Document:

ex4-9_102011.htm

 

 

 

Exhibit 4.9

 

 

OPTIMOST LLC

 

2006 EQUITY COMPENSATION PLAN

 

    The purpose of the Optimost LLC 2006 Equity Compensation Plan (the “Plan”) is to provide (i) designated employees of Optimost LLC (the “Company”) and its subsidiaries, (ii) certain advisors who perform services for the Company or its subsidiaries and (iii) non-employee members of the Management Committee of the Company (the “Board”) with the opportunity to receive grants of incentive stock options and nonqualified options. The Company believes that the Plan will encourage the participants to contribute materially to the growth of the Company, thereby benefiting the Company’s members, and will align the economic interests of the participants with those of the members.

 

1. Administration

 

(a) Committee. The Plan shall be administered and interpreted by a committee appointed by the Board (the “Committee”). Prior to the Company becoming a “Reporting Company” as described in Section 18(b), the Board may exercise any power or authority of the Committee under the Plan and, in such case, references to the Committee hereunder, as they relate to Plan administration, shall be deemed to include the Board as a whole. After the Company becomes a Reporting Company, the Committee shall consist of two or more persons appointed by the Board, all of whom may be “outside directors” as defined under section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and related Treasury regulations and may be “non-employee directors” as defined under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

(b) Committee Authority. The Committee shall have the sole authority to (i) determine the individuals to whom grants shall be made under the Plan, (ii) determine the type, size and terms of the grants to be made to each such individual, (iii) determine the time when the grants will be made and the duration of any applicable exercise or restriction period, including the criteria for exercisability and the acceleration of exercisability and (iv) deal with any other matters arising under the Plan.

 

(c) Committee Determinations. The Committee shall have full power and authority to administer and interpret the Plan, to make factual determinations and to adopt or amend such rules, regulations, agreements and instruments for implementing the Plan and for the conduct of its business as it deems necessary or advisable, in its sole discretion. The Committee's interpretations of the Plan and all determinations made by the Committee pursuant to the powers vested in it hereunder shall be conclusive and binding on all persons having any interest in the Plan or in any awards granted hereunder. All powers of the Committee shall be executed in its sole discretion, in the best interest of the Company, not as a fiduciary, and in keeping with the objectives of the Plan, and need not be uniform as to similarly situated individuals.

 

 

  

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2. Grants

 

    Awards under the Plan may consist of grants (collectively, the “Grants”) of (1) on or after the Company becomes a Reporting Company, incentive stock options as described in Section 5 (“Incentive Stock Options”) and (2) Nonqualified Options as described in Section 5 (“Nonqualified Options”) (Incentive Stock Options and Nonqualified Options are collectively referred to as “Options”). All Grants shall be subject to the terms and conditions set forth herein and to such other terms and conditions consistent with this Plan as the Committee deems appropriate and as are specified in writing by the Committee to the individual in a grant instrument (the “Grant Instrument”) or an amendment to the Grant Instrument. The Committee shall approve the form and provisions of each Grant Instrument. Grants under a particular Section of the Plan need not be uniform as among the grantees. With respect to Options granted under the Plan to California residents, and only to the extent required to exempt the offer of securities from the qualification requirements under California law, the provisions set forth in Appendix A hereto shall apply, notwithstanding anything in the Plan or a Grant Instrument to the contrary.

 

3. Units Subject to the Plan

 

(a) Units Authorized. For purposes of the Plan, a Unit means (i) prior to the Company becoming a Reporting Company, one Class A Unit of the Company and (ii) on and after the Company becomes a Reporting Company, one or more units of equity interest in the Company as determined pursuant to Section 3(b). Subject to the adjustment specified below, the aggregate number of Units of the Company that may be issued or transferred under the Plan is 3,000,000 Units. The maximum aggregate number of Units that shall be subject to Grants made under the Plan to any individual during any calendar year shall be 200,000 Units. The Units may be authorized but unissued Units or reacquired Units, including Units purchased by the Company on the open market for purposes of the Plan. If and to the extent Options granted under the Plan terminate, expire, or are canceled, forfeited, exchanged or surrendered without having been exercised, the Units subject to such Grants shall again be available for purposes of the Plan.

 

(b) Adjustments. If there is any change in the number or kind of Units outstanding (i) by reason of a dividend, spinoff, recapitalization, split or combination or exchange of Units, (ii) by reason of a merger, reorganization or consolidation in which the Company is the surviving corporation, (iii) by reason of a reclassification or change in par value, (iv) by reason of any other extraordinary or unusual event affecting the outstanding Units of the Company as a class without the Company's receipt of consideration, or (v) by reason of the Company being a Reporting Company, or if the value of outstanding Units is substantially reduced as a result of a spinoff or the Company's payment of an extraordinary dividend or distribution, the maximum number of Units available for Grants, the maximum number of Units that any individual participating in the Plan may be granted in any year, the number of Units covered by outstanding Grants, the kind of Units issued under the Plan and the price per Unit or the applicable market value of such Grants shall be appropriately adjusted by the Committee to reflect any increase or decrease in the number of, or change in the kind or value of, issued Units to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under such Grants; provided, however, that any fractional Units resulting from such adjustment shall be eliminated. Any adjustments determined by the Committee shall be final, binding and conclusive.

 

 

  

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4. Eligibility for Participation

 

(a) Eligible Persons. All employees of the Company and its subsidiaries (“Employees”), including Employees who are officers or members of the Board, and members of the Board who are not Employees (“Non-Employee Directors”) shall be eligible to participate in the Plan. Advisors who perform services to the Company or any of its subsidiaries (“Key Advisors”) shall be eligible to participate in the Plan if the Key Advisors render bona fide services and such services are not in connection with the offer or sale of securities in a capital-raising transaction.

 

(b)  Selection of Grantees. The Committee shall select the Employees, Non-Employee Directors and Key Advisors to receive Grants and shall determine the number of Units subject to a particular. Grant in such manner as the Committee determines. Employees, Key Advisors and Non-Employee Directors who receive Grants under this Plan shall hereinafter be referred to as “Grantees.”

 

5. Granting of Options

 

(a) Number of Units. The Committee shall determine the number of Units that will be subject to each Grant of Options to Employees, Non-Employee Directors and Key Advisors.

 

(b) Type of Option and Price.

 

(i) On or after the Company becomes a Reporting Company, the Committee may grant Incentive Stock Options that are intended to qualify as “incentive stock options” within the meaning of section 422 of the Code or Nonqualified Options that are not intended so to qualify or any combination of Incentive Stock Options and Nonqualified Options, all in accordance with the terms and conditions set forth herein. Incentive Stock Options may be granted only to Employees. Nonqualified Options may be granted to Employees, Non-Employee Directors and Key Advisors.

