Power-One 8-K 2007
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (this Agreement) is made and entered into by and between Power-One, Inc., a Delaware corporation (hereinafter referred to as the Company) and (hereinafter referred to as the Executive).
A. The Board of Directors of the Company has approved the Company entering into a severance agreement with the Executive.
B. The Executive is a key executive of the Company.
C. Should the possibility of a Change in Control of the Company arise, the Board believes it is imperative that the Company and the Board be able to rely upon the Executive to continue in his position, and that the Company should be able to receive and rely upon the Executives advice, if requested, as to the best interests of the Company and its stockholders without concern that the Executive might be distracted by the personal uncertainties and risks created by the possibility of a Change in Control.
D. Should the possibility of a Change in Control arise, in addition to his regular duties, the Executive may be called upon to assist in the assessment of such possible Change in Control, advise management and the Board as to whether such Change in Control would be in the best interests of the Company and its stockholders, and to take such other actions as the Board might determine to be appropriate.
E. This Agreement provides the benefits the Executive will be entitled to receive upon certain terminations of employment in connection with Change in Control from and after the Effective Date and supersedes and negates any and all previous agreements with respect to such benefits, including, without limitation, any previous Change in Control Severance Agreement by and between the Executive and the Company (the Prior Change in Control Agreement).
NOW THEREFORE, to help assure the Company that it will have the continued dedication of the Executive and the availability of his advice and counsel notwithstanding the possibility, threat, or occurrence of a Change in Control of the Company, and to induce the Executive to remain in the employ of the Company in the face of these circumstances and for other good and valuable consideration, the Company and the Executive agree as follows:
Article 1. Term
This Agreement shall be effective as of (the Effective Date). This Agreement will continue in effect through the first anniversary of the Effective Date. 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 three (3) months prior to the end of such term (or extended term, as the case may be) to the Executive that this Agreement will not be extended, and if such notice is timely given this Agreement will terminate at the end of the term then in progress.
Notwithstanding the foregoing, in the event a Change in Control occurs during the original or any extended term of this Agreement, this Agreement will remain in effect for the longer of: (i) twenty-four (24) months beyond the month in which such Change in Control occurred; or (ii) until all obligations of the Company hereunder have been fulfilled, and until all benefits required hereunder have been paid to the Executive. For purposes of clarity, subject to Section 4.1, benefits shall be payable to the Executive under this Agreement only with respect to a single Change in Control of the Company. Accordingly, no Change in Control after the first Change in Control shall be considered for purposes of this Agreement.
Article 2. ERISA
This Agreement is intended as part of a severance program of the Company that constitutes (i) a pension plan within the meaning of Section 3(2) of ERISA, and (ii) an unfunded pension plan maintained by the Company for a select group of management or highly compensated employees within the meaning of Department of Labor Regulation 2520.104-23 promulgated under ERISA, and Sections 201, 301, and 401 of ERISA.
Article 3. Definitions
Whenever used in this Agreement, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized:
(a) Accrued Obligations means (i) any Base Salary that had accrued but had not been paid (including any accrued and unpaid vacation time) prior to the Severance Date, and (ii) any bonus earned as of the Severance Date with respect to the fiscal year preceding the year in which the Severance Date occurs (if the Executive was employed by the Company on the last day of that fiscal year) that had not previously been paid.
(b) Agreement means this Change in Control Severance Agreement.
(c) Base Salary means the salary of record paid to the Executive by the Company as annual salary (whether or not deferred), but excludes amounts received under incentive or other bonus plans.
(d) Beneficial Owner and Beneficial Ownership shall have the meaning ascribed to such terms in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
(e) Beneficiary means the persons or entities designated or deemed designated by the Executive pursuant to Section 11.2.
(f) Board means the Board of Directors of the Company.
