2003 New Executive Recuitment Stock Option Plan

Exhibit 10.5

CAPTIVA SOFTWARE CORPORATION

2003 NEW EXECUTIVE RECRUITMENT STOCK OPTION PLAN


ADOPTED: OCTOBER 23, 2003


1. PURPOSES.

(a) General Purpose . The Company, by means of the Plan, seeks to retain the services of persons not previously an employee or director of the Company, or following a bona fide period of non-employment, as an inducement material to the individual's entering into employment with the Company within the meaning of Rule 4350(i)(1)(A) of the NASD Marketplace Rules, and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates.


(b) Eligible Stock Award Recipients . The persons eligible to receive Stock Awards are the Employees of the Company and its Affiliates hired as managers of the Company (director level or higher).


(c) Available Stock Awards . The purpose of the Plan is to provide a means by which eligible recipients of Stock Awards may be given an opportunity to benefit from increases in value of the Common Stock through the granting of the following Stock Awards: (i) Options, (ii) Restricted Stock Awards, (iii) Stock Appreciation Rights (iv) Phantom Stock Awards and (v) Other Stock Awards.


2. DEFINITIONS.

(a) "Affiliate" means any parent corporation or subsidiary corporation of the Company, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code.


(b) "Board" means the Board of Directors of the Company.

(c) "Capitalization Adjustment" has the meaning ascribed to that term in Section 11(a).

(d) "Cause" means, with respect to a particular Participant (i) a felony conviction of such Participant; (ii) the commission by such Participant of an act of fraud or embezzlement against the Company or an Affiliate; (iii) such Participant's willful misconduct or gross negligence materially detrimental to the Company or an Affiliate; (iv) such Participant's continued failure to implement reasonable requests or directions received in the course of his service as an Employee; (v) such Participant's wrongful dissemination or use of confidential or proprietary information; or (vi) the intentional and habitual neglect by such Participant of his or her duties to the Company or an Affiliate.

(e) "Change in Control" means or occurs upon (i) a sale or other disposition of all or substantially all of the assets of the Company; (ii) a merger or consolidation in which the Company is not the surviving entity and in which the stockholders of the Company immediately prior to such consolidation or merger Own less than 50% of the surviving entity's voting power immediately after the transaction; (iii) a reverse merger in which the Company is the surviving entity but the shares of Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, and in which the stockholders of the Company immediately prior to such reverse


merger Own less than 50% of the Company's voting power immediately after the transaction; and (iv) any Exchange Act Person becoming the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company's then outstanding securities other than by virtue of a merger, consolidation or similar transaction.


(f) "Code" means the Internal Revenue Code of 1986, as amended.


(g) "Committee" means a committee of one or more members of the Board appointed by the Board in accordance with Section 3(c).

(h) "Common Stock" means the common stock of the Company, or any security of the Company issued in substitution, exchange or lieu thereof.


(i) "Company" means Captiva Software Corporation, a Delaware corporation, or any successor corporation.


(j) "Consultant" means any person, including an advisor, (i) engaged by the Company or an Affiliate to render consulting or advisory services and who is compensated for such services or (ii) serving as a member of the Board of Directors of an Affiliate and who is compensated for such services. However, the term "Consultant" shall not include Directors who are not compensated by the Company for their services as Directors, and the payment of a director's fee by the Company for services as a Director shall not cause a Director to be considered a "Consultant" for purposes of the Plan.


(k) "Continuous Service" means that the Participant's service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant's service with the Company or an Affiliate, shall not terminate a Participant's Continuous Service. For example, a change in status from an Employee of the Company to a Consultant of an Affiliate or a Director shall not constitute an interruption of Continuous Service. The Board or the chief executive officer of the Company, in that party's sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave. Notwithstanding the foregoing, an approved leave of absence shall be treated as Continuous Service for purposes of vesting in a Stock Award only to such extent as may be provided in the Company's leave of absence policy or in the written terms of the Participant's leave of absence.


(l) "Corporate Transaction" means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

(i) a sale or other disposition of all or substantially all, as determined by the Board in its discretion, of the consolidated assets of the Company and its Subsidiaries;


(ii) a sale or other disposition of at least ninety percent (90%) of the outstanding securities of the Company;

(iii) a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or


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(iv) a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.


(m) "Director" means a member of the Board of Directors of the Company.

(n) "Disability" means, with respect to a Participant, such Participant's permanent and total disability within the meaning of the Company's long-term disability plan, as it may be amended from time to time, or, if there is no such plan, as determined by the Committee.


(o) "Employee" means any person employed by the Company or an Affiliate. Service as a Director or payment of a director's fee by the Company or an Affiliate shall not be sufficient to constitute "employment" by the Company or an Affiliate. Subject to the exclusions set forth below, the term "Employee" shall include only an individual who was hired (and advised that he or she was being hired) directly by the Company or an Affiliate as a regular employee and who performs regular employment services directly for the Company or an Affiliate. Exclusions: The term "Employee" as used in the Plan shall not include an individual who works, or who was hired to work, or who was advised that he or she works: (1) as an independent contractor or an employee of an independent contractor; or (2) as a temporary employee, regardless of the length of time that he or she works at the Company or an Affiliate; or (3) through a temporary employment agency, job placement agency, or other third party; or (4) as part of an employee leasing arrangement between the Company or an Affiliate and any third party. For the purposes of the Plan, the exclusions described above shall remain in effect even if the described individual could otherwise be construed as an employee under any applicable common law or is subsequently determined under applicable laws to be an employee.


