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Exhibit 10.12  




  


 
 

Witness Systems Stock Option
  Inducement Grant for Employees of Blue Pumpkin    
    


 
 

Option Award    
    


Note: Except as otherwise provided in this Option Award document, the Option referred to herein shall be subject to the terms and conditions of the Amended and Restated Stock
Incentive Plan of Witness Systems, Inc. (the "Plan"), as if it had been granted thereunder, although it is not granted under the Plan.


1.    Exercise Period of Option. Subject to the terms and conditions of this Option Award document and the Plan, and
unless otherwise modified by a written modification signed by the Company and Optionee, this Option may be exercised with respect to all of the Shares, but only according to the vesting schedule
described in Section 10 below, prior to the date which is five (5) years (the "Term") following the date of grant (hereinafter "Expiration Date"). 


2.    Restrictions on Exercise. This Option may not be exercised, unless such exercise is in compliance with the
Securities Act of 1933 and all applicable state securities laws, as they are in effect on the date of exercise, and the requirements of any stock exchange or national market system on which the
Company's Common Stock may be listed or traded at the time of exercise. Optionee understands that the Company is under no obligation to register, qualify or list the Shares with the Securities and
Exchange Commission ("SEC"), any state securities commission or any stock exchange to effect such compliance. 



3.    Termination of Option. Except as provided below in this Section, this Option may not be exercised after the date
which is thirty (30) days after Optionee ceases to perform services for the Company, or any Parent or Subsidiary. Optionee shall be considered to perform services for the Company, or any Parent
or Subsidiary, for all purposes under this Section and Section 10 hereof, if Optionee is an officer or full-time employee of the Company, or any Parent or Subsidiary, or if the
Board determines that Optionee is rendering substantial services as a part-time employee, consultant, contractor or advisor to the Company, or any Parent or Subsidiary. The Board shall
have discretion to determine whether Optionee has ceased to perform services for the Company, or any Parent or Subsidiary, and the effective date on which such services cease (the "Termination Date").
Notwithstanding anything contained herein to the contrary, if the corporate position of Optionee is, at any time, altered or revised such that Optionee's responsibilities are materially reduced or
decreased for any reason, as determined by the Board in its sole discretion, the vesting of Shares under Section 10 shall cease, effective as of the date of such reduction in Optionee's
employment responsibilities; provided, however, except as otherwise provided in this Option and the Plan, Optionee shall have the right to exercise this Option with respect to Shares which have vested
under Section 10 as of the date of such reduction of Optionee's responsibilities. 


        (a)    Termination Generally. If Optionee ceases to perform services for the Company, or any Parent or Subsidiary, for any
reason, except death or disability (within the meaning of Code Section 22(e)(3)), 










this
Option shall immediately be forfeited, along with any and all rights or subsequent rights attached thereto, thirty (30) days following the Termination Date, but in no event later than the
Expiration Date. 


        (b)    Death or Disability. If Optionee ceases to perform services for the Company, or any Parent or Subsidiary, as a result of
the death or disability of Optionee (as determined by the Board in its sole discretion), this Option, to the extent (and only to the extent) that it would have been exercisable by Optionee on the
Termination Date, may be exercised by Optionee (or, in the event of Optionee's death, by Optionee's legal representative) within ninety (90) days after the Termination Date, but in no event
later than the Expiration Date. 


        (c)    No Right to Employment. Nothing in the Plan or this Option Award document shall confer on Optionee any right to continue
in the employ of, or other relationship with, the Company, or any Parent or Subsidiary, or limit in any way the right of the Company, or any Parent or Subsidiary, to terminate Optionee's employment or
other relationship at any time, with or without cause. 


4.    Manner of Exercise.


        (a)    Exercise Agreement. This Option shall be exercisable by delivery to the Company of such form of exercise agreement,
notice, or other form as may be approved or accepted by the Company from time to time, which shall set forth Optionee's election to exercise this Option, the number of Shares being purchased, any
restrictions imposed on the Shares, and such other representations and agreements as may be required by the Company to comply with applicable securities laws. 



        (b)    Exercise Price. Such notice shall be accompanied by full payment of the Exercise Price for the Shares being purchased.
Payment for the Shares may be made in U.S. dollars in cash (by check) or, where permitted by law and approved in advance and in writing by the Compensation Committee of the Board in its sole
discretion: (i) by surrender of shares of Common Stock of the Company that have been owned by Optionee for more than six (6) months (and which have been paid for within the meaning of
SEC Rule 144, and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such shares), or were obtained by Optionee in the
open public market, having a Fair Market Value equal to the Exercise Price of the Shares being purchased; (ii) by instructing the Company to withhold Shares otherwise issuable pursuant to the
exercise of the Option having a Fair Market Value equal to the Exercise Price of the Shares being purchased (including the withheld Shares); (iii) by waiver of compensation accrued by Optionee
for services rendered; or (iv) a combination of the foregoing. 


        (c)    Withholding Taxes. Prior to the issuance of Shares upon exercise of this Option, Optionee must pay, or make adequate
provision for, any applicable federal or state tax withholding obligations of the Company. Where approved by the Compensation Committee, Optionee may provide for payment of withholding taxes upon
exercise of the Option by requesting that the Company retain Shares with a Fair Market Value equal to the minimum amount of taxes required to be withheld. In such case, the Company shall issue the net
number of Shares to Optionee by deducting the Shares retained from the Shares otherwise issuable upon exercise. 


        (d)    Issuance of Shares. Provided that such notice and payment are in form and substance satisfactory to counsel for the
Company, the Company shall cause the Shares to be issued in the name of Optionee or Optionee's legal representative. 


