EXHIBIT 10.35


 


WITNESS SYSTEMS, INC.


 


AMENDED & RESTATED

EMPLOYEE STOCK PURCHASE PLAN

January 1, 2006


 


ARTICLE I


PURPOSE OF PLAN


 


Witness
Systems, Inc. has adopted this employee stock purchase plan to encourage the
employees of the Company (and its participating affiliated companies) to
acquire a proprietary interest, or to increase their existing proprietary
interest, in the Company. The Board of Directors of the Company believes that
employee ownership of the Company’s stock will serve as an incentive, encouraging
employees to continue their employment and to perform diligently their duties
as employees. It is further intended that the Plan qualify as an “employee
stock purchase plan” within the meaning of Code §423.


 


ARTICLE II


DEFINITIONS


 


When
used in this Plan with initial capital letters, the following terms shall have
the meanings set forth below:


 


2.1           Board shall mean the Board of Directors of
the Company.


 


a.             2.2           Code shall mean the Internal Revenue Code
of 1986, as amended.


 


b.             2.3           Committee shall mean the group of
individuals appointed by the Board to administer the Plan, pursuant to Section
10.1. In the absence of any such appointment, the Company’s Human Resource
Director and Chief Financial Officer shall function as the Committee.


 


c.             2.4           Common Stock shall mean the common stock
of the Company.


 


d.             2.5           Company shall mean Witness Systems, Inc.


 


e.             2.6           Effective Date shall mean the day on which
the Common Stock is initially offered for purchase to the public by the
Company. This Amended & Restated Plan shall be effective as of January 1,
2006.


 


f.              2.7           Eligible Employee
shall mean, with respect to an Offering Period, an Employee who is not
described by the following:


 


(a)           any
Employee who is regularly scheduled to work (determined as of the Enrollment
Date for such Offering Period) 20 hours or less per week;


 


(b)           any
Employee who is regularly scheduled to work (determined as of the Enrollment
Date for such Offering Period) for not more than five (5) months in any
calendar year; and


 


(c)           any
Employee who, immediately after an option would be granted hereunder, would own
shares of the Common Stock, or of the stock of a parent or subsidiary
corporation of the Company, possessing 5% or more of the total combined voting
power or value of all classes of such stock. In determining whether an Employee
owns 5% of such shares, (A) the attribution of ownership rules of Code §424(d)
shall apply, and (B) an Employee shall be deemed to own the shares of stock
underlying any outstanding option which he has been granted (whether under the
Plan or any other plan or arrangement).


 


g.             2.8           Employee shall mean any individual who is
a common-law employee of any Participating Company. Certain Employees are not
eligible to participate in the Plan, pursuant to Section 3.2 hereof.


 

















 


h.             2.9           Enrollment Date shall mean the last
business day of the calendar month immediately preceding each Offering
Commencement Date, except that, with respect to the initial Offering Period,
the Enrollment Date shall be the last business day of the calendar month
immediately following the calendar month in which the initial registration
statement registering the shares of Common Stock issuable hereunder pursuant to
the Securities Act of 1933, as amended, is declared effective.


 


i.              2.10         Fair Market Value
shall mean, as of any date, the value of Common Stock determined as follows:


 


(a)           For
purposes of making purchases under the Plan which are made on the open market,
the Fair Market Value of the Common Stock shall be the actual market close
price on the date and at the time of the purchase;


 


(b)           For
purposes other than making purchases under the Plan, the Fair Market Value of
the Common Stock shall be determined as follows:


 


(i)            If
the Common Stock is listed on any established stock exchange or a national
market system, including without limitation the National Market of the National
Association of Securities Dealers, Inc. Automated Quotation (“NASDAQ”) System,
its Fair Market Value per share shall be the closing sale price for the Common
Stock (or the mean of the closing bid and asked prices, if no sales were
reported), as quoted on such exchange or system on the date of such
determination, as reported by NASDAQ, or such other source as the Committee
deems reliable;


 


(ii)           If
the Common Stock is not listed on any established stock exchange or a national
market system, its Fair Market Value per share shall be the average of the
closing dealer “bid” and “ask” prices of a share of the Common Stock as
reflected on the NASDAQ interdealer quotation system of the National
Association of Securities Dealers, Inc. on the date of such determination;


 


(iii)          In
the absence of an established market for the Common Stock, the Fair Market
Value thereof shall be determined in good faith by the Board.


