Document:

EXHIBIT 4.1

MERCURY INTERACTIVE
CORPORATION 

2000 SUPPLEMENTAL STOCK OPTION PLAN 

(Adopted by the Board on July 25, 2000)

1.             Purposes
of the Plan. The purposes of this Stock Option Plan are to attract and retain
the best available personnel for positions of substantial responsibility, to
provide additional incentive to such individuals of the Company and to promote
the success of the Company’s business. Options granted hereunder may only be
Nonstatutory Stock Options.

2.             Definitions.
As used herein, the following definitions shall apply: 

(a)           “Administrator”
means the Committee, if one has been appointed, or the Board of Directors of
the Company, if no Committee is appointed. 

(b)           “Board”
means the Board of Directors of the Company. A member of the Board shall be
referred to hereinafter as a “Director.” 

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

(d)           “Committee”
means the Committee appointed by the Board of Directors in accordance with
paragraph (a) of Section 4 of the Plan, if one is appointed. 

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

(f)            “Company”
means Mercury Interactive Corporation, a Delaware corporation. 

(g)           “Continuous
Status as an Employee” means that the employment or consulting relationship is
not interrupted or terminated by the Company, any Parent or Subsidiary.
Continuous Status as an Employee shall not be considered interrupted in the
case of: (i) any leave of absence approved by the Administrator, including sick
leave, military leave, or any other personal leave; provided, however, that for
purposes of Incentive Stock Options, any such leave may not exceed ninety (90)
days, unless reemployment upon the expiration of such leave is guaranteed by
contract (including certain Company policies) or statute; or (ii) transfers
between locations of the Company or between the Company, its Parent, its
Subsidiaries or its successor. 

(h)           “Director”
means a member of the Board of Directors of the Company or of the board of
directors of any Parent or Subsidiary of the Company. 

(i)            “Employee”
means any person, excluding Officers and Directors, who is not a United States
citizen, employed by the Company or any Parent or Subsidiary of the Company.
Neither service as a Director nor the payment of a director’s fee by the Company
shall not be sufficient to constitute “employment” by the Company. 

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

(k)           “Incentive
Stock Option” means any Option intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code. 

(l)            “Nonstatutory
Stock Option” means an Option not intended to qualify as an Incentive Stock
Option. 

(m)          “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. 

(n)           “Option”
means a stock option granted pursuant to the Plan. 

(o)           “Optioned
Stock” means the Common Stock subject to an Option. 

(p)           “Optionee”
means an Employee who receives an Option.

 

(q)           “Parent”
means a “parent corporation”, whether now or hereafter existing, as defined in
Section 424(e) of the Code. 

(r)            “Plan”
means this 2000 Supplemental Stock Option Plan. 

(s)           “Share”
means a share of the Common Stock, as adjusted in accordance with Section 11 of
the Plan. 

(t)            “Subsidiary”
means a “subsidiary corporation”, whether now or hereafter existing, as defined
in Section 424(f) of the Code.

3.             Stock
Subject to the Plan. Subject to the provisions to Section 11 of the Plan, the
total number of Shares reserved and available for issuance is 2,000,000.

Subject to Section
11 of the Plan, if any Shares that have been optioned under an Option cease to
be subject to such Option (other than through exercise of the Option), or if
any Option granted hereunder is forfeited, or any such award otherwise
terminates prior to the issuance of Common Stock to the participant, the Shares
that were subject to such Option shall again be available for distribution in
connection with future Option grants under the Plan. Shares that have actually
been issued under the Plan, upon exercise of an Option, shall not in any event
be returned to the Plan and shall not become available for future distribution
under the Plan.

4.             Administration
of the Plan. 

(a)           Procedure.
The Plan shall be administered by (A) the Board or (B) a committee designated
by the Board, which committee shall be constituted in such a manner as to
satisfy the legal requirements relating to the administration of stock option
plans, if any, of state corporate law, the relevant stock exchange and the Code
(the “Applicable Rules”). Once appointed, such Committee shall serve in its
designated capacity until otherwise directed by the Board. The Board may
increase the size of the Committee and appoint additional members, remove
members (with or without cause) and substitute new members, fill vacancies
(however caused), and remove all members of the Committee and thereafter
directly administer the Plan, all to the extent permitted by the Applicable
Rules. 

