Document:

exv10w1

 

Exhibit 10.1

LIVEWORLD, INC.

(Formerly LiveWorld Productions, Inc. and Talk City, Inc.)

1996 STOCK OPTION PLAN

(as amended and restated May 19, 2000 and July 5, 2001)

     1. Purposes
of the Plan. The purposes of this 1996 Stock Plan, as amended and
restated, are:

	 	—	 	to attract and retain the best available personnel for positions
of substantial responsibility,
	 
	 	—	 	to provide additional incentive to Employees, Directors and
Consultants, and
	 
	 	—	 	to promote the success of the Company’s business.

     Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options,
as determined by the Administrator at the time of grant. Stock Purchase Rights may also be granted
under the Plan.

     2. Definitions. As used herein, the following definitions shall apply:

          (a) “Administrator” means the Board or any of its Committees as shall be administering
the Plan, in accordance with Section 4 of the Plan.

          (b) “Applicable Laws” means the requirements relating to the administration of stock
option plans under U. S. state corporate laws, U.S. federal and state securities laws, the Code,
any stock exchange or quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.

          (c) “Board” means the Board of Directors of the Company.

          (d) “Code” means the Internal Revenue Code of 1986, as amended.

          (e) “Committee” means a committee of Directors appointed by the Board in accordance
with Section 4 of the Plan.

          (f) “Common Stock” means the common stock of the Company.

          (g) “Company” means LiveWorld, Inc., a Delaware corporation.

          (h) “Consultant” means any person, including an advisor, engaged by the Company or a
Parent or Subsidiary to render services to such entity.

          (i) “Director” means a member of the Board.

 

 

          (j) “Disability” means total and permanent disability as defined in Section 22(e)(3)
of the Code.

          (k) “Employee” means any person, including Officers and Directors, employed by the
Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an
Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For
purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of
a leave of absence approved by the Company is not so guaranteed, on the 181st day of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option
and shall be treated for tax purposes as a Nonstatutory Stock Option. Neither service as a
Director nor payment of a director’s fee by the Company shall be sufficient to constitute
“employment” by the Company.

          (l) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          (m) “Fair Market Value” means, as of any date, the value of Common Stock determined as
follows:

                    (i) If the Common Stock is listed on any established stock exchange or a national market
system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of
The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on such exchange or system for the last
market trading day prior to the time of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;

                    (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling
prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between
the high bid and low asked prices for the Common Stock on the last market trading day prior to the
day of determination, as reported in The Wall Street Journal or such other source as the
Administrator deems reliable; or

                    (iii) In the absence of an established market for the Common Stock, the Fair Market Value
shall be determined in good faith by the Administrator.

          (n) “Incentive Stock Option” means an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

          (o) “Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.

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          (p) “Notice of Grant” means a written or electronic notice evidencing certain terms
and conditions of an individual Option or Stock Purchase Right grant. The Notice of Grant is part
of the Option Agreement.

          (q) “Officer” means a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

          (r) “Option” means a stock option granted pursuant to the Plan.

          (s) “Option Agreement” means an agreement between the Company and an Optionee
evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject
to the terms and conditions of the Plan.

          (t) “Option Exchange Program” means a program whereby outstanding Options are
surrendered in exchange for Options with a lower exercise price.

          (u) “Optioned Stock” means the Common Stock subject to an Option or Stock Purchase
Right.

          (v) “Optionee” means the holder of an outstanding Option or Stock Purchase Right
granted under the Plan.

          (w) “Parent” means a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code.

          (x) “Plan” means this 1996 Stock Plan, as amended and restated.

          (y) “Restricted Stock” means shares of Common Stock acquired pursuant to a grant of
Stock Purchase Rights under Section 11 of the Plan.

          (z) “Restricted Stock Purchase Agreement” means a written agreement between the
Company and the Optionee evidencing the terms and restrictions applying to stock purchased under a
Stock Purchase Right. The Restricted Stock Purchase Agreement is subject to the terms and
conditions of the Plan and the Notice of Grant.

          (aa) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3,
as in effect when discretion is being exercised with respect to the Plan.

          (bb) “Section 16(b)” means Section 16(b) of the Exchange Act.

