'S RIGHT OF FIRST REFUSAL.
(a) An Optionee (a "PROPOSED SELLER") shall be permitted to
transfer, assign, or sell any Option Shares in an arm's length transaction (a
"PROPOSED TRANSFER"); PROVIDED, HOWEVER, such Optionee shall first offer to
sell such Option Shares to the Company under the procedure described in
paragraphs (b) and (c) of this Section 6.2.
(b) Prior to consummating any Proposed Transfer, the
Proposed Seller shall first notify the Company in writing that such Proposed
Seller has received a bona fide written offer to purchase Option Shares (a
"PURCHASE OFFER") and shall offer to sell to the Company all Option Shares
subject to the Purchase Offer upon the terms and conditions (including credit
terms, if any) set forth in such Purchase Offer. Such notice (the "OFFER
NOTICE") shall set forth: (A) the number of Option Shares proposed to be
transferred, (B) the name and address of the Proposed Seller and the proposed
purchaser (the "PROPOSED PURCHASER") and (C) the proposed amount of
consideration and all other applicable terms and conditions as set forth in,
and shall be accompanied by a copy of, the Purchase Offer.
(c) (i) The Company shall have the option for a period of
fifteen (15) days following the Company's receipt of the Offer Notice to
agree to purchase all of the
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Option Shares subject to the Purchase Offer, upon the terms and
conditions specified therein.
(ii) In the event the Company agrees to purchase Option
Shares pursuant to and in accordance with this Section 6.2, such
purchase shall occur at the principal office of the Company ten (10)
days following the expiration of the fifteen (15) day period specified
in subparagraph (i) of this paragraph (c). In no event shall the
Proposed Seller be required to transfer any Option Shares to the Company
pursuant to this Section 6.2 unless the Company purchases all of the
Option Shares subject to the Purchase Offer on the terms and at the
price stated therein and within the time periods specified herein.
(d) In the event the Company does not agree to purchase all
of the Option Shares offered to the Company by a Proposed Seller pursuant to
this Section 6.2, then the Proposed Seller shall have the right for a period
of thirty (30) days after the termination of the Company's right to purchase
such Option Shares (or after waiver by the Company of its option to purchase
such Option Shares) to transfer to the Proposed Purchaser all, but not less
than all, of such Option Shares in the manner and on the terms and conditions
specified in the Purchase Offer; PROVIDED, HOWEVER, the Proposed Purchaser
shall agree in writing to be bound by this Plan.
6.3. LAPSE OF STOCK RESTRICTIONS AND RIGHTS. The provisions
set forth in Sections 6.1 and 6.2 shall terminate and cease to be of any
further force or effect upon the completion of a Public Offering, or a series
of Public Offerings, which result in public ownership of Common Stock of the
Company possessing at least twenty percent (20%) of the voting power of such
Common Stock.
6.4. OWNERSHIP AND TRANSFER RESTRICTIONS. The Committee, in
its absolute discretion, may impose additional restrictions on the ownership
and transferability of the shares purchasable upon the exercise of an Option
as it deems appropriate. Any such restriction shall be set forth in the
respective Stock Option Agreement and may be referred to on the certificates
evidencing such shares.
6.5. LEGEND. Each certificate representing Option Shares
shall be endorsed with the following legend, which legend shall be removed
upon termination of the stock restrictions set forth in this Article 6:
THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN 1999 EQUITY INCENTIVE PLAN
OF FIRSTWORLD COMMUNICATIONS, INC. COPIES OF SUCH
1999 EQUITY INCENTIVE PLAN MAY BE OBTAINED UPON
WRITTEN REQUEST TO THE SECRETARY OF THE
CORPORATION.
6.6. DISPOSITION OF SHARES. Notwithstanding and in addition
to the foregoing, each Optionee shall be required to give the Company prompt
notice of any disposition of shares of Common Stock acquired by exercise of
an Incentive Stock Option within (i) two (2) years from the date of granting
such Option to such Optionee or (ii) one (1) year after the transfer of
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such shares to such Optionee. Certificates evidencing shares acquired by
exercise of an Incentive Stock Option shall refer to such requirement to give
prompt notice of disposition.
ARTICLE VII.
STOCK APPRECIATION RIGHTS
7.1. GRANT OF STOCK APPRECIATION RIGHTS. A Stock
Appreciation Right may be granted to any key Employee or consultant selected
by the Committee. A Stock Appreciation Right may be granted (a) in
connection and simultaneously with the grant of an Option, (b) with respect
to a previously granted Option or (c) independent of an Option. A Stock
Appreciation Right shall be subject to such terms and conditions not
inconsistent with the Plan as the Committee shall impose and shall be
evidenced by a Stock Appreciation Right Award Agreement.
7.2. COUPLED STOCK APPRECIATION RIGHTS.
(a) A Coupled Stock Appreciation Right ("CSAR") shall be related
to a particular Option and shall be exercisable only when and to the extent
the related Option is exercisable.
(b) A CSAR may be granted to the Holder for no more than the
number of shares subject to the simultaneously or previously granted Option
to which it is coupled.
(c) A CSAR shall entitle the Holder (or other person entitled to
exercise the Option pursuant to the Plan) to surrender to the Company
unexercised a portion of the Option to which the CSAR relates (to the extent
then exercisable pursuant to its terms) and to receive from the Company in
exchange therefor an amount determined by multiplying the difference obtained
by subtracting the Option exercise price from the Fair Market Value of a
share of Common Stock on the date of exercise of the CSAR by the number of
shares of Common Stock with respect to which the CSAR shall have been
exercised, subject to any limitations the Committee may impose.
7.3. INDEPENDENT STOCK APPRECIATION RIGHTS.
(a) An Independent Stock Appreciation Right ("ISAR") shall be
unrelated to any Option and shall have a term set by the Committee. An ISAR
shall be exercisable in such installments as the Committee may determine. An
ISAR shall cover such number of shares of Common Stock as the Committee may
determine; PROVIDED, HOWEVER, that unless the Committee otherwise provides in
the terms of the ISAR or otherwise, no ISAR granted to a person subject to
Section 16 of the Exchange Act shall be exercisable until at least six months
have elapsed from (but excluding) the date on which the ISAR was granted.
The exercise price per share of Common Stock subject to each ISAR shall be
set by the Committee. An ISAR is exercisable only while the Holder is an
Employee or consultant; PROVIDED THAT the Committee may determine that the
ISAR may be exercised subsequent to Termination of Employment or Termination
of Consultancy without cause, or following a Change in Control of the Company
or because of the Holder's retirement, death or disability, or otherwise.
(b) An ISAR shall entitle the Holder (or other person entitled to
exercise the ISAR pursuant to the Plan) to exercise all or a specified
portion of the ISAR (to the extent then exercisable pursuant to its terms)
and to receive from the Company an amount determined by
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multiplying the difference obtained by subtracting the initial price per
share of the ISAR from the Fair Market Value of a share of Common Stock on
the date of exercise of the ISAR by the number of shares of Common Stock with
respect to which the ISAR shall have been exercised, subject to any
limitations the Committee may impose.
7.4. RIGHT OF THE BOARD TO CONVERT STOCK APPRECIATION RIGHTS
TO OPTIONS. Notwithstanding the provisions of this Plan, the Board shall
have the right, but not the obligation, to convert the Stock Appreciation
Rights granted to any or all Holders pursuant to this Plan from Stock
Appreciation Rights to Options to purchase Common Stock of the Company. Any
conversion effected pursuant to this Section 7.4 shall adopt (i) an exercise
price of the Options equal to the initial price as stated in the Holder's
Stock Appreciation Right Award Agreement, (ii) an option period equal to the
period of exercisability as provided in the Holder's Stock Appreciation Right
Award Agreement and (iii) such other terms as determined by the Committee.
Upon the Board's determination to effect a conversion pursuant to this
Section 7.4, the Board shall provide prompt notice to the Holder of such
determination (the "CONVERSION NOTICE"). The Holder must surrender his Stock
Appreciation Right Award Agreement within fifteen (15) business days of the
delivery of the Conversion Notice. Within fifteen (15) business days of the
receipt of the Holder's Stock Appreciation Right Award Agreement, the Board
shall issue an Option Agreement to the Holder consistent with this Section
7.4 and such other terms as determined by the Board.
7.5. PAYMENT AND LIMITATIONS ON EXERCISE.
(a) Payment of the amounts determined under Section 7.2(c) and
7.3(b) above shall be in cash.
(b) Holders of Stock Appreciation Rights may be required to comply
with any timing or other restrictions with respect to the settlement or
exercise of a Stock Appreciation Right, including a window-period limitation,
as may be imposed in the discretion of the Committee.
ARTICLE VIII.
ADMINISTRATION
8.1. COMPENSATION COMMITTEE. The Compensation Committee (or
another committee of the Board assuming the functions of the Committee under
this Plan) shall consist solely of two or more Independent Directors
appointed by and holding office at the pleasure of the Board, each of whom is
both a "non-employee director" as defined by Rule 16(b)-3 and an "outside
director" for purposes of Section 162(m) of the Code. Appointment of
Committee members shall be effective upon acceptance of appointment.
Committee members may resign at any time by delivering written notice to the
Board. Vacancies in the Committee may be filled by the Board.
8.2. DUTIES AND POWERS OF COMMITTEE. It shall be the duty
of the Committee to conduct the general administration of this Plan in
accordance with its provisions. The Committee shall have the power to
interpret this Plan and the agreements pursuant to which Options are granted
or awarded, and to adopt such rules for the administration, interpretation,
and application of this Plan as are consistent therewith and to interpret,
amend or revoke any
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such rules. Any such grant or award under this Plan need not be the same
with respect to each Optionee. Any such interpretations and rules with
respect to Incentive Stock Options shall be consistent with the provisions of
Section 422 of the Code. In its absolute discretion, the Board may at any
time and from time to time exercise any and all rights and duties of the
Committee under this Plan except with respect to matters which under Rule
16b-3 or Section 162(m) of the Code, or any regulations or rules issued
thereunder, are required to be determined in the sole discretion of the
Committee.
8.3. MAJORITY RULE; UNANIMOUS WRITTEN CONSENT. The
Committee shall act by a majority of its members in attendance at a meeting
at which a quorum is present or by a memorandum or other written instrument
signed by all members of the Committee.
