Exhibit 10.37
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SWITCHBOARD INCORPORATED
INCENTIVE STOCK OPTION AGREEMENT
1. Grant of Option. Switchboard Incorporated, a Delaware Corporation
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(the "Company"), hereby grants to Xxxxx X. Canon (the "Optionee"), an option,
pursuant to the Company's 1996 Stock Incentive Plan (the "Plan"), to purchase an
aggregate of 50,000 shares of Common Stock, $.01 par value per share, of the
Company ("Common Stock"), at a price of $9.00 per share, purchasable as set
forth and subject to the terms and conditions of this option and the Plan. The
date of grant of this option is October 13, 1999. Except where the context
otherwise requires, the term "Company" shall include the parent and all present
and future subsidiaries of the Company as defined in Sections 424(e) and 424(f)
of the Internal Revenue Code of 1986, as amended or replaced from time to time
(the "Code").
2. Incentive Stock Option. To the extent permitted by applicable law,
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this option is intended to qualify as an incentive stock option ("Incentive
Stock Option") within the meaning of Section 422 of the Code.
3. Exercise of Option and Provisions for Termination.
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(a) Vesting Schedule. Except as otherwise provided in this
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Agreement, this option may be exercised prior to the tenth anniversary of the
date of grant (hereinafter the "Final Exercise Date") in installments as to not
more than the number of shares set forth in the table below during the
respective installment periods set forth below.
(i) Ten thousand (10,000) shares will vest on the earlier of
(A) the effective date of the initial registration of the
Company's Common Stock under the Securities Act of 1933, as
amended or (B) five (5) years from the date of grant;
(ii) Fifteen thousand (15,000) shares will vest on the earlier
of (A) the date that the Company's Market Capitalization
equals or exceeds two billion dollars for a period of one-
hundred and eighty (180) consecutive calendar days or (B)
four (4) years from the date of grant;
(iii) Twelve thousand five hundred (12,500) shares will vest on
the earlier of (A) the date that the Company's Market
Capitalization equals or exceeds one and a half billion
dollars for a period of ninety (90) consecutive calendar
days or (B) three (3) years from the date of grant;
(iv) Twelve thousand five hundred (12,500) shares will vest on
the earlier of (A) the date that the Company's Market
Capitalization equals or exceeds one billion dollars for a
period of ninety (90) consecutive calendar days or (B) two
(2) years from the date of grant.
The right of exercise shall be cumulative so that if the option is not exercised
to the maximum extent permissible during any exercise period, it shall be
exercisable, in whole or in part, with respect to all shares not so purchased at
any time prior to the Final Exercise Date or the earlier termination of this
option. This option may not be exercised at any time on or after the Final
Exercise Date.
For the purposes of this provision 3(a), "Market Capitalization" means the
number of outstanding shares of Common Stock of the Company multiplied by the
"fair market value" of a share of Common Stock as of a particular date (the
"Determination Date"). The "fair market value" shall mean: (I) if shares of
Common Stock are traded on a national securities exchange (an "Exchange"), the
average of the closing prices of a share of the Common Stock of the Company on
the last twenty (20) trading days prior to the Determination Date reported on
such Exchange as reported in The Wall Street Journal or comparable reporting
service; or (ii) if shares of Common Stock are not traded on an Exchange but
trade in the over-the-counter market and such shares are quoted on the Nasdaq
National Market System or the Nasdaq Small-Cap Market (either, "NASDAQ"), (A)
the average of the last sale prices reported on NASDAQ or (B) if such shares are
an issue for which last sale prices are not reported on NASDAQ, the average of
the closing bid and ask prices, in each case on the last twenty (20) trading
days (or if the relevant price or quotation did not exist on any of such days,
the relevant price or quotation on the next preceding business day on which
there was such a price or quotation) prior to the Determination Date as reported
in The Wall Street Journal or comparable reporting service; or (iii) if no price
can be determined on the basis of the above methods of valuation, then the
judgment of valuation shall be determined in good faith by the Board of
Directors of the Company, which determination shall be described in a duly
adopted board resolution certified by the Company's Clerk or Assistant Clerk.
