FIRSTWORLD COMMUNICATIONS, INC.
STOCK OPTION AGREEMENT
Capitalized terms used herein but not otherwise defined herein, shall
have the meanings assigned to such terms in that certain Employment
Agreement, dated as of September 28, 1998, by and between the Company (as
defined below) and Xxxxxxx X. Xxxxxxxx (the "EMPLOYMENT AGREEMENT").
1. NOTICE OF STOCK OPTION GRANT
(a) NOTICE:
Xxxxxxx X. Xxxxxxxx
c/o FirstWorld Communications
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
The undersigned optionee ("OPTIONEE") has been granted an option to
purchase (the "STOCK OPTION") Series B Common Stock, par value $.0001 per
share (the "COMMON STOCK"), of FirstWorld Communications, Inc. (the
"COMPANY"), subject to the terms and conditions of this Stock Option
Agreement, as follows.
Date of Grant: 9/28/98
Vesting Commencement Date: 10/1/98
Exercise Price per Share: $6.00 (as adjusted pursuant to Section
2(c) below)
Total Number of Shares Granted: 2,805,000 (as adjusted pursuant to
Section 2(c) below)
Total Exercise Price: $16,830,000 (as adjusted pursuant to
Section 2(c) below)
Type of Option: Nonstatutory Stock Option
Term/Expiration Date: 9/30/05
(b) VESTING SCHEDULE:
This Stock Option shall be exercisable, in whole or in part, according
to the following vesting schedule:
(i) with respect to one-third (1/3) of the Shares purchasable
thereunder, on the Commencement Date (as defined in the Employment
Agreement);
(ii) with respect to one-third (1/3) of the Shares purchasable
thereunder, on the first anniversary of the Commencement Date; and
(iii) with respect to the remaining one-third (1/3) of the Shares
purchasable thereunder, on the second anniversary of the Commencement Date;
PROVIDED, HOWEVER, that immediately prior to the effectiveness of a Change of
Control (as defined below) of the Company, all of the Shares subject to the
Stock Option shall immediately vest; and FURTHER PROVIDED, HOWEVER, if the
Company has a market capitalization of at least $1.2 billion (as adjusted as
described below) for a period of twenty (20) consecutive trading days at any
time during a three year period beginning on October 1, 1998 and ending on
September 30, 2001, then all of the Shares subject to the Stock Option shall
immediately vest.
For the purposes hereof, a "Change in Control" of the Company means the
occurrence of one of the following events:
(1) the sale, lease, transfer, conveyance or other disposition, in
one or a series of related transactions, of all or substantially all of
the assets of the Company and its subsidiaries, taken as a whole, to any
person (as such term is defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT")) or group (as such
term is defined in Section 13(d)(3) of the Exchange Act and Section
14(d)(2) of the Exchange Act);
(2) the adoption of a plan relating to the liquidation or dissolution
of the Company; or
(3) any person (as defined above) or group (as defined above) other
than the Permitted Holders (as defined below) is or becomes the Beneficial
Owner (as defined below), directly or indirectly, of 50% or more of the
total voting stock or total common equity of the Company, including by way
of merger, consolidation or otherwise.
For the purposes hereof, the term "Permitted Holders" means (a) Xxxxxx X.
Xxxxx, Colorado Spectra 1, LLC, a Colorado limited liability company ("SPECTRA
1"), Colorado Spectra 2, LLC, a Colorado limited liability company ("SPECTRA
2"), Colorado Spectra 3, LLC, a Colorado limited liability company ("SPECTRA
3"), Enron Capital & Trade Resources Corp., a Delaware corporation ("ENRON"),
and any other person which any of the foregoing entities directly or indirectly
controls, or is under common control with, or is controlled by (other than the
Company and its subsidiaries) and (b) any child, stepchild, spouse, sibling,
son-in-law, daughter-in-law, brother-in-law or sister-in-law (including adoptive
relationships) of Xxxxxx X. Xxxxx (or any entity all of the beneficial ownership
interests of which are owned by such a relative) to whom membership interests in
Spectra 1, Spectra 2 or Spectra 3 are distributed to upon the death of Xxxxxx X.
