<PAGE>
As filed with the Securities and Exchange Commission on January 18, 2000.
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
the Securities Act of 1933
MERCURY INTERACTIVE CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 77-0224776
------------------------ ----------
(State of incorporation) (I.R.S. Employer Identification Number)
1325 Borregas Avenue
Sunnyvale, California 94089
(408) 822-5200
(Address, including zip code, of Registrant's principal executive offices)
CONDUCT LTD. 1998 SHARE OPTION PLAN
AMENDED AND RESTATED 1999 STOCK OPTION PLAN
(Full title of the Plans)
Amnon Landan
Chairman of the Board, President and Chief Executive Officer
1325 Borregas Avenue
Sunnyvale, California 94089
(408) 822-5200
(Name, address and telephone number, including area code, of agent for service)
Copies to:
Susan J. Skaer, Esq.
General Counsel Associates LLP
1891 Landings Drive
Mountain View, CA 94043
(650) 428-3900
<TABLE>
<CAPTION>
=========================================================================================================
CALCULATION OF REGISTRATION FEE
=========================================================================================================
Proposed Proposed
Title of Maximum Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Share Price Fee
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$.002 par value.......... 20,079 shares(1) $6.8573(2) $ 137,688(2) $ 36.35
Common Stock,
$.002 par value.......... 1,802,750 shares(3) $ 89.03 $160,501,086(4) 42,372.29
TOTAL................ 1,822,829 shares(1) -- $160,638,774(2) $42,408.64
</TABLE>
(1) This subtotal represents the sum of shares issuable upon exercise of
presently outstanding options that have been granted under the Conduct Ltd.
1998 Share Option Plan and were assumed by Registrant in connection with
the closing of the Share Exchange Agreement with Conduct Ltd. and its
shareholders pursuant to which Conduct Ltd. will become a wholly-owned
subsidiary of Registrant.
(2) Calculated in accordance with Rule 457(h) based on the aggregate exercise
price for all presently outstanding options described in note 1 above.
(3) This subtotal represents the sum of shares issuable upon exercise of
options that have not yet been granted under the Amended and Restated 1999
Stock Option Plan, as of the date of this Registration Statement.
(4) Estimated in accordance with Rule 457(h) under the Securities Act of 1933
solely for the purpose of calculating the total registration fee.
Computation based upon the average of the high and low prices of the Common
Stock as reported on the Nasdaq National Market on January 13, 2000 because
the price at which the options to be granted in the future may be exercised
is not currently determinable.
================================================================================
<PAGE>
PART II:
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. INFORMATION INCORPORATED BY REFERENCE
-------------------------------------
The following documents and information heretofore filed with the Securities
and Exchange Commission are hereby incorporated by reference:
Item 3(a)
The Registrant's Annual Report on Form 10-K filed on March 31, 1999 pursuant
to Section 13(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
which contains audited financial statements for the Registrant's latest
fiscal year ended December 31, 1998 for which such statements have been
filed.
Item 3(b)
All other reports filed by the Registrant pursuant to Sections 13(a) or 15(d)
of the Exchange Act since the end of the fiscal year covered by the Annual
Report on Form 10-K referred to in Item 3(a) above.
Item 3(c)
<PAGE>
Items 1 and 2 of the Registrant's Registration Statement on Form 8-A filed on
September 9, 1993, as amended by Amendment No. 1 to Form 8-A filed on October
28, 1993, pursuant to Section 12 of the Exchange Act and Items 1 and 2 of the
Registrant's Registration Statement on Form 8-A filed on July 8, 1996, as
amended by Amendment No. 1 to Form 8-A filed on April 2, 1999.
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-
effective amendment which indicates that all securities offered have been sold
or which deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference in this Registration Statement and to be part hereof
from the date of filing of such documents.
Item 4. DESCRIPTION OF SECURITIES
-------------------------
Not Applicable.
Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
--------------------------------------
Not Applicable.
Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
As permitted by the Delaware General Corporation Law, the Registrant has
included in its Certificate of Incorporation a provision to eliminate the
personal liability of its directors for monetary damages for breach or alleged
breach of their fiduciary duties as directors, subject to certain exceptions.
In addition, the By-laws of the Registrant provide that the Registrant is
required to indemnify its officers and directors under certain circumstances,
including those circumstances in which indemnification would otherwise be
discretionary, and the Registrant is required to advance expenses to its
officers and directors as incurred in connection with proceedings against them
for which they may be indemnified. The Registrant has entered into
indemnification agreements with its officers and directors containing provisions
that are in some respects broader than the specific indemnification provisions
contained in the Delaware General Corporation Law. The indemnification
agreements may require the Registrant, among other things, to indemnify such
officers and directors against certain liabilities that may arise by reason of
their status or service as directors or officers (other than liabilities arising
from willful misconduct of a culpable nature), to advance expenses incurred as a
result of any proceeding against them as to which they could be indemnified, and
to obtain directors' and officers' insurance if available on reasonable terms.
At present, the Registrant is not aware of any pending or threatened litigation
or proceeding involving a director, officer, employee or agent of the Registrant
in which indemnification would be required or permitted. The Registrant
believes that its charter provisions and indemnification agreements are
necessary to attract and retain qualified persons as directors and officers.
Item 7. EXEMPTION FROM REGISTRATION CLAIMED
-----------------------------------
Not Applicable.
