Stock Option Agreement - Sohu.com Inc.


 
                      [FORM OF OPTION GRANT FOR EMPLOYEES]

                                 SOHU.COM INC.
   Memorandum of Agreement Evidencing Granting of Non-Qualified Stock Option

     Stock Option Agreement dated as of December 5, 1999 between Sohu.com Inc.,
a Delaware corporation (the 'Company'), and [___________] (the 'Grantee').

1)   The Company hereby grants to the Grantee, as of the date set forth above,
     in consideration of the Grantee's continued employment with the Company or
     a direct or indirect subsidiary of the Company, an option (the 'Option') to
     purchase an aggregate of [__________] shares of the Common Stock of the
     Company, US$.001 par value per share, at an exercise price of US$[_______]
     per share, subject to the vesting, exercise provisions and other terms and
     conditions set forth below.

2)   The shares subject to the Option shall vest (a) as to 25% of the shares
     subject to the Option, on the first anniversary of the date of grant of the
     Option; and (b) as to the remaining 75% of the shares subject to the
     Option, in 12 equal quarterly installments beginning one calendar quarter
     after the date of such anniversary.

3)   If the Grantee ceases for any reason to be an employee of the Company, or
     any direct or indirect subsidiary of the Company, any part of the Option
     not then vested will be cancelled and will be of no further force or
     effect. If the Grantee ceases for any reason, other than death or
     Disability (as defined below), to be an employee of the Company, or any
     direct or indirect subsidiary of the Company, any part of the Option then
     vested and not exercised within ninety (90) days after the date of the
     termination of his employment will be cancelled and will be of no further
     force or effect, provided that such 90-day period may be extended by the
     Company's Board of Directors in its sole discretion.

4)   If the Grantee dies while in the employ of the Company, or any direct or
     indirect subsidiary of the Company, the Option may be exercised, to the
     extent of the number of shares with respect to which the Grantee could have
     exercised it on the date of his death, by his estate, personal
     representative or beneficiary, at any time within 180 days after the date
     of death. If the Grantee ceases to be employed by the Company, or a direct
     or indirect subsidiary of the Company, by reason of his Disability, the
     Option may be exercised, to the extent of the number of shares with respect
     to which he could have exercised it on the date of the termination of his
     employment, at any time within one (1) year after such termination. At the
     expiration of such 180-day or one year period, whichever is the earlier,
     the Option shall terminate and the only rights hereunder shall be those as
     to which the Option was properly exercised before such termination.
     'Disability' shall mean 'permanent and total disability' as defined in
     Section 22(e)(3) of the Internal Revenue Code of 1986, as amended, or any
     successor statute.

5)   If the Company determines in good faith that the Grantee has violated any
     obligation of confidentiality, non-competition or non-solicitation of
     employees, customers or suppliers owed to the Company, then, in the sole
     discretion of the Company's Board of Directors, 

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     (1) any part of the Option not yet exercised will be cancelled and will be
     of no further force or effect, effective upon written notice from the
     Company to the Grantee and (2) any shares of the capital stock of the
     Company held by the Grantee which were purchased by the Grantee through
     exercise of the Option or any part of the Option will be repurchased by the
     Company at a price equal to the exercise price paid by the Grantee,
     effective upon written notice from the Company to the Grantee accompanied
     by the Company's tender of the price for such repurchase, and will cease to
     be held by the Grantee. The Company may, in the sole discretion of the
     Company's Board of Directors, exercise either, both or neither of the
     foregoing remedies, and such remedies shall be in addition to all other
     remedies available to the Company for violations of any such obligation.

6)   The Option is exercisable, in whole or in part, with respect to any then
     vested shares only from and after the first to occur of the following
     events: (a) the closing of an underwritten public offering of shares of
     Common Stock of the Company; or (b) any liquidation, dissolution or winding
     up of the Company or any consolidation or merger of the Company with or
     into any other corporation or corporations in which the stockholders of the
     Company immediately prior to such transaction own 50% or less of the voting
     power of the surviving entity immediately following such transaction, or a
     sale, conveyance or disposition of all or substantially all of the assets
     of the Company, or the effectuation by the Company of a transaction or
     series of related transactions in which more than 50% of the voting power
     of the Corporation is disposed of.

7)   The Option (or any part or installment thereof) may be exercised by the
     Grantee's delivering to the Company a duly executed Notice of Exercise of
     Option as described below, together with provision for payment of the full
     purchase price in accordance with this Agreement for the shares as to which
     the Option is being exercised, and upon compliance with any other
     conditions set forth in this Agreement. Such written notice must be signed
     by the Grantee, state the number of shares with respect to which the Option
     is being exercised and contain any representations required by this
     Agreement. Payment of the purchase price for the shares as to which the
     Option is being exercised may be made (i) in United States dollars in cash
     or by check, or (ii) at the discretion of the Company's Board of Directors,
     by any other means, including a promissory note of the Grantee, which the
     Board of Directors determines to be acceptable.

8)   The Option granted herein is subject to the following additional terms and
     provisions:

     a)   The Option is not transferable by the Grantee otherwise than by will
          or laws of descent and distribution to the Grantee's spouse and lineal
          descendants, and is exercisable, during the Grantee's lifetime, only
          by him or her.

     b)   The Option may be exercised in whole or in part from time to time,
          provided that the Option may not be exercised as to less than one
          hundred (100) shares at any one time, unless it is being exercised in
          full and the balance of shares subject to the Option is less than one
          hundred.

