STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT (this "Agreement") is made and entered
into as of the 21st day of May, 1998, by and between GeoCities, a California
corporation, and XXXXXX X. XXXXX, an employee of GeoCities (the "Optionee").
WITNESSETH:
WHEREAS, the Optionee is currently employed by GeoCities as Vice
President, Business Development; and
WHEREAS, GeoCities desires to grant the Optionee an option which does
not meet the requirements of Section 422 of the Internal Revenue Code of 1986,
as amended, to purchase shares of the common stock of GeoCities, $0.005 par
value per share ("Common Stock");
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and conditions hereinafter set forth and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. GeoCities hereby grants to the Optionee the option to purchase
75,000 shares of Common Stock at a price per share of $6.00 upon the terms and
subject to the conditions set forth herein.
2. Subject to the conditions set forth herein, the right to exercise
this option shall accrue in periodic installments as follows:
(i) commencing with the period of twelve (12) consecutive months
beginning on the first (1st) anniversary of the date on which you became a full-
time employee of GeoCities, this option may be exercised to the extent of 18,750
shares;
(ii) commencing with the period of twelve (12) consecutive months
beginning on the second (2nd) anniversary of the date on which you became a
full-time employee of GeoCities, this option may be exercised to the extent of
an additional 18,750 shares;
(iii) commencing with the period of twelve (12) consecutive months
beginning on the third (3rd) anniversary of the date on which you became a full-
time employee of GeoCities, this option may be exercised to the extent of an
additional 18,750 shares; and
(iv) commencing with the period of twelve (12) consecutive
months beginning on the fourth (4th) anniversary of the date on which you became
a full-time employee of GeoCities, this option may be exercised to the extent of
an additional 18,750 shares.
This option may be exercised, in whole or in part, subject to the
limitations imposed by the exercise schedule set forth above, at any time and
from time to time commencing with the respective dates on which each portion
becomes exercisable and continuing until the seventh (7th) anniversary of the
date on which you became a full-time employee of GeoCities, at which time the
entire unexercised portion of this option shall expire. You and GeoCities
hereby confirm that you became a full-time employee of GeoCities on May 18,
1998.
3. In the event of termination of the Optionee's employment for
cause, as defined below, this option shall immediately terminate. If the
Optionee's employment is terminated for any reason other than for cause, then
this option may be exercised to the extent this option was exercisable on the
date of such cessation of employment, within three (3) months after the date the
Optionee ceases to be an employee of GeoCities. An approved leave of absence
shall not be deemed a termination of employment for purposes of this Agreement,
but no option may be exercised during any such leave of absence, except during
the first three (3) months thereof. Solely for purposes of this Paragraph 3,
"cause" shall mean any fair and honest cause or reason assigned in good faith by
the Board of Directors or any officer of GeoCities.
4. This option shall be exercisable by the Optionee only during the
Optionee's lifetime. This option shall be nontransferable by the Optionee other
than by will or the laws of descent and distribution.
5. In the event of the Optionee's death or permanent and total
disability while in the employ of GeoCities, or during the period following
termination of employment during which the Optionee is permitted to exercise an
option pursuant to Paragraph 3 hereof, this option may be exercised, to the
extent that it was otherwise exercisable as of the date of such death,
disability or termination of employment by the Optionee or the Optionee's
transferee within one (1) year after the date the Optionee dies or becomes
permanently and totally disabled. The Optionee's transferee shall be the person
or persons entitled to exercise the option under the Optionee's will, or, if no
testamentary disposition of the option shall have been made, the Optionee's
legal representative. Any transferee exercising the option must furnish
GeoCities with: (a) written confirmation of his or her status as transferee; (b)
evidence satisfactory to GeoCities to establish the validity of the transfer of
this option in compliance with this Agreement and with any laws or regulations
pertaining to said transfer; and (c) written acceptance of the terms and
conditions of this Option as prescribed in this Agreement.
6. Subject to any required action of GeoCities' shareholders, the
existence of outstanding options hereunder shall not affect GeoCities' right or
power to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in its capital structure or business; to
approve any merger or consolidation, issuance of bonds, debentures, preferred or
prior preference stock ahead of or affecting the Common Stock; to elect its
dissolution or liquidation or that of any of its subsidiaries, to sell or
transfer any of its business; or to do any
2.
other corporate act whether similar to the events described above or otherwise.
