def14a
SCHEDULE 14A INFORMATION
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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Conexant Systems, Inc.
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Form, Schedule or Registration Statement No.:
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January 10, 2006
Dear Shareowner:
Conexants 2006 Annual Meeting of Shareowners will be held
at 10:00 a.m. Pacific Standard Time on Wednesday,
February 22, 2006, at the Hilton Irvine/Orange County
Airport hotel, located at 18800 MacArthur Boulevard, Irvine,
California 92612. We look forward to your attending either in
person or by proxy. Details of the business to be conducted at
the Annual Meeting are included in the attached Notice of Annual
Meeting and Proxy Statement. Shareowners may also access the
Notice of Annual Meeting and the Proxy Statement via the
Internet at http://www.conexant.com.
If you plan to attend the meeting, please check the box on your
Proxy Card indicating your desire to attend and save the
admission ticket attached to your proxy; or indicate your
intention to attend when voting by telephone or via the
Internet, and an admittance card will be forwarded to you
promptly.
Sincerely yours,
Dwight W. Decker, Ph. D.
Chairman of the Board and
Chief Executive Officer
TABLE OF CONTENTS
RETURN OF
PROXY CARD
Please complete, sign, date and return the accompanying Proxy
Card promptly in the enclosed addressed envelope, even if you
plan to attend the Annual Meeting. Postage need not be affixed
to the envelope if mailed in the United States.
The immediate return of your Proxy Card will be of great
assistance in preparing for the Annual Meeting and is,
therefore, urgently requested. If you attend the Annual Meeting
and have made arrangements to vote in person, your Proxy Card
will not be used.
VOTING
ELECTRONICALLY OR BY TELEPHONE
Instead of submitting your proxy vote with the accompanying
paper Proxy Card, you may vote electronically via the Internet
or by telephone by following the procedures set forth on the
Proxy Card.
IF YOU
PLAN TO ATTEND THE ANNUAL MEETING IN PERSON
If you plan to attend the Annual Meeting to be held at
10:00 a.m. Pacific Standard Time on Wednesday,
February 22, 2006, at the Hilton Irvine/Orange County
Airport hotel, located at 18800 MacArthur Boulevard, Irvine,
California 92612, please be sure to check the box on your proxy
card indicating your desire to attend and save the admission
ticket attached to your proxy; or, indicate your desire to
attend the meeting through Conexants telephone or Internet
voting procedures.
If you plan to attend the Annual Meeting, it will be
necessary for you to bring your admission ticket. In addition to
your admission ticket, you may be asked to present a valid
picture identification such as a drivers license or
passport.
If your shares are not registered in your own name and you
plan to attend the Annual Meeting and vote your shares in
person, in addition to bringing your admission ticket, you
should contact your broker or agent in whose name your shares
are registered to obtain a brokers proxy and bring it to
the Annual Meeting in order to vote.
CONEXANT
SYSTEMS, INC.
4000 MacArthur Boulevard
Newport Beach, California 92660
NOTICE OF ANNUAL MEETING OF
SHAREOWNERS
Dear Shareowner:
You are cordially invited to attend the 2006 Annual Meeting of
Shareowners of Conexant Systems, Inc. (Conexant or
the Company) which will be held on Wednesday,
February 22, 2006, at 10:00 a.m. Pacific Standard
Time, at the Hilton Irvine/Orange County Airport hotel, located
at 18800 MacArthur Boulevard, Irvine, California 92612. The 2006
Annual Meeting is being held for the following purposes:
1. To elect three members of the Board of Directors of the
Company with terms expiring at the 2009 Annual Meeting of
Shareowners;
2. To ratify the appointment by the Audit Committee of the
Board of Directors of the accounting firm of Deloitte &
Touche LLP as independent auditors for the Company for the
current fiscal year; and
3. To transact such other business as may properly come
before the 2006 Annual Meeting or any adjournment thereof.
These items are fully discussed in the following pages. Only
shareowners of record at the close of business on
January 2, 2006 will be entitled to notice of, and to vote
at, the 2006 Annual Meeting. A list of such shareowners will be
available for inspection by any shareowner at the offices of the
Company at 4000 MacArthur Boulevard, Newport Beach, California
92660-3095, for at
least ten days prior to the 2006 Annual Meeting and also at the
meeting.
Shareowners are requested to complete, sign, date and return the
Proxy Card as promptly as possible. A return envelope is
enclosed. Submitting your proxy with the Proxy Card, via the
Internet or by telephone will not affect your right to vote in
person should you decide to attend the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Dennis E. OReilly
Secretary
January 10, 2006
Conexant
Systems, Inc.
4000 MacArthur Boulevard
Newport Beach, California 92660
Proxy Statement
The enclosed proxy is solicited by the Board of Directors of
Conexant Systems, Inc. (Conexant or the
Company) for use in voting at the 2006 Annual
Meeting of Shareowners (the Annual Meeting) to be
held at 10:00 a.m. Pacific Standard Time on Wednesday,
February 22, 2006, at the Hilton Irvine/Orange County
Airport hotel, located at 18800 MacArthur Boulevard, Irvine,
California 92612, and at any adjournment thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting
of Shareowners. This proxy statement and the proxy are first
being mailed to shareowners and made available on the Internet
(http://www.conexant.com) on or about January 10, 2006.
On June 27, 2003, the Company completed the spin-off of its
Internet infrastructure business, Mindspeed Technologies, Inc.
(Mindspeed) (the Mindspeed Spin-Off). In
connection with the Mindspeed Spin-Off, certain adjustments were
made to the Companys stock-based compensation plans and
outstanding awards thereunder. On February 27, 2004, the
Company completed its merger with GlobespanVirata, Inc.
(GlobespanVirata) (the Merger). In
connection with the Merger, certain adjustments were made with
respect to the Companys stock-based compensation plans and
outstanding awards thereunder. All information in this Proxy
Statement regarding the Companys Common Stock and awards
under the Companys stock-based compensation plans gives
effect to the Mindspeed Spin-Off, the Merger, and the related
adjustments. For presentation purposes, references made to the
fiscal years ended September 30, 2003, 2004 and 2005 relate
to the actual fiscal years ended October 3, 2003,
October 1, 2004, and September 30, 2005, respectively.
Voting
and Revocability of Proxies
When proxies are properly executed, dated and returned, the
shares they represent will be voted at the Annual Meeting in
accordance with the instructions of the shareowners. If no
specific instructions are given, the shares will be voted FOR
the election of the nominees for directors set forth herein
and FOR ratification of the appointment of the
independent auditors. In addition, if other matters come before
the Annual Meeting, the persons named in the Proxy Card will
vote in accordance with their best judgment with respect to such
matters. A shareowner giving a proxy has the power to revoke it
at any time prior to its exercise by giving written notice of
revocation to the Secretary prior to the Annual Meeting, by
giving a valid, later dated proxy, or by voting in person at the
Annual Meeting.
The enclosed Proxy Card also offers shareowners the option to
access materials for any future shareowner meeting
electronically via the Internet. A shareowner consenting to
accessing such materials electronically may revoke such consent
at any time. The Company will continue to distribute printed
materials for future shareowner meetings to shareowners who do
not consent to access such materials electronically.
It is the Companys policy to maintain the confidentiality
of proxy cards, ballots and voting tabulations that identify
individual shareowners except as may be necessary to meet any
applicable legal requirements and, in the case of any contested
proxy solicitation, as may be necessary to permit proper parties
to verify the propriety of proxies presented by any person and
the results of the voting. The inspectors of election and any
employees associated with processing proxy cards or ballots and
tabulating the vote are required to acknowledge their
responsibility to comply with this policy of confidentiality.
Each share of Common Stock of the Company outstanding on the
record date will be entitled to one vote on all matters. The
three candidates for election as directors at the Annual Meeting
who receive the highest number of affirmative votes, a quorum
being present, will be elected. The ratification of the
appointment of the independent auditors will require the
affirmative vote of a majority of the votes entitled to be cast
by holders of shares of the Companys Common Stock present
or represented by proxy and entitled to vote at the Annual
Meeting, a quorum being present. Because abstentions with
respect to any matter are treated as shares present or
represented by proxy
and entitled to vote for the purposes of determining whether
that matter has been approved by the shareowners, abstentions
have the same effect as negative votes for each proposal, other
than the election of directors. Broker non-votes are not deemed
to be present or represented by proxy for purposes of
determining whether shareowner approval of a matter has been
obtained, but they are counted as present for purposes of
determining the existence of a quorum at the Annual Meeting.
Record
Date, Quorum and Share Ownership
Only shareowners of record at the close of business on
January 2, 2006 will be entitled to vote at the Annual
Meeting. The presence in person or by proxy of a majority of the
shares of the Companys Common Stock outstanding on the
record date is required for a quorum. As of January 2,
2006, there were 474,639,018 outstanding shares of the
Companys Common Stock.
ELECTION
OF DIRECTORS (Proposal 1)
The Companys Restated Certificate of Incorporation
provides that the Board of Directors shall consist of three
classes of directors with overlapping three-year terms. One
class of directors is to be elected each year with a term
extending to the third succeeding Annual Meeting after election.
The Restated Certificate of Incorporation provides that the
Board shall maintain the three classes so as to be as nearly
equal in number as the then total number of directors permits.
At the end of fiscal year 2005, the Company had
10 directors. The four directors in Class I, the three
directors in Class II and the three directors in
Class III are serving terms expiring at the Companys
Annual Meeting of Shareowners in 2006, 2007 and 2008,
respectively. In November 2005, Mr. Dipanjan Deb informed
the Board that, in order to have more time to pursue other
interests, he did not wish to be considered as a nominee to
Class I and will not stand for re-election to the Board.
Mr. Debs tenure as a director will end on
February 22, 2006, at which time the size of the Board of
Directors will decrease to 9 directors.
Unless marked otherwise, proxies received will be voted FOR
the election of each of the three nominees specified in
Class I Nominees for Directors with
Terms Expiring in 2009 below, who now serve as directors
with terms expiring at the 2006 Annual Meeting and until their
successors are elected and qualified. If any such nominee for
the office of director is unwilling or unable to serve as a
nominee for the office of director at the time of the Annual
Meeting, the proxies may be voted either (1) for a
substitute nominee, who shall be designated by the proxy holders
or by the present Board of Directors to fill such vacancy, or
(2) for the other nominees only, leaving a vacancy.
Alternatively, the size of the Board may be reduced so that
there is no vacancy. The Board of Directors has no reason to
believe that any of the nominees will be unwilling or unable to
serve if elected as a director. Such persons have been nominated
to serve until the 2009 Annual Meeting of Shareowners and until
their successors are elected and qualified.
The Board of Directors recommends a vote FOR the
election of each of the nominees listed below.
Information
as to Nominees for Directors and Continuing
Directors
Listed below for each director, as reported to Conexant, is the
directors name, age and principal occupation for the past
five years, his position, if any, with Conexant, and other
directorships held.
Class I
Nominees for Directors with Terms Expiring in 2009
Dwight W. Decker,
age 55 Mr. Decker has been chairman
of the board of Conexant since December 1998; he served as
non-executive chairman from the end of February 2004 to November
2004. He has been chief executive officer of the Company from
January 1999 to February 2004 and again since November 2004.
Mr. Decker is non-executive chairman of the board and a
director of each of Mindspeed Technologies, Inc. Skyworks
Solutions, Inc., and a director of Pacific Mutual Holding
Company. He also serves as a director or member of numerous
professional and civic organizations.
F. Craig Farrill,
age 53 Mr. Farrill has been a
director of Conexant since 1998. Mr. Farrill has been
president and chief executive officer of Kodiak Networks, Inc.
(wireless communications) since March 2003.
2
Mr. Farrill was managing director and chief technology
officer of InOvate Communications Group (wireless
communications) from September 2000 to March 2003. He is a
director and a corporate officer of the CDMA Development Group,
a digital cellular technology consortium, which he founded in
1993.
John W. Marren,
age 42 Mr. Marren has been a director
of Conexant since February 2004. Prior to that, he was a
director of GlobespanVirata, Inc. since June 2000. He has been a
partner of Texas Pacific Group (investment firm) since April
2000. Mr. Marren is chairman of the board and a director of
MEMC Electronic Materials, Inc. and a director of ON
Semiconductor Corporation and several privately held companies.
Class III
Continuing Directors with Terms Expiring in 2008
Steven J. Bilodeau,
age 47 Mr. Bilodeau has been a
director of Conexant since February 2004. Prior to that, he was
a director of GlobespanVirata, Inc. since September 2003. He has
been the chairman of the board, chief executive officer, and
president of SMSC (formerly known as Standard Microsystems
Corporation) (semiconductors) since February 2000.
D. Scott Mercer,
age 54 Mr. Mercer has been a director
of Conexant since 2003. Mr. Mercer is a private investor,
who served as interim chief executive officer of Adaptec, Inc.
(computer technology services) from May 2005 to November 2005,
and as senior vice president and adviser to the chief executive
officer of Western Digital Corporation (computer hardware) from
February 2004 through December 2004. Prior to that, he was
senior vice president and chief financial officer of Western
Digital Corporation since October 2001. He served as vice
president and chief financial officer of TeraLogic, Inc.
