EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, entered into as of this 8th day of July,
1998, is made by and between VLSI TECHNOLOGY, INC., a Delaware corporation
(hereinafter the "Company"), and XXXXXX X. XXXXX (hereinafter "Executive").
Certain capitalized terms used in this Agreement are defined in
Article 8.
RECITALS
WHEREAS, Executive is currently employed as the Chief Executive
Officer of the Company; and
WHEREAS, the Company and Executive have entered into that certain
Agreement (the "Services Agreement") dated October 31, 1995, and that
certain Executive Change in Control Severance Benefits Agreement (the
"Change in Control Agreement") dated as of the 26th day of April, 1996, and
that certain Executive Salary Continuation Agreement (the "Salary
Agreement") effective December 20, 1996, and that certain Amendment to
Change in Control Agreement and Salary Continuation Agreement (the
"Amendment") dated as of the 10th day of June, 1998 (all such agreements
being collectively referred to hereafter as the "Prior Agreements"); and
WHEREAS, the Company and Executive wish to set forth in this Agreement
the terms and conditions of the Prior Agreements, with the intent that this
Agreement shall thereupon supersede the terms and conditions of the Prior
Agreements, and to make such additional changes and clarifications to the
Prior Agreements as mutually agreed to by both the Company and Executive.
NOW, THEREFORE, the Company and Executive, in consideration of the
mutual promises set forth herein, agree as follows:
ARTICLE 1
EFFECT OF AGREEMENT
1.1 Effect of Agreement. This Agreement shall be effective as of
July 8, 1998 (the "Effective Date") and shall remain in effect so long as
Executive is employed by the Company; provided, however, that the rights
and obligations of the parties hereto contained in Articles 6 and 7 of this
Agreement, and as otherwise explicitly provided in this Agreement, shall
survive any termination of this Agreement until such time as such duty or
obligation is satisfied in full. This Agreement shall supersede the Prior
Agreements as of the Effective Date.
1.2 Consideration. The duties and obligations of the Company to
Executive under this Agreement shall be in consideration of Executive's
continued employment with the Company.
ARTICLE 2
EMPLOYMENT DUTIES
2.1 Title/Responsibilities. Executive hereby accepts the terms of
this Agreement and agrees to continue to serve as the Chief Executive
Officer of the Company and Chairman of the Company's Board of Directors
(the "Board"). Executive shall report directly to the Board. Executive
shall have all powers and duties commensurate with such position, including
but not limited to hiring personnel necessary to carry out the
responsibilities for such position.
2.2 Full-Time Attention. Executive shall devote his best efforts
and his full business time and attention to the performance of the services
customarily incident to such office and to such other services as the Board
may reasonably request, provided that Executive may also serve on the board
of directors of one or more other companies with the prior consent of the
Compensation Committee of the Board, which shall not be unreasonably
withheld.
2.3 Other Activities. Except upon the prior consent of the
Compensation Committee of the Board, Executive shall not during the period
of this Agreement engage, directly or indirectly, in any other business
activity (whether or not pursued for pecuniary advantage) that is or may be
competitive with, or that might place him in a competing position to that
of the Company or any other corporation or entity that directly or
indirectly controls, is controlled by, or is under common control with the
Company (an "Affiliated Company"), provided that Executive may own less
than five percent (5%) of the outstanding securities of any such publicly
traded competing corporation. Nothing in this Agreement is intended to
prevent Executive from accepting employment with another employer, or
providing other services to another business, after Executive's departure
from the Company.
2.4 Directorship. Executive will be nominated for re-election to
the Company's Board and to continue serving as Chairman of the Board
throughout the time that this Agreement is in effect. While he remains an
employee of the Company, Executive agrees to serve as a member of the Board
at no additional compensation.
ARTICLE 3
COMPENSATION
3.1 Annual Base Pay. The Annual Base Pay of Executive is currently
seven hundred thousand dollars ($700,000). For as long as this Agreement
is effective, the Board shall review Executive's annual base pay at least
annually and may, in its discretion, increase but not decrease Executive's
Annual Base Pay.
3.2 Annual Incentive Bonus. For each of the Company's fiscal
years, commencing with the Company's 1998 fiscal year and for each fiscal
year thereafter as long as this Agreement is in effect, the Board shall
establish a set of performance targets for Executive, which if fully
achieved shall result in a cash payment to Executive equal to eighty
percent (80%) of Executive's Annual Base Pay for that fiscal year (the
"Target Bonus"). If Executive's performance shall exceed the selected
performance targets, the Board may award a cash incentive bonus payment in
excess of eighty percent (80%) of Executive's Annual Base Pay for that
fiscal year. If Executive's performance does not fully achieve the set of
performance targets, the Board may nonetheless award a cash incentive bonus
of less than eighty percent (80%) of Executive's Annual Base Pay. Any
bonus payment to which Executive becomes entitled hereunder shall be paid
to Executive by March 1 after the end of the applicable fiscal year.
