EXHIBIT 10.2
COMPAQ COMPUTER CORPORATION
RETENTION AGREEMENT
THIS AGREEMENT is made this 8 day of September 2000 (the "Effective Date"),
by and between XXXXXXX X. XXXXXX, (the "Executive") and COMPAQ COMPUTER
CORPORATION, 00000 XX 000, Xxxxxxx, Xxxxx 00000 ("Compaq").
INTRODUCTION
A. The Executive is employed by Compaq as its Senior Vice President and Group
General Manager, Consumer.
B. Compaq wishes to make an incentive compensation payment to Executive in
consideration for his attainment of specific tenure objectives during his
employment with Compaq, subject to the terms and conditions of this Agreement.
COVENANTS
1. INCENTIVE COMPENSATION
Subject to the terms and conditions of this Agreement, Compaq agrees to
pay the Executive (a) the amount of $1,000,000, less applicable tax withholdings
("Initial Payment"), on September 8, 2000 ("Initial Payment Date"), and (b) an
additional $1,000,000, less applicable tax withholdings ("Subsequent Payment")
on December 28, 2003 ("Subsequent Payment Date").
2. CONDITIONS PRECEDENT TO SUBSEQUENT PAYMENT
Compaq shall not be liable for making the Subsequent Payment to the
Executive unless Executive is employed by Compaq as of the Subsequent Payment
Date in his current position or a comparable level executive position.
3. TERMINATION OF EXECUTIVE'S EMPLOYMENT
3.1 VOLUNTARY TERMINATION. In the event of Executive's voluntary
termination of employment prior to August 28, 2002, Executive agrees to repay in
full the amount of the Initial Payment. Such payment shall be made by Executive
within 10 days of the effective date of his termination of employment. In the
event of Executive's voluntary termination of employment prior to the Subsequent
Payment Date, in no event shall Executive be entitled to any part of the
Subsequent Payment.
3.2 INVOLUNTARY TERMINATION, DISABILITY, OR DEATH. Executive will be
entitled to receive a partial Subsequent Payment ("Partial Subsequent Payment")
equal to x, pursuant to the formula
x = ($2,000,000 times a divided by b), minus $1,000,000,
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where a = the number of full months that has elapsed since the date of this
Agreement, and b = 40, if the Executive's employment with Compaq is terminated
prior to the Subsequent Payment Date for any of the following reasons:
(a) Executive's employment is terminated by Compaq without "Cause"
(as defined below);
(b) Executive resigns within ninety days after a material diminution
in his job responsibilities and/or duties within Compaq;
(c) Executive resigns or his employment is terminated within 180
days after there is a "Change in Control" of Compaq (as defined below);
(d) Executive resigns after becoming "Disabled" (as defined below)
or his employment is terminated after he becomes Disabled;
(e) Executive resigns because of a decision of the Board of
Directors to establish his base compensation at an amount less than 75% of the
greater of (a) his annual base salary in effect on the Effective Date or (b) his
annual base salary in effect during the calendar year preceding the Board's
decision, and such resignation is tendered within ninety days after Executive is
notified of such decision.
3.2.1 For purposes of this Agreement, "Cause" shall mean termination
for reason of: (a) Executive's conviction of a felony or any other criminal act
involving moral turpitude; (b) Executive's deliberate and intentional continuing
refusal to substantially perform his duties and obligations under this Agreement
(except by reason of incapacity due to illness or accident) if Executive (i)
shall have either failed to remedy such alleged breach within fifteen days from
the date written notice is given by the Secretary of Compaq demanding that
Executive remedy such alleged breach, or (ii) shall have failed to take
reasonable steps in good faith to that end during such fifteen-day period,
provided, with respect to (ii) that, after the end of such fifteen-day period,
there shall have been delivered to Executive a certified copy of a resolution of
the Board of Directors of Compaq, finding that Executive was guilty of conduct
set forth in this clause (b) and specifying the particulars thereof in detail,
and that Executive has failed to take reasonable steps in good faith to remedy
such alleged breach; or (c) upon a finding by a majority vote of the Board of
Directors that Executive engaged in willful fraud or defalcation either of which
involved material funds or other assets of Compaq.
