EMPLOYMENT AGREEMENT
EXHIBIT 10.1
This EMPLOYMENT AGREEMENT (“Agreement”) is entered into as of the 21st day of June, 2007, by
and between Conexant Systems, Inc., a Delaware corporation (the “Company”), and Xxxxxx Xxxxxx (the
“Executive”).
WHEREAS, the parties hereto wish to enter into the arrangements set forth herein with respect
to the terms and conditions of the Executive’s employment with the Company from and after the
Effective Date (as defined in Section 2);
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment Agreement. On the terms and conditions set forth in this Agreement, the
Company agrees to employ the Executive, and the Executive agrees to be employed by the Company, for
the Employment Period set forth in Section 2 and in the positions and with the duties set forth in
Section 3. Terms used herein with initial capitalization are defined in Section 24.
2. Term. Unless earlier terminated pursuant to Section 8, the term of the Executive’s
employment hereunder in the positions referenced under Section 3 will begin as of July 9, 2007 (the
“Effective Date”) and will conclude on July 8, 2009 (the “Employment Period”); provided that,
beginning on July 9, 2009 and on each anniversary of that date thereafter, the Employment Period
will automatically be extended for a one-year period unless either party gives written notice to
the other party at least sixty days before the end of the Employment Period (or extended Employment
Period, as the case may be) that it no longer wishes such automatic one year extensions to
continue.
3. Position and Duties. The Executive will serve as President and Chief Executive
Officer of the Company during the Employment Period. As President and Chief Executive Officer of
the Company, the Executive will render executive, policy, and other management services to the
Company of the type customarily performed by persons serving in a similar capacity and as
reasonably determined by the Board with regard to the Executive’s status and position within the
Company. The Executive will also become a member of the Board of Directors subject to his
commencing employment and will continue to serve as such member for the Employment Period. The
Executive will report directly to the Board. The Executive will devote the Executive’s reasonable
best efforts and substantially full business time to the performance of the Executive’s duties
hereunder and the advancement of the business and affairs of the Company during the Employment
Period, it being understood that the Executive may, consistent with the other provisions of this
Agreement, pursue other outside interests (specifically the Executive’s board position at Powerwave
Technologies, Inc.), including but not limited to devoting time to managing the Executive’s
personal investments and to charitable and community activities. As a condition of employment and
this Agreement, Executive will resign his position as a director of Atheros Communications, Inc.,
effective no later than the “Effective Date” of this Agreement.
4. Place of Performance. During the Employment Period, the Executive’s primary place
of employment and work location will be Austin, Texas, except for reasonable travel on Company
business and as otherwise consented to by the Executive.
5. Compensation.
(a) Base Salary. During the Employment Period, the Company will pay to the Executive
an annual base salary (the “Base Salary”), which initially will be $550,000. The Base Salary will
be reviewed by the Board or the Compensation and Management Development Committee of the Board (the
“Compensation Committee”) no less frequently than annually and may be increased (but not decreased)
at the discretion of the Board or the Compensation Committee. If the Executive’s Base Salary is
increased, the increased amount will be the Base Salary for the
remainder of the Employment Period. The Base Salary will be payable monthly or in such other
installments as will be consistent with the Company’s payroll procedures in effect from time to
time.
(b) Bonus. (i) During the Employment Period, the Executive will be eligible to earn
an annual performance bonus in an amount determined at the discretion of the Board or the
Compensation Committee for each fiscal year. It is the intention of the parties hereto that the
Company shall establish a target bonus for the Executive with respect to each fiscal year of the
Employment Period based upon overall performance of the Company and upon the Executive’s individual
performance. The Executive’s initial full year annual target bonus will be 100% of the Base Salary
(pro-rata for the time worked in the fiscal year). In the event that a target bonus is not
established with respect to any subsequent year, the Executive’s target bonus shall be deemed to be
the target bonus established under this Agreement for the immediately preceding year. Not
withstanding the foregoing, for the fiscal year 2007, the Executive will be guaranteed a bonus of
not less than $150,000, to be disbursed when normal company bonuses are paid. For fiscal year 2008
(which commences October 1, 2007), the Executive will be guaranteed a bonus of not less than
$275,000, to be disbursed when normal company bonuses are paid.
(ii) In addition to any annual performance bonus payable under this Section 5(b), the Company
shall pay the Executive within thirty (30) days of commencing employment, a special “one time”
bonus in the gross amount (before applicable taxes) of $100,000. While this “special” bonus will be
paid within thirty (30) days of commencing employment, it will not be considered fully earned until
the first anniversary date of the “Effective Date” of this Agreement. Should the Executive
voluntarily terminate his employment for any reason (other than as a result of death or Disability)
or be terminated for Cause before the first anniversary date of this Agreement, the Executive will
owe the gross amount back to the Company within 30 days of his Termination Date. If the Executive
is involuntarily terminated for any other reason than Cause before the first anniversary date of
this Agreement, the Executive will be deemed to have earned the “special” bonus.