8.4. COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH
ACTIONS. Members of the Committee shall receive such compensation for their
services as members as may be determined by the Board. All expenses and
liabilities which members of the Committee incur in connection with the
administration of this Plan shall be borne by the Company. The Committee
may, with the approval of the Board, employ attorneys, consultants,
accountants, appraisers, brokers, or other persons. The Committee, the
Company and the Company's officers and Directors shall be entitled to rely
upon the advice, opinions or valuations of any such persons. All actions
taken and all interpretations and determinations made by the Committee or the
Board in good faith shall be final and binding upon all Optionees, the
Company and all other interested persons. No members of the Committee or
Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan or Options, and
all members of the Committee and the Board shall be fully protected by the
Company in respect of any such action, determination or interpretation.
ARTICLE IX.
MISCELLANEOUS PROVISIONS
9.1. NOT TRANSFERABLE. Options under this Plan may not be
sold, pledged, assigned or transferred in any manner other than by will or
the laws of descent and distribution, unless and until such options have been
exercised, or the shares underlying such Options have been issued, and all
restrictions applicable to such shares have lapsed. No Option or interest or
right therein shall be liable for the debts, contracts or engagements of the
Optionee or the Optionee's successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except
to the extent that such disposition is permitted by the preceding sentence.
During the lifetime of the Optionee, only such Optionee may
exercise an Option (or any portion thereof) granted to such Optionee under
the Plan. After the death of the Optionee, any exercisable portion of an
Option may, prior to the time when such portion becomes unexercisable under
the Plan or the applicable Stock Option Agreement or other agreement, be
exercised by the Optionee's personal representative or by any person
empowered
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to do so under the deceased Optionee's will or under the then applicable laws
of descent and distribution.
9.2. AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN.
Except as otherwise provided in this Section 9.2, this Plan may be wholly or
partially amended or otherwise modified, suspended or terminated at any time
or from time to time by the Board or the Committee. However, without
approval of the Company's stockholders given within twelve months before or
after the action by the Board or the Committee, no action of the Board or the
Committee may, except as provided in Section 9.3, increase the limits imposed
in Section 2.1 on the maximum number of shares which may be issued under this
Plan or modify the Award Limit, and no action of the Board or the Committee
may be taken that would otherwise require stockholder approval as a matter of
applicable law, regulation or rule. No amendment, suspension or termination
of this Plan shall, without the consent of the holder of Options, alter or
impair any rights or obligations under any Options theretofore granted or
awarded, unless the award itself otherwise expressly so provides. No Options
may be granted or awarded during any period of suspension or after
termination of this Plan, and in no event may any Incentive Stock Option be
granted under this Plan after the first to occur of the following events:
(a) The expiration of five (5) years from the date the Plan
is adopted by the Board; or
(b) The expiration of five (5) years from the date the Plan
is approved by the Company's stockholders under Section 9.4.
9.3. CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY,
ACQUISITION OR LIQUIDATION OF THE COMPANY AND OTHER CORPORATE EVENTS.
(a) Subject to Section 9.3(d), (A) in the event that the
Committee determines that any dividend or other distribution (whether in the
form of cash, Common Stock, other securities, or other property),
recapitalization, reclassification, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, liquidation, dissolution, or
sale, transfer, exchange or other disposition of all or substantially all of
the assets of the Company (including, but not limited to, a Change of
Control), or exchange of Common Stock or other securities of the Company,
issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction or event,
in the Committee's sole discretion, affects the Common Stock such that an
adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan or with respect to an Option or
(B) in the event of any stock split or reverse stock split, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and kind of shares of Common Stock (or
other securities or property) with respect to which Awards may be
granted under the Plan, (including, but not limited to, adjustments of
the limitations in Section 2.1 on the maximum number and kind of shares
which may be issued and adjustments of the Award Limit),
(ii) the number and kind of shares of Common Stock (or
other securities or property) subject to outstanding Awards, and
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(iii) the grant or exercise price with respect to any
Award.
(b) Subject to Section 9.3(d), in the event of a Change of
Control, the Board in its sole and absolute discretion shall provide either
(i) that all Awards granted hereunder shall become
fully exercisable notwithstanding anything to the contrary in Section
4.4 or the provisions of the Awards, or
(ii) that the resulting or surviving corporation in
any merger or consolidation associated with such Change of Control
will assume the Awards granted hereunder or substitute for each Award
granted hereunder an option to purchase its shares on terms and
conditions both as to the number and kind of shares, prices and
otherwise, which shall substantially preserve to each Holder the
rights and benefits of the applicable Award outstanding hereunder
granted by the Company.
(c) Subject to Section 9.3(d) and 9.7, the Committee may,
in its discretion, include such further provisions and limitations in any
Award as it may deem equitable and in the best interests of the Company.
(d) With respect to Awards intended to qualify as
performance-based compensation under Section 162(m), no adjustment or action
described in this Section 9.3 or in any other provision of the Plan shall be
authorized to the extent that such adjustment or action would cause the Plan
to violate Section 422(b)(1) of the Code or would cause such Award to fail to
so qualify under Section 162(m), as the case may be, or any successor
provisions thereto. Furthermore, no such adjustment or action shall be
authorized to the extent such adjustment or action would result in
short-swing profits liability under Section 16 or violate the exemptive
conditions of Rule 16b-3 unless the Committee determines that the Award is
not to comply with such exemptive conditions. The number of shares of Common
Stock subject to any Award shall always be rounded to the next whole number.
9.4. APPROVAL OF PLAN BY STOCKHOLDERS. This Plan will be
submitted for the approval of the Company's stockholders within twelve months
after the date of the Board's initial adoption of this Plan. Options may be
granted prior to such stockholder approval, provided that such Options shall
not be exercisable prior to the time when this Plan is approved by the
stockholders, and provided further that if such approval has not been
obtained at the end of said twelve-month period, all Options previously
granted under this Plan shall thereupon be canceled and become null and void.
9.5. TAX WITHHOLDING. The Company shall be entitled to
require payment in cash or deduction from other compensation payable to each
Optionee of any sums required by federal, state or local tax law to be
withheld with respect to the issuance, vesting or exercise of any Option.
The Committee may in its discretion and in satisfaction of the foregoing
requirement allow such Optionee to elect to have the Company withhold shares
of Common Stock otherwise issuable under such Option (or allow the return of
shares of Common Stock) having a Fair Market Value equal to the sums required
to be withheld.
9.6. FORFEITURE PROVISIONS. Pursuant to its general
authority to determine the terms and conditions applicable to awards under
the Plan, the Committee shall have the right (to
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the extent consistent with the applicable exemptive conditions of Rule 16b-3
and to the extent permitted under applicable state law) to provide, in the
terms of Options made under the Plan, or to require the recipient to agree by
separate written instrument, that (i) any proceeds, gains or other economic
benefit actually or constructively received by the recipient upon any receipt
or exercise of an Option, or upon the receipt or resale of any Common Stock
underlying such Option, must be paid to the Company, and (ii) the Option
shall terminate and any unexercised portion of such Option (whether or not
vested) shall be forfeited, if (a) a Termination of Employment or Termination
of Consultancy occurs prior to a specified date, or within a specified time
period following receipt or exercise of the Option, or (b) the recipient at
any time, or during a specified time period, engages in any activity in
competition with the Company, or which is inimical, contrary or harmful to
the interests of the Company, as further defined by the Committee (or the
Board, as applicable).
9.7. LIMITATIONS APPLICABLE TO SECTION 16 PERSONS AND
PERFORMANCE-BASED COMPENSATION. Notwithstanding any other provision of this
Plan and any Option granted to any individual who is then subject to Section
16 of the Exchange Act, shall be subject to any additional limitations set
forth in any applicable exemptive rule under Section 16 of the Exchange Act
(including any amendment to Rule 16b-3 of the Exchange Act) that are
requirements for the application of such exemptive rule. To the extent
permitted by applicable law, the Plan and Options granted or awarded
hereunder shall be deemed amended to the extent necessary to conform to such
applicable exemptive rule. Furthermore, notwithstanding any other provision
of this Plan, any Option intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall be
subject to any additional limitations set forth in Section 162(m) of the Code
(including any amendment to Section 162(m) of the Code) or any regulations or
rulings issued thereunder that are requirements for qualification as
performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and this Plan shall be deemed amended to the extent necessary to
conform to such requirements.
9.8. EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS.
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company or any Subsidiary. Nothing in this
Plan shall be construed to limit the right of the Company (i) to establish
any other forms of incentives or compensation for Employees or consultants of
the Company or any Subsidiary or (ii) to grant or assume options or other
rights otherwise than under this Plan in connection with any proper corporate
purpose including, but not by way of limitation, the grant or assumption of
options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any
corporation, partnership, limited liability company, firm or association.
9.9. COMPLIANCE WITH LAWS. This Plan, the granting and
vesting of Options under this Plan and the issuance and delivery of shares of
Common Stock and the payment of money under this Plan or under Options
granted hereunder are subject to compliance with all applicable federal and
state laws, rules and regulations (including but not limited to state and
federal securities law and federal margin requirements) and to such approvals
by any listing, regulatory or governmental authority as may, in the opinion
of counsel for the Company, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by
the Company, provide such assurances and representations to the Company as
the Company may deem necessary or desirable to assure compliance with all
applicable legal requirements. To the
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extent permitted by applicable law, the Plan and Options granted or awarded
hereunder shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.
9.10. TITLES. Titles are provided herein for convenience
only and are not to serve as a basis for interpretation or construction of
this Plan.
9.11. GOVERNING LAW. This Plan and any agreements hereunder
shall be administered, interpreted and enforced under the internal laws of
the State of Delaware without regard to conflicts of laws thereof.
* * *
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I hereby certify that the foregoing Plan was duly adopted by
the Board of Directors of FirstWorld Communications, Inc. on March 8, 1999.
Executed on this 14th day of April, 1999.
/s/ Jeffrey L. Dykes
--------------------
Secretary
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INCENTIVE STOCK OPTION AGREEMENT
OF
FIRSTWORLD COMMUNICATIONS, INC.