 

(ii) The purchase price (the “Exercise Price”) of Units subject to an Option shall be determined by the Committee and shall be equal to, or greater than, the Fair Market Value (as defined below) of a Unit on the date the Option is granted; provided, however, that an Incentive Stock Option may not be granted to an Employee who, at the time of grant, owns Units possessing more than 10 percent of the total combined voting power of all Units and other classes of stock of the Company or any parent or subsidiary of the Company, unless the Exercise Price per Unit is not less than 110% of the Fair Market Value of a Unit on the date of grant.

 

(iii) If the Units are publicly traded, then the Fair Market Value per Unit shall be determined as follows: (x) if the principal trading market for the Units is a national securities exchange or the NASDAQ National Market, the last reported sale price thereof on the relevant date or (if there were no trades on that date) the latest preceding date upon which a sale was reported, or (y) if the Units are not principally traded on such exchange or market, the mean between the last

 

 

  

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reported “bid” and “asked” prices of a Unit on the relevant date, as reported on Nasdaq or, if not so reported, as reported by the National Daily Quotation Bureau, Inc. or as reported in a customary financial reporting service, as applicable and as the Committee determines. If the Units are not publicly traded or, if publicly traded, are not subject to reported transactions or “bid” or “asked” quotations as set forth above, the Fair Market Value per Unit shall be as determined by the Committee.

 

(c) Option Term. The Committee shall determine the term of each Option. The term of any Option shall not exceed ten years from the date of grant. However, an Incentive Stock Option that is granted to an Employee who, at the time of grant, owns Units possessing more than 10 percent of the total combined voting power of all Units and other classes of stock of the Company, or any parent or subsidiary of the Company, may not have a term that exceeds five years from the date of grant.

 

(d) Exercisability of Options.

 

(i) Options shall become exercisable in accordance with such terms and conditions, consistent with the Plan, as may be determined by the Committee and specified in the Grant Instrument or an amendment to the Grant Instrument. The Committee may accelerate the exercisability of any or all outstanding Options at any time for any reason.

 

(ii) Notwithstanding the foregoing, the Option may, but need not, include a provision whereby the Grantee may elect at any time while an Employee, Non-Employee Director or Key Advisor to exercise the Option as to any part or all of the Units subject to the Option prior to the full vesting of the Option. Any unvested Units so purchased shall be subject to a repurchase right in favor of the Company, with the repurchase price to be equal to the lesser of (x) the original purchase price and (y) the Fair Market Value of the Units, or to any other restriction the Committee determines to be appropriate.

 

(e) Termination of Employment, Disability or Death.

 

(i) Except as provided below, an Option may only be exercised while the Grantee is employed by the Company as an Employee, Key Advisor or member of the Board. In the event that a Grantee ceases to be employed by the Company for any reason other than “disability,” death or “termination for cause,” any Option which is otherwise exercisable by the Grantee shall terminate unless exercised within 90 days after the date on which the Grantee ceases to be employed by the Company (or within such other period of time as may be specified by the Committee), but in any event no later than the date of expiration of the Option term. Any of the Grantee's Options that are not otherwise exercisable as of the date on which the Grantee ceases to be employed by the Company shall terminate as of such date.

 

 

  

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(ii) In the event the Grantee ceases to be employed by the Company on account of a “termination for cause” by the Company, any Option held by the Grantee shall terminate as of the date the Grantee ceases to be employed by the Company.

 

(iii) In the event the Grantee ceases to be employed by the Company because the Grantee is “disabled,” any Option which is otherwise exercisable by the Grantee shall terminate unless exercised within one year after the date on which the Grantee ceases to be employed by the Company (or within such other period of time as may be specified by the Committee), but in any event no later than the date of expiration of the Option term. Any of the Grantee's Options which are not otherwise exercisable as of the date on which the Grantee ceases to be employed by the Company shall terminate as of such date.

 

(iv) If the Grantee dies while employed by the Company or within 90 days after the date on which the Grantee ceases to be employed on account of a termination of employment specified in Section 5(e)(i) above (or within such other period of time as may be specified by the Committee), any Option that is otherwise exercisable by the Grantee shall terminate unless exercised within one year after the date on which the Grantee ceases to be employed by the Company (or within such other period of time as may be specified by the Committee), but in any event no later than the date of expiration of the Option term. Any of the Grantee's Options that are not otherwise exercisable as of the date on which the Grantee ceases to be employed by the Company shall terminate as of such date.

 

(v) For purposes hereof:

 

      (A) “Company,” when used in the phrase “employed by the Company,” shall mean the Company and its parent and subsidiary corporations.

 

(B) “Employed by the Company” shall mean employment or service as an Employee, Key Advisor or member of the Board (so that, for purposes of exercising Options, a Grantee shall not be considered to have terminated employment or service until the Grantee ceases to be an Employee, Key Advisor and member of the Board), unless the Committee determines otherwise.

 

(C) “Disability” shall mean a Grantee's becoming disabled within the meaning of section 22(e)(3) of the Code.

 

(D) “Termination for cause” shall mean, except to the extent specified otherwise by the Committee, a finding by the Committee that (1) the Grantee has breached his or her employment, service, noncompetition, nonsolicitation or other similar contract with the Company or its parent and subsidiary corporations, (2) has been engaged in disloyalty to the Company or its parent and subsidiary corporations, including, without limitation, fraud, embezzlement, theft, commission of a felony or dishonesty in the course of his or her employment or service, (3) has disclosed trade secrets or confidential information of the Company or its parents and subsidiary corporations to persons not entitled to receive such

 

 

  

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information or (4) has entered into competition with the Company or its parent or Subsidiary Corporations. Notwithstanding the foregoing, if the Grantee has an employment agreement with the Company defining “termination for cause,” then such definition shall supersede the foregoing definition.

 

(f) Exercise of Options. A Grantee may exercise an Option that has become exercisable, in whole or in part, by delivering a notice of exercise to the Company with payment of the Exercise Price. The Grantee shall pay the Exercise Price for an Option as specified by the Committee (x) in cash, (y) if approved by the Committee in its sole discretion, by delivering Units owned by the Grantee for the period necessary to avoid a charge to the Company's earnings for financial reporting purposes (including Units acquired in connection with the exercise of an Option, subject to such restrictions as the Committee deems appropriate) and having a Fair Market Value on the date of exercise equal to the Exercise Price, or (z) by such other method as the Committee may approve, including, after the Company becomes a Reporting Company, payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board; provided, that, for purpose of assisting an Optionee to exercise an Option, the Company may make loans to the Optionee or guarantee loans made by third parties to the Optionee, on such terms and conditions as the Committee may authorize. Units used to exercise an Option shall have been held by the Grantee for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the Option. The Grantee shall pay the Exercise Price and the amount of any withholding tax due (pursuant to Section 6) in cash at the time of exercise.

