<PAGE>
As filed with the Securities and Exchange Commission on March 31, 2000
Registration No. 333-
---------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ASK JEEVES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 7375 94-3334199
----------------------------------------------------------
(State of Incorporation) (Primary Standard Industrial) (I.R.S. Employer
Classification Code Number Identification No.)
5858 HORTON STREET, SUITE 350
EMERYVILLE, CALIFORNIA 94608
----------------------------
(Address of principal executive offices)
1996 EQUITY INCENTIVE PLAN
1998-A DIRECT HIT STOCK PLAN
1999 NON-OFFICER EQUITY INCENTIVE PLAN
(Full title of the plan)
ROBERT W. WRUBEL
CHIEF EXECUTIVE OFFICER
ASK JEEVES, INC.
5858 HORTON STREET, SUITE 350
EMERYVILLE, CALIFORNIA 94608
(510) 985-7400
--------------
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
COPIES TO:
SUZANNE SAWOCHKA HOOPER, ESQ.
MICHAEL L. WEINER, ESQ.
COOLEY GODWARD LLP
FIVE PALO ALTO SQUARE
3000 EL CAMINO REAL
PALO ALTO, CALIFORNIA 94306-2155
(650) 843-5000
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE EXERCISE PRICE PER AGGREGATE EXERCISE AMOUNT OF
TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) REGISTRATION FEE
---------- ------- -------- ----------------
<S> <C> <C> <C> <C>
Common Stock ($ .001 par value) 5,933,666 (SEE NOTE TO CALCULATION $248,861,188 $ 65,700
---------- --------------- -----------
OF REGISTRATION FEE
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) and (h)(1). The price per
share and aggregate exercise price are based upon (a) the exercise
prices of (i) options to purchase 2,808,606 shares of the
Registrant's Common Stock at a weighted average exercise price of
$3.37 per share pursuant to the 1996 Equity Incentive Plan, (ii)
options to purchase 321,610 shares of the Registrant's Common Stock at
a weighted average exercise price of $9.08 per share pursuant to the
1998-A Direct Hit Stock Plan, and (iii) options to purchase 1,003,900
shares of the Registrant's Common Stock at a weighted average
exercise price $105.65 per share pursuant to the 1999 Non-Officer
Equity Incentive Plan; and (b) the average of the high and low
prices of the Registrant's Common Stock as reported on the Nasdaq
Stock Market on March 29, 2000, for 1,799,460 shares reserved for
future issuance pursuant to the option plans listed above (pursuant
to Rule 457(c) of the Securities Act of 1933, as amended).
FEE CALCULATION TABLE
<TABLE>
<CAPTION>
TITLE OF SHARES NUMBER OF SHARES WEIGHTED AVERAGE AGGREGATE
--------------- ----------------
EXERCISE PRICE EXERCISE PRICE
-------------- --------------
<S> <C> <C> <C> <C>
SHARES ISSUABLE PURSUANT 2,808,606 $3.37 $ 9,465,765
TO ISSUED STOCK OPTIONS
PURSUANT TO THE 1996
EQUITY INCENTIVE PLAN
SHARES ISSUABLE PURSUANT TO 321,610 $9.08 $ 2,920,219
ISSUED STOCK OPTIONS
PURSUANT TO THE 1998-A
DIRECT HIT STOCK PLAN
SHARES ISSUABLE PURSUANT 1,003,990 $105.65 $ 106,068,337
TO ISSUED STOCK OPTIONS
PURSUANT TO THE 1999
NON-OFFICER EQUITY
INCENTIVE PLAN
SHARES RESERVED FOR FUTURE 803,450 $72.47 $ 58,226,022
ISSUANCE PURSUANT TO THE
1996 EQUITY INCENTIVE PLAN
SHARES RESERVED FOR FUTURE 996,010 $72.47 $ 72,180,895
ISSUANCE PURSUANT TO THE
1999 NON-OFFICER EQUITY
INCENTIVE PLAN
TOTAL 5,933,666 $ 248,861,188
----- ---------- ---------------
</TABLE>
<PAGE>
PART II
ITEM 3: INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Ask Jeeves, Inc. (the "Company") with the
Securities and Exchange Commission are incorporated by reference into this
Registration Statement:
(a) The Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999 filed pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act.");
(b) All other reports filed pursuant to Sections 13(a) or 15(d)
of the Exchange Act since the year ended December 31, 1999;
and
(c) The description of the Company's Common Stock which is
contained in the registration statement on Form 8-A filed
under the Exchange Act on June 28, 1999, including any
amendment or report filed for the purpose of updating such
description.
All reports and other documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act 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 herein and to be a part of this registration
statement from the date of the filing of such reports and documents.
ITEM 4: DESCRIPTION OF SECURITIES
Not applicable.
ITEM 5: INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
ITEM 6: INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law, the Company has
broad powers to indemnify its directors and officers against liabilities they
may incur in such capacities, including liabilities under the Securities Act.
The Company's Bylaws provide that the Company will indemnify its directors
and executive officers and may indemnify other officers to the fullest extent
permitted by law. Under its Bylaws, indemnified parties are entitled to
indemnification for negligence, gross negligence and otherwise to the fullest
extent permitted by law. The Bylaws also require the Company to advance
litigation expenses in the case of stockholder derivative actions or other
actions, against an undertaking by the indemnified party and to repay such
advances if it is ultimately determined that the indemnified party is not
entitled to indemnification.
In addition, the Company's Certificate of Incorporation provides that, pursuant
to Delaware law, its directors shall not be liable for monetary damages for
breach of the directors' fiduciary duty of care to the Company and its
stockholders. This provision in the Certificate of Incorporation does not
eliminate the duty of care, and in appropriate circumstances equitable remedies
such as injunctive or other forms of non-monetary relief will remain available
under Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Company for acts
or omissions not in good faith or involving intentional misconduct, for knowing
violation of law, for actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.
The Company has entered into indemnity agreements with each of its directors and
executive officers. Such indemnity agreements contain provisions that are in
some respects broader than the specific indemnification provisions contained in
Delaware law.
The Company maintains a policy providing directors' and officers' liability
insurance, which insures directors and officers of the Company in certain
circumstances with a liability limit of $15,000,000 per claim and in the
aggregate, subject to varying retentions. This coverage is on a claims made
basis.
ITEM 7: EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
ITEM 8: EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
4.1* Certificate of Incorporation of the Registrant.
4.2* Bylaws of the Registrant.
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of PricewaterhouseCoopers LLP.
23.4 Consent of Cooley Godward LLP is contained in Exhibit 5.1
to this Registration Statement.
24.1 Power of Attorney is contained on the signature page II-1.
99.1 1996 Equity Incentive Plan.
99.2 Form of Option Agreement for the 1996 Equity Incentive
Plan.
99.3 1998-A Direct Hit Stock Plan.
99.4 Form of Option Agreement for the 1998-A Direct Hit Stock
Plan.
99.5 1999 Non-Officer Equity Incentive Plan.
99.6 Form of Option Agreement for the 1999 Non-Officer Equity
Incentive Plan.
</TABLE>
- -------------------------------
* Previously filed with Registrant's S-1 Registration Statement
No. 333-77539.
** Previously filed with Registrant's S-1 Registration Statement
No. 333-95691.
*** Previously filed with Registrant's Current Report on Form 8-K, as filed
with the Securities and Exchange Commission on February 14, 1999.
<PAGE>
ITEM 9: UNDERTAKINGS
1. The undersigned registrant hereby undertakes:
(a) 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;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) (Section 230.424(b) of this chapter) if, in the
aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
Provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the issuer pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference herein.
(b) 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 herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
(c) 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.
2. 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 Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. 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 Securities and Exchange 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, 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 Emeryville, State of California, on March 30, 2000.
ASK JEEVES, INC.
BY: /s/ Christine M. Davis
---------------------------------
Christine M. Davis
Vice President and Corporate Controller
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert W. Wrubel, Christine M. Davis and Cynthia
Pevehouse, and each or any one of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, or
their or his or her substitutes or 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 by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Robert W. Wrubel Chief Executive Officer and Director March 30, 2000
- ------------------------------ (Principal Executive Officer and
Robert W. Wrubel Principal Financial Officer)
/s/ Christine M. Davis Vice President and Corporate Controller March 30, 2000
- ------------------------------ (Principal Accounting Officer)
Christine M. Davis
/s/ Roger A. Strauch Chairman of the Board March 30, 2000
- ------------------------------
Roger A. Strauch
/s/ A. George Skip Battle Director March 30, 2000
- ------------------------------
A. George Skip Battle
II-1
<PAGE>
/s/ Garrett Gruener Director March 30, 2000
- ------------------------------
Garrett Gruener
/s/ Daniel J. Nova Director March 30, 2000
- ------------------------------
Daniel J. Nova
/s/ Benjamin M. Rosen Director March 30, 2000
- ------------------------------
Benjamin M. Rosen
/s/ Geoffrey Y. Yang Director March 30, 2000
- ------------------------------
Geoffrey Y. Yang
</TABLE>
II-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
4.1* Certificate of Incorporation of the Registrant.
4.2* Bylaws of the Registrant.
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Cooley Godward LLP is contained in Exhibit 5.1
to this Registration Statement.
24.1 Power of Attorney is contained on the signature page II-1.
99.1 1996 Equity Incentive Plan.
99.2 Form of Option Agreement for the 1996 Equity Incentive
Plan.
99.3 1998-A Direct Hit Stock Plan.
99.4 Form of Option Agreement for the 1998-A Direct Hit Stock
Plan.
99.5 1999 Non-Officer Equity Incentive Plan.
99.6 Form of Option Agreement for the 1999 Non-Officer Equity
Incentive Plan.
</TABLE>
- -------------------------------
* Previously filed with Registrant's S-1 Registration Statement
No. 333-77539.
** Previously filed with Registrant's S-1 Registration Statement
No. 333-95691.
*** Previously filed with Registrant's Current Report on Form 8-K, as filed
with the Securities and Exchange Commission on February 14, 1999.
<PAGE>
[LETTERHEAD]
March 31, 2000
Ask Jeeves, Inc.
5858 Horton Street, Ste. 350
Emeryville, CA 94608
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by Ask Jeeves, Inc. (the "Company") of a Registration
Statement on Form S-8 (the "Registration Statement") with the Securities and
Exchange Commission covering the registration of an aggregate of 5,933,666
shares of the Company's Common Stock, $.001 par value (the "Shares"),
pursuant to the Company's 1996 Equity Incentive Plan, 1999 Non-Officer Equity
Incentive Plan and Direct Hit 1998-A Stock Plan (the "Plans").
In connection with this opinion, we have examined the Registration Statement
and related Prospectuses, your Certificate of Incorporation and Bylaws, as
amended, and such other documents, records, certificates, memoranda and other
instruments as we deem necessary as a basis for this opinion. We have
assumed the genuineness and authenticity of all documents submitted to us as
originals, the conformity to originals of all documents submitted to us as
copies thereof, and the due execution and delivery of all documents where due
execution and delivery are a prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when sold and issued in accordance with the Plans, the
Registration Statement and the related Prospectuses, will be validly issued,
fully paid and nonassessable (except as to shares issued pursuant to certain
deferred payment arrangements, which will be fully paid and nonassessable
when such deferred payments are made in full).
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
COOLEY GODWARD LLP
/s/ Suzanne Sawochka Hooper
Suzanne Sawochka Hooper, Esq.
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8) of Ask Jeeves, Inc. pertaining to the Ask Jeeves, Inc.
1996 Equity Incentive Plan and 1999 Non-Officer Equity Incentive Plan and
Direct Hit Technologies, Inc. 1998-A Direct Hit Stock Plan of our report
dated January 17, 2000, except for Note 13, as to which the date is March 13,
2000, with respect to the consolidated financial statements of Ask Jeeves,
Inc., included in its Annual Report (Form 10-K) for the year ended December
31, 1999, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Walnut Creek, California
March 24, 2000
<PAGE>
EXHIBIT 23.2
[LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement of on Form S-8 of Ask Jeeves, Inc. of our report dated March 22,
1999, except Note 9 as to which the date is November 19, 1999, relating to
the financial statements of Net Effect Systems, Inc., which appear in the
Current Report on Form 8-K/A dated January 20, 2000.
PricewaterhouseCoopers LLP
/s/ PricewaterhouseCoopers LLP
Woodland Hills, California
March 24, 2000
<PAGE>
ASK JEEVES, INC.
1996 EQUITY INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. PURPOSE.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. SHARES SUBJECT TO THE PLAN. . . . . . . . . . . . . . . . . . . . . . . . . .1
2.1 Number of Shares Available.. . . . . . . . . . . . . . . . . . . . . .1
2.2 Adjustment of Shares.. . . . . . . . . . . . . . . . . . . . . . . . .1
3. ELIGIBILITY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
4. ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
4.1 Committee Authority. . . . . . . . . . . . . . . . . . . . . . . . . .2
4.2 Committee Discretion.. . . . . . . . . . . . . . . . . . . . . . . . .2
4.3 Exchange Act Requirements. . . . . . . . . . . . . . . . . . . . . . .2
5. OPTIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
5.1 Form of Option Grant.. . . . . . . . . . . . . . . . . . . . . . . . .3
5.2 Date of Grant. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
5.3 Exercise Period. . . . . . . . . . . . . . . . . . . . . . . . . . . .3
5.4 Exercise Price.. . . . . . . . . . . . . . . . . . . . . . . . . . . .3
5.5 Method of Exercise.. . . . . . . . . . . . . . . . . . . . . . . . . .3
5.6 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
5.7 Limitations on Exercise. . . . . . . . . . . . . . . . . . . . . . . .4
5.8 Limitations on ISOs. . . . . . . . . . . . . . . . . . . . . . . . . .4
5.9 Modification, Extension or Renewal.. . . . . . . . . . . . . . . . . .4
5.10 No Disqualification. . . . . . . . . . . . . . . . . . . . . . . . . .5
6. RESTRICTED STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
6.1 Form of Restricted Stock Award.. . . . . . . . . . . . . . . . . . . .5
6.2 Purchase Price.. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
6.3 Restrictions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
7. STOCK BONUSES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
7.1 Awards of Stock Bonuses. . . . . . . . . . . . . . . . . . . . . . . .6
7.2 Code Section 162(m). . . . . . . . . . . . . . . . . . . . . . . . . .6
7.3 Terms of Stock Bonuses.. . . . . . . . . . . . . . . . . . . . . . . .6
7.4 Form of Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
7.5 Termination During Performance Period. . . . . . . . . . . . . . . . .7
</TABLE>
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
8. PAYMENT FOR SHARE PURCHASES.. . . . . . . . . . . . . . . . . . . . . . . . .7
8.1 Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
8.2 Loan Guaranties. . . . . . . . . . . . . . . . . . . . . . . . . . . .8
9. WITHHOLDING TAXES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
9.1 Withholding Generally. . . . . . . . . . . . . . . . . . . . . . . . .8
9.2 Stock Withholding. . . . . . . . . . . . . . . . . . . . . . . . . . .8
10. PRIVILEGES OF STOCK OWNERSHIP.. . . . . . . . . . . . . . . . . . . . . . . .9
10.1 Voting and Dividends.. . . . . . . . . . . . . . . . . . . . . . . . .9
10.2 Financial Statements.. . . . . . . . . . . . . . . . . . . . . . . . .9
11. TRANSFERABILITY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
12. RESTRICTIONS ON SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . .9
13. CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
14. ESCROW; PLEDGE OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . .9
15. EXCHANGE AND BUYOUT OF AWARDS.. . . . . . . . . . . . . . . . . . . . . . . 10
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. . . . . . . . . . . . . . . 10
17. NO OBLIGATION TO EMPLOY.. . . . . . . . . . . . . . . . . . . . . . . . . . 10
18. CORPORATE TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
18.1 Assumption or Replacement of Awards by Successor.. . . . . . . . . . 10
18.2 Other Treatment of Awards. . . . . . . . . . . . . . . . . . . . . . 11
18.3 Assumption of Awards by the Company. . . . . . . . . . . . . . . . . 11
19. ADOPTION AND SHAREHOLDER APPROVAL.. . . . . . . . . . . . . . . . . . . . . 11
20. TERM OF PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
21. AMENDMENT OR TERMINATION OF PLAN. . . . . . . . . . . . . . . . . . . . . . 12
22. NONEXCLUSIVITY OF THE PLAN. . . . . . . . . . . . . . . . . . . . . . . . . 12
23. DEFINITIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
ii.
<PAGE>
ASK JEEVES, INC.
1996 EQUITY INCENTIVE PLAN
AS ADOPTED ON DECEMBER 26, 1996
APPROVED BY THE SHAREHOLDERS ON DECEMBER 26, 1996
ADJUSTED FOR STOCK SPLIT EFFECTIVE NOVEMBER 12, 1997
AMENDED BY THE BOARD OF DIRECTORS ON JANUARY 11, 1999
APPROVED BY THE SHAREHOLDERS ON JANUARY 19, 1999
AMENDED BY THE BOARD OF DIRECTORS ON FEBRUARY 18, 1999
APPROVED BY THE SHAREHOLDERS ON FEBRUARY 18, 1999
1. PURPOSE. The purpose of the 1996 Equity Incentive Plan (the
"Plan") of Ask Jeeves, Inc., a California corporation (the "Company"), is to
provide incentives to attract, retain and motivate eligible persons whose
present and potential contributions are important to the success of the Company,
its Parent, Subsidiaries and Affiliates, by offering them an opportunity to
participate in the Company's future performance through awards of Options,
Restricted Stock and Stock Bonuses. Capitalized terms not defined in the text
are defined in Section 23.
2. SHARES SUBJECT TO THE PLAN.
2.1 NUMBER OF SHARES AVAILABLE. Subject to Sections 2.2 and
18, the total number of Shares reserved and available for grant and issuance
pursuant to the Plan shall be Eleven Million Nine Hundred Forty Six Thousand
Seven Hundred Forty Five (11,946,745) Shares. Subject to Sections 2.2 and 18,
Shares shall again be available for grant and issuance in connection with future
Awards under the Plan that: (a) are subject to issuance upon exercise of an
Option but cease to be subject to such Option for any reason other than exercise
of such Option; (b) are subject to an Award granted hereunder but are forfeited;
or (c) are subject to an Award that otherwise terminates without Shares being
issued.