(c) Other Equity Compensation. (i) On the Effective Date, the Company will grant to
the Executive options to purchase 3,000,000 shares of Company Common Stock (“Stock Options”), with
an exercise price equal to the fair market value of the Company Common Stock on the date of grant,
such options to become exercisable as follows: (A) one-third of the options will become exercisable
on the first anniversary of the Effective Date; (B) one-third of the options will be come
exercisable on the second anniversary of the Effective Date; and (C) one-third of the options will
become exercisable on the third anniversary of the Effective Date. In addition, on the Effective
Date, you will be granted 1,000,000 Restricted Stock Units (“Non-Performance RSU’s”). These
Non-Performance RSU’s will vest one-third each year on the first, second and third anniversary
dates of the Effective Date. In addition, on the Effective Date, you will be granted 500,000
Non-Performance RSUs which will vest on the first anniversary of the Effective Date. On the
Effective Date, you will also be made a grant of 1,000,000 Performance Restricted Stock Units
(“Performance RSU’s”). These Performance RSU’s are subject to vest under the following conditions:
(A) one-third will vest if the Company’s Common Stock sustains an average closing price of $3.00
over a 60 calendar day period; (B) one-third will vest if the Company’s Common Stock sustains an
average closing price of $4.50 over a 60 calendar day period; and (C) one-third will vest if the
Company’s Common Stock sustains an average closing price of $6.00 over a 60 calendar day period.
Any unvested portion of the initial Performance RSU grant after five (5) years will be forfeited.
The Stock Options, Non-Performance RSUs and Performance RSUs will be granted substantially in the
forms of the respective award agreements provided to the Executive prior to date of this Agreement.
(ii) Notwithstanding the foregoing, in the event of a Change of Control, any unvested Stock
Options, Non-Performance RSUs and shares of non-performance based Restricted Company Common Stock
will become fully vested contingent upon and immediately prior to such Change of Control. In
addition, in the event of a Change of Control, if and to the extent not already vested, (A)
one-third of the Performance RSUs granted as of the Effective Date will vest contingent upon and
immediately prior to such Change of Control if the closing price of the Company’s Common Stock (or,
in the event of a Change of Control that is a Corporate Transaction, the price per share of Common
Stock in such Corporate Transaction) is at least $3.00 on the date of such Change of Control, (B)
an additional one-third of such Performance RSUs will vest contingent upon and immediately prior to
such Change of Control if the closing price of the Company’s Common Stock (or, in the event of a
Change of Control that is a Corporate Transaction, the price per share of Common Stock in such
Corporate Transaction) is at least $4.50 on the date of such Change of Control, and (C) the
remaining one-third of such Performance RSUs will vest contingent upon and immediately prior to
such Change of Control if the closing price of the Company’s Common Stock (or, in
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the event of a Change of Control that is a Corporate Transaction, the price per share of Common
Stock in such Corporate Transaction) is at least $6.00 on the date of such Change of Control.
(iii) Notwithstanding any other provision of this Agreement to the contrary, except as
otherwise provided in Section 1 of the respective Non-Performance RSU and Performance RSU award
agreements, any vested Non-Performance RSUs or Performance RSUs will be paid out immediately upon
vesting and in any event no later than March 15th of the calendar year of the year
following the year in which such Non-Performance RSUs or Performance RSUs vest.
(d) Benefits. During the Employment Period, the Executive will be entitled to all
employee benefits and perquisites made available to senior executives of the Company. Nothing
contained in this Agreement will prevent the Company from terminating plans, changing carriers or
effecting modifications in employee benefits coverage for the Executive as long as such
modifications affect all similarly situated employees and/or officers of the Company.
(e) Vacation; Holidays. During the Employment Period, the Executive will be entitled
to all public holidays observed by the Company and vacation days in accordance with the applicable
vacation policies for senior executives of the Company, which vacation days will be taken at a
reasonable time or times. The Executive will initially be entitled to four (4) weeks vacation per
year.
(f) Withholding Taxes and Other Deductions. To the extent required by law, the
Company will withhold from any payments due to the Executive under this Agreement any applicable
federal, state or local taxes and such other deductions as are prescribed by law.
6. Expenses. The Executive is expected and is authorized, subject to the business
expense policies as determined by the Company, to incur reasonable expenses in the performance of
the Executive’s duties hereunder, including the costs of entertainment, travel, and similar
business expenses. The Company will promptly reimburse the Executive for all such expenses upon
periodic presentation by the Executive of an accounting of such expenses on terms applicable to
senior executives of the Company.
