Document:

Exhibit
10.1

 

SEVERANCE AGREEMENT

 

THIS SEVERANCE AGREEMENT (this “Agreement”), dated as
of October 29, 2007, (the “Effective Date”) is made by and between
International Rectifier Corporation, a Delaware corporation (the “Company”),
and Donald R. Dancer (“Employee”). This term of this Agreement extends from the
Effective Date through the End Date.

 

WITNESSETH:

 

WHEREAS, Employee is a senior level employee of the
Company and is currently serving as its acting Chief Executive Officer,
Executive Vice President, Secretary and General Counsel;

 

WHEREAS, Employee has made and is expected to continue
to make major contributions to the short- and long-term profitability, growth
and financial strength of the Company;

 

WHEREAS, the Company desires to assure itself of both
present and future continuity of management and desires to establish certain
severance benefits for Employee, applicable in the event of a Change in
Control;

 

WHEREAS, the Company is contemporaneously entering
into a compensation agreement with Employee (the “Compensation Agreement”); and

 

WHEREAS, on October 29, 2007 the Board authorized the
Company to enter into this Agreement.

 

NOW, THEREFORE, the Company and Employee agree as
follows:

 

1. Certain Defined Terms. In addition to terms defined
elsewhere herein, the following terms have the following meanings when used in
this Agreement with initial capital letters:

 

(a) “Base Amount” has the same meaning provided to it
under the Code Section 280G final regulations.

 

(b) “Base Pay” means Employee’s annual rate of base
salary as in effect from time to time.

 

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

 

(d) “Cause” means any one or more of the following
committed (or omitted) by Employee:

 

(i) conviction of, or
guilty plea or plea of nolo contendre to, a felony crime; or (ii) gross
misconduct that is materially injurious to the Company and/or any of its
Subsidiaries or affiliates; or

(iii) repeated failure to
follow the reasonable and lawful directions of the Company after the Employee
has received at least one written warning from the Company; or

(iv) any willful and/or
intentional material violation of any written Company policy or procedure; or

(v) a material breach of
this Agreement

 

Whether or not Cause exists in clauses (ii) through (v) shall in each
case be determined in good faith by the Board.

 

1

 

Notwithstanding the foregoing, Employee shall not be deemed to have
been terminated for “Cause” under clauses (ii) through (v) unless and until there
shall have been delivered to the Employee a copy of a resolution duly adopted
by the affirmative vote of not less than a majority of the Board then in office
at a meeting of the Board. In addition, before such termination for Cause is
effective, the Company shall provide the Employee with written notice detailing
why the Company believes a Cause event has occurred and specifying the
particulars thereof in detail. The Board shall also provide the Employee with
ten days after his/her receipt of such notice to cure the Cause event(s)(if
curable) and the opportunity, together with the Employee’s counsel (if the
Employee chooses to have counsel present at such meeting), to be heard before
the Board (or, in the Board’s discretion, the Committee or their delegates)
during such ten day period. Nothing herein will limit the right of the Employee
to contest the validity or propriety of any such determination.

 

(e) “Change in Control” means the occurrence of any
one or more of the following events:

 

(1) Approval by the
stockholders of the Company of the dissolution or liquidation of the Company,
except to the extent the dissolution is in connection with a sale of assets
which would not constitute a Change in Control Event under subsection (2)
below.

 

(2) Approval by the
stockholders of the Company of an agreement to merge, consolidate or otherwise
reorganize, with or into, sell or transfer substantially all of the Company’s
business and/or assets as an entirety to one or more entities that are not
Subsidiaries, as a result of which 50% or less of the outstanding voting
securities of the surviving or resulting entities immediately after the
reorganization are, or are to be, owned by former stockholders of the Company
immediately before such reorganization (assuming for purposes of such
determination that there is no change in the record ownership of the Company’s
securities from the record date for such approval until such reorganization,
but including in such determination any securities of the other parties to such
reorganization held by such affiliates of the Company).

 

(3) The occurrence of any
of the following:

 

Any “person,” alone or
with “affiliates” and “associates” of such person, without the prior approval
of the Board, becomes the “beneficial 
owner” of more than 50% of the outstanding voting securities of the
Company (the terms “person,” “affiliates,” “associates” and “beneficial owner”
are used as such terms are used in the Exchange Act and the General Rules and
Regulations thereunder); provided, however, that a “Change in Control Event”
shall not be deemed to have occurred if such “person” is/are:

 

(A) the Company,

(B) any Subsidiary, or

(C) any employee benefit
plan or employee stock plan of the Company, or any trust or other entity
organized, established or holding shares of such voting securities by, for, or
pursuant to the  terms of any such plan.

 

(4) Individuals who at
the beginning of any period of two consecutive calendar years constitute a
majority of the Board cease for any reason, during such period, to constitute
at least a  majority thereof, unless the
election, or the nomination for election by the Company’s stockholders, of each
new Board member was approved by a vote of at least two-thirds of the Board
members then still in office who were Board members at the beginning of such
period.

 

(5) If, on or before the
second anniversary of the Effective Date, the individual serving as the Company’s
Acting Chief Executive Officer or Chief Executive Officer as of the Effective
Date is

 

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no longer serving in such
position as a result of any reason other than due to such individual’s death or
disability.

 

(f) “Code” means the Internal Revenue Code of 1986, as
amended.

 

(g) “Committee” means the Compensation and Stock
Options Committee of the Board.

 

(h) “Disability” means disability as defined in the
Company’s long-term disability plan in which the Employee participates at the
relevant time or, if the Employee does not participate in a Company long-term
disability plan at the relevant time, as such term is defined in the Company’s
principal long-term disability plan that generally covers the Company’s
senior-level employees at that time, or, if neither of the foregoing applies,
as defined in Code Section 22(e)(3).

 

(i) “Employee Benefits” means any Company group health
or dental benefit plan; provided, however, that Employee Benefits shall not
include contributions made by the Company to any retirement plan, pension plan
or profit sharing plan for the benefit of the Employee.

 

(j) “Employee Benefits Continuation Period” means the
18 month period commencing as of the first day of the month following a
Qualifying Termination.

 

(k) “End Date” means the earlier of: (i) the effective
date that the Company and Employee mutually agree in writing to terminate this
Agreement, (ii) the date, following a Qualifying Termination, when the Company
has fulfilled all of its obligations to Employee under this Agreement, (iii)
the Termination Date arising from a non-Qualifying Termination of Employee’s
employment, or (iv) the date that is two years after the date when the Company
provided written notice to the Employee that it is terminating this Agreement
provided, however, that the End Date under this clause (iv) can be no earlier than
the date that is two years after a Change in Control that occurred during the
term of the Agreement or the date determined under clause (ii) if there is a
Qualifying Termination.

 

(l) “Exchange Act” means the Securities Exchange Act
of 1934, as amended.

 

(m) “Good Reason” means that any one or more of the
following have occurred without the Employee’s prior written consent either in
connection with a Change in Control or during the Protected Period:

 

(i) Employee has, except
in connection with termination of employment for Cause or due to Employee’s
death or Disability, suffered a material and substantial diminution in Employee’s
job responsibilities as in effect immediately prior to the public announcement
of a contemplated Change in Control (and where such Change in Control does
occur), provided, however, that neither mere changes in title and/or reporting
relationship, nor reassignment following a Change in Control to a position that
is similar to the position held immediately prior to such public announcement
of the contemplated Change in Control shall constitute a material and
substantial diminution in job responsibilities. In addition, if Employee’s job
title as of the Effective Date (as specified in the above recitals) is denoted
as or is in effect an “Interim” or “Acting” position, then a subsequent
reassignment to a position of the same level which Employee held immediately
prior to assuming such Interim or Acting position or to a higher level shall
not constitute a Good Reason event; or

(ii) Employee has
incurred a reduction in his or her Base Pay or his/her Target Bonus
opportunity; or

(iii) Employee has been
notified that his or her principal place of work will be relocated to a new
location that is twenty miles or more from Employee’s principal work location
as of immediately before the public announcement of a contemplated Change in
Control (and where such Change in Control does occur); or

(iv) The Company has
materially breached this Agreement including without limitation the failure to
timely comply with Section 3(a).

