SCHEDULE 14A INFORMATION
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
[ ] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Section 240.14a-12
CONEXANT SYSTEMS, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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PRELIMINARY COPY
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(CONEXANT LOGO)
January 10, 2003
Dear Shareowner:
Conexant's 2003 Annual Meeting of Shareowners will be held at 10:00 a.m.
Pacific Standard Time on Wednesday, February 26, 2003, at the Crowne Plaza
Hotel, located at 17941 Von Karman Avenue, Irvine, California 92614. 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,
/s/ DWIGHT W. DECKER
Dwight W. Decker
Chairman of the Board and Chief
Executive Officer
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 26, 2003, at the Crowne Plaza Hotel,
located at 17941 Von Karman Avenue, Irvine, California 92614, 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 Conexant's 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 DRIVER'S 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 BROKER'S PROXY AND BRING IT TO THE ANNUAL
MEETING IN ORDER TO VOTE.
CONEXANT SYSTEMS, INC.
4311 JAMBOREE ROAD
NEWPORT BEACH, CALIFORNIA 92660-3095
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
Dear Shareowner:
You are cordially invited to attend the 2003 Annual Meeting of Shareowners
of Conexant Systems, Inc. ("Conexant" or the "Company") which will be held on
Wednesday, February 26, 2003, at 10:00 a.m. Pacific Standard Time, at the Crowne
Plaza Hotel, located at 17941 Von Karman Avenue, Irvine, California 92614. The
2003 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 2006 Annual Meeting of Shareowners;
2. To approve an amendment to the Company's Restated Certificate of
Incorporation to change the par value of the Company's Common Stock;
3. To approve an amendment to the Company's 2001 Employee Stock
Purchase Plan to increase the maximum number of shares authorized under the
plan;
4. To ratify the appointment by the Board of Directors of the
accounting firm of Deloitte & Touche LLP as independent auditors for the
Company for the current fiscal year; and
5. To transact such other business as may properly come before the
2003 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, 2003 will be entitled to notice
of, and to vote at, the 2003 Annual Meeting. A list of such shareowners will be
available for inspection by any shareowner at the offices of the Company, 4311
Jamboree Road, Newport Beach, California 92660-3095, for at least ten days prior
to the 2003 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
[/s/ DENNIS E. O'REILLY]
Dennis E. O'Reilly
Secretary
January 10, 2003
CONEXANT SYSTEMS, INC.
4311 JAMBOREE ROAD
NEWPORT BEACH, CALIFORNIA 92660-3095
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 2003 Annual
Meeting of Shareowners (the "Annual Meeting") to be held at 10:00 a.m. Pacific
Standard Time on Wednesday, February 26, 2003, at the Crowne Plaza Hotel,
located at 17941 Von Karman Avenue, Irvine, California 92614, 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 14, 2003.
On June 25, 2002, the Company completed the spin-off and merger of its
wireless communications business with Alpha Industries, Inc. to form Skyworks
Solutions, Inc. (the "Wireless Transaction"). In connection with the Wireless
Transaction, certain adjustments were made to the Company's stock-based
compensation plans and outstanding awards thereunder. All information in this
Proxy Statement regarding the Company's Common Stock and awards under the
Company's stock-based compensation plans gives effect to the Wireless
Transaction and the related adjustments. For presentation purposes, references
made to the fiscal years ended September 30, 2000, 2001 and 2002 relate to the
actual fiscal years ended September 29, 2000, September 28, 2001 and September
27, 2002, 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, FOR approval of an amendment to the Company's Restated Certificate of
Incorporation to change the par value of the Company's Common Stock, FOR the
approval of the amendment to the Company's 2001 Employee Stock Purchase Plan to
increase the maximum number of shares authorized under the plan, 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 voting in person at the Annual Meeting, by giving
written notice of revocation to the Secretary prior to the Annual Meeting, or by
giving a valid, later dated proxy.
THE ENCLOSED PROXY CARD ALSO OFFERS SHAREOWNERS THE OPTION TO ACCESS
MATERIALS FOR ANY FUTURE SHAREOWNER MEETING ELECTRONICALLY VIA THE INTERNET. A
SHAREOWNER, WHO CONSENTS 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 Company's 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 approval of the amendment to
the Company's Restated Certificate of Incorporation to change the par value of
the Company's Common Stock will require the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock entitled to vote. The
approval of the amendment to the Company's 2001 Employee Stock Purchase Plan to
increase the maximum number of shares authorized under the plan, and the
ratification of the appointment of the independent auditors each will require
the affirmative vote of a majority of the votes entitled to be cast by holders
of shares of the Company's 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. Therefore, broker non-votes will
have the same effect as negative votes with respect to the proposal to approve
the amendment to the Company's Restated Certificate of Incorporation to change
the par value of the Company's Common Stock and will have no effect on any other
matter.
RECORD DATE, QUORUM AND SHARE OWNERSHIP
Only shareowners of record at the close of business on January 2, 2003 will
be entitled to vote at the Annual Meeting. The presence in person or by proxy of
a majority of the shares of the Company's Common Stock outstanding on the record
date is required for a quorum. As of January 2, 2003, there were
outstanding shares of the Company's Common Stock.
ELECTION OF DIRECTORS (PROPOSAL 1)
The Company's 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. On February 1, 2002, the Board of Directors increased the
number of directors of the Company from seven to eight and designated
Balakrishnan S. Iyer, who was elected by the Board of Directors to fill the
vacancy created by such increase, as a member of Class II, whose term expires at
the 2004 Annual Meeting. The three directors in Class I will be elected at the
2003 Annual Meeting to serve for a term expiring at the Company's Annual Meeting
in 2006. The three directors in Class II and the two directors in Class III are
serving terms expiring at the Company's Annual Meeting of Shareowners in 2004
and 2005, respectively.
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 2006" below, who now serve as directors with terms expiring at
the 2003 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 2006 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
There is shown below for each nominee for director and each continuing
director, as reported to the Company, the name, age and principal occupation;
the position, if any, with the Company; and other directorships held.
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CLASS I -- NOMINEES FOR DIRECTORS WITH TERMS EXPIRING IN 2006
DWIGHT W. DECKER (PHOTO) Dr. Decker has been a director of
Age 52 Conexant since its incorporation in
Chairman of the Board and Chief 1996. Dr. Decker has been Chairman of
Executive Officer of the Company the Board and Chief Executive Officer
of the Company since November 1998. He
served as Senior Vice President of
Rockwell International Corporation (now
named Rockwell Automation, Inc.)
(electronic controls and
communications) and President, Rockwell
Semiconductor Systems from July 1998 to
December 1998; and Senior Vice
President of Rockwell and President,
Rockwell Semiconductor Systems and
Electronic Commerce prior thereto. Dr.
Decker is the non-executive Chairman
and a director of Skyworks Solutions,
Inc., and a director of Pacific Mutual
Holding Company, Jazz Semiconductor,
Inc. and Pictos Technologies, Inc. He
is also a director or member of
numerous professional and civic
organizations.
HOSSEIN ESLAMBOLCHI (PHOTO) Dr. Eslambolchi has been a director of
Age 42 Conexant since November 2001. Dr.
Chief Technology Officer of AT&T Eslambolchi has been Chief Technology
Corporation and President of AT&T Officer of AT&T Corp.
Labs (telecommunications) and President of
AT&T Labs since July 2001. He is also
Chief Information Officer of AT&T
Business. He served as the interim
President of Excite@Home Broadband
Networks Services of At Home
Corporation (Internet services) from
January to June 2001, Senior Vice
President of AT&T's Packet and Optical
Network Services from July 2000 to July
2001, Vice President, AT&T Data and
Network Services from January to July
2000, and Vice President, AT&T Network
Operations and AT&T Chief Compliance
Officer from October 1997 to January
2000. Dr. Eslambolchi is a member of
the Board of Advisors of The Catalyst
Group, Inc. and Pacific Broadband
Communications. He has served on the
Compaq Computer Corporation Board of
Technical Advisors and was an Advisory
Council member at the Johns Hopkins
University Whiting School of
Engineering.
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F. CRAIG FARRILL (PHOTO) Mr. Farrill has been a director of Conexant
Age 50 since 1998. Mr. Farrill has been Managing
Managing Director and Chief Director and Chief Technology Officer of inOvate
Technology Officer of inOvate Communications Group (wireless communications)
Communications Group and President since September 2000. He was Chief Technology
and Chief Executive Officer of Officer of Vodafone AirTouch PLC (wireless
Kodiak Networks, Inc. communications) from July 1999 to July 2000 and
Vice President, Strategic Technology of AirTouch
Communications, Inc. (wireless communications)
prior thereto. Mr. Farrill has also been
President and Chief Executive Officer of Kodiak
Networks, Inc. since 2001. He is also a member
of the Board of Directors and a corporate
officer of the CDMA Development Group, a digital
cellular technology consortium, which he founded
in 1993.
CLASS II -- CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2004
DONALD R. BEALL (PHOTO) Mr. Beall has been a director of Conexant since
Age 64 1998. He is the retired Chairman and Chief
Retired Chairman and Chief Executive Executive Officer of Rockwell and was a director
Officer of Rockwell International of Rockwell from 1978 to February 2001. He
Corporation served as Chairman of Rockwell from February
1988 to February 1998 and Chief Executive
Officer from February 1988 to September 1997.
Mr. Beall is Chairman of the Executive
Committee, an advisor to and a director of
Rockwell Collins, Inc. (avionics and
communications). He is also a director of
Skyworks Solutions, Inc., Jazz Semiconductor,
Inc. and CT Realty. He is a former director of
Amoco Corporation, ArvinMeritor, Inc., Rockwell,
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 a member of The Business Council and is an
investor, director and/or advisor with several
venture capital groups, private companies and
investment partnerships.
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BALAKRISHNAN S. IYER (PHOTO) Mr. Iyer has been a director of Conexant since
Age 46 2002. He has served as Senior Vice President and
Senior Vice President and Chief Chief Financial Officer of the Company since
Financial Officer of the Company December 1998; Senior Vice President and Chief
Financial Officer of Rockwell Semiconductor
Systems from October 1998 to December 1998; and
Senior Vice President and Chief Financial
Officer of VLSI Technology, Inc.
(semiconductors) prior thereto. Mr. Iyer is a
director of Invitrogen Corporation and Skyworks
Solutions, Inc.
JERRE L. STEAD (PHOTO) Mr. Stead has been a director of Conexant since
Age 60 1998. In May 2000 he retired as Chairman of the
Retired Chairman and Chief Executive Board and Chief Executive Officer of Ingram
Officer of Ingram Micro Inc. Micro Inc. (computer technology products and
services), positions he had held since August
1996. Mr. Stead is a director of Armstrong World
Industries, Inc., Brightpoint, Inc., Mobility,
Inc. and Thomas & Betts Corporation. He is
Chairman of the Board of the Center of Ethics
and Values at Garrett Seminary on the
Northwestern University campus.
CLASS III -- CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2005
RICHARD M. BRESSLER (PHOTO) Mr. Bressler has been a director of Conexant
Age 72 since 1998. He served as Chief Executive Officer
Retired Chairman of the Board of El of Burlington Northern Inc. (rail
Paso Energy Corp. transportation) from 1980 through 1988. Mr.
Bressler retired in October 1990 as Chairman of
both Burlington Northern Inc. and Burlington
Resources Inc. (natural resources operations),
positions he had held since 1982 and 1989,
respectively. He served as Chairman of Plum
Creek Management Company (timber operations)
from April 1989 to January 1993 and as Chairman
of the El Paso Natural Gas Company, now known as
El Paso Energy Corp. (natural gas operations),
from October 1990 through December 1993. Mr.
Bressler is active in a number of business and
civic organizations.
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RALPH J. CICERONE (PHOTO) Dr. Cicerone has been a director of Conexant
Age 59 since November 2001. He has been Chancellor and
Chancellor of the University of the Daniel G. Aldrich Professor of Earth
California, Irvine Sciences of the University of California, Irvine
(education) since 1998 and served as Dean of
Physical Sciences from 1994 through 1998. He
also served as a consultant to the Minnesota
Mining and Manufacturing Company from 1989 to
1998. Dr. Cicerone is a past president of the
American Geophysical Union and is a member of
the National Academy of Sciences, the American
Academy of the Arts and Sciences and the
American Philosophical Society.
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BOARD COMMITTEES AND MEETINGS
The standing committees of the Board of Directors of the Company during
fiscal 2002 were an Audit Committee, a Board Composition Committee, a
Compensation and Management Development Committee, a Technology Committee and a
Social and Environmental Committee, each of which is comprised of non-employee
directors. The functions of each of these five committees are described below.
The members of the standing committees are identified in the following table,
each Committee Chairman being denoted with an asterisk.
COMPENSATION &
BOARD MANAGEMENT SOCIAL &
DIRECTOR AUDIT COMPOSITION DEVELOPMENT TECHNOLOGY ENVIRONMENTAL
-------- ----- ----------- -------------- ---------- ----------------
D. R. Beall........................ x* x x x
R. M. Bressler..................... x* x
R. J. Cicerone..................... x x x x*
H. Eslambolchi..................... x x
F. C. Farrill...................... x x x*
J. L. Stead........................ x x x*
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* Chairman
The AUDIT COMMITTEE reviews the scope and effectiveness of audits of the
Company by the Company's independent public accountants and internal auditors;
selects and recommends to the Board of Directors the employment of independent
public accountants for the Company, subject to approval of the shareowners;
reviews the audit plans of the Company's independent public accountants and
internal auditors; reviews and approves the fees charged by the independent
public accountants; reviews the Company's quarterly and annual financial
statements before their release; reviews and approves the appointment or change
of the Company's director of internal audit; reviews the adequacy of the
Company's 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 the employees of the Company with the Company's standards of
business conduct policies; meets with the Company's management to review any
issues related to matters within the scope of the Audit Committee's duties; and
investigates any matter brought to its attention within the scope of its duties.
The Audit Committee acts pursuant to a written charter, which was most recently
amended on October 31, 2002, a copy of which is attached as an Appendix A to
this Proxy Statement. In the opinion of the Board of Directors, all current
members of the Company's Audit Committee are independent directors within the
meaning of Rule 4200(a)(14) of the Rules of the National Association of
Securities Dealers, Inc. The Committee met 7 times during the 2002 fiscal year.
The principal functions of the BOARD COMPOSITION COMMITTEE are to consider
and recommend to the Board of Directors qualified candidates for election as
directors of the Company and periodically to prepare and submit to the Board of
Directors for adoption the Committee's selection criteria for director nominees.
The Committee periodically assesses the performance of the Board of Directors
and reports thereon to the Board. Shareowners of the Company may recommend
candidates for consideration by the Committee by writing to the Secretary of the
Company within certain time periods specified in the Company's By-laws, giving
the candidate's name, biographical data and qualifications. Any such
recommendation should be accompanied by a written statement from the individual
of his or her consent to be named as a candidate and, if nominated and elected,
to serve as a director. The Board Composition Committee met 3 times during the
2002 fiscal year.
The principal functions of the COMPENSATION AND MANAGEMENT DEVELOPMENT
COMMITTEE (the "Compensation Committee") are to evaluate the performance of the
Company's senior executives and plan for management succession and development,
to consider the design and competitiveness of the Company's compensation plans,
to review and approve senior executive compensation and to administer the
Company's incentive, deferred compensation, stock option and long-term
incentives plans pursuant to the terms of the
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respective plans. The members of the Compensation Committee are ineligible to
participate in any of the plans or programs administered by the Compensation
Committee, except the Company's Directors Stock Plan and except for certain
replacement options granted to non-employee directors who participated in the
Company's Exchange Offer, described below under the caption "Stock Options and
Restricted Stock" in the Report of the Compensation and Management Development
Committee on Executive Compensation. The Committee met 4 times during the 2002
fiscal year and acted by unanimous written consent 6 times.
The TECHNOLOGY COMMITTEE reviews and oversees technology-based issues of
importance to the Company including, but not limited to, evaluation of the
Company's investments in technology, research resources and product development;
evaluation of the Company as a technology leader based on benchmarking against
other recognized technology centers (corporate, government and universities);
evaluation of the strength and integrity of the Company's engineering and
manufacturing processes and disciplines; and evaluation of the application of
information and other advanced technologies in the Company's businesses to
enhance productivity and competitiveness. The Technology Committee did not meet
in the 2002 fiscal year.
The SOCIAL AND ENVIRONMENTAL COMMITTEE reviews and assesses the Company's
policies and practices in the areas of community and civic relations including
programs and contributions to health, educational, cultural and other social
institutions; product integrity and safety; employee health and safety; employee
relations, with particular emphasis on equal employment opportunities and
advancement; and the protection and enhancement of the environment and energy
resources. The Social and Environmental Committee did not meet in the 2002
fiscal year.
The Board of Directors held 14 meetings and acted by unanimous written
consent four times during the 2002 fiscal year. Each director is expected to
attend each meeting of the Board and those committees on which he serves. Other
than Messrs. Bressler and Eslambolchi, who attended 67% and 55%, respectively,
of all meetings of the Board and all committees on which each of them served, no
director attended less than 75% of all the meetings of the Board and those
committees on which he served in the 2002 fiscal year.
DIRECTORS' COMPENSATION
During fiscal 2002, non-employee directors of the Company 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: (a) an
annual fee of $2,500 for service as a committee chairman and (b) an annual fee
of $1,500 for service as a member of a committee. In addition, each non-employee
director received (a) $1,000 per day for each Board meeting attended in person
and (b) $500 per day for each Board meeting attended by telephone. The 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 the Company's
Common Stock at an exercise price per share equal to the fair market value of
the Company's 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 one year of service on the Board, each non-employee director will
thereafter be granted an option to purchase 20,000 shares of the Company's
Common Stock following each Annual Meeting of Shareowners of the Company. No
annual grants of options were made pursuant to the Directors Stock Plan in
fiscal year 2002 to the directors who participated in the Company's Exchange
Program to the full amount allowed.
In view of Mr. Beall's extraordinary contributions to the Company and its
shareowners, on October 31, 2002 the Board of Directors (with Mr. Beall
abstaining) voted to extend the expiration date of certain options to purchase
the Company's Common Stock (the "Conexant Options") granted to Mr. Beall under
the Conexant Systems, Inc. 1998 Stock Option Plan (the "Conexant 1998 Plan") in
connection with certain adjustments to options to purchase Rockwell common stock
(the "Rockwell Options") held by Mr. Beall at the time of the spin-off of the
Company from Rockwell on December 31, 1998. Mr. Beall's Conexant Options consist
of (i) non-qualified options to purchase 288,208 shares of Common Stock of the
Company with an exercise price of $1.78 per share; (ii) non-qualified options to
purchase 321,986 shares of Common Stock of the Company with an exercise price of
$2.59 per share; and (iii) non-qualified options to purchase 273,820
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shares of Common Stock of the Company with an exercise price of $3.27 per share.
Under the terms of the Conexant 1998 Plan and Mr. Beall's stock option
agreements, the Conexant Options, if not sooner exercised, were to expire on
June 30, 2003, the fifth anniversary of Mr. Beall's retirement from Rockwell. As
a result of the extension, the Conexant Options may be exercised until ten years
after the original date of grant of the corresponding Rockwell Options from
which the Conexant Options were derived (specifically, until December 5, 2004 in
the case of the Conexant Options with a $1.78 exercise price, until December 5,
2005 in the case of the Conexant Options with a $2.59 exercise price and until
December 8, 2006 in the case of the Conexant Options with a $3.27 exercise
price). The Board of Directors noted that there would not be an earnings charge
in connection with the extension of the expiration date of the Conexant Options
because the exercise prices of the Conexant Options exceeded the fair market
value of the Company's Common Stock subject to the Conexant Options on the date
the extension became effective. In addition, in recognition of their
extraordinary service to the Company, Messrs. Beall, Bressler, Farrill and
Stead, the four non-employee directors who have been members of the Board since
the time the Company was spun-off from Rockwell were each granted options to
purchase 80,000 shares of the Company's Common Stock on November 29, 2002,
approximately the fourth anniversary of their joining the Board. The exercise
price of these stock options is $2.28 and the options will vest in four equal
installments on each of the first, second, third and fourth anniversaries of the
date the options were granted.
Under the terms of the Company's 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 the Company's Common
Stock on the Nasdaq National Market on the date each retainer payment would
otherwise be made in cash.
