Exhibit 10.3

 

VERITY, INC.

 

CHANGE IN CONTROL AND SEVERANCE BENEFIT PLAN

 

SECTION 1. INTRODUCTION.

 

The Verity, Inc. Change in Control and Severance Benefit Plan (the “Plan”) is
hereby established effective April 6, 2005 (the “Effective Date”). The purpose
of the Plan is to provide for the payment of severance benefits to certain
eligible employees of Verity, Inc. and its wholly owned subsidiaries (the
“Company”) in the event that such employees are subject to qualifying employment
terminations in connection with a Change in Control. This Plan shall supersede
any severance benefit plan, policy or practice previously maintained by the
Company, other than an individually negotiated contract or agreement with the
Company relating to severance or change in control benefits that is in effect on
an employee’s termination date, in which case such employee’s severance benefit,
if any, shall be governed by the terms of such individually negotiated
employment contract or agreement and shall be governed by this Plan only to the
extent that the reduction pursuant to Section 7(b) below does not entirely
eliminate benefits under this Plan. This document also is the Summary Plan
Description for the Plan.

 

SECTION 2. DEFINITIONS.

 

For purposes of the Plan, the following terms are defined as follows:

 

(a) “Base Salary” means the Participant’s annual base pay (excluding incentive
pay, premium pay, commissions, overtime, bonuses and other forms of variable
compensation), at the rate in effect during the last regularly scheduled payroll
period immediately preceding the date of the Participant’s Covered Termination.

 

(b) “Board” means the Board of Directors of Verity, Inc.

 

(c) “Change in Control” means one of the following events or a series of more
than one of the following events that are related, wherein the stockholders of
the Company immediately before the transaction do not retain immediately after
the transaction, in substantially the same proportions as their ownership of
shares of the Company’s voting stock immediately before the transaction, direct
or indirect beneficial ownership of more than fifty percent (50%) of the total
combined voting power of the outstanding voting stock of the Company, the
resulting entity in a merger or, in the case of an asset sale, the corporation
or corporations to which the assets of the Company were transferred (the
“Transferee Corporation(s)”), as the case may be:

 

(i) the direct or indirect sale or exchange in a single or series of related
transactions by the stockholders of the Company of more than fifty percent (50%)
of the voting stock of the Company;

 

(ii) a merger or consolidation in which the Company is a party;

 

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(iii) the sale, exchange, or transfer of all or substantially all of the assets
of the Company; or

 

(iv) a liquidation or dissolution of the Company.

 

For purposes of this Section 2(c), indirect beneficial ownership shall include,
without limitation, an interest resulting from ownership of the voting stock of
one or more corporations, which as a result of the transaction, own the Company,
the resulting entity or the Transferee Corporation(s), as the case may be,
either directly or through one or more subsidiary corporations. The Board shall
have the right to determine whether multiple sales or exchanges of the voting
stock of the Company or more than one of the following events are related, and
its determination shall be final, binding and conclusive.

 

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

 

(e) “Company” means Verity, Inc. and its wholly owned subsidiaries or, following
a Change in Control, the surviving entity resulting from such transaction.

 

(f) “Constructive Termination” means a voluntary termination of employment by a
Participant after one of the following is undertaken without the Participant’s
express written consent:

 

(i) a substantial reduction in the Participant’s duties or responsibilities (and
not simply a change in title or reporting relationships) in effect immediately
prior to the effective date of the Change in Control; provided, however, that it
shall not be a “Constructive Termination” if, following the effective date of
the Change in Control, either (a) the Company is retained as a separate legal
entity or business unit and the Participant holds the same position in such
legal entity or business unit as the Participant held before such effective
date, or (b) the Participant holds a position with duties and responsibilities
comparable (though not necessarily identical, in view of the relative sizes of
the Company and the entity involved in the Change in Control) to the duties and
responsibilities of the Participant prior to the effective date of the Change in
Control;

 

(ii) a reduction in the Participant’s base salary (except for salary decreases
generally applicable to the Company’s other similarly situated employees);

 

(iii) a change in the Participant’s business location of more than 20 miles from
the business location prior to such change, except for required travel for the
Company’s business to an extent substantially consistent with Participant’s
prior business travel obligations;

 

(iv) a material breach by the Company of any provisions of the Plan or any
enforceable written agreement between the Company and the Participant; or

 

(v) any failure by the Company to obtain assumption of the Plan by any successor
or assign of the Company.

 

Notwithstanding the foregoing, a voluntary termination shall not be deemed a
Constructive Termination unless (x) the Participant provides the Company with
written notice (the

 

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“Constructive Termination Notice”) that the Participant believes that an event
described in this Section 2(f) has occurred, (y) the Constructive Termination
Notice is given within three (3) months of the date the event occurred, and (z)
the Company does not rescind or cure the conduct giving rise to the event
described in this Section 2(f) within fifteen (15) days of receipt by the
Company of the Constructive Termination Notice.

 

(g) “Covered Termination” means an Involuntary Termination Without Cause or a
Constructive Termination, either of which occurs within one (1) month prior to
or within eighteen (18) months following the effective date of a Change in
Control. Termination of employment of a Participant due to death or disability
shall not constitute a Covered Termination unless a voluntary termination of
employment by the Participant immediately prior to the Participant’s death or
disability would have qualified as a Constructive Termination.

 

(h) “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended.

 

(i) “Involuntary Termination Without Cause” means an involuntary termination of
employment by the Company other than for one of the following reasons:

 

(i) the Participant’s violation of any material provision of the Company’s
standard agreement relating to proprietary rights;

 

(ii) the Participant participates in any act of theft or dishonesty; or

 

(iii) the Participant participates in any immoral or illegal act which has had
or could reasonably be expected to have or had a detrimental effect on the
business or reputation of the Company; or

 

(iv) any material failure by the Participant to use reasonable efforts to
perform reasonably requested tasks after written notice and a reasonable
opportunity to comply with such notice.

