Document:

SEVERENCE COMPENSATION AGREEMENT DATED 05/7/02

 EXHIBIT 10.6 
  
 SEVERANCE COMPENSATION AGREEMENT 
  
 This Severance Compensation Agreement (the “Agreement”) by and between Casual Male Corp., a Massachusetts
corporation (the “Company”) with its principal place of business at 555 Turnpike Street, Canton, Massachusetts and Joseph H. Cornely, III of 157 Warren Ave., Boston, MA 02116 (the “Executive”) shall be effective as of the
date the Agreement is approved by the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”). 
  
 WHEREAS, the Company and certain of its affiliates filed voluntary petitions to reorganize their businesses under Chapter 11 of the United States
Bankruptcy Code, as amended, on May 18, 2001, which cases have been administratively consolidated under the heading “Casual Male Corp. et al.” and have been assigned case numbers 01-41403(REG) through 01-41418(REG) (the “Chapter 11
Case”); 
  
 WHEREAS, the Board of Directors of the Company
has determined that it is in the best interests of the Company and its stakeholders that certain key members of management be provided with the appropriate incentives to cause them to remain employed by the Company pending the Company’s
reorganization; 
  
 WHEREAS, the Official Committee of Unsecured
Creditors of the Company has consented to the Company entering into this Agreement; 
  
 NOW THEREFORE, in consideration of the agreements contained herein including the undertakings of the parties hereto, the receipt and sufficiency of which are hereby acknowledged by each of the parties hereto, it is
covenanted and agreed as follows: 
  
 1. Severance Compensation upon
Termination of Employment. 
  
 In the event that the
Executive’s employment with the Company or any of its affiliates is terminated for one of the reasons described below, the Company shall pay to the Executive the corresponding cash severance payment (the “Severance Payment”):

  

	 	(a)	 Termination Without Cause or For Good Reason. In the event the Executive’s employment with the Company is terminated (x) by the Company without Cause or
(y) by the Company or by the Executive for “good reason” (as defined in Section 1(d) below), the Severance Payment shall be the Executive’s Annual Base Salary for a period of 14 months and shall be payable to the Executive in
accordance with the Company’s regular pay intervals for its senior executives beginning immediately following the Executive’s Termination Date. The Severance Payments made pursuant to this Section 1(a) shall be offset by any salary, earned
income, deferred income or other compensation earned by the Executive from other 

	 	 
employment during the Severance Period, it being understood that the Executive shall use reasonable efforts to find new employment suitable to, and
consistent with, his or her training and experience during such 14 month period. 

  

	 	(b)	Change of Control. In the event that the Executive’s employment with the Company is terminated by the Company or any successor thereto following or in connection with a
“change of control” as defined in Exhibit A hereto then, at the election of the Executive, the Severance Payment shall be either: (x) a payment equal to the Executive’s Annual Base Salary for a period of 14 months, payable in
accordance with the Company’s normal pay intervals for its senior executives, offset by any salary, earned income, deferred income or other compensation earned by the Executive from other employment during the Severance Period (it being
understood that the Executive shall use reasonable efforts to find new employment suitable to, and consistent with, his or her training and experience during such 14 month period) or (y) a payment equal to Executive’s Annual Base Salary for a
period of 8 months made to the Executive in a single lump sum cash payment within ten (10) business days of the Termination Date, which payment shall not by offset by salary, earned income, deferred income or other income earned by the Executive
from other Employment. 

  

	 	(c)	Liquidation of Company. In the event that the Executive’s employment with the Company is terminated by the Company or its estate following or in connection with the
conversion of the Company’s Chapter 11 Case to a case under Chapter 7 of the United States Bankruptcy Code or other liquidation of the Company the Severance Payment shall be a payment equal to Executive’s Annual Base Salary for a period of
8 months made to the Executive in a single lump sum cash payment within ten (10) business days of the Termination Date, which payment shall not by offset by salary, earned income, deferred income or other income earned by the Executive from other
Employment. 

  

	 	(d)	Certain Definitions. For purposes of this Agreement, the following words and phrases shall have the following meanings: 

  

	 	(i)	“Annual Base Salary” shall mean the Executive’s base salary in effect on the date of this Agreement, as such base salary may be increased from time to time.

  

	 	(ii)	“Termination Date” shall mean the date upon which the Executive formally ceases all regular employment activities on behalf of the Company as recognized by the records of
the Company. 

  

	 	(iii)	 A termination for “good reason” shall be deemed to have 

  

 2 

	 	 
occurred, and the Executive shall be entitled to the benefits set forth in this Section 1, if the Executive voluntarily terminates his employment after the
occurrence of any of the following events: (x) the assignment to the Executive of any duties inconsistent with the highest position (including status, offices, titles and reporting requirements), authority, duties or responsibilities attained by the
Executive during the period of his employment by the Company; (y) a relocation of the Executive outside the metropolitan Boston area; or (z) a decrease in the Executive’s compensation (including base salary, bonus or fringe benefits).