(semiconductors) from June 2000 to September 2001.
Mr. Mercer is a director of Adaptec, Inc., NetRatings, Inc.
and Palm, Inc.
Giuseppe Zocco,
age 40 Mr. Zocco has been a director
of Conexant since February 2004. Prior to that, he was a
director of GlobespanVirata, Inc. since December 2001. He has
been a general partner of Index Ventures (private venture
capital firm) since 1996.
Class II
Continuing Directors with Terms Expiring in 2007
Donald R. Beall,
age 67 Mr. Beall has been a director
of Conexant since 1998. He is the retired chairman and chief
executive officer of Rockwell International Corporation (now
named Rockwell Automation, Inc.) (electronic controls and
communications) and was a director of Rockwell from 1978 to
February 2001. Mr. Beall is Chairman of the Executive
Committee of and a director of Rockwell Collins, Inc. (avionics
and communications). He is also a director of Mindspeed
Technologies, Inc. He is a former director of Amoco Corporation,
ArvinMeritor, Inc., Skyworks Solutions, Inc., The
Procter & Gamble Company and The Times Mirror Company.
He is a trustee of the California Institute of Technology, a
member of various University of California-Irvine supporting
organizations, and an Overseer of the Hoover Institution at
Stanford University. He is also an investor, director
and/or advisor with
several private companies and investment partnerships.
Balakrishnan S. Iyer,
age 49 Mr. Iyer has been a director
of Conexant since 2002. He served as senior vice president and
chief financial officer of the Company from January 1999 to June
2003. He has served as a consultant to Mindspeed Technologies,
Inc. (networking infrastructure semiconductors) from June 2003
through December 2004. Mr. Iyer is currently a director of
IHS, Inc., Invitrogen Corporation, Power Integrations, QLogic
Corporation and Skyworks Solutions, Inc.
Jerre L. Stead,
age 63 Mr. Stead has been a director
of Conexant since 1998. Mr. Stead has been chairman of the
board of IHS, Inc. (software) since December 2000. He is a
director of Armstrong World Industries, Inc., Brightpoint, Inc.,
Mindspeed Technologies, Inc. and Mobility Electronics, Inc. He
is also chairman of the board of the Center of Ethics and Values
at Garrett Seminary on the Northwestern University campus.
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BOARD
COMMITTEES AND MEETINGS
The standing committees of the Board of Directors of Conexant
during fiscal 2005 were an Audit Committee, a Governance and
Board Composition Committee, and a Compensation and Management
Development Committee, each of which is comprised of
non-employee directors who are independent directors within the
meaning of the rules of The Nasdaq Stock Market. The functions
of each of these three committees are described below; committee
charters are posted on Conexants website at
www.conexant.com/ir/corp_corp_gov.html. In addition, as of
August 6, 2004, the Board of Directors of Conexant also has
an Investment Management Committee, whose members consist of
employee and non-employee directors, some of whom are not
independent directors. The members of each of the Board
committees are identified in the following table, each committee
chairman being denoted with an asterisk. Conexants
independent directors also hold regular meetings without members
of management present.
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Governance
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Compensation
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Board
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Management
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Investment
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Director
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Audit
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Composition
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Development
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Management
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D. R. Beall
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S. J. Bilodeau
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D. Deb
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D. W. Decker
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F. C. Farrill
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B. S. Iyer
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J. W. Marren
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F. S. Mercer
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X
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J. L. Stead
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X
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G. Zocco
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The Audit Committee, among other things, reviews the
scope and effectiveness of audits of Conexant by its independent
public accountants and internal auditors; selects and recommends
the employment of independent public accountants for Conexant,
subject to approval of the shareowners; reviews the audit plans
of Conexants independent public accountants and internal
auditors; reviews and approves, in advance, the fees charged and
the scope and extent of any non-audit services performed by the
independent public accountants; establishes procedures for the
receipt, retention and treatment of anonymous and other
complaints regarding Conexants accounting or auditing
matters; reviews Conexants quarterly and annual financial
statements before their release; reviews and approves the
appointment or change of Conexants executive director of
internal audit; reviews the adequacy of Conexants system
of internal controls and recommendations of the independent
public accountants and of the internal auditors with respect
thereto; reviews and acts on comments and suggestions by the
independent public accountants and by the internal auditors with
respect to their audit activities; monitors compliance by
Conexants employees with its standard of business conduct
policies; meets with Conexants management to review any
issues related to matters within the scope of the Audit
Committees duties; and investigates any matter brought to
its attention within the scope of its duties. The Audit
Committee acts pursuant to a written charter. In the opinion of
the Conexant board of directors, all current members of the
Audit Committee are independent directors. The Audit Committee
met 12 times during the 2005 fiscal year.
The principal functions of the Governance and Board
Composition Committee are to develop and review at least
annually Conexants governance guidelines; to develop an
annual self-evaluation process for the board and its committees
and oversee the annual self-evaluations; to review the
boards committee structure and recommend to the board for
its approval the directors to serve as members of each
committee; to consider and recommend to the board of directors
qualified candidates for election as directors of Conexant; to
lead the search for qualified candidates who may be submitted by
directors, officer, employees, shareowners and others; and
periodically to
4
prepare and submit to the board of directors for adoption the
committees selection criteria for director nominees. The
Governance and Board Composition Committee acts pursuant to a
written charter.
Under the Governance and Board Composition Committees
current board selection criteria (included in the Companys
Guidelines on Corporate Governance and posted on Conexants
website at www.conexant.com/ir/corp_corp_gov.html), director
candidates are selected with a view to bringing to the board a
variety of experience and backgrounds. Directors should have
high level managerial experience in a relatively complex
organization or be accustomed to dealing with complex problems.
The committee seeks candidates of the highest character and
integrity, and who have experience at or demonstrated
understanding of strategy/policy setting and a reputation for
working constructively with others. In addition, candidates
should have sufficient time available to devote to Conexant in
order to carry out their duties as directors. In fulfilling its
responsibility to lead the search for qualified director
candidates, the committee consults with other directors, as well
as the chief executive officer and other senior executives of
Conexant. The committee may also from time to time retain third
party search firms to assist in identifying candidates. The
committee will consider director candidates recommended by
Conexant shareowners pursuant to the procedures described in
Shareowner Proposals or Nominations. In the opinion
of the Conexant board of directors, all current members of the
Governance and Board Composition Committee are independent
directors. The Governance and Board Composition Committee met
once during the 2005 fiscal year.
The principal functions of the Compensation and Management
Development Committee, or the Compensation Committee, are to
recommend compensation and benefits for non-employee directors;
to review and approve on an annual basis the corporate goals and
objectives with respect to compensation for the chief executive
officer; to determine the salaries of all executive officers and
review annually the salary plan for other executives in general
management positions; to review Conexants base pay,
incentive compensation, deferred compensation and all
stock-based plans; to review the performance of Conexants
chief executive officer and oversee the development of executive
succession plans; and to prepare and publish an annual executive
compensation report. The members of the Compensation Committee
are ineligible to participate in any of the plans or programs
administered by the Compensation Committee, except the Conexant
Directors Stock Plan. In the opinion of the Conexant board of
directors, all current members of the Compensation Committee are
independent directors. The Compensation Committee met 5 times
during the 2005 fiscal year and acted by unanimous written
consent 4 times.
The principal functions of the Investment Management
Committee are the review of the Companys investments,
equity and debt positions and working with management to develop
a strategy for the liquidation of certain investments and
repayment of the Companys convertible notes. The
Investment Management Committee met once during the 2005 fiscal
year.
The Conexant Board of Directors held 9 meetings and acted by
unanimous written consent 4 times during the 2005 fiscal year.
Each director is expected to attend each meeting of the board
and those committees on which he serves. No director attended
less than 75% of all the meetings of the board and those
committees on which he served in the 2005 fiscal year. In
addition, Conexants independent directors held 2 meetings
during the 2005 fiscal year. Directors are expected to attend
Conexants annual meetings of shareowners. All currently
serving directors, who were members of the board of directors as
of the time of the 2005 Annual Meeting of Shareowners (other
than Dipanjan Deb and John W. Marren) attended that meeting,
held on February 23, 2005. The board of directors has
implemented a process for shareowners of Conexant to send
communications to the board. Any shareowner desiring to
communicate with the board, or with specific individual
directors, may do so by writing to the Secretary of Conexant,
who has been instructed by the board to forward promptly all
such communications to the addressees indicated thereon.
Directors
Compensation
During fiscal 2005, non-employee directors of Conexant received
a base retainer at the rate of $30,000 per year for board
service. They received an additional retainer for service on
committees of the board as follows: an annual fee of $5,000 for
service as a committee chairman, except that the chairman of the
Audit Committee received an annual fee of $10,000, and an annual
fee of $2,500 for service as a member of a committee. In
addition, each non-employee director received $1,500 per
day for each board meeting attended in person and $750 per
day for each board meeting attended by telephone. On dates when
there was no regularly scheduled board meeting, each non-
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employee director received $1,000 for each committee meeting
attended either in person or by telephone. The Conexant
Directors Stock Plan provides that upon initial election to the
board, each non-employee director will be granted an option to
purchase 40,000 shares of Conexant Common Stock at an
exercise price per share equal to the fair market value of
Conexant Common Stock on the date of grant. Such stock options
become exercisable in four equal installments on each of the
first, second, third and fourth anniversaries of the date the
options are granted. In addition, following completion of
6 months of service on the board, each non-employee
director is eligible to receive an option to purchase
10,000 shares following the Conexant Annual Meeting of
Shareowners and an option to purchase an additional
10,000 shares approximately 6 months from that date.
Immediately following the 2005 Annual Meeting of Shareowners on
February 23, 2005 and again in August 2005, each
non-employee director received options to purchase
10,000 shares of Conexant Common Stock. Until November
2005, all of the cash and equity compensation to which
Mr. Marren was entitled was paid directly to TPG GenPar
L.P., a unit of Texas Pacific Group.
Effective December 30, 2004, Dr. Ralph J. Cicerone
resigned from the board in preparation for his assuming the
Presidency of the National Academy of Sciences, which does not
permit its president to serve on corporate boards. In
recognition of Dr. Cicerones contribution to the
Company and service on the Board of Directors, the Compensation
Committee amended the terms and conditions of
Dr. Cicerones stock options grants such that his
stock options will be treated as if he were retiring at
age 55 and after 5 years of service; i.e., upon
his leaving the board all his outstanding options became
exercisable and he has the lesser of 5 years or the
remaining life of the options in which to exercise them.
None of the non-employee directors was eligible to participate
in the Companys Exchange Offer, described below under the
caption Long-Term Incentive Compensation in the
report of the Compensation Committee on Executive Compensation.
Under the terms of Conexants directors deferred
compensation plan, a director may elect to defer all or part of
the cash payment of retainer fees until such time as shall be
specified with interest on deferred amounts accruing quarterly
at 120% of the Federal long-term rate set each month by the
Secretary of the Treasury. Each director also has the
alternative each year to determine whether to defer all or any
portion of the cash retainer by electing to receive shares or
restricted shares valued at the closing price of Conexant Common
Stock on the Nasdaq National Market System on the date each
retainer payment would otherwise be made in cash.
Report of
the Audit Committee
The Audit Committee has furnished the following report on Audit
Committee matters:
The Audit Committee acts pursuant to a written charter that was
adopted by the board of directors on November 30, 1998 and
amended and restated most recently on February 25, 2004.
The Audit Committee reviews the charter annually and revises it
as appropriate; a copy of the charter is available on the
Companys website at www.conexant.com. The Audit Committee
consists entirely of independent directors, and its Chairman,
D. Scott Mercer, is an audit committee financial
expert.
The Audit Committee reviewed and discussed with Conexants
management and Deloitte & Touche LLP, the
Companys independent auditors, the audited consolidated
financial statements of Conexant for the fiscal year 2005. The
Audit Committee also discussed with Deloitte & Touche
LLP the matters required to be discussed pursuant to the
Statement on Auditing Standards No. 61 (Communication with
Audit Committees) and Securities and Exchange Commission
Regulation S-X
Rule 2-07.
The Audit Committee also reviewed written disclosures and the
letter from Deloitte & Touche LLP required by
Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and discussed with
Deloitte & Touche LLP its independence from Conexant
and considered whether the provision of non-audit services by
Deloitte & Touche LLP is compatible with maintaining
the independence of that firm.
The Audit Committee also discussed with the Companys
internal and independent auditors their evaluations of the
Companys internal accounting controls and the overall
quality of the Companys financial reporting.
6
Based on the reviews and discussions referred to above, the
Audit Committee approved the inclusion of the audited financial
statements for fiscal year 2005 in Conexants Annual Report
on Form 10-K filed
with the Securities and Exchange Commission. The Audit Committee
also selected, subject to shareholder ratification,
Deloitte & Touche LLP as the Companys independent
auditors for fiscal year 2006.
