Exhibit 10.17
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), dated as of May 27, 1996, is
between CompUSA Inc., a Delaware corporation, and ____________________
("Employee").
R E C I T A L S:
A. Employee has been employed by Employer, and Employer and Employee
desire to enter into a written agreement to specify the terms and conditions of
Employee's continued employment with Employer.
B. Employer considers the maintenance of a sound management team,
including Employee, essential to protecting and enhancing its best interests and
those of its stockholders.
C. Employer recognizes that the possibility of a change in control of
Employer may result in the departure or distraction of management to the
detriment of Employer and its stockholders.
D. Employee is a vice president of Employer and an integral member of its
management team.
E. Employer has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of selected
members of Employer's management team to their assigned duties without the
distraction arising from the possibility of a change in control of Employer.
NOW, THEREFORE, in consideration of Employee's future employment with
Employer and other good and valuable consideration, the parties agree as
follows:
SECTION 1. Employment. Employer hereby employs Employee, and Employee
hereby accepts employment, upon the terms and subject to the conditions
hereinafter set forth.
SECTION 2. Duties. Employee shall be employed as Vice President -
____________ of Employer, or such other position to which he may be appointed by
the Board of Directors. Employee agrees to devote his full time and best
efforts to the performance of the duties attendant to his executive position
with Employer.
SECTION 3. Term. The term of employment of Employee hereunder shall
commence on the date of this Agreement (the "Commencement Date") and continue
until May 1, 1998, unless earlier terminated pursuant to Section 6 or Section
10.
SECTION 4. Compensation and Benefits. In consideration for the services
of Employee hereunder, Employer shall compensate Employee as follows:
(a) Base Salary. Until the termination of Employee's employment
hereunder, Employer shall pay Employee, semi-monthly in arrears, a base salary
at an annual rate of $ ______ (the "Base Salary"). The Base Salary may not be
decreased at any time during the term of Employee's employment hereunder and
shall be reviewed by Employer each October. Any increase in the Base Salary
shall be in the sole discretion of the Compensation Committee of the Board of
Directors of the Company.
(b) Management Incentive Bonus. Employee shall be eligible to receive
from Employer such annual management incentive bonuses as may be provided in
management incentive bonus plans adopted from time to time by Employer.
(c) Vacation. Employee shall be entitled to _____ hours of paid vacation
per year at the reasonable and mutual convenience of Employer and Employee.
Unless otherwise approved by the Compensation Committee of the Board of
Directors of the Company, accrued vacation not taken in any calendar year shall
not be carried forward or used in any subsequent calendar year.
(d) Insurance Benefits. Employer shall provide accident, health, dental,
disability and life insurance for Employee under the group accident, health,
dental, disability and life insurance plans maintained by Employer for its full-
time, salaried employees.
(e) Car Allowance. As a condition of Employee's employment, Employee
shall from time to time be required to travel by automobile on Employer's
business. Accordingly, during the term of Employee's employment hereunder,
Employer shall provide Employee with a monthly car allowance of $600, payable in
equal semi-monthly installments, to cover Employee's costs of obtaining,
maintaining and insuring a suitable automobile.
SECTION 5. Expenses. The parties anticipate that in connection with the
services to be performed by Employee pursuant to the terms of this Agreement,
Employee will be required to make payments for travel, entertainment of business
associates and similar expenses. Employer shall reimburse Employee for all
reasonable expenses of types authorized by Employer and incurred by Employee in
the performance of his duties hereunder. Employee shall comply with such budget
limitations and approval and reporting requirements with respect to expenses as
Employer may establish from time to time.
SECTION 6. Termination.
(a) General. Employee's employment hereunder shall commence on the
Commencement Date and continue until the end of the term specified in Section 3,
except that the employment of Employee hereunder shall terminate prior to such
time in accordance with the following:
(i) Death or Disability. Upon the death of Employee during the term
of his employment hereunder or, at the option of Employer, in the event of
Employee's Disability, upon 30 days' notice to Employee.
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(ii) For Cause. For "Cause" immediately upon written notice by
Employer to Employee. A termination shall be for Cause if:
(1) Employee commits a criminal act involving moral turpitude;
or
(2) Employee commits a material breach of any of the covenants,
terms and provisions hereof or fails to obey written directions
delivered to Employee by the Company's Chairman of the Board,
President, Chief Executive Officer or its Board of Directors or by any
of the Company's Executive Vice Presidents or Senior Vice Presidents.
(iii) Without Cause. Without Cause upon notice by Employer to
Employee.
(b) Severance Pay and Bonuses.