2.2 ADJUSTMENT OF SHARES. In the event that the number of
outstanding Shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under the Plan; (b) the
Exercise Prices of and number of Shares subject to outstanding Options; and (c)
the number of Shares subject to other outstanding Awards shall be
proportionately adjusted, subject to any required action by the Board or the
shareholders of the Company and compliance with applicable securities laws;
PROVIDED, HOWEVER, that fractions of a Share shall not be issued but shall
either be paid in cash at Fair Market Value or shall be rounded up to the
nearest Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted
only to employees (including officers and directors who are also employees) of
the Company, or of a Parent or Subsidiary of the Company. All other Awards may
be granted to employees, officers, directors, consultants and advisors of the
Company or any Parent, Subsidiary or Affiliate of the
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Company; PROVIDED, HOWEVER, such consultants and advisors render bona fide
services not in connection with the offer and sale of securities in a
capital-raising transaction. A person may be granted more than one Award
under the Plan.
4. ADMINISTRATION.
4.1 COMMITTEE AUTHORITY. The Plan shall be administered by the
Committee or the Board acting as the Committee. Subject to the general
purposes, terms and conditions of the Plan, and to the direction of the Board,
the Committee shall have full power to implement and carry out the Plan. The
Committee shall have the authority to:
(A) construe and interpret the Plan, any Award Agreement
and any other agreement or document executed pursuant to the Plan;
(B) prescribe, amend and rescind rules and regulations
relating to the Plan;
(C) select persons to receive Awards;
(D) determine the form and terms of Awards;
(E) determine the number of Shares or other
consideration subject to Awards;
(F) determine whether Awards will be granted singly, in
combination, in tandem with, in replacement of, or as alternatives to, other
Awards under the Plan or any other incentive or compensation plan of the Company
or any Parent, Subsidiary or Affiliate of the Company;
(G) grant waivers of Plan or Award conditions;
(H) determine the vesting, exercisability and payment of
Awards;
(I) correct any defect, supply any omission, or
reconcile any inconsistency in the Plan, any Award or any Award Agreement;
(J) determine whether an Award has been earned; and
(K) make all other determinations necessary or advisable
for the administration of the Plan.
4.2 COMMITTEE DISCRETION. Any determination made by the
Committee with respect to any Award shall be made in its sole discretion at the
time of grant of the Award or, unless in contravention of any express term of
the Plan or Award, at any later time, and such determination shall be final and
binding on the company and all persons having an interest in any Award under the
Plan. The Committee may delegate to one or more officers of the Company the
authority to grant an Award under the Plan to Participants who are not Insiders
of the Company.
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4.3 EXCHANGE ACT REQUIREMENTS. If the Company is subject to
the Exchange Act, the Company will take appropriate steps to comply with the
disinterested director requirements of Section 16(b) of the Exchange Act,
including but not limited to, the appointment by the Board of a Committee
consisting of not less than two (2) persons (who are members of the Board),
each of whom is a Disinterested Person.
5. OPTIONS. The Committee may grant Options to eligible persons and
shall determine whether such Options shall be Incentive Stock Options within the
meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 FORM OF OPTION GRANT. Each Option granted under the Plan
shall be evidenced by an Award Agreement which shall expressly identify the
Option as an ISO or NQSO ("Stock Option Agreement"), and be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee shall from time to time approve, and which shall comply with and be
subject to the terms and conditions of the Plan.
5.2 DATE OF GRANT. The date of grant of an Option shall be the
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
the Plan will be delivered to the Participant within a reasonable time after the
granting of the Option.
5.3 EXERCISE PERIOD. Options shall be exercisable within the
times or upon the events determined by the Committee as set forth in the Stock
Option Agreement; PROVIDED, HOWEVER, that no Option shall be exercisable after
the expiration of ten (10) years from the date the Option is granted, and
provided further that no Option granted to a person who directly or by
attribution owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Parent or Subsidiary of the
Company ("Ten Percent Shareholder") shall be exercisable after the expiration of
five (5) years from the date the Option is granted. The Committee also may
provide for the exercise of Options to become exercisable at one time or from
time to time, periodically or otherwise, in such number or percentage as the
Committee determines.
5.4 EXERCISE PRICE. The Exercise Price shall be determined by
the Committee when the Option is granted and may be not less than eighty-five
percent (85%) of the Fair Market Value of the Shares on the date of grant;
provided that (i) the Exercise Price of an ISO shall be not less than one
hundred percent (100%) of the Fair Market Value of the Shares on the date of
grant; and (ii) the Exercise Price of any Option granted to a Ten Percent
Shareholder shall not be less than one hundred ten percent (1 10%) of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased may be made in accordance with Section 8 of the Plan.
5.5 METHOD OF EXERCISE. Options may be exercised only by
delivery to the Company of a written stock option exercise agreement (the
"Exercise Agreement") in a form approved by the Committee (which need not be the
same for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares, if any, and such
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representations and agreements regarding Participant's investment intent and
access to information and other matters, if any, as may be required or
desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price for the number of Shares being
purchased.
5.6 TERMINATION. Notwithstanding the exercise periods set
forth in the Stock Option Agreement, exercise of an Option shall always be
subject to the following:
(A) If the Participant is Terminated for any reason
except death or Disability, then Participant may exercise such Participant's
Options only to the extent that such Options would have been exercisable upon
the Termination Date no later than three (3) months after the Termination Date
(or such shorter time period as may be specified in the Stock Option Agreement),
but in any event, no later than the expiration date of the Options.
(B) If the Participant is terminated because of death or
Disability (or the Participant dies within three (3) months of such
termination), then Participant's Options may be exercised only to the extent
that such Options would have been exercisable by Participant on the Termination
Date and must be exercised by Participant (or Participant's legal representative
or authorized assignee) no later than twelve (12) months after the Termination
Date (or such shorter time period as may be specified in the Stock Option
Agreement), but in any event no later than the expiration date of the Options;
PROVIDED, HOWEVER, that in the event of termination due to Disability other than
as defined in Section 22(e)(3) of the Code, any ISO that remains exercisable
after ninety (90) days after the date of termination shall be deemed a NQSO.
5.7 LIMITATIONS ON EXERCISE. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option; PROVIDED, HOWEVER, that such minimum number will not prevent Participant
from exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 LIMITATIONS ON ISOs. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year (under
the Plan or under any other incentive stock option plan of the Company or any
Affiliate, Parent or Subsidiary of the Company) shall not exceed One Hundred
Thousand Dollars ($100,000). If the Fair Market Value of Shares on the date of
grant with respect to which ISOs are exercisable for the first time by a
Participant during any calendar year exceeds One Hundred Thousand Dollars
($100,000), the Options for the first One Hundred Thousand Dollars ($100,000)
worth of Shares to become exercisable in such calendar year shall be ISOs and
the Options for the amount in excess of One Hundred Thousand Dollars ($100,000)
that become exercisable in that calendar year shall be NQSOs. In the event that
the Code or the regulations promulgated thereunder are amended after the
Effective Date of the Plan to provide for a different limit on the Fair Market
Value of Shares permitted to be subject to ISOs, such different limit shall be
automatically incorporated herein and shall apply to any Options granted after
the effective date of such amendment.
5.9 MODIFICATION, EXTENSION OR RENEWAL. The Committee may
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor; PROVIDED, HOWEVER, that any such action may
not without the written consent of
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Participant, impair any of Participant's rights under any Option previously
granted. Any outstanding ISO that is modified, extended, renewed or
otherwise altered shall be treated in accordance with Section 424(h) of the
Code. The Committee may reduce the Exercise Price of outstanding Options
without the consent of Participants affected by a written notice to them;
PROVIDED, HOWEVER, that the Exercise Price may not be reduced below the
minimum Exercise price that would be permitted under Section 5.4 of the Plan
for Options granted on the date the action is taken to reduce the Exercise
Price.
5.10 NO DISQUALIFICATION. Notwithstanding any other provision
in the Plan, no term of the Plan relating to ISOs shall be interpreted, amended
or altered, nor shall any discretion or authority granted under the Plan be
exercised, so as to disqualify the Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee shall determine to whom an offer will be made, the number of
Shares the person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares shall be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 FORM OF RESTRICTED STOCK AWARD. All purchases under a
Restricted Stock Award made pursuant to the Plan shall be evidenced by an Award
Agreement ("Restricted Stock Purchase Agreement") that shall be in such form
(which need not be the same for each Participant) as the Committee shall from
time to time approve, and shall comply with and be subject to the terms and
conditions of the Plan. The offer of Restricted Stock shall be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement is delivered to the person. If
such person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the Shares to the Company within thirty (30) days,
then the offer shall terminate, unless otherwise determined by the Committee.
6.2 PURCHASE PRICE. The Purchase Price of Shares sold pursuant
to a Restricted Stock Award shall be determined by the Committee and shall be at
least eighty-five percent (85%) of the Fair Market Value of the Shares on the
date the Restricted Stock Award is granted, except in the case of a sale to a
Ten Percent Shareholder, in which case the Purchase Price shall be one hundred
percent (100%) of the Fair Market Value. Payment of the Purchase Price may be
made in accordance with Section 8 of the Plan.
6.3 RESTRICTIONS. Restricted Stock Awards shall be subject to
such restrictions as the Committee may impose. The Committee may provide for
the lapse of such restrictions in installments and may accelerate or waive such
restrictions, in whole or in part, based on length of service, performance or
such other factors or criteria as the Committee may determine. Restricted Stock
Awards which the Committee intends to qualify under Code Section 162(m) shall be
subject to a performance-based goal. Restrictions on such stock shall lapse
based on one or more of the following performance goals: stock price, market
share, sales increases, earning per share, return on equity, cost reductions, or
any other similar performance
5.
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measure established by the Committee. Such performance measures shall be
established by the Committee, in writing, no later than the earlier of (a)
ninety (90) days after the commencement of the performance period with
respect to which the Restricted Stock award is made and (b) the date as of
which twenty-five percent (25%) of such performance period has elapsed.
7. STOCK BONUSES.
7.1 AWARDS OF STOCK BONUSES. A Stock Bonus is an award of
Shares (which may consist of Restricted Stock) for services rendered to the
Company or any Parent, Subsidiary or Affiliate of the Company. A Stock Bonus
may be awarded for past services already rendered to the Company, or any Parent,
Subsidiary or Affiliate of the Company pursuant to an Award Agreement (the
"Stock Bonus Agreement") that shall be in such form (which need not be the same
for each Participant) as the Committee shall from time to time approve, and
shall comply with and be subject to the terms and conditions of the Plan subject
to Section 7.2 herein, a Stock Bonus may be awarded upon satisfaction of such
performance goals as are set out in advance in Participant's individual Award
Agreement (the "Performance Stock Bonus Agreement") that shall be in such form
(which need not be the same for each Participant) as the Committee shall from
time to time approve, and shall comply with and be subject to the terms and
conditions of the Plan. Stock Bonuses may vary from Participant to Participant
and between groups of Participants, and may be based upon such other criteria as
the Committee may determine; PROVIDED, HOWEVER, that performance-based bonuses
shall be restricted to individuals earning at least Fifty Thousand Dollars
($50,000) per year and of adequate sophistication and sufficiently empowered to
achieve the performance goals.
7.2 CODE SECTION 162(m). A Stock Bonus that the Committee
intends to qualify for the performance-based exception under Code Section 162(m)
shall only be awarded based upon the attainment of one or more of the following
performance goals: stock price, market share, sales increases, earning per
share, return on equity, cost reductions, or any other similar performance
measure established by the Committee. Such performance measures shall be
established by the Committee, in writing, no later than the earlier of: (a)
ninety (90) days after the commencement of the performance period with respect
to which the Stock Bonus award is made; and (b) the date as of which twenty-five
percent (25%) of such performance period has elapsed.
7.3 TERMS OF STOCK BONUSES. The Committee shall determine the
number of Shares to be awarded to the Participant and whether such Shares shall
be Restricted Stock. If the Stock Bonus is being earned upon the satisfaction
of performance goals pursuant to a Performance Stock Bonus Agreement, then the
Committee shall determine: (a) the nature, length and starting date of any
period during which performance is to be measured (the "Performance Period") for
each Stock Bonus; (b) the performance goals and criteria to be used to measure
the performance, if any; (c) the number of Shares that may be awarded to the
Participant; and (d) the extent to which such Stock Bonuses have been earned.
Performance Periods may overlap and Participants may participate simultaneously
with respect to Stock Bonuses that are subject to different Performance Periods
and different performance goals and other criteria. The number of Shares may be
fixed or may vary in accordance with such performance goals and criteria as may
be determined by the Committee. The Committee may adjust the performance goals
applicable to the Stock Bonuses to take into account changes in law and
accounting or tax rules and to make
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such adjustments as the Committee deems necessary or appropriate to reflect
the impact of extraordinary or unusual items, events or circumstances to
avoid windfalls or hardships.
7.4 FORM OF PAYMENT. The earned portion of a Stock Bonus may
be paid currently or on a deferred basis with such interest or dividend
equivalent, if any, as the Committee may determine. Payment may be made in the
form of cash, whole Shares, including Restricted Stock, or a combination
thereof, either in a lump sum payment or in installments, all as the Committee
shall determine.
7.5 TERMINATION DURING PERFORMANCE PERIOD. If a Participant is
Terminated during a Performance Period for any reason, then such Participant
shall be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Stock Bonus only to the extent earned as of the date of Termination in
accordance with the Performance Stock Bonus Agreement, unless the Committee
shall determine otherwise.
8. PAYMENT FOR SHARE PURCHASES.
8.1 PAYMENT. Payment for Shares purchased pursuant to the Plan
may be made in cash (by check) or, where expressly approved for the Participant
by the Committee and where permitted by law:
(A) by cancellation of indebtedness of the Company to
the Participant;
(B) by surrender of Shares that either (1) have been
owned by Participant for more than six (6) months and have been paid for within
the meaning of SEC Rule 144 (and, if such shares were purchased from the Company
by use of a promissory note, such note has been fully paid with respect to such
Shares); or (2) were obtained by Participant in the public market;
(C) by tender of a full recourse promissory note having
such terms as may be approved by the Committee and bearing interest at a rate
sufficient to avoid imputation of income under Sections 483 and 1274 of the
Code; PROVIDED, HOWEVER, that Participants who are not employees of the Company
shall not be entitled to purchase Shares with a promissory note unless the note
is adequately secured by collateral other than the Shares.
(D) by waiver of compensation due or accrued to
Participant for services rendered;
(E) by tender of property;
(F) with respect only to purchases upon exercise of an
Option, and provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from
Participant and a broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD Dealer") whereby the Participant irrevocably elects
to exercise the Option and to sell a portion of the Shares so purchased to pay
for the Exercise Price, and whereby the NASD Dealer
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irrevocably commits upon receipt of such Shares to forward the Exercise Price
directly to the Company; or
(2) through a "margin" commitment from
Participant and an NASD Dealer whereby Participant irrevocably elects to
exercise the Option and to pledge the Shares so purchased to the NASD Dealer in
a margin account as security for a loan from the NASD Dealer in the amount of
the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt
of such Shares to forward the exercise price directly to the Company; or
(G) by any combination of the foregoing.
8.2 LOAN GUARANTIES. The Committee may help the Participant
pay for Shares purchased under the Plan by authorizing a guaranty by the Company
of a third-party loan to the Participant.
9. WITHHOLDING TAXES.
9.1 WITHHOLDING GENERALLY. Whenever Shares are to be issued in
satisfaction of Awards granted under the Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under the Plan, payments
in satisfaction of Awards are to be made in cash, such payment shall be net of
an amount sufficient to satisfy federal, state, and local withholding tax
requirements.
9.2 STOCK WITHHOLDING. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may allow the
Participant to satisfy the minimum withholding tax obligation by electing to
have the Company withhold from the Shares to be issued that number of Shares
having a Fair Market Value equal to the minimum amount required to be withheld,
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date"). All elections by a Participant to have Shares withheld for
this purpose shall be made in writing in a form acceptable to the Committee and
shall be subject to the following restrictions:
(A) the election must be made on or prior to the
applicable Tax Date;
(B) once made, then except as provided below, the
election shall be irrevocable as to the particular Shares as to which the
election is made;
(C) all elections shall be subject to the consent or
disapproval of the Committee;
(D) if the Participant is an Insider and if the Company
is subject to Section 16(b) of the Exchange Act: (1) the election may not be
made within six (6) months of the date of grant of the Award, except as
otherwise permitted by SEC Rule 16b-3(e) under the Exchange Act, and (2) either
(A) the election to use stock with- holding must be irrevocably made at least
six (6) months prior to the Tax Date (although such election may be revoked at
any time at least six (6) months prior to the Tax Date), or (B) the exercise of
the Option or election to
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use stock withholding must be made in the ten (10) day period beginning on
the third day following the release of the Company's quarterly or annual
summary statement of sales or earnings; and
(E) in the event that the Tax Date is deferred until six
(6) months after the delivery of Shares under Section 83(b) of the Code, the
Participant shall receive the full number of Shares with respect to which the
exercise occurs, but such Participant shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.
10. PRIVILEGES OF STOCK OWNERSHIP.
10.1 VOTING AND DIVIDENDS. No Participant shall have any of the
rights of a shareholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
shall be a shareholder and have all the rights of a shareholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; PROVIDED, HOWEVER, that
if such Shares are Restricted Stock, then any new, additional or different
securities the Participant may become entitled to receive with respect to such
Shares by virtue of a stock dividend, stock split or any other change in the
corporate or capital structure of the Company shall be subject to the same
restrictions as the Restricted Stock.
10.2 FINANCIAL STATEMENTS. The Company shall provide financial
statements to each Participant prior to such Participant's purchase of Shares
under the Plan, and to each Participant annually during the period such
Participant has Awards outstanding; PROVIDED, HOWEVER, the Company shall not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
11. TRANSFERABILITY. Awards granted under the Plan, and any interest
therein, shall not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution or as consistent with the specific
Plan and Award Agreement provisions relating thereto. During the lifetime of
the Participant an Award shall be exercisable only by the Participant, and any
elections with respect to an Award, may be made only by the Participant.
12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right of first refusal to purchase all Shares that a Participant (or a
subsequent transferee) may propose to transfer to a third party.