(b)           Powers
of the Administrator. Subject to the provisions of the Plan, and in the case of
a Committee, subject to the specific duties delegated by the Board to such
Committee, the Administrator shall have the authority, in its discretion: 

(i)            to
determine the Fair Market Value of the Common Stock, in accordance with Section
8(b) of the Plan; 

(ii)           to
select the Employees to whom Options may be granted hereunder; 

(iii)          to
determine whether and to what extent Options are granted hereunder; 

(iv)          to
determine the number of shares of Common Stock to be covered by each Option
granted hereunder; 

(v)           to
approve forms of agreement for use under the Plan; 

(vi)          to
determine the terms and conditions, not inconsistent with the terms of the
Plan, of any award granted hereunder. Such terms and conditions include, but
are not limited to, the exercise price, the time or times when Options may be
exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or limitation
regarding any Option or the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole discretion, shall
determine; 

(vii)         to
construe and interpret the terms of the Plan and awards granted pursuant to the
Plan; 

(viii)        to
prescribe, amend and rescind rules and regulations relating to the Plan; 

(ix)           to
modify or amend each Option (subject to Section 14(b) of the Plan); 

(x)            to
authorize any person to execute on behalf of the Company any instrument required
to effect the grant of an Option previously granted by the Administrator; 

 

(xi)           to
determine and recommend the terms of any Option exchange program or repricing
program for Options granted under the Plan, and subject to prior stockholder
approval, to institute and implement any such program; 

(xii)          to
determine the terms and restrictions applicable to Options; and 

(xiii)         to
make all other determinations deemed necessary or advisable for administering
the Plan. 

(c)           Effect
of Administrator’s Decision. The Administrator’s decisions, determinations and
interpretations shall be final and binding on all Optionees and any other
holders of Options.

5.             Eligibility.

(a)           Nonstatutory
Stock Options may be granted to only to Employees who are not Officers or Directors
of the Company. For purposes of the foregoing sentence, “Employees” shall
include prospective Employees to whom Options are granted in connection with
written offers of employment with the Company or any Parent or Subsidiary of
the Company. 

(b)           Each
Option shall be designated in the written option agreement as a Nonstatutory
Stock Option. However, notwithstanding such designations, to the extent that
the aggregate Fair Market Value of the Shares with respect to which Options
designated as Incentive Stock Options are exercisable for the first time by any
Optionee during any calendar year (under all plans of the Company)
exceeds$100,000, such Options shall be treated as Nonstatutory Stock Options. 

(c)           For
purposes of Section 5(b), Options shall be taken into account in the order in
which they were granted, and the Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted. 

(d)           Nothing
in the Plan or any Option granted hereunder shall confer upon any Optionee any
right with respect to continuation of employment or consulting relationship
with the Company, nor shall it interfere in any way with the Optionee’s right
or the Company’s right to terminate his employment or consulting relationship at
any time, with or without cause. 

(e)           The
following limitations shall apply to grants of Options to Employees: 

(i)            No
Employee shall be granted, in any fiscal year of the Company, Options to
purchase more than 1,000,000 Shares. 

(ii)           In
connection with his or her initial employment, an Employee may be granted
Options to purchase up to an additional 2,000,000 Shares which shall not count
against the limit set forth in subsection (i) above . 

(iii)          The
foregoing limitations shall be adjusted proportionately in connection with any
change in the Company’s capitalization as described in Section 11. 

(iv)          If
an Option is cancelled in the same fiscal year of the Company in which it was
granted (other than in connection with a transaction described in Section 11), the
cancelled Option shall be counted against the limit set forth in subsection (i)
above. For this purpose, if the exercise price of an Option is reduced, such
reduction will be treated as a cancellation of the Option and the grant of a
new Option.” 

6.             Term
of Plan. The term of the Plan shall be ten (10) years, commencing on July 25,
2000 and terminating on July 25, 2010 unless sooner terminated under
Section 14 of the Plan.

7.             Term
of Option. The term of each Option shall be no more than ten (10) years from
the date of grant. However, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Incentive
Stock Option shall be no more than five (5) years from the date of grant.

 

8.             Exercise
Price and Consideration. 

(a)           The
per Share exercise price under each Option shall be such price as is determined
by the Board; provided, however, in the case of a Nonstatutory Stock Option the
per Share exercise price shall be no less than 100% of the Fair Market Value
per Share on the date of grant. 

For
purposes of this Section 8(a), in the event that an Option is amended to reduce
the exercise price, the date of grant of such Option shall thereafter be
considered to be the date of such amendment. 

(b)           The
Fair Market Value shall be determined by the Board in good faith; provided,
however, that where there is a public market for the Common Stock, the Fair
Market Value per Share shall be the mean of the bid and asked prices (or the
closing price per share if the Common Stock is listed on the National
Association of Securities Dealers Automated Quotation (“NASDAQ”) National
Market System) of the Common Stock for the date of grant, as reported in the
Wall Street Journal (or, if not so reported, as otherwise reported by the
NASDAQ System) or, in the event the Common Stock is listed on a stock exchange,
the Fair Market Value per Share shall be the closing price on such exchange on
the date of grant of the Option, as reported in the Wall Street Journal. 

(c)           The
Administrator shall determine the acceptable form of consideration for
exercising an Option, including the method of payment. The Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of: 

(i)            cash;

(ii)           check;

(iii)          promissory
note; 

(iv)          other
Shares which (A) in the case of Shares acquired upon exercise of an option,
have been owned by the Optionee for more than six months on the date of
surrender, and (B) have a Fair Market Value on the date of surrender equal to
the aggregate exercise price of the Shares as to which said Option shall be
exercised; 

(v)           delivery
of a properly executed exercise notice together with such other documentation
as the Administrator and the broker, if applicable, shall require to effect an
exercise of the Option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price and any tax withholding resulting from such
exercise; 

(vi)          any
combination of the foregoing methods of payment; or 

(vii)         such
other consideration and method of payment for the issuance of Shares to the
extent permitted by applicable laws. 

