**Exhibit 10.2**

 

**AMENDED AND RESTATED EMPLOYMENT**

**AGREEMENT**

 

AGREEMENT,dated as of the **1st**day of **November**, 2003 (this “Agreement”), by and between BEA Systems, Inc., a Delaware corporation (the “Company”), and William Klein (the “Executive”). 

 

WHEREAS, the Board of Directors of the Company (the “Board”), hasdetermined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change in Control (as definedherein). The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change in Control and to encourage the Executive’s fullattention and dedication to the current Company and in the event of any threatened or pending Change in Control, and to provide the Executive with compensation and benefits arrangements upon a Change in Control that ensure that the compensation andbenefits expectations of the Executive will be satisfied and that are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. 

 

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 

 

**Section 1.****Certain Definitions****.** (a)“Effective Date” means the first date during the Change in Control Period (as defined herein) on which a Change in Control occurs. Notwithstanding anything in this Agreement to the contrary, if a Change in Control occurs and if theExecutive’s employment with the Company is terminated prior to the date on which the Change in Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third partythat has taken steps reasonably calculated to effect a Change in Control or (2) otherwise arose in connection with or anticipation of a Change in Control, then “Effective Date” means the date immediately prior to the date of suchtermination of employment. 

 

(b) “Change in ControlPeriod” means the period commencing on the date hereof and ending on the third anniversary of the date hereof; *provided*, *however*, that, commencing on the date one year after the date hereof, and on each annual anniversary of suchdate (such date and each annual anniversary thereof, the “Renewal Date”), unless previously terminated, the Change in Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless, at least 60days prior to the Renewal Date, the Company shall give notice to the Executive that the Change in Control Period shall not be so extended. 

 

(c) “Affiliated Company” means any company controlled by, controlling or under common control with the Company. 

 

(d) “Assume” means that pursuant to a Change in Control either (i)the Compensatory Award is expressly affirmed by the Company or (ii) the contractual obligations represented by the Compensatory Award are expressly assumed (and not simply by operation of law) by the successor entity or its parent in connection withthe Change in Control with appropriate adjustments to the number and type of securities of the successor entity or its parent subject to the Compensatory Award and the exercise or purchase price thereof (if any) which preserves the compensationelement of the Compensatory Award existing at the time of the Change in Control as determined in accordance with the instruments evidencing the agreement to assume the Compensatory Award. 

(e) “Change in Control” means the first to occur of any of the following: 

 

(1) The acquisition by any individual, entity or group (within the meaningof Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more ofeither (A) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in theelection of directors (the “Outstanding Company Voting Securities”); *provided*, *however*, that, for purposes of this Section 1(e), the following acquisitions shall not constitute a Change in Control: (i) any acquisitiondirectly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company or (iv) any acquisition by any corporationpursuant to a transaction that complies with Sections 1(e)(3)(A), 1(e)(3)(B) and 1(e)(3)(C). 

 

(2) Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; *provided*, *however*, that anyindividual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall beconsidered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to theelection or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board. 

 

(3) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any ofits subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), ineach case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediatelyprior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in theelection of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of theCompany’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding CompanyVoting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination)beneficially owns, directly or indirectly, 20% 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 securitiesof such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members ofthe Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or 

 

2 

(4) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

 

**Section 2.****Employment Period****.******The Company hereby agrees to continue the Executive in its employ, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the first anniversary of the Effective Date (the“Employment Period”). The Employment Period shall terminate upon the Executive’s termination of employment for any reason. 

 

**Section 3.****Terms of Employment****.** (a) **Position and Duties.** (1) During the Employment Period, (A) theExecutive’s position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assignedat any time during the 120-day period immediately preceding the Effective Date and (B) the Executive’s services shall be performed at the office where the Executive was employed immediately preceding the Effective Date or at any other locationless than 35 miles from such office. 

 

(2) During the EmploymentPeriod, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extentnecessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period, it shall not be aviolation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so longas such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that, to the extent that any suchactivities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemedto interfere with the performance of the Executive’s responsibilities to the Company. 

 

(b) **Compensation.** (1) **Base Salary.**During the Employment Period, the Executive shall receive an annual base salary (the “Annual Base Salary”) at an annual rate at least equal to12 times the highest monthly base salary paid or payable, including any base salary that has been earned but deferred, to the Executive by the Company and the Affiliated Companies in respect of the 12-month period immediately preceding the month inwhich the Effective Date occurs. The Annual Base Salary shall be paid at such intervals as the Company pays executive salaries generally. During the Employment Period, the Annual Base Salary shall be reviewed at least annually, beginning no morethan 12 months after the last salary increase awarded to the Executive prior to the Effective Date. Any increase in the Annual Base Salary during the Employment Period shall not serve to limit or reduce any other obligation to the Executive underthis Agreement. The Annual Base Salary shall not be reduced after any such increase and the term “Annual Base Salary” shall refer to the Annual Base Salary as so increased. 

 

3 

(2) **Annual Bonus****.** In addition to the Annual Base Salary, the Executive shall beawarded, for each fiscal year ending during the Employment Period, an annual bonus (the “Annual Bonus”) in cash at least equal to the Executive’s highest bonus earned under the Company’s Executive Bonus Plan, or any comparablebonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (or for such lesser number of full fiscal years prior to the Effective Date for which the Executive was eligible to earn such a bonus,and annualized in the case of any bonus earned for a partial fiscal year) (the “Recent Annual Bonus”). (If the Executive has not been eligible to earn such a bonus for any period prior to the Effective Date, the “Recent AnnualBonus” shall mean the Executive’s target annual bonus for the year in which the Effective Date occurs.) Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year forwhich the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. 

 

(3) **Incentive, Savings and Retirement Plans.**During the Employment Period, the Executive shall be entitled to participate in all cashincentive, equity incentive, savings and retirement plans, practices, policies, and programs applicable generally to other peer executives of the Company and the Affiliated Companies, but in no event shall such plans, practices, policies andprograms provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefitopportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and the Affiliated Companies for the Executive under such plans, practices, policies and programs as in effect at any time duringthe 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the Affiliated Companies. In the eventthat, in connection with a Change of Control, the party effectuating the Change of Control does not agree to Assume any stock option, restricted stock award, restricted stock unit award or other equity-based award or performance award held by theExecutive or any transferee of the Executive (each, a “Compensatory Award”) that is unvested and outstanding as of immediately prior to the Change of Control, such Compensatory Award shall as of immediately prior to the Change of Controlvest in full and be immediately exercisable, provided, that if the Executive’s employment with the Company is terminated prior to the date on which the Change in Control occurs, and if it is reasonably demonstrated by the Executive thatsuch termination of employment (1) was at the request of a third party that has taken steps reasonably calculated to effect a Change in Control or (2) otherwise arose in connection with or anticipation of a Change in Control, then each CompensatoryAward that is unvested and outstanding as of immediately prior to the Date of Termination shall not be forfeited, shall remain outstanding following the Date of Termination, and shall not vest unless and until a Change of Control occurs within oneyear following the Date of Termination, in which case, immediately prior to a Change of Control, such Compensatory Awards shall vest in full and become immediately exercisable. In the event that a Change in Control does not occur within one yearfollowing the Date of Termination as described in the proviso of the preceding sentence, each unvested Compensatory Award shall be immediately forfeited by the Executive. 

 

4 

(4) **Welfare Benefit Plans****.**During the Employment Period, the Executive and/or theExecutive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and the Affiliated Companies (including, withoutlimitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and the AffiliatedCompanies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits that are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for theExecutive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the AffiliatedCompanies. 

 

(5) **Expenses****.**During theEmployment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and the AffiliatedCompanies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of theCompany and the Affiliated Companies. 

 

(6) **FringeBenefits****.**During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and paymentof related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and the Affiliated Companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Dateor, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies. 

 

(7) **Office and Support Staff****.**During the Employment Period, the Executive shall be entitled to anoffice or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and the AffiliatedCompanies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and the AffiliatedCompanies. 

 

5 

(8) **Vacation****.**During the Employment Period, the Executive shall be entitled to paidvacation in accordance with the most favorable plans, policies, programs and practices of the Company and the Affiliated Companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, ifmore favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies. 

 

**Section 4.****Termination of Employment****.** (a) **Death or Disability.** TheExecutive’s employment shall terminate automatically if the Executive dies during the Employment Period. If the Company determines in good faith that the Disability (as defined herein) of the Executive has occurred during the Employment Period(pursuant to the definition of “Disability”), it may give to the Executive written notice in accordance with Section 11(b) of its intention to terminate the Executive’s employment. In such event, the Executive’s employment withthe Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), *provided*that, within the 30 days after such receipt, the Executive shall not have returned tofull-time performance of the Executive’s duties. “Disability” means the absence of the Executive from the Executive’s duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due tomental or physical illness that is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative. 

 

(b) **Cause****.**The Company may terminate theExecutive’s employment during the Employment Period for Cause. “Cause” means: 

 

(1) the willful and continued failure of the Executive to perform substantially the Executive’s duties (as contemplated by Section3(a)(1)(A)) with the Company or any Affiliated Company (other than any such failure resulting from incapacity due to physical or mental illness or following the Executive’s delivery of a Notice of Termination for Good Reason), after a writtendemand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company that specifically identifies the manner in which the Board or the Chief Executive Officer of the Company believes that theExecutive has not substantially performed the Executive’s duties, or 

 

(2) the willful engaging by the Executive in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company. 

 

For purposes of this Section 4(b), no act, or failure to act, on the part of the Executive shall be considered “willful” unless itis done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to aresolution duly adopted by the Board or upon the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omittedto be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of aresolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (excluding the Executive, if the Executive is a member of the Board) at a meeting of the Board called and held for such purpose(after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty ofthe conduct described in Section 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail. 

 

6 

(c) **Good Reason****.**The Executive’s employment may be terminated by the Executivefor Good Reason or by the Executive voluntarily without Good Reason. “Good Reason” means: 

 

(1) the assignment to the Executive of any duties inconsistent in any respect with the Executive’s position (including status,offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a), or any other diminution in such position, authority, duties or responsibilities (whether or not occurring solely as a result of theCompany’s ceasing to be a publicly traded entity), excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by theExecutive; 

 

(2) any failure by the Company tocomply with any of the provisions of Section 3(b), other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive;

 

(3) the Company’s requiring theExecutive (i) to be based at any office or location other than as provided in Section 3(a)(1)(B), (ii) to be based at a location other than the principal executive offices of the Company if the Executive was employed at such location immediatelypreceding the Effective Date, or (iii) to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; 

 

(4) any purported termination by the Company of the Executive’s employment otherwise than as expressly permitted by thisAgreement; or 

 

(5) any failure by the Companyto comply with and satisfy Section 10(c). 

 

For purposes of this Section 4(c),any good faith determination of Good Reason made by the Executive shall be conclusive. The Executive’s mental or physical incapacity following the occurrence of an event described above in clauses (1) through (5) shall not affect theExecutive’s ability to terminate employment for Good Reason. 

 

(d) **Notice of Termination.**Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b).“Notice of Termination” means a written notice that (1) indicates the specific termination provision in this Agreement relied upon, (2) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed toprovide a basis for termination of the Executive’s employment under the provision so indicated, and (3) if the Date of Termination (as defined herein) is other than the date of receipt of such notice, specifies the Date of Termination (whichDate of Termination shall be not more than 30 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Causeshall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s respectiverights hereunder. 

 

7 

(e) **Date of Termination****.**“Date of Termination” means (1) if theExecutive’s employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified in the Notice of Termination, (which date shall not be more than 30days after the giving of such notice), as the case may be, (2) if the Executive’s employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executiveof such termination, and (3) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 

 

**Section 5.****Obligations of the Company uponTermination****. (a) Good Reason; Other Than for Cause, Death or Disability.** If, during the Employment Period, the Company terminates the Executive’s employment other than for Cause or Disability or the Executive terminatesemployment for Good Reason: 

 

(1) the Companyshall pay to the Executive, in a lump sum in cash within 30 days after the Date of Termination, the aggregate of the following amounts: 

 

(A) the sum of (i) the Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid, (ii) theproduct of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof that has been earned but deferred (and annualized for any fiscal year consisting of less than 12 full monthsor during which the Executive was employed for less than 12 full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount, the “Highest Annual Bonus”) and (y) a fraction, the numeratorof which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365, and (iii) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon)and any accrued vacation pay, in each case, to the extent not theretofore paid (the sum of the amounts described in subclauses (i), (ii) and (iii), the “Accrued Obligations”); 

 

(B) the amount equal to the product of (i) two and (ii) the sum of (x) the Executive’s Annual BaseSalary and (y) the Highest Annual Bonus; and 

 

(C) an amount equal to the excess of (i) the actuarial equivalent of the benefit under the Company’s qualified defined benefit retirement plan (the “Retirement Plan”) (utilizing actuarial assumptions no less favorable to theExecutive than those in effect under the Retirement Plan immediately prior to the Effective Date) and any excess or supplemental retirement plan in which the Executive participates (collectively, the “SERP”) that the Executive wouldreceive if the Executive’s employment continued for two years after the Date of Termination, assuming for this purpose that all accrued benefits are fully vested and assuming that the Executive’s compensation in each of the two years isthat required by Sections 3(b)(1) and 3(b)(2), over (ii) the actuarial equivalent of the Executive’s actual benefit (paid or payable), if any, under the Retirement Plan and the SERP as of the Date of Termination; 

 

8 

(2) for two years after the Executive’s Date of Termination, or such longer periodas may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive’s family at least equal to those that would have been provided to them in accordancewith the plans, programs, practices and policies described in Section 3(b)(4) and 3(b)(6) if the Executive’s employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respectto other peer executives of the Company and the Affiliated Companies and their families, *provided*, *however*, that, if the Executive becomes reemployed with another employer and is eligible to receive such benefits under another employerprovided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencementof benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until two years after the Date of Termination and to have retired on the lastday of such period; 

 

(3) the Company shall, atits sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in the Executive’s sole discretion provided, that the cost of such outplacement shall notexceed $50,000; 

 

(4) notwithstanding anyprovision in an award agreement to the contrary, effective as of the Date of Termination, (1) each and every Compensatory Award that is outstanding as of the Date of Termination shall immediately vest in full and become exercisable or payable and bereleased from any repurchase or forfeiture rights, and (2) to the extent applicable, the term during which each and every such Compensatory Award may be exercised by the Executive shall be extended until the date upon which the right to exercise anyCompensatory Award would have expired if the Executive had continued to be employed by the Company for the full term of such Compensatory Award, *provided*, that this Section 5(a)(4) shall not apply to any Compensatory Award outstanding as ofthe Date of Termination under the Company’s 1997 Employee Stock Purchase Plan (or any successor thereto). The applicable award agreements for the Compensatory Awards are hereby amended to the extent necessary to implement this Section 5(a)(4);and 

 

9 

(5) to the extent not theretofore paid or provided, the Company shall timely pay orprovide to the Executive any Other Benefits (as defined in Section 6). 

 

(b) **Death****.** If the Executive’s employment is terminated by reason of the Executive’s death during the Employment Period, the Company shall provide the Executive’s estate or beneficiaries with the AccruedObligations, the benefits provided for under Section 3(a) of the Employment Agreement (as defined in Section 6 hereof) and the timely payment or delivery of the Other Benefits, and shall have no other severance obligations under this Agreement. TheAccrued Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term “Other Benefits”as utilized in this Section 5(b) shall include, without limitation, and the Executive’s estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and the AffiliatedCompanies to the estates and beneficiaries of peer executives of the Company and the Affiliated Companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives andtheir beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive’s estate and/or the Executive’s beneficiaries, as in effect on the date of the Executive’s deathwith respect to other peer executives of the Company and the Affiliated Companies and their beneficiaries. 

