VERITY,
INC.


NONSTATUTORY
STOCK OPTION AGREEMENT


          THIS
NONSTATUTORY STOCK OPTION AGREEMENT (the “Option
Agreement”) is made and entered into as of the date stated on the Notice of Grant of Stock Option which
incorporates this Option Agreement by reference, by and between Verity, Inc.
and the person named on the Notice of Grant
of Stock Option (the “Optionee”).


          The
Company has granted to the Optionee an option to purchase certain shares of
Stock, upon the terms and conditions set forth in this Option Agreement and the
Notice of Grant of Stock Option (the “Option”).

          1.          Definitions and Construction.

                       1.1           Definitions.  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 the Compensation
Committee or other 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)          “Consultant” means any person, including an
advisor, engaged by a Participating Company to render services other than as an
Employee or a Director.

                                       (f)          “Director” means a member of the Board or
of the board of directors of any other Participating Company

                                       (g)          “Disability” means the permanent and total
disability of the Optionee within the meaning of Section 22(e)(3) of the Code.

                                       (h)          “Employee” means any person treated as an
employee (including an officer or a Director who is also treated as an employee)
in the records of a Participating Company; 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.

1.










                                       (i)          “Exchange Act” means the Securities
Exchange Act of 1934, as amended.

                                       (j)          “Exercise Price” means the price stated in
the Notice of Grant of Stock Option that
is to be paid per share of Stock issued under this Option, as adjusted from
time to time pursuant to Section 9.

                                       (k)          “Fair Market Value” means, as of any date,
the value of a share of stock or other property as determined by the Board, in
its sole discretion, or by the Company, in its sole discretion, if such
determination is expressly allocated to the Company herein.

                                       (l)          “Initial Exercise Date” means, as
applicable, either the Initial Vesting Date as stated in the Notice of Grant of Stock Option, or if this
Option is granted to an Employee eligible for overtime pay (as determined under
the Fair Labor Standards Act of 1938, as amended), then the later of the
Initial Vesting Date and six (6) months after the Date of Grant set forth in
the Notice of Grant of Stock Option.

                                       (m)          “Number of Option Shares” means the number
of shares of Stock that is stated on the Notice
of Grant of Stock Option as initially being subject to this Option,
as adjusted from time to time pursuant to Section 9.

                                       (n)          “Option Expiration Date” means the date
eight (8) years after the Date of Option Grant.

                                       (o)          “Parent Corporation” means any present or
future “parent corporation” of the Company, as defined in Section 424(e) of the
Code.

                                       (p)          “Participating Company” means the Company
or any Parent Corporation or Subsidiary Corporation.

                                       (q)          “Participating Company Group” means, at any
point in time, all corporations collectively, each of which is then a
Participating Company.

                                       (r)          “Plan” means the Verity, Inc. 1996
Nonstatutory Stock Option Plan.

                                       (s)          “Securities Act” means the Securities Act
of 1933, as amended.

                                       (t)          “Service” means the Optionee’s employment
or service with the Participating Company Group, whether in the capacity of an
Employee, a Director or a Consultant. 
The Optionee’s Service shall not be deemed to have terminated merely
because of a change in the capacity in which the Optionee renders Service to
the Participating Company Group or a change in the Participating Company for
which the Optionee renders such Service, provided that there is no interruption
or termination of the Optionee’s Service. 
The Optionee’s Service shall be deemed to have terminated either upon an
actual termination of Service or upon the corporation for which the Optionee
performs Service ceasing to be a Participating Company.  Subject to the foregoing, the Company, in
its sole discretion, shall determine whether the Optionee’s Service has
terminated and the effective date of such termination.

2.










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

                                       (v)          “Subsidiary Corporation” means any present
or future “subsidiary corporation” of the Company, as defined in Section 424(f)
of the Code.

