Document:

Exhibit 10.2

 

TERMINATION
AGREEMENT

 

This
Termination Agreement (the “Termination Agreement”) is executed as of August 8,
2005, by and among SILICON VALLEY BANK, a California-chartered bank, with its
principal place of business at 3003 Tasman Drive, Santa Clara, California 95054
and with a loan production office located at One Newton Executive Park, Suite 200,
2221 Washington Street, Newton, Massachusetts 02462 (“Bank”), and PHASE
FORWARD SECURITIES CORPORATION, a Massachusetts corporation with its principal
place of business at 880 Winter Street, Waltham, Massachusetts 02451 (“Guarantor”).

 

WHEREAS,
Guarantor and Bank are parties to a certain Security Agreement dated as of May 3,
1999 (as amended, the “Security Agreement”);

 

WHEREAS,
Guarantor and Bank wish to terminate the Security Agreement as set forth
herein;

 

NOW,
THEREFORE, for good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Guarantor and Bank hereto agree as follows:

 

1.             Termination
of Security Agreement.  Guarantor and
Bank hereby agree that the Security Agreement is terminated in all respects and
shall no longer be of any legal force or effect, and each of the parties
thereto have no rights or obligations thereunder.

 

2.             Binding
Effect.  This Termination Agreement
shall be binding on Borrower and Bank upon their execution hereof. This
Termination Agreement shall inure to the benefit of, and be binding upon the
parties and each of their respective assigns, heirs or other successors in
interest.

 

3.             Governing
Law.  This Termination Agreement
shall be construed and enforced in accordance with the substantive laws of the
Commonwealth of Massachusetts, without reference to its principles of conflicts
of law.

 

4.             Counterparts.  This Termination Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

***

 

 

IN WITNESS
WHEREOF, each of the parties has executed this Termination Agreement as an
instrument under seal as of the date first written above.

 

 

	
  SILICON VALLEY BANK

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  
	
   

  
	
   

  
	
  PHASE FORWARD SECURITIES CORPORATION

  
	
   

  
	
  By:

  	
  /s/ William
  G. Porter

  	
   

  
	
  Its:

  	
  Assistant
  Treasurer

  	
   

  

 

2

 

SIXTH LOAN MODIFICATION AGREEMENT

 

This Sixth Loan Modification
Agreement (this “Loan Modification Agreement”) is entered into as of August 8,
2005, by and between SILICON VALLEY BANK,
a California-chartered bank, with its principal place of business at
3003 Tasman Drive, Santa Clara, California 95054 and with a loan
production office located at One Newton Executive Park, Suite 200, 2221
Washington Street, Newton, Massachusetts 02462 (“Bank”) and PHASE FORWARD INCORPORATED, a Delaware
corporation (“Borrower”).

 

1.             DESCRIPTION OF EXISTING INDEBTEDNESS
AND OBLIGATIONS. Among other indebtedness and obligations which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan
arrangement dated as of April 17, 2002, evidenced by, among other
documents, a certain Second Amended and Restated Loan and Security Agreement
dated as of April 17, 2002 between Borrower and Bank, as amended by a
certain First Loan Modification Agreement dated as of December 24, 2002,
as further amended by a certain Second Loan Modification Agreement dated as of February 28,
2003, as further amended by a certain Third Loan Modification Agreement dated
as of March 31, 2003, as further amended by a certain Fourth Loan
Modification Agreement dated as of February 27, 2004, and as further
amended by a certain Fifth Loan Modification Agreement dated as of April 27,
2004 (as amended, the “Loan Agreement”). Capitalized terms used but not
otherwise defined herein shall have the same meaning as in the Loan Agreement.

 

Hereinafter, the Loan
Agreement, together with all other documents evidencing or securing the
Obligations shall be referred to as the “Existing Loan Documents”.

 

2.             DESCRIPTION OF CHANGE IN TERMS.

 

A.            Modifications to Loan Agreement.

 

1.             The Loan Agreement shall be amended by deleting the following
text appearing in Section 2.1.1 thereof, entitled “Revolving Advances”:

 

“(a)         Bank shall make Advances not exceeding (i) the
lesser of (A) the Committed Revolving Line or (B) the Borrowing Base
minus (ii) the amount of all outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit), minus (iii) the FX Reserve, and
minus (iv) the aggregate outstanding Advances hereunder (including any
Cash Management Services).”

 

and inserting in lieu thereof the following:

 

“(a)         Bank shall make Advances not exceeding (i) the
Committed Revolving Line, minus (ii) the amount of all outstanding Letters
of Credit (including drawn but unreimbursed Letters of Credit), minus (iii) the
FX Reserve, and minus (iv) the aggregate outstanding Advances hereunder (including
any Cash Management Services).”

 

2.             The Loan Agreement shall be amended by deleting the
following text appearing in Section 2.1.11 thereof, entitled “Letters of
Credit Sublimit”:

 

“(a)         Bank shall issue or have issued Letters of
Credit for Borrower’s account not exceeding (i) the lesser of the
Committed Revolving Line or the Borrowing Base minus (ii) the outstanding
principal balance of any Advances (including any Cash Management Services),
minus (iii) the amount of all Letters of Credit (including drawn but
unreimbursed Letters of Credit), plus an amount equal to any Letter of Credit
Reserves. The face amount of

 

 

outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit Reserve) may not exceed
$5,000,000.00. Each Letter of Credit shall have an expiry date no later than
180 days after the Revolving Maturity Date provided Borrower’s Letter of Credit
reimbursement obligation shall be secured by cash on terms acceptable to Bank
on and after (i) the Revolving Maturity Date if the Revolving Maturity
Date is not extended by Bank, or (ii) the occurrence of an Event of
Default hereunder.”

