exv10w3






Exhibit 10.3



THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE
PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102, OR
25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.



THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.




REPLY! INC.




STOCK OPTION AGREEMENT



     Reply! Inc. has granted to the individual (the “Participant”) named in the Notice of Grant of Stock
Option (the “ Notice”) to which this Stock Option Agreement (the “Option Agreement”) is attached an
option (the “Option”) to purchase certain shares of Stock upon the terms and conditions set forth
in the Notice and this Option Agreement. The Option has been granted pursuant to and shall in all
respects be subject to the terms and conditions of the Reply! Inc. 2004 Stock Plan (the “Plan”), as
amended to the Date of Option Grant, the provisions of which are incorporated herein by reference.
By signing the Notice, the Participant: (a) represents that the Participant has received copies of,
and has read and is familiar with the terms and conditions of, the Notice, the Plan and this Option
Agreement, (b) accepts the Option subject to all of the terms and conditions of the Notice, the
Plan and this Option Agreement, and (c) agrees to accept as binding, conclusive and final all
decisions or interpretations of the Board upon any questions arising under the Notice, the Plan or
this Option Agreement.



     1. Definitions and Construction.



          1.1 Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings
assigned to such terms in the Notice or the Plan.




          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.





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     2. Tax Consequences.



          2.1 Tax Status of Option. This Option is intended to have the tax status designated in the Notice.




               (a) Incentive Stock Option. If the Notice so designates, 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 Participant should consult with the
Participant’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 PARTICIPANT: 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.)



               (b) Nonstatutory Stock Option. If the Notice so designates, this Option is intended to be a
Nonstatutory Stock Option and shall not be treated as an Incentive Stock Option within the meaning
of Section 422(b) of the Code.



          2.2 ISO Fair Market Value Limitation. If the Notice designates this Option as an Incentive Stock
Option, then to the extent that the Option (together with all Incentive Stock Options granted to
the Participant 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 Participant may designate which portion
of such Option the Participant is exercising. In the absence of such designation, the Participant
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 PARTICIPANT: If the 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 Participant exercises this Option to purchase
shares of Stock that are both nontransferable and subject to a substantial risk of forfeiture, the
Participant understands that the Participant should consult with the





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Participant’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 Participant exercises the Option. Shares acquired upon exercise of the Option
are nontransferable and subject to a substantial risk of forfeiture if, for example, (a) they are
unvested and are subject to a right of the Company to repurchase such shares at the Participant’s
original purchase price if the Participant’s Service terminates or (b) the Participant is an
Insider and, under certain circumstances, exercises the Option within six (6) months of the Date of
Option Grant (if a class of equity security of the Company is registered under Section 12 of the
Exchange Act). Failure to file an election under Section 83(b), if appropriate, may result in
adverse tax consequences to the Participant. The Participant acknowledges that the Participant has
been advised to consult with a tax advisor prior to the exercise of the Option regarding the tax
consequences to the Participant of the exercise of the Option. AN ELECTION UNDER SECTION 83(b) MUST
BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH THE PARTICIPANT PURCHASES SHARES. THIS TIME PERIOD
CANNOT BE EXTENDED. THE PARTICIPANT ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS
THE PARTICIPANT’S SOLE RESPONSIBILITY, EVEN IF THE PARTICIPANT 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 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.




               (a) In General. Except as otherwise provided herein, the Option shall be exercisable on and after
the Initial Exercise Date 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 Company’s repurchase rights set forth in Section 11,
Section 12 and Section 13. In no event shall the Option be exercisable for more shares than the
Number of Option Shares, as adjusted pursuant to Section 9.



