**Exhibit 10.3**

 

**PORTAL SOFTWARE LETTERHEAD**

 

Dear                                        :

 

We are pleased to inform you that theCompany’s Board of Directors has approved a special severance benefit program for you. The purpose of this letter agreement is to set forth the terms and conditions of your severance benefits. 

 

Your severance package will become payable should youremployment terminate under certain circumstances following a substantial change in ownership or control of the Company. To understand the full scope of your benefits, you should familiarize yourself with the definitional provisions of Part One ofthis letter agreement. The benefits comprising your severance package are detailed in Parts Two and Three. Part Four deals with ancillary matters affecting your severance arrangement. 

 

**PART ONE — DEFINITIONS**

 

For purposes of this letter agreement, the following definitions will be in effect: 

 

**Base Salary** means the annual rate of base salary ineffect for you immediately prior to the Change in Control or (if greater) the annual rate of base salary in effect at the time of your Involuntary Termination. 

 

**Board** means the Company’s Board of Directors. 

 

**Change in Control** means a change in the ownership or control of the Company effected through any ofthe following transactions: 

 

(i)a merger or consolidation approved by the Company’s stockholders in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or personsdifferent from the persons holding those securities immediately prior to such transaction; 

 

(ii) any stockholder-approved sale, transfer or other disposition of all or substantially all of the Company’s assetsin complete liquidation or dissolution of the Company; 

 

 

(iii) the acquisition, directly or indirectly, by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by or is under common control with, the Company) ofbeneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securitiespursuant to a tender or exchange offer made directly to the Company’s stockholders; or 

 

(iv) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that amajority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been electedor nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination. 

 

**Code** means the Internal Revenue Code of 1986, asamended. 

 

**Common Stock** means theCompany’s common stock. 

 

**Company**means Portal Software, Inc., a Delaware corporation, or any successor corporation, whether or not resulting from a Change in Control. 

 

**Disability** means your inability to perform the normal and usual duties of your position with the Company by reason of any physicalor medical impairment which is expected to result in death or continue for a period of twelve (12) consecutive months or more. 

 

**Fair Market Value** means, with respect to the shares of Common Stock subject to any of your Options, the closing selling price pershare of Common Stock on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market and published in The Wall Street Journal. If there is no closing selling price reportedfor the Common Stock on the date in question, then the Fair Market Value will be the closing selling price on the last preceding date for which such report exists. 

 

**Health Care Coverage**means the continued coverage to which you and your eligible dependents may becomeentitled under the Company’s health care plans pursuant to the severance benefit provisions of Part Two of this letter agreement. 

 

**Involuntary Termination** means (i) the involuntary termination of your employment with the Company other than a Termination forCause or (ii) your voluntary resignation ***within one hundred eighty days (180)******days*** (A) following both (x) a material reduction in your duties and responsibilities or the level of management to which you report in theacquiror (for example if the Employee was the CFO of the Company previously reported to 

 

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the CEO of the Company and now reports to the CFO of the acquiror, the employee would have experienced areduction in level of management to which he reports; also if the employee was a Section 16 reporting officer of the Company and is not deemed to be a Section 16 reporting officer of the acquiror, a material reduction will have been deemed to havetaken place) AND (y) a 120 day period following the change of control, (B) following a reduction in your level of compensation (including Base Salary, fringe benefits and target bonus under any corporate-performance based bonus or incentiveprograms) by more than fifteen percent (15%) or (C) following a relocation of your principal place of employment by more than fifty (50) miles. 

 

An Involuntary Termination will not be deemed to occur in the event your employment terminates by reason of your death or Disability or aTermination for Cause. 

 

**Option** means anyoutstanding option you hold under the Plan at the time of the Change in Control or upon your subsequent Involuntary Termination. Your Options will be divided into two (2) separate categories as follows: 

 

Acquisition-Accelerated Options: anyoutstanding Option (or installment thereof) which automatically accelerates, pursuant to the acceleration provisions of the agreement evidencing that Option, upon a Change in Control. 

 

Severance-Accelerated Options: any outstanding Option (or installment thereof) which,pursuant to Part Two of this letter agreement, accelerates upon an Involuntary Termination. 

