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                                                                   EXHIBIT 10.35



                                  VERITY, INC.

                        1995 EMPLOYEE STOCK PURCHASE PLAN

                (AS AMENDED AND ADJUSTED THROUGH OCTOBER 1, 2001)


     1. Establishment, Purpose and Term of Plan.

        1.1 ESTABLISHMENT. The Verity, Inc. 1995 Employee Stock Purchase Plan
(the "PLAN") is hereby established effective as of the effective date of the
initial registration by the Company of its Stock under Section 12 of the
Exchange Act (the "EFFECTIVE DATE").

        1.2 PURPOSE. The purpose of the Plan to provide Eligible Employees of
the Participating Company Group with an opportunity to acquire a proprietary
interest in the Company through the purchase of Stock. The Company intends that
the Plan shall qualify as an "employee stock purchase plan" under Section 423 of
the Code (including any amendments or replacements of such section), and the
Plan shall be so construed.

        1.3 TERM OF PLAN. The Plan shall continue in effect until the earlier of
its termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued.

     2. DEFINITIONS AND CONSTRUCTION.

        2.1 DEFINITIONS. Any term not expressly defined in the Plan but defined
for purposes of Section 423 of the Code shall have the same definition herein.
Whenever used herein, the following terms shall have their respective meanings
set forth below:

            (a) "BOARD" means the Board of Directors of the Company. If one or
more Committees have been appointed by the Board to administer the Plan, "Board"
also means such Committee(s).

            (b) "CODE" means the Internal Revenue Code of 1986, as amended, and
any applicable regulations promulgated thereunder.

            (c) "COMMITTEE" means a committee of the Board duly appointed to
administer the Plan and having such powers as shall be specified by the Board.
Unless the powers of the Committee have been specifically limited, the Committee
shall have all of the powers of the Board granted herein, including, without
limitation, the power to amend or terminate the Plan at any time, subject to the
terms of the Plan and any applicable limitations imposed by law.

            (d) "COMPANY" means Verity, Inc., a Delaware corporation, or any
successor corporation thereto.

            (e) "COMPENSATION" means, with respect to an Offering Period under
the Plan, all amounts paid in cash in the forms of base salary, commissions,
overtime, bonuses, annual awards, other incentive payments, shift premiums, and
all other compensation paid in cash during such Offering Period before deduction
for any contributions to any plan maintained by a Participating Company and
described in Section




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401(k) or Section 125 of the Code. Compensation shall not include reimbursements
of expenses, allowances, long-term disability, workers' compensation or any
amount deemed received without the actual transfer of cash or any amounts
directly or indirectly paid pursuant to the Plan or any other stock purchase or
stock option plan.

            (f) "ELIGIBLE EMPLOYEE" means an Employee who meets the requirements
set forth in Section 5 for eligibility to participate in the Plan.

            (g) "EMPLOYEE" means any person treated as an employee of a
Participating Company for purposes of Section 423 of the Code (including an
officer or a Director who is also treated as an employee); provided, however,
that neither service as a Director nor payment of a director's fee shall be
sufficient to constitute employment for purposes of the Plan. A Participant
shall be deemed to have ceased to be an Employee either upon an actual
termination of employment or upon the corporation employing the Participant
ceasing to be a Participating Company. For purposes of the Plan, an individual
shall not be deemed to have ceased to be an Employee while such individual is on
a military leave, sick leave or other bona fide leave of absence approved by the
Company of ninety (90) days or less. In the event an individual's leave of
absence exceeds ninety (90) days, the individual shall be deemed to have ceased
to be an Employee on the ninety-first (91st) day of such leave unless the
individual's right to reemployment with the Participating Company Group is
guaranteed either by statute or by contract. The Company shall determine in good
faith and in the exercise of its discretion whether an individual has become or
has ceased to be an Employee and the effective date of such individual's
employment or termination of employment, as the case may be. All such
determinations by the Company shall be, for purposes of an individual's
participation in or other rights under the Plan as of the time of the Company's
determination, final, binding and conclusive, notwithstanding that the Company
or any governmental agency subsequently makes a contrary determination.

            (h) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

            (i) "FAIR MARKET VALUE" means, as of any date, if there is then a
public market for the Stock, the closing sale price of a share of Stock (or the
mean of the closing bid and asked prices if the Stock is so quoted instead) as
quoted on the Nasdaq National Market, the Nasdaq Small-Cap Market or such other
national or regional securities exchange or market system constituting the
primary market for the Stock, as reported in The Wall Street Journal or such
other source as the Company deems reliable. If the relevant date does not fall
on a day on which the Stock has traded on such securities exchange or market
system, the date on which the Fair Market Value shall be established shall be
the last day on which the Stock was so traded prior to the relevant date, or
such other appropriate day as shall be determined by the Board, in its sole
discretion. If there is then no public market for the Stock, the Fair Market
Value on any relevant date shall be as determined by the Board without regard to
any restriction other than a restriction which, by its terms, will never lapse.
Notwithstanding the foregoing, the Fair Market Value per share of Stock on the
Effective Date shall be deemed to be the public offering price set forth in the
final prospectus filed with the Securities and Exchange Commission in connection
with the initial public offering of the Stock.

