Document:

exv10w4

 

Exhibit 10.4

BANKNORTH GROUP, INC.

RETENTION AGREEMENT

     This Retention Agreement (this “Agreement”) is made and entered into as of
the 25th of August, 2004, by and between Banknorth Group, Inc., a Maine
corporation (the “Company”) and                             (the “Executive”);

W I T N E S S E T H:

     WHEREAS, the Company, Berlin Delaware Inc., a Delaware corporation and
wholly owned subsidiary of the Company (“Berlin Delaware”), The
Toronto-Dominion Bank, a Canadian chartered bank, (“TD”), and Berlin Merger
Co., a Delaware corporation and wholly owned subsidiary of TD (“Berlin
Mergerco”), have entered into an Agreement and Plan of Merger dated as of
August 25, 2004, whereby, among other things, Berlin Mergerco will merge with
and into Berlin Delaware (the “Merger”); and

     WHEREAS, the Company wishes to continue to retain the services of the
Executive after the Effective Date for the benefit of its successor Berlin
Delaware;

     NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Executive hereby agree, contingent on completion of the Merger, as follows:

1. Definitions.

     (a) Accrued Benefits means:

 

 

          (i) all salary earned or accrued through the date the Executive’s
employment is terminated, and any unpaid amounts described in Section
6(a);

          (ii) reimbursement for any and all monies advanced in connection
with the Executive’s employment for reasonable and necessary expenses
incurred by the Executive through the date the Executive’s employment is
terminated;

          (iii) any and all other compensation previously earned by the
Executive and deferred under or pursuant to any deferred compensation
plan or plans of the Company then in effect together with any interest or
deemed earnings thereon pursuant to, and to the extent consistent with,
the terms of such plan or plans;

          (iv) any bonus earned by the Executive for a Year or other
performance period ending prior to the Year or other performance period
in which employment terminates, but not yet paid to the Executive, under
any bonus or incentive compensation plan or plans in which the Executive
is a participant;

          (v) to the extent not previously paid or provided to the Executive,
all other payments and benefits to which the Executive may be entitled
under the terms of any applicable compensation or benefit plan, program
or arrangement of the Company except for any severance plan, or any plan,
program or arrangement that would result in any duplication of benefits.

     (b) Affiliate of any specified person means any other person that,
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under direct or indirect common control with such
specified person. For the purposes of this definition, “control” means the
possession, direct or indirect, of the power to direct or cause the direction
of the management and policies of a person, whether through the ownership of
voting securities, by contract or

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otherwise, and the terms “controlling” and “controlled” have meanings
correlative to the foregoing.

     (c) Annual Bonus means any bonus or incentive award under any bonus or
incentive compensation plan, program or arrangement of the Company in which the
Executive is a participant the performance period for which is or was initially
scheduled to be one (1) year or less.

     (d) Base Amount means an amount equal to the Executive’s Annualized
Includable Compensation for the Base Period as defined in Section 280G(d)(1)
and (2) of the Code (as hereinafter defined).

     (e) Benefit Computation Base means either (i) the Benefit Computation Base
as defined in the Supplemental Retirement Agreement between Executive and the
Company or (ii) if there is no Supplemental Retirement Agreement between the
Executive and the Company, the base annual compensation amount used in
calculating the Executive’s benefits under the Retirement Plan.

     (f) Bonus (whether or not capitalized) means any bonus or incentive award
(including any Annual Bonus or Long-Term Incentive Award) under any bonus or
incentive compensation plan, program or arrangement of the Company in which the
Executive is a participant.

     (g) Cause means:

          (i) the Executive’s conviction of, or plea of nolo contendere to, a
felony; or

          (ii) willful and intentional misconduct, willful neglect, or gross
negligence in the performance of the Executive’s duties, which has caused
a demonstrable and serious injury to the Company, monetary or otherwise.
The Executive shall be given written notice that the Company intends to
terminate the Executive’s employment for Cause.

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Such written notice shall specify the particular acts, or failures
to act, on the basis of which the decision to so terminate employment was
made.

     In the case of a termination for Cause as described in clause (ii), above,
the Executive shall be given the opportunity within thirty (30) days of the
receipt of such notice to meet with the Board of Directors of the Company to
defend such acts, or failures to act, prior to termination. The Company may
suspend the Executive’s title and authority pending such meeting, and such
suspension shall not constitute Good Reason, as defined in subsection (o)
below.

     (h) Change of Control means a change of control, as that term is defined
in TD’s Performance Based Restricted Share Unit Plan (Outside Canada) (as in
effect from time to time, or any successor plan), of either TD or the Company,
with such definition being appropriately adjusted, where necessary, to refer to
the Company.

     (i) Code means the Internal Revenue Code of 1986, as amended.

     (j) Deferred Compensation Plan means a deferred compensation plan approved
by the Compensation Committee of the Board.

     (k) Disability means a disability entitling the Executive to payments
under the Company’s long-term disability plan applicable to the Executive,
provided that in no event shall the Executive’s employment be terminable by
reason of Disability unless the Executive shall have been absent from the
Executive’s duties with the Company on a full-time basis for one hundred and
twenty (120) consecutive business days as a result of incapacity due to mental
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.

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     (l) Early Retirement Benefit means either (i) the “Early Retirement
Benefit” or “Early Retirement/Termination of Service Benefit” as defined in the
SERP Agreement or (ii) if there is no Supplemental Retirement Agreement between
the Executive and the Company, the early retirement benefit as defined in the
Retirement Plan.

     (m) Effective Date means the date on which the Effective Time (as defined
in the Merger Agreement) occurs.

     (n) EIP means the Banknorth Group, Inc. Executive Incentive Plan as
amended and in effect on the Merger Agreement Date.

     (o) Good Reason means:

          (i) any breach of this Agreement by the Company, including without
limitation, (A) any reduction during the Retention Period in the amount
of the Executive’s Base Salary, incentive compensation opportunities or
aggregate welfare and pension benefits as in effect on the Effective
Date, or (B) failure to provide the Executive with the same fringe
benefits that were provided to the Executive immediately prior to the
Effective Date, or with a package of fringe benefits (including paid
vacations) that, though one or more of such benefits may vary from those
in effect immediately prior to the Effective Date, is substantially
comparable in all material respects to such fringe benefits taken as a
whole;

          (ii) without the Executive’s express written consent, the assignment
to the Executive of any duties that are materially inconsistent with the
Executive’s positions, duties, responsibilities and status immediately
following the Effective Date, a material change in the Executive’s
reporting responsibilities, titles or offices as an employee and as in
effect immediately following the Effective Date, or a significant
reduction in the

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Executive’s title, duties, or responsibilities, as in effect
immediately prior to the Effective Date, but without regard to the
Executive’s normal and appropriate interaction with executives of TD as a
result of the Company’s status as an Affiliate of TD;

          (iii) the relocation of the Executive’s principal place of
employment, without the Executive’s written consent, to a location
outside the same metropolitan area in which the Executive was employed at
the time of the Effective Date, or the imposition of any requirement that
the Executive spend more than ninety (90) business days per year at a
location other than such principal place of employment; or

          (iv) any purported termination of the Executive’s employment for
Cause or Disability which is not effected pursuant to a satisfactory
Notice of Termination.

     In the event of the occurrence of any of the events described in (i),
(ii), (iii), or (iv) above, the Executive may, within three (3) months after
the Executive has knowledge of the occurrence of such event, give the Company
written notice that such event constitutes Good Reason, and the Company shall
thereafter have thirty (30) days in which to cure. If the Company has not
cured in that time, the event shall constitute Good Reason. If the Executive
has not given notice of Good Reason during such three (3) month period, such
event shall not constitute Good Reason.

     (p) Long-Term Incentive Award means an incentive award under the EIP the
performance period for which is or was initially scheduled to be in excess of
one (1) year.

     (q) Merger Agreement means the Agreement and Plan of Merger, dated as of
August 25, 2004 among the Company, Berlin Delaware, TD and Berlin Mergerco.

     (r) Merger Agreement Date means the date upon which the Merger Agreement
was executed by the parties thereto.

     (s) Non-Competition and Retention Amount shall be:

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          (i) a lump sum payment equal to $1,046,964; and

          (ii) for purposes of determining the Executive’s benefit under the
SERP Agreement an additional thirty-six (36) months of age and of service
shall be credited, determined as follows:

               (A) The additional thirty-six (36) months of age and service shall be
applied for purposes of benefit accrual, vesting, eligibility for early
retirement, subsidized early retirement factors, actuarial equivalence and any
other purposes under the SERP Agreement.

               (B) Any provision under the SERP Agreement prohibiting the accrual of any
additional benefits after the Executive has been credited with more than a
stated number of years of service shall be disregarded.

               (C) For purposes of determining the amount of the Executive’s benefit
under the SERP Agreement, the reduction in respect of the benefit paid under
the Retirement Plan shall be based on the Executive’s actual Retirement Plan
benefit (that is, without any additional deemed service).

               (D) For purposes of determining the Early Retirement Benefit and other
forms of benefit under the SERP Agreement, if the Executive is less than
fifty-five (55) years of age, the Executive shall be deemed to be at least
fifty-five (55) years of age on the date the Executive’s employment with the
Company terminates, notwithstanding the Executive’s actual age, if less.

               (E) The Benefit Computation Base (as defined in the SERP Agreement) shall
be determined as if it were being calculated at the end of the thirty-six (36)
month period of service credited to the Executive under this paragraph (ii) and
as if during such thirty-six (36) additional month period the Executive’s
annualized compensation was the same as such

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compensation for (I) the Year during which the Executive’s employment is
terminated, or, (II) any Year before the Effective Date occurred, whichever is
greater. The parties hereto agree that (i) any bonus amount that would normally
be payable in 2005, but is accelerated into 2004 shall be taken into account in
determining the Executive’s Benefit Computation Base under this paragraph (E)
as if it had been paid in 2005, (ii) no amounts payable pursuant to Sections 6,
7 and 8 shall be taken into account in determining the Executive’s benefits
under the SERP Agreement, and (iii) the SERP Agreement shall be amended
accordingly, if necessary.

               (F) Any amendment to the Retirement Plan after the date hereof shall be
disregarded to the extent that the application of such amendment would decrease
the total amount of the benefits provided for in this paragraph (ii).

               (G) The Executive shall be entitled to a lump sum distribution of SERP
Agreement benefits in all events, and the Company shall not be entitled to
require payment over a longer period. If the Executive elects a lump sum
payment (i) the actuarial equivalent benefit shall be determined in accordance
with the provisions of the Retirement Plan as in effect immediately prior to
the Effective Date, or as in effect on termination of the Executive’s
employment, whichever creates the greater benefit, and (ii) the lump sum
payment shall, unless deferred in advance by the Executive pursuant to
reasonable criteria consistent with the requirements of the Code, be made
within thirty (30) days following the termination of the Executive’s employment

               (H) An example of the SERP calculation described by this Agreement will be
appended hereto as Exhibit A as soon as reasonably practicable following the
Merger Agreement Date.

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     (t) Notice of Termination means a notice which shall indicate the specific
termination provision relied upon in this Agreement and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive’s employment under the provision so indicated.

     (u) Plan Year with respect to any of the Retirement Plan or the 401(k)
Plan, the “plan year” as defined in such plan.

     (v) Post-Retention Period Severance means a severance payment consisting
of twenty-four (24) months of continuation of the Executive’s then base salary.

     (w) Pre-Merger Option means any option to purchase common stock of the
Company that was granted prior to the date on which the Merger Agreement was
executed by the parties thereto.

     (x) Prorated Bonus means a lump sum cash payment payable within ten (10)
business days of the date of termination equal to the product of (x) the
average Annual Bonus paid (whether deferred or paid in equity) to the Executive
under the annual bonus plan of the Company for the last three (3) full fiscal
years of the Company ending prior to the date of termination or such shorter
number of years that the Executive has been employed by the Company and
eligible to receive a full year bonus and (y) a fraction, the numerator of
which is the number of days in the current fiscal year through the date of
termination and the denominator of which is three hundred and sixty-five (365).

     (y) Retention Period means a period commencing on the Effective Date and
ending on the third (3rd) anniversary of the date on which the Effective Date
occurs.

     (z) Retirement Plan means the Banknorth Group, Inc. Retirement Plan, as
amended and in effect from time to time and any successor plan.

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     (aa) RSUs means restricted stock units.

     (bb) SERP Agreement means either (i) the Supplemental Retirement Agreement
between the Executive and the Company or (ii) if there is no Supplemental
Retirement Agreement between the Executive and the Company, the Banknorth
Group, Inc. Supplemental Retirement Plan, as amended.

     (cc) Year means a calendar year unless otherwise specifically provided.

     (dd) 401(k) Plan means the Banknorth Group, Inc. 401(k) Plan dated January
1, 2001, as amended, or any successor plan.

2. Term of Agreement.

     This Agreement shall begin on the Effective Date and shall terminate on
the third anniversary of such date. If the Effective Date does not occur, this
Agreement shall be null and void ab initio.

3. Duties.

     During the Retention Period, the Executive shall serve the Company in such
capacities and positions as may be assigned by the Company consistent with the
Executive’s capacities and positions immediately prior to the Effective Date
and shall devote the Executive’s best efforts and all of the Executive’s
business time, attention and skill to the business and affairs of the Company,
as such business and affairs now exist and as they may hereafter be conducted.