(g) Cause means, as reasonably determined by a majority of the Continuing Directors (as defined in Section 3(h)(ii) below) then in office (excluding the Executive, if he is then a Continuing Director) based on the information then known to them, the occurrence of either or both of the following:
(i) the Executives 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 Executives part shall be deemed to be willful if the Executive reasonably believed in good faith that such acts or omissions were in the best interests of the Company.
If there are no Continuing Directors then in office, the determination of Cause shall be made by a majority of the independent directors (as determined under the listing requirements of the Nasdaq Stock Market) or, if there are no independent directors then in office, by the full Board.
(h) Change in Control means any of the following:
(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a Person)) of Beneficial Ownership of twenty percent (20%) or more of either (1) the then-outstanding shares of common stock of the Company (the Outstanding Company Common Stock) or (2) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the Outstanding Company Voting Securities); provided, however, that, for purposes of this clause (i), the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliate of the Company or a successor, and (D) any acquisition by any entity pursuant to a transaction that complies with clauses (1), (2) and (3) of Section 3(h)(iii) below; further provided, that, creditors of the Company who become stockholders of the Company in connection with any bankruptcy of the Company under the laws of the United States shall not, by virtue of such bankruptcy, be deemed a group or a single Person for the purposes of this clause (i) (provided that any one of such creditors may trigger a Change in Control pursuant to this clause (i) if such
creditors 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: (A) if the Company does not have a Parent, a majority of the Board; or (B) if the Company has a Parent, a majority of the Board of Directors of the Controlling Parent. A director is a Continuing Director if he or she either:
(1) was a member of the Board on the applicable Initial Date (an Initial Director); or
(2) was elected to the Board (or the Board of Directors of the Controlling Parent, as applicable), or was nominated for election by the Companys or the Controlling Parents 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 Companys or the Controlling Parents 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).
Notwithstanding the foregoing, in no event shall a transaction or other event that occurred prior to the Effective Date constitute a Change in Control. Notwithstanding anything to the contrary in clause (iii) above, a change in ownership of the Company resulting from creditors of the Company becoming stockholders of the Company in connection with any bankruptcy of the Company under the laws of the United States shall not trigger a Change in Control pursuant to clause (iii) above.
(i) Code means the United States Internal Revenue Code of 1986, as amended.
(j) Committee means the Compensation Committee of the Board.
(k) Company means Power-One, Inc., a Delaware corporation (including, for purposes of determining whether the Executive is employed by the Company, any and all subsidiaries specified by the Committee), or any successor thereto as provided in Article 10.
(l) Controlling Parent means the Companys Parent so long as a majority of the voting stock or voting power of that Parent is not Beneficially Owned,
directly or indirectly through one or more subsidiaries, by any other Person. In the event that the Company has more than one Parent, then Controlling Parent shall mean the Parent of the Company the majority of the voting stock or voting power of which is not Beneficially Owned, directly or indirectly through one or more subsidiaries, by any other Person.
(m) Disability means disability as defined in the Companys 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.
(n) Effective Date has the meaning given to such term in Article 1 hereof.
(o) ERISA means the Employee Retirement Income Security Act of 1974, as amended.
(p) Exchange Act means the United States Securities Exchange Act of 1934, as amended.
(q) Executive means the individual identified in the first sentence, and on the signature page, of this Agreement.
(r) Good Reason means, without the Executives express written consent, the occurrence of any one or more of the following:
(i) A material reduction in the nature or status of the Executives authorities, duties, and/or responsibilities, (when such authorities, duties, and/or responsibilities are viewed in the aggregate) from their level in effect on the day immediately prior to the start of the Protected Period, other than an insubstantial and inadvertent act that is remedied by the Company promptly after receipt of notice thereof given by the Executive. In addition, Good Reason will be deemed to exist if the Executives reporting relationship is diminished from the Executives 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 Companys Chief Executive Officer on the day immediately prior to the start of the Protected Period, Good Reason will be deemed to exist if the Executives reporting relationship is changed such that the Executive no longer reports directly to the Chief Executive Officer of the Company or any Parent or directly to the Board of Directors of the Company or any Parent). A mere change in the Executives title by itself shall not constitute Good Reason, provided that there is not a material reduction in the nature or status of the Executives authorities, duties, and/or responsibilities as contemplated above.
