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Exhibit 10.2 MCAFEE, INC.
CHANGE OF CONTROL RETENTION PLAN Introduction
It is possible that the Company may
from time to time receive acquisition proposals by other entities.
The Compensation Committee of the board of directors of the Company
(the " Committee ") recognizes that consideration of any
such proposals can be a distraction to employees and can cause the
employees to consider alternative employment opportunities. The
Committee has determined that it is in the best interests of the
Company and its stockholders to assure that the Company will have
the continued dedication and objectivity of the participants in the
Plan (the " Participants "), notwithstanding the
possibility, threat or occurrence of a " Change of Control "
(as defined herein) of the Company.
The Committee believes that it is in
the best interests of the Company and its stockholders to provide
each Participant with an incentive to continue his or her
employment and to motivate the Participants to maximize the value
of the Company upon a Change of Control for the benefit of its
stockholders. The Committee believes
that it is imperative to provide the Participants with certain
benefits upon the Participants’ termination of employment
following a Change of Control. These benefits will provide the
Participants with enhanced financial security and incentive and
encouragement to remain with the Company notwithstanding the
possibility, threat or occurrence of a Change of Control.
SECTION 1.
ESTABLISHMENT OF PLAN
A. Establishment of Plan
. As of the Effective Date, the Company hereby establishes a Change
of Control Retention plan to be known as the " Change of Control
Retention Plan " (the " Plan "), as set forth in this
document. The purposes of the Plan are as set forth in the
Introduction. B. Contractual
Right to Benefits . Subject to the terms of the Plan, the Plan
establishes and vests in each Participant a contractual right to
the benefits to which he or she is entitled pursuant to the terms
thereof, enforceable by the Participant against the Company.
SECTION 2.
DEFINITIONS AND CONSTRUCTION
A. Definitions .
Whenever used in the Plan, the following terms shall have the
meanings set forth below and, when the meaning is intended, the
initial letter of the term is capitalized.
1.
Base Salary means the rate of annual base salary paid to the
Participant immediately prior to a Change of Control, provided that
such amount shall in no event be less than the highest rate of
annual base salary paid to the Participant during the one
(1) year period immediately prior to the Change of Control.
2.
Target Bonus means the bonus amount (percentage multiplied
by annual base salary or dollar figure) established for the
Participant by the Committee or other party with the authority to
establish such bonus amount.
3.
Cause means:
(a) The
Participant’s commission of an act of material fraud or
dishonesty against the Company;
(b) Any
intentional refusal or willful failure to carry out the reasonable
instructions of the Participant’s supervisor, the Chief
Executive Officer or the Board of Directors;
(c) The
Participant’s conviction of, guilty plea or "no contest" plea
to a felony or to a misdemeanor involving moral turpitude. Moral
turpitude means so extreme a departure from ordinary standards of
honesty, good morals, justice, or ethics as to be shocking to the
moral sense of the community;
(d) The
Participant’s gross misconduct in connection with the
performance of his or her duties;
(e) The
Participant’s improper disclosure of confidential information
or violation of material Company policy or the Company code of
ethics;
(f) The
Participant’s breach of his or her fiduciary duty to the
Company; or
(g) The
Participant’s failure to cooperate with the Company in any
investigation or formal proceeding or the Participant being found
liable in a Securities and Exchange Commission enforcement action
or otherwise being disqualified from serving in his or her role.
4.
Change of Control means the occurrence of any of the
following, in one or a series of related transactions:
(a)
Change in ownership of the Company;
(b)
Change in effective control of the Company; or
(c)
Change in the ownership of a substantial portion of the
Company’s assets (with an asset value change in ownership
exceeding more than 50% of the total gross fair market value
replacing the 40% default rule); all as defined under Code
Section 409A and the final Treasury Regulations thereunder.
5.
Change of Control Date means the date on which a Change of
Control occurs.
6.
Change of Control Period means the eighteen (18) month
period beginning on the Change of Control Date.
7.
Company means McAfee, Inc., any subsidiary corporations, any
successor entities, and any parent or subsidiaries of such
successor entities.
8.
Disability means:
(a) the
Participant has been incapacitated by bodily injury, illness or
disease so as to be prevented thereby from engaging in the
performance of the Participant’s duties;
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(b)
such total incapacity shall have continued for a period of six
(6) consecutive months; and
(c)
such incapacity will, in the opinion of a qualified physician, be
permanent and continuous during the remainder of the
Participant’s life.
9.
Employee means an individual employed by the Company.
10.