 

(j) “Participant” means an individual who is employed by the Company as its
Executive Chairman of the Board, Chief Executive Officer, as a senior vice
president, or as a vice president (other than any individual who is a vice
president on sales commission, as determined by the Company in its sole
discretion); provided, however, that if the Board shall make an affirmative
determination that an employee serving in any such capacity shall not be a
Participant, then such employee shall not be deemed a Participant. The
determination of whether an employee is a Participant shall be made by the
Company, in its sole discretion, and such determination shall be binding and
conclusive on all persons.

 

(k) “Participation Notice” means the latest notice delivered by the Company to a
Participant informing the employee that the employee is a Participant in the
Plan, substantially in the form of Exhibit A hereto.

 

(l) “Plan Administrator” means the Board or any committee duly authorized by the
Board to administer the Plan. The Plan Administrator may, but is not required to
be, the Compensation Committee of the Board. The Board may at any time
administer the Plan, in whole or in part, notwithstanding that the Board has
previously appointed a committee to act as the Plan Administrator.

 

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SECTION 3. ELIGIBILITY FOR BENEFITS.

 

(a) General Rules. Subject to the provisions set forth in this Section and
Section 7, in the event of a Covered Termination, the Company will provide the
severance benefits described in Section 4 of the Plan to the affected
Participant. Promptly upon an employee becoming a Participant, the Company shall
deliver to the Participant a Participation Notice.

 

(b) Exceptions to Benefit Entitlement. An employee, including an employee who
otherwise is a Participant, will not receive benefits under the Plan (or will
receive reduced benefits under the Plan) in the following circumstances, as
determined by the Company in its sole discretion:

 

(i) The employee has executed an individually negotiated employment contract or
agreement with the Company relating to severance or change in control benefits
that is in effect on his or her termination date, in which case such employee’s
severance benefit, if any, shall be governed by the terms of such individually
negotiated employment contract or agreement and shall be governed by this Plan
only to the extent that the reduction pursuant to Section 7(b) below does not
entirely eliminate benefits under this Plan.

 

(ii) The employee voluntarily terminates employment with the Company in order to
accept employment with another entity that is controlled (directly or
indirectly) by the Company or is otherwise an affiliate of the Company.

 

(iii) The employee is offered immediate reemployment by a successor to the
Company or by a purchaser of its assets, as the case may be, following a change
in ownership of the Company or a sale of all or substantially all the assets of
a division or business unit of the Company. For purposes of the foregoing,
“immediate reemployment” means that the employee’s employment with the successor
to the Company or the purchaser of its assets, as the case may be, results in
uninterrupted employment such that the employee does not suffer a lapse in pay
as a result of the change in ownership of the Company or the sale of its assets.

 

(iv) The employee does not confirm in writing that he or she shall be subject to
the Company’s Confidentiality Agreement and Non-Compete Agreement.

 

(c) Termination of Benefits. A Participant’s right to receive the payment of
benefits under this Plan shall terminate immediately if, at any time prior to or
during the period for which the Participant is receiving benefits hereunder, the
Participant, without the prior written approval of the Company:

 

(i) willfully breaches a material provision of the Participant’s proprietary
information or confidentiality agreement with the Company, as referenced in
Section 3(b)(iv);

 

(ii) owns, manages, operates, joins, controls or participates in the ownership,
management, operation or control of, is employed by or connected in any manner
with, any person, enterprise or entity which is engaged in any business
competitive with that of the

 

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Company; provided, however, that such restriction will not apply to any passive
investment representing an interest of less than two percent (2%) of an
outstanding class of publicly-traded securities of any corporation or other
entity or enterprise;

 

(iii) encourages or solicits any of the Company’s then current employees to
leave the Company’s employ for any reason or interferes in any other manner with
employment relationships at the time existing between the Company and its then
current employees; or

 

(iv) induces any of the Company’s then current clients, customers, suppliers,
vendors, distributors, licensors, licensees or other third party to terminate
their existing business relationship with the Company or interferes in any other
manner with any existing business relationship between the Company and any then
current client, customer, supplier, vendor, distributor, licensor, licensee or
other third party.

 

SECTION 4. AMOUNT OF BENEFITS.

 

(a) Cash Severance Benefits. Each Participant who incurs a Covered Termination
and was employed by the Company at the position or level set forth below within
one (1) month immediately prior to such Covered Termination shall be entitled to
receive a cash severance benefit equal to the number of months of Base Salary
set forth below. Any cash severance benefits provided under this Section 4(a)
shall be paid pursuant to the provisions of Section 5.

 

Position or Level

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Amount of Cash Severance Benefit

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Executive Chairman of the Board

  24 months

Chief Executive Officer

  24 months

Senior Vice President

  18 months

Vice President (Except Vice Presidents on sales commissions)

  12 months

 

(b) Accelerated Stock Award Vesting and Extended Exercisability of Stock
Options. If a Participant incurs a Covered Termination, then effective as of the
date of the Participant’s Covered Termination, (i) the vesting and
exercisability of all outstanding options to purchase the Company’s common stock
that are held by the Participant on such date shall be accelerated in full, and
(ii) any reacquisition or repurchase rights held by the Company in respect of
common stock issued pursuant to any other stock award granted to the Participant
by the Company shall lapse.

 

In addition, the post-termination of employment exercise period of any
outstanding option held by the Participant on the date of his or her Covered
Termination shall be extended, if necessary, such that the post-termination of
employment exercise period shall not terminate prior to the later of (i) the
date twelve (12) months after the effective date of the Covered Termination or
(ii) the post-termination exercise period provided for in such option; provided,
however, that

 

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such option shall not be exercisable after the expiration of its maximum term;
provided, further, however, that in the event that any extended exercisability
of an option pursuant to this Section 4(b) would adversely affect a
Participant’s option or other stock award (including, without limitation, its
status as an incentive stock option under Section 422 of the Code or result in
an option that would not otherwise be deemed to be a nonqualified deferred
compensation plan or arrangement for the purposes of Section 409A of the Code to
be deemed to be such a nonqualified deferred compensation plan or arrangement),
such extended exercisability shall be deemed null and void unless the affected
Participant consents in writing to such extended exercisability within thirty
(30) days after becoming a Participant in the Plan.