If the number of outstanding shares of Common Stock is increased or decreased or
changed into or exchanged for a different number or kind of securities, whether
of GeoCities or any other corporation, by reason of recapitalization,
reclassification, stock split, combination of shares, stock dividends or other
similar event, the number and kind of securities as to which outstanding options
may be exercised, and the option price at which outstanding options may be
exercised may be adjusted by the Board of Directors, whose determination shall
be binding and final.
7. This option may be exercised in accordance with the terms hereof
by: (a) giving written notice of such exercise to GeoCities, specifying the
number of whole shares to be purchased and accompanied by full payment of the
purchase price thereof, either in cash, by check, or by delivery to GeoCities of
shares of Common Stock already owned by the Optionee (duly endorsed in favor of
GeoCities or accompanied by a duly endorsed stock power) together with the
amount of any income tax GeoCities is required by law to withhold by reason of
such exercise, and (b) giving satisfactory assurances in writing, if requested
by GeoCities, signed by the person exercising this option, that the shares to be
purchased upon such exercise are being purchased for investment and not with the
view to distribution thereof.
8. (a) Notwithstanding anything contained herein to the contrary, in
the event that the Optionee ceases to be employed by GeoCities for any reason
(including, without limitation, as a result of resignation, retirement,
dismissal with or without cause, death or disability), GeoCities shall have the
first right and option, and the holders of Senior Securities (as defined below)
shall have the second right and option, to purchase from the Optionee (or, in
the case of death, from the Optionee's legal representative) all shares of
Common Stock held by the Optionee on the date of cessation of employment or
purchased by the Optionee following such date as permitted under Paragraphs 3
and 5 hereof. In the event that GeoCities or any holder of Senior Securities
shall exercise such right and option, then the exercising party shall pay the
Optionee, as the purchase price for such shares of Common Stock, the Fair Market
Value (as defined below) of such shares. GeoCities may exercise its first right
and option by delivering notice to Optionee and to each holder of Senior
Securities within ninety (90) days following the cessation of the Optionee's
employment or the subsequent purchase of shares, as applicable, of its intent to
exercise its repurchase right and the Fair Market Value of the shares in cash at
the end of such 90th day (unless the Fair Market Value of the shares has not
been conclusively determined as of such date, in which case GeoCities may, at
its sole option, pay the Optionee the estimated Fair Market Value at the end of
such 90th day, subject to adjustment upon the final determination of the Fair
Market Value, or pay the Optionee promptly after the Fair Market Value is
determined in accordance with subparagraph (d) below).
(b) If GeoCities fails to fully exercise its right to repurchase
all of the Optionee's shares of Common Stock after the cessation of the
Optionee's employment or the subsequent purchase of shares, as applicable, then
GeoCities shall give the Optionee and each holder of its Preferred Stock, or
Common Stock issued upon conversion thereof (collectively, the "Senior
Securities"), notice ("Termination Notice") of such fact, the number of shares
of Common Stock available for purchase by each share holder and GeoCities'
determination of the Fair
3.
Market Value of such shares. The holders of the Senior Securities shall have
the right to purchase the Optionee's Common Stock, on a pro-rata basis, by
giving GeoCities notice of their intent to exercise such option ("Notice of
Election") within twenty (20) days after the receipt of the Termination Notice
from GeoCities, together with cash in the amount of the purchase price (unless
the Fair Market Value of the shares has not been conclusively determined as of
such date, in which case each such holder shall pay the Optionee promptly after
the Fair Market Value has been conclusively determined in accordance with
subparagraph (d) below). For the purposes of this subparagraph (b), "pro rata
basis" shall be equal to the product obtained by multiplying (i) the number of
the Optionee's shares not purchased by GeoCities by (ii) a fraction, the
numerator of which is the number of shares of Senior Securities held by such
holder (on an as-converted basis) and the denominator of which is the total
number of shares held by all the holders of Senior Securities (on an as-
converted basis).
(c) Any holder of Senior Securities that fails to provide a
timely Notice of Election shall be deemed to have elected not to purchase any
shares in a transaction pursuant to this Paragraph 8. If any holder of Senior
Securities elects (or is deemed to have elected) not to fully participate in a
transaction pursuant to this Paragraph 8, GeoCities shall so notify the other
holders of Senior Securities who elected to participate (the "Repurchase
Holders"). Such notice may be made by telephone if confirmed in writing within
two (2) days. The Repurchase Holders shall have five (5) days from the date such
notice was given to agree to purchase their pro rata share of the unsold portion
of the Optionee's shares. For the purposes of this subparagraph (c), a "pro rata
share" shall be equal to the product obtained by multiplying (i) the number of
the Optionee's shares in the unsold portion by (ii) a fraction, the numerator of
which is the number of shares of Senior Securities held by such Repurchase
Holder (on an as-converted basis) and the denominator of which is the total
number of shares held by all of the Repurchase Holders (on an as-converted
basis).