Good Reason means any of the following that occurs without
the Participant’s consent:
(a) a
material reduction of the Participant’s Base Salary below the
amount set forth in his or her offer letter agreement or as
increased during the course of his or her employment with the
Company;
(b) a
material reduction in the Participant’s Target Bonus below
the amount set forth in the offer letter agreement or as increased
during the course of his or her employment with the Company;
(c) a
material reduction in the Participant’s duties, authority,
reporting relationship or responsibilities, including:
(i)
the assignment of responsibilities, duties, reporting relationship
or position that are not at least the substantial functional
equivalent of the Participant’s position occupied immediately
preceding the Change of Control, including the assignment of
responsibilities, duties, reporting relationship or position that
are not in a substantive area that is consistent with the
Participant’s experience and the position occupied prior to
the Change of Control; or
(ii)
a material diminution in the budget and number of subordinates over
which the Participant retains authority; except that,
notwithstanding the foregoing, any change in duties, authority, or
responsibilities that is solely attributable to the change in the
Company’s status from that of an independent company to that
of a subsidiary of the newly controlling entity shall not
constitute a change in duties, authority, or responsibilities so
long as the subsidiary structure is maintained in all material
respects for at least eighteen (18) months after the change of
control.
(d)
requiring the Participant to relocate to a location more than
thirty-five (35) miles from his or her then current office
location;
(e)
material violation of material term of any employment, severance,
or change of control agreement between the Participant and the
Company; or
(f)
failure by successor entity to assume agreement; provided, however,
that Good Reason shall not exist unless the Participant has
provided the Company with written notice of the purported grounds
for such Good Reason within ninety (90) days of its initial
existence and such purported grounds, after good faith
negotiations, are not cured within thirty (30) days of the
Company’s receipt of such written notice.
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11.
Potential Change of Control means the earliest to occur of
(a) the
execution of a definitive agreement or letter of intent, in which
the consummation of the transactions described would result in a
Change of Control;
(b) the
approval by the Board of a transaction or series of transactions,
the consummation of which would result in a Change of Control; or
(c) the
public announcement of a tender offer for the Company’s
voting stock, the completion of which would result in a Change of
Control; provided , that no
such event shall be a "Potential Change of Control" unless
(d) in
the case of any agreement or letter of intent described in clause
(a), the transaction described therein is subsequently consummated
by the Company and the other party or parties to such agreement or
letter of intent and thereupon constitutes a "Change of Control";
(e) in
the case of any Board-approved transaction described in clause (b),
the transaction so approved is subsequently consummated and
thereupon constitutes a "Change of Control"; or
(f) in
the case of any tender offer described in clause (c), such tender
offer is subsequently completed and such completion thereupon
constitutes a "Change of Control".
12.
Potential Change of Control Date means the date on which a
Potential Change of Control occurs.
13.
Participant means an individual classified by the Committee
as either a Tier 2B or Tier 3 Participant.
14.
Participation Agreement means an agreement in the form
attached hereto as Exhibit A .
15.
Plan means this McAfee, Inc. Change of Control Retention
Plan.
16.
Release means a standard release of claims with the Company
in substantially the Form attached hereto as Exhibit B
. 17.
Tier 2B Participant means a Participant designated as such
in a Participation Agreement.
18.
Tier 3 Participant means a Participant designated as such in
a Participation Agreement. SECTION 3.
ELIGIBILITY Subject to
the terms of the Plan, the benefits provided by the Plan shall be
available to certain key employees of the Company as approved by
the Committee, until the Plan terminates in accordance with the
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provisions of Section 9. A Participant shall cease to be a
Participant in the Plan when he or she ceases to be an Employee,
unless such Participant is entitled to benefits hereunder at such
time. SECTION 4.
SEVERANCE BENEFITS
A. In addition to the benefits
described below, the Participant will be entitled to receive
payment for:
1.
Accrued Salary and Vacation . All salary and accrued
vacation earned through the Termination Date, less applicable
federal and state withholding.
2.
Expense Reimbursement . Within thirty (30) days of
submission of proper expense reports by the Participant, the
Company shall reimburse the Participant for all expenses incurred
by the Participant, consistent with past practices, in connection
with the business of the Company prior to the Participant’s
termination of employment.
3.
Employee Benefits . Benefits, if any, under any 401(k) plan,
nonqualified deferred compensation plan, employee stock purchase
plan and other Company benefit plans under which the Participant
may be entitled to benefits, payable pursuant to the terms of such
plans. B. Severance
Retention Benefits . If within the Change of Control Period,
(i) a Participant resigns his or her employment with the
Company (or any parent or subsidiary of the Company) for " Good
Reason " (as defined herein), or (ii) the Company (or any
parent or subsidiary of the Company) terminates the
Participant’s employment for other than " Cause " (as
defined herein), the Participant’s death or the
Participant’s Disability (as defined herein), and, the
Participant (X) complies with the Company’s
sub-certification requirements that have been implemented to ensure
compliance with the Sarbanes Oxley Act 2002 in form and substance
determined by the Company in its complete discretion, and
(Y) signs and does not revoke a Release, then the Participant
shall receive the following severance benefits from the Company:
1.
