Document:

2004 Equity Incentive Plan

 Exhibit 10.2 
  
 HOUSEVALUES, INC. 
  
 2004 EQUITY INCENTIVE PLAN 
  
 SECTION 1. PURPOSE 
  
 The purpose of the HouseValues, Inc. 2004 Equity Incentive Plan is to attract, retain and motivate employees, officers, directors, consultants, agents, advisors and
independent contractors of the Company and its Related Companies by providing them the opportunity to acquire a proprietary interest in the Company and to align their interests and efforts to the long-term interests of the Company’s
shareholders. 
  
 SECTION 2. DEFINITIONS 
  
 Certain capitalized terms used in the Plan have the meanings set forth in Appendix A.

  
 SECTION 3. ADMINISTRATION 
  
 3.1 Administration of the Plan 
  
 The Plan shall be administered by the Board or the Compensation Committee, which shall be
composed of two or more directors, each of whom is a “non-employee director” within the meaning of Rule 16b-3(b)(3) promulgated under the Exchange Act, or any successor definition adopted by the Securities and Exchange Commission.
Notwithstanding the foregoing, the Board may delegate responsibility for administering the Plan with respect to designated classes of Eligible Persons to different committees consisting of two or more members of the Board, subject to such
limitations as the Board deems appropriate, except with respect to Awards to Participants who are subject to Section 16 of the Exchange Act. Members of any committee shall serve for such term as the Board may determine, subject to removal by the
Board at any time. To the extent consistent with applicable law, the Board may authorize one or more senior executive officers of the Company to grant Awards to designated classes of Eligible Persons, within limits specifically prescribed by the
Board; provided, however, that no such officer shall have or obtain authority to grant Awards to himself or herself or to any person subject to Section 16 of the Exchange Act. All references in the Plan to the “Committee” shall be, as
applicable, to the Compensation Committee or any other committee or any officer to whom the Board or the Compensation Committee has delegated authority to administer the Plan. 
  
 3.2 Administration and Interpretation by Committee 
  
 (a) Except for the terms and conditions explicitly set forth in the Plan and to the extent permitted by applicable law, the Committee shall
have full power and exclusive authority, subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board or a Committee composed of members of the 

 Board, to (i) select the Eligible Persons to whom Awards may from time to time be granted under the Plan; (ii) determine
the type or types of Award to be granted to each Participant under the Plan; (iii) determine the number of shares of Common Stock to be covered by each Award granted under the Plan; (iv) determine the terms and conditions of any Award granted under
the Plan; (v) approve the forms of notice or agreement for use under the Plan; (vi) determine whether, to what extent and under what circumstances Awards may be settled in cash, shares of Common Stock or other property or canceled or suspended;
(vii) determine whether, to what extent and under what circumstances cash, shares of Common Stock, other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the Participant; (viii)
interpret and administer the Plan and any instrument evidencing an Award, notice or agreement executed or entered into under the Plan; (ix) establish such rules and regulations as it shall deem appropriate for the proper administration of the Plan;
(x) delegate ministerial duties to such of the Company’s employees as it so determines; and (xi) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan. 

 
 (b) The Committee shall not have the right, without shareholder approval, to (i) cancel or
amend outstanding Options or SARs for the purpose of repricing, replacing or regranting such Options or SARs with Options or SARs that have a purchase or grant price that is less than the purchase or grant price for the original Options or SARs
except in connection with adjustments provided in Section 15, or (ii) issue an Option or amend an outstanding Option to provide for the grant or issuance of a new Option on exercise of the original Option. 
  
 (c) The effect on the vesting of an Award of a Company-approved leave of absence or a
Participant’s working less than full-time shall be determined by the Company’s chief human resources officer or other person performing that function, unless the Board or the Committee designates another officer of the Company to perform
such function, or, with respect to directors or executive officers, by the Compensation Committee, whose determination shall be final. 
  
 (d) Decisions of the Committee shall be final, conclusive and binding on all persons, including the Company, any Participant, any shareholder and any Eligible Person. A
majority of the members of the Committee may determine its actions. 
  
 SECTION 4. SHARES SUBJECT TO THE PLAN 
  
 4.1 Authorized Number
of Shares 
  
 Subject to adjustment from time to time as provided in Section
15.1, the number of shares of Common Stock available for issuance under the Plan shall be: 
  
 (a) 1,500,000 shares; plus 
  
 (b) an annual
increase to be added as of the first day of the Company’s fiscal year beginning in 2005 equal to the least of (i) 700,000 shares and (ii) 3% of the outstanding Common Stock as of the end of the Company’s immediately preceding fiscal year,
and (iii) a 
  

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 lesser amount determined by the Board; provided that any shares from any such increases in previous years that are not
actually issued shall continue to be available for issuance under the Plan; plus 
  
 (c) (i) any authorized shares not issued or subject to outstanding awards under the Company’s 1999 Stock Incentive Plan (the “Prior Plan”) on the Effective Date and (ii) any shares subject to outstanding awards under
the Prior Plan on the Effective Date that cease to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled), up to an aggregate maximum of 4,366,616 shares, which shares
shall cease, as of such date, to be available for grant and issuance under the Prior Plan, but shall be available for issuance under the Plan. 
  
 Shares issued under the Plan shall be drawn from authorized and unissued shares. 
  

4.2 Share Usage 
  
 (a) Shares of Common Stock covered by an Award shall not be counted as used unless and until they are actually issued and delivered to a Participant. If any Award lapses, expires, terminates or is canceled prior to
the issuance of shares thereunder or if shares of Common Stock are issued under the Plan to a Participant and thereafter are forfeited to or otherwise reacquired by the Company, the shares subject to such Awards and the forfeited or reacquired
shares shall again be available for issuance under the Plan. Any shares of Common Stock (i) tendered by a Participant or retained by the Company as full or partial payment to the Company for the purchase price of an Award or to satisfy tax
withholding obligations in connection with an Award, or (ii) covered by an Award that is settled in cash, or in a manner such that some or all of the shares of Common Stock covered by the Award are not issued, shall be available for Awards under the
Plan. The number of shares of Common Stock available for issuance under the Plan shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional shares of Common Stock or credited as additional shares of
Common Stock subject or paid with respect to an Award. 
  
 (b) The Committee shall
also, without limitation, have the authority to grant Awards as an alternative to or as the form of payment for grants or rights earned or due under other compensation plans or arrangements of the Company. 
  
 (c) Notwithstanding anything in the Plan to the contrary, the Committee may grant Substitute
Awards under the Plan. Substitute Awards shall not reduce the number of shares authorized for issuance under the Plan. In the event that an Acquired Entity has shares available for awards or grants under one or more preexisting plans not adopted in
contemplation of such acquisition or combination, then, to the extent determined by the Board or the Compensation Committee, the shares available for grant pursuant to the terms of such preexisting plan (as adjusted, to the extent appropriate, using
the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to holders of common stock of the entities that are parties to such acquisition or combination) may
be used for Awards under the Plan and shall not reduce the number of shares of Common Stock authorized for issuance under the Plan; 
  

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 provided, however, that Awards using such available shares shall not be made after the date awards or grants could have
been made under the terms of such preexisting plans, absent the acquisition or combination, and shall only be made to individuals who were not employees or directors of the Company or a Related Company prior to such acquisition or combination. In
the event that a written agreement between the Company and an Acquired Entity pursuant to which a merger, consolidation or statutory share exchange is completed is approved by the Board and said agreement sets forth the terms and conditions of the
substitution for or assumption of outstanding awards of the Acquired Entity, said terms and conditions shall be deemed to be the action of the Committee without any further action by the Committee, except as may be required for compliance with Rule
16b-3 under the Exchange Act, and the persons holding such awards shall be deemed to be Participants. 
  
 (d) Notwithstanding the other provisions in this Section 4.2, the maximum number of shares that may be issued upon the exercise of Incentive Stock Options shall equal the aggregate share number stated in Section 4.1,
subject to adjustment as provided in Section 15.1. 
  
 SECTION
5. ELIGIBILITY 
  
 An Award may be granted to any employee, officer or
director of the Company or a Related Company whom the Committee from time to time selects. An Award may also be granted to any consultant, agent, advisor or independent contractor for bona fide services rendered to the Company or any Related Company
that (a) are not in connection with the offer and sale of the Company’s securities in a capital-raising transaction and (b) do not directly or indirectly promote or maintain a market for the Company’s securities. 
  
