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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
(This Agreement supersedes any and all Employment Agreements which were executed
prior to May 22, 1997.)
This Agreement is made by and between Zilog, Inc., a Delaware corporation
(hereinafter "Zilog") and Xx Xxxxx (hereinafter "Xxxxx"), whereby Zilog and
Xxxxx agree that Xxxxx accepts employment as Vice President and General Manager,
Consumer & Peripherals Division of Zilog, under the following terms and
conditions:
1. Term. Zilog and Xxxxx agree that Xxxxx will be Vice President and General
Manager, Consumer & Peripherals Division of Zilog for a period of twenty
four (24) months, commencing on January 27, 1997 and ending November 5,
1998. This Agreement may be extended upon written agreement of Zilog and
Xxxxx. If during the term of this Agreement a "Change in Control" of Zilog
occurs, the term of this Agreement will be extended for a period of twenty
four (24) months commencing on the earlier of the effective date of the
Change in Control or the date this Agreement would otherwise expire;
provided, however, in the case of a Change in Control that is subject to
an agreement that is executed before the date this Agreement would
otherwise expire but becomes effective on a closing date that will occur
after the date this Agreement would otherwise expire, there will be no
such automatic twenty four month extension if the closing date does not
occur within six (6) months after the date this Agreement would otherwise
expire. Under these circumstances the term of this Agreement shall be
extended six (6) months from the date it would otherwise expire.
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For purposes of this Agreement, "Change in Control" shall mean the
occurrence of any of the following events:
(i) A change in the composition of the board of directors of Zilog,
Inc., as a result of which fewer than two-thirds of the incumbent
directors are directors who either:
(A) Had been directors of Zilog, Inc. twenty-four (24) months
prior to such change; or
(B) Were elected, or nominated for election, to the board of
directors of Zilog, Inc. with the affirmative votes of at
least a majority of the directors who had been directors of
Zilog, Inc. twenty-four (24) months prior to such change and
who were still in office at the time of the election or
nomination;
(ii) Any "person" (as such term is used in sections 13(d) and 14(d) of
the Exchange Act) other than Zilog, Inc. (or its designee), by the
acquisition or aggregation of securities is or becomes the
beneficial owner, directly or indirectly, of securities of Zilog,
Inc. representing twenty percent (20%) or more of the combined
voting power of Zilog, Inc.'s then outstanding securities
ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of directors;
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(iii) the sale of all or substantially all of the assets of Zilog, Inc. to
a third party who is not an affiliate (including a parent or
subsidiary) of Zilog, Inc.; or
(iv) Any acquisition of stock, tender offer, merger, consolidation, sale,
reorganization, dissolution or other such event or series of events,
which in the opinion of a majority of the members of the board of
Zilog, Inc. (as reflected in a written resolution of the board of
Zilog, Inc.) has resulted in a change of control of Zilog, Inc.
2. Extent of Services. Xxxxx shall devote his entire time, attention and
energies to his position as vice President and General Manager, Consumer &
Peripherals Division of Zilog and shall not, during the term of this
Employment Agreement be engaged in any other business activity whether or
not such business activity is pursued for gain, profit or other pecuniary
advantage; provided, that Xxxxx may engage in personal investment
activities consistent with Zilog's Conflict of Interest Policy.
3. Compensation.
A. Salary. For each month of employment, Zilog will pay, or cause to be
paid, to Xxxxx the sum of at least $16,917.00 as base salary. Such
sum will be paid in monthly installments or such other normal
periodic payment schedule
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as Zilog may establish for its executives. Xxxxx'x salary will be reviewed
periodically in accordance with established salary review procedures and
adjustments to his salary, if any, will be based upon such reviews.
B. Employee Performance Incentive Plan and Executive Bonus Plan. Xxxxx
will be eligible to receive Awards and Payouts in accordance with
the terms of the Zilog Employee Performance Incentive Plan
(hereinafter "EPIP"), and the EPIP Executive Bonus Plan (hereinafter
"Executive Bonus") as such plans may be modified from time to time
and as modified by this Agreement.
