Document:

exv10w3

 

Exhibit 10.3

PRIMUS KNOWLEDGE SOLUTIONS, INC.

1999 STOCK INCENTIVE COMPENSATION PLAN

SECTION 1. PURPOSE

     The purpose of the Primus Knowledge Solutions, Inc. 1999 Stock Incentive Compensation Plan
(the “Plan”) is to enhance the long-term shareholder value of Primus Knowledge Solutions, Inc., a
Washington corporation (the “Company”), by offering opportunities to selected persons to
participate in the Company’s growth and success, and to encourage them to remain in the service of
the Company and its Related Corporations (as defined in Section 2) and to acquire and maintain
stock ownership in the Company.

SECTION 2. DEFINITIONS

     For purposes of the Plan, the following terms shall be defined as set forth below:

     “AWARD” means an award or grant made pursuant to the Plan, including, without limitation,
awards or grants of Stock Awards and Options, or any combination of the foregoing.

     “BOARD” means the Board of Directors of the Company.

     “CAUSE” means dishonesty, fraud, misconduct, unauthorized use or disclosure of confidential
information or trade secrets, or conviction or confession of a crime punishable by law (except
minor violations), in each case as determined by the Plan Administrator, and its determination
shall be conclusive and binding.

     “CODE” means the Internal Revenue Code of 1986, as amended from time to time.

     “COMMON STOCK” means the common stock, par value $.025 per share, of the Company.

     “CORPORATE TRANSACTION” means any of the following events:

             (a)    Consummation of any merger or consolidation of the Company with or into another
corporation; or

             (b)    Consummation of any sale, lease, exchange or other transfer in one transaction or a series
of related transactions of all or substantially all of the Company’s assets other than a transfer
of the Company’s assets to a majority-owned subsidiary corporation (as defined in Section 8.3) of
the Company.

     “DISABILITY,” unless otherwise defined by the Plan Administrator, means a mental or physical
impairment of the Participant that is expected to result in death or that has lasted or is expected
to last for a continuous period of 12 months or more and that causes the Participant to

 

 

be unable, in the opinion of the Company, to perform his or her duties for the Company or a
Related Corporation and to be engaged in any substantial gainful activity.

     “EFFECTIVE DATE” has the meaning set forth in Section 17.

     “EXCHANGE ACT” means the Securities Exchange Act of 1934, as amended.

     “FAIR MARKET VALUE” shall be as established in good faith by the Plan Administrator or (a) if
the Common Stock is listed on the Nasdaq National Market, the average of the high and low per share
sales prices for the Common Stock as reported by the Nasdaq National Market for a single trading
day or (b) if the Common Stock is listed on the New York Stock Exchange or the American Stock
Exchange, the average of the high and low per share sales prices for the Common Stock as such price
is officially quoted in the composite tape of transactions on such exchange for a single trading
day. If there is no such reported price for the Common Stock for the date in question, then such
price on the last preceding date for which such price exists shall be determinative of Fair Market
Value.

     “GRANT DATE” means the date on which the Plan Administrator completes the corporate action
relating to the grant of an Award and all conditions precedent to the grant have been satisfied,
provided that conditions to the exercisability or vesting of Awards shall not defer the Grant Date.

     “INCENTIVE STOCK OPTION” means an Option to purchase Common Stock granted under Section 7 with
the intention that it qualify as an “incentive stock option” as that term is defined in Section 422
of the Code.

     “NONQUALIFIED STOCK OPTION” means an Option to purchase Common Stock granted under Section 7
other than an Incentive Stock Option.

     “OPTION” means the right to purchase Common Stock granted under Section 7.

     “OPTION TERM” has the meaning set forth in Section 7.3.

     “PARENT,” except as otherwise provided in Section 8.3 in connection with Incentive Stock
Options, means any entity, whether now or hereafter existing, that directly or indirectly controls
the Company.

     “PARTICIPANT” means (a) the person to whom an Award is granted; (b) for a Participant who has
died, the personal representative of the Participant’s estate, the person(s) to whom the
Participant’s rights under the Award have passed by will or by the applicable laws of descent and
distribution, or the beneficiary designated in accordance with Section 11; or (c) the person(s) to
whom an Award has been transferred in accordance with Section 11.

     “PLAN ADMINISTRATOR” means the Board or any committee or committees designated by the Board or
any person to whom the Board has delegated authority to administer the Plan under Section 3.1.

     “RELATED CORPORATION” means any Parent or Subsidiary of the Company.

-2-

 

     “SECURITIES ACT” means the Securities Act of 1933, as amended.

     “STOCK AWARD” means shares of Common Stock or units denominated in Common Stock granted under
Section 9, the rights of ownership of which may be subject to restrictions prescribed by the Plan
Administrator.

     “SUBSIDIARY,” except as otherwise provided in Section 8.3 in connection with Incentive Stock
Options, means any entity that is directly or indirectly controlled by the Company.

     “SUCCESSOR CORPORATION” has the meaning set forth in Section 12.3.

     “TERMINATION DATE” has the meaning set forth in Section 7.6.

