Exhibit 10.4

 

PEREGRINE SYSTEMS, INC.

 

1999 NONSTATUTORY STOCK OPTION PLAN

 

(as amended through October 17, 2001

and applicable to Options granted on or after April 17, 2001)(1)

 

1.             PURPOSES OF THE PLAN.  THE PURPOSES OF THIS NONSTATUTORY STOCK
OPTION PLAN ARE:

 

•                  to attract and retain the best available personnel for
positions of substantial responsibility,

 

•                  to provide additional incentive to Employees and Consultants,
and

 

•                  to promote the success of the Company’s business.

 

Options granted under the Plan will be Nonstatutory Stock Options.

 

2.             DEFINITIONS.  AS USED HEREIN, THE FOLLOWING DEFINITIONS SHALL
APPLY:

 

(A)           “ADMINISTRATOR” MEANS THE BOARD OR ANY OF ITS COMMITTEES AS SHALL
BE ADMINISTERING THE PLAN, IN ACCORDANCE WITH SECTION 4 OF THE PLAN.

 

(B)           “APPLICABLE LAWS” MEANS THE REQUIREMENTS RELATING TO THE
ADMINISTRATION OF STOCK OPTION PLANS UNDER U.S. STATE CORPORATE LAWS, U.S.
FEDERAL AND STATE SECURITIES LAWS, THE CODE, ANY STOCK EXCHANGE OR QUOTATION
SYSTEM ON WHICH THE COMMON STOCK IS LISTED OR QUOTED AND THE APPLICABLE LAWS OF
ANY FOREIGN COUNTRY OR JURISDICTION WHERE OPTIONS ARE, OR WILL BE, GRANTED UNDER
THE PLAN.

 

(C)           “BOARD” MEANS THE BOARD OF DIRECTORS OF THE COMPANY.

 

(D)           “CHANGE OF CONTROL” MEANS THE OCCURRENCE OF ANY OF THE FOLLOWING
EVENTS:

 

(I)            ANY “PERSON” (AS SUCH TERM IS USED IN SECTIONS 13(D) AND 14(D) OF
THE EXCHANGE ACT) BECOMES THE “BENEFICIAL OWNER” (AS DEFINED IN RULE 13D-3 UNDER
THE EXCHANGE ACT), DIRECTLY OR INDIRECTLY, OF SECURITIES OF THE COMPANY
REPRESENTING FIFTY PERCENT (50%) OR MORE OF THE TOTAL VOTING POWER REPRESENTED
BY THE COMPANY’S THEN OUTSTANDING VOTING SECURITIES; OR

 

(II)           THE CONSUMMATION OF THE SALE OR DISPOSITION BY THE COMPANY OF ALL
OR SUBSTANTIALLY ALL THE COMPANY’S ASSETS; OR

 

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(1) Options granted prior to April 17, 2001 shall be governed by the terms of
the Plan in effect prior to such date.

 

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(III)          THE CONSUMMATION OF A MERGER OR CONSOLIDATION OF THE COMPANY WITH
ANY OTHER CORPORATION, OTHER THAN A MERGER OR CONSOLIDATION WHICH WOULD RESULT
IN THE VOTING SECURITIES OF THE COMPANY OUTSTANDING IMMEDIATELY PRIOR THERETO
CONTINUING TO REPRESENT (EITHER BY REMAINING OUT-STANDING OR BY BEING CONVERTED
INTO VOTING SECURITIES OF THE SURVIVING ENTITY OR ITS PARENT) AT LEAST FIFTY
PERCENT (50%) OF THE TOTAL VOTING POWER REPRESENTED BY THE VOTING SECURITIES OF
THE COMPANY OR SUCH SURVIVING ENTITY OR ITS PARENT OUTSTANDING IMMEDIATELY AFTER
SUCH MERGER OR CONSOLIDATION; OR

 

(IV)          A CHANGE IN THE COMPOSITION OF THE BOARD OCCURRING WITHIN A
TWO-YEAR PERIOD, AS A RESULT OF WHICH FEWER THAN A MAJORITY OF THE DIRECTORS ARE
INCUMBENT DIRECTORS.  “INCUMBENT DIRECTORS” SHALL MEAN DIRECTORS WHO EITHER (A)
ARE DIRECTORS OF THE COMPANY AS OF APRIL 17, 2001 OR (B) ARE ELECTED, OR
NOMINATED FOR ELECTION, TO THE BOARD WITH THE AFFIRMATIVE VOTES OF AT LEAST A
MAJORITY OF THOSE DIRECTORS WHOSE ELECTION OR NOMINATION WAS NOT IN CONNECTION
WITH ANY TRANSACTION DESCRIBED IN SUBSECTIONS (I), (II), OR (III) ABOVE, OR IN
CONNECTION WITH AN ACTUAL OR THREATENED PROXY CONTEST RELATING TO THE ELECTION
OF DIRECTORS TO THE COMPANY.

 

(E)           “CODE” MEANS THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.

 

(F)            “COMMITTEE”  MEANS A COMMITTEE OF DIRECTORS APPOINTED BY THE
BOARD IN ACCORDANCE WITH SECTION 4 OF THE PLAN.

 

(G)           “COMMON STOCK” MEANS THE COMMON STOCK OF THE COMPANY.

 

(H)           “COMPANY” MEANS PEREGRINE SYSTEMS, INC., A DELAWARE CORPORATION.

 

(I)            “CONSULTANT” MEANS ANY PERSON, INCLUDING AN ADVISOR, ENGAGED BY
THE COMPANY OR A PARENT OR SUBSIDIARY TO RENDER SERVICES TO SUCH ENTITY.

 

(J)            “DIRECTOR” MEANS A MEMBER OF THE BOARD.