Severance Payment . The Participant shall receive a lump-sum
severance payment (less applicable tax withholding) equal to a
number of months set forth on Exhibit A of the
Participant’s Base Salary plus an amount equal to a
percentage of the Participant’s Target Bonus (as set forth on
Exhibit A ) for the fiscal year in which the Change of
Control or the Participant’s termination occurs, whichever is
greater.
2.
Equity Awards . All of the Participant’s
then-outstanding equity awards covering shares of the
Company’s common stock (" Equity Awards ") shall vest
a percentage set forth on Exhibit A as of the date of
termination.
3.
Additional Severance Payment . If the Participant is covered
by the Company health care plan, the Participant shall receive a
cash payment equal to a number of months set forth on
Exhibit A multiplied by the cost of a single month of
COBRA coverage at the rates in effect on the date of termination.
If such coverage included the Participant’s dependents
immediately prior to the Participant’s termination of
employment with the Company, such payment shall also include the
cost of COBRA coverage for the Participant’s dependents.
C. Treatment of
Performance-Based Equity . Upon the occurrence of a Change of
Control, all of the Participant’s outstanding Equity Awards
scheduled to vest based on performance shall convert to be awards
with time-based vesting. As of the date of the Change of Control,
the awards will be vested as to the extent that they would have
been vested if they had been granted originally with a four year
time-based vesting schedule with annual vesting. The vesting of
such Equity Awards will continue after the Change of
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Control, assuming continuous service, based upon the same
time-based vesting schedule. To the extent that such Equity Awards
are not fully vested at the 18-month anniversary of the Change of
Control, on such 18-month anniversary they will be 100% vested. The
acceleration provisions of Section 4.B will govern any
terminations of employment prior to the 18-month anniversary of the
Change of Control. D. Other
Terminations By Company .
1. If a
Participant’s employment with the Company terminates
(i) voluntarily by the Participant other than for Good Reason
or Disability, (ii) for Cause by the Company, or (iii)
pursuant to the Participant’s death or Disability, then the
Participant shall not be entitled to receive severance or other
benefits except for those (if any) as may then be established under
the Company’s then existing severance and benefits plans and
practices or pursuant to other written agreements with the Company.
2. In
the event that a Participant’s employment otherwise is
terminated by the Company for any reason, either prior to the
occurrence of a Change of Control or after the 18-month period
following a Change of Control, then the Participant shall be
entitled to receive severance benefits only as may then be
established under the Company’s existing severance and
benefit plans and policies at the time of such termination .
E. Special Termination .
If a Participant’s employment is terminated by the Company
without Cause prior to the Change of Control Date but on or after a
Potential Change of Control Date, then the Company will provide to
the Participant the payments and benefits as provided in
Section 4.B.; provided, however, that if the Company
reasonably demonstrates that the Participant’s termination of
employment (X) was not at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control,
and (Y) would have occurred absent the Change of Control, then
Section 4.F. shall apply. Solely for purposes of determining
the timing of payments and the provision of benefits under the
circumstances described in this Section 4.G., the
Participant’s date of termination shall be deemed to be the
Change of Control Date. F.
Timing of Severance Payments . Other than with respect to
the payments made under Section 4.A., the severance payments
to which the Participant is entitled will be subject to the
Participant signing and not revoking the Release and provided that
such Release is effective within sixty (60) days following the
termination of employment. Such payments will be made to the
Participant in cash and in full, not later than seven
(7) calendar days after the effective date of any Release. In
the event the termination occurs at a time during the calendar year
where it would be possible for the Release to become effective in
the calendar year following the calendar year in which the
Participant’s termination occurs, any severance that would be
considered Deferred Compensation Separation Benefits (as defined in
Section 5) will be paid on the first payroll date to occur
during the calendar year following the calendar year in which such
termination occurs, or such later time as required by the payment
schedule applicable to each payment or benefit, or Section 5.
G. Exclusive Remedy . In
the event of a termination of the Participant’s employment,
the provisions of this Section 4 are intended to be and are
exclusive and in lieu of any other rights or remedies to which the
Participant or the Company may otherwise be entitled, whether at
law, tort or contract, in equity, or under the Plan. The
Participant shall be entitled to no benefits, compensation or other
payments or rights upon termination of employment other than those
benefits expressly set forth in this Section 4.
