March 15, 2006 Hock E. Tan 373 Righters Mill Road Gladwyne, PA 19035 Re: Employment Offer Dear Hock:
Exhibit-10.26
March 15, 2006
Xxxx X. Xxx
000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
Re: Employment Offer
Dear Xxxx:
Avago Technologies Limited (the “Company”) is pleased to offer you the position of Chief
Executive Officer. This letter (the “Agreement”) sets forth, among other things, the terms of your
employment with the Company. For purposes of this Agreement, employment with the Company shall be
deemed to include employment with the Company’s United States subsidiaries.
• Duties. Your employment will commence hereunder effective as of
March 31, 2006. You will be employed as the President and Chief Executive Officer, and will
perform the duties customarily associated with such positions. You will report to and be a member
of the Company’s Board of Directors (the “Board”) and will perform your services on a full-time
basis at the Company’s headquarters in San Jose, California. You shall devote your full working
time and attention to the business affairs of the Company.
• Base Salary/Bonus. You will receive an annual base salary of
$600,000 for all hours worked to be paid in accordance with the Company’s customary payroll
procedures, less payroll deductions and withholdings. You will be eligible to receive a cash bonus
each year based upon your and/or the Company’s attainment of certain performance objectives as
determined by the Board following consultation with you. The target level for attaining 100% of
your objectives will be 100% of your base salary. Based upon actual performance versus such
performance objectives, your cash bonus payouts may exceed your target amount.
• Options. You will be eligible to participate in the Equity Incentive Plan
for Executive Employees of Avago Technologies Limited and Subsidiaries or any successor equity plan
and will be granted an initial non-qualified option to purchase 950,000 ordinary shares of the
Company. Assuming your continued employment, 450,000 of your initial option will vest 50% based on
time and 50% based on the performance of the Company, in each case, over five years. The remaining
500,000 ordinary shares of the Company, assuming your continued employment, will vest 100% based on
the performance of the Company over five years. You will receive an opportunity to invest
$2,000,000 in the ordinary shares of the Company and will be eligible for a non-qualified option to
purchase additional shares in connection with any co-investment of 3.5x the amount you choose to
invest ($2,000,000). The options you receive in connection with your co-investment will vest 50%
based on time and 50% based on performance, in each case, assuming your continued employment over
five years.
• Benefits. You will be eligible to participate in all of the
employee benefit plans or programs the Company generally makes available to its executive
employees, pursuant to the terms and conditions of such plans. You will initially be entitled to
three (3) weeks of paid flexible time off.
• Expenses. You shall be entitled to reimbursement for all ordinary
and reasonable out-of-pocket business expenses which are reasonably incurred by you in furtherance
of the Company’s business and in accordance with the Company’s standard policies.
• Relocation Bonus. Consistent with Company policy, you will be
entitled to a relocation benefit equal to one month of base salary, which shall be paid in a single
lump sum on the first normally scheduled payroll period following your first day of employment.
• Indemnification. You shall be entitled to enter into an
indemnification agreement with the Company containing customary terms no less favorable than the
terms of any such indemnification agreement between the Company and any other director. You shall
be entitled to be covered under the Company’s director’s and officer’s insurance policy consistent
with the coverage of other directors generally.
• Company Policies And Confidentiality Agreement. As an employee of
the Company, you will be expected to abide by all of the Company’s policies and procedures. As a
condition of your employment, you agree to abide by the terms of the Company’s form of Agreement
Regarding Confidential Information and Proprietary Developments.
• Other Agreements. As a condition to your employment with the
Company, you agree that your performance of your duties for the Company will not violate any
agreements, obligations or understandings that you may have with any third party or prior employer.
You agree not to make any unauthorized disclosure or use, on behalf of the Company, of any
confidential information belonging to any of your former employers. You also represent that you
are not in unauthorized possession of any materials containing a third party’s confidential and
proprietary information.
• Outside Activities. While employed by the Company, you will not
engage in any business activity in competition with the Company nor make preparations to do so.
With prior approval of the Board you may serve as a member of the board of directors of other
companies not in competition with the Company; provided such service does not interfere with the
performance of your duties hereunder. The Company expressly acknowledges and agrees that you can
remain and continue your role as the non-executive Chairman of the Board of Directors of Integrated
Device Technology, Inc. provided such service does not interfere with the performance of
your duties under this Agreement.
• At-will Employment. As an employee of the Company, you may
terminate your employment and your service as a member of the Board at any time and for any reason
whatsoever simply by notifying the Company. Similarly, the Company may terminate your employment
and your service as a member of the Board at any time and for any reason whatsoever, with or
without Cause or advance notice. Your at-will employment relationship
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with the Company cannot be changed except in writing signed by an authorized representative of
the Board.