 

and
inserting in lieu thereof the following:

 

“(a)         Bank shall issue or have issued Letters of
Credit for Borrower’s account not exceeding (i) the Committed Revolving
Line, minus (ii) the outstanding principal balance of any Advances
(including any Cash Management Services), minus (iii) the amount of all
Letters of Credit (including drawn but unreimbursed Letters of Credit), plus an
amount equal to any Letter of Credit Reserves. The face amount of outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit and any
Letter of Credit Reserve) may not exceed $5,000,000.00. Borrower’s Letter of
Credit reimbursement obligation shall be secured by cash on terms acceptable to
Bank on and after (i) the Revolving Line Maturity Date, or (ii) the
termination of the Committed Revolving Line by Borrower, or (iii) the
occurrence of an Event of Default hereunder.”

 

3.             The Loan Agreement shall be amended by deleting the
following text appearing in Section 2.1.12 thereof, entitled “Foreign
Exchange Sublimit”:

 

“If there is availability
under the Committed Revolving Line and the Borrowing Base, then Borrower may
enter in foreign exchange forward contracts with the Bank under which Borrower
commits to purchase from or sell to Bank a set amount of foreign currency more
than one business day after the contract date (the “FX Forward Contract”).”

 

and
inserting in lieu thereof the following:

 

“If there is availability
under the Committed Revolving Line, then Borrower may enter in foreign exchange
forward contracts with the Bank under which Borrower commits to purchase from
or sell to Bank a set amount of foreign currency more than one business day
after the contract date (the “FX Forward Contract”). Borrower’s existing and
contingent obligations with respect any such FX Forward Contracts shall be
secured by cash on terms acceptable to Bank on and after (i) the Revolving
Line Maturity Date, or (ii) the termination of the Committed Revolving
Line by Borrower, or (iii) the occurrence of an Event of Default
hereunder.”

 

4.             The Loan Agreement shall be amended by deleting the
following text appearing in Section 2.1.13 thereof, entitled “Cash
Management Services Sublimit”:

 

“Borrower may use up to $5,000,000.00 for the Bank’s
Cash Management Services, which may include merchant services, direct deposit
of payroll, business credit card, and check cashing services identified in the
various cash management services agreements related to such Cash Management
Services (the “Cash Management Services”).”

 

 

and inserting in lieu thereof the following:

 

“Borrower may use up to $5,000,000.00 for the Bank’s
Cash Management Services, which may include merchant services, direct deposit
of payroll, business credit card, and check cashing services identified in the
various cash management services agreements related to such Cash Management
Services (the “Cash Management Services”). Borrower’s existing and contingent
obligations with respect any such Cash Management Services shall be secured by
cash on terms acceptable to Bank on and after (i) the Revolving Line
Maturity Date, or (ii) the termination of the Committed Revolving Line by
Borrower, or (iii) the occurrence of an Event of Default hereunder.”

 

5.             The Loan Agreement shall be amended by deleting Section 2.2
thereof, entitled “Overadvances”, in its entirety, and inserting in lieu
thereof the following:

 

“2.2        INTENTIONALLY DELETED”

 

6.             The Loan Agreement shall be amended by deleting Section 4.1
thereof, entitled “Grant of Security Interest”, in its entirety, and inserting
in lieu thereof the following:

 

“4.1        INTENTIONALLY DELETED”

 

7.             The Loan Agreement shall be amended by deleting Section 5.2
thereof, entitled “Collateral”, in its entirety, and inserting in lieu thereof
the following:

 

“5.2        INTENTIONALLY DELETED”

 

8.             The Loan Agreement shall be amended by deleting Section 6.2
thereof, entitled “Financial Statements, Reports, Certificates” in its entirety,
and inserting in lieu thereof the following:

 

“6.2        Financial Statements,
Reports, Certificates.

 

(a)           Borrower shall deliver to Bank:  (i) as soon as available, but no later
than forty-five (45) days after the last day of each quarter, a company
prepared consolidated and consolidating balance sheet and income statement
covering Borrower’s consolidated operations during the period certified by a
Responsible Officer and in a form reasonably acceptable to Bank.
Notwithstanding the foregoing, such balance sheet and income statement for January 2004
and February 2004, shall be delivered to Bank no later than April 15,
2004; (ii) as soon as available, but no later than one hundred twenty
(120) days after the last day of Borrower’s fiscal year, audited consolidated
financial statements prepared under GAAP, consistently applied, together with
an unqualified opinion on the financial statements from an independent
certified public accounting firm reasonably acceptable to Bank; (iii) as
soon as available, but no later than forty-five (45) days after the last day of
Borrower’s fiscal year, financial projections, approved by the Borrower’s Board
of Directors, for the then current fiscal year; (iv) within five (5) days
of filing, copies of or electronic notice of links to, all statements, reports
and notices made available to Borrower’s security holders or to any holders of
Subordinated Debt and all reports on Form 10-K, 10-Q and 8 K
filed with the Securities and Exchange Commission; (v) a prompt report of
any legal actions pending or threatened against Borrower or any Subsidiary that
could result in damages or costs to

 

 

Borrower or any Subsidiary of Five Hundred Thousand
Dollars ($500,000.00) or more in the aggregate; and (vi) budgets, sales
projections, operating plans or other financial information reasonably
requested by Bank.