Xxxxx. The term "Beneficial Owner" means a beneficial owner as defined in Rules
13d-3 and 13d-5 under the Exchange Act (or any successor rules), including (but
not limited to) the provisions of such rules that a person shall be deemed to
have beneficial ownership of all securities that such person has a right to
acquire within 60 days; PROVIDED that a person will not be deemed a beneficial
owner of, or to own beneficially, any securities if such beneficial ownership
(1) arises solely as a result of a revocable proxy delivered in response to a
proxy or consent solicitation made pursuant to, and in accordance with, the
Exchange Act and (2) is not also then reportable on Schedule 13D or Schedule 13G
(or any successor schedule) under
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the Exchange Act. The term "controls," 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 voting interests or otherwise.
For the purposes hereof, market capitalization of $1.2 billion assumes
60,000,000 fully diluted shares of Common Stock (regardless of whether
60,000,000 shares of Common Stock are actually trading as of any period of
determination) and a market price of $20.00 per share (subject to adjustment as
described in the following sentence). If the number of fully diluted shares of
Common Stock is greater than or less than 60,000,000 shares of Common Stock, the
target market capitalization shall be proportionately adjusted; PROVIDED THAT
the $20.00 per share market price would not be so adjusted, except to the extent
required to appropriately reflect any subdivision (by any stock split, stock
dividend, recapitalization or otherwise), combination (by reverse stock split or
otherwise) or other adjustment in the number of outstanding shares of the
Company as determined on a fully diluted basis made without the receipt of
consideration to the Company after October 1, 1998.
(c) TERMINATION PERIOD:
Optionee acknowledges that he (or his estate) will have ninety (90) days
from the Date of Termination (as defined in the Employment Agreement) to
exercise all Shares of Common Stock vested under the Stock Option as of the Date
of Termination. In no event may Optionee exercise this Option after the
"Term/Expiration Date" set forth in Section 1(a) above.
2. AGREEMENT
(a) GRANT OF OPTION. The Board of Directors of the Company (the
"BOARD") hereby grants to the Optionee the Stock Option to purchase the
number of Shares set forth in the Notice of Grant, at the exercise price
per share set forth in the Notice of Grant (the "EXERCISE PRICE"), and
subject to the terms and conditions hereof.
This Stock Option is not intended to qualify as an Incentive Stock
Option as defined in Section 422 of the Code; therefore, this Stock Option
shall be treated as a Nonstatutory Stock Option ("NSO").
(b) EXERCISE OF OPTION.
(1) RIGHT TO EXERCISE. This Stock Option is exercisable during
its term in accordance with the vesting schedule set out in the Notice
of Grant and the applicable provisions of this Stock Option Agreement.
(2) METHOD OF EXERCISE. This Stock Option is exercisable by
delivery of an exercise notice, in the form attached as EXHIBIT A (the
"EXERCISE NOTICE"), which shall state the election to exercise the
Stock Option, the number of Shares with respect to which the Stock
Option is being exercised, and such other representations and
agreements as may be required by the Company. The Exercise Notice
shall be accompanied by payment of the aggregate Exercise Price as to
all Shares being exercised thereby. This Stock Option shall be deemed
to be
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exercised upon receipt by the Company of such fully executed Exercise
Notice accompanied by the aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of a Stock
Option unless such issuance and such exercise complies with applicable
laws. Assuming such compliance, for income tax purposes the Shares
shall be considered transferred to the Optionee on the date on which
the Stock Option is exercised with respect to such Shares.
(c) ADJUSTMENT TO EXERCISE PRICE AND NUMBER OF SHARES. In order to
prevent dilution of the rights granted to Optionee under the Stock Option,
the number of shares of Common Stock subject to the Stock Option and the
Exercise Price of such Common Stock shall be subject to adjustment from
time to time as provided in this Section 2(c).
(1) SUBDIVISION OR COMBINATION OF STOCK.
(A) If at any time or from time to time after the
Commencement Date the Company shall subdivide (by stock split,
stock dividend or otherwise) its outstanding shares of common
stock, the Exercise Price in effect immediately prior to such
subdivision shall, concurrently with the effectiveness of such
subdivision, be proportionately decreased. In the event the
outstanding shares of common stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser
number of shares of common stock, the Exercise Price then in
effect shall, concurrently with the effectiveness of such
combination or consolidation, be proportionately increased.
(B) Upon each adjustment of the Exercise Price as provided
in Section 2(c)(1)(A), Optionee thereafter shall be entitled to
purchase, at the Exercise Price resulting from such adjustment,
the number of shares of Common Stock (calculated to the nearest
whole share) obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment
and dividing the product thereof by the Exercise Price resulting
from such adjustment.