9
REPORT OF THE AUDIT COMMITTEE
The Audit Committee, which consists entirely of non-employee directors (see
"Board Committees and Meetings" above), has furnished the following report on
Audit Committee matters:
The Audit Committee acts pursuant to a written charter, which was adopted
by the Board of Directors of the Company on November 30, 1998, amended and
restated most recently on October 31, 2002. A copy of the charter, which is
reviewed annually by the Audit Committee, is attached as Appendix A to this
Proxy Statement. The Audit Committee has reviewed the audited financial
statements of the Company for the fiscal year ended September 30, 2002 with
management and it has discussed with Deloitte & Touche LLP, the Company's
independent auditors, the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication with Audit Committees) relating to the
conduct of the audit. The Audit Committee has also received written disclosures
and a letter from Deloitte & Touche LLP regarding its independence from the
Company as required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), has discussed with Deloitte & Touche LLP the
independence of that firm and has considered whether the provision of non-audit
services by Deloitte & Touche LLP is compatible with maintaining the
independence of that firm. Based upon the above materials and discussions, the
Board of Directors, including all the members of the Audit Committee, met with
Deloitte & Touche LLP, reviewed the Company's audited financial statements and
approved the inclusion of these financial statements in the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 2002.
Audit Committee
Richard M. Bressler, Chairman
Ralph J. Cicerone
F. Craig Farrill
Jerre L. Stead
REPORT OF THE COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE ON EXECUTIVE
COMPENSATION
The Compensation and Management Development Committee (the "Compensation
Committee"), which consists entirely of non-employee directors (see "Board
Committees and Meetings" above), has furnished the following report on executive
compensation:
COMPENSATION PHILOSOPHY AND OBJECTIVES OF THE COMPANY
The Compensation Committee has adopted for the Company a general
compensation philosophy of "pay for performance" in which total cash
compensation should vary with Company performance. The Compensation Committee
believes this philosophy is appropriate for the Company as a high technology,
semiconductor company. The Compensation Committee's goal is to provide base
salary and opportunity for annual incentives sufficient to provide total cash
compensation at market competitive levels for major U.S. high technology
companies and to provide long-term incentives in the form of stock option grants
to its executives at slightly above market competitive levels for major U.S.
high technology companies.
Total annual compensation for the majority of the Company's employees,
including its executive officers, consists of the following:
- Base salary; and
- An annual incentive compensation program that is related to growth in
certain financial performance measures of the Company and/or its stock
price appreciation, and based on an individual bonus target for the
performance period. The annual incentive from year to year may be
delivered in cash, restricted stock or stock options.
10
Long-term incentive compensation is realized through the grant of stock
options and, in some cases, shares of restricted stock, to executive officers
and most employees under the 1999 Long Term Incentives Plan ("1999 LTIP") and
the 2000 Non-Qualified Stock Plan.
In addition to encouraging stock ownership by granting stock options and
restricted stock, the Company further encourages all of its employees to own the
Company's Common Stock through the Company's Employee Stock Purchase Plans (the
"ESPPs"). The ESPPs allow participants to buy the Company's Common Stock at a
discount to the market price with up to 10% of their salary and bonuses (subject
to certain limits), thereby allowing employees to profit when the value of the
Company's Common Stock increases over time.
SETTING EXECUTIVE COMPENSATION
In setting the base salary and individual bonus target amount for executive
officers, the Compensation Committee reviews information relating to executive
compensation of U.S.-based semiconductor and other high technology companies
that are considered generally comparable to the Company. While there is no
specific formula that is used to establish executive compensation in relation to
this market data, executive officer base salary is generally set to be around
the average salaries for comparable jobs in the marketplace. However, if the
Company's business groups meet or exceed certain predetermined financial and
non-financial goals, amounts paid under the Company's performance-based
incentive compensation programs may lead to total cash compensation levels that
are higher than the average salaries for comparable jobs. The Compensation
Committee considers the total compensation (earned or potentially available) of
the senior executives in establishing each component of compensation. In its
review, the Compensation Committee considers the following: (1) industry, peer
group and national surveys of other U.S. semiconductor and high technology
companies; (2) reports of the independent compensation consultants who advise
the Compensation Committee on the Company's compensation programs in comparison
with those of other companies which the consultants believe compete with the
Company for executive talent; and (3) performance judgments as to the past and
expected future contributions of individual senior executives.
As a result of this process, and in accordance with the Company's
compensation philosophy that total cash compensation should vary with Company
performance, for fiscal year 2002 the Company continued the 10% salary reduction
for officers at the level of vice president and above that was instituted in
fiscal year 2001. This reduction remained in place throughout fiscal year 2002
and is expected to remain in effect until the Company's Broadband Communications
business segment achieves profitability as measured on a pro forma basis;
however, the reduction is expected to remain in place until the Company's
Mindspeed Technologies business segment ("Mindspeed") achieves profitability as
measured on a pro forma basis for officers at the level vice president and above
if they are assigned to the Mindspeed segment or if they serve both the
Broadband Communication and the Mindspeed segments (e.g., Messrs. Decker, Iyer
and O'Reilly). In addition, as discussed below, a significant part of each
executive officer's potential total cash compensation is dependent on the
performance of the Company as measured through its performance-based incentive
compensation program.
PERFORMANCE-BASED COMPENSATION
The Company's executive annual incentive compensation plan is based on the
overall financial performance of the Company. In any given year, that
performance is measured against the specific performance criteria adopted by the
Compensation Committee for use in that particular fiscal year. Performance
criteria typically include revenue growth, operational profitability, and
attainment of strategic business development goals. In addition, executive
incentive compensation awards may be adjusted by an individual performance
multiplier. The Chief Executive Officer's annual incentive plan has the same
components as the executive plan. This award may also be adjusted by the Board
of Directors based on individual performance. For all executives, the annual
incentive award value is targeted at competitive market levels for semiconductor
and other high technology companies.
11
PERFORMANCE BASED COMPENSATION PLAN FOR FISCAL YEAR 2002
In November 2001, the Company adopted the 2001 Performance Share Plan
pursuant to which the Company may make grants of performance share awards to
eligible employees, including executive officers. Performance share awards
entitle the employee to whom a grant is made to receive cash or shares of the
Company's Common Stock at the election of the Compensation Committee, based on
the value of the Company's Common Stock on the date the performance share award
vests. This form of equity-based incentive compensation is intended to attract,
reward and retain employees.
The Compensation Committee determines which of the employees of the Company
or its subsidiaries are eligible for performance share awards under the 2001
Performance Share Plan, to whom performance share awards are granted and the
terms and conditions of performance share award grants, including the number of
shares subject to the performance share award and the vesting criteria of the
shares.
For grants of performance share awards during fiscal 2002, the Compensation
Committee has established separate vesting criteria for performance share awards
to employees of the Company's Broadband Communications business segment and
employees of Mindspeed. In each case, the performance share awards will vest
upon the achievement by the Company's Broadband Communications business segment
or Mindspeed, as the case may be, of their separate and respective financial
performance criteria by certain specified dates.
To the extent that the applicable financial performance criteria are not
met by the specified dates, the relevant performance share awards will not vest
and will terminate.
STOCK OPTIONS AND RESTRICTED STOCK
The Company grants stock options to aid in the attraction and retention of
employees and to align the interests of employees with those of the shareowners.
Stock options have value for an employee only if the price of the Company's
stock increases above the fair market value on the grant date and the employee
remains employed by the Company for the period required for the stock option to
be exercisable, thus providing an incentive to remain in the Company's employ.
In addition, stock options directly link a portion of an employee's compensation
to the interests of shareowners by providing an incentive to maximize shareowner
value.
The Company's 1999 LTIP is generally used for making grants of incentive
stock options, nonqualified stock options and restricted stock to officers and
other employees as a part of the Company's executive performance review process.
In addition, the Company's 2000 Non-Qualified Stock Plan authorizes the grant of
nonqualified stock option and restricted stock awards to officers and other
employees. Annual stock option grants for executives are a key element of
market-competitive total compensation. In fiscal year 2002, stock options for
the executive officers were granted upon recommendation of management and
approval of the Compensation Committee. Individual grant amounts were based on
internal factors such as relative job scope and contributions made during the
past year, as well as a review of publicly available data on senior management
compensation at other companies. In general, options are exercisable in 25%
increments over a four-year period, first exercisable one year after the date of
grant (e.g., 25% of options granted in 2002 become exercisable on the
anniversary of the date of grant in 2003). However, with respect to stock
options granted on March 30, 2001, 50% became exercisable on the first
anniversary of the date of grant, and 25% become exercisable on each of the
second and third anniversaries.
The continuing deterioration in the price of the Company's Common Stock
strongly undercut the Board of Directors' desire to provide all employees of the
Company with the opportunity to participate in the Company's long-term growth
through its stock option programs. In order to increase the value of the
Company's stock option programs, the Board approved an exchange offer pursuant
to which all employees, officers and directors with stock option grants having
an exercise price of $25 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 September 4, 2001, eligible employees, officers and
directors who chose to participate had their stock options cancelled on October
2, 2001 and received on April 3, 2002 for each option
12
cancelled one new option with an exercise price of $11.71 (based on the closing
price of the Company's Common Stock as reported by Nasdaq on that date) (the
"Replacement Options"). The vesting provisions of the Replacement Options issued
remained the same as the provisions applicable to the cancelled options. At the
close of the Exchange Offer on October 2, 2001, the Company accepted for
exchange options to purchase an aggregate of 27,497,528 shares of the Company's
Common Stock from 3,730 eligible participants representing 89% of the shares
subject to stock options that were eligible for the Exchange Offer. All of the
Company's non-employee directors and officers who were eligible to participate
in the Exchange Offer participated in the Exchange Offer to the full amount
allowed. On April 3, 2002, the Company issued an aggregate of 26,651,212
Replacement Options.
On November 4, 2002, the Company issued 5,502,208 options to the eligible
participants in its Broadband Communications business segment; on November 5,
2002 the Company issued 4,625,597 options to its eligible Mindspeed
participants.
COMPLIANCE WITH SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), places a limit of $1,000,000 on the amount of compensation that may be
deducted by the Company in any year with respect to each of the Company's five
most highly paid executive officers. Certain performance-based compensation that
has been approved by shareowners is not subject to the deduction limit. The 1999
LTIP is qualified so that awards under the plan constitute performance-based
compensation not subject to the deduction limit under Section 162(m). It is the
Committee's objective that, so long as it is consistent with its overall
business, compensation and retention objectives, the Company will, to the extent
reasonable, endeavor to keep executive compensation deductible by the Company
for federal income tax purposes.
COMPANY PERFORMANCE AND CEO COMPENSATION
The Company's compensation program is designed to support the achievement
of corporate and business objectives. This pay-for-performance program is most
clearly exemplified in the compensation of the Company's Chairman and Chief
Executive Officer, Dwight W. Decker.
Dr. Decker's base salary and incentive target are determined in the same
manner as described above for all executive officers. In setting compensation
levels for the Chief Executive Officer, the Compensation Committee considers
data reflecting comparative compensation information from other companies for
the prior year. Effective January 1, 2002, the Compensation Committee elected to
leave Dr. Decker's salary unchanged at the $657,000 amount to which it had been
reduced in the prior fiscal year. On November 4, 2002, Dr. Decker, together with
the other employees in the Company's Broadband Communications business segment,
was awarded stock options covering 500,000 shares, of which 188,338 were
incentive stock options.
Compensation and Management
Development Committee
Jerre L. Stead, Chairman
Donald R. Beall
Ralph J. Cicerone
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of September 30, 2002 about
shares of the Company's Common Stock that may be issued upon the exercise of
options, warrants and rights granted to employees, consultants or directors
under all of the Company's existing equity compensation plans, including the
Company's 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
and 2001 Performance Share Plan. The table does not include information
13
with respect to shares subject to outstanding options granted under equity
compensation plans assumed by the Company in connection with mergers and
acquisitions of the companies which originally granted those options. Footnote
(5) to the table sets forth the total number of shares of the Company's Common
Stock issuable upon exercise of those assumed options as of September 30, 2002
and the weighted average exercise price of those options. No additional options
may be granted under the assumed plans.
WEIGHTED-
AVERAGE EXERCISE
PRICE OF NUMBER OF
NUMBER OF SECURITIES TO OUTSTANDING SECURITIES REMAINING
BE ISSUED UPON EXERCISE OPTIONS, AVAILABLE FOR FUTURE
OF OUTSTANDING OPTIONS, WARRANTS AND ISSUANCE UNDER EQUITY
WARRANTS AND RIGHTS RIGHTS COMPENSATION PLANS
----------------------- ----------------- -----------------------
EQUITY COMPENSATION PLANS APPROVED BY
SHAREHOLDERS
Stock plans........................... 31,478,566 $3.53 2,661,328
Employee stock purchase plans
(Domestic)......................... 2,179,145(1)
Directors stock plan.................. 540,000 $3.88 366,829(2)
------------ ---------
Total.............................. 32,018,566 5,207,302
EQUITY COMPENSATION PLANS NOT APPROVED
BY SHAREHOLDERS
Stock plans........................... 52,229,869 $4.12 6,116,888
Employee stock purchase plans
(International).................... 1,941,693(3)
Performance share plans............... 1,257,818(4) 2,742,182(4)
------------ ---------
Total.............................. 53,487,687 10,800,763
Total................................... 85,506,253(5) 16,008,065
---------------
(1) Includes shares of the Company's Common Stock subject to purchase rights
accruing under the Amended and Restated 2001 Employee Stock Purchase Plan.
Excludes an additional 5,000,000 shares of the Company's Common Stock
authorized under the Amended and Restated 2001 Employee Stock Purchase Plan
pursuant to an amendment adopted by the Board of Directors on July 18, 2002.
In addition, pursuant to the July 18, 2002 amendment, 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. The amendment to the 2001 Employee Stock Purchase Plan is described
below under "Approval of Amendment to the 2001 Employee Stock Purchase Plan
to Increase the Maximum Number of Shares Authorized Under the Plan (Proposal
3)".
(2) The Directors Stock Plan 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 150,000 shares
or 0.067% of the shares of the Company's Common Stock outstanding on that
date, subject to the Board of Directors being authorized and empowered to
select the smaller amount.
(3) Includes shares of the Company's Common Stock subject to purchase rights
accruing under the 1999 Non-Qualified Employee Stock Purchase Plan.
(4) Under the 2001 Performance Share Plan, the performance share awards may be
paid in shares of the Company's Common Stock, cash or both. See "-- Equity
Compensation Plans Not Approved by Shareowners-2001 Performance Share Plan"
below.
(5) The table does not include information for equity compensation plans assumed
by the Company in connection with mergers and acquisitions of the companies
which originally established those plans. As of September 30, 2002, a total
of 4,556,293 shares of the Company's Common Stock were issuable upon
14
exercise of outstanding options under those assumed plans. The weighted average
exercise price of those outstanding options is $1.95 per share. No additional
options may be granted under those assumed plans.
EQUITY COMPENSATION PLANS NOT APPROVED BY SHAREOWNERS
1999 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
The Company's 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 and July 18, 2002. The Non-Qualified
ESPP has not been approved by the Company's shareowners. Employees of the
Company's 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. The Board of Directors has reserved 2,400,000 shares of the
Company's Common Stock for issuance under the Non-Qualified ESPP, subject to
adjustment under certain circumstances.
The Non-Qualified ESPP permits eligible employees to purchase shares of the
Company's Common Stock at the end of each offering period at 85% of the lower of
the fair market value of the Company's 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 10% 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, 2002, an aggregate of 1,941,693 shares of the Company's Common
Stock were available for future purchases under the Non-Qualified ESPP.
2000 NON-QUALIFIED STOCK PLAN
The Company's 2000 Non-Qualified Stock Plan (the "2000 Plan") was adopted
by the Board of Directors on November 5, 1999 and was subsequently amended on
each of July 20, 2000, November 3, 2000 and January 12, 2001. The 2000 Plan has
not been approved by the Company's shareowners. The 2000 Plan authorizes grants
of non-qualified stock options and restricted stock. An aggregate of 47,500,000
shares of the Company's 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 Company's Common Stock at the date of grant. 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. Stock options
granted under the 2000 Plan may not be exercised after eight years from the date
of grant. As of September 30, 2002, an aggregate of 6,116,888 shares were
available for future grants under the 2000 Plan.
2001 PERFORMANCE SHARE PLAN
The Company's 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 Company's shareowners. An aggregate of
4,000,000 shares of the Company's 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
Company's Common Stock. Employees whose performance share awards vest are
entitled to receive a payment in the form of shares of the Company's Common
Stock, cash or both. As of September 30, 2002, an aggregate of 2,742,182 shares
of the Company's Common Stock were available for future grants under the
Performance Share Plan.
15
SHAREOWNER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total shareowner
return on the Company's Common Stock against the cumulative total return of the
Standard & Poor's 500 Stock Index and the Nasdaq Electronic Components Index for
the period beginning January 4, 1999 and ending September 30, 2002. The graph
assumes that $100 was invested on January 4, 1999, the first day of public
trading of the Company's Common Stock, in each of the Company's Common Stock,
the Standard & Poor's 500 Stock Index and the Nasdaq Electronic Components Index
and that all dividends were reinvested. No cash dividends have been paid or
declared on the Company's Common Stock. For purposes of the graph, the
distribution of the Skyworks shares to holders of the Company's Common Stock in
the Wireless Transaction is treated as a non-taxable cash dividend that was
reinvested in additional shares of the Company's Common Stock at the close of
business on June 26, 2002.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG CONEXANT SYSTEMS, INC., STANDARD & POOR'S 500 STOCK INDEX
AND THE NASDAQ ELECTRONIC COMPONENTS INDEX
(PERFORMANCE GRAPH)
---------------
* $100 Invested on 1/4/1999 in Stock or Index -- Including Reinvestment of
Dividends. Fiscal Year Ending September 30.
CUMULATIVE TOTAL RETURN (DOLLARS)
--------------------------------------------
JANUARY 4, SEPTEMBER 30,
---------- -------------------------------
1999 1999 2000 2001 2002
---------- ------ ------ ----- -----
Conexant Systems, Inc. ............................ 100 386.21 445.18 88.24 30.76
Standard & Poor's 500 Stock Index.................. 100 105.24 119.79 87.81 69.78
Nasdaq Electronic Components Index................. 100 139.73 245.74 69.26 46.20
16
EXECUTIVE COMPENSATION
The information shown below reflects the annual and long-term compensation,
from all sources, of (1) the Chief Executive Officer of the Company, (2) the
other four most highly compensated executive officers of the Company at
September 30, 2002 and (3) any other persons who were executive officers at any
time during fiscal 2002 and would have been included under clause (2) if they
had remained executive officers at September 30, 2002 (the "Named Executive
Officers"), for services rendered in all capacities to the Company for the
fiscal years ended September 30, 2000, 2001 and 2002.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
----------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ---------------------- ---------
---------------------------------- RESTRICTED STOCK LONG-TERM
NAME AND PRINCIPAL POSITION FISCAL OTHER ANNUAL STOCK OPTIONS INCENTIVE ALL OTHER
WITH THE COMPANY YEAR SALARY BONUS COMPENSATION AWARDS (SHARES) PAYOUTS COMPENSATION(1)
--------------------------- ------ ------- ------- ------------ ---------- --------- --------- ---------------
Dwight W. Decker........... 2002 699,756(2) -- 10,102 -- 1,250,000(3) -- 26,280
Chairman of the Board and 2001 686,827 -- 26,118 -- 600,000 -- 29,822
Chief Executive Officer 2000 669,231 950,000 80,440 -- 1,250,000(4) -- 26,769
Raouf Y. Halim............. 2002 450,000 -- 21,669 -- 450,000(3) -- 18,000
Senior Vice President and 2001 422,885 250,000(4) 37,965 -- 1,024,000 -- 27,869
Chief Executive
Officer -- 2000 334,615 234,437 72,565 -- 825,000(3) -- 13,385
Mindspeed Technologies
Balakrishnan S. Iyer....... 2002 337,500 -- 4,813 -- 500,000(3) -- 13,500
Senior Vice President and 2001 343,817 -- 14,109 -- 197,629 -- 19,314
Chief Financial Officer 2000 320,769 227,085 65,962 -- 500,000(3) -- 12,831
F. Matthew Rhodes.......... 2002 313,269 -- 921 -- 991,647(3) -- 8,164
Senior Vice President and 2001 317,787 2,500(5) 9,010 -- 170,572 -- 15,204
President Broadband 2000 292,308 276,558(6) 22,969 -- 300,000(3) -- 10,850
Communications
Dennis E. O'Reilly......... 2002 292,500 -- 10,078 -- 200,000(3) -- 11,786
Senior Vice President, 2001 304,183 -- 15,125 -- 163,858 -- 11,166
General Counsel and 2000 270,385 167,640 110,551(7) -- 200,000(3) -- 8,216
Secretary
Moiz M. Beguwala........... 2002 352,616(8) -- 3,405 -- 225,000(3) -- 13,901
Senior Vice President(9) 2001 326,700 -- 10,356 -- 97,629 -- 16,151
2000 343,846(10) 120,142 19,297 -- 225,000(3) -- 12,831
---------------
(1) Amounts contributed or accrued for the Named Executive Officers under the
Conexant savings plans and the related supplemental savings plan.