 

(b)           Within forty-five (45) days after the last
day of each quarter, Borrower shall deliver to Bank with the monthly financial
statements a Compliance Certificate signed by a Responsible Officer in the form
of Exhibit D.
Notwithstanding the foregoing, such Compliance Certificate for January 2004
and February 2004, shall be delivered to Bank no later than April 15,
2004.”

 

9.             The Loan Agreement shall be amended by deleting Section 6.5
thereof, entitled “Primary Accounts”, in its entirety, and inserting in lieu
thereof the following:

 

“6.5        Primary Accounts.  In
order to permit the Bank to monitor the Borrower’s financial performance and
condition, Borrower shall maintain its primary depository and operating
accounts with Bank. Additionally, at least one-third (33.33%) of the aggregate
dollar value of Borrower’s and Borrower’s Subsidiaries’ cash and securities
maintained at domestic financial institutions, shall be maintained and
administered through the Bank. Borrower shall not maintain more than fifteen
percent (15%) of the aggregate dollar value of Borrower’s and Borrower’s
Subsidiaries’ cash and securities maintained at financial institutions,
domestic or otherwise, in the name of Borrower’s foreign Subsidiaries. Borrower
shall identify to Bank, in writing, of any bank or securities account opened by
Borrower with any institution other than Bank. The provisions of this paragraph
shall not apply to deposit accounts exclusively used for payroll, payroll taxes
and other employee wage and benefit payments to or for the benefit of the
Borrower’s employees.”

 

10.           The Loan Agreement shall be amended by deleting Section 6.6
thereof, entitled “Adjusted Quick Ratio”, in its entirety, and inserting in
lieu thereof the following:

 

“6.6        Adjusted Quick Ratio. 
Borrower shall maintain at all times, to be tested as of the last day of
each quarter, a ratio of Quick Assets to Current Liabilities minus Deferred
Revenue of not less than 3.0 to 1.0.”

 

11.           The Loan Agreement shall be amended by deleting Section 6.7
thereof, entitled “Revenue”, in its entirety, and inserting in lieu thereof the
following:

 

“6.7        Revenue.  Borrower shall maintain, as of the last day of
each quarter, net revenues of not less than: (i) Eighteen Million Two
Hundred Fifty Thousand Dollars ($18,250,000.00) for the quarter ending June 30,
2005, (ii) Nineteen Million Dollars ($19,000,000.00) for the quarter
ending September 30, 2005, and (iii) Nineteen Million Five Hundred
Thousand Dollars ($19,500,000.00) for the quarter ending December 31,
2005. Commencing with the quarter ending March 31, 2006, and for each
quarter thereafter, the Borrower shall maintain net revenues at an amount not
less than the greater of: (a) Twenty Million Dollars ($20,000,000.00), or (b) eighty-five
percent (85%) of the plan for minimum quarterly net revenues approved by the
Borrower’s Board of Directors.”

 

12.           The Loan Agreement shall be amended by deleting Section 9.5
thereof, entitled “Bank’s Liability for Collateral”, in its entirety, and
inserting in lieu thereof the following:

 

 

“9.5        INTENTIONALLY DELETED”

 

13.           The Loan Agreement shall be amended by deleting the
definitions of “Borrowing Base,” “Collateral,” and “Eligible Accounts,”
appearing in Section 13.1 thereof.

 

14.           Exhibit A to the Loan Agreement is hereby deleted in its entirety.

 

15.           Exhibit C to the Loan Agreement is
hereby deleted in its entirety.

 

16.           The Compliance Certificate appearing as Exhibit D to the Loan Agreement is hereby replaced with the
Compliance Certificate attached as Exhibit A hereto.

 

17.           The Loan Agreement shall be amended by deleting all
references to the defined terms “Collateral” and “Code.”

 

3.             FEES. The Borrower shall also reimburse
Bank for all legal fees and expenses incurred in connection with this amendment
to the Existing Loan Documents.

 

4.             CONSISTENT CHANGES. 
The Existing Loan Documents are hereby amended wherever necessary to
reflect the changes described above.

 

5.             RATIFICATION OF LOAN DOCUMENTS. 
Borrower hereby ratifies, confirms, and reaffirms all terms and
conditions of the Loan Documents.

 

6.             NO DEFENSES OF BORROWER. 
Borrower hereby acknowledges and agrees that Borrower has no offsets,
defenses, claims, or counterclaims against Bank with respect to the
Obligations, or otherwise, and that if Borrower now has, or ever did have, any
offsets, defenses, claims, or counterclaims against Bank, whether known or
unknown, at law or in equity, all of them are hereby expressly WAIVED and
Borrower hereby RELEASES Bank from any liability thereunder.

 

7.             CONTINUING VALIDITY. 
Borrower understands and agrees that in modifying the existing
Obligations, Bank is relying upon Borrower’s representations, warranties, and
agreements, as set forth in the Existing Loan Documents.  Except as expressly modified pursuant to this
Loan Modification Agreement, the terms of the Existing Loan Documents remain
unchanged and in full force and effect. 
Bank’s agreement to modifications to the existing Obligations pursuant
to this Loan Modification Agreement in no way shall obligate Bank to make any
future modifications to the Obligations. 
Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Obligations.  It is
the intention of Bank and Borrower to retain as liable parties all makers of
Existing Loan Documents, unless the party is expressly released by Bank in
writing.  No maker will be released by
virtue of this Loan Modification Agreement.

 

8.             COUNTERSIGNATURE. 
This Loan Modification Agreement shall become effective only when it shall
have been executed by Borrower and Bank.