 

(c) **Disability****.**If the Executive’s employment is terminated by reason of the Executive’s Disability during the EmploymentPeriod, the Company shall provide the Executive with the Accrued Obligations, the benefits provided for under Section 3(b) of the Employment Agreement (as defined in Section 6 hereof) and the timely payment or delivery of the Other Benefits, andshall have no other severance obligations under this Agreement. The Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term“Other Benefits” as utilized in this Section 5(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generallyprovided by the Company and the Affiliated Companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peerexecutives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive’s family, as in effect at any time thereafter generally with respect toother peer executives of the Company and the Affiliated Companies and their families. 

 

(d) **Cause; Other Than for Good Reason****.**If the Executive’s employment is terminated for Cause during the Employment Period, the Company shall provide to the Executive (1) the Executive’sAnnual Base Salary through the Date of Termination, (2) the amount of any compensation previously deferred by the Executive, and (3) the Other Benefits, in each case, to the extent theretofore unpaid, and shall have no other severance obligationsunder this Agreement. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, the Company shall provide to the Executive the Accrued Obligations and the timely payment or delivery ofthe Other Benefits, and shall have no other severance obligations under this Agreement. In such case, all the Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. 

 

10 

**Section 6.****Non-exclusivity of Rights.** Nothing in this Agreement shall prevent orlimit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or the Affiliated Companies and for which the Executive may qualify, nor, subject to Section 11(f), shall anything hereinlimit or otherwise affect such rights as the Executive may have under any other contract or agreement with the Company or the Affiliated Companies. Amounts that are vested benefits or that the Executive is otherwise entitled to receive under anyplan, policy, practice or program of or any other contract or agreement with the Company or the Affiliated Companies at or subsequent to the Date of Termination (“Other Benefits”) shall be payable in accordance with such plan, policy,practice or program or contract or agreement, except as explicitly modified by this Agreement. Notwithstanding the foregoing, if the Executive becomes eligible to receive payments and benefits pursuant to Section 5(a) of this Agreement, theExecutive shall not be entitled to any severance pay or benefits under any severance plan, program or policy of the Company and the Affiliated Companies unless otherwise specifically provided therein in a specific reference to this Agreement.

 

**Section 7.****Full Settlement****.** TheCompany’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim, right or action that theCompany may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of thisAgreement, and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred (within 10 days following the Company’s receipt of an invoice from the Executive), to the full extentpermitted by law, all legal fees and expenses that the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under,any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at theapplicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the “Code”). In addition, the Company shall indemnify and hold the Executive, harmless on an after-tax basis, for any ExciseTax (as defined in Section 8(f), income tax, and all other applicable taxes (including interest and penalties) imposed as a result of the Company’s payment of legal fees and expenses that the Executive may reasonably incur as a result of anysuch contest. 

 

**Section 8.****Certain AdditionalPayments by the Company****.**

 

(a) Anything in thisAgreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any Payment would be subject to the Excise Tax, then the Executive shall be entitled to receive an additional payment (the“Gross-Up Payment”) in an amount such that, after payment by the Executive of all taxes (and any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penaltiesimposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 8(a),if it shall be determined that the Executive is entitled to the Gross-Up Payment, but that the Parachute Value of all Payments does not exceed 110% of the Safe Harbor Amount, then no Gross-Up Payment shall be made to the Executive and the amountspayable under this Agreement shall be reduced so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made by first reducing the paymentsunder Section 5(a)(i)(B), unless an alternative method of reduction is elected by the Executive, and in any event shall be made in such a manner as to maximize the Value of all Payments actually made to the Executive. For purposes of reducing thePayments to the Safe Harbor Amount, only amounts payable under this Agreement (and no other Payments) shall be reduced. If the reduction of the amount payable under this Agreement would not result in a reduction of the Parachute Value of allPayments to the Safe Harbor Amount, no amounts payable under the Agreement shall be reduced pursuant to this Section 8(a). The Company’s obligation to make Gross-Up Payments under this Section 8 shall not be conditioned upon theExecutive’s termination of employment. 

 

11 

(b) Subject to the provisions of Section 8(c), all determinations required to be made under this Section8, including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Ernst & Young, LLP, or such other nationally recognizedcertified public accounting firm as may be designated by the Executive (the “Accounting Firm”). The Accounting Firm shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receiptof notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to thisSection 8, shall be paid by the Company to the Executive within 5 days of the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of theuncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (the“Underpayment”), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is required to make a payment of any Excise Tax, theAccounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. 

 

(c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful,would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable, but no later than 10 business days after the Executive is informed in writing of such claim. The Executive shall apprise theCompany of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to theCompany (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that the Company desires to contest such claim,the Executive shall: 

 

(1) give the Company anyinformation reasonably requested by the Company relating to such claim, 

 

12 

(2) take such action in connection with contesting such claim as the Company shallreasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, 

 

(3) cooperate with the Company in good faith in ordereffectively to contest such claim, and 

 

(4)permit the Company to participate in any proceedings relating to such claim; 

 

*provided*, *however*, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest, and shall indemnify and hold the Executiveharmless, on an after-tax basis, for any Excise Tax or income tax, and all other applicable taxes, (including interest and penalties) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoingprovisions of this Section 8(c), the Company shall control all proceedings taken in connection with such contest, and, at its sole discretion, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with theapplicable taxing authority in respect of such claim and may, at its sole discretion, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute suchcontest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; *provided*, *however*, that, if the Company directs the Executive to paysuch claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax(including interest or penalties) imposed with respect to such advance or with respect to any imputed income in connection with such advance; and *provided*, *further*, that any extension of the statute of limitations relating to paymentof taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues withrespect to which the Gross-Up Payment would be payable hereunder, and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. 

 

(d) If, after the receipt by the Executive of a Gross-Up Payment or an amountadvanced by the Company pursuant to Section 8(c), the Executive becomes entitled to receive any refund with respect to the Excise Tax to which such Gross-Up Payment relates or with respect to such claim, the Executive shall (subject to theCompany’s complying with the requirements of Section 8(c), if applicable) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by theExecutive of an amount advanced by the Company pursuant to Section 8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intentto contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amountof Gross-Up Payment required to be paid. 

 

13 

(e) Notwithstanding any other provision of this Section 8, the Company may, in its sole discretion,withhold and pay over to the Internal Revenue Service or any other applicable taxing authority, for the benefit of the Executive, all or any portion of any Gross-Up Payment, and the Executive hereby consents to such withholding. 

 

(f) Definitions. The following terms shall have the following meaningsfor purposes of this Section 8. 

 

(i) “Excise Tax”shall mean the excise tax imposed by Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax. 

 

(ii) “Parachute Value” of a Payment shall mean the present value as of the date of the change of control for purposes of Section 280G of theCode of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2), as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.

 

(iii) A “Payment” shall mean any payment benefit ordistribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise. 

 

(iv) The “Safe Harbor Amount” means 2.99 times the Executive’s“base amount,” within the meaning of Section 280G(b)(3) of the Code. 

 

(v) “Value” of a Payment shall mean the economic present value of a Payment as of the date of the change of control for purposes of Section 280G of the Code, as determined by the Accounting Firm using thediscount rate required by Section 280G(d)(4) of the Code. 

 

**Section 9.****Confidential Information****.** The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or theAffiliated Companies, and their respective businesses, which information, knowledge or data shall have been obtained by the Executive during the Executive’s employment by the Company or the Affiliated Companies and which information, knowledgeor data shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive’s employment with the Company, the Executive shall not,without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those persons designated by the Company. Inno event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 

 

**Section 10.****Successors****.** (a) This Agreement ispersonal to the Executive, and, without the prior written consent of the Company, shall not be assignable by the Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable bythe Executive’s legal representatives. 

 

14 

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors andassigns. Except as provided in Section 10(c), without the prior written consent of the Executive this Agreement shall not be assignable by the Company. 

 

(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all ofthe business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. “Company”means the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise. 

 

**Section 11.****Miscellaneous****.** (a) This Agreement shall be governed by and construed in accordancewith the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherthan by a written agreement executed by the parties hereto or their respective successors and legal representatives. 

 

(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered orcertified mail, return receipt requested, postage prepaid, addressed as follows: 

 

if to the Executive: 

 

WilliamKlein 

c/o BEA Systems Inc. 

2315 North First Street 

San Jose, CA. 95131 

 

if to the Company: 

 

BEA Systems, Inc. 

2315 North First Street

San Jose, CA 95131 

 

Attention: General Counsel 

 

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actuallyreceived by the addressee. 

 

(c) The invalidity orunenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. 

 

15 

(d) The Company may withhold from any amounts payable under this Agreement such United States federal,state or local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. 

 

(e) The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert anyright the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver of suchprovision or right or any other provision or right of this Agreement. 

 

(f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is “at will” and,subject to Section 1(a), prior to the Effective Date, the Executive’s employment may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights underthis Agreement. From and after the Effective Date, except for the Employee Proprietary Information and Inventions Agreement entered into between the Company and the Executive and dated July 6, 2001, which shall remain in effect from and after theEffective Date and as specifically otherwise provided herein, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof, including without limitation the Employment Agreement between theExecutive and the Company dated as of August 12, 2002. 

 

INWITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first abovewritten. 

 

BEA SYSTEMS, INC.

        /s/ WILLIAM M. KLEIN

William M. Klein

 

16 

**AMENDED AND RESTATED EMPLOYMENT**

**AGREEMENT**

 

AGREEMENT, dated as of the **1st**day of **November**, 2003 (this “Agreement”), by and between BEA Systems, Inc., a Delaware corporation (the “Company”), and Thomas M. Ashburn (the “Executive”).

 

WHEREAS, the Board of Directors of the Company (the“Board”), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Changein Control (as defined herein). The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change in Control and to encourage theExecutive’s full attention and dedication to the current Company and in the event of any threatened or pending Change in Control, and to provide the Executive with compensation and benefits arrangements upon a Change in Control that ensure thatthe compensation and benefits expectations of the Executive will be satisfied and that are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into thisAgreement. 

 

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

 

**Section 1.****Certain Definitions****.**(a) “Effective Date” means the first date during the Change in Control Period (as defined herein) on which a Change in Control occurs. Notwithstanding anything in this Agreement to the contrary, if a Change in Control occurs and if theExecutive’s employment with the Company is terminated prior to the date on which the Change in Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third partythat has taken steps reasonably calculated to effect a Change in Control or (2) otherwise arose in connection with or anticipation of a Change in Control, then “Effective Date” means the date immediately prior to the date of suchtermination of employment. 

 

(b) “Change in ControlPeriod” means the period commencing on the date hereof and ending on the third anniversary of the date hereof; *provided*, *however*, that, commencing on the date one year after the date hereof, and on each annual anniversary of suchdate (such date and each annual anniversary thereof, the “Renewal Date”), unless previously terminated, the Change in Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless, at least 60days prior to the Renewal Date, the Company shall give notice to the Executive that the Change in Control Period shall not be so extended. 

 

(c) “Affiliated Company” means any company controlled by, controlling or under common control with the Company. 

 

(d) “Assume” means that pursuant to a Change in Control either (i)the Compensatory Award is expressly affirmed by the Company or (ii) the contractual obligations represented by the Compensatory Award are expressly assumed (and not simply by operation of law) by the successor entity or its parent in connection withthe Change in Control with appropriate adjustments to the number and type of securities of the successor entity or its parent subject to the Compensatory Award and the exercise or purchase price thereof (if any) which preserves the compensationelement of the Compensatory Award existing at the time of the Change in Control as determined in accordance with the instruments evidencing the agreement to assume the Compensatory Award. 

(e) “Change in Control” means the first to occur of any of the following: 

 

(1) The acquisition by any individual, entity or group (within the meaningof Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more ofeither (A) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in theelection of directors (the “Outstanding Company Voting Securities”); *provided*, *however*, that, for purposes of this Section 1(e), the following acquisitions shall not constitute a Change in Control: (i) any acquisitiondirectly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company or (iv) any acquisition by any corporationpursuant to a transaction that complies with Sections 1(e)(3)(A), 1(e)(3)(B) and 1(e)(3)(C). 

 

(2) Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; *provided*, *however*, that anyindividual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall beconsidered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to theelection or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board. 

 

(3) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any ofits subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), ineach case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediatelyprior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in theelection of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of theCompany’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding CompanyVoting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination)beneficially owns, directly or indirectly, 20% 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 securitiesof such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members ofthe Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or 

 

(4) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 

 

2 

**Section 2.****Employment Period****.******The Company hereby agrees to continuethe Executive in its employ, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the first anniversary of the Effective Date (the “Employment Period”). The Employment Periodshall terminate upon the Executive’s termination of employment for any reason. 

 

**Section 3.****Terms of Employment****.** (a) **Position and Duties.** (1) During the Employment Period, (A) the Executive’s position (including status, offices, titles and reportingrequirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the EffectiveDate and (B) the Executive’s services shall be performed at the office where the Executive was employed immediately preceding the Effective Date or at any other location less than 35 miles from such office. 

 

(2) During the Employment Period, and excluding any periods of vacation andsick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilitiesassigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period, it shall not be a violation of this Agreement for the Executive to(A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interferewith the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that, to the extent that any such activities have been conducted by the Executiveprior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of theExecutive’s responsibilities to the Company. 

 

(b)**Compensation.** (1) **Base Salary.**During the Employment Period, the Executive shall receive an annual base salary (the “Annual Base Salary”) at an annual rate at least equal to 12 times the highest monthly basesalary paid or payable, including any base salary that has been earned but deferred, to the Executive by the Company and the Affiliated Companies in respect of the 12-month period immediately preceding the month in which the Effective Date occurs.The Annual Base Salary shall be paid at such intervals as the Company pays executive salaries generally. During the Employment Period, the Annual Base Salary shall be reviewed at least annually, beginning no more than 12 months after the last salaryincrease awarded to the Executive prior to the Effective Date. Any increase in the Annual Base Salary during the Employment Period shall not serve to limit or reduce any other obligation to the Executive under this Agreement. The Annual Base Salaryshall not be reduced after any such increase and the term “Annual Base Salary” shall refer to the Annual Base Salary as so increased. 

 

3 

(2) **Annual Bonus****.** In addition to the Annual Base Salary, the Executive shall beawarded, for each fiscal year ending during the Employment Period, an annual bonus (the “Annual Bonus”) in cash at least equal to the Executive’s highest bonus earned under the Company’s Executive Bonus Plan, or any comparablebonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (or for such lesser number of full fiscal years prior to the Effective Date for which the Executive was eligible to earn such a bonus,and annualized in the case of any bonus earned for a partial fiscal year) (the “Recent Annual Bonus”). (If the Executive has not been eligible to earn such a bonus for any period prior to the Effective Date, the “Recent AnnualBonus” shall mean the Executive’s target annual bonus for the year in which the Effective Date occurs.) Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year forwhich the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. 

 

(3) **Incentive, Savings and Retirement Plans.**During the Employment Period, the Executive shall be entitled to participate in all cashincentive, equity incentive, savings and retirement plans, practices, policies, and programs applicable generally to other peer executives of the Company and the Affiliated Companies, but in no event shall such plans, practices, policies andprograms provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefitopportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and the Affiliated Companies for the Executive under such plans, practices, policies and programs as in effect at any time duringthe 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the Affiliated Companies. In the eventthat, in connection with a Change of Control, the party effectuating the Change of Control does not agree to Assume any stock option, restricted stock award, restricted stock unit award or other equity-based award or performance award held by theExecutive or any transferee of the Executive (each, a “Compensatory Award”) that is unvested and outstanding as of immediately prior to the Change of Control, such Compensatory Award shall as of immediately prior to the Change of Controlvest in full and be immediately exercisable, provided, that if the Executive’s employment with the Company is terminated prior to the date on which the Change in Control occurs, and if it is reasonably demonstrated by the Executive thatsuch termination of employment (1) was at the request of a third party that has taken steps reasonably calculated to effect a Change in Control or (2) otherwise arose in connection with or anticipation of a Change in Control, then each CompensatoryAward that is unvested and outstanding as of immediately prior to the Date of Termination shall not be forfeited, shall remain outstanding following the Date of Termination, and shall not vest unless and until a Change of Control occurs within oneyear following the Date of Termination, in which case, immediately prior to a Change of Control, such Compensatory Awards shall vest in full and become immediately exercisable. In the event that a Change in Control does not occur within one yearfollowing the Date of Termination as described in the proviso of the preceding sentence, each unvested Compensatory Award shall be immediately forfeited by the Executive. 

