exv10w3



 






Exhibit 10.3




ENTERASYS NETWORKS, INC.




2005 Change-in-Control Severance Benefit

Plan for Key Employees

(Amended and Restated November 11, 2005)




     The 2005 Change-in-Control Severance Benefit Plan set forth herein (the “Plan”), together with
other plans and programs of Enterasys Networks, Inc. (“the Company”), is intended to assure that
the Company and its direct and indirect subsidiaries (together with the Company, the “Employer”)
will have the benefit of continuity of key personnel in the event of any actual or threatened
change in control.



     1. Eligibility. The Board of Directors of the Company (the “Board”) or its designee
shall from time to time designate participants in the Plan (“Participants”) from among the
Employer’s key employees. An employee once designated a Participant shall continue to be a
Participant (subject to satisfaction of the requirements set forth in Section 2 below) until the
earlier of (a) the date (not later than the 365th day preceding a “Change in Control,” as
hereinafter defined) on which the Board determines that he or she is no longer eligible to
participate in the Plan (as evidenced by written notice thereof) or (b) the date he or she ceases
to be employed by the Employer; provided, that a Participant who ceases to be employed by the
Employer under circumstances that would give rise to benefits under the Plan shall continue to be
treated as a Participant with respect to such benefits until they have been paid or provided in
full.



     2. Agreement of Participants. As a precondition to participation in the Plan, each
individual who is designated a Participant must enter into a written agreement (each, a “Plan
Agreement”) in accordance with procedures prescribed by and in a form acceptable to the Board.
Each Plan Agreement shall contain:




     (a) the Participant’s binding commitment to the effect that once any Person other than
the Company, a direct or indirect subsidiary of the Company, or an employee benefit plan of
the Company or any such subsidiary begins a tender or exchange offer or a solicitation of
proxies from the Company’s security holders or takes other actions to effect a “Change in
Control,” as hereinafter defined, the Participant will not voluntarily terminate his or her
employment with the Employer until such Person has abandoned or terminated such efforts to
effect a Change in Control or until a Change in Control has occurred (for purposes of the
Plan, a “Person” means any individual, entity or other person, including a group within the
meaning of Sections 13(d) or 14(d)(2) of the Securities Exchange Act of 1934 (“Exchange
Act”));




     (b) the Participant’s agreement that if he or she voluntarily terminates his or her
employment prior to the Change in Control then he/she will not be entitled to any payments
or benefits under this Plan or the Plan Agreement; and




     (c) such other terms, if any, as the Board may specify, which may (if the Board so
provides) deviate from the terms generally set forth in the Plan.



 









 




As applied to any Participant, the term “Plan” means the terms and provisions of the Plan set forth
herein as modified by the terms and provisions of the Participant’s Plan Agreement. A Participant
who signed a Plan Agreement prior to this amendment and restatement of the 2005 Enterasys Networks,
Inc. Change in Control Severance Benefit Plan for Key Employees shall not be required to sign a new
Plan Agreement so long as his/her participation has continued without interruption.




     3. Change in Control. For purposes of the Plan, a “Change in Control” shall be deemed
to have occurred upon the occurrence of any of the events described in subsections (a), (b), (c) or
(d) below:




     (a) Any Person acquires beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30% or more of either (i) the then outstanding shares
of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) the combined
voting power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Outstanding Company Voting Securities”);
provided, that for purposes of this subsection (a) the following acquisitions shall not
constitute a Change in Control: (A) any acquisition directly from the Company, (B) any
acquisition by the Company, (C) any acquisition by an employee benefit plan (or related
trust) sponsored or maintained by the Employer, or (D) any Business Combination (but except
as provided in subsection (c) of this Section 3 a Business Combination may nevertheless
constitute a Change in Control under subsection (c)); and provided further, that an
acquisition by a Person of 30% or more but less than 50% of the Outstanding Company Common
Stock or of the combined voting power of the Outstanding Company Voting Securities shall not
constitute a Change in Control under this subsection (a) if within 15 days of the Board’s
being advised that such ownership level has been reached, a majority of the “Incumbent
Directors” (as hereinafter defined) then in office adopt a resolution approving the
acquisition of that level of securities ownership by such Person; or