Audit Committee
D. Scott Mercer, Chairman
Steven J. Bilodeau
John W. Marren
Report of
the Compensation and Management Development Committee on
Executive Compensation
The Compensation and Management Development Committee
(Committee) consists entirely of independent directors and is
responsible for determining all components of the compensation
to be paid to the Chief Executive Officer and each of the
Companys other named executive officers, as well as
administering the Companys stock plans (including
reviewing and approving equity grants to executive officers).
The Committee approves and evaluates the Companys
compensation and polices applicable to the executive officers
and also periodically reviews the compensation of other senior
executives who have significant managerial responsibility. The
Committee has provided the following report on executive
compensation.
Compensation
Philosophy and Objectives
The Committee believes that executive compensation should be
based on a
pay-for-performance
philosophy and strongly linked to individual performance,
Company financial and business performance and increases in
shareowner value. Its compensation objectives are to provide a
compensation package that allows Conexant to attract and retain
key managerial talent, has variable pay opportunities linked to
short-term Company performance and has equity compensation
opportunities linked to longer-term increases in shareowner
value. The key components of executive compensation are: base
salary; a short-term incentive opportunity (annual bonus plan);
and long-term stock-based incentives.
Compensation levels for executives are established based on
comparisons to executive compensation of
U.S.-based
semiconductor and other high technology companies which are
considered generally comparable to Conexant. While there is no
specific formula that is used to establish executive
compensation, the Committee considers the total compensation
(earned or potentially available) of the executive officers in
establishing each component of compensation. In its review, the
Committee primarily relies on the following: (1) industry,
peer group and national surveys; (2) reports of independent
compensation consultants who may from time to time advise the
Committee; and (3) performance judgments as to the past and
expected future contributions of individual executives.
Based on the Committees assessment of the compensation of
comparable executives in similar companies, the Committee
establishes base salaries, short-term annual incentives and
long-term incentives. For each comparable job, each component of
compensation (base salary, short-term annual incentive and
long-term incentives) is generally targeted to be near the
median of the competitive data. However, the Committee uses its
discretion to set any one or more of the components of
compensation at levels higher or lower than the median depending
on an individuals role, responsibilities, and performance
and with regard to internal equity within the Company.
The total executive compensation package of base salary,
short-term incentives and long-term incentives is linked to
pay-for-performance
and is intended to vary with individual performance, Company
financial and business performance and Conexant stock
performance. If short-term Company performance and long-term
Conexant stock performance are better or worse than expected,
executives can earn materially more or less than originally
targeted. The Committee believes that this type of
performance-based compensation is appropriate for the
Companys business and industry.
Conexant also offers its executives a few perquisites, such as
financial planning and tax preparation services, physicals and
health club memberships. The Company also has an executive
compensation deferral plan which allows executive officers,
directors and certain other executives to defer their base
salary and bonuses to future
7
dates. This compensation deferral plan also allows certain
executives to obtain the 401(k) Company match beyond the
IRS-prescribed contribution limits of the Companys
qualified 401(k) plan. The costs associated with these
additional compensation items are disclosed in the Summary
Compensation Table and related footnotes.
Short-term
Incentive Compensation
Conexants short-term incentive program (annual bonus plan)
is based on Company performance as measured against the
performance criteria adopted by the Committee for each
particular fiscal year. The performance criteria typically
include one or more of the following: revenue growth,
operational profitability, and attainment of strategic business
development goals. Achievement of the pre-established
performance criteria is the main determinant of whether or not
there will be an incentive pool (i.e., an amount
available for payments under the annual bonus plan) for the
fiscal year. Each executive officer is eligible to receive an
annual bonus award based upon the executives bonus target
and the size of the incentive pool that the Committee approves
for the payment of bonuses for fiscal year performance. At the
end of the fiscal year, the Committee, in its sole discretion,
may increase or decrease the size of the incentive pool from
that determined solely by reference to the pre-established
performance criteria. In exercising its discretion to determine
the incentive pool amount, if any, the Committee will consider
all then existing circumstances that it deems relevant,
including, for example, the achievement of performance criteria,
market conditions, forecasts, and anticipated expenses to be
incurred or payable during the fiscal year. If Conexant meets or
exceeds the applicable performance criteria, amounts paid under
the annual bonus plan may exceed target levels. Similarly, if
the performance criteria are not achieved, bonus amounts may be
less than the target levels or potentially zero. The actual
payout of an award may be further adjusted by the Committee to
reflect individual performance. The annual bonus plan is
generally cash based, but has on occasion been designed using
restricted stock and performance share awards that vested upon
achievement of operational and financial targets.
For fiscal 2005, Conexant adopted an annual incentive
compensation plan based on financial performance as measured by
core operating income. Subsequent to fiscal year 2005, based on
fiscal 2005 performance, the Committee determined that no
bonuses would be paid out of this plan.
For fiscal 2004, Conexant had two separate short-term incentive
plans in place:
|
|
|
|
|
an incentive plan for Conexant employees which covered the
5-month period prior to
the merger with GlobespanVirata; and
|
|
|
|
a company-wide post-merger incentive plan applicable to all
employees of the newly combined company for the remaining
7 months of fiscal 2004.
|
Both plans were based on financial performance as measured by
pro-forma operating income as well as other financial criteria.
Based on the post-merger Company performance, no bonus was paid
under the company-wide post-merger incentive plan. However, for
Conexant employees and executives who were eligible for the
5-month pre-merger
incentive plan, a pro-rata bonus was paid for achievement of
Conexant performance against the goals. In fiscal 2004, that
short-term pre-merger incentive plan for legacy-Conexant
employees generated a bonus which was approximately 21% of an
employees target level of annual incentive compensation.
For fiscal 2003, the Committee adopted an annual bonus plan
based on financial performance as measured by pro-forma
operating income for the Companys Broadband Communications
business. In 2003, that plan generated a bonus which was
approximately 17% of an employees target level of annual
incentive compensation.
For fiscal 2002, Conexant granted performance share awards that
entitled the recipient to receive shares of Conexant common
stock or cash, based on the value of Conexant common stock on
the date the performance share award vested. At the time the
performance share awards were granted, the Committee established
vesting criteria based upon the achievement of financial
performance criteria for fiscal years 2002 and 2003 by certain
specified dates. To the extent that the financial performance
criteria were not met by the specified dates, the relevant
performance share awards would not vest and would terminate. In
February 2003 and February 2004, the portion of the performance
share award that was based on achievement of fiscal performance
criteria related to fiscal years 2002 and 2003, respectively,
vested. On average, that plan generated a bonus which was
approximately 38% of an employees target level of annual
incentive compensation.
8
Additionally, on occasion the Committee has made special cash
bonus awards outside of the annual bonus plan. In fiscal 2005,
the Committee awarded Lewis Brewster $75,000 for his work on the
Companys gross margin improvement initiative. In fiscal
2004, upon completion of the Merger on February 27, 2004,
the Committee awarded each of Messrs. Decker, Rhodes,
Brewster and Blouin a special cash bonus in recognition of their
contributions in completing the Companys focused business
creation strategy and during the Merger process.
Long-term
Incentive Compensation
Conexant has a long-term incentive program that provides a
direct link to the interests of shareowners by providing an
incentive to maximize shareowner value. Annual long-term
incentive grants for executives and employees are a key element
of market-competitive compensation in our industry.
Conexants long-term incentive compensation is delivered
through the grant of stock options (and in some cases, shares of
restricted stock) to executives and most employees under the
1999 Long-Term Incentives Plan and the 2000 Non-Qualified Stock
Plan.
Stock options aid in the attraction and retention of employees
and align the interests of employees with those of the
shareowners. Stock options have value for an employee only if
the price of Conexant common stock increases and the employee
remains employed by Conexant for the period required for the
stock options to vest and become exercisable (typically four
years), thus providing an incentive to remain employed at
Conexant.
As with all the components of executive compensation, the
Committee determines all material aspects of the long-term
incentive awards who receives an award, the
amount of the award, the grant price of the award, the timing of
the awards as well as any other aspect of the award they may
deem material. When making its decisions regarding long-term
incentives, the Committee considers many factors. In addition to
competitive market data, it considers the number of shares of
Conexant common stock outstanding, the amount of equity
incentives currently outstanding and the number of shares
available for future grant under the stock plans. Furthermore,
individual executive stock option awards may be based on many
individual factors such as relative job scope and contributions
made during the prior year and the number of shares held by the
executive.
In fiscal 2005, Conexant did not make a broad-based stock option
grant other than the replacement option grants made in
connection with the stock option Exchange Offer discussed below.
The decline of the Companys common stock price during 2004
strongly undercut the Board of Directors desire to provide
Conexant employees with the opportunity to participate in its
long-term growth through its stock option programs. In order to
increase the retention value of the Companys stock option
programs, the Board approved an exchange offer pursuant to which
all employees with stock option grants having an exercise price
of $5 or above could exchange them for new stock options to be
granted in the future (the Exchange Offer). Under
the terms of the Exchange Offer, which commenced on
November 12, 2004, eligible employees who chose to
participate had their tendered stock options cancelled on
December 13, 2004 and, on June 14, 2005 they received
one new option as a replacement for each option cancelled. Those
replacement options had an exercise price of
$1.49 per share (the fair market value of Conexant common
stock on the date of grant). Depending on whether the cancelled
options were granted before, on or after December 31, 2002
or whether the eligible employee was a senior executive of the
Company, the replacement options either (i) vest in three
equal installments on the first, second and third anniversaries
of the grant date or (ii) vest 50% on the first anniversary
of the grant date and 25% on each of the second and third
anniversaries of the grant date. In addition, if an employee is
involuntarily terminated without cause within one year following
the replacement option grant date, then 50% of the shares
subject to the replacement option will vest immediately as of
the date of termination.
On December 13, 2004, the Company accepted and cancelled
all options properly tendered in the Exchange Offer. Pursuant to
the Exchange Offer, all of the executive officers exchanged all
of their eligible options with exercise prices of $5 or above.
Accordingly, on June 14, 2005 each executive officer
received his replacement options with an exercise price of
$1.49 per share, and which vest and become exercisable in
three equal installments over three years.
For fiscal years 2004 and before, long-term incentive awards
were typically made on an annual basis. However, on occasion the
incentive awards were delivered in two phases in an effort to
minimize the market risk associated
9
with making an annual award on a single date and to increase
their retention value by spreading out the vesting events over
time.
In addition to encouraging stock ownership by granting stock
options and restricted stock, Conexant further provides all of
its employees (including executive officers) the opportunity to
own Conexant common stock through Conexants Employee Stock
Purchase Plans, or the ESPPs. The ESPPs allow participants to
buy Conexant common stock at a 15% discount to the market price
with up to 15% of their salary and bonuses (subject to certain
legal and other limitations).
Chief
Executive Officer Compensation
Fiscal year 2005 was a transition year for Conexant. On
November 9, 2004, Armando Geday resigned as chief executive
officer of the Company and on November 12, 2004 he resigned
from the Board of Directors. On June 30, 2005 his
employment with the Company ended. Substantially all of
Mr. Gedays fiscal 2005 compensation was paid pursuant
to the terms of his separation agreement with the Company. A
description of his separation agreement is included under the
caption Certain Relationships and Related
Transactions Executive Officer Employment
Agreements of the Proxy Statement and the separation
payment details can be found in a footnote to the Summary
Compensation Table.
On November 9, 2004, coincident with Mr. Gedays
resignation, at the request of the Board of Directors, Dwight W.
Decker reassumed the position of chief executive officer, a
position he previously held from the spin-off of Conexant from
Rockwell International Corporation in 1999 through the
completion of the Merger on February 27, 2004.
Mr. Deckers compensation for fiscal year 2005 is
discussed below. A description of Mr. Deckers
employment contract can be found under the caption Certain
Relationships and Related
Transactions Executive Officer Employment
Agreements of the Proxy Statement.
Upon completion of the Merger on February 27, 2004,
although Mr. Decker relinquished the role of chief
executive officer of Conexant to Mr. Geday, at the request
of the Board, he remained an employee of Conexant and became the
non-executive chairman of the board. On November 9, 2004,
at the request of the board, Mr. Decker resumed the
position of chief executive officer while continuing in his
position as chairman of the board. Since June 28, 2003
Mr. Deckers base salary has remained at $575,000 and
he is eligible for an annual performance bonus as determined by
the Committee. In early 2005, based on Conexant performance
under the 2004 pre-merger incentive plan for Conexant employees,
Mr. Decker was paid a bonus of $150,661. This amount was
approximately 21% of his annual incentive compensation target,
comparable to the percentage for other employees and executives
receiving payment under the pre-merger incentive plan for
Conexant employees.