(d)           Prior
to issuance of the Shares upon exercise of an Option, the Optionee shall pay or
make adequate provision for any federal or state withholding obligations of the
Company, if applicable. 

9.             Exercise
of Option. 

(a)           Procedure
for Exercise; Rights as a Stockholder. Any Option granted hereunder shall be
exercisable at such times and under such conditions as determined by the Board
at the time of grant, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan. 

An Option may not be exercised for a fraction of a
Share.

An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Board, consist
of any consideration and method of payment allowable under Section 8(c) of the
Plan. 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 stock
certificate evidencing such 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 Company shall issue (or cause
to be issued) such stock certificate as promptly as practicable upon 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 the stock certificate is issued,
except as provided in Section 11 of the Plan.

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

(b)           Termination
of Status as an Employee. In the event of termination of an Optionee’s
Continuous Status as an Employee with the Company, such Optionee may, but only
within thirty (30) days after the date of such termination (or such other
period as is set out by the Administrator in the Option Agreement, but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise the Option to the extent that Optionee was
entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate. 

(c)           Disability
of Optionee. Notwithstanding the provisions of Section 9(b) above, in the event
of termination of an Optionee’s Continuous Status as an Employee as a result of
his total and permanent disability (as defined in Section 22(e)(3) of the
Code), he may exercise his Option to the extent he was entitled to exercise it
at the date of such termination within six (6) months from the date of such
termination (or such other period as is specified in the grant, but in no event
later than the date of expiration of the term of such Option as set forth in the
Option Agreement). To the extent that the Optionee was not entitled to exercise
the Option at the date of termination, or does not exercise such Option (to the
extent exercisable) within the time specified herein, the Option shall
terminate. 

(d)           Death
of Optionee. Notwithstanding the provisions of Section 9(b) above, in the event
of the death of an Optionee: 

(i)            during
the term of the Option, who is at the time of his death an Employee of the
Company and who shall have been in Continuous Status as an Employee since the
date of grant of the Option, the Option may be exercised, at any time within
six (6) months following the date of death ((or such other period as is
specified in the grant, but in no event later than the date of expiration of
the term of such Option as set forth in the Option Agreement), by the
Optionee’s estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, by the Optionee’s estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, as to all of the
Optioned Stock, including Shares as to which it would not otherwise be
exercisable, and such Shares shall be fully vested and not subject to any
repurchase option; or 

(ii)           during
the post-termination exercise period specified in the grant with respect to
terminations under Section 9(b) above, at any time within six (6) months
following the date of death (or such other period as is determined by the
Administrator, but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement), 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 of the right to exercise that had accrued
at the date of termination. 

10.           Non-Transferability
of Options. Except as otherwise designated by the Administrator, an Option may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in
any manner other than by will or by the laws of descent or distribution and may
be exercised, during the lifetime of the Optionee, only by the Optionee.

11.           Adjustments
Upon Changes in Capitalization, Dissolution, Merger, Asset Sale or Change of
Control. 

(a)           Changes
in Capitalization. Subject to any required action by the stockholders of the
Company, the number of shares of Common Stock covered by each outstanding
Option, and the number of shares of Common Stock which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or which
have been returned to the Plan upon cancellation or expiration of an Option, as
well as the price per share of Common Stock covered by each such outstanding
Option, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or 

 

reclassification of the
Common Stock, or any other increase or decrease in the number of issued shares
of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been “effected without receipt of consideration.”
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option. 

(b)           Dissolution
or Liquidation. In the event of the proposed dissolution or liquidation of the
Company, to the extent that an Option has not been previously exercised, it
will terminate immediately prior to the consummation of such proposed action.
The Board may, in the exercise of its sole discretion in such instances,
declare that any Option shall terminate as of a date fixed by the Board and
give each Optionee the right to exercise his or her Option as to all or any
part of the Optioned Stock, including Shares as to which the Option would not
otherwise be exercisable. 

(c)           Merger
or Asset Sale. In the event of a merger of the Company with or into another
corporation or the sale of substantially all of the assets of the Company: 

(i)            Each
outstanding Option shall be assumed or an equivalent option substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation.
Any Shares subject to a repurchase option of the Company shall be exchanged for
the consideration (whether stock, cash, or other securities or property)
received in the merger or asset sale by the holders of the Common Stock for the
successor corporation or a parent or subsidiary of such successor corporation
for each Share held on the effective date of the transaction and such
consideration shall, in the case of securities of the successor corporation, be
subject to a repurchase option with terms consistent to the Company’s
repurchase option and in the case of any other property shall be subject to
vesting according to the schedule for the lapse of the repurchase option. 

