Employment Agreement
Effective as of July 22, 1999
Between
Compaq Computer Corporation
And
Xxxxxxx X. Xxxxxxxx
This Employment Agreement, effective as of July 22, 1999 ("Effective Date"), is
by and between Compaq Computer Corporation ("Compaq"), a corporation organized
and existing under the laws of the State of Delaware, U.S.A., and Xxxxxxx X.
Xxxxxxxx ("Executive").
WHEREAS Compaq is desirous of employing Executive pursuant to the terms and
conditions and for the consideration set forth in this Agreement, and Executive
is desirous of being employed by Compaq pursuant to such terms and conditions
and for such consideration.
NOW, THEREFORE, for and in consideration of the respective promises, covenants,
and obligations contained herein, Compaq and Executive agree as follows:
1. Introduction. Compaq agrees to employ, and Executive agrees to be
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employed by Compaq, subject to the terms and conditions of this Agreement. The
employment relationship between Compaq and Employee shall be at-will, that is,
the employment relationship may be terminated at any time for any reason
whatsoever, with or without Cause, subject to the provisions of this Agreement.
2. Definitions. Capitalized terms used in this Agreement shall have the
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meanings set forth below or as defined throughout this Agreement.
2.1. "Agreement" means this Employment Agreement effective as of the
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Effective Date.
2.2. "Base Compensation" means the sum of the annualized base salary
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paid hereunder at any determination date and the annual bonus paid for the
calendar year preceding any determination date. Base Compensation shall not
include any other forms of compensation including, but not limited to, bonuses
paid under Compaq's Long-term Bonus program (or any successor program),
restricted stock grants, stock option grants, or stock option exercise proceeds.
2.3. "Board of Directors" or "Board" means the Board of Directors of
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Compaq or any successor entity.
2.4. "Cause" shall mean termination due to any of the following
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reasons:
2.4.1. Executive's final conviction of a felony, or
2.4.2. Executive's substantial failure to perform his duties with
Compaq (except by reason of incapacity due to illness or accident),
2.4.3. Executive's breach of his obligations under paragraph 6.2. of
this Agreement, or
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2.4.4. Upon a finding by a majority of Compaq's Board of Directors
that Executive engaged in a willful fraud or defalcation either of
which involved funds or other assets of Compaq.
2.5. "Change in Control" means and shall be deemed to have occurred if:
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(i) 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 Compaq
employee benefit plan, or any entity owned, directly or indirectly, by Compaq
stockholders in substantially the same proportions as their ownership of Compaq
voting securities), is or becomes the "beneficial owner" (as defined in Ruled
13d-3 under the Exchange Act, or any successor rule or regulation thereto as in
effect from time to time), directly or indirectly, of Compaq securities
representing 30% or more of the combined voting power of Compaq's then
outstanding securities; (ii) during any period of two consecutive years (not
including any period 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 (i), (iii),
or (iv) 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
lest 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 approved, cease for any reason to constitute at least a
majority of the Board of Directors; (iii) Compaq stockholders approve a merger
or consolidation of Compaq with any other corporation, other than a merger or
consolidation that would result in Compaq voting securities 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 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; or (iv) Compaq
stockholders 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. If any of the events enumerated in clause (i) through (iv) occur,
Compaq's Board of Directors shall determine the effective date of the Change in
Control resulting therefrom for purposes of this Agreement.
2.6. "Code" means the U.S. Internal Revenue Code of 1986, as amended.
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2.7. "Confidential Information" means any confidential or private
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information, not generally known to the public, related to the business or
operations (past, present or future) of any member of the Group that Executive
has possession or knowledge of through his employment with Compaq or through his
association with the Group. The parties agree that Confidential Information
encompasses a broad scope of information that includes, without limitation:
business plans and strategies; information regarding the identities, skills,
qualities, competencies, characteristics, expertise, or experience of the
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directors, officers, or employees of any Group member; information regarding the
compensation practices of, or payments made to or by, Group members; the
contents of communications, oral or written, with, by or between directors,
officers, employees, or agents of the Group; statements of fact or opinion or
mixed statements of fact and opinion if such statements are based on information
or events to which Executive had access as a result of his employment by Compaq;
and similar information related to third parties to whom any Group member owes a
duty of confidentiality or privacy.
2.8. "Disabled" or "Disability" means a determination by independent
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competent medical authority that Executive is unable to perform his duties as
President and Chief Executive Officer of Compaq and in all reasonable medical
likelihood such inability will continue for a period in excess of one hundred
eighty days. Unless otherwise agreed by Executive and the Board of Directors,
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.
2.9. "Group" means Compaq, its subsidiaries, and other affiliated entities.
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2.10. "Intellectual Property" includes, without limitation, any and all
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information, ideas, concepts, improvements, discoveries, designs, inventions,
trade secrets, know-how, manufacturing processes, product formulae, design
specifications, writings and other works of authorship, computer programs, and
business methods, whether patentable or not, which are originated by, conceived
by, created by, made by, developed by, invented by, learned by, or disclosed to
Executive, individually or in conjunction with others, during Executive's
employment by Compaq (whether during business hours or otherwise and whether on
Compaq's premises or otherwise) which relate to the Group's business, products,
or services (including, without limitation, all such information relating to
corporate opportunities, research, financial and sales data, pricing and trading
terms, evaluations, opinions, interpretations, acquisition prospects, the
identity of customers or their requirements, the identity of key contacts with
in the customer's organizations or within the organization of acquisition
prospects, or marketing and merchandising techniques, prospective names, and
marks). The term "Intellectual Property" also includes all rights provided by
the law of any jurisdiction throughout the world with respect to such
information, ideas, concepts, improvements, discoveries, designs, inventions,
trade secrets, know-how, manufacturing processes, product formulae, design
specifications, writings and other works of authorship, computer programs, and
business methods, including, without limitation, the right to maintain the same
as confidential information, the right to first publication, the right to obtain
patents and industrial rights thereon, all rights of copyright, all trademark
rights, and the right to protect the same against acts of unfair competition.