THIS AGREEMENT, dated _________ ___, ____, is made by and between
FirstWorld Communications, Inc., a Delaware corporation (the "COMPANY"), and
_________________________, an employee of the Company or a Subsidiary of the
Company ("OPTIONEE"):
WHEREAS, the Company wishes to afford the Optionee the
opportunity to purchase shares of its Common Stock; and
WHEREAS, the Company wishes to carry out the Plan (the terms of
which are hereby incorporated by reference and made a part of this Agreement);
and
WHEREAS, the Committee, appointed to administer the Plan, has
determined that it would be to the advantage and best interest of the Company
and its stockholders to grant the Incentive Stock Option provided for herein to
the Optionee as an inducement to enter into or remain in the service of the
Company or its Subsidiaries and as an incentive for increased efforts during
such service, and has advised the Company thereof and instructed the undersigned
officers to issue said Option;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they
shall have the meaning specified below unless the context clearly indicates to
the contrary. The masculine pronoun shall include the feminine and neuter, and
the singular the plural, where the context so indicates. All capitalized terms
used herein without definition shall have the meanings ascribed to such terms in
the Plan.
SECTION 1.1 - AGREEMENT
AGREEMENT shall mean this Incentive Stock Option Agreement of
FirstWorld Communications, Inc.
SECTION 1.2 - OPTION
OPTION shall mean the incentive stock option to purchase Common
Stock of the Company granted under this Agreement.
SECTION 1.3 - PLAN
PLAN shall mean The 1999 Equity Incentive Plan of FirstWorld
Communications, Inc.
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ARTICLE II
GRANT OF OPTION
SECTION 2.1 - GRANT OF OPTION
In consideration of the Optionee's agreement to remain in the
employ of the Company or its Subsidiaries and for other good and valuable
consideration, on the date hereof the Company irrevocably grants to the Optionee
the option to purchase any part or all of an aggregate of ________ shares of its
Common Stock upon the terms and conditions set forth in this Agreement and the
Plan.
SECTION 2.2 - PURCHASE PRICE
The purchase price of the shares of stock covered by the Option
shall be as follows:
(a) $_____ per share without commission or other charge with
respect to the First Installment (as defined in Section 3.1 below);
(b) $_____ per share without commission or other charge with
respect to the Second Installment (as defined in Section 3.1 below);
(c) $_____ per share without commission or other charge with
respect to the Third Installment (as defined in Section 3.1 below); and
(d) $_____ per share without commission or other charge with
respect to the Fourth Installment (as defined in Section 3.1 below).
SECTION 2.3 - CONSIDERATION TO COMPANY
In consideration of the granting of this Option by the Company,
the Optionee agrees to render faithful and efficient services to the Company or
a Subsidiary, with such duties and responsibilities as the Company shall from
time to time prescribe. Nothing in this Agreement or in the Plan shall confer
upon the Optionee any right to continue in the employ of the Company or any
Subsidiary, or shall interfere with or restrict in any way the rights of the
Company and its Subsidiaries, which are hereby expressly reserved, to discharge
the Optionee at any time for any reason whatsoever, with or without cause.
SECTION 2.4 - ADJUSTMENTS IN OPTION
The Committee shall make adjustments with respect to the Option
in accordance with the provisions of Section 9.3 of the Plan; PROVIDED, HOWEVER,
that each such adjustment shall be made in such manner as not to constitute a
modification within the meaning of Section 424(h)(3) of the Code, unless the
Optionee consents to an adjustment which would constitute such a modification.
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ARTICLE III
PERIOD OF EXERCISABILITY
SECTION 3.1 - COMMENCEMENT OF EXERCISABILITY
(a) Subject to Sections 3.4, 5.3 and 5.7 hereof, the Option
shall become exercisable in installments as follows:
(i) The first installment (the FIRST INSTALLMENT)
shall consist of twenty-five percent (25%) of the shares covered by the
Option and shall become exercisable on [_______ __, 199__] [the first
anniversary of the date the Option is granted or the date the Option
begins to vest, whichever is earlier].
(ii) The second installment (the SECOND INSTALLMENT)
shall consist of twenty-five percent (25%) of the shares covered by the
Option and shall become exercisable on [_________ __, _____] [the second
anniversary of the date the Option is granted or the date the Option
begins to vest, whichever is earlier].
(iii) The third installment (the THIRD INSTALLMENT)
shall consist of twenty-five percent (25%) of the shares covered by the
Option and shall become exercisable on [_________ __, _____] [the third
anniversary of the date the Option is granted or the date the Option
begins to vest, whichever is earlier].
(iv) The fourth installment (the FOURTH INSTALLMENT)
shall consist of twenty-five percent (25%) of the shares covered by the
Option and shall become exercisable on [_________ __, _____] [the fourth
anniversary of the date the Option is granted or the date the Option
begins to vest, whichever is earlier].
(b) No portion of the Option which is unexercisable at
Termination of Employment shall thereafter become exercisable.
SECTION 3.2 - DURATION OF EXERCISABILITY
The installments provided for in Section 3.1 hereof are
cumulative. Each such installment which becomes exercisable pursuant to Section
3.1 hereof shall remain exercisable until it becomes unexercisable under Section
3.3 or as otherwise provided under the Plan.
SECTION 3.3 - EXPIRATION OF OPTION
The Option may not be exercised to any extent by anyone after the
first to occur of the following events:
(a) The expiration of seven (7) years from the date the
Option was granted; or
(b) The expiration of ninety (90) days from the date of the
Optionee's Termination of Employment for any reason prior to a Public Offering
except death or Disability or Termination for Cause; or
(c) The expiration of thirty (30) days from the date of the
Optionee's Termination of
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Employment for any reason after a Public Offering except death or Disability
or Termination for Cause; or
(d) The expiration of twelve (12) months from the date of the
Termination of Employment due to the Optionee's death or Disability; or
(e) At the discretion of the Committee, the date of the
Optionee's Termination of Employment if such termination qualifies as a
Termination for Cause; or
(f) If the Optionee owned (within the meaning of Section
424(d) of the Code),at the time the Option was granted, more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any Subsidiary (within the meaning of Section 422 of the Code), the
expiration of five (5) years from the date such Option was granted.
SECTION 3.4 - LIMITATION ON EXERCISABILITY
Notwithstanding any other provision of this Agreement, the
aggregate Fair Market Value (determined at the time the Option is granted) of
the shares of the Company's stock with respect to which incentive stock
options (within the meaning of Section 422 of the Code) are exercisable for the
first time by the Optionee during any calendar year (under the Plan and all
other incentive stock option plans of the Company, any Subsidiary and any parent
corporation thereof (within the meaning of Section 422 of the Code)) shall not
exceed $100,000.
ALTERNATE LANGUAGE TO BE USED WHERE THE OPTION IS DELIBERATELY EXERCISABLE AT A
RATE IN EXCESS OF $100,000 PER YEAR:
[Section 3.4 - Special Tax Consequences
The Optionee acknowledges that, to the extent that the aggregate
Fair Market Value of stock with respect to which incentive stock options
(within the meaning of Section 422 of the Code, but without regard to Section
422(d) of the Code), including the Option, are exercisable for the first time by
the Optionee during any calendar year (under the Plan and all other incentive
stock option plans of the Company, any Subsidiary and any parent corporation
thereof (within the meaning of Section 422 of the Code)) exceeds $100,000, such
options shall be treated as Non-Qualified Stock Options to the extent required
by Section 422 of the Code. The Optionee further acknowledges that the rule set
forth in the preceding sentence shall be applied by taking options into account
in the order in which they were granted. For purposes of these rules, the Fair
Market Value of stock shall be determined as of the time the option with respect
to such stock is granted.]
ARTICLE IV
EXERCISE OF OPTION
SECTION 4.1 - PERSON ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only the Optionee may
exercise the Option or any portion thereof. After the death of the Optionee,
any exercisable portion of the Option may, prior to the time when the Option
becomes unexercisable under Section 3.3 hereof or as otherwise provided under
the Plan, be exercised by the Optionee's personal representative or by any
person empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution.
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SECTION 4.2 - PARTIAL EXERCISE
Any exercisable portion of the Option or the entire Option, if
then wholly exercisable, may be exercised in whole or in part at any time
prior to the time when the Option or portion thereof becomes unexercisable
under Section 3.3 hereof or as otherwise provided under the Plan; PROVIDED,
HOWEVER, that each partial exercise shall be for the lesser of 25% of the
Award or one thousand (1,000) shares and shall be for whole shares only.
SECTION 4.3 - MANNER OF EXERCISE
The Option, or any exercisable portion thereof, may be exercised
solely by delivery to the Secretary or his office of all of the following prior
to the time when the Option or such portion becomes unexercisable under Section
3.3 hereof or as otherwise provided under the Plan:
(a) A written notice complying with the applicable rules
established by the Committee stating that the Option, or a portion thereof, is
exercised. The notice shall be signed by the Optionee or other person then
entitled to exercise the Option or such portion; and
(b) Full cash payment to the Secretary of the Company for the
shares with respect to which the Option, or portion thereof, is exercised.
However, the Committee, may in its discretion (i) allow payment, in whole or in
part, through the surrender of shares of Common Stock then issuable upon
exercise of the Option having a Fair Market Value on the date of Option exercise
equal to the aggregate exercise price of the Option or exercised portion
thereof; (ii) allow payment, in whole or in part, through the delivery of a
notice that the Optionee has placed a market sell order with a broker with
respect to shares of Common Stock then issuable upon exercise of the Option, and
that the broker has been directed to pay a sufficient portion of the net
proceeds of the sale to the Company in satisfaction of the Option exercise price
and any applicable withholding or other employment taxes; or (iii) allow payment
through any combination of the consideration provided in the foregoing
subparagraphs (i) and (ii).
(c) A bona fide written representation and agreement, in a
form satisfactory to the Committee, signed by the Optionee or other person then
entitled to exercise the Option or portion thereof, stating that the shares of
stock are being acquired for his own account, for investment and without any
present intention of distributing or reselling said shares or any of them except
as may be permitted under the Securities Act and the applicable rules and
regulations thereunder, and that the Optionee or other person then entitled to
exercise the Option or portion thereof will indemnify the Company against and
hold it free and harmless from any loss, damage, expense or liability resulting
to the Company if any sale or distribution of the shares by such person is
contrary to the representation and agreement referred to above. The Committee
may, in its absolute discretion, take whatever additional actions it deems
appropriate to insure the observance and performance of such representation and
agreement and to effect compliance with the Securities Act and any other federal
or state securities laws or regulations. Without limiting the generality of the
foregoing, the Committee may require an opinion of counsel acceptable to it to
the effect that any subsequent transfer of shares acquired on the Option
exercise does not violate the Securities Act, and may issue stop-transfer orders
covering such shares. Share certificates evidencing stock issued on exercise of
this Option shall bear an appropriate legend referring to the provisions of the
agreements herein. The written representation and agreement referred to in the
first sentence of this subsection (c) shall, however, not be required if the
shares to be issued pursuant to such exercise have been registered under the
Securities Act, and such registration is then effective in respect of such
shares; and
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(d) Full payment to the Company (or other employer
corporation) of all amounts which, under federal, state or local tax law, it is
required to withhold upon exercise of the Option; and
(e) In the event the Option or portion thereof shall be
exercised pursuant to Section 4.1 hereof by any person or persons other than the
Optionee, appropriate proof of the right of such person or persons to exercise
the Option.