7. Confidentiality; Work Product.
(a) Information. The Executive acknowledges that the information, observations and
data obtained by the Executive concerning the business and affairs of the Company and its
Affiliates and their predecessors during the course of the Executive’s performance of services for,
or employment with, any of the foregoing persons (whether or not compensated for such services) are
the property of the Company and its Affiliates, including information concerning acquisition
opportunities in or reasonably related to the business or industry of the Company or its Affiliates
and their predecessors of which the Executive becomes aware during such period. Therefore, the
Executive agrees that the Executive will not at any time (whether during or after the Employment
Period) disclose to any unauthorized person or, directly or indirectly, use for the Executive’s own
account, any of such information, observations, data or any Work Product (as defined below) or
Copyrightable Work (as defined below) without the Board’s consent, unless and to the extent that
the aforementioned matters become generally known to and available for use by the public other than
as a direct or indirect result of the Executive’s acts or omissions to act or the acts or omissions
to act of other senior or junior management employees of the Company and its Affiliates. The
Executive agrees to deliver to the Company at the termination of the Executive’s employment, or at
any other time the Company may request in writing (whether during or after the Employment Period),
all memoranda, notes, plans, records, reports and other documents, regardless of the format or
media (and copies thereof), relating to the business of the Company and its Affiliates and their
predecessors (including, without limitation, all acquisition prospects, lists and contact
information) which the Executive may then possess or have under the Executive’s control.
(b) Intellectual Property. The Executive acknowledges that all inventions,
innovations, improvements, developments, methods, designs, analyses, drawings, reports, trade
secrets, know-how, ideas, computer programs, and all similar or related information (whether or not
patentable) that relate to the actual or anticipated business, research and development or existing
or future products or services of the Company or its Affiliates and their predecessors that are
conceived, developed, made or reduced to practice by the Executive while employed by the Company or
any of its predecessors (“Work Product”) belong to the Company, and the Executive
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hereby assigns, and agrees to assign, all of the Executive’s rights, title and interest in and
to the Work Product to the Company. Any copyrightable work (“Copyrightable Work”) prepared in
whole or in part by the Executive in the course of the Executive’s work for any of the foregoing
entities will be deemed a “work made for hire” under the copyright laws, and the Company will own
all rights therein. To the extent that it is determined, by any authority having jurisdiction,
that any such Copyrightable Work is not a “work made for hire,” the Executive hereby assigns and
agrees to assign to the Company all of the Executive’s rights, title and interest, including,
without limitation, copyright in and to such Copyrightable Work. The Executive will promptly
disclose such Work Product and Copyrightable Work to the Board and perform all actions reasonably
requested by the Board (whether during or after the Employment Period) to establish and confirm the
Company’s ownership (including, without limitation, assignments, consents, powers of attorney and
other instruments).
(c) Enforcement. The Executive acknowledges that the restrictions contained in this
Section 7 are reasonable and necessary, in view of the nature of the Company’s business, in order
to protect the legitimate interests of the Company, and that any violation thereof would result in
irreparable injury to the Company. Therefore, the Executive agrees that in the event of a breach
or threatened breach by the Executive of the provisions of this Section 7, the Company will be
entitled to obtain from any court of competent jurisdiction, preliminary or permanent injunctive
relief restraining the Executive from disclosing or using any such confidential information.
Nothing herein will be construed as prohibiting the Company from pursuing any other remedies
available to it for such breach or threatened breach, including, without limitation, recovery of
damages from the Executive.
8. Termination of Employment. Any termination of the Employment Period by the Company
or the Executive will be communicated by written Notice of Termination to the other party hereto in
accordance with Section 12. For purposes of this Agreement, a “Notice of Termination” will mean a
notice which will indicate the specific termination provision in this Agreement relied upon, if
any, and will set forth in reasonable detail the facts and circumstances claimed to provide a basis
for termination of the Employment Period under the provision so indicated. Termination of the
Employment Period will take effect on the Date of Termination. The Employment Period will be
terminated under the following circumstances:
(a) Death. The Employment Period will terminate upon the Executive’s death;
(b) By the Company. The Company may terminate the Employment Period (i) if the
Executive will have been unable to perform all of the Executive’s duties hereunder by reason of
illness, physical or mental disability or other similar incapacity, which inability will continue
for more than three consecutive months, or any six months in a twelve-month period (a
“Disability”), or (ii) with or without Cause;
(c) By the Executive. The Executive may terminate the Employment Period at any time
for Good Reason or without Good Reason; or
(d) Non-Renewal. The Employment Period may terminate pursuant to the terms of Section
2. The expiration of the Employment Period due to a notice of non-renewal tendered by the Company
to the Executive will be treated as a termination of the Employment Period by the Company without
Cause. The expiration of the Employment Period due to a notice of non-renewal tendered by the
Executive to the Company will be treated as a termination of the Employment Period by the Executive
without Good Reason.