(2) Includes $42,756 paid to Mr. Decker in lieu of vacation.
(3) Includes options to purchase 1,250,000; 825,000; 500,000; 300,000; 200,000;
and 225,000 shares with exercise prices of $25 or above (representing all
of their eligible options) exchanged by Messrs. Decker, Halim, Iyer,
Rhodes, O'Reilly, and Beguwala, respectively, pursuant to the Company's
Exchange Offer for a grant of new options for the same number of shares on
April 3, 2002 (other than for Mr. Halim). The exchanged options were
cancelled on October 2, 2001 and Messrs. Decker, Halim, Iyer, Rhodes,
O'Reilly and Beguwala received their new options with an exercise price
equal to $11.71, the fair market value of the Company's Common Stock on the
grant date. Mr. Halim received new options to purchase 450,000 shares on
April 3, 2002 as satisfaction in full of his rights to receive new options
under the Exchange Offer. In connection with the Wireless Transaction, the
exercise prices of these new options were adjusted to $4.2327 per share.
(4) Represents a bonus paid to Mr. Halim in connection with his being named
Senior Vice President and Chief Executive Officer -- Mindspeed
Technologies.
(5) Represents an invention award paid to Mr. Rhodes in recognition of his
contribution towards an invention.
17
(6) Includes a retention bonus of $60,000 paid to Mr. Rhodes in connection with
Rockwell's acquisition of Pacific Communication Sciences, Inc.
(7) Includes $79,345 paid in connection with the relocation of Mr. O'Reilly's
residence in Southern California upon his joining the Company.
(8) Includes $16,985 paid to Mr. Beguwala in lieu of vacation.
(9) Effective June 25, 2002, Mr. Beguwala is no longer an executive officer of
the Company but continues as an employee of the Company. He will continue
as an active employee and receive salary payments until a mutually agreed
upon date between February 26, 2003 and February 25, 2004 and during that
time will continue to be covered under certain medical benefit plans of the
Company, to receive financial planning, health physical and health club
memberships and to receive outplacement benefits.
(10) Includes $23,077 paid to Mr. Beguwala in lieu of vacation.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into change of control employment agreements
("Employment Agreements") with certain key executives, including Messrs. Decker,
Halim, Iyer, O'Reilly, and Rhodes. Each Employment Agreement becomes effective
upon a "change of control" of the Company. Each Employment Agreement provides
for the continuing employment of the executive after the change of control on
terms and conditions no less favorable than those in effect before the change of
control. If the executive's employment is terminated by the Company without
"cause" or if the executive terminates his or her own employment for "good
reason" (each as defined in the Employment Agreement), the executive is entitled
to severance benefits equal to a multiple of his or her annual compensation
(including bonus) and continuation of certain benefits for a number of years
equal to the multiple. The multiple is three for Mr. Decker and two for the
other executives (or, in either case, the shorter number of years until the
executive's normal retirement date). The executives are entitled to an
additional payment, if necessary, to make them whole as a result of any excise
tax imposed by the Code on certain change of control payments (unless the safe
harbor amount above which the excise tax is imposed is not exceeded by more than
10%, in which event the payments will be reduced to avoid the excise tax).
For the purposes of the Employment Agreements, a "change of control" is
defined generally as:
- the acquisition by any individual, entity or group of beneficial
ownership of 20% or more of either the then outstanding shares of the
Company's 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 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
the Company's assets, which results in a change in the majority of the
Board of Directors or of more than 60% of the Company's shareowners; or
- approval by the Company's shareowners of the complete liquidation or
dissolution of the Company.
In October 1999, the Company made loans to certain officers and other
employees (including the Named Executive Officers), the proceeds of which were
used to pay federal and state withholding tax due in connection with the
accelerated vesting on October 1, 1999 of certain shares of restricted stock
previously granted to the officers and other employees. Because the tax payments
were due at a time shortly prior to the announcement of the Company's year-end
results when the officers and other employees were not permitted to trade in the
Company's Common Stock, the Company made the loans available to these
individuals to allow them to pay the taxes without selling their shares of
restricted stock. The loans carried an interest rate of 5.54% and, pursuant to
action of the Board taken on March 21, 2001 became due on December 1, 2002. All
outstanding loans were repaid on or prior to that date. There are no other loan
agreements between the Company and any of its executive officers.
18
In fiscal year 2002, the Company donated $1,033,807.55 to the University of
California, Irvine Foundation. Of these donations, $860,746.82 was made directly
by the Company; the remainder was made by the Conexant Systems Charitable Fund,
a donor-directed fund administered by the California Community Foundation. Dr.
Cicerone is Chancellor of the University of California, Irvine.
On September 28, 2001, At Home Corporation and all of its wholly owned
subsidiaries and certain of its foreign subsidiaries filed voluntary petitions
for reorganization under Chapter 11 of the U.S. Bankruptcy Code. In the first
half of 2001, Dr. Eslambolchi served as interim president of Excite@Home
Broadband Networks Services, a division of At Home Corporation, during which
time he was an AT&T employee and executive on-loan to Excite@Home Broadband
Networks Services.
See also the discussion regarding the extension of the expiration date of
certain options held by Mr. Beall under "Directors' Compensation".
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is further information on grants to the Named Executive
Officers of stock options pursuant to the 1999 LTIP during the fiscal year ended
September 30, 2002, which are reflected in the Summary Compensation Table on
page .
OPTIONS GRANTS
---------------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENTAGE OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS GRANTED TO STOCK PRICE APPRECIATION FOR
UNDERLYING CONEXANT EXERCISE OPTION TERM
OPTIONS GRANTED EMPLOYEES IN PRICE (PER EXPIRATION -----------------------------
NAME (SHARES) FISCAL 2002 SHARE) DATE 5% 10%
---- --------------- ------------------- ----------- ---------- ------------- -------------
Dwight W. Decker..... 1,250,000(1) $4.2327 4/3/2012 $3,327,403 $8,432,292
Raouf Y. Halim....... 450,000(1) $4.2327 4/3/2012 1,197,865 3,035,625
Balakrishnan S.
Iyer............... 500,000(1) $4.2327 4/3/2012 1,330,961 3,372,917
F. Matthew Rhodes.... 300,000(1) $4.2327 4/3/2012 798,577 2,023,750
691,647(2) $2.6351 5/6/2012 1,146,198 2,904,690
Dennis E. O'Reilly... 200,000(1) $4.2327 4/3/2012 532,384 1,349,167
Moiz M. Beguwala..... 225,000(1) $4.2327 4/3/2012 598,933 1,517,813
---------------
(1) Represents options to purchase 1,250,000; 450,000; 500,000; 300,000, 200,000
and 225,000 shares exchanged by Messrs. Decker, Halim, Iyer, Rhodes,
O'Reilly and Beguwala, respectively, pursuant to the Company's Exchange
Offer for a grant of new options for the same number of shares on April 3,
2002 (other than for Mr. Halim who tendered options to purchase an aggregate
of 825,000 shares in the Exchange Offer and received options to purchase
450,000 shares as satisfaction in full of his rights to receive new
options). The exchanged options were cancelled on October 2, 2001 and
Messrs. Decker, Halim, Iyer, Rhodes, O'Reilly and Beguwala received their
new options with exercise prices equal to $11.71, the fair market value of
the Company's Common Stock on April 3, 2002. In connection with the Wireless
Transaction, the exercise prices of these new options were adjusted to
$4.2327 per share. These options maintained their original vesting
schedules.
(2) Options were granted on May 6, 2002 and become exercisable in four equal
annual installments on each of the first four anniversaries of the date of
grant.
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 year 2002 of options to purchase the Company's
Common Stock granted under the Company's 1998 Stock Option Plan or the 1999 LTIP
and (ii) the unexercised options to purchase the Company's Common Stock
19
granted to the Named Executive Officers in fiscal year 2002 and prior years and
held by them at September 30, 2002.
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES SEPTEMBER 30, 2002(1) AT SEPTEMBER 30, 2002(2)
ACQUIRED VALUE ---------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Dwight W. Decker........ -- -- 2,823,586(3) 1,175,000(3) -- --
Raouf Y. Halim.......... -- -- 2,160,748(3) 1,750,295(3) -- --
Balakrishnan S. Iyer.... -- -- 853,390 678,391 -- --
F. Matthew Rhodes....... -- -- 410,286 1,001,933 -- --
Dennis E. O'Reilly...... -- -- 356,829 244,429 -- --
Moiz M. Beguwala........ -- -- 734,996(3) 241,315(3) -- --
---------------
(1) Includes options to purchase 1,250,000; 450,000; 500,000; 300,000; 200,000;
and 225,000 shares exchanged by Messrs. Decker, Halim, Iyer, Rhodes,
O'Reilly and Beguwala, respectively, pursuant to the Company's Exchange
Offer for a grant of new options for the same number of shares on April 3,
2002 (other than for Mr. Halim who tendered options to purchase an aggregate
of 825,000 shares in the Exchange Offer and received options to purchase
450,000 shares as satisfaction in full of his rights to receive new
options). The exchanged options were cancelled on October 2, 2001 and
Messrs. Decker, Halim, Iyer, Rhodes, O'Reilly and Beguwala received their
new options with exercise prices equal to $11.71, the fair market value of
the Company's Common Stock on the grant date. In connection with the
Wireless Transaction, the exercise prices of these new options were adjusted
to $4.2327 per share. These options maintained their original vesting
schedules.
(2) Based on the closing price of the Company's Common Stock on the Nasdaq
National Market on September 27, 2002 ($1.06).
(3) Includes options that were granted by Rockwell prior to the spin-off of the
Company from Rockwell and were converted into options to purchase the
Company's Common Stock, on the same terms and vesting schedule as the
Rockwell 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
The Company does not sponsor a defined benefit pension plan for salaried
employees.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To the Company's knowledge, the following table sets forth information
regarding ownership of the Company's outstanding Common Stock on November 30,
2002 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.
20
BENEFICIAL OWNERSHIP AS OF NOVEMBER 30, 2002
COMMON STOCK
-----------------------------------
NAME SHARES(1) PERCENT OF CLASS(2)
---- ---------- -------------------
Donald R. Beall............................................. 1,355,481(3,4,5) --*
Richard M. Bressler......................................... 175,802(5,6) --*
Ralph J. Cicerone........................................... 12,675(5,7) --*
Dwight W. Decker............................................ 3,267,560(3,5) --*
Hossein Eslambolchi......................................... 10,000(5) --*
F. Craig Farrill............................................ 82,152(5,8) --*
Jerre L. Stead.............................................. 70,444(5,9) --*
Raouf Y. Halim.............................................. 2,335,690(3,5) --*
Moiz M. Beguwala............................................ 901,870(3,5) --*
Balakrishnan S. Iyer........................................ 1,057,440(3,5) --*
Dennis E. O'Reilly.......................................... 530,556(3,5) --*
F. Matthew Rhodes........................................... 514,254(3,5) --*
All of the above and other executive officers as a group (21
persons).................................................. 12,904,893(3,4,5, 4.85%
6,7,8,9)
---------------
* Less than 1%
(1) Each person's address is the address of the Company.
(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.
(3) Includes shares of Common Stock held under the savings plans of the Company
and Rockwell as of November 30, 2002. Does not include the following:
14,026; 522; 1,360; 163; 34; 201; and 16,512 share equivalents for Messrs.
Decker, Halim, Beguwala, Iyer, O'Reilly, Rhodes and the group, respectively,
held under the Company's and Rockwell's supplemental savings plans as of
November 30, 2002. Awards under the supplemental savings plans are paid in
cash.
(4) Includes shares, as to which beneficial ownership is disclaimed, as follows:
8,976 shares held for the benefit of family members and 10,000 shares owned
by the Beall Foundation, of which Mr. Beall is President and a director.
Does not include 288,208 shares of Common Stock that may be acquired upon
exercise of stock options held in Beall Trust #2, the beneficiaries of which
are adult children of Mr. Beall not living in the same household and as to
which trust Mr. Beall has no relationship.
(5) Includes shares of Common Stock that may be acquired upon the exercise of
outstanding stock options within 60 days as follows: 691,556; 101,238;
10,000; 3,123,586; 10,000; 75,000; 55,000; 2,302,748; 863,811; 1,039,705;
428,758; 495,572; and 11,677,934 for Messrs. Beall, Bressler, Cicerone,
Decker, Eslambolchi, Farrill, Stead, Halim, Beguwala, Iyer, O'Reilly, Rhodes
and the group, respectively.
(6) Includes 1,784 shares of Common Stock issued in the spin-off of the Company
from Rockwell in respect of restricted shares of Rockwell common stock
granted to Mr. Bressler under the Rockwell Directors Stock Plan.
(7) Includes 675 shares of Common Stock owned by the Ralph J. Cicerone and Carol
M. Cicerone Trust, of which Mr. Cicerone is a co-trustee.
(8) Includes 3,760 shares of Common Stock granted to Mr. Farrill as restricted
stock under the Directors Plan.
(9) Includes 15,444 shares of Common Stock granted to Mr. Stead as restricted
stock under the Directors Plan.
21
With the exception of Wells Fargo Bank, N.A., as trustee under various
savings plans of Rockwell and Rockwell Collins, which held approximately 5% of
the outstanding shares of the Company's Common Stock and FMR, Inc., which held
approximately 10.317% of the outstanding shares of the Company's Common Stock as
of January 2, 2003, there are no persons known to Conexant to be "beneficial
owners" (as that term is defined in the rules of the Securities and Exchange
Commission) of 5% of any class of the Company's voting securities outstanding as
of November 30, 2002. Shares held by the trustee of the savings plans of
Rockwell and Rockwell Collins on account of the participants in such plans will
be voted by the trustee in accordance with instructions from the participants
(either in writing or by means of the Company's telephone or Internet voting
procedures), and where no instructions are received, as the trustee deems
proper.
APPROVAL OF AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION TO CHANGE THE PAR VALUE OF THE COMMON STOCK (PROPOSAL 2)
The Board of Directors believes that it is in the best interest of the
Company to amend the Company's Restated Certificate of Incorporation to change
the par value of the Common Stock from $1.00 per share to $0.01 per share.
The Board believes that the reduction in par value to $0.01 per share will
provide the Company with additional flexibility with respect to the Company's
capital account under Delaware law. Upon the effectiveness of the change in par
value, the Company's stated capital will be reduced by an amount per share equal
to $0.99 and the additional paid-in capital account will be credited with the
aggregate amount by which the stated capital is reduced. Historically, the
concepts of par value and the stated capital of a corporation were to protect
creditors and senior security holders by ensuring that the corporation received
at least the par value as consideration for issuance of its shares. Over time,
these concepts have lost their significance for the most part. In fact, Delaware
corporate law permits the issuance of shares without par value. Most newly-
formed companies, including most of the Company's peers, have no par value or a
minimal par value. The reduction in par value, will place the Company among its
peer companies with respect to its par value.
The Board believes that the change in par value will provide the Company
with greater flexibility with respect to the issuance of stock and stock-based
compensation because Delaware law requires that the Company receive at least the
par value as payment for the Common Stock. In addition, the corresponding
reduction in the stated capital of the Company will provide the Board of
Directors additional flexibility with respect to dividends and distributions.
Under Delaware law, the Board of Directors may only declare dividends out of the
Company's surplus (i.e., the additional paid-in capital) or if there is no
surplus, only under specified conditions. The reduction in par value will
increase the Company's surplus for purposes of this provision of Delaware law.
The reduction in par value will not affect outstanding options, employee
benefit plans or savings plans.
If this proposal is approved, the first paragraph of Article FOURTH of the
Restated Certificate of Incorporation will be amended to read as follows:
"FOURTH: THE TOTAL NUMBER OF SHARES OF ALL CLASSES OF STOCK WHICH THE
CORPORATION SHALL HAVE THE AUTHORITY TO ISSUE IS 1,025,000,000, OF WHICH
25,000,000 SHARES WITHOUT PAR VALUE ARE TO BE OF A CLASS DESIGNATED
PREFERRED STOCK AND 1,000,000,000 SHARES OF THE PAR VALUE OF $0.01 EACH ARE
TO BE OF A CLASS DESIGNATED COMMON STOCK."
The Board has unanimously adopted resolutions setting forth the proposed
amendment to the Restated Certificate of Incorporation, declaring its
advisability and directing that the proposed amendment be submitted to the
shareowners for their approval at the Annual Meeting. If adopted by the
shareowners, the amendment will become effective upon filing of an appropriate
amendment to the Company's Restated Certificate of Incorporation with the
Secretary of State of the State of Delaware.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED
AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO CHANGE THE
PAR VALUE OF THE COMMON STOCK. UNLESS A CONTRARY
22
CHOICE IS SPECIFIED, PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED
FOR APPROVAL OF THE PROPOSED AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION TO CHANGE THE PAR VALUE OF THE COMMON STOCK.
APPROVAL OF AMENDMENT TO THE 2001 EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE
MAXIMUM NUMBER OF SHARES AUTHORIZED UNDER THE PLAN (PROPOSAL 3)
The Company's shareowners are being asked to act upon a proposal to approve
an amendment (the "Amendment") to the Company's 2001 Employee Stock Purchase
Plan (the "2001 ESPP"), to increase the aggregate maximum number of shares that
may be issued under the 2001 ESPP. The 2001 ESPP, as amended and restated
effective July 18, 2002 and incorporating the Amendment, is referred to as the
"Plan". The Plan permits eligible employees to elect to have a portion of their
base salary withheld for purchases of the Company's Common Stock at a price
discounted from the fair market value of the Common Stock. The "2001 ESPP" was
originally adopted by the Board of Directors effective September 4, 2001. The
Amendment adopted by the Board of Directors on July 18, 2002 (i) increased the
maximum number of shares authorized under the Plan from 5 million shares to 10
million; and (ii) provides that the maximum number of shares authorized under
the Plan will be automatically increased by 2.5 million shares, or such lesser
number as the Board may determine, on October 1 of each year for 10 years
commencing on October 1, 2003 and ending on October 1, 2012, for a maximum
increase of 25 million additional shares.
The 2001 ESPP was approved by the shareowners of the Company at the 2002
Annual Meeting and is qualified as an Employee Stock Purchase Plan under Section
423 of the Internal Revenue Code of 1986, as amended (the "Code"). If the
proposal to approve the Amendment is approved by the shareowners of the Company,
the Plan will be qualified as an Employee Stock Purchase Plan under Section 423
of the Code; however, if the shareowners do not approve the Amendment within 12
months of its adoption by the Board, then the Plan will be an Employee Stock
Purchase Plan not qualified under Section 423 of the Code with respect to any
purchase rights covering the additional 5 million shares and the annual
additional share increase authorized by the Board on July 18, 2002. Regardless
of whether the Plan qualifies as an Employee Stock Purchase Plan under Section
423 of the Code, it is the Company's present intention that the provisions of
the Plan will be administered, interpreted and construed in a manner consistent
with the requirements of Section 423 of the Code.
The Plan became effective upon adoption by the Board of Directors on July
18, 2002 and will continue to be effective in that form, including the
Amendment, regardless of the outcome of the vote upon this Proposal 3. The
approval of the Company's shareowners is being sought solely to qualify the
additional shares authorized under the Plan for purposes of Section 423 of the
Code.
