Document:

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

The
parties to this Employment Agreement (this “Agreement”),
dated as of February 18, 2008 (the “Effective Date”),
are Power-One, Inc., a Delaware corporation (the “Company”),
and Richard J. Thompson (the “Executive”).  The Company and the Executive each desire that
the Executive be employed by the Company to carry out the duties and
responsibilities described below, all on the terms and conditions hereinafter
set forth.  This Agreement shall govern
the employment relationship between the Executive and the Company from and
after the date hereof, and supersedes and negates any previous agreements with
respect to such employment relationship.

 

Accordingly, in consideration of the mutual
covenants and promises contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby expressly
acknowledged, the parties, intending to be legally bound, agree as follows:

 

1.             Employment.

 

1.1           General.  On the Effective Date, the Company hereby employs
the Executive in an executive officer capacity. 
Upon the resignation or other termination of employment of the Company’s
current Chief Executive Officer, the Executive shall be employed in the
capacity of Chief Executive Officer.  The
Executive hereby accepts such employment, subject to the terms and conditions
herein contained.  During the Employment
Term (as defined in Section 4), the Executive agrees faithfully to perform
(i) any duties delineated in the By-laws of the Company relating to his
position as Chief Executive Officer, (ii) such duties and responsibilities
as are customary for an executive with similar titles and positions at similar
publicly-traded companies and (iii) such additional duties (consistent
with his position as Chief Executive Officer) as may be reasonably assigned to
the Executive from time to time by the Company’s Board of Directors (the “Board”).  During the
Employment Term, the Company shall also nominate (or re-nominate, as the case
may be) the Executive to serve as a member of the Board.  The Executive shall at all times report
directly and solely to the Board.

 

1.2           Full-Time
Position.  The Executive hereby
agrees that, during the Employment Term, he shall devote all of his business
time, attention and skills to the business and affairs of the Company and its
subsidiaries, except during vacation time as provided by Section 3.4
hereof and any periods of illness. 
Subject to the foregoing, nothing in this Agreement shall restrict the
Executive from (i) managing his personal investments, personal business
affairs and other personal matters, (ii) serving on the boards of
directors of companies that do not compete directly or indirectly with the
Company, (iii) serving on civic or charitable boards or committees or (iv) delivering
lectures, fulfilling speaking engagements or teaching at educational
institutions; provided that none of such activities, either singly or in
the aggregate, interfere with the performance of his duties under this
Agreement.  The Executive must receive
approval of the Board prior to assuming any directorships, which approval shall
not be unreasonably withheld, delayed or conditioned.

 

 

 

2.             Compensation.

 

2.1           Salary.  Subject to the terms and conditions herein
contained, during the Employment Term, the Company shall pay to the Executive,
and the Executive shall accept, for all services to be rendered by him pursuant
to this Agreement (including, but not limited to, any services that may be
rendered by him to any subsidiary of the Company and any services that may be
rendered by him as a member of the Board or the board of any such subsidiary or
any committee(s) thereof) a base salary of not less than $500,000 per
annum, and subject to increases, if any, as may be approved from time to time
by the Board or the Compensation Committee in its discretion (such amount,
together with any applicable increases, shall be referred to herein as the “Base Salary”).  The
Executive’s Base Salary shall be payable in such installments as are in effect
from time to time in accordance with the regular payroll practices of the
Company.

 

2.2           Incentive
Payment.  Commencing in the 2008
calendar year, in addition to his Base Salary, the Executive shall be entitled
to receive an incentive payment in respect of each calendar year during the
Employment Term (an “Incentive Payment”).  The Executive’s target Incentive Payment for
each calendar year during the Employment Term shall be equal to 100% of his
Base Salary (the “Target Bonus”).  The
actual amount of any Incentive Payment earned by the Executive each year shall
be determined by the Board (or its Compensation Committee) based on performance
objectives established by the Board (or its Compensation Committee), with input
from the Executive, for that particular year. The Board (or its Compensation
Committee) will generally establish, with input from the Executive, the
performance objectives for each year within thirty days after the Company’s
budget for the year is approved. 
Performance objectives for the Executive shall be based solely on
objective Company performance criteria, and shall at all times exclude from its
determination extraordinary charges that are approved by the Board, including,
without limit, charges such as gain or loss from disposal of principal
operating location or investments, one-time accounting adjustments or changes
in accounting principles, goodwill impairment, restructuring costs, other
one-time charges and such other items as may be determined by the Board (the “Extraordinary Charges”). 
The actual Incentive Payment earned for each year shall be paid no later
than March 15 of the following year, but may be paid earlier in the
Company’s discretion. Except as provided in Section 5.6, the payment of
any Incentive Payment for a calendar year is subject to the Executive’s
continued employment through the last day of such calendar year. For the 2008
calendar year, the Executive’s Incentive Payment shall become earned based on
the performance objectives and terms set forth in Exhibit A
(attached and incorporated herein), provided that the Executive shall be
entitled to receive a minimum bonus for 2008 equal to $350,000 if the Company
achieves positive earnings per share for the 2008 calendar year.  The Company agrees that the amount of the
Executive’s Target Bonus shall not be reduced during the Employment Term.

 

2.3           Equity
Compensation.  On the Effective Date,
the Executive shall be granted a long-term incentive compensation award in the
form of 450,000 restricted stock units (the “RSUs”),
500,000 stock options (the “Options”) and
250,000 stock appreciation rights (the “SARs”).  The RSUs, Options and SARs shall be granted
in accordance with the terms of the written award agreements evidencing such
awards that have been provided to the Executive in connection with his entering
into this Agreement.

 

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2.3.1        RSUs.     Each RSU shall represent the right to
receive the value of one share of the Company’s common stock.  Except as set forth herein, subject to the
Executive’s continued employment on each vesting date, the RSUs shall become
vested in four substantially equal annual installments on each of the first
four annual anniversaries of the date hereof. The RSUs may also become vested
in connection with the Executive’s termination of employment or non-renewal of
this Agreement pursuant to the provisions of Section 5.6 or 5.7 below.

 

2.3.2        Options
and SARs.  Each Option and SAR shall
have a per share exercise price or base price (the applicable exercise price
and base price are each referred to as the “Exercise
Price”) equal to the fair market value of a share of the Company’s
common stock on the grant date.  The
Options and SARs shall have a maximum term of 10 years, subject to earlier
termination as determined under the terms of the written agreements evidencing
the Options and SARs.  Except as set
forth herein, subject to the Executive’s continued employment, the Options and
SARs shall become 100% vested on February 18, 2012.  The Options and SARs will vest earlier in the
following circumstances: (i) 50% of the total number of Options and 50% of
the total number of SARs shall become vested on March 1, 2010 if (A) the
closing price per share of the Company’s common stock on the principal exchange
on which such stock is traded on any 20 out of 30 consecutive trading days in
the period beginning October 1, 2009 and ending March 1, 2010 exceeds
150% of the Exercise Price (as appropriately adjusted for stock splits and
similar transactions) and (B) the Company’s consolidated net income for
the 2009 calendar year as determined under generally accepted accounting
principles (“GAAP”) equals or exceeds 5% of the
Company’s consolidated net sales revenue for such period determined under GAAP;
and (ii) 25% of the total number of Options and 25% of the total number of
SARs shall become vested on March 1, 2011 if (X) the closing price
per share of the Company’s common stock on the principal exchange on which such
stock is traded on any 20 out of 30 consecutive trading days in the period
beginning October 1, 2010 and ending March 1, 2011 exceeds 160% of
the Exercise Price (as appropriately adjusted for stock splits and similar
transactions) and (Y) the Company’s consolidated net income for the 2010
calendar year as determined under GAAP equals or exceeds 7.5% of the Company’s
consolidated net sales revenue for such period determined under GAAP.  In all cases in which the Company’s
consolidated net income and consolidated net sales revenue is a vesting
measurement, Extraordinary Charges shall be excluded.  The Options and SARs may also become vested
in connection with the Executive’s termination of employment or non-renewal of
this Agreement pursuant to the provisions of Section 5.6 or Section 5.7
below.

 

3.             Additional
Benefits.

 

3.1           Expenses.  During the Employment Term, the Company shall
reimburse the Executive (upon the submission by him of reasonably itemized
accounts therefor), or advance to the Executive, where appropriate, an amount
for such costs and expenses as the Executive shall reasonably incur (including,
among other things, business travel and business entertainment expenses) in
connection with the performance by him of his duties hereunder in accordance
with the Company’s policy with respect thereto as in effect from time to time
during the Employment Term.  In addition,
during the Employment Term the Executive shall be entitled to, and the Company
shall provide, a non-accountable pre-tax annual car allowance of $13,260
(subject to annual review and any increases as may be approved by the
Compensation Committee), paid bi-weekly.

 

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3.2           Housing;
Relocation.

 

3.2.1        Temporary Housing.  To facilitate its needs to secure the
services of the Executive in an expedited matter, as necessary, the Company
shall secure for him fully-furnished temporary executive housing, located in
close proximity to the Company’s headquarters. 
The executive housing contemplated in this paragraph shall be provided
to the Executive temporarily for a period of up to 90 days after the Effective
Date, until a more suitable long-term housing shall be located, at which point
the provisions of Section 3.2.2 shall apply.

 

3.2.2        Housing Costs.  As soon as reasonably practicable following
the Effective Date and continuing for a period of at least 12 months (or until
such later time as may be established by the Compensation Committee) during the
Employment Term following the date the Executive moves into such housing, the
Company shall reimburse the Executive, or advance to the Executive, where
appropriate, up to a maximum of $6,000 per month for such out-of-pocket housing
costs and expenses as the Executive shall reasonably incur.  Any personal income taxes the Executive may
incur on his receipt of payment for such housing costs and expenses shall be
considered part of the Executive’s reasonable housing costs and expenses,
however the $6,000 monthly cap is inclusive of any such tax reimbursement
expenses.

 

3.2.3        Moving Expenses.  During the Employment Term, the Company shall
pay, or shall reimburse the Executive, for reasonable costs associated with
relocating his residence to the area in which the Company maintains the offices
in which Executive will perform his services. 
For these purposes, reasonable relocation costs shall include the costs
associated with his relocation, which shall include reimbursement or payment of
costs associated with moving Executive’s and his family’s personal property,
travel costs incurred with respect to finding and moving to a new residence for
Executive and his family and other similar costs.

 

3.3           General Fringe
Benefits.  During the Employment
Term, the Executive shall be entitled to, and the Company shall provide, such
fringe benefits of the Company, including, but not limited to, participation in
employee health and benefit plans and the Company’s purchase of health and/or
disability insurance, which the Company may from time to time generally offer
its senior officers and for which the Executive is eligible.  Notwithstanding the preceding sentence, such
fringe benefits may be adjusted from time to time by the Company, as long as
such adjustment is generally consistent for all senior officers.

 

3.4           Vacation
and Other Leave.  During the
Employment Term, the Executive’s annual rate of vacation accrual shall be four (4) weeks
per year, provided that such vacation shall accrue and be subject to the
Company’s vacation policies in effect from time to time.  The Executive shall also be entitled to all
other holiday and leave pay generally available to other senior officers of the
Company.

 

3.5           Other
Benefits.  Nothing in this Agreement
shall prevent the Company from, or obligate the Company to, increase
compensation (including without limitation any Base Salary or Incentive
Payment), any other payments or any other benefits to the Executive, or from
deciding to provide the Executive with any benefits in addition to those
provided for herein.  Subject to the
foregoing, the Board (or its Compensation Committee) will review the Executive’s
compensation annually.

 

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4.             Term
of Employment.  The Executive’s
employment hereunder shall commence on the Effective Date and shall continue
through the second annual anniversary of the date hereof (the “Initial Term”); provided that the parties may extend the
employment as described herein.  The
Executive’s employment shall terminate at the end of the Initial Term (or any
subsequent term, as determined hereunder) unless the parties mutually agree in
writing at least sixty (60) days prior to the end of such term to extend his
employment, whereupon the Executive’s employment shall be extended for the
longer of one year or such term as is then mutually agreed (which shall be no
less than one year).  The employment
under this Agreement shall be subject to earlier termination under Section 5.

 

The period of the Executive’s employment, as
it may be extended, is referred to herein as the “Employment
Term.”  The end of the Initial
Term or any subsequent term is referred to herein as the “Expiration
Date.”

 

5.             Termination.

 

5.1           Death.  The Employment Term shall terminate
automatically in the event of the Executive’s death during the Employment Term
and upon such termination, the obligations, duties and liabilities of the
Company to the Executive shall solely be as set forth in Section 5.6.1
hereof.

 

5.2           Disability.  In the event of, but only in the event of,
the Executive’s clear inability to perform his duties by reason of his becoming
Disabled (as defined herein) during the Employment Term, the Company shall have
the option (but not the obligation) to terminate the Employment Term, by giving
written notice of such termination to the Executive, which notice shall specify
the effective date of termination.  Upon
such termination, the Executive shall have no further duties hereunder (except
as set forth in Section 7 hereof) and the obligations, duties and
liabilities of the Company to the Executive shall solely be as set forth in Section 5.6.1
hereof.  For purposes of this Agreement,
the term “Disabled” or “Disability”
shall mean that the Executive is either (a) unable to engage in any
substantial gainful activity by reason of any medically determinable physical
or mental impairment that can be expected to result in death or can be expected
to last for a continuous period of not less than 12 months, or (b) by
reason of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months, receiving income replacement benefits for a period
of not less than 3 months under an accident and health plan covering employees
of the Company.

 

5.3           By the Company
for Cause.  The Company may, at its
option, terminate the Employment Term, for any of the following reasons (each a
“Cause”), upon five (5) business
days’ prior written notice to the Executive that a meeting of the Board will be
held to consider such action, at which meeting the Executive and his counsel
shall be afforded an opportunity to be heard (a “Hearing”).
Upon such termination, the Executive shall have no further duties hereunder
(except as set forth in Section 7 hereof) and the obligations, duties and
liabilities of the Company to the Executive shall solely be as set forth in Section 5.6.2
hereof:

 

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5.3.1        Violation
of Law.  If the Executive is
convicted of a felony under federal or state law, the Board may terminate the
Employment Term by written notice to the Executive, which termination shall be
effective, if not rescinded, immediately after the date of the Hearing.

 

5.3.2        Failure to Perform.  If, without the prior express written consent
of the Board (other than the Executive), the Executive fails to perform, in any
material respect, any of his material duties or obligations under Sections 1 or
7 (other than as a result of being Disabled as to which Section 5.2 hereof
could apply), and if such failure continues for more than thirty (30) days
after a Hearing is held in respect thereof, then the Board may terminate the
Employment Term immediately after said thirty (30) day period; provided,
however, that if such failure is incapable of being cured, in the good
faith determination of the Board, the Employment Term shall terminate
immediately after the date of the Hearing.

 

The parties hereto acknowledge and agree that
matters of the business judgment of the Executive or the economic performance
of the Company or any segment thereof shall not be factors in determining
Cause, except to the extent that they involve gross negligence or willful
misconduct.

 

5.3.3        Other
Actions.  If, without the prior
express written consent of the Board, the Executive takes actions or omits to
take actions in connection with his duties and/or responsibilities hereunder that
constitute willful misconduct or gross negligence and such actions or omissions
adversely and materially affect the business, reputation, or financial or other
condition of the Company, the Board may terminate the Employment Term by
written notice to the Executive, which termination shall be effective
immediately after the date of the Hearing.

 

The parties hereto acknowledge and agree that
matters of the business judgment of the Executive or the economic performance
of the Company or any segment thereof shall not be factors in determining
Cause, except to the extent that they involve gross negligence or willful
misconduct.

