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EXHIBIT 10.05
VERITAS SOFTWARE CORPORATION
1993 EQUITY INCENTIVE PLAN
AS ADOPTED OCTOBER 1, 1993, AND AS AMENDED APRIL 22, 1994, APRIL 20,
1995, JANUARY 12, 1997 AND JANUARY 26, 1999
1. PURPOSE. The purpose of the Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent,
Subsidiaries and Affiliates, by offering them an opportunity to participate in
the Company's future performance through awards of Options, Restricted Stock and
Stock Bonuses. Capitalized terms not defined in the text are defined in Section
24.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and
18, the total number of Shares reserved and available for grant and issuance
pursuant to the Plan shall be 16,000,000 Shares. In addition, on each January 1,
the aggregate number of shares of the Company's Common Stock reserved for
issuance under this Plan shall be increased automatically by a number of shares
equal to four and one-half percent (4 1/2%) of the total outstanding shares of
the Company as of the immediately preceding December 31; provided, however, that
such increase shall in no event exceed 8,000,000 shares per year. Any Shares
issuable upon exercise of options granted pursuant to the Company's 1991
Executive Stock Option Plan, and the Company's 1985 Stock Option Plan (the
"Prior Plans") that expire or become unexercisable for any reason without having
been exercised in full, shall no longer be available for distribution under the
Prior Plans, but shall be available for distribution under this Plan. Subject to
Sections 2.2 and 18, Shares shall again be available for grant and issuance in
connection with future Awards under the Plan that: (a) are subject to issuance
upon exercise of an Option but cease to be subject to such Option for any reason
other than exercise of such Option, (b) are subject to an Award granted
hereunder but are forfeited or are repurchased by the Company at the original
issue price, or (c) are subject to an Award that otherwise terminates without
Shares being issued. The total number of Shares issued under the Plan upon
exercise of ISOs will in no event exceed 50,000,000 Shares (adjusted in
proportion to any adjustment under Section 2.2 below) over the term of the Plan.
2.2 Adjustment of Shares. In the event that the number of
outstanding Shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under the Plan, (b) the
Exercise Prices of and number of Shares subject to outstanding Options, and (c)
the number of Shares subject to other outstanding Awards shall be
proportionately adjusted, subject to any required action by the Board or the
shareholders of the Company and compliance with applicable securities laws;
provided, however, that fractions of a Share shall not be issued but shall
either be paid in cash at Fair Market Value or shall be rounded down to the
nearest Share, as determined by the Committee;
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and provided, further, that the Exercise Price of any Option may not be
decreased to below the par value of the Shares.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted
only to employees (including officers and directors who are also employees) of
the Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors, consultants, independent contractors
and advisers of the Company or any Parent, Subsidiary or Affiliate of the
Company; provided such consultants, contractors and advisers render bona fide
services not in connection with the offer and sale of securities in a
capital-raising transaction. "Named Executive Officers" (as that term is defined
in Item 402(a)(3) of Regulation S-K promulgated under the Exchange Act) shall
each be eligible to receive up to an aggregate maximum of 300,000 Shares at any
time during the term of this Plan pursuant to the grant of Awards hereunder, not
to exceed 300,000 Shares during any one twelve (12) month period. A person may
be granted more than one Award under the Plan.
4. ADMINISTRATION.
4.1 Committee Authority. The Plan shall be administered by the
Committee or the Board acting as the Committee. Subject to the general purposes,
terms and conditions of the Plan, and to the direction of the Board, the
Committee shall have full power to implement and carry out the Plan. The
Committee shall have the authority to:
(a) construe and interpret the Plan, any Award Agreement and any other
agreement or document executed pursuant to the Plan;
(b) prescribe, amend and rescind rules and regulations relating to the
Plan;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration subject to
Awards;
(f) determine whether Awards will be granted singly, in combination, in
tandem, in replacement of, or as alternatives to, other Awards under
the Plan or any other incentive or compensation plan of the Company or
any Parent, Subsidiary or Affiliate of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission, or reconcile any inconsistency
in the Plan, any Award or any Award Agreement;
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(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable for the
administration of the Plan.
4.2 Committee Discretion. Any determination made by the
Committee with respect to any Award shall be made in its sole discretion at the
time of grant of the Award or, unless in contravention of any express term of
the Plan or Award, at any later time, and such determination shall be final and
binding on the Company and all persons having an interest in any Award under the
Plan. The Committee may delegate to one or more officers of the Company the
authority to grant an Award under the Plan to Participants who are not Insiders
of the Company, provided such officer is a member of the Board.
4.3 Compliance With Code Section 162m. If two or more members
of the Board are Outside Directors, the Committee shall be comprised of at least
two members of the Board, all of whom are Outside Directors.
5. OPTIONS. The Committee may grant Options to eligible persons and
shall determine whether such Options shall be Incentive Stock Options within the
meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under the Plan
shall be evidenced by an Award Agreement which shall expressly identify the
Option as an ISO or NQSO ("Stock Option Agreement"), and be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee shall from time to time approve, and which shall comply with and be
subject to the terms and conditions of the Plan.
5.2 Date of Grant. The date of grant of an Option shall be the
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
the Plan will be delivered to the Participant within a reasonable time after the
granting of the Option.
5.3 Exercise Period. Options shall be exercisable within the
times or upon the events determined by the Committee as set forth in the Stock
Option Agreement; provided, however, that no Option shall be exercisable after
the expiration of one hundred twenty (120) months from the date the Option is
granted, and provided further that no Option granted to a person who directly or
by attribution owns more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary of the
Company ("Ten Percent Shareholder") shall be exercisable after the expiration of
five (5) years from the date the Option is granted.
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The Committee also may provide for the exercise of Options to become exercisable
at one time or from time to time, periodically or otherwise, in such number or
percentage as the Committee determines.
5.4 Exercise Price. The Exercise Price shall be determined by
the Committee when the Option is granted and may be not less than 85% of the
Fair Market Value of the Shares on the date of grant; provided that (i) the
Exercise Price of an ISO shall be not less than 100% of the Fair Market Value of
the Shares on the date of grant and (ii) the Exercise Price of any Option
granted to a Ten Percent Shareholder shall not be less than 110% of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased may be made in accordance with Section 8 of the Plan.