4. Compensation.

     During the Retention Period, the Executive shall be compensated by the
Company as follows:

     (a) the Executive shall receive, at such intervals and in accordance with
such standard policies of the Company from time to time, an annual base salary
not less than the Executive’s

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annual base salary as in effect immediately prior to the Effective Date,
subject to adjustment as hereinafter provided, and shall be entitled to such
increases in Executive’s base salary, if any, as may be determined from time to
time in the sole discretion of the Board, provided that in no event may the
Executive’s annual base salary be decreased;

     (b) the Executive shall be included in all plans providing incentive
compensation to executives, including but not limited to bonus, deferred
compensation, annual or other incentive compensation, supplemental pension,
stock ownership, stock option, stock appreciation, stock bonus and similar or
comparable plans as any such plans are extended by the Company from time to
time to senior corporate officers, key employees and other employees of
comparable status, provided that in no event shall the Executive’s incentive
compensation opportunities be less favorable than the Executive’s incentive
compensation opportunities immediately prior to the Effective Date;

     (c) the Executive shall be reimbursed, at such intervals and in accordance
with such standard policies as may be in effect on the Effective Date, for any
and all monies advanced in connection with the Executive’s employment for
reasonable and necessary expenses incurred by the Executive on behalf of the
Company, including travel expenses;

     (d) the Executive shall enjoy the fringe benefits normally afforded to the
Company’s executive officers. Such fringe benefits may vary from those in
effect immediately prior to the Effective Date, provided that such fringe
benefits taken as a whole are substantially comparable in all material respects
to those in effect immediately prior to such date;

     (e) the Executive shall be allowed to participate, on the same basis as
applicable to other employees of comparable status and position, in any and all
plans, programs or arrangements covering employee benefits or fringe benefits,
including but not limited to the following: group

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medical insurance, hospitalization benefits, disability benefits, medical
benefits, dental benefits, pension benefits, profit sharing and stock bonus
plans, but excluding severance and any similar plans, programs or arrangements,
and, in any event, such plans, programs or arrangements shall be no less
favorable, in the aggregate, than those in effect as of immediately prior to
the Effective Date; and

     (f) the Executive shall receive annually not less than the amount of paid
vacation and not fewer than the number of paid holidays received annually
immediately prior to the Effective Date or, if greater, available annually to
other employees of comparable status and position with the Company.

     During the Retention Period, the Board of Directors of the Company, or an
appropriate committee thereof, will consider and appraise, at least annually,
the contributions of the Executive to the Company’s operating efficiency,
growth, production and profits and, in accordance with past practice, due
consideration shall be given to the upward adjustment of the Executive’s
compensation rate, at least annually, commensurate with increases generally
given to other senior corporate officers and key employees and as the scope of
the Executive’s duties expands.

5. Equity-Based Arrangements.

     (a) As soon as practicable after the Effective Date, the Company shall
grant the Executive the number of RSUs determined by dividing $2 million by the
per-share closing price of TD common stock on the New York Stock Exchange (the
“Closing Price”) on the Effective Date. The RSUs shall vest on the third (3rd)
anniversary of the Effective Date, provided that, subject to the provisions of
Section 7, the Executive has remained continuously in the employ of the Company
from the Effective Date through such third (3rd) anniversary. The RSUs shall be
paid

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by the Company as soon as practicable, in an amount of cash equal to the
aggregate Closing Price of such shares on such third (3rd) anniversary,
provided that the Executive may elect to defer such cash amount in accordance
with a Deferred Compensation Plan. The cash amount payable pursuant to this
Section 5 shall be adjusted upward or downward (but not by more than 20%) to
reflect the performance of Berlin against an annual growth in operating
earnings per share target established each year by the Compensation Committee
of the Board, provided that such operating earnings per share target (i) shall
not increase by more than 10% annually and (ii) shall exclude for all relevant
years (x) costs associated with the Merger, (y) costs, if any, related to the
expensing of stock options, and (z) extraordinary items. Except as specifically
provided in this Agreement (including, without limitation, Section 5 and
Section 7), the terms of the RSUs shall be governed by the terms of a RSU
agreement with terms substantially similar to the terms applicable to grants of
restricted stock units under TD’s Performance Based Restricted Share Unit Plan
(Outside Canada) except that in no event shall Sections 7.5, 7.6, 7.7 and 7.8
of the Performance Based Restricted Share Unit Plan (Outside Canada) or
provisions similar thereto apply to the RSUs.

     (b) Notwithstanding the terms and conditions of the pre-Merger Options,
whether set forth in any option plan or option agreement, the transactions
contemplated by the Merger Agreement shall be deemed not to constitute a change
in control under such plans or agreement, and, therefore, none of the
pre-Merger Options shall vest and become exercisable directly as a result of
the Merger.

6. Initial Payment and Non-Competition and Retention Amount.

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     (a) Initial Payment. Within ten (10) business days after the
Effective Date, the Executive shall be paid any unpaid portion of a pro-rata
Long Term Incentive Award in an amount determined as described in Section 5 of
the EIP.

     (b) Non-Competition and Retention Amount. Subject to the
provisions of Section 7 and in consideration for the Executive’s agreement to
remain employed by the Company and to abide by the provisions of Sections 9(a),
9(b) and 10 hereof, within ten (10) business days following the third (3rd)
anniversary of the Effective Date, provided that the Executive has continuously
been in the employ of the Company from the Effective Date through such
anniversary date, the Executive shall be paid, or be credited with, as the case
may be, the Non-Competition and Retention Amount.

7. Termination of Employment.

     Any termination by the Company or the Executive of the Executive’s
employment during the Retention Period shall be communicated by written Notice
of Termination to the Executive if such notice is delivered by the Company, and
to the Company if such notice is delivered by the Executive. Any payments made
under this Section 7, other than due to death, shall be contingent on the
Executive’s prior execution and non-revocation of a mutual release
substantially in the form attached hereto as Exhibit B; provided, however, that
if the Company refuses to execute such mutual release, the Executive’s
obligation to execute and not revoke the release as a precondition to receiving
severance benefits shall terminate. The Notice of Termination shall comply with
the requirements of Section 20 below.

     (a) Termination for Disability Prior to the End of the Retention
Period. If during the Retention Period, the Executive’s employment is
terminated on account of the Executive’s Disability, the Executive shall
receive any Accrued Benefits, the Prorated Bonus, and any unpaid

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Non-Competition and Retention Amount, and shall remain
eligible for all benefits as provided pursuant to the terms of any long-term
disability programs of the Company in effect at the time of such termination.
In addition, (i) the pre-Merger Options shall become immediately vested and
exercisable (to the extent not previously vested and exercisable) and shall
remain exercisable for the period provided under the applicable option
agreement, and (ii) if such termination occurs prior to the third anniversary
of the Effective Date, RSUs shall vest (or to the extent such termination
occurs prior to the grant of such RSUs, the RSUs shall be granted and vest) but
shall be paid out, subject to the Executive’s continued compliance with
Sections 9(a), 9(b) and 10, on the third (3rd) anniversary of the Effective
Date, and the payout shall be determined without regard to the performance
conditions

     (b) Termination due to the Executive’s Death Prior to the End of the
Retention Period. If, during the Retention Period, the Executive’s
employment is terminated on account of the Executive’s death, the Executive,
(or the Executive’s estate or designated beneficiary (or beneficiaries), as
applicable), shall receive all the Executive’s Accrued Benefits, the Prorated
Bonus, and any unpaid Non-Competition and Retention Amount. In addition, (i)
the pre-Merger Options shall become immediately vested and exercisable (to the
extent not previously vested and exercisable) and shall remain exercisable for
the period provided under the applicable option agreement, and (ii) if such
termination occurs prior to the third anniversary of the Effective Date, RSUs
shall vest (or to the extent such termination occurs prior to the grant of such
RSUs, the RSUs shall be granted and vest) but shall be paid out on the third
(3rd) anniversary of the Effective Date, and the payout shall be determined
without regard to the performance conditions.

     (c) Voluntary Termination or Termination for Cause Prior to the End of
the Retention Period. If, during the Retention Period, (i) the Executive
shall terminate employment with the

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Company other than for Good Reason, or (ii)
the Executive’s employment is terminated for Cause, the Executive shall receive
from the Company only the Accrued Benefits.

     (d) Termination by the Company Without Cause or by the Executive for
Good Reason Prior to the End of the Retention Period. If, during the
Retention Period, the Executive’s employment with the Company is terminated by
the Company other than for Cause, or by the Executive for Good Reason, then:

          (i) the Executive shall receive from the Company the Accrued
Benefits, the Prorated Bonus, and any unpaid Non-Competition and
Retention Amount, which shall be paid within ten (10) days after the date
of termination of the Executive’s employment; and

          (ii) the pre-Merger Options shall become immediately vested and
exercisable (to the extent not previously vested and exercisable) and
shall remain exercisable for the period provided under the applicable
option agreement; and

          (iii) if such termination takes place following a Change of Control
that occurs after the Effective Date, any other grants of equity-based
compensation awards from TD or the Company shall become immediately
vested and exercisable (to the extent not previously vested and
exercisable) and, if applicable, shall remain exercisable for the period
provided under the applicable award agreement; and

          (iv) if such termination occurs prior to the third anniversary of
the Effective Date, RSUs shall vest (or to the extent such termination
occurs prior to the grant of such RSUs, the RSUs shall be granted and vest) but shall be paid out,
subject to the Executive’s continued compliance with Sections 9(a), 9(b)
and 10, on the third (3rd)

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anniversary of the Effective Date, and further
the payout shall be determined without regard to the performance
conditions; and

          (v) the Executive shall continue to be covered at the expense of the
Company by the same or equivalent hospital, medical, dental, accident,
disability and life insurance coverage as in effect for the Executive
immediately prior to termination of the Executive’s employment, until the
earlier of (I) thirty-six (36) months following termination of
employment, or (II) the date the Executive has commenced new employment
and has thereby become eligible for comparable benefits; provided that,
with respect to any of the coverages described above, if such coverage is
provided through an insurance policy with an insurance company
unaffiliated with the Company and if under the terms of the applicable
policy, it is not possible to provide continued coverage (or if continued
coverage under such policy would increase the Company’s cost allocable to
the Executive by more than one hundred percent (100%)), then the Company
shall pay the Executive a lump sum cash amount, no later than thirty (30)
days following termination of employment an amount equal to twice the
aggregate allocable cost of such coverage as applicable immediately prior
to termination of employment, such payment to be made without any
discount for present value (the “Medical Benefits”).

     (e) Termination After the Retention Period.

          (i) If, after the Retention Period, the Executive’s employment with
the Company is terminated by the Company other than for cause or by the
Executive for good reason, each as defined pursuant to the Company’s then-applicable
severance program for its executives, the Executive shall receive the
Post-Retention Period Severance.

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          (ii) In addition, in the event that the Executive ceases to be
employed by the Company for any reason at or following the end of the
Retention Period (other than by reason of a termination of the
Executive’s employment by the Company for Cause), the Executive shall be
entitled to the Medical Benefits.

8. Certain Supplemental Payments by the Company.

     (a) In the event it is determined that part or all of the compensation and
benefits to be paid to the Executive, whether or not payable hereunder, (i)
constitute “parachute payments” under Section 280G of the Code (the
“Payments”), and (ii) exceed one hundred and five percent (105%) of three (3)
times the Executive’s Base Amount, the Company, on or before the date for
payment of such excise tax, shall pay to or on behalf of the Executive, in lump
sum, an amount (the “Gross-Up Amount”) such that, after payment of all federal,
state and local income tax and any additional excise tax under Section 4999 of
the Code in respect of the Gross-Up Amount payment, the Executive will be fully
reimbursed for the amount of such excise tax. If the Payments equal three (3)
times the Executive’s Base Amount or exceed three (3) times the Executive’s
Base Amount, but by an amount less than five percent (5%) of three (3) times
the Base Amount, such payments shall be reduced by the least amount necessary
to bring such Payments below three (3) times the Executive’s Base Amount.

     (b) The determination of the Parachute Amount, the Base Amount and the
Gross-Up Amount, as well as any other calculations necessary to implement this
Section 8 shall be made by KPMG LLP, and subject to the review and reasonable
approval of Ernst & Young LLP, unless
the Executive and the Company agree otherwise. The accounting firm’s fee
shall be paid by the Company.

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     (c) As promptly as practicable following such determination and the
elections hereunder, the Company shall pay to or distribute to or for the
benefit of the Executive such amounts as are then due to the Executive under
this Agreement and shall promptly pay to or distribute for the benefit of the
Executive in the future such amounts as become due to the Executive under this
Agreement.

     (d) As a result of the uncertainty in the application of Section 280G of
the Code at the time of an initial determination hereunder, it is possible that
payments will not have been made by the Company which should have been made
under clause (a) of this Section 8 (“Underpayment”). In the event that there
is a final determination by the Internal Revenue Service, or a final
determination by a court of competent jurisdiction, that an Underpayment has
been made and the Executive thereafter is required to make any payment of an
excise tax, income tax, any interest or penalty, the accounting or benefits
consulting firm selected under clause (b) above 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. If and to the
extent that the Executive receives any tax refund from the Internal Revenue
Service that is attributable to payments by the Company pursuant to this
Section 8 of amounts in excess of the actual Gross-Up Amount as finally
determined by the Internal Revenue Service or a court of competent jurisdiction
(“Overpayment”), the Executive shall promptly pay to the Company the amount of
such refund that is attributable to the Overpayment (together with any interest
paid or credited thereon after taxes applicable thereto); provided, however,
the Executive shall not have any obligation to pay the Company any amount
pursuant to this Section 8(d) if and to the extent
that any such obligation would cause the arrangement to be treated as a
loan or extension of credit prohibited by applicable law.