 

(c) Continued Medical Benefits. If a Participant incurs a Covered Termination
and the Participant was enrolled in a health, dental, or vision plan sponsored
by the Company immediately prior to such Covered Termination, the Participant
may be eligible to continue coverage under such health, dental, or vision plan
(or to convert to an individual policy), at the time of the Participant’s
termination of employment, under the Consolidated Omnibus Budget Reconciliation
Act of 1985 (“COBRA”). The Company will notify the Participant of any such right
to continue such coverage at the time of termination pursuant to COBRA. No
provision of this Plan will affect the continuation coverage rules under COBRA,
except that the Company’s payment, if any, of applicable insurance premiums will
be credited as payment by the Participant for purposes of the Participant’s
payment required under COBRA. Therefore, the period during which a Participant
may elect to continue the Company’s health, dental, or vision plan coverage at
his or her own expense under COBRA, the length of time during which COBRA
coverage will be made available to the Participant, and all other rights and
obligations of the Participant under COBRA (except the obligation to pay
insurance premiums that the Company pays, if any) will be applied in the same
manner that such rules would apply in the absence of this Plan.

 

If a Participant timely elects continued coverage under COBRA, the Company shall
pay the full amount of the Participant’s COBRA premiums on behalf of the
Participant for the Participant’s continued coverage under the Company’s health,
dental and vision plans, including coverage for the Participant’s eligible
dependents, during the number of months of Base Salary in respect of which the
amount paid to the Participant under Section 4(a) was calculated (the “Severance
Period”); provided, however, that if the Severance Period exceeds the length of
time that the Participant is entitled to coverage under COBRA (including any
additional period under analogous provisions of state law), the resulting or
acquiring entity or Transferee Corporation involved in the Change in Control, as
applicable, shall be required to provide health, dental and vision insurance
coverage for the Participant and his or her eligible dependents for any portion
of the Severance Period that exceeds the length of time that the Participant is
entitled to coverage under COBRA (including any additional period under
analogous provisions of state law), at a level of coverage that is substantially
similar to the continued coverage that the Participant and his or her eligible
dependents received under the Company’s health, dental and vision plans;
provided, further, however, that no such premium payments (or any other payments
for medical, dental or vision coverage by the Company) shall be made following
the Participant’s death or the effective date of the Participant’s coverage by a
medical, dental or vision insurance plan of a subsequent employer. Each
Participant shall be required to notify the Company immediately if the
Participant becomes covered by a medical, dental or vision insurance plan of a
subsequent employer. Upon the conclusion of such period of insurance premium
payments made by the Company, the Participant will be responsible for the entire
payment of premiums required under COBRA for the duration of the COBRA period.

 

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For purposes of this Section 4(c), (i) references to COBRA shall be deemed to
refer also to analogous provisions of state law and (ii) any applicable
insurance premiums that are paid by the Company shall not include any amounts
payable by the Participant under an Internal Revenue Code Section 125 health
care reimbursement plan, which amounts, if any, are the sole responsibility of
the Participant.

 

(d) Other Employee Benefits. All other benefits (such as life insurance,
disability coverage, and 401(k) plan coverage) shall terminate as of the
Participant’s termination date (except to the extent that a conversion privilege
may be available thereunder).

 

(e) Additional Benefits. Notwithstanding the foregoing, the Company may, in its
sole discretion, provide benefits in addition to those pursuant to Sections
4(a), 4(b) and 4(c) to Participants or employees who are not Participants
(“Non-Participants”) chosen by the Company, in its sole discretion, and the
provision of any such benefits to a Participant or a Non-Participant shall in no
way obligate the Company to provide such benefits to any other Participant or to
any other Non-Participant, even if similarly situated. If benefits under the
Plan are provided to a Non-Participant, references in the Plan to “Participant”
(with the exception of Sections 4(a), 4(b) and 4(c)) shall be deemed to refer to
such Non- Participants.

 

SECTION 5. TIME AND FORM OF SEVERANCE PAYMENTS.

 

(a) General Rules. Subject to Section 5(b), any cash severance benefit provided
under Section 4(a) shall be paid in installments pursuant to the Company’s
regularly scheduled payroll periods commencing as soon as practicable following
the effective date of a Participant’s Covered Termination and shall be subject
to all applicable withholding for federal, state and local taxes. In the event
of a Participant’s death prior to receiving all installment payments of his or
her cash severance benefit under Section 4(a), any remaining installment
payments shall be made to the Participant’s estate on the same payment schedule
as would have occurred absent the Participant’s death. In no event shall payment
of any Plan benefit be made prior to the effective date of the Participant’s
Covered Termination or prior to the effective date of the release described in
Section 7(a).

 

(b) Application of Section 409A. In the event that any cash severance benefit
provided under Section 4(a) or continued medical benefit under Section 4(c)
shall fail to satisfy the distribution requirement of Section 409A(a)(2)(A) of
the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code,
the payment of such benefit shall be accelerated to the minimum extent necessary
so that the benefit is not subject to the provisions of Section 409A(a)(1) of
the Code. (The payment schedule as revised after the application of the
preceding sentence shall be referred to as the “Revised Payment Schedule.”) In
the event the payment of benefits pursuant to the Revised Payment Schedule would
be subject to Section 409A(a)(1) of the Code, the payment of such benefits shall
not be paid pursuant to the Revised Payment Schedule and instead the payment of
such benefits shall be delayed to the minimum extent necessary so that such
benefits are not subject to the provisions of Section 409A(a)(1) of the Code.
The Board may attach conditions to or adjust the amounts paid pursuant to this
Section 5(b) to preserve, as closely as possible, the economic consequences that
would have applied in the absence of this Section 5(b); provided, however, that
no such condition or adjustment shall result in the payments being subject to
Section 409A(a)(1) of the Code.

