Document:

Epicor Software Corp. Nonqualified Option Agreement

 EXHIBIT 4.2 
  
 EPICOR SOFTWARE CORPORATION 
  
 NONQUALIFIED OPTION AGREEMENT 
  
 I.    NOTICE OF STOCK OPTION GRANT 
  
 Michael A. Piraino 
  
 195 Technology Drive 
  
 Irvine, CA 92618 
  
 You have been granted a Nonstatutory Stock Option to purchase Common Stock of the Company, subject to the terms and conditions of this Agreement, as
follows: 
  

	 Date of Grant
	  	May 27, 2003
		
	 Vesting Commencement Date
	  	May 27, 2003
		
	 Exercise Price per Share
	  	$3.65
		
	 Total Number of Shares Granted
	  	250,000
		
	 Total Exercise Price
	  	$912,500
		
	 Term/Expiration Date:
	  	May 27, 2013
		
	 Vesting Schedule:
	  	 

  
 This Option
shall vest and may be exercised, in whole or in part, in accordance with the following schedule: 
  
 25% of the Shares subject to the Option shall vest one year after the Vesting Commencement Date, and 6.25% of the Shares subject to the Option shall vest
at the conclusion of each three (3) month period thereafter, such that the subsequent vesting dates are as follows: August 27, 2004; November 27, 2004; February 27, 2005; May 27, 2005; August 27, 2005; November 27,
2005; February 27, 2006; May 27, 2006; August 27, 2006; November 27, 2006; February 27, 2007 and May 27, 2007, subject to the Optionee continuing to be a Service Provider on such dates. 
  
 Termination Period 
  
 This Option may be exercised for three (3) months after Optionee ceases to be
a Service Provider in accordance with Section 8 of this Agreement. Upon the death or Disability of the Optionee, this Option may be exercised for one year after the Optionee ceases to be a Service 

 Provider in accordance with Sections 9 and 10 of this Agreement. In no event shall this Option be exercised later that
the Term/Expiration Date provided. 
  
 II.    AGREEMENT 
  
 1.    Definitions. As used herein, the following definitions shall apply: 
  
         (a)    “Agreement” means this stock option agreement between the
Company and Optionee evidencing the terms and conditions of this Option. 
  
         (b)    “Applicable Laws” means the requirements relating to the administration of stock options 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 that may apply to this Option. 
  
         (c)    “Board” means the Board of Directors of the Company or any committee of the Board that has been designated by the Board to administer this
Agreement. 
  
         (d)    “Code” means the Internal Revenue Code of 1986, as amended. 
  

        (e)    “Common Stock” means the common stock of the Company.

  
         (f)    “Company” means Epicor Software Corporation, a Delaware corporation. 
  
         (g)    “Consultant” means any person,
including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity. 
  
         (h)    “Director” means a member of the Board. 
  
         (i)    “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code. 
  
         (j)    “Employee” means any person, including Officers and Directors, 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. 
  
         (k)    “Exchange Act” means the Securities Exchange Act of 1934, as
amended. 
  
         (l)    “Fair Market Value” means, as of any date, the value of Common Stock determined as follows: 
  
                 (1)    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 
  

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 exchange or system for the last market trading day on or prior to the time of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; 
  
                 (2)    If the Common Stock is regularly quoted by a recognized securities dealer but selling prices
are not reported, its Fair Market Value 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; or 
  
                 (3)    In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in
good faith by the Board. 
  
         (m)    “Nonstatutory Stock Option” means an Option not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder. 
  
         (n)    “Notice of Grant” means a written notice, in Part I of this Agreement, evidencing certain the terms and conditions of this Option grant. The Notice
of Grant is part of the Option Agreement. 
  
         (o)    “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. 
  
         (p)    “Option” means this stock option. 
  
         (q)    “Optioned Stock” means the Common Stock subject to this
Option. 
  
         (r)    “Optionee” means the person named in the Notice of Grant or such person’s successor. 
  
         (s)    “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code. 
  
         (t)    “Service Provider” means an Employee, Director or Consultant. 
  
         (u)    “Share” means a share of the
Common Stock, as adjusted in accordance with Section 11 of this Agreement. 
  
         (v)    “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of
the Code. 
  