 

(g) Limits on Incentive Stock Options. Each Incentive Stock Option shall provide that, if the aggregate Fair Market Value of the Units on the date of the grant with respect to which Incentive Stock Options are exercisable for the first time by a Grantee during any calendar year, under the Plan or any other equity compensation plan of the Company or a parent or subsidiary, exceeds $100,000, then the option, as to the excess, shall be treated as a Nonqualified Option. An Incentive Stock Option shall not be granted to any person who is not an Employee of the Company or a parent or subsidiary (within the meaning of section 424(f) of the Code).

 

6. Withholding of Taxes

 

(a) Required Withholding. All Grants under the Plan shall be subject to applicable federal (including FICA), state and local tax withholding requirements. The Company shall have the right to deduct from all Grants paid in cash, or from other wages paid to the Grantee, any federal, state or local taxes required by law to be withheld with respect to such Grants. The Company may require the Grantee to pay to the Company in cash the amount of any such taxes that the Company is required to withhold with respect to such Grants, or the Company may deduct from other wages paid by the Company the amount of any withholding taxes due with respect to such Grants.

 

(b) Election to Withhold Units. If the Committee (in its sole discretion) so permits, a Grantee may elect to satisfy the Company's income tax withholding obligation with respect to an Option paid in Company Units by having Units withheld up to an amount that does not exceed the Grantee's maximum marginal tax rate for federal (including FICA), state and local tax

 

 

  

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liabilities. The election must be in a form and manner prescribed by the Committee and shall be subject to the prior approval of the Committee.

 

7. Transferability of Grants

 

(a) Except as provided in Section 7(b), only the Grantee may exercise rights under a Grant during the Grantee's lifetime. A Grantee may not transfer those rights except by will or by the laws of descent and distribution. When a Grantee dies, the personal representative or other person entitled to succeed to the rights of the Grantee (“Successor Grantee”) may exercise such rights. A Successor Grantee must furnish proof satisfactory to the Company of his or her right to receive the Grant under the Grantee's will or under the applicable laws of descent and distribution.

 

(b) Transfer of Nonqualified Options. The Committee may provide, in a Grant Instrument, that a Grantee may transfer Nonqualified Options to family members or other persons or entities according to such terms as the Committee may determine; provided that the Grantee receives no consideration for the transfer of an Option and the transferred Option shall continue to be subject to the same terms and conditions as were applicable to the Option immediately before the transfer.

 

8. Right of First Refusal and other Restrictions on Transfer of Units

 

    If at any time an individual desires to sell, encumber, or otherwise dispose of Units distributed to him under this Plan, the individual shall first comply with the transfer restrictions set forth in the Company's Amended and Restated Operating Agreement, as amended from time to time (the “Operating Agreement”). Any transfer that does not so comply shall be null and void.

 

9. Purchase by the Company

 

    Unless otherwise determined by the Board or Committee at or after grant, in the event of the Optionee's termination of employment or performance of services for the Company, the Company shall have the right to repurchase all Units issued or to be issued to the Optionee under this Plan at Fair Market Value but not less than the Optionee's cost. In the event that the Board or Committee determines in good faith that the Optionee has materially breached any non-compete or confidentiality agreement with the Company after termination of his or her status as an Employee or Consultant, the price at which the Company shall have the right to repurchase such Units shall be equal to the exercise price or purchase price paid by the Optionee. Any repurchase shall be made in accordance with accounting rules to avoid adverse accounting treatment.

 

    The Company's right to repurchase shall be exercisable at any time within one year after the date of Optionee's termination of employment or performance of service by the delivery of written notice by the Company to such effect to the Optionee, his executor, administrator or beneficiaries. Within 30 days after receipt of such notice, the Optionee, his executor, administrator or beneficiaries shall deliver a certificate or certificates for the shares being sold, together with appropriate duly signed stock powers transferring such shares to the Company, and

 

 

  

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the Company shall deliver to the Optionee, his executor, administrator or beneficiaries the Company's check in the amount of the purchase price for the shares being sold.

 

The Units are also subject to any repurchase provisions set forth in the Operating Agreement.

 

10. Reorganization of the Company

 

(a) Reorganization. As used herein, a “Reorganization” shall be deemed to have occurred if the members of the Company approve (or, if shareholder approval is not required, the Board approves) an agreement providing for (i) the merger or consolidation of the Company with another corporation where the members of the Company, immediately prior to the merger or consolidation, will not beneficially own, immediately after the merger or consolidation, Units entitling such members to more than 50% of all votes to which all members of the surviving corporation would be entitled in the election of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote), (ii) the sale or other disposition of all or substantially all of the assets of the Company or (iii) a liquidation or dissolution of the Company.

 

(b) Assumption of Grants. Upon a Reorganization where the Company is not the surviving corporation (or survives only as a subsidiary of another corporation), unless the Committee determines otherwise, all outstanding Options that are not exercised shall. be assumed by, or replaced with comparable options or rights by, the surviving corporation.

 

(c) Other Alternatives. Notwithstanding the foregoing, in the event of a Reorganization, the Committee may take one or both of the following actions: the Committee may (i) require that Grantees surrender their outstanding Options in exchange for a payment by the Company, in cash or Units as determined by the Committee, in an amount equal to the amount by which the then Fair Market Value of the Units subject to the Grantee's unexercised Options exceeds the Exercise Price of the Options, or (ii) after accelerating all vesting and giving Grantees an opportunity to exercise their outstanding Options, terminate any or all unexercised Options at such time as the Committee deems appropriate. Such surrender or termination shall take place as of the date of the Reorganization or such other date as the Committee may specify.

 

(d) Limitations. Notwithstanding anything in the Plan to the contrary, in the event of a Reorganization, the Committee shall not have the right to take any actions described in the Plan (including without limitation actions described in Subsection (b) above) that would make the Reorganization ineligible for desired tax treatment if, in the absence of such right, the Reorganization would qualify for such treatment and the Company intends to use such treatment with respect to the Reorganization.

 

11. Change of Control of the Company.

 

	
(a)  

	
As used herein, a “Change of Control” shall be deemed to have occurred if.

 

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) other than Mark Wachen or any of his family members becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),

 

 

  

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directly or indirectly, of securities of the Company representing a majority of the voting power of the then outstanding securities of the Company except where the acquisition is approved by the Board; or

 

(ii) Any person has commenced a tender offer or exchange offer for a majority of the voting power of the then outstanding Units of the Company.

