EXHIBIT 10
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PERITUS SOFTWARE SERVICES, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
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The purpose of this Plan is to provide eligible employees of Peritus
Software Services, Inc. (the "Company") and certain of its subsidiaries with
opportunities to purchase shares of the Company's Class A common stock, no par
value (the "Common Stock"), commencing on October 1, 1997. Two hundred thousand
(200,000) shares of Common Stock in the aggregate have been approved for this
purpose.
1. Administration. The Plan will be administered by the Company's Board of
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Directors (the "Board") or by a Committee appointed by the Board (the
"Committee"). The Board or the Committee has authority to make rules and
regulations for the administration of the Plan and its interpretation and
decisions with regard thereto shall be final and conclusive.
2. Eligibility. Participation in the Plan will neither be permitted nor
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denied contrary to the requirements of Section 423 of the Internal Revenue
Code of 1986, as amended (the "Code"), and regulations promulgated
thereunder. All employees of the Company, including Directors who are
employees, and all employees of any subsidiary of the Company (as defined
in Section 424(f) of the Code) designated by the Board or the Committee
from time to time (a "Designated Subsidiary"), are eligible to participate
in any one or more of the offerings of Options (as defined in Section 9) to
purchase Common Stock under the Plan provided that:
a. they are customarily employed by the Company or a Designated
Subsidiary for more than 20 hours a week; and
b. they are employees of the Company or a Designated Subsidiary on
the first day of the applicable Plan Period (as defined below).
No employee may be granted an option hereunder if such employee,
immediately after the option is granted, owns 5% or more of the total combined
voting power or value of the stock of the Company or any subsidiary. For
purposes of the preceding sentence, the attribution rules of Section 424(d) of
the Code shall apply in determining the stock ownership of an employee, and all
stock which the employee has a contractual right to purchase shall be treated as
stock owned by the employee.
3. Offerings. The Company will make four offerings ("Offerings") to employees
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to purchase stock under this Plan. Unless the Board determines
otherwise, Offerings will begin each October 1 and April 1, or the first
business day thereafter (the "Offering Commencement Dates") and each
Offering Commencement Date will begin a 6-month period (a "Plan Period")
during which payroll deductions will be made and held for the purchase of
Common Stock at the end of the Plan Period. The first Plan Period shall
begin on October 1, 1997 and end on March 31, 1998. The last Plan Period
shall begin on April 1, 1999 and end on September 30, 1999 unless the Board
determines otherwise. The maximum number of shares available under each
Offering shall not exceed 50,000 shares during each Plan Period together
with any shares remaining unsold from any prior Plan Period. If the total
number of shares for which options are exercised exceeds the maximum number
available for each Plan Period, the Board or Committee shall make a pro-
rata allocation of the shares available and the excess payroll deduction
shall be automatically refunded to the employee, except that any balance
which is less than the purchase price of one share of Common Stock shall be
carried forward into the employee's payroll deduction account for the next
Offering. If the employee elects to discontinue participation in the Plan,
such amount shall promptly be refunded to the employee, without interest.
4. Participation. An employee eligible on the Offering Commencement Date of
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any Offering may participate in such Offering by completing and forwarding
a payroll deduction authorization form to the employee's appropriate
payroll office at least 20 days prior to the applicable Offering
Commencement Date. The form will authorize a regular payroll deduction from
the Compensation received by the employee during the Plan Period. Unless
an employee files a new form or withdraws from the Plan, his deductions and
purchases will continue at the same rate for future Offerings under the
Plan as long as the Plan remains in effect.
5. Deductions. The Company will maintain payroll deduction accounts for all
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participating employees. With respect to any Offering made under this
Plan, an employee may authorize a payroll deduction of any whole number
percentage of Compensation from 1% through 10% of Compensation with any
change in compensation during the Plan Period to result in an automatic
corresponding change in the dollar amount withheld. An employee's
Compensation shall be the employee's Base Pay. An employee's Base Pay is
his or her regular straight-time earnings, as the same may be adjusted from
time to time, and amounts paid for vacation, holiday, sick time and short-
term disability. Base Pay excludes all special payments including the
following without limitation: overtime, incentive compensation, bonuses,
sales commissions, automobile allowances, relocation expense
reimbursements, insurance payments made pursuant to any long-term
disability policies and any other type of special payment.
No employee may be granted an Option (as defined in Section 9) which
permits his rights to purchase Common Stock under this Plan and any other stock
purchase
plan of the Company and its subsidiaries, to accrue at a rate which exceeds
$25,000 of fair market value of such Common Stock (determined at the Offering
Commencement Date of the Plan Period) for each calendar year in which the Option
is outstanding at any time.
