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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(AMENDMENT NO. 7)
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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VLSI TECHNOLOGY, INC.
(Name Of Subject Company)
VLSI TECHNOLOGY, INC.
(Name Of Person(s) Filing Statement)
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COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title Of Class Of Securities)
918270109
(Cusip Number Of Class Of Securities)
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ALFRED J. STEIN
CHIEF EXECUTIVE OFFICER
VLSI TECHNOLOGY, INC.
1109 MCKAY DRIVE
SAN JOSE, CALIFORNIA 95131
(408) 434-3100
(Name, Address And Telephone Number Of Person Authorized To
Receive Notice And Communications On Behalf Of Person(s) Filing Statement)
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COPIES TO:
CHRISTOPHER L. KAUFMAN
LATHAM & WATKINS
135 COMMONWEALTH DRIVE
MENLO PARK, CALIFORNIA 94025
(650) 328-4600
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This Amendment No. 7 amends and supplements the Solicitation/Recommendation
Statement on Schedule 14D-9 (as subsequently amended, the "Schedule 14D-9")
filed with the Securities and Exchange Commission (the "Commission") on March
18, 1999, by VLSI Technology, Inc., a Delaware corporation ("VLSI"), relating to
the cash tender offer by Koninklijke Philips Electronics N.V., a company
organized under the laws of The Netherlands ("Philips"), and KPE Acquisition
Inc. ("KPE"), a Delaware corporation and an indirect wholly owned subsidiary of
Philips, to purchase all outstanding shares of Common Stock, par value $.01 per
share (the "Common Stock"), of VLSI including the associated preferred stock
purchase rights (the "Rights" and, together with the Common Stock, the "Shares")
issued pursuant to the Common Share Rights Agreement, dated as of November 7,
1989, as amended on August 12, 1992, as amended and restated on August 24, 1992
and as further amended and restated as of March 7, 1999, all as set forth in the
Second Amended and Restated Rights Agreement (the "Second Amended and Restated
Rights Agreement"), between VLSI and BankBoston, N.A. (formerly The First
National Bank of Boston), as Rights Agent, at a price of $17.00 per Share, net
to the seller in cash, upon the terms and subject to the conditions set forth in
KPE's Offer to Purchase dated March 5, 1999 and the related Letter of
Transmittal (which together constitute the "Philips Offer"). The Philips Offer
is disclosed in a Tender Offer Statement on Schedule 14D-1, dated March 5, 1999
(as subsequently amended, the "Schedule 14D-1"), as filed with the Commission.
Unless otherwise indicated, all capitalized terms used but not defined shall
have the meanings ascribed to them in the Schedule 14D-9.
ITEM 3. IDENTITY AND BACKGROUND.
The response to Item 3(b) is hereby amended and supplemented by adding the
following:
VLSI recognizes that its most important resource is its employees and that
the Philips Offer has caused substantial uncertainty on the part of VLSI
employees with respect to the future prospects of VLSI and their future
employment with VLSI. As a result of VLSI's concern about the potentially
disruptive effects of the Philips Offer on VLSI's employees, VLSI retained the
independent consulting firm Compensation Resource Group, Inc. to advise the
Board and to evaluate the possibility of implementing a new employee retention
program to provide the employees with enhanced financial security and incentive
to remain with VLSI notwithstanding the possibility of a change in control of
VLSI. At a meeting of the Board held on April 17, 1999, the Compensation
Committee of the Board and the Board acting through the unanimous vote of Pierre
Bonelli, William Howard, Paul Low, and Horace Tsiang, each a member of the Board
not employed by VLSI, authorized VLSI to implement the following:
RETENTION AGREEMENTS.
In order to ensure the continued dedication of certain key executives of
VLSI in the context of a threatened change of control of VLSI, the Board
authorized VLSI to enter into retention agreements ("Retention Agreements") with
such executives ("Executives"). For purposes of the Retention Agreements the
Executives are classified into two different tiers. Tier I consists of Robert
Dilworth, Thierry Laurent, John Hodgson, William Malanczuk, Rajeeva Lahri,
Thomas Tokos, Arthur Gemmell and Victor Lee. Tier II consists of nineteen other
Executives. These Retention Agreements would replace existing or promised
retention agreements with seventeen of the Tier I or Tier II Executives. Copies
of the forms of Tier I and Tier II Retention Agreements are filed as Exhibits 33
and 34 hereto, respectively, and are incorporated by reference herein.
The agreements provide for certain severance benefits to those individuals
solely in the event of certain terminations of their employment following a
Change in Control (as defined below). Each of the Retention Agreements continues
in effect until terminated in writing by the applicable Executive and VLSI;
provided that if a Change in Control occurs, then the term continues for two
years following the date on which a Change in Control occurs. All Retention
Agreements provide for payment of severance benefits ("Severance Benefits") only
if both (i) there is a Change in Control and (ii) the Executive's employment by
VLSI (or its successor) is terminated by VLSI without Cause (as defined below)
or by the
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Executive with Good Reason (as defined below) (each such termination
constituting a "Qualifying Termination").
The Tier I Retention Agreements provide for Severance Benefits solely
following a Qualifying Termination and consisting of: (i) a lump sum payment
equal to two times the sum of (A) the Executive's base salary immediately prior
to the Change in Control and (B) the Executive's targeted annual bonus
immediately prior to the Change in Control; (ii) continued medical and dental
benefits until the later of (A) twenty-four months after the Executive's
termination or (B) the Executive's 65th birthday if the Executive has attained
age 55 on the Change in Control date, in each case reduced by comparable
benefits received by the Executive under a subsequent employer's benefits plan;
(iii) directors' and officers' liability insurance for six years following the
date of termination; (iv) transfer of title to the Executive of home computer
hardware, software and related equipment which has been purchased by the
Executive pursuant to VLSI's computer policy; (v) immediate vesting and
exercisability of all stock options held by the Executive; (vi) outplacement
services at a cost to VLSI not to exceed 25% of the Executive's base salary in
effect at the time notice of termination is given or immediately prior to the
Change in Control date (or the date the stockholders of VLSI approve a
transaction the consummation of which would result in the occurrence of a Change
in Control), whichever is greater; and (vii) with the exception of Robert
Dilworth's Severance Benefits, a gross-up payment for any excise taxes imposed
on any "excess parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code").
The Tier II Retention Agreements provide for Severance Benefits solely
following a Qualifying Termination and consisting of: (i) a lump sum payment
equal to one and one-half times the sum of (A) the Executive's base salary
immediately prior to the Change in Control and (B) the Executive's targeted
annual bonus immediately prior to the Change in Control; (ii) continued medical
and dental benefits until the later of (A) eighteen months after the Executive's
termination or (B) the Executive's 65th birthday if the Executive has attained
age 55 on the Change in Control date, in each case reduced by comparable
benefits received by the Executive under a subsequent employer's benefits plan;
(iii) directors' and officers' liability insurance for six years following the
date of termination; (iv) transfer of title to the Executive of home computer
hardware, software and related equipment which has been purchased by the
Executive pursuant to VLSI's computer policy; (v) immediate vesting and
exercisability of all stock options held by the Executive; and (vi) outplacement
services at a cost to VLSI not to exceed 25% of the Executive's base salary in
effect at the time notice of termination is given or immediately prior to the
Change in Control date (or the date the stockholders of VLSI approve a
transaction the consummation of which would result in the occurrence of a Change
in Control), whichever is greater.
Payments and benefits under the Tier II Retention Agreements and under
Robert Dilworth's Tier I Retention Agreement are limited by Section 280G of the
Code, unless the Executive would realize a greater net after-tax benefit if no
limitation were imposed.
The Retention Agreements also provide that the Executive shall covenant: (i)
not to disclose certain confidential information obtained or created during the
Executive's period of employment with VLSI and that such confidential
information shall be VLSI's sole and exclusive property; (ii) not to solicit any
of VLSI's employees for a competing business during the term of the Executive's
employment or for a period of two years and one and one-half years after a Tier
I Executive's employment and a Tier II Executive's employment, respectively; and
(iii) to assign and agree to assign to VLSI all intellectual property developed
by the Executive during his or her employment with VLSI and which pertains to
VLSI's business, relates to the Executive's work for VLSI, involves the use of
VLSI's materials, facilities or trade secret information, or is developed during
VLSI's normal working hours.
Under the Retention Agreements, a "Change in Control" is deemed to occur
upon the earliest to occur of any one of the following events: (i) any person,
as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), becomes the beneficial owner of
securities of VLSI representing 25% or more of the voting power of VLSI's then
outstanding securities; (ii) the effective date of a merger or consolidation of
VLSI with any other corporation, other than a
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merger or consolidation upon which the voting securities of VLSI outstanding
immediately before such merger or consolidation continue to represent more than
51% of the voting power of VLSI or such surviving entity immediately afterwards
and with the power to elect at least a majority of the Board; (iii) approval by
the stockholders of VLSI of a complete liquidation of VLSI or an agreement for
the sale or disposition of all or substantially all of VLSI's assets; (iv) any
event that would be required to be reported in response to Item 6(e) of Schedule
14A of the Exchange Act; or (v) within any 24-month period, the persons who were
directors immediately before the beginning of such period (the "Incumbent
Directors") cease for any reason to constitute at least a majority of the Board.
For this purpose, any director who was not a director at the beginning of such
period is deemed to be an Incumbent Director if such director was elected to the
Board by, or on the recommendation of or with the approval of, at least
two-thirds of the directors who then qualified as Incumbent Directors.
Under the Retention Agreements, "Cause" is defined as (i) the Executive's
continued failure to substantially perform his or her duties and
responsibilities after written demand for substantial performance; (ii) the
Executive's willful and continued failure to follow and comply substantially
with the specific and lawful directives of the Board after written demand for
substantial performance; (iii) fraud or dishonesty which results in material
economic or financial injury to VLSI; or (iv) engagement in illegal activity
which is materially and demonstrably injurious to VLSI.
Termination of an Executive's employment for Cause under the Severance
Agreements can be effected by delivery to the Executive of a copy of a
resolution duly adopted by three-quarters of the Board (after reasonable notice
to the Executive and reasonable opportunity for the Executive to be heard before
the Board and a reasonable opportunity to cure), finding that in the good faith
opinion of such Board, the Executive was guilty of conduct set forth in any of
clauses (i) through (iv) in the definition of "Cause."
Under the Retention Agreements, "Good Reason" is defined as any (i) material
diminution in the Executive's position, authority, title, duties or
responsibilities; (ii) reduction of the Executive's annual base salary or
targeted cash incentive bonus; (iii) failure by VLSI to pay any portion of the
Executive's current compensation or portion of an installment of deferred
compensation; (iv) failure by VLSI either to continue in effect, or to provide
reasonably similar material benefit plans; (v) relocation of the Executive's
employment to a location in excess of 15 miles from the Executive's location
prior to the Change in Control; and (vi) failure of a successor of VLSI to
assume the Severance Agreement.
EMPLOYEE RETENTION PLAN.
To affirm VLSI's commitment to its employees, to assist VLSI in retaining it
employees during times of uncertainty, and to establish a severance policy in
the change in control context, the Board approved an Employee Retention Plan
(the "Employee Plan") that provides severance benefits for current and future
employees who are not parties to Retention Agreements. The Employee Plan
provides for a severance payment for VLSI employees of four weeks pay plus one
week pay for each full year of employment with VLSI, which is the same as VLSI's
present severance policy. The severance payment will only be paid if the
employee is involuntarily terminated without cause within one year of a change
in control, with a minimum payment of 2 months pay for employees with 2 years of
service, 3 months pay for employees with 3 years of service, 4 months pay for
technical managers and engineers, 6 months pay for director-level employees or
the equivalent and 9 months pay for vice presidents or equivalents. VLSI will
provide each individual with subsidized COBRA coverage for the length of his or
her severance pay. Directors and vice presidents will also receive outplacement
services at a cost to VLSI not to exceed 15% of such individual's base salary.
INDEMNIFICATION AGREEMENTS.
The Board also approved indemnification agreements between VLSI and each
member of the Board and certain officers or key employees of VLSI, including the
Tier I Executives. VLSI agreed to indemnify the individual indemnitees pursuant
to the terms of the agreements and to the fullest extent permitted by law. In
general, the indemnification agreements provide for VLSI to indemnify the
directors, officers and
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key employees against expenses, judgments, fines and amounts paid in settlement
arising in connection with proceedings against any director, officer or key
employee relating to his or her services with VLSI. Each indemnitee is presumed
to be entitled to indemnification. The indemnitee's rights to be indemnified and
receive the advancement of expenses as provided for in the agreement are not
exclusive of any other rights such person may be entitled to under applicable
law, VLSI's Certificate of Incorporation or VLSI's bylaws, and any other
agreement, a vote of the stockholders, a resolution of the Board or otherwise.
The foregoing description is qualified in its entirety by reference to the
Form of Indemnity Agreement, a copy of which is filed as Exhibit 35 hereto and
incorporated by reference herein.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The response to Item 8 is hereby amended and supplemented by adding the
following:
On April 13, 1999, the Delaware Court of Chancery entered an order
consolidating the seven actions brought by alleged stockholders of VLSI
other than Philips under the caption, IN RE VLSI TECHNOLOGY, INC.
SHAREHOLDERS LITIGATION, CONSOL, C.A. No. 16986.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The response to Item 9 is hereby amended by the addition of the following
new exhibits:
33. Form of Retention Agreement for Tier I Executives.
34. Form of Retention Agreement for Tier II Executives.
35. Form of Indemnity Agreement.
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SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
<TABLE>
<S> <C>
Dated: April 19, 1999 VLSI TECHNOLOGY, INC.
