LINEAR TECHNOLOGY CORPORATION
XXXXXX X. XXXXXXX, XX. EMPLOYMENT AGREEMENT
This Agreement is made by and between Linear Technology Corporation
(the "Company") and Xxxxxx X. Xxxxxxx, Xx. ("Executive").
1. Duties and Scope of Employment.
(a) Positions; Agreement Commencement Date; Duties.
Executive's coverage under this Agreement shall commence upon the date this
Agreement has been signed by both parties hereto (the "Agreement Commencement
Date"). Following the Agreement Commencement Date, Executive shall continue to
serve as Chief Executive Officer and Chairman of the Board of Directors of the
Company (the "Board"), reporting to the Board. The period of Executive's
employment hereunder is referred to herein as the "Employment Term." During the
Employment Term, Executive shall render such business and professional services
in the performance of his duties, consistent with Executive's position within
the Company, as shall reasonably be assigned to him by the Board.
(b) Obligations. During the Employment Term, Executive shall
devote his full business efforts and time to the Company. Executive agrees,
during the Employment Term, not to actively engage in any other employment,
occupation or consulting activity for any direct or indirect remuneration
without the prior approval of the Board; provided, however, that Executive may
serve in any capacity with any civic, educational or charitable organization, or
as a member of corporate Boards of Directors or committees thereof, without the
approval of the Board, unless such service involves a conflict of interest with
the Company's business.
(c) Employee Benefits. During the Employment Term, Executive
shall be eligible to participate in the employee benefit plans maintained by the
Company that are applicable to other senior management to the full extent
provided for under those plans.
2. At-Will Employment. Executive and the Company understand and
acknowledge that Executive's employment with the Company constitutes "at-will"
employment. Subject to the Company's obligation to provide severance benefits as
specified herein, Executive 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 either
of the Company or Executive.
3. Compensation.
(a) Base Salary. While employed by the Company, the Company
shall pay the Executive as compensation for his services a base salary at the
annualized rate of $345,000 (the "Base Salary"). Such salary shall be paid
periodically in accordance with normal Company payroll practices and subject to
the usual, required withholding. Executive's Base Salary shall be reviewed
annually by the Compensation Committee of the Board for possible adjustments in
light of Executive's performance and competitive data.
(b) Bonuses. Executive shall be eligible to earn a target
bonus under the Company's 1996 Senior Executive Bonus Plan as specified annually
by the Compensation Committee of the Board and will also be eligible to
participate in the Key Employee Incentive Bonus Plan (the target amounts under
these plans, added together, are referred to herein as the "Target Bonus").
(c) Use of Company Airplane. While employed by the Company,
Executive shall be permitted to use, for personal purposes, the Company airplane
and pilot(s), for up to 35% of the available flight time in any year; provided,
however, that such use shall be subject to the Company's reasonable policies and
airplane usage requirements. Executive shall be fully grossed-up for any imputed
taxable income recognized by virtue of such use so that the net effect to
Executive is the same as if there was no imputed income.
(d) Severance Prior to a Change of Control.
(i) Voluntary Termination for Good Reason;
Involuntary Termination Other Than for Cause. If, prior to a Change of Control
(as defined herein), Executive's employment with the Company or, following a
transition pursuant to Section 3(f) hereof, his tenure as Chairman of the Board,
terminates due to (i) a voluntary termination for "Good Reason" (as defined
herein) where the grounds for the Good Reason are not cured by the Company
within 30 days following receipt of written notice specifying the grounds from
Executive, or (ii) an involuntary termination by the Company other than for
"Cause" (as defined herein), then, subject to Executive executing and not
revoking a standard form of mutual release of claims with the Company and not
breaching the terms of Section 11 hereof, (i) all of Executive's Company stock
options and restricted stock shall immediately accelerate vesting as to 100% of
the then unvested shares, (ii) Executive shall receive continued payments of one
year's Base Salary plus Target Bonus, less applicable withholding, in accordance
with the Company's standard payroll practices (the "Severance Payment"), (iii)
the Company shall pay the group health and dental plan continuation coverage
premiums for Executive and his covered dependents under Title X of the
Consolidated Budget Reconciliation Act of 1985, as amended ("COBRA") for the
lesser of (A) eighteen (18) months from the date of Executive's termination of
employment, or (B) the date upon which Executive and his covered dependents are
covered by similar plans of Executive's new employer (the "COBRA Coverage").