 


(iv)          If,
for any reason, the Fair Market Value per share cannot be ascertained or is
unavailable for the date in question, the Fair Market Value per share shall be
determined as of the nearest preceding date on which such Fair Market Value can
be ascertained under the appropriate method indicated above.


 


(c)           Notwithstanding the above provisions,
for purposes of making purchases under the Plan during the initial Offering
Period, the Fair Market Value per share of the Common Stock as of the Effective
Date shall be deemed to be the price per share at which the Common Stock is
offered to the public by the Company pursuant to the Company’s initial public
offering.


 


j.              2.11         Offering Commencement
Date shall mean the first day of each Offering Period.


 


k.             2.12         Offering Ending Date
shall mean the last day of each Offering Period.


 


l.              2.13         Offering Period
shall mean the period during which each option to purchase stock granted
pursuant to the Plan is in effect. The duration and timing of Offering Periods
may be changed by the Committee pursuant to Section 4.2 of this Plan.


 


m.            2.14         Offering Period Pay shall mean, with
respect to an Offering Period, the product of (i) the number of complete
payroll periods in such Offering Period, times (ii) such Employee’s Total Pay
for the payroll period which ends on or immediately prior to the Offering
Commencement Date of such Offering Period.


 


n.             2.15         Participating Company
shall mean (i) the Company, and (ii) any “parent corporation” or “subsidiary
corporation” (as defined in Code §§424(e) and (f)) of the Company which have
been designated by the


 

















 


Board and which have
adopted (by formal written resolutions of the board of directors of such
corporation) the Plan for the benefit of its employees.


 


o.             2.16         Plan shall
mean the Witness Systems, Inc. Amended & Restated Employee Stock Purchase
Plan.


 


p.             2.17         Total Pay
shall mean, with respect to an Employee, all of his regular straight-time
earnings, plus commissions, overtime, shift premium, incentive compensation,
incentive payments, bonuses, and other compensation, all as reported to the
Internal Revenue Service for federal income tax purposes on Form W-2, plus any
before-tax contributions made to plans covered by Code §§401(k) and 125.


 


ARTICLE III


ELIGIBILITY


 


q.             3.1           Participation by Eligible Employees. An Eligible
Employee of a Participating Company shall be eligible to participate in the
Plan as of the first day of the Offering Period which next begins following the
date of hire of such Eligible Employee by the Company if the Employee is an
Eligible Employee as of such date.


 


r.              3.2           Transfers to/from
Eligible Class. An Employee who ceases to be an Eligible Employee
during an Offering Period but who remains an Employee shall be treated as if he
had made an election to modify his payroll deductions to zero effective for
payroll periods ending on or after the date on which such Employee ceased to be
an Eligible Employee. An Employee who becomes an Eligible Employee during an
Offering Period and who was an Employee prior to the date on which such
Employee became an Eligible Employee hereunder shall be entitled to participate
in the Plan as of the first day of the Offering Period which next begins on or
after the date on which such Employee becomes an Eligible Employee if the
Employee is an Eligible Employee as of such date.


 


ARTICLE IV


OFFERING
PERIODS


 


s.             4.1           Quarterly Offering Periods. The Plan shall be
implemented by a continuous series of Offering Periods. Prior to January 1,
2006, the Offering Periods under the Plan shall be the six-month periods of
January 1 through June 30, and July 1 through December 31, with the initial
Offering Period beginning on the Effective Date and ending on June 30, 2000. On
and after January 1, 2006, the Offering Periods under the Plan shall be the
three-month periods of January 1 through March 31, April 1 through June 30,
July 1 through September 30, and October 1 through December 31.