               (b) ISO Exercise Limitation. If this Option is designated as an Incentive Stock Option in the
Notice, then notwithstanding the provisions of Section 4.1(a) and except as provided in Section
4.1(c), the aggregate Fair Market Value of the shares of Stock with respect to which the
Participant may exercise the Option for the first time during any calendar year, when added to the
aggregate Fair Market Value of the shares subject to any other options designated as Incentive
Stock Options granted to the Participant under all stock option plans of the Participating Company
Group prior to the Date of Option Grant with respect to which such



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options are exercisable for the first time during the same calendar year, shall not exceed One
Hundred Thousand Dollars ($100,000). For purposes of the preceding sentence, 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 shares of stock shall be determined as of the time the option with respect
to such shares is granted. Such limitation on exercise shall be referred to in this Option
Agreement as the “ISO Exercise Limitation.” If Section 422 of the Code is amended to provide for a
different limitation from that set forth in this Section 4.1(b), the ISO Exercise Limitation shall
be deemed amended effective as of the date required or permitted by such amendment to the Code. The
ISO Exercise Limitation shall terminate upon the earlier of (i) the Participant’s termination of
Service, (ii) the day immediately prior to the effective date of a Change in Control in which the
Option is not assumed or substituted for by the Acquiror Corporation as provided in Section 8, or
(iii) the day ten (10) days prior to the Option Expiration Date. Upon such termination of the ISO
Exercise Limitation, the Option shall be deemed a Nonstatutory Stock Option to the extent of the
number of shares subject to the Option which would otherwise exceed the ISO Exercise Limitation.




               (c) Exception to ISO Exercise Limitation. Notwithstanding any other provision of this Option
Agreement, if compliance with the ISO Exercise Limitation as set forth in Section 4.1(b) will
result in the exercisability of any Vested Shares being delayed more than thirty (30) days beyond
the date such shares become Vested Shares (the “Vesting Date”), the Option shall be deemed to be
two (2) options. The first option shall be for the maximum portion of the Number of Option Shares
that can comply with the ISO Exercise Limitation without causing the Option to be unexercisable in
the aggregate as to Vested Shares on the Vesting Date for such shares. The second option, which
shall not be treated as an Incentive Stock Option as described in section 422(b) of the Code, shall
be for the balance of the Number of Option Shares; that is, those such shares which, on the
respective Vesting Date for such shares, would be unexercisable if included in the first option and
thereby made subject to the ISO Exercise Limitation. Shares treated as subject to the second option
shall be exercisable on the same terms and at the same time as set forth in this Option Agreement;
provided, however, that (i) Section 4.1(b) shall not apply to the second option and (ii) each such
share shall become a Vested Share on the Vesting Date such share must first be allocated to the
second option pursuant to the preceding sentence. Unless the Participant specifically elects to the
contrary in the Participant’s written notice of exercise, the first option shall be deemed to be
exercised first to the maximum possible extent and then the second option shall be deemed to be
exercised.



          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 Stock for which the Option
is being exercised and such other representations and agreements as to the Participant’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 Participant 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





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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 Participant having a Fair Market Value 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 Participant for more than six (6) months (and not used for another option exercise by
attestation during such period) or were not acquired, directly or indirectly, from the Company.



                    (ii) Cashless
Exercise. A “Cashless Exercise” means the delivery of a properly executed notice
together with irrevocable instructions to a broker in a form acceptable to the Company providing
for the assignment 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.



          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 Participant hereby authorizes withholding from payroll
and any other amounts payable to the Participant, 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 Option is not
exercisable unless the tax withholding obligations of the





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Participating Company Group are satisfied. Accordingly, the Company shall have no obligation
to deliver shares of Stock or to release shares of Stock from an escrow established pursuant to
this Option Agreement until the tax withholding obligations of the Participating Company Group have
been satisfied by the Participant.




          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 Participant, or, if applicable, in the names of the heirs of the Participant.




          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 PARTICIPANT IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE PARTICIPANT 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 Participant 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.




          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 Participant only by the Participant or
the Participant’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
Participant, the Option, to the extent provided in Section 7, may be exercised by the Participant’s
legal representative or by any person empowered to do so under the deceased Participant’s will or
under the then applicable laws of descent and distribution.





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     6. Termination of the Option.


          The Option shall terminate and may no longer be exercised after the first to occur of (a) the
Option Expiration Date, (b) the last date for exercising the Option following termination of the
Participant’s Service as described in Section 7, or (c) a Change in Control to the extent provided
in Section 8.


