Exhibit 10.26
LSI LOGIC CORPORATION
XXXXXXX X. XXXXXXXX EMPLOYMENT AGREEMENT
This Agreement is made by and between LSI Logic Corporation ("the
Company"), and you, Xxxxxxx X. Xxxxxxxx, as of September 20, 2001 (the
"Effective Date").
1. Duties and Scope of Employment.
(a) Positions and Duties. You will continue to serve as Chief
Executive Officer ("CEO") and Chairman of the Company's Board of Directors
("Chairman"). You will render such business and professional services in the
performance of your duties, consistent with your position within the Company, as
may reasonably be assigned to you by the Board of Directors (the "Board"). If
the Board appoints a different CEO during your term of employment with the
Company, you will serve as the employee Chairman of the Company. Your term of
employment with the Company is referred to as the "Employment Term".
(b) Obligations. During the Employment Term, you will devote your
full business efforts and time to the Company and such of its subsidiaries as
the Board may designate. During the Employment Term, you will not engage in any
other employment, occupation or consulting activity for any direct or indirect
remuneration without the prior approval of the Board (which approval will not be
unreasonably withheld), except that without the approval of the Board, and to
the extent that such service does not substantially interfere with your duties
under this Agreement, you may serve in any capacity with any civic, educational
or charitable organization and on any board of directors on which you presently
serve.
2. Employee Benefits. During the Employment Term, you will be eligible
to participate in all Company employee benefit plans that are applicable to
executive officers of the Company, as such plans may exist from time to time and
at a level commensurate with your position.
3. Vacation. During the Employment Term, you will be entitled to the
same amount of paid vacation time as other executive officers of the Company.
4. At-Will Employment. Your employment with the Company constitutes
"at-will" employment. You and the Company acknowledge that this employment
relationship may be terminated at any time, upon written notice to the other
party, with or without good cause or for any or no cause, at the option of
either you or the Company. However, as described in this Agreement, you may be
entitled to severance benefits depending upon the circumstances of your
termination of employment.
5. Business Expenses. The Company will pay or reimburse you for all
business expenses incurred while performing your duties under this Agreement.
Such reimbursements will be in accordance with the Company's established
policies, as they may exist from time to time.
6. Compensation.
(a) Base Salary. During the Employment Term, the Company will pay you
as compensation for your services a base salary as determined by the Board from
time to time (the "Base Salary"). The Base Salary will be paid through payroll
periods that are consistent with the Company's normal payroll practices, but in
any case not less frequently than once per month.
(b) Annual Bonus. For each calendar year during which you are CEO,
you will be eligible to receive a bonus based upon the achievement of one or
more performance goals specified by the Compensation Committee of the Board (the
"Committee"), as provided in the Company's Chief Executive Officer Incentive
Plan or another similar plan adopted by the Company (the "Bonus Plan"). The
actual amount of the bonus (if any) payable to you for any year will depend upon
the extent to which the applicable performance goal(s) have been satisfied. In
determining the bonus formula for any year, the Committee may (but will not be
required to) specify a target bonus (the "Target Bonus") to be paid if the
performance goal(s) specified by the Committee are exactly 100% achieved (with
the actual bonus payable being increased or decreased for over- or
underachievement of the performance goal(s)). For purposes of Section 7 below,
if the Committee does not specify a Target Bonus for a particular year, your
Target Bonus for that year will be deemed to equal 50% of the maximum annual
bonus payable under the Bonus Plan.
7. Severance.
(a) Termination Other than for Cause; Termination as a Result of
Death or Disability. If the Company terminates your employment for any reason
other than "Cause" (as defined below) or if your employment terminates as a
result of your death or "Disability" (as defined below), then you will be
entitled to the following:
(i) Option Acceleration and Time to Exercise. Any then unexpired
Company stock options that were granted after the Effective Date, your Company
stock option grant no. 018891, dated November 11, 1999 (if then unexpired), and
your Company stock option grant no. 025112, dated April 2, 2001 (if then
unexpired) will immediately become fully vested and exercisable. In addition,
with respect to each option described in the preceding sentence, you will have
the respective full term of each such option to exercise the option.