9. Compensation upon Termination. The Executive’s employment as both President and
Chief Executive Officer of the Company must be terminated in order for the Executive to receive any
payment or other benefit under this Section 9.
(a) Death. If the Employment Period terminates as a result of the Executive’s death,
the Company will promptly pay to the Executive’s estate, or as may be directed by the legal
representatives of such estate, after the Date of Termination any accrued but unpaid Base Salary
through the Date of Termination. All other unpaid amounts, if any, which the Executive has accrued
and is entitled to as of the Date of Termination in connection with any fringe benefits or under
any bonus or incentive compensation plan or program of the Company pursuant to Sections 5(b), (c)
and (d) will be paid in accordance with the terms of such arrangements. In addition, if the
Employment period terminates as a result of the Executive’s death, then all unvested Stock Options,
Non-Performance RSUs and shares of non-performance based Restricted Company Common Stock held by
the Executive will become fully vested and, in
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the case of the Stock Options, fully exercisable on the Date of Termination, and the Executive
will be entitled to exercise all such options until the earlier of (i) the third anniversary of the
Executive’s Date of Termination and (ii) the expiration date of such option set forth in the grant
notice for the option award. The Company will have no further obligations to the Executive under
this Agreement or otherwise (other than pursuant to any employee benefit plan and any life
insurance, death in service or other equivalent policy for the benefit of the Executive).
(b) Disability. If the Company terminates the Employment Period because of the
Executive’s Disability, the Company will promptly pay to the Executive after the Date of
Termination any accrued but unpaid Base Salary through the Date of Termination. All other unpaid
amounts, if any, which the Executive has accrued and is entitled to as of the Date of Termination
in connection with any fringe benefits or under any bonus or incentive compensation plan or program
of the Company pursuant to Sections 5(b), (c) and (d) will be paid in accordance with the terms of
such arrangements. In addition, if the Company terminates the Employment Period because of the
Executive’s Disability, then the Executive will be entitled to the equity and health insurance
portions of the Separation Benefits set forth in Section 9(e)(ii) and (iii). The Company will
have no further obligations to the Executive under this Agreement or otherwise (other than pursuant
to any employee benefit plan and any disability or other medical insurance policy for the benefit
of the Executive).
(c) By the Company for Cause; By the Executive Without Good Reason. If the Company
terminates the Employment Period for Cause or if the Executive terminates the Employment Period
without Good Reason, the Company will promptly pay to the Executive after the Date of Termination
any accrued but unpaid Base Salary through the Date of Termination. All other unpaid amounts, if
any, which the Executive has accrued and is entitled to as of the Date of Termination in connection
with any fringe benefits or under any bonus or incentive compensation plan or program of the
Company pursuant to Sections 5(b), (c) and (d) will be paid in accordance with the terms of such
arrangements.
Other than as set forth in this Section 9(c), the Company will have no further obligations to
the Executive under this Agreement or otherwise (other than pursuant to any employee benefit plan).
(d) By the Company Without Cause; By the Executive for Good Reason. If the Company
terminates the Employment Period other than for Cause, Disability or death, or the Executive
terminates the Employment Period for Good Reason, the Executive will be entitled to the Separation
Benefits (as defined in Section 9(e)). Other than as set forth herein, the Company will have no
further obligations to the Executive under this Agreement or otherwise (other than pursuant to any
employee benefit plan).
If requested by the Company, the Executive will execute a customary general release in a form
satisfactory to the Company in furtherance of this Agreement and as a condition to the receipt of
any Separation Benefits. Nothing in this Section 9(d) will be deemed to operate or will operate as
a release, settlement or discharge of any liability of the Executive to the Company or others for
any action or omission by the Executive, including without limitation any actions which formed, or
could have formed, the basis for termination of the Executive’s employment for Cause.
(e) Separation Benefits. For purposes of this Agreement, “Separation Benefits” will
mean:
(i) payment by the Company to the Executive of a cash lump sum equal to:
| (A) | any accrued but unpaid Base Salary through the Date of Termination and all other unpaid amounts, if any, which the Executive has accrued and is entitled to as of the Date of Termination; | ||
| (B) | a pro-rata portion of the Executive’s target bonus for the fiscal year in which the Date of Termination occurs (such pro rata amount to be determined by multiplying such target bonus by a fraction, the numerator of which is the number of days of the then current fiscal year that have elapsed before the Date of Termination, and the denominator of which is 365); |
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| (C) | the Base Salary multiplied by two (2); | ||
| (D) | the Executive’s “annual target bonus” multiplied by two (2); and | ||
| (E) | an additional payment of $200,000; |
(ii) continued provision by the Company of coverage under the Company’s health
insurance plan for a period of 18 months beginning on the Date of Termination; and
(iii) all unvested Stock Options, Non-Performance RSUs and shares of non-performance
based Restricted Company Common Stock held by the Executive will become fully vested and, in
the case of the Stock Options, fully exercisable on the Date of Termination, and the
Executive will be entitled to exercise all such options until the earlier of (A) the second
anniversary of the Executive’s Date of Termination and (B) the expiration date of such
option set forth in the grant notice for the option award. For purposes of this Section
9(e), the Executive’s “annual target bonus” will be equal to the Executive’s Base Salary
then in effect.