Also in 2005, as an inducement to resume the chief executive
officer position, Mr. Decker was granted a performance
share award covering 275,000 shares of Conexant common
stock. This performance share award was made in lieu of a cash
bonus for fiscal year 2005. The performance share award, which
was provided for in Mr. Deckers amended employment
agreement entered into with the Company on March 10, 2005,
was subject to vest and be payable only to the extent that the
performance goals established and measured by the Committee were
achieved. Subsequent to fiscal year 2005, the Committee
determined that, based upon its assessment of
Mr. Deckers 2005 performance, the performance share
award would vest as of November 2, 2005 and that the award
would be paid in the form of shares of Company common stock (net
of applicable taxes). In making its determination, the Committee
considered a number of factors in assessing
Mr. Deckers performance, including, but not limited
to, achievement and progress in the areas of strategic planning,
financial results, reducing operating expenses, leadership and
investor relations. Mr. Decker was also recognized for
stabilizing the business during its turnaround by consistently
meeting the Companys quarterly revenue targets for fiscal
year 2005, improving margins and making major progress against
key Company goals.
On June 14, 2005, pursuant to the terms of the Exchange
Offer (described above), all eligible employees and executives
received replacement options with an exercise price of
$1.49 per share. Mr. Decker received 473,343
replacement options which will vest in three equal installments
over three years. Additionally, pursuant to the terms of the
employment agreement with Mr. Decker on July 1, 2005,
Mr. Decker was granted 300,000 options, which were to vest
and become exercisable in two equal installments on
November 8, 2005 and November 8, 2006.
10
In fiscal 2005, Mr. Decker also received executive
perquisites as described in the Summary Compensation Table.
Compliance
with Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as
amended, places a limit of $1,000,000 on the amount of
compensation that may be deducted by Conexant in any year with
respect to each of Conexants named executive officers.
Certain performance-based compensation that has been approved by
shareowners is not subject to the deduction limit. The 1999
Long-Term Incentives Plan is qualified so that awards under the
plan constitute performance-based compensation not subject to
the deduction limit under section 162(m). Since the
Committee retains discretion with respect to base salaries and
certain other compensation awards, those elements would not
qualify as performance based compensation for
section 162(m) purposes. It is the Committees
objective that, so long as it is consistent with its overall
business, compensation and retention objectives, Conexant will,
to the extent reasonable, endeavor to keep executive
compensation deductible by Conexant for federal income tax
purposes.
Compensation and Management Development Committee
Jerre L. Stead, Chairman
Donald R. Beall
Dipanjan Deb
John W. Marren
11
Equity
Compensation Plan Information
The following table provides information as of
September 30, 2005 about shares of the Companys
Common Stock that may be issued upon the exercise of options,
warrants and rights granted to employees, consultants or
directors under all of the Companys existing equity
compensation plans, including the Companys 1998 Stock
Option Plan, 1999 Long-Term Incentives Plan, 2000 Non-Qualified
Stock Plan, Directors Stock Plan, Amended and Restated 2001
Employee Stock Purchase Plan, 1999 Non-Qualified Employee Stock
Purchase Plan, 2001 Performance Share Plan, and 2004 New-Hire
Equity Incentive Plan, as well as the GlobespanVirata 1999
Equity Incentive Plan, 1999 Supplemental Stock Options Plan, and
Amended and Restated 1999 Stock Incentive Plan assumed in the
Merger (collectively, the Equity Compensation
Plans). The table does not include information with
respect to shares subject to outstanding options granted under
equity compensation plans assumed by the Company in connection
with other mergers and acquisitions of the companies which
originally granted those options. Footnote (6) to the table
sets forth the total number of shares of the Companys
common stock issuable upon exercise of those assumed options as
of September 30, 2005 and the weighted average exercise
price of those options. No additional options may be granted
under these assumed plans.
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Number of Securities
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|
|
Number of Securities to
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Weighted Average Exercise
|
|
|
Remaining
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|
be Issued upon Exercise
|
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Price of Outstanding
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Available for Future Issuance
|
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|
|
of Outstanding Options,
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|
|
Options, Warrants and
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|
under Equity Compensation
|
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|
|
Warrants and Rights
|
|
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Rights
|
|
|
Plans
|
|
|
Equity compensation plans
approved by shareowners
|
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|
|
|
|
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|
|
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|
Stock plans
|
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|
38,350,432
|
|
|
$
|
3.44
|
|
|
|
29,943,095
|
(1)
|
Employee Stock Purchase Plan
(domestic)
|
|
|
|
|
|
|
|
|
|
|
5,085,522
|
(2)
|
Directors Stock Plan
|
|
|
1,405,857
|
|
|
$
|
3.19
|
|
|
|
275,715
|
(3)
|
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|
|
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Total
|
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39,756,289
|
|
|
|
|
|
|
|
35,304,332
|
|
Equity compensation plans not
approved by shareowners
|
|
|
|
|
|
|
|
|
|
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|
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Stock plans
|
|
|
66,987,227
|
|
|
$
|
2.21
|
|
|
|
10,460,275
|
|
2004 New-Hire Equity Incentive Plan
|
|
|
1,340,782
|
|
|
$
|
7.42
|
|
|
|
16,285,968
|
|
Employee Stock Purchase Plan
(international)
|
|
|
|
|
|
|
|
|
|
|
739,465
|
(4)
|
Performance Share Plan
|
|
|
275,000
|
|
|
|
|
|
|
|
3,167,196
|
(5)
|
|
|
|
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|
|
|
|
|
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Total
|
|
|
68,603,009
|
(6)(7)
|
|
|
|
|
|
|
30,652,904
|
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Grand Total
|
|
|
108,359,298
|
|
|
|
|
|
|
|
65,957,236
|
|
|
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(1) |
|
Includes shares of Conexant common stock issuable upon exercise
of outstanding options under the GlobespanVirata 1999 Equity
Incentive Plan, 1999 Supplemental Stock Option Plan and Amended
and Restated 1999 Stock Incentive Plan assumed by Conexant in
connection with the Merger. |
|
(2) |
|
Includes shares of Conexant common stock subject to purchase
rights accruing under the Amended and Restated 2001 Employee
Stock Purchase Plan. The Amended and Restated 2001 Employee
Stock Purchase Plan provides that the maximum authorized shares
thereunder will be automatically increased by an additional
2,500,000 shares, or such lesser number as the Board may
determine, on October 1 of each year commencing with
October 1, 2003 and ending on October 1, 2012, for a
maximum increase of 25,000,000 additional shares. |
|
(3) |
|
Effective on October 1, 2004, the maximum number of shares
issuable under the Directors Stock Plan was automatically
increased by 351,192 shares. The Directors Stock Plan, as
amended effective February 27, 2004, provides that the
maximum number of shares under the Directors Stock Plan is
automatically increased on the first day of each fiscal year by
an additional amount equal to the greater of 250,000 shares
or 0.075% of the shares of Conexant common stock outstanding on
that date, subject to the Board of Directors being authorized
and empowered to select the smaller amount. |
|
(4) |
|
Includes shares of Conexant common stock subject to purchase
rights accruing under the 1999 Non-Qualified Employee Stock
Purchase Plan. |
12
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|
|
(5) |
|
Under the 2001 Performance Share Plan, the performance share
awards may be paid in shares of Conexant common stock, cash or
both. See Equity Compensation Plans Not
Approved by Stockholders 2001 Performance Share
Plan below. |
|
(6) |
|
The table does not include information for certain equity
compensation plans assumed by Conexant in connection with
mergers and acquisitions of the companies which originally
established those plans. As of September 30, 2005, a total
of 3,110,918 shares of Conexant common stock were issuable
upon exercise of outstanding options under those assumed plans
and the weighted average exercise price of those outstanding
options was $5.70 per share. No additional options may be
granted under those assumed plans. |
|
(7) |
|
Pursuant to the Companys Exchange Offer, on
December 13, 2004 options to purchase an aggregate of
32,692,663 shares of Conexant common stock were tendered
for exchange to the Company and were cancelled. On June 14,
2005, eligible employees who tendered options for exchange
received an equivalent number of replacement options under the
Companys 2000 Non-Qualified Stock Plan. |
Equity
Compensation Plans Not Approved by Shareowners
1999
Non-Qualified Employee Stock Purchase Plan
The Companys 1999 Non-Qualified Employee Stock Purchase
Plan (the Non-Qualified ESPP) was adopted by the
Board of Directors on May 14, 1999 and was subsequently
amended on August 13, 1999, July 18, 2002,
July 22, 2004 and November 2, 2005. The Non-Qualified
ESPP has not been approved by the Companys shareowners.
Employees of the Companys subsidiaries located in certain
countries outside the U.S. who are not officers or
directors of the Company may be eligible to participate in the
Non-Qualified ESPP. As of September 30, 2005, the Board of
Directors reserved 2,400,000 shares of the Companys
common stock for issuance under the Non-Qualified ESPP, subject
to adjustment under certain circumstances. On November 2,
2005, the Non-Qualified ESPP was amended to increase by
1,500,000 the number of shares reserved for issuance under the
plan.
The Non-Qualified ESPP permits eligible employees to purchase
shares of the Companys common stock at the end of each
offering period at 85% of the lower of the fair market value of
the Companys common stock on the first trading day of the
offering period or on the last trading day of the offering
period. Under the plan, employees may authorize the Company to
withhold up to 15% of their compensation for each pay period to
purchase shares under the plan, subject to certain limitations.
Offering periods generally commence on the first trading day of
February and August of each year and are generally six months in
duration, but may be terminated earlier under certain
circumstances. As of September 30, 2005, an aggregate of
739,465 shares of the Companys common stock were
available for future purchases under the Non-Qualified ESPP.
2000
Non-Qualified Stock Plan
The Companys 2000 Non-Qualified Stock Plan (the 2000
Plan) was adopted by the Board of Directors on
November 5, 1999 and was most recently amended on
February 26, 2003. The 2000 Plan has not been approved by
the Companys shareowners. The 2000 Plan authorizes grants
of non-qualified stock options and restricted stock. An
aggregate of 47,500,000 shares of the Companys common
stock are authorized for issuance or delivery under the 2000
Plan, provided that no more than 3,000,000 shares will be
available for grants of restricted stock, in each case, subject
to adjustment under certain circumstances.
Restricted stock may be granted only to employees, including
officers and directors who are employees, of the Company. Stock
options granted under the 2000 Plan will have an exercise price
per share equal to the fair market value per share of the
Companys common stock at the date of grant. Generally,
each option will vest in installments over a four year period,
with 25% of the shares becoming exercisable each year on the
anniversary of the date of grant. In connection with the
Companys Exchange Offer, replacement options granted on
June 14, 2005 under the 2000 Plan vest in installments over
a three-year period as described under the captions
Long-Term Incentive Compensation in the report of
the Compensation Committee. Stock options granted under the 2000
Plan may not be exercised after eight years from the date of
grant. As of September 30, 2005, an aggregate of
10,460,275 shares were available for future grants under
the 2000 Plan.
13
At the time of the Merger, Conexant shareowners approved the
assumption and adoption by Conexant of GlobespanViratas
1999 Equity Incentive Plan, 1999 Supplemental Stock Option Plan
and Amended and Restated 1999 Stock Incentive Plan, referred to
collectively as the GlobespanVirata stock plans. Additionally,
shareowners approved Conexants use of the shares remaining
available for grant under the GlobespanVirata stock plans at the
time of the Merger, as well as any additional shares that may
become available for grant under the GlobespanVirata stock plans
as a result of cancellations, forfeitures, lapses or other
terminations of outstanding awards (in each case after
adjustment to reflect the merger exchange ratio), for grant of
awards by Conexant after the Merger under the GlobespanVirata
stock plans or under Conexants stock plans, including
Conexants 1999 LTIP and the 2000 Plan. As of
September 30, 2005, a total of 24,287,317 shares were
available for issuance under these plans, which are included on
the Equity compensation plans approved by
shareowners section of the Equity Compensation Plan table.
2001
Performance Share Plan
The Companys 2001 Performance Share Plan (the
Performance Share Plan) was adopted by the Board of
Directors on November 2, 2001. The Performance Share Plan
has not been approved by the Companys shareowners. An
aggregate of 4,000,000 shares of the Companys common
stock are authorized for grants of performance share awards
under the Performance Share Plan, subject to adjustment under
certain circumstances.
The Performance Share Plan permits eligible employees to receive
grants of performance share awards which vest based on
performance criteria and continued employment with the Company
from the grant date through the time of vesting. The value of
the performance share award will equal the fair market value of
the Companys common stock. Employees whose performance
share awards vest are entitled to receive a payment in the form
of shares of the Companys common stock, cash or both. As
of September 30, 2005, an aggregate of
3,167,196 shares of the Companys common stock were
available for future grants under the Performance Share Plan.
2004
New-Hire Incentive Plan
The Companys 2004 New-Hire Incentive Plan (the
New-Hire Plan) was adopted by the Board of Directors
on February 6, 2004. The New-Hire Plan has not been
approved by the Companys shareowners. An aggregate of
12,000,000 shares of the Companys common stock were
authorized for grants of stock or stock options under the
New-Hire Plan, subject to adjustment under certain
circumstances. The New-Hire Plan has an evergreen feature so
that at the start of each new fiscal year of the Company the
number of shares authorized for grants is adjusted to add as
many shares as needed to bring the aggregate available shares up
to 10,000,000.
