EXHIBIT 10.15
FOUNDER STOCK PURCHASE AGREEMENT
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THIS AGREEMENT is made as of the 13th day of April, 1988, by and between
Power Integrations, Inc., a California corporation (the "Company"), and Klas X.
Xxxxxx ("Purchaser").
WITNESSETH:
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WHEREAS, the Company desires to issue and the Purchaser desires to acquire
stock of the Company as herein described, on the terms and conditions
hereinafter set forth.
WHEREAS, the parties intend the Purchaser to become an employee of the
Company as soon as an appropriate visa is obtained from the U.S. Immigration and
Naturalization Service (the "INS").
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. Number of Shares and Price Per Share. The Purchaser hereby agrees to
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purchase from the Company and the Company agrees to sell to the Purchaser Six
Hundred Sixty (660,000) shares of the Company's Common Stock (the "Stock") for a
purchase price of $6,600 (or $0.01 per share). The closing of such purchase
shall occur immediately upon execution of this Agreement. Payment of the
purchase price will be made at the closing by the Purchaser's delivery to the
Company of an assignment of certain patent rights in substantially the form
attached as Exhibit D.
2. Unvested Share Repurchase Option. The Purchaser will become an
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employee as soon as he has obtained an appropriate visa from the INS.
Thereafter, in the event the Purchaser's employment with the Company is
terminated for any reason (other than death or disability), with or without
cause, or if the Purchaser or the Purchaser's legal representative attempts to
sell, exchange, transfer, pledge or otherwise dispose of any shares purchased
pursuant to this Agreement which have not vested in the Purchaser pursuant to
Section 2(a) (the "Unvested Shares"), the Company shall have the right to
reacquire the Unvested Shares under the terms set forth in this Section 2 (the
"Unvested Share Repurchase Option"). If the Purchaser is unable to obtain a visa
enabling him to be employed by the Company, the Purchaser will become a
consultant to the Company and the Stock will vest on the same schedule as is set
forth in this Section 2, with the Unvested Share Repurchase Option triggered by
termination of the consulting relationship (for reasons other than death or
disability).
1.
(a) Vesting of Shares. Upon the closing of the purchase of the Stock,
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220,000 shares shall be immediately vested. The remaining 440,000 shares will
initially be subject to the Unvested Share Repurchase Option, which will lapse
with respect to 1/48 of such shares (i.e., approximately 9,167 shares) per month
of the Purchaser's continuous employment with the Company measured from April 1,
1988 (even though his actual employment will begin at a later date), with
fractional months not counted. Shares of Stock that are not subject to the
Unvested Share Repurchase Option are "Vested Shares."
(b) Exercise of Unvested Share Repurchase Option. If the Purchaser's
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employment with the Company is terminated for any reason (other than death or
disability), with or without cause, or if the Purchaser or the Purchaser's legal
representative attempts to dispose of any Unvested Shares other than as allowed
in this Agreement, the Company may exercise the Unvested Share Repurchase Option
by written notice to the Escrow Agent (as defined in Section 10) and to the
Purchaser or the Purchaser's legal representative within sixty (60) days after
such termination or after the Company has received notice of the attempted
disposition.
(c) Payment for Shares and Return of Shares. Payment by the Company
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to the Escrow Agent on behalf of the Purchaser or the Purchaser's legal
representative shall be made in cash within sixty (60) days after the date of
the mailing of the written notice of exercise of the Unvested Share Repurchase
Option. For purposes of the foregoing, cancellation of any promissory note of
the Purchaser to the Company shall be treated as payment to the Purchaser in
cash to the extent of the unpaid principal and any accrued interest cancelled.
The purchase price per share being purchased by the Company pursuant to the
Unvested Share Repurchase Option shall be $0.01 per share, adjusted
appropriately to reflect any stock split, stock dividend, recapitalization, etc.
Within thirty (30) days after payment by the Company, the Escrow Agent shall
give the shares which the Company has purchased to the Company and shall give
the payment received from the Company to the Purchaser.
(d) Early Termination of Unvested Share Repurchase Option. The other
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provisions of Section 2 notwithstanding, the Company's Board of Directors may
terminate the Unvested Share Repurchase Option in the event of (1) a merger in
which the Company is not the surviving corporation; (2) a merger or the sale or
exchange by the shareholders of the Company of all or substantially all of the
stock of the Company where the shareholders before such merger or sale or
exchange do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the surviving
2.