C. Zilog Employee Stock Option Plan. Zilog has provided to Xxxxx stock
options under the 1990 Zilog Employee Stock Option Plan (hereinafter
"ZSOP") and the 1994 Long Term Incentive Plan (hereinafter "LTIP"),
copies of such plans being attached hereto. Vesting will continue in
accordance with the plan provisions during the term of this
Agreement.
4. Benefits. As an employee of Zilog, Xxxxx will be entitled to such benefits
as Zilog normally provides its employees. In addition, Zilog will provide
Xxxxx with Directors and Officers (D & O) insurance in an amount deemed
appropriate by the Company.
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5. Company Policies. Xxxxx agrees to be bound by all Zilog Company Policies
applicable to its employees including but not limited to Business Ethics,
Conflict of Interest, Proprietary Information and Antitrust Compliance,
and he agrees to sign any such documents as Zilog requests evidencing such
agreement.
6. Termination of Employment. Zilog reserves the right to terminate the
employment of Xxxxx at any time during the term of this Agreement, for any
reason or for no reason, with or without cause, by giving Xxxxx at least
thirty (30) days written notice of such termination or compensation in
lieu of notice; and Xxxxx may terminate his employment by giving at least
thirty (30) days written notice to Zilog. Zilog reserves the right to
accelerate any deferred resignation date given it by Xxxxx, and any such
acceleration of such date will not alter the character of such termination
from voluntary to involuntary.
7. Payment Upon Termination. Notwithstanding any other provisions of this
Agreement to the contrary, Zilog's obligations to Xxxxx, if his employment
with Zilog is terminated prior to the end of this Agreement, shall be as
follows:
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A. If Xxxxx voluntarily resigns his employment for 1) other than Good
Reason (as defined in Paragraph 7.B. below) or 2) other than
Retirement (as defined in Paragraph 7.C. below) or 3) other than the
sale, merger or change in ownership of Zilog (as defined in
Paragraph 7.G below) prior to the termination date of this
Agreement, he will be entitled to: (1) base salary then due and
owing for services previously performed, (2) Payouts under EPIP
which become payable to Xxxxx pursuant to the terms of EPIP prior to
the effective date of resignation, and (3) Payouts under the
Executive Bonus which become payable to Xxxxx pursuant to the terms
of the Executive Bonus prior to the effective date of resignation.
Upon payment of the foregoing items, Zilog will have no further
obligation to Xxxxx.
B. If Xxxxx voluntarily resigns his employment for Good Reason, as
defined herein, prior to the termination date of this Agreement, he
will be entitled to the benefits provided in Paragraph 7.D. below.
Good Reason, as used herein, shall mean:
(i) a reduction in Xxxxx'x authority, responsibility or status as
Vice President and General Manager, Consumer & Peripherals
Division such that Xxxxx ceases to be an "officer" as that
term is defined in the regulations under Section 16 of the
Securities Exchange Act of 1934;
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(ii) a reduction in Xxxxx'x base salary other than in connection
with a general reduction applicable to the Vice Presidents of
Zilog who are members of the Management Committee;
(iii) a reduction in form and effect or cessation of any benefit or
compensation plan, except EPIP, the Executive Bonus, the
Deferred Compensation Plan, or those that may occur for the
Zilog employee group in general in accord with a general
policy change;
(iv) a requirement to relocate, except for office relocations that
would not increase Xxxxx'x one-way commute distance by more
than 20 miles;
(v) any material breach of this Agreement on the part of Zilog not
fully remedied by Zilog within sixty (60) days after written
notice by Xxxxx of such breach.