In addition, the change in status of the Company from a publicly-traded company to a company the securities of which are not publicly-traded (including any related termination of the Companys 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 Executives authorities, duties, and/or responsibilities.
(ii) A reduction by the Company in the Executives 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 Executives aggregate incentive opportunities under the Companys 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 Executives incentive opportunities shall be deemed to have occurred in the event his incentive opportunity levels and/or the degree of probability of attainment of such incentive opportunities are materially diminished by the Company from the levels and probability of attainment that existed immediately prior to the start of the Protected Period. If the Company has a Parent, a significant reduction of the Executives aggregate incentive opportunities under the Companys short and/or long-term incentive programs shall not be deemed to have occurred if there is an across-the-board reduction in or elimination of any such program which similarly affects all executives of the Company and the reduced or eliminated incentives are replaced by a similar program of a Parent.
(iv) A significant reduction in the Executives relative level of coverage and accruals under the Companys employee benefit and/or retirement plans, policies, practices, or arrangements in which the Executive participates immediately prior to the start of the Protected Period, both in terms of the amount of benefits provided, and amounts accrued. For this purpose, the Company may eliminate and/or modify existing programs and coverage levels; provided, however, that the Executives 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 Companys organization.
(v) The failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform this Agreement, as contemplated in Article 10.
(vi) The Executive is informed by the Company that his principal place of employment for the Company will be relocated to a location that is greater than thirty-five (35) miles away from the Executives principal place of employment for the Company at the start of the corresponding Protected Period.
The Executives right to terminate employment for Good Reason shall not be affected by the Executives incapacity due to physical or mental illness. The Executives 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 Executives authorities that is deemed waived by operation of this clause may be considered for purposes of determining whether any subsequent reduction in the Executives authorities (when taken into consideration with the first reduction) constitutes a material reduction in the nature or status of the Executives 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 Companys assets, directly or indirectly through one or more subsidiaries.
(t) Qualifying Termination has the meaning given to such term in Section 4.2(a).
(u) Severance Benefits means the payments and/or benefits provided in Section 4.3.
(v) Severance Date means the date on which the Executives employment with the Company and its subsidiaries terminates for any reason (whether or not as a result of a Qualifying Termination).
Article 4. Severance Benefits
4.1. Right to Severance Benefits. The Executive shall be entitled to receive from the Company Severance Benefits, as described in Section 4.3, if the Executive has incurred a Qualifying Termination.
The Executive shall not be entitled to receive Severance Benefits if his employment terminates (regardless of the reason) before the Protected Period (as such
term is defined in Section 4.2(c)) corresponding to a Change in Control of the Company or more than twenty-four (24) months after the date of a Change in Control of the Company.
4.2. Qualifying Termination.
(a) Subject to Sections 4.2(d), 4.4, and 4.5, the occurrence of any one or more of the following events within the Protected Period corresponding to a Change in Control of the Company, or within twenty-four (24) calendar months following the date of a Change in Control of the Company shall constitute a Qualifying Termination:
(i) An involuntary termination of the Executives employment by the Company for reasons other than Cause;
(ii) A voluntary termination of employment by the Executive for Good Reason;
(iii) A failure or refusal by a successor company to assume by written instrument the Companys obligations under this Agreement, as required by Article 10; or
(iv) A repudiation or breach by the Company or any successor company of any of the provisions of this Agreement.
For purposes of determining any benefits payable hereunder, the date on which the succession referred to in clause (iii) becomes effective and the date on which the repudiation or breach referred to in clause (iv) occurs, as applicable, shall be deemed to be the Executives Severance Date.