            (j) "OFFERING" means an offering of Stock as provided in Section 6.

            (k) "OFFERING DATE" means, for any Offering Period, the first day of
such Offering Period.

            (l) "OFFERING PERIOD" means a period determined in accordance with
Section 6.1.


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            (m) "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.

            (n) "PARTICIPANT" means an Eligible Employee participating in the
Plan.

            (o) "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation which the Board determines should be
included in the Plan. The Board shall have the sole and absolute discretion to
determine from time to time what Parent Corporations or Subsidiary Corporations
shall be Participating Companies.

            (p) "PARTICIPATING COMPANY GROUP" means, at any point in time, the
Company and all other corporations collectively which are then Participating
Companies.

            (q) "PURCHASE DATE" means, for any Purchase Period, the last day of
such Purchase Period.

            (r) "PURCHASE PERIOD" means a period determined in accordance with
Section 6.2.

            (s) "PURCHASE PRICE" means the price at which a share of Stock may
be purchased pursuant to the Plan, as determined in accordance with Section 9.

            (t) "PURCHASE RIGHT" means an option granted to a Participant
pursuant to the Plan to purchase such shares of Stock as provided in Section 8,
which the Participant may or may not exercise during the Offering Period in
which such option is outstanding. Such option arises from the right of a
Participant to withdraw any accumulated payroll deductions of the Participant
not previously applied to the purchase of Stock under the Plan and to terminate
participation in the Plan or any Offering at any time during an Offering Period.

            (u) "STOCK" means the common stock, par value $0.001, of the
Company, as adjusted from time to time in accordance with Section 4.2.

            (v) "SUBSCRIPTION AGREEMENT" means a written agreement in such form
as specified by the Company, stating an Employee's election to participate in
the Plan and authorizing payroll deductions under the Plan from the Employee's
Compensation.

            (w) "SUBSCRIPTION DATE" means the last business day prior to the
Offering Date of an Offering Period or such earlier date as the Company shall
establish.

            (x) "SUBSIDIARY CORPORATION" means any present or future "subsidiary
corporation" of the Company, as defined in Section 424(f) of the Code.

        2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.

     3. ADMINISTRATION.



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        3.1 ADMINISTRATION BY THE BOARD. The Plan shall be administered by the
Board, including any duly appointed Committee of the Board. All questions of
interpretation of the Plan or of any Purchase Right shall be determined by the
Board and shall be final and binding upon all persons having an interest in the
Plan or such Purchase Right. Subject to the provisions of the Plan, the Board
shall determine all of the relevant terms and conditions of Purchase Rights
granted pursuant to the Plan; provided, however, that all Participants granted
Purchase Rights pursuant to the Plan shall have the same rights and privileges
within the meaning of Section 423(b)(5) of the Code. All expenses incurred in
connection with the administration of the Plan shall be paid by the Company.

        3.2 AUTHORITY OF OFFICERS. Any officer of the Company shall have the
authority to act on behalf of the Company with respect to any matter, right,
obligation, determination or election that is the responsibility of or that is
allocated to the Company herein, provided that the officer has apparent
authority with respect to such matter, right, obligation, determination or
election.

        3.3 POLICIES AND PROCEDURES ESTABLISHED BY THE COMPANY. The Company may,
from time to time, consistent with the Plan and the requirements of Section 423
of the Code, establish, change or terminate such rules, guidelines, policies,
procedures, limitations, or adjustments as deemed advisable by the Company, in
its sole discretion, for the proper administration of the Plan, including,
without limitation, (a) a minimum payroll deduction amount required for
participation in an Offering, (b) a limitation on the frequency or number of
changes permitted in the rate of payroll deduction during an Offering, (c) an
exchange ratio applicable to amounts withheld in a currency other than United
States dollars, (d) a payroll deduction greater than or less than the amount
designated by a Participant in order to adjust for the Company's delay or
mistake in processing a Subscription Agreement or in otherwise effecting a
Participant's election under the Plan or as advisable to comply with the
requirements of Section 423 of the Code, and (e) determination of the date and
manner by which the Fair Market Value of a share of Stock is determined for
purposes of administration of the Plan.

     4. SHARES SUBJECT TO PLAN.

        4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as provided
in Section 4.2, the maximum aggregate number of shares of Stock that may be
issued under the Plan shall be four million (4,000,000) and shall consist of
authorized but unissued or reacquired shares of the Stock, or any combination
thereof. If an outstanding Purchase Right for any reason expires or is
terminated or canceled, the shares of Stock allocable to the unexercised portion
of such Purchase Right shall again be available for issuance under the Plan.

