EXHIBIT 10.2
POWER-ONE, INC.
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT is made and entered
into by and between Power-One, Inc., a Delaware corporation (hereinafter
referred to as the "Company") and Xxxxxxx X. Xxxxxx (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 imperative that the Company and the Board
should 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.
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 April 28, 2004 (the "Effective
Date"). This Agreement will continue in effect through April 27, 2005. However,
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 six (6) months prior to the end of such term, or extended term,
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; provided, however, that this provision for automatic extension shall
have no application following a Change in Control.
However, in the event a Change in Control occurs during the original or
any extended term, 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. Any subsequent Change in Control ("Subsequent Change in Control")
that occurs during the original or any extended term shall also continue the
term of this Agreement until the later of: (i) twenty-four (24) months beyond
the month in which such Subsequent 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; provided, however, that if a
Subsequent Change in Control occurs, it shall only be considered a Change in
Control under this Agreement if it occurs no later than twenty-four (24) months
after the immediately preceding Change in Control or Subsequent Change in
Control.
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) "Agreement" means this Change in Control Severance Agreement.
(b) "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.
(c) "Beneficial Owner" shall have the meaning ascribed to such
term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
(d) "Beneficiary" means the persons or entities designated or
deemed designated by the Executive pursuant to Section 11.2.
(e) "Board" means the Board of Directors of the Company.
(f) "Cause" means 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 considered "willful" unless done, or
omitted to be done, by the Executive not in good
faith and without reasonable belief that the
Executive's action or omission was in the best
interest of the Company.
(g) "Change in Control" of the Company shall be deemed to have
occurred as of the first day that any one or more of the
following conditions shall have been satisfied:
(i) Any Person (other than those Persons in control of
the Company as of the Effective Date) becomes the
Beneficial Owner, directly or indirectly, of
securities of the Company representing 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, or (D) any
acquisition by any entity pursuant to a transaction
that complies with Sections (g)(ii), (iii) and (iv)
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);
(ii) On any day after the Effective Date (the "Measurement
Date") Continuing Directors cease for any reason to
constitute either: (1) if the Company does not have a
Parent, a majority of the Board; or (2) 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 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).
(iv) A complete liquidation or dissolution of the Company
other than in the context of a transaction that does
not constitute a Change in Control of the Company
under clause (iii) above.
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 to the contrary, 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.
(h) "Code" means the United States Internal Revenue Code of 1986,
as amended.
(i) "Committee" means the Compensation Committee of the Board, or
any other committee appointed by the Board to perform the
functions of the Compensation Committee.
(j) "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.
(k) "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.
(l) "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,
such term shall mean a "permanent and total disability" within
the meaning of Section 22(e)(3) of the Code.
(m) "Effective Date" has the meaning given to such term in Article
1 hereof.
(n) "Effective Date of Termination" means the date on which a
Qualifying Termination occurs.
(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; provided that
if the Executive is a vice president, for purposes of
the preceding phrase the Executive's loss of vice
president status (other than a promotion to a higher
level officer) will constitute Good Reason. 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). 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.
(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 targeted
annualized award opportunities and/or the degree of
probability of attainment of such annualized award
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) The failure of the Company to maintain (x) 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 and (y) the relative
level of the Executive's participation in such plans,
policies, practices, or arrangements on a basis at
least as beneficial as, or substantially equivalent
to, that on which the Executive participated in such
plans immediately prior to the start of the Protected
Period. 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) Any purported termination by the Company of the
Executive's employment that is not effected pursuant
to a Notice of Termination satisfying the
requirements of Section 4.6 and for purposes of this
Agreement, no such purported termination shall be
effective.
(vii) 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; provided
that, if the Company communicates an intended
effective date for such relocation, in no event shall
Good Reason exist pursuant to this clause (vii) more
than ninety (90) days before such intended effective
date.
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 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.
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.
(e) 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;
(iii) A successor company fails or refuses to assume by
written instrument the Company's obligations under
this Agreement, as required by Article 10; or
(iv) The Company or any successor company repudiates or
breaches any of the provisions of this Agreement.
(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.
(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 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
Effective Date of Termination.