5.5 Method of Exercise. Options may be exercised only by
delivery to the Company or its designee of a written stock option exercise
agreement (the "Exercise Agreement") in a form approved by the Committee (which
need not be the same for each Participant), stating the number of Shares being
purchased, the restrictions imposed on the Shares, if any, and such
representations and agreements regarding Participant's investment intent and
access to information, if any, as may be required or desirable by the Company to
comply with applicable securities laws, together with payment in full of the
Exercise Price for the number of Shares being purchased.
5.6 Termination. Notwithstanding the exercise periods set
forth in the Stock Option Agreement, exercise of an Option shall always be
subject to the following:
(a) If the Participant is Terminated for any reason except death or
Disability, then Participant may exercise such Participant's Options
only to the extent that such Options would have been exercisable upon
the Termination Date no later than ninety (90) days after the
Termination Date (or such shorter time period as may be specified in
the Stock Option Agreement), but in any event, no later than the
expiration date of the Options.
(b) If the Participant is terminated because of death or Disability (or the
participant dies within three months of such termination), then
Participant's Options may be exercised only to the extent that such
Options would have been exercisable by Participant on the Termination
Date and must be exercised by Participant (or Participant's legal
representative or authorized assignee) no later than twelve (12) months
after the Termination Date (or such shorter time period as may be
specified in the Stock Option Agreement), but in any event no later
than the expiration date of the Options.
5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
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5.8 Limitations on ISOs. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year (under
the Plan or under any other incentive stock option plan of the Company or any
Affiliate, Parent or Subsidiary of the Company) shall not exceed $100,000. If
the Fair Market Value of Shares on the date of grant with respect to which ISOs
are exercisable for the first time by a Participant during any calendar year
exceeds $100,000, the Options for the first $100,000 worth of Shares to become
exercisable in such calendar year shall be ISOs and the Options for the amount
in excess of $100,000 that become exercisable in that calendar year shall be
NQSOs. In the event that the Code or the regulations promulgated thereunder are
amended after the Effective Date of the Plan to provide for a different limit on
the Fair Market Value of Shares permitted to be subject to ISOs, such different
limit shall be automatically incorporated herein and shall apply to any Options
granted after the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of Participant, impair any of Participant's rights under any
Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered shall be treated in accordance with Section 424(h)
of the Code. The Committee may reduce the Exercise Price of outstanding Options
without the consent of Participants affected by a written notice to them;
provided, however, that the Exercise Price may not be reduced below the minimum
Exercise Price that would be permitted under Section 5.4 of the Plan for Options
granted on the date the action is taken to reduce the Exercise Price; provided,
further, that the Exercise Price shall not be reduced below the par value of the
Shares, if any.
5.10 No Disqualification. Notwithstanding any other provision
in the Plan, no term of the Plan relating to ISOs shall be interpreted, amended
or altered, nor shall any discretion or authority granted under the Plan be
exercised, so as to disqualify the Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee shall determine to whom an offer will be made, the number of
Shares the person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares shall be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a
Restricted Stock Award made pursuant to the Plan shall be evidenced by an Award
Agreement ("Restricted Stock Purchase Agreement") that shall be in such form
(which need not be the same for each Participant) as the Committee shall from
time to time approve, and shall comply with and be subject to the terms and
conditions of the Plan. The offer of
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Restricted Stock shall be accepted by the Participant's execution and delivery
of the Restricted Stock Purchase Agreement and full payment for the Shares to
the Company within thirty (30) days from the date the Restricted Stock Purchase
Agreement is delivered to the person. If such person does not execute and
deliver the Restricted Stock Purchase Agreement along with full payment for the
Shares to the Company within thirty (30) days, then the offer shall terminate,
unless otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant
to a Restricted Stock Award shall be determined by the Committee and shall be at
least 85% of the Fair Market Value of the Shares when the Restricted Stock Award
is granted, except in the case of a sale to a Ten Percent Shareholder, in which
case the Purchase Price shall be 100% of the Fair Market Value. Payment of the
Purchase Price may be made in accordance with Section 8 of the Plan.
6.3 Restrictions. Restricted Stock Awards shall be subject to
such restrictions as the Committee may impose. The Committee may provide for the
lapse of such restrictions in installments and may accelerate or waive such
restrictions, in whole or part, based on length of service, performance or such
other factors or criteria as the Committee may determine.
7. STOCK BONUSES.
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of
Shares (which may consist of Restricted Stock) for services rendered to the
Company or any Parent, Subsidiary or Affiliate of the Company. A Stock Bonus may
be awarded for past services already rendered to the Company, or any Parent,
Subsidiary or Affiliate of the Company pursuant to an Award Agreement (the
"Stock Bonus Agreement") that shall be in such form (which need not be the same
for each Participant) as the Committee shall from time to time approve, and
shall comply with and be subject to the terms and conditions of the Plan. A
Stock Bonus may be awarded upon satisfaction of such performance goals as are
set out in advance in Participant's individual Award Agreement (the "Performance
Stock Bonus Agreement") that shall be in such form (which need not be the same
for each Participant) as the Committee shall from time to time approve, and
shall comply with and be subject to the terms and conditions of the Plan. Stock
Bonuses may vary from Participant to Participant and between groups of
Participants, and may be based upon the achievement of the Company, Parent,
Subsidiary or Affiliate and/or individual performance factors or upon such other
criteria as the Committee may determine.
7.2 Terms of Stock Bonuses. The Committee shall determine the
number of Shares to be awarded to the Participant and whether such Shares shall
be Restricted Stock. If the Stock Bonus is being earned upon the satisfaction of
performance goals pursuant to a Performance Stock Bonus Agreement, then the
Committee shall determine: (a) the nature, length and starting date of any
period during which performance is to be measured (the "Performance Period") for
each Stock Bonus; (b) the performance goals and criteria to be used to measure
the performance, if any; (c) the
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number of Shares that may be awarded to the Participant; and (d) the extent to
which such Stock Bonuses have been earned. Performance Periods may overlap and
Participants may participate simultaneously with respect to Stock Bonuses that
are subject to different Performance Periods and different performance goals and
other criteria. The number of Shares may be fixed or may vary in accordance with
such performance goals and criteria as may be determined by the Committee. The
Committee may adjust the performance goals applicable to the Stock Bonuses to
take into account changes in law and accounting or tax rules and to make such
adjustments as the Committee deems necessary or appropriate to reflect the
impact of extraordinary or unusual items, events or circumstances to avoid
windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may
be paid currently or on a deferred basis with such interest or dividend
equivalent, if any, as the Committee may determine. Payment may be made in the
form of cash, whole Shares, including Restricted Stock, or a combination
thereof, either in a lump sum payment or in installments, all as the Committee
shall determine.
