Document:

Exhibit 10.6

 

METASTORM, INC.

1999 EQUITY INCENTIVE PLAN

 

1.             PURPOSE

 

(a)           The purpose of the 1999 Equity
Incentive Plan (the “Plan”) is to provide a means by which selected key
employees and directors (if declared eligible under paragraph 4) of and
consultants to Metastorm, Inc., a Maryland corporation (the “Company”),
and its Affiliates, as defined in subparagraph 1(b), may be given an
opportunity to benefit from increases in value of the stock of the
Company.  It is intended that this
purpose will be effected through the granting of (a) incentive stock
options, (b) non-statutory stock options, (c) stock bonuses, and (d) purchases
of restricted stock.

 

(b)           The word “Affiliate” as used in
the Plan means any parent corporation or subsidiary corporation of the Company,
as those terms are defined in Sections 424 (e) and (i), respectively,
of the Internal Revenue Code of 1986, as amended from time to time (the “Code”).

 

(c)           The Company, by means of the
Plan, seeks to retain the services of persons now employed by or serving as
consultants or directors to the Company, to secure and retain the services of
persons capable of filling such positions, and to provide incentives for such
persons to exert maximum efforts for the success of the Company.

 

(d)           The Company intends that rights
granted under the Plan (“Stock Awards”) shall, in the discretion of the Board
of Directors of the Company (the “Board”), or any committee to which
responsibility for administration of the Plan has been delegated pursuant to
subparagraph 2 (c), be either (i) stock options granted pursuant to
paragraph 5 hereof, including incentive stock options as that term is used
in Section 422 of the Code (“Incentive Stock Options”), or options which
do not qualify as incentive stock options (“Supplemental Stock Options”), or (ii) stock
bonuses, or purchases of restricted stock granted pursuant to paragraph 6
hereof.

 

2.             ADMINISTRATION.

 

(a)           The plan shall be administered
by the Board unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(c).  Whether or not the Board has delegated
administration, the Board shall have the final power to determine all questions
of policy and expediency that may arise in the administration of the Plan.

 

(b)           The Board The Board shall have
the power, subject to, and within the limitations of, the express provisions of
the Plan:

 

(i)             To
determine from time to time which of the persons eligible under the Plan shall
be granted Stock Awards; when and how Stock Awards shall be granted; whether a
Stock Award will be an Incentive Stock Option, a Supplemental Stock Option, a
stock bonus, a purchase of restricted stock, or a combination of the foregoing;
the provisions of each Stock Award granted (which need not be identical),
including the time or times when a person shall be permitted to purchase or
receive stock pursuant to a Stock Award; and the number of shares with respect
to which Stock Awards shall be granted to each such person.

 

(ii)            To
construe and interpret the Plan and Stock Awards granted under it, and to
establish, amend and revoke rules and regulations for its
administration.  The Board, in the
exercise of this power, may correct any defect, omission or inconsistency in
the Plan or in any 

 

1

 

Stock
Award, in a manner and to the extent it shall deem necessary or expedient to
make the Plan fully effective.

 

(iii)           To
amend the Plan as provided in paragraph 11.

 

(iv)          Generally,
to exercise such powers and to perform such acts as the Board deems necessary
or expedient to promote the best interests of the Company.

 

(c)           The board may delegate
administration of the Plan to a committee composed of not fewer than three (3) members
(the “Committee”).  If the Committee
grants Stock Awards to persons subject to Section 16(b) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), all of the
members of the Committee shall be disinterested persons, if required and as
defined by the provisions of subparagraph 2(d).  If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board, subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. 
The Board may abolish the Committee at any time and revest in the Board
the administration of the Plan.

 

(d)           The term “disinterested person,”
as used this Plan, shall mean an administrator of the Plan, whether a member of
the Board or of any Committee to which responsibility for administration of the
Plan has been delegated pursuant to subparagraph 2 (c):  (i) who is not at the time he or she
exercises discretion in administering the Plan eligible and has not at any time
within one (1) year prior thereto been eligible for selection as a person
to whom stock may be allocated or to whom stock options may be granted pursuant
to the Plan or any other plan of the Company or any of its affiliates (as
defined in the Exchange Act) entitling the participants therein to acquire
stock or stock options of the Company or any of its affiliates (as defined in
the Exchange Act); or (ii) who is otherwise considered to be a “disinterested
person” in accordance with the rules, regulations or interpretations of the
Securities and Exchange Commission.  Any
such person shall otherwise comply with the requirements of Rule 16b-3
promulgated under the Exchange Act.

 

(e)           Any requirement that an
administrator of the Plan be a “disinterested person” shall not apply if the
Board or the Committee expressly declares that such requirement shall not
apply.

 

3.             SHARES
SUBJECT TO THE PLAN.

 

(a)           Subject to the provisions of
paragraph 10 relating to adjustments upon changes in stock, the stock may
be issued pursuant to Stock Awards granted under the Plan shall not exceed in
the aggregate four million seven hundred fifty thousand (4,750,000) shares of
the Company’s common stock.  If any
option or right granted under the Plan shall for any reason expire or otherwise
terminate without having been exercised in full, the stock not issued under
such option or right shall again become available for the Plan.

 

(b)           The stock subject to the Plan
may be unissued shares or reacquired shares, bought on the market or otherwise.

 

4.             ELIGIBILITY.

 

(a)           Incentive Stock Options may be
granted only to employees (including officers) of the Company or its
Affiliates.  A director of the Company
shall not be eligible to receive Incentive Stock Options unless such director
is also an employee (including an officer) of the Company or any Affiliate.

 

2

 

Stock Awards other than
Incentive Stock Options may be granted only to directors, officers or employees
of or consultants to the Company or its Affiliates.

 

(b)           A director shall in no event be
eligible for the benefits of the Plan unless and until such director is
expressly declared eligible to participate in the Plan by action of the Board
or the Committee, and only if, at any time discretion is exercised by the Board
in the selection of a director as a person to whom Stock Awards may be granted,
or in the determination of the number of shares which may be covered by Stock
Awards granted to a director:  (i) a
majority of the Board and a majority of the directors acting in such matter are
disinterested persons, as defined in subparagraph 2(d); (ii) the
Committee consists solely of “disinterested persons” as defined in
subparagraph 2(d); or (iii) the Plan otherwise complies with the
requirements of Rule 16b-3 promulgated under the Exchange Act, as from
time to time in effect.  The Board shall
otherwise comply with the requirements of Rule 16b-3 promulgated under the
Exchange Act, as from time to time in effect. 
Notwithstanding the foregoing, the restrictions set forth in this
subparagraph 4(b) shall not apply if the Board or Committee expressly
declares that such restrictions shall not apply.

 

(c)           No person shall be eligible for
the grant of an Incentive Stock Option under the Plan if, at the time of grant,
such person owns (or is deemed  to own
pursuant to Section 424(d) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or of any of its Affiliates unless the exercise price of such
option is at least one hundred ten percent (110%) of the fair market value of
such stock at the date of grant and the term of the option does not exceed five
(5) years from the date of grant

 

5.             TERMS
OF STOCK OPTIONS.

 

Each stock option shall be
in such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate.  All
options shall be separately designated Incentive Stock Options or Supplemental
Stock Options at the time of grant, and in such form as issued pursuant to this
paragraph 5, and a separate certificate or certificates shall be issued
for shares purchased on exercise of each type of option.  An option designated as a Supplemental Stock
option shall not be treated as an incentive stock option.  The provisions of separate options need not
be identical, but each option shall include (through incorporation of
provisions hereof by reference in the option or otherwise) the substance of
each of the following provisions.

 

(a)           The term of any option shall not
be greater than ten (10) years from the date it was granted.

 

(b)           The exercise price of each
Incentive Stock Option shall be not less than one hundred percent (100%) of the
fair market value of the stock subject to the option on the date the option is granted.  The exercise price of each Supplemental Stock
Option shall be not less than eighty-five percent (85%) of the fair market
value of the stock subject to the option on the date the option is granted.

 

(c)           The purchase price of stock
acquired pursuant to an option shall be paid, to the extent permitted by
applicable statutes and regulations, either (i) in cash at the time the
option is exercised, or (ii) at the discretion of the Board or the
Committee, either at the time of the grant or exercise of the option, (A) by
delivery to the Company of other common stock of the Company, (B) according
to a deferred payment or other arrangement (which may include, without limiting
the generality of the foregoing, the use of other common stock of the Company)
with the person to whom the option is granted or to whom the option is
transferred pursuant to subparagraph 5(d), or (C) in any other form
of legal consideration that may be acceptable to the Board or the Committee.

 

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(d)           Unless otherwise expressly
stated in the option, an option shall not be transferable except by will or by
the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the option is granted only by such person.

 

(e)           The total number of shares of
stock subject to an option may, but need not, be allotted in periodic
installments (which may, but need not, be equal).  From time to time during each of such
installment periods, the option may become exercisable (“vest”) with respect to
some or all of the shares allotted to that period, and may be exercised with
respect to some or all of the shares allotted to such period and/or any prior
period as to which the option was not fully exercised.  During the remainder of the term of the
option (if its term extends beyond the end of the installment periods), the
option may be exercised from time to time with respect to any shares then
remaining subject to the option.  The
provisions of this subparagraph 5(e) are subject to any option
provisions governing the minimum number of shares as to which an option may be
exercised.

 

(f)            An
option shall terminate three (3) months after termination of the optionee’s
employment or relationship as a director of or consultant to the Company or an
Affiliate, unless (i) such termination is due to such person’s permanent
and total disability within the meaning of Section 422(c)(6) of the
Code, in which case the option may, but need not, provide that it may be
exercised at any time within one (1) year following such termination of
employment or relationship as a director or consultant; or (ii) the
optionee dies while in the employ of or while serving as a director of or
consultant to the Company or an Affiliate, or within not more than three (3) months
after termination of such relationship, in which case the option may, but need
not, provide that it may be exercised at any time within eighteen (18) months
following the death of the optionee by the person or persons to whom the
optionee’s rights under such option passes by will or by the laws of descent
and distribution; or (iii) the option by its terms specifies either (a) that
it shall terminate sooner than three (3) months after termination of the
optionee’s employment or relationship as a director or consultant, or (b) that
it may be exercised more than three (3) months after termination of the
relationship with the Company or an Affiliate. 
This subparagraph 5(f) shall not be construed to extend the
term of any option or to permit anyone to exercise the option after expiration
of its term, nor shall it be construed to increase the number of shares as to
which any option is exercisable from the amount exercisable on the date of
termination of the optionee’s employment or relationship as a consultant or
director.

 

(g)           The option may, but need not,
include a provision whereby the optionee may elect at any time during the term
of his or her employment or relationship as a director or consultant to the
Company or any Affiliate to exercise the option as to any part or all of the
shares subject to the option prior to the stated vesting date of the option or
of any installment or installments specified in the option.  Any shares so purchased from any unvested
installment or option may be subject to a repurchase right in favor of the
Company to any other restriction the Board or the Committee determines to be
appropriate.

 

6.             TERMS
OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.

 

Each stock bonus or
restricted stock purchase agreement shall be in such form and shall contain
such terms and conditions as the Board or the Committee shall deem
appropriate.  The terms and conditions of
stock bonus or restricted stock purchase agreements may change from time to time,
and the terms and conditions of separate agreements need not be identical, but
each stock bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:

 

(a)           The purchase price under each
stock purchase agreement shall be not less than eighty-five percent (85%) of
the fair market value of the stock on the date the stock purchase agreement is
authorized by the Board or the Committee. 
Notwithstanding the foregoing, the Board or the Committee 

 

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may
determine that eligible participants in the Plan may be awarded stock pursuant
to a stock bonus agreement in consideration for past services actually rendered
to the Company or for its benefit.

 

(b)           No rights under a stock bonus or
restricted stock purchase agreement shall be assignable by any participant
under the Plan, either voluntarily or by operation of law, except where such
assignment is required by law or expressly authorized by the terms of the
applicable stock bonus or restricted stock purchase agreement.

 

(c)           The purchase price of stock
acquired pursuant to a stock purchase agreement shall be paid either (i) in
cash at the time of purchase, or (ii) at the discretion of the Board or a
Committee to which administration of the Plan has been delegated, (A) according
to a deferred payment or other arrangement (which may include, without limiting
the generality of the foregoing, the use of other common stock of the Company)
with the person to whom the stock is sold, or (B) in any other form of
legal consideration that may be acceptable to the Board or the Committee in its
discretion.  Notwithstanding the
foregoing, the Board or the Committee to which administration of the plan has
been delegated may award stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or for its
benefit.

 

(d)           Shares of stock sold or awarded
under the Plan may, but need not, be subject to a repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the Board
or the Committee.

 

(e)           In the event a person ceases to
be an employee of or ceases to serve as a director of or consultant to the Company
or an Affiliate, the Company may repurchase or otherwise reacquire any or all
of the shares of stock held by that person which have not vested as of the date
of termination under the terms of the stock bonus or restricted stock purchase
agreement between the Company and such person.

 

7.             COVENANTS
OF THE COMPANY.

 

(a)           During the terms of any Stock
Awards granted under the Plan, the Company shall keep available at all times
the number of shares of stock required to satisfy such Stock Awards.

 

(b)           The Company shall seek to obtain
from each regulatory commission or agency having jurisdiction over the Plan
such authority as may be required to issue and sell shares of stock upon grant
or exercise of Stock Awards under the Plan; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
of 1933, as amended (the “Securities Act”), either the Plan, any Stock Award
granted under the Plan or any stock issued or issuable pursuant to any such
Stock Awards.  If, after reasonable
efforts, the Company is unable to obtain from any such regulatory commission or
agency the authority which counsel for the Company deems necessary for the
lawful issuance and sale of stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell stock upon exercise of such
Stock Awards unless and until such authority is obtained.

 

8.             USE
OF PROCEEDS FROM STOCK.

 

Proceeds from the sale of
stock pursuant to Stock Awards granted under the Plan shall constitute general
funds of the Company.

 

9.             MISCELLANEOUS.

 

(a)           The Board or the Committee shall
have the power to accelerate the time during which a Stock Award may be
exercised or the time during which an option or stock acquired pursuant to a
Stock 

 

5

 

Award
will vest, notwithstanding the provisions. 
In the Stock Award stating the time during which it may be exercised or
the time during which stock acquired pursuant thereto will vest.

 

(b)           Neither a recipient of a Stock
Award nor any person to whom a Stock Award is transferred under
subparagraphs 5(d) and 6(b) shall be deemed to be the holder of,
or to have any of the rights of a holder with respect to, any shares subject to
such Stock Award unless and until such person has satisfied all requirements
for exercise of the Stock Award pursuant to its terms and is thereby entitled
to receive shares of stock.

 

(c)           Throughout the term of any Stock
Award granted pursuant to the Plan, the Company shall make available to the
holder of such Stock Award, not later than one hundred twenty (120) days after
the close of each of the Company’s fiscal years during the option term, upon
request, such financial and other information regarding the Company as
comprises the annual report to the shareholders of the Company provided for in
the bylaws of the Company.

 

(d)           Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any recipient any right to continue in the employ of the Company or any
Affiliate to terminate the employment or consulting relationship or
directorship of any eligible employee or recipient with or without cause.  In the event that a Stock Award recipient is
permitted or otherwise entitled to take a leave of absence, the Company shall
have the unilateral right to (i) determine whether such leave of absence
will be treated as a termination of employment for purposes of his or her Stock
Award, and (ii) suspend or otherwise delay the time or times at which the
shares subject to the Stock Award would otherwise vest.

 

(e)           To the extent provided by the
terms of any Stock Award, the recipient may satisfy any federal, state or local
tax withholding obligation relating to the exercise or receipt of such Stock
Award by any of the following means or by a combination of such means: (1) tendering
a cash payment; (2) authorizing the Company to withhold from the shares of
the common stock otherwise issuable to the participant as a result of the
exercise of receipt of the Stock Award cash or a number of shares having a fair
market value less than or equal to the amount of the withholding tax
obligation; or (3) delivering to the Company owned and unencumbered shares
of the common stock having a fair market value less than or equal to the amount
of the withholding tax obligation.