 


t.              4.2           Other Offering Periods.
Without amendment to the Plan, the Committee may, in its sole discretion,
designate other periods as Offering Periods. These periods may be more or less
frequent and may be in addition to or in lieu of the semi-annual Offering
Periods described in Section 4.1 above. However, notwithstanding the foregoing,
in no event shall Offering Periods be designated which would cause the Plan to
violate the requirements of Code §423(b)(7).


 


ARTICLE V


ELECTION
TO PARTICIPATE


 


u.             5.1           Election. Each employee who is eligible to
participate in the Plan may file with the Committee or their designated
representative on or before the close of business on any Enrollment Date
(within such time period as provided by the Committee), an election form
authorizing specified regular payroll deductions over the next succeeding
Offering Period; provided, however, with respect to the initial Enrollment Date,
no election shall be valid unless given with a period specified by the
Committee prior to such date. These payroll deductions shall be on an after-tax
basis, so that all applicable federal, state, local and Social Security taxes
shall apply. At the time an Employee files his election form, he shall elect to
have payroll deductions made on each payday during the Offering Period (or, for
the initial Offering Period, during the period beginning immediately following
the initial Enrollment Date and ending on the initial Offering Ending Date) in
an amount which is not less than 1% nor greater than 15% of such Employee’s
Total Pay for each payroll period. No cash contributions or payments may be
made by an Employee to the Plan. Payroll deductions for an Employee shall
commence on the first payroll period beginning after the Offering Commencement
Date (or, for the initial Offering Period, the Enrollment Date) and shall


 

















 


end on the last payroll
in the Offering Period before the Offering Ending Date, to which such
authorization is applicable, unless sooner terminated by the Employee.


 


v.             5.2           Deemed Election. An Employee who has
entered into a written agreement with the Company not to be eligible for
participation in this Plan and/or any employee benefit plans of the Company
shall, by entering into such written agreement, automatically be considered to
have elected to have none of his pay deducted under this Plan during any
Offering Period which begins while such written agreement is in effect.


 


w.            5.3           Accounts. The Committee or their
designated representatives shall establish a bookkeeping account for each
Employee in the Plan and shall credit each Employee’s payroll deductions to his
account. Any funds actually held in Accounts shall remain part of the general assets
of the Company and may be used by the Company for any corporate purpose.


 


x.             5.4           Withdrawals. By written notice to the
Committee or their designated representatives during an Offering Period (on
such form or in such manner as the Committee may specify), but at least thirty
(30) days prior to the Offering Ending Date for such Offering Period, an
Employee may elect to cease his payroll deductions effective as soon as
administratively practicable following receipt of such election, and the
Employee may also elect to withdraw the total amount (but not less than the
total amount) credited to his Account. Any such withdrawn amount shall be paid
to the Employee, in cash or its equivalent, without interest, as promptly as
administratively practicable. An Employee who elects to withdraw the total
amount credited to his Account shall cease participation in the Plan
immediately. 


 


y.             5.5           Modifications. An Employee may not elect
to modify his payroll deductions during an Offering Period, except as provided
in Section 5.4 above.


 


z.             5.6           Leave of Absence. For purposes of
participation in the Plan, an Employee who is on a leave of absence shall be
deemed to be an Employee for the first ninety (90) days of such leave of
absence; provided, that as of the close of business on the ninetieth (90th)
day of such leave of absence, the Employee’s employment (solely for purposes of
the Plan) shall be deemed to have terminated unless the Employee shall have
returned to his regular employment prior to the close of business on such ninetieth
(90th) day, except as otherwise required by law. If an Employee’s
employment is terminated earlier by the Company, for any reason, his right to
participate in the Plan shall terminate simultaneously.


 


aa.           5.7           Interest. No interest will accrue or be
paid on any payroll deductions contributed to the Plan or credited to the
Account of any Employee.


 


ARTICLE VI


GRANTING
OF OPTIONS


 


bb.          6.1           Number of Option Shares.