 

4 

(4) **Welfare Benefit Plans****.**During the Employment Period, the Executive and/or theExecutive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and the Affiliated Companies (including, withoutlimitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and the AffiliatedCompanies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits that are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for theExecutive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the AffiliatedCompanies. 

 

(5) **Expenses****.**During theEmployment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and the AffiliatedCompanies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of theCompany and the Affiliated Companies. 

 

(6) **FringeBenefits****.**During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and paymentof related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and the Affiliated Companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Dateor, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies. 

 

(7) **Office and Support Staff****.**During the Employment Period, the Executive shall be entitled to anoffice or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and the AffiliatedCompanies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and the AffiliatedCompanies. 

 

5 

(8) **Vacation****.**During the Employment Period, the Executive shall be entitled to paidvacation in accordance with the most favorable plans, policies, programs and practices of the Company and the Affiliated Companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, ifmore favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies. 

 

**Section 4.****Termination of Employment****.** (a) **Death or Disability.** TheExecutive’s employment shall terminate automatically if the Executive dies during the Employment Period. If the Company determines in good faith that the Disability (as defined herein) of the Executive has occurred during the Employment Period(pursuant to the definition of “Disability”), it may give to the Executive written notice in accordance with Section 11(b) of its intention to terminate the Executive’s employment. In such event, the Executive’s employment withthe Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), *provided*that, within the 30 days after such receipt, the Executive shall not have returned tofull-time performance of the Executive’s duties. “Disability” means the absence of the Executive from the Executive’s duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due tomental or physical illness that is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative. 

 

(b) **Cause****.**The Company may terminate theExecutive’s employment during the Employment Period for Cause. “Cause” means: 

 

(1) the willful and continued failure of the Executive to perform substantially the Executive’s duties (as contemplated by Section3(a)(1)(A)) with the Company or any Affiliated Company (other than any such failure resulting from incapacity due to physical or mental illness or following the Executive’s delivery of a Notice of Termination for Good Reason), after a writtendemand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company that specifically identifies the manner in which the Board or the Chief Executive Officer of the Company believes that theExecutive has not substantially performed the Executive’s duties, or 

 

(2) the willful engaging by the Executive in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company. 

 

For purposes of this Section 4(b), no act, or failure to act, on the part of the Executive shall be considered “willful” unless itis done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to aresolution duly adopted by the Board or upon the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omittedto be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of aresolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (excluding the Executive, if the Executive is a member of the Board) at a meeting of the Board called and held for such purpose(after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty ofthe conduct described in Section 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail. 

 

6 

(c) **Good Reason****.**The Executive’s employment may be terminated by the Executivefor Good Reason or by the Executive voluntarily without Good Reason. “Good Reason” means: 

 

(1) the assignment to the Executive of any duties inconsistent in any respect with the Executive’s position (including status,offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a), or any other diminution in such position, authority, duties or responsibilities (whether or not occurring solely as a result of theCompany’s ceasing to be a publicly traded entity), excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by theExecutive; 

 

(2) any failure by the Company tocomply with any of the provisions of Section 3(b), other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive;

 

(3) the Company’s requiring theExecutive (i) to be based at any office or location other than as provided in Section 3(a)(1)(B), (ii) to be based at a location other than the principal executive offices of the Company if the Executive was employed at such location immediatelypreceding the Effective Date, or (iii) to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; 

 

(4) any purported termination by the Company of the Executive’s employment otherwise than as expressly permitted by thisAgreement; or 

 

(5) any failure by the Companyto comply with and satisfy Section 10(c). 

 

For purposes of this Section 4(c),any good faith determination of Good Reason made by the Executive shall be conclusive. The Executive’s mental or physical incapacity following the occurrence of an event described above in clauses (1) through (5) shall not affect theExecutive’s ability to terminate employment for Good Reason. 

 

(d) **Notice of Termination.**Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b).“Notice of Termination” means a written notice that (1) indicates the specific termination provision in this Agreement relied upon, (2) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed toprovide a basis for termination of the Executive’s employment under the provision so indicated, and (3) if the Date of Termination (as defined herein) is other than the date of receipt of such notice, specifies the Date of Termination (whichDate of Termination shall be not more than 30 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Causeshall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s respectiverights hereunder. 

 

7 

(e) **Date of Termination****.**“Date of Termination” means (1) if theExecutive’s employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified in the Notice of Termination, (which date shall not be more than 30days after the giving of such notice), as the case may be, (2) if the Executive’s employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executiveof such termination, and (3) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 

 

**Section 5.****Obligations of the Company uponTermination****. (a) Good Reason; Other Than for Cause, Death or Disability.** If, during the Employment Period, the Company terminates the Executive’s employment other than for Cause or Disability or the Executive terminatesemployment for Good Reason: 

 

(1) the Companyshall pay to the Executive, in a lump sum in cash within 30 days after the Date of Termination, the aggregate of the following amounts: 

 

(A) the sum of (i) the Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid, (ii) theproduct of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof that has been earned but deferred (and annualized for any fiscal year consisting of less than 12 full monthsor during which the Executive was employed for less than 12 full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount, the “Highest Annual Bonus”) and (y) a fraction, the numeratorof which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365, and (iii) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon)and any accrued vacation pay, in each case, to the extent not theretofore paid (the sum of the amounts described in subclauses (i), (ii) and (iii), the “Accrued Obligations”); 

 

(B) the amount equal to the product of (i) two and (ii) the sum of (x) the Executive’s Annual BaseSalary and (y) the Highest Annual Bonus; and 

 

(C) an amount equal to the excess of (i) the actuarial equivalent of the benefit under the Company’s qualified defined benefit retirement plan (the “Retirement Plan”) (utilizing actuarial assumptions no less favorable to theExecutive than those in effect under the Retirement Plan immediately prior to the Effective Date) and any excess or supplemental retirement plan in which the Executive participates (collectively, the “SERP”) that the Executive wouldreceive if the Executive’s employment continued for two years after the Date of Termination, assuming for this purpose that all accrued benefits are fully vested and assuming that the Executive’s compensation in each of the two years isthat required by Sections 3(b)(1) and 3(b)(2), over (ii) the actuarial equivalent of the Executive’s actual benefit (paid or payable), if any, under the Retirement Plan and the SERP as of the Date of Termination; 

 

8 

(2) for two years after the Executive’s Date of Termination, or such longer periodas may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive’s family at least equal to those that would have been provided to them in accordancewith the plans, programs, practices and policies described in Section 3(b)(4) and 3(b)(6) if the Executive’s employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respectto other peer executives of the Company and the Affiliated Companies and their families, *provided*, *however*, that, if the Executive becomes reemployed with another employer and is eligible to receive such benefits under another employerprovided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencementof benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until two years after the Date of Termination and to have retired on the lastday of such period; 

 

(3) the Company shall, atits sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in the Executive’s sole discretion provided, that the cost of such outplacement shall notexceed $50,000; 

 

(4) notwithstanding anyprovision in an award agreement to the contrary, effective as of the Date of Termination, (1) each and every Compensatory Award that is outstanding as of the Date of Termination shall immediately vest in full and become exercisable or payable and bereleased from any repurchase or forfeiture rights, and (2) to the extent applicable, the term during which each and every such Compensatory Award may be exercised by the Executive shall be extended until the date upon which the right to exercise anyCompensatory Award would have expired if the Executive had continued to be employed by the Company for the full term of such Compensatory Award, *provided*, that this Section 5(a)(4) shall not apply to any Compensatory Award outstanding as ofthe Date of Termination under the Company’s 1997 Employee Stock Purchase Plan (or any successor thereto). The applicable award agreements for the Compensatory Awards are hereby amended to the extent necessary to implement this Section 5(a)(4);and 

 

9 

(5) to the extent not theretofore paid or provided, the Company shall timely pay orprovide to the Executive any Other Benefits (as defined in Section 6). 

 

(b) **Death****.** If the Executive’s employment is terminated by reason of the Executive’s death during the Employment Period, the Company shall provide the Executive’s estate or beneficiaries with the AccruedObligations, the benefits provided for under Section 3(a) of the Employment Agreement (as defined in Section 6 hereof) and the timely payment or delivery of the Other Benefits, and shall have no other severance obligations under this Agreement. TheAccrued Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term “Other Benefits”as utilized in this Section 5(b) shall include, without limitation, and the Executive’s estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and the AffiliatedCompanies to the estates and beneficiaries of peer executives of the Company and the Affiliated Companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives andtheir beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive’s estate and/or the Executive’s beneficiaries, as in effect on the date of the Executive’s deathwith respect to other peer executives of the Company and the Affiliated Companies and their beneficiaries. 

 

(c) **Disability****.**If the Executive’s employment is terminated by reason of the Executive’s Disability during the EmploymentPeriod, the Company shall provide the Executive with the Accrued Obligations, the benefits provided for under Section 3(b) of the Employment Agreement (as defined in Section 6 hereof) and the timely payment or delivery of the Other Benefits, andshall have no other severance obligations under this Agreement. The Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term“Other Benefits” as utilized in this Section 5(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generallyprovided by the Company and the Affiliated Companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peerexecutives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive’s family, as in effect at any time thereafter generally with respect toother peer executives of the Company and the Affiliated Companies and their families. 

 

(d) **Cause; Other Than for Good Reason****.**If the Executive’s employment is terminated for Cause during the Employment Period, the Company shall provide to the Executive (1) the Executive’sAnnual Base Salary through the Date of Termination, (2) the amount of any compensation previously deferred by the Executive, and (3) the Other Benefits, in each case, to the extent theretofore unpaid, and shall have no other severance obligationsunder this Agreement. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, the Company shall provide to the Executive the Accrued Obligations and the timely payment or delivery ofthe Other Benefits, and shall have no other severance obligations under this Agreement. In such case, all the Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. 

 

10 

**Section 6.****Non-exclusivity of Rights.** Nothing in this Agreement shall prevent orlimit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or the Affiliated Companies and for which the Executive may qualify, nor, subject to Section 11(f), shall anything hereinlimit or otherwise affect such rights as the Executive may have under any other contract or agreement with the Company or the Affiliated Companies. Amounts that are vested benefits or that the Executive is otherwise entitled to receive under anyplan, policy, practice or program of or any other contract or agreement with the Company or the Affiliated Companies at or subsequent to the Date of Termination (“Other Benefits”) shall be payable in accordance with such plan, policy,practice or program or contract or agreement, except as explicitly modified by this Agreement. Notwithstanding the foregoing, if the Executive becomes eligible to receive payments and benefits pursuant to Section 5(a) of this Agreement, theExecutive shall not be entitled to any severance pay or benefits under any severance plan, program or policy of the Company and the Affiliated Companies unless otherwise specifically provided therein in a specific reference to this Agreement.

 

**Section 7.****Full Settlement****.** TheCompany’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim, right or action that theCompany may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of thisAgreement, and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred (within 10 days following the Company’s receipt of an invoice from the Executive), to the full extentpermitted by law, all legal fees and expenses that the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under,any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at theapplicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the “Code”). In addition, the Company shall indemnify and hold the Executive, harmless on an after-tax basis, for any ExciseTax (as defined in Section 8(f), income tax, and all other applicable taxes (including interest and penalties) imposed as a result of the Company’s payment of legal fees and expenses that the Executive may reasonably incur as a result of anysuch contest. 

 

**Section 8.****Certain AdditionalPayments by the Company****.**

 

(a) Anything in thisAgreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any Payment would be subject to the Excise Tax, then the Executive shall be entitled to receive an additional payment (the“Gross-Up Payment”) in an amount such that, after payment by the Executive of all taxes (and any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penaltiesimposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 8(a),if it shall be determined that the Executive is entitled to the Gross-Up Payment, but that the Parachute Value of all Payments does not exceed 110% of the Safe Harbor Amount, then no Gross-Up Payment shall be made to the Executive and the amountspayable under this Agreement shall be reduced so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made by first reducing the paymentsunder Section 5(a)(i)(B), unless an alternative method of reduction is elected by the Executive, and in any event shall be made in such a manner as to maximize the Value of all Payments actually made to the Executive. For purposes of reducing thePayments to the Safe Harbor Amount, only amounts payable under this Agreement (and no other Payments) shall be reduced. If the reduction of the amount payable under this Agreement would not result in a reduction of the Parachute Value of allPayments to the Safe Harbor Amount, no amounts payable under the Agreement shall be reduced pursuant to this Section 8(a). The Company’s obligation to make Gross-Up Payments under this Section 8 shall not be conditioned upon theExecutive’s termination of employment. 

 

11 

(b) Subject to the provisions of Section 8(c), all determinations required to be made under this Section8, including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Ernst & Young, LLP, or such other nationally recognizedcertified public accounting firm as may be designated by the Executive (the “Accounting Firm”). The Accounting Firm shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receiptof notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to thisSection 8, shall be paid by the Company to the Executive within 5 days of the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of theuncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (the“Underpayment”), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is required to make a payment of any Excise Tax, theAccounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. 

 

(c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful,would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable, but no later than 10 business days after the Executive is informed in writing of such claim. The Executive shall apprise theCompany of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to theCompany (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that the Company desires to contest such claim,the Executive shall: 

 

(1) give the Company anyinformation reasonably requested by the Company relating to such claim, 

 

12 

(2) take such action in connection with contesting such claim as the Company shallreasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, 

 

(3) cooperate with the Company in good faith in ordereffectively to contest such claim, and 

 

(4)permit the Company to participate in any proceedings relating to such claim; 

 

*provided*, *however*, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest, and shall indemnify and hold the Executiveharmless, on an after-tax basis, for any Excise Tax or income tax, and all other applicable taxes, (including interest and penalties) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoingprovisions of this Section 8(c), the Company shall control all proceedings taken in connection with such contest, and, at its sole discretion, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with theapplicable taxing authority in respect of such claim and may, at its sole discretion, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute suchcontest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; *provided*, *however*, that, if the Company directs the Executive to paysuch claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax(including interest or penalties) imposed with respect to such advance or with respect to any imputed income in connection with such advance; and *provided*, *further*, that any extension of the statute of limitations relating to paymentof taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues withrespect to which the Gross-Up Payment would be payable hereunder, and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. 

 

(d) If, after the receipt by the Executive of a Gross-Up Payment or an amountadvanced by the Company pursuant to Section 8(c), the Executive becomes entitled to receive any refund with respect to the Excise Tax to which such Gross-Up Payment relates or with respect to such claim, the Executive shall (subject to theCompany’s complying with the requirements of Section 8(c), if applicable) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by theExecutive of an amount advanced by the Company pursuant to Section 8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intentto contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amountof Gross-Up Payment required to be paid. 

 

13 

(e) Notwithstanding any other provision of this Section 8, the Company may, in its sole discretion,withhold and pay over to the Internal Revenue Service or any other applicable taxing authority, for the benefit of the Executive, all or any portion of any Gross-Up Payment, and the Executive hereby consents to such withholding. 

 

(f) Definitions. The following terms shall have the following meaningsfor purposes of this Section 8. 

 

(i) “Excise Tax”shall mean the excise tax imposed by Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax. 

 

(ii) “Parachute Value” of a Payment shall mean the present value as of the date of the change of control for purposes of Section 280G of theCode of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2), as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.

 

(iii) A “Payment” shall mean any payment benefit ordistribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise. 