 

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SECTION 6. REEMPLOYMENT.

 

In the event of a Participant’s reemployment by the Company during the period of
time in respect of which severance benefits pursuant to Section 4(a) or 4(e)
have been paid, the Company, in its sole and absolute discretion, may require
such Participant to repay to the Company all or a portion of such severance
benefits as a condition of reemployment.

 

SECTION 7. LIMITATIONS ON BENEFITS.

 

(a) Release. In order to be eligible to receive benefits under the Plan, a
Participant also must execute a general waiver and release in substantially the
form attached hereto as Exhibit B, Exhibit C or Exhibit D, as appropriate, and
such release must become effective in accordance with its terms. For purposes of
the preceding sentence, with respect to any outstanding option held by the
Participant, the receipt of benefits shall be deemed to be the exercise of such
option pursuant to the extended exercisability of such option under Section
4(b), rather than the acceleration or extension of such option’s exercisability.
The Company, in its sole discretion, may modify the form of the required release
to comply with applicable law and shall determine the form of the required
release, which may be incorporated into a termination agreement or other
agreement with the Participant.

 

(b) Certain Reductions. The Company, in its sole discretion, shall have the
authority to reduce a Participant’s severance benefits, in whole or in part, by
any other severance benefits, pay in lieu of notice, or other similar benefits
payable to the Participant by the Company that become payable in connection with
the Participant’s termination of employment pursuant to (i) any applicable legal
requirement, including, without limitation, the Worker Adjustment and Retraining
Notification Act (the “WARN Act”), (ii) a written employment or severance
agreement with the Company, or (iii) any Company policy or practice providing
for the Participant to remain on the payroll for a limited period of time after
being given notice of the termination of the Participant’s employment. The
benefits provided under this Plan are intended to satisfy, in whole or in part,
any and all statutory obligations and other contractual obligations of the
Company that may arise out of a Participant’s termination of employment, and the
Plan Administrator shall so construe and implement the terms of the Plan. The
Company’s decision to apply such reductions to the severance benefits of one
Participant and the amount of such reductions shall in no way obligate the
Company to apply the same reductions in the same amounts to the severance
benefits of any other Participant, even if similarly situated. In the Company’s
sole discretion, such reductions may be applied on a retroactive basis, with
severance benefits previously paid being recharacterized as payments pursuant to
the Company’s statutory or other contractual obligations.

 

(c) Mitigation. Except as otherwise specifically provided herein, a Participant
shall not be required to mitigate damages or the amount of any payment provided
under this Plan by seeking other employment or otherwise, nor shall the amount
of any payment provided for under this Plan be reduced by any compensation
earned by a Participant as a result of employment by another employer or any
retirement benefits received by such Participant after the date of the
Participant’s termination of employment with the Company.

 

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(d) Non-Duplication of Benefits. Except as otherwise specifically provided for
herein, no Participant is eligible to receive benefits under this Plan or
pursuant to other contractual obligations more than one time. This Plan is
designed to provide certain severance pay and change in control benefits to
Participants pursuant to the terms and conditions set forth in this Plan. The
payments pursuant to this Plan are in addition to, and not in lieu of, any
unpaid salary, bonuses or benefits to which a Participant may be entitled for
the period ending with the Participant’s Covered Termination.

 

(e) Indebtedness of Participants. If a Participant is indebted to the Company on
the effective date of his or her Covered Termination, the Company reserves the
right to offset any severance payments under the Plan by the amount of such
indebtedness.

 

SECTION 8. RIGHT TO INTERPRET PLAN; AMENDMENT AND TERMINATION.

 

(a) Exclusive Discretion. The Plan Administrator shall have the exclusive
discretion and authority to establish rules, forms, and procedures for the
administration of the Plan and to construe and interpret the Plan and to decide
any and all questions of fact, interpretation, definition, computation or
administration arising in connection with the operation of the Plan, including,
but not limited to, the eligibility to participate in the Plan and amount of
benefits paid under the Plan. The rules, interpretations, computations and other
actions of the Plan Administrator shall be binding and conclusive on all
persons.

 

(b) Amendment or Termination. The Company reserves the right to amend or
terminate this Plan or the benefits provided hereunder at any time; provided,
however, that no such amendment or termination shall occur following (i) the
date one (1) month prior to a Change in Control or (ii) a Covered Termination as
to any Participant who would be adversely affected by such amendment or
termination unless such Participant consents in writing to such amendment or
termination. Any action amending or terminating the Plan shall be in writing and
executed by a duly authorized officer of the Company. Unless otherwise required
by law, no approval of the shareholders of the Company shall be required for any
amendment or termination including any amendment that increases the benefits
provided under any option or other stock award.

 

SECTION 9. NO IMPLIED EMPLOYMENT CONTRACT.

 

The Plan shall not be deemed (i) to give any employee or other person any right
to be retained in the employ of the Company or (ii) to interfere with the right
of the Company to discharge any employee or other person at any time, with or
without cause, which right is hereby reserved.

 

SECTION 10. LEGAL CONSTRUCTION.

 

This Plan shall be governed by and construed under the laws of the State of
California (without regard to principles of conflict of laws), except to the
extent preempted by ERISA.

 

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SECTION 11. CLAIMS, INQUIRIES AND APPEALS.

 

(a) Applications for Benefits and Inquiries. Any application for benefits,
inquiries about the Plan or inquiries about present or future rights under the
Plan must be submitted to the Plan Administrator in writing by an applicant (or
his or her authorized representative). The Plan Administrator is:

 

Verity, Inc.