3.3 Life Insurance.
3.3.1 Split-Dollar Life Insurance Policy. Pursuant to
resolutions of the Board adopted at its May 3, 1993 meeting, the Company
purchased a one million dollar ($1,000,000) split-dollar life insurance
policy with Executive as the insured. The Company agrees that it will
continue to make any premium payments over a sixteen (16)-year period from
the time of such policy's issuance based on the current dividend schedule
with a guaranteed minimum benefit of one million dollars ($1,000,000);
provided, however, that in the event of a Change in Control of the Company,
the Company shall make a single premium payment equal to the present value
of the remaining payments described above using a six percent (6%) discount
rate, simple interest. Furthermore, the Company agrees that it will pay
Executive an additional amount to offset fully any tax liability incurred
by Executive during his lifetime with respect to such life insurance
policy, including but not limited to any tax liability previously
recognized by Executive in taxable years prior to 1998, such that the
after-tax cost to Executive of maintaining this policy shall be zero
dollars ($0). This obligation shall remain in effect even if this
Agreement has terminated.
3.3.2 MetLife Life Insurance Policy.
(a) The Company agrees to make ten (10) annual payments
to Executive or such person or persons as Executive may designate, on or
before October 31 of each year, beginning on October 31, 1995, in an amount
equal to the annual premium necessary to endow a single life policy
(Corporate Universal Life) on the life of Executive issued by the
Specialized Benefit Resources division of Metropolitan Life Insurance
Company (the "MetLife Policy") and based on the following policy
assumptions: level death benefit of five million dollars ($5,000,000);
premiums payable for ten (10) years; policy crediting rate assumption equal
to seven percent (7%); mortality rates and loads current as of October 31,
1995; nonsmoker unisex rates; and, standard risk based on full
underwriting. The amount of the annual premium necessary to endow the
policy described above will be adjusted upward or downward annually in view
of the actual policy crediting rate in effect for the year.
(b) In the event that fewer than all payments set forth
in Article 3.3.2(a) have been made to Executive and (i) Executive becomes
disabled as defined in Article 8 hereof, (ii) the Company undergoes a
Change in Control (as defined in Article 8 hereof) or (iii) the Company
notifies Executive that it no longer desires that Executive perform the
services described under Article 2 hereof, the Company shall make a single
lump-sum payment to Executive equal to the sum of the present values of all
payments provided in Article 3.3.2(a) which have not been paid to Executive
at the time of such Disability, Change in Control or notification.
(c) The lump sum payment payable under Article 3.3.2(b)
hereof shall be calculated based on the assumptions set forth in Article
3.3.2(a) with a discount rate equal to the lesser of the prime rate on the
date of termination and 5.5%.
(d) In addition, the Company also agrees to make any
additional premium payments with respect to the MetLife Policy so that such
policy is endowed at age ninety-five (95) and the policy's cash value at
that time is equal to or greater than five million dollars ($5,000,000),
but in no event shall the Company pay fewer than ten (10) annual premium
payments after June 10, 1998, each in the amount of one hundred eighty-
three thousand one hundred sixty-four dollars ($183,164). The premium
payment period may be changed by the Company, with the written concurrence
of Executive, to the extent necessary to maintain compliance of such policy
with Sections 7702 and 7702A of the Code. Furthermore, as described in
further detail in Article 3.3.2(e), the Company agrees that it will pay
Executive an additional amount to offset fully any tax liability incurred
by Executive during his lifetime with respect to such premium payments,
such that the after-tax cost to Executive of maintaining this policy shall
be zero dollars ($0). If an event described in Article 3.3.2(b) occurs,
any additional payment shall be made at the same time as the payment called
for in Article 3.3.2(b) but any such additional payment shall not discharge
the Company from satisfying its obligation set forth in this paragraph.
The Company's obligations under this paragraph shall survive termination of
this Agreement.
(e) All payments payable under this Article 3.3.2 shall
be grossed up, and made free and clear of and without deduction, for any
and all present or future income taxes, payroll taxes, excise taxes,
deductions, charges or withholdings, and all liabilities with respect
thereto, (all such taxes, deductions, charges, withholdings and liabilities
being hereinafter referred to as "Taxes"). If the Company shall be
required by law to deduct any Taxes from or in respect of a payment, (i)
the payment shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums
payable under this Article 3.3.2(e)) the payment shall be made in an amount
equal to the amount payable had no such deductions been made, (ii) the
Company shall make such deductions and (iii) the Company shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law. For purposes of computing increases in
payments payable under this Article 3.3.2(e), the Company shall, in all
cases, assume that Executive is taxable at the highest marginal tax rate
applicable to an individual.