        4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company, or
in the event of any merger (including a merger effected for the purpose of
changing the Company's domicile), sale of assets or other reorganization in
which the Company is a party, appropriate adjustments shall be made in the
number and class of shares subject to the Plan and the limitation in Section 8.1
and to each Purchase Right and in the Purchase Price. If a majority of the
shares which are of the same class as the shares that are subject to outstanding
Purchase Rights are exchanged for, converted into, or otherwise become (whether
or not pursuant to an Ownership Change Event) shares of another corporation (the
"NEW SHARES"), the Board may unilaterally amend the outstanding Purchase Rights
to provide that such Purchase Rights are exercisable for New Shares. In the
event of any such amendment, the number of shares subject to, and the Purchase
Price of, the outstanding Purchase Rights shall be adjusted in a fair and
equitable manner, as determined by the Board, in its sole discretion.
Notwithstanding the foregoing, any fractional share



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resulting from an adjustment pursuant to this Section 4.2 shall be rounded down
to the nearest whole number, and in no event may the Purchase Price be decreased
to an amount less than the par value, if any, of the stock subject to the
Purchase Right. The adjustments determined by the Board pursuant to this Section
4.2 shall be final, binding and conclusive.

     5. ELIGIBILITY.

        5.1 EMPLOYEES ELIGIBLE TO PARTICIPATE. Any Employee of a Participating
Company is eligible to participate in the Plan except the following:

            (a) Employees who are customarily employed by the Participating
Company Group for twenty (20) hours or less per week; or

            (b) Employees who are customarily employed by the Participating
Company Group for not more than five (5) months in any calendar year.

        5.2 EXCLUSION OF CERTAIN SHAREHOLDERS. Notwithstanding any provision of
the Plan to the contrary, no Employee shall be granted a Purchase Right under
the Plan if, immediately after such grant, such Employee would own or hold
options to purchase stock of the Company or of any Parent Corporation or
Subsidiary Corporation possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of such corporation, as
determined in accordance with Section 423(b)(3) of the Code. For purposes of
this Section 5.2, the attribution rules of Section 424(d) of the Code shall
apply in determining the stock ownership of such Employee.

        5.3 EXCLUSION OF LEASED EMPLOYEES. Notwithstanding anything herein to
the contrary, any individual performing services for a Participating Company
solely through a leasing agency or employment agency shall not be deemed an
"Employee" of such Participating Company.

     6. OFFERINGS.

        6.1 OFFERING PERIODS. Except as otherwise set forth below, the Plan
shall be implemented by sequential Offerings of approximately twelve (12) months
duration or such other duration as the Board shall determine (an "OFFERING
PERIOD"); provided, however that the first Offering Period shall commence on the
Effective Date and end on September 30, 1997 (the "INITIAL OFFERING PERIOD".
Subsequent Offerings shall commence on the first days of April and October of
each year and end on the last days of the first March and September,
respectively, occurring thereafter. Notwithstanding the foregoing, the Board may
establish a different term for one or more Offerings or different commencing or
ending dates for such Offerings; provided, however, that no Offering may exceed
a term of twenty-seven (27) months. If the first or last day of an Offering
Period is not a day on which the national securities exchanges or Nasdaq Stock
Market are open for trading, the Company shall specify the trading day that will
be deemed the first or last day, as the case may be, of the Offering Period.

        6.2 PURCHASE PERIODS. Each Offering Period shall consist of two (2)
consecutive purchase periods of approximately six (6) months duration (except
the Initial Offering Period which consisted of four (4) purchase periods
(Effective Date to March 31, 1996; April 1, 1996 to September 30, 1996; October
1, 1996 to March 31, 1997; and April 1, 1997 to September 30, 1997)) or such
other number or duration as the Board shall determine (individually, a "PURCHASE
PERIOD"). A Purchase Period commencing on the first day of April shall end on
the last day of the next following September. A Purchase Period commencing on
the first day of



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October shall end on the last day of the next following March. Notwithstanding
the foregoing, the Board may establish a different term for one or more Purchase
Periods or different commencing or ending dates for such Purchase Periods. If
the first or last day of a Purchase Period is not a day on which the national
securities exchanges or Nasdaq Stock Market are open for trading, the Company
shall specify the trading day that will be deemed the first or last day, as the
case may be, of the Purchase Period.

        6.3 GOVERNMENTAL APPROVAL; STOCKHOLDER APPROVAL. Notwithstanding any
other provision of the Plan to the contrary, any Purchase Right granted pursuant
to the Plan shall be subject to (a) obtaining all necessary governmental
approvals or qualifications of the sale or issuance of the Purchase Rights or
the shares of Stock and (b) obtaining stockholder approval of the Plan.
Notwithstanding the foregoing, stockholder approval shall not be necessary in
order to grant any Purchase Right granted in the Plan's Initial Offering Period;
provided, however, that the exercise of any such Purchase Right shall be subject
to obtaining stockholder approval of the Plan.