 

(b) Notice and Acceleration. Upon a Change of Control, vesting of all Options will accelerate 12 months (that is, the Optionee will be deemed to have completed an additional 12 full months of continuous service upon a Change in Control).

 

(c) Other Alternatives. Notwithstanding the foregoing, subject to subsection (d) below, in the event of a Change of Control, the Committee may take one or both of the following actions: the Committee may (i) require that Grantees surrender their outstanding Options in exchange for a payment by the Company, in cash or Units as determined by the Committee, in an amount equal to the amount by which the then Fair Market Value of the Units subject to the Grantee's unexercised Options exceeds the Exercise Price of the Options or (ii) after giving Grantees an opportunity to exercise their outstanding Options, terminate any or all unexercised Options at such time as the Committee deems appropriate. Such surrender or termination shall take place as of the date of the Change of Control or such other date as the Committee may specify.

 

(d) Committee. The Committee making the determinations under this Section 11 following a Change of Control must be comprised of the same members as those on the Committee immediately before the Change of Control. If the Committee members do not meet this requirement, the automatic provisions of Subsection (b) of this Section shall apply in the case of such a Change of Control, and the Committee shall not have discretion to vary them.

 

(e) Limitations. Notwithstanding anything in the Plan to the contrary, in the event of a Change of Control, the Committee shall not have the right to take any actions described in the Plan (including without limitation actions described in Subsection (c) above) that would make the Change of Control ineligible for desired tax treatment if, in the absence of such right, the Change of Control would qualify for such treatment and the Company intends to use such treatment with respect to the Change of Control.

 

12. Requirements for Issuance or Transfer of Units

 

(a) Securityholder's Agreement. The Committee may require that a Grantee execute a securityholder's agreement, with such terms as the Committee deems appropriate, with respect to any Units distributed pursuant to this Plan. Each Grantee shall become a party to the Operating Agreement.

 

(b) Limitations on Issuance or Transfer of Units. No Units shall be issued or transferred in connection with any Grant hereunder unless and until all legal requirements applicable to the issuance or transfer of such Units have been complied with to the satisfaction of the Committee. The Committee shall have the right to condition any Grant made to any Grantee hereunder on such Grantee's undertaking in writing to comply with such restrictions on his or her subsequent disposition of such Units as the Committee shall deem necessary or advisable as a

 

 

  

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result of any applicable law, regulation or official interpretation thereof, and certificates representing such Units may be legended to reflect any such restrictions. Certificates representing Units issued or transferred under the Plan will be subject to such stop-transfer orders and other restrictions as may be required by applicable laws, regulations and interpretations, including any requirement that a legend be placed thereon.

 

13. Amendment and Termination of the Plan

 

(a) Amendment. The Board may amend or terminate the Plan at any time.

 

(b) Termination of Plan. The Plan shall terminate on the day immediately preceding the tenth anniversary of its effective date, unless the Plan is terminated earlier by the Board or is extended by the Board with the approval of the members.

 

(c) Termination and Amendment of Outstanding Grants. A termination or amendment of the Plan that occurs after a Grant is made shall not materially impair the rights of a Grantee unless the Grantee consents. The termination of the Plan shall not impair the power and authority of the Committee with respect to an outstanding Grant. Whether or not the Plan has terminated, an outstanding Grant may be terminated or amended in accordance with the Plan or may be amended by agreement of the Company and the Grantee consistent with the Plan.

 

(d) Governing Document. The Plan shall be the controlling document. No other statements, representations, explanatory materials or examples, oral or written, may amend the Plan in any manner. The Plan shall be binding upon and enforceable against the Company and its successors and assigns.

 

14. Funding of the Plan

 

    This Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Grants under this Plan. In no event shall interest be paid or accrued on any Grant, including unpaid installments of Grants.

 

15. Rights of Participants

 

    Nothing in this Plan shall entitle any Employee, Non-Employee Director, Key Advisor or other person to any claim or right to be granted a Grant under this Plan. Neither this Plan nor any action taken hereunder shall be construed as giving any individual any rights to be retained by or in the employ of the Company or any other employment rights.

 

16. No Fractional Units

 

    No fractional Units shall be issued or delivered pursuant to the Plan or any Grant. The Committee shall determine whether cash, other awards or other property shall be issued or paid in lieu of such fractional Units or whether such fractional Units or any rights thereto shall be forfeited or otherwise eliminated.

 

17. Headings

 

 

  

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    Section headings are for reference only. In the event of a conflict between a title and the content of a Section, the content of the Section shall control.

 

18. Effective Date of the Plan: Definition of Terms

 

(a) Effective Date. The Plan shall be effective as of November 15, 2006.

 

(b) Reporting Company. The provisions of the Plan that refer to the Company becoming a Reporting Company, or that refer to, or are applicable to persons subject to, Section 16 of the Exchange Act or section 162(m) of the Code, shall be effective, if at all, upon the initial registration of the Units under Section 12(g) of the Exchange Act, and shall remain effective thereafter for so long as such Units are so registered.

 

(c) Public Offering. All references in the Plan to a Public Offering shall refer to the consummation of the first registered public offering of Units of the Company in a firm commitment underwriting.

 

19. Miscellaneous

 

(a) Grants in Connection with Corporate Transactions and Otherwise. Nothing contained in this Plan shall be construed to limit the right of the Committee to make Grants under this Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including Grants to employees thereof who become Employees of the Company, or for other proper corporate purposes, or (ii) limit the right of the Company to grant stock options or make other awards outside of this Plan. Without limiting the foregoing, the Committee may make a Grant to an employee of another corporation who becomes an Employee by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company or any of its subsidiaries in substitution for a stock option or restricted unit grant made by such corporation. The terms and conditions of the substitute grants may vary from the terms and conditions required by the Plan and from those of the substituted stock incentives. The Committee shall prescribe the provisions of the substitute grants.

 

(b) Compliance with Law. The Plan, the exercise of Options and the obligations of the Company to issue or transfer Units under Grants shall be subject to all applicable laws and to approvals by any governmental or regulatory agency as may be required. With respect to persons subject to Section 16 of the Exchange Act, it is the intent of the Company that the Plan and all transactions under the Plan comply with all applicable provisions of Rule l6b-3 or its successors under the Exchange Act. The Committee may revoke any Grant if it is contrary to law or modify a Grant to bring it into compliance with any valid and mandatory government regulation. The Committee may also adopt rules regarding the withholding of taxes on payments to Grantees. The Committee may, in its sole discretion, agree to limit its authority under this Section.

 

(c) Governing Law. The validity, construction, interpretation and effect of the Plan and Grant Instruments issued under the Plan shall exclusively be governed by and determined in accordance with the law of the State of New York.