13. CERTIFICATES. All certificates for Shares or other securities
delivered under the Plan shall be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares,
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together with stock powers or other instruments of transfer approved by the
Committee, appropriately endorsed in blank, with the Company or an agent
designated by the Company to hold in escrow until such restrictions have
lapsed or terminated, and the Committee may cause a legend or legends
referencing such restrictions to be placed on the certificates. Any
Participant who is permitted to execute a promissory note as partial or full
consideration for the purchase of Shares under the Plan shall be required to
place and deposit with the Company all or part of the Shares so purchased as
collateral to secure the payment of Participant's obligation to the Company
under the promissory note; PROVIDED, HOWEVER, that the Committee may require
or accept other or additional forms of collateral to secure the payment of
such obligation and, in any event, the Company shall have full recourse
against the Participant under the promissory note notwithstanding any pledge
of the Participant's Shares or other collateral. In connection with any
pledge of the Shares, Participant shall be required to execute and deliver a
written pledge agreement in such form as the Committee shall from time to
time approve. The Shares purchased with the promissory note may be released
from the pledge on a pro rata basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant shall agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award shall
not be effective unless such Award is in compliance with all applicable federal
and state securities laws, rules and regulations of any governmental body, and
the requirements of any stock exchange or automated quotation system upon which
the Shares may then be listed, as they are in effect on the date of grant of the
Award and also on the date of exercise or other issuance. Notwithstanding any
other provision in the Plan, the Company shall have no obligation to issue or
deliver certificates for Shares under the Plan prior to (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable, and/or (b) completion of any registration or other qualification
of such shares under arty state or federal law or ruling of any governmental
body that the Company determines to be necessary or advisable. The Company
shall be under no obligation to register the Shares with the SEC or to effect
compliance with the registration, qualification or listing requirements of any
state securities laws, stock exchange or automated quotation system, and the
Company shall have no liability for any inability or failure to do so.
17. NO OBLIGATION TO EMPLOY. Nothing in the Plan or any Award granted
under the Plan shall confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent, Subsidiary or Affiliate of the Company or limit in any
way the right of the Company or any Parent, Subsidiary or Affiliate of the
Company to terminate Participant's employment or other relationship at any time,
with or without cause.
18. CORPORATE TRANSACTIONS.
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18.1 ASSUMPTION OR REPLACEMENT OF AWARDS BY SUCCESSOR. In the
event of (a) a merger or consolidation in which the Company is not the surviving
corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the shareholders of
the company and the Awards granted under the Plan are assumed or replaced by the
successor corporation, which assumption shall be binding on all Participants);
(b) a dissolution or liquidation of the Company; (c) the sale of substantially
all of the assets of the Company; or (d) any other transaction which qualifies
as a "corporate transaction" under Section 424(a) of the Code wherein the
shareholders of the Company give up all of their equity interest in the Company
(except for the acquisition, sale or transfer of all or substantially all of the
outstanding shares of the Company), any or all outstanding Awards may be assumed
or replaced by the successor corporation (if any), which assumption or
replacement shall be binding on all Participants. In the alternative, the
successor corporation may substitute equivalent Awards or provide substantially
similar consideration to Participants as was provided to shareholders (after
taking into account the existing provisions of the Awards). The successor
corporation may also issue, in place of outstanding Shares of the Company held
by the Participant, substantially similar shares or other property subject to
repurchase restrictions no less favorable to the Participant.
In the event such successor corporation (if any) refuses to assume or
substitute Options, as provided above, pursuant to a transaction described in
this Subsection 18.1, such Options shall expire on such transaction at such time
and on such conditions as the Board shall determine.
18.2 OTHER TREATMENT OF AWARDS. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 18, in
the event of the occurrence of any transaction described in Section 18.1, any
outstanding Awards shall be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, sale of assets or other
"corporate transaction."
18.3 ASSUMPTION OF AWARDS BY THE COMPANY. The Company, from
time to time, also may substitute or assume outstanding awards granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either (a) granting an Award under the Plan in substitution of
such other company's award; or (b) assuming such award as if it had been granted
under the Plan if the terms of such assumed award could be applied to an Award
granted under the Plan. Such substitution or assumption shall be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under the Plan if the other company had applied the rules of
the Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award shall remain unchanged
(except that the exercise price and the number and nature of Shares issuable
upon exercise of any such option will be adjusted approximately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.
19. ADOPTION AND SHAREHOLDER APPROVAL. The Plan shall become
effective on the date that it is adopted by the Board (the "Effective Date").
The Plan shall be approved by the shareholders of the Company (excluding Shares
issued pursuant to this Plan), consistent with
11.
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applicable laws, within twelve months before or after the Effective Date.
Upon the Effective Date, the Board may grant Awards pursuant to the Plan;
PROVIDED, HOWEVER, that: (a) no Option may be exercised prior to initial
shareholder approval of the Plan; (b) no Option granted pursuant to an
increase in the number of Shares approved by the Board shall be exercised
prior to the time such increase has been approved by the shareholders of the
Company; and (c) in the event that shareholder approval is not obtained
within the time period provided herein, all Awards granted hereunder shall be
cancelled, any Shares issued pursuant to any Award shall be cancelled and any
purchase of Shares hereunder shall be rescinded. After the Company becomes
subject to Section 16(b) of the Exchange Act, the Company will comply with
the requirements of Rule 16b-3 (or its successor), as amended, with respect
to shareholder approval.
20. TERM OF PLAN. The Plan will terminate ten (10) years from the
Effective Date or, if earlier, the date of shareholder approval of the Plan.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend the Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to the Plan; PROVIDED, HOWEVER, that the Board shall not, without the approval
of the shareholders of the Company, amend the Plan in any manner that requires
such shareholder approval pursuant to the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans or pursuant to the Exchange Act
or Rule 16b-3 (or its successor), as amended, thereunder.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by
the Board, the submission of the Plan to the shareholders of the Company for
approval, nor any provision of the Plan shall be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under the Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
23. DEFINITIONS. As used in the Plan, the following terms shall have
the following meanings:
"AFFILIATE" means any corporation that directly, or indirectly through
one or more intermediaries, controls or is controlled by, or is under common
control with, another corporation, where "control" (including the terms
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management and policies of
the corporation, whether through the ownership of voting securities, by contract
or otherwise.
"AWARD" means any award under the Plan, including any Option, Restricted
Stock or Stock Bonus.
"AWARD AGREEMENT" means, with respect to each Award, the signed written
agreement between the Company and the Participant setting forth the terms and
conditions of the Award.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
12.
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"COMMITTEE" means the committee appointed by the Board to administer the
Plan, or if no committee is appointed, the Board.
"COMPANY" means Ask Jeeves, Inc., a corporation organized under the laws
of the State of California, or any successor corporation.
"DISABILITY" means a disability, whether temporary or permanent, partial
or total, as determined by the Committee.
"DISINTERESTED PERSON" means a director who has not, during the period
that person is a member of the Committee and for one (1) year prior to service
as a member of the Committee, been granted or awarded equity securities pursuant
to the Plan or any other plan of the Company or any Parent, Subsidiary or
Affiliate of the Company, except in accordance with the requirements set forth
in Rule 16b-3(c)(2)(i) (and any successor regulation thereto) as promulgated by
the SEC under Section 16(b) of the Exchange Act, as such rule is amended from
time to time and as interpreted by the SEC.
"EXCHANGE ACT" means the Securities Exchange Act of 1 934, as amended.
"EXERCISE PRICE" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a share of the
Company's Common Stock determined as follows:
(A) if such Common Stock is then quoted on the Nasdaq
National Market, its last reported sale price on the Nasdaq National Market or,
if no such reported sale takes place on such date, the average of the closing
bid and asked prices;
(B) if such Common Stock is publicly traded and is then
listed on a national securities exchange, the last reported sale price or, if no
such reported sale takes place on such date, the average of the closing bid and
asked prices on the principal national securities exchange on which the Common
Stock is listed or admitted to trading;
(C) if such Common Stock is publicly traded but is not
quoted on the Nasdaq National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid arid asked prices
on such date, as reported by The Wall Street Journal, for the over-the-counter
market; or
(D) if none of the foregoing is applicable, by the Board
of Directors of the Company in good faith.
"INSIDER" means an officer or director of the Company or any other person
whose transactions in the Company's Common Stock are subject to Section 16 of
the Exchange Act.
"OPTION" means an award of an option to purchase Shares pursuant to
Section 5.
13.
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"PARENT" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company, if at the time of the granting of
an Award under the Plan, each of such corporations other than the Company 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.
"PARTICIPANT" means a person who receives an Award under the Plan.
"PLAN" means this Ask Jeeves, Inc. 1996 Equity Incentive Plan, as amended
from time to time.
"RESTRICTED STOCK AWARD" means an award of Shares pursuant to Section 6.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1 933, as amended.
"SHARES" means shares of the Company's Common Stock reserved for issuance
under the Plan, as adjusted pursuant to Sections 2 and 15, and any successor
security.
"STOCK BONUS" means an award of Shares, or cash in lieu of Shares,
pursuant to Section 7.
"SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of
granting of the Award, each of the corporations other than the last corporation
in the unbroken chain 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 claim.
"TERMINATION" or "TERMINATED" means, for purposes of the Plan with
respect to a Participant, that the Participant has ceased to provide services as
an employee, director, consultant or adviser, to the Company or a Parent,
Subsidiary or Affiliate of the Company, except in the case of sick leave,
military leave, or any other leave of absence approved by the Committee;
PROVIDED, HOWEVER, that such leave is for a period of not more than ninety (90)
days, or reinstatement upon the expiration of such leave is guaranteed by
contract or statute. The Committee shall have sole discretion to determine
whether a Participant has ceased to provide services and the effective date on
which the Participant ceased to provide services (the "Termination Date").
14.
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ASK JEEVES, INC.
1996 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
(INCENTIVE AND NONSTATUTORY STOCK OPTIONS)
Pursuant to the Stock Option Grant Notice ("Grant Notice") and this Stock
Option Agreement, Ask Jeeves, Inc. (the "Company") has granted you an option
under its 1996 Equity Incentive Plan (the "Plan") to purchase the number of
shares of the Company's Common Stock indicated in the Grant Notice at the
exercise price indicated in the Grant Notice. Defined terms not explicitly
defined in this Stock Option Agreement but defined in the Plan shall have the
same definitions as in the Plan.
The details of your option are as follows:
1. VESTING. Subject to the limitations contained herein, your option
will vest as provided in the Grant Notice, provided that vesting will cease upon
the termination of your Continuous Service.
2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares subject
to your option and your exercise price per share referenced in the Grant Notice
may be adjusted from time to time for Capitalization Adjustments, as provided in
the Plan.
3. EXERCISE PRIOR TO VESTING ("EARLY EXERCISE"). If permitted in the
Grant Notice (i.e., the "Exercise Schedule" indicates that "Early Exercise" of
your option is permitted) and subject to the provisions of this option, you may
elect at any time that is both (i) during the period of your Continuous Service
and (ii) during the term of your option, to exercise all or part of your option,
including the nonvested portion of your option; provided, however, that:
(A) a partial exercise of your option shall be deemed to cover
first vested shares and then the earliest vesting installment of unvested
shares;
(B) any shares so purchased from installments which have not
vested as of the date of exercise shall be subject to the purchase option in
favor of the Company as described in the Company's form of Early Exercise Stock
Purchase Agreement;
(C) you shall enter into the Company's form of Early Exercise
Stock Purchase Agreement with a vesting schedule that will result in the same
vesting as if no early exercise had occurred; and
(D) if your option is an incentive stock option, then, as
provided in the Plan, to the extent that the aggregate Fair Market Value
(determined at the time of grant) of stock with respect to which your option
plus all other incentive stock options you hold are exercisable for the first
time by you during any calendar year (under all plans of the Company and its
Affiliates) exceeds one hundred thousand dollars ($100,000), the options or
portions thereof that exceed
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such limit (according to the order in which they were granted) shall be
treated as nonstatutory stock options.
4. METHOD OF PAYMENT. Payment of the exercise price is due in full
upon exercise of all or any part of your option. You may elect to make payment
of the exercise price in cash or by check or in any other manner PERMITTED BY
THE GRANT NOTICE, which may include one or more of the following:
(A) In the Company's sole discretion at the time your option is
exercised and provided that at the time of exercise the Common Stock is publicly
traded and quoted regularly in THE WALL STREET JOURNAL, pursuant to a program
developed under Regulation T as promulgated by the Federal Reserve Board which,
prior to the issuance of Common Stock, results in either the receipt of cash (or
check) by the Company or the receipt of irrevocable instructions to pay the
aggregate exercise price to the Company from the sales proceeds.
(B) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in THE WALL STREET JOURNAL, by delivery of
already-owned shares of Common Stock, held for the period required to avoid a
charge to the Company's reported earnings (generally six months) or were not
acquired, directly or indirectly from the Company, owned free and clear of any
liens, claims, encumbrances or security interests, and valued at its Fair Market
Value on the date of exercise. "Delivery" for these purposes, in the sole
discretion of the Company at the time your option is exercised, shall include
delivery to the Company of your attestation of ownership of such shares of
Common Stock in a form approved by the Company. Notwithstanding the foregoing,
your option may not be exercised by tender to the Company of Common Stock to the
extent such tender would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock.
5. WHOLE SHARES. Your option may only be exercised for whole shares.
6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, your option may not be exercised unless the shares
issuable upon exercise of your option are then registered under the Securities
Act or, if such shares are not then so registered, the Company has determined
that such exercise and issuance would be exempt from the registration
requirements of the Securities Act. The exercise of your option must also
comply with other applicable laws and regulations governing the option, and the
option may not be exercised if the Company determines that the exercise would
not be in material compliance with such laws and regulations.
7. TERM. The term of your option commences on the Date of Grant and
expires upon the EARLIEST of the following:
(A) immediately upon the termination of your Continuous Service
for Cause;
(B) three (3) months after the termination of your Continuous
Service for any other reason, provided that if during any part of such three-
(3-)month period the option is not
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<PAGE>
exercisable solely because of the condition set forth in paragraph 6, the
option shall not expire until the earlier of the Expiration Date or until it
shall have been exercisable for an aggregate period of three (3) months after
the termination of your Continuous Service;
(C) twelve (12) months after the termination of your Continuous
Service due to Disability;
(D) eighteen (18) months after your death if you die either
during your Continuous Service or within three (3) months after your Continuous
Service terminates for reason other than Cause;
(E) the Expiration Date indicated in the Grant Notice; or
(F) the tenth (10th) anniversary of the Date of Grant.
If your option is an incentive stock option, note that, to obtain the
federal income tax advantages associated with an "incentive stock option," the
Code requires that at all times beginning on the date of grant of the option and
ending on the day three (3) months before the date of the option's exercise, you
must be an employee of the Company or an Affiliate, except in the event of your
death or your Disability. The Company has provided for extended exercisability
of your option under certain circumstances for your benefit, but cannot
guarantee that your option will necessarily be treated as an "incentive stock
option" if you provide services to the Company or an Affiliate as a Consultant
or Director or if you exercise your option more than three (3) months after the
date your employment with the Company or an Affiliate terminates.
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<PAGE>
8. EXERCISE.
(A) You may exercise the vested portion of your option (and the
unvested portion of your option if the Grant Notice so permits) during its term
by delivering a Notice of Exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require.
(B) By exercising your option you agree that, as a condition to
any exercise of your option, the Company may require you to enter an arrangement
providing for the payment by you to the Company of any tax withholding
obligation of the Company arising by reason of (1) the exercise of your option,
(2) the lapse of any substantial risk of forfeiture to which the shares are
subject at the time of exercise, or (3) the disposition of shares acquired upon
such exercise.
(C) If your option is an incentive stock option, by exercising
your option you agree that you will notify the Company in writing within fifteen
(15) days after the date of any disposition of any of the shares of the Common
Stock issued upon exercise of your option that occurs within two (2) years after
the date of your option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of your option.
9. TRANSFERABILITY. Your option is not transferable, except by will
or by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.
10. RIGHT OF FIRST REFUSAL/RIGHT OF REPURCHASE. Vested shares that
are received upon exercise of your option are subject to any right of first
refusal that may be described in the Company's bylaws in effect at such time the
Company elects to exercise its right. The Company's right of first refusal
shall expire on the date of the first registration of an equity security of the
Company under Section 12 of the Exchange Act. In addition, to the extent
provided in the Company's bylaws as amended from time to time, the Company shall
have the right to repurchase all or any part of the shares received pursuant to
the exercise of your option.
11. OPTION NOT A SERVICE CONTRACT. Your option is not an employment
or service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or
an Affiliate, their respective shareholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.
12. WITHHOLDING OBLIGATIONS.
(A) At the time your option is exercised, in whole or in part,
or at any time thereafter as requested by the Company, you hereby authorize
withholding from payroll and any
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<PAGE>
other amounts payable to you, and otherwise agree to make adequate provision
for (including by means of a "cashless exercise" pursuant to a program
developed under Regulation T as promulgated by the Federal Reserve Board to
the extent permitted by the Company), any sums required to satisfy the
federal, state, local and foreign tax withholding obligations of the Company
or an Affiliate, if any, which arise in connection with your option.
(B) Upon your request and subject to approval by the Company,
in its sole discretion, and compliance with any applicable conditions or
restrictions of law, the Company may withhold from fully vested shares of Common
Stock otherwise issuable to you upon the exercise of your option a number of
whole shares having a Fair Market Value, determined by the Company as of the
date of exercise, not in excess of the minimum amount of tax required to be
withheld by law. If the date of determination of any tax withholding obligation
is deferred to a date later than the date of exercise of your option, share
withholding pursuant to the preceding sentence shall not be permitted unless you
make a proper and timely election under Section 83(b) of the Code, covering the
aggregate number of shares of Common Stock acquired upon such exercise with
respect to which such determination is otherwise deferred, to accelerate the
determination of such tax withholding obligation to the date of exercise of your
option. Notwithstanding the filing of such election, shares shall be withheld
solely from fully vested shares of Common Stock determined as of the date of
exercise of your option that are otherwise issuable to you upon such exercise.
Any adverse consequences to you arising in connection with such share
withholding procedure shall be your sole responsibility.
