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EXHIBIT 10.6
EMPLOYMENT AGREEMENT
(This Agreement supersedes any and all Employment Agreements which were executed
prior to May 22, 1997.)
This Agreement is made by and between Zilog, Inc., a Delaware corporation
(hereinafter "Zilog") and Xxxxxxx X. Xxxxxxxx (hereinafter "Xxxxxxxx"), whereby
Zilog and Xxxxxxxx agree that Xxxxxxxx accepts employment as Senior Vice
President, Worldwide Operations of Zilog, under the following terms and
conditions:
1. Term. Zilog and Xxxxxxxx agree that Xxxxxxxx will be Senior Vice
President, Worldwide Operations of Zilog for a period of twenty four
(24) months, commencing on November 6, 1996 and ending November 5, 1998.
This Agreement may be extended upon written agreement of Zilog and
Xxxxxxxx. If during the term of this Agreement a "Change in Control" of
Zilog occurs, the term of this Agreement will be extended for a period
of twenty four (24) months commencing on the earlier of the effective
date of the Change in Control or the date this Agreement would otherwise
expire; provided, however, in the case of a Change in Control that is
subject to an agreement that is executed before the date this Agreement
would otherwise expire but becomes effective on a closing date that will
occur after the date this Agreement would otherwise expire, there will
be no such automatic twenty four month extension if the closing date
does not occur within six (6) months after the date this Agreement would
otherwise expire. Under these circumstances the term of this Agreement
shall be extended six (6) months from the date it would otherwise
expire.
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For purposes of this Agreement, "Change in Control" shall mean the
occurrence of any of the following events:
(i) A change in the composition of the board of directors of Zilog,
Inc., as a result of which fewer than two-thirds of the
incumbent directors are directors who either:
(A) Had been directors of Zilog, Inc. twenty-four (24)
months prior to such change; or
(B) Were elected, or nominated for election, to the board of
directors of Zilog, Inc. with the affirmative votes of
at least a majority of the directors who had been
directors of Zilog, Inc. twenty-four (24) months prior
to such change and who were still in office at the time
of the election or nomination;
(ii) Any "person" (as such term is used in sections 13 (d) and 14(d)
of the Exchange Act) other than Zilog, Inc. (or its designee),
by the acquisition or aggregation of securities is or becomes
the beneficial owner, directly or indirectly, of securities of
Zilog, Inc. representing twenty percent (20%) or more of the
combined voting power of Zilog, Inc.'s then outstanding
securities ordinarily (and apart from rights accruing under
special circumstances) having the right to vote at elections of
directors;
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(iii) the sale of all or substantially all of the assets of Zilog,
Inc. to a third party who is not an affiliate (including a
parent or subsidiary) of Zilog, Inc.; or
(iv) Any acquisition of stock, tender offer, merger, consolidation,
sale, reorganization, dissolution or other such event or series
of events, which in the opinion of a majority of the members of
the board of Zilog, Inc. (as reflected in a written resolution
of the board of Zilog, Inc.) has resulted in a change of control
of Zilog, Inc.
2. Extent of Services. Xxxxxxxx shall devote his entire time, attention and
energies to his position as Senior Vice President, Worldwide Operations
of Zilog and shall not, during the term of this Employment Agreement be
engaged in any other business activity whether or not such business
activity is pursued for gain, profit or other pecuniary advantage;
provided, that Xxxxxxxx may engage in personal investment activities
consistent with Zilog's Conflict of Interest Policy.
3. Compensation.
A. Salary. For each month of employment, Zilog will pay, or cause
to be paid, to Xxxxxxxx the sum of at least $18,375.00 as base
salary. Such sum will be paid in monthly installments or such
other normal periodic payment schedule
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as Zilog may establish for its executives. Xxxxxxxx'x salary
will be reviewed periodically in accordance with established
salary review procedures and adjustments to his salary, if any,
will be based upon such reviews.
