Exhibit 5 to
Debtors' Joint Reorganization Plan
New Xxxxxxxx Employment Agreement
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of
January 7, 2002 (the "Execution Date"), by and between XXXXX XXXXXXXX
("Executive") and ZILOG, INC. (the "Company"), a California corporation,
based on the following:
WHEREAS, the Company desires to employ Executive to provide
personal services to the Company, and wishes to provide Executive with
certain compensation and benefits in return for his services;
WHEREAS, Executive wishes to be employed by the Company and to
provide personal services to the Company in return for certain compensation
and benefits;
WHEREAS, the parties hereto are entering into this Agreement in
contemplation of the successful completion of the Reorganization Plan (as
defined herein);
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, it is hereby agreed by and between the parties
hereto as follows:
1. EMPLOYMENT BY THE COMPANY.
1.1 Title and Responsibilities. Subject to the terms set forth
herein, the Company agrees to employ Executive in the position of Chief
Executive Officer and Chairman of the Board, and Executive hereby accepts
such employment effective on the date that the Plan of Reorganization (the
"Reorganization Plan") becomes effective (the "Effective Date"). During his
employment with the Company, Executive will devote his full time and
attention to the business of the Company, except as otherwise provided
herein, and shall do and perform all acts and things necessary to perform
his duties. Notwithstanding the foregoing, Executive may devote up to an
average of two days per five-day work week providing part-time services on
matters involving affiliates of TPG Partners, LLP ("TPG") so long as such
services do not interfere with the performance of his responsibilities at
the Company in any material respect and are not detrimental to the Company
in any material respect, and Executive terminates such services no later
than April 1, 2002. In addition, subject to the prior approval of the Board
of Directors, Executive may serve on up to two boards of directors in
addition to the board of directors of the Company, including companies
affiliated with TPG, so long as such services do not interfere with the
performance of his responsibilities at the Company in any material respect
and are not detrimental to the Company in any material respect. The parties
hereto agree that this Agreement shall become binding upon the parties
hereto as of the Execution Date, but this Agreement shall be void ab initio
if the Effective Date does not occur on or prior to June 9, 2002; provided,
however, that the provisions of Sections 2.2 and 5.2 shall remain in effect
if the Effective Date does not occur on or prior to June 9, 2002.
1.2 Company Employment Policies. The employment relationship
between the parties shall be governed by the general employment policies
and procedures of the Company, including those relating to the protection
of confidential information and assignment of inventions, except that when
the terms of this Agreement differ from or are in conflict with the
Company's general employment policies or procedures, this Agreement shall
control.
2. COMPENSATION.
2.1 Salary. Executive shall receive for services to be rendered
hereunder a base salary at an annualized rate of $800,000 (the "Base
Salary"), payable commencing on the Effective Date and in accordance with
the Company's customary payroll practices. The Board of Directors will
review Executive's Base Salary on an annual basis.
2.2 Signing Bonus. If the conditions set forth below in this
Section 2.2 are satisfied, the Company shall pay a signing bonus of
$650,000 to Executive for services to be rendered, which Employee shall
retain even if this Agreement is determined to be void ab initio pursuant
to Section 1.1. Such payment will be made on the date that (1) voting on
the Reorganization Plan has been completed, (2) the required acceptances
have been obtained, and (3) the Company is proceeding in accordance with
the pre-packaged Reorganization Plan.
2.3 Incentive Bonus. Executive shall be eligible for a cash
bonus to be paid within 45 days after the end of each fiscal year of the
Company calculated on Executive's then current Base Salary based on the
Company's annual EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortization) milestones (the "Incentive Bonus"). All bonuses under this
section will be calculated based on straight line increments between each
of the EBITDA milestones. The milestones are as follows:
25% of annual salary will be paid on $0 - $17.2 million
annual EBITDA 50% of annual salary will be paid on $25.7
million annual EBITDA 80% of annual salary will be paid
on $30 million annual EBITDA 125% of annual salary will
be paid on $40 million annual EBITDA 200% of annual
salary will be paid on $50 million or greater annual
EBITDA
For example, if the Company's annual EBITDA is $8.6 million, Executive will
be entitled to an Incentive Bonus of 12.5% of annual Base Salary, and if
the Company's annual EBITDA is $35 million, Executive will be entitled to
an Incentive Bonus of 102.5% of annual Base Salary.