SECTION 4.4 - CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The shares of stock deliverable upon the exercise of the Option,
or any portion thereof, may be either previously authorized but unissued shares
or issued shares which have then been reacquired by the Company. Such shares
shall be fully paid and nonassessable. The Company shall not be required to
issue or deliver any certificate or certificates for shares of stock purchased
upon the exercise of the Option or portion thereof prior to fulfillment of all
of the following conditions:
(a) The admission of such shares to listing on all stock
exchanges, if any, on which such class of stock is then listed; and
(b) The completion of any registration or other qualification
of such shares under any state or federal law or under rulings or regulations of
the Securities and Exchange Commission or of any other governmental regulatory
body, which the Committee shall, in its absolute discretion, deem necessary or
advisable; and
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
(d) The receipt by the Company of full payment for such
shares, including payment of all amounts which, under federal, state or local
tax law, the Company (or other employer corporation) is required to withhold
upon exercise of the Option; and
(e) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may from time to time establish for
reasons of administrative convenience.
SECTION 4.5 - RIGHTS AS STOCKHOLDER
The holder of the Option shall not be, nor have any of the rights
or privileges of, a stockholder of the Company in respect of any shares
purchasable upon the exercise of any part of the Option unless and until
certificates representing such shares shall have been issued by the Company to
such holder.
ARTICLE V
OTHER PROVISIONS
SECTION 5.1 - ADMINISTRATION
The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret, amend or
revoke any such rules. All actions taken and all interpretations and
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<PAGE>
determinations made by the Committee in good faith shall be final and binding
upon the Optionee, the Company and all other interested persons. No member
of the Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Option.
Any such interpretations and rules with respect to incentive stock options
shall be consistent with the provisions of Section 422 of the Code. In its
absolute discretion, the Board may at any time and from time to time exercise
any and all rights and duties of the Committee under the Plan and this
Agreement except with respect to matters which under Rule 16b-3 or Section
162(m) of the Code, or any regulations or rules issued thereunder, are
required to be determined in the sole discretion of the Committee.
SECTION 5.2 - OPTION NOT TRANSFERABLE
Neither the Option nor any interest or right therein or part
thereof shall be sold, pledged, assigned or transferred in any manner other than
by will or the laws of descent and distribution, unless and until the Option has
been exercised (and, in such event, solely in accordance with the terms and
conditions of this Agreement and the Plan), or the shares underlying the Option
have been issued, and all restrictions applicable to such shares have lapsed.
Neither the Option nor any interest or right therein or part thereof shall be
liable for the debts, contracts or engagements of the Optionee or his successors
in interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect, except to the extent that such disposition is permitted
by the preceding sentence.
SECTION 5.3 - CHANGE IN CONTROL
Subject to Section 9.3(d) of the Plan, in the event of a Change
of Control, the Board in its sole and absolute discretion shall provide either
(i) that all Options granted hereunder shall become
fully exercisable notwithstanding anything to the contrary in Section
4.4 or the provisions of the Options, or
(ii) that the resulting or surviving corporation in any
merger or consolidation associated with such Change of Control will
assume the Options granted hereunder or substitute for each Option
granted hereunder an option to purchase its shares on terms and
conditions both as to the number and kind of shares, prices and
otherwise, which shall substantially preserve to each Optionee the
rights and benefits of the applicable Option outstanding hereunder
granted by the Company
PROVIDED, HOWEVER, that, except as otherwise provided in the employment
agreement between the Company and the Optionee, notwithstanding anything to
the contrary set forth in the Plan or elsewhere herein, the Option granted
hereby shall become fully exercisable if a material reduction in the
Optionee's position or salary occurs within 12 months of a Change of Control
and such material reduction in position or salary is directly attributable to
the Change of Control. All decisions as to the acceleration of the Option as
a result of a reduction in an Optionee's position or salary which is directly
attributable to a Change of Control, including, but not limited to, whether a
reduction in position or salary is directly attributable to a Change of
Control or whether such a reduction in position or salary is material, shall
be made in the reasonable discretion of the Board.
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SECTION 5.4 - SHARES TO BE RESERVED
The Company shall at all times during the term of the Option
reserve and keep available such number of shares of Common Stock as will be
sufficient to satisfy the requirements of this Agreement.
SECTION 5.5 - NOTICES
Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary, and any
notice to be given to the Optionee shall be addressed to him at the address
given beneath his signature hereto. By a notice given pursuant to this Section
5.5, either party may hereafter designate a different address for notices to be
given to him. Any notice which is required to be given to the Optionee shall,
if the Optionee is then deceased, be given to the Optionee's personal
representative if such representative has previously informed the Company of his
status and address by written notice under this Section 5.5. Any notice shall
be deemed duly given when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, deposited (with postage prepaid) in a post office or
branch post office regularly maintained by the United States Postal Service.
SECTION 5.6 - TITLES
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
SECTION 5.7 - STOCKHOLDER APPROVAL
The Plan will be submitted for approval by the Company's
stockholders within twelve (12) months after the date the Plan was initially
adopted by the Board. This Option may not be exercised to any extent by anyone
prior to the time when the Plan is approved by the stockholders, and if such
approval has not been obtained by the end of said twelve-month period, this
Option shall thereupon be canceled and become null and void.
SECTION 5.8 - NOTIFICATION OF DISPOSITION
The Optionee shall give prompt notice to the Company of any
disposition or other transfer of any shares of stock acquired under this
Agreement if such disposition or transfer is made (a) within two (2) years from
the date of granting the Option with respect to such shares or (b) within one
(1) year after the transfer of such shares to him. Such notice shall specify
the date of such disposition or other transfer and the amount realized, in cash,
other property, assumption of indebtedness or other consideration, by the
Optionee in such disposition or other transfer.
SECTION 5.9 - CONSTRUCTION
This Agreement shall be administered, interpreted and enforced
under the internal laws of the State of Delaware without regard to conflicts of
laws thereof.
SECTION 5.10 - CONFORMITY TO SECURITIES LAWS
The Optionee acknowledges that the Plan is intended to conform to
the extent necessary with all provisions of the Securities Act and the Exchange
Act and any and all regulations and rules promulgated by the Securities and
Exchange Commission thereunder, including, without limitation, Rule
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16b-3. Notwithstanding anything herein to the contrary, the Plan shall be
administered, and the Option is granted and may be exercised, only in such a
manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, the Plan and this Agreement shall be deemed
amended to the extent necessary to conform to such laws, rules and
regulations.
SECTION 5.11 - AMENDMENTS
This Agreement and the Plan may be amended without the consent of
the Optionee provided that such amendment would not impair any rights of the
Optionee under this Agreement. No amendment of this Agreement shall, without
the consent of the Optionee, impair any rights of the Optionee under this
Agreement.
ARTICLE VI
RIGHTS AND RESTRICTIONS WITH RESPECT TO OPTION SHARES
SECTION 6.1 - TRANSFER RESTRICTION.
The Optionee may not transfer, assign, pledge or otherwise
encumber any Option Shares except as expressly provided otherwise in this
Article VI; PROVIDED, HOWEVER, that the Optionee may transfer Option Shares at
any time to a Related Person, provided that the Related Person agrees in writing
to be bound by the terms of this Agreement and the Plan.
SECTION 6.2 - COMPANY'S RIGHT OF FIRST REFUSAL.
(a) The Optionee (a PROPOSED SELLER) shall be permitted to
transfer, assign, or sell any Option Shares in an arm's length transaction (a
PROPOSED TRANSFER); PROVIDED, HOWEVER, the Optionee shall first offer to sell
such Option Shares to the Company under the procedure described in paragraphs
(b) and (c) of this Section 6.2.
(b) Prior to consummating any Proposed Transfer, the Proposed
Seller shall first notify the Company in writing that the Proposed Seller has
received a bona fide written offer to purchase Option Shares (a PURCHASE
OFFER) and shall offer to sell to the Company all Option Shares subject to the
Purchase Offer upon the terms and conditions (including credit terms, if any)
set forth in such Purchase Offer. Such notice (the OFFER NOTICE) shall set
forth: (A) the number of Option Shares proposed to be transferred, (B) the name
and address of the Proposed Seller and the proposed purchaser (the PROPOSED
PURCHASER) and (C) the proposed amount of consideration and all other
applicable terms and conditions as set forth in, and shall be accompanied by a
copy of, the Purchase Offer.
(c) (i) The Company shall have the option for a period of
fifteen (15) days following the Company's receipt of the Offer Notice to
agree to purchase all of the Option Shares subject to the Purchase
Offer, upon the terms and conditions specified therein.
(ii) In the event the Company agrees to purchase Option
Shares pursuant to and in accordance with this Section 6.2, such
purchase shall occur at the principal office of the Company ten (10)
days following the expiration of the fifteen (15) day period specified
in subparagraph (i) of this paragraph (c). In no event shall the
Proposed Seller be required to transfer any Option Shares to the Company
pursuant to this Section 6.2 unless the Company purchases all of the
Option Shares subject to the Purchase Offer on the terms and at the
price stated therein and within the time periods specified herein.
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(d) In the event the Company does not agree to purchase all
of the Option Shares offered to the Company by a Proposed Seller pursuant to
this Section 6.2, then the Proposed Seller shall have the right for a period of
thirty (30) days after the termination of the Company's right to purchase such
Option Shares (or after waiver by the Company of its option to purchase such
Option Shares) to transfer to the Proposed Purchaser all, but not less than all,
of such Option Shares in the manner and on the terms and conditions specified in
the Purchase Offer; PROVIDED, HOWEVER, the Proposed Purchaser shall agree in
writing to be bound by this Agreement or the Plan.
SECTION 6.3 - LAPSE OF STOCK RESTRICTIONS AND RIGHTS.
The provisions set forth in Sections 6.1 and 6.2 hereof shall
terminate and cease to be of any further force or effect upon the completion
of a Public Offering, or a series of Public Offerings, which result in public
ownership of Common Stock of the Company possessing at least twenty percent
(20%) of the voting power of such Common Stock.