(i) Termination Upon Death or Disability. Employee shall not be
entitled to any severance pay or other compensation upon termination of his
employment hereunder pursuant to Section 6(a)(i) except for the following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination;
(3) compensation for accrued, unused vacation as of the date of
termination; and
(4) any bonus to which Employee would have been entitled for
the Bonus Period if he were still employed hereunder on the last day
of the Bonus Period. Any such bonus shall be paid to Employee at the
same time bonuses are paid in respect of the Bonus Period to other
employees of Employer entitled to receive bonuses for the Bonus
Period. In the event the determination of Employee's bonus in respect
of the Bonus Period involves any subjective assessment, such
assessment shall be made in a manner most favorable to Employee. For
purposes of this Section 6(b)(i)(4), the term "Bonus Period" means the
full fiscal year or other applicable bonus period during which an
Employee's employment hereunder was terminated.
(ii) Termination Without Cause; Separation Payments. In the event
Employee's employment hereunder is terminated pursuant to Section
6(a)(iii), Employer shall pay Employee Separation Payments as Employee's
sole remedy in connection with such termination. "Separation Payments" are
payments made at the semi-monthly rate of Employee's Base Salary in effect
immediately preceding the date of termination. Separation Payments shall be
made for six months after the date of termination (the
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"Separation Payment Period") and shall be paid by Employer in equal semi-
monthly payments in arrears. Separation Payments shall be reduced by the
amount of any personal services income earned by Employee during the
Separation Payment Period. Separation Payments shall be made for the number
of months specified above without regard to the number of months remaining
in the term of this Agreement. Employer shall also pay Employee the
following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination; and
(3) compensation for accrued, unused vacation as of the date of
termination.
This Section 6(b)(ii) is subject to the provisions of Section 10(j) dealing
with the coordination of payments in the event of a Change In Control.
(iii) Termination For Cause. Employee shall not be entitled to any
severance pay or other compensation upon termination of his employment
hereunder pursuant to Section 6(a)(ii) except for the following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination; and
(3) compensation for accrued, unused vacation as of the date of
termination.
(c) Transfers of Employment. Employee's employment hereunder shall
continue until the earlier of the following:
(i) Employee's employment with all Employers terminates; or
(ii) the last Employer (other than the Company) by which Employee is
employed under this Agreement ceases to be a subsidiary or affiliate of the
Company. For purposes of Section 6(b)(ii), the termination of Employee's
employment hereunder pursuant to this Section 6(c)(ii) shall be treated as
a termination by Employer without Cause pursuant to Section 6(a)(iii).
SECTION 7. Inventions; Assignment.
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(a) Inventions Defined. All rights to discoveries, inventions,
improvements, designs and innovations (including all data and records pertaining
thereto) that relate to the business of Employer, whether or not patentable,
copyrightable or reduced to writing, that Employee may discover, invent or
originate during the term of his employment hereunder, and for a period of six
months thereafter, either alone or with others and whether or not during working
hours or by the use of the facilities of Employer ("Inventions"), shall be the
exclusive property of Employer. Employee shall promptly disclose all Inventions
to Employer, shall execute at the request of Employer any assignments or other
documents Employer may deem necessary to protect or perfect its rights therein,
and shall assist Employer, at Employer's expense, in obtaining, defending and
enforcing Employer's rights therein. Employee hereby appoints Employer as his
attorney-in-fact to execute on his behalf any assignments or other documents
deemed necessary by Employer to protect or perfect its rights to any Inventions.
(b) Covenant to Assign and Cooperate. Without limiting the generality of
the foregoing, Employee shall assign and transfer to Employer the world-wide
right, title and interest of Employee in the Inventions. Employee agrees that
Employer may apply for and receive patent rights (including Letters Patent in
the United States) for the Inventions in Employer's name in such countries as
may be determined solely by Employer. Employee shall communicate to Employer all
facts known to Employee relating to the Inventions and shall cooperate with
Employer's reasonable requests in connection with vesting title to the
Inventions and related patents exclusively in Employer and in connection with
obtaining, maintaining and protecting Employer's exclusive patent rights in the
Inventions.
(c) Successors and Assigns. Employee's obligations under this Section 7
shall inure to the benefit of Employer and its successors and assigns and shall
survive the expiration of the term of this Agreement for such time as may be
necessary to protect the proprietary rights of Employer in the Inventions.
SECTION 8. Confidential Information.
(a) Acknowledgment of Proprietary Interest. Employee acknowledges the
proprietary interest of Employer in all Confidential Information. Employee
agrees that all Confidential Information learned by Employee during his
employment with Employer or otherwise, whether developed by Employee alone or in
conjunction with others or otherwise, is and shall remain the exclusive property
of Employer. Employee further acknowledges and agrees that his disclosure of any
Confidential Information will result in irreparable injury and damage to
Employer.