. 3.2.2 For purposes of this Agreement, a "Change in Control" of
Compaq shall mean and shall be deemed to have occurred if: (a) any "person" as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (other than Compaq, any trustee or other
fiduciary holding securities under any employee benefit plan of Compaq, or any
company owned, directly or indirectly, by the stockholders of Compaq in
substantially the same proportions as their ownership of stock of Compaq), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of Compaq representing 30% or more
of the combined voting power of Compaq's then-outstanding securities; (b) during
any period of two consecutive years (not including any period
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prior to the Effective Date of this Agreement), individuals who at the beginning
of such period constitute the Board of Directors, and any new director (other
than a director designated by a person who has entered into an agreement with
Compaq to effect a transaction described in clause (a), (c), or (d) of this
Paragraph) whose election by the Board of Directors or nomination for election
by Compaq's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
two-year period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority of the Board of
Directors; (c) the stockholders of Compaq approve a merger or consolidation of
Compaq with any other corporation, other than a merger or consolidation which
would result in the voting securities of Compaq outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 50% of the
combined voting power of the voting securities of Compaq or such surviving
entity outstanding immediately after such merger or consolidation; provided,
however, that a merger or consolidation effected to implement a recapitalization
of Compaq (or similar transaction) in which no person acquires more than 30% of
the combined voting power of Compaq's then-outstanding securities shall not
constitute a Change in Control of Compaq; or (d) the stockholders of Compaq
approve a plan of complete liquidation of Compaq or an agreement for the sale or
disposition by Compaq of all or substantially all of Compaq's assets.
3.2.3 For purposes of this Agreement, "Disabled" or "Disability"
shall mean a determination by independent competent medical authority that
Executive is unable to perform, even with reasonable accommodations, the
essential duties of his job and that in all reasonable medical likelihood such
inability will continue for a period in excess of 180 days. Unless otherwise
agreed by Executive and Compaq, the independent medical authority shall be
selected by Executive and Compaq each selecting a board certified licensed
physician and the two physicians selected shall designate an independent medical
authority, whose determination of Disability shall be binding upon Compaq and
Executive.
3.2.4 Notwithstanding any other provision of this Agreement, in the
event that payment is made to Executive pursuant to a Change in Control, if a
reduction in the amount of the Subsequent Payment or Partial Subsequent Payment
Executive otherwise would be entitled to receive under this Agreement would
result in a greater "Net After-Tax Amount" (as defined below), then such
reduction shall be made to provide the greatest Net After-Tax Amount. A
nationally recognized accounting firm acceptable to Executive and Compaq shall
make the determination of whether any such payment reduction shall be effected
and such determination shall be binding upon Executive and Compaq. Compaq shall
pay the cost of such determination. For purposes of this Section, "Net After-Tax
Amount" shall mean the net amount of payments Executive is entitled to receive
under this Agreement after giving effect to all taxes which would be applicable
to such payments, including, but not limited to, any tax under Section 4999 of
the Internal Revenue Code of 1986, as amended.
3.3 RESCISSION OF AWARD. In the event that any of the following has
occurred: (a) at anytime before February 28, 2002, with respect to the Initial
Payment, or (b) at anytime before June 30, 2005, with respect to any Subsequent
Payment or Partial Subsequent Payment, Compaq may rescind the applicable of the
Initial Payment, Subsequent Payment, or Partial Subsequent Payment, with written
notice of such rescission to be given to Executive no later than (x) February
28, 2004, with respect to the Initial Payment, and (y) June 30, 2007, with
respect to any Subsequent Payment or Partial Subsequent Payment:
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3.3.1 The Executive, directly or indirectly, in any state of the
United States or in any foreign country where Compaq or any of its subsidiaries
or affiliated companies is conducting business, renders services for any
organization or engages directly or indirectly in any business which is
competitive with 3.3.1 Compaqthe business unit of Compaq managed by Executive at
the time of his departure from Compaq's employment;
3.3.2 The Executive discloses to anyone outside Compaq, or uses in
other than Compaq's business, without prior written authorization from Compaq,
any confidential information or material, as defined in Compaq's Intellectual
Property Assignment and Confidentiality Agreement, relating to the business of
Compaq, acquired by the Executive either during or after employment with Compaq;
3.3.3 The failure or refusal to disclose promptly and to assign to
Compaq, pursuant to Compaq's Intellectual Property Assignment and
Confidentiality Agreement, all right, title and interest in any invention or
idea, patentable or not, made or conceived by the Executive during employment by
Compaq, relating in any manner to the actual or anticipated business, research
or development work of Compaq or the failure or refusal to do anything
reasonably necessary to enable Compaq to secure a patent where appropriate in
the United States and in other countries;
3.3.4 Any attempt, directly or indirectly, to solicit, request or
induce any individual who was employed by Compaq, its subsidiaries, or other
affiliated entities, within the immediately preceding six months before
employment by Executive or any entity of which he is an employee, or any
attempt, directly or indirectly, to solicit the trade or business of any current
or prospective customer, supplier or partner of Compaq, its subsidiaries, or
other affiliated entities.