 

(f)            In
connection with each Stock Award made pursuant to the Plan, the Company may
require as a condition precedent to its obligation to issue or transfer shares
to an eligible participant, or to evidence the removal of any restrictions on
transfers or lapse of any repurchase right, that such participant make
arrangements satisfactory to the Company to insure that the amount of any
federal or other withholding tax required to be withheld with respect to such
sale or transfer, or such removal or lapse, is made available to the Company
for timely payment of such tax.

 

(g)           The Company may, as a condition
of transferring any stock pursuant to the Plan, require any person who is to
acquire such stock (1) to give written assurances satisfactory to the
Company as to the optionee’s knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably satisfactory to
the Company who is knowledgeable and experienced in financial and business
matters, and that he or she is capable of evaluating, alone or together with
the purchaser representative, the merits and risks of acquiring the stock; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock for such person’s own account and not with any present
intention of selling or otherwise distributing the stock.  These requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (i) the issuance of
the shares has been registered under a then currently effective registration
statement under the Securities Act, or (ii) as 

 

6

 

to
any particular requirement, a determination is made by counsel for the Company
that such requirement need not be met in the circumstances under the then
applicable securities laws.

 

10.           ADJUSTMENTS
UPON CHANGES IN STOCK.

 

(a)           If any change is made in the
stock subject to the Plan, or subject to any Stock Award granted under the Plan
(through merger, consolidation, reorganization, recapitalization, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the Plan and outstanding Stock Awards will be
appropriately adjusted in the class(es) and maximum number of shares subject to
the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding Stock Awards.

 

(b)           In the event of:  (1) a merger or consolidation in which
the Company is not the surviving corporation, or (2) a reverse merger in
which the Company is the surviving corporation but the shares of the Company’s
common stock outstanding immediately preceding the merger are converted by virtue
of the merger into other property, whether in the form of securities, cash or
otherwise, then to the extent permitted by applicable law: (i) any
surviving corporation shall assume any Stock Awards outstanding under the Plan
or shall substitute similar rights for those outstanding under the Plan, or (ii) such
Stock Awards shall continue in full force and effect.  In the event any surviving corporation
refuses to assume or continue such Stock Awards, or to substitute similar Stock
Awards for those outstanding under the Plan, then, with respect to Stock Awards
held by persons then performing services as employees or as consultants or
directors for the Company, as the case may be, the time during which such Stock
Awards shall vest shall be accelerated and the Stock Awards terminated if not
exercised prior to such event.  In the
event of a dissolution or liquidation of the Company, any options outstanding
under the Plan shall terminate if not exercised prior to such event.

 

11.           AMENDMENT
OF THE PLAN.

 

(a)           The Board at any time, and from
time to time, may amend the Plan. However, except as provided in
paragraph 10 relating to adjustments upon changes in stock, no amendment
shall be effective unless approved by the shareholders of the Company within
twelve (12) months before or after the adoption of the amendment, where the
amendment will increase the number of shares reserved for issuance under the
Plan.

 

(b)           With a view to making available
the benefits provided by Section 422 of the Code and/or Rule 16b-3
promulgated under the Exchange Act, if deemed desirable by the Board, the Board
in its discretion shall determine at the time of each amendment of the Plan
whether or not to submit such amendment to the shareholders of the Company for
approval.

 

(c)           It is expressly contemplated
that the Board may amend the Plan in any respect the Board deems necessary or
advisable to provide eligible employees with the maximum benefits provided or
to be provided under provisions of the Code and the regulations promulgated
thereunder relating to employee incentive stock options and/or to bring the
Plan and/or incentive stock options granted under it into compliance therewith.

 

(d)           Rights and obligations under any
Stock Award granted before amendment of the Plan shall not be altered or
impaired by any amendment of the Plan unless (i) the Company requests the
consent of the person to whom the Stock Award was granted and (ii) such
person consents in writing.

 

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12.           TERMINATION
OR SUSPENSION OF THE PLAN.

 

(a)           The Board may suspend or
terminate the Plan at any time.  Unless
sooner terminated, the Plan shall terminate ten (10) years from the date
the Plan is adopted by the Board or approved by the shareholders of the
Company, whichever is earlier.  No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.

 

(b)           Rights and obligations under any
Stock Award granted while the Plan is in effect shall not be altered or
impaired by suspension or termination of the Plan, except with the consent of
the person to whom the Stock Award was granted.

 

13.           EFFECTIVE
DATE OF PLAN.

 

The Plan shall become
effective as determined by the Board, but no Stock Award granted under the Plan
shall be exercised and no stock shall otherwise be issued under the Plan unless
and until the Plan has been approved by the shareholders of the Company, and,
if required, an appropriate permit has been issued by the Commissioner of
Corporations of the State of Maryland.

 

IN WITNESS WHEREOF, the
authorized officer of the Company has executed this Plan on this 1st
day of April, 1999, to be effective on the 1st day of January, 1999.

 

	
   

  	
  METASTORM,
  INC.

  
	
   

  	
   

  
	
   

  	
  BY:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TITLE:

  	
   

  	
   

  
					

 

8

 

SUMMARY OF THE SUPPLEMENTAL
STOCK OPTION GRANT AGREEMENT to METASTORM, INC.’s 1999 EQUITY INCENTIVE PLAN

 

(there may be some variances between the UK and US versions, the
original $0.30 options are still governed under the old terms, and some
executives have non-standard grants)

 

·                                          Metastorm grants to employee an Option to
purchase all or any part of the number of shares of Common Stock at the Option
price per share and in accordance with the vesting schedule as set forth in Exhibit A

·                                          Employee must sign and abide by Metastorm’s
Non-Interference and Confidentiality Agreement in order to receive an Option

·                                          Employee must have been in the continuous
employ of Metastorm from the Grant Date through the day immediately prior to
the vesting date

·                                          An Option shall become 100% vested upon the
earliest to occur of:  (i) a Change
in Control or (ii) Employee’s death or Disability

·                                          Options are currently being awarded at $0.65
per share

·                                          Standard vesting schedule is as follows:

 

	
  Anniversary of Grant Date

  	
   

  	
  Percentage of Shares Vested

  
	
  1st anniversary

  	
   

  	
  25%

  
	
  2nd anniversary

  	
   

  	
  50%

  
	
  3rd anniversary

  	
   

  	
  75%

  
	
  4th anniversary

  	
   

  	
  100%

  

 

·                                          A vested Option may be exercised in whole or
in part (minimum of one hundred shares) upon written notice to the Committee
accompanied by full payment of the Option Price in cash

·                                          As long as the shares of Common Stock have
not been successfully registered under the Securities Act of 1933 (United
States), exercie notice shall be accompanied by a written statement stating
that the shares are purchased for investment and not with a view to
distribution or resale and acknowledging restrictions on the transferability of
the shares

·                                          Grantee agrees that Metastorm may, in
connection with the first underwritten of any securities of the Company under
the Act, require that the Grantee not sell or otherwise transfer or dispose of
any shares of Common Stock or other securities during such period (not to
exceed one hundred eighty (180) days) following the effective date (the
“Effective Date”) of the registration statement

·                                          Upon notice of exercise and receipt of
payment, Metastorm shall issue the number of shares of Common Stock in the form
of fully paid and nonassessable Common Stock. 
The stock certificates for any shares of Common Stock issued hereunder
shall, unless such shares are registered or an exemption from registration is
available under applicable federal and state law, bear a legend restricting
transferability of such share

·                                          Unless terminated earlier, the Option shall
expire at 12:01 a.m. Eastern Time on the day prior to the fifth (5th)
anniversary of the Grant Date

·                                          All Options shall expire at 12:01 am Eastern
Time on the date Grantee’s employment with Metastorm is terminated, unless such
termination was the result of the Grantee’s death or Disability

·                                          Upon Grantee’s death, Grantee’s Permitted
Transferee may exercise all or any part of the outstanding Option as of the
Grantee’s date of death, provided such exercise occurs within twelve (12)
months after the date of Grantee’s death, but not later than the end of the
stated term of the Option

 

1

 

·                                          In the event that Grantee ceases, by reason
of Disability, to be an employee of Metastorm, the outstanding portion of the
Option may be exercised in whole or in part at any time within twelve (12)
months after the date of Disability, but not later than the end of the stated
term of the Option

·                                          No shares of Common Stock may be acquired
through the exercise of an Option on or after the date the Option expires

·                                          If Grantee’s employment is terminated for any
reason, and shares of Common Stock are not publicly traded at the time of such
termination of employment, then until such time (if ever) that the shares of
Common Stock held by Grantee become publicly traded, Metastorm shall have the
right to require Grantee to sell, upon delivery of written notice to Grantee,
at any time following Grantee’s termination of employment, all or any portion
of (1) the shares of Common Stock then owned by Grantee, ownership of
which shares was acquired through exercise of an Option granted hereunder; and (2) Grantee’s
right to acquire shares of Common Stock pursuant to any remaining unexercised
portion of an Option granted hereunder

·                                          The purchase price for shares of Common Stock
purchased pursuant to Metastorm’s call rights shall be the Fair Market Value of
such shares of Common Stock as of the date that Metastorm mails or otherwise
delivers written notice to Grantee of a call

·                                          The purchase price for Grantee’s right to
acquire shares of Common Stock pursuant to the unexercised portion of an Option
which is purchased by Metastorm pursuant to its call rights shall be the
difference between the exercise prices of the shares that are the subject of
the unexercised Option and the Fair Market Value of those shares on the date of
the purchase of the shares by Metastorm

·                                          At Metastorm’s option, the price for any
Common Stock purchased by Metastorm pursuant to its call rights shall be paid
in cash or in installments over the period. 
In the event Metastorm elects to pay the purchase price in installments,
the deferred portion of the repurchase price shall accrue interest compounded
annually at the applicable short-term federal rate for the month in which
Metastorm mails or otherwise delivers written notice to Grantee of a call

·                                          The purchase price paid by Metastorm for the Common
Stock and/or Options shall be reduced by any amount that the Grantee owes to
Metastorm

·                                          If Metastorm elects to pay the purchase price
in installments, no amount shall be due Grantee on the Closing Date.  Metastorm shall pay Grantee the purchase price
(less any amount Grantee owes to Metastorm) in three equal annual installments
of principal, the first of which shall be due on the first anniversary of the
Closing Date, with the final installment of principal due on the third
anniversary of the Closing Date.  Accrued
interest on the deferred purchase price shall be due and payable with each
installment of principal

·                                          Metastorm shall have the right to deduct from
any compensation or any other payment of any kind (including withholding the
issuance of shares of Common Stock) due the Grantee the amount of any taxes
required by law to be withheld as a result of the exercise of the Option;
provided, however, that the value of the shares of Common Stock withheld may
not exceed the statutory minimum withholding amount required by law.  In lieu of such deduction, Metastorm may
require the Grantee to enter an arrangement providing for the cash payment by
the Grantee to Metastorm of any tax withholding obligation of Metastorm arising
by reason of:  (1) the exercise of
this option; (2) the lapse of any substantial risk of forfeiture to which
the shares are subject at the time of exercise; or (3) the disposition of
shares acquired upon such exercise.  If
the Grantee does not make such payment when requested, Metastorm may refuse to
issue any Common Stock certificate under the Plan until arrangements satisfactory
to the Committee for such payment have been made

·                                          The Option shall be nontransferable otherwise
than by will or the laws of descent and distribution.  Any and all transferees of the Option shall
be bound by the terms of the Agreement. 
During the lifetime of the Grantee, the Option may be exercised only by
the Grantee or, during the period the Grantee is under a legal disability, by
the Grantee’s guardian or legal representative

 

 

METASTORM, INC. 1999 EQUITY
INCENTIVE PLAN

 

SUPPLEMENTAL 2001 STOCK OPTION GRANT AGREEMENT

 

This Grant Agreement is entered into this
       day of
        , 200  , by and
between METASTORM, INC. (the “Company”), and
                        
(the “Grantee”).

 

The
Grantee and the Company agree that the grant of options hereunder and the
purchase and sale of Common Stock upon exercise thereof are intended to comply
with the exemption from registration provided by Rule 701 of the
Securities Act of 1933 and each shall use his or its best efforts to comply
with such Rule 701.

 

ARTICLE 1

DEFINITIONS

 

For
the purposes of this Agreement, except where the context otherwise indicates,
the following definitions shall be applicable.

 

 “Affiliate”
shall mean any parent or subsidiary corporation of the Company, as those terms
are defined §§424(e) and (f) of the Code.

 

 “Agreement”
shall mean this Grant Agreement and shall include the applicable provisions of
the Plan, which is hereby incorporated into and made a part of the Agreement.

 

“Board” shall
mean the Board of Directors of the Company.

 

“Change in Control” shall mean the approval by the shareholders of the Company of:

 

(i)            an agreement (1) to merge, amalgamate, or
consolidate the Company into another entity that is not an Affiliate (with the
Company not surviving); (2) to sell, convey, assign, transfer, lease, or
otherwise dispose of all or substantially all of the assets of the Company to
an entity that is not an Affiliate; or (3) to consolidate, amalgamate, or
merge another entity that is not an Affiliate into the Company pursuant to a
transaction in which the outstanding common stock is changed into or exchanged
for cash, securities, or other property other than voting common stock or
securities of the surviving or continuing entity (provided, however, if such
merger, amalgamation, consolidation, sale, conveyance, assignment, transfer, lease
or other disposition is not consummated, the approval of such event by the
shareholders shall not be deemed to constitute a Change in Control for purposes
of this Plan); or

 

 

(ii)           any plan of liquidation or dissolution or similar event.

 

“Code” shall
mean the Internal Revenue Code of 1986, as amended, and any regulations issued
thereunder.

 

 “Committee” shall
mean the Board or the Committee appointed pursuant to Section 2(c) of
the Plan.

 

 “Common Stock” shall mean shares of the Company’s common
stock, $ .001 par value.

 

“Disability”
shall mean termination of Grantee’s employment because he is permanently and
totally disabled.  A Grantee will be
deemed to be permanently and totally disabled if he is unable to engage in any
substantial gainful activity by reason of any medically determinable physical
or mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than 12
months.

 

“Exercise Date”
shall mean the date on which the Committee receives the written notice required
under Section 4.2 of the Agreement that the Grantee has exercised the
Option.

 

 “Fair Market Value” of a share of Common Stock for any purpose on
a particular date shall be determined in a manner such as the Committee shall
in good faith determine to be appropriate.

 

 “Grant Date”
shall mean the date specified on Schedule A, attached hereto and made a part
hereof, with respect to the number of shares that correlate to the specified
Grant Date.

 

 “Option” shall
mean a nonqualified stock option to acquire shares of Common Stock of Company.

 

 “Option Price”
shall mean the price per share of Common Stock at which an Option may be
exercised, as is designated on Schedule A.

 

 “Plan” shall
mean the Metastorm, Inc. 1999 Equity Incentive Plan, as amended from time
to time.

 

Any
capitalized term used herein that is not expressly defined in the Agreement
shall have the meaning that such term has under the Plan.

 

ARTICLE 2

GRANT OF OPTION

 

Section 2.1
Grant of Option.  Subject to the provisions of the Agreement,
and pursuant to the provisions of the Plan, Company hereby grants to the
Grantee, as of the Grant Date specified on Schedule A, an Option to purchase
all or any part of the number of shares of Common Stock set forth on Schedule A
at the Option Price per share set forth on Schedule A.

 

 

Section 2.2
Condition Precedent to Grant of Option.  As a condition to receiving
grants under the Plan, the Grantee shall enter into, and meet the requirements
of, the Non-Interference and Confidentiality Agreement substantially in the
form of the agreement attached hereto and marked Exhibit A.

 

ARTICLE 3

VESTING

 

Section 3.1
Vesting Schedule.
Unless an Option has earlier terminated pursuant to the provisions of the
Agreement, Grantee shall be vested in such Option in accordance with the
vesting schedule specified on Schedule A; provided, however, that Grantee shall
have been in the continuous employ of the Company and/or its Affiliates from
the Grant Date through the day immediately prior to the vesting date specified
on Schedule A.

 

Section 3.2
Acceleration of Vesting.  Unless an Option has earlier terminated
pursuant to the provisions of the Agreement, each Option that has been granted
to Grantee hereunder shall become one hundred percent (100%) vested in Grantee
upon the earliest to occur of: (i) a Change in Control or (ii) Grantee’s
death or Disability.  Notwithstanding the
provisions of this Grant Agreement providing for an acceleration of vesting
upon a Change in Control, such acceleration shall be limited to the extent
necessary to prevent such acceleration from triggering an “excess parachute
payment,” within the meaning of Section 280G of the Code.