     (b) Individuals who, as of December 31, 2004, constituted the Board (the “Incumbent
Directors”) cease for any reason to constitute at least a majority of the Board; provided,
that any individual who becomes a member of the Board subsequent to December 31, 2004 and
whose election or nomination for election was approved by a vote of at least two-thirds of
the Incumbent Directors shall be treated as an Incumbent Director unless he or she assumed
office as a result of an actual or threatened election contest with respect to the election
or removal of directors; or




     (c) There is consummated a reorganization, merger or consolidation involving the
Company, or a sale or other disposition of all or substantially all of the assets of the
Company (a “Business Combination”), in each case unless, following such Business
Combination, (i) the Persons who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and of the combined voting power of the Outstanding Company
Voting Securities immediately prior to the Business Combination beneficially own, directly
or indirectly, more than 50% of, respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the



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case may be, of the entity resulting from such Business Combination in substantially
the same proportions as their ownership immediately prior to such Business Combination of
the Outstanding Company Common Stock and of the combined voting power of the Outstanding
Company Voting Securities, as the case may be, (ii) no Person (excluding any entity
resulting from such Business Combination or any employee benefit plan (or related trust) of
the Employer or of such corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 30% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors, except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members of the Board
resulting from such Business Combination were Incumbent Directors at the time of the
execution of the initial agreement, or of the action of the Board, providing for such
Business Combination; or




     (d) The stockholders of the Company approve a complete liquidation or dissolution of
the Company;




provided, that if any payment or benefit payable hereunder upon or following a Change in
Control (as defined herein) would be required to comply with the limitations of Section
409A(a)(2)(A)(v) of the Internal Revenue Code (the “Code”) and the guidance thereunder in
order to avoid an additional tax under Section 409A of the Code, such payment or benefit
shall be made only if such Change in Control constitutes a change in ownership or control of
the Company, or a change in ownership of the Company’s assets, described in IRS Notice
2005-1 or any successor guidance.




4. Change in Control and Severance Benefits.





     (a) 
Change in Control Benefits. Upon a Change in Control, (1) the
Company shall pay to the Participant in cash (i) in the case of each Participant who does
not receive sales commission-based variable compensation, as soon as practicable after the
Change in Control an amount equal to one half (1/2) of the Participant’s target incentive
bonus, if any, immediately before the Change in Control, multiplied times a fraction, the
numerator of which is the number of days elapsed between the beginning of such year and the
date of the Change in Control and the denominator of which is 365, and then reduced by the
amount of any bonus paid or payable (provided that such amount shall be paid) pursuant to
the Enterasys Performance Incentive Plan (or any similar or successor plan) in connection
with or as a result of the Change in Control, and (ii) in the case of each Participant who
receives sales commission-based variable compensation, on the earlier of (x) the date that
annual bonus payouts are made pursuant to the Enterasys Performance Incentive Plan and (y)
the date of a Qualifying Termination (as defined below) of Participant’s employment, an
amount equal to the Participant’s annual variable sales compensation target multiplied times
a fraction, the numerator of which is the number of days elapsed between the beginning of
such year and the date of the Change in Control, and the denominator of which is 365, which
amount shall be reduced by the amount of such variable sales compensation actually earned by
such Participant for the portion of the year prior to the Change in Control; (2) each
Company stock option or



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other stock-based award (other than an award under the Company’s Employee Stock
Purchase Program) (a “Stock-Based Award”) held by the Participant immediately prior to the
Change in Control (a “Change in Control Affected Award”), shall be vested (and, in the case
of a Change in Control Affected Award requiring exercise, shall be exercisable) for the
“applicable number of shares” (as hereinafter defined) not later than immediately prior to
the Change in Control, and (3) if the Change in Control Affected Award is assumed (or a
substitute award is granted) by the acquiror or survivor or an affiliate of the acquiror or
survivor, such assumed or substituted award shall




     (A) continue to be vested (and where relevant exercisable from and after the
Change in Control to the extent provided for under clause (ii) above; and




     (B) as to any portion of such award that was not vested (and where relevant
exercisable) and that did not become vested (and, where relevant, exercisable)
pursuant to clause (ii) above, continue to vest (and, where relevant, become
exercisable) from and after the Change in Control on the same basis as if the
vesting/exercisability schedule that would have applied without regard to this
Section 4(a)(iii)(B) had been accelerated by twelve (12) months.




