November 16, 2000 Gary L. Bloom EMPLOYMENT AGREEMENT Dear Gary: On behalf of the Board of Directors of Veritas Software Corporation ("Veritas"), I am pleased to offer you the position of President and Chief Executive Officer of Veritas on the terms set forth below. 1) Position. You will be employed by Veritas as its President and Chief Executive Officer commencing upon the date specified at the end of this letter below the signature line (the "Commencement Date") and continuing thereafter until termination pursuant to Section 6. You will have overall responsibility for the management of Veritas and will report directly to its Board of Directors. During your term of employment, you will also be appointed to the Board of Directors. You will be expected to devote your full working time and attention to the business of Veritas, and you will not render services to any other business without the prior approval of the Board of Directors or, directly or indirectly, engage or participate in any business that is competitive in any manner with the business of Veritas, except for current board memberships with AppWorx, Virata, Mediasnap, and current advisory board memberships for Diamondhead Ventures, Arcot, and the President's Advisory Council for Cal Poly San Luis Obispo. You will also be expected to comply with and be bound by the Company's operating policies, procedures and practices that are from time to time in effect during the term of your employment. 2) Cash Compensation. Your annual base salary from the Commencement Date through December 31, 2001 will be $1,000,000, and your bonus for 2001 will be targeted at $800,000 for a total target annual compensation of $1,800,000. In subsequent years of employment the Compensation Committee of the Board of Directors, at its own discretion, will determine your compensation. a) Base Salary. Your base annual salary will be payable in accordance with Veritas' normal payroll practices with such payroll deductions and withholdings as are required by law. Your base salary will be reviewed on an annual basis by the Compensation Committee of the Board of Directors and may be increased from time to time, in the discretion of the Compensation Committee. b) Bonus. You will be eligible to receive a target bonus payable based on Veritas' EPS Bonus Plan for the year beginning January 1, 2001, a copy of which is attached to this letter as Exhibit A, titled "Veritas 2001 Chief Executive Compensation Plan". 3) Vacation: It is understood that after commencing employment for Veritas for one week you will be taking four weeks of vacation, such vacation days to be in addition to any vacation days that are earned in the normal course of employment. Further, during the first two years of employment, you will be eligible for three weeks of vacation annually. 2 4) Other Benefits. You will be eligible for the normal health insurance, 401(k), employee stock purchase plan and other benefits offered to all Veritas senior executives of similar rank and status. 5) Stock Options. Within 30 days of the Commencement Date, the Compensation Committee of the Board of Directors shall grant you incentive stock options (to the maximum allowed under the IRS regulations) and nonqualified stock options (for the balance) to purchase a total of 2,500,000 shares of Veritas common stock at an exercise price equal to the fair market value of Veritas common stock on the date of grant ("Initial Option Price"). a) These options will vest and become exercisable over a four-year period, in 48 equal monthly installments. Except as otherwise indicated in this agreement, the vested portion of such options may be exercised at any time until the earlier of 90 days after the termination of your employment or ten years after the grant of such options. The unvested shares may be exercised early coincident with entering into a company repurchase agreement mirroring your vesting schedule. You should consult a tax advisor concerning your income tax consequences before exercising any of the options. b) Notwithstanding any other provision of this Section 5 to the contrary, upon "Involuntary Termination," "Termination without Cause," or "Termination for Death or Disability," a portion of the unvested options shall immediately vest as provided in Section 8 below. c) Veritas shall register the shares issuable under the option on a Form S-8 registration statement and shall keep such registration statement in effect for the entire period the options remain outstanding. d) In order to assure the consistency of the goals of its executives with its shareholders, Veritas is committed to providing substantial stock option incentive to its executives. During your first year of employment with Veritas, in the event that your initial stock options are priced materially above the market (that your options are "under water"), the Veritas board of directors agrees to meet, to deliberate, and, if and as it deems appropriate, to grant additional options. 6) Employment and Termination. Your employment with Veritas will be at-will and may be terminated by you or by Veritas at any time for any reason as follows: a) You may terminate your employment upon written notice to the Board of Directors at any time for "Good Reason," as defined below (an "Involuntary Termination"); b) You may terminate your employment upon written notice to the Board of Directors at any time in your discretion without Good Reason ("Voluntary Termination"); c) Veritas may terminate your employment upon written notice to you at any time following a determination by two-thirds (2/3) vote of the entire Board of Directors that there is "Cause," as defined below, for such termination ("Termination for Cause"); d) Veritas may terminate your employment upon written notice to you at any time in the sole discretion of the Board of Directors without a determination that there is Cause for such termination ("Termination without Cause"); e) Your employment will automatically terminate upon your death or upon your disability as determined by the Board of Directors ("Termination for Death or Disability"); provided that "disability" shall mean your complete inability to perform your job responsibilities for a period of 180 consecutive days or 180 days in the aggregate in any 12-month period. 