(b) Exercise Procedure. Subject to the conditions set forth in this
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Agreement, this option shall be exercised by the Optionee's delivery of written
notice of exercise to the Treasurer of the Company, specifying the number of
shares to be purchased and the purchase price to be paid therefor and
accompanied by payment in full in accordance with Section 4. Such exercise
shall be effective upon receipt by the Treasurer of the Company of such written
notice together with the required payment. The Optionee may purchase less than
the number of shares covered hereby, provided that no partial exercise of this
option may be for any fractional share or for fewer than ten whole shares.
(C) Continuous Employment Required. This option may not be exercised
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unless the Optionee, at the time he or she exercises this option, is, and has
been at all times since the date of grant of this option, an employee of the
Company. For all purposes of this option, (I) "employment" shall be defined in
accordance with the provisions of Section 1.421-7(h) of the Income Tax
Regulations or any successor regulations, and (ii) if this option shall be
assumed or a new option substituted therefor in a transaction to which Section
424(a) of the Code applies, employment by such assuming or substituting
corporation (hereinafter called the "Successor Corporation") shall be considered
for all purposes of this option to be employment by the Company.
(d) Termination of Employment. If the Optionee ceases to be employed
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by the Company for any reason (including without limitation death, disability,
or voluntary or involuntary termination), then the right to exercise this option
shall terminate 90 days after such cessation (but in no event after the Final
Exercise Date, provided, that, this option shall be exercisable only to the
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extent that the Optionee was entitled to exercise this option on the date of
such cessation.
(e) Early Exercise Alternative. Notwithstanding the exercisability
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schedule set forth in paragraph (a), the Optionee may elect to exercise this
option as to the unvested shares (in addition to the vested shares) if
simultaneously with such exercise the Optionee enters into a Stock
Restriction Agreement with the Company in the form attached hereto as Exhibit A
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(the "Stock Restriction Agreement"). The Stock Restriction Agreement provides
that the unvested shares shall be subject to a right of repurchase (the
"Purchase Option") in favor of the Company at the $9.00 exercise price (as
adjusted pursuant to the terms hereof) in the event that the Optionee ceases to
be employed by the Company.
4. Payment of Purchase Price.
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(a) Method of Payment. Payment of the purchase price for shares
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purchased upon exercise of this option shall be made by delivery of cash or a
check in an amount equal to the exercise price of such option or, with the prior
consent of the Company (which may be withheld in its sole discretion), by (A)
delivery of shares of Common Stock owned by the Optionee for at least six
months, valued at their fair market value, as determined in (b) below, (B)
delivery of a promissory note of the Optionee to the Company on terms determined
by the Board, (C) delivery of an irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise price or delivery
of
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irrevocable instructions to a broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price, (D) payment of such other lawful
consideration as the Board may determine, or (E) any combination of the
foregoing.
(b) Valuation of Shares or Other Non-Cash Consideration Tendered in
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Payment of Purchase Price. For the purposes hereof, the fair market value of
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any share of the Company's Common Stock or other non-cash consideration which
may be delivered to the Company in exercise of this option shall be determined
in good faith by the Board of Directors of the Company.
(C) Delivery of Shares Tendered in Payment of Purchase Price. If the
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Optionee exercises this option by delivery of shares of Common Stock of the
Company, the certificate or certificates representing the shares of Common Stock
of the Company to be delivered shall be duly executed in blank by the Optionee
or shall be accompanied by a stock power duly executed in blank suitable for
purposes of transferring such shares to the Company. Fractional shares of
Common Stock of the Company will not be accepted in payment of the purchase
price of shares acquired upon exercise of this option.
(d) Restrictions on Use of Option Stock. Notwithstanding the
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foregoing, no shares of Common Stock of the Company may be tendered in payment
of the purchase price of shares purchased upon exercise of this option if the
shares to be so tendered were acquired within six (6) months before the date of
such tender, through the exercise of an option granted under the Plan or any
other stock option or restricted stock plan of the Company.
5. Delivery of Shares; Compliance With Securities Laws, Etc.
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(a) General. The Company shall, upon payment of the option price for
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the number of shares purchased and paid for, make prompt delivery of such shares
to the Optionee, provided that if any law or regulation requires the Company to
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take any action with respect to such shares before the issuance thereof, then
the date of delivery of such shares shall be extended for the period necessary
to complete such action.