Item 8 EXHIBITS
--------
Exhibit
Number Document
4.1 Conduct Ltd. 1998 Share Option Plan.
4.2 Mercury Interactive Corporation Amended and Restated 1999 Stock
Option Plan, as amended through December 1999.
5.1 Opinion of Counsel as to Legality of Securities being Registered.
23.1 Consent of Independent Accountants.
23.2 Consent of Counsel (contained in Exhibit 5.1 hereto).
24.1 Power of Attorney (see page 5).
<PAGE>
Item 9. UNDERTAKINGS
------------
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933 (the "Securities Act"), each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Mercury Interactive Corporation, a corporation organized and existing under the
laws of the State of Delaware, certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-8 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Sunnyvale, State of
California, on December 31, 1999.
MERCURY INTERACTIVE CORPORATION
By: /s/ Sharlene Abrams
-----------------------------------------------------
Sharlene Abrams, Vice President of Finance and
Administration, Chief Financial Officer and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Amnon Landan, Sharlene Abrams and Susan J. Skaer,
jointly and severally, as his or her attorneys-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any amendments
to this Registration Statement on Form S-8, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURES TITLE DATE
President,
Chief Executive Officer
and Chairman of the Board
/s/ Amnon Landan (Principal Executive Officer) December 31, 1999
- ----------------------------
AMNON LANDAN
Vice President of
Finance and Administration
Chief Financial Officer
(Principal Financial and
Accounting Officer) and
/s/ Sharlene Abrams Secretary December 31, 1999
- ----------------------------
SHARLENE ABRAMS
/s/ Igal Kohavi Director December 31, 1999
- ----------------------------
IGAL KOHAVI
/s/ Yair Shamir Director December 31, 1999
- ----------------------------
YAIR SHAMIR
/s/ Giora Yaron Director December 31, 1999
- ----------------------------
GIORA YARON
<PAGE>
EXHIBIT INDEX
Exhibit
- -------
Number Document
- ------ --------
4.1 Conduct Ltd. 1998 Share Option Plan.
4.2 Mercury Interactive Corporation Amended and Restated 1999 Stock Option
Plan, as amended through December 1999.
5.1 Opinion of Counsel as to Legality of Securities Being Registered.
23.1 Consent of Independent Accountants.
23.2 Consent of Counsel (contained in Exhibit 5.1 hereto).
24.1 Power of Attorney (see page 5).
<PAGE>
Exhibit 4.1
CONDUCT LTD. 1998 SHARE OPTION PLAN
<PAGE>
CONDUCT LTD.
1998 SHARE OPTION PLAN
1. Purposes of the Plan. The purposes of this Share Option Plan are to
--------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business. Options
granted under this Plan may or may not contain such terms as will qualify the
Options as Options granted pursuant to the provisions of section 102 of the
Israeli Income Tax Ordinance (new version) 1961 (the "Ordinance") and any
regulations, rules, orders or procedures promulgated thereunder, including the
Income Tax Rules (Tax benefits in Stock Issuance to Employees) 5349-1989 (the
"Rules") ("Qualified Options"). Options granted under this Plan may or may not
contain such terms as will qualify the Options as Incentive Share Option
("ISOs") within the meaning of section 422(b) of the United State Internal
Revenue Code of 1986, as amended (the "Code"). Options granted under this Plan
will be designated for tax purposes as determined by the Administrator at the
time of the grant in accordance with Applicable Laws.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees as shall
-------------
be administering the Plan, in accordance with Section 4 hereof.
(b) "Applicable Laws" means the requirements relating to the
---------------
administration of share option plans under U.S. state corporate laws, U.S.
federal and state securities laws, U.S. and Israeli tax laws, Israel's
securities laws, Israel's companies ordinance, Israel's foreign exchange control
law, any stock exchange or quotation system on which the Shares are listed or
quoted and any other applicable laws of any country or jurisdiction where
Options are granted under the Plan.
(c) "Board" means the Board of Directors of the Company or of any
-----
Parent or Subsidiary of the Company.
(d) "Committee" means a committee of Directors appointed by the Board
---------
in accordance with Section 4 hereof.
(e) "Company" means Conduct Ltd., a company organized under the laws
-------
of the State of Israel.
(f) "Consultant" means any person who is engaged by the Company or any
----------
Parent or Subsidiary to render consulting or advisory services to such entity.
(g) "Director" means a member of the Board.
--------
-1-
<PAGE>
(h) "Employee" means any person, including officers of the Company
--------
(within the meaning of the U.S. Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder) and Directors, employed by the
Company or any Parent or Subsidiary of the Company. A Service Provider shall
not cease to be an Employee in the case of (i) any leave of absence approved by
the Company or (ii) transfers between locations of the Company or between the
Company, any Parent, any Subsidiary, or any successor. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(i) "Fair Market Value" means, as of any date, the value of a Share
-----------------
determined as follows:
(i) If the Shares are listed on any established stock exchange
or a national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, their Fair
Market Value shall be the closing sales price for such Shares (or the closing
bid, if no sales were reported) as quoted on such exchange or system for the
last market trading day prior to the time of determination, as reported in The
Wall Street Journal or such other source as the Administrator deems reliable;
(ii) If the Shares are regularly quoted by a recognized
securities dealer but selling prices are not reported, their Fair Market Value
shall be the mean between the high bid and low asked prices for the Shares on
the last market trading day prior to the day of determination, or;
(iii) In the absence of an established market for the Shares, the
Fair Market Value thereof shall be determined in good faith by the
Administrator.
(j) "Option" means a share option granted pursuant to the Plan.