C. If Xxxxx retires as defined in PM60-05 prior to the termination date
of this Agreement, he will be entitled to the following at the
effective date of retirement: (1) base salary then due and owing for
services previously performed, (2) Payouts under EPIP for Awards
made prior to the effective date of the retirement, and (3) Payouts
under the Executive Bonus for Awards made prior to the effective
date
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of the retirement. EPIP and Executive Bonus Awards may also be
granted at Zilog's sole discretion for the year in which the
retirement occurs, prorated to the date of the retirement. Payouts
for all Awards will be made at the same time and on the same
schedule as those for active employees. Upon the payment of the
foregoing items, Zilog will have no further obligation to Xxxxx.
D. If Zilog terminates Xxxxx'x employment during the term of this
Agreement other than for Cause or Detrimental Activity as defined in
7.E. below, he will be entitled to receive the following: (1) the
then current base salary for the period remaining in this Agreement,
(2) Payouts under EPIP for Awards made prior to the effective date
of termination of employment which Payouts are payable to Xxxxx
pursuant to the terms of EPIP prior to expiration of the term of
this Agreement, and (3) Payouts under the Executive Bonus for Awards
made prior to the effective date of termination of employment which
Payouts are payable to Xxxxx pursuant to the terms of the Executive
Bonus prior to expiration of the term of this Agreement. Xxxxx will
not be eligible for Awards under EPIP or the Executive Bonus made
after the date on which his employment at Zilog ceased or for
Payouts made on any Awards after the
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expiration date of this Agreement. Vesting of common stock and stock
options granted under ZSOP and LTIP will continue for the period
remaining in this Agreement. Upon the payment of the foregoing
items, Zilog will have no further obligation to Xxxxx.
E. If Zilog terminates Xxxxx during the term of this Agreement for
Cause, or for Detrimental Activity as defined herein, Zilog will
have no further monetary obligation to Xxxxx other than: (1) any
base salary then due and owing for services previously performed,
(2) Payouts under EPIP which become payable to Xxxxx pursuant to the
terms of EPIP prior to the effective date of termination, and (3)
Payouts under the Executive Bonus which become payable to Xxxxx
pursuant to the terms of the Executive Bonus prior to the effective
date of termination. Cause or Detrimental Activity shall be a
willful violation of a major company policy, conviction of any
criminal or civil law involving moral turpitude, willful misconduct
which results in a material reduction in Xxxxx'x effectiveness in
the performance of his duties, or willful and reckless disregard for
the best interests of the Company.
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F. If Xxxxx ceases to be an employee of Zilog during the term of this
Agreement because of total and permanent disability or death,
Zilog's obligations to Xxxxx or his beneficiaries will be limited
solely to: (1) any base salary then due and owing for services
previously performed, (2) Payouts in accordance with the terms of
EPIP, (3) Payouts in accordance with the terms of the Executive
Bonus, and (4) any benefits including ZSOP and LTIP benefits
normally provided by Zilog to its employees due to or on account of
total and permanent disability or death.
