Exhibit 10.3
ENTERASYS NETWORKS, INC.
2005 Change-in-Control Severance Benefit
Plan for Key Employees
(Amended and Restated November 11, 2005)
     The 2005 Change-in-Control Severance Benefit Plan set forth herein (the
“Plan”), together with other plans and programs of Enterasys Networks, Inc.
(“the Company”), is intended to assure that the Company and its direct and
indirect subsidiaries (together with the Company, the “Employer”) will have the
benefit of continuity of key personnel in the event of any actual or threatened
change in control.
     1. Eligibility. The Board of Directors of the Company (the “Board”) or its
designee shall from time to time designate participants in the Plan
(“Participants”) from among the Employer’s key employees. An employee once
designated a Participant shall continue to be a Participant (subject to
satisfaction of the requirements set forth in Section 2 below) until the earlier
of (a) the date (not later than the 365th day preceding a “Change in Control,”
as hereinafter defined) on which the Board determines that he or she is no
longer eligible to participate in the Plan (as evidenced by written notice
thereof) or (b) the date he or she ceases to be employed by the Employer;
provided, that a Participant who ceases to be employed by the Employer under
circumstances that would give rise to benefits under the Plan shall continue to
be treated as a Participant with respect to such benefits until they have been
paid or provided in full.
     2. Agreement of Participants. As a precondition to participation in the
Plan, each individual who is designated a Participant must enter into a written
agreement (each, a “Plan Agreement”) in accordance with procedures prescribed by
and in a form acceptable to the Board. Each Plan Agreement shall contain:
     (a) the Participant’s binding commitment to the effect that once any Person
other than the Company, a direct or indirect subsidiary of the Company, or an
employee benefit plan of the Company or any such subsidiary begins a tender or
exchange offer or a solicitation of proxies from the Company’s security holders
or takes other actions to effect a “Change in Control,” as hereinafter defined,
the Participant will not voluntarily terminate his or her employment with the
Employer until such Person has abandoned or terminated such efforts to effect a
Change in Control or until a Change in Control has occurred (for purposes of the
Plan, a “Person” means any individual, entity or other person, including a group
within the meaning of Sections 13(d) or 14(d)(2) of the Securities Exchange Act
of 1934 (“Exchange Act”));
     (b) the Participant’s agreement that if he or she voluntarily terminates
his or her employment prior to the Change in Control then he/she will not be
entitled to any payments or benefits under this Plan or the Plan Agreement; and
     (c) such other terms, if any, as the Board may specify, which may (if the
Board so provides) deviate from the terms generally set forth in the Plan.

 

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As applied to any Participant, the term “Plan” means the terms and provisions of
the Plan set forth herein as modified by the terms and provisions of the
Participant’s Plan Agreement. A Participant who signed a Plan Agreement prior to
this amendment and restatement of the 2005 Enterasys Networks, Inc. Change in
Control Severance Benefit Plan for Key Employees shall not be required to sign a
new Plan Agreement so long as his/her participation has continued without
interruption.
     3. Change in Control. For purposes of the Plan, a “Change in Control” shall
be deemed to have occurred upon the occurrence of any of the events described in
subsections (a), (b), (c) or (d) below:
     (a) Any Person acquires beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (i) the
then outstanding shares of common stock of the Company (the “Outstanding Company
Common Stock”) or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided, that for
purposes of this subsection (a) the following acquisitions shall not constitute
a Change in Control: (A) any acquisition directly from the Company, (B) any
acquisition by the Company, (C) any acquisition by an employee benefit plan (or
related trust) sponsored or maintained by the Employer, or (D) any Business
Combination (but except as provided in subsection (c) of this Section 3 a
Business Combination may nevertheless constitute a Change in Control under
subsection (c)); and provided further, that an acquisition by a Person of 30% or
more but less than 50% of the Outstanding Company Common Stock or of the
combined voting power of the Outstanding Company Voting Securities shall not
constitute a Change in Control under this subsection (a) if within 15 days of
the Board’s being advised that such ownership level has been reached, a majority
of the “Incumbent Directors” (as hereinafter defined) then in office adopt a
resolution approving the acquisition of that level of securities ownership by
such Person; or
     (b) Individuals who, as of December 31, 2004, constituted the Board (the
“Incumbent Directors”) cease for any reason to constitute at least a majority of
the Board; provided, that any individual who becomes a member of the Board
subsequent to December 31, 2004 and whose election or nomination for election
was approved by a vote of at least two-thirds of the Incumbent Directors shall
be treated as an Incumbent Director unless he or she assumed office as a result
of an actual or threatened election contest with respect to the election or
removal of directors; or
     (c) There is consummated a reorganization, merger or consolidation
involving the Company, or a sale or other disposition of all or substantially
all of the assets of the Company (a “Business Combination”), in each case
unless, following such Business Combination, (i) the Persons who were the
beneficial owners, respectively, of the Outstanding Company Common Stock and of
the combined voting power of the Outstanding Company Voting Securities
immediately prior to the Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the