  

	 	(iv)	“Cause” shall mean (w) willful misconduct with regard to the Company intended to have, and having, a material adverse affect on the Company, (x) failure by the Employee to
cure a material breach of this Agreement within 15 days after written notice thereof by the Company, (y) refusal to or failure to attempt to follow the reasonable written legal direction of the Board of Directors of the Company or the Chief
Executive Officer of the Company or (z) the commission by the Employee of an act constituting a felony. 

  
 2. Effective Date. 
  
 This Agreement shall become effective as of the date on which the Bankruptcy Court grants its approval thereto. 
  
 3. Release of Liability. 
  
 Notwithstanding anything to the contrary herein, as a condition precedent to
the Company’s obligation to make the Severance Payment described in Section 1 hereof, Executive shall execute and deliver to the Company a release and waiver of employment liabilities in substantially the form attached to this Agreement as
Exhibit B, provided, however, that the Company may modify such form from time to time in order for such form to comply with the continually developing law of employment release enforceability. 
  
 4. Confidential Information. 
  
 The Employee will never use for his own advantage or disclose any
proprietary or confidential information relating to the business operations or properties of the Company, any affiliate thereof or any of their respective customers, suppliers, landlords or licensees. On the Termination Date, the Executive will
surrender and deliver to the Company all documents and information of every kind relating to or connected with the Company and its affiliates and their respective businesses, customers, suppliers, landlords and licensees. 
  

 3 

 5. Nonsolicitation of Employees. 
  
 (a) For a one (1) year period following the Termination Date, Executive will not, in any manner, hire or engage, or assist
any company or business organization by which he is employed or which is directly or indirectly controlled by him to hire or engage, any person who is or was employed by the Company or one of its affiliates at any time during his employment with the
Company or during the period of one (1) year thereafter. 
  
 (b)
For a one (1) year period following the Termination Date, Executive will not, in any manner, solicit, recruit or induce, or assist any company or business organization by which he is employed or which is directly or indirectly controlled by him to
solicit, recruit or induce, any person who is or was employed by the Company or one of its affiliates (or is or was an agent, representative, contractor, project consultant or consultant of the Company or one of its affiliates) at any time during
his employment with the Company, or during the period of one (1) year thereafter, to leave his or her employment, relationship or engagement with the Company. 
  

6. Nonsolicitation of Customers. 
  
 (a) Executive agrees that, for a period of one (1) year following the Termination Date he will not, in any manner, solicit for business (or assist any
company or business organization by which he is employed or which is directly or indirectly controlled by him to solicit or do business) any customer or client of the Company or any of its affiliates with whom Executive has had contact or for whom
Executive has performed services during his employment with the Company. 
  
 (b) Executive agrees that, for a period of one (1) year following the Termination Date, Executive will not, in any manner, solicit for business (or assist any company or business organization by which he is employed
or which is directly or indirectly controlled by him to solicit or do business) any customer or client of the Company made known to him by the Company during his employment with the Company. 
  
 7. Company’s Sole Severance Obligation. 
  
 Executive acknowledges and agrees that the Severance Payment set forth in
Section 1 is in lieu of and shall preclude any and all other severance or termination payments that would otherwise be made by Company to Executive as the result of Company policy, state or federal laws or regulations or otherwise (including,
without limitation, claims under the Worker Adjustment and Retraining Act) and that Company’s commitment to make said Severance Payment is subject to and conditioned upon the prior execution by Executive of the release and waiver described in
Section 3 above. 
  

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 8. Nonguarantee of Employment. 
  
 Nothing contained in this Agreement shall be construed as a contract of employment between the Company and the Executive, or
as a right of the Executive to continue in the employ of the Company, or as a limitation of the right of the Company to discharge the Executive with or without cause. 
  
 9. Successors. 
  
 (a) This Agreement shall be binding upon the Company, its successors and assigns, and in the event of a Change of Control of the Company or in the event
the Company shall be merged or consolidated or otherwise combined into one or more other corporations or other entities, or substantially all of its assets are sold or otherwise transferred to one or more other corporations or entities, this
Agreement shall be binding upon the corporation or entity resulting from such merger or consolidation or to which such assets shall be sold or transferred and shall be assignable by it by way of transfer of assets, merger, consolidation or
combination to the same extent as if it were the Company. Except as provided above in this Section 8(a), this Agreement shall not be assignable by the Company or its successors and assigns. The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume 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 or assignment had taken place. 
  
 (b) This Agreement shall inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 
  
 10. Assignment by Executive. 
  
 This Agreement shall not be assignable by the Executive and shall not be subject to attachment, execution, pledge or hypothecation. 
  