5.    Nontransferability of Option. This Option may not be transferred in any manner, other than by will or by the
laws of descent and distribution, and may be exercised during Optionee's lifetime only by Optionee. The terms of this Option shall be binding upon the executor, administrators, successors and assigns
of Optionee. 


6.    Tax Consequences. Optionee understands that the grant and exercise of this Option, and the sale of Shares
obtained through the exercise of this Option, may have adverse tax consequences to Optionee. Optionee should consult with his or her tax advisor and may not rely on the Company for any financial, tax
or other advice. 











7.    Interpretation. Any dispute regarding the interpretation of this Option Award document shall be submitted by
Optionee or the Company to the Compensation Committee of the Board, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Compensation Committee of the
Board shall be final and binding on the Company and Optionee. 


8.    Entire Agreement. The Plan is incorporated herein by this reference. The granting of this Option constitutes a
full accord, satisfaction and release of all obligations or commitments made to Optionee by the Company or any of its officers, directors, shareholders or affiliates with respect to the issuance of
any securities, or rights to acquire securities, of the Company or any of its affiliates. This Option Award document and the Plan constitute the entire agreement of the parties hereto, and supersede
all prior undertakings and agreements with respect to the subject matter hereof. 


9.    Exercisability of Option. Subject to the terms of the Plan and this Option Award document, the issuance of
Shares pursuant to the exercise of this Option shall be subject to the limitations set forth herein and defined below. For purposes of this Section, "Continuous Service" means a period of continuous
performance of services by Optionee for the Company, a Parent, or a Subsidiary, as determined by the Board. 



Four Year Vesting:    Optionee may exercise this Option with respect to the percentage of Shares set forth below only after Optionee has
completed the following periods of Continuous Service following the date of grant: 


        (a)    After
twelve (12) months of Continuous Service, up to twenty-five percent (25%) of the Shares; 



        (b)    After
thirteen (13) months of Continuous Service, and for each additional month of Continuous Service thereafter through the end of the forty-seventh (47th) month
of Continuous Service, an additional two percent (2%) of the Shares per month; and 


        (c)    After
forty-eight (48) months of Continuous Service, up to one hundred percent (100%) of the Shares. 




        If
Optionee's employment with the Company is terminated by the Company other than for Cause (as defined below) or by Optionee for Good Reason (as defined below) at any time
(i) during the 90-day period before a Change of Control (as defined below) and (ii) for one hundred eighty (180) days after a Change of Control, then (A) the
Option granted hereby, if less than fully vested as of the Termination Date, shall be deemed fully vested and exercisable; and (B) Section 3 (other than the second sentence thereof)
shall be deleted and replaced with the following: "This Option may not be exercised more than one hundred eighty (180) days from the later of: Optionee's Termination Date or the date Optionee
ceases to perform services for the Company, or any Parent or Subsidiary (which date shall be determined by the Board in its reasonable discretion)." 



Definitions. For purposes of Section 10 of this Option, the following definitions shall apply: 



1.    Change of Control. A "Change of Control" shall be conclusively deemed to have occurred if (and only if) any of the following shall have
taken place: (i) a Change of Control is reported by the Company in response to either Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended ("Exchange Act"), or Item 5.01 of Form 8-K promulgated under the Exchange Act; (ii) any person (as such term is used in Section 13(d) and 14(d)(2) of
the Exchange Act) is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the combined voting power of the Company's then outstanding securities; or (iii) following the election or removal of directors, a majority of the Board consists of
individuals who were not members of the Board two (2) years before such election or removal, unless the election of each director who was not a director at the beginning of such
2-year period has been approved in advance by directors representing at least a majority of the directors then in office who were directors at the beginning of the 2-year
period. 












2.    "Good
Reason" means Optionee's termination of employment for any of the following events, unless such event occurs with Optionee's express prior written consent: 



(a)    The
assignment to Optionee of any duties materially inconsistent with, or a material diminution of, his duties with the Company as in effect immediately prior to the Change of Control
of the Company, except in connection with the termination of Optionee's employment for disability, retirement, or Cause or as a result of Optionee's death or termination of employment other than for
Good Reason; 


(b)    A
reduction of fifteen percent (15%) or more in Optionee's base salary as in effect on the date hereof or as the same may be increased from time to time; 


(c)    A
change in the location of Optionee's principal place of employment by more than thirty-five (35) miles from the location where he was principally employed
immediately prior to the Change of Control; 


(d)    Any
material breach by the Company of any provision of this Option; or 


(e)    Any
failure by the Company to obtain the assumption of this Option by any successor or assign of the Company. 




3.    Cause. "Cause" means termination of Optionee's employment under any one or more of the following events: 



(a)    Optionee's
knowing and willful misconduct with respect to the business and affairs of the Company; 


(b)    Any
material violation by Optionee of any policy of the Company relating to ethical conduct or practices or fiduciary duties of a similarly situated executive; 


(c)    Knowing
and willful material breach of any provision of this Agreement which is not remedied within thirty (30) days after Optionee's receipt of notice thereof; 


(d)    Optionee's
commission of a felony or any illegal act involving moral turpitude or fraud or Optionee's dishonesty which may reasonably be expected to have a material adverse effect on
the Company; and/or 


(e)    Failure
to comply with reasonable directives of the Board which are consistent with Optionee's duties, if not remedied within thirty (30) days after Optionee's receipt of
notice thereof. 

















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Witness Systems Stock Option Inducement Grant for Employees of Blue Pumpkin

Option Award