(2) OTHER DISTRIBUTIONS.
(A) In case the Company shall after the Commencement Date
distribute to the holders of its common stock evidences of its
indebtedness or assets (excluding regular cash dividends or
distributions and dividends or distributions referred to in
Section 2(c)(1) above) in connection with a split-up, spin-off or
otherwise, then in each such case the Exercise Price in effect
thereafter shall be determined by multiplying the Exercise Price
in effect immediately prior thereto by a fraction, the numerator
of which shall be the total number of shares of common stock
outstanding multiplied by the Fair Market Value (as defined in
Section 2(c)(5) below) per share of
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common stock prior to such distribution, less the fair market
value (as determined by the Board) of said assets or evidences
of indebtedness so distributed, and the denominator of which
shall be the total number of shares of common stock
outstanding multiplied by the Fair Market Value per share of
common stock prior to the distribution. Such adjustment shall
be made successively whenever such a record date is fixed.
Such adjustment shall be made whenever any such distribution
is made and shall become effective immediately after the
record date for the determination of stockholders entitled to
receive such distribution.
(B) Upon each adjustment of the Exercise Price as provided
in Section 2(c)(2)(A), Optionee thereafter shall be entitled to
purchase, at the Exercise Price resulting from such adjustment,
the number of shares of Common Stock (calculated to the nearest
whole share) obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment
and dividing the product thereof by the Exercise Price resulting
from such adjustment.
(3) No adjustment in the Exercise Price and/or the number of
shares subject to the Stock Option shall be made if such adjustment would
result in a change in (i) the Exercise Price of less than one cent ($0.01)
per share or (ii) the number of shares represented by the Stock Option of
less than one share (the "ADJUSTMENT THRESHOLD AMOUNT"). Any adjustment
not made because the Adjustment Threshold Amount is not satisfied shall be
carried forward and made, together with any subsequent adjustments, at the
earlier of such time as (a) the aggregate amount of all such adjustments is
at least equal to the Adjustment Threshold Amount or (b) the shares of
Common Stock subject to the Stock Option are acquired.
(4) Upon the occurrence of each adjustment or readjustment of
the Exercise Price pursuant to this Section 2(c), the Company promptly
shall compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to Optionee a certificate setting forth such
adjustment or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based.
(5) "Fair Market Value" of a share of common stock as of a given
date shall be: (i) the average closing sale price of a share of common
stock on the principal exchange on which the common stock is then trading,
if any, over the last ten trading days prior to such date, or, if shares
were not traded during such period, over the next preceding ten trading day
period during which a sale occurred; (ii) if the common stock is not traded
on an exchange but is quoted on Nasdaq or a successor quotation system, (1)
the average closing sale price over the last ten trading days (if the
common stock is then quoted on the Nasdaq National Market or the Nasdaq
SmallCap Market) or (2) the mean between the closing representative bid and
asked prices (in all other cases) for a share of the common stock over the
last ten trading days prior to such date, or, if shares were not traded
during such period, then over the next preceding ten trading day period
during which a sale
5
occurred, as reported by Nasdaq or such successor quotation system;
(iii) if the common stock is not publicly traded on an exchange and not
quoted on Nasdaq or a successor quotation system, the mean between the
closing bid and asked prices for a share of common stock over the last
ten trading days prior to such date, or, if shares were not traded
during such period, then over the next preceding ten trading day period
during which a sale occurred, as determined in good faith by the Board;
or (iv) if the common stock is not publicly traded, the fair market
value of a share of common stock established by the Board acting in good
faith.
(6) Prior to the consummation of any recapitalization,
reorganization, reclassification, consolidation, merger or other
transaction which is effected in such a way that holders of common stock
are entitled to receive (either directly or upon subsequent liquidation)
stock, securities or assets with respect to or in exchange for such
securities (each an "ORGANIC CHANGE"), the Company shall make
appropriate provision to ensure that Optionee shall have the right to
acquire and receive upon Optionee's acquisition of the shares of Common
Stock subject to the Stock Option subsequent to such consummation, in
lieu of or in addition to (as the case may be) the shares of Common
Stock subject to the Stock Option, such shares of stock, securities or
assets as Optionee would be entitled to receive if the shares of Common
Stock subject to the Stock Option had been acquired immediately prior to
such Organic Change. In any such case, the Company shall make
appropriate provision with respect to Optionee's rights and interests to
insure that the provisions of this Section 2(c) shall thereafter be
applicable to the Stock Option. The Company shall not effect any such
Organic Change unless, prior to the consummation thereof, the successor
entity (if other than the Company) resulting from such Organic Change
(including a purchaser of all or substantially all of the Company's
assets) assumes by written instrument the obligation to deliver to
Optionee such shares of stock, securities or assets as, in accordance
with the foregoing provisions, Optionee may be entitled to acquire upon
acquisition of the shares of Common Stock subject to the Stock Option.