SECTION 3. ADMINISTRATION

     3.1    PLAN ADMINISTRATOR

     The Plan shall be administered by the Board and/or a committee or committees (which term
includes subcommittees) appointed by, and consisting of two or more members of, the Board (a “Plan
Administrator”). If and so long as the Common Stock is registered under Section 12(b) or 12(g) of
the Exchange Act, the Board shall consider in selecting the members of any committee acting as Plan
Administrator, with respect to any persons subject or likely to become subject to Section 16 of the
Exchange Act, the provisions regarding (a) “outside directors” as contemplated by Section 162(m) of
the Code and (b) “nonemployee directors” as contemplated by Rule 16b-3 under the Exchange Act.
Notwithstanding the foregoing, the Board may delegate the responsibility for administering the Plan
with respect to designated classes of eligible persons to different committees consisting of two or
more members of the Board, subject to such limitations as the Board deems appropriate. Committee
members shall serve for such term as the Board may determine, subject to removal by the Board at
any time. To the extent consistent with applicable law, the Board may authorize a senior executive
officer of the Company to grant Awards to specified eligible persons, within the limits
specifically prescribed by the Board.

     3.2    ADMINISTRATION AND INTERPRETATION BY PLAN ADMINISTRATOR

     Except for the terms and conditions explicitly set forth in the Plan, the Plan Administrator
shall have exclusive authority, in its discretion, to determine all matters relating to Awards
under the Plan, including the selection of individuals to be granted Awards, the type of Awards,
the number of shares of Common Stock subject to an Award, all terms, conditions, restrictions and
limitations, if any, of an Award and the terms of any instrument that evidences the Award. The Plan
Administrator shall also have exclusive authority to interpret the Plan and the terms of any
instrument evidencing the Award and may from time to time adopt, and change, rules and regulations
of general application for the Plan’s administration. The Plan Administrator’s interpretation of
the Plan and its rules and regulations, and all actions taken and determinations made by the Plan
Administrator pursuant to the Plan, shall be conclusive and binding on all parties involved or
affected. The Plan Administrator may delegate administrative duties to such of the Company’s
officers as it so determines.

-3-

 

SECTION
4. STOCK SUBJECT TO THE PLAN

     4.1    AUTHORIZED NUMBER OF SHARES

     Subject to adjustment from time to time as provided in Section 12.1, the number of shares of
Common Stock that shall be available for issuance under the Plan shall be:

             
(a)    1,166,666 shares plus;

              (b)    all annual increases as added on the first day of the Company’s fiscal year beginning in
2001 and ending in 2005, with each annual increase equal to the lessor of (i) 666,666 shares or
(ii) 5% of the adjusted average common shares outstanding of the Company used to calculate fully
diluted earnings per share as reported in the Annual Report to shareholders for the preceding year,
provided that any shares from any such increases in previous years that are not actually issued
shall be added to the aggregate number of shares available for issuance under the Plan; plus

              (c)    any authorized shares (i) not issued or subject to outstanding awards under the Company’s
Employee Stock Option and Restricted Stock Award Plan (Symbologic Corporation) and 1995 Stock
Incentive Compensation Plan (the “Prior Plans”) on the Effective Date and (ii) any shares subject
to outstanding awards under the Prior Plans on the Effective Date that cease to be subject to such
awards (other than by reason of exercise or payment of the awards to the extent they are exercised
for or settled in shares), which shares shall no longer be available for grant and issuance under
the Prior Plans, but shall be available for issuance under the Plan.

     Shares issued under the Plan shall be drawn from authorized and unissued shares or shares now
held or subsequently acquired by the Company. Solely for the purposes of applying this limitation,
each Option granted under this Plan shall reduce the number of shares available for grant by one
share for every one share granted and each grant of a Stock Award other than an Option under this
Plan shall reduce the number of shares available by 1.24 shares for every one share granted.

     4.2    REUSE OF SHARES

     Any shares of Common Stock that have been made subject to an Award that cease to be subject to
the Award (other than by reason of exercise or payment of the Award to the extent it is exercised
for or settled in shares) shall again be available for issuance in connection with future grants of
Awards under the Plan.

SECTION 5. ELIGIBILITY

     Awards may be granted under the Plan to those officers, directors and employees of the Company
and its Related Corporations as the Plan Administrator from time to time selects. Awards may also
be made to consultants, agents, advisors and independent contractors who provide services to the
Company and its Related Corporations; provided, however, that such Participants render bona fide
services that are not in connection with the offer and sale of the

-4-

 

Company’s securities in a capital-raising transaction and do not directly or indirectly
promote or maintain a market for the Company’s securities.

SECTION 6. AWARDS

     6.1    FORM AND GRANT OF AWARDS

     The Plan Administrator shall have the authority, in its sole discretion, to determine the type
or types of Awards to be made under the Plan. Such Awards may include, but are not limited to,
Incentive Stock Options, Nonqualified Stock Options and Stock Awards. Awards may be granted singly
or in combination.

     6.2    SETTLEMENT OF AWARDS

     The Company may settle Awards through the delivery of shares of Common Stock, cash payments,
the granting of replacement Awards or any combination thereof as the Plan Administrator shall
determine. Any Award settlement, including payment deferrals, may be subject to such conditions,
restrictions and contingencies as the Plan Administrator shall determine. The Plan Administrator
may permit or require the deferral of any Award payment, subject to such rules and procedures as it
may establish, which may include provisions for the payment or crediting of interest, or dividend
equivalents, including converting such credits into deferred stock equivalents. The Plan
Administrator may at any time offer to buy out, for a payment in cash or Common Stock, an Award
previously granted based on such terms and conditions as the Plan Administrator shall establish and
communicate to the Participant at the time such offer is made.