 

 

  

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APPENDIX A

 

PROVISIONS FOR CALIFORNIA RESIDENTS

 

With respect to Options granted under the Optimost LLC 2006 Equity Compensation Plan (the “Plan”) to California residents, and only to the extent required to exempt the offer of securities from the qualification requirements under California law, the following provisions shall apply notwithstanding anything in the Plan or a Grant Instrument to the contrary:

 

	
  

	
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The Option shall provide an exercise price which is not less than 85% of the Fair Market Value of a Unit on the date the Option is granted, except that the price shall be at least 110% of the Fair Market Value of a Unit on the date the Option is granted in the case of any person who, at the time of grant, owns securities possessing more than 10% of the total combined voting power of all Units and other classes of securities of the Company or any parent or subsidiary of the Company.

 

	
  

	
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The Option shall be non-transferable other than by will, by the laws of descent and distribution, or (to the extent permitted by the Committee) as otherwise permitted by Rule 701 of the Securities Act of 1933, as amended.

 

	
  

	
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The Grantee shall have the right to exercise at the rate of at least 20% per year over 5 years from the date the Option is granted, subject to reasonable conditions such as continued employment; provided, however, that if the Option is granted to an officer, director, or consultant of the Company or its subsidiaries, the Option may become fully exercisable, subject to reasonable conditions such as continued employment, at any time or during any period established by the Company.

 

	
  

	
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In the event of termination of employment other than for “cause” (as defined by applicable law, the terms of the Plan, a Grant Instrument or a contract of employment), the Grantee shall have the right to exercise the Option as follows (but only to the extent that the Grantee is otherwise entitled to exercise the Option on the date employment terminates, and in no event later than the expiration date of the Option):

 

	
  

	
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At least 6 months from the date of termination of employment if termination was caused by death or disability (which means that the Grantee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment); or

 

	
  

	
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At least 30 days from the date of termination of employment if termination was caused by other than death or disability.

 

	
  

	
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The Plan shall terminate on the day immediately preceding the tenth anniversary of the date the Plan is adopted or the date the Plan is approved by the security holders of the Company, whichever is earlier.

 

	
  

	
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The Company's security holders must approve the Plan within 12 months before or after the date the Plan is adopted by the Board.

 

	
  

	
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The Company will provide financial statements to each Grantee annually during the period such individual has Options outstanding to the extent required under Section 260.140.46 of Title 10 of the California Code of Regulations (“CCR”).

 

 

  

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If provisions in the Grant Instrument give the Company the right to repurchase securities upon termination of employment,

 

	
  

	
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at not less than the Fair Market Value of the securities to be repurchased on the date of termination of employment, then such right to repurchase must be exercised for cash or cancellation of purchase money indebtedness for the securities within 90 days of termination of employment (or in the case of securities issued upon exercise of Options after the date of termination, within 90 days after the date of the exercise), and such right terminates when the Company's securities become publicly traded; or

 

	
  

	
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at the original purchase price or exercise price, then such right to repurchase shall lapse at the rate of at least 20% of the securities per year over 5 years from the date the Option is granted (without respect to the date the Option was exercised or became exercisable) and must be exercised for cash or cancellation of purchase money indebtedness for the securities within 90 days of termination of employment (or in the case of securities issued upon exercise of Options after the date of termination, within 90 days after the date of the exercise).

 

In addition to the restrictions set forth above, the securities held by an officer, director, manager or consultant of the Company or its affiliates may be subject to additional or greater restrictions as determined by the Committee.

 

	
  

	
•

	
The Company will comply with Section 260.140.1 of Title 10 of the CCR with respect to the voting rights of common stock and similar equity securities.

 

Options granted to California residents are intended to comply with Section 25102(o) of the California Corporations Code. Any provision of the Plan that is inconsistent with Section 25102(o), including without limitation any provision of the Plan that is more restrictive than would be permitted by Section 25102(o) as amended from time to time, shall, without further act or amendment by the Committee, be reformed to comply with the requirements of Section 25102(o). If at any time the Committee determines that the delivery of securities under the Plan to California residents is or may be unlawful under U.S. federal or state securities laws, the right to exercise an Option or receive securities pursuant to an Option shall be suspended until the Committee determines that such delivery is lawful. The Company shall have no obligation to effect any registration or qualification of the securities subject to an Option under U.S. federal or state laws.

 

Unless otherwise defined herein, capitalized terms used in this Appendix A are defined in the Plan.

 

 

  

A-2

  

FIRST AMENDMENT TO THE OPTIMOST LLC

2006 EQUITY COMPENSATION PLAN

 

WHEREAS, the Optimost LLC 2006 Equity Compensation Plan (the “Plan”) was adopted effective as of November 15, 2006; and

 

WHEREAS, pursuant to section 13(a) of the Plan, the members of the Management Committee of Optimost LLC can amend the Plan at any time; and

 

WHEREAS, pursuant to the terms of the Agreement and Plan of Merger dated on or about October 16, 2007 by and among Interwoven, Inc., Optimost LLC, Broadway Merger LLC, a wholly owned acquisition subsidiary of Interwoven, Inc., and Mark Wachen as representative (the “Merger”), Optimost LLC shall grant, prior to the closing date of the Merger, stock options to certain key employees; and

 

WHEREAS, it desired to amend the Plan to permit the grant of such stock options.

 

NOW, THEREFORE, the Plan is hereby amended effective October 16, 2007 as follows:

 

1.      Section 3(a) of the Plan is hereby amended by replacing “3,000,000” in the second sentence thereof with “[insert number].”

 

2.      Section 3(a) of the Plan is hereby amended by replacing “200,000” in the third sentence thereof with “[insert number].”

 

3.      Section 5(b)(ii) of the Plan is hereby amended in its entirety to read as follows.

 

The purchase price (the “Exercise Price”) of Units subject to a Nonqualified Option shall be determined by the Committee. The Exercise Price of Units subject to an Incentive Stock Option shall be determined by the Committee and shall be equal to, or greater than, the Fair Market Value (as defined below) of a Unit on the date the Incentive Stock Option is granted; provided however, that an Incentive Stock Option may not be granted to an Employee who, at the time of grant, owns Units possessing more than 10 percent of the total combined voting power of all Units and other classes of stock of the Company or any parent or subsidiary of the Company, unless the Exercise Price per Unit is not less than 110% of the Fair Market Value of a Unit on the date of grant.