          (cc) “Service Provider” means an Employee, Director or Consultant.

          (dd) “Share” means a share of the Common Stock, as adjusted in accordance with Section
13 of the Plan.

          (ee) “Stock Purchase Right” means the right to purchase Common Stock pursuant to
Section 11 of the Plan, as evidenced by a Notice of Grant.

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          (ff) “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing,
as defined in Section 424(f) of the Code.

     3. Stock Subject to the Plan. Subject to the provisions of Section 13 of the Plan,
the maximum aggregate number of Shares which may be optioned and sold under the Plan is 7,325,000
Shares, plus an annual increase to be added on the first day of the Company’s fiscal year beginning
in 2001 equal to the lesser of (i) 2,000,000 shares, (ii) 7% of the outstanding shares on such date
or (iii) a lesser amount determined by the Board. The Shares may be authorized, but unissued, or
reacquired Common Stock.

          If an Option or Stock Purchase Right expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares
which were subject thereto shall become available for future grant or sale under the Plan (unless
the Plan has terminated); provided, however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Right, shall not be returned to the Plan and
shall not become available for future distribution under the Plan, except that if Shares of
Restricted Stock are repurchased by the Company at their original purchase price, such Shares shall
become available for future grant under the Plan.

     4. Administration of the Plan.

          (a) Procedure.

                    (i) Multiple Administrative Bodies. The Plan may be administered by different
Committees with respect to different groups of Service Providers.

                    (ii) Section 162(m). To the extent that the Administrator determines it to be
desirable to qualify Options granted hereunder as “performance-based compensation” within the
meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more
“outside directors” within the meaning of Section 162(m) of the Code.

                    (iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt
under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the
requirements for exemption under Rule 16b-3.

                    (iv) Other Administration. Other than as provided above, the Plan shall be
administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy
Applicable Laws.

          (b) Powers of the Administrator. Subject to the provisions of the Plan, and in the
case of a Committee, subject to the specific duties delegated by the Board to such Committee, the
Administrator shall have the authority, in its discretion:

                    (i) to determine the Fair Market Value;

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                    (ii) to select the Service Providers to whom Options and Stock Purchase Rights may be granted
hereunder;

                    (iii) to determine the number of shares of Common Stock to be covered by each Option and Stock
Purchase Right granted hereunder;

                    (iv) to approve forms of agreement for use under the Plan;

                    (v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any
Option or Stock Purchase Right granted hereunder. Such terms and conditions include, but are not
limited to, the exercise price, the time or times when Options or Stock Purchase Rights may be
exercised (which may be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option or Stock Purchase
Right or the shares of Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;

                    (vi) to reduce the exercise price of any Option or Stock Purchase Right to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered by such Option or Stock
Purchase Right shall have declined since the date the Option or Stock Purchase Right was granted;

                    (vii) to institute an Option Exchange Program;

                    (viii) to construe and interpret the terms of the Plan and awards granted pursuant to the
Plan;

                    (ix) to prescribe, amend and rescind rules and regulations relating to the Plan, including
rules and regulations relating to sub-plans established for the purpose of qualifying for preferred
tax treatment under foreign tax laws;

                    (x) to modify or amend each Option or Stock Purchase Right (subject to Section 15(c) of the
Plan), including the discretionary authority to extend the post-termination exercisability period
of Options longer than is otherwise provided for in the Plan;

                    (xi) to allow Optionees to satisfy withholding tax obligations by electing to have the Company
withhold from the Shares to be issued upon exercise of an Option or Stock Purchase Right that
number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by an Optionee to have Shares withheld for this
purpose shall be made in such form and under such conditions as the Administrator may deem
necessary or advisable;

                    (xii) to authorize any person to execute on behalf of the Company any instrument required to
effect the grant of an Option or Stock Purchase Right previously granted by the Administrator;

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                    (xiii) to make all other determinations deemed necessary or advisable for administering the
Plan.

          (c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations
and interpretations shall be final and binding on all Optionees and any other holders of Options or
Stock Purchase Rights.

     5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may be granted
to Service Providers. Incentive Stock Options may be granted only to Employees.