 2.    Grant of Option.
The Board hereby grants to the Optionee named in the Notice of Grant attached as Part I of this Agreement 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 this Agreement. 
  

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 3.    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 this Agreement. 
  
 (b)    Method of
Exercise.    This Option is exercisable by delivery of an exercise notice, in the form attached as Exhibit A (the “Exercise Notice”), 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. The Exercise Notice shall be completed by the Optionee and delivered to
Secretary of the Company. 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. 
  
 (c)    Legal Compliance.    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. 
  
 4.    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 or check; 
  
 (b)    consideration received by the Company under a cashless exercise program implemented by the Company; or 
  
 (c) 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. 
  
 5.    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 this
Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 
  
 6.    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 terms of this Agreement. 
  
 7.    Termination of Relationship as a Service Provider.    If the Optionee ceases to be a Service Provider (other than for death or Disability), this Option may be
exercised for a period of three (3) months after the date of such termination (but in no event later than the expiration date of this Option as set forth in the Notice of Grant) to the extent that the Option is vested on the date of such
termination. To the extent that the Optionee does not exercise this Option within the time specified herein, the Option shall terminate. 
  

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 8.    Disability of Optionee.    If the Optionee ceases to
be a Service Provider as a result of the Optionee’s Disability, this Option may be exercised for a period of twelve (12) months after the date of such termination (but in no event later than the expiration date of this Option as set forth in
the Notice of Grant) to the extent that the Option is vested on the date of such termination. To the extent that Optionee does not exercise this Option within the time specified herein, the Option shall terminate. 
  
 9.    Death of Optionee.    If
the Optionee dies while a Service Provider, the Option may be exercised at any time within twelve (12) months following the date of death (but in no event later than the expiration date of this Option as set forth in the Notice of Grant), by the
Optionee’s estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent that the Optionee was entitled to exercise the Option at the date of death. If, after death, the Optionee’s
estate or a person who acquired the right to exercise the Option by bequest or inheritance does not exercise the Option within the time specified herein, the Option shall terminate. 
  
 10.    Adjustments upon Changes in Capitalization or Change of Control. 
  
 (a)    In the event that the outstanding shares of Common
Stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of merger, consolidation or reorganization in which the Company is the
surviving corporation or of a recapitalization, stock split, combination of shares, reclassification, reincorporation, stock dividend (in excess of 2%), or other change in the corporate structure of the Company, appropriate adjustments shall be made
by the Board in the aggregate number and kind of shares and the price per share subject to the Option in order to preserve, but not to increase, the benefits to the person then holding the Option. 
  
 (b)    In the event that a Change of Control (as defined
below) occurs, the vesting of the Option shall be accelerated immediately prior thereto and Optionee shall have the right to exercise the Option in respect to any or all of the Shares then subject thereto. To the extent possible, the Board shall
cause written notice of the Change of Control to be given to the Optionee not less than ten (10) days prior to the anticipated effective date of the Change of Control. In the event of a Change of Control, the Company may take such other action as is
equitable and fair. 
  
 (c)    For the
purposes of this Agreement, the term “Change of Control” shall mean the occurrence of any of the following: 
  
 (1)    Any “person,” as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”) (other than the Company, a Company subsidiary, or a Company employee benefit plan, including any trustee of such plan acting as trustee) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company (or a successor to the Company) representing fifty percent (50%) or more of the combined voting power of the then outstanding securities of the Company or such successor; or

  
 (2)    At least a majority of the
directors of the Company constitute persons who were not at the time of their first election to the Board, candidates proposed by a majority of the Board in office prior to the time of such first election; or 
  

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 (3)    A merger or consolidation in which the Company is not the surviving entity,
except for a transaction, the principal purpose of which is to change the state in which the Company is incorporated; or 
  
 (4)    A sale, transfer or other disposition of assets involving fifty percent (50%) or more in value of the assets of the Company;
or 
  
 (5)    The dissolution of the Company,
or liquidation of more than fifty percent (50%) in value of the Company; or 
  
 (6)    Any reverse merger in which the Company is a surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s
outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such reverse merger. 
  