                       1.2          Construction. 
Captions and titles contained herein are for convenience only and shall
not affect the meaning or interpretation of any provision of this Option
Agreement.  Except when otherwise
indicated by the context, the singular shall include the plural, the plural
shall include the singular and the term “or” shall include the conjunctive as
well as the disjunctive.

          2.          Tax Consequences.  This Option is intended to be a nonstatutory
stock option and shall not be treated as an “incentive stock option” (within
the meaning of Section 422(b) of the Code). 
Taxation of a nonstatutory stock option is discussed in the prospectus
for the Plan.

          3.          Administration.  All questions of interpretation concerning
this Option Agreement shall be determined by the Board, including any duly
appointed Committee of the Board.  All
determinations by the Board shall be final and binding upon all persons having
an interest in the Option.  Any officer
of a Participating Company shall have the authority to act on behalf of the
Company with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.

          4.          Exercise of the Option.

                       4.1          Right to Exercise. 
Except as otherwise provided herein, the Option shall be exercisable on
and after the Initial Exercise Date and prior to the termination of the Option
(as provided in Section 6) in an amount not to exceed a percentage of the
Number of Option Shares that is equal to the Vested Percentage on the date of
exercise for such amount less the number of shares previously acquired upon
exercise of the Option.

                       4.2          Method of Exercise.  Exercise
of the Option shall be by written notice to the Company which must state the
election to exercise the Option, the number of whole shares of Stock for which
the Option is being exercised and such other representations and agreements as
to the Optionee’s investment intent with respect to such shares as may be
required pursuant to the provisions of this Option Agreement.  The written notice must be signed by the
Optionee and must be delivered in person, by certified or registered mail,
return receipt requested, by confirmed facsimile transmission, or by such other
means as the Company may permit, to the Chief Financial Officer of the Company,
or other authorized representative of the Participating Company Group, prior to
the termination of the Option as set forth in Section 6, accompanied by (i)
full payment of the aggregate Exercise Price for the number of shares of Stock
being purchased and (ii) an executed copy, if required by the Company, of any
representation and/or warranty referenced below.  The Option shall be deemed to be exercised upon receipt by the
Company of such written notice, the aggregate Exercise Price, and, if required
by the Company, such executed agreements.

3.










                       4.3          Payment of Exercise Price.

                                      (a)          Forms of Consideration Authorized.  Except as otherwise provided
below, payment of the aggregate Exercise Price for the number of shares of
Stock for which the Option is being exercised shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company of whole shares of
Stock owned by the Optionee having a Fair Market Value (as determined by the
Company without regard to any restrictions on transferability applicable to
such stock by reason of federal or state securities laws or agreements with an
underwriter for the Company) not less than the aggregate Exercise Price, (iii)
by means of a Cashless Exercise, as defined in Section 4.3(c), (iv) in the
Company’s sole discretion at the time the Option is exercised, by cash for a
portion of the aggregate Exercise Price not less than the par value of the
shares being acquired and the Optionee’s promissory note for the balance of the
aggregate Exercise Price, or (v) by any combination of the foregoing.

                                      (b)          Tender of Stock. 
Notwithstanding the foregoing, the Option may not be
exercised by tender to the Company of shares of Stock to the extent such tender
of Stock would constitute a violation of the provisions of any law, regulation
or agreement restricting the redemption of the Company’s stock.  The Option may not be exercised by tender to
the Company of shares of Stock unless such shares either have been owned by the
Optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company.

                                      (c)          Cashless Exercise. 
A “Cashless Exercise”
means the assignment in a form acceptable to the Company of the proceeds of a
sale or loan with respect to some or all of the shares of Stock acquired upon
the exercise of the Option pursuant to a program or procedure approved by the
Company (including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to, time by the Board of
Governors of the Federal Reserve System). 
The Company reserves, at any and all times, the right, in the Company’s
sole and absolute discretion, to decline to approve or terminate any such
program or procedure.