     7. PARTICIPATION IN THE PLAN.

        7.1 INITIAL PARTICIPATION. An Eligible Employee may become a Participant
in an Offering Period by delivering a properly completed Subscription Agreement
to the office designated by the Company not later than the close of business for
such office on the Subscription Date established by the Company for such
Offering Period. An Eligible Employee who does not deliver a properly completed
Subscription Agreement to the Company's designated office on or before the
Subscription Date for an Offering Period shall not participate in the Plan for
that Offering Period or for any subsequent Offering Period unless such Eligible
Employee subsequently delivers a properly completed Subscription Agreement to
the appropriate office of the Company on or before the Subscription Date for
such subsequent Offering Period. An Employee who becomes an Eligible Employee
after the Offering Date of an Offering Period shall not be eligible to
participate in such Offering Period but may participate in any subsequent
Offering Period provided such Employee is still an Eligible Employee as of the
Offering Date of such subsequent Offering Period.

        7.2 CONTINUED PARTICIPATION. A Participant shall automatically
participate in the next Offering Period commencing immediately after the final
Purchase Date of each Offering Period in which the Participant participates
provided that such Participant remains an Eligible Employee on the Offering Date
of the new Offering Period and has not either (a) withdrawn from the Plan
pursuant to Section 12.1 or (b) terminated employment as provided in Section 13.
A Participant who may automatically participate in a subsequent Offering Period,
as provided in this Section 7.2, is not required to deliver any additional
Subscription Agreement for the subsequent Offering Period in order to continue
participation in the Plan. However, a Participant may deliver a new Subscription
Agreement for a subsequent Offering Period in accordance with the procedures set
forth in Section 7.1 if the Participant desires to change any of the elections
contained in the Participant's then effective Subscription Agreement. Eligible
Employees may not participate simultaneously in more than one Offering.

     8. RIGHT TO PURCHASE SHARES.

        8.1 GRANT OF PURCHASE RIGHT ON OR AFTER OCTOBER 1, 2001. Except as set
forth below, on the Offering Date of each Offering Period that commences on or
after October 1, 2001, each Participant in such Offering Period shall be granted
automatically a Purchase Right consisting of an option to purchase a number of
shares of Stock equal to the product of 416.66 shares and the number of months
in the Offering Period with the resulting product rounded to the nearest whole
share. For purposes of the preceding sentence, fractional months



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shall be rounded to the nearest whole month and no effect shall be given to the
termination of the Offering Period pursuant to the provisions of Section 12.3 or
Section 14. No Purchase Right shall be granted on an Offering Date to any person
who is not, on such Offering Date, an Eligible Employee. Shares of Stock may
only be purchased through a Participant's payroll deductions pursuant to Section
10.

        8.2 CALENDAR YEAR PURCHASE LIMITATION. Notwithstanding any provision of
the Plan to the contrary, no Purchase Right shall entitle a Participant to
purchase shares of Stock under the Plan at a rate which, when aggregated with
such Participant's rights to purchase shares under all other employee stock
purchase plans of a Participating Company intended to meet the requirements of
Section 423 of the Code, exceeds Twenty-Five Thousand Dollars ($25,000) in Fair
Market Value (or such other limit, if any, as may be imposed by the Code) for
each calendar year in which such Purchase Right has been outstanding at any
time. For purposes of the preceding sentence, the Fair Market Value of shares
purchased during a given Offering Period shall be determined as of the Offering
Date for such Offering Period. The limitation described in this Section 8.2
shall be applied in conformance with applicable regulations under Section
423(b)(8) of the Code.

     9. PURCHASE PRICE. The Purchase Price at which each share of Stock may be
     acquired in an Offering Period upon the exercise of all or any portion of a
     Purchase Right granted with respect to such Offering Period shall be
     established by the Board; provided, however, that the Purchase Price shall
     not be less than eighty-five percent (85%) of the lesser of (a) the Fair
     Market Value of a share of Stock on the Offering Date of the Offering
     Period or (b) the Fair Market Value of a share of Stock on the Purchase
     Date. Unless otherwise provided by the Board prior to the commencement of
     an Offering Period, the Purchase Price for that Offering Period shall be
     eighty-five percent (85%) of the lesser of (a) the Fair Market Value of a
     share of Stock on the Offering Date of the Offering Period, or (b) the Fair
     Market Value of a share of Stock on the Purchase Date.

     10. ACCUMULATION OF PURCHASE PRICE THROUGH PAYROLL DEDUCTION. Shares of
     Stock which are acquired pursuant to the exercise of all or any portion of
     a Purchase Right for an Offering Period may be paid for only by means of
     payroll deductions from the Participant's Compensation accumulated during
     the Offering Period.

