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APTIMUS, INC.
1997 STOCK OPTION PLAN
This Stock Option Plan (the “Plan”) provides for the grant of options to acquire shares of
Common Stock, no par value (the “Common Stock”), of
FreeShop International, Inc., a Washington
corporation (the “Company”). Stock options granted under this Plan that qualify under Section 422
of the Internal Revenue Code of 1986, as amended, (the “Code”) are referred to in this Plan as
“Incentive Stock Options.” Incentive Stock Options and stock options that do not qualify under
Section 422 of the Code (“Non-Qualified Stock Options”) granted under this Plan are referred to as
“Options.”
1. PURPOSES.
The purposes of this Plan are to retain the services of valued key employees, directors and
consultants of the Company and such other persons as the Plan Administrator shall select in
accordance with Section 3 below, to encourage such persons to acquire a greater proprietary
interest in the Company, thereby strengthening their incentive to achieve the objectives of the
shareholders of the Company, and to serve as an aid and inducement in the hiring of new employees,
consultants and other persons selected by the Plan Administrator.
2. ADMINISTRATION.
(a) This Plan shall be administered initially by the Board of Directors of the
Company (the “Board”). If the Board so desires, the Plan shall be administered by the full
Board or
a committee of the Board composed solely of two or more directors, which committee (the
“Committee”) may be an executive, compensation or other committee, including a separate
committee especially created for this purpose. The Board, or any committee thereof appointed
to
administer the Plan in accordance with Paragraph (b) below, is referred to herein as the “Plan
Administrator.”
(b) At such time as the Company becomes subject to the reporting obligations
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Plan shall be
administered by the full Board or a Committee composed solely of two or more “non-employee
directors,” as defined in Rule 16b-3 (as amended from time to time) promulgated under the
Exchange Act or any successor rule or regulatory requirement (the “Rule”). The Committee shall
have the powers and authority vested in the Board hereunder (including the power and authority
to
interpret any provision of this Plan or of any Option). The members of any such Committee
shall
serve at the pleasure of the Board. A majority of the members of the Committee shall
constitute a
quorum, and all actions of the Committee shall be taken by a majority of the members present.
Any action may be taken by a written instrument signed by all of the members of the Committee
and any action so taken shall be fully effective as if it had been taken at a meeting.
(c) Subject to the provisions of this Plan, and with a view to effecting its
purpose, the Plan Administrator shall have sole authority, in its absolute discretion, to (i)
construe
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International, Inc.
1997 Stock Option Plan
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and interpret this Plan; (ii) define the terms used in this Plan; (iii) prescribe, amend and
rescind rules and regulations relating to this Plan; (iv) correct any defect, supply any omission
or reconcile any inconsistency in this Plan; (v) grant Options under this Plan; (vi) determine the
individuals to whom Options shall be granted under this Plan and whether the Option is an Incentive
Stock Option or a Non-Qualified Stock Option; (vii) determine the time or times at which Options
shall be granted under this Plan; (viii) determine the number of shares of Common Stock subject to
each Option, the exercise price of each Option, the duration of each Option and the times at which
each Option shall become exercisable; (ix) determine all other terms and conditions of Options; and
(x) make all other determinations necessary or advisable for the administration of this Plan. All
decisions, determinations and interpretations made by the Plan Administrator shall be binding and
conclusive on all participants in this Plan and on their legal representatives, heirs and
beneficiaries.
(d) The Board or the Committee may delegate to one or more executive officers of the
Company the authority to grant Options under this Plan to employees of the Company who, on the Date
of Grant, are not subjected to Section 16(b) of the Exchange Act with respect to the Common Stock
(“Non-Insiders”), and are not “covered employees” as such term is defined for purposes of Section
162(m) of the Code (“Non-Covered Employees”), and in connection therewith the authority to
determine: (i) the number of shares of Common Stock subject to such Option; (ii) the duration of
the Option; (iii) the vesting schedule for determining the times at which such Option shall become
exercisable; and (iv) all other terms and conditions of such Options. The exercise price for any
Option granted by action of an executive officer or officers pursuant to such delegation of
authority shall not be less than the fair market value per share of the Common Stock on the Date of
Grant. Unless expressly approved in advance by the Board or the Committee, such delegation of
authority shall not include the authority to accelerate the vesting, extend the period for exercise
or otherwise alter the terms of outstanding Options. The term “Plan Administrator” when used in any
provision of this Plan other than Sections 2, 5(m), and 11 shall be deemed to refer to the Board or
the Committee, as the case may be, and an executive officer who has been authorized to grant
Options pursuant thereto, insofar as such provisions may be applied to persons that are
Non-Insiders and Non-Covered Employees and Options granted to such persons.