 

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Before “Good Reason” has been deemed to have occurred,
Employee must give the Company written notice detailing why the Employee
believes a Good Reason event has occurred and such notice must be provided to
the Company within sixty days of the initial occurrence of such alleged Good
Reason event(s) or else such Good Reason event(s) will be deemed to have been
irrevocably waived by Employee. The Company shall then have thirty days after
its receipt of written notice to cure or remedy the items cited in the written
notice so that “Good Reason” will not have formally occurred with respect to
the event(s) in question. If the Company does not timely remedy or cure the
Good Reason events, then Employee’s employment shall be terminated for Good
Reason as of the end of the thirty day cure period.

 

(n) “Protected Period” means the two year period
immediately following (and commencing on) a Change in Control.

 

(o) “Qualifying Termination” means termination of the
Employee’s employment either by the Company without Cause or by the Employee
for Good Reason, in each case occurring either in connection with a Change in
Control (or an impending Change in Control) and/or during the Protected Period.
For avoidance of doubt, termination of employment due to Employee’s death or
Disability is not a Qualifying Termination.

 

(p) “Release Agreement” means a separation agreement
containing the release of all employment related claims against the Company and
its affiliates along with Employee’s covenant not to sue the Company or its
affiliates in substantially the following form and where such separation
agreement will also contain only those covenants expressed in Section 12 below.

 

The release of claims will provide that in exchange for good and
valuable consideration, the “Employee hereby covenants not to sue and releases
and forever discharges the Company, its parents, subsidiaries, attorneys,
insurers, agents, employees, shareholders, directors, officers, affiliates,
predecessors and successors of and from any and all employment related rights,
claims, actions, demands, causes of action, obligations, attorneys’ fees,
costs, damages, and liabilities of whatever kind or nature arising from his
service with the Company, in law or in equity, that Employee may have (whether
known or not known) (collectively, “Claims”), accruing to Employee as of the
Termination Date, that Employee has ever had, including but not limited to
Claims based on and/or arising under Title VII of the Civil Rights Act of 1964,
as amended, The Americans with Disabilities Act, The Family Medical Leave Act,
The Equal Pay Act, The Employee Retirement Income Security Act, The Fair Labor
Standards Act, and/or the California Fair Employment and Housing Act; The
California Constitution, The California Government Code, The California Labor
Code, The Industrial Welfare Commission’s Orders, The Securities Act of 1933,
The Securities Exchange Act of 1934, the Worker Adjustment and Retraining
Notification Act, California Labor Code sections 1400-1408, and any and all
other Claims Employee may have under any other federal, state or local
Constitution, Statute, Ordinance and/or Regulation; and all other Claims
arising under common law including but not limited to tort, express and/or
implied contract and/or quasi-contract, arising out of or, in any way, related
to Employee’s previous relationship with the Company as an employee, consultant
and/ or director. Furthermore, Employee acknowledges that Employee is waiving
and releasing any rights Employee may have under the Older Workers Benefit
Protection Act, Age Discrimination in Employment Act of 1967 (“ADEA”), as
amended, and that this waiver and release is knowing and voluntary. Employee
acknowledges that the consideration given for this waiver and release is in
addition to anything of value to which Employee was already entitled. Employee
further acknowledges that Employee has been advised by this writing that:

 

(a)                                  Employee
should consult with an attorney prior to executing this Agreement;

(b)                                 Employee
has at least twenty-one (21) days within which to consider this Agreement;

(c)                                  Employee
has up to seven (7) days following the execution of this Agreement by the
Parties to revoke the Agreement; and

(d)                                 this
Agreement shall not be effective until the revocation period in subsection (c)
has expired without revocation by Employee.

 

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The Company and Employee agree that this release shall be and remain in
effect in all respects as a complete general release as to the matters
released.”

 

Such Release Agreement will not require a release of the Employee’s
rights to indemnification and contribution by the Company or to coverage under
the Company’s directors and officers liability insurance coverage if applicable
or any claims that may not be released as a matter of law.

 

(q) “Subsidiary” means any corporation or other entity
a majority of whose outstanding voting stock or voting power is beneficially
owned directly or indirectly by the Company.

 

(r) “Target Bonus” means the targeted annualized
cash-based incentive compensation opportunity for the Employee during each
Company fiscal year. Solely for the purposes of determining whether Good Reason
applies, this Target Bonus amount can not be reduced from any prior fiscal year
without the Employee’s express prior written consent, although the actual
amount of any bonus earned and paid to Employee for any year shall be
determined pursuant to the terms of each year’s bonus arrangement.

 

(s) “Termination Date” means the last date of Employee’s
employment with the Company (and any Subsidiary).

 

2. Qualifying Termination Consequences. If a
Qualifying Termination occurs during the term of this Agreement and also occurs
either in connection with a Change in Control (or an impending Change in
Control) and/or during the Protected Period, then the following subsections in
this Section 2 shall apply (with Sections 2(b) through 2(g) being subject to
the effectiveness of the Release Agreement referenced in Section 2(h) below):

 

(a) Within ten days of his/her Termination Date (or
such earlier time required by applicable law), Employee shall be paid for
(i) his/her unpaid salary and paid time off and vacation pay that are
accrued through the Termination Date, (ii) earned but unpaid bonuses for
performance periods completed on or prior to the Termination Date, and (iii)
unreimbursed valid business expenses that were submitted in accordance with
Company policies and procedures. Employee is also eligible for other vested
benefits pursuant to the express terms of any applicable Company employee
benefit plan.

 

(b) The Company shall pay in cash to Employee an
amount equal to two (2) times the sum of the Employee’s Base Pay and Target
Bonus as in effect on the Termination Date (the “Cash Severance”). The Board
shall determine in good faith whether such Qualifying Termination is occurring
in connection with an impending Change in Control. However, such a Qualifying
Termination shall in any event be deemed to be in connection with an impending
Change in Control if such Qualifying Termination (i) is required by the
merger agreement or other instrument relating to such Change in Control, or
(ii) is made at the express request of the other party (or parties) to the
transaction constituting such Change in Control, or (iii) occurs after the
public announcement of an impending Change in Control. The Cash Severance shall
be paid to Employee in a cash lump sum within ten days after the effectiveness
of the Release Agreement.

 

(c) For the Employee Benefits Continuation Period, the
Company shall continue to provide to Employee the Employee Benefits which were
received by, or with respect to, Employee as of the date of the Qualifying
Termination, at the same expense to Employee as before the Qualifying
Termination subject to immediate cessation (other than as to any pre-existing
condition not covered by the new benefits coverage) if Employee is offered
employee benefits coverage in connection with new employment. From the
Termination Date through the Employee Benefits Continuation Period, Employee
shall provide advance written notice to the Company informing the Company when
the Employee is offered or becomes eligible for other employee benefits in
connection with new employment. In addition, if periodically requested by the
Company during the Employee Benefits Continuation Period, the Employee will
provide the Company with written confirmation that he/she has not been offered
other employee benefits.