(b) If more than one of the events set forth in Section 4.2(a) occurs, such events shall constitute but a single Qualifying Termination and the Executive shall be entitled to but a single payment of the Severance Benefits.
(c) The Protected Period corresponding to a Change in Control of the Company shall be a period of time determined in accordance with the following:
(i) If the Change in Control is triggered by a tender offer for shares of the Companys stock or by the offerors 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 Executives 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 Executives Severance Benefits under this Agreement shall be reduced by the severance benefits (including, without limitation, any other change-in-control severance benefits and any other severance benefits generally) that the Executive may be entitled to under any other plan, program, agreement or other arrangement with the Company (including, without limitation, any such benefits provided for by an employment agreement). For purposes of the foregoing, any cash severance benefits payable to the Executive under any other plan, program, agreement or other arrangement with the Company shall offset the cash severance benefits otherwise payable to the Executive under this Agreement on a dollar-for-dollar basis. For purposes of the foregoing, non-cash severance benefits to be provided to the Executive under any other plan, program, agreement or other arrangement with the Company shall offset any corresponding benefits otherwise to be provided to the Executive under this Agreement or, if there are no corresponding benefits otherwise to be provided to the Executive under this Agreement, the value of such benefits shall offset the cash severance benefits otherwise payable to the Executive under this Agreement on a dollar-for-dollar basis. If the amount of other benefits to be offset against the cash severance benefits otherwise payable to the Executive under this Agreement in accordance with the preceding two sentences exceeds the amount of cash severance benefits otherwise payable to the Executive under this Agreement, then the excess may be used to offset other non-cash severance benefits otherwise to be provided to the Executive under this Agreement on a dollar-for-dollar basis. For
purposes of this paragraph, the Committee shall reasonably determine the value of any non-cash benefits.
4.3. Description of Severance Benefits. In the event that the Executive becomes entitled to receive Severance Benefits, as provided in Sections 4.1 and 4.2, the Company shall, subject to Section 4.7, pay to the Executive and provide him with the following:
(a) An amount equal to times the Executives highest annualized rate of Base Salary in effect at any time after the commencement of the Protected Period and on or before the Executives Severance Date.
(b) An amount equal to times the average of the annual bonuses paid by the Company to the Executive for the three (3) full fiscal years of the Company immediately preceding Executives Severance Date.
(c) Payment or reimbursement of the Executives premiums charged to continue medical coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act (COBRA), at the same or reasonably equivalent medical coverage for the Executive (and, if applicable, the Executives eligible dependents) as in effect immediately prior to the Executives Severance Date, to the extent that the Executive elects such continued coverage; provided that the Companys obligation to make any payment or reimbursement pursuant to this Section 4.3(c) shall cease upon the first to occur of (a) the anniversary of the Severance Date; (b) the Executives death; (c) the date the Executive becomes eligible for coverage under the health plan of a future employer; or (d) the date the Company or its affiliates ceases to offer any group medical coverage to its active executive employees or the Company is otherwise under no obligation to offer COBRA continuation coverage to the Executive.
(d) A lump-sum cash amount equal to the portion of the Executives account under the Companys qualified retirement plan (including, without limitation, any 401(k) matching contributions) that has not become vested under the terms of such plan as of the Severance Date.
(e) A lump-sum cash amount equal to the portion of the Executives account under any Company nonqualified deferred compensation or other supplemental retirement plan that has not become vested under the terms of such plan as of the Severance Date.
(f) The Company shall pay or reimburse the Executive for up to $15,000 of outplacement services obtained by the Executive during the twelve (12) month period following the Effective Date of Termination.