For purposes of this Agreement, "Cause" shall mean (i) an act of
personal dishonesty taken by Executive in connection with his responsibilities
as an employee and intended to result in substantial personal enrichment of
Executive, (ii) Executive being convicted of, or plea of nolo contendere to, a
felony, (iii) a willful act by Executive which constitutes gross misconduct and
which is injurious to the Company, (iv) following delivery to Executive of a
written demand for performance from the Company which describes the basis for
the Company's reasonable belief that Executive has not substantially performed
his duties, continued violations by Executive of Executive's obligations to the
Company which are demonstrably willful and deliberate on Executive's part.
For purposes of this Agreement, "Good Reason" means, without
Executive's express consent, (i) a material reduction of Executive's duties,
title, authority or responsibilities, relative to Executive's duties, title,
authority or responsibilities as in effect immediately prior to such reduction,
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or the assignment to Employee of such reduced duties, title, authority or
responsibilities (ii) a material reduction, of the facilities and perquisites
(including office space and location) available to Executive immediately prior
to such reduction, other than a reduction generally applicable to all senior
management of the Company; (iii) a reduction by the Company in the Base Salary
of Executive as in effect immediately prior to such reduction; (iv) a material
reduction by the Company in the aggregate level of employee benefits, including
Target Bonuses, to which Executive was entitled immediately prior to such
reduction with the result that Executive's aggregate benefits package is
materially reduced (other than a reduction that generally applies to Company
employees); (v) the relocation of Executive to a facility or a location more
than thirty-five (35) miles from Executive's then present location; or (vi) any
act or set of facts or circumstances which would, under California case law or
statute constitute a constructive termination of Executive; provided, however,
that Executive's transition from Chairman of the Board and Chief Executive
Officer to Chairman pursuant to Section 3(f) hereof and the related reductions
in pay, responsibilities and the like shall not constitute Good Reason.
The Executive shall not be required to mitigate the value of
any severance benefits contemplated by this Agreement, nor shall any such
benefits be reduced by any earnings or benefits that the Executive may receive
from any other source; provided, however, that Executive if Executive receives
severance benefits hereunder, he expressly waives the right to receive severance
benefits under any other severance plan or policy of the Company.
(ii) Voluntary Termination Other than for Good
Reason; Involuntary Termination for Cause. Except as provided otherwise in
Sections 3(f) and 3(g) hereof, in the event Executive terminates his employment
voluntarily other than for Good Reason or is involuntarily terminated by the
Company for Cause, then all vesting of Executive's stock options and restricted
stock shall terminate immediately and all payments of compensation by the
Company to Executive hereunder shall immediately terminate (except as to amounts
already earned).
(e) Change of Control Benefits. In the event of a "Change of
Control" (as defined herein), then Executive shall receive the benefits
specified in Section 3(d)(i) above (including 100% vesting acceleration);
provided that the Severance Payment shall be payable in a lump-sum within five
days following the Change of Control and the COBRA Coverage shall be extended to
Executive upon any subsequent termination of his employment, whether or not for
Cause or Good Reason. In the event Executive's employment or tenure as Chairman
of the Board terminates following a Change of Control, for any or no reason,
including pursuant to Sections 3(f) or 3(g) hereof, Executive shall not be
entitled to any additional compensation (excepts as to amounts already earned
and payments and benefits due pursuant to Section 3(f)).
For purposes of this Agreement, "Change of Control" shall mean the
occurrence of any of the following events:
(i) Any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company's then outstanding
voting securities; or
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(ii) The consummation of the sale or disposition by
the Company of all or substantially all the Company's assets; or
(iii) The consummation of 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
(iv) A change in the composition of the Board
occurring within a two-year period, as a result of which fewer than a majority
of the directors are Incumbent Directors. "Incumbent Directors" shall mean
directors who either (A) are directors of the Company as of the date upon which
this Agreement was entered into, or (B) are elected, or nominated for election,
to the Board with the affirmative votes of at least a majority of those
directors whose election or nomination was not in connection with any
transaction described in subsections (i), (ii), or (iii) above, or in connection
with an actual or threatened proxy contest relating to the election of directors
to the Company.
(f) Transition from CEO and Chairman of the Board to Chairman
of the Board. In the event that (i) Executive voluntarily resigns from his
position as Chief Executive Officer, (ii) such resignation is not a Voluntary
Termination for Good Reason, (iii) the Board of Directors requests that
Executive remain as Chairman of the Board with duties requiring Executive's
services on the order of 1-2 days per week, and (iv) Executive agrees to remain
as Chairman of the Board on such terms, then Executive shall receive the
following compensation and benefits during the period of his tenure as Chairman
of the Board:
(i) Salary. Salary equal to his Base Salary as in
effect immediately prior to the date of his transition (the "Transition Date"),
divided by 365, and multiplied by each full day of service he performs as
Chairman of the Board.