 


cc.           (a)           On
each Offering Commencement Date prior to January 1, 2006, each Employee who is
eligible to participate in this Plan shall be granted an option to purchase a
maximum number of shares of the Common Stock determined by dividing 15% of his
expected Offering Period Pay by 85% of the Fair Market Value of one share of
the Common Stock on such Offering Commencement Date and rounding the result
down to the nearest whole number.


 


dd.          (b)           On
each Offering Commencement Date on or after January 1, 2006, each Employee who
is eligible to participate in this Plan shall be granted an option to purchase
a maximum number of shares of the Common Stock determined by dividing the 1% to
15% of his Offering Period Pay contribution by 95% of the Fair Market Value
close price of one share of the Common Stock on such Offering Ending Date and
rounding the result down to the nearest whole number.


 


ee.           6.2           Duration. Each option granted on an
Offering Commencement Date shall terminate on the immediately following
Offering Exercise Date, unless terminated earlier pursuant to the terms of the
Plan.


 

















 


ff.            6.3           Annual Limit on Options Granted. No option
to purchase shares under the Plan shall be granted to an Employee if such
option, when combined with all other options granted under all of the Code §
423 employee stock purchase plans of the Company, its parents and its
subsidiary corporations, would permit such Employee to purchase shares of the
Common Stock with a Fair Market Value (determined at the time the option is
granted) in excess of $25,000 for each calendar year in which the option is
outstanding at any time, determined in accordance with Code §423(b)(8).


 


gg.          6.4           Option Exercise Price.


 


hh.          (a)           For
an option to purchase stock granted prior to January 1, 2006, the price of each
share of the Common Stock shall be the lesser of (i) 85% of the Fair Market
Value of such share on the Offering Commencement Date, or (ii) 85% of the Fair
Market Value of such share on the Offering Exercise Date.


 


ii.             (b)           For
an option to purchase stock granted on or after January 1, 2006, the price of
each share of the Common Stock shall be 95% of the Fair Market Value market
close price of such share on the Offering Ending Date.


 


ARTICLE VII


EXERCISE
OF OPTIONS


 


jj.             7.1           Automatic Purchase. As of each Offering
Ending Date and except as provided in Sections 7.2 and 7.3 hereof, the Committee
or their designee shall purchase, for each Employee having funds credited to
his Account, the number of whole shares of the Common Stock which is the lesser
of (i) the maximum number of such shares for which such Employee has been
granted an option to purchase during such Offering Period, or (ii) the number
of whole shares of the Common Stock determined by dividing the amount credited
to his Account by the Share Purchase Price. No fractional shares shall be
issued, and, except as provided in Sections 7.2 and 7.3 hereof, any amount in
an Employee’s Account that could have represented the purchase of such
fractional shares, or that exceeds the Share Purchase Price for the shares of
the Common Stock purchased on such Offering Ending Date, shall be either (1) carried
forward in such Employee’s Account and shall be available for purchasing shares
of Common Stock in the next succeeding Offering Period or (2) refunded to the
employee as soon as administratively practical.


 


kk.           7.2           Maximum Amount of Common Stock Purchased.
Notwithstanding any provisions to the contrary contained herein, no Employee
may use the amount credited to his Account pursuant to the Plan during any
calendar year for purchase of Common Stock exceeding $25,000 in Fair Market
Value (determined as of the Offering Commencement Date). When this amount of
Common Stock has been purchased, any excess amount credited to an Employee’s
Account (including any excess resulting from an inability to purchase a whole
share) shall be returned to such Employee, payroll deductions for such Employee
shall cease, and such Employee shall be ineligible to participate in any
subsequent Offering Period occurring during that same calendar year. Such
Employee’s election automatically shall become effective on the first Offering
Commencement Date of the next succeeding calendar year, subject to the
termination provisions herein. To the extent that the amount credited to his
Account pursuant to the Plan for purchase of Common Stock during any calendar
year is greater than necessary for such purchase, any excess shall be returned
to such Employee as promptly as administratively practicable.