(d) LOCK-UP PERIOD. Optionee hereby agrees that, if so requested by
the Company or any representative of the underwriters (the "MANAGING
UNDERWRITER") in connection with any registration of the offering of any
securities of the Company under the Securities Act, Optionee shall not sell
or otherwise transfer any Shares or other securities of the Company during
the 180-day period (or such other period as may be requested in writing by
the Managing Underwriter and agreed to in writing by the Company) (the
"MARKET STANDOFF PERIOD") following the effective date of the registration
statement of the Company filed under the Securities Act. Such restriction
shall apply only to the first registration statement of the Company to
become effective under the Securities Act that includes securities to be
sold on behalf of the Company to the public in an underwritten public
offering under the Securities Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
(e) METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall
be by any of the following, or a combination thereof, at the election of
the Optionee:
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(1) cash or check;
(2) consideration received by the Company under a formal
cashless exercise program adopted by the Company; or
(3) surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee
for more than six (6) months on the date of surrender and (ii) have a
Fair Market Value (as defined in Section 2(c)(5) above) on the date of
surrender equal to the aggregate Exercise Price of the Shares being
exercised thereby.
(f) RESTRICTIONS ON EXERCISE.
(1) This Stock Option may not be exercised if the issuance of
such Shares upon such exercise or the method of payment of
consideration for such Shares would constitute a violation of any
Applicable Law (as defined below).
For the purposes hereof, "Applicable Laws" means the requirements
relating to the administration of stock option plans under U.S. state
corporate laws, U.S. federal and state securities laws, the Internal
Revenue Code of 1986, as amended, and any stock exchange or quotation
system on which the Common Stock is listed or quoted.
(2) Upon any exercise of the Stock Option, Optionee agrees
that he will hold at least 40% of the shares acquired pursuant to
such Stock Option exercise for at least one year from the date of
such Stock Option exercise; PROVIDED, HOWEVER, that the foregoing
requirement will not apply from and after (i) a Change in Control
(as defined above) of the Company or (ii) a merger, consolidation
or other transaction in which the Company is not the surviving
entity and in which all of the Company's stockholders receive cash
or other consideration for their shares as a result of such merger,
consolidation or other transaction. In addition, in connection
with a merger, consolidation or other transaction in which the
Company is not the surviving entity and in which all of the
Company's stockholders receive stock for their shares as a result
of such merger, consolidation or other transaction, the period
during which Optionee held the restricted shares of the Company
will be added to the time Optionee holds the shares acquired in
connection with such merger, consolidation or other transaction for
purposes of determining the one year holding period for the
restricted shares.
In connection with all Stock Option exercises, certificates
representing an aggregate of 40% of the shares acquired pursuant to
such exercise shall be endorsed conspicuously as follows:
"BY THE TERMS OF AN EMPLOYMENT AGREEMENT, CERTAIN RESTRICTIONS
HAVE BEEN PLACED ON THE TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE. THE CORPORATION WILL FURNISH A COPY OF SUCH
AGREEMENT TO THE HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON
REQUEST
7
TO THE CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED
OFFICE."
In addition, the Company will be entitled to issue
"stop-transfer" orders to its transfer agent (the "TRANSFER AGENT")
with respect to the Common Stock that bears the endorsement set
forth above. At the conclusion of each applicable one-year period,
the Company will cause the Transfer Agent to remove the above
legend from the shares bearing such legend and which were
restricted from transfer during the prior one-year period pursuant
to this Section 2(f)(2).
(g) NON-TRANSFERABILITY OF OPTION. This Stock Option may not be
transferred in any manner otherwise than by will or by the laws of descent
or distribution and may be exercised during the lifetime of Optionee only
by Optionee. The terms of this Stock Option Agreement shall be binding
upon the executors, administrators, heirs, successors and assigns of the
Optionee.
(h) TERM OF OPTION. This Stock Option may be exercised only within
the term set out in the Notice of Grant, and may be exercised during such
term only in accordance with the terms of this Stock Option.