 SECTION 6. AWARDS 
  
 6.1 Form, Grant and Settlement of Awards 
  
 The Committee shall have the authority, in its sole discretion, to determine the type or
types of Awards to be granted under the Plan. Such Awards may be granted either alone or in addition to or in tandem with any other type of Award. Any Award settlement may be subject to such conditions, restrictions and contingencies as the
Committee shall determine. 
  
 6.2 Evidence of Awards 
  
 Awards granted under the Plan shall be evidenced by a written, including an electronic,
notice or agreement that shall contain such terms, conditions, limitations and restrictions as the Committee shall deem advisable and that are not inconsistent with the Plan. 
  
 6.3 Deferrals 
  
 The Committee may permit or require a Participant to defer receipt of the payment of any Award. If any such deferral election is permitted or required, the Committee, in
its sole discretion, shall establish rules and procedures for such payment deferrals, which may include the grant of additional Awards or provisions for the payment or crediting of interest or dividend equivalents, including converting such credits
to deferred stock unit equivalents. 
  

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 6.4 Dividends and Distributions 
  
 Participants may, if the Committee so determines, be credited with dividends paid with respect to shares of Common Stock underlying an Award
in a manner determined by the Committee in its sole discretion. The Committee may apply any restrictions to the dividends or dividend equivalents that the Committee deems appropriate. The Committee, in its sole discretion, may determine the form of
payment of dividends or dividend equivalents, including cash, shares of Common Stock, Restricted Stock or Stock Units. 
  
 SECTION 7. OPTIONS 
  
 7.1 Grant of Options 
  
 The Committee may grant Options designated as Incentive Stock Options or Nonqualified Stock Options. 
  
 7.2 Option Exercise Price 
  
 The exercise price for shares purchased under an Option shall be as determined by the Committee, but shall not be less than the minimum exercise price required by Section
8.3 with respect to Incentive Stock Options, except in the case of Substitute Awards. Notwithstanding the foregoing, the Committee, in its sole discretion, may establish an exercise price that is equal to the average of 100% of the Fair Market Value
over a period of trading days not to exceed 30 days from the Grant Date. 
  
 7.3 Term of Options 
  
 Subject to earlier termination in
accordance with the terms of the Plan and the instrument evidencing the Option, the maximum term of a Nonqualified Stock Option shall be as established for that Option by the Committee or, if not so established, shall be ten years from the Grant
Date. 
  

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 7.4 Exercise of Options 
  

The Committee shall establish and set forth in each instrument that evidences an Option the time at which, or the installments in which, the Option shall vest and
become exercisable, any of which provisions may be waived or modified by the Committee at any time. If not so established in the instrument evidencing the Option, the Option shall vest and become exercisable according to the following
schedule, which may be waived or modified by the Committee at any time: 
  

			
	 Period of Participant’s Continuous
 Employment or Service With the Company
 or Its Related Companies From the Vesting
 Commencement Date

	 	 Portion of Total Option
 That Is Vested and
Exercisable

	After 1 year	 	25%
	Each additional three-month period of continuous service completed thereafter	 	An additional 6.25%
	After 4 years	 	100%

  
 To the extent an Option has vested and
become exercisable, the Option may be exercised in whole or from time to time in part by delivery to or as directed or approved by the Company of a properly executed stock option exercise agreement or notice, in a form and in accordance with
procedures established by the Committee, setting forth the number of shares with respect to which the Option is being exercised, the restrictions imposed on the shares purchased under such exercise agreement, if any, and such representations and
agreements as may be required by the Committee, accompanied by payment in full as described in Sections 7.5 and 13. An Option may be exercised only for whole shares and may not be exercised for less than a reasonable number of shares at any one
time, as determined by the Committee. 
  
 7.5 Payment of Exercise Price

  
 The exercise price for shares purchased under an Option shall be paid in
full to the Company by delivery of consideration equal to the product of the Option exercise price and the number of shares purchased. Such consideration must be paid before the Company will issue the shares being purchased and must be in a form or
a combination of forms acceptable to the Committee for that purchase, which forms may include: 
  
 (a) cash, check or wire transfer; 
  
 (b)
tendering (either actually or, so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, by attestation) shares of Common Stock that on the day prior to the exercise date have an aggregate Fair Market Value equal to
the aggregate exercise price of the shares being purchased under the Option owned by the Participant for at least six months (or any shorter period necessary to avoid a charge to the Company’s earnings for financial reporting purposes);

  
 (c) so long as the Common Stock is registered under Section 12(b) or 12(g) of
the Exchange Act, and to the extent permitted by law, delivery of a properly executed exercise notice, together with irrevocable instructions to a brokerage firm designated or approved by the Company to deliver promptly to the Company the aggregate
amount of proceeds to pay the Option exercise price and any withholding tax obligations that may arise in connection with the exercise, all in accordance with the regulations of the Federal Reserve Board; or 
  

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 (d) such other consideration as the Committee may permit. 
  
 In addition, to assist a Participant (other than, to the extent prohibited by law, a Participant who is an executive officer or a director
of the Company) in acquiring shares of Common Stock pursuant to an Award granted under the Plan, the Committee, in its sole discretion, may authorize, either at the Grant Date or at any time before the acquisition of Common Stock pursuant to the
Award, (i) the payment by a Participant of the purchase price of the Common Stock by a promissory note or (ii) the guarantee by the Company of a loan obtained by the Participant from a third party. Such notes or loans must be full recourse to the
extent necessary to avoid charges to the Company’s earnings for financial reporting purposes. Subject to the foregoing, the Committee shall in its sole discretion specify the terms of any loans or loan guarantees, including the interest rate
and terms of and security for repayment. 
  
 7.6 Effect of Termination of
Service 
  
 The Committee shall establish and set forth in each instrument
that evidences an Option whether the Option shall continue to be exercisable, and the terms and conditions of such exercise, after a Termination of Service, any of which provisions may be waived or modified by the Committee at any time. If not so
established in the instrument evidencing the Option, the Option shall be exercisable according to the following terms and conditions, which may be waived or modified by the Committee at any time: 
  
 (a) Any portion of an Option that is not vested and exercisable on the date of a
Participant’s Termination of Service shall expire on such date. 
  
 (b) Any
portion of an Option that is vested and exercisable on the date of a Participant’s Termination of Service shall expire on the earliest to occur of: 
  
 (i) if the Participant’s Termination of Service occurs for reasons other than Cause, Retirement, Disability or death, the date that is three months after such
Termination of Service; 
  
 (ii) if the Participant’s Termination of Service
occurs by reason of Retirement, Disability or death, the one-year anniversary of such Termination of Service; and 
  
 (iii) the last day of the maximum term of the Option (the “Option Expiration Date”). 
  
 Notwithstanding the foregoing, if a Participant dies after his or her Termination of Service but while an Option is otherwise exercisable,
the portion of the Option that is vested and exercisable on the date of such Termination of Service shall expire upon the earlier to occur of (y) the Option Expiration Date and (z) the one-year anniversary of the date of death, unless the Committee
determines otherwise. 
  
 Also notwithstanding the foregoing, in case a
Participant’s Termination of Service occurs for Cause, all Options granted to the Participant shall automatically expire upon first notification to the Participant of such termination, unless the Committee determines otherwise. If a 

 

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 Participant’s employment or service relationship with the Company is suspended pending an investigation of whether
the Participant shall be terminated for Cause, all the Participant’s rights under any Option shall likewise be suspended during the period of investigation. If any facts that would constitute termination for Cause are discovered after a
Participant’s Termination of Service, any Option then held by the Participant may be immediately terminated by the Committee, in its sole discretion. 
  
 (c) A Participant’s change in status from an employee to a consultant, advisor or independent contractor, or a change in status from a consultant, advisor or
independent contractor to an employee, shall not be considered a Termination of Service for purposes of this Section 7.6. 
  
 SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS 
  
 Notwithstanding any other provisions of the Plan, the terms and conditions of any Incentive Stock Options shall in addition comply in all respects with Section 422 of the
Code, or any successor provision, and any applicable regulations thereunder, including, to the extent required thereunder, the following: 
  
 8.1 Dollar Limitation 
  
 To the extent the aggregate Fair Market Value (determined as of the Grant Date) of Common Stock with respect to which a Participant’s Incentive Stock Options become exercisable for the first time during any
calendar year (under the Plan and all other stock option plans of the Company and its parent and subsidiary corporations) exceeds $100,000, such portion in excess of $100,000 shall be treated as a Nonqualified Stock Option. In the event the
Participant holds two or more such Options that become exercisable for the first time in the same calendar year, such limitation shall be applied on the basis of the order in which such Options are granted. 
  
 8.2 Eligible Employees 
  
 Individuals who are not employees of the Company or one of its parent or subsidiary corporations may not be granted Incentive Stock Options.

  
 8.3 Exercise Price 
  
 The exercise price of an Incentive Stock Option shall be at least 100% of the Fair Market
Value of the Common Stock on the Grant Date, and in the case of an Incentive Stock Option granted to a Participant who owns more than 10% of the total combined voting power of all classes of the stock of the Company or of its parent or subsidiary
corporations (a “Ten Percent Shareholder”), shall not be less than 110% of the Fair Market Value of the Common Stock on the Grant Date. The determination of more than 10% ownership shall be made in accordance with Section 422 of the
Code. 
  

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 8.4 Option Term 
  
 Subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the Option, the maximum term of an Incentive Stock Option shall not
exceed ten years, and in the case of an Incentive Stock Option granted to a Ten Percent Shareholder, shall not exceed five years. 
  
 8.5 Exercisability 
  
 An Option designated as an Incentive Stock Option shall cease to qualify for favorable tax treatment as an Incentive Stock Option to the extent it is exercised (if permitted by the terms of the Option) (a) more than
three months after the date of a Participant’s Termination of Service if termination was for reasons other than death or disability, (b) more than one year after the date of a Participant’s Termination of Service if termination was by
reason of disability, or (c) after the Participant has been on leave of absence for more than 90 days, unless the Participant’s reemployment rights are guaranteed by statute or contract. 
  
 8.6 Taxation of Incentive Stock Options 
  
 In order to obtain certain tax benefits afforded to Incentive Stock Options under Section
422 of the Code, the Participant must hold the shares acquired upon the exercise of an Incentive Stock Option for two years after the Grant Date and one year after the date of exercise. 
  
 A Participant may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option. The Participant shall give
the Company prompt notice of any disposition of shares acquired on the exercise of an Incentive Stock Option prior to the expiration of such holding periods. 
  
 8.7 Code Definitions 
  
 For the purposes of this Section 8 “disability,” “parent corporation” and “subsidiary corporation” shall have the meanings attributed to those terms for purposes of Section 422 of the
Code. 
  
 8.8 Promissory Notes 
  
 The amount of any promissory note delivered pursuant to Section 7.5 in connection with an
Incentive Stock Option shall bear interest at a rate specified by the Committee, but in no case less than the rate required to avoid imputation of interest (taking into account any exceptions to the imputed interest rules) for federal income tax
purposes. 
  
 SECTION 9. STOCK APPRECIATION RIGHTS

  
 9.1 Grant of Stock Appreciation Rights 
  
 The Committee may grant Stock Appreciation Rights to Participants at any time on such terms
and conditions as the Committee shall determine in its sole discretion. An SAR may 
  

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 be granted in tandem with an Option or alone (“freestanding”). The grant price of a tandem SAR shall be equal
to the exercise price of the related Option. The grant price of a freestanding SAR shall be established in accordance with procedures for Options set forth in Section 7.2. An SAR may be exercised upon such terms and conditions and for the term as
the Committee determines in its sole discretion; provided, however, that, subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the SAR, the term of a freestanding SAR shall be as established for that
SAR by the Committee or, if not so established, shall be ten years, and in the case of a tandem SAR, (a) the term shall not exceed the term of the related Option and (b) the tandem SAR may be exercised for all or part of the shares subject to the
related Option upon the surrender of the right to exercise the equivalent portion of the related Option, except that the tandem SAR may be exercised only with respect to the shares for which its related Option is then exercisable. 
  
 9.2 Payment of SAR Amount 
  
 Upon the exercise of an SAR, a Participant shall be entitled to receive payment in an amount
determined by multiplying: (a) the difference between the Fair Market Value of the Common Stock on the date of exercise over the grant price of the SAR by (b) the number of shares with respect to which the SAR is exercised. At the discretion of the
Committee as set forth in the instrument evidencing the Award, the payment upon exercise of an SAR may be in cash, in shares, in some combination thereof or in any other manner approved by the Committee in its sole discretion. 
  
 SECTION 10. STOCK AWARDS, RESTRICTED STOCK AND STOCK UNITS 

 
 10.1 Grant of Stock Awards, Restricted Stock and Stock Units 
  
 The Committee may grant Stock Awards, Restricted Stock and Stock Units on such terms and
conditions and subject to such repurchase or forfeiture restrictions, if any, which may be based on continuous service with the Company or a Related Company or the achievement of any performance goals, as the Committee shall determine in its sole
discretion, which terms, conditions and restrictions shall be set forth in the instrument evidencing the Award. 
  
 10.2 Vesting of Restricted Stock and Stock Units 
  
 Upon the satisfaction of any terms, conditions and restrictions prescribed with respect to Restricted Stock or Stock Units, or upon a Participant’s release from any
terms, conditions and restrictions of Restricted Stock or Stock Units, as determined by the Committee, and subject to the provisions of Section 13, (a) the shares of Restricted Stock covered by each Award of Restricted Stock shall become freely
transferable by the Participant, and (b) Stock Units shall be paid in shares of Common Stock or, if set forth in the instrument evidencing the Awards, in cash or a combination of cash and shares of Common Stock. Any fractional shares subject to such
Awards shall be paid to the Participant in cash. 
  

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 10.3 Waiver of Restrictions 
  
 Notwithstanding any other provisions of the Plan, the Committee, in its sole discretion, may waive the repurchase or forfeiture period and
any other terms, conditions or restrictions on any Restricted Stock or Stock Unit under such circumstances and subject to such terms and conditions as the Committee shall deem appropriate. 
  
 SECTION 11. PERFORMANCE AWARDS 
  
 11.1 Performance Shares 
  
 The Committee may grant Awards of Performance Shares, designate the Participants to whom Performance Shares are to be awarded and determine
the number of Performance Shares and the terms and conditions of each such Award. Performance Shares shall consist of a unit valued by reference to a designated number of shares of Common Stock, the value of which may be paid to the Participant by
delivery of shares of Common Stock or, if set forth in the instrument evidencing the Award, of such property as the Committee shall determine, including, without limitation, cash, shares of Common Stock, other property, or any combination thereof,
upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee. Notwithstanding the foregoing, the amount to be paid under an Award of Performance Shares may be adjusted on the
basis of such further consideration as the Committee shall determine in its sole discretion. 
  
 11.2 Performance Units 
  
 The Committee
may grant Awards of Performance Units, designate the Participants to whom Performance Units are to be awarded and determine the number of Performance Units and the terms and conditions of each such Award. Performance Units shall consist of a unit
valued by reference to a designated amount of property other than shares of Common Stock, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including, without limitation, cash, shares of Common
Stock, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee. Notwithstanding the foregoing, the amount to be paid under an
Award of Performance Units may be adjusted on the basis of such further consideration as the Committee shall determine in its sole discretion. 
  
 SECTION 12. OTHER STOCK OR CASH-BASED AWARDS 
  
 Subject to the terms of the Plan and such other terms and conditions as the Committee deems appropriate, the Committee may grant other incentives payable in cash or in
shares of Common Stock under the Plan. 
  
 SECTION 13.
WITHHOLDING 
  
 The Company may require the Participant to pay to the Company
the amount of (a) any taxes that the Company is required by applicable federal, state, local or foreign law to withhold 
  

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 with respect to the grant, vesting or exercise of an Award (“tax withholding obligations”) and (b) any amounts
due from the Participant to the Company or to any Related Company (“other obligations”). The Company shall not be required to issue any shares of Common Stock or otherwise settle an Award under the Plan until such tax withholding
obligations and other obligations are satisfied. 
  