(ii) Bonus. For the partial year prior to the
Transition Date, Executive shall be eligible to receive a pro-rated Target
Bonus. For periods on and after the Transition Date, Executive shall be eligible
to receive Executive's Target Bonus as in effect immediately prior to the
Transition Date, divided by 365, and multiplied by each full day of service he
performs for the Company as Chairman, or alternatively in such amount as the
Board deems appropriate, but in no event more than 50% of the last full annual
bonus received by Executive prior to the Transition Date.
(iii) Benefits and Perquisites. The same benefits and
perquisites he would have received had he remained Chief Executive Officer,
including health and other welfare plan participation, use of the Company
airplane and pilot(s) as set forth in Section 3(c) hereof, office space and
secretary, but excluding stock options, Employee Stock Purchase Plan
participation, 401(k) participation and any benefits and perquisites where
continuing Executive's participation would be either (A) contrary to statute or
regulation, or (B) highly impractical.
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(iv) Stock Options and Restricted Stock. Executive's
stock options and restricted stock that are unvested on the Transition Date
shall continue to vest, subject to his continuing as Chairman, at twice the rate
as if he had continued as Chief Executive Officer. For example, if Executive has
a stock option that is 25% unvested on the Transition Date and the option is
scheduled to vest as to 1/12 of the unvested shares each month so as to be 100%
vested on the one year anniversary of the Transition Date, the vesting schedule
shall be accelerated so that the option shall vest at to 1/12 of the unvested
shares each half-month, so as to be 100% vested six months following the
Transition Date.
(g) Voluntary Termination when Executive is 65 or Older. In
the event that on or after his 65th birthday, Executive (i) voluntarily
terminates as Chairman of the Board, and, (ii) if he is then employed by the
Company, voluntarily terminates such employment, then Executive shall receive
the same benefits as if such voluntary termination was a voluntary termination
for Good Reason.
4. Death or Total Disability of Executive.
(a) Death. Upon Executive's death while Executive is an
employee or consultant of the Company, then (i) employment hereunder shall
automatically terminate, (ii) all of Executive's Company stock options and
restricted stock shall immediately accelerate vesting as to 50% of the then
unvested shares, and all subsequent vesting of Executive's stock options and
restricted stock shall terminate immediately, and (iii) all payments of
compensation by the Company to Executive hereunder shall immediately terminate
(except as to amounts already earned).
(b) Disability. Upon Executive's becoming permanently and
totally disabled (as defined in accordance with Internal Revenue Code Section
22(e)(3) or its successor provision) while Executive is an employee or
consultant of the Company, then employment hereunder shall automatically
terminate and all payments of compensation by the Company to Executive hereunder
shall immediately terminate (except as to amounts already earned), and all
vesting of Executive's stock options and restricted stock shall terminate
immediately.
5. Golden Parachute Excise Tax Full Gross-Up. In the event that the
benefits provided for in this Agreement or otherwise payable to Executive
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 Executive shall receive
(i) 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 by the
Company to Employee pursuant to this sentence. Unless the Company and the
Executive otherwise agree in writing, the determination of Executive's excise
tax liability and the amount required to be paid under this Section 5 shall be
made in writing by the Company's 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 5, 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. The Company and Executive
shall furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make a
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determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 5.
6. Assignment. This Agreement shall be binding upon and inure to the
benefit of (a) the heirs, beneficiaries, executors and legal representatives of
Executive upon Executive's death and (b) any successor of the Company. Any such
successor of the Company shall be deemed substituted for the Company under the
terms of this Agreement for all purposes. As used herein, "successor" shall
include 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 the
rights of Executive to receive any form of compensation payable pursuant to this
Agreement shall be assignable or transferable except through a testamentary
disposition or by the laws of descent and distribution upon the death of
Executive. Any attempted assignment, transfer, conveyance or other disposition
(other than as aforesaid) of any interest in the rights of Executive to receive
any form of compensation hereunder shall be null and void.
7. Notices. All notices, requests, demands and other communications
called for hereunder shall be in writing and shall be deemed given if (i)
delivered personally or by facsimile, (ii) one (1) day after being sent by
Federal Express or a similar commercial overnight service, or (iii) three (3)
days after being mailed by registered or certified mail, return receipt
requested, prepaid and addressed to the parties or their successors in interest
at the following addresses, or at such other addresses as the parties may
designate by written notice in the manner aforesaid:
If to the Company: Linear Technology Corporation
000 Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn: General Counsel
If to Executive: Xxxxxx X. Xxxxxxx
at the last residential address
known by the Company.
8. 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 shall continue in full force and effect without said
provision.