     6.3    ACQUIRED COMPANY AWARDS

     Notwithstanding anything in the Plan to the contrary, the Plan Administrator may grant Awards
under the Plan in substitution for awards issued under other plans, or assume under the Plan awards
issued under other plans, if the other plans are or were plans of other acquired entities
(“Acquired Entities”) (or the parent of the Acquired Entity) and the new Award is substituted, or
the old award is assumed, by reason of a merger, consolidation, acquisition of property or of
stock, reorganization or liquidation (the “Acquisition Transaction”). In the event that a written
agreement pursuant to which the Acquisition Transaction is completed is approved by the Board and
said agreement sets forth the terms and conditions of the substitution for or assumption of
outstanding awards of the Acquired Entity, said terms and conditions shall be deemed to be the
action of the Plan Administrator without any further action by the Plan Administrator, except as
may be required for compliance with Rule 16b-3 under the Exchange Act, and the persons holding such
awards shall be deemed to be Participants.

SECTION 7. AWARDS OF OPTIONS

     7.1    GRANT OF OPTIONS

     The Plan Administrator is authorized under the Plan, in its sole discretion, to issue Options
as Incentive Stock Options or as Nonqualified Stock Options, which shall be appropriately
designated.

-5-

 

     7.2    OPTION EXERCISE PRICE

     The Board shall establish the exercise price of each Option and specify such exercise price in
the applicable option agreement, provided, however, that the exercise price of any Option shall not
be less than the fair market value per share of the Common Stock as of the date of the option
grant. For Incentive Stock Options granted to a more than 10% shareholder, the Option exercise
price shall be as specified in Section 8.2.

     7.3    TERM OF OPTIONS

     The term of each Option (the “Option Term”) shall be established by the Plan Administrator,
provided the term shall be not longer than ten years from the Grant Date. For Incentive Stock
Options, the maximum Option Term shall be as specified in Sections 8.2 and 8.4.

     7.4    EXERCISE OF OPTIONS

     The Plan Administrator shall establish and set forth in each instrument that evidences an
Option the time at which, or the installments in which, the Option shall vest and become
exercisable, which provisions may be waived or modified by the Plan Administrator at any time. If
not so established in the instrument evidencing the Option, the Option shall vest and become
exercisable according to the following schedule, which may be waived or modified by the Plan
Administrator at any time:

	 	 	 
	PERIOD OF PARTICIPANT’S CONTINUOUS 

EMPLOYMENT OR SERVICE WITH THE 

COMPANY OR ITS RELATED 

CORPORATIONS FROM THE OPTION DATE
	 	

PERCENT OF TOTAL OPTION GRANT

THAT IS VESTED AND EXERCISABLE
	 	 	 
	After 1 year
	 	25%
	 	 	 
	Each additional one-month period of 

continuous service completed thereafter
	 	
An additional 1/48
	 	 	 
	After 4 years
	 	100%

     The Plan Administrator may adjust the vesting schedule of an Option held by a Participant who
works less than “full-time” as that term is defined by the Plan Administrator.

     To the extent that an Option has vested and become exercisable, the Option may be exercised
from time to time by delivery to the Company of a written stock option exercise agreement or
notice, in a form and in accordance with procedures established by the Plan Administrator, setting
forth the number of shares with respect to which the Option is being exercised, the restrictions
imposed on the shares purchased under such exercise agreement, if any, and such representations and
agreements as may be required by the Plan Administrator, accompanied by payment in full as
described in Section 7.5. An Option may not be exercised as to less than a reasonable number of
shares at any one time, as determined by the Plan Administrator.

-6-

 

     7.5    PAYMENT OF EXERCISE PRICE

     The exercise price for shares purchased under an Option shall be paid in full to the Company
by delivery of consideration equal to the product of the Option exercise price and the number of
shares purchased. Such consideration must be paid in cash or by check or, unless the Plan
Administrator in its sole discretion determines otherwise, either at the time the Option is granted
or at any time before it is exercised, in any combination of

             (a)    cash or check;

             (b)    tendering (either actually or, if and so long as the Common Stock is registered under
Section 12(b) or 12(g) of the Exchange Act, by attestation) shares of Common Stock already owned by
the Participant for at least six months (or any shorter period necessary to avoid a charge to the
Company’s earnings for financial reporting purposes) having a Fair Market Value on the day prior to
the exercise date equal to the aggregate Option exercise price;

             (c)    if and so long as the Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act, delivery of a properly executed exercise notice, together with irrevocable
instructions, to (i) a brokerage firm designated by the Company to deliver promptly to the Company
the aggregate amount of sale or loan proceeds to pay the Option exercise price and any withholding
tax obligations that may arise in connection with the exercise and (ii) the Company to deliver the
certificates for such purchased shares directly to such brokerage firm, all in accordance with the
regulations of the Federal Reserve Board;

             (d)    with the consent of the Board, by reducing the number of shares of Common Stock otherwise
issuable to the optionee upon exercise of the Option by a number of shares of Common Stock having a
fair market value equal to such aggregate exercise price; or

             (e)    such other consideration as the Plan Administrator may permit.