 11.    Notices.    Any notice to be given to the Company hereunder shall be in writing and shall be
addressed to the Company, at its then current principal executive office or to such other address as the Company may hereafter designate to the Optionee by notice as provided in this Section. Any notice to be given to the Optionee hereunder shall be
addressed to the Optionee at the address set forth beneath his signature hereto, or at such other address as the Optionee may hereafter designate to the Company by notice as provided herein. A notice shall be deemed to have been duly given when
personally delivered or mailed by registered or certified mail to the party entitled to receive it. 
  
 12.    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 a Nonstatutory Stock Option (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. 
  
 13.    Entire Agreement; Governing Law.    This Agreement constitutes the entire agreement of the 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 
  

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 signed by the Company and Optionee. This agreement is governed by the internal substantive laws, but not the choice of
law rules, of California. 
  
 14.    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 CONTINUES 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 this Agreement. Optionee has reviewed this Agreement in
its entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of this Agreement. Optionee hereby agrees to accept as binding, conclusive and final all decisions or
interpretations of the Board upon any questions relating to this Agreement. Optionee further agrees to notify the Company upon any change in the residence address indicated below. 
  

	OPTIONEE	  	 EPICOR SOFTWARE CORPORATION

		
	 /s/  MICHAEL A. PIRAINO

	  	 /s/  JOHN IRELAND

	 Signature
	  	 By

		
	 Michael A. Piraino

	  	 General Counsel

	 Print Name
	  	 Title

	  
  

 Address
	  	 
	  
 195 Technology Drive

	  	 
	 Irvine, CA 92618

	  	 

  

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 EXHIBIT A 
  
 EPICOR SOFTWARE CORPORATION 
  

EXERCISE NOTICE 
  
 Epicor Software Corporation 
 195 Technology Drive 
 Irvine, CA 92718-2402 
  
 Attention: 
  
 1.    Exercise of Option. Effective as of today,
                        , 20    , the undersigned (“Purchaser”) hereby elects to purchase
                 shares (the “Shares”) of the Common Stock of Epicor Software Corporation (the “Company”) under and pursuant to the Nonqualified
Option Agreement effective as of May 27, 2003 (the “Option Agreement”). The purchase price for the Shares shall be $                , as required by the Option
Agreement. 
  
 2.    Delivery of
Payment. Purchaser herewith delivers to the Company the full purchase price for the Shares. 
  
 3.    Representations of Purchaser. Purchaser acknowledges that Purchaser has received, read and understood the Option
Agreement and agrees to abide by and be bound by their terms and conditions. 
  
 4.    Rights as Stockholder. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the Shares, no
right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Shares so acquired shall be issued to the Optionee as soon as practicable after
exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date of issuance, except as provided in Section 10 of the Option Agreement. 
  
 5.    Tax Consultation. Purchaser understands that
Purchaser may suffer adverse tax consequences as a result of Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has consulted with any tax consultants Purchaser deems advisable in connection with the purchase
or disposition of the Shares and that Purchaser is not relying on the Company for any tax advice. 
  
 6.    Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple
assignees, and this Exercise Notice shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon Optionee and his or her heirs,
executors, administrators, successors and assigns. 
  

 7.    Interpretation. Any dispute regarding the interpretation of this
Exercise Notice shall be submitted by Optionee or by the Company forthwith to the Administrator which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all
parties. 
  
 8.    Entire Agreement;
Governing Law. The Option Agreement is incorporated herein by reference. This Agreement, and the Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of the Company and Purchaser with respect to the subject matter hereof, and may not be modified adversely to the Purchaser’s interest except by means of a writing signed by the Company and Purchaser. This agreement
is governed by the internal substantive laws, but not the choice of law rules, of California. 
  

	Submitted by:	 	 	 	 Accepted by:

			
	OPTIONEE	 	 	 	 EPICOR SOFTWARE CORPORATION

			
	
	 	 	 	

	 Signature
	 	 	 	 
			
	
	 	 	 	

	 Print Name
	 	 	 	 
			
	
	 	 	 	 195 Technology Drive

	 Address
	 	 	 	 
			
	
	 	 	 	 Irvine, CA 92718-2402

  
  

				
	 	 	 	 	Date Received:Prepared by R.R. Donnelley Financial -- Offer Letter - John G. Schwarz

 EXHIBIT 10.7 
 March 6, 2003 
  
 Mr. Victor A. Cohn 
 FocalPoint Partners 
 909 Third Avenue 
 New York, NY 10022 
  
 Dear Victor,

  
 We are pleased that you have accepted a position on the Board of Directors
(the “Board”) of Verity, Inc. (“Verity” or the “Company”). We are further pleased to have you join the Audit Committee of the Board. This is an exciting time for the Company, and we believe that your skills and
experience can greatly assist in moving the Company forward. We would like to provide you with further information regarding your compensation as a member of the Board. 
  