                                      (d)          Payment by Promissory Note.  No promissory note shall be permitted if an exercise
of the Option using a promissory note would be a violation of any law.  Unless otherwise specified by the Board at
the time the Option is granted, the promissory note permitted in clause (iv) of
Section 4.3(a) shall be for not more than ninety percent (90%) of the aggregate
Exercise Price of the shares of Stock being purchased and shall be a full
recourse note in a form satisfactory to the Company, with principal payable
four (4) years after the date the Option is exercised.  Interest on the principal balance of the promissory
note shall be payable in annual installments at an interest rate no less than
that necessary to both avoid imputed interest pursuant to all applicable
sections of the Code and avoid requiring the Company’s outside auditors to
alter the accounting treatment of the Option. 
Such recourse promissory note shall be secured by the shares of Stock
acquired pursuant to the then current form of security agreement as approved by
the Company.  At any time the Company is
subject to the regulations promulgated by the Board of Governors of the Federal
Reserve System or any other governmental entity affecting the extension of
credit in connection with the Company’s securities, any promissory note shall
comply with such applicable regulations, and the Optionee shall pay the unpaid
principal and accrued interest, if any, to the extent necessary to comply with
such applicable regulations.  Except as
the Company in its sole discretion shall determine, the Optionee shall pay the
unpaid principal balance of the promissory note and any accrued interest
thereon upon termination of the Optionee’s Service with the Participating
Company Group for any reason, with or without cause.

4.










                       4.4          Tax Withholding.  At
the time the Option is exercised, in whole or in part, or at any time thereafter
as requested by the Company, the Optionee hereby authorizes withholding from
payroll and any other amounts payable to the Optionee, and otherwise agrees to
make adequate provision for (including by means of a Cashless Exercise to the
extent permitted by the Company), any sums required to satisfy the federal,
state, local and foreign tax withholding obligations of the Participating
Company Group, if any, which arise in connection with the Option, including,
without limitation, obligations arising upon (i) the exercise, in whole or in
part, of the Option, (ii) the transfer, in whole or in part, of any shares
acquired upon exercise of the Option, (iii) the operation of any law or
regulation providing for the imputation of interest, or (iv) the lapsing of any
restriction with respect to any shares acquired upon exercise of the
Option.  The Optionee is cautioned that
the Option is not exercisable unless the tax withholding obligations of the
Participating Company Group are satisfied. 
Accordingly, the Optionee may not be able to exercise the Option when
desired even though the Option is vested, and the Company shall have no
obligation to issue a certificate for such shares or release such shares from
any escrow provided for herein.

                       4.5          Certificate Registration.  Except
in the event the Exercise Price is paid by means of a Cashless Exercise, the
certificate for the shares as to which the Option is exercised shall be
registered in the name of the Optionee, or, if applicable, in the names of the
heirs of the Optionee.

                       4.6          Restrictions on Grant of the Option and Issuance of Shares.  The grant of the Option and
the issuance of shares of Stock upon exercise of the Option shall be subject to
compliance with all applicable requirements of federal, state or foreign law
with respect to such securities.  The
Option may not be exercised if the issuance of shares of Stock upon exercise
would constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed.  In addition, the Option may not be exercised
unless (i) a registration statement under the Securities Act shall at the time
of exercise of the Option be in effect with respect to the shares issuable upon
exercise of the Option or (ii) in the opinion of legal counsel to the Company,
the shares issuable upon exercise of the Option may be issued in accordance
with the terms of an applicable exemption from the registration requirements of
the Securities Act.  THE OPTIONEE IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS
ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION
WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. 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 subject to the Option 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 exercise of the
Option, the Company may require the Optionee 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.

                       4.7          Fractional Shares.  The
Company shall not be required to issue fractional shares upon the exercise of
the Option.