     In addition, to assist a Participant in acquiring shares of Common Stock pursuant to an Award
granted under the Plan, the Plan Administrator, in its sole discretion, may authorize, either at
the Grant Date or at any time before the acquisition of Common Stock pursuant to the Award, (i) the
payment by a Participant of a full-recourse promissory note, with the understanding that no loans
shall be made to directors or executive officers, (ii) the payment by the Participant of the
purchase price, if any, of the Common Stock in installments, or (iii) the guarantee by the Company
of a loan obtained by the Participant from a third party. Subject to the foregoing, the Plan
Administrator shall in its sole discretion specify the terms of any loans, installment payments or
loan guarantees, including the interest rate and terms of and security for repayment.

     7.6    POST-TERMINATION EXERCISES

     The Plan Administrator shall establish and set forth in each instrument that evidences an
Option whether the Option shall continue to be exercisable, and the terms and conditions of such
exercise, if a Participant ceases to be employed by, or to provide services to, the Company or its
Related Corporations, which provisions may be waived or modified by the Plan Administrator at any
time. If not so established in the instrument evidencing the Option, the Option shall be

-7-

 

exercisable according to the following terms and conditions, which may be waived or modified
by the Plan Administrator at any time:

             (a)    Any portion of an Option that is not vested and exercisable on the date of termination of
the Participant’s employment or service relationship (the “Termination Date”) shall expire on such
date.

             (b)    Any portion of an Option that is vested and exercisable on the Termination Date shall
expire upon the earliest to occur of

                      (i)      the last day of the Option Term;

                      (ii)     if the Participant’s Termination Date occurs for reasons other than Cause, death or
Disability, the three-month anniversary of such Termination Date; and

                      (iii)    if the Participant’s Termination Date occurs by reason of Disability or death, the
one-year anniversary of such Termination Date.

     Notwithstanding the foregoing, if the Participant dies after the Termination Date while the
Option is otherwise exercisable, the portion of the Option that is vested and exercisable on such
Termination Date shall expire upon the earlier to occur of (y) the last day of the Option Term and
(z) the first anniversary of the date of death, unless the Plan Administrator determines otherwise.

     Also notwithstanding the foregoing, in case of termination of the Participant’s employment or
service relationship for Cause, the Option shall automatically expire upon first notification to
the Participant of such termination, unless the Plan Administrator determines otherwise. If a
Participant’s employment or service relationship with the Company is suspended pending an
investigation of whether the Participant shall be terminated for Cause, all the Participant’s
rights under any Option likewise shall be suspended during the period of investigation.

     A Participant’s transfer of employment or service relationship between or among the Company
and its Related Corporations, or a change in status from an employee to a consultant, agent,
advisor or independent contractor, shall not be considered a termination of employment or service
relationship for purposes of this Section 7. Employment or service relationship shall be deemed to
continue while the Participant is on a bona fide leave of absence, if such leave was approved by
the Company or a Related Corporation in writing and if continued crediting of service for purposes
of this Section 7 is expressly required by the terms of such leave or by applicable law (as
determined by the Company). The effect of a Company-approved leave of absence on the terms and
conditions of an Option shall be determined by the Plan Administrator, in its sole discretion.

     7.7    NO REPRICING OF OPTIONS

     Notwithstanding anything to the contrary in the Plan, the Company shall not engage in any
repricing of Options granted under this Plan without further stockholder approval. For this
purpose, the term “repricing” shall mean any of the following or other action that has the same

-8-

 

effect: (i) lowering the exercise price of an Option after it is granted, (ii) any other
actions that is treated as a repricing under generally accepted accounting principles, or (iii)
canceling an Option at a time when its exercise price exceeds the fair market value of the
underlying stock in exchange for another Stock Award, or other equity of the Company, unless the
cancellation and exchange occurs in connection with a merger, acquisition, spin-off, or similar
corporate transaction (including any adjustment described in Section 12).

SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS

     To the extent required by Section 422 of the Code, Incentive Stock Options shall be subject to
the following additional terms and conditions:

     8.1    DOLLAR LIMITATION

     To the extent the aggregate Fair Market Value (determined as of the Grant Date) of Common
Stock with respect to which Incentive Stock Options are exercisable for the first time during any
calendar year (under the Plan and all other stock option plans of the Company) exceeds $100,000,
such portion in excess of $100,000 shall be treated as a Nonqualified Stock Option. In the event
the Participant holds two or more such Options that become exercisable for the first time in the
same calendar year, such limitation shall be applied on the basis of the order in which such
Options are granted.

     8.2    MORE THAN 10% SHAREHOLDERS

     If an individual owns more than 10% of the total voting power of all classes of the Company’s
stock, then the exercise price per share of an Incentive Stock Option shall not be less than 110%
of the Fair Market Value of the Common Stock on the Grant Date and the Option Term shall not exceed
five years. The determination of more than 10% ownership shall be made in accordance with Section
422 of the Code.