 11. Notice. 
  
 For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing
and either delivered in hand or by mail by United States registered or certified mail, return receipt requested, postage prepaid, or by nationally recognized overnight courier, and shall be deemed to have been duly given the sooner of when actually

  

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received or three (3) days following deposit (a) in the mail by United States registered or certified mail, return receipt requested, postage prepaid or (b)
with a nationally recognized overnight courier, as follows: 
  
 If to the Company: 
  
 Casual Male
Corp. 
 555 Turnpike Street 
 Canton, MA 02021 
 Attn:        Chief Executive
Officer 
  
 Copy to:  General Counsel

  
 If to the Executive: 
  
 Joseph H. Cornely, III 
 157 Warren Ave. 
 Boston, MA 02116 
  
 or to such other
address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 
  
 12. Modification. 
  
 No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the
Executive and the Company. No waiver by either party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such party shall be deemed a waiver of any other provisions hereof or of any similar or dissimilar
provisions or conditions at the same or any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly
in this Agreement. 
  
 13. Validity. 
  
 The invalidity or unenforceability of any provisions of this Agreement shall
not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. 
  
 14. Governing Law. 
  
 This Agreement shall be governed by the laws of the Commonwealth of Massachusetts without giving effect to the conflicts of law principles thereof. The
parties hereby agree that Bankruptcy Court shall retain exclusive jurisdiction to determine any disputes under this Agreement during the pendency of the Chapter 11 Case (or any conversion of such case to a case under Chapter 7 of the United States
Bankruptcy Court). 
  

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 15. Entire Agreement 
  
 This Agreement constitutes the entire understanding of the parties, and revokes and supersedes all prior agreements between the parties (including,
without limitation, any employment agreements, severance agreements and change of control agreements) and is intended as a final expression of their Agreement. This Agreement shall take precedence over any other documents that may be in conflict
therewith. 
  
 IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date first above written. 
  

	Casual Male Corp.
		
	 By:
	 	

	 	 	         Alan I. Weinstein

	 	 	         Chairman and

	 	 	         Chief Executive Officer

	
	 EXECUTIVE:

	
	

	Joseph H. Cornely, III

  

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 EXHIBIT A 
  

“Change of Control” shall mean the occurrence of any one of the following events: 
  
 (i) any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the “Act”) (other than the Company, any of its Subsidiaries, or any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Company or any of its Subsidiaries),
together with all “affiliates” and “associates” (as such terms are defined in Rule 12b-2 under the Act) of such person, shall become the “beneficial owner” (as such term is defined in Rule 13d-3 under the Act), directly
or indirectly, of securities of the Company representing 30% or more of either (A) the combined voting power of the Company’s then outstanding securities having the right to vote in an election of the Company’s Board of Directors
(“Voting Securities”) or (B) the then outstanding shares of Stock of the Company (in either such case other than as a result of an acquisition of securities directly from the Company); or 
  
 (ii) persons who, as of the Effective Date, constitute the
Company’s Board of Directors (the “Incumbent Directors”) cease for any reason, including, without limitation, as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority of the Board,
provided that any person becoming a director of the Company subsequent to the Effective Date whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors shall, for purposes of this Plan, be
considered an Incumbent Director; or 
  
 (iii)
the stockholders of the Company shall approve (A) any consolidation or merger of the Company or any Subsidiary where the shareholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or
merger, beneficially own (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate 80% or more of the voting shares of the corporation issuing cash or securities in the consolidation or
merger (or of its ultimate parent corporation, if any), (B) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets
of the Company or (C) any plan or proposal for the liquidation or dissolution of the Company. 
  
 Notwithstanding the foregoing, a “Change of Control” shall not be deemed to have occurred for purposes of the foregoing clause (i) solely as the result of an acquisition of securities by the Company which,
by reducing the number of shares of Stock or other Voting Securities outstanding, increases (x) the proportionate number of shares of Stock beneficially owned by any person to 30% or more of the shares of Stock then outstanding or (y) the
proportionate voting 

  

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power represented by the Voting Securities beneficially owned by any person to 30% or more of the combined voting power of all then outstanding Voting
Securities; provided, however, that if any person referred to in clause (x) or (y) of this sentence shall thereafter become the beneficial owner of any additional shares of Stock or other Voting Securities (other than pursuant to a
stock split, stock dividend, or similar transaction), then a “Change of Control” shall be deemed to have occurred for purposes of the foregoing clause (i). 
  

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 EXHIBIT B 
  

Form of Release 
  
 In exchange for the amounts described in the Severance Compensation Agreement dated as of
                    , 2001 and other good and valuable consideration, the receipt of which is hereby acknowledged, Executive and his
representatives, agents, estate, heirs, successors and assigns, without limitation, hereby irrevocably and unconditionally release and forever discharge the Company, its predecessors, successors, parents, subsidiaries, divisions, affiliates,
assigns, and its and their current and former officers, agents, directors, supervisors, employees, representatives, successors and assigns, and all persons acting by, through, under, or in concert with, any of them, from any and all charges,
complaints, claims, suits, contracts, causes of action, debts, sums of money, controversies, agreements, promises, damages, and liabilities of any kind or nature whatsoever, both at law and equity, known or unknown, suspected or unsuspected
(hereinafter referred to as “claim” or “claims”) arising from conduct occurring up to and through the date of this release, including, without limitation, any claims incidental to or arising out of Executive’s employment
with the Company or the termination thereof. This release is intended by the parties to be all encompassing and to act as a full and total release of any claims, whether specifically enumerated herein or not, that Executive has, may have or has had,
that exist or ever have existed, on or prior to the date of this Agreement, including, but not limited to, any claims based upon any federal or state law or regulation dealing with either employment or employment discrimination such as those laws or
regulations concerning discrimination on the basis of age, race, color, religion, creed, sex, sex harassment, sexual orientation, national origin, ancestry, marital status, handicap or physical disability, mental disability, medical condition or
status as a disabled or Vietnam-era veteran, veteran status or any military service or application for military service; any contract, whether oral or written, express or implied; any tort; or common law. 
  