 

(K)           “DISABILITY” MEANS TOTAL AND PERMANENT DISABILITY AS DEFINED IN
SECTION 22(E)(3) OF THE CODE.

 

(L)            “EMPLOYEE” MEANS ANY PERSON, INCLUDING OFFICERS, EMPLOYED BY THE
COMPANY OR ANY PARENT OR SUBSIDIARY OF THE COMPANY.  A SERVICE PROVIDER SHALL
NOT CEASE TO BE AN EMPLOYEE IN THE CASE OF (I) ANY LEAVE OF ABSENCE APPROVED BY
THE COMPANY OR (II) TRANSFERS BETWEEN LOCATIONS OF THE COMPANY OR BETWEEN THE
COMPANY, ITS PARENT, ANY SUBSIDIARY, OR ANY SUCCESSOR.  NEITHER SERVICE AS A
DIRECTOR NOR PAYMENT OF A DIRECTOR’S FEE BY THE COMPANY SHALL BE SUFFICIENT TO
CONSTITUTE “EMPLOYMENT” BY THE COMPANY.

 

(M)          “EXCHANGE ACT” MEANS THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

(N)           “FAIR MARKET VALUE” MEANS, AS OF ANY DATE, THE VALUE OF COMMON
STOCK DETERMINED AS FOLLOWS:

 

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(I)            IF THE COMMON STOCK IS LISTED ON ANY ESTABLISHED STOCK EXCHANGE
OR A NATIONAL MARKET SYSTEM, INCLUDING WITHOUT LIMITATION THE NASDAQ NATIONAL
MARKET OR THE NASDAQ SMALLCAP MARKET OF THE NASDAQ STOCK MARKET, ITS FAIR MARKET
VALUE SHALL BE THE CLOSING SALES PRICE FOR SUCH STOCK (OR THE CLOSING BID, IF NO
SALES WERE REPORTED) AS QUOTED ON SUCH EXCHANGE OR SYSTEM FOR THE LAST MARKET
TRADING DAY PRIOR TO THE TIME OF DETERMINATION, AS REPORTED IN THE WALL STREET
JOURNAL OR SUCH OTHER SOURCE AS THE ADMINISTRATOR DEEMS RELIABLE;

 

(II)           IF THE COMMON STOCK IS REGULARLY QUOTED BY A RECOGNIZED
SECURITIES DEALER BUT SELLING PRICES ARE NOT REPORTED, THE FAIR MARKET VALUE OF
A SHARE OF COMMON STOCK SHALL BE THE MEAN BETWEEN THE HIGH BID AND LOW ASKED
PRICES FOR THE COMMON STOCK ON THE LAST MARKET TRADING DAY PRIOR TO THE DAY OF
DETERMINATION, AS REPORTED IN THE WALL STREET JOURNAL OR SUCH OTHER SOURCE AS
THE ADMINISTRATOR DEEMS RELIABLE;

 

(III)          IN THE ABSENCE OF AN ESTABLISHED MARKET FOR THE COMMON STOCK, THE
FAIR MARKET VALUE SHALL BE DETERMINED IN GOOD FAITH BY THE ADMINISTRATOR.

 

(O)           “NOTICE OF GRANT” MEANS A WRITTEN OR ELECTRONIC NOTICE EVIDENCING
CERTAIN TERMS AND CONDITIONS OF AN INDIVIDUAL OPTION GRANT.  THE NOTICE OF GRANT
IS PART OF THE OPTION AGREEMENT.

 

(P)           “OFFICER” MEANS A PERSON WHO IS AN OFFICER OF THE COMPANY WITHIN
THE MEANING OF SECTION 16 OF THE EXCHANGE ACT AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER.

 

(Q)           “OPTION” MEANS A NONSTATUTORY STOCK OPTION GRANTED PURSUANT TO THE
PLAN, THAT IS NOT INTENDED TO QUALIFY AS AN INCENTIVE STOCK OPTION WITHIN THE
MEANING OF SECTION 422 OF THE CODE AND THE REGULATIONS PROMULGATED THEREUNDER.

 

(R)            “OPTION AGREEMENT” MEANS AN AGREEMENT BETWEEN THE COMPANY AND AN
OPTIONEE EVIDENCING THE TERMS AND CONDITIONS OF AN INDIVIDUAL OPTION GRANT.  THE
OPTION AGREEMENT IS SUBJECT TO THE TERMS AND CONDITIONS OF THE PLAN.

 

(S)           “OPTION EXCHANGE PROGRAM” MEANS A PROGRAM WHEREBY OUTSTANDING
OPTIONS ARE SURRENDERED IN EXCHANGE FOR OPTIONS WITH A LOWER EXERCISE PRICE.

 

(T)            “OPTIONED STOCK” MEANS THE COMMON STOCK SUBJECT TO AN OPTION.

 

(U)           “OPTIONEE” MEANS THE HOLDER OF AN OUTSTANDING OPTION GRANTED UNDER
THE PLAN.

 

(V)           “PARENT” MEANS A “PARENT CORPORATION,” WHETHER NOW OR HEREAFTER
EXISTING, AS DEFINED IN SECTION 424(E) OF THE CODE.

 

(W)          “PLAN” MEANS THIS 1999 NONSTATUTORY STOCK OPTION PLAN.

 

(X)            “SERVICE PROVIDER” MEANS AN EMPLOYEE, OFFICER, CONSULTANT OR
DIRECTOR.

 

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(Y)           “SHARE” MEANS A SHARE OF THE COMMON STOCK, AS ADJUSTED IN
ACCORDANCE WITH SECTION 12 OF THE PLAN.

 

(Z)            “SUBSIDIARY” MEANS A “SUBSIDIARY CORPORATION,” WHETHER NOW OR
HEREAFTER EXISTING, AS DEFINED IN SECTION 424(F) OF THE CODE.

