Exhibit 10.39
 
SEPARATION AGREEMENT
 
This Separation Agreement (“Agreement”) is entered into by and between Douglas
C. Spreng (“Mr. Spreng”) and Applied Micro Circuits Corporation (“AMCC” or
“Company”).
 
RECITALS
 
A.    AMCC is a corporation doing business in the State of California, where Mr.
Spreng is employed.
 
B.    AMCC acquired MMC Networks, Inc. (“MMC”) in October 2000. Mr. Spreng was
then employed by MMC as its President and Chief Executive Officer pursuant to an
employment agreement executed with MMC and the Company (“Employment Agreement”).
 
C.    Mr. Spreng is currently AMCC’s President and Chief Operating Officer
(“COO”), and a member of its Board of Directors (“Board”).
 
D.    Mr. Spreng desires to retire from the Company and the parties desire to
set forth the terms upon which Mr. Spreng will retire.
 
AGREEMENT
 
1.    Resignation and Termination of Employment.
 
Concurrently with execution of this Agreement, Mr. Spreng is submitting his
resignation as the Company’s President and COO, and from all other offices and
capacities in which he currently serves the Company or its affiliates, effective
September 30, 2002, but will remain on the Company’s Board. Mr. Spreng agrees to
submit his resignation in a letter, the form of which is attached hereto as
Exhibit “A”. Mr. Spreng and AMCC also approve the issuance of the press release
attached hereto as Exhibit “B”. AMCC will continue to pay Mr. Spreng’s salary
and provide him with the benefits he is currently receiving through September
30, 2002 (“Termination Date”), at which time AMCC shall have no further
obligations to Mr. Spreng except as set forth in this Agreement.
 
2.    Separation Pay/Consideration.
 
Promptly after the Effective Date of this Agreement, and after Company’s receipt
of the letter described in Section 1, Mr. Spreng will receive the following
consideration:
 
2.1    The amount of three hundred and fifty thousand dollars ($350,000), less
applicable taxes and withholdings; and,
 
2.2    The Company will pay Mr. Spreng’s COBRA insurance premiums for medical,
dental and vision health insurance benefits for Mr. Spreng and his dependents,
through March 30, 2004.

--------------------------------------------------------------------------------

 
3.    RELEASE.
 
3.1    Mr. Spreng, for himself and for his heirs, assigns, executors, successors
and each of them, does hereby unconditionally, irrevocably and absolutely
release and discharge AMCC, its owners, directors, officers, employees, agents,
attorneys, stockholders, divisions, successors and assigns, and any related
holding, parent or subsidiary corporations or predecessors in interest,
including MMC, from any and all loss, liability, claims, demands, causes of
action or suits of any type, whether in law and/or in equity, related directly
or indirectly, or in any way connected with any transaction, affairs or
occurrences between them through the Effective Date, including, but not limited
to, Mr. Spreng’s employment with AMCC or MMC and the termination of said
employment, including claims for wrongful termination, employment
discrimination, violation of public policy, defamation, infliction of emotional
distress and any other such claims under state or federal law, and any claims
relating to the Employment Agreement, including but not limited to any severance
obligations thereunder, or any other agreements between Mr. Spreng and AMCC or
MMC. This release specifically applies to any claims for age discrimination in
employment, including any claims arising under the Age Discrimination and
Employment Act (“ADEA”), the State of California Fair Employment and Housing
Act, or any other statutes or laws which govern discrimination in employment.
Notwithstanding any other provision herein, Mr. Spreng is not releasing any
claims he may have against the Company for indemnification by the Company under
that certain Indemnification Agreement between the Company and Mr. Spreng dated
            , 200   (the “Indemnification Agreement”) or as an officer,
Director, employee or agent of the Company under the Company’s Certificate of
Incorporation or Bylaws or under applicable law, and neither Mr. Spreng or the
Company release any rights the Company and/or Mr. Spreng may have against any of
the Company’s or Mr. Spreng’s insurers.
 
3.2    Mr. Spreng expressly waives all of the benefits and rights granted to him
pursuant to California Civil Code section 1542, which reads as follows:
 
A general release does not extend to claims which the creditor does not know of
or suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.
 
Mr. Spreng certifies that he has read all of this Agreement, including the
release provisions contained herein and the quoted Civil Code section, and that
he fully understands all of the same. Mr. Spreng hereby expressly agrees

2

--------------------------------------------------------------------------------

 
that this Agreement shall extend and apply to all unknown, unsuspected and
unanticipated injuries and damages, as well as those that are now disclosed.
 