 If applicable: 
  
 Waiver of Rights and Claims Under the Age Discrimination in Employment Act of 1967. 
  
 Since Executive is 40 years of age or older, Executive has been informed and
agrees that Executive: 
  
 (a) has or may have specific rights
and/or claims under the Age Discrimination in Employment Act (“ADEA”) of 1967; 
  
 (b) is, in consideration for the amounts and benefits described in the Severance Compensation Agreement dated
                    , 2001, specifically waiving such rights and/or claims he might have against the Company, its predecessors, successors,
parents, subsidiaries, divisions, affiliates, assigns, and its and their current and former officers, agents, directors, supervisors, employees, representatives, successors and assigns, and all persons acting by, through, under, or in concert with
any of them, to the extent such rights and/or claims arose prior to the date this release was executed; 
  

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 (c) understands that rights or claims under ADEA which may arise after the date this release is executed
are not waived by him; 
  
 (d) was advised when presented by the
Company with the original draft of this release that he had at least 21 days within which to consider this release; this 21-day review period will not be affected or extended by any revisions which might be made to this release; 
  
 (e) has been advised to consider the terms of this release carefully and of
his right to consult with or seek advice from an attorney of his choice or any other person of his choosing prior to executing this release and has not been subject to any undue or improper influence interfering with the exercise of his free will in
deciding whether to execute this release; 
  
 (f) has carefully
read and fully understands all of the provisions of this release, and he knowingly and voluntarily agrees to all of the terms set forth in this release; and 
  
 (g) after signing this release, Executive may revoke this release for a period of seven (7) days following said execution. The release shall not become
effective or enforceable under this revocation period has expired. 
  

 11Telecom Share Option Scheme

  
 Exhibit 4.1 
  

  
 TELECOM SHARE OPTION SCHEME 
  

  
 [GRAPHIC] 
  

  
 TELECOM
SHARE OPTION SCHEME 
  
 TABLE OF CONTENTS 
  

	 1
	  	 NAME
	  	1
	 2
	  	 GROUNDING
	  	1
	 2.1
	  	 Alignment
	  	1
	 2.2
	  	 Corporate Objective
	  	1
	 3
	  	 KEY TERMS
	  	1
	 4
	  	 COMMITTEE
	  	3
	 4.1
	  	 Administration
	  	3
	 4.2
	  	 Delegation
	  	4
	 5
	  	 GRANTS
	  	4
	 6
	  	 REJECTION OF GRANT
	  	4
	 6.1
	  	 Opportunity
	  	4
	 6.2
	  	 Acknowledgement
	  	4
	 7
	  	 EXERCISE OF OPTIONS
	  	5
	 7.1
	  	 Qualifying Date notice
	  	5
	 7.2
	  	 Subsequent notice
	  	5
	 7.3
	  	 No further notice
	  	5
	 7.4
	  	 Date on which Options may be exercised
	  	5
	 8
	  	 PROCEDURE FOR EXERCISE
	  	5
	 8.1
	  	 Exercise Notice
	  	5
	 8.2
	  	 Payment
	  	5
	 8.3
	  	 Issue
	  	5
	 8.4
	  	 Committee’s Notice
	  	6
	 8.5
	  	 Effective Exercise
	  	6
	 8.6
	  	 Continued Breach
	  	6
	 9
	  	 RIGHTS ON EXERCISE
	  	6
	 10
	  	 ADJUSTMENTS
	  	7
	 10.1
	  	 Rights Issue
	  	7
	 10.2
	  	 Bonus Issue
	  	7
	 10.3
	  	 Reconstruction
	  	7
	 10.4
	  	 Qualifying Date acceleration
	  	7
	 11
	  	 LAPSE OF OPTIONS
	  	8
	 11.1
	  	 Rejection of Grant
	  	8
	 11.2
	  	 Leave Prior to Qualifying Date
	  	8
	 11.3
	  	 Lapse on Performance Expiry Date
	  	8
	 11.4
	  	 Leave After Qualifying Date: Involuntary Event
	  	8
	 11.5
	  	 Leave After Qualifying Date: Dismissal
	  	8
	 11.6
	  	 Leave After Qualifying Date: Other Reason
	  	8
	 11.7
	  	 Option Lapse Date
	  	8
	 11.8
	  	 Breach
	  	9
	 11.9
	  	 Variation or Waiver
	  	9
	 12
	  	 NO DIVESTMENT
	  	9
	 13
	  	 AMENDMENT AND TERMINATION
	  	9
	 13.1
	  	 Committee’s Discretion
	  	9