Any cash payment pursuant this Section 9(e), payment of Non-Performance RSUs or issuance of
shares of non-performance based Restricted Company Common Stock pursuant to Section 9(e)(iii) will
be made by the Company within thirty days following the Date of Termination, except as may be
provided otherwise in Section 23.
(f) Liquidated Damages. The parties acknowledge and agree that damages suffered by
the Executive as a result of a termination by the Company without Cause will be extremely difficult
or impossible to establish or prove, and agree that the payments and benefits provided pursuant to
Section 9(d) will constitute liquidated damages for any breach of this Agreement by the Company
through the Date of Termination. The Executive agrees that, except for such other payments and
benefits to which the Executive may be entitled as expressly provided by the terms of this
Agreement or any applicable Company plan, such liquidated damages will be in lieu of all other
claims that the Executive may make with respect to the termination of the Executive’s employment,
the Employment Period or any such breach of this Agreement. In no event will the Executive be
obligated to seek other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement, and, except as specifically
provided in clause (ii) of Section 9(e), such amounts will not be reduced whether or not the
Executive obtains other employment.
10. Noncompetition and Nonsolicitation.
(a) Noncompetition. THIS SECTION 10(a) WILL HAVE NO FORCE OR EFFECT, AND WILL NOT BE
DEEMED A PART OF THIS AGREEMENT, DURING ANY AND ALL PERIODS IN WHICH THE EXECUTIVE PERFORMS
SERVICES AS AN EMPLOYEE OF THE COMPANY PRINCIPALLY IN THE STATE OF CALIFORNIA, BUT WILL BECOME
IMMEDIATELY EFFECTIVE IF AND TO THE EXTENT THE EXECUTIVE PERFORMS SERVICES AS AN EMPLOYEE OF THE
COMPANY PRINCIPALLY IN A JURISDICTION OTHER THAN THE STATE OF CALIFORNIA. The Executive
acknowledges that his initial and principal place of employment is Austin, Texas, and therefore,
this section 10 (a) is in force and effect on the Effective Date. The Executive further
acknowledges that in the course of the Executive’s employment with the Company and its Affiliates
and their predecessors, the Executive has and will continue to become familiar with the trade
secrets of, and other confidential information concerning, the Company and its Affiliates and their
predecessors, that the Executive’s services will be of special, unique and extraordinary value to
the Company and its Affiliates and that the Company’s ability to accomplish its purposes and to
successfully pursue its business plan and compete in the marketplace depends substantially on the
skills and expertise of the Executive. Therefore, and in further consideration of the compensation
being paid to the Executive hereunder, the Executive agrees that, during the Employment Period and
for a period of twelve months following the termination of the Employment Period for any reason
(the “Restricted Period”), the Executive will not directly or indirectly own, manage, control,
participate in, consult with, render services for, or in any manner engage in any business
competing with the businesses of the Company or its Affiliates, in any country where the Company or
its Affiliates conducts business; provided, however, that passive investments
amounting to no more than three percent of the voting equity of a business and the Executive’s
other current positions and activities described in Section 3 will not be prohibited hereby.
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(b) Nonsolicitation. During the Restricted Period, the Executive will not directly or
indirectly through another entity (i) induce or attempt to induce any employee of the Company or
any Affiliate to leave the employ of the Company or such Affiliate, or in any way willfully
interfere with the relationship between the Company or any Affiliate and any employee thereof, or
(ii) induce or attempt to induce any customer, supplier, licensee or other business relation of the
Company or any Affiliate to cease doing business with the Company or such Affiliate, or in any way
interfere with the relationship between any such customer, supplier, licensee or business relation
and the Company or any Affiliate.
(c) Enforcement. If, at the time of enforcement of this Section 10, a court holds
that the restrictions stated herein are unreasonable under circumstances then existing, the parties
hereto agree that the maximum duration, scope or geographical area reasonable under such
circumstances will be substituted for the stated period, scope or area and that the court will be
allowed to revise the restrictions contained herein to cover the maximum duration, scope and area
permitted by law. If the provisions of this Section 10 will be deemed illegal by any jurisdiction,
the provisions in this Section 10 will be deemed ineffective within such jurisdiction. Because the
Executive’s services are unique and because the Executive has access to confidential information,
the parties hereto agree that money damages would be an inadequate remedy for any breach of any
provision of this Agreement. Therefore, in the event of a breach or threatened breach by the
Executive of any provision of this Agreement, the Company may, in addition to other rights and
remedies existing in its favor, apply to any court of competent jurisdiction for specific
performance and/or injunctive or other relief in order to enforce, or prevent any violations of,
the provisions hereof (without posting a bond or other security).
11. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and except as set forth below,
in the event it will be determined that any payment or distribution by the Company or its
Affiliates to or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but determined without regard
to any additional payments required under this Section 11) (a “Payment”) would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Executive will
be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after
payment by the Executive of all taxes (including any interest or penalties imposed with respect to
such taxes), and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the
foregoing provisions of this Section 11(a), if it will be determined that the Executive is entitled
to a Gross-Up Payment, but that the Payments do not exceed 110% of the greatest amount (the
“Reduced Amount”) that could be paid to the Executive such that the receipt of the Payments would
not give rise to any Excise Tax, then no Gross-Up Payment will be made to the Executive and the
Payments, in the aggregate, will be reduced to the Reduced Amount. In all cases, any Gross-Up
Payment made in accordance with this Section 11 will be made no later than the end of the calendar
year in which the Executive pays the Excise Tax.
(b) Subject to the provisions of Section 11(c), all determinations required to be made under
this Section 11, including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such determinations, will be
made by Deloitte & Touche LLP or such other nationally recognized public accounting firm agreed to
by the Executive and the Company (the “Accounting Firm”) which will provide detailed supporting
calculations both to the Company and the Executive within fifteen business days of the receipt of
notice from the Executive that there has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as an accountant or auditor for the
individual, entity or group (other than the Company) effecting the change of control resulting in
an Excise Tax, the Executive will appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm will then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm will be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 11, will be paid by the Company to
the Executive within five days of the receipt of the Accounting Firm’s determination. Any
determination by the Accounting Firm will be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will
not have been made by the Company should have been made (“Underpayment”), consistent with the
calculations required to be made hereunder. In the
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event that the Company exhausts its remedies pursuant to Section 11(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm will determine the
amount of the Underpayment that has occurred and any such Underpayment will be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive will notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the Company of the Gross-Up Payment.
Such notification will be given as soon as practicable but no later than ten business days after
the Executive is informed in writing of such claim and will apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The Executive will not pay
such claim before the expiration of the thirty-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in writing before the
expiration of such period that it desires to contest such claim, the Executive will:
(i) give the Company any information reasonably requested by the Company relating to such
claim;
(ii) take such action in connection with contesting such claim as the Company will reasonably
request in writing from time to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company will bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection with such contest and
will indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income
tax (including interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 11(c), the Company will control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of such claim and may,
at its sole option, either direct the Executive to pay the tax claimed and xxx for a refund or
contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial jurisdiction and in one
or more appellate courts, as the Company will determine; provided, however, that if
the Company directs the Executive to pay such claim and xxx for a refund, the Company will advance
the amount of such payment to the Executive, on an interest-free basis and will indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is limited solely to such contested
amount. Further, the Company’s control of the contest will be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive will be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to
Section 11(c), the Executive becomes entitled to receive any refund with respect to such claim, the
Executive will (subject to the Company’s complying with the requirements of Section 11(c)) promptly
pay to the Company the amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 11(c), a determination is made that the Executive will not be
entitled to any refund with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund before the expiration of thirty days after
such determination, then such advance will be forgiven and will not be required to be repaid and
the amount of such advance will offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
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12. Notices. All notices, demands, requests or other communications required or
permitted to be given or made hereunder will be in writing and will be delivered, telecopied or
mailed by first class registered or certified mail, postage prepaid, addressed as follows:
(a) If to the Company:
Conexant Systems, Inc.
0000 XxxXxxxxx Xxxxxxxxx, Xxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxx Xxxxxx, Senior Vice President, Human Resources
0000 XxxXxxxxx Xxxxxxxxx, Xxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxx Xxxxxx, Senior Vice President, Human Resources
(b) If to the Executive:
at the address on the books and records of the Company at the time of such notice, or to such other
address as may be designated by either party in a notice to the other. Each notice, demand,
request or other communication that will be given or made in the manner described above will be
deemed sufficiently given or made for all purposes three days after it is deposited in the U.S.
mail, postage prepaid, or at such time as it is delivered to the addressee (with the return
receipt, the delivery receipt, the answer back or the affidavit of messenger being deemed
conclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon
presentation.
13. Severability. The invalidity or unenforceability of any one or more provisions of
this Agreement will not affect the validity or enforceability of the other provisions of this
Agreement, which will remain in full force and effect.