     6. Limitations.

          (a) Each Option shall be designated in the Option Agreement as either an Incentive Stock
Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent
that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by the Optionee during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options shall be
taken into account in the order in which they were granted. The Fair Market Value of the Shares
shall be determined as of the time the Option with respect to such Shares is granted.

          (b) Neither the Plan nor any Option or Stock Purchase Right shall confer upon an Optionee any
right with respect to continuing the Optionee’s relationship as a Service Provider with the
Company, nor shall they interfere in any way with the Optionee’s right or the Company’s right to
terminate such relationship at any time, with or without cause.

          (c) The following limitations shall apply to grants of Options:

                    (i) No Service Provider shall be granted, in any fiscal year of the Company, Options to
purchase more than 500,000 Shares.

                    (ii) In connection with his or her initial service, a Service Provider may be granted Options
to purchase up to an additional 500,000 Shares which shall not count against the limit set forth in
subsection (i) above.

                    (iii) The foregoing limitations shall be adjusted proportionately in connection with any
change in the Company’s capitalization as described in Section 13.

                    (iv) If an Option is cancelled in the same fiscal year of the Company in which it was granted
(other than in connection with a transaction described in Section 13), the cancelled Option will be
counted against the limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.

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     7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become effective
upon its adoption by the Board. It shall continue in effect for a term of ten (10) years unless
terminated earlier under Section 15 of the Plan.

     8. Term of Option. The term of each Option shall be stated in the Option Agreement.
In the case of an Incentive Stock Option, the term shall be ten (10) years from the date of grant
or such shorter term as may be provided in the Option Agreement. Moreover, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock
Option shall be five (5) years from the date of grant or such shorter term as may be provided in
the Option Agreement.

     9. Option Exercise Price and Consideration.

     (a) Exercise Price. The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be determined by the Administrator, subject to the following:

          (i) In the case of an Incentive Stock Option

                    (A) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of stock of the Company
or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.

                    (B) granted to any Employee other than an Employee described in paragraph (A) immediately
above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share
on the date of grant.

          (ii) In the case of a Nonstatutory Stock Option

                    (A) granted to a Service Provider who, at the time of the Nonstatutory Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.

                    (B) intended to qualify as “performance-based compensation” within the meaning of Section
162(m) of the Code, the per Share exercise price shall be no less than 100% of the Fair Market
Value per Share on the date of grant.

                    (C) granted to any other Service Provider, the per Share exercise price shall be no less than
85% of the Fair Market Value per Share on the date of grant.

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                    (iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of
less than 100% of the Fair Market Value per Share on the date of grant pursuant to a merger or
other corporate transaction.

          (b) Waiting Period and Exercise Dates. At the time an Option is granted, the
Administrator shall fix the period within which the Option may be exercised and shall determine any
conditions which must be satisfied before the Option may be exercised.

          (c) Form of Consideration. The Administrator shall determine the acceptable form of
consideration for exercising an Option, including the method of payment. In the case of an
Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at
the time of grant. Such consideration may consist entirely of:

                    (i) cash;

                    (ii) check;

                    (iii) promissory note;

                    (iv) other Shares which (a) in the case of Shares acquired upon exercise of an option, have
been owned by the Optionee for more than six months on the date of surrender, and (b) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;

                    (v) consideration received by the Company under a cashless exercise program implemented by the
Company in connection with the Plan;

                    (vi) a reduction in the amount of any Company liability to the Optionee, including any
liability attributable to the Optionee’s participation in any Company-sponsored deferred
compensation program or arrangement;

                    (vii) any combination of the foregoing methods of payment; or

                    (viii) such other consideration and method of payment for the issuance of Shares to the extent
permitted by Applicable Laws.

     10. Exercise of Option.

          (a) Procedure for Exercise; Rights as a Shareholder. Any Option granted hereunder
shall be exercisable according to the terms of the Plan and at such times and under such conditions
as determined by the Administrator and set forth in the Option Agreement. Except in the cases of
Options granted to Officers, Directors and Consultants, Options shall become exercisable at a rate
of no less than 20% per year over five (5) years from the date the Options are granted. Unless the
Administrator provides otherwise, vesting of Options granted hereunder shall be tolled during any
unpaid leave of absence. An Option may not be exercised for a fraction of a Share.