6. Deduction Changes. An employee may not increase or decrease his payroll
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deduction during a Plan Period. However, an employee may discontinue his
payroll deduction once during any Plan Period, by filing a new payroll
deduction authorization form. If an employee elects to discontinue his
payroll deductions during a Plan Period, such election shall constitute an
election to withdraw his funds pursuant to Section 8 hereof.
7. Interest. Interest will not be paid on any employee accounts, except to
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the extent that the Board or the Committee, in its sole discretion, elects
to credit employee accounts with interest at such per annum rate as it may
from time to time determine.
8. Withdrawal of Funds. An employee may at any time twenty (20) days prior to
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the close of business on the last business day in a Plan Period and for any
reason permanently draw out the balance accumulated in the employee's
account and thereby withdraw from participation in an Offering. Partial
withdrawals are not permitted. The employee may not begin participation
again during the remainder of the Plan Period. The employee may
participate in any subsequent Offering by filing a new payroll
authorization form no later than 20 days prior to the beginning date of
such Offering.
9. Purchase of Shares. On the Offering Commencement Date of each Plan Period,
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the Company will grant to each eligible employee who is then a participant
in the Plan an option ("Option") to purchase on the last business day of
such Plan Period (the "Exercise Date"), at the Option Price hereinafter
provided for, the largest number of whole shares of Common Stock of the
Company reserved for the purposes of the Plan as does not exceed the number
of shares determined by dividing $12,500 by the Average Market Price on the
Offering Commencement Date of such Plan Period. The Average Market Price
on any date shall be (a) the average (on that date) of the high and low
prices of the Common Stock on any national securities exchange on which the
Common Stock is listed, (b) the last reported sale price of the Common
Stock on the Nasdaq National Market or (c) the average of the closing bid
and asked prices last quoted on that date in the over-the-counter-market,
whichever is applicable, as published in The Wall Street Journal. If no
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sales of Common Stock were made on such a day, the price of the Common
Stock for purposes of clauses (a) and (b) above shall be the reported price
for the next preceding day on which sales were made.
The purchase price for each share purchased (the "Option Price") will be
85% of the Average Market Price of the Common Stock on (i) the first business
day of such
Plan Period or (ii) the Exercise Date, whichever is less. Each employee who
continues to be a participant in the Plan on the Exercise Date shall be deemed
to have exercised his Option at the Option Price on such date and shall be
deemed to have purchased from the Company the number of full shares of Common
Stock reserved for the purpose of the Plan that his accumulated payroll
deductions on such date will pay for pursuant to the formula set forth above
(but not in excess of the maximum number determined in the manner set forth
above). The Board may set a higher purchase price for an Offering at any time at
least 30 days prior to the Offering Commencement Date of such Offering.
Any balance remaining in an employee's payroll deduction account at the end
of a Plan Period will be automatically refunded to the employee, except that any
balance which is less than the purchase price of one share of Common Stock will
be carried forward into the employee's payroll deduction account for the
following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.
10. Issuance of Certificates. Certificates representing shares of Common Stock
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purchased under the Plan may be issued only in the name of the employee, in
the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or (in the Company's sole discretion) in the
street name of a brokerage firm, bank or other nominee holder designated by
the employee.
11. Rights on Retirement, Death or Termination of Employment. In the event of
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a participating employee's termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any
pay due and owing to an employee and the balance in the employee's account
shall be paid to the employee or, in the event of the employee's death, (a)
to a beneficiary previously designated in a revocable notice signed by the
employee (with any spousal consent required under state law) or (b) in the
absence of such a designated beneficiary, to the executor or administrator
of the employee's estate or (c) if no such executor or administrator has
been appointed to the knowledge of the Company, to such other person(s) as
the Company may, in its discretion, designate. If, prior to the last
business day of the Plan Period, the Designated Subsidiary by which an
employee is employed shall cease to be a subsidiary of the Company, or if
the employee is transferred to a subsidiary of the Company that is not a
Designated Subsidiary, the employee shall be deemed to have terminated
employment for the purposes of this Plan. Employment shall be defined in
accordance with Treasury Regulation (S) 1.421-7(h).
12. Optionees Not Stockholders. Neither the granting of an Option to an
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employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this
Plan until such shares have been purchased by and issued to him.
13. Rights Not Transferable. Rights under this Plan are not transferable by a
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participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by
the employee.
14. Application of Funds. All funds received or held by the Company under this
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Plan may be combined with other corporate funds and may be used for any
corporate purpose.
15. Adjustment in Case of Changes Affecting Common Stock. In the event of a
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subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for this Plan, and
the share limitation set forth in Section 9, shall be increased
proportionately, and such other adjustment shall be made as may be deemed
equitable by the Board or the Committee. In the event of any other change
affecting the Common Stock, such adjustment shall be made as may be deemed
equitable by the Board or the Committee to give proper effect to such
event.