14. Survival. It is the express intention and agreement of the parties hereto that
the provisions of Sections 7, 9, 10, 11, 12 and 23 will survive the termination of employment of
the Executive. In addition, all obligations of the Company to make payments hereunder will survive
any termination of this Agreement on the terms and conditions set forth herein.
15. Assignment. The rights and obligations of the parties to this Agreement will not
be assignable or delegable, except that (i) in the event of the Executive’s death, the personal
representative or legatees or distributees of the Executive’s estate, as the case may be, will have
the right to receive any amount owing and unpaid to the Executive hereunder, and (ii) the rights
and obligations of the Company hereunder will be assignable and delegable in connection with any
merger, consolidation or sale of all or substantially all of the assets of the Company and any
similar event with respect to any successor corporation. Notwithstanding anything herein to the
contrary, the rights and obligations of the Company hereunder will inure to the benefit of, and
will be binding upon, any successor to the Company or its business by merger or otherwise, whether
or not there is an express assignment, delegation or assumption of such rights and obligations.
16. Binding Effect. Subject to any provisions hereof restricting assignment, this
Agreement will be binding upon the parties hereto and will inure to the benefit of the parties and
their respective heirs, devisees, executors, administrators, legal representatives, successors and
assigns.
17. Amendment; Waiver. This Agreement will not be amended, altered or modified except
by an instrument in writing duly executed by the parties hereto. No waiver by either of the
parties hereto of a breach of or a default under any of the provisions of this Agreement will
thereafter be construed as a waiver of any subsequent breach or default of a similar nature. The
failure of either of the parties, on one or more occasions, to enforce any of the provisions of
this Agreement or to exercise any right or privilege hereunder will not be construed as a waiver of
any such provisions, rights or privileges hereunder, or a waiver of any subsequent breach or
default of a similar nature.
18. Headings. Section and subsection headings contained in this Agreement are
inserted for convenience of reference only, will not be deemed to be a part of this Agreement for
any purpose, and will not in any way define or affect the meaning, construction or scope of any of
the provisions hereof.
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19. Governing Law. This Agreement, the rights and obligations of the parties hereto,
and any claims or disputes relating thereto, will be governed by and construed in accordance with
the laws of the State of Texas (but not including the choice of law rules thereof).
20. Entire Agreement. This Agreement constitutes the entire agreement between the
parties respecting the employment of the Executive, there being no representations, warranties or
commitments between the parties except as set forth herein.
21. Counterparts. This Agreement may be executed in two or more counterparts, each of
which will be an original and all of which will be deemed to constitute one and the same
instrument.
22. Legal Expenses. The Company will pay or reimburse the Executive for reasonable
attorneys’ fees incurred by the Executive in connection with the negotiation of this Agreement and
the Executive’s commencement of employment hereunder. Any such reimbursement will be made no later
than the calendar year following the year in which such expense was incurred.
23. Provisions Regarding Code Section 409A.
(a) Six-Month Wait for Key Employees Under Separation from Service. To the extent any
amount payable under this Agreement constitutes amounts payable under a “nonqualified deferred
compensation plan” (as defined in Code Section 409A) following a “separation from service” (as
defined in Code Section 409A), including any amount payable under Sections 9 or 11 of this
Agreement, then, notwithstanding any other provision in this Agreement to the contrary, such
payment will not be made until the date that is six months following the Executive’s “separation
from service,” but only if the Executive is then deemed to be a “specified employee” under Code
Section 409A as of the date he “separates from service”.
(b) Necessary Amendments Due to Code Section 409A. The parties hereto acknowledge
that the requirements of Code Section 409A are still being developed and interpreted by government
agencies, that certain issues under Code Section 409A remain unclear at this time, and that the
parties hereto have made a good faith effort to comply with current guidance under Code Section
409A. Notwithstanding anything in this Agreement to the contrary, in the event that amendments to
this Agreement are necessary in order to comply with future guidance or interpretations under Code
Section 409A, including amendments necessary to ensure that compensation will not be subject to
Code Section 409A, the Executive agrees that the Company will be permitted to make such amendments,
on a prospective and/or retroactive basis, in its sole discretion, provided that it has first
negotiated with the Executive on a good faith basis to construct an amendment that would be
mutually satisfactory to the parties hereto.
(c) Gross-Up for Code Section 409A Liabilities. Notwithstanding anything in this
Agreement to the contrary, in the event that it will be determined that any compensation, payment
or distribution by the Company or its Affiliates to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this Agreement or
otherwise) would be subject to the interest and additional 20% tax imposed by Code Section 409A (a
“409A Amount”), then the Executive will be entitled to receive a payment (a “409A Gross-Up
Payment”) in an amount such that after payment by the Executive of the interest and the additional
20% tax imposed under Code Section 409A(a)(1)(B) (including any interest and additional 20% tax
imposed with respect to such payment) and any income taxes imposed on the 409A Gross-Up Payment
only (and any interest and penalties imposed with respect thereto), the Executive retains an amount
equal to the 409A Amount. Any 409A Gross-Up Payment will be made no later than the end of the
calendar year in which the Executive pays the 409A Amount.