(f) In the event that Executive is taxable at a
marginal tax rate less than the rate assumed in Article 3.3.2(e) hereof,
Executive shall reimburse the Company for the excess of such increase paid
to Executive over the increase computed on the basis of Executive's actual
marginal tax rate.
ARTICLE 4
EXPENSE ALLOWANCES AND FRINGE BENEFITS
4.1 Benefits. While this Agreement is in effect, the Company
shall provide Executive with the same or greater benefits which it provides
to any of its other senior executives, including but not limited to
medical, pension, vacation, bonus, stock, profit-sharing and savings plans
and similar benefits as such plans and benefits may be adopted by the
Company from time to time.
4.2 Business Expense Reimbursement. While this Agreement is in
effect, Executive shall be entitled to receive proper reimbursement for all
reasonable out-of-pocket expenses incurred by him (in accordance with the
policies and procedures established by the Company for its senior executive
officers) in performing services hereunder. Executive agrees to furnish
the Company reasonably adequate records and other documentary evidence of
such expenses for which Executive seeks reimbursement. Such expenses shall
be accounted for under the policies and procedures established by the
Company.
ARTICLE 5
OTHER RIGHTS AND BENEFITS
5.1 Nonexclusivity. Nothing in this Agreement shall prevent or
limit Executive's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company and for which Executive may otherwise qualify, nor shall anything
herein limit or otherwise affect such rights as Executive may have under
any stock option or other agreements with the Company. Except as otherwise
expressly provided herein, amounts which are vested benefits or which
Executive is otherwise entitled to receive under any plan, policy, practice
or program of the Company at or subsequent to the date of a Covered
Termination, a Change in Control or a Change in Control Termination shall
be payable in accordance with such plan, policy, practice or program.
ARTICLE 6
TERMINATION OF EMPLOYMENT
6.1 Covered Termination.
6.1.1 Entitlement to Salary Continuation Payments. If
Executive's employment terminates due to a Covered Termination, Executive
shall receive salary continuation benefits. The amount of the salary
continuation payment shall be equal to three hundred percent (300%) of the
sum of Annual Base Pay and Annual Bonus, to be paid in one lump sum within
sixty (60) days of the termination, or if greater, at Executive's election,
sixty percent (60%) of Executive's highest Annual Base Pay from the Company
or its successor, payable within sixty (60) days of Executive's Covered
Termination and on each anniversary date of such termination thereafter for
the duration of Executive's life. If Executive has previously become
entitled to receive payment under Article 6.2.2 of this Agreement on
account of the occurrence of a Change in Control, Executive shall not be
entitled to any additional payments under this Article 6.1.1.
6.1.2 Welfare Benefits. Following a Covered Termination,
Executive and his spouse will each be eligible (a) to continue their
Welfare Benefits coverage under any Welfare Benefit plan or program
maintained by the Company on the same terms and conditions (including cost
to Executive) as in effect immediately prior to the Covered Termination for
the lives of each of Executive and his spouse, or the survivor of them,
and/or (b) to purchase such additional or substitute Welfare Benefits
coverage as Executive or his spouse may determine in his or her sole
discretion, including reimbursement of expenses for health care expenses
not otherwise paid by insurance, Medicare, or otherwise; provided, however,
that the cost to the Company shall not exceed, by payment of premium or
otherwise, twenty-five thousand dollars ($25,000.00) per year, as adjusted
for cost of living increases.
With respect to any Welfare Benefits provided through an
insurance policy, the Company's obligation to provide such Welfare Benefits
following a Covered Termination shall be limited by the terms of such a
policy; provided that (i) the Company shall make reasonable efforts to
amend such policy to provide the continued coverage, and (ii) if a policy
providing health benefits is not amended to provide the continued benefits,
the Company shall pay for the cost of comparable replacement coverage. The
cost of any such insurance shall be included and subject to the twenty-five
thousand dollars ($25,000.00) per year limit set forth above.
This Article 6.1.2 is not intended to affect, nor does it
affect, the rights of Executive, or Executive's covered dependents, under
any applicable law with respect to health insurance continuation coverage.
6.1.3 Stock Options. All stock options granted to Executive
by the Company which are outstanding on the Effective Date and all stock
options granted to Executive in the future, are hereby amended or shall
provide as follows: (i) to fully vest upon a Covered Termination, and (ii)
to permit Executive to exercise the vested options for at least twelve (12)
months following a Covered Termination, unless an extension of an option's
term would cause the Company to incur a change to earnings for financial
accounting purposes, in which case the amendment to such option extending
the term shall not be made until the first time that such amendment would
not cause the Company to incur a charge to earnings, at which time such
amendment shall automatically occur.