     7. Effect of Termination of Service.


          7.1 Option Exercisability.


               (a) Disability. If the Participant’s Service terminates because of the Disability of the
Participant, the Option, to the extent unexercised and exercisable on the date on which the
Participant’s Service terminated, may be exercised by the Participant (or the Participant’s
guardian or legal representative) at any time prior to the expiration of twelve (12) months after
the date on which the Participant’s Service terminated, but in any event no later than the Option
Expiration Date.


               (b) Death. If the Participant’s Service terminates because of the death of the Participant, the
Option, to the extent unexercised and exercisable on the date on which the Participant’s Service
terminated, may be exercised by the Participant’s legal representative or other person who acquired
the right to exercise the Option by reason of the Participant’s death at any time prior to the
expiration of twelve (12) months after the date on which the Participant’s Service terminated, but
in any event no later than the Option Expiration Date. The Participant’s Service shall be deemed to
have terminated on account of death if the Participant dies within three (3) months after the
Participant’s termination of Service.


               (c) Termination for Cause. Notwithstanding any other provision of this Option Agreement, if the
Participant’s Service is terminated for Cause, the Option shall terminate and cease to be
exercisable on the effective date of such termination of Service. Unless otherwise defined in a
contract of employment or service between the Participant and a Participating Company, for purposes
of this Option Agreement “Cause” shall mean any of the following: (i) the Participant’s theft,
dishonesty, or falsification of any Participating Company documents or records; (ii) the
Participant’s improper use or disclosure of a Participating Company’s confidential or proprietary
information; (iii) any action by the Participant which has a detrimental effect on a Participating
Company’s reputation or business; (iv) the Participant’s failure or inability to perform any
reasonable assigned duties after written notice from a Participating Company of, and a reasonable
opportunity to cure, such failure or inability; (v) any material breach by the Participant of any
employment agreement between the Participant and a Participating Company, which breach is not cured
pursuant to the terms of such agreement; or (vi) the Participant’s conviction (including any plea
of guilty or nolo contendere) of any criminal act which impairs the Participant’s ability to perform
his or her duties with a Participating Company.


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               (d) Other Termination of Service. If the Participant’s Service terminates for any reason, except
Disability, death or Cause, the Option, to the extent unexercised and exercisable by the
Participant on the date on which the Participant’s Service terminated, may be exercised by the
Participant at any time prior to the expiration of three (3) months (or such other longer period of
time as determined by the Board, in its discretion) after the date on which the Participant’s
Service terminated, but in any event no later than the Option Expiration Date.



          7.2 Additional Limitation on Option Exercise. Notwithstanding the provisions of Section 7.1, the
Option may not be exercised after the Participant’s termination of Service to the extent that the
shares to be acquired upon exercise of the Option would be subject to the Unvested Share Repurchase
Option as provided in Section 11.




          7.3 Extension if Exercise Prevented by Law. Notwithstanding the foregoing, other than a termination
for Cause, if the exercise of the Option within the applicable time periods set forth in Section
7.1 is prevented by the provisions of Section 4.6, the Option shall remain exercisable until three
(3) months after the date the Participant is notified by the Company that the Option is
exercisable, but in any event no later than the Option Expiration Date.




          7.4 Extension if Participant Subject to Section 16(b). Notwithstanding the foregoing, other than a
termination for Cause, if a sale within the applicable time periods set forth in Section 7.1 of
shares acquired upon the exercise of the Option would subject the Participant 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 Participant would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day after the
Participant’s termination of Service, or (iii) the Option Expiration Date.