Company; (3) the sale or exchange of all or substantially all of the Company's
assets (other than a sale or transfer to a subsidiary of the Company as defined
in section 425(f) of the Code); or (4) in such other event as the Company's
Board of Directors may determine to be appropriate. The Unvested Share
Repurchase Option will terminate in the event of Purchaser's death or
termination of employment due to permanent and total disability as defined in
Section 72(m) of the Internal Revenue Code of 1986, as amended.
(e) Transfers Not Subject to the Unvested Share Repurchase Option.
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The Unvested Share Repurchase Option shall not apply to a transfer to the
Purchaser's ancestors, descendants or spouse or to a trustee for their benefit
or the benefit of the Purchaser, provided that such transferee shall agree in
writing (in a form satisfactory to the Company) to take the stock subject to all
the terms and conditions of this Section 2.
(f) Legends. The Company may at any time place a legend or legends
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referencing the Unvested Share Repurchase Option on any shares subject to the
Unvested Share Repurchase Option.
(g) Assignment of Unvested Share Repurchase Option. The Company may
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assign the Unvested Share Repurchase Option to one or more persons, who shall
have the right to exercise the Unvested Share Repurchase Option in his or her
own name for his or her own account.
3. Stock Dividends, etc. If, from time to time, there is any stock
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dividend, stock split or other change in the character or amount of any of the
outstanding stock of the Company, then in such event any and all new substituted
or additional securities to which Purchaser is entitled by reason of Purchaser's
ownership of Unvested Shares shall be immediately subject to the Unvested Share
Repurchase Option with the same force and effect as the Unvested Shares.
4. Right of First Refusal. The Purchaser cannot transfer, assign or
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otherwise dispose of, voluntarily or involuntarily, any Unvested Shares or any
interest in those shares. Before any Vested Shares registered in the name of
Purchaser may be sold or transferred (including transfer by operation of law)
other than to Purchaser's spouse, descendants, ancestors, or trusts for their
benefit or the benefit of the Purchaser, such shares shall first be offered to
the Company, which will have the right to purchase all or any part of the Vested
Shares proposed to be transferred ("Right of First Refusal"), in the following
manner:
3.
(a) Transfer Notice. The Purchaser or his or her legal representative
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shall first give written notice (the "Transfer Notice") of any proposed transfer
to the Company. The Transfer Notice shall name the proposed transferee, state
the number of shares of Stock to be transferred, the price per share and all
other terms of the offer. The Transfer Notice shall be signed by the Purchaser
or his or her representative and the prospective transferee and must constitute
a binding agreement for the transfer of the Stock subject only to the Right of
First Refusal.
(b) Bona Fide Determination. Within thirty (30) days of delivery of
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the Purchaser's notice of a proposed transfer, the Company's Board of Directors
shall determine the bona fide nature of the proposed transfer and give the
Purchaser written notice of its determination. If the proposed transfer is
deemed to be bona fide, the remaining subsections of this section shall apply to
the sale. If the proposed transfer is deemed not to be bona fide, the Purchaser
will be responsible for providing additional information to the Board to show
the bona fide nature of the proposed transfer and no Stock will be transferred
on the books of the Company until the Board has approved the proposed transfer
as bona fide.
(c) Failure to Exercise. If the Company elects not to or fails to
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exercise in full the Right of First Refusal within thirty (30) days from the
later of the date the Transfer Notice is delivered to the Company or thirty (30)
days after the date the transfer is determined to be bona fide (if the Purchaser
is required to provide additional information as provided in Section 4(b)), the
Purchaser may, by the later of sixty (60) days after the delivery of the
Transfer Notice to the Company or thirty (30) days after the date the transfer
is determined to be bona fide (if the Purchaser is required to provide
additional information as provided in Section 4(b)), conclude a transfer of the
shares of Stock subject to the Transfer Notice which have not been purchased by
the Company pursuant to exercise of the Right of First Refusal on the terms and
conditions described in the Transfer Notice. Any proposed transfer on terms and
conditions different from those described in the Transfer Notice, as well as any
subsequent proposed transfer by the Purchaser, shall again be subject to the
Right of First Refusal and shall require compliance by the Purchaser with the
procedure described in this Section 4. If the Company exercises the Right of
First Refusal, the parties shall consummate the sale of shares of Stock on the
terms set forth in the Transfer Notice by the later of sixty (60) days after the
delivery of the Transfer Notice to the Company or thirty (30) days after the
date the transfer is determined to be bona fide (if the Purchaser is required to
provide additional
4.