 1. Stock Option Grants. Upon your election to the Board, and in consideration of your services to Verity as a
director, you will be granted a non-statutory stock option to purchase 40,000 shares of Verity’s Common Stock under Verity’s 1995 Outside Directors Stock Option Plan. This option shall vest over four years with  1/4 of the shares vesting after one year and the remaining  3/4 of the shares vesting in 36 equal monthly installments thereafter. As a non-employee director, you will also be granted an option to purchase an
additional 40,000 shares at each annual meeting of Verity’s stockholders starting in October of 2003. This option shall vest over four years with  1/12 of the shares vesting after 37 months and the remaining  11/12
of the shares vesting in 11 equal monthly installments thereafter. In addition, upon your election to the Board, you will also be granted a non-statutory stock option to purchase 60,000 shares of Verity’s Common Stock under Verity’s 1996
Nonstatutory Stock Option Plan. This option shall vest in equal monthly installments over 24 months. All such options shall have an exercise price equal to the fair market value of Verity’s Common Stock on the date of grant. The options shall
be subject to vesting restrictions and other standard provisions set forth in Verity’s stock option documentation. Additional details regarding the options are described in Exhibit A to this letter.

  
 2. Reimbursement for Board
Duties. As a non-employee director of Verity, you will receive an annual retainer of $25,000. In addition, you will also be reimbursed for your expenses in attending Board and committee meetings. 
  
 3. Indemnity Agreement. Verity enters into a standard form of
indemnity agreement with each of its directors. Such agreements require Verity to indemnify its directors to the fullest extent permitted by law. A copy of Verity’s form of indemnity agreement is attached to this letter as Exhibit B.

  
 4. Proprietary Information. In your role as a director
of the Company, you will be expected not to use or disclose any confidential information, including trade secrets, of any former employer or other person to whom you have an obligation of confidentiality. Additionally, you will receive confidential
and proprietary information belonging to the Company, which you will have a duty of care and a duty of loyalty to protect. 
  
 5. Nature of Relationship. Your relationship with the Company will be as a member of the Board and will not involve an employment or consulting
relationship. This letter, together with the indemnity agreement and documents relating to your option grant, forms the complete and exclusive statement of our understanding with respect to your service on the Company’s Board of Directors. The
terms in this letter supersede any other agreements or promises made to you by anyone, whether oral or written. 
  
 We are excited to have you join Verity’s Board of Directors and would like to have you participate at the Company’s next scheduled Board meeting on March 10,
2003. 
  
 Please sign and date this letter and return it to me to confirm that you
wish to accept membership on the Board under the terms described above. 
  
 Sincerely, 

 Gary J. Sbona 
 Chairman of the Board of Directors 
  
 Accepted and agreed to: 
  

			
	 /s/    VICTOR A. COHN        

	 	 	 	 3/6/03        

	Victor A. Cohn	 	 	 	Date

  

	Enclosures:	 	Exhibit A	 	 	 	 	 	 
	 	 	Exhibit B	 	 	 	 	 	 

 EXHIBIT A 
  
 ADDITIONAL OPTION TERMS AND CONDITIONS 
  
 Vesting 
  
 Under the 1995 Outside Directors Stock Option Plan, an option is exercisable as the shares underlying the option vest, provided the optionee has
continuously served as a director. 
  
 Under the 1996 Nonstatutory
Stock Option Plan, an option is exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria, and restrictions as shall be determined by the Board and set forth in the option agreement
evidencing such option. 
  