(i) TAX CONSEQUENCES. Set forth below is a brief summary as of the
date of this Stock Option of some of the federal tax consequences of
exercise of this Stock Option and disposition of the Shares. THIS SUMMARY
IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS
STOCK OPTION OR DISPOSING OF THE SHARES.
(1) EXERCISE OF NONSTATUTORY STOCK OPTION. There may be a
regular federal income tax liability upon the exercise of a
Nonstatutory Stock Option. The Optionee will be treated as having
received compensation income (taxable at ordinary income tax rates)
equal to the excess, if any, of the Fair Market Value of the Shares on
the date of exercise over the Exercise Price. If Optionee is an
employee or a former employee, the Company will be required to
withhold from Optionee's compensation or collect from Optionee and pay
to the applicable taxing authorities an amount in cash equal to a
percentage of this compensation income at the time of exercise, and
may refuse to honor the exercise and refuse to deliver Shares if such
withholding amounts are not delivered at the time of exercise.
(2) DISPOSITION OF SHARES. In the case of an NSO, if Shares are
held for at least one year, any gain realized on disposition of the
Shares will be treated as long-term capital gain for federal income
tax purposes.
(j) ENTIRE AGREEMENT; GOVERNING LAW. The Employment Agreement and
this Stock Option Agreement constitute the entire agreement of the parties
with respect to the subject matter hereof and supersede in their entirety
all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to
the Optionee's interest except by means of a writing
8
signed by the Company and Optionee. This agreement is governed by the
internal substantive laws, but not the choice of law rules, of
California.
(k) NO GUARANTEE OF CONTINUED EMPLOYMENT. OPTIONEE ACKNOWLEDGES AND
AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF
IS NOT EARNED THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS STOCK
OPTION OR ACQUIRING SHARES HEREUNDER. OPTIONEE FURTHER ACKNOWLEDGES AND
AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OF THE COMPANY.
Optionee has reviewed this Stock Option in its entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Stock
Option Agreement and fully understands all provisions of the Stock Option.
Optionee hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Board upon any questions arising under
this Stock Option. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: FIRSTWORLD COMMUNICATIONS, INC.,
a Delaware corporation
/s/ XXXXXXX X. XXXXXXXX /s/ XXXXXX X. XXXXXXX
------------------------------------ --------------------------------
XXXXXXX X. XXXXXXXX Name: Xxxxxx X. Xxxxxxx
Title: Executive Vice President
------------------------------------
------------------------------------
------------------------------------
Residence Address
Date: September 28, 1998
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EXHIBIT A
EXERCISE NOTICE
FirstWorld Communications
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
1) EXERCISE OF OPTION. Effective as of today, ____________ ___, _____, the
undersigned ("OPTIONEE") hereby elects to exercise Optionee's option to
purchase (the "OPTION") ___________ shares of the Series B Common Stock,
par value $.0001 per share (the "SHARES"), of FirstWorld Communications,
Inc., a Delaware corporation (the "COMPANY"), under and pursuant to the
Stock Option Agreement dated September 28, 1998 (the "OPTION AGREEMENT").
2) DELIVERY OF PAYMENT. Optionee herewith delivers to the Company the full
purchase price of the Shares, as set forth in the Option Agreement.
3) REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee has
received, read and understood the Option Agreement and agrees to abide by
and be bound by its terms and conditions.
4) RIGHTS AS STOCKHOLDER. Until the issuance of the Shares (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to the Shares
acquired hereby, notwithstanding the exercise of the Option. The Shares
shall be issued to the Optionee as soon as practicable after the Option is
exercised.
5) COMPANY'S RIGHT OF FIRST REFUSAL. Before any Shares held by Optionee or
any transferee (either being sometimes referred to herein as the "HOLDER")
may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of
first refusal to purchase the Shares on the terms and conditions set forth
in this Section (the "RIGHT OF FIRST REFUSAL").
a) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares shall deliver
to the Company a written notice (the "NOTICE") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer such
Shares; (ii) the name of each proposed purchaser or other transferee
("PROPOSED TRANSFEREE"); (iii) the number of Shares to be transferred
to each Proposed Transferee; and (iv) the bona fide cash price or
other consideration for which the Holder proposes to transfer the
Shares (the "OFFERED PRICE"), and the Holder shall offer the Shares at
the Offered Price to the Company or its assignee(s).