By: /s/ Alfred J. Stein
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Name: Alfred J. Stein
Title: Chairman of the Board and
Chief Executive Officer
</TABLE>
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Exhibit 33
FORM OF AGREEMENT FOR TIER I EXECUTIVES
VLSI Technology, Inc.
1109 McKay Drive
San Jose, California 95131
April __, 1999
[Tier 1 Executive]
[Address]
Dear [Tier 1 Executive]:
The Board of Directors (the "Board") of VLSI Technology, Inc. (the
"Corporation") has determined that it is in the best interests of the
Corporation and its stockholders to assure that the Corporation will continue
to have your dedication and services notwithstanding the possibility, threat
or occurrence of a Change in Control (as defined herein). The Board believes
it is imperative to diminish the distraction that you would face by virtue of
the personal uncertainties created by a pending or threatened Change in
Control and to encourage your full attention and dedication to the
Corporation currently and in the event of any threatened or pending Change in
Control. Further, the Board desires to provide you with compensation and
benefits arrangements upon a Change in Control which ensure that your
compensation and benefits expectations will be satisfied and which are
competitive with those of other corporations. Therefore, in order to
accomplish these objectives, the Board has caused the Corporation to enter
into this Agreement (the "Agreement"). [This Agreement constitutes a complete
amendment and restatement of the Executive Change in Control Severance
Agreement that you and the Corporation entered into as of [date of prior
agreement].]
1. TERM OF AGREEMENT. The terms of this Agreement shall become
effective upon the execution hereof by the Corporation and shall continue
unless terminated by written agreement between you and the Corporation;
PROVIDED, that if a Change in Control occurs, then the term of this Agreement
shall continue in effect for a period of not less than twenty-four (24)
months beyond the date (the "Change in Control Date") on which a Change in
Control occurs. No benefits shall be payable hereunder unless there has been
a Change in Control.
2. CHANGE IN CONTROL. A Change in Control shall be deemed to occur
upon the earliest to occur after the date of this Agreement of any of the
following events:
2.1. ACQUISITION OF STOCK BY THIRD PARTY. Any Person (as defined
below) is or becomes the Beneficial Owner (as defined below), directly or
indirectly, of securities of the Corporation representing twenty five percent
(25%) or more of the combined voting power of the Corporation's then
outstanding securities;
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April __, 1999
Page 2
2.2. CHANGE IN BOARD OF DIRECTORS. During any period of two (2)
consecutive years (not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period constitute the
Board, and any new director (other than a director designated by a person who
has entered into an agreement with the Corporation to effect a transaction
described in Sections 2.1, 2.3 or 2.4) whose election by the Board or
nomination for election by the Corporation's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
at least a majority of the members of the Board;
2.3. CORPORATE TRANSACTIONS. The effective date of a merger or
consolidation of the Corporation with any other entity, other than a merger
or consolidation which would result in the voting securities of the
Corporation outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 51% of
the combined voting power of the voting securities of the surviving entity
outstanding immediately after such merger or consolidation and with the power
to elect at least a majority of the board of directors or other governing
body of such surviving entity;
2.4. LIQUIDATION. The approval by the stockholders of the
Corporation of a complete liquidation of the Corporation or an agreement for
the sale or disposition by the Corporation of all or substantially all of the
Corporation's assets; or
2.5. OTHER EVENTS. There occurs any other event of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A (or a response to any similar item on any similar schedule or
form) promulgated under the Exchange Act (as defined below), whether or not
the Corporation is then subject to such reporting requirement.
2.6. CERTAIN DEFINITIONS. For purposes of this Section 2, the
following terms shall have the following meanings:
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Person" shall have the meaning as set forth in Sections
13(d) and 14(d) of the Exchange Act; PROVIDED, HOWEVER, that Person shall
exclude (i) the Corporation, (ii) any trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation and (iii) any
corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions as their ownership of stock
of the Corporation.
"Beneficial Owner" shall have the meaning given to such
term in Rule 13d-3 under the Exchange Act; PROVIDED, HOWEVER, that Beneficial
Owner shall exclude any Person otherwise becoming a Beneficial Owner by
reason of the stockholders of the Corporation approving a merger of the
Corporation with another entity.
3. TERMINATION FOLLOWING A CHANGE IN CONTROL.
3.1. GENERAL. You shall be entitled to the benefits provided in
Section 4 upon the termination of your employment, provided (a) that such
termination occurs after the date on which the stockholders of the
Corporation approve a transaction the consummation of which would result in
the
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April __, 1999
Page 3
occurrence of a Change in Control (the "Approval Date") and (b) the Change in
Control actually occurs, unless such termination is (x) because of your death
or Disability (as defined in Section 3.2), (y) by the Corporation for Cause
(as defined in Section 3.3), or (z) by you other than for Good Reason (as
defined in Section 3.4).
3.2. DEFINITION OF DISABILITY. If, as a result of your
incapacity due to physical or mental illness, you shall have been absent from
the full-time performance of your duties with the Corporation for six (6)
consecutive months, and within thirty (30) days after written notice of
termination is given you shall not have returned to the full-time performance
of your duties, your employment may be terminated for "Disability."
3.3. DEFINITION OF CAUSE. Termination by the Corporation of your
employment for "Cause" shall mean termination (a) upon your willful and
continued failure to perform substantially your duties with the Corporation
(other than any such failure resulting from your incapacity due to physical
or mental illness or any such actual or anticipated failure after your
issuance of a Notice of Termination (as defined in Section 3.5) for Good
Reason), after a written demand for substantial performance is delivered to
you by Board which demand specifically identifies the manner in which the
Board believes that you have not substantially performed your duties, (b)
upon your willful and continued failure to follow and comply substantially
with the specific and lawful directives of the Board, as reasonably
determined by the Board (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual or
anticipated failure after your issuance of a Notice of Termination for Good
Reason), after a written demand for substantial performance is delivered to
you by the Board, which demand specifically identifies the manner in which
the Board believes that you have not substantially followed or complied with
the directives of the Board, (c) upon your willful commission of an act of
fraud or dishonesty resulting in material economic or financial injury to the
Corporation, or (d) upon your willful engagement in illegal conduct which is
materially and demonstrably injurious to the Corporation. For purposes of
this Section 3.3, no act, or failure to act, on your part shall be deemed
"willful" unless done, or omitted to be done, by you not in good faith.
Notwithstanding the foregoing, you shall not be deemed terminated for Cause
pursuant to Sections 3.3(a), (b), (c) or (d) hereof 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 Board at a meeting of the Board (after reasonable notice to you, an
opportunity for you, together with your counsel, to be heard before the Board
and a reasonable opportunity to cure), finding that in the Board's good faith
opinion you were guilty of conduct set forth above in Section 3.3(a), (b),
(c) or (d) and specifying the particulars thereof in reasonable detail. In
the event of a Change in Control under Section 2.3 pursuant to which the
Corporation is not the surviving entity, then on and after the Change in
Control Date all determinations and actions required to be taken by the Board
under this Section 3.3 shall be made or taken by the board of directors of
the surviving entity, or if the surviving entity is a subsidiary, then by the
board of directors of the ultimate parent corporation of the surviving entity.
3.4. GOOD REASON. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without your express written consent, the occurrence after the
Approval Date of any of the following circumstances unless, in the case of
Sections 3.4(a), (f), (g), or (h), such circumstances are fully corrected
(provided such circumstances
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April __, 1999
Page 4
are capable of correction) prior to the Date of Termination (as defined in
Section 3.6) specified in the Notice of Termination given in respect thereof:
(a) the assignment to you of any duties inconsistent with
the position in the Corporation that you held immediately prior to the
Approval Date, a significant adverse alteration in the nature or status of
your responsibilities or the conditions of your employment from those in
effect immediately prior to the Approval Date, or any other action by the
Corporation that results in a material diminution in your position,
authority, title, duties or responsibilities;
(b) the Corporation's reduction of your annual base
salary or targeted annual cash incentive bonus as in effect on the Approval
Date or as the same may be increased from time to time;
(c) the relocation of the Corporation's offices at which
you are principally employed immediately prior to the Approval Date (your
"Principal Location") to a location more than fifteen (15) miles from such
location or the Corporation's requiring you, without your written consent, to
be based anywhere other than your Principal Location, except for required
travel on the Corporation's business to an extent substantially consistent
with your present business travel obligations;
(d) the Corporation's failure to pay to you any portion
of your current compensation or to pay to you any portion of an installment
of deferred compensation under any deferred compensation program of the
Corporation within seven (7) days of the date such compensation is due;
(e) the Corporation's failure to continue in effect any
material compensation or benefit plan or practice in which you are eligible
to participate in on the Approval Date (other than any equity based plan),
unless an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or the
Corporation's failure to continue your participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of your
participation relative to other participants, as existed at the time of the
Approval Date;
(f) the Corporation's failure to continue to provide you
with benefits substantially similar in the aggregate to those enjoyed by you
under any of the Corporation's life insurance, medical, health and accident,
disability, pension, retirement, or other benefit plans or practices in which
you and your eligible family members were eligible to participate in on the
Approval Date (other than any equity based plans), the taking of any action
by the Corporation which would directly or indirectly materially reduce any
of such benefits, or the failure by the Corporation to provide you with the
number of paid vacation days to which you are entitled on the basis of years
of service with the Corporation in accordance with the Corporation's normal
vacation policy in effect on the Approval Date;
(g) the Corporation's failure to obtain a satisfactory
agreement from any successor to assume and agree to perform this Agreement,
as contemplated in Section 6 hereof; or
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April __, 1999
Page 5
(h) any purported termination of your employment that is
not effected pursuant to a Notice of Termination satisfying the requirements
of Section 3.5 hereof (and, if applicable, the requirements of Section 3.3
hereof), which purported termination shall not be effective for purposes of
this Agreement.
Your right to terminate your employment pursuant to this Section 3.4 shall
not be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights
with respect to, any circumstance constituting Good Reason hereunder.
3.5. NOTICE OF TERMINATION. Any purported termination of your
employment by the Corporation or by you (other than termination due to death
which shall terminate your employment automatically) shall be communicated by
written Notice of Termination to the other party hereto in accordance with
Section 7. "Notice of Termination" shall mean a notice that shall indicate
the specific termination provision in this Agreement relied upon and shall
set forth in reasonable detail the facts and circumstances claimed to provide
a basis for termination of your employment under the provision so indicated.
3.6. DATE OF TERMINATION, ETC. "Date of Termination" shall mean
(a) if your employment is terminated due to your death, the date of your
death; (b) if your employment is terminated for Disability, thirty (30) days
after Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such thirty (30)
day period), and (c) if your employment is terminated pursuant to Section 3.3
or Section 3.4 or for any other reason (other than death or Disability), the
date specified in the Notice of Termination (which, in the case of a
termination for Cause shall not be less than thirty (30) days from the date
such Notice of Termination is given, and in the case of a termination for
Good Reason shall not be less than fifteen (15) nor more than sixty (60) days
from the date such Notice of Termination is given). Notwithstanding anything
to the contrary contained in this Section 3.6, if within fifteen (15) days
after any Notice of Termination is given, the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, then the Date of Termination shall be the date on which the
dispute is finally determined, either by mutual written agreement of the
parties, or otherwise; PROVIDED, HOWEVER, that (i) the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence; and (ii) in the event of your death pending a
dispute, and the resolution of such dispute is ultimately in your favor, then
the Date of Termination shall be the date specified in the Notice of
Termination.
4. COMPENSATION UPON TERMINATION. The benefits to which you are
entitled upon termination of your employment, subject to Section 3 and the
other terms and conditions of this Agreement, are:
4.1. CAUSE OR VOLUNTARY TERMINATION. If your employment shall be
terminated by the Corporation for Cause or voluntarily terminated by you
other than for Good Reason, the Corporation shall pay you your full base
salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given, plus all other amounts to which you are
entitled under any compensation plan or practice of the Corporation, and the
Corporation shall have no further obligations to you under this Agreement.