 Transfer of Control 
  
 Under the 1995 Outside Directors Stock Option Plan, if a “transfer of
control” of the Company occurs, any unexercisable or unvested portion of the outstanding options will be immediately exercisable and vested in full ten days before the date of the transfer of control. In addition, 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 outstanding options or substitute for outstanding
options substantially equivalent options for the acquiring corporation’s stock. Any options which are not assumed, substituted for or exercised will terminate as of the transfer of control. 
  
 Under the 1996 Nonstatutory Stock Option Plan, if a “transfer of
control” of the Company occurs, 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 outstanding options or substitute for outstanding options substantially equivalent options for the acquiring corporation’s stock. Any options which are not assumed, substituted for or exercised will terminate as of the
transfer of control. 
  
 A “transfer of control” under
both plans means an “ownership change event” (as defined below) 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 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. An “ownership change event” is deemed to have occurred if any of the following
occurs with respect to the Company: (1) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of more than 50% of the voting stock of the Company; (2) a merger or consolidation in which the Company
is a party; (3) the sale, exchange, or transfer of all or substantially all of the assets of the Company; or (4) a liquidation or dissolution of the Company. 

 EXHIBIT B 
  
 FORM OF INDEMNITY AGREEMENT 
  

This INDEMNITY AGREEMENT, dated as of March 6, 2003, is made by and between
VERITY, INC., a Delaware corporation (the “Company”), and VICTOR A. COHN (the “Indemnitee”). 
  
 RECITALS 
  
 A. The Company is aware that competent and experienced persons are increasingly reluctant to serve as directors, officers or agents of corporations unless
they are protected by comprehensive liability insurance or indemnification, due to increased exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure frequently bears no
reasonable relationship to the compensation of such directors, officers and other agents. 
  
 B. The statutes and judicial decisions regarding the duties of directors and officers are often difficult to apply, ambiguous, or conflicting, and therefore fail to provide such directors, officers and agents with
adequate, reliable knowledge of legal risks to which they are exposed or information regarding the proper course of action to take. 
  
 C. Plaintiffs often seek damages in such large amounts and the costs of litigation may be so enormous (whether or not the case is meritorious), that the
defense and/or settlement of such litigation is often beyond the personal resources of directors, officers and other agents. 
  
 D. The Company believes that it is unfair for its directors, officers and agents and the directors, officers and agents of its subsidiaries to assume the
risk of huge judgments and other expenses which may occur in cases in which the director, officer or agent received no personal profit and in cases where the director, officer or agent was not culpable. 
  
 E. The Company recognizes that the issues in controversy in litigation
against a director, officer or agent of a corporation such as the Company or its subsidiaries are often related to the knowledge, motives and intent of such director, officer or agent, that he is usually the only witness with knowledge of the
essential facts and exculpating circumstances regarding such matters, and that the long period of time which usually elapses before the trial or other disposition of such litigation often extends beyond the time that the director, officer or agent
can reasonably recall such matters; and may extend beyond the normal time for retirement for such director, officer or agent with the result that he, after retirement or in the event of his death, his spouse, heirs, executors or administrators, may
be faced with limited ability and undue hardship in maintaining an adequate defense, which may discourage such a director, officer or agent from serving in that position. 
  
 F. Based upon their experience as business managers, the Board of Directors of the Company (the “Board”) has
concluded that, to retain and attract talented and experienced individuals to serve as directors, officers and agents of the Company and its subsidiaries and to encourage such individuals to take the business risks necessary for the success of the
Company and its subsidiaries, it is necessary for the Company to contractually indemnify its directors, officers and agents and the directors, officers and agents of its subsidiaries, and to assume for itself maximum liability for expenses and
damages in connection with claims against such directors, officers and agents in connection with their service to the Company and its subsidiaries, and has further concluded that the failure to provide such contractual indemnification could result
in great harm to the Company and its subsidiaries and the Company’s stockholders. 
  
 G. Section 145 of the General Corporation Law of Delaware, under which the Company is organized (“Section 145”), empowers the Company to indemnify its directors, officers, employees and agents by agreement
and to indemnify persons who serve, at the request of the Company, as the directors, officers, employees or agents of other corporations or enterprises, and expressly provides that the indemnification provided by Section 145 is not exclusive.