19

 

9. Further Obligations of the Executive.

     (a) Confidentiality. During and following the Executive’s
employment by the Company, the Executive shall hold in confidence and not
directly or indirectly disclose or use or copy or make lists of any
confidential information or proprietary data of the Company, except to the
extent authorized in writing by the Board or required by any court or
administrative agency or otherwise by applicable law, other than to an employee
of the Company or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by the Executive of duties as an
executive of the Company. Confidential information shall not include any
information known generally to the public or any information of a type not
otherwise considered confidential by persons engaged in the same business or a
business similar to that of the Company. All records, files, documents and
materials or copies thereof relating to the Company’s business which the
Executive shall prepare, or use, or come into contact with, shall be and remain
the sole property of the Company and shall be promptly returned to the Company
upon termination of employment with the Company.

     (b) Non-Solicitation. During the Retention Period and for a period
of three (3) years following the date the Executive ceases to be employed by
the Company (the “Restricted Period”), the Executive will not hire, or,
directly or indirectly, contact, approach or solicit for the purpose of
offering employment to or hiring (whether as an employee, consultant, agent,
independent contractor or otherwise), or encouraging to cease work with the
Company or its Affiliates, any person who is then employed or retained as a
consultant by the Company, or an Affiliate of the Company, other than on behalf
of the Company or an Affiliate of the Company, or was employed or retained as a
consultant by the Company or an Affiliate of the Company

20

 

during the one (1) year period prior to such hiring,
solicitation or other act prohibited by this Section 9(b)(i).

     (c) Certain Accelerations and Option Exercises. The Executive
agrees that the Company may, at its election, accelerate the payment of (x) the
amount described in Section 6(a) and/or (y) the annual bonus for 2004 to a date
on or before December 31, 2004 (it being understood that the amount payable
under Section 6(a) shall be based upon the date upon which the Effective Time
occurs and shall be reduced by any amount previously paid under this Section
9(c)), and agrees to exercise, prior to December 31, 2004, any vested options
to purchase Berlin shares that would otherwise expire by their terms during
calendar year 2004, 2005 and 2006 and that may reasonably be necessary, based
on the advice of KPMG LLP, and subject to the review and reasonable approval of
Ernst & Young, LLP, in order for the Executive to mitigate the effects of
Section 280G of the Code.

     (d) Share Ownership Guidelines. The Executive shall comply with
TD’s executive share ownership guidelines, as they may be in effect from time
to time, including the one-year holding period after termination of employment,
provided that one-half of the value of shares that the guidelines require the
Executive to hold shall be satisfied by the Executive holding TD shares, and
the other half by holding Berlin Delaware shares.

10. Non-Competition. The Executive acknowledges and recognizes the
highly competitive nature of the businesses of the Company and its subsidiaries
and accordingly agrees as follows:

     (a) During the Restricted Period, the Executive will not, whether on the
Executive’s own behalf or on behalf of or in conjunction with any person, firm,
partnership, joint venture,
association, corporation or other business organization, entity or
enterprise whatsoever

21

 

(“Person”), directly or indirectly solicit or assist in
soliciting in competition with the Company, the business of any client or
prospective client:

          (i) with whom the Executive had personal contact or dealings on
behalf of the Company during the one (1) year period preceding
Executive’s termination of employment;

          (ii) with whom employees reporting to the Executive have had
personal contact or dealings on behalf of the Company during the one (1)
year immediately preceding the Executive’s termination of employment; or

          (iii) for whom the Executive had direct or indirect responsibility
during the one (1) year immediately preceding the Executive’s termination
of employment.

     (b) During the Restricted Period, the Executive will not directly or
indirectly:

          (i) engage in any business that competes with the business of the
Company or its subsidiaries (including, without limitation, businesses
which the Company or its subsidiaries have specific plans to conduct in
the future as of the date of termination and as to which Executive is
aware of such planning) during the Retention Period within one hundred
(100) miles of any location in North America in which the Company or its
subsidiaries provide deposit-taking or personal and commercial banking
services (a “Competitive Business”) provided, that any business or
endeavor shall cease to be a Competitive Business if the Company and its
subsidiaries are not, or cease to be, engaged in such business or
endeavor;

          (ii) enter the employ of, or render any services to, any Person (or
any division or controlled or controlling Affiliate of any Person) who or
which engages in a Competitive Business;

22

 

          (iii) acquire a financial interest in, or otherwise become actively
involved with, any Competitive Business, directly or indirectly, as an
individual, partner, shareholder, officer, director, principal, agent,
trustee or consultant.

     (c) Notwithstanding anything to the contrary in this Agreement, (i) the
Executive may, directly or indirectly own, solely as an investment, securities
of any Person engaged in the business of the Company or its Affiliates which
are publicly traded on a national or regional stock exchange or on the
over-the-counter market if Executive (A) is not a controlling person of, or a
member of a group which controls, such person and (B) does not, directly or
indirectly, own five percent (5%) or more of any class of securities of such
Person (ii) the Executive may, directly or indirectly, following termination of
the Executive’s employment, (A) provide services to any person or entity
engaged in any Competitive Business if the Executive is not involved, directly
or indirectly, in the management, supervision or operations of such Competitive
Business and the gross revenues generated by such Competitive Business do not
constitute more than the lesser of (x) 10% of the consolidated gross revenues
of such person or entity and its Affiliates or (y) 10% of the consolidated
gross revenues of the Competitive Businesses in which the Company and its
subsidiaries engage as of the Executive’s termination of employment, and (iii)
notwithstanding anything in any arrangement to the contrary, the restrictive
covenants set forth in this Agreement shall be the sole restrictive covenants
applicable to the Executive during the Retention Period.

11. Equitable Relief. Executive acknowledges and agrees that in the
event of a breach by Executive of any of the provisions of Sections 9(a), 9(b)
and 10 hereof, the Company may suffer irreparable harm for which monetary
damages alone will constitute an insufficient remedy. Consequently, in the
event of any such breach, the Company may, in addition to other rights and

23

 

remedies existing in its favor, apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violations of the provisions hereof,
in each case without the requirement of posting a bond or proving actual
damages.

24

 

12. Expenses and Interest. If, during the Retention Period, a good faith
dispute arises with respect to the enforcement of the Executive’s rights under
this Agreement, or if any legal or arbitration proceeding shall be brought in
good faith to enforce or interpret any provision contained herein, or to
recover damages for breach hereof, the Executive shall recover from the Company
any reasonable attorney’s fees and necessary costs and disbursements incurred
as a result of such dispute, and prejudgment interest on any money judgment or
arbitration award obtained by the Executive calculated at the rate of interest
announced by Banknorth N.A., or any successor thereto, from time to time as its
prime rate from the date that payments to the Executive should have been made
under this Agreement.

13. Payment Obligations Absolute. The Company’s obligation during and
after the Retention Period to pay the Executive the compensation and to make
the arrangements provided herein shall be absolute and unconditional and shall
not be affected by any circumstances, including, without limitation, any
setoff, counterclaim, recoupment, defense or other right which the Company may
have against the Executive or anyone else. All amounts payable by the Company
hereunder shall be paid without notice or demand. Each and every payment made
hereunder by the Company shall be final and the Company will not seek to
recover all or any part of such payment from the Executive or from whomsoever
may be entitled thereto, for any reason whatever except as provided in Section
8(d) above. 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 this Agreement, and such
amounts shall not be reduced whether or not the Executive obtains other
employment.

14. Successors.

25

 

     (a) 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. Any failure of the
pompany to obtain such agreement prior to the effectiveness of any such
succession or assignment shall be a material breach of this Agreement and shall
entitle the Executive to terminate the Executive’s employment for Good Reason.
As used in this Agreement, “Company” shall mean the Company as hereinbefore
defined and any successor or assign to all or substantially all of the business
and/or assets as aforesaid which executes and delivers the agreement provided
for in this Section 14(a) or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law. Notwithstanding the
foregoing, the Executive hereby expressly agrees to the assumption of this
Agreement by Berlin Delaware.

     (b) This Agreement and all rights of the Executive shall inure to the
benefit of and be enforceable by the Executive’s personal or legal
representatives, estates, executors, administrators, heirs and beneficiaries.
All amounts payable to the Executive hereunder shall be paid, in the event of
the Executive’s death, to the Executive’s estate, heirs and representatives.
Except as provided in this Section 14, no party may assign this Agreement or
any rights, interests, or obligations hereunder without the prior written
approval of the other party. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns pursuant to Section 14(a).
This Agreement shall not be terminated by the voluntary or involuntary
dissolution of the

26

 

Company. In addition, Sections 5, 7, 8, 9, 10, 11, 12, 13, 15 and 19
shall survive the termination of this Agreement to the extent necessary to give
effect to the terms thereof.

15. Severability and Enforcement. The provisions of this Agreement shall
be regarded as divisible, and if any such provisions or any part hereof are
declared invalid or unenforceable by a court of competent jurisdiction, the
validity and enforceability of the remainder of such provisions or parts hereof
and the applicability thereof shall not be affected thereby. It is expressly
understood and agreed that although the Executive and the Company consider the
restrictions contained herein to be reasonable, if a final judicial
determination is made by a court of competent jurisdiction that the time or
territory or any other restriction contained in this Agreement is an
unenforceable restriction against Executive, the provisions of this Agreement
shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable. Alternatively, if any
court of competent jurisdiction finds that any restriction contained in this
Agreement is unenforceable, and such restriction cannot be amended so as to
make it enforceable, such finding shall not affect the enforceability of any of
the other restrictions contained herein.

16. Amendment. This Agreement may not be amended or modified at any time
except by a written instrument executed by the Company and the Executive.

17. Withholding. The Company shall be entitled to withhold from amounts
to be paid to the Executive hereunder any federal, state or local withholding
or other taxes, or charge which it is from time to time required to withhold.
The Company shall be entitled to rely on an opinion of counsel if any question
as to the amount or requirement of any such withholding shall arise.

27

 

18. Governing Law. This Agreement and the rights and obligations
hereunder shall be governed by and construed in accordance with the laws of the
State of Maine.

19. Arbitration. Any dispute arising out of this Agreement other than
with regard to either of Sections 9(a), 9(b) and 10 shall be determined by
arbitration in the State of Maine under the rules of the American Arbitration
Association then in effect and judgment upon any award pursuant to such
arbitration may be enforced in any court having jurisdiction thereof.

20. Notice. Notices given pursuant to this Agreement shall be in writing
and shall be deemed given when received and, if mailed, shall be mailed by
United States registered or certified mail, return receipt requested, addressee
only postage prepaid, to the Company at:

	 	 	Banknorth Group, Inc.

P.O. Box 9540

Two Portland Square

Portland, ME 04112

Attn General Counsel

or if to the Executive, at the address contained in the records of the Company,
or to such other address as the party to be notified shall have given to the
other.

21. No Waiver. No waiver by any party at any time of any breach by
another party of, or compliance with, any condition or provision of this
Agreement to be performed by another party shall be deemed a waiver of similar
or dissimilar provisions or conditions at any time.

22. Headings. The headings herein contained are for reference only and
shall not affect the meaning or interpretation of any provision of this
Agreement.

23. Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and
supersedes any prior severance agreements between the Executive and the
Company.

28

 

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.

	 	 	 	 	 
	 	 	BANKNORTH GROUP, INC.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	 
	 	 	 	 
	 	 	

 

EXHIBIT A

[EXAMPLE OF SERP CALCULATION]

 

EXHIBIT B

GENERAL RELEASE

     1. Release of Claims by Executive.

     (a) In consideration of the payments and benefits to be provided to
[                   ] (“Executive”) pursuant to the retention agreement, dated as
of August      , 2004, to which Executive and Banknorth Group, Inc., a Maine
corporation (the “Company”), are parties (the “Retention
Agreement”), the sufficiency of which is acknowledged hereby, Executive,
with the intention of binding himself and his heirs, executors, administrators
and assigns, does hereby release, remise, acquit and forever discharge the
Company, Toronto-Dominion Bank (“TD”) and each of their subsidiaries and
affiliates (the “Company Affiliated Group”), their present and former
officers, directors, executives, agents, attorneys and employees, and the
successors, predecessors and assigns of each of the foregoing (collectively,
the “Company Released Parties”), of and from any and all claims,
actions, causes of action, complaints, charges, demands, rights, damages,
debts, sums of money, accounts, financial obligations, suits, expenses,
attorneys’ fees and liabilities of whatever kind or nature in law, equity or
otherwise, whether accrued, absolute, contingent, unliquidated or otherwise and
whether now known or unknown, suspected or unsuspected, which Executive,
individually or as a member of a class, now has, owns or holds, or has at any
time heretofore had, owned or held, against any Company Released Party in any
capacity, including, without limitation, any and all claims (i) arising out of
or in any way connected with Executive’s service to any member of the Company
Affiliated Group (or the predecessors thereof) in any capacity, or the
termination of such service in any such capacity, (ii) for severance or
vacation benefits, unpaid wages, salary or incentive payments, (iii) for breach
of contract, wrongful discharge, impairment of economic opportunity,
defamation, intentional infliction of emotional harm or other tort, (iv) for
any violation of applicable state and local labor and employment laws
(including, without limitation, all laws concerning unlawful and unfair labor
and employment practices) and (v) for employment discrimination under any
applicable federal, state or local statute, provision, order or regulation, and
including, without limitation, any claim under Title VII of the Civil Rights
Act of 1964 (“Title VII”), the Civil Rights Act of 1988, the Fair Labor
Standards Act, the Americans with Disabilities Act (“ADA”), the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), the Age
Discrimination in Employment Act (“ADEA”) and any similar or analogous
state statute, excepting only:

               (A) the rights of Executive under the Retention Agreement;

               (B) the rights of Executive (i) relating to any stock options and other
equity-based awards held by Executive as of the date hereof (collectively, the
“Equity Arrangements”) and (ii) as a stockholder of the Company or its
affiliates;

               (C) the right of Executive to receive COBRA continuation coverage in
accordance with applicable law;

 

               (D) rights to indemnification Executive may have under (i) applicable
corporate law, (ii) the by-laws or certificate of incorporation of any Company
Released Party, (iii) any other agreement between Executive and a Company
Released Party (iv) as an insured under any director’s and officer’s liability
insurance policy now or previously in force or (v) Section 6.7 of the Agreement
and Plan of Merger, dated as of August 25, 2004, among the Company, Berlin
Delaware, Inc., TD and Berlin Merger Co.; and

               (E) claims for benefits under any health, disability, retirement, life
insurance or other, similar “employee benefit plan” (within the meaning of
Section 3(3) of ERISA) of the Company Affiliated Group (the “Company Benefit
Plans”).

