10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	FOR THE TRANSITION PERIOD FROM          TO

COMMISSION FILE NUMBER 000-31321

RIGHTNOW TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

DELAWARE
(State or other jurisdiction of incorporation or organization) 81-0503640
(I.R.S. Employer Identification No.)

136 ENTERPRISE BLVD, BOZEMAN, MONTANA 59718

(Address of principal executive offices) (Zip code)

(406) 522-4200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class:	Name of Each Exchange on Which Registered:
COMMON STOCK, PAR VALUE $0.001	THE NASDAQ STOCK MARKET LLC

Securities registered pursuant to Section 12(g) of the Act:
NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o     No þ

The aggregate market value of common stock held by non-affiliates of the registrant as of June 30, 2009, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $374,000,000, based on the closing sales price of the registrant’s common stock on that date as reported by The Nasdaq Global Market. For the purposes of the foregoing calculation only, all of the registrant’s directors, executive officers and persons known to the registrant to hold ten percent or greater of the registrant’s outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not a determination for other purposes.

The number of shares outstanding of the registrant’s common stock as of February 28, 2010 was 31,937,173.

DOCUMENTS INCORPORATED BY REFERENCE:

Information required by Items 10 through 14 of Part III of this Form 10-K, to the extent not set forth herein, is incorporated herein by reference to portions of the registrant’s definitive proxy statement for the registrant’s 2010 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year ended December 31, 2009. Except with respect to the information specifically incorporated by reference in this Form 10-K, the registrant’s definitive proxy statement is not deemed to be filed as a part of this Form 10-K.

RightNow Technologies, Inc.

Annual Report on Form 10-K

For The Fiscal Year Ended December 31, 2009

Table of Contents

PART I		4
Item 1.	Business	4
Item 1A.	Risk Factors	14
Item 1B.	Unresolved Staff Comments	27
Item 2.	Properties	27
Item 3.	Legal Proceedings	27
Item 4.	Reserved	28
PART II		28
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	28
Item 6.	Selected Financial Data	30
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	45
Item 8.	Financial Statements and Supplementary Data	46
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	46
Item 9A.	Controls and Procedures	46
Item 9B.	Other Information	48
PART III		48
Item 10.	Directors, Executive Officers and Corporate Governance	48
Item 11.	Executive Compensation	49
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	49
Item 13.	Certain Relationships and Related Transactions, and Director Independence	49
Item 14.	Principal Accounting Fees and Services	49
PART IV		49
Item 15.	Exhibits, Financial Statement Schedules	49
	Signatures	52
EX-10.3
EX-10.23
EX-10.24
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32.1

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CAUTIONARY STATEMENT

In this report, the terms “RightNow Technologies,” “RightNow,” “Company,” “we,” “us” and “our” refer to RightNow Technologies, Inc. and its separate, wholly-owned independent subsidiaries.

All statements included or incorporated by reference in this report, other than statements or characterizations of historical fact, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing,” similar expressions, and variations or negatives of these words, and include, but are not limited to, statements regarding projected results of operations, management’s future strategic plans, market acceptance and performance of our products, our ability to retain and hire key executives, sales and technical personnel and other employees in the numbers, with the capabilities, and at the compensation levels needed to implement our business and product plans, the competitive nature of and anticipated growth in our markets, our accounting estimates, and assumptions and judgments. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that are difficult to predict and that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. The risks and uncertainties referred to above include, but are not limited to general economic conditions; fluctuations in foreign currency exchange; our business model; our ability to develop or acquire and gain market acceptance for new products and enhancements to existing products in a cost-effective and timely manner; fluctuations in our earnings as a result of potential changes to our valuation allowance(s) on our deferred tax assets; the success of our efforts to integrate HiveLive’s personnel and processes, following our recent acquisition of that entity; the risk of asset impairment associated with the acquisition of HiveLive; the gain or loss of key customers; competitive pressures and other similar factors such as the availability and pricing of competing products and technologies and the resulting effects on sales and pricing of our products; our ability to expand or contract operations, manage expenses and grow profitability; the rate at which our present and future customers adopt our existing and future products and services; fluctuations in our operating results including our revenue mix and our rate of growth; fluctuations in backlog; the risk that our investments in partner relationships and additional employees will not achieve expected results; interruptions or delays in our hosting operations; breaches of our security measures; our ability to protect our intellectual property from infringement, and to avoid infringing on the intellectual property rights of third parties; the credit markets and potential impact on the recoverability of our portfolio of auction rate securities; our ability to sell auction rate securities under a put option with our broker; any unanticipated ambiguities in fair value accounting standards; fluctuations in our operating results from the impact of stock-based compensation expense; our ability to manage and expand our partner relationships; our ability to hire, retain and motivate our employees and manage our growth; the impact of potential future acquisitions, if any; and various other factors, some of which are described under the section below entitled “Risk Factors,” in Item 1A of this report. These forward-looking statements speak only as of the date of this report. We undertake no obligation to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law.

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Part I

Item 1.   Business

OVERVIEW

RightNow Technologies (“we,” “us,” “our,” the “Company” or “RightNow”) provides RightNow CX, an on-demand (“cloud-based”) suite of customer experience software and services that helps consumer-centric organizations improve customer experiences, reduce costs and increase revenue. In today’s competitive business environment, we believe providing superior customer experiences can be a powerful way for companies to drive sustainable differentiation. The Company helps organizations deliver exceptional customer experiences across the web, social networks and contact centers. RightNow’s technology enables an organization’s service, marketing and sales personnel to leverage a common application platform to deliver service, to market and to sell via the phone, email, web, chat and social interactions. Additionally, through our on demand delivery approach, or software-as-a-service (“SaaS”), we are able to eliminate much of the complexity associated with traditional on premise solutions, implement rapidly, and price our solutions at a level that results in a lower cost of ownership compared to on premise solutions. Our value-added services, including business process optimization and product tune-ups, are directed toward improving our customers’ efficiency, increasing user adoption and assisting our customers to maximize the return on their investment. Approximately 1,900 corporations and government agencies worldwide depend on RightNow to help them achieve their strategic objectives and better meet the needs of those they serve.

RightNow was incorporated in Montana in September 1997 and reincorporated in Delaware in August 2000. Our principal executive offices are located at 136 Enterprise Boulevard, Bozeman, Montana 59718-9300, and our telephone number is (406) 522-4200. We have regional field offices in Boston, Massachusetts; Boulder, Colorado; Chicago, Illinois; Dallas, Texas; San Mateo, California; Orange County, California; New York, New York; Fairport, New York; Herndon, Virginia; and Toronto, Canada. We also have offices in Maidenhead, England; Munich, Germany; Sydney, Australia; and Tokyo, Japan. Our internet address is http://www.rightnow.com. The inclusion of our internet address in this report does not include or incorporate by reference into this report any information contained on, or accessible through, our website. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports and other Securities and Exchange Commission, or SEC, filings are available free of charge through our website as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC. Our common stock trades on The Nasdaq Global Market under the symbol RNOW.

PRODUCTS AND SERVICES

RightNow CX^tm, the Customer Experience Suite

RightNow CX is designed to be a comprehensive customer experience solution for consumer-centric organizations to enable interactions across web, social, and contact center touch points. Our solutions give companies the ability to coordinate disparate resources across the organization to develop, rapidly execute, and manage their customer experience strategy.

We believe that our solutions deliver customer experiences that build loyalty, drive revenue, reduce costs and increase efficiency.

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RightNow CX includes and integrates web, social and contact center experiences, which are layered on RightNow Engage and our CX cloud platform as illustrated below.

RightNow Web Experience

Integrates into an existing web infrastructure to provide a fully interactive, engaging, and branded online customer experience providing customer access to web self-service and the ability to seamlessly transition to agent-assisted channels.

•  Web Self-Service  

Customer Portal gives organizations the ability to create and manage a branded, highly interactive online customer experience 24-hours-a-day. Web self-service utilizes artificial intelligence technology that “learns” how customers search for and use knowledge base information. Features include knowledge syndication to present knowledge base information on any public page, whether that is the organization’s own web page or a partner’s.

•  Email Management  

Email Management is designed to ensure quality communication and timely responses between organizations and customers by tracking the progress of every email through escalation and ensuring that no email is left unanswered. With attribute-based routing capabilities, consumers’ questions can be routed to the agent with the right skill set to address the specific customer situation.

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•  Chat and Co-Browse  

Live chat customer service software facilitates real-time, online chat sessions between organization’s agents and customers visiting a website. Chat helps to resolve customer issues and increase purchase conversion rates. Co-Browsing extends the value of the web experience by providing a visual connection between agents and their online visitors. Coupled with a chat session or phone call, agents are able to provide expert support by guiding customers through the website in real-time.

RightNow Social Experience

Enables organizations both to listen and respond to conversations with their consumers on the social web and build branded communities to cultivate their own conversations. RightNow’s social solutions are integrated into a complete customer experience solution that helps ensure consistency in customer information management, knowledge management and customer experience processes.

•  Support Community  

Facilitates discussion between customers to talk about products and services, share tips, and answer each other’s questions. Customers can mark the best answers and be rewarded for their participation and expertise. A resource library keeps a searchable repository of useful information, including both company and user-generated content.

•  Innovation Community  

Invites customers to submit ideas, vote for their favorite ideas and be rewarded for their participation and expertise. Structured feedback is captured to improve the quality of products and services.

•  Cloud Monitor  

Enables agents to efficiently and effectively engage customers proactively in the social cloud, monitoring Twitter, YouTube, RSS-enabled sites, and RightNow powered communities, following relevant discussions, and determining actionable next steps such as proactive outreach or creation of a service case based on information gathered.

•  Social Experience Designer  

Provides business users a powerful, do-it-yourself interface to expand, create, and customize the RightNow community solution.

RightNow Contact Center Experience

Enables organizations to deliver consistent customer experiences across multi-channel interactions designed to maximize agent productivity, lower costs, and drive revenue.

•  Intelligent Voice Automation (IVR)  

Personalized speech IVR, voice self-service, and custom voice applications facilitate a tailored, personalized experience for each caller based on their individual needs, customer profile, and business objectives.

•  RightNow’s Dynamic Agent Desktop  

Provides a single unified view into all customer information and interaction history regardless of contact channel. Scripting, contextual workspaces and desktop workflow guide agents with contextually relevant, just-in-time knowledge and best practices enabling the delivery of a consistent customer experience and efficient interaction.

•  Contact Center Experience Designer  

Configurable workspaces, scripting, and desktop workflow give contact center business managers the power and flexibility to define and tailor the customer experience within the contact center.

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RightNow Engage

Provides the horizontal service, sales, and marketing business processes that support, span, and inter-connect the web, social and contact center experiences. RightNow Engage helps enable organizations provide seamless, personalized customer experiences through proactive engagement, actionable customer feedback, and deep business insight.

•  Service-Sales-Marketing  

The traditional CRM operational business processes, designed for consumer-centric business:

•  Service: Business processes that support efficient and effective problem resolution and customer support across channels.

•  Sales: Business processes that support revenue-generation, such as sales automation, opportunity management, and upsell and cross sell.

•  Marketing: Business processes that drive personalized, proactive customer communication such as email marketing, lead generation and campaign management.

•  Customer Feedback:  

A prerequisite to delivering superior customer experiences across web, social, and contact center is the ability to gather the voice-of-the-customer in real-time across every customer touch point and take immediate action.

•  Analytics:  

Managerial and operational insight to measure and analyze customer experiences, highlight areas of improvement, and identify trends to anticipate customer needs.

RightNow CX Cloud Platform

RightNow CX Cloud Platform provides a platform for scalability, performance, flexibility and security and offers a set of foundational elements that help enhance value and infuse knowledge across the RightNow CX applications, enabling the delivery of a positive customer experience.

•  Knowledge Foundation  

Enables organizations to leverage appropriate knowledge resources to deliver customers and agents real-time, relevant knowledge across web, social and contact center touch points. Captures and learns from each interaction to drive continuous knowledge improvements, and deliver actionable customer and business insight.

•  Enterprise Integration & Extensibility   

Provides an open platform for fast and cost-effective integration across the agent desktop, business applications, data and telephone systems, making relevant customer knowledge easily accessible to the frontlines of the business regardless of where that knowledge resides. By empowering frontline employees with comprehensive knowledge at the moment of customer interaction, it improves the interaction and customer experience.

•  RightNow Government Cloud  

Provides a dedicated secure hosting facility for United States government agencies. Housed in a carrier-class, tier-4 facility, the Government Hosting Center meets US Federal security and audit standards as defined by The Federal Information Security Management Act, or FISMA, including NIST SP 800-37, NIST SP 800-53, and FIPS 199.

•  RightNow PCI Certified Cloud  

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RightNow PCI Certified Cloud meets the standards set out by PCI (a set of comprehensive requirements for enhancing payment account data security) for Service Provider Level 1 Certification for customers with enhanced security requirements.

RightNow CX Commitment

The RightNow CX Commitment describes the way in which we engage with our customers to deliver a superior customer experience.

•  Focus on Results  

RightNow’s Client Success Managers work with organizations to help them measure their customer experience key performance indicators, benchmark their system and processes against industry metrics, and leverage best practices.

•  Easy to Buy  

Our business processes are designed to make us easy to buy from. Beginning January 2010, RightNow introduced the Cloud Services Agreement (CSA), which we believe gives our customers an arrangement that offers greater flexibility, and is an easy to read, plain-English framework for purchasing. Among other things, the CSA includes annual termination for convenience, price transparency for up to six years, ability to purchase annual pools of capacity, and cash service level credits. We identify performance targets and offer cash service level credits where we fail to meet these targets.

•  Expertise  

RightNow Centers of Excellence (COEs) bring together experts from across the organization for each of the five areas in RightNow CX: Web Experience, Social Experience, Contact Center Experience, Engage and CX Cloud Platform. The COEs help clients define best practices, provide technical product expertise, and drive product innovation.

Professional Services

Our Professional Services group combines project management (RightNow Project Methodology) with technical and business-focused consulting services to our clients. Using proven methods and customer-centric best practices, our Professional Services group is experienced in implementing and integrating RightNow products across many industries, drawing on in-depth knowledge and practical expertise gained from thousands of deployments. Professional services helps customers determine strategic business objectives, align business processes, define success metrics, help with rapid system configuration and deployment, and adjust business solutions to support full user adoption. We also provide tune-up services to our clients, auditing their solution against our library of best practices.

During 2009, we continued to expand our professional service organization with new investments in both partner relationships and additional employees. These investments are expected to allow us to engage in more complex deployments, add scalability to our business and help drive our growth.

Sales and Marketing

RightNow products and services are sold predominantly through our direct sales organization and to a lesser extent through partner channels. The sales team is organized around geographic territory, prospect company size and vertical industry, calling on potential new clients as well as focusing on managing and further expanding existing client relationships.

A prospective client may deploy a portion or all of our solutions on a pilot basis to ensure that RightNow CX solutions meet its needs, prior to committing to any subscription fees. A pilot project usually lasts between 30 and 90 days. The prospective client’s objectives are quantified and results measured during the pilot period. As a result of this program, we believe we have experienced shorter sales cycles, higher sale closure rates and larger deal sizes.

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During 2009, we continued to develop our worldwide partner relationships to enhance the delivery of an optimized customer experience for our shared clients. Our partner program is focused on three core strategies — extend market reach and penetration, expand our implementation delivery providers and extend the RightNow CX solution. These partners represent many of the world’s largest customer care outsourcers, including Convergys, Teleperformance, and TELUS.

In addition, we continued to develop an ecosystem of business and technology alliance partners. These relationships with leading independent software companies, systems integrators, and contact center infrastructure providers has opened up new opportunities for our direct sales organization and has created a host of complimentary solutions for our customers.

New partners and solutions added to our ecosystem to expand RightNow CX include Birst, Sterling Commerce, TARGUSinfo, Boomi, Pervasive, OpenMethods, Interactive Intelligence, Language Weaver, and Sajan.

We believe these partnerships have enabled our direct sales organization to expand its contact base in key accounts, enhance and differentiate the RightNow CX solution, and we believe ultimately will develop larger and more profitable enterprise sales opportunities.

In those international markets where we do not have a direct selling presence, we rely on system integrators and resellers to offer RightNow CX solutions. This strategy is primarily employed in mainland Europe, New Zealand, Asia, and Latin America. In 2009, we continued to broaden our distribution to these markets through resellers.

Our marketing department coordinates future product and service direction, manages generation of client leads, and oversees public and industry analyst relations. To expand our client base, we have also developed and expect to continue to increase innovative marketing initiatives.

Clients and Backlog

As of December 31, 2009, we had approximately 1,900 active clients in various industries with sales generated approximately 20% from technology, 16% from telecommunications, 16% from public sector, 15% from retail/consumer packaged goods, 11% from entertainment, 6% from financial services, 5% from travel and hospitality, 1% from manufacturing, 1% from services, and 9% from various other industries. For the year ended December 31, 2009, approximately 46% of our sales were generated from entities with over $1 billion in annual sales, 38% of our revenue was generated from entities with less than $1 billion in annual revenue and 16% of our revenue was generated from government/educational institutions. No single client accounted for more than 10% of our revenue in 2007, 2008, or 2009. No individual customer accounted for more than 10% of the Company’s accounts receivable or total net receivables at December 31, 2008 and December 31, 2009, respectively. Beginning in 2007, our change to subscriptions from license arrangements required that we no longer record additions to term receivables. As a result, the customer concentration as a percentage of term receivables has increased since the change. One customer represented 22% of term receivables at December 31, 2008, and the same customer represented 40% of term receivables at December 31, 2009.

Total backlog is as follows (in thousands):

	December 31,
	2009		2008
Current committed backlog	$	117,600	$	98,100
Non-current committed backlog		57,020		48,300
Total firm committed backlog		174,620		146,400
Current backlog subject to termination for convenience		3,400		3,900
Non-current backlog subject to termination for convenience		1,980		700
Total backlog	$	180,000	$	151,000

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Total backlog, which represents total invoiced and uninvoiced deferred revenue, was approximately $180 million and $151 million as of December 31, 2009 and December 31, 2008, respectively. Current total backlog, which is the portion of backlog expected to be recognized as revenue within the next twelve months was approximately $121 million and $102 million as of December 31, 2009 and December 31, 2008, respectively.

A certain portion of our backlog includes terms for termination for convenience at the customer option. Specifically, the termination for convenience exists in certain of our business contracted with the federal government, and with some commercial customers. In the case of federal government customers, some of the business that is contracted with this group falls under the termination for convenience guidelines as set forth in the Federal Acquisition Regulations (FARs). The FARs allow the federal government at its option to terminate these arrangements. The majority of our business with the federal government is sold through reseller arrangements that do not include termination for convenience provision(s). A minority of our business is sold either direct to the federal government or through resellers under contracts that do include a right of termination for convenience in accordance with the applicable FARs. We treat this backlog as uncommitted. Most of our business with the federal government is under twelve month arrangements and we ensure that the contracting party has approved the funding prior to recording a transaction or commencing revenue recognition for both new and renewal arrangements. Based on our past experience, termination for convenience by our federal government and commercial customers is rarely exercised.

The backlog not recorded on our balance sheet represents future billings under our subscription agreements that have not been invoiced and, accordingly, are not recorded in deferred revenue.

We expect that the amount of backlog may change from year-to-year for several reasons, including the specific timing and duration of large customer subscription agreements, varying billing cycles of non-cancelable subscription agreements, the specific timing of customer renewals, foreign currency fluctuations, the timing of revenue recognition, and changes in customer financial circumstances. For multi-year subscription agreements billed annually, the associated unbilled deferred revenue is typically high at the beginning of the contract period, zero just prior to renewal, and increases if the agreement is renewed. Low unbilled backlog revenue attributable to a particular subscription agreement is typically associated with an impending renewal and may not be an indicator of the likelihood of renewal or future revenue from such customer. Accordingly, we expect that the amount of aggregate unbilled backlog revenue may change from year-to-year depending in part upon the number and dollar amount of subscription agreements at particular stages in their renewal cycle. Such fluctuations are generally not a reliable indicator of future revenues.

In January 2010 we introduced the CSA, which includes customer termination for convenience terms. As a result, we expect the proportion of total backlog that is uncommitted to increase in the future.

Please refer to Note 1 (c) of our Notes to Consolidated Financial Statements for financial information about our geographic areas.

Product Development and Technology

Our product development efforts are focused on improving and enhancing our existing solutions and service offerings as well as developing new proprietary technology. Our product roadmap incorporates our long-term strategic view of our market and incorporates customer feedback to improve and enhance our products. We currently are developing products and solutions to broaden and deepen our offerings beyond what is offered in the traditional CRM market. We are focusing on building applications that not only improve the internal business processes, but also improve the end customer experience. We allow our clients to run different versions of our software and provide customers the ability to adequately plan, schedule and implement upgrades of new releases. Our support and development efforts are focused only on the current and future releases of our products. We provide support for our software versions for 24 months, and self service support for 12 months after that. Our research and development expenses totaled approximately $17.1 million in 2007, $18.3 million in 2008, and $20.2 million in 2009.

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We believe we have significant technology expertise in developing and deploying highly scalable and reliable cloud based customer experience applications. All of our products have been designed using industry standards for the Internet and are designed to meet the following goals: cost efficient deployment, highly configurable, scalable, easily integrated, multi-tenant and capable of being internationalized. The architectural components described below form the foundation for the delivery of a variety of features within our solution.

Intuitive Knowledge Foundation.  Artificial intelligence, self-learning, knowledgebase technologies and innovative information retrieval technologies form the foundation of our solution. These technologies are combined within our customer service solution to provide self-service and automatic email response to users and as an automated assistant for our clients’ customer service representatives. Core technologies in the area of the knowledge foundation include automatic learning and decay of the relevancy and relatedness of information, natural language processing, word-stemming algorithms, information clustering and classification algorithms, and information retrieval technologies.

Integration with Other Enterprise Applications.  Our clients are able to integrate our solution with their other mission-critical enterprise applications through several techniques, including: web services, application level triggers; user interface extensibility that allows the integration of other applications into our solution; and “pass through” authentication that allows our solution to inherit user credentials from other applications to identify and enforce access to our clients’ web sites. The Developer portion of our Customer Community portal provides our customers an on-line forum of information on integration topics such as up-to-date documentation and sample integrations as well as on-line discussion forums that are moderated by RightNow experts.

Highly Customizable and Usable User Interface.  The web portal interface portion of our product, which allows our clients to serve their customers through the web, is browser based and provides support for all current browsers and versions, and complies with web accessibility standards. The web portal interface is designed to be easily integrated into our client’s web sites and simple for inexperienced internet users to understand. Our back-end interface utilizes Microsoft Corporation’s Smart Client technology. The back-end interface is used by administrators, agents, sales representatives and marketing users. The Microsoft Smart Client user interface (or “UI”) communicates with our server through web services. This UI combines the speed and power of traditional client/server applications with the flexibility and reduced total cost of ownership associated with browser-based applications. With the Microsoft Smart Client UI, a richer user experience is possible than could be provided through a browser. Because the Microsoft Smart Client is automatically network installed and updated, the desktop maintenance generally associated with client/server applications is reduced. Our back-end interface can be easily customized without programming to support different workflows and can be extended to incorporate data from other applications.

Software Architecture.  Our solution has been developed using a logical three-tier Internet architecture consisting of presentation, application logic and data management layers. Because of the tiered separation, our solution is designed to be highly scalable, allowing expansion at each tier. We deploy our solution in highly available, highly scalable, load-balanced web server and clustered database server configurations.

Intellectual Property

Our success depends to a significant degree upon the development and protection of our intellectual property rights. We believe we have a rich repository of intellectual property. As of December 31, 2009, our intellectual property assets included ten issued U.S. patents, thirteen pending U.S. patents, one pending European patent, five U.S. trademark registrations, and multiple foreign trademark registrations. The majority of our patents and patent applications concern our knowledgebase technology, including processes relating to the relative usefulness ranking and the order of display of retrieved information in the knowledgebase; the ability of the knowledgebase to suggest related information to a user accessing the knowledgebase; and the ability of the knowledgebase to produce a relational map of help information items based on the historical usage patterns of customers accessing the knowledgebase. Our patent portfolio also includes patents and patent applications that relate to our voice technology, social, marketing and sales solutions.

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The following is a summary of our issued U.S. patents:

Implicit Rating of Retrieved Information in an Information Search System.  This process relates to an information search and retrieval system through a network, such as the Internet, in which the relative usefulness ranking and the order of display of the retrieved information in the knowledgebase is adjusted based on actions taken by a user. This patent continues until April 2020.

Temporal Updates of Relevancy Rating of Retrieved Information in an Information Search System.  This process relates to an information search and retrieval system through a network, such as the Internet, in which the relative usefulness ranking and the order of display of the retrieved information in the knowledgebase is adjusted based on the amount of time elapsed since the particular information was last accessed. This patent continues until April 2020.

Usage Based Strength between Related Information in an Information Retrieval System.  This patent describes an information retrieval system in which information is displayed based on navigation behavior of previous users. This patent continues until April 2020.

System and Method for Generating a Dynamic Interface through a Communications Network.  This patent describes a system for dynamically adapting selections in an automatic phone support system. This invention enables the provision of information from a dynamic knowledgebase through a telephone channel. This patent continues until June 2020.

Usage Based Strength between Related Help Topics and Context Based Mapping Thereof in a Help Information retrieval System.  This process allows the knowledgebase to suggest related information to a person based on the keyword search and navigation patterns of that person. This patent continues until April 2020.

Display Screen for a Computer.  This is a design patent relating to the user interface to our software. This patent continues until March 2016.

Method for Routing Electronic Correspondence Based on the Level and Type of Emotion Contained Therein.  This process relates to determining the emotional content of an electronic correspondence to route or prioritize the information, to set the expectations of a customer support worker, to flag those workers who are using inappropriate language with the customer, or determine another best course to send the correspondence. This patent continues until October 2022.

Method of Clustering Automation and Classification Techniques.  This invention covers a method for automatically classifying and summarizing related information in a hierarchical manner. The system comprises the steps and means for the presentation and analysis of collected data through the application of four distinct processes: feature selection, clustering, classification and summarization. This patent continues until August 2021.

Our nine registered trademarks in the United States and eight foreign registered trademarks are RIGHTNOW^® (US, Japan, European Union), RIGHTNOW TECHNOLOGIES^® (stylized) (Canada), BRILLIANT ANSWERS^® (Australia), LOCATOR^® (US), RIGHTNOW TECHNOLOGIES & Design^® (European Union), RIGHTNOW TECHNOLOGIES (& Design)^® (Australia, Japan), SALESNET^® (Canada, European Union, US), SALESNET & DESIGN^®, (Canada), SALESNET.COM^® (US), SMARTASSISTANT^® (Australia, Canada, European Union, Japan and US), HIVELIVE^®, HIVELIVE and DESIGN^®, SOCIAL BY DESIGN^®, and LIVECONNECT^® We use our “RightNow” mark as a descriptor of all of our products. These marks continue indefinitely, subject to continuous use and payment of registration fees at the statutorily required intervals. We also use the following common law marks “RightNow CX^tm,” “RightNow Analytics^tm,” “RightNow CX Cloud Platform^tm,” “RightNow Contact Center^tm,” “RightNow Marketing^tm,” “RightNow Engage^tm,” “RightNow Feedback^tm,” RightNow Sales^tm,” “RightNow Service^tm,” “SmartSense^tm,” “RightNow Social^tm,” “RightNow Voice^tm,” “RightNow Web^tm,” “RightNow Chat^tm,” “RightNow Offer Advisor^tm,” “RightNow Connect^tm,” and “RightStart^tm.” Other trademarks, trade names or service marks appearing in this report are the property of their respective holders.

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We also incorporate a number of third party software products into our software pursuant to relevant licenses covering such software and related underlying patents, the duration of which range from term licenses to perpetual licenses. Some of the software is proprietary and some is open source. These functions are peripheral in nature, we are not substantially dependent upon these third party software licenses and we believe the licensed software is generally replaceable, by either licensing or purchasing similar software from another vendor or building the software function ourselves.

Competition

The CRM software market consists of three major market segments: customer service, sales force automation and marketing automation. Within this segmentation, vendors are offering solutions through either on demand or traditional on premise delivery methods. We compete in all segments of the CRM software market and believe that we are the leader in on demand customer service.

The market for CRM solutions is highly competitive and fragmented and is subject to rapidly changing technology, shifting client requirements, frequent introductions of new products and services, and increased marketing activities of other industry participants.

We face competition from other companies currently providing customer service solutions, some of which offer hosted services, including BMC Software Corporation, Inc., eGain Communications Corporation, Inquira Software, Inc., Kana Software, Inc., Liveperson, Microsoft Corporation, Netsuite, nGenera, Oracle Corporation, Parature, SAP AG, and salesforce.com. In interactive voice response technology, competing vendors include Microsoft, TuVox, and Voxify. Social CRM competitors include Lithium and other niche social providers.

We expect to compete with these and additional companies as we further expand into the CRM market, and as more companies expand into the customer service segment. In addition, our solutions compete with CRM systems that are developed and maintained internally by businesses, as well as CRM products or services that are developed, or bundled with other products or services, and installed on a client’s premises by software vendors. We also face competition from outsourced contact center providers who bundle solutions and agent labor in their service offerings. To the extent our competitors have an existing relationship with a potential client, that client may be unwilling to switch vendors due to the time and financial commitments already made with our competitors.

Many of our current and potential competitors have larger presence in the general CRM market, greater name recognition, access to larger customer bases and substantially greater financial, technical, sales and marketing, management, support and other resources than we have. As a result, such competitors may be able to respond more quickly than we can to new or changing opportunities, technologies, standards or client requirements or devote greater resources to the promotion and sale of their products than we can. In addition, many of our current and potential competitors have established or may establish business, financial or strategic relationships among themselves or with existing or potential clients, alliance partners or other third parties, or may combine and consolidate to become more formidable competitors with better resources.

New companies are entering the CRM software market, the on demand applications market and the on demand CRM market, or expanding from any one of these markets to the others. We expect that new competitors, such as enterprise software vendors and online service providers that have traditionally focused on enterprise resource planning or back office applications, will continue to enter the on demand CRM market with competing products as the on demand CRM market develops and matures. It is possible that these new competitors could rapidly acquire significant market share.

We believe the principal factors that generally determine a company’s competitive advantage in the on demand customer service and broader CRM markets include the following:

•  Low total cost of ownership and easily demonstrable cost-effective benefits for clients;

•  Effectiveness in improving the quality of clients’ interactions with their customers across customer service, sales and marketing departments;

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•  Broad product functionality to meet complex client process requirements;

•  Ability to leverage information from customer interactions to more accurately target marketing efforts and enhance revenue opportunities;

•  Speed and ease of implementation;

•  Ease of use and associated high rates of utilization;

•  System performance, security, scalability, flexibility and reliability;

•  Ease of integration with existing applications and data;

•  Availability and quality of implementation, consulting and education services;

•  Quality of client care;

•  Competitive sales and marketing capabilities; and

•  Financial stability and reputation of the vendor.

We cannot assure you that we will be successful in all or any of these areas that we believe contribute to competitive advantage, or that we will be able to compete successfully against current or potential competitors, or that competition will not have a material adverse effect on our business, financial condition and results of operations.

Employees

As of December 31, 2009, we had 797 full-time employees. Of the total employees, we had 255 in sales and marketing, 169 in software development, 167 in professional services, 114 in technical support and hosting, and 92 in finance and administration. None of our employees are represented by a labor union. We believe that our relationship with our employees is good.

Item 1A.   Risk Factors

Before deciding to purchase, hold or sell our common stock, you should carefully consider the risks described below, in addition to the other cautionary statements and risks described elsewhere and the other information contained in this report and in our other filings with the SEC, including our reports on Forms 10-Q and 8-K. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business. If any of these known or unknown risks or uncertainties actually occurs with material adverse effects on RightNow, our business, financial condition and results of operations could be seriously harmed. In that event, the market price for our common stock could decline and you may lose all or part of your investment.

General economic conditions could adversely affect our clients’ ability or willingness to purchase our products, which could materially and adversely affect our results of operations.