6.1.4 Bonus. If a Covered Termination occurs, Executive
shall receive a bonus for the fiscal year in which the Covered Termination
occurs. The amount of the bonus shall be equal to the amount Executive
would have been paid if the Covered Termination had not occurred prior to
the end of such fiscal year multiplied by a fraction in which (i) the
numerator is the number of days from and including the first day of the
fiscal year until and including the date of the Covered Termination, and
(ii) the denominator is three hundred sixty-five (365). Such bonus shall
be paid on the date Executive would have received the bonus if the Covered
Termination had not occurred during such fiscal year.
6.2 Termination Due to Change in Control.
6.2.1 Entitlement To Severance Benefits. Upon the occurrence
of a Change in Control while Executive is employed by the Company, the
Company shall provide Executive the compensation and benefits described in
Articles 6.2.2, 6.2.3 and 6.2.6 below. If Executive's employment
terminates due to an Involuntary Termination without Cause or a Voluntary
Termination for Good Reason within twenty-four (24) months following a
Change in Control, the termination of employment will be a Change in
Control Termination and the Company shall pay Executive the compensation
and benefits described in Articles 6.2.4 and 6.2.5. If Executive's
employment terminates, but not due to an Involuntary Termination without
Cause or a Voluntary Termination for Good Reason within twenty-four (24)
months following a Change in Control, then the termination of employment
will not be a Change in Control Termination.
6.2.2 Lump Sum Severance Payment. Within thirty (30) days
following a Change in Control, Executive shall receive a lump sum payment
equal to three hundred percent (300%) of the sum of Annual Base Pay and
Annual Bonus, subject to any applicable withholding of federal, state or
local taxes.
6.2.3 Stock Options. All stock options granted to Executive
by the Company which are outstanding on the Effective Date and all stock
options granted to Executive in the future, are hereby amended or shall
provide as follows: (i) to provide for full vesting of stock options upon a
Change in Control, (ii) to permit Executive to exercise any vested options
following his termination of service to the Company as an employee or
consultant for up to three (3) months (or such longer period as may be
currently provided in Executive's stock option agreement without giving
effect to this Article 6.2.3) and (iii) to permit Executive to exercise the
options for at least the twelve (12) months following a Change in Control
Termination, unless an extension of an option's term would cause the
Company to incur a charge to earnings for financial accounting purposes, in
which case no amendment to such option extending the term shall be made
until the first time that such amendment would not cause the Company to
incur a charge to earnings, at which time such amendment shall
automatically occur.
6.2.4 Welfare Benefits. Following a Change in Control
Termination, Executive and his spouse shall be eligible for the same
Welfare Benefits as following a Covered Termination (as such Welfare
Benefits are described in Article 6.1.2 above). In addition, for the three
(3) year period following a Change in Control Termination, the Company
shall reimburse Executive for any income tax liability due as a result of
the provision of Welfare Benefits under this Article 6.2 (and as a result
of any payments due under this paragraph) in order to put Executive in the
same after-tax position as if no taxable Welfare Benefits had been
provided.
6.2.5 Office Space; Secretarial Support. For three (3) years
following a Change in Control Termination, Executive shall be provided an
office and secretarial support comparable to those provided to Executive
prior to the Change of Control; provided, however, that the Company's
obligation to provide office space and secretarial support under this
Article 6.2.5 shall terminate upon Executive's obtaining full-time
employment or full-time consulting work.
6.2.6 Stock Purchase Promissory Note. In the event of the
occurrence of a Change in Control, Executive shall be entitled to exercise
any or all of his outstanding stock options to acquire shares of the
Company's common stock using a full recourse promissory note. Any such
note shall be due and payable after five (5) years, subject to earlier
prepayment voluntarily by Executive. Any such note shall bear the minimum
rate of interest required to avoid imputed income to Executive under all
applicable provisions of the Code.
6.2.7 Excise Tax Gross-up. In the event it shall be
determined that any payment by the Company to or for the benefit of
Executive, whether paid or payable under this Agreement or otherwise, but
determined without regard to any additional payments required under this
Article 6.2.7 (a "Payment"), would be subject to the excise tax imposed by
Section 4999 of the Code, or any comparable federal, state, or local excise
tax (such excise tax, together with any interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment")
in such an amount that after the payment of all taxes (including without
limitation, any interest and penalties on such taxes and the excise tax) on
the Payment and on the Gross-Up Payment, Executive shall retain an amount
equal to the Payment minus all applicable income and employment taxes on
the Payment. The intent of the parties is that the Company shall be solely
responsible for, and shall pay, any Excise Tax on the Payment and Gross-Up
Payment and any income, employment and other taxes (including, without
limitation, penalties and interest) imposed on any Gross-Up Payment, as
well as any loss of tax deduction caused by the Gross-Up Payment or
applicable provisions of the Code. All determinations required to be made
under this Article 6.2.7, including without limitation, 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, shall be
made by a nationally recognized accounting firm that is the Company's
outside auditor at the time of such determinations, which firm must be
reasonably acceptable to Executive (the "Accounting Firm"). All fees and
expenses of the Accounting Firm shall be borne solely by the Company.