(d) If the Optionee objects to the Fair Market Value as so
proposed, then the Optionee may request an appraisal by written notice of
objection delivered not later than ten (10) days after receipt of the Fair
Market Value set by GeoCities' Board of Directors. If an appraisal is requested,
the Optionee and GeoCities shall jointly select an appraiser to determine the
Fair Market Value of the Optionee's shares. If the Optionee and GeoCities cannot
agree on an appraiser, each shall select its own appraiser (each, a "Party
Appraiser") and the two Party Appraisers shall jointly select a third appraiser
(the "Arbitrating Appraiser"). Each of the Party Appraisers shall submit its
appraisal to the Arbitrating Appraiser, and the Arbitrating Appraiser shall
select one of such appraisals as the Fair Market Value. All expenses of such
appraisal shall be paid by the Optionee, unless the Fair Market Value as
determined by such appraisal is at least five percent (5%) greater than the Fair
Market Value initially set by the Board of Directors, in which case GeoCities
and the holders of Senior Securities shall pay for the appraisal in proportion
to each party's purchase of the Optionee's shares.
9. The Optionee may not sell or engage in any transaction which has
resulted in or will result in a change in the beneficial or record ownership of
any shares of Common Stock held by the Optionee, including without limitation a
voluntary or involuntary sale,
4.
assignment, transfer, pledge, hypothecation, encumbrance, disposal, loan, gift
attachment or levy (a "Transfer"), except as provided in this Agreement, and any
such Transfer of shares of Common Stock or attempted Transfer of shares of
Common Stock in contravention of this Agreement shall be void and ineffective
for any purpose or confer on any transferee or purported transferee any rights
whatsoever.
10. (a) Each time the Optionee proposes to Transfer (or is required
by operation of law or other involuntary transfer) any or all of the shares of
Common Stock standing in the Optionee's name or owned by the Optionee during the
term of this Agreement, the Optionee shall first offer such shares to GeoCities
and the holders of the Senior Securities in accordance with the following
provisions:
(i) The Optionee shall deliver a written notice (a
"Notice") to GeoCities stating (A) the Optionee's bona fide intention to
Transfer such shares, (B) the name and the address of the proposed transferee,
(C) the number of shares to be transferred, and (D) the purchase price per share
and the terms of payment for which the Optionee proposes to Transfer such
shares.
(ii) Within thirty (30) days after the receipt of the
Notice, GeoCities shall have the first right to purchase or obtain such shares,
upon the price and terms of payment designated in the Notice. If the Notice
provides for the payment of non-cash consideration, GeoCities at its option may
pay the consideration in cash equal to GeoCities' good faith estimate of the
present fair market value of the non-cash consideration offered.
(iii) If GeoCities elects not to purchase or obtain all of
the shares designated in the Optionee's Notice, then GeoCities shall promptly
provide written notice of such fact, together with a copy of the Notice, to the
holders of the Senior Securities. The holders of the Senior Securities shall
have an additional thirty (30) days immediately following the receipt of the
Notice from GeoCities in which to purchase the shares not purchased by GeoCities
on a pro rata basis upon the terms and conditions specified in subparagraph (ii)
above by giving GeoCities notice of their intent to exercise such option
("Notice of Purchase") within thirty (30) days after the receipt of the Notice
from GeoCities. For purposes of this subparagraph (iii), "pro rata" shall be
equal to the product obtained by multiplying (i) the number of the Optionee's
shares not purchased by GeoCities by (ii) a fraction, the numerator of which is
the number of shares of Senior Securities held by such holder (on an as-
converted basis) and the denominator of which is the total number of shares held
by all holders of the Senior Securities (on an as-converted basis).