Our clients consist of large, medium and small companies in nearly all industry sectors and geographies. Potential new clients or existing clients could defer purchases of our products because of unfavorable macroeconomic conditions, such as fluctuations in currency exchange rates, industry purchasing patterns, industry or national economic downturns, rising interest rates, and other factors. Our ability to grow revenues may be adversely affected by unfavorable economic conditions.

Starting in 2008 there has been deterioration in global economic conditions due to many factors, including the credit market crisis, reduced credit availability, bank failures, slower economic activity, significant expense reductions, bankruptcies, concerns about inflation, recessionary conditions, and general adverse business conditions. These conditions could lead to fewer sales of our products, longer sales cycles, customers requesting longer payment terms, customers failing to pay amounts due, and slower collections of accounts receivable. All of these factors could adversely impact our results of operations, cash flow from operations,

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and our financial position. In addition, we may be forced to respond to an economic downturn by contracting operations, which we may have difficulties managing in a timely fashion.

We have significant international sales and are subject to risks associated with operating in international markets including the risk of foreign currency exchange rate fluctuations.

International sales comprised 31% and 27% of our revenue for the years ended December 31, 2008 and 2009, respectively. We intend to continue to pursue and expand our international business activities. Adverse political and economic conditions could make it difficult for us to increase our international sales or to operate abroad. International operations are subject to many inherent risks, including:

•  fluctuations in foreign currency exchange rates;

•  political, social and economic instability, including conflicts in the Middle East, Central Asia and elsewhere abroad, terrorist attacks and security concerns in general;

•  adverse changes in tariffs and other protectionist laws and business practices that favor local competitors;

•  longer collection periods and difficulties in collecting receivables from foreign entities;

•  exposure to different legal standards and burdens of complying with a variety of foreign laws, including employment, tax, privacy and data protection laws and regulations;

•  reduced protection for our intellectual property in some countries;

•  expenses associated with localizing products for foreign countries, including translation into foreign languages; and

•  import and export license requirements and restrictions of the United States and each other country in which we operate.

We believe that international sales will continue to represent a significant portion of our revenue for the foreseeable future, and that continued growth will require further expansion of our international operations. A substantial percentage of our international sales are denominated in the local currency. As a result, an increase in the relative value of the dollar could make our products more expensive and potentially less price competitive in international markets.

Margins on sales of our products and services in foreign countries, and on sales of products and services that include costs from foreign based employees or foreign suppliers, could be materially adversely affected by foreign currency exchange rate fluctuations. When compared to the year ended December 31, 2008, the U.S. dollar fluctuated significantly compared to the British pound, Australian dollar, and Euro in the year ended December 31, 2009. The change in weighted average exchange rates between the years ended December 31, 2008 and 2009 had an unfavorable impact to revenue of $4.1 million. Conversely, deferred revenue increased by approximately $3.1 million when comparing the change in period-end exchange rates between the years ended December 31, 2008 and 2009. Expenses associated with international revenue are generally paid in local currency, which generally provides a natural hedge to offset the revenue impact. These expenses in the year ended December 31, 2009 were favorably impacted by $3.5 million when comparing the change in weighted average exchange rates between the years ended December 31, 2008 and 2009. The Company’s primary exposure to movements in foreign currency exchange rates relate to non-U.S. dollar denominated sales in EMEA, and Asia-Pacific and non-U.S. dollar denominated operating expenses incurred in these respective regions. These foreign currency exposures may make it difficult to compare our financial statements for the current period with financial statements from earlier periods.

We may not be able to sustain or increase profitability in the future.

We had an accumulated deficit of $58.3 million as of December 31, 2009. We expect to continue to incur significant professional services, sales and marketing, research and development and general and administrative expenses as we expand our operations and, as a result, we will need to generate significant revenue to sustain

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or increase profitability. We may not be able to continue to improve our operating results at the rate that has occurred in the past. Even though we were profitable during the three and twelve months ended December 31, 2009, we may not be able to sustain or increase profitability on a quarterly or annual basis in the future, which may cause the price of our stock to decline.

We face intense competition, and our failure to compete successfully could make it difficult for us to add and retain clients and could reduce or impede the growth of our business.

The market for CRM solutions is highly competitive and fragmented, and is subject to rapidly changing technology, shifting client requirements, frequent introductions of new products and services, and increased marketing activities of other industry participants. Increased competition could result in commoditization, pricing pressure, reduced sales, lower margins or the failure of our solutions to achieve or maintain broad market acceptance. If we are unable to compete effectively, it will be difficult for us to add and retain clients, and our business, financial condition and results of operations will be seriously harmed.

We face competition from:

•  Companies currently providing customer service solutions, some of whom offer hosted services, including ATG, BMC Software Corporation, Inc., eGain Communications Corporation, Inquira Software, Inc., Kana Software, Inc., Liveperson, Microsoft Corporation, Netsuite, nGenera, Oracle Corporation, Parature, SAP AG, and salesforce.com;

•  CRM systems that are developed and maintained internally by businesses;

•  CRM products or services that are developed, or bundled with other products or services, and installed on a client’s premises by software vendors;

•  Outsourced contact center providers that bundle solutions and agent labor in their service offerings;

•  New companies entering the CRM software market, the on demand applications market and the on demand CRM market, or expanding from any one of these markets to the others;

•  Voice system integrators and voice-enabled IVR technology providers, such as Microsoft, TuVox, and Voxify; and

•  Social CRM providers, such as Lithium and other niche social CRM providers.

Many of our current and potential competitors have longer operating histories and larger presence, greater name recognition, access to larger customer bases and substantially greater financial, technical, sales and marketing, management, service, support and other resources than we have. As a result, such competitors may be able to respond more quickly than we can to new or changing opportunities, technologies, standards or client requirements or devote greater resources to the promotion and sale of their products and services than we can. To the extent our competitors have an existing relationship with a potential client, that client may be unwilling to switch vendors due to the time and financial commitments already made with our competitors.

In addition, many of our current and potential competitors have established or may establish business, financial or strategic relationships among themselves or with existing or potential clients, alliance partners or other third parties, or may combine and consolidate to become more formidable competitors with better resources. We also expect that new competitors, such as enterprise software vendors and online service providers that have traditionally focused on enterprise resource planning or back office applications, will continue to enter the on demand CRM market with competing products as the on demand CRM market develops and matures.

Our quarterly results of operations may fluctuate in the future.

Our quarterly revenue and results of operations may fluctuate as a result of a variety of factors, many of which are outside of our control. If our quarterly revenue or results of operations decline or fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.

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Fluctuations in our results of operations may be due to a number of factors, including, but not limited to, those listed below and identified throughout this “Risk Factors” section:

•  our ability to retain and increase sales to existing clients, attract new clients and satisfy our clients’ requirements;

•  general economic, industry and market conditions;

•  the mix of revenue between license arrangements, professional services and subscription arrangements as sales commissions are generally expensed ratably over the term of an agreement for subscription services, and expensed when invoiced for license arrangements and professional services;

•  changes in the mix of revenue between professional services and software, hosting and support, because the gross margin on professional services is typically lower than the gross margin on software, hosting and support;

•  changes in the mix of voice self service applications sold and/or usage volume, because the gross margin on voice self service applications is typically lower than the gross margin on our sales, marketing, feedback and service applications;

•  the timing and success of new product introductions or upgrades by us or our competitors;

•  the timing of professional service sales and our ability to appropriately staff and train professional service resources without negatively impacting professional service margins;

•  changes in our pricing policies or those of our competitors;

•  the amount and timing of expenditures related to expanding our operations;

•  changes in our assumptions of stock price volatility, employee exercise behaviors, and option forfeiture rates, or changes in the number of stock options granted and vesting requirements in any particular period, which effects the amount of stock-based compensation expense;

•  changes in the payment terms for our products and services, including changes in the mix of payment options chosen by our customers;

•  the purchasing and budgeting cycles of our clients;

•  changes in tax rate affected by changes in the mix of earnings and losses in jurisdictions with differing statutory tax rates, certain non-deductible expenses arising from the requirement to expense stock options and the valuation of deferred tax assets and liabilities, including our ability to use our net operating losses; and

•  changes in credit market conditions associated with auction rate securities, which could permanently impair the recoverability of these investments.

Because the sales cycle for the evaluation and implementation of our solutions typically ranges from 60 to 180 days, we may also experience a delay between increasing operating expenses and the generation of corresponding revenue, if any. Moreover, because most of the revenue from new sales agreements is recognized over time, downturns or upturns in sales may not be immediately reflected in our operating results. Additionally, our professional service margins may be negatively impacted by training requirements for new professional service resources and/or customer scheduling issues. Most of our expenses, such as salaries and third-party hosting co-location costs, are relatively fixed in the short-term, and our expense levels are based in part on our expectations regarding future revenue levels. As a result, if revenue for a particular quarter is below our expectations, we may not be able to proportionally reduce operating expenses for that quarter, causing a disproportionate effect on our expected results of operations for that quarter.

Due to the foregoing factors, and the other risks discussed in this report, you should not rely on quarter-to-quarter comparisons of our results of operations as an indication of our future performance.

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Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to increase our client base and achieve broader market acceptance of our solutions.

Increasing our client base and achieving broader market acceptance of our solutions may depend to a significant extent on the effectiveness of our sales and marketing programs/operations. Our business will be seriously harmed if our efforts do not maximize revenue per sales and marketing headcount. We may not effectively develop and maintain awareness of the CX brand and our other brands in a cost-effective manner, not achieve widespread acceptance of our existing and future services and fail to expand and attract new customers. We also may not achieve anticipated revenue growth from our third-party channel partners if we are unable to attract and retain additional motivated channel partners, if any existing or future channel partners fail to successfully market, resell, implement or support our solutions for their customers, or if they represent multiple providers and devote greater resources to market, resell, implement and support competing products and services.

Most of our solutions are sold pursuant to time-based agreements, and if our existing clients elect not to renew or to renew on terms less favorable to us, our business, financial condition and results of operations will be adversely affected.

Our solutions are generally sold pursuant to time-based agreements that are typically subject to renewal every two years or less and our clients have no obligation to renew. Additionally, some of our solutions are sold pursuant to time-based agreements that allow our customers to terminate for convenience annually provided they notify us at least 90 days before the contract anniversary date. Because our clients may elect not to renew, we may not be able to consistently and accurately predict future renewal rates. Our clients’ renewal rates may decline or fluctuate as a result of a number of factors, including their level of satisfaction with our solutions, their ability to continue their operations or invest in customer service, their acceptance of a change from term license agreements to subscription service agreements, or the availability and pricing of competing products. If large numbers of existing clients do not renew, or renew on terms less favorable to us, and if we cannot replace or supplement those non-renewals with new agreements generating the same or greater level of revenue, our business, financial condition and results of operations will be adversely affected.

We have experienced growth in recent periods. If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service or adequately address competitive challenges.

To achieve our business objectives, we will need to continue to expand our business at an appropriate pace. This expansion has placed, and is expected to continue to place, a significant strain on our managerial, administrative, operational, financial and other resources. We anticipate that expansion will require substantial management effort and significant additional investment in our infrastructure. If we are unable to successfully manage our growth, our business, financial condition and results of operations will be adversely affected.

Part of the challenge that we expect to face in the course of our expansion is to maintain the high level of customer service to which our clients have become accustomed. To date, we have focused on providing personalized account management and customer service on a frequent basis to ensure our clients are effectively leveraging the capabilities of our solution. We believe that much of our success to date has been the result of high client satisfaction, attributable in part to this focus on client service. To the extent our client base grows, we will need to expand our account management, client service and other personnel, and third-party channel partners, in order to enable us to continue to maintain high levels of client service and satisfaction. If we are not able to continue to provide high levels of client service, our reputation, as well as our business, financial condition and results of operations, could be harmed.

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If there are interruptions or delays in our hosting services through third-party error, our own error or the occurrence of unforeseeable events, delivery of our solutions could become impaired, which could harm our relationships with clients and subject us to liability.

As of December 31, 2009, over 95% of our clients were using our hosting services for deployment of our software applications. We generally provide our hosting services for our applications through computer hardware that we own and that is currently located in third-party web hosting co-location facilities maintained and operated in California, Illinois, New Jersey and London, England. Our voice applications for several international customers are hosted by third parties who also own and operate the hardware on which our applications reside. We do not maintain long-term supply contracts with any of our hosting providers, and providers do not guarantee that our clients’ access to hosted solutions will be uninterrupted, error-free or secure. Our operations depend on our providers’ ability to protect their and our systems in their facilities against damage or interruption from natural disasters, power or telecommunications failures, criminal acts and similar events. Our back-up computer hardware and systems have not been tested under actual disaster conditions and may not have sufficient capacity to recover all data and services in the event of an outage occurring simultaneously at all hosting facilities. In the event that our hosting facility arrangements were terminated, or there was a lapse of service or accidental or willful damage to such facilities, we could experience lengthy interruptions in our hosting service as well as delays and/or additional expense in arranging new facilities and services. Any or all of these events could cause our clients to lose access to their important data. In addition, the failure by our third-party hosting facilities to meet our capacity requirements could result in interruptions in our service or impede our ability to scale our operations.

Design and mechanical errors, spikes in usage volume and failure to follow system protocols and procedures could cause our systems to fail, resulting in interruptions in our clients’ service to their customers. Any interruptions or delays in our hosting services, whether as a result of third-party error, our own error, natural disasters or security breaches, whether accidental or willful, could harm our relationships with clients and our reputation. This in turn could reduce our revenue, subject us to liability, and cause us to issue credits or pay penalties or cause clients to fail to renew their licenses, any of which could adversely affect our business, financial condition and results of operations. In the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. Additionally, during the first quarter of 2009, we announced a SaaS service level credit program, which provides for a partial rebate if we fall short of our system availability objective. If we fail to meet this objective for one or all of our customers, we may have to pay a substantial amount of money, which may impact cash reserves, revenue recognition, and our reputation.

If the security of our clients’ confidential information contained in our systems or stored by use of our software is breached or otherwise subjected to unauthorized access, our hosting service or our software may be perceived as not being secure and clients may curtail or stop using our hosting service and our solutions.

Our hosting systems and our software store and transmit proprietary information and critical data belonging to our clients and their customers. Any accidental or willful security breaches or other unauthorized access could expose us to a risk of information loss, litigation and other possible liabilities. If security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in our software are exposed and exploited, and, as a result, a third party obtains unauthorized access to any of our clients’ data, our relationships with clients and our reputation will be damaged, our business may suffer and we could incur significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we and our third-party hosting co-location facilities may be unable to anticipate these techniques or to implement adequate preventative measures.

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If we fail to respond effectively to rapidly changing technology and evolving industry standards, particularly in the on demand CRM industry, our solutions may become less competitive or obsolete.

The CRM industry is characterized by rapid technological advances, changes in client requirements, frequent new product and service introductions and enhancements, changes in protocols and evolving industry standards. Our hosted business model and the on demand CRM market may evolve even more rapidly than the rest of the CRM market. Competing products and services based on new technologies or new industry standards may perform better or cost less than our solutions and could render our solutions less competitive or obsolete. In addition, because our solutions are designed to operate on a variety of network hardware and software platforms using a standard Internet web browser, we will need to continuously modify and enhance our solutions to keep pace with changes in Internet-related hardware, software, communication, browser and database technologies and to integrate with our clients’ systems as they change and evolve. Furthermore, uncertainties about the timing and nature of new network platforms or technologies, or modifications to existing platforms or technologies, could increase our research and development expenses.

Our software incorporates use of Microsoft’s .NET Framework, and its Smart Client methodology. The .NET Framework is core functionality that Microsoft incorporates into operating systems, while the Smart Client methodology enables development and deployment of software applications using the .NET Framework. We believe that the .NET Framework and Smart Client enable us to provide users with a richer experience and better functionality than would be possible using a pure Web-based application. However, the .NET Framework has not been universally adopted. If software users do not adopt the .NET Framework or if the .NET Framework is superseded, the potential market for our solutions will be reduced and we may need to develop an alternative architecture.

If we are unable to successfully develop and market new and enhanced solutions that respond in a timely manner to changing technology and evolving industry standards, and if we are unable to satisfy the diverse and evolving technology needs of our clients, our business, financial condition and results of operations will suffer.

Our failure to attract and retain qualified or key personnel may prevent us from effectively developing, marketing, selling, integrating and supporting our products.

Our success and future growth depends to a significant degree upon the skills, experience, performance and continued service of our senior management, engineering, sales, marketing, service, support and other key personnel. Specifically, we believe that our future success is highly dependent on Greg Gianforte, our founder, Chairman and Chief Executive Officer. In addition, we do not have employment agreements with any of our senior management or key personnel that require them to remain our employees and, therefore, they could terminate their employment with us at any time without penalty. If we lose the services of Mr. Gianforte or any of our other key personnel, our business will be severely disrupted and we may be unable to operate effectively. We do not maintain “key person” life insurance policies on any of our key employees. Our future success also depends in large part upon our ability to attract, train, integrate, motivate and retain highly skilled employees, particularly sales, marketing and professional services personnel, software engineers, product trainers, and senior personnel.

Our failure to attract, manage, support and retain qualified partners may prevent us from effectively deploying product and professional services.

Our success and future growth depends in part upon the skills, experience, performance and continued service of our partners. We engage with partners in a number of ways, including assisting us to identify prospective customers, to distribute our solutions, to develop complementary solutions, and to help us to fulfill professional services engagements. We believe that our future success depends in part upon our ability to develop strategic, long term and profitable partnerships. If we do not acquire and retain the right partners, our products might become uncompetitive, we may be unable to take full advantage of the potential demand for our solutions, or our ability to rapidly deliver our solutions may be impaired. The use of partners to fulfill customer requirements may impact our normal margins, and affect the profitability of customer transactions.

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If our solutions fail to perform properly or if they contain technical defects, our reputation will be harmed, our market share would decline and we could be subject to product liability claims.

Our software products may contain undetected errors or defects that may result in product failures, slow response times, or otherwise cause our products to fail to perform in accordance with client expectations. Because our clients use our products for important aspects of their business, any errors or defects in, or other performance problems with, our products could hurt our reputation and may damage our clients’ businesses.

If that occurs, we could lose future sales, or our existing clients could elect to not renew or to delay or withhold payment to us, which could result in an increase in our provision for doubtful accounts and an increase in collection cycles for accounts receivable. Clients also may make warranty or other claims against us, which could result in the expense and risk of litigation. Product performance problems could result in loss of market share, failure to achieve market acceptance and the diversion of development resources. If one or more of our products fails to perform or contains a technical defect, a client may assert a claim against us for substantial damages, whether or not we are responsible for the product failure or defect. We do not currently maintain any warranty reserves.

Product liability claims could require us to spend significant time and money in litigation or to pay significant settlements or damages. Although we maintain general liability insurance, including coverage for errors and omissions, this coverage may not be sufficient to cover liabilities resulting from such product liability claims. Also, our insurer may disclaim coverage. Our liability insurance also may not continue to be available to us on reasonable terms, in sufficient amounts, or at all. Any product liability claims successfully brought against us would cause our business to suffer.

If we are unable to protect our intellectual property rights, our competitive position could be harmed or we could be required to incur significant expenses to enforce our rights.

Our success depends to a significant degree upon the protection of our software and other proprietary technology rights. We rely on trade secret, copyright and trademark laws, patents and confidentiality agreements with employees and third parties, all of which offer only limited protection. The steps we have taken to protect our intellectual property may not prevent misappropriation of our proprietary rights or the reverse engineering of our solutions. We may not be able to obtain any further patents or trademarks, and our pending applications may not result in the issuance of patents or trademarks. Any of our issued patents may not be broad enough to protect our proprietary rights or could be successfully challenged by one or more third parties, which could result in our loss of the right to prevent others from exploiting the inventions claimed in those patents. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights in other countries are uncertain and may afford little or no effective protection of our proprietary technology. Consequently, we may be unable to prevent our proprietary technology from being exploited abroad, which could diminish international sales or require costly efforts to protect our technology. Policing the unauthorized use of our products, trademarks and other proprietary rights is expensive, difficult and, in some cases, impossible. Litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. Such litigation could result in substantial costs and diversion of management resources, either of which could harm our business. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property.

Our product development efforts may be constrained by the intellectual property of others, and we may become subject to claims of intellectual property infringement, which could be costly and time-consuming.

The software and Internet industries are characterized by the existence of a large number of patents, trademarks and copyrights, and by frequent litigation based upon allegations of infringement or other violations of intellectual property rights. As we seek to extend our customer experience product and service offerings, we may be constrained by the intellectual property rights of others. We have in the past been named as a defendant in a lawsuit alleging intellectual property infringement, and we may again in the future have to

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defend against intellectual property lawsuits. We may not prevail in any future intellectual property infringement litigation given the complex technical issues and inherent uncertainties in litigation. Any claims, regardless of their merit, could be time-consuming and distracting to management, result in costly litigation or settlement, cause product development delays, or require us to enter into royalty or licensing agreements. If any of our products violate third-party proprietary rights, we may be required to re-engineer our products or seek to obtain licenses from third parties, which may not be available on reasonable terms or at all. Because our sales agreements typically require us to indemnify our clients from any claim or finding of intellectual property infringement, any such litigation or successful infringement claims could adversely affect our business, financial condition and results of operations. Any efforts to re-engineer our products, obtain licenses from third parties on favorable terms or license a substitute technology may not be successful and, in any case, may substantially increase our costs and harm our business, financial condition and results of operations.

Further, our software products contain open source software components that are licensed to us under various public domain licenses. While we believe we have complied with our obligations under the various applicable licenses for open source software that we use, there is little or no legal precedent governing the interpretation of many of the terms of certain of these licenses and therefore the potential impact of such terms on our business is somewhat unknown. Use of open source standards also may make us more vulnerable to competition because the public availability of open source software could make it easier for new market entrants and existing competitors to introduce similar competing products quickly and cheaply.

The market for our on demand application services is not at the same stage of development as traditional on-premise enterprise software, and if it does not develop or develops more slowly than we expect, our business will be harmed.

The market for on demand application services is not as mature as the market for traditional on-premise enterprise software, and it is uncertain whether these application services will achieve and sustain high levels of demand and market acceptance. Our success will depend to a substantial extent on the willingness of companies to increase their use of on demand application services in general and for on demand RightNow CX applications in particular. The willingness of companies to increase their use of any on demand application services is in part dependent on the actual and perceived reliability of hosted solutions. In addition, many companies have invested substantial personnel and financial resources to integrate traditional enterprise software into their businesses, and therefore may be reluctant or unwilling to migrate to on demand application services. While we have supported traditional on site deployment of our software applications, widespread market acceptance of our on demand software solutions is critical to the success of our business. Other factors that may affect the market acceptance of our solutions include:

•  on demand security capabilities and reliability;

•  concerns with entrusting a third party to store and manage critical customer data;

•  the level of customization we offer;

•  our ability to continue to achieve and maintain high levels of client satisfaction;

•  concerns with purchasing critical CRM solutions from a company with a history of operating losses; and

•  the price, performance and availability of competing products and services.

If businesses do not perceive the benefits of on demand solutions in general, or our on demand solutions in particular, then the market for these solutions may not develop further, or it may develop more slowly than we expect, either of which would adversely affect our business, financial condition and results of operations.

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If our efforts to enhance existing solutions, introduce new solutions or expand the applications for our products and solutions to broader CRM markets do not succeed, our ability to grow our business will be adversely affected.

If we are unable to successfully develop and sell new and enhanced versions of our solutions, or introduce new solutions for the customer service market, our financial performance will suffer. In recent years, we have expanded our CRM solution offering to include sales, marketing, feedback, social and voice-enabled applications. Additionally, we have focused on eService solutions to call centers. Our efforts to expand our solution in order to improve the customer experience may not be successful in part because certain of our competitors may have far greater experience or brand recognition in the market or because they have greater financial resources that they can use to develop or acquire superior products. In addition, our efforts to expand our on demand software solutions may divert management resources from our existing operations and require us to commit significant financial resources to a market where we are less proven, which may harm our business, financial condition and results of operations.

Recently completed and/or future acquisitions could disrupt our business and harm our financial condition and results of operations.

In order to expand our addressable market, we may decide to acquire additional businesses, products and technologies. In May 2005, we acquired the assets of Convergent Voice and in May 2006, we acquired Salesnet, Inc. Most recently, in September 2009 we acquired HiveLive, Inc. Acquisitions could require significant capital infusions into the acquired business and could involve many risks, including, but not limited to, the following:

•  an acquisition may negatively impact our results of operations because it may require incurring large one-time charges, substantial debt or liabilities; it may require the amortization or write down of amounts related to deferred compensation, goodwill and other intangible assets; or it may cause adverse tax consequences, substantial depreciation or deferred compensation charges;

•  we may encounter difficulties in assimilating and integrating the business, technologies, products, personnel or operations of companies that we acquire, particularly if key personnel of the acquired company decide not to work for us;

•  our existing and potential clients and the customers of the acquired company may delay purchases due to uncertainty related to an acquisition;

•  an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management;

•  the acquired businesses, products or technologies may not generate sufficient revenue to offset acquisition costs and could result in material asset impairment charges;

•  we may have to issue equity securities to complete an acquisition, which would dilute our stockholders and could adversely affect the market price of our common stock; and

•  acquisitions may involve the entry into a geographic or business market in which we have little or no prior experience.

We cannot assure you that we will be able to identify or consummate any future acquisitions on favorable terms, or at all. If we do pursue any future acquisitions, it is possible that we may not realize the anticipated benefits from the acquisitions or that the financial markets or investors will negatively view the acquisitions. Even if we successfully complete an acquisition, it could adversely affect our business, financial condition and results of operations.

Changes to financial accounting standards may affect our results of operations and financial condition.

Generally accepted accounting principles and accompanying accounting pronouncements, implementation guidelines and interpretations for many aspects of our business, such as software revenue recognition, accounting for stock-based compensation, software cost capitalization, unanticipated ambiguities in fair value

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accounting standards and income tax uncertainties, are complex and involve subjective judgments by management. Changes to generally accepted accounting principles, their interpretation, or changes in our products or business could significantly change our reported earnings and financial condition and could add significant volatility to those measures.

With the recent volatility in the capital markets, there is a risk that we could suffer a loss of principal in our cash and cash equivalents and short term investments and suffer a reduction in our interest income or in our return on investments. Additionally funds associated with auction rate securities may be inaccessible in excess of 12 months, which may result in market value declines, which could have a material impact on our operating results in the period it is recognized.

We invest our cash and cash equivalents and short-term investments pursuant to our investment policy in cash, money market funds, commercial paper, corporate bonds and government agency securities, which are of investment grade quality. Prior to March 3, 2008, our investment policy allowed us to invest cash in auction-rate securities (“ARS”). At December 31, 2009, we held approximately $3.8 million par value ARS that are subject to general credit, liquidity, market, and interest rate risks, which may be exacerbated by U.S. sub-prime mortgage defaults that have affected various sectors of the financial markets and caused credit and liquidity issues. During the fourth quarter of 2008, we executed a settlement agreement with our broker to redeem the ARS held by us at par commencing June 2010 through July 2012. By accepting the terms of the settlement, we (1) received the non-transferable right (“put option”) to sell our ARS at par value to the broker commencing June 2010 through July 2012, and (2) gave the broker the right to purchase the ARS from us at any time after the executed settlement agreement date as long as we receive par value. However, if we do not exercise the put option during or before July 2012, it will expire and the broker will have no further rights or obligation to buy the ARS. Redemption of these investments may be subject to brokerage house default. As a result of this settlement, we reclassified ARS from available for sale securities to trading securities. During the twelve months ended December 31, 2009, we marked to market the investment in accordance with FASB ASC Topic 320, which resulted in an increase in fair value for a total unrealized gain of $500,000 included in other income, net. Partially, offsetting this gain within other income, net was a $466,000 unrealized loss during the twelve months ended December 31, 2009 related to the put option we obtained pursuant to the settlement agreement. Our inability to dispose of our ARS prior to June 2010 could negatively impact our liquidity and cash on hand, which, in turn, could cause us to forego potentially beneficial operational and strategic transactions or to incur additional indebtedness. Additionally, we could be adversely impacted if the broker is unable to meet its obligations under the settlement agreement as the broker’s obligations under the put option are not secured by its assets and do not require the broker to obtain any financing to support its performance obligations under the put option.

We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.

We may require additional capital to respond to business challenges, including the need to develop new solutions or enhance our existing solutions, enhance our operating infrastructure, fund expansion, respond to competitive pressures and acquire complementary businesses, products and technologies. Absent sufficient cash flow from operations, we may need to engage in equity or debt financings to secure additional funds to meet our operating and capital needs. In addition, even though we may not need additional funds, we may still elect to sell additional equity or debt securities or obtain credit facilities for other reasons. We may not be able to secure additional debt or equity financing on favorable terms, or at all, at the time when we need such funding. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital, to pay dividends and to pursue business opportunities, including potential acquisitions. In addition, if we decide to raise funds through debt or convertible debt financings, we may be unable to meet our interest or principal payments.

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The success of our products and our hosted business depends on the continued use of the Internet as a business and communications tool, and the related expansion of the Internet infrastructure.

The future success of our products and our hosted business depends upon the continued and widespread use of the Internet as a primary medium for commerce, communication and business applications. Our business growth would be impeded if the performance or perception of the Internet, or companies providing hosted solutions, was harmed by security problems such as “viruses,” “worms” and other malicious programs, reliability issues arising from outages and damage to Internet infrastructure, delays in development or adoption of new standards and protocols to handle increased demands of Internet activity, increased costs, decreased accessibility and quality of service, or increased government regulation and taxation of Internet activity.

Federal, state or foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting data privacy, the solicitation, collection, processing or use of personal or consumer information, the use of the Internet as a commercial medium and the use of email for marketing or other consumer communications. In addition, government agencies or private organizations may begin to impose taxes, fees or other charges for accessing the Internet or for sending commercial email. These laws or charges could limit the growth of Internet-related commerce or communications generally, result in a decline in the use of the Internet and the viability of Internet-based services such as ours and reduce the demand for our products.

The Internet has experienced, and is expected to continue to experience, significant user and traffic growth, which has, at times, caused user frustration with slow access and download times. If Internet activity grows faster than Internet infrastructure or if the Internet infrastructure is otherwise unable to support the demands placed on it, or if hosting capacity becomes scarce, our business growth may be adversely affected.

Privacy concerns and laws or other domestic or foreign regulations may adversely affect our business or reduce sales of our solutions.

Businesses using our solutions collect personal information regarding their customers when those customers contact them with customer service inquiries. A valuable component of our solutions is their ability to allow our clients to use and analyze their customers’ information to increase sales, marketing and up-sell or cross-sell opportunities. Federal, state and foreign government bodies and agencies, however, have adopted and are considering adopting laws and regulations regarding the collection, use and disclosure of personal information obtained from consumers. The costs of compliance with, and other burdens imposed by, such laws and regulations that are applicable to the businesses of our clients may limit the use and adoption of this component of our solutions and reduce overall demand for our solutions. Furthermore, even where a client desires to make full use of these features in our solutions, privacy concerns may cause our clients’ customers to resist providing the personal data necessary to allow our clients to use our solutions most effectively. Even the perception of privacy concerns, whether or not valid, may inhibit market acceptance of our products.

European Union members have imposed stringent restrictions on the collection and use of personal data that impose significant burdens on subject businesses. Domestic and international laws and regulations, and legislative and regulatory initiatives, may adversely affect our clients’ ability to collect and/or use demographic and personal information from their customers, which could reduce demand for our solutions.

In addition to government activity, privacy advocacy groups and the technology and direct marketing industries are considering various new, additional or different self-regulatory standards that may place additional burdens on us. If the gathering of profiling information were to be curtailed in this manner, customer service CRM solutions would be less effective, which would reduce demand for our solutions and harm our business.

Non-solicitation concerns, laws or regulations may adversely affect our clients’ ability to perform outbound marketing and other email communications, which could reduce sales of our solutions.