 

3.             STOCK SUBJECT TO THE PLAN.  SUBJECT TO THE PROVISIONS OF
SECTION 12 OF THE PLAN, THE MAXIMUM AGGREGATE NUMBER OF SHARES, WHICH MAY BE
OPTIONED AND SOLD UNDER THE PLAN, IS 7,000,000 SHARES.  THE SHARES MAY BE
AUTHORIZED, BUT UNISSUED, OR REACQUIRED COMMON STOCK.

 

If an Option expires or becomes unexercisable without having been exercised in
full, or is surrendered pursuant to an Option Exchange Program, the unpurchased
Shares which were subject thereto shall become available for future grant or
sale under the Plan (unless the Plan has terminated).

 

4.             ADMINISTRATION OF THE PLAN.

 

(A)           ADMINISTRATION.  THE PLAN SHALL BE ADMINISTERED BY (I) THE BOARD
OR (II) A COMMITTEE, WHICH COMMITTEE SHALL BE CONSTITUTED TO SATISFY APPLICABLE
LAWS.

 

(B)           POWERS OF THE ADMINISTRATOR.  SUBJECT TO THE PROVISIONS OF THE
PLAN, AND IN THE CASE OF A COMMITTEE, SUBJECT TO THE SPECIFIC DUTIES DELEGATED
BY THE BOARD TO SUCH COMMITTEE, THE ADMINISTRATOR SHALL HAVE THE AUTHORITY, IN
ITS DISCRETION:

 

(I)            TO DETERMINE THE FAIR MARKET VALUE OF THE COMMON STOCK;

 

(II)           TO SELECT THE SERVICE PROVIDERS TO WHOM OPTIONS MAY BE GRANTED
HEREUNDER;

 

(III)          TO DETERMINE WHETHER AND TO WHAT EXTENT OPTIONS ARE GRANTED
HEREUNDER;

 

(IV)          TO DETERMINE THE NUMBER OF SHARES OF COMMON STOCK TO BE COVERED BY
EACH OPTION GRANTED HEREUNDER;

 

(V)           TO APPROVE FORMS OF AGREEMENT FOR USE UNDER THE PLAN;

 

(VI)          TO DETERMINE THE TERMS AND CONDITIONS, NOT INCONSISTENT WITH THE
TERMS OF THE PLAN, OF ANY AWARD GRANTED HEREUNDER.  SUCH TERMS AND CONDITIONS
INCLUDE, BUT ARE NOT LIMITED TO, THE EXERCISE PRICE, THE TIME OR TIMES WHEN
OPTIONS MAY BE EXERCISED (WHICH MAY BE BASED ON PERFORMANCE CRITERIA), ANY
VESTING ACCELERATION OR WAIVER OF FORFEITURE RESTRICTIONS, AND ANY RESTRICTION
OR LIMITATION REGARDING ANY OPTION  OR THE SHARES OF COMMON STOCK RELATING
THERETO, BASED IN EACH CASE ON SUCH FACTORS AS THE ADMINISTRATOR, IN ITS SOLE
DISCRETION, SHALL DETERMINE;

 

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(VII)         TO REDUCE THE EXERCISE PRICE OF ANY OPTION TO THE THEN CURRENT
FAIR MARKET VALUE IF THE FAIR MARKET VALUE OF THE COMMON STOCK COVERED BY SUCH
OPTION SHALL HAVE DECLINED SINCE THE DATE THE OPTION WAS GRANTED;

 

(VIII)        TO INSTITUTE AN OPTION EXCHANGE PROGRAM;

 

(IX)           TO CONSTRUE AND INTERPRET THE TERMS OF THE PLAN AND AWARDS
GRANTED PURSUANT TO THE PLAN;

 

(X)            TO PRESCRIBE, AMEND AND RESCIND RULES AND REGULATIONS RELATING TO
THE PLAN, INCLUDING RULES AND REGULATIONS RELATING TO SUB-PLANS ESTABLISHED FOR
THE PURPOSE OF QUALIFYING FOR PREFERRED TAX TREATMENT UNDER FOREIGN TAX LAWS;

 

(XI)           TO MODIFY OR AMEND EACH OPTION (SUBJECT TO SECTION 14(B) OF THE
PLAN), INCLUDING THE DISCRETIONARY AUTHORITY TO EXTEND THE POST-TERMINATION
EXERCISABILITY PERIOD OF OPTIONS LONGER THAN IS OTHERWISE PROVIDED FOR IN THE
PLAN;

 

(XII)          TO AUTHORIZE ANY PERSON TO EXECUTE ON BEHALF OF THE COMPANY ANY
INSTRUMENT REQUIRED TO EFFECT THE GRANT OF AN OPTION PREVIOUSLY GRANTED BY THE
ADMINISTRATOR;

 

(XIII)         TO DETERMINE THE TERMS AND RESTRICTIONS APPLICABLE TO OPTIONS;

 

(XIV)        TO ALLOW OPTIONEES TO SATISFY WITHHOLDING TAX OBLIGATIONS BY
ELECTING TO HAVE THE COMPANY WITHHOLD FROM THE SHARES TO BE ISSUED UPON EXERCISE
OF AN OPTION THAT NUMBER OF SHARES HAVING A FAIR MARKET VALUE EQUAL TO THE
AMOUNT REQUIRED TO BE WITHHELD.  THE FAIR MARKET VALUE OF THE SHARES TO BE
WITHHELD SHALL BE DETERMINED ON THE DATE THAT THE AMOUNT OF TAX TO BE WITHHELD
IS TO BE DETERMINED.  ALL ELECTIONS BY AN OPTIONEE TO HAVE SHARES WITHHELD FOR
THIS PURPOSE SHALL BE MADE IN SUCH FORM AND UNDER SUCH CONDITIONS AS THE
ADMINISTRATOR MAY DEEM NECESSARY OR ADVISABLE; AND

 

(XV)         TO MAKE ALL OTHER DETERMINATIONS DEEMED NECESSARY OR ADVISABLE FOR
ADMINISTERING THE PLAN.