The following is a summary of the principal terms of the Plan as currently
in effect, including the Offering adopted by the Board on July 18, 2002 (the
"2002 Offering"). Although the Company believes that the following description
provides a fair summary of the material terms of the Plan and the 2002 Offering,
the description is qualified in its entirety by the specific terms of the Plan
and the 2002 Offering, copies of which are attached as Appendix B to this Proxy
Statement.
Purpose. The purpose of the Plan is to provide a means by which employees
of the Company and certain participating subsidiaries may be given an
opportunity to purchase shares of the Company's Common Stock. The Company, by
means of the Plan, seeks to retain the services of these employees, to secure
and retain the services of new employees and to provide incentives for these
persons to exert maximum efforts for the success of the Company and its parent
or subsidiary corporations ("Related Corporations").
Number Of Shares. The maximum number of shares of the Company's Common
Stock that are available for sale under the Plan is 10 million shares, subject
to annual increases of 2.5 million shares on October 1 of each year as described
above and to adjustment upon changes in capitalization of the Company or in the
event of a Corporate Transaction (as defined below). These shares may be newly
issued shares or shares reacquired in private transactions or open market
purchases. To the extent that any right to purchase
23
shares under the Plan is not exercised by any participant for any reason, or if
any right to purchase terminates, any shares not purchased under such right will
again become available for issuance under the Plan, unless the Plan has been
terminated, but all shares sold under the Plan, regardless of source, will be
counted against the maximum number of shares available for sale. Pursuant to the
2002 Offering, the maximum aggregate number of shares of Company Common Stock
available to be purchased by all participants is the number of shares of Company
Common Stock remaining available under the Plan on the Offering Date (as defined
below).
Administration. The Board, or a committee appointed by the Board,
administers the Plan and has the power (i) to determine when and how purchase
rights will be granted and the provisions of each Offering (which is a grant of
rights to purchase shares of Company Common Stock under the Plan to eligible
employees), (ii) to designate which Related Corporations will be eligible to
participate in the Plan, (iii) to construe and interpret the Plan and to
establish rules for the administration of the Plan, (iv) to amend the Plan in
accordance with its terms and (v) to exercise such powers and to perform such
acts as it deems necessary or expedient to promote the best interests of the
Company and its Related Corporations and to carry out the intent that the Plan
be treated as an Employee Stock Purchase Plan within the meaning of Section
423(b) of the Code.
Eligibility. The Plan provides that except as otherwise described below,
rights to purchase Company Common Stock may be granted to employees of the
Company or, if designated by the Board, to employees of a Related Corporation.
Except as otherwise described below, an employee will not be eligible to be
granted a purchase right under the Plan unless, on the date selected by the
Board for an Offering to commence (an "Offering Date"), the employee has been in
the employ of the Company or the Related Corporation, as the case may be, for
such continuous period preceding such Offering Date as the Board may require,
but in no event will the required period of continuous employment, be greater
than two years. In addition, the Board may provide, and under the 2002 Offering
the Board has provided, that no employee will be eligible to be granted a
purchase right unless, on the Offering Date, the employee's customary employment
with the Company or a Related Corporation is more than 20 hours per week and
more than five months per calendar year.
No employee will be eligible to participate in the Plan if, immediately
after the grant of a purchase right under the Plan, he or she would own,
directly or indirectly, stock possessing 5% or more of the total combined voting
power or value of all classes of stock of the Company or of any Related
Corporation (including any stock which the employee may purchase under all
outstanding purchase rights under the Plan and other stock-based plans of the
Company). In addition, pursuant to applicable provisions of the Code, no
employee may be granted a purchase right under the Plan that permits the
employee to accrue the right to purchase more than $25,000 worth of the
Company's Common Stock (determined at the fair market value of the stock at the
time the purchase rights are granted) under all employee stock purchase plans of
the Company and its affiliates for each calendar year in which the purchase
right is outstanding at any time.
Participation. Participants will authorize an amount of contributions
expressed as a percentage of the participant's Earnings (as defined in each
Offering) during the Offering (not to exceed the maximum percentage specified by
the Board). These contributions will be used to pay the purchase price of the
shares of the Company's Common Stock when a purchase right under the Plan is
exercised. To the extent provided in the Offering, a participant may thereafter
reduce (including to zero) or increase his or her contributions. All of the
employees of the Company and its domestic subsidiaries are eligible to
participate under the terms of the Plan. At November 30, 2002, 1,044 eligible
employees have elected to participate in the Plan, although the Company cannot
determine how many eligible employees will elect to participate in the future.
Purchase Periods. Pursuant to the Plan, the Board may from time to time
grant or provide for the grant of purchase rights to eligible employees in an
Offering (consisting of one or more Purchase Periods) on an Offering Date or
Offering Dates selected by the Board. Each Offering will be in a form and will
contain terms and conditions the Board deems appropriate, which shall comply
with the requirement of Section 423(b)(5) of the Code that all employees granted
purchase rights shall have the same rights and privileges. The
24
provisions of separate Offerings need not be identical, but each Offering will
include the period during which the Offering will be effective, which period
shall not exceed 27 months from the Offering Date.
Under the 2002 Offering, the current Offering under the Plan began on
August 1, 2002 and will end on July 31, 2004, unless terminated earlier.
Thereafter, an Offering shall begin on the day after the last Purchase Date of
the immediately preceding Offering. Except as described below, each Offering
will be approximately two years in duration, with four Purchase Periods, each of
which (except as otherwise provided in the Plan) will be approximately six
months in length. Except as described below, a Purchase Date is the last day of
a Purchase Period or of an Offering, as the case may be. The current Offering
consists of four Purchase Periods, with the first Purchase Period ending on
February 28, 2003, the second Purchase Period ending on July 31, 2003, the third
Purchase Period ending on January 31, 2004, and the fourth Purchase Period
ending on July 31, 2004. Notwithstanding the foregoing, if the first annual
meeting of the Company's shareowners during 2003 occurs after February 28, 2003,
then: (i) the first Purchase Period under the current Offering shall end on the
next trading day following such shareowner meeting; and (ii) the Offering
scheduled to begin March 3, 2003 will be delayed until the second trading day
following such shareowner meeting.
Pursuant to the Offering, notwithstanding the foregoing: (i) if the fair
market value of the Company's Common Stock on an Offering Date is less than the
par value of the Company's Common Stock, then the Offering Date shall instead
commence on the next trading day on which the fair market value of the Company's
Common Stock is equal to or greater than its par value; and (ii) each Offering
shall terminate on the seventh trading day prior to a Distribution Record Date
(as defined below) (or the Company's best estimate of that date) and such
termination date will be a Purchase Date under each such Offering. In addition,
a new Offering will begin as soon as administratively practicable after the
Distribution Date and will end on either the January 31 or July 31 that falls at
least 18 months but less than 24 months after the first trading day of such new
Offering. For this purpose, a "Distribution Record Date" means a record date for
the distribution of shares of common stock of a subsidiary of the Company to the
shareowners of the Company and the "Distribution Date" means the date of the
distribution of such shares of common stock to the shareowners of the Company.
Under the 2002 Offering, if on the first day of a new Purchase Period
during the Offering the fair market value of a share of Company Common Stock is
less than or equal to the fair market value of a share of Company Common Stock
on the Offering Date for the current Offering, then that Offering will
immediately terminate and that day will become the Offering Date of a new
Offering. Participants in the terminated Offering will automatically be enrolled
in the new Offering.
The Plan provides that the fair market value of a share of the Company's
Common Stock on a given date will be determined by the Board in its discretion
based on the closing price of the Company's Common Stock for such date as
reported by the Nasdaq National Market or, if the price is not reported, the
mean of the bid and asked prices per share of the Company's Common Stock as
reported by Nasdaq or, in the event the Company's Common Stock is listed on a
stock exchange, the fair market value per share will be the closing price on
such exchange on such date (or, in the event that the Company's Common Stock is
not traded on such date, on the immediately preceding trading day), as reported
in The Wall Street Journal.
Grant of Purchase Rights. On each Offering Date, each eligible employee,
pursuant to an Offering made under the Plan, will be granted a right to purchase
up to that number of shares of the Company's Common Stock purchasable either
with a percentage or with a maximum dollar amount, as designated by the Board,
but in either case not exceeding 10% of the employee's Earnings during the
period that begins on the Offering Date (or such later date as the Board
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no later than the end of the Offering. Under the
2002 Offering, the Board has provided that a participant's purchase right shall
permit the purchase of the number of shares of Company Common Stock purchasable
with any whole percentage of not less than 1% and not more than 10% of the
participant's Earnings paid during the period of the Offering beginning as soon
as administratively practicable after the participant first commences
participation; provided, however, that no participant may have more than 10% of
the participant's Earnings applied to purchase shares of Company Common Stock
25
under all ongoing Offerings under the Plan and all other plans of the Company
and Related Corporations that are intended to qualify as Employee Stock Purchase
Plans under the Code.
The Board will establish one or more Purchase Dates during an Offering as
of which purchase rights granted pursuant to that Offering will be exercised and
purchases of shares of Company Common Stock will be carried out in accordance
with the Offering.
In connection with each Offering made under the Plan, the Board may specify
a maximum number of shares of Company Common Stock that may be purchased by any
participant on any Purchase Date during the Offering and by all participants
pursuant to the Offering. Under the 2002 Offering, the Board has provided that
the maximum number of shares of Company Common Stock that an eligible employee
may purchase on any Purchase Date during the Offering shall not exceed 1,000
shares. If the aggregate purchase of shares of Company Common Stock issuable
upon exercise of purchase rights granted under the Offering would exceed the
specified maximum aggregate number of shares for all participants, then, in the
absence of any Board action otherwise, a pro rata allocation of the shares of
Company Common Stock available will be made in as nearly a uniform manner as
shall be practicable and equitable.
Under the Plan, the purchase price of shares of Company Common Stock
acquired pursuant to purchase rights will not be less than the lesser of: (i)
85% of the fair market value of Company Common Stock on the Offering Date; or
(ii) 85% of the fair market value of Company Common Stock on the applicable
Purchase Date; provided, however, that for Offerings beginning on or after
August 1, 2002, the purchase price per share of Company Common Stock will not be
less than the par value per share of the Company's Common Stock. Under the 2002
Offering, the purchase price of each share of Company Common Stock is the
greater of (a) the par value per share of Company Common Stock or (b) the lesser
of: (i) 85% of the fair market value of Company Common Stock on the Offering
Date; or (ii) 85% of the fair market value of Company Common Stock on the
applicable Purchase Date, in each case rounded up to the nearest whole cent per
share.
Exercise Of Purchase Right. On each Purchase Date during an Offering, each
participant's accumulated contributions will be applied to the purchase of
shares of Company Common Stock up to the maximum number of shares permitted
pursuant to the terms of the Plan and the applicable Offering, at the purchase
price specified in the Offering.
Any amount of accumulated contributions remaining in a participant's
account after the purchase of shares of Company Common Stock on any Purchase
Date will be returned, without interest, to the participant as promptly as
administratively practicable.
If the fair market value of a share of Company Common Stock is less than
its par value on a Purchase Date during an Offering, then the Company will not
exercise the participants' purchase rights and will distribute to each
participant his or her accumulated contributions (reduced to the extent, if any,
such contributions have been used to acquire shares of Company Common Stock for
the participant on a prior Purchase Date) under the Offering.
No purchase rights may be exercised to any extent unless the shares of
Company Common Stock to be issued upon the exercise are covered by an effective
registration statement pursuant to the Securities Act and the Plan is in
material compliance with all applicable federal, state, foreign and other
securities and other laws applicable to the Plan.
Voluntary Withdrawal; Termination Of Employment. The Plan provides that
during an Offering, a participant may cease making contributions and withdraw
from the Offering by delivering to the Company a notice of withdrawal.
Participants may elect to withdraw at any time prior to the end of the Offering,
except as provided otherwise in the Offering. Under the current Offering,
participants may not withdraw during the ten calendar-day period immediately
preceding a Purchase Date. Upon withdrawal from an Offering by a participant,
the Company will distribute to the participant all of his or her accumulated
contributions (reduced to the extent, if any, such contributions have been used
to acquire shares of Company Common Stock for the participant) under the
Offering, and the participant's purchase right in that Offering will thereupon
terminate.
26
Purchase rights granted pursuant to any Offering under the Plan will
terminate immediately upon termination of a participant's continuous status as
an employee for any reason or for no reason or other lack of eligibility. The
Company will distribute to a terminated or otherwise ineligible employee all of
his or her accumulated contributions (reduced to the extent, if any, such
contributions have been used to acquire shares of Company Common Stock for the
terminated or otherwise ineligible employee) under the Offering.
Corporate Transactions; Adjustments. In the event of a Corporate
Transaction, then: (i) any surviving or acquiring corporation may continue or
assume purchase rights outstanding under the Plan or may substitute similar
rights (including a right to acquire the same consideration paid to shareowners
in the Corporate Transaction) for those outstanding under the Plan, or (ii) if
any surviving or acquiring corporation does not continue or assume such purchase
rights or does not substitute similar rights for purchase rights outstanding
under the Plan, then the participants' accumulated contributions will be used to
purchase shares of Company Common Stock within five business days prior to the
Corporate Transaction under the then-current Offering, and the participants'
purchase rights under the then-current Offering will terminate immediately after
such purchase.
For purposes of the Plan, a Corporate Transaction is defined as the
occurrence, in a single transaction or in a series of related transactions, of:
(i) a sale, lease, license or other disposition of all or substantially all of
the consolidated assets of the Company; (ii) a sale or other disposition of at
least 90% of the outstanding securities of the Company; (iii) a merger,
consolidation or similar transaction following which the Company is not the
surviving corporation; or (iv) a merger, consolidation or similar transaction
following which the Company is the surviving corporation but the shares of
Company Common Stock outstanding immediately preceding the merger, consolidation
or similar transaction are converted or exchanged by virtue of the merger,
consolidation or similar transaction into other property, whether in the form of
securities, cash or otherwise.
If any change is made in the shares of Company Common Stock subject to the
Plan, or subject to any purchase right, without the receipt of consideration by
the Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan shall be appropriately adjusted in the
type(s), class(es) and maximum number of shares of Company Common Stock subject
to the Plan, and the outstanding purchase rights shall be appropriately adjusted
in the type(s), class(es), number of shares and purchase limits of such
outstanding purchase rights. The Board will make these adjustments, and its
determination shall be final, binding and conclusive.
Amendment Or Termination. The Board may suspend or terminate the Plan at
any time. Unless terminated earlier, the Plan will terminate when all of the
shares of Company Common Stock reserved for issuance under the Plan, as
increased and/or adjusted from time to time, have been issued under the terms of
the Plan.
The Board may amend the Plan at any time. However, except in the event of
an adjustment for changes in the Company's securities or for a Corporate
Transaction, and except as to amendments solely to benefit the administration of
the Plan, to take account of a change in legislation or to obtain or maintain
favorable tax, exchange control or regulatory treatment for participants or the
Company or any Related Corporation, no amendment shall be effective unless
approved by the shareowners of the Company to the extent shareowner approval is
necessary for the Plan to satisfy the requirements of Section 423 of the Code or
other applicable laws or regulations.
Without shareowner consent and without regard to whether any participant
rights may be considered to have been adversely affected, the Board (or its
Committee) will be entitled to change the Offering Dates and Purchase Dates,
limit the frequency and/or number of changes in the amount withheld during an
Offering, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Company Common
Stock for each participant properly correspond with amounts
27
withheld from the participant's Earnings, and establish other limitations or
procedures the Board (or its Committee) determines in its sole discretion
advisable that are consistent with the Plan.
Term. The Plan will continue in effect for a term of 20 years unless
sooner terminated in accordance with its terms.
Tax Matters. The tax consequences of participating in the Plan will depend
upon whether the Plan is qualified as an Employee Stock Purchase Plan under
Section 423 of the Code (a "Qualified ESPP"). This qualification is contingent
on the Amendment adopted by the Board of Directors on July 18, 2002 being
approved by the shareowners of the Company within twelve months of such
adoption. If the Amendment is approved by the shareowners of the Company, the
Plan will be a Qualified ESPP. If the Company does not obtain the necessary
shareowner approval, then the Plan will not be a Qualified ESPP (i.e., a
"Nonqualified ESPP") with respect to any purchase rights covering the additional
5 million shares and the annual additional share increase authorized by the
Board on July 18, 2002. The different tax treatment for a Qualified ESPP and a
Nonqualified ESPP is set forth below.
QUALIFIED ESPP
If the Plan is a Qualified ESPP, purchase rights granted under the Plan
will qualify for favorable federal income tax treatment. It is intended that
purchase rights under the Plan be considered options for purposes of the Code. A
participant will realize taxable ordinary income on amounts withheld for the
purchase of shares of the Company's Common Stock as if he or she actually
received such amounts. No further taxable income will be realized by a
participant either at the time participation begins (i.e., the Offering Date) or
at the time shares are purchased under the Plan (i.e., the Purchase Date), nor
will the Company be entitled to a deduction at either such time in respect of
the Plan. The federal income tax treatment upon disposition of shares purchased
under the Plan depends on when such disposition occurs.
If the shares of the Company's Common Stock are disposed of at least two
years after the beginning of an offering period and at least one year after the
shares of the Company's Common Stock are transferred to the participant, then
the participant will recognize as ordinary taxable income an amount equal to the
lesser of (i) the excess of the fair market value of the Company's Common Stock
at the time of such disposition over the purchase price or (ii) 15% of the fair
market value of the Company's Common Stock as of the beginning of the offering
period. The difference between the disposition price and the participant's basis
in the shares (that is, the purchase price plus the amount, if any, taxed as
ordinary income) will be treated as long-term capital gain or loss. No deduction
will be allowed to the Company for federal income tax purposes under such
circumstances.
If the shares of the Company's Common Stock are sold or otherwise disposed
of before the expiration of the holding period described above, then the
participant will recognize as ordinary taxable income an amount equal to the
excess of the fair market value of the Company's Common Stock on the Purchase
Date over the purchase price. In addition, the participant will recognize
capital gain or loss in an amount equal to the difference between the amount
realized upon the disposition of the shares and the participant's basis in the
shares (that is, the purchase price plus the amount taxed as ordinary income).
Even if the Company's Common Stock is disposed of for less than its fair market
value on the Purchase Date, the same amount of ordinary taxable income is
attributed to the participant, and a capital loss is recognized equal to the
difference between the sales price and the fair market value of the Company's
Common Stock on such Purchase Date. Any capital gain or loss will be short-term
or long-term, depending on whether the participant held the shares for more than
one year. The Company will be entitled to a deduction in an amount equal to the
amount recognized by a participant as ordinary taxable income upon such a
disposition.
Under present provision of the Code, long-term capital gains are taxable at
a maximum rate of 20% and capital losses of individual taxpayers are deductible
only against capital gains and a limited amount of ordinary income.
28
NONQUALIFIED ESPP
If the Plan is a Nonqualified ESPP with respect to any purchase rights
covering the additional 5 million shares and the annual additional share
increase authorized by the Board on July 18, 2002, then the Plan will not be
treated as a tax-advantaged plan with respect to those purchase rights and
generally participants in the Plan who hold those purchase rights will realize
taxable ordinary income at the time the Company's Common Stock is purchased
under the Plan in an amount equal to the excess of the fair market value of the
shares on the Purchase Date over the purchase price. In that case, the Company
will be entitled to a corresponding deduction equal to the amount recognized by
the participant as ordinary taxable income.
When the participant later sells the shares of the Company's Common Stock
or otherwise disposes of such shares in a taxable disposition, the participant
generally will recognize an additional gain or loss equal to the difference
between the value of the shares at the time of purchase and the price at which
the shares are sold. The sale of shares will be treated as a capital gain or
loss, which will be either long-term or short-term depending on whether the
participant held the shares for more than one year. The Company will not be
entitled to a deduction at such time.
The number of shares that may be purchased by participants under the Plan
is discretionary and the value of the Company's Common Stock purchased by
participants under the Plan will vary based on the fair market value of the
Company's Common Stock on each Purchase Date and Offering Date. Accordingly, the
number of shares that will be purchased by the named executive officers,
executive officers as a group, non-executive directors as a group and
non-executive officers as a group in the future are not currently determinable.