  

	 13.2
	  	 Termination
	  	9
	 13.3
	  	 Breach
	  	9
	 13.4
	  	 Notice to Participants
	  	10
	 14
	  	 QUOTATION
	  	10
	 15
	  	 MISCELLANEOUS
	  	10
	 15.1
	  	 Spirit of the Scheme
	  	10
	 15.2
	  	 Fractions
	  	10
	 15.3
	  	 Entire Agreement
	  	10
	 15.4
	  	 Delay
	  	10
	 15.5
	  	 Disputes
	  	10
	 15.6
	  	 Notice
	  	10
	 15.7
	  	 Governing Law
	  	11
	 15.8
	  	 Construction
	  	11

  
 TELECOM
SHARE OPTION SCHEME 
  
 Date: August 2003 
  

	1	NAME 

  
 The name of this scheme is the Telecom Share Option Scheme. 
  

	2	GROUNDING 

  
 The ultimate corporate objective is to create shareholder value (as measured by the sum of share price appreciation and dividend paid to shareholders). To
do this, employees must develop and implement successful corporate and business-unit strategies. Employee compensation is critical to this process in two ways: 
  

	 	(i)	by supporting the strategies, management processes, organisation approaches and culture critical to creating shareholder value; and 

  

	 	(ii)	by paying directly for the value created. 

  
 The Scheme: 
  

	 	2.1	Alignment 

  
 is intended to align the incentives for senior employees with the interests of Telecom’s shareholders; and 
  

	 	2.2	Corporate Objective 

  
 forms part of a Telecom corporate objective which seeks to build morale, retain good employees and promote decisions that will benefit Telecom
shareholders by conferring on a selected group of employees a right to participate in the equity of Telecom. 
  

	3	KEY TERMS 

  
 Unless the context requires otherwise: 
  
 “Breach” means a breach of: 
  

	 	(i)	Telecom’s constitution; 

  

	 	(ii)	the listing and/or other rules governing the Exchange or any other stock exchange on which Shares are quoted; and/or 

  

	 	(iii)	the Securities Amendment Act 1988, any other statute or regulation, or Telecom’s internal procedures for insiders; 

  
 “Business Day” means a day on which the Exchange is open
for trading; 
  

 1 

 TELECOM SHARE OPTION SCHEME 
  

 “Commencement Date” means the date from and including which a Participant is
entitled to participate in the Scheme, specified in the Grant; 
  
 “Committee” means Telecom’s Human Resources/Compensation Committee or any other committee or person nominated by the board of directors of Telecom; 
  
 “Employment” means employment with, or the provision of personal services (otherwise than as an employee)
principally to, a company in the Group; 
  
 “Exchange” means New Zealand Exchange Limited’s NZSX; 
  
 “Exercise Date” means: 
  

	 	(i)	the later of the Qualifying Date and the Performance Date; or 

  

	 	(ii)	the Qualifying Date, if there are no Performance Criteria or the Qualifying Date and the Performance Date are the same, 

  
 subject to clauses 10.4 and 11.3; 
  
 “Exercise Notice” means notice of the exercise of an
Option; 
  
 “Exercise Price” means (subject to
clause 10) the average end of day market price of Shares on the Exchange for the Business Days in the month immediately preceding the Commencement Date; 
  
 “Group” means Telecom and its subsidiaries; 
  
 “Grant” means the grant of an Option; 
  
 “Involuntary Event” means death, redundancy, unjustified dismissal, retirement at or after attaining normal retirement age, illness,
accident, mental infirmity or physical infirmity; 
  
 “Leave” means to suffer termination of Employment by any means and for any reason, excluding: 
  

	 	(i)	termination primarily for the purpose of assuming further Employment; and 

  

	 	(ii)	non-permanent leave of absence with employer approval; 

  
 “Live Option” means an Option which has not been exercised, for which the Qualifying Date has crystallised and which has not lapsed
pursuant to clause 11; 
  

 2 

 TELECOM SHARE OPTION SCHEME 
  

 “Option” means (subject to clause 10) an option to subscribe for a Share pursuant to
this Scheme; 
  
 “Option Lapse Date” means the
first day after the expiration of the period, specified in a Grant, from and including the Commencement Date; 
  
 “Participant” means an Employee to whom Options are granted; 
  
 “Performance Criteria” means the performance criteria (if any) specified in a Grant; 
  
 “Performance Date” means the date on which the Committee
notifies a Participant under clause 7 that the Performance Criteria are satisfied; 
  
 “Performance Expiry Date” means the date, specified in a Grant, for the purpose of clause 7.3; 
  
 “Qualifying Date” means the first Business Day after the expiration of the period, specified in a Grant, from and including the
Commencement Date; 
  
 “Reconstruction” means
any consolidation, subdivision, cancellation, redemption, acquisition by Telecom or other rearrangement or reconstruction whatever of shares in Telecom which changes the proportionate interest in Telecom represented by a Share; 
  
 “Scheme” means the Telecom Share Option Scheme recorded in
this document as amended from time to time; 
  
 “Share” means an ordinary share in Telecom; 
  
 “Takeover” means the acquisition by any means by any person (excluding Telecom) or group of associated persons of a legal or beneficial interest in 20% or more of all Shares; and 
  
 “Telecom” means Telecom Corporation of New Zealand Limited.