(b) Confidential Information Defined. "Confidential Information" means
all confidential and proprietary information of Employer, including without
limitation (i) information derived from reports, investigations, experiments,
research and work in progress, (ii) methods of operation, (iii) market data,
(iv) proprietary computer programs and codes, (v) drawings, designs, plans and
proposals, (vi) marketing and sales programs, (vii) client lists, (viii)
historical financial information and financial projections, (ix) pricing
formulae and policies, (x) all other concepts, ideas, materials and information
prepared or performed for or by Employer and (xi) all
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information related to the business, products, purchases or sales of Employer or
any of its suppliers and customers, other than information that is publicly
available.
(c) Covenant Not To Divulge Confidential Information. Employer is
entitled to prevent the disclosure of Confidential Information. As a portion of
the consideration for the employment of Employee and for the compensation being
paid to Employee by Employer, Employee agrees at all times during the term of
his employment hereunder and thereafter to hold in strict confidence and not to
disclose or allow to be disclosed to any person, firm or corporation, other than
to persons engaged by Employer to further the business of Employer, and not to
use except in the pursuit of the business of Employer, the Confidential
Information, without the prior written consent of Employer.
(d) Return of Materials at Termination. In the event of any termination
or cessation of his employment with Employer for any reason, Employee shall
promptly deliver to Employer all documents, data and other information derived
from or otherwise pertaining to Confidential Information. Employee shall not
take or retain any documents or other information, or any reproduction or
excerpt thereof, containing or pertaining to any Confidential Information.
SECTION 9. Noncompetition.
(a) Until one year after termination of Employee's employment hereunder,
Employee shall not do any of the following:
(i) engage directly or indirectly, alone or as a shareholder,
partner, director, officer, employee of or consultant to any other business
organization, in any business activities that:
(1) relate to the wholesale, direct or retail sale of computer
hardware, software, peripherals, training or other computer related
services (the "Designated Industry"); or
(2) were either conducted by Employer prior to the termination
of Employee's employment hereunder or proposed to be conducted by
Employer at the time of such termination;
(ii) divert to any competitor of Employer in the Designated Industry
any customer of Employer; or
(iii) solicit or encourage any director, officer, employee of or
consultant to Employer to end his relationship with Employer or commence
any such relationship with any competitor of Employer in the Designated
Industry.
(b) Employee's noncompetition obligations hereunder shall not preclude
Employee from owning less than five percent of the common stock of any publicly
traded corporation
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conducting business activities in the Designated Industry. If at any time the
provisions of this Section 9 are determined to be invalid or unenforceable by
reason of being vague or unreasonable as to area, duration or scope of activity,
this Section 9 shall be considered divisible and shall be immediately amended to
only such area, duration and scope of activity as shall be determined to be
reasonable and enforceable by the court or other body having jurisdiction over
the matter, and Employee agrees that this Section 9 as so amended shall be valid
and binding as though any invalid or unenforceable provision had not been
included herein.
SECTION 10. Termination of Employment in Connection With a Change In
Control.
(a) Applicability. The provisions of this Section 10 shall apply in lieu
of all conflicting provisions in this Agreement in the event Employee's
employment hereunder is terminated in a Triggering Termination. Each of the
following events constitutes a "Triggering Termination" when Employee's
employment hereunder is:
(i) actually terminated by Employer during an Applicable Period
other than for Good Reason;
(ii) Constructively Terminated by Employer during an Applicable
Period other than for Good Reason;
(iii) terminated by Employee for any reason (other than death) in the
period commencing 180 days after the Change In Control and ending 210 days
after the Change in Control; or
(iv) terminated pursuant to Section 6(c)(ii) during an Applicable
Period.
(b) Termination Payment.
(i) Amount. Upon the occurrence of a Triggering Termination,
Employer shall pay Employee a lump sum payment in cash (the "Termination
Payment") equal to one times the sum of the following items:
(1) Employee's annual base compensation determined by reference
to his highest annual base compensation in effect at any time during
Employee's employment with Employer;
(2) two times the Target Bonus that would be payable to
Employee by Employer for the bonus period in which the Change In
Control occurred; provided that the amount determined under this
Section 10(b)(i)(2) shall not be less than 50% of the amount
determined under Section 10(b)(i)(1);
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(3) Employee's annualized car allowance determined by reference
to his highest car allowance rate in effect at any time during
Employee's employment with Employer;
(4) the amount of Employee's Base Salary accrued but unpaid as
of the date of the Triggering Termination;
(5) reimbursement under Section 5 for unpaid expenses incurred
in the performance of his duties hereunder prior to the date of the
Triggering Termination;
(6) any other benefit accrued but unpaid as of the date of the
Triggering Termination; and
(7) an amount that represents the estimated cost to Employee of
obtaining accident, health, dental, disability and life insurance
coverage for the 12 month period following the expiration of his
continuation (COBRA) rights; provided that this Section 10(b)(i)(7)
shall be applied without regard to, and the amount payable under this
Section 10(b)(i)(7) is in addition to, any continuation (COBRA) rights
or conversion rights under any plan provided by Employer, which rights
are not affected by any provision hereof.