In January 2004, the federal Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or CAN-SPAM Act, became effective. The CAN-SPAM Act regulates the transmission and content of

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commercial emails and, among other things, obligates the sender of such emails to provide recipients with the ability to opt-out of receiving future emails from the sender, and establishes penalties for the transmission of email messages which are intended to deceive the recipient as to source or content. Many state legislatures also have adopted laws that impact the delivery of commercial email, and laws that regulate commercial email practices have been enacted in many of the international jurisdictions in which we do business, including Europe, Australia, Japan, and Canada. In addition, Internet service providers and licensors of software products have introduced a variety of systems and products to filter out certain types of commercial email, without any common protocol to determine whether the recipient desired to receive the email being blocked. As a result, it is difficult for us to determine in advance whether or not emails generated by our clients using our solutions will be permitted by spam filters to reach the intended recipients.

Our RightNow Marketing solution specifically serves the market for mass distribution marketing and other email communications. The increasing regulation of email delivery, both domestically and internationally, and the spam filtering practices of Internet service providers and email users generally, will place significant additional burdens on our clients who have outbound communication programs, and may cause those clients to substantially change their outbound communications programs or abandon them altogether. These factors may lead to a reduction in sales of our RightNow Marketing solution, may make it necessary to redesign our RightNow Marketing solution to make it easier for our clients to conform to the requirements of such laws and standards, which would increase our expenses, or may make it necessary for us to redefine the market for and use of our RightNow Marketing solution, which could reduce our revenue.

The significant influence over stockholder voting matters and our office leases that may be exercised by our founder and Chief Executive Officer will limit your ability to influence corporate actions and may require us to find alternative office space to lease or buy in the future.

At December 31, 2009, Greg Gianforte, our founder and Chief Executive Officer, and his spouse, Susan Gianforte, have voting power over approximately 25% of our outstanding common stock and, together with other officers and directors, have voting power over approximately 31% of our outstanding common stock. In addition, none of the shares of common stock over which Mr. Gianforte and Mrs. Gianforte have voting power are subject to vesting restrictions. As a result, Mr. Gianforte and Mrs. Gianforte, acting together with some of our other officers and directors, may be able to influence matters requiring stockholder approval, including the election of directors, management changes and approval of significant corporate transactions. This concentration of voting power may have the effect of delaying, preventing or deterring a change in control of RightNow, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of RightNow and might reduce the market price of our common stock.

In addition, Mr. Gianforte beneficially owns, directly or indirectly, a 50% membership interest in Genesis Partners, LLC, our landlord from whom we lease our principal offices in Bozeman, Montana. Consequently, Mr. Gianforte has significant influence over any decisions by Genesis Partners regarding renewal, modification or termination of our Bozeman, Montana leases. In the event that our current leases with Genesis Partners were terminated or otherwise could not be renewed, or came up for renewal on commercially unreasonable terms, we would be required to find alternative office space to lease or buy.

Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in control of our company and may affect the trading price of our common stock.

Provisions of our certificate of incorporation and bylaws and Delaware law may discourage, delay or prevent a merger or acquisition that a stockholder may consider favorable and may limit the market price of our common stock. These provisions include the following:

•  establishing a classified board in which only a portion of the total board members will be elected at each annual meeting;

•  authorizing the board to issue preferred stock;

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•  providing the board with sole authority to set the number of authorized directors and to fill vacancies on the board;

•  limiting the persons who may call special meetings of stockholders;

•  prohibiting certain transactions under certain circumstances with interested stockholders;

•  requiring supermajority approval to amend certain provisions of the certificate of incorporation; and

•  prohibiting stockholder action by written consent.

It is possible that the provisions contained in our certificate of incorporation and bylaws, the voting rights held by insiders and the ability of our board of directors to issue preferred stock without stockholder action may have the effect of delaying, deferring or preventing a change in control of our Company without further action by the stockholders, may discourage bids for our common stock at a premium over the market price of our common stock and may adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock.

Item 1B.   Unresolved Staff Comments

None.

Item 2.   Properties

Our corporate headquarters, including our principal administrative, marketing, technical support and research and development facilities, are located in Bozeman, Montana, where we lease approximately 30,000 square feet with a term that expires in March 2011, and approximately 22,000 square feet under two leases with terms that expire in March and June 2015. Additionally, we have a lease agreement for an additional 29,000 square feet in Bozeman with a term that expires in February 2017. We also currently occupy a number of sales and service offices in California, Colorado, Illinois, Massachusetts, New Jersey, New York, Texas, Virginia, Canada, Australia, Germany, Japan and the United Kingdom, where we lease or license the use of an aggregate of approximately 80,000 square feet under multiple agreements, which have terms that expire between March 2010 and February 2017. We believe that our current facilities are suitable and adequate to meet our current needs, and that suitable additional or substitute space will be available as needed to accommodate expansion of our operations. See Note 11(a) to the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations and Commitments” for information regarding our lease obligations.

Item 3.   Legal Proceedings

On October 16, 2009, RightNow entered into a General Release and Settlement Agreement with Kana Software, Inc. (“KANA”) and four former employees of RightNow to settle a lawsuit that was filed by RightNow alleging violations by KANA and the four former employees of RightNow of certain provisions of employment agreements, misappropriation of trade secrets, as well as other claims. In the General Release and Settlement Agreement, KANA agreed that it would pay a total of $1,000,000 to RightNow with $100,000 due within ten days of executing the General Release and Settlement Agreement and the remainder due over nine consecutive quarters beginning with the quarter commencing January 1, 2010. KANA provided RightNow with a subordinated security interest in its assets to secure the amounts payable to RightNow. On December 23, 2009, KANA sold substantially all of its assets to Kay Technology Corp, Inc. Pursuant to an acceleration clause in the settlement agreement related to the change in control, KANA paid the Company $1,000,000. RightNow received the entire cash settlement payment during the fourth quarter of 2009 and recorded the gain on settlement of this litigation in other income.

From time to time, we are involved in legal proceedings arising in the ordinary course of business. We believe that the resolution of these matters will not have a negative material effect on our consolidated financial position, results of operations or liquidity.

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Item 4.   Reserved

Part II

Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Securities

The graph depicted below shows a comparison of cumulative total stockholder returns for our common stock, the NASDAQ Global Market Index and the Standard Industrial Code Index for Prepackaged Software for the period from December 31, 2004, to December 31, 2009, the last trading day of 2009.

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN AMONG
RIGHTNOW TECHNOLOGIES, INC., NASDAQ MARKET INDEX AND
PREPACKAGED SOFTWARE

ASSUMES $100 INVESTED ON DEC. 31, 2004

ASSUMES DIVIDEND REINVESTED

FISCAL YEAR ENDING DEC. 31, 2009

The graph above assumes that $100 was invested in the common stock of RightNow at its closing price and in each index, on December 31, 2004, and that all dividends were reinvested. RightNow has not paid or declared any cash dividends on its common stock. The Standard Industrial Code (“SIC”) used is 7372 — Prepackaged Software.

Notwithstanding anything to the contrary set forth in any of our previous filings made under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate future filings made by us under those statutes, neither the preceding Stock Performance Graph, nor the information relating to it, is “soliciting material” or is “filed” or is to be incorporated by reference into any such prior filings, nor shall such graph or information be incorporated by reference into any future filings made by us under those statutes.

Market Information for Common Stock

Our common stock is traded on The Nasdaq Global Market under the symbol RNOW. The table below reflects the quarterly high and low per share sales prices of our common stock for the period January 1, 2008 through December 31, 2009, as reported by The Nasdaq Global Market. These prices represent prices among dealers, do not include retail markups, markdowns or commissions, and may not represent actual transactions.

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Quarter Ended	Mar 31		June 30		Sept 30		Dec 31
Year ended December 31, 2008
Common stock price per share:
High	$	15.06	$	14.98	$	17.26	$	12.12
Low		9.93		10.47		11.07		5.80
Year ended December 31, 2009
Common stock price per share:
High	$	9.25	$	12.35	$	14.75	$	18.22
Low		5.72		6.84		9.86		13.36

Holders

On February 28, 2010, there were approximately 77 holders of record of our common stock.

Dividends

We have never declared or paid cash dividends on our capital stock since converting from an S corporation to a C corporation at the end of 1999. We currently intend to retain future earnings, if any, to finance the growth and development of our business, and therefore do not anticipate paying any cash dividends in the foreseeable future.

Unregistered Sales of Equity Securities

None.

Use of Proceeds from Sales of Registered Securities

On August 5, 2004, the Securities and Exchange Commission declared effective our Registration Statement on Form S-1 (Reg. File No. 333-115331) under the Securities Act of 1933, as amended, in connections with the initial public offering of our common stock, par value $.001 per share. We sold 6.4 million shares, including shares sold upon exercise of the underwriters’ over-allotment option, for an aggregate offering price of $44.9 million, and 321,945 shares, including shares sold upon exercise of the underwriters’ over-allotment option, were sold by a selling stockholder for an aggregate offering price of $2.3 million. After deducting $3.3 million in underwriting discounts and commissions and $1.8 million in other offering costs, we received net proceeds from the offering of approximately $40 million. None of the expenses and none of our net proceeds from the offering were paid directly or indirectly to any director, officer, general partner of RightNow or their associates, persons owning 10% or more of any class of equity securities of RightNow, or an affiliate of RightNow.

In May 2005, we spent $1 million of the offering proceeds for the acquisition of the assets of Convergent Voice. In May 2006, we spent $8.7 million of the offering proceeds to acquire Salesnet, Inc. In September 2009, we spent $5.9 million of the offering proceeds to acquire HiveLive, Inc. We currently intend to use the remaining proceeds for general corporate purposes as described in the prospectus for the offering. Pending these uses, the net proceeds from the offering are invested in short-term, interest-bearing, investment-grade securities.

Purchases of Equity Securities by the Issuer or Affiliated Purchasers

None.

Item 6.   Selected Consolidated Financial Data

The following selected consolidated financial data should be read in conjunction with the Consolidated Financial Statements and Notes thereto and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial data included elsewhere in this report. The consolidated statement of operations data for the years ended December 31, 2009, 2008 and 2007, and the

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consolidated balance sheet data at December 31, 2009 and 2008, are derived from audited consolidated financial statements included elsewhere in this report. The consolidated statement of operations data for the years ended December 31, 2006 and 2005, and the consolidated balance sheet data at December 31, 2007, 2006 and 2005, are derived from audited consolidated financial statements not included in this report. The historical results are not necessarily indicative of results to be expected in any future period.

	Year Ended December 31,
	2005			2006			2007			2008			2009
	(In thousands, except per share data)
Consolidated Statements of Operations Data:
Revenue:
Software, hosting and support	$	67,944		$	86,257		$	86,983		$	102,576		$	115,395
Professional services		19,204			24,131			25,094			37,859			37,292
Total revenue		87,148			110,388			112,077			140,435			152,687
Cost of revenue:
Software, hosting and support		9,111			13,260			18,411			20,397			20,948
Professional services		11,956			19,110			22,012			30,440			26,610
Total cost of revenue		21,067			32,370			40,423			50,837			47,558
Gross profit		66,081			78,018			71,654			89,598			105,129
Operating expenses:
Sales and marketing		42,683			61,504			65,118			67,628			64,751
Research and development		10,428			14,478			17,084			18,292			20,221
General and administrative		6,445			9,578			11,500			13,615			15,801
Total operating expenses		59,556			85,560			93,702			99,535			100,773
Income (loss) from operations		6,525			(7,542	)		(22,048	)		(9,937	)		4,356
Interest and other income, net		1,646			3,064			3,683			2,696			2,094
Income (loss) before income taxes		8,171			(4,478	)		(18,365	)		(7,241	)		6,450
Provision for income taxes		(478	)		(530	)		(276	)		(42	)		(579	)
Net income (loss)		7,693			(5,008	)		(18,641	)		(7,283	)		5,871
Net income (loss) per share(1):
Basic	$	0.25		$	(0.16	)	$	(0.56	)	$	(0.22	)	$	0.18
Diluted		0.23			(0.16	)		(0.56	)		(0.22	)		0.18
Shares used in the computation(1):
Basic		30,631			32,241			33,078			33,362			31,752
Diluted		33,695			32,241			33,078			33,362			32,336

(1) See Note 1 of Notes to Consolidated Financial Statements for an explanation of the calculation of basic and diluted income (loss) per share and for an explanation of the determination of the number of weighted average shares used for such calculations.

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	December 31,
	2005		2006		2007		2008		2009
	(In thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	40,874	$	39,208	$	43,681	$	51,405	$	41,546
Short-term investments		23,314		39,127		52,644		34,412		54,977
Long-term investments		—		—		—		4,963		—
Working capital		45,156		50,374		45,063		34,075		40,392
Total assets		123,676		178,242		173,786		162,337		164,435
Deferred revenue		67,923		114,578		114,660		113,198		101,327
Long-term debt, less current portion		117		85		68		22		—
Total stockholders’ equity		44,655		47,474		38,181		27,183		40,242

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes in this report. This discussion contains forward-looking statements that involve risks and uncertainties. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing,” similar expressions, and variations or negatives of these words and include, but are not limited to, statements regarding projected results of operations and management’s future strategic plans. Our actual results could differ significantly from those projected in the forward-looking statements as a result of factors, including those discussed under “Risk Factors” and elsewhere in this report. We assume no obligation to update the forward-looking statements or such risk factors.

Overview

RightNow Technologies provides RightNow CX, a cloud-based suite of customer experience software and services that helps consumer-centric organizations improve customer experiences, reduce costs and increase revenue. In today’s competitive business environment, we believe providing superior customer experiences can be a powerful way for companies to drive sustainable differentiation. RightNow’s technology enables an organization’s service, marketing and sales personnel to leverage a common application platform to deliver service, to market and to sell via the phone, email, web, chat, and social interactions. Additionally, through our on demand delivery approach, or software-as-a-service (“SaaS”), we are able to eliminate much of the complexity associated with traditional on premise solutions, implement rapidly, and price our solutions at a level that results in a lower cost of ownership compared to on premise solutions. Our value-added services, including business process optimization and product tune-ups, are directed toward improving our customers’ efficiency, increasing user adoption and assisting our customers to maximize the return on their investment. Approximately 1,900 corporations and government agencies worldwide depend on RightNow to help them achieve their strategic objectives and better meet the needs of those they serve.

We released our initial version of RightNow Service ^tm in 1997. This product addressed the new customer service needs resulting from the increasing use of the Internet as a customer service channel. Since then, we have significantly enhanced product features and functionality to address customer service needs across multiple communication channels, including web, interactive voice, email, chat, telephone, proactive outbound email communications, and social interactions. We have also added several products that are complementary to our RightNow Service solution, including RightNow Marketing ^tm, RightNow Sales ^tm, RightNow Feedback ^tm, and RightNow Cloud Monitor^tm, which automate aspects of marketing campaigns, sales operations, and

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customer monitoring. In February 2007, we initiated a quarterly release cycle which allows us to deliver new product capabilities to customers every three months. The latest of our 2009 quarterly releases, RightNow CX November ’09, includes the first major integration of our social solution, and functionality related to Section 508 of the Disabilities Act as part of our expanded government cloud offering. Additionally, RightNow CX November ’09 includes for the first time RightNow Order Management, which allows order entry directly from the RightNow agent desktop. During the third quarter of 2009, we acquired HiveLive, Inc., an enterprise-class social platform provider with an innovative platform for customer support, engagement and loyalty, and ideation communities to help organizations maximize opportunities to deliver great customer experiences. The acquisition is expected to allow us to offer the broadest social CRM solution in the market place. Our products served approximately 2.5 billion customer interactions, or unique sessions hosted by our solutions, during the year ended December 31, 2009. We distribute our solutions primarily through direct sales efforts and to a lesser extent through indirect channels.

Sources of Revenue

Our revenue is comprised of fees for software, hosting and support, and fees for professional services. “Recurring revenue”, referred to in this report, includes software, hosting and support revenue from term license and subscription agreements.

Software, hosting and support revenue includes fees earned under subscriptions and software license arrangements. Subscription arrangements are for a fixed term and include a bundled fee to access the software and data through our hosting services, and support services. Subscription revenue is recorded ratably over the length of the agreement. Our hosting services provide remote management and maintenance of our software and customers’ data which is physically located in third party facilities. Customers’ access hosted software and data through a secure Internet connection. Support services include technical assistance for our software products and unspecified product upgrades and enhancements on a when and if available basis.

License arrangements are also for a fixed term (a “term” license). For term licenses, software, hosting and support revenue is recognized ratably over the length of the agreement. Beginning in 2007, we substantially eliminated perpetual license arrangements. Due to the change, perpetual license revenue decreased from $2.1 million, or 2% of revenue in the year ending December 31, 2007, to $312,000 in the year ending December 31, 2008 and $145,000 in the year ending December 31, 2009, or less than 1% of revenue in the year ending December 31, 2008, and December 31, 2009, respectively.

Our sales arrangements generally provide customers with the right to use our software up to a maximum number of users or transactions. A number of our arrangements provide for additional fees for usage above the maximum, which are billed and recognized into revenue when determinable and earned.

Professional services revenue is comprised of revenue from consulting, education, development services, and reimbursement of related travel costs. Consulting and education services include implementation and best practices consulting. Development services include customizations and integrations for a client’s specific business application. Professional services revenue was approximately 22% of total revenue during 2007, 27% in 2008, and 24% in 2009.

Professional services are typically sold with initial sales arrangements and at times over the client engagement. Our typical education courses are billed on a per person, per class basis.

Depending on the size and complexity of the client project, our consulting or development services contracts are either fixed price/fixed scope or, more frequently, billed on a time and materials basis. We have determined that the professional services element of our software and subscription arrangements is not essential to the functionality of the software.

Cost of Revenue and Operating Expenses

Cost of Revenue.  Cost of revenue consists primarily of salaries and related expenses (such as employee benefits, stock based compensation and payroll taxes) for our hosting, support and professional services organizations, third-party costs and equipment depreciation relating to our hosting services, third-party costs

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for voice enabled CRM applications, travel expenses related to providing professional services to our clients, amortization of acquired intangible assets and allocated overhead. We allocate most overhead expenses, such as office supplies, computer supplies, utilities, rent, depreciation for furniture and equipment, and certain employee benefits, based on headcount. As a result, these common overhead expenses are reflected in each cost of revenue and operating expense category.

Sales and Marketing Expenses.  Sales and marketing expenses consist primarily of salaries and related expenses for employees in sales and marketing, including commissions and bonuses, advertising, marketing events, corporate communications, product management expenses, travel costs and allocated overhead. For subscription arrangements, we expense the related sales commission in proportion to the revenue recognized. We expense our sales commissions on license arrangements when earned, which is typically at the time the related sale is invoiced to the client. Since the majority of our historical revenue has been from software, hosting and support arrangements recognized over time, we have experienced a delay between increasing sales and marketing expenses and the recognition of corresponding revenue. We expect to increase sales and marketing expenses in absolute dollars as we continue to hire additional sales and marketing personnel to increase the level of sales and marketing activities.

Research and Development Expenses.  Research and development expenses consist primarily of salary and related expenses for development personnel and costs related to the development of new products, enhancement of existing products, translation fees, quality assurance, testing and allocated overhead. To date, we have not capitalized any costs related to development of software to be sold, leased, or otherwise marketed, because the timing of the commercial releases of our products has substantially coincided with the attainment of technological feasibility. Beginning in 2009, we capitalized costs of internally developed computer software to be sold as a service, which were incurred during the application development stage. We capitalized approximately $550,000 of cost of internally developed computer software as of December 31, 2009. We intend to continue to expand and enhance our product offerings. To accomplish this, we plan to utilize existing personnel, hire additional personnel and, from time to time, contract with third parties. We expect that research and development expenses will increase in absolute dollars as we seek to expand our technology and product offerings. We also expect that the capitalized cost of internally developed computer software will increase as we continue to sell and deliver our solution as a service.

General and Administrative Expenses.  General and administrative expenses consist primarily of salary and related expenses for management, finance and accounting, legal, information systems and human resources personnel, professional fees, other corporate expenses and allocated overhead. We anticipate that we will incur additional employee salaries and related expenses, professional service fees and insurance costs related to the growth of our business and operations.

Critical Accounting Policies and Estimates

Our financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosures of contingent assets and liabilities. Management evaluates these estimates on an on-going basis using historical experience and other factors, including the current economic environment, and management believes these estimates to be reasonable under the circumstances. Estimates and assumptions are adjusted when facts and circumstances dictate. Illiquid credit markets, volatile equity markets, foreign currency fluctuations, and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. These assumptions are affected by management’s application of accounting policies. Our critical accounting policies include revenue recognition, valuation of receivables and deferred tax assets, accounting for share-based compensation, and software cost capitalization. Significant items subject to such estimates and assumptions include: elements comprising our software, hosting and support sales arrangements and whether the elements have stand-alone and/or fair value; whether the fees charged for our products and services are fixed or determinable; the carrying amount of property and equipment and intangible assets; estimates regarding the recoverability and respective fair value of auction-rate securities and all other investments; valuation allowances for receivables and deferred income tax assets; estimates of expected term and volatility

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in determining share based compensation expense; and software cost capitalization. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates.

Revenue Recognition

We sell substantially all products under subscription arrangements (“subscriptions”). For a bundled fee, subscriptions provide the customer with access to the software and data over the Internet, or on demand, and provide technical support services and software upgrades when and if available. Under subscriptions, customers do not have the right to take possession of the software and these arrangements are considered service contracts which are outside the scope of Industry Topic 985, Software. Accordingly, we account for sales of subscriptions under Topic 605, Revenue Recognition. We recognize subscription revenue ratably over the length of the agreement and professional services are recognized as incurred based on their relative fair values, in accordance with Topic 605-25.

To a lesser extent, we sell products under term-based software license arrangements (“licenses”) and account for them in accordance with Industry Topic 985, Software. Licenses generally include multiple elements that are delivered up front or over time. For example, under a term license, we deliver the software up front and provide hosting and support services over time. Fair value for each element in a license does not exist since none are sold separately, and consequently, the bundled revenue is recognized ratably over the length of the agreement.

The application of these rules requires judgment, including the identification of individual elements in multiple element arrangements, whether there is objective and reliable evidence of fair value, including vendor specific objective evidence (“VSOE”) of fair value, for some or all elements. Changes to the elements in our sales arrangements, or our ability to establish VSOE or fair value for those elements may result in a material change to the amount of revenue recorded in a given period.

Fees charged for professional services are recognized when delivered. We believe the fees for professional services qualify for separate accounting because: a) the services have value to the customer on a stand-alone basis; b) objective and reliable evidence of fair value exists for these services; and c) performance of the services is considered probable and does not involve unique customer acceptance criteria.

Our standard payment terms are net 30, although payment within 90 days is considered normal. We periodically provide extended payment terms and we consider any fees due beyond 90 days to not be fixed or determinable. In such cases, judgment is required in determining the appropriate timing of revenue recognition. Changes to our practice of providing extended payment terms or providing concessions following a sale, may result in a material change to the amount of revenue recorded in a given period.

Allowance for doubtful accounts

We regularly assess the collectability of outstanding customer invoices and, in so doing, we maintain an allowance for estimated losses resulting from the non-collection of customer receivables. In estimating this allowance, we consider factors such as: historical collection experience; a customer’s current creditworthiness; customer concentration; age of the receivable balance; and general economic conditions that may affect a customer’s ability to pay. Actual customer collections could differ from our estimates and could exceed our related loss allowance.

Income Taxes

We record income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. When applicable, a

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valuation allowance is established to reduce any deferred tax asset when it is determined that it is more likely than not that some portion of the deferred tax asset will not be realized.

We have established a valuation allowance equal to our net deferred tax assets due to uncertainties regarding the realization of our net operating loss carryforwards, tax credits, and deductible timing differences. The uncertainty of realizing these benefits has been based primarily on our lack of taxable earnings. We continue to monitor the necessity for a full or partial valuation allowance against our deferred tax assets.

Effective January 1, 2007, we adopted Topic 740, Income Taxes, and it did not have a significant impact on our financial position or results of operations. Topic 740 requires judgment when evaluating tax positions. Our judgment includes, but is not limited to, an evaluation of our material positions taken on tax return filings. The ultimate resolution of tax issues may result in a significant change to our recorded tax assets and liabilities.

Share-Based Compensation

We record share-based payment arrangements in accordance with Topic 718, Compensation-Stock Compensation. Topic 718 requires the cost of share-based payment arrangements to be recorded in the statement of operations. Prior to 2006, the estimated cost of share-based payment arrangements was disclosed in a footnote to the financial statements. Share-based compensation amounts are affected by our stock price as well as our assumptions regarding the expected volatility of our stock, our employee stock option exercise behaviors, forfeitures, and the related income tax effects. Our assumptions are based primarily on our historical information.

Software Capitalization

Industry Topic 985, Software, requires capitalization of certain software development costs subsequent to the establishment of technological feasibility. We establish technological feasibility upon completion of a working model. Historically, the period between achieving technological feasibility and general availability of such software has been short and software development costs qualifying for capitalization have been immaterial. Accordingly, we have not capitalized any software development costs under this standard.

Topic 350, Intangibles — Goodwill and Other, requires capitalization of costs incurred during the application development stage of certain internally developed computer software to be sold as a service. We capitalize these software development costs when application development begins, it is probable that the project will be completed, and the software will be used as intended. Costs associated with preliminary project stage activities, training, maintenance and all other post implementation stage activities are expensed as incurred. Our policy provides for the capitalization of certain payroll, benefits and other payroll-related costs for employees who are directly associated with internal use computer software development projects, as well as share-based compensation costs, and external direct costs of materials and services associated with developing or obtaining internal use software. Capitalized costs are being amortized and recognized as a cost of software, hosting and support revenue, on a straight-line basis, over the estimated useful lives of the related applications which is approximately three years. The capitalized costs are included in intangible assets, net on our Consolidated Balance Sheets.

Recently Issued Accounting Standards

In September 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2009-13, Revenue Arrangements with Multiple Deliverables. ASU 2009-13 addresses the criteria for separating consideration in multiple-element arrangements. The consensus will require companies allocating the overall consideration to each deliverable to use an estimated selling price of individual deliverables in the arrangement in the absence of vendor-specific objective evidence or other third-party evidence of the selling price for the deliverables. The ASU will be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with earlier application permitted. We are currently in process of evaluating the impact of the ASU and plan to adopt the standard effective January 1, 2010.

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Results of Operations

The following table sets forth certain consolidated statements of operations data for each of the periods indicated, expressed as a percentage of total revenue:

	Year Ended December 31,
	2007			2008			2009
Revenue:
Software, hosting and support		78	%		73	%		76	%
Professional services		22			27			24
Total revenue		100			100			100
Cost of revenue:
Software, hosting and support		16			14			14
Professional services		20			22			17
Total cost of revenue		36			36			31
Gross profit		64			64			69
Operating expenses:
Sales and marketing		58			48			43
Research and development		15			13			13
General and administrative		10			10			10
Total operating expenses		83			71			66
Income (loss) from operations		(19	)		(7	)		3
Interest and other income (expense), net		3			2			1
Income (loss) before income taxes		(16	)		(5	)		4
Provision for income taxes		(1	)		0			0
Net income (loss)		(17	)%		(5	)%		4	%

The following table sets forth our on demand customer interactions and our revenue by type and geography expressed as a percentage of total revenue for each of the periods indicated.

	Year Ended December 31,
	2007			2008			2009
Customer interactions (in millions)		1,466			2,099			2,494
Revenue by type:
Recurring (subscriptions, term licenses, hosting and support)		78	%		73	%		76	%
Professional services		22			27			24
Revenue by geography in:
North America		71	%		69	%		73	%
Europe		21			23			19
Asia Pacific		8			8			8

Overview of 2009

Due to the deteriorating macroeconomic conditions that began in 2008 and persisted in 2009, our two primary objectives for 2009 were to take care of our customers and increase profitability. Our investments were managed and focused primarily on ensuring that existing customers were satisfied with their solutions and that new offerings we developed would enable us to expand the breadth of our product footprint.

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Total revenue for 2009 was $152.7 million, compared to 2008 revenue of $140.4 million. Software, hosting and support revenue increased 12% in 2009 over 2008. We believe revenue increased in 2009 due to our focus on taking care of our customers combined with sales and marketing efforts aimed at increasing our customer base among consumer centric organizations. Additionally, we believe our expanded contact center offerings and our strategy to win small, initial deals with customers (“land”) and then grow our customer penetration based on measurable success (“expand”) resulted in increased revenue.

We adjusted our sales processes to better align with customer buying patterns, primarily by improving our understanding of the customers’ procurement requirements and the greater levels of scrutiny required to initiate and close projects in the difficult economic environment. A portion of our revenue is also contingent on customers renewing subscription agreements. We saw some customers reduce their solution needs at renewal time primarily because their requirements had changed. Additionally, we saw some smaller organizations fail to renew their subscriptions for a variety of reasons, including that some ceased operations, were consolidated, or purchased less expensive solutions from competitors.

Revenue per customer increased primarily due to higher average selling price per customer, which we believe was attributable to expansion of our customer base. Sales to customers with annual revenues greater than $1 billion and the public sector made up approximately 62% of total revenue in 2009, compared to approximately 60% of total revenue in 2008 and 59% of total revenue in 2007.

As part of our objective to grow profitability while still making investments in customer satisfaction, we continued adding partners to support our solution offerings, capacity to support our hosting operations and customer support, research and development personnel to work on quarterly releases and quality assurance testing automation, and administrative personnel to support operations. We reduced the investment in less productive sales and marketing channels and overall managed expenses including staff utilization and compensation. We monitored and continue to monitor these investments on a regular basis so that we can reduce spending in a given function or across all functions if it significantly puts at risk increasing our profitability. Lastly, to further our competitive advantage, we invested in expanding our offering by acquiring HiveLive, and in October 2009, we rebranded our offering as RightNow CX, the Customer Experience Suite.

These investments, and approximately $1.0 million of incremental expense during the fourth quarter of 2009 as a result of headcount additions from the acquisition of HiveLive, caused total expenses to increase in absolute dollars, but to decrease 5% as a percentage of revenue during 2009. Total revenue growth combined with improved leverage in our business model and the increased focus on operating expenses resulted in an improvement from an operating loss as a percentage of revenue of (7)% in 2008 to operating income as a percentage of revenue of 3% in 2009.

When compared to the year ended December 31, 2008, our results were impacted by the strength of the U.S. dollar for the year ended December 31, 2009 relative to the British pound, Australian dollar, and Euro. Although we report our actual results in U.S. dollars, we conduct a significant number of transactions in currencies other than U.S. dollars. Therefore, we discuss constant currency information to provide a framework for assessing how our underlying business performed excluding the effect of foreign currency rate fluctuations. Constant currency discussions herein are based on comparison to currency exchange rates during the prior year. For example, total revenue in the year ended December 31, 2009 increased by $12.3 million, or 9% over total revenue reported in the same period of 2008. If weighted average currency exchange rates in the year ended December 31, 2009 had remained constant with December 31, 2008, revenue as of December 31, 2009 would have increased by approximately $16.4 million, which is an additional $4.1 million, or a further 3%. In other words, the change in exchange rates between the year ended December 31, 2008 and 2009 had an unfavorable impact to revenue of approximately $4.1 million or 3%. Using similar methodology, the change in period-end exchange rates between the year ended December 31, 2008 and 2009 had a favorable impact on deferred revenue of $3.1 million. Expenses associated with international revenue are primarily paid in local currency, which generally provides a natural hedge to offset the revenue impact. Total cost of revenue and operating expenses in the year ended December 31, 2009 decreased by $2.0 million, or (1)% over total cost of revenue and operating expenses reported in the year ended December 31, 2008. If currency exchange rates in the year ended December 31, 2009 had remained constant with the same period of 2008, these total expenses

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as of December 31, 2009 would have increased by approximately $1.5 million, which is an additional $3.5 million, or a further 2%. In other words, the change in weighted-average exchange rates between the year ended December 31, 2008 and 2009 had a favorable impact to these total expenses of approximately $3.5 million or 2%. The expenses most significantly exposed to currency exchange fluctuations are within sales and marketing and professional services cost of revenue.

For the year ended December 31, 2009, we generated $16.1 million of cash from operations compared to $14.7 million of cash in 2008. Our cash and investments balances increased to $96.5 million at December 31, 2009 from $90.8 million a year earlier, which was primarily due to strong collections, timing of new sales during the year, increased profitability over the prior year, and a non-recurring litigation settlement gain which is described below in Note 11(d) of our Notes to Consolidated Financial Statements. We grew our cash and investment balances while at the same time using $1.8 million to repurchase 231,000 shares of our common stock and completing the acquisition of HiveLive for a purchase price of $5.9 million.