     8.3    ELIGIBLE EMPLOYEES

     Individuals who are not employees of the Company or one of its parent corporations or
subsidiary corporations may not be granted Incentive Stock Options. For purposes of this Section
8.3, “parent corporation” and “subsidiary corporation” shall have the meanings attributed to those
terms for purposes of Section 422 of the Code.

     8.4    TERM

     Except as provided in Section 8.2, the Option Term shall not exceed 10 years.

     8.5    EXERCISABILITY

     An Option designated as an Incentive Stock Option shall cease to qualify for favorable tax
treatment as an Incentive Stock Option to the extent it is exercised (if permitted by the terms of
the Option) (a) more than three months after the Termination Date for reasons other than death or
Disability, (b) more than one year after the Termination Date by reason of Disability, or (c)

-9-

 

after the Participant has been on leave of absence for more than 90 days, unless the
Participant’s reemployment rights are guaranteed by statute or contract.

     For purposes of this Section 8.5, Disability shall mean “disability” as that term is defined
for purposes of Section 422 of the Code.

     8.6    TAXATION OF INCENTIVE STOCK OPTIONS

     In order to obtain certain tax benefits afforded to Incentive Stock Options under Section 422
of the Code, the Participant must hold the shares issued upon the exercise of an Incentive Stock
Option for two years after the Grant Date and one year from the date of exercise. A Participant may
be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option. The
Participant shall give the Company prompt notice of any disposition of shares acquired by the
exercise of an Incentive Stock Option prior to the expiration of such holding periods.

     8.7    PROMISSORY NOTES

     The amount of any promissory note delivered pursuant to Section 7.5 in connection with an
Incentive Stock Option shall bear interest at a rate specified by the Plan Administrator, but in no
case less than the rate required to avoid imputation of interest (taking into account any
exceptions to the imputed interest rules) for federal income tax purposes.

SECTION 9. STOCK AWARDS

     9.1    GRANT OF STOCK AWARDS

     The Plan Administrator is authorized to make Awards of Common Stock or Awards denominated in
units of Common Stock on such terms and conditions and subject to such restrictions, if any (which
may be based on continuous service with the Company or the achievement of performance goals), as
the Plan Administrator shall determine, in its sole discretion, which terms, conditions and
restrictions shall be set forth in the instrument evidencing the Award. The terms, conditions and
restrictions that the Plan Administrator shall have the power to determine shall include, without
limitation, the manner in which shares subject to Stock Awards are held during the periods they are
subject to restrictions and the circumstances under which forfeiture of the Stock Award shall occur
by reason of termination of the Participant’s employment or service relationship. To the extent
applicable, no Stock Award shall be exercisable more than ten (10) years after the date the Stock
Award is granted.

     9.2    ISSUANCE OF SHARES

     Upon the satisfaction of any terms, conditions and restrictions prescribed in respect to a
Stock Award, or upon the Participant’s release from any terms, conditions and restrictions of a
Stock Award, as determined by the Plan Administrator, the Company shall release, as soon as
practicable, to the Participant or, in the case of the Participant’s death, to the personal
representative of the Participant’s estate or as the appropriate court directs, the appropriate
number of shares of Common Stock.

-10-

 

     9.3    WAIVER OF RESTRICTIONS

     Notwithstanding any other provisions of the Plan, the Plan Administrator may, in its sole
discretion, waive the forfeiture period and any other terms, conditions or restrictions on any
Stock Award under such circumstances and subject to such terms and conditions as the Plan
Administrator shall deem appropriate.

SECTION 10. WITHHOLDING

     The Company may require the Participant to pay to the Company the amount of any withholding
taxes that the Company is required to withhold with respect to the grant, vesting or exercise of
any Award. Subject to the Plan and applicable law, the Plan Administrator may, in its sole
discretion, permit the Participant to satisfy withholding obligations (up to the minimum rate), in
whole or in part, by paying cash, by electing to have the Company withhold shares of Common Stock
or by transferring shares of Common Stock to the Company, in such amounts as are equivalent to the
Fair Market Value of the withholding obligation. The Company shall have the right to withhold from
any Award or any shares of Common Stock issuable pursuant to an Award or from any cash amounts
otherwise due or to become due from the Company to the Participant an amount equal to such taxes.
The Company may also deduct from any Award any other amounts due from the Participant to the
Company or a Related Corporation.

SECTION 11. ASSIGNABILITY

     Awards granted under the Plan and any interest therein may not be assigned, pledged or
transferred by the Participant and may not be made subject to attachment or similar proceedings
otherwise than by will or by the applicable laws of descent and distribution, and, during the
Participant’s lifetime, such Awards may be exercised only by the Participant.