     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



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outstanding voting securities of the Company or, in the case of a Transaction described in Section
8.1(a)(iii), the corporation or other business entity to which the assets of the Company were
transferred (the “Transferee”), 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 securities of one or more corporations or other business entities which own
the Company or the Transferee, as the case may be, either directly or through one or more
subsidiary corporations or other business entities. The Board shall have the right to determine
whether multiple sales or exchanges of the voting securities 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 Option. In the event of a Change in Control, the surviving,
continuing, successor, or purchasing corporation or other business entity or parent thereof, as the
case may be (the “Acquiror”), may, without the consent of the Participant, either assume the
Company’s rights and obligations under the Option or substitute for the Option a substantially
equivalent option for the Acquiror Corporation’s stock. The Option shall terminate and cease to be
outstanding effective as of the date of the Change in Control to the extent that the Option is
neither assumed or substituted for by the Acquiror Corporation in connection with the Change in
Control nor exercised as of the date of the Change in Control. Notwithstanding the foregoing,
shares acquired upon exercise of the 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 this Option Agreement except as otherwise provided herein.
Furthermore, notwithstanding the foregoing, if the corporation the stock of which is subject to the
Option 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 Option shall not terminate unless the Board otherwise provides in its
discretion.




     9. Adjustments for Changes in Capital Structure.



          Subject to any required action by the stockholders of the Company, in the event of any change in
the Stock effected without receipt of consideration by the Company, whether through merger,
consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of
shares, or similar change in the capital structure of the Company, or in the event of payment of a
dividend or distribution to the stockholders of the Company in a form other than Stock (excepting
normal cash dividends) that has a material effect on the Fair Market Value of shares of Stock,
appropriate and proportionate adjustments shall be made in the number, Exercise Price and class of
shares subject to the Option, in order to prevent dilution or enlargement of the Participant’s
rights under the Option. For purposes of the foregoing, conversion of any convertible securities of
the Company shall not be treated as “effected without receipt of consideration by the
Company.” Any fractional share resulting from an adjustment pursuant to this Section 9 shall be
rounded down to the nearest whole number, and in no event






9









 







may the Exercise Price of the Option be decreased to an amount less than the par value, if any, of
the stock subject to the Option. Such adjustments shall be determined by the Board, and its
determination shall be final, binding and conclusive.




     10. Rights
as A Stockholder, Employee or
Consultant.



          The Participant 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 9. If the Participant is an Employee, the Participant understands and
acknowledges that, except as otherwise provided in a separate, written employment agreement between
a Participating Company and the Participant, the Participant’s employment is “at will” and is for
no specified term. Nothing in this Option Agreement shall confer upon the Participant 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 Participant’s Service as an Employee or Consultant, as
the case may be, at any time.




     11. Unvested Share Repurchase Option.



          11.1 Grant of Unvested Share Repurchase Option. In the event the Participant’s Service with the
Participating Company Group is terminated for any reason or no reason, with or without cause, or,
if the Participant, the Participant’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 Unvested Shares, as defined in Section 11.2 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 11 (the “Unvested Share
Repurchase Option ”).




          11.2
Unvested Shares Defined. The “Unvested Shares” shall mean, on any given date, the number of
shares of Stock acquired upon exercise of the Option which exceed the Vested Shares determined as
of such date.




          11.3 Exercise of Unvested Share Repurchase Option. The Company may exercise the Unvested Share
Repurchase Option by written notice to the Participant within sixty (60) days after (a) termination
of the Participant’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 Participant 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 Participant otherwise agree.






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          11.4 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 Participant’s original cost per share,
as adjusted pursuant to Section 9 (the “Repurchase Price”). The Company shall pay the aggregate
Repurchase Price to the Participant in cash within thirty (30) days after the date of the written
notice to the Participant of the Company’s exercise of the Unvested Share Repurchase Option. For
purposes of the foregoing, cancellation of any purchase money indebtedness of the Participant to
any Participating Company for the shares shall be treated as payment to the Participant 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 Participant at the same time as the delivery of the
Repurchase Price to the Participant.


          11.5 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.


          11.6 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 Participant is entitled by
reason of the Participant’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 Shares 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.


     12. Right of First Refusal.


          12.1 Grant of Right of First Refusal. Except as provided in Section 12.7 below, in the event the
Participant, the Participant’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 12 (the “Right of
First Refusal”).


          12.2 Notice of Proposed Transfer. Prior to any proposed transfer of the Transfer Shares, the
Participant 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,


11







 




as determined by the Board in good faith. If the Participant proposes to transfer any Transfer
Shares to more than one Proposed Transferee, the Participant shall provide a separate Transfer
Notice for the proposed transfer to each Proposed Transferee. The Transfer Notice shall be signed
by both the Participant and the Proposed Transferee and must constitute a binding commitment of the
Participant and the Proposed Transferee for the transfer of the Transfer Shares to the Proposed
Transferee subject only to the Right of First Refusal.




