Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into this 6th
day of February 2008, by and between International Rectifier Corporation, a
Delaware corporation (the “Corporation”), and Oleg Khaykin, an individual (the
“Executive”).

 

RECITALS

 

THE CORPORATION AND THE EXECUTIVE ENTER INTO THIS AGREEMENT on the basis of the
following facts, understandings and intentions:

 

A.  The Corporation desires that the Executive be employed by the Corporation to
carry out the duties and responsibilities described below, all on the terms and
conditions hereinafter set forth.

 

B.  The Executive desires to accept employment on such terms and conditions.

 

NOW, THEREFORE, in consideration of the above recitals incorporated herein and
the mutual covenants and promises contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby expressly
acknowledged, the Corporation and the Executive agree as follows:

 

1.             Retention and Duties.

 

1.1                               RETENTION.  THE CORPORATION HEREBY AGREES TO
ENGAGE AND EMPLOY THE EXECUTIVE FOR THE PERIOD OF EMPLOYMENT (AS DEFINED IN
SECTION 2) ON THE TERMS AND CONDITIONS EXPRESSLY SET FORTH IN THIS AGREEMENT. 
THE EXECUTIVE HEREBY ACCEPTS AND AGREES TO SUCH ENGAGEMENT AND EMPLOYMENT, ON
THE TERMS AND CONDITIONS EXPRESSLY SET FORTH IN THIS AGREEMENT.

 

1.2                               DUTIES.  DURING THE PERIOD OF EMPLOYMENT, THE
EXECUTIVE SHALL SERVE THE CORPORATION AS ITS PRESIDENT AND CHIEF EXECUTIVE
OFFICER AND SHALL BE PRINCIPALLY RESPONSIBLE FOR THE GENERAL SUPERVISION,
DIRECTION AND CONTROL OF THE BUSINESS AND OFFICERS OF THE CORPORATION, IN EACH
CASE SUBJECT TO THE GENERAL DIRECTION OF THE CORPORATION’S BOARD OF DIRECTORS
(THE “BOARD”).  DURING THE PERIOD OF EMPLOYMENT, THE EXECUTIVE SHALL HAVE THE
POWERS AND DUTIES CUSTOMARILY ATTENDANT TO THE OFFICES OF PRESIDENT AND CHIEF
EXECUTIVE OFFICER OF A CORPORATION OF THE SIZE AND NATURE OF THE CORPORATION AND
SUCH OTHER POWERS AND DUTIES COMMENSURATE WITH HIS POSITION AS THE BOARD MAY
ASSIGN FROM TIME TO TIME.  THE EXECUTIVE SHALL ALSO BE SUBJECT TO THE CORPORATE
POLICIES OF THE CORPORATION AS THEY ARE IN EFFECT FROM TIME TO TIME THROUGHOUT
THE PERIOD OF EMPLOYMENT (INCLUDING, WITHOUT LIMITATION, THE CORPORATION’S
INSIDER TRADING POLICY, CODE OF ETHICS, AND EMPLOYEE POLICIES, AS THEY MAY
CHANGE FROM TIME TO TIME).  DURING THE PERIOD OF EMPLOYMENT, THE EXECUTIVE SHALL
REPORT SOLELY TO THE BOARD.  THE CORPORATION SHALL APPOINT THE EXECUTIVE TO THE
BOARD PROMPTLY FOLLOWING THE COMMENCEMENT DATE (AS DEFINED IN SECTION 2).  IN
CONNECTION WITH ANY EXPIRATION OF THE TERM OF THE EXECUTIVE’S BOARD SEAT DURING
THE PERIOD OF EMPLOYMENT, THE CORPORATION SHALL RE-NOMINATE THE EXECUTIVE AT THE
RELATED ANNUAL MEETING OF THE CORPORATION’S

 

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STOCKHOLDERS TO FILL A BOARD SEAT, IF THE EXECUTIVE IS ELECTED AS A DIRECTOR,
THAT WOULD HAVE THE LONGEST REMAINING TERM OF THE DIRECTOR SEATS TO BE FILLED AT
THAT MEETING (BUT THE BOARD SHALL NOT BE REQUIRED TO CHANGE THE CLASS OF SEAT
THE EXECUTIVE HAS THERETOFORE FILLED AS A DIRECTOR) AND, IN SUCH CASES, SHALL
USE GOOD FAITH EFFORTS TO KEEP THE EXECUTIVE ON THE BOARD; PROVIDED THE
EXECUTIVE IS CONTINUING AS AN EMPLOYEE OF THE CORPORATION, IS OTHERWISE WILLING
TO SERVE ON THE BOARD, AND SATISFIES THE MINIMUM GUIDELINES AND REQUIREMENTS (IF
ANY) ESTABLISHED BY THE CORPORATION FOR BOARD MEMBERSHIP GENERALLY.

 

1.3                               NO OTHER EMPLOYMENT; MINIMUM TIME COMMITMENT.
 DURING THE PERIOD OF EMPLOYMENT, THE EXECUTIVE SHALL DEVOTE SUBSTANTIALLY ALL
OF THE EXECUTIVE’S BUSINESS TIME, ENERGY AND SKILL TO THE PERFORMANCE OF THE
EXECUTIVE’S DUTIES FOR THE CORPORATION, AND HOLD NO OTHER EMPLOYMENT.  NOTHING
HEREIN SHALL PRECLUDE THE EXECUTIVE FROM (I) SERVING ON BOARDS OF DIRECTORS OF
OTHER BUSINESS ENTITIES PROVIDED THAT THE BOARD APPROVES SUCH OTHER SERVICE IN
WRITING, (II) ENGAGING IN A REASONABLE LEVEL OF CHARITABLE ACTIVITIES AND
COMMUNITY AFFAIRS, INCLUDING SERVING ON BOARDS OF DIRECTORS OR THE EQUIVALENT,
AND (III) MANAGING HIS PERSONAL AND FAMILY INVESTMENTS AND AFFAIRS, PROVIDED
THAT SUCH ACTIVITIES DO NOT VIOLATE APPLICABLE LAW OR MATERIALLY INTERFERE OR
CONFLICT WITH THE EFFECTIVE DISCHARGE OF HIS DUTIES AND RESPONSIBILITIES TO THE
CORPORATION OR THE POLICIES OF THE CORPORATION, AS THEY MAY BE IN EFFECT FROM
TIME TO TIME.  THE BOARD HAS APPROVED THE EXECUTIVE’S SERVICE AS A MEMBER OF THE
BOARD OF DIRECTORS OF ZARLINK SEMICONDUCTOR, INC.  NOTWITHSTANDING THE
FOREGOING, HOWEVER, THE CORPORATION HAS THE RIGHT (UPON WRITTEN NOTICE) TO
REQUIRE THE EXECUTIVE TO RESIGN FROM ANY BOARD (INCLUDING, WITHOUT LIMITATION,
THE BOARD OF DIRECTORS OF ZARLINK SEMICONDUCTOR, INC.) OR SIMILAR BODY ON WHICH
HE MAY NOW OR IN THE FUTURE SERVE (OR REDUCE HIS INVOLVEMENT) IF THE BOARD
REASONABLY DETERMINES IN GOOD FAITH THAT SUCH SERVICE VIOLATES APPLICABLE LAW OR
MATERIALLY INTERFERES OR CONFLICTS WITH THE EFFECTIVE DISCHARGE OF THE
EXECUTIVE’S DUTIES AND RESPONSIBILITIES TO THE CORPORATION OR THAT ANY BUSINESS
RELATED TO SUCH SERVICE IS THEN IN MATERIAL COMPETITION WITH ANY BUSINESS OF THE
CORPORATION OR ANY OF ITS AFFILIATES.

 

1.4                               NO BREACH OF CONTRACT.  THE EXECUTIVE HEREBY
REPRESENTS TO THE CORPORATION THAT: (I) THE EXECUTION AND DELIVERY OF THIS
AGREEMENT BY THE EXECUTIVE AND THE CORPORATION AND THE PERFORMANCE BY THE
EXECUTIVE OF THE EXECUTIVE’S DUTIES HEREUNDER SHALL NOT CONSTITUTE A BREACH OF,
OR OTHERWISE CONTRAVENE, THE TERMS OF ANY OTHER AGREEMENT OR POLICY TO WHICH THE
EXECUTIVE IS A PARTY OR OTHERWISE BOUND; (II) THE EXECUTIVE HAS PROVIDED THE
CORPORATION WITH A COPY OF ANY CONFIDENTIALITY, TRADE SECRET, NON-COMPETE, NO
SOLICIT, OR SIMILAR AGREEMENT OR POLICY (OR AGREEMENT OR POLICY CONTAINING ANY
SIMILAR RESTRICTIVE COVENANT) TO WHICH THE EXECUTIVE IS A PARTY OR OTHERWISE
BOUND (EACH, A “RESTRICTIVE COVENANT AGREEMENT”); (III) NO RESTRICTIVE COVENANT
AGREEMENT REASONABLY WILL INTERFERE WITH THE EFFECTIVE DISCHARGE BY THE
EXECUTIVE OF HIS DUTIES TO THE CORPORATION; AND (IV) THE EXECUTIVE WILL NOT
DISCLOSE TRADE SECRETS OR OTHER CONFIDENTIAL INFORMATION TO THE CORPORATION IN
VIOLATION OF ANY APPLICABLE LAW OR ANY RESTRICTIVE COVENANT AGREEMENT.

 

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1.5                               LOCATION.  THE EXECUTIVE ACKNOWLEDGES THAT THE
CORPORATION’S PRINCIPAL EXECUTIVE OFFICES ARE CURRENTLY LOCATED IN EL SEGUNDO,
CALIFORNIA.  THE EXECUTIVE’S PRINCIPAL PLACE OF EMPLOYMENT SHALL BE THE
CORPORATION’S PRINCIPAL EXECUTIVE OFFICES, AS (SUBJECT TO SECTION 5.5(E)(III))
THEY MAY BE MOVED FROM TIME TO TIME AT THE DISCRETION OF THE CORPORATION.  THE
EXECUTIVE AGREES THAT HE WILL BE REGULARLY PRESENT AT THE CORPORATION’S
PRINCIPAL EXECUTIVE OFFICES, SUBJECT TO TRAVEL IN THE COURSE OF PERFORMING HIS
DUTIES FOR THE CORPORATION.

 

2.                                      PERIOD OF EMPLOYMENT.  SUBJECT TO
EARLIER TERMINATION AS PROVIDED IN SECTION 3.5, THE “PERIOD OF EMPLOYMENT” SHALL
BE A PERIOD OF THREE (3) YEARS COMMENCING ON MARCH 1, 2008 (THE “COMMENCEMENT
DATE”) AND ENDING AT THE CLOSE OF BUSINESS ON THE THIRD (3RD) ANNIVERSARY OF THE
COMMENCEMENT DATE (THE “TERMINATION DATE”); PROVIDED, HOWEVER, THAT THIS
AGREEMENT SHALL BE AUTOMATICALLY RENEWED, AND THE PERIOD OF EMPLOYMENT SHALL BE
AUTOMATICALLY EXTENDED FOR ONE (1) ADDITIONAL YEAR ON EACH OF THE SECOND, THIRD,
FOURTH AND FIFTH ANNIVERSARIES OF THE COMMENCEMENT DATE, UNLESS EITHER PARTY
GIVES NOTICE, IN WRITING, PRIOR TO SUCH ANNIVERSARY THAT THE PERIOD OF
EMPLOYMENT SHALL NOT BE EXTENDED (OR FURTHER EXTENDED, AS THE CASE MAY BE).  THE
TERM “PERIOD OF EMPLOYMENT” SHALL INCLUDE ANY EXTENSION THEREOF PURSUANT TO THE
PRECEDING SENTENCE.  PROVISION OF NOTICE THAT THE PERIOD OF EMPLOYMENT SHALL NOT
BE EXTENDED OR FURTHER EXTENDED, AS THE CASE MAY BE, SHALL NOT CONSTITUTE A
BREACH OF THIS AGREEMENT AND SHALL NOT CONSTITUTE “GOOD REASON” FOR PURPOSES OF
THIS AGREEMENT.  NOTWITHSTANDING THE FOREGOING, THE PERIOD OF EMPLOYMENT IS
SUBJECT TO EARLIER TERMINATION AS PROVIDED BELOW IN THIS AGREEMENT.