Attn: Vice President, Human Resources

894 Ross Drive

Sunnyvale, CA 94089

 

(b) Denial of Claims. In the event that any application for benefits is denied
in whole or in part, the Plan Administrator must provide the applicant with
written or electronic notice of the denial of the application, and of the
applicant’s right to review the denial. Any electronic notice will comply with
the regulations of the U.S. Department of Labor. The notice of denial will be
set forth in a manner designed to be understood by the applicant and will
include the following:

 

  (1) the specific reason or reasons for the denial;

 

  (2) references to the specific Plan provisions upon which the denial is based;

 

  (3) a description of any additional information or material that the Plan
Administrator needs to complete the review and an explanation of why such
information or material is necessary; and

 

  (4) an explanation of the Plan’s review procedures and the time limits
applicable to such procedures, including a statement of the applicant’s right to
bring a civil action under Section 502(a) of ERISA following a denial on review
of the claim, as described in Section 11(d) below.

 

This notice of denial will be given to the applicant within ninety (90) days
after the Plan Administrator receives the application, unless special
circumstances require an extension of time, in which case, the Plan
Administrator has up to an additional ninety (90) days for processing the
application. If an extension of time for processing is required, written notice
of the extension will be furnished to the applicant before the end of the
initial ninety (90) day period.

 

This notice of extension will describe the special circumstances necessitating
the additional time and the date by which the Plan Administrator is to render
its decision on the application.

 

(c) Request for a Review. Any person (or that person’s authorized
representative) for whom an application for benefits is denied, in whole or in
part, may appeal the denial by submitting a request for a review to the Plan
Administrator within sixty (60) days after the application is denied. A request
for a review shall be in writing and shall be addressed to:

 

Verity, Inc.

Attn: Vice President, Human Resources

894 Ross Drive

Sunnyvale, CA 94089

 

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A request for review must set forth all of the grounds on which it is based, all
facts in support of the request and any other matters that the applicant feels
are pertinent. The applicant (or his or her representative) shall have the
opportunity to submit (or the Plan Administrator may require the applicant to
submit) written comments, documents, records, and other information relating to
his or her claim. The applicant (or his or her representative) shall be
provided, upon request and free of charge, reasonable access to, and copies of,
all documents, records and other information relevant to his or her claim. The
review shall take into account all comments, documents, records and other
information submitted by the applicant (or his or her representative) relating
to the claim, without regard to whether such information was submitted or
considered in the initial benefit determination.

 

(d) Decision on Review. The Plan Administrator will act on each request for
review within sixty (60) days after receipt of the request, unless special
circumstances require an extension of time (not to exceed an additional sixty
(60) days), for processing the request for a review. If an extension for review
is required, written notice of the extension will be furnished to the applicant
within the initial sixty (60) day period. This notice of extension will describe
the special circumstances necessitating the additional time and the date by
which the Plan Administrator is to render its decision on the review. The Plan
Administrator will give prompt, written or electronic notice of its decision to
the applicant. Any electronic notice will comply with the regulations of the
U.S. Department of Labor. In the event that the Plan Administrator confirms the
denial of the application for benefits in whole or in part, the notice will set
forth, in a manner calculated to be understood by the applicant, the following:

 

  (1) the specific reason or reasons for the denial;

 

  (2) references to the specific Plan provisions upon which the denial is based;

 

  (3) a statement that the applicant is entitled to receive, upon request and
free of charge, reasonable access to, and copies of, all documents, records and
other information relevant to his or her claim; and

 

  (4) a statement of the applicant’s right to bring a civil action under Section
502(a) of ERISA.

 

(e) Rules and Procedures. The Plan Administrator will establish rules and
procedures, consistent with the Plan and with ERISA, as necessary and
appropriate in carrying out its responsibilities in reviewing benefit claims.
The Plan Administrator may require an applicant who wishes to submit additional
information in connection with an appeal from the denial of benefits to do so at
the applicant’s own expense.

 

11.

--------------------------------------------------------------------------------

(f) Exhaustion of Remedies. No legal action for benefits under the Plan may be
brought until the applicant (i) has submitted a written application for benefits
in accordance with the procedures described by Section 11(a) above, (ii) has
been notified by the Plan Administrator that the application is denied, (iii)
has filed a written request for a review of the application in accordance with
the appeal procedure described in Section 11(c) above, and (iv) has been
notified that the Plan Administrator has denied the appeal. Notwithstanding the
foregoing, if the Plan Administrator does not respond to an applicant’s claim or
appeal within the relevant time limits specified in this Section 11, the
applicant may bring legal action for benefits under the Plan pursuant to Section
502(a) of ERISA.

 

SECTION 12. BASIS OF PAYMENTS TO AND FROM PLAN.

 

All benefits under the Plan shall be paid by the Company. The Plan shall be
unfunded, and benefits hereunder shall be paid only from the general assets of
the Company.

 

SECTION 13. OTHER PLAN INFORMATION.

 

(a) Employer and Plan Identification Numbers. The Employer Identification Number
assigned to the Company (which is the “Plan Sponsor” as that term is used in
ERISA) by the Internal Revenue Service is 77-0182779. The Plan Number assigned
to the Plan by the Plan Sponsor pursuant to the instructions of the Internal
Revenue Service is 520.

 

(b) Ending Date for Plan’s Fiscal Year. The date of the end of the fiscal year
for the purpose of maintaining the Plan’s records is May 31.

 

(c) Agent for the Service of Legal Process. The agent for the service of legal
process with respect to the Plan is:

 

Verity, Inc.

Attn: Vice President, Human Resources

894 Ross Drive

Sunnyvale, CA 94089

 

(d) Plan Sponsor and Administrator. The “Plan Sponsor” and the “Plan
Administrator” of the Plan is:

 

Verity, Inc.

Attn: Vice President, Human Resources

894 Ross Drive

Sunnyvale, CA 94089

 

The Plan Sponsor’s and Plan Administrator’s telephone number is (408) 541-1500.
The Plan Administrator is the named fiduciary charged with the responsibility
for administering the Plan.

 

SECTION 14. STATEMENT OF ERISA RIGHTS.

 

Participants in this Plan (which is a welfare benefit plan sponsored by Verity,
Inc.) are entitled to certain rights and protections under ERISA. If you are a
Participant, you are

 

12.