 

4.      Section 5(f) of the Plan is hereby amended in its entirety to read as follows:

 

A Grantee may exercise an Option that has become exercisable, in whole or in part, by delivering notice of exercise to the Company with payment of the Exercise Price. The Grantee shall pay the Exercise Price for an Option in cash, or if approved by the Committee in its sole discretion, (i) by delivering Units already owned by the Grantee, (ii) by withholding and surrender of the Units subject to the Option, or (iii) by such other method as the Committee may approve, including, after the Company becomes a Reporting Company, payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board; provided that, for purpose of assisting an

 

  

1

  

Optionee to exercise an Option, the Company may make loans to the Optionee or guarantee loans made by third parties to the Optionee, on such teens and conditions as the Committee may authorize. Payment may also be made in any other form approved by the Committee, consistent with applicable law, regulations and rules. The Grantec shall pay the Exercise Price and the amount of any withholding tax due (pursuant to Section 6) at the time of exercise.

 

5.      Section 11(b) of the Plan is hereby amended by adding the following two sentences to the end thereof:

 

For the avoidance of doubt, the Merger by and among Interwoven, Inc., Optimost LLC, Broadway Merger LLC, a wholly owned acquisition subsidiary of Interwoven, Inc., and Mark Wachen as representative (the “Merger”) shall be considered a Change of Control and the Optionee will be deemed to have completed an additional 12 full months of continuous service. Any Options granted in connection with the Merger shall not be entitled to such acceleration of Vesting upon the closing of the Merger.

 

Except as otherwise provided in this First Amendment, all other terms and conditions of the Plan shall continue in full force and effect.

 

IN WITNESS WHEREOF, the members of the Management Committee of Optimost LLC have caused this First Amendment to be executed as of the 16th day of October, 2007.

 

OPTIMOST LLC MANAGEMENT

COMMITTEE

/s/ Optimost LLC Management Committee

 

 

  

2ex4-10_102011.htm

 

Exhibit 4.10

 

 

VERITY, INC.

 

1996 NONSTATUTORY STOCK OPTION PLAN

 

(As Amended Through November 15, 2002)

 

1.           Establishment, Purpose and Term of Plan.

 

1.1           Establishment.  The Verity, Inc. 1996 Nonstatutory Stock Option Plan (the “Plan”) is hereby established effective as of February 6, 1996 (the “Effective Date”).

 

1.2           Purpose.  The purpose of the Plan is to advance the interests of the Participating Company Group and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group.

 

1.3           Term of Plan.  The Plan shall continue in effect until the earlier of its termination by the Board or the date on which all of the shares of Stock available for issuance under the Plan have been issued and all restrictions on such shares under the terms of the Plan and the agreements evidencing Options granted under the Plan have lapsed.

 

2.           Definitions and Construction.

 

2.1           Definitions.  Whenever used herein, the following terms shall have their respective meanings set forth below:

 

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

 

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

 

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

 

(d)           “Company” means Verity, Inc., a Delaware corporation, or any successor corporation thereto.

 

(e)           “Consultant” means any person, including an advisor, engaged by a Participating Company to render services other than as an Employee or a Director.

 

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

 

 

  

1.

  

 

 

(g)           “Employee” means any person treated as an employee (including an officer or a Director who is also treated as an employee) in the records of a Participating Company; provided, however, that neither service as a Director nor payment of a director’s fee shall be sufficient to constitute employment for purposes of the Plan.

 

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

 

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

 

(j)           “Insider” means an officer or a Director of the Company or any other person whose transactions in Stock are subject to Section 16 of the Exchange Act.

 

(k)           “Option” means a right to purchase Stock (subject to adjustment as provided in Section 4.2) pursuant to the terms and conditions of the Plan.  Options are intended to be nonstatutory stock options and shall not be treated as incentive stock options within the meaning of Section 422(b) of the Code.

 

(l)           “Option Agreement” means a written agreement between the Company and an Optionee setting forth the terms, conditions and restrictions of the Option granted to the Optionee and any shares acquired upon the exercise thereof.

 

(m)           “Optionee” means a person who has been granted one or more Options.

 

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

 

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

 

(p)           “Participating Company Group” means, at any point in time, all corporations collectively which are then Participating Companies.

 

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

 

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

 

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

 

  

2.

  

 

 

3.           Administration.

 

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

 

3.2           Powers of the Board.  In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Board shall have the full and final power and authority, in its sole discretion:

 

(a)           to determine the persons to whom, and the time or times at which, Options shall be granted and the number of shares of Stock to be subject to each Option;

 

(b)           to determine the Fair Market Value of shares of Stock or other property;

 

(c)           to determine the terms, conditions and restrictions applicable to each Option (which need not be identical) and any shares acquired upon the exercise thereof, including, without limitation, (i) the exercise price of the Option, (ii) the method of payment for shares purchased upon the exercise of the Option, (iii) the method for satisfaction of any tax withholding obligation arising in connection with the Option or such shares, including by the withholding or delivery of shares of stock, (iv) the timing, terms and conditions of the exercisability of the Option or the vesting of any shares acquired upon the exercise thereof, (v) the time of the expiration of the Option, (vi) the effect of the Optionee’s termination of employment or service with the Participating Company Group on any of the foregoing, and (vii) all other terms, conditions and restrictions applicable to the Option or such shares not inconsistent with the terms of the Plan;

 

(d)           to approve one or more forms of Option Agreement;

 

(e)           to amend, modify, extend, or renew, or grant a new Option in substitution for, any Option or to waive any restrictions or conditions applicable to any Option or any shares acquired upon the exercise thereof, including without limitation (1) the reduction of the exercise price of any outstanding Option under the Plan to the then Fair Market Value and/or (2) the cancellation of any outstanding Option under the Plan and the grant in substitution  therefor of (A) a new Option under the Plan covering the same or a different number of shares of Common Stock, (B) a stock bonus, (C) the right to acquire restricted stock, (D) cash and/or (E) other valuable consideration (as determined by the Board, in its sole discretion);

 

(f)           to accelerate, continue, extend or defer the exercisability of any Option or the vesting of any shares acquired upon the exercise thereof, including with respect to the period following an Optionee’s termination of employment or service with the Participating Company Group;

 

 

  

3.

  

 

(g)           to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt supplements to, or alternative versions of, the Plan, including, without limitation, as the Board deems necessary or desirable to comply with the laws of, or to accommodate the tax policy or custom of, foreign jurisdictions whose citizens may be granted Options; and

 

(h)           to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Option Agreement and to make all other determinations and take such other actions with respect to the Plan or any Option as the Board may deem advisable to the extent consistent with the Plan and applicable law.