     (b) Executive acknowledges and agrees that the release of claims set
forth in this Section 1 is not to be construed in any way as an admission of
any liability whatsoever by any Company Released Party, any such liability
being expressly denied.

     (c) The release of claims set forth in this Section 1 applies to any
relief no matter how called, including, without limitation, wages, back pay,
front pay, compensatory damages, liquidated damages, punitive damages, damages
for pain or suffering, costs, and attorney’s fees and expenses.

     (d) Executive specifically acknowledges that his acceptance of the terms
of the release of claims set forth in this Section 1 is, among other things, a
specific waiver of his rights, claims and causes of action under Title VII,
ADEA, ADA and any state or local law or regulation in respect of discrimination
of any kind.

     (e) Executive shall have a period of 21 days to consider whether to
execute this General Release. To the extent Executive has executed this General
Release within less than twenty-one (21) days after its delivery to him, the
Executive hereby acknowledges that his decision to execute this General Release
prior to the expiration of such twenty-one (21) day period was entirely
voluntary. If Executive accepts the terms hereof and executes this General
Release, he may thereafter, for a period of 7 days following (and not
including) the date of execution, revoke this General Release. If no such
revocation occurs, this General Release shall become irrevocable in its
entirety, and binding and enforceable against Executive, on the day next
following the day on which the foregoing seven-day period has elapsed. Any
revocation of this General Release shall be deemed for all purposes a
revocation of this General Release in its entirety.

     (f) Executive acknowledges and agrees that he has not, with respect to
any transaction or state of facts existing prior to the date hereof, filed any
complaints, charges or lawsuits against any Company Released Party with any
governmental agency, court or tribunal.

     2. Effect of Unenforceability of Release. In addition to any
other remedy available to the Company hereunder, in the event that, as a result
of a challenge brought by an Employee Released Party (as defined below), the
release of claims set forth in Section 1 becomes null and void or is otherwise
determined not to be enforceable, then the Company’s obligation to make any
additional payments or to provide any additional benefits under the Retention

2

 

Agreement shall immediately cease to be of any force and effect,
and Executive shall promptly return to the Company any payments or benefits the
provision of which by the Company was conditioned on the enforceability of this
General Release.

     3. Release of Claims by the Company and TD.

     (a) The Company and TD, with the intention of binding themselves and
their subsidiaries, affiliates, predecessors and successors and their directors
and officers (collectively, the “Releasing Entities”), do hereby release,
remise, acquit and forever discharge Executive and his heirs, estate,
executors, administrators and assigns (collectively, the “Employee Released
Parties”), of and from any and all claims, actions, causes of action,
complaints, charges, demands, rights, damages, debts, sums of money, accounts,
financial obligations, suits, expenses, attorneys’ fees and liabilities of
whatever kind or nature in law, equity or otherwise, whether accrued, absolute,
contingent, unliquidated or otherwise and whether now known or unknown,
suspected or unsuspected, which the Company, TD and their subsidiaries,
affiliates, predecessors and successors, individually or as a member of a
class, now have, own or hold, or have at any time heretofore had, owned or
held, against any Employee Released Party, excepting only:

               (A) rights of the Releasing Entities under this General Release, the
Retention Agreement, the Equity Arrangements and the Company Benefit Plans; and

               (B) rights of the Releasing Entities arising by reason of Executive
having committed a crime or an act or omission to act which constitutes fraud,
willful misconduct or gross negligence.

     (b) The Releasing Entities acknowledge and agree that the release of
claims set forth in this Section 3 is not to be construed in any way as an
admission of any liability whatsoever by any Employee Released Party, any such
liability being expressly denied.

     (c) The release of claims set forth in this Section 3 applies to any
relief no matter how called, including, without limitation, compensatory
damages, liquidated damages, punitive damages, damages for pain or suffering,
costs, and attorney’s fees and expenses.

     (d) Nothing herein shall be deemed, nor does anything contained herein
purport, to be a waiver of any right or claim or cause of action which by law
the Company is not permitted to waive.

     (e) The Company acknowledges and agrees that it has not, with respect to
any transaction or state of facts existing prior to the date hereof, filed any
complaints, charges or lawsuits against any Employee Released Party with any
governmental agency, court or tribunal.

     4. Nondisparagement. Executive agrees not to make any disparaging
statements about the Company Released Parties or the Company Affiliated Group’s
business practices, operations or personnel policies and practices to any of
the Company Affiliated Group’s customers, clients, competitors, suppliers,
directors, consultants, employees, former employees, or the press or other
media in any country. Similarly, the Company agrees to instruct its

3

 

executive officers and directors not to make any disparaging statement
about the Executive or Executive’s performance of his duties and
responsibilities while employed with the Company Affiliated Group to any of the
Company Affiliated Group’s customers, client’s, competitors, suppliers,
directors, consultants, employees, former employees or the press or other media
in any country.

     5. Counterparts. This General Release may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.

     6. Successors. This General Release shall be binding upon any and
all successors and assigns of Executive and the Company.

     7. Governing Law. Except for issues or matters as to which federal
law is applicable, this General Release shall be construed in accordance with
and governed by the laws of the State of Maine.

IN WITNESS WHEREOF, this General Release has been signed by or on behalf of
each of the Parties, all as of                    .

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	BANKNORTH GROUP, INC.
	 
	 	 	 	 	 	 	 	 	 	 
	
	 	

	[Executive]	 	By:	 	 	 	 	 	 
	

	 	 	 	Its:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	Dated:	 	 	 	 	 	 
	

	 	

	 	 	 	
	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	THE TORONTO-DOMINION BANK
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	

	

	 	 	 	By:	 	 	 	 	 	 
	

	 	 	 	Its:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	Dated:	 	 	 	 	 	 
	

	 	 	 	 	 	
	 	 	 	 

4exv10w01

 

EXHIBIT 10.01

VERITAS SOFTWARE CORPORATION

2003 STOCK INCENTIVE PLAN

AS AMENDED AND RESTATED EFFECTIVE MAY 13,
2004

ARTICLE ONE

GENERAL PROVISIONS

I.     PURPOSE OF THE
PLAN

     
This amended and restated 2003 Stock Incentive
Plan is intended to promote the interests of VERITAS Software
Corporation, a Delaware corporation, by providing eligible
persons in the Corporation’s service with the opportunity
to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation as an incentive for
them to remain in such service.

II.  STRUCTURE OF THE PLAN

     
A. The Plan shall be divided into two
separate equity incentive programs:

		
	 	     
    1. the Discretionary Grant Program under
    which eligible persons may, at the discretion of the Plan
    Administrator, be granted options to purchase shares of Common
    Stock or stock appreciation rights tied to the value of such
    Common Stock, and
    
	 
	 	     
    2. the Stock Issuance Program under which
    eligible persons may, at the discretion of the Plan
    Administrator, be issued shares of Common Stock pursuant to
    restricted stock awards, restricted stock units or other share
    right awards which vest upon the completion of a designated
    service period or the attainment of pre-established performance
    milestones, or such shares of Common Stock may be issued through
    direct purchase or as a bonus for services rendered the
    Corporation (or any Parent or Subsidiary).
    

     
B. The provisions of Articles One and Four
shall apply to all equity programs under the Plan and shall
govern the interests of all persons under the Plan.

III.     ADMINISTRATION
OF THE PLAN

     
A. The Primary Committee shall have sole and
exclusive authority to administer the Discretionary Grant and
Stock Issuance Programs with respect to Section 16
Insiders. The Primary Committee shall also have full power and
authority to administer the Discretionary Grant and Stock
Issuance Programs with respect to all other persons eligible to
participate in those programs. However, the Board may, in its
sole discretion, appoint a Secondary Committee to exercise
separate but concurrent jurisdiction with the Primary Committee
in the administration of the Discretionary Grant and Stock
Issuance Programs with respect to one or more groups of persons
eligible to participate in those programs other than
Section 16 Insiders. The Board may also, in its sole
discretion, retain the power to administer those programs with
respect to all persons other than Section 16 Insiders.

     
B. Members of the Primary Committee or any
Secondary Committee shall serve for such period of time as the
Board may determine and may be removed by the Board at any time.
The Board may also at any time terminate the functions of any
Secondary Committee and reassume all powers and authority
previously delegated to such committee.

     
C. Each Plan Administrator shall, within the
scope of its administrative functions under the Plan, have full
power and authority (subject to the provisions of the Plan) to
establish such rules and regulations as it may deem appropriate
for proper administration of the Discretionary Grant and Stock
Issuance Programs and to make such determinations under, and
issue such interpretations of, the provisions of those programs
and any outstanding options, stock appreciation rights, stock
issuances or other stock-based awards thereunder as it

B-1

 

may deem necessary or advisable. Decisions of the
Plan Administrator within the scope of its administrative
functions under the Plan shall be final and binding on all
parties who have an interest in the Discretionary Grant and
Stock Issuance Programs under its jurisdiction or any stock
option, stock appreciation right, stock issuance or other
stock-based award thereunder.

     
D. Subject to the express limitations of the
Plan, the Plan Administrator shall, within the scope of its
administrative authority under the Plan, have full power and
authority to structure or otherwise modify any awards made under
the Discretionary Grant and Stock Issuance Programs to persons
residing in foreign jurisdictions or held by any such persons so
as to comply with the applicable laws and regulations of the
jurisdictions in which those awards are made or outstanding.

     
E. Service on the Primary Committee or the
Secondary Committee shall constitute service as a Board member,
and members of each such committee shall accordingly be entitled
to full indemnification and reimbursement as Board members for
their service on such committee. No member of the Primary
Committee or the Secondary Committee shall be liable for any act
or omission made in good faith with respect to the Plan or any
stock option, stock appreciation right, stock issuance or other
stock-based award made or granted under the Plan.

IV.     ELIGIBILITY

     
A. The persons eligible to participate in
the Discretionary Grant and Stock Issuance Programs are as
follows:

		
	 	     
    (i) Employees, and
    
	 
	 	     
    (ii) consultants and other independent
    advisors who provide services to the Corporation (or any Parent
    or Subsidiary).
    

     
B. Non-employee Board members shall not be
eligible to participate in either the Discretionary Grant or
Stock Issuance Program.

     
C. Each Plan Administrator shall, within the
scope of its administrative jurisdiction under the Plan, have
full authority to determine, (i) with respect to the grant
of stock options or stock appreciation rights under the
Discretionary Grant Program, which eligible persons are to
receive such grants, the time or times when those grants are to
be made, the number of shares to be covered by each such grant,
the status of a granted option as either an Incentive Option or
a Non-Statutory Option, the time or times when each option or
stock appreciation right is to become exercisable, the vesting
schedule (if any) applicable to the grant and the maximum term
for which the grant is to remain outstanding and (ii) with
respect to stock issuances or other stock-based awards under the
Stock Issuance Program, which eligible persons are to receive
such issuances or awards, the time or times when the issuances
or awards are to be made, the number of shares subject to each
such issuance or award, the vesting schedule (if any) applicable
to the shares subject to such issuance or award and the
consideration for such shares.

     
D. The Plan Administrator shall have the
absolute discretion either to grant options or stock
appreciation rights in accordance with the Discretionary Grant
Program or to effect stock issuances or other stock-based awards
in accordance with the Stock Issuance Program.

V.     STOCK SUBJECT
TO THE PLAN

     
A. The stock issuable under the Plan shall
be shares of authorized but unissued or reacquired Common Stock,
including shares repurchased by the Corporation on the open
market. The number of shares of Common Stock reserved for
issuance over the term of the Plan shall not exceed thirty-two
million (32,000,000) shares. Such reserve includes an
increase of eighteen million (18,000,000) shares authorized
by the Board on May 13, 2004, subject to stockholder
approval at the 2004 Annual Meeting, and shall be in addition to
the shares of Common Stock reserved for issuance under the
Corporation’s 1993 Equity Incentive Plan. Accordingly,
issuances under the 1993 Equity Incentive Plan shall not reduce
the number of shares of Common Stock reserved for issuance under
this Plan, nor shall issuances under this Plan reduce the number

B-2

 

of shares of Common Stock available for issuance
under the 1993 Equity Incentive Plan. However, no new option
grants shall be made under the 1993 Equity Incentive Plan after
May 13, 2003, the date this Plan was originally approved by
the Corporation’s stockholders.

     
B. No more than thirty-three percent (33%)
of the total number of shares of Common Stock from time to time
authorized for issuance under the Plan shall be issued pursuant
to the Stock Issuance Program.

     
C. No one person participating in the Plan
may receive stock options, stand-alone stock appreciation
rights, direct stock issuances (whether vested or unvested) and
other stock-based awards (whether in the form of restricted
stock units or other share right awards) for more than 3,000,000
shares of Common Stock in the aggregate per calendar year,
provided, however, that the aggregate number of shares of Common
Stock issuable under stock options, stand-alone stock
appreciation rights, direct stock issuances (whether vested or
unvested) and other stock-based awards (whether in the form of
restricted stock units or other share right awards) received
during any calendar year by all persons participating in the
Plan shall not exceed the aggregate number of shares reserved
for issuance under the Plan as specified in Section V.A of
this Article One.