7.4 Termination During Performance Period. If a Participant is
Terminated during a Performance Period for any reason, then such Participant
shall be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Stock Bonus only to the extent earned as of the date of Termination in
accordance with the Performance Stock Bonus Agreement, unless the Committee
shall determine otherwise.
8. PAYMENT FOR SHARE PURCHASES.
8.1 Payment. Payment for Shares purchased pursuant to the Plan
may be made in cash (by check) or, where expressly approved for the Participant
by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the Participant;
(b) by surrender of Shares that either: (1) have been owned by Participant
for more than six (6) months and have been paid for within the meaning
of SEC Rule 144 (and, if such shares were purchased from the Company by
use of a promissory note, such note has been fully paid with respect to
such Shares); or (2) were obtained by Participant in the public market;
(c) by tender of a full recourse promissory note having such terms as may
be approved by the Committee and bearing interest at a rate sufficient
to avoid imputation of income under Sections 483 and 1274 of the Code;
provided, however, that Participants who are not employees of the
Company shall not be entitled to purchase Shares with a promissory note
unless the note is adequately secured by collateral other than the
Shares; provided, further, that the portion of the Purchase Price equal
to the par value of the Shares, if any, must be paid in cash;
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(d) by waiver of compensation due or accrued to Participant for services
rendered;
(e) by tender of property;
(f) with respect only to purchases upon exercise of an Option, and provided
that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from Participant and a
broker-dealer that is a member of the National Association of
Securities Dealers (a "NASD Dealer") whereby Participant
irrevocably elects to exercise the Option and to sell a
portion of the Shares so purchased to pay for the Exercise
Price, and whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the Exercise Price directly
to the Company; or
(2) through a "margin" commitment from Participant and a NASD
Dealer whereby Participant irrevocably elects to exercise the
Option and to pledge the Shares so purchased to the NASD
Dealer in a margin account as security for a loan from the
NASD Dealer in the amount of the Exercise Price, and whereby
the NASD Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to the Company;
or
(g) by any combination of the foregoing.
8.2 Loan Guarantees. The Committee may help the Participant
pay for Shares purchased under the Plan by authorizing a guarantee by the
Company of a third-party loan to the Participant.
9. WITHHOLDING TAXES.
9.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under the Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under the Plan, payments
in satisfaction of Awards are to be made in cash, such payment shall be net of
an amount sufficient to satisfy federal, state, and local withholding tax
requirements.
9.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that minimum number of Shares having a Fair
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Market Value equal to the minimum amount required to be withheld, determined on
the date that the amount of tax to be withheld is to be determined; but in no
event will the Company withhold Shares if such withholding would result in
adverse accounting consequences to the Company. All elections by a Participant
to have Shares withheld for this purpose will be made in accordance with the
requirements established by the Committee for such elections and be in writing
in a form acceptable to the Committee.
10. PRIVILEGES OF STOCK OWNERSHIP.
10.1 Voting and Dividends. No Participant shall have any of
the rights of a shareholder with respect to any Shares until the Shares are
issued to the Participant. After Shares are issued to the Participant, the
Participant shall be a shareholder and have all the rights of a shareholder with
respect to such Shares, including the right to vote and receive all dividends or
other distributions made or paid with respect to such Shares; provided, that if
such Shares are Restricted Stock, then any new, additional or different
securities the Participant may become entitled to receive with respect to such
Shares by virtue of a stock dividend, stock split or any other change in the
corporate or capital structure of the Company shall be subject to the same
restrictions as the Restricted Stock; provided, further, that the Participant
shall have no right to retain such dividends or distributions with respect to
Shares that are repurchased at the Participant's original Purchase Price
pursuant to Section 12.
10.2 Financial Statements. The Company shall provide financial
statements to each Participant prior to such Participant's purchase of Shares
under the Plan, and to each Participant annually during the period such
Participant has Options outstanding; provided, however, the Company shall not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
11. TRANSFERABILITY. Awards granted under the Plan, and any interest
therein, shall not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution or as consistent with the specific
Plan and Award Agreement provisions relating thereto. During the lifetime of the
Participant an Award shall be exercisable only by the Participant, and any
elections with respect to an Award, may be made only by the Participant.
12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase a portion of or all Shares which have not yet vested that
are held by a Participant following such Participant's Termination at any time
within ninety (90) days after the later of Participant's Termination Date and
the date Participant purchases Shares under this Plan, for cash and/or
cancellation of purchase money indebtedness, at the Participant's Exercise Price
or Purchase Price, as the case may be.
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13. CERTIFICATES. All certificates for Shares or other securities
delivered under the Plan shall be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates, together with stock powers or other instruments of transfer
approved by the Committee, appropriately endorsed in blank, with the Company or
an agent designated by the Company to hold in escrow until such restrictions
have lapsed or terminated, and the Committee may cause a legend or legends
referencing such restrictions to be placed on the certificates. Any Participant
who is permitted to execute a promissory note as partial or full consideration
for the purchase of Shares under the Plan shall be required to pledge and
deposit with the Company all or part of the Shares so purchased as collateral to
secure the payment of Participant's obligation to the Company under the
promissory note; provided, however, that the Committee may require or accept
other or additional forms of collateral to secure the payment of such obligation
and, in any event, the Company shall have full recourse against the Participant
under the promissory note notwithstanding any pledge of the Participant's Shares
or other collateral. In connection with any pledge of the Shares, Participant
shall be required to execute and deliver a written pledge agreement in such form
as the Committee shall from time to time approve. The Shares purchased with the
promissory note may be released from the pledge on a prorata basis as the
promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant shall agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award shall not
be effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed, as they are in effect on the date of grant of the
Award and also on the date of exercise or other issuance. Notwithstanding any
other provision in the Plan, the Company shall have no obligation to issue or
deliver certificates for Shares under the Plan prior to (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable, and/or (b) completion of any registration or other qualification
of such shares under any state or federal law or ruling of any governmental body
that the Company determines to be necessary or advisable. The Company shall be
under no obligation to register the Shares with the SEC or to effect compliance
with the
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registration, qualification or listing requirements of any state securities
laws, stock exchange or automated quotation system, and the Company shall have
no liability for any inability or failure to do so.
