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.
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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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