information as provided in Section 4(b)); provided, however, in the event the
Transfer Notice provides for the payment for the shares of Stock other than in
cash, the Company shall have the option of paying for the shares of Stock by the
discounted cash equivalent of the consideration described in the Transfer Notice
as reasonably determined by the Company.
(d) Condition to Transfer. All transferees of shares of Stock or any
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interest therein other than the Company shall be required as a condition of such
transfer to agree in writing (in a form satisfactory to the Company) that they
will receive and hold such shares of Stock or interests subject to the
provisions of this Agreement, including the Right of First Refusal.
(e) Termination. The Right of First Refusal will terminate at such
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time as a public market exists for the Company's Common Stock (or any other
stock issued by the Company, or any successor, in exchange for the Stock). For
the purpose of this Agreement, a "public market" shall be deemed to exist if (i)
such stock is listed on a national securities exchange (as that term is used in
the Securities Exchange Act of 1934) or (ii) such stock is traded on the over-
the-counter market and prices therefore are published daily on business days in
a recognized financial journal.
(f) Permitted Transfers. The Right of First Refusal shall not apply
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to a transfer (inter vivos or upon death) to the Purchaser's ancestors or
descendants or spouse or to a trustee for their benefit provided that such
transferee shall agree in writing (in a form satisfactory to the Company) to
take the Stock subject to all the terms of the Plan, including the Right of
First Refusal.
5. Piggyback Registration Rights.
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(a) The terms "register", "registered" and "registration" refer to a
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registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933, as amended, and the declaration or
ordering of the effectiveness of such registration statement.
(b) If the Company shall determine to register any of its securities
either for its own account or the account of a stockholder(s) exercising demand
registration rights, other than a registration relating solely to employee
benefit plans, or a registration relating solely to a transaction within the
scope of Rule 145 promulgated under the Securities Act of 1933, or a
registration on any registration form which does not permit secondary sales or
does not include substantially the same information as would be required to be
included in a registration statement covering the sale of the
5.
Stock, the Company will promptly give to the Purchaser written notice thereof
and include in such registration (and any related qualification under blue sky
laws), and in any underwriting involved therein, the number of Vested Shares
specified in a written request made by the Purchaser within fifteen (15) days
after receipt of such written notice from the Company, except as set forth in
Section 5(b) below.
(c) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the right of any Purchaser
to registration shall be conditioned upon the Purchaser's participation in such
underwriting and the inclusion of such Purchaser's Stock in the underwriting
pursuant to an underwriting agreement in customary form with the underwriter or
underwriters selected by the Company. Notwithstanding any other provision of
this Section 5, if the underwriter reasonably determines that marketing factors
require a limitation on the number of shares to be underwritten the underwriter
may exclude some or all of the Stock, as follows: with respect to stockholders
exercising demand registration rights or exercising piggyback rights superior,
as to inclusion of shares in a registration, to those of the Purchaser (for
example, the rights under the Registration Rights Agreement to be entered into
in or around April 1988 by the Company and purchasers of the Company's Series A
Preferred Stock, amendments to those rights that may occur from time to time,
and similar rights that may be granted in the future), the number of shares that
may be included by the Purchaser shall be cut back entirely before any
limitation on the number of shares that may be included by such stockholders.
With respect to stockholders exercising other registration rights (i.e., rights
on a parity with the Purchaser's rights), the number of shares that may be
included in the registration and underwriting will be allocated in proportion,
as nearly as practicable, to the respective amounts of securities of the Company
owned by each.
(d) All expenses of the registration shall be borne by the Company,
except underwriting discounts and selling commissions applicable to the sale of
any Stock and any other securities of the Company being sold in the same
registration by other stockholders, which shall be borne by the Purchaser and
such other stockholders pro rata on the basis of the number of their shares
registered.