          12.3 Bona Fide Transfer. If the Company determines that the information provided by the Participant
in the Transfer Notice is insufficient to establish the bona fide nature of a proposed voluntary
transfer, the Company shall give the Participant written notice of the Participant’s failure to
comply with the procedure described in this Section 12, and the Participant shall have no right to
transfer the Transfer Shares without first complying with the procedure described in this Section
12. The Participant shall not be permitted to transfer the Transfer Shares if the proposed transfer
is not bona fide.




          12.4 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 Participant otherwise agree) at the purchase price and on the
terms set forth in the Transfer Notice by delivery to the Participant 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 Participant or
issued by a person other than the Participant with respect to a proposed transfer to the same
Proposed Transferee. If the Company exercises the Right of First Refusal, the Company and the
Participant 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
Participant to any Participating Company shall be treated as payment to the Participant in cash to
the extent of the unpaid principal and any accrued interest canceled.




          12.5 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 Participant otherwise agree)
within the period specified in Section 12.4 above, the Participant 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 Participant 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




12









 




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 Participant, shall again be subject to the Right of First Refusal and
shall require compliance by the Participant with the procedure described in this Section 12.




          12.6 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 hold such
Transfer Shares or interest therein subject to all of the terms and conditions of this Option
Agreement, including this Section 12 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 12 are met.




          12.7 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 12.9 below result in
a termination of the Right of First Refusal.




          12.8 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.




          12.9 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 Acquiror Corporation assumes the
Company’s rights and obligations under the Option or substitutes a substantially equivalent option
for the Acquiror 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.




     13. Vested Share Repurchase Option



          13.1 Grant of Vested Share Repurchase Option. Except as otherwise provided herein, in the event of
the Participant’s termination of Service, for any reason, the Company shall have the right to
repurchase the shares acquired by the Participant pursuant to the Option (the “Repurchase Shares”)
under the terms and subject to the conditions set forth in this Section 13 (the “Vested Share
Repurchase Option”).




          13.2 Exercise of Vested Share Repurchase Option. The Company may exercise the Vested Share
Repurchase Option by written notice to the Participant, the





13











 




Participant’s legal representative, or other holder of the Repurchase Shares, as the case may
be, during the Repurchase Period. The “Repurchase Period” shall be the period commencing on the
date of the Participant’s termination of Service and ending on the later of (a) the date ninety
(90) days thereafter or (b) the date ninety (90) days after the Option is last exercised. If the
Company fails to give notice during the Repurchase Period, the Vested Share Repurchase Option shall
terminate (unless the Company and the Participant have extended the time for the exercise of the
Vested Share Repurchase Option). Notwithstanding a termination of the Vested Share Repurchase
Option, the remaining provisions of this Option Agreement shall remain in full force and effect,
including, without limitation, the Right of First Refusal set forth in Section 12. The Vested Share
Repurchase Option must be exercised, if at all, for all of the Repurchase Shares, except as the
Company and the Participant otherwise agree.




          13.3 Payment for Repurchase Shares. The repurchase price per share being repurchased by the Company
pursuant to the Vested Share Repurchase Option shall be an amount equal to the Fair Market Value of
the shares determined as of the date of the Participant’s termination of Service by the Board in
good faith. Payment by the Company to the Participant shall be made in cash on or before the last
day of the Repurchase Period. For purposes of this Section 13.3, cancellation of any indebtedness
of the Participant to the Company shall be treated as payment to the Participant in cash to the
extent of the unpaid principal and any accrued interest canceled.




          13.4 Transfers Not Subject to Vested Share Repurchase Option. The Vested Share Repurchase Option
shall not apply to any transfer or exchange of shares acquired upon exercise of the Option if such
transfer or exchange is in connection with an Ownership Change Event as described in the Plan. If
the consideration received pursuant to such transfer or exchange consists of stock of a
Participating Company, such consideration will remain subject to the Vested Share Repurchase Option
unless the provisions of Section 13.6 below result in a termination of the Vested Share Repurchase
Option.