2.4 Stock Purchase.
(a) Stock purchase upon employment. On the Effective Date, the
Company will grant Executive 696,744 shares of Common Stock (equal on the
date of grant to 2.14% of the Company's outstanding stock on a
fully-diluted basis subject to the terms and conditions and pursuant to the
ZiLOG, Inc. 2002 Omnibus Stock Incentive Plan attached hereto as Exhibit A
(the "Omnibus Plan") and any applicable Award Agreement (as defined in the
Omnibus Plan). Executive shall receive 25% of such stock on the Effective
Date and an additional 25% of such stock on each of the first three
anniversaries of the Effective Date.
(b) EBITDA linked stock purchase. The Company will grant
Executive an option to purchase 605,581 shares of Common Stock (equal on
the date of grant to 1.86% of the Company's outstanding stock on a
fully-diluted basis) exercisable at the fair market value for the Common
Stock subject to the terms and conditions and pursuant to the Omnibus Plan
and any applicable Award Agreement.
(c) Restrictions on Stock and Stock Options. Any stock granted
to Executive under (a) or (b) above is subject to the restrictions
contained in the Omnibus Plan and any applicable Award Agreement.
2.5 Company Benefits.
(a) Standard Benefits. Executive shall be entitled to all
rights and benefits for which he is eligible under the terms and conditions
of the standard Company benefits and compensation plans which may be in
effect from time to time and provided by the Company to its executives.
(b) Vacation. Executive will be entitled to four weeks'
vacation per year at such times as may be mutually agreed by Executive and
the Company. In no event shall Executive be eligible to accrue any more
than four weeks' vacation time at any point in time.
(c) Business Expenses. The Company will reimburse Executive for
all reasonable business expenses actually incurred by Executive, including
commuting expenses for up to two round trip visits per week to Executive's
residence, and expenses incurred for temporary housing. Executive shall
provide appropriate supporting documentation of all such expenses in a form
reasonably acceptable to the Company.
(d) Relocation Expenses. If the Company reasonably determines
that it is appropriate for Executive to relocate his residence to
California, the Company will reimburse Executive for all reasonable
relocation expenses, provided that if Executive resigns without Good Reason
or is terminated with Cause within nine months of the date of relocation,
Executive will pay the Company a prorated amount of the relocation expenses
equal to a fraction of the relocation expenses, the numerator of which is
nine months minus the number of months Executive worked after the
relocation, and the denominator of which is nine months ((nine months - the
# of months worked)
- (nine months)).
3. CONFIDENTIAL INFORMATION. Executive shall sign and abide by the
Company's Employee Proprietary Rights and Non-Disclosure Agreement (the
"Confidentiality Agreement") and the Company's Policy Statement on
Conflicts of Interest (the "Policy Statement").
4. TERMINATION OF EMPLOYMENT.
4.1 Termination With or Without Cause.
(a) Term of Employment. Subject to Section 1.1, the
employment period commences on the Effective Date and terminates
automatically on the second anniversary of the Effective Date.
Notwithstanding the foregoing, the Company shall have the right to
terminate Executive's employment with the Company at any time with or
without Cause (as defined below), and Executive shall have the right to
terminate his employment with the Company for Good Reason (as defined
below), subject to the following limitations. If Executive terminates his
employment for any reason other than Good Reason, the Company shall not
institute an action for damages against Executive solely on account of such
termination without Good Reason; provided, however, that nothing contained
herein shall limit any rights that the Company may have as a result of any
other breach by Executive of this Agreement or any other agreement referred
to herein or limit any rights of the Company with respect to any other
agreement to which it is a party, including, without limitation, the
Non-Solicitation and Non-Hire Agreement between the Company and TPG
Partners II, L.P., a Delaware limited partnership.