 

(d) The Company shall pay in cash to Employee an
amount equal to a pro-rata portion (based on the number of whole months
Employee served as a Company employee during the fiscal year of the Qualifying
Termination divided by twelve) of the Target Bonus for such year. Any amounts
payable to Employee

 

5

 

under this Section 2(d) will be paid to Employee at the same time that
the Cash Severance is paid. The Company shall also provide, at Company expense
and not to exceed $50,000 in the aggregate, job outplacement services for the
Employee until the earlier of nine months after the Termination Date or the
date when Employee accepts an offer of new employment. The Company shall select
the outplacement service provider and provide any compensation benefit
hereunder directly with and to the service provider.

 

(e) In the event that the Employee is entitled to
receive payment of the Cash Severance, and notwithstanding anything to the
contrary in any restricted stock, stock option or other equity compensation
plan or agreement or deferred compensation or retirement plan or agreement,
upon the Termination Date the Employee shall become immediately fully vested
(and all vesting restrictions and Company repurchase rights removed) in all of
his/her then outstanding stock options, stock appreciation rights, warrants,
restricted stock, phantom stock, nonqualified deferred compensation,
nonqualified retirement agreement or similar nonqualified plans or agreements
with the Company. In addition, subject to the terms of any applicable Company
equity compensation plan or merger agreement or other instrument relating to
the Change in Control that provides that all Company stock options will be
canceled and not continued upon a Change in Control, the Employee shall have at
least until the earlier of (i) the scheduled expiration date of the stock
option term or (ii) six months after the Termination Date to exercise his/her
vested then-outstanding stock options. Notwithstanding the foregoing, any award
that is subject to a performance condition will vest only to the extent the
performance condition has been satisfied on or prior to the Termination Date.

 

(f) In  the
event that it is determined that any payment or distribution of any type to or
for the benefit of the Employee made by the Company, by any of its affiliates,
by any person who acquires ownership or effective control of the Company or
ownership of a substantial portion of the Company’s assets (within the meaning
of section 280G of the Code, and the regulations thereunder or by any affiliate
of such person, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise (the “Total Payments”),
would be subject to the excise tax imposed by section 4999 of the Code or any
interest or penalties with respect to such excise tax (such excise tax,
together with any such interest or penalties, are collectively referred to as
the “Excise Tax”), then either paragraphs (1) or (2) of this Section 2(f) below
shall occur as applicable:

 

(1) If the aggregate present value of the Total Payments (as calculated
pursuant to the Code Section 280G final regulations) is less than 345% of the
Employee’s Base Amount, then such Total Payments shall be reduced to the
smaller amount that is equal to $1.00 less than 300% of the Employee’s Base
Amount.

 

(2) If the aggregate present value of the Total Payments (as calculated
pursuant to the Code Section 280G final regulations) is equal to or greater
than 345% of the Employee’s Base Amount, then, subject to the maximum dollar
limit expressed in Section 2(g), the Company shall pay Employee a cash amount
equal to the sum of: (i) any excise taxes that may be imposed on Employee under
Code Sections 280G and 4999 (the “Excise Tax Restoration”) and (ii) for any
taxes (including excise taxes) imposed on the Excise Tax Restoration payment,
and for any interest or penalties related to such excise tax with all such
computations performed applying the then highest marginal tax rates. Such
payment shall be made to Employee within thirty days of the determination that
there are excise taxes owed and will be in an amount so that Employee will be
in the same position on an after-tax basis that he would have been if no excise
taxes, interest and/or penalties had been imposed.

 

(3) All mathematical determinations and all determinations of whether
any of the Total Payments are “parachute payments” (within the meaning of
section 280G of the Code) that are required to be made under this Section 2(f),
shall be made by a nationally recognized independent registered public
accounting firm not currently retained by the Company immediately prior to the
Change in Control (the “Accountants”), who shall provide their determination,
together with detailed supporting calculations regarding the amount of any
relevant matters, both to the Company and to the Employee within seven (7)
business days of the Change in Control or Termination Date, as applicable, or
such earlier time as is requested by the Company. Such determination shall be
made by the Accountants using reasonable good faith interpretations of the Code.
Any determination by the Accountants shall be binding upon the Company and the
Employee,

 

6

 

absent manifest error. The Company shall pay the fees and costs of the
Accountants which are incurred in connection with this Section 2(f).

 

(g) In the event the Employee is subject to additional
taxes imposed by Code Section 409A with respect to any payments or benefits due
to the Employee under this Agreement, the Company shall pay Employee a cash
amount equal to the sum of: (i) any taxes that may be imposed on Employee under
Code Section 409A (the “409A Tax Restoration”) and (ii) for any taxes
(including excise taxes) imposed on the 409A Tax Restoration payment, and for
any interest or penalties related to such Code Section 409A taxes with all such
computations performed applying the then highest marginal tax rates. Such
payment shall be made to Employee within thirty days of the determination that
there are Code Section 409A taxes owed and will be in an amount so that
Employee will be in the same position on an after-tax basis that he would have
been if no Code Section 409A taxes, excise taxes, interest and/or penalties had
been imposed.

 

Notwithstanding anything to the contrary, the maximum aggregate amount
of payments that the Company will be required to make under Sections 2(f)(2)
and 2(g) is $3,000,000.

 

(h) All payments and benefits provided under Sections
2(b) through 2(g) are conditioned on and subject to the Employee’s continuing
compliance with this Agreement and the Employee’s timely execution (and
non-revocation and effectiveness) of the Release Agreement on or after the
Termination Date and the Employee’s on-going compliance with the terms of the
Release Agreement. The Company will provide the Release Agreement to the
Employee for his/her review and execution within three days of the Termination
Date. There is no entitlement to any payments or benefits unless and until such
Release Agreement is effective and the Release Agreement must become effective
within sixty days after the Termination Date or else no payments or benefits
will be provided to Employee under Sections 2(b) through 2(g). In addition, to
the extent Employee receives severance or similar payments and/or benefits
(other than any payments and/or benefits under Employee’s Compensation
Agreement, which payments and/or benefits are expressly excluded from this
provision) under any other Company plan, program, agreement, policy, practice,
or the like, or under the WARN Act or similar state law, the payments and
benefits due to Employee under this Agreement will be correspondingly reduced
on a dollar-for-dollar basis (or vice-versa).

 

3. Successors and Binding
Agreement.

 

(a) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation, reorganization or
otherwise) to all or substantially all of the business or assets of the
Company, by written agreement in form and substance reasonably satisfactory to
the Employee, expressly to assume and agree to perform this Agreement in the
same manner and to the same extent the Company would be required to perform if
no such succession had taken place. This Agreement will be binding upon and
inure to the benefit of the Company and any successor to the Company, including
without limitation any persons acquiring directly or indirectly all or
substantially all of the business or assets of the Company whether by purchase,
merger, consolidation, reorganization or otherwise (and such successor shall
thereafter be deemed the “Company” for the purposes of this Agreement), but
will not otherwise be assignable, transferable or delegable by the Company.

 

(b) This Agreement will inure to the benefit of and be
enforceable by the Employee’s personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees.

 

(c) This Agreement is personal in nature and neither
of the parties hereto shall, without the consent of the other, assign, transfer
or delegate this Agreement or any rights or obligations hereunder except as
expressly provided in Sections 3(a) and 3(b). Without limiting the generality
or effect of the foregoing, the Employee’s right to receive payments hereunder
will not be assignable, transferable or delegable, whether by pledge, creation
of a security interest, or otherwise, other than by a transfer by Employee’s
will or by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 3(c), the Company
shall have no liability to pay any amount so attempted to be assigned,
transferred or delegated.

 

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4. No Retention Rights. This Agreement is not an
employment agreement and does not give the Employee the right to be retained by
the Company (or its Subsidiaries or affiliates) and the Employee agrees that
he/she is an employee-at-will subject to any effective employment agreement
between the parties. The Company (or its Subsidiaries or affiliates) reserves
the right to terminate the Employee’s service at any time and for any reason.