 

5.4           By
the Company Without Cause.  In
addition (and without prejudice) to its right to terminate the Employment Term
under the provisions of Section 5.3 hereof, the Company may, at its
option, terminate the Employment Term for any reason whatsoever by giving
written notice of termination to the Executive from the Board, specifying the
date of termination. Upon such termination, the Executive shall have no further
duties hereunder (except as set forth in Section 7 hereof) and the
obligations, duties and liabilities of the Company to the Executive shall
solely be as set forth in Section 5.6.3 hereof.

 

5.5           By the Executive
For “Substantial Breach.”  As used
herein, “Substantial Breach” shall mean the
Company’s material breach of this Agreement, including but not limited to (i) the
failure of the Company to employ the Executive in his current or a
substantially similar position, without regard to title, such that his duties
and responsibilities are materially diminished without his consent; (ii) a
material reduction in the Executive’s base salary rate without his consent; or (iii) a
relocation of the Executive’s primary place of employment more than 35 miles
from his current site of employment without his consent; provided, however, if
any of these conditions occur, the Executive is required to provide notice of
any such condition to the Board within 60 days of the initial occurrence of the
condition, and the Company will then have 

 

6

 

30 days to cure and/or remedy the condition, prior to the existence of
such condition being deemed to be “Substantial Breach;” and provided, further,
a termination based on a Substantial Breach must occur within two years
following the initial existence of one or more of the conditions set forth
above without the Executive’s consent. 
Upon such termination, the Executive shall have no further duties
hereunder (except as set forth in Section 7 hereof) and the obligations,
duties and liabilities of the Company to the Executive shall solely be as set
forth in section 5.6.3 hereof.

 

5.6           Payments Upon
Termination.  In the event that the
Executive’s employment pursuant to this Agreement is terminated before the
Employment Term expires as a result of death or Disability of the Executive, or
by the Company with or without Cause, or by the Executive for Substantial
Breach, the Company shall pay to the Executive the following amounts, as and if
applicable, and the Company shall thereupon have no liability or other
obligation of any kind or character under or in connection with this Agreement
(the effective date of any such termination is hereinafter referred to as the “Termination Date”):

 

5.6.1        Death
or Disability.  In the event that the
Employment Term is terminated pursuant to Section 5.1 or Section 5.2
hereof, the Company shall pay to the Executive or to the Executive’s executor,
administrator, beneficiary or personal representative (the “Representative”), as the case may be, the following:

 

(i)  the Base Salary, accrued vacation
and all other amounts due and owing through the Termination Date, plus any
Incentive Payment for a year prior to the year in which the Termination Date
occurs that  has been earned under Section 2.2
but that remains unpaid on the Termination Date (the “Accrued
Obligations”), each payable in accordance with the Company’s regular
payroll practices; and

 

(ii) a lump-sum payment equal to one
times (X) Base Salary plus (Y) the Executive’s Target Bonus for the
year in which his death or Disability occurs; provided that, amounts payable
under this Section 5.6.1(ii) shall be reduced by any payment actually
received by the Executive from either a Company-sponsored long-term disability
or life insurance plan, as the case may be; and

 

(iii) accelerated vesting of a pro-rata
portion of the RSUs, Options and SARs and all other equity awards granted on or
after the Effective Date (with the pro-rata portion based on the portion of
days after the grant date and prior to the date the award would otherwise be
100% fully vested (without regard to performance milestones) that the Executive
was employed by the Company), provided, however, that the Executive shall in
all cases vest in that number of RSUs, Options and SARs that results in at
least 50% of the total number of each of the RSUs, Options and SARs being
vested on the Termination Date.

 

In addition, the Executive or his
Representative, as the case may be, shall, to the extent allowable under the
law and the provisions of the applicable plan, continue to receive during the
twelve (12) month period following the Termination Date or until such time as
the Executive obtains subsequent full-time employment, all benefits under the
Company’s medical, dental, hospitalization and life insurance plans to which he
was entitled at the Termination Date, with 

 

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the Company paying the same percentage of the premium payments paid at
the Termination Date while the benefits are provided (collectively, the “Benefits”).

 

5.6.2        By
the Company for Cause.  In the event
that the Employment Term is terminated pursuant to Section 5.3 hereof, the
Company shall pay to the Executive the Accrued Obligations in accordance with
the Company’s regular payroll practices.

 

5.6.3        By
the Company without Cause or By the Executive for Substantial Breach.  In the event that the Employment Term is
terminated pursuant to Section 5.4 or Section 5.5 hereof, the Company
shall pay to the Executive (i) the Accrued Obligations, payable in
accordance with the Company’s regular payroll practices; (ii) a lump-sump
payment payable within 10 days after the Termination Date in an amount equal to
(A) the greater of (1) one times Base Salary or (2) the Base
Salary the Executive would have earned through the then current Expiration Date
plus (B) the Executive’s Target Bonus for the year in which the
Termination Date occurs, multiplied by the greater of one or the number of
years left during the then current term; (iii) accelerated vesting of a
pro-rata portion of the RSUs, Options, SARs and all other equity awards granted
on or after the Effective Date (with the pro-rata portion based on the portion
of days after the grant date and prior to the date the award would otherwise be
100% fully vested (without regard to performance milestones) that the Executive
was employed by the Company), provided, however, that the
Executive shall in all cases vest in that number of RSUs, Options and SARs that
results in at least 50% of the total number of each of the RSUs, Options and
SARs being vested on the Termination Date; and (iv) the costs and expenses
of outplacement related services which the Executive shall reasonably incur
during the two years following the Termination Date in an amount not to exceed
$45,000 (with payment by the Company to occur within 30 days after the
submission by him of reasonably itemized invoices therefor).

 

In addition, the Executive shall continue to receive, to the extent
allowable by law, the Benefits during the twenty-four (24) month period
following the Termination Date, or until such time as Executive obtains
subsequent full-time employment,  To the
extent such Benefits under COBRA cannot be provided after a period of eighteen
(18) months, the Company will reimburse the Executive an amount equivalent to
the cost of such Benefits under COBRA to the Executive for the remaining six (6) month
period (or until such time as Executive obtains subsequent full-time employment,
if shorter), with such reimbursement determined to ensure that the Executive
enjoys the same tax free benefit he would have received had he remained
employed.

 

5.6.4        Effect of Change
of Control.

 

(a)           Concurrently with
entering into this Agreement, the Executive has executed and become a party to
the Company’s Senior Executive Change in Control Agreement, attached hereto as Exhibit B
(attached and incorporated herein), which provides for benefits payable upon
certain terminations of employment in connection with a change in control of
the Company.  Any severance or other
benefits payable under Section 5.6 or Section 5.7 of this Agreement
shall reduce the benefits payable under the Senior Executive Change in Control
Agreement (or any similar agreement, plan, program or other arrangement
covering the Executive from time to time), with such reduction in benefits
occurring pursuant to the provisions of section 4.2(e) of the Senior
Executive Change in Control Agreement as in effect on the date hereof.

 

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(b)                                 Notwithstanding
anything to the contrary contained in the Senior Executive Change in Control
Agreement, the Company and the Executive agree as follows: (i) the Company
shall not terminate the Senior Executive Change in Control Agreement during the
Employment Term, (ii) for purposes of Section 4.3(b) of the
Senior Executive Change in Control Agreement, (A) during 2008, the
Executive’s Target Bonus shall be used to determine the value of the payment
provided thereunder instead of the average of the annual bonuses paid for the
three (3) full fiscal years immediately preceding the date of the
Executive’s termination of employment and (B) during 2009 and thereafter,
the value of the payment thereunder shall be based on the average value of the
annual bonuses paid by the Company to the Executive for the three (3) full
fiscal years immediately preceding the date of the Executive’s termination of
employment (or for such lesser number of full fiscal years that the Executive
was employed by the Company) and (iii) the mandatory retirement age with
respect to the Executive shall in no event be less than age 65.

 

5.7                                 Non-Renewal By
the Employer on Expiration Date.  If the Employment Term ends on the Expiration
Date (as it may be extended from time to time) because of the Company’s failure
to offer to renew the Agreement on terms that are no less favorable than those
then in effect under the Agreement, (a) the Company shall pay to the
Executive the Accrued Obligations, payable in accordance with the Company’s
regular payroll practices; (b) a lump-sum payment payable within 10 days
after the Termination Date equal to one times (X) Base Salary plus (Y) the
Executive’s Target Bonus for the year in which the Termination Date occurs; (c) the
Executive shall be entitled to accelerated vesting of a pro-rata portion of the
RSUs, Options, SARs and all other equity awards granted on or after the
Effective Date (with the pro-rata portion based on the portion of days after
the grant date and prior to the date the award would otherwise be 100% fully
vested (without regard to performance milestones)  that the Executive was employed by the
Company), provided, however, that the Executive shall in all
cases vest in that number of RSUs, Options and SARs that results in at least
50% of the total number of each of the RSUs, Options and SARs being vested on
the Expiration Date.

 

5.8                                 Release;
Exclusive Remedy.  This Section 5.8
shall apply notwithstanding anything else contained in this Agreement or any
stock option, restricted stock unit, stock appreciation right or other
equity-based award agreement to the contrary. 
As a condition precedent to any Company obligation to the Executive
pursuant to Sections 5.6.3 or 5.7 or any obligation to accelerate vesting of
any equity-based award in connection with the termination of the Executive’s
employment, the Executive shall, upon or promptly following his last day of
employment with the Company, provide the Company with a valid, executed general
release agreement in substantially the form attached as Exhibit C (attached
and incorporated herein), and such release agreement shall have not been
revoked by the Executive pursuant to any revocation rights afforded by
applicable law.  The Company shall have
no obligation to make any payment to the Executive pursuant to Sections 5.6.3
or 5.7 (or otherwise accelerate the vesting of any equity-based award in the
circumstances as otherwise contemplated by the applicable award agreement)
unless and until the release agreement contemplated by this Section 5.8
becomes irrevocable by the Executive in accordance with all applicable laws, rules and
regulations.

 

 

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6.                                       Arbitration.

 

6.1                                 In General.  All claims or controversies arising out of or
in connection with this Agreement, that the Company may have against the
Executive, or that the Executive may have against the Company or against its
officers, directors, employees or agents acting in their capacity as such,
shall be resolved through arbitration as provided in this Section 6.  The decision of an arbitrator on any issue,
dispute, claim or controversy submitted for arbitration shall be final and
binding upon the Company and the Executive, and that judgment may be entered on
the award of the arbitrator in any court having proper jurisdiction.

 

6.2                                 Applicable Rules and
Procedures.  Except as
otherwise provided in this procedure or by mutual agreement of the parties, any
arbitration shall be administered: (1) in accordance with the then-current
Model Employment Arbitration Procedures of the American Arbitration Association
(“AAA”) before an arbitrator who is
licensed to practice law in the state in which the arbitration is convened; or (2) if
locally available, the Judicial Arbitration & Mediation Services, Inc.
(“JAMS”), in accordance with the JAMS
procedures then in effect.  The party who
did not initiate the claim can designate between JAMS or AAA (the “Tribunal”).  The
arbitration shall be held in the city in which the Executive is or was last
employed by the Company in the nearest Tribunal office or at a mutually
agreeable location.  Pre-hearing and
post-hearing procedures may be held by telephone or in person as the arbitrator
deems necessary.  The arbitrator shall be
selected as follows: if the parties cannot agree on an arbitrator, the Tribunal
(JAMS or AAA) shall then provide the names of nine (9) available
arbitrators experienced in business employment matters along with their resumes
and fee schedules.  Each party may strike
all names on the list it deems unacceptable. 
If more than one common name remains on the list of all parties, the
parties shall strike names alternately until only one remains.  The party who did not initiate the claim shall
strike first.  If no common name remains
on the lists of the parties, the Tribunal shall furnish an additional list or
lists until an arbitrator is selected. 
The arbitrator shall interpret this Agreement, any applicable Company
policy or rules and regulations, any applicable substantive law (and the
law of remedies, if applicable) of the state in which the claim arose, or
applicable federal law.  In reaching his
or her decision, the arbitrator shall have no authority to change or modify any
lawful Company policy, rule or regulation, or this Agreement.  The arbitrator, and not any federal, state or
local court or agency, shall have exclusive and broad authority to resolve any
dispute relating to the interpretation, applicability, enforceability or
formation of this Agreement, including but not limited to, any claim that all
or any part of this Agreement is voidable. 
To the extent required by applicable law, the arbitration shall be
conducted pursuant to California Code of Civil Procedure Sections 1282 et. seq.  Notwithstanding the foregoing provisions, the
Company and the Executive each may apply to any court of competent jurisdiction
for a temporary restraining order, preliminary injunction, or other interim or
conservatory relief, to ensure that any relief sought in arbitration is not
rendered ineffectual through interim harm and as necessary to enforce the
provisions of this Agreement, without breach of this arbitration agreement and
without abridgement of the powers of the arbitrator.

 

7.                                       Restrictive
Covenants.

 

7.1                                 Nondisclosure,
Proprietary Inventions, and Assignment Agreement.  Concurrently with entering into this
Agreement, the Executive has executed and become a party to the Company’s form
non-disclosure agreement, which will be furnished to the Executive prior to the
Effective Date.

 

10

 

7.2                                 Trade Secrets.  In the course of performing his duties for
the Company, the Executive will receive, and acknowledges that he has received
or will receive, confidential information, including without limitation,
information not available to competitors relating to the Company’s existing and
contemplated financial plans, products, business plans, operating plans,
research and development information, and customer information, all of which is
hereinafter referred to as “Trade Secrets.”  The Executive agrees that he will not, either
during his employment or subsequent to the termination of his employment with
the Company, directly or indirectly disclose, publish or otherwise divulge any
Trade Secret of the Company or any of its affiliates to anyone outside the
Company, or use such information in any manner which would adversely affect the
business or business prospects of the Company, without prior written
authorization from the Company to do so. 
The Executive further agrees that if, at the time of the termination of
his employment with the Company, he is in possession of any documents or other
written or electronic materials constituting, containing or reflecting Trade
Secrets, the Executive will return and surrender all such documents and materials
to the Company upon leaving its employ. 
The restrictions and protection provided for in this Section 7.2
shall be in addition to any protection afforded to Trade Secrets by law or
equity and in addition to any protection afforded to Trade Secrets by any other
agreement between the Executive and the Company.

 

7.3                                 Non-compete
Covenant.  To the
extent permissible under applicable law, the Executive hereby agrees that he
shall not, during the Employment Term and for a period of twelve (12) months
after the Termination Date (as long as he is entitled to and duly receives any
payments due to him pursuant to Section 5.6 or 5.7 hereof), directly or
indirectly engage in any business (whether as owner, manager, operator, lender,
partner, stockholder, licensor, licensee, joint venturer, employee, consultant
or otherwise) in which the Company or any of its subsidiaries, as of the
Termination Date, is engaged as a significant portion of its business (it is
hereby agreed that any business that constitutes at least twenty (20%) percent
of the Company’s prior fiscal year’s revenues shall automatically be deemed “significant”
hereunder) in any geographic area in which the Company or any of its
subsidiaries then is so engaged. 
Notwithstanding the foregoing, the Executive shall be permitted to own
(as a passive investment) not more than two (2%) percent of the economic
interests of a person or entity; provided, however, that said two (2%) percent
limitation shall apply to the aggregate holdings of the Executive and those of
all other persons and entities with whom the Executive has agreed to act for
the purpose of acquiring, holding, voting or disposing of such securities,
except pursuant to a bona fide operating agreement in respect of such person or
entity, such as a stockholders’ agreement or partnership agreement.  In the event of a termination of the
Employment Term as a result of a change in control (as such term is defined in
the Company’s Senior Executive Change in Control Agreement or any similar
agreement, plan, program or other arrangement covering the Executive from time
to time), the non-compete covenant contained in this paragraph shall not apply
to the Executive.