The New-Hire Plan permits the Company to make grants of equity
compensation to new employees in a merger or acquisition or to
persons not previously a director of or employed by the Company,
or following a bona fide period of non-employment by the
Company, if the equity grant is a material inducement in the
persons entering into employment with the Company. As of
September 30, 2005, an aggregate of 16,285,968 shares
of the Companys Common Stock were available for future
grants under the New Hire Plan, which number of shares includes
additional shares that may have become available for grant as a
result of cancellations, forfeitures, lapses or other
terminations of outstanding awards.
14
Shareowner
Return Performance Graph
Set forth below is a line graph comparing the cumulative total
shareowner return on Conexant common stock against the
cumulative total return of the Standard & Poors
500 Stock Index and the Nasdaq Electronic Components Index for
the period beginning October 1, 2000 and ending
September 30, 2005. The graph assumes that $100 was
invested on October 1, 2000, in each of Conexant common
stock, the Standard & Poors 500 Stock Index and
the Nasdaq Electronic Components Index at the respective closing
prices on October 1, 2000 and that all dividends were
reinvested. No cash dividends have been paid or declared on
Conexant common stock. For purposes of the graph, the 2002
distribution of the Skyworks Solutions, Inc. shares to holders
of Conexant common stock as part of the spin-off and merger of
Conexants wireless communication business with Alpha
Industries, Inc. to form Skyworks Solutions, Inc., and the
2003 Mindspeed Spin-Off are treated as non-taxable cash
dividends that were reinvested in additional shares of Conexant
common stock at the closing price on June 26, 2002 and
June 30, 2003, respectively.
COMPARISON OF
CUMULATIVE TOTAL RETURN 2000 - 2005
AMONG
CONEXANT SYSTEMS, INC., THE S&P 500 INDEX
AND THE NASDAQ ELECTRONIC COMPONENTS INDEX
(ASSUMING REINVESTMENT OF STOCK DIVIDENDS)
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* |
Includes the reinvestment of all dividends in Conexant common
stock, including the value of the dividends related to receipt
of 0.351 shares of Skyworks Solutions, Inc. common stock on
June 25, 2002 for each share of Conexant common stock held
and the receipt of 1 share of Mindspeed Technologies, Inc.
common stock on June 27, 2003 for every 3 shares of
Conexant common stock held.
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Cumulative Total
Return
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9/00
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9/01
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9/02
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9/03
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9/04
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9/05
|
CONEXANT SYSTEMS, INC.*
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$
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100.00
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$
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19.82
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$
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6.91
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$
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42.81
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$
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12.10
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$
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13.54
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S&P 500
|
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100.00
|
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73.38
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58.35
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72.58
|
|
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82.65
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|
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92.78
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|
NASDAQ ELECTRONIC COMPONENTS INDEX
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100.00
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36.20
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22.58
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44.45
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35.80
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42.83
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|
15
Executive
Compensation
The information shown below reflects the annual and long-term
compensation, from all sources, of the chief executive officers
of Conexant during fiscal 2005 and the other four most highly
compensated executive officers of Conexant at September 30,
2005 (the Named Executive Officers) for services
rendered in all capacities to Conexant for the fiscal years
ended September 30, 2003, 2004 and 2005.
Summary
Compensation Table
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Long-term Compensation
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Annual Compensation
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Awards
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Payouts
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Long-
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Restricted
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Stock
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term
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Name and Principal Position
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Fiscal
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Other Annual
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Stock
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Options
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Incentive
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All Other
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With Conexant
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Year
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Salary
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Bonus
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Compensation
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Awards
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(Shares)
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Payouts
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Compensation(1)
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Dwight W. Decker
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2005
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$
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575,000
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$
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150,661
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$
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23,525
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773,343
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(2)
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$
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23,044
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Chairman of the board
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2004
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663,462
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(3)
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1,112,431
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(4)
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54,167
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(5)
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125,000
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28,239
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and chief executive
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2003
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660,192
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50,929
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(6)
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21,180
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741,742
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29,946
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officer
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F. Matthew Rhodes
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2005
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450,000
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75,724
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13,784
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1,320,231
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(2)
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13,845
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President
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2004
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483,173
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(7)
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415,475
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(8)
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14,820
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800,000
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10,604
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2003
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389,904
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17,081
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(6)
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12,276
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696,696
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12,703
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Lewis C. Brewster
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2005
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416,250
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(9)
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127,823
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(10)
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14,268
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593,545
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(2)
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8,990
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Executive vice
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2004
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360,000
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246,025
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(11)
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12,875
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375,000
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14,400
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president and chief
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2003
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350,361
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(12)
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16,328
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(6)
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15,856
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396,696
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13,427
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operating officer
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J. Scott Blouin
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2005
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316,442
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(13)
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112,731
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(14)
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21,372
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992,380
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(2)
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8,399
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Senior vice president
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2004
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300,000
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206,645
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(15)
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15,041
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375,000
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and chief financial
|
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2003
|
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311,538
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15,069
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(6)
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13,167
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185,435
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officer
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Dennis E. OReilly
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2005
|
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325,000
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40,875
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22,813
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333,545
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(2)
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13,000
|
|
Senior vice president,
|
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2004
|
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325,000
|
|
|
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85,973
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(16)
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24,023
|
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265,000
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13,000
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chief legal officer
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2003
|
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312,500
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10,883
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(6)
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19,009
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148,348
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12,500
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and secretary
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Armando Geday(17)
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2005
|
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58,767
|
(18)
|
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2,555
|
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2,607,440
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(2)
|
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3,157,506
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(19)
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Chief executive officer
|
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2004
|
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|
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391,346
|
(20)
|
|
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|
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12,952
|
|
|
|
|
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1,050,000
|
|
|
|
|
|
|
|
|
|
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(1) |
|
Amounts contributed or accrued for the Named Executive Officers
under the Conexant savings plans and the related executive
deferral plan. |
|
(2) |
|
Represents stock options granted on June 14, 2005 to
Messrs. Decker, Rhodes, Brewster, Blouin, OReilly and
Geday for stock options tendered by each of them and
subsequently cancelled in Conexants offer to exchange
options with exercise prices of $5 or above for new options with
exercise prices equal to the fair market value of Conexant
Common Stock on that date and a three year (33% per year)
vesting schedule. Mr. Deckers 773,343 options include
a grant of non-qualified options to purchase 300,000 shares
made on July 1, 2005. |
|
(3) |
|
Includes $88,462 paid to Mr. Decker in lieu of vacation. |
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(4) |
|
Represents a $718,750 special bonus paid in connection with the
completion of the Merger, $136,165 paid as part of the fiscal
2003 bonus program and $257,516, which represents the fair
market value of performance share awards granted in fiscal 2002
that vested in fiscal 2004 based on Conexants business
performance for fiscal 2003. Mr. Decker received a portion
of his award in the form of 20,387 shares of Conexant
common stock. |
|
(5) |
|
Includes $33,554 for Conexant restricted stock that vested in
2004 which was originally received as a grant by Rockwell
International Corporation (now, Rockwell Automation, Inc.). |
|
(6) |
|
Represents the fair market value of performance share awards
granted in fiscal 2002 which vested in fiscal 2003 based on
Conexants business performance for fiscal 2002.
Mr. Decker chose to receive the value of his award in the
form of 10,124 shares of Conexant common stock. |
16
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|
|
(7) |
|
Includes $43,269 paid to Mr. Rhodes in lieu of vacation. |
|
(8) |
|
Represents a $300,000 special bonus paid in connection to the
completion of the Merger, $57,901 paid as part of the fiscal
2003 bonus program and $57,574, which represents the fair market
value of performance share awards granted in fiscal 2002 that
vested in fiscal 2004 based on Conexants business
performance for fiscal 2003. Mr. Rhodes received a portion
of his award in the form of 4,558 shares of Conexant Common
Stock. |
|
(9) |
|
Includes $56,250 paid to Mr. Brewster in lieu of vacation. |
|
(10) |
|
Includes a $75,000 special bonus paid for work related to
Conexants Gross Margin Improvement Program. Another
payment in the same amount will be made in January 2006. |
|
(11) |
|
Represents a $150,000 special bonus paid in connection to the
completion of the Merger, $38,770 paid as part of the fiscal
2003 bonus program and $55,035, which represents the fair market
value of performance share awards granted in fiscal 2002 that
vested in fiscal 2004 based on Conexants business
performance for fiscal 2003. Mr. Brewster received a
portion of his award in the form of 4,357 shares of
Conexant common stock and $2,220 in the form of a performance
award. |
|
(12) |
|
Includes $14,688 paid to Mr. Brewster in lieu of vacation. |
|
(13) |
|
Includes $16,442 paid to Mr. Blouin in lieu of vacation. |
|
(14) |
|
Includes a $75,000 special bonus paid to Mr. Blouin on the
first anniversary of the Merger, per his employment agreement. |
|
(15) |
|
Represents a $125,000 special bonus paid in connection to the
completion of the Merger, $30,842 paid as part of the fiscal
2003 bonus program and $50,803, which represents the fair market
value of performance share awards granted in fiscal 2002 that
vested in fiscal 2004 based on Conexants business
performance for fiscal 2003. Mr. Blouin received a portion
of his award in the form of 4,022 shares of Conexant common
stock. |
|
(16) |
|
Represents $30,938 paid as part of the fiscal year 2003 bonus
program and $55,035, which represents the fair market value of
performance share awards granted in fiscal 2002 that vested in
fiscal 2004 based on Conexants business performance in
fiscal 2003. Mr. OReilly received a portion of his
award in the form of 4,357 shares of Conexant common stock. |
|
(17) |
|
Mr. Geday served as chief executive officer of the Company
from February 27, 2004 through November 9, 2004. |
|
(18) |
|
Represents Mr. Gedays salary paid while active as
chief executive officer. |
|
(19) |
|
Represents payments Mr. Geday received under his separation
agreement dated December 13, 2004. See, Certain
Relationships and Related
Transactions Executive Officer Employment
Agreements. These payments are comprised of salary
continuation of $351,618 paid after his resignation as chief
executive officer on November 9, 2004 through June 30,
2005, and $21,960 in lieu of vacation and floating holidays, and
a cash severance payment of $2,758,767, which is comprised of a
special cash payment of $500,000, two-times his annual base and
target bonus, plus a pro-rata fiscal 2005 bonus award. In
addition, he received $10,000 for replacement of computer
equipment and $15,161 for continuation of benefits. |
|
(20) |
|
Includes $63,462 paid to Mr. Geday in lieu of vacation. |
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Change
of Control Employment Agreements
At the time of the Merger, Conexant entered into employment
agreements with certain key executives, including
Messrs. Decker, Rhodes, Brewster, Blouin, OReilly and
Geday. Except as noted below, each of the employment agreements
contains the following provisions. Each agreement sets forth the
individuals initial annual base salary and a formula for
determining the individuals annual target bonus for fiscal
2004. Each agreement provides that Conexants Board of
Directors or the Compensation Committee will (1) review the
individuals annual base salary at least annually and may
increase (but not decrease) the salary and (2) determine
the amount of the individuals annual target bonus for
fiscal years after fiscal 2004. If Conexant terminates an
individuals employment without cause or if the
individual resigns for good reason (as defined in
the employment agreements), Conexant will continue to provide
certain benefits to the executive for a specified period after
the termination, unless and until the executive receives similar
benefits from another employer. However,
17
Messrs. Brewster and OReilly do not have a good
reason clause in their employment agreements. Each
agreement also restricts the individual from competing with
Conexant or soliciting employees or customers of Conexant during
the employment period and for 12 months thereafter. Under
each agreement, the individual will generally be made whole for
any excise taxes imposed by the Internal Revenue Code on certain
change of control payments.
For the purposes of the employment agreements, a change of
control is defined generally as:
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|
|
the acquisition by any individual, entity or group of beneficial
ownership of 20% or more of either the then outstanding shares
of Conexant common stock or the combined voting power of the
then outstanding voting securities entitled to vote generally in
the election of directors;
|
|
|
|
a change in the composition of a majority of the Conexant board
of directors which is not supported by the current board of
directors;
|
|
|
|
a major corporate transaction, such as a reorganization, merger
or consolidation or sale or other disposition of all or
substantially all of Conexants assets, which results in a
change in the majority of the board of directors or of more than
60% of Conexants shareowners; or
|
|
|
|
approval by Conexants shareowners of the complete
liquidation or dissolution of Conexant.
|
Executive
Officer Employment Agreements
Dwight W. Decker. On March 10, 2005,
Mr. Decker and the Company entered into an Amended and
Restated Employment Agreement (the Agreement), which amended and
restated his Employment Agreement dated as of January 15,
2004 (the Prior Agreement), pursuant to which Mr. Decker
served as non-executive chairman of the board and an employee of
the Company from February 27, 2004. On November 9,
2004, at the request of the Board of Directors, Mr. Decker
resumed the position of chief executive officer while continuing
in his position as chairman of the board. The Agreement sets
forth the terms and conditions of Mr. Deckers
employment as chairman of the board and chief executive officer.
The Agreement also sets forth the terms and conditions of his
employment as non-executive chairman of the board following his
service as chief executive officer, if the Company and
Mr. Decker agree that he will continue as non-executive
chairman of the board; these terms and conditions are
substantially similar to the terms and conditions of the Prior
Agreement.