         10.1 AMOUNT OF PAYROLL DEDUCTIONS. Except as otherwise provided herein,
the amount to be deducted under the Plan from a Participant's Compensation on
each payday during an Offering Period shall be determined by the Participant's
Subscription Agreement. The Subscription Agreement shall set forth the
percentage (in a whole number percentage) of the Participant's Compensation to
be deducted on each payday during an Offering Period, which, except as a result
of an election pursuant to Section 10.3 to stop payroll deductions, shall be not
less than zero percent (0%) nor more than twenty percent (20%) of the
Participant's Compensation otherwise payable on such payday. Notwithstanding the
foregoing, the Board may change the limits on payroll deductions effective as of
any future Offering Date.

         10.2 COMMENCEMENT OF PAYROLL DEDUCTIONS. Payroll deductions shall
commence on the first payday following the Offering Date and shall continue to
the end of the Offering Period unless sooner altered or terminated as provided
in the Plan.

         10.3 ELECTION TO CHANGE OR STOP PAYROLL DEDUCTIONS. A Participant may
elect to increase or decrease the rate of payroll deductions during a Purchase
Period by delivering a new Subscription Agreement to the person designated by
the Company. For a Purchase Period that commences on or after October 1, 2001,
the new Subscription Agreement shall become effective as soon as practicable,
but not later than the first payroll



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period that commences more than fifteen (15) days after receipt of the
Subscription Agreement and shall continue for the remainder of the Offering
Period unless changed as described below. A Participant may increase or decrease
the rate of payroll deductions for any subsequent Offering Period by filing a
new Subscription Agreement with the person designated by the Company. This new
Subscription Agreement shall become effective with the first payroll period in
such subsequent Offering Period. A Participant who elects to decrease the rate
of his or her payroll deductions to zero percent (0%) shall nevertheless remain
a Participant in the current Offering Period unless such Participant
subsequently withdraws from the Offering or the Plan as provided in Sections
12.1 and 12.2, respectively, or is automatically withdrawn from the Offering as
provided in Section 12.3.

         10.4 PARTICIPANT ACCOUNTS. Individual Plan bookkeeping accounts shall
be maintained for each Participant. All payroll deductions from a Participant's
Compensation shall be credited to such account and shall be deposited with the
general funds of the Company. All payroll deductions received or held by the
Company may be used by the Company for any corporate purpose.

         10.5 NO INTEREST PAID. Interest shall not be paid on sums deducted from
a Participant's Compensation pursuant to the Plan.

     11. PURCHASE OF SHARES.

         11.1 EXERCISE OF PURCHASE RIGHT. On each Purchase Date of an Offering
Period, each Participant who has not withdrawn from the Offering or the Plan or
whose participation in the Offering has not terminated on or before such
Purchase Date shall automatically acquire pursuant to the exercise of the
Participant's Purchase Right the number of whole shares of Stock determined by
dividing (a) the total amount of the Participant's payroll deductions
accumulated in the Participant's Plan account during the Offering Period and not
previously applied toward the purchase of Stock by (b) the Purchase Price.
However, in no event shall the number of shares purchased by the Participant
during an Offering Period exceed the number of shares subject to the
Participant's Purchase Right. No shares of Stock shall be purchased on a
Purchase Date by a Participant whose participation in the Offering or the Plan
has terminated on or before such Purchase Date.

         11.2 PRO RATA ALLOCATION OF SHARES. In the event the number of shares
of Stock which might be purchased by all Participants in the Plan on a Purchase
Date exceeds the number of shares of Stock available in the Plan as provided in
Section 4.1, the Company shall make a pro rata allocation of the remaining
shares in as uniform a manner as shall be practicable and as the Company shall
determine to be equitable. Any fractional share resulting from such pro rata
allocation to any Participant shall be disregarded.

         11.3 DELIVERY OF SHARES. As soon as practicable after each Purchase
Date, the Company shall deliver the shares acquired by the Participant on such
Purchase Date to a broker designated by the Company to hold such shares in
street name for the benefit of the Participant. Shares to be delivered to a
Participant under the Plan shall be registered in the name of the Participant.

         11.4 RETURN OF CASH BALANCE. Any cash balance remaining in a
Participant's Plan account following any Purchase Date shall be refunded to the
Participant as soon as practicable after such Purchase Date. However, if the
cash to be returned to a Participant pursuant to the preceding sentence is an
amount less than the amount that would have been necessary to purchase an
additional whole share of Stock on such Purchase Date, the Company may retain
such amount in the Participant's Plan account to be applied toward the purchase
of shares of Stock in the subsequent Purchase Period or Offering Period, as the
case may be.