The following table sets forth the number of shares of the Company's Common
Stock and the aggregate purchase prices for the shares purchased by the
foregoing persons during fiscal 2002 under the Plan.
NUMBER OF WEIGHTED AVERAGE
NAME AND POSITION WITH THE COMPANY SHARES PURCHASE PRICE
---------------------------------- ---------------- ----------------
Dwight W. Decker............................................ 2,204 $6.7364
Chairman of the Board and Chief Executive Officer
Raouf Y. Halim.............................................. 2,204 $6.7364
Senior Vice President and Chief Executive Officer,
Mindspeed Technologies
Balakrishnan S. Iyer........................................ 2,699 $6.7364
Senior Vice President and Chief Financial Officer
Dennis E. O'Reilly.......................................... 3,178 $5.4146
Senior Vice President, General Counsel and Secretary
F. Matthew Rhodes........................................... 3,035 $5.7654
Senior Vice President and President, Broadband
Communications
Moiz M. Beguwala............................................ 2,957 $5.9711
Senior Vice President
Executive Officers as a Group............................... 25,593 $5.9721
Non-Executive Directors as a Group(1)....................... -- --
All Employees (other than Executive Officers) as a Group.... 3,141,435 $5.1742
---------------
(1) Directors who are not also employees of the Company are not eligible to
participate in the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT.
UNLESS A CONTRARY CHOICE IS SPECIFIED, PROXIES SOLICITED BY THE BOARD OF
DIRECTORS WILL BE VOTED FOR APPROVAL OF THE AMENDMENT.
29
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS (PROPOSAL 4)
Deloitte & Touche LLP have been the Company's independent auditors since
1998 and, at the recommendation of the Audit Committee of the Board, have been
selected by the Board of Directors as the Company's independent auditors for the
fiscal year ending September 30, 2003.
Before the Audit Committee recommended to the full Board the appointment of
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 BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR THE COMPANY FOR
THE CURRENT FISCAL YEAR. UNLESS A CONTRARY CHOICE IS SPECIFIED, PROXIES
SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR RATIFICATION OF THE
APPOINTMENT.
AUDITORS' FEES
The aggregate fees billed by Deloitte & Touche LLP for professional
services rendered for the audit of the Company's annual financial statements for
fiscal 2002 and for the review of the Company's quarterly financial statements
for fiscal 2002 were $514,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed by Deloitte & Touche LLP for financial
information systems design and implementation services for fiscal 2002.
ALL OTHER FEES
The aggregate fees billed by Deloitte & Touche LLP to the Company for
fiscal 2002 for all other services rendered to the Company were $1,774,000.
These fees relate principally to (i) tax-related services and an IT security
assessment and (ii) audit and other procedures performed in connection with the
Wireless Transaction, accounting consultations, and benefit plan and foreign
statutory audits.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership of, and transactions in, the Company's securities with the Securities
and Exchange Commission. Such directors, executive officers and 10% shareowners
are also required to furnish the Company 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, the Company believes
that during fiscal year 2002 its directors, executive officers and 10%
shareowners timely filed all forms required to be filed under Section 16(a),
except for: (i) Mr. Beguwala, whose initial report of ownership inadvertently
omitted 1,770 shares of common stock (after giving effect to the 2-for-1 stock
split in 1999) distributed to him in connection with the spin-off of the Company
from Rockwell. Mr. Beguwala is no longer an executive officer of the Company and
is no longer subject to the filing requirements of Section 16; (ii) Messrs.
Beall, Bressler and Stead, whose Form 5 filings were amended to include certain
transactions which were inadvertently omitted due to an administrative error;
and (iii) Messrs. O'Reilly and Yates, each of whom filed a Form 4 reporting one
transaction late due to an administrative error. The Company has recently
implemented new procedures to ensure timely compliance with Section 16(a)
reporting requirements on an on-going basis, including compliance with the
requirements of the Sarbanes-Oxley Act of 2002 and the Commission's rules
thereunder.
30
2004 SHAREOWNER PROPOSALS OR NOMINATIONS
Shareowners of the Company may submit proposals that they believe should be
voted upon at the Company's 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 Company's Proxy Statement for the Company's 2004 Annual Meeting of
Shareowners. To be eligible for inclusion in the Company's 2004 Proxy Statement,
any such shareowner proposals must be submitted in writing to the Secretary of
the Company no later than September 10, 2003. The submission of a shareowner
proposal does not guarantee that it will be included in the Company's Proxy
Statement.
With respect to the Company's 2004 Annual Meeting, under the Company's
By-laws, 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 2003 Annual Meeting, unless the date of the 2004 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
2003 Annual Meeting. For the Company's 2004 Annual Meeting, this means that any
such proposal or nomination must be submitted no earlier than October 29, 2003
and no later than November 28, 2003. If the date of the 2004 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 2003 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 2004 Annual Meeting and no later than
the close of business on the later of the 90th day prior to the 2004 Annual
Meeting or the 10th day following the day on which public announcement of the
date of such meeting is first made. The shareowner's submission must include
certain specified information concerning the proposal or nominee, as the case
may be, and information as to the shareowner's ownership of Common Stock of the
Company. Proposals or nominations not meeting these requirements will not be
entertained at the 2004 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 4311 Jamboree Road, 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 Company's 2002 Annual Report to Shareowners is being mailed to the
Company's shareowners together with this proxy statement. COPIES OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
2002 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 TEN CENTS PER PAGE COVERING THE COMPANY'S COSTS. WRITTEN
REQUESTS SHOULD BE DIRECTED TO THE COMPANY AT 4311 JAMBOREE ROAD, NEWPORT BEACH,
CALIFORNIA 92660-3095, ATTENTION: INVESTOR RELATIONS. The Company's 2002 Annual
Report to Shareowners, the Form 10-K and this proxy statement are also available
on Conexant's 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.
31
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 regular 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, 2003
32
APPENDIX A
AUDIT COMMITTEE CHARTER
As Amended October 31, 2002
The Audit Committee has been constituted by the Board of Directors to
assist the Board of Directors in overseeing (1) the integrity of the financial
statements of the Corporation, (2) the compliance by the Corporation with legal
and regulatory requirements and (3) the independence and performance of the
Corporation's internal and external auditors.
The membership of the Committee shall consist of at least three directors
who are generally knowledgeable in financial and auditing matters, including at
least one member with accounting or related financial management expertise. Each
member shall be free of any relationship that, in the opinion of the Board,
would interfere with his or her individual exercise of independent judgment.
Applicable laws and regulations shall be followed in evaluating a member's
independence. The chairperson shall be appointed by the full Board.
The members of the Audit Committee shall meet the independence and
experience requirements of the Nasdaq Stock Market, Inc., shall have the
following powers and duties and shall report thereon to the Board of Directors:
1) For each fiscal year:
a) to select and recommend employment of, subject to the approval
of the shareowners, independent public accountants to audit the books,
records, accounts and financial statements of this Corporation and its
subsidiaries, which independent public accountants shall directly are
ultimately accountable report to the Board of Directors and the Audit
Committee who act as representatives of the shareowners of this
Corporation; and
b) to take, or to recommend that the Board of Directors of this
Corporation take, appropriate action to oversee the independence of the
independent public accountants;
2) To review with the independent public accountants:
a) the scope of their annual audit of this Corporation's financial
statements;
b) this Corporation's quarterly and annual financial statements
before their release;
c) the adequacy of this Corporation's system of internal controls
and any recommendations of the independent public accountants with
respect thereto;
d) any comments they may have on major issues related to their
audit activities, restrictions, if any, imposed on their work and the
cooperation they received during the audit;
e) the matters required to be discussed by Statement on Auditing
Standards No. 1 (Communication with Audit Committees); and
f) a formal written statement prepared by the independent public
accountants delineating all relationships between the independent public
accountants and this Corporation consistent with Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees)
and any disclosed relationships or services that may impact the
objectivity and independence of the independent public accountants;
3) To review and approve the fees charged, and the scope and extent of
any non-audit services performed, by the independent public accountants;
A-1
4) To review and approve the appointment or change of this
Corporation's Director of Internal Audit (however titled, the "General
Auditor") and review with this General Auditor:
a) the scope of the annual internal audit plan and the results of
completed internal audits; and
b) any comments the General Auditor may have on major issues
related to the internal audit activities or restrictions, if any,
imposed thereon;
5) To monitor compliance by the employees of this Corporation with
this Corporation's Standards of Business Conduct policies;
6) To meet with this Corporation's Chief Executive Officer, Chief
Financial Officer, General Counsel and other management personnel to review
any issues related to this Corporation's financial reporting, internal
controls, Standards of Business Conduct policies or other matters within
the scope of the Audit Committee's duties; and
7) To investigate any matter brought to its attention within the scope
of its duties and to engage consultants or independent counsel in
connection therewith as the Audit Committee deems appropriate.
The Committee is expected to maintain free and open communication with the
public accounting firm, the internal auditors, and this Corporation's
management. This communication shall include private executive sessions, at
least semi-annually, with each of these parties. The Committee chairperson shall
report on Audit Committee activities to the full Board.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that this Corporation's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. Those duties are the responsibility of management and the
independent auditors. Nor is it the duty of the Audit Committee to conduct
investigations, to resolve disagreements, if any, between management and the
independent auditors or to assure compliance with laws and regulations and the
Corporation's Standards of Business Conduct policies.
A-2
Appendix B
CONEXANT SYSTEMS, INC.
2001 EMPLOYEE STOCK PURCHASE PLAN
ADOPTED BY THE BOARD OF DIRECTORS SEPTEMBER 4, 2001
APPROVED BY STOCKHOLDERS FEBRUARY 27, 2002
AMENDED AND RESTATED BY THE BOARD JULY 18, 2002
AMENDMENT APPROVED BY THE STOCKHOLDERS __________, 2002
1. PURPOSE.
(a) The purpose of the Plan is to provide a means by which Employees of
the Company and certain designated Participating Subsidiaries may be given an
opportunity to purchase shares of the Common Stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
such Employees, to secure and retain the services of new Employees and to
provide incentives for such persons to exert maximum efforts for the success of
the Company and its Related Corporations.
(c) The Company intends that the Purchase Rights be considered options
issued under an Employee Stock Purchase Plan.
(d) This Plan is an amendment and restatement of the Plan adopted by the
Board effective September 4, 2001. Offerings under the Plan prior to such
amendment and restatement shall continue (and terminate) according to their
original terms.
2. DEFINITIONS.
(a) "AGENT" means Mellon Investor Services LLC or such successor agent
as the Company may employ.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a committee appointed by the Board in accordance
with Section 3(c) of the Plan.
(e) "COMMON STOCK" means the common stock of the Company.
(f) "COMPANY" means Conexant Systems, Inc., a Delaware corporation.
B-1
(g) "CONTINUOUS STATUS AS AN EMPLOYEE" means the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee will not be considered interrupted in the case of a leave of absence
agreed to in writing by the Company, provided that such leave is for a period of
not more than ninety (90) days or reemployment upon the expiration of such leave
is guaranteed by contract or statute.
(h) "CONTRIBUTIONS" means the payroll deductions, and other additional
payments specifically provided for in the Offering, that a Participant
contributes to fund the exercise of a Purchase Right. A Participant may make
additional payments into his or her account, if specifically provided for in the
Offering, and then only if the Participant has not already had the maximum
permitted amount through payroll deductions withheld during the Offering.
(i) "CORPORATE TRANSACTION" means the occurrence, in a single
transaction or in a series of related transactions, of any one or more of the
following events:
(i) a sale, lease, license or other disposition of all or
substantially all of the consolidated assets of the Company;
(ii) a sale or other disposition of at least ninety percent (90%)
of the outstanding securities of the Company;
(iii) a merger, consolidation or similar transaction following
which the Company is not the surviving corporation; or
(iv) a merger, consolidation or similar transaction following
which the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger, consolidation or similar
transaction are converted or exchanged by virtue of the merger, consolidation or
similar transaction into other property, whether in the form of securities, cash
or otherwise.
(j) "DIRECTOR" means a member of the Board.
(k) "ELIGIBLE EMPLOYEE" means an Employee who meets the requirements set
forth in the Offering for eligibility to participate in the Offering, provided
that such Employee also meets the requirements for eligibility to participate
set forth in the Plan.
(l) "EMPLOYEE" means any person, including Officers and Directors, who
is employed for purposes of Section 423(b)(4) of the Code by the Company or any
Related Corporation. Neither service as a Director nor payment of a director's
fee shall be sufficient to make an individual an Employee of the Company or a
Related Corporation.
(m) "EMPLOYEE STOCK PURCHASE PLAN" means a plan that grants Purchase
Rights intended to be options issued under an "employee stock purchase plan," as
that term is defined in Section 423(b) of the Code.
(n) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
B-2
(o) "FAIR MARKET VALUE" means the value of a security, as determined by
the Board in its discretion, based on the closing price of the Common Stock for
such date (or, in the event that the Common Stock is not traded on such date, on
the immediately preceding Trading Day), as reported by the National Association
of Securities Dealers Automated Quotation (Nasdaq) National Market or, if such
price is not reported, the mean of the bid and asked prices per share of the
Common Stock as reported by Nasdaq or, in the event the Common Stock is listed
on a stock exchange, the Fair Market Value per share will be the closing price
on such exchange on such date (or, in the event that the Common Stock is not
traded on such date, on the immediately preceding Trading Day), as reported in
The Wall Street Journal.
(p) "GRANT DATE" means the first Trading Day of an Offering.
(q) "IVR SYSTEM" means the integrated voice response system maintained
for this Plan and provided by the Agent, through which Participants may elect to
participate, amend their participation or withdraw from participation in this
Plan, pursuant to the terms and conditions of this Plan.
(r) "OFFERING" means the grant of Purchase Rights to purchase shares of
Common Stock under the Plan to Eligible Employees.
(s) "OFFERING DATE" means a date selected by the Board for an Offering
to commence.
(t) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(u) "PARTICIPANT" means an Eligible Employee who holds an outstanding
Purchase Right granted pursuant to the Plan.
(v) "PLAN" means this Conexant Systems, Inc. 2001 Employee Stock
Purchase Plan.
(w) "PURCHASE DATE" means one or more dates during an Offering
established by the Board on which Purchase Rights shall be exercised and as of
which purchases of shares of Common Stock shall be carried out in accordance
with such Offering.
(x) "PURCHASE PERIOD" means a period of time specified within an
Offering beginning on the Offering Date or on the next day following a Purchase
Date within an Offering and ending on a Purchase Date. An Offering may consist
of one or more Purchase Periods.
(y) "PURCHASE RIGHT" means an option to purchase shares of Common Stock
granted pursuant to the Plan.
(z) "RELATED CORPORATION" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
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(aa) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(bb) "TRADING DAY" means a day on which the National Stock Exchanges and
the National Association of Securities Dealers Automated Quotation (NASDAQ)
System are open for trading.
(cc) "WEB" means Mellon Employee Service Direct System that is used to
facilitate Plan transactions and is accessible through the Company's intranet.
3. ADMINISTRATION.
(a) The Board shall administer the Plan unless and until the Board
delegates administration to a Committee, as provided in Section 3(c). Whether or
not the Board has delegated administration, the Board shall have the final power
to determine all questions of policy and expediency that may arise in the
administration of the Plan.
(b) The Board (or the Committee) shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine when and how Purchase Rights to purchase shares
of Common Stock shall be granted and the provisions of each Offering of such
Purchase Rights (which need not be identical).
(ii) To designate from time to time which Related Corporations of
the Company shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and Purchase Rights, and
to establish, amend and revoke rules and regulations for the administration of
the Plan. The Board, in the exercise of this power, may correct any defect,
omission or inconsistency in the Plan, in a manner and to the extent it shall
deem necessary or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in Section 15.
(v) Generally, to exercise such powers and to perform such acts
as it deems necessary or expedient to promote the best interests of the Company
and its Related Corporations and to carry out the intent that the Plan be
treated as an Employee Stock Purchase Plan.
(c) The Board may delegate administration of the Plan to a Committee of
the Board composed of one (1) or more members of the Board. If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the administration of
the Plan. If administration is delegated to a Committee, references to the Board
in this Plan and in the Offering document shall thereafter be deemed to be to
the Board or the Committee, as the case may be.
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4. SHARES OF COMMON STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 14 relating to adjustments upon changes in securities, the shares of
Common Stock that may be sold pursuant to Purchase Rights shall not exceed in
the aggregate ten million (10,000,000) shares of Common Stock, plus an annual
increase of two million five hundred thousand (2,500,000) shares of Common Stock
to be added on the first day of the fiscal year of the Company for a period of
ten (10) years, commencing on the first day of the fiscal year that begins on
October 1, 2003 and ending on (and including) the first day of the fiscal year
that begins on October 1, 2012. Notwithstanding the foregoing, the Board may
act, prior to the first day of any fiscal year of the Company and in lieu of the
automatic increase described in the prior sentence, to increase the share
reserve by such number of shares of Common Stock as the Board shall determine,
which number shall be less than two million five hundred thousand (2,500,000)
shares of Common Stock. If any Purchase Right granted under the Plan shall for
any reason terminate without having been exercised, the shares of Common Stock
not purchased under such Purchase Right shall again become available for
issuance under the Plan, but all shares sold under this Plan, regardless of
source, shall be counted against the limitation set forth above. Notwithstanding
anything to the contrary contained herein, with respect to the Offering that
began on March 1, 2002, if the Fair Market Value of the Common Stock on August
1, 2002 is equal to or greater than the Fair Market Value of such stock on the
Grant Date of such Offering as adjusted pursuant to Section 14 herein, then the
shares reserved under this Plan that were approved by the stockholders at the
Company's annual meeting held on February 27, 2002 shall be first used to
satisfy Purchase Rights under such Offering.
5. GRANT OF PURCHASE RIGHTS; OFFERING.
(a) The Board may from time to time grant or provide for the grant of
Purchase Rights to purchase shares of Common Stock under the Plan to Eligible
Employees in an Offering (consisting of one or more Purchase Periods) on an
Offering Date or Offering Dates selected by the Board. Each Offering shall be in
such form and shall contain such terms and conditions as the Board shall deem
appropriate, which shall comply with the requirement of Section 423(b)(5) of the
Code that all Employees granted Purchase Rights shall have the same rights and
privileges. The terms and conditions of an Offering shall be incorporated by
reference into the Plan and treated as part of the Plan. The provisions of
separate Offerings need not be identical, but each Offering shall include
(through incorporation of the provisions of this Plan by reference in the
document comprising the Offering or otherwise) the period during which the
Offering shall be effective, which period shall not exceed twenty-seven (27)
months beginning with the Offering Date, and the substance of the provisions
contained in Sections 6 through 9, inclusive.
(b) If a Participant has more than one Purchase Right outstanding under
the Plan, unless he or she otherwise indicates in agreements or notices
delivered hereunder: (i) each agreement or notice delivered by that Participant
shall be deemed to apply to all of his or her Purchase Rights under the Plan,
and (ii) a Purchase Right with a lower exercise price (or an earlier-granted
Purchase Right, if different Purchase Rights have identical exercise prices)
shall be exercised to the fullest possible extent before a Purchase Right with a
higher exercise price (or a later-granted Purchase Right if different Purchase
Rights have identical exercise prices) shall be exercised.
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6. ELIGIBILITY.
(a) Purchase Rights may be granted only to Employees of the Company or,
as the Board may designate as provided in Section 3(b), to Employees of a
Related Corporation. Except as provided in Section 6(b), an Employee shall not
be eligible to be granted Purchase Rights under the Plan unless, on the Offering
Date, such Employee has been in the employ of the Company or the Related
Corporation, as the case may be, for such continuous period preceding such
Offering Date as the Board may require, but in no event shall the required
period of continuous employment be greater than two (2) years. In addition, the
Board may provide that no Employee shall be eligible to be granted Purchase
Rights under the Plan unless, on the Offering Date, such Employee's customary
employment with the Company or the Related Corporation is more than twenty (20)
hours per week and more than five (5) months per calendar year.