  

	4	COMMITTEE 

  

	4.1	Administration 

  
 The Committee will administer all aspects of the Scheme, including the making of Grants. Any matter to be determined by the Committee will be determined
as it sees fit in its sole discretion. 
  

 3 

 TELECOM SHARE OPTION SCHEME 
  

	4.2	Delegation 

  
 The Committee may delegate to any person (and revoke any delegation of) all or any of its powers, discretions, rights and obligations under the Scheme
from time to time as it sees fit, and reference to the “Committee” will be construed accordingly. 
  

	5	GRANTS 

  
 The Committee may make a Grant to an Employee. Each Grant will: 
  

	 	(i)	specify the number of Options granted to the Employee; 

  

	 	(ii)	enclose a copy of the Scheme (unless the Employee has previously received a copy); 

  

	 	(iii)	enclose a copy of an investment statement for the offer of Shares made under the Grant (if made in New Zealand); 

  

	 	(iv)	specify the Commencement Date, the Exercise Price, the Performance Criteria (if any), the Performance Expiry Date (if any) and the periods after which the Qualifying Date and the
Option Lapse Date fall; 

  

	 	(v)	enclose an Options certificate; and 

  

	 	(vi)	specify the period during which the Employee may reject the Grant. 

  

	6	REJECTION OF GRANT 

  

	6.1	Opportunity 

  
 A Participant may reject a Grant by giving the Committee notice, and returning to the Committee the Options certificate, within 40 Business Days after the
Grant. 
  

	6.2	Acknowledgement 

  
 In retaining a Grant (and electing not to reject the Grant pursuant to clause 6.1), a Participant acknowledges that: 
  

	 	(i)	the terms of the Scheme are binding; and 

  

	 	(ii)	participation in the Scheme does not affect the terms of the Participant’s Employment. In no event will Telecom be deemed, by making a Grant or otherwise, to have represented
that a Participant’s Employment will continue until and/or beyond the Qualifying Date or the Exercise Date. 

  

 4 

 TELECOM SHARE OPTION SCHEME 
  

	7	EXERCISE OF OPTIONS 

  

	7.1	Qualifying Date notice 

  
 On or prior to the Qualifying Date, the Committee will notify a Participant whether or not the Performance Criteria are satisfied (where applicable).

  

	7.2	Subsequent notice 

  
 If the Committee gives notice under clause 7.1 that the Performance Criteria are not satisfied, the Committee will notify the Participant of satisfaction,
on the next monthly anniversary of the Qualifying Date on which the Performance Criteria are satisfied (or, if that day is not a Business Day, on the next Business Day), subject to clause 7.3. 
  

	7.3	No further notice 

  
 The Committee will only give notice under clause 7.2 (if any) prior to the Performance Expiry Date. 
  

	7.4	Date on which Options may be exercised 

  
 Options may be exercised on the Exercise Date or any Business Day after the Exercise Date, unless: 
  

	 	(i)	Breach 

  
 the Committee considers that the exercise would give rise to a Breach; or 
  

	 	(ii)	Lapse 

  
 the Option has lapsed pursuant to clause 11. 
  

	8	PROCEDURE FOR EXERCISE 

  

	8.1	Exercise Notice 

  
 A Participant may, as the Participant sees fit from time to time (subject to clause 7.4), exercise part or all of that Participant’s Options (subject
to any minimum number or multiple of a number of Options prescribed by the Committee from time to time), by giving the Committee an Exercise Notice. 
  

	8.2	Payment 

  
 Any Exercise Notice must be accompanied by: 
  

	 	(i)	payment of the aggregate Exercise Price; and 

  

	 	(ii)	(if applicable) a form requesting consent to acquire Shares, in terms of Telecom’s internal procedures for insiders. 

  

	8.3	Issue 

  
 Within five Business Days after the date on which the Committee receives: 
  

	 	(i)	an Exercise Notice; 

  

 5 

 TELECOM SHARE OPTION SCHEME 
  

	 	(ii)	payment; and 

  

	 	(iii)	(if applicable) a form requesting consent to acquire Shares, in terms of Telecom’s internal procedures for insiders, 

  
 in accordance with this clause, Telecom will issue to the Participant
Shares, unless clause 7.4 precludes the exercise of Options (if so, the Committee will give notice to the Participant accordingly and refund the Exercise Price (without interest)). 
  

	8.4	Committee’s Notice 

  
 The Committee will give a further notice to a Participant who has been precluded (pursuant to clause 7.4(i)) from exercising an Option, as soon as it
considers that the exercise would no longer give rise to a Breach. 
  