2.11. "Release of Claims" or "Release," means a release of claims in
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substantially the form of the document attached as Exhibit A to this Agreement.
Executive acknowledges and agrees that Compaq retains the unilateral right to
amend the form of the Release, provided that any such amendment is found
necessary as determined by a majority vote of the Board of Directors (a) to
protect Compaq's business or then current business plans or (b) to conform to
any applicable law.
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2.12. "Separation Payment" means a payment equal to two times Executive's
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Base Compensation (except for purposes of paragraph 9.1.6. under which the
payment equals three times Executive's Base Compensation).
2.13. "Stock Option" means an option to purchase Compaq stock pursuant
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to a nonqualified stock option agreement between Executive and Compaq made
pursuant to any of Compaq's various employee stock option plans.
2.14. "Termination Date" means the date on which Executive ceases to be
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an employee irrespective of the cause or manner in which the employment ends.
3. Term of Employment. The initial term of this Agreement will commence on
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the Effective Date and, unless terminated at an earlier date in accordance with
paragraphs 9.1. or 9.2., shall continue until July 22, 2002. The term of this
Agreement shall automatically extend by consecutive twelve-month increments
unless, prior to March 15, 2002, and of each year thereafter, Compaq notifies
Executive in writing of Compaq's intention to terminate this Agreement. If
Compaq so notifies Executive, then this Agreement shall terminate one hundred
and twenty days after the date Compaq's written notice is delivered to
Executive.
4. Duties and Responsibilities.
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4.1. Service. Compaq shall employ Executive as Compaq's President and
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Chief Executive Officer. Executive shall faithfully and diligently serve as
Compaq's President and Chief Executive Officer.
4.2. Other Activities. Executive shall not during the term of this
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Agreement, without the consent of the Board of Directors, (a) act as an officer,
director, partner, consultant, advisor or in any other capacity for any entity
other than a member of the Group, if such activity is for gain, profit or
pecuniary advantage, (b) engage in any other business activity whatsoever, other
than business activity for a member of the Group, or (c) cause or allow any
member of the Group to participate in any transaction with Executive or any of
his relatives or with any entity in which Executive or any of his relatives has
an interest other than holding less than five percent of an entity whose stock
is publicly traded. Executive shall be entitled to make and manage his personal
investments, provided such investments or other activities do not violate the
terms of Articles 6 or 7 hereof and, further provided, that such investments do
not violate Compaq's policies on xxxxxxx xxxxxxx, conflict of interest, or any
trading restriction policy or program applicable to Compaq executive officers.
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5. Compensation and Benefits.
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5.1. Benefits. Executive shall receive all standard benefits generally
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available to executive officers of Compaq. Executive shall be entitled to one
physical each calendar year at Compaq's expense. Executive shall be eligible to
participate in Compaq's executive officer financial counseling and tax
preparation program to the same extent and under the same terms and conditions
that Compaq makes available to its other executive officers. Compaq, at its
expense, shall install, and provide for the monitoring of, a home security
system in Executive's local residence.
5.2. Compensation. Commencing on the Effective Date, Executive's
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annual base salary shall be eight hundred fifty thousand dollars ($850,000),
which shall be paid in installments in accordance with Compaq's standard payroll
practice. Compaq and Executive may renegotiate Executive's base salary annually
in good faith.
5.3. Stock Option Eligibility. During the term of his Compaq
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employment, Executive shall continue to be eligible to receive stock option
grants under the plans and programs applicable to Compaq executive officers. On
the Effective Date, Compaq will grant to Executive a Stock Option on one million
shares subject to the terms and conditions of the Compaq Computer Corporation
1998 Stock Option Plan. The exercise price will be equal to the Dow Xxxxx
composite close for Compaq's stock on the Effective Date. Executive understands
that Compaq will issue Executive a grant notice conveying these options and
providing the terms and conditions thereof.
5.4. Restricted Stock Grant. On the Effective Date, Compaq shall grant
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Executive two hundred thousand shares of restricted stock (the "Restricted
Stock") as that term is defined in the Compaq Computer Corporation 1989 Equity
Incentive Plan (the "Plan").
5.4.1. Terms and Conditions. The Restricted Stock shall be issued
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under the Plan. Except as modified in this Agreement, the Restricted
Stock shall be subject to the terms and conditions of the Plan.
5.4.2. Vesting.
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5.4.2.1. Performance Incentive. As a special performance
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incentive to Executive, the Restricted Stock shall vest in the
quantities listed below the first time after the Effective Date
and during Executive's employment with Compaq, that the closing
price of Compaq's stock on the NYSE (or other nationally
recognized stock exchange on which it is listed at the time)
equals or exceeds each performance target listed below for thirty
consecutive trading days.
Quantity Performance Target
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50,000 shares $35.00 per share
50,000 shares $40.00 per share
100,000 shares $50.00 per share
Compaq shall adjust the quantities and performance targets in
this section to reflect any stock dividend, subdivision, or
combination of shares or reclassification that occurs under the
Plan.
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5.4.2.2. Regular Vesting. Except as provided for in section
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5.4.2.1. and in paragraph 9.6., the Restricted Stock shall vest
on the fifth anniversary of the Effective Date provided Executive
is an employee of Compaq on that date.
5.4.3. Cash Dividends. Cash Dividends on unvested shares of the
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Restricted Stock shall inure to the benefit of Compaq.