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April __, 1999
Page 6
4.2. GOOD REASON OR TERMINATION BY CORPORATION WITHOUT CAUSE. If
your employment by the Corporation shall be terminated by you for Good
Reason, or by the Corporation other than for Cause, Disability or death, then
you shall be entitled to the benefits provided below:
(a) the Corporation shall pay to you your full base
salary, when due, through the Date of Termination at the rate in effect at
the time Notice of Termination is given, at the time specified in Section
4.3, plus (i) that portion of your targeted cash bonuses prorated through the
Date of Termination, (ii) all accrued but unused vacation time through the
Date of Termination and (iii) all other amounts to which you are entitled
under any compensation plan or practice of the Corporation at the time such
payments are due;
(b) in lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Corporation shall pay as
severance pay to you, at the time specified in Section 4.3, a lump sum
payment equal to the sum of the following:
(1) two (2) times your annual base salary as in
effect at the time the Notice of Termination is given or immediately prior to
the Change in Control Date (or the Approval Date if the Date of Termination
is prior to the Change in Control Date), whichever is greater; and
(2) two (2) times your targeted annual bonus as in
effect at the time the Notice of Termination is given or immediately prior to
the Change in Control Date (or the Approval Date if the Date of Termination
is prior to the Change in Control Date), whichever is greater;
(c) for a period of two (2) years following the Date of
Termination, the Corporation shall, at its sole expense as incurred, provide
you with outplacement services, the scope and provider of which shall be
selected by you in your sole discretion, at an aggregate cost to the
Corporation not to exceed twenty five percent (25%) of your base salary as in
effect at the time the Notice of Termination is given or immediately prior to
the Change in Control Date (or the Approval Date if the Date of Termination
is prior to the Change in Control Date), whichever is greater;
(d) for a twenty-four (24) month period after such
termination, or if later until your 65th birthday if you have attained age 55
on the Change in Control Date, the Corporation shall continue to provide you
and your eligible family members, based on the cost sharing arrangement
between you and the Corporation at the time the Notice of Termination is
given, with medical and dental health benefits and life and disability
benefits at least equal to those which would have been provided to you and
them if your employment had not been terminated or, if more favorable to you,
as in effect generally at any time thereafter; PROVIDED, HOWEVER, that if you
become re-employed with another employer and are eligible to receive such
benefits under another employer's plans, the Corporation's obligations under
this Section 4.2(d) shall be reduced to the extent comparable benefits are
actually received by you during the twenty-four (24) month period following
your termination, and any such benefits actually received by you shall be
reported to the Corporation. In the event you are ineligible under the terms
of such benefit plans or programs to continue to be so covered, the
Corporation shall provide you with substantially equivalent coverage through
other sources or will provide you with a lump-sum payment in such amount
that, after all taxes on that amount, shall be equal to the
<PAGE>
April __, 1999
Page 7
cost to you of providing yourself such benefit coverage. At the termination
of the medical and dental benefits coverage under the second preceding
sentence, you, your spouse and your dependents shall be entitled to
continuation coverage pursuant to section 4980B of the Internal Revenue Code
of 1986, as amended (the "Code"), sections 601-608 of the Employee Retirement
Income Security Act of 1974, as amended, and under any other applicable law,
to the extent required by such laws, as if you had terminated employment with
the Corporation on the date such benefits coverage terminates. The lump-sum
shall be determined on a present value basis using the interest rate provided
in section 1274(b)(2)(B) of the Code on the Date of Termination;
(e) the Corporation shall furnish you for six (6) years
following the Date of Termination (without reference to whether the term of
this Agreement continues in effect) with directors' and officers' liability
insurance insuring you against insurable events which occur or have occurred
while you were a director or officer of the Corporation, such insurance to
have policy limits aggregating not less than the amount in effect immediately
prior to the Change in Control or the Approval Date (whichever is more
favorable to you), and otherwise to be in substantially the same form and to
contain substantially the same terms, conditions and exceptions as the
liability issuance policies provided for officers and directors of the
Corporation in force from time to time, PROVIDED, HOWEVER, that (i) such
terms, conditions and exceptions shall not be, in the aggregate, materially
less favorable to you than those in effect on the date hereof and (ii) if the
aggregate annual premiums for such insurance at any time during such period
exceed two hundred percent (200%) of the per annum rate of premium currently
paid by the Corporation for such insurance, then the Corporation shall
provide the maximum coverage that will then be available at an annual premium
equal to two hundred percent (200%) of such rate;
(f) the Corporation shall transfer ownership to you,
without additional consideration, the home computer hardware, software and
related equipment purchased by you pursuant to the Corporation's computer
purchase policy;
(g) all unvested stock options held by you on the Date of
Termination shall immediately vest and become exercisable in full and shall
remain exercisable for the period specified in such options; and
(h) in the event that it shall be determined that any
payment or benefit by the Corporation to or for your benefit, or the
acceleration of any payment or benefit including the acceleration of vesting
of any stock options, whether paid or payable under this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 4.2 (a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Code, or any comparable federal, state, or
local excise tax (such excise tax, together with any interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the
Corporation shall pay you an additional payment (a "Gross-Up Payment") in
such an amount that after the payment of all taxes (including without
limitation, any interest and penalties on such taxes and the excise tax) on
the Payment and on the Gross-Up Payment, you shall retain an amount equal to
the Payment minus all applicable income and employment taxes on the Payment.
Our intent is that the Corporation shall be solely responsible for, and shall
pay, any Excise Tax on the Payment and Gross-Up Payment and any income,
employment and other taxes (including, without limitation, penalties and
interest) imposed on any Gross-Up Payment, as well as any loss
<PAGE>
April __, 1999
Page 8
of tax deduction caused by the Gross-Up Payment or applicable provisions of
the Code. The foregoing determination shall be made by the Corporation's
independent certified public accountants serving immediately prior to the
Change in Control (the "Accountants"). In the event that the Accountants are
also serving as accountant or auditor for the individual, group or entity
effecting the Change in Control you may appoint another nationally recognized
public accounting firm to make the determination required hereunder (which
firm shall then be referred to as the Accountants hereunder). All fees and
expenses of the Accountings shall be borne solely by the Corporation.
4.3. TIMING OF PAYMENTS UNDER SECTIONS 4.1 AND 4.2. The
payments provided for in (a) Section 4.1 and Sections 4.2(a) and (b) shall
be made not later than the fifth day following the Date of Termination and
(b) Section 4.2(h) shall be made on the earlier of the date on which you
would be required to pay, or the Corporation would be required to withhold,
the Excise Tax; PROVIDED, HOWEVER, that if the amounts of such payments
cannot be finally determined on or before such day, the Corporation shall pay
to you on such day an estimate, as determined in good faith by the
Corporation, of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code) from the Date of Termination as soon as
the amount thereof can be determined but in no event later than the thirtieth
day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Corporation to you, payable
on the fifth day after demand by the Corporation (together with interest at
the rate provided in section 1274(b)(2)(B) of the Code) from the date such
payment was made by the Corporation.
4.4. DEATH OR DISABILITY. If your employment by the
Corporation shall be terminated by reason of death or Disability, the
Corporation shall continue payment of your annual base salary, at the rate
then in effect on the date of such termination, for a period of one year.
4.5. NO MITIGATION. You shall not be required to mitigate
the amount of any payment provided for in this Section 4 by seeking other
employment or otherwise nor, except as provided in Section 4.2(d), shall the
amount of any payment or benefit provided for in this Section 4 be reduced by
any compensation earned by you as the result of employment by another
employer or self-employment, by retirement benefits, by offset against any
amount claimed to be owed by you to the Corporation, or otherwise.
5. YOUR COVENANTS.
5.1. CONFIDENTIALITY. You agree that all drawings, diaries,
correspondence, files, tapes, discs, project books, notebooks, sketches,
reports, manuals, blueprints, documents, electronic mail messages, voicemail
messages, and any other materials in any form or medium which detail your
employment activities and/or which include Confidential Information (as
defined below), including all copies thereof, are and shall be the
Corporation's sole and exclusive property. You agree that the Corporation
will have unrestricted access to such materials at any time during the term
of your employment with or without notice to you. In addition, you agree to
hold in confidence and not use or disclose, either during or after
termination of your employment with the Corporation, any Confidential
Information which you obtain or create during the period of your employment,
whether or not during working hours, except to the extent authorized by the
Corporation. Upon the Corporation's request, or upon termination of your
employment for any reason, you will deliver to the Corporation all such
Confidential Information in your possession or control in all forms,
including all copies thereof, and
<PAGE>
April __, 1999
Page 9
destroy all copies that cannot be delivered. You promise and agree that you
shall not misuse, misappropriate, or disclose any of the trade secrets,
including current Corporation products or services, directly or indirectly,
or use them in any way, either during the term of this Agreement or at any
time thereafter, except as required in the course of your employment. As used
in this Agreement, the term "Confidential Information" means information
belonging or relating to the Corporation that is not publicly available, and
includes, but is not limited to, trade secrets consisting of formulas,
patterns, devices, secret inventions, processes, and compilations of
information, including, but not limited to, marketing, engineering, sales,
employment, employees, compensation, operations, future or proposed products
or services (whether these are planned, under consideration, or in
production), and any features of those products or services, information
related to financial lists, records, and specifications, all of which the
Corporation owns and regularly uses in operating its business. It includes
not only the Corporation's information, but also information which the
Corporation has obtained from a third party under an obligation of
confidentiality. Such Confidential Information may be in writing; may or may
not be marked as proprietary or confidential; may be a sketch or drawing; may
be a machine or computer program; may be verbal; may be stored in an
electronics storage medium; or may be in a combination of forms and/or in
forms not enumerated here.
5.2. NONSOLICITATION. You will not, either during the term of
your employment, or for a period of two years after your employment has
terminated, solicit any of the Corporation's employees for a competing
business or otherwise induce or attempt to induce such employees to terminate
their employment with the Corporation.
5.3. INTELLECTUAL PROPERTY. You hereby agree promptly to
disclose to the Corporation, and hereby assign and agree to assign to the
Corporation or its designee, your entire right, title, and interest in and to
all Intellectual Property (as defined below) which you develop either alone
or with others during your employment with the Corporation and which: (i)
pertains to any line of the Corporation's business activity, or any of the
Corporation's actual or demonstrably anticipated research and development;
(ii) involves the use of the Corporation's material, facilities, or trade
secret information, whether or not during working hours; (iii) relates to any
of your work during the period of your employment with the Corporation,
whether or not during normal working hours; or (iv) is developed wholly or
partially during the Corporation's normal working hours. You agree to
perform, both during and after your employment, all necessary lawful acts to
permit and assist the Corporation, at its expense, to obtain and enforce the
full benefits, enjoyment, rights and title throughout the world in the
Intellectual Property hereby assigned to it. Such acts include, but are not
limited to, executing documents and assisting or cooperating in legal
proceedings. In addition, you agree to disclose to the Corporation, in
confidence if requested, all Intellectual Property that you have developed to
permit the Corporation to determine whether or not the Intellectual Property
should be the Corporation's property. As used in this Agreement, the term
"Intellectual Property" means patents, designs, trademarks, discoveries,
formulae, processes, manufacturing, techniques, trade secrets, inventions
(whether patentable or not), improvements, ideas, works registerable as "mask
works," or copyrightable works, including all rights to obtain, register,
perfect and enforce these proprietary interests throughout the world.
Notwithstanding the foregoing, this Section 5.3 does not apply to an
Invention which qualifies fully under the provisions of Section 2870 of the
California Labor Code.
5.4. MODIFICATION. If the covenants contained in this Section 5
are, in the view of any court or arbitrator asked to rule upon the issue,
deemed unenforceable by reason of being too extensive in nature or scope,
then the same shall be deemed to cover only the greatest nature or scope, as
<PAGE>
April __, 1999
Page 10
the case may be, that will not render it unenforceable.
5.5. SPECIFIC PERFORMANCE. You acknowledge and agree that the
Corporation cannot be fully or adequately compensated in damages for a
violation of the covenants contained in this Section 5, and that, in addition
to any other relief to which the Corporation may be entitled, it shall be
entitled to injunctive and equitable relief.
6. SUCCESSORS; BINDING AGREEMENT.
6.1. SUCCESSOR TO ASSUME AGREEMENT. The Corporation shall require
any successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of
the Corporation to expressly assume and agree to perform this Agreement.
Failure of the Corporation to obtain such assumption and agreement prior to
the Change in Control Date shall be a breach of this Agreement and shall
entitle you to terminate your employment and receive compensation from the
Corporation in the same amount and on the same terms to which you would be
entitled hereunder if you terminate your employment for Good Reason following
the Approval Date, except that for purposes of implementing the foregoing,
the Change in Control Date shall be deemed the Date of Termination. Unless
expressly provided otherwise, "Corporation" as used herein shall mean the
Corporation as defined in this Agreement and any successor to its business
and/or assets as aforesaid.
6.2. BINDING AGREEMENT. This Agreement shall inure to the benefit
of and be enforceable by you and your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be payable to you
hereunder had you continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement
to your devisee, legatee or other designee or, if there is no such designee,
to your estate.
7. NOTICE. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing
and shall be deemed to have been duly given when received if personally
delivered; when transmitted if transmitted by telecopy; the day after it is
sent, if sent for next day delivery to a domestic address by recognized
overnight delivery service (e.g., Federal Express); and upon receipt, if sent
by certified or registered mail, return receipt requested. All notices,
requests, demands and other communications shall be addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Corporation shall be directed to the attention of the
Board with a copy to the Secretary of the Corporation, or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon receipt.
8. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed
to in writing and signed by you and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this
Agreement. All references to sections of the Exchange Act or the Code shall
be deemed also to refer to any successor provisions to such sections.
<PAGE>
April __, 1999
Page 11
Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law. The obligations of
the Corporation under Section 4 shall survive the expiration of the term of
this Agreement. The section headings contained in this Agreement are for
convenience only, and shall not affect the interpretation of this Agreement.
9. SEVERABILITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and
effect.
10. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
11. SUITS, ACTIONS, PROCEEDINGS, ETC.
11.1. COMPENSATION DURING DISPUTE, ETC. Your compensation
during any disagreement, dispute, controversy, claim, suit, action or
proceeding (collectively, a "Dispute"), arising out of or relating to this
Agreement or the interpretation of this Agreement shall be as follows:
If there is a termination followed by a Dispute as to whether you are
entitled to the payments and other benefits provided under this Agreement,
then, during the period of that Dispute the Corporation shall pay you fifty
percent (50%) of the amount specified in Sections 4.2(a) and 4.2(b) hereof,
and the Corporation shall provide you with the other benefits provided in
Section 4.2 of this Agreement, if, but only if, you agree in writing that if
the Dispute is resolved against you, you shall promptly refund to the
Corporation all payments you receive under Sections 4.2(a) and 4.2(b) of this
Agreement plus interest at the rate provided in Section 1274(d) of the Code,
compounded quarterly. If the Dispute is resolved in your favor, promptly
after resolution of the dispute the Corporation shall pay you the sum that
was withheld during the period of the Dispute plus interest at the rate
provided in Section 1274(d) of the Code, compounded quarterly.