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     c)   The shares of Common Stock underlying the Option and the exercise
          price therefor and the minimum number of shares that may be purchased
          at any one time will be appropriately adjusted from time to time for
          stock splits, reverse stock splits, stock dividends and
          reclassifications of shares.

     d)   If the Company is to be consolidated with or acquired by another
          entity in a merger, or in the event of a sale of all or substantially
          all of the Company's assets (an 'Acquisition'), the Company may take
          such action with respect to the Option as the Company's Board of
          Directors may deem to be equitable and in the best interests of the
          Company and its stockholders under the circumstances, including,
          without limitation, (i) making appropriate provision for the
          continuation of the Option by substituting on an equitable basis for
          the shares then subject to the Option either the consideration payable
          with respect to the outstanding shares of Common Stock in connection
          with the Acquisition or securities of any successor or acquiring
          entity or (ii) giving the Grantee reasonable advance notice of the
          pendency of the Acquisition and canceling the Option effective upon
          the Acquisition if it is not exercised prior to the Acquisition.
          Nothing contained herein will be deemed to require the Company to
          take, or refrain from taking, any one or more of the foregoing
          actions.

     e)   The Grantee will not have any rights as a stockholder with respect to
          any shares of Common Stock covered by the Option except after due
          exercise of the Option and tender of the full purchase price for the
          shares being purchased pursuant to such exercise and registration of
          the shares in the Company's share register in the name of the Grantee.

     f)   Unless the offering and sale of the shares to be issued upon the
          exercise of the Option has been registered under the Securities Act
          and any applicable State 'Blue Sky' laws, the Company will be under no
          obligation to issue the shares covered by such exercise unless

          i)   the person who exercises the Option represents and warrants to
               the Company at the time of such exercise that such person is
               acquiring such shares for his or her own account for investment
               and not with a view to, or for sale in connection with, the
               distribution of any such shares and

          ii)  the Company has received an opinion of its counsel that the
               shares may be issued upon such exercise in compliance with the
               Securities Act and any applicable State Blue Sky laws without
               registration thereunder.

     g)   Each certificate representing shares of Common Stock issued upon
          exercise of the Option (except to the extent that the restrictions
          described in any such legend are no longer applicable) will be bear
          legends in substantially the following form (in addition to any legend
          required under applicable state securities laws):

                    THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
                    REGISTERED UNDER THE SECURITIES ACT OF 1933, AS

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                    AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD,
                    OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
                    TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
                    STATEMENT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
                    COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

                    THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
                    LOCK-UP RESTRICTION OF UP TO 180 DAYS FOLLOWING THE INITIAL
                    UNDERWRITTEN PUBLIC OFFERING OF THE COMPANY'S SECURITIES.

     h)   In connection with the initial underwritten public offering of the
          Company's Common Stock, the Grantee will not, without the prior
          written consent of the Company, sell, make any short sale of, loan,
          grant any option for the purchase of, or otherwise dispose of or
          transfer his or her economic risk with respect to any shares of Common
          Stock for a period of 180 days after the date of the final prospectus
          used in connection with such offering. The Grantee will execute and
          deliver such documents as the Company may request confirming the
          foregoing.

9)   At any time when the Grantee wishes to exercise the Option, in whole or in
     part, the Grantee will submit to the Company, a duly executed Notice of
     Exercise of Option in the form attached hereto as Exhibit A. Copies of such
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     notice are available from the Secretary or an Assistant Secretary of the
     Company.

10)  All notices made pursuant to this Agreement shall be in writing and shall
     be conclusively deemed to have been duly given (a) when hand delivered to
     the other party (b) when received, if sent by an overnight delivery
     service, postage prepaid, addressed, if to the Grantee, as set forth below,
     and if to the Company, to the Company's principal offices.

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in its
name by its President or a Vice President or its Secretary or an Assistant
Secretary and the Grantee has hereunto set his or her hand as of the date first
above written.

                              SOHU.COM INC.
                              By:______________________________
                                 Name:
                                 Title:


                              _________________________________
                              (signature)

                              [___________________]
                              (printed name)

 
                              _________________________________
                              (address)
 
                              _________________________________

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                                   EXHIBIT A

Sohu.com Inc.
7 Jianguomen Nei Avenue
Bright China Chang An Building
Tower 2 Room 519
Beijing, China  100005
Ladies and Gentlemen:

     I hereby elect to exercise the stock option granted to me on ___________
___, 20__, by Sohu.com Inc., a Delaware corporation ('Sohu'), with respect to
______________ shares (the 'Shares') of common stock, par value $.001 per share
('Common Stock'), at the option price of $___________ per share for a total
purchase price of $__________.

     I understand that the stock option that I am electing to exercise is not
qualified as an 'incentive stock option' under Section 422 of the United States
Internal Revenue Code of 1986.

     I wish to make payment of the exercise price for the Shares as indicated
below (check one or more boxes):

               ______    Cash, my check in the amount of $__________ is enclosed
                         herewith.
               ______    Already owned Common Stock; _____ such Common Stock
                         with a total value of $______ enclosed herewith, duly
                         endorsed for transfer to the Company. I understand that
                         this method of payment may be rejected by Sohu's Board
                         of Directors of or a duly authorized Compensation
                         Committee of the Board of Directors in its sole
                         discretion.



                              Signature:  _________________________
                             Print Name:  _________________________
                               Address:   _________________________
                                          _________________________
                                          _________________________

Dated:________________




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