Exhibit 10.4
MANAGEMENT PARTICIPATION AGREEMENT
THIS MANAGEMENT PARTICIPATION AGREEMENT (this "Agreement") is
made and entered into as of March 29, 2000 among Seagate Technology, Inc.,
Delaware corporation ("Seller"), Suez Acquisition Company (Cayman) Limited, a
limited company organized under the laws of the Cayman Islands, ("Purchaser")
and each of the management employees of Seller listed on the signature pages
hereof (each a "Senior Manager" and collectively, the "Senior Managers").
WHEREAS, Seller and Purchaser are entering into the Stock
Purchase Agreement dated as of March 29, 2000 (the "Stock Purchase Agreement")
pursuant to which, as of the Closing which occurs on the Closing Date (each as
defined in the Stock Purchase Agreement), Purchaser will acquire all of the
shares of various subsidiaries of Seller and indirectly substantially all of the
assets of Seller:
WHEREAS, Seller and each of the Senior Managers have entered
in Management Retention Agreements pursuant to which each Senior Manager is
afforded certain rights following the occurrence of a change of control of
Seller (each a "Retention Agreement" and collectively, the "Retention
Agreements") and Purchaser intends to assume, as of the Closing Date, Seller's
obligations under the Retention Agreements, as modified hereby;
WHEREAS, the Senior Managers currently hold unvested options
to acquire shares of Seller common stock ("Seller Options") and/or unvested
restricted shares of Seller common stock ("Seller Restricted Shares") and have
agreed that, as of the Closing Date, a portion of such Seller Options shall be
assumed by Purchaser and converted into options to acquire shares of Purchaser
(the "Rollover Options) and a portion of such Seller Restricted Shares shall be
exchanged for substitute restricted shares of Purchaser issued by the Purchaser
on the Closing Date ("Purchaser Restricted Shares"), in each case, on the terms
and conditions hereinafter set forth; and
WHEREAS, Purchaser and the Senior Managers intend to enter
into certain other compensation arrangements which are more fully set forth in
the Management Term Sheet attached hereto as Exhibit A (the "Management Term
Sheet").
NOW THEREFORE, in consideration of the foregoing premises, and
the covenants and promises and representations set forth herein, and for other
good and valuable consideration the receipt and sufficiency of which is hereby
acknowledged and accepted, the parties hereto agree as follows:
1. Section Effectiveness. This Agreement shall constitute a
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binding obligation of the parties hereto as of the date hereof; provided that
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the operative provisions of this Agreement shall only take effect upon the
occurrence of the Closing Date. In the event the Stock Purchase Agreement is
terminated for any reason without the Closing Date having occurred, this
Agreement shall be terminated without further obligation or liability of any
party hereunder.
2. Section Management Retention Agreements: As of the Closing Date,
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Purchaser shall assume the Retention Agreements and all of Seller's obligations
and liabilities thereunder and such Retention Agreements shall thereafter
continue in full force and effect in accordance with their terms, with the
following understandings and modifications:
(a) The Closing shall be deemed to constitute a "Change of Control"
for purposes of the Retention Agreements and the protection afforded to the
Senior Managers under the Retention Agreements which become applicable from and
after the occurrence of a Change of Control shall apply; provided that from and
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after the Closing, all references in the Retention Agreements to the Company
shall be deemed to constitute references to Purchaser; and from and after the
Closing, no future corporate transactions or events (other than the Closing)
shall be deemed to constitute a Change of Control for purposes of the Retention
Agreements; provided, further, that (i) to the extent, but only to the extent,
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that any such Retention Agreements currently include a provision providing for
gross-up protection for excise taxes incurred under Section 280G of the Internal
Revenue Code of 1986 (a "Gross-Up Provision"), such Gross-Up Provision shall
continue to apply with respect to any future change of control transactions
involving Purchaser and (ii) to the extent that any such Retention Agreements
currently include a provision limiting the dollar amount of the parachute
payments (within the meaning of Section 280G of the Internal Revenue Code of
1986) payable thereunder to the greatest after-tax benefit that can be provided
the individual, such limit shall continue to apply with respect to any future
change of control transactions involving Purchaser;
(b) The consummation of the transactions contemplated by the Stock
Purchase Agreement, the occurrence of the Closing, and the termination of each
Senior Manager's employment with Seller and commencement of employment with
Purchaser shall not constitute a termination of any Senior Manager's employment
for purposes of the Retention Agreements;
(i) The term "Good Reason" within the Retention Agreements shall be
restated to mean" an Employee's resignation of his or her employment with the
Company as a result of any of the following actions, which actions remain
uncured for at least thirty (30) days following written notice from Employee to
the Company describing the occurrence of such events and asserting that such
events constitute Good Reason; provided notice of such resignation is given to
the Company within sixty (60) days after the expiration of such cure period:
without Employee's express written consent, any material reduction in Employee's
authority or responsibilities from those set forth in Employee's employment
agreement with the Company (an "Employment Agreement") (or if such Employee is
not a party to an Employment Agreement, from the authority and responsibilities
initially assigned to such Employee by the Company after the Closing (as defined
in the Stock Purchase Agreement dated as of March 29, 2000 by and between
Seagate Technology, Inc. and Suez Acquisition Company (Cayman) Limited), without
Employee's express written consent, any reduction of 10% or more in the level of
the base salary, target annual bonus or employee benefits to be provided to
Employee under the Employment Agreement (or if such Employee is not a party to
an Employment Agreement, a
reduction of 10% or more in the level of the base salary, target annual
bonus or employee benefits provided to such Employee immediately prior to the
Closing), other than a reduction implemented with the consent of Employee or a
reduction that is equivalent to reduction in base salaries, annual bonus
opportunities and/or employee benefits, as applicable, imposed on all other
senior executives of the Company at a similar level within the Company (provided
that the use of private aircraft shall not be deemed an employee benefit for
theses purposes); or the relocation of Employee to a principal place of
employment more than 50 miles from Employee's current principal place of
employment, without Employee's express written consent"; and
(c) The provisions of Sections 3(a)(2) and 3(a)(3) of each of the
Retention Agreements (relating to the accelerated vesting of stock options and
restricted shares) shall only apply with respect to the Rollover Options and
Purchaser Restricted Shares (i.e., options and restricted shares expressly
granted by Purchaser in substitution of (or as a result of Purchaser's
assumption of) unvested options to acquire Seller common stock and unvested
restricted shares which were not otherwise cancelled for consideration in
connection with the Agreement and Plan of Merger by and among Veritas Software
Corporation and Seagate Technology, Inc. dated as of March 29, 2000);