11.2. LEGAL FEES. The Corporation shall pay to you all legal
fees and expenses incurred by you in connection with any Dispute arising out
of or relating to this Agreement or the interpretation thereof (including,
without limitation, all such fees and expenses, if any, incurred in
contesting or disputing any termination of your employment or in seeking to
obtain or enforce any right or benefit provided by this Agreement, or in
connection with any tax audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or benefit provided
hereunder), regardless of the outcome of such proceeding, provided that in
the event you commence such action, you shall not be entitled to recover such
fees and costs if the court determines that you brought the claim in bad
faith. Any attorneys' fees and costs incurred by you shall be paid by the
Corporation in advance of the final disposition of such action or challenge,
as such fees and expenses are incurred, provided that you hereby agree to
repay such amounts, net of any income taxes paid or payable by you with
respect to such amounts, if such amounts are incurred in connection with an
action commenced by you if it is ultimately determined by the court that you
brought such claim in bad faith.
11.3. CHOICE OF LAW; ARBITRATION. The internal laws of the State
of California, United States of America, applicable to contracts entered into
and wholly to be performed in California by California residents, without
reference to any principles concerning conflicts of law, shall govern the
validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of
<PAGE>
April __, 1999
Page 12
the parties hereunder. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by the following
procedures: Either party may send the other written notice identifying the
matter in dispute and involving the procedures of this Section 11.3. Within
fourteen (14) days after such written notice is given, one or more principals
of each party shall meet at a mutually agreeable location in San Francisco,
California, for the purpose of determining whether they can resolve the
dispute themselves by written agreement, and, if not, whether they can agree
upon a third-party impartial arbitrator (the "Arbitrator") to whom to submit
the matter in dispute for final and binding arbitration. If the parties fail
to resolve the dispute by written agreement or agree on the Arbitrator within
such twenty-one (21) day period, either party may make written application to
the Judicial Arbitration and Mediation Services ("JAMS"), 2 Embarcadero
Center, San Francisco, California, for the appointment of a single Arbitrator
to resolve the dispute by arbitration and at the request of JAMS, the parties
shall meet with JAMS at its offices or confer with JAMS by telephone within
ten (10) calendar days of such request to discuss the dispute and the
qualifications and experience which each party respectively believes the
Arbitrator should have; PROVIDED, HOWEVER, the selection of the Arbitrator
shall be the exclusive decision of JAMS and shall be made within thirty (30)
days of the written application to JAMS. Within 30 days of the selection of
the Arbitrator, the parties shall meet in San Francisco, California with such
Arbitrator at a place and time designated by the Arbitrator after
consultation with the parties and present their respective positions on the
dispute. Each party shall have no longer than one day to present its
position, the entire proceedings before the Arbitrator shall be on no more
than three consecutive days, and the award shall be made in writing no more
than 30 days following the end of the proceeding. Such award shall be a final
and binding determination of the dispute and shall be fully enforceable as an
arbitration award in any court having jurisdiction and venue over the
parties. The non-prevailing party (as determined by the Arbitrator) shall pay
the Arbitrator's fees and expenses.
12. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein and
supersedes all other prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by
any officer, employee or representative of any party hereto; and any prior
agreement of the parties hereto in respect of the subject matter contained
herein, including, without limitation, any prior severance agreements, is
hereby terminated and canceled. Any of your rights hereunder shall be in
addition to any rights you may otherwise have under benefit plans or
agreements of the Corporation to which you are a party or in which you are a
participant, including, but not limited to, any Corporation sponsored
employee benefit plans and stock options plans. Provisions of this Agreement
shall not in any way abrogate your rights under such other plans and
agreements.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter. A
duly authorized officer of the Corporation will sign this letter and a fully
executed copy will be returned to you, constituting our agreement on this
subject. Unless and until accepted in writing by the Corporation, this
Agreement is deemed to be neither executed nor effective.
Sincerely,
VLSI TECHNOLOGY, INC.
<PAGE>
April __, 1999
Page 13
By:
-------------------------------
Its:
-------------------------------
Agreed and Accepted,
this __ day of April, 1999.
- ---------------------------------
<PAGE>
Exhibit 34
FORM OF AGREEMENT FOR TIER II EXECUTIVES
VLSI Technology, Inc.
1109 McKay Drive
San Jose, California 95131
April __, 1999
[Tier 2 Executive]
[Address]
Dear [Tier 2 Executive]:
The Board of Directors (the "Board") of VLSI Technology, Inc. (the
"Corporation") has determined that it is in the best interests of the
Corporation and its stockholders to assure that the Corporation will continue
to have your dedication and services notwithstanding the possibility, threat
or occurrence of a Change in Control (as defined herein). The Board believes
it is imperative to diminish the distraction that you would face by virtue of
the personal uncertainties created by a pending or threatened Change in
Control and to encourage your full attention and dedication to the
Corporation currently and in the event of any threatened or pending Change in
Control. Further, the Board desires to provide you with compensation and
benefits arrangements upon a Change in Control which ensure that your
compensation and benefits expectations will be satisfied and which are
competitive with those of other corporations. Therefore, in order to
accomplish these objectives, the Board has caused the Corporation to enter
into this Agreement (the "Agreement"). [This Agreement constitutes a
complete amendment and restatement of the Executive Change in Control
Severance Agreement that you and the Corporation entered into as of [date of
prior agreement].]
1. TERM OF AGREEMENT. The terms of this Agreement shall become
effective upon the execution hereof by the Corporation and shall continue
unless terminated by written agreement between you and the Corporation;
PROVIDED, that if a Change in Control occurs, then the term of this Agreement
shall continue in effect for a period of not less than twenty-four (24)
months beyond the date (the "Change in Control Date") on which a Change in
Control occurs. No benefits shall be payable hereunder unless there has
been a Change in Control.
2. CHANGE IN CONTROL. A Change in Control shall be deemed to occur
upon the earliest to occur after the date of this Agreement of any of the
following events:
2.1. ACQUISITION OF STOCK BY THIRD PARTY. Any Person (as defined
below) is or becomes the Beneficial Owner (as defined below), directly or
indirectly, of securities of the Corporation representing twenty five percent
(25%) or more of the combined voting power of the Corporation's then
outstanding securities;
<PAGE>
April __, 1999
Page 2
2.2. CHANGE IN BOARD OF DIRECTORS. During any period of two (2)
consecutive years (not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period constitute the
Board, and any new director (other than a director designated by a person who
has entered into an agreement with the Corporation to effect a transaction
described in Sections 2.1, 2.3 or 2.4) whose election by the Board or
nomination for election by the Corporation's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
at least a majority of the members of the Board;
2.3. CORPORATE TRANSACTIONS. The effective date of a merger or
consolidation of the Corporation with any other entity, other than a merger
or consolidation which would result in the voting securities of the
Corporation outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 51% of
the combined voting power of the voting securities of the surviving entity
outstanding immediately after such merger or consolidation and with the power
to elect at least a majority of the board of directors or other governing
body of such surviving entity;
2.4. LIQUIDATION. The approval by the stockholders of the
Corporation of a complete liquidation of the Corporation or an agreement for
the sale or disposition by the Corporation of all or substantially all of the
Corporation's assets; or
2.5. OTHER EVENTS. There occurs any other event of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A (or a response to any similar item on any similar schedule or
form) promulgated under the Exchange Act (as defined below), whether or not
the Corporation is then subject to such reporting requirement.
2.6. CERTAIN DEFINITIONS. For purposes of this Section 2, the
following terms shall have the following meanings:
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Person" shall have the meaning as set forth in Sections
13(d) and 14(d) of the Exchange Act; PROVIDED, HOWEVER, that Person shall
exclude (i) the Corporation, (ii) any trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation and (iii) any
corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions as their ownership of stock
of the Corporation.
"Beneficial Owner" shall have the meaning given to such term
in Rule 13d-3 under the Exchange Act; PROVIDED, HOWEVER, that Beneficial
Owner shall exclude any Person otherwise becoming a Beneficial Owner by
reason of the stockholders of the Corporation approving a merger of the
Corporation with another entity.
3. TERMINATION FOLLOWING A CHANGE IN CONTROL.
3.1. GENERAL. You shall be entitled to the benefits provided in
Section 4 upon the termination of your employment, provided (a) that such
termination occurs after the date on which the stockholders of the
Corporation approve a transaction the consummation of which would result in
the
<PAGE>
April __, 1999
Page 3
occurrence of a Change in Control (the "Approval Date") and (b) the
Change in Control actually occurs, unless such termination is (x) because of
your death or Disability (as defined in Section 3.2), (y) by the Corporation
for Cause (as defined in Section 3.3), or (z) by you other than for Good
Reason (as defined in Section 3.4).
3.2. DEFINITION OF DISABILITY. If, as a result of your
incapacity due to physical or mental illness, you shall have been absent from
the full-time performance of your duties with the Corporation for six (6)
consecutive months, and within thirty (30) days after written notice of
termination is given you shall not have returned to the full-time performance
of your duties, your employment may be terminated for "Disability."
3.3. DEFINITION OF CAUSE. Termination by the Corporation of your
employment for "Cause" shall mean termination (a) upon your willful and
continued failure to perform substantially your duties with the Corporation
(other than any such failure resulting from your incapacity due to physical
or mental illness or any such actual or anticipated failure after your
issuance of a Notice of Termination (as defined in Section 3.5) for Good
Reason), after a written demand for substantial performance is delivered to
you by Board which demand specifically identifies the manner in which the
Board believes that you have not substantially performed your duties, (b)
upon your willful and continued failure to follow and comply substantially
with the specific and lawful directives of the Board, as reasonably
determined by the Board (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual or
anticipated failure after your issuance of a Notice of Termination for Good
Reason), after a written demand for substantial performance is delivered to
you by the Board, which demand specifically identifies the manner in which
the Board believes that you have not substantially followed or complied with
the directives of the Board, (c) upon your willful commission of an act of
fraud or dishonesty resulting in material economic or financial injury to the
Corporation, or (d) upon your willful engagement in illegal conduct which is
materially and demonstrably injurious to the Corporation. For purposes of
this Section 3.3, no act, or failure to act, on your part shall be deemed
"willful" unless done, or omitted to be done, by you not in good faith.
Notwithstanding the foregoing, you shall not be deemed terminated for Cause
pursuant to Sections 3.3(a), (b), (c) or (d) hereof 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 Board at a meeting of the Board (after reasonable notice to you, an
opportunity for you, together with your counsel, to be heard before the Board
and a reasonable opportunity to cure), finding that in the Board's good faith
opinion you were guilty of conduct set forth above in Section 3.3(a), (b),
(c) or (d) and specifying the particulars thereof in reasonable detail. In
the event of a Change in Control under Section 2.3 pursuant to which the
Corporation is not the surviving entity, then on and after the Change in
Control Date all determinations and actions required to be taken by the Board
under this Section 3.3 shall be made or taken by the board of directors of
the surviving entity, or if the surviving entity is a subsidiary, then by the
board of directors of the ultimate parent corporation of the surviving entity.
3.4. GOOD REASON. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without your express written consent, the occurrence after the
Approval Date of any of the following circumstances unless, in the case of
Sections 3.4(a), (f), (g), or (h), such circumstances are fully corrected
(provided such circumstances
<PAGE>
April __, 1999
Page 4
are capable of correction) prior to the Date of Termination (as defined in
Section 3.6) specified in the Notice of Termination given in respect thereof:
(a) the assignment to you of any duties inconsistent with
the position in the Corporation that you held immediately prior to the
Approval Date, a significant adverse alteration in the nature or status of
your responsibilities or the conditions of your employment from those in
effect immediately prior to the Approval Date, or any other action by the
Corporation that results in a material diminution in your position,
authority, title, duties or responsibilities;
(b) the Corporation's reduction of your annual base salary
or targeted annual cash incentive bonus as in effect on the Approval Date or
as the same may be increased from time to time;
(c) the relocation of the Corporation's offices at which
you are principally employed immediately prior to the Approval Date (your
"Principal Location") to a location more than fifteen (15) miles from such
location or the Corporation's requiring you, without your written consent, to
be based anywhere other than your Principal Location, except for required
travel on the Corporation's business to an extent substantially consistent
with your present business travel obligations;
(d) the Corporation's failure to pay to you any portion of
your current compensation or to pay to you any portion of an installment of
deferred compensation under any deferred compensation program of the
Corporation within seven (7) days of the date such compensation is due;
(e) the Corporation's failure to continue in effect any
material compensation or benefit plan or practice in which you are eligible
to participate in on the Approval Date (other than any equity based plan),
unless an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or the
Corporation's failure to continue your participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of your
participation relative to other participants, as existed at the time of the
Approval Date;
(f) the Corporation's failure to continue to provide you
with benefits substantially similar in the aggregate to those enjoyed by you
under any of the Corporation's life insurance, medical, health and accident,
disability, pension, retirement, or other benefit plans or practices in which
you and your eligible family members were eligible to participate in on the
Approval Date (other than any equity based plans), the taking of any action
by the Corporation which would directly or indirectly materially reduce any
of such benefits, or the failure by the Corporation to provide you with the
number of paid vacation days to which you are entitled on the basis of years
of service with the Corporation in accordance with the Corporation's normal
vacation policy in effect on the Approval Date;
(g) the Corporation's failure to obtain a satisfactory
agreement from any successor to assume and agree to perform this Agreement,
as contemplated in Section 6 hereof; or
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April __, 1999
Page 5
(h) any purported termination of your employment that is
not effected pursuant to a Notice of Termination satisfying the requirements
of Section 3.5 hereof (and, if applicable, the requirements of Section 3.3
hereof), which purported termination shall not be effective for purposes of
this Agreement.