(b) The Board may provide that each person who, during the course of an
Offering, first becomes an Eligible Employee shall, on a date or dates specified
in the Offering which coincides with the day on which such person becomes an
Eligible Employee or which occurs thereafter, receive a Purchase Right under
that Offering, which Purchase Right shall thereafter be deemed to be a part of
that Offering. Such Purchase Right shall have the same characteristics as any
Purchase Rights originally granted under that Offering, as described herein,
except that:
(i) the date on which such Purchase Right is granted shall be the
"Offering Date" of such Purchase Right for all purposes, including determination
of the exercise price of such Purchase Right;
(ii) the period of the Offering with respect to such Purchase
Right shall begin on its Offering Date and end coincident with the end of such
Offering; and
(iii) the Board may provide that if such person first becomes an
Eligible Employee within a specified period of time before the end of the
Offering, he or she shall not receive any Purchase Right under that Offering.
(c) No Employee shall be eligible for the grant of any Purchase Rights
under the Plan if, immediately after any such Purchase Rights are granted, such
Employee owns stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or of any Related
Corporation. For purposes of this Section 6(c), the rules of Section 424(d) of
the Code shall apply in determining the stock ownership of any Employee, and
stock which such Employee may purchase under all outstanding Purchase Rights and
options shall be treated as stock owned by such Employee.
(d) As specified by Section 423(b)(8) of the Code, an Eligible Employee
may be granted Purchase Rights under the Plan only if such Purchase Rights,
together with any other rights granted under all Employee Stock Purchase Plans
of the Company and any Related Corporations, do not permit such Eligible
Employee's rights to purchase stock of the Company or any Related Corporation to
accrue at a rate which exceeds twenty five thousand dollars ($25,000) of Fair
Market Value of such stock (determined at the time such rights are granted, and
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which, with respect to the Plan, shall be determined as of their respective
Offering Dates) for each calendar year in which such rights are outstanding at
any time.
(e) Officers of the Company and any designated Related Corporation, if
they are otherwise Eligible Employees, shall be eligible to participate in
Offerings under the Plan. Notwithstanding the foregoing, the Board may provide
in an Offering that Employees who are highly compensated Employees within the
meaning of Section 423(b)(4)(D) of the Code shall not be eligible to
participate.
7. PURCHASE RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each Eligible Employee, pursuant to an
Offering made under the Plan, shall be granted a Purchase Right to purchase up
to that number of shares of Common Stock purchasable either with a percentage or
with a maximum dollar amount, as designated by the Board, but in either case not
exceeding ten percent (10%), of such Employee's Earnings (as defined by the
Board in each Offering) during the period that begins on the Offering Date (or
such later date as the Board determines for a particular Offering) and ends on
the date stated in the Offering, which date shall be no later than the end of
the Offering.
(b) The Board shall establish one (1) or more Purchase Dates during an
Offering as of which Purchase Rights granted pursuant to that Offering shall be
exercised and purchases of shares of Common Stock shall be carried out in
accordance with such Offering.
(c) In connection with each Offering made under the Plan, the Board may
specify a maximum number of shares of Common Stock that may be purchased by any
Participant on any Purchase Date during such Offering. In connection with each
Offering made under the Plan, the Board may specify a maximum aggregate number
of shares of Common Stock that may be purchased by all Participants pursuant to
such Offering. In addition, in connection with each Offering that contains more
than one Purchase Date, the Board may specify a maximum aggregate number of
shares of Common Stock that may be purchased by all Participants on any given
Purchase Date under the Offering. If the aggregate purchase of shares of Common
Stock issuable upon exercise of Purchase Rights granted under the Offering would
exceed any such maximum aggregate number, then, in the absence of any Board
action otherwise, a pro rata allocation of the shares of Common Stock available
shall be made in as nearly a uniform manner as shall be practicable and
equitable.
(d) The purchase price of shares of Common Stock acquired pursuant to
Purchase Rights shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the Fair
Market Value of the shares of Common Stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the Fair
Market Value of the shares of Common Stock on the applicable Purchase Date;
B-7
provided, however, that for Offerings beginning on or after August 1, 2002, the
purchase price per share of Common Stock shall not be less than the par value
per share of the Common Stock.
8. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) A Participant may elect to authorize payroll deductions pursuant to
an Offering under the Plan by enrolling through an IVR System or the Web (or
other electronic form of subscription agreement) within the time specified in
the Offering. Each such enrollment shall authorize an amount of Contributions
expressed as a percentage of the submitting Participant's Earnings (as defined
in each Offering) during the Offering (not to exceed the maximum percentage
specified by the Board). Each Participant's Contributions shall be credited to a
bookkeeping account for such Participant under the Plan and shall be deposited
with the general funds of the Company except where applicable law requires that
Contributions be deposited with a third party. To the extent provided in the
Offering, a Participant may begin such Contributions after the beginning of the
Offering. To the extent provided in the Offering, a Participant may thereafter
reduce (including to zero) or increase his or her Contributions by submitting a
new enrollment election through the IVR System or the Web (or other electronic
form of subscription agreement).
(b) During an Offering, a Participant may cease making Contributions and
withdraw from the Offering by delivering to the Company a notice of withdrawal
in such form as the Company may provide. Such withdrawal may be elected at any
time prior to the end of the Offering, except as provided otherwise in the
Offering. Upon such withdrawal from the Offering by a Participant, the Company
shall distribute to such Participant as soon as administratively practicable all
of his or her accumulated Contributions (reduced to the extent, if any, such
deductions have been used to acquire shares of Common Stock for the Participant)
under the Offering, and such Participant's Purchase Right in that Offering shall
thereupon terminate. A Participant's withdrawal from an Offering shall have no
effect upon such Participant's eligibility to participate in any other Offerings
under the Plan, but such Participant shall be required to deliver a new
enrollment form pursuant to the procedure set forth in Section 8(a) in order to
participate in subsequent Offerings.
(c) Purchase Rights granted pursuant to any Offering under the Plan
shall terminate immediately upon termination of a Participant's Continuous
Status as an Employee for any reason or for no reason or other lack of
eligibility. The Company shall distribute to such terminated or otherwise
ineligible Employee all of his or her accumulated Contributions (reduced to the
extent, if any, such Contributions have been used to acquire shares of Common
Stock for the terminated or otherwise ineligible Employee) under the Offering.
If the Fair Market Value of a share of Common Stock is less than its par value
on a Purchase Date during an Offering, then the Company shall not exercise the
Participants' Purchase Rights and shall distribute to each Participant his or
her accumulated Contributions (reduced to the extent, if any, such Contributions
have been used to acquire shares of Common Stock for the Participant on a prior
Purchase Date) under the Offering.
B-8
(d) Neither Contributions credited to a Participant's account nor any
Purchase Rights or rights to receive shares under this Plan may be assigned,
transferred, pledged or otherwise disposed of in any way other than by will or
the laws of descent and distribution, or by a beneficiary designation as
provided in Section 13. Any such attempt at assignment, transfer, pledge or
other disposition will be without effect, except that the Company may treat such
act as an election to withdraw funds in accordance with this Section 8. During a
Participant's lifetime, Purchase Rights shall be exercisable only by such
Participant.
(e) Unless otherwise specified in an Offering, the Company shall have no
obligation to pay interest on Contributions.
9. EXERCISE.
(a) On each Purchase Date during an Offering, each Participant's
accumulated Contributions shall be applied to the purchase of shares of Common
Stock up to the maximum number of shares of Common Stock permitted pursuant to
the terms of the Plan and the applicable Offering, at the purchase price
specified in the Offering. No fractional shares shall be issued upon the
exercise of Purchase Rights unless specifically provided for in the Offering.
(b) If any amount of accumulated Contributions remains in a
Participant's account after the purchase of shares of Common Stock on any
Purchase Date pursuant to Section 9(a) above, then such remaining amount shall
be returned, without interest, to the Participant as promptly as
administratively practicable.
(c) If the stockholders of the Company do not approve this Plan within
twelve (12) months of the adoption of this Plan by the Company's Board, then the
Company shall satisfy any federal, state, or local tax withholding obligations
relating to a Participant's purchase of Common Stock by withholding the entire
minimum required withholding amount from such Participant's paycheck(s) as soon
as administratively practicable following such purchase until paid in full.
(d) No Purchase Rights may be exercised to any extent unless the shares
of Common Stock to be issued upon such exercise under the Plan are covered by an
effective registration statement pursuant to the Securities Act and the Plan is
in material compliance with all applicable federal, state, foreign and other
securities and other laws applicable to the Plan. If on a Purchase Date during
any Offering hereunder the shares of Common Stock are not so registered or the
Plan is not in such compliance, no Purchase Rights or any Offering shall be
exercised on such Purchase Date, and the Purchase Date shall be delayed until
the shares of Common Stock are subject to such an effective registration
statement and the Plan is in such compliance, except that the Purchase Date
shall not be delayed more than twelve (12) months and the Purchase Date shall in
no event be more than twenty-seven (27) months from the Offering Date. If, on
the Purchase Date under any Offering hereunder, as delayed to the maximum extent
permissible, the shares of Common Stock are not registered and the Plan is not
in such compliance, no Purchase Rights or any Offering shall be exercised and
all Contributions accumulated during the Offering (reduced to the extent, if
any, such deductions have been used to acquire shares of Common Stock) shall be
distributed to the Participants.
B-9
(e) As a condition to the exercise of an Purchase Right, the Company may
require the Participant to represent and warrant at the time of any such
exercise that the shares of Common Stock to be issued are being purchased only
for investment and without any present intention to sell or distribute such
shares if, in the opinion of counsel for the Company, such a representation is
required by any applicable provisions of law.
(f) As promptly as practicable after each Purchase Date, the Company
will arrange for the deposit, into each Participant's account with the Agent
designated by the Company to administer this Plan, of the number of shares
purchased upon exercise of his or her option.
10. COVENANTS OF THE COMPANY. The Company shall seek to obtain from each
federal, state, foreign or other regulatory commission or agency having
jurisdiction over the Plan such authority as may be required to issue and sell
shares of Common Stock upon exercise of the Purchase Rights. If, after
commercially reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority that counsel for the Company deems
necessary for the lawful issuance and sale of shares of Common Stock under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell shares of Common Stock upon exercise of such Purchase Rights unless and
until such authority is obtained.
11. USE OF PROCEEDS FROM SHARES OF COMMON STOCK. Proceeds from the sale of
shares of Common Stock pursuant to Purchase Rights shall constitute general
funds of the Company.
12. RIGHTS AS A STOCKHOLDER. A Participant shall not be deemed to be the
holder of, or to have any of the rights of a holder with respect to, shares of
Common Stock subject to Purchase Rights unless and until the Participant's
shares of Common Stock acquired upon exercise of Purchase Rights are recorded in
the books of the Company (or the Agent).
13. DESIGNATION OF BENEFICIARY.
(a) A Participant may file a written designation of a beneficiary who is
to receive any shares of Common Stock and/or cash, if any, from the
Participant's account under the Plan in the event of such Participant's death
subsequent to the end of an Offering but prior to delivery to the Participant of
such shares of Common Stock or cash. In addition, a Participant may file a
written designation of a beneficiary who is to receive any cash from the
Participant's account under the Plan in the event of such Participant's death
during an Offering.
(b) The Participant may change such designation of beneficiary at any
time by written notice to the Company. In the event of the death of a
Participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such Participant's death, the Company shall
deliver such shares of Common Stock and/or cash to the executor or administrator
of the estate of the Participant, or if no such executor or administrator has
been appointed (to the knowledge of the Company), the Company, in its sole
discretion, may deliver such shares of Common Stock and/or cash to the spouse or
to any one or more dependents or relatives of the Participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.
B-10
14. ADJUSTMENTS UPON CHANGES IN SECURITIES; CORPORATE TRANSACTIONS.
(a) If any change is made in the shares of Common Stock, subject to the
Plan, or subject to any Purchase Right, without the receipt of consideration by
the Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan shall be appropriately adjusted in the
type(s), class(es) and maximum number of shares of Common Stock subject to the
Plan pursuant to Section 4, and the outstanding Purchase Rights shall be
appropriately adjusted in the type(s), class(es), number of shares and purchase
limits of such outstanding Purchase Rights. The Board shall make such
adjustments, and its determination shall be final, binding and conclusive. (The
conversion of any convertible securities of the Company shall not be treated as
a "transaction not involving the receipt of consideration by the Company.")
(b) In the event of a Corporate Transaction, then: (i) any surviving or
acquiring corporation may continue or assume Purchase Rights outstanding under
the Plan or may substitute similar rights (including a right to acquire the same
consideration paid to stockholders in the Corporate Transaction) for those
outstanding under the Plan, or (ii) if any surviving or acquiring corporation
does not continue or assume such Purchase Rights or does not substitute similar
rights for Purchase Rights outstanding under the Plan, then, the Participants'
accumulated Contributions shall be used to purchase shares of Common Stock
within five (5) business days prior to the Corporate Transaction under the
ongoing Offering, and the Participants' Purchase Rights under the ongoing
Offering shall terminate immediately after such purchase.
15. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 14 and this Section 15, and except as to
amendments solely to benefit the administration of the Plan, to take account of
a change in legislation or to obtain or maintain favorable tax, exchange control
or regulatory treatment for Participants or the Company or any Related
Corporation, no amendment shall be effective unless approved by the stockholders
of the Company to the extent stockholder approval is necessary for the Plan to
satisfy the requirements of Section 423 of the Code or other applicable laws or
regulations.
(b) Without stockholder consent and without regard to whether any
Participant rights may be considered to have been adversely affected, the Board
(or its Committee) will be entitled to change the Offering Dates and Purchase
Dates, limit the frequency and/or number of changes in the amount withheld
during an Offering, establish the exchange ratio applicable to amounts withheld
in a currency other than U.S. dollars, permit payroll withholding in excess of
the amount designated by a Participant in order to adjust for delays or mistakes
in the Company's processing of properly completed withholding elections,
establish reasonable waiting and adjustment periods and/or accounting and
crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each Participant properly correspond with amounts withheld from
the Participant's Earnings, and establish such other limitations or procedures
as
B-11
the Board (or its Committee) determines in its sole discretion advisable that
are consistent with this Plan.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Employee Stock Purchase Plans
and/or to bring the Plan and/or Purchase Rights into compliance therewith.
(d) The rights and obligations under any Purchase Rights granted before
amendment of the Plan shall not be impaired by any amendment of the Plan except:
(i) with the consent of the person to whom such Purchase Rights were granted, or
(ii) as necessary to comply with any laws or governmental regulations
(including, without limitation, the provisions of the Code and the regulations
promulgated thereunder relating to Employee Stock Purchase Plans).
16. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board in its discretion may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate at the time that all of
the shares of Common Stock reserved for issuance under the Plan, as increased
and/or adjusted from time to time, have been issued under the terms of the Plan.
No Purchase Rights may be granted under the Plan while the Plan is suspended or
after it is terminated.
(b) Any benefits, privileges, entitlements and obligations under any
Purchase Rights while the Plan is in effect shall not be impaired by suspension
or termination of the Plan except (i) as expressly provided in the Plan or with
the consent of the person to whom such Purchase Rights were granted, (ii) as
necessary to comply with any laws, regulations, or listing requirements, or
(iii) as desired, in the sole discretion of the Board, to ensure that the Plan
and/or Purchase Rights comply with the requirements of Section 423 of the Code
(or any successor rule or provision or any applicable law or regulation).
17. REPORTS. Individual accounts will be maintained for each Participant in
this Plan. Statements of account will be given to Participants promptly
following each Exercise Date, which statements will set forth the amounts of
Contributions, the per share purchase price, the number of shares purchased and
the remaining cash balance, if any.
18. TERM AND EFFECTIVE DATE OF PLAN. The Plan shall become effective as
determined by the Board. Notwithstanding the intent that the Company intends
that the Purchase Rights be considered options issued under an Employee Stock
Purchase Plan, Purchase Rights may be exercised even if the Plan has not been
approved by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted by the Board. The Plan will continue in
effect for a term of twenty (20) years unless sooner terminated under
Section 16.
19. ADDITIONAL RESTRICTIONS OF RULE 16B-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act will comply with the applicable provisions of
Rule 16b-3. This Plan will be
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deemed to contain, and such options will contain, and the shares issued upon
exercise thereof will be subject to, such additional conditions and restrictions
as may be required by Rule 16b-3 to qualify for the maximum exemption from
Section 16 of the Exchange Act with respect to Plan transactions.
20. MISCELLANEOUS PROVISIONS.
(a) The Plan and Offering do not constitute an employment contract.
Nothing in the Plan or in the Offering shall in any way alter the at will nature
of a Participant's employment or be deemed to create in any way whatsoever any
obligation on the part of any Participant to continue in the employ of the
Company or a Related Corporation, or on the part of the Company or a Related
Corporation to continue the employment of a Participant.
(b) The provisions of the Plan shall be governed by the laws of the
State of California without resort to that state's conflicts of laws rules.
(c) All notices or other communications by a Participant to the Company
under or in connection with this Plan will be deemed to have been duly given
when received in the form specified by the Company at the location, or by the
person, designated by the Company for the receipt thereof.
* * * * * * *
B-13
CONEXANT SYSTEMS, INC.
2001 EMPLOYEE STOCK PURCHASE PLAN
OFFERING
ADOPTED BY THE BOARD OF DIRECTORS July 18, 2002
In this document, capitalized terms not otherwise defined shall have the
same definitions of such terms as in the Conexant Systems, Inc. 2001 Employee
Stock Purchase Plan.
1. GRANT; OFFERING DATE.
(a) The Board hereby authorizes a series of Offerings pursuant to the
terms of this Offering document.
(b) The first Offering hereunder (the "Initial Offering") shall begin on
August 1, 2002 and shall end on July 31, 2004, unless terminated earlier as
provided below. Thereafter, an Offering shall begin on the day after the last
Purchase Date of the immediately preceding Offering. Except as provided below,
each Offering shall be approximately two (2) years in duration, with four (4)
Purchase Period(s), each of which (except as otherwise provided herein) shall be
approximately six (6) months in length. Except as provided below, a Purchase
Date is the last day of a Purchase Period or of an Offering, as the case may be.
The Initial Offering shall consist of four (4) Purchase Periods, with the first
Purchase Period ending on February 28, 2003, the second Purchase Period ending
on July 31, 2003, the third Purchase Period ending on January 31, 2004, and the
fourth Purchase Period ending on July 31, 2004. Notwithstanding the foregoing,
if the first annual meeting of the Company's stockholders during 2003 occurs
after February 28, 2003, then: (i) the first Purchase Period under the Initial
Offering shall end on the next Trading Day following such stockholder meeting;
and (ii) the Offering scheduled to begin March 3, 2003 shall be delayed until
the second Trading Day following such stockholder meeting.
(c) Notwithstanding the foregoing: (i) if any Offering Date falls on a
day that is not a Trading Day, then such Offering Date shall instead fall on the
next subsequent Trading Day; (ii) if the Fair Market Value of the Common Stock
on an Offering Date is less than the par value of the Common Stock, then such
Offering Date shall instead commence on the next Trading Day on which the Fair
Market Value of the Common Stock is equal to or greater than its par value;
(iii) if any Purchase Date falls on a day that is not a Trading Day, then such
Purchase Date shall instead fall on the immediately preceding Trading Day; and
(iv) each Offering shall terminate on the seventh (7th) Trading Day prior to a
Distribution Record Date (or the Company's best estimate of such date) and such
termination date shall be a Purchase Date under each such Offering; provided,
however, that if: (x) a Distribution Record Date occurs prior to the first
meeting of the stockholders of the Company held in 2003 and (y) the Fair Market
Value of the Common Stock on August 1, 2002 is equal to or greater than the Fair
Market Value of the Common Stock on March 1, 2002 as adjusted pursuant to
Section 14 of the Plan, then a Participant's Purchase Right shall be exercised
only with respect to shares of Common Stock reserved under the Plan for which
the Company obtained stockholder approval and that are
B-14
available under such Offering. In addition, a new Offering shall begin on the as
soon as administratively practicable after the Distribution Date and shall end
on either the January 31 or July 31 that falls at least eighteen (18) months but
less than twenty-four (24) months after the Grant Date for such new Offering.
For this purpose, a "Distribution Record Date" shall mean a record date for the
distribution of shares of common stock of a subsidiary of the Company to the
stockholders of the Company and the "Distribution Date" shall mean the date of
the distribution of such shares of common stock to the stockholders of the
Company.