 

ARTICLE 4

EXERCISE OF OPTION

 

Section 4.1
Exercisability of Option.
No Option granted to the Grantee herein shall be exercisable by Grantee prior
to the time such Option has vested.

 

Section 4.2
Manner of Exercise.

 

(a) A vested Option may be exercised, in
whole or in part, by delivering written notice to the Committee in such form as
the Committee may require from time to time; provided, however, that the Option
may not be exercised at any one time as to fewer than one hundred (100) shares
(or such number of shares as to which the Option is then exercisable if such
number of shares then exercisable is less than one hundred (100). Such notice
shall specify the number of shares of Common Stock subject to the Option as to
which the Option is being exercised and shall be accompanied by full payment of
the Option Price of the shares of Common Stock as to which the Option is being
exercised.  In addition, so long as the
shares of Common Stock have not been successfully registered under the
Securities Act of 1933, such notice shall be accompanied by a written statement
stating that the shares are purchased for investment and not with a view to
distribution or resale and acknowledging restrictions on the transferability of
the shares, such written statement and acknowledgment to be provided by
executing a letter substantially in the form of the letter attached hereto and
marked Exhibit B.

 

 

(b) Payment
of the Option Price shall be made (i) in cash (including certified or
cashier’s check), (ii) with the consent of the Committee, in shares of
Common Stock (including shares of Common Stock acquired upon the exercise of an
option) which have been owned by the Grantee for more than six (6) months
and which have a total Fair Market Value on the Exercise Date equal to the
Option Price multiplied by the number of shares of Common Stock as to which the
Option is being exercised, or (iii) by a combination of the foregoing.

 

(c) By
exercising this option the Grantee agrees that the Company (or a representative
of the underwriters) may, in connection with the first underwritten
registration of any securities of the Company under the Act, require that the
Grantee not sell or otherwise transfer or dispose of any shares of Common Stock
or other securities of the Company during such period (not to exceed one
hundred eighty (180) days) following the effective date (the “Effective Date”)
of the registration statement of the Company filed under the Act as may be
requested by the Company or the representative of the underwriters.  For purposes of this restriction the Grantee
will be deemed to own securities which (1) are owned directly or
indirectly by the Grantee, including securities held for the Grantee’s benefit
by nominees, custodians, brokers or pledgers; (2) may be acquired by the
Grantee within sixty (60) days of the Effective Date; (3) are owned
directly or indirectly, by or for the Grantee’s brothers or sisters (whether by
whole or half blood) spouse, ancestors and lineal descendants; or (4) are
owned, directly or indirectly, by or for a corporation, partnership, estate or
trust of which the Grantee is a shareholder, partner or beneficiary, but only
to the extent of his proportionate interest therein as a shareholder, partner
or beneficiary thereof.  The Grantee
shall further agree that the Company may impose stop transfer instructions with
respect to securities subject to the foregoing restrictions until the end of
such period.

 

Section 4.3
Issuance of Shares and Payment upon Exercise.  Upon
exercise of the Option, in whole or in part, in accordance with the terms of
the Agreement and upon payment of the Option Price for the shares of Common
Stock as to which the Option is exercised, the Company shall issue to the
Grantee or, in the event of the Grantee’s death, to the Grantee’s executor,
personal representative or the person to whom the Option shall have been
transferred by will or the laws of descent and distribution, as the case may
be, the number of shares of Common Stock so paid for, in the form of fully paid
and nonassessable Common Stock.  The
stock certificates for any shares of Common Stock issued hereunder shall,
unless such shares are registered or an exemption from registration is
available under applicable federal and state law, bear a legend restricting
transferability of such shares.

 

ARTICLE 5

TERMINATION OF OPTION

 

Section 5.1
Term of Option.  Unless the Option granted pursuant to Section 2.1
terminates earlier pursuant to other provisions of the Agreement, the Option
shall expire at 12:01 a.m. Eastern Time on the day prior to the fifth (5th)
anniversary of the Grant Date.

 

 

Section 5.2 Termination of Employment.

 

(a)           Termination of
Employment or Affiliation for Reason Other Than Death or Disability.   Unless the Option has earlier expired or
terminated pursuant to the provisions of this Agreement or unless the Company
provides otherwise in its sole discretion, all Options granted to Grantee
hereunder shall expire at 12:01 a.m. Eastern Time on the date Grantee’s
employment with the Company or an Affiliate is terminated, unless such
termination was the result of the Grantee’s death or Disability.

 

(b)           Termination of
Employment or Affiliation for Death or Disability.

 

(i)            Termination of Employment by
Reason of Death.  Unless the Option
has earlier terminated pursuant to the provisions of the Agreement, upon
Grantee’s death Grantee’s Permitted Transferee may exercise all or any part of
the outstanding Option as of the Grantee’s date of death, provided such
exercise occurs within twelve (12) months after the date of Grantee’s death,
but not later than the end of the stated term of the Option.

 

(ii)           Termination of Employment or
Affiliation by Reason of Disability. 
Unless the Option has earlier terminated pursuant to the provisions of
the Agreement, in the event that Grantee ceases, by reason of Disability, to be
an employee of or affiliated with the Company or an affiliate, the outstanding
portion of the Option may be exercised in whole or in part at any time within
twelve (12) months after the date of Disability, but not later than the end of
the stated term of the Option. The Committee may require such proof of
Disability as the Committee in its sole discretion deems appropriate and the
Committee’s determination as to whether Grantee is Disabled shall be final and
binding on all parties concerned.

 

Section 5.3
Effect of Expiration or Termination of Option.   No
shares of Common Stock may be acquired through the exercise of an Option on or
after the date the Option expires.

 

ARTICLE 6

CALL RIGHTS

 

Section 6.1
Call Rights Upon Termination of Employment.

 

(a)           If Grantee’s
employment is terminated by Company or Grantee for any reason, and shares of
Common Stock are not publicly traded at the time of such termination of
employment, then until such time (if ever) that the shares of Common Stock held
by Grantee become publicly traded, the Company shall have the right to require
Grantee to sell, upon delivery of written notice to Grantee, at any time
following Grantee’s termination of employment, all or any portion of (1) the
shares of Common Stock then owned by Grantee, ownership of which shares was
acquired through exercise of an Option granted hereunder; and (2) Grantee’s
right to acquire shares of Common Stock pursuant to any remaining unexercised
portion of an Option granted hereunder.

 

(b)           The “call” rights
contained in this Article 6 shall continue to apply for as long as (i) Grantee
holds any Common Stock acquired through the exercise of this Option; and (ii) the
shares of Common Stock held by Grantee are not publicly traded.

 

 

Section 6.2
Purchase Price.

 

(a)           The purchase price for shares of Common Stock purchased
pursuant to  Article 6 shall be the
Fair Market Value of such shares of Common Stock as of the date that Company
mails or otherwise delivers written notice to Grantee of a call.

 

(b)           The purchase price for Grantee’s right to acquire shares
of Common Stock pursuant to the unexercised portion of an Option which is
purchased by Company pursuant to this Article 6 shall be the difference
between the exercise prices of the shares that are the subject of the
unexercised vested portion of the Option, as provided on Schedule A, and the
Fair Market Value of those shares on the date of the purchase of the shares by
the Company.

 

(c)           Payment of Purchase Price.

 

(i)            At Company’s option, the price for
any Common Stock purchased by Company pursuant to this Section 6.2 shall
be paid in cash or in installments over the period and according to the terms
contained in Section 6.2(c)(iii).  
In the event Company elects to pay the purchase price in installments,
the deferred portion of the repurchase price shall accrue interest compounded
annually at the applicable short-term federal rate for the month in which the
Company mails or otherwise delivers written notice to Grantee of a call.

 

(ii)           The purchase price paid by Company
for the Common Stock and/or Options shall be reduced by any amount that the
Grantee owes to Company.

 

(iii)          If the Company elects to pay the price
for any Common Stock pursuant to this Section 6.2 in installments, no
amount shall be due Grantee on the Closing Date.  Company shall pay Grantee the purchase price
(less any amount Grantee owes to Company) in three equal annual installments of
principal, the first of which shall be due on the first anniversary of the
Closing Date, with the final installment of principal due on the third
anniversary of the Closing Date.  Accrued
interest on the deferred purchase price shall be due and payable with each
installment of principal.

 

ARTICLE 7

MISCELLANEOUS

 

Section 7.1
Non-Guarantee of Employment.  Nothing in the Plan or the
Agreement shall be construed as a contract of employment between the Company
(or an Affiliate) and the Grantee, or as a contractual right of the Grantee to
continue in the employ of the Company or an Affiliate, or as a limitation of
the right of the Company or an Affiliate to discharge the Grantee at any time.

 

Section 7.2
No Rights of Stockholder.  The Grantee shall not have any of the rights
of a stockholder with respect to the shares of Common Stock that may be issued
upon the exercise of the Option until such shares of Common Stock have been
issued upon the due exercise of the Option.

 

 

Section 7.3
Withholding Taxes.
The Company or any Affiliate shall have the right to deduct from any
compensation or any other payment of any kind (including withholding the
issuance of shares of Common Stock) due the Grantee the amount of any federal,
state or local taxes required by law to be withheld as a result of the exercise
of the Option; provided, however, that the value of the shares of Common Stock
withheld may not exceed the statutory minimum withholding amount required by
law.  In lieu of such deduction, the
Company may require the Grantee to enter an arrangement providing for the cash
payment by the Grantee to the Company of any tax withholding obligation of the
Company arising by reason of:  (1) the
exercise of this option; (2) the lapse of any substantial risk of
forfeiture to which the shares are subject at the time of exercise; or (3) the
disposition of shares acquired upon such exercise.  If the Grantee does not make such payment
when requested, the Company may refuse to issue any Common Stock certificate
under the Plan until arrangements satisfactory to the Committee for such
payment have been made.

 

Section 7.4
Nontransferability of Option.  The Option shall be
nontransferable otherwise than by will or the laws of descent and distribution.
Any and all transferees of the Option shall be bound by the terms of the
Agreement.  During the lifetime of the
Grantee, the Option may be exercised only by the Grantee or, during the period
the Grantee is under a legal disability, by the Grantee’s guardian or legal
representative.

 

Section 7.5
Agreement Subject to Charter and By-Laws.  The
Agreement is subject to the Charter and By-Laws of the Company, and all
applicable laws, rules or regulations, including without limitation, the
laws, rules, and regulations of the United States and the State of Maryland.

 

Section 7.6
Gender.  As used herein the masculine shall include
the feminine as the circumstances may require.

 

Section 7.7
Headings.  The headings in the Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
the Agreement.

 

Section 7.8
Notices.  All notices and other communications made or
given pursuant to the Agreement shall be in writing and shall be sufficiently
made or given if hand delivered or mailed by certified mail, addressed to the
Grantee at the address contained in the records of the Company or an Affiliate,
or to the Company for the attention of its Secretary at its principal office
or, if the receiving party consents in advance, transmitted and received via
telecopy or via such other electronic transmission mechanism as may be
available to the parties.  The date of
delivery of such notice or other communication shall be the date of such hand
delivery or the date of mailing, as applicable. 
In the event notice is provided via telecopy or other electronic means,
the date of delivery shall be the date the notice is received in intelligible
form.

 

 

ARTICLE 8

SCOPE OF AGREEMENT

 

Section 8.1
Entire Agreement; Modification. This Agreement contains the entire agreement between the parties with
respect to the subject matter contained herein and may not be modified, except
as provided in the Plan or in a written document signed by each of the parties
hereto.

 

Section 8.2
Conformity with Plan.
This Agreement is intended to conform in all respects with, and is subject to
all applicable provisions of, the Plan, which is incorporated herein by
reference. Inconsistencies between the Agreement and the Plan shall be resolved
in accordance with the terms of the Plan. In the event of any ambiguity in the
Agreement or any matters as to which the Agreement is silent, the Plan shall
govern including, without limitation, the provisions thereof pursuant to which
the Committee (as such term is defined therein) has the power, among others, to
(i) interpret the Plan and Grant Agreements related thereto, (ii) prescribe,
amend and rescind rules and regulations relating to the Plan and (iii) make
all other determinations deemed necessary or advisable for the administration
of the Plan.

 

Section 8.3
Counterparts. This
Agreement may be executed simultaneously in one or more counterparts, each of
which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.

 

IN
WITNESS WHEREOF, the parties have executed the Agreement as of the date first
above written.

 

	
  ATTEST:

  	
   

  	
  METASTORM,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
  Secretary

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  WITNESS:

  	
   

  	
  GRANTEE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (Seal)

  
					

 

 

EXHIBIT A

 

METASTORM, INC.

NON-INTERFERENCE AND
CONFIDENTIALITY AGREEMENT

FOR EXISTING EMPLOYEES

 

THIS NON-INTERFERENCE AND CONFIDENTIALITY AGREEMENT (“Agreement”) is entered into on the
       day of          ,
20     (the “Effective Date”), by and between Metastorm, Inc.,
a Maryland corporation (the “Company”), and
                      
(the “Employee”).

 

The
Employee is an existing employee of the Company and desires to continue as such
and to receive an award under the Metastorm, Inc. 1999 Equity Incentive
Plan (the “Equity Incentive Plan”). As a condition to such award and in
consideration of the Employee’s continued employment with the Company, the
Employee hereby agrees as follows:

 

1.             Covenants of the Employee.

 

1.1           Necessity for Covenants. The Employee acknowledges that his
employment with the Company has provided (and, in the future, will give) him
with access to trade secrets of and confidential information concerning the
Company and its Affiliates, and that the Company’s business interests require a
confidential relationship between the Employee and the Company and the fullest
practical protection and confidential treatment of its trade secrets of and
confidential information. The Employee also acknowledges that the Company has
invested a great deal of time and money in developing the skills of its
existing personnel and in order for the Company to succeed, it needs to retain
its existing personnel. The Employee further acknowledges that the agreements
and covenants contained in this Agreement  are essential
to protect the business and goodwill of the Company and its Affiliates, and
that the Employee’s agreement to be bound by such covenants are a condition to
the Employee’s receipt of an award under the Equity Incentive Plan, and the
Employee’s continued employment with the Company.

 

1.2           Definitions.

 

(a)           “Affiliate” means any parent or
subsidiary corporation of the Company, as those terms are defined §§424(e) and
(f) of the Code

 

(b)            “Confidential or Proprietary Information”  means:

 

(i)            any and all information, formulae, patterns,
compilations, programs, devices, methods, techniques, processes, know how,
plans (marketing, business, strategic or otherwise), arrangements, pricing and
other data (collectively, “Information”) that (i) derives independent
economic value, actual or potential, from not being generally known to the
public or to other Persons who can obtain economic value from its

 

 

disclosure
or use, and (ii) is the subject of efforts by the Company and/or any of
its Affiliates that are reasonable under the circumstances to maintain its
secrecy; or

 

(ii)           any and all other Information (i) unique
to the Company or any of its Affiliates which has a significant business
purpose and is not known or generally available from sources outside the
Company or its Affiliates or typical of industry practice, or (ii) the
disclosure of which would have a material adverse effect on the business of the
Company or any of its Affiliates.

 

(b)           “Control” or any form thereof, when used with respect to any
Person, means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise.

 

(c)           “Misappropriation,” or any form thereof, means:

 

(i) the acquisition of any Trade Secret or Confidential or
Proprietary Information by a Person who knows or has reason to know that the
Trade Secret or Confidential or Proprietary Information was acquired by theft,
bribery, misrepresentation, breach or inducement of a breach of a duty to
maintain secrecy, or espionage through electronic or other means (each, an “Improper
Means”); or

 

(ii) the disclosure or use of any Trade Secret or Confidential or
Proprietary Information without the express consent of the Company by a Person
who (x) used Improper Means to acquire knowledge of the Trade Secret or
Confidential or Proprietary Information; (y) at the time of disclosure or
use, knew or had reason to know that his or her knowledge of the Trade Secret
or Confidential or Proprietary Information was (i) derived from or through
a Person who had utilized Improper Means to acquire it, (ii) acquired
under circumstances giving rise to a duty to maintain its secrecy or limit its
use, or (iii) derived from or through a Person who owed a duty to the
Company and/or any of its Affiliates to maintain its secrecy or limit its use;
or (z) before a material change of his or her position, knew or had reason
to know that it was a Trade Secret or Confidential or Proprietary Information
and that knowledge of it had been acquired by accident or mistake.