 

(iv) The “Safe Harbor Amount” means 2.99 times the Executive’s“base amount,” within the meaning of Section 280G(b)(3) of the Code. 

 

(v) “Value” of a Payment shall mean the economic present value of a Payment as of the date of the change of control for purposes of Section 280G of the Code, as determined by the Accounting Firm using thediscount rate required by Section 280G(d)(4) of the Code. 

 

**Section 9.****Confidential Information****.** The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or theAffiliated Companies, and their respective businesses, which information, knowledge or data shall have been obtained by the Executive during the Executive’s employment by the Company or the Affiliated Companies and which information, knowledgeor data shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive’s employment with the Company, the Executive shall not,without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those persons designated by the Company. Inno event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 

 

**Section 10.****Successors****.** (a) This Agreement ispersonal to the Executive, and, without the prior written consent of the Company, shall not be assignable by the Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable bythe Executive’s legal representatives. 

 

14 

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors andassigns. Except as provided in Section 10(c), without the prior written consent of the Executive this Agreement shall not be assignable by the Company. 

 

(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all ofthe business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. “Company”means the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise. 

 

**Section 11.****Miscellaneous****.** (a) This Agreement shall be governed by and construed in accordancewith the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherthan by a written agreement executed by the parties hereto or their respective successors and legal representatives. 

 

(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered orcertified mail, return receipt requested, postage prepaid, addressed as follows: 

 

if to the Executive: 

 

ThomasM. Ashburn 

c/o BEA Systems Inc. 

2315 North First Street 

San Jose, CA. 95131 

 

if to the Company: 

 

BEA Systems, Inc. 

2315 North First Street

San Jose, CA 95131 

 

Attention: General Counsel 

 

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actuallyreceived by the addressee. 

 

(c) The invalidity orunenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. 

 

15 

(d) The Company may withhold from any amounts payable under this Agreement such United States federal,state or local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. 

 

(e) The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert anyright the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver of suchprovision or right or any other provision or right of this Agreement. 

 

(f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is “at will” and,subject to Section 1(a), prior to the Effective Date, the Executive’s employment may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights underthis Agreement. From and after the Effective Date, except for the Employee Proprietary Information and Inventions Agreement entered into between the Company and the Executive and dated July 6, 2001, which shall remain in effect from and after theEffective Date and as specifically otherwise provided herein, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof, including without limitation the Employment Agreement between theExecutive and the Company dated as of August 12, 2002. 

 

INWITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first abovewritten. 

 

BEA SYSTEMS, INC.

        /s/ THOMAS M. ASHBURN

Thomas M. Ashburn

 

16 

**AMENDED AND RESTATED EMPLOYMENT**

**AGREEMENT**

 

AGREEMENT, dated as of the **1st**day of **November**, 2003 (this “Agreement”), by and between BEA Systems, Inc., a Delaware corporation (the “Company”), and Charles L. Ill, III (the “Executive”).

 

WHEREAS, the Board of Directors of the Company (the“Board”), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Changein Control (as defined herein). The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change in Control and to encourage theExecutive’s full attention and dedication to the current Company and in the event of any threatened or pending Change in Control, and to provide the Executive with compensation and benefits arrangements upon a Change in Control that ensure thatthe compensation and benefits expectations of the Executive will be satisfied and that are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into thisAgreement. 

 

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

 

**Section 1.****Certain Definitions****.**(a) “Effective Date” means the first date during the Change in Control Period (as defined herein) on which a Change in Control occurs. Notwithstanding anything in this Agreement to the contrary, if a Change in Control occurs and if theExecutive’s employment with the Company is terminated prior to the date on which the Change in Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third partythat has taken steps reasonably calculated to effect a Change in Control or (2) otherwise arose in connection with or anticipation of a Change in Control, then “Effective Date” means the date immediately prior to the date of suchtermination of employment. 

 

(b) “Change in ControlPeriod” means the period commencing on the date hereof and ending on the third anniversary of the date hereof; *provided*, *however*, that, commencing on the date one year after the date hereof, and on each annual anniversary of suchdate (such date and each annual anniversary thereof, the “Renewal Date”), unless previously terminated, the Change in Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless, at least 60days prior to the Renewal Date, the Company shall give notice to the Executive that the Change in Control Period shall not be so extended. 

 

(c) “Affiliated Company” means any company controlled by, controlling or under common control with the Company. 

 

(d) “Assume” means that pursuant to a Change in Control either (i)the Compensatory Award is expressly affirmed by the Company or (ii) the contractual obligations represented by the Compensatory Award are expressly assumed (and not simply by operation of law) by the successor entity or its parent in connection withthe Change in Control with appropriate adjustments to the number and type of securities of the successor entity or its parent subject to the Compensatory Award and the exercise or purchase price thereof (if any) which preserves the compensationelement of the Compensatory Award existing at the time of the Change in Control as determined in accordance with the instruments evidencing the agreement to assume the Compensatory Award. 

(e) “Change in Control” means the first to occur of any of the following: 

 

(1) The acquisition by any individual, entity or group (within the meaningof Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more ofeither (A) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in theelection of directors (the “Outstanding Company Voting Securities”); *provided*, *however*, that, for purposes of this Section 1(e), the following acquisitions shall not constitute a Change in Control: (i) any acquisitiondirectly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company or (iv) any acquisition by any corporationpursuant to a transaction that complies with Sections 1(e)(3)(A), 1(e)(3)(B) and 1(e)(3)(C). 

 

(2) Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; *provided*, *however*, that anyindividual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall beconsidered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to theelection or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board. 

 

(3) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any ofits subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), ineach case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediatelyprior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in theelection of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of theCompany’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding CompanyVoting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination)beneficially owns, directly or indirectly, 20% 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 securitiesof such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members ofthe Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or 

 

(4) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 

 

2 

**Section 2.****Employment Period****.******The Company hereby agrees to continuethe Executive in its employ, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the first anniversary of the Effective Date (the “Employment Period”). The Employment Periodshall terminate upon the Executive’s termination of employment for any reason. 

 

**Section 3.****Terms of Employment****.** (a) **Position and Duties.** (1) During the Employment Period, (A) the Executive’s position (including status, offices, titles and reportingrequirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the EffectiveDate and (B) the Executive’s services shall be performed at the office where the Executive was employed immediately preceding the Effective Date or at any other location less than 35 miles from such office. 

 

(2) During the Employment Period, and excluding any periods of vacation andsick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilitiesassigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period, it shall not be a violation of this Agreement for the Executive to(A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interferewith the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that, to the extent that any such activities have been conducted by the Executiveprior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of theExecutive’s responsibilities to the Company. 

 

(b)**Compensation.** (1) **Base Salary.**During the Employment Period, the Executive shall receive an annual base salary (the “Annual Base Salary”) at an annual rate at least equal to 12 times the highest monthly basesalary paid or payable, including any base salary that has been earned but deferred, to the Executive by the Company and the Affiliated Companies in respect of the 12-month period immediately preceding the month in which the Effective Date occurs.The Annual Base Salary shall be paid at such intervals as the Company pays executive salaries generally. During the Employment Period, the Annual Base Salary shall be reviewed at least annually, beginning no more than 12 months after the last salaryincrease awarded to the Executive prior to the Effective Date. Any increase in the Annual Base Salary during the Employment Period shall not serve to limit or reduce any other obligation to the Executive under this Agreement. The Annual Base Salaryshall not be reduced after any such increase and the term “Annual Base Salary” shall refer to the Annual Base Salary as so increased. 

 

3 

(2) **Annual Bonus****.** In addition to the Annual Base Salary, the Executive shall beawarded, for each fiscal year ending during the Employment Period, an annual bonus (the “Annual Bonus”) in cash at least equal to the Executive’s highest bonus earned under the Company’s Executive Bonus Plan, or any comparablebonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (or for such lesser number of full fiscal years prior to the Effective Date for which the Executive was eligible to earn such a bonus,and annualized in the case of any bonus earned for a partial fiscal year) (the “Recent Annual Bonus”). (If the Executive has not been eligible to earn such a bonus for any period prior to the Effective Date, the “Recent AnnualBonus” shall mean the Executive’s target annual bonus for the year in which the Effective Date occurs.) Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year forwhich the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. 

 

(3) **Incentive, Savings and Retirement Plans.**During the Employment Period, the Executive shall be entitled to participate in all cashincentive, equity incentive, savings and retirement plans, practices, policies, and programs applicable generally to other peer executives of the Company and the Affiliated Companies, but in no event shall such plans, practices, policies andprograms provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefitopportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and the Affiliated Companies for the Executive under such plans, practices, policies and programs as in effect at any time duringthe 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the Affiliated Companies. In the eventthat, in connection with a Change of Control, the party effectuating the Change of Control does not agree to Assume any stock option, restricted stock award, restricted stock unit award or other equity-based award or performance award held by theExecutive or any transferee of the Executive (each, a “Compensatory Award”) that is unvested and outstanding as of immediately prior to the Change of Control, such Compensatory Award shall as of immediately prior to the Change of Controlvest in full and be immediately exercisable, provided, that if the Executive’s employment with the Company is terminated prior to the date on which the Change in Control occurs, and if it is reasonably demonstrated by the Executive thatsuch termination of employment (1) was at the request of a third party that has taken steps reasonably calculated to effect a Change in Control or (2) otherwise arose in connection with or anticipation of a Change in Control, then each CompensatoryAward that is unvested and outstanding as of immediately prior to the Date of Termination shall not be forfeited, shall remain outstanding following the Date of Termination, and shall not vest unless and until a Change of Control occurs within oneyear following the Date of Termination, in which case, immediately prior to a Change of Control, such Compensatory Awards shall vest in full and become immediately exercisable. In the event that a Change in Control does not occur within one yearfollowing the Date of Termination as described in the proviso of the preceding sentence, each unvested Compensatory Award shall be immediately forfeited by the Executive. 

 

4 

(4) **Welfare Benefit Plans****.**During the Employment Period, the Executive and/or theExecutive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and the Affiliated Companies (including, withoutlimitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and the AffiliatedCompanies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits that are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for theExecutive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the AffiliatedCompanies. 

 

(5) **Expenses****.**During theEmployment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and the AffiliatedCompanies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of theCompany and the Affiliated Companies. 

 

(6) **FringeBenefits****.**During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and paymentof related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and the Affiliated Companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Dateor, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies. 

 

(7) **Office and Support Staff****.**During the Employment Period, the Executive shall be entitled to anoffice or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and the AffiliatedCompanies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and the AffiliatedCompanies. 

 

5 

(8) **Vacation****.**During the Employment Period, the Executive shall be entitled to paidvacation in accordance with the most favorable plans, policies, programs and practices of the Company and the Affiliated Companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, ifmore favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies. 

 

**Section 4.****Termination of Employment****.** (a) **Death or Disability.** TheExecutive’s employment shall terminate automatically if the Executive dies during the Employment Period. If the Company determines in good faith that the Disability (as defined herein) of the Executive has occurred during the Employment Period(pursuant to the definition of “Disability”), it may give to the Executive written notice in accordance with Section 11(b) of its intention to terminate the Executive’s employment. In such event, the Executive’s employment withthe Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), *provided*that, within the 30 days after such receipt, the Executive shall not have returned tofull-time performance of the Executive’s duties. “Disability” means the absence of the Executive from the Executive’s duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due tomental or physical illness that is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative. 

 

(b) **Cause****.**The Company may terminate theExecutive’s employment during the Employment Period for Cause. “Cause” means: 

 

(1) the willful and continued failure of the Executive to perform substantially the Executive’s duties (as contemplated by Section3(a)(1)(A)) with the Company or any Affiliated Company (other than any such failure resulting from incapacity due to physical or mental illness or following the Executive’s delivery of a Notice of Termination for Good Reason), after a writtendemand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company that specifically identifies the manner in which the Board or the Chief Executive Officer of the Company believes that theExecutive has not substantially performed the Executive’s duties, or 

 

(2) the willful engaging by the Executive in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company. 

 

For purposes of this Section 4(b), no act, or failure to act, on the part of the Executive shall be considered “willful” unless itis done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to aresolution duly adopted by the Board or upon the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omittedto be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of aresolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (excluding the Executive, if the Executive is a member of the Board) at a meeting of the Board called and held for such purpose(after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty ofthe conduct described in Section 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail. 

 

6 

(c) **Good Reason****.**The Executive’s employment may be terminated by the Executivefor Good Reason or by the Executive voluntarily without Good Reason. “Good Reason” means: 

 

(1) the assignment to the Executive of any duties inconsistent in any respect with the Executive’s position (including status,offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a), or any other diminution in such position, authority, duties or responsibilities (whether or not occurring solely as a result of theCompany’s ceasing to be a publicly traded entity), excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by theExecutive; 

 

(2) any failure by the Company tocomply with any of the provisions of Section 3(b), other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive;

 

(3) the Company’s requiring theExecutive (i) to be based at any office or location other than as provided in Section 3(a)(1)(B), (ii) to be based at a location other than the principal executive offices of the Company if the Executive was employed at such location immediatelypreceding the Effective Date, or (iii) to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; 

 

(4) any purported termination by the Company of the Executive’s employment otherwise than as expressly permitted by thisAgreement; or 

 

(5) any failure by the Companyto comply with and satisfy Section 10(c). 

 

For purposes of this Section 4(c),any good faith determination of Good Reason made by the Executive shall be conclusive. The Executive’s mental or physical incapacity following the occurrence of an event described above in clauses (1) through (5) shall not affect theExecutive’s ability to terminate employment for Good Reason. 

 

(d) **Notice of Termination.**Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b).“Notice of Termination” means a written notice that (1) indicates the specific termination provision in this Agreement relied upon, (2) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed toprovide a basis for termination of the Executive’s employment under the provision so indicated, and (3) if the Date of Termination (as defined herein) is other than the date of receipt of such notice, specifies the Date of Termination (whichDate of Termination shall be not more than 30 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Causeshall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s respectiverights hereunder. 

 

7 

(e) **Date of Termination****.**“Date of Termination” means (1) if theExecutive’s employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified in the Notice of Termination, (which date shall not be more than 30days after the giving of such notice), as the case may be, (2) if the Executive’s employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executiveof such termination, and (3) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 

 

**Section 5.****Obligations of the Company uponTermination****. (a) Good Reason; Other Than for Cause, Death or Disability.** If, during the Employment Period, the Company terminates the Executive’s employment other than for Cause or Disability or the Executive terminatesemployment for Good Reason: 

 

(1) the Companyshall pay to the Executive, in a lump sum in cash within 30 days after the Date of Termination, the aggregate of the following amounts: 

 

(A) the sum of (i) the Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid, (ii) theproduct of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof that has been earned but deferred (and annualized for any fiscal year consisting of less than 12 full monthsor during which the Executive was employed for less than 12 full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount, the “Highest Annual Bonus”) and (y) a fraction, the numeratorof which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365, and (iii) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon)and any accrued vacation pay, in each case, to the extent not theretofore paid (the sum of the amounts described in subclauses (i), (ii) and (iii), the “Accrued Obligations”); 

 

(B) the amount equal to the product of (i) two and (ii) the sum of (x) the Executive’s Annual BaseSalary and (y) the Highest Annual Bonus; and 

 

(C) an amount equal to the excess of (i) the actuarial equivalent of the benefit under the Company’s qualified defined benefit retirement plan (the “Retirement Plan”) (utilizing actuarial assumptions no less favorable to theExecutive than those in effect under the Retirement Plan immediately prior to the Effective Date) and any excess or supplemental retirement plan in which the Executive participates (collectively, the “SERP”) that the Executive wouldreceive if the Executive’s employment continued for two years after the Date of Termination, assuming for this purpose that all accrued benefits are fully vested and assuming that the Executive’s compensation in each of the two years isthat required by Sections 3(b)(1) and 3(b)(2), over (ii) the actuarial equivalent of the Executive’s actual benefit (paid or payable), if any, under the Retirement Plan and the SERP as of the Date of Termination; 

 

8 

(2) for two years after the Executive’s Date of Termination, or such longer periodas may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive’s family at least equal to those that would have been provided to them in accordancewith the plans, programs, practices and policies described in Section 3(b)(4) and 3(b)(6) if the Executive’s employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respectto other peer executives of the Company and the Affiliated Companies and their families, *provided*, *however*, that, if the Executive becomes reemployed with another employer and is eligible to receive such benefits under another employerprovided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencementof benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until two years after the Date of Termination and to have retired on the lastday of such period; 

 

(3) the Company shall, atits sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in the Executive’s sole discretion provided, that the cost of such outplacement shall notexceed $50,000; 

 

(4) notwithstanding anyprovision in an award agreement to the contrary, effective as of the Date of Termination, (1) each and every Compensatory Award that is outstanding as of the Date of Termination shall immediately vest in full and become exercisable or payable and bereleased from any repurchase or forfeiture rights, and (2) to the extent applicable, the term during which each and every such Compensatory Award may be exercised by the Executive shall be extended until the date upon which the right to exercise anyCompensatory Award would have expired if the Executive had continued to be employed by the Company for the full term of such Compensatory Award, *provided*, that this Section 5(a)(4) shall not apply to any Compensatory Award outstanding as ofthe Date of Termination under the Company’s 1997 Employee Stock Purchase Plan (or any successor thereto). The applicable award agreements for the Compensatory Awards are hereby amended to the extent necessary to implement this Section 5(a)(4);and 

 

9 

(5) to the extent not theretofore paid or provided, the Company shall timely pay orprovide to the Executive any Other Benefits (as defined in Section 6). 