(d) Prior to the commencement of any Offering, the Board may change any
or all terms of such Offering and any subsequent Offerings. The granting of
Purchase Rights pursuant to each Offering hereunder shall occur on each
respective Offering Date unless prior to such date (i) the Board determines that
such Offering shall not occur, or (ii) no shares of Common Stock remain
available for issuance under the Plan in connection with the Offering.
(e) If the Company's accountants advise the Company that the accounting
treatment of purchases under the Plan has changed in a manner that the Company
determines is detrimental to its best interests, then each Offering hereunder
that is then ongoing shall terminate as of the next Purchase Date (after the
purchase of stock on such Purchase Date) under such Offering.
(f) Notwithstanding anything in this Section 1 to the contrary, if on
the first day of a new Purchase Period during the Offering the Fair Market Value
of a share of Common Stock is less than or equal to the Fair Market Value of a
share of Common Stock on the Offering Date for that Offering, then that Offering
shall immediately terminate and that day shall become the Offering Date of a new
Offering. Participants in the terminated Offering shall automatically be
enrolled in the new Offering that starts on such day.
2. ELIGIBLE EMPLOYEES.
(a) Each Eligible Employee, who is either an employee of the Company or
an employee of a Related Corporation incorporated in the United States on the
Offering Date of an Offering hereunder shall be granted a Purchase Right on the
Offering Date of such Offering provided, however, that an Eligible Employer may
not participate in more than one Offering.
(b) Notwithstanding the foregoing, the following Employees shall not be
Eligible Employees or be granted Purchase Rights under an Offering:
(i) part-time or seasonal Employees whose customary employment is
twenty (20) hours per week or less or five (5) months per calendar year or less;
(ii) five percent (5%) stockholders (including ownership through
unexercised and/or unvested stock options) as described in Section 6(c) of the
Plan; or
(iii) Employees in jurisdictions outside of the United States if,
as of the Offering Date of the Offering, the grant of such Purchase Rights would
not be in compliance with the applicable laws of any jurisdiction in which the
Employee resides or is employed.
3. PURCHASE RIGHTS.
B-15
(a) Subject to the limitations herein and in the Plan, a Participant's
Purchase Right shall permit the purchase of the number of shares of Common Stock
purchasable with any whole percentage of not less than one percent (1%) and not
more than ten percent (10%) of such Participant's Earnings paid during the
period of such Offering beginning as soon as administratively practicable after
such Participant first commences participation; provided, however, that no
Participant may have more than ten percent (10%) of such Participant's Earnings
applied to purchase shares of Common Stock under all ongoing Offerings under the
Plan and all other plans of the Company and Related Corporations that are
intended to qualify as Employee Stock Purchase Plans.
(b) For Offerings hereunder, "Earnings" means all compensation paid to
an Employee by the Company or a Related Corporation, including all salary, wages
(including amounts elected to be deferred by the Employee, but would otherwise
have been paid, under any cash or deferred arrangement established by the
Company or a Related Corporation), overtime pay, commissions, bonuses, and other
remuneration paid directly to the Employee; but excluding the cost of employee
benefits paid by the Company or a Related Corporation, education or tuition
reimbursements, imputed income arising under any Company or Related Corporation
group insurance or benefit program, travel expenses, business and moving expense
reimbursements, income received in connection with stock options, contributions
made by the Company or any Related Corporation under any employee benefit plan,
and similar items of compensation.
(c) Notwithstanding the foregoing, the maximum number of shares of
Common Stock that a Participant may purchase on any Purchase Date in an Offering
shall be such number of shares as has a Fair Market Value (determined as of the
Offering Date for such Offering) equal to (x) $25,000 multiplied by the number
of calendar years in which the Purchase Right under such Offering has been
outstanding at any time, minus (y) the Fair Market Value of any other shares of
Common Stock (determined as of the relevant Offering Date with respect to such
shares) that, for purposes of the limitation of Section 423(b)(8) of the Code,
are attributed to any of such calendar years in which the Purchase Right is
outstanding. The amount in clause (y) of the previous sentence shall be
determined in accordance with regulations applicable under Section 423(b)(8) of
the Code based on (i) the number of shares previously purchased with respect to
such calendar years pursuant to such Offering or any other Offering under the
Plan, or pursuant to any other Company or Related Corporation plans intended to
qualify as Employee Stock Purchase Plans, and (ii) the number of shares subject
to other Purchase Rights outstanding on the Offering Date for such Offering
pursuant to the Plan or any other such Company or Related Corporation Employee
Stock Purchase Plan. The Company may reduce a Participant's Contributions to
zero at such time during any Offering that is scheduled to end during the
then-current calendar year that the aggregate of all Contributions accumulated
with respect to such Offering and any other Offering would exceed the foregoing
limitations.
(d) The maximum aggregate number of shares of Common Stock available to
be purchased by all Participants under an Offering shall be the number of shares
of Common Stock remaining available under the Plan on the Offering Date. If the
aggregate purchase of shares of Common Stock upon exercise of Purchase Rights
granted under the Offering would exceed the maximum aggregate number of shares
available, the Board shall make a pro rata allocation of the shares available in
a uniform and equitable manner.
B-16
(e) Notwithstanding the foregoing, the maximum number of shares of
Common Stock that an Eligible Employee may purchase on any Purchase Date during
any Offering shall not exceed one thousand (1,000) shares.
4. PURCHASE PRICE. The purchase price of each share of Common Stock under
the Offering shall be the greater of (a) the par value per share of such Common
Stock or (b) the lesser of: (i) eighty-five percent (85%) of the Fair Market
Value of such shares of Common Stock on the Offering Date, or (ii) eighty-five
percent (85%) of the Fair Market Value of such shares of Common Stock on the
applicable Purchase Date, in each case rounded up to the nearest whole cent per
share.
5. PARTICIPATION.
(a) Except as otherwise provided below with respect to the Initial
Offering, a Participant may enroll in the Offering through an IVR System, the
Web, other electronic form of subscription agreement (or such other form or
manner as determined by the Board) and thereby authorize payroll deductions
during the period for which such authorization is effective. Except as otherwise
provided below with respect to the Initial Offering, a Participant must enroll
in the manner set forth above before the Grant Date of such Offering; provided,
however, that, with the exception of the Initial Offering, any Participant who
was enrolled in the immediately preceding Offering as of the final Purchase Date
for such Offering shall be deemed to have enrolled in any subsequent Offering at
the same level of payroll deductions as in effect on such immediately preceding
Purchase Date, unless such Participant elects otherwise prior to the Grant Date
of such subsequent Offering. Such payroll deductions must be in whole
percentages only, with a minimum of one percent (1%) and a maximum percentage of
ten percent (10%) of the Participant's Earnings during such Offering. If payroll
deductions are not permitted by local law, an Eligible Employee shall become a
Participant in the Offering by enrolling through an IVR System, the Web, other
electronic form of subscription agreement (or such other form or manner as
determined by the Board).
(i) A Participant may not make additional Contributions into his
or her account.
(ii) Notwithstanding the foregoing, with respect to the Initial
Offering, an Eligible Employee shall become a Participant by enrolling
in the Initial Offering in the manner or form determined by the Board.
A Participant may make payroll deductions with respect to the Initial
Offering at any time on or before August 30, 2002 to be effective and
used for the exercise of Purchase Rights under the Initial Offering.
(b) Subject to the percentage requirements in Section 5(a), a
Participant may increase, decrease or suspend his or her participation level at
any time during an Offering by making a request for such Contribution increase,
decrease or suspension through the IVR System or the Web (or by submitting a new
written or electronic subscription agreement if the IVR System or the Web is not
available). A Participant's election to suspend Contributions during an Offering
Period shall not limit such Participant's right to resume payroll deductions at
a later date during the Offering Period by electing an increase in Contributions
to any whole percentage of not less than one percent (1%) and not more than ten
percent (10%). The increase, decrease or
B-17
suspension in Contributions will be effective as soon as administratively
practicable following the date of the Contribution increase, decrease or
suspension request.
(c) A Participant may withdraw from an Offering and receive a refund of
his or her Contributions (reduced to the extent, if any, such Contributions have
been used to acquire shares of Common Stock for the Participant on any prior
Purchase Date) without interest, at any time prior to the end of the Offering,
excluding only each ten (10) calendar day period immediately preceding a
Purchase Date (or such shorter period of time determined by the Company and
communicated to Participants), by delivering a withdrawal notice to the Company
or a designated Related Corporation in such form as the Company provides. A
Participant who has withdrawn from an Offering shall not again participate in
such Offering, but may participate in subsequent Offerings under the Plan in
accordance with the terms of the Plan and the terms of such subsequent
Offerings.
(d) Notwithstanding the foregoing or any other provision of this
Offering document or of the Plan to the contrary, neither the enrollment of any
Eligible Employee in the Plan nor any forms relating to participation in the
Plan shall be given effect until such time as a registration statement covering
the registration of the shares under the Plan that are subject to the Offering
has been filed by the Company and has become effective.
6. PURCHASES. Subject to the limitations contained herein, on each Purchase
Date, each Participant's Contributions (without any increase for interest) shall
be applied to the purchase of whole shares, up to the maximum number of shares
permitted under the Plan and the Offering.
7. NOTICES AND AGREEMENTS. Any notices or agreements provided for in an
Offering or the Plan shall be given in writing, in a form provided by the
Company, and unless specifically provided for in the Plan or this Offering,
shall be deemed effectively given upon receipt or, in the case of notices and
agreements delivered by the Company, five (5) days after deposit in the United
States mail, postage prepaid.
8. EXERCISE CONTINGENT ON STOCKHOLDER APPROVAL. The Purchase Rights granted
under an Offering are subject to the approval of the Plan by the stockholders of
the Company as required for the Plan to obtain treatment as an Employee Stock
Purchase Plan.
9. OFFERING SUBJECT TO PLAN. Each Offering is subject to all the provisions
of the Plan, and the provisions of the Plan are hereby made a part of the
Offering. The Offering is further subject to all interpretations, amendments,
rules and regulations which may from time to time be promulgated and adopted
pursuant to the Plan. In the event of any conflict between the provisions of an
Offering and those of the Plan (including interpretations, amendments, rules and
regulations which may from time to time be promulgated and adopted pursuant to
the Plan), the provisions of the Plan shall control.
B-18
WHITE PROXY CARD
Where a vote is not specified, the proxies will vote the shares represented by
the proxy FOR the election of directors and FOR proposal 2, FOR proposal 3 and
FOR proposal 4 and will vote in accordance with their discretion on such other
matters as may properly come before the meeting.
Please mark your votes as indicated in this example
|X|
1. ELECTION OF THREE DIRECTORS - Nominees: 01 D. W. Decker 02 H. Eslambolchi 03
F. C. Farrill
WITHHOLD
FOR FOR ALL
|_| |_|
Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
-----------------------------------
2. APPROVAL TO AMEND THE CERTIFICATE OF INCORPORATION TO CHANGE THE PAR VALUE OF
THE COMMON STOCK
FOR AGAINST ABSTAIN
|_| |_| |_|
3. TO APPROVE AN AMENDMENT TO THE 2001 EMPLOYEE STOCK PURCHASE PLAN
FOR AGAINST ABSTAIN
|_| |_| |_|
4. RATIFICATION OF APPOINTMENT OF AUDITORS
FOR AGAINST ABSTAIN
|_| |_| |_|
I/We consent to future access of the Annual Reports and Proxy Materials
electronically via the Internet. I/We understand that the Company may no longer
distribute printed materials to me/us for any future shareowner meeting until
such consent is revoked. I/We understand that I/we may revoke my/our consent at
any time.
|_|
I/We plan to attend the meeting. (Please detach and bring admission ticket)
|_|
Comments on other side
|_|
Signature ____________ Signature if held jointly ___________ Date: _______, 2003
If signing as attorney, executor, administrator, trustee or guardian, please
give full title as such, and, if signing for a corporation, please give your
title. When shares are in the name of more than one person, each person should
sign the proxy card. Please sign, date and return the proxy card promptly using
the enclosed envelope.
--------------------------------------------------------------------------------
(up arrow) FOLD AND DETACH HERE (up arrow)
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
Internet
http://www.eproxy.com/cnxt
Use the Internet to vote your proxy. Have your proxy card in hand when you
access the web site. You will be prompted to enter your control number, located
in the box below, to create and submit an electronic ballot.
OR
Telephone
1-800-435-6710
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter your control number, located in the
box below, and then follow the directions given.
OR
Mail
Mark, sign and date your proxy card and return it in the enclosed
postage-paid envelope.
If you vote your proxy by Internet or by telephone, you do NOT need to mail back
your proxy card.
TO VIEW THE ANNUAL REPORT AND PROXY MATERIALS ONLINE GO TO:
http://www.conexant.com
PROXY
CONEXANT SYSTEMS, INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Dwight W. Decker and Dennis E. O'Reilly, 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 26,
2003, or any adjournment thereof, with all powers which 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.
Comments:
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
(If you have written in the above space, please mark the "Comments" box on the
other side.)
(Continued, and to be marked, dated and signed, on the other side)
--------------------------------------------------------------------------------
(up arrow) FOLD AND DETACH HERE (up arrow)
Bring this admission ticket with you to the meeting on February 26, 2003. 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, 2003, the record date.
ADMISSION TICKET
CONEXANT SYSTEMS
2003 Annual Meeting of Shareowners
February 26, 2003
10:00 A.M.
Crowne Plaza Hotel
17941 Von Karman Avenue
Irvine, CA 92614
NON-TRANSFERABLE NON-TRANSFERABLE
BROWN DIRECTION CARD
Please mark your votes as indicated in this example
|X|
1. ELECTION OF THREE DIRECTORS - Nominees: 01 D. W. Decker 02 H. Eslambolchi 03
F. C. Farrill
WITHHOLD
FOR FOR ALL
|_| |_|
Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
-----------------------------------
2. APPROVAL TO AMEND THE CERTIFICATE OF INCORPORATION TO CHANGE THE PAR VALUE OF
THE COMMON STOCK
FOR AGAINST ABSTAIN
|_| |_| |_|
3. TO APPROVE AN AMENDMENT TO THE 2001 EMPLOYEE STOCK PURCHASE PLAN
FOR AGAINST ABSTAIN
|_| |_| |_|
4. RATIFICATION OF APPOINTMENT OF AUDITORS
FOR AGAINST ABSTAIN
|_| |_| |_|
I/We consent to future access of the Annual Reports and Proxy Materials
electronically via the Internet. I/We understand that the Company may no longer
distribute printed materials to me/us for any future shareowner meeting until
such consent is revoked. I/We understand that I/we may revoke my/our consent at
any time.
|_|
I/We plan to attend the meeting. (Please detach and bring admission ticket)
|_|
Signature ____________ Signature if held jointly ___________ Date: _______, 2003
If signing as attorney, executor, administrator, trustee or guardian, please
give full title as such, and, if signing for a corporation, please give your
title. When shares are in the name of more than one person, each person should
sign. Please sign, date and return the direction card promptly using the
enclosed envelope.
--------------------------------------------------------------------------------
(up arrow) FOLD AND DETACH HERE (up arrow)
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Your telephone or Internet vote authorizes the Trustee to vote your shares in
the same manner as if you marked, signed and returned your direction card.
Internet
http://www.eproxy.com/cnxt
Use the Internet to vote. Have your direction card in hand when you access the
web site. You will be prompted to enter your control number, located in the box
below, to create and submit an electronic ballot.
OR
Telephone
1-800-435-6710
Use any touch-tone telephone to vote. Have your direction card in hand when you
call. You will be prompted to enter your control number, located in the box
below, and then follow the directions given.
OR
Mail
Mark, sign and date your direction card and return it in the enclosed
postage-paid envelope.
If you vote by Internet or by telephone, you do NOT need to mail back your
direction card.
TO VIEW THE ANNUAL REPORT AND PROXY MATERIALS ONLINE GO TO:
http://www.conexant.com
DIRECTION CARD
ROCKWELL RETIREMENT SAVINGS PLAN FOR REPRESENTED HOURLY EMPLOYEES
TO: WELLS FARGO BANK, N.A., TRUSTEE
You are hereby directed to vote, with respect to the proposals listed on
the other side of this Direction Card, the number of shares of Conexant Systems,
Inc. Common Stock held for my account in the Rockwell Retirement Savings Plan
for Represented Hourly Employees (the "Plan") at the Annual Meeting of
Shareowners of Conexant Systems, Inc. to be held on February 26, 2003, or any
adjournment thereof, as follows:
To vote in accordance with the Board of Directors' recommendations check
the boxes FOR each proposal listed on the other side, then sign, date and return
this card.
Please vote in accordance with the instructions on the reverse side of
this card by February 21, 2003. If you do not properly vote by that date, Wells
Fargo Bank, N.A., Trustee for the Plan, will vote the shares allocated to your
Plan account as it deems proper.
(Continued, and to be marked, dated and signed, on the other side)
--------------------------------------------------------------------------------
(up arrow) FOLD AND DETACH HERE (up arrow)
Bring this admission ticket with you to the meeting on February 26, 2003. 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, 2003, the record date.
ADMISSION TICKET
CONEXANT SYSTEMS
2003 Annual Meeting of Shareowners
February 26, 2003
10:00 A.M.
Crowne Plaza Hotel
17941 Von Karman Avenue
Irvine, CA 92614
NON-TRANSFERABLE NON-TRANSFERABLE
GREEN DIRECTION CARD
Please mark your votes as indicated in this example
|X|
1. ELECTION OF THREE DIRECTORS - Nominees: 01 D. W. Decker 02 H. Eslambolchi 03
F. C. Farrill
WITHHOLD
FOR FOR ALL
|_| |_|
Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
-----------------------------------
2. APPROVAL TO AMEND THE CERTIFICATE OF INCORPORATION TO CHANGE THE PAR VALUE OF
THE COMMON STOCK
FOR AGAINST ABSTAIN
|_| |_| |_|
3. TO APPROVE AN AMENDMENT TO THE 2001 EMPLOYEE STOCK PURCHASE PLAN
FOR AGAINST ABSTAIN
|_| |_| |_|
4. RATIFICATION OF APPOINTMENT OF AUDITORS
FOR AGAINST ABSTAIN
|_| |_| |_|
I/We consent to future access of the Annual Reports and Proxy Materials
electronically via the Internet. I/We understand that the Company may no longer
distribute printed materials to me/us for any future shareowner meeting until
such consent is revoked. I/We understand that I/we may revoke my/our consent at
any time.
|_|
I/We plan to attend the meeting. (Please detach and bring admission ticket)
|_|
Signature ____________ Signature if held jointly ___________ Date: _______, 2003
If signing as attorney, executor, administrator, trustee or guardian, please
give full title as such, and, if signing for a corporation, please give your
title. When shares are in the name of more than one person, each person should
sign. Please sign, date and return the direction card promptly using the
enclosed envelope.
--------------------------------------------------------------------------------
(up arrow) FOLD AND DETACH HERE (up arrow)
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Your telephone or Internet vote authorizes the Trustee to vote your shares in
the same manner as if you marked, signed and returned your direction card.
Internet
http://www.eproxy.com/cnxt
Use the Internet to vote. Have your direction card in hand when you access the
web site. You will be prompted to enter your control number, located in the box
below, to create and submit an electronic ballot.
OR
Telephone
1-800-435-6710
Use any touch-tone telephone to vote. Have your direction card in hand when you
call. You will be prompted to enter your control number, located in the box
below, and then follow the directions given.
OR
Mail
Mark, sign and date your direction card and return it in the enclosed
postage-paid envelope.
If you vote by Internet or by telephone, you do NOT need to mail back your
direction card.
TO VIEW THE ANNUAL REPORT AND PROXY MATERIALS ONLINE GO TO:
http://www.conexant.com
DIRECTION CARD
ROCKWELL RETIREMENT SAVINGS PLAN FOR CERTAIN EMPLOYEES
TO: WELLS FARGO BANK, N.A., TRUSTEE
You are hereby directed to vote, with respect to the proposals listed on
the other side of this Direction Card, the number of shares of Conexant Systems,
Inc. Common Stock held for my account in the Rockwell Retirement Savings Plan
for Certain Employees (the "Plan") at the Annual Meeting of Shareowners of
Conexant Systems, Inc. to be held on February 26, 2003, or any adjournment
thereof, as follows:
To vote in accordance with the Board of Directors' recommendations check
the boxes FOR each proposal listed on the other side, then sign, date and return
this card.