(ii)           In
the event that the successor corporation refuses to assume or substitute for
the Option, the Optionee shall have the right to exercise the Option as to all
of the Optioned Stock, including Shares as to which it would not otherwise be
exercisable, and such Shares shall be fully vested and not subject to any
repurchase option. In the event that the successor corporation fails to assume
the restricted stock purchase agreement pursuant to which the Optionee
purchased unvested Shares, the Company’s repurchase option shall lapse and the
shares shall be fully vested. If an Option is exercisable in lieu of assumption
or substitution in the event of a merger or sale of assets, the Administrator
shall notify the Optionee that the Option shall be fully exercisable for a
period of fifteen (15) days from the date of such notice, and the Option shall
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed if, following the merger or
sale of assets, the option confers the right to purchase or receive, for each
Share of Optioned Stock subject to the Option immediately prior to the merger
or sale of assets, the consideration (whether stock, cash, or other securities
or property) received in the merger or sale of assets by holders of Common
Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or sale of assets
was not solely Common Stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option, for each
Share of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in Fair Market Value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets. 

12.           Stock
Withholding to Satisfy Withholding Tax Obligations. At the discretion of the
Administrator, Optionees may satisfy withholding obligations as provided in
this paragraph. When an Optionee incurs tax liability in connection with the
exercise of an Option, which tax liability is subject to tax withholding under
applicable tax laws, and the Optionee is obligated to pay the Company an amount
required to be withheld under applicable tax laws, the Optionee may satisfy the
withholding tax obligation by electing to have the Company withhold from the
Shares to be issued upon exercise of the Option that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is determined (the “Tax Date”).

 

All elections by
an Optionee to have Shares withheld for this purpose shall be made in writing
in a form acceptable to the Administrator and shall be subject to the following
restrictions: 

(a)           the
election must be made on or prior to the applicable Tax Date; 

(b)           once
made, the election shall be irrevocable as to the particular Shares of the
Option as to which the election is made; 

(c)           all
elections shall be subject to the consent of the Administrator; 

(d)           if
the Optionee is subject to Rule 16b-3, the election must comply with the
applicable provisions of Rule 16b-3 and shall be subject to such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions. 

In the event the
election to have Shares withheld is made by an Optionee and the Tax Date is
deferred under Section 83 of the Code because no election is filed under
Section 83(b) of the Code, the Optionee shall receive the full number of Shares
with respect to which the Option is exercised but such Optionee shall be
unconditionally obligated to tender back to the Company the proper number of
Shares on the Tax Date.

13.           Time
of Granting Options. The date of grant of an Option shall, for all purposes, be
the date on which the Board makes the determination granting such Option.
Notice of the determination shall be given to each Employee to whom an Option
is so granted within a reasonable time after the date of such grant.

14.           Amendment
and Termination of the Plan. 

(a)           Amendment
and Termination. The Board may amend or terminate the Plan from time to time in
such respects as the Board may deem advisable; provided that the following
changes shall require approval of the stockholders of the Company in the manner
described in Section 18 of the Plan: (i) changes in the designation of the
class of persons eligible to be granted Options; and/or (ii) the reduction of
the exercise price of any Option to the then current Fair Market Value if the
Fair Market Value of the Common Stock covered by such Option shall have
declined since the date the Option was granted. 

(b)           Effect
of Amendment or Termination. Any such amendment or termination of the Plan
shall not affect Options already granted and such Options shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company. 

 

15.           Conditions
Upon Issuance of Shares. Shares shall not be issued pursuant to the exercise of
an Option unless the exercise of such Option and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.

As a condition to
the exercise of an Option, the Company may require the person exercising such
Option to represent and warrant at the time of any such exercise that the
Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.

16.           Reservation
of Shares. The Company, during the term of this Plan, will at all times reserve
and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan. The inability of the Company to obtain authority from
any regulatory body having jurisdiction, which authority is deemed by the
Company’s counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect of the failure
to issue or sell such Shares as to which such requisite authority shall not
have been obtained.

17.           Option
Agreement. Options shall be evidenced by written option agreements in such form
as the Board shall approve.

18.           Stockholder
Approval. Any required stockholder approval obtained at a duly held
stockholders’ meeting, may be obtained by the affirmative vote of the holders
of a majority of the outstanding Shares of the Company present or represented
and entitled to vote thereon.EXHIBIT 4.2

MERCURY INTERACTIVE CORPORATION

AMENDED AND RESTATED 

1999 STOCK OPTION PLAN

(Amended and Restated by
the Board of Directors on September 30, 2003 and approved by the stockholders
on

December 10, 2003)

1.             Purposes
of the Plan. The purposes of this Stock Option Plan are to attract and
retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to such individuals of the
Company and to promote the success of the Company’s business. Options granted
hereunder may be either Incentive Stock Options or Nonstatutory Stock Options,
at the discretion of the Administrator and as reflected in the terms of the
written option agreement.

2.             Definitions.
As used herein, the following definitions shall apply: 

(a)           “Administrator”
means the Committee, if one has been appointed, or the Board of Directors of
the Company, if no Committee is appointed. 