 

(b) **Death****.** If the Executive’s employment is terminated by reason of the Executive’s death during the Employment Period, the Company shall provide the Executive’s estate or beneficiaries with the AccruedObligations, the benefits provided for under Section 3(a) of the Employment Agreement (as defined in Section 6 hereof) and the timely payment or delivery of the Other Benefits, and shall have no other severance obligations under this Agreement. TheAccrued Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term “Other Benefits”as utilized in this Section 5(b) shall include, without limitation, and the Executive’s estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and the AffiliatedCompanies to the estates and beneficiaries of peer executives of the Company and the Affiliated Companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives andtheir beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive’s estate and/or the Executive’s beneficiaries, as in effect on the date of the Executive’s deathwith respect to other peer executives of the Company and the Affiliated Companies and their beneficiaries. 

 

(c) **Disability****.**If the Executive’s employment is terminated by reason of the Executive’s Disability during the EmploymentPeriod, the Company shall provide the Executive with the Accrued Obligations, the benefits provided for under Section 3(b) of the Employment Agreement (as defined in Section 6 hereof) and the timely payment or delivery of the Other Benefits, andshall have no other severance obligations under this Agreement. The Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term“Other Benefits” as utilized in this Section 5(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generallyprovided by the Company and the Affiliated Companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peerexecutives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive’s family, as in effect at any time thereafter generally with respect toother peer executives of the Company and the Affiliated Companies and their families. 

 

(d) **Cause; Other Than for Good Reason****.**If the Executive’s employment is terminated for Cause during the Employment Period, the Company shall provide to the Executive (1) the Executive’sAnnual Base Salary through the Date of Termination, (2) the amount of any compensation previously deferred by the Executive, and (3) the Other Benefits, in each case, to the extent theretofore unpaid, and shall have no other severance obligationsunder this Agreement. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, the Company shall provide to the Executive the Accrued Obligations and the timely payment or delivery ofthe Other Benefits, and shall have no other severance obligations under this Agreement. In such case, all the Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. 

 

10 

**Section 6.****Non-exclusivity of Rights.** Nothing in this Agreement shall prevent orlimit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or the Affiliated Companies and for which the Executive may qualify, nor, subject to Section 11(f), shall anything hereinlimit or otherwise affect such rights as the Executive may have under any other contract or agreement with the Company or the Affiliated Companies. Amounts that are vested benefits or that the Executive is otherwise entitled to receive under anyplan, policy, practice or program of or any other contract or agreement with the Company or the Affiliated Companies at or subsequent to the Date of Termination (“Other Benefits”) shall be payable in accordance with such plan, policy,practice or program or contract or agreement, except as explicitly modified by this Agreement. Notwithstanding the foregoing, if the Executive becomes eligible to receive payments and benefits pursuant to Section 5(a) of this Agreement, theExecutive shall not be entitled to any severance pay or benefits under any severance plan, program or policy of the Company and the Affiliated Companies unless otherwise specifically provided therein in a specific reference to this Agreement.

 

**Section 7.****Full Settlement****.** TheCompany’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim, right or action that theCompany may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of thisAgreement, and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred (within 10 days following the Company’s receipt of an invoice from the Executive), to the full extentpermitted by law, all legal fees and expenses that the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under,any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at theapplicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the “Code”). In addition, the Company shall indemnify and hold the Executive, harmless on an after-tax basis, for any ExciseTax (as defined in Section 8(f), income tax, and all other applicable taxes (including interest and penalties) imposed as a result of the Company’s payment of legal fees and expenses that the Executive may reasonably incur as a result of anysuch contest. 

 

**Section 8.****Certain AdditionalPayments by the Company****.**

 

(a) Anything in thisAgreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any Payment would be subject to the Excise Tax, then the Executive shall be entitled to receive an additional payment (the“Gross-Up Payment”) in an amount such that, after payment by the Executive of all taxes (and any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penaltiesimposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 8(a),if it shall be determined that the Executive is entitled to the Gross-Up Payment, but that the Parachute Value of all Payments does not exceed 110% of the Safe Harbor Amount, then no Gross-Up Payment shall be made to the Executive and the amountspayable under this Agreement shall be reduced so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made by first reducing the paymentsunder Section 5(a)(i)(B), unless an alternative method of reduction is elected by the Executive, and in any event shall be made in such a manner as to maximize the Value of all Payments actually made to the Executive. For purposes of reducing thePayments to the Safe Harbor Amount, only amounts payable under this Agreement (and no other Payments) shall be reduced. If the reduction of the amount payable under this Agreement would not result in a reduction of the Parachute Value of allPayments to the Safe Harbor Amount, no amounts payable under the Agreement shall be reduced pursuant to this Section 8(a). The Company’s obligation to make Gross-Up Payments under this Section 8 shall not be conditioned upon theExecutive’s termination of employment. 

 

11 

(b) Subject to the provisions of Section 8(c), all determinations required to be made under this Section8, including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Ernst & Young, LLP, or such other nationally recognizedcertified public accounting firm as may be designated by the Executive (the “Accounting Firm”). The Accounting Firm shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receiptof notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to thisSection 8, shall be paid by the Company to the Executive within 5 days of the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of theuncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (the“Underpayment”), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is required to make a payment of any Excise Tax, theAccounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. 

 

(c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful,would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable, but no later than 10 business days after the Executive is informed in writing of such claim. The Executive shall apprise theCompany of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to theCompany (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that the Company desires to contest such claim,the Executive shall: 

 

(1) give the Company anyinformation reasonably requested by the Company relating to such claim, 

 

12 

(2) take such action in connection with contesting such claim as the Company shallreasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, 

 

(3) cooperate with the Company in good faith in ordereffectively to contest such claim, and 

 

(4)permit the Company to participate in any proceedings relating to such claim; 

 

*provided*, *however*, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest, and shall indemnify and hold the Executiveharmless, on an after-tax basis, for any Excise Tax or income tax, and all other applicable taxes, (including interest and penalties) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoingprovisions of this Section 8(c), the Company shall control all proceedings taken in connection with such contest, and, at its sole discretion, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with theapplicable taxing authority in respect of such claim and may, at its sole discretion, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute suchcontest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; *provided*, *however*, that, if the Company directs the Executive to paysuch claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax(including interest or penalties) imposed with respect to such advance or with respect to any imputed income in connection with such advance; and *provided*, *further*, that any extension of the statute of limitations relating to paymentof taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues withrespect to which the Gross-Up Payment would be payable hereunder, and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. 

 

(d) If, after the receipt by the Executive of a Gross-Up Payment or an amountadvanced by the Company pursuant to Section 8(c), the Executive becomes entitled to receive any refund with respect to the Excise Tax to which such Gross-Up Payment relates or with respect to such claim, the Executive shall (subject to theCompany’s complying with the requirements of Section 8(c), if applicable) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by theExecutive of an amount advanced by the Company pursuant to Section 8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intentto contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amountof Gross-Up Payment required to be paid. 

 

13 

(e) Notwithstanding any other provision of this Section 8, the Company may, in its sole discretion,withhold and pay over to the Internal Revenue Service or any other applicable taxing authority, for the benefit of the Executive, all or any portion of any Gross-Up Payment, and the Executive hereby consents to such withholding. 

 

(f) Definitions. The following terms shall have the following meaningsfor purposes of this Section 8. 

 

(i) “Excise Tax”shall mean the excise tax imposed by Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax. 

 

(ii) “Parachute Value” of a Payment shall mean the present value as of the date of the change of control for purposes of Section 280G of theCode of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2), as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.

 

(iii) A “Payment” shall mean any payment benefit ordistribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise. 

 

(iv) The “Safe Harbor Amount” means 2.99 times the Executive’s“base amount,” within the meaning of Section 280G(b)(3) of the Code. 

 

(v) “Value” of a Payment shall mean the economic present value of a Payment as of the date of the change of control for purposes of Section 280G of the Code, as determined by the Accounting Firm using thediscount rate required by Section 280G(d)(4) of the Code. 

 

**Section 9.****Confidential Information****.** The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or theAffiliated Companies, and their respective businesses, which information, knowledge or data shall have been obtained by the Executive during the Executive’s employment by the Company or the Affiliated Companies and which information, knowledgeor data shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive’s employment with the Company, the Executive shall not,without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those persons designated by the Company. Inno event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 

 

**Section 10.****Successors****.** (a) This Agreement ispersonal to the Executive, and, without the prior written consent of the Company, shall not be assignable by the Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable bythe Executive’s legal representatives. 

 

14 

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors andassigns. Except as provided in Section 10(c), without the prior written consent of the Executive this Agreement shall not be assignable by the Company. 

 

(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all ofthe business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. “Company”means the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise. 

 

**Section 11.****Miscellaneous****.** (a) This Agreement shall be governed by and construed in accordancewith the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherthan by a written agreement executed by the parties hereto or their respective successors and legal representatives. 

 

(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered orcertified mail, return receipt requested, postage prepaid, addressed as follows: 

 

if to the Executive: 

 

CharlesL. Ill, 

c/o BEA Systems Inc. 

2315 North First Street 

San Jose, CA. 95131 

 

if to the Company: 

 

BEA Systems, Inc. 

2315 North First Street

San Jose, CA 95131 

 

Attention: General Counsel 

 

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actuallyreceived by the addressee. 

 

(c) The invalidity orunenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. 

 

15 

(d) The Company may withhold from any amounts payable under this Agreement such United States federal,state or local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. 

 

(e) The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert anyright the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver of suchprovision or right or any other provision or right of this Agreement. 

 

(f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is “at will” and,subject to Section 1(a), prior to the Effective Date, the Executive’s employment may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights underthis Agreement. From and after the Effective Date, except for the Employee Proprietary Information and Inventions Agreement entered into between the Company and the Executive and dated July 6, 2001, which shall remain in effect from and after theEffective Date and as specifically otherwise provided herein, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof, including without limitation the Employment Agreement between theExecutive and the Company dated as of August 12, 2002. 

 

INWITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first abovewritten. 

 

BEA SYSTEMS, INC.

        /s/ CHARLES L. ILL,III

Charles L. Ill, III

 

16 

**AMENDED AND RESTATED EMPLOYMENT**

**AGREEMENT**

 

AGREEMENT, dated as of the **1st**day of ******November**, 2003 (this “Agreement”), by and between BEA Systems, Inc., a Delaware corporation (the “Company”), and Thomas Tod Nielsen (the“Executive”). 

 

WHEREAS, the Board of Directors of theCompany (the “Board”), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat oroccurrence of a Change in Control (as defined herein). The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change in Controland to encourage the Executive’s full attention and dedication to the current Company and in the event of any threatened or pending Change in Control, and to provide the Executive with compensation and benefits arrangements upon a Change inControl that ensure that the compensation and benefits expectations of the Executive will be satisfied and that are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company toenter into this Agreement. 

 

NOW, THEREFORE, IT IS HEREBY AGREEDAS FOLLOWS: 

 

**Section 1.****CertainDefinitions****.** (a) “Effective Date” means the first date during the Change in Control Period (as defined herein) on which a Change in Control occurs. Notwithstanding anything in this Agreement to the contrary, if a Change inControl occurs and if the Executive’s employment with the Company is terminated prior to the date on which the Change in Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (1) was at therequest of a third party that has taken steps reasonably calculated to effect a Change in Control or (2) otherwise arose in connection with or anticipation of a Change in Control, then “Effective Date” means the date immediately prior tothe date of such termination of employment. 

 

(b) “Changein Control Period” means the period commencing on the date hereof and ending on the third anniversary of the date hereof; *provided*, *however*, that, commencing on the date one year after the date hereof, and on each annualanniversary of such date (such date and each annual anniversary thereof, the “Renewal Date”), unless previously terminated, the Change in Control Period shall be automatically extended so as to terminate three years from such Renewal Date,unless, at least 60 days prior to the Renewal Date, the Company shall give notice to the Executive that the Change in Control Period shall not be so extended. 

 

(c) “Affiliated Company” means any company controlled by, controlling or under common control with the Company. 

 

(d) “Assume” means that pursuant to a Change in Control either (i)the Compensatory Award is expressly affirmed by the Company or (ii) the contractual obligations represented by the Compensatory Award are expressly assumed (and not simply by operation of law) by the successor entity or its parent in connection withthe Change in Control with appropriate adjustments to the number and type of securities of the successor entity or its parent subject to the Compensatory Award and the exercise or purchase price thereof (if any) which preserves the compensationelement of the Compensatory Award existing at the time of the Change in Control as determined in accordance with the instruments evidencing the agreement to assume the Compensatory Award. 

(e) “Change in Control” means the first to occur of any of the following: 

 

(1) The acquisition by any individual, entity or group (within the meaningof Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more ofeither (A) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in theelection of directors (the “Outstanding Company Voting Securities”); *provided*, *however*, that, for purposes of this Section 1(e), the following acquisitions shall not constitute a Change in Control: (i) any acquisitiondirectly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company or (iv) any acquisition by any corporationpursuant to a transaction that complies with Sections 1(e)(3)(A), 1(e)(3)(B) and 1(e)(3)(C). 

 

(2) Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; *provided*, *however*, that anyindividual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall beconsidered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to theelection or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board. 

 

(3) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any ofits subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), ineach case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediatelyprior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in theelection of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of theCompany’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding CompanyVoting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination)beneficially owns, directly or indirectly, 20% 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 securitiesof such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members ofthe Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or 

 

(4) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 

 

2 

**Section 2.****Employment Period****.******The Company hereby agrees to continuethe Executive in its employ, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the first anniversary of the Effective Date (the “Employment Period”). The Employment Periodshall terminate upon the Executive’s termination of employment for any reason. 

 

**Section 3.****Terms of Employment****.** (a) **Position and Duties.** (1) During the Employment Period, (A) the Executive’s position (including status, offices, titles and reportingrequirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the EffectiveDate and (B) the Executive’s services shall be performed at the office where the Executive was employed immediately preceding the Effective Date or at any other location less than 35 miles from such office. 

 

(2) During the Employment Period, and excluding any periods of vacation andsick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilitiesassigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period, it shall not be a violation of this Agreement for the Executive to(A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interferewith the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that, to the extent that any such activities have been conducted by the Executiveprior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of theExecutive’s responsibilities to the Company. 