7) Definitions. As used in this agreement, the following terms have the following meanings: a) "Good Reason" means (i) a material reduction in your duties that is inconsistent with your position as President and Chief Executive Officer of Veritas or a change in your reporting relationship such 3 that you no longer report directly to the Board of Directors; (ii) your no longer being President and Chief Executive Officer of Veritas or, in the case of a Change in Control, of the surviving entity or acquiror that results from any Change in Control; (iii) any reduction in your base annual salary or target quarterly or annual bonus (other than in connection with a general decrease in the salary or target bonuses for all officers of Veritas) without your consent; or (iv) material breach by Veritas of any of its obligations hereunder after providing Veritas with written notice and an opportunity to cure within seven days; (v) a requirement by Veritas that you relocate your principal office to a facility more than 50 miles from Veritas' current headquarters; or (vi) failure of any successor to assume this agreement pursuant to Section 14(d) below. b) "Cause" means (i) gross negligence or willful misconduct in the performance of your duties to Veritas (other than as a result of a disability) that has resulted or is likely to result in substantial and material damage to Veritas, after a written demand for substantial performance is delivered to you by the Board of Directors which specifically identifies the manner in which the Board believes you have not substantially performed your duties and you have been provided with a reasonable opportunity, of not less than 60 days, to cure any alleged gross negligence or willful misconduct; (ii) commission of any act of fraud with respect to Veritas; or (iii) conviction of a felony or a crime involving moral turpitude either of which causes material harm to the business and affairs of Veritas. No act or failure to act by you shall be considered "willful" if done or omitted by you in good faith with reasonable belief that your action or omission was in the best interests of Veritas. c) "Change in Control" means (i) The acquisition (other than from the Company) by any person, entity or "group", within the meaning of section 13(d) (3) or 14 (d) (2) of the Securities and Exchange Act of 1934 (the "Exchange Act"), (excluding, for this purpose, Veritas or its subsidiaries, (or any employee benefit plan of Veritas or its subsidiaries which acquires beneficial ownership of voting securities of Veritas) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either the then outstanding shares of common stock or the combined voting power of the Veritas' then outstanding voting securities entitled to vote generally in the election of directors; or (ii) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by Veritas' shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of the office is in connection with an actual or threatened election contest relating to the election of the directors of Veritas, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for the purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or (iii) Approval of the stockholders of Veritas of a reorganization, merger or consolidation, in each case, with respect to which persons who were the stockholders of Veritas immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities, or a liquidation or dissolution of Veritas or of the sale of all or substantially all of the assets of Veritas. 8) Separation Benefits. Upon termination of your employment with Veritas for any reason, you will receive payment for all unpaid salary and vacation accrued to the date of your termination of employment; and your benefits will be continued under Veritas' then existing benefit plans and policies for so long as provided under the terms of such plans and policies and as required by applicable law. Under certain circumstances, subject to your execution of a termination and general release agreement, you will also be entitled to receive severance benefits as set forth below. Veritas' termination and general release agreement will contain provisions specifying that you will not compete with Veritas while you are receiving such severance benefits, nor will you solicit employees for a period of two years after any final payment, that neither you nor Veritas shall disparage the other party, and that neither party shall have claims that survive that agreement. 4 a) In the event of your Voluntary Termination or Termination for Cause, you will not be entitled to any cash severance benefits or additional vesting of shares of options. b) In the event of your Involuntary Termination or Termination without Cause within one year of the Commencement Date, you will be entitled to i) a severance payment equal to twelve months of your current annual base salary plus full target bonus, payable over twelve months in accordance with Veritas' normal payroll practices with such payroll deductions and withholdings as are required by law, provided, that you provide Veritas with consulting services during such period after the date of termination (the "CONSULTING SERVICES"); and ii) accelerated vesting and exercisability of that portion of your outstanding unvested options to purchase Veritas common stock that would have vested within two years from the date of the Involuntary Termination or Termination without Cause, with all vested options exercisable for a period of 90 days from the later of: (1) the date of your Involuntary Termination or Termination without Cause; or (2) the date you cease providing Consulting Services to Veritas. c) In the event of your Involuntary Termination or Termination without Cause within two years of the Commencement Date, you will be entitled to: i) a severance payment equal to six months of your current annual base salary plus one-half of your target bonus, payable over twelve months in accordance with Veritas's normal payroll practices with such payroll deductions and withholdings as are required by law, provided, that you provide Veritas with Consulting Services; and ii) accelerated vesting and exercisability of that portion of your outstanding unvested options to purchase Veritas common stock that would have vested within one year from the Involuntary Termination or Termination without Cause, with all vested options exercisable for a period of 90 days from the later of: (1) the date of your Involuntary Termination or Termination without Cause; or (2) the date you cease providing Consulting Services to Veritas. d) In the event of your Involuntary Termination or Termination without Cause on or after two years of the Commencement Date, you will not be entitled to any severance payments or accelerated vesting of your outstanding unvested options. e) In the event of your Involuntary Termination or Termination without Cause within one year of a Change in Control, provided the change of control occurs within two years of the Commencement Date, you will be entitled to the following: a lump sum payment equal to twelve months of your current annual base salary and full target bonus (less applicable deductions and withholding) payable within 30 days after the date of termination; and accelerated vesting of fifty percent (50%) of your outstanding unvested options to purchase Veritas common stock, with all vested options exercisable for a period of 90 days from the date of your Involuntary Termination or Termination without Cause. This section 8.e shall survive for twelve months beyond the term noted in Section 13. 