6. Dissolution of Marriage.
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(a) In the event of the dissolution of Purchaser's marriage,
Purchaser shall have the right and option to purchase from his or her spouse all
or any portion of shares of Stock (i) awarded to the spouse pursuant to a decree
of
6.
dissolution of marriage or any other order by any court of competent
jurisdiction and/or by any property settlement agreement (whether or not
incorporated by reference in any such decree), or (ii) gifted to the spouse by
Purchaser prior to the dissolution, at the fair market value of said Stock at
the time of such decree, other order or property settlement as determined by the
Company's Board of Directors, upon the terms set forth below. If either
Purchaser or Purchaser's spouse disputes the fair market valuation of the Stock
by the Board of Directors, such fair market value shall be determined by
arbitration in accordance with the rules of the American Arbitration
Association. Purchaser shall exercise his or her right, if at all, within thirty
(30) days of the entry of any such decree or property settlement agreement by
delivery to Purchaser's former spouse of written notice of exercise, specifying
the number of shares of Stock Purchaser elects to purchase. The purchase price
for the Stock shall be paid by delivery of a promissory note for the purchase
price bearing interest at the rate of ten percent (10%) per annum payable in
four (4) equal annual installments of principal and interest, commencing on the
anniversary date of the exercise of the option; provided, however that if,
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subsequent to the date any or all of the Stock is awarded to Purchaser's former
spouse as provided above, the Company exercises its Unvested Share Repurchase
Option with respect to any or all of the Stock so awarded, the amount remaining
due under such promissory note shall be reduced by the difference between the
fair market value of such Stock determined as set forth above and the amount
received by Purchaser for such Stock upon exercise by the Company of the
Unvested Share Repurchase Option.
(b) In the event Purchaser does not exercise his right to purchase
all of the Stock awarded to Purchaser's former spouse, Purchaser shall provide
written notice to the Company of the number of shares of Stock available for
purchase within thirty (30) days of the entry of the decree. The Company shall
then have the right for the next thirty (30) days to purchase any of the Stock
not acquired by Purchaser directly from Purchaser's former spouse in the manner
provided in Section 6(a) at the same price and on the same terms that were
available to Purchaser.
(c) Nothing contained in this Section 6 shall affect or impair the
Unvested Share Repurchase Option in favor of the Company as set forth in Section
2 above.
7. Consent of Spouse. If the Purchaser is married on the date of this
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Agreement, the Purchaser's spouse shall execute a Consent of Spouse in the form
of Exhibit A hereto, effective on the date hereof. Such consent shall not be
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deemed to confer or convey to the spouse any rights in the
7.
Stock that do not otherwise exist by operation of law or the agreement of the
parties. If the Purchaser should marry or remarry subsequent to the date of this
Agreement, the Purchaser shall within thirty (30) days thereafter obtain his or
her new spouse's acknowledgment of and consent to the existence and binding
effect of all restrictions contained in this Agreement by signing an additional
Consent of Spouse in the form of Exhibit A.
8. Legends. All certificates representing any shares of Stock subject to
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the provisions of this Agreement shall have endorsed thereon the following
legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
REPURCHASE OPTION AND A RIGHT OF FIRST REFUSAL IN FAVOR OF THE CORPORATION OR
ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE
REGISTERED HOLDER, OR HIS OR HER PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON
FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION."
(b) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
(c) Any legend required to be placed thereon by the California
Commissioner of Corporations.
9. Warranties and Representations. In connection with the proposed
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purchase of the Stock, the Purchaser hereby agrees, represents and warrants as
follows:
(a) The Purchaser is purchasing the Stock solely for his or her own
account for investment and not with a view to, or for resale in connection with,
any distribution thereof within the meaning of the Securities Act of 1933 as
amended (the "Act"). The Purchaser further represents that he or she does not
have any present intention of selling, offering to sell or otherwise disposing
of or distributing the Stock or any portion thereof; and that the entire legal
and beneficial interest of the Stock he or she is purchasing is being purchased
for, and will be held for the account of, the Purchaser only and neither in
whole nor in part for any other person.
8.