5.5. Loan to Purchase Shares. Compaq shall loan Executive five
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million dollars on a full recourse basis to enable Executive to immediately
purchase Compaq common stock with an equivalent value. The purchased shares of
Compaq common stock will secure the loan. The loan principal will become due and
payable to Compaq on the earlier of the fifth anniversary of the Effective Date
or one hundred twenty days after the termination of Executive's employment with
Compaq. In addition, the full proceeds of any sale of any of the shares securing
the loan, if earlier than the above dates, must be used to retire principal
and/or interest on the loan. The loan will bear interest at a fixed rate which
will be the minimum rate required under Code section 7872 in order that the loan
is not considered a below market interest loan. Interest on the loan will be due
and payable at the same time as the principal amount of the loan. The loan and
security agreement on the purchased shares will be evidenced by a separate
written agreement.
5.6. Reimbursement. Compaq shall reimburse Executive for reasonable
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business expenses that he incurs in the course of his duties under this
Agreement on presentation to Compaq or its designee of an itemized account of
such expenses together with supporting documentation.
5.7. Full Consideration. Executive's compensation and benefits under this
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Agreement shall constitute the full consideration to be paid to Executive for
any services rendered to the Group. Compaq, in its sole discretion, may grant
additional compensation or benefits to Executive in the form of bonuses, stock
options, or other compensatory arrangements.
6. Confidential Information and Public Remarks.
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6.1. Unique Position and Unique Harm. Executive appreciates the unique
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position he will hold as Compaq's President and Chief Executive Officer and
understands that because of his position Compaq will provide him unique and
broad access to Confidential Information, including matters related to all
members of the Group, the Group's business operations, and to third parties in
business and employment relationships with the Group. Executive acknowledges
that the business of the Group is highly competitive and that the Confidential
Information of the Group constitutes valuable, special, and unique assets of the
Group. Executive understands that in his position with Compaq, investors,
business leaders, the media, the public, and governmental entities will view him
as the primary public representative of a corporate entity. Executive further
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understands that even after his employment with Compaq ends, members of these
groups will continue to perceive him as having unique information and insight
into matters involving the Group. Executive acknowledges that his access to
Confidential Information and the public attention that will attach to him
through his employment as President and Chief Executive Officer will, during and
after the termination of his Compaq employment, place Executive in a unique
position to harm Compaq, its employees, officers, directors, and entities
engaged in business with Compaq, through the disclosure of Compaq's Confidential
Information or through other public or private remarks. Executive understands
the potentially significant negative financial and other impacts a former senior
executive's remarks can cause Compaq as a publicly held corporation.
6.2. Therefore, Executive agrees as follows:
6.2.1. Disclosure and Misuse. Except in good faith furtherance of his
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duties to the Group, Executive shall not at any time directly or indirectly
disclose to third parties or use either for himself or others any
Confidential Information without first obtaining the written consent of
Compaq. Executive agrees that this prohibition applies to the Confidential
Information of third parties that Executive obtains knowledge or possession
of through his Compaq employment. Any records of Confidential Information
prepared by Executive or that come into his possession or to which he has
access during his employment with Compaq shall remain the property of
Compaq. Upon termination of his employment with Compaq, Executive shall not
remove any such records or copies thereof and shall deliver such records or
copies in his personnel possession to Compaq. Executive understands and
agrees that this duty of non-disclosure and proper use shall survive the
termination of his employment with Compaq.
6.2.2. Public Statement Prohibition. Executive shall refrain, both
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during the employment relationship and after the employment relationship
terminates, from publishing or making any oral or written statements about
any Group member or any Group member's directors, officers, employees,
agents or representatives, that are derogatory or disparaging, or that
constitute an intrusion into the seclusion or privacy of any Group member's
directors, officers, employees, agents or representatives or that gives
rise to publicity about private matters concerning of any Group member's
directors, officers, employees, agents or representatives, or that place
any Group member or any Group member's directors, officers, employees,
agents or representatives in a false or misleading light before the public.
The courts may enjoin a violation or threatened violation of this
prohibition. The rights afforded the Group members and their directors,
officers, employees, agents and representatives in this section are in
addition to any and all rights and remedies otherwise afforded by law.
6.2.3. Liquidated Damages for Breach. Executive agrees that a breach
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of his paragraph 6.2. duties would likely negatively impact Compaq's stock
price, its business good will, its reputation with customers and investors,
and its relationships with partners, suppliers, vendors, and employees.
Executive agrees that while potentially financially material to the Group,
the damages he could cause the Group through a breach of the obligations he
assumes in paragraphs 6.2.1. and 6.2.2. would not be readily measurable in
terms of legal damages. Therefore, Executive agrees that if Executive
breaches his obligations under paragraphs 6.2.1. or 6.2.2. of this
Agreement, Compaq shall be entitled to an amount of liquidated damages
determined in accordance with this paragraph.
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6.2.3.1. The parties agree that, except as to injunctive relief
available under paragraph 6.2.2., this Article 6 is subject
to the parties' agreement to arbitration set out in Article
11. The parties agree that if an arbitrator determines
Executive has breached his Article 6 obligations, then the
arbitrator shall award Compaq liquidated damages. The
parties agree that the arbitrator shall determine the
liquidated damage award by multiplying the number of shares
of Compaq stock then outstanding by a multiplier the
arbitrator selects from a range with a minimum of five
one-hundredths of a cent ($0.0005) to a maximum of two cents
($0.02) per outstanding share. The parties agree that the
arbitrator shall select the multiplier from this range based
on the arbitrator's assessment of (a) the scope and severity
of Executive's breach, and (b) the scope and probable
magnitude of damage to Compaq, its employees, officers,
directors, and entities engaged in business with Compaq,
considering the impact of Executive's breach on, without
limitation, Compaq's stock price, business good will, and
reputation with customers, investors, and other entities
engaged in business with Compaq. The parties agree that for
purposes of this paragraph the arbitrator shall determine
the number of outstanding shares by reference to the then
most recently filed Quarterly Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 (Form 10Q).