 


ARTICLE VIII


DELIVERY
OF COMMON STOCK; SHAREHOLDER RIGHTS


 


ll.             As soon as practicable after each
Offering Exercise Date, the Company shall issue and deliver to each Employee
certificates, or electronic facsimile, representing the shares of the Common
Stock, if any, purchased for such Employee, together with any cash to which he
may be entitled hereunder. Upon issuance of such certificates (but not prior
thereto), the Employee shall have all of the rights and privileges of a
shareholder of the Company with respect to such shares. Common Stock to be
delivered to an Employee pursuant to the Plan shall be registered in the name
of the Employee.


 

















 


ARTICLE IX


STOCK
RESERVED FOR OPTIONS


 


mm.         9.1           Shares Reserved for Use By Plan. The
Company shall reserve a total of five hundred fifty thousand (550,000) shares
of the Common Stock for issuance and purchase by Employees under the Plan;
provided, however, this total number of shares of Common Stock that may be
issued pursuant to this Plan shall be automatically increased on the last
trading day of the final month of each calendar year of the Company, beginning
with the calendar year ending December 31, 2000, by (1) a number of Shares
equal to 2% of the number of shares of Common Stock outstanding on the last
trading day of the month preceding the final month of each such calendar year
or (2) such lesser amount as may be determined by the Board in its sole
discretion, but in no event shall any such annual increase exceed five hundred
thousand (500,000) Shares (as adjusted for any change contemplated in Article
XII hereof). The number of shares of the Common Stock reserved for the Plan may
be adjusted as provided in Article XII. The shares of the Common Stock reserved
for the Plan may be shares now or hereafter authorized but unissued or may be
shares of treasury stock.


 


nn.          9.2           Shares Subject to Unexercised Options. If
and to the extent that any right to purchase reserved shares of the Common
Stock shall not be exercised by the Employee who is the holder of such right,
or if such right shall terminate as provided herein, then the shares subject to
such right to purchase (i) shall again become available for purposes of the
Plan, unless the Plan shall have been terminated, and (ii) shall not be deemed
to increase the number of shares of the Common Stock reserved for purposes of
the Plan.


 


ARTICLE X


ADMINISTRATION
OF PLAN


 


oo.          10.1         Appointment of Committee. The Plan shall
be administered by a Committee, which shall consist of those persons so
designated by the Board. The Board from time to time may remove members from,
or add members to, the Committee. Vacancies on the Committee shall be filled by
the Board.


 


pp.          10.2         Meetings. The Committee shall select one
of its members as Chairman and shall hold meetings at such times and places as
the Chairman shall determine. A majority of the members of the Committee shall
constitute a quorum, and the Committee may act by vote of a majority of its
members at a meeting at which a quorum is present, or without a meeting by a
written consent to their action signed by all members of the Committee.


 


qq.          10.3         Authority. The Committee may request
advice or assistance or employ such other persons as are necessary for proper
administration of the Plan. Subject to the express provisions of the Plan, the
Committee shall have authority to interpret the Plan, to prescribe rules and
regulations for administering the Plan, and to make all other determinations
necessary or advisable in administering the Plan; all of such determinations
shall be final and binding upon all persons, unless otherwise determined by the
Board. Without amendment to the Plan, the Committee shall be authorized to:


 


(a)           limit
the frequency and/or number of changes in the payroll deduction amounts
withheld during an Offering Period;


 


(b)           permit
payroll withholding in excess of the amount designated by an Employee in order
to adjust for delays or mistakes in the Company’s processing of properly
completed election forms;


 


(c)           establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Company Stock
for each Employee properly correspond with amounts withheld from the Employee’s
paychecks; and


 


(d)           establish
such other limitations or procedures as it may determine, in its sole
discretion, advisable which are consistent with the terms of the Plan.


 


ARTICLE XI


RIGHTS
NOT TRANSFERABLE


 


Rights
under the Plan are not transferable by an Employee other than by will or the
laws of descent and distribution and are exercisable during his lifetime only
by him.


