**Exhibit 10.3**

 

**Witness Systems Amended andRestatedStock Incentive Plan**

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**OptionAward**

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The Option referred toherein is subject to the terms and conditions of the Amended and Restated StockIncentive Plan of Witness Systems, Inc. (the “Plan”).

 

**1.****     ExercisePeriod of Option.**  Subject to theterms and conditions of this Award document and the Plan, and unless otherwisemodified by a written modification signed by the Company and Optionee, thisOption may be exercised with respect to all of the Shares, but only accordingto the vesting schedule below and as described in Section 10 below,prior to the date which is five (5) years (the “Term”) following the dateof grant (hereinafter “Expiration Date”).

 

**2.****     Restrictionson Exercise.**  This Option may notbe exercised unless such exercise is in compliance with the Securities Act of1933 and all applicable state securities laws as they are in effect on the dateof exercise, and the requirements of any stock exchange or national marketsystem on which the Company’s Common Stock may be listed or traded at the timeof exercise.  Optionee understands thatthe Company is under no obligation to register, qualify or list the Shares withthe Securities and Exchange Commission (“SEC”), any state securities commissionor 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 afterOptionee ceases to perform services for the Company, or any Parent orSubsidiary.  Optionee shall be consideredto perform services for the Company, or any Parent or Subsidiary, for allpurposes under this Section and Section 10 hereof, if Optionee is anofficer or full-time employee of the Company, or any Parent or Subsidiary, orif the Board determines that Optionee is rendering substantial services as apart-time employee, consultant, contractor or advisor to the Company, or anyParent or Subsidiary.  The Board shallhave discretion to determine whether Optionee has ceased to perform servicesfor the Company, or any Parent or Subsidiary, and the effective date on whichsuch services cease (the “Termination Date”). Notwithstanding anything contained herein to the contrary, if thecorporate position of Optionee is, at any time, altered or revised such thatOptionee’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 10shall cease, effective as of the date of such reduction in Optionee’semployment responsibilities; provided, however, except as otherwise provided inthis Option and the Plan, Optionee shall have the right to exercise this Optionwith respect to Shares which have vested under Section 10 as of the dateof such reduction of Optionee’s responsibilities.

 

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(a)*   TerminationGenerally.* If Optionee ceases toperform 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, alongwith any and all rights or subsequent rights attached thereto, thirty (30) daysfollowing the Termination Date, but in no event later than the Expiration Date.

 

(b)*   Deathor Disability.* If Optioneeceases to perform services for the Company, or any Parent or Subsidiary, as aresult of the death or disability of Optionee (as determined by the Board inits sole discretion), this Option, to the extent (and only to the extent) thatit would have been exercisable by Optionee on the Termination Date, may beexercised by Optionee (or, in the event of Optionee’s death, by Optionee’slegal representative) within ninety (90) days after the Termination Date, butin no event later than the Expiration Date.

 

(c)   *No Right to Employment.* Nothing in the Plan or this Option Awarddocument shall confer on Optionee any right to continue in the employ of, orother relationship with, the Company, or any Parent or Subsidiary, or limit inany way the right of the Company, or any Parent or Subsidiary, to terminateOptionee’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 deliveryto the Company of such form of exercise agreement, notice, or other form as maybe approved or accepted by the Company from time to time, which shall set forthOptionee’s election to exercise this Option, the number of Shares beingpurchased, any restrictions imposed on the Shares, and such otherrepresentations and agreements as may be required by the Company to comply withapplicable securities laws.

 

(b)   *Exercise Price.* Such notice shall be accompanied by fullpayment 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 advanceand in writing by the Compensation Committee of the Board in its sole discretion:  (i) by surrender of shares of CommonStock 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, ifsuch shares were purchased from the Company by use of a promissory note, suchnote has been fully paid with respect to such shares), or were obtained byOptionee in the open public market, having a Fair Market Value equal to theExercise Price of the Shares being purchased; (ii) by instructing theCompany to withhold Shares otherwise issuable pursuant to the exercise of theOption having a Fair Market Value equal to the Exercise Price of the Sharesbeing purchased (including the withheld Shares); (iii) by waiver ofcompensation accrued by Optionee for services rendered; or (iv) by acombination of the foregoing.

 

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(c)   *Withholding Taxes.*  Prior to the issuance of Shares upon exerciseof this Option, Optionee must pay, or make adequate provision for, anyapplicable federal or state tax withholding obligations of the Company.  Where approved by the Board or itsCompensation Committee, Optionee may provide for payment of withholding taxesupon exercise of the Option by requesting that the Company retain Shares with aFair Market Value equal to the minimum amount of taxes required to bewithheld.  In such case, the Companyshall issue the net number of Shares to Optionee by deducting the Sharesretained from the Shares otherwise issuable upon exercise.

 

(d)   *Issuance of Shares.* Provided that such notice and payment are inform and substance satisfactory to counsel for the Company, the Company shallcause the Shares to be issued in the name of Optionee or Optionee’s legalrepresentative.

 

**5.****     Nontransferabilityof Option.**  This Option may notbe transferred in any manner, other than by will or by the laws of descent anddistribution, and may be exercised during Optionee’s lifetime only byOptionee.  The terms of this Option shallbe binding upon the executor, administrators, successors and assigns ofOptionee.