     
D. Shares of Common Stock subject to
outstanding options or other awards made under the Plan shall be
available for subsequent issuance under the Plan to the extent
those options or awards expire, terminate or are cancelled for
any reason prior to the issuance of the shares of Common Stock
subject to those options or awards. Unvested shares issued under
the Plan and subsequently repurchased by the Corporation, at a
price per share not greater than the original issue price paid
per share, pursuant to the Corporation’s repurchase rights
under the Plan shall be added back to the number of shares of
Common Stock reserved for issuance under the Plan and shall
accordingly be available for subsequent reissuance under the
Plan. Should the exercise price of an option under the Plan be
paid with shares of Common Stock, then the authorized reserve of
Common Stock under the Plan shall be reduced only by the net
number of shares issued under the exercised stock option. Should
shares of Common Stock otherwise issuable under the Plan be
withheld by the Corporation in satisfaction of the withholding
taxes incurred in connection with the exercise of an option or
stock appreciation right or the issuance of fully-vested shares
under the Stock Issuance Program, then the number of shares of
Common Stock available for issuance under the Plan shall be
reduced only by the net number of shares issued under the
exercised stock option or stock appreciation right or the net
number of fully-vested shares issued under the Stock Issuance
Program. Such withholding shall in effect be treated under the
Plan as a cash bonus, payable directly to the applicable taxing
authorities on behalf of the individual concerned, in an amount
equal to the Fair Market Value of the withheld shares, and shall
not be treated as an issuance and immediate repurchase of those
shares.

     
E. If any change is made to the Common Stock
by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the
Corporation’s receipt of consideration, appropriate
adjustments shall be made by the Plan Administrator to
(i) the maximum number and/or class of securities issuable
under the Plan, (ii) the maximum number and/or class of
securities for which any one person may be granted stock
options, stand-alone stock appreciation rights, direct stock
issuances and other stock-based awards under the Plan per
calendar year, (iii) the number and/or class of securities
and the exercise or base price per share in effect under each
outstanding stock option or stock appreciation right under the
Plan and (iv) the number and/or class of securities subject
to each outstanding restricted stock unit or other stock-based
award under the Plan and the issue price (if any) payable per
share. Such adjustments to the outstanding options, stock
appreciation rights or other stock-based awards are to be
effected in a manner which shall preclude the enlargement or
dilution of rights and benefits under those options, stock
appreciation rights or other stock-based awards The adjustments
determined by the Plan Administrator shall be final, binding and
conclusive.

ARTICLE TWO

DISCRETIONARY GRANT PROGRAM

I.     OPTION
TERMS

     
Each option shall be evidenced by one or more
documents in the form approved by the Plan Administrator;
provided, however, that each such document shall comply
with the terms specified below. Each

B-3

 

document evidencing an Incentive Option shall, in
addition, be subject to the provisions of the Plan applicable to
such options.

     
A. Exercise Price.

		
	 	     
    1. The exercise price per share shall be
    fixed by the Plan Administrator but shall not be less than one
    hundred percent (100%) of the Fair Market Value per share of
    Common Stock on the option grant date.
    
	 
	 	     
    2. The exercise price shall become
    immediately due upon exercise of the option and shall be payable
    in one or more of the forms specified below:
    

		
	 	     
    (i) cash or check made payable to the
    Corporation,
    
	 
	 	     
    (ii) shares of Common Stock held for the
    requisite period necessary to avoid a charge to the
    Corporation’s earnings for financial reporting purposes and
    valued at Fair Market Value on the Exercise Date, or
    
	 
	 	     
    (iii) to the extent the option is exercised
    for vested shares, through a special sale and remittance
    procedure pursuant to which the Optionee shall concurrently
    provide irrevocable instructions to (a) a brokerage firm
    (reasonably satisfactory to the Corporation for purposes of
    administering such procedure in compliance with the
    Corporation’s pre-notification/pre clearance policies) to
    effect the immediate sale of the purchased shares and remit to
    the Corporation, out of the sale proceeds available on the
    settlement date, sufficient funds to cover the aggregate
    exercise price payable for the purchased shares plus all
    applicable income and employment taxes required to be withheld
    by the Corporation by reason of such exercise and (b) the
    Corporation to deliver the certificates for the purchased shares
    directly to such brokerage firm in order to complete the sale.
    

     
Except to the extent such sale and remittance
procedure is utilized, payment of the exercise price for the
purchased shares must be made on the Exercise Date.

     
B. Exercise and Term of
Options. Each option shall be exercisable at such time
or times, during such period and for such number of shares as
shall be determined by the Plan Administrator and set forth in
the documents evidencing the option. However, no option shall
have a term in excess of seven (7) years measured from the
option grant date.

     
C. Effect of Termination of
Service.

		
	 	     
    1. The following provisions shall govern the
    exercise of any options held by the Optionee at the time of
    cessation of Service or death:
    

		
	 	     
    (i) Any option outstanding at the time of
    the Optionee’s cessation of Service for any reason shall
    remain exercisable for such period of time thereafter as shall
    be determined by the Plan Administrator and set forth in the
    documents evidencing the option, but no such option shall be
    exercisable after the expiration of the option term.
    
	 
	 	     
    (ii) Any option held by the Optionee at the
    time of death and exercisable in whole or in part at that time
    may be subsequently exercised by the personal representative of
    the Optionee’s estate or by the person or persons to whom
    the option is transferred pursuant to the Optionee’s will
    or the laws of inheritance or by the Optionee’s designated
    beneficiary or beneficiaries of that option.
    
	 
	 	     
    (iii) Should the Optionee’s Service be
    terminated for Misconduct or should the Optionee otherwise
    engage in Misconduct while holding one or more outstanding
    options under this Article Two, then all those options
    shall terminate immediately and cease to be outstanding.
    
	 
	 	     
    (iv) During the applicable post-Service
    exercise period, the option may not be exercised in the
    aggregate for more than the number of vested shares for which
    the option is at that time exercisable. No additional shares
    shall vest under the option following the Optionee’s
    cessation of Service, except to the extent (if any) specifically
    authorized by the Plan Administrator in its sole discretion
    pursuant to an express written agreement with Optionee. Upon the
    expiration of the applicable exercise period
    

B-4

 

		
	 	
    or (if earlier) upon the expiration of the option
    term, the option shall terminate and cease to be outstanding for
    any shares for which the option has not been exercised.
    

		
	 	     
    2. The Plan Administrator shall have
    complete discretion, exercisable either at the time an option is
    granted or at any time while that option remains outstanding, to:
    

		
	 	     
    (i) extend the period of time for which the
    option is to remain exercisable following the Optionee’s
    cessation of Service from the limited exercise period otherwise
    in effect for that option to such greater period of time as the
    Plan Administrator shall deem appropriate, but in no event
    beyond the expiration date of the option term,
    
	 
	 	     
    (ii) include an automatic extension
    provision whereby the specified post-Service exercise period in
    effect for any option granted under this Article Two shall
    automatically be extended by an additional period of time equal
    in duration to any interval within the specified post-Service
    exercise period during which the exercise of that option or the
    immediate sale of the shares acquired under such option could
    not be effected in compliance with applicable federal and state
    securities laws, but in no event shall such an extension result
    in the continuation of such option beyond the expiration date of
    the term of that option, and/or
    
	 
	 	     
    (iii) permit the option to be exercised,
    during the applicable post-Service exercise period, not as to
    the number of vested shares of Common Stock for which such
    option is exercisable at the time of the Optionee’s
    cessation of Service but also with respect to one or more
    additional installments in which the Optionee would have vested
    had the Optionee continued in Service.
    

     
D. Stockholder Rights. The
holder of an option shall have no stockholder rights with
respect to the shares subject to the option until such person
shall have exercised the option, paid the exercise price and
become a holder of record of the purchased shares.

     
E. Repurchase Rights. The Plan
Administrator shall have the discretion to grant options which
are exercisable for unvested shares of Common Stock. Should the
Optionee cease Service while any of the shares purchased under
those options remain unvested, then the Corporation shall have
the right to repurchase any or all of those unvested shares at a
price per share equal to the lower of (i) the
exercise price paid per share or (ii) the Fair Market Value
per share of Common Stock at the time of the Optionee’s
cessation of Service. The terms upon which such repurchase right
shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set
forth in the document evidencing such repurchase right.

     
F. Limited Transferability of
Options. During the lifetime of the Optionee, Incentive
Options shall be exercisable only by the Optionee and shall not
be assignable or transferable other than by will or the laws of
inheritance following the Optionee’s death. Non-Statutory
Options shall be subject to the same transfer restriction as for
Incentive Options, except that the Plan Administrator may
structure one or more Non-Statutory Options under the
Discretionary Grant Program so that each such option may be
assigned in whole or in part during the Optionee’s lifetime
to one or more Family Members of the Optionee or to a trust
established exclusively for the Optionee and/or one or more such
Family Members, to the extent such assignment is in connection
with the Optionee’s estate plan or pursuant to a domestic
relations order. The assigned portion may only be exercised by
the person or persons who acquire a proprietary interest in the
option pursuant to the assignment. The terms applicable to the
assigned portion shall be the same as those in effect for the
option immediately prior to such assignment and shall be set
forth in such documents issued to the assignee as the Plan
Administrator may deem appropriate. Notwithstanding the
foregoing, the Optionee may also designate one or more persons
as the beneficiary or beneficiaries of his or her outstanding
options under this Article Two, and the options shall, in
accordance with such designation, automatically be transferred
to such beneficiary or beneficiaries upon the Optionee’s
death while holding those options. Such beneficiary or
beneficiaries shall take the transferred options subject to all
the terms and conditions of the applicable agreement evidencing
each such transferred option, including (without limitation) the
limited time period during which the option may be exercised
following the Optionee’s death.

B-5

 

II.     INCENTIVE
OPTIONS

     
The terms specified below shall be applicable to
all Incentive Options. Except as modified by the provisions of
this Section II, all the provisions of Articles One, Two
and Seven shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options when
issued under the Plan shall not be subject to the terms of this
Section II.

     
A. Eligibility. Incentive
Options may only be granted to Employees.

     
B. Dollar Limitation. The
aggregate Fair Market Value of the shares of Common Stock
(determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan
(or any other option plan of the Corporation or any Parent or
Subsidiary) may for the first time become exercisable as
Incentive Options during any one calendar year shall not exceed
the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options
which become exercisable for the first time in the same calendar
year, the foregoing limitation on the exercisability of such
options as Incentive Options shall be applied on the basis of
the order in which such options are granted.

     
C. 10% Stockholder. If any
Employee to whom an Incentive Option is granted is a 10%
Stockholder, then the exercise price per share shall not be less
than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock on the option grant date, and the option
term shall not exceed five (5) years measured from the
option grant date.

III.     STOCK
APPRECIATION RIGHTS

     
A. Authority. The Plan
Administrator shall have full power and authority, exercisable
in its sole discretion, to grant stock appreciation rights in
accordance with this Section III to selected Optionees or
other individuals eligible to receive option grants under the
Discretionary Grant Program.

     
B. Types. Three types of stock
appreciation rights shall be authorized for issuance under this
Section III: (i) tandem stock appreciation rights
(“Tandem Rights”), (ii) stand-alone stock
appreciation rights (“Stand-alone Rights”) and
(iii) limited stock appreciation rights (“Limited
Rights”).

     
C. Tandem Rights. The
following terms and conditions shall govern the grant and
exercise of Tandem Rights.

		
	 	     
    1. One or more Optionees may be granted a
    Tandem Right, exercisable upon such terms and conditions as the
    Plan Administrator may establish, to elect between the exercise
    of the underlying stock option for shares of Common Stock or the
    surrender of that option in exchange for a distribution from the
    Corporation in an amount equal to the excess of (i) the
    Fair Market Value (on the option surrender date) of the number
    of shares in which the Optionee is at the time vested under the
    surrendered option (or surrendered portion thereof) over
    (ii) the aggregate exercise price payable for such vested
    shares. To the extent an option is surrendered as to one or more
    shares of Common Stock subject thereto pursuant to the exercise
    of the Tandem Right, the option shall be cancelled with respect
    to those shares and shall no longer be exercisable for those
    shares.
    
	 
	 	     
    2. No such option surrender shall be
    effective unless it is approved by the Plan Administrator,
    either at the time of the actual option surrender or at any
    earlier time. If the surrender is so approved, then the
    distribution to which the Optionee shall accordingly become
    entitled under this Section III may be made in shares of
    Common Stock valued at Fair Market Value on the option surrender
    date, in cash, or partly in shares and partly in cash, as the
    Plan Administrator shall in its sole discretion deem appropriate.
    
	 
	 	     
    3. If the surrender of an option is not
    approved by the Plan Administrator, then the Optionee shall
    retain whatever rights the Optionee had under the surrendered
    option (or surrendered portion thereof) on the option surrender
    date and may exercise such rights at any time prior to the
    later of (i) five (5) business days after the
    receipt of the rejection notice or (ii) the last day on
    which the option is otherwise exercisable in accordance with the
    terms of the instrument evidencing such option, but in no event
    may such rights be exercised more than seven (7) years
    after the date of the option grant.
    

B-6

 

     
D. Stand-Alone Rights. The
following terms and conditions shall govern the grant and
exercise of Stand-alone Rights under this Article Two:

		
	 	     
    1. One or more individuals eligible to
    participate in the Discretionary Grant Program may be granted a
    Stand-alone Right not tied to any underlying option under this
    Discretionary Grant Program. The Stand-alone Right shall relate
    to a specified number of shares of Common Stock and shall be
    exercisable upon such terms and conditions as the Plan
    Administrator may establish. In no event, however, may the
    Stand-alone Right have a maximum term in excess of seven
    (7) years measured from the grant date. Upon exercise of
    the Stand-alone Right, the holder shall be entitled to receive a
    distribution from the Corporation in an amount equal to the
    excess of (i) the aggregate Fair Market Value (on the
    exercise date) of the shares of Common Stock underlying the
    exercised right over (ii) the aggregate base price in
    effect for those shares.
    