(C) Your option is not exercisable unless the tax withholding
obligations of the Company and/or any Affiliate are satisfied. Accordingly, you
may not be able to exercise your option when desired even though your option is
vested, and the Company shall have no obligation to issue a certificate for such
shares or release such shares from any escrow provided for herein.
13. NOTICES. Any notices provided for in your option or the Plan
shall be given in writing and shall be deemed effectively given upon receipt or,
in the case of notices delivered by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the last
address you provided to the Company.
14. GOVERNING PLAN DOCUMENT. Your option is subject to all the
provisions of the Plan, the provisions of which are hereby made a part of your
option, and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated and adopted pursuant to
the Plan. In the event of any conflict between the provisions of your option
and those of the Plan, the provisions of the Plan shall control.
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<PAGE>
DIRECT HIT TECHNOLOGIES, INC.
1998-A STOCK OPTION PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The Direct Hit Technologies, Inc. 1998-A
Stock Option Plan (the "PLAN") is hereby established effective as of June 24,
1998.
1.2 PURPOSE. The purpose of the Plan is to advance the
interests of the Participating Company Group and its stockholders by providing
an incentive to attract, retain and reward persons performing services for the
Participating Company Group and by motivating such persons to contribute to the
growth and profitability of the Participating Company Group.
1.3 TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued and all
restrictions on such shares under the terms of the Plan and the agreements
evidencing Options granted under the Plan have lapsed. However, all Options
shall be granted, if at all, within ten (10) years from the earlier of the date
the Plan is adopted by the Board or the date the Plan is duly approved by the
stockholders of the Company.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Whenever used herein, the following terms
shall have their respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company.
If one or more Committees have been appointed by the Board to administer the
Plan, "BOARD" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means the Compensation Committee or
other committee of the Board duly appointed to administer the Plan and having
such powers as shall be specified by the Board. Unless the powers of the
Committee have been specifically limited, the Committee shall have all of the
powers of the Board granted herein, including, without limitation, the power to
amend or terminate the Plan at any time, subject to the terms of the Plan and
any applicable limitations imposed by law.
(d) "COMPANY" means Direct Hit Technologies, Inc., a
Delaware corporation, or any successor corporation thereto.
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(e) "CONSULTANT" means any person, including an advisor,
engaged by a Participating Company to render services other than as an Employee
or a Director.
(f) "DIRECTOR" means a member of the Board or of the
board of directors of any other Participating Company.
(g) "DISABILITY" means the inability of the Optionee, in
the opinion of a qualified physician acceptable to the Company, to perform the
major duties of the Optionee's position with the Participating Company Group
because of the sickness or injury of the Optionee.
(h) "EMPLOYEE" means any person treated as an employee
(including an officer or a Director who is also treated as an employee) in the
records of a Participating Company and, with respect to any Incentive Stock
Option granted to such person, who is an employee for purposes of Section 422 of
the Code; provided, however, that neither service as a Director nor payment of a
director's fee shall be sufficient to constitute employment for purposes of the
Plan.
(i) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
(j) "FAIR MARKET VALUE" means, as of any date, the value
of a share of Stock or other property as determined by the Board, in its
discretion, or by the Company, in its discretion, if such determination is
expressly allocated to the Company herein, subject to the following:
(i) If, on such date, the Stock is listed on a
national or regional securities exchange or market system, the Fair Market Value
of a share of Stock shall be the closing price of a share of Stock (or the mean
of the closing bid and asked prices of a share of Stock if the Stock is so
quoted instead) as quoted on the Nasdaq National Market, The Nasdaq SmallCap
Market or such other national or regional securities exchange or market system
constituting the primary market for the Stock, as reported in the WALL STREET
JOURNAL or such other source as the Company deems reliable. If the relevant
date does not fall on a day on which the Stock has traded on such securities
exchange or market system, the date on which the Fair Market Value shall be
established shall be the last day on which the Stock was so traded prior to the
relevant date, or such other appropriate day as shall be determined by the
Board, in its discretion.
(ii) If, on such date, there is no public market
for the Stock, the Fair Market Value of a share of Stock shall be as determined
by the Board in good faith without regard to any restriction other than a
restriction which, by its terms, will never lapse.
(k) "INCENTIVE STOCK OPTION" means an Option intended to
be (as set forth in the Option Agreement) and which qualifies as an incentive
stock option within the meaning of Section 422(b) of the Code.
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(l) "INSIDER" means an officer or a Director of the
Company or any other person whose transactions in Stock are subject to
Section 16 of the Exchange Act.
(m) "NONSTATUTORY STOCK OPTION" means an Option not
intended to be (as set forth in the Option Agreement) or which does not qualify
as an Incentive Stock Option.
(n) "OPTION" means a right to purchase Stock (subject to
adjustment as provided in Section 4.2) pursuant to the terms and conditions of
the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory
Stock Option.
(o) "OPTION AGREEMENT" means a written agreement between
the Company and an Optionee setting forth the terms, conditions and restrictions
of the Option granted to the Optionee and any shares acquired upon the exercise
thereof.
(p) "OPTIONEE" means a person who has been granted one
or more Options.
(q) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.
(r) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation.
(s) "PARTICIPATING COMPANY GROUP" means, at any point in
time, all corporations collectively which are then Participating Companies.
(t) "RULE 16b-3" means Rule 16b-3 under the Exchange
Act, as amended from time to time, or any successor rule or regulation.
(u) "SECURITIES ACT" means the Securities Act of 1933,
as amended.
(v) "SERVICE" means an Optionee's employment or service
with the Participating Company Group, whether in the capacity of an Employee, a
Director or a Consultant. The Optionee's Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Optionee
renders Service to the Participating Company Group or a change in the
Participating Company for which the Optionee renders such Service, provided that
there is no interruption or termination of the Optionee's Service. Furthermore,
an Optionee's Service with the Participating Company Group shall not be deemed
to have terminated if the Optionee takes any military leave, sick leave, or
other bona fide leave of absence approved by the Company; provided, however,
that if any such leave exceeds ninety (90) days, on the ninety-first (91st) day
of such leave the Optionee's Service shall be deemed to have terminated unless
the Optionee's right to return to Service with the Participating Company Group
is guaranteed by statute or contract. Notwithstanding the foregoing, unless
otherwise
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designated by the Company or required by law, a leave of absence shall not be
treated as Service for purposes of determining vesting under the Optionee's
Option Agreement. The Optionee's Service shall be deemed to have terminated
either upon an actual termination of Service or upon the corporation for
which the Optionee performs Service ceasing to be a Participating Company.
Subject to the foregoing, the Company, in its discretion, shall determine
whether the Optionee's Service has terminated and the effective date of such
termination.
(w) "STOCK" means the common stock of the Company, as
adjusted from time to time in accordance with Section 4.2.
(x) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
(y) "TEN PERCENT OWNER OPTIONEE" means an Optionee who,
at the time an Option is granted to the Optionee, owns stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of a Participating Company within the meaning of Section 422(b)(6) of the
Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular.
Use of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.
3. ADMINISTRATION.
3.1 ADMINISTRATION BY THE BOARD. The Plan shall be
administered by the Board. All questions of interpretation of the Plan or of
any Option shall be determined by the Board, and such determinations shall be
final and binding upon all persons having an interest in the Plan or such
Option.
3.2 AUTHORITY OF OFFICERS. Any officer of a Participating
Company shall have the authority to act on behalf of the Company with respect to
any matter, right, obligation, determination or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
determination or election.
3.3 ADMINISTRATION WITH RESPECT TO INSIDERS. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b-3.
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3.4 POWERS OF THE BOARD. In addition to any other powers set
forth in the Plan and subject to the provisions of the Plan, the Board shall
have the full and final power and authority, in its discretion:
(a) to determine the persons to whom, and the time or
times at which, Options shall be granted and the number of shares of Stock to be
subject to each Option;
(b) to designate Options as Incentive Stock Options or
Nonstatutory Stock Options;
(c) to determine the Fair Market Value of shares of
Stock or other property;
(d) to determine the terms, conditions and restrictions
applicable to each Option (which need not be identical) and any shares acquired
upon the exercise thereof, including, without limitation, (i) the exercise price
of the Option, (ii) the method of payment for shares purchased upon the exercise
of the Option, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with the Option or such shares, including by
the withholding or delivery of shares of stock, (iv) the timing, terms and
conditions of the exercisability of the Option or the vesting of any shares
acquired upon the exercise thereof, (v) the time of the expiration of the
Option, (vi) the effect of the Optionee's termination of Service with the
Participating Company Group on any of the foregoing, and (vii) all other terms,
conditions and restrictions applicable to the Option or such shares not
inconsistent with the terms of the Plan;
(e) to approve one or more forms of Option Agreement;
(f) to amend, modify, extend, cancel, renew, reprice or
otherwise adjust the exercise price of, or grant a new Option in substitution
for, any Option or to waive any restrictions or conditions applicable to any
Option or any shares acquired upon the exercise thereof;
(g) to accelerate, continue, extend or defer the
exercisability of any Option or the vesting of any shares acquired upon the
exercise thereof, including with respect to the period following an Optionee's
termination of Service with the Participating Company Group;
(h) to prescribe, amend or rescind rules, guidelines and
policies relating to the Plan, or to adopt supplements to, or alternative
versions of, the Plan, including, without limitation, as the Board deems
necessary or desirable to comply with the laws of, or to accommodate the tax
policy or custom of, foreign jurisdictions whose citizens may be granted
Options; and
(i) to correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Option Agreement and to make all
other determinations and take
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such other actions with respect to the Plan or any Option as the Board may
deem advisable to the extent consistent with the Plan and applicable law.
4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment
as provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be two hundred twelve thousand six hundred
five (212,605) and shall consist of authorized but unissued or reacquired shares
of Stock or any combination thereof. If an outstanding Option for any reason
expires or is terminated or canceled or if shares of Stock are acquired upon the
exercise of an Option subject to a Company repurchase option and are repurchased
by the Company at the Optionee's exercise price, the shares of Stock allocable
to the unexercised portion of such Option or such repurchased shares of Stock
shall again be available for issuance under the Plan. Notwithstanding the
foregoing, at any such time as the offer and sale of securities pursuant to the
Plan is subject to compliance with Section 260.140.45 of Title 10 of the
California Code of Regulations ("SECTION 260.140.45"), the total number of
shares of Stock issuable upon the exercise of all outstanding Options (together
with options outstanding under any other stock option plan of the Company) and
the total number of shares provided for under any stock bonus or similar plan of
the Company shall not exceed thirty percent (30%) (or such other higher
percentage limitation as may be approved by the stockholders of the Company
pursuant to Section 260.140.45) of the then outstanding shares of the Company as
calculated in accordance with the conditions and exclusions of Section
260.140.45.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event
of any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, appropriate adjustments shall be made in the number and class of shares
subject to the Plan and to any outstanding Options and in the exercise price per
share of any outstanding Options. If a majority of the shares which are of the
same class as the shares that are subject to outstanding Options are exchanged
for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change Event, as defined in Section 8.1) shares of another corporation
(the "NEW SHARES"), the Board may unilaterally amend the outstanding Options to
provide that such Options are exercisable for New Shares. In the event of any
such amendment, the number of shares subject to, and the exercise price per
share of, the outstanding Options shall be adjusted in a fair and equitable
manner as determined by the Board, in its discretion. Notwithstanding the
foregoing, any fractional share resulting from an adjustment pursuant to this
Section 4.2 shall be rounded down to the nearest whole number, and in no event
may the exercise price of any Option be decreased to an amount less than the par
value, if any, of the stock subject to the Option. The adjustments determined
by the Board pursuant to this Section 4.2 shall be final, binding and
conclusive.
5. ELIGIBILITY AND OPTION LIMITATIONS.
5.1 PERSONS ELIGIBLE FOR OPTIONS. Options may be granted only
to Employees, Consultants, and Directors. For purposes of the foregoing
sentence, "Employees,"
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"Consultants" and "Directors" shall include prospective Employees,
prospective Consultants and prospective Directors to whom Options are granted
in connection with written offers of an employment or other service
relationships with the Participating Company Group. Eligible persons may be
granted more than one (1) Option.
5.2 OPTION GRANT RESTRICTIONS. Any person who is not an
Employee on the effective date of the grant of an Option to such person may be
granted only a Nonstatutory Stock Option. An Incentive Stock Option granted to
a prospective Employee upon the condition that such person become an Employee
shall be deemed granted effective on the date such person commences Service with
a Participating Company, with an exercise price determined as of such date in
accordance with Section 6.1.
5.3 FAIR MARKET VALUE LIMITATION. To the extent that options
designated as Incentive Stock Options (granted under all stock option plans of
the Participating Company Group, including the Plan) become exercisable by an
Optionee for the first time during any calendar year for stock having a Fair
Market Value greater than One Hundred Thousand Dollars ($100,000), the portions
of such options which exceed such amount shall be treated as Nonstatutory Stock
Options. For purposes of this Section 5.3, options designated as Incentive
Stock Options shall be taken into account in the order in which they were
granted, and the Fair Market Value of stock shall be determined as of the time
the option with respect to such stock is granted. If the Code is amended to
provide for a different limitation from that set forth in this Section 5.3, such
different limitation shall be deemed incorporated herein effective as of the
date and with respect to such Options as required or permitted by such amendment
to the Code. If an Option is treated as an Incentive Stock Option in part and
as a Nonstatutory Stock Option in part by reason of the limitation set forth in
this Section 5.3, the Optionee may designate which portion of such Option the
Optionee is exercising. In the absence of such designation, the Optionee shall
be deemed to have exercised the Incentive Stock Option portion of the Option
first. Separate certificates representing each such portion shall be issued
upon the exercise of the Option.
6. TERMS AND CONDITIONS OF OPTIONS.
Options shall be evidenced by Option Agreements specifying the number of
shares of Stock covered thereby, in such form as the Board shall from time to
time establish. No Option or purported Option shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Option Agreement.
Option Agreements may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:
6.1 EXERCISE PRICE. The exercise price for each Option shall
be established in the discretion of the Board; provided, however, that (a) the
exercise price per share for an Incentive Stock Option shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the
Option, (b) the exercise price per share for a Nonstatutory Stock Option shall
be not less than eighty-five percent (85%) of the Fair Market Value of a share
of
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Stock on the effective date of grant of the Option, and (c) no Option granted
to a Ten Percent Owner Optionee shall have an exercise price per share less
than one hundred ten percent (110%) of the Fair Market Value of a share of
Stock on the effective date of grant of the Option. Notwithstanding the
foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory
Stock Option) may be granted with an exercise price lower than the minimum
exercise price set forth above if such Option is granted pursuant to an
assumption or substitution for another option in a manner qualifying under
the provisions of Section 424(a) of the Code.
6.2 EXERCISE PERIOD. Options shall be exercisable at such time
or times, or upon such event or events, and subject to such terms, conditions,
performance criteria, and restrictions as shall be determined by the Board and
set forth in the Option Agreement evidencing such Option; provided, however,
that (a) no Option shall be exercisable after the expiration of ten (10) years
after the effective date of grant of such Option, (b) no Incentive Stock Option
granted to a Ten Percent Owner Optionee shall be exercisable after the
expiration of five (5) years after the effective date of grant of such Option,
(c) no Option granted to a prospective Employee, prospective Consultant or
prospective Director may become exercisable prior to the date on which such
person commences Service with a Participating Company, and (d) with the
exception of an Option granted to an officer, Director or Consultant, no Option
shall become exercisable at a rate less than twenty percent (20%) per year over
a period of five (5) years from the effective date of grant of such Option,
subject to the Optionee's continued Service. Subject to the foregoing, unless
otherwise specified by the Board in the grant of an Option, any Option granted
hereunder shall have a term of ten (10) years from the effective date of grant
of the Option.
6.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the exercise price for the number of shares
of Stock being purchased pursuant to any Option shall be made (i) in cash, by
check or cash equivalent, (ii) by tender to the Company, or attestation to the
ownership, of shares of Stock owned by the Optionee having a Fair Market Value
(as determined by the Company without regard to any restrictions on
transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriter for the Company) not less than
the exercise price, (iii) by the assignment of the proceeds of a sale or loan
with respect to some or all of the shares being acquired upon the exercise of
the Option (including, without limitation, through an exercise complying with
the provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System) (a "CASHLESS EXERCISE"), (iv) by the
Optionee's promissory note in a form approved by the Company, (v) by such other
consideration as may be approved by the Board from time to time to the extent
permitted by applicable law, or (vi) by any combination thereof. The Board may
at any time or from time to time, by adoption of or by amendment to the standard
forms of Option Agreement described in Section 7, or by other means, grant
Options which do not permit all of the foregoing forms of consideration to be
used in payment of the exercise price or which otherwise restrict one or more
forms of consideration.
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(b) LIMITATIONS ON FORMS OF CONSIDERATION.
(i) TENDER OF STOCK. Notwithstanding the
foregoing, an Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock to the extent such tender or
attestation would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock.
Unless otherwise provided by the Board, an Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares of Stock unless such
shares either have been owned by the Optionee for more than six (6) months or
were not acquired, directly or indirectly, from the Company.
(ii) CASHLESS EXERCISE. The Company reserves, at
any and all times, the right, in the Company's sole and absolute discretion, to
establish, decline to approve or terminate any program or procedures for the
exercise of Options by means of a Cashless Exercise.
(iii) PAYMENT BY PROMISSORY NOTE. No promissory
note shall be permitted if the exercise of an Option using a promissory note
would be a violation of any law. Any permitted promissory note shall be on such
terms as the Board shall determine at the time the Option is granted. The Board
shall have the authority to permit or require the Optionee to secure any
promissory note used to exercise an Option with the shares of Stock acquired
upon the exercise of the Option or with other collateral acceptable to the
Company. Unless otherwise provided by the Board, if the Company at any time is
subject to the regulations promulgated by the Board of Governors of the Federal
Reserve System or any other governmental entity affecting the extension of
credit in connection with the Company's securities, any promissory note shall
comply with such applicable regulations, and the Optionee shall pay the unpaid
principal and accrued interest, if any, to the extent necessary to comply with
such applicable regulations.