  
 H. The Company desires and has requested the Indemnitee to
serve or continue to serve as a director, officer or agent of the Company and/or one or more subsidiaries of the Company free from undue concern for claims for damages arising out of or related to such services to the Company and/or one or more
subsidiaries of the Company. 
  
 I. Indemnitee is willing to
serve, or to continue to serve, the Company and/or one or more subsidiaries of the Company, provided that he is furnished the indemnity provided for herein. 
  
 AGREEMENT 
  
 NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: 
  
 1. Definitions. 
  
 (a) Agent. For the purposes of this Agreement, “agent” of the Company means any person who is or was a director, officer, employee or
other agent of the Company or a subsidiary of the Company; or is or was serving at the request of, for the convenience of, or to represent the interests of the Company or a subsidiary of the Company as a director, officer, 

 
employee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise; or was a director, officer, employee or
agent of a foreign or domestic corporation which was a predecessor corporation of the Company or a subsidiary of the Company, or was a director, officer, employee or agent of another enterprise at the request of, for the convenience of, or to
represent the interests of such predecessor corporation. 
  
 (b)
Expenses. For purposes of this Agreement, “expenses” include all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements, other out-of-pocket
costs actually and reasonably incurred by the Indemnitee in connection with either the investigation, defense or appeal of a proceeding or establishing or enforcing a right to indemnification under this Agreement or Section 145 or otherwise;
provided, however, that “expenses” shall not include any judgments, fines, ERISA excise taxes or penalties, or amounts paid in settlement of a proceeding. 
  
 (c) Proceeding. For the purposes of this Agreement, “proceeding” means any threatened, pending, or
completed action, suit or other proceeding, whether civil, criminal, administrative, or investigative. 
  
 (d) Subsidiary. For purposes of this Agreement, “subsidiary” means any corporation of which more than 50% of the outstanding voting
securities is owned directly or indirectly by the Company, by the Company and one or more other subsidiaries, or by one or more other subsidiaries. 
  
 2. Agreement to Serve. The Indemnitee agrees to serve and/or continue to serve as agent of the Company, at its will (or under separate agreement,
if such agreement exists), in the capacity Indemnitee currently serves as an agent of the Company, so long as he is duly appointed or elected and qualified in accordance with the applicable provisions of the Bylaws of the Company or any subsidiary
of the Company or until such time as he tenders his resignation in writing; provided, however, that nothing contained in this Agreement is intended to create any right to continued employment by Indemnitee. 
  
 3. Liability Insurance. 
  
 (a) Maintenance of D&O Insurance. The Company hereby covenants and
agrees that, so long as the Indemnitee shall continue to serve as an agent of the Company and thereafter so long as the Indemnitee shall be subject to any possible proceeding by reason of the fact that the Indemnitee was an agent of the Company, the
Company, subject to Section 3(c), shall promptly obtain and maintain in full force and effect directors’ and officers’ liability insurance (“D&O Insurance”) in reasonable amounts from established and reputable insurers.

  
 (b) Rights and Benefits. In all policies of D&O
Insurance, the Indemnitee shall be named as an insured in such a manner as to provide the Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s directors, if the Indemnitee is a director; or of
the Company’s officers, if the Indemnitee is not a director of the Company but is an officer; or of the Company’s key employees, if the Indemnitee is not a director or officer but is a key employee. 
  
 (c) Limitation on Required Maintenance of D&O Insurance.
Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain D&O Insurance if the Company determines in good faith that such insurance is not reasonably available, the premium costs for such insurance are
disproportionate to the amount of coverage provided, the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit, or the Indemnitee is covered by similar insurance maintained by a subsidiary of the
Company. 
  
 4. Mandatory Indemnification. Subject to
Section 9 below, the Company shall indemnify the Indemnitee as follows: 
  
 (a) Successful Defense. To the extent the Indemnitee has been successful on the merits or otherwise in defense of any proceeding (including, without limitation, an action by or in the right of the Company) to which the Indemnitee was
a party by reason of the fact that he is or was an Agent of the Company at any time, against all expenses of any type whatsoever actually and reasonably incurred by him in connection with the investigation, defense or appeal of such proceeding.