------
(k) "Option Agreement" means a written or electronic agreement between
----------------
the Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of
the Plan.
(l) "Optioned Shares" means the Shares subject to an Option.
---------------
(m) "Optionee" means the holder of an outstanding Option granted under
--------
the Plan.
(n) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the U.S. Internal Revenue Code of
1986, as amended.
(o) "Plan" means this 1998 Share Option Plan.
----
(p) "Repurchaser" means (i) the Company, if permitted by Applicable
-----------
Laws; (ii) if the Company is not permitted by law, then any affiliate or
subsidiary of the Company; or (iii) if the majority of the Board of Directors of
the Company so decide, any other third party or
-2-
<PAGE>
parties designated by the Board of Directors, provided in no case shall the
Company provide financial assistance to any other party to purchase the Shares
if doing so is prohibited by Applicable Laws.
(q) "Service Provider" means an Employee, Director or Consultant.
----------------
(r) "Share" means a share of the Company's Ordinary Shares having a
-----
nominal value of NIS 0.01, as adjusted in accordance with Section 12 below.
(s) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the U.S. Internal Revenue
Code of 1986, as amended.
3. Shares Subject to the Plan. Subject to the provisions of Section 12
--------------------------
of the Plan, the maximum aggregate number of Shares which may be subject to
option and sold under the Plan is 1,875,000 Shares, of which up to 1,200,000
Shares may be subject to options intended to qualify under Section 102 of the
Ordinance and regulations, rules and orders of procedures promulgated
thereunder. The Shares may be authorized, but unissued, or acquired by the
Repurchaser.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
--------
the Plan shall not be returned to the Plan and shall not become available for
future distribution under the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure. The Plan shall be administered by the Board or a
---------
Committee appointed by the Board, which Committee shall be constituted to comply
with Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities, the
Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options may from
time to time be granted hereunder;
(iii) to determine the number of Shares to be covered by each
such award granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions of any Option granted
hereunder;
-3-
<PAGE>
(vi) to determine whether and under what circumstances an Option
may be settled in cash under subsection 10(e) instead of Shares;
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value, if the Fair Market Value of the Shares covered by
such Option has declined since the date the Option was granted;
(viii) to prescribe, amend and rescind rules and regulations
relating to the Plan;
(ix) subject to Applicable Laws, to allow Optionees to satisfy
withholding tax obligations by electing to have the Company, if permitted under
Applicable Laws, withhold from the Shares to be issued upon exercise of an
Option that number of Shares having a Fair Market Value equal to the amount
required to be withheld. The Fair Market Value of the Shares to be withheld
shall be determined on the date that the amount of tax to be withheld is to be
determined. All elections by Optionees to have Shares withheld for this purpose
shall be made in such form and under such conditions as the Administrator may
deem necessary or advisable; and
(x) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees.
(d) Grants to Committee Members. If the Administrator is a committee
---------------------------
appointed by the Board, the grant of options under the Plan to members of such
committee, if any, shall be made by the Board and not by such committee.
Anything in this Plan to the contrary not withstanding, all grants of Options to
Directors and office holders - "Nosei Misra"- as such term is defined in the
Israeli Companies Ordinance (New Version), 1983, as amended from time to time
(the "Companies Ordinance"), shall be authorized and implemented only in
accordance with the provisions of the Companies Ordinance.
5. Eligibility.
-----------
(a) Options may be granted to Service Providers. The persons eligible
to receive Qualified Options shall include any employees of the Company. The
persons eligible to receive Non Qualified Options shall include any employees
of the Company or of any Parent or Subsidiary of the Company, Directors of the
Company or of any Parent or Subsidiary of the Company who are not employees of
the Company or its Subsidiaries and consultants or contractors of the Company
or its Subsidiaries.
(b) The Plan shall not confer upon any Optionee any right with respect
to continuing the Optionee's relationship as a Service Provider with the Company
or a Parent or Subsidiary of the Company, nor shall it interfere in any way with
his or her right or the Company's right, or the right of the Company's Parent or
Subsidiary, to terminate such
-4-
<PAGE>
relationship at any time, with or without cause.
6. Application of Section 102 of the Ordinance.
--------------------------------------------
(a) The provisions governing the exemption of tax for Options granted
to employees as embodied in Section 102 of the Ordinance shall be applied to
Qualified Options and to the Shares subject to Qualified Options (the "Qualified
Shares").
(b) No employee receiving Qualified Options shall claim an exemption
from Israeli Tax pursuant to Sections 95 or 97(a) of the Ordinance or pursuant
to the Law for the Encouragement of Industry (Taxes) 5729-1960 in connection
with a transfer by such employee of an Option or acquired Share prior to the end
of the "Holding Period" as defined in Rule 1( i ) of the Rules.
(c) The Qualified Options and the Qualified Shares shall be issued to
an escrow agent and held in escrow for the benefit of the Qualified Optionee
for a period of no less than two years from the date of the grant. After the two
year holding period, the escrow agent may release the Qualified Options or the
Qualified Shares to the Optionee only after ( i) the receipt by the escrow agent
of an acknowledgment from the Income Tax Authority that the Optionee has paid
any applicable tax due pursuant to the ordinance and the Rules, or (ii) the
escrow agent withholds any applicable tax due pursuant to the Ordinance and
Rules. The escrow agent and each such Qualified Optionee shall comply with the
Ordinance, the Rules and with the Escrow Agreement entered into between the
Company and the escrow agent. In the event a share dividend is declared on
Qualified Shares, such dividend shall also be subject to the provisions of this
Section 6 and the holding period for such dividend shares shall be measured from
the commencement of the holding period for the Qualified Option from which the
dividend was declared.