 

3.             Compensation.

 

3.1                               BASE SALARY.  THE EXECUTIVE’S BASE SALARY FOR
THE PERIOD OF EMPLOYMENT (THE “BASE SALARY”) SHALL BE AT THE INITIAL RATE OF
SEVEN HUNDRED AND FIFTY THOUSAND DOLLARS ($750,000) PER ANNUM AND SHALL BE PAID
IN ACCORDANCE WITH THE CORPORATION’S REGULAR PAYROLL PRACTICES IN EFFECT FROM
TIME TO TIME, BUT NOT LESS FREQUENTLY THAN IN MONTHLY INSTALLMENTS.  DURING THE
PERIOD OF EMPLOYMENT, THE BOARD WILL REVIEW THE EXECUTIVE’S BASE SALARY ON AN
ANNUAL BASIS (COMMENCING IN 2009) AND MAY, IN ITS DISCRETION, INCREASE (BUT NOT
DECREASE) THE BASE SALARY FROM THE RATE IN EFFECT IMMEDIATELY PRECEDING ANY SUCH
CHANGE.

 

3.2                               ANNUAL INCENTIVE BONUS.  DURING THE PERIOD OF
EMPLOYMENT, THE EXECUTIVE SHALL BE ELIGIBLE TO RECEIVE AN ANNUAL INCENTIVE BONUS
IN AN AMOUNT TO BE DETERMINED BY THE COMPENSATION COMMITTEE OF THE BOARD (THE
“COMPENSATION COMMITTEE”) IN GOOD FAITH (THE “INCENTIVE BONUS”); PROVIDED,
HOWEVER, THAT THE EXECUTIVE MUST BE CONTINUOUSLY EMPLOYED WITH THE CORPORATION
THROUGH THE LAST DAY OF A FISCAL YEAR TO BE ELIGIBLE TO RECEIVE AN INCENTIVE
BONUS FOR THAT FISCAL YEAR.  THE EXECUTIVE’S TARGET INCENTIVE BONUS OPPORTUNITY
FOR A FISCAL YEAR SHALL EQUAL ONE HUNDRED PERCENT (100%) OF THE EXECUTIVE’S BASE
SALARY AT THE RATE IN EFFECT ON THE LAST DAY OF SUCH FISCAL YEAR, WITH THE
ACTUAL BONUS AMOUNT FOR ANY SUCH FISCAL YEAR DETERMINED BY THE COMPENSATION
COMMITTEE BASED ON PERFORMANCE TARGETS AND OBJECTIVES (WHICH MAY BE BASED ON THE
PERFORMANCE OF THE CORPORATION AND/OR THE EXECUTIVE’S INDIVIDUAL PERFORMANCE, AS
THE COMPENSATION COMMITTEE MAY DETERMINE), AND ACTUAL PERFORMANCE AGAINST THOSE

 

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TARGETS AND OBJECTIVES, AS DETERMINED IN GOOD FAITH BY THE COMPENSATION
COMMITTEE FOR SUCH YEAR, IN CONSULTATION WITH THE EXECUTIVE; PROVIDED, HOWEVER,
THAT WITH RESPECT TO THE EXECUTIVE’S INCENTIVE BONUS FOR THE CORPORATION’S
FISCAL YEAR ENDING JUNE 30, 2008, SUCH BONUS SHALL BE PRORATED BASED ON THE
NUMBER OF DAYS BETWEEN THE COMMENCEMENT DATE AND JUNE 30, 2008.  ANY INCENTIVE
BONUS PAYABLE TO THE EXECUTIVE WITH RESPECT TO A FISCAL YEAR SHALL BE PAID AS
SOON AS REASONABLY PRACTICABLE AFTER THE LAST DAY OF SUCH FISCAL YEAR (AND IN
ALL EVENTS IN THE SAME CALENDAR YEAR AS THE YEAR IN WHICH SUCH FISCAL YEAR
ENDS).

 

3.3                               SIGNING BONUS.  IN THE EVENT THAT (1) ANY OF
(I) EXECUTIVE’S NOTICE TO AMKOR TECHNOLOGY, INC. (THE “FORMER EMPLOYER”) OR
FORMER EMPLOYER OTHERWISE ACQUIRING NOTICE OF THE EXECUTIVE’S APPOINTMENT TO THE
BOARD OR INTENTION TO ACCEPT EMPLOYMENT WITH THE CORPORATION, (II) PUBLIC
ANNOUNCEMENT OF EXECUTIVE’S APPOINTMENT TO THE BOARD OR INTENTION TO ACCEPT
EMPLOYMENT WITH THE CORPORATION, OR (III) COMMENCEMENT OF EXECUTIVE’S SERVICE AS
A MEMBER OF THE BOARD OR EMPLOYMENT WITH THE CORPORATION OCCURS BEFORE THE TIME
OF PAYMENT OF THE FORMER EMPLOYER’S EXECUTIVE BONUSES FOR ITS 2007 FISCAL YEAR
GENERALLY AND (2) THE FORMER EMPLOYER DOES NOT PAY THE EXECUTIVE A BONUS WITH
RESPECT TO THE FORMER EMPLOYER’S 2007 FISCAL YEAR OR PAYS THE EXECUTIVE A BONUS
WITH RESPECT TO SUCH FISCAL YEAR OF LESS THAN FIVE HUNDRED AND SEVENTY FIVE
THOUSAND DOLLARS ($575,000), THE EXECUTIVE WILL BE ENTITLED TO RECEIVE A
ONE-TIME SIGNING BONUS FROM THE CORPORATION (THE “SIGNING BONUS”) EQUAL TO
DIFFERENCE BETWEEN FIVE HUNDRED AND SEVENTY FIVE THOUSAND DOLLARS ($575,000) AND
THE AMOUNT OF SUCH BONUS PAID BY THE FORMER EMPLOYER TO THE EXECUTIVE WITH
RESPECT TO SUCH FISCAL YEAR.  (FOR PURPOSES OF CLARITY, THE ENTITLEMENT TO A
SIGNING BONUS WILL BE DETERMINED BASED ON GROSS BONUS AMOUNTS DETERMINED BEFORE
GIVING EFFECT TO TAX WITHHOLDING AND OTHER AUTHORIZED DEDUCTIONS, BUT ANY
PAYMENT OF THE SIGNING BONUS ITSELF WILL BE SUBJECT TO REQUIRED TAX
WITHHOLDING.)  IF THE EXECUTIVE IS ENTITLED TO A SIGNING BONUS, THE CORPORATION
SHALL PAY SUCH BONUS TO THE EXECUTIVE NOT LATER THAN DECEMBER 31, 2008.  THE
EXECUTIVE AGREES TO USE HIS REASONABLE EFFORTS TO OBTAIN FROM THE FORMER
EMPLOYER THE FULL AMOUNT OF HIS BONUS FOR THE FORMER EMPLOYER’S 2007 FISCAL
YEAR.

 

3.4                               EQUITY INCENTIVE AWARDS.  THE COMPENSATION
COMMITTEE SHALL APPROVE THE GRANT TO THE EXECUTIVE OF THE FOLLOWING AWARDS UNDER
THE CORPORATION’S 2000 INCENTIVE PLAN, AS AMENDED (THE “PLAN”), SUCH AWARDS TO
BE GRANTED NO LATER THAN THE LATER OF THE COMMENCEMENT DATE OR THE DATE THAT IS
THE THIRD TRADING DAY ON THE NEW YORK STOCK EXCHANGE THAT FOLLOWS THE DAY ON
WHICH THE CORPORATION IS CURRENT IN ITS FINANCIAL STATEMENT REPORTING
OBLIGATIONS TO THE SECURITIES AND EXCHANGE COMMISSION (WHICH IS CURRENTLY
EXPECTED TO BE WHEN THE CORPORATION FILES ITS ANNUAL REPORT ON FORM 10-K FOR ITS
FISCAL YEAR ENDED JUNE 30, 2007, BUT WOULD BE EXTENDED UNTIL THE THIRD TRADING
DAY FOLLOWING THE FILING OF ANY THEN PAST DUE REPORT FOR A SUBSEQUENT FISCAL
QUARTER AND THE AMENDMENT OF ANY INCOMPLETE CURRENT REPORT REQUIRING THE
PRESENTMENT OF FINANCIAL INFORMATION) (THE LATER OF SUCH DATES, THE “DATE OF
GRANT”):

 

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·                  An option (the “Option”) to purchase 750,000 shares of the
Corporation’s common stock.  The per-share exercise price of the Option shall be
the closing market price of a share of the Corporation’s common stock on the
Date of Grant, and the expiration date of the Option shall be the day before the
fifth anniversary of the Date of Grant (subject to earlier termination as
provided in the applicable award agreement).  The Option shall vest and become
exercisable in five substantially equal installments on each of the first five
anniversaries of the Commencement Date, in each case subject to the Executive’s
employment with the Corporation through the applicable vesting date (and subject
to accelerated vesting as provided in Section 5.3 below), provided that the
vesting date for the fifth and final such installment shall not be later than
the date that is four years and nine months after the Date of Grant.  The Option
shall be evidenced by a stock option agreement in substantially the form
provided by the Corporation to the Executive and will be subject to such other
terms as are provided therein and in the Plan.

 

·                  An award of 250,000 restricted stock units (the “RSU Award”),
such award to be effective on the Date of Grant and to vest in five
substantially equal installments on each of the first five anniversaries of the
Commencement Date, in each case subject to the Executive’s employment with the
Corporation through the applicable vesting date (and subject to accelerated
vesting as provided in Section 5.3 below).  The restricted stock units subject
to the RSU Award shall be paid, upon vesting, in an equal number of shares of
the Corporation’s common stock.  The RSU Award shall be evidenced by a
restricted stock unit award agreement in substantially the form provided by the
Corporation to the Executive and will be subject to such other terms as are
provided therein and in the Plan.

 

·                  If a Change in Control Event occurs prior to the Date of
Grant specified above, the Executive’s right to the grant of the Option shall
immediately terminate and instead the number of restricted stock units subject
to the RSU Award shall be increased to (x) 375,000 if the Change in Control
Event occurs within six months after the Commencement Date or (y) 500,000 if the
Change in Control Event occurs on or after the date that is six months after the
Commencement Date (in each case, in lieu of the 250,000 set forth above), and
the RSU Award as so increased shall be granted upon (or, as may be necessary to
give effect to the grant, immediately prior to) the occurrence of the Change in
Control Event; provided, however, the Corporation shall have the right at its
option to pay the Executive a lump sum amount upon or within thirty (30) days
after such Change in Control Event (in lieu of such RSU Award) equal to the
number of shares subject to such RSU Award that would have been vested at the
time of such Change in Control Event multiplied by the Fair Market Value (as
defined in the Plan) of a share of the Corporation’s common stock at the time of
such Change in Control Event (such amount subject to required tax withholding).

 

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·                  Subject to Section 5.3, the vesting of the Option and the RSU
Award shall not, unless otherwise specifically approved by the Board in its
discretion, accelerate in connection with any Change in Control Event to the
extent the awards will continue in effect after such event or be assumed by a
successor company (or a parent thereof).

 

The parties acknowledge and agree that the foregoing awards are intended to
satisfy the Corporation’s obligation to grant equity incentive awards to the
Executive for the initial four years of the Period of Employment (if employment
continues through such period) and the parties do not anticipate that additional
equity incentive awards will be granted to the Executive during such period. 
The amount, timing, and other terms of any future equity award grants to the
Executive shall be determined by the Board (or the Compensation Committee) in
its sole discretion.  The share amounts set forth above are subject to
adjustment for stock splits, stock dividends, reverse stock splits, mergers and
similar events in accordance with the adjustment provisions of the Plan.

 

3.5                               COMPENSATION FOR BOARD SERVICE.  THE EXECUTIVE
SHALL NOT BE ENTITLED TO ADDITIONAL COMPENSATION (OTHER THAN THE COMPENSATION
OTHERWISE PROVIDED FOR IN THIS AGREEMENT) FOR SERVICE ON THE BOARD OR FOR
SERVICE AS A DIRECTOR, OFFICER, OR IN ANY OTHER CAPACITY WITH ANY AFFILIATE OF
THE CORPORATION.