 

(C)           EFFECT OF ADMINISTRATOR’S DECISION.  THE ADMINISTRATOR’S
DECISIONS, DETERMINATIONS AND INTERPRETATIONS SHALL BE FINAL AND BINDING ON ALL
OPTIONEES AND ANY OTHER HOLDERS OF OPTIONS.

 

5.             ELIGIBILITY.  OPTIONS MAY BE GRANTED TO SERVICE PROVIDERS;
PROVIDED, HOWEVER, THAT NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN
THE PLAN, OPTIONS MAY NOT BE GRANTED TO OFFICERS AND DIRECTORS, EXCEPT IN
CONNECTION WITH AN OFFICER’S INITIAL SERVICE TO THE COMPANY.

 

6.             LIMITATION.  NEITHER THE PLAN NOR ANY OPTION SHALL CONFER UPON AN
OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUING THE OPTIONEE’S RELATIONSHIP AS A
SERVICE PROVIDER WITH THE COMPANY, NOR SHALL THEY INTERFERE IN ANY WAY WITH THE
OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE SUCH RELATIONSHIP AT ANY
TIME, WITH OR WITHOUT CAUSE.

 

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7.             TERM OF PLAN.  THE PLAN SHALL BECOME EFFECTIVE UPON ITS ADOPTION
BY THE BOARD.  IT SHALL CONTINUE IN EFFECT FOR TEN (10) YEARS, UNLESS SOONER
TERMINATED UNDER SECTION 14 OF THE PLAN.

 

8.             TERM OF OPTION.  THE TERM OF EACH OPTION SHALL BE STATED IN THE
OPTION AGREEMENT.

 

9.             OPTION EXERCISE PRICE AND CONSIDERATION.

 

(A)           EXERCISE PRICE.  THE PER SHARE EXERCISE PRICE FOR THE SHARES TO BE
ISSUED PURSUANT TO EXERCISE OF AN OPTION SHALL BE DETERMINED BY THE
ADMINISTRATOR.

 

(B)           WAITING PERIOD AND EXERCISE DATES.  AT THE TIME AN OPTION IS
GRANTED, THE ADMINISTRATOR SHALL FIX THE PERIOD WITHIN WHICH THE OPTION MAY BE
EXERCISED AND SHALL DETERMINE ANY CONDITIONS WHICH MUST BE SATISFIED BEFORE THE
OPTION MAY BE EXERCISED.

 

(C)           FORM OF CONSIDERATION.  THE ADMINISTRATOR SHALL DETERMINE THE
ACCEPTABLE FORM OF CONSIDERATION FOR EXERCISING AN OPTION, INCLUDING THE METHOD
OF PAYMENT.  SUCH CONSIDERATION MAY CONSIST ENTIRELY OF:

 

(I)            CASH;

 

(II)           CHECK;

 

(III)          PROMISSORY NOTE;

 

(IV)          OTHER SHARES WHICH (A) IN THE CASE OF SHARES ACQUIRED UPON
EXERCISE OF AN OPTION, HAVE BEEN OWNED BY THE OPTIONEE FOR MORE THAN SIX MONTHS
ON THE DATE OF SURRENDER, AND (B) HAVE A FAIR MARKET VALUE ON THE DATE OF
SURRENDER EQUAL TO THE AGGREGATE EXERCISE PRICE OF THE SHARES AS TO WHICH SAID
OPTION SHALL BE EXERCISED;

 

(V)           CONSIDERATION RECEIVED BY THE COMPANY UNDER A CASHLESS EXERCISE
PROGRAM IMPLEMENTED BY THE COMPANY IN CONNECTION WITH THE PLAN;

 

(VI)          A REDUCTION IN THE AMOUNT OF ANY COMPANY LIABILITY TO THE
OPTIONEE, INCLUDING ANY LIABILITY ATTRIBUTABLE TO THE OPTIONEE’S PARTICIPATION
IN ANY COMPANY-SPONSORED DEFERRED COMPENSATION PROGRAM OR ARRANGEMENT;

 

(VII)         SUCH OTHER CONSIDERATION AND METHOD OF PAYMENT FOR THE ISSUANCE OF
SHARES TO THE EXTENT PERMITTED BY APPLICABLE LAWS; OR

 

(VIII)        ANY COMBINATION OF THE FOREGOING METHODS OF PAYMENT.

 

10.           EXERCISE OF OPTION.

 

(A)           PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. ANY OPTION
GRANTED HEREUNDER SHALL BE EXERCISABLE ACCORDING TO THE TERMS OF THE PLAN AND AT
SUCH TIMES AND UNDER SUCH

 

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conditions as determined by the Administrator and set forth in the Option
Agreement.  An Option may not be exercised for a fraction of a Share.

 

An Option shall be deemed exercised when the Company receives: (i) written or
electronic notice of exercise (in accordance with the Option Agreement) from the
person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised.  Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan.  Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse.  Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option.  The Company shall
issue (or cause to be issued) such Shares promptly after the Option is
exercised.  No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 12 of the Plan.