 

(d)           “Person” means any individual, corporation, partnership, limited
liability company, joint venture, association, business trust, joint-stock
company, estate, trust, unincorporated organization, or government or other
agency or political subdivision thereof; or any other legal or commercial
entity.

 

(e)           “Specified Trade Secrets” means the Trade Secrets or
Confidential or Proprietary Information that the Employee is or will be
intimately involved in developing or implementing and any additional Trade
Secrets or Confidential or Proprietary Information developed or implemented by
the Employee after the date hereof.

 

 

(f)             “Trade Secrets” means:

 

(i)            any and all information; machinery;
inventions; experiments; research; formulae; patterns; compilations; programs;
devices; methods; techniques; processes; software (including, without
limitation, designs, programs and codes)know how; plans (including, without
limitation, marketing, business, strategic or otherwise); arrangements;
pricing, cost, revenue or profit information; and other data (collectively, “Information”)
that (1) derive independent economic value, actual or potential, from not
being generally known to the public or to other Persons who can obtain economic
value from its disclosure or use, and (2) are the subject of efforts by
the Company and/or any of its Affiliates that are reasonable under the
circumstances to maintain their secrecy;

 

(ii)           any and all other Information (A) unique to the Company or any of
its Affiliates which has a significant business purpose and is not known or
generally available from sources outside the Company or its Affiliates or
typical of industry practice, or (B) the disclosure of which would have a
material adverse effect on the business of the Company or any of its
Affiliates; and

 

(iii)          all other information of the Company that would be deemed to be “trade
secrets” within the meaning of the Uniform Trade Secrets Act (as promulgated by
the United States National Conference of Commissioners on Uniform State Laws)
or such other similar statute of any jurisdiction which is found to be
applicable to this Agreement, its enforcement or its interpretation.

 

1.3             Non-Interference with Company Employees. During the term of the Employee’s
employment with the Company and, for a period of one (1) year after the
Employee’s employment hereunder is terminated (the “Termination Date”),
regardless of the reason for such termination (the “Restricted Period”), the
Employee shall not, directly or indirectly, for himself or on behalf of any
other person, firm, corporation or other entity, whether as a principal, agent,
employee, stockholder, partner, officer, member, director, sole proprietor, or
otherwise:

 

(a)           solicit, hire, entice, or aid, or cooperate with others in soliciting,
hiring, enticing or aiding any employee of the Company or any of its Affiliates
to leave the employ of, or cease performing services for, the Company or any of
its Affiliates; or

 

(b)           otherwise interfere in any way with the personnel of the Company or any
Affiliate.

 

1.4             No Disparaging Comments Upon Termination. Upon termination of employment with the
Company, the Employee shall refrain from making any disparaging remarks about
the businesses, services, products, stockholders, officers, directors or other
personnel of the Company or any of its Affiliates.

 

 

1.5             Trade Secrets and Confidential Information

 

(a)           The Employee acknowledges, covenants and
agrees that:

 

(i)            except as required by law or court order, the
Employee will keep confidential and will not disclose to anyone (other than the
Company or any persons designated by the Company), or publish, utter, exploit,
make use of (or aid others in publishing, uttering, exploiting or using), or
otherwise Misappropriate any Trade Secrets or Confidential or Proprietary
Information at any time;

 

(ii)           each of the Specified Trade Secrets are, and
for all purposes hereof shall be, “Trade Secrets,” within the meaning of Section 11-1201
of the Maryland Uniform Trade Secret Act (as codified in the Annotated Code of
Maryland, Commercial Law, § 11-1201 et.seq.)), of the Company and its
Affiliates;

 

(iii)          the Employee is and will be intimately
involved in the development and/or implementation of the Specified Trade
Secrets;

 

(iv)          in the event the Employee breaches the
covenants contained in his Section 1.5 with respect to any Trade Secrets
or Confidential or Proprietary Information, such breach shall be deemed to be a
Misappropriation of such Trade Secrets or Confidential or Proprietary
Information; and

 

(v)           any Misappropriation of the Specified Trade
Secrets or any other Trade Secrets or Confidential or Proprietary Information
will result in immediate and irreparable harm to the Company.

 

(b)           The Employee’s obligations hereunder shall
continue both during the term of the Employee’s employment and thereafter,
regardless of the reason for the termination of his employment.

 

(c)           Notwithstanding anything herein to the
contrary, the obligations of secrecy and confidentiality set forth herein shall
not apply to any Information which is now generally publicly known or which
subsequently becomes generally publicly known other than as a direct or
indirect result of the breach of this Agreement by the Employee, or which is
required by law or order of any court to be disclosed.

 

1.6             Property
of the Company. All drawings, memoranda, notes, lists,
records and other documents or papers (and all copies thereof), including but
not limited to, such items stored in computer memories, on microfiche or by any
other means, made or compiled by or on behalf of the Employee, or made
available to the Employee or in the Employee’s possession concerning the in any
way relating to the conduct of the Business or the business of any Affiliate,
customer, or supplier, are and shall be the property of the Company and shall
be delivered to the Company promptly upon the termination of the Employee’s
employment with the Company or at any other time on request.

 

 

1.7             Employee’s Ideas, Etc. All inventions, ideas, prototypes,
discoveries, improvements, innovations and the like (“Inventions”) and all
works of original authorship or images that are fixed in any tangible medium of
expression and all copies thereof (“Works”) which are designed, created or
developed by Employee, solely or in conjunction with others, in the course of
performance of the Employee’s duties which relate to the Business, shall be
made or conceived for the exclusive benefit of and shall be the exclusive
property of the Company. The Employee shall immediately notify the Company upon
the design, creation or development of all Inventions and Works. At any time
thereafter, the Employee, at the request and expense of the Company, shall
execute and deliver to the Company all documents or instruments which may be
necessary to secure or perfect the Company’s title to or interest in the
Inventions and Works, including but not limited to applications for letters of
patent, and extensions, continuations or reissues thereof, applications for
copyrights and documents or instruments of assignment or transfer. All Works
are agreed and stipulated to be “works made for hire,” as that term is used and
understood within the Copyright Act of 1976, as amended. To the extent any
Works are not deemed to be works made for hire as defined above, and to the
extent that title to or ownership of any Invention or Work and all other rights
therein are not otherwise vested exclusively in the Company, the Employee
shall, without further consideration but at the expense of the Company, assign
and transfer to the Company the Employee’s entire right, title and interest
(including copyrights and patents) in or to those Inventions and Works.

 

1.8             Rights and Remedies Upon Breach. The Employee acknowledges and agrees that
if the Employee breaches any of the provisions of Sections 1.3 through 1.7 the
Company will suffer immediate and irreparable harm for which monetary damages
alone will not be a sufficient remedy, and that, in addition to all other
remedies that the Company may have (including, without limitation, the recovery
of damages pursuant to Section 11-1203 of the Maryland Uniform Trade
Secret Act (as codified in the Annotated Code of Maryland, Commercial Law, §
11-1201 et.seq.)), the Company shall be entitled to seek injunctive
relief (including, without limitation, an injunction pursuant to Section 11-1202
of the Maryland Uniform Trade Secret Act), specific performance or any other
form of equitable relief to remedy a breach or threatened breach of this
Agreement (including, without limitation, any actual or threatened
Misappropriation) by the Employee and to enforce the provisions of this
Agreement, and the Employee hereby waives any and all defenses he may have on
the grounds of lack of jurisdiction or competence of a court to grant such an
injunction or other equitable relief and to the enforceability of this
Agreement. The existence of this right shall not preclude or otherwise limit
the applicability or exercise of any other rights and remedies which the
Company may have at law or in equity.

 

1.9             Review. The Employee has received or been given the opportunity to review the
provisions of this Agreement, and the meaning and effect of each provision,
with independent legal counsel of the Employee’s choosing.

 

1.10           Interpretation; Severability.

 

(a)           The Employee has carefully considered the
possible effects on the Employee of the covenants not to compete, the
confidentiality provisions, and the other obligations contained in this
Agreement, and the Employee recognizes that the Company has

 

 

made
every effort to limit the restrictions placed upon the Employee to those that
are reasonable and necessary to protect the Company’s legitimate business
interests.

 

(b)           The Employee acknowledges and agrees that the
restrictive covenants set forth in this Agreement are reasonable and necessary
in order to protect the Company’s valid business interests. It is the intention
of the parties hereto that the covenants, provisions and agreements contained
herein shall be enforceable to the fullest extent allowed by law. If any
covenant, provision, or agreement contained herein is found by a court having
jurisdiction to be unreasonable in duration, scope or character of
restrictions, or otherwise to be unenforceable, such covenant, provision or
agreement shall not be rendered unenforceable thereby, but rather the duration,
scope or character of restrictions of such covenant, provision or agreement
shall be deemed reduced or modified with retroactive effect to render such
covenant, provision or agreement reasonable or otherwise enforceable (as the
case may be), and such covenant, provision or agreement shall be enforced as
modified. If the court having jurisdiction will not review the covenant,
provision or agreement, the parties hereto shall mutually agree to a revision
having an effect as close as permitted by applicable law to the provision
declared unenforceable. Moreover, to the extent that any provision is declared
unenforceable, the Company shall have all rights under statute or common law to
enforce its rights with respect to (i) any trade secrets or confidential
or proprietary information, or (ii) any unfair competition by the
Employee. The parties hereto agree that if a court having jurisdiction
determines, despite the express intent of the parties hereto, that any portion
of the covenants, provisions or agreements contained herein are not
enforceable, the remaining covenants, provisions and agreements herein shall be
valid and enforceable.

 

2.             Dispute Resolution.

 

2.1           Costs of Litigation. If either party files suit to enforce its
rights under this Agreement, the prevailing party shall be entitled to recover
from the other party all expenses incurred by it in preparing for and in trying
the case, including, but not limited to, investigative costs, court costs and
reasonable attorneys’ fees.

 

2.2           Consent to Jurisdiction. The parties submit to the jurisdiction and
venue of the courts of the State of Maryland

 

2.3           No Jury Trial. NEITHER PARTY SHALL ELECT A TRIAL BY JURY
IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS AGREEMENT.

 

3.             Other Provisions.

 

3.1           Notices. Any notice or other communication required or which may be given
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage paid, and shall be deemed given when so delivered
personally, telegraphed, telexed or sent by facsimile transmission or, if
mailed, four days after the date of mailing, as follows:

 

 

(i)            if to the Company, to:

Metastorm, Inc.

8825 Stanford Blvd.

Suite 200

Columbia, MD 21045

 

(ii)           if to the Employee, to:

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 

Any
party may by notice given in accordance with this Section to the other
party designate another address or person for receipt of notices hereunder.

 

3.2           Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings, written or oral, with
respect thereto.

 

3.3           Waivers and Amendments. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the Employee and a duly
authorized officer of the Company (each, in such capacity, a party) or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder.

 

3.4           Governing Law. This Agreement has been negotiated and is
to be performed in the United States of America, State of Maryland and shall be
governed and construed in accordance with the laws of the State of Maryland
applicable to agreements made and to be performed entirely within such State.

 

3.5           Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

 

3.6           Word Forms. Whenever used herein, the singular shall
include the plural and the plural shall include the singular. The use of any
gender or tense shall include all genders and tenses.

 

3.7           Headings. The Section headings have been included for convenience only,
are not part of this Agreement, and are not to be used to interpret any
provision hereof.

 

 

3.8           Binding Effect and Benefit. This Agreement shall be binding upon and
inure to the benefit of the parties, their successors, heirs, personal
representatives and other legal representatives. This Agreement may be assigned
by the Company to any entity which buys substantially all of the Company’s
assets. However, the Employee may not assign this Agreement without the prior
written consent of the Company.

 

IN
WITNESS WHEREOF, the parties, intending to be legally bound, have executed this
Agreement or caused it to be executed and attested by their duly authorized
officers as a document under seal on the day and year first above written.

 

	
  ATTEST/WITNESS:

  	
   

  	
  METASTORM,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:
  Chris Desautelle, CFO

  	
   

  	
  By:

  	
  Robert
  Farrell, CEO/President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EMPLOYEE:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name

  

 

 

EXHIBIT B

 

	
  Metastorm, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

 

Gentlemen:

 

I
hereby exercise the Option granted to me on
                            
        , 20    ,
by Metastorm, Inc. (the “Company”), subject to all the terms and
provisions thereof and of the Metastorm, Inc. 1999 Equity Incentive Plan
(the “Plan”), and notify you of my desire to purchase
                        
shares of Common Stock of Metastorm, Inc. at a price of $      per
share pursuant to the exercise of said Option. This will confirm my
understanding with respect to the shares to be issued to me by reason of this
exercise of the Option (the shares to be issued pursuant hereto shall be
collectively referred to hereinafter as the “Shares”) as follows:

 

(a)           I am acquiring the Shares for my own account for investment with no
present intention of dividing my interest with others or of reselling or
otherwise disposing of any of the Shares.

 

(b)           The Shares are being issued without registration under the Securities
Act of 1933, as amended (the “Act”), in reliance upon one or more exemptions
contained in the Act, and such reliance is based in part on the above
representation.

 

(c)           The certificates for the Shares to be issued to me will bear a legend
substantially as follows:

 

“The securities represented by this stock
certificate have not been registered under the Securities Act of 1933 (the “Act”)
or applicable state securities laws (the “State Acts”), and shall not be sold,
pledged, hypothecated, donated, or otherwise transferred (whether or not for
consideration) by the holder except upon the issuance to the Company of a
favorable opinion of its counsel and/or submission to the Company of such other
evidence as may be satisfactory to counsel for the Company, to the effect that
any such transfer shall not be in violation of the Act and the State Acts.”

 

Appropriate
stop transfer instructions will be issued by the issuer to its transfer agent.

 

(d)           Since the Shares have not been registered under the Act, they must be
held indefinitely until an exemption from the registration requirements of the
Act is available or they are subsequently registered, in which event the
representation in Paragraph (a) hereof shall terminate. As a condition to
any transfer of the shares, I understand that the issuer will require an
opinion of counsel satisfactory to the issuer to the effect that such transfer
does not require registration under the Act or any state securities law.

 

 

(e)           The issuer is not obligated to comply with the registration
requirements of the Act or with the requirements for an exemption under
Regulation A under the Act for my benefit.

 

 

Total
Amount Enclosed: $

 

 

	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
  (Grantee)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Received
  by Metastorm, Inc. on

  
	
   

  	
   

  
	
   

  	
   

  	
  ,

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
							

 

 

SCHEDULE A

 

Options Granted to                

 

	
  Grant Date

  	
   

  	
  Number of Shares

  	
   

  	
  Option Price Per Share

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Anniversary of Grant Date

  	
   

  	
  Percentage of Shares VestedExhibit
10.7

 

METASTORM INC.

 

FORM OF AMENDED AND

RESTATED

2004 OMNIBUS STOCK PLAN

 

 

EFFECTIVE:  JANUARY 7, 2008

 

 

Copyright Venable,
Baetjer & Howard, LLP

 

 

METASTORM
INC.

FORM OF
AMENDED AND RESTATED

2004 OMNIBUS STOCK PLAN

 

1.                                      Establishment,
Purpose and Types of Awards

 

Metastorm Inc. hereby
establishes the METASTORM INC. AMENDED AND RESTATED 2004 OMNIBUS STOCK PLAN
(the “Plan”). The purpose of the Plan is to promote the long-term growth and
profitability of Metastorm Inc. (the “Corporation”) by (i) providing key
people with incentives to improve stockholder value and to contribute to the
growth and financial success of the Corporation, and (ii) enabling the
Corporation to attract, retain and reward the best available persons for
positions of substantial responsibility.

 

The Plan permits the
granting of stock options (including nonqualified stock options and incentive
stock options qualifying under Section 422 of the Code), restricted and
unrestricted stock and restricted stock units (collectively, “Awards”).