In the event of any such rescission, the Executive shall pay to Compaq the
full amount of the Initial Payment, Subsequent Payment, or Partial Subsequent
Payment, as the case may be. Such repayment shall be made within 10 days after
written notice is given to the Executive by Compaq of the rescission and the
reasons for it. However, in the event Compaq believes that the Executive has
violated 3.3.1 or 3.3.4 above, Compaq shall, before giving any notice of
rescission to the Executive, provide the Executive with written notice of the
reason it believes the Executive has violated 3.3.1 or 3.3.4 and give the
Executive a reasonable time, not to Compaq.exceed 10 business days, to cure the
alleged violation or obtain Compaq's written approval of the activity in
question.
It is expressly understood and agreed that Compaq and Executive consider
the restrictions contained in this Section 3.3 to be reasonable and necessary
for the purposes of preserving and protecting the business, goodwill, and
proprietary information of Compaq. Executive acknowledges that he has received
sufficient consideration under this Agreement to justify such restrictions.
These covenants are in addition to any other obligations pursuant to any other
Compaq policy or agreement between Compaq and Executive regarding this subject
matter.
4. CLAIMS RESOLUTION PROCESS
4.1 If the Executive has any claim in connection with this Agreement, he
agrees to submit his claim in writing to Compaq's Senior Vice President, Human
Resources, who will promptly respond to the Executive normally within 21 days
from the receipt of the claim.
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4.2 If the Executive disagrees with Compaq's determination, the parties
agree to attempt to settle the Executive's claim by non-binding mediation held
in Houston, Texas and administrated by the American Arbitration Association
("AAA") under its National Rules for the Resolution of Employment Disputes.
4.3 If the parties fail to reach a settlement as a result of the mediation
process, any claim or controversy in connection with this Agreement shall be
finally settled by binding arbitration conducted by AAA, held in Houston, Texas
pursuant to AAA's National Rules for the Resolution of Employment Disputes. A
judgment based upon the arbitrator's decision may be entered and enforced in any
Texas court having jurisdiction.
4.4 The cost of the foregoing mediation and arbitration shall be borne
equally by the parties.
5. MISCELLANEOUS
5.1 This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas, USA.
5.2 This Agreement is an incentive compensation arrangement and does not
grant the Executive any rights of continued employment nor alter the Executive's
"at will" employment status.
5.3 Compaq makes no representation concerning the tax treatment under
federal, state or local laws of the compensation paid to the Executive under
this Agreement. Compaq will withhold any taxes required by law, including FICA,
at the time payment is made to the Executive.
5.4 This Agreement is personal to Executive and any rights to receive
compensation under this Agreement may not be assigned or transferred to any
third party, unless required by applicable law.
5.5 The Executive acknowledges and agrees that this Agreement represents
the entire agreement between the Executive and Compaq regarding the subject
matter hereof and that all promises, commitments, or representations of any
kind, verbal or otherwise, which have been made to the Executive are contained
in this Agreement.
5.6 Any changes or modifications to this Agreement must be in writing and
signed by the Executive and Compaq.
5.7 If any term, provision, covenant or remedy of this Agreement or the
application thereof to any person or circumstances shall, to any extent, be
construed to be invalid or unenforceable in whole or in part, then such term,
provision, covenant or remedy shall be construed in a manner so as to permit its
enforceability under the applicable law to the fullest extent permitted by law.
In any case, the remaining provisions of this Agreement or the application
thereof to any person or circumstances, other than those to which they have been
held invalid or unenforceable, shall remain in full force and effect.
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5.8 If Executive is in breach of any of the promises and covenants set
forth in this Agreement, Compaq shall have the right, without in any way
limiting any other legal or equitable remedy available to it, to seek specific
performance of the Agreement, any and all damages resulting from the breach, and
any attorney's fees and costs incurred in bringing the action.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first set forth above.
COMPAQ COMPUTER CORPORATION
By: /S/ XXXXXX X. XXXXXXX /S/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx
Title: SR. V.P. HUMAN RESOURCES
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Date: 9-8-00 Date: 9/8/00
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