 

4.             Benefits.

 

4.1                               RETIREMENT, WELFARE AND FRINGE BENEFITS. 
DURING THE PERIOD OF EMPLOYMENT, THE EXECUTIVE SHALL BE ENTITLED TO PARTICIPATE
IN ALL EMPLOYEE PENSION AND WELFARE BENEFIT PLANS AND PROGRAMS, AND FRINGE
BENEFIT PLANS AND PROGRAMS, MADE AVAILABLE BY THE CORPORATION TO THE
CORPORATION’S SENIOR EXECUTIVES GENERALLY, IN ACCORDANCE WITH THE ELIGIBILITY
AND PARTICIPATION PROVISIONS OF SUCH PLANS AND AS SUCH PLANS OR PROGRAMS MAY BE
IN EFFECT FROM TIME TO TIME.  UNLESS THE COMPENSATION COMMITTEE IN ITS
DISCRETION DETERMINES OTHERWISE, THE EXECUTIVE SHALL NOT, HOWEVER, HAVE RIGHTS
TO PARTICIPATE IN ANY BONUS OR OTHER INCENTIVE PLAN MAINTAINED OR ADOPTED BY THE
CORPORATION (OTHER THAN AS EXPRESSLY PROVIDED IN SECTIONS 3.2 AND 3.4).

 

4.2                               REIMBURSEMENT OF LEGAL EXPENSES.  THE
CORPORATION SHALL REIMBURSE THE EXECUTIVE FOR OR PAY THE REASONABLE LEGAL FEES
INCURRED BY THE EXECUTIVE RELATING TO THE NEGOTIATION AND PREPARATION OF THIS
AGREEMENT, PROVIDED THAT IN NO EVENT SHALL THE CORPORATION’S OBLIGATION WITH
RESPECT TO SUCH REIMBURSEMENT OR PAYMENT OF SUCH LEGAL FEES EXCEED FIFTEEN
THOUSAND DOLLARS ($15,000).

 

4.3                               VACATION AND OTHER LEAVE.  DURING THE PERIOD
OF EMPLOYMENT, THE EXECUTIVE SHALL ACCRUE AND BE ENTITLED TO TAKE PAID TIME OFF
(OR VACATION, DEPENDING ON THE CORPORATION’S PROGRAMS IN EFFECT FROM TIME TO
TIME) AT A RATE OF FOUR (4) WEEKS PER YEAR, SUBJECT TO SCHEDULING WITH THE BOARD
AND THE CORPORATION’S POLICIES REGARDING VACATION ACCRUALS (INCLUDING, WITHOUT
LIMITATION, LIMITS ON THE AMOUNT OF VACATION THAT MAY BE ACCRUED AND UNTAKEN
BEFORE FUTURE ACCRUALS CEASE).

 

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4.4                               RELOCATION EXPENSES.  THE CORPORATION SHALL
PAY OR REIMBURSE THE EXECUTIVE FOR HIS REASONABLE COSTS INCURRED IN RELOCATING
FROM SCOTTSDALE, ARIZONA TO A LOCATION THAT IS A REASONABLE COMMUTING DISTANCE
FROM THE CORPORATION’S PRINCIPAL EXECUTIVE OFFICES, INCLUDING, WITHOUT
LIMITATION, REASONABLE COSTS FOR BROKERAGE FEES, LOAN AND CLOSING COSTS,
TEMPORARY HOUSING, TRAVEL ASSOCIATED WITH LOCATING A RESIDENCE AND
TRANSPORTATION AND STORAGE OF HOUSEHOLD GOODS; PROVIDED THAT IN NO EVENT SHALL
THE CORPORATION’S OBLIGATION WITH RESPECT TO SUCH PAYMENTS OR REIMBURSEMENTS
EXCEED ONE HUNDRED AND FIFTY THOUSAND DOLLARS ($150,000) IN THE AGGREGATE.  THE
PARTIES ANTICIPATE THAT SUCH RELOCATION WILL NOT OCCUR BEFORE JUNE 1, 2008, BUT
WILL OCCUR PROMPTLY AFTER THAT DATE.

 

4.5                               SUPPLEMENTAL LIFE/DISABILITY INSURANCE.
 SUBJECT TO ELIGIBILITY UNDER THE THEN-EXISTING PROGRAMS, DURING THE PERIOD OF
EMPLOYMENT THE CORPORATION SHALL PROVIDE THE EXECUTIVE WITH SUPPLEMENTAL LIFE
INSURANCE AND LONG TERM DISABILITY INSURANCE UP TO A CAP ON SUPPLEMENTAL
PREMIUMS OF ONE THOUSAND THREE HUNDRED DOLLARS ($1,300) ANNUALLY FOR LIFE
INSURANCE AND SEVEN THOUSAND DOLLARS ($7,000) ANNUALLY FOR DISABILITY INSURANCE.

 

5.             Termination.

 

5.1                               TERMINATION BY THE CORPORATION.  THE
EXECUTIVE’S EMPLOYMENT WITH THE CORPORATION, AND THE PERIOD OF EMPLOYMENT, MAY
BE TERMINATED AT ANY TIME BY THE CORPORATION: (I) WITH CAUSE (AS DEFINED IN
SECTION 5.5), OR (II) ON WRITTEN NOTICE TO THE EXECUTIVE, WITHOUT CAUSE, OR
(III) IN THE EVENT OF THE EXECUTIVE’S DEATH, OR (IV) IN THE EVENT THE EXECUTIVE
HAS A DISABILITY (AS DEFINED IN SECTION 5.5).

 

5.2                               TERMINATION BY THE EXECUTIVE.  THE EXECUTIVE’S
EMPLOYMENT WITH THE CORPORATION, AND THE PERIOD OF EMPLOYMENT, MAY BE TERMINATED
BY THE EXECUTIVE WITH NO LESS THAN THIRTY (30) DAYS ADVANCE WRITTEN NOTICE TO
THE CORPORATION (SUCH NOTICE TO BE DELIVERED IN ACCORDANCE WITH SECTION 18);
PROVIDED, HOWEVER, THAT IN THE CASE OF A TERMINATION FOR GOOD REASON (AS DEFINED
IN SECTION 5.5), THE EXECUTIVE MAY PROVIDE IMMEDIATE WRITTEN NOTICE OF
TERMINATION ONCE THE APPLICABLE CURE PERIOD (AS CONTEMPLATED BY THE DEFINITION
OF GOOD REASON) HAS LAPSED IF THE CORPORATION HAS NOT REASONABLY CURED THE
CIRCUMSTANCES THAT GAVE RISE TO THE TERMINATION FOR GOOD REASON.

 

5.3                               BENEFITS UPON TERMINATION.  IF THE EXECUTIVE’S
EMPLOYMENT WITH THE CORPORATION IS TERMINATED DURING THE PERIOD OF EMPLOYMENT
FOR ANY REASON BY THE CORPORATION OR BY THE EXECUTIVE, OR UPON OR FOLLOWING THE
EXPIRATION OF THE PERIOD OF EMPLOYMENT (IN ANY CASE, THE DATE THAT THE
EXECUTIVE’S EMPLOYMENT BY THE CORPORATION TERMINATES IS REFERRED TO AS THE
“SEVERANCE DATE”), THE CORPORATION SHALL HAVE NO FURTHER OBLIGATION TO MAKE OR
PROVIDE TO THE EXECUTIVE, AND THE EXECUTIVE SHALL HAVE NO FURTHER RIGHT TO
RECEIVE OR OBTAIN FROM THE CORPORATION, ANY PAYMENTS OR BENEFITS EXCEPT:

 

(a)           the Corporation shall pay the Executive (or, in the event of his
death, the Executive’s estate) any Accrued Obligations (as defined in
Section 5.5);

 

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(b)           if, during the Period of Employment (but not upon or following the
expiration of the Period of Employment), the Executive’s employment is
terminated (x) by the Corporation without Cause or (y) by the Executive for Good
Reason, (any of such terminations, a “Qualifying Termination”), the Corporation
shall, subject to the following provisions of this Section 5.3 and the
provisions of Section 5.4, pay (in addition to the Accrued Obligations) the
Executive the following severance benefits:

 

(i)                     The Corporation shall pay the Executive an amount,
subject to tax withholding and other authorized deductions, equal to (A) the sum
of (1) the Executive’s Base Salary at the highest annualized rate in effect
during the one (1) year period immediately prior to the Severance Date plus
(2) such annualized rate of Base Salary multiplied by the Executive’s highest
target Incentive Bonus percentage in effect during the one-year period
immediately prior to the Severance Date (but not less than 100%), multiplied by
(B) one and one-half (1.5).  Such amount is referred to hereinafter as the
“Severance Benefit.”  Notwithstanding the foregoing, in the event that such
termination of employment occurs at any time during the period commencing two
(2) months prior to the occurrence of a Change in Control Event (as defined in
Section 5.5) and ending on the second anniversary of such Change in Control
Event (the “Protected Period”), the one and one-half (1.5) multiplier in the
foregoing clause (B) shall be replaced by a multiplier of two (2).

 

                                Subject to Section 5.7(a), the Corporation shall
pay the Severance Benefit (if the Executive is entitled to the Severance
Benefit) to the Executive in accordance with the provisions of this paragraph. 
If the Executive’s Separation from Service (as defined in Section 5.5) occurs
before a 409A CIC Event (as defined in Section 5.5), the Severance Benefit shall
be paid in a series of substantially equal separate installments in accordance
with the Corporation’s standard payroll practices over a period of eighteen (18)
consecutive months, with the first installment payable in the month following
the month in which the Executive’s Separation from Service.  (For purposes of
clarity, each such installment shall equal the applicable fraction of the
aggregate Severance Benefit.  For example, each installment would equal
one-eighteenth (1/18th) of the Severance Benefit.)  If the Executive is
receiving such installment payments and a 409A CIC Event occurs, any remaining
installment payments (commencing with any installment for the month following
the month in which such 409A CIC Event occurs and any future installments
otherwise due) will be paid (without applying a present value discount) in the
month following the month in which the 409A CIC Event occurs.  If the
Executive’s Separation from Service occurs on or within twenty four (24) months
after a 409A CIC Event, the Severance Benefit shall be paid in a single lump sum
payment in the month following the month in which the Executive’s Separation
from Service occurs.

 

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(ii)                  The Executive shall be entitled to accelerated vesting of
a portion of the Option and RSU Award (to the extent then outstanding and
otherwise not fully vested) as follows:  (A) the vesting schedule applicable to
each of the Option and RSU Award shall, for this purpose, be deemed to have been
a 5-year monthly vesting schedule over the sixty (60) months following the
Commencement Date, and (B) the portion of the Option and RSU Award that, under
such monthly vesting schedule, would have otherwise been scheduled to vest based
on the Executive’s continued employment (had the Executive’s employment not
terminated) during the period of eighteen (18) months following the Severance
Date shall become fully vested and, in the case of the Option, exercisable as of
the Severance Date, and the Option, to the extent exercisable, shall remain
exercisable until the earlier of the first anniversary of the Severance Date,
the end of the maximum term of the Option, or a termination of the option in
connection with a change in control or similar event as provided in the Plan. 
However, in the case of a Qualifying Termination during the Protected Period,
the Option and RSU Award (to the extent then outstanding and otherwise not fully
vested) shall become fully vested and, in the case of the Option, exercisable as
of the Severance Date, and the Option, to the extent exercisable, shall remain
exercisable until the earlier of the first anniversary of the Severance Date,
the end of the maximum term of the Option, or a termination of the option in
connection with a change in control or similar event as provided in the Plan.

 

                                Notwithstanding the foregoing, if a Qualifying
Termination occurs prior to the Date of Grant, the Executive’s right to the
grant of the Option shall immediately terminate and instead the number of
restricted stock units subject to the RSU Award shall be increased to
(x) 375,000 if the Qualifying Termination occurs within six months after the
Commencement Date or (y) 500,000 if the Qualifying Termination occurs on or
after the date that is six months after the Commencement Date (in each case, in
lieu of the 250,000 set forth above), and the RSU Award as so increased shall be
granted upon (or, as may be necessary to give effect to the grant, immediately
prior to) the Severance Date and the provisions of the preceding paragraph
regarding accelerated vesting shall apply with respect to the RSU Award as so
increased.

 

(iii)               The Corporation will pay or reimburse the Executive for his
premiums charged to continue medical coverage pursuant to the Consolidated
Omnibus Budget Reconciliation Act (“COBRA”), at the same or reasonably
equivalent medical coverage for the Executive (and, if applicable, the
Executive’s eligible dependents) as in effect immediately prior to the Severance
Date, to the extent that the Executive elects such continued coverage; provided
that the Corporation’s obligation to make any payment or reimbursement pursuant
to this clause (iii) shall commence with continuation coverage for the month
following the month in which the Executive’s Separation from Service occurs and
shall cease

 

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                                with continuation coverage for the eighteenth
(18th) month following the month in which the Executive’s Separation from
Service occurs (or, if earlier, shall cease upon the first to occur of the
Executive’s death, the date the Executive becomes eligible for coverage under
the health plan of a future employer, or the date the Corporation ceases to
offer group medical coverage to its active executive employees or the
Corporation is otherwise under no obligation to offer COBRA continuation
coverage to the Executive).  To the extent the Executive elects COBRA coverage,
he shall notify the Corporation in writing of such election prior to such
coverage taking effect and complete any other continuation coverage enrollment
procedures the Corporation may then have in place.  The Executive shall promptly
notify the Corporation in writing if he or any of his covered dependents becomes
eligible for coverage under any other health plan.