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case may be, of the entity resulting from such Business Combination in
substantially the same proportions as their ownership immediately prior to such
Business Combination of the Outstanding Company Common Stock and of the combined
voting power of the Outstanding Company Voting Securities, as the case may be,
(ii) no Person (excluding any entity resulting from such Business Combination or
any employee benefit plan (or related trust) of the Employer or of such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 30% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors, except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the Board
resulting from such Business Combination were Incumbent Directors at the time of
the execution of the initial agreement, or of the action of the Board, providing
for such Business Combination; or
     (d) The stockholders of the Company approve a complete liquidation or
dissolution of the Company;
provided, that if any payment or benefit payable hereunder upon or following a
Change in Control (as defined herein) would be required to comply with the
limitations of Section 409A(a)(2)(A)(v) of the Internal Revenue Code (the
“Code”) and the guidance thereunder in order to avoid an additional tax under
Section 409A of the Code, such payment or benefit shall be made only if such
Change in Control constitutes a change in ownership or control of the Company,
or a change in ownership of the Company’s assets, described in IRS Notice 2005-1
or any successor guidance.
4. Change in Control and Severance Benefits.
     (a)  Change in Control Benefits. Upon a Change in Control, (1) the Company
shall pay to the Participant in cash (i) in the case of each Participant who
does not receive sales commission-based variable compensation, as soon as
practicable after the Change in Control an amount equal to one half (1/2) of the
Participant’s target incentive bonus, if any, immediately before the Change in
Control, multiplied times a fraction, the numerator of which is the number of
days elapsed between the beginning of such year and the date of the Change in
Control and the denominator of which is 365, and then reduced by the amount of
any bonus paid or payable (provided that such amount shall be paid) pursuant to
the Enterasys Performance Incentive Plan (or any similar or successor plan) in
connection with or as a result of the Change in Control, and (ii) in the case of
each Participant who receives sales commission-based variable compensation, on
the earlier of (x) the date that annual bonus payouts are made pursuant to the
Enterasys Performance Incentive Plan and (y) the date of a Qualifying
Termination (as defined below) of Participant’s employment, an amount equal to
the Participant’s annual variable sales compensation target multiplied times a
fraction, the numerator of which is the number of days elapsed between the
beginning of such year and the date of the Change in Control, and the
denominator of which is 365, which amount shall be reduced by the amount of such
variable sales compensation actually earned by such Participant for the portion
of the year prior to the Change in Control; (2) each Company stock option or