3. ELIGIBILITY
Incentive Stock Options may be granted to any individual who, at the time the Option is
granted, is a full-time employee of the Company or any Related Corporation (as defined below)
(“Employees”) or who is a non-Employee director of the Company. Non-Qualified Stock Options may be
granted to Employees, directors and such other persons as the Plan Administrator shall select.
Options may be granted in substitution for outstanding Options of another corporation in
connection with the merger, consolidation, acquisition of property or stock or other
reorganization between such other corporation and the Company or any subsidiary of the Company.
Options also may be granted in exchange for outstanding Options. Any person to whom an Option is
granted under this Plan is referred to as an “Optionee.”
As used in this Plan, the term “Related Corporation,” when referring to a subsidiary
corporation, shall mean any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company if, at the time of the granting of the Option, each of
the corporations other than the last corporation in the unbroken chain owns stock
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1997 Stock Option Plan
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possessing fifty percent (50%) or more of the total combined voting power of all classes of stock
of one of the other corporations in such chain. When referring to a parent corporation, the term
“Related Corporation” shall mean any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company if, at the time of granting of the Option, each of the
corporations other than the Company owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock of one of the other corporations in such chain.
4. STOCK.
The Plan Administrator is authorized to grant Options to acquire up to a total of 1,600,000
shares of the Company’s authorized but unissued, or reacquired, Common Stock. The number of shares
with respect to which Options may be granted hereunder is subject to adjustment as set forth in
Section 5(m) hereof. In the event that any outstanding Option expires or is terminated for any
reason, the shares of Common Stock allocable to the unexercised portion of such Option may again be
subject to an Option to the same Optionee or to a different person eligible under Section 3 of this
Plan.
5. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted under this Plan shall be evidenced by a written agreement approved by the
Plan Administrator (the “Agreement”). Agreements may contain such additional provisions, not
inconsistent with this Plan, as the Plan Administrator in its discretion may deem advisable. All
Options also shall comply with the following requirements:
(a) Number of Shares and Type of Option.
Each Agreement shall state the number of shares of Common Stock to which it pertains and
whether the Option is intended to be an Incentive Stock Option or a Non-Qualified Stock Option. In
the absence of action to the contrary by the Plan Administrator in connection with the grant of an
Option, all Options shall be Non-Qualified Stock Options. The aggregate fair market value
(determined at the Date of Grant, as defined below) of the stock with respect to which Incentive
Stock Options are exercisable for the first time by the Optionee during any calendar year (granted
under this Plan and all other Incentive Stock Option plans of the Company, a Related Corporation or
a predecessor corporation) shall not exceed $100,000, or such other limit as may be prescribed by
the Code as it may be amended from time to time. Any Option which exceeds the annual limit shall
not be void but rather shall be a Non-Qualified Stock Option.
(b) Date of Grant.
Each Agreement shall state the date the Plan Administrator has deemed to be the effective
date of the Option for purposes of this Plan (the “Date of Grant”).
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1997 Stock Option Plan
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(c) Exercise Price.
Each Agreement shall state the price per share of Common Stock at which it is exercisable. The
exercise price shall be fixed by the Plan Administrator at whatever price the Plan Administrator
may determine in the exercise of its sole discretion in good faith;
provided, that with
respect to Incentive Stock Options granted to greater-than-10 percent (>10%) shareholders of the
Company (as determined with reference to Section 424(d) of the Code), the exercise price per share
shall not be less than 110 percent (110%) of the fair market value per share of the Common Stock at
the Date of Grant.
