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EXECUTION COPY
EMPLOYMENT
AGREEMENT
THIS
EMPLOYMENT AGREEMENT (this “ Agreement ”) is
entered into as of April 6, 2005 (the “ Effective
Date ”) between Mark S. Thompson (the “
Executive ”), on the one hand, and Fairchild
Semiconductor International, Inc. (“ FSII ”), a
Delaware corporation, and Fairchild Semiconductor Corporation (the
“ Company ”), a Delaware corporation and wholly
owned subsidiary of FSII, on the other hand. Except as otherwise
provided herein, this Agreement replaces and supersedes in its
entirety the employment agreement entered into by and between the
Executive and the Company as of December 1, 2004.
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For ease of reference,
this Agreement is divided into the following parts:
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DUTIES AND SCOPE,
COMPENSATION AND BENEFITS DURING EMPLOYMENT
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(Sections 1-4)
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Other |
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PART 2— COMPENSATION AND BENEFITS IN CASE OF ACTUAL OR
CONSTRUCTIVE TERMINATION (Sections 5-6) |
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Termination |
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PART 3— COMPENSATION AND BENEFITS IN CASE OF A CHANGE IN
CONTROL (Section 7) |
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PART 4— CONFIDENTIALITY AND NON-DISCLOSURE, FORFEITURE,
INTELLECTUAL PROPERTY, NON-COMPETITION AND NON-SOLICITATION,
REMEDIES, SUCCESSORS, MISCELLANEOUS PROVISIONS, SIGNATURE PAGE
(Sections 8-14) |
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Confidentiality and Non-Disclosure |
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Forfeiture in Case of Certain Events |
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Non-Competition and Non-Solicitation |
1
Terms
For good
and valuable consideration, the adequacy and receipt of which are
hereby acknowledged, FSII, the Company and the Executive, intending
to be legally bound, agree as follows:
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PART 1
Section 1.
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DUTIES AND SCOPE, COMPENSATION AND
BENEFITS DURING
EMPLOYMENT
Term of Agreement; Termination of Employment |
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(a) |
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Unless sooner terminated as provided in this Agreement, the
term of this Agreement will begin on the Effective Date and will
end on the third anniversary of the Effective Date (the “
Initial Term ”). Upon the first and each subsequent
anniversary of the Effective Date, the term of this Agreement will
be automatically extended so as to end three years after the date
of such anniversary (each such three-year period, a “
Renewal Term ”) unless, prior to such anniversary,
either the Company or the Executive gives the other written notice
of non-renewal. The Initial Term and any Renewal Terms are
collectively referred to as the “ Term ”. |
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(b) |
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Subject to the other terms of this Agreement, including those
in Part 2, either the Company or the Executive may terminate
the Executive’s employment with the Company at any time and
for any reason or no reason upon written notice to the other party,
with effect as of the subsequent date specified in such
notice. |
Section 2. Duties and Scope of
Employment
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(a) |
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Position . As of the date of the 2005 annual
stockholders’ meeting (the “ Stockholders’
Meeting Date ”) of FSII, each of FSII and the Company
will employ the Executive in the position of President and Chief
Executive Officer, reporting to the board of directors of FSII and
the Company, respectively. As of the Stockholders’ Meeting
Date, the Executive will be appointed as a member of the board of
directors of FSII (the “ Board ”) and the board
of directors of the Company, which will be comprised of the same
members as the Board. Until the Stockholders’ Meeting Date,
the Executive shall continue to be employed in the positions and
have the responsibilities he held immediately prior to the
Effective Date. |
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(b) |
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Obligations . The Executive shall have such duties,
responsibilities and authority as customarily held or exercised by
a President and CEO of a public corporation, including but not
limited to general supervision over all of the business, operations
and other affairs of FSII and the Company and sole supervisory
authority over all of the executive officers of FSII the Company,
subject to the oversight of the Board. During the Term, the
Executive shall devote the Executive’s full business efforts
and time to the business and affairs of the Company as needed to
carry out his duties and responsibilities hereunder. The foregoing
shall not preclude the Executive from engaging in appropriate
civic, charitable, religious or other non-profit activities or from
devoting a reasonable amount of time to private investments or from
serving on the boards of directors of other entities, provided that
those activities do not interfere or conflict with the
Executive’s duties or responsibilities to the Company. |
Section 3. Base Compensation
While employed hereunder,
the Company shall pay the Executive, as compensation for services,
a base salary of at least $630,000 per year. Salary increases will
be considered after the first anniversary of the Effective Date, or
sooner in the discretion of the Board or its compensation
committee, so as to be competitive with compensation paid to
similarly situated CEOs and on a basis consistent with Company
policies.