H. Severance Payment
Offset . The amount of any cash severance otherwise payable
hereunder shall be offset by any severance payment required by law
or contractual cash severance payments paid to a Participant. This
offset shall only apply specifically to cash severance pay, and
shall not apply to other amounts due upon termination of
employment, such as accrued paid time off or expense
reimbursements.
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SECTION 5.
SECTION 409A A.
Code Section 409A .
1.
Notwithstanding anything to the contrary in the Plan, if the
Participant is a "specified employee" within the meaning of
Section 409A of the Internal Revenue Code of 1986, as amended
(the " Code ") and the final regulations and any guidance
promulgated thereunder (" Section 409A ") at the time of the
Participant’s termination of employment (other than due to
death) or resignation, then the severance payable to the
Participant, if any, pursuant to the Plan, when considered together
with any other severance payments or separation benefits that are
considered deferred compensation under Section 409A (together,
the " Deferred Compensation Separation Benefits ") that are
payable within the first six (6) months following the
Participant’s termination of employment, will become payable
on the first payroll date that occurs on or after the date six
(6) months and one (1) day following the date of the
Participant’s termination of employment. All subsequent
Deferred Compensation Separation Benefits, if any, will be payable
in accordance with the payment schedule applicable to each payment
or benefit. Notwithstanding anything herein to the contrary, if the
Participant dies following his or her termination but prior to the
six (6) month anniversary of his or her termination, then any
payments delayed in accordance with this paragraph will be payable
in a lump sum as soon as administratively practicable after the
date of the Participant’s death and all other Deferred
Compensation Separation Benefits will be payable in accordance with
the payment schedule applicable to each payment or benefit. Each
payment and benefit payable under the Plan is intended to
constitute a separate payment for purposes of
Section 1.409A-2(b)(2) of the Treasury Regulations.
2. Any
amount paid under the Plan that satisfies the requirements of the
"short-term deferral" rule set forth in Section 1.409A-1(b)(4)
of the Treasury Regulations shall not constitute Deferred
Compensation Separation Benefits for purposes of clause
(1) above.
3. Any
amount paid under the Plan that qualifies as a payment made as a
result of an involuntary separation from service pursuant to
Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that
do not exceed the Section 409A Limit shall not constitute
Deferred Compensation Separation Benefits for purposes of clause
(1) above. " Section 409A Limit " will mean the
lesser of two (2) times: (i) the Participant’s
annualized compensation based upon the annual rate of pay paid to
the Participant during the Participant’s taxable year
preceding the Participant’s taxable year of the
Participant’s termination of employment as determined under,
and with such adjustments as are set forth in, Treasury
Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue
Service guidance issued with respect thereto; or (ii) the
maximum amount that may be taken into account under a qualified
plan pursuant to Section 401(a)(17) of the Code for the year
in which the Participant’s employment is terminated.
4. The
foregoing provisions are intended to comply with the requirements
of Section 409A so that none of the severance payments and
benefits to be provided hereunder will be subject to the additional
tax imposed under Section 409A, and any ambiguities herein
will be interpreted to so comply. The Company and the Participant
agree to work together in good faith to consider amendments to the
Plan and to take such reasonable actions which are necessary,
appropriate or desirable to avoid imposition of any additional tax
or income recognition prior to actual payment to the Participant
under Section 409A. SECTION 6.
GOLDEN PARACHUTE EXCISE TAX AND
NON-DEDUCTIBILITY LIMITATIONS
Golden Parachute Excise Tax Best
Results . In the event that the severance and other benefits
provided for in the Plan or otherwise payable to the Participant
(X) constitute "parachute payments" within
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the meaning of Code Section 280G, and (Y) would be
subject to the excise tax imposed by Section 4999 of the Code,
then such benefits shall be either:
1.
delivered in full, or
2.
delivered as to such lesser extent which would result in no portion
of such severance benefits being subject to excise tax under
Section 4999 of the Code, whichever of the foregoing amounts,
taking into account the applicable federal, state and local income
and employment taxes and the excise tax imposed by
Section 4999, results in the receipt by the Participant, on an
after-tax basis, of the greatest amount of benefits,
notwithstanding that all or some portion of such benefits may be
taxable under Section 4999 of the Code. Unless the Company and
the Participant otherwise agree in writing, the determination of
the Participant’s excise tax liability and the amount
required to be paid under this Section 6 shall be made in
writing by a nationally-recognized independent accounting firm
selected by the Company (the " Accountants "). For purposes
of making the
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