SECTION 12. ADJUSTMENTS

     12.1   ADJUSTMENT OF SHARES

     In the event that, at any time or from time to time, a stock dividend, stock split, spin-off,
combination or exchange of shares, recapitalization, merger, consolidation, distribution to
shareholders other than a normal cash dividend, or other change in the Company’s corporate or
capital structure results in (a) the outstanding shares, or any securities exchanged therefor or
received in their place, being exchanged for a different number or class of securities of the
Company or of any other corporation or (b) new, different or additional securities of the Company
or of any other corporation being received by the holders of shares of Common Stock of the Company,
then the Plan Administrator shall make proportional adjustments in (i) the maximum number and kind
of securities subject to the Plan as set forth in Section 4.1 and (ii) the number and kind of
securities that are subject to any outstanding Award and the per share price of such securities,
without any change in the aggregate price to be paid therefor. The determination by the Plan
Administrator as to the terms of any of the foregoing adjustments shall be conclusive and binding.
Notwithstanding the foregoing, a dissolution or liquidation of the Company or a Corporate
Transaction shall not be governed by this Section 12.1 but shall be governed by Sections 12.2 and
12.3, respectively.

-11-

 

     12.2   DISSOLUTION OR LIQUIDATION

     In the event of the proposed dissolution or liquidation of the Company, the Plan Administrator
shall notify each Participant as soon as practicable prior to the effective date of such proposed
transaction. The Plan Administrator in its discretion may permit a Participant to exercise an
Option until ten days prior to such transaction with respect to all vested and exercisable shares
of Common Stock covered thereby and with respect to such number of unvested shares as the Plan
Administrator shall determine. In addition, the Plan Administrator may provide that any forfeiture
provision or Company repurchase option applicable to any Award shall lapse as to such number of
shares as the Plan Administrator shall determine, contingent upon the occurrence of the proposed
dissolution or liquidation at the time and in the manner contemplated. To the extent an Option has
not been previously exercised, the Option shall terminate automatically immediately prior to the
consummation of the proposed action. To the extent a forfeiture provision applicable to a Stock
Award has not been waived by the Plan Administrator, the Stock Award shall be forfeited
automatically immediately prior to the consummation of the proposed action.

     12.3   CORPORATE TRANSACTION

     In the event of a Corporate Transaction, except as otherwise provided in the instrument
evidencing the Award, each outstanding Option shall be continued, assumed or an equivalent option
or right substituted by the surviving corporation, the successor corporation or its parent
corporation, as applicable (the “Successor Corporation”). In the event that the Successor
Corporation refuses to continue, assume or substitute for the Option, the Participant shall fully
vest in and have the right to exercise the Option as to all of the shares of Common Stock subject
thereto, including shares as to which the Option would not otherwise be vested or exercisable. If
an Option becomes fully vested and exercisable in lieu of assumption or substitution in the event
of a Corporate Transaction, the Plan Administrator shall notify the Participant in writing or
electronically that the Option shall be fully vested and exercisable for a specified time period
after the date of such notice, and the Option shall terminate upon the expiration of such period,
in each case conditioned on the consummation of the Corporate Transaction. For the purposes of this
Section 12.3, the Option shall be considered assumed if, following the Corporate Transaction, the
option or right confers the right to purchase or receive, for each share of Common Stock subject to
the Option, immediately prior to the Corporate Transaction, the consideration (whether stock, cash,
or other securities or property) received in the merger or sale of assets by holders of Common
Stock for each share held on the effective date of the transaction (and if holders were offered a
choice of consideration, the type of consideration chosen by the holders of a majority of the
outstanding shares); provided, however, that if such consideration received in the Corporate
Transaction is not solely common stock of the Successor Corporation, the Plan Administrator may,
with the consent of the Successor Corporation, provide for the consideration to be received upon
the exercise of the Option, for each share of Common Stock subject thereto, to be solely common
stock of the Successor Corporation equal in fair market value to the per share consideration
received by holders of Common Stock in the Corporate Transaction. All Options shall terminate and
cease to remain outstanding immediately following the consummation of the Corporate Transaction,
except to the extent assumed by the Successor Corporation.

-12-

 

     In the event of a Corporate Transaction, the vesting of Shares subject to Stock Awards shall
accelerate, and the forfeiture provisions to which such Shares are subject shall lapse, if and to
the same extent that the vesting of outstanding Options accelerates in connection with the
Corporate Transaction. If unvested Options are to be assumed, continued or substituted by a
Successor Corporation without acceleration upon the occurrence of a Corporate Transaction, the
forfeiture provisions to which such shares are subject will continue with respect to shares of the
Successor Corporation that may be issued in exchange for such Shares.

     12.4   FURTHER ADJUSTMENT OF AWARDS

     Subject to Sections 12.2 and 12.3, the Plan Administrator shall have the discretion,
exercisable at any time before a sale, merger, consolidation, reorganization, liquidation or change
in control of the Company, as defined by the Plan Administrator, to take such further action as it
determines to be necessary or advisable, and fair and equitable to the Participants, with respect
to Awards. Such authorized action may include (but shall not be limited to) establishing, amending
or waiving the type, terms, conditions or duration of, or restrictions on, Awards so as to provide
for earlier, later, extended or additional time for exercise, lifting restrictions and other
modifications, and the Plan Administrator may take such actions with respect to all Participants,
to certain categories of Participants or only to individual Participants. The Plan Administrator
may take such action before or after granting Awards to which the action relates and before or
after any public announcement with respect to such sale, merger, consolidation, reorganization,
liquidation or change in control that is the reason for such action.

     12.5   LIMITATIONS

     The grant of Awards shall in no way affect the Company’s right to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or assets.