17. NO OBLIGATION TO EMPLOY. Nothing in the Plan or any Award granted
under the Plan shall confer or be deemed to confer on any Participant any right
to continue in the employ of, or other relationship with, the Company or any
Parent, Subsidiary or Affiliate of the Company or limit in any way the right of
the Company or any Parent, Subsidiary or Affiliate of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
18. CORPORATE TRANSACTIONS.
18.1 Assumption or Replacement of Awards by Successor. In the
event of (a) a merger or consolidation in which the Company is not the surviving
corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the shareholders of
the Company and the Awards granted under the Plan are assumed or replaced by the
successor corporation, which assumption shall be binding on all Participants),
(b) a dissolution or liquidation of the Company, (c) the sale of substantially
all of the assets of the Company, or (d) any other transaction which qualifies
as a "corporate transaction" under Section 424(a) of the Code wherein the
shareholders of the Company give up all of their equity interest in the Company
(except for the acquisition, sale or transfer of all or substantially all of the
outstanding shares of the Company), any or all outstanding Awards may be assumed
or replaced by the successor corporation, which assumption or replacement shall
be binding on all Participants. In the alternative, the successor corporation
may substitute equivalent Awards or provide substantially similar consideration
to Participants as was provided to shareholders (after taking into account the
existing provisions of the Awards). The successor corporation may also issue, in
place of outstanding Shares of the Company held by the Participant,
substantially similar shares or other property subject repurchase restrictions
no less favorable to the Participant.
18.2 Expiration of Options. In the event such successor
corporation, if any, refuses to assume or substitute the Options, as provided
above, pursuant to a transaction described in Subsection 18.1(a) above, such
Options shall expire on such transaction at such time and on such conditions as
the Board shall determine. In the event such successor corporation, if any,
refuses to assume or substitute the Options as provided above, pursuant to a
transaction described in Subsections 18.1(b), (c) or (d) above, or there is no
successor corporation, and if the Company ceases to exist as a separate
corporate entity, then, notwithstanding any contrary terms in the Award
Agreement, the Options shall expire on a date at least twenty (20) days after
the Board gives written notice to Participants specifying the terms and
conditions of such termination.
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18.3 Other Treatment of Awards. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 18, in
the event of the occurrence of any transaction described in Section 18.1, any
outstanding Awards shall be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, sale of assets or other
"corporate transaction."
18.4 Assumption of Awards by the Company. The Company, from
time to time, also may substitute or assume outstanding awards granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either (a) granting an Award under the Plan in substitution of
such other company's award, or (b) assuming such award as if it had been granted
under the Plan if the terms of such assumed award could be applied to an Award
granted under the Plan. Such substitution or assumption shall be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under the Plan if the other company had applied the rules of
the Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award shall remain unchanged
(except that the exercise price and the number and nature of Shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.
18.5 Acceleration of Officer Options. The Committee in its
sole discretion may grant Options to certain officers under which the vesting
will accelerate upon the occurrence of a transaction described in Subsections
18.1(a), 18.1(b), 18.1(c) or 18.1(d) above in which there is a successor
corporation, as to an additional 1/48th of the Shares subject to such Options
for each month of employment the officer completed with the Company from the
date of the grant to the date of transaction. In addition, the vesting of such
Options shall accelerate for an additional twenty four months at the rate of
1/48th of the Shares subject to such option; provided that: (i) if requested to
do so, the officer remains employed with the successor for a period of six
months following the date of such transaction or (ii) the officer is not
requested to remain with the successor following the date of such transaction.
19. ADOPTION AND SHAREHOLDER APPROVAL. The Plan shall become effective
on the date that it is adopted by the Board (the "Effective Date"). The Plan
shall be approved by the shareholders of the Company (excluding Shares issued
pursuant to this Plan), consistent with applicable laws, within twelve months
before or after the Effective Date. Upon the Effective Date, the Board may grant
Awards pursuant to the Plan; provided, however, that: (a) no Option may be
exercised prior to initial shareholder approval of the Plan; (b) no Option
granted pursuant to an increase in the number of Shares approved by the Board
shall be exercised prior to the time such increase has been approved by the
shareholders of the Company; and (c) in the event that shareholder approval is
not obtained within the time period provided herein, all Awards granted
hereunder shall be cancelled, any Shares issued pursuant to any Award shall be
cancelled and any purchase of Shares hereunder shall be rescinded.
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<PAGE> 13
20. TERM OF PLAN. The Plan will terminate ten (10) years from the
Effective Date or, if earlier, the date of shareholder approval.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend the Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to the Plan; provided, however, that the Board shall not, without the approval
of the shareholders of the Company, amend the Plan in any manner that requires
such shareholder approval pursuant to the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the
Board, the submission of the Plan to the shareholders of the Company for
approval, nor any provision of the Plan shall be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under the Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
23. GOVERNING LAW. The Plan and all agreements, documents and
instruments entered into pursuant to the Plan shall be governed by and construed
in accordance with the internal laws of the State of California, excluding that
body of law pertaining to conflict of laws.
24. DEFINITIONS. As used in the Plan, the following terms shall have
the following meanings:
"Affiliate" means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, another corporation, where "control" (including the terms
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management and policies of
the corporation, whether through the ownership of voting securities, by contract
or otherwise.
"Award" means any award under the Plan, including any Option,
Restricted Stock or Stock Bonus.
"Award Agreement" means, with respect to each Award, the
signed written agreement between the Company and the Participant setting forth
the terms and conditions of the Award.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
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<PAGE> 14
"Committee" means the committee appointed by the Board to
administer the Plan, or if no committee is appointed, the Board.
"Company" means VERITAS Software Corporation, a corporation
organized under the laws of the State of Delaware, any successor corporation
thereto and any corporation that assumes the Plan.
"Disability" means a disability, whether temporary or
permanent, partial or total, within the meaning of Section 22(e)(3) of the Code,
as determined by the Committee.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Price" means the price at which a holder of an
Option may purchase the Shares issuable upon exercise of the Option.