(d) Each Qualified Optionee shall be obligated to immediately notify
the Company and the escrow agent of his or her request, if any, to the income
Tax Authority pursuant to Rule 6(b) of the Rules in the event the Qualified
Share are registered on any stock exchange. Nothing herein shall obligate the
Company to register its shares or any portion of its shares on a stock exchange.
(e) The exemption under Section 102 of the Ordinance shall be
forfeited and the Optionee shall be required to pay any applicable tax promptly
at such time as (i) the Optionees employment is terminated during the two year
holding period (other than because of death or some other reason acceptable to
the Income Tax Authority); (ii) the Company or the Optionee fails to comply with
one or more of the conditions for the exemption as required by the Ordinance,
Rules or Income Tax Authority; or (iii) the Income Tax Authority withdraws or
cancels the exemption for the Plan or the particular Optionee. Notwithstanding
the loss of an exemption, the escrow agent shall continue to hold the Qualified
options or Qualified Shares (to the extent the Option remains exercisable
following termination of employment) for the remainder of the applicable holding
period under Section 102 of the Ordinance.
-5-
<PAGE>
7. Term of Plan. The Plan shall become effective upon its adoption by
------------
the Board. It shall continue in effect for a term of ten (10) years after the
earlier of its adoption by the Board or by the Company's Shareholders, unless
sooner terminated under Section 14 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Option
--------------
Agreement; provided, however, that the term shall be no more than ten (10) years
from the date of grant thereof.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the
Administrator in accordance with Applicable Laws and subject to guidelines as
shall be suggested by the Board from time to time, if any; provided, however,
that for Options subject to California securities laws, such price shall be (i)
no less than 85% of the Fair Market Value per Share on the date of the grant, or
(ii) if the Option is granted to a Service Provider who, at the time of the
grant of such Option, owns stock representing more than 10% of the voting power
of all classes of shares of the Company or any Parent or Subsidiary of the
Company, no less than 110% of the Fair Market Value per Share on the date of the
grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator and may consist entirely of (1) cash, (2) check, (3)
promissory note, (4) consideration received by the Company under a formal
cashless exercise program adopted by the Company in connection with the Plan, or
(5) any combination of the foregoing methods of payment. To the extent that the
consideration paid for the Shares is denominated in a currency other than New
Israeli Shekels, the exchange rate to be used to obtain a New Israeli Shekel
value of such consideration shall be according to the Representative Rate of the
U.S. dollar published by the Bank of Israel and known on the date of exercise of
the Option. In making its determination as to the type of consideration to
accept, the Administrator shall consider if acceptance of such consideration may
be reasonably expected to benefit the Company.
(c) The proceeds received by the Company from the issuance of
Shares subject to the Options will be added to the general funds of the Company
and used for its corporate purposes.
10. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Options subject to California securities laws
shall become exercisable at a rate of no less than 20% per year over five (5)
years from the date the Options are granted (except in the case of Options
granted to Officers, Directors and Consultants). Unless the Administrator
provides otherwise, vesting of Options granted hereunder shall be tolled during
any unpaid leave of absence. An Option may not be exercised for a fraction of a
Share.
-6-
<PAGE>
An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by Applicable Laws, the Option Agreement and the
Plan. If required by Israel's Currency Control Law-1978 and the regulations
promulgated thereunder (the "CCL") at the time of the payment, payment for the
Shares by a non Israeli resident shall be effected via an Israeli commercial
bank that qualifies as an "authorized dealer" pursuant to the CCL. Shares
issued upon exercise of an Option shall be issued in the name of the Optionee
or, if requested by the Optionee, in the name of the Optionee and his or her
spouse, provided that Shares issued upon exercise of a Qualified Option, within
24 months from the date of the grant, shall be issued in the name of the escrow
agent for the benefit of the Optionee. The escrow agent shall have no rights to
equity participation as to the Shares held in escrow. Until the Shares are
issued (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Shares, notwithstanding the exercise of the Option. Upon their issuance, the
Shares shall carry equal voting rights on all matters where such vote is
permitted by Applicable Law. The Company shall issue (or cause to be issued)
such Shares promptly after the Option is exercised. No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
Shares are issued, except as provided in Section 12 of the Plan.
If any law or regulation requires the Company to take any action with
respect to the Shares specified in such notice before the issuance thereof, then
the date of their issuance shall be extended for the period necessary to take
such action.
An Option may not be exercised unless, at the time the Optionee gives
notice of exercise to the Company, the Optionee includes with such notice
payment in cash or by bank check of all withholding taxes due, if any, on
account of his or her acquired Shares under the Option or gives other
assurance satisfactory to the Administrator of the payment of those withholding
taxes.
