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EXHIBIT 10.56
CHIEF EXECUTIVE OFFICER
RETENTION AGREEMENT
This Chief Executive Officer Retention Agreement (the "Agreement") is
made and entered into as of May 29, 1998 (the "Effective Date"), by and between
Maxtor Corporation, a Delaware corporation (the "Company") and Xxxxxxx Xxxxxx
("Executive").
RECITALS
The Company recognizes that the possibility of a change of control or
other event which may change the nature and structure of the Company and that
uncertainty regarding the consequences of such events may adversely affect the
Company's ability to retain its key employees. The Company also recognizes that
the Executive possesses an intimate and essential knowledge of the Company upon
which the Company may need to draw for objective advice and continued services
in connection with any acquisition of the Company or other change of control
that is potentially advantageous to the Company's stockholders. The Company
believes that the existence of this Agreement will serve as an incentive to
Executive to remain in the employ of the Company and will enhance its ability to
call on and rely upon the Executive in connection with a change of control.
The Company and the Executive desire to enter into this Agreement in
order to provide additional compensation and benefits to the Executive and to
encourage Executive to continue to devote his full attention and dedication to
the Company and to continue his employment with the Company.
1. Definitions. As used in this Agreement, unless the context requires a
different meaning, the following terms shall have the meanings set forth herein:
(a) "Cause" means:
(i) theft, a material act of dishonesty, fraud, the
intentional falsification of any employment or Company records or the commission
of any criminal act which impairs Executive's ability to perform his/her duties
under this Agreement;
(ii) improper disclosure of the Company's confidential,
business or proprietary information by Executive; or
(iii) the Executive's conviction (including any plea of
guilty or nolo contendere) for a felony causing material harm to the reputation
and standing of the Company, as determined by the Company in good faith.
(b) "Change of Control" means:
(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 a trustee or other fiduciary holding securities of the
Company under an employee benefit plan of the Company, or HEA, becomes the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of securities of the Company representing 50% or
more
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of (A) the outstanding shares of common stock of the Company or (B) the combined
voting power of the Company's then-outstanding securities;
(ii) the Company is party to a merger or consolidation
which results in the holders of voting securities of the Company outstanding
immediately prior thereto failing to continue to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 50% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation;
(iii) There occurs a change in the Board of Directors of
the Company within a two-year period, as a result of which fewer than a majority
of the Directors are Incumbent Directors. For purposes of this Agreement, an
Incumbent Director is any director who is either:
(A) a director of the Company as of the Effective
Date of this Agreement; or
(B) a director who is elected or nominated for
election to the Board of Directors of the Company with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to the
election of directors to the Company).
(C) changes in the composition of the Board resulting
from a reduction in the percentage of the Company's outstanding stock owned by
HEA which occur pursuant to a written agreement between HEA and the Company
shall not be deemed a change in the Incumbent Directors for purposes of this
subparagraph 1(b)(iii).
(iv) The sale or disposition of all or substantially all
of the Company's assets (or any transaction having similar effect is
consummated);
(v) The dissolution or liquidation of the Company; or
(vi) The sale or disposition by HEA of shares of the
Company representing at least 50% of the number of shares owned by HEA at the
time of such sale, and at least 10% of the Company's then outstanding stock to a
manufacturer of hard disk drives.
Notwithstanding any other provision herein to the contrary, for purposes of this
Agreement no Change of Control shall be deemed to have occurred as a result of
any ownership change which may occur as a result of an underwritten public
offering of the Company's stock.
(c) "Good Reason" means the occurrence of any of the following
conditions, without Executive's written consent, which condition(s) remain(s) in
effect 20 days after written notice to the Board from Executive of such
condition(s):
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(i) a material decrease in Executive's Total Annual
Earnings or employee benefits following a Change of Control;
(ii) a demotion, a material reduction in Executive's
position, responsibilities or duties or a material, adverse change in
Executive's substantive functional responsibilities or duties, and such a
material adverse change shall be deemed to occur if Executive no longer serves
as the Chief Executive Officer reporting to the Board of Directors. In the event
the Company completes an underwritten public offering of Company stock, then
such a material adverse change shall be deemed to occur if Executive no longer
serves as the Chief Executive Officer of a public company reporting to the Board
of Directors;
(iii) the relocation of Executive's work place for the
Company to a location more than one hundred (100) miles from the location of
Executive's work place following a Change of Control; or
(iv) any material breach of this Agreement by the Company.
(d) "Effective Date" means the day and year first set forth
above.
(e) "HEA" means Hyundai Electronics America, and any parent,
subsidiary or affiliate thereof or successor thereto.