Please vote in accordance with the instructions on the reverse side of
this card by February 21, 2003. If you do not properly vote by that date, Wells
Fargo Bank, N.A., Trustee for the Plan, will vote the shares allocated to your
Plan account as it deems proper.
(Continued, and to be marked, dated and signed, on the other side)
--------------------------------------------------------------------------------
(up arrow) FOLD AND DETACH HERE (up arrow)
Bring this admission ticket with you to the meeting on February 26, 2003. 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, 2003, the record date.
ADMISSION TICKET
CONEXANT SYSTEMS
2003 Annual Meeting of Shareowners
February 26, 2003
10:00 A.M.
Crowne Plaza Hotel
17941 Von Karman Avenue
Irvine, CA 92614
NON-TRANSFERABLE NON-TRANSFERABLE
GREY DIRECTION CARD
Please mark your votes as indicated in this example
|X|
1. ELECTION OF THREE DIRECTORS - Nominees: 01 D. W. Decker 02 H. Eslambolchi 03
F. C. Farrill
WITHHOLD
FOR FOR ALL
|_| |_|
Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
-----------------------------------
2. APPROVAL TO AMEND THE CERTIFICATE OF INCORPORATION TO CHANGE THE PAR VALUE OF
THE COMMON STOCK
FOR AGAINST ABSTAIN
|_| |_| |_|
3. TO APPROVE AN AMENDMENT TO THE 2001 EMPLOYEE STOCK PURCHASE PLAN
FOR AGAINST ABSTAIN
|_| |_| |_|
4. RATIFICATION OF APPOINTMENT OF AUDITORS
FOR AGAINST ABSTAIN
|_| |_| |_|
I/We consent to future access of the Annual Reports and Proxy Materials
electronically via the Internet. I/We understand that the Company may no longer
distribute printed materials to me/us for any future shareowner meeting until
such consent is revoked. I/We understand that I/we may revoke my/our consent at
any time.
|_|
I/We plan to attend the meeting. (Please detach and bring admission ticket)
|_|
Signature ____________ Signature if held jointly ___________ Date: _______, 2003
If signing as attorney, executor, administrator, trustee or guardian, please
give full title as such, and, if signing for a corporation, please give your
title. When shares are in the name of more than one person, each person should
sign. Please sign, date and return the direction card promptly using the
enclosed envelope.
--------------------------------------------------------------------------------
(up arrow) FOLD AND DETACH HERE (up arrow)
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Your telephone or Internet vote authorizes the Trustee to vote your shares in
the same manner as if you marked, signed and returned your direction card.
Internet
http://www.eproxy.com/cnxt
Use the Internet to vote. Have your direction card in hand when you access the
web site. You will be prompted to enter your control number, located in the box
below, to create and submit an electronic ballot.
OR
Telephone
1-800-435-6710
Use any touch-tone telephone to vote. Have your direction card in hand when you
call. You will be prompted to enter your control number, located in the box
below, and then follow the directions given.
OR
Mail
Mark, sign and date your direction card and return it in the enclosed
postage-paid envelope.
If you vote by Internet or by telephone, you do NOT need to mail back your
direction card.
TO VIEW THE ANNUAL REPORT AND PROXY MATERIALS ONLINE GO TO:
http://www.conexant.com
DIRECTION CARD
ROCKWELL SALARIED RETIREMENT SAVINGS PLAN
TO: WELLS FARGO BANK, N.A., TRUSTEE
You are hereby directed to vote, with respect to the proposals listed on
the other side of this Direction Card, the number of shares of Conexant Systems,
Inc. Common Stock held for my account in the Rockwell Salaried Retirement
Savings Plan (the "Plan") at the Annual Meeting of Shareowners of Conexant
Systems, Inc. to be held on February 26, 2003, or any adjournment thereof, as
follows:
To vote in accordance with the Board of Directors' recommendations check
the boxes FOR each proposal listed on the other side, then sign, date and return
this card.
Please vote in accordance with the instructions on the reverse side of
this card by February 21, 2003. If you do not properly vote by that date, Wells
Fargo Bank, N.A., Trustee for the Plan, will vote the shares allocated to your
Plan account as it deems proper.
(Continued, and to be marked, dated and signed, on the other side)
--------------------------------------------------------------------------------
(up arrow) FOLD AND DETACH HERE (up arrow)
Bring this admission ticket with you to the meeting on February 26, 2003. 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, 2003, the record date.
ADMISSION TICKET
CONEXANT SYSTEMS
2003 Annual Meeting of Shareowners
February 26, 2003
10:00 A.M.
Crowne Plaza Hotel
17941 Von Karman Avenue
Irvine, CA 92614
NON-TRANSFERABLE NON-TRANSFERABLE
LIGHT BLUE DIRECTION CARD
Please mark your votes as indicated in this example
|X|
1. ELECTION OF THREE DIRECTORS - Nominees: 01 D. W. Decker 02 H. Eslambolchi
03 F. C. Farrill
WITHHOLD
FOR FOR ALL
|_| |_|
Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
-----------------------------------
2. APPROVAL TO AMEND THE CERTIFICATE OF INCORPORATION TO CHANGE THE PAR VALUE OF
THE COMMON STOCK
FOR AGAINST ABSTAIN
|_| |_| |_|
3. TO APPROVE AN AMENDMENT TO THE 2001 EMPLOYEE STOCK PURCHASE PLAN
FOR AGAINST ABSTAIN
|_| |_| |_|
4. RATIFICATION OF APPOINTMENT OF AUDITORS
FOR AGAINST ABSTAIN
|_| |_| |_|
I/We consent to future access of the Annual Reports and Proxy Materials
electronically via the Internet. I/We understand that the Company may no longer
distribute printed materials to me/us for any future shareowner meeting until
such consent is revoked. I/We understand that I/we may revoke my/our consent at
any time.
|_|
I/We plan to attend the meeting. (Please detach and bring admission ticket)
|_|
Signature ____________ Signature if held jointly ___________ Date: _______, 2003
If signing as attorney, executor, administrator, trustee or guardian, please
give full title as such, and, if signing for a corporation, please give your
title. When shares are in the name of more than one person, each person should
sign. Please sign, date and return the direction card promptly using the
enclosed envelope.
--------------------------------------------------------------------------------
(up arrow) FOLD AND DETACH HERE (up arrow)
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Your telephone or Internet vote authorizes the Trustee to vote
your shares in the same manner as if you marked, signed and
returned your direction card.
Internet
http://www.eproxy.com/cnxt
Use the Internet to vote. Have your direction card in hand when you access
the web site. You will be prompted to enter your control number, located in
the box below, to create and submit an electronic ballot.
OR
Telephone
1-800-435-6710
Use any touch-tone telephone to vote. Have your direction card in hand when
you call. You will be prompted to enter your control number, located in the
box below, and then follow the directions given.
OR
Mail
Mark, sign and date your direction card and return it in the enclosed
postage-paid envelope.
If you vote by Internet or by telephone, you do NOT need to mail back
your direction card.
TO VIEW THE ANNUAL REPORT AND PROXY MATERIALS ONLINE GO TO:
http://www.conexant.com
DIRECTION CARD
ROCKWELL EMPLOYEE SAVINGS AND INVESTMENT PLAN FOR
REPRESENTED HOURLY EMPLOYEES TO: WELLS FARGO BANK, N.A., TRUSTEE
You are hereby directed to vote, with respect to the proposals listed on
the other side of this Direction Card, the number of shares of Conexant Systems,
Inc. Common Stock held for my account in the Rockwell Employee Savings and
Investment Plan for Represented Hourly Employees (the "Plan") at the Annual
Meeting of Shareowners of Conexant Systems, Inc. to be held on February 26,
2003, or any adjournment thereof, as follows:
To vote in accordance with the Board of Directors' recommendations check
the boxes FOR each proposal listed on the other side, then sign, date and return
this card.
Please vote in accordance with the instructions on the reverse side of
this card by February 21, 2003. If you do not properly vote by that date, Wells
Fargo Bank, N.A., Trustee for the Plan, will vote the shares allocated to your
Plan account as it deems proper.
(Continued, and to be marked, dated and signed, on the other side)
--------------------------------------------------------------------------------
(up arrow) FOLD AND DETACH HERE (up arrow)
Bring this admission ticket with you to the meeting on February 26, 2003.
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, 2003, the record date.
ADMISSION TICKET
CONEXANT SYSTEMS
2003 Annual Meeting of Shareowners
February 26, 2003
10:00 A.M.
Crowne Plaza Hotel
17941 Von Karman Avenue
Irvine, CA 92614
NON-TRANSFERABLE NON-TRANSFERABLE
PURPLE DIRECTION CARD
Please mark your votes as indicated in this example
|X|
1. ELECTION OF THREE DIRECTORS - Nominees: 01 D. W. Decker 02 H. Eslambolchi
03 F. C. Farrill
WITHHOLD
FOR FOR ALL
|_| |_|
Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
-----------------------------------
2. APPROVAL TO AMEND THE CERTIFICATE OF INCORPORATION TO CHANGE THE PAR VALUE OF
THE COMMON STOCK
FOR AGAINST ABSTAIN
|_| |_| |_|
3. TO APPROVE AN AMENDMENT TO THE 2001 EMPLOYEE STOCK PURCHASE PLAN
FOR AGAINST ABSTAIN
|_| |_| |_|
4. RATIFICATION OF APPOINTMENT OF AUDITORS
FOR AGAINST ABSTAIN
|_| |_| |_|
I/We consent to future access of the Annual Reports and Proxy Materials
electronically via the Internet. I/We understand that the Company may no longer
distribute printed materials to me/us for any future shareowner meeting until
such consent is revoked. I/We understand that I/we may revoke my/our consent at
any time.
|_|
I/We plan to attend the meeting. (Please detach and bring admission ticket)
|_|
Signature ____________ Signature if held jointly ___________ Date: _______, 2003
If signing as attorney, executor, administrator, trustee or guardian, please
give full title as such, and, if signing for a corporation, please give your
title. When shares are in the name of more than one person, each person should
sign. Please sign, date and return the direction card promptly using the
enclosed envelope.
--------------------------------------------------------------------------------
(up arrow) FOLD AND DETACH HERE (up arrow)
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Your telephone or Internet vote authorizes the Trustee to vote
your shares in the same manner as if you marked, signed and
returned your direction card.
Internet
http://www.eproxy.com/cnxt
Use the Internet to vote. Have your direction card in hand when you access
the web site. You will be prompted to enter your control number, located in
the box below, to create and submit an electronic ballot.
OR
Telephone
1-800-435-6710
Use any touch-tone telephone to vote. Have your direction card in hand when
you call. You will be prompted to enter your control number, located in the
box below, and then follow the directions given.
OR
Mail
Mark, sign and date your direction card and return it in the enclosed
postage-paid envelope.
If you vote by Internet or by telephone, you do NOT need to mail back
your direction card.
TO VIEW THE ANNUAL REPORT AND PROXY MATERIALS ONLINE GO TO:
http://www.conexant.com
DIRECTION CARD
ROCKWELL NON-REPRESENTED HOURLY RETIREMENT SAVINGS PLAN
TO: WELLS FARGO BANK, N.A., TRUSTEE
You are hereby directed to vote, with respect to the proposals listed on
the other side of this Direction Card, the number of shares of Conexant Systems,
Inc. Common Stock held for my account in the Rockwell Non-Represented Hourly
Retirement Savings Plan (the "Plan") at the Annual Meeting of Shareowners of
Conexant Systems, Inc. to be held on February 26, 2003, or any adjournment
thereof, as follows:
To vote in accordance with the Board of Directors' recommendations check
the boxes FOR each proposal listed on the other side, then sign, date and return
this card.
Please vote in accordance with the instructions on the reverse side of
this card by February 21, 2003. If you do not properly vote by that date, Wells
Fargo Bank, N.A., Trustee for the Plan, will vote the shares allocated to your
Plan account as it deems proper.
(Continued, and to be marked, dated and signed, on the other side)
--------------------------------------------------------------------------------
(up arrow) FOLD AND DETACH HERE (up arrow)
Bring this admission ticket with you to the meeting on February 26, 2003.
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, 2003, the record date.
ADMISSION TICKET
CONEXANT SYSTEMS
2003 Annual Meeting of Shareowners
February 26, 2003
10:00 A.M.
Crowne Plaza Hotel
17941 Von Karman Avenue
Irvine, CA 92614
NON-TRANSFERABLE NON-TRANSFERABLE
RED DIRECTION CARD
Please mark your votes as indicated in this example
|X|
1. ELECTION OF THREE DIRECTORS - Nominees: 01 D. W. Decker 02 H.
Eslambolchi 03 F. C. Farrill
WITHHOLD
FOR FOR ALL
|_| |_|
Instruction: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below.
______________________________
2. APPROVAL TO AMEND THE CERTIFICATE OF INCORPORATION TO CHANGE THE
PAR VALUE OF THE COMMON STOCK
FOR AGAINST ABSTAIN
|_| |_| |_|
3. TO APPROVE AN AMENDMENT TO THE 2001 EMPLOYEE STOCK PURCHASE PLAN
FOR AGAINST ABSTAIN
|_| |_| |_|
4. RATIFICATION OF APPOINTMENT OF AUDITORS
FOR AGAINST ABSTAIN
|_| |_| |_|
I/We consent to future access of the Annual Reports and Proxy Materials
electronically via the Internet. I/We understand that the Company may no longer
distribute printed materials to me/us for any future shareowner meeting until
such consent is revoked. I/We understand that I/we may revoke my/our consent at
any time.
|-|
I/We plan to attend the meeting. (Please detach and bring admission
ticket)
|-|
Signature ____________ Signature if held jointly ___________ Date: _______, 2003
If signing as attorney, executor, administrator, trustee or guardian, please
give full title as such, and, if signing for a corporation, please give your
title. When shares are in the name of more than one person, each person should
sign. Please sign, date and return the direction card promptly using the
enclosed envelope.
--------------------------------------------------------------------------------
(up arrow) FOLD AND DETACH HERE (up arrow)
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Your telephone or Internet vote authorizes the Trustee to vote your shares
in the same manner as if you marked, signed and returned your
direction card.
Internet
http://www.eproxy.com/cnxt
Use the Internet to vote. Have your direction card in hand when you
access the web site. You will be prompted to enter your control
number, located in the box below, to create and submit an electronic ballot.
OR
Telephone
1-800-435-6710
Use any touch-tone telephone to vote. Have your direction card in
hand when you call. You will be prompted to enter your control
number, located in the box below, and then follow the directions given.
OR
Mail
Mark, sign and date your direction card and return it in the
enclosed postage-paid envelope.
If you vote by Internet or by telephone, you do NOT need
to mail back your direction card.
TO VIEW THE ANNUAL REPORT AND PROXY MATERIALS ONLINE GO TO:
http://www.conexant.com
DIRECTION CARD
CONEXANT SYSTEMS, INC. RETIREMENT SAVINGS PLAN
TO: FIDELITY MANAGEMENT TRUST COMPANY, TRUSTEE
You are hereby directed to vote, with respect to the proposals listed on
the other side of this Direction Card, the number of shares of Conexant Systems,
Inc. Common Stock held for my account in the Conexant Systems, Inc. Retirement
Savings Plan (the "Plan") at the Annual Meeting of Shareowners of Conexant
Systems, Inc. to be held on February 26, 2003, or any adjournment thereof, as
follows:
To vote in accordance with the Board of Directors' recommendations check
the boxes FOR each proposal listed on the other side, then sign, date and return
this card.
Please vote in accordance with the instructions on the reverse side of
this card by February 21, 2003. If you do not properly vote by that date,
Fidelity Management Trust Company, Trustee for the Plan, will vote the shares
allocated to your Plan account in the same proportion on each issue as it votes
the shares for which it has received voting directions from the other Plan
participants.
(Continued, and to be marked, dated and signed, on the other side)
--------------------------------------------------------------------------------
(up arrow) FOLD AND DETACH HERE (up arrow)
Bring this admission ticket with you to the meeting on
February 26, 2003. 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, 2003, the record date.
ADMISSION TICKET
CONEXANT SYSTEMS
2003 Annual Meeting of Shareowners
February 26, 2003
10:00 A.M.
Crowne Plaza Hotel
17941 Von Karman Avenue
Irvine, CA 92614
NON-TRANSFERABLE NON-TRANSFERABLE
YELLOW DIRECTION CARD
Please mark your votes as indicated in this example
|X|
1. ELECTION OF THREE DIRECTORS - Nominees: 01 D. W. Decker 02 H.
Eslambolchi 03 F. C. Farrill
WITHHOLD
FOR FOR ALL
|_| |_|
Instruction: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below.
___________________________________
2. APPROVAL TO AMEND THE CERTIFICATE OF INCORPORATION TO CHANGE THE
PAR VALUE OF THE COMMON STOCK
FOR AGAINST ABSTAIN
|_| |_| |_|
3. TO APPROVE AN AMENDMENT TO THE 2001 EMPLOYEE STOCK PURCHASE PLAN
FOR AGAINST ABSTAIN
|_| |_| |_|
4. RATIFICATION OF APPOINTMENT OF AUDITORS
FOR AGAINST ABSTAIN
|_| |_| |_|
I/We consent to future access of the Annual Reports and Proxy Materials
electronically via the Internet. I/We understand that the Company may no longer
distribute printed materials to me/us for any future shareowner meeting until
such consent is revoked. I/We understand that I/we may revoke my/our consent at
any time.
|_|
I/We plan to attend the meeting. (Please detach and bring admission
ticket)
|_|
Signature ____________ Signature if held jointly ___________ Date: _______, 2003
If signing as attorney, executor, administrator, trustee or guardian, please
give full title as such, and, if signing for a corporation, please give your
title. When shares are in the name of more than one person, each person should
sign. Please sign, date and return the direction card promptly using the
enclosed envelope.
--------------------------------------------------------------------------------
(up arrow) FOLD AND DETACH HERE (up arrow)
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Your telephone or Internet vote authorizes the Trustee to vote your shares
in the same manner as if you marked, signed and returned your
direction card.
Internet
http://www.eproxy.com/cnxt
Use the Internet to vote. Have your direction card in hand when you
access the web site. You will be prompted to enter your control
number, located in the box below, to create and submit an electronic ballot.
OR
Telephone
1-800-435-6710
Use any touch-tone telephone to vote. Have your direction card in
hand when you call. You will be prompted to enter your control
number, located in the box below, and then follow the directions given.
OR
Mail
Mark, sign and date your direction card and return it in the
enclosed postage-paid envelope.
If you vote by Internet or by telephone, you do NOT need
to mail back your direction card.
TO VIEW THE ANNUAL REPORT AND PROXY MATERIALS ONLINE GO TO:
http://www.conexant.com
DIRECTION CARD
CONEXANT SYSTEMS, INC. HOURLY EMPLOYEES' SAVINGS PLAN
TO: FIDELITY MANAGEMENT TRUST COMPANY, TRUSTEE
You are hereby directed to vote, with respect to the proposals listed on the
other side of this Direction Card, the number of shares of
Conexant Systems, Inc. Common Stock held for my account in the
Conexant Systems, Inc. Hourly Employees' Savings Plan (the "Plan") at
the Annual Meeting of Shareowners of Conexant Systems, Inc. to be
held on February 26, 2003, or any adjournment thereof, as follows:
To vote in accordance with the Board of Directors' recommendations check the
boxes FOR each proposal listed on the other side, then
sign, date and return this card.
Please vote in accordance with the instructions on the reverse side
of this card by February 21, 2003. If you do not properly vote by
that date, Fidelity Management Trust Company, Trustee for the Plan, will vote
the shares allocated to your Plan account in the same
proportion on each issue as it votes the shares for which it has received
voting directions from the other Plan participants.
(Continued, and to be marked, dated and signed, on the other side)
--------------------------------------------------------------------------------
(up arrow) FOLD AND DETACH HERE (up arrow)
Bring this admission ticket with you to the meeting on
February 26, 2003. 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, 2003, the record date.
ADMISSION TICKET
CONEXANT SYSTEMS
2003 Annual Meeting of Shareowners
February 26, 2003
10:00 A.M.
Crowne Plaza Hotel
17941 Von Karman Avenue
Irvine, CA 92614
NON-TRANSFERABLE NON-TRANSFERABLE