In the event the Shares are to be held by an escrow agent in
accordance with the provisions of Section 6 hereof, the escrow agent will
transfer the Shares to the Optionee upon demand, but in no event earlier than
24 months from date of grant.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee
-------------------------------------------------
ceases to be a Service Provider, other than upon the Optionee's death or
disability (as defined below), the Optionee may exercise his or her Option
within such period of time (of at least thirty (30) days) as is specified in the
Option Agreement to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in
-7-
<PAGE>
the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for three (3) months following
the Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
----------------------
Provider as a result of the Optionee's total and permanent disability (as
defined in Section 22(e)(3) of the Code), the Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement (of at
least six (6) months) to the extent the Option is vested on the date of
termination, but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement. In the absence of a specified time
in the Option Agreement, the Option shall remain exercisable for twelve (12)
months following the Optionee's termination. If, on the date of termination,
the Optionee is not vested as to the entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Option is not exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
-----------------
the Option may be exercised within such period of time as is specified in the
Option Agreement (of at least six (6) months) to the extent that the Option is
vested on the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement) by the Optionee's
estate or by a person who acquires the right to exercise the Option by bequest
or inheritance. In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to the
entire Option, the Shares covered by the unvested portion of the Option shall
revert to the Plan. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time, if
-----------------
permitted under Applicable Laws, offer to buy out for a payment in cash or
Shares, an Option previously granted, based on such terms and conditions as the
Administrator shall establish and communicate to the Optionee at the time that
such offer is made.
(f) Qualified Option Provisions. Notwithstanding the foregoing, any
---------------------------
termination of employment prior to the expiration of the 24 month period
required under Section 102 of the Ordinance and Rules may subject the Optionee
who has received Qualified Options to forfeiture of the tax benefits available
under Section 102 of the Ordinance.
11. Non-Transferability of Options. Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
12. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
-8-
<PAGE>
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of Shares covered by each outstanding
Option, and the number of Shares which have been authorized for issuance under
the Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the exercise price per Share of each such outstanding Option shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a shares split, reverse shares split, shares dividend,
recapitalization, combination or reclassification of the Shares, rights issues
or any other increase or decrease in the number of issued Shares effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Administrator, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of any class, or securities convertible into shares of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until fifteen (15) days prior to
such transaction as to all of the Optioned Shares, including Shares as to which
the Option would not otherwise be exercisable. To the extent it has not been
previously exercised, an Option will terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another company, or the sale of substantially all of the assets of
the Company, each outstanding Option shall be assumed or an equivalent option
substituted by the successor company or a Parent or Subsidiary of the successor
company. In the event that the successor company refuses to assume or
substitute for the Option, the Optionee shall fully vest in and have the right
to exercise the Option as to all of the Optioned Shares, including shares as to
which it would not otherwise be vested or exercisable. If an Option becomes
fully vested and exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Administrator shall notify the Optionee in
writing or electronically that the Option shall be fully exercisable for a
period of fifteen (15) days from the date of such notice, and the Option shall
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed if, following the merger or
sale of assets, the option confers the right to purchase or receive, for each
Share of Optioned Shares immediately prior to the merger or sale of assets, the
consideration (whether shares, cash, or other securities or property) received
in the merger or sale of assets by holders of Shares for each Share held on the
effective date of the transaction (and if such holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets is not solely ordinary shares (or their
equivalent) of the successor company or its Parent, the Administrator may, with
the consent of the successor company, provide for the consideration to be
received upon the exercise of the Option, for each Share of Optioned Shares, to
be solely ordinary shares (or their equivalent) of the successor
-9-
<PAGE>
company or its Parent equal in fair market vale to the per Share consideration
received by holders of in the merger or sale of assets.
13. Date of Grant. Subject to Applicable Laws, the date of grant of an
-------------
Option shall, for all purposes, be the date on which the Administrator makes the
determination granting such Option, or such other date as is determined by the
Board. Notice of the determination shall be given to each Service Provider to
whom an Option is so granted within a reasonable time after the date of such
grant.
14. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Board shall obtain shareholder approval
--------------------
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
15. Conditions Upon Issuance of Shares.
----------------------------------
(a) Legal Compliance. Shares shall not be issued pursuant to the
----------------
exercise of an Option unless the exercise of such Option, the method of payment
and the issuance and delivery of such Shares shall comply with Applicable Laws
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an
--------------------------
Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
16. Inability to Obtain Authority. The inability of the Company to obtain
-----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
17. Reservation of Shares. The Company, during the term of this Plan,
---------------------
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the
-10-
<PAGE>
requirements of the Plan.
18. Shareholder Approval. The Plan shall be subject to approval by the
--------------------
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
19. Information to Optionees and Purchasers. To the extent required under
---------------------------------------
California securities laws, the Company shall provide to each Optionee and to
each individual who acquires Shares pursuant to the Plan, not less frequently
than annually during the period such Optionee or purchaser has one or more
Options outstanding, and, in the case of an individual who acquires Shares
pursuant to the Plan, during the period such individual owns such Shares, copies
of annual financial statements. The Company shall not be required to provide
such statements to key employees whose duties in connection with the Company
assure their access to equivalent information.
20. Governing law. This Plan shall be governed by and construed and
-------------
enforced in accordance with the laws of the state of Israel applicable to
contracts made and to be performed therein, without giving effect to the
principles of conflict of laws.
21. Tax Consequences. Any tax consequences arising from the grant or
----------------
exercise of any Option, from the payment for Shares or from any other event or
act (of the Company or the Optionee) hereunder, shall be borne solely by the
Optionee.
22. Multiple Agreements. The terms of each Option may differ from other
-------------------
Options granted under the Plan at the same time. The Administrator may also
grant more than one Option to a given Optionee during the term of the Plan,
either in addition to, or in substitution for, one or more Options previously
granted to that Optionee.