The Agreement, effective as of February 28, 2005, provides
that Mr. Decker will serve as chairman of the board and
chief executive officer of the Company until November 9,
2006. Following that date, the Agreement will be automatically
extended for additional one-year terms, unless either party
notifies the other that it no longer wishes the extensions to
continue. In exchange for his services, Mr. Decker will be
paid an initial annual base salary of $575,000 and will be
eligible for an annual performance bonus as determined by the
Board of Directors or the Compensation Committee. For fiscal
2005, in lieu of a cash bonus, Mr. Decker received a
performance share award pursuant to the Companys 2001
Performance Share Plan covering 275,000 shares of the
Companys common stock. On July 1, 2005,
Mr. Decker was granted options to purchase
300,000 shares of the Companys common stock, which
will become exercisable in two equal installments on
November 8, 2005 and November 8, 2006. All of his
outstanding unvested equity awards will continue to vest during
the employment term.
Under the Agreement, if the Company terminates
Mr. Deckers employment as chairman of the board and
chief executive officer without cause or if he
resigns as chairman of the board and chief executive officer for
good reason the Company will pay him a cash lump-sum
equal to the sum of (i) any unpaid base salary (and any
other unpaid amounts) accrued through his termination date,
(ii) a pro rata share of his target bonus for the fiscal
year in which his termination occurs, (iii) two times his
base salary, (iv) two times his annual target bonus, and
(v) $200,000. In addition, all of his options and shares of
restricted stock will become fully vested and Mr. Decker
may exercise all such options until the later of
(A) February 27, 2010 and (B) the second
anniversary of his termination date.
If Mr. Decker resigns from his position as chief executive
officer without good reason on or after
November 9, 2005, but continues to serve as non-executive
chairman of the board and an employee of the Company by mutual
agreement (the Chairmanship Only Resumption), his continued
service will be on terms
18
substantially similar to those contained in the Prior Agreement.
Upon a Chairmanship Only Resumption, Mr. Decker will serve
as non-executive chairman of the board for as long as he
continues as a director of the Company, but at least two years
and four months from the date of his resignation as chief
executive officer (i.e., the term remaining under the
Prior Agreement at the time Mr. Decker resumed the position
of chief executive officer). During the first four months
following a Chairmanship Only Resumption, Mr. Decker will
be paid his base salary in effect at the time of his resignation
as chief executive officer. For each of the two years of his
employment following this four month period, Mr. Decker
will be paid $100,000. For future periods, the Board of
Directors or the Compensation Committee will determine
Mr. Deckers annual base salary. During the period
following a Chairmanship Only Resumption, Mr. Decker will
be eligible for such annual performance bonuses, if any, as
determined by the Board of Directors or the Compensation
Committee. If during the first year following a Chairmanship
Only Resumption, the Company terminates Mr. Deckers
employment as non-executive chairman of the board without
cause or if he resigns for good reason,
he will be entitled to the separation benefits described in the
preceding paragraph, except that the certain payments will be
calculated using the base salary in effect at the time of his
resignation as chief executive officer and other payments will
be based on two times his annual target bonus. Following the
first year, if the Company terminates Mr. Deckers
employment without cause or if he resigns for
good reason, he will be entitled to lesser
separation benefits and the Company will also pay him, as part
of the cash lump-sum, any unpaid target bonus for the fiscal
year in which his termination occurs.
If Mr. Decker resigns from his positions as chairman of the
board and/or chief executive officer without good
reason on or after November 9, 2005 and does not
continue as non-executive chairman of the board or if
Mr. Decker resigns from his position as non-executive
chairman of the board without good reason after the
four-month anniversary of the Chairmanship Only Resumption, all
of his outstanding unvested equity awards will become fully
vested and Mr. Decker may exercise such awards for two
years following his resignation.
F. Matthew Rhodes. Mr. Rhodess
January 15, 2004 employment agreement as amended on
November 12, 2004, was effective February 27, 2004 and
provides that he will be employed as president of Conexant. The
agreement has an initial two-year term, which will be
automatically extended daily to provide for a rolling two-year
term, unless either party notifies the other that it no longer
wishes the extensions to continue. Mr. Rhodess
initial annual base salary was $450,000 and his initial annual
target bonus was 85% of his annual base salary. If Conexant
terminates Mr. Rhodes employment without
cause or if he resigns for good reason,
Conexant will pay him a cash sum of (i) any unpaid base
salary (and any other unpaid amounts) accrued through his
termination, (ii) a pro rata share of his target bonus for
the fiscal year in which his termination occurs, (iii) two
times his annual base salary, (iv) two times his target
bonus for the fiscal year in which his termination occurs, and
(v) $200,000. In addition, all of Mr. Rhodes
options and shares of restricted stock will become fully vested
and his options may be exercised for three years following his
termination.
Lewis C. Brewster. Mr. Brewsters
February 27, 2004 employment agreement was effective on
that date and provides that he will serve as executive vice
president, sales, operations and quality of Conexant. In
November 2004, he was promoted to executive vice president and
chief operating officer. His agreement has an initial two-year
term and thereafter will be automatically extended for
additional one-year terms, unless either party notifies the
other that it no longer wishes the extensions to continue.
Mr. Brewsters initial annual base salary was $360,000
and his initial annual target bonus was 70% of his annual base
salary. If Conexant terminates Mr. Brewsters
employment without cause, Conexant will
(i) continue to pay his base salary for 12 months
following his termination and (ii) pay him promptly after
the end of the fiscal year in which the termination occurs a
cash sum of (A) a pro rata share of his target bonus for
the fiscal year in which the termination occurs and (B) the
full amount of his target bonus for such fiscal year. In
addition, all of Mr. Brewsters options and shares of
restricted stock will continue to vest during the 12 months
following his termination and all vested options may be
exercised during that period and for ninety days thereafter,
after which time all of his options will expire.
J. Scott Blouin. In December 2002,
Conexant entered into an employment and change of control
agreement with Mr. Blouin which, in addition to providing
for his continuing employment after a change of control (defined
in substantially similar terms as under the change of control
employment agreements described above), further defined the
terms of his employment with Conexant. In connection with the
Merger, the agreement was amended effective February 27,
2004 to provide that he will be employed as senior vice
president and chief accounting officer of Conexant.
Mr. Blouin was promoted to senior vice president and chief
financial officer in August 2004. His
19
amended agreement has an initial two-year term and thereafter
will be automatically extended for additional one-year terms,
unless either party notifies the other that it no longer wishes
the extensions to continue. Mr. Blouins initial
annual base salary was $300,000 and his initial annual target
bonus was 60% of his annual base salary. In addition,
Mr. Blouin will receive on or about the first anniversary
of the Merger, a cash bonus of $75,000, subject to repayment in
certain circumstances. If Conexant terminates
Mr. Blouins employment without cause or
if he resigns for good reason, Conexant will
(i) pay him a cash lump-sum equal to any unpaid base salary
(and any other unpaid amounts) accrued through his termination,
(ii) continue to pay his base salary for two years
following his termination and (iii) pay him promptly after
the end of the fiscal year in which the termination occurs a
cash lump-sum equal to the full amount of his target bonus for
such fiscal year. In addition, all of Mr. Blouins
options and shares of restricted stock will continue to vest
during the two-year period following his termination and all
vested options may be exercised during that period and for
ninety days thereafter, after which time all of his options will
expire.
Dennis E.
OReilly. Mr. OReillys
January 15, 2004 employment agreement was effective
February 27, 2004 and provides that he will be employed as
senior vice president, chief legal officer and secretary of
Conexant. His agreement has an initial two-year term and
thereafter will be automatically extended for additional
one-year terms, unless either party notifies the other that it
no longer wishes the extensions to continue.
Mr. OReillys initial annual base salary was
$325,000 and his initial annual target bonus was 60% of his
annual base salary. If Conexant terminates
Mr. OReillys employment without
cause, Mr. OReilly will be entitled to
substantially the same payments and benefits as
Mr. Brewster under his employment agreement described
above. In addition, Mr. OReillys agreement with
Conexant defining certain conditional benefits to
Mr. OReilly upon his retirement, including payment of
any earned unused vacation, formal salary and benefit
continuation status for six months and continued eligibility for
applicable benefits, remains in effect.
Armando Geday. Mr. Gedays
January 15, 2004 employment agreement was effective
February 27, 2004 and initially provided that
Mr. Geday would serve as chief executive officer and as a
director of Conexant. Following his resignation as chief
executive officer and a director of the Company in November
2004, Conexant entered into a separation agreement with
Mr. Geday in December 2004 defining certain
post-termination payments and benefits to which Mr. Geday
would be entitled and amending his employment agreement. Under
the separation agreement, Conexant (i) continued to pay his
base salary as a non-executive employee until June 30,
2005, (ii) paid him a cash sum of (A) unpaid base
salary (and other unpaid amounts) accrued through the date of
his resignation as chief executive officer, (B) a pro rata
share of his target bonus of $550,000 for fiscal 2005,
(C) two times his annual base salary of $550,000,
(D) two times his target bonus of $550,000 for fiscal 2005,
and (E) $510,000, (iii) agreed that Mr. Geday
would continue to be able to participate in certain benefits and
perquisites, including any equity program or equity-based plan
until June 30, 2005 and (iv) paid him on June 30,
2005 a cash lump-sum equal to the amount to cover the cost of
his continued health benefits from June 30, 2005 to
November 9, 2006. In addition, Mr. Gedays
options and shares of restricted stock continued to vest through
June 30, 2005, at which time all remaining unvested options
became vested and eligible for exercise during the thirty-five
(35) month period following his resignation as chief
executive officer, after which time all of his unexercised
options will expire. In addition, the non-competition and
non-solicitation provisions of Mr. Gedays employment
agreement were extended until June 30, 2006.
Indemnification
Agreements
The Company has entered into indemnification agreements with
each of its directors, executive officers and with certain other
executives. The indemnification agreements require the Company
to indemnify these individuals to the fullest extent permitted
by Delaware law and to advance expenses incurred by them in
connection with any proceeding against them with respect to
which they may be entitled to indemnification by the Company.
Other
In 2003, Conexant entered into an agreement with Mindspeed in
connection with the Mindspeed Spin-Off pursuant to which
Conexant reimbursed Mindspeed, through January 1, 2005, for
costs incurred on behalf of Mr. Iyer and for related
administrative overhead. In fiscal year 2005, this amount was
$89,421.
20
In connection with the Mindspeed Spin-Off, Mindspeed entered
into a Credit Agreement (credit facility) with
Conexant, under which Mindspeed could borrow up to
$50.0 million for working capital and other general
corporate purposes. The credit facility was available for a term
ending on June 29, 2007. Loans under the credit facility
would accrue interest at the rate of 10 percent per annum,
payable at maturity. In connection with the credit facility,
Mindspeed issued to Conexant warrants to purchase up to
8.3 million shares of Mindspeed common stock. The number of
shares that may be acquired under the warrants would depend on
the highest level of borrowings under the credit facility,
increasing on a pro rata basis up to a maximum of
8.3 million shares of Mindspeed common stock if the level
of borrowings under the credit facility reached
$50 million. On December 2, 2004, Conexant entered
into an amendment to the credit facility, which amendment, among
other things, provided that upon the closing of any financing or
series of related financings resulting in gross aggregate
proceeds to Mindspeed of $40.0 million or more,
Conexants commitment and the Credit Agreement would
terminate upon the closing of such financing(s). On
December 8, 2004, Mindspeed closed a financing in excess of
$40.0 million and the credit facility and related warrants
were terminated. No borrowings ever occurred under the credit
facility.
In connection with the Mindspeed Spin-Off, Mindspeed issued to
Conexant a warrant to purchase 30 million shares of
Mindspeed common stock at a price of $3.408 per share,
exercisable until June 27, 2013.
OPTION
GRANTS IN LAST FISCAL YEAR
Shown below is further information on grants to the Named
Executive Officers of stock options pursuant to the Equity
Compensation Plans during the fiscal year ended
September 30, 2005, which are reflected in the Summary
Compensation Table on page 16.