4.4. Termination Due to Disability, Death or Retirement. Termination of the Executives employment due to the Executives death or Disability is not a Qualifying Termination, and upon any such termination, the Executive shall be entitled to payment
only of the Accrued Obligations. However, if immediately prior to the condition or event leading to, or the commencement of, the Disability of the Executive (but not the death of the Executive), the Executive would have experienced a Qualifying Termination if he had terminated at that time, then upon termination of his employment for Disability he shall be entitled to the benefits provided by this Agreement for a Qualifying Termination. A voluntary termination of employment by the Executive due to the Executives retirement is not a Qualifying Termination, and upon any such termination, the Executive shall be entitled to payment only of the Accrued Obligations. However, if immediately prior to the Executives 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 Executives employment by the Company for Cause or by the Executive other than for Good Reason does not constitute a Qualifying Termination. Upon any such termination, the Executive shall be entitled to payment only of the Accrued Obligations.
4.6. Notice of Termination. Any termination of the Executives employment by the Company for Cause or by the Executive for Good Reason shall be communicated by a Notice of Termination. For purposes of this Agreement, a Notice of Termination shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executives employment under the provision so indicated.
4.7. Release; Exclusive Remedy.
(a) This Section 4.7 shall apply notwithstanding anything else contained in this Agreement or any stock option, restricted stock or other equity-based award agreement to the contrary. As a condition precedent to any Company obligation to the Executive pursuant to Section 4.3 or any obligation to accelerate vesting of any equity-based award in connection with the termination of the Executives employment, (i) the Executive shall, upon or promptly following his last day of employment with the Company, provide the Company with a valid, executed general release agreement in a form acceptable to the Company, and such release agreement shall have not been revoked by the Executive pursuant to any revocation rights afforded by applicable law, and (ii) the Executive shall have complied with any and all covenants set forth in Article 8 hereof. The Company shall have no obligation to make any payment to the Executive pursuant to Section 4.3 (or otherwise accelerate the vesting of any equity-based award in the circumstances as otherwise contemplated by the applicable award agreement) unless and until the release agreement contemplated by this Section 4.7 becomes irrevocable by the Executive in
accordance with all applicable laws, rules and regulations, or at any time after a breach by the Executive of any covenant set forth in Article 8.
(b) The Executive agrees that the general release agreement described in Section 4.7(a) will require that the Executive acknowledge, as a condition to the payment of any benefits under Section 4.3 that the payments contemplated by Section 4.3 (and any applicable acceleration of vesting of an equity-based award in accordance with the terms of such award in connection with the termination of the Executives employment) shall constitute the exclusive and sole remedy for any termination of his employment, and the Executive will be required to covenant, as a condition to receiving any such payment (and any such accelerated vesting), not to assert or pursue any other remedies, at law or in equity, with respect to any termination of employment. The Company and Executive acknowledge and agree that there is no duty of the Executive to mitigate damages under this Agreement. All amounts paid to the Executive pursuant to Section 4.3 shall be paid without regard to whether the Executive has taken or takes actions to mitigate damages.
4.8. Acceleration of Equity Awards on Change in Control. Notwithstanding any other provision herein or in any applicable stock incentive plan document or award agreement, each stock option, restricted stock, or other equity or equity-based award granted by the Company to the Executive, to the extent such award is outstanding and unvested as of the date of a Change in Control, shall automatically become fully vested as of such Change in Control date. In the event that the Executive has a Qualifying Termination during the Protected Period related to a Change in Control and any stock option, restricted stock, or other equity or equity-based award (or portion thereof) that had not vested as of the Severance Date was cancelled or otherwise terminated upon or prior to the date of the related Change in Control solely as a result of such Qualifying Termination, such award shall be reinstated and shall automatically become fully vested and, in the case of stock options or similar awards, the Executive shall be given a reasonable opportunity to exercise such accelerated portion of the option or other award before it terminates.
Article 5. Form and Timing of Severance Benefits; Tax Withholding;
5.1. Form and Timing of Severance Benefits. The Severance Benefits described in Sections 4.3(a), 4.3(b), 4.3(d) and 4.3(e) shall be paid in cash to the Executive in a single lump sum as soon as practicable following the Severance Date, but in no event beyond thirty (30) days from such date. Notwithstanding the foregoing, payment of any and all Severance Benefits are subject to the provisions of Section 4.7 and Section 11.10.