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         11.5 TAX WITHHOLDING. At the time a Participant's Purchase Right is
exercised, in whole or in part, or at the time a Participant disposes of some or
all of the shares of Stock he or she acquires under the Plan, the Participant
shall make adequate provision for the foreign, federal, state and local tax
withholding obligations of the Participating Company Group, if any, which arise
upon exercise of the Purchase Right or upon such disposition of shares,
respectively. The Participating Company Group may, but shall not be obligated
to, withhold from the Participant's compensation the amount necessary to meet
such withholding obligations.

         11.6 EXPIRATION OF PURCHASE RIGHT. Any portion of a Participant's
Purchase Right remaining unexercised after the end of the Offering Period to
which such Purchase Right relates shall expire immediately upon the end of such
Offering Period.

         11.7 REPORTS TO PARTICIPANTS. Each Participant who has exercised all or
part of his or her Purchase Right shall receive, as soon as practicable after
the Purchase Date, a report of such Participant's Plan account setting forth the
total payroll deductions accumulated prior to such exercise, the number of
shares of Stock purchased, the Purchase Price for such shares, the Fair Market
Value of such shares, the date of purchase and cash balance, if any, remaining
immediately after such purchase that is to be refunded or retained in the
Participant's Plan account pursuant to Section 11.4. The report required by this
Section may be delivered in such form and by such means, including by electronic
transmission, as the Company may determine. Each Participant shall be provided
information concerning the Company equivalent to that information generally made
available to the Company's common stockholders.

     12. WITHDRAWAL FROM OFFERING OR PLAN.

         12.1 WITHDRAWAL FROM AN OFFERING. This Section 12.1 shall apply only to
Offerings that commenced prior to October 1, 2001. A Participant may withdraw
from an Offering by signing and delivering to the Company's designated office a
written notice of withdrawal on a form provided by the Company for such purpose.
Such withdrawal may be elected at any time prior to the end of an Offering
Period; provided, however, if a Participant withdraws after the Purchase Date of
a Purchase Period during the Offering, the withdrawal shall not affect shares of
Stock acquired by the Participant on such Purchase Date. Unless otherwise
elected by the Participant, withdrawal from an Offering shall not result in the
Participant's withdrawal from the Plan or any succeeding Offering therein. By
withdrawing from an Offering effective as of the close of a given Purchase Date,
a Participant may have shares of Stock purchased on such Purchase Date and
immediately commence participation in the new Offering commencing immediately
after such Purchase Date. A Participant is prohibited from again participating
in an Offering at any time following withdrawal from such Offering. The Company
may impose, from time to time, a requirement that the notice of withdrawal from
the Offering be on file with the Company's designated office for a reasonable
period prior to the effectiveness of the Participant's withdrawal from an
Offering.

         12.2 WITHDRAWAL FROM THE PLAN. A Participant may withdraw from the Plan
(and thereby all Offerings) by signing and delivering to the Company's
designated office a written notice of withdrawal on a form provided by the
Company for such purpose. Such withdrawal may be elected at any time prior to
the end of an Offering Period (with an effective date as specified in the
election pursuant to procedures established by the Company). For Offerings that
commence on or after October 1, 2001, however, if a Participant withdraws from
the Plan less than fifteen (15) days prior to the Purchase Date of a Purchase
Period, such withdrawal shall not affect the purchase of shares of Stock for the
Participant on such Purchase Date. A Participant who voluntarily elects to
withdraw from the Plan is prohibited from resuming participation in the Plan in
the same Offering from which he or she withdrew, but may participate in any
subsequent Offering under the Plan by



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again satisfying the requirements of Sections 5 and 7.1. The Company may impose,
from time to time, a requirement that the notice of withdrawal from the Plan be
on file with the Company's designated office for a reasonable period prior to
the effectiveness of the Participant's withdrawal from the Plan.

         12.3 AUTOMATIC WITHDRAWAL FROM AN OFFERING. If the Fair Market Value of
a share of Stock on a Purchase Date other than the final Purchase Date of an
Offering is less than the Fair Market Value of a share of Stock on the Offering
Date of the Offering, then every Participant automatically shall be (a)
withdrawn from such Offering at the close of such Purchase Date and after the
acquisition of shares of Stock for the Purchase Period and (b) enrolled in the
Offering commencing on the first business day subsequent to such Purchase Date.
A Participant may elect not to be automatically withdrawn from an Offering
pursuant to this Section 12.3 by delivering to the Company's designated office
not later than the close of business on the Purchase Date a written notice
indicating such election.

         12.4 RETURN OF PAYROLL DEDUCTIONS. Upon a Participant's voluntary
withdrawal from an Offering or the Plan pursuant to Sections 12.1 or 12.2,
respectively, or automatic withdrawal from an Offering pursuant to Section 12.3,
the Participant's accumulated payroll deductions which have not been applied
toward the purchase of shares of Stock (except, in the case of an automatic
withdrawal pursuant to Section 12.3, for an amount necessary to purchase an
additional whole share as provided in Section 11.4) shall be returned as soon as
practicable after the withdrawal, without the payment of any interest, to the
Participant, and the Participant's interest in the Offering or the Plan, as
applicable, shall terminate. Such accumulated payroll deductions may not be
applied to any other Offering under the Plan.