(d) Duration
of Options.
At the time of the grant of the Option, the Plan Administrator shall designate, subject to
paragraph 5(g) below, the expiration date of the Option, which date shall not be later than ten
(10) years from the Date of Grant in the case of Incentive Stock Options; provided, that
the expiration date of any Incentive Stock Option granted to a greater-than-10 percent (>10%)
shareholder of the Company (as determined with reference to Section 424(d) of the Code) shall not
be later than five (5) years from the Date of Grant. In the absence of action to the contrary by
the Plan Administrator in connection with the grant of a particular Option, and except in the case
of Incentive Stock Options as described above, all Options granted under this Plan shall expire ten
(10) years from the Date of Grant.
(e) Vesting Schedule.
No Option shall be exercisable until it has vested. The vesting schedule for each Option shall
be specified by the Plan Administrator at the time of grant of the Option; provided, that
if no vesting schedule is specified at the time of grant, the Option shall vest according to the
following schedule:
| |
|
|
| Number of Months Following |
|
Percentage of Total |
| Date Employment or Services Commence |
|
Option Vested |
12 |
|
25% |
15 |
|
31.25% |
18 |
|
37.50% |
21 |
|
43.75% |
24 |
|
50% |
27 |
|
56.25% |
30 |
|
62.50% |
33 |
|
68.75% |
36 |
|
75% |
39 |
|
81.25% |
42 |
|
87.50% |
45 |
|
93.75% |
48 |
|
100% |
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International, Inc.
1997 Stock Option Plan
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(f) Acceleration of Vesting.
The vesting of one or more outstanding Options may be accelerated by the Plan Administrator at
such times and in such amounts as it shall determine in its sole discretion. The vesting of Options
also shall be accelerated under the circumstances described in Sections 5(m) below and under such
other circumstances, if any, as may be described in individual Agreements.
(g) Term of Option.
Vested Options shall terminate, to the extent not previously exercised, upon the occurrence of
the first of the following events: (i) the expiration of the Option, as designated by the Plan
Administrator in accordance with Section 5(d) above; (ii) the expiration of ninety (90) days from
the date of an Optionee’s termination of employment or contractual relationship with the Company or
any Related Corporation for any reason whatsoever other than death or Disability (as defined below)
unless, in the case of a Non-Qualified Stock Option, the exercise period is extended by the Plan
Administrator until a date not later than the expiration date of the Option; or (iii) the
expiration of one (1) year from (A) the date of death of the Optionee or (B) cessation of an
Optionee’s employment or contractual relationship by reason of Disability (as defined below)
unless, in the case of a Non-Qualified Stock Option, the exercise period is extended by the Plan
Administrator until a date not later than the expiration date of the Option. If an Optionee’s
employment or contractual relationship is terminated by death, any Option then held by the Optionee
shall be exercisable only by the person or persons to whom such Optionee’s rights under such Option
shall pass by the Optionee’s will or by the laws of descent and distribution of the state or county
of the Optionee’s domicile at the time of death. For purposes of the Plan, unless otherwise defined
in the Agreement, “Disability” shall mean any physical, mental or other health condition which
substantially impairs the Optionee’s ability to perform her or his assigned duties for one hundred
twenty (120) days or more in any two hundred forty (240) day period or that can be expected to
result in death. The Plan Administrator shall determine whether an Optionee has incurred a
Disability on the basis of medical evidence acceptable to the Plan Administrator. Upon making a
determination of Disability, the Plan Administrator shall, for purposes of the Plan, determine the
date of an Optionee’s termination of employment or contractual relationship.
Unless accelerated in accordance with Section 5(f) above, unvested Options shall terminate
immediately upon termination of employment or contractual relationship of the Optionee by the
Company for any reason whatsoever, including death or Disability.