 

3.3           Limitation on Option Grants.  The power of the Board to grant Options shall be limited as follows:  from the date of the amendment of the Plan to extend eligibility to Insiders, to each anniversary of such amendment (commencing with the period from the date of such amendment to the third anniversary of such amendment, then the period from the date of such amendment to the fourth anniversary of such amendment, etc.), less than fifty percent (50%) of the shares made subject to Options granted in such time period may be made subject to Options granted to Insiders; however, shares made subject to an Option granted to an Insider as an essential inducement for such person to become an Employee shall not be included in the numerator nor in the denominator of such calculation.

 

4.           Shares Subject to Plan.

 

4.1           Maximum Number of Shares Issuable.  Subject to adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be twenty-nine million seven hundred thousand (29,700,000) (after giving effect to the Company’s 2:1 stock split of December 3, 1999) and shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof.  If an outstanding Option for any reason expires or is terminated or canceled or shares of Stock acquired, subject to repurchase, upon the exercise of an Option are repurchased by the Company, the shares of Stock allocable to the unexercised portion of such Option, or such repurchased shares of Stock, shall again be available for issuance under the Plan.

 

4.2           Adjustments for Changes in Capital Structure.  In the event of any stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification or similar change in the capital structure of the Company, appropriate adjustments shall be made in the number and class of shares subject to the Plan and to any outstanding Options, and in the exercise price per share of any outstanding Options.  If a majority of the shares which are of the same class as the shares that are subject to outstanding Options are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event, as defined in Section 8.1) shares of another corporation (the “New Shares”), the Board may unilaterally amend the outstanding Options to provide that such Options are exercisable for New Shares.  In the event of any such amendment, the number of shares subject to, and the exercise price per share of, the outstanding Options shall be adjusted in a fair and equitable manner as determined by the Board, in its sole discretion.  Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 4.2 shall be rounded up or down to the nearest whole number, as determined by the Board, and in no event may the exercise price of any Option be 

 

 

  

4.

  

 

 

decreased to an amount less than the par value, if any, of the stock subject to the Option.  The adjustments determined by the Board pursuant to this Section 4.2 shall be final, binding and conclusive.

 

5.           Eligibility. Subject to Section 3.3, Options may be granted only to Employees, Directors and Consultants.  For purposes of the foregoing sentence:  (A) “Employees” shall include prospective Employees to whom Options are granted in connection with written offers of employment with the Participating Company Group; and (B) “Consultants” shall include prospective Consultants to whom Options are granted in connection with written offers of engagement with the Participating Company Group.  Eligible persons may be granted more than one (1) Option.

 

6.           Terms and Conditions of Options.  Options shall be evidenced by Option Agreements specifying the number of shares of Stock covered thereby, in such form as the Board shall from time to time establish.  Option Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

 

6.1           Exercise Price.  The exercise price for each Option shall be established in the sole discretion of the Board; provided, however, that the exercise price per share for an Option shall be not less than eighty-five percent (85%) of the Fair Market Value of a share of Stock on the effective date of grant of the Option.  Notwithstanding the foregoing, an Option may be granted with an exercise price lower than the minimum exercise price set forth above if such Option is granted pursuant to an assumption or substitution for another option in a manner qualifying under the provisions of Section 424(a) of the Code.

 

6.2           Exercise Period.  Options shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria, and restrictions as shall be determined by the Board and set forth in the Option Agreement evidencing such Option; provided, however, that no Option granted to a prospective Employee or prospective Consultant may become exercisable prior to the date on which such person commences service with a Participating Company.

 

6.3           Payment of Exercise Price.

 

(a)           Forms of Consideration Authorized.  Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the Company of shares of Stock owned by the Optionee having a Fair Market Value (as determined by the Company without regard to any restrictions on transferability applicable to such stock by reason of federal or state securities laws or agreements with an underwriter for the Company) not less than the exercise price, (iii) by the assignment of the proceeds of a sale or loan with respect to some or all of the shares being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System) (a “Cashless Exercise”), (iv) by the Optionee’s promissory note in a form approved by the Company, (v) by such other consideration as may be approved by the Board from time to time to 

 

 

  

5.

  

 

 

the extent permitted by applicable law, or (vi) by any combination thereof.  The Board may at any time or from time to time, by adoption of or by amendment to the standard form of Option Agreement described in Section 7, or by other means, grant Options which do not permit all of the foregoing forms of consideration to be used in payment of the exercise price or which otherwise restrict one or more forms of consideration.

 

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

 

(c)           Cashless Exercise.  The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of Options by means of a Cashless Exercise.

 

(d)           Payment by Promissory Note.  No promissory note shall be permitted if the exercise of an Option using a promissory note would be a violation of any law. Any permitted promissory note shall be on such terms as the Board shall determine at the time the Option is granted.  The Board shall have the authority to permit or require the Optionee to secure any promissory note used to exercise an Option with the shares of Stock acquired upon the exercise of the Option or with other collateral acceptable to the Company.  Unless otherwise provided by the Board, if the Company at any time is subject to the regulations promulgated by the Board of Governors of the Federal Reserve System or any other governmental entity affecting the extension of credit in connection with the Company’s securities, any promissory note shall comply with such applicable regulations, and the Optionee shall pay the unpaid principal and accrued interest, if any, to the extent necessary to comply with such applicable regulations.

 

6.4           Tax Withholding.  The Company shall have the right, but not the obligation, to deduct from the shares of Stock issuable upon the exercise of an Option, or to accept from the Optionee the tender of, a number of whole shares of Stock having a Fair Market Value, as determined by the Company, equal to all or any part of the federal, state, local and foreign taxes, if any, required by law to be withheld by the Participating Company Group with respect to such Option or the shares acquired upon the exercise thereof.  Alternatively or in addition, in its sole discretion, the Company shall have the right to require the Optionee, through payroll with-holding, cash payment or otherwise, including by means of a Cashless Exercise, to make adequate provision for any such tax withholding obligations of the Participating Company Group arising in connection with the Option or the shares acquired upon the exercise thereof. The Company shall have no obligation to deliver shares of Stock or to release shares of Stock from an escrow established pursuant to the Option Agreement until the Participating Company Group’s tax withholding obligations have been satisfied by the Optionee.

 

 

  

6.

  

 

 

6.5           Repurchase Rights.  Shares issued under the Plan may be subject to a right of first refusal, one or more repurchase options, or other conditions and restrictions as determined by the Board in its sole discretion at the time the Option is granted.  The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company.  Upon request by the Company, each Optionee shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.

 

7.           Standard Form of Option Agreement.

 

7.1           General.  Unless otherwise provided by the Board at the time the Option is granted, an Option shall comply with and be subject to the terms and conditions set forth in the form of Immediately Exercisable Nonstatutory Stock Option Agreement adopted by the Board concurrently with its adoption of the Plan and as amended from time to time.