     For purposes of this Section 4(a) the term “applicable number of shares” means that
number of shares for which the Stock-Based Award would have been vested (and, where
relevant, exercisable) by the end of the twelve (12)-month period following the Change in
Control had the Participant holding the Award immediately prior to the Change in Control
continued in service for such twelve (12)-month period. Solely for purposes of
illustration, and not by way of limitation, Appendix I to the Plan provides an
example of how the accelerated vesting and exercisability provisions of this Section 4 would
operate under a Change in Control Affected Award. For the avoidance of doubt, in no event
shall an assumed or substituted award become vested for more than the total number of shares
of Stock subject thereto.




For any Change in Control Affected Award, except as provided in subsection 4(c) below, the
Participant shall not be entitled to any additional acceleration of vesting provided for
under the equity incentive plan pursuant to which such Change in Control Affected Award was
granted.




     (b) Severance Benefits. If, during the period of twelve (12) months following
a Change in Control, either the employment of a Participant is terminated by the Employer
for any reason other than for “Cause” (as defined in Section 5 below), or the Participant
terminates his or her employment with the Employer for “Good Reason” (as defined in Section
6 below) (in either case, a “Qualifying Termination”), then each Participant shall also
receive the following payments and benefits:




     (1) The Company shall pay to the Participant in cash, on the date of
termination, the sum of (i) all salary and commissions earned by the Participant
as of the date of termination but not yet paid, (ii) the Participant’s accrued
vacation earned through the date of termination, (iii) in the case of Participants
who do not receive sales commission-based variable compensation, the sum of



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(x) subject to Section 4(d) below, an amount equal to the Participant’s bonus
for the year ended immediately prior to the year of termination, to the extent
such bonus has not already been paid, and (y) an amount equal to the higher of (I)
the Participant’s target incentive bonus, if any, immediately before the Change in
Control, and (II) the Participant’s target bonus, if any, at the date termination
occurs, multiplied times a fraction, the numerator of which is the number of days
elapsed between the beginning of such year and the date of termination, reduced by
the aggregate bonus amounts actually paid in connection with or as a result of the
Change in Control pursuant to section 4(a) of this agreement or any incentive
bonus plan, and the denominator of which is 365, and (iv) in the case of
Participants who receive sales commission-based variable compensation, an amount
equal to the Participant’s annual variable sales compensation target multiplied
times a fraction, the numerator of which is the number of days elapsed between the
beginning of such year and the date of termination, and the denominator of which
is 365. In addition, the Company shall pay to the Participant in cash within five
(5) business days of the date of termination, (i) reimbursement for any unpaid,
valid business expenses that were approved in accordance with Company policy and
(ii) reimbursement, without interest, of any payroll deductions not yet applied to
the purchase of stock under the Company’s employee stock purchase plan pursuant to
the terms of such plan. Any unpaid valid business expenses submitted for
reimbursement on or within sixty (60) days following the date of termination shall
be paid to the Participant in cash within five (5) business days following such
submission.




     (2) The Company shall also pay to the Participant in cash, within ten (10)
business days of the date of termination, an amount equal to three quarters (3/4)
of the Participant’s Base Salary if the Participant was a Vice President-level (or
above) manager of the Company or one half (1/2) the Participant’s Base Salary if
the Participant was below the Vice President-level manager of the Company. “Base
Salary” for the purposes of this subsection means the Participant’s annual rate of
base salary as determined immediately prior to the date of termination (or, if
higher, his or her annual rate of base salary as determined immediately prior to
the Change in Control).