	8.5	Effective Exercise 

  
 Notwithstanding clauses 11.4 to 11.7, but subject to clause 8.6, the Exercise Notice of a Participant precluded (pursuant to clause 7.4(i)) from
exercising an Option will take effect 10 Business Days after the date on which the Committee gives its notice pursuant to clause 8.4, if the Participant: 
  

	 	(i)	pays the aggregate Exercise Price; and 

  

	 	(ii)	(if applicable) delivers a form requesting consent to acquire Shares, in terms of Telecom’s internal procedures for insiders, 

  
 during that period. If the Participant fails to do so, the
Exercise Notice will be deemed to have been revoked. 
  

	8.6	Continued Breach 

  
 If the exercise of Options pursuant to clause 8.5 would give rise to a Breach, the Committee will proceed as if an Exercise Notice had been given pursuant
to clause 8.1. 
  

	9	RIGHTS ON EXERCISE 

  
 Shares issued to Participants will be credited as fully paid and will rank pari passu in all respects with all Shares at the date of issue, except for any
dividend declared on Shares where the record date occurs prior to issue. 
  

 6 

 TELECOM SHARE OPTION SCHEME 
  

	10	ADJUSTMENTS 

  

	10.1	Rights Issue 

  
 If, prior to the exercise of an Option, Telecom confers on the holders of Shares rights to acquire Shares (or other benefits or assets), the Committee may
adjust the Exercise Price so that Participants receive a benefit which reflects the value of the rights to holders of Shares. A Participant will not otherwise benefit from the rights and, in particular, may not acquire Shares (or other benefits or
assets) under the rights, except to the extent the Participant becomes a holder of Shares (on the exercise of Options) before the record date for the rights. 
  

	10.2	Bonus Issue 

  
 If, prior to the exercise of Options, Telecom issues Shares to the holders of Shares in a manner that maintains the existing relative voting and
distribution rights of all holders of Shares, a Participant will be entitled on exercising the Options to receive additional Shares as if the Shares under the Grant received on exercising the Options had participated in the bonus issue. 

 

	10.3	Reconstruction 

  
 If, prior to the exercise of an Option, there is a Reconstruction, the Committee will adjust the number of Shares to be received on the exercise of
Options, the Exercise Price and/or any other rights under the Options, to the extent required at the time of the Reconstruction under the applicable listing and/or other rules governing the Exchange or any other stock exchange on which Shares are
quoted. 
  

	10.4	Qualifying Date acceleration 

  
 Notwithstanding any other provision of the Scheme, if a Participant Leaves prior to the Qualifying Date: 
  

	 	(i)	due to death or redundancy; and 

  

	 	(ii)	on or after the date half-way through the period from the Commencement Date to the Qualifying Date, 

  
 the Committee may (but has no obligation whatever to) deem the Exercise Date to have occurred, on the day immediately prior
to the date on which the Participant Leaves, for a number of the Participant’s Options based on this formula: 
  

	 	 	 number of Options = number of all of the Participant’s Options x
	  	 n

	 	  	  t

  
 where 
  
 n is the number of days from the Commencement Date to the date on
which the Participant Leaves (both inclusive) 
  
 t
is the number of days from the Commencement Date to the Qualifying Date (both inclusive). 
  

 7 

 TELECOM SHARE OPTION SCHEME 
  

 Where the Committee does so, those Options will lapse on the first day after the expiration of one
year from and including the date on which the Participant Leaves. 
  

	11	LAPSE OF OPTIONS 

  

	11.1	Rejection of Grant 

  
 If a Participant rejects a Grant under clause 6.1, the Options under the Grant will lapse immediately. 
  

	11.2	Leave Prior to Qualifying Date 

  
 If a Participant Leaves prior to the Qualifying Date, the Participant’s Options will lapse immediately, subject to clause 10.4. 
  

	11.3	Lapse on Performance Expiry Date 

  
 If the Exercise Date does not precede the Performance Expiry Date (where applicable), the Participant’s Options will lapse immediately. 

 

	11.4	Leave After Qualifying Date: Involuntary Event 

  
 If a Participant Leaves due to an Involuntary Event or within six months from and including the date of a Takeover, the Participant’s Live Options
(if any) will lapse on the first day after the expiration of one year from and including the date on which the Participant Leaves or on the Option Lapse Date, whichever is the earlier. 
  

	11.5	Leave After Qualifying Date: Dismissal 

  
 Subject to clause 11.4, if a Participant Leaves due to dismissal, the Participant’s Live Options (if any) will lapse immediately. 
  

	11.6	Leave After Qualifying Date: Other Reason 

  
 If a Participant Leaves due to a reason other than the reasons referred to in clauses 11.4 and 11.5, the Participant’s Live Options (if any) will
lapse on the first day after the expiration of three months from and including the date on which the Participant Leaves or on the Option Lapse Date, whichever is the earlier. 
  

	11.7	Option Lapse Date 

  
 A Live Option, which has not lapsed pursuant to clauses 11.4 to 11.6 (which, for the avoidance of doubt, are subject to clause 8.5) or 11.8, lapses on the
Option Lapse Date, subject to clauses 8.5 and 11.8. 
  

