CIO Employment Agreement - John M. Watkins, Jr

EXECUTIVE COMMITTEE EMPLOYMENT AGREEMENT


THIS EXECUTIVE COMMITTEE EMPLOYMENT AGREEMENT (this "AGREEMENT") is entered into as of April 1, 2003 between John M. Watkins, Jr. (the "EXECUTIVE") and Fairchild Semiconductor Corporation, a Delaware corporation (the "COMPANY").


For ease of reference, this Agreement is divided into the following parts, which begin on the pages indicated:


PART 1-- TERM, DUTIES AND SCOPE, COMPENSATION AND BENEFITS DURING EMPLOYMENT
(Sections 1-4, beginning on page 2)


o Salary
o EFIP Bonus


PART 2-- COMPENSATION AND BENEFITS IN CASE OF ACTUAL OR CONSTRUCTIVE TERMINATION
(Sections 5-6, beginning on page 3)


o Termination


PART 3-- COMPENSATION AND BENEFITS IN CASE OF A CHANGE IN CONTROL
(Section 7, beginning on page 4


o Change in Control


PART 4-- TRADE SECRETS, INTELLECTUAL PROPERTY, NON-COMPETITION, REMEDIES, SEVERABILITY, SUCCESSORS, MISCELLANEOUS
PROVISIONS, SIGNATURE PAGE
(Sections 8-14, beginning on page 6)


o Non-Compete
o Confidentiality
o Forfeiture in Case of Certain Events
TERMS


For good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, the Company and the Executive, intending to be legally bound, agree as follows:


PART 1 TERM OF EMPLOYMENT, DUTIES AND SCOPE, COMPENSATION AND BENEFITS DURING
EMPLOYMENT


SECTION 1. TERM OF EMPLOYMENT


(a) Term. Unless sooner terminated as provided in this Agreement, the term of
this Agreement will begin on the effective date of this Agreement and will
end on the second anniversary thereof (the "INITIAL Term"). The term of
this Agreement will be automatically extended for one or more successive
one-year periods (each a "RENEWAL TERM") unless the Company or the
Executive gives the other written notice of non-renewal at least 30 days
before the end of the Initial Term or the applicable Renewal Term. The
Initial Term and any Renewal Term are collectively referred to as the
"Term."


(b) Termination or Resignation. Subject to the other terms of this Agreement,
including those in Part 2, either the Company or the Executive may
terminate the Executive's employment with the Company at any time and for
any reason or no reason upon written notice to the other party.


SECTION 2. DUTIES AND SCOPE OF EMPLOYMENT


(a) Position. The Company will employ the Executive (or, if the Company is not
the Executive's employer, the Company will cause its appropriate subsidiary
to employ the Executive) during the Term in the position of Senior Vice
President and Chief Information Officer, reporting to the Senior Executive
Vice President responsible for finance and information technology and to
the Chief Operating Officer. The Executive will be given duties,
responsibilities and authorities that are appropriate to this position.


(b) Obligations. During the Term, the Executive will devote the Executive's
full business efforts and time to the business and affairs of the Company
as needed to carry out his duties and responsibilities. The foregoing shall
not preclude the Executive from engaging in appropriate civic, charitable,
religious or other non-profit activities or from devoting a reasonable
amount of time to private investments or from serving on the boards of
directors of other entities, provided that those activities do not
interfere or conflict with the Executive's duties or responsibilities to
the Company.


SECTION 3. BASE COMPENSATION


During the Term, the Company will pay the Executive, as compensation for services, a base salary at the annual rate of at least $285,000. Salary increases will be considered after the first anniversary of this Agreement, or sooner in the discretion of the Chief Executive Officer, on a basis consistent with Company policies.


2 SECTION 4. OTHER COMPENSATION


EFIP. During the Term the Executive will be enrolled in the Enhanced Fairchild Incentive Plan (EFIP), at a new targeted participation level of 50%. While bonuses under this program are never guaranteed, typically, if the company meets its EBITDA goals, participants receive 100% of the targeted payout. If the company exceeds those goals, participants can receive up to 200% of the targeted payout.


PART 2 COMPENSATION AND BENEFITS IN CASE OF TERMINATION WITHOUT CAUSE OR FOR
GOOD REASON


SECTION 5. TERMINATIONS AND RELATED DEFINITIONS


Part 2 of the Agreement, consisting of Sections 5 and 6, describes the benefits and compensation, if any, payable in case of certain terminations of employment. Part 3 of the Agreement, consisting of Section 7, describes benefits and compensation, if any, payable in case of a Change in Control.