3.3    No Further Action. Mr. Spreng irrevocably and absolutely agrees that he
will not prosecute nor allow to be prosecuted on his behalf, in any
administrative agency, whether federal or state, or in any court, whether
federal or state, any claim or demand of any type related to the matters
released above, it being the intention of the parties that with the execution by
Mr. Spreng of this release, AMCC, MMC, its owners, directors, officers,
employees, agents, attorneys, stockholders, insurers, divisions, predecessors,
successors and assigns, and any related holding, parent or subsidiary
corporations will be absolutely, unconditionally and forever discharged of and
from all obligations to or on behalf of Mr. Spreng related in any way to the
matters discharged herein.
 
4.    RELEASE OF AGE CLAIMS/EFFECTIVE DATE.
 
4.1    Review Period. Mr. Spreng represents, acknowledges and agrees that AMCC
is hereby advising him, in writing, to discuss this Agreement with an attorney,
and to the extent, if any, that Mr. Spreng has desired, Mr. Spreng has done so;
that AMCC has given Mr. Spreng twenty-one (21) days to review and consider this
Agreement before signing it, including the ADEA release therein, and Mr. Spreng
understands that he may use as much of this twenty-one (21) day period as he
wishes prior to signing; and that no promise, representation, warranty or
agreements not contained herein have been made by or with anyone to cause him to
sign this Agreement; that he has read this Agreement in its entirety, and fully
understands and is aware of its meaning, intent, content and legal effect; and
that he is executing the agreement, including all releases herein, voluntarily
and free of any duress or coercion.
 
4.2    Effective Date of Agreement. For a period of seven (7) days following
execution of this Agreement, Mr. Spreng may revoke the Agreement, and the
Agreement shall not become effective or enforceable until and unless the
revocation period has expired and such right has not been exercised. This
Agreement shall become effective eight (8) days after Mr. Spreng has signed it,
provided that he has not revoked the Agreement (the “Effective Date”), except
that the resignation set forth in Section 1, above, is effective upon receipt by
AMCC of the executed resignation letter and may not be revoked.
 
6.    NO SOLICITATION.
 
Commencing upon the Effective Date of this Agreement and ending two years
thereafter, Mr. Spreng shall not, solicit or encourage any employee of AMCC or
its affiliates to consider going to work or work for any other person or entity.
 
7.    CONFIDENTIALITY.
 

3

--------------------------------------------------------------------------------

 
Mr. Spreng shall not use or disclose any proprietary or confidential information
relating to the Company which he acquired while employed by the Company.
 
8.    ENTIRE AGREEMENT.
 
The Parties further declare and represent that no promise, inducement or
agreement not herein expressed has been made to them and that this Agreement
contains the full and entire agreement between and among the Parties, and that
the terms of this Agreement are contractual and not a mere recital. This
Agreement supercedes and governs over all terms in the Employment Agreement
which are in conflict with the terms set forth herein, including any severance
obligations set forth in Section 1(e) thereof, and the consideration set forth
herein is in lieu and full satisfaction of any consideration due pursuant
thereto. The parties acknowledge that Section 4 of the Employment Agreement
(“Covenant not to Compete”), Mr. Spreng’s obligations pursuant to any
proprietary information and inventions assignment agreements, and the Company’s
obligations pursuant to its Indemnification Agreement with Mr. Spreng remain in
full force and effect and survive execution of this Agreement.
 
9.    APPLICABLE LAW.
 
The validity, interpretation, and performance of this Agreement shall be
construed and interpreted according to the laws of the State of California,
without regard to choice of law principles.
 
10.    DISPUTE RESOLUTION.
 
Any dispute arising out of or related to this Agreement shall be resolved
through binding arbitration through JAMS/Endispute in San Diego, California,
under the then current applicable rules of JAMS/Endispute. Each party shall be
responsible for its or his own costs and attorneys’ fees in connection with the
arbitration.
 
11.    COMPLETE DEFENSE.
 
This Agreement may be pleaded as a full and complete defense against any action,
suit or proceeding which may be prosecuted, instituted or attempted by either
party in breach thereof.

4

--------------------------------------------------------------------------------

 
12.    SEVERABILITY.
 
If any provision of this Agreement, or part thereof, is held invalid, void or
voidable as against public policy or otherwise, the invalidity shall not affect
other provisions, or parts thereof, which may be given effect without the
invalid provision or part. To this extent, the provisions, and parts thereof, of
this Agreement are declared to be severable.
 
13.    NO ADMISSION OF LIABILITY.
 
It is understood that this Agreement is not an admission of any liability by any
person, firm, association or corporation but is in compromise of a disputed
claim.
 
14.    SUCCESSORS AND ASSIGNS.
 
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, legal representatives, successors and
assigns.
 
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the dates
shown below.
 