     13. TERMINATION OF EMPLOYMENT OR ELIGIBILITY. Termination of a
     Participant's employment with the Company for any reason, including
     retirement, disability or death or the failure of a Participant to remain
     an Eligible Employee, shall terminate the Participant's participation in
     the Plan immediately. In such event, the payroll deductions credited to the
     Participant's Plan account since the last Purchase Date shall, as soon as
     practicable, be returned to the Participant or, in the case of the
     Participant's death, to the Participant's legal representative, and all of
     the Participant's rights under the Plan shall terminate. Interest shall not
     be paid on sums returned to a Participant pursuant to this Section 13. A
     Participant whose participation has been so terminated may again become
     eligible to participate in the Plan by again satisfying the requirements of
     Sections 5 and 7.1.

     14. TRANSFER OF CONTROL.

         14.1 DEFINITIONS.

              (a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred
if any of the following occurs with respect to the Company: (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 a party;
(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.

              (b) A "TRANSFER OF CONTROL" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, the "TRANSACTION")
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



<PAGE>

the outstanding voting stock of the Company or the corporation or corporations
to which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
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 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 multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.

              (c) EFFECT OF TRANSFER OF CONTROL ON PURCHASE RIGHTS. In the event
of a Transfer of Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may assume the Company's rights and obligations under the Plan or
substitute substantially equivalent Purchase Rights for stock of the Acquiring
Corporation. If the Acquiring Corporation elects not to assume or substitute for
the outstanding Purchase Rights, the Board may, in its sole discretion and
notwithstanding any other provision herein to the contrary, adjust the Purchase
Date of the then current Purchase Period to a date on or before the date of the
Transfer of Control, but shall not adjust the number of shares of Stock subject
to any Purchase Right. All Purchase Rights which are neither assumed or
substituted for by the Acquiring Corporation in connection with the Transfer of
Control nor exercised as of the date of the Transfer of Control shall terminate
and cease to be outstanding effective as of the date of the Transfer of Control.
Notwithstanding the foregoing, if the corporation the stock of which is subject
to the outstanding Purchase Rights immediately prior to an Ownership Change
Event described in Section 15.1(a)(i) constituting a Transfer of Control is the
surviving or continuing corporation and immediately after such Ownership Change
Event less than fifty percent (50%) of the total combined voting power of its
voting stock is held by another corporation or by other corporations that are
members of an affiliated group within the meaning of section 1504(a) of the Code
without regard to the provisions of section 1504(b) of the Code, the outstanding
Purchase Rights shall not terminate unless the Board otherwise provides in its
sole discretion.

     15. NONTRANSFERABILITY OF PURCHASE RIGHTS. A Purchase Right may not be
     transferred in any manner otherwise than by will or the laws of descent and
     distribution and shall be exercisable during the lifetime of the
     Participant only by the Participant. The Company, in its absolute
     discretion, may impose such restrictions on the transferability of the
     shares purchasable upon the exercise of a Purchase Right as it deems
     appropriate and any such restriction shall be set forth in the respective
     Subscription Agreement and may be referred to on the certificates
     evidencing such shares.

     16. RESTRICTION ON ISSUANCE OF SHARES. The issuance of shares under the
     Plan shall be subject to compliance with all applicable requirements of
     foreign, federal or state law with respect to such securities. A Purchase
     Right may not be exercised if the issuance of shares upon such exercise
     would constitute a violation of any applicable foreign, federal or state
     securities laws or other law or regulations. In addition, no Purchase Right
     may be exercised unless (a) a registration statement under the Securities
     Act of 1933, as amended, shall at the time of exercise of the Purchase
     Right be in effect with respect to the shares issuable upon exercise of the
     Purchase Right, or (b) in the opinion of legal counsel to the Company, the
     shares issuable upon exercise of the Purchase Right may be issued in
     accordance with the terms of an applicable exemption from the registration
     requirements of said Act. The inability of the Company to obtain from any
     regulatory body having jurisdiction the authority, if any, deemed by the
     Company's legal counsel to be necessary to the lawful issuance and sale of
     any shares under the Plan 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. As a condition to the



<PAGE>

     exercise of a Purchase Right, the Company may require the Participant to
     satisfy any qualifications that may be necessary or appropriate, to
     evidence compliance with any applicable law or regulation, and to make any
     representation or warranty with respect thereto as may be requested by the
     Company.