5 f) For the purpose of this agreement, Termination by Death or Disability shall be treated as Involuntary Termination. g) If your severance and other benefits provided for in this Section 8 constitute "parachute payments" within the meaning of Section 280G of the Code and, but for this subsection, would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, then your severance and other benefits under this Section 8 will be payable, at your election, either in full or in such lesser amount as would result, after taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, in your receipt on an after-tax basis of the greatest amount of severance and other benefits. h) No payments due you hereunder shall be subject to mitigation or offset. 9) Indemnification Agreement. Upon your commencement of employment with Veritas, Veritas will enter into its standard form of indemnification agreement for officers and directors (which can be viewed in our most recent published proxy statement) to indemnify you against certain liabilities you may incur as an officer or director of Veritas. 10) Confidential Information and Invention Assignment Agreement. Upon your commencement of employment with Veritas, you will be required to sign its standard form of Employee Agreement, a copy of which is attached to this letter as Exhibit B, to protect Veritas' confidential information and intellectual property. 11) No Solicitation. During the term of your employment with Veritas and for two years thereafter, you will not, on behalf of yourself or any third party, solicit or attempt to induce any employee of Veritas to terminate his or her employment with Veritas. 12) Arbitration. The parties agree that any dispute regarding the interpretation or enforcement of this agreement shall be decided by confidential, final and binding arbitration conducted by Judicial Arbitration and Mediation Services ("JAMS") under the then existing JAMS rules rather than by litigation in court, trial by jury, administrative proceeding or in any other forum. The filing fees and arbitrator's fees and costs in such arbitration will be borne by Veritas. The parties will be entitled to reasonable discovery of essential matters as determined by the arbitrator. In the arbitration, the parties will be entitled to all remedies that would have been available if the matter were litigated in a court of law. 13) Term. This agreement shall be in effect upon the signing by both parties, and shall expire two years after the commencement date, at which time your employment with Veritas will be treated no less favorably than the policies in effect at the time for other senior executives of Veritas. 14) Miscellaneous. a) Authority to Enter into Agreement. Veritas represents that Mark Leslie, its Chairman of the Board, has due authority to execute and deliver this agreement on behalf of Veritas. b) Absence of Conflicts. You represent that upon the Commencement Date your performance of your duties under this agreement will not breach any other agreement as to which you are a party. c) Attorneys Fees. If a legal action or other proceeding is brought for enforcement of this agreement because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees and costs incurred, both before and after judgment, in addition to any other relief to which they may be entitled. 6 d) Successors. This agreement is binding on and may be enforced by Veritas and its successors and assigns and is binding on and may be enforced by you and your heirs and legal representatives. Any successor to Veritas or substantially all of its business (whether by purchase, merger, consolidation or otherwise) will in advance assume in writing and be bound by all of Veritas's obligations under this agreement. e) Notices. Notices under this agreement must be in writing and will be deemed to have been given when personally delivered or two days after mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. Mailed notices to you will be addressed to you at the home address which you have most recently communicated to Veritas in writing. Notices to Veritas will be addressed to its General Counsel at Veritas's corporate headquarters. f) Waiver. No provision of this agreement will be modified or waived except in writing signed by you and an officer of Veritas duly authorized by its Board of Directors. No waiver by either party of any breach of this agreement by the other party will be considered a waiver of any other breach of this agreement. g) Entire Agreement. This agreement, including the attached exhibits, represents the entire agreement between us concerning the subject matter of your employment by Veritas. h) Governing Law. This agreement will be governed by the laws of the State of California without reference to conflict of laws provisions. Gary, we are very pleased to extend this offer of employment to you and look forward to your joining Veritas as its President and Chief Executive Officer. This offer of employment is effective through November 17, 2000, after which it will expire. Please indicate your acceptance of the terms of this agreement by signing in the place indicated below. Very truly yours, /s/ Mark Leslie --------------------------------- Mark Leslie, Chairman and CEO VERITAS Software Corporation ACCEPTED: /s/ Gary L. Bloom November 17, 2000 --------------------------------- Gary L. Bloom Commencement Date: November 17, 2000 7 Exhibit A VERITAS 2001 CHIEF EXECUTIVE OFFICER COMPENSATION PLAN The 2001 CEO Annual Compensation Plan shall consist of two components, as follows:
Employment Agreement - VERITAS Software Corp. and Gary L. Bloom
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