-11-
<PAGE>
Exhibit 4.2
AMENDED AND RESTATED 1999 STOCK OPTION PLAN
<PAGE>
MERCURY INTERACTIVE CORPORATION
AMENDED AND RESTATED
1999 STOCK OPTION PLAN
(Effective December 16, 1999)
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
--------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to such individuals of the
Company and to promote the success of the Company's business. Options granted
hereunder may be either Incentive Stock Options or Nonstatutory Stock Options,
at the discretion of the Administrator and as reflected in the terms of the
written option agreement.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Committee, if one has been appointed,
-------------
or the Board of Directors of the Company, if no Committee is appointed.
(b) "Board" means the Board of Directors of the Company. A member of
-----
the Board shall be referred to hereinafter as a "Director."
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Committee" means the Committee appointed by the Board of
---------
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one is
appointed.
(e) "Common Stock" means the Common Stock of the Company.
------------
(f) "Company" means Mercury Interactive Corporation, a Delaware
-------
corporation.
(g) "Continuous Status as an Employee" means that the employment or
--------------------------------
consulting relationship is not interrupted or terminated by the Company, any
Parent or Subsidiary. Continuous Status as an Employee shall not be considered
interrupted in the case of: (i) any leave of absence approved by the
Administrator, including sick leave, military leave, or any other personal
leave; provided, however, that for purposes of Incentive Stock Options, any such
leave may not exceed ninety (90) days, unless reemployment upon the expiration
of such leave is guaranteed by contract (including certain Company policies) or
statute; or (ii) transfers between locations of the Company or between the
Company, its Parent, its Subsidiaries or its successor.
-1-
<PAGE>
(h) "Employee" means any person, including officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(j) "Incentive Stock Option" means any Option intended to qualify as
----------------------
an incentive stock option within the meaning of Section 422 of the Code.
(k) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(l) "Option" means a stock option granted pursuant to the Plan.
------
(m) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(n) "Optionee" means an Employee who receives an Option.
--------
(o) "Parent" means a "parent corporation", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(p) "Plan" means this 1999 Stock Option Plan.
----
(q) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 of the Plan.
(r) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions to Section 11 of
-------------------------
the Plan, the total number of Shares reserved and available for issuance is the
number equal to the sum of (i) 2,300,000 and (ii) on the first day of any fiscal
year, the number equal to 4% of the sum of the number of Shares outstanding as
of the last business day preceding the first day of such new fiscal year plus
the number of shares subject to outstanding and unexercised options (the
"Percentage Increase"). The Percentage Increase shall be determined annually on
the first day of each new fiscal year of the Company beginning with fiscal year
2000 and ending with (and including) fiscal year 2003. Notwithstanding the
preceding sentence, the maximum annual Percentage Increase which may be
allocated to Incentive Stock Options in any single fiscal year shall be
1,900,000 Shares, for a maximum aggregate number of 9,900,000 Shares allocable
to Incentive Stock Options under the Plan.
-2-
<PAGE>
Subject to Section 11 of the Plan, if any Shares that have been optioned
under an Option cease to be subject to such Option (other than through exercise
of the Option), or if any Option granted hereunder is forfeited, or any such
award otherwise terminates prior to the issuance of Common Stock to the
participant, the Shares that were subject to such Option shall again be
available for distribution in connection with future Option grants under the
Plan. Shares that have actually been issued under the Plan, upon exercise of an
Option, shall not in any event be returned to the Plan and shall not become
available for future distribution under the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Multiple Administrative Bodies. The Plan may be
------------------------------
administered by different bodies with respect to Directors, Officers who are not
Directors, and Employees who are neither Directors nor Officers.
(ii) Administration With Respect to Directors and Officers
-----------------------------------------------------
Subject to Section 16(b). With respect to Option grants made to Employees who
- ------------------------
are also Officers or Directors subject to Section 16(b) of the Exchange Act, the
Plan shall be administered by (A) the Board, if the Board may administer the
Plan in compliance with the rules governing a plan transaction intended to
qualify as an exempt transaction under Rule 16b-3 and/or in accordance with
Section 162(m) of the Code, or (B) a Committee (or Committees) designated by the
Board to administer the Plan, which Committee shall be constituted to comply
with the rules governing a plan transaction intended to qualify as an exempt
transaction under Rule 16b-3 and/or in accordance with Section 162(m) of the
Code. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time, as the Board
deems appropriate (and for the purposes of satisfying Rule 16b-3 and/or Section
162(m)), it may increase the size of the Committee and appoint additional
members, remove members (with or without cause) and substitute new members, fill
vacancies (however caused), and remove all members of the Committee and
thereafter directly administer the Plan .
(iii) Administration With Respect to Other Persons. With respect
--------------------------------------------
to Option grants made to Employees who are neither Directors nor Officers of the
Company, the Plan shall be administered by (A) the Board or (B) a committee
designated by the Board, which committee shall be constituted in such a manner
as to satisfy the legal requirements relating to the administration of stock
option plans, if any, of state corporate law, the relevant stock exchange and
the Code (the "Applicable Rules"). Once appointed, such Committee shall serve
in its designated capacity until otherwise directed by the Board. The Board may
increase the size of the Committee and appoint additional members, remove
members (with or without cause) and substitute new members, fill vacancies
(however caused), and remove all members of the Committee and thereafter
directly administer the Plan, all to the extent permitted by the Applicable
Rules.