 

**Option Parachute Payment** means, with respect to any Acquisition-Accelerated Option or any Severance-Accelerated Option, the portion of that Option deemed to be a parachute payment under CodeSection 280G and the Treasury Regulations issued thereunder. The portion of such Option which is categorized as an Option Parachute Payment will be calculated in accordance with the valuation provisions established under Code Section 280G and theapplicable Treasury Regulations and will include an appropriate dollar adjustment to reflect the lapse of your obligation to remain in the Company’s employ as a condition to the vesting of the accelerated installment. In no event, however, willthe Option Parachute Payment attributable to any Acquisition-Accelerated Option or Severance-Accelerated Option (or accelerated installment) exceed the spread (the excess of the Fair Market Value of the accelerated option shares over the optionexercise price payable for those shares) existing at the time of acceleration. 

 

**Other Parachute Payment** means any payment in the nature of compensation (other than the benefits to which you become entitled under Part Two of this letter agreement) which is made to you inconnection with the Change in Control and which accordingly qualifies as parachute payments within the meaning of Code Section 280G(b)(2) and the Treasury Regulations issued thereunder. Your Other Parachute Payment will include (without limitation)the Present Value, measured as of the Change in Control, of the aggregate Option Parachute Payment attributable to your Acquisition-Accelerated Options (if any). 

 

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**ParachutePayment** means any payment or benefit provided you under Part Two of this letter agreement (other than the Option Parachute Payment attributable to your Severance-Accelerated Options) which is deemed to constitute a parachute payment within themeaning of Code Section 280G(b)(2) and the Treasury Regulations issued thereunder. 

 

**Plan** means (i) the Company’s 1999 Stock Incentive Plan, as amended or restated from time to time, (ii) the Company’s 2000 Supplemental Stock Option Plan and (iii) any successor stockincentive plan subsequently implemented by the Company. 

 

**Present Value** means the value, determined as of the date of the Change in Control, of any payment in the nature of compensation to which you become entitled in connection with the Change in Control or your subsequentInvoluntary Termination, including (without limitation) the Option Parachute Payment attributable to your Severance-Acceleration Options, the additional benefits to which you become entitled under Part Two of this letter agreement and the OptionParachute Payment attributable to your Acquisition-Accelerated Options. The Present Value of each such payment will be determined in accordance with the provisions of Code Section 280G(d)(4), utilizing a discount rate equal to one hundred twentypercent (120%) of the applicable Federal rate in effect at the time of such determination, compounded semi-annually to the effective date of the Change in Control. 

 

**Target Bonus**means the target bonus (as a percentage of base salary) in effect for you under theCompany’s annual cash incentive bonus program immediately prior to the Change in Control or (if greater) the target bonus in effect for you at the time of your Involuntary Termination. 

 

**Termination for Cause** means the Company’stermination of your employment for any of the following reasons: (i) your commission of any act of fraud, embezzlement or dishonesty, (ii) your unauthorized use or disclosure of any confidential information or trade secrets of the Company, (iii) anyintentional misconduct by you which has a materially adverse effect upon the Company’s business or reputation, (iv) your continued failure to perform the major duties, functions and responsibilities of your position after written notice fromthe Company identifying the deficiencies in your performance and a reasonable cure period of not less than thirty (30) days or (v) a material breach of your fiduciary duties as an officer of the Company. 

 

**PART TWO — CHANGE IN CONTROL BENEFITS**

 

Should your employment with the Company terminate by reason ofan Involuntary Termination within twelve (12) months after a Change in Control, then you will become entitled to receive the severance benefits provided under this Part Two, provided you execute and deliver to the Company, at the time of suchInvoluntary Termination, a General Release in substantially the form of attached Exhibit A. However, your benefits under this Part Two will be in lieu of all other severance benefits to which you might otherwise be entitled upon such termination ofyour employment. 

 

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**1.    Accelerated Vesting.**

 

Each outstanding Option which you hold at the time of your Involuntary Termination, to the extent not otherwise exercisable for all the shares of Common Stock subject to that Option, will immediatelyvest and become exercisable for all those option shares and may be exercised for any or all of those shares as fully vested shares. Each such accelerated Option granted prior to the date of this letter agreement will remain exercisable until theearlier of (i) the expiration of the option term or (ii) the end of the three (3)-month period following the date of your Involuntary Termination, and each such accelerated Option granted after the date of this letter agreement will remainexercisable until the earlier of (x) the expiration of the option term or (y) the end of the twelve (12)-month period following the date of your Involuntary Termination. Any Options not exercised prior to the expiration of the applicablepost-service exercise period will lapse and cease to remain exercisable. 

 

**2.    Severance Payment.**

 

You will receive a severance payment from the Company in an amount equal to three (3) times the sum of your annual rate of Base Salary and Target Bonus, subject to all applicable withholding taxes. Theseverance payment shall be paid to you in one lump sum payment, payable no later than the date your Involuntary Termination within twelve (12) months after the occurrence of a Change in Control. 