 

The Plan is a compensatory
benefit plan within the meaning of Rule 701 under the Securities Act of
1933 (the “Securities Act”). Except to the extent any other exemption from the
Securities Act is expressly relied upon in connection with any agreement
entered into pursuant to the Plan or the securities issuable hereunder are
registered under the Securities Act, or the securities issuable hereunder are
registered under the Securities Act, the issuance of Common or Preferred Stock
pursuant to the Plan is intended to qualify for the exemption from registration
under the Securities Act provided by Rule 701.  To the extent that an exemption from
registration under the Securities Act provided by Rule 701 is unavailable,
all unregistered offers and sales of Awards and shares of Common or Preferred
Stock issuable upon exercise of an Award are intended to be exempt from
registration under the Securities Act in reliance upon the private offering
exemption contained in Section 4(2) of the Securities Act, or other available
exemption, and the Plan shall be so administered.

 

2.                                      Definitions

 

Under this Plan, except
where the context otherwise indicates, the following definitions apply:

 

(a)                                  “Board” shall mean the Board of Directors of the Corporation.

 

(b)                                 “Change in Control” shall mean:

 

(i)                                     The
consummation of a merger or consolidation of the Corporation with or into
another entity or any other reorganization of the Corporation, if more than
fifty percent (50%) of the combined voting power of the continuing or surviving
entity’s securities outstanding immediately 

 

 

after
such merger, consolidation or other reorganization is not owned directly or
indirectly (via ownership of another entity) by persons who were holders of the
Corporation’s then-outstanding voting securities immediately prior to such
merger, consolidation or other reorganization;

 

(ii)                                  The
sale, transfer or other disposition of all or substantially all of the
Corporation’s assets to an entity that is not a Parent or a Subsidiary of the
Corporation; or

 

(iii)                               Any
transaction as a result of which any person becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing at least fifty percent (50%) of the
total voting power represented by the Corporation’s then-outstanding voting
securities. For purposes of this subsection, the term “person” shall have the
same meaning as when used in sections 13(d) and 14(d) of the Exchange
Act but shall exclude: (A) any Parent or Subsidiary of the Corporation, (B) any
employee benefit plan (or related trust) sponsored or maintained by the
Corporation, a Parent, or any Subsidiary, and (C) any underwriter
temporarily holding securities pursuant to an offering of such securities.

 

(c)                                  “Code” shall mean the Internal Revenue Code of 1986, as
amended, and any regulations issued thereunder.

 

(d)                                 “Committee” shall mean the Board or committee of Board
members appointed pursuant to Section 3 of the Plan to administer the
Plan.

 

(e)                                  “Common Stock” shall mean shares of the Corporation’s common
stock.

 

(f)                                    “Exchange Act” shall mean the Securities Exchange Act of
1934, as amended.

 

(g)                                 “Fair Market Value” of a share of the Corporation’s Common or
Preferred Stock for any purpose on a particular date shall be determined in a
manner such as the Committee shall in good faith determine to be appropriate.

 

(h)                                 “Grant Agreement” shall mean a written agreement between the
Corporation and a grantee memorializing the terms and conditions of an Award
granted pursuant to the Plan.

 

(i)                                     “Grant Date” shall mean the date on which the Committee
formally acts to grant an Award to a grantee or such other date as the
Committee shall so designate at the time of taking such formal action.

 

2

 

(j)                                     “Parent” shall mean a corporation, whether now or hereafter
existing, within the meaning of the definition of “parent corporation” provided
in Section 424(e) of the Code, or any successor thereto of similar
import.

 

(k)                                  “Preferred Stock” means shares of the Corporation’s Class AA
Preferred Stock.

 

(l)                                     “Restricted Stock Units” mean Awards granted under Section 7
providing for the issuance of Preferred Stock to Participants at a specified
future date, in such amounts and subject to such vesting requirements and other
restrictions and conditions as the Committee determines.

 

(m)                               “Restricted Stock” means Awards granted under Section 7
providing for the issuance of Preferred Stock to Participants, in such amounts
and subject to such vesting requirements and other restrictions and conditions
as the Committee determines.

 

(n)                                 “Rule 16b-3” shall mean Rule 16b-3 as in effect
under the Exchange Act on the effective date of the Plan, or any successor
provision prescribing conditions necessary to exempt the issuance of securities
under the Plan (and further transactions in such securities) from Section 16(b) of
the Exchange Act.

 

(o)                                 “Stock Options” means Awards granted under Section 6
providing for the right of a Participant to purchase Common Stock in such
amounts, at such exercise price, for such term and subject to such vesting
requirements and other restrictions and conditions as the Committee determines.

 

(p)                                 “Subsidiary” and “subsidiaries” shall mean only a corporation
or corporations, whether now or hereafter existing, within the meaning of the
definition of “subsidiary corporation” provided in Section 424(f) of
the Code, or any successor thereto of similar import.

 

(q)                                 “Unrestricted Stock” means Awards granted under Section 7
providing for the issuance of Preferred Stock to Participants, in such amounts
and subject to such conditions as the Committee determines.

 

3.                                      Administration

 

(a)                                  Procedure.  The Plan shall be
administered by the Board.  In the
alternative, the Board may appoint a Committee consisting of not less than two (2) members
of the Board to administer the Plan on behalf of the Board, subject to such
terms and conditions as the Board may prescribe.  Once appointed, the Committee shall continue
to serve until otherwise directed by the Board. 
From time to time, the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however caused,
and remove all members of the Committee and, thereafter, 

 

3

 

directly administer the Plan.  In the event that the Board is the
administrator of the Plan in lieu of a Committee, the term “Committee” as used
herein shall be deemed to mean the Board.

 

Members
of the Board or Committee who are either eligible for Awards or have been
granted Awards may vote on any matters affecting the administration of the Plan
or the grant of Awards pursuant to the Plan, except that no such member shall
act upon the granting of an Award to himself or herself, but any such member
may be counted in determining the existence of a quorum at any meeting of the
Board or the Committee during which action is taken with respect to the
granting of an Award to him or her.

 

The
Committee shall meet at such times and places and upon such notice as it may
determine.  A majority of the Committee
shall constitute a quorum.  Any acts by
the Committee may be taken at any meeting at which a quorum is present and shall
be by majority vote of those members entitled to vote. Additionally, any acts
reduced to writing or approved in writing by all of the members of the
Committee shall be valid acts of the Committee.

 

(b)                                 Procedure After Registration of Common or Preferred Stock.  Upon and after the point in time that the
Common or Preferred Stock or any other capital stock of the Corporation becomes
registered under Section 12 of the Exchange Act, the Board shall take all
action necessary to cause the Plan to be administered in accordance with the
then effective provisions of Rule 16b-3, provided that any amendment to
the Plan required for compliance with such provisions shall be made in
accordance with Section 11 of the Plan.

 

(c)                                  Powers of the Committee. 
The Committee shall have all the powers vested in it by the terms of the
Plan, such powers to include authority, in its sole and absolute discretion, to
grant Awards under the Plan, prescribe Grant Agreements evidencing such Awards
and establish programs for granting Awards. 
The Committee shall have full power and authority to take all other
actions necessary to carry out the purpose and intent of the Plan, including,
but not limited to, the authority to:

 

(i)                                     determine
the eligible persons to whom, and the time or times at which Awards shall be
granted,

 

(ii)                                  determine
the types of Awards to be granted,

 

(iii)                               determine
the number of shares to be covered by or used for reference purposes for each
Award,

 

(iv)                              impose
such terms, limitations, restrictions and conditions upon any such Award as the
Committee shall deem appropriate,

 

4

 

(v)                                 modify,
extend or renew outstanding Awards, accept the surrender of outstanding Awards
and substitute new Awards, provided that no such action shall be taken with
respect to any outstanding Award which would adversely affect the grantee
without the grantee’s consent,

 

(vi)                              accelerate
or otherwise change the time in which an Award may be exercised or becomes
payable and to waive or accelerate the lapse, in whole or in part, of any
restriction or condition with respect to such Award, including, but not limited
to, any restriction or condition with respect to the vesting or exercisability
of an Award following termination of any grantee’s employment, and

 

(vii)                           to
establish objectives and conditions, if any, for earning Awards and determining
whether Awards will be paid after the end of a performance period.

 

The Committee shall have
full power and authority to administer and interpret the Plan and to adopt such
rules, regulations, agreements, guidelines and instruments for the
administration of the Plan and for the conduct of its business as the Committee
deems necessary or advisable and to interpret same, all within the Committee’s
sole and absolute discretion.

 

(d)                                 Limited Liability. 
To the maximum extent permitted by law, no member of the Board or
Committee shall be liable for any action taken or decision made in good faith
relating to the Plan or any Award thereunder.

 

(e)                                  Indemnification. 
To the maximum extent permitted by law, the members of the Board and
Committee shall be indemnified by the Corporation in respect of all their
activities under the Plan.

 

(f)                                    Effect of Committee’s Decision.  All actions taken and decisions and
determinations made by the Committee on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Committee’s sole
and absolute discretion and shall be conclusive and binding on all parties
concerned, including the Corporation, its stockholders, any participants in the
Plan and any other employee of the Corporation, and their respective successors
in interest.

 

4.                                      Shares
Available for the Plan

 

Subject to adjustments as
provided in Section 10 of the Plan, the shares of stock that may be
delivered or purchased with respect to Stock Options, including incentive stock
options intended to qualify under Section 422 of the Code, shall not
exceed an aggregate of 12,770,232 shares of Common Stock and the shares of
stock that may be delivered or purchased with respect to Restricted and
Unrestricted Stock and Restricted 

 

5

 

Stock Units shall not exceed
an aggregate of 2,224,345 shares of Preferred Stock.  The Corporation shall reserve said number of
shares for Awards under the Plan, subject to adjustments as provided in Section 10
of the Plan.  If any Award, or portion of
an Award, under the Plan expires or terminates unexercised, becomes
unexercisable or is forfeited or otherwise terminated, surrendered or canceled
as to any shares without the delivery of shares or other consideration, the
shares subject to such Award shall thereafter be available for further Awards
under the Plan.

 

5.                                      Participation

 

Participation in the Plan
shall be open to all employees, officers, directors and consultants of the
Corporation, or of any Parent or Subsidiary of the Corporation, as may be
selected by the Committee from time to time. 
Notwithstanding the foregoing, participation in the Plan with respect to
Awards of incentive stock options shall be limited to employees of the
Corporation or of any Parent or Subsidiary of the Corporation.

 

Awards may be granted to
such eligible persons and for or with respect to such number of shares of
Common or Preferred Stock as the Committee shall determine, subject to the
limitations in Section 4 of the Plan. 
A grant of any type of Award made in any one year to an eligible person
shall neither guarantee nor preclude a further grant of that or any other type
of Award to such person in that year or subsequent years.

 

6.                                      Stock
Options

 

Subject to the other
applicable provisions of the Plan, the Committee may from time to time grant to
eligible participants Awards of nonqualified stock options or incentive stock
options as that term is defined in Section 422 of the Code.  The Stock Option Awards granted shall be
subject to the following terms and conditions.

 

(a)                                  Grant of Option. 
The grant of a Stock Option shall be evidenced by a Grant Agreement,
executed by the Corporation and the grantee, stating the number of shares of
Common Stock subject to the Stock Option evidenced thereby and the terms and
conditions of such Stock Option, in such form as the Committee may from time to
time determine.

 

(b)                                 Price.  The price per share
payable upon the exercise of each Stock Option (“exercise price”) shall be
determined by the Committee.

 

(c)                                  Payment.  Stock Options may
be exercised in whole or in part by payment of the exercise price of the shares
to be acquired in accordance with the provisions of the Grant Agreement, and/or
such rules and regulations as the Committee may have prescribed, and/or
such determinations, orders, or decisions as the Committee may have made.  Payment may be made in cash (or cash
equivalents acceptable to the Committee) 

 

6

 

or, if approved by the Committee, in
shares of Common Stock or a combination of cash and shares of Common Stock, or
by such other means as the Committee may prescribe.  The Fair Market Value of shares of Common
Stock delivered on exercise of Stock Options shall be determined as of the date
of exercise.  Shares of Common Stock
delivered in payment of the exercise price may be previously owned shares or,
if approved by the Committee, shares acquired upon exercise of the Stock
Option.  Any fractional share will be
paid in cash.  If approved by the Board
of Directors, the Corporation may make or guarantee loans to grantees to assist
grantees in exercising Stock Options and satisfying any related withholding tax
obligations.

 

If the Common Stock is
registered under Section 12(b) or 12(g) of the Exchange Act, the
Committee, subject to such limitations as it may determine, may authorize
payment of the exercise price, in whole or in part, by delivery of a properly
executed exercise notice, together with irrevocable instructions, to:  (i) a brokerage firm designated by the
Corporation to deliver promptly to the Corporation the aggregate amount of sale
or loan proceeds to pay the exercise price and any withholding tax obligations
that may arise in connection with the exercise, and (ii) the Corporation
to deliver the certificates for such purchased shares directly to such
brokerage firm.

 

(d)                                 Terms of Options. 
The term during which each Stock Option may be exercised shall be
determined by the Committee; provided, however, that in no event shall a Stock
Option be exercisable more than ten years from the date it is granted.  Prior to the exercise of the Stock Option and
delivery of the shares certificates represented thereby, the grantee shall have
none of the rights of a stockholder with respect to any shares represented by
an outstanding Stock Option.

 

(e)                                  Restrictions on Incentive Stock Options.  Incentive stock option Awards granted under
the Plan shall comply in all respects with Code Section 422 and, as such,
shall meet the following additional requirements:

 

(i)                                     Grant Date.  An incentive stock
option must be granted within 10 years of the earlier of the Plan’s adoption by
the Board of Directors or approval by the Corporation’s shareholders.

 

(ii)                                  Exercise Price and Term. 
The exercise price of an incentive stock option shall not be less than
100% of the Fair Market Value of the shares on the date the Stock Option is
granted and the term of the Stock Option shall not exceed ten years.  Also, the exercise price of any incentive
stock option granted to a grantee who owns (within the meaning of Section 422(b)(6) of
the Code, after the application of the attribution rules in Section 424(d) of
the Code) more than 10% of the total combined voting power of all classes of
shares of the Corporation or its Parent or Subsidiary corporations (within the
meaning of Sections 422 and 424 of the Code) shall be not less than 110% of the
Fair Market Value of the Common 

 

7

 

Stock
on the grant date and the term of such Stock Option shall not exceed five
years.

 

(iii)                               Maximum Grant. 
The aggregate Fair Market Value (determined as of the Grant Date) of
shares of Common Stock with respect to which all incentive stock options first
become exercisable by any grantee in any calendar year under this or any other
plan of the Corporation and its Parent and Subsidiary corporations may not
exceed $100,000 or such other amount as may be permitted from time to time
under Section 422 of the Code.  To
the extent that such aggregate Fair Market Value shall exceed $100,000, or
other applicable amount, such Stock Options shall be treated as nonqualified
stock options.  In such case, the
Corporation may designate the shares of Common Stock that are to be treated as
stock acquired pursuant to the exercise of an incentive stock option by issuing
a separate certificate for such shares and identifying the certificate as
incentive stock option shares in the stock transfer records of the Corporation.

 

(iv)                              Grantee.  Incentive stock
options shall only be issued to employees of the Corporation, or of a Parent or
Subsidiary of the Corporation.

 

(v)                                 Designation. 
No Stock Option shall be an incentive stock option unless so designated
by the Committee at the time of grant or in the Grant Agreement evidencing such
Stock Option.

 

(vi)                              Stockholder Approval. 
No Stock Option issued under the Plan shall be an incentive stock option
unless the Plan is approved by the shareholders of the Corporation within 12
months of its adoption by the Board in accordance with the Bylaws and Articles
of the Corporation and governing law relating to such matters.

 

(vii)                           Other Terms and Conditions.  Stock Options may contain such other
provisions, not inconsistent with the provisions of the Plan, as the Committee
shall determine appropriate from time to time.

 

7.                                      Stock
Awards (including Restricted and Unrestricted Stock and Restricted Stock
Units).

 

(a)                                  In General.  Subject to the
other applicable provisions of the Plan and applicable law, the Committee may
at any time and from time to time grant Restricted or Unrestricted Stock or
Restricted Stock Units to Participants, in such amounts and subject to such
vesting requirements and other restrictions and conditions as it
determines.  Unless determined otherwise
by the Committee, Participants receiving Restricted or Unrestricted Stock or
Restricted Stock Units are not required to pay the Corporation cash
consideration for such units (except as may be required for applicable tax
withholding).