 

(b)**Compensation.** (1) **Base Salary.**During the Employment Period, the Executive shall receive an annual base salary (the “Annual Base Salary”) at an annual rate at least equal to 12 times the highest monthly basesalary paid or payable, including any base salary that has been earned but deferred, to the Executive by the Company and the Affiliated Companies in respect of the 12-month period immediately preceding the month in which the Effective Date occurs.The Annual Base Salary shall be paid at such intervals as the Company pays executive salaries generally. During the Employment Period, the Annual Base Salary shall be reviewed at least annually, beginning no more than 12 months after the last salaryincrease awarded to the Executive prior to the Effective Date. Any increase in the Annual Base Salary during the Employment Period shall not serve to limit or reduce any other obligation to the Executive under this Agreement. The Annual Base Salaryshall not be reduced after any such increase and the term “Annual Base Salary” shall refer to the Annual Base Salary as so increased. 

 

3 

(2) **Annual Bonus****.** In addition to the Annual Base Salary, the Executive shall beawarded, for each fiscal year ending during the Employment Period, an annual bonus (the “Annual Bonus”) in cash at least equal to the Executive’s highest bonus earned under the Company’s Executive Bonus Plan, or any comparablebonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (or for such lesser number of full fiscal years prior to the Effective Date for which the Executive was eligible to earn such a bonus,and annualized in the case of any bonus earned for a partial fiscal year) (the “Recent Annual Bonus”). (If the Executive has not been eligible to earn such a bonus for any period prior to the Effective Date, the “Recent AnnualBonus” shall mean the Executive’s target annual bonus for the year in which the Effective Date occurs.) Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year forwhich the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. 

 

(3) **Incentive, Savings and Retirement Plans.**During the Employment Period, the Executive shall be entitled to participate in all cashincentive, equity incentive, savings and retirement plans, practices, policies, and programs applicable generally to other peer executives of the Company and the Affiliated Companies, but in no event shall such plans, practices, policies andprograms provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefitopportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and the Affiliated Companies for the Executive under such plans, practices, policies and programs as in effect at any time duringthe 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the Affiliated Companies. In the eventthat, in connection with a Change of Control, the party effectuating the Change of Control does not agree to Assume any stock option, restricted stock award, restricted stock unit award or other equity-based award or performance award held by theExecutive or any transferee of the Executive (each, a “Compensatory Award”) that is unvested and outstanding as of immediately prior to the Change of Control, such Compensatory Award shall as of immediately prior to the Change of Controlvest in full and be immediately exercisable, provided, that if the Executive’s employment with the Company is terminated prior to the date on which the Change in Control occurs, and if it is reasonably demonstrated by the Executive thatsuch termination of employment (1) was at the request of a third party that has taken steps reasonably calculated to effect a Change in Control or (2) otherwise arose in connection with or anticipation of a Change in Control, then each CompensatoryAward that is unvested and outstanding as of immediately prior to the Date of Termination shall not be forfeited, shall remain outstanding following the Date of Termination, and shall not vest unless and until a Change of Control occurs within oneyear following the Date of Termination, in which case, immediately prior to a Change of Control, such Compensatory Awards shall vest in full and become immediately exercisable. In the event that a Change in Control does not occur within one yearfollowing the Date of Termination as described in the proviso of the preceding sentence, each unvested Compensatory Award shall be immediately forfeited by the Executive. 

 

4 

(4) **Welfare Benefit Plans****.**During the Employment Period, the Executive and/or theExecutive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and the Affiliated Companies (including, withoutlimitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and the AffiliatedCompanies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits that are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for theExecutive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the AffiliatedCompanies. 

 

(5) **Expenses****.**During theEmployment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and the AffiliatedCompanies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of theCompany and the Affiliated Companies. 

 

(6) **FringeBenefits****.**During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and paymentof related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and the Affiliated Companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Dateor, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies. 

 

(7) **Office and Support Staff****.**During the Employment Period, the Executive shall be entitled to anoffice or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and the AffiliatedCompanies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and the AffiliatedCompanies. 

 

5 

(8) **Vacation****.**During the Employment Period, the Executive shall be entitled to paidvacation in accordance with the most favorable plans, policies, programs and practices of the Company and the Affiliated Companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, ifmore favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies. 

 

**Section 4.****Termination of Employment****.** (a) **Death or Disability.** TheExecutive’s employment shall terminate automatically if the Executive dies during the Employment Period. If the Company determines in good faith that the Disability (as defined herein) of the Executive has occurred during the Employment Period(pursuant to the definition of “Disability”), it may give to the Executive written notice in accordance with Section 11(b) of its intention to terminate the Executive’s employment. In such event, the Executive’s employment withthe Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), *provided*that, within the 30 days after such receipt, the Executive shall not have returned tofull-time performance of the Executive’s duties. “Disability” means the absence of the Executive from the Executive’s duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due tomental or physical illness that is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative. 

 

(b) **Cause****.**The Company may terminate theExecutive’s employment during the Employment Period for Cause. “Cause” means: 

 

(1) the willful and continued failure of the Executive to perform substantially the Executive’s duties (as contemplated by Section3(a)(1)(A)) with the Company or any Affiliated Company (other than any such failure resulting from incapacity due to physical or mental illness or following the Executive’s delivery of a Notice of Termination for Good Reason), after a writtendemand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company that specifically identifies the manner in which the Board or the Chief Executive Officer of the Company believes that theExecutive has not substantially performed the Executive’s duties, or 

 

(2) the willful engaging by the Executive in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company. 

 

For purposes of this Section 4(b), no act, or failure to act, on the part of the Executive shall be considered “willful” unless itis done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to aresolution duly adopted by the Board or upon the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omittedto be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of aresolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (excluding the Executive, if the Executive is a member of the Board) at a meeting of the Board called and held for such purpose(after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty ofthe conduct described in Section 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail. 

 

6 

(c) **Good Reason****.**The Executive’s employment may be terminated by the Executivefor Good Reason or by the Executive voluntarily without Good Reason. “Good Reason” means: 

 

(1) the assignment to the Executive of any duties inconsistent in any respect with the Executive’s position (including status,offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a), or any other diminution in such position, authority, duties or responsibilities (whether or not occurring solely as a result of theCompany’s ceasing to be a publicly traded entity), excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by theExecutive; 

 

(2) any failure by the Company tocomply with any of the provisions of Section 3(b), other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive;

 

(3) the Company’s requiring theExecutive (i) to be based at any office or location other than as provided in Section 3(a)(1)(B), (ii) to be based at a location other than the principal executive offices of the Company if the Executive was employed at such location immediatelypreceding the Effective Date, or (iii) to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; 

 

(4) any purported termination by the Company of the Executive’s employment otherwise than as expressly permitted by thisAgreement; or 

 

(5) any failure by the Companyto comply with and satisfy Section 10(c). 

 

For purposes of this Section 4(c),any good faith determination of Good Reason made by the Executive shall be conclusive. The Executive’s mental or physical incapacity following the occurrence of an event described above in clauses (1) through (5) shall not affect theExecutive’s ability to terminate employment for Good Reason. 

 

(d) **Notice of Termination.**Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b).“Notice of Termination” means a written notice that (1) indicates the specific termination provision in this Agreement relied upon, (2) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed toprovide a basis for termination of the Executive’s employment under the provision so indicated, and (3) if the Date of Termination (as defined herein) is other than the date of receipt of such notice, specifies the Date of Termination (whichDate of Termination shall be not more than 30 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Causeshall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s respectiverights hereunder. 

 

7 

(e) **Date of Termination****.**“Date of Termination” means (1) if theExecutive’s employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified in the Notice of Termination, (which date shall not be more than 30days after the giving of such notice), as the case may be, (2) if the Executive’s employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executiveof such termination, and (3) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 

 

**Section 5.****Obligations of the Company uponTermination****. (a) Good Reason; Other Than for Cause, Death or Disability.** If, during the Employment Period, the Company terminates the Executive’s employment other than for Cause or Disability or the Executive terminatesemployment for Good Reason: 

 

(1) the Companyshall pay to the Executive, in a lump sum in cash within 30 days after the Date of Termination, the aggregate of the following amounts: 

 

(A) the sum of (i) the Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid, (ii) theproduct of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof that has been earned but deferred (and annualized for any fiscal year consisting of less than 12 full monthsor during which the Executive was employed for less than 12 full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount, the “Highest Annual Bonus”) and (y) a fraction, the numeratorof which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365, and (iii) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon)and any accrued vacation pay, in each case, to the extent not theretofore paid (the sum of the amounts described in subclauses (i), (ii) and (iii), the “Accrued Obligations”); 

 

(B) the amount equal to the product of (i) two and (ii) the sum of (x) the Executive’s Annual BaseSalary and (y) the Highest Annual Bonus; and 

 

(C) an amount equal to the excess of (i) the actuarial equivalent of the benefit under the Company’s qualified defined benefit retirement plan (the “Retirement Plan”) (utilizing actuarial assumptions no less favorable to theExecutive than those in effect under the Retirement Plan immediately prior to the Effective Date) and any excess or supplemental retirement plan in which the Executive participates (collectively, the “SERP”) that the Executive wouldreceive if the Executive’s employment continued for two years after the Date of Termination, assuming for this purpose that all accrued benefits are fully vested and assuming that the Executive’s compensation in each of the two years isthat required by Sections 3(b)(1) and 3(b)(2), over (ii) the actuarial equivalent of the Executive’s actual benefit (paid or payable), if any, under the Retirement Plan and the SERP as of the Date of Termination; 

 

8 

(2) for two years after the Executive’s Date of Termination, or such longer periodas may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive’s family at least equal to those that would have been provided to them in accordancewith the plans, programs, practices and policies described in Section 3(b)(4) and 3(b)(6) if the Executive’s employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respectto other peer executives of the Company and the Affiliated Companies and their families, *provided*, *however*, that, if the Executive becomes reemployed with another employer and is eligible to receive such benefits under another employerprovided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencementof benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until two years after the Date of Termination and to have retired on the lastday of such period; 

 

(3) the Company shall, atits sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in the Executive’s sole discretion provided, that the cost of such outplacement shall notexceed $50,000; 

 

(4) notwithstanding anyprovision in an award agreement to the contrary, effective as of the Date of Termination, (1) each and every Compensatory Award that is outstanding as of the Date of Termination shall immediately vest in full and become exercisable or payable and bereleased from any repurchase or forfeiture rights, and (2) to the extent applicable, the term during which each and every such Compensatory Award may be exercised by the Executive shall be extended until the date upon which the right to exercise anyCompensatory Award would have expired if the Executive had continued to be employed by the Company for the full term of such Compensatory Award, *provided*, that this Section 5(a)(4) shall not apply to any Compensatory Award outstanding as ofthe Date of Termination under the Company’s 1997 Employee Stock Purchase Plan (or any successor thereto). The applicable award agreements for the Compensatory Awards are hereby amended to the extent necessary to implement this Section 5(a)(4);and 

 

9 

(5) to the extent not theretofore paid or provided, the Company shall timely pay orprovide to the Executive any Other Benefits (as defined in Section 6). 

 

(b) **Death****.** If the Executive’s employment is terminated by reason of the Executive’s death during the Employment Period, the Company shall provide the Executive’s estate or beneficiaries with the AccruedObligations, the benefits provided for under Section 3(a) of the Employment Agreement (as defined in Section 6 hereof) and the timely payment or delivery of the Other Benefits, and shall have no other severance obligations under this Agreement. TheAccrued Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term “Other Benefits”as utilized in this Section 5(b) shall include, without limitation, and the Executive’s estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and the AffiliatedCompanies to the estates and beneficiaries of peer executives of the Company and the Affiliated Companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives andtheir beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive’s estate and/or the Executive’s beneficiaries, as in effect on the date of the Executive’s deathwith respect to other peer executives of the Company and the Affiliated Companies and their beneficiaries. 

 

(c) **Disability****.**If the Executive’s employment is terminated by reason of the Executive’s Disability during the EmploymentPeriod, the Company shall provide the Executive with the Accrued Obligations, the benefits provided for under Section 3(b) of the Employment Agreement (as defined in Section 6 hereof) and the timely payment or delivery of the Other Benefits, andshall have no other severance obligations under this Agreement. The Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term“Other Benefits” as utilized in this Section 5(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generallyprovided by the Company and the Affiliated Companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peerexecutives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive’s family, as in effect at any time thereafter generally with respect toother peer executives of the Company and the Affiliated Companies and their families. 

 

(d) **Cause; Other Than for Good Reason****.**If the Executive’s employment is terminated for Cause during the Employment Period, the Company shall provide to the Executive (1) the Executive’sAnnual Base Salary through the Date of Termination, (2) the amount of any compensation previously deferred by the Executive, and (3) the Other Benefits, in each case, to the extent theretofore unpaid, and shall have no other severance obligationsunder this Agreement. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, the Company shall provide to the Executive the Accrued Obligations and the timely payment or delivery ofthe Other Benefits, and shall have no other severance obligations under this Agreement. In such case, all the Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. 

 

10 

**Section 6.****Non-exclusivity of Rights.** Nothing in this Agreement shall prevent orlimit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or the Affiliated Companies and for which the Executive may qualify, nor, subject to Section 11(f), shall anything hereinlimit or otherwise affect such rights as the Executive may have under any other contract or agreement with the Company or the Affiliated Companies. Amounts that are vested benefits or that the Executive is otherwise entitled to receive under anyplan, policy, practice or program of or any other contract or agreement with the Company or the Affiliated Companies at or subsequent to the Date of Termination (“Other Benefits”) shall be payable in accordance with such plan, policy,practice or program or contract or agreement, except as explicitly modified by this Agreement. Notwithstanding the foregoing, if the Executive becomes eligible to receive payments and benefits pursuant to Section 5(a) of this Agreement, theExecutive shall not be entitled to any severance pay or benefits under any severance plan, program or policy of the Company and the Affiliated Companies unless otherwise specifically provided therein in a specific reference to this Agreement.

 

**Section 7.****Full Settlement****.** TheCompany’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim, right or action that theCompany may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of thisAgreement, and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred (within 10 days following the Company’s receipt of an invoice from the Executive), to the full extentpermitted by law, all legal fees and expenses that the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under,any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at theapplicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the “Code”). In addition, the Company shall indemnify and hold the Executive, harmless on an after-tax basis, for any ExciseTax (as defined in Section 8(f), income tax, and all other applicable taxes (including interest and penalties) imposed as a result of the Company’s payment of legal fees and expenses that the Executive may reasonably incur as a result of anysuch contest. 

 

**Section 8.****Certain AdditionalPayments by the Company****.**

 

(a) Anything in thisAgreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any Payment would be subject to the Excise Tax, then the Executive shall be entitled to receive an additional payment (the“Gross-Up Payment”) in an amount such that, after payment by the Executive of all taxes (and any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penaltiesimposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 8(a),if it shall be determined that the Executive is entitled to the Gross-Up Payment, but that the Parachute Value of all Payments does not exceed 110% of the Safe Harbor Amount, then no Gross-Up Payment shall be made to the Executive and the amountspayable under this Agreement shall be reduced so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made by first reducing the paymentsunder Section 5(a)(i)(B), unless an alternative method of reduction is elected by the Executive, and in any event shall be made in such a manner as to maximize the Value of all Payments actually made to the Executive. For purposes of reducing thePayments to the Safe Harbor Amount, only amounts payable under this Agreement (and no other Payments) shall be reduced. If the reduction of the amount payable under this Agreement would not result in a reduction of the Parachute Value of allPayments to the Safe Harbor Amount, no amounts payable under the Agreement shall be reduced pursuant to this Section 8(a). The Company’s obligation to make Gross-Up Payments under this Section 8 shall not be conditioned upon theExecutive’s termination of employment. 