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                    An Option shall be deemed exercised when the Company receives: (i) written or electronic
notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise
the Option, and (ii) full payment for the Shares with respect to which the Option is exercised.
Full payment may consist of any consideration and method of payment authorized by the Administrator
and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall
be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee
and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company), no right to vote or
receive dividends or any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued)
such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.

                    Exercising an Option in any manner shall decrease the number of Shares thereafter available,
both for purposes of the Plan and for sale under the Option, by the number of Shares as to which
the Option is exercised.

          (b) Termination of Relationship as a Service Provider. If an Optionee ceases to be a
Service Provider, other than upon the Optionee’s death or Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement to the extent that
the Option is vested on the date of termination (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement). In the absence of a specified time in
the Option Agreement, the Option shall remain exercisable for three (3) months following the
Optionee’s termination. If, on the date of termination, the Optionee is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option shall revert to the
Plan. If, after termination, the Optionee does not exercise his or her Option within the time
specified by the Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.

          (c) Disability of Optionee. If an Optionee ceases to be a Service Provider as a
result of the Optionee’s Disability, the Optionee may exercise his or her Option within such period
of time as is specified in the Option Agreement to the extent the Option is vested on the date of
termination (but in no event later than the expiration of the term of such Option as set forth in
the Option Agreement). In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee’s termination. If, on the
date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered
by the unvested portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

          (d) Death of Optionee. If an Optionee dies while a Service Provider, the Option may
be exercised within such period of time as is specified in the Option Agreement (but in no event
later than the expiration of the term of such Option as set

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forth in the Notice of Grant), by the Optionee’s estate or by a person who acquires the right
to exercise the Option by bequest or inheritance, but only to the extent that the Option is vested
on the date of death. In the absence of a specified time in the Option Agreement, the Option shall
remain exercisable for twelve (12) months following the Optionee’s termination. If, at the time of
death, the Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall immediately revert to the Plan. The Option may be exercised
by the executor or administrator of the Optionee’s estate or, if none, by the person(s) entitled to
exercise the Option under the Optionee’s will or the laws of descent or distribution. If the
Option is not so exercised within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.

          (e) Buyout Provisions. The Administrator may at any time offer to buy out for a
payment in cash or Shares an Option previously granted based on such terms and conditions as the
Administrator shall establish and communicate to the Optionee at the time that such offer is made.

     11. Stock Purchase Rights.

          (a) Rights to Purchase. Stock Purchase Rights may be issued either alone, in addition
to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the
Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan,
it shall advise the offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of Shares that the
offeree shall be entitled to purchase, the price to be paid, and the time within which the offeree
must accept such offer. The terms of the offer shall comply in all respects with Section
260.140.42 of Title 10 of the California Code of Regulations. The offer shall be accepted by
execution of a Restricted Stock Purchase Agreement in the form determined by the Administrator.

          (b) Repurchase Option. Unless the Administrator determines otherwise, the Restricted
Stock Purchase Agreement shall grant the Company a repurchase option exercisable upon the voluntary
or involuntary termination of the purchaser’s service with the Company for any reason (including
death or Disability). The purchase price for Shares repurchased pursuant to the Restricted Stock
Purchase Agreement shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall
lapse at a rate determined by the Administrator, but in no case at a rate of less than 20% per year
over five years from the date of purchase.

          (c) Other Provisions. The Restricted Stock Purchase Agreement shall contain such
other terms, provisions and conditions not inconsistent with the Plan as may be determined by the
Administrator in its sole discretion.

          (d) Rights as a Shareholder. Once the Stock Purchase Right is exercised, the
purchaser shall have the rights equivalent to those of a shareholder, and shall be a shareholder
when his or her purchase is entered upon the records of the duly authorized

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transfer agent of the Company. No adjustment will be made for a dividend or other right for
which the record date is prior to the date the Stock Purchase Right is exercised, except as
provided in Section 13 of the Plan.