(b)           “Board”
means the Board of Directors of the Company. A member of the Board shall be
referred to hereinafter as a “Director.” 

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

(d)           “Committee”
means the Committee appointed by the Board of Directors in accordance with
paragraph (a) of Section 4 of the Plan, if one is appointed. 

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

(f)            “Company”
means Mercury Interactive Corporation, a Delaware corporation. 

(g)           “Continuous
Status as an Employee” means that the employment or consulting relationship
is not interrupted or terminated by the Company, any Parent or Subsidiary.
Continuous Status as an Employee shall not be considered interrupted in the
case of: (i) any leave of absence approved by the Administrator, including sick
leave, military leave, or any other personal leave; provided, however, that for
purposes of Incentive Stock Options, any such leave may not exceed ninety (90)
days, unless reemployment upon the expiration of such leave is guaranteed by
contract (including certain Company policies) or statute; or (ii) transfers
between locations of the Company or between the Company, its Parent, its
Subsidiaries or its successor. 

(h)           “Employee”
means any person, including officers and directors, employed by the Company or
any Parent or Subsidiary of the Company. The payment of a director’s fee by the
Company shall not be sufficient to constitute “employment” by the Company. 

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

 

(j)            “Incentive
Stock Option” means any Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code. 

(k)           “Nonstatutory
Stock Option” means an Option not intended to qualify as an Incentive Stock
Option. 

(l)            “Option”
means a stock option granted pursuant to the Plan. 

(m)          “Optioned
Stock” means the Common Stock subject to an Option. 

(n)           “Optionee”
means an Employee who receives an Option. 

(o)           “Parent”
means a “parent corporation”, whether now or hereafter existing, as defined in
Section 424(e) of the Code. 

(p)           “Plan”
means this 1999 Stock Option Plan. 

(q)           “Share”
means a share of the Common Stock, as adjusted in accordance with Section 11 of
the Plan. 

(r)            “Subsidiary”
means a “subsidiary corporation”, whether now or hereafter existing, as defined
in Section 424(f) of the Code. 

3.             Stock
Subject to the Plan. Subject to the provisions to Section 11 of the Plan,
the total number of shares reserved and available for issuance is 23,206,527
Shares.

Subject to Section
11 of the Plan, if any Shares that have been optioned under an Option cease to
be subject to such Option (other than through exercise of the Option), or if
any Option granted hereunder is forfeited, or any such award otherwise
terminates prior to the issuance of Common Stock to the participant, the Shares
that were subject to such Option shall again be available for distribution in
connection with future Option grants under the Plan. Shares that have actually
been issued under the Plan, upon exercise of an Option, shall not in any event
be returned to the Plan and shall not become available for future distribution
under the Plan.

4.             Administration of the Plan.

(a)           Procedure.

(i)            Multiple
Administrative Bodies. The Plan may be administered by different bodies
with respect to Directors, Officers who are not Directors, and Employees who
are neither Directors nor Officers. 

(ii)           Administration
With Respect to Directors and Officers Subject to Section 16(b). With
respect to Option grants made to Employees who are also Officers or Directors
subject to Section 16(b) of the Exchange Act, the Plan shall be administered by
(A) the Board, if the Board may administer the Plan in compliance with the
rules governing a plan transaction intended to qualify as an exempt transaction
under Rule 16b-3 and/or in accordance with Section 162(m) of the Code, or (B) a
Committee (or Committees) designated by the Board to administer the Plan, which
Committee shall be constituted to comply with the rules governing a plan
transaction intended to qualify as an exempt transaction under Rule 16b-3
and/or in accordance with Section 162(m) of the Code. Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the 

 

Board.  From time to
time, as the Board deems appropriate (and for the purposes of satisfying
Rule 16b-3 and/or Section 162(m)), it may increase the size of
the Committee and appoint additional members, remove members (with or without
cause) and substitute new members, fill vacancies (however caused), and remove
all members of the Committee and thereafter directly administer the Plan . 

(iii)          Administration
With Respect to Other Persons. With respect to Option grants made to
Employees who are neither Directors nor Officers of the Company, the Plan shall
be administered by (A) the Board or (B) a committee designated by the Board,
which committee shall be constituted in such a manner as to satisfy the legal
requirements relating to the administration of stock option plans, if any, of
state corporate law, the relevant stock exchange and the Code (the “Applicable
Rules”). Once appointed, such Committee shall serve in its designated capacity
until otherwise directed by the Board. The Board may increase the size of the
Committee and appoint additional members, remove members (with or without
cause) and substitute new members, fill vacancies (however caused), and remove
all members of the Committee and thereafter directly administer the Plan, all
to the extent permitted by the Applicable Rules. 