 

7.4                                 Non-Solicitation
and Disparagement.  For a
period of one year following the termination of the Executive’s employment with
the Company, the Executive shall not, directly or indirectly through, aid,
assistance or counsel, on the Executive’s own behalf or on behalf of another
person or entity (i) contact, solicit or offer to hire any person who was,
within a period of six months prior to the termination of the Executive’s
employment with the Company, employed by the Company or its affiliates, or (ii) by
any means issue or communicate any private or public 

 

11

 

statement that may be critical or disparaging of any member of the
Company or its affiliates, or any of their respective products, services,
officers, directors or employees.

 

7.5                                 Acknowledgements.  The Executive represents that he (i) is
familiar with the foregoing covenants, (ii) is fully aware of his
obligations hereunder, (iii) agrees to the reasonableness of the length of
time, scope and geographic coverage of the foregoing covenants, and (iv) agrees
that such covenants are necessary to protect the Company’s confidential and
proprietary information, good will, stable workforce, and customer relations.

 

7.6                                 Specific
Performance.  The
Executive agrees that a breach of any of the covenants in this Section 7
would cause immediate and irreparable harm to the Company that would be
difficult or impossible to measure, and that damages to the Company for any
such injury would therefore be an inadequate remedy for any such breach.  Accordingly, the Executive agrees that if he
breaches any term of this Section 7, the Company shall be entitled, in
addition to and without limitation upon all other remedies the Company may have
under this Agreement, at law or otherwise, to obtain injunctive or other
appropriate equitable relief to restrain any such breach upon a showing by the
Company of the legal requirements to obtain such relief.

 

7.7                                 Survival of
Provisions of Section 7. It is understood and
agreed that the provisions of this Section 7 shall survive the date of
termination or expiration of the Employment Term.

 

8.                                       Miscellaneous
Provisions.

 

8.1                                 Withholding.  All payments required to be made to the
Executive by the Company hereunder shall be subject to any applicable
withholding under applicable Federal, state and local income tax laws. Any such
withholding shall be based upon the most recent Form W-4 filed by the
Executive with the Company, and the Executive may from time to time revise such
filing.

 

8.2                                 Severability. If in any
jurisdiction any term or provision hereof is adjudicated to be invalid or
unenforceable, (i) the remaining terms and provisions hereof shall be
unimpaired, (ii) any such invalidity or unenforceability in any
jurisdiction shall not invalidate, limit or render unenforceable such provision
in any other jurisdiction and (iii) the invalid or unenforceable term or
provision shall, for purposes of such jurisdiction, be deemed replaced by a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision.

 

8.3                                 Indemnification.  The Company shall indemnify the Executive to
the fullest extent permitted by applicable law for all amounts (including
without limitation, judgments, fines, settlement payments, costs, expenses and
attorneys’ fees and expenses) reasonably incurred or paid by the Executive in
connection with any claim, action, suit, investigation or proceeding arising
out of or relating to performance by the Executive of services for, or actions
of the Executive as (or the Executive’s serving in the position of) a director,
officer or employee of, the Company, any subsidiary or affiliate of the Company
or any enterprise at the Company’s request, and shall advance to the Executive
(subject to the Executive’s undertaking to repay any advances if it is
determined that he is not entitled to them) the reasonable costs, including
attorneys fees, of defending any such notion. 
The provisions of this Section 8.3 shall survive the termination of
this Agreement.

 

12

 

8.4                                 Execution in
Counterparts.  This
Agreement may be executed in one or more counterparts, and by each of the
parties hereto in separate counterparts, each of which shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement, and this Agreement shall become effective when one or more
counterparts has been signed by each of the parties hereto and delivered to the
other party hereto.

 

8.5                                 Notices.  For purposes of this Agreement, notices and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or on the date stamped
as received by the U.S. Postal Service for delivery by certified or registered
mail, postage prepaid and addressed: (i) if to the Executive, to his
latest address as reflected on the records of the Company, and (ii) if to
the Company: Power-One, Inc., 740 Calle Plano, Camarillo, California
93012, Attn: Corporate Secretary, or in either case to such other address as
one party may furnish to the other party in writing with specific reference to
this change-of-address provision in this Agreement and the importance of the
notice, except that notice of change of address shall be effective only upon
receipt.

 

8.6                                 Amendment.  No provision of this Agreement may be
modified, amended or discharged in any manner, except by a written instrument
executed by each of the parties hereto.

 

8.7                                 Entire
Agreement.  This
Agreement, along with its Exhibits and the Equity Plan and the Company’s Senior
Executive Change in Control Agreement, constitute the entire agreement of the
parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings of the parties hereto, oral and written,
including without limitation all prior or existing employment agreements or
other agreements by and between the Executive in any capacity and the Company,
including without limitation in his capacity as a director of the Company or as
a consultant to the Board.  Each party
hereto hereby acknowledges and agrees that, other than as contained herein, no
other representations or warranties, oral or written, have been made, expressly
or impliedly, by the other party hereto.

 

8.8                                 Applicable Law.  To the extent not preempted by the laws of
the United States, the laws of the State of Delaware shall be the controlling
law in all matters relating to this Agreement (notwithstanding any Delaware or
other conflict of law provision to the contrary).  Any statutory reference in this Agreement shall
also be deemed to refer to all applicable final rules and final
regulations promulgated under or with respect to the referenced statutory
provision.

 

8.9                                 Headings.  The headings contained herein are for the
sole purpose of convenience of reference, and shall not in any way limit or
affect the meaning or interpretation of any of the terms or provisions of this
Agreement.

 

8.10                           Non-assignability.

 

8.10.1                  By the
Executive.  Neither
this Agreement nor any right, duty, obligation or interest hereunder shall be
assignable or delegable by the Executive without the Company’s prior written
consent; however, that the Executive may designate any of his beneficiaries to
receive (and such beneficiaries shall receive) any compensation, payments or
other benefits payable 

 

13

 

hereunder upon or after his death, or the foregoing may be transferred
by the laws of descent or distribution.

 

8.10.2                  By the Company.  This Agreement and all of the Company’s
rights and obligations hereunder may be assigned or transferred by it through a
merger, consolidation or other business combination, including a change of
control of the Company.  Upon the
occurrence of such a transaction, any such successor company resulting
therefrom shall be deemed to be substituted for all purposes as the Company
hereunder.

 

8.11                           Binding Effect;
Benefits.  This
Agreement shall inure to the benefit of, and be binding upon, the parties
hereto and their respective heirs, legal representatives, successors and permitted
assigns.

 

8.12                           Waiver.  The failure of either of the parties hereto
at any time to enforce any provision of this Agreement shall not be deemed or
construed to be a waiver of any such or any other provision, nor to in any way
affect the validity of this Agreement or any provision hereof or the right of
either of the parties hereto to thereafter enforce each and every provision of
this Agreement. No waiver of any breach of any of the provisions of this
Agreement shall be effective unless set forth in a written instrument executed
by the party against whom or which enforcement of such waiver is sought, and no
waiver of any such breach shall be construed or deemed to be a waiver of any
other or subsequent breach.

 

8.13                           Capacity, etc.  The Executive hereby represents and warrants
to the Company and the Company hereby represents and warrants to the Executive
that: (i) he (or it) has full power, authority and capacity to execute and
deliver this Agreement, and to perform his (or its) obligations hereunder, (ii) said
execution, delivery and performance will not (and with the giving of notice or
lapse of time, or both, would not) result in the breach of any agreement or
other obligation to which he (or it) is a party or is otherwise bound and (iii) this
Agreement is his (or its) valid and binding obligation enforceable in
accordance with its terms.

 

8.14                           Section 409A.

 

8.14.1                  Six-Month Delay.   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” within the meaning of Section 409A
of the Code, the Executive shall not be entitled to any payment or benefit
pursuant to Section 5.6 or Section 5.7 until the earlier of (i) the
date which is six (6) months after his separation from service for any
reason other than death, or (ii) the date of the Executive’s death.  The provisions of this paragraph 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 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 8.14.1
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).

 

14

 

8.14.2                  Provisions
Applicable to the Benefits and Reimbursements.  To the extent that any Benefits (as defined
in Section 5.6) or reimbursements pursuant to Sections 3.1 or 3.2 are
taxable to the Executive, any reimbursement payment due to the Executive shall
be paid to the Executive on or before the last day of the Executive’s taxable
year following the taxable year in which the related expense was incurred.  The Benefits and reimbursements pursuant to
Sections 3.1 and 3.2  are not subject to
liquidation or exchange for another benefit, and the amount of the Benefits and
reimbursements pursuant to Sections 3.1 and 3.2 that the Executive receives in
one taxable year shall not affect the amount of the Benefits or reimbursements
that the Executive receives in any other taxable year.

 

8.15.                        Reimbursement
of Legal Fees.  The Company
shall reimburse the Executive (upon the submission by him of reasonably
itemized accounts therefor) up to $20,000 in the aggregate for the reasonable,
out-of-pocket fees and expenses of his legal counsel incurred in the drafting,
negotiation and preparation of this Agreement. Any such reimbursement will be
paid promptly upon the Company’s receipt of an invoice therefor.

 

 

 

IN WITNESS WHEREOF, this Agreement has been
executed and delivered by the parties hereto as of the date first above
written.

 

	
   

  	
  POWER-ONE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BY:

  	
  /s/ RANDALL H. HOLLIDAY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Randall H. Holliday

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Secretary and General
  Counsel

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
      /s/ RICHARD J. THOMPSON

  	
   

  
	
   

  	
   

  
	
   

  	
  Richard J. Thompson

  	
   

  

 

15

 

Exhibit A

 

Incentive Payment Performance
Objectives and Terms for Richard Thompson Incentive Payments for Calendar 2008

 

Target Incentive Payment: 100% of Base Salary at
100% achievement of performance objectives

 

Upper and Lower Range of Incentive Payment:
150%, 50%

 

Minimum Incentive Payment: $350,000

 

The performance threshold for any Incentive
Payment (including the Minimum Incentive Payment) is positive earnings per
share (“EPS”) for the calendar year.

 

	
  Goals for 2008 Calendar Year

  	
   

  	
  Weight

  	
   

  
	
  Revenue
  Growth (“RG”)

  	
   

  	
  25

  	
  %

  
	
  Operating
  Income (“OI”)

  	
   

  	
  50

  	
  %

  
	
  Net
  Cash Provided by Operating Activities (“CF”)

  	
   

  	
  25

  	
  %

  

 

 

Revenue Growth is measured from 2007 to 2008
audited total Revenues.

 

OI and CF are based upon audited 2008
financials.

 

The full Board, meeting in January, 2009, will
determine whether the goal(s) were “substantially accomplished,” which is
the threshold for paying an Incentive Payment at 100% or greater.

 

The Compensation Committee has the
responsibility to determine the actual Incentive Payment based upon attainment
of the goals, and retains discretion (together with the Board) to adjust for
any unusual matters or Extraordinary Charges (as defined in the Employment
Agreement by and between Power-One, Inc. and Richard J. Thompson of which
this Exhibit A is a part) that may have occurred during 2008.

 

The minimum financial
achievement to earn at each of the three pay points:

 

	
  Goal

  	
   

  	
  50%

  	
   

  	
  100%

  	
   

  	
  150%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  RG (%)

  	
   

  	
  [Confidential]

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OI ($M)

  	
   

  	
  [Confidential]

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CF ($M)

  	
   

  	
  [Confidential]

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Each financial goal’s portion of the Incentive
Payment is calculated individually based upon that goal’s weight.  For example, if RG=[bonus at 50%], OI=[bonus
at 100%] and CF=[bonus at 150%] then the Executive receives the sum of 25% of
50% ($62.5k), 50% of 100% ($250k) and 25% of 150% ($187.5k) for a total
incentive payment of $500,000.  For financial achievement between the minimum, target and upper pay
points, the  Incentive Payment
attributable to each financial goal will be calculated based on linear
interpolation.

 

 

Exhibit B

 

 

 

POWER-ONE, INC.

CHANGE IN CONTROL SEVERANCE AGREEMENT

 

THIS CHANGE IN CONTROL SEVERANCE
AGREEMENT (this “Agreement”) is
made and entered into by and between Power-One, Inc., a Delaware
corporation (hereinafter referred to as the “Company”)
and Richard J. Thompson (hereinafter referred to as the “Executive”).

 

RECITALS

 

A.                                   The Board of
Directors of the Company has approved the Company entering into a severance
agreement with the Executive.

 

B.                                     The Executive
is a key executive of the Company.

 

C.                                     Should the
possibility of a Change in Control of the Company arise, the Board believes it
is imperative that the Company and the Board be able to rely upon the Executive
to continue in his position, and that the Company should be able to receive and
rely upon the Executive’s advice, if requested, as to the best interests of the
Company and its stockholders without concern that the Executive might be
distracted by the personal uncertainties and risks created by the possibility
of a Change in Control.

 

D.                                    Should the
possibility of a Change in Control arise, in addition to his regular duties,
the Executive may be called upon to assist in the assessment of such possible
Change in Control, advise management and the Board as to whether such Change in
Control would be in the best interests of the Company and its stockholders, and
to take such other actions as the Board might determine to be appropriate.

 

E.                                      This Agreement
provides the benefits the Executive will be entitled to receive upon certain
terminations of employment in connection with Change in Control from and after
the Effective Date and supersedes and negates any and all previous agreements
with respect to such benefits, including, without limitation, any previous
Change in Control Severance Agreement by and between the Executive and the
Company (the “Prior Change in Control Agreement”).

 

NOW THEREFORE, to help assure the Company that it will
have the continued dedication of the Executive and the availability of his
advice and counsel notwithstanding the possibility, threat, or occurrence of a
Change in Control of the Company, and to induce the Executive to remain in the
employ of the Company in the face of these circumstances and for other good and
valuable consideration, the Company and the Executive agree as follows:

 

Article 1.                                            Term

 

This Agreement shall be effective as of February 18,
2008 (the “Effective Date”).  This Agreement will continue in effect
through the first anniversary of the Effective Date.  However, 

 

1

 

at the end of such one (1) year period and, if
extended, at the end of each additional year thereafter, the term of this
Agreement shall be extended automatically for one (1) additional year,
unless the Committee delivers written notice at least three (3) months
prior to the end of such term (or extended term, as the case may be) to the
Executive that this Agreement will not be extended, and if such notice is
timely given this Agreement will terminate at the end of the term then in
progress.

 

Notwithstanding the foregoing, in the event a Change
in Control occurs during the original or any extended term of this Agreement,
this Agreement will remain in effect for the longer of:  (i) twenty-four (24) months beyond the
month in which such Change in Control occurred; or (ii) until all
obligations of the Company hereunder have been fulfilled, and until all
benefits required hereunder have been paid to the Executive.  For purposes of clarity, subject to Section 4.1,
benefits shall be payable to the Executive under this Agreement only with
respect to a single Change in Control of the Company.  Accordingly, no Change in Control after the
first Change in Control shall be considered for purposes of this Agreement.

 

Article 2.                                            ERISA

 

This Agreement is intended as part of a severance
program of the Company that constitutes (i) a pension plan within the
meaning of Section 3(2) of ERISA, and (ii) an unfunded pension
plan maintained by the Company for a select group of management or highly
compensated employees within the meaning of Department of Labor Regulation
2520.104-23 promulgated under ERISA, and Sections 201, 301, and 401 of ERISA.

 

Article 3.                                            Definitions

 

Whenever used in this Agreement, the following terms
shall have the meanings set forth below and, when the meaning is intended, the
initial letter of the word is capitalized:

 

(a)                                  “Accrued Obligations”
means (i) any Base Salary that had accrued but had not been paid
(including any accrued and unpaid vacation time) prior to the Severance Date,
and (ii) any bonus earned as of the Severance Date with respect to the
fiscal year preceding the year in which the Severance Date occurs (if the
Executive was employed by the Company on the last day of that fiscal year) that
had not previously been paid.