• Severance Benefits.
¡ Termination By The Company Without Cause or for Good Reason, Death or Disability. If
your employment by the Company is terminated by the Company without Cause (as defined
below), or if you voluntarily terminate your employment for Good Reason (as defined below),
and if you provide the Company with a signed customary and reasonable general release of all
claims against the Company and its affiliates in a form acceptable to the Company, the
Company shall provide you with continuation of your base salary for a period of twelve (12)
months after your termination date at the rate in effect immediately prior to your
termination of employment, less applicable withholdings and payment of an amount equal to
the lesser of (a) your prior year’s bonus and (b) your prior year’s target bonus, both
payable in twelve (12) substantially equal installments pursuant to the Company’s normal and
customary payroll procedures; provided, however, that for your first year of employment,
your prior year’s bonus and your prior year’s target bonus shall both be deemed to be your
first year’s target bonus; provided further, however, that to the extent required to comply
with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), if you are
deemed to be a “specified employee” for purposes of Section 409A(a)(2)(B) of the Code, you
agree that the installments due to you under this paragraph in connection with a termination
of your employment that would otherwise have been payable at any time during the six-month
period immediately following such termination of employment shall not be paid prior to, and
shall instead be payable in a lump sum as soon as practicable following, the expiration of
such six-month period. In the event of your death or disability, upon provision to the
Company of a signed general release of all claims against the Company and its affiliates in
a form acceptable to the Company, you (or your estate) will receive the severance benefits
described in this paragraph.
¡ Change in Control Benefits. If your employment by the Company is terminated by the
Company without Cause, or if you voluntarily terminate your employment for Good Reason, or
if you die or become disabled, in each case within the three (3) month period immediately
prior to or the twelve (12) month period commencing on a Change in Control (as defined
below), and if you provide the Company with a signed customary and reasonable general
release of all claims against the Company and its affiliates in a form acceptable to the
Company, then in lieu of the severance benefits described in the preceding paragraph, the
Company shall provide you (or your estate) with continuation of your base salary for a
period of twenty-four (24) months after your termination date at the rate in effect
immediately prior to your termination of employment, less applicable withholdings, and
payment of an amount equal to 200% of the lesser of (a) your prior year’s bonus and (b) your
prior year’s target bonus, both payable in twenty-four (24) substantially equal installments
pursuant to the Company’s normal and customary payroll procedures; provided, however, that
for your first year of employment, your prior year’s bonus and your prior year’s target
bonus shall both be deemed to be your first year’s target bonus; provided further, however,
that to the extent required to comply with
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Section 409A of the Code, if you are deemed to be a “specified employee” for purposes
of Section 409A(a)(2)(B) of the Code, you agree that the installments due to you under this
paragraph in connection with a termination of your employment that would otherwise have been
payable at any time during the six-month period immediately following such termination of
employment shall not be paid prior to, and shall instead be payable in a lump sum as soon as
practicable following, the expiration of such six-month period. Finally, your then
outstanding options shall immediately accelerate and become vested and exercisable for that
number of shares subject thereto with respect to which such options would have become vested
and exercisable over the succeeding twelve (12) month period based solely on the passage of
time and your performance of services (i.e., you will receive twelve (12) month accelerated
vesting on your time vesting options).
¡ Gross-Up Payment. Prior to the Company becoming listed on an established stock
exchange or national market system, Kohlberg Kravis & Xxxxxxx Co., L.P. and Silver Lake
Partners, LLC (the “Sponsors”) shall use commercially reasonable efforts to obtain
shareholder approval for any payments that would otherwise result in an excise tax liability
under Section 4999 of the Code following your timely, written request therefore. In the
event the Company becomes listed on any established stock exchange or a national market
system, the Board shall negotiate in good faith with you regarding whether to amend this
Agreement to provide for a payment to offset any excise taxes imposed by Section 4999 of the
Code.
¡ Termination By The Company With Cause Or Termination By You. If your employment by
the Company is terminated by the Company with Cause, or if you voluntarily terminate your
employment with the Company (other than for Good Reason), you shall not be entitled to any
severance pay, severance benefits, or any compensation or benefits from the Company
whatsoever, other than as required under applicable law.
¡ Definitions.