6.4 TAX WITHHOLDING. The Company shall have the right, but not
the obligation, to deduct from the shares of Stock issuable upon the exercise of
an Option, or to accept from the Optionee the tender of, a number of whole
shares of Stock having a Fair Market Value, as determined by the Company, equal
to all or any part of the federal, state, local and foreign taxes, if any,
required by law to be withheld by the Participating Company Group with respect
to such Option or the shares acquired upon the exercise thereof. Alternatively
or in addition, in its discretion, the Company shall have the right to require
the Optionee, through payroll withholding, cash payment or otherwise, including
by means of a Cashless Exercise, to make adequate provision for any such tax
withholding obligations of the Participating Company Group arising in connection
with the Option or the shares acquired upon the exercise thereof. The Company
shall have no obligation to deliver shares of Stock or to release shares of
Stock from an escrow established pursuant to the Option Agreement until the
Participating Company Group's tax withholding obligations have been satisfied by
the Optionee.
6.5 REPURCHASE RIGHTS. Shares issued under the Plan may be
subject to a right of first refusal, one or more repurchase options, or other
conditions and restrictions as
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determined by the Board in its discretion at the time the Option is granted.
The Company shall have the right to assign at any time any repurchase right
it may have, whether or not such right is then exercisable, to one or more
persons as may be selected by the Company. Upon request by the Company, each
Optionee shall execute any agreement evidencing such transfer restrictions
prior to the receipt of shares of Stock hereunder and shall promptly present
to the Company any and all certificates representing shares of Stock acquired
hereunder for the placement on such certificates of appropriate legends
evidencing any such transfer restrictions.
6.6 EFFECT OF TERMINATION OF SERVICE.
(a) OPTION EXERCISABILITY. Subject to earlier
termination of the Option as otherwise provided herein, an Option shall be
exercisable after an Optionee's termination of Service as follows:
(i) DISABILITY. If the Optionee's Service with
the Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of six (6) months (or such longer period of time as determined by the
Board, in its discretion) after the date on which the Optionee's Service
terminated, but in any event no later than the date of expiration of the
Option's term as set forth in the Option Agreement evidencing such Option (the
"OPTION EXPIRATION DATE").
(ii) DEATH. If the Optionee's Service with the
Participating Company Group is terminated because of the death of the Optionee,
the Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee's legal
representative or other person who acquired the right to exercise the Option by
reason of the Optionee's death at any time prior to the expiration of six (6)
months (or such longer period of time as determined by the Board, in its
discretion) after the date on which the Optionee's Service terminated, but in
any event no later than the Option Expiration Date. The Optionee's Service
shall be deemed to have terminated on account of death if the Optionee dies
within thirty (30) days (or such longer period of time as determined by the
Board, in its discretion) after the Optionee's termination of Service (other
than for Cause (as defined below)).
(iii) TERMINATION AFTER CHANGE IN CONTROL. If the
Optionee's Service with the Participating Company Group ceases as a result of
Termination After Change in Control (as defined below), then (1) the Option, to
the extent unexercised and exercisable on the date on which the Optionee's
Service terminated, may be exercised by the Optionee (or the Optionee's guardian
or legal representative) at any time prior to the expiration of six (6) months
(or such longer period of time as determined by the Board, in its sole
discretion) after the date on which the Optionee's Service terminated, but in
any event no later than the Option Expiration Date, and (2) the vesting of the
Option shall be accelerated as to a number of shares of equal to twenty-five
percent (25%) of the shares remaining unvested as of the date of the Optionee's
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termination of Service (or as otherwise determined by the Board and set forth
in the Option Agreement).
(iv) OTHER TERMINATION OF SERVICE. If the
Optionee's Service with the Participating Company Group terminates for any
reason, except Disability, death or Termination After Change in Control, the
Option, to the extent unexercised and exercisable by the Optionee on the date on
which the Optionee's Service terminated, may be exercised by the Optionee within
thirty (30) days (or such longer period of time as determined by the Board, in
its discretion) after the date on which the Optionee's Service terminated, but
in any event no later than the Option Expiration Date.
(b) EXTENSION IF EXERCISE PREVENTED BY LAW.
Notwithstanding the foregoing, if the exercise of an Option within the
applicable time periods set forth in Section 6.6(a) is prevented by the
provisions of Section 11 below, the Option shall remain exercisable until thirty
(30) days (or such longer period of time as determined by the Board, in its
discretion) after the date the Optionee is notified by the Company that the
Option is exercisable, but in any event no later than the Option Expiration
Date.
(c) EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 6.6(a) of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date.
(d) CERTAIN DEFINITIONS.
(i) "TERMINATION AFTER CHANGE IN CONTROL" shall
mean either of the following events:
(1) a termination by the Participating
Company Group of the Optionee's Service with the Participating Company Group for
any reason other than for Cause (as defined below), which termination occurs
within twelve (12) months after a Change in Control or immediately prior to such
Change in Control; or
(2) the Optionee's resignation for Good
Reason (as defined below) from Service with the Participating Company Group
within twelve (12) months after a Change in Control, which termination occurs
within a reasonable period of time following the event constituting Good Reason.
Notwithstanding any provision herein to the contrary, Termination After Change
in Control shall not include any termination of the Optionee's Service with the
Participating Company Group which (1) is for Cause (as defined below); (2) is a
result of the Optionee's death or Disability;
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(3) is a result of the Optionee's voluntary termination of Service other than
for Good Reason; or (4) occurs prior to the effectiveness of a Change in
Control (except as otherwise provided above).
(ii) "CAUSE" shall mean any of the following: (1)
the Optionee's theft, dishonesty, or falsification of any Participating Company
documents or records; (2) the Optionee's improper use or disclosure of a
Participating Company's confidential or proprietary information; (3) any action
by the Optionee which has a detrimental effect on a Participating Company's
reputation or business; (4) the Optionee's failure or inability to perform any
reasonable assigned duties after written notice from the Participating Company
Group of, and a reasonable opportunity to cure, such failure or inability; (5)
any material breach by the Optionee of any employment agreement between the
Optionee and the Participating Company Group, which breach is not cured pursuant
to the terms of such agreement; or (6) the Optionee's conviction (including any
plea of guilty or nolo contendere) of any criminal act which impairs the
Optionee's ability to perform his or her duties with the Participating Company
Group.
(iii) "GOOD REASON" shall mean any one or more of
the following:
(1) without the Optionee's express written
consent, the assignment to the Optionee of any duties, or any limitation of the
Optionee's responsibilities, substantially inconsistent with the Optionee's
positions, duties, responsibilities and status with the Participating Company
Group immediately prior to the date of the Change in Control;
(2) any failure by the Participating
Company Group to pay, or any material reduction by the Participating Company
Group of, (A) the Optionee's base salary in effect immediately prior to the date
of the Change in Control (unless reductions comparable in amount and duration
are concurrently made for all other employees of the Participating Company Group
with responsibilities, organizational level and title comparable to the
Optionee's), or (B) the Optionee's bonus compensation, if any, in effect
immediately prior to the date of the Change in Control (subject to applicable
performance requirements with respect to the actual amount of bonus compensation
earned by the Optionee); or
(3) any failure by the Participating
Company Group to (A) continue to provide the Optionee with the opportunity to
participate, on terms no less favorable than those in effect for the benefit of
any employee group which customarily includes a person holding the employment
position or a comparable position with the Participating Company Group then held
by the Optionee, in any benefit or compensation plans and programs, including,
but not limited to, the Participating Company Group's life, disability, health,
dental, medical, savings, profit sharing, stock purchase and retirement plans,
if any, in which the Optionee was participating immediately prior to the date of
the Change in Control, or their equivalent, or (B) provide the Optionee with all
other fringe benefits (or their equivalent) from time to time in effect for the
benefit of any employee group which customarily includes a person holding the
employment position or a comparable position with the Participating Company
Group then held by the Optionee.
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7. STANDARD FORMS OF OPTION AGREEMENT.
7.1 INCENTIVE STOCK OPTIONS. Unless otherwise provided by the
Board at the time the Option is granted, an Option designated as an "Incentive
Stock Option" shall comply with and be subject to the terms and conditions set
forth in the form of Incentive Stock Option Agreement adopted by the Board
concurrently with its adoption of the Plan and as amended from time to time.
7.2 NONSTATUTORY STOCK OPTIONS. Unless otherwise provided by
the Board at the time the Option is granted, an Option designated as a
"Nonstatutory Stock Option" shall comply with and be subject to the terms and
conditions set forth in the form of Nonstatutory Stock Option Agreement adopted
by the Board concurrently with its adoption of the Plan and as amended from time
to time.
7.3 AUTHORITY TO VARY TERMS. The Board shall have the
authority from time to time to vary the terms of any of the standard forms of
Option Agreement described in this Section 7 either in connection with the grant
or amendment of an individual Option or in connection with the authorization of
a new standard form or forms; provided, however, that the terms and conditions
of any such new, revised or amended standard form or forms of Option Agreement
are not inconsistent with the terms of the Plan.
8. CHANGE IN CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company: (i) the
direct or indirect sale or exchange in a single or series of related
transactions by the stockholders of the Company of more than fifty percent (50%)
of the voting stock of the Company; (ii) a merger or consolidation in which the
Company is a party; (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or (iv) a liquidation or
dissolution of the Company.
(b) A "CHANGE IN CONTROL" shall mean an Ownership Change
Event or a series of related Ownership Change Events (collectively, a
"TRANSACTION") wherein the stockholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall
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have the right to determine whether multiple sales or exchanges of the voting
stock of the Company or multiple Ownership Change Events are related, and its
determination shall be final, binding and conclusive.
8.2 EFFECT OF CHANGE IN CONTROL ON OPTIONS. In the event of a
Change in Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may either assume the Company's rights and obligations under
outstanding Options or substitute for outstanding Options substantially
equivalent options for the Acquiring Corporation's stock. For purposes of this
Section 8.2, an Option shall be deemed assumed if, following the Change in
Control, the Option confers the right to purchase in accordance with its terms
and conditions, for each share of Stock subject to the Option immediately prior
to the Change in Control, the consideration (whether stock, cash or other
securities or property) to which a holder of a share of Stock on the effective
date of the Change in Control was entitled. Any Options which are neither
assumed or substituted for by the Acquiring Corporation in connection with the
Change in Control nor exercised as of the date of the Change in Control shall
terminate and cease to be outstanding effective as of the date of the Change in
Control. Notwithstanding the foregoing, shares acquired upon exercise of an
Option prior to the Change in Control and any consideration received pursuant to
the Change in Control with respect to such shares shall continue to be subject
to all applicable provisions of the Option Agreement evidencing such Option
except as otherwise provided in such Option Agreement. Furthermore,
notwithstanding the foregoing, if the corporation the stock of which is subject
to the outstanding Options immediately prior to an Ownership Change Event
described in Section 8.1(a)(i) constituting a Change in Control is the surviving
or continuing corporation and immediately after such Ownership Change Event less
than fifty percent (50%) of the total combined voting power of its voting stock
is held by another corporation or by other corporations that are members of an
affiliated group within the meaning of Section 1504(a) of the Code without
regard to the provisions of Section 1504(b) of the Code, the outstanding Options
shall not terminate unless the Board otherwise provides in its discretion.
8.3 ACCELERATION OF VESTING. If within twelve (12) months
following a Change in Control, the principal place of the Optionee's employment
is relocated to a location more than fifty (50) miles from the Optionee's
principal place of employment immediately prior to the Change in Control and the
Optionee continues to perform Service at such new location, the vesting of each
Option held by such Optionee shall be accelerated as to a number of shares equal
to twenty-five percent (25%) of the shares then remaining unvested and the
remaining shares will vest in equal monthly increments over the remaining
portion of the original vesting schedule.
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9. PROVISION OF INFORMATION.
At least annually, copies of the Company's balance sheet and income
statement for the just completed fiscal year shall be made available to each
Optionee and purchaser of shares of Stock upon the exercise of an Option. The
Company shall not be required to provide such information to key employees whose
duties in connection with the Company assure them access to equivalent
information.
10. NONTRANSFERABILITY OF OPTIONS.
During the lifetime of the Optionee, an Option shall be exercisable only
by the Optionee or the Optionee's guardian or legal representative. No Option
shall be assignable or transferable by the Optionee, except by will or by the
laws of descent and distribution.
11. COMPLIANCE WITH SECURITIES LAW.
The grant of Options and the issuance of shares of Stock upon exercise of
Options shall be subject to compliance with all applicable requirements of
federal, state and foreign law with respect to such securities. Options may not
be exercised if the issuance of shares of Stock upon exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other
law or regulations or the requirements of any stock exchange or market system
upon which the Stock may then be listed. In addition, no Option may be
exercised unless (a) a registration statement under the Securities Act shall at
the time of exercise of the Option be in effect with respect to the shares
issuable upon exercise of the Option or (b) in the opinion of legal counsel to
the Company, the shares issuable upon exercise of the Option may be issued in
accordance with the terms of an applicable exemption from the registration
requirements of the Securities Act. The inability of the Company to obtain from
any regulatory body having jurisdiction the authority, if any, deemed by the
Company's legal counsel to be necessary to the lawful issuance and sale of any
shares hereunder shall relieve the Company of any liability in respect of the
failure to issue or sell such shares as to which such requisite authority shall
not have been obtained. As a condition to the exercise of any Option, the
Company may require the Optionee to satisfy any qualifications that may be
necessary or appropriate, to evidence compliance with any applicable law or
regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.
12. INDEMNIFICATION.
In addition to such other rights of indemnification as they may have as
members of the Board or officers or employees of the Participating Company
Group, members of the Board and any officers or employees of the Participating
Company Group to whom authority to act for the Board or the Company is delegated
shall be indemnified by the Company against all reasonable expenses, including
attorneys' fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any right
granted hereunder, and against all amounts paid by them
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in settlement thereof (provided such settlement is approved by independent
legal counsel selected by the Company) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to
matters as to which it shall be adjudged in such action, suit or proceeding
that such person is liable for gross negligence, bad faith or intentional
misconduct in duties; provided, however, that within sixty (60) days after
the institution of such action, suit or proceeding, such person shall offer
to the Company, in writing, the opportunity at its own expense to handle and
defend the same.
13. TERMINATION OR AMENDMENT OF PLAN.
The Board may terminate or amend the Plan at any time. However, subject
to changes in applicable law, regulations or rules that would permit otherwise,
without the approval of the Company's stockholders, there shall be (a) no
increase in the maximum aggregate number of shares of Stock that may be issued
under the Plan (except by operation of the provisions of Section 4.2), (b) no
change in the class of persons eligible to receive Incentive Stock Options, and
(c) no other amendment of the Plan that would require approval of the Company's
stockholders under any applicable law, regulation or rule. In any event, no
termination or amendment of the Plan may adversely affect any then outstanding
Option or any unexercised portion thereof, without the consent of the Optionee,
unless such termination or amendment is required to enable an Option designated
as an Incentive Stock Option to qualify as an Incentive Stock Option or is
necessary to comply with any applicable law, regulation or rule.
14. STOCKHOLDER APPROVAL.
The Plan or any increase in the maximum aggregate number of shares of
Stock issuable thereunder as provided in Section 4.1 (the "AUTHORIZED SHARES")
shall be approved by the stockholders of the Company within twelve (12) months
of the date of adoption thereof by the Board. Options granted prior to
stockholder approval of the Plan or in excess of the Authorized Shares
previously approved by the stockholders shall become exercisable no earlier than
the date of stockholder approval of the Plan or such increase in the Authorized
Shares, as the case may be.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing is the Direct Hit Technologies, Inc. 1998-A Stock Option Plan
as duly adopted by the Board on June 24, 1998 and amended by the Board through
_____________, 1999
____________________________________
Secretary of the Company
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DIRECT HIT TECHNOLOGIES, INC.
IMMEDIATELY EXERCISABLE
INCENTIVE STOCK OPTION AGREEMENT
THIS IMMEDIATELY EXERCISABLE INCENTIVE STOCK OPTION AGREEMENT (the
"OPTION AGREEMENT") is made and entered into as of the Date of Option Grant by
and between Direct Hit Technologies, Inc. and Aaron Zallen (the "OPTIONEE").
The Company has granted to the Optionee pursuant to the Direct Hit
Technologies, Inc. 1998-A Stock Option Plan (the "PLAN") an option to purchase
certain shares of Stock, upon the terms and conditions set forth in this Option
Agreement (the "OPTION"). The Option shall in all respects be subject to the
terms and conditions of the Plan, the provisions of which are incorporated
herein by reference.
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Plan. Whenever used
herein, the following terms shall have their respective meanings set forth
below:
(a) "DATE OF OPTION GRANT" means November 8, 1999.
(b) "NUMBER OF OPTION SHARES" means 20,000 shares of
Stock, as adjusted from time to time pursuant to Section 7.
(c) "EXERCISE PRICE" means $ 3.34 per share of Stock, as
adjusted from time to time pursuant to Section 7.
(d) "INITIAL VESTING DATE" means (i) the date occurring
one (1) year after the Date of Option Grant; or (ii) if a Change in Control
occurs prior to such date, the Initial Vesting Date shall mean the date
occurring one (1) month after the date on which the Optionee's Service
commenced. However, if the acceleration of vesting resulting from a change to
the Initial Vesting Date described in (ii) above would preclude the use of
"pooling of interests" accounting treatment with respect to the Change in
Control, no such acceleration of vesting shall occur and the Initial Vesting
Date shall be the date described in (i) above.
(e) "OPTION EXPIRATION DATE" means the date ten (10)
years after the Date of Option Grant.
(f) "VESTED RATIO" means, on any relevant date, the
ratio determined as follows:
(i) Prior to the Initial Vesting Date, the Vested
Ratio shall be zero.
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(ii) On the Initial Vesting Date, provided that
the Optionee's Service has not terminated prior to such date, the Vested Ratio
shall be 1/4; provided, however, that if the Initial Vesting Date is determined
pursuant to Section 1.1(e)(ii) above, the Vested Ratio shall be 1/48 as of the
Initial Vesting Date.
(iii) For each full month of the Optionee's
continuous Service from the Initial Vesting Date, the Vested Ratio shall be
increased by 1/48 until the Vested Ratio equals 1/1.
1.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural and the plural shall include the
singular. Use of the term "or" is not intended to be exclusive, unless the
context clearly requires otherwise.