6.3 Termination for Cause. The Company may terminate Executive's
employment for Cause (as defined below) without liability at any time with
or without advance notice to Executive. The Company shall pay Executive
all Accrued Compensation, but no other compensation or reimbursement of any
kind, including without limitation, severance compensation, shall be paid
to Executive. The Company's obligations under this Article 6.3 shall
terminate upon complete payment of Accrued Compensation.
6.4 Mitigation. Except as otherwise specifically provided herein,
Executive shall not be required to mitigate damages or the amount of any
payment provided under this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment provided for under this
Agreement be reduced by any compensation earned by Executive as a result of
employment by another employer or by retirement benefits after the date of
a Covered Termination or a Change in Control Termination.
6.5 Indemnification. For a period no less than six (6) years
following the date of a Covered Termination or a Change in Control
Termination, Executive shall be indemnified by the Company (or any
successor entity) for any act, or omission, taken while Executive was
employed by the Company (or any successor entity), and the Company shall
maintain insurance coverage which is either at least equivalent to such
indemnification coverage provided for Executive prior to such termination,
or if such equivalent coverage is not available at a commercially
reasonable price, then at least equivalent to the indemnification coverage
provided to the then current executive officers of the Company (or in the
event of the occurrence of a Change in Control of the Company, the
executive officers of the controlling entity of which the Company is then a
part).
ARTICLE 7
LIMITATIONS AND CONDITIONS ON BENEFITS
7.1 Withholding of Taxes. The Company shall withhold appropriate
federal, state and local income and employment taxes from any payments
hereunder.
7.2 Employee Agreement and Release Prior to Receipt of Benefits.
Upon the occurrence of a Covered Termination or a Change in Control
Termination and prior to the receipt of any benefits under this Agreement
on account of the occurrence of a Covered Termination or a Change in
Control Termination, Executive shall, as of the date of a Covered
Termination or a Change in Control Termination, as applicable, execute an
employee agreement and release in the form attached hereto as Exhibit A.
Such employee agreement and release shall specifically relate to all of
Executive's rights and claims in existence at the time of such execution
and shall confirm Executive's obligations under the Company's standard form
of proprietary information agreement. It is understood that Executive has
twenty-one (21) days to consider whether to execute such employee agreement
and release and Executive may revoke such employee agreement and release
within seven (7) business days after execution of such employee agreement
and release. In the event Executive does not execute such employee
agreement and release within the twenty-one (21) day period, or if
Executive revokes such employee agreement and release within the seven (7)
business day period, no benefits shall be payable to Executive on account
of the occurrence of a Covered Termination or a Change in Control
Termination under this Agreement.
ARTICLE 8
DEFINITIONS
For purposes of the Agreement, the following terms shall have the meanings
set forth below:
8.1 "Accrued Compensation" means any accrued Annual Base Pay, any
bonus compensation to the extent actually awarded by the Board but not yet
paid, any vested deferred compensation (other than pension plan or profit-
sharing plan benefits which will be paid in accordance with the applicable
plan), any benefits under any plans of the Company in which Executive is a
participant to the full extent of Executive's rights under such plans, any
accrued vacation pay and any appropriate business expenses incurred by
Executive in connection with his duties hereunder, all to the date of
termination.
8.2 "Agreement" means this Employment Agreement.
8.3 "Annual Base Pay" means the annual base pay of Executive as
determined in accordance with Article 3.1 of this Agreement.
For the purposes of a payment made pursuant to Article 6.1 of this
Agreement relating to a Covered Termination, Annual Base Pay means
Executive's Annual Base Pay at the rate in effect during the last regularly
scheduled payroll period immediately preceding the Covered Termination.
For the purposes of a payment made pursuant to Article 6.2 of this
Agreement relating to a Change in Control, Annual Base Pay means
Executive's annual base pay in effect during the last regularly scheduled
payroll period immediately preceding the Change in Control.
8.4 "Annual Bonus" means the annual incentive bonus of Executive
as determined in accordance with Article 3.2 of this Agreement.
For purposes of a payment made pursuant to Article 6.1 or Article 6.2 of
this Agreement relating to a Covered Termination or a Change in Control,
Annual Bonus means the greater of (i) Executive's Target Bonus (which for
the Company's fiscal year ending December 31, 1998 is eighty percent (80%)
of Executive's Annual Base Pay) of the year in which the Covered
Termination or the Change in Control occurs or (ii) Executive's most recent
actual annual cash incentive bonus for the fiscal year of the Company
preceding the year in which the Covered Termination or the Change in
Control occurs.