     (3) The Participant, together with his or her dependents, will continue for
the duration of the “coverage continuation period” (as hereinafter defined) to be
eligible to participate at the Employer’s expense (subject to any applicable
waiting periods or similar requirements to the extent such requirements had not
been satisfied prior to the date of termination, and subject to the payment by the
Participant or his or her dependents of premiums, co-pays or similar amounts at
rates not greater than those applicable immediately prior to the Change in Control
to active employees and their dependents) in all medical, dental and life
insurance plans or programs maintained or sponsored by the Employer immediately
prior to the Change in Control; provided, that if such continued participation is
impracticable, the Company may provide the Participant with the premium cost of
such coverage paid promptly in cash. For purposes of this subsection, the
“coverage continuation period” means the nine (9) month period



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following the termination of employment if the Participant was a Vice
President-level (or above) manager of the Company or the six (6) month period
following the termination of employment if the Participant was below the Vice
President-level manager of the Company; provided, that if the plan or program in
question, or applicable law, provides for a longer period of coverage following
termination of employment, then the Participant shall receive this additional
period of coverage pursuant to the terms and conditions as set forth in the plan
or program or as prescribed by applicable law. Notwithstanding the foregoing
provisions of this subsection, if the Participant becomes reemployed by another
employer and is eligible (together with his or her dependents) for medical, dental
or life insurance coverage that is substantially equivalent (as to extent of
coverage and as to employee cost) to the coverage of the same type that he or she
(and his or her dependents) were entitled to receive under this subsection, the
Employer’s obligation to the Participant and his or her dependents under this
subsection shall cease with respect to that type of coverage.




     (4) Each Stock-Based Award held by the Participant immediately prior to a
Qualifying Termination (an “Affected Award”) shall become fully vested and
exercisable immediately prior to the Qualifying Termination. In the event a
Participant holds an Affected Award requiring exercise, the Company shall give the
Participant adequate notice and opportunity to exercise the Affected Award.




     (c) Notwithstanding the provisions of this Section 4 to the contrary, if a Stock-Based
Award held by a Participant is not assumed or replaced, or agreed to be assumed or replaced,
upon a Change in Control, each Stock-Based Award held by such Participant, whether or not he
or she has experienced a Qualifying Termination, shall become fully vested and exercisable,
effective immediately prior to the Change in Control.




     (d) The prior-year bonus, if any, payable pursuant to Section 4(b)(1)(iii)(x) above
(the “prior year bonus”) (A) shall be paid in accordance with the bonus determinations made
with respect to such prior year, if such determinations had been made by the Incumbent
Directors (but not yet paid)prior to the date of termination, and otherwise (B) shall be
determined and paid assuming that the Participant has satisfied all individual performance
requirements necessary for full payment of the bonus (consistent with levels funded or
deemed funded under the plan) and in accordance with the preliminary funding and allocation
determinations for any period to the extent previously determined by the Incumbent Board,
and, to the extent not so determined, assuming a level of Company performance consistent
with the Company’s annual operating plan with respect to any corporate measures of
performance. In the circumstances described in clause (B) of the preceding sentence, if it
is later determined that corporate performance was greater than the levels set forth in the
Company’s annual operating plan, the Participant’s prior-year bonus shall be correspondingly
adjusted.



     5. Cause. “Cause” means, for purposes of this Plan, only: (a) the Participant’s
conviction of, or a plea of nolo contendere with respect to, a felony; (b) the Participant’s
willful



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failure (other than by reason of disability) to perform, or gross negligence in the
performance of, his or her duties to the Employer which remains uncured fifteen (15) business days
after receipt of written notice from the Employer specifying in reasonable detail the nature of
such willful failure or gross negligence and the manner in which it may be cured; or (c) the
Participant’s commission of any willful act (or acts) of fraud, embezzlement or other dishonesty
that is materially harmful to the Employer.