 

**3.    Health Care Coverage.**

 

The Company will, at its expense, provide you and youreligible dependents with continued health care coverage under the Company’s medical/dental plan in effect on the date of the occurrence of a Change in Control until the earlier of (i) the expiration of the thirty-six (36) month periodmeasured from the first day of the first month following the effective date of your Involuntary Termination or (ii) the first date that you are covered under another employer’s health benefit program which provides substantially the same levelof benefits without exclusion for pre-existing medical conditions. Such Health Care Coverage will be in lieu of any other continued health care coverage to which you or your dependents would otherwise be entitled at your own cost under Code Section4980B by reason of your termination of employment. 

 

**PART THREE — EFFECT OF CODE SECTION 280G**

 

**1.    Excise Tax.**

 

If any payment or distribution by the Company to you or for your benefit, whether pursuant to the terms of this Agreement or otherwise (a “Payment”), constitutes a parachute payment within the meaning of CodeSection 280G(b)(2) and is subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by you with respect to such excise tax (such excise tax, together with any such interest and penalties are hereinaftercollectively referred to as the “Excise Tax”), the Company will make an additional payment (a “Gross-Up Payment”) to you in an amount such that, after payment by you of all taxes (including, any interest or penalties imposed withrespect to such taxes) including, without limitation, any 

 

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federal, state or local income and employment taxes and the Excise Tax imposed upon the Gross-Up Payment,you will retain an amount of the Gross-Up Payment equal to the Excise Tax imposed on the Payment. 

 

**2.    Determination of Gross Up Payment.**

 

Subject to the provisions of Paragraph 3 below, all determinations under this Part Three, including whether a Gross-Up Payment is requiredand the amount of the Gross-Up Payment, will be made by a certified public accounting firm immediately before the Change in Control occurs (the “Accounting Firm”), which shall provide detailed supporting calculations to both you and theCompany within 15 business days after the Change in Control (or any other change in ownership or effective control that triggers application of the Excise Tax). All fees and expenses of the Accounting Firm will be borne solely by the Company. Theinitial Gross-Up Payment determined pursuant to this Paragraph 2 will be paid to you by the Company within five days after it receives the Accounting Firm’s determination. If the Accounting Firm determines that no Excise Tax is payable by you,it will furnish you with a written opinion that failure to report the Excise Tax on your applicable federal tax return will not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm will be binding onboth you and the Company. Notwithstanding the foregoing, as a result of uncertainty in applying Section 4999 of the Code, it is possible that the Company will not have made Gross-Up Payments that it should have made hereunder (an“Underpayment”). If the Company exhausts its remedies pursuant to Paragraph 3 hereof and you are thereafter required to pay any Excise Tax, the Accounting Firm will determine the amount of the Underpayment, inform you and the Company inwriting of the Underpayment, and, within five days of receiving such written report, the Company will pay the amount of such Underpayment to you or for your benefit. 

 

**3.    Notice and Payment of Excise Tax.**

 

You must notify the Company in writing of any claim by theInternal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. You must give such notification as soon as practicable but not later than ten business days after you are informed in writing of suchclaim and the notification must apprise the Company of the nature of such claim and the date on which such claim is required to be paid. You agree to not pay such claim before the expiration of 30 days following the date on which you give suchnotice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such is due). If the Company notifies you in writing before the expiration of such 30-day period that it desires to contest such claim, youmust (1) give the Company any information reasonably requested by the Company relating to such claim, and (2) take such action in connection with contesting such claim as the Company reasonably requests in writing from time to time, including,without limitation, accepting legal representation with respect to such claim by an attorney selected by the Company; provided, however, that the Company will directly pay all costs and expenses (including additional interest and penalties) incurredin connection with such contest and will indemnify and hold you harmless, on an after-tax basis, for any tax, including interest and penalties, imposed as a result of such representation and payment of costs and expenses. The Company will controlall proceedings in connection with such contest and may, at its sole option, either direct you to pay the tax claimed and sue for a refund or to contest 

 

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the claim in any permissible manner, and you agree to prosecute such contest to a determination before anyappropriate administrative tribunal or court, as the Company may determine; provided, that if the Company directs you to pay such claim and sue for a refund, the Company will advance to you the amount of such payment, on an interest-free basis, andwill indemnify and hold you harmless, on an after-tax basis, from any tax, including interest or penalties, imposed with respect to such advance. The Company’s control of the contest will be limited to issues with respect to which a Gross-UpPayment would be payable hereunder, and you will be entitled to settle or contest any other issue. 