 

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

 

(B)           TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER.  IF AN OPTIONEE
CEASES TO BE A SERVICE PROVIDER, OTHER THAN UPON THE OPTIONEE’S DEATH OR
DISABILITY, THE OPTIONEE MAY EXERCISE HIS OR HER OPTION, BUT ONLY WITHIN SUCH
PERIOD OF TIME AS IS SPECIFIED IN THE OPTION AGREEMENT, AND ONLY TO THE EXTENT
THAT THE OPTION IS VESTED ON THE DATE OF TERMINATION (BUT IN NO EVENT LATER THAN
THE EXPIRATION OF THE TERM OF SUCH OPTION AS SET FORTH IN THE OPTION
AGREEMENT).  IN THE ABSENCE OF A SPECIFIED TIME IN THE OPTION AGREEMENT, THE
OPTION SHALL REMAIN EXERCISABLE FOR NINETY (90) DAYS FOLLOWING THE OPTIONEE’S
TERMINATION.  IF, ON THE DATE OF TERMINATION, THE OPTIONEE IS NOT VESTED AS TO
HIS OR HER ENTIRE OPTION, THE SHARES COVERED BY THE UNVESTED PORTION OF THE
OPTION SHALL REVERT TO THE PLAN.  IF, AFTER TERMINATION, THE OPTIONEE DOES NOT
EXERCISE HIS OR HER OPTION WITHIN THE TIME SPECIFIED BY THE ADMINISTRATOR, THE
OPTION SHALL TERMINATE, AND THE SHARES COVERED BY SUCH OPTION SHALL REVERT TO
THE PLAN.

 

(C)           DISABILITY OF OPTIONEE.  IF AN OPTIONEE CEASES TO BE A SERVICE
PROVIDER AS A RESULT OF THE OPTIONEE’S DISABILITY, THE OPTIONEE MAY EXERCISE HIS
OR HER OPTION WITHIN SUCH PERIOD OF TIME AS IS SPECIFIED IN THE OPTION
AGREEMENT, TO THE EXTENT THE OPTION IS VESTED ON THE DATE OF TERMINATION (BUT IN
NO EVENT LATER THAN THE EXPIRATION OF THE TERM OF SUCH OPTION AS SET FORTH IN
THE OPTION AGREEMENT).  IN THE ABSENCE OF A SPECIFIED TIME IN THE OPTION
AGREEMENT, THE OPTION SHALL REMAIN EXERCISABLE FOR SIX (6) MONTHS FOLLOWING THE
OPTIONEE’S TERMINATION.  IF, ON THE DATE OF TERMINATION, THE OPTIONEE IS NOT
VESTED AS TO HIS OR HER ENTIRE OPTION, THE SHARES COVERED BY THE UNVESTED
PORTION OF THE OPTION SHALL REVERT TO THE PLAN.  IF, AFTER TERMINATION, THE
OPTIONEE DOES NOT EXERCISE HIS OR HER OPTION WITHIN THE TIME SPECIFIED HEREIN,
THE OPTION SHALL TERMINATE, AND THE SHARES COVERED BY SUCH OPTION SHALL REVERT
TO THE PLAN.

 

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(D)           DEATH OF OPTIONEE. IN THE EVENT OF THE DEATH OF AN OPTIONEE, THE
OPTION SHALL VEST AND BECOME EXERCISABLE AS TO ALL OF THE SHARES SUBJECT THERETO
AND MAY BE EXERCISED WITHIN SUCH PERIOD OF TIME AS IS SPECIFIED IN THE OPTION
AGREEMENT (BUT IN NO EVENT LATER THAN THE EXPIRATION OF THE TERM OF SUCH OPTION
AS SET FORTH IN THE NOTICE OF GRANT), BY THE OPTIONEE’S ESTATE OR BY A PERSON
WHO ACQUIRES THE RIGHT TO EXERCISE THE OPTION BY BEQUEST OR INHERITANCE.  IN THE
ABSENCE OF A SPECIFIED TIME IN THE OPTION AGREEMENT, THE OPTION SHALL REMAIN
EXERCISABLE FOR TWELVE (12) MONTHS FOLLOWING THE OPTIONEE’S TERMINATION.  THE
OPTION MAY BE EXERCISED BY THE EXECUTOR OR ADMINISTRATOR OF THE OPTIONEE’S
ESTATE OR, IF NONE, BY THE PERSON(S) ENTITLED TO EXERCISE THE OPTION UNDER THE
OPTIONEE’S WILL OR THE LAWS OF DESCENT OR DISTRIBUTION.  IF THE OPTION IS NOT SO
EXERCISED WITH THE SPECIFIED TIME, THE OPTION SHALL TERMINATE, AND THE SHARES
COVERED BY SUCH OPTION SHALL REVERT TO THE PLAN.

 

(E)           BUYOUT PROVISIONS.  THE ADMINISTRATOR MAY AT ANY TIME OFFER TO BUY
OUT FOR A PAYMENT IN CASH OR SHARES, AN OPTION PREVIOUSLY GRANTED BASED ON SUCH
TERMS AND CONDITIONS AS THE ADMINISTRATOR SHALL ESTABLISH AND COMMUNICATE TO THE
OPTIONEE AT THE TIME THAT SUCH OFFER IS MADE.

 

11.           NON-TRANSFERABILITY OF OPTIONS.  UNLESS DETERMINED OTHERWISE BY
THE ADMINISTRATOR, AN OPTION MAY NOT BE SOLD, PLEDGED, ASSIGNED, HYPOTHECATED,
TRANSFERRED, OR DISPOSED OF IN ANY MANNER OTHER THAN BY WILL OR BY THE LAWS OF
DESCENT OR DISTRIBUTION AND MAY BE EXERCISED, DURING THE LIFETIME OF THE
OPTIONEE, ONLY BY THE OPTIONEE.  IF THE ADMINISTRATOR MAKES AN OPTION
TRANSFERABLE, SUCH OPTION SHALL CONTAIN SUCH ADDITIONAL TERMS AND CONDITIONS AS
THE ADMINISTRATOR DEEMS APPROPRIATE.

 

12.           ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
ASSET SALE.