 The Committee may permit or
require a Participant to satisfy all or part of the Participant’s tax withholding obligations and other obligations by (a) paying cash to the Company, (b) having the Company withhold an amount from any cash amounts otherwise due or to become
due from the Company to the Participant, (c) having the Company withhold a number of shares of Common Stock that would otherwise be issued to the Participant (or become vested, in the case of Restricted Stock) having a Fair Market Value equal to the
tax withholding obligations and other obligations, or (d) surrendering a number of shares of Common Stock the Participant already owns having a value equal to the tax withholding obligations and other obligations. The value of the shares so withheld
may not exceed the employer’s minimum required tax withholding rate, and the value of the shares so tendered may not exceed such rate to the extent the Participant has owned the tendered shares for less than six months if such limitations are
necessary to avoid a charge to the Company for financial reporting purposes. 
  
 SECTION 14. ASSIGNABILITY 
  
 No Award or
interest in an Award may be sold, assigned, pledged (as collateral for a loan or as security for the performance of an obligation or for any other purpose) or transferred by a Participant or made subject to attachment or similar proceedings
otherwise than by will or by the applicable laws of descent and distribution, except to the extent the Participant designates one or more beneficiaries on a Company-approved form who may exercise the Award or receive payment under the Award after
the Participant’s death. During a Participant’s lifetime, an Award may be exercised only by the Participant. Notwithstanding the foregoing and to the extent permitted by Section 422 of the Code, the Committee, in its sole discretion, may
permit a Participant to assign or transfer an Award subject to such terms and conditions as the Committee shall specify. 
  
 SECTION 15. ADJUSTMENTS 
  
 15.1 Adjustment of Shares 
  
 In the event, at any time or from time to time, a stock dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger, consolidation,
distribution to shareholders other than a normal cash dividend, or other change in the Company’s corporate or capital structure results in (a) the outstanding shares of Common Stock, or any securities exchanged therefor or received in their
place, being exchanged for a different number or kind of securities of the Company or (b) new, different or additional securities of the Company or any other company being received by the holders of shares of Common Stock, then the Committee shall
make proportional adjustments in (i) the maximum number and kind of securities available for issuance under the Plan; (ii) the maximum number and kind of 
  

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 securities issuable as Incentive Stock Options as set forth in Section 4.2; and (iii) the number and kind of securities
that are subject to any outstanding Award and the per share price of such securities, without any change in the aggregate price to be paid therefor. The determination by the Committee, as to the terms of any of the foregoing adjustments shall be
conclusive and binding. 
  
 Notwithstanding the foregoing, the issuance by the
Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services rendered, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor,
or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, outstanding Awards. Also notwithstanding the foregoing,
a dissolution or liquidation of the Company or a Company Transaction shall not be governed by this Section 15.1 but shall be governed by Sections 15.2 and 15.3, respectively. 
  
 15.2 Dissolution or Liquidation 
  
 To the extent not previously exercised or settled, and unless otherwise determined by the Committee in its sole discretion, Awards shall terminate immediately prior to
the dissolution or liquidation of the Company. To the extent a vesting condition, forfeiture provision or repurchase right applicable to an Award has not been waived by the Committee, the Award shall be forfeited immediately prior to the
consummation of the dissolution or liquidation. 
  
 15.3 Company Transaction

  
 Notwithstanding any other provision of the Plan to the contrary, unless
the Committee shall determine otherwise at the time of grant with respect to a particular Award, in the event of a Company Transaction that is not a Related Party Transaction: 
  
 (i) All outstanding Awards, other than Performance Shares and Performance Units, shall become fully and immediately exercisable, and all
applicable deferral and restriction limitations or forfeiture provisions shall lapse, immediately prior to the Company Transaction and shall terminate effective at the effective time of the Company Transaction, unless such Awards are converted,
assumed or replaced by the Successor Company. 
  
 For the purposes of this Section
15.3, an Award shall be considered assumed or substituted for if following the Company Transaction the option or right confers the right to purchase or receive, for each share of Common Stock subject to the Award immediately prior to the Company
Transaction, the consideration (whether stock, cash or other securities or property) received in the Company Transaction by holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Company Transaction is not solely common stock of the Successor Company, the
Committee may, with the consent of the Successor Company, provide for the consideration to be received upon the exercise of the Option, for each share of Common Stock subject thereto, to be solely common stock of the 
  

 -13- 

 Successor Company substantially equal in fair market value to the per share consideration received by holders of Common
Stock in the Company Transaction. The determination of such substantial equality of value of consideration shall be made by the Committee, and its determination shall be conclusive and binding. 
  
 (ii) All Performance Shares or Performance Units earned and outstanding as of the date the
Company Transaction is determined to have occurred shall be payable in full at the target level in accordance with the payout schedule pursuant to the Award agreement. Any remaining Performance Shares or Performance Units (including any applicable
performance period) for which the payout level has not been determined shall be prorated at the target payout level up to and including the date of such Company Transaction and shall be payable in full at the target level in accordance with the
payout schedule pursuant to the Award agreement. Any existing deferrals or other restrictions not waived by the Committee in its sole discretion shall remain in effect. 
  
 (iii) Notwithstanding the foregoing, the Committee, in its sole discretion, may instead provide that a Participant’s outstanding Awards
shall terminate upon or immediately prior to such Company Transaction and that such Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (x) the value of the per share consideration received by
holders of Common Stock in the Company Transaction, or, in the event the Company Transaction is one of the transactions listed under subsection (c) in the definition of Company Transaction or otherwise does not result in direct receipt of
consideration by holders of Common Stock, the value of the deemed per share consideration received, in each case as determined by the Committee in its sole discretion, multiplied by the number of shares of Common Stock subject to such outstanding
Awards (to the extent then vested and exercisable or whether or not then vested and exercisable, as determined by the Committee in its sole discretion) exceeds (y) if applicable, the respective aggregate exercise price or grant price for such Award.

  
 15.4 Further Adjustment of Awards 
  
 Subject to Sections 15.2 and 15.3, the Committee shall have the discretion, exercisable at
any time before a sale, merger, consolidation, reorganization, liquidation, dissolution or change in control of the Company, as defined by the Committee, to take such further action as it determines to be necessary or advisable with respect to
Awards. Such authorized action may include (but shall not be limited to) establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on, Awards so as to provide for earlier, later, extended or additional time for
exercise, lifting restrictions and other modifications, and the Committee may take such actions with respect to all Participants, to certain categories of Participants or only to individual Participants. The Committee may take such action before or
after granting Awards to which the action relates and before or after any public announcement with respect to such sale, merger, consolidation, reorganization, liquidation, dissolution or change in control that is the reason for such action.

  

 -14- 

 15.5 No Limitations 
  
 The grant of Awards shall in no way affect the Company’s right to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 
  
 15.6 Fractional Shares 
  
 In the event of
any adjustment in the number of shares covered by any Award, each such Award shall cover only the number of full shares resulting from such adjustment. 
  
 SECTION 17. MARKET STANDOFF 
  
 In the event of an underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, no
person may sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose of or transfer for value or otherwise agree to engage in any of the foregoing transactions with respect to any shares
issued pursuant to an Award granted under the Plan without the prior written consent of the Company or its underwriters. Such limitations shall be in effect for such period of time as may be requested by the Company or such underwriters; provided,
however, that in no event shall such period exceed 180 days after the effective date of the registration statement. The limitations of this Section 17 shall in all events terminate two years after the effective date of the Company’s initial
public offering. 
  
 In the event of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change affecting the Company’s outstanding Common Stock effected as a class without the Company’s receipt of consideration, any new, substituted or additional securities
distributed with respect to the purchased shares shall be immediately subject to the provisions of this Section 17, to the same extent the purchased shares are at such time covered by such provisions. 
  
 In order to enforce the limitations of this Section 17, the Company may impose stop-transfer
instructions with respect to the purchased shares until the end of the applicable standoff period. 
  
 SECTION 18. AMENDMENT AND TERMINATION 
  
 18.1 Amendment, Suspension or Termination 
  
 The Board or the Compensation Committee may amend, suspend or terminate the Plan or any portion of the Plan at any time and in such respects as it shall deem advisable; provided, however, that, to the extent required by applicable law,
regulation or stock exchange rule, shareholder approval shall be required for any amendment to the Plan; and provided, further, that any amendment that requires shareholder approval may be made only by the Board. Subject to Section 18.3, the
Committee may amend the terms of any outstanding Award, prospectively or retroactively. 
  