 

[The
remainder of this page is intentionally left blank]

 

 

This Loan Modification
Agreement is executed as a sealed instrument under the laws of the Commonwealth
of Massachusetts as of the date first written above.

 

 

	
  BORROWER:

  	
  BANK:

  
	
  PHASE FORWARD INCORPORATED

  	
  SILICON VALLEY BANK

  
	
   

  	
   

  
	
  By:

  	
  /s/ William G. Porter

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   William G. Porter

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   Vice President, Finance

  	
   

  	
  Title:

  	
   

  	
   

  
												

 

 

The undersigned, PHASE
FORWARD SECURITIES CORPORATION, ratifies, confirms and reaffirms,
all and singular, the terms and conditions of a certain Unlimited Guaranty
dated May 3, 1999 (the “Guaranty”) and acknowledges, confirms and agrees
that the Guaranty shall remain in full force and effect and shall in no way be
limited by the execution of this Loan Modification Agreement, or any other
documents, instruments and/or agreements executed and/or delivered in
connection herewith.

 

 

	
   

  	
  PHASE FORWARD SECURITIES CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
        /s/
  Rodger Weismann

  	
   

  
	
   

  	
  Name: Rodger Weismann

  
	
   

  	
  Title: Treasurer

  

 

 

EXHIBIT A

 

COMPLIANCE
CERTIFICATE

 

TO:         SILICON VALLEY BANK

FROM:   PHASE FORWARD INCORPORATED

 

The undersigned authorized
officer of PHASE FORWARD INCORPORATED certifies that under the terms and
conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”),
(i) Borrower is in complete compliance for the period ending                               
with all required covenants except as noted below and (ii) all
representations and warranties in the Agreement are true and correct in all
material respects on this date.  Attached
are the required documents supporting the certification.  The Officer certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) consistently
applied from one period to the next except as explained in an accompanying
letter or footnotes.  The Officer
acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the
Agreement, and that compliance is determined not just at the date this
certificate is delivered.

 

.Please indicate compliance status by circling Yes/No
under “Complies” column.

 

	
  Reporting Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Financial statements with CC

  	
   

  	
  Monthly within 45 days*

  	
   

  	
  Yes  No

  	
   

  
	
  Annual financial statement (CPA Audited)

  	
   

  	
  FYE within 120 days

  	
   

  	
  Yes  No

  	
   

  
	
  10-Q, 10-K and 8-K

  	
   

  	
  Within 5 days after filing with SEC

  	
   

  	
  Yes  No

  	
   

  
	
  Annual Projections

  	
   

  	
  Within 45 days of prior FYE

  	
   

  	
  Yes  No

  	
   

  

 

*January 2004
and February 2004 financial statements and compliance certificate due April 15,
2004.

 

	
  Financial Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Adjusted Quick Ratio (tested quarterly)

  	
   

  	
  3.0:1.0

  	
   

  	
  :1.0

  	
   

  	
  Yes  No

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Net Revenue (tested quarterly)

  	
   

  	
  $18,500,000 for Q-end 6/30/05

  	
   

  	
  $

  	
   

  	
   

  	
  Yes  No

  	
   

  
	
   

  	
   

  	
  $19,000,000 for Q-end 9/30/05

  	
   

  	
  $

  	
   

  	
   

  	
  Yes  No

  	
   

  
	
   

  	
   

  	
  $19,500,000 for Q-end 12/31/05

  	
   

  	
  $

  	
   

  	
   

  	
  Yes  No

  	
   

  
	
  The greater of:

  	
   

  	
  $20,000,000 or 85% of Board approved plan thereafter

  	
   

  	
  $

  	
   

  	
   

  	
  Yes  No

  	
   

  

 

 

	
   

  	
  BANK USE ONLY

  
	
  Comments Regarding Exceptions: See Attached.

  	
  Received by:

  	
   

  	
   

  
	
  Sincerely,

  	
   

  	
  AUTHORIZED SIGNER 

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
  SIGNATURE

  	
   

  
	
   

  	
   

  	
  Verified:

  	
   

  	
   

  
	
  TITLE

  	
   

  	
  AUTHORIZED SIGNER 

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
  DATE

  	
   

  
	
   

  	
  Compliance
  Status:              Yes        NoExhibit 10.3

 

PHASE FORWARD INCORPORATED

 

NON-STATUTORY STOCK OPTION
AGREEMENT (U.K.)

 

Phase
Forward Incorporated (the “Company”) hereby grants the following stock
option pursuant to its 2004 Stock Option and Incentive Plan.  The terms and conditions attached hereto are
also a part hereof.

 

	
  Name of optionee
  (the “Optionee”):

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date of this
  option grant:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number of shares
  of the Company’s Common Stock subject to this option (“Shares”):

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Option exercise
  price per share:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number, if any,
  of Shares that may be purchased on or after the grant date:

  	
   

  	
  0[**]

  
	
   

  	
   

  	
   

  
	
  Shares that are
  subject to vesting schedule:

  	
   

  	
  100%[**]

  
	
   

  	
   

  	
   

  
	
  Vesting Start
  Date:

  	
   

  	
   

  
	
  [*]Vesting
  Schedule:

  	
   

  	
   

  
	
  One year
  from Vesting Start Date:

  	
   

  	
  25% of the
  Shares subject to this option[**]

  
	
   

  	
   

  	
   

  
	
  Each subsequent
  month following the first anniversary of the Vesting Start Date:

  	
   

  	
  An additional
  2.083% of the Shares subject to this option[**]

  
	
   

  	
   

  	
   

  
	
  All vesting is
  dependent on the continuation of a Business Relationship with the Company, as
  provided herein.