     12. Non-Transferability of Options and Stock Purchase Rights. Unless determined
otherwise by the Administrator, an Option or Stock Purchase Right may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws
of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the
Optionee. If the Administrator in its sole discretion makes an Option transferable, such Option
may only be transferred by (i) will, (ii) the laws of descent and distribution, (iii) instrument to
an inter vivos or testamentary trust in which the Option is to be passed to beneficiaries upon the
death of the Optionee, or (iv) gift to a member of Optionee’s immediate family (as such term is
defined in Rule 16a-1(e) of the Exchange Act). In addition, any transferable Option shall contain
additional terms and conditions as the Administrator deems appropriate.

     13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset
Sale.

          (a) Changes in Capitalization. Subject to any required action by the shareholders of
the Company, the number of shares of Common Stock covered by each outstanding Option and Stock
Purchase Right, and the number of shares of Common Stock which have been authorized for issuance
under the Plan but as to which no Options or Stock Purchase Rights have yet been granted or which
have been returned to the Plan upon cancellation or expiration of an Option or Stock Purchase
Right, as well as the price per share of Common Stock covered by each such outstanding Option or
Stock Purchase Right, shall be proportionately adjusted for any increase or decrease in the number
of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company shall not be deemed
to have been “effected without receipt of consideration”. Such adjustment shall be made by the
Board, whose determination in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of Common Stock subject to an
Option or Stock Purchase Right.

          (b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable
prior to the effective date of such proposed transaction. The Administrator in its discretion may
provide for an Optionee to have the right to exercise his or her Option until ten (10) days prior
to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which
the Option would not otherwise be exercisable. In addition, the Administrator may provide that any
Company repurchase option applicable to any Shares purchased upon exercise of an Option or Stock
Purchase Right shall lapse

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as to all such Shares, provided the proposed dissolution or liquidation takes place at the
time and in the manner contemplated. To the extent it has not been previously exercised, an Option
or Stock Purchase Right will terminate immediately prior to the consummation of such proposed
action.

          (c) Merger or Asset Sale. In the event of a merger of the Company with or into
another corporation, or the sale of substantially all of the assets of the Company, each
outstanding Option and Stock Purchase Right shall be assumed or an equivalent option or right
substituted by the successor corporation or a Parent or Subsidiary of the successor corporation.
In the event that the successor corporation refuses to assume or substitute for the Option or Stock
Purchase Right, the Optionee shall fully vest in and have the right to exercise the Option or Stock
Purchase Right as to all of the Optioned Stock, including Shares as to which it would not otherwise
be vested or exercisable. If an Option or Stock Purchase Right becomes fully vested and
exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the Option or Stock
Purchase Right shall be fully vested and exercisable for a period of fifteen (15) days from the
date of such notice, and the Option or Stock Purchase Right shall terminate upon the expiration of
such period. For the purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or right confers the
right to purchase or receive, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right immediately prior to the merger or sale of assets, the consideration (whether stock,
cash, or other securities or property) received in the merger or sale of assets 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 merger or
sale of assets is not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option or Stock Purchase Right, for each Share of Optioned
Stock subject to the Option or Stock Purchase Right, to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.

     14. Date of Grant. The date of grant of an Option or Stock Purchase Right shall be,
for all purposes, the date on which the Administrator makes the determination granting such Option
or Stock Purchase Right, or such other later date as is determined by the Administrator. Notice of
the determination shall be provided to each Optionee within a reasonable time after the date of
such grant.

     15. Amendment and Termination of the Plan.

          (a) Amendment and Termination. The Board may at any time amend, alter, suspend or
terminate the Plan.

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          (b) Shareholder Approval. The Company shall obtain shareholder approval of any Plan
amendment to the extent necessary and desirable to comply with Applicable Laws.

          (c) Effect of Amendment or Termination. No amendment, alteration, suspension or
termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise
between the Optionee and the Administrator, which agreement must be in writing and signed by the
Optionee and the Company. Termination of the Plan shall not affect the Administrator’s ability to
exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to
the date of such termination.

     16. Conditions Upon Issuance of Shares.

          (a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an
Option or Stock Purchase Right unless the exercise of such Option or Stock Purchase Right and the
issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject
to the approval of counsel for the Company with respect to such compliance.

          (b) Investment Representations. As a condition to the exercise of an Option or Stock
Purchase Right, the Company may require the person exercising such Option or Stock Purchase Right
to represent and warrant at the time of any such exercise that the Shares are being purchased only
for investment and without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.