 

5. Notices. For all purposes of this Agreement, all
communications, including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder will be in writing and
will be deemed to have been duly given when hand delivered or dispatched by
electronic facsimile transmission (with receipt thereof orally confirmed), or
five business days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid, or three business
days after having been sent by a nationally recognized overnight courier
service such as FedEx, UPS, or DHL, addressed to the Company (to the attention
of the Secretary of the Company) at its principal executive office and to the
Employee at his/her principal residence, or to such other address as any party
may have furnished to the other in writing and in accordance herewith, except that
notices of changes of address shall be effective only upon receipt.

 

6. Validity. If any provision of this Agreement or the
application of any provision hereof to any person or circumstances is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement
and the application of such provision to any other person or circumstances will
not be affected, and the provision so held to be invalid, unenforceable or
otherwise illegal will be reformed to the extent (and only to the extent) necessary
to make it enforceable, valid or legal.

 

7. Arbitration; Governing Law. Any dispute between the
parties under this Agreement shall be resolved (except as provided below) in
Los Angeles, California through informal arbitration by an arbitrator selected
under the rules of the American Arbitration Association. The arbitrator shall
have the right only to interpret and apply the provisions of this Agreement and
may not change its provisions. The arbitrator shall permit reasonable
pre-hearing discovery of facts, to the extent necessary to establish a claim or
a defense to a claim, subject to supervision by the arbitrator. The
determination of the arbitrator shall be conclusive and binding upon the
parties and judgment upon the same may be entered in any court having
jurisdiction thereof. The arbitrator shall give written notice to the parties
stating his determination and shall furnish to each party a signed copy of such
written decision. To the extent required by applicable law, the expenses of the
arbitration shall be borne by the Company, otherwise the arbitration expenses
shall be borne equally by the Company and the Employee provided, however, that
each party shall be responsible for their own legal fees and expenses (except
that the Company shall reimburse the Employee for the Employee’s legal fees
within thirty days of the arbitration decision if the Employee is forced to
successfully enforce at least one material claim of his Section 2 entitlements
under this Section 7). The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California without regard to the conflicts of laws principles thereof.

 

8. Miscellaneous. No provision of this Agreement may
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing signed by the Employee and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto any
condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. This Agreement and the
Compensation Agreement constitute the entire agreement of the parties with
respect to the subject matter thereof and supersede any and all prior
agreements of the parties with respect to such subject matter. No agreements or
representations, oral or otherwise, expressed or implied with respect to the
subject matter thereof have been made by either party which are not set forth
expressly in this Agreement and/or the Compensation Agreement.

 

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

 

10. Section 409A. The Agreement is not intended to
constitute a “nonqualified deferred compensation plan” within the meaning of
section 409A of the Code. Notwithstanding the foregoing, in

 

8

 

the event this Agreement or any benefit paid under this Agreement to
Employee is deemed to be subject to section 409A of the Code, the Employee
consents to the Company’s adoption of such conforming amendments as the Company
deems advisable or necessary, in its sole discretion, to comply with section
409A of the Code (including without limit delaying the timing of payments). Notwithstanding
anything to the contrary, if, upon Employee’s separation from service, Employee
is then a Company “specified employee” (as defined in Section 409A of the
Code), then to the extent necessary to comply with Code Section 409A, the
Company will defer payment (without interest) of certain of the amounts owed to
Employee under this Agreement until the earlier of the Employee’s death or the
first business day of the seventh month following Employee’s separation from
service.

 

11. Withholding. All payments and benefits made under
this Agreement shall be subject to reduction to reflect any withholding taxes
or other amounts required by applicable law or regulation.

 

12. Restrictive Covenants. The provisions of this
Section 12 shall survive termination of this Agreement and/or termination of
Employee’s employment for any reason.

 

(a) Nondisparagement. The
Employee will not disparage the Company, its directors, officers, employees,
affiliates, Subsidiaries, predecessors, successors or assigns in any written or
oral communications to any third party. The Employee further agrees that he/she
will not direct anyone to make any disparaging oral or written remarks to any
third parties, provided, however, that the Employee may testify or otherwise
provide information truthfully in connection with any (i) governmental and/or
regulatory proceeding, (ii) required governmental or regulatory filing, or
(iii) any subpoena for testimony served upon the Employee.

 

(b) Nonsolicit. During
the Employee’s employment with Company and for 12 months after the Termination
Date, the Employee shall not, directly or indirectly, either as an individual
or as an employee, agent, consultant, advisor, independent contractor, general
partner, officer, director, stockholder, investor, lender, or in any other
capacity whatsoever, of any person, firm, corporation or partnership: (i)
solicit, induce, recruit or encourage any of the Company’s employees or
consultants to terminate their relationship with the Company, or attempt to
solicit, induce, recruit or encourage any of the Company’s employees or
consultants to terminate their relationship with the Company, or (ii) attempt
to negatively influence any of the Company’s clients or customers from
purchasing Company products or services.

 

(c) Nondisclosure. Notwithstanding
any requirement that the Company may have to publicly disclose the terms of
this Agreement pursuant to applicable law or regulations, the Employee agrees
to use reasonable efforts to maintain in confidence the existence of this
Agreement, the contents and terms of this Agreement, and the consideration for
this Agreement (hereinafter collectively referred to as “Agreement Information”).
The Employee also agrees to take every reasonable precaution to prevent
disclosure of any Agreement Information to third parties, except for
disclosures required by law or reasonably necessary with respect to Employee’s
immediate family members or personal advisors who shall also agree to maintain
confidentiality of the Agreement Information.

 

(d) Confidentiality. Employee
shall not, except as required by any court or administrative agency, without
the written consent of the Board, or the Company’s Chief Executive Officer, or
a person authorized thereby, disclose to any person, other than an employee of
the Company or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by the Employee or his duties to
the Company, any confidential information obtained by him while in the employ
of the Company with respect to any of the Company’s inventions, processes,
customers, methods of distribution, methods of manufacturing, attorney-client
communications, pending or contemplated acquisitions, other trade secrets, or
any other material which the Company is obliged to keep confidential pursuant
to any confidentiality agreement or protective order; provided, however, that
confidential information shall not include any information now known or which
becomes known generally to the public (other than as a result of an
unauthorized disclosure by the Employee) or any information of a type not
otherwise considered confidential by a person engaged in the same business or a
business similar to that conducted by the Company. Employee acknowledges that
he also continues to be bound by the Inventions and Confidential Information
agreement with the Company that Employee previously executed.

 

9

 

(e) Remedy for Breach. The
parties hereto agree that, in the event of breach or threatened breach of any
covenants herein, the damage or imminent damage shall be inestimable, and that
therefore any remedy at law or in damages shall be inadequate. Accordingly, the
parties hereto agree that the Company and Employee shall be entitled to apply
for injunctive relief in the event of any breach or threatened breach of any of
such provisions by Employee or the Company, in addition to any other relief
(including damages) available to the Company or Employee under this Agreement
or under law. If the Employee materially breaches the Release Agreement then
within thirty days of the Company’s notice to the Employee regarding such
breach, the Employee must repay to the Company in cash all of the payments and
benefits previously provided to the Employee under Section 2 and the Company
will owe no further obligations to Employee under this Agreement.

 

IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed and delivered as of the Effective Date.

 

 

INTERNATIONAL RECTIFIER CORPORATION

 

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Lawrence A. Michlovich

  
	
   

  	
  Assistant Secretary

  
	
   

  
	
  EMPLOYEE:

  
	
   

  
	
   

  
	
   

  	
   

  
	
  Donald R. Dancer

  
				

 

10Exhibit 10.2

 

SEVERANCE AGREEMENT

 

THIS SEVERANCE
AGREEMENT (this “Agreement”), dated as of October 29, 2007, (the “Effective
Date”) is made by and between International Rectifier Corporation, a Delaware
corporation (the “Company”), and Linda J. Pahl (“Employee”).  This term of this Agreement extends from the
Effective Date through the End Date.