(i) Definition of Cause. For purposes of this
Agreement, "Cause" shall mean one or more of the following: (a) Executive's
material breach of this Agreement; (b) Executive's failure to reasonably
and substantially perform his duties under this Agreement; (c) Executive's
willful misconduct or gross negligence which materially injures the
Company; (d) Executive's conviction or plea of nolo contendere to (i) a
felony, or (ii) other serious crime involving moral turpitude. In all of
the foregoing cases, the Company shall provide written notice to Executive
indicating in reasonable detail the event or circumstances that constitute
Cause under this Agreement, and, if such breach or failure is reasonably
susceptible to cure, the Company will provide Executive with thirty days to
cure such breach or failure prior to termination for Cause.
(ii) Definition of Good Reason. For purposes of this
Agreement, "Good Reason" shall mean a material diminution in Executive's
duties and responsibilities under this Agreement. Executive shall provide
written notice to Company indicating in reasonable detail the event or
circumstances that constitute Good Reason under this Agreement, and
Executive will provide the Company with thirty days to cure such diminution
prior to termination for Good Reason.
(iii) Termination for Death or Disability. The Company
may terminate Executive's employment due to Executive's death or
"Disability." For purposes of this Agreement, "Disability" shall mean any
illness, disability or other incapacity renders Executive physically or
mentally unable regularly to perform his duties hereunder for a period in
excess of sixty (60) consecutive days or more than ninety (90) days in any
consecutive twelve (12) month period. The Board shall make a good faith
determination of whether Executive is physically or mentally unable to
regularly perform his duties, subject to its review and consideration of
any physical and/or mental health information provided to it by Executive
as determined by a physician reasonably acceptable to the Company.
(b) Termination for Cause. If the Company terminates
Executive's employment at any time for Cause or as a result of Executive's
death or Disability, Executive's salary shall cease on the date of
termination, and Executive will not be entitled to severance pay, pay in
lieu of notice or any other such compensation, other than payment of
accrued Base Salary and such other benefits as expressly required in such
event by applicable law or the terms of any applicable Company benefit
plans. All stock options and other stock awards held by Executive shall
cease vesting as of the date of termination, and shall be exercisable
thereafter only pursuant to the terms of the applicable stock option plans
and agreements.
(c) Termination without Cause or Resignation for Good
Reason. If the Company terminates Executive's employment at any time
without Cause, or Executive resigns at any time for Good Reason, the
Company shall pay to Executive, as sole and complete compensation, the
greater of (i) 180% of Executive's then current Base Salary, or (ii) the
Executive's current Base Salary for the balance of the term of this
Agreement plus an additional amount equal to 80% of Executive's then
current Base Salary for the balance of the term of this Agreement. The
Company shall make such payments to Executive within 30 days after such
termination (including any cure periods if Executive has resigned for Good
Reason). The Company also shall continue to provide medical benefits
comparable to the benefits Executive received while employed by Company for
the greater of one year or the balance of the term of this Agreement;
provided, however, that the Company's obligation to provide such medical
benefits shall cease if Executive becomes eligible for coverage under
another employer's medical benefits.
5. CHANGE OF CONTROL.
5.1 Definition. For purposes of this Agreement, Change of
Control means the occurrence of any of the following: (i) a dissolution,
liquidation or sale of all or substantially all of the assets of the
Company; (ii) the consummation of a merger or consolidation of the Company
or any direct or indirect subsidiary of the Company with any other
corporation or other entity, other than a merger or consolidation that
results in the voting securities of the Company outstanding immediately
prior to such merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or any parent thereof), in combination with the ownership
of any trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any subsidiary of the Company, at least 50%
of the combined voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately after such
merger or consolidation; (iii) from and after the Listing Date (as defined
in the Omnibus Plan), the acquisition by any person, entity or group within
the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of
1934, or any comparable successor provisions (excluding any employee
benefit plan, or related trust, sponsored or maintained by the Company or
any affiliate of the Company) of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
1934, or comparable successor rule) of securities of the Company
representing at least 50% of the combined voting power entitled to vote in
the election of directors. Notwithstanding the foregoing, prior to the
Effective Date of the Reorganization Plan, issuance of stock to the holders
of Senior Notes (as defined in the Reorganization Plan) pursuant to the
Reorganization Plan or any other transaction which is consummated without
the approval of the holders of Senior Notes shall not be deemed to
constitute, for purposes of this Agreement, a Change of Control.