 

















 


ARTICLE XII


ADJUSTMENT
IN CASE OF CHANGES


AFFECTING
THE COMPANY’S STOCK


 


rr.            12.1         General Rule. In the event of a split,
subdivision or consolidation of outstanding shares of the Common Stock, or in
the event of any “corporate transaction”, as defined in Treas. Reg.
§1.425-1(a)(1)(ii), other than a transaction described in Section 12.2 hereof,
the number of shares of the Common Stock reserved or authorized to be reserved
under the Plan and the number and price of such shares subject to purchase
pursuant to options outstanding hereunder, in the sole discretion of the
Committee, may be adjusted in such manner as may be deemed necessary or
equitable by the Committee to give proper effect to such event. If any
adjustment hereunder would create a fractional share or a right to acquire a
fractional share, such fractional share shall be disregarded, and the number of
shares available under the Plan or the number of shares to which any Employee
shall be entitled will be the next lower number of shares, rounding all
fractions downward. Notwithstanding anything herein to the contrary, all
adjustments to the shares of the Common Stock shall be made in such a manner as
to comply with the requirements of Code §424 and to preserve the options’
status under Code §423.


 


ss.           12.2         Dissolution or Certain Mergers. A
dissolution or liquidation of the Company or a merger or consolidation in which
the Company is not the surviving corporation, shall cause each outstanding
option to terminate; provided, that each Employee shall, in such event, have
paid to him in cash the amount credited to his Account at that time prior to
such dissolution or liquidation, or merger or consolidation in which the
Company is not the surviving corporation.


 


tt.            12.3         Rights of Employees. Except as hereinabove
expressly provided, no Employee shall have any rights by reason of any
subdivision or consolidation of shares of stock of any class or any other
increase or decrease in the number of shares of stock of any class by reason of
any dissolution, liquidation, merger or consolidation or spin-off of the assets
or stock of another corporation; and any issue by the Company of shares of
stock of any class, or securities convertible into shares of stock of any
class, shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of the Common Stock subject to the
option. The grant of an option pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part
of its business or assets.


 


ARTICLE XIII


TERMINATION
OF EMPLOYMENT OR DEATH OF EMPLOYEE


 


uu.          13.1         Termination of Employment. In the event of
an Employee’s termination of employment (for any reason other than death)
during a Offering Period (other than the last day of such Offering Period), any
option granted to him under the Plan shall terminate immediately upon the date
his employment ends, and the amount credited to his Account shall be refunded
to him in cash as soon as practicable after the earlier of (1) the Offering
Ending Date of such Offering Period, or (2) the payroll period next following
his termination of employment.


 


vv.          13.2         Death. In the event of an Employee’s death
during a Offering Period (other than the last day of such Offering Period), any
option granted to him under the Plan for such Offering Period shall terminate
immediately upon the date of his death, and the amount credited to his Account
for such Offering Period shall be paid in cash to the Estate of such Employee
as soon as practicable after the earlier of (1) the Offering Ending Date of
such Offering Period, or (2) the payroll period next following his termination
of employment. Also, in the event any shares of the Common Stock and/or any
cash is payable to the deceased Employee with respect to an Offering Period
ending on or before his date of death, such shares and/or cash shall be paid to
the Estate of such Employee.


 


ARTICLE XIV


AMENDMENT
AND TERMINATION OF THE PLAN


 


ww.         14.1         Amendment. The Board may amend the Plan in
any respect; provided, any amendment (i) increasing the number of shares of the
Common Stock reserved under the Plan, (ii) changing the designated class of
employees eligible to participate in the Plan, or (iii) materially increasing
the benefits accruing to Employees


 

















 


under the Plan, must be
approved within 12 months of the adoption of such an amendment by the holders
of a majority of the voting power of the outstanding shares of the Common Stock.


 


xx.            14.2         Termination. The Plan and all rights of
Employees hereunder shall terminate:


 


(a)           as
of the Offering Ending Date that Employees become entitled to purchase a number
of shares of the Common Stock that substantially exhausts the number of such shares
available for issuance under the Plan, to such an extent that the Board and the
Committee determine that no subsequent options are practicable; or


 


(b)           in
the sole discretion of the Board, as of the end of any Offering Period with
respect to future Offering Periods.