(ii) Time for Payment; Interest. Employer shall pay the Termination
Payment to Employee concurrent with the Triggering Termination. Employer's
obligation to pay to Employee any amounts under this Section 10, including
without limitation the Termination Payment and any Gross Up Payment due
under Section 10(d), shall bear interest at the maximum rate allowed by law
until paid by Employer, and all accrued and unpaid interest shall bear
interest at the same rate, all of which interest shall be compounded daily.
(c) Change In Control. A Change In Control shall be deemed to have
occurred for purposes hereof when any Person meets the requirements for becoming
an Acquiring Person, whether or not a Distribution Date occurs or the Rights are
redeemed by Employer, as those terms are defined in the Rights Agreement between
the Company and Bank One, Texas, N.A. as Rights Agent (First Interstate Bank of
Texas, N.A. became successor Rights Agent as of November 1, 1995), dated as of
April 29, 1994 (the "Rights Agreement"); provided that a Change In Control shall
not be deemed to have occurred for purposes hereof with respect to any Person
meeting the requirements of clauses (i) and (ii) of Rule 13d-1(b)(1) promulgated
under the Securities Exchange Act of 1934, as amended.
(d) Gross Up Payment.
(i) Excess Parachute Payment. If Employee incurs the tax (the
"Excise Tax") imposed by Section 4999 of the Code on "excess parachute payments"
within the meaning
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of Section 280G(b)(1) of the Code as the result of the receipt of any
payments under this Agreement, Employer shall pay to Employee an amount
(the "Gross Up Payment") such that the net amount retained by Employee,
after deduction of (1) any Excise Tax upon any payments under this
Agreement (other than payments provided by this Section 10(d)(i)) and (2)
any federal, state and local income and employment taxes (together with
penalties and interest) and Excise Tax upon the payments provided by this
Section 10(d)(i), shall be equal to the amount of the payments that
Employee is entitled to receive under this Agreement (other than payments
provided by this Section 10(d)(i)).
(ii) Applicable Rates. For purposes of determining the amount of
the Gross Up Payment, Employee shall be deemed:
(1) to pay federal income taxes at the highest marginal rate of
federal income taxation applicable to individual taxpayers in the
calendar year in which the Gross Up Payment is made (which rate shall
be adjusted as necessary to take into account the effect of any
reduction in deductions, exemptions or credits otherwise available to
Employee had the Gross Up Payment not been received);
(2) to pay additional employment taxes as a result of the
receipt of the Gross Up Payment in an amount equal to the highest
marginal rate of employment taxes applicable to wages; provided that
if any employment tax is applied only up to a specified maximum amount
of wages, such limit shall be taken into account for purposes of such
calculation; and
(3) to pay state and local income taxes at the highest marginal
rates of taxation in the state and locality of Employee's residence on
the date of the Triggering Termination, net of the maximum reduction
in federal income taxes that could be obtained from deduction of such
state and local taxes.
(iii) Determination of Gross Up Payment Amount. The determination of
the amount of the Gross Up Payment shall be made by Ernst & Young LLP or
another nationally recognized public accounting firm selected by Employee
(in either case, the "Accountants"). If the Excise Tax amount payable by
Employee, based upon a "Determination," is different from the Excise Tax
amount computed by the Accountants for purposes of determining the Gross Up
Payment amount, then appropriate adjustments to the Gross Up Payment amount
shall be made in the manner provided in Section 10(d)(iv). For purposes of
determining the Gross Up Payment amount prior to a Determination of the
Excise Tax amount, the following assumptions shall be utilized:
(1) that portion of the Termination Payment that is
attributable to the items described in Sections 10(b)(i)(1), (2), (3)
and (7), and the Gross Up Payment, shall be treated as Parachute
Payments, without regard to whether a Change In Control satisfies the
requirements of Section 280G(b)(2)(A)(i) of the Code;
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(2) no portion of any payment made pursuant to Sections
10(b)(i)(4), (5) or (6) or Section 11(c) shall be treated as a
Parachute Payment;
(3) the amount payable to Employee pursuant to Section 10(k)
shall be:
(I) deemed to be equal to 15% of the amount determined
under Section 10(b)(i)(1);
(II) deemed to have been paid immediately following the
Change In Control;
(III) deemed to include the additional amount payable
under Section 10(k), if any, for additional taxes payable by
Employee as a result of the receipt of the payment described in
Section 10(k); and
(IV) treated 100% as a Parachute Payment;
(4) the "ascertainable fair market value" (as set forth in
Prop. Treas. Reg. (S)1.280G-1, Q&A 13) of the Options, the vesting of
which was accelerated by the Change In Control as provided in the
Incentive Plan and as further provided in Section 10(i), shall be
equal to the product of (I) and (II) as set forth below:
(I) the number of shares covered by such Options; and
(II) the difference between:
a. the fair market value per share as of the date of
the Change In Control; and
b. the exercise price per share of stock subject to
such Options; and
(5) for purposes of applying the rules set forth in Prop.