As of December 31, 2009, we had an accumulated deficit of $58.3 million. This deficit and our historical operating losses were primarily the result of costs incurred in the development, sales and marketing of our products and for general and administrative purposes.

Years Ended December 31, 2007, 2008 and 2009

Revenue

	Year Ended December 31,
					Percent					Percent
	2007		2008		Change			2009		Change
	(Amounts in thousands)
Software, hosting and support	$	86,983	$	102,576		18	%	$	115,395		12	%
Professional services		25,094		37,859		51			37,292		(1.5	)
Total revenue	$	112,077	$	140,435		25	%	$	152,687		9	%

Total revenue for 2009 was $152.7 million, an increase of $12.3 million, or 9%, over total revenue of $140.4 million for 2008. If currency exchange rates in the year ended December 31, 2009 had remained constant with the currency exchange rates in the year ended December 31, 2008, total revenue during 2009 would have increased by approximately $16.4 million, which is an additional $4.1 million, or a further 3%, with the majority of the currency rate impact within software, hosting and support revenue.

Software, hosting and support revenue, increased $12.8 million in 2009, or 12%, over software, hosting and support revenue of $102.6 million for 2008 primarily due to expansion sales within our existing customer base, and new customer acquisitions over the comparable period. If currency exchange rates in the year ended December 31, 2009 had remained constant with the currency exchange rates in the year ended December 31, 2008, software, hosting and support revenue during 2009 would have increased by approximately $15.7 million, which is an additional $2.9 million, or a further 3%. Total active customers remained constant at 1,900 as of December 31, 2009 and December 31, 2008. We believe our latest product, appeals to large customers because of robust performance characteristics, notably within the contact center, which in turn has driven expansion within our existing customer base and higher average transaction prices per customer. Average recurring revenue per customer increased as a result of sales of capacity additions, contract renewals and new products. Customer interactions, a measure of unique customer sessions hosted in our data centers, were approximately 2.5 billion in 2009, a 19% increase over 2008. Our client retention rate was approximately 90% in 2009.

Professional services revenue decreased $567,000, or (1.5)%, in 2009 over 2008, primarily due to currency exchange rate impact. If currency exchange rates in the year ended December 31, 2009 had remained constant with the currency exchange rates in the year ended December 31, 2008, professional services revenue during 2009 would have increased by approximately $600,000, which is an additional $1.2 million, or a further 3%. Customers generally purchase professional services with initial license or subscription arrangements, and from time to time over the life of the contract.

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The mix of professional services revenue affects our profitability from period-to-period due to the lower gross profit earned on professional services as compared to the gross profit earned on software, hosting and support revenue. Professional services revenue represented 24% of total revenue in 2009 compared to 27% of total revenue in 2008 and 22% of total revenue in 2007.

Total revenue for 2008 was $140.4 million, an increase of $28.3 million, or 25%, over total revenue of $112.1 million for 2007. If currency exchange rates in 2008 had remained constant with 2007 rates, revenue in 2008 would have increased approximately by an additional $700,000, or a further 1%.

Software, hosting and support revenue, increased $15.6 million in 2008, or 18%, over software, hosting and support revenue of $87.0 million for 2007. Software, hosting and support revenue increased 18% over 2007 primarily due to expansion sales within our existing customer base, and new customer acquisitions over the comparable period. Total active customers increased to 1,900 at December 31, 2008 from approximately 1,800 at December 31, 2007. Average recurring revenue per customer increased as a result of sales of capacity additions, contract renewals and new products. Customer interactions were approximately 2.1 billion in 2008, a 40% increase over 2007. Our client retention rate was approximately 90% in 2008 and 2007.

Professional services revenue increased $12.8 million, or 51%, in 2008 over 2007. The growth in professional services revenue was primarily due to a higher volume of larger customer projects in 2008 as compared to 2007, which we believe was a result of the release of RightNow 8.0, which created, expanded opportunities within the contact center space.

Cost of Revenue

	Year Ended December 31,
					Percent					Percent
	2007		2008		Change			2009		Change
	(Amounts in thousands)
Software, hosting and support	$	18,411	$	20,397		11	%	$	20,948		3	%
Professional services		22,012		30,440		38			26,610		(13	)
Total cost of revenue	$	40,423	$	50,837		26	%	$	47,558		(6	)%

Total cost of revenue for 2009 was $47.6 million, a decrease of $3.3 million, or (6)%, over total cost of revenue of $50.8 million in 2008.

Cost of software, hosting and support increased $551,000, or 3% in 2009 due primarily to increased headcount to assist with technical support and delivering our solutions, which increased salaries and related expenses, such as salaries, bonuses, stock-based compensation by $1.2 million, $215,000 of increased sub-contractor hours to assist with hosting, and $211,000 of increased telecom maintenance to support government secure pods. These costs were offset by decreased depreciation expense of approximately $620,000 associated with hosting operations, and improved hosting bandwidth service costs, which decreased $430,000 when compared to the year ended December 31, 2008. Average employee count in our hosting and technical support operations was 110 in 2009 as compared to 91 in 2008. As a percent of the associated revenue, the cost of software, hosting and support was 18% in 2009 as compared to 20% in 2008 due to improved leverage in our business model, combined with focused expense management.

Cost of professional services decreased $3.8 million, or (13)%, in 2009 due primarily to a favorable foreign currency exchange rate benefit of $1.2 million, a reassignment of professional service employees to support sales and marketing, reduction in utilization of third-party partners that assisted in the deployment of professional services, and a reduction in travel-related costs. Average employee count in our professional services organization decreased to 166 in 2009 from 178 in 2008, partially due to a reassignment of professional service employees. Employee training, customer scheduling requirements, and use of third-party resources can cause the cost of professional services to fluctuate as a percentage of revenue from period to period.

Total cost of revenue for 2008 was $50.8 million, an increase of $10.4 million, or 26%, over total cost of revenue of $40.4 million in 2007.

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Cost of software, hosting and support increased $2.0 million, or 11% in 2008 due primarily to capacity additions to our hosting data centers, increased voice and non-voice hosting volume and staff additions. Capacity additions to our hosting data centers and growth in customer interactions increased third party hosting provider costs by $766,000 in 2008 over 2007, and capacity additions to our data centers increased telecom maintenance and depreciation expense in 2008 by $487,000 over 2007. Staff additions to our hosting and technical support organizations increased salaries and related expenses by $477,000 during 2008 over 2007. Average employee count in our hosting and technical support operations was 91 in 2008 as compared to 80 in 2007. As a percent of the associated revenue, software, hosting and support costs were 20% in 2008 as compared to 21% in 2007 due to improved leverage in our business model, combined with focused expense management.

Cost of professional services increased $8.4 million, or 38%, in 2008 due primarily to employee staff additions, increased third-party resource usage, and increased travel related expenses. Average employee count in our professional services organization grew to 178 in 2008 from 142 in 2007, which increased salaries and related expenses by $4 million, and increased common expenses, which are allocated based upon headcount, such as payroll taxes, benefits, office rent, supplies and other overhead expenses by $893,000. Increased utilization of third-party providers used to assist in the deployment of professional services increased by $2.6 million during 2008 over 2007. Travel related expenses associated with professional service deployments increased by $521,000 during 2008. As a percent of the associated revenue, professional services costs decreased to 80% in 2008 from 88% in 2007 due to focused expense management and favorable currency impact in the third and fourth quarters of 2008 primarily in the strength of the US dollar relative to the British Pound, Euro, and Australian dollar.

Operating Expenses

	Year Ended December 31,
					Percent					Percent
	2007		2008		Change			2009		Change
	(Amounts in thousands)
Sales and marketing	$	65,118	$	67,628		4	%	$	64,751		(4	)%
Research and development		17,084		18,292		7			20,221		11
General and administrative		11,500		13,615		18			15,801		16
Total operating expenses	$	93,702	$	99,535		6	%	$	100,773		1	%

Sales and Marketing Expenses

Sales and marketing expenses of $64.8 million in 2009 declined (4%), or $2.8 million, compared to $67.6 million in 2008. The decrease was due primarily to $2.0 million in favorable foreign currency exchange rate impact. Additionally we had reduced headcount during the first two quarters of 2009, $746,000 of reduced recruitment and relocation costs and $422,000 of reduced travel related spending. These costs were primarily offset by increased commissions and bonus expense of approximately $400,000 due to increased sales over 2008. The average employee headcount in our sales and marketing organizations was relatively consistent from 261 in 2009 as compared to 262 in 2008.

Under license arrangements, we expense sales incentives when earned, which is typically upon contract signing. Under subscription arrangements, we defer the related sales incentive costs and expense them in proportion to the revenue recognized. Net sales incentive expense was approximately $14.0 million and $13.6 million for the year ended December 31, 2009 and 2008, respectively. Our deferred commissions were $9.9 million and $8.2 million at December 31, 2009 and December 31, 2008, respectively.

Sales and marketing expenses of $67.6 million in 2008 were 4%, or $2.5 million, higher than $65.1 million in 2007. Staff additions to our sales and marketing organization increased salaries and common expense allocation by $2.9 million. The average number of employees in our sales and marketing organizations was relatively constant at 262 in 2008 and 263 in 2007. Headcount in sales and marketing declined during the fourth quarter of 2008 due to expense reduction efforts in the fourth quarter of 2008; prior to this the

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headcount was increasing throughout 2008 when compared to the comparable quarters in 2007. Commissions and bonus expense increased $2.1 million due to increased sales over 2007. Offsetting the increased salaries and related expenses were lower advertising costs of $1.7 million, and $700,000 favorable currency impact primarily due to the strength of the US dollar relative to the British Pound, Euro, and Australian dollar in the third and fourth quarter of 2008.

Our deferred commissions were $8.2 million and $5.0 million at December 31, 2008 and December 31, 2007, respectively.

Research and Development Expenses

Research and development expenses increased $1.9 million in 2009 to $20.2 million, or 11%, over 2008, primarily due to growth in headcount and expenditures pertaining to projects to automate quality assurance testing procedures. Average employee count in our research and development organization increased to 169 in 2009 from 146 in 2008.

Our capitalized cost of internally developed computer software to be sold as a service was approximately $550,000 and $0 as of December 31, 2009 and December 31, 2008, respectively.

Research and development expenses increased $1.2 million in 2008 to $18.3 million, or 7%, over 2007, primarily due to increased salaries and related expenses and outsourced services. Salary and related expense increased $1.0 million primarily due to staff additions, and common expense allocation increased by $332,000. These costs were offset by a reduction in third-party research and development services, and other employee related expenses of $166,000. The average number of employees in our research and development organization increased to 146 in 2008 from 133 in 2007.

General and Administrative Expenses

General and administrative expenses increased $2.2 million to $15.8 million, or 16%, in 2009 over 2008 primarily due to staff additions, which increased salaries, related expenses, stock-based compensation and common expense allocation by approximately $1.8 million. The average number of employees in our general and administrative organization was 90 in 2009 as compared to 79 in 2008. Employee additions in 2009 were primarily for finance, accounting and information technology personnel.

General and administrative expenses increased $2.1 million to $13.6 million, or 18%, in 2008 over 2007 primarily due to staff additions, which increased salaries, related expenses and common expense allocation approximately $1.4 million. The average number of employees in our general and administrative organization was 79 in 2008 compared to 68 in 2007. Additionally, donations increased $308,000 compared to the same period in 2007 related to sponsorship programs including a computer science grant program at a university and the Special Olympics.

Stock-Based Compensation Expense

Total stock-based compensation expense for 2009 was $7.8 million, a 30% increase compared to $6.0 million in 2008. The year-over-year increase in stock-based compensation expense was primarily due to a change in estimated forfeiture rates during the second quarter of 2009, combined with a one-time director’s stock option grant during the first quarter of 2009. Stock-based compensation expense varies from period-to-period because of the number of option shares that are expected to vest, forfeiture rates, and changes in our underlying stock price and valuation assumptions.

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Interest and Other Income (Expense), Net

	Year Ended December 31,
							Percent						Percent
	2007			2008			Change			2009			Change
	(Amounts in thousands)
Interest income	$	3,898		$	2,906			(25	)%	$	1,023			(65	)%
Interest expense		(7	)		(12	)		n/m			(7	)		n/m
Other income (expense)		(208	)		(198	)		n/m			1,078			n/m
Total interest and other income (expense), net	$	3,683		$	2,696			(27	)%	$	2,094			(22	)%

Interest income decreased (65%) in 2009 over 2008 due to declining investment yields. Our investment portfolio consists primarily of investment-grade government securities, corporate debt instruments, and auction-rate securities.

Other income (expense) in 2009 consists primarily of a non-recurring litigation settlement gain. KANA Software, Inc. (“KANA”) paid $1,000,000 during the fourth quarter of 2009, under an acceleration clause pursuant to the terms of a General Release and Settlement Agreement. On October 16, 2009, RightNow entered into a General Release and Settlement Agreement with KANA and four former employees of RightNow to settle a lawsuit that was filed by RightNow alleging violations by KANA and the four former employees of RightNow of certain provisions of employment agreements, misappropriation of trade secrets, as well as other claims. For further discussion related to the settlement please refer to Note 11 (d) of our Notes to Consolidated Financial Statements.

Interest income decreased (25%) in 2008 over 2007 due to declining investment yields driven by decreases in the federal funds rate. Our investment portfolio consists primarily of investment-grade government securities, corporate debt instruments, and auction-rate securities.

Other income (expense) consists primarily of losses on transactions denominated in foreign currencies, and an other than temporary impairment loss on auction-rate securities. These losses were primarily offset by a gain on a put option settlement right associated with the auction-rate securities. Refer to Note 4 of our Notes to Consolidated Financial Statements for further discussion on the ARS investments and put option.

Provision for Income Taxes

The provision for income taxes of $579,000 in 2009, $42,000 in 2008, and $276,000 in 2007, consists primarily of foreign withholding taxes, and various state income taxes. Our effective tax rate differs from the federal statutory rate primarily due to the utilization of net operating loss carry forwards, tax credits, foreign rate differentials, and non-deductible meal and entertainment expenses. Our effective tax rate in 2010 will depend on a number of factors, such as the amount and mix of stock-based compensation expense to be recorded under Topic 718, the level of business in state and foreign tax jurisdictions, management’s expectation of the realization of deferred tax assets and the associated valuation allowance, and other factors.

At December 31, 2009, we had approximately $24 million of net deferred tax assets that have been reserved in full by a valuation allowance. During 2010, we anticipate that we may recognize a tax benefit as a result of the removal of some or all of the valuation allowance on our deferred tax assets dependent on our financial performance in 2010. Excluding any benefit from the removal of some or all of the valuation allowance, we expect our full year 2010 effective income tax rate will increase to more closely approximate the federal and state blended statutory rate.

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Liquidity and Capital Resources

	Year Ended December 31,
					Percent					Percent
	2007		2008		Change			2009		Change
	(Amounts in thousands)
Cash, cash equivalents and short-term investments	$	96,325	$	85,817		(11	)%	$	96,523		12	%
Long-term investments		—		4,963		100			—		(100	)
Cash provided by operating activities		21,034		14,724		(30	)%		16,097		9	%

We have historically funded our operations with cash from operations, equity financings and debt borrowings. At December 31, 2009, cash and cash equivalents, and short-term investments, totaled $96.5 million. In addition to our cash and short-term investments, other sources of liquidity at December 31, 2009 included a $3.0 million bank line of credit facility, under which there have been no borrowings.

Operating activities provided $16.1 million of cash during the year ended December 31, 2009 as compared to $14.7 million in 2008 and $21.0 million in 2007. Strong cash collections from growth in sales was the primary driver of the cash provided in operating activities during the year ended December 31, 2009. We typically bill customers on net 30-day terms at the beginning of the contract period, which is reflected in accounts receivable and deferred revenue. Cash flow from operations can vary significantly from year- to-year for many reasons, including the timing of business in a given period, and customer payment preferences and patterns. During the third and fourth quarters of 2009, the percentage of business signed with monthly or periodic billing terms increased from historical rates of 15-25% to approximately 39 and 46%, respectively. Deferred revenue is not recorded for subscriptions with monthly or periodic billing terms until the invoices are issued. A change in the billing practice resulting in delayed payment or billing terms could have a material adverse effect on cash provided from operating activities and growth in deferred revenue.

The allowance for uncollectible accounts receivable represented approximately 6% and 5% of current accounts and term receivables at December 31, 2009 and 2008, respectively. Accounts written off in 2009 increased over 2008, primarily due to small to mid-size companies that have gone out of business or have liquidity issues. We regularly assess the adequacy of the allowance for doubtful accounts. Actual write-offs could exceed our estimates and adversely affect operating cash flows in the future.

We have approximately $6.4 million of payments due in 2010 under contractual obligations and purchase commitments for operating and capital leases, hosting services and other items. Total purchase commitments at December 31, 2009 were $15.9 million to be paid per the table set forth below under the heading “Contractual Obligations and Commitments.” We believe we will generate sufficient cash from operations to satisfy the commitments that will come due within the next twelve months.

Investing activities used $28.0 million in 2009, which included net purchases of short-term investments of $15.8 million, acquisition consideration for the purchase of HiveLive, Inc. of $5.9 million, and approximately $6.2 million of capital expenditures. As indicated in Item 5, the source of the funds used for the acquisition came from the proceeds of our initial public offering. Cash generated through investing activities in 2008 was $7.6 million, due to $13.4 million from net proceeds from sales or maturities of short-term investments offset by $5.8 million for capital expenditures.

Financing activities provided $147,000 in 2009, which was primarily due to approximately $1.7 million generated from exercises of common stock options issued under our employee incentive plan and stock purchases under our employee stock purchase plan, offset by a repurchase of 231,000 shares of our common stock for $1.8 million in the first quarter of 2009, which completed our $15 million stock buyback program.

At December 31, 2009 we held $3.8 million par value auction rate securities (“ARS”) that are subject to general credit, liquidity, market, and interest rate risks, which may be exacerbated by U.S. sub-prime mortgage defaults that have affected various sectors of the financial markets and caused credit and liquidity issues. The ARS are comprised of federally insured student loan bonds.

During the fourth quarter of 2008, we executed a settlement agreement with our broker to redeem the ARS held by us at par commencing June 2010 through July 2012. By accepting the terms of the settlement,

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we (1) received the non-transferable right (“put option”) to sell our ARS at par value to the broker commencing June 2010 through July 2012, and (2) gave the broker the right to purchase the ARS from us at any time after the executed settlement agreement date as long as we receive par value. We expect to sell the ARS under the put option. However, if we do not exercise the put option during or before July 2012, it will expire and the broker will have no further rights or obligation to buy the ARS. Redemption of these investments may be subject to brokerage house default. As a result of this settlement, we reclassified the ARS from available for sale securities to trading securities. During the year ended December 31, 2009, we marked to market the investment in accordance with Topic 320, which resulted in an increase in fair value for a total unrealized gain of $500,000, included in other income, net. Partially offsetting this gain within other income, net was a $466,000 unrealized loss related to the change in fair value of the put option we obtained pursuant to the settlement agreement. We elected the fair value option on the put option in accordance with Topic 825, and as such, changes in fair value are recorded during each reporting period. Our inability to dispose of our ARS prior to June 2010 could negatively impact our liquidity and cash on hand, which, in turn, could cause us to forego potentially beneficial operational and strategic transactions or to incur additional indebtedness. Additionally, we could be adversely impacted if the broker is unable to meet its obligations under the settlement agreement as the broker’s obligations under the put option are not secured by its assets and do not require the broker to obtain any financing to support its performance obligations under the put option. As a result, the agreement covers $3.8 million par value (fair value $3.5 million) of the ARS held by us as of December 31, 2009.

We believe our existing cash and short-term investments, together with funds generated from operations, should be sufficient to fund operating and investment requirements for at least the next twelve months. Our future capital requirements will depend on many factors, including our rate of revenue growth and expansion of our sales and marketing activities, the possible future acquisitions of complementary products or businesses, the timing and extent of spending required for research and development efforts, and the continuing market acceptance of our products. To the extent that available funds are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financings. Additional equity or debt financing may not be available on terms favorable to us, in a timely fashion or at all.

Off-Balance Sheet Arrangements

As of December 31, 2009, we did not have any significant off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC.

Contractual Obligations and Commitments

The following table summarizes our contractual payment obligations and commitments as of December 31, 2009:

	Payments Due by Period
			Less than						More than
Contractual Obligations	Total		1 Year		1-3 Years		3-5 Years		5 Years
	(In thousands)
Operating lease obligations	$	13,448	$	4,601	$	6,905	$	1,430	$	512
Obligations under capital leases		1,980		1,579		401		—		—
Purchase obligations — hosting services								—		—
Purchase obligations — other		485		205		280		—		—
Total	$	15,913	$	6,385	$	7,586	$	1,430	$	512

We lease our office facilities and certain office equipment under operating lease agreements that expire at various dates through 2017. Obligations under capital leases pertain to certain tenant improvements in our main office facility. Purchase obligations consist of agreements with third parties to provide co-location services for hosting operations, and obligations for marketing and other miscellaneous services.

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Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risk

Our results of operations and cash flows are subject to fluctuation due to changes in foreign currency exchange rates, particularly changes in the British pound, Australian dollar, and Euro, because our contracts are frequently denominated in local currency. In the future, we may utilize foreign currency forward and option contracts to manage currency exposures. We do not currently have any such contracts in place, nor did we enter into any such contracts during the years ended December 31, 2009 or December 31, 2008.

When compared to the year ended December 31, 2008, our results were impacted by the strength of the U.S. dollar in the year ended December 31, 2009 relative to the British pound, Australian dollar, and Euro. The change in weighted average exchange rates between the years ended December 31, 2008 and 2009 had an unfavorable impact to revenue of $4.1 million. Additionally, deferred revenue increased by approximately $3.1 million when comparing the change in period-end exchange rates between the years ended December 31, 2008 and 2009. Expenses associated with international revenue are generally paid in local currency, which generally provides a natural hedge to offset the revenue impact. These expenses in the year ended December 31, 2009 were favorably impacted $3.5 million when comparing the change in period-end exchange rates between the years ended December 31, 2008 and 2009.

Interest Rate Sensitivity

Our investments consist of short-term, interest-bearing securities, which are subject to credit and interest rate risk. Our portfolio is investment-grade and diversified among issuers and security types to reduce credit risk. We manage our interest rate risk by maintaining a large portion of our investment portfolio in instruments with short maturities or frequent interest rate resets. We also manage interest rate risk by maintaining sufficient cash and cash equivalents such that we are able to hold investments until maturity. If market interest rates were to increase by 100 basis points from the level at December 31, 2009, the fair value of our portfolio would decline by approximately $237,000.

Liquidation and Valuation Risk

Our short-term investments consist of approximately $3.8 million in par value auction rate securities (“ARS”) with investment grades of AAA or AA, as of December 31, 2009. Despite the long-term contractual maturities of the ARS, all of these securities are considered trading securities as of December 31, 2009. Since February 2008, uncertainties in the credit markets caused all auctions of our ARS to be unsuccessful. During the fourth quarter of 2008 we executed a settlement agreement with our broker to redeem the ARS held by us at par commencing June 2010 through July 2012. By accepting the terms of the settlement, we (1) received the non-transferable right (“put option”) to sell our ARS at par value to the broker commencing June 2010 through July 2012, and (2) gave the broker the right to purchase the ARS from us at any time after the executed settlement agreement date as long as we receive par value. We expect to sell the ARS under the put option. However, if we do not exercise the put option during or before July 2012, it will expire and the broker will have no further rights or obligation to buy the ARS. Redemption of these investments may be subject to brokerage house default. As a result of this settlement, we reclassified the ARS from available for sale securities to trading securities. During the year ended December 31, 2009, we marked to market the investment in accordance with Topic 320, which resulted in an increase in fair value for a total unrealized gain of $500,000, included in other income, net. Partially offsetting this gain within other income, net was a $466,000 unrealized loss related to the put option we obtained pursuant to the settlement agreement. Our inability to dispose of our ARS prior to June 2010 could negatively impact our liquidity and cash on hand, which, in turn, could cause us to forego potentially beneficial operational and strategic transactions or to incur additional indebtedness. Additionally, we could be adversely impacted if the broker is unable to meet its obligations under the settlement agreement as the broker’s obligations under the put option are not secured by its assets and do not require the broker to obtain any financing to support its performance obligations under the put option. As a result, the agreement covers $3.8 million par value (fair value $3.5 million) of the ARS held by us as of December 31, 2009. Based on our expected operating cash flows, and other sources and uses of cash,

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we do not anticipate that the lack of liquidity on these investments will affect our ability to execute our current business plan. We will continue to monitor the state of the credit markets and its potential impact, if any, on the fair value and classification of our portfolio of ARS.

Item 8.   Financial Statements and Supplementary Data

Our consolidated financial statements, together with our related notes and report of KPMG LLP, our independent registered public accounting firm, are set forth on the pages indicated in Item 15.

Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.   Controls and Procedures

(a)   Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2009 our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission and (ii) accumulated and communicated to our management, including our principal executive and principal accounting officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

(b)   Changes to Internal Control over Financial Reporting

During the most recent completed fiscal quarter covered by this report, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Report of Management on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining a system of internal control over financial reporting as defined under the Exchange Act Rules 13a — 15(f) and 15d-15(f). Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of our financial reporting and preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with U. S. generally accepted accounting principles; providing reasonable assurance that our receipts and expenditures are made in accordance with authorizations of our management and directors; and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.

Management conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2009 to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Our independent registered public accounting firm, KPMG LLP has issued an audit report on the effectiveness of our internal control over financial reporting which is included in this Item 9A below.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders RightNow Technologies, Inc.:

We have audited RightNow Technologies, Inc’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). RightNow Technologies, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, RightNow Technologies, Inc maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of RightNow Technologies, Inc as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2009, and our report dated March 9, 2010 expressed an unqualified opinion on those consolidated financial statements.

/s/  KPMG LLP

Portland, OR

March 9, 2010

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Item 9B.   Other Information

On February 16, 2010, we renewed our lease agreements with Genesis Partners, LLC for our office space located at 77 Discovery Drive and 110 Enterprise Boulevard in Bozeman, Montana. The renewals include the same terms and conditions as the original leases, except for the negotiated rent. The 77 Discovery Drive lease was renewed for a period of 60 months from April 1, 2010 at a monthly rent of $11,786, and includes a renewal option for an additional 60 month period. The 110 Enterprise Boulevard lease was renewed for a period of 60 months from June 13, 2010 at a monthly rent of $16,570, and includes a renewal option for an additional 60 month period. The renewals of the 77 Discovery Drive and 110 Enterprise Boulevard leases are filed under Item 15 (a) (3) as Exhibits 10.23 and 10.24, respectively, and are incorporated in their entirety herein by this reference.

Greg Gianforte, our Chairman, Chief Executive Officer and President, and Steve Daines, our Vice President and General Manager of Asia-Pacific, beneficially own, directly or indirectly, 50% and 25% membership interests in Genesis Partners LLC, respectively. The remaining 25% of Genesis Partners is beneficially owned by Mr. Daines’ father, Clair Daines, who is a commercial real estate developer and builder.

On March 3, 2010, our Board of Directors amended our 2004 Equity Incentive Plan to eliminate the automatic option grant program thereunder for our directors. Notwithstanding this amendment, our directors remain eligible to receive discretionary option grants pursuant to the existing terms of our 2004 Equity Incentive Plan.

Part III

Item 10.   Directors, Executive Officers and Corporate Governance

(a)   Identification of Directors.

The information under the captions “Proposal One: Election of Directors” and “Corporate Governance, Board Composition and Board Committees,” appearing in our proxy statement for our 2010 annual meeting of stockholders, is hereby incorporated by reference.

(b)   Identification of Executive Officers and Certain Significant Employees.

The information under the caption “Executive Officers,” appearing in our proxy statement for our 2010 annual meeting of stockholders, is hereby incorporated by reference.

(c)   Compliance with Section 16(a) of the Exchange Act.

The information under the caption “Section 16(a) Beneficial Ownership Reporting Compliance,” appearing in our proxy statement for our 2010 annual meeting of stockholders, is hereby incorporated by reference.

(d)   Code of Ethics.

Our board of directors has adopted a code of ethics and business conduct that applies to all of our employees, officers (including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions) and directors. The full text of our code of ethics and business conduct is posted on our web site at http://www.rightnow.com under the Investor Relations section. We intend to disclose future amendments to certain provisions of our code of ethics and business conduct, or waivers of such provisions, applicable to our directors and executive officers (including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions), at the same location on our web site identified above. The inclusion of our web site address in this report does not include or incorporate by reference the information on, or accessible through, our web site into this report.

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(e)   Corporate Governance.

The information under the caption “Corporate Governance, Board Composition and Board Committees”, appearing in our proxy statement for our 2010 annual meeting of stockholders, is hereby incorporated by reference.

Item 11.   Executive Compensation

The information under the captions “Compensation Discussion and Analysis,” “Compensation Committee Interlocks and Insider Participation,” and “Compensation Committee Report,” appearing in our proxy statement for our 2010 annual meeting of stockholders, is hereby incorporated herein by reference.

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information under the captions “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” and “Securities Authorized for Issuance Under Equity Compensation Plans,” appearing in our proxy statement for our 2010 annual meeting of stockholders, is hereby incorporated by reference.

Item 13.   Certain Relationships and Related Transactions and Director Independence

(a)   Certain Relationships and Related Transactions.

The information under the caption “Certain Relationships and Related Person Transactions” appearing in our proxy statement for our 2010 annual meeting of stockholders, is hereby incorporated by reference.

(b)   Director Independence.

The information under the captions “Proposal One:  Election of Directors” and “Corporate Governance, Board Composition and Board Committees,” appearing in our proxy statement for our 2010 annual meeting of stockholders, is hereby incorporated by reference.

Item 14.   Principal Accounting Fees and Services

The information under the captions “Principal Accountant Fees and Services,” and “Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors,” appearing in our proxy statement for our 2010 annual meeting of stockholders, is hereby incorporated by reference.

Part IV

Item 15.   Exhibits, Financial Statement Schedules

(a)(1) Financial Statements

	Page
Report of Independent Registered Public Accounting Firm		F-1
Consolidated Financial Statements:
Balance Sheets		F-2
Statements of Operations		F-3
Statements of Stockholders’ Equity and Comprehensive Income (Loss)		F-4
Statements of Cash Flows		F-5
Notes		F-6

(a)(2) Financial Statement Schedules

The financial statement schedules required by Regulation S-X and Item 8 of this report are included in the financial statements and notes thereto listed in Item 15(a)(1) of this report.

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(a)(3) Exhibits

The following is a list of exhibits to this report.