5.2 Benefits upon Change of Control Prior or During Chapter 11
Reorganization. In the event of a Change of Control, as defined herein,
prior to the Effective Date of the Reorganization Plan, Executive will be
entitled to a percentage of the purchase price of the Company payable at
the time of closing as follows: (i) 2.14% of the purchase price, plus (ii)
the difference between (a) 1.86% of the purchase price and (b) the price
per share Executive would be obligated to pay to acquire 1.86% of the stock
under the applicable stock option agreement; (iii) one year's base salary
and annual bonus, calculated on an annualized basis using the criteria set
forth in Section 2.3 herein. The provisions of this Section 5.2 shall
remain in effect even if this Agreement is determined to be void ab initio
pursuant to Section 1.1.
5.3 Change of Control Termination. In the event Executive
decides to terminate his employment with the Company, with or without Good
Reason, within thirty days following a Change of Control, the Company shall
pay Executive, within 30 days after such termination, the balance of his
then current Base Salary for the remainder of the term of this Agreement
plus an amount equal to 80% of Executive's then current Base Salary. The
Company also shall continue to provide medical benefits comparable to the
benefits Executive received while employed by the Company for the greater
of one year or the balance of the term of this Agreement, and the Company
shall accelerate the vesting on all stock, stock options and other stock
awards held by Executive so that Executive is fully vested.
6. NONSOLICITATION. In the event Executive's employment with the
Company is terminated by the Company or the Executive, with or without
Cause or Good Reason, then for eighteen (18) months immediately following
the termination date, Executive shall not, without first obtaining the
prior written approval of the Company, directly or indirectly solicit,
induce, persuade or entice, or attempt to do so, or otherwise cause, or
attempt to cause (i) any employee or independent contractor of the Company
to terminate his or her employment or contracting relationship in order to
become an employee, or independent contractor to or for any person or
entity, or (ii) any actual customer at the time of employment termination
to discontinue or otherwise alter its relationship with the Company.
7. CONFIDENTIALITY. Executive shall keep the existence and terms
of this Agreement confidential, provided that he may discuss this Agreement
with his family members, counsel and, financial advisors, or disclose it as
required by law.
8. GENERAL PROVISIONS.
8.1 Notices. Any notices provided hereunder must be in writing
and shall be deemed effective upon the earlier of personal delivery
(including, personal delivery by facsimile transmission), delivery by
express delivery service (e.g. Federal Express), 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 on the Company payroll (which
address may be changed by written notice).
8.2 Severability. 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 such invalid, illegal or unenforceable provision will be
reformed, construed and enforced in such jurisdiction so as to render it
valid, legal, and enforceable consistent with the intent of the parties
insofar as possible.
8.3 Waiver. If either party should waive any breach of any
provisions of this Agreement, he or it shall not thereby be deemed to have
waived any preceding or succeeding breach of the same or any other
provision of this Agreement.
- 7 - 8.4 Entire Agreement. This Agreement, the Omnibus Plan,
the Confidentiality Agreement, and the Policy Statement constitute the
entire agreement between Executive and the Company regarding the subject
matter hereof and it supersedes any prior agreement, promise,
representation, written or otherwise, between Executive and the Company
with regard to this subject matter. It is entered into without reliance on
any agreement, or promise, or representation, other than those expressly
contained or incorporated herein, and it cannot be modified or amended
except in a writing signed by Executive and a duly authorized officer of
the Company.
8.5 Counterparts. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement. Signatures transmitted via facsimile shall be deemed the
equivalent of originals.
8.6 Headings and Construction. The headings of the sections
hereof are inserted for convenience only and shall not be deemed to
constitute a part hereof or to affect the meaning thereof. For purposes of
construction of this Agreement, any ambiguities shall not be construed
against either party as the drafter.
8.7 Successors and Assigns. This Agreement is intended to bind
and inure to the benefit of and be enforceable by Executive, the Company
and their respective successors, assigns, heirs, executors and
administrators, except that Executive may not assign any of his duties
hereunder and he may not assign any of his rights hereunder without the
written consent of the Company.
8.8 Attorneys' Fees. If either party hereto brings any action,
suit or other proceeding to interpret this Agreement or to determine or
enforce his or its rights hereunder, the prevailing party in any such
action shall be entitled to recover his or its reasonable attorneys' fees
(including in-house counsel fees) and costs incurred in connection with
such action to the extent that a party prevails.