 

**4.    Refund of Excise Tax.**

 

If, after you receive an advance by the Company pursuant to Paragraph 3 hereof, you become entitled to receive a refund claimed pursuantto such Paragraph 3, you will (subject to the Company’s complying with the requirements of such Paragraph 3) promptly pay to the Company the amount of such refund (together with any interest thereon, after taxes applicable thereto). If, afteryou receive an amount advanced by the Company pursuant to Paragraph 3 hereof, a determination is made that you will not be entitled to any refund claimed pursuant to such Paragraph 3, and the Company does not notify you in writing of its intent tocontest such denial of refund before the expiration of 30 days after such determination, you will not be required to repay such advance, and the amount of such advance shall offset, to the extent thereof, the amount of the required Gross-Up Payment.

 

**PART FOUR — MISCELLANEOUS**

 

**1.    Amendment andTermination.**

 

This letter agreement mayonly be amended by written instrument signed by you and an authorized officer of the Company. This letter agreement shall remain in effect through                        ,              or anyearlier termination of your employment with the Company. Provided you continue in the Company’s employ, this letter agreement shall automatically be renewed for successive one (1)-year terms, beginning                        ,             , unlessthe Company provides you with written notice of termination of this letter agreement at least thirty (30) days prior to the start of any such one (1)-year renewal period. Once a Change in Control occurs, this letter agreement may not be terminatedat any time prior to the expiration of the twelve (12)-month period following the effective date of that Change of Control, and no subsequent termination of this letter agreement shall adversely affect your right to receive any benefits to which youmay have previously become entitled hereunder in connection with your Involuntary Termination following that Change in Control. 

 

**2.    Termination for Cause.**

 

Should your employment cease by reason of a Termination for Cause or should you voluntarily resign under circumstances which wouldotherwise constitute grounds for a Termination for Cause, then the Company will only be required to pay you (i) any unpaid compensation earned for services previously rendered through the date of such termination and 

 

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(ii) any accrued but unpaid vacation benefits or sick days, and no benefits will be payable to you underPart Two of this letter agreement. 

 

**3.    Death.**

 

Should you die before receiptof one or more salary continuation/target bonus payments to which you become entitled under this letter agreement, then those payments will be made to the executors or administrators of your estate. Should you die before you exercise all youroutstanding Options as accelerated hereunder, then such Options may be exercised, within twelve (12) months after your death, by the executors or administrators of your estate or by persons to whom the Options are transferred pursuant to your willor in accordance with the laws of inheritance. In no event, however, may any such Option be exercised after the specified expiration date of the option term. 

 

**4.    Indemnification.**

 

The indemnification provisions for Officers and Directors under the Company By-Laws will (to the maximum extent permitted by law) beextended to you, during the period following your Involuntary Termination, with respect to any and all matters, events or transactions occurring or effected during your period of employment with the Company. 

 

**5.    Miscellaneous.**

 

This letter agreement will be binding upon the Company, itssuccessors and assigns (including, without limitation, the surviving entity in any Change in Control) and is to be construed and interpreted under the laws of the State of California. If any provision of this letter agreement as applied to you orthe Company or to any circumstance should be adjudged by a court of competent jurisdiction to be void or unenforceable for any reason, the invalidity of that provision will in no way affect (to the maximum extent permissible by law) the applicationof such provision under circumstances different from those adjudicated by the court, the application of any other provision of this letter agreement, or the enforceability or invalidity of this letter agreement as a whole. Should any provision ofthis letter agreement become or be deemed invalid, illegal or unenforceable in any jurisdiction by reason of the scope, extent or duration of its coverage, then such provision will be deemed amended to the extent necessary to conform to applicablelaw so as to be valid and enforceable or, if such provision cannot be so amended without materially altering the intention of the parties, then such provision will be stricken and the remainder of this letter agreement will continue in full forceand effect. 

 

**6.    General CreditorStatus.**

 

All cash payments to which youbecome entitled hereunder will be paid, when due, from the general assets of the Company, and no trust fund, escrow arrangement or other segregated account will be established as a funding vehicle for such payment. Accordingly, your right (or theright of the personal representatives or beneficiaries of your estate) to receive such cash payments hereunder will at all times be that of a general creditor of the Company and will have no priority over the claims of other general creditors.