SECTION 13. MARKET STANDOFF

     In connection with any underwritten public offering by the Company of its equity securities
pursuant to an effective registration statement filed under the Securities Act, including the
Company’s initial public offering, a person shall not sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of, or otherwise dispose of or transfer for
value or otherwise agree to engage in any of the foregoing transactions with respect to any shares
issued pursuant to an Award granted under the Plan without the prior written consent of the Company
or its underwriters. Such limitations shall be in effect for such period of time as may be
requested by the Company or such underwriters and agreed to by the Company’s officers and directors
with respect to their shares; provided, however, that in no event shall such period exceed 180
days. The limitations of this paragraph shall in all events terminate two years after the effective
date of the Company’s initial public offering. Holders of shares issued pursuant to an Award
granted under the Plan shall be subject to the market standoff provisions of this paragraph only if
the officers and directors of the Company are also subject to similar arrangements.

-13-

 

     In the event of any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the Company’s outstanding Common Stock effected as a
class without the Company’s receipt of consideration, any new, substituted or additional securities
distributed with respect to the purchased shares shall be immediately subject to the provisions of
this Section 13, to the same extent the purchased shares are at such time covered by such
provisions.

     In order to enforce the limitations of this Section 14, the Company may impose stop-transfer
instructions with respect to the purchased shares until the end of the applicable standoff period.

SECTION 14. AMENDMENT AND TERMINATION OF PLAN

     14.1   AMENDMENT OF PLAN

     The Plan may be amended only by the Board in such respects as it shall deem advisable;
provided, however, that to the extent required for compliance with Section 422 of the Code or any
applicable law or regulation, shareholder approval shall be required for any amendment that would
(a) increase the total number of shares available for issuance under the Plan, (b) modify the class
of persons eligible to receive Options, or (c) otherwise require shareholder approval under any
applicable law or regulation. Any amendment made to the Plan that would constitute a “modification”
to Incentive Stock Options outstanding on the date of such amendment shall not, without the consent
of the Participant, be applicable to such outstanding Incentive Stock Options but shall have
prospective effect only.

     14.2   TERMINATION OF PLAN

     The Board may suspend or terminate the Plan at any time. Unless sooner terminated as provided
herein, the Plan shall terminate ten years after the earlier of the Plan’s adoption by the Board
and approval by the shareholders.

     14.3   CONSENT OF PARTICIPANT

     The amendment or termination of the Plan or the amendment of an outstanding Award shall not,
without the Participant’s consent, impair or diminish any rights or obligations under any Award
theretofore granted to the Participant under the Plan. Any change or adjustment to an outstanding
Incentive Stock Option shall not, without the consent of the Participant, be made in a manner so as
to constitute a “modification” that would cause such Incentive Stock Option to fail to continue to
qualify as an Incentive Stock Option. Notwithstanding the foregoing, any adjustments made pursuant
to Section 12 shall not be subject to these restrictions.

SECTION 15. GENERAL

     15.1   EVIDENCE OF AWARDS

     Awards granted under the Plan shall be evidenced by a written instrument that shall contain
such terms, conditions, limitations and restrictions as the Plan Administrator shall deem advisable
and that are not inconsistent with the Plan.

-14-

 

     15.2   NO INDIVIDUAL RIGHTS

     Nothing in the Plan or any Award granted under the Plan shall be deemed to constitute an
employment contract or confer or be deemed to confer on any Participant any right to continue in
the employ of, or to continue any other relationship with, the Company or any Related Corporation
or limit in any way the right of the Company or any Related Corporation to terminate a
Participant’s employment or other relationship at any time, with or without Cause.

     15.3   REGISTRATION

     Notwithstanding any other provision of the Plan, the Company shall have no obligation to issue
or deliver any shares of Common Stock under the Plan or make any other distribution of benefits
under the Plan unless such issuance, delivery or distribution would comply with all applicable laws
(including, without limitation, the requirements of the Securities Act), and the applicable
requirements of any securities exchange or similar entity.

     The Company shall be under no obligation to any Participant to register for offering or resale
or to qualify for exemption under the Securities Act, or to register or qualify under state
securities laws, any shares of Common Stock, security or interest in a security paid or issued
under, or created by, the Plan, or to continue in effect any such registrations or qualifications
if made. The Company may issue certificates for shares with such legends and subject to such
restrictions on transfer and stop-transfer instructions as counsel for the Company deems necessary
or desirable for compliance by the Company with federal and state securities laws.

     To the extent that the Plan or any instrument evidencing an Award provides for issuance of
stock certificates to reflect the issuance of shares of Common Stock, the issuance may be effected
on a noncertificated basis, to the extent not prohibited by applicable law or the applicable rules
of any stock exchange.

     15.4   NO RIGHTS AS A SHAREHOLDER

     No Option or Stock Award denominated in units shall entitle the Participant to any cash
dividend, voting or other right of a shareholder unless and until the date of issuance under the
Plan of the shares that are the subject of such Award.

     15.5   COMPLIANCE WITH LAWS AND REGULATIONS

     Notwithstanding anything in the Plan to the contrary, the Plan Administrator, in its sole
discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision
of the Plan to Participants who are officers or directors subject to Section 16 of the Exchange Act
without so restricting, limiting or conditioning the Plan with respect to other Participants.
Additionally, in interpreting and applying the provisions of the Plan, any Option granted as an
Incentive Stock Option pursuant to the Plan shall, to the extent permitted by law, be construed as
an “incentive stock option” within the meaning of Section 422 of the Code.