(p) "Entity" means a corporation, partnership or other entity.


(q) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(r) "Exchange Act Person" means any natural person, Entity or "group" (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that "Exchange Act Person" shall not include (A) the Company or any Subsidiary of the Company, (B) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (C) an underwriter temporarily holding securities pursuant to an offering of such securities, or (D) an Entity Owned, directly or indirectly, by the shareowners of the Company in substantially the same proportions as their Ownership of stock of the Company.

(s) "Fair Market Value" means, as of any date, the value of the Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the relevant date or, if no shares are traded on such date, then on the last market trading day prior to the relevant date.

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(ii) In the absence of such markets for the Common Stock, the Fair Market Value shall be determined in good faith by the Board.


(t) "Non-Employee Director" means a Director who either (i) is not a current Employee or Officer of the Company or its parent or a subsidiary, does not receive compensation (directly or indirectly) from the Company or its parent or a subsidiary for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act ("Regulation S-K")), does not possess an interest in any other transaction as to which disclosure would be required under Item 404(a) of Regulation S-K and is not engaged in a business relationship as to which disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-employee director" for purposes of Rule 16b-3.

(u) "Officer" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.


(v) "Option" means a nonstatutory stock option granted pursuant to the Plan that is not intended to qualify as an incentive stock option under Section 422 of the Code and the regulations promulgated thereunder.

(w) "Option Agreement" means an agreement between the Company and an Optionholder evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan.


(x) "Optionholder" means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.


(y) "Other Stock Award" means an award based in whole or in part by reference to the Common Stock which is granted pursuant to the terms and conditions of Section 7(d).

(z) "Other Stock Award Agreement" means an agreement between the Company and a holder of an Other Stock Award evidencing the terms and conditions of an individual Other Stock Award grant. Each Other Stock Award Agreement shall be subject to the terms and conditions of the Plan.


(aa) "Own," "Owned," "Owner," "Ownership" A person or Entity shall be deemed to "Own," to have "Owned," to be the "Owner" of, or to have acquired "Ownership" of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.

(bb) "Participant" means a person to whom a Stock Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award.

(cc) "Phantom Stock Award" means a right to receive shares of Common Stock which is granted pursuant to the terms and conditions of Section 7(b).


(dd) "Phantom Stock Award Agreement" means an agreement between the Company and a holder of a Phantom Stock Award evidencing the terms and conditions of an individual Phantom Stock Award grant. Each Phantom Stock Award Agreement shall be subject to the terms and conditions of the Plan.


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(ee) "Restricted Stock Award" means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 7(a).


(ff) "Restricted Stock Award Agreement" means an agreement between the Company and a holder of a Restricted Stock Award evidencing the terms and conditions of an individual Restricted Stock Award grant. Each Restricted Stock Award Agreement shall be subject to the terms and conditions of the Plan.


(gg) "Plan" means this Captiva Software Corporation 2003 New Executive Recruitment Stock Option Plan.


(hh) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.


(ii) "Securities Act" means the Securities Act of 1933, as amended.


(jj) "Stock Appreciation Right" means a right to receive the appreciation of Common Stock which is granted pursuant to the terms and conditions of Section 7(c).

(kk) "Stock Appreciation Right Agreement" means an agreement between the Company and a holder of a Stock Appreciation Right evidencing the terms and conditions of an individual Stock Appreciation Right grant. Each Stock Appreciation Right Agreement shall be subject to the terms and conditions of the Plan.


(ll) "Stock Award" means any right granted under the Plan, including an Option, a Restricted Stock Award, Phantom Stock, a Stock Appreciation Right and an Other Stock Award.


(mm) "Stock Award Agreement" means an agreement between the Company and a holder of a Stock Award evidencing the terms and conditions of an individual Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan.


(nn) "Subsidiary" means, with respect to the Company, (i) any corporation of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%).


3. ADMINISTRATION.


(a) Administration by Board . The Board shall administer the Plan unless and until the Board delegates administration to a committee, as provided in Section 3(c).

(b) Powers of Board . The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:


(i) Subject to Section 5 herein, to determine from time to time which of the persons eligible under the Plan shall be granted Stock Awards; when and how each Stock Award shall be granted; what type or combination of types of Stock Award shall be granted; the


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provisions of each Stock Award granted (which need not be identical), including the time or times when a person shall be permitted to receive Common Stock pursuant to a Stock Award; and the number of shares of Common Stock with respect to which a Stock Award shall be granted to each such person.

(ii) To construe and interpret the Plan and Stock Awards granted under it, and to establish, ame ...