     6. Voluntary Termination for Good Reason. For purposes of this Plan, a Participant
shall be deemed to have voluntarily terminated his or her employment for Good Reason if he or she
leaves the employ of the Employer for any of the following reasons:




     (a) Any action by the Company which results in a material adverse change in
Participant’s position, title, reporting relationship, authority, duties or responsibilities
as in effect immediately prior to the Change in Control, excluding for this purpose any
action not taken in bad faith and which is remedied by the Company promptly after receipt of
notice thereof by the Parent; provided, however, that a sale or transfer of all or
substantially all of the business of the Company or any of its subsidiaries or other
reduction of all or substantially all of its business or that of its subsidiaries, or the
fact that the Company has become a subsidiary of another company or that the securities of
the Company are no longer publicly traded, shall not constitute, in and of itself, “Good
Reason” hereunder; or




     (b) Any reduction in (i) the Participant’s rate of annual base salary for any fiscal
year to less than the greater of 100% of the rate of annual base salary payable to him or
her in the completed fiscal year immediately preceding the Change in Control or 100% of the
rate at which annual base salary was payable to the Participant immediately prior to such
reduction, (ii) any adverse change in the Participant’s annual bonus opportunity (other than
immaterial changes), including the reasonableness of the ability of the Participant to
achieve the targets in relation to the Company’s then effective operating plan, or (iii) if
the Participant is eligible to earn sales commission-based variable compensation, any
adverse change (other than immaterial changes) in the method of determining or otherwise in
the opportunity to earn such compensation from the method and opportunity in effect
immediately prior to the Change in Control a reduction of annual base salary or annual
bonus opportunity or the method or opportunity for earning sales commission-based variable
compensation which is not taken in bad faith and which is remedied by the Employer within
fifteen (15) business days after receipt of notice thereof given by the Participant; or




     (c) Any failure of the Company to continue or cause to be continued in effect any
retirement, life, medical, dental, disability, accidental death or travel insurance plan in
which the Participant was participating immediately prior to the Change in Control unless
the Company provides the Participant with a plan or plans that provide at least
substantially equivalent benefits (as to extent of coverage and as to employee cost), or the
taking of any action by the Employer that would adversely effect the Participant’s
participation in or materially reduce the Participant’s benefits under any such plan or
deprive the Participant of any material fringe benefit or perquisite enjoyed by the
Participant immediately prior to the Change in Control, other than an isolated,



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insubstantial and inadvertent failure not in bad faith and which is remedied by the
Employer promptly, but in any event within fifteen (15) business days after receipt of
notice thereof given by the Participant; or




     (d) The Company requires the Participant to be based at any office or location that is
more than 35 miles distant from the Participant’s base office or work location immediately
prior to the Change in Control; or




     (e) The Company fails to comply with and satisfy Section 8 of the Plan.



     7. Certain Tax-Related Payments. All tax determinations under this Section 7 shall be
made at the Company’s expense by a nationally recognized accounting firm selected by the Company to
whom the Participant has no reasonable objection (the “Outside Firm”). Any good faith
determinations of the Outside Firm made hereunder shall be final, binding and conclusive upon the
Company and the Participant.



     If the Payment (as defined in Section 7(a)) would be subject to the 4999 of the Internal
Revenue Code (the “Section 4999 tax”), then the Participant shall receive either (i) the full
Payment or (ii) such lesser amount of the Payment which would result in no portion of such Payment
being subject to the Section 4999 tax, whichever yields the greatest net amount to the Participant
on an after-tax basis (applying the then highest aggregate marginal tax rates). If a reduction of
the Payment is required pursuant to subpart (ii), then the Participant will be permitted to request
which component items of the Payment will be reduced provided, however, that the Participant must
provide to the Company in writing his/her request within the reasonable time period established by
the Company and the Company must in its discretion consent to such request (or else the Company
shall make its own determinations with respect to which Payment items are to be reduced). The
Company may elect to contest at its expense any initial IRS determination with respect to a
Participant. The Participant shall cooperate reasonably with the Company in any effort by the
Company to contest an IRS determination under this paragraph, including by the making of such
filings and appeals as the Company may reasonably require, but nothing herein shall be construed as
requiring the Participant to bear any cost or expense of such a contest or in connection therewith
to compromise any tax item (including without limitation any deduction or credit) other than the
Section 4999 tax and related interest and penalties, if any, that are the subject of the contested
IRS determination. In the event of any underpayment or overpayment under this Plan, as determined
by the Outside Firm, the amount of such underpayment or overpayment shall be promptly paid to the
Participant or refunded to the Company, as the case may be, with interest at 120% of the applicable
Federal rate provided for in Section 7872(f)(2) of the Internal Revenue Code.