 -15- 

 18.2 Term of the Plan 
  
 Unless sooner terminated as provided herein, the Plan shall terminate ten years from the Effective Date. After the Plan is terminated, no future Awards may be granted,
but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and the Plan’s terms and conditions. Notwithstanding the foregoing, no Incentive Stock Options may be granted more than ten years
after the later of (a) the date the Plan is approved by the Board and (b) the approval by the shareholders of any amendment to the Plan that constitutes the adoption of a new plan for purposes of Section 422 of the Code. 
  
 18.3 Consent of Participant 
  
 The amendment, suspension or termination of the Plan or a portion thereof or the amendment
of an outstanding Award shall not, without the Participant’s consent, materially adversely affect any rights under any Award theretofore granted to the Participant under the Plan. Any change or adjustment to an outstanding Incentive Stock
Option shall not, without the consent of the Participant, be made in a manner so as to constitute a “modification” that would cause such Incentive Stock Option to fail to continue to qualify as an Incentive Stock Option. Notwithstanding
the foregoing, any adjustments made pursuant to Section 15 shall not be subject to these restrictions. 
  
 SECTION 19. GENERAL 
  
 19.1 No Individual Rights 
  
 No individual or Participant shall
have any claim to be granted any Award under the Plan, and the Company has no obligation for uniformity of treatment of Participants under the Plan. 
  
 Furthermore, nothing in the Plan or any Award granted under the Plan shall be deemed to constitute an employment contract or confer or be deemed to confer on any
Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate a Participant’s employment or
other relationship at any time, with or without cause. 
  
 19.2 Issuance of
Shares 
  
 Notwithstanding any other provision of the Plan, the Company shall
have no obligation to issue or deliver any shares of Common Stock under the Plan or make any other distribution of benefits under the Plan unless, in the opinion of the Company’s counsel, such issuance, delivery or distribution would comply
with all applicable laws (including, without limitation, the requirements of the Securities Act or the laws of any state or foreign jurisdiction) and the applicable requirements of any securities exchange or similar entity. 
  

 -16- 

 The Company shall be under no obligation to any Participant to register for offering or resale or to qualify for
exemption under the Securities Act, or to register or qualify under the laws of any state or foreign jurisdiction, any shares of Common Stock, security or interest in a security paid or issued under, or created by, the Plan, or to continue in effect
any such registrations or qualifications if made. 
  
 As a condition to the
exercise of an Option or any other receipt of Common Stock pursuant to an Award under the Plan, the Company may require (a) the Participant to represent and warrant at the time of any such exercise or receipt that such shares are being purchased or
received only for the Participant’s own account and without any present intention to sell or distribute such shares and (b) such other action or agreement by the Participant as may from time to time be necessary to comply with the federal,
state and foreign securities laws. At the option of the Company, a stop-transfer order against any such shares may be placed on the official stock books and records of the Company, and a legend indicating that such shares may not be pledged, sold or
otherwise transferred, unless an opinion of counsel is provided (concurred in by counsel for the Company) stating that such transfer is not in violation of any applicable law or regulation, may be stamped on stock certificates to ensure exemption
from registration. The Committee may also require the Participant to execute and deliver to the Company a purchase agreement or such other agreement as may be in use by the Company at such time that describes certain terms and conditions applicable
to the shares. 
  
 To the extent the Plan or any instrument evidencing an Award
provides for issuance of stock certificates to reflect the issuance of shares of Common Stock, the issuance may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.

  
 19.3 No Rights as a Shareholder 
  
 Unless otherwise provided by the Committee or in the instrument evidencing the Award or in a
written employment, services or other agreement, no Award, other than a Stock Award, shall entitle the Participant to any cash dividend, voting or other right of a shareholder unless and until the date of issuance under the Plan of the shares that
are the subject of such Award. 
  
 19.4 Compliance With Laws and Regulations

  
 In interpreting and applying the provisions of the Plan, any Option
granted as an Incentive Stock Option pursuant to the Plan shall, to the extent permitted by law, be construed as an “incentive stock option” within the meaning of Section 422 of the Code. 
  
 19.5 Participants in Other Countries or Jurisdictions 
  
 Without amending the Plan, the Committee may grant Awards to Eligible Persons who are
foreign nationals on such terms and conditions different from those specified in this Plan as 
  

 -17- 

 may, in the judgement of the Committee, be necessary or desirable to foster and promote achievement of the purposes of
the Plan and shall have the authority to adopt such modifications, procedures, subplans and the like as may be necessary or desirable to comply with provisions of the laws or regulations of other countries or jurisdictions in which the Company or
any Related Company may operate or have employees to ensure the viability of the benefits from Awards granted to Participants employed in such countries or jurisdictions, meet the requirements that permit the Plan to operate in a qualified or
tax-efficient manner, comply with applicable foreign laws or regulations and meet the objectives of the Plan. 
  
 19.6 No Trust or Fund 
  
 The Plan is
intended to constitute an “unfunded” plan. Nothing contained herein shall require the Company to segregate any monies or other property, or shares of Common Stock, or to create any trusts, or to make any special deposits for any immediate
or deferred amounts payable to any Participant, and no Participant shall have any rights that are greater than those of a general unsecured creditor of the Company. 
  
 19.7 Successors 
  
 All obligations of the Company under the Plan with respect to Awards shall be binding on any successor to the Company, whether the existence of such successor is the
result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all the business and/or assets of the Company. 
  
 19.8 Severability 
  
 If any provision of the Plan or any Award is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Award under any law deemed applicable by
the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Committee’s determination, materially altering the intent of the Plan or the
Award, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect. 
  
 19.9 Choice of Law 
  
 The Plan, all Awards granted thereunder and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United
States, shall be governed by the laws of the State of Washington without giving effect to principles of conflicts of law. 
  

 -18- 

 19.10 Legal Requirements 
  

The granting of Awards and the issuance of shares of Common Stock under the Plan are subject to all applicable laws, rules and regulations and to such approvals by any
governmental agencies or national securities exchanges as may be required. 
  
 SECTION 20. EFFECTIVE DATE 
  
 The
effective date (the “Effective Date”) is the date on which the Company’s initial public offering is effective. 
  

 -19- 

 APPENDIX A 
  
 DEFINITIONS 
  
 As used in the Plan, 
  
 “Acquired Entity” means any entity acquired by the Company or a Related Company or with which the Company or a Related Company merges or combines. 
  
 “Award” means any Option, Stock Appreciation Right, Stock Award, Restricted
Stock, Stock Unit, Performance Share, Performance Unit, cash-based award or other incentive payable in cash or in shares of Common Stock as may be designated by the Committee from time to time. 
  
 “Board” means the Board of Directors of the Company. 
  
 “Cause,” unless otherwise defined in the instrument evidencing an
Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means the commission of any of the following acts in a manner that has an adverse financial impact on the Company, in each
case as determined by the Company’s chief human resources officer or other person performing that function, unless the Board or the Committee designates another officer of the Company to perform such function, or, in the case of directors and
executive officers, the Compensation Committee, whose determination shall be conclusive and binding: dishonesty, fraud, serious or willful misconduct, unauthorized use or disclosure of confidential information or trade secrets, or conduct prohibited
by law (except minor violations). 
  
 “Code” means the Internal
Revenue Code of 1986, as amended from time to time. 
  
 “Committee” has the meaning set forth in Section 3.1. 
  
 “Common Stock” means the common stock, par value $0.001 per share, of the Company. 
  
 “Company” means HouseValues, Inc., a Washington corporation. 
  
 “Company Transaction,” unless otherwise defined in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a
Related Company, means consummation of: 
  
 (a) a merger or consolidation of the
Company with or into any other company or other entity; 
  
 (b) a statutory share
exchange pursuant to which the Company’s outstanding shares are acquired or a sale in one transaction or a series of transactions undertaken with a common purpose of all or substantially all of the Company’s outstanding voting securities;
or 

 (c) a sale, lease, exchange or other transfer in one transaction or a series of related transactions undertaken with a
common purpose of all or substantially all of the Company’s assets. 
  
 Where
a series of transactions undertaken with a common purpose is deemed to be a Company Transaction, the date of such Company Transaction shall be the date on which the last of such transactions is consummated. 
  