2. TAX CONSEQUENCES.
2.1 TAX STATUS OF OPTION. This Option is intended to be an
Incentive Stock Option within the meaning of Section 422(b) of the Code, but the
Company does not represent or warrant that this Option qualifies as such. The
Optionee should consult with the Optionee's own tax advisor regarding the tax
effects of this Option and the requirements necessary to obtain favorable income
tax treatment under Section 422 of the Code, including, but not limited to,
holding period requirements. (NOTE TO OPTIONEE: If the Option is exercised more
than three (3) months after the date on which you cease to be an Employee (other
than by reason of your death or permanent and total disability as defined in
Section 22(e)(3) of the Code), the Option will be treated as a Nonstatutory
Stock Option and not as an Incentive Stock Option to the extent required by
Section 422 of the Code.)
2.2 FAIR MARKET VALUE LIMITATION. To the extent that the
Option (together with all Incentive Stock Options granted to the Optionee under
all stock option plans of the Participating Company Group, including the Plan)
becomes exercisable for the first time during any calendar year for shares
having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000),
the portion of such options which exceeds such amount will be treated as
Nonstatutory Stock Options. For purposes of this Section 2.2, options
designated as Incentive Stock Options are taken into account in the order in
which they were granted, and the Fair Market Value of stock is determined as of
the time the option with respect to such stock is granted. If the Code is
amended to provide for a different limitation from that set forth in this
Section 2.2, such different limitation shall be deemed incorporated herein
effective as of the date required or permitted by such amendment to the Code.
If the Option is treated as an Incentive Stock Option in part and as a
Nonstatutory Stock Option in part by reason of the limitation set forth in this
Section 2.2, the Optionee may designate which portion of such Option the
Optionee is exercising. In the absence of such designation, the Optionee shall
be deemed to have exercised the Incentive Stock Option portion of the Option
first. Separate certificates representing each such portion shall be issued
upon the exercise of the Option. (NOTE TO OPTIONEE: If the
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aggregate Exercise Price of the Option (that is, the Exercise Price
multiplied by the Number of Option Shares) plus the aggregate exercise price
of any other Incentive Stock Options you hold (whether granted pursuant to
the Plan or any other stock option plan of the Participating Company Group)
is greater than $100,000, you should contact the Chief Financial Officer of
the Company to ascertain whether the entire Option qualifies as an Incentive
Stock Option.)
2.3 ELECTION UNDER SECTION 83(b) OF THE CODE. If the Optionee
exercises this Option to purchase shares of Stock that are both nontransferable
and subject to a substantial risk of forfeiture, the Optionee understands that
the Optionee should consult with the Optionee's tax advisor regarding the
advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days
after the date on which the Optionee exercises the Option. Shares acquired upon
exercise of the Option are nontransferable and subject to a substantial risk of
forfeiture if, for example, they are unvested and are subject to a right of the
Company to repurchase such shares at the Optionee's original purchase price if
the Optionee's Service terminates. Failure to file an election under Section
83(b), if appropriate, may result in adverse tax consequences to the Optionee.
The Optionee acknowledges that the Optionee has been advised to consult with a
tax advisor prior to the exercise of the Option regarding the tax consequences
to the Optionee of the exercise of the Option. AN ELECTION UNDER SECTION 83(b)
MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH THE OPTIONEE PURCHASES
SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE OPTIONEE ACKNOWLEDGES THAT
TIMELY FILING OF A SECTION 83(b) ELECTION IS THE OPTIONEE'S SOLE RESPONSIBILITY,
EVEN IF THE OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH
ELECTION ON HIS OR HER BEHALF.
3. ADMINISTRATION.
All questions of interpretation concerning this Option Agreement shall be
determined by the Board. All determinations by the Board shall be final and
binding upon all persons having an interest in the Option. Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.
4. EXERCISE OF THE OPTION.
4.1 RIGHT TO EXERCISE. Except as otherwise provided herein,
the Option shall be exercisable on and after the Date of Option Grant and prior
to the termination of the Option (as provided in Section 6) in an amount not to
exceed the Number of Option Shares less the number of shares previously acquired
upon exercise of the Option, subject to the Optionee's agreement that any shares
purchased upon exercise are subject to the Company's repurchase rights set forth
in Section 9 and Section 10.
4.2 METHOD OF EXERCISE. Exercise of the Option shall be by
written notice to the Company which must state the election to exercise the
Option, the number of whole shares of
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Stock for which the Option is being exercised and such other representations
and agreements as to the Optionee's investment intent with respect to such
shares as may be required pursuant to the provisions of this Option
Agreement. The written notice must be signed by the Optionee and must be
delivered in person, by certified or registered mail, return receipt
requested, by confirmed facsimile transmission, or by such other means as the
Company may permit, to the Chief Financial Officer of the Company, or other
authorized representative of the Participating Company Group, prior to the
termination of the Option as set forth in Section 6, accompanied by (i) full
payment of the aggregate Exercise Price for the number of shares of Stock
being purchased and (ii) an executed copy, if required herein, of the then
current form of escrow agreement referenced below. The Option shall be deemed
to be exercised upon receipt by the Company of such written notice, the
aggregate Exercise Price, and, if required by the Company, such executed
agreement.
4.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the aggregate Exercise Price for the number
of shares of Stock for which the Option is being exercised shall be made (i) in
cash, by check, or cash equivalent, (ii) by tender to the Company, or
attestation to the ownership, of whole shares of Stock owned by the Optionee
having a Fair Market Value (as determined by the Company without regard to any
restrictions on transferability applicable to such stock by reason of federal or
state securities laws or agreements with an underwriter for the Company) not
less than the aggregate Exercise Price, (iii) by means of a Cashless Exercise,
as defined in Section 4.3(b), or (iv) by any combination of the foregoing.
(b) LIMITATIONS ON FORMS OF CONSIDERATION.
(i) TENDER OF STOCK. Notwithstanding the
foregoing, the Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock to the extent such tender or
attestation would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock. The
Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock unless such shares either have been owned by the
Optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company.
(ii) CASHLESS EXERCISE. A "CASHLESS EXERCISE"
means the assignment in a form acceptable to the Company of the proceeds of a
sale or loan with respect to some or all of the shares of Stock acquired upon
the exercise of the Option pursuant to a program or procedure approved by the
Company (including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure.
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4.4 TAX WITHHOLDING. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes withholding from payroll and any other amounts
payable to the Optionee, and otherwise agrees to make adequate provision for
(including by means of a Cashless Exercise to the extent permitted by the
Company), any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of the Participating Company Group, if any, which arise
in connection with the Option, including, without limitation, obligations
arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any shares acquired upon exercise of the
Option, (iii) the operation of any law or regulation providing for the
imputation of interest, or (iv) the lapsing of any restriction with respect to
any shares acquired upon exercise of the Option. The Optionee is cautioned that
the Option is not exercisable unless the tax withholding obligations of the
Participating Company Group are satisfied. Accordingly, the Optionee may not be
able to exercise the Option when desired even though the Option is vested, and
the Company shall have no obligation to issue a certificate for such shares or
release such shares from any escrow provided for herein.
4.5 CERTIFICATE REGISTRATION. Except in the event the Exercise
Price is paid by means of a Cashless Exercise, the certificate for the shares as
to which the Option is exercised shall be registered in the name of the
Optionee, or, if applicable, in the names of the heirs of the Optionee.
4.6 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES.
The grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, the Option
may not be exercised unless (i) a registration statement under the Securities
Act shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from
any regulatory body having jurisdiction the authority, if any, deemed by the
Company's legal counsel to be necessary to the lawful issuance and sale of any
shares subject to the Option shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of the
Option, the Company may require the Optionee to satisfy any qualifications that
may be necessary or appropriate, to evidence compliance with any applicable law
or regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.
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4.7 FRACTIONAL SHARES. The Company shall not be required to
issue fractional shares upon the exercise of the Option.
5. NONTRANSFERABILITY OF THE OPTION.
The Option may be exercised during the lifetime of the Optionee only by
the Optionee or the Optionee's guardian or legal representative and may not be
assigned or transferred in any manner except by will or by the laws of descent
and distribution. Following the death of the Optionee, the Option, to the
extent provided in the Plan, may be exercised by the Optionee's legal
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.
6. TERMINATION OF THE OPTION.
The Option shall terminate and may no longer be exercised on the first to
occur of (a) the Option Expiration Date, (b) the last date for exercising the
Option following termination of the Optionee's Service as described in the Plan,
or (c) a Change in Control to the extent provided in the Plan.
7. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.
In the event of any stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification, or similar change in the
capital structure of the Company, appropriate adjustments shall be made in the
number, Exercise Price and class of shares of stock subject to the Option. If a
majority of the shares which are of the same class as the shares that are
subject to the Option are exchanged for, converted into, or otherwise become
(whether or not pursuant to an Ownership Change Event) shares of another
corporation (the "NEW SHARES"), the Board may unilaterally amend the Option to
provide that the Option is exercisable for New Shares. In the event of any such
amendment, the Number of Option Shares and the Exercise Price shall be adjusted
in a fair and equitable manner, as determined by the Board, in its discretion.
Notwithstanding the foregoing, any fractional share resulting from an adjustment
pursuant to this Section 7 shall be rounded down to the nearest whole number,
and in no event may the Exercise Price be decreased to an amount less than the
par value, if any, of the stock subject to the Option. The adjustments
determined by the Board pursuant to this Section 7 shall be final, binding and
conclusive.
8. RIGHTS AS A STOCKHOLDER, EMPLOYEE OR CONSULTANT.
The Optionee shall have no rights as a stockholder with respect to any
shares covered by the Option until the date of the issuance of a certificate for
the shares for which the Option has been exercised (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company). No adjustment shall be made for dividends, distributions
or other rights for which the record date is prior to the date such certificate
is issued, except as provided in Section 7. If the Optionee is an Employee, the
Optionee understands and acknowledges that, except as otherwise provided in a
separate, written
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employment agreement between a Participating Company and the Optionee, the
Optionee's employment is "at will" and is for no specified term. Nothing in
this Option Agreement shall confer upon the Optionee any right to continue in
the Service of a Participating Company or interfere in any way with any right
of the Participating Company Group to terminate the Optionee's Service as an
Employee or Consultant, as the case may be, at any time.
9. UNVESTED SHARE REPURCHASE OPTION.
9.1 GRANT OF UNVESTED SHARE REPURCHASE OPTION. In the event
the Optionee's Service with the Participating Company Group is terminated for
any reason or no reason, with or without cause, or, if the Optionee, the
Optionee's legal representative, or other holder of shares acquired upon
exercise of the Option attempts to sell, exchange, transfer, pledge, or
otherwise dispose of (other than pursuant to an Ownership Change Event) any
shares acquired upon exercise of the Option which exceed the Vested Shares as
defined in Section 9.2 below (the "UNVESTED SHARES"), the Company shall have the
right to repurchase the Unvested Shares under the terms and subject to the
conditions set forth in this Section 9 (the "UNVESTED SHARE REPURCHASE OPTION").
9.2 VESTED SHARES AND UNVESTED SHARES DEFINED. Except as
otherwise provided herein or in the Plan, the "VESTED SHARES" shall mean, on any
given date, a number of shares of Stock equal to the Number of Option Shares
multiplied by the Vested Ratio determined as of such date and rounded down to
the nearest whole share. On such given date, the "UNVESTED SHARES" shall mean
the number of shares of Stock acquired upon exercise of the Option which exceed
the Vested Shares determined as of such date.
9.3 EXERCISE OF UNVESTED SHARE REPURCHASE OPTION. The Company
may exercise the Unvested Share Repurchase Option by written notice to the
Optionee within sixty (60) days after (a) termination of the Optionee's Service
(or exercise of the Option, if later) or (b) the Company has received notice of
the attempted disposition of Unvested Shares. If the Company fails to give
notice within such sixty (60) day period, the Unvested Share Repurchase Option
shall terminate unless the Company and the Optionee have extended the time for
the exercise of the Unvested Share Repurchase Option. The Unvested Share
Repurchase Option must be exercised, if at all, for all of the Unvested Shares,
except as the Company and the Optionee otherwise agree.
9.4 PAYMENT FOR SHARES AND RETURN OF SHARES TO COMPANY. The
purchase price per share being repurchased by the Company shall be an amount
equal to the Optionee's original cost per share, as adjusted pursuant to Section
7 (the "REPURCHASE PRICE"). The Company shall pay the aggregate Repurchase
Price to the Optionee in cash within thirty (30) days after the date of the
written notice to the Optionee of the Company's exercise of the Unvested Share
Repurchase Option. For purposes of the foregoing, cancellation of any purchase
money indebtedness of the Optionee to any Participating Company for the shares
shall be treated as payment to the Optionee in cash to the extent of the unpaid
principal and any accrued interest canceled. The shares being repurchased shall
be delivered to the Company by the Optionee at the same time as the delivery of
the Repurchase Price to the Optionee.
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9.5 ASSIGNMENT OF UNVESTED SHARE REPURCHASE OPTION. The
Company shall have the right to assign the Unvested Share Repurchase Option at
any time, whether or not such option is then exercisable, to one or more persons
as may be selected by the Company.
9.6 OWNERSHIP CHANGE EVENT. Upon the occurrence of an
Ownership Change Event, any and all new, substituted or additional securities or
other property to which the Optionee is entitled by reason of the Optionee's
ownership of Unvested Shares shall be immediately subject to the Unvested Share
Repurchase Option and included in the terms "Stock" and "Unvested Shares" for
all purposes of the Unvested Share Repurchase Option with the same force and
effect as the Unvested Shares immediately prior to the Ownership Change Event.
While the aggregate Repurchase Price shall remain the same after such Ownership
Change Event, the Repurchase Price per Unvested Share upon exercise of the
Unvested Share Repurchase Option following such Ownership Change Event shall be
adjusted as appropriate. For purposes of determining the Vested Ratio following
an Ownership Change Event, credited Service shall include all Service with any
corporation which is a Participating Company at the time the Service is
rendered, whether or not such corporation is a Participating Company both before
and after the Ownership Change Event.
10. RIGHT OF FIRST REFUSAL.
10.1 GRANT OF RIGHT OF FIRST REFUSAL. Except as provided in
Section 10.7 below, in the event the Optionee, the Optionee's legal
representative, or other holder of shares acquired upon exercise of the Option
proposes to sell, exchange, transfer, pledge, or otherwise dispose of any Vested
Shares (the "TRANSFER SHARES") to any person or entity, including, without
limitation, any stockholder of a Participating Company, the Company shall have
the right to repurchase the Transfer Shares under the terms and subject to the
conditions set forth in this Section 10 (the "RIGHT OF FIRST REFUSAL").
10.2 NOTICE OF PROPOSED TRANSFER. Prior to any proposed
transfer of the Transfer Shares, the Optionee shall deliver written notice (the
"TRANSFER NOTICE") to the Company describing fully the proposed transfer,
including the number of Transfer Shares, the name and address of the proposed
transferee (the "PROPOSED TRANSFEREE") and, if the transfer is voluntary, the
proposed transfer price, and containing such information necessary to show the
bona fide nature of the proposed transfer. In the event of a bona fide gift or
involuntary transfer, the proposed transfer price shall be deemed to be the Fair
Market Value of the Transfer Shares, as determined by the Board in good faith.
If the Optionee proposes to transfer any Transfer Shares to more than one
Proposed Transferee, the Optionee shall provide a separate Transfer Notice for
the proposed transfer to each Proposed Transferee. The Transfer Notice shall be
signed by both the Optionee and the Proposed Transferee and must constitute a
binding commitment of the Optionee and the Proposed Transferee for the transfer
of the Transfer Shares to the Proposed Transferee subject only to the Right of
First Refusal.
10.3 BONA FIDE TRANSFER. If the Company determines that the
information provided by the Optionee in the Transfer Notice is insufficient to
establish the bona fide nature of
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a proposed voluntary transfer, the Company shall give the Optionee written
notice of the Optionee's failure to comply with the procedure described in
this Section 10, and the Optionee shall have no right to transfer the
Transfer Shares without first complying with the procedure described in this
Section 10. The Optionee shall not be permitted to transfer the Transfer
Shares if the proposed transfer is not bona fide.
10.4 EXERCISE OF RIGHT OF FIRST REFUSAL. If the Company
determines the proposed transfer to be bona fide, the Company shall have the
right to purchase all, but not less than all, of the Transfer Shares (except as
the Company and the Optionee otherwise agree) at the purchase price and on the
terms set forth in the Transfer Notice by delivery to the Optionee of a notice
of exercise of the Right of First Refusal within thirty (30) days after the date
the Transfer Notice is delivered to the Company. The Company's exercise or
failure to exercise the Right of First Refusal with respect to any proposed
transfer described in a Transfer Notice shall not affect the Company's right to
exercise the Right of First Refusal with respect to any proposed transfer
described in any other Transfer Notice, whether or not such other Transfer
Notice is issued by the Optionee or issued by a person other than the Optionee
with respect to a proposed transfer to the same Proposed Transferee. If the
Company exercises the Right of First Refusal, the Company and the Optionee shall
thereupon consummate the sale of the Transfer Shares to the Company on the terms
set forth in the Transfer Notice within sixty (60) days after the date the
Transfer Notice is delivered to the Company (unless a longer period is offered
by the Proposed Transferee); provided, however, that in the event the Transfer
Notice provides for the payment for the Transfer Shares other than in cash, the
Company shall have the option of paying for the Transfer Shares by the present
value cash equivalent of the consideration described in the Transfer Notice as
reasonably determined by the Company. For purposes of the foregoing,
cancellation of any indebtedness of the Optionee to any Participating Company
shall be treated as payment to the Optionee in cash to the extent of the unpaid
principal and any accrued interest canceled.
10.5 FAILURE TO EXERCISE RIGHT OF FIRST REFUSAL. If the Company
fails to exercise the Right of First Refusal in full (or to such lesser extent
as the Company and the Optionee otherwise agree) within the period specified in
Section 10.4 above, the Optionee may conclude a transfer to the Proposed
Transferee of the Transfer Shares on the terms and conditions described in the
Transfer Notice, provided such transfer occurs not later than ninety (90) days
following delivery to the Company of the Transfer Notice. The Company shall
have the right to demand further assurances from the Optionee and the Proposed
Transferee (in a form satisfactory to the Company) that the transfer of the
Transfer Shares was actually carried out on the terms and conditions described
in the Transfer Notice. No Transfer Shares shall be transferred on the books of
the Company until the Company has received such assurances, if so demanded, and
has approved the proposed transfer as bona fide. Any proposed transfer on terms
and conditions different from those described in the Transfer Notice, as well as
any subsequent proposed transfer by the Optionee, shall again be subject to the
Right of First Refusal and shall require compliance by the Optionee with the
procedure described in this Section 10.