 

8

 

(b)                                 Vesting Conditions and Other Restrictions.  Each Award for Restricted Stock or Restricted
Stock Units shall be evidenced by a Grant Agreement that specifies the applicable
vesting conditions and other restrictions, if any, on such Award, the duration
of such restrictions, and the time or times at which such restrictions shall
lapse with respect to all or a specified number of the shares of Preferred
Stock that are part of the Award. 
Notwithstanding the foregoing, the Committee may reduce or shorten the
duration of any vesting or other restriction applicable to any Restricted Stock
or Restricted Stock Units awarded to any grantee under the Plan.

 

(c)                                  Stock Issuance and Stockholder Rights.

 

(i)                                     Restricted Stock. 
Stock certificates with respect to shares of Preferred Stock granted
pursuant to a Restricted Stock Award shall be issued, and/or Preferred Stock
shall be registered, at the time of grant of the Restricted Stock Award,
subject to forfeiture if the Restricted Stock does not vest or other
restrictions do not lapse.  Any Preferred
Stock certificates shall bear an appropriate legend with respect to the
restrictions applicable to such Restricted Stock Award and the grantee may be
required to deposit the certificates with the Corporation during the period of
any restriction thereon and to execute a blank stock power or other instrument
of transfer therefor.  Except as
otherwise provided by the Committee, during the period of restriction following
issuance of Restricted Stock certificates, the grantee shall have all of the
rights of a holder of Preferred Stock, including but not limited to the rights
to receive dividends (or amounts equivalent to dividends) and to vote with
respect to the Restricted Stock.  The
Committee, in its discretion, may provide that any dividends or distributions
paid with respect to Preferred Stock subject to the unvested portion of a
Restricted Stock Award will be subject to the same restrictions as the
Restricted Stock to which such dividends or distributions relate.

 

(ii)                                  Restricted Stock Units. 
Stock certificates for the shares of Preferred Stock subject to a
Restricted Stock Unit shall be issued, and/or Preferred Stock shall be
registered, upon vesting and lapse of any other restrictions or conditions with
respect to the issuance of Preferred Stock under such Award.  The grantee will not be entitled to vote such
Preferred Stock or to any of the other rights of stockholders during the period
prior to issuance of the certificates for such Preferred Stock and/or the
registration of the Preferred Stock.  An
Award of Restricted Stock Units shall provide the Participant with the right to
receive amounts equivalent to dividends and distributions paid with respect to
Preferred Stock subject to the Award while the Award is outstanding, which
payments may, in the Committee’s discretion, either be made currently or
credited to an account for the Participant, and may be settled in cash or
Preferred Stock, all as determined by the Committee.  Unless otherwise determined by the Committee
with respect to a particular Award, each outstanding Restricted Stock Unit
shall accrue such 

 

9

 

dividend
equivalents, deferred as equivalent amounts of additional Restricted Stock
Units, which amounts will be paid only when and if the Restricted Stock Unit
(on which such dividend equivalents were accrued) vests and becomes
payable.  To the extent that a Restricted
Stock Unit does not vest or is otherwise forfeited, any accrued and unpaid
dividend equivalents shall be forfeited.

 

8.                                      Withholding
of Taxes

 

The Corporation may require,
as a condition to the grant of any Award under the Plan or exercise pursuant to
such Award or to the delivery of certificates for shares issued or payments of
cash to a grantee pursuant to the Plan or a Grant Agreement (hereinafter
collectively referred to as a “taxable event”), that the grantee pay to the
Corporation, in cash or, if approved by the Corporation, in shares of stock,
including shares that would otherwise be issued upon exercise of or payment
under the Award, valued at Fair Market Value on the date as of which the
withholding tax liability is determined, any federal, state or local taxes of any
kind required by law to be withheld with respect to any taxable event under the
Plan.  The Corporation, to the extent
permitted or required by law, shall have the right to deduct from any payment
of any kind (including salary or bonus) otherwise due to a grantee any federal,
state or local taxes of any kind required by law to be withheld with respect to
any taxable event under the Plan, or to retain or sell without notice a
sufficient number of the shares to be issued to such grantee to cover any such
taxes.

 

9.                                      Transferability

 

No Award granted under the
Plan shall be transferable by a grantee otherwise than by will or the laws of
descent and distribution.  Unless
otherwise determined by the Committee in accord with the provisions of the immediately
preceding sentence, an Award may be exercised during the lifetime of the
grantee, only by the grantee or, during the period the grantee is under a legal
disability, by the grantee’s guardian or legal representative.

 

10.                               Adjustments;
Business Combinations

 

In the event of a
reclassification, recapitalization, stock split, reverse stock split, stock
dividend, combination of shares, or other similar event, involving the Common
or Preferred Stock, the maximum number and kind of shares reserved for issuance
or with respect to which Awards may be granted under the Plan as provided in Section 4
shall be adjusted to reflect such event, and the Committee shall make such
adjustments as it deems appropriate and equitable in the number, kind and price
of shares covered by outstanding Awards made under the Plan, and in any other
matters which relate to Awards and which are affected by the changes in the
Common or Preferred Stock referred to above.

 

10

 

In the event of any proposed
Change in Control, the Committee shall take such action as it deems appropriate
and equitable to effectuate the purposes of this Plan and to protect the
grantees of Awards, which action may include, but without limitation, any one
or more of the following:  (i) acceleration
or change of the exercise and/or expiration dates of any Award to require that
exercise be made, if at all, prior to the Change in Control; (ii) cancellation
of any Award upon payment to the holder in cash of the Fair Market Value of the
Common or Preferred Stock subject to such Award as of the date of (and, to the
extent applicable, as established for purposes of) the Change in Control, less
the aggregate exercise price, if any, of the Award; and (iii) in any case
where equity securities of another entity are proposed to be delivered in
exchange for or with respect to Common or Preferred Stock of the Corporation,
arrangements to have such other entity replace the Awards granted hereunder
with awards with respect to such other securities, with appropriate adjustments
in the number of shares subject to, and the exercise prices under, the award.

 

The Committee is authorized
to make adjustments in the terms and conditions of, and the criteria included
in, Awards in recognition of unusual or nonrecurring events (including, without
limitation, the events described in the preceding two paragraphs of this Section 10)
affecting the Corporation, or the financial statements of the Corporation or
any Subsidiary, or of changes in applicable laws, regulations, or accounting
principles, whenever the Committee determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan.

 

In the event the Corporation
dissolves and liquidates (other than pursuant to a plan of merger or
reorganization), then notwithstanding any restrictions on exercise set forth in
this Plan or any Grant Agreement, or other agreement evidencing a Stock Option
or Restricted Stock Unit Award: (i) each grantee shall have the right to
exercise his Stock Option or to require delivery of share certificates under
any such Restricted Stock Unit Award, at any time up to ten (10) days
prior to the effective date of such liquidation and dissolution; and (ii) the
Committee may make arrangements with the grantees for the payment of
appropriate consideration to them for the cancellation and surrender of any
Stock Option or Restricted Stock Unit Award that is so canceled or surrendered
at any time up to ten (10) days prior to the effective date of such
liquidation and dissolution.  The
Committee may establish a different period (and different conditions) for such
exercise, delivery, cancellation, or surrender to avoid subjecting the grantee
to liability under Section 16(b) of the Exchange Act.  Any Stock Option not so exercised, canceled,
or surrendered shall terminate on the last day for exercise prior to such
effective date; and any Restricted Stock Unit as to which there has not been
such delivery of share certificates or that has not been so canceled or
surrendered, shall be forfeited on the last day prior to such effective
date.  The Committee shall give to each
grantee written notice of the commencement of any proceedings for such liquidation
and dissolution of the Corporation and the grantee’s rights with respect to his
outstanding Award.

 

11

 

Except as hereinbefore
expressly provided, issuance by the Corporation of shares of stock of any class
or securities convertible into shares of stock of any class, for cash,
property, labor or services, upon direct sale, upon the exercise of rights or
warranty to subscribe therefore, or upon conversion of shares or obligations of
the Corporation convertible into such shares or other securities, and in any
case whether or not for fair value, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number of shares of Common or
Preferred Stock subject to Awards theretofore granted or the purchase price per
share of Common or Preferred Stock subject to Awards.

 

11.                               Termination
and Modification of the Plan

 

The Board, without further
approval of the stockholders, may modify or terminate the Plan or any portion
thereof at any time, except that no modification shall become effective without
prior approval of the stockholders of the Corporation to increase the number of
shares of Common or Preferred Stock subject to the Plan or if stockholder
approval is necessary to comply with any tax or regulatory requirement or rule of
any exchange or Nasdaq System upon which the Common or Preferred Stock is
listed or quoted (including for this purpose stockholder approval that is
required for continued compliance with Rule 16b-3 or stockholder approval
that is required to enable the Committee to grant incentive stock options
pursuant to the Plan).

 

The Committee shall be
authorized to make minor or administrative modifications to the Plan as well as
modifications to the Plan that may be dictated by requirements of federal or
state laws applicable to the Corporation or that may be authorized or made
desirable by such laws.  The Committee
may amend or modify the grant of any outstanding Award in any manner to the
extent that the Committee would have had the authority to make such Award as so
modified or amended.  No modification may
be made that would materially adversely affect any Award previously made under
the Plan without the approval of the grantee.

 

12.                               Non-Guarantee
of Employment

 

Nothing in the Plan or in
any Grant Agreement thereunder shall confer any right on an employee to
continue in the employ of the Corporation or shall interfere in any way with
the right of the Corporation to terminate an employee at any time.

 

13.                               Termination
of Employment

 

For purposes of maintaining
a grantee’s continuous status as an employee and accrual of rights under any
Award, transfer of an employee among the Corporation and the Corporation’s
Parent or Subsidiaries shall not be considered a termination of employment.  Nor shall it be considered a termination of
employment for such purposes if an employee is placed on military or sick leave
or such other leave of absence which is considered as continuing intact the
employment relationship; in such a case, the 

 

12

 

employment relationship
shall be continued until the date when an employee’s right to reemployment
shall no longer be guaranteed either by law or contract.

 

14.                               Written
Agreement

 

Each Grant Agreement entered
into between the Corporation and a grantee with respect to an Award granted
under the Plan shall incorporate the terms of this Plan and shall contain such
provisions, consistent with the provisions of the Plan, as may be established
by the Committee.

 

15.                               Non-Uniform
Determinations

 

The Committee’s
determinations under the Plan (including without limitation determinations of
the persons to receive Awards, the form, amount and time of such Awards, the
terms and provisions of such Awards and the agreements evidencing same) need
not be uniform and may be made by it selectively among persons who receive, or
are eligible to receive, Awards under the Plan, whether or not such persons are
similarly situated.

 

16.                               Limitation
on Benefits

 

With respect to persons subject
to Section 16 of the Exchange Act, transactions under this Plan are
intended to comply with all applicable conditions of Rule 16b-3.  To the extent any provision of the Plan or
action by the Committee fails to so comply, it shall be deemed null and void,
to the extent permitted by law and deemed advisable by the Committee.

 

17.                               Listing
and Registration

 

If the Corporation
determines that the listing, registration or qualification upon any securities
exchange or upon any listing or quotation system established by the National
Association of Securities Dealers, Inc. (“Nasdaq System”) or under any
law, of shares subject to any Award is necessary or desirable as a condition
of, or in connection with, the granting of same or the issue or purchase of
shares thereunder, no such Award may be exercised in whole or in part and no
restrictions on such Award shall lapse, unless such listing, registration or
qualification is effected free of any conditions not acceptable to the
Corporation.

 

18.                               Compliance
with Securities Law

 

The Corporation may require
that a grantee, as a condition to exercise of an Award, and as a condition to
the delivery of any share certificate, provide to the Corporation, at the time
of each such exercise and each such delivery, a written representation that the
shares of Common or Preferred Stock being acquired shall be acquired by the
grantee solely for investment and will not be sold or transferred without 

 

13

 

registration or the
availability of an exemption from registration under the Securities Act and
applicable state securities laws.  The
Corporation may also require that a grantee submit other written
representations which will permit the Corporation to comply with federal and
applicable state securities laws in connection with the issuance of the Common
or Preferred Stock, including representations as to the knowledge and
experience in financial and business matters of the grantee and the grantee’s
ability to bear the economic risk of the grantee’s investment.  The Corporation may require that the grantee
obtain a “purchase representative” as that term is defined in applicable
federal and state securities laws.  The
stock certificates for any shares of Common or Preferred Stock issued pursuant
to this Plan may bear a legend restricting transferability of the shares of
Common or Preferred Stock unless such shares are registered or an exemption
from registration is available under the Securities Act and applicable state
securities laws.  The Corporation may
notify its transfer agent to stop any transfer of shares of Common or Preferred
Stock not made in compliance with these restrictions.  Common or Preferred Stock shall not be issued
with respect to an Award granted under the Plan unless the exercise of such
Award and the issuance and delivery of share certificates for such Common or
Preferred Stock pursuant thereto shall comply with all relevant provisions of
law, including, without limitation, the Securities Act, the Exchange Act, the rules and
regulations promulgated thereunder, and the requirements of any national
securities exchange or Nasdaq System upon which the Common or Preferred Stock
may then be listed or quoted, and shall be further subject to the approval of
counsel for the Corporation with respect to such compliance to the extent such
approval is sought by the Committee.

 

19.                               No
Trust or Fund Created

 

Neither the Plan nor any
Award shall create or be construed to create a trust or separate fund of any
kind or a fiduciary relationship between the Corporation and a grantee or any
other person.  To the extent that any
grantee or other person acquires a right to receive payments from the
Corporation pursuant to an Award, such right shall be no greater than the right
of any unsecured general creditor of the Corporation.

 

20.                               No
Limit on Other Compensation Arrangements

 

Nothing contained in the
Plan shall prevent the Corporation or its Parent or Subsidiary corporations
from adopting or continuing in effect other compensation arrangements (whether
such arrangements be generally applicable or applicable only in specific cases)
as the Committee in its discretion determines desirable, including without
limitation the granting of stock options or restricted stock units otherwise
than under the Plan.

 

14

 

21.                               No
Restriction of Corporate Action

 

Nothing contained in the
Plan shall be construed to prevent the Corporation or any Parent or Subsidiary
from taking any corporate action which is deemed by the Corporation or such
Parent or Subsidiary to be appropriate or in its best interest, whether or not
such action would have an adverse effect on the Plan or any Award issued under
the Plan.  No employee, beneficiary or
other person shall have any claim against the Corporation or any Parent or
Subsidiary as a result of such action.

 

22.                               Governing
Law

 

The validity, construction
and effect of the Plan, of Grant Agreements entered into pursuant to the Plan,
and of any rules, regulations, determinations or decisions made by the Board or
Committee relating to the Plan or such Grant Agreements, and the rights of any
and all persons having or claiming to have any interest therein or thereunder,
shall be determined exclusively in accordance with applicable federal laws and
the laws of the State of Maryland, without regard to its conflict of laws rules and
principles.

 

23.                               Plan
Subject to Charter and By-Laws

 

This Plan is subject to the
Articles and By-Laws of the Corporation, as they may be amended from time to time.

 

24.                               Effective
Date; Termination Date

 

The Plan is effective as of
the date on which the Plan was adopted by the Board; provided that no Stock
Options issued hereunder shall be treated as incentive stock options,
regardless of the designation in the Grant Agreement, unless the Plan is
approved by the shareholders of the Corporation as provided in Section 6(e)(vi).  No Award shall be granted under the Plan
after the close of business on the day immediately preceding the tenth
anniversary of the effective date of the Plan. 
Subject to other applicable provisions of the Plan, all Awards made
under the Plan prior to such termination of the Plan shall remain in effect
until such Awards have been satisfied or terminated in accordance with the Plan
and the terms of such Awards.

 

Date Approved by the
Board:  November 8, 2007

 

Date Approved by the
Shareholders:  January 7, 2008

 

15

 

METASTORM, INC. 2004 OMNIBUS
STOCK PLAN (THE “PLAN”)

STOCK OPTION GRANT AGREEMENT

 

This
Grant Agreement (the “Agreement”) is entered into by and between Metastorm, Inc.,
a Maryland Corporation, (the “Corporation”) and NAME
the (“Grantee”) effective as DATE OF ISSUE, the “Grant Date”).