(ii) Other Benefits. You will be paid a lump sum equal to: (1)
thirty-six (36) months of your Base Salary (as in effect immediately prior to
the date of your employment termination), and (2) 300% of your Target Bonus for
the year in which the employment termination occurs. In addition, the Company
shall provide you with (a) health, dental and vision coverage benefits during
the period of twenty-four (24) months following the date of your employment
termination, provided, however, that you elect continuation coverage pursuant to
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), within the time period prescribed pursuant to COBRA, and (b) life
insurance benefits during the period of eighteen (18) months following the date
of your employment termination, at the same level as each of such benefits were
in effect for you on the day immediately preceding the date of your employment
termination.
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(iii) Accrued Wages and Vacation; Expenses. The Company will pay
you: (1) any unpaid Base Salary due for periods prior to the date of your
employment termination; (2) all of your accrued and unused vacation through the
date of your employment termination; and (3) following your submission of proper
expense reports, the total unreimbursed amount of all expenses that you
reasonably and necessarily incurred in connection with the business of the
Company prior to the date of your employment termination. These payments will be
made promptly upon your employment termination and within the period of time
mandated by law.
(b) Certain Voluntary Resignations. If you voluntarily resign as CEO
for any reason other than your death or Disability and the Company asks you to
remain as the employee Chairman and you agree to do so, then you will be
entitled to receive the following:
(i) Option Vesting and Time to Exercise. The vesting schedule of
any unvested Company stock option granted after the Effective Date that remains
outstanding on the effective date of your resignation (the "Resignation Date"),
of your Company stock option grant no. 018891, dated November 11, 1999 (if then
unexpired and to the extent not yet vested), and of your Company stock option
grant no. 025112, dated April 2, 2001 (if then unexpired and the extent not yet
vested) automatically will be converted to a monthly vesting schedule pursuant
to the following rules. The number of shares that will be scheduled to vest on
each "Monthly Vesting Date" will equal the "Monthly Vesting Amount." The Monthly
Vesting Amount equals the product of the total number of unvested shares covered
by the option on the Resignation Date, and the "Vesting Multiplier." The Vesting
Multiplier equals the reciprocal of the number of full months (but in no event
more than 36) between the Resignation Date and the date on which the option
originally was scheduled to become fully vested (the "Final Vesting Date"). The
Monthly Vesting Date is the monthly anniversary of the Final Vesting Date. The
Monthly Vesting Amount actually will vest on any Monthly Vesting Date only if
you still are Chairman on that Monthly Vesting Date, subject to the following:
if, before your options become fully vested in accordance with the rules of this
Section 7(b)(i), the Company terminates your employment for any reason other
than Cause or if your employment terminates as a result of your death or
Disability, then all of your then unexpired Company stock options (whether
granted before, on or after the Effective Date) will immediately become fully
vested and exercisable. In addition, with respect to each option described in
this Section 7(b)(i), you will have the respective full term of each such option
to exercise the vested part of the option.
(ii) Examples of Option Vesting Rules. The vesting rules of
Section 7(b)(i) are illustrated by the following examples. Assume that the
Resignation Date is June 1, 2007, and that the Company asks you to remain as
Chairman and you agree to do so. (1) Also assume that you have an option that
covers 240,000 unvested shares on the Resignation Date and the Final Vesting
Date is April 15, 2011. Therefore, the number of full months remaining until the
Final Vesting Date is forty six, and the Vesting Multiplier is the reciprocal of
36. The Monthly Vesting Amount is 6,667 shares (6,655 shares on the last Monthly
Vesting Date, due to rounding). The Monthly Vesting Date is the 15th of each
month, commencing June 15, 2007. (2) Assume the same facts as in the preceding
example, except that the Final Vesting Date is November 20, 2007. Therefore, the
number of full months remaining until the Final Vesting Date is five, and the
Vesting Multiplier is the reciprocal of 5. The Monthly Vesting Amount is 48,000
shares. The Monthly Vesting Date is the 20th of each month, commencing June 20,
2007.