(b) An amount equal to two (2) times the highest aggregate
bonus(es) paid by the Company to the Executive for any one of
the three (3) full fiscal years of the Company immediately
preceding Executive's Effective Date of Termination.
(c) A continuation of the Executive's medical coverage, dental
coverage, and group term life insurance for the Executive, his
spouse, and his eligible dependents for the two (2) year(s)
following the Executive's Effective Date of Termination;
provided that such continuation of coverage shall run
concurrently with COBRA continuation or similar state law
continuation periods; and provided further that the
continuation of such coverage shall be discontinued prior to
the end of the two (2) year period in the event the Executive
has available substantially similar benefits from a subsequent
employer, as reasonably determined by the Committee. Except as
provided in the next sentence, such benefits shall be provided
to the Executive at the same premium cost, and at the same
coverage level, as in effect as of the Executive's Effective
Date of Termination. However, in the event the premium cost
and/or level of coverage shall change for all employees of the
Company, the cost and/or coverage level, likewise, shall
change for the Executive in a corresponding manner. The
continuation of coverage for the period contemplated by this
Section 4.3(c) shall be coordinated with and paid secondary to
any benefits that the Executive, his spouse, or his dependent
receives from another employer or from Medicare (following the
Executive's, his spouse's, and/or his dependent's entitlement
to Medicare benefits) to the maximum extent permissible under
relevant law.
(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 Effective Date of Termination.
(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 Effective Date
of Termination.
(f) If any stock option, restricted stock, or other equity or
equity-based award granted by the Company to the Executive is
subject to a vesting schedule and does not automatically
become fully vested upon or in connection with the termination
of the Executive's employment with the Company or the related
Change in Control event, the portion of such award that was
scheduled to vest (assuming that the Executive continued to be
employed by the Company) at any time within the two (2) year
period following the Effective Date of Termination shall
automatically become vested as of the Effective Date of
Termination; provided, however, that any portion of such award
remaining unvested after giving effect to the foregoing clause
shall immediately terminate upon the Effective Date of
Termination. In the event that the Effective Date of
Termination occurs during the Protected Period related to a
Change in Control and a portion of a stock option or other
award referred to in the preceding sentence is deemed to
become vested in connection with the termination of the
Executive's employment pursuant to the preceding sentence, and
such portion of the award would otherwise terminate or expire
upon or prior to the date of the related
Change in Control, the Executive shall be given a reasonable
opportunity to exercise such accelerated portion of the option
or other award before it terminates.
(g) 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. 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. 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.
4.6. NOTICE OF TERMINATION. Any termination 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.
ARTICLE 5. FORM AND TIMING OF SEVERANCE BENEFITS; TAX WITHHOLDING;
5.1. FORM AND TIMING OF SEVERANCE BENEFITS. The Severance Benefits
described in Section 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
Effective Date of Termination, but in no event beyond thirty (30) days from such
date.
5.2. WITHHOLDING OF TAXES. The Company shall be entitled to withhold
from any amounts payable under or pursuant to this Agreement all taxes as
legally shall be required (including, without limitation, any United States
Federal taxes, and any other state, city, or local taxes).
ARTICLE 6. SECTION 280G POTENTIAL CUT-BACK
6.1. CUT-BACK. Notwithstanding anything contained in this Agreement to
the contrary, to the extent that any payment or distribution of any type to or
for the Executive by the Company or any of its affiliates, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise (including, without limitation, any accelerated vesting of stock
options or restricted stock granted by the Company pursuant to this Agreement or
otherwise) (collectively, the "Total Payments") is or will be subject to the
excise tax imposed under Section 4999 of the Code (which reference includes, for
purposes of this Agreement, any similar successor provision to Section 4999),
then the Total Payments shall be reduced (but not below zero) so that the
maximum amount of the Total Payments (after reduction) shall be one dollar
($1.00) less than the amount which would cause the Total Payments to be subject
to the excise tax imposed by Section 4999 of the Code. Unless the Executive
shall have given prior written notice to the Company to effectuate a reduction
in the Total Payments if such a reduction is required, the Company shall reduce
or eliminate the Total Payments
by first reducing or eliminating any cash severance benefits, then by reducing
or eliminating any accelerated vesting of stock options, then by reducing or
eliminating any accelerated vesting of restricted stock, then by reducing or
eliminating any other remaining Total Payments. 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; provided, however, that if the Executive is a
party to a written employment or other written agreement with the Company that
contains express provisions for a so-called "gross-up" payment to the extent
that excise taxes are imposed under Section 4999 of the Code, the Section 280G
and/or Section 4999 provisions of such employment or other agreement shall
control.