 

**6.****     TaxConsequences.**  OPTIONEEUNDERSTANDS THAT THE GRANT AND EXERCISE OF THIS OPTION, AND THE SALE OF SHARESOBTAINED THROUGH THE EXERCISE OF THIS OPTION, MAY HAVE TAX IMPLICATIONSTHAT COULD RESULT IN ADVERSE TAX CONSEQUENCES TO OPTIONEE.  OPTIONEE SHOULD CONSULT WITH HIS OR HER TAXADVISOR AND MAY NOT RELY ON THE COMPANY FOR ANY FINANCIAL, TAX OR OTHERADVICE.

 

**7.**     **Interpretation.**  Any dispute regarding the interpretation ofthis Option Award document shall be submitted by Optionee or the Company to theCompensation Committee of the Board, which shall review such dispute at itsnext regular meeting.  The resolution ofsuch a dispute by the Compensation Committee of the Board shall be final andbinding on the Company and Optionee.

 

**8.**     **Entire Agreement.**  The Plan is incorporated herein by thisreference.  The granting of this Optionconstitutes a full accord, satisfaction and release of all obligations orcommitments made to Optionee by the Company or any of its officers, directors,shareholders or affiliates with respect to the issuance of any securities, orrights to acquire securities, of the Company or any of its affiliates.  This Option Award document and the Planconstitute the entire agreement of the parties hereto, and supersede all priorundertakings and agreements with respect to the subject matter hereof.

 

**9.****     Exercisabilityof Option. **Subject to the termsof the Plan and this Option Award document, the issuance of Shares pursuant tothe exercise of this Option shall be subject to the limitations set forthherein and defined below.  For purposesof this Section, “Continuous Service” means a period of continuous performanceof services by Optionee for the Company, a Parent, or a Subsidiary, asdetermined by the Board.

 

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*Four Year Vesting:** *Optionee may exercisethis Option with respect to the percentage of Shares set forth below only afterOptionee has completed the following periods of Continuous Service followingthe date of grant:

 

(a)           Aftertwelve (12) months of Continuous Service, up to twenty-five percent (25%) ofthe Shares;

 

(b)           Afterthirteen (13) months of Continuous Service, and for each additional month ofContinuous Service thereafter through the end of the forty-eighth (48th)month of Continuous Service, an additional amount of Shares per month, suchamount being equal to the quotient of 75% of the Shares divided by 36, suchthat after forty-eight (48) months of Continuous Service, one hundred percent(100%) of the Shares shall have vested.

 

IfOptionee’s employment with the Company is terminated by the Company other thanfor 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 (asdefined below) and (ii) for one hundred eighty (180) days after a Changeof Control, then (A) the Option granted hereby, if less than fully vestedas of the Termination Date, shall be deemed fully vested and exercisable; and (B) Section 3above (other than the second sentence thereof) shall be deleted and replacedwith the following: “This Option may not be exercised more than one hundredeighty (180) days from the later of: Optionee’s Termination Date or the date Optionee ceases to performservices for the Company, or any Parent or Subsidiary (which date shall bedetermined by the Board in its reasonable discretion).”

 

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

 

1.             Change of Control.  A “Change ofControl” shall be conclusively deemed to have occurred if (and only if) any ofthe following shall have taken place: (i) a Change of Control is reportedby the Company in response to either Item 6(e) of Schedule 14A ofRegulation 14A promulgated under the Securities Exchange Act of

 

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1934, as amended (“Exchange Act”), or Item 5.01 of Form 8-Kpromulgated under the Exchange Act; (ii) any person (as such term is usedin Section 13(d) and 14(d)(2) of the Exchange Act) is or becomesthe 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 outstandingsecurities; or (iii) following the election or removal of directors, amajority of the Board consists of individuals who were not members of the Boardtwo (2) years before such election or removal, unless the election of eachdirector who was not a director at the beginning of such 2-year period has beenapproved in advance by directors representing at least a majority of thedirectors then in office who were directors at the beginning of the 2-yearperiod.

 

2.             “Good Reason” means Optionee’s termination ofemployment for any of the following events, unless such event occurs withOptionee’s express prior written consent:

 

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

 

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

 

(c)           A change in the location of Optionee’sprincipal place of employment by more than thirty-five (35) miles from thelocation where he was principally employed immediately prior to the Change ofControl;

 

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

 

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

 

3.             Cause.  “Cause” meanstermination of Optionee’s employment under any one or more of the followingevents:

 

(a)           Optionee’s knowing and willful misconductwith respect to the business and affairs of the Company;

 

(b)           Any material violation by Optionee of anypolicy of the Company relating to ethical conduct or practices or fiduciaryduties of a similarly situated executive;

 

(c)           Knowing and willful material breach ofany provision of this Agreement which is not remedied within thirty (30) daysafter Optionee’s receipt of notice thereof;

 

(d)           Optionee’s commission of a felony or anyillegal act involving moral turpitude or fraud or Optionee’s dishonesty whichmay reasonably be expected to have a material adverse effect on the Company;and/or

 

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(e)           Failure to comply with reasonabledirectives of the Board which are consistent with Optionee’s duties, if notremedied within thirty (30) days after Optionee’s receipt of notice thereof.

 

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