Executive acknowledges that as of March 31, 1999, Compaq had
approximately 1,691,000,000 shares outstanding and that if
an arbitrator awarded Compaq a remedy under this paragraph
the minimum damages, based on the number foregoing number of
outstanding shares, would equal one million six hundred
ninety-one thousand dollars ($845,000.00). Executive agrees
that the above liquidated damage range and calculations are
reasonably related to the harm that he would cause Compaq
through a breach of his paragraph 6.2. duties. Executive
further agrees that this liquidated damage calculation would
be an appropriate remedy for Compaq and is not a penalty
against him.
6.2.3.2. The parties agree that if an arbitrator finds that
Executive engaged in conduct that constitutes a breach of
his paragraph 6.2. obligations only, and provided the
arbitrator awards Compaq liquidated damages hereunder, then,
except as to Compaq's rights under paragraphs 9.4., 9.5.,
9.6., 9.7. and 9.8., the remedy provided under paragraph
6.2.3. shall be Compaq's exclusive remedy in damages. The
parties further agree that if an arbitrator finds that
Executive has breached his paragraph 6.2. obligations and
also finds that Executive has breached duties or obligations
under other Articles of this Agreement, then the remedy
available to Compaq under this paragraph shall not be deemed
exclusive but shall be in addition to the remedies available
under such other Article(s).
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7. Intellectual Property.
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7.1. Access, Protection, Disclosure and Misuse. Executive acknowledges
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that the Group's Intellectual Property is confidential business information and
trade secrets that are valuable, special, and unique assets that the Group
members use in their business to obtain competitive advantage over competitors.
Executive further acknowledges that protection of such Intellectual Property
against unauthorized disclosure or use is of critical importance to the Group
members in maintaining their competitive position. Executive agrees that he
will not, at any time during or after his employment by Compaq, make any
unauthorized disclosure of any Group member's Intellectual Property, or make any
use thereof, except in carrying out his employment responsibilities. As a
result of Executive's employment by Compaq, Executive may from time to time have
access to, or knowledge of, Intellectual Property of third parties, such as
customers, suppliers, partners, joint venturers, and the like. Executive also
agrees to preserve and protect the confidentiality of such third party
Intellectual Property to the same extent, and on the same basis, as Compaq's
Intellectual Property. These obligations apply irrespective of whether the
information has been reduced to a tangible medium of expression (e.g. is only
maintained in the minds of the Group's employees) and, if it has been reduced to
a tangible medium, irrespective of the form or medium in which the information
is embodied.
7.2. Assignment. During the term of his employment, Executive shall
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promptly disclose in writing to Compaq any Intellectual Property, whether
originated, conceived, created, made, developed or invented in whole or in part
by him, and maintain adequate and current records thereof. Executive assigns,
transfers, and conveys to Compaq, or its designees or successors, Executive's
entire right, title and interest in any Intellectual Property that he
originates, conceives, creates, makes, develops or invents whether as sole
inventor, creator, developer or originator or as a joint inventor, creator,
developer or originator with others, whether made within or without the usual
working hours or upon the premises of the Group or elsewhere, during his
employment.
7.3. Cooperation. The parties agree that if after the Termination
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Date, Executive performs an act at Compaq's request or direction, or provides
assistance to Compaq, as described in this paragraph, then Compaq shall
compensate Executive for his time at a rate of one thousand dollars per day.
Either during or subsequent to Executive's employment, upon the request and at
the expense of Compaq, but for no consideration in addition to that due
Executive pursuant to his employment with Compaq and this Agreement, Executive
shall execute, acknowledge, and deliver to Compaq or its designee any
instruments that in the judgement of Compaq may be necessary or desirable to
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secure or maintain for the benefit of Compaq or its designee adequate patent,
copyright, and other property rights with respect to Intellectual Property
within the scope of this Agreement, including, but not limited to: (a) domestic
and foreign patent and copyright applications, (b) any other applications for
securing, protecting, or registering property rights, and (c) powers of
attorney, assignments, oaths, affirmations, supplemental oaths and sworn
statements. Executive shall also assist Compaq or its designee as required to
draft such instruments, to obtain such rights, and to enforce such rights,
provided that such assistance will not unreasonably interfere with his other
endeavors.
7.4. Enforcement. Executive acknowledges that money damages would not be
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sufficient remedy for any breach of this Article 7 by Executive, and Compaq
shall be entitled to specific performance and injunctive relief as remedies for
such breach or any threatened breach. Such remedies shall not be deemed the
exclusive remedies for a breach of this Article, but shall be in addition to all
remedies available at law or in equity to Compaq including the recovery of
damages from Executive and his agent involved in such a breach.
8. Non-Competition. Compaq shall disclose to Executive, or place Executive
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in a position to have access to, or develop, Confidential Information or
Intellectual Property of the Group; and/or shall entrust Executive with business
opportunities of the Group; and/or shall place Executive in a position to
develop business good will on behalf of the Group. Executive acknowledges that
he will require such access to successfully perform his duties on behalf of
Compaq.
8.1. Consideration. As part of the consideration for the compensation
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and benefits to be provided to Executive hereunder; to protect the
confidentiality of the Intellectual Property or Confidential Information of the
Group that will be disclosed or entrusted to Executive, the business good will
of the Group that will be developed in Executive, or the business opportunities
that the Group will disclose or entrust to Executive; and as an additional
incentive for Compaq to enter into this Agreement, Compaq and Executive agree to
the non-competition provisions of this Article 8.