"Fair Market Value" means, as of any date, the value of a
share of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National Market, its
last reported sale price on the Nasdaq National Market or, if no such
reported sale takes place on such date, the average of the closing bid
and asked prices;
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, the last reported sale price or, if no
such reported sale takes place on such date, the average of the closing
bid and asked prices on the principal national securities exchange on
which the Common Stock is listed or admitted to trading;
(c) if such Common Stock is publicly traded but is not quoted on the Nasdaq
National Market nor listed or admitted to trading on a national
securities exchange, the average of the closing bid and asked prices on
such date, as reported by The Wall Street Journal, for the
over-the-counter market;
or
(d) if none of the foregoing is applicable, by the Board of Directors of
the Company in good faith.
"Insider" means an officer or director of the Company or any
other person whose transactions in the Company's Common Stock are subject to
Section 16 of the Exchange Act.
"Option" means an award of an option to purchase Shares
pursuant to Section 5.
"Outside Director" means any director who is not (i) a current
employee of the Company or any Parent, Subsidiary or Affiliate of the Company;
(ii) a former
14
<PAGE> 15
employee of the Company or any Parent, Subsidiary or Affiliate of the Company
who is receiving compensation for prior services (other than benefits under a
tax-qualified pension plan); (iii) a current or former officer of the Company or
any Parent, Subsidiary or Affiliate of the Company; or (iv) currently receiving
compensation for personal services in any capacity, other than as a director,
from the Company or any Parent, Subsidiary or Affiliate of the Company;
provided, however, that at such time as the term "Outside Director", as used in
Section 162(m) is defined in regulations promulgated under Section 162(m) of the
Code, "Outside Director" shall have the meaning set forth in such regulations,
as amended from time to time and as interpreted by the Internal Revenue Service.
"Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if at the time of the
granting of an Award under the Plan, each of such corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
"Participant" means a person who receives an Award under the
Plan.
"Plan" means this VERITAS Software Corporation 1993 Equity
Incentive Plan, as amended from time to time.
"Restricted Stock Award" means an award of Shares pursuant to
Section 6.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of the Company's Common Stock reserved
for issuance under the Plan, as adjusted pursuant to Sections 2 and 15, and any
successor security.
"Stock Bonus" means an award of Shares, or cash in lieu of
Shares, pursuant to Section 7.
"Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
granting of the Award, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
"Termination" or "Terminated" means, for purposes of the Plan
with respect to a Participant, that the Participant has ceased to provide
services as an employee, director, consultant, independent contractor or
adviser, to the Company or a Parent, Subsidiary or Affiliate of the Company,
except in the case of sick leave, military
15
<PAGE> 16
leave, or any other leave of absence approved by the Committee, provided, that
such leave is for a period of not more than ninety (90) days, or reinstatement
upon the expiration of such leave is guaranteed by contract or statute. The
Committee shall have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "Termination Date").
16
<PAGE> 17
VERITAS SOFTWARE CORPORATION
1993 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
NEW HIRE STOCK OPTION GRANTS
This Stock Option Agreement ("Agreement") is made and entered into as
of the effective date of grant (the "Date of Grant") set forth in the attached
Notice of Grant of Stock Options and Signature Page to Stock Option Agreement
(the "Notice of Grant") by and between VERITAS Software Corporation, a Delaware
corporation (the "Company"), and the participant named in the Notice of Grant
("Participant"). Capitalized terms not defined herein shall have the meaning
ascribed to them in the Company's 1993 Equity Incentive Plan, as amended January
26, 1999 (the "Plan").
1. GRANT OF OPTION. The Company hereby grants to Participant an option
(the "Option") to purchase the total number of shares of Common Stock of the
Company set forth in the Notice of Grant (the "Shares") at the exercise price
per share set forth in the Notice of Grant, subject to all of the terms and
conditions of this Agreement and the Plan. If designated as an Incentive Stock
Option above, the Option is intended to qualify as an "incentive stock option"
("ISO") within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
2. VESTING SCHEDULE.
2.1 Vesting Schedule for New Hire Grants. Subject to the terms
and conditions of the Plan and this Agreement, the Option shall be exercisable
as it vests. The Shares subject to the Option shall vest as follows:
Provided Participant continues to provide services to the
Company or any Subsidiary, Parent or Affiliate of the Company throughout the
specified period, the Option shall vest as to portions of the Shares as follows:
(a) the Option shall not vest with respect to any of the Shares until the
Participant has completed six (6) months employment with the Company or any
Subsidiary, Parent or Affiliate of the Company; (b) upon the Participant's
completion of six (6) months employment with the Company or any Subsidiary,
Parent or Affiliate of the Company, the Option shall vest as to twelve and one
half percent (12.5%) of the Total Option Shares; and (c) each month thereafter,
the Option shall vest as to 1/48th of the Total Option Shares until the Option
is vested with respect to one hundred percent (100%) of the Shares. If
application of the vesting percentage causes a fractional Share, such Share
shall be rounded down to a whole Share.
2.2 Expiration. The Option shall expire on the Expiration Date
set forth in the Notice of Grant and must be exercised, if at all, on or before
the Expiration Date.
2.3 Extension of Vesting for Part-Time Employees. In the event
Participant is a full time employee of the Company or any Subsidiary, Parent or
Affiliate of the Company on the Date of Grant, and subsequently agrees with the
Company or any Subsidiary, Parent or Affiliate of the Company to reduce
Participant's normal working hours to at least twenty (20) and fewer than (30)
hours per week, all references to 1/48th in Section 2.1 above shall be
automatically deemed to be 1/96th from that date forward, until such time as
Participant returns to a normal full time schedule, whereupon the vesting
percentage shall revert to 1/48th per month from that date forward. In the event
Participant is an employee of the Company or any Subsidiary on the Date of Grant
with normal working hours of at least twenty (20) hours per week, and
subsequently agrees with the Company or any Subsidiary, Parent or Affiliate of
the Company to reduce Participant's normal working hours to fewer than twenty
(20) per week, the Option shall cease to vest until such time (if any) when
Participant returns to a working schedule of at least twenty (20) hours per
week.
<PAGE> 18
3. TERMINATION.
3.1 Termination for Any Reason Except Death or Disability. If
Participant is Terminated for any reason, except death or Disability, the
Option, to the extent (and only to the extent) that it would have been
exercisable by Participant on the date of Termination, may be exercised by
Participant no later than ninety (90) days after the date of Termination, but in
any event no later than the Expiration Date.
3.2 Termination Because of Death or Disability. If Participant
is Terminated because of death or Disability of Participant, the Option, to the
extent that it is exercisable by Participant on the date of Termination, may be
exercised by Participant (or Participant's legal representative) no later than
twelve (12) months after the date of Termination, but in any event no later than
the Expiration Date.