Section 4. Other Compensation
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(a) |
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EFIP. While employed hereunder, the Executive will be
enrolled in the Enhanced Fairchild Incentive Plan (EFIP), at a
participation level of at least 150%. By way of example only, if an
EFIP bonus is paid at the 100% target level, the Executive would
receive a bonus equal to 150% of his qualified earnings under EFIP
during the measurement period. Notwithstanding the foregoing, the
Executive shall remain entitled to any bonus commitment contained
in his employment agreement dated December 1, 2004. |
(b) Equity
Awards.
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(A) |
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Promotion Grants . The Executive shall receive a grant
of 45,000 FSII deferred stock units (“ DSUs ”),
a grant of 46,000 FSII performance shares (“ Performance
Shares ”) and a grant of options to purchase 275,000
shares of FSII common stock (“ Options ”),
subject to the following terms (collectively, the “
Promotion Grants ”). The Promotion Grants will be made
under the Fairchild Semiconductor Stock Plan as such plan may be
amended from time to time (the “ Plan ”) and
standard executive forms of agreements (the “ Equity Award
Agreements ”) as in effect on the date of the Promotion
Grants, the terms of which shall be consistent with the terms
hereof. The Promotion Grants are subject to FSII stockholder
approval of certain amendments to the Plan at FSII’s 2005
annual stockholders’ meeting. If such approval is not
obtained the Company and the Executive shall renegotiate the terms
of this Agreement in good faith so as to provide a similar measure
of total compensation as contemplated herein. The grant date or
dates for the Promotion Grants will be the same date or dates as
the date or dates of annual stock option (in the case of the DSUs
and Options) and performance share (in the case of the Performance
Shares) grants to other executive officers and key employees under
the Plan, and in any case will not be later than July 15,
2005. The DSUs will vest in one-third increments on each of the
first three anniversaries of the grant date, if in each case the
Executive remains employed by the Company under this Agreement on
such anniversary, and vested DSUs must be settled by delivery of
stock promptly following the earliest to occur of (i) the
Executive’s death, (ii) the Executive’s disability
(as defined in Section 409A of the Internal Revenue Code of
1986, as amended (the “ Code ”)), (iii)
termination of the Executive’s employment, subject to
Section 8(d), or (iv) a date chosen by the Executive at
the time of grant, which chosen date must be at least three years
after the grant date. The Options will vest in one-quarter
increments on each of the first four anniversaries of the grant
date, if in each case the Executive remains employed by the Company
under this Agreement on such anniversary. The actual number of
shares of stock issued under the Performance Shares will be
determined in accordance with the Plan and terms generally
applicable to 2005 performance share grants to executive officers
of the Company, and the Performance Shares will vest over the
period from their grant to February 2008, subject to the Plan
and other terms of this Agreement. The Executive will be solely
responsible for any taxes associated with the receipt, vesting,
exercise or delivery of shares or cash under the Promotion Grants,
and the Company will make appropriate withholdings from any
distributions of shares or cash thereunder. |
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(C) |
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No Eligibility for Other Grants in 2005 . A portion of
the Promotion Grants are made in lieu of any that would otherwise
be made to the Executive as part of the Company’s annual
grant program for 2005, and, accordingly, the Executive shall not
receive any grants of DSUs or options under such program in 2005,
other than the Promotion Grants. The Executive will be eligible to
receive additional awards that the Company may undertake under any
other program, with respect to the Executive or otherwise, in
2005. |
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(D) |
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Additional Grants After 2005 . So long as he is employed
by the Company after 2005, the Executive shall receive grants of
stock options, performance shares and other equity-based awards,
subject to the applicable Company plans governing such awards, and
covering a number of shares as recommended by compensation
consultants and determined by the compensation committee of the
Board. Since a portion of the Promotion Grants are made in
connection with the Executive’s promotion to President and
CEO, future annual awards may be smaller than the Promotion
Grants. |
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(c) |
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Tax and Financial Planning Assistance. The Executive