 

(c)           The foregoing provisions of this Section 5.3 shall not affect:
(i) the Executive’s receipt of benefits otherwise due terminated employees under
group insurance coverage consistent with the terms of the applicable Corporation
welfare benefit plan; (ii) the Executive’s rights under COBRA to continue
participation in medical, dental, hospitalization and life insurance coverage;
(iii) the Executive’s receipt of benefits otherwise due in accordance with the
terms of the Corporation’s Retirement Savings Plan; (iv) any rights that the
Executive may have under and with respect to a stock option, restricted stock or
other equity-based award, to the extent that such award was granted before the
Severance Date and to the extent expressly provided in the written agreement
evidencing such award; or (v) any right to indemnification the Executive may
have from the Corporation or the Executive’s right to be covered under any
applicable insurance policy, with respect to any liability the Executive
incurred or might incur as an employee, officer or director of the Corporation
or its affiliates.

 

5.4          Release; Exclusive Remedy.

 

(A)           THIS SECTION 5.4 SHALL APPLY NOTWITHSTANDING ANYTHING ELSE
CONTAINED IN THIS AGREEMENT TO THE CONTRARY.  AS A CONDITION PRECEDENT TO ANY
CORPORATION OBLIGATION TO THE EXECUTIVE PURSUANT TO SECTION 5.3(B), THE
EXECUTIVE SHALL, UPON OR PROMPTLY FOLLOWING HIS LAST DAY OF EMPLOYMENT WITH THE
CORPORATION: (I) PROVIDE THE CORPORATION WITH A VALID, EXECUTED, WRITTEN RELEASE
OF CLAIMS (IN SUBSTANTIALLY THE FORM ATTACHED HERETO AS EXHIBIT A, WITH SUCH
CHANGES TO SUCH FORM AS THE CORPORATION MAY DETERMINE NECESSARY OR APPROPRIATE
TO HELP ENSURE THAT THE RELEASE CONTEMPLATED BY SUCH FORM IS MAXIMALLY
ENFORCEABLE IN ACCORDANCE WITH APPLICABLE LAW) AND SUCH RELEASE SHALL HAVE NOT
BEEN REVOKED BY THE EXECUTIVE PURSUANT TO ANY REVOCATION RIGHTS AFFORDED BY
APPLICABLE LAW; AND (II) SATISFY HIS OBLIGATIONS UNDER SECTION 5.4(C).  THE
CORPORATION SHALL HAVE NO OBLIGATION TO MAKE ANY PAYMENT TO THE EXECUTIVE
PURSUANT TO SECTION 5.3(B) UNLESS AND UNTIL THE RELEASE CONTEMPLATED BY THIS
SECTION 5.4 IS EXECUTED AND DELIVERED, AND NOT REVOKED BY THE EXECUTIVE PURSUANT
TO ANY REVOCATION RIGHTS AFFORDED BY APPLICABLE LAW.

 

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(B)           THE EXECUTIVE AGREES THAT THE PAYMENTS CONTEMPLATED BY SECTION 5.3
SHALL CONSTITUTE THE EXCLUSIVE AND SOLE REMEDY FOR ANY TERMINATION OF HIS
EMPLOYMENT AND IN SUCH CASE THE EXECUTIVE COVENANTS NOT TO ASSERT OR PURSUE ANY
OTHER REMEDIES, AT LAW OR IN EQUITY, WITH RESPECT TO ANY TERMINATION OF
EMPLOYMENT.  THE CORPORATION AND THE EXECUTIVE ACKNOWLEDGE AND AGREE THAT THERE
IS NO DUTY OF THE EXECUTIVE TO MITIGATE DAMAGES UNDER THIS AGREEMENT, AND THERE
SHALL BE NO OFFSET AGAINST ANY AMOUNTS DUE TO THE EXECUTIVE UNDER THIS AGREEMENT
ON ACCOUNT OF ANY REMUNERATION ATTRIBUTABLE TO ANY SUBSEQUENT EMPLOYMENT THAT
THE EXECUTIVE MAY OBTAIN.  ALL AMOUNTS PAID TO THE EXECUTIVE PURSUANT TO
SECTION 5.3 SHALL BE PAID WITHOUT REGARD TO WHETHER THE EXECUTIVE HAS TAKEN OR
TAKES ACTIONS TO MITIGATE DAMAGES AND, SUBJECT TO ALL APPLICABLE LAWS AND
REGULATIONS, SHALL NOT BE SUBJECT TO SETOFF, COUNTERCLAIM, RECOUPMENT, DEFENSE
OR OTHER RIGHT WHICH THE CORPORATION MAY HAVE AGAINST THE EXECUTIVE OR OTHERS.

 

(C)           THE EXECUTIVE AGREES THAT, UPON OR PROMPTLY FOLLOWING THE
TERMINATION OF THE EXECUTIVE’S EMPLOYMENT WITH THE CORPORATION (REGARDLESS OF
THE REASON), HE WILL RESIGN FROM THE BOARD (IF HE IS THEN A MEMBER OF THE
BOARD), FROM THE BOARD OF DIRECTORS OR SIMILAR GOVERNING BODY OF ANY AFFILIATE
OF THE CORPORATION ON WHICH HE MAY THEN SERVE, AND FROM ANY OTHER POSITION WHICH
HE MAY THEN HOLD WITH THE CORPORATION AND ITS AFFILIATES.

 

5.5          Certain Defined Terms.

 

(a)           As used herein, “Accrued Obligations” means:

 

(i)            any Base Salary that had accrued but had not been paid (including
accrued and unpaid vacation time) prior to the Severance Date;

 

(ii)           any Incentive Bonus payable pursuant to Section 3.2 with respect
to the fiscal year preceding the fiscal year in which the Severance Date occurs
(if the Executive was employed by the Corporation on the last day of that fiscal
year) that had not previously been paid; and

 

(iii)          any reimbursement due to the Executive pursuant to Section 4.2
for expenses incurred by the Executive prior to the Severance Date.

 

Subject to Section 5.7, the Accrued Obligations shall be paid promptly after the
Severance Date.

 

(b)           As used herein, “Cause” shall mean that, during the Period of
Employment, any of the following events or contingencies exists or has occurred:

 

(i)            the Executive is convicted of, or pleads guilty or nolo
contendere to, a felony (whether or not involving the Corporation or any of its
affiliates); or

 

(ii)           the Executive commits an act of willful and material misconduct
involving the Corporation or any of its affiliates; or

 

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(iii)          the Executive willfully and repeatedly fails or refuses to
perform his duties as required by this Agreement; or

 

(iv)          a willful and material violation by the Executive of any written
rule, regulation or policy of the Corporation; or

 

(v)           a willful and material breach by the Executive of any provision of
this Agreement.

 

However, no act or failure to act, on the Executive’s part shall be considered
“willful” unless done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the Executive’s action or omission was in the
best interest of the Corporation, and in the case of clauses (ii) through (v) of
the foregoing definition, there shall be no determination of Cause hereunder
unless the Executive shall have received written notice from the Board stating
the nature of the act or omission asserted to constitute Cause and affording the
Executive at least ten (10) days to correct such act or omission.  A
determination by the Board that Cause exists shall be effective only if approved
at a Board meeting (in person or telephonic) by at least a majority of the Board
(not counting the Executive if he is then a member of the Board).  The Executive
is entitled to be present (with counsel) at such meeting and respond to any
basis that may be asserted as constituting Cause (a summary of which shall be
supplied to the Executive in writing at least five (5) days before any such
meeting).

 

(c)           As used herein, “Change in Control Event” shall have the meaning
ascribed to such term in the Corporation’s 2000 Incentive Plan; provided,
however, that as used in this Agreement, the exception in clause (D) of the
first bullet point under paragraph (3) of such term as so defined (the exception
for acquisitions by any member of or entity or group affiliated with the Lidow
family) shall not apply.

 

(d)           As used herein, “Disability” shall mean a physical or mental
impairment which has resulted in the Executive’s entitlement to commencement of
long-term disability benefits under the Company’s long-term disability policy
applicable to the Executive or, in the absence of such a policy, a physical or
mental impairment which has rendered the Executive unable to perform the
essential functions of his employment with the Corporation, even with reasonable
accommodation that does not impose an undue hardship on the Corporation, for
more than 90 calendar days in any 12-month period, unless a longer period is
required by federal or state law, in which case that longer period would apply. 
In the absence of an applicable long-term disability policy as described above,
the determination of whether or not a Disability exists for purposes of this
Agreement shall be based upon the findings of a qualified medical doctor
reasonably agreed to by the Corporation and the Executive (or, in the event of
the Executive’s incapacity, his legal representative).  In the absence of
agreement between the Corporation and the Executive, each party shall nominate a
qualified medical doctor, and the two

 

12

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doctors so nominated shall select a third qualified medical doctor, who shall
make the determination as to Disability.

 

(e)           As used herein, “Good Reason” shall mean the occurrence of one or
more of the following without the Executive’s written consent:

 

(i)       a material diminution in the Executive’s rate of Base Salary;

 

(ii)      a material diminution in the Executive’s authority, duties, or
responsibilities;

 

(iii)     a material change in the geographic location of the Executive’s
principal office with the Corporation (for this purpose, in no event shall a
relocation of such office to a new location that is not more than fifty (50)
miles from the current location of the Corporation’s executive offices
constitute a “material change”);

 

(iv)     a material breach by the Corporation of this Agreement; or

 

(v)      in the event of a Change in Control Event after the Commencement Date,
the Executive should for any reason not then be or thereafter cease to be a
member of the Board (provided that the Executive is then otherwise willing to
serve as a member of the Board and satisfies the minimum guidelines and
requirements (if any) established by the Corporation for Board membership
generally);

 

provided, however, that any such condition or conditions, as applicable, shall
not constitute Good Reason unless both (x) the Executive provides written notice
to the Corporation of the condition claimed to constitute Good Reason within
ninety (90) days of the initial existence of such condition(s) (such notice to
be delivered in accordance with Section 18), and (y) the Corporation fails to
remedy such condition(s) within thirty (30) days of receiving such written
notice thereof; and provided, further, that in all events the termination of the
Executive’s employment with the Corporation shall not constitute a termination
for Good Reason unless such termination occurs not more than one hundred and
twenty (120) days following the initial existence of the condition claimed to
constitute Good Reason.

 

(f)            As used herein, a “Separation from Service” occurs when the
Executive dies, retires, or otherwise has a termination of employment with the
Corporation that constitutes a “separation from service” within the meaning of
Treasury Regulation Section 1.409A-1(h)(1), without regard to the optional
alternative definitions available thereunder.

 

(g)           As used herein, “409A CIC Event” means a Change in Control Event
that qualifies as a “change in the ownership” of the Corporation, a “change in
the effective control” of the Corporation, or a “change in the ownership of a
substantial portion of the assets” of the Corporation, each within the meaning
of Treas. Reg. Section 1.409A-3(i)(5).

 

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5.6                               SECTION 280G GROSS-UP.  THE EXECUTIVE SHALL BE
COVERED BY THE TAX GROSS-UP PROVISIONS SET FORTH IN EXHIBIT B HERETO,
INCORPORATED HEREIN BY THIS REFERENCE.

 

5.7                               SECTION 409A.  IF THE EXECUTIVE IS A
“SPECIFIED EMPLOYEE” WITHIN THE MEANING OF TREASURY REGULATION
SECTION 1.409A-1(I) AS OF THE DATE OF THE EXECUTIVE’S SEPARATION FROM SERVICE,
THE EXECUTIVE SHALL NOT BE ENTITLED TO ANY PAYMENT OR BENEFIT PURSUANT TO
SECTION 5.3(B) UNTIL THE EARLIER OF (I) THE DATE WHICH IS SIX (6) MONTHS AFTER
SEPARATION FROM SERVICE FOR ANY REASON OTHER THAN DEATH, OR (II) THE DATE OF THE
EXECUTIVE’S DEATH.  THE PROVISIONS OF THIS SECTION 5.7(A) SHALL ONLY APPLY IF,
AND TO THE EXTENT, REQUIRED TO AVOID THE IMPUTATION OF ANY TAX, PENALTY OR
INTEREST PURSUANT TO SECTION 409A OF THE U.S. INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE “CODE”).  ANY AMOUNTS OTHERWISE PAYABLE TO THE EXECUTIVE UPON OR IN
THE SIX (6) MONTH PERIOD FOLLOWING THE EXECUTIVE’S SEPARATION FROM SERVICE THAT
ARE NOT SO PAID BY REASON OF THIS SECTION 5.7(A) SHALL BE PAID (WITHOUT
INTEREST) AS SOON AS PRACTICABLE (AND IN ALL EVENTS WITHIN THIRTY (30) DAYS)
AFTER THE DATE THAT IS SIX (6) MONTHS AFTER THE EXECUTIVE’S SEPARATION FROM
SERVICE (OR, IF EARLIER, AS SOON AS PRACTICABLE, AND IN ALL EVENTS WITHIN THIRTY
(30) DAYS, AFTER THE DATE OF THE EXECUTIVE’S DEATH).