B. Employee Performance Incentive Plan and Executive Bonus Plan.
Xxxxxxxx will be eligible to receive Awards and Payouts in
accordance with the terms of the Zilog Employee Performance
Incentive Plan (hereinafter "EPIP"), and the EPIP Executive
Bonus Plan (hereinafter "Executive Bonus") as such plans may be
modified from time to time and as modified by this Agreement.
C. Zilog Employee Stock Option Plan. Zilog has provided to Xxxxxxxx
stock options under the 1990 Zilog Employee Stock Option Plan
(hereinafter "ZSOP") and the 1994 Long Term Incentive Plan
(hereinafter "LTIP"), copies of such plans being attached
hereto. Vesting will continue in accordance with the plan
provisions during the term of this Agreement.
4. Benefits. As an employee of Zilog, Xxxxxxxx will be entitled to such
benefits as Zilog normally provides its employees. In addition, Zilog
will provide Xxxxxxxx with Directors and Officers (D & O) insurance in
an amount deemed appropriate by the Company.
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5. Company Policies. Xxxxxxxx agrees to be bound by all Zilog Company
Policies applicable to its employees including but not limited to
Business Ethics, Conflict of Interest, Proprietary Information and
Antitrust Compliance, and he agrees to sign any such documents as Zilog
requests evidencing such agreement.
6. Termination of Employment. Zilog reserves the right to terminate the
employment of Xxxxxxxx at any time during the term of this Agreement,
for any reason or for no reason, with or without cause, by giving
Xxxxxxxx at least thirty (30) days written notice of such termination or
compensation in lieu of notice; and Xxxxxxxx may terminate his
employment by giving at least thirty (30) days written notice to Zilog.
Zilog reserves the right to accelerate any deferred resignation date
given it by Xxxxxxxx, and any such acceleration of such date will not
alter the character of such termination from voluntary to involuntary.
7. Payment Upon Termination. Notwithstanding any other provisions of this
Agreement to the contrary, Zilog's obligations to Xxxxxxxx, if his
employment with Zilog is terminated prior to the end of this Agreement,
shall be as follows:
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A. If Xxxxxxxx voluntarily resigns his employment for 1) other than
Good Reason (as defined in Paragraph 7.B. below) or 2) other
than Retirement (as defined in Paragraph 7.C. below) or 3) other
than the sale, merger or change in ownership of Zilog (as
defined in Paragraph 7.G below) prior to the termination date of
this Agreement, he will be entitled to: (1) base salary then due
and owing for services previously performed, (2) Payouts under
EPIP which become payable to Xxxxxxxx pursuant to the terms of
EPIP prior to the effective date of resignation, and (3)
Payouts under the Executive Bonus which become payable to
Xxxxxxxx pursuant to the terms of the Executive Bonus prior to
the effective date of resignation. Upon payment of the foregoing
items, Zilog will have no further obligation to Xxxxxxxx.
B. If Xxxxxxxx voluntarily resigns his employment for Good Reason,
as defined herein, prior to the termination date of this
Agreement, he will be entitled to the benefits provided in
Paragraph 7.D. below. Good Reason, as used herein, shall mean:
(i) a reduction in Xxxxxxxx'x authority, responsibility or
status as Senior Vice President, Worldwide Operations
such that Xxxxxxxx ceases to be an "officer" as that
term is defined in the regulations under Section 16 of
the Securities Exchange Act of 1934;
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(ii) a reduction in Xxxxxxxx'x base salary other than in
connection with a general reduction applicable to the
Vice Presidents of Zilog who are members of the
Management Committee;
(iii) a reduction in form and effect or cessation of any
benefit or compensation plan, except EPIP, the Executive
Bonus, the Deferred Compensation Plan, or those that may
occur for the Zilog employee group in general in accord
with a general policy change;
(iv) a requirement to relocate, except for office relocations
that would not increase Xxxxxxxx'x oneway commute
distance by more than 20 miles;
(v) any material breach of this Agreement on the part of
Zilog not fully remedied by Zilog within sixty (60) days
after written notice by Xxxxxxxx of such breach.