  	
   

  	
   

  
	
  Payment
  alternatives (specify any or all of Section 7(a)(i) though (iii):

  	
   

  	
  Section 7(a) (i) through
  (iii)

  

 

[* The
foregoing is a sample vesting schedule only.  Actual vesting schedule for each
Optionee will be determined by the Board of Directors on the grant date.]

 

[**
Vested amount of shares may be expressed as a number, a percentage or a
fraction.]

 

This
option satisfies in full all commitments that the Company has to the Optionee
with respect to the issuance of stock, stock options or other equity
securities.

 

 

I hereby agree to all of
the terms contained in this Stock Option Agreement

 

	
  SIGNED
  as a Deed

  	
  )

  	
   

  	
   

  	
   

  	
   

  
	
  by optionee name

  	
  )

  	
  Signature

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  
	
  in the presence
  of:-

  	
   

  
	
  Signature of
  witness:

  	
   

  
	
   

  	
   

  
	
  Name of witness:

  	
   

  
	
   

  	
   

  
	
  Address:

  	
   

  
	
   

  	
   

  
	
  Occupation:

  	
   

  
	
   

  	
   

  
	
  NB. the witness
  must be over 18 and not related to you by blood or marriage.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Phase Forward Incorporated

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Robert K. Weiler

  	
   

  	
   

  
	
   

  	
  Chief Executive Officer

  	
   

  	
   

  
								

 

1

 

PHASE FORWARD INCORPORATED

 

STOCK OPTION AGREEMENT — INCORPORATED TERMS AND
CONDITIONS

 

1.             Grant
Under Plan.  This option is granted
pursuant to and is governed by the Company’s 2004 Stock Option and Incentive
Plan (the “Plan”) and, unless the context otherwise requires, terms used
herein shall have the same meaning as in the Plan.

 

2.             Grant
as Non-Qualified Stock Option.  This
option is a non-statutory stock option and is not intended to qualify as an
incentive stock option under Section 422 of the Internal Revenue Code of
1986, as amended, and the regulations thereunder (the “Code”).

 

3.             Vesting
of Option.

 

(a)           Vesting
if Business Relationship Continues. The Optionee may exercise this option
on or after the date of this option grant for the number of shares of Common Stock,
if any, set forth on the cover page hereof.  If the Optionee has continuously maintained a
Business Relationship (as defined below) with the Company through the dates
listed on the vesting schedule set forth on the cover page hereof,
the Optionee may exercise this option for the additional number of shares of
Common Stock set opposite the applicable vesting date.  Notwithstanding the foregoing, the Board may,
in its discretion, accelerate the date that any installment of this option
becomes exercisable.  The foregoing
rights are cumulative and may be exercised only before the date which is ten
years from the date of this option grant.

 

(b)  Accelerated Vesting Due to
Acquisition. In the event an Acquisition that is not a Private Transaction
occurs while the Optionee maintains a Business Relationship with the Company
and this option has not fully vested, this option shall become exercisable for
one-quarter of the Shares (in addition to any Shares already vested), such
vesting to occur immediately prior to the closing of the Acquisition, with
vesting to continue after the closing at the rate/number set forth on the cover
page as to the remainder of the Shares subject to vesting and on the same
vesting dates, provided that the Optionee
continuously maintains a Business Relationship with the Company or its
successor through the applicable vesting dates.

 

(c)  Definitions. The following
definitions shall apply:

 

“Business Relationship” means service to the
Company or its successor in the capacity of an employee, officer, director or
consultant.

 

“Cause” means: (i) gross negligence or willful
malfeasance in the performance of the Optionee’s work or a breach of fiduciary
duty or confidentiality obligations to the Company by the Optionee; (ii) failure
to follow the proper directions of the Optionee’s direct or indirect supervisor
after written notice of such failure; (iii) the commission by the Optionee
of illegal conduct relating to the Company; (iv) disregard by the Optionee
of the material rules or material policies of the Company which has not
been cured within 15 days after notice thereof from the Company; or (v) intentional
acts

 

2

 

on the
part of the Optionee that have generated material adverse publicity toward or
about the Company.

 

“Private Transaction” means any Acquisition
where the consideration received or retained by the holders of the then
outstanding capital stock of the Company does not consist of (i) cash or
cash equivalent consideration, (ii) securities which are registered under
the Securities Act and/or (iii) securities for which the Company or any
other issuer thereof has agreed, including pursuant to a demand, to file a
registration statement within ninety (90) days of completion of the transaction
for resale to the public pursuant to the Securities Act.

 

4.             Termination
of Business Relationship.

 

(a)           Termination.  If the Optionee’s Business Relationship with
the Company ceases, voluntarily or involuntarily, with or without cause, no
further installments of this option shall become exercisable, and this option
shall expire (may no longer be exercised) after the passage of ninety days from
the date of termination, but in no event later than the scheduled expiration
date.  Any determination under this agreement
as to the status of a Business Relationship or other matters referred to above
shall be made in good faith by the Board of Directors of the Company.