8.5 "Cause" the occurrence of any of the following (and only the
following): (i) conviction of any felony involving fraud or act of
dishonesty against the Company, (ii) conduct by Executive which, based upon
good faith and reasonable factual investigation and determination of the
Board of Directors of the Company, demonstrates gross unfitness to serve,
or (iii) intentional, material violation by Executive of any statutory or
fiduciary duty of Executive to the Company, provided that in the event that
any of the foregoing events is capable of being cured, the Company shall
provide written notice to Executive describing the nature of such event and
Executive shall thereafter have thirty (30) days to cure such event.
8.6 "Change in Control" means the consummation of any of the
following transactions:
(a) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least fifty percent (50%) of the
total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of
liquidation or dissolution of the Company or an agreement for the sale,
lease, exchange or other transfer or disposition by the Company of all or
substantially all (more than fifty percent (50%)) of the Company's assets;
(b) any person (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), is or becomes the beneficial owner (within the meaning of Rule 13d-
3 under the Exchange Act) directly or indirectly of 25% or more of the
Company's outstanding Common Stock; or
(c) a change in the composition of the Board within a three
(3) year period, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors" shall mean
directors who either:
(i) are directors of the Company as of the date hereof;
(ii) are elected, or nominated for election, to the
Board with the affirmative votes of at least a majority of the directors of
the Company who are Incumbent Directors described in (i) above at the time
of such election or nomination; or
(iii) are elected, or nominated for election, to the
Board with the affirmative votes of at least a majority of the directors of
the Company who are Incumbent Directors described in (i) or (ii) above at
the time of such election or nomination.
Notwithstanding the foregoing, "Incumbent Directors." shall not include an
individual whose election or nomination is in connection with an actual or
threatened proxy contest relating to the election of directors to the
Company.
8.7 "Change in Control Termination" means an Involuntary
Termination without Cause or a Voluntary Termination with Good Reason
within twenty-four (24) months following a Change in Control. No other
event shall be deemed a Change in Control Termination for purposes of this
Agreement.
8.8 "Code" means the Internal Revenue Code of 1986, as amended.
8.9 "Company" means VLSI Technology, Inc., a Delaware corporation,
and any successor thereto.
8.10 "Covered Termination" means any voluntary termination of
Executive and any Involuntary Termination (including death or Disability,
mental or physical) other than for Cause.
8.11 "Disability" means a physical or mental condition, illness, or
injury of Executive such that (a) Executive's personal physician, or (b) a
physician selected by Executive's personal physician, or (c) if neither of
such physicians is reasonably acceptable to the Company, a physician
selected by Executive's personal physician and a physician selected by the
Company, determines that Executive is no longer capable of providing
services as described under Article 2 of this Agreement.
8.12 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
8.13 "Involuntary Termination" means Executive's dismissal or
discharge by the Company (or, if applicable, by the successor entity).
For purposes of a Covered Termination pursuant to Article 6.1 of this
Agreement, Involuntary Termination includes the death or Disability
(physical or mental) of Executive.
For purposes of a Change in Control Termination pursuant to Article 6.2 of
this Agreement, the termination of Executive's employment would not be
deemed to be an "Involuntary Termination" if such termination occurs as a
result of the death or Disability of Executive.
8.14 "Voluntary Termination for Good Reason" means that the
Executive voluntarily terminates his employment after any of the following
are undertaken without Executive's express written consent:
(a) the assignment to Executive of any duties or
responsibilities which result in any diminution or adverse change of
Executive's position, status or circumstances of employment as in effect
immediately prior to a Change in Control of the Company; a change in
Executive's titles or offices as in effect immediately prior to a Change in
Control of the Company; any removal of Executive from or any failure to
reelect Executive to any of such positions, except in connection with the
termination of his employment for death, Disability, retirement, fraud,
misappropriation, embezzlement or any other voluntary termination of
employment by Executive other than Voluntary Termination for Good Reason;
(b) a reduction by the Company in Executive's Annual Base Pay;
(c) any failure by the Company to continue in effect any
benefit plan or arrangement, including incentive plans or plans to receive
securities of the Company, in which Executive is participating at the time
of a Change in Control of the Company (hereinafter referred to as "Benefit
Plans"), or the taking of any action by the Company which would adversely
affect Executive's participation in or reduce Executive's benefits under
any Benefit Plans or deprive Executive of any fringe benefit enjoyed by
Executive at the time of a Change in Control of the Company, provided,
however, that Executive may not terminate for Good Reason following a
Change in Control of the Company if the Company offers a range of benefit
plans and programs which, taken as a whole, are comparable to the Benefit
Plans as determined in good faith by Executive;
(d) a relocation of Executive or the Company's principal
executive offices to a location more than fifteen (15) miles from the
location at which Executive performed Executive's duties prior to a Change
in Control of the Company, except for required travel by Executive on the
Company's business to an extent substantially consistent with Executive's
business travel obligations at the time of a Change in Control of the
Company;
(e) any breach by the Company of any provision of this
agreement; or
(f) any failure by the Company to obtain the assumption of
this agreement by any successor or assign of the Company.