 “Compensation Committee” means the Compensation Committee of the Board.

  
 “Disability,” unless otherwise defined by the
Committee or in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means a mental or physical impairment of the Participant that is expected to
result in death or that has lasted or is expected to last for a continuous period of 12 months or more and that causes the Participant to be unable to perform his or her material duties for the Company or a Related Company and to be engaged in any
substantial gainful activity, in each case as determined by the Company’s chief human resources officer or other person performing that function, unless the Board or the Committee designates another officer of the Company to perform such
function, or, in the case of directors and executive officers, the Compensation Committee, whose determination shall be conclusive and binding. 
  
 “Effective Date” has the meaning set forth in Section 20. 
  
 “Eligible Person” means any person eligible to receive an Award as set forth in Section 5. 
  
 “Entity” means any individual, entity or group (within the meaning of Section 13(d)(3) of the Exchange Act). 
  
 “Exchange Act” means the Securities Exchange Act of 1934, as amended from
time to time. 
  
 “Fair Market Value” means the average of the
high and low trading prices for the Common Stock on any given date during regular trading, or if not trading on that date, such price on the last preceding date on which the Common Stock was traded, unless determined otherwise by the Committee using
such methods or procedures as it may establish. 
  
 “Grant Date”
means the later of (a) the date on which the Committee completes the corporate action authorizing the grant of an Award or such later date specified by the Committee or (b) the date on which all conditions precedent to an Award have been
satisfied, provided that conditions to the exercisability or vesting of Awards shall not defer the Grant Date. 
  
 “Incentive Stock Option” means an Option granted with the intention that it qualify as an “incentive stock option” as that term is defined for purposes of Section 422 of the Code or any
successor provision. 
  

 R-B2 

 “Nonqualified Stock Option” means an Option other than an Incentive Stock Option. 
  
 “Option” means a right to purchase Common Stock granted under Section 7.

  
 “Parent Company” means a company or other entity which as a
result of a Company Transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries. 
  

“Participant” means any Eligible Person to whom an Award is granted. 
  
 “Performance Award” means an Award of Performance Shares or Performance Units granted under Section 11. 
  
 “Performance Criteria” has the meaning set forth in Section 16.1.

  
 “Performance Share” means an Award of units denominated in
shares of Common Stock granted under Section 11.1. 
  
 “Performance
Unit” means an Award of units denominated in cash or property other than shares of Common Stock granted under Section 11.2. 
  
 “Plan” means the HouseValues, Inc. 2004 Equity Incentive Plan. 
  

“Related Company” means any entity that is directly or indirectly controlled by, in control of or under common control with the Company. 

 
 “Related Party Transaction” means (a) a merger, consolidation or
statutory share exchange in which the holders of shares of Common Stock immediately prior to the merger hold at least a majority of the shares of Common Stock of the Successor Company immediately after the merger, (b) a mere reincorporation of the
Company or (c) a transaction undertaken for the sole purpose of creating a holding company. 
  
 “Restricted Stock” means an Award of shares of Common Stock granted under Section 10, the rights of ownership of which are subject to restrictions prescribed by the Committee. 
  
 “Retirement,” unless otherwise defined in the instrument evidencing
the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means “Retirement” as defined for purposes of the Plan by the Committee or the Company’s chief human
resources officer or other person performing that function, unless the Board or the Committee designates another officer of the Company to perform such function, or, if not so defined, means Termination of Service on or after the date the
Participant reaches “normal retirement age,” as that term is defined in Section 411(a)(8) of the Code. 
  
 “Securities Act” means the Securities Act of 1933, as amended from time to time. 
  

 R-B3 

 “Stock Appreciation Right” or “SAR” means a right granted under Section 9.1 to receive
the excess of the Fair Market Value of a specified number of shares of Common Stock over the grant price. 
  
 “Stock Award” means an Award of shares of Common Stock granted under Section 10, the rights of ownership of which are not subject to restrictions prescribed by the Committee. 
  
 “Stock Unit” means an Award denominated in units of Common Stock granted
under Section 10. 
  
 “Substitute Awards” means Awards granted or
shares of Common Stock issued by the Company in substitution or exchange for awards previously granted by an Acquired Entity. 
  
 “Successor Company” means the surviving company, the successor company or Parent Company, as applicable, in connection with a Company Transaction.

  
 “Termination of Service” means a termination of employment or
service relationship with the Company or a Related Company for any reason, whether voluntary or involuntary, including by reason of death, Disability or Retirement. Any question as to whether and when there has been a Termination of Service for the
purposes of an Award and the cause of such Termination of Service shall be determined by the Company’s chief human resources officer or other person performing that function, unless the Board or the Committee designates another officer of the
Company to perform such function, or, with respect to directors and executive officers, by the Compensation Committee, whose determination shall be conclusive and binding. Transfer of a Participant’s employment or service relationship between
the Company and any Related Company shall not be considered a Termination of Service for purposes of an Award. Unless the Compensation Committee determines otherwise, a Termination of Service shall be deemed to occur if the Participant’s
employment or service relationship is with an entity that has ceased to be a Related Company. 
  
 “Vesting Commencement Date” means the Grant Date or such other date selected by the Committee as the date from which an Award begins to vest. 
  

 R-B4Employment Agreement by and between the registrant and Ian Morris

 Exhibit 10.3 
  
 EMPLOYMENT AGREEMENT 
  
 This Employment Agreement (this “Agreement”), dated as of May 13, 2004, between House Values, Inc., a Washington
corporation (“Employer”), and Ian Morris (“Executive”), an individual resident of the State of Washington, is effective as of the date first written above. 
  
 W I T N E S S E T H: 
  
 WHEREAS, Employer desires to continue the employment of Executive upon the
terms and conditions set forth herein; 
  
 WHEREAS, Executive and
Employer have entered into previous employment agreements that they wish to modify and supercede with the terms set forth in this Agreement; and 
  
 WHEREAS, Executive is willing to continue to provide services to Employer upon the terms and conditions set forth herein. 
  
 A G R E E M E N
T S: 
  
 NOW, THEREFORE, for and in consideration of
the foregoing premises and for other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, Employer and Executive hereby agree to enter into an employment relationship in accordance with the terms and
conditions set forth below: 
  

	1.	EMPLOYMENT AND BOARD SEAT 

  

	 	1.1	Employment 

  
 Employer will continue to employ Executive and Executive will continue to accept employment by Employer as its Chief Executive Officer. Executive will
perform the duties of Chief Executive Officer and such other duties as may be assigned from time to time by the Board of Directors of Employer (“Board”), which relate to the business of Employer and are consistent with Executive’s
position. The parties agree that Executive’s performance, compensation and benefits will be subject to an annual review by the Board (or the Compensation Committee thereof) each January, beginning in January 2005. 
  

					
	 EMPLOYMENT AGREEMENT
	 	 	 	 
	 	 	 	 	 

	 	1.2	Board Seal 

  
 Effective as of the first meeting date following the effective date of this Agreement, Executive shall serve as a member of the Board of Employer and
shall be subject to all rules, bylaws and policies (including any and all rules relating to the appointment of Board members of Board committees and the election and removal of Board members). 
  

	2.	ATTENTION AND EFFORT 

  
 Executive will devote his/her full-time efforts to Employer’s business and will serve its interests in good faith to the best of his/her ability
during the term of this Agreement. Executive is not limited from participating in certain activities of a de minimus nature such as boards of directors of other non-competitive companies, public writing and speaking and serving non-profit agencies;
provided that Executive provides Employer with prior notice of such activities and that such activities receive the written approval of Employer. Employer may only withhold its consent to any business activity by Executive that Employer determines
would directly interfere, impair or hinder in any way Executive’s ability to perform or otherwise satisfy Executive’s responsibilities and duties from time to time in effect. 
  

	3.	COMPENSATION 

  
 Employer agrees to pay or cause to be paid to Executive, and Executive agrees to accept in exchange for the services rendered hereunder by him, the
following compensation: 
  

	 	3.1	Base Salary 

  
 Commencing the date hereof, Executive’s compensation shall consist of an annual base salary (the “Base Salary”) of $210,000, before all
customary payroll deductions. The Base Salary shall be paid in twenty four semi-monthly installments in accordance with Employer’s ordinary payroll policies and procedures with respect to its management employees. 
  