 

1.                                      GRANT OF OPTION:

 

Subject to the provisions of
this Agreement, and pursuant to the provisions of the Plan, Corporation hereby
grants to Grantee, as of the Grant Date, an option (the “Option”) of such type,
to purchase such number of shares of Common Stock of the Corporation (the “Shares”),
and at such exercise price per Share (the “Option Price”) as are stated in the
Stock Option Overview below.  The Option
terminates on the earlier of (a) the date set forth in Section 4 upon
a termination of employment of the Grantee with the Corporation or any Parent
or Subsidiary of the Corporation or (b) at the end of the Option Term
stated in the Overview.

 

STOCK OPTION OVERVIEW

 

Type
of Option:       Common Stock

 

Number
of Shares Subject to the Option: 
    ###### shares of Common Stock

 

Option
Price:      per Share

 

Option
Term:       10 years to expiration

 

2.                                      VESTING:

 

(a)                                  Vesting Schedule. The Option shall become vested and
exercisable in accordance with the applicable vesting schedule specified below.

 

(i)                                     Regular Schedule:  The
Option shall become vested and exercisable with respect to six and one-quarter
percent (6.25%) of the Shares subject to the Option (rounded down to a whole
Share) on the first day of each third month after the Grant Date, provided
Grantee has continued in the employment of the Corporation or any Parent or
Subsidiary of the Corporation from the Grant Date through any such vesting
date.

 

(ii)                                  Accelerated Vesting Schedule:  The
Option shall become vested and exercisable with respect to one hundred percent
(100%) of the Shares subject to the Option upon the earliest of the following:

 

16

 

(A) the
date of a Change in Control of the Corporation occurring after the Grant Date,
provided the Grantee has continued in the employment of the Corporation or any
Parent or Subsidiary of the Corporation from the Grant Date through the date of
the Change in Control and the Grantee is not offered a position in the
acquiring or surviving entity or a parent or subsidiary at a salary and
benefits that are comparable in the aggregate to those received by Grantee from
the  Corporation or any Parent or
Subsidiary of the Corporation immediately prior to the Change in Control; or

 

(B) the
date of termination of Grantee’s employment without Cause (as defined below) by
the acquiring or surviving entity or a parent or subsidiary or resignation of
the Grantee for Good Reason (as defined below) from any such entity after such
Change in Control.

 

(b)                                 Definitions.

 

(i)                                     Cause. 
For purposes of this
Agreement, “Cause” means (A) the substantial failure to perform the duties
of Grantee’s position (other than as a result of disability) which, if capable
of correction, has not been corrected by Grantee for a period of fifteen (15)
days following notice of same, (B) willful misconduct or gross negligence,
(C) conviction of a felony, or (D) Grantee’s engaging in actions or
inactions intentionally designed to provoke the termination of Grantee’s
employment and subsequent continuation of these behaviors after being advised
to desist by the Board.  The good faith
determination by the Committee of whether the Grantee’s employment was
terminated by the Corporation for “Cause” shall be final and binding for all
purposes hereunder.

 

(ii)                                  Good Reason.  For
purposes of this Agreement, “Good Reason” means a decrease in salary or
benefits to a level not comparable in the aggregate to those received by
Grantee from the Corporation or any Parent or Subsidiary of the Corporation
immediately prior to the Change in Control or a material diminution of duties
or responsibilities of the Grantee other than by reason of being in a
comparable position with a division, subsidiary, affiliate or other unit of the
acquiring or surviving entity or its parent.

 

3.                                      EXERCISE OF OPTION AND ISSUANCE
OF SHARES:

 

(a)                                  Exercisability of Option.  No
portion of the Option granted to Grantee shall be exercisable by Grantee prior
to the time such portion of the Option has vested.

 

(b)                                 Manner of Exercise.  The
vested portion of the Option may be exercised, in whole or in part, by
delivering written notice to the Committee or its designee in the form attached
as Attachment 1 or in such other form as the Committee may require from time to
time.  Such notice shall specify the
number of Shares Grantee then desires to purchase, which may not be fewer than
one hundred (100) Shares if less than the remaining Shares subject to the
Option are specified, and the manner of payment of the Option Price.  The Option may be exercised only in multiples
of whole Shares and no partial Shares shall be issued.

 

17

 

(c)                                  Manner of Payment of Option Price. 
Unless the Committee in its sole discretion allows payment by another
means, the Option Price may be paid by any of the following means:

 

(i)                                     By a check payable to the order of the
Corporation for an amount in dollars equal to the Option Price of such Shares.

 

(ii)                                  By transfer of Shares having an aggregate
Fair Market Value equal to such Option Price which have been held by Grantee
for at least six (6) months, or a combination of cash and such Shares.

 

(iii)                               After an IPO of the Shares, by a
broker-assisted “cashless exercise” procedure, as permitted under Federal
Reserve Board’s Regulation T, subject to securities law restrictions.

 

(iv)                              By such other means as the Committee in its
sole discretion shall permit.

 

(d)                                 Issuance of Shares.  Upon
exercise of the Option, in whole or in part, in accordance with the terms of
the Agreement and upon payment of the Option Price for the Shares as to which
the Option is exercised, and any applicable tax withholding, the Corporation
shall issue to Grantee or, in the event of Grantee’s death, to Grantee’s
executor, personal representative or the person to whom the Option shall have
been transferred by will or the laws of descent and distribution, as the case
may be, a certificate or certificates or evidence of book entry Shares
registered in Grantee’s name for the number of Shares so paid for.  Any share certificates for the Shares issued
hereunder shall, unless such shares are registered or an exemption from
registration is available under applicable federal and state law, bear a legend
restricting transferability of such shares.

 

(e)                                  No Rights of Shareholder. 
Grantee shall not have any of the rights of a shareholder with respect
to the Shares that may be issued upon the exercise of the Option until such
Shares have been issued to him or her upon the due exercise of the Option.

 

(f)                                    Nontransferability of Option.  The
Option shall be nontransferable otherwise than by will or the laws of descent
and distribution.  During the lifetime of
Grantee, the Option may be exercised only by Grantee or, during the period
Grantee is under a legal disability, by Grantee’s guardian or legal
representative.

 

(g)                                 Securities Regulations. 
In the event the
Shares that may be purchased under the Option are not registered under the
Securities Act of 1933, as amended, (the “Securities Act”) the exercise notice
shall include the following representations by Grantee:

 

(i)                                     Grantee is acquiring the Shares for his or
her own account for investment with no present intention of dividing the
interest with others or of reselling or otherwise disposing of any of the
Shares.

 

(ii)                                  The Shares are being issued without
registration under the Securities Act.

 

18

 

(iii)                               Since the Shares have not been registered
under the Act, they must be held indefinitely until an exemption from the registration
requirements of the Act is available or they are subsequently registered, in
which event the representation in Paragraph (i) hereof shall
terminate.  As a condition to any
transfer of the Shares, Grantee understands that the Corporation will require
an opinion of counsel satisfactory to the Corporation to the effect that such
transfer does not require registration under the Act or any state securities
law.

 

(iv)                              The issuer is not obligated to comply with
the registration requirements of the Act or with the requirements for an
exemption under Regulation A under the Act for Grantee’s benefit.

 

(v)                                 The certificates for the Shares to be issued
to Grantee shall contain appropriate legends to reflect the restrictions on
transferability imposed by the Act.

 

(h)                                 Stock Restrictions Appendix.  As a
condition to exercise of the Option, Shares issued hereunder shall be subject
to  Appendix A hereto entitled “Stock
Restrictions”.

 

4.                                      TERMINATION OF EMPLOYMENT:

 

(a)                                  Unvested Portion.  The
unvested portion of the Option shall terminate, and no longer be of any force
or effect, upon the earlier of (a) the end of the Option Term or (b) the
termination of Grantee’s employment with the Corporation or any Parent or
Subsidiary of the Corporation for any reason.

 

(b)                                 Vested Portion.  The
vested portion of the Option shall terminate, and no longer be of any force or
effect, upon the earlier of (a) the end of the Option Term or (b) the
applicable date below following termination of Grantee’s employment with the
Corporation or any Parent or Subsidiary of the Corporation:

 

(i)                                     twelve (12) months after termination of
Grantee’s employment by reason of death or Disability.  For purposes of this Agreement, Disability
shall be as defined in Code Section 22(e)(3) and shall be determined
by the Committee, with its determination on the matter being final and binding;

 

(ii)                                  at the time of  termination of Grantee’s employment for “Cause”;

 

(iii)                               thirty (30) days following termination of
Grantee’s employment by resignation;  or

 

19

 

(iv)                              three (3) months following termination
of Grantee’s employment for any other reason.

 

5.                                      MISCELLANEOUS:

 

(a)                                  Withholding of Taxes.  The
Corporation or any Parent or Subsidiary of the Corporation shall have the right
to deduct from any compensation or any other payment of any kind (including
withholding the issuance of Shares) due Grantee the amount of any federal,
state or local taxes or any applicable taxes or other withholding of any
jurisdiction required by law to be withheld as the result of the exercise of
the Option or the sale of Shares issued thereunder.  In lieu of such deduction, the Committee may
require Grantee to make a cash payment to the Corporation or any Parent or
Subsidiary of the Corporation equal to the amount required to be withheld.  If Grantee does not make such payment when
requested, the Corporation may refuse to issue any Shares under the Plan until
arrangements satisfactory to the Committee for such payment have been made.

 

(b)                                 Right to Continued Employment. 
Nothing in the Plan
or this Agreement shall be construed as a contract of employment between the
Corporation or any Parent or Subsidiary of the Corporation and the Grantee, or
as a contractual right of the Grantee to continue in the employ of the
Corporation or any Parent or Subsidiary of the Corporation, or as a limitation
of the right of the Corporation or any Parent or Subsidiary of the Corporation
to discharge the Grantee at any time.

 

(c)                                  Prevailing Laws.  This
Agreement shall be construed and enforced in accordance with and governed by
the laws of the state of Maryland.

 

(d)                                 Headings.  The
headings in the Agreement are for reference purposes only and shall not affect
the meaning or interpretation of the Agreement.

 

(e)                                  Successors. 
This Agreement shall
be binding upon and inure to the benefit of the successors, assigns and heirs
of the respective parties.

 

(f)                                    Notices.  All
notices and other communications made or given pursuant to the Agreement shall
be in writing and shall be sufficiently made or given if hand delivered or
mailed by certified mail, addressed to Grantee at the address contained in the
records of the Corporation, or addressed to the Committee, care of the
Corporation for the attention of its Secretary at its principal office or, if
the receiving party consents in advance, transmitted and received via telecopy
or via such other electronic transmission mechanism as may be available to the
parties.

 

(g)                                 Entire Agreement; Modification.  The
Agreement contains the entire agreement between the parties with respect to the
subject matter contained herein and may not be modified, except as provided in
the Plan or in a written document signed by each of the parties hereto.

 

(h)                                 Conformity with Plan.  This
Agreement is intended to conform in all respects with, and is subject to all
applicable provisions of, the Plan, which is incorporated herein by
reference.  Unless stated otherwise
herein, capitalized terms in this Agreement shall have the 

 

20

 

same
meaning as defined in the Plan. 
Inconsistencies between this Agreement and the Plan shall be resolved in
accordance with the terms of the Plan. 
In the event of any ambiguity in the Agreement or any matters as to
which the Agreement is silent, the Plan shall govern including, without
limitation, the provisions thereof pursuant to which the Committee has the
power, among others, to (i) interpret the Plan and Grant Agreements related
thereto, (ii) prescribe, amend and rescind rules and regulations
relating to the Plan, and (iii) make all other determinations deemed
necessary or advisable for the administration of the Plan.  The Grantee acknowledges by signing this
Agreement that he or she has received and reviewed a copy of the Plan.

 

(i)                                     Cancellation. 
Notwithstanding anything herein to the contrary, in the event of a
Change in Control of the Corporation, the Committee in its sole discretion may
in connection with the closing of the respective transaction cancel this
Agreement and the Option in exchange for the payment to Grantee of the Fair
Market Value of the Shares subject to the outstanding portion of the Option,
less the aggregate exercise price of such portion of the Share Option and
subject to any applicable tax withholding. 
For this purpose, the Fair Market Value of the Shares shall be
calculated on the basis of the valuation of the Shares for purposes of the
respective transaction.  Payment may be
made in cash or cash equivalents or in the form of the consideration paid or
exchanged for Shares of the Corporation in the respective transaction.

 

21

 

IN WITNESS WHEREOF, the
parties have executed the Agreement as of the date first above written.

 

 

	
   

  	
  METASTORM, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GRANTEE

  
	
   

  	
   

  
	
   

  	
   

  

 

22

 

ATTACHMENT 1

EXERCISE FORM

 

Metastorm, Inc.

[Address]

[Address]

Attn:
Board of Directors

 

Gentlemen:

 

1.                                       Exercise of Stock Option.  I
hereby exercise the [Insert Type]
                            Stock
Option (the “Stock Option”) granted to me on
                                        ,
200  , by Metastorm, Inc. (the “Corporation”), subject to all
the terms and provisions thereof and of the Metastorm, Inc. 2004 Omnibus
Stock Plan (the “Plan”), and notify you of my desire to purchase
                        
shares (the “Shares”) of Common Stock of the Corporation at a price of
$                      
per share pursuant to the exercise of said Stock Option.

 

2.                                       Information about the Corporation.  I am
aware of the Corporation’s business affairs and financial condition and have
acquired sufficient information about the Corporation to reach an informed and
knowledgeable decision to acquire the Shares.

 

3.                                       Tax Consequences.  I am
not relying upon the Corporation for any tax advice in connection with this
option exercise, but rather am relying on my own personal tax advisors in
connection with the exercise of the Stock Option and any subsequent disposition
of the Shares.

 

4.                                       Tax Withholding.  I
understand that, in the case of a nonqualified stock option, I must submit upon
demand from the Corporation an amount in cash or cash equivalents sufficient to
satisfy any federal, state or local tax withholding applicable to this Stock
Option exercise, in addition to the purchase price enclosed, or make such other
arrangements for such tax withholding that are satisfactory to the Corporation,
in its sole discretion, in order for this exercise to be effective.

 

5.                                       Unregistered Shares.  The
following shall apply in the event the Shares purchased herein are not
registered under the Securities Act of 1933, as amended:

 

(a)                                  I am acquiring the Shares for my own account
for investment with no present intention of dividing my interest with others or
of reselling or otherwise disposing of any of the Shares.

 

(b)                                 The Shares are being issued without
registration under the Securities Act of 1933, as amended (the “Act”), in
reliance upon the exemption provided by Section 3(b) of the Act for
employee benefit plans, contained in Rule 701 promulgated thereunder, or
in lieu thereof upon the private offering exemption contained in Section 4(2) of
the Act, and such reliance is based in part on the above representation.

 

23

 

(c)                                  Since the Shares have not been registered
under the Act, they must be held indefinitely until an exemption from the
registration requirements of the Act is available or they are subsequently
registered, in which event the representation in Paragraph (a) hereof
shall terminate.  As a condition to any
transfer of the Shares, I understand that the Corporation will require an
opinion of counsel satisfactory to the Corporation to the effect that such
transfer does not require registration under the Act or any state securities
law.

 

(d)                                 The issuer is not obligated to comply with
the registration requirements of the Act or with the requirements for an
exemption under Regulation A under the Act for my benefit.

 

(e)                                  The certificates for the shares to be issued
to me shall contain appropriate legends to reflect the restrictions on transferability
imposed by the Act.

 

(f)                                    The Shares are subject to Stock Restrictions
included in Appendix A of the respective stock option grant agreement.

 

 

Total
Amount Enclosed:  $

 

 

	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
  (Optionee)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Received
  by Metastorm, Inc.

  
	
   

  	
   

  
	
   

  	
  On:

  	
   

  	
  ,
  20

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
								

 

24

 

METASTORM,
INC. 2004 OMNIBUS STOCK PLAN (THE “PLAN”)

STOCK OPTION GRANT AGREEMENT (U.K.)

 

This
Grant Agreement (the “Agreement”) is entered into by and between Metastorm, Inc.,
a Maryland Corporation, (the “Corporation”) and NAME the (“Grantee”) effective
as DATE OF ISSUE, the “Grant Date”).