8.15 "Welfare Benefits" means benefits providing for coverage or
payment in the event of Executive's death, disability, illness or injury of
a type provided to Executive immediately before a Covered Termination,
whether taxable or non-taxable and whether funded through insurance or
otherwise.
ARTICLE 9
GENERAL PROVISIONS
9.1 Governing Law. The validity, interpretation, construction and
performance of this Agreement and the rights of the parties hereunder shall
be interpreted and enforced under California law without reference to
principles of conflicts of laws. The parties expressly agree that inasmuch
as the Company's headquarters and principal place of business are located
in California, it is appropriate that California law govern this Agreement.
9.2 Assignment; Successors; Binding Agreement.
9.2.1 Executive may not assign, pledge or encumber his
interest in this Agreement or any part thereof and any attempt to do so
shall be void.
9.2.2 The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by
operation of law or by agreement in form and substance reasonably
satisfactory to Executive, to assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required
to perform it if no such succession had taken place.
9.2.3 This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amount is at such time payable to him
hereunder, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to Executive's devisee,
legatee or other designee or, if there be no such designee, to his estate.
9.3 Notices. Any notices provided hereunder must be in writing and
such notices or any other written communication shall be deemed effective
upon the earlier of personal delivery (including personal delivery by telex
or facsimile) or the third day after mailing by first class mail, to the
Company at its primary office location and to Executive at his address as
listed in the Company's payroll records. Any payments made by the Company
to Executive under the terms of this Agreement shall be delivered to
Executive either in person or at his address as listed in the Company's
payroll records.
9.4 Modification; Waiver; Entire Agreement. No provisions of this
Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by Executive and
such officer or other representative of the Company as may be specifically
designated by the Board. No waiver by either party hereto at any time of
any breach by the other party of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the
same or any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set forth or
referred to in this Agreement.
9.5 Validity. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law
or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or any other
jurisdiction, but this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable
provisions had never been contained herein.
9.6 Controlling Document. In case of conflict between any of the
terms and conditions of this Agreement and the documents herein referred
to, or any other documents or agreements affecting the same terms and
conditions of Executive's employment as are addressed in this Agreement,
the terms and conditions of this Agreement shall control, and such other
documents shall be deemed to be amended hereby.
9.7 Employment Status. This Agreement does not constitute a
contract of employment or impose on Executive any obligation to remain as
an employee, or impose on the Company any obligation (i) to retain
Executive as an employee, (ii) to change the status of Executive as an at-
will employee, or (iii) to change the Company's policies regarding
termination of employment.
9.8 Headings. The headings of the Articles hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof
nor to affect the meaning thereof.
9.9 Non-Publication. The parties mutually agree not to disclose
publicly the terms of this Agreement except to the extent that disclosure
is mandated by applicable law.
9.10 Tax and Attorney Fees. The Company will reimburse Executive,
Executive's successor-in-interest, or the holder of any life insurance
policy referred to in this Agreement for all attorney fees and costs
associated with bringing any action under this Agreement to enforce their
rights hereunder, regardless of the outcome of such proceeding, provided
the court finds the claim was brought in good faith. In addition, the
Company will reimburse Executive for all fees and costs associated with
advice, execution or negotiation of this Agreement and Executive's ongoing
employment relationship with the Company on or before the Effective Date.
9.11 Construction. In the event of a conflict between the text of
the Agreement and any summary, description or other information regarding
the Agreement, the text of the Agreement shall control.
9.12 Counterparts. This Agreement may be executed in one or more
counterparts any one of which need not contain signatures of more than one
party, all of which taken together shall constitute one and the same
Agreement.
Executed by the parties as of the day and year first above written.
VLSI TECHNOLOGY, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------
Its: Director
---------------------------
EXECUTIVE:
/s/ Xxxxxx X. Xxxxx
--------------------------------
Xxxxxx X. Xxxxx
EXHIBIT A
EMPLOYEE AGREEMENT AND RELEASE
I understand and agree completely to the terms set forth in the
foregoing agreement.
I hereby confirm my obligations under the Company's standard form of
proprietary information agreement.
I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A general release does not
extend to claims which the creditor does not know or suspect to exist in
his favor at the time of executing the release, which if known by him must
have materially affected his settlement with the debtor." I hereby
expressly waive and relinquish all rights and benefits under that section
and any law of any jurisdiction of similar effect with respect to my
release of any claims I may have against the Company.