G. If Xxxxx leaves his employment, either voluntarily for Good Reason
or involuntarily for reasons other than for Cause or Detrimental
Activity, following the effective date of a Change in Control prior
to the termination date of this Agreement, he will be entitled to
receive the following: (1) the then current base salary for the
period remaining in this Agreement, payable in a cash lump sum not
more than five (5) business days following the date of leaving
employment, (2) Payouts under EPIP for Awards made prior to the
effective date of termination of employment, and (3) Payouts under
the Executive Bonus for Awards made prior to the effective date of
termination of employment. EPIP and Executive Bonuses shall also be
awarded for the year in which the termination of employment occurs
and shall be
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calculated in accordance with the terms of such arrangements
assuming the date of Xxxxx'x termination is the last day of Zilog's
fiscal year and based on Zilog's financial performance for the
portion of such fiscal year that includes calculated financials for
Zilog as a separate entity. All of the above EPIP and Executive
Bonus Awards shall be paid in a cash lump sum within five (5)
business days of the date of Xxxxx'x termination of employment. All
outstanding unvested stock options whether granted under ZSOP and
LTIP or otherwise will continue to vest for the period of time
remaining in the Agreement (the "Continuation Period"). Regardless
of the provisions of ZSOP, LTIP or any other plans or agreements,
the Continuation Period shall be counted as employment with Zilog
for purposes of vesting under all options and for purposes of
determining the expiration date of any stock options held by Xxxxx
when his employment terminates. During the remaining term of this
Agreement Xxxxx (and, where applicable, his dependents) shall be
entitled to continue participation in the group insurance plans
maintained by Zilog, including life, disability and health insurance
programs, as if he were still an employee of Zilog. To the extent
that Zilog finds it impossible to cover Xxxxx under its group
insurance policies during such period, Zilog shall provide Xxxxx
with individual policies which offer at least
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the same level of coverage and which impose not more than the same
costs on him as if he were still an employee of Zilog. The foregoing
notwithstanding, in the event that Xxxxx becomes eligible for
comparable group insurance coverage in connection with new
employment, the coverage provided by Zilog under this paragraph
shall terminate immediately. Any group health continuation coverage
that Zilog is otherwise required to offer under the Consolidated
Omnibus Budget Reconciliation Act of 1986 ("COBRA") shall be offered
when coverage under this paragraph terminates.
Except as provided in the paragraph immediately following, upon
payment of the foregoing items, Zilog will have no further
obligation to Xxxxx.
In the event that it is determined that any payment or distribution
of any type to or for the benefit of Xxxxx made by Zilog, by any of
its affiliates, by any person who acquires ownership or effective
control of Zilog or ownership of a substantial portion of Zilog's
assets (within the meaning of section 280G of the Internal Revenue
Code of 1986, as amended, and the regulations thereunder (the
"Code")) or by any affiliate of such person, whether paid or payable
or distributed or distributable pursuant to the terms of this
Agreement or otherwise (the "Total Payments"), would be subject to
the excise tax imposed by section 4999 of the Code or any interest
or penalties with respect to
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to such excise tax (such excise tax, together with any such interest
or penalties, are collectively referred to as the "Excise Tax"),
then Xxxxx shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount that shall fund the payment by
Xxxxx of any Excise Tax on the Total Payments as well as all income
taxes imposed on the Gross-Up Payment, any Excise Tax imposed on the
Gross-Up Payment and any interest or penalties imposed with respect
to taxes on the Gross-Up Payment or any Excise Tax.
All mathematical determinations and all determinations of whether
any of the Total Payments are "parachute payments" (within the
meaning of section 280G of the Code) that are required to be made
hereunder, including all determinations of whether a Gross-Up
Payment is required and of the amount of such Gross-Up Payment,
shall be made by the independent auditors retained by Zilog most
recently prior to the Change in Control (the "Auditors"), who shall
provide their determination (the "Determination"), together with
detailed supporting calculations regarding the amount of any
Gross-Up Payment and any other relevant matters, both to Zilog and
to Xxxxx within seven (7) business days of Xxxxx'x termination date,
if applicable, or such earlier time as is requested by Zilog or by
Xxxxx (if Xxxxx reasonably believes that any of the Total Payments
may be subject to the Excise Tax). If the Auditors determine that no
Excise Tax is payable by Xxxxx, it shall furnish Xxxxx with a
written statement
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that such Auditors have concluded that no Excise Tax is payable
(including the reasons therefor) and that Xxxxx has substantial
authority not to report any Excise Tax on his federal income tax
return. If a Gross-Up Payment is determined to be payable, it shall
be paid to Xxxxx within five (5) business days after the
Determination is delivered to Zilog or Xxxxx. Any determination by
the Auditors shall be binding upon Zilog and Xxxxx, absent manifest
error.