For purposes of this Plan, transfer of employment or contractual relationship between or among
the Company and/or any Related Corporation shall not be deemed to constitute a termination of
employment with the Company or any Related Corporations. For purposes of this Plan, if an Employee
Optionee’s relationship with the Company changes (e.g., from an Employee to a non-Employee, such as
a part-time employee or a consultant, or by reason of military leave, sick leave or other leave of
absence), such change shall be deemed to constitute a termination of employment unless otherwise
determined by the Plan Administrator; provided, that if, in the case of an Incentive Stock
Option, the Plan Administrator determines that for purposes hereof a change from an Employee to a
part-time employee or consultant shall not
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International, Inc.
1997 Stock Option Plan
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constitute a termination of the Optionee’s employment with the Company, then the Optionee’s
Incentive Stock Option shall automatically be converted into a Non-Qualified Stock Option; and
provided further, that with respect to Incentive Stock Options, employment shall in no
event be deemed to continue beyond the first ninety (90) days of any leave of absence unless the
Optionee’s re-employment rights are guaranteed by statute or by contract.
(h) Exercise of Options.
Options shall be exercisable, either all or in part, at any time after vesting, until
termination; provided, that after registration of any of the Company’s securities under
Section 12 of the Exchange Act and regardless of when the Option is exercised, any Optionee who is
an Insider shall be precluded from selling or transferring any Common Stock or other security
underlying an Option during the six (6) months immediately following the grant of that Option. If
less than all of the shares included in the vested portion of any Option are purchased, the
remainder may be purchased at any subsequent time prior to the expiration of the Option term. No
portion of any Option for less than five (5) shares (as adjusted pursuant to Section 5(m) below)
may be exercised; provided, that if the vested portion of any Option is less than five (5)
shares, it may be exercised with respect to all shares for which it is vested. Only whole shares
may be issued pursuant to an Option, and to the extent that an Option covers less than one (1)
share, it is unexercisable. Options or portions thereof may be exercised by giving written notice
to the Company, which notice shall specify the number of shares to be purchased, and be accompanied
by payment in the amount of the aggregate exercise price for the Common Stock so purchased, which
payment shall be in the form specified in Section 5(i) below. The Company shall not be obligated to
issue, transfer or deliver a certificate of Common Stock to any Optionee, or to his personal
representative, until the aggregate exercise price has been paid for all shares for which the
Option shall have been exercised and adequate provision has been made by the Optionee for
satisfaction of any tax withholding obligations associated with such exercise. During the lifetime
of an Optionee, Options are exercisable only by the Optionee.
(i) Payment upon Exercise of Option.
Upon the exercise of any Option, the aggregate exercise price shall be paid to the Company in
cash or by certified or cashier’s check. In addition, upon approval of the Plan Administrator, an
Optionee may pay for all or any portion of the aggregate exercise price (1) by delivering to the
Company shares of Common Stock previously held by such Optionee, (2) by having shares withheld from
the amount of shares of Common Stock to be received by Optionee or (3) by complying with any other
payment mechanism approved by the Plan Administrator from time to time. The shares of Common Stock
received or withheld by the Company as payment for shares of Common Stock purchased upon the
exercise of Options shall have a fair market value at the date of exercise (as determined by the
Plan Administrator) equal to the aggregate exercise price (or portion thereof) to be paid by the
Optionee upon such exercise.
(j) Rights as a Shareholder.
An Optionee shall have no rights as a shareholder with respect to any shares covered by an
Option until such Optionee becomes a record holder of such shares, irrespective of
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International, Inc.
1997 Stock Option Plan
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whether such Optionee has given notice of exercise. Subject to the provisions of Section 5(m)
hereof, no rights shall accrue to an Optionee and no adjustments shall be made on account of
dividends (ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights declared on, or created in, the Common Stock for which the record
date is prior to the date the Optionee becomes a record holder of the shares of Common Stock
covered by the Option, irrespective of whether such Optionee has given notice of exercise.
(k) Transfer of Option.