 

WITNESSETH:

 

WHEREAS, Employee
is a senior level employee of the Company and is currently serving as its
acting Chief Financial Officer;

 

WHEREAS, Employee
has made and is expected to continue to make major contributions to the short-
and long-term profitability, growth and financial strength of the Company;

 

WHEREAS, the
Company desires to assure itself of both present and future continuity of
management and desires to establish certain severance benefits for Employee,
applicable in the event of a Change in Control; and

 

WHEREAS, on
October 29, 2007 the Board authorized the Company to enter into this Agreement.

 

NOW, THEREFORE,
the Company and Employee agree as follows:

 

1. Certain Defined
Terms.  In addition to terms defined
elsewhere herein, the following terms have the following meanings when used in
this Agreement with initial capital letters:

 

(a) “Base Amount”
has the same meaning provided to it under the Code Section 280G final
regulations.

 

(b) “Base Pay”
means Employee’s annual rate of base salary as in effect from time to time.

 

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

 

(d) “Cause” means
any one or more of the following committed (or omitted) by Employee:

 

(i) conviction of, or guilty plea or plea of nolo
contendre to, a felony crime; or (ii) gross misconduct that is materially
injurious to the Company and/or any of its Subsidiaries or affiliates; or

(iii) repeated failure to follow the reasonable and
lawful directions of the Company after the Employee has received at least one
written warning from the Company; or

(iv) any willful and/or intentional material violation
of any written Company policy or procedure; or

(v) a material breach of this Agreement

 

Whether or not Cause exists in clauses (ii) through (v) shall in each
case be determined in good faith by the Board.

 

Notwithstanding the foregoing, Employee shall not be deemed to have
been terminated for “Cause” under clauses (ii) through (v) unless and until
there shall have been delivered to the Employee a copy of a resolution duly
adopted by the affirmative vote of not less than a majority of the Board then
in office at a meeting of the Board.  In
addition, before such termination for Cause is effective, the Company shall 

 

1

 

provide the Employee with written notice detailing why the Company
believes a Cause event has occurred and specifying the particulars thereof in
detail.  The Board shall also provide the
Employee with ten days after his/her receipt of such notice to cure the Cause
event(s)(if curable) and the opportunity, together with the Employee’s counsel
(if the Employee chooses to have counsel present at such meeting), to be heard
before the Board (or, in the Board’s discretion, the Committee or their
delegates) during such ten day period. 
Nothing herein will limit the right of the Employee to contest the
validity or propriety of any such determination.

 

(e) “Change in
Control” means the occurrence of any one or more of the following events:

 

(1) Approval by the
stockholders of the Company of the dissolution or liquidation of the Company,
except to the extent the dissolution is in connection with a sale of assets
which would not constitute a Change in Control Event under subsection (2)
below.

 

(2) Approval by the
stockholders of the Company of an agreement to merge, consolidate or otherwise
reorganize, with or into, sell or transfer substantially all of the Company’s
business and/or assets as an entirety to one or more entities that are not
Subsidiaries, as a result of which 50% or less of the outstanding voting
securities of the surviving or resulting entities immediately after the
reorganization are, or are to be, owned by former stockholders of the Company
immediately before such reorganization (assuming for purposes of such
determination that there is no change in the record ownership of the Company’s
securities from the record date for such approval until such reorganization,
but including in such determination any securities of the other parties to such
reorganization held by such affiliates of the Company).

 

(3) The occurrence of any of the following:

 

Any “person,” alone or with “affiliates” and “associates”
of such person, without the prior approval of the Board, becomes the “beneficial
owner” of more than 50% of the outstanding voting securities of the Company
(the terms “person,” “affiliates,” “associates” and “beneficial owner” are used
as such terms are used in the Exchange Act and the General Rules and
Regulations thereunder); provided, however, that a “Change in Control Event”
shall not be deemed to have occurred if such “person” is/are:

(A) the Company,

(B) any Subsidiary, or

(C) any employee benefit
plan or employee stock plan of the Company, or any trust or other entity
organized, established or holding shares of such voting securities by, for, or
pursuant to the terms of any such plan.

 

(4) Individuals who at the beginning of any period of
two consecutive calendar years constitute a majority of the Board cease for any
reason, during such period, to constitute at least a majority thereof, unless
the election, or the nomination for election by the Company’s stockholders, of
each new Board member was approved by a vote of at least two-thirds of the
Board members then still in office who were Board members at the beginning of
such period.

 

(5) If, on or before the second anniversary of the
Effective Date, the individual serving as the Company’s Acting Chief Executive
Officer or Chief Executive Officer as of the Effective Date is no longer
serving in such position as a result of any reason other than due to such
individual’s death or disability.

 

(f) “Code” means
the Internal Revenue Code of 1986, as amended.

 

2

 

(g) “Committee”
means the Compensation and Stock Options Committee of the Board.

 

(h) “Disability”
means disability as defined in the Company’s long-term disability plan in which
the Employee participates at the relevant time or, if the Employee does not
participate in a Company long-term disability plan at the relevant time, as
such term is defined in the Company’s principal long-term disability plan that
generally covers the Company’s senior-level employees at that time, or, if
neither of the foregoing applies, as defined in Code Section 22(e)(3).

 

(i) “Employee
Benefits” means any Company group health or dental benefit plan; provided,
however, that Employee Benefits shall not include contributions made by the
Company to any retirement plan, pension plan or profit sharing plan for the
benefit of the Employee.

 

(j) “Employee
Benefits Continuation Period” means the 18 month period commencing as of the
first day of the month following a Qualifying Termination.

 

(k) “End Date”
means the earlier of: (i) the effective date that the Company and Employee
mutually agree in writing to terminate this Agreement, (ii) the date, following
a Qualifying Termination, when the Company has fulfilled all of its obligations
to Employee under this Agreement, (iii) the Termination Date arising from a
non-Qualifying Termination of Employee’s employment, or (iv) the date that is
two years after the date when the Company provided written notice to the
Employee that it is terminating this Agreement provided, however, that the End
Date under this clause (iv) can be no earlier than the date that is two years
after a Change in Control that occurred during the term of the Agreement or the
date determined under clause (ii) if there is a Qualifying Termination.

 

(l) “Exchange Act”
means the Securities Exchange Act of 1934, as amended.

 

(m) “Good Reason”
means that any one or more of the following have occurred without the Employee’s
prior written consent either in connection with a Change in Control or during
the Protected Period:

 

(i) Employee has, except in connection with
termination of employment for Cause or due to Employee’s death or Disability,
suffered a material and substantial diminution in Employee’s job
responsibilities as in effect immediately prior to the public announcement of a
contemplated Change in Control (and where such Change in Control does occur),
provided, however, that neither mere changes in title and/or reporting
relationship, nor reassignment following a Change in Control to a position that
is similar to the position held immediately prior to such public announcement
of the contemplated Change in Control shall constitute a material and
substantial diminution in job responsibilities. 
In addition, if Employee’s job title as of the Effective Date (as
specified in the above recitals) is denoted as or is in effect an “Interim” or “Acting”
position, then a subsequent reassignment to a position of the same level which
Employee held immediately prior to assuming such Interim or Acting position or
to a higher level shall not constitute a Good Reason event; or

(ii) Employee has incurred a reduction in his or her
Base Pay or his/her Target Bonus opportunity; or

(iii) Employee has been notified that his or her
principal place of work will be relocated to a new location that is twenty
miles or more from Employee’s principal work location as of immediately before
the public announcement of a contemplated Change in Control (and where such
Change in Control does occur); or

(iv) The Company has materially breached this
Agreement including without limitation the failure to timely comply with
Section 3(a).