8.2. Obligation. Executive agrees that during the period of
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Executive's non-competition obligations hereunder, Executive will not, directly
or indirectly for Executive or for others, in any geographic area or market
where a Group member is conducting any business as of the Termination Date or
have during the previous twelve months conducted any business:
8.2.1. engage in any business competitive with the business conducted
by any Group member;
8.2.2. render advice or services to, or otherwise assist, any other
person, association, or entity who is engaged, directly or indirectly, in
any business competitive with the business conducted by any Group member;
or
8.2.3. solicit or induce any employee of any Group member to terminate
his or her employment with the Group member, or hire or assist in the
hiring of any such employee by any person, association, or entity not
affiliated with the Group.
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These non-competition obligations shall extend for so long as Compaq employs
Executive or, if the employment terminates, for twenty-four months from the
Termination Date.
8.3. Acknowledgement of Limitations and Remuneration. Executive
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understands that the foregoing restrictions may limit his ability to engage in
certain businesses anywhere in the world during the period provided for above,
but acknowledges that Executive will receive sufficiently high remuneration and
other benefits (e.g. the right to receive a Separation Payment under paragraph
9.1) under this Agreement to justify such restriction. Executive acknowledges
that money damages would not be sufficient remedy for any breach of this Article
8 by Executive, and Compaq shall be entitled to specific performance and
injunctive relief to enforce these provisions or to remedy a breach or
threatened breach of these provisions. Such remedies shall not be deemed the
exclusive remedies for a breach of this Article, but shall be in additional to
all remedies available at law or in equity to Compaq, including, without
limitation, the recovery of damages from Executive and his agent involved in
such breach.
8.4. Modification by Court. It is expressly understood and agreed
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that Compaq and Executive consider the restrictions contained in this Article 8
to be reasonable and necessary for the purposes of preserving and protecting
Compaq's Intellectual Property and other Confidential Information, business, and
goodwill. Nevertheless, if any of the aforesaid restrictions are found by a
Court having jurisdiction to be unreasonable or overbroad as to geographic area
or time, or otherwise unenforceable, the parties intend for the restrictions set
forth herein to be modified by such Court so as to be reasonable and enforceable
and, as so modified by the Court, to be fully enforced. Compaq shall be
entitled to enforce the provisions of this Article 8 by resorting to appropriate
legal and equitable action.
9. Termination of Employment.
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9.1. Separation Payment. Subject to Executive's execution of a
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Release, Executive shall be entitled to a Separation Payment in the event that
his employment with Compaq is terminated due to any one or more of the following
events:
9.1.1. Compaq terminates Executive's employment without cause;
9.1.2. Executive resigns his employment and all positions of
responsibility with the Group within ninety days after he is removed as
President or Chief Executive Officer or is assigned duties inconsistent in
a material respect with his position as Chief Executive Officer;
9.1.3. Executive resigns his employment within ninety days after
Compaq notifies Executive in writing that the Board of Directors has
decided to establish Executive's annual base salary at an amount less than
75% of his highest annual base salary from Compaq in effect at any time
under this Agreement unless such reduction occurs as part of a general
reduction in base salary applicable to all of Compaq's executive officers;
or
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9.1.4. Executive resigns his employment within ninety days of
receiving notice from Compaq of its intent to terminate this Agreement
pursuant to Article 3.
9.1.5. Executive terminates his employment under circumstances in
clauses 9.1.1. through 9.1.4., inclusive, and such termination occurs
within ninety days after a Change in Control. In the event Executive
resigns under this section 9.1.5., then, subject to paragraph 9.3., the
Separation Payment shall be equal to three times Executive's Base
Compensation.
9.2. No Separation Payment. Executive shall not be entitled to a
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Separation Payment in the event his employment with Compaq is terminated due to
any of the following events:
9.2.1. Executive dies during the term of this Agreement;
9.2.2. Executive resigns his employment at any time for any reason
other than as specifically set forth in paragraph 9.1;
9.2.3. Executive resigns his employment after he becomes Disabled or
his employment is terminated after he becomes Disabled;
9.2.4. Compaq terminates Executive's employment for Cause; or
9.2.5. Executive's employment terminates for any reason after the term
of this Agreement has expired.
Upon termination of Executive's employment for Cause under this Agreement,
Executive shall be entitled to receive the monthly installment of his annual
salary being paid at the time of such termination and any other reimbursement or
allowance required under this Agreement through the Termination Date.
Thereupon, this Agreement shall terminate and Executive shall have no further
rights under or be entitled to any other benefits of this Agreement, provided
that (a) the provisions of Articles 6, 7, 8, and 11 through 18 shall survive
such termination and (b) Executive's rights, claims, or causes of action, if
any, under (i) stock options granted by Compaq, (ii) any Compaq retirement
benefits accrued to Executive, and (iii) any other benefit program for which
Executive is eligible, shall survive such termination.
9.3. Release of Claims. Executive agrees that his right to receive a
-------------------
Separation Payment is subject to his execution of a Release of Claims within 30
days after the Termination Date.
12
9.4. Payment Schedule.
-----------------
9.4.1. Initial and Installment Payments. Within ten business days
----------------------------------
after Compaq's receipt of Executive's executed Release, Compaq shall
deliver to Executive a cashier's check or wire transfer in an amount equal
to 25% of the Separation Payment. Compaq shall pay Executive the remaining
75% of the Separation Payment in equal installments, without interest,
commencing on Compaq's second regularly scheduled payday after receipt of
Executive's signed Release and ending twenty-four months later (the
"Separation Pay Period"). The Separation Payment shall be subject to such
deductions and other withholding as are required by law. Except as
otherwise set forth in this Agreement, the Separation Payment shall be in
addition to and shall not be offset or reduced by (a) any other amounts
that have accrued or have otherwise become payable to Executive or his
beneficiaries, but have not been paid by Compaq at the time such Separation
Payment becomes payable pursuant to this section and (b) any
indemnification payments that may have accrued but have not been paid or
that may thereafter become payable to Executive pursuant to the provisions
of Compaq's Certificate of Incorporation, as amended, By-laws, or similar
policy, plan or agreement relating to the indemnification of directors or
officers of Compaq under certain circumstances.