	 	3.2	Bonus 

  
 Executive shall be
eligible for annual bonuses pursuant to a management bonus plan to be determined by the Board of Directors with an annual target award for Executive of at least 30% of the then Base Salary, but no more than 75% of such Base Salary, with the exact
award to be determined at the sole discretion of the Board. 
  

					
	 EMPLOYMENT AGREEMENT
	 	 	 	 
	 	 	2	 	 

	 	3.3	Benefits 

  
 Executive shall be entitled to participate at Employer’s expense in such benefit programs as Employer provides from time to time to its executive
management team (and, if not so provided to the executive management team, Executive shall be entitled to basic health and dental insurance for Executive and his family at Employer’s expense, four weeks of paid vacation time, and a monthly
automobile allowance of $750), which participation shall be subject to and in accordance with the terms of such benefit programs. 
  

	 	3.4	Business Expenses 

  
 Employer agrees that Executive shall be entitled to reimbursement by Employer for all reasonable expenses that Executive may incur in the performance of
his duties and obligations under this Agreement, consistent with Employer’s policies for documentation, reimbursement and payment. 
  

	 	3.5	Life Insurance 

  
 Executive will be provided with Employer-paid life insurance which will provide death benefits in the event of his death in an amount of at least
$2,500,000 payable to the beneficiary of beneficiaries named by Executive. 
  

	 	3.6	Withholding 

  
 Employer shall be responsible for withholding from Executive’s compensation FICA, FUTA and other payroll and income taxes, as required by law and
such other amounts as may be directed by Executive. 
  

	4.	TERMINATION 

  
 The employment of Executive pursuant to this Agreement may be terminated as follows, but in any case, the provisions of this Agreement which are intended
to survive termination shall so survive the termination of this Agreement and the termination of Executive’s employment hereunder. 
  

	 	4.1.	By Employer 

  
 With or without Cause (as defined below), Employer may terminate the employment of Executive at any time during the term of employment upon giving Notice
of Termination (as defined below). 
  

					
	 EMPLOYMENT AGREEMENT
	 	 	 	 
	 	 	3	 	 

	 	4.2.	By Executive 

  
 Executive may terminate his/her employment at any time, for any reason, upon giving Notice of Termination. 
  

	 	4.3.	Automatic Termination 

  
 This Agreement and Executive’s employment hereunder shall terminate automatically upon the death or total disability of Executive. The term
“total disability” as used herein shall mean Executive’s inability to perform the duties set forth in Section 1 hereof for a period or periods aggregating one hundred eighty (180) consecutive days in any twelve-month
period as a result of physical or mental illness, loss of legal capacity or any other cause beyond Executive’s control as determined by a physician mutually selected by Executive and Employer, unless Executive is granted a leave of absence by
the Board of Directors of Employer. Executive and Employer hereby acknowledge that Executive’s ability to perform the duties specified in paragraph 1 hereof is of the essence of this Agreement. Termination hereunder shall be deemed to be
effective (a) at the end of the calendar month in which Executive’s death occurs or (b) immediately upon a determination by the Board of Directors of Employer of Executive’s total disability, as defined herein. 
  

	 	4.4.	Notice 

  
 The term “Notice of Termination” shall mean at least 30 days’ written notice of termination of Executive’s employment, during
which period Executive’s employment and performance of services will continue; provided, however, that Employer may, upon notice to Executive and without reducing Executive’s Base Salary and employee benefits during such
period, excuse Executive from any or all of his/her duties during such period. The effective date of the termination of Executive’s employment hereunder shall be the date on which such 30-day period expires. 
  

	5.	TERMINATION OF EMPLOYMENT 

  
 In the event of termination of the employment of Executive, all compensation and benefits set forth in this Agreement shall terminate except as
specifically provided in this Section 5. 
  

	 	5.1.	Termination by Employer 

  
 If (a) Employer terminates Executive’s employment without Cause (as defined below), or (b) Executive resigns for Good Reason (as defined below), then
Executive shall be entitled to receive the following termination payments and benefits: 
  
 (i) Executive shall be entitled to twelve months Base Salary, paid at the same interval as payments of Base Salary were made to Executive immediately prior to termination. 
  

					
	 EMPLOYMENT AGREEMENT
	 	 	 	 
	 	 	4	 	 

 (ii) Executive shall be entitled to any unpaid Base Salary which has accrued for services already
performed as of the date termination of Executive’s employment becomes effective. 
  
 (iii) Executive shall be entitled to a severance bonus equal to 100% of the most recent annual bonus paid to Executive. This severance bonus shall be paid in twenty four equal semi-monthly installments beginning at
the end of the month during which Executive’s employment is terminated. 
  
 (iv) Employer shall pay any COBRA premiums otherwise due from Executive, for himself and his eligible dependents, with respect to COBRA coverage offered by Employer and timely elected by Executive under
Employer’s basic health insurance program as a result of Executive’s termination of employment with Employer, such payment to continue until the termination or expiration of COBRA coverage in accordance with the terms of such program.

  
 (v) Simultaneous with the termination of Executive’s
employment, on the date of termination, (a) in the event Executive resigns for Good Reason, then all unvested outstanding options to purchase shares of common stock of HouseValues that were granted to Executive on or prior to the date hereof (the
“Stock Options”) shall become 100% vested and immediately exercisable, and (b) in the event Employer terminates Executive’s employment without Cause, then all unvested options that would have been exercisable on the fourth quarterly
vesting following Executive’s termination shall be deemed vested and exercisable as of the date of Executive’s termination. Any shares of common stock issued upon exercise of the Stock Options shall remain subject to the terms of the Stock
Option Letter Agreement(s) evidencing such Stock Options (the “Option Letter Agreement(s)”), as modified herein and any applicable Notice of Exercise and Stock Purchase Agreements. 
  
 (vi) Employer agrees that it shall not exercise the Repurchase Rights set
forth in Section 13.1 of Employer’s 1999 Stock Incentive Plan, as amended (the “Option Plan”) or any other repurchase rights it may have. 
  
 (vii) Notwithstanding anything to the contrary in the Option Letter Agreement(s) or the Option Plan, the vested portion of the Stock Options (including
portions vested pursuant to subsection (v) above) shall remain exercisable through the 

  

					
	 EMPLOYMENT AGREEMENT
	 	 	 	 
	 	 	5	 	 

 
applicable Expiration Date (as such term is defined in the Option Letter Agreement(s)) of such Stock Options. 
  

	 	5.2.	Termination for Cause 

  
 If Executive is terminated by Employer for Cause, Executive shall not be entitled to receive any payments or rights hereunder, other than those set forth
in clause (ii) of Section 5.1 hereof. In addition, notwithstanding anything to the contrary in the Option Letter Agreement(s) or the Option Plan, the vested portion of the Stock Options shall not be forfeited upon termination for Cause, but shall
remain exercisable in accordance with their terms. 
  

	 	5.3.	Termination by Executive 

  
 In the case of the termination of Executive’s employment by Executive, other than for Good Reason, Executive shall not be entitled to receive any
payments or rights hereunder, other than those set forth in clause (ii) of Section 5.1 hereof. 
  

	 	5.4.	Automatic Termination 

  
 In the case of Automatic Termination as set forth in Section 4.3, Executive shall not be entitled to receive any payments or rights hereunder, other than
those set forth in clauses (ii), (iv), (vi) and (vii); provided, however, that at the sole discretion of the Board, either the Executive’s estate or the Executive may receive a pro rata portion of the entire annual target award under
Employer’s management compensation plan (based upon Executive’s then annual Base Salary), payable when bonuses are made to other management employees of Employer hereof. 
  

	 	5.5.	Cause 

  
 Wherever reference is made in this Agreement to termination being with or without Cause, “Cause” shall be limited to the occurrence of
one or more of the following events: 
  

	 	(a)	willful misconduct, insubordination, or dishonesty in the performance of Executive’s duties or other knowing and material violation of Employer’s policies and procedures
in effect from time to time which results in a material adverse effect on Employer; 

  

	 	(b)	 the continued failure of Executive to satisfactorily perform his/her duties for a period of sixty consecutive days after receipt of written notice that specifically
identifies the areas in which Executive’s performance is 

  

					
	 EMPLOYMENT AGREEMENT
	 	 	 	 
	 	 	6	 	 

	 	 
deficient and Executive fails to cure such acts or omissions within thirty (30) days after receipt of the written notice; 

  

	 	(c)	conviction of Executive of a felony involving an act of dishonesty, moral turpitude, deceit or fraud, or the commission of acts that could reasonably be expected to result in such a
conviction; 

  

	 	(d)	current use by the Executive of illegal substances that results in a criminal conviction and materially impairs Employer’s business, goodwill or reputation; or

  

	 	(e)	any material violation by Executive of Executive’s Noncompetition Agreement with Employer that results in a material adverse effect on Employer. 