Your right to terminate your employment pursuant to this Section 3.4 shall
not be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights
with respect to, any circumstance constituting Good Reason hereunder.
3.5. NOTICE OF TERMINATION. Any purported termination of your
employment by the Corporation or by you (other than termination due to death
which shall terminate your employment automatically) shall be communicated by
written Notice of Termination to the other party hereto in accordance with
Section 7. "Notice of Termination" shall mean a notice that shall indicate
the specific termination provision in this Agreement relied upon and shall
set forth in reasonable detail the facts and circumstances claimed to provide
a basis for termination of your employment under the provision so indicated.
3.6. DATE OF TERMINATION, ETC. "Date of Termination" shall mean
(a) if your employment is terminated due to your death, the date of your
death; (b) if your employment is terminated for Disability, thirty (30) days
after Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such thirty (30)
day period), and (c) if your employment is terminated pursuant to Section 3.3
or Section 3.4 or for any other reason (other than death or Disability), the
date specified in the Notice of Termination (which, in the case of a
termination for Cause shall not be less than thirty (30) days from the date
such Notice of Termination is given, and in the case of a termination for
Good Reason shall not be less than fifteen (15) nor more than sixty (60) days
from the date such Notice of Termination is given). Notwithstanding anything
to the contrary contained in this Section 3.6, if within fifteen (15) days
after any Notice of Termination is given, the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, then the Date of Termination shall be the date on which the
dispute is finally determined, either by mutual written agreement of the
parties, or otherwise; provided, however, that (i) the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence; and (ii) in the event of your death pending a
dispute, and the resolution of such dispute is ultimately in your favor, then
the Date of Termination shall be the date specified in the Notice of
Termination.
4. COMPENSATION UPON TERMINATION. The benefits to which you are
entitled upon termination of your employment, subject to Section 3 and the
other terms and conditions of this Agreement, are:
4.1. CAUSE OR VOLUNTARY TERMINATION. If your employment shall be
terminated by the Corporation for Cause or voluntarily terminated by you
other than for Good Reason, the Corporation shall pay you your full base
salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given, plus all other amounts to which you are
entitled under any compensation plan or practice of the Corporation, and the
Corporation shall have no further obligations to you under this Agreement.
<PAGE>
April __, 1999
Page 6
4.2. GOOD REASON OR TERMINATION BY CORPORATION WITHOUT CAUSE. If
your employment by the Corporation shall be terminated by you for Good
Reason, or by the Corporation other than for Cause, Disability or death,
then, subject to Section 4.6, you shall be entitled to the benefits provided
below:
(a) the Corporation shall pay to you your full base salary,
when due, through the Date of Termination at the rate in effect at the time
Notice of Termination is given, at the time specified in Section 4.3, plus
(i) that portion of your targeted cash bonuses prorated through the Date of
Termination, (ii) all accrued but unused vacation time through the Date of
Termination and (iii) all other amounts to which you are entitled under any
compensation plan or practice of the Corporation at the time such payments
are due;
(b) in lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Corporation shall pay as
severance pay to you, at the time specified in Section 4.3, a lump sum
payment equal to the sum of the following:
(1) one and one-half (1-1/2) times your annual base
salary as in effect at the time the Notice of Termination is given or
immediately prior to the Change in Control Date (or the Approval Date if the
Date of Termination is prior to the Change in Control Date), whichever is
greater; and
(2) one and one-half (1-1/2) times your targeted annual
bonus as in effect at the time the Notice of Termination is given or
immediately prior to the Change in Control Date (or the Approval Date if the
Date of Termination is prior to the Change in Control Date), whichever is
greater;
(c) for a period of two (2) years following the Date of
Termination, the Corporation shall, at its sole expense as incurred, provide
you with outplacement services, the scope and provider of which shall be
selected by you in your sole discretion, at an aggregate cost to the
Corporation not to exceed twenty five percent (25%) of your base salary as in
effect at the time the Notice of Termination is given or immediately prior to
the Change in Control Date (or the Approval Date if the Date of Termination
is prior to the Change in Control Date), whichever is greater;
(d) for a eighteen (18) month period after such
termination, or if later until your 65th birthday if you have attained age 55
on the Change in Control Date, the Corporation shall continue to provide you
and your eligible family members, based on the cost sharing arrangement
between you and the Corporation at the time the Notice of Termination is
given, with medical and dental health benefits and life and disability
benefits at least equal to those which would have been provided to you and
them if your employment had not been terminated or, if more favorable to you,
as in effect generally at any time thereafter; provided, however, that if you
become re-employed with another employer and are eligible to receive such
benefits under another employer's plans, the Corporation's obligations under
this Section 4.2(d) shall be reduced to the extent comparable benefits are
actually received by you during the eighteen (18) month period following your
termination, and any such benefits actually received by you shall be reported
to the Corporation. In the event you are ineligible under the terms of such
benefit plans or programs to continue to be so covered, the Corporation shall
provide you with substantially equivalent coverage through other sources or
will provide you with a lump-
<PAGE>
April __, 1999
Page 7
sum payment in such amount that, after all taxes on that amount, shall be
equal to the cost to you of providing yourself such benefit coverage. At the
termination of the medical and dental benefits coverage under the second
preceding sentence, you, your spouse and your dependents shall be entitled to
continuation coverage pursuant to section 4980B of the Internal Revenue Code
of 1986, as amended (the "Code"), sections 601-608 of the Employee Retirement
Income Security Act of 1974, as amended, and under any other applicable law,
to the extent required by such laws, as if you had terminated employment with
the Corporation on the date such benefits coverage terminates. The lump-sum
shall be determined on a present value basis using the interest rate provided
in section 1274(b)(2)(B) of the Code on the Date of Termination;
(e) the Corporation shall furnish you for six (6) years
following the Date of Termination (without reference to whether the term of
this Agreement continues in effect) with directors' and officers' liability
insurance insuring you against insurable events which occur or have occurred
while you were a director or officer of the Corporation, such insurance to
have policy limits aggregating not less than the amount in effect immediately
prior to the Change in Control or the Approval Date (whichever is more
favorable to you), and otherwise to be in substantially the same form and to
contain substantially the same terms, conditions and exceptions as the
liability issuance policies provided for officers and directors of the
Corporation in force from time to time, provided, however, that (i) such
terms, conditions and exceptions shall not be, in the aggregate, materially
less favorable to you than those in effect on the date hereof and (ii) if the
aggregate annual premiums for such insurance at any time during such period
exceed two hundred percent (200%) of the per annum rate of premium currently
paid by the Corporation for such insurance, then the Corporation shall
provide the maximum coverage that will then be available at an annual premium
equal to two hundred percent (200%) of such rate;
(f) the Corporation shall transfer ownership to you,
without additional consideration, the home computer hardware, software and
related equipment purchased by you pursuant to the Corporation's computer
purchase policy; and
(g) all unvested stock options held by you on the Date of
Termination shall immediately vest and become exercisable in full and shall
remain exercisable for the period specified in such options.
4.3. TIMING OF PAYMENTS UNDER SECTIONS 4.1 AND 4.2. The payments
provided for in (a) Section 4.1 and (b) Sections 4.2(a) and (b) shall be
made not later than the fifth day following the Date of Termination;
PROVIDED, HOWEVER, that if the amounts of such payments cannot be finally
determined on or before such day, the Corporation shall pay to you on such
day an estimate, as determined in good faith by the Corporation, of the
minimum amount of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code) from the Date of Termination as soon as the amount thereof can be
determined but in no event later than the thirtieth day after the Date of
Termination. In the event that the amount of the estimated payments exceeds
the amount subsequently determined to have been due, such excess shall
constitute a loan by the Corporation to you, payable on the fifth day after
demand by the Corporation (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code) from the date such payment was made by the
Corporation.
<PAGE>
April __, 1999
Page 8
4.4. DEATH OR DISABILITY. If your employment by the Corporation
shall be terminated by reason of death or Disability, the Corporation shall
continue payment of your annual base salary, at the rate then in effect on
the date of such termination, for a period of one year.
4.5. NO MITIGATION. You shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other
employment or otherwise nor, except as provided in Section 4.2(d), shall the
amount of any payment or benefit provided for in this Section 4 be reduced by
any compensation earned by you as the result of employment by another
employer or self-employment, by retirement benefits, by offset against any
amount claimed to be owed by you to the Corporation, or otherwise.
4.6 TAXES. You shall bear all expense of, and be solely
responsible for, all federal, state, local or foreign taxes due with respect
to any payment received hereunder, including, without limitation, any excise
tax imposed by Section 4999 of the Code; PROVIDED, HOWEVER, that any payment
or benefit, or the acceleration of any payment or benefit including the
acceleration of vesting of any stock options, received or to be received by
you or for your benefit in connection with a Change in Control or the
termination of your employment (whether payable pursuant to the terms of this
Agreement ("Contract Payments") or any other plan, arrangements or agreement
with the Corporation or an affiliate (collectively with the Contract
Payments, the "Total Payments")) that would constitute a "parachute payment"
within the meaning of Section 280G of the Code, shall be reduced to the
extent necessary so that no portion thereof shall be subject to the excise
tax imposed by Section 4999 of the Code but only if, by reason of such
reduction, the net after-tax benefit received by you shall exceed the net
after-tax benefit received by you if no such reduction were made. For
purposes of this Section 4.6, "net after-tax benefit" shall mean (i) the
Total Payments which you receive or are then entitled to receive from the
Corporation that would constitute "parachute payments" within the meaning of
Section 280G of the Code, less (ii) the amount of all federal, state and
local income and employment taxes payable by you with respect to the
foregoing calculated at the highest marginal income tax rate for each year in
which the foregoing shall be paid to you (based on the rate in effect for
such year as set forth in the Code as in effect at the time of the first
payment of the foregoing), less (iii) the amount of excise taxes imposed with
respect to the payments and benefits described in (i) above by Section 4999
of the Code. The foregoing determination will be made by the Corporation's
independent certified public accountants serving immediately prior to the
Change in Control (the "Accountants"). In the event that the Accountants are
also serving as accountant or auditor for the individual, group or entity
effecting the Change in Control you may appoint another nationally recognized
public accounting firm to make the determination required hereunder (which
firm shall then be referred to as the Accountants hereunder). All fees and
expenses of the Accountants shall be borne by the Corporation. You will
direct the Accountants to submit their determination and detailed supporting
calculations to both you and the Corporation within fifteen (15) days of
receipt from you or the Corporation that you have received or will receive
the Total Payments. If the Accountants determine that such reduction is
required by this Section 4.6, you, in your sole and absolute discretion, may
determine which Total Payments shall be reduced to the extent necessary so
that no portion thereof shall be subject to the excise tax imposed by Section
4999 of the Code, and the Corporation shall pay such reduced amount to you.
You and the Corporation will each provide the Accountants access to and
copies of any books, records, and documents in the possession of you or the
Corporation, as the case may be, reasonably requested by the Accountants, and
otherwise cooperate with the Accountants in connection with the preparation
and issuance of the determinations and calculations contemplated by this
Section 4.6.
<PAGE>
April __, 1999
Page 9
5. YOUR COVENANTS.
5.1. CONFIDENTIALITY. You agree that all drawings, diaries,
correspondence, files, tapes, discs, project books, notebooks, sketches,
reports, manuals, blueprints, documents, electronic mail messages, voicemail
messages, and any other materials in any form or medium which detail your
employment activities and/or which include Confidential Information (as
defined below), including all copies thereof, are and shall be the
Corporation's sole and exclusive property. You agree that the Corporation
will have unrestricted access to such materials at any time during the term
of your employment with or without notice to you. In addition, you agree to
hold in confidence and not use or disclose, either during or after
termination of your employment with the Corporation, any Confidential
Information which you obtain or create during the period of your employment,
whether or not during working hours, except to the extent authorized by the
Corporation. Upon the Corporation's request, or upon termination of your
employment for any reason, you will deliver to the Corporation all such
Confidential Information in your possession or control in all forms,
including all copies thereof, and destroy all copies that cannot be
delivered. You promise and agree that you shall not misuse, misappropriate,
or disclose any of the trade secrets, including current Corporation products
or services, directly or indirectly, or use them in any way, either during
the term of this Agreement or at any time thereafter, except as required in
the course of your employment. As used in this Agreement, the term
"Confidential Information" means information belonging or relating to the
Corporation that is not publicly available, and includes, but is not limited
to, trade secrets consisting of formulas, patterns, devices, secret
inventions, processes, and compilations of information, including, but not
limited to, marketing, engineering, sales, employment, employees,
compensation, operations, future or proposed products or services (whether
these are planned, under consideration, or in production), and any features
of those products or services, information related to financial lists,
records, and specifications, all of which the Corporation owns and regularly
uses in operating its business. It includes not only the Corporation's
information, but also information which the Corporation has obtained from a
third party under an obligation of confidentiality. Such Confidential
Information may be in writing; may or may not be marked as proprietary or
confidential; may be a sketch or drawing; may be a machine or computer
program; may be verbal; may be stored in an electronics storage medium; or
may be in a combination of forms and/or in forms not enumerated here.
5.2. NONSOLICITATION. You will not, either during the term of
your employment, or for a period of one and one-half (1-1/2) years after your
employment has terminated, solicit any of the Corporation's employees for a
competing business or otherwise induce or attempt to induce such employees to
terminate their employment with the Corporation.