10.6 TRANSFEREES OF TRANSFER SHARES. All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and
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hold such Transfer Shares or interest therein subject to all of the terms and
conditions of this Option Agreement, including this Section 10 providing for
the Right of First Refusal with respect to any subsequent transfer. Any sale
or transfer of any shares acquired upon exercise of the Option shall be void
unless the provisions of this Section 10 are met.
10.7 TRANSFERS NOT SUBJECT TO RIGHT OF FIRST REFUSAL. The Right
of First Refusal shall not apply to any transfer or exchange of the shares
acquired upon exercise of the Option if such transfer or exchange is in
connection with an Ownership Change Event. If the consideration received
pursuant to such transfer or exchange consists of stock of a Participating
Company, such consideration shall remain subject to the Right of First Refusal
unless the provisions of Section 10.9 below result in a termination of the Right
of First Refusal.
10.8 ASSIGNMENT OF RIGHT OF FIRST REFUSAL. The Company shall
have the right to assign the Right of First Refusal at any time, whether or not
there has been an attempted transfer, to one or more persons as may be selected
by the Company.
10.9 EARLY TERMINATION OF RIGHT OF FIRST REFUSAL. The other
provisions of this Option Agreement notwithstanding, the Right of First Refusal
shall terminate and be of no further force and effect upon (a) the occurrence of
a Change in Control, unless the Acquiring Corporation assumes the Company's
rights and obligations under the Option or substitutes a substantially
equivalent option for the Acquiring Corporation's stock for the Option, or
(b) the existence of a public market for the class of shares subject to the
Right of First Refusal. A "PUBLIC MARKET" shall be deemed to exist if (i) such
stock is listed on a national securities exchange (as that term is used in the
Exchange Act) or (ii) such stock is traded on the over-the-counter market and
prices therefor are published daily on business days in a recognized financial
journal.
11. ESCROW.
11.1 ESTABLISHMENT OF ESCROW. To ensure that shares subject to
the Unvested Share Repurchase Option will be available for repurchase, the
Company may require the Optionee to deposit the certificate evidencing the
shares which the Optionee purchases upon exercise of the Option with an agent
designated by the Company under the terms and conditions of an escrow agreement
approved by the Company. If the Company does not require such deposit as a
condition of exercise of the Option, the Company reserves the right at any time
to require the Optionee to so deposit the certificate in escrow. Upon the
occurrence of an Ownership Change Event or a change, as described in Section 7,
in the character or amount of any of the outstanding stock of the corporation
the stock of which is subject to the provisions of this Option Agreement, any
and all new, substituted or additional securities or other property to which the
Optionee is entitled by reason of the Optionee's ownership of shares of Stock
acquired upon exercise of the Option that remain, following such Ownership
Change Event or change described in Section 7, subject to the Unvested Share
Repurchase Option shall be immediately subject to the escrow to the same extent
as such shares of Stock immediately before such event. The Company shall bear
the expenses of the escrow.
10
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11.2 DELIVERY OF SHARES TO OPTIONEE. As soon as practicable
after the expiration of the Unvested Share Repurchase Option, but not more
frequently than twice each calendar year, the escrow agent shall deliver to the
Optionee the shares and any other property no longer subject to such
restriction.
11.3 NOTICES AND PAYMENTS. In the event the shares and any
other property held in escrow are subject to the Company's exercise of the
Unvested Share Repurchase Option or the Right of First Refusal, the notices
required to be given to the Optionee shall be given to the escrow agent, and any
payment required to be given to the Optionee shall be given to the escrow agent.
Within thirty (30) days after payment by the Company, the escrow agent shall
deliver the shares and any other property which the Company has purchased to the
Company and shall deliver the payment received from the Company to the Optionee.
12. STOCK DISTRIBUTIONS SUBJECT TO OPTION AGREEMENT.
If, from time to time, there is any stock dividend, stock split or other
change, as described in Section 7, in the character or amount of any of the
outstanding stock of the corporation the stock of which is subject to the
provisions of this Option Agreement, then in such event any and all new,
substituted or additional securities to which the Optionee is entitled by reason
of the Optionee's ownership of the shares acquired upon exercise of the Option
shall be immediately subject to the Unvested Share Repurchase Option and the
Right of First Refusal with the same force and effect as the shares subject to
the Unvested Share Repurchase Option and the Right of First Refusal immediately
before such event.
13. NOTICE OF SALES UPON DISQUALIFYING DISPOSITION.
The Optionee shall dispose of the shares acquired pursuant to the
Option only in accordance with the provisions of this Option Agreement. In
addition, the Optionee shall promptly notify the Chief Financial Officer of
the Company if the Optionee disposes of any of the shares acquired pursuant
to the Option within one (1) year after the date of the Optionee exercises
all or part of the Option or within two (2) years after the Date of Option
Grant. Until such time as the Optionee disposes of such shares in a manner
consistent with the provisions of this Option Agreement, unless otherwise
expressly authorized by the Company, the Optionee shall hold all shares
acquired pursuant to the Option in the Optionee's name (and not in the name
of any nominee) for the one-year period immediately after the exercise of the
Option and the two-year period immediately after Date of Option Grant. At
any time during the one-year or two-year periods set forth above, the Company
may place a legend on any certificate representing shares acquired pursuant
to the Option requesting the transfer agent for the Company's stock to notify
the Company of any such transfers. The obligation of the Optionee to notify
the Company of any such transfer shall continue notwithstanding that a legend
has been placed on the certificate pursuant to the preceding sentence.
11
<PAGE>
14. LEGENDS.
The Company may at any time place legends referencing the Unvested Share
Repurchase Option, the Right of First Refusal, and any applicable federal, state
or foreign securities law restrictions on all certificates representing shares
of stock subject to the provisions of this Option Agreement. The Optionee
shall, at the request of the Company, promptly present to the Company any and
all certificates representing shares acquired pursuant to the Option in the
possession of the Optionee in order to carry out the provisions of this Section.
Unless otherwise specified by the Company, legends placed on such certificates
may include, but shall not be limited to, the following:
14.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO
THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
14.2 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
AN UNVESTED SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE
SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR
SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THIS CORPORATION."
14.3 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET
FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH
HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THIS CORPORATION."
14.4 "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY
THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK
OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED ("ISO"). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED
TO ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO
_________________________. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY
OF THE SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER
AGENT FOR THE SHARES SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE
REGISTERED HOLDER SHALL HOLD ALL
12
<PAGE>
SHARES PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER'S
NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL
TRANSFERRED AS DESCRIBED ABOVE."
15. LOCK-UP AGREEMENT.
The Optionee hereby agrees that in the event of any underwritten public
offering of stock, including an initial public offering of stock, made by the
Company pursuant to an effective registration statement filed under the
Securities Act, the Optionee shall not offer, sell, contract to sell, pledge,
hypothecate, grant any option to purchase or make any short sale of, or
otherwise dispose of any shares of stock of the Company or any rights to acquire
stock of the Company for such period of time from and after the effective date
of such registration statement as may be established by the underwriter for such
public offering; provided, however, that such period of time shall not exceed
one hundred eighty (180) days from the effective date of the registration
statement to be filed in connection with such public offering. The foregoing
limitation shall not apply to shares registered in the public offering under the
Securities Act.
16. RESTRICTIONS ON TRANSFER OF SHARES.
No shares acquired upon exercise of the Option may be sold, exchanged,
transferred (including, without limitation, any transfer to a nominee or agent
of the Optionee), assigned, pledged, hypothecated or otherwise disposed of,
including by operation of law, in any manner which violates any of the
provisions of this Option Agreement and, except pursuant to an Ownership Change
Event, until the date on which such shares become Vested Shares, and any such
attempted disposition shall be void. The Company shall not be required (a) to
transfer on its books any shares which will have been transferred in violation
of any of the provisions set forth in this Option Agreement or (b) to treat as
owner of such shares or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such shares will have been so transferred.
17. MISCELLANEOUS PROVISIONS.
17.1 BINDING EFFECT. Subject to the restrictions on transfer
set forth herein, this Option Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
17.2 TERMINATION OR AMENDMENT. The Board may terminate or amend
the Plan or the Option at any time; provided, however, that except as provided
in the Plan in connection with a Change in Control, no such termination or
amendment may adversely affect the Option or any unexercised portion hereof
without the consent of the Optionee unless such termination or amendment is
necessary to comply with any applicable law or government regulation or is
required to enable the Option to qualify as an Incentive Stock Option. No
amendment or addition to this Option Agreement shall be effective unless in
writing.
13
<PAGE>
17.3 NOTICES. Any notice required or permitted hereunder shall
be given in writing and shall be deemed effectively given (except to the extent
that this Option Agreement provides for effectiveness only upon actual receipt
of such notice) upon personal delivery or upon deposit in the United States Post
Office, by registered or certified mail, with postage and fees prepaid,
addressed to the other party at the address shown below that party's signature
or at such other address as such party may designate in writing from time to
time to the other party.
17.4 INTEGRATED AGREEMENT. This Option Agreement and the Plan
constitute the entire understanding and agreement of the Optionee and the
Participating Company Group with respect to the subject matter contained herein
and therein and supersedes any prior agreements, understandings, restrictions,
representations, or warranties among the Optionee and the Participating Company
Group with respect to such subject matter other than those as set forth or
provided for herein or therein. To the extent contemplated herein or therein,
the provisions of this Option Agreement shall survive any exercise of the Option
and shall remain in full force and effect.
17.5 APPLICABLE LAW. This Option Agreement shall be governed by
the laws of the State of Massachusetts as such laws are applied to agreements
between Massachusetts residents entered into and to be performed entirely within
the State of Massachusetts.
17.6 COUNTERPARTS. This Option Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
DIRECT HIT TECHNOLOGIES, INC.
By: ________________________________
Title: _____________________________
Address: 888 Worcester Street
Suite 340
Wellesley, MA 02482
14
<PAGE>
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, including the Unvested Share Repurchase
Option set forth in Section 9 and the Right of First Refusal set forth in
Section 10, and hereby accepts the Option subject to all of the terms and
provisions thereof. The Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under this Option Agreement. The undersigned acknowledges receipt of a
copy of the Plan.
OPTIONEE
Date: ________________________________ ____________________________________
Optionee Address:
____________________________________
____________________________________
15
<PAGE>
Optionee: _________________________
Date: ________________________
IMMEDIATELY EXERCISABLE
INCENTIVE STOCK OPTION
EXERCISE NOTICE
Direct Hit Technologies, Inc.
888 Worcester Street, Suite 340
Wellesley, MA 02482
Attention: Chief Financial Officer
Ladies and Gentlemen:
1. EXERCISE OF OPTION. I was granted an incentive stock option (the
"OPTION") to purchase shares of the common stock of Direct Hit Technologies,
Inc. (the "COMPANY") pursuant to the Company's 1998-A Stock Option Plan (the
"PLAN") and my Immediately Exercisable Incentive Stock Option Agreement dated
__________________, 19___ (the "OPTION AGREEMENT"). The Grant Number of the
Option is _____________. I hereby elect to exercise the Option as to a total of
__________________ shares of the common stock of the Company (the "SHARES"), of
which ________________ are Vested Shares and ______________ are Unvested Shares
as determined in accordance with the Option Agreement.
2. PAYMENT. Enclosed is full payment in the aggregate amount of
$_____________ (representing $_______ per share) for the Shares in the manner
set forth in the Option Agreement. I authorize payroll withholding and
otherwise will make adequate provision for foreign, federal, state and local tax
withholding obligations of the Company, if any.
3. BINDING EFFECT. I agree that the Shares are being acquired in
accordance with and subject to the terms, provisions and conditions of the
Option Agreement, including the Unvested Share Repurchase Option and the Right
of First Refusal set forth therein, to all of which I hereby expressly assent.
This Agreement shall inure to the benefit of and be binding upon the my heirs,
executors, administrators, successors and assigns. If required by the Company,
I agree to deposit the certificate or certificates evidencing the Shares, along
with a blank stock assignment separate from certificate executed by me, with an
escrow agent designated by the Company, to be held by such escrow agent pursuant
to the Company's standard Joint Escrow Instructions.
4. TRANSFER. I am aware that Rule 144, promulgated under the
Securities Act, which permits limited public resale of securities acquired in a
nonpublic offering, is not currently available with respect to the Shares and,
in any event, is available only if certain conditions are satisfied. I
understand that any sale of the Shares that might be made in reliance upon
Rule 144
1
<PAGE>
may only be made in limited amounts in accordance with the terms and
conditions of such rule and that a copy of Rule 144 will be delivered to me
upon request.
I agree that I will promptly notify the Chief Financial Officer of the
Company if I transfer any of the Shares acquired pursuant to the Option within
one (1) year from the date I exercise all or part of the Option or within two
(2) years of the date of grant of the Option.
My address is:____________________________________________________
____________________________________________________
My Social Security Number is:
_______________________________________________
5. ELECTION UNDER SECTION 83(b) OF THE CODE. I understand and
acknowledge that if I am exercising the Option to purchase Unvested Shares
(i.e., shares that remain subject to the Company's Unvested Share Repurchase
Option), that I should consult with my tax advisor regarding the advisability of
filing with the Internal Revenue Service an election under Section 83(b) of the
Code, which must be filed no later than thirty (30) days after the date on which
I exercise the Option. I acknowledge that I have been advised to consult with a
tax advisor prior to the exercise of the Option regarding the tax consequences
to me of exercising the Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED
WITHIN 30 DAYS AFTER THE DATE ON WHICH I PURCHASE SHARES. THIS TIME PERIOD
CANNOT BE EXTENDED. I ACKNOWLEDGE THAT TIMELY FILING OF A SECTION 83(b)
ELECTION IS MY SOLE RESPONSIBILITY, EVEN IF I REQUEST THE COMPANY OR ITS
REPRESENTATIVES TO FILE SUCH ELECTION ON MY BEHALF.
I understand that I am purchasing the Shares pursuant to the terms of the
Plan and my Option Agreement, copies of which I have received and carefully read
and understand.
Very truly yours,
____________________________________
(Signature)
Receipt of the above is hereby acknowledged.
DIRECT HIT TECHNOLOGIES, INC.
By: ___________________________
Title: ________________________
Dated: ________________________
2
<PAGE>
ASK JEEVES, INC.
1999 NON-OFFICER EQUITY INCENTIVE PLAN
ADOPTED OCTOBER 14, 1999
STOCKHOLDER APPROVAL NOT REQUIRED
1. PURPOSES.
(A) The purpose of the Plan is to provide a means by which selected
Employees of and Consultants to the Company and its Affiliates who are not
Officers or members of the Boards of Directors of the Company or any of its
Affiliates, may be given an opportunity to benefit from increases in value of
the stock of the Company through the granting of (i) Nonstatutory Stock Options,
(ii) stock bonuses and (iii) rights to purchase restricted stock, all as
described below. The Plan is also intended to provide a means by which the
Company may grant options to persons not previously employed by the Company as
an inducement essential to those persons' entering employment contracts with the
Company. These inducement grants may be made to persons who ultimately are
employed by the Company as Officers.
(B) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees of or Consultants to the Company or an Affiliate
and to provide incentives for such persons to exert maximum efforts for the
success of the Company and its Affiliates.
(C) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
be either (i) Options granted pursuant to Section 6 hereof or (ii) stock bonuses
or rights to purchase restricted stock granted pursuant to Section 7 hereof.
2. DEFINITIONS.
(A) "AFFILIATE" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.
(B) "BOARD" means the Board of Directors of the Company.
(C) "CODE" means the Internal Revenue Code of 1986, as amended.
(D) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(E) "COMPANY" means Ask Jeeves, Inc., a Delaware corporation.
(F) "CONSULTANT" means any person, including an advisor or other form
of independent contractor, engaged by the Company or an Affiliate to render
consulting services and who is compensated for such services (provided that such
services are not in connection with the offer or sale of securities in a
capital-raising transaction, and do not directly or indirectly
1.
<PAGE>
promote or maintain a market for the Company's securities), provided that the
term "Consultant" shall not include Employees, Officers, Directors or
stockholders beneficially owning ten percent (10%) or more of the Company's
common stock.
(G) "CONTINUOUS SERVICE" means that the service of an individual with
the Company or an Affiliate, whether as an Employee, Director or Consultant, is
not interrupted or terminated. The individual's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the individual renders services to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the individual
renders such service, provided that there is no interruption or termination of
the individual's Continuous Service. The Board or the chief executive officer
of the Company, in that party's sole discretion, may determine whether
Continuous Service shall be considered interrupted in the case of any leave of
absence approved by that party, including sick leave, military leave, or any
other personal leave.
(H) "DIRECTOR" means a member of the Board.
(I) "DISABILITY" means the inability of a person, in the opinion of a
qualified physician acceptable to the Company, to perform the major duties of
that person's position with the Company or an Affiliate of the Company because
of the sickness or injury of the person.
(J) "EMPLOYEE" means any person employed by the Company or any
Affiliate, excluding Officers and Directors of the Company (and of any
Affiliate, which controls the Company) and excluding stockholders beneficially
owning ten percent (10%) or more of the Company's Common Stock.
(K) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(L) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows:
(1) If the common stock is listed on any established stock
exchange or traded on the Nasdaq National Market or The Nasdaq SmallCap Market,
the Fair Market Value of a share of common stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in the Company's common stock) on the last market trading day prior
to the day of determination, as reported in THE WALL STREET JOURNAL or such
other source as the Board deems reliable.
(2) In the absence of such markets for the common stock, the
Fair Market Value shall be determined in good faith by the Board.
(M) "NONSTATUTORY STOCK OPTION" means a stock option not intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(N) "OFFICER" means a person who is an officer of the Company,
including any Employee defined as an "Officer" by the National Association of
Securities Dealers pursuant to
2.
<PAGE>
Rule 4460(i) of the National Association of Securities Dealers, Inc. Manual
of 1997, as amended and any other Employee of the Company whom the Board or
the Committee classifies as an "Officer."