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other stock-based award (other than an award under the Company’s Employee Stock
Purchase Program) (a “Stock-Based Award”) held by the Participant immediately
prior to the Change in Control (a “Change in Control Affected Award”), shall be
vested (and, in the case of a Change in Control Affected Award requiring
exercise, shall be exercisable) for the “applicable number of shares” (as
hereinafter defined) not later than immediately prior to the Change in Control,
and (3) if the Change in Control Affected Award is assumed (or a substitute
award is granted) by the acquiror or survivor or an affiliate of the acquiror or
survivor, such assumed or substituted award shall
     (A) continue to be vested (and where relevant exercisable from and after
the Change in Control to the extent provided for under clause (ii) above; and
     (B) as to any portion of such award that was not vested (and where relevant
exercisable) and that did not become vested (and, where relevant, exercisable)
pursuant to clause (ii) above, continue to vest (and, where relevant, become
exercisable) from and after the Change in Control on the same basis as if the
vesting/exercisability schedule that would have applied without regard to this
Section 4(a)(iii)(B) had been accelerated by twelve (12) months.
     For purposes of this Section 4(a) the term “applicable number of shares”
means that number of shares for which the Stock-Based Award would have been
vested (and, where relevant, exercisable) by the end of the twelve (12)-month
period following the Change in Control had the Participant holding the Award
immediately prior to the Change in Control continued in service for such twelve
(12)-month period. Solely for purposes of illustration, and not by way of
limitation, Appendix I to the Plan provides an example of how the accelerated
vesting and exercisability provisions of this Section 4 would operate under a
Change in Control Affected Award. For the avoidance of doubt, in no event shall
an assumed or substituted award become vested for more than the total number of
shares of Stock subject thereto.
For any Change in Control Affected Award, except as provided in subsection 4(c)
below, the Participant shall not be entitled to any additional acceleration of
vesting provided for under the equity incentive plan pursuant to which such
Change in Control Affected Award was granted.
     (b) Severance Benefits. If, during the period of twelve (12) months
following a Change in Control, either the employment of a Participant is
terminated by the Employer for any reason other than for “Cause” (as defined in
Section 5 below), or the Participant terminates his or her employment with the
Employer for “Good Reason” (as defined in Section 6 below) (in either case, a
“Qualifying Termination”), then each Participant shall also receive the
following payments and benefits:
     (1) The Company shall pay to the Participant in cash, on the date of
termination, the sum of (i) all salary and commissions earned by the Participant
as of the date of termination but not yet paid, (ii) the Participant’s accrued
vacation earned through the date of termination, (iii) in the case of
Participants who do not receive sales commission-based variable compensation,
the sum of

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(x) subject to Section 4(d) below, an amount equal to the Participant’s bonus
for the year ended immediately prior to the year of termination, to the extent
such bonus has not already been paid, and (y) an amount equal to the higher of
(I) the Participant’s target incentive bonus, if any, immediately before the
Change in Control, and (II) the Participant’s target bonus, if any, at the date
termination occurs, multiplied times a fraction, the numerator of which is the
number of days elapsed between the beginning of such year and the date of
termination, reduced by the aggregate bonus amounts actually paid in connection
with or as a result of the Change in Control pursuant to section 4(a) of this
agreement or any incentive bonus plan, and the denominator of which is 365, and
(iv) in the case of Participants who receive sales commission-based variable
compensation, an amount equal to the Participant’s annual variable sales
compensation target multiplied times a fraction, the numerator of which is the
number of days elapsed between the beginning of such year and the date of
termination, and the denominator of which is 365. In addition, the Company shall
pay to the Participant in cash within five (5) business days of the date of
termination, (i) reimbursement for any unpaid, valid business expenses that were
approved in accordance with Company policy and (ii) reimbursement, without
interest, of any payroll deductions not yet applied to the purchase of stock
under the Company’s employee stock purchase plan pursuant to the terms of such
plan. Any unpaid valid business expenses submitted for reimbursement on or
within sixty (60) days following the date of termination shall be paid to the
Participant in cash within five (5) business days following such submission.
     (2) The Company shall also pay to the Participant in cash, within ten (10)
business days of the date of termination, an amount equal to three quarters
(3/4) of the Participant’s Base Salary if the Participant was a Vice
President-level (or above) manager of the Company or one half (1/2) the
Participant’s Base Salary if the Participant was below the Vice President-level
manager of the Company. “Base Salary” for the purposes of this subsection means
the Participant’s annual rate of base salary as determined immediately prior to
the date of termination (or, if higher, his or her annual rate of base salary as
determined immediately prior to the Change in Control).
     (3) The Participant, together with his or her dependents, will continue for
the duration of the “coverage continuation period” (as hereinafter defined) to
be eligible to participate at the Employer’s expense (subject to any applicable
waiting periods or similar requirements to the extent such requirements had not
been satisfied prior to the date of termination, and subject to the payment by
the Participant or his or her dependents of premiums, co-pays or similar amounts
at rates not greater than those applicable immediately prior to the Change in
Control to active employees and their dependents) in all medical, dental and
life insurance plans or programs maintained or sponsored by the Employer
immediately prior to the Change in Control; provided, that if such continued
participation is impracticable, the Company may provide the Participant with the
premium cost of such coverage paid promptly in cash. For purposes of this
subsection, the “coverage continuation period” means the nine (9) month period