Treas. Reg. (S)1.280G-1, Q&A 24(c) to a payment described in Prop.
Treas. Reg. (S)1.280G-1, Q&A 24(b), the amount reflecting the lapse of
the obligation to continue performing services shall be equal to the
minimum amount allowed for such payment as set forth in Prop. Treas.
Reg. (S)1.280G-1, Q&A 24(c)(2) (or if Prop. Treas. Reg. (S)1.280G-1
has been superseded by temporary or final regulations, the minimum
amount provided for in any temporary or final regulations that
supersede Prop. Treas. Reg. (S)1.280G-1 and that are applicable to the
Termination Payment, Gross Up Payment, or both).
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(iv) Time For Payment. Employer shall pay the estimated Gross Up
Payment amount in cash to Employee concurrent with the payment of the
Termination Payment. Employee and Employer agree to reasonably cooperate in
the determination of the actual Gross Up Payment amount. Further, Employee
and Employer agree to make such adjustments to the estimated Gross Up
Payment amount as may be necessary to equal the actual Gross Up Payment
amount, which in the case of Employee shall refer to refunds of prior
overpayments and in the case of Employer shall refer to makeup of prior
underpayments.
(e) Term. Notwithstanding the provisions of Section 3, if a Change In
Control occurs prior to April 30, 1998, Sections 10, 11 and 12 shall continue in
effect for a period of 24 months after the date of the Change In Control.
(f) No Duty to Mitigate Damages. Employee's rights and privileges under
this Section 10 shall be considered severance pay in consideration of his past
service and his continued service to Employer from the Commencement Date, and
his entitlement thereto shall neither be governed by any duty to mitigate his
damages by seeking further employment nor offset by any compensation that he may
receive from future employment.
(g) Arbitration. Except as provided in Section 10(i) and in Section 11(d)
with respect to Section 10(l), any controversy or claim arising out of or
relating to this Section 10, or the breach thereof, shall be settled exclusively
by arbitration in Dallas, Texas, in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then in effect. Judgment upon the
award rendered by the arbitrator may be entered in, and enforced by, any court
having jurisdiction thereof.
(h) No Right To Continued Employment. This Section 10 shall not give
Employee any right of continued employment or any right to compensation or
benefits from Employer except the rights specifically stated herein.
(i) Restricted Stock and Exercise of Stock Options. Employee may hold
options ("Options") issued under the Incentive Plan that become immediately
exercisable upon a Change In Control. In addition, Employee may hold restricted
stock ("Restricted Stock") issued under the Incentive Plan pursuant to which
applicable restrictions will lapse upon a Change In Control. Employer shall take
no action to facilitate a transaction involving a Change In Control, including
without limitation redemption of the Rights issued pursuant to the Rights
Agreement, unless it has taken such action as may be necessary to ensure that
Employee has the opportunity to exercise all Options he may then hold, and
obtain certificates containing no restrictive legends in respect of any
Restricted Stock he may then hold, at a time and in a manner that shall give
Employee the opportunity to sell or exchange the securities of Employer acquired
upon exercise of his Options and upon receipt of unrestricted certificates for
shares of Common Stock in respect of his Restricted Stock, if any (collectively,
the "Acquired Securities"), at the earliest time and in the most advantageous
manner any holder of the same class of securities as the Acquired Securities is
able to sell or exchange such securities in connection with such Change In
Control.