(b)           Powers
of the Administrator. Subject to the provisions of the Plan, and in the
case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion: 

(i)            to
determine the Fair Market Value of the Common Stock, in accordance with Section
8(b) of the Plan; 

(ii)           to
select the Employees to whom Options may be granted hereunder; 

(iii)          to
determine whether and to what extent Options are granted hereunder; 

(iv)          to
determine the number of shares of Common Stock to be covered by each Option
granted hereunder; 

(v)           to
approve forms of agreement for use under the Plan; 

(vi)          to
determine the terms and conditions, not inconsistent with the terms of the
Plan, of any award granted hereunder. Such terms and conditions include, but
are not limited to, the exercise price, the time or times when Options may be
exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option or the shares of Common Stock relating thereto,
based in each case on such factors as the Administrator, in its sole
discretion, shall determine; 

(vii)         to
construe and interpret the terms of the Plan and awards granted pursuant to the
Plan; 

(viii)        to
prescribe, amend and rescind rules and regulations relating to the Plan; 

(ix)           to
modify or amend each Option (subject to Section 14(b) of the Plan); 

 

(x)            to
authorize any person to execute on behalf of the Company any instrument
required to effect the grant of an Option previously granted by the Administrator;

(xi)           to
determine and recommend the terms of any Option exchange program or repricing
program for Options granted under the Plan, and subject to prior stockholder
approval, to institute and implement any such program; 

(xii)          to
determine the terms and restrictions applicable to Options; and 

(xiii)         to
make all other determinations deemed necessary or advisable for administering
the Plan. 

(c)           Effect
of Administrator’s Decision. The Administrator’s decisions, determinations
and interpretations shall be final and binding on all Optionees and any other
holders of Options. 

5.             Eligibility.

(a)           Nonstatutory
Stock Options and Incentive Stock Options may be granted to only to Employees. 

(b)           Each
Option shall be designated in the written option agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding
such designations, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Options designated as Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year (under
all plans of the Company) exceeds $100,000, such Options shall be treated as
Nonstatutory Stock Options. 

(c)           For
purposes of Section 5(b), Options shall be taken into account in the order in
which they were granted, and the Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted. 

(d)           Nothing
in the Plan or any Option granted hereunder shall confer upon any Optionee any
right with respect to continuation of employment or consulting relationship
with the Company, nor shall it interfere in any way with the Optionee’s right
or the Company’s right to terminate his employment or consulting relationship
at any time, with or without cause. 

(e)           The
following limitations shall apply to grants of Options to Employees: 

(i)            No
Employee shall be granted, in any fiscal year of the Company, Options to
purchase more than 1,000,000 Shares. 

(ii)           In
connection with his or her initial employment, an Employee may be granted
Options to purchase up to an additional 2,000,000 Shares which shall not count
against the limit set forth in subsection (i) above. 

(iii)          The
foregoing limitations shall be adjusted proportionately in connection with any
change in the Company’s capitalization as described in Section 11. 

(iv)          If
an Option is cancelled in the same fiscal year of the Company in which it was
granted (other than in connection with a transaction described in Section 11),
the cancelled Option shall be counted against the limit set forth in subsection
(i) above. For this purpose, if the exercise price of an Option is reduced,
such reduction will be treated as a cancellation of the Option and the grant of
a new Option. 

 

6.             Term
of Plan. The term of the Plan shall be ten (10) years, commencing on August
31, 1999 and terminating on August 31, 2009 unless sooner terminated under
Section 13 of the Plan.

7.             Term
of Option. The term of each Option shall be no more than ten (10) years
from the date of grant. However, in the case of an Incentive Stock Option
granted to an Optionee who, at the time the Incentive Stock Option is granted,
owns stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be no more than five (5) years from the date of
grant.

8.             Exercise
Price and Consideration. 

(a)           The
per Share exercise price under each Option shall be such price as is determined
by the Board, subject to the following: 

(i)            In
the case of an Incentive Stock Option 

(A)          granted
to an Employee who, at the time of the grant of such Incentive Stock Option,
owns stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the per Share
exercise price shall be no less than 110% of the Fair Market Value per Share on
the date of grant. 

(B)           granted
to any Employee, the per Share exercise price shall be no less than 100% of the
Fair Market Value per Share on the date of grant. 

(ii)           In
the case of a Nonstatutory Stock Option the per Share exercise price shall be
no less than 100% of the Fair Market Value per Share on the date of grant. 

For
purposes of this Section 8(a), in the event that an Option is amended to reduce
the exercise price, the date of grant of such Option shall thereafter be
considered to be the date of such amendment. 

(b)           The
Fair Market Value shall be determined by the Board in good faith; provided,
however, that where there is a public market for the Common Stock, the Fair
Market Value per Share shall be the mean of the bid and asked prices (or the
closing price per share if the Common Stock is listed on the National
Association of Securities Dealers Automated Quotation (“NASDAQ”) National
Market System) of the Common Stock for the date of grant, as reported in the
Wall Street Journal (or, if not so reported, as otherwise reported by the
NASDAQ System) or, in the event the Common Stock is listed on a stock exchange,
the Fair Market Value per Share shall be the closing price on such exchange on
the date of grant of the Option, as reported in the Wall Street Journal. 