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(iii) Other Benefits. You will be paid a lump sum equal to: (1)
thirty-six (36) months of your Base Salary (as in effect immediately prior to
the date of your employment termination), and (2) 300% of your Target Bonus for
the year in which the employment termination occurs. In addition, the Company
shall provide you with (a) health, dental and vision coverage benefits during
the period of twenty-four (24) months following the end of the Employment Term;
provided, however, that you elect continuation coverage pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
within the time period prescribed pursuant to COBRA, and (b) life insurance
benefits during the period of eighteen (18) months following the Employment
Term, at the same level as each of such benefits were in effect for you on the
day immediately preceding the date of your employment termination.
(iv) Accrued Wages and Vacation; Expenses. The Company will pay
you: (1) any unpaid Base Salary due for periods prior to the Resignation Date;
(2) all of your accrued and unused vacation through the Resignation Date; and
(3) following your submission of proper expense reports, the total unreimbursed
amount of all expenses that you reasonably and necessarily incurred in
connection with the business of the Company prior to the Resignation Date. These
payments will be made promptly following the Resignation Date.
(c) Certain Voluntary Terminations. If you voluntarily terminate your
employment as CEO for any reason other than your death or Disability and the
Company does not ask you to remain as Chairman, then you will be entitled to
receive the following:
(i) Option Acceleration and Time to Exercise. Any then unexpired
Company stock options that were granted after the Effective Date, your Company
stock option grant no. 018891, dated November 11, 1999 (if then unexpired), and
your Company stock option grant no. 025112, dated April 2, 2001 (if then
unexpired) will immediately become fully vested and exercisable. In addition,
with respect to each option described in the preceding sentence, you will have
the respective full term of each such option to exercise the option.
(ii) Other Benefits. You will be paid a lump sum equal to: (1)
thirty-six (36) months of your Base Salary (as in effect immediately prior to
the date of your employment termination), and (2) 300% of your Target Bonus for
the year in which the employment termination occurs. In addition, the Company
shall provide you with (a) health, dental and vision coverage benefits during
the period of twenty-four (24) months following the date of your employment
termination, provided, however, that you elect continuation coverage pursuant to
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), within the time period prescribed pursuant to COBRA, and (b) life
insurance benefits during the period of eighteen (18) months following the date
of your employment termination, at the same level as each of such benefits were
in effect for you on the day immediately preceding the date of your employment
termination.
(iii) Accrued Wages and Vacation; Expenses. The Company will pay
you: (1) any unpaid Base Salary due for periods prior to the date of your
employment termination; (2) all of your accrued and unused vacation through the
date of your employment termination; and (3) following your submission of proper
expense reports, the total unreimbursed amount of all expenses that you
reasonably and necessarily incurred in connection with the business of the
Company prior
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to the date of your employment termination. These payments will be made promptly
upon your employment termination and within the period of time mandated by law.
(d) Termination for Cause; Other Voluntary Terminations. If (1) the
Company terminates your employment for Cause or (2) if you voluntarily terminate
your employment for any reason (other than your death or Disability) and the
Company asks you to remain as Chairman but you do not agree to do so, then you
will receive: (i) the Base Salary owed to you through the date of your
employment termination, (ii) any bonus earned under Section 6(b) prior to the
date of your employment termination, (iii) all accrued vacation, expense
reimbursements and any other benefits due to you through the date of your
employment termination in accordance with the Company's then existing employee
benefit plans and policies, and (iv) such other compensation or benefits from
the Company as may be required by law (for example, COBRA benefits under Section
4980B of the Code) or as part of your other employment-related agreements. Thus,
for example, vesting of your Company stock options will cease upon your
termination of employment and you will have until the earlier of ninety (90)
days after your termination of employment or the normal expiration date of your
option(s) to exercise any vested but unexpired options.
