Exhibit 10.5


 


October 29, 2007


 


Donald R. Dancer


 


Re:  Compensation Agreement


 


Dear Don:


 


This letter agreement (this “agreement”) confirms the terms of your
employment with International Rectifier Corporation (the “Company”), during and
after your service as acting Chief Executive Officer, as approved by the Board
of Directors (the “Board”) of the Company.


 


You will be offered a Severance Agreement with the Company, on terms
substantially as set forth in the form of Severance Agreement delivered to you
in connection with this agreement, which will take effect promptly (and in all
cases while you are still acting Chief Executive Officer of the Company). Your
Employee Benefits Continuation Period under your Severance Agreement will be 18
months and your severance multiplier for purposes of Section 2(b) of your
Severance Agreement will be two times (2.0). Except as otherwise expressly
provided herein, the following provisions supplement and do not supersede or
replace your Severance Agreement or any portion thereof. Similarly, your
Severance Agreement will supplement and will not supersede or replace this
agreement or any portion hereof.


 


You will receive a salary at an annualized rate of $450,000 while you
are employed by the Company. Not more than ten (10) business days after
executing this agreement, the Company will pay you, in a single lump sum
payment, an amount equal to the difference between the base salary you have
been paid for the period of time you have acted as Chief Executive Officer and
the amount to which you would have otherwise been entitled for the
corresponding period of time at the base salary rate set forth above. You will
also participate in the Company’s annual bonus program while you are employed
by the Company with a target annual bonus of 75% of your base salary for the
year to which the bonus opportunity relates. Your participation in the annual
bonus program will be on terms and conditions that are not less favorable than
those applicable to the Company’s other executive officers generally. In the
future the Company may increase, but it will not decrease (regardless of
whether or not you continue as Chief Executive Officer) your base salary rate
or your annual target bonus percentage from the rate or percentage,
respectively, set forth above.


 


In addition to your base salary and annual bonus opportunities, you
will receive (i) a one-time cash incentive award of $100,000 upon executing
this agreement (payable within ten (10) business days after executing this
agreement), and (ii) a one-time special cash bonus of $400,000 payable on (or
within ten (10) business days after) March 1, 2008.


 


For purposes of clarity (and without duplicating the contemplated
option grant), the Company will grant you options to purchase 75,000
shares of Company common stock (subject to customary adjustments for any stock
splits, reverse stock splits, stock dividends or any similar changes in
capitalization that may occur) as set forth, and on the other terms and
conditions referred to, in the commitment letter to you from the Company
dated on or about October 29, 2007. When granted, the vesting period of such
options shall be set so that you receive vesting credit for your services with
the Company on and after October 29, 2007.


 


In addition, the Company will grant you a special award of restricted
stock units (the “RSU Award”). The RSU Award will be granted on the third New
York Stock Exchange trading day that follows the day on which the Company is
current in its financial statement reporting obligations to the Securities and
Exchange Commission (“SEC”), or, if such date is within fifteen (15) days prior
to the end of a Company fiscal quarter or prior to the filing with the SEC of
the periodic report on Form 10-Q for a completed Company fiscal quarter, then
on the third New York Stock Exchange trading day that follows the day on which
such report on Form 10-Q is filed with the SEC (the “Grant Date”).The number of
units subject to 


 


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the RSU
Award will be determined by dividing $500,000 by the Fair Market Value (as such
term is defined in the Company’s 2000 Incentive Plan, as amended) of a share of
the Company’s common stock as of the Grant Date, with such result rounded up to
the nearest whole share increment. The RSU Award will be granted under
the Company’s 2000 Incentive Plan, as amended, and will be vested immediately
upon grant, subject to applicable federal and state income tax withholdings.


 