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Employer acknowledges that its covenants in the preceding sentence (the
"Covenants") are reasonable and necessary in order to protect the legitimate
interests of Employer in maintaining Employee as one of its employees and that
any violation of the Covenants by Employer would result in irreparable injuries
to Employee, and Employer therefore acknowledges that in the event of any
violation of the Covenants by Employer or its directors, officers or employees,
or any of their respective agents, Employee shall be entitled to obtain from any
court of competent jurisdiction temporary, preliminary and permanent injunctive
relief in order to (i) obtain specific performance of the Covenants, (ii) obtain
specific performance of the exercise of his Options, delivery of certificates
containing no restrictive legends in respect of his Restricted Stock and the
sale or exchange of the Acquired Securities in the advantageous manner
contemplated above or (iii) prevent violation of the Covenants; provided that in
the event Employee fails to obtain such injunctive relief, nothing in this
Agreement shall be deemed to prejudice Employee's rights to damages for
violation of the Covenants.
(j) Coordination With Other Payments.
(i) After the termination of Employee's employment hereunder:
(1) if Employee is entitled to receive Separation Payments; and
(2) Employee subsequently becomes entitled to receive a
Termination Payment, Gross Up Payment or both, then
(ii) prior to the disbursement of the Termination Payment and Gross
Up Payment:
(1) the payment date of all unpaid Separation Payments shall be
accelerated to the payment date of the Termination Payment and such
Separation Payments shall be made (in this event, Employer waives any
requirement that Employee reduce the Separation Payments by the amount
of any income earned by Employee thereafter); and
(2) the Termination Payment shall be reduced by the amount of
the Separation Payments so accelerated and made.
(k) Outplacement Services. If Employee becomes entitled to receive a
Termination Payment under this Section 10, Employer agrees to reimburse Employee
for the amount of any outplacement consulting fees and expenses incurred by
Employee during the two year period following the Change In Control; provided
that the aggregate amount reimbursed by Employer shall not exceed 15% of the
amount determined pursuant to Section 10(b)(i)(1). In addition and as to each
reimbursement payment, to the extent that any reimbursement under this Section
10(k) is not deductible by Employee for federal, state and local income tax
purposes, Employer shall pay Employee an additional amount such that the net
amount retained by Employee, after deduction of any federal, state and local
income tax on the reimbursement and such additional
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amount, shall be equal to the reimbursement payment. All amounts under this
Section 10(k) shall be paid by Employer within 15 days after Employee's
presentation to Employer of any statements of such amounts and thereafter shall
bear interest at the maximum rate allowed by law until paid by Employer, and all
accrued and unpaid interest shall bear interest at the same rate, all of which
interest shall be compounded daily.
(l) Noncompetition.
(i) Following the occurrence of a Triggering Termination, Employee
shall not:
(1) for a period of one year following the date of the
Triggering Termination engage directly or indirectly, alone or as a
shareholder, partner, director, officer, employee of or consultant to,
any entity other than Employer that is in existence on the date of the
Triggering Termination and is at that time engaged directly, or
indirectly through any subsidiary, division or other business unit
(individually, an "Entity"), in retail or direct sales of computer
hardware, software, peripherals, training or other computer related
services to end users (the "Change In Control Designated Industry");
or
(2) for a period of one year following the date of the
Triggering Termination solicit or encourage any director, officer,
employee of or consultant to Employer to end his relationship with
Employer and commence any such relationship with any competitor of
Employer in the Change In Control Designated Industry.
(ii) Notwithstanding the foregoing, an Entity shall not be deemed to
be engaged in the Change In Control Designated Industry if retail and
direct sales of computer hardware, software, peripherals, training or other
computer related services to end users are incidental to such Entity's
business. Retail and direct sales of computer hardware, software,
peripherals, training or other computer related services shall be deemed
incidental to an Entity's business so long as:
(1) the aggregate of such sales by such Entity is 40% or less
of the total sales of such Entity for the fiscal quarter of such
Entity immediately preceding the date of the Triggering Termination or
any of the eight immediately subsequent fiscal quarters of such
Entity; and
(2) such Entity is not a member of a group of Entities under
common control that includes one or more Computer Sales Entities;
provided that the foregoing restriction shall be deemed not to have
been violated if Employee terminates his employment or other
prohibited relationship with an Entity promptly after his discovery
that the Entity first became a Computer Sales Entity (during the term
of his relationship) during the preceding fiscal quarter of such
Entity. A "Computer Sales Entity" is defined as an Entity whose retail
and direct sales of
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computer hardware, software, peripherals, training and other computer
related services to end users, in the aggregate, are more than 40% of
the total sales of such Entity, measured over any fiscal quarter.
Notwithstanding the foregoing, the following Entities shall be deemed
to be Computer Sales Entities engaged in the Change In Control
Designated Industry: Best Buy, Circuit City, Tandy Corporation (and
its subsidiaries, affiliates and divisions including Computer City),
Fry's, Micro Electronics, Inc. (d/b/a Micro Center), Elek-Tek,
Silo/Fretter and Computer Discount Warehouse, Inc.