9.4.2. Termination of Payments. Executive agrees that his right to
------------------------
continued payment of the Separation Payment installments during the
Separation Pay Period is contingent upon his compliance with all of the
terms and conditions of this Agreement. Executive agrees that, without
prejudice to other rights Compaq may have, Compaq shall have the right to
discontinue, and Executive shall forfeit all rights to, payment of the
remaining Separation Payment installments if Executive breaches any
provision, duty, or obligation Executive has under this Agreement. The
parties agree that Compaq shall exercise its rights under this paragraph by
delivering a written notice to Executive setting out the circumstances of
Executive's breach.
9.5. Stock Options.
--------------
9.5.1. Vesting Period. In the event that Executive becomes entitled to
--------------
a Separation Payment under any section of paragraph 9.1., except for
section 9.1.5., Executive shall, for the duration of the Separation Pay
Period, continue vesting in any unvested stock options Compaq granted him
prior to the Termination Date as if Executive had continued in employment
during such period. Executive's vesting under this section shall cease if
Compaq terminates payment of the Separation Payment installments under
paragraph 9.4.2.
9.5.2. Exercise Period. In the event that Executive becomes entitled
---------------
to a Separation Payment under any section of paragraph 9.1., except for
section 9.1.5., the period during which Executive shall have the right to
exercise vested stock options granted under any stock option agreement
between Compaq and Executive shall be extended to the earlier of (a) the
expiration of the term of the option, or (b) the twelve-month anniversary
of the payment of the final Separation Payment installment. If Compaq
terminates payment of the Separation Payment installments under paragraph
9.4.2., then the exercise period shall end on the earlier of (a) the
expiration of the term of the option, or (b) the twelve-month anniversary
of the date of the written notice provided for in paragraph 9.4.2.
13
9.6. Restricted Stock Vesting. In the event that Executive becomes
--------------------------
entitled to a Separation Payment under any paragraph of paragraph 9.1., except
for section 9.1.5., then Compaq shall vest Executive in the Restricted Stock as
provided in this paragraph. Vesting under this paragraph shall be effective one
hundred eighty calendar days after the Termination Date, provided Executive has
remained in compliance with his obligations under this Agreement during that
period. If Executive becomes entitled to vesting under this paragraph, then
Compaq shall vest Executive in the number of shares of the Restricted Stock
determined by the formula [(N/60 x 200,000) - Y] where N equals the number of
whole calendar months in the period from the Effective Date to the end of the
calendar year in which the Termination Date occurs (maximum of 60) and Y equals
the number of shares of the Restricted Stock that have vested under section
5.4.2. of this Agreement as of the Termination Date. The 200,000 in the formula
above shall be adjusted to the same extent that the original number of shares of
Restricted Stock is adjusted pursuant to Section 4 (d) of the Plan due to a
stock dividend, subdivision, or combination of shares or reclassification.
9.7. Loan to Purchase Shares. In the event that Executive becomes
-------------------------
entitled to a Separation Payment under any paragraph of paragraph 9.1, or in the
event of termination of Executive's employment with Compaq under section 9.2.1
or 9.2.3, Executive may satisfy the entire outstanding balance, including
accrued and unpaid interest, of the loan described in paragraph 5.5 by
transferring to Compaq the shares which secure the loan. Except in the instance
of termination under section 9.2.1 or 9.2.3, Executive's right to satisfy the
loan in the manner described in this section shall immediately cease if Compaq
terminates payment of the Separation Payment installments under paragraph 9.4.2.
9.8. Supplemental Payment. On the ninety-day anniversary of Compaq's
---------------------
receipt of Executive's executed Release, and provided Executive is not then in
breach of his obligations and duties under this Agreement, Compaq shall pay
Executive a supplemental payment equal to one hundred thousand dollars
($100,000.00) (the "Supplemental Payment"). The Supplemental Payment shall be
subject to such deductions and other withholdings as are required by law. The
Supplemental Payment shall be in lieu of any Compaq payment to Executive for tax
preparation services, financial counseling, security system monitoring,
accounting or legal fees necessitated by the termination of Executive's
employment, secretarial services, outplacement services, and any other similar
purposes.
14
9.9. Health Benefit Continuation. If Executive becomes entitled to a
---------------------------
Separation Payment, Executive shall have the opportunity to continue his health
care benefits, and those of his eligible dependents, in accordance with COBRA.
The parties agree that during the six calendar months following the month in
which the Termination Date occurs, Compaq shall make any necessary payments or
adjustments such that Executive shall have the opportunity to continue these
health care benefits at the employee premium rate. After this six-month period,
Executive shall have the opportunity to continue such coverage at the COBRA
premium rate.