 

(b)                                 “Agreement”
means this Change in Control Severance Agreement.

 

(c)                                  “Base Salary”
means the salary of record paid to the Executive by the Company as annual
salary (whether or not deferred), but excludes amounts received under incentive
or other bonus plans.

 

(d)                                 “Beneficial Owner”
and “Beneficial Ownership” shall have the
meaning ascribed to such terms in Rule 13d-3 of the General Rules and
Regulations under the Exchange Act.

 

(e)                                  “Beneficiary”
means the persons or entities designated or deemed designated by the Executive
pursuant to Section 11.2.

 

2

 

(f)                                    “Board” means
the Board of Directors of the Company.

 

(g)                                 “Cause” means,
as reasonably determined by a majority of the Continuing Directors (as defined
in Section 3(h)(ii) below) then in office (excluding the Executive,
if he is then a Continuing Director) based on the information then known to
them, the occurrence of either or both of the following:

 

(i)                                     the Executive’s conviction for committing
an act of fraud, embezzlement, theft, or other act constituting a felony (other
than traffic related offenses or as a result of vicarious liability); or

 

(ii)                                  the willful engaging by the Executive in
misconduct that is significantly injurious to the Company.  However, no act or failure to act on the
Executive’s part shall be deemed to be “willful” if the
Executive reasonably believed in good faith that such acts or omissions were in
the best interests of the Company.

 

If
there are no Continuing Directors then in office, the determination of Cause
shall be made by a majority of the independent directors (as determined under
the listing requirements of the Nasdaq Stock Market) or, if there are no
independent directors then in office, by the full Board.

 

(h)                                 “Change in Control”
means any of the following:

 

(i)                                     The acquisition by any individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act (a “Person”)) of
Beneficial Ownership of twenty percent (20%) or more of either (1) the
then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (2) the combined
voting power of the then-outstanding voting securities of the Company entitled
to vote generally in the election of directors (the “Outstanding
Company Voting Securities”); provided, however, that,
for purposes of this clause (i), the following acquisitions shall not
constitute a Change in Control: (A) any acquisition directly from the
Company, (B) any acquisition by the Company, (C) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any affiliate of the Company or a successor, and (D) any
acquisition by any entity pursuant to a transaction that complies with clauses
(1), (2) and (3) of Section 3(h)(iii) below; further
provided , that, creditors of the Company who become stockholders of the
Company in connection with any bankruptcy of the Company under the laws of the
United States shall not, by virtue of such bankruptcy, be deemed a “group” or a
single Person for the purposes of this clause (i) (provided that
any one of such creditors may trigger a Change in Control pursuant to this
clause (i) if such creditor’s ownership of Company securities equals or
exceeds the foregoing threshold);

 

3

 

(ii)                                  On any day after the Effective Date (the “Measurement Date”) Continuing Directors cease for any reason
to constitute either:  (A) if the
Company does not have a Parent, a majority of the Board; or (B) if the
Company has a Parent, a majority of the Board of Directors of the Controlling
Parent.  A director is a “Continuing
Director” if he or she either:

 

(1)                                  was a member of the Board on the
applicable Initial Date (an “Initial Director”);
or

 

(2)                                  was elected to the Board (or the Board of
Directors of the Controlling Parent, as applicable), or was nominated for
election by the Company’s or the Controlling Parent’s stockholders, by a vote
of at least two-thirds (2/3) of the Initial Directors then in office.

 

A
member of the Board (or Board of Directors of the Controlling Parent, as
applicable) who was not a director on the applicable Initial Date shall be
deemed to be an Initial Director for purposes of clause (2) above if his
or her election, or nomination for election by the Company’s or the Controlling
Parent’s stockholders, was approved by a vote of at least two-thirds (2/3) of
the Initial Directors (including directors elected after the applicable Initial
Date who are deemed to be Initial Directors by application of this provision)
then in office; provided that such member of the Board shall not be
deemed to be an Initial Director if his or her initial assumption of office
occurs as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board.

 

“Initial Date” means the later of (1) the Effective Date
or (2) the date that is two (2) years before the Measurement Date.

 

(iii)                               Consummation of a reorganization, merger,
statutory share exchange or consolidation or similar corporate transaction
involving the Company or any of its subsidiaries, a sale or other disposition
of all or substantially all of the assets of the Company, or the acquisition of
assets or stock of another entity by the Company or any of its subsidiaries
(each, a “Business Combination”), in each case
unless, following such Business Combination, (1) all or substantially all
of the individuals and entities that were the Beneficial Owners of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities
immediately prior to such Business Combination Beneficially Own, directly or
indirectly, more than sixty percent (60%) of the then-outstanding shares of
common stock and the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the entity resulting from such Business Combination (including,
without limitation, an entity that, as a result of such transaction, is a
Parent of the 

 

4

 

Company or the
successor of the Company) in substantially the same proportions as their
ownership immediately prior to such Business Combination of the Outstanding
Company Common Stock and the Outstanding Company Voting Securities, as the case
may be, (2) no Person (excluding any entity resulting from such Business
Combination or a Parent of the Company or any successor of the Company or any
employee benefit plan (or related trust) of the Company or such entity
resulting from such Business Combination or a Parent of the Company or the
successor entity) Beneficially Owns, directly or indirectly, twenty percent
(20%) or more of, respectively, the then-outstanding shares of common stock of
the entity resulting from such Business Combination or the combined voting
power of the then-outstanding voting securities of such entity, except to the
extent that the ownership in excess of twenty percent (20%) existed prior to
the Business Combination, and (3) a Change in Control is not triggered
pursuant to clause (ii) above with respect to the Company (including any
successor entity) or any Parent of the Company (or the successor entity).

 

Notwithstanding
the foregoing, in no event shall a transaction or other event that occurred
prior to the Effective Date constitute a Change in Control.  Notwithstanding anything to the contrary in
clause (iii) above, a change in ownership of the Company resulting from
creditors of the Company becoming stockholders of the Company in connection
with any bankruptcy of the Company under the laws of the United States shall
not trigger a Change in Control pursuant to clause (iii) above.

 

(i)                                     “Code” means the
United States Internal Revenue Code of 1986, as amended.

 

(j)                                     “Committee”
means the Compensation Committee of the Board.

 

(k)                                  “Company” means
Power-One, Inc., a Delaware corporation (including, for purposes of
determining whether the Executive is employed by the Company, any and all
subsidiaries specified by the Committee), or any successor thereto as provided
in Article 10.

 

(l)                                     “Controlling Parent”
means the Company’s Parent so long as a majority of the voting stock or voting
power of that Parent is not Beneficially Owned, directly or indirectly through
one or more subsidiaries, by any other Person. 
In the event that the Company has more than one “Parent,”
then “Controlling Parent” shall mean the
Parent of the Company the majority of the voting stock or voting power of which
is not Beneficially Owned, directly or indirectly through one or more
subsidiaries, by any other Person.

 

(m)                               “Disability”
means disability as defined in the Company’s long-term disability plan in which
the Executive participates at the relevant time or, if the Executive does not
participate in a Company long-term disability plan at the relevant time, 

 

5

 

such term shall
mean a “permanent and total disability” within
the meaning of Section 22(e)(3) of the Code.

 

(n)                                 “Effective Date”
has the meaning given to such term in Article 1 hereof.

 

(o)                                 “ERISA” means
the Employee Retirement Income Security Act of 1974, as amended.

 

(p)                                 “Exchange Act”
means the United States Securities Exchange Act of 1934, as amended.

 

(q)                                 “Executive”
means the individual identified in the first sentence, and on the signature
page, of this Agreement.

 

(r)                                    “Good Reason”
means, without the Executive’s express written consent, the occurrence of any
one or more of the following:

 

(i)                                     A material reduction in the nature or
status of the Executive’s authorities, duties, and/or responsibilities, (when
such authorities, duties, and/or responsibilities are viewed in the aggregate)
from their level in effect on the day immediately prior to the start of the
Protected Period, other than an insubstantial and inadvertent act that is
remedied by the Company promptly after receipt of notice thereof given by the
Executive.  In addition, Good Reason will
be deemed to exist if the Executive’s reporting relationship is diminished from
the Executive’s reporting relationship in effect on the day immediately prior
to the start of the Protected Period (for example, if the Executive reports
directly to the Company’s Chief Executive Officer on the day immediately prior
to the start of the Protected Period, Good Reason will be deemed to exist if
the Executive’s reporting relationship is changed such that the Executive no
longer reports directly to the Chief Executive Officer of the Company or any
Parent or directly to the Board of Directors of the Company or any
Parent).  A mere change in the Executive’s
title by itself shall not constitute Good Reason, provided that there is not a
material reduction in the nature or status of the Executive’s authorities, duties,
and/or responsibilities as contemplated above.

 

In
addition, the change in status of the Company from a publicly-traded company to
a company the securities of which are not publicly-traded (including any
related termination of the Company’s reporting obligations under the Exchange
Act) shall not, in and of itself, constitute Good Reason or a material
reduction in the nature or status of the Executive’s authorities, duties,
and/or responsibilities.

 

(ii)                                  A reduction by the Company in the
Executive’s Base Salary as in effect immediately prior to the start of the
Protected Period or as the same shall be increased from time to time.

 

6

 

(iii)                               A significant reduction by the Company of
the Executive’s aggregate incentive opportunities under the Company’s short
and/or long-term incentive programs, as such opportunities exist immediately
prior to the start of the Protected Period, or as such opportunities may be
increased from time to time.  For this
purpose, a significant reduction in the Executive’s incentive opportunities
shall be deemed to have occurred in the event his incentive opportunity levels
and/or the degree of probability of attainment of such incentive opportunities
are materially diminished by the Company from the levels and probability of
attainment that existed immediately prior to the start of the Protected
Period.  If the Company has a Parent, a
significant reduction of the Executive’s aggregate incentive opportunities
under the Company’s short and/or long-term incentive programs shall not be
deemed to have occurred if there is an across-the-board reduction in or
elimination of any such program which similarly affects all executives of the
Company and the reduced or eliminated incentives are replaced by a similar
program of a Parent.

 

(iv)                              A significant reduction in the Executive’s
relative level of coverage and accruals under the Company’s employee benefit
and/or retirement plans, policies, practices, or arrangements in which the
Executive participates immediately prior to the start of the Protected Period,
both in terms of the amount of benefits provided, and amounts accrued. For this
purpose, the Company may eliminate and/or modify existing programs and coverage
levels; provided, however, that the Executive’s level of coverage
under all such programs must be at least as great as is provided to executives
who have the same or lesser levels of reporting responsibilities within the
Company’s organization.

 

(v)                                 The failure of the Company to obtain a
satisfactory agreement from any successor to the Company to assume and agree to
perform this Agreement, as contemplated in Article 10.

 

(vi)                              The Executive is informed by the Company
that his principal place of employment for the Company will be relocated to a
location that is greater than thirty-five (35) miles away from the Executive’s
principal place of employment for the Company at the start of the corresponding
Protected Period.

 

The Executive’s right to terminate employment for Good
Reason shall not be affected by the Executive’s incapacity due to physical or
mental illness. The Executive’s continued employment shall not constitute a
consent to, or a waiver of rights with respect to, any circumstances
constituting Good Reason herein; provided, however, that if the
Executive does not terminate employment and claim Good Reason for such
termination within ninety (90) days after the Executive has knowledge of an
event or circumstance that would constitute Good Reason, then the Executive
shall be deemed to have waived his right to claim Good Reason as to that
specific fact or circumstance (except that the event or

 

7

 

circumstance
may be considered for purposes of determining whether any subsequent, separate,
event or circumstance constitutes Good Reason; for example, and without
limitation, a reduction in the Executive’s authorities that is deemed waived by
operation of this clause may be considered for purposes of determining whether
any subsequent reduction in the Executive’s authorities (when taken into
consideration with the first reduction) constitutes a “material reduction” in
the nature or status of the Executive’s authorities from their level in effect
on the day immediately prior to the start of the Protected Period).

 

(s)                                  “Parent” means
an entity that Beneficially Owns a majority of the voting stock or voting power
of the Company, or all or substantially all of the Company’s assets, directly
or indirectly through one or more subsidiaries.

 

(t)                                    “Qualifying Termination”
has the meaning given to such term in Section 4.2(a).

 

(u)                                 “Severance Benefits”
means the payments and/or benefits provided in Section 4.3.

 

(v)                                 “Severance Date”
means the date on which the Executive’s employment with the Company and its
subsidiaries terminates for any reason (whether or not as a result of a
Qualifying Termination).

 

Article 4.                                            Severance Benefits

 

4.1                               Right to Severance Benefits. 
The Executive shall be entitled to receive from the Company Severance
Benefits, as described in Section 4.3, if the Executive has incurred a
Qualifying Termination.

 

The Executive shall not be
entitled to receive Severance Benefits if his employment terminates (regardless
of the reason) before the Protected Period (as such term is defined in Section 4.2(c))
corresponding to a Change in Control of the Company or more than twenty-four
(24) months after the date of a Change in Control of the Company.

 

4.2                               Qualifying Termination.

 

(a)                                  Subject to Sections 4.2(d), 4.4, and 4.5,
the occurrence of any one or more of the following events within the Protected
Period corresponding to a Change in Control of the Company, or within
twenty-four (24) calendar months following the date of a Change in Control of
the Company shall constitute a “Qualifying Termination”:

 

(i)                                     An involuntary termination of the
Executive’s employment by the Company for reasons other than Cause;

 

(ii)                                  A voluntary termination of employment by
the Executive for Good Reason;

 

 

8

 

(iii)                               A failure or refusal by a successor company to assume
by written instrument the Company’s obligations under this Agreement, as
required by Article 10; or

 

(iv)                              A repudiation or breach by the Company or
any successor company of any of the provisions of this Agreement.

 

For
purposes of determining any benefits payable hereunder, the date on which the
succession referred to in clause (iii) becomes effective and the date on
which the repudiation or breach referred to in clause (iv) occurs, as
applicable, shall be deemed to be the Executive’s Severance Date.

 

(b)                                 If more than one of the events set forth
in Section 4.2(a) occurs, such events shall constitute but a single
Qualifying Termination and the Executive shall be entitled to but a single
payment of the Severance Benefits.

 

(c)                                  The “Protected Period”
corresponding to a Change in Control of the Company shall be a period of time
determined in accordance with the following:

 

(i)                                     If the Change in Control is triggered by
a tender offer for shares of the Company’s stock or by the offeror’s
acquisition of shares pursuant to such a tender offer, the Protected Period
shall commence on the date of the initial tender offer and shall continue
through and including the date of the Change in Control; provided that
in no case will the Protected Period commence earlier than the date that is six
(6) months prior to the Change in Control.

 

(ii)                                  If the Change in Control is triggered by
a merger, consolidation, or reorganization of the Company with or involving any
other corporation, the Protected Period shall commence on the date that serious
and substantial discussions first take place to effect the merger,
consolidation, or reorganization and shall continue through and including the
date of the Change in Control; provided that in no case will the
Protected Period commence earlier than the date that is six (6) months
prior to the Change in Control.

 

(iii)                               In the case of any Change in Control not described in
clause (i) or (ii) above, the Protected Period shall commence on the
date that is six (6) months prior to the Change in Control and shall
continue through and including the date of the Change in Control.

 

(d)                                 Notwithstanding anything else contained
herein to the contrary, the Executive’s termination of employment on account of
reaching mandatory retirement age, as such age may be defined from time to time
in policies adopted by the Company prior to the commencement of the Protected
Period, and consistent with applicable law, shall not be a Qualifying
Termination.