3.3 No Obligation to Employ. Nothing in the Plan or this
Agreement shall confer on Participant any right to continue in the employ of, or
any other relationship with, the Company or any Parent, Subsidiary or Affiliate
of the Company, or limit in any way the right of the Company or any Parent,
Subsidiary or Affiliate of the Company to terminate Participant's employment or
other relationship at any time, with or without cause.
4. MANNER OF EXERCISE.
4.1 Stock Option Exercise Agreement. To exercise this Option,
Participant (or in the case of exercise after Participant's death, Participant's
executor, administrator, heir or legatee, as the case may be) must deliver to
the Company an executed stock option exercise agreement in the form as may be
approved by the Company from time to time (the "Exercise Agreement"), which
shall set forth, inter alia. Participant's election to exercise the Option, the
number of Shares being purchased, any restrictions imposed on the Shares and any
representations, warranties and agreements regarding Participant's investment
intent and access to information as may be required by the Company to comply
with applicable securities laws. If someone other than Participant exercises the
Option, then such person must submit documentation reasonably acceptable to the
Company that such person has the right to exercise the Option. Alternatively,
Participant may elect to exercise the Option by way of a Company-sponsored
program with an on-line stock broker ("the Broker") whereby Participant conveys
Participant's intent to exercise the Option through the Broker's Internet site.
4.2 Limitations on Exercise. The Option may not be exercised
unless such exercise is in compliance with all applicable federal and state
securities laws, as they are in effect on the date of exercise. The Option may
not be exercised as to fewer than 100 Shares unless it is exercised as to all
Shares as to which the Option is then exercisable.
4.3 Payment. The Exercise Agreement shall be accompanied by
full payment of the Exercise Price for the Shares being purchased in cash (by
check), or where permitted by law:
(a) provided that a public market for the Company's stock exists, (1)
through a "same day sale" commitment from Participant and a
broker-dealer that is a member of the National Association of
Securities Dealers (a "NASD Dealer") whereby Participant irrevocably
elects to exercise the Option and to sell a portion of the Shares so
purchased to pay for the Exercise Price and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the Exercise
Price directly to the Company, or (2) through a "margin" commitment
from Participant and a NASD Dealer whereby Participant irrevocably
elects to exercise the Option and to pledge the Shares so purchased to
the NASD Dealer in a margin account as security for a loan from the
NASD Dealer in the amount of the Exercise Price, and whereby the NASD
Dealer irrevocably commits upon receipt of such Shares to forward the
Exercise Price directly to the Company; or
(b) by any combination of the foregoing.
4.4 Tax Withholding. Prior to the issuance of the Shares upon
exercise of the Option, Participant must pay or provide for any applicable
federal or state withholding obligations of the Company. If the Committee
permits, Participant may provide for payment of withholding taxes upon exercise
of the Option by
2
<PAGE> 19
requesting that the Company retain Shares with a Fair Market Value equal to the
minimum amount of taxes required to be withheld. In such case, the Company shall
issue the net number of Shares to the Participant by deducting the Shares
retained from the Shares issuable upon exercise.
4.5 Issuance of Shares. Provided that the Exercise Agreement
and payment are in form and substance satisfactory to counsel for the Company,
the Company shall issue the Shares registered in the name of Participant,
Participant's authorized assignee, or Participant's legal representative, and
shall deliver certificates representing the Shares with the appropriate legends
affixed thereto.
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Option is
an ISO, and if Participant sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (1) the date two years
after the Date of Grant, and (2) the date one year after transfer of such Shares
to Participant upon exercise of the Option, Participant shall immediately notify
the Company in writing of such disposition. Participant agrees that Participant
may be subject to income tax withholding by the Company on the compensation
income recognized by Participant from the early disposition by payment in cash
or out of the current wages or other compensation payable to Participant.
6. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of the Option and
the issuance and transfer of Shares shall be subject to compliance by the
Company and Participant with all applicable requirements of federal and state
securities laws and with all applicable requirements of any stock exchange on
which the Company's Common Stock may be listed at the time of such issuance or
transfer. Participant understands that the Company is under no obligation to
register or qualify the Shares with the Securities and Exchange Commission, any
state securities commission or any stock exchange to effect such compliance.
7. NONTRANSFERABILITY OF OPTION. The Option may not be transferred in
any manner other than by will or by the laws of descent and distribution and may
be exercised during the lifetime of Participant only by Participant. The terms
of the Option shall be binding upon the executors, administrators, successors
and assigns of Participant.
8. TAX CONSEQUENCES. Set forth below is a brief summary as of the Date
of Grant of some of the United States federal and California tax consequences of
exercise of the Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
PARTICIPANT SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THE OPTION OR
DISPOSING OF THE SHARES. Participants residing in other states or other
countries should contact their own tax advisors.
8.1 Exercise of ISO. If the Option qualifies as an ISO, there
will be no regular federal or California income tax liability upon the exercise
of the Option, although the excess, if any, of the Fair Market Value of the
Shares on the date of exercise over the Exercise Price will be treated as a tax
preference item for federal and state income tax purposes and may subject the
Participant to the alternative minimum tax in the year of exercise.
8.2 Exercise of Nonqualified Stock Option. If the Option does
not qualify as an ISO, there may be regular federal and California income tax
liability upon the exercise of the Option. Participant will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price. The Company will be required to withhold from
Participant's compensation or collect from Participant and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.
8.3 Disposition of Shares. If the Shares are held for more
than twelve (12) months after the date of the transfer of the Shares pursuant to
the exercise of the Option (and, in the case of an ISO, are disposed of more
than two years after the Date of Grant), any gain realized on disposition of the
Shares will be treated as long term capital gain for federal and California
income tax purposes. If Shares purchased under an ISO are disposed of within one
year of exercise or within two years after the Date of Grant, any gain realized
on such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the excess, if any, of the Fair Market Value of
the Shares on the date of exercise over the Exercise Price. The Company will be
3
<PAGE> 20
required to withhold from Participant's compensation or collect from Participant
and pay to the applicable taxing authorities an amount equal to a percentage of
this compensation income at the time of exercise.
9. PRIVILEGES OF STOCK OWNERSHIP. Participant shall not have any of the
rights of a shareholder with respect to any Shares until Participant exercises
the Option and pays the Exercise Price.