(iv) Any holder of Senior Securities that fails to provide
a timely Notice of Purchase shall be deemed to have elected to not purchase any
shares in a transaction pursuant to this Paragraph 10. If any holder of Senior
Securities elects (or is deemed to have elected) not to fully participate in a
transaction pursuant to this Paragraph 10, then GeoCities shall so notify the
other holders of Senior Securities who elected to participate (the "Right of
First Refusal Holders"). Such notice may be made by telephone if confirmed in
writing within
5.
two (2) days. The Right of First Refusal Holders shall have five (5) days from
the date such notice was given to agree to purchase their pro rata share of the
unsold portion of the Optionee's shares. For purposes of this subparagraph
(iv), a "pro rata share" shall be equal to the product obtained by multiplying
(i) the number of the Optionee's shares in the unsold portion by (ii) a
fraction, the numerator of which is the number of shares of Senior Securities
held by such Right of First Refusal Holder (on an as-converted basis) and the
denominator of which is the total number of shares of Senior Securities held by
all the Right of First Refusal Holders (on an as-converted basis).
(v) If neither (x) GeoCities nor (y) any of the holders of
the Senior Securities elects to purchase or obtain all of the shares designated
in the Optionee's Notice, then the Optionee may Transfer the unsold shares
referred to in the Notice to the proposed transferee, providing such Transfer
(A) is completed within 180 days after the expiration of the right of GeoCities
and the holders of the Senior Securities to purchase or obtain such shares, (B)
is made at the same price and terms designated in the Notice, and (C) the
proposed transferee agrees to be bound by the terms and provisions of a buy-sell
agreement substantially similar to the terms of Paragraph 9 through 13 of this
Agreement and to become a party to such an agreement immediately upon receipt of
such shares. If such shares are not so transferred, the Optionee must give
notice in accordance with this Paragraph 10 prior to any other or subsequent
Transfer of such shares.
(b) Notwithstanding Paragraph 9(a), the Optionee may Transfer
for no or nominal consideration shares to (i) the Optionee's spouse, parents,
grandparents, siblings, children or grandchildren or other members of the
Optionee's family (including relatives by marriage), or to a custodian, trustee
or other fiduciary for the account of the Optionee or members of the Optionee's
family, or to any person designated by the Optionee, or (ii) by way of bequest
or inheritance upon death; provided that the Optionee or the Optionee's
representative notifies GeoCities of such Transfer not less than ten (10) nor
more than ninety (90) days prior to the Transfer and that the proposed
transferee agrees to be bound by the terms and provisions of a buy-sell
agreement substantially similar to the terms of Paragraph 8 through 13 of this
Agreement and to become a party to such an agreement immediately upon the
receipt of such shares. Such buy-sell agreement shall provide that, for purposes
of the paragraph in such buy-sell agreement that is analogous to Paragraph 8 of
this Agreement, a cessation of the Optionee's employment with GeoCities shall be
deemed to be a cessation of employment by the transferee.
11. Notwithstanding any provisions to the contrary contained in this
Agreement, GeoCities' obligations to pay or complete payment for any shares to
be purchased by it under this Agreement are subject to its being legally
permitted to do so under the tests contained in Sections 500 and 501 of the
California General Corporation Law or any successor statute applicable thereto.
The inability of GeoCities to validly purchase any shares hereunder by reason of
its failure to meet the tests contained in Section 500 and 501 of the California
General Corporation Law shall not be deemed to affect or limit in any way the
ability of the holders of the Senior Securities to purchase the shares.
6.
12. Each Certificate representing shares owned of record or
beneficially by a party to this Agreement shall be endorsed with the following
legend:
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO A STOCK OPTION
AGREEMENT BETWEEN GEOCITIES AND THE HOLDER OF THE SHARES EVIDENCED BY
THIS CERTIFICATE, PROVIDING FOR, AMONG OTHER MATTERS, THE RIGHT OF
GEOCITIES AND CERTAIN SHAREHOLDERS THEREOF TO REPURCHASE THE SHARES
REPRESENTED BY THE CERTIFICATE. A COPY OF SUCH AGREEMENT IS ON FILE AT
THE PRINCIPAL BUSINESS OFFICE OF GEOCITIES.