 

9

 

(e)                                  Notwithstanding anything else contained
herein to the contrary (other than those provisions that contain an express
exception to this Section 4.2(e)), the Executive’s Severance Benefits
under this Agreement shall be reduced by the severance benefits (including,
without limitation, any other change-in-control severance benefits and any
other severance benefits generally) that the Executive may be entitled to under
any other plan, program, agreement or other arrangement with the Company
(including, without limitation, any such benefits provided for by an employment
agreement).  For purposes of the
foregoing, any cash severance benefits payable to the Executive under any other
plan, program, agreement or other arrangement with the Company shall offset the
cash severance benefits otherwise payable to the Executive under this Agreement
on a dollar-for-dollar basis.  For
purposes of the foregoing, non-cash severance benefits to be provided to the
Executive under any other plan, program, agreement or other arrangement with
the Company shall offset any corresponding benefits otherwise to be provided to
the Executive under this Agreement or, if there are no corresponding benefits
otherwise to be provided to the Executive under this Agreement, the value of
such benefits shall offset the cash severance benefits otherwise payable to the
Executive under this Agreement on a dollar-for-dollar basis.  If the amount of other benefits to be offset
against the cash severance benefits otherwise payable to the Executive under
this Agreement in accordance with the preceding two sentences exceeds the
amount of cash severance benefits otherwise payable to the Executive under this
Agreement, then the excess may be used to offset other non-cash severance
benefits otherwise to be provided to the Executive under this Agreement on a
dollar-for-dollar basis.  For purposes of
this paragraph, the Committee shall reasonably determine the value of any non-cash
benefits.

 

4.3                               Description of Severance Benefits. 
In the event that the Executive becomes entitled to receive Severance
Benefits, as provided in Sections 4.1 and 4.2, the Company shall, subject to Section 4.7,
pay to the Executive and provide him with the following:

 

(a)                                  An amount equal to two (2) times the
Executive’s highest annualized rate of Base Salary in effect at any time after
the commencement of the Protected Period and on or before the Executive’s
Severance Date.

 

(b)                                 An amount equal to two (2) times the
average of the annual bonuses paid by the Company to the Executive for the
three (3) full fiscal years of the Company immediately preceding Executive’s
Severance Date.

 

(c)                                  Payment or reimbursement of the Executive’s
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 Executive’s Severance Date, to the extent that the Executive elects such
continued coverage; provided that the Company’s obligation to make any payment
or reimbursement pursuant to this Section 4.3(c) shall cease upon the
first to occur of (a) the second anniversary of the Severance Date; (b) the
Executive’s death; (c) the date the Executive becomes eligible for 

 

10

 

coverage under the
health plan of a future employer; or (d) the date the Company or its
affiliates ceases to offer any group medical coverage to its active executive
employees or the Company is otherwise under no obligation to offer COBRA
continuation coverage to the Executive.

 

(d)                                 A lump-sum cash amount equal to the
portion of the Executive’s account under the Company’s qualified retirement
plan (including, without limitation, any 401(k) matching contributions)
that has not become vested under the terms of such plan as of the Severance
Date.

 

(e)                                  A lump-sum cash amount equal to the
portion of the Executive’s account under any Company nonqualified deferred
compensation or other supplemental retirement plan that has not become vested
under the terms of such plan as of the Severance Date.

 

(f)                                    The Company shall pay or reimburse the
Executive for up to $15,000 of outplacement services obtained by the Executive
during the twelve (12) month period following the Effective Date of
Termination.

 

4.4                               Termination Due to Disability,
Death or Retirement.  Termination of the Executive’s employment due
to the Executive’s death or Disability is not a Qualifying Termination, and
upon any such termination, the Executive shall be entitled to payment only of
the Accrued Obligations.  However, if
immediately prior to the condition or event leading to, or the commencement of,
the Disability of the Executive (but not the death of the Executive), the
Executive would have experienced a Qualifying Termination if he had terminated
at that time, then upon termination of his employment for Disability he shall
be entitled to the benefits provided by this Agreement for a Qualifying
Termination.  A voluntary termination of
employment by the Executive due to the Executive’s retirement is not a
Qualifying Termination, and upon any such termination, the Executive shall be
entitled to payment only of the Accrued Obligations.  However, if immediately prior to the
Executive’s retirement (but not death), the Executive would have experienced a
Qualifying Termination if he had terminated at that time, then upon his
retirement he shall (subject to Section 4.2(d)) be entitled to the
benefits provided by this Agreement for a Qualifying Termination.

 

4.5                               Termination for Cause or by the
Executive Other Than for Good Reason.  Termination
of the Executive’s employment by the Company for Cause or by the Executive
other than for Good Reason does not constitute a Qualifying Termination.  Upon any such termination, the Executive
shall be entitled to payment only of the Accrued Obligations.

 

4.6                               Notice of Termination. 
Any termination of the Executive’s employment by the Company for Cause or
by the Executive for Good Reason shall be communicated by a Notice of
Termination.  For purposes of this
Agreement, a “Notice of Termination” shall mean
a written notice which shall indicate the specific termination provision in
this Agreement relied upon, and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive’s
employment under the provision so indicated.

 

11

 

4.7                               Release; Exclusive Remedy.

 

(a)                                  This Section 4.7 shall apply
notwithstanding anything else contained in this Agreement or any stock option,
restricted stock or other equity-based award agreement to the contrary.  As a condition precedent to any Company
obligation to the Executive pursuant to Section 4.3 or any obligation to
accelerate vesting of any equity-based award in connection with the termination
of the Executive’s employment, (i) the Executive shall, upon or promptly
following his last day of employment with the Company, provide the Company with
a valid, executed general release agreement in a form acceptable to the
Company, and such release agreement shall have not been revoked by the
Executive pursuant to any revocation rights afforded by applicable law, and (ii) the
Executive shall have complied with any and all covenants set forth in Article 8
hereof.  The Company shall have no
obligation to make any payment to the Executive pursuant to Section 4.3
(or otherwise accelerate the vesting of any equity-based award in the
circumstances as otherwise contemplated by the applicable award agreement)
unless and until the release agreement contemplated by this Section 4.7
becomes irrevocable by the Executive in accordance with all applicable laws, rules and
regulations, or at any time after a breach by the Executive of any covenant set
forth in Article 8.

 

(b)                                 The Executive agrees that the general
release agreement described in Section 4.7(a) will require that the
Executive acknowledge, as a condition to the payment of any benefits under Section 4.3
that the payments contemplated by Section 4.3 (and any applicable
acceleration of vesting of an equity-based award in accordance with the terms
of such award in connection with the termination of the Executive’s employment)
shall constitute the exclusive and sole remedy for any termination of his
employment, and the Executive will be required to covenant, as a condition to
receiving any such payment (and any such accelerated vesting), not to assert or
pursue any other remedies, at law or in equity, with respect to any termination
of employment.  The Company and Executive
acknowledge and agree that there is no duty of the Executive to mitigate
damages under this Agreement.  All
amounts paid to the Executive pursuant to Section 4.3 shall be paid
without regard to whether the Executive has taken or takes actions to mitigate
damages.

 

4.8                               Acceleration of Equity Awards on
Change in Control.  Notwithstanding any other provision herein or
in any applicable stock incentive plan document or award agreement, each stock
option, restricted stock, or other equity or equity-based award granted by the
Company to the Executive, to the extent such award is outstanding and unvested
as of the date of a Change in Control, shall automatically become fully vested
as of such Change in Control date.  In
the event that the Executive has a Qualifying Termination during the Protected
Period related to a Change in Control and any stock option, restricted stock,
or other equity or equity-based award (or portion thereof) that had not vested
as of the Severance Date was cancelled or otherwise terminated upon or prior to
the date of the related Change in Control solely as a result of such Qualifying
Termination, such award shall be reinstated and shall automatically become
fully vested and, in the case of stock options or similar awards, the Executive
shall be given a reasonable opportunity to exercise such accelerated portion of
the option or other award before it terminates.

 

12

 

Article 5.                                            Form and Timing of Severance
Benefits; Tax Withholding;

 

5.1          Form and Timing of Severance Benefits. 
The Severance Benefits described in Sections 4.3(a), 4.3(b), 4.3(d) and
4.3(e) shall be paid in cash to the Executive in a single lump sum as soon
as practicable following the Severance Date, but in no event beyond thirty (30)
days from such date.  Notwithstanding the
foregoing, payment of any and all Severance Benefits are subject to the
provisions of Section 4.7 and Section 11.10.

 

5.2                               Withholding of Taxes. 
Notwithstanding anything else herein to the contrary, the Company 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 and local income, employment, or other taxes as may be required to be
withheld pursuant to any applicable law or regulation.

 

Article 6.                                            Section 280G

 

6.1                               Possible Gross-Up.

 

(a)                                  Subject to Section 6.1(b), in the
event it is determined (pursuant to Section 6.2 below) or finally
determined (as defined in Section 6.3(c) below) that any payment,
distribution, transfer, benefit or other event with respect to the Company or a
successor, direct or indirect subsidiary or affiliate of the Company (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 Effective 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 6) (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 Company
shall pay to the Executive (or to the applicable taxing authority on Executive’s
behalf) 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 6.1(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.

 

13

 

(b)                                 Notwithstanding anything contained in Section 6.1(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 one hundred
thousand dollars ($100,000) 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 notice to the
Company to effectuate a reduction in the Payments if such a reduction is
required, the Company shall reduce or eliminate the Payments by first reducing
or eliminating any cash severance benefits, then by reducing or eliminating any
accelerated vesting of stock options or stock appreciation rights, 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 6.1
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

 

6.2          Initial Determination.  Except as
provided in Section 6.3, the determination that a Payment is subject to an
Excise Tax and, in such event, whether a Gross-Up Payment or reduction in
Payments is required pursuant to Section 6.1, shall be made in writing by
a nationally recognized accounting firm or consulting firm with experience in
such matters selected by the Executive (“Executive’s Accountant”).  Such determination shall include the amount
of the Gross-Up Payment or reduction in Payments, as applicable, and detailed
computations thereof, including any assumptions used in such computations (the
written determination of the Executive’s Accountant, hereinafter, the “Executive’s Determination”). 
The Executive’s Determination shall be reviewed on behalf of the Company
by a nationally recognized accounting firm or consulting firm with experience
in such matters selected by the Company (the “Company’s
Accountant”).  The Company
shall notify Executive within 10 business days after receipt of the Executive’s
Determination of any disagreement or dispute therewith, and failure to so
notify within that period shall be considered an agreement by the Company to
make any required Gross-Up Payment as provided in Section 6.1 above within
10 days from the expiration of such 10 business-day period.  In the event of an objection by the Company
to the Executive’s Determination, any amount not in dispute shall be paid
within 10 days following the 10 business-day period referred to herein, and
with respect to the amount in dispute the Executive’s Accountant and the Company’s
Accountant shall jointly select a third nationally recognized accounting firm
or consulting firm with experience in such matters to resolve the dispute and
the decision of such third firm shall be final, binding and conclusive upon the
Executive and the Company.  In such a
case, the third accounting firm’s findings shall be deemed the binding
determination with respect to the amount in dispute, obligating the Company to
make any payment as a result thereof within 10 days following the receipt of
such third accounting firm’s determination. 
All fees and expenses of each of the firms referred to in this Section 6.2
with respect to the matters referred to in this Section 6 shall be borne
solely by the Company.

 

 

14

 

6.3          Claim of Taxing Authority.

 

(a)                                  The Executive shall notify the Company 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 Company 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 Company 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 notice within such 30-day period shall
not result in a waiver or forfeiture of any of the Executive’s rights under
this Section 6 except to the extent of actual damages suffered by the
Company 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 Company (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 Company 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 (and demonstrates to the reasonable
satisfaction of Executive its ability to make the payments to Executive which
may ultimately be required under this section before assuming responsibility
for the claim), Executive shall:

 

(i)                                     give the Company any information
reasonably requested by the Company relating to such claim;

 

(ii)                                  take such action in connection with contesting
such claim as the Company 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 Company that is reasonably
acceptable to the Executive;

 

(iii)                               cooperate with the Company in good faith in order
effectively to contest such claim; and

 

(iv)                              permit the Company to participate in any
proceedings relating to such claim;

 

provided, however,
that the Company 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 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.

 

(b)                                 Without limitation on the foregoing
provisions of this Section 6.3, and to the extent its actions do not
unreasonably interfere with or prejudice the Executive’s disputes with the
Taxing Authority as to other issues, the Company shall control 

 

15

 

all proceedings
taken in connection with such contest and, in its reasonable discretion, may
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with the Taxing Authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax, interest or penalties
claimed and sue for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance an amount equal to such payment to the
Executive, on an interest-free basis, and 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 advance or with respect to any imputed income with
respect to such advance, as any such amounts are incurred; and, further,
provided, that any extension of the statute of limitations relating to
payment of taxes, interest, penalties or additions to tax for the taxable year
of the Executive with respect to which such contested amount is claimed to be
due is limited solely to such contested amount; and, provided, further, that
any settlement of any claim shall be reasonably acceptable to the Executive and
the Company’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.

 

(c)                                  If, after receipt by the Executive of an
amount advanced by the Company pursuant to Section 6.3(b), the Executive
receives any refund with respect to such claim, the Executive shall (subject to
the Company’s complying with the requirements of this Section 6) promptly
pay to the Company 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 advance, after giving effect to such repayment.  If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 6.3(a), it is finally
determined that the Executive is not entitled to any refund with respect to
such claim, then such advance shall be forgiven and shall not be required to be
repaid and the amount of such advance 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 section, whether the
Excise Tax is applicable to a Payment shall be deemed to be “finally determined”
upon the earliest of:  (A) the
expiration of the 15-day period referred to in Section 6.3(a) above
if the Company has not notified the Executive that it intends to contest the
underlying claim, (B) the expiration of any period following which no
right of appeal exists, (C) 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), (D) the receipt by the

 

16

 

Executive of
notice from the Company that it no longer seeks to pursue a contest (which
shall be deemed received if the Company does not, within 15 days following
receipt of a written inquiry from the Executive, affirmatively indicate in
writing to Executive that the Company intends to continue to pursue such
contest).

 

6.4                               Over- and Under-Payments. 
As a result of uncertainty in the application of Section 4999 that
may exist at the time of any determination that a Gross-Up Payment is due, it
may be possible that in making the calculations required to be made hereunder,
the parties or their accountants shall determine that a Gross-Up Payment need
not be made (or shall make no determination with respect to a Gross-Up Payment)
that properly should be made or that Payments should be reduced that should
have been made (“Underpayment”), or that a
Gross-Up Payment not properly needed to be made should be made or that Payments
be reduced by an amount less than that required pursuant to Section 6.1 (“Overpayment”).  The
determination of any Underpayment shall be made using the procedures set forth
in Section 6.2 above and shall be paid to Executive as an additional
Payment (or Gross-Up Payment, as applicable). 
The Company shall be entitled to use procedures similar to those
available to the Executive in Section 6.2 to determine the amount of any
Overpayment (provided that the Company shall bear all costs of the accountants
as provided in Section 6.2).  In the
event of a determination that an Overpayment was made, the Executive shall
promptly repay the amount of such Overpayment to the Company together with
interest on such amount (at the same rate as is applied to determine the
present value of payments under Section 280G or any successor thereto),
from the date the reimbursable payment was received by the Executive to the
date the same is repaid to the Company; provided, however, that the amount to
be repaid by the Executive to the Company shall be subject to reduction to the
extent necessary to put the Executive in the same after-tax position as if such
Overpayment were never made.