10. INTERPRETATION. All disputes regarding the interpretation of this
Agreement, the Plan or the Notice of Grant must be submitted by Participant or
the Company to the Committee for review. The resolution of such a dispute by the
Committee shall be final and binding on the Company and Participant.
11. ENTIRE AGREEMENT. The Plan and the Notice of Grant are incorporated
herein by reference. This Agreement, the Plan and the Notice of Grant constitute
the entire agreement of the parties and supersede all prior undertakings and
agreements with respect to the subject matter hereof.
12. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated on the Notice of Grant or to
such other address as such party may designate in writing from time to time to
the Company. All notices shall be deemed to have been given or delivered upon:
personal delivery; three (3) days after deposit in the United States mail by
certified or registered mail (return receipt requested); one (1) business day
after deposit with any return receipt express courier (prepaid); or one (1)
business day after transmission by facsimile or telecopier.
13. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer set forth herein, this Agreement shall be binding upon
Participant and Participant's heirs, executors, administrators, legal
representatives, successors and assigns.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
15. ACCEPTANCE. Participant hereby acknowledges receipt of a copy of
the Plan, this Agreement and the Notice of Grant. Participant has read and
understands the terms and provisions thereof, and accepts the Option subject to
all the terms and conditions of the Plan, this Agreement and the Notice of
Grant. Participant acknowledges that there may be adverse tax consequences upon
exercise of the Option or disposition of the Shares and that Participant should
consult a tax adviser prior to such exercise or disposition.
****
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<PAGE> 21
VERITAS SOFTWARE CORPORATION
1993 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
SUBSEQUENT STOCK OPTION GRANTS
This Stock Option Agreement ("Agreement") is made and entered into as
of the effective date of grant (the "Date of Grant") set forth in the attached
Notice of Grant of Stock Options and Signature Page to Stock Option Agreement
(the "Notice of Grant") by and between VERITAS Software Corporation, a Delaware
corporation (the "Company"), and the participant named in the Notice of Grant
("Participant"). Capitalized terms not defined herein shall have the meaning
ascribed to them in the Company's 1993 Equity Incentive Plan, as amended January
26, 1999 (the "Plan").
1. GRANT OF OPTION. The Company hereby grants to Participant an option
(the "Option") to purchase the total number of shares of Common Stock of the
Company set forth in the Notice of Grant (the "Shares") at the exercise price
per share set forth in the Notice of Grant, subject to all of the terms and
conditions of this Agreement and the Plan. If designated as an Incentive Stock
Option above, the Option is intended to qualify as an "incentive stock option"
("ISO") within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
2. VESTING SCHEDULE.
2.1 Vesting Schedule for Subsequent Grants. Subject to the
terms and conditions of the Plan and this Agreement, the Option shall be
exercisable as it vests. The Shares subject to the Option shall vest as follows:
Provided Participant continues to provide services to the
Company or any Subsidiary, Parent or Affiliate of the Company throughout the
specified period, the Option shall vest as to portions of the Shares as follows:
(a) one month following the Date of Grant, the Option shall vest as to 1/48th of
the Total Option Shares; and (b) each month thereafter, the Option shall vest as
to 1/48th of the Total Option Shares until the Option is vested with respect to
one hundred percent (100%) of the Shares. If application of the vesting
percentage causes a fractional Share, such Share shall be rounded down to a
whole Share.
2.2 Expiration. The Option shall expire on the Expiration Date
set forth in the Notice of Grant and must be exercised, if at all, on or before
the Expiration Date.
2.3 Extension of Vesting for Part-Time Employees. In the event
Participant is a full time employee of the Company or any Subsidiary, Parent or
Affiliate of the Company on the Date of Grant, and subsequently agrees with the
Company or any Subsidiary, Parent or Affiliate of the Company to reduce
Participant's normal working hours to at least twenty (20) and fewer than (30)
hours per week, all references to 1/48th in Section 2.1 above shall be
automatically deemed to be 1/96th from that date forward, until such time as
Participant returns to a normal full time schedule, whereupon the vesting
percentage shall revert to 1/48th per month from that date forward. In the event
Participant is an employee of the Company or any Subsidiary on the Date of Grant
with normal working hours of at least twenty (20) hours per week, and
subsequently agrees with the Company or any Subsidiary, Parent or Affiliate of
the Company to reduce Participant's normal working hours to fewer than twenty
(20) per week, the Option shall cease to vest until such time (if any) when
Participant returns to a working schedule of at least twenty (20) hours per
week.
3. TERMINATION.
3.1 Termination for Any Reason Except Death or Disability. If
Participant is Terminated for any reason, except death or Disability, the
Option, to the extent (and only to the extent) that it would
<PAGE> 22
have been exercisable by Participant on the date of Termination, may be
exercised by Participant no later than ninety (90) days after the date of
Termination, but in any event no later than the Expiration Date.
3.2 Termination Because of Death or Disability. If Participant
is Terminated because of death or Disability of Participant, the Option, to the
extent that it is exercisable by Participant on the date of Termination, may be
exercised by Participant (or Participant's legal representative) no later than
twelve (12) months after the date of Termination, but in any event no later than
the Expiration Date.
3.3 No Obligation to Employ. Nothing in the Plan or this
Agreement shall confer on Participant any right to continue in the employ of, or
any other relationship with, the Company or any Parent, Subsidiary or Affiliate
of the Company, or limit in any way the right of the Company or any Parent,
Subsidiary or Affiliate of the Company to terminate Participant's employment or
other relationship at any time, with or without cause.
4. MANNER OF EXERCISE.
4.1 Stock Option Exercise Agreement. To exercise this Option,
Participant (or in the case of exercise after Participant's death, Participant's
executor, administrator, heir or legatee, as the case may be) must deliver to
the Company an executed stock option exercise agreement in the form as may be
approved by the Company from time to time (the "Exercise Agreement"), which
shall set forth, inter alia. Participant's election to exercise the Option, the
number of Shares being purchased, any restrictions imposed on the Shares and any
representations, warranties and agreements regarding Participant's investment
intent and access to information as may be required by the Company to comply
with applicable securities laws. If someone other than Participant exercises the
Option, then such person must submit documentation reasonably acceptable to the
Company that such person has the right to exercise the Option. Alternatively,
Participant may elect to exercise the Option by way of a Company-sponsored
program with an on-line stock broker ("the Broker") whereby Participant conveys
Participant's intent to exercise the Option through the Broker's Internet site.