(b) The Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Stock. The Purchaser
further represents and warrants that he or she has discussed the Company and its
plans, operations and financial condition with its officers, has received all
such information as he or she deems necessary and appropriate to enable him or
her to evaluate the financial risk inherent in making an investment in the Stock
and has received satisfactory and complete information concerning the business
and financial condition of the Company in response to all inquiries in respect
thereof.
(c) The Purchaser realizes that his or her purchase of the Stock will
be a highly speculative investment, and he or she is able, without impairing his
financial condition, to hold the Stock for an indefinite period of time and to
suffer a complete loss on his or her investment.
(d) The Company has disclosed to the Purchaser that:
(i) the sale of the Stock has not been registered under the
Act, and the Stock must be held indefinitely unless a transfer of it is
subsequently registered under the Act or an exemption from such registration is
available, and that the Company is under no obligation to register the Stock;
(ii) the Company will make a notation in its records of the
aforementioned restrictions on transfer and legends.
(e) The Purchaser is aware of the provisions of Rule 144, promulgated
under the Act, which, in substance, permits limited public resale of "restricted
securities" acquired, directly or indirectly, from the issuer thereof (or an
affiliate of such issuer), in a non-public offering subject to the satisfaction
of certain conditions, including among other things: the resale occurring not
less than two years from the date the Purchaser has purchased and paid for the
Stock; the availability of certain public information concerning the Company;
the sale being through a broker in an unsolicited "broker's transaction" or in a
transaction directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934); and that any sale of the Stock may be made by
him or her only in limited amounts during any three-month period not exceeding
specified limitations. The Purchaser further represents that he or she
understands that at the time he or she wishes to sell the
9.
Stock there may be no public market upon which to make such a sale, and that,
even if such a public market then exists, the Company may not be satisfying the
current public information requirements of Rule 144, and that, in such event, he
or she would be precluded from selling the Stock under Rule 144 even if the two-
year minimum holding period had been satisfied. The Purchaser represents that he
or she understands that in the event all of the requirements of Rule 144 are not
satisfied, registration under the Act or compliance with an exemption from
registration will be required; and that, notwithstanding the fact that Rule 144
is not exclusive, the staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial burden
of proof in establishing that an exemption from registration is available for
such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
(f) Without in any way limiting the Purchaser's representations and
warranties set forth above, the Purchaser further agrees that he or she shall in
no event make any disposition of all or any portion of the Stock which he or she
is purchasing unless and until:
(i) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with said Registration Statement; or
(ii) The Purchaser shall have (1) notified the Company of the
proposed disposition and furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and (2) furnished the
Company with an opinion of his or her own counsel to the effect that such
disposition will not require registration of such shares under the Act, and such
opinion of his or her counsel shall have been concurred in by counsel for the
Company and the Company shall have advised the Purchaser of such concurrence.
10. Escrow. As security for his or her faithful performance of the terms
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of this Agreement and to insure the availability for delivery of the Stock upon
exercise of the Purchase Option herein provided for, the Purchaser agrees to
deliver to and deposit with Xxxx & Freidenrich, A Professional Company, counsel
to the Company (the "Escrow Agent"), as Escrow Agent in this transaction, two
Stock Assignments duly endorsed (with date and number of shares blank) in the
form attached hereto as Exhibit B, together with the certificate or certificates
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evidencing the Stock; such documents are to be held by the Escrow Agent pursuant
to the Joint Escrow Instructions of the Company and the
10.
Purchaser set forth in Exhibit C attached hereto and incorporated by this
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reference, which instructions shall also be delivered to the Escrow Agent at the
closing hereunder.
11. Transfers in Violation of Agreement. The Company shall not be required
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(i) to transfer on its books any shares of Stock of the Company which shall have
been sold or transferred in violation of any of the provisions set forth in this
Agreement or (ii) to treat as owner of such shares or to accord the right to
vote as such owner or to pay dividends to any transferee to whom such shares
shall have been so transferred.
12. Rights as Stockholder. Subject to the provisions of this Agreement,
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the Purchaser shall exercise all rights and privileges of a stockholder of the
Company with respect to the Stock deposited in escrow.
13. Further Instruments. The parties agree to execute such further
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instruments and to take such further action as may reasonably be necessary to
carry out the intent of this Agreement.