 

Article 7.                                         The Company’s Payment Obligation

 

7.1                             Payment of Obligations Absolute. 
Except as provided in Sections 4.2(e), 4.7, 5.2 and in Article 6,
the Company’s obligation to make the payments and the arrangements provided for
herein shall be absolute and unconditional, and shall not be affected by any
circumstances, including, without limitation, any offset, counterclaim,
recoupment, defense, or other right which the Company may have against the
Executive or anyone else.  All amounts
payable by the Company hereunder shall be paid without notice or demand.  Each and every payment made hereunder by the
Company shall be final, and the Company shall not seek to recover all or any
part of such payment from the Executive or from whoever may be entitled
thereto, for any reasons whatsoever, except as otherwise provided in Article 6
or Article 9.

 

The Executive shall not be
obligated to seek other employment in mitigation of the amounts payable or arrangements
made under any provision of this Agreement, and the obtaining of any such other
employment shall in no event effect any reduction of the Company’s obligations
to make the payments and arrangements required to be made under this Agreement,
except to the extent provided in Section 4.3(c).

 

7.2                             Contractual Right to Benefits. 
This Agreement establishes and vests in the Executive a contractual
right to the benefits to which he or she is entitled hereunder.  The 

 

17

 

Company expressly waives any ability, if possible, to
deny liability for any breach of its contractual commitment hereunder upon the
grounds of lack of consideration, accord and satisfaction or any other
defense.  In any dispute arising after a
Change in Control as to whether the Executive is entitled to benefits under
this Agreement, there shall be a presumption that the Executive is entitled to
such benefits and the burden of proving otherwise shall be on the Company.  However, nothing herein contained shall
require or be deemed to require, or prohibit or be deemed to prohibit, the
Company to segregate, earmark, or otherwise set aside any funds or other
assets, in trust or otherwise, to provide for any payments to be made or
required hereunder.

 

7.3                             Pension Plans; Duplicate Benefits. 
All payments, benefits and amounts provided under this Agreement shall
be in addition to and not in substitution for any pension rights under the
Company’s tax-qualified pension plan, supplemental retirement plans,
nonqualified deferred compensation plans, bonus plans, and any disability,
workers’ compensation or other Company benefit plan distribution that the
Executive is entitled to as of his Severance Date.  Notwithstanding the foregoing, this Agreement
shall not create an inference that any duplicate payments shall be
required.  No payments made pursuant to
this Agreement shall be considered compensation for purposes of any such
benefit plan.  Payment of the Executive’s
Accrued Obligations shall be deemed to not duplicate any benefit contemplated
by this Agreement and shall not result in an offset pursuant to Section 4.2(e).

 

Article 8.                                            Trade Secrets; Non-Solicitation
and Non-Disparagement

 

By executing this Agreement
and again by receiving any benefits provided for by this Agreement, the
Executive agrees follows:

 

(a)                                  In the course of performing his duties
for the Company, the Executive will receive, and acknowledges that he or she
has received, confidential information, including without limitation, information
not available to competitors relating to the Company’s existing and
contemplated financial plans, products, business plans, operating plans,
research and development information, and customer information, all of which is
hereinafter referred to as “Trade Secrets.” 
The Executive agrees that he or she will not, either during his
employment or subsequent to the termination of his employment with the Company,
directly or indirectly disclose, publish or otherwise divulge any Trade Secret
of the Company or any of its affiliates to anyone outside the Company, or use
such information in any manner which would adversely affect the business or
business prospects of the Company, without prior written authorization from the
Company to do so.  The Executive further
agrees that if, at the time of the termination of his employment with the
Company, he is in possession of any documents or other written or electronic
materials constituting, containing or reflecting Trade Secrets, the Executive
will return and surrender all such documents and materials to the Company upon
leaving its employ.  The restrictions and
protection provided for in this Section 8(a) shall be in addition to
any protection afforded to Trade Secrets by law or equity and in addition to
any protection afforded to Trade Secrets by any other agreement between the
Executive and the Company.

 

18

 

(b)                                 For a period of one year following the
termination of the Executive’s employment with the Company, the Executive shall
not, directly or indirectly through, aid, assistance or counsel, on the
Executive’s own behalf or on behalf of another person or entity (i) contact,
solicit or offer to hire any person who was, within a period of six months
prior to the termination of the Executive’s employment with the Company,
employed by any member of the Company Group, or (ii) by any means issue or
communicate any private or public statement that may be critical or disparaging
of any member of the Company Group, or any of their respective products,
services, officers, directors or employees.

 

(c)                                  The Executive represents that he (i) is
familiar with the foregoing covenants, (ii) is fully aware of his
obligations hereunder, (iii) agrees to the reasonableness of the length of
time, scope and geographic coverage of the foregoing covenants, and (iv) agrees
that such covenants are necessary to protect the Company’s confidential and
proprietary information, good will, stable workforce, and customer relations.

 

(d)                                 The Executive agrees that a breach of any
of the covenants in this Article 8 would cause immediate and irreparable
harm to the Company that would be difficult or impossible to measure, and that
damages to the Company for any such injury would therefore be an inadequate
remedy for any such breach.  Accordingly,
the Executive agrees that if he breaches any term of this Article 8, the
Company shall be entitled, in addition to and without limitation upon all other
remedies the Company may have under this Agreement, at law or otherwise, to
obtain injunctive or other appropriate equitable relief to restrain any such
breach upon a showing by the Company of the legal requirements to obtain such
relief.

 

Article 9.             Claims
Procedure

 

9.1         Committee
Review.  The Executive or, in the event of the
Executive’s death, the Executive’s Beneficiary (as applicable, the “Claimant”)
may deliver to the Committee a written claim for a determination with respect
to the amounts distributable to such Claimant from this Agreement.  Such claim shall be delivered to the
Committee care of the Company in accordance with the notice provisions of Section 11.7.  If such a claim relates to the contents of a
notice received by the Claimant, the claim must be made within sixty (60) days
after such notice was received by the Claimant. 
All other claims must be made within two hundred and seventy (270) days
of the date on which the event that caused the claim to arise occurred (subject
to any timing requirements that may apply in the case of a purported
termination for Good Reason).  The claim
must state with particularity the determination desired by the Claimant.

 

9.2         Notification
of Decision.  The Committee shall consider a Claimant’s
claim pursuant to Section 9.1 within a reasonable time, but no later than
ninety (90) days after receiving the claim. 
If the Committee determines that special circumstances require an
extension of time for processing the claim, written notice of the extension
shall be furnished to the Claimant prior to the termination of the initial ninety
(90) day period.  In no event shall such
extension exceed a period of ninety (90) days from the end of the initial
period.  The extension notice shall
indicate the special circumstances requiring an extension of time and the date
by 

 

19

 

which the Committee expects to render the benefit
determination.  The Committee shall
notify the Claimant in writing:

 

(a)                                  that the Claimant’s requested
determination has been made, and that the claim has been allowed in full; or

 

(b)                                 that the Committee has reached a
conclusion contrary, in whole or in part, to the Claimant’s requested
determination, and such notice must set forth in a manner calculated to be
understood by the Claimant:

 

(i)                                     the specific reason(s) for the denial
of the claim, or any part of it;

 

(ii)                                  specific reference(s) to pertinent
provisions of this Agreement upon which such denial was based;

 

(iii)                               a description of any additional material or
information necessary for the Claimant to perfect the claim, and an explanation
of why such material or information is necessary;

 

(iv)                              a statement that the Claimant is entitled
to receive, upon request and free of charge, reasonable access to and copies
of, all documents, records and other information relevant (as defined in
applicable ERISA regulations) to the Claimant’s claim for benefits; and

 

(v)                                 a statement of the Claimant’s right to
seek arbitration pursuant to Section 9.4.

 

9.3         Pre
and Post-Change in Control Procedures.  With respect
to claims made prior to the occurrence of a Change in Control, a Claimant’s
compliance with the foregoing provisions of this Article 9 is a mandatory
prerequisite to a Claimant’s right to commence arbitration pursuant to Section 9.4
with respect to any claim for benefits under this Agreement.  With respect to claims made upon and after
the occurrence of a Change in Control, the Claimant may proceed directly to
arbitration in accordance with Section 9.4 and need not first satisfy the
foregoing provisions of this Article 9.

 

9.4         Arbitration
of Claims.  All claims or controversies arising out of or
in connection with this Agreement, that the Company may have against any
Claimant, or that any Claimant may have against the Company or against its
officers, directors, employees or agents acting in their capacity as such,
shall, subject to the initial review provided for in the foregoing provisions
of this Article 9 that are effective with respect to claims brought prior
to the occurrence of a Change in Control, be resolved through arbitration as
provided in this Section 9.4.  The
decision of an arbitrator on any issue, dispute, claim or controversy submitted
for arbitration, shall be final and binding upon the Company and the Claimant
and that judgment may be entered on the award of the arbitrator in any court
having proper jurisdiction.  The
arbitrator shall review  de novo  any claim previously considered by the
Committee pursuant to Section 9.1.

 

20

 

Except as otherwise provided
in this procedure or by mutual agreement of the parties, any arbitration shall
be administered:  (1) in accordance
with the then-current Model Employment Arbitration Procedures of the American
Arbitration Association (“AAA”) before an arbitrator who is licensed to practice
law in the state in which the arbitration is convened; or (2) if locally
available, the Judicial Arbitration & Mediation Services, Inc. (“JAMS”),
in accordance with the JAMS procedures then in effect.  The party who did not initiate the claim can
designate between JAMS or AAA (the “Tribunal”). 
The arbitration shall be held in the city in which the Claimant is or
was last employed by the Company in the nearest Tribunal office or at a
mutually agreeable location.  Pre-hearing
and post-hearing procedures may be held by telephone or in person as the
arbitrator deems necessary.

 

The arbitrator shall be
selected as follows: if the parties cannot agree on an arbitrator, the Tribunal
(JAMS or AAA) shall then provide the names of nine (9) available
arbitrators experienced in business employment matters along with their resumes
and fee schedules.  Each party may strike
all names on the list it deems unacceptable. 
If more than one common name remains on the list of all parties, the
parties shall strike names alternately until only one remains.  The party who did not initiate the claim
shall strike first.  If no common name
remains on the lists of the parties, the Tribunal shall furnish an additional
list or lists until an arbitrator is selected.

 

The arbitrator shall
interpret this Agreement, any applicable Company policy or rules and
regulations, any applicable substantive law (and the law of remedies, if
applicable) of the state in which the claim arose, or applicable federal
law.  In reaching his or her decision,
the arbitrator shall have no authority to change or modify any lawful Company
policy, rule or regulation, or this Agreement.  The arbitrator, and not any federal, state or
local court or agency, shall have exclusive and broad authority to resolve any
dispute relating to the interpretation, applicability, enforceability or
formation of this Agreement, including but not limited to, any claim that all
or any part of this Agreement is voidable.

 

The arbitration shall be
conducted pursuant to California Code of Civil Procedure Sections 1282 et. seq.

 

Notwithstanding the
foregoing provisions, the Company and the Executive each may apply to any court
of competent jurisdiction in the state of California for a temporary
restraining order, preliminary injunction, or other interim or conservatory
relief, to ensure that any relief sought in arbitration is not rendered
ineffectual through interim harm and as necessary to enforce the provisions of
this Agreement, without breach of this arbitration agreement and without abridgement
of the powers of the arbitrator.

 

9.5         Claims
Expenses; Legal Fees and Expenses of Executive.  The Company
shall advance and bear all reasonable expenses of any arbitration conducted
under this Article 9 and all reasonable legal fees and expenses incurred
by Claimant in pursuing a claim at and through any stage of review or dispute
resolution pursuant to this Article 9; provided,
however, that if
it is finally determined that the Claimant did not pursue the claim or commence
the arbitration in good faith and had no reasonable basis therefore, the
Claimant shall repay all of Claimant’s legal fees and expenses advanced by the
Company and shall reimburse the Company for its reasonable legal fees and
expenses in connection therewith (except that, in any event, the Company shall
be 

 

21

 

responsible for payment of the forum costs of any
arbitration hereunder, including the arbitrator’s fee).

 

Article 10.            Successors and Assignment

 

10.1        Successors to the Company.  The Company
will require any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) of all or substantially all of the business and/or
assets of the Company or of any division or subsidiary thereof (the business
and/or assets of which constitute at least fifty percent (50%) of the total
business and/or assets of the Company) to expressly assume and agree to perform
the Company’s obligations under this Agreement in the same manner and to the
same extent that the Company would be required to perform them if such
succession had not taken place.  Failure
of the Company to obtain such assumption and agreement in a written instrument
prior to the effective date of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be entitled to
hereunder if he had terminated his employment with the Company voluntarily for
Good Reason.  Except for the purpose of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Executive’s Severance Date if the Executive so
elects, but any delay or failure by the Executive to so elect shall not be a
waiver or release of any rights hereunder which may be asserted at any time.

 

10.2        Assignment by the Executive.  This
Agreement shall inure to the benefit of and be enforceable by the Executive’s
personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees, and legatees.

 

Article 11.            Miscellaneous

 

11.1        Employment Status.  Except as may
be provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company is “at will,” and, prior
to the effective date of a Change in Control, may be terminated by either the
Executive or the Company at any time, subject to applicable law.

 

11.2        Beneficiaries.  The Executive
may designate one or more persons or entities as the primary and/or contingent
Beneficiaries of any Severance Benefits owing to the Executive under this
Agreement.  If the Executive dies while
any amount would still be payable to him hereunder had he continued to live,
all such amounts, unless otherwise provided herein, shall be paid to the
Executive’s Beneficiary in accordance with the terms of this Agreement.  If the Executive has not named a Beneficiary,
then such amounts shall be paid to the Executive’s devisee, legatee, or other
designee, or if there is no such designee, to the Executive’s estate.  The Executive may make or change such
designation at any time, provided that any designation or change thereto
must be in the form of a signed writing acceptable to and received by the
Committee.

 

11.3        Gender and Number; Section Headings. 
Where the context requires herein, the singular shall include the
plural, the plural shall include the singular, and any gender shall include all
other genders.  The section headings of,
and titles of paragraphs and subparagraphs 

 

22

 

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.

 

11.4        Severability.  In the event
any provision of this Agreement shall be held illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining parts of
this Agreement, and this Agreement shall be construed and enforced as if the
illegal or invalid provision had not been included.

 

11.5        Entire Agreement.  This
Agreement, together with any employment agreement and any written agreement
evidencing any stock option or other equity-based incentive award previously
granted by the Company, embodies the entire agreement of the parties hereto
respecting the matters within its scope. 
As of the Effective Date, this Agreement shall supersede all other
agreements of the parties hereto that are prior to or contemporaneous with the Effective
Date and that directly or indirectly bear upon the subject matter hereof
(including, without limitation, any Prior Change in Control Agreement), other
than any prior agreement relating to any right to indemnification the Executive
may have from the Company or the Executive’s right to be covered under any
applicable insurance policy, with respect to any liability the Executive
incurred or may incur as an employee, officer or director of the Company or its
affiliates.  Any negotiations,
correspondence, agreements, proposals or understandings prior to the Effective
Date relating to the subject matter hereof shall be deemed to have been merged
into this Agreement, and to the extent inconsistent herewith, such
negotiations, 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. 
This Agreement is an integrated agreement.

 

11.6        Modification.  Except as
expressly provided in the definition of “Good Reason” in
Section 3 with respect to certain waivers of circumstances that would
otherwise constitute Good Reason, no provision of this Agreement may be
modified, waived, or discharged unless such modification, waiver, or discharge
is agreed to in writing and signed by the Executive and by an authorized member
of the Committee or its designee, or by the respective parties’ legal
representatives and successors.