(c)           The
Administrator shall determine the acceptable form of consideration for
exercising an Option, including the method of payment. In the case of an
Incentive Stock Option, the Administrator shall determine the acceptable form
of consideration at the time of grant. Such consideration may consist entirely
of: 

(i)            cash;

 

(ii)           check;

(iii)          promissory
note; 

(iv)          other
Shares which (A) in the case of Shares acquired upon exercise of an option,
have been owned by the Optionee for more than six months on the date of
surrender, and (B) have a Fair Market Value on the date of surrender equal to
the aggregate exercise price of the Shares as to which said Option shall be
exercised; 

(v)           delivery
of a properly executed exercise notice together with such other documentation
as the Administrator and the broker, if applicable, shall require to effect an
exercise of the Option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price and any tax withholding resulting from such
exercise; 

(vi)          any
combination of the foregoing methods of payment; or 

(vii)         such
other consideration and method of payment for the issuance of Shares to the
extent permitted by applicable laws. 

(d)           Prior
to issuance of the Shares upon exercise of an Option, the Optionee shall pay or
make adequate provision for any federal or state withholding obligations of the
Company, if applicable. 

9.             Exercise
of Option. 

(a)           Procedure
for Exercise; Rights as a Stockholder. Any Option granted hereunder shall
be exercisable at such times and under such conditions as determined by the
Board at the time of grant, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan. 

An Option may not be exercised for a fraction of a
Share. 

An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Board, consist
of any consideration and method of payment allowable under Section 8(c) of the
Plan. 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 stock
certificate evidencing such 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 Company shall issue (or
cause to be issued) such stock certificate as promptly as practicable upon
exercise of the Option. In the event that the exercise of an Option is treated
in part as the exercise of an Incentive Stock Option and in part as the
exercise of a Nonstatutory Stock Option pursuant to Section 5(b), the Company
shall issue a separate stock certificate evidencing the Shares treated as
acquired upon exercise of an Incentive Stock Option and a separate stock
certificate evidencing the Shares treated as acquired upon exercise of a Nonstatutory
Stock Option, and shall identify each such certificate accordingly in its stock
transfer records. No adjustment will be made for a dividend or other right for
which the record date is prior to the date the stock certificate is issued,
except as provided in Section 11 of the Plan. 

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

 

(b)           Termination
of Status as an Employee . In the event of termination of an Optionee’s
Continuous Status as an Employee with the Company, such Optionee may, but only
within thirty (30) days after the date of such termination (or such other
period as is set out by the Administrator in the Option Agreement, but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise the Option to the extent that Optionee was
entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate. 

(c)           Disability
of Optionee. Notwithstanding the provisions of Section 9(b) above, in the
event of termination of an Optionee’s Continuous Status as an Employee as a
result of his total and permanent disability (as defined in Section 22(e)(3) of
the Code), he may exercise his Option to the extent he was entitled to exercise
it at the date of such termination within six (6) months from the date of such
termination (or such other period as is specified in the grant, but in no event
later than the date of expiration of the term of such Option as set forth in
the Option Agreement). To the extent that the Optionee was not entitled to
exercise the Option at the date of termination, or does not exercise such
Option (to the extent exercisable) within the time specified herein, the Option
shall terminate. 

(d)           Death
of Optionee. Notwithstanding the provisions of Section 9(b) above, in the
event of the death of an Optionee: 

(i)            during
the term of the Option, who is at the time of his death an Employee of the
Company and who shall have been in Continuous Status as an Employee since the
date of grant of the Option, the Option may be exercised, at any time within
six (6) months following the date of death ((or such other period as is
specified in the grant, but in no event later than the date of expiration of
the term of such Option as set forth in the Option Agreement), by the
Optionee’s estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, by the Optionee’s estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, as to all of the
Optioned Stock, including Shares as to which it would not otherwise be
exercisable, and such Shares shall be fully vested and not subject to any
repurchase option; or 

(ii)           during
the post-termination exercise period specified in the grant with respect to
terminations under Section 9(b) above, at any time within six (6) months
following the date of death (or such other period as is determined by the
Administrator, but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement), 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 of the right to exercise that had accrued
at the date of termination. 

10.           Non-Transferability
of Options. Except as otherwise designated by the Administrator, an Option
may not be sold, pledged, assigned, hypothecated, transferred, or disposed of
in any manner other than by will or by the laws of descent or distribution and
may be exercised, during the lifetime of the Optionee, only by the Optionee.

11.           Adjustments
Upon Changes in Capitalization, Dissolution, Merger, Asset Sale or Change of Control.

(a)           Changes
in Capitalization. Subject to any required action by the stockholders of
the Company, the number of shares of Common Stock covered by each outstanding
Option, and the number of shares of Common Stock which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been “effected without receipt of
consideration.” Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option. 

 

(b)           Dissolution
or Liquidation. In the event of the proposed dissolution or liquidation of
the Company, to the extent that an Option has not been previously exercised, it
will terminate immediately prior to the consummation of such proposed action.
The Board may, in the exercise of its sole discretion in such instances,
declare that any Option shall terminate as of a date fixed by the Board and
give each Optionee the right to exercise his or her Option as to all or any
part of the Optioned Stock, including Shares as to which the Option would not
otherwise be exercisable. 