3. Section Rollover Equity.
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(i) Each Senior Manager agrees to work, in good faith, with Purchaser
and the institutional investors investing in Purchaser at the Closing (the
"Institutional Investors") to provide that Seller Options and/or Seller
Restricted Shares with an aggregate Rollover Value (as defined below) of between
$150,000,000 and $250,000,000 (targeted at $200,000,000) will be converted into
Rollover Options and Purchaser Restricted Shares as follows; provided, that in
any event Seller Options and/or Seller Restricted Shares with an aggregate
Rollover Value of at least $150,000,000 will be so converted: Any such Seller
Options will be assumed by Purchaser and converted into options to acquire
shares of Purchaser and any such Seller Restricted Shares shall be exchanged as
of the Closing Date for the issuance by Purchaser of Purchaser Restricted
Shares, in each case, on the same terms and conditions as were applicable to the
Seller Options and Seller Restricted Shares, as applicable, immediately prior to
the Closing (including any unsatisfied vesting conditions and without any
accelerated vesting as a result of the Closing or any related transactions). For
purposes of this Agreement, "Rollover Value" shall mean with respect to Seller
Options, the excess of (x) the fair market value per share of Seller common
stock (using the average of the Seller's closing selling prices for the five
consecutive trading days ending two trading days immediately preceding the
Closing (the "FMV"), times the number of shares of Seller common stock subject
to the Seller Option, over (y) the aggregate exercise price of the Seller Option
and with respect to Seller Restricted Shares, the FMV times the number of Seller
Restricted Shares.
(b) The Purchaser Restricted Shares issued in exchange for Seller
Restricted Shares held by any Senior Manager will have an aggregate fair market
value (determined by reference to the price per share paid by the Institutional
Investors at Closing), as of immediately after Closing, equal to the aggregate
FMV of such cancelled Seller Restricted Shares
immediately prior to the Closing. Similarly, the conversion of the Seller
Options into Rollover Options will be effected in a manner so as to preserve, as
of the date of assumption and conversion, the "spread" (i.e., the excess of the
FMV per share of Seller common stock immediately prior to the Closing over the
exercise price of the Seller Option).
(c) The Senior Managers will work with the Institutional Investors in
good faith to effect the transactions contemplated by this Section 3 in a manner
designed to minimize the application of any excise taxes imposed by Section 280G
of the Internal Revenue Code of 1986.
(i) All existing options to acquire common stock of Seller and its
subsidiaries, other than the Seller Options which are assumed by Purchaser and
converted into Rollover Options as contemplated hereby and options to acquire
Seagate Information Management Group Holdings, Inc. common stock which shall
remain outstanding after the Closing; and all existing restricted shares; other
than the Seller Restricted Shares issued in exchange for the issuance of
Purchaser Restricted Shares as contemplated hereby, will be cancelled in
consideration for the payment by Veritas Software Corporation of the merger
consideration pursuant to the terms of the Merger Agreement between Seller and
Veritas Software Corporation.
(ii) Section Management Term Sheet. In addition to the foregoing,
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Purchaser and the Senior Managers acknowledge that they have agreed in good
faith to enter into definitive documentation prior to the Closing providing for
the adoption by Purchaser of a new option plan and the grant of options to the
Senior Managers and others, the creation of a management stockholders agreement
governing each Senior Manager's rights and obligations with respect to shares of
Purchaser and other compensation matters, each as set forth more fully in the
Management Term Sheet attached hereto as Exhibit A.
4. Section Miscellaneous.
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(a) This Agreement and the documents and instruments attached hereto
as Exhibits, constitute the entire agreement among the parties with respect to
the subject matter hereof and supercede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
(c) This Agreement may be executed in one or more counterparts, all
of which shall be considered one and the same agreement, it being understood
that all parties need not sign the same counterpart.
SUEZ ACQUISITION COMPANY (CAYMAN) LIMITED
By: /s/ ▇▇▇▇▇ ▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇
Title: Managing Member
SEAGATE TECHNOLOGY, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Sr. VP, General Counsel
and Secretary
Senior Managers
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