Exhibit
Number			Description of Document
	3	.1	Amended and restated certificate of incorporation of the registrant.(1)
	3	.2	Amended and restated bylaws of the registrant.(4)
	10	.1	Form of indemnification agreement between the registrant and its officers and directors.(2)
	10	.2	Amended and restated 1998 Long-Term Incentive and Stock Option Plan.(2)
	10	.3	2004 Equity Incentive Plan, as amended and restated.
	10	.4	2004 Employee Stock Purchase Plan.(2)
	10	.5	Lease agreement dated July 10, 2000, between Genesis Partners, LLC and the registrant (relating to property at 40 Enterprise Blvd, Bozeman, MT).(2)
	10	.6	Lease agreement dated July 10, 2000, between Genesis Partners, LLC and the registrant (relating to property at 77 Discovery Drive, Bozeman, MT).(2)
	10	.7†	Severance policy for executive officers.(2)
	10	.8†	Form of executive officer offer letter and schedule of omitted material details thereto.(2)
	10	.9†	Form of executive officer incentive stock option agreement and schedule of omitted material details thereto.(2)
	10	.10†	Form of executive officer non-incentive stock option agreement and schedule of omitted material details thereto.(2)
	10	.11	Form of director non-incentive stock option agreement and schedule of omitted material details thereto.(2)
	10	.12†	Form of Notice of Grant of Stock Options and Stock Option Agreements.(5)
	10	.13†	Form of Incentive Stock Option Agreement.(6)
	10	.14†	Form of Non-Incentive Stock Option Agreement.(6)
	10	.15	Lease agreement dated March 28, 2005, between the registrant and Genesis Partners, LLC for office space located at 110 Enterprise Boulevard, Bozeman, Montana.(3)
	10	.16	Renewed lease agreement, dated March 28, 2005, between the registrant and Genesis Partners, LLC for office space located at 77 Discovery Drive, Bozeman, Montana.(3)
	10	.17†	Form of amended employment offer letter for executive officers.(7)
	10	.18	Lease agreement, dated November 1, 2005 and commencing March 23, 2007, between the registrant and Genesis Partners, LLC for office space located at 136 Enterprise Boulevard, Bozeman, Montana.(8)
	10	.19†	Form of offer letter for Jason Mittelstaedt, Joseph Brown, Steve Daines, and Michael Saracini, and schedule of omitted material details thereto.(9)
	10	.20†	Form of executive officer offer letter and schedule of material differences thereto for Jeff Davison and Susan Carstensen.(10)
	10	.21†	Offer letter with Marcus Bragg, VP and GM of the Americas.(11)
	10	.22†	Terms of understanding with Michael Saracini, Former VP and GM of Americas.(12)
	10	.23	Renewed lease agreement, dated February 16, 2010, between the registrant and Genesis Partners, LLC for office space located at 77 Discovery Drive, Bozeman, Montana.
	10	.24	Renewed lease agreement, dated February 16, 2010, between the registrant and Genesis Partners, LLC for office space located at 110 Enterprise Boulevard, Bozeman, Montana.
	21	.1	Subsidiaries of the registrant.
	23	.1	Consent of KPMG LLP, Independent Registered Public Accounting Firm.
	31	.1	Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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Exhibit
Number			Description of Document
	31	.2	Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

(1)	Incorporated by reference to Exhibit 4.2 of the registrant’s registration statement on Form S-8 (File No. 333-118515) filed with the Securities and Exchange Commission on August 24, 2004.
(2)	Incorporated by reference to the exhibit of the same number from the registrant’s registration statement of Form S-1 (File No. 333-115331) initially filed with the Securities and Exchange Commission on May 10, 2004, as amended.
(3)	Incorporated by reference to the exhibit of the same number from the registrant’s current report on Form 8-K (File No. 000-31321) filed with the Securities and Exchange Commission on April 1, 2005.
(4)	Incorporated by reference to Exhibit 3.1 of the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on January 25, 2006.
(5)	Incorporated by reference to Exhibits 10.13, 10.14 and 10.15 of the registrant’s annual report on Form 10-K filed with the Securities and Exchange Commission on filed on March 31, 2005.
(6)	Incorporated by reference to Exhibits 10.20 and 10.21, respectively, of the registrant’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on May 10, 2006.
(7)	Incorporated by reference to the exhibit of the same number from the registrant’s annual report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2007.
(8)	Incorporated by reference to the exhibit of the same number from the registrant’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on May 8, 2007.
(9)	Incorporated by reference to Exhibit 10.30 of the registrant’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on August 9, 2007.
(10)	Incorporated by reference to Exhibit 10.31 of the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on January 30, 2008.
(11)	Incorporated by reference to Exhibit 10.1 of the registrant’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on November 7, 2008.
(12)	Incorporated by reference to Exhibit 10.2 of the registrant’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on November 7, 2008.
†	Denotes management contract or compensatory plan or arrangement.

(b) Exhibits

The exhibits filed as part of this report are listed in Item 15(a)(3) of this report.

(c) Financial Statement Schedules

The financial statement schedules required by Regulation S-X and Item 8 of this report are included in the financial statements and notes thereto listed in Item 15(a)(1) of this report.

51

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

RIGHTNOW TECHNOLOGIES, INC.

By:  /s/  JEFFREY C. DAVISON

Jeffrey C. Davison

Chief Financial Officer, Vice President and Treasurer

(Principal Financial and Accounting Officer)

March 9, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 9, 2010.

Signature	Title
/s/  GREG R. GIANFORTE Greg R. Gianforte	Chairman, Chief Executive Officer and President (Principal Executive Officer)
/s/  JEFFREY C. DAVISON Jeffrey C. Davison	Chief Financial Officer, Vice President and Treasurer (Principal Financial and Accounting Officer)
/s/  GREGORY M. AVIS Gregory M. Avis	Director
/s/  THOMAS W. KENDRA Thomas W. Kendra	Director
/s/  WILLIAM J. LANSING William J. Lansing	Director
/s/  ALLEN E. SNYDER Allen E. Snyder	Director
/s/  RICHARD E. ALLEN Richard E. Allen	Director
/s/  STEVEN S. SINGH Steven S. Singh	Director

52

Independent Auditors’ Report

The Board of Directors and Stockholders RightNow Technologies, Inc.:

We have audited the accompanying consolidated balance sheets of RightNow Technologies, Inc. as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of RightNow Technologies, Inc. as of December 31, 2009 and 2008, and the results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), RightNow Technologies, Inc’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control- Integrated Framework issued by the Committee Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 9, 2010 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting

/s/  KPMG LLP

March 9, 2010

F-1

RIGHTNOW TECHNOLOGIES, INC.

Consolidated Balance Sheets

(In thousands)

	December 31,
	2008			2009
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	51,405		$	41,546
Short-term investments		34,412			54,977
Accounts receivable		36,770			31,850
Term receivables, current		5,752			2,417
Total current receivables		42,522			34,267
Less allowance for doubtful accounts		(2,277	)		(1,914	)
Total current receivables, net		40,245			32,353
Deferred commissions		5,381			6,394
Prepaid and other current assets		2,150			2,434
Total current assets		133,593			137,704
Long-term investments		4,963			—
Property and equipment, net		10,141			10,122
Term receivables, non-current		3,547			1,105
Intangible assets, net		6,399			11,141
Deferred commissions, non-current		2,840			3,461
Other assets		854			902
Total Assets	$	162,337		$	164,435
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,058		$	5,427
Commissions and bonuses payable		5,665			6,271
Other accrued liabilities		11,165			11,146
Current portion of long-term debt		46			22
Current portion of deferred revenue		77,584			74,446
Total current liabilities		99,518			97,312
Long-term debt, less current portion		22			—
Deferred revenue, net of current portion		35,614			26,881
Total liabilities		135,154			124,193
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.001 par value. Authorized and undesignated 15,000 shares at December 31, 2008, and 2009, respectively		—			—
Common stock, $0.001 par value. Authorized 150,000 shares; issued and outstanding 33,712 and 31,830 shares at December 31, 2008; issued and outstanding 33,992 and 31,879 respectively at December 31, 2009		34			34
Additional paid-in capital		102,662			112,439
Treasury Stock, at cost. 1,882 shares and 2,113 shares at December 31, 2008 and 2009, respectively		(13,209	)		(15,007	)
Accumulated other comprehensive income		1,916			1,125
Accumulated deficit		(64,220	)		(58,349	)
Total stockholders’ equity		27,183			40,242
Total Liabilities and Stockholders’ Equity	$	162,337		$	164,435

See accompanying notes to consolidated financial statements

F-2

RIGHTNOW TECHNOLOGIES, INC.

Consolidated Statements of Operations

	Year Ended December 31,
	2007			2008			2009
	(In thousands, except per share data)
Revenue:
Software, hosting and support	$	86,983		$	102,576		$	115,395
Professional services		25,094			37,859			37,292
Total revenue		112,077			140,435			152,687
Costs of revenue:
Software, hosting and support		18,411			20,397			20,948
Professional services		22,012			30,440			26,610
Total cost of revenue		40,423			50,837			47,558
Gross profit		71,654			89,598			105,129
Operating expenses:
Sales and marketing		65,118			67,628			64,751
Research and development		17,084			18,292			20,221
General and administrative		11,500			13,615			15,801
Total operating expenses		93,702			99,535			100,773
Income (loss) from operations		(22,048	)		(9,937	)		4,356
Interest and other income (expense):
Interest income		3,898			2,906			1,023
Interest expense		(7	)		(12	)		(7	)
Other		(208	)		(198	)		1,078
Total interest and other income, net		3,683			2,696			2,094
Income (loss) before provision for income taxes		(18,365	)		(7,241	)		6,450
Provision for income taxes		(276	)		(42	)		(579	)
Net income (loss)	$	(18,641	)	$	(7,283	)	$	5,871
Net income (loss) per share:
Basic	$	(0.56	)	$	(0.22	)	$	0.18
Diluted	$	(0.56	)	$	(0.22	)	$	0.18
Shares used in the computation:
Basic		33,078			33,362			31,752
Diluted		33,078			33,362			32,336

See accompanying notes to consolidated financial statements

F-3

RIGHTNOW TECHNOLOGIES, INC.

Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Loss)

										Additional			Accumulated Other						Total
	Common Stock				Treasury Stock					Paid-in			Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Shares		Amount			Capital			Income (Loss)			Deficit			Equity
	(Amount in thousands)
Balance at December 31, 2006		32,788		33		—		—			86,069			(332	)		(38,296	)		47,474
Issuance of common stock:
Exercise of stock options		651		—		—		—			3,436			—			—			3,436
Employee stock purchase plan		14		—		—		—			218			—			—			218
Stock-based compensation expense		—		—		—		—			5,471			—			—			5,471
Tax benefit of stock option exercises		—		—		—		—			183			—			—			183
Fair value of options granted to non-employees		—		—		—		—			—			—			—			—
Comprehensive loss:
Net loss		—		—		—		—			—			—			(18,641	)		(18,641	)
Unrealized loss on available for sale investments net of tax of $0		—		—		—		—			—			78			—			78
Foreign currency translation adjustment		—		—		—		—			—			(38	)		—			(38	)
Total comprehensive loss																				(18,601	)
		33,453		33		—		—			95,377			(292	)		(56,937	)		38,181
Balance at December 31, 2007
Issuance of common stock:
Exercise of stock options		236		1		—		—			1,176			—			—			1,177
Employee stock purchase plan		23		—		—		—			219			—			—			219
Stock-based compensation expense		—		—		—		—			6,025			—			—			6,025
Tax benefit of stock option exercises		—		—		—		—			(135	)		—			—			(135	)
Fair value of options granted to non-employees		—		—		—		—			—						—			—
Treasury Stock, at cost		—		—		1,882		(13,209	)		—			—			—			(13,209	)
Comprehensive loss:
Net loss		—		—		—		—			—			—			(7,283	)		(7,283	)
Unrealized gain on available for sale investments net of tax of $0		—		—		—		—			—			242			—			242
Foreign currency translation adjustment		—		—		—		—			—			1,966			—			1,966
Total comprehensive loss																				(5,075	)
		33,712		34		1,882		(13,209	)		102,662			1,916			(64,220	)		27,183
Balance at December 31, 2008
Issuance of common stock:
Exercise of stock options		261		—		—		—			1,497			—			—			1,497
Employee stock purchase plan		19		—		—		—			251			—			—			251
Stock-based compensation expense		—		—		—		—			7,786			—			—			7,786
Tax benefit of stock option exercises		—		—		—		—			243			—			—			243
Fair value of options granted to non-employees		—		—		—		—			—			—			—			—
Treasury Stock, at cost		—		—		231		(1,798	)		—			—			—			(1,798	)
Comprehensive income:
Net income		—		—		—		—			—			—			5,871			5,871
Unrealized gain on available for sale investments net of tax of $0		—		—		—		—			—			11						11
Foreign currency translation adjustment		—		—		—		—			—			(802	)					(802	)
Total comprehensive income																				5,080
		33,992	$	34		2,113		(15,007	)	$	112,439		$	1,125		$	(58,349	)	$	40,242

See accompanying notes to consolidated financial statements

F-4

RIGHTNOW TECHNOLOGIES, INC.

Consolidated Statements of Cash Flows

	2007			2008			2009
	(Amounts in thousands)
Operating activities:
Net income (loss)	$	(18,641	)	$	(7,283	)	$	5,871
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		7,266			7,771			7,491
Stock-based compensation		5,471			6,025			7,786
Provision for losses on accounts receivable		384			212			157
Changes in operating assets and liabilities (net of assets acquired):
Receivables		27,552			4,774			11,255
Prepaid and other current assets		(226	)		(101	)		(209	)
Deferred commissions		(4,803	)		(3,623	)		(1,282	)
Accounts payable		(45	)		895			238
Commissions and bonuses payable		957			930			451
Other accrued liabilities		3,733			462			(424	)
Deferred revenue		(606	)		4,169			(14,916	)
Other		(8	)		493			(321	)
Net cash provided by operating activities		21,034			14,724			16,097
Investing activities:
Purchases of short-term investments		(57,512	)		(47,908	)		(69,952	)
Sales or maturities of investments		43,995			61,339			54,119
Purchase of property and equipment		(6,687	)		(5,738	)		(5,591	)
Business acquisitions, net of cash acquired		—			—			(5,906	)
Proceeds from sale of property and equipment		55			(21	)		14
Intangible asset additions		(610	)		(33	)		(654	)
Net cash provided by (used in) investing activities		(20,759	)		7,639			(27,970	)
Financing activities:
Purchase of treasury stock		—			(13,209	)		(1,798	)
Proceeds from issuance of common stock:
Exercise of stock options and warrants		3,436			1,177			1,497
Employee stock purchase plan		218			219			251
Excess (shortfall) tax benefit of stock options exercised		183			(135	)		243
Payments on long-term debt		(36	)		(43	)		(46	)
Net cash provided by (used in) financing activities		3,801			(11,991	)		147
Effect of foreign exchange rates on cash and cash equivalents		397			(2,648	)		1,867
Net change in cash and cash equivalents		4,473			7,724			(9,859	)
Cash and cash equivalents at beginning of period		39,208			43,681			51,405
Cash and cash equivalents at end of period	$	43,681		$	51,405		$	41,546

See accompanying notes to consolidated financial statements

F-5

RIGHTNOW TECHNOLOGIES, INC.

Notes to Consolidated Financial Statements

Years ended December 31, 2007, 2008 and 2009

(1)   Business Description and Summary of Significant Accounting Policies

(a)   Business Description

RightNow Technologies, Inc. (the “Company” or “RightNow”) provides RightNow CX, a cloud-based suite of customer experience software solutions for companies of all sizes. The Company’s customer experience solution is designed to help consumer-centric organizations improve customer experiences, reduce costs and increase revenue. The Company helps organizations deliver exceptional customer experiences across the web, social networks and contact centers, all delivered through its cloud service. Founded in 1997, RightNow is headquartered in Bozeman, Montana, with additional offices in North America, Europe, Asia, and Australia. The Company operates in one segment, which is the customer relationship management market.

(b)   Basis of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, which include the accounts of the Company and its foreign subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

(c)   Certain Risks and Concentrations

The Company’s revenue is derived from the subscription, license, hosting and support of its software products and provision of related professional services. The markets in which the Company competes are highly competitive and rapidly changing. Significant technological changes, changes in customer requirements, or the emergence of competitive products with new capabilities or technologies could adversely affect the Company’s operating results. The Company has historically derived a majority of its revenue from customer service software solutions. These products are expected to continue to account for a significant portion of revenue for the foreseeable future. As a result of this revenue concentration, the Company’s business could be harmed by a decline in demand for, or in the prices of, these products or as a result of, among other factors, any change in pricing model, a maturation in the markets for these products, increased price competition or a failure by the Company to keep up with technological change.

Financial instruments subjecting the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, and accounts and term receivables. The Company maintains cash, cash equivalents, and short-term investments with various domestic and foreign financial institutions. The Company’s cash balances with its financial institutions may exceed deposit insurance limits. Short-term investments are investment grade, interest-earning securities, and are diversified by type and industry. Approximately $3.8 million of short-term investments consist of auction rate securities (“ARS”) and a repurchase put option associated with the ARS as further described in Note 4.

The Company’s customers are worldwide with approximately 71% of total revenue in North America during 2007, approximately 69% of total revenue in North America in 2008 and approximately 73% of total revenue in North America during 2009. No individual customer accounted for more than 10% of the Company’s revenue in 2007, 2008 or 2009. No individual customer accounted for more than 10% of the Company’s accounts receivable or total net receivables at December 31, 2008 and December 31, 2009, respectively. Beginning in 2007, as a result of the Company’s change to subscriptions from license arrangements RightNow no longer records additions to term receivables. As a result, the customer concentration as a percentage of term licenses has increased since the change. One customer represented 22% of term receivables at December 31, 2008, and the same customer represented 40% of term receivables at December 31, 2009.

F-6

Assets located outside North America were 12% and 18% of total assets at December 31, 2008 and 2009, respectively. The loss from operations outside the United States totaled $12.9 million, $1.4 million, and $849,000 for the years ended December 31, 2007, 2008 and 2009, respectively.

Revenue by geographical region is as follows (in thousands):

	Year Ended December 31,
	2007		2008		2009
North America	$	79,540	$	97,640	$	110,814
Europe		23,561		31,946		28,544
Asia Pacific		8,976		10,849		13,329
	$	112,077	$	140,435	$	152,687

(d)   Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management of the Company to make a number of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosures of contingent assets and liabilities. Management evaluates these estimates on an on-going basis using historical experience and other factors, including the current economic environment, and management believes these estimates to be reasonable under the circumstances. Estimates and assumptions are adjusted when facts and circumstances dictate. Illiquid credit markets, volatile equity, foreign currency, and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. Significant items subject to such estimates and assumptions include: elements comprising our software, hosting and support sales arrangements and whether the elements have stand-alone and/or fair value; whether the fees charged for our products and services are fixed or determinable, the carrying amount of property and equipment and intangible assets, including software cost capitalization; estimates regarding the recoverability and respective fair value of auction-rate securities and all other investments; valuation allowances for receivables and deferred income tax assets; and estimates of expected term and volatility in determining stock-based compensation expense. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates.

(e)   Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity date of three months or less to be cash equivalents. Cash equivalents are recorded at cost, which approximates market value.

(f)   Short-Term Investments

Short-term investments in debt and equity securities, excluding ARS, are classified as available-for-sale and are recorded at fair market value as determined by quotations from national exchanges. Realized gains and losses are included in income based on the specific identification method. Unrealized gains and losses (excluding other-than-temporary impairments), net of tax, are recorded to Other Comprehensive Income (Loss), a component of stockholders’ equity.

Approximately $3.5 million of short-term investments consist of ARS with investment grades of AAA or AA, as of December 31, 2009. Additionally, the ARS investments consist of a repurchase put option associated with the ARS. Despite the long-term contractual maturities of the auction rate securities, all of these securities are considered trading securities and are recorded at fair market value as determined by assumed risk premiums, and assumed work out periods using a discounted cash flow model. The put option associated with the ARS was recorded at fair value using a discounted cash flow model as determined by assumed risk premiums, and assumed work out periods. The amounts derived through the discounted cash flow model for the ARS and put option were generally consistent with the fair value indicated by the broker statement at December 31, 2009. Realized and unrealized gains and losses are included in income based on the changes in

F-7

fair market value as these instruments are marked to market at period end. Refer to Note 4 for further discussion on the ARS investments and put option.

A decline in market value of any available-for-sale security below cost, which is deemed to be other-than-temporary results in an impairment charge to reduce the carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. If the cost of an investment exceeds its fair value, we evaluate, among other factors, general market conditions, the duration and extent that cost is less than fair value, as well as our ability and intent to hold the investment. We also consider specific adverse conditions of the investee, including industry and sector performance, operational and cash flow factors, and rating agency actions.

(g)   Accounts Receivable and Term Receivables

Accounts receivable represents amounts currently due from customers for which revenue has been recognized or is being recognized ratably in future periods, and amounts currently due under contract billings for which revenue has not been recognized. In license arrangements, term receivables include the remaining minimum committed amounts due from customers for which no revenue has been recognized. The Company performs credit evaluations when considered necessary, but generally does not require collateral to extend credit.

The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing receivables. The Company determines the allowance based on factors such as historical collection experience, customer’s current creditworthiness, customer concentration, age of accounts receivable balance and general economic conditions that may affect a customer’s ability to pay. Actual customer collections could differ from estimates. Account balances are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance sheet credit exposure related to its customers.

Provisions to the allowance for doubtful accounts are charged to expense and/or against deferred revenue for accounts receivable and against deferred revenue for term receivables. Following is a summary of the activity in the allowance for doubtful accounts (in thousands):

	Year Ended December 31,
	2007			2008			2009
Balance, beginning of year	$	2,621		$	1,918		$	2,277
Provision charged to expense		384			212			157
Provision charged against deferred revenue		1,785			1,515			1,158
Write-downs charged against the allowance		(2,990	)		(1,399	)		(2,160	)
Recoveries of amounts previously charged-off		118			31			482
Balance, end of year	$	1,918		$	2,277		$	1,914

(h)   Property and Equipment

Property and equipment, including software purchased for internal use, are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets, generally three to seven years. Repairs and maintenance are expensed as incurred.

(i)   Intangible Assets

Intangible assets include purchased technologies and goodwill. Purchased technologies are carried at cost less accumulated amortization. The Company amortizes these assets on a straight-line basis over their estimated useful lives of two to five years. Goodwill is the excess of cost over the fair value of the net identifiable assets acquired in business acquisitions. Goodwill is not amortized, but is evaluated for impairment at least annually and more often if indicators of potential impairment exist.

F-8

(j)   Revenue Recognition

The Company earns its revenues from the delivery of software, hosting, and support services, and from the delivery of professional services. Software, hosting and support services are sold under subscription arrangements and license arrangements. Hosting and support services involve the remote management of the software, technical assistance, and unspecified product upgrades and enhancements on a when and if available basis. Professional services include consulting, training and development services.

The Company recognizes revenue for subscriptions and licenses when all of the following criteria are met: a) the Company has entered into a legally binding agreement with the customer; b) the software has been made available or delivered to the customer; c) the Company’s fee for providing the software and services is fixed or determinable; and d) collection of the Company’s fee is probable.

Subscriptions include access to the Company’s software through its hosting services, technical support, and product upgrades when and if available, all for a bundled fee. The Company accounts for subscriptions, in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification, Topic 605-25, Multiple-Element Arrangements. Under Topic 605-25, value is allocated to each deliverable of an arrangement using prices established when the elements are sold stand-alone. Stand-alone sales of subscription agreements are evidenced by subscription renewals and stand-alone sales of professional services are evidenced by rates charged for consulting, education, and development services in stand-alone transactions. The arrangement fee is then allocated to the individual elements based on their relative fair values. Revenue for subscriptions are recognized over the contractual period and professional services are recognized as incurred provided the above criteria have been met.

Under the Company’s subscription contracts, the Company applies Topic 605-25 rather than Industry Topic 985, Software because the customer does not have the right to take possession of the software without incurring a significant incremental penalty. As such, these arrangements are considered service contracts and are not within the scope of Industry Topic 985.

The Company’s revenue also is, to a lesser extent, earned under license arrangements. Revenue under these arrangements is recognized pursuant to the requirements of Industry Topic 985. Licenses, generally include the same elements as subscriptions, plus the right to take possession of the software for no additional fee and are sold for a period of time (a “term” license). The majority of term licenses are non-cancelable, and generally cover a period of two years, but can range from a period of six months to five years. For term licenses, the Company treats the software license, hosting and support services as single element for purposes of allocating revenue. The Company has established vendor specific objective evidence of fair value for the term license bundle based on stand-alone sales of the bundled items. When sold with professional services, revenue is allocated between the software license, hosting and support element and the professional services element using the relative fair value method. Revenue for the term license element is recognized ratably over the period of the arrangement and revenue for professional services in these arrangements is recognized as performed.

The Company’s policy is to record revenue net of any applicable sales, use or excise taxes.

If an arrangement includes a right of acceptance or a right to cancel, revenue is recognized when acceptance is received or the right to cancel has expired. If the fee has any payment term that is due in excess of the Company’s normal payment terms (over 90 days), the fee is not considered fixed or determinable, and the amount of revenue recognized for term license or subscription arrangements is limited to the lesser of the amount currently due from the customer or a ratable portion of the total unallocated arrangement fee.

Certain customers have agreements that provide for usage fees above fixed minimums. Usage of the Company’s software requires additional fees if used by more than a specified number of users or for more than a specified number of interactions. Fixed minimums are recognized as revenue ratably over the term of the arrangement. Usage fees above fixed minimums are recognized as revenue when such amounts are known and billed.

Separate contracts with the same customer that are entered into at or near the same time are generally presumed to have been negotiated together and are combined and accounted for as a single arrangement.

F-9

Professional services revenue is recognized as performed, based on hours incurred, unless sold in conjunction with a term license or subscription where objective and reliable evidence (including vendor specific objective evidence) for the term or subscription element does not exist, in which case professional services revenue is recognized ratably over the contractual period. The Company has determined that the professional service elements of its software arrangements are not essential to the functionality of the software. The Company has also determined that its professional services (a) are available from other vendors, (b) do not involve a significant degree of risk or unique acceptance criteria, and (c) are not required for the customer to use the software.

The following table sets forth revenue by product or service as a percentage of total revenue:

	Year Ended December 31,
	2007			2008			2009
Revenue by type:
Software, hosting and support		78	%		73	%		76	%
Professional services		22			27			24
		100	%		100	%		100	%

Deferred revenue represents amounts received or due from customers for which the revenue recognition criteria have not been met. The majority of deferred revenue results from the upfront billing of term and subscription contracts while revenue is recognized ratably over the contractual period. Deferred revenue is recognized into revenue when the Company provides its products and services, assuming all other revenue recognition criteria noted above are met. Under subscriptions, the amount currently due and payable from the customer is reflected in accounts receivable and deferred revenue. Under licenses, the full customer commitment is reflected in accounts receivable for amounts currently due, or term receivables for amounts due over the contractual term, and deferred revenue. The Company does not provide refunds for customer cancellations.

(k)   Sales Commissions

Sales incentives paid for subscriptions are deferred and charged to expense in proportion to the revenue recognized. Sales incentives paid for licenses and professional services are expensed when earned, which is typically at the time the related sale is invoiced. Sales incentive expense was $10.5 million, $13.6 million, and $14.0 million for the years ended December 31, 2007, 2008 and 2009, respectively. Deferred commissions at December 31, 2008 and December 31, 2009 were $8.2 million and $9.9 million, respectively.

(l)   Research and Development

Research and development expenditures are expensed as incurred. Industry Topic 985, Software, requires capitalization of certain software development costs subsequent to the establishment of technological feasibility. Based on the Company’s product development process, technological feasibility is established upon completion of a working model. Historically, the period between achieving technological feasibility and general availability of such software has been short and software development costs qualifying for capitalization have been immaterial. Accordingly, the Company has not capitalized any software development costs.

(m)   Internal Use Software

Topic 350, Intangibles — Goodwill and Other, requires capitalization of costs incurred during the application development stage of certain internally developed computer software to be sold as a service. The Company capitalizes these software development costs when application development begins, it is probable that the project will be completed, and the software will be used as intended. Costs associated with preliminary project stage activities, training, maintenance and all other post implementation stage activities are expensed as incurred. Our policy provides for the capitalization of certain payroll, benefits and other payroll-related costs for employees who are directly associated with internal use computer software development projects, as well as share-based compensation costs, external direct costs of materials and services associated with

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developing or obtaining internal use software. Capitalizable personnel costs are limited to the time directly spent on such projects. In the second half of 2009, the Company began to sell voice and social exclusively as a service. The capitalized costs are being amortized and recognized as a cost of software, hosting and support revenue, on a straight-line basis, over the estimated useful lives of the related applications which is approximately three years. Cost of internally developed computer software to be sold as a service capitalized was $0 and approximately $550,000 as of December 31, 2008 and December 31, 2009, respectively. The capitalized costs are included in intangible assets, net on the Company’s Consolidated Balance Sheets.

(n)   Income Taxes

The Company records income taxes under the asset and liability method as prescribed under Topic 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. When applicable, a valuation allowance is established to reduce any deferred tax asset when it is determined that it is more likely than not that some portion of the deferred tax asset will not be realized.

Effective January 1, 2007, the Company adopted the provisions of Topic 740, Income Taxes, which deal with accounting for uncertainties in income taxes. The adopted provisions did not have a significant impact on the Company’s financial position or results of operations. The provisions prescribe a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As of December 31, 2009 and January 1, 2009, the Company had an insignificant amount of unrecognized tax benefits, none of which would affect the Company’s effective tax rate if recognized. The Company does not anticipate that the amount of unrecognized tax benefits will significantly increase or decrease in the next 12 months. The Company’s policy is to recognize interest and penalties on unrecognized tax benefits as interest expense and other expense, respectively in the Consolidated Statements of Operations. The amount of interest and penalties accrued for the year ended December 31, 2009 was not significant. Tax years beginning in 2005 are subject to examination by taxing authorities, although net operating loss and credit carry forwards from all years are subject to examinations and adjustments for at least three years following the year in which the attributes are used. The jurisdictions which could be subject to examination include the U.S., Montana, Illinois, California, Massachusetts, New York, United Kingdom, Germany, Australia, Japan, Canada and the Netherlands.

(o)   Impairment of Long-Lived Assets

Long-lived assets, including intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Fair value is determined based on discounted cash flow or appraised value, depending on the nature of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Goodwill is tested for impairment at least annually, and more frequently if indicators of potential impairment exist. No impairments of long-lived assets have been identified in any of the periods presented.

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(p)   Net Income (Loss) Per Share

A reconciliation of the denominator used in the calculation of basic and diluted net income (loss) per share is as follows (in thousands):

	Year Ended December 31,
	2007		2008		2009
Weighted average common shares outstanding for basic net income (loss) per share		33,078		33,362		31,752
Employee stock options		—		—		584
Weighted average shares outstanding for dilutive net income (loss) per share		33,078		33,362		32,336

The Company included in the computation of diluted net income (loss) per share options to purchase 584,000 shares of common stock for the period ending December 31, 2009, because the Company incurred net income for the period and the option price was greater than the average market price of the common stock during the period.

The following common stock equivalents were excluded from the computation of diluted earnings income (loss) per share because they had an anti-dilutive impact (in thousands):

	Year Ended December 31,
	2007		2008		2009
Employee stock options		3,874		4,428		5,363

(q)   Stock-Based Compensation

The Company accounts for its stock-based compensation plans in accordance with FASB Accounting Standards Codification, Topic 718, Compensation-Stock Compensation. Under Topic 718, stock-based compensation costs are recognized based on the estimated fair value at the grant date for all stock-based awards. The Company estimates grant date fair values using the Black-Scholes-Merton option pricing model, which requires assumptions of the life of the award and the stock price volatility over the term of the award. The Company records compensation cost of stock-based awards using the straight line method, which is recorded into earnings over the vesting period of the award. Pursuant to the income tax provisions included in Topic 718, the Company has elected the “short cut method” of computing its hypothetical pool of additional paid-in capital that is available to absorb future tax benefit shortfalls.

Compensation cost recorded in the years ended December 31, 2007, 2008 and 2009 includes the cost for all stock-based awards granted prior to, but not yet vested as of December 31, 2005, based on the grant-date fair value estimated in accordance with the original provisions of Topic 718. Compensation expense for all stock-based awards granted after December 31, 2005 was based on the grant-date fair value estimated in accordance with the provisions of Topic 718.

(r)   Foreign Currency Translation

For non-U.S. operations, the functional currency is the local currency. Assets and liabilities of those operations are translated into U.S. dollars using year-end exchange rates; income and expenses are translated using the average exchange rates for the reporting period. Translation adjustments are deferred in accumulated other comprehensive income (loss), a separate component of stockholders’ equity. Realized foreign currency transaction gains and losses are included in other income and expense.

(s)   Comprehensive Income (Loss)

Comprehensive income (loss) includes net income or loss, as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders. Additional elements of other comprehensive income or loss are attributable to foreign currency translation adjustments and unrealized gains or losses on short-term investments.

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(t)   Advertising Costs

The Company expenses advertising costs as incurred.  Advertising costs were $4.3 million, $2.9 million and $2.6 million for the years ended December 31, 2007, 2008 and 2009, respectively.

(u)   Reclassifications

Certain amounts in the consolidated financial statements and notes thereto have been reclassified to conform to the current period presentation.