  

	 	5.6.	Good Reason 

  
 For the purposes of this Agreement, “Good Reason” shall mean that Executive, without his/her consent, has either:

  
 (a) incurred a material reduction in his or
her title, status, authority or responsibility at Employer; or 
  
 (b) incurred a reduction in Executive’s Base Salary from Employer; 
  
 (c) suffered a material breach of this Agreement by Employer which Employer does not cure within 20 days following written notice from
Executive; 
  
 (d) a relocation of Executives
office location more than 40 miles from the current location, or 
  
 (e) been removed as a member of the Board other than by a vote of the shareholders or because his employment has been terminated for Cause as described in this Agreement. 
  

	6.	Confidentiality Agreement 

  
 Executive is subject to, and this Employment Agreement is conditioned on agreement to, the terms of the Confidential Information, Inventions,
Nonsolicitation and Noncompetition Agreement (the “Confidentiality Agreement”) entered into by Executive and the terms of the Confidentiality Agreement shall survive the termination of Executive’s employment with Employer. 

 

					
	 EMPLOYMENT AGREEMENT
	 	 	 	 
	 	 	7	 	 

	7.	REPRESENTATIONS AND WARRANTIES 

  
 In order to induce Employer to enter into this Agreement, Executive represents and warrants to Employer that neither the execution nor the performance of
this Agreement by Executive will violate or conflict in any way with any other agreement by which Executive may be bound, or with any other duties imposed upon Executive by corporate or other statutory or common law. 
  

	8.	FORM OF NOTICE 

  
 All notices given hereunder shall be given in writing, shall specifically refer to this Agreement and shall be personally delivered or sent by telecopy or
other electronic facsimile transmission or by registered or certified mail, return receipt requested, at the address set forth below or at such other address as may hereafter be designated by notice given in compliance with the terms hereof:

  

			
	If to Executive:	  	 13528 137th Place NE
 Kirkland, WA
98034

		
	If to Employer:	  	 House Values, Inc.
 Suite 202
 15 Lake Bellevue Drive
 Bellevue, WA 98005
 Attention: General Counsel

		
	Copy to:	  	 Perkins Coie LLP
 1201 Third Street, Suite
4800
 Seattle, WA 98101
 Attention: David F. McShea
 Telephone: 206-359-8000
 Facsimile: 206-359-9000

  
 If notice is mailed, such notice shall
be effective upon mailing, or if notice is personally delivered or sent by telecopy or other electronic facsimile transmission, it shall be effective upon receipt. 
  

	9.	ASSIGNMENT 

  
 This Agreement is personal to Executive and shall not be assignable by Executive. Employer may assign its rights hereunder to (a) any corporation
resulting 

  

					
	 EMPLOYMENT AGREEMENT
	 	 	 	 
	 	 	8	 	 

 
from any merger, consolidation or other reorganization to which Employer is a party or (b) any corporation, partnership, association or other person to which
Employer may transfer all or substantially all of the assets and business of Employer existing at such time. All of the terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of and be enforceable by the parties
hereto and their respective successors and permitted assigns. 
  

	10.	WAIVERS 

  
 No delay or failure by any party hereto in exercising, protecting or enforcing any of its rights, titles, interests or remedies hereunder, and no course
of dealing or performance with respect thereto, shall constitute a waiver thereof. The express waiver by a party hereto of any right, title, interest or remedy in a particular instance or circumstance shall not constitute a waiver thereof in any
other instance or circumstance. All rights and remedies shall be cumulative and not exclusive of any other rights or remedies. 
  

	11.	ARBITRATION 

  
 Any controversies or claims arising out of or relating to this Agreement shall be fully and finally settled by arbitration in accordance with the
Employment Arbitration Rules of the American Arbitration Association then in effect (the “AAA Rules”), conducted by one arbitrator either mutually agreed upon by Employer and Executive or chosen in accordance with the AAA Rules,
except that the parties thereto shall have any right to discovery as would be permitted by the Federal Rules of Civil Procedure for a period of 90 days following the commencement of such arbitration and the arbitrator thereof shall resolve any
dispute which arises in connection with such discovery. The prevailing party shall be entitled to costs, expenses and reasonable attorneys’ fees, and judgment upon the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. 
  

	12.	AMENDMENTS IN WRITING 

  
 No amendment, modification, waiver, termination or discharge of any provision of this Agreement, nor consent to any departure therefrom by either party
hereto, shall in any event be effective unless the same shall be in writing, specifically identifying this Agreement and the provision intended to be amended, modified, waived, terminated or discharged and signed by Employer and Executive, and each
such amendment, modification, waiver, termination or discharge shall be effective only in the specific instance and for the specific purpose for which given. No provision of this Agreement shall be varied, contradicted or explained by any oral

  

					
	 EMPLOYMENT AGREEMENT
	 	 	 	 
	 	 	9	 	 

 
agreement, course of dealing or performance or any other matter not set forth in an agreement in writing and signed by Employer and Executive. 
  

	13.	APPLICABLE LAW 

  
 This Agreement shall in all respects, including all matters of construction, validity and performance, be governed by, and construed and enforced in
accordance with, the laws of the State of Washington, without regard to any rules governing conflicts of laws. 
  

	14.	SEVERABILITY 

  
 If any provision of this Agreement shall be held invalid, illegal or unenforceable in any jurisdiction, for any reason, then, to the full extent permitted
by law (a) all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intent of the parties hereto as nearly as may be possible, (b) such invalidity, illegality
or unenforceability shall not effect the validity, legality or enforceability of any other provision hereof, and (c) any court having jurisdiction thereover shall have the power to reform such provision to the extent necessary for such provision to
be enforceable under applicable law. 
  

	15.	HEADINGS 

  
 All headings used herein are for convenience only and shall not in any way affect the construction of, or be taken into consideration in interpreting,
this Agreement. 
  

	16.	COUNTERPARTS 

  
 This Agreement, and any amendment or modification entered into pursuant to Section 13 hereof, may be executed in any number of counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute one and the same instrument. 
  

	17.	ENTIRE AGREEMENT 

  
 This Agreement, on and as of the date hereof, constitutes the entire agreement between Employer and Executive with respect to the subject matter hereof
and all prior or contemporaneous oral or written communications, understandings or agreements between Employer and Executive with respect to such subject matter, including, without limitation, the Executive’s offer letter, are hereby
superseded; 

  

					
	 EMPLOYMENT AGREEMENT
	 	 	 	 
	 	 	10	 	 

 
provided, however, that thus Agreement does not modify or affect the terms of any Option Letter Agreement or the Option Plan, except as explicitly set forth
herein. 
  

	18.	CERTAIN PAYMENTS TO EXECUTIVE 

  
 Employer shall reimburse Executive, on an annual basis, in an annual amount not to exceed $10,000, for his attorney fees incurred in connection with the
negotiation and execution of this Agreement and/or in connection with estate tax and financial planning. Executive shall be entitled to receive an additional payment or payments (a “gross-up payment”) in an amount such that, after payment
by the Executive of all taxes associated with the payment of the foregoing fees by Employer (including any interest or penalties imposed with respect to such taxes), Executive will realize no additional personal income taxes as a result of such
payment of fees. 
  

					
	 EMPLOYMENT AGREEMENT
	 	 	 	 
	 	 	11	 	 

 IN WITNESS WHEREOF, the parties have executed and entered into this Agreement on the date set forth
above. 
  

			
	 IAN MORRIS

	
	 /s/ Ian Morris

  

			
	 EMPLOYER:

	
	 HOUSEVALUES, INC.

		
	By	 	 /s/ Mark Powell

	 Its
	 	 Chairman

  

					
	 EMPLOYMENT AGREEMENT
	 	 	 	 
	 	 	12

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