          13.5 Assignment of Vested Share Repurchase Option. The Company shall have the right to assign the
Vested 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.




          13.6 Early Termination of Vested Share Repurchase Option. The other provisions of this Option
Agreement notwithstanding, the Vested Share Repurchase Option shall terminate and be of no further
force and effect upon (a) the occurrence of a Change in Control as described in the Plan, unless
the Acquiror assumes the Company’s rights and obligations under the Option or substitutes a
substantially equivalent option for the Acquiror Corporation’s stock for the Option, or (b) the
existence of a public market, as defined in Section 12.9, for the class of shares subject to the
Vested Share Repurchase Option.




     14. Escrow.



          14.1 Establishment of Escrow. To ensure that shares subject to the Unvested Share Repurchase Option
will be available for repurchase, the Company may require the Participant to deposit the
certificate evidencing the shares which the Participant purchases upon





14









 







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
Participant to so deposit the certificate in escrow. Upon the occurrence of an Ownership Change
Event or a change, as described in Section 9, 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 Participant is
entitled by reason of the Participant’s ownership of shares of Stock acquired upon exercise of the
Option that remain, following such Ownership Change Event or change described in Section 9, 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.




          14.2 Delivery of Shares to Participant. 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 Participant the shares and any other property no longer subject to such
restriction.




          14.3 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, the Vested Share
Repurchase Option or the Right of First Refusal, the notices required to be given to the
Participant shall be given to the escrow agent, and any payment required to be given to the
Participant 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
Participant.




     15. 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 9, 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 Participant is entitled by reason of the
Participant’s ownership of the shares acquired upon exercise of the Option shall be immediately
subject to the Unvested Share Repurchase Option, the Vested 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, the Vested Share Repurchase Option and the Right of First Refusal immediately
before such event.




     16. Notice of Sales Upon Disqualifying Disposition.



          The Participant shall dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, if the Notice designates this Option as an
Incentive Stock Option, the Participant shall (a) promptly
notify the Chief Financial Officer of the Company if the Participant disposes of any of the shares
acquired pursuant to the Option within one (1) year after the date the Participant exercises all or
part of the





15









 







Option or within two (2) years after the Date of Option Grant and (b) provide the Company with a
description of the circumstances of such disposition. Until such time as the Participant disposes
of such shares in a manner consistent with the provisions of this Option Agreement, unless
otherwise expressly authorized by the Company, the Participant shall hold all shares acquired
pursuant to the Option in the Participant’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 Participant 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.




     17. Legends.



          The Company may at any time place legends referencing the Unvested Share Repurchase Option, the
Vested 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 Participant 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 Participant 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:




          17.1 “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
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.”




          17.2 “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.”




          17.3 “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







16









 




PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS
CORPORATION.”



          17.4 “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A VESTED 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.”



          17.5 If this Option is designated as an Incentive Stock Option: “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 [INSERT DISQUALIFYING DISPOSITION DATE HERE]. 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 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.”



     18. Lock-Up Agreement.


          The Participant 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 Participant 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.



     19. 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 Participant),
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




17








 




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.


     20. Miscellaneous Provisions.


          20.1 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.


          20.2
Termination or Amendment. The Board may terminate or amend the Plan or the Option at any time;
provided, however, that except as provided in Section 8.2 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 Participant unless such termination or amendment is necessary to comply
with any applicable law or government regulation or is required to enable the Option, if designated
an Incentive Stock Option in the Notice, to qualify as an Incentive Stock Option. No amendment or
addition to this Option Agreement shall be effective unless in writing.


          20.3 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.


          20.4 Integrated Agreement. The Notice, this Option Agreement and the Plan constitute the entire
understanding and agreement of the Participant and the Participating Company Group with respect to
the subject matter contained herein or therein and supersedes any prior agreements, understandings,
restrictions, representations, or warranties among the Participant 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 the Notice and the Option
Agreement shall survive any exercise of the Option and shall remain in full force and effect.