4.2 Limitations on Exercise. The Option may not be exercised
unless such exercise is in compliance with all applicable federal and state
securities laws, as they are in effect on the date of exercise. The Option may
not be exercised as to fewer than 100 Shares unless it is exercised as to all
Shares as to which the Option is then exercisable.
4.3 Payment. The Exercise Agreement shall be accompanied by
full payment of the Exercise Price for the Shares being purchased in cash (by
check), or where permitted by law:
(a) provided that a public market for the Company's stock exists, (1)
through a "same day sale" commitment from Participant and a
broker-dealer that is a member of the National Association of
Securities Dealers (a "NASD Dealer") whereby Participant irrevocably
elects to exercise the Option and to sell a portion of the Shares so
purchased to pay for the Exercise Price and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the Exercise
Price directly to the Company, or (2) through a "margin" commitment
from Participant and a NASD Dealer whereby Participant irrevocably
elects to exercise the Option and to pledge the Shares so purchased to
the NASD Dealer in a margin account as security for a loan from the
NASD Dealer in the amount of the Exercise Price, and whereby the NASD
Dealer irrevocably commits upon receipt of such Shares to forward the
Exercise Price directly to the Company; or
(b) by any combination of the foregoing.
4.4 Tax Withholding. Prior to the issuance of the Shares upon
exercise of the Option, Participant must pay or provide for any applicable
federal or state withholding obligations of the Company. If the Committee
permits, Participant may provide for payment of withholding taxes upon exercise
of the Option by requesting that the Company retain Shares with a Fair Market
Value equal to the minimum amount of taxes required to be withheld. In such
case, the Company shall issue the net number of Shares to the Participant by
deducting the Shares retained from the Shares issuable upon exercise.
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4.5 Issuance of Shares. Provided that the Exercise Agreement
and payment are in form and substance satisfactory to counsel for the Company,
the Company shall issue the Shares registered in the name of Participant,
Participant's authorized assignee, or Participant's legal representative, and
shall deliver certificates representing the Shares with the appropriate legends
affixed thereto.
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Option is
an ISO, and if Participant sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (1) the date two years
after the Date of Grant, and (2) the date one year after transfer of such Shares
to Participant upon exercise of the Option, Participant shall immediately notify
the Company in writing of such disposition. Participant agrees that Participant
may be subject to income tax withholding by the Company on the compensation
income recognized by Participant from the early disposition by payment in cash
or out of the current wages or other compensation payable to Participant.
6. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of the Option and
the issuance and transfer of Shares shall be subject to compliance by the
Company and Participant with all applicable requirements of federal and state
securities laws and with all applicable requirements of any stock exchange on
which the Company's Common Stock may be listed at the time of such issuance or
transfer. Participant understands that the Company is under no obligation to
register or qualify the Shares with the Securities and Exchange Commission, any
state securities commission or any stock exchange to effect such compliance.
7. NONTRANSFERABILITY OF OPTION. The Option may not be transferred in
any manner other than by will or by the laws of descent and distribution and may
be exercised during the lifetime of Participant only by Participant. The terms
of the Option shall be binding upon the executors, administrators, successors
and assigns of Participant.
8. TAX CONSEQUENCES. Set forth below is a brief summary as of the Date
of Grant of some of the United States federal and California tax consequences of
exercise of the Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
PARTICIPANT SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THE OPTION OR
DISPOSING OF THE SHARES. Participants residing in other states or other
countries should contact their own tax advisors.
8.1 Exercise of ISO. If the Option qualifies as an ISO, there
will be no regular federal or California income tax liability upon the exercise
of the Option, although the excess, if any, of the Fair Market Value of the
Shares on the date of exercise over the Exercise Price will be treated as a tax
preference item for federal and state income tax purposes and may subject the
Participant to the alternative minimum tax in the year of exercise.
8.2 Exercise of Nonqualified Stock Option. If the Option does
not qualify as an ISO, there may be regular federal and California income tax
liability upon the exercise of the Option. Participant will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price. The Company will be required to withhold from
Participant's compensation or collect from Participant and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.
8.3 Disposition of Shares. If the Shares are held for more
than twelve (12) months after the date of the transfer of the Shares pursuant to
the exercise of the Option (and, in the case of an ISO, are disposed of more
than two years after the Date of Grant), any gain realized on disposition of the
Shares will be treated as long term capital gain for federal and California
income tax purposes. If Shares purchased under an ISO are disposed of within one
year of exercise or within two years after the Date of Grant, any gain realized
on such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the excess, if any, of the Fair Market Value of
the Shares on the date of exercise over the Exercise Price. The Company will be
required to withhold from Participant's compensation or collect from Participant
and pay to the applicable taxing authorities an amount equal to a percentage of
this compensation income at the time of exercise.
9. PRIVILEGES OF STOCK OWNERSHIP. Participant shall not have any of the
rights of a shareholder with respect to any Shares until Participant exercises
the Option and pays the Exercise Price.
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10. INTERPRETATION. All disputes regarding the interpretation of this
Agreement, the Plan or the Notice of Grant must be submitted by Participant or
the Company to the Committee for review. The resolution of such a dispute by the
Committee shall be final and binding on the Company and Participant.
11. ENTIRE AGREEMENT. The Plan and the Notice of Grant are incorporated
herein by reference. This Agreement, the Plan and the Notice of Grant constitute
the entire agreement of the parties and supersede all prior undertakings and
agreements with respect to the subject matter hereof.
12. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated on the Notice of Grant or to
such other address as such party may designate in writing from time to time to
the Company. All notices shall be deemed to have been given or delivered upon:
personal delivery; three (3) days after deposit in the United States mail by
certified or registered mail (return receipt requested); one (1) business day
after deposit with any return receipt express courier (prepaid); or one (1)
business day after transmission by facsimile or telecopier.
13. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer set forth herein, this Agreement shall be binding upon
Participant and Participant's heirs, executors, administrators, legal
representatives, successors and assigns.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
15. ACCEPTANCE. Participant hereby acknowledges receipt of a copy of
the Plan, this Agreement and the Notice of Grant. Participant has read and
understands the terms and provisions thereof, and accepts the Option subject to
all the terms and conditions of the Plan, this Agreement and the Notice of
Grant. Participant acknowledges that there may be adverse tax consequences upon
exercise of the Option or disposition of the Shares and that Participant should
consult a tax adviser prior to such exercise or disposition.
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