 

11.7        Notice.  For purposes of this
Agreement, notices, including a Notice of Termination, and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or on the date stamped as
received by the U.S. Postal Service for delivery by certified or registered
mail, postage prepaid and addressed:  (i) if
to the Executive, to his latest address as reflected on the records of the
Company, and (ii) if to the Company: Power-One, Inc., 740 Calle
Plano, Camarillo, California 93012, Attn: Corporate Secretary, or to such other
address as the Company may furnish to the Executive in writing with specific
reference to this Agreement and the importance of the notice, except that
notice of change of address shall be effective only upon receipt.

 

11.8        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 

 

23

 

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.

 

11.9        Applicable Law.  To the extent
not preempted by the laws of the United States, the laws of the State of
California shall be the controlling law in all matters relating to this
Agreement (notwithstanding any California or other conflict of law provision to
the contrary).  Any statutory reference
in this Agreement shall also be deemed to refer to all applicable final rules and
final regulations promulgated under or with respect to the referenced statutory
provision.

 

11.10      Section 409A.

 

(a)                                  Notwithstanding any provision of this
Agreement to the contrary, if the Executive is a “specified employee” as
defined in Section 409A of the Code (“Section 409A”), the
Executive shall not be entitled to any payments in connection with a separation
from service of the Executive (within the meaning of Section 409A) until
the earlier of (i) the date which is six (6) months after his
separation from service for any reason other than death, or (ii) the date
of the Executive’s death.  Furthermore,
with regard to any benefit to be provided upon a termination of employment, to
the extent required to avoid the imputation of any tax, penalty or interest
under Section 409A, the Executive shall pay the premium for such benefit
during the aforesaid period and be reimbursed by the Company therefor promptly
after the end of such period.  The
provisions of this Section 11.10 shall only apply if, and to the extent,
required to avoid the imputation of any tax, penalty or interest under Section 409A.

 

(b)                                 To the extent that this Agreement or any
plan, program or award of the Company in which the Executive participates or
which has been or is granted by the Company to the Executive, as applicable, is
subject to Section 409A, the Company and the Executive agree that the
terms and conditions of this Agreement and such other plan, program or award
shall be construed and interpreted to the maximum extent reasonably possible,
without altering the fundamental intent of the agreement, to avoid the
imputation of any tax, penalty or interest under Section 409A.

 

 

IN WITNESS WHEREOF, the parties
have executed this Agreement on this 18th day of February, 2008.

	
   

  	
   

  	
   

  
	
  Power-One, Inc.

  	
   

  	
  Executive

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Print Name:

  	
   

  	
   

  	
  Print Name:  Richard
  J. Thompson

  
	
   

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  	
   

  
					

 

 

24

 

 

EXHIBIT C

 

FORM OF RELEASE AGREEMENT

 

This Release Agreement (this “Release Agreement”)
is entered into this        day of
                  
20    , by and between Richard J. Thompson, an individual (“Executive”),
and Power-One, Inc., a Delaware corporation (the “Company”).

 

WHEREAS, Executive has
been employed by the Company or one of its subsidiaries; and

 

WHEREAS, Executive’s
employment by the Company or one of its subsidiaries has terminated and, in
connection with the Executive’s Employment Agreement with the Company, dated as
of
[                            ]
(the “Employment Agreement”), the Company and Executive desire to enter
into this Release Agreement upon the terms set forth herein;

 

NOW, THEREFORE, in
consideration of the covenants undertaken and the releases contained in this
Release Agreement, and in consideration of the obligations of the Company to
pay severance and other benefits (conditioned upon this Release Agreement)
under and pursuant to the Employment Agreement, Executive and the Company agree
as follows:

 

                                                                                                1.                                       Termination of
Employment.  Executive’s
employment with the Company terminated on
[                            ,
          ] (the “Separation
Date”).  Executive waives any right
or claim to reinstatement as an employee of the Company and each of its
affiliates.  Executive hereby confirms
that Executive does not hold any position as an officer or employee with the
Company and each of its affiliates.  Executive
acknowledges and agrees that Executive has received all amounts owed for his
regular and usual salary (including, but not limited to, any overtime, bonus,
accrued vacation, commissions, or other wages), reimbursement of expenses, and
usual benefits.

 

                                                                                                2.                                       Release.  Executive, on behalf of himself, his
descendants, dependents, heirs, executors, administrators, assigns, and
successors, and each of them, hereby covenants not to sue and fully releases
and discharges the Company and each of its parents, subsidiaries and
affiliates, past and present, as well as its and their trustees, directors,
officers, members, managers, partners, agents, attorneys, insurers, employees,
stockholders, representatives, assigns, and successors, past and present, and
each of them, hereinafter together and collectively referred to as the “Releasees,”
with respect to and from any and all claims, wages, demands, rights, liens,
agreements or contracts (written or oral), covenants, actions, suits, causes of
action, obligations, debts, costs, expenses, attorneys’ fees, damages,
judgments, orders and liabilities of whatever kind or nature in law, equity or
otherwise, 

 

1

 

whether
now known or unknown, suspected or unsuspected, and whether or not concealed or
hidden arising out of or in any way connected with Executive’s service as an
officer, director employee, member or manager of any Releasee, Executive’s
separation from his position as an officer, director, employee, manager and/or
member, as applicable, of any Releasee (each, a “Claim”), which he now
owns or holds or he  has at any time
heretofore owned or held or may in the future hold as against any of said
Releasees, whether known or unknown, suspected or unsuspected, resulting from
any act or omission by or on the part of said Releasees, or any of them,
committed or omitted prior to the date of this Release Agreement including,
without limiting the generality of the foregoing, any Claim under Title VII of
the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967,
the Americans with Disabilities Act, the Family and Medical Leave Act of 1993,
the California Fair Employment and Housing Act (to the extent applicable), the
California Family Rights Act (to the extent applicable), or any other federal,
state or local law, regulation, or ordinance, or any Claim for severance pay,
bonus, sick leave, holiday pay, vacation pay, life insurance, health or medical
insurance or any other fringe benefit, workers’ compensation or disability (the
“Release”); provided, however, that the foregoing Release does not apply
to any obligation of the Company to Executive pursuant to any of the following:
(1) any equity-based awards previously granted by the Company to
Executive, to the extent that such awards continue after the termination of
Executive’s employment with the Company 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); (2) any right to
indemnification that Executive may have pursuant to the Bylaws of the Company,
its Articles of Incorporation or under any written indemnification agreement
with the Company (or any corresponding provision of any subsidiary or affiliate
of the Company) 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 service as
an employee, officer or director of the Company or any of its subsidiaries or
affiliates; (3) with respect to any rights that Executive may have to
insurance coverage for such losses, damages or expenses under any Company (or
subsidiary or affiliate) directors and officers liability insurance policy; (4) any
rights to continued medical or dental coverage that Executive may have under
COBRA (or similar applicable state law); (5) any rights to severance
payments or benefits under Section 5 of the Employment Agreement or the
Company’s Senior Executive 

 

2

 

Change
in Control Agreement, as applicable, or similar agreement, in accordance with
the terms thereof ; or (6) any rights to payment of benefits under any
plan or arrangement that is either subject to Title IV of the Employee
Retirement Income Security Act of 1974, as amended, or under a retirement plan
sponsored or maintained by the Company that is intended to qualify under Section 401(a) of
the Internal Revenue Code of 1986, as amended. 
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.

 

                                                                                                3.                                       1542 Waiver.  It is the intention of Executive in executing
this Release Agreement that the same shall be effective as a bar to each and
every Claim hereinabove specified.  In
furtherance of this intention, to the extent California law is applicable,
Executive hereby expressly waives any and all rights and benefits conferred
upon him by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE
and expressly consents that this Release Agreement (including, without
limitation, the Release set forth above) shall be given full force and effect
according to each and all of its express terms and provisions, including those
related to unknown and unsuspected Claims, if any, as well as those relating to
any other Claims hereinabove specified. SECTION 1542 provides:

 

“A GENERAL RELEASE DOES
NOT EXTEND TO CLAIMS 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 may hereafter discover Claims 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 Release Agreement and which, if known or
suspected at the time of executing this Release Agreement, may have materially
affected this settlement.  Nevertheless,
Executive hereby waives any right, Claim or cause of action that might arise as
a result of such different or additional Claims or facts.  Executive acknowledges that he or she
understands the significance and consequences of such release and such specific
waiver of SECTION 1542.

 

                                                                                                4.                                       ADEA Waiver.  Executive expressly acknowledges and agrees
that by entering into this Release 

 

3

 

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

 

A.                                   In return for
this Release Agreement, the Executive will receive consideration beyond that
which the Executive was already entitled to receive before entering into this
Release Agreement;

 

B.                                     Executive is
hereby advised in writing by this Release Agreement to consult with an attorney
before signing this Release Agreement;

 

C.                                     Executive has
voluntarily chosen to enter into this Release Agreement and has not been forced
or pressured in any way to sign it;

 

D.                                    Executive was
given a copy of this Release Agreement on
[                                  ,
20    ] and informed that he had [twenty
one (21)/forty five (45)] days within
which to consider this Release Agreement and that if he wished to execute this
Release Agreement prior to expiration of such [21-day/45-day] period, he should execute the Endorsement attached hereto;

 

E.                                      Executive was
informed that he had seven (7) days following the date of execution of
this Release Agreement in which to revoke this Release Agreement, and this
Release 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 Company during the seven-day revocation
period.  In the event that Executive
exercises his right of revocation, neither the Company nor Executive will have
any obligations under this Release Agreement;

 

F.                                      Nothing in this
Release 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.

 

5.                                       No Transferred
Claims.  Executive warrants and
represents that the Executive has not heretofore assigned or transferred to any
person not a party to this Release Agreement any released matter or any part or
portion thereof and he shall defend, indemnify and hold the Company and each of
its affiliates harmless from and against any claim (including the payment of
attorneys’ fees and costs actually incurred whether or not litigation is
commenced) based on or in connection with or arising out of any such assignment
or transfer made, purported or claimed.

 

6.                                       Severability.  It is the desire and intent of the parties
hereto that the provisions of this Release Agreement be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. 
Accordingly, if any particular provision of this Release Agreement shall
be adjudicated by a court of competent jurisdiction to be invalid, prohibited
or unenforceable under any present or future law, such 

 

4

 

provision, as to such jurisdiction, shall be
ineffective, without invalidating the remaining provisions of this Release
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction; furthermore, in lieu of such invalid or unenforceable provision
there will be added automatically as a part of this Release Agreement, a legal,
valid and enforceable provision as similar in terms to such invalid or
unenforceable provision as may be possible. 
Notwithstanding the foregoing, if such provision could be more narrowly
drawn so as not to be invalid, prohibited or unenforceable in such
jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without
invalidating the remaining provisions of this Release Agreement or affecting
the validity or enforceability of such provision in any other jurisdiction.

 

7.                                       Counterparts.  This Release Agreement may be executed in
separate counterparts, each of which is deemed to be an original and all of
which taken together constitute one and the same agreement.

 

8.                                       Successors.  This Release Agreement is personal to
Executive and shall not, without the prior written consent of the Company, be
assignable by Executive.  This Release
Agreement shall inure to the benefit of and be binding upon the Company and its
respective successors and assigns and any such successor or assignee shall be
deemed substituted for the Company under the terms of this Release Agreement
for all purposes.  As used herein, “successor”
and “assignee” shall include any person, firm, corporation or other business
entity which at any time, whether by purchase, merger, acquisition of assets,
or otherwise, directly or indirectly acquires the ownership of the Company,
acquires all or substantially all of the Company’s assets, or to which the
Company assigns this Release Agreement by operation of law or otherwise.

 

9. [Intentionally Omitted]

 

10.                                 Governing Law.  THIS RELEASE AGREEMENT WILL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH UNITED STATES FEDERAL LAW AND, TO THE EXTENT
NOT PREEMPTED BY UNITED STATES FEDERAL LAW, THE LAWS OF THE STATE OF DELAWARE,
WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE
(WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE
THE LAWS OF ANY JURISDICTION OTHER THAN UNITED STATES FEDERAL LAW AND THE LAW
OF THE STATE OF DELAWARE TO BE APPLIED. 
IN FURTHERANCE OF THE FOREGOING, APPLICABLE FEDERAL LAW AND, TO THE
EXTENT NOT PREEMPTED BY APPLICABLE FEDERAL LAW, THE INTERNAL LAW OF THE STATE
OF DELAWARE, WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS RELEASE
AGREEMENT, EVEN IF UNDER SUCH JURISDICTION’S CHOICE OF LAW OR CONFLICT OF LAW
ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY
APPLY.

 

11.                                 Amendment and
Waiver.  The provisions of this Release
Agreement may be amended and waived only with the prior written consent of the
Company and Executive, and no course of conduct or failure or delay in
enforcing the provisions of this Release Agreement shall be construed as a
waiver of such provisions or affect the validity, binding effect or
enforceability of this Release Agreement or any provision hereof.

 

5

 

12.                                 Descriptive
Headings.  The
descriptive headings of this Release Agreement are inserted for convenience
only and do not constitute a part of this Release Agreement.

 

13.                                 Construction.  Where specific language is used to clarify by
example a general statement contained herein, such specific language shall not
be deemed to modify, limit or restrict in any manner the construction of the
general statement to which it relates. 
The language used in this Release Agreement shall be deemed to be the
language chosen by the parties to express their mutual intent, and no rule of
strict construction shall be applied against any party.

 

14.                                 Arbitration.

 

A.                                   In General.  All claims or controversies arising out of or
in connection with this Release Agreement, that the Company may have against
the Executive, or that the Executive may have against the Company or against
its officers, directors, employees or agents acting in their capacity as such,
shall be resolved through arbitration as provided in this Section 14.  The decision of an arbitrator on any issue,
dispute, claim or controversy submitted for arbitration shall be final and
binding upon the Company and the Executive, and that judgment may be entered on
the award of the arbitrator in any court having proper jurisdiction.

 

B.                                     Applicable Rules and
Procedures.  Except as
otherwise provided in this procedure or by mutual agreement of the parties, any
arbitration shall be administered: (1) in accordance with the then-current
Model Employment Arbitration Procedures of the American Arbitration Association
(“AAA”) before an arbitrator who is licensed to practice law in the
state in which the arbitration is convened; or (2) if locally available,
the Judicial Arbitration & Mediation Services, Inc. (“JAMS”),
in accordance with the JAMS procedures then in effect.  The party who did not initiate the claim can
designate between JAMS or AAA (the “Tribunal”).  The arbitration shall be held in the city in
which the Executive is or was last employed by the Company in the nearest
Tribunal office or at a mutually agreeable location.  Pre-hearing and post-hearing procedures may be
held by telephone or in person as the arbitrator deems necessary.  The arbitrator shall be selected as follows:
if the parties cannot agree on an arbitrator, the Tribunal (JAMS or AAA) shall
then provide the names of nine (9) available arbitrators experienced in
business employment matters along with their resumes and fee schedules.  Each party may strike all names on the list
it deems unacceptable.  If more than one
common name remains on the list of all parties, the parties shall strike names
alternately until only one remains.  The
party who did not initiate the claim shall strike first.  If no common name remains on the lists of the
parties, the Tribunal shall furnish an additional list or lists until an
arbitrator is selected.  The arbitrator
shall interpret this Release Agreement, any applicable Company policy or rules and
regulations, any applicable substantive law (and the law of remedies, if
applicable) of the state in which the claim arose, or applicable federal
law.  In reaching his or her decision,
the arbitrator shall have no authority to change or modify any lawful Company
policy, rule or regulation, or this Release Agreement.  The arbitrator, and not any federal, state or
local court or agency, shall have exclusive and broad authority to resolve any
dispute relating to the interpretation, 

 

6

 

applicability,
enforceability or formation of this Release, Agreement including but not
limited to, any claim that all or any part of this Release Agreement is
voidable.  To the extent required by
applicable law, the arbitration shall be conducted pursuant to California Code
of Civil Procedure Sections 1282 et. seq. 
Notwithstanding the foregoing provisions, the Company and the Executive
each may apply to any court of competent jurisdiction for a temporary
restraining order, preliminary injunction, or other interim or conservatory
relief, to ensure that any relief sought in arbitration is not rendered
ineffectual through interim harm and as necessary to enforce the provisions of
this Release Agreement, without breach of this arbitration agreement and
without abridgement of the powers of the arbitrator.