 

6.                                      MEANS AND EFFECT OF TERMINATION.  ANY
TERMINATION OF THE EXECUTIVE’S EMPLOYMENT UNDER THIS AGREEMENT SHALL BE
COMMUNICATED BY WRITTEN NOTICE OF TERMINATION FROM THE TERMINATING PARTY TO THE
OTHER PARTY.  THE NOTICE OF TERMINATION SHALL INDICATE THE SPECIFIC
PROVISION(S) OF THIS AGREEMENT RELIED UPON IN EFFECTING THE TERMINATION.  UPON
THE OCCURRENCE OF ANY SUCH TERMINATION, THE EXECUTIVE SHALL BE DEEMED TO HAVE
RESIGNED AS A DIRECTOR AND/OR OFFICER OF THE CORPORATION AND ITS AFFILIATES AS
OF THE SEVERANCE DATE WITHOUT THE GIVING OF ANY NOTICE OR TAKING OF ANY OTHER
ACTION.

 

7.                                      Protective Covenants.

 

7.1                               Confidential Information; Inventions.

 

(a)         The Executive shall not disclose or use at any time, either during
the Period of Employment or thereafter, any Confidential Information (as defined
below) of which the Executive is or becomes aware, whether or not such
information is developed by him, except to the extent that such disclosure or
use is made by the Executive in connection with the Executive’s performance in
good faith of his duties for the Corporation.  The Executive will take all
appropriate steps to safeguard Confidential Information in his possession and to
protect it against disclosure, misuse, espionage, loss and theft.  The Executive
shall deliver to the Corporation at the termination of the Period of Employment,
or at any time the Corporation may request, all memoranda, notes, plans,
records, reports, computer tapes and software and other documents and data (and
copies thereof) relating to the Confidential Information or the Work Product (as
hereinafter defined) of the business of the Corporation or any of its affiliates
(the Corporation and its affiliates are referred to, collectively, as the
“Company Group”) which the Executive may then possess or have under his
control.  Notwithstanding the foregoing, the Executive may truthfully respond to
a lawful and valid subpoena or

 

14

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other legal process, but shall give the Corporation the earliest possible notice
thereof, shall, as much in advance of the return date as possible and to the
extent legally permitted to do so, make available to the Corporation and its
counsel the documents and other information sought, and shall assist the
Corporation and such counsel in resisting or otherwise responding to such
process.

 

(b)        As used in this Agreement, the term “Confidential Information” means
information that is not generally known to the public and that is used,
developed or obtained by the Corporation in connection with its business,
including, but not limited to, information, observations and data obtained by
the Executive while employed by the Corporation or any predecessors thereof
(including those obtained prior to the Commencement Date) concerning (i) the
business or affairs of the Corporation (or such predecessors), (ii) products or
services, (iii) fees, costs and pricing structures, (iv) designs, (v) analyses,
(vi) drawings, photographs and reports, (vii) computer software, including
operating systems, applications and program listings, (viii) flow charts,
manuals and documentation, (ix) data bases, (x) accounting and business methods,
(xi) inventions, devices, new developments, methods and processes, whether
patentable or unpatentable and whether or not reduced to practice,
(xii) customers and clients and customer or client lists, (xiii) other
copyrightable works, (xiv) all production methods, processes, technology and
trade secrets, and (xv) all similar and related information in whatever form. 
Confidential Information will not include any information that has been
published (other than a disclosure by the Executive in breach of this Agreement)
in a form generally available to the public prior to the date the Executive
proposes to disclose or use such information.  Confidential Information will not
be deemed to have been published merely because individual portions of the
information have been separately published, but only if all material features
comprising such information have been published in combination.

 

(c)         As used in this Agreement, the term “Work Product” means all
inventions, innovations, improvements, technical information, systems, software
developments, methods, designs, analyses, drawings, reports, service marks,
trademarks, trade names, logos and all similar or related information (whether
patentable or unpatentable, copyrightable, registerable as a trademark, reduced
to writing, or otherwise) which relates to actual or anticipated business,
research and development or existing or future products or services of any
member of the Company Group and which are conceived, developed or made by the
Executive (whether or not during usual business hours, whether or not by the use
of the facilities of a member of the Company Group, and whether or not alone or
in conjunction with any other person) while employed by the Corporation together
with all patent applications, letters patent, trademark, trade name and service
mark applications or registrations, copyrights and reissues thereof that may be
granted for or upon any of the foregoing.  All Work Product that the Executive
may have discovered, invented or originated during his employment by any member
of the Company Group prior to the Commencement Date, that he may discover,
invent or originate during the Period of Employment, shall be the exclusive
property of the applicable Company Group member, and the Executive hereby
assigns all of

 

15

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the Executive’s right, title and interest in and to such Work Product to the
applicable Company Group member, including all intellectual property rights
therein.  The Executive shall promptly disclose all Work Product to the
Corporation, shall execute at the request of the Corporation any assignments or
other documents the Corporation may deem necessary to protect or perfect its
right (or the rights of any member of the Company Group) therein, and shall
assist the Corporation, at the Corporation’s expense, in obtaining, defending
and enforcing the Corporation’s rights (or the rights of any member of the
Company Group) therein.  The Executive hereby appoints the Corporation as his
attorney-in-fact to execute on his behalf any assignments or other documents
deemed necessary by the Corporation to protect or perfect the Corporation, the
Corporation’s right (or the rights of any member of the Company Group) to any
Work Product.  Notwithstanding the foregoing, the provisions of this agreement
requiring assignment of Work Product to the Corporation do not apply to any Work
Product which qualifies fully under the provisions of California Labor Code
Section 2870 (attached hereto as Exhibit C) or the provisions of any applicable
like statute of any other state.  For purposes of this Agreement, the term
“person” includes any individual, association, corporation, partnership, limited
liability company, trust or any other entity or organization, including a
governmental entity.

 

7.2                               No Competing Employment.  The Executive
acknowledges and recognizes the highly competitive nature of the businesses of
the Corporation, the amount of sensitive and confidential information involved
in the discharge of the Executive’s position with the Corporation, and the harm
to the Corporation that would result if such knowledge or expertise was
disclosed or made available to a competitor.  Based on that understanding, the
Executive hereby expressly agrees that, during the Period of Employment and for
a period of six months following the Severance Date, the Executive shall not,
without prior written approval of the Corporation, directly or indirectly own an
interest in, manage, operate, join, control, lend money or render financial
assistance to, as an officer, employee, partner, stockholder, consultant or
otherwise, any individual, partnership, firm, corporation or other business
organization or entity that, at such time competes with the Company Group in the
business of power management semiconductor technology or products (a “Competing
Company”).  Notwithstanding the foregoing, the Executive shall be entitled to
own up to 2% of the outstanding securities of any entity if such securities are
registered under Section 12(b) or (g) of the Securities Exchange Act of 1934, as
amended.

 

7.3                               Prohibition on Solicitation of Customers. 
During the Period of Employment and for a period of one year following the
Severance Date (or, if longer, during any period in which the Executive is
receiving severance or other payments from the Corporation hereunder), the
Executive shall not, directly or indirectly, either for the Executive or for any
other person or entity, solicit any person or entity to terminate such person’s
or entity’s contractual and/or business relationship with the Company Group, nor
shall the Executive interfere with or disrupt or attempt to interfere with or
disrupt any such relationship.  The foregoing shall not be

 

16

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violated by general advertising of a customary nature not targeted at such
persons or entities, nor by serving as a reasonable and customary reference upon
request.

 

7.4                               Prohibition on Solicitation of the
Corporation’s Employees or Independent Contractors after Termination.  During
the Period of Employment and for a period of one year following the Severance
Date (or, if longer, during any period in which the Executive is receiving
severance or other payments from the Corporation hereunder), the Executive will
not directly or indirectly solicit any of the Company Group’s employees, agents,
or independent contractors to leave the employ of the Company Group for a
Competing Company.  The foregoing shall not be violated by general advertising
of a customary nature not targeted at such employees, agents or independent
contractors, nor by serving as a reasonable and customary reference upon
request.

 

7.5                               Cooperation.  The Executive agrees that during
the Period of Employment and thereafter, he shall respond to all reasonable
inquiries of the Corporation about any matters concerning the Corporation or its
affairs that occurred or arose during the Executive’s employment by the
Corporation, and the Executive further agrees to reasonably cooperate with the
Corporation in investigating, prosecuting and defending any charges, claims,
demands, liabilities, causes of action, lawsuits or other proceedings by,
against or involving the Corporation relating to the period during which the
Executive was employed by the Corporation or relating to matters of which the
Executive has or should have knowledge or information.  The Executive further
agrees that, except as required by law, the Executive will at no time
voluntarily serve as a witness or offer written or oral testimony against the
Corporation in conjunction with any complaints, charges or lawsuits brought
against the Corporation by or on behalf of any other current or former
employees, or any governmental or administrative agencies related to his period
of employment and, to the extent legally permitted, will provide the Corporation
with notice of any subpoena or other request for such information or testimony.

 

7.6                               Understanding of Covenants.  The Executive
represents that he (i) is familiar with and has carefully considered the
foregoing covenants set forth in this Section 7 (together, the “Restrictive
Covenants”), (ii) is fully aware of his obligations hereunder, (iii) agrees to
the reasonableness of the length of time, scope and geographic coverage, as
applicable, of the Restrictive Covenants, (iv) agrees that the Corporation and
the other members of the Company Group currently conduct business throughout the
continental United States and the rest of the world, and (v) agrees that the
Restrictive Covenants are necessary to protect the Corporation’s and the other
members of the Company Groups’ respective confidential and proprietary
information, good will, stable workforce, and customer relations.  The Executive
understands that the Restrictive Covenants may limit his ability to earn a
livelihood in a business similar to the business of the Company and any other
member of the Company Group, but he nevertheless believes that he has received
and will receive sufficient consideration and other benefits as an employee of
the Company and as otherwise provided hereunder or as described in the recitals
hereto to clearly justify such restrictions which, in any

 

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event (given his education, skills and ability), the Executive does not believe
would prevent him from otherwise earning a living.  The Executive agrees that
the Restrictive Covenants do not confer a benefit upon the Company
disproportionate to the detriment of the Executive.

 

7.7                               Right to Injunctive and Equitable Relief.  The
Executive’s obligations not to disclose or use Confidential Information and to
refrain from conduct otherwise prohibited by the Restrictive Covenants are of a
special and unique character, which gives them a peculiar value.  The
Corporation cannot be reasonably or adequately compensated in damages in an
action at law in the event the Executive breaches such obligations, and the
breach of such obligations would cause irreparable harm to the Corporation. 
Therefore, the Executive expressly agrees that the Corporation shall be entitled
to injunctive and other equitable relief without bond or other security in the
event of such breach in addition to any other rights or remedies which the
Corporation may possess.  Furthermore, the obligations of the Executive and the
rights and remedies of the Corporation under this Section 7 are cumulative and
in addition to, and not in lieu of, any obligations, rights, or remedies created
by applicable law relating to misappropriation or theft of trade secrets or
confidential information.