	 
	 	     
    2. The number of shares of Common Stock
    underlying each Stand-alone Right and the base price in effect
    for those shares shall be determined by the Plan Administrator
    in its sole discretion at the time the Stand-alone Right is
    granted. In no event, however, may the base price per share be
    less than the Fair Market Value per underlying share of Common
    Stock on the grant date. In the event outstanding Stand-alone
    Rights are to be assumed in connection with a Change in Control
    transaction or otherwise continued in effect, the shares of
    Common Stock underlying each such Stand-alone Right shall be
    adjusted immediately after such Change in Control so as to apply
    to the number and class of securities into which those shares of
    Common Stock would have been converted in consummation of such
    Change in Control had those shares actually been outstanding at
    that time. Appropriate adjustments to reflect such Change in
    Control shall also be made to the base price per share in effect
    under each outstanding Stand-alone Right, provided the
    aggregate base price shall remain the same. To the extent the
    actual holders of the Corporation’s outstanding Common
    Stock receive cash consideration for their Common Stock in
    consummation of the Change in Control, the successor corporation
    may, in connection with the assumption or continuation of the
    outstanding Stand-alone Rights under the Discretionary Grant
    Program, substitute, for the securities underlying those assumed
    rights, one or more shares of its own common stock with a fair
    market value equivalent to the cash consideration paid per share
    of Common Stock in the Change in Control transaction.
    
	 
	 	     
    3. Stand-alone Rights shall be subject to
    the same transferability restrictions applicable to
    Non-Statutory Options and may not be transferred during the
    holder’s lifetime, except to one or more Family Members of
    the holder or to a trust established for the holder and/or one
    or more such Family Members or pursuant to a domestic relations
    order covering the Stand-alone Right as marital property. In
    addition, one or more beneficiaries may be designated for an
    outstanding Stand-alone Right in accordance with substantially
    the same terms and provisions as set forth in Section I.F
    of this Article Two.
    
	 
	 	     
    4. The distribution with respect to an
    exercised Stand-alone Right may be made in shares of Common
    Stock valued at Fair Market Value on the exercise date, in cash,
    or partly in shares and partly in cash, as the Plan
    Administrator shall in its sole discretion deem appropriate.
    
	 
	 	     
    5. The holder of a Stand-alone Right shall
    have no stockholder rights with respect to the shares subject to
    the Stand-alone Right unless and until such person shall have
    exercised the Stand-alone Right and become a holder of record of
    the shares of Common Stock issued upon the exercise of such
    Stand-alone Right.
    

     
E. Limited Rights. The
following terms and conditions shall govern the grant and
exercise of Limited Rights under this Article Two:

		
	 	     
    1. One or more Section 16 Insiders may,
    in the Plan Administrator’s sole discretion, be granted
    Limited Rights with respect to their outstanding options under
    this Article Two.
    
	 
	 	     
    2. Upon the occurrence of a Hostile
    Tender-Offer, the Section 16 Insider shall have the
    unconditional right (exercisable for a thirty (30)-day period
    following such Hostile Tender-Offer) to surrender each option
    with such a Limited Right to the Corporation. The
    Section 16 Insider shall in return be entitled to a cash
    distribution from the Corporation in an amount equal to the
    excess of (i) the Tender-
    

B-7

 

		
	 	
    Offer Price of the number of shares in which the
    Optionee is at the time vested under the surrendered option (or
    surrendered portion thereof) over (ii) the aggregate
    exercise price payable for those vested shares. Such cash
    distribution shall be made within five (5) days following
    the option surrender date.
    
	 
	 	     
    3. The Plan Administrator shall pre-approve,
    at the time such Limited Right is granted, the subsequent
    exercise of that right in accordance with the terms of the grant
    and the provisions of this Section III. No additional
    approval of the Plan Administrator or the Board shall be
    required at the time of the actual option surrender and cash
    distribution. Any unsurrendered portion of the option shall
    continue to remain outstanding and become exercisable in
    accordance with the terms of the instrument evidencing such
    grant.
    

     
F. Post-Service Exercise. The
provisions governing the exercise of Tandem, Stand-alone and
Limited Stock Appreciation Rights following the cessation of the
recipient’s Service shall be substantially the same as
those set forth in Section I.C of this Article Two for
the options granted under the Discretionary Grant Program, and
the Plan Administrator’s discretionary authority under
Section I.C.2 of this Article Two shall also extend to
any outstanding Tandem, Stand-alone or Limited Stock
Appreciation Rights.

     
G. Net Counting. Upon the
exercise of any Tandem, Stand-alone or Limited Right under this
Section III, the share reserve under Section V of
Article One shall be reduced by the net number of shares
actually issued by the Corporation upon such exercise, and not
by the gross number of shares as to which such Tandem,
Stand-alone or Limited Right is exercised.

IV.     CHANGE IN
CONTROL/ HOSTILE TAKE-OVER

     
A. In the event of a Change in Control, each
outstanding option or stock appreciation right under the
Discretionary Grant Program shall automatically accelerate so
that each such option or stock appreciation right shall,
immediately prior to the effective date of that Change in
Control, become exercisable as to all the shares of Common Stock
at the time subject to such option or stock appreciation right
and may be exercised as to any or all of those shares as fully
vested shares of Common Stock. However, an outstanding option or
stock appreciation right shall not become exercisable on
such an accelerated basis if and to the extent: (i) such
option or stock appreciation right is to be assumed by the
successor corporation (or parent thereof) or is otherwise to
continue in full force and effect pursuant to the terms of the
Change in Control transaction or (ii) such option or stock
appreciation right is to be replaced with a cash incentive
program of the successor corporation which preserves the spread
existing at the time of the Change in Control on any shares as
to which the option or stock appreciation right is not otherwise
at that time exercisable and provides for subsequent payout of
that spread in accordance with the same exercise/vesting
schedule applicable to those shares or (iii) the
acceleration of such option or stock appreciation right is
subject to other limitations imposed by the Plan Administrator
at the time of the grant.

     
B. All outstanding repurchase rights under
the Discretionary Grant Program shall automatically terminate,
and the shares of Common Stock subject to those terminated
rights shall immediately vest in full, in the event of a Change
in Control, except to the extent: (i) those repurchase
rights are to be assigned to the successor corporation (or
parent thereof) or are otherwise to continue in full force and
effect pursuant to the terms of the Change in Control
transaction or (ii) such accelerated vesting is precluded
by other limitations imposed by the Plan Administrator at the
time the repurchase right is issued.

     
C. Immediately following the consummation of
the Change in Control, all outstanding options or stock
appreciation rights under the Discretionary Grant Program shall
terminate and cease to be outstanding, except to the extent
assumed by the successor corporation (or parent thereof) or
otherwise continued in full force and effect pursuant to the
terms of the Change in Control transaction.

     
D. Each option which is assumed in
connection with a Change in Control or otherwise continued in
effect shall be appropriately adjusted, immediately after such
Change in Control, to apply to the number and class of
securities which would have been issuable to the Optionee in
consummation of such Change in Control had the option been
exercised immediately prior to such Change in Control.
Appropriate adjustments to reflect such Change in Control shall
also be made to (i) the exercise price payable per share
under each

B-8

 

outstanding option, provided the aggregate
exercise price payable for such securities shall remain the
same, (ii) the maximum number and/or class of securities
available for issuance over the remaining term of the Plan and
(iii) the maximum number and/or class of securities for
which any one person may be granted stock options, stand-alone
stock appreciation rights, direct stock issuances and other
stock-based awards under the Plan per calendar year. To the
extent the actual holders of the Corporation’s outstanding
Common Stock receive cash consideration for their Common Stock
in consummation of the Change in Control, the successor
corporation may, in connection with the assumption or
continuation of the outstanding options under the Discretionary
Grant Program, substitute one or more shares of its own common
stock with a fair market value equivalent to the cash
consideration paid per share of Common Stock in such Change in
Control transaction.

     
E. The Plan Administrator shall have the
discretionary authority to structure one or more outstanding
options or stock appreciation rights under the Discretionary
Grant Program so that those options or stock appreciation rights
shall, immediately prior to the effective date of a Change in
Control, vest and become exercisable as to all the shares of
Common Stock at the time subject to those options or stock
appreciation rights and may be exercised as to any or all of
those shares as fully vested shares of Common Stock, whether or
not those options or stock appreciation rights are to be assumed
in the Change in Control transaction or otherwise continued in
effect. In addition, the Plan Administrator shall have the
discretionary authority to structure one or more of the
Corporation’s repurchase rights under the Discretionary
Grant Program so that those rights shall immediately terminate
upon the consummation of the Change in Control transaction, and
the shares subject to those terminated rights shall thereupon
vest in full.

     
F. The Plan Administrator shall have full
power and authority to structure one or more outstanding options
or stock appreciation rights under the Discretionary Grant
Program so that those options or stock appreciation rights shall
vest and become exercisable as to all the shares of Common Stock
at the time subject to those options or stock appreciation
rights in the event the Optionee’s Service is subsequently
terminated by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months)
following the effective date of any Change in Control
transaction in which those options or stock appreciation rights
do not otherwise vest on an accelerated basis. In addition, the
Plan Administrator may structure one or more of the
Corporation’s repurchase rights so that those rights shall
immediately terminate with respect to any shares held by the
Optionee at the time of such Involuntary Termination, and the
shares subject to those terminated repurchase rights shall
accordingly vest in full at that time.

     
G. The Plan Administrator shall have the
discretionary authority to structure one or more outstanding
options or stock appreciation rights under the Discretionary
Grant Program so that those options or stock appreciation rights
shall, immediately prior to the effective date of a Hostile
Take-Over, vest and become exercisable as to all the shares of
Common Stock at the time subject to those options or stock
appreciation rights and may be exercised as to any or all of
those shares as fully vested shares of Common Stock. In
addition, the Plan Administrator shall have the discretionary
authority to structure one or more of the Corporation’s
repurchase rights under the Discretionary Grant Program so that
those rights shall terminate automatically upon the consummation
of such Hostile Take-Over, and the shares subject to those
terminated rights shall thereupon vest in full. Alternatively,
the Plan Administrator may condition the automatic acceleration
of one or more outstanding options or stock appreciation rights
under the Discretionary Grant Program and the termination of one
or more of the Corporation’s outstanding repurchase rights
under such program upon the subsequent termination of the
Optionee’s Service by reason of an Involuntary Termination
within a designated period (not to exceed eighteen
(18) months) following the effective date of such Hostile
Take-Over.

     
H. The portion of any Incentive Option
accelerated in connection with a Change in Control or Hostile
Take-Over shall remain exercisable as an Incentive Option only
to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar
limitation is exceeded, the accelerated portion of such option
shall be exercisable as a Non-Statutory Option under the Federal
tax laws.

     
I. The outstanding options and stock
appreciation rights shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.

B-9

 

V.     PROHIBITION ON
REPRICING

     
The Plan Administrator shall not
(i) implement any cancellation/regrant program pursuant to
which outstanding options or stock appreciation rights under the
Plan are cancelled and new options or stock appreciation rights
are granted in replacement with a lower exercise price per
share, (ii) cancel outstanding options or stock
appreciation rights under the Plan with exercise prices per
share in excess of the then current Fair Market Value per share
of Common Stock for consideration payable in equity securities
of the Corporation or (iii) otherwise directly reduce the
exercise price in effect for outstanding options or stock
appreciation rights under the Plan, without in each such
instance obtaining stockholder approval.

ARTICLE THREE

STOCK ISSUANCE PROGRAM

I.     STOCK ISSUANCE
TERMS

     
Shares of Common Stock may be issued under the
Stock Issuance Program through direct and immediate issuances
without any intervening option grants. Each stock issuance under
the program shall be evidenced by a Stock Issuance Agreement
which complies with the terms specified below. Shares of Common
Stock may also be issued under the Stock Issuance Program
pursuant to share right awards or restricted stock units which
entitle the recipients to receive the shares of Common Stock
subject to those awards or units upon the attainment of
designated performance goals or the satisfaction of specified
Service requirements or upon the expiration of a designated time
period following the vesting of those awards or units.

		
	 	
    A. Issue Price.
    

		
	 	     
    1. The price per share at which shares of
    Common Stock may be issued under the Stock Issuance Program
    shall be fixed by the Plan Administrator.
    
	 
	 	     
    2. Shares of Common Stock may be issued
    under the Stock Issuance Program for any of the following items
    of consideration which the Plan Administrator may deem
    appropriate in each individual instance:
    

			
	 	(i)	
    cash or check made payable to the Corporation,
    
	 
	 	(ii)	
    past services rendered to the Corporation (or any
    Parent or Subsidiary) or
    
	 
	 	(iii)	
    any other valid consideration under the Delaware
    General Corporation Law.
    

		
	 	
    B. Vesting Provisions.
    

		
	 	     
    1. Shares of Common Stock issued under the
    Stock Issuance Program may, in the discretion of the Plan
    Administrator, be fully and immediately vested upon issuance or
    may vest in one or more installments over the Participant’s
    period of Service or upon the attainment of specified
    performance objectives. The elements of the vesting schedule
    applicable to any unvested shares of Common Stock issued under
    the Stock Issuance Program shall be determined by the Plan
    Administrator and incorporated into the Stock Issuance
    Agreement. Shares of Common Stock may also be issued under the
    Stock Issuance Program pursuant to share right awards or
    restricted stock units which entitle the recipients to receive
    the shares of Common Stock subject to those awards or units upon
    the attainment of designated performance goals or the
    satisfaction of specified Service requirements or upon the
    expiration of a designated time period following the vesting of
    those awards or units, including (without limitation) a deferred
    distribution date following the termination of the
    Participant’s Service.
    