8. Golden Parachute Excise Tax Gross-Up. In the event that the benefits
provided for in this Agreement or otherwise payable to you constitute "parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") and will be subject to the excise tax imposed by
Section 4999 of the Code, then you will receive a payment from the Company
sufficient to pay such excise tax, plus (ii) an additional payment from the
Company sufficient to pay the excise tax and federal and state income and
employment taxes arising from the payments made to you by the Company pursuant
to this sentence. Unless you and the Company otherwise agree in writing, the
determination of your excise tax liability and the amount required to be paid
under this Section 8 will be made in writing by the independent auditors who are
primarily used by the Company immediately prior to the change of control (the
"Accountants"). For purposes of making the calculations required by this Section
8, the Accountants may make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith interpretations
concerning the application of Sections 280G and 4999 of the Code. You and the
Company will furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make a determination under this
Section 8. The Company will bear all costs the Accountants may reasonably incur
in connection with any calculations contemplated by this Section 8.
9. Maximum Deductibility for the Company. To the extent a payment under
this Agreement would be subject to the Section 162(m) limit of the Code, the
Board may elect to defer such payment until the first date when the payment
would not be subject to the limit.
10. Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:
(a) Cause. "Cause" means termination due to your willful engagement
in misconduct that is demonstrably and materially injurious to the Company and
its subsidiaries taken as a whole. No act, or failure to act, on your part will
be considered "willful" unless done, or omitted to be done, by you not in good
faith and without reasonable belief that your action or
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omission was in the best interest of the Company or its subsidiaries.
Notwithstanding the foregoing, you will not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Company's Board of Directors at a meeting of the
Board called and held for the purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the Board),
finding that in the good faith opinion of the Board you were guilty of
misconduct as set forth above and specifying the particulars thereof in detail.
(b) Disability. "Disability" means your being unable to perform the
principal functions of your duties due to a physical or mental impairment, but
only if such inability has lasted or is reasonably expected to last for at least
twelve (12) months. The Board will determine whether a Disability exists based
on evidence provided by one or more physicians selected by the Board.
11. Assignment. This Agreement will be binding upon and inure to the
benefit of (a) your heirs, executors and legal representatives upon your death
and (b) any successor of the Company. Any such successor of the Company will be
deemed substituted for the Company under the terms of this Agreement for all
purposes. For this purpose, "successor" means any person, firm, corporation or
other business entity which at any time, whether by purchase, merger or
otherwise, directly or indirectly acquires all or substantially all of the
assets or business of the Company. None of your rights to receive any form of
compensation payable pursuant to this Agreement may be assigned or transferred
except by will or the laws of descent and distribution. Any other attempted
assignment, transfer, conveyance or other disposition of your right to
compensation or other benefits will be null and void.
12. Legal Fees. The Company will reimburse you for your reasonable,
direct costs of obtaining counsel to review this Agreement. In addition, the
Company will reimburse all reasonable legal fees and expenses incurred by you in
contesting any termination or in seeking to obtain or enforce any right or
benefit provided by this Agreement.
13. Notices. All notices, requests, demands and other communications
called for hereunder shall be in writing and will be deemed given (i) on the
date of delivery if delivered personally, (ii) one (1) day after being sent by a
well established commercial overnight service, or (iii) four (4) days after
being mailed by registered or certified mail, return receipt requested, prepaid
and addressed to the parties or their successors at the following addresses, or
at such other addresses as the parties may later designate in writing:
If to the Company:
LSI Logic Corporation
0000 XxXxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
Attn: Vice President, General Counsel and Corporate Secretary
If to you:
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at your last residential address known by the Company.
14. Severability. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement will continue in full force and effect without said
provision.
15. Confidentiality. You agree to use your best efforts to maintain in
confidence the existence of this Agreement, the contents and terms of this
Agreement, including any documents incorporated by reference, and the
consideration for this Agreement (hereinafter collectively referred to as
"Employment Information"). You agree to take every reasonable precaution to
prevent disclosure of any Employment Information to third parties, and agree
that there will be no publicity, directly or indirectly, concerning any
Employment Information. You agree to take every precaution to disclose
Employment Information only to those attorneys, accountants, governmental
entities and family members who have a reasonable need to know of such
Employment Information. After termination of employment for any reason, you will
continue to maintain the confidentiality of all Employment Information.