 

7.8                               Remedy for Breach of Section 7.  This
provisions of this Section 7.8 control notwithstanding anything to the contrary
in Section 5.3.  In the event the Executive breaches any provision of Section 7
in any willful and material manner the Executive will no longer be entitled to,
and the Corporation will no longer be obligated to pay, any remaining unpaid
portion of any benefits contemplated by Section 5.3(b) and, in addition to any
other legal remedies the Corporation may have in such circumstances, the
Corporation shall have the right, in its sole discretion, to take any or all of
the following actions: (i) terminate the payments and benefits otherwise due
pursuant to Section 5.3(b), (ii) require the Executive to repay to the
Corporation any amount theretofore paid to the Executive pursuant to
Section 5.3(b), and/or (iii) terminate any and all stock options theretofore
granted to the Executive by the Corporation (to the extent not theretofore
exercised); provided, however, that if a cure is reasonably possible in the
circumstances, the Corporation shall provide the Executive with written notice
of the breach and shall not take any of the above actions unless the Executive
fails to cure the breach within ten (10) business days’ after such notice, and
the Executive agrees to not exercise any such stock options after the
Corporation provides the Executive with such notice and before such cure is
made.  In no case where benefits are otherwise triggered under Section 5.3(b),
however, shall the Executive be entitled to benefits pursuant to
Section 5.3(b)(i) of less than $5,000, which amount the parties agree is good
and adequate consideration, in and of itself, for the Executive’s release
contemplated by Section 5.4.

 

8.                                      WITHHOLDING TAXES.  NOTWITHSTANDING
ANYTHING ELSE HEREIN TO THE CONTRARY, THE CORPORATION MAY WITHHOLD (OR CAUSE
THERE TO BE WITHHELD, AS THE CASE MAY BE) FROM ANY AMOUNTS OTHERWISE DUE OR
PAYABLE UNDER OR PURSUANT TO THIS AGREEMENT SUCH FEDERAL, STATE

 

18

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AND LOCAL INCOME, EMPLOYMENT, OR OTHER TAXES AS MAY BE REQUIRED TO BE WITHHELD
PURSUANT TO ANY APPLICABLE LAW OR REGULATION.

 

9.                                      ASSIGNMENT.

 

(a)           This Agreement is personal to the Executive and without the prior
written consent of the Corporation shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution.  This Agreement
shall inure to the benefit of and be enforceable by the Executive’s legal
representatives.

 

(b)           This Agreement shall inure to the benefit of and be binding upon
the Corporation and its successors and assigns.  Without limiting the generality
of the preceding sentence, the Corporation will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place.  As used in this Agreement, “Corporation” shall mean
the Corporation as hereinbefore defined and any successor or assignee, as
applicable, which assumes and agrees to perform this Agreement by operation of
law or otherwise.

 

10.                               NUMBER AND GENDER.  WHERE THE CONTEXT
REQUIRES, THE SINGULAR SHALL INCLUDE THE PLURAL, THE PLURAL SHALL INCLUDE THE
SINGULAR, AND ANY GENDER SHALL INCLUDE ALL OTHER GENDERS.

 

11.                               SECTION HEADINGS.  THE SECTION HEADINGS OF,
AND TITLES OF PARAGRAPHS AND SUBPARAGRAPHS CONTAINED IN, THIS AGREEMENT ARE FOR
THE PURPOSE OF CONVENIENCE ONLY, AND THEY NEITHER FORM A PART OF THIS AGREEMENT
NOR ARE THEY TO BE USED IN THE CONSTRUCTION OR INTERPRETATION THEREOF.

 

12.                               GOVERNING LAW.  THIS AGREEMENT, AND ALL
QUESTIONS RELATING TO ITS VALIDITY, INTERPRETATION, PERFORMANCE AND ENFORCEMENT,
AS WELL AS THE LEGAL RELATIONS HEREBY CREATED BETWEEN THE PARTIES HERETO, SHALL
BE GOVERNED BY AND CONSTRUED UNDER, AND INTERPRETED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF CALIFORNIA, NOTWITHSTANDING ANY CALIFORNIA OR
OTHER CONFLICT OF LAW PROVISION TO THE CONTRARY.  (THE EXECUTIVE AND THE
CORPORATION ARE SOMETIMES REFERRED TO IN THIS AGREEMENT AS THE “PARTIES”
HERETO.)

 

13.                               SEVERABILITY.  IF ANY PROVISION OF THIS
AGREEMENT OR THE APPLICATION THEREOF IS HELD INVALID, THE INVALIDITY SHALL NOT
AFFECT OTHER PROVISIONS OR APPLICATIONS OF THIS AGREEMENT WHICH CAN BE GIVEN
EFFECT WITHOUT THE INVALID PROVISIONS OR APPLICATIONS AND TO THIS END THE
PROVISIONS OF THIS AGREEMENT ARE DECLARED TO BE SEVERABLE.

 

14.                               ENTIRE AGREEMENT.  THIS AGREEMENT EMBODIES THE
ENTIRE AGREEMENT OF THE PARTIES HERETO RESPECTING THE MATTERS WITHIN ITS SCOPE. 
THIS AGREEMENT SUPERSEDES ALL PRIOR AND CONTEMPORANEOUS AGREEMENTS OF THE
PARTIES HERETO THAT DIRECTLY OR INDIRECTLY BEARS UPON THE SUBJECT MATTER HEREOF
(INCLUDING, WITHOUT LIMITATION, THE PRIOR EMPLOYMENT AGREEMENT).  ANY PRIOR
NEGOTIATIONS, CORRESPONDENCE, AGREEMENTS, PROPOSALS OR UNDERSTANDINGS RELATING
TO THE SUBJECT MATTER HEREOF SHALL BE DEEMED TO HAVE BEEN MERGED INTO THIS
AGREEMENT, AND TO THE EXTENT INCONSISTENT HEREWITH, SUCH NEGOTIATIONS,

 

19

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CORRESPONDENCE, AGREEMENTS, PROPOSALS, OR UNDERSTANDINGS SHALL BE DEEMED TO BE
OF NO FORCE OR EFFECT.  THERE ARE NO REPRESENTATIONS, WARRANTIES, OR AGREEMENTS,
WHETHER EXPRESS OR IMPLIED, OR ORAL OR WRITTEN, WITH RESPECT TO THE SUBJECT
MATTER HEREOF, EXCEPT AS EXPRESSLY SET FORTH HEREIN.

 

15.                               MODIFICATIONS.  THIS AGREEMENT MAY NOT BE
AMENDED, MODIFIED OR CHANGED (IN WHOLE OR IN PART), EXCEPT BY A FORMAL,
DEFINITIVE WRITTEN AGREEMENT EXPRESSLY REFERRING TO THIS AGREEMENT, WHICH
AGREEMENT IS EXECUTED BY BOTH OF THE PARTIES HERETO.

 

16.                               WAIVER.  NEITHER THE FAILURE NOR ANY DELAY ON
THE PART OF A PARTY TO EXERCISE ANY RIGHT, REMEDY, POWER OR PRIVILEGE UNDER THIS
AGREEMENT SHALL OPERATE AS A WAIVER THEREOF, NOR SHALL ANY SINGLE OR PARTIAL
EXERCISE OF ANY RIGHT, REMEDY, POWER OR PRIVILEGE PRECLUDE ANY OTHER OR FURTHER
EXERCISE OF THE SAME OR OF ANY RIGHT, REMEDY, POWER OR PRIVILEGE, NOR SHALL ANY
WAIVER OF ANY RIGHT, REMEDY, POWER OR PRIVILEGE WITH RESPECT TO ANY OCCURRENCE
BE CONSTRUED AS A WAIVER OF SUCH RIGHT, REMEDY, POWER OR PRIVILEGE WITH RESPECT
TO ANY OTHER OCCURRENCE.  NO WAIVER SHALL BE EFFECTIVE UNLESS IT IS IN WRITING
AND IS SIGNED BY THE PARTY ASSERTED TO HAVE GRANTED SUCH WAIVER.

 

17.                               ARBITRATION.  EXCEPT AS PROVIDED IN SECTION 7,
ANY CONTROVERSY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ITS ENFORCEMENT OR
INTERPRETATION, OR BECAUSE OF AN ALLEGED BREACH, DEFAULT, OR MISREPRESENTATION
IN CONNECTION WITH ANY OF ITS PROVISIONS, OR ANY OTHER CONTROVERSY ARISING OUT
OF THE EXECUTIVE’S EMPLOYMENT, INCLUDING, BUT NOT LIMITED TO, ANY STATE OR
FEDERAL STATUTORY CLAIMS, SHALL BE SUBMITTED TO ARBITRATION IN LOS ANGELES
COUNTY, CALIFORNIA, BEFORE A SOLE ARBITRATOR SELECTED FROM JUDICIAL ARBITRATION
AND MEDIATION SERVICES, INC., LOS ANGELES COUNTY, CALIFORNIA, OR ITS SUCCESSOR
(“JAMS”), OR IF JAMS IS NO LONGER ABLE TO SUPPLY THE ARBITRATOR, SUCH ARBITRATOR
SHALL BE SELECTED FROM THE AMERICAN ARBITRATION ASSOCIATION, AND SHALL BE
CONDUCTED IN ACCORDANCE WITH THE PROVISIONS OF CALIFORNIA CODE OF CIVIL
PROCEDURE §§ 1280 ET SEQ. AS THE EXCLUSIVE FORUM FOR THE RESOLUTION OF SUCH
DISPUTE; PROVIDED, HOWEVER, THAT PROVISIONAL INJUNCTIVE RELIEF MAY, BUT NEED
NOT, BE SOUGHT BY EITHER PARTY TO THIS AGREEMENT IN A COURT OF LAW WHILE
ARBITRATION PROCEEDINGS ARE PENDING, AND ANY PROVISIONAL INJUNCTIVE RELIEF
GRANTED BY SUCH COURT SHALL REMAIN EFFECTIVE UNTIL THE MATTER IS FINALLY
DETERMINED BY THE ARBITRATOR.  FINAL RESOLUTION OF ANY DISPUTE THROUGH
ARBITRATION MAY INCLUDE ANY REMEDY OR RELIEF WHICH THE ARBITRATOR DEEMS JUST AND
EQUITABLE, INCLUDING ANY AND ALL REMEDIES PROVIDED BY APPLICABLE STATE OR
FEDERAL STATUTES.  AT THE CONCLUSION OF THE ARBITRATION, THE ARBITRATOR SHALL
ISSUE A WRITTEN DECISION THAT SETS FORTH THE ESSENTIAL FINDINGS AND CONCLUSIONS
UPON WHICH THE ARBITRATOR’S AWARD OR DECISION IS BASED.  ANY AWARD OR RELIEF
GRANTED BY THE ARBITRATOR HEREUNDER SHALL BE FINAL AND BINDING ON THE PARTIES
HERETO AND MAY BE ENFORCED BY ANY COURT OF COMPETENT JURISDICTION.  THE PARTIES
AGREE THAT THE CORPORATION SHALL BE RESPONSIBLE FOR PAYMENT OF THE FORUM COSTS
OF ANY ARBITRATION HEREUNDER, INCLUDING THE ARBITRATOR’S FEE.  THE EXECUTIVE AND
THE CORPORATION FURTHER AGREE THAT IN ANY PROCEEDING TO ENFORCE THE TERMS OF
THIS AGREEMENT, EACH PARTY SHALL BEAR ITS OWN ATTORNEYS’ FEES AND COSTS;
PROVIDED, HOWEVER, THE CORPORATION SHALL PAY (OR REIMBURSE THE EXECUTIVE FOR, AS
THE CASE MAY BE) THE EXECUTIVE’S REASONABLE ATTORNEYS’ FEE AND COSTS IN ANY
PROCEEDING TO ENFORCE THE TERMS OF THIS AGREEMENT (TO THE EXTENT OF THE MATERIAL
CLAIM SET FORTH IN (II) BELOW) IF (I) SUCH PROCEEDING COMMENCES AFTER A CHANGE
IN CONTROL EVENT AND (II) THE EXECUTIVE IS A PREVAILING PARTY ON A MATERIAL
CLAIM IN SUCH PROCEEDING.  NOTWITHSTANDING

 

20

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THIS PROVISION, THE PARTIES HERETO MAY MUTUALLY AGREE TO MEDIATE ANY DISPUTE
PRIOR TO OR FOLLOWING SUBMISSION TO ARBITRATION.

 

18.          Notices.

 

(a)           All notices, requests, demands and other communications required
or permitted under this Agreement shall be in writing and shall be deemed to
have been duly given and made if (i) delivered by hand, (ii) otherwise delivered
against receipt therefor, or (iii) sent by registered or certified mail, postage
prepaid, return receipt requested.  Any notice shall be duly addressed to the
parties hereto as follows:

 

if to the Corporation:

 

International Rectifier Corporation

233 Kansas Street

El Segundo, California 90245

Attn: General Counsel

 

with a copy to:

 

Board of Directors

International Rectifier Corporation

233 Kansas Street

El Segundo, California 90245

Attn: Lead Independent Director

 

(ii)   if to the Executive, at the last address of the Executive on the books of
the Corporation.