	 
	 	     
    2. The Plan Administrator shall also have
    the discretionary authority to structure one or more stock
    issuances or restricted stock unit or share right awards so that
    the shares of Common Stock subject to those issuances or awards
    shall vest (or vest and become issuable) upon the achievement of
    certain pre-established corporate performance goals based on one
    or more of the following criteria: (1) return on total
    stockholder equity; (2) earnings per share of Common Stock;
    (3) net income (before or after taxes); (4) earnings
    before interest, taxes, depreciation and amortization;
    (5) sales or revenue targets;
    

B-10

 

		
	 	
    (6) return on assets, capital or investment;
    (7) market share; (8) cost reduction goals;
    (9) budget comparisons; (10) measures of customer
    satisfaction; (11) any combination of, or a specified
    increase in, any of the foregoing; (12) implementation or
    completion of projects or processes strategic or critical to the
    Corporation’s business operations; and (13) the
    formation of joint ventures, research or development
    collaborations, or the completion of other corporate
    transactions intended to enhance the Corporation’s revenue
    or profitability or expand its customer base. In addition, any
    of the foregoing listed performance goals may be based upon the
    attainment of specified levels of the Corporation’s
    performance under one or more of the measures described above
    relative to the performance of other entities and may also be
    based on the performance of any of the Corporation’s
    business units or divisions or any Parent or Subsidiary.
    Performance goals may include a minimum threshold level of
    performance below which no award will be earned, levels of
    performance at which specified portions of an award will be
    earned and a maximum level of performance at which an award will
    be fully earned. The Plan Administrator shall have complete
    discretion, in setting any performance targets based on revenue,
    income, earnings or similar financial measures, to exclude any
    item or items deemed by the Plan Administrator to be
    extraordinary or unusual in nature and not incurred or realized
    in the ordinary course of business, whether or not those items
    would otherwise be deemed extraordinary in accordance with the
    standards established by Opinion No. 30 of the Accounting
    Principles Board,
    
	 
	 	     
    3. Any new, substituted or additional
    securities or other property (including money paid other than as
    a regular cash dividend) which the Participant may have the
    right to receive with respect to the Participant’s unvested
    shares of Common Stock by reason of any stock dividend, stock
    split, recapitalization, combination of shares, exchange of
    shares or other change affecting the outstanding Common Stock as
    a class without the Corporation’s receipt of consideration
    shall be issued subject to (i) the same vesting
    requirements applicable to the Participant’s unvested
    shares of Common Stock and (ii) such escrow arrangements as
    the Plan Administrator shall deem appropriate.
    
	 
	 	     
    4. The Participant shall have full
    stockholder rights with respect to any shares of Common Stock
    issued to the Participant under the Stock Issuance Program,
    whether or not the Participant’s interest in those shares
    is vested. Accordingly, the Participant shall have the right to
    vote such shares and to receive any regular cash dividends paid
    on such shares. The Participant shall not have any stockholder
    rights with respect to the shares of Common Stock subject to a
    restricted stock unit or share right award until that award
    vests and the shares of Common Stock are actually issued
    thereunder. However, dividend-equivalent units may be paid or
    credited, either in cash or in actual or phantom shares of
    Common Stock, on outstanding restricted stock unit or share
    right awards, subject to such terms and conditions as the Plan
    Administrator may deem appropriate.
    
	 
	 	     
    5. Should the Participant cease to remain in
    Service while holding one or more unvested shares of Common
    Stock issued under the Stock Issuance Program or should the
    performance objectives not be attained with respect to one or
    more such unvested shares of Common Stock, then those shares
    shall be immediately surrendered to the Corporation for
    cancellation, and the Participant shall have no further
    stockholder rights with respect to those shares. To the extent
    the surrendered shares were previously issued to the Participant
    for consideration paid in cash or cash equivalent, the
    Corporation shall repay to the Participant the lower
    of (i) the cash consideration paid for the
    surrendered shares or (ii) the Fair Market Value of those
    shares at the time of cancellation.
    
	 
	 	     
    6. The Plan Administrator may in its
    discretion waive the surrender and cancellation of one or more
    unvested shares of Common Stock which would otherwise occur upon
    the cessation of the Participant’s Service or the
    non-attainment of the performance objectives applicable to those
    shares. Any such waiver shall result in the immediate vesting of
    the Participant’s interest in the shares of Common Stock as
    to which the waiver applies. Such waiver may be effected at any
    time, whether before or after the Participant’s cessation
    of Service or the attainment or non-attainment of the applicable
    performance objectives. However, no vesting requirements tied to
    the attainment of performance objectives may be waived with
    respect to shares which were intended at the time of issuance to
    qualify as performance-based compensation under Code
    Section 162(m).
    

B-11

 

		
	 	     
    7. Outstanding share right awards or
    restricted stock units under the Stock Issuance Program shall
    automatically terminate, and no shares of Common Stock shall
    actually be issued in satisfaction of those awards or units, if
    the performance goals or Service requirements established for
    such awards or units are not attained or satisfied. The Plan
    Administrator, however, shall have the discretionary authority
    to issue vested shares of Common Stock under one or more
    outstanding share right awards or restricted stock units as to
    which the designated performance goals or Service requirements
    have not been attained or satisfied. However, no vesting
    requirements tied to the attainment of performance goals may be
    waived with respect to awards or units which were intended, at
    the time those awards or units were granted, to qualify as
    performance-based compensation under Code Section 162(m).
    

II.     CHANGE IN
CONTROL/HOSTILE TAKE-OVER

     
A. All of the Corporation’s outstanding
repurchase rights under the Stock Issuance Program shall
terminate automatically, and all the shares of Common Stock
subject to those terminated rights shall immediately vest in
full, in the event of any Change in Control, except to the
extent (i) those repurchase rights are to be assigned to
the successor corporation (or parent thereof) or are otherwise
to continue in full force and effect pursuant to the terms of
the Change in Control transaction or (ii) such accelerated
vesting is precluded by other limitations imposed in the Stock
Issuance Agreement.

     
B. Each outstanding restricted stock unit or
share right award assumed in connection with a Change in Control
or otherwise continued in effect shall be adjusted immediately
after the consummation of that Change in Control so as to apply
to the number and class of securities into which the shares of
Common Stock subject to the award immediately prior to the
Change in Control would have been converted in consummation of
such Change in Control had those shares actually been
outstanding at that time.

     
C. The Plan Administrator shall have the
discretionary authority to structure one or more unvested stock
issuances or one or more restricted stock unit or other share
right awards under the Stock Issuance Program so that the shares
of Common Stock subject to those issuances or awards shall
automatically vest (or vest and become issuable) in whole or in
part immediately upon the occurrence of a Change in Control or
upon the subsequent termination of the Participant’s
Service by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months)
following the effective date of that Change in Control
transaction.

     
D. The Plan Administrator shall also have
the discretionary authority to structure one or more unvested
stock issuances or one or more restricted stock unit or other
share right awards under the Stock Issuance Program so that the
shares of Common Stock subject to those issuances or awards
shall automatically vest (or vest and become issuable) in whole
or in part immediately upon the occurrence of a Hostile
Take-Over or upon the subsequent termination of the
Participant’s Service by reason of an Involuntary
Termination within a designated period (not to exceed eighteen
(18) months) following the effective date of that Hostile
Take-Over.

     
E. The Plan Administrator’s authority
under Paragraphs C and D of this Section II shall also
extend to any stock issuances, restricted stock units or other
share right awards intended to qualify as performance-based
compensation under Code Section 162(m), even though the
automatic vesting of those issuances, units or awards pursuant
to Paragraph C or D of this Section II may result in
their loss of performance-based status under Code
Section 162(m).

ARTICLE FOUR

MISCELLANEOUS

I.     TAX
WITHHOLDING

     
A. The Corporation’s obligation to
deliver shares of Common Stock upon the exercise of options or
stock appreciation rights or the issuance or vesting of such
shares under the Plan shall be subject to the satisfaction of
all applicable income and employment tax withholding
requirements. The Corporation shall also make

B-12

 

appropriate arrangements to satisfy all
applicable foreign tax withholding requirements which may be
imposed in connection with the grant or exercise of options or
stock appreciation rights under the Plan or the issuance or
vesting of shares of Common Stock under the Plan.

     
B. The Plan Administrator may, in its
discretion, provide any or all holders of Non-Statutory Options,
stock appreciation rights, restricted stock units or any other
share right awards pursuant to which vested shares of Common
Stock are to be issued under the Plan and any or all
Participants to whom vested or unvested shares of Common Stock
are issued in a direct issuance under the Stock Issuance Program
with the right to use shares of Common Stock in satisfaction of
all or part of the Withholding Taxes to which such holders may
become subject in connection with the exercise of their options
or stock appreciation rights, the issuance to them of vested
shares or the subsequent vesting of unvested shares issued to
them. Such right may be provided to any such holder in either or
both of the following formats:

		
	 	     
    1. Stock Withholding: The election to
    have the Corporation withhold, from the shares of Common Stock
    otherwise issuable upon the exercise of such Non-Statutory
    Option or stock appreciation right or upon the issuance of
    fully-vested shares, a portion of those shares with an aggregate
    Fair Market Value equal to the percentage of the Withholding
    Taxes (not to exceed one hundred percent (100%)) designated by
    the holder and make a cash payment equal to such Fair Market
    Value directly to the appropriate taxing authorities on the
    individual’s behalf. The shares of Common Stock so withheld
    shall not reduce the number of shares of Common Stock authorized
    for issuance under the Plan.
    
	 
	 	     
    2. Stock Delivery: The election to
    deliver to the Corporation, at the time the Non-Statutory Option
    or stock appreciation right is exercised, the vested shares are
    issued or the unvested shares subsequently vest, one or more
    shares of Common Stock previously acquired by such holder (other
    than in connection with such exercise, share issuance or share
    vesting triggering the Withholding Taxes) with an aggregate Fair
    Market Value equal to the percentage of the Withholding Taxes
    (not to exceed one hundred percent (100%)) designated by the
    holder. The shares of Common Stock so delivered shall not be
    added to the shares of Common Stock authorized for issuance
    under the Plan.
    

II.     ASSUMPTION OR
SUBSTITUTION OF OPTIONS

     
A. The shares of Common Stock reserved for
issuance under the Plan may, in the sole discretion of the Plan
Administrator, be used to fund one or more shares of Common
Stock issuable upon the exercise of (i) any Code
Section 422 incentive stock option originally granted by a
corporation or other entity acquired by the Corporation (or any
Parent or Subsidiary), whether by merger or asset or stock sale,
and assumed by the Corporation in connection with that
acquisition or (ii) any Incentive Option granted under this
Plan in substitution for such incentive stock option of the
acquired entity. Any such assumption or substitution of options
shall not be deemed to contravene the option exercise price
requirements of Section I.A of Article Two, even if
the exercise price per share of Common Stock under the assumed
or substituted option is less than one hundred percent (100%) of
the Fair Market Value per share of Common Stock on the date such
assumption or substitution is effected, provided all of the
following requirements are satisfied:

		
	 	     
    1. The excess of the aggregate Fair Market
    Value of the shares of Common Stock subject to the assumed or
    substituted option immediately after the assumption or
    substitution over the aggregate exercise price in effect for
    those shares is not greater than the excess of the aggregate
    fair market value of the shares of stock subject to the option
    immediately prior to such assumption or substitution over the
    aggregate exercise price payable for those shares.
    
	 
	 	     
    2. The ratio of the exercise price to the
    Fair Market Value per share of Common Stock subject to the
    assumed or substituted option immediately after such assumption
    or substitution is no more favorable to the Optionee than the
    ratio of the exercise price to the fair market value per share
    immediately prior to such assumption or substitution.
    
	 
	 	     
    3. The assumed or substituted option does
    not provide the Optionee with any additional benefits the
    Optionee did not otherwise have under the option immediately
    prior to the assumption or substitution.
    

B-13

 

		
	 	     
    4. In the case of a substitution, the option
    granted by the acquired entity must be cancelled at the time of
    such substitution, and the Optionee must have no further rights
    under that cancelled option.
    

III.     SHARE
ESCROW/LEGENDS

     
Unvested shares issued under the Plan may, in the
Plan Administrator’s discretion, be held in escrow by the
Corporation until the Participant’s interest in such shares
vests or may be issued directly to the Participant with
restrictive legends on the certificates evidencing those
unvested shares.

IV.     EFFECTIVE
DATE AND TERM OF THE PLAN

     
A. The Plan became effective on May 13,
2003 upon stockholder approval at the 2003 Annual Meeting.

     
B. The Plan shall terminate upon the
earliest to occur of (i) December 31, 2012,
(ii) the date on which all shares available for issuance
under the Plan shall have been issued as fully vested shares or
(iii) the termination of all outstanding options, stock
appreciation rights, restricted stock units and other share
right awards in connection with a Change in Control. Should the
Plan terminate on December 31, 2012, then all option
grants, stock appreciation rights, unvested stock issuances,
restricted stock units and other share right awards outstanding
at that time shall continue to have force and effect in
accordance with the provisions of the documents evidencing such
grants, issuances or awards.

V.     AMENDMENT OF
THE PLAN

     
A. The Board shall have complete and
exclusive power and authority to amend or modify the Plan in any
or all respects. However, no such amendment or modification
shall adversely affect the rights and obligations with respect
to stock options, stock appreciation rights, unvested stock
issuances or other stock-based awards at the time outstanding
under the Plan unless the Optionee or the Participant consents
to such amendment or modification. In addition, amendments to
the Plan will be subject to stockholder approval to the extent
required under applicable law or regulation or pursuant to the
listing standards of the stock exchange (or the Nasdaq National
Market) on which the Common Stock is at the time primarily
traded.