(b) Compliance With Securities Laws, Etc. The Company will not be
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obligated to deliver any shares of Common Stock pursuant to the Plan or to
remove restriction from shares previously delivered under the Plan (I) until all
conditions of the option have been satisfied or removed, (ii) until, in the
opinion of the Company's counsel, all applicable federal and state laws and
regulation have been complied with, (iii) if the outstanding Stock is at the
time listed on any stock exchange, until the shares to be delivered have been
listed or authorized to be listed on such exchange upon official notice of
issuance, and (iv) until all other legal matters in connection with the issuance
and delivery of such shares have been approved by the Company's counsel.
6. Nontransferability of Option. This option is personal and no rights
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granted hereunder may be transferred, assigned, pledged or hypothecated in any
way (whether by operation of law or otherwise) nor shall any such rights be
subject to execution, attachment or similar process. Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of this option or of
such rights contrary to the provisions hereof, or upon the levy of any
attachment or similar process upon this option or such rights, this option and
such rights shall, at the election of the Company, become null and void.
7. Proxy. The Optionee hereby appoints Banyan Worldwide, a Massachusetts
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corporation, and/or its designee(s) ("Banyan"), as the Optionee's attorney-in-
fact and proxy, with full power of substitution, for and in the Optionee's name,
to vote, express consent or disapproval, or otherwise act in
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such manner (including pursuant to written consent) and upon such matters as
Banyan or its designee(s), proxy or substitute(s) shall, in its or their sole
discretion, deem proper with respect to any and all of the shares issued upon
any exercise of this option or issued in respect to such shares as a stock
dividend, stock split or otherwise (collectively, for purposes of Sections 7, 8
and 9 hereof, the "Shares"). The proxy granted hereby shall be irrevocable and
may be exercised at any meeting or in respect of any written consent of
stockholders. This proxy is coupled with an interest sufficient in law to
support such proxy. This proxy shall remain in full force and effect and be
enforceable against any donee, transferee or assignee of the stock. In addition
to any other applicable limitations pursuant to the terms of this option, the
Optionee agrees not to sell, assign, transfer, loan, tender, pledge,
hypothecate, exchange, encumber or otherwise dispose of, or issue an option or
call with respect to, any of the Shares, or impair such Shares, in each case
unless, and as a condition precedent thereto, the transferee of such Shares
executes and delivers to Banyan an agreement to be bound by the terms of this
Section 7. Any purported transfer in violation of this Section 7 shall be null
and void and shall not be recognized by the Company or reflected on the stock
records of the Company. The Optionee shall cause the Company to require any
certificates representing any and all Shares issued upon any exercise of this
option to bear a legend referencing the restrictions on transfer set for in this
Section 7, which legend shall be subject to the approval of Banyan.
Notwithstanding anything to the contrary in the foregoing, the provisions of,
including, without limitation, the proxy appointed by, this Section 7 shall
terminate upon the closing of the Company's initial public offering,
underwritten by a nationally recognized underwriter, pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act").
8. Repurchase of Shares Upon Termination of Employment. The following
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repurchase provisions shall apply to any and all Shares;
(a) Repurchase Rights. If the Optionee for any reason whatsoever
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(including without limitation death, disability, or voluntary or involuntary
termination) ceases to be employed by the Company prior to the date specified in
Section 8(d) below for the expiration of these restrictions, then during the 90-
day period following such termination the Company may elect, by written notice
delivered to the Optionee, to repurchase all or any portion of the Shares, at a
price per share equal to the fair market value of such Shares as of the close of
business on the date of termination of the Optionee's employment. Such fair
market value shall be determined by mutual agreement of the Company and the
Optionee. Failing such agreement between the Optionee and the Company within 30
days of the date of the Company's notice electing to repurchase such Shares, the
fair market value of such Shares shall be determined by three appraisers, one
designated within five days after the termination of said 30-day period by the
Optionee or his or her legal representatives (which appraiser shall not be the
Optionee or his or her legal representative), one within said period of five
days by the Company (which appraiser shall not be an officer, director or
employee of the Company) and the third within five days after said appointment
last occurring by the two appraisers so chosen. Successor appraisers, if any
shall be required, shall be appointed, within a reasonable time, as nearly as
may be in the manner provided as to the related original appointment. No
appointment shall be deemed as having been accomplished unless such appraiser
shall have accepted in writing his appointment as such within the time limited
for his appointment. Notice of each appointment of an appraiser shall be given
promptly to the other parties in interest. Any expenses relating to the
appointment and service of an appraiser shall be paid by the party appointing
such appraiser or, in the case of the appraiser appointed by the appraisers
chosen by the Company and the Optionee, shall be paid by the Company. Said
appraisers shall proceed promptly to determine the fair market value of said
Share or Shares by agreement of any two of the appraisers, which shall be
conclusive upon all parties in interest in such Shares. Promptly following such
determination, the appraisers shall mail or deliver such notice of such
determination to the Optionee and the Company.