(f) "Permanent Disability" means that:
(i) the Employee has been incapacitated by bodily injury
or disease so as to be prevented thereby from engaging in the performance of the
Employee's duties;
(ii) such total incapacity shall have continued for a
period of six consecutive months; and
(iii) such incapacity will, in the opinion of a qualified
physician, be permanent and continuous during the remainder of the Employee's
life.
(g) "Termination Upon Change of Control" means:
(i) any termination of the employment of the Executive by
the Company without Cause within thirty (30) days before or within twelve (12)
months after the date of the Company's first public announcement that the
Company has entered into a definitive agreement that would result in a Change of
Control (even though still subject to approval by the Company's stockholders and
other conditions and contingencies); or
(ii) any resignation by the Executive for Good Reason
within twelve (12) months after the occurrence of any Change of Control.
"Termination Upon Change of Control" shall not include any termination
of the employment of the Executive (a) by the Company for Cause; (b) by the
Company as a result of the Permanent Disability of the Executive; (c) as a
result of the death of the Executive; or (d) as a
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result of the voluntary termination of employment by the Executive for reasons
other than Good Reason.
(g) "Total Annual Earnings" means the sum of the Executive's
annual salary and targeted annual incentive bonus.
2. Position and Duties. Executive shall continue to be an at-will
employee of the Company employed in his current position at his then current
salary rate. Executive shall also be entitled to continue to participate in and
to receive benefits on the same basis as other executive or senior staff members
under any of the Company's employee benefit plans as in effect from time to
time. In addition, Executive shall be entitled to the benefits afforded to other
employees similarly situated under the Company's vacation, holiday and business
expense reimbursement policies. Executive agrees to devote his full business
time, energy and skill to his duties at the Company. These duties shall include,
but not be limited to, any duties consistent with his/her position which may be
assigned to Executive from time to time.
3. Termination Upon Change of Control.
(a) Severance Benefits. In the event of the Executive's
Termination Upon Change of Control, Executive shall be entitled to the following
separation benefits:
(i) all salary, accrued but unused vacation earned through
the date of Executive's termination and Executive's target bonus for the year in
which termination occurs, prorated through the date of Executive's termination;
(ii) twenty four (24) months of Executive's Total Annual
Earnings as in effect as of the date of such termination, all less applicable
withholding, paid in a lump sum within thirty (30) days of termination of
employment;
(iii) all stock options and restricted stock granted by
the Company to the Executive prior to the Change of Control shall become fully
vested and immediately exercisable in full to the extent such stock options and
restricted stock remain outstanding and unvested and/or unexercised at the time
of such Termination Upon Change of Control. All stock options and restricted
stock granted by the Company to the Executive prior to the Change of Control
shall also become fully vested and, in the case of stock options, immediately
exercisable in full if the acquiring company does not assume the stock options
or restricted stock or does not substitute equivalent stock options or
restricted stock upon a Change of Control;
(iv) within fourteen (14) days of submission of proper
expense reports by the Executive, the Company shall reimburse the Executive for
all expenses reasonably and necessarily incurred by the Executive in connection
with the business of the Company prior to his/her termination of employment;
(v) if Executive elects continued medical insurance
coverage in accordance with the applicable provisions of federal law (commonly
referred to as "COBRA"), the Company shall pay Executive's COBRA premiums for
the duration of such COBRA coverage, or twenty-four (24) months, whichever is
less; If Executive's medical coverage immediately prior to the date of
termination included the Executive's dependents , the company paid COBRA
premiums shall include such dependents. Notwithstanding the above, in the event
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Executive becomes covered under another employer's group health plan (other than
a plan which imposes a preexisting condition exclusion unless the preexisting
condition exclusion does not apply) during the period provided for herein, the
Company shall cease payment of the COBRA premiums; and
(vi) Executive shall receive the benefits, if any, under
the Company's 401(k) Plan and other Company benefit plans to which he may be
entitled pursuant to the terms of such plans.
4. Payment of Taxes. All payments made to Executive under this Agreement
shall be subject to all applicable federal and state income, employment and
payroll taxes.
5. Parachute Payment. If due to the benefits provided under this
Agreement, Executive is subject to any excise tax due to characterization of any
amounts payable hereunder as excess parachute payments pursuant to Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"), the Company
agrees to offer the Executive the option of (i) receiving the full parachute
payment subject to the excise tax, or (ii) receiving a reduced parachute payment
that would not be subject to the excise tax (which in some circumstances may
maximize the net benefit to Executive). Unless the Company and Executive
otherwise agree in writing, any calculation required under this Section 5 shall
be made in writing by independent public accountants agreed to by the Company
and Executive (the "Accountants"), whose calculation shall be conclusive and
binding upon Executive and the Company for all purposes. For purposes of
calculating the Executive's options under this Section 5, the Accountants may
rely on reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code. The Company and Executive shall furnish to
the Accountants such information and documents as the Accountants may reasonably
request in order to make a determination under this Section 5. The Company shall
bear all costs the Accountants may reasonably incur in connection with any
calculations contemplated by this Section 5.