     
B. Options and stock appreciation rights may
be granted under the Discretionary Grant Program and stock-based
awards may be made under the Stock Issuance Program that in each
instance involve shares of Common Stock in excess of the number
of shares then available for issuance under the Plan, provided
no shares shall actually be issued pursuant to those grants or
awards until the number of shares of Common Stock available for
issuance under the Plan is sufficiently increased by stockholder
approval of an amendment of the Plan sufficiently increasing the
share reserve. If stockholder approval is required and is not
obtained within twelve (12) months after the date the first
excess grant or award made against such contingent increase,
then any options, stock appreciation rights or other stock-based
awards granted on the basis of such excess shares shall
terminate and cease to be outstanding.

     
C. The Plan was amended on May 13,
2004, subject to stockholder approval at the 2004 Annual Meeting
in order to effect the following changes: (i) increase the
number of shares of Common Stock reserved for issuance under the
Plan by an additional eighteen million (18,000,000) shares,
(ii) expand the types of stock-based awards available under
the Plan so as to include stock appreciation rights and
restricted stock units and other stock-based awards which vest
and become payable either upon the attainment of designated
performance goals or the satisfaction of specified service
requirements or upon the expiration of a designated time period
following such vesting events, including (without limitation) a
deferred distribution date following the termination of the
individual’s service with the Corporation,
(iii) eliminate the limitation on the maximum number of
shares of Common Stock which may be issued under the Stock
Issuance Program, (iv) bring the provisions of the Plan
into compliance with recent changes in the Nasdaq requirements
for listed companies and the Treasury regulations applicable to
plans under which incentive stock options may be granted and
(v) effect a series of additional revisions to facilitate
plan administration and to establish net counting provisions so
that the share reserve is reduced only by the actual number of
shares issued under the amended Plan, and not by the gross
number of shares subject to awards made thereunder. The forgoing
changes shall be effective as to all awards made under the Plan
on or after May 13, 2004. However, should the
Corporation’s

B-14

 

stockholders not approve the amendment at the
2004 Annual Meeting, then none of the changes and revisions
effected by such amendment shall become effective. In addition,
no stock options, stock appreciation rights or direct stock
issuances or other stock-based awards shall be made on the basis
of the share increase authorized by such amendment, unless and
until such increase is approved by the Corporation’s
stockholders at the 2004 Annual Meeting.

VI.     USE OF
PROCEEDS

     
Any cash proceeds received by the Corporation
from the sale of shares of Common Stock under the Plan shall be
used for general corporate purposes.

VII.     REGULATORY
APPROVALS

     
A. The implementation of the Plan, the
granting of any stock option or stock appreciation right or
other stock-based award under the Plan and the issuance of any
shares of Common Stock (i) upon the exercise of any granted
option or stock appreciation right or (ii) pursuant to any
award under the Stock Issuance Program shall be subject to the
Corporation’s procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the
Plan, the stock options, stock appreciation rights or other
stock-based awards granted under it and the shares of Common
Stock issued pursuant to it.

     
B. No shares of Common Stock or other assets
shall be issued or delivered under the Plan unless and until
there shall have been compliance with all applicable
requirements of applicable securities laws, including the filing
and effectiveness of the Form S-8 registration statement
for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any stock exchange (or the
Nasdaq National Market, if applicable) on which Common Stock is
then listed for trading.

VIII.     NO
EMPLOYMENT/SERVICE RIGHTS

     
Nothing in the Plan shall confer upon the
Optionee or the Participant any right to continue in Service for
any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent
or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly
reserved by each, to terminate such person’s Service at any
time for any reason, with or without cause.

B-15

 

APPENDIX

     
The following definitions shall be in effect
under the Plan:

     
A. Board shall mean the
Corporation’s Board of Directors.

     
B. Change in Control shall
mean a change in ownership or control of the Corporation
effected through any of the following transactions:

		
	 	     
    (i) a merger, consolidation or other
    reorganization approved by the Corporation’s stockholders,
    unless securities representing more than fifty percent (50%) of
    the total combined voting power of the voting securities of the
    successor corporation are immediately thereafter beneficially
    owned, directly or indirectly and in substantially the same
    proportion, by the persons who beneficially owned the
    Corporation’s outstanding voting securities immediately
    prior to such transaction, or
    
	 
	 	     
    (ii) the sale, transfer or other disposition
    of all or substantially all of the Corporation’s assets in
    complete liquidation or dissolution of the Corporation, or
    
	 
	 	     
    (iii) any transaction or series of related
    transactions pursuant to which any person or any group of
    persons comprising a “group” within the meaning of
    Rule 13d-5(b)(1) under the 1934 Act (other than the
    Corporation or a person that, prior to such transaction or
    series of related transactions, directly or indirectly controls,
    is controlled by or is under common control with, the
    Corporation) becomes directly or indirectly the beneficial owner
    (within the meaning of Rule 13d-3 under the 1934 Act) of
    securities possessing (or convertible into or exercisable for
    securities possessing) more than fifty percent (50%) of the
    total combined voting power of the Corporation’s securities
    outstanding immediately after the consummation of such
    transaction or series of related transactions, whether such
    transaction involves a direct issuance from the Corporation or
    the acquisition of outstanding securities held by one or more of
    the Corporation’s stockholders.
    

     
C. Code shall mean the
Internal Revenue Code of 1986, as amended.

     
D. Common Stock shall mean the
Corporation’s common stock.

     
E. Corporation shall mean
VERITAS Software Corporation, a Delaware corporation, and any
corporate successor to all or substantially all of the assets or
voting stock of VERITAS Software Corporation which shall by
appropriate action adopt the Plan.

     
F. Discretionary Grant Program
shall mean the discretionary grant program in effect
under Article Two of the Plan pursuant to which stock
options and stock appreciation rights may be granted to one or
more eligible individuals.

     
G. Employee shall mean an
individual who is in the employ of the Corporation (or any
Parent or Subsidiary), subject to the control and direction of
the employer entity as to both the work to be performed and the
manner and method of performance.

     
H. Exercise Date shall mean
the date on which the Corporation shall have received written
notice of the option exercise.

     
I. Fair Market Value per share
of Common Stock on any relevant date shall be determined in
accordance with the following provisions:

		
	 	     
    (i) If the Common Stock is at the time
    traded on the Nasdaq National Market, then the Fair Market Value
    shall be the closing selling price per share of Common Stock at
    the close of regular hours trading on the Nasdaq National Market
    on the date in question, as that price is reported by the
    National Association of Securities Dealers. If there is no
    closing selling price for the Common Stock on the date in
    question, then the Fair Market Value shall be the closing
    selling price at the close of regular hours trading on the last
    preceding date for which such quotation exists.
    
	 
	 	     
    (ii) If the Common Stock is at the time
    listed on any Stock Exchange, then the Fair Market Value shall
    be the closing selling sale price per share of Common Stock at
    the close of regular hours trading on
    

B-16

 

		
	 	
    the date in question on the Stock Exchange
    determined by the Plan Administrator to be the primary market
    for the Common Stock, as such price is officially quoted in the
    composite tape of transactions on such exchange. If there is no
    closing selling price for the Common Stock on the date in
    question, then the Fair Market Value shall be the closing
    selling price at the close of regular hours trading on the last
    preceding date for which such quotation exists.
    

     
J. Family Member means, with
respect to a particular Optionee or Participant, any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse,
former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, bother-in-law or
sister-in-law.

     
K. Hostile Take-Over shall
mean a change in ownership or control of the Corporation
effected through either of the following transactions:

		
	 	     
    (i) a change in the composition of the Board
    over a period of thirty-six (36) consecutive months or less
    such that a majority of the Board members ceases, by reason of
    one or more contested elections for Board membership, to be
    comprised of individuals who either (A) have been Board
    members continuously since the beginning of such period or
    (B) have been elected or nominated for election as Board
    members during such period by at least a majority of the Board
    members described in clause (A) who were still in office at
    the time the Board approved such election or nomination, or
    
	 
	 	     
    (ii) a Hostile Tender-Offer.
    

     
L. Hostile Tender-Offer shall
mean the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person
that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation) of beneficial
ownership (within the meaning of Rule 13d-3 of the 1934
Act) of securities possessing more than thirty percent (30%) of
the total combined voting power of the Corporation’s
outstanding securities pursuant to a tender or exchange offer
made directly to the Corporation’s stockholders which the
Board does not recommend such stockholders to accept.

     
M. Incentive Option shall mean
an option which satisfies the requirements of Code
Section 422.

     
N. Involuntary Termination
shall mean the termination of the Service of any
individual which occurs by reason of:

		
	 	     
    (i) such individual’s involuntary
    dismissal or discharge by the Corporation (or any Parent or
    Subsidiary) for reasons other than Misconduct, or
    
	 
	 	     
    (ii) such individual’s voluntary
    resignation following (A) a change in his or her position
    with the Corporation (or any Parent or Subsidiary) which
    materially reduces his or her duties and responsibilities or the
    level of management to which he or she reports, (B) a
    reduction in his or her aggregate level of base salary and
    target bonus under any corporate-performance based bonus or
    incentive program by more than fifteen percent (15%) or
    (C) a relocation of such individual’s place of
    employment by more than fifty (50) miles, provided and only
    if such change, reduction or relocation is effected by the
    Corporation (or any Parent or Subsidiary) without the
    individual’s consent.
    

     
O. Misconduct shall mean the
commission of any act of fraud, embezzlement or dishonesty by
the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or trade secrets of
the Corporation (or any Parent or Subsidiary), or any other
intentional misconduct by such person adversely affecting the
business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall
not in any way preclude or restrict the right of the Corporation
(or any Parent or Subsidiary) to discharge or dismiss any
Optionee, Participant or other person in the Service of the
Corporation (or any Parent or Subsidiary) for any other acts or
omissions, but such other acts or omissions shall not be deemed,
for purposes of the Plan, to constitute grounds for termination
for Misconduct.

     
P. 1934 Act shall mean the
Securities Exchange Act of 1934, as amended.

     
Q. Non-Statutory Option shall
mean an option not intended to satisfy the requirements of Code
Section 422.

B-17

 

     
R. Optionee shall mean any
person to whom an option is granted under the Discretionary
Grant Program.

     
S. Parent shall mean any
corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation)
owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.

     
T. Participant shall mean any
person who is issued shares of Common Stock under the Stock
Issuance Program.

     
U. Permanent Disability or Permanently
Disabled shall mean the inability of the Optionee or the
Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous
duration of twelve (12) months or more.

     
V. Plan shall mean the
Corporation’s 2003 Stock Incentive Plan, as set forth in
this document.

     
W. Plan Administrator shall
mean the particular entity, whether the Primary Committee, the
Secondary Committee or the Board, which is authorized to
administer the Discretionary Grant and Stock Issuance Programs
with respect to one or more classes of eligible persons, to the
extent such entity is carrying out its administrative functions
under those programs with respect to the persons under its
jurisdiction.

     
X. Plan Effective Date shall
mean the date the Plan became effective and is coincidental with
the date the Plan was approved by the Corporation’s
stockholders. The Plan Effective Date is accordingly
May 13, 2003, the date the stockholders approved the Plan
at the 2003 Annual Meeting.

     
Y. Primary Committee shall
mean the committee of two (2) or more non-employee Board
members appointed by the Board to administer the Discretionary
Grant and Stock Issuance Programs with respect to
Section 16 Insiders.

     
Z. Secondary Committee shall
mean a committee of one or more Board members appointed by the
Board to administer the Discretionary Grant and Stock Issuance
Programs with respect to eligible persons other than
Section 16 Insiders.

     
AA. Section 16 Insider
shall mean an officer or director of the Corporation
subject to the short-swing profit liabilities of Section 16
of the 1934 Act.

     
BB. Service shall mean the
performance of services for the Corporation (or any Parent or
Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically
provided in the documents evidencing the option grant or stock
issuance. Service shall not be deemed to cease during a period
of military leave, sick leave or other personal leave approved
by the Corporation; provided, however, that for a leave which
exceeds ninety (90) days, Service shall be deemed, for
purposes of determining the period within which any outstanding
option held by the Optionee in question may be exercised as an
Incentive Option, to cease on the ninety-first (91st) day
of such leave, unless the right of that Optionee to return to
Service following such leave is guaranteed by law or statute.
Except to the extent otherwise required by law or expressly
authorized by the Plan Administrator, no Service credit shall be
given for vesting purposes for any period the Optionee or
Participant is on a leave of absence.

     
CC. Stock Exchange shall mean
either the American Stock Exchange or the New York Stock
Exchange.

     
DD. Stock Issuance Agreement
shall mean the agreement entered into by the Corporation
and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.

     
EE. Stock Issuance Program
shall mean the stock issuance program in effect under
Article Three of the Plan.

     
FF. Subsidiary shall mean any
corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in

B-18

 

the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one
of the other corporations in such chain.

     
GG. 10% Stockholder shall mean
the owner of stock (as determined under Code
Section 424(d)) possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the
Corporation (or any Parent or Subsidiary).

     
HH. Tender-Offer Price shall
mean the greater of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered
to the Corporation in connection with a Hostile Tender-Offer or
(ii) the highest reported price per share of Common Stock
paid by the tender offeror in effecting such Hostile
Tender-Offer. However, if the surrendered option is an Incentive
Option, the Tender-Offer Price shall not exceed the
clause (i) price per share.

     
II. Withholding Taxes shall
mean the applicable income and employment withholding taxes to
which the holder of an option or stock appreciation right or
shares of Common Stock under the Plan may become subject in
connection with the grant or exercise of those options or stock
appreciation rights or the issuance or vesting of those shares.

B-19

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