C. If Xxxxxxxx retires as defined in PM60-05 prior to the
termination date of this Agreement, he will be entitled to the
following at the effective date of retirement: (1) base salary
then due and owing for services previously performed, (2)
Payouts under EPIP for Awards made prior to the effective date
of the retirement, and (3) Payouts under the Executive Bonus for
Awards made prior to the effective date
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of the retirement. EPIP and Executive Bonus Awards may also be
granted at Zilog's sole discretion for the year in which the
retirement occurs, prorated to the date of the retirement.
Payouts for all Awards will be made at the same time and on the
same schedule as those for active employees. Upon the payment of
the foregoing items, Zilog will have no further obligation to
Xxxxxxxx.
D. If Zilog terminates Xxxxxxxx'x employment during the term of
this Agreement other than for Cause or Detrimental Activity as
defined in 7.E. below, he will be entitled to receive the
following: (1) the then current base salary for the period
remaining in this Agreement, (2) Payouts under EPIP for Awards
made prior to the effective date of termination of employment
which Payouts are payable to Xxxxxxxx pursuant to the terms of
EPIP prior to expiration of the term of this Agreement, and (3)
Payouts under the Executive Bonus for Awards made prior to the
effective date of termination of employment which Payouts are
payable to Xxxxxxxx pursuant to the terms of the Executive Bonus
prior to expiration of the term of this Agreement. Xxxxxxxx will
not be eligible for Awards under EPIP or the Executive Bonus
made after the date on which his employment at Zilog ceased or
for Payouts made on any Awards after the
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expiration date of this Agreement. Vesting of common stock and
stock options granted under ZSOP and LTIP will continue for the
period remaining in this Agreement. Upon the payment of the
foregoing items, Zilog will have no further obligation to
Xxxxxxxx.
E. If Zilog terminates Xxxxxxxx during the term of this Agreement
for Cause, or for Detrimental Activity as defined herein, Zilog
will have no further monetary obligation to Xxxxxxxx other than:
(1) any base salary then due and owing for services previously
performed, (2) Payouts under EPIP which become payable to
Xxxxxxxx pursuant to the terms of EPIP prior to the effective
date of termination, and (3) Payouts under the Executive Bonus
which become payable to Xxxxxxxx pursuant to the terms of the
Executive Bonus prior to the effective date of termination.
Cause or Detrimental Activity shall be a willful violation of a
major company policy, conviction of any criminal or civil law
involving moral turpitude, willful misconduct which results in a
material reduction in Xxxxxxxx'x effectiveness in the
performance of his duties, or willful and reckless disregard for
the best interests of the Company.
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F. If Xxxxxxxx ceases to be an employee of Zilog during the term of
this Agreement because of total and permanent disability or
death, Zilog's obligations to Xxxxxxxx or his beneficiaries will
be limited solely to: (1) any base salary then due and owing for
services previously performed, (2) Payouts in accordance with
the terms of EPIP, (3) Payouts in accordance with the terms of
the Executive Bonus, and (4) any benefits including ZSOP and
LTIP benefits normally provided by Zilog to its employees due to
or on account of total and permanent disability or death.
G. If Xxxxxxxx leaves his employment, either voluntarily for Good
Reason or involuntarily for reasons other than for Cause or
Detrimental Activity, following the effective date of a Change
in Control prior to the termination date of this Agreement, he
will be entitled to receive the following; (1) the then current
base salary for the period remaining in this Agreement, payable
in a cash lump sum not more than five (5) business days
following the date of leaving employment, (2) Payouts under EPIP
for Awards made prior to the effective date of termination of
employment, and (3) Payouts under the Executive Bonus for Awards
made prior to the effective date of termination of employment.