 

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**7.    At Will Employment.**

 

Nothing in this letter agreement is intended to provide you with any right to continue in the employ of the Company (or any subsidiary) for any period of specific duration or interfere with orotherwise restrict in any way your rights or the rights of the Company (or any subsidiary), which rights are hereby expressly reserved by each, to terminate your employment at any time and for any reason. 

 

**8.    Legal Fees and Expenses.**

 

The Company will pay all legal fees and expenses (includingbut not limited to reasonable attorneys’ fees) which you may incur as a result of the Company’s contesting the validity, enforceability or your interpretation of, or determinations under, this letter agreement or the Company’s failureto perform its obligations under this letter agreement. 

 

**9.    Entire Agreement.**

 

With respect to the subject matter hereto, this letter agreement supersedes and replaces all previous severance or change in control contracts and agreements, including but not limited to the agreementbetween you and the Company dated                     ,             , andconstitutes the entire agreement between you and the Company. No oral statements or prior written material, unless specifically incorporated herein, shall be of any force and effect. 

 

Please indicate your agreement with the foregoing terms and conditions of your change in control severancepackage by signing the Acceptance section of the enclosed copy of this letter and returning it to the Company. 

 

Very truly yours, 

 

**PORTAL SOFTWARE, INC.**

 

 

 

By:                                                                                                                                        

Name:                                                                                                                                  

Title:                                                                                                                                    

 

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**ACCEPTANCE**

 

I hereby agree to all the terms andprovisions of the foregoing letter agreement governing the special benefits to which I may become entitled in the event my employment should terminate under certain prescribed circumstances following a substantial change in control or ownership ofthe Company. 

 

Signature:                                                                                                                           

 

 

Dated:                                                                                                                                  

 

 

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**EXHIBIT A**

 

**GENERAL RELEASE**

 

 

**RELEASEAND WAIVER OF CLAIMS**

 

In consideration ofthe severance payments and other benefits to which I have become entitled, pursuant to that certain letter agreement between Portal Software, Inc., a Delaware corporation (the “Company”), and myself dated                    ,              (the “Severance Agreement”),in connection with the termination of my employment on this date, I,             , hereby furnish the Company with the following release and waiver (“Release and Waiver”).

 

I hereby release and forever discharge theCompany, its officers, directors, agents, employees, stockholders, successors, assigns and affiliates from any and all claims, liabilities, demands, causes of action, costs, expenses, attorney fees, damages, indemnities and obligations of every kindand nature, in law, equity or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed, arising from or relating to my employment with the Company and the termination of that employment, including (without limitation)claims of wrongful discharge, emotional distress, defamation, fraud, breach of contract, breach of the covenant of good faith and fair dealing, discrimination claims based on sex, age, race, national origin, disability or any other basis under TitleVII of the Civil Rights Act of 1964, as amended, the California Fair Employment and Housing Act, the Federal Age Discrimination in Employment Act of 1967, as amended (“ADEA”), the Americans with Disability Act, contract claims, tortclaims, and wage or benefit claims, including but not limited to, claims for salary, bonuses, commissions, stock grants, stock options, vacation pay, fringe benefits, severance pay or any other form of compensation (other than the payments andbenefits to which I am entitled under the Severance Agreement). 

 

In releasing claims unknown to me at present, I am waiving all rights and benefits under Section 1542 of the California Civil Code, and any law or legal principle of similar effect in any jurisdiction: **“A general release doesnot extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.”**

 

This Release and Waiver does not pertain to any claims whichmay subsequently arise in connection with the Company’s default in any of its payment obligations under the Severance Agreement. 

 

I acknowledge that, among other rights subject to his Release and Waiver, I am hereby waiving and releasing any rights I may have underADEA, that this release and waiver is knowing and voluntary, and that the consideration given for this release and waiver is in addition to anything of value to which I was already entitled as an executive of the Company. I further acknowledge thatI have been advised, as required by the Older Workers Benefit Protection Act, that: (a) the release and waiver granted herein does not relate to claims which may arise after this release and waiver is executed; (b) I have the right to consult withan attorney prior to executing this release and waiver (although I may choose voluntarily not to do so); and if I am over 40 years old upon execution of this (c) I have twenty-one (21) days from the date of termination of my employment with theCompany in which to consider this release and waiver (although I may 

 

choose voluntarily to execute this release and waiver earlier); (d) I have seven (7) days following theexecution of this release and waiver to revoke my consent to this release and waiver; and (e) this release and waiver shall not be effective until the seven (7)-day revocation period has expired. 

 

 

Date:  
   
**EXECUTIVE**