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following the termination of employment if the Participant was a Vice
President-level (or above) manager of the Company or the six (6) month period
following the termination of employment if the Participant was below the Vice
President-level manager of the Company; provided, that if the plan or program in
question, or applicable law, provides for a longer period of coverage following
termination of employment, then the Participant shall receive this additional
period of coverage pursuant to the terms and conditions as set forth in the plan
or program or as prescribed by applicable law. Notwithstanding the foregoing
provisions of this subsection, if the Participant becomes reemployed by another
employer and is eligible (together with his or her dependents) for medical,
dental or life insurance coverage that is substantially equivalent (as to extent
of coverage and as to employee cost) to the coverage of the same type that he or
she (and his or her dependents) were entitled to receive under this subsection,
the Employer’s obligation to the Participant and his or her dependents under
this subsection shall cease with respect to that type of coverage.
     (4) Each Stock-Based Award held by the Participant immediately prior to a
Qualifying Termination (an “Affected Award”) shall become fully vested and
exercisable immediately prior to the Qualifying Termination. In the event a
Participant holds an Affected Award requiring exercise, the Company shall give
the Participant adequate notice and opportunity to exercise the Affected Award.
     (c) Notwithstanding the provisions of this Section 4 to the contrary, if a
Stock-Based Award held by a Participant is not assumed or replaced, or agreed to
be assumed or replaced, upon a Change in Control, each Stock-Based Award held by
such Participant, whether or not he or she has experienced a Qualifying
Termination, shall become fully vested and exercisable, effective immediately
prior to the Change in Control.
     (d) The prior-year bonus, if any, payable pursuant to
Section 4(b)(1)(iii)(x) above (the “prior year bonus”) (A) shall be paid in
accordance with the bonus determinations made with respect to such prior year,
if such determinations had been made by the Incumbent Directors (but not yet
paid)prior to the date of termination, and otherwise (B) shall be determined and
paid assuming that the Participant has satisfied all individual performance
requirements necessary for full payment of the bonus (consistent with levels
funded or deemed funded under the plan) and in accordance with the preliminary
funding and allocation determinations for any period to the extent previously
determined by the Incumbent Board, and, to the extent not so determined,
assuming a level of Company performance consistent with the Company’s annual
operating plan with respect to any corporate measures of performance. In the
circumstances described in clause (B) of the preceding sentence, if it is later
determined that corporate performance was greater than the levels set forth in
the Company’s annual operating plan, the Participant’s prior-year bonus shall be
correspondingly adjusted.
     5. Cause. “Cause” means, for purposes of this Plan, only: (a) the
Participant’s conviction of, or a plea of nolo contendere with respect to, a
felony; (b) the Participant’s willful

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failure (other than by reason of disability) to perform, or gross negligence in
the performance of, his or her duties to the Employer which remains uncured
fifteen (15) business days after receipt of written notice from the Employer
specifying in reasonable detail the nature of such willful failure or gross
negligence and the manner in which it may be cured; or (c) the Participant’s
commission of any willful act (or acts) of fraud, embezzlement or other
dishonesty that is materially harmful to the Employer.
     6. Voluntary Termination for Good Reason. For purposes of this Plan, a
Participant shall be deemed to have voluntarily terminated his or her employment
for Good Reason if he or she leaves the employ of the Employer for any of the
following reasons:
     (a) Any action by the Company which results in a material adverse change in
Participant’s position, title, reporting relationship, authority, duties or
responsibilities as in effect immediately prior to the Change in Control,
excluding for this purpose any action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof by the Parent;
provided, however, that a sale or transfer of all or substantially all of the
business of the Company or any of its subsidiaries or other reduction of all or
substantially all of its business or that of its subsidiaries, or the fact that
the Company has become a subsidiary of another company or that the securities of
the Company are no longer publicly traded, shall not constitute, in and of
itself, “Good Reason” hereunder; or
     (b) Any reduction in (i) the Participant’s rate of annual base salary for
any fiscal year to less than the greater of 100% of the rate of annual base
salary payable to him or her in the completed fiscal year immediately preceding
the Change in Control or 100% of the rate at which annual base salary was
payable to the Participant immediately prior to such reduction, (ii) any adverse
change in the Participant’s annual bonus opportunity (other than immaterial
changes), including the reasonableness of the ability of the Participant to
achieve the targets in relation to the Company’s then effective operating plan,
or (iii) if the Participant is eligible to earn sales commission-based variable
compensation, any adverse change (other than immaterial changes) in the method
of determining or otherwise in the opportunity to earn such compensation from
the method and opportunity in effect immediately prior to the Change in Control
a reduction of annual base salary or annual bonus opportunity or the method or
opportunity for earning sales commission-based variable compensation which is
not taken in bad faith and which is remedied by the Employer within fifteen
(15) business days after receipt of notice thereof given by the Participant; or
     (c) Any failure of the Company to continue or cause to be continued in
effect any retirement, life, medical, dental, disability, accidental death or
travel insurance plan in which the Participant was participating immediately
prior to the Change in Control unless the Company provides the Participant with
a plan or plans that provide at least substantially equivalent benefits (as to
extent of coverage and as to employee cost), or the taking of any action by the
Employer that would adversely effect the Participant’s participation in or
materially reduce the Participant’s benefits under any such plan or deprive the
Participant of any material fringe benefit or perquisite enjoyed by the
Participant immediately prior to the Change in Control, other than an isolated,