• Cause. For purposes of this Agreement, “Cause” shall mean (A) your willful
refusal to perform in any material respect your duties or responsibilities for the Company
or its affiliates or willful disregard in any material respect of any financial or other
budgetary limitations established in good faith by the Board; or (B) your material breach of
any provision of this Agreement that is not cured upon ten (10) days notice thereof; or (C)
the engaging by you in conduct that causes material and demonstrable injury, monetarily or
otherwise, to the Company or any affiliates, including, but not limited to, misappropriation
or conversion of assets of the Company or any affiliates (other than non-material assets);
or (D) your engagement in an act of moral turpitude or conviction of or entry of a plea of
nolo contendere to a felony.
•
Change in Control. For purposes of this Agreement, “Change in Control” shall
mean (i) the sale of all or substantially all of the assets of the Company and its
subsidiaries, taken as a whole to a person who is not an affiliate of the Company or the
Sponsors; (ii) a sale by the Sponsors or any of their respective affiliates resulting in
more than fifty percent (50%) of the voting shares of the Company being held by a
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person or related group of persons that does not include the Sponsors or any of their
respective affiliates or (iii) a merger or consolidation of the Company into another person
which is not an affiliate of the Company or the Sponsors, if and only if as a result of such
merger or consolidation the Sponsors lose the ability to elect a majority of the Board (or
the resulting entity).
• Good Reason. For purposes of this Agreement, the term “Good Reason” shall mean
any of the following: (A) a reduction in your base salary (other than as part of a broad
salary reduction program instituted because the Company or its affiliates is in financial
distress); (B) a substantial reduction in your duties and responsibilities; (C) the
elimination or reduction of your eligibility to participate in the Company’s benefit
programs that is inconsistent with the eligibility of executive employees of the Company to
participate therein; (D) the Company informs you of its intention to transfer your primary
workplace to a location that is more than 50 miles from your workplace as set forth herein;
(E) the Company’s material breach of this Agreement that is not cured within sixty (60) days
written notice thereof; and (F) any serious chronic mental or physical illness of a member
of your family that requires you to terminate your employment because of substantial
interference with your duties at the Company; provided, that at the Company’s request you
shall provide the Company with a written physician’s statement confirming the existence of
such mental or physical illness.
• Entire Agreement. This Agreement and the documents referenced
herein (including, without limitation, the equity-related documents) constitute the complete, final
and exclusive embodiment of the entire agreement between you and the Company with respect to the
terms and conditions of your employment specified herein. This Agreement supersedes any other such
promises, warranties, representations or agreements. This Agreement may not be amended or modified
except by a written instrument signed by you and an authorized representative of the Board.
• Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of California without regard to the conflicts of law
provisions thereof.
• Dispute Resolution. To ensure the timely and economical resolution
of disputes that arise in connection with your employment with the Company, you and the Company
agree that any and all disputes, claims, or causes of action arising from or relating to the
enforcement, breach, performance or interpretation of this Agreement, your employment, or the
termination of your employment, shall be resolved to the fullest extent permitted by law by final,
binding and confidential arbitration, by a single arbitrator, in Santa Xxxxx County, California,
conducted by Judicial Arbitration and Mediation Services, Inc. (“JAMS”) under the applicable JAMS
employment rules. By agreeing to this arbitration procedure, both you and the Company waive the
right to resolve any such dispute through a trial by jury or judge or administrative proceeding.
The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of
the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a
written arbitration decision, to include the arbitrator’s essential findings and conclusions and a
statement of the award. The arbitrator shall be authorized to award any or all remedies that you
or the Company would be entitled to seek in a court of law.
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The Company shall pay all JAMS’ arbitration fees in excess of the amount of court fees that
would be required if the dispute were decided in a court of law. Nothing in this Agreement is
intended to prevent either you or the Company from obtaining injunctive relief in court to prevent
irreparable harm pending the conclusion of any such arbitration. Notwithstanding the foregoing,
you and the Company each have the right to resolve any issue or dispute over intellectual property
rights by Court action instead of arbitration.
As required by law, this Agreement is subject to satisfactory proof of your right to work in
the United States. This Agreement and your employment by the Company are also conditioned on the
Company completing, to its satisfaction, a review of your personal and/or business references as
well as a background check.
We are looking forward to a long and fruitful working relationship with you. If you choose to
accept this Agreement under the terms described above, please acknowledge your acceptance of our
offer by returning a signed copy of this letter to our attention.
Sincerely,
/s/ Xxxx
Xxxxxxx
Xxxx Xxxxxxx
Xxxxxxxx Kravis Xxxxxxx & Co.
Xxxxxxxx Kravis Xxxxxxx & Co.
/s/ Xxx
Xxx
Xxx Xxx
Silver Lake Partners
Silver Lake Partners
Agreed
and Accepted this 28 day of March, 2006
/s/ Xxxx
X. Xxx
Xxxx X. Xxx
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