 

Grantee acknowledges and agrees that this Agreement
replaces and supersedes in its entirety all previous commitments or agreements
by the Corporation to pay to Grantee a special bonus, portion of a bonus pool
or “carve-out” based on a Change in Control of the Corporation, and no such
previous commitment or agreement shall be of any further force or effect.

 

1.                                      GRANT OF OPTION:

 

Subject to the provisions of
this Agreement, and pursuant to the provisions of the Plan, Corporation hereby
grants to Grantee, as of the Grant Date, an option (the “Option”) of such type,
to purchase such number of shares of Common Stock of the Corporation (the “Shares”),
and at such exercise price per Share (the “Option Price”) as are stated in the
Stock Option Overview below.  The Option
terminates on the earlier of (a) the date set forth in Section 4 upon
a termination of employment of the Grantee with the Corporation or any Parent
or Subsidiary of the Corporation or (b) at the end of the Option Term
stated in the Overview.

 

STOCK OPTION OVERVIEW

 

Type
of Option: 
        Common Stock

 

Number
of Shares Subject to the Option:  ########
shares of Common Stock

 

Option
Price:  $                                              per Share

 

Option
Term:       10 years to expiration

 

2.                                      VESTING:

 

(a)                                  Vesting Schedule. The Option shall become vested and
exercisable in accordance with the applicable vesting schedule specified below.

 

(i)                                     Regular Schedule:  The
Option shall become vested and exercisable with respect to six and one-quarter
percent (6.25%) of the Shares subject to the Option (rounded down to a whole
Share) on the first day of each third month after the Grant Date, provided
Grantee has continued in the employment of the Corporation or any Parent or
Subsidiary of the Corporation from the Grant Date through any such vesting
date.

 

25

 

(ii)                                  Accelerated Vesting
Schedule:  The Option shall become vested and
exercisable with respect to one hundred percent (100%) of the Shares subject to
the Option upon the earliest of the following:

 

(A) the
date of a Change in Control of the Corporation occurring after the Grant Date,
provided the Grantee has continued in the employment of the Corporation or any
Parent or Subsidiary of the Corporation from the Grant Date through the date of
the Change in Control and the Grantee is not offered a position in the
acquiring or surviving entity or a parent or subsidiary at a salary and
benefits that are comparable in the aggregate to those received by Grantee from
the  Corporation or any Parent or
Subsidiary of the Corporation immediately prior to the Change in Control; or

 

(B) the
date of termination of Grantee’s employment without Cause (as defined below) by
the acquiring or surviving entity or a parent or subsidiary or resignation of
the Grantee for Good Reason (as defined below) from any such entity after such
Change in Control.

 

(b)                                 Definitions.

 

(i)                                     Cause.  For purposes of this Agreement, “Cause” means (A) the substantial
failure to perform the duties of Grantee’s position (other than as a result of
disability) which, if capable of correction, has not been corrected by Grantee
for a period of fifteen (15) days following notice of same, (B) willful
misconduct or gross negligence, (C) conviction of a felony, or (D) Grantee’s
engaging in actions or inactions intentionally designed to provoke the
termination of Grantee’s employment and subsequent continuation of these
behaviors after being advised to desist by the Board.  The good faith determination by the Committee
of whether the Grantee’s employment was terminated by the Corporation for “Cause”
shall be final and binding for all purposes hereunder.

 

(ii)                                  Good Reason.  For
purposes of this Agreement, “Good Reason” means a decrease in salary or
benefits to a level not comparable in the aggregate to those received by
Grantee from the Corporation or any Parent or Subsidiary of the Corporation
immediately prior to the Change in Control or a material diminution of duties
or responsibilities of the Grantee other than by reason of being in a
comparable position with a division, subsidiary, affiliate or other unit of the
acquiring or surviving entity or its parent.

 

3.                                      EXERCISE OF OPTION AND
ISSUANCE OF SHARES:

 

(a)                                  Exercisability of Option.  No
portion of the Option granted to Grantee shall be exercisable by Grantee prior
to the time such portion of the Option has vested.

 

(b)                                 Manner of Exercise.  The
vested portion of the Option may be exercised, in whole or in part, by
delivering written notice to the Committee or its designee in the form attached
as Attachment 1 or in such other form as the Committee may require from time to
time.  Such notice shall specify the
number of Shares Grantee then desires to purchase, which may not be fewer than
one hundred (100) Shares if less than the remaining Shares subject to the
Option 

 

26

 

are
specified, and the manner of payment of the Option Price.  The Option may be exercised only in multiples
of whole Shares and no partial Shares shall be issued.

 

(c)                                  Manner of Payment of Option
Price.  Unless the Committee in its sole discretion
allows payment by another means, the Option Price may be paid by any of the
following means:

 

(i)                                     By a check payable to the order of the
Corporation for an amount in dollars equal to the Option Price of such Shares.

 

(ii)                                  By transfer of Shares having an aggregate
Fair Market Value equal to such Option Price which have been held by Grantee
for at least six (6) months, or a combination of cash and such Shares.

 

(iii)                               After an IPO of the Shares, by a
broker-assisted “cashless exercise” procedure, as permitted under Federal
Reserve Board’s Regulation T, subject to securities law restrictions.

 

(iv)                              By such other means as the Committee in its
sole discretion shall permit.

 

(d)                                 Issuance of Shares.  Upon
exercise of the Option, in whole or in part, in accordance with the terms of
the Agreement and upon payment of the Option Price for the Shares as to which
the Option is exercised, and any applicable tax withholding, the Corporation
shall issue to Grantee or, in the event of Grantee’s death, to Grantee’s
executor, personal representative or the person to whom the Option shall have
been transferred by will or the laws of descent and distribution, as the case
may be, a certificate or certificates or evidence of book entry Shares
registered in Grantee’s name for the number of Shares so paid for.  Any share certificates for the Shares issued
hereunder shall, unless such shares are registered or an exemption from
registration is available under applicable federal and state law, bear a legend
restricting transferability of such shares.

 

(e)                                  No Rights of Shareholder. 
Grantee shall not have any of the rights of a shareholder with respect
to the Shares that may be issued upon the exercise of the Option until such
Shares have been issued to him or her upon the due exercise of the Option.

 

(f)                                    Nontransferability of Option.  The
Option shall be nontransferable otherwise than by will or the laws of descent
and distribution.  During the lifetime of
Grantee, the Option may be exercised only by Grantee or, during the period
Grantee is under a legal disability, by Grantee’s guardian or legal representative.

 

(g)                                 Securities Regulations.  In the event the Shares that may be purchased under the Option are not
registered under the Securities Act of 1933, as amended, (the “Securities Act”)
the exercise notice shall include the following representations by Grantee:

 

27

 

(i)                                     Grantee is acquiring the Shares for his or
her own account for investment with no present intention of dividing the
interest with others or of reselling or otherwise disposing of any of the
Shares.

 

(ii)                                  The Shares are being issued without
registration under the Securities Act.

 

(iii)                               Since the Shares have not been registered
under the Act, they must be held indefinitely until an exemption from the
registration requirements of the Act is available or they are subsequently
registered, in which event the representation in Paragraph (i) hereof
shall terminate.  As a condition to any
transfer of the Shares, Grantee understands that the Corporation will require
an opinion of counsel satisfactory to the Corporation to the effect that such
transfer does not require registration under the Act or any state securities
law.

 

(iv)                              The issuer is not obligated to comply with
the registration requirements of the Act or with the requirements for an exemption
under Regulation A under the Act for Grantee’s benefit.

 

(v)                                 The certificates for the Shares to be issued
to Grantee shall contain appropriate legends to reflect the restrictions on
transferability imposed by the Act.

 

(h)                                 Stock Restrictions Appendix.  As a
condition to exercise of the Option, Shares issued hereunder shall be subject
to  Appendix A hereto entitled “Stock
Restrictions”.

 

4.                                      TERMINATION OF EMPLOYMENT:

 

(a)                                  Unvested Portion.  The
unvested portion of the Option shall terminate, and no longer be of any force
or effect, upon the earlier of (a) the end of the Option Term or (b) the
termination of Grantee’s employment with the Corporation or any Parent or
Subsidiary of the Corporation for any reason.

 

(b)                                 Vested Portion.  The
vested portion of the Option shall terminate, and no longer be of any force or
effect, upon the earlier of (a) the end of the Option Term or (b) the
applicable date below following termination of Grantee’s employment with the
Corporation or any Parent or Subsidiary of the Corporation:

 

(i)                                     twelve (12) months after termination of
Grantee’s employment by reason of death 
or Disability.  For purposes of
this Agreement, Disability shall be as defined in Code Section 22(e)(3) and
shall be determined by the Committee, with its determination on the matter
being final and binding;

 

(ii)                                  at the time of  termination of Grantee’s employment for “Cause”;

 

(iii)                               thirty (30) days following termination of
Grantee’s employment by resignation;  or

 

28

 

(iv)                              three (3) months following termination
of Grantee’s employment for any other reason.

 

5.                                      MISCELLANEOUS:

 

(a)                                  Withholding of Taxes.  The
Corporation or any Parent or Subsidiary of the Corporation shall have the right
to deduct from any compensation or any other payment of any kind (including
withholding the issuance of Shares) due Grantee the amount of any federal,
state or local taxes or any applicable taxes or other withholding of any
jurisdiction required by law to be withheld as the result of the exercise of
the Option or the sale of Shares issued thereunder.  In lieu of such deduction, the Committee may
require Grantee to make a cash payment to the Corporation or any Parent or
Subsidiary of the Corporation equal to the amount required to be withheld.  If Grantee does not make such payment when
requested, the Corporation may refuse to issue any Shares under the Plan until
arrangements satisfactory to the Committee for such payment have been made.

 

(b)                                 Right to Continued
Employment.  Nothing in the Plan or this Agreement shall
be construed as a contract of employment between the Corporation or any Parent
or Subsidiary of the Corporation and the Grantee, or as a contractual right of
the Grantee to continue in the employ of the Corporation or any Parent or
Subsidiary of the Corporation, or as a limitation of the right of the
Corporation or any Parent or Subsidiary of the Corporation to discharge the
Grantee at any time. Any Grantee whose office or employment is terminated for
any reason whatsoever (and whether lawful or otherwise) will not be entitled to
claim any compensation for or in respect of any consequent diminuation or
extinction of his rights or benefits (actual or prospective) under any option
then held by him or otherwise in connection with the Plan.

 

(c)                                  Prevailing Laws.  This
Agreement shall be construed and enforced in accordance with and governed by
the laws of the state of Maryland.

 

(d)                                 Headings.  The
headings in the Agreement are for reference purposes only and shall not affect
the meaning or interpretation of the Agreement.

 

(e)                                  Successors.  This Agreement shall be binding upon and inure to the benefit of the
successors, assigns and heirs of the respective parties.

 

(f)                                    Notices.  All
notices and other communications made or given pursuant to the Agreement shall
be in writing and shall be sufficiently made or given if hand delivered or
mailed by certified mail, addressed to Grantee at the address contained in the
records of the Corporation, or addressed to the Committee, care of the Corporation
for the attention of its Secretary at its principal office or, if the receiving
party consents in advance, transmitted and received via telecopy or via such
other electronic transmission mechanism as may be available to the parties.

 

(g)                                 Entire Agreement;
Modification.  The Agreement contains the entire agreement
between the parties with respect to the subject matter contained herein and may
not be modified, except as provided in the Plan or in a written document signed
by each of the parties hereto.

 

29

 

(h)                                 Conformity with Plan.  This
Agreement is intended to conform in all respects with, and is subject to all
applicable provisions of, the Plan, which is incorporated herein by
reference.  Unless stated otherwise
herein, capitalized terms in this Agreement shall have the same meaning as
defined in the Plan.  Inconsistencies
between this Agreement and the Plan shall be resolved in accordance with the
terms of the Plan.  In the event of any
ambiguity in the Agreement or any matters as to which the Agreement is silent,
the Plan shall govern including, without limitation, the provisions thereof
pursuant to which the Committee has the power, among others, to (i) interpret
the Plan and Grant Agreements related thereto, (ii) prescribe, amend and
rescind rules and regulations relating to the Plan, and (iii) make
all other determinations deemed necessary or advisable for the administration
of the Plan.  The Grantee acknowledges by
signing this Agreement that he or she has received and reviewed a copy of the
Plan.

 

(i)                                     Cancellation. 
Notwithstanding anything herein to the contrary, in the event of a
Change in Control of the Corporation, the Committee in its sole discretion may
in connection with the closing of the respective transaction cancel this
Agreement and the Option in exchange for the payment to Grantee of the Fair
Market Value of the Shares subject to the outstanding portion of the Option,
less the aggregate exercise price of such portion of the Share Option and
subject to any applicable tax withholding. 
For this purpose, the Fair Market Value of the Shares shall be
calculated on the basis of the valuation of the Shares for purposes of the
respective transaction.  Payment may be
made in cash or cash equivalents or in the form of the consideration paid or
exchanged for Shares of the Corporation in the respective transaction.

 

30

 

IN WITNESS WHEREOF, the
parties have executed the Agreement as of the date first above written.

 

 

	
   

  	
  METASTORM, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GRANTEE

  
	
   

  	
   

  
	
   

  	
   

  

 

31

 

ATTACHMENT 1

EXERCISE FORM

 

Metastorm, Inc.

[Address]

[Address]

Attn:
Board of Directors

 

Gentlemen:

 

1.                                       Exercise of Stock Option.  I hereby
exercise the [Insert Type]
                            Stock
Option (the “Stock Option”) granted to me on
                                        ,
200  , by Metastorm, Inc. (the “Corporation”), subject to all
the terms and provisions thereof and of the Metastorm, Inc. 2004 Omnibus
Stock Plan (the “Plan”), and notify you of my desire to purchase
                        
shares (the “Shares”) of Common Stock of the Corporation at a price of
$                      
per share pursuant to the exercise of said Stock Option.

 

2.                                       Information about the Corporation.  I am
aware of the Corporation’s business affairs and financial condition and have
acquired sufficient information about the Corporation to reach an informed and
knowledgeable decision to acquire the Shares.

 

3.                                       Tax Consequences.  I am
not relying upon the Corporation for any tax advice in connection with this
option exercise, but rather am relying on my own personal tax advisors in
connection with the exercise of the Stock Option and any subsequent disposition
of the Shares.

 

4.                                       Tax Withholding.  I
understand that, in the case of a nonqualified stock option, I must submit upon
demand from the Corporation an amount in cash or cash equivalents sufficient to
satisfy any federal, state or local tax withholding applicable to this Stock
Option exercise, in addition to the purchase price enclosed, or make such other
arrangements for such tax withholding that are satisfactory to the Corporation,
in its sole discretion, in order for this exercise to be effective.

 

5.                                       Unregistered Shares.  The
following shall apply in the event the Shares purchased herein are not
registered under the Securities Act of 1933, as amended:

 

(a)                                  I am acquiring the Shares for my own account
for investment with no present intention of dividing my interest with others or
of reselling or otherwise disposing of any of the Shares.

 

(b)                                 The Shares are being issued without
registration under the Securities Act of 1933, as amended (the “Act”), in
reliance upon the exemption provided by Section 3(b) of the Act for
employee benefit plans, contained in Rule 701 promulgated thereunder, or
in lieu thereof upon the private offering exemption contained in Section 4(2) of
the Act, and such reliance is based in part on the above representation.

 

32

 

(c)                                  Since the Shares have not been registered
under the Act, they must be held indefinitely until an exemption from the
registration requirements of the Act is available or they are subsequently
registered, in which event the representation in Paragraph (a) hereof
shall terminate.  As a condition to any
transfer of the Shares, I understand that the Corporation will require an
opinion of counsel satisfactory to the Corporation to the effect that such
transfer does not require registration under the Act or any state securities
law.

 

(d)                                 The issuer is not obligated to comply with
the registration requirements of the Act or with the requirements for an
exemption under Regulation A under the Act for my benefit.

 

(e)                                  The certificates for the shares to be issued
to me shall contain appropriate legends to reflect the restrictions on
transferability imposed by the Act.

 

(f)                                    The Shares are subject to Stock Restrictions
included in Appendix A of the respective stock option grant agreement.

 

 

Total
Amount Enclosed:  $

 

 

	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
  (Optionee)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Received
  by Metastorm, Inc.

  
	
   

  	
   

  
	
   

  	
  On:

  	
   

  	
  ,
  20

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
								

 

33

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