(O) "OPTION" means a Nonstatutory Stock Option granted pursuant to the
Plan.
(P) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of
the Plan.
(Q) "OPTIONHOLDER" means a person to whom an Option is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.
(R) "PLAN" means this 1999 Non-Officer Equity Incentive Plan.
(S) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(T) "STOCK AWARD" means any right granted under the Plan, including
any Option, any stock bonus, and any right to purchase restricted stock.
(U) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to
the terms and conditions of the Plan.
3. ADMINISTRATION.
(A) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(B) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; whether a Stock Award will be an Option, a stock bonus,
a right to purchase restricted stock, or a combination of the foregoing; the
provisions of each Stock Award granted (which need not be identical), including
the time or times when a person shall be permitted to receive stock pursuant to
a Stock Award; and the number of shares with respect to which a Stock Award
shall be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section
12.
3.
<PAGE>
(4) To terminate or suspend the Plan as provided in Section 13.
(5) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company, which are not in conflict with the provisions of the Plan.
(C) The Board may delegate administration of the Plan to a Committee
of one (1) or more members of the Board, and the term "Committee" shall apply to
any person or persons to whom such authority has been delegated. If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or subcommittee),
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the administration of
the Plan.
4. SHARES SUBJECT TO THE PLAN.
(A) Subject to the provisions of Section 11 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock Awards
shall not exceed in the aggregate two million (2,000,000) shares of the
Company's Common Stock. If any Stock Award shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in full,
the stock not acquired under such Stock Award shall revert to and again become
available for issuance under the Plan.
(B) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(A) Stock Awards may be granted only to Employees or Consultants.
Notwithstanding the foregoing, Stock Awards may be granted to any individual as
an inducement to that individual entering into an employment contract with the
Company, provided that the individual was not an Employee of the Company prior
to the grant of the Stock Award and regardless of the fact that such individual
may be an Officer of the Company once his or her employment with the Company
begins.
(B) Options may not be granted to Consultants who are not natural
persons unless the Company determines both (i) that such grant (A) shall be
registered in another manner under the Securities Act (E.G., on a Form S-3
Registration Statement) or (B) does not require registration under the
Securities Act in order to comply with the requirements of the Securities Act,
if applicable, and (ii) that such grant complies with the securities laws of all
other relevant jurisdictions.
4.
<PAGE>
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(A) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(B) PRICE. The exercise price of each Option shall be not less than
eighty-five percent (85%) of the Fair Market Value of the stock subject to the
Option on the date of grant.
(C) CONSIDERATION. The purchase price of stock acquired pursuant to
an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company,
(B) according to a deferred payment arrangement (however, in the event the
Company is then incorporated in the state of Delaware, then payment of the
common stock's "par value" as defined in the Delaware General Corporation Law
shall not be made by deferred payment), or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other common stock
of the Company) with the person to whom the Option is granted or to whom the
Option is transferred pursuant to subsection 6(d) or (C) in any other form of
legal consideration that may be acceptable to the Board. In the case of any
deferred payment arrangement, interest shall be compounded at least annually and
shall be charged at the minimum rate of interest necessary to avoid the
treatment as interest, under any applicable provisions of the Code, of any
amounts other than amounts stated to be interest under the deferred payment
arrangement.
(D) TRANSFERABILITY. An Option may be transferable to the extent
provided in the Option Agreement; provided, however, that if the Option
Agreement does not specifically provide for transferability, then such Option
shall not be transferable except by will or by the laws of descent and
distribution. Notwithstanding the foregoing, the person to whom the Option is
granted may, by delivering written notice to the Company, in a form satisfactory
to the Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
(E) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
5.
<PAGE>
(F) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
disability), the Optionholder may exercise the Option (to the extent that the
Optionholder was entitled to exercise it as of the date of termination) but only
within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionholder's Continuous Status as an
Employee, Director or Consultant (or such longer period as specified in the
Option Agreement), or (ii) the expiration of the term of the Option as set forth
in the Option Agreement. If, after termination, the Optionholder does not
exercise the Option within the time specified in the Option Agreement, the
Option shall terminate, and the shares covered by such Option shall revert to
and again become available for issuance under the Plan.
(G) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement
also may provide that if the exercise of the Option following the termination of
the Optionholder's Continuous Service (other than upon the Optionholder's death
or disability) would be prohibited at any time solely because the issuance of
shares would violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the first paragraph of this subsection 6(f), or
(ii) the expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.
(H) DISABILITY OF OPTIONHOLDER. In the event an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise the Option (to the extent that the Optionholder was
entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination (or such longer or shorter period specified in the
Option Agreement), or (ii) the expiration of the term of the Option as set forth
in the Option Agreement. If, after termination, the Optionholder does not
exercise the Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(I) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's
Continuous Service terminates as a result of the Optionholder's death or (ii)
the Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder's Continuous Service for a
reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise the Option as of the date of death) by the
Optionholder's estate, by a person who acquired the right to exercise the Option
by bequest or inheritance or by a person designated to exercise the option upon
the Optionholder's death pursuant to subsection 6(d), but only within the period
ending on the earlier of (i) the date twelve (12) months following the date of
death (or such longer or shorter period specified in the Option Agreement), or
(ii) the expiration of the term of such Option as set forth in the Option
Agreement. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
6.
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7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(A) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such Stock Award Agreement, but in no event shall the
purchase price be less than eighty-five percent (85%) of the stock's Fair Market
Value on the date such Stock Award is made. Notwithstanding the foregoing, the
Board or the Committee may determine that eligible participants in the Plan may
be awarded stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
(B) TRANSFERABILITY. Rights under a stock bonus or restricted stock
purchase agreement shall be transferable only by will or the laws of descent and
distribution, so long as stock awarded under such Stock Award Agreement remains
subject to the terms of the agreement.
(C) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment arrangement (however, in the event the Company is then
incorporated in the state of Delaware, then payment of the common stock's "par
value" as defined in the Delaware General Corporation Law shall not be made by
deferred payment), or other arrangement with the person to whom the stock is
sold; or (iii) in any other form of legal consideration that may be acceptable
to the Board or the Committee in its discretion. Notwithstanding the foregoing,
the Board or the Committee to which administration of the Plan has been
delegated may award stock pursuant to a stock bonus agreement in consideration
for past services actually rendered to the Company or for its benefit.
(D) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
(E) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.
8. COVENANTS OF THE COMPANY.
(A) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.
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(B) The Company shall seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act either the Plan, any Stock Award or any stock issued or
issuable pursuant to any such Stock Award. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such Stock Awards
unless and until such authority is obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
10. MISCELLANEOUS.
(A) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or any
part thereof will vest pursuant to subsection 6(e) or 7(d), notwithstanding the
provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(B) Neither an Employee nor a Consultant nor any person to whom a
Stock Award is transferred under subsection 6(d) or 7(b) shall be deemed to be
the holder of, or to have any of the rights of a holder with respect to, any
shares subject to such Stock Award unless and until such person has satisfied
all requirements for exercise of the Stock Award pursuant to its terms.
(C) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee or Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or any
Affiliate (or to continue serving as a Consultant) or shall affect the right of
the Company or any Affiliate to terminate the employment of any Employee with or
without cause or the right to terminate the relationship of any Consultant
subject to the terms of such Consultant's agreement with the Company or any
Affiliate.
(D) The Company may require any person to whom a Stock Award is
granted, or any person to whom a Stock Award is transferred pursuant to
subsection 6(d) or 7(b), as a condition of exercising or acquiring stock under
any Stock Award, (1) to give written assurances satisfactory to the Company as
to such person's knowledge and experience in financial and business matters
and/or to employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and business matters,
and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Stock Award;
and (2) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the Stock Award for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. The foregoing requirements, and any assurances given pursuant to
such requirements, shall be inoperative if (i) the issuance of the shares upon
the exercise or acquisition of stock
8.
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under the Stock Award has been registered under a then currently effective
registration statement under the Securities Act, or (ii) as to any particular
requirement, a determination is made by counsel for the Company that such
requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company,
place legends on stock certificates issued under the Plan as such counsel
deems necessary or appropriate in order to comply with applicable securities
laws, including, but not limited to, legends restricting the transfer of the
stock.
(E) To the extent provided by the terms of a Stock Award Agreement,
the person to whom a Stock Award is granted may satisfy any federal, state or
local tax withholding obligation relating to the exercise or acquisition of
stock under a Stock Award by any of the following means or by a combination of
such means: (1) tendering a cash payment; (2) authorizing the Company to
withhold shares from the shares of the common stock otherwise issuable to the
participant as a result of the exercise or acquisition of stock under the Stock
Award; or (3) delivering to the Company owned and unencumbered shares of Company
common stock. Notwithstanding the foregoing, the Company shall not be
authorized to withhold shares of Common Stock at rates in excess of the minimum
statutory withholding rates for federal and state tax purposes, including
payroll taxes.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(A) CAPITALIZATION ADJUSTMENTS. If any change is made in the stock
subject to the Plan, or subject to any Stock Award (through merger,
consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the type(s) and maximum
number of securities subject to the Plan pursuant to subsection 4(a) and the
outstanding Stock Awards will be appropriately adjusted in the type(s) and
number of securities and price per share of stock subject to such outstanding
Stock Awards. Such adjustments shall be made by the Board or the Committee, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company.")
(B) CHANGE IN CONTROL--DISSOLUTION OR LIQUIDATION. In the event of a
dissolution or liquidation of the Company, then all outstanding Stock Awards
shall terminate immediately prior to such event.
(C) CHANGE IN CONTROL--ASSET SALE, MERGER, CONSOLIDATION OR REVERSE
MERGER. In the event of (1) a sale, lease or other disposition of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then any surviving corporation or acquiring corporation shall
assume any Stock Awards outstanding under the Plan or shall substitute similar
stock awards (including an award to acquire the same consideration paid to the
stockholders in the transaction described in this subsection 11(c)) for
9.
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those outstanding under the Plan. In the event any surviving corporation or
acquiring corporation refuses to assume or continue such Stock Awards or to
substitute similar stock awards for those outstanding under the Plan, then
with respect to Stock Awards held by persons whose Continuous Service has
terminated, the vesting of such Stock Awards (and, if applicable, the time
during which such Stock Awards may be exercised) shall be accelerated in
full, and the Stock Awards shall terminate if not exercised (if applicable)
by a time established by the Board at or following the occurrence such event.
With respect to any other Stock Awards outstanding under the Plan, such
Stock Awards shall terminate if not exercised (if applicable) at or prior to
such event.
12. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(A) The Board at any time, and from time to time, may amend the Plan.
(B) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
(C) The Board at any time, and from time to time, may amend the terms
of any one or more Stock Award; provided, however, that the rights and
obligations under any Stock Award shall not be impaired by any such amendment
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(A) The Board may suspend or terminate the Plan at any time. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.
(B) Rights and obligations under any Stock Award granted while the
Plan is in effect shall not be impaired by suspension or termination of the
Plan, except with the written consent of the person to whom the Stock Award was
granted.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the date on which it is adopted by the
Board.
15. CHOICE OF LAW.
The law of the State of California shall govern all questions concerning
the construction, validity and interpretation of this Plan, without regard to
such state's conflict of laws rules.
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ASK JEEVES, INC.
1999 NON-OFFICER EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
(NONSTATUTORY STOCK OPTIONS)
Pursuant to your Stock Option Grant Notice ("Grant Notice") and this
Stock Option Agreement, Ask Jeeves, Inc. (the "Company") has granted you an
option under its 1999 Non-Officer Equity Incentive Plan (the "Plan") to purchase
the number of shares of the Company's Common Stock indicated in your Grant
Notice at the exercise price indicated in your Grant Notice. Defined terms not
explicitly defined in this Stock Option Agreement but defined in the Plan shall
have the same definitions as in the Plan.
The details of your option are as follows:
1. VESTING. Subject to the limitations contained herein, your option
will vest as provided in your Grant Notice, provided that vesting will cease
upon the termination of your Continuous Service.
2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of
Common Stock subject to your option and your exercise price per share referenced
in your Grant Notice may be adjusted from time to time for Capitalization
Adjustments, as provided in the Plan.
3. EXERCISE PRIOR TO VESTING ("EARLY EXERCISE"). If permitted in
your Grant Notice (i.e., the "Exercise Schedule" indicates that "Early Exercise"
of your option is permitted) and subject to the provisions of your option, you
may elect at any time that is both (i) during the period of your Continuous
Service and (ii) during the term of your option, to exercise all or part of your
option, including the nonvested portion of your option; provided, however, that:
(A) a partial exercise of your option shall be deemed to cover
first vested shares of Common Stock and then the earliest vesting installment of
unvested shares of Common Stock;
(B) any shares of Common Stock so purchased from installments
that have not vested as of the date of exercise shall be subject to the purchase
option in favor of the Company as described in the Company's form of Early
Exercise Stock Purchase Agreement; and
(C) you shall enter into the Company's form of Early Exercise
Stock Purchase Agreement with a vesting schedule that will result in the same
vesting as if no early exercise had occurred.
4. METHOD OF PAYMENT. Payment of the exercise price is due in full
upon exercise of all or any part of your option. You may elect to make payment
of the exercise price in cash or by check or in any other manner PERMITTED BY
YOUR GRANT NOTICE, which may include one or more of the following:
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(A) In the Company's sole discretion at the time your option is
exercised and provided that at the time of exercise the Common Stock is publicly
traded and quoted regularly in THE WALL STREET JOURNAL, pursuant to a program
developed under Regulation T as promulgated by the Federal Reserve Board that,
prior to the issuance of Common Stock, results in either the receipt of cash (or
check) by the Company or the receipt of irrevocable instructions to pay the
aggregate exercise price to the Company from the sales proceeds.
(B) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in THE WALL STREET JOURNAL, by delivery of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company's reported earnings (generally six
months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise.
"Delivery" for these purposes, in the sole discretion of the Company at the time
you exercise your option, shall include delivery to the Company of your
attestation of ownership of such shares of Common Stock in a form approved by
the Company. Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender would violate
the provisions of any law, regulation or agreement restricting the redemption of
the Company's stock.
5. WHOLE SHARES. You may exercise your option only for whole shares
of Common Stock.
6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, you may not exercise your option unless the shares of
Common Stock issuable upon such exercise are then registered under the
Securities Act or, if such shares of Common Stock are not then so registered,
the Company has determined that such exercise and issuance would be exempt from
the registration requirements of the Securities Act. The exercise of your
option must also comply with other applicable laws and regulations governing
your option, and you may not exercise your option if the Company determines that
such exercise would not be in material compliance with such laws and
regulations.
7. TERM. You may not exercise your option before the commencement of
its term or after its term expires. The term of your option commences on the
Date of Grant and expires upon the EARLIEST of the following:
(A) three (3) months after the termination of your Continuous
Service for any reason other than your Disability or death, provided that if
during any part of such three- (3-) month period your option is not exercisable
solely because of the condition set forth in the preceding paragraph relating to
"Securities Law Compliance," your option shall not expire until the earlier of
the Expiration Date or until it shall have been exercisable for an aggregate
period of three (3) months after the termination of your Continuous Service;
(B) twelve (12) months after the termination of your Continuous
Service due to your Disability;
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(C) eighteen (18) months after your death if you die either
during your Continuous Service or within three (3) months after your Continuous
Service terminates;
(D) the Expiration Date indicated in your Grant Notice; or
(E) the day before the tenth (10th) anniversary of the Date of
Grant.
8. EXERCISE.
(A) You may exercise the vested portion of your option (and the
unvested portion of your option if your Grant Notice so permits) during its term
by delivering a Notice of Exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require.
(B) By exercising your option you agree that, as a condition to
any exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
your option, (2) the lapse of any substantial risk of forfeiture to which the
shares of Common Stock are subject at the time of exercise, or (3) the
disposition of shares of Common Stock acquired upon such exercise.
9. TRANSFERABILITY. Your option is not transferable, except by will
or by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.
10. OPTION NOT A SERVICE CONTRACT. Your option is not an employment
or service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or
an Affiliate, their respective shareholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.
11. WITHHOLDING OBLIGATIONS.
(A) At the time you exercise your option, in whole or in part,
or at any time thereafter as requested by the Company, you hereby authorize
withholding from payroll and any other amounts payable to you, and otherwise
agree to make adequate provision for (including by means of a "cashless
exercise" pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Company or an Affiliate, if any, which arise in connection
with your option.
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(B) Upon your request and subject to approval by the
Company, in its sole discretion, and compliance with any applicable
conditions or restrictions of law, the Company may withhold from fully vested
shares of Common Stock otherwise issuable to you upon the exercise of your
option a number of whole shares of Common Stock having a Fair Market Value,
determined by the Company as of the date of exercise, not in excess of the
minimum amount of tax required to be withheld by law. If the date of
determination of any tax withholding obligation is deferred to a date later
than the date of exercise of your option, share withholding pursuant to the
preceding sentence shall not be permitted unless you make a proper and timely
election under Section 83(b) of the Code, covering the aggregate number of
shares of Common Stock acquired upon such exercise with respect to which such
determination is otherwise deferred, to accelerate the determination of such
tax withholding obligation to the date of exercise of your option.
Notwithstanding the filing of such election, shares of Common Stock shall be
withheld solely from fully vested shares of Common Stock determined as of the
date of exercise of your option that are otherwise issuable to you upon such
exercise. Any adverse consequences to you arising in connection with such
share withholding procedure shall be your sole responsibility.
(C) You may not exercise your option unless the tax
withholding obligations of the Company and/or any Affiliate are satisfied.
Accordingly, you may not be able to exercise your option when desired even
though your option is vested, and the Company shall have no obligation to
issue a certificate for such shares of Common Stock or release such shares of
Common Stock from any escrow provided for herein.
12. NOTICES. Any notices provided for in your option or the Plan
shall be given in writing and shall be deemed effectively given upon receipt or,
in the case of notices delivered by mail by the Company to you, five (5) days
after deposit in the United States mail, postage prepaid, addressed to you at
the last address you provided to the Company.
13. GOVERNING PLAN DOCUMENT. Your option is subject to all the
provisions of the Plan, the provisions of which are hereby made a part of your
option, and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated and adopted pursuant to
the Plan. In the event of any conflict between the provisions of your option
and those of the Plan, the provisions of the Plan shall control.
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