Except as otherwise set forth in this Agreement, I hereby release,
acquit and forever discharge the Company, its parents and subsidiaries, and
their officers, directors, agents, servants, employees, shareholders,
successors, assigns and affiliates, of and from any and all claims,
liabilities, demands, causes of action, costs, expenses, attorneys fees,
damages, indemnities and obligations of every kind and nature, in law,
equity, or otherwise, known and unknown, suspected and unsuspected,
disclosed and undisclosed (other than any claim for indemnification I may
have as a result of any third party action against me based on my
employment with the Company), arising out of or in any way related to
agreements, events, acts or conduct at any time prior to and including the
Effective Date of this Agreement, including but not limited to: all such
claims and demands directly or indirectly arising out of or in any way
connected with my employment with the Company or the termination of that
employment, including but not limited to, claims of intentional and
negligent infliction of emotional distress, any and all tort claims for
personal injury, claims or demands related to salary, bonuses, commissions,
stock, stock options, or any other ownership interests in the Company,
vacation pay, fringe benefits, expense reimbursements, severance pay, or
any other form of compensation; claims pursuant to any federal, state or
local law or cause of action including, but not limited to, the federal
Civil Rights Act of 1964, as amended; the federal Age Discrimination in
Employment Act of 1967, as amended ("ADEA"); the federal Americans with
Disabilities Act of 1990; the California Fair Employment and Housing Act,
as amended; tort law; contract law; wrongful discharge; discrimination;
fraud; defamation; emotional distress; and breach of the implied covenant
of good faith and fair dealing; provided, however, that nothing in this
paragraph shall be construed in any way to release the Company from its
obligation to indemnify you pursuant to the Company's Indemnification
Agreement.
I acknowledge that I am knowingly and voluntarily waiving and
releasing any rights I may have under ADEA. I also acknowledge that the
consideration given for the waiver and release in the preceding paragraph
hereof is in addition to anything of value to which I was already entitled.
I further acknowledge that I have been advised by this writing, as required
by the ADEA, that: (A) my waiver and release do not apply to any rights or
claims that may arise after the Effective Date of this Agreement; (B) I
have the right to consult with an attorney prior to executing this
Agreement; (c) I have twenty-one (21) days to consider this Agreement
(although I may choose to voluntarily execute this Agreement earlier); (D)
I have seven (7) days following the execution of this Agreement by the
parties to revoke the Agreement; and (E) this Agreement shall not be
effective until the date upon which the revocation period has expired,
which shall be the eighth day after this Agreement is executed by me,
provided that the Company has also executed this Agreement by that date
("Effective Date").
By:
--------------------------
Xxxxxx X. Xxxxx
Date:
-------------------------
TABLE OF CONTENTS
ARTICLE 1 Effect of Agreement 1
1.1 Effect of Agreement 1
1.2 Consideration 1
ARTICLE 2 Employment Duties 2
2.1 Title/Responsibilities 2
2.2 Full-Time Attention 2
2.3 Other Activities 2
2.4 Directorship 2
ARTICLE 3 Compensation 2
3.1 Annual Base Pay 2
3.2 Annual Incentive Bonus 2
3.3 Life Insurance 3
ARTICLE 4 Expense Allowances And Fringe Benefits. 4
4.1 Benefits 4
4.2 Business Expense Reimbursement 5
ARTICLE 5 Other Rights and Benefits 5
5.1 Nonexclusivity 5
ARTICLE 6 Termination of Employment 5
6.1 Covered Termination 5
6.2 Termination Due to Change in Control 6
6.3 Termination for Cause 8
6.4 Mitigation 8
6.5 Indemnification 8
ARTICLE 7 Limitations and Conditions on Benefits 8
7.1 Withholding of Taxes 8
7.2 Employee Agreement and Release Prior to Receipt of Benefits 9
ARTICLE 8 Definitions 9
8.1 "Accrued Compensation" 9
8.2 "Agreement" 9
8.3 "Annual Base Pay" 9
8.4 "Annual Bonus" 9
8.5 "Cause" 10
8.6 "Change in Control" 10
8.7 "Change in Control Termination" 11
8.8 "Code" 11
8.9 "Company" 11
8.10 "Covered Termination" 11
8.11 "Disability" 11
8.12 "Exchange Act" 11
8.13 "Involuntary Termination" 11
8.14 "Voluntary Termination for Good Reason" 11
8.15 "Welfare Benefits" 12
ARTICLE 9 General Provisions 12
9.1 Governing Law 12
9.2 Assignment; Successors; Binding Agreement 12
9.3 Notices. 13
9.4 Modification; Waiver; Entire Agreement 13
9.5 Validity 13
9.6 Controlling Document 13
9.7 Employment Status 14
9.8 Headings 14
9.9 Non-Publication 14
9.10 Tax and Attorney Fees 14
9.11 Construction 14
9.12 Counterparts 14