 

Before “Good Reason” has been deemed to have occurred,
Employee must give the Company written notice detailing why the Employee
believes a Good Reason event has occurred and such notice must be provided to
the Company within sixty days of the initial occurrence of such alleged Good
Reason 

 

3

 

event(s) or else such
Good Reason event(s) will be deemed to have been irrevocably waived by
Employee.  The Company shall then have
thirty days after its receipt of written notice to cure or remedy the items
cited in the written notice so that “Good Reason” will not have formally
occurred with respect to the event(s) in question.  If the Company does not timely remedy or cure
the Good Reason events, then Employee’s employment shall be terminated for Good
Reason as of the end of the thirty day cure period.

 

(n) “Protected
Period” means the two year period immediately following (and commencing on) a
Change in Control.

 

(o) “Qualifying
Termination” means termination of the Employee’s employment either by the
Company without Cause or by the Employee for Good Reason, in each case
occurring either in connection with a Change in Control (or an impending Change
in Control) and/or during the Protected Period. 
For avoidance of doubt, termination of employment due to Employee’s
death or Disability is not a Qualifying Termination.

 

(p) “Release
Agreement” means a separation agreement containing the release of all
employment related claims against the Company and its affiliates along with
Employee’s covenant not to sue the Company or its affiliates in substantially
the following form and where such separation agreement will also contain only
those covenants expressed in Section 12 below.

 

The release of claims will provide that in exchange for good and
valuable consideration, the “Employee hereby covenants not to sue and releases
and forever discharges the Company, its parents, subsidiaries, attorneys,
insurers, agents, employees, shareholders, directors, officers, affiliates,
predecessors and successors of and from any and all employment related rights,
claims, actions, demands, causes of action, obligations, attorneys’ fees,
costs, damages, and liabilities of whatever kind or nature arising from his
service with the Company, in law or in equity, that Employee may have (whether
known or not known) (collectively, “Claims”), accruing to Employee as of the
Termination Date, that Employee has ever had, including but not limited to
Claims based on and/or arising under Title VII of the Civil Rights Act of 1964,
as amended, The Americans with Disabilities Act, The Family Medical Leave Act,
The Equal Pay Act, The Employee Retirement Income Security Act, The Fair Labor
Standards Act, and/or the California Fair Employment and Housing Act; The
California Constitution, The California Government Code, The California Labor
Code, The Industrial Welfare Commission’s Orders, The Securities Act of 1933,
The Securities Exchange Act of 1934, the Worker Adjustment and Retraining
Notification Act, California Labor Code sections 1400-1408, and any and all
other Claims Employee may have under any other federal, state or local
Constitution, Statute, Ordinance and/or Regulation; and all other Claims
arising under common law including but not limited to tort, express and/or
implied contract and/or quasi-contract, arising out of or, in any way, related
to Employee’s previous relationship with the Company as an employee, consultant
and/ or director.  Furthermore, Employee
acknowledges that Employee is waiving and releasing any rights Employee may
have under the Older Workers Benefit Protection Act, Age Discrimination in
Employment Act of 1967 (“ADEA”), as amended, and that this waiver and release
is knowing and voluntary.  Employee
acknowledges that the consideration given for this waiver and release is in
addition to anything of value to which Employee was already entitled.  Employee further acknowledges that Employee
has been advised by this writing that:

 

(a)           Employee should consult with an
attorney prior to executing this Agreement;

(b)           Employee has at least twenty-one (21)
days within which to consider this Agreement;

(c)           Employee has up to seven (7) days
following the execution of this Agreement by the Parties to revoke the
Agreement; and

(d)           this Agreement shall not be effective
until the revocation period in subsection

(c) has expired without
revocation by Employee.

 

The Company and Employee agree that this release shall be and remain in
effect in all respects as a complete general release as to the matters
released.”

 

4

 

Such Release Agreement will not require a release of the Employee’s
rights to indemnification and contribution by the Company or to coverage under
the Company’s directors and officers liability insurance coverage if applicable
or any claims that may not be released as a matter of law.

 

(q) “Subsidiary”
means any corporation or other entity a majority of whose outstanding voting
stock or voting power is beneficially owned directly or indirectly by the
Company.

 

(r) “Target Bonus”
means the targeted annualized cash-based incentive compensation opportunity for
the Employee during each Company fiscal year. 
Solely for the purposes of determining whether Good Reason applies, this
Target Bonus amount can not be reduced from any prior fiscal year without the
Employee’s express prior written consent, although the actual amount of any
bonus earned and paid to Employee for any year shall be determined pursuant to
the terms of each year’s bonus arrangement.

 

(s) “Termination
Date” means the last date of Employee’s employment with the Company (and any
Subsidiary).

 

2. Qualifying
Termination Consequences.  If a
Qualifying Termination occurs during the term of this Agreement and also occurs
either in connection with a Change in Control (or an impending Change in
Control) and/or during the Protected Period, then the following subsections in
this Section 2 shall apply (with Sections 2(b) through 2(g) being subject to
the effectiveness of the Release Agreement referenced in Section 2(h) below):

 

(a) Within ten
days of his/her Termination Date (or such earlier time required by applicable
law), Employee shall be paid for (i) his/her unpaid salary and paid time
off and vacation pay that are accrued through the Termination Date, (ii) earned
but unpaid bonuses for performance periods completed on or prior to the
Termination Date, and (iii) unreimbursed valid business expenses that were
submitted in accordance with Company policies and procedures.  Employee is also eligible for other vested
benefits pursuant to the express terms of any applicable Company employee
benefit plan.

 

(b) The Company
shall pay in cash to Employee an amount equal to two (2) times the sum of the
Employee’s Base Pay and Target Bonus as in effect on the Termination Date (the “Cash
Severance”).  The Board shall determine
in good faith whether such Qualifying Termination is occurring in connection
with an impending Change in Control. 
However, such a Qualifying Termination shall in any event be deemed to
be in connection with an impending Change in Control if such Qualifying
Termination (i) is required by the merger agreement or other instrument
relating to such Change in Control, or (ii) is made at the express request
of the other party (or parties) to the transaction constituting such Change in
Control, or (iii) occurs after the public announcement of an impending Change
in Control.  The Cash Severance shall be
paid to Employee in a cash lump sum within ten days after the effectiveness of
the Release Agreement.

 

(c) For the
Employee Benefits Continuation Period, the Company shall continue to provide to
Employee the Employee Benefits which were received by, or with respect to,
Employee as of the date of the Qualifying Termination, at the same expense to
Employee as before the Qualifying Termination subject to immediate cessation
(other than as to any pre-existing condition not covered by the new benefits
coverage) if Employee is offered employee benefits coverage in connection with
new employment.  From the Termination
Date through the Employee Benefits Continuation Period, Employee shall provide
advance written notice to the Company informing the Company when the Employee
is offered or becomes eligible for other employee benefits in connection with
new employment.  In addition, if
periodically requested by the Company during the Employee Benefits Continuation
Period, the Employee will provide the Company with written confirmation that
he/she has not been offered other employee benefits.

 

(d) The Company
shall pay in cash to Employee an amount equal to a pro-rata portion (based on
the number of whole months Employee served as a Company employee during the
fiscal year of the Qualifying Termination divided by twelve) of the Target
Bonus for such year.  Any amounts payable
to Employee under this Section 2(d) will be paid to Employee at the same time
that the Cash Severance is paid.  The
Company shall also provide, at Company expense and not to exceed $50,000 in the
aggregate, job outplacement services for the Employee until the earlier of nine
months after the Termination Date or the 

 

5

 

date when Employee
accepts an offer of new employment.  The
Company shall select the outplacement service provider and provide any
compensation benefit hereunder directly with and to the service provider.