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insubstantial and inadvertent failure not in bad faith and which is remedied by
the Employer promptly, but in any event within fifteen (15) business days after
receipt of notice thereof given by the Participant; or
     (d) The Company requires the Participant to be based at any office or
location that is more than 35 miles distant from the Participant’s base office
or work location immediately prior to the Change in Control; or
     (e) The Company fails to comply with and satisfy Section 8 of the Plan.
     7. Certain Tax-Related Payments. All tax determinations under this
Section 7 shall be made at the Company’s expense by a nationally recognized
accounting firm selected by the Company to whom the Participant has no
reasonable objection (the “Outside Firm”). Any good faith determinations of the
Outside Firm made hereunder shall be final, binding and conclusive upon the
Company and the Participant.
     If the Payment (as defined in Section 7(a)) would be subject to the 4999 of
the Internal Revenue Code (the “Section 4999 tax”), then the Participant shall
receive either (i) the full Payment or (ii) such lesser amount of the Payment
which would result in no portion of such Payment being subject to the
Section 4999 tax, whichever yields the greatest net amount to the Participant on
an after-tax basis (applying the then highest aggregate marginal tax rates). If
a reduction of the Payment is required pursuant to subpart (ii), then the
Participant will be permitted to request which component items of the Payment
will be reduced provided, however, that the Participant must provide to the
Company in writing his/her request within the reasonable time period established
by the Company and the Company must in its discretion consent to such request
(or else the Company shall make its own determinations with respect to which
Payment items are to be reduced). The Company may elect to contest at its
expense any initial IRS determination with respect to a Participant. The
Participant shall cooperate reasonably with the Company in any effort by the
Company to contest an IRS determination under this paragraph, including by the
making of such filings and appeals as the Company may reasonably require, but
nothing herein shall be construed as requiring the Participant to bear any cost
or expense of such a contest or in connection therewith to compromise any tax
item (including without limitation any deduction or credit) other than the
Section 4999 tax and related interest and penalties, if any, that are the
subject of the contested IRS determination. In the event of any underpayment or
overpayment under this Plan, as determined by the Outside Firm, the amount of
such underpayment or overpayment shall be promptly paid to the Participant or
refunded to the Company, as the case may be, with interest at 120% of the
applicable Federal rate provided for in Section 7872(f)(2) of the Internal
Revenue Code.
     8. Binding Effect on Successor Entity. If the Company is merged or
consolidated into or with any other entity (whether or not the Company is the
surviving entity), or if substantially all of the assets of the Company are
transferred to another entity, the provisions of the Plan will be binding upon
and inure to the benefit of the entity resulting from such merger or
consolidation or the acquirer of such assets (the “Successor Entity”). The
Company will require any such Successor Entity to assume expressly and agree to
perform the provisions of the Plan (including any Plan Agreements) in the same
manner and to the same extent that the Company would have been required to
perform if no such transaction had taken place.