6.2. DETERMINATION. Any determination that Total Payments to the
Executive must be reduced or eliminated in accordance with the forgoing
provisions of this Section 6 and the assumptions to be utilized in arriving at
such determination, shall be made by a nationally recognized accounting firm or
consulting firm with experience in such matters selected by the Company (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and the Executive within fifteen (15) business days after the date
such calculation is requested by the Company or the Executive. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, the Executive shall appoint
another nationally recognized accounting or consulting firm with experience in
such matters to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. If a
reduction or elimination of Total Payments to the Executive in accordance with
the foregoing is necessary based on the Accounting Firm's determination, the
Accounting Firm shall furnish the Executive with a written opinion that failure
to limit the amount of the Total Payments would result in the imposition of a
tax under Section 4999 of the Code. Any determination by the Accounting Firm
shall be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Total Payments to the Executive which will not have been made by the Company
should have been made ("Underpayment"). The Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive. In the
event that any Total Payment made to the Executive shall be determined by the
Accounting Firm to result in the imposition of any tax under Section 4999 of the
Code, the Executive shall promptly repay the amount of such excess 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.
ARTICLE 7. THE COMPANY'S PAYMENT OBLIGATION
7.1. PAYMENT OF OBLIGATIONS ABSOLUTE. Except as provided in Sections
4.2(e) and 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 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,
and any disability, workers' compensation or other Company benefit plan
distribution that the Executive is entitled to at his Effective Date of
Termination. 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 and unpaid Base Salary and
accrued vacation pay through the Executive's Effective Date of Termination 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). If the acceleration of
vesting, lapse of restrictions and/or payout provisions triggered by a Change in
Control as to any award held by the Executive under any long-term incentive plan
are more favorable to the Executive as to that award than the provisions of
Section 4.3(f), the provisions more favorable to the Executive shall control;
provided that if the provisions of such a plan are more favorable to the
Executive in the circumstances and the provisions of such plan are deemed to
control as to an award, Section 4.3(f) shall not be applied to provide any
duplicate benefits or result in any greater vesting as to the award than the
provisions of such plan.
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:
(f) 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.
(g) 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 one of its subsidiaries, or (ii) by any means issue
or communicate any private or public statement that may be
critical or disparaging of the Company or any of its
affiliates, or any of their respective products, services,
officers, directors or employees.
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 11.6. 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 Section 3(r) as to the timing of certain
claims related to 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 which the Committee expects to render the
benefit determination. The Committee shall notify the Claimant in writing:
(h) that the Claimant's requested determination has been made, and
that the claim has been allowed in full; or
(i) 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.
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.
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 Section 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 Section 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
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 they would be entitled to
hereunder if they had terminated their 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
Effective Date of Termination 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. 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.
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. 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. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine, the
plural shall include the singular, and the singular shall include the plural.
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. Further, the captions of this Agreement are not part of the provisions
hereof and shall have no force and effect.
11.5. MODIFICATION. Except as expressly provided in Section 3(r) 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.
11.6. 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., 000 Xxxxx Xxxxx,
Xxxxxxxxx, Xxxxxxxxxx 00000, 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.
11.7. 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. 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.
IN WITNESS WHEREOF, the parties have executed this Agreement
on this 28th day of April, 2004.
POWER-ONE, INC. EXECUTIVE
By: /s/ XXXXXXX X. XXXXXXXX /s/ XXXXXXX X. XXXXXX
------------------------------ ------------------------------
Print Name: Xxxxxxx X. Xxxxxxxx Print Name: Xxxxxxx X. Xxxxxx
Its: Secretary and General Counsel