     8. Binding Effect on Successor Entity. If the Company is merged or consolidated into
or with any other entity (whether or not the Company is the surviving entity), or if substantially
all of the assets of the Company are transferred to another entity, the provisions of the Plan will
be binding upon and inure to the benefit of the entity resulting from such merger or consolidation
or the acquirer of such assets (the “Successor Entity”). The Company will require any such
Successor Entity to assume expressly and agree to perform the provisions of the Plan (including any
Plan Agreements) in the same manner and to the same extent that the Company would have been
required to perform if no such transaction had taken place.



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     9. Payment Obligations Absolute. Upon a Change in Control and/or Qualifying
Termination described in Section 4, the Company’s obligations to pay the benefits described in
Sections 4 and 7 shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Company or the Employer may have against any Participant; provided, however,
that the Company may delay the payment of any amounts due hereunder for six months following
termination of a Participant’s employment with the Company if necessary to comply with the
“specified employee” rules pursuant to Section 409A of the Code. In no event shall a Participant
be obligated to seek other employment or take any other action by way of mitigation of the amounts
payable to a Participant under any of the provisions of the Plan and, except as otherwise provided
in Section 4(b)(3), in no event shall the amount of any payment hereunder be reduced by any
compensation earned by a Participant as a result of employment by another employer.



     10. Limited Effect. Nothing herein or in any Plan Agreement shall be construed as
giving any Participant a right of continued employment or as limiting the Employer’s right to
terminate a Participant’s employment, subject, in the case of any Qualifying Termination described
in Section 4, to the payment of the benefits described in Sections 4 and 7.



     11. Amendment and Termination. The Board may amend the Plan at any time and from time
to time, and may terminate the Plan at any time; provided, that no action hereafter purporting to
amend or terminate the Plan that is approved by the Board within the twelve (12) month period
immediately preceding a Change in Control or at the time of or at any time following a Change in
Control and that, if effective, would adversely affect the rights of any Participant accruing
hereunder as a result of that Change in Control, shall affect the rights of such Participant
without his or her express written consent.



     12. No Duplication of Benefits. The benefits and rights to benefits under this Plan
are in lieu of any and all benefits that may become due a Participant under any change in control
plan or program of the Company (any such plan or program, a “Company CIC program”), and each
Participant, for himself or herself and his or her heirs, beneficiaries and assigns, by signing a
Plan Agreement waives and relinquishes any right that he or she may have to any such benefits under
any Company CIC program.



     13. Withholding. All payments and benefits hereunder shall be subject to reduction
for applicable tax withholdings.



     14. Indemnification. The Employer agrees to pay all costs and expenses (including
without limitation reasonable fees and expenses of counsel) incurred by any Participant in
connection with efforts to enforce his or her rights under this Plan and will indemnify and hold
harmless any Participant from and against any damages, liabilities and expenses (including without
limitation reasonable fees and expenses of counsel) incurred by the Participant in connection with
any litigation or threatened litigation, including any regulatory proceedings, arising out of the
making, performance or enforcement of this Plan. Employer shall pay all such costs and expenses
promptly after receipt by the Employer of an invoice submitted by the Participant.



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     15. Source of Payment. Nothing herein shall be construed as establishing a trust or
as requiring the Company to set aside funds to meet its obligations hereunder. Notwithstanding the
foregoing, if the Board in its discretion so determines the Company may establish a so-called
“rabbi trust” or similar arrangement to assist it in meeting any such obligations that it may have.



     16. Governing Law. The Plan and agreements made with Participants hereunder shall be
governed by the laws of The Commonwealth of Massachusetts without regard to its conflicts of laws
principles.



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Appendix I




Example of the Application of Section 4



The following example illustrates the application of the accelerated vesting and exercisability
provisions of Section 4 of the Plan as they would apply except as otherwise determined by the
Administrator with respect to an Award, based on the assumed facts set forth below.



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





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