Under no circumstances shall any Transfer of any shares subject hereto
be valid until the proposed transferee thereof shall have agreed to be bound by
the terms and provisions of a buy-sell agreement substantially similar to the
terms of Paragraphs 9 through 13 of this Agreement and to become a party to such
an agreement immediately upon receipt of such shares; and notwithstanding any
other provisions of this Agreement, no such Transfer of any kind shall in any
event result in the non-applicability of the provisions hereof at any time to
any of the shares subject hereto. Additionally, in order to permit GeoCities to
enforce the provisions of Paragraphs 8 through 13 of this Agreement you and
GeoCities agree that the stock certificates representing all of the shares
issued and to be issued to you by GeoCities pursuant to this Agreement and any
other Stock Option Agreements between you and GeoCities shall be deposited into
escrow pursuant to Joint Escrow Instructions to be executed by you, GeoCities
and an Escrow Agent. At the time of such deposit, you shall also deposit into
such escrow two Stock Assignments Separate from Certificate executed in blank.
13. The restrictions on Transfer of shares set forth in this
Agreement shall terminate upon the consummation of a firm commitment
underwritten public offering from which GeoCities receives gross proceeds of not
less than $20 million and in which the offering price per share (prior to
underwriting commissions and expenses) equals at least $5 (as adjusted for stock
splits, stock dividends, reorganizations and the like).
14. This Agreement is made solely for the benefit of the parties to
this Agreement and their respective successors and assigns, and, except as
provided in Paragraphs 8 through 13, no other person or entity shall have or
acquire any right by virtue of this Agreement Each holder of Senior Securities
shall be a third-party beneficiary of Paragraphs 8 through 13 of this Agreement.
15. Unless the shares to be issued are at the time of issuance
registered under the Securities Act of 1933, as amended, this option is granted
on the condition that the purchase of stock hereunder shall be for investment
purposes and not with the view to resale or distribution.
7.
16. Neither the Optionee nor any person claiming under or through the
Optionee shall be, or have any of the rights or privileges of a shareholder of
GeoCities with respect to any of the shares issuable upon the exercise of this
option, unless and until certificates representing such shares shall have been
issued and delivered to the Optionee.
17. Any notice to be given to GeoCities under the terms of this
Agreement shall be addressed to GeoCities, in care of its President, at 0000
Xxxx Xxxxxx, Xxxxx Xxxxx, Xxxxx Xxxxxx Xxxxxxxxxx 00000-0000, or to such other
address as GeoCities may hereafter designate in writing. Any notice to be given
to the Optionee shall be addressed to the Optionee at the address set forth
beneath the Optionee's signature hereto, or at any other address as the Optionee
may hereafter designate in writing. Any such notice shall be deemed to have
been duly given if and when personally delivered, or if mailed, two (2) business
days following its being deposited in the United States mails in a properly
sealed envelope, addressed as aforesaid, registered or certified, postage
prepaid.
18. Except as otherwise provided herein, this option and the rights
and privileges conferred by this Agreement may not be transferred, assigned,
pledged or hypothecated by the Optionee in any way (whether by operation of law
or otherwise) and shall not be subject w sale under execution, attachment or
similar process. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of this option, or of any right or privilege conferred hereby,
contrary to the provisions hereof, or upon any attempted sale under any
execution, attachment or similar process upon the rights and privileges
conferred hereby, this option and the rights and privileges conferred upon the
Optionee in this Agreement shall immediately become null and void.
19. Subject to the limitations of transferability contained herein,
this Agreement shall be binding upon and inure to the benefit of the heirs,
legal representatives, successors and assigns of the parties hereto.
20. Nothing in this Agreement is intended, nor shall it be deemed, to
create any employment agreement between the Optionee and GeoCities or to impose
any obligation on the part of GeoCities to maintain Optionee's employment with
GeoCities, and any rights that the Optionee may have GeoCities with respect to
the Optionee's employment, other than as an at-will employee, shall be as set
forth in a written employment agreement between the Optionee and GeoCities, if
any.
8.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
in duplicate, as of the day and year first above written.
GEOCITIES
By: _____________________________________
Xxxxxx X. Xxxxx
President and Chief Executive Officer
ACCEPTED:
___________________________________
Signature
___________________________________
Xxxxxx X. Xxxxx
___________________________________
Address
___________________________________
City, State, Zip
9.
Consent of Spouse
-----------------
I, the undersigned spouse of the Optionee, acknowledge on my own
behalf that I have read the foregoing Agreement and I know its contents, I am
aware that by its provisions my spouse grants GeoCities and certain other
shareholders an option to purchase all of his shares of GeoCities, including my
community interest in them, I hereby consent to the sale, approve of the
provisions of the Agreement, and agree that those shares and my interest in them
are subject to the provisions of the Agreement and that I will take no action at
any time to hinder operation of the Agreement on those shares or my interest in
them.
_____________________________________
10.