(c)           Merger
or Asset Sale. In the event of a merger of the Company with or into another
corporation or the sale of substantially all of the assets of the Company: 

(i)            Each
outstanding Option shall be assumed or an equivalent option substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation.
Any Shares subject to a repurchase option of the Company shall be exchanged for
the consideration (whether stock, cash, or other securities or property)
received in the merger or asset sale by the holders of the Common Stock for the
successor corporation or a parent or subsidiary of such successor corporation
for each Share held on the effective date of the transaction and such
consideration shall, in the case of securities of the successor corporation, be
subject to a repurchase option with terms consistent to the Company’s
repurchase option and in the case of any other property shall be subject to
vesting according to the schedule for the lapse of the repurchase option. 

(ii)           In
the event that the successor corporation refuses to assume or substitute for
the Option, the Optionee shall have the right to exercise the Option as to all
of the Optioned Stock, including Shares as to which it would not otherwise be
exercisable, and such Shares shall be fully vested and not subject to any
repurchase option. In the event that the successor corporation fails to assume
the restricted stock purchase agreement pursuant to which the Optionee
purchased unvested Shares, the Company’s repurchase option shall lapse and the
shares shall be fully vested. If an Option is exercisable in lieu of assumption
or substitution in the event of a merger or sale of assets, the Administrator
shall notify the Optionee that the Option shall be fully exercisable for a
period of fifteen (15) days from the date of such notice, and the Option shall
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed if, following the merger or
sale of assets, the option confers the right to purchase or receive, for each
Share of Optioned Stock subject to the Option immediately prior to the merger
or sale of assets, the consideration (whether stock, cash, or other securities
or property) received in the merger or sale of assets by holders of Common
Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or sale of assets
was not solely Common Stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option, for each
Share of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in Fair Market Value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets. 

12.           Stock
Withholding to Satisfy Withholding Tax Obligations. At the discretion of
the Administrator, Optionees may satisfy withholding obligations as provided in
this paragraph. When an Optionee incurs tax liability in connection with the exercise
of an Option, which tax liability is subject to tax withholding under
applicable tax laws, and the Optionee is obligated to pay the Company an amount
required to be withheld under applicable tax laws, the Optionee may satisfy the
withholding tax obligation by electing to have the Company withhold from the
Shares to be issued upon exercise of the Option that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is determined (the “Tax Date”).

All elections by
an Optionee to have Shares withheld for this purpose shall be made in writing
in a form acceptable to the Administrator and shall be subject to the following
restrictions: 

(a)           the
election must be made on or prior to the applicable Tax Date; 

(b)           once
made, the election shall be irrevocable as to the particular Shares of the
Option as to which the election is made; 

 

(c)           all
elections shall be subject to the consent of the Administrator; 

(d)           if
the Optionee is subject to Rule 16b-3, the election must comply with the
applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions. 

In the event the
election to have Shares withheld is made by an Optionee and the Tax Date is
deferred under Section 83 of the Code because no election is filed under
Section 83(b) of the Code, the Optionee shall receive the full number of Shares
with respect to which the Option is exercised but such Optionee shall be
unconditionally obligated to tender back to the Company the proper number of Shares
on the Tax Date.

13.           Time
of Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Board makes the determination granting such
Option. Notice of the determination shall be given to each Employee to whom an
Option is so granted within a reasonable time after the date of such grant.

14.           Amendment
and Termination of the Plan. 

(a)           Amendment
and Termination. The Board may amend or terminate the Plan from time to
time in such respects as the Board may deem advisable; provided that the
following changes shall require approval of the stockholders of the Company in
the manner described in Section 18 of the Plan (i) revisions or amendments to
increase the number of Shares in the Share Pool (other than in connection with
an adjustment under Section 11 of the Plan); (ii) changes in the designation of
the class of persons eligible to be granted Options and/or (iii) the reduction
of the exercise price of any Option to the then current Fair Market Value if
the Fair Market Value of the Common Stock covered by such Option shall have
declined since the date the Option was granted. 

(b)           Effect
of Amendment or Termination. Any such amendment or termination of the Plan
shall not affect Options already granted and such Options shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company. 

15.           Conditions
Upon Issuance of Shares. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933,
as amended, the Exchange Act, the rules and regulations promulgated thereunder,
and the requirements of any stock exchange upon which the Shares may then be
listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.

As a condition to
the exercise of an Option, the Company may require the person exercising such
Option to represent and warrant at the time of any such exercise that the
Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.

16.           Reservation
of Shares. The Company, during the term of this Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

 

17.           Option
Agreement. Options shall be evidenced by written option agreements in such
form as the Board shall approve.

18.           Stockholder
Approval. Any required stockholder approval obtained at a duly held
stockholders’ meeting, may be obtained by the affirmative vote of the holders
of a majority of the outstanding Shares of the Company present or represented
and entitled to vote thereon.

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