9. Entire Agreement. This Agreement, the Confidential Information and
Invention Assignment Agreement previously entered into by and between the
Company and Executive and the indemnification agreement previously entered into
by and between the Company and Executive represent the entire agreement and
understanding between the Company and Executive concerning Executive's
employment relationship with the Company, and supersede and replace any and all
prior agreements and understandings concerning Executive's employment
relationship with the Company.
10. Dispute Resolution.
(a) The parties shall first meet to settle any dispute through
good faith negotiation or non-binding mediation. If not settled by good faith
negotiation or non-binding mediation between the parties within 30 days from the
date one party requests in writing to meet the other party, then to
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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 shall be finally
settled by binding arbitration to be held in Santa Xxxxx County, 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 shall be confidential, final, conclusive and
binding on the parties to the arbitration. Judgment may be entered under a
protective order on the arbitrator's decision in any court having jurisdiction.
The Company shall pay all costs of any mediation or arbitration; provided,
however, that each party shall pay its own attorney and advisor fees.
(b) The arbitrator shall apply California law to the merits of
any dispute or claim, without reference to rules of conflict of law. The
arbitration proceedings shall be governed by federal arbitration law and by the
Rules, without reference to state arbitration law. Executive hereby expressly
consents 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) Executive understands that nothing in Section 10 modifies
Executive's at-will status. Either the Company or Executive can terminate the
employment relationship at any time, with or without cause.
(d) EXECUTIVE HAS READ AND UNDERSTANDS SECTION 10, WHICH
DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT,
EXECUTIVE AGREES, 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 EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL
DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP.
11. Covenants Not to Compete and Not to Solicit.
(a) Covenant Not to Compete. In consideration for the benefits
Executive is to receive herein Executive agrees that, until the end of the
twelve month period following the date of his termination of employment with the
Company for any reason or no reason, Executive will not directly engage in
(whether as an employee, consultant, proprietor, partner, director or
otherwise), or have any ownership interest in, or participate in the financing,
operation, management or control of, any person, firm, corporation or business
that engages or participates anywhere in the world in providing goods and
services similar to those provided by the Company upon the date of Executive's
termination of employment. Ownership of less than 3% of the outstanding voting
stock of a corporation or other entity will not constitute a violation of this
provision. The Company agrees not to unreasonably withhold consent from
Executive to engage in any activity that is not competitive with the Company.
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(b) Covenant Not to Solicit. In consideration for the benefits
Executive is to receive herein Executive agrees that he will not, at any time
during the twelve month period following his termination date, directly or
indirectly solicit any individuals to leave the Company's employ for any reason
or interfere in any other manner with the employment relationships at the time
existing between the Company and its current or prospective employees.
(c) Representations. The parties intend that the covenants
contained in Section 11(a) and (b) shall be construed as a series of separate
covenants, one for each county, city and state (or analogous entity) and country
of the world. If, in any judicial proceeding, a court shall refuse to enforce
any of the separate covenants, or any part thereof, then such unenforceable
covenant, or such part thereof, shall be deemed eliminated from this Agreement
for the purpose of those proceedings to the extent necessary to permit the
remaining separate covenants, or portions thereof, to be enforced.
(d) Reformation. In the event that the provisions of this
Section 11 should ever be deemed to exceed the time or geographic limitations,
or scope of this covenant, permitted by applicable law, then such provisions
shall be reformed to the maximum time or geographic limitations, as the case may
be, permitted by applicable laws.
(e) Reasonableness of Covenants. Employee represents that he
(i) is familiar with the covenants not to compete and solicit, and (ii) is fully
aware of his obligations hereunder, including, without limitation, the
reasonableness of the length of time, scope and geographic coverage of these
covenants.
12. No Oral Modification, Cancellation or Discharge. This Agreement may
only be amended, canceled or discharged in writing signed by Executive and the
Chairman of the Board.
13. Withholding. The Company shall be entitled to withhold, or cause to
be withheld, from payment any amount of withholding taxes required by law with
respect to payments made to Executive in connection with his employment
hereunder.
14. Governing Law. This Agreement shall be governed by the laws of the
State of California.
15. Effective Date. This Agreement is effective upon the date it has
been executed by both parties.
16. Acknowledgment. Executive acknowledges that he has had the
opportunity to discuss this matter with and obtain advice from his private
attorney, has had sufficient time to, and has carefully read and fully
understands all the provisions of this Agreement, and is knowingly and
voluntarily entering into this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement:
LINEAR TECHNOLOGY CORPORATION
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Xxxxxx Xxxxx
EXECUTIVE
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Xxxxxx X. Xxxxxxx, Xx.
Date:__________________, 2001