Option
Grants in Last Fiscal Year
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|
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|
|
|
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|
|
|
|
|
|
|
|
Number of
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|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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Securities
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|
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Potential Realizable Value at
|
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Underlying
|
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|
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Percentage of Total
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Exercise
|
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|
|
|
|
Assumed Annual Rates of
|
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|
Options
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|
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|
Options Granted to
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Price
|
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|
|
|
|
Stock Price Appreciation For
|
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Granted
|
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|
|
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Conexant Employees
|
|
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(per
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Expiration
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Option Term
|
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(Shares)
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Footnote
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in Fiscal 2005
|
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share)
|
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Date
|
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5%
|
|
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10%
|
|
|
D. W. Decker
|
|
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473,343
|
|
|
(1)
|
|
|
1.32
|
%
|
|
$
|
1.49
|
|
|
|
6/14/2013
|
|
|
$
|
336,740
|
|
|
$
|
806,552
|
|
|
|
|
300,000
|
|
|
(2)
|
|
|
0.84
|
%
|
|
$
|
1.65
|
|
|
|
7/1/2013
|
|
|
$
|
236,340
|
|
|
$
|
566,076
|
|
F. M. Rhodes
|
|
|
1,320,231
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|
|
(1)
|
|
|
3.69
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%
|
|
$
|
1.49
|
|
|
|
6/14/2013
|
|
|
$
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939,224
|
|
|
$
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2,249,604
|
|
L. C. Brewster
|
|
|
593,545
|
|
|
(1)
|
|
|
1.66
|
%
|
|
$
|
1.49
|
|
|
|
6/14/2013
|
|
|
$
|
422,253
|
|
|
$
|
1,011,369
|
|
J. S. Blouin
|
|
|
992,380
|
|
|
(1)
|
|
|
2.77
|
%
|
|
$
|
1.49
|
|
|
|
6/14/2013
|
|
|
$
|
705,988
|
|
|
$
|
1,690,963
|
|
D. E. OReilly
|
|
|
333,545
|
|
|
(1)
|
|
|
0.93
|
%
|
|
$
|
1.49
|
|
|
|
6/14/2013
|
|
|
$
|
237,287
|
|
|
$
|
568,343
|
|
A. Geday
|
|
|
2,607,440
|
|
|
(1)(3)
|
|
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7.29
|
%
|
|
$
|
1.49
|
|
|
|
10/9/2007
|
|
|
$
|
468,452
|
|
|
$
|
967,615
|
|
|
|
|
(1) |
|
Replacement options granted on June 14, 2005 pursuant to
the Exchange Offer which vest and become exercisable ratably
over 3 years. |
|
(2) |
|
Options granted on July 1, 2005 pursuant to
Mr. Deckers employment agreement which vest and
become exercisable 50% on November 8, 2005 and 50% on
November 8, 2006. |
|
(3) |
|
Pursuant to Mr. Gedays separation agreement, upon his
termination all of his then outstanding options became
immediately exercisable and will expire on October 9, 2007.
The potential realizable value calculations in this table for
Mr. Geday were based on a
28-month option term,
the period from their initial grant to their October 9,
2007 expiration. |
AGGREGATED
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
Shown below is information with respect to (i) exercises by
the Named Executive Officers during fiscal 2005 of options to
purchase Conexant common stock granted under the Equity
Compensation Plans and (ii) the
21
unexercised options to purchase Conexant common stock granted to
the Named Executive Officers in fiscal 2005 and prior years and
held by them at September 30, 2005.
|
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Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Acquired
|
|
|
|
|
|
Number of Unexercised Options
|
|
|
Value of Unexercised
In-the-Money
|
|
|
|
on
|
|
|
Value
|
|
|
Held at September 30,
2005
|
|
|
Options at September 30,
2005(1)
|
|
Name
|
|
Exercise
|
|
|
Realized
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
D. W. Decker
|
|
|
|
|
|
|
|
|
|
|
4,080,226
|
(2)
|
|
|
1,019,214
|
(2)
|
|
$
|
91,734
|
|
|
$
|
275,737
|
|
F. M. Rhodes
|
|
|
|
|
|
|
|
|
|
|
1,338,876
|
|
|
|
1,630,931
|
|
|
$
|
31,813
|
|
|
$
|
432,763
|
|
L. C. Brewster
|
|
|
|
|
|
|
|
|
|
|
805,902
|
|
|
|
691,893
|
|
|
$
|
36,694
|
|
|
$
|
214,757
|
|
J. S. Blouin
|
|
|
|
|
|
|
|
|
|
|
208,993
|
|
|
|
1,103,023
|
|
|
$
|
22,933
|
|
|
$
|
320,648
|
|
D. E. OReilly
|
|
|
|
|
|
|
|
|
|
|
621,980
|
|
|
|
382,719
|
|
|
$
|
18,347
|
|
|
$
|
118,410
|
|
A. Geday
|
|
|
|
|
|
|
|
|
|
|
5,732,745
|
(3)
|
|
|
|
|
|
$
|
782,232
|
|
|
$
|
|
|
|
|
|
(1) |
|
Based on the closing price of Conexant common stock on the
Nasdaq National Market System on September 30, 2005.
($1.79). |
|
(2) |
|
Includes stock options, granted by Rockwell International
Corporation prior to the spin-off of Conexant from Rockwell,
which were converted into stock options to purchase Conexant
common stock, on the same terms and vesting schedule as the
Rockwell stock options but with adjustments to the exercise
price and the number of shares for which such options are
exercisable to preserve the aggregate intrinsic value of the
options. |
|
(3) |
|
Includes stock options, granted by GlobespanVirata prior to the
Merger, which were converted into options to purchase Conexant
common stock, on the same terms and vesting schedule as the
GlobespanVirata stock options but with adjustments to the
exercise price and the number of shares for which such options
are exercisable to preserve the aggregate intrinsic value of the
options. |
Retirement
Benefits
Conexant does not sponsor a defined benefit pension plan for
employees.
22
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To Conexants knowledge, the following table sets forth
information regarding ownership of outstanding Conexant common
stock on November 25, 2005 by each director and Named
Executive Officer and all directors and executive officers as a
group. Except as otherwise indicated below and subject to
applicable community property laws, each owner has sole voting
and sole investment power with respect to the stock listed.
Beneficial
Ownership as of November 25, 2005
|
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|
|
|
|
|
|
|
|
Common Stock
|
|
Name(1)
|
|
Shares
|
|
|
Percent of Class(2)
|
|
|
Donald R. Beall
|
|
|
2,439,085
|
(3,4,5)
|
|
|
|
*
|
Steven J. Bilodeau
|
|
|
48,440
|
(5)
|
|
|
|
*
|
Dipanjan Deb
|
|
|
57,425
|
(5)
|
|
|
|
*
|
Dwight W. Decker
|
|
|
4,658,517
|
(3,5)
|
|
|
|
*
|
F. Craig Farrill
|
|
|
218,780
|
(5,6)
|
|
|
|
*
|
Armando Geday
|
|
|
5,757,598
|
(5)
|
|
|
1.2
|
%
|
Balakrishnan S. Iyer
|
|
|
1,476,343
|
(5)
|
|
|
|
*
|
John W. Marren
|
|
|
|
|
|
|
|
*
|
D. Scott Mercer
|
|
|
79,670
|
(5)
|
|
|
|
*
|
Jerre L. Stead
|
|
|
248,316
|
(5,6)
|
|
|
|
*
|
Giuseppe Zocco
|
|
|
338,652
|
(5)
|
|
|
|
*
|
J. Scott Blouin
|
|
|
293,424
|
(5)
|
|
|
|
*
|
Lewis C. Brewster
|
|
|
881,353
|
(3,5)
|
|
|
|
*
|
Dennis E. OReilly
|
|
|
755,533
|
(3,5)
|
|
|
|
*
|
F. Matthew Rhodes
|
|
|
1,416,898
|
(3,5)
|
|
|
|
*
|
All of the above directors and
officers as a group
|
|
|
18,660,034
|
(3,4,5,6)
|
|
|
3.9
|
%
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* |
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Less than 1%. |
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(1) |
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Each persons address is the address of Conexant. |
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(2) |
|
For purposes of computing the percentage of outstanding shares
beneficially owned by each person, shares of which such person
has a right to acquire beneficial ownership within 60 days
have been included in both the number of shares owned by that
person and the number of shares outstanding, in accordance with
Rule 13d-3(d)(1)
under the Securities Exchange Act of 1934, as amended, or the
Exchange Act. |
|
(3) |
|
Includes shares held under the savings plans of Conexant and
Rockwell as of November 30, 2005. Does not include 2,326
Rockwell share equivalents under Rockwells supplemental
savings plans as of November 30, 2005 for Mr. Decker.
Awards under the supplemental savings plans are paid in cash. |
|
(4) |
|
Includes shares, as to which beneficial ownership is disclaimed,
as follows: 305,223 held in trusts, the beneficiaries of which
are adult children of Mr. Bealls not living in the
same household and as to which trusts Mr. Beall has no
relationship, and 10,000 shares owned by the Beall
Foundation, of which Mr. Beall is president and a director. |
|
(5) |
|
Includes shares that may be acquired upon the exercise of
outstanding stock options within 60 days as follows:
481,669; 48,440; 57,425; 4,239,567; 211,628; 5,732,745;
1,452,596; 29,670; 191,958; 182,137; 288,902; 855,076; 646,567;
1,388,050; and 18,660,034 for Messrs. Beall, Bilodeau, Deb,
Decker, Farrill, Geday, Iyer, Mercer, Stead, Zocco, Blouin,
Brewster, OReilly, Rhodes, and the group, respectively. |
|
(6) |
|
Includes 56,358 shares granted to Mr. Stead and
3,760 shares granted to Mr. Farrill as restricted
stock under the Conexant Directors Stock Plan. |
There are no persons known to Conexant to be beneficial
owners (as that term is defined in the rules of the SEC)
of 5% of any class of Conexants voting securities
outstanding as of November 30, 2005.
23
Ratification
of Selection of Independent Auditors
Deloitte & Touche LLP have been Conexants
independent auditors since 1998 and have been selected by the
Audit Committee of the Board of Directors as Conexants
independent auditors for the fiscal year ending
September 30, 2006.
Before the Audit Committee appointed Deloitte & Touche
LLP, it carefully considered the qualifications of that firm,
including its performance for Conexant and Rockwell in prior
years and its reputation for integrity and for competence in the
fields of accounting and auditing.
A representative of Deloitte & Touche LLP is expected
to be present at the annual meeting and will have an opportunity
to make a statement if he or she so desires. The representative
will also be available to respond to appropriate questions from
shareowners.
The Conexant Board of Directors unanimously recommends a vote
FOR ratification of the appointment of
Deloitte & Touche LLP as independent auditors for
Conexant for the current fiscal year. Unless a contrary choice
is specified, proxies solicited by the Conexant Board of
Directors will be voted FOR ratification of
the appointment.
Principal
Accountant Fees and Services
The following table summarizes fees billed by
Deloitte & Touche LLP, the member firms of Deloitte
Touche Tohmatsu, and their respective affiliates (collectively,
Deloitte & Touche) for professional
services indicated for fiscal years 2005 and 2004.
|
|
|
|
|
|
|
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|
|
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2005
|
|
|
2004
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|
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Audit Fees
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$
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1,237,838
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$
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876,140
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Audit-Related Fees
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$
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260,230
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$
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314,630
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Tax Fees
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$
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71,300
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$
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122,679
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All Other Fees
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|
Audit Fees. Audit Fees billed by
Deloitte & Touche for professional services rendered
consist of the audit of the Companys annual financial
statements and the review of the Companys quarterly
financial statements for fiscal 2005 and fiscal 2004. In fiscal
2005, Audit Fees also includes the audit of managements
assessment of the effectiveness of the Companys internal
control over financial reporting and audit of internal control
over financial reporting.
Audit-Related Fees. Audit-Related Fees billed
by Deloitte & Touche for professional services rendered
consist of (i) international statutory audits,
(ii) reviews and audits of benefit plans and
(iii) acquisition-related work. In fiscal 2005,
Audit-Related Fees also includes consultation re compliance with
the Sarbanes-Oxley Act of 2002.
Tax Fees. Tax Fees billed by
Deloitte & Touche for professional services rendered
consist of (i) tax consultations and (ii) tax
compliance, including preparation of domestic and foreign tax
returns.
All Other Fees. There were no fees billed by
Deloitte & Touche for any other services for fiscal
2005 and fiscal 2004.
OTHER
MATTERS
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires Conexants
directors and executive officers, and persons who own more than
10% of a registered class of Conexants equity securities,
to file reports of ownership of, and transactions in,
Conexants securities with the SEC. Such directors,
executive officers and 10% shareowners are also required to
furnish Conexant with copies of all Section 16(a) forms
they file.
Based solely on a review of the copies of such forms received by
it, and on written representations from certain reporting
persons, Conexant believes that during fiscal 2005 its
directors, executive officers and 10% shareowners timely filed
all forms required to be filed under Section 16(a).
24
2007 Shareowner
Proposals or Nominations
Shareowners of the Company may submit proposals that they
believe should be voted upon at the Companys Annual
Meetings of Shareowners or nominate persons for election to the
Board of Directors. Pursuant to
Rule 14a-8 under
the Securities Exchange Act, some Shareowner proposals may be
eligible for inclusion in the Companys Proxy Statement for
the Companys 2007 Annual Meeting of Shareowners. To be
eligible for inclusion in the Companys 2007 Proxy
Statement, any such shareowner proposals must be submitted in
writing to the Secretary of the Company no later than
September 12, 2006. The submission of a shareowner proposal
does not guarantee that it will be included in the
Companys Proxy Statement.