In the event that you incur a Qualifying Termination on or before March
1, 2008, then, in addition to any other severance you may be entitled to in the
circumstances, the Company will pay you on (or within
ten (10) business days after) the date you incur a separation from service with
the Company the one-time $400,000 cash bonus referred to above. (The term “separation
from service” is used in this agreement as that term is applied for purposes of
Section 409A of the Internal Revenue Code, as amended (the “Code”).) Without
limiting the preceding sentence and in addition to any other severance you may
be entitled to in the circumstances, the Company will pay you $500,000 in lieu
of your RSU Award if either of the following occur prior to the Grant Date: (1)
you incur a Qualifying Termination (the term “Qualifying Termination” is used
in this agreement as defined in your Severance Agreement),. or (2) a Change in
Control (as that term is defined in your Severance Agreement) of the Company
occurs which constitutes a “change in the ownership or effective control” of
the Company or a change “in the ownership of a substantial portion of the
assets” of the Company (as such terms are applied for purposes of Section 409A
of the Internal Revenue Code and the published regulations and other guidance
of the Internal Revenue Service thereunder (collectively, “Section 409A”)). If
you are entitled to the payment described in the preceding sentence, the
payment will be made to you on (or within ten (10) business days after) the
date of your separation from service with the Company that relates to your
Qualifying Termination or the date of such Change in Control, whichever gave
rise to your entitlement. Notwithstanding the foregoing provisions of this
paragraph, in the event that you are a “specified employee” of the Company for
purposes of Section 409A of the Code, the amounts otherwise payable to you
pursuant to this paragraph in connection with your separation from service
shall not be paid until the date that is six months and one day after the date
you have a separation from service with the Company (or, if earlier, the date
of your death), and shall be paid (without interest) on or within ten (10)
business days after that date, to the extent such six-month delay is required
to avoid the imputation of any tax, penalty, or interest under Section 409A of
the Code. If all or any portion of the payments made pursuant to this
agreement, when taken together with payments made under your Severance
Agreement create an excise tax liability under Internal Revenue Code Sections
280G and 4999, the payments under this agreement shall be entitled to the
benefits of Section 2(f) of your Severance Agreement upon your furnishing the
release contemplated by Section 2(h) of your Severance Agreement.


 


All payments contemplated by this agreement will be subject to all applicable
withholdings and other authorized deductions. Your base salary will be paid in
regular installments (not less frequently than monthly) in accordance with the
Company’s normal payroll procedures.


 


Your employment with the Company is entirely voluntary for both parties
and either you or the Company may terminate the employment relationship at any
time for any reason (or for no reason at all).


 


The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation, reorganization or otherwise) to all or
substantially all of the business or assets of the Company, by written
agreement in form and substance reasonably satisfactory to you, expressly to
assume and agree to perform this agreement in the same manner and to the same
extent the Company would be required to perform if no such succession had taken
place. This agreement will be binding upon and inure to the benefit of the
Company and any successor to the Company, including without limitation any
persons acquiring directly or indirectly all or substantially all of the
business or assets of the Company whether by purchase, merger, consolidation,
reorganization or otherwise (and such successor shall thereafter be deemed the “Company”
for the purposes of this agreement), but will not otherwise be assignable,
transferable or delegable by the Company. This agreement will inure to the
benefit of and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees and legatees. This
agreement is personal in nature and neither of the parties hereto shall,
without the consent of the other, assign, transfer or delegate this agreement
or any rights or obligations hereunder except as expressly provided above. Without
limiting the generality or effect of the foregoing, your right to receive
payments hereunder will not be assignable, transferable or delegable, whether
by pledge, creation of a security interest, or otherwise, 


 


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other than by a transfer by your will or by the laws of descent and
distribution and, in the event of any attempted assignment or transfer contrary
to this paragraph, the Company shall have no liability to pay any amount so
attempted to be assigned, transferred or delegated.


 


Any dispute between the parties under this agreement shall be resolved
in accordance with the arbitration provisions set forth in your Severance
Agreement. The validity, interpretation, construction and performance of this
agreement shall be governed by the laws of the State of California without
regard to the conflicts of laws principles thereof.


 


No provision of this agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed by
the party against whom such modification, waiver or discharge is sought to be
enforced. No waiver by either party hereto at any time of any breach by the
other party hereto or compliance with any condition or provision of this
agreement to be performed by such other party will be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This agreement (along with the documents referred to herein)
constitutes the entire agreement of the parties with respect to the subject
matter hereof and supersedes any and all prior agreements of the parties with
respect to such subject matter. No agreements or representations, oral or
otherwise, expressed or implied with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this agreement
(or the documents referred to herein).


 


This agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will constitute
one and the same agreement.


 


If this agreement accurately reflects our understanding regarding these
matters, please indicate your acceptance by signing this agreement below and
returning it to me. A duplicate copy of this agreement is included for your
records.


 


 


	
   

  	
  International Rectifier Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Accepted and Agreed:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Donald R. Dancer

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
						



 


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