5.3. INTELLECTUAL PROPERTY. You hereby agree promptly to
disclose to the Corporation, and hereby assign and agree to assign to the
Corporation or its designee, your entire right, title, and interest in and to
all Intellectual Property (as defined below) which you develop either alone
or with others during your employment with the Corporation and which: (i)
pertains to any line of the Corporation's business activity, or any of the
Corporation's actual or demonstrably anticipated research and development;
(ii) involves the use of the Corporation's material, facilities, or trade
secret information, whether or not during working hours; (iii) relates to any
of your work during the period of your employment with the Corporation,
whether or not during normal working hours; or (iv) is developed wholly or
partially during the Corporation's normal working hours. You agree to
perform, both during and after your employment, all necessary lawful acts to
permit and assist the Corporation, at its expense, to obtain and enforce the
full benefits, enjoyment, rights and title throughout the world in the
Intellectual
<PAGE>
April __, 1999
Page 10
Property hereby assigned to it. Such acts include, but are not
limited to, executing documents and assisting or cooperating in legal
proceedings. In addition, you agree to disclose to the Corporation, in
confidence if requested, all Intellectual Property that you have developed to
permit the Corporation to determine whether or not the Intellectual Property
should be the Corporation's property. As used in this Agreement, the term
"Intellectual Property" means patents, designs, trademarks, discoveries,
formulae, processes, manufacturing, techniques, trade secrets, inventions
(whether patentable or not), improvements, ideas, works registerable as "mask
works," or copyrightable works, including all rights to obtain, register,
perfect and enforce these proprietary interests throughout the world.
Notwithstanding the foregoing, this Section 5.3 does not apply to an
Invention which qualifies fully under the provisions of Section 2870 of the
California Labor Code.
5.4. MODIFICATION. If the covenants contained in this Section 5
are, in the view of any court or arbitrator asked to rule upon the issue,
deemed unenforceable by reason of being too extensive in nature or scope,
then the same shall be deemed to cover only the greatest nature or scope, as
the case may be, that will not render it unenforceable.
5.5. SPECIFIC PERFORMANCE. You acknowledge and agree that the
Corporation cannot be fully or adequately compensated in damages for a
violation of the covenants contained in this Section 5, and that, in addition
to any other relief to which the Corporation may be entitled, it shall be
entitled to injunctive and equitable relief.
6. SUCCESSORS; BINDING AGREEMENT.
6.1. SUCCESSOR TO ASSUME AGREEMENT. The Corporation shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Corporation to expressly assume and agree to perform
this Agreement. Failure of the Corporation to obtain such assumption and
agreement prior to the Change in Control Date shall be a breach of this
Agreement and shall entitle you to terminate your employment and receive
compensation from the Corporation in the same amount and on the same terms to
which you would be entitled hereunder if you terminate your employment for
Good Reason following the Approval Date, except that for purposes of
implementing the foregoing, the Change in Control Date shall be deemed the
Date of Termination. Unless expressly provided otherwise, "Corporation" as
used herein shall mean the Corporation as defined in this Agreement and any
successor to its business and/or assets as aforesaid.
6.2. BINDING AGREEMENT. This Agreement shall inure to the
benefit of and be enforceable by you and your personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount would still be
payable to you hereunder had you continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to your devisee, legatee or other designee or, if there is no such
designee, to your estate.
7. NOTICE. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing
and shall be deemed to have been duly given when received if personally
delivered; when transmitted if transmitted by telecopy; the day after it is
sent, if sent for next day delivery to a domestic address by recognized
overnight delivery service (E.G., Federal Express); and upon receipt, if sent
by certified or registered mail, return receipt requested. All notices,
requests, demands and other communications shall be addressed to the
respective addresses set
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April __, 1999
Page 11
forth on the first page of this Agreement, provided that all notices to the
Corporation shall be directed to the attention of the Board with a copy to
the Secretary of the Corporation, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
8. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed
to in writing and signed by you and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement. All references to sections of the Exchange Act or the Code shall
be deemed also to refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law. The obligations of
the Corporation under Section 4 shall survive the expiration of the term of
this Agreement. The section headings contained in this Agreement are for
convenience only, and shall not affect the interpretation of this Agreement.
9. SEVERABILITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and
effect.
10. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
11. SUITS, ACTIONS, PROCEEDINGS, ETC.
11.1. COMPENSATION DURING DISPUTE, ETC. Your compensation during
any disagreement, dispute, controversy, claim, suit, action or proceeding
(collectively, a "Dispute"), arising out of or relating to this Agreement or
the interpretation of this Agreement shall be as follows:
If there is a termination followed by a Dispute as to whether you are
entitled to the payments and other benefits provided under this Agreement,
then, during the period of that Dispute the Corporation shall pay you fifty
percent (50%) of the amount specified in Sections 4.2(a) and 4.2(b) hereof,
and the Corporation shall provide you with the other benefits provided in
Section 4.2 of this Agreement, if, but only if, you agree in writing that if
the Dispute is resolved against you, you shall promptly refund to the
Corporation all payments you receive under Sections 4.2(a) and 4.2(b) of this
Agreement plus interest at the rate provided in Section 1274(d) of the Code,
compounded quarterly. If the Dispute is resolved in your favor, promptly
after resolution of the dispute the Corporation shall pay you the sum that
was withheld during the period of the Dispute plus interest at the rate
provided in Section 1274(d) of the Code, compounded quarterly.
11.2. LEGAL FEES. The Corporation shall pay to you all legal
fees and expenses incurred by you in connection with any Dispute arising out
of or relating to this Agreement or the interpretation thereof (including,
without limitation, all such fees and expenses, if any, incurred in
contesting or disputing any termination of your employment or in seeking to
obtain or enforce any right
<PAGE>
April __, 1999
Page 12
or benefit provided by this Agreement, or in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of
the Code to any payment or benefit provided hereunder), regardless of the
outcome of such proceeding, provided that in the event you commence such
action, you shall not be entitled to recover such fees and costs if the court
determines that you brought the claim in bad faith. Any attorneys' fees and
costs incurred by you shall be paid by the Corporation in advance of the
final disposition of such action or challenge, as such fees and expenses are
incurred, provided that you hereby agree to repay such amounts, net of any
income taxes paid or payable by you with respect to such amounts, if such
amounts are incurred in connection with an action commenced by you if it is
ultimately determined by the court that you brought such claim in bad faith.
11.3. CHOICE OF LAW; ARBITRATION. The internal laws of the State
of California, United States of America, applicable to contracts entered into
and wholly to be performed in California by California residents, without
reference to any principles concerning conflicts of law, shall govern the
validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties hereunder. Any
controversy or claim arising out of or relating to this Agreement, or the
breach thereof, shall be settled by the following procedures: Either party
may send the other written notice identifying the matter in dispute and
involving the procedures of this Section 11.3. Within fourteen (14) days
after such written notice is given, one or more principals of each party
shall meet at a mutually agreeable location in San Francisco, California, for
the purpose of determining whether they can resolve the dispute themselves by
written agreement, and, if not, whether they can agree upon a third-party
impartial arbitrator (the "Arbitrator") to whom to submit the matter in
dispute for final and binding arbitration. If the parties fail to resolve
the dispute by written agreement or agree on the Arbitrator within such
twenty-one (21) day period, either party may make written application to the
Judicial Arbitration and Mediation Services ("JAMS"), 2 Embarcadero Center,
San Francisco, California, for the appointment of a single Arbitrator to
resolve the dispute by arbitration and at the request of JAMS, the parties
shall meet with JAMS at its offices or confer with JAMS by telephone within
ten (10) calendar days of such request to discuss the dispute and the
qualifications and experience which each party respectively believes the
Arbitrator should have; PROVIDED, HOWEVER, the selection of the Arbitrator
shall be the exclusive decision of JAMS and shall be made within thirty (30)
days of the written application to JAMS. Within 30 days of the selection of
the Arbitrator, the parties shall meet in San Francisco, California with such
Arbitrator at a place and time designated by the Arbitrator after
consultation with the parties and present their respective positions on the
dispute. Each party shall have no longer than one day to present its
position, the entire proceedings before the Arbitrator shall be on no more
than three consecutive days, and the award shall be made in writing no more
than 30 days following the end of the proceeding. Such award shall be a
final and binding determination of the dispute and shall be fully enforceable
as an arbitration award in any court having jurisdiction and venue over the
parties. The non-prevailing party (as determined by the Arbitrator) shall
pay the Arbitrator's fees and expenses.
12. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein and
supersedes all other prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by
any officer, employee or representative of any party hereto; and any prior
agreement of the parties hereto in respect of the subject matter contained
herein, including, without limitation, any prior severance agreements, is
hereby terminated and canceled. Any of your rights hereunder shall be in
addition to any rights you may otherwise have under benefit plans or
agreements of the Corporation to which you are a party or in which you are a
participant, including, but not limited to, any Corporation sponsored
employee benefit plans and stock options plans. Provisions of this Agreement
shall not in any
<PAGE>
April __, 1999
Page 13
way abrogate your rights under such other plans and agreements.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter.
A duly authorized officer of the Corporation will sign this letter and a
fully executed copy will be returned to you, constituting our agreement on
this subject. Unless and until accepted in writing by the Corporation, this
Agreement is deemed to be neither executed nor effective.
Sincerely,
VLSI TECHNOLOGY, INC.
By:________________________________
Its:_______________________________
Agreed and Accepted,
this ___ day of April, 1999.
___________________________________
<PAGE>
Exhibit 35
INDEMNITY AGREEMENT
THIS AGREEMENT is made as of ___________, by and between VLSI Technology,
Inc., a Delaware corporation ("Company"), and ___________("Indemnitee"), an
officer or director of the Company.
RECITALS
WHEREAS, highly competent persons have become more reluctant to serve
publicly-held corporations as directors or in other capacities unless they
are provided with adequate protection through insurance or adequate
indemnification against inordinate risks of claims and actions against them
arising out of their service to and activities on behalf of the Company; and
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that, in order to attract and retain qualified individuals, the
Company will attempt to maintain on an ongoing basis, at its sole expense,
liability insurance to protect persons serving the Company and its
subsidiaries from certain liabilities. Although the furnishing of such
insurance has been a customary and widespread practice among United
States-based corporations and other business enterprises, the Company
believes that, given current market conditions and trends, such insurance may
be available to it in the future only at higher premiums and with more
exclusions. At the same time, directors, officers, and other persons in
service to corporations or business enterprises are being increasingly
subjected to expensive and time-consuming litigation relating to, among other
things, matters that traditionally would have been brought only against the
Company or business enterprise itself. The By-laws of the Company require
indemnification of the officers and directors of the Company. Indemnitee may
also be entitled to indemnification pursuant to the Delaware General
Corporation Law ("DGCL"). The By-laws and the DGCL expressly provide that the
indemnification provisions set forth therein are not exclusive, and thereby
contemplate that contracts may be entered into between the Company and
members of the board of directors and officers with respect to
indemnification of directors and officers.
WHEREAS, the uncertainties relating to such insurance and to
indemnification have increased the difficulty of attracting and retaining
such persons; and
WHEREAS, the Board has determined that the increased difficulty in
attracting and retaining such persons is detrimental to the best interests of
the Company's stockholders and that the Company should act to assure such
persons that there will be increased certainty of such protection in the
future; and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify, and to advance expenses on
behalf of, such persons to the fullest extent permitted by applicable law so
that they will serve or continue to serve the Company free from undue concern
that they will not be so indemnified; and
<PAGE>
WHEREAS, this Agreement is a supplement to and in furtherance of the
Bylaws of the Company and any resolutions adopted pursuant thereto, and shall
not be deemed a substitute therefor, nor to diminish or abrogate any rights
of Indemnitee thereunder; and
WHEREAS, Indemnitee does not regard the protection available under the
Company's Bylaws and insurance adequate in the present circumstances, and may
not be willing to serve as an officer or director without adequate
protection, and the Company desires Indemnitee to serve in such capacity.
Indemnitee is willing to serve, continue to serve and to take on additional
service for or on behalf of the Company on the condition that he be so
indemnified;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. SERVICES TO THE COMPANY. Indemnitee will serve or continue to
serve, at the will of the Company, as an officer, director or key employee of
the Company for so long as Indemnitee is duly elected or appointed or until
Indemnitee tenders his or her resignation.
2. DEFINITIONS. As used in this Agreement:
(a) A "Change in Control" shall be deemed to occur upon the
earliest to occur after the date of this Agreement of any of the following
events:
(i) Acquisition of Stock by Third Party. Any Person (as
defined below) is or becomes the Beneficial Owner (as defined below),
directly or indirectly, of securities of the Company representing fifteen
percent (15%) or more of the combined voting power of the Company's then
outstanding securities;
(ii) Change in Board of Directors. During any period of
two (2) consecutive years (not including any period prior to the execution of
this Agreement), individuals who at the beginning of such period constitute
the Board, and any new director (other than a director designated by a person
who has entered into an agreement with the Company to effect a transaction
described in Sections 2(a)(i), 2(a)(iii) or 2(a)(iv)) whose election by
the Board or nomination for election by the Company's shareholders was
approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a least a majority of the members of the Board;
(iii) Corporate Transactions. The effective date of a
merger or consolidation of the Company with any other entity, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior to such merger of consolidation
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 51% of
the combined voting power of the voting securities of the surviving entity
outstanding immediately after such merger or consolidation and with the power
to elect at least a majority of the board of directors or other governing
body of such surviving entity;
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<PAGE>
(iv) Liquidation. The approval by the shareholders of the
Company of a complete liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of the Company's
assets; and
(v) Other Events. There occurs any other event of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A (or a response to any similar item on any
similar schedule or form) promulgated under the Exchange Act (as defined
below), whether or not the Company is then subject to such reporting
requirement.