(2)   Acquisition

On September 15, 2009, the Company acquired the outstanding common and preferred stock of HiveLive, Inc. (“HiveLive”), for $5.9 million in net cash paid at closing. HiveLive is an enterprise-class social platform provider with a platform for customer support, engagement and loyalty, and ideation communities. The acquisition has been accounted for under the purchase method of accounting and, accordingly, the results of HiveLive are included in the condensed consolidated financial statements since the acquisition date.

The Company has allocated the purchase price to the HiveLive assets acquired and liabilities assumed at estimated fair values, after considering a number of factors. The purchase price, and purchase price allocation are as follows (amounts in thousands):

Cash consideration	$	5,906
Total purchase price	$	5,906
Purchase price allocation:
Net assets assumed	$	189
Intangible assets		5,717
Total purchase price	$	5,906

The purchase price and allocation are subject to revision, subsequent revisions, if any, are not expected to be material. Potential revisions may arise from the finalization of accrued liabilities.

The components of the intangible assets listed in the above table as of the acquisition date are as follows (amounts in thousands):

Goodwill	$	3,617
Developed technology		1,800
Customer relationships		200
Trade name and trademarks		100
Intangible assets	$	5,717

The excess of the purchase price over the estimated fair value of the net assets acquired of $3.6 million has been recorded as goodwill, which is deemed to have an indefinite useful life and, accordingly, will not be amortized, but will be subject to periodic impairment testing in future periods. The acquisition is expected to allow RightNow to offer a broad social CRM solution in the marketplace, which resulted in the recorded goodwill. The developed technology and customer relationships intangible assets will be amortized over a period of four years, using the straight-line method. The trade name and trademarks will be amortized over a period of two years using the straight-line method. None of the goodwill is expected to be deductible for tax purposes.

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Unaudited pro forma results of operations, assuming the above acquisition occurred as of January 1, 2008, were as follows (in thousands, except per share amounts):

	Three Months Ended					Year Ended
	December 31,					December 31,
	2008			2009		2008			2009
	(Unaudited)					Unaudited)
Total Revenues	$	36,176		$	41,579	$	140,800		$	153,437
Net income (loss)		(535	)		2,607		(11,143	)		2,704

The amounts of revenue and earnings of HiveLive since the acquisition date are included in the consolidated statement of operations for the three and twelve month period ended December 31, 2009. The Company recognized revenue from HiveLive of $268,000 and incurred a net loss of $954,000 since the date of the acquisition through December 31, 2009.

(3)   Supplemental Cash Flow Information

Supplemental statement of cash flow information follows (in thousands):

	Year Ended December 31,
	2007		2008		2009
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	7	$	12	$	7
Income taxes		140		28		262
Non-cash financing activities:
Assets acquired under capital lease		30		—		—

(4)   Cash Equivalents, Short and Long-Term Investments, and Fair Value

The components of cash equivalents and short and long term investments at December 31, 2008 and 2009 are as follows (in thousands):

								Fair
			Unrealized					Market		Cash		Short and Long-
December 31, 2008	Cost		Gains		Losses			Value		Equivalents		Term Investments
Cash equivalents:
Money market funds	$	28,527	$	—	$	—		$	28,527	$	28,527	$	—
Fixed maturity securities:
Corporate notes and bonds		3,034		—		(16	)		3,018		—		3,018
U.S. Government agency securities		27,754		251		(1	)		28,004		—		28,004
State and municipal securities		3,383		7		—			3,390		—		3,390
Auction rate state and municipal securities		5,000		—		(775	)		4,225		—		4,225
Auction rate settlement agreement:
Repurchase put option		—		738		—			738		—		738
Totals at December 31, 2008	$	67,698		996		(792	)	$	67,902	$	28,527	$	39,375

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								Fair
			Unrealized					Market		Cash		Short-
December 31, 2009	Cost		Gains		Losses			Value		Equivalents		Term Investments
Cash equivalents:
Money market funds	$	15,655	$	—	$	—		$	15,655	$	15,655	$	—
Commercial paper		1,400		—		—			1,400		1,400		—
Fixed maturity securities:
Certificates of deposit		738		—		—			738		—		738
Commercial paper		5,597		—		—			5,597		—		5,597
Corporate notes and bonds		3,274		5		—			3,279		—		3,279
U.S. Government agency securities		41,309		39		(29	)		41,319		—		41,319
State and municipal securities		248		—		(1	)		247		—		247
Auction rate state and municipal securities		3,800		—		(275	)		3,525		—		3,525
Auction rate settlement agreement:
Repurchase put option		—		272		—			272		—		272
Totals at December 31, 2009	$	72,021		316		(305	)	$	72,032	$	17,055	$	54,977

Auction rate state and municipal securities and the repurchase put option were classified as short-term as of December 31, 2009. The unrealized gains at December 31, 2009 of $316,000 include $44,000 related to investment-grade, fixed income securities, and are primarily attributable to changes in interest rate and $272,000 recorded as other income associated with the repurchase put option. Unrealized losses at December 31, 2009 of $305,000 include $30,000 related to securities held more than one year and an other-than temporary impairment of $275,000 associated with auction rate state and municipal securities recorded as other expense. Realized gains and losses from sales of available-for-sale securities in 2007, 2008 and 2009 were insignificant.

Effective January 1, 2008, the Company adopted the provisions of FASB Accounting Standards Codification, Topic 820, Fair Value Measurements and Disclosures. Topic 820 establishes a framework for measuring fair value in GAAP, and enhances disclosures about fair value measurements. Fair value is defined under Topic 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under Topic 820 must maximize the use of observable inputs and minimize the use of unobservable inputs.

The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

•  Level 1 — Quoted prices in active markets for identical assets or liabilities.

•  Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•  Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. As a result of recent market conditions, the Company holds financial instruments for which limited or no observable market data is available. These fair value measurements are based primarily upon our own estimates and are often calculated based on current pricing policy, the current economic and competitive environment, the characteristics of the instrument, credit, interest, and other such factors. Therefore, the results cannot be determined with precision, cannot be substantiated by comparison to quoted prices in active markets, and may not be realized in a

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current sale or immediate settlement of the asset. Additionally, there are inherent uncertainties in any fair value measurement technique, and changes in the underlying assumptions used, including discount rates, liquidity risks, and estimates of future cash flows, could significantly affect the fair value measurement amounts.

The adoption of this statement did not have a material impact on the Company’s consolidated results of operations and financial condition.

The following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of December 31, 2009 (in thousands):

	Level 1		Level 2		Level 3		Total
Cash	$	24,491	$	—	$	—	$	24,491
Money market funds		15,655		—		—		15,655
Certificates of deposit		738		—		—		738
Commercial paper		—		6,997		—		6,997
Corporate notes and bonds		—		3,279		—		3,279
U.S. Government agency securities		—		41,319		—		41,319
State and municipal securities		—		247		—		247
Auction rate state and municipal securities		—		—		3,525		3,525
Auction rate security put option		—		—		272		272
	$	40,884	$	51,842	$	3,797	$	96,523

The following table illustrates the activity of “level 3” assets from December 31, 2008 to December 31, 2009 (in thousands):

Fair value at December 31, 2008	$	4,963
Unrealized gain adjustment-ARS		500
Unrealized loss adjustment-put option		(466	)
Redemptions		(1,200	)
Fair value at December 31, 2009	$	3,797

As of December 31, 2009, assets characterized as “level 3” for fair value purposes consisted of approximately $3.8 million in par value auction rate federally insured student loan bonds with investment grades of AAA or AA.

Auction rate securities (“ARS”) are long-term bonds or preferred stocks that act like short-term debt, where interest rates reset in Dutch auctions held daily, weekly, or monthly and have historically provided liquidity for these investments. Despite the long-term contractual maturities of the underlying securities, all of these securities were considered available for sale and were available to fund the Company’s current operations as of December 31, 2007. Since February 2008, uncertainties in the credit markets caused substantially all auctions of these securities held by the Company to be unsuccessful. An unsuccessful auction is an event when there are fewer securities bid for than are available for sale. Upon an unsuccessful auction, the interest rate is reset at a predetermined rate. Given that substantially all of the auctions had been unsuccessful since February 2008, the Company classified the investments as long-term at December 31, 2008.

During the fourth quarter of 2008, the Company executed a settlement agreement with its broker to redeem the ARS held by it at par commencing June 2010 through July 2012 (“redemption period”). By accepting the terms of the settlement, the Company (1) received the non-transferable right (“put option”) to sell its ARS at par value to the broker commencing June 2010 through July 2012, and (2) gave the broker the right to purchase the ARS from the Company at any time after the executed settlement agreement date as long as the Company receive par value. The Company expects to sell the ARS under the put option, and as the put option is available within the next twelve months, the Company has reclassified the investment from long-term

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at December 31, 2008 to short-term at September 30, 2009. However, if the put option is not exercised during or before July 2012, it will expire and the broker will have no further rights or obligation to buy the ARS. Redemption of these investments may be subject to brokerage house default. Furthermore, the broker’s obligations under the put option are not secured by its assets and do not require the broker to obtain any financing to support its performance obligations under the put option. The broker has disclaimed any assurance that it will have sufficient financial resources to satisfy its obligations under the put option. The agreement covers $3.8 million par value (fair value of $3.5 million) of the ARS held by the Company as of December 31, 2009. RightNow considers the put option to be a freestanding financial instrument and has accounted for it separately from the ARS. The Company believes the put option does not meet the definition of a derivative under Topic 815, Derivatives and Hedging, as the put option is non-transferable and not considered by the Company to be readily convertible into cash. The Company also believes that, since the put option does not qualify as a derivative, it is not within the scope of Topic 320, Investments-Debt and Equity Securities. During the fourth quarter of 2008, the Company elected the fair value option to account for the put option pursuant to Topic 825, Financial Instruments, and as such, changes in fair value are recorded through the statement of operations each reporting period. During the year ended December 31, 2009, the Company recorded an unrealized loss on the put option of $466,000, in other income, net. The fair value of the instrument is recorded as an asset of $272,000 on the Company’s balance sheet in short-term investments as of December 31, 2009.

Simultaneously, during the fourth quarter of 2008, the Company made an election under Topic 320, Investments-Debt and Equity Securities, to transfer its ARS from available-for-sale to trading securities. The transfer to trading securities reflects the Company’s intent to exercise the put option during the redemption period. Prior to entering into the settlement agreement, the Company’s intent was to hold the ARS until the market recovered. At the time of the transfer, the unrealized loss on the ARS for the first three quarters of 2008 of $390,000 included in accumulated other comprehensive income (loss) was immediately recognized in earnings, as a component of other income, net. During the fourth quarter of 2008, the Company recognized an additional decline in fair value of $385,000, included in other expense, net for a total unrealized loss of $775,000 for the year ended December 31, 2008. During the period ended December 31, 2009, the Company recognized an increase in fair value for a total unrealized gain of $500,000, included in other income, net.

The Company estimated the fair value of its ARS and put option using a discounted cash flow model where it considered assumed risk premiums and assumed work out periods. The amount derived through the discounted cash flow model was generally consistent with the ARS and put option fair value indicated by the broker statement at December 31, 2009.

To date, the Company has collected all interest payments on all of the auction rate securities when due. If the auction rate securities continue to experience unsuccessful auctions, if the credit rating of the auction rate securities deteriorates, or if the brokerage houses declare redemption default, the Company may not recover the par value of its investment. While the recent auction failures will limit the Company’s ability to liquidate the remainder of these investments for some period of time, the Company does not believe the auction failures will materially impact its ability to fund its working capital needs, capital expenditures, or other business requirements. The Company will continue to monitor the state of the credit markets and its potential impact, if any, on the fair value and classification of its portfolio of auction rate securities.

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(5)   Property and Equipment, Net

Property and equipment, net are as follows (in thousands):

	December 31,
	2008			2009
Computer equipment	$	18,922		$	21,421
Purchased software		7,942			7,808
Equipment		819			738
Furniture and fixtures		1,487			1,697
Leasehold improvements		1,057			1,209
Total cost		30,227			32,873
Less accumulated depreciation		(20,086	)		(22,751	)
Total property and equipment, net	$	10,141		$	10,122

(6)   Intangible assets

The following table sets forth information regarding intangible assets (in thousands):

			Customer			Purchased			Internally Developed
	Goodwill		Relationships			Technologies			Software			Total
As of December 31, 2008:
Gross carrying value	$	4,358	$	3,250		$	4,547		$	—		$	12,155
Accumulated amortization		—		(2,121	)		(3,635	)		—			(5,756	)
Net carrying value	$	4,358	$	1,129		$	912		$	—		$	6,399
As of December 31, 2009:
Gross carrying value	$	7,975	$	3,450		$	4,204		$	556		$	16,185
Accumulated amortization		—		(2,948	)		(2,091	)		(5	)		(5,044	)
Net carrying value	$	7,975	$	502		$	2,113		$	551		$	11,141
Weighted-average amortization period:
(in years)		n/a		4.0			4.1			3.0			3.7
Aggregate amortization expense:
2007	$	—	$	765		$	708		$	—		$	1,473
2008		—		766			831			—			1,597
2009		—		827			797		$	5			1,629
Estimated amortization expense:
2010	$	—	$	367		$	822		$	202		$	1,391
2011		—		50			520			202			772
2012		—		50			453			147			650
2013		—		35			318			—			353

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(7)   Long-Term Debt and Credit Facility

Long-term debt consists of the following (in thousands):

	December 31,
	2008		2009
Obligations under capital leases for tenant improvements to leased property and furniture, payable monthly in installments of $3 and $1 through May 2010 and June 2010, respectively at approximately 6% interest	$	68	$	22
Less current portion		46		22
Long-term debt, excluding current portion	$	22	$	—

In 2005, the Company entered into an office lease agreement that included $162,000 of tenant improvements, which have been capitalized and will be repaid to the landlord over the initial lease term of five years. The improvements are being amortized over an expected useful life of seven years since the Company expects to renew the office lease upon its initial term expiration in 2010. During 2007, the Company assumed $30,000 of capital lease obligations associated with furniture in its Washington D.C. office space, which will be repaid over the initial lease term of three years.

During 2008 and 2009, the Company had a $3.0 million working capital line of credit agreement with a commercial bank. Advances under the line bear a variable rate of interest which approximates the prime lending rate, and are payable monthly. The working capital line of credit is secured by substantially all of the United States dollar-denominated accounts receivable of the Company. There were no advances under the line during 2008 or 2009.

(8)   Redeemable Convertible Preferred Stock

The Company has authorized 15 million shares of preferred stock, $.001 par value, which may be issued from time to time by its board of directors without further action by stockholders unless otherwise required by the rules of The Nasdaq Stock Market. Shares of preferred stock may be issued with dividend, redemption, voting or other rights senior to existing common shares. There were no outstanding shares of preferred stock at December 31, 2008 or 2009.

(9)   Treasury Stock

On October 20, 2008, the Company announced a share repurchase program under which the board of directors authorized the repurchase of up to $15.0 million of the Company’s common stock over the next two years. The Company was permitted to purchase shares from time to time at prevailing prices in the open market, in block transactions, in privately negotiated transactions, and/or in accelerated share repurchase programs, in accordance with Rule 10b-18 of the Securities and Exchange Commission. As of December 31, 2008, the Company repurchased 1,881,877 shares of common stock under this program at a total price of $13.2 million. During the first quarter of 2009, the Company repurchased an additional 231,115 shares of common stock under this program at a total price of $1.8 million. Consequently, there can be no further repurchases made under this program because the entire amount of the authorized $15.0 million has been utilized.

(10)   Stock-Based Compensation

The Company’s 1998 Long-Term Incentive and Stock Option Plan, as amended, and the 2004 Equity Incentive Plan (the “equity plans”) provide for stock options to be granted to employees, consultants, independent contractors, officers and directors. The equity plans have been approved by stockholders. Except for automatic grants to directors, options are granted at the discretion of the Company’s board of directors, at an exercise price and term determined by the board. However, exercise prices are not less than the fair market value at the date of grant, and the term of the options is not greater than ten years. Options generally vest over a period of four years in eight equal increments. The Company also has an employee stock purchase plan (“ESPP”) that allows employees to purchase shares of common stock at a discount to the fair market value at

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the date of purchase. Purchase periods under the ESPP issuances are consecutive six-month periods ending on the last day in June and December each year. Shares issued to satisfy stock option exercises and ESPP are newly issued. At December 31, 2009, the Company had approximately 2.8 million shares available for future issuance under the equity plans and ESPP.

Compensation expense recognized in the statement of operations for the year ended December 31, 2008 and 2009 is based on awards ultimately expected to vest and reflects an estimate of awards that will be forfeited. Topic 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The following table illustrates the stock-based compensation expense resulting from stock-based awards included in the consolidated statement of operations (amounts in thousands):

	2007		2008		2009
Stock-based compensation expense:
Cost of software, hosting and support	$	288	$	323	$	460
Cost of professional services		647		638		612
Sales and marketing		2,264		2,454		3,029
Research and development		887		969		1,178
General and administrative		1,385		1,641		2,507
Stock-based compensation expense before income taxes		5,471		6,025		7,786
Income tax provision		—		—		—
Stock-based compensation expense, net of income taxes	$	5,471	$	6,025	$	7,786

No stock-based compensation expense was capitalized during the years ended December 31, 2007 and 2008 and an insignificant amount was capitalized during the year ended December 31, 2009.

Unrecognized compensation expense of outstanding stock options at December 31, 2009 was approximately $11.9 million, which is expected to be recognized over a weighted-average period of 2.7 years.

The estimated weighted-average fair value per share of stock options granted in 2007, 2008 and 2009 was $7.33, $5.54 and $4.75, respectively. For all shares purchased under the ESPP in 2007, 2008, and 2009 ending on the last day of June and December, no compensation cost was recognized in the accompanying statement of operations because the terms of the plan were determined to be noncompensatory under Topic 718. Assumptions used to obtain the estimated fair values were:

	2007			2008			2009
Employee stock options
Weighted average risk free rate		4.5	%		2.6	%		1.7	%
Weighted average expected term		4.2	yrs		4.5	yrs		4.4	yrs
Weighted average volatility		52	%		55	%		67	%
Dividend yield		0	%		0	%		0	%

Key assumptions used to estimate the fair value of stock awards are as follows:

Risk Free Rate:  The risk-free rate is determined by reference to U.S. Treasury yields at or near the time of grant for time periods similar to the expected term of the award.

Expected Term:  The expected term represents the period that the Company’s stock-based awards are expected to be outstanding and is estimated based on historical experience of similar awards, giving consideration to the contractual term of the awards, vesting schedules and expectations of employee exercise behavior.

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Volatility:  The Company’s estimate of expected volatility is based on the historical volatility of the Company’s common stock over the expected life of the options as this represents the Company’s best estimate of future volatility.

Dividend Yield:  The dividend yield assumption is based on the Company’s history and expectation of dividend payouts.

Activity under the Company’s stock option plans was as follows (option shares in thousands):

							Weighted
				Shares			Average				Weighted
	Shares			Underlying			Exercise		Aggregate		Average
	Available			Outstanding			Price Per		Intrinsic		Remaining
	for Grant			Options			Share		Value		Contractual Life
									(In thousands)		(In years)
Balance at December 31, 2008		3,610			4,428		$	11.81				6.8
Annual reserve addition(1)		1,000			—			—
Granted(2)		(2,113	)		2,089			8.91
Exercised		—			(261	)		5.74
Forfeited, expired or exchanged(3)		277			(309	)		13.59
Balance at December 31, 2009		2,774			5,947		$	10.96	$	38,690		7.2
Vested or expected to vest at December 31, 2009					5,738		$	11.01	$	37,099		7.2
Exercisable at December 31, 2009					3,203		$	11.30	$	19,939		6.0

(1)	The 2004 Equity Incentive Plan provides for an automatic, annual increase on the first of each year in an amount equal to the lesser of; a) 1,000,000 shares, b) 4% of the number of outstanding common shares on the last day of the previous fiscal year, or c) such lesser amount as determined by the board of directors. The automatic annual increase has been approved by shareholders through December 31, 2014.
(2)	On September 16, 2009, the Company granted 24,180 restricted stock units to certain employees at a fair value of $12.20 per share. The shares were granted from the 2004 Equity Incentive Plan.
(3)	Shares forfeited, expired, exchanged or canceled under the 1998 Long-Term Equity Incentive and Stock Option Plan are not available for re-grant under the 2004 Equity Incentive Plan.

The total intrinsic value of options exercised in 2007, 2008 and 2009 was $7.5 million, $1.8 million and $1.7 million, respectively.

(11)   Commitments and Contingencies

(a)   Operating Leases

The Company leases its office facilities and certain office equipment under various non-cancelable operating lease agreements with various expiration dates through 2017. Future minimum payments for the next five years and thereafter as of December 31, 2009, under these leases, are as follows (in thousands):

2010	$	4,601
2011		3,197
2012		1,916
2013		1,792
2014		880
Thereafter		1,062

Rent expense was $4.1 million, $4.2 million and $4.5 million in 2007, 2008 and 2009, respectively. Rent expense is determined using the straight-line method of the minimum expected rent paid over the term of the agreement. The Company has no contingent rent agreements.

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The Company leases a portion of its office facilities from a development group, of which the Company’s chief executive officer is a 50% member and the Company’s Vice President and General Manager of Asia-Pacific is a 25% member. During 2007, 2008 and 2009, the Company paid $1.2 million, $1.2 million and $1.3 million, respectively, to the development group under these leases.

(b)   Hosting Services

The Company has agreements with third parties to provide co-location services for hosting operations. The agreements require payment of a minimum amount per month for a fixed period of time in return for which the hosting service provider provides certain guarantees of network availability.

Future minimum payments as of December 31, 2009 under these arrangements were $1.6 million for 2010, and $401,000 in 2011.

(c)   Warranties and Indemnification

The Company’s on demand application service is typically warranted to perform in accordance with its user documentation.

The Company’s arrangements generally include certain provisions for indemnifying customers against liabilities if its products or services infringe a third-party’s intellectual property rights. To date, the Company has not incurred any material costs as a result of such indemnifications and has not accrued any liabilities related to such obligations in the accompanying consolidated financial statements.

The Company has entered into service level agreements with its customers warranting certain levels of uptime reliability and permitting those customers to receive credits or terminate their license agreements in the event that the Company fails to meet those levels. To date, the Company has not provided any material credits, or cancelled any agreements related to these service level agreements.

The Company has also agreed to indemnify its directors and executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by the Company, arising out of that person’s services as the Company’s director or officer or that person’s services provided to any other company or enterprise at the Company’s request.

(d)   Litigation

From time to time, the Company is involved in legal proceedings arising in the ordinary course of business. The Company believes that the resolution of these matters will not have a material negative effect on the Company’s consolidated financial position, results of operations or liquidity. Legal fees are charged to expense as incurred, unless the Company considers the potential loss from any dispute or legal matter probable and the amount or range of the loss can be estimated, in which case the Company will accrue a liability for the estimated loss in accordance with Topic 450,Contingencies.

On October 16, 2009, RightNow entered into a General Release and Settlement Agreement with Kana Software, Inc. (“KANA”) and four former employees of RightNow to settle a lawsuit that was filed by RightNow alleging violations by KANA and the four former employees of RightNow of certain provisions of employment agreements, misappropriation of trade secrets, as well as other claims. In the General Release and Settlement Agreement, KANA agreed that it would pay a total of $1,000,000 to RightNow with $100,000 due within ten days of executing the General Release and Settlement Agreement and the remainder due over nine consecutive quarters beginning with the quarter commencing January 1, 2010. KANA provided RightNow with a subordinated security interest in its assets to secure the amounts payable to RightNow. On December 23, 2009, KANA sold substantially all of its assets to Kay Technology Corp, Inc. Pursuant to an acceleration clause in the settlement agreement related to the change in control, KANA paid the Company $1,000,000. RightNow received the entire cash settlement payment during the fourth quarter of 2009 and recorded the gain on settlement of this litigation in other income.

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(12)   Income Taxes

The domestic and foreign components of income (loss) before provision for income taxes consist of the following (in thousands):

	Year Ended December 31,
	2007			2008			2009
United States	$	(5,437	)	$	(5,856	)	$	7,299
Foreign		(12,928	)		(1,385	)		(849	)
Income (loss) before provision for income taxes	$	(18,365	)	$	(7,241	)	$	6,450

The components of the income tax provision are as follows (in thousands):

	Year Ended December 31,
	2007			2008			2009
Current:
Federal	$	120		$	—		$	—
Foreign		(109	)		(134	)		(155	)
State		(287	)		92			(424	)
Total current		(276	)		(42	)	$	(579	)
Deferred:
Federal		—			—			—
Foreign		—			—			—
State		—			—			—
Total deferred		—			—			—
Provision for income taxes	$	(276	)	$	(42	)	$	(579	)

The reconciliation of income tax attributable to operations computed at the U.S. Federal statutory income tax rate of 34% to income tax (benefit) expense is as follows:

	Year Ended December 31,
	2007			2008			2009
Statutory federal tax rate		(34	)%		(34	)%		34	%
Net operating loss tax benefits not realized (realized)		34			29			(23	)
Tax credits		(4	)		—			(11	)
Stock-based compensation		2			5			1
State income taxes, net of federal benefit		1			(2	)		4
Foreign taxes		—			2			2
Foreign tax rate differential		2			(1	)		—
Nondeductible meals & entertainment expense		1			2			2
Income tax rate		2	%		1	%		9	%

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Deferred tax components are as follows (in thousands):

	At December 31,
	2008			2009
Deferred tax assets:
Net operating loss carry forwards	$	10,836		$	13,634
Deferred revenue		8,401			3,757
Stock compensation		3,288			6,813
Tax credits		957			1,256
Fixed assets and intangibles		296			65
Other		3,091			1,647
Total deferred tax assets		26,869			27,172
Valuation allowance		(23,873	)		(24,239	)
Net deferred tax assets		2,996			2,933
Deferred tax liabilities:
Deferred commissions		(2,509	)		(2,686	)
Other		(487	)		(247	)
Total deferred tax liabilities		(2,996	)		(2,933	)
Net deferred tax assets	$	—		$	—

The ultimate realization of deferred tax assets is dependent upon the existence, or generation, of taxable income in the periods when those temporary differences and net operating loss carry forwards are deductible. Management considers the scheduled reversal of deferred tax liabilities, taxes paid in carry back years, projected future taxable income, available tax planning strategies, and other factors in making this assessment. Based on available evidence, management does not believe it is more likely than not that any or all of the deferred tax assets will be realized as of December 31, 2009. Accordingly, the Company has established a valuation allowance equal to the net deferred tax assets. The valuation allowance decreased by $573,000 in 2008 and increased by $366,000 in 2009.

At December 31, 2009, the Company had domestic Federal and State net operating loss carry forwards of approximately $28.1 million and $26.8 million, respectively. The Company also has approximately $31.5 million of foreign net operating loss carry forwards, of which $29.4 million are not subject to expiration. The remaining $2.1 million of foreign net operating loss carry forwards expire between 2013 and 2027. Federal net operating loss carry forwards expire at various dates between 2019 and 2029, while state net operating loss carry forwards expire between 2010 and 2029. In addition, the Company has federal and state research and development credits and foreign tax credits available to reduce future domestic income taxes. The total amount of these credits is approximately $4.9 million. The federal and state research and development credits expire between 2019 and 2028, and between 2014 and 2023, respectively. The foreign tax credits expire between 2012 and 2019.

Under the Tax Reform Act of 1986, as amended, the amounts of and benefits from net operating loss carry forwards and research and development credits may be impaired or limited in certain circumstances. Events which cause limitations in the amount of net operating losses that the Company may utilize in any one year include, but are not limited to, a cumulative ownership change of more than 50%, as defined, over a three year period. The Company’s acquisition of Salesnet, Inc. in May 2006 and HiveLive, Inc. in September 2009 constituted an ownership change to each entity, and therefore the availability of Salesnet, Inc.’s and HiveLive, Inc.’s net operating loss carry forwards which approximate $5.8 million and $6.4 million, respectively, will be limited in future years.

The Company’s deferred tax assets as of December 31, 2008 and 2009 have been reduced in accordance with Topic 718. As such, net operating loss carry forwards and other attributes created by excess tax benefits from the exercise of stock options are not recorded as deferred tax assets. Instead such amounts are recorded as an addition to stockholders’ equity if and when they are utilized. Deferred tax assets and the related

F-24

valuation allowance in the above presentation have been reduced by $18.9 million and $18.7 million, as of December 31, 2008 and 2009, respectively, for the effect of excess tax deductions from stock options.

(13)   Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, term receivables, accounts payable, and debt approximated their fair values at December 31, 2008 and at December 31, 2009. The reason these financial instruments approximated fair values are as follows:

Account receivable and term receivables — current:  The carrying amount approximated fair value at the respective dates due to the relative short maturities of these items.

Accounts payable — current:  The carrying amount approximated fair value at the respective dates due to the short duration the accounts payable is outstanding.

Term receivables — noncurrent:  The carrying amount approximated fair value at the respective dates due to the low rate of interest for the period of time the items are expected to be outstanding.

Debt:  The carrying amount approximated fair value at the respective dates due to the low rate of interest for the period of time the items are expected to be outstanding.

(14)   Employee Benefit Plans

The Company has a voluntary defined contribution retirement plan qualifying under Section 401(k) of the Internal Revenue Code of 1986. The plan covers substantially all full-time employees. Under the terms of the plan, participants may contribute up to the lower of 12% of their salary or the statutorily prescribed limit to the plan. Employees are eligible after 90 days of service. At its discretion, the Company may make matching contributions. The Company made matching contributions during 2007, 2008 and 2009 of $982,000, $1.3 million and $1.3 million, respectively. The Company also has retirement benefit plans related to its foreign subsidiaries. Amounts expensed under these plans were $370,000, $414,000 and $405,000 during 2007, 2008 and 2009, respectively.

The Company has a medical, dental and vision benefit plan and a short-term disability program covering full-time employees of the Company and their dependents. The plan is a partially self-funded plan under which participant claims are obligations of the plan. The plan is funded through employer and employee contributions at a level sufficient to pay for the benefits provided by the plan. The Company contributions to the plan were $2.0 million during 2007, $3.0 million during 2008, and $3.2 million during 2009. During 2009 the plan maintained individual and aggregate stop loss insurance policies on the medical portion of the plan of $95,000 and $4.6 million (based on actual plan participants, adjusted monthly), respectively, to mitigate losses.

In July 2004, the Company adopted the 2004 Employee Stock Purchase Plan (“Plan”) which became effective in conjunction with the Company’s initial public offering of common stock. The Plan is administered by the compensation committee of the board of directors and is intended to qualify as an employee stock purchase plan within the meaning of Section 423 of the Internal Revenue Code. Under the terms of the plan, substantially all employees are eligible to purchase shares of RightNow common stock through periodic after-tax payroll deductions at a purchase price established by the administrator. Payroll deductions are limited to 15% of the employee’s regular compensation for each purchase period. The administrator may set the purchase price equal to or discounted from fair market value on the first or last day of each purchase period. Purchase periods are consecutive six-month periods ending on the last day in June and December each year. For the purchase periods ended December 31, 2007, 2008 and 2009, and June 30, 2008 and 2009, the plan was deemed noncompensatory because the terms were no more favorable than those available to all holders of our common stock. Activity under the plan for 2007, 2008 and 2009 was as follows:

	Purchase Date
	Dec 31,		June 30,		Dec 31,		June 30,		Dec 31,
	2007		2008		2008		2009		2009
Purchase price per share	$	15.06	$	12.99	$	7.34	$	11.21	$	16.50
Shares purchased		6,357		8,930		14,129		11,903		7,038

F-25

(15)   Subsequent Events

The Company accounts for its subsequent events in accordance with FASB Accounting Standards Codification, Topic 855, Subsequent Events.

On February 16, 2010, RightNow Technologies, Inc. renewed its lease agreement with Genesis Partners, LLC for office space located at 77 Discovery Drive and 110 Enterprise Boulevard in Bozeman, Montana. The renewals include the same terms and conditions as the original leases, except for the negotiated rent. The 77 Discovery Drive lease was renewed for a period of 60 months at a monthly rent of $11,786, and includes a renewal option for an additional 60 month period. The 110 Enterprise Boulevard lease was renewed for a period of 60 months at a monthly rent of $16,570, and includes a renewal option for an additional 60 month period.