          5.          Nontransferability of the Option.  The Option may be exercised
during the lifetime of the Optionee only by the Optionee or the Optionee’s
guardian or legal representative and may not be assigned or transferred in any
manner except by will or by the laws of descent and distribution.  Following the death of the Optionee, the
Option, to the extent provided in Section 7, may be exercised by the Optionee’s
legal representative or by any person empowered to do so under the deceased
Optionee’s will or under the then applicable laws of descent and distribution.

5.










          6.          Termination of the Option.  The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Expiration Date,
(b) the last date for exercising the Option following termination of the
Optionee’s Service as described in Section 7, or (c) a Transfer of Control to
the extent provided in Section 8.

          7.          Effect of Termination of Service.

                       7.1          Option Exercisability.

                                      (a)          Disability.  If
the Optionee’s Service with the Participating Company Group is terminated
because of the Disability of the Optionee, the Option, to the extent
unexercised and exercisable on the date on which the Optionee’s Service
terminated, may be exercised by the Optionee (or the Optionee’s guardian or
legal representative) at any time prior to the expiration of six (6) months
after the date on which the Optionee’s Service terminated, but in any event no
later than the Option Expiration Date.

                                      (b)          Death.  If
the Optionee’s Service with the Participating Company Group is terminated
because of the death of the Optionee, the Option, to the extent unexercised and
exercisable on the date on which the Optionee’s Service terminated, may be
exercised by the Optionee (or the Optionee’s legal representative, or other
person who acquired the right to exercise the Option by reason of the
Optionee’s death) at any time prior to the expiration of six (6) months after
the date on which the Optionee’s Service terminated, but in any event no later
than the Option Expiration Date.  The
Optionee’s Service shall be deemed to have terminated on account of death if
the Optionee dies within one (1) month after the Optionee’s termination of
Service.

                                      (c)          Other Termination of Service.  If the Optionee’s Service with
the Participating Company Group terminates for any reason, except Disability or
death, the Option, to the extent unexercised and exercisable by the Optionee on
the date on which the Optionee’s Service terminated, may be exercised by the
Optionee within one (1) month (or such other longer period of time as
determined by the Board, in its sole discretion) after the date on which the
Optionee’s Service terminated, but in any event no later than the Option
Expiration Date.

                       7.2          Additional Limitations on Option Exercise. Except as the
Company and the Optionee otherwise agree, exercise of the Option pursuant to
Section 7.1 following termination of the Optionee’s Service may not be made by
delivery of a promissory note as provided in Section 4.3(a).

                       7.3          Extension if Exercise Prevented by Law.  Notwithstanding the foregoing, if the exercise of
the Option within the applicable time periods set forth in Section 7.1 is
prevented by the provisions of Section 4.6, the Option shall remain in effect
and exercisable so that the aggregate period of time that the Option is to be
exercisable as provided under the applicable provision of Section 7.1
(determined by reference to the cause of termination of the Optionee’s Service
with the Participating Company Group), but in no event later than the Option
Expiration Date.

6.










                       7.4          Extension if Optionee Subject to Section 16(b).  Notwithstanding the
foregoing, if a sale within the applicable time periods set forth in Section
7.1 of shares acquired upon the exercise of the Option would subject the
Optionee to suit under Section 16(b) of the Exchange Act, the Option shall
remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee’s termination of Service, or (iii) the Option Expiration
Date.

                       7.5          Leave of Absence.  For
purposes of Section 7.1, the Optionee’s Service with the Participating Company
Group shall not be deemed to terminate if the Optionee takes any military
leave, sick leave, or other bona fide leave of absence approved by the Company
of ninety (90) days or less.  In the
event of a leave of absence in excess of ninety (90) days, the Optionee’s
Service shall be deemed to terminate on the ninety-first (91st) day of such
leave unless the Optionee’s right to reemployment with the Participating
Company Group remains guaranteed by statute or contract.  Notwithstanding the foregoing, unless otherwise
designated by the Company (or required by law), a leave of absence shall not be
treated as Service for purposes of determining the Optionee’s Vested
Percentage.

          8.          Transfer of Control.

                       8.1          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 is 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 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.