 

(e) In the event
that the Employee is entitled to receive payment of the Cash Severance, and notwithstanding
anything to the contrary in any restricted stock, stock option or other equity
compensation plan or agreement or deferred compensation or retirement plan or
agreement, upon the Termination Date the Employee shall become immediately
fully vested (and all vesting restrictions and Company repurchase rights
removed) in all of his/her then outstanding stock options, stock appreciation
rights, warrants, restricted stock, phantom stock, nonqualified deferred
compensation, nonqualified retirement agreement or similar nonqualified plans
or agreements with the Company.  In
addition, subject to the terms of any applicable Company equity compensation
plan or merger agreement or other instrument relating to the Change in Control
that provides that all Company stock options will be canceled and not continued
upon a Change in Control, the Employee shall have at least until the earlier of
(i) the scheduled expiration date of the stock option term or (ii) six months
after the Termination Date to exercise his/her vested then-outstanding stock
options.  Notwithstanding the foregoing,
any award that is subject to a performance condition will vest only to the
extent the performance condition has been satisfied on or prior to the
Termination Date.

 

(f) In the event that
it is determined that any payment or distribution of any type to or for the
benefit of the Employee made by the Company, by any of its affiliates, by any
person who acquires ownership or effective control of the Company or ownership
of a substantial portion of the Company’s assets (within the meaning of section
280G of the Code, and the regulations thereunder or by any affiliate of such
person, whether paid or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise (the “Total Payments”), would be subject
to the excise tax imposed by section 4999 of the Code or any interest or
penalties with respect to such excise tax (such excise tax, together with any
such interest or penalties, are collectively referred to as the “Excise Tax”),
then either paragraphs (1) or (2) of this Section 2(f) below shall occur as
applicable:

 

(1) If the aggregate present value of the Total Payments (as calculated
pursuant to the Code Section 280G final regulations) is less than 345% of the
Employee’s Base Amount, then such Total Payments shall be reduced to the
smaller amount that is equal to $1.00 less than 300% of the Employee’s Base
Amount.

 

(2) If the aggregate present value of the Total Payments (as calculated
pursuant to the Code Section 280G final regulations) is equal to or greater
than 345% of the Employee’s Base Amount, then, subject to the maximum dollar
limit expressed in Section 2(g), the Company shall pay Employee a cash amount
equal to the sum of: (i) any excise taxes that may be imposed on Employee under
Code Sections 280G and 4999 (the “Excise Tax Restoration”) and (ii) for any
taxes (including excise taxes) imposed on the Excise Tax Restoration payment,
and for any interest or penalties related to such excise tax with all such computations
performed applying the then highest marginal tax rates.  Such payment shall be made to Employee within
thirty days of the determination that there are excise taxes owed and will be
in an amount so that Employee will be in the same position on an after-tax
basis that he would have been if no excise taxes, interest and/or penalties had
been imposed.

 

(3) All mathematical determinations and all determinations of whether
any of the Total Payments are “parachute payments” (within the meaning of section
280G of the Code) that are required to be made under this Section 2(f), shall
be made by a nationally recognized independent registered public accounting
firm not currently retained by the Company immediately prior to the Change in
Control (the “Accountants”), who shall provide their determination, together
with detailed supporting calculations regarding the amount of any relevant
matters, both to the Company and to the Employee within seven (7) business days
of the Change in Control or Termination Date, as applicable, or such earlier
time as is requested by the Company. 
Such determination shall be made by the Accountants using reasonable
good faith interpretations of the Code. 
Any determination by the Accountants shall be binding upon the Company
and the Employee, absent manifest error. 
The Company shall pay the fees and costs of the Accountants which are
incurred in connection with this Section 2(f).

 

6

 

(g) In the event the Employee is subject to additional
taxes imposed by Code Section 409A with respect to any payments or benefits due
to the Employee under this Agreement, the Company shall pay Employee a cash
amount equal to the sum of: (i) any taxes that may be imposed on Employee under
Code Section 409A (the “409A Tax Restoration”) and (ii) for any taxes
(including excise taxes) imposed on the 409A Tax Restoration payment, and for
any interest or penalties related to such Code Section 409A taxes with all such
computations performed applying the then highest marginal tax rates.  Such payment shall be made to Employee within
thirty days of the determination that there are Code Section 409A taxes owed
and will be in an amount so that Employee will be in the same position on an
after-tax basis that he would have been if no Code Section 409A taxes, excise
taxes, interest and/or penalties had been imposed.

 

Notwithstanding anything to the contrary, the maximum aggregate amount
of payments that the Company will be required to make under Sections 2(f)(2)
and 2(g) is $3,000,000.

 

(h) All payments and benefits provided under Sections
2(b) through 2(g) are conditioned on and subject to the Employee’s continuing
compliance with this Agreement and the Employee’s timely execution (and
non-revocation and effectiveness) of the Release Agreement on or after the
Termination Date and the Employee’s on-going compliance with the terms of the
Release Agreement.  The Company will
provide the Release Agreement to the Employee for his/her review and execution
within three days of the Termination Date. 
There is no entitlement to any payments or benefits unless and until
such Release Agreement is effective and the Release Agreement must become
effective within sixty days after the Termination Date or else no payments or
benefits will be provided to Employee under Sections 2(b) through 2(g).  In addition, to the extent Employee receives
severance or similar payments and/or benefits under any other Company plan,
program, agreement, policy, practice, or the like, or under the WARN Act or
similar state law, the payments and benefits due to Employee under this
Agreement will be correspondingly reduced on a dollar-for-dollar basis (or
vice-versa).

 

3. Successors and
Binding Agreement.

 

(a) The Company
will require any successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization or otherwise) to all or substantially all of the
business or assets of the Company, by written agreement in form and substance
reasonably satisfactory to the Employee, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent the Company
would be required to perform if no such succession had taken place.  This Agreement will be binding upon and inure
to the benefit of the Company and any successor to the Company, including
without limitation any persons acquiring directly or indirectly all or
substantially all of the business or assets of the Company whether by purchase,
merger, consolidation, reorganization or otherwise (and such successor shall thereafter
be deemed the “Company” for the purposes of this Agreement), but will not
otherwise be assignable, transferable or delegable by the Company.

 

(b) This Agreement
will inure to the benefit of and be enforceable by the Employee’s personal or
legal representatives, executors, administrators, successors, heirs,
distributees and legatees.

 

(c) This Agreement
is personal in nature and neither of the parties hereto shall, without the
consent of the other, assign, transfer or delegate this Agreement or any rights
or obligations hereunder except as expressly provided in Sections 3(a) and
3(b).  Without limiting the generality or
effect of the foregoing, the Employee’s right to receive payments hereunder
will not be assignable, transferable or delegable, whether by pledge, creation
of a security interest, or otherwise, other than by a transfer by Employee’s
will or by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 3(c), the Company
shall have no liability to pay any amount so attempted to be assigned,
transferred or delegated.

 

4. No Retention
Rights.  This Agreement is not an
employment agreement and does not give the Employee the right to be retained by
the Company (or its Subsidiaries or affiliates) and the Employee agrees that
he/she is an employee-at-will subject to any effective employment agreement
between the parties. The Company (or its Subsidiaries or affiliates) reserves
the right to terminate the Employee’s service at any time and for any reason.