16. Entire Agreement. This Agreement, the Chief Executive Officer
Incentive Plan, and agreements evidencing the options represent the entire
agreement and understanding between the Company and you concerning your
employment relationship with the Company or any of its subsidiaries, and
supersedes and replaces any and all prior agreements and understandings
concerning your employment relationship with the Company. For example (but not
by way of limitation), your 1998 Change of Control Severance Agreement no longer
is effective and you will not be entitled to receive any benefits under that
agreement.
17. Arbitration and Equitable Relief.
(a) Except as provided in Section 16(d) below, you and the Company
agree that to the extent permitted by law, any dispute or controversy arising
out of, relating to, or in connection with this Agreement, or the
interpretation, validity, construction, performance, breach, or termination
thereof will be settled by arbitration to be held in the County of Santa Clara,
California, in accordance with the National Rules for the Resolution of
Employment Disputes then in effect of the American Arbitration Association (the
"Rules"). The arbitrator may grant injunctions or other relief in such dispute
or controversy. The decision of the arbitrator will be final, conclusive and
binding on the parties to the arbitration. Judgment may be entered on the
arbitrator's decision in any court having jurisdiction.
(b) The arbitrator will apply California law to the merits of any
dispute or claim (with the exception of its conflict of laws provisions). You
hereby expressly consent to the personal jurisdiction of the state and federal
courts located in California for any action or proceeding arising from or
relating to this Agreement and/or relating to any arbitration in which the
parties are participants.
(c) The Company will pay the direct costs and expenses of the
arbitration. The Company will pay your counsel fees and expenses.
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(d) The Company or you may apply to any court of competent
jurisdiction for a temporary restraining order, preliminary injunction, or other
interim or conservatory relief, as necessary to enforce the provisions of this
Agreement, without breach of this arbitration agreement and without abridgement
of the powers of the arbitrator.
(e) You understand that nothing in this Section 16 modifies your
at-will status. Either the Company or you can terminate the employment
relationship at any time, with or without cause.
(f) YOU HAVE READ AND UNDERSTAND THIS SECTION 16, WHICH DISCUSSES
ARBITRATION. YOU UNDERSTAND THAT BY SIGNING THIS AGREEMENT, YOU AGREE TO THE
EXTENT PERMITTED BY LAW, TO SUBMIT ANY FUTURE CLAIMS ARISING OUT OF, RELATING
TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH, OR TERMINATION THEREOF TO BINDING
ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF YOUR RIGHT
TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL
ASPECTS OF THE EMPLOYER/EXECUTIVE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO,
THE FOLLOWING CLAIMS:
(i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT;
BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD
FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL
INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL MISREPRESENTATION;
NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC
ADVANTAGE; AND DEFAMATION;
(ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR
MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, THE AMERICANS WITH
DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS ACT, AND ANY LAW OF ANY
STATE; AND
(iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND
REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.
18. No Oral Modification, Cancellation or Discharge. This Agreement may
be changed or terminated only in writing (signed by you and another member of
the Board of Directors).
19. Withholding. The Company is authorized to withhold, or cause to be
withheld, from any payment or benefit under this Agreement the full amount of
any applicable withholding taxes.
20. Governing Law. This Agreement will be governed by the laws of the
State of California (with the exception of its conflict of laws provisions).
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21. Acknowledgment. You acknowledge that you have had the opportunity to
discuss this matter with and obtain advice from your private attorney, have had
sufficient time to, and have carefully read and fully understand all the
provisions of this Agreement, and are knowingly and voluntarily entering into
this Agreement.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
respective dates set forth below:
XXXXXXX X. XXXXXXXX
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Xxxxxxx X. Xxxxxxxx
LSI LOGIC CORPORATION
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Name: Xxxxx X. Xxxxxx
Title: Vice-President, General Counsel, Secretary
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