7.











                                      (c)          Effect of Transfer of Control on Option.  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 either assume the Company’s rights and
obligations under the Option or substitute for the Option a substantially
equivalent option for the Acquiring Corporation’s stock.  The Option shall terminate and cease to be
outstanding effective as of the date of the Transfer of Control to the extent
that the Option is 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. 
Notwithstanding the foregoing, shares acquired upon exercise of the
Option prior to the date of the Transfer of Control and any consideration
received pursuant to the Transfer of Control with respect to such shares shall
continue to be subject to all applicable provisions of this Option Agreement
except as otherwise provided herein. 
Furthermore, notwithstanding the foregoing, if the corporation the stock
of which is subject to the Option immediately prior to an Ownership Change
Event described in Section 8.1 (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
Option shall not terminate unless the Board otherwise provides in its sole
discretion.

          9.          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,
appropriate adjustments shall be made in the number, Exercise Price and class
of shares of stock subject to the Option. 
If a majority of the shares which are of the same class as the shares
that are subject to the Option 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 Option to provide that the Option is
exercisable for New Shares.  In the
event of any such amendment, the Number of Option Shares and the Exercise Price
shall be adjusted in a fair and equitable manner, as determined by the Board,
in its sole discretion.  Notwithstanding
the foregoing, any fractional share resulting from an adjustment pursuant to
this Section 9 shall be rounded up or down to the nearest whole number, as
determined by the Board, and in no event may the Exercise Price be decreased to
an amount less than the par value, if any, of the stock subject to the Option.

          The
adjustments determined by the Board pursuant to this Section 9 shall be final,
binding and conclusive.


          10.        Rights as a Stockholder, Employee or Consultant.  The Optionee shall have no rights as a
stockholder with respect to any shares covered by the Option until the date of
the issuance of a certificate for the shares for which the Option has been
exercised (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company).  No adjustment shall be made for dividends, distributions or other
rights for which the record date is prior to the date such certificate is
issued, except as provided in Section 9 Nothing in this Option Agreement shall
confer upon the Optionee any right to continue in the Service of a
Participating Company or interfere in any way with any right of the
Participating Company Group to terminate the Optionee’s Service as an Employee
or Consultant, as the case may be, at any time.

8.










          11.        Legends. 
The Company may at any time place legends referencing any applicable
federal, state or foreign securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option
Agreement.  The Optionee shall, at the
request of the Company, promptly present to the Company any and all
certificates representing shares acquired pursuant to the Option in the
possession of the Optionee in order to carry out the provisions of this
Section.

          12.        Binding Effect.  Subject to the restrictions on transfer set forth herein,
this Option Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators,
successors and assigns.

          13.        Termination or Amendment.  The Board may terminate or amend the
Plan or the Option at any time; provided, however, that except as provided in
Section 8.2 in connection with a Transfer of Control, no such termination or
amendment may adversely affect the Option or any unexercised portion hereof
without the consent of the Optionee unless such termination or amendment is
necessary to comply with any applicable law or government regulation.  No amendment or addition to this Option
Agreement shall be effective unless in writing.


          14.        Integrated Agreement.  This Option Agreement constitutes the
entire understanding and agreement of the Optionee and the Participating Company
Group with respect to the subject matter contained herein and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Participating Company Group with respect to such subject
matter other than those as set forth or provided for herein.  To the extent contemplated herein, the
provisions of this Option Agreement shall survive any exercise of the Option
and shall remain in full force and effect.

          15.        Applicable Law.  This Option Agreement shall be governed by the laws of the
State of California as such laws are applied to agreements between California
residents entered into and to be performed entirely within the State of
California.

          16.        Review and Interpretation.  The Optionee represents that the Optionee
is familiar with the terms and provisions of this Option Agreement and hereby
accepts the Option subject to all of the terms and provisions thereof.  The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board
upon any questions arising under this Option Agreement.

9.