Seagate Technology is set to pay $2.5 million any day now to the chief executive it fired last month, according to the terms of his “separation and release” agreement the company filed Tuesday with the SEC as an amendment to its quarterly financials.
The money is to be paid to him with ten days of his signing the agreement on Feb. 4. He’ll get another $2.5 million payment within ten days of Dec. 2, 2009, so long as he complies with all the do’s and don’ts of his severance agreement.
Between now and then, Watkins will serve as a consultant to Seagate’s board and CEO, getting $500 an hour. He’ll also be provided administrative support through June to help him in this capactiy.
As far as his stock-based compensation goes, though, Watkins is being dealt with by the book. All his unvested options were cancelled upon his termination and he was given the standard three-month period during which he may exercise his vested options.
(Some companies use a consulting relationship to extend the period during which its departed executive may exercise his or her options. For example, SumTotal Systems made its departing CEO a “business advisor” after he stepped down last November and extended the exercise period for him by as much as two years.)
Watkins will also have to arrange for continuation of his health, vision and dental coverage at his own expense once his company-paid benefits expire Feb. 28. Unlike most of us, though, the company has offered him $29,944 to help defray the costs of his COBRA coverage. And between now and June 30, Watkins is eligible for an all-expense paid physical performed at the famed Mayo Clinic in Rochester, Minnesota.
Should Seagate be acquired anytime in the next six months, Watkins would be owed an additional $2.5 million payment by the end of the year, all of his “cancelled” stock-based compensation would instead become fully vested and exerciseable, and he’d get an extra $9,981 toward his health care coverage.
Seagate has offered to help Watkins find another job, too, arranging for him to receive “outplacement assistance” from Right Management Consultants, a division of Manpower.
And here’s the “perk” we most enjoyed: he company agreed not to contest any claim Watkins makes for unemployment.
As for Steven Luczo, the chairman of its board and its former CEO who has returned to lead it once again, he’ll be getting the same $1 million salary his predeccesor was paid, although he and other top executives at Seagate have agreed to take pay cuts of as much as 25 percent. He’ll also be eligible for a bonus targeted at 150 percent of his salary to be paid at the “sole discretion of the board.”
Luczo, who already owns 4.6 million shares of Seagate, was also give an option grant good for 3.5 million more that were to be priced Jan. 30, a day when Seagate shares closed at $3.79, 53 percent below their average price over the last year, along with 150,000 shares of a performance-based bonus.