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considered a participant in the Plan for the purposes of this Section 14 and,
under ERISA, you are entitled to:

 

Receive Information About Your Plan and Benefits

 

(a) Examine, without charge, at the Plan Administrator’s office and at other
specified locations, such as worksites, all documents governing the Plan and a
copy of the latest annual report (Form 5500 Series), if applicable, filed by the
Plan with the U.S. Department of Labor and available at the Public Disclosure
Room of the Employee Benefits Security Administration;

 

(b) Obtain, upon written request to the Plan Administrator, copies of documents
governing the operation of the Plan and copies of the latest annual report (Form
5500 Series), if applicable, and an updated (as necessary) Summary Plan
Description. The Administrator may make a reasonable charge for the copies; and

 

(c) Receive a summary of the Plan’s annual financial report, if applicable. The
Plan Administrator is required by law to furnish each participant with a copy of
this summary annual report.

 

Prudent Actions By Plan Fiduciaries

 

In addition to creating rights for Plan participants, ERISA imposes duties upon
the people who are responsible for the operation of the employee benefit plan.
The people who operate the Plan, called “fiduciaries” of the Plan, have a duty
to do so prudently and in the interest of you and other Plan participants and
beneficiaries. No one, including your employer, your union or any other person,
may fire you or otherwise discriminate against you in any way to prevent you
from obtaining a Plan benefit or exercising your rights under ERISA.

 

Enforce Your Rights

 

If your claim for a Plan benefit is denied or ignored, in whole or in part, you
have a right to know why this was done, to obtain copies of documents relating
to the decision without charge, and to appeal any denial, all within certain
time schedules.

 

Under ERISA, there are steps you can take to enforce the above rights. For
instance, if you request a copy of Plan documents or the latest annual report
from the Plan, if applicable, and do not receive them within 30 days, you may
file suit in a Federal court. In such a case, the court may require the Plan
Administrator to provide the materials and pay you up to $110 a day until you
receive the materials, unless the materials were not sent because of reasons
beyond the control of the Plan Administrator.

 

If you have a claim for benefits which is denied or ignored, in whole or in
part, you may file suit in a state or Federal court.

 

If you are discriminated against for asserting your rights, you may seek
assistance from the U.S. Department of Labor, or you may file suit in a Federal
court. The court will decide who should pay court costs and legal fees. If you
are successful, the court may order the person you have sued to pay these costs
and fees. If you lose, the court may order you to pay these costs and fees, for
example, if it finds your claim is frivolous.

 

13.

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Assistance With Your Questions

 

If you have any questions about the Plan, you should contact the Plan
Administrator. If you have any questions about this statement or about your
rights under ERISA, or if you need assistance in obtaining documents from the
Plan Administrator, you should contact the nearest office of the Employee
Benefits Security Administration, U.S. Department of Labor, listed in your
telephone directory or the Division of Technical Assistance and Inquiries,
Employee Benefits Security Administration, U.S. Department of Labor, 200
Constitution Avenue N.W., Washington, D.C. 20210. You may also obtain certain
publications about your rights and responsibilities under ERISA by calling the
publications hotline of the Employee Benefits Security Administration.

 

SECTION 15. GENERAL PROVISIONS.

 

(a) Notices. Any notice, demand or request required or permitted to be given by
either the Company or a Participant pursuant to the terms of this Plan shall be
in writing and shall be deemed given when delivered personally or deposited in
the U.S. mail, First Class with postage prepaid, and addressed to the parties,
in the case of the Company, at the address set forth in Section 11(a) and, in
the case of a Participant, at the address as set forth in the Company’s
employment file maintained for the Participant as previously furnished by the
Participant or such other address as a party may request by notifying the other
in writing.

 

(b) Transfer and Assignment. The rights and obligations of a Participant under
this Plan may not be transferred or assigned without the prior written consent
of the Company. This Plan shall be binding upon any surviving entity resulting
from a Change in Control and upon any other person who is a successor by merger,
acquisition, consolidation or otherwise to the business formerly carried on by
the Company without regard to whether or not such person or entity actively
assumes the obligations hereunder.

 

(c) Waiver. Any Party’s failure to enforce any provision or provisions of this
Plan shall not in any way be construed as a waiver of any such provision or
provisions, nor prevent any Party from thereafter enforcing each and every other
provision of this Plan. The rights granted the Parties herein are cumulative and
shall not constitute a waiver of any Party’s right to assert all other legal
remedies available to it under the circumstances.

 

(d) Severability. Should any provision of this Plan be declared or determined to
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired.

 

(e) Section Headings. Section headings in this Plan are included for convenience
of reference only and shall not be considered part of this Plan for any other
purpose.

 

14.

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SECTION 16. EXECUTION.

 

To record the adoption of the Plan as set forth herein, Verity, Inc. has caused
its duly authorized officer to execute the same as of the Effective Date.

 

VERITY, INC. By:  

/s/    STEVEN R. SPRINGSTEEL

--------------------------------------------------------------------------------

Title:  

Senior Vice President of Finance and Administration and Chief Financial Officer

 

15.

--------------------------------------------------------------------------------

EXHIBIT A

 

VERITY, INC.

 

CHANGE IN CONTROL AND SEVERENCE BENEFIT PLAN

 

PARTICIPATION NOTICE

 

To:                                         

 

Date:                    

 

Verity, Inc. (the “Company”) has adopted the Verity, Inc. Change in Control and
Severance Benefit Plan (the “Plan”). The Company is providing you with this
Participation Notice to inform you that, given your position at the Company, you
qualify as a participant in the Plan. A copy of the Plan document, which also
constitutes a summary plan description, is attached to this Participation
Notice. The terms and conditions of your participation in the Plan are as set
forth in the Plan, and in the event of any conflict between this Participation
Notice and the Plan, the terms of the Plan shall prevail. Subject to the
provisions of the Plan, the details of your Plan benefits, as described in
Section 4 of the Plan, are as follows:

 

Cash Severance Benefit:      months.