 

15.                                 Nouns and
Pronouns.  Whenever
the context may require, any pronouns used herein shall include the corresponding
masculine, feminine or neuter forms, and the singular form of nouns and
pronouns shall include the plural and vice-versa.

 

16.                                 Legal Counsel.  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. 
Executive acknowledges and agrees that he has read and understands this
Release Agreement completely, is entering into it freely and voluntarily, and
has been advised to seek counsel prior to entering into this Release Agreement
and he has had ample opportunity to do so.

 

[The Remainder of this Page is
Intentionally Left Blank]

 

7

 

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

 

 

EXECUTED this
                
day of
                
20    , at

 

	
   

  	
  “Executive”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

	
   

  	
  Print Name:

  	
   

  

 

	
   

  	
   

  
	
   

  	
  POWER-ONE,
  INC.,

  
	
   

  	
  a
  Delaware corporation,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

8

 

ENDORSEMENT

 

I,
                                              ,
hereby acknowledge that I was given [21/45] days to consider the foregoing Release Agreement and
voluntarily chose to sign the Release Agreement prior to the expiration of the [21-day/45-day] period.

 

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

 

EXECUTED this 
[        ] day of
[                          
200        ].

 

 

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  

 

9Exhibit
10.2

 

POWER-ONE, INC.

STOCK UNIT AWARD AGREEMENT

 

THIS STOCK UNIT AWARD AGREEMENT (this “Agreement”)
is dated as of February 18, 2008 by and between Power-One, Inc., a
Delaware corporation (the “Corporation”) and Richard J. Thompson (the “Employee”).

 

W I T N E S S E T H

 

WHEREAS, the Corporation has granted
to the Employee effective as of the date hereof (the “Award Date”) a credit of
stock units (the “Stock Unit Award” or “Award”) upon the terms and conditions set
forth herein.

 

WHEREAS, the Corporation intends to seek stockholder
approval of an amendment to the terms of the Power-One, Inc. 2004 Stock
Incentive Plan (the “Plan”) so that the Award may be settled by delivering the
Employee shares of Common Stock available under the Plan; however, in the event
such stockholder approval is not obtained, the Award shall be settled in cash
upon the terms and conditions set forth herein.

 

NOW THEREFORE, in consideration of
services rendered and to be rendered by the Employee, and the mutual promises
made herein and the mutual benefits to be derived therefrom, the parties agree
as follows:

 

1.     Defined Terms.   Capitalized
terms used herein and not otherwise defined herein shall have the meaning
assigned to such terms in the Plan.

 

2.     Grant.   Subject to the
terms of this Agreement, the Corporation hereby grants to the Employee a Stock
Unit Award with respect to an aggregate of 450,000 stock units (subject to
adjustment in the same manner as provided in Section 7.1 of the Plan) (the
“Stock Units”).  As used herein, the term
“stock unit” shall mean a non-voting unit of measurement which is deemed for
bookkeeping purposes to be equivalent to one outstanding share of the
Corporation’s Common Stock (subject to adjustment in the same manner as
provided in Section 7.1 of the Plan) solely for purposes of this Agreement
and the Plan (to the extent the Stock Units are settled under the Plan).  The Stock Units shall be used solely as a
device for the determination of the payment to eventually be made to the Employee
if such Stock Units vest pursuant to Section 3.  The Stock Units shall not be treated as
property or as a trust fund of any kind.

 

3.     Vesting.   Subject to Section 8
below, the Award shall vest and become nonforfeitable with respect to
twenty-five (25%) of the total number of Stock Units (subject to adjustment in
the same manner as provided under Section 7.1 of the Plan) on each of the
first, second, third and fourth anniversaries of the Award Date.  The Stock Units shall also vest and become
nonforfeitable pursuant to the provisions of the Employee’s Employment
Agreement with the Corporation entered into on the date hereof (as it may be
amended from time to time, the “Employment Agreement”), which provisions
generally provide for accelerated vesting of a portion of the Stock Units upon
a termination of the Employee’s employment due to death, disability, by the
Corporation without Cause (as defined in the Employment Agreement), by the 

 

 

Employee
due to a Substantial Breach (as defined in the Employment Agreement) by the
Corporation, or due to a non-renewal of the Employment Agreement by the
Corporation.  The Employee is also a
party to the Corporation’s Senior Executive Change in Control Agreement (the “CIC
Agreement”), which provides for accelerated vesting of the Stock Units under
the circumstances provided therein.

 

4.     Continuance of Employment.   Except for any
vesting provided for in the Employment Agreement or CIC Agreement, the vesting
schedule requires continued employment through each applicable vesting date as
a condition to the vesting of the applicable installment of the Award and the
rights and benefits under this Agreement.  Partial employment, even if substantial,
during any vesting period will not entitle the Employee to any proportionate
vesting or avoid or mitigate a termination of rights and benefits upon or
following a termination of employment or services as provided in Section 8
below or under the Plan (which provisions shall equally apply to the Employee’s
Award, whether or not the Stock Units are settled under the Plan).  Service solely as a director of the
Corporation or one of its Subsidiaries shall not be considered continued
employment for purposes of this Agreement or the Award.

 

Nothing
contained in this Agreement or the Plan constitutes an employment or service
commitment by the Corporation, affects the Employee’s status as an employee at
will who is subject to termination without cause, confers upon the Employee any
right to remain employed by or in service to the Corporation or any Subsidiary,
interferes in any way with the right of the Corporation or any Subsidiary at
any time to terminate such employment or services, or affects the right of the
Corporation or any Subsidiary to increase or decrease the Employee’s other
compensation or benefits.  Nothing in
this paragraph, however, is intended to adversely affect any independent
contractual right of the Employee without his consent thereto, including
Employee’s rights under the Employment Agreement and CIC Agreement.

 

5.     Dividend and Voting Rights.

 

(a)    Limitations on Rights Associated with Units.  
The Employee shall have no rights as a stockholder of the Corporation, no
dividend rights (except as expressly provided in Section 5(b) with
respect to dividend equivalent rights) and no voting rights with respect to the
Stock Units and any shares of Common Stock underlying or issuable in respect of
such Stock Units until such shares of Common Stock are actually issued to and
held of record by the Employee.  Other
than as set forth in Section 5(b) below and subject to the adjustment
provisions under Section 7.1 of the Plan, no adjustments will be made for
dividends or other rights of a holder for which the record date is prior to the
date of issuance of the stock certificate.

 

(b)    Dividend Equivalent Rights Distributions.  
As of any date that the Corporation pays a cash dividend on its Common Stock,
the Corporation shall pay Employee an amount equal to the per share cash
dividend paid by the Corporation on its Common Stock on such date multiplied by
the number of Stock Units remaining subject to this Award as of the related
dividend payment record date.  No such
payment shall be made with respect to any Stock Units which, as of such record
date, have either been paid pursuant to Section 7 or terminated pursuant
to Section 8.

 

 

6.     Restrictions on Transfer.   Neither the
Stock Unit Award, nor any interest therein or amount or shares payable in
respect thereof may be sold, assigned, transferred, pledged or otherwise disposed
of, alienated or encumbered, either voluntarily or involuntarily.  The transfer restrictions in the preceding
sentence shall not apply to (a) transfers to the Corporation, or (b) transfers
by will or the laws of descent and distribution.

 

7.     Timing and Manner of Payment of Stock Units.   Any
Stock Units subject to this Award that vest per Section 3 above (including
any vesting that occurs pursuant to the Employment Agreement or CIC Agreement)
shall be paid on or as soon as administratively practical following, and in any
event within 60 days following, each applicable vesting date, unless such Stock
Units terminate prior to the given vesting date pursuant to Section 8 and
in any event subject to Section 9. 
If, prior to any applicable vesting date, the Corporation’s stockholders
approve an amendment to the limitations on individual awards contained in Section 4.2
of the Plan such that the Corporation may issue shares of Common Stock in
respect of the Stock Units (the “Plan Amendment”), vested Stock Units shall be
paid by the Corporation’s delivery to the Employee of a number of shares of
Common Stock equal to the number of Stock Units subject to this Award that vest
on the applicable vesting date.  If the
Corporation’s stockholders do not approve the Plan Amendment prior to the
applicable vesting date, vested Stock Units shall be paid in cash having a
value equal to the fair market value (as defined in the Plan and such value
determined as of the applicable vesting date) of the number of shares of Common
Stock underlying the Stock Units subject to this Award that vest on the
applicable vesting date. The Employee shall have no further rights with respect
to any Stock Units that are so paid or that are terminated pursuant to Section 8.

 

8.     Effect of Termination of Employment.   Except as
provided in Sections 7.2 or 7.3 of the Plan (which provisions shall equally
apply to the Employee’s Award, whether or not the Stock Units are settled under
the Plan) or in the Employment Agreement or the CIC Agreement, the Employee’s
Stock Units shall terminate to the extent such units have not become vested
prior to the date the Employee is no longer employed by the Corporation or one
of its Subsidiaries, regardless of the reason for the termination of the
Employee’s employment by the Corporation or a Subsidiary, whether with or
without cause, voluntarily or involuntarily. 
If the Employee is employed by a Subsidiary and that entity ceases to be
a Subsidiary, such event shall be deemed to be a termination of employment of
the Employee for purposes of this Award Agreement, unless the Employee
otherwise continues to be employed by the Corporation or another of its
Subsidiaries following such event.  If
any Stock Units are terminated hereunder, such unvested terminated Stock Units
shall automatically terminate and be cancelled as of the applicable termination
date without payment of any consideration by the Company and without any other
action by the Employee, or the Employee’s Beneficiary or Personal
Representative, as the case may be.

 

9.     Adjustments Upon Specified Events.  
Upon the occurrence of certain events relating to the Corporation’s stock
contemplated by Section 7.1 of the Plan (which provisions shall equally
apply to the Employee’s Award, whether or not the Stock Units are settled under
the Plan), the Committee shall make adjustments if appropriate in the number of
Stock Units and the number and kind of securities that may be issued in respect
of the Stock Unit Award.  The 

 

 

Committee
may accelerate payment and vesting of the Stock Units in such circumstances as
it, in its sole discretion, may determine.

 

10.   Tax
Withholding.   Upon any payment of dividend
equivalents and/or the distribution of cash or shares of Common Stock in
respect of the Stock Units, the Corporation (or the Subsidiary last employing
the Employee) shall have the right at its option to (a) require the
Employee to pay or provide for payment in cash of the amount of any taxes that
the Corporation or the Subsidiary may be required to withhold with respect to
such payment and/or distribution, or (b) deduct from any amount payable to
the Employee the amount of any taxes which the Corporation or the Subsidiary
may be required to withhold with respect to such payment and/or distribution.  In any case where a tax is required to be
withheld in connection with the delivery of shares of Common Stock under this
Award Agreement, the Committee may, in its sole discretion, direct the
Corporation or the Subsidiary to reduce the number of shares to be delivered by
(or otherwise reacquire) the appropriate number of shares, valued at their then
fair market value (as defined in the Plan) to satisfy such withholding
obligation.

 

11.  
Notices.   Any notice to be given under the terms
of this Agreement shall be in writing and addressed to the Corporation at its
principal office to the attention of the Secretary, and to the Employee at the
Employee’s last address reflected on the Corporation’s records, or at such
other address as either party may hereafter designate in writing to the other.  Any such notice shall be given only when
received, but if the Employee is no longer an employee of the Company, shall be
deemed to have been duly given by the Corporation when enclosed in a properly
sealed envelope addressed as aforesaid, registered or certified, and deposited
(postage and registry or certification fee prepaid) in a post office or branch
post office regularly maintained by the United States Government.

 

12.  
Plan.   Whether or not the Stock Units are
settled under the Plan, the Employee agrees to be bound by all of the terms and
conditions of the provisions of the Plan, incorporated herein by reference.  In the event of a conflict or inconsistency
between the terms and conditions of this Agreement and of the Plan, the terms
and conditions of the Plan shall govern.  The Employee agrees to be bound by the terms
of the Plan and this Agreement.  The
Employee acknowledges having read and understanding the Plan, the Prospectus
for the Plan, and this Agreement.  Unless
otherwise expressly provided in other sections of this Agreement, provisions of
the Plan that confer discretionary authority on the Committee do not (and shall
not be deemed to) create any rights in the Employee unless such rights are
expressly set forth herein or are otherwise in the sole discretion of the
Committee so conferred by appropriate action of the Committee under the Plan after the date hereof.  Notwithstanding the foregoing or any other
provision of this Agreement, Section 7.7 of the Plan shall not be
applicable to this Award.

 

13.  
Entire Agreement.   This Agreement,
the Plan, the Employment Agreement and the CIC Agreement together constitute
the entire agreement and supersede all prior understandings and agreements,
written or oral, of the parties hereto with respect to the subject matter
hereof.  The Plan and this Award
Agreement may be amended only in the manner provided for pursuant to Section 8.6
of the Plan.  Such amendment must be in
writing and signed by the Corporation.  The
Corporation may, however, unilaterally waive any provision hereof in writing to
the extent such waiver does not adversely affect the interests of the Employee
hereunder, but no such 

 

 

waiver
shall operate as or be construed to be a subsequent waiver of the same
provision or a waiver of any other provision hereof.

 

14.  
Limitation on Employee’s Rights.   This Agreement
and any participation in the Plan confers no rights or interests other than as
herein provided.  This Agreement creates
only a contractual obligation on the part of the Company as to amounts payable
and shall not be construed as creating a trust.  Neither this Agreement or the Plan nor any
underlying program, in and of itself, has any assets.  The Employee shall have only the rights of a
general unsecured creditor of the Corporation (or applicable Subsidiary) with
respect to amounts credited and benefits payable in cash, if any, with respect
to the Stock Units, and rights no greater than the right to receive the Common
Stock (or equivalent value) as a general unsecured creditor with respect to
Stock Units, as and when payable thereunder.

 

15.  
Counterparts.   This Agreement may be executed
simultaneously in any number of counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same
instrument.

 

16.   Section Headings.  
The section headings of this Agreement are for convenience of reference only
and shall not be deemed to alter or affect any provision hereof.

 

17.  
Governing Law.   This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware.

 

 

IN WITNESS WHEREOF,   the Corporation
has caused this Agreement to be executed on its behalf by a duly authorized
officer and the Employee has hereunto set his or her hand as of the date and
year first above written.

 

 

 

	
  POWER-ONE, INC.  

  	
   

  	
  EMPLOYEE

  	
   

  
	
  a Delaware corporation

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ RANDALL H.
  HOLLIDAY

  	
   

  	
  /s/ RICHARD J.
  THOMPSON

  	
   

  
	
   

  	
   

  	
  Signature

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Print Name:  RANDALL H. HOLLIDAY

  	
   

  	
  RICHARD J.
  THOMPSON

  	
   

  
	
   

  	
   

  	
  Print Name

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:  SECRETARY AND GENERAL COUNSEL

  	
   

  	
   

  	
   

  
					

 

 

CONSENT OF SPOUSE

 

In consideration of the Corporation’s execution of
this Option Agreement, the undersigned spouse of the Grantee agrees to be bound
by all of the terms and provisions hereof and of the Plan.

 

 

	
   

  	
   

  	
   

  	
   

  
	
  Signature of Spouse

  	
   

  	
  Date

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00136-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00136-of-00352.parquet"}]]