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IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto.
FIRSTWORLD COMMUNICATIONS, INC.,
a Delaware corporation
By:
-----------------------------
President
By:
-----------------------------
Secretary
- -----------------------------------
Optionee
- -----------------------------------
- -----------------------------------
Address
Optionee's Taxpayer
Identification Number:
- -----------------------------------
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NON-QUALIFIED STOCK OPTION AGREEMENT
OF
FIRSTWORLD COMMUNICATIONS, INC.
THIS AGREEMENT, dated _________ ___, ____, is made by and
between FirstWorld Communications, Inc., a Delaware corporation (the
COMPANY), and _________________________, [an employee] [a consultant] of
the Company or a Subsidiary of the Company (OPTIONEE):
WHEREAS, the Company wishes to afford the Optionee the
opportunity to purchase shares of its Common Stock; and
WHEREAS, the Company wishes to carry out the Plan (the terms
of which are hereby incorporated by reference and made a part of this
Agreement); and
WHEREAS, the Committee, appointed to administer the Plan, has
determined that it would be to the advantage and best interest of the Company
and its stockholders to grant the Non-Qualified Option provided for herein to
the Optionee as an inducement to enter into or remain in the service of the
Company or its Subsidiaries and as an incentive for increased efforts during
such service, and has advised the Company thereof and instructed the
undersigned officers to issue said Option;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, receipt of which
is hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they
shall have the meaning specified below unless the context clearly indicates
to the contrary. The masculine pronoun shall include the feminine and
neuter, and the singular the plural, where the context so indicates. All
capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the Plan.
SECTION 1.1 - AGREEMENT
AGREEMENT shall mean this Non-Qualified Stock Option
Agreement of FirstWorld Communications, Inc.
SECTION 1.2 - OPTION
OPTION shall mean the non-qualified option to purchase
Common Stock of the Company granted under this Agreement.
SECTION 1.3 - PLAN
PLAN shall mean The 1999 Equity Incentive Plan of FirstWorld
Communications, Inc.
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ARTICLE II
GRANT OF OPTION
SECTION 2.1 - GRANT OF OPTION
In consideration of the Optionee's agreement to remain
[in the employ of] [as a consultant of] the Company or its Subsidiaries and
for other good and valuable consideration, on the date hereof the Company
irrevocably grants to the Optionee the option to purchase any part or all of
an aggregate of ________ shares of its Common Stock upon the terms and
conditions set forth in this Agreement and the Plan.
SECTION 2.2 - PURCHASE PRICE
The purchase price of the shares of stock covered by the
Option shall be as follows:
(a) $_____ per share without commission or other charge
with respect to the First Installment (as defined in Section 3.1 below);
(b) $_____ per share without commission or other charge
with respect to the Second Installment (as defined in Section 3.1 below);
(c) $_____ per share without commission or other charge
with respect to the Third Installment (as defined in Section 3.1 below); and
(d) $_____ per share without commission or other charge
with respect to the Fourth Installment (as defined in Section 3.1 below).
SECTION 2.3 - CONSIDERATION TO COMPANY
In consideration of the granting of this Option by the
Company, the Optionee agrees to render faithful and efficient services to the
Company or a Subsidiary, with such duties and responsibilities as the Company
shall from time to time prescribe. Nothing in this Agreement or in the Plan
shall confer upon the Optionee any right to continue [in the employ of]
[as a consultant of] the Company or any Subsidiary, or shall interfere with or
restrict in any way the rights of the Company and its Subsidiaries, which are
hereby expressly reserved, to discharge the Optionee at any time for any
reason whatsoever, with or without cause.
SECTION 2.4 - ADJUSTMENTS IN OPTION
The Committee shall make adjustments with respect to the
Option in accordance with the provisions of Section 9.3 of the Plan.
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ARTICLE III
PERIOD OF EXERCISABILITY
SECTION 3.1 - COMMENCEMENT OF EXERCISABILITY
(a) Subject to Section 5.3 and 5.7 hereof, the Option shall
become exercisable in installments as follows:
(i) The first installment (the FIRST INSTALLMENT)
shall consist of twenty-five percent (25%) of the shares covered by the
Option and shall become exercisable on [_______ __, 199__] [the first
anniversary of the date the Option is granted or the date the Option
begins to vest, whichever is earlier].
(ii) The second installment (the SECOND INSTALLMENT)
shall consist of twenty-five percent (25%) of the shares covered by the
Option and shall become exercisable on [_________ __, _____] [the second
anniversary of the date the Option is granted or the date the Option
begins to vest, whichever is earlier].
(iii) The third installment (the THIRD INSTALLMENT)
shall consist of twenty-five percent (25%) of the shares covered by the
Option and shall become exercisable on [_________ __, _____] [the third
anniversary of the date the Option is granted or the date the Option
begins to vest, whichever is earlier].
(iv) The fourth installment (the FOURTH INSTALLMENT)
shall consist of twenty-five percent (25%) of the shares covered by the
Option and shall become exercisable on [_________ __, _____] [the fourth
anniversary of the date the Option is granted or the date the Option
begins to vest, whichever is earlier].
(b) No portion of the Option which is unexercisable at
[Termination of Consultancy] [Termination of Employment] shall thereafter
become exercisable.
SECTION 3.2 - DURATION OF EXERCISABILITY
The installments provided for in Section 3.1 hereof are
cumulative. Each such installment which becomes exercisable pursuant to
Section 3.1 hereof shall remain exercisable until it becomes unexercisable
under Section 3.3 or as otherwise provided under the Plan.
SECTION 3.3 - EXPIRATION OF OPTION
The Option may not be exercised to any extent by anyone after
the first to occur of the following events:
(a) The expiration of seven (7) years from the date the
Option was granted; or
(b) The expiration of ninety (90) days from the date of the
Optionee's [Termination of Consultancy] [Termination of Employment] for any
reason prior to a Public Offering except death or Disability or Termination
for Cause; or
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(c) The expiration of thirty (30) days from the date of the
Optionee's [Termination of Consultancy] [Termination of Employment] for any
reason after a Public Offering except death or Disability or Termination for
Cause; or
(d) The expiration of twelve (12) months from the date of
the Optionee's [Termination of Consultancy] [Termination of Employment] due
to the Optionee's death or Disability; or
(e) At the discretion of the Committee, the date of the
Optionee's [Termination of Consultancy] [Termination of Employment] if such
termination qualifies as a Termination for Cause.
ARTICLE IV
EXERCISE OF OPTION
SECTION 4.1 - PERSON ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only the Optionee may
exercise the Option or any portion thereof. After the death of the Optionee,
any exercisable portion of the Option may, prior to the time when the Option
becomes unexercisable under Section 3.3 hereof or as otherwise provided under
the Plan, be exercised by the Optionee's personal representative or by any
person empowered to do so under the deceased Optionee's will or under the
then applicable laws of descent and distribution.
SECTION 4.2 - PARTIAL EXERCISE
Any exercisable portion of the Option or the entire Option, if
then wholly exercisable, may be exercised in whole or in part at any time
prior to the time when the Option or portion thereof becomes unexercisable
under Section 3.3 hereof or as otherwise provided under the Plan; PROVIDED,
HOWEVER, that each partial exercise shall be for the lesser of 25% of the
Award or one thousand (1,000) shares and shall be for whole shares only.
SECTION 4.3 - MANNER OF EXERCISE
The Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary or his office of all of the
following prior to the time when the Option or such portion becomes
unexercisable under Section 3.3 hereof or as otherwise provided under the
Plan:
(a) A written notice complying with the applicable rules
established by the Committee stating that the Option, or a portion thereof,
is exercised. The notice shall be signed by the Optionee or other person
then entitled to exercise the Option or such portion; and
(b) Full cash payment to the Secretary of the Company for
the shares with respect to which the Option, or portion thereof, is
exercised. However, the Committee, may in its discretion (i) allow payment,
in whole or in part, through the surrender of shares of Common Stock then
issuable upon exercise of the Option having a Fair Market Value on the date
of Option exercise equal to the aggregate exercise price of the Option or
exercised portion thereof; (ii) allow payment, in whole or in part, through
the delivery of a notice that the Optionee has placed a market sell order
with a broker with respect to shares of Common Stock then issuable upon
exercise of the Option, and that the broker has been directed
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<PAGE>
to pay a sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price and any applicable withholding or
other employment taxes; or (iii) allow payment through any combination of the
consideration provided in the foregoing subparagraphs (i) and (ii).
(c) A bona fide written representation and agreement, in a
form satisfactory to the Committee, signed by the Optionee or other person
then entitled to exercise the Option or portion thereof, stating that the
shares of stock are being acquired for his own account, for investment and
without any present intention of distributing or reselling said shares or any
of them except as may be permitted under the Securities Act and the
applicable rules and regulations thereunder, and that the Optionee or other
person then entitled to exercise the Option or portion thereof will indemnify
the Company against and hold it free and harmless from any loss, damage,
expense or liability resulting to the Company if any sale or distribution of
the shares by such person is contrary to the representation and agreement
referred to above. The Committee may, in its absolute discretion, take
whatever additional actions it deems appropriate to insure the observance and
performance of such representation and agreement and to effect compliance
with the Securities Act and any other federal or state securities laws or
regulations. Without limiting the generality of the foregoing, the Committee
may require an opinion of counsel acceptable to it to the effect that any
subsequent transfer of shares acquired on the Option exercise does not
violate the Securities Act, and may issue stop-transfer orders covering such
shares. Share certificates evidencing stock issued on exercise of this
Option shall bear an appropriate legend referring to the provisions of the
agreements herein. The written representation and agreement referred to in
the first sentence of this subsection (c) shall, however, not be required if
the shares to be issued pursuant to such exercise have been registered under
the Securities Act, and such registration is then effective in respect of
such shares; and
(d) Full payment to the Company (or other employer
corporation) of all amounts which, under federal, state or local tax law, it
is required to withhold upon exercise of the Option; and
(e) In the event the Option or portion thereof shall be
exercised pursuant to Section 4.1 hereof by any person or persons other than
the Optionee, appropriate proof of the right of such person or persons to
exercise the Option.