EPIP and Executive Bonuses shall also be awarded for the year in
which the termination of employment occurs and shall be
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calculated in accordance with the terms of such arrangements
assuming the date of Xxxxxxxx'x termination is the last day of
Zilog's fiscal year and based on Zilog's financial performance
for the portion of such fiscal year that includes calculated
financials for Zilog as a separate entity. All of the above EPIP
and Executive Bonus Awards shall be paid in a cash lump sum
within five (5) business days of the date of Xxxxxxxx'x
termination of employment. All outstanding unvested stock
options whether granted under ZSOP and LTIP or otherwise will
continue to vest for the period of time remaining in the
Agreement (the "Continuation Period"). Regardless of the
provisions of ZSOP, LTIP or any other plans or agreements, the
Continuation Period shall be counted as employment with Zilog
for purposes of vesting under all options and for purposes of
determining the expiration date of any stock options held by
Xxxxxxxx when his employment terminates. During the remaining
term of this Agreement Xxxxxxxx (and, where applicable, his
dependents) shall be entitled to continue participation in the
group insurance plans maintained by Zilog, including life,
disability and health insurance programs, as if he were still an
employee of Zilog. To the extent that Zilog finds it impossible
to cover Xxxxxxxx under its group insurance policies during such
period, Zilog shall provide Xxxxxxxx with individual policies
which offer at least
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the same level of coverage and which impose not more than the
same costs on him as if he were still an employee of Zilog. The
foregoing notwithstanding, in the event that Xxxxxxxx becomes
eligible for comparable group insurance coverage in connection
with new employment, the coverage provided by Zilog under this
paragraph shall terminate immediately. Any group health
continuation coverage that Zilog is otherwise required to offer
under the Consolidated Omnibus Budget Reconciliation Act of 1986
("COBRA") shall be offered when coverage under this paragraph
terminates.
Except as provided in the paragraph immediately following, upon
payment of the foregoing items, Zilog will have no further
obligation to Xxxxxxxx.
In the event that it is determined that any payment or
distribution of any type to or for the benefit of Xxxxxxxx made
by Zilog, by any of its affiliates, by any person who acquires
ownership or effective control of Zilog or ownership of a
substantial portion of Zilog's assets (within the meaning of
section 280G of the Internal Revenue Code of 1986, as amended,
and the regulations thereunder (the "Code")) or by any affiliate
of such person, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise (the "Total Payments"), would be subject to the excise
tax imposed by section 4999 of the Code or any interest or
penalties with respect to
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such excise tax (such excise tax, together with any such
interest or penalties, are collectively referred to as the
"Excise Tax"), then Xxxxxxxx shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount that
shall fund the payment by Xxxxxxxx of any Excise Tax on the
Total Payments as well as all income taxes imposed on the
Gross-Up Payment, any Excise Tax imposed on the Gross-Up Payment
and any interest or penalties imposed with respect to taxes on
the Gross-Up Payment or any Excise Tax.
All mathematical determinations and all determinations of
whether any of the Tota1 Payments are "parachute payments"
(within the meaning of section 280G of the Code) that are
required to be made hereunder, including all determinations of
whether a Gross-Up Payment is required and of the amount of such
Gross-Up Payment, shall be made by the independent auditors
retained by Zilog most recently prior to the Change in Control
(the "Auditors"), who shall provide their determination (the
"Determination"), together with detailed supporting
calculations regarding the amount of any Gross-Up Payment and
any other relevant matters, both to Zilog and to Xxxxxxxx within
seven (7) business days of Xxxxxxxx'x termination date, if
applicable, or such earlier time as is requested by Zilog or by
Xxxxxxxx (if Xxxxxxxx reasonably believes that any of the Total
Payments may be subject to the Excise Tax) . If the Auditors
determine that no Excise Tax is payable by Xxxxxxxx, it shall
furnish Xxxxxxxx with
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a written statement that such Auditors have concluded that no
Excise Tax is payable (including the reasons therefor) and that
Xxxxxxxx has substantial authority not to report any Excise Tax
on his federal income tax return. If a Gross-Up Payment is
determined to be payable, it shall be paid to Xxxxxxxx within
five (5) business days after the Determination is delivered to
Zilog or Xxxxxxxx. Any determination by the Auditors shall be
binding upon Zilog and Xxxxxxxx, absent manifest error.