With respect to the Companys 2007 Annual Meeting, under
the Companys Bylaws, a shareowner proposal or nomination
must be submitted in writing to the Secretary of the Company not
less than 90 days nor more than 120 days prior to the
anniversary of the 2006 Annual Meeting, unless the date of the
2007 Annual Meeting of shareowners is advanced by more than
30 days or delayed (other than as a result of adjournment)
by more than 60 days from the anniversary of the 2006
Annual Meeting. For the Companys 2007 Annual Meeting, this
means that any such proposal or nomination must be submitted no
earlier than October 25, 2006 and no later than
November 24, 2006. If the date of the 2007 Annual Meeting
is advanced by more than 30 days or delayed (other than as
a result of adjournment) by more than 60 days from the
anniversary of the 2006 Annual Meeting, the shareowner must
submit any such proposal or nomination no earlier than the close
of business on the 120th day prior to the 2007 Annual
Meeting and no later than the close of business on the later of
the 90th day prior to the 2007 Annual Meeting or the
10th day following the day on which public announcement of
the date of such meeting is first made. The shareowners
submission must include certain specified information concerning
the proposal or nominee, as the case may be, and information as
to the shareowners ownership of common stock of the
Company. Proposals or nominations not meeting these requirements
will not be entertained at the 2007 Annual Meeting. If the
shareowner does not also comply with the requirements of
Rule 14a-4 under
the Securities Exchange Act, the Company may exercise
discretionary voting authority under proxies it solicits to vote
in accordance with its best judgment on any such proposal or
nomination submitted by a shareowner. Shareowners should contact
the Secretary of the Company in writing at 4000 MacArthur
Boulevard, Newport Beach, California
92660-3095 to make any
submission or to obtain additional information as to the proper
form and content of submissions.
Annual
Report to Shareowners and Financial Statements
The Companys Annual Report to Shareowners for fiscal year
2005 is being mailed to the Companys shareowners together
with this proxy statement. Copies of the Companys
Annual Report on
Form 10-K for the
fiscal year ended September 30, 2005 will be furnished to
interested shareowners, without charge, upon written request.
Exhibits to the
Form 10-K will be
furnished upon written request and payment of a fee of fifteen
cents per page covering the Companys costs. Written
requests should be directed to the Company at 4000 MacArthur
Boulevard, Newport Beach, California
92660-3095, Attention:
Investor Relations. The Companys 2005 Annual Report to
Shareowners, the
Form 10-K and this
proxy statement are also available on Conexants website
(http://www.conexant.com) under the Investor Relations section.
Other
Matters
At the date hereof, there are no other matters that the Board of
Directors intends to present, or has reason to believe others
will present, at the Annual Meeting. If other matters come
before the Annual Meeting, the persons named in the accompanying
form of proxy will vote in accordance with their best judgment
with respect to such matters.
Expenses
of Solicitation
The cost of the solicitation of proxies will be borne by the
Company. In addition to the use of the mails, proxies may be
solicited personally, by telephone or by telegraph, or by a few
employees of the Company without additional compensation. The
Company will also reimburse brokers and other persons holding
stock in their names, or in the names of nominees, for their
expenses for sending proxy materials to principals and obtaining
their proxies.
January 10, 2006
25
CONEXANT SYSTEMS
4000 MACARTHUR BLVD.
WEST TOWER
NEWPORT BEACH, CA 92660
VOTE BY INTERNET www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up
until 11:59 P.M. Eastern Time on February 21, 2005. Have your proxy card in hand when you access
the web site and follow the instructions to obtain your records and to create an electronic voting
instruction form.
ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS
If you would like the convenience of viewing your proxy and other company materials online, please
go to www.conexant.com/ir and you can consent to receiving all future proxy statements, proxy cards
and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery,
when prompted, please indicate that you agree to receive or access shareholder communications
electronically in future years.
VOTE BY PHONE 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time
on February 21, 2005. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or
return it to Conexant Systems, Inc., c/o ADP, 51 Mercedes Way, Edgewood, NY 11717.
If you vote by Internet or by telephone,
you do NOT need to mail back your proxy card.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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CONEX1
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
CONEXANT SYSTEMS, INC.
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Vote on Directors |
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1.
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ELECTION OF THREE DIRECTORS |
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Nominees: |
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01) D. W. Decker |
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02) F. C. Farrill |
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03) J. W. Marren |
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Vote on Proposal |
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For |
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Against |
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Abstain |
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2.
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RATIFICATION OF APPOINTMENT OF
DELOITTE & TOUCHE LLP AS AUDITORS.
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For address changes and/or comments, please
check this box
and write them on the back where indicated. |
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Yes
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No |
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Please indicate if you plan to attend this meeting |
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For
All
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Withhold
All
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For All
Except
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To withhold authority to vote for any individual
nominee, mark For All Except and write the
nominees name on the line below. |
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date |
Bring this admission ticket with you to the meeting on February 22, 2006. Do not mail.
This admission ticket admits you to the meeting. You will not be let in to the meeting without an
admission ticket or other proof of stock ownership as of January 2, 2006, the record date.
ADMISSION TICKET
CONEXANT SYSTEMS, INC.
2006 Annual Meeting of Shareowners
February 22, 2006
10:00 A.M.
Hilton Irvine/Orange County Airport Hotel
18800 MacArthur Boulevard
Irvine, CA 92612
PROXY
CONEXANT SYSTEMS, INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Dwight W. Decker and Dennis E. OReilly, and each of them,
with power to act without the other and with full power of substitution, as proxies and
attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side,
all the shares of Conexant Systems, Inc. Common Stock which the undersigned is entitled to vote,
and, in their discretion, to vote upon such other business as may properly come before the Annual
Meeting of Shareowners of the Company to be held on February 22, 2006, or any adjournment thereof,
with all powers the undersigned would possess if present at the Meeting.
To vote in accordance with the Board of Directors recommendations just sign and date the
other side; no boxes need to be checked.
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Address Changes/Comments: |
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(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
(Continued and to be marked, dated and signed, on the other side)
CONEXANT SYSTEMS
4000 MACARTHUR BLVD.
WEST TOWER
NEWPORT BEACH, CA 92660
VOTE BY INTERNET www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up
until 11:59 P.M. Eastern Time on February 16, 2005. Have your proxy card in hand when you access
the web site and follow the instructions to obtain your records and to create an electronic voting
instruction form.
ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS
If you would like the convenience of viewing your proxy and other company materials online, please
go to www.conexant.com/ir and you can consent to receiving all future proxy statements, proxy cards
and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery,
when prompted, please indicate that you agree to receive or access shareholder communications
electronically in future years.
VOTE BY PHONE 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time
on February 16, 2005. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or
return it to Conexant Systems, Inc., c/o ADP, 51 Mercedes Way, Edgewood, NY 11717.
If you vote by Internet or by telephone,
you do NOT need to mail back your proxy card.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
|
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CONEX3
|
|
KEEP THIS PORTION FOR YOUR RECORDS |
|
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
CONEXANT SYSTEMS, INC.
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Vote on Directors |
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1.
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ELECTION OF THREE DIRECTORS |
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Nominees: |
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01) D. W. Decker |
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02) F. C. Farrill |
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03) J. W. Marren |
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Vote on Proposal |
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For |
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Against |
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Abstain |
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2.
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RATIFICATION OF APPOINTMENT OF
DELOITTE & TOUCHE LLP AS AUDITORS.
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o
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For address changes and/or comments, please check
this box
and write them on the back where indicated. |
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o |
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Yes
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No |
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Please indicate if you plan to attend this meeting |
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o |
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o |
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For
All
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Withhold
All
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For All
Except
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To withhold authority to vote for any individual
nominee, mark For All Except and write the
nominees name on the line below. |
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date |
Bring this admission ticket with you to the meeting on February 22, 2006. Do not mail.
This admission ticket admits you to the meeting. You will not be let in to the meeting without an
admission ticket or other proof of stock ownership as of January 2, 2006, the record date.
ADMISSION TICKET
CONEXANT SYSTEMS, INC.
2006 Annual Meeting of Shareowners
February 22, 2006
10:00 A.M.
Hilton Irvine/Orange County Airport Hotel
18800 MacArthur Boulevard
Irvine, CA 92612
PROXY
CONEXANT SYSTEMS, INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Dwight W. Decker and Dennis E. OReilly, and each of them,
with power to act without the other and with full power of substitution, as proxies and
attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side,
all the shares of Conexant Systems, Inc. Common Stock which the undersigned is entitled to vote,
and, in their discretion, to vote upon such other business as may properly come before the Annual
Meeting of Shareowners of the Company to be held on February 22, 2006, or any adjournment thereof,
with all powers the undersigned would possess if present at the Meeting.
To vote in accordance with the Board of Directors recommendations just sign and date the other
side; no boxes need to be checked.
As a participant in the Conexant Systems, Inc. Retirement Savings Plan, the Rockwell Collins
Retirement Savings Plan, and/or the Rockwell Collins Retirement Savings Plan for Bargaining Unit
Employees, you have the right to direct Fidelity Management Trust Company (Fidelity) regarding
how to vote the shares of Conexant Systems, Inc. attributable to this account at the Annual
Shareowner Meeting to be held on February 22, 2006. These voting directions will be tabulated
confidentially. Only Fidelity and its affiliates or agents will have access to the individual
voting directions.
Unless otherwise required by law, the shares attributable to this account will be voted as
directed; if no direction is made, if the card is not signed, or if the card is not received by
February 16, 2006, the shares attributable to this account will be voted in the same proportion as
directions received from participants, in the respective retirement plans.
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Address Changes/Comments: |
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(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
(Continued and to be marked, dated and signed, on the other side)
CONEXANT SYSTEMS
4000 MACARTHUR BLVD.
WEST TOWER
NEWPORT BEACH, CA 92660
VOTE BY INTERNET www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up
until 11:59 P.M. Eastern Time on February 16, 2005. Have your proxy card in hand when you access
the web site and follow the instructions to obtain your records and to create an electronic voting
instruction form.
ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS
If you would like the convenience of viewing your proxy and other company materials online, please
go to www.conexant.com/ir and you can consent to receiving all future proxy statements, proxy cards
and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery,
when prompted, please indicate that you agree to receive or access shareholder communications
electronically in future years.
VOTE BY PHONE 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time
on February 16, 2005. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or
return it to Conexant Systems, Inc., c/o ADP, 51 Mercedes Way, Edgewood, NY 11717.
If you vote by Internet or by telephone,
you do NOT need to mail back your proxy card.
|
|
|
|
|
|
|
|
|
|
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
|
|
CONEX5
|
|
KEEP THIS PORTION FOR YOUR RECORDS |
|
|
|
|
|
DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
CONEXANT SYSTEMS, INC.
|
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Vote on Directors |
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1.
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ELECTION OF THREE DIRECTORS |
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Nominees: |
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01) D. W. Decker |
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02) F. C. Farrill |
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03) J. W. Marren |
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Vote on Proposal |
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For |
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Against |
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Abstain |
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2.
|
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RATIFICATION OF APPOINTMENT OF
DELOITTE & TOUCHE LLP AS AUDITORS.
|
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o
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o
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o |
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For address changes and/or comments, please
check this box
and write them on the back where indicated. |
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o |
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Yes
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No |
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Please indicate if you plan to attend this meeting |
|
o |
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o |
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For
All
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Withhold
All
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For All
Except
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To withhold authority to vote for any individual
nominee, mark For All Except and write the
nominees name on the line below. |
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Bring this admission ticket with you to the meeting on February 22, 2006. Do not mail.
This admission ticket admits you to the meeting. You will not be let in to the meeting without an
admission ticket or other proof of stock ownership as of January 2, 2006, the record date.
ADMISSION TICKET
CONEXANT SYSTEMS, INC.
2006 Annual Meeting of Shareowners
February 22, 2006
10:00 A.M.
Hilton Irvine/Orange County Airport Hotel
18800 MacArthur Boulevard
Irvine, CA 92612
PROXY
CONEXANT SYSTEMS, INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Dwight W. Decker and Dennis E. OReilly, and each of them,
with power to act without the other and with full power of substitution, as proxies and
attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side,
all the shares of Conexant Systems, Inc. Common Stock which the undersigned is entitled to vote,
and, in their discretion, to vote upon such other business as may properly come before the Annual
Meeting of Shareowners of the Company to be held on February 22, 2006, or any adjournment thereof,
with all powers the undersigned would possess if present at the Meeting.
To vote in accordance with the Board of Directors recommendations just sign and date the other
side; no boxes need to be checked.
As a participant in the Rockwell Automation Retirement Savings Plan for Salaried Employees,
the Rockwell Automation Retirement Savings Plan for Hourly Employees, the Rockwell Automation
Savings & Investment Plan for Represented Hourly Employees, and/or the Rockwell Automation
Retirement Savings Plan for Represented Hourly Employees, you have the right to direct Fidelity
Management Trust Company (Fidelity) regarding how to vote the shares of Conexant Systems, Inc.
attributable to this account at the Annual Shareowner Meeting to be held on February 22, 2006.
These voting directions will be tabulated confidentially. Only Fidelity and its affiliates or
agents will have access to the individual voting direction.
Unless otherwise required by law, the shares attributable to this account will be voted as
directed; if no direction is made, if the card is not signed, or if the card is not received by
February 16, 2006, the shares attributable to this account will not be voted.
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Address Changes/Comments: |
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(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
(Continued and to be marked, dated and signed, on the other side)