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(b) Repurchase Procedure. Upon notice from the Company of exercise of
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its rights under this Section 8 and determination of the purchase price for the
Shares so repurchased, the Optionee shall transfer the Shares or appropriate
part thereof to the Company against payment by the Company of the purchase price
therefor. If upon the expiration of the 90-day period following the Optionee's
termination of employment the Company shall have failed to elect to repurchase
all of the Shares, the repurchase rights with respect to the Shares not so
elected to be repurchased imposed by this Section 8 shall terminate, and the
Optionee or his or her legal representatives may thereafter transfer such
Shares. The Optionee or his or her legal representatives may in no event
transfer any Shares prior thereto, other than to the Company.
(C) Failure of Optionee to Comply. If the Optionee fails to comply
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with any of the provisions of this Section 8, the Company, at its option and in
addition to its other remedies, may suspend the rights of the Optionee to vote
and to receive dividends on the Shares, or may refuse to register on its books
any transfer or change in the ownership of the Shares or in the right to vote
thereon, until the provisions of this Section 8 are complied with to the
satisfaction of the Company.
(d) Expiration. The restriction contained in this Section 8 shall
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expire upon the closing of the Company's initial public offering, underwritten
by a nationally recognized underwriter, pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act")
(such expiration date shall be referred to herein as the "Expiration Date").
(e) Safekeeping. The Optionee acknowledges that the Company may, in
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its discretion, retain for safekeeping stock certificates representing all
Shares purchased hereunder by the Optionee. The Optionee further acknowledges
that the Company may, to insure that the Optionee complies with the restriction
of this Section 8, continue to retain such stock certificates until the earlier
of the Expiration Date or the date of expiration of these repurchase rights
under Section 8(b) above. At the time of any exercise of this option, in whole
or in part, the Optionee shall execute such further agreement as the Company may
require to implement the foregoing.
9. Right of First Refusal.
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(a) General. The Optionee shall not sell, assign, pledge, or in any
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manner transfer any of the Shares or any right or interest therein, whether
voluntarily or by operation of law, or by gift or otherwise, except by a
transfer which meets the requirements of the provisions of this Section 9.
(b) Restrictions on Transfer. If at any time or from time to time the
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Optionee intends to sell or transfer any Shares to a third party, the Optionee
shall provide notice thereof to the Company prior to such transfer (which in the
case of a sale shall include a bona fide purchase agreement with a viable
purchaser). The Company shall have an option for 30 days following the date of
receipt of the Optionee's notice to purchase such Shares on the terms upon which
the Shares were to be purchased by or transferred to the third party by the
Optionee. If the Company does not exercise its right of first refusal under
this Section 9(b) with respect to such proposed sale or transfer within such 30-
day period, the Optionee shall be free to sell or transfer such Shares to the
third party identified in the Optionee's notice for a period of 45 days after
the expiration of the 30-day period following the date of receipt of the
Optionee's notice. Such sale or transfer must be on terms no more favorable to
the recipient than those set forth in the Optionee's notice. In no event may
Shares be sold or transferred to any then-current competitor of the Company.
Any transfer or sale of Shares by the Optionee will be conditional upon the
recipient acknowledging in writing the option set forth in this Section 9(b) and
the other restrictions to which the Shares are subject.
