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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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
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(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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