 

(b)           Employment
Status. For purposes hereof, with respect to employees of the Company,
employment shall not be considered as having terminated during any leave of absence if such leave of absence has been approved
in writing by the Company and if such written approval contractually obligates
the Company to continue the employment of the Optionee after the approved
period of absence; in the event of such an approved leave of absence, vesting
of this option shall be suspended (and the period of the leave of absence shall
be added to all vesting dates) unless otherwise provided in the Company’s
written approval of the leave of absence.. For purposes hereof, a termination
of employment followed by another Business Relationship shall be deemed a
termination of the Business Relationship with all vesting to cease unless the
Company enters into a written agreement related to such other Business
Relationship in which it is specifically stated that there is no termination of
the Business Relationship under this agreement. This option shall not be
affected by any change of employment within or among the Company and its
Subsidiaries so long as the Optionee continuously remains an employee of the
Company or any Subsidiary.

 

(c)           Termination
for Cause.  If the Business
Relationship of the Optionee is terminated for Cause (as defined above), this
option may no longer be exercised from and after the Optionee’s receipt of
written notice of such termination.

 

(d)           Partial
Acceleration Upon Death.  In the
event the Optionee dies prior to the vesting of the first tranche of Shares (as
set forth on the cover page hereto), the vesting of such first tranche of
Shares will automatically accelerate and become exercisable until the
expiration of this option pursuant to Section 4(a).

 

3

 

5.             Death;
Disability.

 

(a)           Death.  Upon the death of the Optionee while the
Optionee is maintaining a Business Relationship with the Company, this option
may be exercised, to the extent otherwise exercisable on the date of the
Optionee’s death, by the Optionee’s estate, personal representative or
beneficiary to whom this option has been transferred pursuant to Section 10,
only at any time within 365 days after the date of death, but not later
than the scheduled expiration date.

 

(b)           Disability.  If the Optionee ceases to maintain a Business
Relationship with the Company by reason of his or her disability, this option
may be exercised, to the extent otherwise exercisable on the date of cessation
of the Business Relationship, only at any time within 180 days after such
cessation of the Business Relationship, but not later than the scheduled
expiration date.  For purposes hereof, “disability”
means “permanent and total disability” as defined in Section 22(e)(3) of
the Code.

 

6.             Partial
Exercise.  This option may be
exercised in part at any time and from time to time within the above limits,
except that this option may not be exercised for a fraction of a share.

 

7.             Payment
of Exercise Price.

 

(a)           Payment
Options.  The exercise price shall be
paid by one or any combination of the following forms of payment that are
applicable to this option, as indicated on the cover page hereof:

 

(i)            by check
in US currency payable to the order of the Company; or

 

(ii)           delivery
of an irrevocable and unconditional undertaking, satisfactory in form and
substance to the Company, by a creditworthy broker to deliver promptly to the
Company sufficient funds to pay the exercise price, or delivery by the Optionee
to the Company of a copy of irrevocable and unconditional instructions,
satisfactory in form and substance to the Company, to a creditworthy broker to
deliver promptly to the Company cash or a check sufficient to pay the exercise
price; or

 

(iii)          subject
to Section 7(b) below, if the Common Stock is then traded on a
national securities exchange or on the Nasdaq National Market (or successor
trading system), by delivery of shares of Common Stock having a fair market
value equal as of the date of exercise to the option price.

 

In the case of (iii) above, fair market value as
of the date of exercise shall be determined as of the last business day for
which such prices or quotes are available prior to the date of exercise and
shall mean (i) the last reported sale price (on that date) of the Common
Stock on the principal national securities exchange on which the Common Stock
is traded, if the Common Stock is then traded on a national securities
exchange; or (ii) the last reported sale price (on that date) of the
Common Stock on the Nasdaq National Market (or successor trading system), if
the Common Stock is not then traded on a national securities exchange.

 

4

 

(b)           Limitations
on Payment by Delivery of Common Stock. 
If Section 7(a)(iii) is applicable, and if the Optionee
delivers Common Stock held by the Optionee (“Old Stock”) to the Company
in full or partial payment of the exercise price and the Old Stock so delivered
is subject to restrictions or limitations imposed by agreement between the
Optionee and the Company, an equivalent number of Shares shall be subject to
all restrictions and limitations applicable to the Old Stock to the extent that
the Optionee paid for the Shares by delivery of Old Stock, in addition to any
restrictions or limitations imposed by this agreement.  Notwithstanding the foregoing, the Optionee
may not pay any part of the exercise price hereof by transferring Common Stock
to the Company unless such Common Stock has been owned by the Optionee free of
any substantial risk of forfeiture for at least six months.

 

8.             Securities
Laws Restrictions on Resale. Until registered under the Securities Act of
1933, as amended, or any successor statute (the “Securities Act”), the
Shares will be illiquid and will be deemed to be “restricted securities” for
purposes of the Securities Act. 
Accordingly, such shares must be sold in compliance with the
registration requirements of the Securities Act or an exemption therefrom and
may need to be held indefinitely.  Unless
the Shares have been registered under the Securities Act, each certificate
evidencing any of the Shares shall bear a restrictive legend specified by the
Company.

 

9.             Method
of Exercising Option.  Subject to the
terms and conditions of this agreement, this option may be exercised by written
notice to the Company at its principal executive office, or to such transfer
agent as the Company shall designate. 
Such notice shall state the election to exercise this option and the
number of Shares for which it is being exercised and shall be signed by the
person or persons so exercising this option. 
Such notice shall be accompanied by payment of the full purchase price
of such shares, and the Company shall deliver a certificate or certificates
representing such shares as soon as practicable after the notice shall be
received.  Such certificate or certificates
shall be registered in the name of the person or persons so exercising this
option (or, if this option shall be exercised by the Optionee and if the
Optionee shall so request in the notice exercising this option, shall be
registered in the name of the Optionee and another person jointly, with right
of survivorship). In the event this option shall be exercised, pursuant to Section 5
hereof, by any person or persons other than the Optionee, such notice shall be
accompanied by appropriate proof of the right of such person or persons to exercise
this option.