8.9 Governing Law. All questions concerning the construction,
validity and interpretation of this Agreement shall be governed by the law
of the State of California as applied to contracts made and to be performed
entirely within California.
8.10 Injunctive Relief; Specific Performance. Executive hereby
expressly agrees and acknowledges that an actual or threatened breach by
Executive of any of Executive's obligations under Sections 3, 6 and 7
hereof would result in severe and irreparable injury to the Company, which
injury could not be adequately compensated by an award of money damages,
and Executive therefore agrees and acknowledges that the Company shall be
entitled to injunctive relief in the event of any such breach of this
Agreement, or to enjoin or prevent such a breach, notwithstanding Section
8.11,and that such injunctive relief may be sought from any court or
tribunal of competent jurisdiction.
8.11 Mutual Agreement to Arbitrate. Except for an action
exclusively seeking injunctive relief, Executive and the Company each
hereby agree to use final and binding arbitration to resolve any and all
disputes (each, an "Arbitrable Dispute") which they may have with one
another or with any affiliate of one another. Except as set forth in
Section 8.10, this arbitration agreement applies to all matters relating to
this Agreement, Executive's employment with and/or termination from the
Company, and any claims or controversies arising out of or relating to
Executive's employment, including, but not limited to, disputes about the
validity, interpretation or effect of this Agreement, or alleged violations
of it, and further including all claims arising out of any alleged
discrimination, harassment, retaliation or breach of any state or federal
equal employment opportunity laws, including, but not limited to, those
claims covered by the California Fair Employment and Housing Act, Title
VII, 42 U.S.C. Section 2000e et seq., the Federal Age Discrimination in
Employment Act, the Fair Labor Standards Act and the Americans with
Disabilities Act.
The arbitration will take place in San Francisco, California
(unless the parties mutually agree to an alternative venue), before a
single experienced employment arbitrator licensed to practice law in
California and selected in accordance with the then-current arbitration
rules and procedures for employment disputes governing arbitrations
administered by the Judicial Arbitration and Mediation Service (the
"Rules"). The arbitration shall allow for discovery sufficient to
adequately arbitrate any statutory claims, including access to essential
documents and witnesses, and provided, further, that the Rules shall be
modified by the arbitrator as to the extent necessary to be consistent with
applicable law. The arbitration will be conducted in accordance with such
Rules, and, to the extent required by California law, the Company shall pay
the administrative costs and arbitrator's fees associated with certain
claims that are the subject of arbitration. Subject to Section 8.8 hereof,
it is understood, however, that Executive shall bear his own attorney's,
expert, witness and other fees associated with the arbitration.
The arbitrator may not modify or change this Agreement in any
way, unless any provision is found to be unenforceable, in which case the
arbitrator may sever it in accordance with the terms of Section 8.2. The
remedies available in arbitration shall be identical to those allowed at
law. The arbitrator shall be allowed to award attorneys' fees pursuant to
Section 8.8 and in accordance with applicable law.
The parties understand and agree that the arbitrator's decision
shall be in writing with sufficient explanation to allow for such
meaningful judicial review as may be permitted by law, and that such
decision shall be final and binding. The arbitrator shall be required to
follow applicable law. Executive and the Company understand that, by
entering into this Agreement, they each are waiving their respective rights
to have an Arbitrable Dispute adjudicated by a court or by a jury.
Executive hereby acknowledges by initialing this provision that Executive
has read and understood, and that Executive expressly agrees to be bound
by, the terms of this Section 8.11. __________ (Initials)
8.12 Assistance in Litigation. At all times during and after
the term of this Agreement, Executive will render assistance, advice and
counsel to the Company at its request regarding any matter, dispute or
controversy with which the Company may become involved and of which
Executive has or may have reason to have knowledge, information or
expertise. Such services will be without additional compensation. The
Company will reimburse Executive for his actual, reasonable travel
expenditures and other costs incurred in connection with such assistance,
upon submission of documentation in a form acceptable to the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the Effective Date above written.
ZILOG, INC.
By:/s/
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Print Name:
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Title:
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XXXXX XXXXXXXX
/s/
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