 8 

 TELECOM SHARE OPTION SCHEME 
  

	11.8	Breach 

  
 Notwithstanding clauses 11.4 to 11.7, if, after the period of six months from the date on which it first gives notice pursuant to clause 8.3, the
Committee considers that it is still unable to give notice in respect of an Option pursuant to clause 8.4 and/or the exercise of Options pursuant to clause 8.5 would give rise to a Breach: 
  

	 	(i)	the Committee will arrange to pay the Participant the sum representing the difference between the Exercise Price and the average end of day market price of Shares on the Exchange
for the Business Days in the month immediately preceding the date of the Exercise Notice given by the Participant pursuant to clause 8.1; and 

  

	 	(ii)	the Live Option will lapse immediately upon that payment being made. 

  

	11.9	Variation or Waiver 

  
 The Committee may vary or waive the application of clauses 11.1 to 11.8 for any one or more of the Participants. 
  

	12	NO DIVESTMENT 

  
 No Participant may transfer, assign, or otherwise dispose of or create any interest (including any security, legal or equitable interest) in an Option,
without the prior written consent of the Committee. 
  

	13	AMENDMENT AND TERMINATION 

  

	13.1	Committee’s Discretion 

  
 Subject to clause 13.3, the Committee may from time to time: 
  

	 	(i)	vary any term of a Participant’s participation in the Scheme, with the agreement of the Participant; or 

  

	 	(ii)	amend the Scheme, if the Committee considers that the interests of Participants affected are not materially prejudiced. 

  

	13.2	Termination 

  
 Subject to clause 13.3, the Committee may terminate the Scheme. 
  

	13.3	Breach 

  
 The Committee: 
  

	 	(i)	may not amend (or vary any term of a Participant’s participation in), or terminate, the Scheme if this would give rise to a Breach; but 

  

 9 

 TELECOM SHARE OPTION SCHEME 
  

	 	(ii)	may amend or terminate the Scheme if the Committee considers that this would avoid giving rise to a Breach. 

  

	13.4	Notice to Participants 

  
 The Committee will give notice of any amendment to or termination of the Scheme to all Participants affected. Similarly, the Committee will give notice of
any adjustment under clause 10 to all Participants affected. 
  

	14	QUOTATION 

  
 Options will not be quoted on a stock exchange. 
  

	15	MISCELLANEOUS 

  

	15.1	Spirit of the Scheme 

  
 If any circumstance arises which might result in the spirit and intent of the Scheme not being fulfilled, the Committee will use all reasonable endeavours
to effect any modification to the Scheme required to preserve that spirit and intent. 
  

	15.2	Fractions 

  
 If a calculation or adjustment under the Scheme produces a fraction of a cent or Share, the product will be rounded to the nearest whole number favourable
to the Participant. 
  

	15.3	Entire Agreement 

  
 The Scheme represents all of the terms on which Options are issued and exercised and Shares issued under the Scheme, except those which the Committee
reasonably implies to give effect to the Scheme. 
  

	15.4	Delay 

  
 No failure, delay or indulgence by the Committee in exercising any power or right conferred on it under the Scheme will operate as a waiver of that power
or right; nor will a single exercise of a power or right preclude further exercises, or the exercise of any other power or right under the Scheme. 
  

	15.5	Disputes 

  
 Any dispute which arises under the Scheme will be determined by the Committee. The Committee’s decision will be final. 
  

	15.6	Notice 

  
 All notices and communications required to be given or made under the Scheme will be in writing and addressed to the recipient at the address or facsimile
number from time to time designated by the recipient. Unless any other designations are given, the addresses and facsimile numbers of Telecom and a 

  

 10 

 TELECOM SHARE OPTION SCHEME 
  

 
Participant are those (if any) set out in the relevant Grant. Any notice or communication will be deemed to have been received: 
  

	 	(i)	at the time of delivery, if delivered by hand; 

  

	 	(ii)	on the second Business Day after the date of mailing, if sent by post or airmail with postage prepaid; or 

  

	 	(iii)	on the day on which confirmation of proper transmission is received (on transmission), if sent by facsimile. 

  

	15.7	Governing Law 

  
 The Scheme will be governed by and construed in accordance with New Zealand law. 
  

	15.8	Construction 

  
 Unless the context requires otherwise: 
  

	 	(i)	the singular includes the plural and vice versa, and words importing any gender include the other genders; 

  

	 	(ii)	a reference to a “person” includes any individual, partnership, committee and incorporated or unincorporated body (whether or not having a separate legal personality);

  

	 	(iii)	a reference to an “amendment” includes any deletion or addition; 

  

	 	(iv)	a reference to an enactment (statute or regulation) includes enactments in New Zealand and in any other jurisdiction affecting the Scheme, and is a reference to that enactment as
amended, or any enactment substituted for that enactment; 

  

	 	(v)	where a word or expression is defined in the Scheme, other parts of speech and grammatical forms of that word or expression have a corresponding meaning; and

  

	 	(vi)	a reference to a person includes its successors and permitted assigns. 

  

 11

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