10. Gross-up for Excise Tax. Compaq, at its sole expense, shall cause its
-------------------------
independent auditors promptly to review all payments, distributions and benefits
that have been made to or provided to, and are to be made to or provided to,
Executive under this Agreement, and any other agreement and plan benefiting
Executive, to determine the applicability of Section 4999 of the Code. If such
auditors determine that any such payments, distributions or benefits are subject
to excise taxes as provided under Section 4999 of the Code, then such payment,
distributions, or benefits (the "Original Payment(s)") shall be increased by an
amount (the "Gross-up Amount") such that, after the Company withholds all taxes
due, including any excise and employment taxes imposed on the Gross-up Amount,
Executive will retain a net amount equal to the Original Payment(s) less income
and employment taxes, if any, imposed on the Original Payment(s). To facilitate
the calculation of the applicable excise tax, Executive agrees to provide
Compaq's auditors with copies of Executive's Forms W-2 for the tax years they
deem necessary for their use in determining the application of Section 4999 and
calculating any amounts payable under this Article. Compaq's auditors will
perform the calculations in conformance with the foregoing provisions and
provide Executive with a copy of their calculation. The intent of the parties
is that Compaq shall be solely responsible for, and shall pay, any Excise Tax on
the Original Payment(s) and Gross-up Amount and any income and employment taxes
(including, without limitation, penalties and interest) imposed on any Gross-up
Amount. If no determination by Compaq's auditors is made prior to the time
Executive is required to file a tax return reflecting any portion of the
Original Payment(s), Executive will be entitled to receive a Gross-up Amount
calculated on the basis of the Original Payment(s) Executive reports in such tax
return, within 30 days of the filing of such tax return. Executive agrees that,
for the purposes of the foregoing sentence, Executive is not required to file a
tax return until Executive has obtained the maximum number and length of filing
extensions available. If any tax authority finally determines that a greater
Excise Tax should be imposed upon the Original Payment(s) than is determined by
Compaq's independent auditors or reflected in Executive's tax returns, Executive
shall be entitled to receive the full Gross-up Amount calculated on the basis of
the additional amount of Excise Tax determined to be payable by such tax
authority (including related penalties and interest) from Compaq within 30 days
of such determination as long as Executive has taken all reasonable actions to
minimize any such amounts. If any tax authority finally determines that the
Excise Tax to be less than the amount taken into account hereunder in
calculating the Gross-up Amount, Executive shall repay to the Compaq, within 30
days of that determination, the portion of the Gross-up Amount attributable to
such reduction (plus that portion of Gross-up Amount attributable to the Excise
Tax and federal, state and local income and employment taxes imposed on the
Gross-up Amount being repaid).
15
11. Arbitration.
-----------
11.1. The parties have agreed in various provisions of this Agreement
that Compaq shall be entitled to seek specific performance and injunctive relief
("Equitable Relief") to enforce or remedy breach of certain obligations
Executive has assumed herein. The parties agree that Compaq shall exercise
these rights by seeking redress in a judicial forum possessing jurisdiction over
the parties and the subject matter.
11.2. Except for actions to obtain Equitable Relief, all claims,
demands, causes of action, disputes, controversies, and other matters arising
out of or relating to this Agreement, any provision hereof, the alleged breach
hereof, or related in any way to Executive's employment or the parties'
relationship, even though some or all of such claims allegedly are
extra-contractual in nature, whether such claims sound in contract, tort, or
otherwise, at law or in equity, under state or federal law, whether provided by
statute or common law, for damages or any other relief ("Arbitrable Claims"),
shall be resolved by final and binding arbitration in Houston, Texas, under the
Federal Arbitration Act in accordance with the Employment Dispute Resolution
Rules then in effect with the American Arbitration Association. This paragraph
shall apply both during and after termination of the parties' relationship.
Either party shall have the right to enforce this agreement to arbitrate in
either federal or state court.
11.3. All proceedings and documents prepared in connection with
any Arbitrable Claim shall be Confidential Information and, unless otherwise
required by law, the contents or subject matter thereof shall not be disclosed
to any person other than the parties to the proceedings, their counsel,
witnesses and experts, the arbitrator, and, if court enforcement of an
arbitration award is sought, the court and court staff hearing such matter.
11.4. If any party to this Agreement institutes a proceeding to enforce
this agreement to arbitration, or institutes arbitration to enforce the terms of
this Agreement, the party who prevails in such proceeding or arbitration,
whether plaintiff or defendant, in addition to the remedy or relief obtained in
such proceeding or arbitration shall be entitled to recover the reasonable
expenses such prevailing party incurred in connection with such proceeding or
arbitration, including, without limitation, attorneys fees and arbitrators fees.
12. Notices. For purposes of this Agreement, notices and all other
-------
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
12.1. Compaq.
------
Corporate Secretary
Compaq Computer Corporation
00000 XX 000
Xxxxxxx, XX 00000-0000
16
12.2. Executive.
---------
Xxxxxxx X. Xxxxxxxx
0000 Xxxxxxx Xxxxx
Xxxx, XX 00000
Either Compaq or Executive may furnish a change of address to the other in
writing except that notices of changes of address shall be effective only upon
receipt.
13. Controlling Law. Except where otherwise provided for herein, this
----------------
Agreement shall be governed in all respects by the laws of the State of Texas,
excluding any conflict-of-law rule or principle that might refer the
construction of the Agreement to the laws of another State or country.
14. Separability and Construction. It is the desire and intent of the
-------------------------------
parties that the terms, provisions, covenants, and remedies contained in this
Agreement shall be enforceable to the fullest extent permitted by law. If any
such term, provision, or covenant of this Agreement or the application thereof
to any person, association, or entity or circumstances shall, to any extent, be
construed by an arbitrator or a court to be invalid or unenforceable in whole or
in part, then such term, provision, or covenant shall be construed in a manner
so as to permit its enforceability under the applicable law to the fullest
extent permitted by law. If an arbitrator or a court shall declare void or
unenforceable any remedy provided in any part of this Agreement, then the
arbitrator or court shall award, instead of the invalid remedy, such damages or
other remedy as would ordinarily be available at law or equity. In any case, the
remaining provisions of this Agreement or the application thereof to any person,
association, or entity or circumstances, other than those to which they have
been held invalid or unenforceable, shall remain in full force and effect.
15. Waiver of Breach. No failure by either party hereto at any time to give
----------------
notice of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same time or at any prior or
subsequent time.