(iii) If at any time the provisions of this Section 10(l) are
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 10(l)
shall be considered divisible and shall be immediately amended to only such
area, duration or scope of activity as shall be determined to be reasonable
and enforceable by the court or other body having jurisdiction over the
matter; and Employee agrees that this Section 10(l) as so amended shall be
valid and binding as though any invalid or unenforceable provision had not
been included herein. Notwithstanding the foregoing, Employee's
noncompetition obligations hereunder shall not preclude Employee from
owning stock with less than five percent of the voting power or economic
interest in any publicly traded corporation conducting business activities
in the Change In Control Designated Industry.
SECTION 11. General.
(a) Notices. All notices and other communications hereunder shall be in
writing or by written telecommunication, and shall be deemed to have been duly
given if delivered personally or if mailed by certified mail, return receipt
requested or by written telecommunication, to the relevant address set forth
below, or to such other address as the recipient of such notice or communication
shall have specified to the other party in accordance with this Section 11(a):
If to Employer, to: with a copy to:
CompUSA Inc. Jackson & Walker, L.L.P.
14951 North Dallas Parkway 901 Main Street, Suite 6000
Dallas, Texas 75240 Dallas, Texas 75202
Attention: Chairman of the Board Attention: Fred W. Fulton
Facsimile Number: (214) 982-4276 Facsimile Number: (214) 953-6115
If to Employee, to:
____________________
____________________
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(b) Withholding; No Offset. All payments required to be made to Employee
by Employer under this Agreement shall be subject to the withholding of such
amounts, if any, relating to federal, state and local taxes as may be required
by law. No payments under Section 10 shall be subject to offset or reduction
attributable to any amount Employee may owe to Employer or any other person.
(c) Legal and Accounting Costs. Employer shall pay all attorneys' and
accountants' fees and costs incurred by Employee as a result of any breach by
Employer of its obligations under this Agreement, including without limitation
all such costs incurred in contesting or disputing any determination made by
Employer under Section 10 or in connection with any tax audit or proceeding to
the extent attributable to the application of Section 4999 of the Code to any
payment under Section 10. Reimbursements of such costs shall be made by Employer
within 15 days after Employee's presentation to Employer of any statements of
such costs and thereafter shall bear interest at the maximum rate allowed by law
until paid by Employer, and all accrued and unpaid interest shall bear interest
at the same rate, all of which interest shall be compounded daily.
(d) Equitable Remedies. Each of the parties hereto acknowledges and
agrees that upon any breach by Employee of his obligations under any of Sections
7, 8, 9 and 10(l), Employer shall have no adequate remedy at law and accordingly
shall be entitled to specific performance and other appropriate injunctive and
equitable relief.
(e) Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable, such provision shall be fully severable, and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof, and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
(f) Waivers. No delay or omission by either party in exercising any
right, power or privilege hereunder shall impair such right, power or privilege,
nor shall any single or partial exercise of any such right, power or privilege
preclude any further exercise thereof or the exercise of any other right, power
or privilege.
(g) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
(h) Captions. The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
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(i) Reference to Agreement. Use of the words "herein," "hereof,"
"hereto," "hereunder" and the like in this Agreement refer to this Agreement
only as a whole and not to any particular section or subsection of this
Agreement, unless otherwise noted.
(j) Binding Agreement. This Agreement shall be binding upon and inure to
the benefit of the parties and shall be enforceable by the personal
representatives and heirs of Employee and the successors and assigns of
Employer. This Agreement may be assigned by the Company or any Employer to any
Employer; provided that in the event of any such assignment, the Company shall
remain liable for all of its obligations hereunder and shall be liable for all
obligations of all such assignees hereunder. If Employee dies while any amounts
would still be payable to him hereunder, such amounts shall be paid to
Employee's estate. This Agreement is not otherwise assignable by Employee.
(k) Entire Agreement. This Agreement contains the entire understanding of
the parties, supersedes all prior agreements and understandings relating to the
subject matter hereof and may not be amended except by a written instrument
hereafter signed by each of the parties hereto.
(l) Governing Law. This Agreement and the performance hereof shall be
construed and governed in accordance with the laws of the State of Texas,
without regard to its choice of law principles.
(m) Gender and Number. The masculine gender shall be deemed to denote the
feminine or neuter genders, the singular to denote the plural, and the plural to
denote the singular, where the context so permits.
SECTION 12. Definitions. As used in this Agreement, the following terms
will have the following meanings:
(a) Accountants has the meaning ascribed to it in Section 10(d)(iii).