5.2. Withholding of Taxes. Notwithstanding anything else herein to the contrary, the Company may withhold (or cause there to be withheld, as the case may be) from any amounts otherwise due or payable under or pursuant to this Agreement such
federal, state and local income, employment, or other taxes as may be required to be withheld pursuant to any applicable law or regulation.
Article 6. Section 280G.
6.1. Possible Gross-Up.
(a) Subject to Section 6.1(b), in the event it is determined (pursuant to Section 6.2 below) or finally determined (as defined in Section 6.3(c) below) that any payment, distribution, transfer, benefit or other event with respect to the Company or a successor, direct or indirect subsidiary or affiliate of the Company (or any successor or affiliate of any of them, and including any benefit plan of any of them), and arising in connection with an event described in Section 280G(b)(2)(A)(i) of the Code, occurring after the Effective Date, to or for the benefit the Executive or the Executives dependents, heirs or beneficiaries (whether such payment, distribution, transfer, benefit or other event occurs pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 6) (each a Payment and collectively the Payments) is or was subject to the excise tax imposed by Section 4999 of the Code, and any successor provision or any comparable provision of state or local income tax law (collectively, Section 4999), or any interest, penalty or addition to tax is or was incurred by Executive with respect to such excise tax (such excise tax, together with any such interest, penalty, addition to tax, and costs (including professional fees)) hereinafter collectively referred to as the Excise Tax), then, within 10 days after such determination or final determination, as the case may be, the Company shall pay to the Executive (or to the applicable taxing authority on Executives behalf) an additional cash payment (hereinafter referred to as the Gross-Up Payment) equal to an amount such that after payment by the Executive of all taxes, interest, penalties, additions to tax and costs imposed or incurred with respect to the Gross-Up Payment (including, without limitation, any income and excise taxes imposed upon the Gross-Up Payment), the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon such Payment or Payments. The Gross-Up Payment, if triggered pursuant to this Section 6.1(a), is intended to put the Executive in the same position as the Executive would have been had no Excise Tax been imposed upon or incurred as a result of any Payment.
(b) Notwithstanding anything contained in Section 6.1(a) or any other provision of this Agreement to the contrary, if a reduction in the amount of the Payments by an amount up to but not in excess of one hundred thousand dollars ($100,000) would avoid the imputation of any Excise Tax on the remaining Payments (after such reduction), then the Payments shall be reduced (but not below zero) so that the maximum amount of the Payments (after reduction) shall be one dollar ($1.00) less than the amount
which would cause the Payments to be subject to the Excise Tax. Unless the Executive shall have given prior written notice to the Company to effectuate a reduction in the Payments if such a reduction is required, the Company shall reduce or eliminate the Payments by first reducing or eliminating any cash severance benefits, then by reducing or eliminating any accelerated vesting of stock options, then by reducing or eliminating any accelerated vesting of other equity-based awards, then by reducing or eliminating any other remaining Payments.