SECTION 4.4 - CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The shares of stock deliverable upon the exercise of the
Option, or any portion thereof, may be either previously authorized but
unissued shares or issued shares which have then been reacquired by the
Company. Such shares shall be fully paid and nonassessable. The Company
shall not be required to issue or deliver any certificate or certificates for
shares of stock purchased upon the exercise of the Option or portion thereof
prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock
exchanges, if any, on which such class of stock is then listed; and
(b) The completion of any registration or other
qualification of such shares under any state or federal law or under rulings
or regulations of the Securities and Exchange Commission or of any other
governmental regulatory body, which the Committee shall, in its absolute
discretion, deem necessary or advisable; and
5
<PAGE>
(c) The obtaining of any approval or other clearance from
any state or federal governmental agency which the Committee shall, in its
absolute discretion, determine to be necessary or advisable; and
(d) The receipt by the Company of full payment for such
shares, including payment of all amounts which, under federal, state or local
tax law, the Company (or other employer corporation) is required to withhold
upon exercise of the Option; and
(e) The lapse of such reasonable period of time following
the exercise of the Option as the Committee may from time to time establish
for reasons of administrative convenience.
SECTION 4.5 - RIGHTS AS STOCKHOLDER
The holder of the Option shall not be, nor have any of the
rights or privileges of, a stockholder of the Company in respect of any
shares purchasable upon the exercise of any part of the Option unless and
until certificates representing such shares shall have been issued by the
Company to such holder.
ARTICLE V
OTHER PROVISIONS
SECTION 5.1 - ADMINISTRATION
The Committee shall have the power to interpret the Plan and
this Agreement and to adopt such rules for the administration, interpretation
and application of the Plan as are consistent therewith and to interpret,
amend or revoke any such rules. All actions taken and all interpretations
and determinations made by the Committee in good faith shall be final and
binding upon the Optionee, the Company and all other interested persons. No
member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan
or the Option. In its absolute discretion, the Board may at any time and
from time to time exercise any and all rights and duties of the Committee
under the Plan and this Agreement except with respect to matters which under
Rule 16b-3 or Section 162(m) of the Code, or any regulations or rules issued
thereunder, are required to be determined in the sole discretion of the
Committee.
SECTION 5.2 - OPTION NOT TRANSFERABLE
Neither the Option nor any interest or right therein or part
thereof shall be sold, pledged, assigned, or transferred in any manner other
than by will or the laws of descent and distribution, unless and until the
Option has been exercised (and, in such event, solely in accordance with the
terms and conditions of this Agreement and the Plan), or the shares
underlying the Option have been issued, and all restrictions applicable to
such shares have lapsed. Neither the Option nor any interest or right
therein or part thereof shall be liable for the debts, contracts or
engagements of the Optionee or his successors in interest or shall be subject
to disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except
to the extent that such disposition is permitted by the preceding sentence.
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SECTION 5.3 - CHANGE IN CONTROL
Subject to Section 9.3(d) of the Plan, in the event of a
Change of Control, the Board in its sole and absolute discretion shall
provide either
(i) that all Options granted hereunder shall become
fully exercisable notwithstanding anything to the contrary in Section
4.4 or the provisions of the Options, or
(ii) that the resulting or surviving corporation in
any merger or consolidation associated with such Change of Control
will assume the Options granted hereunder or substitute for each
Option granted hereunder an option to purchase its shares on terms and
conditions both as to the number and kind of shares, prices and
otherwise, which shall substantially preserve to each Optionee the
rights and benefits of the applicable Option outstanding hereunder
granted by the Company
[PROVIDED, HOWEVER, that, [except as otherwise provided in the employment
agreement between the Company and the Optionee,] notwithstanding anything to
the contrary set forth in the Plan or elsewhere herein, the Option granted
hereby shall become fully exercisable if a material reduction in the Optionee's
position or salary occurs within 12 months of a Change of Control and such
material reduction in position or salary is directly attributable to the Change
of Control. All decisions as to the acceleration of the Option as a result of
a reduction in an Optionee's position or salary which is directly attributable
to a Change of Control, including, but not limited to, whether a reduction in
position or salary is directly attributable to a Change of Control or whether
such a reduction in position or salary is material, shall be made in the
reasonable discretion of the Board.
SECTION 5.4 - SHARES TO BE RESERVED
The Company shall at all times during the term of the Option
reserve and keep available such number of shares of Common Stock as will be
sufficient to satisfy the requirements of this Agreement.
SECTION 5.5 - NOTICES
Any notice to be given under the terms of this Agreement to
the Company shall be addressed to the Company in care of its Secretary, and
any notice to be given to the Optionee shall be addressed to him at the
address given beneath his signature hereto. By a notice given pursuant to
this Section 5.5, either party may hereafter designate a different address
for notices to be given to him. Any notice which is required to be given to
the Optionee shall, if the Optionee is then deceased, be given to the
Optionee's personal representative if such representative has previously
informed the Company of his status and address by written notice under this
Section 5.5. Any notice shall be deemed duly given when enclosed in a
properly sealed envelope or wrapper addressed as aforesaid, deposited (with
postage prepaid) in a post office or branch post office regularly maintained
by the United States Postal Service.
SECTION 5.6 - TITLES
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
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SECTION 5.7 - STOCKHOLDER APPROVAL
The Plan will be submitted for approval by the Company's
stockholders within twelve (12) months after the date the Plan was initially
adopted by the Board. This Option may not be exercised to any extent by
anyone prior to the time when the Plan is approved by the stockholders, and
if such approval has not been obtained by the end of said twelve-month
period, this Option shall thereupon be canceled and become null and void.
SECTION 5.8 - CONSTRUCTION
This Agreement shall be administered, interpreted and enforced
under the internal laws of the State of Delaware without regard to conflicts
of laws thereof.
SECTION 5.9 - CONFORMITY TO SECURITIES LAWS
The Optionee acknowledges that the Plan is intended to conform
to the extent necessary with all provisions of the Securities Act and the
Exchange Act and any and all regulations and rules promulgated by the
Securities and Exchange Commission thereunder, including, without limitation,
Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall
be administered, and the Option is granted and may be exercised, only in such
a manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, the Plan and this Agreement shall be deemed
amended to the extent necessary to conform to such laws, rules and
regulations.
SECTION 5.10 - AMENDMENTS
This Agreement and the Plan may be amended without the consent
of the Optionee provided that such amendment would not impair any rights of
the Optionee under this Agreement. No amendment of this Agreement shall,
without the consent of the Optionee, impair any rights of the Optionee under
this Agreement.
ARTICLE VI
RIGHTS AND RESTRICTIONS WITH RESPECT TO OPTION SHARES
SECTION 6.1 - TRANSFER RESTRICTION.
The Optionee may not transfer, assign, pledge or otherwise
encumber any Option Shares except as expressly provided otherwise in this
Article VI; PROVIDED, HOWEVER, that the Optionee may transfer Option Shares
at any time to a Related Person, provided that the Related Person agrees in
writing to be bound by the terms of this Agreement and the Plan.
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SECTION 6.2 - COMPANY'S RIGHT OF FIRST REFUSAL.
(a) The Optionee (a PROPOSED SELLER) shall be permitted
to transfer, assign, or sell any Option Shares in an arm's length transaction
(a PROPOSED TRANSFER); PROVIDED, HOWEVER, the Optionee shall first offer to
sell such Option Shares to the Company under the procedure described in
paragraphs (b) and (c) of this Section 6.2.
(b) Prior to consummating any Proposed Transfer, the
Proposed Seller shall first notify the Company in writing that the Proposed
Seller has received a bona fide written offer to purchase Option Shares (a
PURCHASE OFFER) and shall offer to sell to the Company all Option Shares
subject to the Purchase Offer upon the terms and conditions (including credit
terms, if any) set forth in such Purchase Offer. Such notice (the OFFER
NOTICE) shall set forth: (A) the number of Option Shares proposed to be
transferred, (B) the name and address of the Proposed Seller and the proposed
purchaser (the PROPOSED PURCHASER) and (C) the proposed amount of
consideration and all other applicable terms and conditions as set forth in,
and shall be accompanied by a copy of, the Purchase Offer.
(c) (i) The Company shall have the option for a period of
fifteen (15) days following the Company's receipt of the Offer Notice to
agree to purchase all of the Option Shares subject to the Purchase
Offer, upon the terms and conditions specified therein.
(ii) In the event the Company agrees to purchase
Option Shares pursuant to and in accordance with this Section 6.2,
such purchase shall occur at the principal office of the Company ten
(10) days following the expiration of the fifteen (15) day period
specified in subparagraph (i) of this paragraph (c). In no event
shall the Proposed Seller be required to transfer any Option Shares to
the Company pursuant to this Section 6.2 unless the Company purchases
all of the Option Shares subject to the Purchase Offer on the terms
and at the price stated therein and within the time periods specified
herein.
(d) In the event the Company does not agree to purchase all
of the Option Shares offered to the Company by a Proposed Seller pursuant to
this Section 6.2, then the Proposed Seller shall have the right for a period
of thirty (30) days after the termination of the Company's right to purchase
such Option Shares (or after waiver by the Company of its option to purchase
such Option Shares) to transfer to the Proposed Purchaser all, but not less
than all, of such Option Shares in the manner and on the terms and conditions
specified in the Purchase Offer; PROVIDED, HOWEVER, the Proposed Purchaser
shall agree in writing to be bound by this Agreement or the Plan.
SECTION 6.3 - LAPSE OF STOCK RESTRICTIONS AND RIGHTS.
The provisions set forth in Sections 6.1 and 6.2 hereof shall
terminate and cease to be of any further force or effect upon the completion
of a Public Offering, or a series of Public Offerings, which result in public
ownership of Common Stock of the Company possessing at least twenty percent
(20%) of the voting power of such Common Stock.
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IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto.
FIRSTWORLD COMMUNICATIONS, INC.,
a Delaware corporation
By:________________________________
President
By:________________________________
Secretary
___________________________________
Optionee
___________________________________
___________________________________
Address
Optionee's Taxpayer
Identification Number:
___________________________________
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STOCK APPRECIATION RIGHT AWARD AGREEMENT
OF
FIRSTWORLD COMMUNICATIONS, INC.
THIS AGREEMENT, dated as of ____________ ___, ____, is made by
and between FirstWorld Communications, Inc., a Delaware corporation (the
"COMPANY") and ______________ (the "HOLDER").