     17. Inability to Obtain Authority. The inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of
any liability in respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

     18. Reservation of Shares. The Company, during the term of this Plan, will at all
times reserve and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.

     19. Shareholder Approval. The Plan shall be subject to approval by the shareholders
of the Company within twelve (12) months after the date the Plan is adopted. Such shareholder
approval shall be obtained in the manner and to the degree required under Applicable Laws.

     20. Information to Optionees. The Company shall provide to each Optionee and to each
individual who acquires Shares pursuant to the Plan, not less frequently than annually during the
period such Optionee has one or more Options outstanding, and, in the case of an individual who
acquires Shares pursuant to the Plan, during the period such individual owns such Shares, copies of
annual financial statements. The Company shall not be required to provide such statements to key
employees whose duties in connection
with the Company assure their access to equivalent information.

-13-exv10w2

 

Exhibit 10.2

TALK CITY, INC.

1999 DIRECTOR OPTION PLAN

     1. Purposes of the Plan. The purposes of this 1999 Director Option Plan are to
attract and retain the best available personnel for service as Outside Directors (as defined
herein) of the Company, to provide additional incentive to the Outside Directors of the Company to
serve as Directors, and to encourage their continued service on the Board.

     All options granted hereunder shall be nonstatutory stock options.

     2. Definitions. As used herein, the following definitions shall apply:

          (a) “Board” means the Board of Directors of the Company.

          (b) “Code” means the Internal Revenue Code of 1986, as amended.

          (c) “Common Stock” means the common stock of the Company.

          (d) “Company” means Talk City, Inc., a Delaware corporation.

          (e) “Director” means a member of the Board.

          (f) “Disability” means total and permanent disability as defined in section 22(e)(3)
of the Code.

          (g) “Employee” means any person, including officers and Directors, employed by the
Company or any Parent or Subsidiary of the Company. The payment of a Director’s fee by the Company
shall not be sufficient in and of itself to constitute “employment” by the Company.

          (h) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          (i) “Fair Market Value” means, as of any date, the value of Common Stock determined as
follows:

                    (i) If the Common Stock is listed on any established stock exchange or a national market
system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of
The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on such exchange or system for the last
market trading day prior to the time of determination as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;

                    (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling
prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between
the high bid and low asked prices for the Common Stock for the last market

 

 

trading day prior to the
time of determination, as reported in The Wall Street Journal or such other source as the Board
deems reliable; or

                    (iii) In the absence of an established market for the Common Stock, the Fair Market Value
thereof shall be determined in good faith by the Board.

          Notwithstanding the foregoing, with respect to any Options granted upon the effective date of
the Company’s initial public offering (the “IPO”), as set forth in Section 4 below, the Fair Market
Value shall be the price as it appears in the final prospectus relating to the IPO.

          (j) “Inside Director” means a Director who is an Employee.

          (k) “Option” means a stock option granted pursuant to the Plan.

          (l) “Optioned Stock” means the Common Stock subject to an Option.

          (m) “Optionee” means a Director who holds an Option.

          (n) “Outside Director” means a Director who is not an Employee.

          (o) “Parent” means a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code.

          (p) “Plan” means this 1999 Director Option Plan.

          (q) “Share” means a share of the Common Stock, as adjusted in accordance with Section
10 of the Plan.

          (r) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing,
as defined in Section 424(f) of the Internal Revenue Code of 1986.

     3. Stock Subject to the Plan. Subject to the provisions of Section 10 of the Plan,
the maximum aggregate number of Shares which may be optioned and sold under the Plan is 250,000
Shares (the “Pool”). The Shares may be authorized, but unissued, or reacquired Common Stock.

          If an Option expires or becomes unexercisable without having been exercised in full, the
unpurchased Shares which were subject thereto shall become available for future grant or sale under
the Plan (unless the Plan has terminated). Shares that have actually been issued under the Plan
shall not be returned to the Plan and shall not become available for future distribution under the
Plan.