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     9. Payment Obligations Absolute. Upon a Change in Control and/or Qualifying
Termination described in Section 4, the Company’s obligations to pay the
benefits described in Sections 4 and 7 shall be absolute and unconditional and
shall not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Company or
the Employer may have against any Participant; provided, however, that the
Company may delay the payment of any amounts due hereunder for six months
following termination of a Participant’s employment with the Company if
necessary to comply with the “specified employee” rules pursuant to Section 409A
of the Code. In no event shall a Participant be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to a Participant under any of the provisions of the Plan and, except as
otherwise provided in Section 4(b)(3), in no event shall the amount of any
payment hereunder be reduced by any compensation earned by a Participant as a
result of employment by another employer.
     10. Limited Effect. Nothing herein or in any Plan Agreement shall be
construed as giving any Participant a right of continued employment or as
limiting the Employer’s right to terminate a Participant’s employment, subject,
in the case of any Qualifying Termination described in Section 4, to the payment
of the benefits described in Sections 4 and 7.
     11. Amendment and Termination. The Board may amend the Plan at any time and
from time to time, and may terminate the Plan at any time; provided, that no
action hereafter purporting to amend or terminate the Plan that is approved by
the Board within the twelve (12) month period immediately preceding a Change in
Control or at the time of or at any time following a Change in Control and that,
if effective, would adversely affect the rights of any Participant accruing
hereunder as a result of that Change in Control, shall affect the rights of such
Participant without his or her express written consent.
     12. No Duplication of Benefits. The benefits and rights to benefits under
this Plan are in lieu of any and all benefits that may become due a Participant
under any change in control plan or program of the Company (any such plan or
program, a “Company CIC program”), and each Participant, for himself or herself
and his or her heirs, beneficiaries and assigns, by signing a Plan Agreement
waives and relinquishes any right that he or she may have to any such benefits
under any Company CIC program.
     13. Withholding. All payments and benefits hereunder shall be subject to
reduction for applicable tax withholdings.
     14. Indemnification. The Employer agrees to pay all costs and expenses
(including without limitation reasonable fees and expenses of counsel) incurred
by any Participant in connection with efforts to enforce his or her rights under
this Plan and will indemnify and hold harmless any Participant from and against
any damages, liabilities and expenses (including without limitation reasonable
fees and expenses of counsel) incurred by the Participant in connection with any
litigation or threatened litigation, including any regulatory proceedings,
arising out of the making, performance or enforcement of this Plan. Employer
shall pay all such costs and expenses promptly after receipt by the Employer of
an invoice submitted by the Participant.

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     15. Source of Payment. Nothing herein shall be construed as establishing a
trust or as requiring the Company to set aside funds to meet its obligations
hereunder. Notwithstanding the foregoing, if the Board in its discretion so
determines the Company may establish a so-called “rabbi trust” or similar
arrangement to assist it in meeting any such obligations that it may have.
     16. Governing Law. The Plan and agreements made with Participants hereunder
shall be governed by the laws of The Commonwealth of Massachusetts without
regard to its conflicts of laws principles.

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Appendix I
Example of the Application of Section 4
The following example illustrates the application of the accelerated vesting and
exercisability provisions of Section 4 of the Plan as they would apply except as
otherwise determined by the Administrator with respect to an Award, based on the
assumed facts set forth below.
Assume that a Participant is granted a Stock Option for 480 shares of stock that
is scheduled to vest and become exercisable as to 25% of the shares on the first
anniversary of the date of grant and as to the remaining 75% of the shares on a
monthly basis over the three-year period following the first anniversary of the
date of grant, subject to the requirement that the Participant continue to be
employed. Assume further that six months after the date of grant, a Change in
Control of the Company occurs, and the Participant’s Stock Option is assumed by
the acquiror on the basis of a one share for one share conversion ratio. Under
Section 4 of the Plan, the Stock Option would become vested and exercisable
immediately prior to the Change in Control for 180 shares (the “applicable
number of shares”) – i.e., the number of shares for which the Stock Option would
have become vested and exercisable assuming twelve (12) months of additional
service: 120 shares after an assumed six months of additional service, that is,
on the first anniversary of the date of grant, and 10 shares per month for an
additional assumed six months of service following the first anniversary of the
date of grant. After the Change in Control, assuming the Participant continued
to be employed, the Stock Option would become vested and exercisable each month
for an additional ten (10) shares, with full vesting and exercisability
occurring thirty (30) months following the Change in Control.

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