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(C) Failure of Optionee to Comply. If the Optionee's notice in
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respect of any Shares is not received by the Company as provided in Section 9(b)
above, or if the Optionee fails to comply with the provisions of Section 9(b)
above in respect of any such Shares in any other regard, the Company, at its
option and in addition to its other remedies, may suspend the rights to vote or
to receive dividends on said Shares, or may refuse to register on its books any
transfer or change in ownership of said Shares or in the right to vote thereon,
until the provisions of Section 9(b) are complied with to the satisfaction of
the Company; and if the required Optionee's notice is not received by the
Company after written demand by the Company, the Company may also independently
proceed as though a proper Optionee's notice has been received at the expiration
of ten days after mailing such demand, and, if the Company exercises its rights
under Section 9(b) with respect to said Shares or any of them, the Shares
specified shall be transferred accordingly.
(d) Expiration. The Company's right of first refusal contained in
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this Section 9 with respect to any sale or transfer of Shares shall expire upon
the Expiration Date.
10. No Special Employment Rights. Nothing contained in the Plan or this
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option shall be construed or deemed by any person under any circumstances to
bind the Company to continue the employment of the Optionee for the period
within which this option may be exercised.
11. Rights as a Shareholder. The Optionee shall have no rights as a
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shareholder with respect to any shares which may be purchased by exercise of
this option (including, without limitation, any rights to receive dividends or
non-cash distributions with respect to such shares) unless and until a
certificate representing such shares is duly issued and delivered to the
Optionee. No adjustment shall be made for dividends or other rights for which
the record date is prior to the date such stock certificate is issued.
12. Adjustment Provisions.
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(a) General. In the event of a consolidation, merger or other
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reorganization in which all of the outstanding shares of Common Stock are
exchanged for securities, cash or other property of any other corporation or
business entity (an "Acquisition") or in the event of a liquidation of the
Company, the Board of Directors of the Company or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions as to this option: (I) provide
that this option shall be assumed, or a substantially equivalent option shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof) on such terms as the Board determines to be appropriate, (ii) upon
written notice to the Optionee, provide that if unexercised, this option will
terminate immediately prior to the consummation of such transaction unless
exercised by the Optionee within a specified period following the date of such
notice, (iii) in the event of an Acquisition under the terms of which holders of
the Common Stock of the Company will receive upon consummation thereof a cash
payment for each share surrendered in the Acquisition (the "Acquisition Price"),
make or provide for a cash payment to the Optionee equal to the difference
between (A) the Acquisition Price times the number of shares of Common Stock
subject to outstanding options (to the extent then exercisable at prices not in
excess of the Acquisition Price) and (B) the aggregate exercise price of all
such outstanding options in exchange for the termination of such options, and
(iv) provide that all or any outstanding options shall become exercisable or
realizable in full prior to the effective date of such Acquisition.
(b) Board Authority to Make Adjustments. Any adjustments under this
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Section 12 will be made by the Board of Directors, whose determination as to
what adjustments, if any, will be made
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and the extent thereof will be final, binding and conclusive. No fractional
shares will be issued pursuant to this option on account of any such
adjustments.
13. Withholding Taxes. The Company's obligation to deliver shares upon
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the exercise of this option shall be subject to the Optionee's satisfaction of
all applicable federal, state and local income and employment tax withholding
requirements. The Optionee shall pay to the Company, or make provision
satisfactory to the Board for payment of, any taxes required by law to be
withheld in respect of options under the Plan no later than the date of the
event creating the tax liability. In the Board's discretion, and subject to
such conditions as the Board may establish, such tax obligations may be paid in
whole or in part in shares of Common Stock, including shares retained from the
option creating the tax obligation, valued at their fair market value. The
Company may, to the extent permitted by law, deduct any such tax obligations
from any payment of any kind otherwise due to the Optionees.
14. Limitations on Disposition of Incentive Stock Option Shares. It is
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understood and intended that this option shall qualify as an "incentive stock
option" as defined in Section 422 of the Code. Accordingly, the Optionee
understands that in order to obtain the benefits of an incentive stock option
under Section 421 of the Code, no sale or other disposition may be made of any
shares acquired upon exercise of the option within one year after the day of the
transfer of such shares to him, nor within two years after the grant of the
option. If the Optionee intends to dispose, or does dispose (whether by sale,
exchange, gift, transfer or otherwise), of any such shares within said periods,
he or she will notify the Company in writing within ten days after such
disposition.