As a result of uncertainty in the application of section 4999 of
the Code at the time of the initial determination by the
Auditors hereunder, it is possible that Gross-Up Payments not
made by Zilog should have been made ("Underpayments") or that
Gross-Up Payments will have been made by Zilog which should not
have been made ("Overpayments"). In either event, the Auditors
shall determine the amount of the Underpayment or Overpayment
that has occurred. In the case of an Underpayment, the amount of
such Underpayment shall promptly be paid by Zilog to or for the
benefit of Xxxxxxxx. In the case of an Overpayment, the Employee
shall, at the direction and expense of Zilog, take such steps as
are reasonably necessary (including the filing of returns and
claims for refund), follow reasonable instructions from, and
procedures established by, Zilog and otherwise reasonably
cooperate with Zilog to correct such Overpayment; provided,
however, that (a.) Xxxxxxxx shall in
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no event be obligated to return to Zilog an amount greater than the
net after-tax portion of the Overpayment that Xxxxxxxx has retained
or has recovered as a refund from the applicable taxing authorities
and (b.) this provision shall be interpreted in a manner consistent
with the intent of this excise tax restoration provision which is to
make Xxxxxxxx whole, on an after-tax basis, for the application of
the Excise Tax, it being understood that the correction of an
Overpayment may result in Xxxxxxxx'x repaying to Zilog an amount
which is less than the Overpayment.
8. Xxxxxxxx Representations. Xxxxxxxx represents to Zilog that to the best of
his knowledge he is under no obligation to any employer or third party
which would preclude his full, complete and unfettered discharge of his
duties under this Agreement.
9. Notices. Any notices required to be given hereunder shall be in writing,
and if by Zilog shall be addressed to Xxxxxxxx as indicated in Zilog's
personnel records or such other address as Xxxxxxxx shall specify in
writing and if by Xxxxxxxx to Zilog at:
Zilog, Inc.
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Vice President, Human Resources and
Administration
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Such addresses may be changed by written notice from either Zilog or
Xxxxxxxx, to the other.
10. Amendment. This Agreement may be amended only in writing, signed by both
parties hereto.
11. Successors and Assigns. This Agreement shall inure to the benefit of and
be binding upon Zilog, its successors and assigns. Xxxxxxxx may not
assign, transfer, pledge or hypothecate any of his rights or obligations
hereunder, Awards or Payouts under EPIP or the Executive Bonus or other
compensation to which he may be entitled hereunder. Zilog will require any
successor (whether direct or indirect, by purchase, merger, consolidation,
liquidation or otherwise) to all or substantially all of the business
and/or assets of Zilog to assume expressly and agree, in substance and
form satisfactory to Xxxxxxxx, to perform this Agreement in the same
manner and to the same extent Zilog would be required to perform it if no
succession had taken place.
12. Waiver of Breach. The waiver by Zilog of a breach of any provision of this
Agreement by Xxxxxxxx shall not operate or be construed as a waiver of any
subsequent breach by Xxxxxxxx.
13. Severability. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other
provision hereof.
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14. Entire Agreement. This entire Agreement consists of this document,
together with the following documents:
A. EPIP, attached as Exhibit I;
B. Executive Bonus, attached as Exhibit II:
C. Zilog Employee Stock Option Plan, attached as Exhibit III;
D. Zilog 1994 Long Term Incentive Plan, attached as Exhibit IV;
E. Employee Proprietary Rights and Non-Disclosure Agreement, attached
as Exhibit V;
F. Conflict of Interest Statement, attached as Exhibit VI:
G. Statement addressed to "Human Resources," attached as Exhibit VII;
H. Policy on Business Ethics, attached as Exhibit VIII; and
I. PM60-05, attached as Exhibit IX.
15. Governing Law. This Employment Agreement shall be governed by the laws of
the State of California, without regard to conflict of laws principles.
Executed effective May 22, 1997
By /s/ XXXXXXX X. XXXXXXXX By /s/ X. X. XXXX, PRESIDENT AND CEO
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Xxxxxxx X. Xxxxxxxx X. X. Xxxx, President and CEO
Dated: 22 May 1997 Dated: 5-22-97
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