     4. Administration and Grants of Options under the Plan.

          (a) Procedure for Grants. All grants of Options to Outside Directors under this Plan
shall be automatic and nondiscretionary and shall be made strictly in accordance with the following
provisions:

-2-

 

                    (i) No person shall have any discretion to select which Outside Directors shall be granted
Options or to determine the number of Shares to be covered by Options.

                    (ii) Subject to subsection (iv) below, each Outside Director shall be automatically granted an
Option to purchase 20,000 Shares (the “First Option”) on the date on which such person first
becomes an Outside Director, whether through election by the shareholders of the Company or
appointment by the Board to fill a vacancy; provided, however, that an Inside Director who ceases
to be an Inside Director but who remains a Director shall not receive a First Option.

                    (iii) Subject to subsection (iv) below, each Outside Director shall be automatically granted
an Option to purchase 5,000 Shares on both (A) the effective date of the IPO and (B) the date of
the Company’s Annual Meeting of Stockholders each year, provided he or she is then an Outside
Director and if as of such date, he or she shall have served on the Board for at least the
preceding six (6) months.

                    (iv) The terms of each Option granted hereunder shall be as follows:

                         (A) the term of the Option shall be ten (10) years.

                         (B) the Option shall be exercisable only while the Outside Director remains a Director of the
Company, except as set forth in Sections 8 and 10 hereof.

                         (C) the exercise price per Share shall be 100% of the Fair Market Value per Share on the date
of grant of the Option.

                         (D) the Option shall be fully vested and exercisable on the date of grant.

                    (v) In the event that any Option granted under the Plan would cause the number of Shares
subject to outstanding Options plus the number of Shares previously purchased under Options to
exceed the Pool, then the remaining Shares available for Option grant shall be granted under
Options to the Outside Directors on a pro rata basis. No further grants shall be made until such
time, if any, as additional Shares become available for grant under the Plan through action of the
Board or the shareholders to increase the number of Shares which may be issued under the Plan or
through cancellation or expiration of Options previously granted hereunder.

     5. Eligibility. Options may be granted only to Outside Directors. All Options shall
be automatically granted in accordance with the terms set forth in Section 4 hereof.

          The Plan shall not confer upon any Optionee any right with respect to continuation of service
as a Director or nomination to serve as a Director, nor shall it interfere in any way with any
rights which the Director or the Company may have to terminate the Director’s relationship with the
Company at any time.

-3-

 

     6. Term of Plan. The Plan shall become effective upon the effective date of the IPO.
It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 11
of the Plan.

     7. Form of Consideration. The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall consist of (i) cash, (ii) check,
(iii) other shares which (x) in the case of Shares acquired upon exercise of an option, have been
owned by the Optionee for more than six (6) months on the date of surrender, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (iv) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan, or (v) any combination of
the foregoing methods of payment.

     8. Exercise of Option.

          (a) Procedure for Exercise; Rights as a Shareholder. Any Option granted hereunder
shall be exercisable at such times as are set forth in Section 4 hereof; provided, however, that no
Options shall be exercisable until shareholder approval of the Plan in accordance with Section 16
hereof has been obtained.

          An Option may not be exercised for a fraction of a Share.

          An Option shall be deemed to be exercised when written notice of such exercise has been given
to the Company in accordance with the terms of the Option by the person entitled to exercise the
Option and full payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the appropriate entry
on the books of the Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. A share certificate for the number of Shares so acquired shall be issued to the Optionee
as soon as practicable after exercise of the Option. No adjustment shall be made for a dividend or
other right for which the record date is prior to the date the stock certificate is issued, except
as provided in Section 10 of the Plan.

          Exercise of an Option in any manner shall result in a decrease in the number of Shares which
thereafter may be available, both for purposes of the Plan and for sale under the Option, by the
number of Shares as to which the Option is exercised.

          (b) Termination of Continuous Status as a Director. Subject to Section 10 hereof, in
the event an Optionee’s status as a Director terminates (other than upon the Optionee’s death or
Disability), the Optionee may exercise his or her Option, but only within three (3) months
following the date of such termination, and only to the extent that the Optionee was entitled to
exercise it on the date of such termination (but in no event later than the expiration of its ten
(10) year term). To

-4-

 

the extent that the Optionee was not entitled to exercise an Option on the
date of such termination, and to the extent that the Optionee does not exercise such Option (to the
extent otherwise so entitled) within the time specified herein, the Option shall terminate.