(b) Acquired Securities has the meaning ascribed to it in Section 10(i).
(c) Agreement has the meaning ascribed to it in the heading of this
document.
(d) Applicable Period means, with respect to any Change In Control, the
period of 27 months commencing 3 months before the Change In Control and ending
24 months after the Change In Control.
(e) Base Salary has the meaning ascribed to it in Section 4(a).
(f) Cause has the meaning ascribed to it in Section 6(a)(ii).
(g) Change In Control has the meaning ascribed to it in Section 10(c).
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(h) Change In Control Designated Industry has the meaning ascribed to it
in Section 10(l)(i)(1).
(i) Code means the Internal Revenue Code of 1986, as amended.
(j) Commencement Date has the meaning ascribed to it in Section 3.
(k) Company means CompUSA Inc., a Delaware corporation.
(l) Computer Sales Entity has the meaning ascribed to it in Section
10(l)(ii)(2).
(m) Confidential Information has the meaning ascribed to it in Section
8(b).
(n) Constructively Terminated with respect to an Employee's employment
with Employer will be deemed to have occurred if Employer:
(i) demotes Employee to a lesser position, either in title or
responsibility, than the highest position held by Employee with Employer at
any time during Employee's employment with Employer;
(ii) decreases Employee's compensation below the highest level in
effect at any time during Employee's employment with Employer or reduces
Employee's benefits and perquisites below the highest levels in effect at
any time during Employee's employment with Employer (other than as a result
of any amendment or termination of any employee or group or other executive
benefit plan, which amendment or termination is applicable to all
executives of Employer); or
(iii) requires Employee to relocate to a principal place of business
more than 25 miles from the principal place of business occupied by
Employer on the first day of an Applicable Period.
(o) Covenants has the meaning ascribed to it in Section 10(i).
(p) Designated Industry has the meaning ascribed to it in Section
9(a)(i)(1).
(q) Determination has the meaning ascribed to such term in Section 1313(a)
of the Code.
(r) Disability with respect to an Employee shall be deemed to exist if he
meets the definition of disability under the terms of the disability insurance
policy referred to in Section 4(d). Any refusal by Employee to submit to a
reasonable medical examination to determine whether Employee is so disabled
shall be deemed conclusively to constitute evidence of Employee's Disability.
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(s) Employee has the meaning ascribed to it in the heading of this
Agreement.
(t) Employer refers collectively to the Company and its subsidiaries
and other affiliates. In Section 10, the term "Employer" shall be deemed to
refer to the Company, and for purposes of Section 10, Employee shall be deemed
to be employed by the Company and all compensation and benefits paid or provided
to Employee by any Employer under this Agreement at any time shall be deemed to
have been paid or provided to Employee by the Company.
(u) Entity has the meaning ascribed to it in Section 10(l)(i)(1).
(v) Excise Tax has the meaning ascribed to it in Section 10(d)(i).
(w) Good Reason means the termination of Employee's employment with
Employer as a result of Employee's commission of a felony or failure to obey
written directions delivered to Employee by Employer's Chairman of the Board,
President, Chief Executive Officer or its Board of Directors or by any of
Employer's Executive Vice Presidents or Senior Vice Presidents.
(x) Gross Up Payment has the meaning ascribed to it in Section 10(d)(i).
(y) Incentive Plan means the CompUSA Inc. Long-Term Incentive Plan, as
amended from time to time.
(z) Inventions has the meaning ascribed to it in Section 7(a).
(aa) Options has the meaning ascribed to it in Section 10(i).
(bb) Parachute Payments has the meaning ascribed to such term in Section
280G(b)(2) of the Code.
(cc) Restricted Stock has the meaning ascribed to it in Section 10(i).
(dd) Rights Agreement has the meaning ascribed to it in Section 10(c).
(ee) Separation Payment Period has the meaning ascribed to it in Section
6(b)(ii).
(ff) Separation Payments has the meaning ascribed to it in Section
6(b)(ii).
(gg) Target Bonus means, with respect to each Employee, the dollar amount
that is equal to the established percentage of such Employee's Base Salary that
would be paid to Employee under the management incentive bonus plan of Employer
assuming the measurement criteria contained in such plan with respect to
Employee were achieved for the bonus period in which the Change In Control
occurred.
(hh) Termination Payment has the meaning ascribed to it in Section
10(b)(i).
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(ii) Triggering Termination has the meaning ascribed to it in Section
10(a).
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EXECUTED as of the date and year first above written.
CompUSA Inc.
By _______________________________________
James F. Halpin, President and Chief
Executive Officer
____________________________________________
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