-3-
<PAGE>
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 8(b) of the Plan;
(ii) to select the Employees to whom Options may be granted
hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
(vii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(viii) to prescribe, amend and rescind rules and regulations
relating to the Plan;
(ix) to modify or amend each Option (subject to Section 14(b)
of the Plan);
(x) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option previously
granted by the Administrator;
(xi) to determine and recommend the terms of any Option
exchange program or repricing program for Options granted under the Plan, and
subject to prior stockholder approval, to institute and implement any such
program;
(xii) to determine the terms and restrictions applicable to
Options; and
-4-
<PAGE>
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
----------------------------------
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.
5. Eligibility.
-----------
(a) Nonstatutory Stock Options and Incentive Stock Options may be
granted to only to Employees.
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company) exceeds $100,000, such Options shall be
treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Options shall be taken into account
in the order in which they were granted, and the Fair Market Value of the Shares
shall be determined as of the time the Option with respect to such Shares is
granted.
(d) Nothing in the Plan or any Option granted hereunder shall confer
upon any Optionee any right with respect to continuation of employment or
consulting relationship with the Company, nor shall it interfere in any way with
the Optionee's right or the Company's right to terminate his employment or
consulting relationship at any time, with or without cause.
(e) The following limitations shall apply to grants of Options to
Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 400,000 Shares.
(ii) The foregoing limitation shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 11.
(iii) If an Option is canceled (other than in connection with a
transaction described in Section 11), the canceled Option will be counted
against the limit set forth in Section 5(e)(i). For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
-5-
<PAGE>
6. Term of Plan. The term of the Plan shall be ten (10) years,
------------
commencing on August 31, 1999 and terminating on August 31, 2009 unless sooner
terminated under Section 13 of the Plan.
7. Term of Option. The term of each Option shall be no more than ten
--------------
(10) years from the date of grant. However, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Incentive Stock Option shall be no more than five (5) years from the date of
grant.
8. Exercise Price and Consideration.
--------------------------------
(a) The per Share exercise price under each Option shall be such
price as is determined by the Board, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option the per
Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
For purposes of this Section 8(a), in the event that an Option is amended to
reduce the exercise price, the date of grant of such Option shall thereafter be
considered to be the date of such amendment.
(b) The Fair Market Value shall be determined by the Board in good
faith; provided, however, that where there is a public market for the Common
Stock, the Fair Market Value per Share shall be the mean of the bid and asked
prices (or the closing price per share if the Common Stock is listed on the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System) of the Common Stock for the date of grant, as reported
in the Wall Street Journal (or, if not so reported, as otherwise reported by the
NASDAQ System) or, in the event the Common Stock is listed on a stock exchange,
the Fair Market Value per Share shall be the closing price on such exchange on
the date of grant of the Option, as reported in the Wall Street Journal.
-6-
<PAGE>
(c) The Administrator shall determine the acceptable form of
consideration for exercising an Option, including the method of payment. In the
case of an Incentive Stock Option, the Administrator shall determine the
acceptable form of consideration at the time of grant. Such consideration may
consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) delivery of a properly executed exercise notice together
with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price and
any tax withholding resulting from such exercise;
(vi) any combination of the foregoing methods of payment; or
(vii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by applicable laws.
(d) Prior to issuance of the Shares upon exercise of an Option, the
Optionee shall pay or make adequate provision for any federal or state
withholding obligations of the Company, if applicable.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board at the time of grant, including performance criteria
with respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to
-7-
<PAGE>
exercise the Option and full payment for the Shares with respect to which the
Option is exercised has been received by the Company. Full payment may, as
authorized by the Board, consist of any consideration and method of payment
allowable under Section 8(c) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a stockholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. The Company shall issue (or cause to be issued) such stock certificate
as promptly as practicable upon exercise of the Option. In the event that the
exercise of an Option is treated in part as the exercise of an Incentive Stock
Option and in part as the exercise of a Nonstatutory Stock Option pursuant to
Section 5(b), the Company shall issue a separate stock certificate evidencing
the Shares treated as acquired upon exercise of an Incentive Stock Option and a
separate stock certificate evidencing the Shares treated as acquired upon
exercise of a Nonstatutory Stock Option, and shall identify each such
certificate accordingly in its stock transfer records. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 11 of the
Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Status as an Employee. In the event of
------------------------------------
termination of an Optionee's Continuous Status as an Employee with the Company,
such Optionee may, but only within thirty (30) days after the date of such
termination (or such other period as is set out by the Administrator in the
Option Agreement, but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise the Option to the
extent that Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the
Option at the date of such termination, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section
----------------------
9(b) above, in the event of termination of an Optionee's Continuous Status as an
Employee as a result of his total and permanent disability (as defined in
Section 22(e)(3) of the Code), he may exercise his Option to the extent he was
entitled to exercise it at the date of such termination within six (6) months
from the date of such termination (or such other period as is specified in the
grant, but in no event later than the date of expiration of the term of such
Option as set forth in the Option Agreement). To the extent that the Optionee
was not entitled to exercise the Option at the date of termination, or does not
exercise such Option (to the extent exercisable) within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. Notwithstanding the provisions of Section 9(b)
-----------------
above, in the event of the death of an Optionee:
-8-
<PAGE>
(i) during the term of the Option, who is at the time of his death an
Employee of the Company and who shall have been in Continuous Status as an
Employee since the date of grant of the Option, the Option may be exercised, at
any time within six (6) months following the date of death ((or such other
period as is specified in the grant, but in no event later than the date of
expiration of the term of such Option as set forth in the Option Agreement), by
the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, as to all
of the Optioned Stock, including Shares as to which it would not otherwise be
exercisable, and such Shares shall be fully vested and not subject to any
repurchase option; or
(ii) during the post-termination exercise period specified in the
grant with respect to terminations under Section 9(b) above, at any time within
six (6) months following the date of death (or such other period as is
determined by the Administrator, but in no event later than the date of
expiration of the term of such Option as set forth in the Option Agreement), by
the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the right to
exercise that had accrued at the date of termination.