 

7.2           Standard Term of Options.  Except as otherwise provided by the Board in the grant of an Option, any Option granted hereunder shall have a term of ten (10) years from the effective date of grant of the Option.

 

7.3           Authority to Vary Terms.  The Board shall have the authority from time to time to vary the terms of the standard form of Option Agreement described in this Section 7 either in connection with the grant or amendment of an individual Option or in connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of any such new, revised or amended standard form or forms of Option Agreement shall be in accordance with the terms of the Plan.  Such authority shall include, but not by way of limitation, the authority to grant Options which are not immediately exercisable.

 

8.           Transfer of Control.

 

8.1           Definitions.

 

(a)           An “Ownership Change Event” shall be deemed to have occurred if any of the following occurs with respect to the Company:

 

(i)           the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company;

 

(ii)          a merger or consolidation in which the Company is a party;

 

(iii)          the sale, exchange, or transfer of all or substantially all of the assets of the Company; or

 

(iv)         a liquidation or dissolution of the Company.

 

 

  

7.

  

 

 

(b)           A “Transfer of Control” shall mean an Ownership Change Event or a series of related Ownership Change Events (collectively, the “Transaction”) wherein the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting stock of the Company or the corporation or corporations to which the assets of the Company were transferred (the “Transferee Corporation(s)”), as the case may be.  For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting stock of one or more corporations which, as a result of the Transaction, own the Company or the Transferee Corporation(s), as the case may be, either directly or through one or more subsidiary corporations.  The Board shall have the right to determine whether multiple sales or exchanges of the voting stock of the Company or multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive.

 

8.2           Effect of Transfer of Control on Options.  In the event of a Transfer of Control, the surviving, continuing, successor, or purchasing corporation or parent corporation thereof, as the case may be (the “Acquiring Corporation”), may either assume the Company’s rights and obligations under outstanding Options or substitute for outstanding Options substantially equivalent options for the Acquiring Corporation’s stock.  Any Options which are neither assumed or substituted for by the Acquiring Corporation in connection with the Transfer of Control nor exercised as of the date of the Transfer of Control shall terminate and cease to be outstanding effective as of the date of the Transfer of Control.  Notwithstanding the foregoing, shares acquired upon exercise of an Option prior to the Transfer of Control and any consideration received pursuant to the Transfer of Control with respect to such shares shall continue to be subject to all applicable provisions of the Option Agreement evidencing such Option except as otherwise provided in such Option Agreement.  Furthermore, notwithstanding the foregoing, if the corporation the stock of which is subject to the outstanding Options immediately prior to an Ownership Change Event described in Section 8.1(a)(i) constituting a Transfer of Control is the surviving or continuing corporation and immediately after such Ownership Change Event less than fifty percent (50%) of the total combined voting power of its voting stock is held by another corporation or by other corporations that are members of an affiliated group within the meaning of Section 1504(a) of the Code without regard to the provisions of Section 1504(b) of the Code, the outstanding Options shall not terminate unless the Board otherwise provides in its sole discretion.

 

9.           Provision of Information.  Each Optionee shall be given access to information concerning the Company equivalent to that information generally made available to the Company’s common stockholders.

 

10.         Nontransferability of Options.  During the lifetime of the Optionee, an Option shall be exercisable only by the Optionee or the Optionee’s guardian or legal representative.  No Option shall be assignable or transferable by the Optionee, except by will or by the laws of descent and distribution.

 

 

  

8.

  

 

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

 

12.         Termination or Amendment of Plan.  The Board may terminate or amend the Plan at any time.  However, no termination or amendment of the Plan may adversely affect any then outstanding Option or any unexercised portion thereof, without the consent of the Optionee, unless such termination or amendment is necessary to comply with any applicable law or government regulation.

 

  

9.

  

ADDENDUM

 

Verity, Inc.

 

 

1996 Nonstatutory Stock Option Plan (“the Plan”)

 

Additional Terms and Conditions for Employees resident of France

 

The additional terms and conditions detailed below are to be read in conjunction with the rules of the Plan. Defined terms are to have the same meaning as that stated in the rules of the Plan. These additional terms and conditions are specific to Employees who are resident in the Republic of France only and do not affect the rights afforded to other Employees who are granted Options under the Plan.

 

	
1.

	
Notwithstanding any other provision of the Plan, Options may only be granted to Employees having a work contract with a Participating Company.

 

	
2.

	
An Option granted to any participant who, at the time of grant, holds shares representing 10% or more of the share capital of any Participating Company will not be deemed to have been granted pursuant to this Addendum.

 

	
3.

	
Notwithstanding any other provision of the Plan, an Option will generally only be exercisable after the expiration of the holding period mentioned under article 163 bis C I of the tax code of the Republic of France, except as otherwise decided at the sole discretion of the Board or Committee.

 

	
4.

	
Notwithstanding any other provision of the Plan, the exercise price shall only be adjusted upon the occurrence of the events specified under July 24, 1966 corporate law (section 208-5) in accordance with the laws of the Republic of France.

 

	
5.

	
Notwithstanding any other provision of the Plan, in the event of the Optionee’s death, the period during which the legal heirs (pursuant to a transfer on death permitted under the laws of the Republic of France) are entitled to exercise that Optionee’s Option (or Options) is the lesser of: (i) six months following that Optionee’s death, and (ii) the expiration of the term of such Option as set forth in the Option Agreement.

 

	
6.

	
The total number of Options granted and remaining unexercised (outstanding options) will never cover a number of shares exceeding one-third of the share capital of Verity, Inc.

 

	
7.

	
The per share exercise price of an Option granted pursuant to this addendum shall be no less than the higher of: (i) ninety-five percent (95%) of the average closing sales price for a share of such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Company’s common stock) for the twenty (20)  market trading days immediately preceding the day of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable; or (ii) one hundred percent (100%) of the Fair Market Value of the stock.

 

 

  

10.

  

 

	
8.

	
The terms herein shall be interpreted to qualify Options granted pursuant to this addendum for the favorable tax and social security treatment applicable to stock options granted under sections L 208-1 up to L 208-8-2 of the Law n° 66-537 of July 24, 1966, and in accordance with the relevant provisions set forth by the tax and social security laws, as well as the tax and social security regulations of the Republic of France.

 

	
9.

	
Except as required by the tax and social security laws and regulations of the Republic of France, the Plan (including this addendum and Options granted hereunder) shall be governed and construed in accordance with the laws of the State of California and the United States of America.

 

IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the foregoing Verity, Inc. 1996 Nonstatutory Stock Option Plan was duly adopted by the Board on February 6, 1996 and last amended by the Board on November 15, 2002.

 

  

11.

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