 

(b)           Any party may alter the address to which communications or copies
are to be sent by giving notice of such change of address in conformity with the
provisions of this Section 18 for the giving of notice.  Any communication shall
be effective when delivered by hand, when otherwise delivered against receipt
therefor, or five (5) business days after being mailed in accordance with the
foregoing.

 

19.                               LEGAL COUNSEL; MUTUAL DRAFTING.  EACH PARTY
RECOGNIZES THAT THIS IS A LEGALLY BINDING CONTRACT AND ACKNOWLEDGES AND AGREES
THAT THEY HAVE HAD THE OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL OF THEIR
CHOICE.  EACH PARTY HAS COOPERATED IN THE DRAFTING, NEGOTIATION AND PREPARATION
OF THIS AGREEMENT.  HENCE, IN ANY CONSTRUCTION TO BE MADE OF THIS AGREEMENT, THE
SAME SHALL NOT BE CONSTRUED AGAINST EITHER PARTY ON THE BASIS OF THAT PARTY
BEING THE DRAFTER OF SUCH LANGUAGE.  EXECUTIVE AGREES AND ACKNOWLEDGES THAT HE
HAS READ AND UNDERSTANDS THIS AGREEMENT, IS ENTERING INTO IT FREELY AND
VOLUNTARILY, AND HAS BEEN ADVISED TO SEEK COUNSEL PRIOR TO ENTERING INTO THIS
AGREEMENT AND HAS HAD AMPLE OPPORTUNITY TO DO SO.

 

20.          Insurance.  The Corporation shall cover Executive under directors
and officers liability insurance both during and, while potential liability
exists, after the Period of Employment on substantially the same terms as the
Corporation then covers its active officers and

 

21

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directors (except in no event shall the Corporation be required to maintain such
coverage for Executive for a period of more than three years after the last day
that the Executive served as an employee of the Corporation or a member of the
Board).

 

21.           Counterparts.  This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original as against any party
whose signature appears thereon, and all of which together shall constitute one
and the same instrument.  This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all of the parties hereto reflected hereon as the signatories.  Photographic
copies of such signed counterparts may be used in lieu of the originals for any
purpose.

 

 [The remainder of this page has intentionally been left blank.]

 

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IN WITNESS WHEREOF, the Corporation and the Executive have executed this
Agreement as of the date first set forth above.

 

 

“CORPORATION”

 

 

 

International Rectifier Corporation,

 

a Delaware corporation

 

 

 

By:

 

 

 

Donald R. Dancer

 

 

Chief Executive Officer (acting)

 

 

 

 

 

“EXECUTIVE”

 

 

 

 

 

Oleg Khaykin

 

23

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EXHIBIT A

 

FORM OF GENERAL RELEASE AGREEMENT

 

1.             Release by Executive.  Oleg Khaykin (“Executive”), on his own
behalf and on behalf of his descendants, dependents, heirs, executors,
administrators, assigns and successors, and each of them, hereby acknowledges
full and complete satisfaction of and releases and discharges and covenants not
to sue International Rectifier Corporation (the “Corporation”), its divisions,
subsidiaries, parents, or affiliated corporations, past and present, and each of
them, as well as its and their assignees, successors, directors, officers,
stockholders, partners, representatives, attorneys, agents or employees, past or
present, or any of them (individually and collectively, “Releasees”), from and
with respect to any and all claims, agreements, obligations, demands and causes
of action, known or unknown, suspected or unsuspected, arising out of or in any
way connected with Executive’s employment or any other relationship with or
interest in the Corporation or the termination thereof, including without
limiting the generality of the foregoing, any claim for severance pay, profit
sharing, bonus or similar benefit, pension, retirement, life insurance, health
or medical insurance or any other fringe benefit, or disability, or any other
claims, agreements, obligations, demands and causes of action, known or unknown,
suspected or unsuspected resulting from any act or omission by or on the part of
Releasees committed or omitted prior to the date of this General Release
Agreement (this “Agreement”) set forth below, including, without limiting the
generality of the foregoing, any claim under Title VII of the Civil Rights Act
of 1964, the Americans with Disabilities Act, the Family and Medical Leave Act,
the California Fair Employment and Housing Act, California Labor Code
Section 132a, the California Family Rights Act, or any other federal, state or
local law, regulation or ordinance (collectively, the “Claims”); provided,
however, that the foregoing release does not apply to any obligation of the
Corporation to Executive pursuant to any of the following: (1) Section 5.3 of
the Employment Agreement dated as of February 6, 2008 by and between the
Corporation and Executive (the “Employment Agreement”); (2) any equity-based
awards previously granted by the Corporation to Executive, to the extent that
such awards continue after the termination of Executive’s employment with the
Corporation in accordance with the applicable terms of such awards (and subject
to any limited period in which to exercise such awards following such
termination of employment); (3) any right to indemnification that Executive may
have pursuant to the Bylaws of the Corporation, its Certificate of Incorporation
or under any written indemnification agreement with the Corporation (or any
corresponding provision of any subsidiary or affiliate of the Corporation) or
applicable state law with respect to any loss, damages or expenses (including
but not limited to attorneys’ fees to the extent otherwise provided) that
Executive may in the future incur with respect to his or her service as an
employee, officer or director of the Corporation or any of its subsidiaries or
affiliates; (4) with respect to any rights that Executive may have to insurance
coverage for such losses, damages or expenses under any Corporation (or
subsidiary or affiliate) directors and officers liability insurance policy;
(5) any rights to continued medical or dental coverage that Executive may have
under COBRA (or similar applicable state law); or (6) any rights to payment of
benefits that Executive may have under the Corporation’s Retirement Savings
Plan.  In addition, this Release does not cover any Claim that cannot be so
released as a matter of applicable law.  Executive acknowledges and agrees that
he has received any and all leave and other benefits that he has been and is
entitled to pursuant to the Family and Medical Leave Act of 1993.

 

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2.             Waiver of Civil Code Section 1542.  This Agreement is intended to
be effective as a general release of and bar to each and every Claim hereinabove
specified.  Accordingly, Executive hereby expressly waives any rights and
benefits conferred by Section 1542 of the California Civil Code and any similar
provision of any other applicable state law as to the Claims.  Section 1542 of
the California Civil Code provides:

 

“A GENERAL RELEASE DOES NOT EXTEND TO A CLAIM WHICH THE CREDITOR DOES NOT KNOW
OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT
WITH THE DEBTOR.”

 

Executive acknowledges that he later may discover claims, demands, causes of
action or facts in addition to or different from those which Executive now knows
or believes to exist with respect to the subject matter of this Agreement and
which, if known or suspected at the time of executing this Agreement, may have
materially affected its terms.  Nevertheless, Executive hereby waives, as to the
Claims, any claims, demands, and causes of action that might arise as a result
of such different or additional claims, demands, causes of action or facts.

 

3.             ADEA Waiver.  Executive expressly acknowledges and agrees that by
entering into this Agreement, he is waiving any and all rights or claims that he
may have arising under the Age Discrimination in Employment Act of 1967, as
amended (“ADEA”), which have arisen on or before the date of execution of this
Agreement.  Executive further expressly acknowledges and agrees that:

 

(a)           In return for this Agreement, he will receive consideration beyond
that which he was already entitled to receive before entering into this
Agreement;

 

(b)           He is hereby advised in writing by this Agreement to consult with
an attorney before signing this Agreement;

 

(c)           He was given a copy of this Agreement on
[                        ] and informed that he had twenty-one (21) days within
which to consider this Agreement and that if he wished to executive this
Agreement prior to expiration of such 21-day period, he should execute the
Acknowledgement and Waiver attached hereto as Exhibit A-1;

 

(d)           Nothing in this Agreement prevents or precludes Executive from
challenging or seeking a determination in good faith of the validity of this
waiver under the ADEA, nor does it impose any condition precedent, penalties or
costs from doing so, unless specifically authorized by federal law; and

 

(e)           He was informed that he has seven (7) days following the date of
execution of this Agreement in which to revoke this Agreement, and this
Agreement will become null and void if Executive elects revocation during that
time.  Any revocation must be in writing and must be received by the Corporation
during the seven-day revocation period.  In the event that Executive exercises
his right of revocation, neither the Corporation nor Executive will have any
obligations under this Agreement.

 

A-2

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4.             No Transferred Claims.  Executive represents and warrants to the
Corporation that he has not heretofore assigned or transferred to any person not
a party to this Agreement any released matter or any part or portion thereof.

 

5.             MISCELLANEOUS.  THE FOLLOWING PROVISIONS SHALL APPLY FOR PURPOSES
OF THIS AGREEMENT:

 

(A)           NUMBER AND GENDER.  WHERE THE CONTEXT REQUIRES, THE SINGULAR SHALL
INCLUDE THE PLURAL, THE PLURAL SHALL INCLUDE THE SINGULAR, AND ANY GENDER SHALL
INCLUDE ALL OTHER GENDERS.

 

(B)           SECTION HEADINGS.  THE SECTION HEADINGS CONTAINED IN THIS
AGREEMENT ARE INSERTED FOR CONVENIENCE ONLY AND SHALL NOT AFFECT IN ANY WAY THE
MEANING OR INTERPRETATION OF THIS AGREEMENT.

 

(C)           GOVERNING LAW.  THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN
EXECUTED AND DELIVERED WITHIN THE STATE OF CALIFORNIA, AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF CALIFORNIA WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS.

 

(D)           SEVERABILITY.  IF ANY PROVISION OF THIS AGREEMENT OR THE
APPLICATION THEREOF IS HELD INVALID, THE INVALIDITY SHALL NOT AFFECT OTHER
PROVISIONS OR APPLICATIONS OF THIS AGREEMENT WHICH CAN BE GIVEN EFFECT WITHOUT
THE INVALID PROVISIONS OR APPLICATIONS AND TO THIS END THE PROVISIONS OF THIS
AGREEMENT ARE DECLARED TO BE SEVERABLE.

 

(E)           MODIFICATIONS.  THIS AGREEMENT MAY NOT BE AMENDED, MODIFIED OR
CHANGED (IN WHOLE OR IN PART), EXCEPT BY A FORMAL, DEFINITIVE WRITTEN AGREEMENT
EXPRESSLY REFERRING TO THIS AGREEMENT, WHICH AGREEMENT IS EXECUTED BY BOTH OF
THE PARTIES HERETO.

 

(F)            WAIVER.  NO WAIVER OF ANY BREACH OF ANY TERM OR PROVISION OF THIS
AGREEMENT SHALL BE CONSTRUED TO BE, NOR SHALL BE, A WAIVER OF ANY OTHER BREACH
OF THIS AGREEMENT.  NO WAIVER SHALL BE BINDING UNLESS IN WRITING AND SIGNED BY
THE PARTY WAIVING THE BREACH.

 

(G)           ARBITRATION.  ANY CONTROVERSY ARISING OUT OF OR RELATING TO THIS
AGREEMENT SHALL BE SUBMITTED TO ARBITRATION IN ACCORDANCE WITH THE ARBITRATION
PROVISIONS OF THE EMPLOYMENT AGREEMENT.

 

(H)           COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN COUNTERPARTS, AND
EACH COUNTERPART, WHEN EXECUTED, SHALL HAVE THE EFFICACY OF A SIGNED ORIGINAL. 
PHOTOGRAPHIC COPIES OF SUCH SIGNED COUNTERPARTS MAY BE USED IN LIEU OF THE
ORIGINALS FOR ANY PURPOSE.

 

[Remainder of page intentionally left blank]

 

A-3

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The undersigned have read and understand the consequences of this Agreement and
voluntarily sign it.  The undersigned declare under penalty of perjury under the
laws of the State of California that the foregoing is true and correct.

 

EXECUTED this                  day of                  200    , at
                                             County,                     .

 

 

 

“Executive”

 

 

 

 

 

Oleg Khaykin

 

EXECUTED this                  day of                  200    , at
                                             County,                     .

 

 

 

INTERNATIONAL RECTIFIER CORPORATION

 

 

 

 

 

By:

 

 

 

 [Name]

 

 

 [Title]

 

A-4

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EXHIBIT A-1

 

ACKNOWLEDGMENT AND WAIVER

 

I, Oleg Khaykin, hereby acknowledge that I was given 21 days to consider the
foregoing General Release Agreement and voluntarily chose to sign the General
Release Agreement prior to the expiration of the 21-day period.

 

I declare under penalty of perjury under the laws of the State of California
that the foregoing is true and correct.

 

EXECUTED this        day of                          200    , at
                       County,                   .