10. Non-Transferability of Options. Except as otherwise designated by the
------------------------------
Administrator, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization, Dissolution, Merger, Asset
----------------------------------------------------------------------
Sale or Change of Control.
-------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
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shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its
sole discretion in such instances, declare that any Option shall terminate as of
a date fixed by the Board and give each Optionee the right to exercise his or
her Option as to all or any part of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation or the sale of substantially all of the assets
of the Company:
(i) Each outstanding Option shall be assumed or an equivalent
option substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. Any Shares subject to a repurchase option of the Company
shall be exchanged for the consideration (whether stock, cash, or other
securities or property) received in the merger or asset sale by the holders of
the Common Stock for the successor corporation or a parent or subsidiary of such
successor corporation for each Share held on the effective date of the
transaction and such consideration shall, in the case of securities of the
successor corporation, be subject to a repurchase option with terms consistent
to the Company's repurchase option and in the case of any other property shall
be subject to vesting according to the schedule for the lapse of the repurchase
option.
(ii) In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall have the right to
exercise the Option as to all of the Optioned Stock, including Shares as to
which it would not otherwise be exercisable, and such Shares shall be fully
vested and not subject to any repurchase option. In the event that the successor
corporation fails to assume the restricted stock purchase agreement pursuant to
which the Optionee purchased unvested Shares, the Company's repurchase option
shall lapse and the shares shall be fully vested. If an Option is exercisable in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Administrator shall notify the Optionee that the Option shall be fully
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option shall terminate upon the expiration of such period. For the purposes
of this paragraph, the Option shall be considered assumed if, following the
merger or sale of assets, the option confers the right to purchase or receive,
for each Share of Optioned Stock subject to the Option immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or sale of assets was
not solely
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Common Stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in Fair Market Value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
12. Stock Withholding to Satisfy Withholding Tax Obligations. At the
--------------------------------------------------------
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with the exercise of an Option, which tax liability is subject to tax
withholding under applicable tax laws, and the Optionee is obligated to pay the
Company an amount required to be withheld under applicable tax laws, the
Optionee may satisfy the withholding tax obligation by electing to have the
Company withhold from the Shares to be issued upon exercise of the Option that
number of Shares having a Fair Market Value equal to the amount required to be
withheld. The Fair Market Value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is determined (the
"Tax Date").
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent of the Administrator;
(d) if the Optionee is subject to Rule 16b-3, the election must comply
with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option is exercised but such Optionee
shall be unconditionally obligated to tender back to the Company the proper
number of Shares on the Tax Date.
13. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Board makes the determination granting
such Option. Notice of the determination shall be given to each Employee to
whom an Option is so granted within a reasonable time after the date of such
grant.
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14. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may amend or terminate the
-------------------------
Plan from time to time in such respects as the Board may deem advisable;
provided that the following changes shall require approval of the stockholders
of the Company in the manner described in Section 18 of the Plan (i) revisions
or amendments to increase the number of Shares in the Share Pool (other than in
connection with an adjustment under Section 11 of the Plan); (ii) changes in the
designation of the class of persons eligible to be granted Options and/or (iii)
the reduction of the exercise price of any Option to the then current Fair
Market Value if the Fair Market Value of the Common Stock covered by such Option
shall have declined since the date the Option was granted.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
16. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
17. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
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18. Stockholder Approval. Any required stockholder approval obtained at a
--------------------
duly held stockholders' meeting, may be obtained by the affirmative vote of the
holders of a majority of the outstanding Shares of the Company present or
represented and entitled to vote thereon.
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EXHIBIT 5.1
OPINION OF COUNSEL
January 18, 2000
Mercury Interactive Corporation
1325 Borregas Avenue
Sunnyvale, California 94089
Re: Registration Statement on Form S-8
----------------------------------
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-8 to be filed by you
with the Securities and Exchange Commission on or about January 18, 2000 (the
"Registration Statement") in connection with the registration under the
Securities Act of 1933, as amended, of a total of 1,822,829 shares of your
Common Stock (the "Shares") reserved for issuance under the Conduct Ltd. 1998
Share Option Plan and the Mercury Interactive Corporation Amended and Restated
1999 Stock Option Plan (the "Plans"). As legal counsel for Mercury Interactive
Corporation, we have examined the proceedings taken and are familiar with the
proceedings proposed to be taken by you in connection with the sale and issuance
of the Shares under the Plans.
It is our opinion that, when issued and sold in the manner referred to in
the Plans and pursuant to the agreement which accompanies each grant under the
Plans, the Shares will be legally and validly issued, fully paid and
nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever it appears in the
Registration Statement and any amendments thereto.
Very truly yours,
GENERAL COUNSEL ASSOCIATES LLP
/s/ General Counsel Associates LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated January 28, 1999, relating to the
financial statements and financial schedules of Mercury Interactive Corporation,
which appears on Mercury Interactive Corporation's Annual Report on Form 10-K
for the year ended December 31, 1998.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
San Jose, California
January 18, 2000