A-1
b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty (30)
days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all,
but not less than all, of the Shares proposed to be transferred to any
one or more of the Proposed Transferees, at the purchase price
determined in accordance with subsection (c) below.
c) PURCHASE PRICE. The purchase price ("PURCHASE PRICE") for the Shares
purchased by the Company or its assignee(s) under this Section shall
be the Offered Price. If the Offered Price includes consideration
other than cash, the cash equivalent value of the non-cash
consideration shall be determined by the Board of Directors of the
Company (the "BOARD") in good faith.
d) PAYMENT. Payment of the Purchase Price shall be made, at the option
of the Company or its assignee(s), in cash (by check), by cancellation
of all or a portion of any outstanding indebtedness of the Holder to
the Company (or, in the case of repurchase by an assignee, to the
assignee), or by any combination thereof within 30 days after receipt
of the Notice or in the manner and at the times set forth in the
Notice.
e) HOLDER'S RIGHT TO TRANSFER. If all of the Shares proposed in the
Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this
Section, then the Holder may sell or otherwise transfer such Shares to
that Proposed Transferee at the Offered Price or at a higher price,
PROVIDED that such sale or other transfer is consummated within 60
days after the date of the Notice, that any such sale or other
transfer is effected in accordance with any applicable securities laws
and that the Proposed Transferee agrees in writing that the provisions
of this Section shall continue to apply to the Shares in the hands of
such Proposed Transferee. If the Shares described in the Notice are
not transferred to the Proposed Transferee within such period, a new
Notice shall be given to the Company, and the Company and/or its
assignees shall again be offered the Right of First Refusal before any
Shares held by the Holder may be sold or otherwise transferred.
f) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the contrary
contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Optionee's lifetime or on the Optionee's
death by will or intestacy to the Optionee's immediate family or a
trust for the benefit of the Optionee's immediate family shall be
exempt from the provisions of this Section. "Immediate Family" as
used herein shall mean spouse, lineal descendant or antecedent,
father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred
subject to the provisions of this Section, and there shall be no
further transfer of such Shares except in accordance with the terms of
this Section.
A-2
g) TERMINATION OF RIGHT OF FIRST REFUSAL. The Company's Right of First
Refusal shall terminate immediately as to all Shares upon the
occurrence of the first to occur of the following events:
i) The acquisition of the Company by another entity by means of the
merger or consolidation of the Company with or into another
corporation in which the stockholders of the Company own less
than 50% of the voting securities of the surviving entity;
ii) The sale of all or substantially all of the assets of the
Company; or
iii) The date of the first sale of Common Stock of the Company to the
general public pursuant to a registration statement filed with
and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended.
6) TAX CONSULTATION. Optionee understands that Optionee may suffer adverse
tax consequences as a result of Optionee's purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company
for any tax advice.
7) RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
a) LEGENDS. Optionee understands and agrees that the Company shall cause
the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of
the Shares together with any other legends that may be required by the
Company or by state or federal securities laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE
ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A
COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE
ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL
ARE BINDING ON TRANSFEREES OF THESE SHARES.
b) REFUSAL TO TRANSFER. The Company shall not be required (i)
to transfer on its books any Shares that have been sold
or otherwise transferred in violation of any of the
provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom
such Shares shall have been so transferred.
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8) SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this
Agreement shall inure to the benefit of the successors and assigns of
the Company. Subject to the restrictions on transfer herein set
forth, this Agreement shall be binding upon Optionee and his or her
heirs, executors, administrators, successors and assigns.
9) INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith
to the Board (or a committee thereof) which shall review such dispute
at its next regular meeting. The resolution of such a dispute by the
Board (or a committee thereof) shall be final and binding on all
parties.
10) GOVERNING LAW. This Agreement is governed by the internal substantive
laws, but not the choice of law rules, of California.
11) ENTIRE AGREEMENT. The Employment Agreement and the Option Agreement
are incorporated herein by reference. This Agreement, the Employment
Agreement and the Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in
their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee's interest except by means of a
writing signed by the Company and Optionee.
Submitted by: Accepted by:
OPTIONEE: FIRSTWORLD COMMUNICATIONS, INC.
a Delaware corporation
XXXXXXX X. XXXXXXXX
________________________________
________________________________ Name: __________________________
Signature Title: _________________________
Address:
Address:
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
________________________________
________________________________
________________________________
Date Received
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