Unless otherwise specified in the Agreement or by the Plan Administrator, Options granted
under this Plan and the rights and privileges conferred by this Plan may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of law or otherwise) other
than by will, by applicable laws of descent and distribution, or (except in the case of an
Incentive Stock Option) pursuant to a qualified domestic relations order, and shall not be subject
to execution, attachment or similar process; provided however, that any Agreement may provide or be
amended to provide that a Non-Qualified Stock Option to which it relates is transferable during the
Optionee’s lifetime without payment of consideration to immediate family members of the Optionee or
to trusts or partnerships established exclusively for the benefit of the Optionee and the
Optionee’s immediate family members. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of any Option or of any right or privilege conferred by this Plan contrary to the
provisions hereof, or upon the sale, levy or any attachment or similar process upon the rights and
privileges conferred by this Plan, such Option shall thereupon terminate and become null and void.
(l) Securities Regulation and Tax Withholding.
(1) Shares shall not be issued with respect to an Option
unless
the exercise of such Option and the issuance and delivery of such shares shall comply with all
relevant provisions of law, including, without limitation, any applicable state securities laws,
the Securities Act of 1933, as amended, (the “Securities Act”), the Exchange Act, the rules and
regulations thereunder and the requirements of any stock exchange upon which such shares may then
be listed, and such issuance shall be further subject to the approval of counsel for the Company
with respect to such compliance, including the availability of an exemption from registration for
the issuance and sale of such shares. The inability of the Company to obtain from any regulatory
body the authority deemed by the Company to be necessary for the lawful issuance and sale of any
shares under this Plan, or the unavailability of an exemption from registration for the issuance
and sale of any shares under this Plan, shall relieve the Company of any liability with respect to
the non-issuance or sale of such shares.
As a condition to the exercise of an Option, the Plan Administrator may require the Optionee
to represent and warrant in writing at the time of such exercise that the shares are being
purchased only for investment and without any then-present intention to sell or distribute such
shares. At the option of the Plan Administrator, a stop-transfer order against such shares may be
placed on the stock books and records of the Company, and a legend indicating that the stock may
not be pledged, sold or otherwise transferred unless an opinion of counsel is provided
FreeShop
International, Inc.
1997 Stock Option Plan
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stating that such transfer is not in violation of any applicable law or regulation, may be stamped
on the certificates representing such shares in order to assure an exemption from registration. The
Plan Administrator also may require such other documentation as may from time to time be necessary
to comply with federal and state securities laws. It is the intent of the Company to register the
shares issurable upon exercise of the Option as soon as reasonably practical after such time, if
ever, as the Company registers any of its other shares of common
stock under the Securities Act,
but THE COMPANY HAS NO OBLIGATION TO UNDERTAKE REGISTRATION OF OPTIONS OR THE SHARES OF STOCK
ISSUABLE UPON THE EXERCISE OF OPTIONS.
(2) As a condition to the exercise of any Option granted under
this Plan, the Optionee shall make such arrangements as the Plan Administrator may require for the
satisfaction of any federal, state or local withholding tax obligations that may arise in
connection with such exercise.
(3) The issuance, transfer or delivery of certificates of
Common Stock pursuant to the exercise of Options may be delayed, at the discretion of the Plan
Administrator, until the Plan Administrator is satisfied that the applicable requirements of the
federal and state securities laws and the withholding provisions of the Code have been met.
(m) Stock Dividend, Reorganization or Liquidation.
(1) If (i) the Company shall at any time be involved in a
transaction described in Section 424(a) of the Code (or any successor provision) or any “corporate
transaction” described in the regulations thereunder; (ii) the Company shall declare a dividend
payable in, or shall subdivide or combine, its Common Stock; or (iii) any other event with
substantially the same effect shall occur, the Plan Administrator shall, with respect to each
outstanding Option, proportionately adjust the number of shares of Common Stock and/or the exercise
price per share so as to preserve the rights of the Optionee substantially proportionate to the
rights of the Optionee prior to such event, and to the extent that such action shall include an
increase or decrease in the number of shares of Common Stock subject to outstanding Options, the
number of shares available under Section 4 of this Plan shall automatically be increased or
decreased, as the case may be, proportionately, without further action on the part of the Plan
Administrator, the Company or the Company’s shareholders.