 

(A)           CHANGES IN CAPITALIZATION.  SUBJECT TO ANY REQUIRED ACTION BY THE
SHAREHOLDERS OF THE COMPANY, THE NUMBER OF SHARES OF COMMON STOCK COVERED BY
EACH OUTSTANDING OPTION, AND THE NUMBER OF SHARES OF COMMON STOCK WHICH HAVE
BEEN AUTHORIZED FOR ISSUANCE UNDER THE PLAN BUT AS TO WHICH NO OPTIONS HAVE YET
BEEN GRANTED OR WHICH HAVE BEEN RETURNED TO THE PLAN UPON CANCELLATION OR
EXPIRATION OF AN OPTION, AS WELL AS THE PRICE PER SHARE OF COMMON STOCK COVERED
BY EACH SUCH OUTSTANDING OPTION, SHALL BE PROPORTIONATELY ADJUSTED FOR ANY
INCREASE OR DECREASE IN THE NUMBER OF ISSUED SHARES OF COMMON STOCK RESULTING
FROM A STOCK SPLIT, REVERSE STOCK SPLIT, STOCK DIVIDEND, COMBINATION OR
RECLASSIFICATION OF THE COMMON STOCK, OR ANY OTHER INCREASE OR DECREASE IN THE
NUMBER OF ISSUED SHARES OF COMMON STOCK EFFECTED WITHOUT RECEIPT OF
CONSIDERATION BY THE COMPANY; PROVIDED, HOWEVER, THAT CONVERSION OF ANY
CONVERTIBLE SECURITIES OF THE COMPANY SHALL NOT BE DEEMED TO HAVE BEEN “EFFECTED
WITHOUT RECEIPT OF CONSIDERATION.”  SUCH ADJUSTMENT SHALL BE MADE BY THE BOARD,
WHOSE DETERMINATION IN THAT RESPECT SHALL BE FINAL, BINDING AND CONCLUSIVE. 
EXCEPT AS EXPRESSLY PROVIDED HEREIN, NO ISSUANCE BY THE COMPANY OF SHARES OF
STOCK OF ANY CLASS, OR SECURITIES CONVERTIBLE INTO SHARES OF STOCK OF ANY CLASS,
SHALL AFFECT, AND NO ADJUSTMENT BY REASON THEREOF SHALL BE MADE WITH RESPECT TO,
THE NUMBER OR PRICE OF SHARES OF COMMON STOCK SUBJECT TO AN OPTION.

 

(B)           DISSOLUTION OR LIQUIDATION.  IN THE EVENT OF THE PROPOSED
DISSOLUTION OR LIQUIDATION OF THE COMPANY, THE ADMINISTRATOR SHALL NOTIFY EACH
OPTIONEE AS SOON AS PRACTICABLE PRIOR TO THE EFFECTIVE DATE OF SUCH PROPOSED
TRANSACTION.  THE ADMINISTRATOR IN ITS DISCRETION MAY PROVIDE FOR AN OPTIONEE TO
HAVE THE RIGHT TO EXERCISE HIS OR HER OPTION UNTIL FIFTEEN (15) DAYS PRIOR TO
SUCH

 

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transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable.  In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated.  To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such proposed
action.

 

(C)           MERGER OR ASSET SALE.  IN THE EVENT OF A MERGER OF THE COMPANY
WITH OR INTO ANOTHER CORPORATION, OR THE SALE OF SUBSTANTIALLY ALL OF THE ASSETS
OF THE COMPANY, EACH OUTSTANDING OPTION SHALL BE ASSUMED OR AN EQUIVALENT OPTION
SUBSTITUTED BY THE SUCCESSOR CORPORATION OR A PARENT OR SUBSIDIARY OF THE
SUCCESSOR CORPORATION.  IN THE EVENT THAT THE SUCCESSOR CORPORATION REFUSES TO
ASSUME OR SUBSTITUTE FOR THE OPTION, THE OPTIONEE SHALL FULLY VEST IN AND HAVE
THE RIGHT TO EXERCISE THE OPTION AS TO ALL OF THE OPTIONED STOCK, INCLUDING
SHARES AS TO WHICH IT WOULD NOT OTHERWISE BE VESTED OR EXERCISABLE.  IF AN
OPTION IS NOT ASSUMED OR SUBSTITUTED (AND ALREADY WAS EXERCISABLE OR BECOMES
FULLY VESTED AND EXERCISABLE IN LIEU OF ASSUMPTION OR SUBSTITUTION), THE
ADMINISTRATOR SHALL NOTIFY THE OPTIONEE IN WRITING OR ELECTRONICALLY THAT THE
OPTION SHALL BE FULLY VESTED AND EXERCISABLE FOR A PERIOD OF FIFTEEN (15) DAYS
FROM THE DATE OF SUCH NOTICE, AND THE OPTION SHALL TERMINATE UPON THE EXPIRATION
OF SUCH PERIOD.  FOR THE PURPOSES OF THIS PARAGRAPH, THE OPTION SHALL BE
CONSIDERED ASSUMED IF, FOLLOWING THE MERGER OR SALE OF ASSETS, THE OPTION OR
RIGHT CONFERS THE RIGHT TO PURCHASE OR RECEIVE, FOR EACH SHARE OF OPTIONED STOCK
SUBJECT TO THE OPTION IMMEDIATELY PRIOR TO THE MERGER OR SALE OF ASSETS, THE
CONSIDERATION (WHETHER STOCK, CASH, OR OTHER SECURITIES OR PROPERTY) RECEIVED IN
THE MERGER OR SALE OF ASSETS BY HOLDERS OF COMMON STOCK FOR EACH SHARE HELD ON
THE EFFECTIVE DATE OF THE TRANSACTION (AND IF HOLDERS WERE OFFERED A CHOICE OF
CONSIDERATION, THE TYPE OF CONSIDERATION CHOSEN BY THE HOLDERS OF A MAJORITY OF
THE OUTSTANDING SHARES); PROVIDED, HOWEVER, THAT IF SUCH CONSIDERATION RECEIVED
IN THE MERGER OR SALE OF ASSETS IS NOT SOLELY COMMON STOCK OF THE SUCCESSOR
CORPORATION OR ITS PARENT, THE ADMINISTRATOR MAY, WITH THE CONSENT OF THE
SUCCESSOR CORPORATION, PROVIDE FOR THE CONSIDERATION TO BE RECEIVED UPON THE
EXERCISE OF THE OPTION, FOR EACH SHARE OF OPTIONED STOCK SUBJECT TO THE OPTION,
TO BE SOLELY COMMON STOCK OF THE SUCCESSOR CORPORATION OR ITS PARENT EQUAL IN
FAIR MARKET VALUE TO THE PER SHARE CONSIDERATION RECEIVED BY HOLDERS OF COMMON
STOCK IN THE MERGER OR SALE OF ASSETS.