14. Notice. Any notice required or permitted hereunder shall be given in
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writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail with
postage and fees prepaid, addressed to the other party at the address
hereinafter shown below his or her signature or at such other address as such
party may designate by ten (10) days' advance written notice to the other party.
15. Successors and Assigns. This Agreement shall inure to the benefit of
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the successors and assigns of the Company and, subject to the restrictions on
transfer herein set forth, be binding upon the Purchaser, his or her heirs,
executors, administrators, successors and assigns.
16. Entire Agreement; Amendments. This Agreement, together with the
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Exhibits hereto, shall be construed under the laws of the State of California
(as it applies to agreements between California residents, entered into and to
be performed entirely within California), and constitutes the entire agreement
of the parties with respect to the subject matter hereof superseding all prior
written or oral agreements, and no amendment or addition hereto shall be deemed
effective unless agreed to in writing by the parties.
17. Right to Specific Performance. The Purchaser agrees that the Company
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shall be entitled to a decree of specific performance of the terms hereof or an
injunction restraining violation of this Agreement, said right to be in addition
to any other remedies available to the Company.
11.
18. Separability. If any provision of this Agreement is held by a court of
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competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions shall nevertheless continue in full force and effect without being
impaired or invalidated in any way and shall be construed in accordance with the
purposes and tenor and effect of this Agreement.
19. Tax Consequences and Tax Election Notification.
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(a) The Purchaser understands that the Stock has been valued by the
Board of Directors and that the Company believes this valuation is a fair
attempt to appraise it. The Purchaser understands, however, that the Company can
give no assurances that the purchase price will be accepted as the fair market
value of the Stock by the Internal Revenue Service (the "IRS"), and that the IRS
could assert that the value of the Stock on the date of purchase was
substantially greater than the purchase price.
If the IRS were to successfully argue in a tax determination that the Stock
had value greater than the price paid by the Purchaser, the additional value
would constitute ordinary income as of the date of its receipt. The additional
taxes (and interest) due would be payable by the Purchaser. There is no
provision for the Company to reimburse the Purchaser for any potential tax
liability, and the Purchaser assumes all responsibility for it. If the
additional value attributed to the Stock were more than 25 percent of the
Purchaser's gross income for the year in which that value was taxable, the IRS
would have six years from the due date for filing the return (or the actual
filing date of the return if filed thereafter) within which to assess the
additional tax and interest.
(b) The Purchaser understands that Section 83 of the Internal Revenue
Code of 1986, as amended (the "Code"), taxes as ordinary income the difference
between the amount paid for the Stock and the fair market value of the Stock as
of the date any restrictions on the Stock lapse. In this context, "restriction"
means the right of the Company to buy back the stock pursuant to the Unvested
Share Repurchase Option. The Purchaser understands that he may elect to be taxed
at the time the Stock is purchased rather than when and as the Unvested Share
Repurchase Option expires by filing an election under Section 83(b) of the Code
with the IRS within 30 days from the date of purchase. Even if the fair market
value of the Stock equals the amount paid for the Stock, the election must be
made to avoid adverse tax consequences in the future. The Purchaser understands
that failure to make this filing timely will result in the recognition of
ordinary income by the Purchaser, as the Unvested Share Xxxxxxxxxx
00.
Option lapses, on the difference between the purchase price and the fair market
value of the Stock at the time such restriction lapses.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY
AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF
THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
THE PURCHASER' S BEHALF.
(c) The Purchaser shall notify the Company in writing if Purchaser
files an election pursuant to Section 83(b) of the Code. The Company intends, in
the event it does not receive from Purchaser evidence of such filing, to claim a
tax deduction for any amount which would be taxable to Purchaser in the absence
of such an election.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"PURCHASER" "COMPANY"
POWER INTEGRATIONS, INC.
/s/ Klas X. Xxxxxx By: /s/ Xxxxxx X. Xxxxx
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(Signature)
Title: President
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KLAS X. XXXXXX
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(Print Name) Address: 0000 Xxxx Xxxx Xxxx,
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Address: 000 Xxxxxxxxx Xx.
Xxx Xxxxx XX 00000
13.