(vi) Certain Definitions. For purposes of this Section
2(a), the following terms shall have the following meanings:
(A) "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended.
(B) "Person" shall have the meaning as
set forth in Sections 13(d) and 14(d) of
the Exchange Act; provided, however, that Person
shall exclude (i) the Company, (ii) any trustee
or other fiduciary holding securities under an
employee benefit plan of the Company, and (iii) any
corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the
same proportions as their ownership of stock of the
Company.
(C) "Beneficial Owner" shall have the
meaning given to such term in Rule 13d-3 under the
Exchange Act; provided, however, that Beneficial
Owner shall exclude any Person otherwise becoming
a Beneficial Owner by reason of the shareholders
of the Company approving a merger of the Company
with another entity.
(b) "Corporate Status" describes the status of a person who is or
was a director, officer, employee or agent of the Company or of any other
corporation, partnership or joint venture, trust, employee benefit plan or
other enterprise which such person is or was serving at the request of the
Company.
(c) "Disinterested Director" means a director of the Company who
is not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.
(d) "Enterprise" shall mean the Company and any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
of which Indemnitee is or was serving at the request of the Company as a
director, officer, employee, agent or fiduciary.
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<PAGE>
(e) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other disbursements or
expenses of the types customarily incurred in connection with prosecuting,
defending, preparing to prosecute or defend, investigating, being or
preparing to be a witness in, or otherwise participating in, a Proceeding.
Expenses, however, shall not include amounts paid in settlement by Indemnitee
or the amount of judgments or fines against Indemnitee.
(f) Reference to "other enterprise" shall include employee
benefit plans; references to "fines" shall include any excise tax assessed
with respect to any employee benefit plan; references to "serving at the
request of the Company" shall include any service as a director, officer,
employee or agent of the Company which imposes duties on, or involves
services by, such director, officer, employee or agent with respect to an
employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the best
interests of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in manner "not opposed to the best interests of
the Company" as referred to in this Agreement.
(g) The term "Proceeding" shall include any threatened, pending
or completed action, suit, arbitration, alternate dispute resolution
mechanism, investigation, inquiry, administrative hearing or any other
actual, threatened or completed proceeding, whether brought in the right of
the Company or otherwise and whether of a civil, criminal, administrative or
investigative nature, in which Indemnitee was, is or will be involved as a
party or otherwise by reason of the fact that Indemnitee is or was a director
or officer of the Company, by reason of any action taken by him or of any
action on his part while acting as director or officer of the Company, or by
reason of the fact that he is or was serving at the request of the Company as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, in each case whether or not serving
in such capacity at the time any liability or expense is incurred for which
indemnification, reimbursement, or advancement of expenses can be provided
under this Agreement.
(h) "Independent Counsel" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and neither presently
is, nor in the past five years has been, retained to represent: (i) the
Company or Indemnitee in any matter material to either such party (other than
with respect to matters concerning the Indemnitee under this Agreement, or of
other indemnitees under similar indemnification agreements), or (ii) any
other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent Counsel"
shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine
Indemnitee's rights under this Agreement. The Company agrees to pay the
reasonable fees and expenses of the Independent Counsel referred to above and
to fully indemnify such counsel against any and all Expenses, claims,
liabilities and damages arising out of or relating to this Agreement or its
engagement pursuant hereto.
3. INDEMNITY IN THIRD-PARTY PROCEEDINGS. The Company shall indemnify
Indemnitee in accordance with the provisions of this Section 3 if Indemnitee
is, or is threatened to be made, a party to or a participant in any
Proceeding, other than a Proceeding by or in the right of the Company
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<PAGE>
to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee
shall be indemnified against all Expenses, judgments, fines and amounts paid
in settlement actually and reasonably incurred by Indemnitee or on his behalf
in connection with such Proceeding or any claim, issue or matter therein, if
Indemnitee acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Company and, in the case of a
criminal proceeding had no reasonable cause to believe that his conduct was
unlawful.
4. INDEMNITY IN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The
Company shall indemnify Indemnitee in accordance with the provisions of this
Section 4 if Indemnitee is, or is threatened to be made, a party to or a
participant in any Proceeding by or in the right of the Company to procure a
judgment in its favor. Pursuant to this Section 4, Indemnitee shall be
indemnified against all Expenses actually and reasonably incurred by him or
on his behalf in connection with such Proceeding or any claim, issue or
matter therein, if Indemnitee acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company. No indemnification for Expenses shall be made under this Section 4
in respect of any claim, issue or matter as to which Indemnitee shall have
been finally adjudged by a court to be liable to the Company, unless and only
to the extent that any court in which the Proceeding was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, Indemnitee is fairly and
reasonably entitled to indemnification.
5. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY
SUCCESSFUL. Notwithstanding any other provisions of this Agreement, to the
extent that Indemnitee is a party to (or a participant in) and is successful,
on the merits or otherwise, in any Proceeding or in defense of any claim,
issue or matter therein, in whole or in part, the Company shall indemnify
Indemnitee against all Expenses actually and reasonably incurred by him in
connection therewith. If Indemnitee is not wholly successful in such
Proceeding but is successful, on the merits or otherwise, as to one or more
but less than all claims, issues or matters in such Proceeding, the Company
shall indemnify Indemnitee against all Expenses actually and reasonably
incurred by him or on his behalf in connection with each successfully
resolved claim, issue or matter. If the Indemnitee is not wholly successful
in such Proceeding, the Company also shall indemnify Indemnitee against all
Expenses reasonably incurred in connection with a claim, issue or matter
related to any claim, issue, or matter on which the Indemnitee was
successful. For purposes of this Section and without limitation, the
termination of any claim, issue or matter in such a Proceeding by dismissal,
with or without prejudice, shall be deemed to be a successful result as to
such claim, issue or matter.
6. INDEMNIFICATION FOR EXPENSES OF A WITNESS. Notwithstanding any
other provision of this Agreement, to the extent that Indemnitee is, by
reason of his Corporate Status, a witness in any Proceeding to which
Indemnitee is not a party, he shall be indemnified against all Expenses
actually and reasonably incurred by him or on his behalf in connection
therewith.
7. ADDITIONAL INDEMNIFICATION.
(a) Notwithstanding any limitation in Sections 3, 4, or 5, the
Company shall indemnify Indemnitee to the fullest extent permitted by law if
Indemnitee is a party to or threatened to be made a party to any Proceeding
(including a Proceeding by or in the right of the Company to
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<PAGE>
procure a judgment in its favor) against all Expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by Indemnitee in
connection with the Proceeding. No indemnity shall be made under this Section
7(a) on account of Indemnitee's conduct which constitutes a breach of
Indemnitee's duty of loyalty to the Company or its shareholders or is an act
or omission not in good faith or which involves intentional misconduct or a
knowing violation of the law.
(b) Notwithstanding any limitation in Sections 3, 4, 5 or 7(a),
the Company shall indemnify Indemnitee to the fullest extent permitted by law
if Indemnitee is a party to or threatened to be made a party to any
Proceeding (including a Proceeding by or in the right of the Company to
procure a judgement in its favor) against all Expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by Indemnitee in
connection with the Proceeding.
(c) For purposes of Sections 7(a) and 7(b), the meaning of the
phrase "to the fullest extent permitted by law" shall include, but not be
limited to:
i. to the fullest extent permitted by the provision of
the Act that authorizes or contemplates additional indemnification by
agreement, or the corresponding provision of any amendment to or replacement
of the Act, and
ii. to the fullest extent authorized or permitted by any
amendments to or replacements of the Act adopted after the date of this
Agreement that increase the extent to which a corporation may indemnify its
officers and directors.
8. EXCLUSIONS. Notwithstanding any provision in this Agreement, the
Company shall not be obligated under this Agreement to make any indemnity in
connection with any claim made against Indemnitee:
(a) for which payment has actually been made to or on behalf of
Indemnitee under any insurance policy or other indemnity provision, except
with respect to any excess beyond the amount paid under any insurance policy
or other indemnity provision; or
(b) for an accounting of profits made from the purchase and sale
(or sale and purchase) by Indemnitee of securities of the Company within the
meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended,
or similar provisions of state statutory law or common law.
9. ADVANCES OF EXPENSES. Notwithstanding any provision of this
Agreement to the contrary, the Company shall advance the expenses incurred by
Indemnitee in connection with any Proceeding within 30 days after the receipt
by the Company of a statement or statements requesting such advances from
time to time, whether prior to or after final disposition of any Proceeding.
Advances shall be unsecured and interest free. Advances shall be made without
regard to Indemnitee's ability to repay the expenses and without regard to
Indemnitee's ultimate entitlement to indemnification under the other
provisions of this Agreement. Advances shall include any and all reasonable
Expenses incurred pursuing an action to enforce this right of advancement,
including
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<PAGE>
Expenses incurred preparing and forwarding statements to the Company to
support the advances claimed. The Indemnitee shall qualify for advances
solely upon the execution and delivery to the Company of an undertaking
providing that the Indemnitee undertakes to repay the advance to the extent
that it is ultimately determined that Indemnitee is not entitled to be
indemnified by the Company.
10. PROCEDURE FOR NOTIFICATION AND DEFENSE OF CLAIM.
(a) To obtain indemnification under this Agreement, Indemnitee
shall submit to the Company a written request, including therein or therewith
such documentation and information as is reasonably available to Indemnitee
and is reasonably necessary to determine whether and to what extent
Indemnitee is entitled to indemnification, not later than thirty (30) days
after receipt by Indemnitee of notice of the commencement of any Proceeding.
The omission to notify the Company will not relieve the Company from any
liability which it may have to Indemnitee otherwise than under this
Agreement. The Secretary of the Company shall, promptly upon receipt of such
a request for indemnification, advise the Board in writing that Indemnitee
has requested indemnification.
(b) The Company will be entitled to participate in the
Proceeding at its own expense.
11. PROCEDURE UPON APPLICATION FOR INDEMNIFICATION.
(a) Upon written request by Indemnitee for indemnification
pursuant to the first sentence of Section 10(a), a determination, if required
by applicable law, with respect to Indemnitee's entitlement thereto shall be
made in the specific case: (i) if a Change in Control shall have occurred, by
Independent Counsel in a written opinion to the Board of Directors, a copy of
which shall be delivered to Indemnitee; or (ii) if a Change in Control shall
not have occurred, (A) by a majority vote of the Disinterested Directors,
even though less than a quorum of the Board, or (B) if there are no such
Disinterested Directors or, if such Disinterested Directors so direct, by
Independent Counsel in a written opinion to the Board, a copy of which shall
be delivered to Indemnitee or (C) if so directed by the Board, by the
stockholders of the Company; and, if it is so determined that Indemnitee is
entitled to indemnification, payment to Indemnitee shall be made within ten
(10) days after such determination. Indemnitee shall cooperate with the
person, persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification, including providing to such
person, persons or entity upon reasonable advance request any documentation
or information which is not privileged or otherwise protected from disclosure
and which is reasonably available to Indemnitee and reasonably necessary to
such determination. Any costs or expenses (including attorneys' fees and
disbursements) incurred by Indemnitee in so cooperating with the person,
persons or entity making such determination shall be borne by the Company
(irrespective of the determination as to Indemnitee's entitlement to
indemnification) and the Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
(b) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section
11(a) hereof, the Independent Counsel shall be selected as provided in this
Section 11(b). If a Change in Control shall not have occurred, the Independent
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<PAGE>
Counsel shall be selected by the Board of Directors, and the Company shall
give written notice to Indemnitee advising him of the identity of the
Independent Counsel so selected. If a Change in Control shall have occurred,
the Independent Counsel shall be selected by Indemnitee (unless Indemnitee
shall request that such selection be made by the Board of Directors, in which
event the preceding sentence shall apply), and Indemnitee shall give written
notice to the Company advising it of the identity of the Independent Counsel
so selected. In either event, Indemnitee or the Company, as the case may be,
may, within 10 days after such written notice of selection shall have been
given, deliver to the Company or to Indemnitee, as the case may be, a written
objection to such selection; PROVIDED, HOWEVER, that such objection may be
asserted only on the ground that the Independent Counsel so selected does not
meet the requirements of "Independent Counsel" as defined in Section 2 of
this Agreement, and the objection shall set forth with particularity the
factual basis of such assertion. Absent a proper and timely objection, the
person so selected shall act as Independent Counsel. If such written
objection is so made and substantiated, the Independent Counsel so selected
may not serve as Independent Counsel unless and until such objection is
withdrawn or a court has determined that such objection is without merit. If,
within 20 days after submission by Indemnitee of a written request for
indemnification pursuant to Section 10(a) hereof, no Independent Counsel
shall have been selected and not objected to, either the Company or
Indemnitee may petition a court of competent jurisdiction for resolution of
any objection which shall have been made by the Company or Indemnitee to the
other's selection of Independent Counsel and/or for the appointment as
Independent Counsel of a person selected by the Court or by such other person
as the Court shall designate, and the person with respect to whom all
objections are so resolved or the person so appointed shall act as
Independent Counsel under Section 11(a) hereof. Upon the due commencement of
any judicial proceeding or arbitration pursuant to Section 13(a) of this
Agreement, Independent Counsel shall be discharged and relieved of any
further responsibility in such capacity (subject to the applicable standards
of professional conduct then prevailing).
12. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.