As a result of uncertainty in the application of section 4999 of the
Code at the time of the initial determination by the Auditors
hereunder, it is possible that Gross-Up Payments not made by Zilog
should have been made ("Underpayments") or that Gross-Up Payments
will have been made by Zilog which should not have been made
("Overpayments"). In either event, the Auditors shall determine the
amount of the Underpayment or Overpayment that has occurred. In the
case of an Underpayment, the amount of such Underpayment shall
promptly be paid by Zilog to or for the benefit of Xxxxx. In the
case of an Overpayment, the Employee shall, at the direction and
expense of Zilog, take such steps as are reasonably necessary
(including the filing of returns and claims for refund), follow
reasonable instructions from, and procedures established by, Zilog
and otherwise reasonably cooperate with Zilog to correct such
Overpayment; provided, however, that (a.) Xxxxx shall in no event be
obligated to return to Zilog an amount greater than
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the net after-tax portion of the Overpayment that Xxxxx has retained
or has recovered as a refund from the applicable taxing authorities
and (b.) this provision shall be interpreted in a manner consistent
with the intent of this excise tax restoration provision which is to
make Xxxxx whole, on an after-tax basis, for the application of the
Excise Tax, it being understood that the correction of an
Overpayment may result in Xxxxx'x repaying to Zilog an amount which
is less than the Overpayment.
8. Xxxxx Representations. Xxxxx represents to Zilog that to the
best of his knowledge he is under no obligation to any
employer or third party which would preclude his full,
complete and unfettered discharge of his duties under this
Agreement.
9. Notices. Any notices required to be given hereunder shall be
in writing, and if by Zilog shall be addressed to Xxxxx as
indicated in Zilog's personnel records or such other address
as Xxxxx shall specify in writing and if by Xxxxx to Zilog at:
Zilog, Inc.
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Vice President, Human Resources and
Administration
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Such addresses may be changed by written notice from either Zilog or
Xxxxx, to the other.
10. Amendment. This Agreement may be amended only in writing, signed by both
parties hereto.
11. Successors and Assigns. This Agreement shall inure to the benefit of and
be binding upon Zilog, its successors and assigns. Xxxxx may not assign,
transfer, pledge or hypothecate any of his rights or obligations
hereunder, Awards or Payouts under EPIP or the Executive Bonus or other
compensation to which he may be entitled hereunder. Zilog will require any
successor (whether direct or indirect, by purchase, merger, consolidation,
liquidation or otherwise) to all or substantially all of the business
and/or assets of Zilog to assume expressly and agree, in substance and
form satisfactory to Xxxxx, to perform this Agreement in the same manner
and to the same extent Zilog would be required to perform it if no
succession had taken place.
12. Waiver of Breach. The waiver by Zilog of a breach of any provision of this
Agreement by Xxxxx shall not operate or be construed as a waiver of any
subsequent breach by Xxxxx.
13. Severability. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other
provision hereof.
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14. Entire Agreement. This entire Agreement consists of this document,
together with the following documents:
A. EPIP, attached as Exhibit I;
B. Executive Bonus, attached as Exhibit II;
C. Zilog Employee Stock Option Plan, attached as Exhibit III;
D. Zilog 1994 Long Term Incentive Plan, attached as Exhibit IV;
E. Employee Proprietary Rights and Non-Disclosure Agreement, attached
as Exhibit V;
F. Conflict of Interest Statement, attached as Exhibit VI;
G. Statement addressed to "Human Resources," attached as Exhibit VII;
H. Policy on Business Ethics, attached as Exhibit VIII; and
I. PM60-05, attached as Exhibit IX.
15. Governing Law. This Employment Agreement shall be governed by the laws of
the State of California, without regard to conflict of laws principles.
Executed effective May 22, 1997
By /s/ XX XXXXX By /s/ X. X. XXXX
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Xx Xxxxx X. X. Xxxx, President and CEO
Dated: 5/22/97 Dated: 5-22-97
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