6. Exclusive Remedy. The payments and benefits provided for in Section 3
shall constitute the Executive's sole and exclusive remedy for any alleged
injury or other damages arising out of the cessation of the employment
relationship between the Executive and the Company in connection with a Change
of Control. To the extent Executive is entitled to severance or other benefits
upon termination of employment under this Agreement and any other agreement, the
benefits payable under this Agreement shall be reduced by the amounts paid to
Executive under any other such agreement.
7. Proprietary and Confidential Information. The Executive agrees to
continue to abide by the terms and conditions of any Company's confidentiality
and/or proprietary rights agreement between the Executive and the Company.
8. Arbitration. Any claim, dispute or controversy arising out of this
Agreement, the interpretation, validity or enforceability of this Agreement or
the alleged breach thereof shall be submitted by the parties to binding
arbitration by the American Arbitration Association in Santa Xxxxx County,
California or elsewhere by mutual agreement. The selection of the arbitrator and
the arbitration procedure shall be governed by the Commercial Arbitration Rules
of the American Arbitration Association. All costs and expenses of arbitration
or litigation, including
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but not limited to attorneys fees and other costs reasonably incurred by the
Executive, shall be paid by the Company. Judgment may be entered on the award of
the arbitration in any court having jurisdiction.
9. Interpretation. Executive and the Company agree that this Agreement
shall be interpreted in accordance with and governed by the laws of the State of
California, without regard to such state's conflict of laws rules.
10. Conflict in Benefits. This Agreement shall supersede all prior
arrangements, whether written or oral, and understandings regarding the subject
matter of this Agreement. To the extent Executive is entitled to severance or
other benefits upon termination of employment under this Agreement and any other
agreement, the benefits payable under this Agreement shall be reduced by the
amounts paid to Executive under any other such agreement. However, this
Agreement is not intended to and shall not affect, limit or terminate (i) any
plans, programs, or arrangements of the Company that are regularly made
available to a significant number of employees of the Company, (ii) the
Company's 1998 Restricted Stock Plan, (iii)any agreement or arrangement with the
Executive that has been reduced to writing and which does not relate to the
subject matter hereof, or (iv) any agreements or arrangements hereafter entered
into by the parties in writing, except as otherwise expressly provided herein.
11. Release of Claims. No severance benefits shall be paid to Executive
under this Agreement unless and until the Executive shall, in consideration of
the payment of such severance benefit, execute a release of claims in a form
reasonably satisfactory to the Company; provided, however, that such release
shall not apply to any right of Executive may have to be indemnified by the
Company.
12. Successors and Assigns.
(a) Successors of the Company. The Company will require any
successor or assign (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company, expressly, absolutely and unconditionally to assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession or assignment
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession transaction shall be a breach of this
Agreement and shall entitle the Executive to terminate his or her employment
with the Company within three months thereafter and to receive the benefits
provided under Section 3 of this Agreement in the event of Termination Upon
Change of Control. As used in this Agreement, "Company" shall mean the Company
as defined above and any successor or assign to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this Section
12 or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.
(b) Heirs of Executive. This Agreement shall inure to the benefit
of and be enforceable by the Executive's personal and legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees.
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13. Notices. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows:
if to the Company: Maxtor Corporation
000 Xxxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn: General Counsel
and if to the Executive at the address specified at the end of this Agreement.
Notice may also be given at such other address as either party may have
furnished to the other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
15. Validity. If any one or more of the provisions (or any part thereof)
of this Agreement shall be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
(or any part thereof) shall not in any way be affected or impaired thereby.
16. Modification. This Agreement may only be modified or amended by a
supplemental written agreement signed by Executive and the Company.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year written below.
MAXTOR CORPORATION
5/29/98 /s/ AUTHORIZED SIGNATURE
Date:________________________ By:__________________________________________
/s/ Authorized Officer
Title:_______________________________________
EXECUTIVE: Xxxxxxx X. Xxxxxx
5/29/98 /s/ XXXXXXX X. XXXXXX
Date:________________________ _____________________________________________
Executive's Signature
Address for Notice:
___________________________
___________________________
___________________________
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