will be entitled to receive up to $15,000 per year in supplemental
life insurance premiums, non-reimbursed medical expenses and
personal tax services at the Company’s expense and on a
tax-assisted (or “fully grossed-up”) basis. |
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(d) |
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Other Benefits. The Executive will be entitled to
participate in Company-paid executive long-term disability
insurance, Company-paid executive long-term care insurance, and
Company-paid basic life insurance programs, and to participate in
the Company’s health insurance, dental insurance, vision
care, short-term disability and personal savings (including 401(k)
and 401(k) benefit restoration) plans, as well as other benefit
plans and fringe benefits and perquisites available to senior
executives of the Company. Additionally, while employed hereunder,
the Executive shall be reimbursed (or the Company shall directly
pay) for the leasing, maintenance, insurance and operational costs
for an automobile of his choosing and approved by the Company, up
to $2,000 per month, net of taxes. To the extent any of the
payments, perquisites or benefits under this Section 4(d) are
taxable to the Executive, they will be provided on a tax-assisted
(or “fully grossed-up”) basis. |
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(e) |
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Paid Vacation . While employed hereunder, the Executive
shall be entitled to a minimum of five weeks paid vacation per
calendar year, such vacation to extend for such periods and to be
taken at such intervals as shall be appropriate and consistent with
the proper performance of the Executive’s duties
hereunder. |
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(f) |
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Business Expenses and Travel . While employed hereunder,
the Executive shall be authorized to incur and shall be reimbursed
for all necessary and reasonable travel, entertainment and other
business expenses in connection with the Executive’s duties
hereunder. |
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Retirement . If the Executive retires upon or following
the third anniversary of the Effective Date and does not engage,
and has no intention of engaging, in full-time employment with a
for-profit business enterprise (“ Retires ” or
takes “ Retirement ”), or if, upon or following
such anniversary, the Company terminates the Executive’s
employment for any reason other than Cause (including as a result
of his death or Disability) or the Executive terminates his
employment for Good Reason, then the Executive’s stock option
and other equity awards shall fully vest or be otherwise affected
as if Section 7(a)(2) were effective with respect thereto. For
purposes of this Agreement and the retirement-related vesting
provisions of equity compensation under any equity compensation
plans or agreements of the Company, or with respect to any other
benefit relating to retirement, the Executive shall be deemed to
have qualified for retirement under any applicable definition
thereof, if he is an employee in good standing on or after three
years from the Effective Date, regardless of age. |
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(h) |
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Legal Fee Reimbursement . The Company agrees to directly
pay Executive’s reasonable advisory and legal fees associated
with entering into this Agreement, up to $5,000, upon receiving
invoices for such services. In the event of one or more disputes
regarding this Agreement or any other agreement relating to
Executive’s employment with the Company or its successor that
arises on or after the occurrence of a Change in Control (as
defined in Section 7 hereof), the Company or its successor
agrees to pay all of Executive’s legal fees and expenses
associated with such disputes. |
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(i) |
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Indemnification . Executive shall receive
indemnification as a corporate officer and director of the Company
to the maximum extent extended to the other officers and directors
of the Company. Following the termination of Executive’s
employment or directorship for any reason, the Company agrees to
honor the indemnification agreement previously entered into with
Executive. |
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PART 2
Section 5.
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COMPENSATION AND BENEFITS IN CASE
OF TERMINATION
WITHOUT CAUSE OR FOR GOOD REASON OUTSIDE OF A CHANGE OF
CONTROL
Terminations and Related Definitions |
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Part 2 of the
Agreement, consisting of Sections 5 and 6, describes the
benefits and compensation, if any, payable in case of certain
terminations of employment prior to six months before a Change in
Control and more than twelve months after a Change in Control.