 

10.           Option
Not Transferable.  This option is not
transferable or assignable except by will or by the laws of descent and
distribution.  During the Optionee’s
lifetime only the Optionee can exercise this option.

 

11.           No
Obligation to Exercise Option.  The
grant and acceptance of this option imposes no obligation on the Optionee to
exercise it.

 

12.           No
Obligation to Continue Business Relationship.  Neither the Plan, this agreement, nor the
grant of this option imposes any obligation on the Company to continue the
Optionee in employment or other Business Relationship.

 

5

 

13.           Adjustments.  Except as is expressly provided in the Plan
with respect to certain changes in the capitalization of the Company, no
adjustment shall be made for dividends or similar rights for which the record
date is prior to such date of exercise.

 

14.           Option
Tax Liability.

 

(a)           In this Section and
Section 15, the following definitions shall have the following meanings:-

 

	
   

  	
  “Employer’s
  NIC Election”

  	
   

  	
  means, an
  election, in such form as may be agreed by the relevant tax authorities (if
  required), entered into by the Optionee and his employing company (or any
  other UK Subsidiary) under which the Optionee agrees that any liability to
  Employer’s NICs which arises in respect of or in relation to this agreement
  or its exercise shall be transferred to the Optionee;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  “Employer’s
  NICs”

  	
   

  	
  means secondary Class 1
  NICs;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  “NICs”

  	
   

  	
  means UK
  National Insurance contributions;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  “NI
  Regulations”

  	
   

  	
  means the laws
  regulations and practices currently in force relating to liability for and
  the collection of NICs;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  “Optionee’s
  Employer”

  	
   

  	
  means such
  company as is the Optionee’s employer or, if he has ceased to be employed by
  the Company or a UK Subsidiary, was his employer or such other company, or
  other person as, under the PAYE Regulations or, as the case may be, the N.I.
  Regulations, or any other statutory or regulatory enactment (whether in the
  United Kingdom or otherwise) is obliged to account for any Option Tax
  Liability.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  “Option
  Gain”

  	
   

  	
  means any gain
  realised upon the exercise or release of, or the acquisition of Shares
  pursuant to an Option, being a gain that is treated as remuneration derived
  from the Optionee’s employment by virtue of section 4(4)(a) of the
  UK Social Security Contributions and Benefits Act 1992;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  “Option
  Tax Liability”

  	
   

  	
  means in
  relation to the Optionee, any liability of the Optionee’s Employer to account
  to the UK Inland Revenue or any other tax authority for any amount of, or
  representing, income tax or NICs (including, without limitation, Employer’s
  NICs) or any other tax charge levy or other sum (whether under the laws of
  the United Kingdom or

  

 

6

 

	
   

  	
   

  	
   

  	
  otherwise) which
  may arise on the grant, vesting or exercise of the Option or the acquisition
  of Shares under the Plan; and

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  “PAYE
  Regulations”

  	
   

  	
  means the
  regulations under section 684 of the UK Income Tax (Earnings and
  Pensions) Act 2003.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  “UK
  Subsidiary”

  	
   

  	
  means any
  company whose registered office is situated in the UK which is for the time
  being a subsidiary of the Company (as defined in section 736 of the UK
  Companies Act 1985)

  

 

(b)           The provisions of this Section 14 shall not apply
in relation to the issue or transfer of Shares on any occasion if, before the
date of issue or transfer, the Optionee has either:-

 

(i)                 paid to the Company or the Optionee’s
Employer a sum which, in the opinion of the Company (or, if different, the Optionee’s
Employer) is, or will be, sufficient to satisfy the Optionee’s liability under
the indemnity in Section 14(c); or

 

(ii)                entered into arrangements with the Company or the
Optionee’s Employer which, in the opinion of the Company (or, if different the Optionee’s
Employer), will ensure that the liability under such indemnity is satisfied
within such period as the Company (or, if different the Optionee’s Employer)
may determine.

 

(c)           The Optionee hereby agrees to the extent permitted by
law, to indemnify the Company and, if different, the Optionee’s Employer
against any liability of any such person to account for any Option Tax
Liability in respect of anything done pursuant to the Plan or this agreement.

 

(d)           The Company shall not be obliged to issue, transfer or
procure the transfer of any Shares or any interest in any Shares under the
Plan, and the Option shall not be validly exercised, unless and until the
Optionee has paid to the Company or the Optionee’s Employer (as appropriate)
such sum as is, in the opinion of the Company, sufficient to indemnify the
Company or the Optionee’s Employer (as appropriate) in full against any Option
Tax Liability or has made such other arrangement as, in the opinion of the
Company, will ensure that the Optionee will satisfy his liability under the
indemnity in Section 14(c).

 

15.           Employer’s NICs 

 

(a)           The Optionee agrees that, and undertakes to the
Company and his Employer that:-

 

(i)                  the Optionee’s Employer may recover
from the Optionee (in such manner as the Company may determine and notify to
the Optionee at any time before the Option is exercised) the whole or any part
of any Employer’s NICs payable in respect of any such Option Gain; and

 

7

 

(ii)                 the Optionee shall join with his
Employer in making an election (in such terms and such form as the Company may
determine and is approved by the UK Inland Revenue) for the transfer to the
Optionee of the whole, or such part as the Company may determine, of any
liability of the Optionee’s Employer to Employer’s NICs on any such Option
Gain; and

 

(iii)                on any occasion on which the Option
is exercised or released after such an election has been made, the Optionee
shall procure that any amount of Employer’s NICs for which the Optionee is
liable is paid to the Optionee’s Employer in time to enable his Employer to
remit such Employer’s NICs to the Collector of Taxes before the 14th
day following the end of the Pay As You Earn month in which the Option is
exercised or released.