Greg Gianforte, the Company’s Chairman, Chief Executive Officer and President, and Steve Daines, the Company’s Vice President and General Manager of Asia-Pacific, beneficially own, directly or indirectly, 50% and 25% membership interests in Genesis Partners LLC, respectively. The remaining 25% of Genesis Partners is beneficially owned by Mr. Daines’ father, Clair Daines, who is a commercial real estate developer and builder.

On March 3, 2010, our Board of Directors amended our 2004 Equity Incentive Plan to eliminate the automatic option grant program thereunder for our directors. Notwithstanding this amendment, our directors remain eligible to receive discretionary option grants pursuant to the existing terms of our 2004 Equity Incentive Plan.

(16)   Quarterly Results (Unaudited)

Quarterly results of operations are as follows (in thousands, except per share amounts):

	Year Ended December 31, 2008
	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
	(Unaudited)
Operating statement data:
Total revenue	$	32,898		$	35,221		$	36,237		$	36,079
Gross profit		20,578			22,368			22,799			23,853
Net income (loss)		(3,396	)		(3,132	)		(1,447	)		692
Net income (loss) per share:
Basic and Diluted	$	(0.10	)	$	(0.09	)	$	(0.04	)	$	0.02

	Year Ended December 31, 2009
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
	(Unaudited)
Operating statement data:
Total revenue	$	36,037	$	36,340	$	38,731	$	41,579
Gross profit		24,080		25,040		27,134		28,875
Net income		1,263		36		1,965		2,607
Net income per share:
Basic and Diluted	$	0.04	$	0.00	$	0.06	$	0.08

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EX-10.3

Exhibit 10.3

RIGHTNOW TECHNOLOGIES, INC.

2004 EQUITY INCENTIVE PLAN

As Amended and Restated through March 3, 2010

     Section 1. Purpose. The purpose of the RightNow Technologies, Inc. 2004 Equity Incentive Plan (the “Plan”) is to promote the interests of RightNow Technologies, Inc. (the “Company”) and its stockholders by aiding the Company in attracting, retaining and providing incentives to employees, officers, directors who are not also employees (“Non-Employee Directors”), consultants and independent contractors.

     Section 2. Definitions. As used in the Plan, the following terms shall have the meanings set forth below:

     “Affiliate” shall mean (i) any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company, and (ii) any entity in which the Company has a significant equity interest, as determined by the Committee.

     “Award” shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Award or other Stock-Based Award granted under the Plan.

     “Award Agreement” shall mean any written agreement, contract or other instrument or document evidencing any Award granted under the Plan.

     “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder.

     “Committee” shall mean either the Board of Directors of the Company (the “Board”) or a committee of the Board appointed by the Board (the “Compensation Committee”) to administer the Plan and composed of not less than two directors, each of whom is a “Non-Employee Director” within the meaning of Rule 16b-3 (which term “Non-Employee Director” is defined in this paragraph for purposes of the definition of “Committee” only and is not intended to define such term as used elsewhere in the Plan) and each of whom is an “outside director” within the meaning of Section 162(m) of the Code.

     “Eligible Person” shall mean any employee, officer, director (including any Non-Employee Director), consultant or independent contractor providing services or other benefits to the Company or any Affiliate who the Committee determines to be an Eligible Person.

     “Fair Market Value” shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such

1

property determined by such methods or procedures as shall be established from time to time by the Committee. Notwithstanding the foregoing, unless otherwise determined by the Committee, the Fair Market Value of Shares on a given date for purposes of the Plan shall not be less than: (i) the closing price as reported for composite transactions, if the Shares are then listed on a national securities exchange; (ii) the last sale price, if the Shares are then quoted on the Nasdaq Global Market; or (iii) in all other cases, the average of the closing representative bid and asked prices of the Shares, all on the date as of which Fair Market Value is being determined. If on a given date the Shares are not traded in an established securities market, the Committee shall make a good faith attempt to satisfy the requirements of this clause and in connection therewith shall take such action as it deems necessary or advisable.

     “Incentive Stock Option” shall mean an option granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code or any successor provision.

     “Non-Qualified Stock Option” shall mean an option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.

     “Option” shall mean an Incentive Stock Option or a Non-Qualified Stock Option.

     “Other Stock-Based Award” shall mean any right granted under Section 6(e) of the Plan.

     “Participant” shall mean an Eligible Person designated to be granted an Award under the Plan.

     “Performance Award” shall mean any right granted under Section 6(d) of the Plan.

     “Person” shall mean any individual, corporation, partnership, association or trust.

     “Restricted Stock” shall mean any Share granted under Section 6(c) of the Plan.

     “Restricted Stock Unit” shall mean any unit granted under Section 6(c) of the Plan evidencing the right to receive a Share (or a cash payment equal to the Fair Market Value of a Share) at some future date.

     “Rule 16b-3” shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

2

     “Shares” shall mean shares of Common Stock, $0.001 par value, of the Company, or such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 4(c) of the Plan.

     “Stock Appreciation Right” shall mean any right granted under Section 6(b) of the Plan.

     Section 3. Administration.

     (a) Power and Authority of the Committee. The Plan shall be administered by the Compensation Committee with respect to grants to the officers and directors of the Company and by the Board with respect to grants to all other Eligible Persons. The Compensation Committee may from time to time assist the Board in administering the Plan with respect to Eligible Persons who are not officers or directors of the Company, or the Board may delegate such administration function entirely to the Compensation Committee. Subject to the terms of the Plan and applicable law, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by (or with respect to which payments, rights or other matters are to be calculated in connection with) each Award; (iv) determine the terms and conditions of any Award or Award Agreement; (v) amend the terms and conditions of any Award or Award Agreement and accelerate the exercisability of any Award or the lapse of restrictions relating to any Award; (vi) determine whether, to what extent and under what circumstances Awards may be exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited or suspended; (vii) determine whether, to what extent and under what circumstances cash, Shares, other securities, other Awards, other property and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or the Committee; (viii) interpret and administer the Plan and any Award made under or instrument or agreement, including an Award Agreement, relating to the Plan; (ix) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (x) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon any Participant, any holder or beneficiary of any Award and any employee of the Company or any Affiliate.

     Section 4. Shares Available for Awards.

     (a) Shares Available. Subject to adjustment as provided in Section 4(c), the total number of Shares available for granting Awards and/or Incentive

3

Stock Options under the Plan shall be 3,500,000, plus an automatic annual increase in the total number of Shares available for granting Awards and/or Incentive Stock Options, on the first day of each of the Company’s fiscal years beginning in 2005 and ending in 2014, equal to the lesser of (i) 1,000,000 shares of Common Stock or (ii) four percent of the number of shares of Common Stock outstanding on the last day of the immediately preceding fiscal year or (iii) such lesser number as determined by the Board. Shares to be issued under the Plan may be either authorized but unissued Shares or Shares acquired in the open market or otherwise. Any Shares that are used by a Participant as full or partial payment to the Company of the purchase price relating to an Award, or in connection with the satisfaction of tax obligations relating to an Award, shall again be available for granting Awards under the Plan. If any Shares covered by an Award or to which an Award relates are not purchased or are forfeited, or if an Award otherwise terminates without delivery of any Shares, then the number of Shares counted against the aggregate number of Shares available under the Plan with respect to such Award, to the extent of any such forfeiture or termination, shall again be available for granting Awards under the Plan.

     (b) Accounting for Awards. For purposes of this Section 4, if an Award entitles the holder thereof to receive or purchase Shares, the number of Shares covered by such Award or to which such Award relates shall be counted on the date of grant of such Award against the aggregate number of Shares available for granting Awards under the Plan. Such Shares may again become available for granting Awards under the Plan pursuant to the provisions of Section 4(a) of the Plan, subject to the limitations set forth in Section 4(c) of the Plan.

     (c) Adjustments. In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares (or other securities or other property) that thereafter may be made the subject of Awards, (ii) the number and type of Shares (or other securities or other property) subject to outstanding Awards, and (iii) the purchase or exercise price with respect to any Award; provided, however, that the number of Shares covered by any Award or to which such Award relates shall always be a whole number.

     (d) Award Limitations Under the Plan. No Eligible Person may be granted any Award or Awards, the value of which is based solely on an increase in the value of the Shares after the date of grant of such Awards, for more than

4

1,000,000 Shares, subject to adjustment as provided in the Plan, in the aggregate in any calendar year. The foregoing annual limitation specifically includes the grant of any “performance-based” Awards within the meaning of Section 162(m) of the Code.

     Section 5. Eligibility. Any Eligible Person of the Company or any Affiliate shall be eligible to be designated a Participant. In determining which Eligible Persons shall receive an Award and the terms of any Award, the Committee may take into account the nature of the services rendered by the respective Eligible Persons, their present and potential contributions to the success of the Company or such other factors as the Committee, in its discretion, shall deem relevant. Notwithstanding the foregoing, an Incentive Stock Option may be granted only to full-time or part-time employees (which term as used herein includes, without limitation, officers and directors who are also employees), and an Incentive Stock Option shall not be granted to an employee of an Affiliate unless such Affiliate is also a “subsidiary corporation” of the Company within the meaning of Section 424(f) of the Code or any successor provision.

     Section 6. Awards.

     (a) Options. The Committee is hereby authorized to grant Options to Participants with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine:

     (i) Exercise Price. The purchase price per Share purchasable under an Option shall be determined by the Committee; provided, however, that the purchase price for Shares underlying Incentive Stock Options shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such Incentive Stock Option, or 110% of the Fair Market Value of a Share on the date of grant of such Incentive Stock Option if the Participant owns directly or indirectly greater than 10% of the Company’s outstanding capital stock.

     (ii) Option Term. The term of each Option shall be fixed by the Committee; provided, however, that the term shall not exceed 10 years, or, in the case of Incentive Stock Options, 5 years if the Participant owns directly or indirectly greater than 10% of the Company’s outstanding capital stock.

     (iii) Time and Method of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part and the method or methods by which, and the form or forms (including, without limitation, cash, Shares, other securities, other Awards or other property, or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price) in which,

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payment of the exercise price with respect thereto may be made or deemed to have been made.

     (b) Stock Appreciation Rights. The Committee is hereby authorized to grant Stock Appreciation Rights to Participants subject to the terms of the Plan and any applicable Award Agreement. A Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive upon exercise thereof the excess of (i) the Fair Market Value of one Share on the date of exercise (or, if the Committee shall so determine, at any time during a specified period before or after the date of exercise) over (ii) the grant price of the Stock Appreciation Right as specified by the Committee, which price shall not be less than 100% of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right. Subject to the terms of the Plan and any applicable Award Agreement, the grant price, term, methods of exercise, dates of exercise, methods of settlement and any other terms and conditions of any Stock Appreciation Right shall be as determined by the Committee. The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate.

     (c) Restricted Stock and Restricted Stock Units. The Committee is hereby authorized to grant Restricted Stock and Restricted Stock Units to Participants with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine:

     (i) Restrictions. Shares of Restricted Stock and Restricted Stock Units shall be subject to such restrictions as the Committee may impose (including, without limitation, any limitation on the right to vote a Share of Restricted Stock or the right to receive any dividend or other right or property with respect thereto), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise as the Committee may deem appropriate.

     (ii) Stock Certificates; Delivery of Shares. Any Restricted Stock granted under the Plan shall be evidenced by issuance of a stock certificate or certificates, which certificate or certificates shall be held by the Company. Such certificate or certificates shall be registered in the name of the Participant and shall bear an appropriate legend referring to the restrictions applicable to such Restricted Stock. Promptly upon the lapse or waiver of applicable restrictions, Shares representing Restricted Stock that is no longer subject to restrictions shall be delivered to the holder thereof. In the case of Restricted Stock Units, no Shares shall be issued at the time such Awards are granted. Upon the lapse or waiver of restrictions and the restricted period relating to Restricted Stock Units evidencing the right to receive Shares, such Shares shall be issued and delivered to the holders of the Restricted Stock Units.

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     (iii) Forfeiture. Except as otherwise determined by the Committee, upon a Participant’s termination of employment (as determined under criteria established by the Committee) during the applicable restriction period, all Shares of Restricted Stock and all Restricted Stock Units held by the Participant at such time shall be forfeited and reacquired by the Company; provided, however, that the Committee may, when it finds that a waiver would be in the best interest of the Company, waive in whole or in part any or all remaining restrictions with respect to Shares of Restricted Stock or Restricted Stock Units.

     (d) Performance Awards. The Committee is hereby authorized to grant Performance Awards to Participants subject to the terms of the Plan and any applicable Award Agreement. A Performance Award granted under the Plan (i) may be denominated or payable in cash, Shares (including, without limitation, Restricted Stock and Restricted Stock Units), other securities, other Awards or other property and (ii) shall confer on the holder thereof the right to receive payments, in whole or in part, upon the achievement of such performance goals during such performance periods as the Committee shall establish. Subject to the terms of the Plan and any applicable Award Agreement, the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award granted, the amount of any payment or transfer to be made pursuant to any Performance Award and any other terms and conditions of any Performance Award shall be determined by the Committee.

     (e) Other Stock-Based Awards. The Committee is hereby authorized to grant to Participants such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as are deemed by the Committee to be consistent with the purpose of the Plan; provided, however, that such grants must comply with applicable law. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the terms and conditions of such Awards. Shares or other securities delivered pursuant to a purchase right granted under this Section 6(e) shall be purchased for such consideration, which may be paid by such method or methods and in such form or forms (including, without limitation, cash, Shares, other securities, other Awards or other property or any combination thereof), as the Committee shall determine.

     (f) General.

     (i) No Cash Consideration for Awards. Awards shall be granted for no cash consideration or for such minimal cash consideration as may be required by applicable law.

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     (ii) Awards May Be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for any other Award or any award granted under any plan of the Company or any Affiliate other than the Plan. Awards granted in addition to or in tandem with other Awards or in addition to or in tandem with awards granted under any such other plan of the Company or any Affiliate may be granted either at the same time as or at a different time from the grant of such other Awards or awards.

     (iii) Forms of Payment under Awards. Subject to the terms of the Plan and of any applicable Award Agreement, payments or transfers to be made by the Company or an Affiliate upon the grant, exercise or payment of an Award may be made in such form or forms as the Committee shall determine (including, without limitation, cash, Shares, other securities, other Awards or other property or any combination thereof), and may be made in a single payment or transfer, in installments or on a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments.

     (iv) Limits on Transfer of Awards. No Award and no right under any such Award shall be transferable by a Participant otherwise than by will or by the laws of descent and distribution; provided, however, that, if so determined by the Committee, a Participant may, in the manner established by the Committee, transfer Options (other than Incentive Stock Options) or designate a beneficiary or beneficiaries to exercise the rights of the Participant and receive any property distributable with respect to any Award upon the death of the Participant. Except as otherwise provided in any applicable Award Agreement or amendment thereto (other than an Award Agreement relating to an Incentive Stock Option), pursuant to terms determined by the Committee, each Award or right under any Award shall be exercisable during the Participant’s lifetime only by the Participant or, if permissible under applicable law, by the Participant’s guardian or legal representative. Except as otherwise provided in any applicable Award Agreement or amendment thereto (other than an Award Agreement or amendment thereto relating to an Incentive Stock Option), no Award or right under any such Award may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate.

     (v) Term of Awards. The term of each Award shall be for such period as may be determined by the Committee.

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     (vi) Restrictions; Securities Exchange Listing. All certificates for Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission and any applicable federal or state securities laws, and the Committee may cause appropriate entries to be made or legend or legends to be affixed on any such certificates to reflect such restrictions. If the Shares or other securities are listed on a securities exchange, the Company shall not be required to deliver any Shares or other securities covered by an Award unless and until such Shares or other securities have been listed on such securities exchange.

     Section 7. Amendment and Termination; Adjustments. Except to the extent prohibited by applicable law and unless otherwise expressly provided in an Award Agreement or in the Plan:

     (a) Amendments to the Plan. The Board may amend, alter, suspend, discontinue or terminate the Plan; provided, however, that, notwithstanding any other provision of the Plan or any Award Agreement, without the approval of the stockholders of the Company, no such amendment, alteration, suspension, discontinuation or termination shall be made that, absent such stockholder approval:

     (i) would cause Rule 16b-3 or Section 162(m) of the Code to become unavailable with respect to the Plan;

     (ii) would violate the rules or regulations of the Nasdaq Stock Market, any other securities exchange or the National Association of Securities Dealers, Inc. that are applicable to the Company; or

     (iii) would cause the Company to be unable, under the Code, to grant Incentive Stock Options under the Plan.

     (b) Amendments to Awards. The Committee may waive any conditions of or rights of the Company under any outstanding Award, prospectively or retroactively. The Committee may not amend, alter, suspend, discontinue or terminate any outstanding Award, prospectively or retroactively, without the consent of the Participant or holder or beneficiary thereof, except as otherwise herein provided or in the Award Agreement.

     (c) Correction of Defects, Omissions and Inconsistencies. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to carry the Plan into effect.

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     Section 8. Income Tax Withholding; Tax Bonuses.

     (a) Withholding. In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal or state payroll, withholding, income or other taxes that are the sole and absolute responsibility of a Participant are withheld or collected from such Participant. In order to assist a Participant in paying all or a portion of the federal and state taxes to be withheld or collected upon exercise or receipt of (or the lapse of restrictions relating to) an Award, the Committee, in its discretion and subject to such additional terms and conditions as it may adopt, may permit the Participant to satisfy such tax obligation by (i) electing to have the Company withhold a portion of the Shares otherwise to be delivered upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes or (ii) delivering to the Company Shares other than Shares issuable upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes. The election, if any, must be made on or before the date that the amount of tax to be withheld is determined.

     (b) Tax Bonuses. The Committee, in its discretion, shall have the authority, at the time of grant of any Award under this Plan or at any time thereafter, to approve cash bonuses to designated Participants to be paid upon their exercise or receipt of (or the lapse of restrictions relating to) Awards in order to provide funds to pay all or a portion of federal and state taxes due as a result of such exercise or receipt (or the lapse of restrictions relating to) Awards in order to provide funds to pay all or a portion of federal and state taxes due as a result of such exercise or receipt (or the lapse of such restrictions). The Committee shall have full authority in its discretion to determine the amount of any such tax bonus.

     Section 9. General Provisions.

     (a) No Rights to Awards. No Eligible Person, Participant or other Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Eligible Persons, Participants or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to different Participants.

     (b) Award Agreements. No Participant will have rights under an Award granted to such Participant unless and until an Award Agreement shall have been duly executed on behalf of the Company.

     (c) No Rights of Stockholders. Except with respect to Restricted Stock and other grants of Common Stock of the Company, neither a Participant nor the Participant’s legal representative shall be, or shall have any of the rights and privileges of, a stockholder of the Company in respect of any Shares issuable

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upon the exercise or payment of any Award, in whole or in part, unless and until the Shares have been issued.

     (d) No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases.

     (e) No Right to Employment. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ, or as giving a Non-Employee Director the right to continue as a director, of the Company or any Affiliate, nor will it affect in any way the right of the Company or an Affiliate to terminate such employment or the term of a Non-Employee Director at any time, with or without cause. In addition, the Company or an Affiliate may at any time dismiss a Participant from employment or terminate the term of a Non-Employee Director free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.

     (f) Governing Law. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Delaware.

     (g) Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan or any Award under any law deemed applicable by the Committee, 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 determination of the Committee, materially altering the purpose or intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction or Award, and the remainder of the Plan or any such Award shall remain in full force and effect.

     (h) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate.

     (i) No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash shall be paid in lieu of any fractional Share or whether such fractional Share or any rights thereto shall be canceled, terminated or otherwise eliminated.

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     (j) Headings. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.

     (k) Section 16 Compliance. The Plan is intended to comply in all respects with Rule 16b-3 or any successor provision, as in effect from time to time, and in all events the Plan shall be construed in accordance with the requirements of Rule 16b-3. If any Plan provision does not comply with Rule 16b-3 as hereafter amended or interpreted, the provision shall be deemed inoperative. The Board, in its absolute discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan with respect to persons who are officers or directors subject to Section 16 of the Securities and Exchange Act of 1934, as amended, without so restricting, limiting or conditioning the Plan with respect to other Participants.

     Section 10. Effective Date of the Plan. The Plan shall be effective as of the date (the “Effective Date”) immediately prior to the date on which the Company’s registration statement relating to its initial public offering of Common Stock is declared effective by the Securities and Exchange Commission, subject to approval by the Company’s stockholders in accordance with applicable law.

     Section 11. Term of the Plan. Awards shall be granted under the Plan only during a 10-year period beginning on the Effective Date of the Plan. However, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond the end of such 10-year period, and the authority of the Committee provided for hereunder with respect to the Plan and any Awards, and the authority of the Board to amend the Plan, shall extend beyond the end of such period.

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EX-10.23

Exhibit 10.23

LEASE AGREEMENT

THIS LEASE (this “Lease”) is made as of February 16, 2010 by and between Genesis Partners, LLC of Bozeman, Montana, herein referred to as “Landlord”, and Right Now Technologies, Inc., a Montana corporation, of Bozeman, Montana, hereinafter referred to as “Tenant”.

WITNESSETH:

     1. Leased Property. Landlord hereby leases to Tenant the office building located on the real property in Gallatin County, Montana whose address is 77 Discovery Drive, Bozeman, Montana, consisting of approximately 9184 square feet as depicted on the attached Exhibit A, together with (i) the non-exclusive right of ingress and egress for Tenant and its employees, agents, invitees and contractors between the building and the nearest public streets, and (ii) the exclusive right to use the parking lot surrounding the building for its employees, agents, invitees and contractors (the “premises”). Landlord represents and agrees that the parking lot will provide, at all times during the term of this Lease, a parking ratio of not less than five spaces per 1000 square feet of rentable square footage in buildings whose tenants are or will be using the parking lot.

     2. Terms of Lease. The primary term of this Lease shall be for sixty (60) months commencing on the 1^st day of April, 2010, and ending on the 31st day of March, 2015, both dates inclusive, unless sooner terminated as herein provided.

     3. Option to Extend. Upon expiration of the primary term of this Lease, Tenant is granted an option to extend the term of this Lease for one (1) additional sixty (60) month period, with the same terms and conditions as are included in this Lease, subject, however, to renegotiation of the rent provided in paragraph 4 of this Lease. The primary term and the extension terms will be collectively referred to in this Lease as the “term.” Tenant shall notify Landlord within not less than one hundred twenty (120) days prior to the expiration of the primary term of this Lease or prior to the expiration of each extension term of Tenant’s exercise of its option to extend this Lease, provided that in the circumstances described in paragraph 13, the options to extend the term may be exercised earlier as provided in paragraph 13, and if the option to extend is exercised earlier as provided in paragraph 13, nevertheless, the rental payable as provided in paragraph 4 shall be determined at the time and in the manner provided in paragraph 4 and this paragraph 3. During the

following sixty (60) day period, Tenant and Landlord shall negotiate and arrive at an agreement or disagreement of the amount of rent to be paid during the applicable extension term. If Landlord and Tenant agree upon the rent to be paid during the applicable extension term, Landlord and Tenant shall at the end of the sixty (60) day period enter into a new written lease or an amendment agreement setting forth the amount of rental Tenant shall be required to pay pursuant paragraph 4 for the applicable extension term and any other additional terms to which Landlord and Tenant have agreed. If Tenant and Landlord fail to agree upon the rent to be paid during the applicable extension term during the sixty (60) day period of negotiations, a fair market appraisal comparison of comparable properties will be completed by an independent party upon which the Landlord and Tenant may use to negotiate the amount of rent to be paid during the applicable extension term. If Tenant and Landlord fail to agree upon the rent to be paid during the applicable extension term during the sixty (60) day period of negotiations, either Landlord or Tenant may, by written notice to the other party given within the ensuing thirty (30) day period, elect to invoke the arbitration provisions of this Lease to determine the rent Tenant shall be required to pay pursuant to paragraph 4 for the applicable extension term.

     4. Rent. Tenant shall pay as rental for the premises for the first year of the primary term of the Lease the sum of $141,434; computed at the rate of $15.40 per square foot on 9184 square feet of office space, payable monthly, in advance on the first day of each month, in installments of $11,786 per month. On each anniversary date of this Lease, beginning on April 1^st, 2011, the annual rent shall be increased by 2%. Rent shall be paid without notice or demand by Landlord to Landlord at 895 Technology Blvd, Suite 101, Bozeman, Montana 59718 or at such other place as Landlord may direct in writing.

     5.  Covenants. Tenant hereby acknowledges and agrees:

     A. Tenant is familiar with the premises. Tenant’s taking of possession of the premises shall be conclusive evidence that the premises were in good, clean and sanitary condition, are in all respects satisfactory and acceptable to Tenant, and are in the condition in which Landlord represented the premises to be.

     B. Tenant will keep the premises in a clean and sanitary condition during the term of this Lease. Landlord shall have no obligation to make any alterations or improvements of any kind in or the premises other than as set forth in this Lease. Tenant shall repair or replace promptly all

damages to the premises due to acts of Tenant, its agents, employees, invitees, or subtenants, reasonable wear and tear excepted. Tenant also shall not cause any waste to be committed in or about the premises; Tenant will keep the premises free and clear of any and all refuse and debris; and Tenant agrees to observe all rules and regulations of the County of Gallatin and State of Montana in any way relating to maintenance, use and occupancy of the premises.

     C. Tenant will not use or permit anything to be used upon the premises which is likely to deface or damage the premises, or do anything that will increase the rate of insurance thereof (unless Tenant first agrees to pay any increased premiums), or permit anything to be done upon the premises or in the areas, sidewalk or streets adjacent to the premises, which will amount to or create a nuisance.

     D. Tenant shall make no alterations in or additions to the premises without first obtaining Landlord’s written consent, which consent will not be unreasonably withheld, delayed or conditioned. Tenant shall not erect or permit to be erected upon the premises any signs without written consent of Landlord, which consent will not be unreasonable withheld, delayed or conditioned.

     E. Tenant agrees, with respect to all alterations or improvements to the premises or any part thereof, which Tenant undertakes with written consent of Landlord, that Tenant shall in all instances save Landlord and the premises forever harmless and free from all damages, loss and liability of every kind and character which may be claimed, asserted or charged, including liability to adjacent owners or tenants, based upon the acts or negligence of Tenant or its agents, contractors or employees, for any negligence, or for the failure of any of them to observe and comply with the requirements of the law, including the regulations and the authorities in the City of Bozeman, and Tenant will preserve and hold Landlord and the premises free and clear from all liens or encumbrances for labor and materials furnished. Any and all alterations, additions, and improvements made by Tenant to or upon the premises (with the exception of furnishings, equipment, and removable trade fixtures installed by Tenant) shall, upon installation, be deemed attached and part of the premises, provided however, that if prior to termination of this Lease, or within fifteen (15) days thereafter, Landlord so directs by written notice to Tenant, promptly following said termination of this Lease, Tenant shall remove such of the said additions, improvements, fixtures, and installations placed upon the demised premises by Tenant as shall by

designated in said notice from Landlord, and Tenant shall repair any damages occasioned by such removal. Further, in this regard, Tenant hereby agrees that it will, during the continuance of this Lease, keep the premises and interior of the premises in good condition and repair, reasonable wear and tear excepted.

     F. Tenant may use and occupy the premises for the purpose of a business office and all activities incidental thereto, including the manufacture of software, and not otherwise. Tenant shall not use or knowingly permit any part of the premises to by used for any unlawful purposes and shall comply with all applicable laws and regulations of the County of Gallatin, State of Montana, and the United States of America.

     G. Tenant agrees that Landlord shall not be liable for any damage or injury to persons or property or for the loss of property sustained by Tenant or by any other person or persons on the premises due to any act of negligence of Tenant.

     H. Tenant agrees that it will not assign this Lease or sublease any portion of the premises or permit this Lease to transferred by operation of law or otherwise without the written consent of Landlord, which consent shall not be unreasonably withheld, delayed or conditioned; provided, however, that any merger and reorganization of Tenant for the purpose of incorporating under another state law shall not be deemed to be an assignment for purposes of this paragraph and shall not require Landlord’s consent, or that any merger or change in control of the Tenant shall not be deemed to be an assignment for the purposes of this paragraph and shall not require Landlord’s consent. Tenant shall remain responsible under this Lease for any portion of the premises sublet by Tenant (even if Landlord approved the subletting), unless Landlord shall agree otherwise. Any subtenant to whom any portion of the property is sublet shall agree to abide by the provisions of this Lease which are applicable to the sublet portion of the premises, before Landlord will be required to consent to the proposed subleasing of any portion of the premises.

     I. Tenant will permit Landlord, at all reasonable times and after reasonable notice to Tenant at Landlord’s sole risk and expense and in a manner that causes the least practical disruption to Tenant, to enter upon the premises (i) to inspect their condition and to make reasonable and necessary repairs for the protection and preservation of the premises, (ii) to ascertain whether Tenant has performed its covenants under this Lease, and (iii) to show the premises to persons who may wish to rent the premises after the expiration of the term of this Lease or to purchase the

premises, provided that any showing of the premises to persons who may wish to rent the premises shall be only during the last year of the term of the Lease.

     J. Tenant, upon leaving the premises, shall at its own expense, remove all dirt, rubbish, and refuse and upon failure to do so, Landlord may immediately, without further notice, do so at Tenant’s expense. Tenant shall immediately pay Landlord’s expenses upon receipt of a bill for the same from Landlord.

     6. Default and Landlord’s Rights. If the premises shall be deserted or vacated, or if a trustee or receiver of a substantial portion of Tenant’s property is appointed, or if an order is entered against Tenant for relief under Title II of the United States Code, or there shall be a default in payment of any rent for more than five (5) days after written notice of such default from Landlord, or there shall be a default in the performance or any other covenant, agreement, condition, rule or regulation herein contained, or hereafter established with Tenant’s consent, which shall continue for more than thirty (30) days (or, if the default is not curable within thirty (30) days and if Tenant begins to cure the default within such thirty (30) day period and diligently pursues curing the same, then for such for additional period as shall be reasonably necessary to cure the default) after Tenant’s receipt of written notice of such default from Landlord, Tenant’s rights in this Lease (if Landlord so elects, and such election is reserved) shall thereupon terminate and end without the necessity for any further notice, and Landlord shall have the right to re-enter and repossess the premises in the manner permitted by law and dispossess or remove there from Tenant or other occupants thereof and their effects without being liable to any prosecution or action therefore. Landlord may likewise, at Landlord’s option, and in addition to any other remedies which Landlord may have upon default, let and relet the premises in whole or in part, altering, changing or subdividing the same as in its reasonable judgment may accomplish the best rental results, and upon such terms and for such length of time, whether lesser or greater than the unexpired portion of the term of this Lease, as Landlord may reasonably see fit, and Tenant shall be liable to Landlord for any deficiency between the remaining unpaid rental and the rental so procured by Landlord for the period of said letting or reletting which is during the remaining term of this Lease and shall further be liable for the reasonable costs of reletting and alterations or changes required to enable Landlord to let and relet the premises, the deficiency and costs not to exceed, however, the balance of the unpaid rental due from tenant for the remaining term of the Lease. Landlord any institute action for

the whole of any such deficiency immediately upon effecting a letting or reletting and shall not thereafter be precluded from further like action in the event such letting or relettng shall not cover the entire unexpired portion of the term hereof, or Landlord may monthly, or at such greater intervals as it may see fit, require Tenant to pay said deficiency then existing, and Tenant agrees to pay said deficiency to Landlord from time to time when called upon by Landlord to do so. Should this Lease not be terminated, Landlord may, notwithstanding such letting or reletting, at any time thereafter elect to terminate it. Tenant, upon termination as herein provided, will yield quiet and peaceful possession to Landlord, subject to any letting or reletting Landlord has effected of the premises. If Landlord shall give the notice of termination as herein provided, then, at the expiration of such period, this Lease shall terminate as completely as if that were the date herein fixed for the expiration of the term of this Lease, and Tenant shall then surrender the premises to Landlord.