 

11 

(b) Subject to the provisions of Section 8(c), all determinations required to be made under this Section8, including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Ernst & Young, LLP, or such other nationally recognizedcertified public accounting firm as may be designated by the Executive (the “Accounting Firm”). The Accounting Firm shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receiptof notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to thisSection 8, shall be paid by the Company to the Executive within 5 days of the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of theuncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (the“Underpayment”), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is required to make a payment of any Excise Tax, theAccounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. 

 

(c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful,would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable, but no later than 10 business days after the Executive is informed in writing of such claim. The Executive shall apprise theCompany of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to theCompany (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that the Company desires to contest such claim,the Executive shall: 

 

(1) give the Company anyinformation reasonably requested by the Company relating to such claim, 

 

12 

(2) take such action in connection with contesting such claim as the Company shallreasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, 

 

(3) cooperate with the Company in good faith in ordereffectively to contest such claim, and 

 

(4)permit the Company to participate in any proceedings relating to such claim; 

 

*provided*, *however*, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest, and shall indemnify and hold the Executiveharmless, on an after-tax basis, for any Excise Tax or income tax, and all other applicable taxes, (including interest and penalties) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoingprovisions of this Section 8(c), the Company shall control all proceedings taken in connection with such contest, and, at its sole discretion, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with theapplicable taxing authority in respect of such claim and may, at its sole discretion, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute suchcontest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; *provided*, *however*, that, if the Company directs the Executive to paysuch claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax(including interest or penalties) imposed with respect to such advance or with respect to any imputed income in connection with such advance; and *provided*, *further*, that any extension of the statute of limitations relating to paymentof taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues withrespect to which the Gross-Up Payment would be payable hereunder, and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. 

 

(d) If, after the receipt by the Executive of a Gross-Up Payment or an amountadvanced by the Company pursuant to Section 8(c), the Executive becomes entitled to receive any refund with respect to the Excise Tax to which such Gross-Up Payment relates or with respect to such claim, the Executive shall (subject to theCompany’s complying with the requirements of Section 8(c), if applicable) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by theExecutive of an amount advanced by the Company pursuant to Section 8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intentto contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amountof Gross-Up Payment required to be paid. 

 

13 

(e) Notwithstanding any other provision of this Section 8, the Company may, in its sole discretion,withhold and pay over to the Internal Revenue Service or any other applicable taxing authority, for the benefit of the Executive, all or any portion of any Gross-Up Payment, and the Executive hereby consents to such withholding. 

 

(f) Definitions. The following terms shall have the following meaningsfor purposes of this Section 8. 

 

(i) “Excise Tax”shall mean the excise tax imposed by Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax. 

 

(ii) “Parachute Value” of a Payment shall mean the present value as of the date of the change of control for purposes of Section 280G of theCode of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2), as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.

 

(iii) A “Payment” shall mean any payment benefit ordistribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise. 

 

(iv) The “Safe Harbor Amount” means 2.99 times the Executive’s“base amount,” within the meaning of Section 280G(b)(3) of the Code. 

 

(v) “Value” of a Payment shall mean the economic present value of a Payment as of the date of the change of control for purposes of Section 280G of the Code, as determined by the Accounting Firm using thediscount rate required by Section 280G(d)(4) of the Code. 

 

**Section 9.****Confidential Information****.** The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or theAffiliated Companies, and their respective businesses, which information, knowledge or data shall have been obtained by the Executive during the Executive’s employment by the Company or the Affiliated Companies and which information, knowledgeor data shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive’s employment with the Company, the Executive shall not,without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those persons designated by the Company. Inno event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 

 

**Section 10.****Successors****.** (a) This Agreement ispersonal to the Executive, and, without the prior written consent of the Company, shall not be assignable by the Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable bythe Executive’s legal representatives. 

 

14 

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors andassigns. Except as provided in Section 10(c), without the prior written consent of the Executive this Agreement shall not be assignable by the Company. 

 

(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all ofthe business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. “Company”means the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise. 

 

**Section 11.****Miscellaneous****.** (a) This Agreement shall be governed by and construed in accordancewith the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherthan by a written agreement executed by the parties hereto or their respective successors and legal representatives. 

 

(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered orcertified mail, return receipt requested, postage prepaid, addressed as follows: 

 

if to the Executive: 

 

ThomasTod Nielsen 

c/o BEA Systems Inc. 

2315 North First Street 

San Jose, CA. 95131 

 

if to the Company: 

 

BEA Systems, Inc. 

2315 North First Street

San Jose, CA 95131 

 

Attention: General Counsel 

 

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actuallyreceived by the addressee. 

 

(c) The invalidity orunenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. 

 

15 

(d) The Company may withhold from any amounts payable under this Agreement such United States federal,state or local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. 

 

(e) The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert anyright the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver of suchprovision or right or any other provision or right of this Agreement. 

 

(f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is “at will” and,subject to Section 1(a), prior to the Effective Date, the Executive’s employment may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights underthis Agreement. From and after the Effective Date, except for the Employee Proprietary Information and Inventions Agreement entered into between the Company and the Executive and dated July 6, 2001, which shall remain in effect from and after theEffective Date and as specifically otherwise provided herein, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof, including without limitation the Employment Agreement between theExecutive and the Company dated as of August 12, 2002. 

 

INWITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first abovewritten. 

 

BEA SYSTEMS, INC.

        /s/ THOMAS TOD NIELSEN

Thomas Tod Nielsen

 

16 

**AMENDED AND RESTATED EMPLOYMENT**

**AGREEMENT**

 

AGREEMENT, dated as of the **            **day of **            **, 2003 (this“Agreement”), by and between BEA Systems, Inc., a Delaware corporation (the “Company”), and Alfred S. Chuang (the “Executive”). 

 

WHEREAS, the Board of Directors of the Company (the “Board”), has determined that it is in the best interests of the Company and itsshareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change in Control (as defined herein). The Board believes it is imperative to diminish theinevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change in Control and to encourage the Executive’s full attention and dedication to the current Company and in theevent of any threatened or pending Change in Control, and to provide the Executive with compensation and benefits arrangements upon a Change in Control that ensure that the compensation and benefits expectations of the Executive will be satisfiedand that are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. 

 

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 

 

**Section 1.****Certain Definitions****.** (a) “Effective Date” means the first date during theChange in Control Period (as defined herein) on which a Change in Control occurs. Notwithstanding anything in this Agreement to the contrary, if a Change in Control occurs and if the Executive’s employment with the Company is terminated priorto the date on which the Change in Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third party that has taken steps reasonably calculated to effect a Change inControl or (2) otherwise arose in connection with or anticipation of a Change in Control, then “Effective Date” means the date immediately prior to the date of such termination of employment. 

 

(b) “Change in Control Period” means the period commencing on thedate hereof and ending on the third anniversary of the date hereof; *provided*, *however*, that, commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversarythereof, the “Renewal Date”), unless previously terminated, the Change in Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the Companyshall give notice to the Executive that the Change in Control Period shall not be so extended. 

 

(c) “Affiliated Company” means any company controlled by, controlling or under common control with the Company. 

 

(d) “Assume” means that pursuant to a Change in Control either (i) the Compensatory Award is expressly affirmed by the Company or (ii) thecontractual obligations represented by the Compensatory Award are expressly assumed (and not simply by operation of law) by the successor entity or its parent in connection with the Change in Control with appropriate adjustments to the number andtype of securities of the successor entity or its parent subject to the Compensatory Award and the exercise or purchase price thereof (if any) which preserves the compensation element of the Compensatory Award existing at the time of the Change inControl as determined in accordance with the instruments evidencing the agreement to assume the Compensatory Award. 

(e) “Change in Control” means the first to occur of any of the following: 

 

(1) The acquisition by any individual, entity or group (within the meaningof Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more ofeither (A) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in theelection of directors (the “Outstanding Company Voting Securities”); *provided*, *however*, that, for purposes of this Section 1(e), the following acquisitions shall not constitute a Change in Control: (i) any acquisitiondirectly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company or (iv) any acquisition by any corporationpursuant to a transaction that complies with Sections 1(e)(3)(A), 1(e)(3)(B) and 1(e)(3)(C). 

 

(2) Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; *provided*, *however*, that anyindividual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall beconsidered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to theelection or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board. 

 

(3) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any ofits subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), ineach case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediatelyprior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in theelection of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of theCompany’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding CompanyVoting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination)beneficially owns, directly or indirectly, 20% 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 securitiesof such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members ofthe Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or 

 

(4) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 

**Section 2.****Employment Period****.******The Company hereby agrees to continuethe Executive in its employ, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the first anniversary of the Effective Date (the “Employment Period”). The Employment Periodshall terminate upon the Executive’s termination of employment for any reason. 

 

**Section 3.****Terms of Employment****.** (a) **Position and Duties.** (1) During the Employment Period, (A) the Executive’s position (including status, offices, titles and reportingrequirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the EffectiveDate and (B) the Executive’s services shall be performed at the office where the Executive was employed immediately preceding the Effective Date or at any other location less than 35 miles from such office. 

 

(2) During the Employment Period, and excluding any periods of vacation andsick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilitiesassigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period, it shall not be a violation of this Agreement for the Executive to(A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interferewith the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that, to the extent that any such activities have been conducted by the Executiveprior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of theExecutive’s responsibilities to the Company. 

 

(b)**Compensation.** (1) **Base Salary.**During the Employment Period, the Executive shall receive an annual base salary (the “Annual Base Salary”) at an annual rate at least equal to 12 times the highest monthly basesalary paid or payable, including any base salary that has been earned but deferred, to the Executive by the Company and the Affiliated Companies in respect of the 12-month period immediately preceding the month in which the Effective Date occurs.The Annual Base Salary shall be paid at such intervals as the Company pays executive salaries generally. During the Employment Period, the Annual Base Salary shall be reviewed at least annually, beginning no more than 12 months after the last salaryincrease awarded to the Executive prior to the Effective Date. Any increase in the Annual Base Salary during the Employment Period shall not serve to limit or reduce any other obligation to the Executive under this Agreement. The Annual Base Salaryshall not be reduced after any such increase and the term “Annual Base Salary” shall refer to the Annual Base Salary as so increased. 

(2) **Annual Bonus****.** In addition to the Annual Base Salary, the Executive shall beawarded, for each fiscal year ending during the Employment Period, an annual bonus (the “Annual Bonus”) in cash at least equal to the Executive’s highest bonus earned under the Company’s Executive Bonus Plan, or any comparablebonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (or for such lesser number of full fiscal years prior to the Effective Date for which the Executive was eligible to earn such a bonus,and annualized in the case of any bonus earned for a partial fiscal year) (the “Recent Annual Bonus”). (If the Executive has not been eligible to earn such a bonus for any period prior to the Effective Date, the “Recent AnnualBonus” shall mean the Executive’s target annual bonus for the year in which the Effective Date occurs.) Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year forwhich the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. In addition, the additional bonus set forth in Section 6 of the Employment Agreement (as defined in Section 6 hereof) shall continue to bepaid in accordance with the terms of Section 6 of the Employment Agreement for the period set forth therein. 

 

(3) **Incentive, Savings and Retirement Plans.**During the Employment Period, the Executive shall be entitled to participate in all cashincentive, equity incentive, savings and retirement plans, practices, policies, and programs applicable generally to other peer executives of the Company and the Affiliated Companies, but in no event shall such plans, practices, policies andprograms provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefitopportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and the Affiliated Companies for the Executive under such plans, practices, policies and programs as in effect at any time duringthe 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the Affiliated Companies. In the eventthat, in connection with a Change of Control, the party effectuating the Change of Control does not agree to Assume any stock option, restricted stock award, restricted stock unit award or other equity-based award or performance award held by theExecutive or any transferee of the Executive (each, a “Compensatory Award”) that is unvested and outstanding as of immediately prior to the Change of Control, such Compensatory Award shall as of immediately prior to the Change of Controlvest in full and be immediately exercisable, provided, that if the Executive’s employment with the Company is terminated prior to the date on which the Change in Control occurs, and if it is reasonably demonstrated by the Executive thatsuch termination of employment (1) was at the request of a third party that has taken steps reasonably calculated to effect a Change in Control or (2) otherwise arose in connection with or anticipation of a Change in Control, then each CompensatoryAward that is unvested and outstanding as of immediately prior to the Date of Termination shall not be forfeited, shall remain outstanding following the Date of Termination, and shall not vest unless and until a Change of Control occurs within oneyear following the Date of Termination, in which case, immediately prior to a Change of Control, such Compensatory Awards shall vest in full and become immediately exercisable. In the event that a Change in Control does not occur within one yearfollowing the Date of Termination as described in the proviso of the preceding sentence, each unvested Compensatory Award shall be immediately forfeited by the Executive. 

(4) **Welfare Benefit Plans****.**During the Employment Period, the Executive and/or theExecutive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and the Affiliated Companies (including, withoutlimitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and the AffiliatedCompanies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits that are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for theExecutive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the AffiliatedCompanies. 

 

(5) **Expenses****.**During theEmployment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and the AffiliatedCompanies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of theCompany and the Affiliated Companies. 

 

(6) **FringeBenefits****.**During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and paymentof related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and the Affiliated Companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Dateor, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies. 

 

(7) **Office and Support Staff.**During the Employment Period, the Executive shall be entitled to an office oroffices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and the Affiliated Companies atany time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies.

(8) **Vacation****.**During the Employment Period, the Executive shall be entitled to paidvacation in accordance with the most favorable plans, policies, programs and practices of the Company and the Affiliated Companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, ifmore favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies. 

 

**Section 4.****Termination of Employment****.** (a) **Death or Disability.** TheExecutive’s employment shall terminate automatically if the Executive dies during the Employment Period. If the Company determines in good faith that the Disability (as defined herein) of the Executive has occurred during the Employment Period(pursuant to the definition of “Disability”), it may give to the Executive written notice in accordance with Section 11(b) of its intention to terminate the Executive’s employment. In such event, the Executive’s employment withthe Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), *provided*that, within the 30 days after such receipt, the Executive shall not have returned tofull-time performance of the Executive’s duties. “Disability” means the absence of the Executive from the Executive’s duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due tomental or physical illness that is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative. 

 

(b) **Cause****.**The Company may terminate theExecutive’s employment during the Employment Period for Cause. “Cause” means: 

 

(1) the willful and continued failure of the Executive to perform substantially the Executive’s duties (as contemplated by Section3(a)(1)(A)) with the Company or any Affiliated Company (other than any such failure resulting from incapacity due to physical or mental illness or following the Executive’s delivery of a Notice of Termination for Good Reason), after a writtendemand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company that specifically identifies the manner in which the Board or the Chief Executive Officer of the Company believes that theExecutive has not substantially performed the Executive’s duties, or 

 

(2) the willful engaging by the Executive in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company. 

 

For purposes of this Section 4(b), no act, or failure to act, on the part of the Executive shall be considered “willful” unless itis done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to aresolution duly adopted by the Board or upon the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omittedto be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of aresolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (excluding the Executive, if the Executive is a member of the Board) at a meeting of the Board called and held for such purpose(after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty ofthe conduct described in Section 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail. 

(c) **Good Reason****.**The Executive’s employment may be terminated by the Executivefor Good Reason or by the Executive voluntarily without Good Reason. “Good Reason” means: 

 

(1) the assignment to the Executive of any duties inconsistent in any respect with the Executive’s position (including status,offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a), or any other diminution in such position, authority, duties or responsibilities (whether or not occurring solely as a result of theCompany’s ceasing to be a publicly traded entity), excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by theExecutive; 

 

(2) any failure by the Company tocomply with any of the provisions of Section 3(b), other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive;

 

(3) the Company’s requiring theExecutive (i) to be based at any office or location other than as provided in Section 3(a)(1)(B), (ii) to be based at a location other than the principal executive offices of the Company if the Executive was employed at such location immediatelypreceding the Effective Date, or (iii) to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; 

 

(4) any purported termination by the Company of the Executive’s employment otherwise than as expressly permitted by thisAgreement; or 

 

(5) any failure by the Companyto comply with and satisfy Section 10(c). 