Dated: August 23, 2002
     
/s/    DOUGLAS C. SPRENG        

--------------------------------------------------------------------------------

       
Douglas C. Spreng

 

       
APPLIED MICRO CIRCUITS CORPORATION
Dated: August 23, 2002
     
By:
 
/s/    DAVE MERSTEN

--------------------------------------------------------------------------------

Dave Mersten
Title: General Counsel
             

5

--------------------------------------------------------------------------------

 
EXHIBIT “A”
 
 
Douglas C. Spreng
1585 Edgewood Drive
Palo Alto, CA 94303
 

--------------------------------------------------------------------------------

 
August 20, 2002
 
David M. Rickey
Chairman of the Board & Chief Executive Officer
Applied Micro Circuits Corporation
6290 Sequence Drive
San Diego, CA 92121
 
Dear Dave:
 
This is to notify you that I am resigning as AMCC’s Chief Operating Officer and
President, as well as from AMCC’s employment and from all other offices and
capacities in which I serve AMCC or its affiliates (other than as a member of
the Board of Directors), effective as of September 30, 2002.
 
Sincerely,
 
 
 
Douglas C. Spreng

6

--------------------------------------------------------------------------------

 
EXHIBIT B
PRESS RELEASE
 
Company Contact:
 
Editorial Contact:
AMCC
 
The Ardell Group
Bill Bendush
 
Angela Edgerton
(858) 450-9333
 
(858) 792-2941
E-mail: bbendush@amcc.com
 
E-mail: angela@ardellgroup.com

 
AMCC Announces the Retirement of Doug Spreng as
President and Chief Operating Officer
 
Dave Rickey Will Resume Duties of President
 
SAN DIEGO, August 26, 2002 - Applied Micro Circuits Corp. (AMCC) [NASDAQ:AMCC]
today announced that Doug Spreng is retiring as the company’s president and
chief operating officer, effective September 30, 2002. Spreng, who is up for
re-election to AMCC’s board of directors at the company’s August 28, 2002 annual
meeting, has announced that, if elected, he will continue to serve on the board.
Dave Rickey, AMCC’s chief executive officer and chairman of the board, will
assume Spreng’s duties as president.
 
Spreng joined AMCC in 2000, following the acquisition of MMC Networks, where he
served as president and chief executive officer. In July 2001, he became AMCC’s
president and chief operating officer.
 
In announcing his retirement, Spreng explained, “We’ve made a lot of progress
this last year in adjusting to this challenging market environment, including
focusing exclusively on our market-leading product lines, adjusting our sales
and marketing programs to increase our success rate with top tier customers, and
implementing improved business processes throughout the company. I am confident
that these actions, coupled with our cost reduction efforts, have made AMCC a
much stronger company that is well positioned to capitalize on the inevitable
recovery of our industry. I am proud to have provided a leadership role in that
endeavor. Having accomplished that, I am looking forward to continuing to serve
the company as a board member, pursuing other interests I have been
contemplating for some time and spending more time with my family.”
 
Commenting upon Mr. Spreng’s departure, Rickey stated, “Doug managed AMCC
through a very difficult period. He helped to successfully reduce the company’s
expense structure in response to the most dramatic downturn in our industry’s
history, while initiating or continuing the development of key products. He also
oversaw and implemented processes to better integrate the company’s business
units

7

--------------------------------------------------------------------------------

and improve the company’s overall efficiency. On behalf of the board and the
entire company, I want to express our appreciation for his contributions and
wish him well in his future endeavors. We also look forward to his continuing
contributions as a member of AMCC’s board.”
 
About AMCC
 
AMCC designs, develops, manufactures, and markets high-performance,
high-bandwidth silicon solutions empowering intelligent wide area networks. AMCC
utilizes a combination of digital, mixed-signal and high-frequency analog design
expertise coupled with system-level knowledge and multiple silicon process
technologies to offer integrated circuit products that enable the transport of
voice and data over fiber optic networks. The company’s system solution
portfolio includes switch fabric, traffic management, network processor,
framer/mapper, PHY and PMD devices that address the high-performance needs of
the evolving intelligent optical network. AMCC’s corporate headquarters and
wafer fabrication facilities are located in San Diego, California. Sales and
engineering offices are located throughout the world. For further information
regarding AMCC, please visit our web site at http://www.amcc.com.
 
Forward Looking Statements
 
The statements contained in this press release that are not purely historical
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Such forward-looking statements are subject to a number of risks and
uncertainties, including the risks and uncertainties associated with the company
achieving future success, maintaining its market position and the industry’s
recovery as well as other risks and uncertainties set forth in the “Factors That
May Affect Future Results” detailed in the Company’s Annual Report on Form 10-K
for the year ended March 31, 2002, and in other filings of the Company with the
Securities and Exchange Commission. As a result of these risks and
uncertainties, actual results may differ materially from these forward-looking
statements. The forward-looking statements contained in this news release are
made as of the date hereof and AMCC does not assume any obligation to update the
reasons why actual results could differ materially from those projected in the
forward-looking statements.
 
###
 
AMCC is a registered trademark of Applied Micro Circuits Corporation. All other
trademarks are the property of their respective owners.

8