     7. No Waiver of Breach. Tenant agrees that no consent, expressed or implied, by Landlord to any breach of Tenant’s covenants or agreements shall be deemed a waiver of any succeeding breach.

     8. Notice. It is agreed that all notices herein required to be given shall be effective upon mailing, postage prepaid, addressed to Landlord at 895 Technology Blvd, Suite 101 Bozeman, Montana 59718 or addressed to Tenant at 136 Enterprise Blvd., Bozeman, Montana or such other place as either may designate in writing to the other. In addition, any notice from Landlord to Tenant relating to this Lease or the premises shall be deemed duly served if personally delivered to an officer of Tenant at the premises.

     9. Surrender Upon Termination. Tenant shall, upon termination of the term, peacefully and quietly surrender the premises to Landlord in as good condition as it was at the beginning, reasonable use and wear and damage by the elements excepted. Tenant shall remove all of its personal property and trade fixtures (repairing any damage to the premises such removal causes) so that Landlord can repossess and enjoy the premises not later than noon on the day upon which the term ends, whether upon notice or by holdover or otherwise. Landlord shall have the right to enforce this covenant by ejectment, for damages, or for breach of any other condition or covenant of this Lease.

     10. Peaceful Possession. Landlord covenants and agrees, at its sole expense, that the exterior, structure, the roof and the heating, ventilating, air conditioning, electrical, plumbing and all

utility systems on or in the premises shall be maintained in good repair and tenantable condition, excepting damage resulting from neglect or intentional acts of Tenant, its agents, employees, contractors and invitees. So long as Tenant pays the rent and performs the covenants and agreements herein contained, Tenant shall peacefully and quietly hold the premises for the primary term and any extensions thereof.

     11. Time of Essence. Time is of the essence of this Lease with respect to the performance by Tenant and Landlord of their obligations hereunder.

     12. Attorney’s Fees. In the event any action to enforce any of the terms of this Lease is brought, the prevailing party shall be entitled to its reasonable attorney’s fees as provided in paragraph 25.

     13. Liability — Premises. Landlord shall not be responsible or liable (i) for any personal injury to Tenant or any other person on the premises, or for injury or damage to personal property or improvements of Tenant or of any third party on the premises unless such injury or damage is caused by the neglect or omissions of Landlord, its agents or employees; (ii) for injury or damage caused by the neglect or omissions of Tenant or its agents, contractors, invitees or employees; or (ii) on account of any inconvenience or annoyance or damage caused by fire, explosion, earthquake, flood or other causes beyond the control of Landlord. Tenant will obtain general liability insurance in an amount of not less than $1,000,000 on which Landlord shall be named as an additional insured. If Tenant shall sublet any portion of the premises, the subtenant shall also furnish the general liability insurance required of Tenant or be covered under Tenant’s policy.

     In addition, Tenant will at all times hold Landlord harmless from any claim or damages by reason of any personal injury, property damage, or otherwise, arising from its operation or use of the premises or any of Tenant’s equipment used in connection therewith, provided the claim or damage is not caused by negligence or omission of Landlord, its agents, contractors or employees.

     Landlord shall carry, at its sole expense, all risk casualty insurance, covering the premises, in the amount equal to the full replacement cost of the premises. The policy shall be endorsed so that it may be terminated or amended only upon not less than thirty (30) days prior written notice to Tenant. The policy shall contain no co-insurance clause, a deductible amount not exceeding $5,000, and the insurance company’s consent to the waivers of subrogation set forth in the next sentence. Landlord waives any claims it may have against Tenant and any rights to grant subrogation rights to

others for any loss, damage or claim which is covered by Landlord’s insurance. In the event that the premises shall be rendered wholly or partially untenantable by fire, explosion, earthquake, Act of God, or any other cause beyond the control of Landlord (collectively, the “casualties”). Landlord (i) shall rebuild and restore the premises as soon as reasonably practicable to the premises’ former condition and use but only (A) to the extent of the insurance proceeds Landlord receives, and (B) if the casualties do not occur during the last two (2) years of the term (and for this purpose the term shall include all extension terms Tenant notifies Landlord it will exercise on or before thirty (30) days after the occurrence of any of the casualties), or (ii) in circumstances not described in clause (ii) may, at its option, either terminate this Lease by written notice given to Tenant within sixty (60) days after the casualty or commence to repair the premises within sixty (60) days after the casualty. If Landlord shall elect or be required to repair the premises, the rental hereunder shall be abated in proportion to the part of the premises that are untenantable, and no rental shall be payable hereunder for the period that said premises shall be wholly untenantable, provided that in the event any of the casualties is caused by carelessness, negligence or improper conduct of Tenant, or of Tenant’s agents, employees, contractors or invitees, the rental shall not be so abated.

     All fixtures or improvements placed on the premises by Tenant, which shall be damaged or destroyed, shall be repaired and replaced by Tenant at its own expense and not at the expense of Landlord.

     If any of the glass or plate glass in the premised shall be damaged or become broken from the inside, Tenant shall replace, at Tenant’s own cost and expense, all such glass or plate glass broken. If the glass is damaged or broken from the outside, Landlord shall replace the same at its own cost and expense.

     14. Repairs and Maintenance. Landlord shall bear the entire expense of all repairs, maintenance, alterations, or improvements to the basic structure (exterior walls, roof, heating, ventilating, air conditioning, electrical, plumbing and other systems on the premises). Landlord shall, in addition, bear the entire expense for the repair and maintenance of the parking area, including landscaping and keeping the parking area free of rubbish, ice and snow. Tenant shall pay at its own expense, all repairs, maintenance, and alterations of Tenant installed fixtures or improvements and utilities.

     15. Utilities, Taxes Etc. Tenant shall pay for all telephone, water/sewer, electricity, natural gas, fire system monitoring, security systems, and janitorial services used in the operation of the premises. Tenant agrees to pay for replacement of light bulbs. Landlord shall pay for all real property taxes and assessments levied and assessed against the premises and for snow removal and lawn maintenance.

     16. No Smoking Policy. There will be no smoking allowed anywhere in the premises by anyone. It will be Tenant’s responsibility to convey to and enforce this policy by its employees, agents and all other invitees.

     17. Paragraph Headings. The paragraph headings in this instrument are for convenience only and do not limit or construe the contents or any paragraphs.

     18. Severability. It is the intent of the parties that if a part of this Lease is invalid, all valid parts that are severable from the invalid part shall remain in effect. If a part of this Lease is invalid in one or more of it applications, that part remains in effect in all valid applications that are severable from the invalid applications.

     19. Landlord’s Liability. The term “Landlord” as used herein shall mean only the owner or owners at the time in question of the premises. In the event of any transfer of such title or interest, Landlord herein named (and in case of any subsequent transfers the then grantor) shall be relieved from and after the date of such transfer of all liabilities as respects Landlord’s obligations thereafter to be performed, provided that any funds in the hands of Landlord or the then grantor at time of such transfer in which Tenant has an interest shall be delivered to the grantee, who shall assume the obligations of Landlord or the then grantor to Tenant with respect to those funds. The obligations contained in this Lease to be performed by Landlord shall, subject to the foregoing provisions of this paragraph 19, be binding on Landlord’s successors and assigns.

     20. Supersedes. This Lease supersedes all prior agreements between the parties.

     21. Exercise of Rights. The omission of Landlord or Tenant to exercise any right provided for on the default of the other at any time shall not preclude Landlord or Tenant from the exercise of such right at any subsequent default of the other or be deemed a waiver thereof or the right to do so.

     22. Binding Effect. This Lease shall be binding upon and inure to the benefit of the heirs, successors, administrators, and permitted assigns of the parties hereto.

23. Security Deposit. The parties acknowledge that at the execution of this Lease, Landlord holds the sum of $10,000 as a security deposit in connection with a prior lease of the premises. Landlord shall continue to hold and use the security deposit as security for Tenant’s performance of its obligations under this Lease. At the termination of this Lease and if at that time Tenant has fully complied with all of its obligations under this Lease, Landlord shall return the security deposit, without interest (or the part of the security deposit which Landlord has not applied to satisfy Tenant’s obligations under this Lease), to Tenant

     24. Governing Law. This Agreement and all matters relating thereto shall be governed by the laws of Montana.

     25. Arbitration. Any dispute under this Lease shall be decided by binding arbitration initiated and conducted in accordance with the commercial arbitration rules of the American Arbitration Association (“AAA”). The parties shall decide upon the arbitrator. If the parties are unable to decide upon the arbitrator within ten (10) days after a notice from one party to the other that a dispute exists under this Lease, the AAA shall select the arbitrator. The decision of the arbitrator shall be binding. All costs of arbitration shall be borne by the party the arbitrator determines to be the non-prevailing party. Such costs shall include the costs and reasonable attorneys’ fees of the prevailing party.

IN WITNESS WHEREOF, the parties have hereunto set their hands as of the date and year first written above.

GENESIS PARTNERS, LLC — Landlord
By:
	/s/ Steve Daines	2/16/10
	Steve Daines, member — Landlord	date
	/s/ Clair Dames	2/18/10
	Clair Dames, member — Landlord	date
	/s/ Greg Gianforte	2/16/10
	Greg Gianforte, member — Landlord	date
Right Now Technologies, Inc. — Tenant
By	/s/ Jeff Davison	2/19/10
	Jeff Davison	date
	Chief Financial Officer

EX-10.24

Exhibit 10.24

LEASE AGREEMENT

THIS LEASE (this “Lease”) is made as of February 16, 2010 by and between Genesis Partners, LLC of Bozeman, Montana, herein referred to as “Landlord”, and Right Now Technologies, Inc., a Montana corporation, of Bozeman, Montana, hereinafter referred to as “Tenant”.

WITNESSETH:

     1. Leased Property. Landlord hereby leases to Tenant the office building located on the real property in Gallatin County, Montana whose address is 110 Enterprise Blvd, Bozeman, Montana, consisting of 12,912 square feet as depicted on the attached Exhibit A, together with (i) the nonexclusive right of ingress and egress for Tenant and its employees, agents, invitees and contractors between the building and the nearest public streets, and (ii) the exclusive right to use the parking as depicted on attached Exhibit A for its employees, agents, invitees and contractors (the “premises”). Landlord represents and agrees that the parking lot will provide, at all times during the term of this Lease, a parking ratio of not less than four spaces per 1000 square feet of rentable square footage in buildings whose tenants are or will be using the parking lot.

     2. Terms of Lease. The primary term of this Lease shall be for sixty (60) months commencing on the 13^th day of June, 2010, and ending on the 12th day of June, 2015, both dates inclusive, unless sooner terminated as herein provided.

     3. Option to Extend. Upon expiration of the primary term of this Lease, Tenant is granted an option to extend the term of this Lease for one (1) additional sixty (60) month period, upon the same terms and conditions as are included in this Lease, subject, however, to renegotiation of the rent provided in paragraph 4 of this Lease. The primary term and the extension terms will be collectively referred to in this Lease as the “term.” Tenant shall notify Landlord within not less than one hundred twenty (120) days prior to the expiration of the primary term of this Lease or prior to the expiration of each extension term of Tenant’s exercise of its option to extend this Lease, provided that in the circumstances described in paragraph 13, the options to extend the term may be exercised earlier as provided in paragraph 13, and if the option to extend is exercised earlier as provided in paragraph 13, nevertheless, the rental payable as provided in paragraph 4 shall be determined at the time and in the manner provided in paragraph 4 and this paragraph 3. During the

following sixty (60) day period, Tenant and Landlord shall negotiate and arrive at an agreement or disagreement of the amount of rent to be paid during the applicable extension term. If Landlord and Tenant agree upon the rent to be paid during the applicable extension term, Landlord and Tenant shall at the end of the sixty (60) day period enter into a new written lease or an amendment agreement setting forth the amount of rental Tenant shall be required to pay pursuant paragraph 4 for the applicable extension term and any other additional terms to which Landlord and Tenant have agreed. If Tenant and Landlord fail to agree upon the rent to be paid during the applicable extension term during the sixty (60) day period of negotiations, a fair market appraisal comparison of comparable properties will be completed by an independent party upon which the Landlord and Tenant may use to negotiate the amount of rent to be paid during the applicable extension term. If Tenant and Landlord fail to agree upon the rent to be paid during the applicable extension term during the sixty (60) day period of negotiations, either Landlord or Tenant may, by written notice to the other party given within the ensuing thirty (30) day period, elect to invoke the arbitration provisions of this Lease to determine the rent Tenant shall be required to pay pursuant to paragraph 4 for the applicable extension term.

     4. Rent. Tenant shall pay as rental for the premises for the first year of the primary term of the Lease the sum of $198,845 computed at the rate of $15.40 per square foot on 12,912 square feet of office space, payable monthly, in advance on the first day of each month, in installments of $16,570 per month. On each anniversary date of this Lease, beginning on June 12^th, 2011, the annual rent shall be increased by 2%. Rent shall be paid without notice or demand by Landlord to Landlord at 895 Technology Blvd, Suite 101, Bozeman, Montana 59718 or at such other place as Landlord may direct in writing.

     5. Covenants. Tenant hereby acknowledges and agrees:

     A. Tenant is familiar with the premises. Tenant’s taking of possession of the premises shall be conclusive evidence that the premises were in good, clean and sanitary condition, are in all respects satisfactory and acceptable to Tenant, and are in the condition in which Landlord represented the premises to be.

     B. Tenant will keep the premises in a clean and sanitary condition during the term of this Lease. Landlord shall have no obligation to make any alterations or improvements of any kind in or about the premises other than as set forth in this Lease. Tenant shall repair or replace promptly all

damages to the premises due to acts of Tenant, its agents, employees, invitees, or subtenants, reasonable wear and tear excepted. Tenant also shall not cause any waste to be committed in or about the premises; Tenant will keep the premises free and clear of any and all refuse and debris; and Tenant agrees to observe all rules and regulations of the County of Gallatin and State of Montana in any way relating to maintenance, use and occupancy of the premises.

     C. Tenant will not use or permit anything to be used upon the premises which is likely to deface or damage the premises, or do anything that will increase the rate of insurance thereof (unless Tenant first agrees to pay any increased premiums), or permit anything to be done upon the premises or in the areas, sidewalk or streets adjacent to the premises, which will amount to or create a nuisance.

     D. Tenant shall make no alterations in or additions to the premises without first obtaining Landlord’s written consent, which consent will not be unreasonably withheld, delayed or conditioned. Tenant shall not erect or permit to be erected upon the premises any signs without written consent of Landlord, which consent will not be unreasonable withheld, delayed or conditioned.

     E. Tenant agrees, with respect to all alterations or improvements to the premises or any part thereof, which Tenant undertakes with written consent of Landlord, that Tenant shall in all instances save Landlord and the premises forever harmless and free from all damages, loss and liability of every kind and character which may be claimed, asserted or charged, including liability to adjacent owners or tenants, based upon the acts or negligence of Tenant or its agents, contractors or employees, for any negligence, or for the failure of any of them to observe and comply with the requirements of the law, including the regulations and the authorities in the City of Bozeman, and Tenant will preserve and hold Landlord and the premises free and clear from all liens or encumbrances for labor and materials furnished. Any and all alterations, additions, and improvements made by Tenant to or upon the premises (with the exception of furnishings, equipment, and removable trade fixtures installed by Tenant) shall, upon installation, be deemed attached and part of the premises, provided however, that if prior to termination of this Lease, or within fifteen (15) days thereafter, Landlord so directs by written notice to Tenant, promptly following said termination of this Lease, Tenant shall remove such of the said additions, improvements, fixtures, and installations placed upon the demised premises by Tenant as shall by

designated in said notice from Landlord, and Tenant shall repair any damages occasioned by such removal. Further, in this regard, Tenant hereby agrees that it will, during the continuance of this Lease, keep the premises and interior of the premises in good condition and repair, reasonable wear and tear excepted.

     F. Tenant may use and occupy the premises for the purpose of a business office and all activities incidental thereto, including the manufacture of software, and not otherwise. Tenant shall not use or knowingly permit any part of the premises to by used for any unlawful purposes and shall comply with all applicable laws and regulations of the County of Gallatin, State of Montana, and the United States of America.

     G. Tenant agrees that Landlord shall not be liable for any damage or injury to persons or property or for the loss of property sustained by Tenant or by any other person or persons on the premises due to any act of negligence of Tenant.

     H. Tenant agrees that it will not assign this Lease or sublease any portion of the premises or permit this Lease to transferred by operation of law or otherwise without the written consent of Landlord, which consent shall not be unreasonably withheld, delayed or conditioned; provided, however, that any merger and reorganization of Tenant for the purpose of incorporating under another state law shall not be deemed to be an assignment for purposes of this paragraph and shall not require Landlord’s consent, or that any merger or change in control of the Tenant shall not be deemed to be an assignment for the purposes of this paragraph and shall not require Landlord’s consent. Tenant shall remain responsible under this Lease for any portion of the premises sublet by Tenant (even if Landlord approved the subletting), unless Landlord shall agree otherwise. Any subtenant to whom any portion of the property is sublet shall agree to abide by the provisions of this Lease which are applicable to the sublet portion of the premises, before Landlord will be required to consent to the proposed subleasing of any portion of the premises.

     I. Tenant will permit Landlord, at all reasonable times and after reasonable notice to Tenant at Landlord’s sole risk and expense and in a manner that causes the least practical disruption to Tenant, to enter upon the premises (i) to inspect their condition and to make reasonable and necessary repairs for the protection and preservation of the premises, (ii) to ascertain whether Tenant has performed its covenants under this Lease, and (iii) to show the premises to persons who may wish to rent the premises after the expiration of the term of this Lease or to purchase the

premises, provided that any showing of the premises to persons who may wish to rent the premises shall be only during the last year of the term of the Lease.

     J. Tenant, upon leaving the premises, shall at its own expense, remove all dirt, rubbish, and refuse and upon failure to do so, Landlord may immediately, without further notice, do so at Tenant’s expense. Tenant shall immediately pay Landlord’s expenses upon receipt of a bill for the same from Landlord.

     6. Default and Landlord’s Rights. If the premises shall be deserted or vacated, or if a trustee or receiver of a substantial portion of Tenant’s property is appointed, or if an order is entered against Tenant for relief under Title 11 of the United States Code, or there shall be a default in payment of any rent for more than five (5) days after written notice of such default from Landlord, or there shall be a default in the performance or any other covenant, agreement, condition, rule or regulation herein contained, or hereafter established with Tenant’s consent, which shall continue for more than thirty (30) days (or, if the default is not curable within thirty (30) days and if Tenant begins to cure the default within such thirty (30) day period and diligently pursues curing the same, then for such for additional period as shall be reasonably necessary to cure the default) after Tenant’s receipt of written notice of such default from Landlord, Tenant’s rights in this Lease (if Landlord so elects, and such election is reserved) shall thereupon terminate and end without the necessity for any further notice, and Landlord shall have the right to re-enter and repossess the premises in the manner permitted by law and dispossess or remove there from Tenant or other occupants thereof and their effects without being liable to any prosecution or action therefore. Landlord may likewise, at Landlord’s option, and in addition to any other remedies which Landlord may have upon default, let and relet the premises in whole or in part, altering, changing or subdividing the same as in its reasonable judgment may accomplish the best rental results, and upon such terms and for such length of time, whether lesser or greater than the unexpired portion of the term of this Lease, as Landlord may reasonably see fit, and Tenant shall be liable to Landlord for any deficiency between the remaining unpaid rental and the rental so procured by Landlord for the period of said letting or reletting which is during the remaining term of this Lease and shall further be liable for the reasonable costs of reletting and alterations or changes required to enable Landlord to let and relet the premises, the deficiency and costs not to exceed, however, the balance of the unpaid rental due from tenant for the remaining term of the Lease. Landlord any institute action for

the whole of any such deficiency immediately upon effecting a letting or reletting and shall not thereafter be precluded from further like action in the event such letting or relettng shall not cover the entire unexpired portion of the term hereof, or Landlord may monthly, or at such greater intervals as it may see fit, require Tenant to pay said deficiency then existing, and Tenant agrees to pay said deficiency to Landlord from time to time when called upon by Landlord to do so. Should this Lease not be terminated, Landlord may, notwithstanding such letting or reletting, at any time thereafter elect to terminate it. Tenant, upon termination as herein provided, will yield quiet and peaceful possession to Landlord, subject to any letting or reletting Landlord has effected of the premises. If Landlord shall give the notice of termination as herein provided, then, at the expiration of such period, this Lease shall terminate as completely as if that were the date herein fixed for the expiration of the term of this Lease, and Tenant shall then surrender the premises to Landlord.

     7. No Waiver of Breach. Tenant agrees that no consent, expressed or implied, by Landlord to any breach of Tenant’s covenants or agreements shall be deemed a waiver of any succeeding breach.

     8. Notice. It is agreed that all notices herein required to be given shall be effective upon mailing, postage prepaid, addressed to Landlord at 895 Technology Blvd, Suite 101 Bozeman, Montana 59718 or addressed to Tenant at 136 Enterprise Blvd, Bozeman, Montana or such other place as either may designate in writing to the other. In addition, any notice from Landlord to Tenant relating to this Lease or the premises shall be deemed duly served if personally delivered to an officer of Tenant at the premises.

     9. Surrender Upon Termination. Tenant shall, upon termination of the term, peacefully and quietly surrender the premises to Landlord in as good condition as it was at the beginning, reasonable use and wear and damage by the elements excepted. Tenant shall remove all of its personal property and trade fixtures (repairing any damage to the premises such removal causes) so that Landlord can repossess and enjoy the premises not later than noon on the day upon which the term ends, whether upon notice or by holdover or otherwise. Landlord shall have the right to enforce this covenant by ejectment, for damages, or for breach of any other condition or covenant of this Lease.

     10. Peaceful Possession. Landlord covenants and agrees, at its sole expense, that the exterior, structure, the roof and the heating, ventilating, air conditioning, electrical, plumbing and all

utility systems on or in the premises shall be maintained in good repair and tenantable condition, excepting damage resulting from neglect or intentional acts of Tenant, its agents, employees, contractors and invitees. So long as Tenant pays the rent and performs the covenants and agreements herein contained, Tenant shall peacefully and quietly hold the premises for the primary term and any extensions thereof.

     11. Time of Essence. Time is of the essence of this Lease with respect to the performance by Tenant and Landlord of their obligations hereunder.

     12. Attorney’s Fees. In the event any action to enforce any of the terms of this Lease is brought, the prevailing party shall be entitled to its reasonable attorney’s fees as provided in paragraph 25.

     13. Liability — Premises. Landlord shall not be responsible or liable (i) for any personal injury to Tenant or any other person on the premises, or for injury or damage to personal property or improvements of Tenant or of any third party on the premises unless such injury or damage is caused by the neglect or omissions of Landlord, its agents or employees; (ii) for injury or damage caused by the neglect or omissions of Tenant or its agents, contractors, invitees or employees; or (ii) on account of any inconvenience or annoyance or damage caused by fire, explosion, earthquake, flood or other causes beyond the control of Landlord. Tenant will obtain general liability insurance in an amount of not less than $1,000,000 on which Landlord shall be named as an additional insured. If Tenant shall sublet any portion of the premises, the subtenant shall also furnish the general liability insurance required of Tenant or be covered under Tenant’s policy.

     In addition, Tenant will at all times hold Landlord harmless from any claim or damages by reason of any personal injury, property damage, or otherwise, arising from its operation or use of the premises or any of Tenant’s equipment used in connection therewith, provided the claim or damage is not caused by negligence or omission of Landlord, its agents, contractors or employees.

     Landlord shall carry, at its sole expense, all risk casualty insurance, covering the premises, in the amount equal to the full replacement cost of the premises. The policy shall be endorsed so that it may be terminated or amended only upon not less than thirty (30) days prior written notice to Tenant. The policy shall contain no co-insurance clause, a deductible amount not exceeding $5,000, and the insurance company’s consent to the waivers of subrogation set forth in the next sentence. Landlord waives any claims it may have against Tenant and any rights to grant subrogation rights to

others for any loss, damage or claim which is covered by Landlord’s insurance. In the event that the premises shall be rendered wholly or partially untenantable by fire, explosion, earthquake, Act of God, or any other cause beyond the control of Landlord (collectively, the “casualties”), Landlord (i) shall rebuild and restore the premises as soon as reasonably practicable to the premises’ former condition and use but only (A) to the extent of the insurance proceeds Landlord receives, and (B) if the casualties do not occur during the last two (2) years of the term (and for this purpose the term shall include all extension terms Tenant notifies Landlord it will exercise on or before thirty (30) days after the occurrence of any of the casualties), or (ii) in circumstances not described in clause (ii) may, at its option, either terminate this Lease by written notice given to Tenant within sixty (60) days after the casualty or commence to repair the premises within sixty (60) days after the casualty. If Landlord shall elect or be required to repair the premises, the rental hereunder shall be abated in proportion to the part of the premises that are untenantable, and no rental shall be payable hereunder for the period that said premises shall be wholly untenantable, provided that in the event any of the casualties is caused by carelessness, negligence or improper conduct of Tenant, or of Tenant’s agents, employees, contractors or invitees, the rental shall not be so abated.

     All fixtures or improvements placed on the premises by Tenant, which shall be damaged or destroyed, shall be repaired and replaced by Tenant at its own expense and not at the expense of Landlord.

     If any of the glass or plate glass in the premised shall be damaged or become broken from the inside, Tenant shall replace, at Tenant’s own cost and expense, all such glass or plate glass broken. If the glass is damaged or broken from the outside, Landlord shall replace the same at its own cost and expense.

     14. Repairs and Maintenance. Landlord shall bear the entire expense of all repairs, maintenance, alterations, or improvements to the basic structure (exterior walls, roof, heating, ventilating, air conditioning, electrical, plumbing and other systems on the premises). Landlord shall, in addition, bear the entire expense for the repair and maintenance of the parking area, including landscaping and keeping the parking area free of rubbish, ice and snow. Tenant shall pay at its own expense, all repairs, maintenance, and alterations of Tenant installed fixtures or improvements and utilities.

     15. Utilities, Taxes Etc. Tenant shall pay for all telephone, water/sewer, electricity, natural gas, fire system monitoring, security systems, and janitorial services used in the operation of the premises. Tenant agrees to pay for replacement of light bulbs. Landlord shall pay for all real property taxes and assessments levied and assessed against the premises and for snow removal and lawn maintenance.

     16. No Smoking Policy. There will be no smoking allowed anywhere in the premises by anyone. It will be Tenant’s responsibility to convey to and enforce this policy by its employees, agents and all other invitees.

     17. Paragraph Headings. The paragraph headings in this instrument are for convenience only and do not limit or construe the contents or any paragraphs.

     18. Severability. It is the intent of the parties that if a part of this Lease is invalid, all valid parts that are severable from the invalid part shall remain in effect. If a part of this Lease is invalid in one or more of it applications, that part remains in effect in all valid applications that are severable from the invalid applications.

     19. Landlord’s Liability. The term “Landlord” as used herein shall mean only the owner or owners at the time in question of the premises. In the event of any transfer of such title or interest, Landlord herein named (and in case of any subsequent transfers the then grantor) shall be relieved from and after the date of such transfer of all liabilities as respects Landlord’s obligations thereafter to be performed, provided that any funds in the hands of Landlord or the then grantor at time of such transfer in which Tenant has an interest shall be delivered to the grantee, who shall assume the obligations of Landlord or the then grantor to Tenant with respect to those funds. The obligations contained in this Lease to be performed by Landlord shall, subject to the foregoing provisions of this paragraph 19, be binding on Landlord’s successors and assigns.

     20. Supersedes. This Lease supersedes all prior agreements between the parties.

     21. Exercise of Rights. The omission of Landlord or Tenant to exercise any right provided for on the default of the other at any time shall not preclude Landlord or Tenant from the exercise of such right at any subsequent default of the other or be deemed a waiver thereof or the right to do so.

     22. Binding Effect. This Lease shall be binding upon and inure to the benefit of the heirs, successors, administrators, and permitted assigns of the parties hereto.

     23. Security Deposit. At the execution of this Lease, Landlord acknowledges Tenant has paid Landlord the sum of $10,000 as a security deposit. Landlord shall hold and use the security deposit as security for Tenant’s performance of its obligations under this Lease. At the termination of this Lease and if at that time Tenant has fully complied with all of its obligations under this Lease, Landlord shall return the security deposit, without interest (or the part of the security deposit which Landlord has not applied to satisfy Tenant’s obligations under this Lease), to Tenant

     24. Governing Law. This Agreement and all matters relating thereto shall be governed by the laws of Montana..

     25. Arbitration. Any dispute under this Lease shall be decided by binding arbitration initiated and conducted in accordance with the commercial arbitration rules of the American Arbitration Association (“AAA”). The parties shall decide upon the arbitrator. If the parties are unable to decide upon the arbitrator within ten (10) days after a notice from one party to the other that a dispute exists under this Lease, the AAA shall select the arbitrator. The decision of the arbitrator shall be binding. All costs of arbitration shall be borne by the party the arbitrator determines to be the non-prevailing party. Such costs shall include the costs and reasonable attorneys’ fees of the prevailing party.

IN WITNESS WHEREOF, the parties have hereunto set their hands as of the date and year first written above.

GENESIS PARTNERS, LLC — Landlord
By:
	/s/ Steve Daines	2/16/10
	Steve Daines, member — Landlord	date
	/s/ Clair Daines	2/18/2010
	Clair Daines, member — Landlord	date
	/s/ Greg Gianforte	2/16/10
	Greg Gianforte, member — Landlord	date
Right Now Technologies, Inc. — Tenant
By	/s/ Jeff Davison	2/19/10
	Jeff Davison	date
	Chief Financial Officer

EX-21.1

Exhibit 21.1

Subsidiaries

Name	Jurisdiction of Incorporation
RightNow Technologies Limited	United Kingdom
RightNow Technologies Pty Ltd.	Australia
RightNow Technologies GmbH	Germany
RightNow Technologies K.K.	Japan

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors
RightNow Technologies, Inc:

We consent to the incorporation by reference in the registration statements (No. 333-157847, 333-149776, 333-141340, 333-138543, 333-124329, 333-118515) on Form S-8 of RightNow Technologies, Inc. of our reports dated March 9, 2010, with respect to the consolidated balance sheets of RightNow Technologies, Inc. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2009, and the effectiveness of internal control over financial reporting as of December 31, 2009, which reports appear in the December 31, 2009 annual report on Form 10-K of RightNow Technologies, Inc.

/s/ KPMG LLP  

Portland, Oregon 
March 9, 2010

EX-31.1

Exhibit 31.1

Certification of the Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a),
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Greg R. Gianforte, certify that:

1. I have reviewed this report on Form 10-K of RightNow Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 9, 2010

/s/  Greg R. Gianforte

Greg R. Gianforte

Chairman, Chief Executive Officer and President

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification of the Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a),
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Jeffrey C. Davison, certify that:

1. I have reviewed this report on Form 10-K of RightNow Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 9, 2010

/s/  Jeffrey C. Davison

Jeffrey C. Davison

Chief Financial Officer, Vice President and Treasurer

(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to U.S.C.
Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

The following certifications accompany this report and are being furnished pursuant to Item 601(b)(32) of Regulation S-K promulgated under the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. These certifications shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed “filed” by the Registrant for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, or incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates them by reference into such a filing.

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Based on my knowledge, I, Greg R. Gianforte, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of RightNow Technologies, Inc. on Form 10-K for the period ended December 31, 2009, as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Form 10-K fairly presents, in all material respects, the financial condition and results of operations of RightNow Technologies, Inc.

Date: March 9, 2010

/s/  Greg R. Gianforte

Greg R. Gianforte

Chairman, Chief Executive Officer and President

Based on my knowledge, I, Jeff Davison, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of RightNow Technologies, Inc. on Form 10-K for the period ended December 31, 2009, as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Form 10-K fairly presents, in all material respects, the financial condition and results of operations of RightNow Technologies, Inc.

Date: March 9, 2010

/s/  Jeffrey C. Davison

Jeffrey C. Davison

Chief Financial Officer, Vice President and Treasurer

A signed original of these written statements required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of these written statements required by Section 906, has been provided to RightNow Technologies, Inc. and will be retained by RightNow Technologies, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.