 

7

 

5. Notices.  For all purposes of this Agreement, all
communications, including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder will be in writing and
will be deemed to have been duly given when hand delivered or dispatched by
electronic facsimile transmission (with receipt thereof orally confirmed), or
five business days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid, or three business
days after having been sent by a nationally recognized overnight courier
service such as FedEx, UPS, or DHL, addressed to the Company (to the attention
of the Secretary of the Company) at its principal executive office and to the
Employee at his/her principal residence, or to such other address as any party
may have furnished to the other in writing and in accordance herewith, except
that notices of changes of address shall be effective only upon receipt.

 

6. Validity.  If any provision of this Agreement or the
application of any provision hereof to any person or circumstances is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement
and the application of such provision to any other person or circumstances will
not be affected, and the provision so held to be invalid, unenforceable or
otherwise illegal will be reformed to the extent (and only to the extent)
necessary to make it enforceable, valid or legal.

 

7. Arbitration;
Governing Law.  Any dispute between the
parties under this Agreement shall be resolved (except as provided below) in
Los Angeles, California through informal arbitration by an arbitrator selected
under the rules of the American Arbitration Association. The arbitrator shall
have the right only to interpret and apply the provisions of this Agreement and
may not change its provisions. The arbitrator shall permit reasonable
pre-hearing discovery of facts, to the extent necessary to establish a claim or
a defense to a claim, subject to supervision by the arbitrator.  The determination of the arbitrator shall be
conclusive and binding upon the parties and judgment upon the same may be
entered in any court having jurisdiction thereof.  The arbitrator shall give written notice to
the parties stating his determination and shall furnish to each party a signed
copy of such written decision.  To the
extent required by applicable law, the expenses of the arbitration shall be
borne by the Company, otherwise the arbitration expenses shall be borne equally
by the Company and the Employee provided, however, that each party shall be
responsible for their own legal fees and expenses (except that the Company
shall reimburse the Employee for the Employee’s legal fees within thirty days
of the arbitration decision if the Employee is forced to successfully enforce
at least one material claim of his Section 2 entitlements under this Section
7). The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of California without
regard to the conflicts of laws principles thereof.

 

8.
Miscellaneous.  No provision of this
Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by the Employee and
the Company. No waiver by either party hereto at any time of any breach by the
other party hereto any condition or provision of this Agreement to be performed
by such other party will be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time. This Agreement
and the Compensation Agreement constitute the entire agreement of the parties
with respect to the subject matter thereof and supersede any and all prior agreements
of the parties with respect to such subject matter.  No agreements or representations, oral or
otherwise, expressed or implied with respect to the subject matter thereof have
been made by either party which are not set forth expressly in this Agreement
and/or the Compensation Agreement.

 

9.
Counterparts.  This Agreement may be
executed in one or more counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the same agreement.

 

10. Section 409A.  The Agreement is not intended to constitute a
“nonqualified deferred compensation plan” within the meaning of section 409A of
the Code.  Notwithstanding the foregoing,
in the event this Agreement or any benefit paid under this Agreement to
Employee is deemed to be subject to section 409A of the Code, the Employee
consents to the Company’s adoption of such conforming amendments as the Company
deems advisable or necessary, in its sole discretion, to comply with section
409A of the Code (including without limit delaying the timing of
payments).  Notwithstanding anything to
the contrary, if, upon Employee’s separation from service, Employee is then a
Company “specified 

 

8

 

employee” (as defined in
Section 409A of the Code), then to the extent necessary to comply with Code
Section 409A, the Company will defer payment (without interest) of certain of
the amounts owed to Employee under this Agreement until the earlier of the
Employee’s death or the first business day of the seventh month following
Employee’s separation from service.

 

11.
Withholding.  All payments and benefits
made under this Agreement shall be subject to reduction to reflect any
withholding taxes or other amounts required by applicable law or regulation.

 

12. Restrictive
Covenants.  The provisions of this
Section 12 shall survive termination of this Agreement and/or termination of
Employee’s employment for any reason.

 

(a)
Nondisparagement.  The Employee will not
disparage the Company, its directors, officers, employees, affiliates,
Subsidiaries, predecessors, successors or assigns in any written or oral
communications to any third party.  The
Employee further agrees that he/she will not direct anyone to make any
disparaging oral or written remarks to any third parties, provided, however,
that the Employee may testify or otherwise provide information truthfully in
connection with any (i) governmental and/or regulatory proceeding, (ii)
required governmental or regulatory filing, or (iii) any subpoena for testimony
served upon the Employee.

 

(b) Nonsolicit. 
During the Employee’s employment with Company and for 12 months after
the Termination Date, the Employee shall not, directly or indirectly, either as
an individual or as an employee, agent, consultant, advisor, independent
contractor, general partner, officer, director, stockholder, investor, lender,
or in any other capacity whatsoever, of any person, firm, corporation or
partnership: (i) solicit, induce, recruit or encourage any of the Company’s employees
or consultants to terminate their relationship with the Company, or attempt to
solicit, induce, recruit or encourage any of the Company’s employees or
consultants to terminate their relationship with the Company, or (ii) attempt
to negatively influence any of the Company’s clients or customers from
purchasing Company products or services.

 

(c) Nondisclosure. 
Notwithstanding any requirement that the Company may have to publicly
disclose the terms of this Agreement pursuant to applicable law or regulations,
the Employee agrees to use reasonable efforts to maintain in confidence the
existence of this Agreement, the contents and terms of this Agreement, and the
consideration for this Agreement (hereinafter collectively referred to as “Agreement
Information”).  The Employee also agrees
to take every reasonable precaution to prevent disclosure of any Agreement
Information to third parties, except for disclosures required by law or
reasonably necessary with respect to Employee’s immediate family members or personal
advisors who shall also agree to maintain confidentiality of the Agreement
Information.

 

(d) Confidentiality. 
Employee shall not, except as required by any court or administrative
agency, without the written consent of the Board, or the Company’s Chief
Executive Officer, or a person authorized thereby, disclose to any person,
other than an employee of the Company or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance by the
Employee or his duties to the Company, any confidential information obtained by
him while in the employ of the Company with respect to any of the Company’s
inventions, processes, customers, methods of distribution, methods of
manufacturing, attorney-client communications, pending or contemplated
acquisitions, other trade secrets, or any other material which the Company is
obliged to keep confidential pursuant to any confidentiality agreement or
protective order; provided, however, that confidential information shall not
include any information now known or which becomes known generally to the
public (other than as a result of an unauthorized disclosure by the Employee)
or any information of a type not otherwise considered confidential by a person
engaged in the same business or a business similar to that conducted by the
Company.  Employee acknowledges that he
also continues to be bound by the Inventions and Confidential Information
agreement with the Company that Employee previously executed.

 

(e) Remedy for Breach. 
The parties hereto agree that, in the event of breach or threatened
breach of any covenants herein, the damage or imminent damage shall be
inestimable, and that therefore any remedy at law or in damages shall be
inadequate. Accordingly, the parties hereto agree that the Company and Employee
shall be entitled to apply for injunctive relief in the event of any breach or
threatened breach 

 

9

 

of any of such provisions
by Employee or the Company, in addition to any other relief (including damages)
available to the Company or Employee under this Agreement or under law.  If the Employee materially breaches the
Release Agreement then within thirty days of the Company’s notice to the
Employee regarding such breach, the Employee must repay to the Company in cash
all of the payments and benefits previously provided to the Employee under
Section 2 and the Company will owe no further obligations to Employee under
this Agreement.

 

IN WITNESS
WHEREOF, the parties have caused this Agreement to be duly executed and
delivered as of the Effective Date.

 

 

	
  INTERNATIONAL RECTIFIER CORPORATION

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  
	
   

  
	
   

  
	
   

  	
   

  
	
  Linda J. Pahl

  
					

 

10

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