          20.5 Applicable Law. This Option Agreement shall be governed by the laws of the State of California
as such laws are applied to agreements between California residents entered into and to be
performed entirely within the State of California.


          20.6 Counterparts. The Notice 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.


18







 





	 	 	 	 	 	 	 
	__ Incentive Stock Option
	 	 	 	Participant:  	 	 
	 
	 	 	 	 	 
	__ Nonstatutory Stock Option
	 	 	 	 	 	 
	 
	 	 	 	 	Date:  	 
	 
	 	 	 	 	 	 




STOCK OPTION EXERCISE NOTICE



Reply! Inc.

Attention: Chief Financial Officer

3000F Danville Boulevard, Suite 151

Alamo, CA 94507

Ladies and Gentlemen:



     1. Option. I was granted an option (the “Option ”) to purchase shares of the common stock
(the “Shares ”) of Reply! Inc. (the “Company ”) pursuant to the Company’s 2004 Stock Plan (the
“Plan ”), my Notice of Grant of Stock Option (the “Notice”) and my Stock Option Agreement (the
“Option Agreement”) as follows:


	 	 	 	 	 	 	 	 	 	 	 
	Date of Option Grant:
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Number of Option Shares:
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Exercise Price per Share:
	 	 	 	 	$	 	 
	 	 





     2. Exercise of Option. I hereby elect to exercise the Option to purchase the following
number of Shares in accordance with the Notice and the Option Agreement:


	 	 	 	 	 	 	 	 	 	 	 
	Vested Shares:
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Unvested Shares:
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Total Shares Purchased:
	 	 	 	 		 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Total Exercise Price (Total Shares X Price per Share)
	 	 	 	 	$	 	 

	 	 





     3. Payments. I enclose payment in full of the total exercise price for the Shares in the
following form(s), as authorized by my Option Agreement:


	 	 	 	 	 	 	 	 	 	 	 
	__ Cash:
	 	 	 	 	$	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	__ Check:
	 	 	 	 	$	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	__ Tender of Company Stock:
	 	 	 	 	  Contact Plan Administrator	 	 




1







 








     4. Tax Withholding. I authorize payroll withholding and otherwise will make adequate
provision for the federal, state, local and foreign tax withholding obligations of the Company, if
any, in connection with the Option. If I am exercising a Nonstatutory Stock Option, I enclose
payment in full of my withholding taxes, if any, as follows:



(Contact Plan Administrator for amount of tax due.)




	 	 	 	 	 	 	 	 	 	 	 
	__ Cash:

	 	 	 	 	$	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	__ Check:

	 	 	 	 	$	 	 

	 	 






     5. Participant Information.



	 	 	 	 	 
	My address is:
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 
	 	 
	 
	 	 	 	 
	My Social Security Number is:	 






     6. Notice of Disqua1ifying Disposition. If the Option is an Incentive Stock Option, I agree
that I will promptly notify the Chief Financial Officer of the Company if I transfer any of the
Shares within one (1) year from the date I exercise all or part of the Option or within two (2)
years of the Date of Option Grant.



     7. 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, the Vested 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 my heirs, executors, administrators, successors and assigns. If required by
the Company, I agree to deposit the certificate(s) 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 pursuant to the Company’s standard Joint Escrow Instructions.



     8. Transfer. I understand and acknowledge that the Shares have not been registered under
the Securities Act of 1933, as amended (the “Securities Act”), and that consequently the Shares
must be held indefinitely unless they are subsequently registered under the Securities Act, an
exemption from such registration is available, or they are sold in accordance with Rule 144 or Rule
701 under the Securities Act. I further understand and acknowledge that the Company is under no
obligation to register the Shares. I understand that the certificate or certificates evidencing the
Shares will be imprinted with legends which prohibit the transfer of the Shares unless they are
registered or such registration is not required in the opinion of legal counsel satisfactory to the
Company.



     I am aware that Rule 144 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 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.



     9. 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




2









 







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, the Notice 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.




Reply! Inc.




	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Dated:
	 	 	 	 
	 

	 	 

	 	 







3