          (c) Disability of Optionee. In the event Optionee’s status as a Director terminates
as a result of Disability, the Optionee may exercise his or her Option, but only within twelve (12)
months following the date of such termination, and only to the extent that the Optionee was
entitled to exercise it on the date of such termination (but in no event later than the expiration
of its ten (10) year term). To the extent that the Optionee was not entitled to exercise an Option
on the date of termination, or if he or she does not exercise such Option (to the extent otherwise
so entitled) within the time specified herein, the Option shall terminate.

          (d) Death of Optionee. In the event of an Optionee’s death, the Optionee’s estate or
a person who acquired the right to exercise the Option by bequest or inheritance may exercise the
Option, but only within twelve (12) months following the date of death, and only to the extent that
the Optionee was entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of death, and to the extent that the Optionee’s estate or a person
who acquired the right to exercise such Option does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall terminate.

     9. Non-Transferability of Options. The Option may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the Optionee, only by the
Optionee.

     10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale.

          (a) Changes in Capitalization. Subject to any required action by the shareholders of
the Company, the number of Shares covered by each outstanding Option, the number of Shares which
have been authorized for issuance under the Plan but as to which no Options have yet been granted
or which have been returned to the Plan upon cancellation or expiration of an Option, as well as
the price per Share covered by each such outstanding Option, and the number of Shares issuable
pursuant to the automatic grant provisions of Section 4 hereof shall be proportionately adjusted
for any increase or decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued Shares effected without receipt of consideration by
the Company; provided, however, that conversion of any convertible securities of the Company shall
not be deemed to have been “effected without receipt of consideration.” Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of Shares subject to an Option.

-5-

 

          (b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, to the extent that an Option has not been previously exercised, it
shall terminate immediately prior to the consummation of such proposed action.

          (c) Merger or Asset Sale. In the event of a merger of the Company with or into
another corporation or the sale of substantially all of the assets of the Company, outstanding
Options may be assumed or equivalent options may be substituted by the successor corporation (the
“Successor Corporation”) or a Parent or Subsidiary thereof.

     If the Successor Corporation does not assume an outstanding Option or substitute for it an
equivalent option, the Board shall notify the Optionee that the Option shall be fully exercisable
for a period of thirty (30) days from the date of such notice, and upon the expiration of such
period the Option shall terminate.

     11. Amendment and Termination of the Plan.

          (a) Amendment and Termination. The Board may at any time amend, alter, suspend, or
discontinue the Plan, but no amendment, alteration, suspension, or discontinuation shall be made
which would impair the rights of any Optionee under any grant theretofore made, without his or her
consent. In addition, to the extent necessary and desirable to comply with any applicable law,
regulation or stock exchange rule, the Company shall obtain shareholder approval of any Plan
amendment in such a manner and to such a degree as required.

          (b) Effect of Amendment or Termination. Any such amendment or termination of the Plan
shall not affect Options already granted and such Options shall remain in full force and effect as
if this Plan had not been amended or terminated.

     12. Time of Granting Options. The date of grant of an Option shall, for all purposes,
be the date determined in accordance with Section 4 hereof.

     13. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and delivery of such
Shares pursuant thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, state securities laws, and the requirements of any stock exchange upon
which the Shares may then be listed, and shall be further subject to the approval of counsel for
the Company with respect to such compliance.

          As a condition to the exercise of an Option, the Company may require the person exercising
such Option to represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or distribute such Shares,
if, in the opinion of counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.

-6-

 

     Inability of the Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to
issue or sell such Shares as to which such requisite authority shall not have been obtained.

     14. Reservation of Shares. The Company, during the term of this Plan, will at all
times reserve and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.

     15. Option Agreement. Options shall be evidenced by written option agreements in such
form as the Board shall approve.

     16. Shareholder Approval. The Plan shall be subject to approval by the shareholders
of the Company within twelve (12) months after the date the Plan is adopted. Such shareholder
approval shall be obtained in the degree and manner required under applicable state and federal law
and any stock exchange rules.

-7-

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