(2) If the Company is liquidated or dissolved, the Plan
Administrator may allow the holders of any outstanding Options to exercise all or any part of the
unvested portion of the Options held by them; provided, that such Options must be
exercised prior to the effective date of such liquidation or dissolution. If the Option holders do
not exercise
their Options prior to such effective date, each outstanding Option shall terminate as of the
effective date of the liquidation or dissolution.
(3) The foregoing adjustments in the shares subject to Options
shall be made by the Plan Administrator, or by any successor administrator of this Plan, or by the
applicable terms of any assumption or substitution document.
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International, Inc.
1997 Stock Option Plan
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(4) The grant of an Option shall not affect in any way the
right
or power of the Company to make adjustments, reclassifications, reorganizations or changes of its
capital or business structure, to merge, consolidate or dissolve, to liquidate or to sell or
transfer all or any part of its business or assets.
6.
EFFECTIVE DATE; TERM.
This Plan shall be effective as of June 30, 1997. Incentive Stock Options may be granted by
the Plan Administrator from time to time thereafter through and until June 30, 2007. Non-Qualified
Stock Options may be granted until this Plan is terminated by the Board in its sole discretion.
Termination of this Plan shall not terminate any Option granted prior to such termination. Any
Options granted by the Plan Administrator prior to the approval of this Plan by a majority of the
shareholders of the Company shall be granted subject to ratification of this Plan by the
shareholders of the Company within twelve (12) months after this Plan is adopted by the Board, and
if shareholder ratification is not obtained, each and every Option granted under this Plan shall be
null and void and shall convey no rights to the holder thereof.
7. NO OBLIGATIONS TO EXERCISE OPTION.
The grant of an Option shall impose no obligation upon the Optionee to exercise such Option.
8. NO RIGHT TO OPTIONS OR TO EMPLOYMENT.
Whether or not any Options are to be granted under this Plan shall be exclusively within the
discretion of the Plan Administrator, and nothing contained in this Plan shall be construed as
giving any person any right to participate under this Plan. The grant of an Option shall in no way
constitute any form of agreement or understanding binding on the Company or any Related Company,
express or implied, that the Company or any Related Company will employ or contract with an
Optionee for any length of time, nor shall it interfere in any way with the Company’s or, where
applicable, a Related Company’s right to terminate Optionee’s employment at any time, which right
is hereby reserved.
9. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock issued upon the
exercise of Options shall be used for general corporate purposes, unless otherwise directed
by the Board.
10. INDEMNIFICATION OF PLAN ADMINISTRATOR.
In addition to all other rights of indemnification they may have as members of the Board,
members of the Plan Administrator shall be indemnified by the Company for all reasonable expenses
and liabilities of any type or nature, including attorneys’ fees, incurred in connection with any
action, suit or proceeding to which they or any of them are a party by reason
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1997 Stock Option Plan
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of, or in connection with, this Plan or any Option granted under this Plan, and against all amounts
paid by them in settlement thereof (provided that such settlement is approved by independent legal
counsel selected by the Company), except to the extent that such expenses relate to matters for
which it is adjudged that such Plan Administrator member is liable for willful misconduct;
provided, that within fifteen (15) days after the institution of any such action, suit or
proceeding, the Plan Administrator member involved therein shall, in writing, notify the Company of
such action, suit or proceeding, so that the Company may have the opportunity to make appropriate
arrangements to prosecute or defend the same.
11. AMENDMENT OF PLAN.
The Plan Administrator may, at any time, modify, amend or terminate this Plan and Options
granted under this Plan, including, without limitation, such modifications or amendments as are
necessary to maintain compliance with applicable statutes, rules or regulations; provided,
that any amendment for which shareholder approval is required by the Rule in order for the Plan to
be eligible or continue to qualify for the benefits of the Rule shall be subject to approval of the
requisite percentage of the shareholders of the Company in accordance with the Rule. Without
limiting the generality of the foregoing, the Plan Administrator may modify grants to persons who
are eligible to receive Options under this Plan who are foreign nationals or employed outside the
United States to recognize differences in local law, tax policy or custom.
Date
Approved by Board of Directors of Company: June 30, 1997.
Date
Approved by Shareholders of Company: June 30, 1997.
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