 

13.           DATE OF GRANT.  THE DATE OF GRANT OF AN OPTION SHALL BE, FOR ALL
PURPOSES, THE DATE ON WHICH THE ADMINISTRATOR MAKES THE DETERMINATION GRANTING
SUCH OPTION, OR SUCH OTHER LATER DATE AS IS DETERMINED BY THE ADMINISTRATOR. 
NOTICE OF THE DETERMINATION SHALL BE PROVIDED TO EACH OPTIONEE WITHIN A
REASONABLE TIME AFTER THE DATE OF SUCH GRANT.

 

14.           AMENDMENT AND TERMINATION OF THE PLAN.

 

(A)           AMENDMENT AND TERMINATION.  THE BOARD MAY AT ANY TIME AMEND,
ALTER, SUSPEND OR TERMINATE THE PLAN.

 

(B)           EFFECT OF AMENDMENT OR TERMINATION.  NO AMENDMENT, ALTERATION,
SUSPENSION OR TERMINATION OF THE PLAN SHALL IMPAIR THE RIGHTS OF ANY OPTIONEE,
UNLESS MUTUALLY AGREED OTHERWISE BETWEEN THE OPTIONEE AND THE ADMINISTRATOR,
WHICH AGREEMENT MUST BE IN WRITING AND SIGNED BY THE

 

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Optionee and the Company.  Termination of the Plan shall not affect the
Administrator’s ability to exercise the powers granted to it hereunder with
respect to options granted under the Plan prior to the date of such termination.

 

15.           CONDITIONS UPON ISSUANCE OF SHARES.

 

(A)           LEGAL COMPLIANCE.  SHARES SHALL NOT BE ISSUED PURSUANT TO THE
EXERCISE OF AN OPTION UNLESS THE EXERCISE OF SUCH OPTION AND THE ISSUANCE AND
DELIVERY OF SUCH SHARES SHALL COMPLY WITH APPLICABLE LAWS AND SHALL BE FURTHER
SUBJECT TO THE APPROVAL OF COUNSEL FOR THE COMPANY WITH RESPECT TO SUCH
COMPLIANCE.

 

(B)           INVESTMENT REPRESENTATIONS.  AS A CONDITION TO THE EXERCISE OF AN
OPTION THE COMPANY MAY REQUIRE THE PERSON EXERCISING SUCH OPTION  TO REPRESENT
AND WARRANT AT THE TIME OF ANY SUCH EXERCISE THAT THE SHARES ARE BEING PURCHASED
ONLY FOR INVESTMENT AND WITHOUT ANY PRESENT INTENTION TO SELL OR DISTRIBUTE SUCH
SHARES IF, IN THE OPINION OF COUNSEL FOR THE COMPANY, SUCH A REPRESENTATION IS
REQUIRED.

 

16.           INABILITY TO OBTAIN AUTHORITY.  THE INABILITY OF THE COMPANY TO
OBTAIN AUTHORITY FROM ANY REGULATORY BODY HAVING JURISDICTION, WHICH AUTHORITY
IS DEEMED BY THE COMPANY’S COUNSEL TO BE NECESSARY TO THE LAWFUL ISSUANCE AND
SALE OF ANY SHARES HEREUNDER, SHALL RELIEVE THE COMPANY OF ANY LIABILITY IN
RESPECT OF THE FAILURE TO ISSUE OR SELL SUCH SHARES AS TO WHICH SUCH REQUISITE
AUTHORITY SHALL NOT HAVE BEEN OBTAINED.

 

17.           RESERVATION OF SHARES.  THE COMPANY, DURING THE TERM OF THIS PLAN,
WILL AT ALL TIMES RESERVE AND KEEP AVAILABLE SUCH NUMBER OF SHARES AS SHALL BE
SUFFICIENT TO SATISFY THE REQUIREMENTS OF THE PLAN.

 

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PEREGRINE SYSTEMS, INC.

 

1999 NONSTATUTORY STOCK OPTION PLAN

 

STOCK OPTION AGREEMENT

 

Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option Agreement.

 

I               NOTICE OF STOCK OPTION GRANT

 

[Optionee’s Name]

 

You have been granted an option to purchase Common Stock of the Company, subject
to the terms and conditions of the Plan and this Option Agreement, as follows:

 

Date of Grant:

 

 

 

Vesting Commencement Date:

 

 

 

Exercise Price per Share:

$

 

 

Total Number of Shares Granted:

 

 

 

Type of Option:

Nonstatutory Stock Option

 

 

Term/Expiration Date:

 

 

Vesting Schedule:

 

25% of the total number of Shares subject to the Option shall vest twelve months
after the Vesting Commencement Date, and 6.25% of the total number of Shares
subject to the Option shall vest each quarter thereafter, provided that Shares
actually will vest on any such date only if the Optionee continues to be a
Service Provider on such date.