  
 (b) Third Party Actions. If the Indemnitee is a person
who was or is a party or is threatened to be made a party to any proceeding (other than an action by or in the right of the Company) by reason of the fact that he is or was an 

 agent of the Company, or by reason of anything done or not done by him in any such capacity, the Company
shall indemnify the Indemnitee against any and all expenses and liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in settlement) actually and reasonably incurred
by him in connection with the investigation, defense, settlement or appeal of such proceeding, provided the Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and its
stockholders, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. 
  
 (c) Derivative Actions. If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding by reason of the
fact that he is or was an agent of the Company, or by reason of anything done or not done by him in any such capacity, the Company shall indemnify the Indemnitee against any amounts paid in settlement of any such proceeding and all expenses actually
and reasonably incurred by him in connection with the investigation, defense, settlement, or appeal of such proceeding, provided the Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests
of the Company and its stockholders. The Company shall indemnify the Indemnitee against judgments, fines, and ERISA excise taxes and penalties to the same extent and subject to the same conditions as described in the immediately preceding sentence.
Notwithstanding the foregoing, no indemnification under this subsection 4(c) shall be made in respect to any claim, issue or matter as to which such person shall have been finally adjudged to be liable to the Company by a court of competent
jurisdiction unless and only to the extent that the court in which such proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such amounts which the court shall deem proper. 
  
 (d) Actions where Indemnitee is Deceased. If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding by reason of the fact that he is or was an agent of the
Company, or by reason of anything done or not done by him in any such capacity, and if prior to, during the pendency of after completion of such proceeding Indemnitee becomes deceased, the Company shall indemnify the Indemnitee’s heirs,
executors and administrators against any and all expenses and liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in settlement) actually and reasonably incurred to
the extent Indemnitee would have been entitled to indemnification pursuant to Sections 4(a), 4(b), or 4(c) above were Indemnitee still alive. 
  
 (e) Notwithstanding the foregoing, the Company shall not be obligated to indemnify the Indemnitee for expenses or liabilities of any type whatsoever
(including, but not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in settlement) for which payment is actually made to Indemnitee under a valid and collectible insurance policy of D&O Insurance, or under a
valid and enforceable indemnity clause, by-law or agreement. 
  
 5. Partial Indemnification. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any expenses or liabilities of any type whatsoever (including, but not limited
to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in settlement) incurred by him in the investigation, defense, settlement or appeal of a proceeding, but not entitled, however, to indemnification for all of the total amount
hereof, the Company shall nevertheless indemnify the Indemnitee for such total amount except as to the portion hereof to which the Indemnitee is not entitled. 
  

6. Mandatory Advancement of Expenses. Subject to Section 8(a) below, the Company shall advance all expenses incurred by the Indemnitee in
connection with the investigation, defense, settlement or appeal of any proceeding to which the Indemnitee is a party or is threatened to be made a party by reason of the fact that the Indemnitee is or was an agent of the Company. Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it shall be determined ultimately that the Indemnitee is not entitled to be indemnified by the Company as authorized hereby. The advances to be made hereunder shall be paid
by the Company to the Indemnitee within twenty (20) days following delivery of a written request therefor by the Indemnitee to the Company. 
  
 7. Notice and Other Indemnification Procedures. 
  
 (a) Promptly after receipt by the Indemnitee of notice of the commencement of or the threat of commencement of any proceeding, the Indemnitee shall, if
the Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company of the commencement or threat of commencement thereof. 

 (b) If, at the time of the receipt of a notice of the commencement of a proceeding pursuant to Section
7(a) hereof, the Company has D&O Insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies. 
  
 (c) In the event the Company shall be obligated to pay the expenses of any
proceeding against the Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by the Indemnitee, upon the delivery to the Indemnitee of written notice of its election so to do.
After delivery of such notice, approval of such counsel by the Indemnitee and the retention of such counsel by the Company, the Company will not be liable to the Indemnitee under this Agreement for any fees of counsel subsequently incurred by the
Indemnitee with respect to the same proceeding, provided that (i) the Indemnitee shall have the right to employ his counsel in any such proceeding at the Indemnitee’s expense; and (ii) if (A) the employment of counsel by the Indemnitee has been
previously authorized by the Company, (B) the Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and the Indemnitee in the conduct of any such defense, or (C) the Company shall not, in fact, have
employed counsel to assume the defense of such proceeding, then the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company. 
  