16. Entire Agreement. Except as provided in written Compaq policies dealing
----------------
with issues such as securities trading, business ethics, governmental affairs
and political contributions, delegation of authority, compliance with law,
conflicts of interest, and the like, this Agreement, as amended from time to
time, shall constitute the entire understanding relating to the services to be
performed by Executive for the Group, and, except as to any agreements as to
indemnification, any previous employment or other agreements, whether written or
oral, between Compaq and Executive shall be deemed to be revoked and canceled
for all purposes as of the Effective Date.
17. Modification in Writing. No addition to, or modification of, this
-------------------------
Agreement shall be effective, unless it is in writing and signed by both
parties.
17
18. Paragraph Headings. The headings in this Agreement are for convenience
-------------------
of reference and shall not be used in the interpretation or construction of this
Agreement.
19. Assumption of Obligations. Compaq agrees that it shall not enter into
---------------------------
any merger, reorganization, sale of substantially all its assets or other
similar agreement or transaction without specifically providing that any
successor entity shall assume the obligations of Compaq hereunder. Executive
agrees that Compaq may assign its rights hereunder to such successor entity
provided that such assignment shall not offset, reduce, or diminish any rights
that shall accrue to Executive as a result of any Change in Control that may
thereby occur. Except as set forth in this Article 19, neither Compaq nor
Executive shall assign their rights under this Agreement without the written
consent of the other party.
20. Execution. The parties may execute this Agreement in multiple
---------
counterparts, each of which shall be deemed an original and all of which shall
constitute one instrument. Executive agrees that he has read this Agreement,
had the opportunity to consult with an attorney of his choice, and understands
that signing this Agreement is a condition of employment. Executive
acknowledges that this Agreement contains a liquidated damages provision and an
arbitration provision.
18
IN WITNESS WHEREOF, executed this 30 day of July 1999 and effective as of the
Effective Date.
COMPAQ COMPUTER CORPORATION EXECUTIVE
By: /s/ Xxxxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxxxx
-------------------------- -----------------------
Xxxxx X. Xxxxxx Xxxxxxx X. Xxxxxxxx
Chairman, Human Resources
Committee
19
Exhibit A to Employment Agreement between Compaq Computer Corporation and
Xxxxxxx X. Xxxxxxxx
Release of Claims
I acknowledge that I have had twenty-one days to decide whether to execute this
Release of Claims (" Release") and that I have been advised in writing to
consult an attorney before executing this Release. I acknowledge that I have
seven days from the date I execute this Release to revoke my signature. I
understand that if I choose to revoke this Release I must deliver my written
revocation to Compaq before the end of the seven-day period.
Excepts as to rights provided me in the Employment Agreement, I, FOR
MYSELF, MY HEIRS, SUCCESSORS, AND ASSIGNS DO HEREBY SETTLE, WAIVE, AND RELEASE
COMPAQ COMPUTER CORPORATION ("COMPAQ") AND ANY OF ITS PAST AND PRESENT OFFICERS,
OWNERS, STOCKHOLDERS, PARTNERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS,
PREDECESSORS, ASSIGNS, REPRESENTATIVES, ATTORNEYS, DIVISIONS, SUBSIDIARIES, OR
AFFILIATES FROM ANY AND ALL CLAIMS, CHARGES, COMPLAINTS, RIGHTS, DEMANDS,
ACTIONS, AND CAUSES OF ACTION OF ANY KIND OR CHARACTER, IN CONTRACT, TORT, OR
OTHERWISE, BASED ON ACTIONS OR OMISSIONS OCCURRING IN THE PAST AND/OR PRESENT,
AND REGARDLESS OF WHETHER KNOWN OR UNKNOWN TO ME AT THIS TIME, INCLUDING THOSE
NOT SPECIFICALLY MENTIONED IN THIS RELEASE. AMONG THE RIGHTS, CLAIMS, AND
CAUSES OF ACTION WHICH I GIVE UP UNDER THIS RELEASE ARE THOSE ARISING IN
CONNECTION WITH MY EMPLOYMENT AND THE TERMINATION OF MY EMPLOYMENT, INCLUDING
RIGHTS OR CLAIMS UNDER FEDERAL, STATE AND LOCAL FAIR EMPLOYMENT PRACTICE OR
DISCRIMINATION LAWS (INCLUDING THE VARIOUS CIVIL RIGHTS ACTS, THE AGE
DISCRIMINATION IN EMPLOYMENT ACT, THE EQUAL PAY ACT, AND THE TEXAS COMMISSION ON
HUMAN RIGHTS ACT), LAWS PERTAINING TO BREACH OF EMPLOYMENT CONTRACT, WRONGFUL
TERMINATION OR OTHER WRONGFUL TREATMENT, AND ANY OTHER LAWS OR RIGHTS RELATING
TO MY EMPLOYMENT WITH COMPAQ AND THE TERMINATION OF THAT EMPLOYMENT. I
ACKNOWLEDGE THAT I AM AWARE OF MY RIGHTS UNDER THE AGE DISCRIMINATION IN
EMPLOYMENT ACT, AND THAT I AM KNOWINGLY AND VOLUNTARILY WAIVING AND RELEASING
ANY CLAIM OF AGE DISCRIMINATION WHICH I MAY HAVE UNDER THAT STATUTE AS PART OF
THIS RELEASE. THIS AGREEMENT DOES NOT WAIVE OR RELEASE ANY RIGHTS, CLAIMS, OR
CAUSES OF ACTION THAT MAY ARISE FROM ACTS OR OMISSIONS OCCURRING AFTER THE DATE
I EXECUTE THIS RELEASE. I AGREE NOT TO BRING OR JOIN ANY LAWSUIT OR FILE ANY
CLAIM AGAINST COMPAQ IN ANY COURT RELATING TO MY EMPLOYMENT OR THE TERMINATION
OF MY EMPLOYMENT.
_________________________ Date: ________________________
Xxxxxxx X. Xxxxxxxx