WHEREAS, the Company has adopted The 1999 Equity Incentive Plan
of FirstWorld Communications, Inc. (the "PLAN"), which authorizes the Company,
acting through its Board of Directors (or the Committee) to grant Stock
Appreciation Rights to certain employees of the Company or its Subsidiaries;
WHEREAS, the Company wishes to grant the Holder a Stock
Appreciation Right under the Plan; and
WHEREAS, the Committee has determined that it would be to the
advantage and best interests of the Company and its stockholders to grant the
Stock Appreciation Right provided for herein to the Holder as an inducement to
enter into or continue employment with the Company or a Subsidiary and the
Committee has advised the Company of its determination and instructed the
undersigned officers to issue this Stock Appreciation Right, as authorized under
the Plan.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Company and the Holder do hereby agree as
follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they
shall have the meaning specified below unless the context clearly indicates to
the contrary. The masculine pronoun shall include the feminine and neuter, and
the singular the plural, where the context so indicates. All capitalized terms
used herein without definition shall have the meanings ascribed to such terms in
the Plan.
SECTION 1.1 - AGREEMENT
"AGREEMENT" shall mean this Stock Appreciation Right Award
Agreement of FirstWorld Communications, Inc.
SECTION 1.2 - EXERCISE AMOUNT
The "EXERCISE AMOUNT" of a Stock Appreciation Right shall mean
the product of (i) the number of Phantom Shares as to which the Stock
Appreciation Right is then being exercised and (ii) the excess, if any, of (1)
the Value of a Phantom Share as defined in Section 1.8 hereto over (2) the
Initial Price of the Phantom Share established in this Agreement.
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SECTION 1.3 - HOLDER
"HOLDER" shall mean the above named and undersigned [Employee]
[consultant] of the Company or Subsidiary.
SECTION 1.4 - INITIAL PRICE
The "INITIAL PRICE" of a Phantom Share shall mean the exercise
price of a Phantom Share with respect to which a Stock Appreciation Right is
granted determined as of the date on which the Stock Appreciation Right is
granted, as determined by the Committee. The Holder may not dispute the
Committee's determination of the Initial Price.
SECTION 1.5 - PHANTOM SHARES
"PHANTOM SHARES" shall mean hypothetical, nonexistent, fractional
shares of Common Stock of the Company. One Phantom Share shall equal one share
of Common Stock of the Company.
SECTION 1.6 - PLAN
"PLAN" shall mean The 1999 Equity Incentive Plan of FirstWorld
Communications, Inc.
SECTION 1.7 - STOCK APPRECIATION RIGHT
"STOCK APPRECIATION RIGHT" shall mean the right granted to a
Holder under the Plan and this Agreement to receive cash measured by the
appreciation in the Value of the Phantom Shares granted to the Holder under the
Plan from the date of grant to the date of exercise, subject to the limitations
and conditions provided in the Plan and in this Agreement.
SECTION 1.8 -VALUE OF A PHANTOM SHARE
The "VALUE OF A PHANTOM SHARE" as of any date shall be the "fair
market value" of a share of Common Stock of the Company. The "fair market
value" of a share of Common Stock as of a given date shall mean: (i) the closing
price of a share of Common Stock on the principal exchange on which shares of
Common Stock are then trading, if any (or as reported on any composite index
which includes such principal exchange), on the trading day previous to such
date, or if shares were not traded on the trading day previous to such date,
then on the next preceding date on which a trade occurred; or (ii) if Common
Stock is not traded on an exchange but is quoted on NASDAQ or a successor
quotation system, the mean between the closing representative bid and asked
prices for the Common Stock on the trading day previous to such date as reported
by NASDAQ or such successor quotation system; or (iii) if Common Stock is not
publicly traded on an exchange and not quoted on NASDAQ or a successor quotation
system, the "fair market value" of a share of Common Stock shall be established
by the Board acting in good faith, giving predominate weight to the earnings
history, book value and prospects of the Company in light of market and industry
conditions generally.
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ARTICLE II
GRANT OF STOCK APPRECIATION RIGHT
SECTION 2.1 - GRANT OF STOCK APPRECIATION RIGHT
In consideration of the Holder's promises set forth in Section
2.3 below, and for other good and valuable consideration, on the date hereof,
the Company grants to the Holder, upon the terms and conditions set forth in
this Agreement, a Stock Appreciation Right with respect to _______________
(______) Phantom Shares. This Stock Appreciation Right is granted pursuant to
the Plan and shall also be subject to the terms and conditions set forth in the
Plan, which terms and conditions are hereby incorporated by reference.
SECTION 2.2 - INITIAL PRICE
The Initial Price of the Phantom Shares covered by the Stock
Appreciation Right shall be as follows:
(a) $_____ per share with respect to the First Installment
(as defined in Section 3.1 below);
(b) $_____ per share with respect to the Second Installment
(as defined in Section 3.1 below);
(c) $_____ per share with respect to the Third Installment
(as defined in Section 3.1 below); and
(d) $_____ per share with respect to the Fourth Installment
(as defined in Section 3.1 below).
SECTION 2.3 - CONSIDERATION TO THE COMPANY
In consideration of the granting of this Stock Appreciation Right
by the Company, the Holder agrees to render faithful and efficient services to
the Company or a Subsidiary, with such duties and responsibilities as the
Company shall from time to time prescribe. Nothing in this Agreement or in the
Plan shall confer upon the Holder any right to continue [in the employ] [as a
consultant] of the Company or any Subsidiary or shall interfere with or restrict
in any way the rights of the Company and its Subsidiaries, which are hereby
expressly reserved, to discharge the Holder at any time for any reason
whatsoever, with or without cause.
SECTION 2.4 - ADJUSTMENTS IN STOCK APPRECIATION RIGHT
In the event that the Company's Common Stock are changed into
or exchanged for a different number or kind of shares of the Company or other
securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split-up, stock dividend or
combination of shares, the Board shall make an appropriate and equitable
adjustment in the number of Phantom Shares
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as to which the Stock Appreciation Right, or portions thereof then
unexercised, shall be exercisable. Such adjustments shall be made with the
intent that, after the change or exchange of shares, the Holder's
proportionate interest shall be maintained as before the occurrence of such
event. Any adjustment in the Stock Appreciation Right shall be made without
change in the total Initial Price applicable to the Stock Appreciation Right
or the unexercised portion of the Stock Appreciation Right (except for any
change in the aggregate Initial Price resulting from rounding-off of share
quantities or prices) and with any necessary corresponding adjustment in
Initial Price per Phantom Share. Any such adjustment made by the Board shall
be final and binding upon the Holder, the Company and all other interested
persons.
SECTION 2.5 - RIGHT OF BOARD TO CONVERT STOCK APPRECIATION RIGHTS TO OPTIONS
The Holder hereby acknowledges that the Board shall have the
right, but not the obligation, to convert the Stock Appreciation Right hereby
granted to "options" to purchase Common Stock of the Company or such other
securities of the Company as the Common Stock may have been exchanged for or
into. If the value of the shares of Common Stock underlying the Option at the
time of conversion is less than or equal to the exercise price of the Option,
the Option issued to the Holder would be an Incentive Stock Option; however, if
the value of the shares of Common Stock underlying the Option at the time of
conversion is greater than the exercise price of the Option, the Option issued
to the Holder would be a Non-Qualified Stock Option. Any conversion effected
pursuant to this Section 2.5 shall adopt (i) an exercise price of the options
equal to the Initial Price as stated in this Agreement, (ii) an option period
equal to the period of exercisability as provided in this Agreement and (iii)
such other terms as determined by the Board. Upon the Board's determination to
effect a conversion pursuant to this Section 2.5, the Board shall provide prompt
notice to the Holder of such determination (the "CONVERSION NOTICE"). The
Holder must surrender this Agreement within fifteen (15) business days of the
delivery of the Conversion Notice. Within fifteen (15) business days of the
receipt of the Holder's Agreement, the Board shall issue an option agreement to
the Holder consistent with this Section 2.5 and such other terms as determined
by the Board.
ARTICLE III
PERIOD OF EXERCISABILITY
SECTION 3.1 - COMMENCEMENT OF EXERCISABILITY
(a) Subject to Section 5.4 and 5.8 hereof, the Stock
Appreciation Right shall become exercisable in installments as follows:
(i) The first installment (the "FIRST INSTALLMENT")
shall consist of twenty-five percent (25%) of the Phantom Shares covered
by the Stock Appreciation Right and shall become exercisable on [_______
__, ____] [the first anniversary of the date the Stock Appreciation
Right is granted or the date the Stock Appreciation Right begins to
vest, whichever is earlier].
(ii) The second installment (the "SECOND INSTALLMENT")
shall consist of twenty-five percent (25%) of the Phantom Shares covered
by the Stock Appreciation Right and shall become exercisable on [_______
__, ____] [the second anniversary of the date the Stock Appreciation
Right is granted or the date the Stock Appreciation Right begins to
vest, whichever
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is earlier].
(iii) The third installment (the "THIRD INSTALLMENT")
shall consist of twenty-five percent (25%) of the Phantom Shares covered
by the Stock Appreciation Right and shall become exercisable on [_______
__, ____] [the third anniversary of the date the Stock Appreciation
Right is granted or the date the Stock Appreciation Right begins to
vest, whichever is earlier].
(iv) The fourth installment (the "FOURTH INSTALLMENT")
shall consist of twenty-five percent (25%) of the Phantom Shares covered
by the Stock Appreciation Right and shall become exercisable on [_______
__, ____] [the fourth anniversary of the date the Stock Appreciation
Right is granted or the date the Stock Appreciation Right begins to
vest, whichever is earlier].
(b) No portion of the Stock Appreciation Right which is
unexercisable at [Termination of Consultancy] [Termination of
Employment] shall thereafter become exercisable.
SECTION 3.2 - DURATION OF EXERCISABILITY
The installments provided for in Section 3.1 are cumulative.
Each such installment which becomes exercisable pursuant to Section 3.1 shall
remain exercisable until it becomes unexercisable under Section 3.3 or Section
3.4.
SECTION 3.3 - EXPIRATION OF STOCK APPRECIATION RIGHT
The Stock Appreciation Right may not be exercised to any extent
by the Holder, the Holder's personal representative in the event of the death of
the Holder or any other individual after the first to occur of the following
events:
(a) The expiration of seven years from the date this Stock
Appreciation Right was granted;
(b) The expiration of ninety (90) days from the date of the
Holder's [Termination of Consultancy] [Termination of Employment] for
any reason prior to a Public Offering except death or Disability or
Termination for Cause;
(c) The expiration of thirty (30) days from the date of the
Holder's [Termination of Consultancy] [Termination of Employment] for
any reason after a Public Offering except death or Disability or
Termination for Cause;
(d) The expiration of twelve (12) months from the date of the
Holder's [Termination of Consultancy] [Termination of Employment] due to
the Holder's death or Disability; or
(e) At the discretion of the Committee, the date of the
Holder's [Termination of Consultancy] [Termination of Employment] if
such termination qualifies as a Termination for Cause.