16. Merger. If the Company shall at any time merge or consolidate with another
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corporation and the holders of the capital stock of the Company immediately
prior to such merger or consolidation continue to hold at least 80% by
voting power of the capital stock of the surviving corporation ("Continuity
of Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such
Option for each share as to which such Option shall be exercised the
securities or property which a holder of one share of the Common Stock was
entitled to upon and at the time of such merger, and the Committee shall
take such steps in connection with such merger as the Committee shall deem
necessary to assure that the provisions of Paragraph 15 shall thereafter be
applicable, as nearly as reasonably may be, in relation to the said
securities or property as to which such holder of such Option might
thereafter be entitled to receive thereunder.
In the event of a merger or consolidation of the Company with or into
another corporation which does not involve Continuity of Control, or of a sale
of all or substantially all of the assets of the Company while unexercised
Options remain outstanding under the Plan, (a) subject to the provisions of
clauses (b) and (c), after the effective date of such transaction, each holder
of an outstanding Option shall be entitled, upon exercise of such Option, to
receive in lieu of shares of Common Stock, shares of such stock or other
securities as the holders of shares of Common Stock received pursuant to the
terms of such transaction; or (b) all outstanding Options may be cancelled by
the Board or the Committee as of a date prior to the effective date of any such
transaction and all payroll deductions shall be paid out to the participating
employees; or (c) all outstanding Options may be cancelled by the Board or the
Committee as of the effective date of any such transaction, provided that notice
of such cancellation shall be given to each holder of an Option, and each holder
of an Option shall have the right to exercise such Option in full based on
payroll deductions
then credited to his account as of a date determined by the Board or the
Committee, which date shall not be less than ten (10) days preceding the
effective date of such transaction.
17. Amendment of the Plan. The Board may at any time, and from time to time,
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amend this Plan in any respect, except that (a) if the approval of any such
amendment by the shareholders of the Company is required by Section 423 of
the Code, such amendment shall not be effected without such approval, and
(b) in no event may any amendment be made which would cause the Plan to
fail to comply with Section 16 of the Exchange Act and the rules
promulgated thereunder, as in effect from time to time, or Section 423 of
the Code.
18. Insufficient Shares. In the event that the total number of shares of
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Common Stock specified in elections to be purchased under any Offering plus
the number of shares purchased under previous Offerings under this Plan
exceeds the maximum number of shares issuable under this Plan, the Board or
the Committee will allot the shares then available on a pro rata basis.
19. Termination of the Plan. This Plan may be terminated at any time by the
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Board. Upon termination of this Plan all amounts in the accounts of
participating employees shall be promptly refunded.
20. Governmental Regulations. The Company's obligation to sell and deliver
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Common Stock under this Plan is subject to listing on a national stock
exchange or quotation on the Nasdaq National Market and the approval of all
governmental authorities required in connection with the authorization,
issuance or sale of such stock.
The Plan shall be governed by Massachusetts law except to the extent that
such law is preempted by federal law.
The Plan is intended to comply with the provisions of Rule 16b-3
promulgated under the Securities Exchange Act of 1934. Any provision
inconsistent with such Rule shall to that extent be inoperative and shall not
affect the validity of the Plan.
21. Issuance of Shares. Shares may be issued upon exercise of an Option from
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authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
22. Notification upon Sale of Shares. Each employee agrees, by entering the
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Plan, to promptly give the Company notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years
after the date of grant of the Option pursuant to which such shares were
purchased.
23. Effective Date and Approval of Shareholders. The Plan as amended hereby
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shall take effect on May 5, 1997, subject to approval by the shareholders
of the Company as required by Section 423 of the Code, which approval must
occur within twelve months of the adoption of such amendment by the Board.
Adopted by the Board of Directors on
May 5, 1997
Approved by the Stockholders on May 28, 1997
AMENDMENT NO. 1 TO THE
PERITUS SOFTWARE SERVICES, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
The first paragraph of the Peritus Software Services, Inc. 1997 Employee
Stock Purchase Plan (the "Plan") is hereby amended, subject to stockholder
approval, to increase from 200,000 to 300,000 the number of shares of Common
Stock, $.01 par value per share, authorized for issuance under the Plan (subject
to adjustment under Section 15 of the Plan).
Section 3 of the Plan is hereby amended, subject to stockholder approval,
to increase from 50,000 to 100,000 the maximum number of shares, together with
any shares remaining unsold from any prior Plan Period, of Common Stock
available under each Offering during each of the third and last Plan Periods.
Capitalized terms used and not otherwise defined herein shall have the
meanings ascribed to them in the Plan.
Adopted by the Board of Directors on
April 21, 1998
Approved by the Stockholders on
June 10, 1998