 

 

 

 

 

Oleg Khaykin

 

A-5

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EXHIBIT B

 

TAX GROSS-UP PROVISIONS

 

1.             Possible Gross-Up Payment.

 

(a)                                  Subject to Section 1(b), in the event it is
determined (pursuant to Section 2 below) or finally determined (as defined in
Section 3(c) below) that any payment, distribution, transfer, benefit or other
event with respect to the Corporation or a successor, direct or indirect
subsidiary or affiliate of the Corporation (or any successor or affiliate of any
of them, and including any benefit plan of any of them), and arising in
connection with an event described in Section 280G(b)(2)(A)(i) of the Code,
occurring after the Commencement Date, to or for the benefit the Executive or
the Executive’s dependents, heirs or beneficiaries (whether such payment,
distribution, transfer, benefit or other event occurs pursuant to the terms of
this Agreement or otherwise, but determined without regard to any additional
payments required under this Section 1(a)) (each a “Payment” and collectively
the “Payments”) is or was subject to the excise tax imposed by Section 4999 of
the Code, and any successor provision or any comparable provision of state or
local income tax law (collectively, “Section 4999”), or any interest, penalty or
addition to tax is or was incurred by Executive with respect to such excise tax
(such excise tax, together with any such interest, penalty, addition to tax, and
costs (including professional fees) hereinafter collectively referred to as the
“Excise Tax”), then, within 10 days after such determination or final
determination, as the case may be, the Corporation shall pay to the Executive
(or to the applicable Taxing Authority (as defined in Section 3(a), on
Executive’s behalf, at the Corporation’s discretion) an additional cash payment
(hereinafter referred to as the “Gross-Up Payment”) equal to an amount such that
after payment by the Executive of all taxes, interest, penalties, additions to
tax and costs imposed or incurred with respect to the Gross-Up Payment
(including, without limitation, any income and excise taxes imposed upon the
Gross-Up Payment), the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon such Payment or Payments.  The Gross-Up Payment,
if triggered pursuant to this Section 1(a), is intended to put the Executive in
the same position as the Executive would have been had no Excise Tax been
imposed upon or incurred as a result of any Payment.

 

(b)                                 Notwithstanding anything contained in
Section 1(a) or any other provision of this Agreement to the contrary, if a
reduction in the amount of the Payments by an amount up to but not in excess of
fifteen percent (15%) of the amount of the Payments otherwise required (as
determined before giving effect to any Gross-Up Payment pursuant to
Section 1(a) and before any reduction pursuant to this Section 1(b)) would avoid
the imputation of any Excise Tax on the remaining Payments (after such
reduction), then the Payments shall be reduced (but not below zero) so that the
maximum amount of the Payments (after reduction) shall be one dollar ($1.00)
less than the amount which would cause the Payments to be subject to the Excise
Tax.  Unless the Executive shall have given prior written

 

B-1

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notice to the Corporation to effectuate a reduction in the Payments if such a
reduction is required, the Corporation shall reduce or eliminate the Payments by
first reducing or eliminating any cash severance benefits, then by reducing or
eliminating any other cash benefits, then by reducing or eliminating any
accelerated vesting of stock options, then by reducing or eliminating any
accelerated vesting of other equity-based awards, then by reducing or
eliminating any other remaining Payments.

 

(c)                                  The preceding provisions of this Section 1
shall take precedence over the provisions of any other plan, arrangement or
agreement governing the Executive’s rights and entitlements to any benefits or
compensation.

 

2.             Determination of Gross-Up.

 

(a)                                  Except as provided in Section 3, the
determination that a Payment is (or, if no reduction were made pursuant to
Section 1(b), would be) subject to an Excise Tax, and whether a Gross-Up Payment
or reduction pursuant to Section 1(b) is required in the circumstances, shall be
made in writing by a nationally recognized accounting firm or executive
compensation consulting firm selected by the Corporation (the “Accounting
Firm”).  If no reduction is required pursuant to Section 1(b), such
determination shall include the amount of the Gross-Up Payment.  The Accounting
Firm’s determination shall include detailed computations thereof, including any
assumptions used in such computations.  Any determination by the Accounting Firm
will be binding on the Corporation and the Executive.

 

(b)                                 For purposes of determining the amount of
any Gross-Up Payment, the Executive shall be deemed to pay Federal income taxes
at the highest marginal rate of Federal individual income taxation in the
calendar year in which the Gross-Up Payment is to be made.  Such highest
marginal rate shall take into account the loss of itemized deductions by the
Executive and shall also include the Executive’s share of the hospital insurance
portion of FICA and state and local income taxes at the highest marginal rate of
individual income taxation in the state and locality of the Executive’s
residence on the date that the Payment is made, net of the maximum reduction in
Federal income taxes that could be obtained from the deduction of such state and
local taxes.

 

3.             Notification.

 

(a)                                  The Executive shall notify the Corporation
in writing of any claim by the Internal Revenue Service (or any successor
thereof) or any state or local taxing authority (individually or collectively,
the “Taxing Authority”) that, if successful, would require the payment by the
Corporation of a Gross-Up Payment.  Such notification shall be given as soon as
practicable but no later than 30 days after the Executive receives written
notice of such claim and shall apprise the Corporation of the nature of such
claim and the date on which such claim is requested to be paid; provided,
however, that failure by the Executive to give such

 

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notice within such 30-day period shall not result in a waiver or forfeiture of
any of the Executive’s rights under this Exhibit B except to the extent of
actual damages suffered by the Corporation as a result of such failure.  The
Executive shall not pay such claim prior to the expiration of the 15-day period
following the date on which the Executive gives such notice to the Corporation
(or such shorter period ending on the date that any payment of taxes, interest,
penalties or additions to tax with respect to such claim is due).  If the
Corporation notifies the Executive in writing prior to the expiration of such
15-day period (regardless of whether such claim was earlier paid as contemplated
by the preceding parenthetical) that it desires to contest such claim, the
Executive shall:

 

(1)                                  give the Corporation any information
reasonably requested by the Corporation relating to such claim;

 

(2)                                  take such action in connection with
contesting such claim as the Corporation shall reasonably request in writing
from time to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney selected by the Corporation;

 

(3)                                  permit the Corporation to participate in
any Proceedings (as defined below) relating to such claim; and

 

(4)                                  cooperate with the Corporation in good
faith in connection with any Proceedings and to contest such claim;

 

provided, however, that the Corporation shall bear and pay directly all
attorneys fees, costs and expenses (including additional interest, penalties and
additions to tax) incurred in connection with such contest and Proceedings and
shall indemnify and hold the Executive harmless, on an after-tax basis, for all
taxes (including, without limitation, income and excise taxes), interest,
penalties and additions to tax imposed in relation to such claim and in relation
to the payment of such costs and expenses or indemnification.

 

As used in this Exhibit, “Proceeding” or “Proceedings” means, with respect to
any claim by a Taxing Authority, the contest of such claim through:  (i) any
applicable administrative remedy or remedies that may be pursued with the Taxing
Authority, or the administrative agency or tribunal having jurisdiction over the
Taxing Authority or claim, including, but not limited to, protests, petitions,
administrative appeals, claims for refund, conferences (including settlement
conferences), hearings and any combination of the foregoing; and (ii) any other
remedy or remedies, including suits for refund, appeals of administrative
determinations, appeals of trial court decisions and further appeals, including
to the court of last resort, settlement of any such suits or appeals, and any
other remedy that the Corporation chooses to pursue.

 

(b)                                 Without limitation on the foregoing
provisions of this Section 3, and to the extent its actions do not unreasonably
interfere with or prejudice the Executive’s

 

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disputes with the Taxing Authority as to other issues, the Corporation shall
control all Proceedings related to such claim.  Any settlement of any claim
shall be reasonably acceptable to the Executive, and the Corporation’s control
of the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder, and the Executive shall be entitled to
settle or contest, as the case may be, any other issue.

 

If the Corporation directs the Executive to pay an amount claimed in connection
with any Proceeding, the Corporation shall make a tentative payment to the
Executive (or to the applicable Taxing Authority on the Executive’s behalf, in
the Corporation’s discretion) of the amount then directed to be paid by the
Corporation, and the Corporation shall indemnify and hold the Executive
harmless, on an after-tax basis, from all taxes (including, without limitation,
income and excise taxes), interest, penalties and additions to tax imposed with
respect to such tentative payment or with respect to any imputed income with
respect to such tentative payment, as any such amounts are incurred.

 

Any extension of the statute of limitations relating to payment of taxes,
interest, penalties or additions to tax for the Executive’s taxable year with
respect to which such claim relates shall be limited solely to the claimed
amount.

 

(c)                                  If, after receipt by the Executive of a
payment by the Corporation pursuant to this Section 3, the Executive receives
any refund with respect to such claim, the Executive shall (subject to the
Corporation’s compliance with the requirements of this Exhibit B) promptly pay
to the Corporation an amount equal to such refund (together with any interest
paid or credited thereof after taxes applicable thereto), net of any taxes
(including, without limitation, any income or excise taxes), interest, penalties
or additions to tax and any other costs incurred by the Executive in connection
with such payment, after giving effect to such repayment.  If, after the receipt
by the Executive of any payment by the Corporation pursuant to this Section 3,
it is finally determined that the Executive is not entitled to any refund with
respect to such claim, then the Executive shall not be required to repay any
portion of such payment and such payment shall be treated as a Gross-Up Payment
and shall offset, to the extent thereof, the amount of any Gross-Up Payment
otherwise required to be paid.

 

(d)                                 For purposes of this Exhibit B, whether the
Excise Tax is applicable to a Payment shall be deemed to be “finally determined”
upon the earliest of: (1) the expiration of the 15-day period referred to in
Section 3(a) if the Corporation or the Executive’s Employer has not notified the
Executive that it intends to contest the underlying claim, (2) the expiration of
any period following which no right of appeal exists, (3) the date upon which a
closing agreement or similar agreement with respect to the claim is executed by
the Executive and the Taxing Authority (which agreement may be executed only in
compliance with this section), or (4) the receipt by the Executive of notice
from the Corporation that it no longer seeks to pursue a contest (which shall be
deemed received if the Corporation does not, within 15 days following receipt of
a written inquiry from the Executive,

 

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affirmatively indicate in writing to the Executive that the Corporation intends
to continue to pursue such contest).

 

4.                                      Underpayment and Overpayment.  It is
possible that no Gross-Up Payment will initially be made but that a Gross-Up
Payment should have been made, or that a Gross-Up Payment will initially be made
in an amount that is less than what should have been made (either of such events
is referred to as an “Underpayment”).  It is also possible that a Gross-Up
Payment will initially be made in an amount that is greater than what should
have been made, or that a reduction in Payments pursuant to Section 1(b) should
have been made (or made in a greater amount, as applicable) that was not
initially made (an “Overpayment”).  The determination of any Underpayment or
Overpayment shall be made by the Accounting Firm in accordance with Section 2. 
In the event of an Underpayment, the amount of any such Underpayment shall be
paid to the Executive as an additional Gross-Up Payment.  In the event of an
Overpayment, the Executive shall promptly pay to the Corporation the amount of
such Overpayment together with interest on such amount at the applicable Federal
rate provided for in Section 1274(d) of the Code for the period commencing on
the date of the Overpayment to the date of such payment by the Executive to the
Corporation.  The Executive shall make such payment to the Corporation as soon
as administratively practicable after the Corporation notifies the Executive of
(a) the Accounting Firm’s determination that an Overpayment was made and (b) the
amount to be repaid.

 

5.                                      Compliance with Law; Section 409A. 
Nothing in this Exhibit B is intended to violate the Sarbanes-Oxley Act of 2002,
and to the extent that any advance or repayment obligation hereunder would
constitute such a violation, such obligation shall be modified so as to make the
advance a nonrefundable payment to the Executive and the repayment obligation
null and void to the extent required by such Act.  Any payment due to the
Executive pursuant to this Exhibit will be paid no later than the last day of
the end of the Executive’s taxable year following the taxable year in which the
Executive pays or remits the related taxes.

 

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EXHIBIT C

 

CALIFORNIA LABOR CODE SECTION 2870

 

EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS

 

“Any provision in an employment agreement which provides that an employee shall
assign, or offer to assign, any of his or her rights in an invention to his or
her employer shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer’s equipment,
supplies, facilities, or trade secret information except for those inventions
that either:

 

(a)           Relate at the time of conception or reduction to practice of the
invention to the employer’s business, or actual or demonstrably anticipated
research or development of the employer.

 

(b)           Result from any work performed by the employee for the employer.

 

1.             To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.”

 

Received and Acknowledged:

 

 

 

 

 

Date:

 

, 2008

 

 

Employee Signature:

 

 

 

Oleg Khaykin

 

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