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ARTICLE IV
EXERCISE OF STOCK APPRECIATION RIGHT
SECTION 4.1 - PERSONS ELIGIBLE TO EXERCISE
During the lifetime of the Holder, only the Holder may exercise a
Stock Appreciation Right granted to him or her, or any portion thereof. After
the death of the Holder, any exercisable portion of a Stock Appreciation Right
may, prior to the time when such portion becomes unexercisable under Article
III, be exercised by such Holder's personal representative or by any person
empowered to do so under the deceased Holder's will or under the then applicable
laws of descent and distribution.
SECTION 4.2 - PARTIAL EXERCISE
At any time and from time to time prior to the time when any
exercisable Stock Appreciation Right or exercisable portion thereof becomes
unexercisable under Article III, such Stock Appreciation Right or portion
thereof may be exercised in whole or in part; PROVIDED, HOWEVER, that the
Committee may require any partial exercise to be for the lesser of 25% of the
Award or 1,000 Phantom Shares.
SECTION 4.3 - MANNER OF EXERCISE
The Stock Appreciation Right, or any exercisable portion thereof,
may be exercised solely by delivery to the Company's Secretary of all of the
following prior to the time when such Stock Appreciation Right or such portion
becomes unexercisable under Article III hereof:
(a) Notice in writing signed by the Holder or other person
then entitled to exercise such Stock Appreciation Right or portion
thereof, stating that such Stock Appreciation Right or portion is
exercised, such notice complying with all applicable rules established
by the Committee; and
(b) In the event that the Stock Appreciation Right or portion
thereof shall be exercised pursuant to Section 4.1 by any person or
persons other than the Holder, appropriate proof of the right of such
person or persons to exercise the Stock Appreciation Right or portion
thereof.
SECTION 4.4 - EFFECT OF EXERCISE
(a) Upon the exercise of all or part of the Stock
Appreciation Right in accordance with the provisions of the Plan and
this Agreement, the Company shall pay to the Holder or other person
properly exercising such Stock Appreciation Right the Exercise Amount in
accordance with Section 4.4(b) below.
(b) The Exercise Amount determined under Section 4.4(a) shall
be paid in cash in three equal annual installments of principal
commencing as soon as practicable after the Stock
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Appreciation Right, or any portion thereof, has been exercised and the
Board has determined the Value of the Phantom Shares with respect to
which the Stock Appreciation Right has been exercised.
(c) The Company shall make appropriate deductions from the
amounts payable under Section 4.4(a) for payroll tax and other
withholdings required by federal, state or local law or requested by the
Holder.
SECTION 4.5 - RIGHTS AS STOCKHOLDER
The Holder shall not be, nor have any of the rights or privileges
of, a stockholder of the Company by virtue of this Stock Appreciation Right or
the exercise thereof.
ARTICLE V
OTHER PROVISIONS
SECTION 5.1 - ADMINISTRATION
The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret or revoke
any such rules. All actions taken and all interpretations and determinations
made by the Committee in good faith shall be final and binding upon the Holder,
the Company and all other interested persons. No member of the Committee shall
be personally liable for any action, determination or interpretation made in
good faith with respect to the Plan or this Agreement. In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under the Plan and this Agreement except with
respect to matters which under Rule 16b-3 or Section 162(m) of the Code, or any
regulations or rules issued thereunder, are required to be determined in the
sole discretion of the Committee.
SECTION 5.2 - WITHHOLDING
The Holder acknowledges that the Company or a Subsidiary may have
an obligation to withhold a portion of the amounts otherwise payable to the
Holder upon exercise of the Stock Appreciation Right pursuant to federal, state
and local income tax laws and regulations, and the Company and its Subsidiaries
are hereby authorized to withhold any such required amount.
SECTION 5.3 - STOCK APPRECIATION RIGHT NOT TRANSFERABLE
Neither the Stock Appreciation Right nor any interest or right
therein or part thereof may be sold, encumbered, pledged, assigned or
transferred in any manner other than by will or by the applicable laws of
descent and distribution. The Stock Appreciation Right may be exercised during
the Holder's lifetime only by the Holder or his guardian or legal
representative.
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SECTION 5.4 - CHANGE IN CONTROL
Subject to Section 9.3(d) of the Plan, in the event of a Change
of Control, the Board in its sole and absolute discretion shall provide either
(i) that all Stock Appreciation Rights granted
hereunder shall become fully exercisable notwithstanding anything to the
contrary set forth herein, or
(ii) that the resulting or surviving corporation in any
merger or consolidation associated with such Change of Control will
assume the Stock Appreciation Rights granted hereunder or substitute for
each Stock Appreciation Right granted hereunder a right similar to that
granted hereby on terms and conditions both as to the Initial Price,
Value of a Phantom Share and otherwise, which shall substantially
preserve to each Holder the rights and benefits of the applicable Stock
Appreciation Right outstanding hereunder granted by the Company
[PROVIDED, HOWEVER, that, [except as otherwise provided in the employment
agreement between the Company and the Holder,] notwithstanding anything to the
contrary set forth in the Plan or elsewhere herein, the Stock Appreciation Right
granted hereby shall become fully exercisable if a material reduction in the
Holder's position or salary occurs within 12 months of a Change of Control and
such material reduction in position or salary is directly attributable to the
Change of Control. All decisions as to the acceleration of the Stock
Appreciation Right as a result of a reduction in a Holder's position or salary
which is directly attributable to a Change of Control, including, but not
limited to, whether a reduction in position or salary is directly attributable
to a Change of Control or whether such a reduction in position or salary is
material, shall be made in the reasonable discretion of the Board.
SECTION 5.5 - NOTICES
Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary, and any
notice to be given to the Holder shall be addressed to him or her at the address
given beneath his or her signature hereto. By a notice given pursuant to this
Section, either party may hereafter designate a different address for notices to
be given to him or her. Any notice which is required to be given to the Holder
shall, if the Holder is then deceased, be given to the Holder's personal
representative if such representative has previously informed the Company of
this status and address by written notice under this Section 5.5. Any notice
shall have been deemed duly given when delivered, if personally delivered, and
two (2) days after mailing, if mailed in a properly sealed envelope addressed as
aforesaid, and deposited (with postage prepaid) in a post office or branch post
office regularly maintained by the United States Postal Service.
SECTION 5.6 - TITLES
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
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SECTION 5.7 - CONSTRUCTION
This Agreement shall be administered, interpreted and enforced
under the internal laws of the State of Delaware without regard to conflicts of
laws thereof.
SECTION 5.8 - STOCKHOLDER APPROVAL
The Plan will be submitted for approval by the Company's
stockholders within twelve (12) months after the date the Plan was initially
adopted by the Board. This Stock Appreciation Right may not be exercised to any
extent by anyone prior to the time when the Plan is approved by the
stockholders, and if such approval has not been obtained by the end of said
twelve-month period, this Option shall thereupon be canceled and become null and
void.
SECTION 5.9 - CONFORMITY TO SECURITIES LAWS
The Holder acknowledges that the Plan is intended to conform to
the extent necessary with all provisions of the Securities Act and the Exchange
Act and any and all regulations and rules promulgated by the Securities and
Exchange Commission thereunder, including, without limitation, Rule 16b-3.
Notwithstanding anything herein to the contrary, the Plan shall be administered,
and the Stock Appreciation Right is granted and may be exercised, only in such a
manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, the Plan and this Agreement shall be deemed amended
to the extent necessary to conform to such laws, rules and regulations.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto.
FIRSTWORLD COMMUNICATIONS, INC.,
a Delaware corporation
By:
-----------------------------
President
By:
-----------------------------
Secretary
- -----------------------------------
Holder
- -----------------------------------
- -----------------------------------
Address
Holder's Taxpayer
Identification Number:
- -----------------------------------
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Exhibit 5.1
[LETTERHEAD OF LATHAM & WATKINS]
April 14, 1999
FirstWorld Communications, Inc.
7100 E. Belleview Avenue, Suite 210
Greenwood Village, Colorado 80111
Re: FORM S-8 REGISTRATION STATEMENT
Ladies and Gentlemen:
In connection with the registration by FirstWorld Communications,
Inc., a Delaware corporation (the "Registrant"), of 5,000,000 shares of Series B
common stock, par value $.0001 per share (the "Shares"), of the Registrant to be
issued pursuant to The 1999 Equity Incentive Plan of FirstWorld Communications,
Inc. (the "Plan") under the Securities Act of 1933, as amended (the "Act"), on a
Registration Statement on Form S-8 filed with the Securities and Exchange
Commission on April 14, 1999 (as amended from time to time, the "Registration
Statement"), you have requested our opinion with respect to the matters set
forth below.
In our capacity as your counsel in connection with such registration,
we are familiar with the proceedings taken and proposed to be taken by the
Registrant in connection with the authorization, issuance and sale of the
Shares. In addition, we have made such legal and factual examinations and
inquiries, including an examination of originals or copies certified or
otherwise identified to our satisfaction of such documents, corporate records
and instruments, as we have deemed necessary or appropriate for purposes of this
opinion.
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, and the
conformity to authentic original documents of all documents submitted to us as
copies.
We are opining herein as to the effect on the subject transaction only
of the General Corporation Law of the State of Delaware, and we express no
opinion with respect to the applicability thereto, or the effect thereon, of the
laws of any other jurisdiction or any other laws, or as to any matters of
municipal law or the laws of any other local agencies within the state.
Subject to the foregoing, it is our opinion that as of the date hereof
the Shares have been duly authorized, and, upon the issuance of and payment for
the Shares in
<PAGE>
LATHAM & WATKINS
FirstWorld Communications, Inc.
April 14, 1999
Page 2
accordance with the terms set forth in the Plan, the Shares will be validly
issued, fully paid and nonassessable.
We consent to your filing this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Latham & Watkins
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated December 11, 1998, relating to the
financial statements of FirstWorld Communications, Inc. (the "Registrant"),
which appears on page F-2 of the Registrant's Annual Report on Form 10-K for the
year ended September 30, 1998, as amended through the date hereof.
PRICEWATERHOUSECOOPERS LLP
San Diego, California
April 14, 1999