 


yy.          14.3         Compliance. To the extent necessary for
compliance with Code §423 (or any successor provisions), the Company shall
obtain shareholder approval in such a manner and to such a degree as may be
required for any amendment to or termination of the Plan.


 


ARTICLE XV


NOTICES


 


All
notices or other communications by an Employee to the Committee pursuant to or
in connection with the Plan shall be deemed to have been duly given when
received in the form specified by the Committee at the location, or by the
person, designated by the Committee for the receipt thereof.


 


ARTICLE XVI


INDEMNIFICATION
OF COMMITTEE


 


In
addition to such other rights of indemnification as they may have as directors,
the members of the Committee shall be indemnified by the Company against
reasonable expenses (including, without limitation, attorneys’ fees) actually
and necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal, to which they or any of them may
be a party by reason of any action taken or failure to act under or in
connection with the Plan or any option granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is
approved to the extent required by and in the manner provided by the Bylaws of
the Company relating to indemnification of directors) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Committee member or members did not act in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Company.


 


ARTICLE XVII


WITHHOLDING
REQUIREMENTS


 


At the
time the option is exercised, in whole or in part, or at the time some or all
of the Common Stock issued under the Plan is disposed of, the Employee must
make adequate provision for the Company’s federal, state, or other tax
withholding obligations, if any, which arise upon the exercise of the option or
the disposition of the Common Stock. At any time, the Company may, but will not
be obligated to, withhold from the Employee’s compensation the amount necessary
for the Company to meet applicable withholding obligations, including any
withholding required to make available to the Company any tax deductions or
benefits attributable to sale or early disposition of Common Stock by the
Employee.


 


ARTICLE XVIII


CONSTRUCTION
OF PLAN


 


For
purposes of the Plan, masculine, feminine, neuter, singular or plural pronouns
shall be deemed to refer to such person, persons or entity as may be
appropriate in the context.


 

















 


ARTICLE XIX


EXPENSES
OF PLAN


 


The
Company shall pay all operational expenses of the Plan, including, without
limitation, all brokerage commissions due and payable for the purchase and sale
of Common Stock.


 


ARTICLE XX


COMPLIANCE


 


The
Plan is intended to comply with the requirements of Code §423 (and any of its
successor provisions). Pursuant to Code §423, an Employee may be eligible for
certain favorable tax treatment with regard to Common Stock purchased under the
Plan, if no disposition of the Common Stock is made by such Employee within 2
years after the date of the granting of the option to him under the Plan nor
within 1 year after the transfer of the Common Stock to him.


 


ARTICLE XXI


EMPLOYEE
STATEMENTS AND REPORTING


 


On or
before January 31 of each calendar year, the Committee shall provide a
statement, either on paper or electronically, to each Employee who exercised an
option to purchase shares under the Plan during the previous calendar year. The
Employee’s statement shall contain the following information: the name, address
and employer identification number of the Company, the date the Common Stock
was transferred to the Employee, the number of shares which were transferred to
the Employee, and the type of option under which the transferred shares were
acquired. In addition, pursuant to Code §6039, the Committee shall make any and
all filings necessary to the Internal Revenue Service with regard to options
granted and exercised under the Plan.


 


ARTICLE XXII


EFFECTIVE
DATE OF PLAN


 


The
Plan shall become effective as of the Effective Date; provided, within 12
months of the adoption of the Plan by the Board, the Plan is approved by the
holders of a majority of the voting power of the outstanding shares of the
Common Stock. If the Plan is not so approved, the Plan shall not become
effective and any prior grant of options hereunder shall be null and void ab initio.


 


IN WITNESS WHEREOF, the Plan is hereby executed by a duly
authorized officer of the Company, on this 30th day of November 2005.


 


 


	
   

  	
   

  	
  COMPANY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  WITNESS SYSTEMS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: William Evans

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title: Chief Financial Officer