In this Agreement,


(a) "CAUSE" means (1) a willful failure by the Executive to substantially
perform the Executive's duties under this Agreement, other than a failure
resulting from the Executive's complete or partial incapacity due to
physical or mental illness or impairment, (2) a willful act by the
Executive that constitutes gross misconduct and that is materially
injurious to the Company, (3) a willful breach by the Executive of a
material provision of this Agreement (including Sections 8 and 10) or (4) a
material and willful violation of a federal or state law or regulation
applicable to the business of the Company that is materially and
demonstrably injurious to the Company, provided that no act, or failure to
act, by the Executive shall be considered "willful" unless committed
without good faith and without a reasonable belief that the act or omission
was in the Company's best interest; and


(b) "GOOD REASON" means any of the following: (1) a reduction in the
Executive's base salary other than as part of a broader executive pay
reduction, (2) a reduction in the Executive's incentive compensation (EFIP)
target other than as part of a broader executive reduction, (3) a material
change in the employment benefits available to the Executive, if such
change does not similarly affect all employees of the Company eligible for
such benefits, or (4) a material reduction in your duties, responsibilities
or authority.


SECTION 6. TERMINATION BY COMPANY WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD REASON


(a) Severance. If, during the Term, the Company terminates the Executive's
employment for any reason other than Cause (including as a result of the
Executive's death or disability), or if the Executive terminates his
employment for Good Reason, then, provided the Executive (or his legal
representative, if applicable) executes the release of claims described in
Section 6(b), the Company will pay the Executive, in a lump sum or, at the
Company's option, in installments over 24 months following the effective
date of such


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termination, an amount equal to two times the Executive's base salary in
effect on such termination date. The Executive will be responsible for all
taxes relating to such payments and the Company will make all required
withholdings of all such taxes.


(b) Release of Claims. As a condition to the receipt of the payments and
benefits described in Section 6(a), the Executive (or his legal
representative, if applicable) shall be required to execute a release of
all claims arising out of the Executive's employment or the termination
thereof, including any claim of discrimination under U.S. state or federal
law or any non-U.S. law, but excluding claims for indemnification from the
Company under any indemnification agreement with the Company, its
certificate of incorporation or bylaws (or equivalent organizing
instruments), or claims under applicable directors' and officers'
insurance.


(c) Conditions to Receipt of Payments. Without limiting the Company's other
rights or remedies in the even of the Executive's breach of any provision
of this Agreement, the obligation of the Company to provide the payments
described in this Section 6 shall cease if the Executive breaches any of
the provisions of Section 8 or 10.


PART 3 COMPENSATION AND BENEFITS IN CASE OF A CHANGE IN CONTROL


SECTION 7. CHANGE IN CONTROL


(a) Payment. In the event of a Change in Control, if the Executive's employment
is terminated by the Company other than for Cause (including as a result of
the Executive's death or disability), or by the Executive for Good Reason,
in either case within the time period beginning six months before the
Change in Control and ending 12 months after the Change in Control, the
cash payment under Section 6(a) will be paid in a lump sum within 14 days
after the date of such termination. Any obligation of the Company under
this Section 7 will survive any termination of this Agreement.


(b) Definition. A "CHANGE IN CONTROL" means the happening of any of the
following events (for purposes of this Section 7 only, the "COMPANY" means
Fairchild Semiconductor International, Inc., a Delaware corporation, and
not any of its subsidiaries):


(1) An acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT")) (any of which, a "PERSON") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 25% or more of either (i) the
then-outstanding shares of common stock of the Company (the
"OUTSTANDING COMPANY COMMON STOCK") or (ii) the combined voting power
of the then-outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "OUTSTANDING COMPANY
VOTING SECURITIES"); excluding, however, the following: (A) Any
acquisition directly from the Company, other than an acquisition by
virtue of the exercise of a conversion privilege unless the security
being so converted was itself acquired directly from


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the Company, (B) Any acquisition by the Company, (C) Any acquisition
by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any entity controlled by the Company, or
(D) Any acquisition pursuant to a transaction which complies with
clauses (i), (ii) and (ii) of Section 7(b)(3); or


(2) A change in the composition of the board of directors of the Company
(the "BOARD") such that the individuals who, as of the effective date
of this Agreement, constitute the Board (such Board shall be
hereinafter referred to as the "INCUMBENT BOARD") cease for any reason
to constitute at least a majority of the Board; provided, however, for
purposes of this definition, that any i ...