 

Accelerated Vesting of Options: Full.

 

Extended Exercisability of Options: Later of 12 months or the post-termination
exercise period of the option; provided, however, that such extended
exercisability shall not extend beyond the term of the option.

 

Continued medical benefits:      months, or such earlier date as you shall
secure subsequent employment that shall provide you with similar medical
benefits.

 

Please retain a copy of this Participation Notice, along with the Plan document,
for your records.

 

VERITY, INC. By:  

 

--------------------------------------------------------------------------------

Its:  

 

--------------------------------------------------------------------------------

 

16.

--------------------------------------------------------------------------------

ACKNOWLEDGEMENT

 

The undersigned Participant hereby acknowledges receipt of the foregoing
Participation Notice. In the event the undersigned holds outstanding stock
options as of the date of this Participation Notice, the undersigned hereby:

 

  ¨ accepts

 

  ¨ rejects

 

the extended exercisability provisions for such stock options set forth above.*
The undersigned acknowledges that the undersigned has been advised to obtain tax
and financial advice regarding the consequences of this election including the
effect, if any, on the status of the stock options for tax purposes under
Sections 409A and 422 of the Internal Revenue Code.

 

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Print name

 

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* Please check one box; failure to check a box will be deemed a rejection of the
extended exercisability provisions as they relate to such stock options.

 

17.

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For Employees Age 40 or Older

Individual Termination

 

EXHIBIT B

 

RELEASE AGREEMENT

 

I understand and agree completely to the terms set forth in the Verity, Inc.
Change in Control and Severance Benefit Plan (the “Plan”).

 

I understand that this Release, together with the Plan, constitutes the
complete, final and exclusive embodiment of the entire agreement between the
Company and me with regard to the subject matter hereof. I am not relying on any
promise or representation by the Company that is not expressly stated therein.
Certain capitalized terms used in this Release are defined in the Plan.

 

I hereby confirm my obligations under the Company’s proprietary information and
inventions agreement.

 

Except as otherwise set forth in this Release, I hereby generally and completely
release the Company and its parents, subsidiaries, successors, predecessors,
affiliates and assigns, and its and their current and former partners, members,
directors, officers, employees, shareholders, agents, attorneys, accountants,
insurers, affiliates and assigns, from any and all claims, liabilities and
obligations, both known and unknown, that arise out of or are in any way related
to events, acts, conduct, or omissions occurring at any time prior to and
including the date I sign this Release. This general release includes, but is
not limited to: (a) all claims arising out of or in any way related to my
employment with the Company or the termination of that employment; (b) all
claims related to my compensation or benefits, including salary, bonuses,
commissions, vacation pay, expense reimbursements, severance pay, fringe
benefits, stock, stock options, or any other ownership interests in the Company;
(c) all claims for breach of contract, wrongful termination, and breach of the
implied covenant of good faith and fair dealing; (d) all tort claims, including
claims for fraud, defamation, emotional distress, and discharge in violation of
public policy; and (e) all federal, state, and local statutory claims, including
claims for discrimination, harassment, retaliation, attorneys’ fees, or other
claims arising under the federal Civil Rights Act of 1964 (as amended), the
federal Americans with Disabilities Act of 1990 (as amended), the federal Age
Discrimination in Employment Act (as amended) (“ADEA”), the federal Employee
Retirement Income Security Act of 1974 (as amended), and the California Fair
Employment and Housing Act (as amended); provided, however, that nothing in this
paragraph shall be construed in any way to release the Company from its
obligation to indemnify me pursuant to agreement or applicable law.

 

I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under the ADEA, and that the consideration given under the
Plan for the waiver and release in the preceding paragraph hereof is in addition
to anything of value to which I was already entitled. I further acknowledge that
I have been advised by this writing, as required by the ADEA, that: (a) my
waiver and release do not apply to any rights or claims that may arise after the
date I sign this Release; (b) I should consult with an attorney prior to signing
this Release (although I may choose voluntarily not do so); (c) I have
twenty-one (21) days to consider this Release (although I may choose voluntarily
to sign this Release earlier); (d) I have

 

1.

--------------------------------------------------------------------------------

For Employees Age 40 or Older

Individual Termination

 

seven (7) days following the date I sign this Release to revoke the Release by
providing written notice to an officer of the Company; and (e) this Release
shall not be effective until the date upon which the revocation period has
expired, which shall be the eighth day after I sign this Release.

 

I acknowledge that I have read and understand Section 1542 of the California
Civil Code which reads as follows: “A general release does not extend to claims
which the creditor does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially affected his
settlement with the debtor.” I hereby expressly waive and relinquish all rights
and benefits under that section and any law of any jurisdiction of similar
effect with respect to my release of any claims hereunder.

 

I acknowledge that to become effective, I must sign and return this Release to
the Company so that it is received not later than twenty-one (21) days following
the date it is provided to me.

 

EMPLOYEE Name:  

 

--------------------------------------------------------------------------------

Date:  

 

--------------------------------------------------------------------------------

 

2.

--------------------------------------------------------------------------------

For Employees Age 40 or Older

Group Termination

 

EXHIBIT C

 

RELEASE AGREEMENT

 

I understand and agree completely to the terms set forth in the Verity, Inc.
Change in Control and Severance Benefit Plan (the “Plan”).

 

I understand that this Release, together with the Plan, constitutes the
complete, final and exclusive embodiment of the entire agreement between the
Company and me with regard to the subject matter hereof. I am not relying on any
promise or representation by the Company that is not expressly stated therein.
Certain capitalized terms used in this Release are defined in the Plan.

 

I hereby confirm my obligations under the Company’s proprietary information and
inventions agreement.