 

(b)           The Optionee understands and accepts that the Company
shall not be obliged to transfer title to any Shares upon the exercise of the
Option unless and until the Optionee has paid, or procured the payment, to his
Employer of such sum as, in the opinion of his Employer, is sufficient to
satisfy the Optionee’s liability under the indemnity referred to in Section 14(c) above
within such period as the Optionee’s Employer shall determine and notify to the
Optionee.

 

(c)           The
provisions of this Section 15 shall not have effect in relation to
Employer’s NICs payable in respect of any gain realised upon the exercise or
release of, or the acquisition of Shares pursuant to, the Option or any
occasion if to do so would contravene the provisions of the UK Social Security
Contributions and Benefits Act 1992 or of any regulations made under that Act.

 

16.           Lock-up
Agreement. The Optionee agrees that in the event that the Company effects
an underwritten public offering of Common Stock registered under the Securities
Act, the Shares may not be sold, offered for sale or otherwise disposed of,
directly or indirectly, without the prior written consent of the managing
underwriter(s) of the offering, for such period of time after the execution of
an underwriting agreement in connection with such offering that all of the
Company’s then directors and executive officers agree to be similarly
bound.  In the event the managing
underwriter(s) consent to the sale or disposition of Shares during the
aforementioned period, such sale or disposition shall nevertheless be made in
accordance with the Company’s insider trading policy, as amended and in effect
from time to time.

 

17.           Arbitration.  Any dispute, controversy, or claim arising
out of, in connection with, or relating to the performance of this agreement or
its termination shall be settled by arbitration in the Commonwealth of
Massachusetts, pursuant to the rules then obtaining of the American
Arbitration Association. Any award shall be final, binding and conclusive upon
the parties and a judgment rendered thereon may be entered in any court having
jurisdiction thereof.

 

18.           Provision
of Documentation to Optionee.  By
signing this agreement the Optionee acknowledges receipt of a copy of this
agreement and a copy of the Plan.

 

8

 

19.           Miscellaneous.

 

(a)           Notices.  All notices hereunder shall be in writing and
shall be deemed given when sent by mail, if to the Optionee, to the address set
forth below or at the address shown on the records of the Company, and if to
the Company, to the Company’s principal executive offices, attention of the
Corporate Secretary.

 

(b)           Entire
Agreement; Modification.  This
agreement constitutes the entire agreement between the parties relative to the
subject matter hereof, and supersedes all proposals, written or oral, and all
other communications between the parties relating to the subject matter of this
agreement. This agreement may be modified, amended or rescinded only by a
written agreement executed by both parties.

 

(c)           Fractional
Shares. If this option becomes exercisable for a fraction of a share
because of the adjustment provisions contained in the Plan, such fraction shall
be rounded down.

 

(d)           Issuances
of Securities; Changes in Capital Structure. Except as expressly provided
herein or in the Plan, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares subject to this option.  No adjustments need be made for dividends
paid in cash or in property other than securities of the Company. If there
shall be any change in the Common Stock of the Company through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination or exchange of shares, spin-off, split-up or other similar change
in capitalization or event, the restrictions contained in this agreement shall
apply with equal force to additional and/or substitute securities, if any,
received by the Optionee in exchange for, or by virtue of his or her ownership
of, Shares, except as otherwise determined by the Board.

 

(e)           Severability.  The invalidity, illegality or
unenforceability of any provision of this agreement shall in no way affect the
validity, legality or enforceability of any other provision.

 

(f)            Successors
and Assigns.  This agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, subject to the limitations set forth in Section 10
hereof.

 

(g)           Governing
Law.  This agreement shall be
governed by and interpreted in accordance with the laws of the State of
Delaware, without giving effect to the principles of the conflicts of laws
thereof.

 

20.           Data Protection Consent

 

(a)           For the purposes of this Section:-

 

	
   

  	
  “Data”

  	
   

  	
  means
  personally identifiable information of the Optionee, including employee
  details

  

 

9

 

	
   

  	
   

  	
   

  	
  relevant to the
  above mentioned purposes, the Optionee’s name, home address, e-mail address,
  telephone number, date of birth, National Insurance number, details of the
  Optionee’s Option and of Shares issued or transferred to the Optionee
  pursuant to the Plan or any other employees’ share scheme

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  “Processing”

  	
   

  	
  means
  in relation to the Optionee’s Data shall have the meaning set out in the UK
  Data Protection Act 1988 and includes obtaining, recording or holding the
  Data or carrying out any operation or set of operations on the Data,
  including organisation, adaptation or alteration of the Data, retrieval,
  consultation or use of the Data, disclosure or sharing of the Data by
  transmission, dissemination or otherwise making available, or alignment,
  combination, blocking, erasure or destruction of the Data

  

 

(b)              In entering into this agreement the Optionee shall
agree and consent to the Processing of his Data by his Employer and third
parties involved in the operation and administration of the Plan for the
purposes of the operation and administration of the Plan.  Such third parties are likely to include
members of the Group and any Plan administrator.”

 

10

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