     17. RIGHTS AS A STOCKHOLDER AND EMPLOYEE. A Participant shall have no
     rights as a stockholder by virtue of the Participant's participation in the
     Plan until the date of the issuance of a stock certificate for the shares
     of Stock being purchased pursuant to the exercise of the Participant's
     Purchase Right. No adjustment shall be made for cash dividends or
     distributions or other rights for which the record date is prior to the
     date such stock certificate is issued. Nothing herein shall confer upon a
     Participant any right to continue in the employ of the Participating
     Company Group or interfere in any way with any right of the Participating
     Company Group to terminate the Participant's employment at any time.

     18. LEGENDS. The Company may at any time place legends or other identifying
     symbols referencing any applicable foreign, federal or state securities law
     restrictions or any provision convenient in the administration of the Plan
     on some or all of the certificates representing shares of Stock issued
     under the Plan. The Participant shall, at the request of the Company,
     promptly present to the Company any and all certificates representing
     shares acquired pursuant to a Purchase Right in the possession of the
     Participant in order to carry out the provisions of this Section. Unless
     otherwise specified by the Company, legends placed on such certificates may
     include but shall not be limited to the following:

"THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE
REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER AN EMPLOYEE STOCK PURCHASE
PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY SHALL NOTIFY THE CORPORATION
IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE REGISTERED HOLDER HEREOF MADE
ON OR BEFORE __________, ____, THE REGISTERED HOLDER SHALL HOLD ALL SHARES
PURCHASED UNDER THE PLAN IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF
ANY NOMINEE) PRIOR TO THIS DATE."

     19. NOTIFICATION OF SALE OF SHARES. The Company may require the Participant
     to give the Company prompt notice of any disposition of shares acquired by
     exercise of a Purchase Right within two years from the date of granting
     such Purchase Right or one year from the date of exercise of such Purchase
     Right. The Company may require that until such time as a Participant
     disposes of shares acquired upon exercise of a Purchase Right, the
     Participant shall hold all such shares in the Participant's name (and not
     in the name of any nominee) until the lapse of the time periods with
     respect to such Purchase Right referred to in the preceding sentence. The
     Company may direct that the certificates evidencing shares acquired by
     exercise of a Purchase Right refer to such requirement to give prompt
     notice of disposition.

     20. NOTICES. All notices or other communications by a Participant to the
     Company under or in connection with the Plan shall be deemed to have been
     duly given when received in the form specified by the Company at the
     location, or by the person, designated by the Company for the receipt
     thereof.

     21. INDEMNIFICATION. In addition to such other rights of indemnification as
     they may have as members of the Board or officers or employees of the
     Participating Company Group, members of the Board and any officers or
     employees of the Participating Company Group to whom authority to act for
     the Board or the Company is delegated shall be indemnified by the Company
     against all reasonable



<PAGE>

     expenses, including attorneys' fees, actually and necessarily incurred in
     connection with the defense of any action, suit or proceeding, or in
     connection with any appeal therein, to which they or any of them may be a
     party by reason of any action taken or failure to act under or in
     connection with the Plan, or any right granted hereunder, and against all
     amounts paid by them in settlement thereof (provided such settlement is
     approved by independent legal counsel selected by the Company) or paid by
     them in satisfaction of a judgment in any such action, suit or proceeding,
     except in relation to matters as to which it shall be adjudged in such
     action, suit or proceeding that such person is liable for gross negligence,
     bad faith or intentional misconduct in duties; provided, however, that
     within sixty (60) days after the institution of such action, suit or
     proceeding, such person shall offer to the Company, in writing, the
     opportunity at its own expense to handle and defend the same.

     22. AMENDMENT OR TERMINATION OF THE PLAN. The Board may at any time amend
     or terminate the Plan, except that (a) such termination shall not affect
     Purchase Rights previously granted under the Plan, except as permitted
     under the Plan, and (b) no amendment may adversely affect a Purchase Right
     previously granted under the Plan (except to the extent permitted by the
     Plan or as may be necessary to qualify the Plan as an employee stock
     purchase plan pursuant to Section 423 of the Code or to obtain
     qualification or registration of the shares of Stock under applicable
     foreign, federal or state securities laws). In addition, an amendment to
     the Plan must be approved by the stockholders of the Company within twelve
     (12) months of the adoption of such amendment if such amendment would
     authorize the sale of more shares than are authorized for issuance under
     the Plan or would change the definition of the corporations that may be
     designated by the Board as Participating Companies.

     23. CONTINUATION OF INITIAL PLAN AS TO OUTSTANDING PURCHASE RIGHTS. Any
     other provision of the Plan to the contrary notwithstanding, the terms of
     the Plan as in effect prior to its amendment on September 25,1997 shall
     remain in effect and apply to all Purchase Rights granted pursuant to the
     Plan prior to such amendment.

IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the
foregoing sets forth the Verity, Inc. 1995 Employee Stock Purchase Plan as duly
adopted by the Board on June 15, 1995 and amended and adjusted through October
1, 2001.

               ---------------------------------
               Secretary