 

Except as otherwise set forth in this Release, I hereby generally and completely
release the Company and its parents, subsidiaries, successors, predecessors,
affiliates and assigns, and its and their current and former partners, members,
directors, officers, employees, shareholders, agents, attorneys, accountants,
insurers, affiliates and assigns, from any and all claims, liabilities and
obligations, both known and unknown, that arise out of or are in any way related
to events, acts, conduct, or omissions occurring at any time prior to and
including the date I sign this Release. This general release includes, but is
not limited to: (a) all claims arising out of or in any way related to my
employment with the Company or the termination of that employment; (b) all
claims related to my compensation or benefits, including salary, bonuses,
commissions, vacation pay, expense reimbursements, severance pay, fringe
benefits, stock, stock options, or any other ownership interests in the Company;
(c) all claims for breach of contract, wrongful termination, and breach of the
implied covenant of good faith and fair dealing; (d) all tort claims, including
claims for fraud, defamation, emotional distress, and discharge in violation of
public policy; and (e) all federal, state, and local statutory claims, including
claims for discrimination, harassment, retaliation, attorneys’ fees, or other
claims arising under the federal Civil Rights Act of 1964 (as amended), the
federal Americans with Disabilities Act of 1990 (as amended), the federal Age
Discrimination in Employment Act (as amended) (“ADEA”), the federal Employee
Retirement Income Security Act of 1974 (as amended), and the California Fair
Employment and Housing Act (as amended); provided, however, that nothing in this
paragraph shall be construed in any way to release the Company from its
obligation to indemnify me pursuant to agreement or applicable law.

 

I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under the ADEA, and that the consideration given under the
Plan for the waiver and release in the preceding paragraph hereof is in addition
to anything of value to which I was already entitled. I further acknowledge that
I have been advised by this writing, as required by the ADEA, that: (a) my
waiver and release do not apply to any rights or claims that may arise after the
date I sign this Release; (b) I should consult with an attorney prior to signing
this Release (although I may choose voluntarily not to do so); (c) I have
forty-five (45) days to consider this Release (although I may choose voluntarily
to sign this Release earlier); (d) I have

 

1.

--------------------------------------------------------------------------------

For Employees Age 40 or Older

Group Termination

 

seven (7) days following the date I sign this Release to revoke the Release by
providing written notice to an office of the Company; (e) this Release shall not
be effective until the date upon which the revocation period has expired, which
shall be the eighth day after I sign this Release; and (f) I have received with
this Release a detailed list of the job titles and ages of all employees who
were terminated in this group termination and the ages of all employees of the
Company in the same job classification or organizational unit who were not
terminated.

 

I acknowledge that I have read and understand Section 1542 of the California
Civil Code which reads as follows: “A general release does not extend to claims
which the creditor does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially affected his
settlement with the debtor.” I hereby expressly waive and relinquish all rights
and benefits under that section and any law of any jurisdiction of similar
effect with respect to my release of any claims hereunder.

 

I acknowledge that to become effective, I must sign and return this Release to
the Company so that it is received not later than forty-five (45) days following
the date it is provided to me.

 

EMPLOYEE Name:  

 

--------------------------------------------------------------------------------

Date:  

 

--------------------------------------------------------------------------------

 

2.

--------------------------------------------------------------------------------

For Employees Under Age 40

Individual and Group Termination

 

EXHIBIT D

 

RELEASE AGREEMENT

 

I understand and agree completely to the terms set forth in the Verity, Inc.
Change in Control and Severance Benefit Plan (the “Plan”).

 

I understand that this Release, together with the Plan, constitutes the
complete, final and exclusive embodiment of the entire agreement between the
Company and me with regard to the subject matter hereof. I am not relying on any
promise or representation by the Company that is not expressly stated therein.
Certain capitalized terms used in this Release are defined in the Plan.

 

I hereby confirm my obligations under the Company’s proprietary information and
inventions agreement.

 

Except as otherwise set forth in this Release, I hereby generally and completely
release the Company and its parents, subsidiaries, successors, predecessors,
affiliates and assigns, and its and their current and former partners, members,
directors, officers, employees, shareholders, agents, attorneys, accountants,
insurers, affiliates and assigns, from any and all claims, liabilities and
obligations, both known and unknown, that arise out of or are in any way related
to events, acts, conduct, or omissions occurring at any time prior to and
including the date I sign this Release. This general release includes, but is
not limited to: (a) all claims arising out of or in any way related to my
employment with the Company or the termination of that employment; (b) all
claims related to my compensation or benefits, including salary, bonuses,
commissions, vacation pay, expense reimbursements, severance pay, fringe
benefits, stock, stock options, or any other ownership interests in the Company;
(c) all claims for breach of contract, wrongful termination, and breach of the
implied covenant of good faith and fair dealing; (d) all tort claims, including
claims for fraud, defamation, emotional distress, and discharge in violation of
public policy; and (e) all federal, state, and local statutory claims, including
claims for discrimination, harassment, retaliation, attorneys’ fees, or other
claims arising under the federal Civil Rights Act of 1964 (as amended), the
federal Americans with Disabilities Act of 1990 (as amended), the federal Age
Discrimination in Employment Act (as amended), the federal Employee Retirement
Income Security Act of 1974 (as amended), and the California Fair Employment and
Housing Act (as amended); provided, however, that nothing in this paragraph
shall be construed in any way to release the Company from its obligation to
indemnify me pursuant to agreement or applicable law.

 

I acknowledge that I have read and understand Section 1542 of the California
Civil Code which reads as follows: “A general release does not extend to claims
which the creditor does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially affected his
settlement with the debtor.” I hereby expressly waive and relinquish all rights
and benefits under that section and any law of any jurisdiction of similar
effect with respect to my release of any claims hereunder.

 

1.

--------------------------------------------------------------------------------

For Employees Under Age 40

Individual and Group Termination

 

I acknowledge that to become effective, I must sign and return this Release to
the Company so that it is received not later than fourteen (14) days following
the date it is provided to me.

 

EMPLOYEE Name:  

 

--------------------------------------------------------------------------------

Date:  

 

--------------------------------------------------------------------------------

 

2.