-15-

 

     15.6   PARTICIPANTS IN FOREIGN COUNTRIES

     The Plan Administrator shall have the authority to adopt such modifications, procedures and
subplans as may be necessary or desirable to comply with provisions of the laws of foreign
countries in which the Company or its Related Corporations may operate to assure the viability of
the benefits from Awards granted to Participants employed in such countries and to meet the
objectives of the Plan.

     15.7   NO TRUST OR FUND

     The Plan is intended to constitute an “unfunded” plan. Nothing contained herein shall require
the Company to segregate any monies or other property, or shares of Common Stock, or to create any
trusts, or to make any special deposits for any immediate or deferred amounts payable to any
Participant, and no Participant shall have any rights that are greater than those of a general
unsecured creditor of the Company.

     15.8   SEVERABILITY

     If any provision of the Plan or any Award is determined to be invalid, illegal or
unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Award
under any law deemed applicable by the Plan Administrator, such provision shall be construed or
deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended
without, in the Plan Administrator’s determination, materially altering the intent of the Plan or
the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the
remainder of the Plan and any such Award shall remain in full force and effect.

     15.9   CHOICE OF LAW

     The Plan and all determinations made and actions taken pursuant hereto, to the extent not
otherwise governed by the laws of the United States, shall be governed by the laws of the State of
Washington without giving effect to principles of conflicts of laws.

SECTION 16. EFFECTIVE DATE

     The Effective Date is the date on which the Plan is adopted by the Board, so long as it is
approved by the Company’s shareholders at any time within 12 months of such adoption.

-16-exv10w4

 

 Exhibit 10.4

			
	 

	 
	 	As adopted by the Board of
	 	 	Directors on July 19, 2005 and
	 
	 	amended on May 17, 2007.

ART TECHNOLOGY GROUP, INC.

NON-EMPLOYEE DIRECTOR COMPENSATION PLAN

     This Non-Employee Director Compensation Plan (this “Plan”) is being adopted to establish the
compensation of the Non-Employee Directors of Art Technology Group, Inc. (the “Company”) for fiscal
year 2005 and subsequent fiscal years.

     ELIGIBILITY: Each member of the Company’s Board of Directors who is not an employee of the
Company shall be eligible to participate in the Plan (the “Non-Employee Directors”).

     ANNUAL RETAINER: Each Non-Employee Director shall receive an annual retainer in the amount of
$10,000, which shall be payable in quarterly installments in arrears.

     RESTRICTED STOCK UNITS: Each Non-Employee Director shall receive an annual restricted stock
unit grant of 20,000 shares of common stock of the Company (the “Common Stock”), to be granted each
year on the date of the Company’s Annual Meeting of Stockholders (or such later date on which a
Non-Employee Director shall first be elected) which restricted stock unit shall vest after one (1)
year beginning from the time of grant; provided, however, that for fiscal year 2007 this annual
restricted stock unit grant shall be granted on the date that this Plan is adopted, but vest as if
such grant had been made on the date of the Company’s 2007 Annual Meeting of Stockholders. The
vesting for all restricted stock units granted to Non-Employee Directors on or after the 2007
Annual Meeting of Stockholders will accelerate 100% upon a Change of Control (as such term is
defined in the Company’s General Change in Control Policy for Employees).

     RESTRICTED STOCK: Each Non-Employee Director shall receive an annual restricted stock grant of
a number of shares of the Common Stock equal to $4,500 divided by the fair market value of the
Common Stock on the date of grant, which grant shall vest in equal quarterly installments and be
made on the date of the Company’s Annual Meeting of Stockholders (or such later date on which a
Non-Employee Director shall first be elected); provided, however, that for fiscal year 2005 this
annual restricted stock grant shall be granted on the date that this Plan is adopted, but vest as
if such grant had been made on the date of the Company’s 2005 Annual Meeting of Stockholders.

     ADDITIONAL ANNUAL RETAINER FOR CHAIRS: Each Non-Employee Director shall receive an annual
retainer of $7,500, payable in quarterly installments in arrears, for each chair of the Board of
Directors or the Audit, Compensation, or Nominating and Governance Committee thereof held by such
Non-Employee Director.

 

 

     MEETING FEES: Each Non-Employee Director shall also receive the following meeting fees:

	 	(i)	 	meeting fee of $1,500 for each in person meeting of the Board of Directors
attended;
	 
	 	(ii)	 	meeting fee of $1,000 for each in person meeting of the Audit, Compensation, or
Nominating and Governance Committee of the Board of Directors attended; and
	 
	 	(iii)	 	meeting fee of $500 for each telephone meeting of the Board of Directors or
the Audit, Compensation, or Nominating and Governance Committee thereof attended.

     AMENDMENT AND INTERPRETATION: This Plan may be amended at any time by the Board of Directors
of the Company. Any dispute or ambiguity concerning the application of the terms of this Plan shall
be resolved by a determination of the Board of Directors of the Company, in its sole discretion.

-2-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00127-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00127-of-00352.parquet"}]]