 

For purposes of this Section 4(c),any good faith determination of Good Reason made by the Executive shall be conclusive. The Executive’s mental or physical incapacity following the occurrence of an event described above in clauses (1) through (5) shall not affect theExecutive’s ability to terminate employment for Good Reason. 

 

(d) **Notice of Termination.**Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b).“Notice of Termination” means a written notice that (1) indicates the specific termination provision in this Agreement relied upon, (2) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed toprovide a basis for termination of the Executive’s employment under the provision so indicated, and (3) if the Date of Termination (as defined herein) is other than the date of receipt of such notice, specifies the Date of Termination (whichDate of Termination shall be not more than 30 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Causeshall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s respectiverights hereunder. 

(e) **Date of Termination****.**“Date of Termination” means (1) if theExecutive’s employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified in the Notice of Termination, (which date shall not be more than 30days after the giving of such notice), as the case may be, (2) if the Executive’s employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executiveof such termination, and (3) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 

 

**Section 5.****Obligations of the Company uponTermination****. (a) Good Reason; Other Than for Cause, Death or Disability.** If, during the Employment Period, the Company terminates the Executive’s employment other than for Cause or Disability or the Executive terminatesemployment for Good Reason: 

 

(1) the Companyshall pay to the Executive, in a lump sum in cash within 30 days after the Date of Termination, the aggregate of the following amounts: 

 

(A) the sum of (i) the Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid, (ii) theproduct of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof that has been earned but deferred (and annualized for any fiscal year consisting of less than 12 full monthsor during which the Executive was employed for less than 12 full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount, the “Highest Annual Bonus”) and (y) a fraction, the numeratorof which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365, and (iii) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon)and any accrued vacation pay, in each case, to the extent not theretofore paid (the sum of the amounts described in subclauses (i), (ii) and (iii), the “Accrued Obligations”); 

 

(B) the amount equal to the product of (i) two and (ii) the sum of (x) the Executive’s Annual BaseSalary and (y) the Highest Annual Bonus; and 

 

(C) an amount equal to the excess of (i) the actuarial equivalent of the benefit under the Company’s qualified defined benefit retirement plan (the “Retirement Plan”) (utilizing actuarial assumptions no less favorable to theExecutive than those in effect under the Retirement Plan immediately prior to the Effective Date) and any excess or supplemental retirement plan in which the Executive participates (collectively, the “SERP”) that the Executive wouldreceive if the Executive’s employment continued for two years after the Date of Termination, assuming for this purpose that all accrued benefits are fully vested and assuming that the Executive’s compensation in each of the two years isthat required by Sections 3(b)(1) and 3(b)(2), over (ii) the actuarial equivalent of the Executive’s actual benefit (paid or payable), if any, under the Retirement Plan and the SERP as of the Date of Termination; 

(2) for two years after the Executive’s Date of Termination, or such longer periodas may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive’s family at least equal to those that would have been provided to them in accordancewith the plans, programs, practices and policies described in Section 3(b)(4) and 3(b)(6) if the Executive’s employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respectto other peer executives of the Company and the Affiliated Companies and their families, *provided*, *however*, that, if the Executive becomes reemployed with another employer and is eligible to receive such benefits under another employerprovided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencementof benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until two years after the Date of Termination and to have retired on the lastday of such period; 

 

(3) the Company shall, atits sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in the Executive’s sole discretion provided, that the cost of such outplacement shall notexceed $50,000; 

 

(4) notwithstanding anyprovision in an award agreement to the contrary, effective as of the Date of Termination, (1) each and every Compensatory Award that is outstanding as of the Date of Termination shall immediately vest in full and become exercisable or payable and bereleased from any repurchase or forfeiture rights, and (2) to the extent applicable, the term during which each and every such Compensatory Award may be exercised by the Executive shall be extended until the date upon which the right to exercise anyCompensatory Award would have expired if the Executive had continued to be employed by the Company for the full term of such Compensatory Award, *provided*, that this Section 5(a)(4) shall not apply to any Compensatory Award outstanding as ofthe Date of Termination under the Company’s 1997 Employee Stock Purchase Plan (or any successor thereto). The applicable award agreements for the Compensatory Awards are hereby amended to the extent necessary to implement this Section 5(a)(4);and 

(5) to the extent not theretofore paid or provided, the Company shall timely pay orprovide to the Executive any Other Benefits (as defined in Section 6). 

 

(b) **Death****.** If the Executive’s employment is terminated by reason of the Executive’s death during the Employment Period, the Company shall provide the Executive’s estate or beneficiaries with the AccruedObligations, the benefits provided for under Section 3(a) of the Employment Agreement (as defined in Section 6 hereof) and the timely payment or delivery of the Other Benefits, and shall have no other severance obligations under this Agreement. TheAccrued Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term “Other Benefits”as utilized in this Section 5(b) shall include, without limitation, and the Executive’s estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and the AffiliatedCompanies to the estates and beneficiaries of peer executives of the Company and the Affiliated Companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives andtheir beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive’s estate and/or the Executive’s beneficiaries, as in effect on the date of the Executive’s deathwith respect to other peer executives of the Company and the Affiliated Companies and their beneficiaries. 

 

(c) **Disability****.**If the Executive’s employment is terminated by reason of the Executive’s Disability during the EmploymentPeriod, the Company shall provide the Executive with the Accrued Obligations, the benefits provided for under Section 3(b) of the Employment Agreement (as defined in Section 6 hereof) and the timely payment or delivery of the Other Benefits, andshall have no other severance obligations under this Agreement. The Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term“Other Benefits” as utilized in this Section 5(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generallyprovided by the Company and the Affiliated Companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peerexecutives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive’s family, as in effect at any time thereafter generally with respect toother peer executives of the Company and the Affiliated Companies and their families. 

 

(d) **Cause; Other Than for Good Reason****.**If the Executive’s employment is terminated for Cause during the Employment Period, the Company shall provide to the Executive (1) the Executive’sAnnual Base Salary through the Date of Termination, (2) the amount of any compensation previously deferred by the Executive, and (3) the Other Benefits, in each case, to the extent theretofore unpaid, and shall have no other severance obligationsunder this Agreement. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, the Company shall provide to the Executive the Accrued Obligations and the timely payment or delivery ofthe Other Benefits, and shall have no other severance obligations under this Agreement. In such case, all the Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. 

**Section 6.****Non-exclusivity of Rights****.** Nothing in this Agreement shall preventor limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or the Affiliated Companies and for which the Executive may qualify, nor, subject to Section 11(f), shall anythingherein limit or otherwise affect such rights as the Executive may have under any other contract or agreement with the Company or the Affiliated Companies. Amounts that are vested benefits or that the Executive is otherwise entitled to receive underany plan, policy, practice or program of or any other contract or agreement with the Company or the Affiliated Companies at or subsequent to the Date of Termination (“Other Benefits”) shall be payable in accordance with such plan, policy,practice or program or contract or agreement, except as explicitly modified by this Agreement. Notwithstanding the foregoing, if the Executive becomes eligible to receive payments and benefits pursuant to Section 5(a) of this Agreement, (i) theExecutive may elect to receive (A) the greater of the cash severance payment set forth in Section 5(a)(1)(B) of this Agreement, or if such payment would have been due, the cash severance payment set forth in Section 3(e) of the Employment Agreementbetween the Company and the Executive dated as of September 1, 1999, as may be amended from time to time (the “Employment Agreement”), and (B) benefit continuation for the longer of the period specified in Section 5(a)(2) of this Agreementor the period specified in Section 3(e) of the Employment Agreement, *provided* that in the event that the Executive elects to receive the cash severance payment and/or the benefit continuation set forth in Section 3(e) of the EmploymentAgreement, (1) the cash severance shall be payable in lump sum at such time as required by Section 5(a)(1) of this Agreement, (2) the Executive shall not be required to provide the consulting services set forth in the Employment Agreement and (3)the Executive shall not be subject to the proviso of the fourth sentence of Section 3(e) of the Employment Agreement, and (ii) except as provided in clause (i) of this sentence, the Executive shall not be entitled to any severance pay or benefitsunder any severance plan, program or policy of the Company and the Affiliated Companies, including, without limitation under the Employment Agreement, unless otherwise specifically provided therein in a specific reference to this Agreement.

 

**Section 7.****Full Settlement****.** TheCompany’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim, right or action that theCompany may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of thisAgreement, and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred (within 10 days following the Company’s receipt of an invoice from the Executive), to the full extentpermitted by law, all legal fees and expenses that the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under,any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at theapplicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the “Code”). In addition, the Company shall indemnify and hold the Executive, harmless on an after-tax basis, for any ExciseTax (as defined in Section 8(f), income tax, and all other applicable taxes (including interest and penalties) imposed as a result of the Company’s payment of legal fees and expenses that the Executive may reasonably incur as a result of anysuch contest. 

**Section 8.****Certain Additional Payments by the Company****.**

 

(a) Anything in this Agreement to the contrary notwithstanding and except asset forth below, in the event it shall be determined that any Payment would be subject to the Excise Tax, then the Executive shall be entitled to receive an additional payment (the “Gross-Up Payment”) in an amount such that, after paymentby the Executive of all taxes (and any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-UpPayment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 8(a), if it shall be determined that the Executive is entitled to theGross-Up Payment, but that the Parachute Value of all Payments does not exceed 110% of the Safe Harbor Amount, then no Gross-Up Payment shall be made to the Executive and the amounts payable under this Agreement shall be reduced so that theParachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made by first reducing the payments under Section 5(a)(i)(B), unless an alternative method ofreduction is elected by the Executive, and in any event shall be made in such a manner as to maximize the Value of all Payments actually made to the Executive. For purposes of reducing the Payments to the Safe Harbor Amount, only amounts payableunder this Agreement (and no other Payments) shall be reduced. If the reduction of the amount payable under this Agreement would not result in a reduction of the Parachute Value of all Payments to the Safe Harbor Amount, no amounts payable under theAgreement shall be reduced pursuant to this Section 8(a). The Company’s obligation to make Gross-Up Payments under this Section 8 shall not be conditioned upon the Executive’s termination of employment. 

 

(b) Subject to the provisions of Section 8(c), all determinations required tobe made under this Section 8, including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Ernst & Young, LLP, or such othernationally recognized certified public accounting firm as may be designated by the Executive (the “Accounting Firm”). The Accounting Firm shall provide detailed supporting calculations both to the Company and the Executive within 15business days of the receipt of notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, asdetermined pursuant to this Section 8, shall be paid by the Company to the Executive within 5 days of the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Company and theExecutive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Companyshould have been made (the “Underpayment”), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is required to make a paymentof any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. 

(c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that,if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable, but no later than 10 business days after the Executive is informed in writing of such claim. The Executiveshall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives suchnotice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that the Company desires tocontest such claim, the Executive shall: 

 

(1)give the Company any information reasonably requested by the Company relating to such claim, 

 

(2) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time,including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, 

 

(3) cooperate with the Company in good faith in order effectively to contest such claim, and 

 

(4) permit the Company to participate in any proceedingsrelating to such claim; 

 

*provided*, *however*, that the Companyshall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest, and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax,and all other applicable taxes, (including interest and penalties) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8(c), the Company shall control allproceedings taken in connection with such contest, and, at its sole discretion, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the applicable taxing authority in respect of such claim and may, atits sole discretion, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, ina court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; *provided*, *however*, that, if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance theamount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties) imposed with respect to such advanceor with respect to any imputed income in connection with such advance; and *provided*, *further*, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to whichsuch contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which the Gross-Up Payment would be payable hereunder, and theExecutive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. 

(d) If, after the receipt by the Executive of a Gross-Up Payment or an amount advanced by the Companypursuant to Section 8(c), the Executive becomes entitled to receive any refund with respect to the Excise Tax to which such Gross-Up Payment relates or with respect to such claim, the Executive shall (subject to the Company’s complying with therequirements of Section 8(c), if applicable) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced bythe Company pursuant to Section 8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refundprior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to bepaid. 

 

(e) Notwithstanding any other provision of this Section8, the Company may, in its sole discretion, withhold and pay over to the Internal Revenue Service or any other applicable taxing authority, for the benefit of the Executive, all or any portion of any Gross-Up Payment, and the Executive herebyconsents to such withholding. 

 

(f) Definitions. Thefollowing terms shall have the following meanings for purposes of this Section 8. 

 

(i) “Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax. 

 

(ii) “Parachute Value” of a Payment shall mean the present value asof the date of the change of control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2), as determined by the Accounting Firm for purposes of determiningwhether and to what extent the Excise Tax will apply to such Payment. 

 

(iii) A “Payment” shall mean any payment benefit or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to thisAgreement or otherwise. 

 

(iv) The “Safe HarborAmount” means 2.99 times the Executive’s “base amount,” within the meaning of Section 280G(b)(3) of the Code. 

 

(v) “Value” of a Payment shall mean the economic present value of a Payment as of the date of the change of control for purposes of Section 280Gof the Code, as determined by the Accounting Firm using the discount rate required by Section 280G(d)(4) of the Code. 

**Section 9.****Confidential Information.** The Executive shall hold in a fiduciarycapacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or the Affiliated Companies, and their respective businesses, which information, knowledge or data shall have been obtained bythe Executive during the Executive’s employment by the Company or the Affiliated Companies and which information, knowledge or data shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executivein violation of this Agreement). After termination of the Executive’s employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate ordivulge any such information, knowledge or data to anyone other than the Company and those persons designated by the Company. In no event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholdingany amounts otherwise payable to the Executive under this Agreement. 

 

**Section 10.****Successors****.** (a) This Agreement is personal to the Executive, and, without the prior written consent of the Company, shall not be assignable by the Executive other than by will or the laws of descentand distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives. 

 

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. Except as provided in Section 10(c),without the prior written consent of the Executive this Agreement shall not be assignable by the Company. 

 

(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all ofthe business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. “Company”means the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise. 

 

**Section 11.****Miscellaneous****.** (a) This Agreement shall be governed by and construed in accordancewith the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherthan by a written agreement executed by the parties hereto or their respective successors and legal representatives. 

 

(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered orcertified mail, return receipt requested, postage prepaid, addressed as follows: 

 

if to the Executive: 

 

Alfred S. Chuang 

c/o BEA Systems Inc. 

2315 North First Street 

San Jose, CA. 95131 

 

if to the Company: 

 

BEA Systems, Inc. 

2315 North First Street 

San Jose, CA 95151 

 

Attention: General Counsel 

 

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communicationsshall be effective when actually received by the addressee. 

(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validityor enforceability of any other provision of this Agreement. 

 

(d) The Company may withhold from any amounts payable under this Agreement such United States federal, state or local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. 

 

(e) The Executive’s or the Company’s failure to insist upon strictcompliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant toSections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. 

 

(f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and theCompany, the employment of the Executive by the Company is “at will” and, subject to Section 1(a), prior to the Effective Date, the Executive’s employment may be terminated by either the Executive or the Company at any time prior tothe Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date, except for the Employee Proprietary Information and Inventions Agreement entered into between the Company and theExecutive and dated             , which shall remain in effect from and after the Effective Date and as specifically otherwise provided herein, this Agreement shall supersede anyother agreement between the parties with respect to the subject matter hereof, including without limitation the Employment Agreement and the Employment Agreement between the Executive and the Company dated as of[         ]. Notwithstanding the foregoing, in the event that the Executive is continuing in the employ of the Company following the end of the Employment Period, and in the absence of the immediatelypreceding sentence, the Employment Agreement would have remained in effect, the Employment Agreement shall again be effective through the end of its remaining term. 

IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to theauthorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. 

 

BEA SYSTEMS, INC.

                ALFRED S.CHUANG

Alfred S. Chuang