(a) In making a determination with respect to entitlement to
indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification
under this Agreement if Indemnitee has submitted a request for
indemnification in accordance with Section 10(a) of this Agreement, and the
Company shall have the burden of proof to overcome that presumption in
connection with the making by any person, persons or entity of any
determination contrary to that presumption. Neither the failure of the
Company (including by its directors or independent legal counsel) to have
made a determination prior to the commencement of any action pursuant to this
Agreement that indemnification is proper in the circumstances because
Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Company (including by its directors or independent legal
counsel) that Indemnitee has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that Indemnitee has
not met the applicable standard of conduct.
(b) If the person, persons or entity empowered or selected
under Section 11 of this Agreement to determine whether Indemnitee is
entitled to indemnification shall not have made a determination within sixty
(60) days after receipt by the Company of the request therefor, the requisite
determination of entitlement to indemnification shall be deemed to have been
made and
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Indemnitee shall be entitled to such indemnification, absent (i) a
misstatement by Indemnitee of a material fact, or an omission of a material
fact necessary to make Indemnitee's statement not materially misleading, in
connection with the request for indemnification, or (ii) a prohibition of
such indemnification under applicable law; provided, however, that such
60-day period may be extended for a reasonable time, not to exceed an
additional thirty (30) days, if the person, persons or entity making the
determination with respect to entitlement to indemnification in good faith
requires such additional time for the obtaining or evaluating of
documentation and/or information relating thereto; and provided, further,
that the foregoing provisions of this Section 12(b) shall not apply (i) if
the determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 11(a) of this Agreement and if (A) within
fifteen (15) days after receipt by the Company of the request for such
determination the Board of Directors has resolved to submit such
determination to the stockholders for their consideration at an annual
meeting thereof to be held within seventy five (75) days after such receipt
and such determination is made thereat, or (B) a special meeting of
stockholders is called within fifteen (15) days after such receipt for the
purpose of making such determination, such meeting is held for such purpose
within sixty (60) days after having been so called and such determination is
made thereat, or (ii) if the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 11(a) of this
Agreement.
(c) The termination of any Proceeding or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon a plea
of NOLO CONTENDERE or its equivalent, shall not (except as otherwise
expressly provided in this Agreement) of itself adversely affect the right of
Indemnitee to indemnification or create a presumption that Indemnitee did not
act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Company or, with respect to any
criminal Proceeding, that Indemnitee had reasonable cause to believe that his
conduct was unlawful.
(d) RELIANCE AS SAFE HARBOR. For purposes of any determination
of good faith, Indemnitee shall be deemed to have acted in good faith if
Indemnitee's action is based on the records or books of account of the
Enterprise, including financial statements, or on information supplied to
Indemnitee by the officers of the Enterprise in the course of their duties,
or on the advice of legal counsel for the Enterprise or on information or
records given or reports made to the Enterprise by an independent certified
public accountant or by an appraiser or other expert selected with the
reasonable care by the Enterprise. The provisions of this Section 12(d) shall
not be deemed to be exclusive or to limit in any way the other circumstances
in which the Indemnitee may be deemed to have met the applicable standard of
conduct set forth in this Agreement.
(e) ACTIONS OF OTHERS. The knowledge and/or actions, or failure
to act, of any director, officer, agent or employee of the Enterprise shall
not be imputed to Indemnitee for purposes of determining the right to
indemnification under this Agreement.
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13. REMEDIES OF INDEMNITEE.
(a) In the event that (i) a determination is made pursuant to
Section 11 of this Agreement that Indemnitee is not entitled to
indemnification under this Agreement, (ii) advancement of Expenses is not
timely made pursuant to Section 9 of this Agreement, (iii) no determination
of entitlement to indemnification shall have been made pursuant to Section
11(a) of this Agreement within 45 days after receipt by the Company of the
request for indemnification, (iv) payment of indemnification is not made
pursuant to Section 5, 6, 7 or the last sentence of Section 11(a) of this
Agreement within ten (10) days after receipt by the Company of a written
request therefor, or (v) payment of indemnification pursuant to Section 3 or
4 of this Agreement is not made within ten (10) days after a determination
has been made that Indemnitee is entitled to indemnification, Indemnitee
shall be entitled to an adjudication by a court of his entitlement to such
indemnification or advancement of Expenses. Alternatively, Indemnitee, at his
option, may seek an award in arbitration to be conducted by a single
arbitrator pursuant to the Commercial Arbitration Rules of the American
Arbitration Association. The Company shall not oppose Indemnitee's right to
seek any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made
pursuant to Section 11(a) of this Agreement that Indemnitee is not entitled
to indemnification, any judicial proceeding or arbitration commenced pursuant
to this Section 13 shall be conducted in all respects as a DE NOVO trial, or
arbitration, on the merits and Indemnitee shall not be prejudiced by reason
of that adverse determination. In any judicial proceeding or arbitration
commenced pursuant to this Section 13 the Company shall have the burden of
proving Indemnitee is not entitled to indemnification or advancement of
Expenses, as the case may be.
(c) If a determination shall have been made pursuant to Section
11(a) of this Agreement that Indemnitee is entitled to indemnification, the
Company shall be bound by such determination in any judicial proceeding or
arbitration commenced pursuant to this Section 13, absent (i) a misstatement
by Indemnitee of a material fact, or an omission of a material fact necessary
to make Indemnitee's statement not materially misleading, in connection with
the request for indemnification, or (ii) a prohibition of such
indemnification under applicable law.
(d) In the event that Indemnitee, pursuant to this Section 13,
seeks a judicial adjudication of or an award in arbitration to enforce his
rights under, or to recover damages for breach of, this Agreement, Indemnitee
shall be entitled to recover from the Company, and shall be indemnified by
the Company against, any and all Expenses actually and reasonably incurred by
him in such judicial adjudication or arbitration. If it shall be determined
in said judicial adjudication or arbitration that Indemnitee is entitled to
receive part but not all of the indemnification or advancement of Expenses
sought, the Indemnitee shall be entitled to recover from the Company, and
shall be indemnified by the Company against, any and all Expenses reasonably
incurred by Indemnitee in connection with such judicial adjudication or
arbitration.
(e) The Company shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section 13 that
the procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any
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such arbitrator that the Company is bound by all the provisions of this
Agreement. The Company shall indemnify Indemnitee against any and all
Expenses and, if requested by Indemnitee, shall (within ten (10) days after
receipt by the Company of a written request therefore) advance such expenses
to Indemnitee, which are incurred by Indemnitee in connection with any action
brought by Indemnitee for indemnification or advance of Expenses from the
Company under this Agreement or under any directors' and officers' liability
insurance policies maintained by the Company, regardless of whether
Indemnitee ultimately is determined to be entitled to such indemnification,
advancement of Expenses or insurance recovery, as the case may be.
14. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION.
(a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Company's Articles of Incorporation, the Company's Bylaws, any
agreement, a vote of stockholders or a resolution of directors, or otherwise.
No amendment, alteration or repeal of this Agreement or of any provision
hereof shall limit or restrict any right of Indemnitee under this Agreement
in respect of any action taken or omitted by such Indemnitee in his Corporate
Status prior to such amendment, alteration or repeal. To the extent that a
change in Delaware law, whether by statute or judicial decision, permits
greater indemnification or advancement of Expenses than would be afforded
currently under the Company's Bylaws and this Agreement, it is the intent of
the parties hereto that Indemnitee shall enjoy by this Agreement the greater
benefits so afforded by such change. No right or remedy herein conferred is
intended to be exclusive of any other right or remedy, and every other right
and remedy shall be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any
other right or remedy.
(b) To the extent that the Company maintains an insurance
policy or policies providing liability insurance for directors, officers,
employees, or agents of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise which such
person serves at the request of the Company, Indemnitee shall be covered by
such policy or policies in accordance with its or their terms to the maximum
extent of the coverage available for any such director, officer, employee or
agent under such policy or policies. If, at the time of the receipt of a
notice of a claim pursuant to Section 2(b) of Section 2 hereof, the Company
has director and officer liability insurance in effect, the Company shall
give prompt notice of the commencement of such proceeding to the insurers in
accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all necessary or desirable action to cause such
insurers to pay, on behalf of the Indemnitee, all amounts payable as a result
of such proceeding in accordance with the terms of such policies.
(c) In the event of any payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all papers required and
take all action necessary to secure such rights, including execution of such
documents as are necessary to enable the Company to bring suit to enforce
such rights.
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(d) The Company shall not be liable under this Agreement to
make any payment of amounts otherwise indemnifiable (or for which advancement
is provided hereunder) hereunder if and to the extent that Indemnitee has
otherwise actually received such payment under any insurance policy,
contract, agreement or otherwise.
(e) The Company's obligation to indemnify or advance Expenses
hereunder to Indemnitee who is or was serving at the request of the Company
as a director, officer, employee or agent of any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
shall be reduced by any amount Indemnitee has actually received as
indemnification or advancement of expenses from such other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
15. DURATION OF AGREEMENT. This Agreement shall continue until and
terminate upon the later of: (a) 10 years after the date that Indemnitee
shall have ceased to serve as a director or officer of the Company or as a
director, officer, employee or agent of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise which
Indemnitee served at the request of the Company; or (b) 1 year after the
final termination of any Proceeding then pending in respect of which
Indemnitee is granted rights of indemnification or advancement of Expenses
hereunder and of any proceeding commenced by Indemnitee pursuant to Section
13 of this Agreement relating thereto. This Agreement shall be binding upon
the Company and its successors and assigns and shall inure to the benefit of
Indemnitee and his heirs, executors and administrators.
16. SEVERABILITY. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (a) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation, each portion of
any Section of this Agreement containing any such provision held to be
invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby and shall
remain enforceable to the fullest extent permitted by law; (b) such provision
or provisions shall be deemed reformed to the extent necessary to conform to
applicable law and to give the maximum effect to the intent of the parties
hereto; and (c) to the fullest extent possible, the provisions of this
Agreement (including, without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall be
construed so as to give effect to the intent manifested thereby.
17. ENFORCEMENT.
(a) The Company expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations imposed on it hereby
in order to induce Indemnitee to serve as a director or officer of the
Company, and the Company acknowledges that Indemnitee is relying upon this
Agreement in serving as a director or officer of the Company.
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<PAGE>
(b) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral, written and implied, between the
parties hereto with respect to the subject matter hereof.
18. MODIFICATION AND WAIVER. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by the parties
thereto. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provisions of this Agreement nor
shall any waiver constitute a continuing waiver.
19. NOTICE BY INDEMNITEE. Indemnitee agrees promptly to notify the
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any
Proceeding or matter which may be subject to indemnification or advancement
of Expenses covered hereunder. The failure of Indemnitee to so notify the
Company shall not relieve the Company of any obligation which it may have to
the Indemnitee under this Agreement or otherwise.
20. NOTICES. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been
duly given (a) if delivered by hand and receipted for by the party to whom
said notice or other communication shall have been directed, or (b) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(a) If to Indemnitee, at the address indicated on the signature
page of this Agreement, or such other address as Indemnitee shall provide to
the Company.
(b) If to the Company to
VLSI Technology, Inc.
1109 McKay Drive
San Jose, California 95131
Attention: General Counsel
or to any other address as may have been furnished to Indemnitee by the
Company.
21. CONTRIBUTION. To the fullest extent permissible under applicable
law, if the indemnification provided for in this Agreement is unavailable to
Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying
Indemnitee, shall contribute to the amount incurred by Indemnitee, whether
for judgments, fines, penalties, excise taxes, amounts paid or to be paid in
settlement and/or for Expenses, in connection with any claim relating to an
indemnifiable event under this Agreement, in such proportion as is deemed
fair and reasonable in light of all of the circumstances of such Proceeding
in order to reflect (i) the relative benefits received by the Company and
Indemnitee as a result of the event(s) and/or transaction(s) giving cause to
such Proceeding; and/or (ii) the relative fault of the Company (and its
directors, officers, employees and agents) and Indemnitee in connection with
such event(s) and/or transaction(s).
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22. APPLICABLE LAW AND CONSENT TO JURISDICTION. This Agreement and
the legal relations among the parties shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware, without
regard to its conflict of laws rules. Except with respect to any arbitration
commenced by Indemnitee pursuant to Section 10(a) of this Agreement, the
Company and Indemnitee hereby irrevocably and unconditionally (i) agree that
any action or proceeding arising out of or in connection with this Agreement
shall be brought only in the Chancery Court of the State of Delaware (the
"Delaware Court"), and not in any other state or federal court in the United
States of America or any court in any other country, (ii) consent to submit
to the exclusive jurisdiction of the Delaware Court for purposes of any
action or proceeding arising out of or in connection with this Agreement,
(iii) appoint, to the extent such party is not a resident of the State of
Delaware, irrevocably RL&F Service Corp., One Rodney Square, 10th Floor, 10th
and King Streets, Wilmington, Delaware 19801 as its agent in the State of
Delaware as such party's agent for acceptance of legal process in connection
with any such action or proceeding against such party with the same legal
force and validity as if served upon such party personally within the State
of Delaware, (iv) waive any objection to the laying of venue of any such
action or proceeding in the Delaware Court, and (v) waive, and agree not to
plead or to make, any claim that any such action or proceeding brought in the
Delaware Court has been brought in an improper or inconvenient forum.
23. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same
Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of
this Agreement.
24. MISCELLANEOUS. Use of the masculine pronoun shall be deemed to
include usage of the feminine pronoun where appropriate. The headings of the
paragraphs of this Agreement are inserted for convenience only and shall not
be deemed to constitute part of this Agreement or to affect the construction
thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
as of the day and year first above written.
VLSI TECHNOLOGY, INC. INDEMNITEE
By: ____________________________________ ___________________________________
Chief Executive Officer Name:
Address:
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