 8. Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this
Agreement: 
  
 (a) Claims Initiated by Indemnitee. To
indemnify or advance expenses to the Indemnitee with respect to proceedings or claims initiated or brought voluntarily by the Indemnitee and not by way of defense, unless (i) such indemnification is expressly required to be made by law, (ii) the
proceeding was authorized by the Board, (iii) such indemnification is provided by the Company, in its sole discretion, pursuant to the powers vested in the Company under the General Corporation Law of Delaware or (iv) the proceeding is brought to
establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Section 145. 
  
 (b) Lack of Good Faith. To indemnify the Indemnitee for any expenses incurred by the Indemnitee with respect to any proceeding instituted by the
Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that the proceeding was not brought by the Indemnitee in good faith or was frivolous; or 
  
 (c) Unauthorized Settlements. To indemnify the Indemnitee under this Agreement for any amounts paid in settlement of
a proceeding unless the Company consents to such settlement, which consent shall not be unreasonably withheld. 
  
 9. Non-exclusivity. The provisions for indemnification and advancement of expenses set forth in this Agreement shall not be deemed exclusive of any
other rights which the Indemnitee may have under any provision of law, the Company’s Certificate of Incorporation or Bylaws, the vote of the Company’s stockholders or disinterested directors, other agreements, or otherwise, both as to
action in his official capacity and to action in another capacity while occupying his position as an agent of the Company, and the Indemnitee’s rights hereunder shall continue after the Indemnitee has ceased acting as an agent of the Company
and shall inure to the benefit of the heirs, executors and administrators of the Indemnitee. 
  
 10. Enforcement. Any right to indemnification or advances granted by this Agreement to Indemnitee shall be enforceable by or on behalf of Indemnitee in any court of competent jurisdiction if (i) the claim for
indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefor. Indemnitee, in such enforcement action, if successful in whole or in part, shall be entitled to be
paid also the expense of prosecuting his claim. It shall be a defense to any action for which a claim for indemnification is made under this Agreement (other than an action brought to enforce a claim for expenses pursuant to Section 6 hereof,
provided that the required undertaking has been tendered to the Company) that Indemnitee is not entitled to indemnification because of the limitations set forth in Sections 4 and 8 hereof. Neither the failure of the Corporation (including its Board
of Directors or its stockholders) to have made a determination prior to the commencement of such enforcement action that indemnification of Indemnitee is proper in the circumstances, nor an actual determination by the Company (including its Board of
Directors or its stockholders) that such indemnification is improper, shall be a defense to the action or create a presumption that Indemnitee is not entitled to indemnification under this Agreement or otherwise. 

 11. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to
the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such
rights. 
  
 12. Survival of Rights. 
  
 (a) All agreements and obligations of the Company contained herein shall
continue during the period Indemnitee is an agent of the Company and shall continue thereafter so long as Indemnitee shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding, whether civil, criminal,
arbitrational, administrative or investigative, by reason of the fact that Indemnitee was serving in the capacity referred to herein. 
  
 (b) The Company shall require any successor to the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

  
 13. Interpretation of Agreement. It is understood that
the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification to the Indemnitee to the fullest extent permitted by law including those circumstances in which indemnification would otherwise be
discretionary. 
  
 14. Severability. If any provision or
provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (i) the validity, legality and enforceability of the remaining provisions of the Agreement (including without limitation, all portions of
any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest
extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to Section 13 hereof. 
  
 15. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless
executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver. 
  
 16. Notice. All notices, requests,
demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and receipted for by the party addressee or (ii) if mailed by certified or registered mail with postage prepaid, on the
third business day after the mailing date. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice. 
  
 17. Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the State
of Delaware as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware. 

 The parties hereto have entered into this Indemnity Agreement effective as of the date first above written. 

 
 VERITY, INC. 
  

		
	 By:
	 	 /s/    PAUL H. COOK

	 	 	 Title: Corporate Controller

	 	 	 Address: 894 Ross Drive
 Sunnyvale, California 94089

  
 INDEMNITEE 
  

		
	 By:
	 	 /s/    VICTOR A.
COHN    

	 	 	Victor A. Cohn

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