24. Definitions.
“Affiliate” means any entity from time to time designated by the Board and any other
entity directly or indirectly controlling or controlled by or under common control with the
Company. For purposes of this definition: “control” means the power to direct the management and
policies of such entity, whether through the ownership of voting securities, by contract or
otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
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“Board” means the board of directors of the Company.
“Cause” means: (i) the Executive’s indictment or conviction of or entering into a
plea of guilty or no contest to a felony or a crime involving moral turpitude or the intentional
commission of any other act or omission involving dishonesty or fraud that is materially injurious
to the Company or any of its Affiliates; (ii) the Executive’s substantial and repeated failure to
perform duties of the office(s) held by the Executive, as reasonably directed by the Board, if such
failure is not cured within thirty days after the Executive receives written notice thereof; (iii)
gross negligence or willful misconduct in the performance of the Executive’s duties which
materially injures the Company or its reputation; or (iv) the Executive’s willful breach of the
material covenants of this Agreement.
“Change of Control” means:
(i) The acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) (a
Person) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 30% or more of either (A) the then outstanding shares of Common Stock of the Company (the
Outstanding Company Common Stock) or (B) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of directors (the Outstanding
Company Voting Securities); provided, however, that for purposes of this subparagraph (i), the
following acquisitions will not constitute a Change of Control: (w) any acquisition directly from
the Company, (x) any acquisition by the Company, (y) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation controlled by the
Company or (z) any acquisition pursuant to a transaction which complies with clauses (A), (B)
and (C) of subsection (iii) of this definition; or
(ii) Individuals who, as of the date hereof, constitute the Board of Directors (the Incumbent
Board) cease for any reason to constitute at least a majority of the Board of Directors; provided,
however, that any individual becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company’s shareowners, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board of Directors; or
(iii) Consummation of a reorganization, merger or consolidation or sale or other disposition
of all or substantially all of the assets of the Company or the acquisition of assets of another
entity (a Corporate Transaction), in each case, unless, following such Corporate Transaction, (A)
all or substantially all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such Corporate
Transaction of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the
Corporation or such corporation resulting from such Corporate Transaction) beneficially owns,
directly or indirectly, 30% or more of, respectively, the then outstanding shares of common stock
of the corporation resulting from such Corporate Transaction or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that such ownership
existed prior to the Corporate Transaction, and (C) at least a majority of the members of the board
of directors of the corporation resulting from such Corporate Transaction were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the action of the
Board of Directors, providing for such Corporate Transaction; or
(iv) Approval by the Company’s shareowners of a complete liquidation or dissolution of the
Company.
11
“Code” means the Internal Revenue Code of 1986, as amended.
“Date of Termination” means: (i) if the Executive’s employment is terminated by the
Executive’s death, the date of the Executive’s death; (ii) if the Executive’s employment is
terminated because of the Executive’s Disability, thirty days after Notice of Termination, provided
that the Executive will not have returned to the performance of the Executive’s duties on a
full-time basis during such thirty-day period; (iii) if the Executive’s employment is terminated by
the Company for Cause, the date specified in the Notice of Termination; (iv) if the Executive’s
employment is terminated during the Employment Period for any other reason, the date specified in
the Notice of Termination; or (v) if the Executive’s employment is terminated due the non-renewal
of the Employment Period in accordance with Section 2 hereof, the date on which the Employment
Period expires by its terms.
“Good Reason” means, in the absence of a written consent of the Executive: (i) a
material diminution in the Executive’s authority, duties or responsibilities, as contemplated by
Section 3 of this Agreement; (ii) a material diminution in the Executive’s Base Salary; or (iii)
the Company’s requiring the Executive to be based at any office or location more than fifty miles
from that identified in Section 4 hereof. Notwithstanding the foregoing, (A) the Executive must
notify the Company in writing of any event or condition described in subsection (i), (ii) or (iii)
hereof within 90 days of the initial existence of such event or condition, (B) the Company will
have at least 30 days after receipt of such notice from the Executive to cure such initial event or
condition, and (C) the Executive must separate from service with the Company within 90 days after
the end of the cure period described in (B) hereof.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or have caused this
Agreement to be duly executed on their behalf, as of the day and year first hereinabove written.
| CONEXANT SYSTEMS, INC. |
||||
| By: | /s/ XXXXXXX X. XXXXXX | |||
| Name: | Xxxxxxx X. Xxxxxx | |||
| Title: | Senior Vice President, Human Resources | |||
| XXXXXX XXXXXX |
||||
| /s/ XXXXXX XXXXXX | ||||
| Date: June 21, 2007 | ||||
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