15. Investment Representations; Legends.
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(a) Representations. The Optionee represents, warrants and covenants
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that:
(i) Any shares purchased upon exercise of this option shall be
acquired for the Optionee's account for investment only and not
with a view to, or for sale in connection with, any distribution
of the shares in violation of the Securities Act or any rule or
regulation under the Securities Act.
(ii) The Optionee has had such opportunity as he or she has
deemed adequate to obtain from representatives of the Company
such information as is necessary to permit the Optionee to
evaluate the merits and risks of his or her investment in the
Company.
(iii) The Optionee is able to bear the economic risk of holding
shares acquired pursuant to the exercise of this option for an
indefinite period.
(iv) The Optionee understands that (A) the shares acquired
pursuant to the exercise of this option will not be registered
under the Securities Act and are "restricted securities" within
the meaning of Rule 144 under the Securities Act; (B) such shares
cannot be sold, transferred or otherwise disposed of unless they
are subsequently registered under the Securities Act or an
exemption from registration is then available; (C) in any event,
an exemption from registration under Rule 144 or otherwise under
the Securities Act may not be available for at least two years
and even then will not be available unless a public market then
exists for the Common Stock, adequate information concerning the
Company is
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then available to the public and other terms and conditions of
Rule 144 are complied with; and (D) there is now no registration
statement on file with the Securities and Exchange Commission
with respect to any stock of the Company and the Company has no
obligation or current intention to register any shares acquired
pursuant to the exercise of this option under the Securities Act.
(v) The Optionee agrees that, if the Company offers for the
first time any of its Common Stock for sale pursuant to a
registration statement under the Securities Act, the Optionee
will not, without the prior written consent of the Company,
publicly offer, sell, contract to sell or otherwise dispose of,
directly or indirectly, any shares purchased upon exercise of
this option for a period of 180 days after the effective date of
such registration statement.
By making payment upon exercise of this option, the Optionee shall be deemed to
have reaffirmed, as of the date of such payment, the representations made in
this Section 15.
(b) Legends on Stock Certificates. All stock certificates
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representing shares of Common Stock issued to the Optionee upon exercise of this
option shall have affixed thereto legends substantially in the following forms,
in addition to any other legends required by applicable state law:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 and may not be
transferred, sold or otherwise disposed of in the absence of an
effective registration statement with respect to the shares evidenced
by this certificate, filed and made effective under the Securities Act
of 1933, or an opinion of counsel satisfactory to the Company to the
effect that registration under such Act is not required."
"The shares of stock represented by this certificate are subject to
certain restrictions on transfer and repurchase rights contained in an
Option Agreement, a copy of which will be furnished upon request by
the issuer."
To ensure compliance with the terms of this agreement, the Company may issue to
its transfer agent appropriate stop transfer instructions with respect to the
Shares.
16. Miscellaneous.
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(a) The Board may amend, modify or terminate any outstanding option,
including substituting therefor another option of the same or a different type,
changing the date of exercise or realization, provided that the Optionee's
consent to such action shall be required unless the Board determines that the
action, taking into account any related action, would not materially and
adversely affect the Optionee. The Board may at any time accelerate the time at
which all or any part of an Option may be exercised.
(b) All notices under this option shall be mailed or delivered by
hand to the parties at their respective addresses set forth beneath their names
below or at such other address as may be designated in writing by either of the
parties to one another.
(C) This option shall be governed by and construed in accordance with
the laws of the State of Delaware.
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SWITCHBOARD INCORPORATED
By: /s/ Xxxxx X. Canon
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Title: Vice President, Business Development
Address: 000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxxxx 00000
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OPTIONEE'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms and
conditions thereof. The undersigned hereby acknowledges receipt of a copy of
the Company's 1996 Stock Incentive Plan.
OPTIONEE
/s/ Xxxxx X. Canon
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Address: _____________________
_____________________
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