 

Notwithstanding the preceding, all of the Shares subject to the Option shall
vest on the date the Optionee ceases to be a Service Provider if (and only if)
the cessation as a Service Provider both (1) occurs within 12 months after a
Change of Control, and (2) either was by action (a) of the Company for a reason
other than Cause, or (b) of the Employee for Good Reason.

 

For purposes of the preceding paragraph, Cause means (i) any act of personal
dishonesty taken in connection with the Optionee’s responsibilities as a Service
Provider that is intended to result in his or her substantial personal
enrichment, (ii) the Optionee’s conviction or plea of no contest to a crime that
will have a detrimental effect on the Company’s reputation or business,
(iii) willful misconduct by the Optionee that is injurious to the Company, or
(iv) the Optionee’s continued violation of his or her

 

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obligations to the Company after the Optionee has been delivered written notice
of the violation and given a reasonable opportunity to cure. Good Reason means,
without the Optionee’s written consent (i) a material reduction in the
optionee’s duties and/or status at the Company, (ii) the Optionee’s principal
work location being moved more than 30 miles, (iii) the Company reducing the
Optionee’s base salary below his or her salary immediately before the Change of
Control, or (iv) the Company reducing the Optionee’s bonus opportunity below his
or her bonus opportunity immediately before the Change of Control.

 

Termination Period:

 

This Option may be exercised for 90 days after termination of Optionee’s
Continuous Status as an Employee or Consultant, or such longer period as may be
applicable upon death or disability of Optionee as provided in the Plan, but in
no event later than the Term/Expiration Date as provided above.

 

II             AGREEMENT

 

1.             Grant of Option.  The Plan Administrator of the Company hereby
grants to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the “Optionee”) an option (the “Option”) to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the “Exercise Price”), subject to the terms and
conditions of the Plan, which is incorporated herein by reference.  Subject to
Section 14(b) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.

 

2.             Exercise of Option.

 

(a)           Right to Exercise.  This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.

 

(b)           Method of Exercise.  This Option is exercisable by delivery of an
exercise notice (in a form and manner satisfactory to the Company) which shall
state the election to exercise the Option, the number of Shares in respect of
which the Option is being exercised (the “Exercised Shares”), and such other
representations and agreements as may be required by the Company pursuant to the
provisions of the Plan.  The Exercise Notice shall be accompanied by payment of
the aggregate Exercise Price as to all Exercised Shares.  This Option shall be
deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.

No Shares shall be issued pursuant to the exercise of this Option unless such
issuance and exercise complies with Applicable Laws.  Assuming such compliance,
for income tax purposes the Exercised Shares shall be considered transferred to
the Optionee on the date the Option is exercised with respect to such Exercised
Shares.

 

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3.             Method of Payment.  Payment of the aggregate Exercise Price shall
be by any of the following, or a combination thereof, at the election of the
Optionee:

 

(a)     cash;

 

(b)     check;

 

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

 

(d)     surrender of other Shares, which (i) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six (6)
months on the date of surrender, and (ii) have a Fair Market Value on the date
of surrender equal to the aggregate Exercise Price of the Exercised Shares.

 

4.             Non-Transferability of Option.  This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by the
Optionee.  The terms of the Plan and this Option Agreement shall be binding upon
the executors, administrators, heirs, successors and assigns of the Optionee.

 

5.             Term of Option.  This Option may be exercised only within the
term set out in the Notice of Grant, and may be exercised during such term only
in accordance with the Plan and the terms of this Option Agreement.

 

6.             Tax Consequences.  Some of the federal tax consequences relating
to this Option, as of the date of this Option, are set forth below.  THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE.  THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS
OPTION OR DISPOSING OF THE SHARES.

 

(a)           Exercising the Option.  The Optionee may incur regular federal
income tax liability upon exercise of an NSO.  The Optionee will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the Fair Market Value of the Exercised Shares on the
date of exercise over their aggregate Exercise Price.  If the Optionee is an
Employee or a former Employee, the Company will be required to withhold from his
or her compensation or collect from Optionee and pay to the applicable taxing
authorities an amount in cash equal to a percentage of this compensation income
at the time of exercise, and may refuse to honor the exercise and refuse to
deliver Shares if such withholding amounts are not delivered at the time of
exercise.

 

(b)           Disposition of Shares.  If the Optionee holds NSO Shares for at
least one year, any gain realized on disposition of the Shares will be treated
as long-term capital gain for federal income tax purposes.

 

7.             Entire Agreement; Governing Law.  The Plan is incorporated herein
by reference.  The Plan and this Option Agreement constitute the entire
agreement of the

 

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parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee’s interest except by means of a writing signed by the Company and
Optionee.  The internal substantive laws, but not the choice of law rules, of
California govern this agreement.

 

8.             NO GUARANTEE OF CONTINUED SERVICE.  OPTIONEE ACKNOWLEDGES AND
AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS
EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND
NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER).  OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE
OPTIONEE’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.

 

By your signature and the signature of the Company’s representative below, you
and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement.  Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option
Agreement.  Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Administrator upon any questions
relating to the Plan and Option Agreement.  Optionee further agrees to notify
the Company upon any change in the residence address indicated below.

 

OPTIONEE

 

PEREGRINE SYSTEMS, INC.

 

 

a Delaware corporation

 

 

 

Print Name of Optionee

 

 

 

 

 

 

 

/s/ Stephen P. Gardner

 

Signature of Optionee

 

Stephen P. Gardner

 

 

Chief Executive Officer

 

 

 

 

 

 

 

 

 

Residential Address

 

 

 

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