In this Agreement,
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(a) |
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“ Cause ” means (1) a willful failure
by the Executive to substantially perform the Executive’s
duties under this Agreement, other than a failure resulting from
the Executive’s complete or partial incapacity due to
physical or mental illness or impairment, (2) a willful act by
the Executive that constitutes gross misconduct and that is
materially injurious to the Company, (3) a willful breach by
the Executive of a material provision of this Agreement (including
Sections 8 or 10) or (4) a material and willful violation
of a federal, state or foreign law or regulation applicable to the
business of the Company that is materially and demonstrably
injurious to the Company, provided that no act, or failure
to act, by the Executive shall be considered “willful”
unless committed without good faith and without a reasonable belief
that the act or omission was in the Company’s best interest;
and provided, further , that, if the failure, act, breach or
other basis for finding Cause under this Agreement is capable of
being cured without material injury to the Company, then no finding
of Cause shall be made unless the Executive has failed to cure such
failure, act, breach or other basis within 30 days after
receiving written notice thereof from the Company, and |
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(b) |
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“Disability” means that the Executive, at
the time the notice is given, has been unable to perform the
Executive’s duties under this Agreement for a period of not
less than six consecutive months as a result of the
Executive’s incapacity due to physical or mental illness,
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(c) |
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“ Good Reason ” means any of the following
or as otherwise provided in this Agreement: (1) a reduction in
the Executive’s base salary other than as part of a broader
executive pay reduction, (2) a reduction in the
Executive’s incentive compensation (EFIP) participation
level other than as part of a broader executive reduction,
(3) a material change in the employment benefits available to
the Executive, if such change does not similarly affect all
employees of the Company eligible for such benefits, (4) a
material reduction in Executive’s duties, responsibilities or
authority as then in effect, (5) a requirement to relocate,
except for office relocations that would not increase the
Executive’s one-way commuting distance by more than 35 miles,
or (6) failure to recommend the Executive for re-election to
the Board to the FSII’s stockholders when his Board term
expires or to re-election to the board of directors of the
Company. |
Section 6. Termination By Company Without
Cause or By Executive for Good Reason
(a)
Severance . If the Company terminates the Executive’s
employment for any reason other than Cause (including as a result
of the Executive’s death or Disability), or if the Executive
terminates his employment for Good Reason, then, provided the
Executive (or his legal representative, if applicable) executes the
release of claims described in Section 6(b), and subject to
Section 6(c), then the Company will promptly pay the
Executive, in a lump sum, an amount equal to two times the sum of
(i) the Executive’s base salary in effect on such
termination date and (ii) the amount of the bonus the
Executive would receive under the Company’s Enhanced
Fairchild Incentive Program (EFIP), assuming a 100% payout based on
the Executive’s base salary and EFIP incentive level in
effect immediately prior to such termination (whether or not such a
bonus has been or is expected to be paid to other executives or
employees of the Company for the fiscal period in which such
termination occurs). If EFIP bonuses are later paid to EFIP
participants at a level higher than 100% in respect of the last
fiscal period during which the Executive had been employed by the
Company, then the Company shall pay the Executive two times the
difference between the amount that would have been paid to the
Executive had the Executive remained employed by the Company, and
been entitled to receive such bonus, and the amount determined
under clause (ii) above. If at the time of such a termination
the EFIP program has been discontinued or replaced, then the amount
payable under clause (ii) above shall be the target or actual
amount that the Executive is entitled to receive under any
incentive bonus program in which he is then participating. The
Executive will be responsible for all taxes relating to such
payments and the Company will make all required withholdings of all
such taxes. In addition, any of the 50,000 deferred stock units
awarded to the Executive in connection with his hiring by the
Company in 2004 that are outstanding as of the date of such
termination, and which are not then vested, shall become fully
vested and shall be considered to be earned and payable in full,
and any deferral or other restrictions on such DSUs shall lapse and
such DSUs shall be settled as promptly as is practicable following
such termination. The Executive will be responsible for all taxes
relating to such payments and vesting and the Company will make all
required withholdings of all such taxes. In addition, the Company
will provide continued medical benefits for the Executive and his
eligible dependents, under COBRA coverage, at the Company’s
expense for two years following the effective date of such
termination. At the time of such termination, the Company shall pay
the Executive in cash for all accrued and unused vacation time.
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Release of Claims . As a condition to the receipt of the
payments and benefits described in Section 6(a), the Executive
(or his legal representative, if applicable) shall be required to
execute a release of all claims arising out of the
Executive’s employment or the termination thereof, including
any claim of discrimination under U.S. state or federal law or any
non-U.S. law, but excluding claims for indemnification from the
Company under any indemnification agreement with the Company, its
certificate of incorpo |
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