(c) The preceding provisions of this Section 6.1 shall take precedence over the provisions of any other plan, arrangement or agreement governing the Executives rights and entitlements to any benefits or compensation
6.2. Initial Determination. Except as provided in Section 6.3, the determination that a Payment is subject to an Excise Tax and, in such event, whether a Gross-Up Payment or reduction in Payments is required pursuant to Section 6.1, shall be made in writing by a nationally recognized accounting firm or consulting firm with experience in such matters selected by the Executive (Executives Accountant). Such determination shall include the amount of the Gross-Up Payment or reduction in Payments, as applicable, and detailed computations thereof, including any assumptions used in such computations (the written determination of the Executives Accountant, hereinafter, the Executives Determination). The Executives Determination shall be reviewed on behalf of the Company by a nationally recognized accounting firm or consulting firm with experience in such matters selected by the Company (the Companys Accountant). The Company shall notify Executive within 10 business days after receipt of the Executives Determination of any disagreement or dispute therewith, and failure to so notify within that period shall be considered an agreement by the Company to make any required Gross-Up Payment as provided in Section 6.1 above within 10 days from the expiration of such 10 business-day period. In the event of an objection by the Company to the Executives Determination, any amount not in dispute shall be paid within 10 days following the 10 business-day period referred to herein, and with respect to the amount in dispute the Executives Accountant and the Companys Accountant shall jointly select a third nationally recognized accounting firm or consulting firm with experience in such matters to resolve the dispute and the decision of such third firm shall be final, binding and conclusive upon the Executive and the Company. In such a case, the third accounting firms findings shall be deemed the binding determination with respect to the amount in dispute, obligating the Company to make any payment as a result thereof within 10 days following the receipt of such third accounting firms determination. All fees and expenses of each of the firms referred to in this Section 6.2 with respect to the matters referred to in this Section 6 shall be borne solely by the Company.
6.3. Claim of Taxing Authority.
(a) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service (or any successor thereof) or any state or local taxing authority (individually or collectively, the Taxing Authority) that,
if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 30 days after the Executive receives written notice of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid; provided, however, that failure by the Executive to give such notice within such 30-day period shall not result in a waiver or forfeiture of any of the Executives rights under this Section 6 except to the extent of actual damages suffered by the Company as a result of such failure. The Executive shall not pay such claim prior to the expiration of the 15-day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes, interest, penalties or additions to tax with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such 15-day period (regardless of whether such claim was earlier paid as contemplated by the preceding parenthetical) that it desires to contest such claim (and demonstrates to the reasonable satisfaction of Executive its ability to make the payments to Executive which may ultimately be required under this section before assuming responsibility for the claim), Executive shall:
(i) give the Company any information reasonably requested by the Company relating to such claim;
(ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by the Company that is reasonably acceptable to the Executive;
(iii) cooperate with the Company in good faith in order effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all attorneys fees, costs and expenses (including additional interest, penalties and additions to tax) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for all taxes (including, without limitation, income and excise taxes), interest, penalties and additions to tax imposed in relation to such claim and in relation to the payment of such costs and expenses or indemnification.
(b) Without limitation on the foregoing provisions of this Section 6.3, and to the extent its actions do not unreasonably interfere with or prejudice the Executives disputes with the Taxing Authority as to other issues, the Company shall control all proceedings taken in connection with such
contest and, in its reasonable discretion, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the Taxing Authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax, interest or penalties claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance an amount equal to such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from all taxes (including, without limitation, income and excise taxes), interest, penalties and additions to tax imposed with respect to such advance or with respect to any imputed income with respect to such advance, as any such amounts are incurred; and, further, provided, that any extension of the statute of limitations relating to payment of taxes, interest, penalties or additions to tax for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount; and, provided, further, that any settlement of any claim shall be reasonably acceptable to the Executive and the Companys control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder, and the Executive shall be entitled to settle or contest, as the case may be, any other issue.
(c) If, after receipt by the Executive of an amount advanced by the Company pursuant to Section 6.3(b), the Executive receives any refund with respect to such claim, the Executive shall (subject to the Companys complying with the requirements of this Section 6) promptly pay to the Company an amount equal to such refund (together with any interest paid or credited thereof after taxes applicable thereto), net of any taxes (including, without limitation, any income or excise taxes), interest, penalties or additions to tax and any other costs incurred by the Executive in connection with such advance, after giving effect to such repayment. If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 6.3(a), it is finally determined that the Executive is not entitled to any refund with respect to such claim, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall be treated as a Gross-Up Payment and shall offset, to the extent thereof, the amount of any Gross-Up Payment otherwise required to be paid.
(d) For purposes of this section, whether the Excise Tax is applicable to a Payment shall be deemed to be finally determined upon the earliest of: (A) the expiration of the 15-day period referred to in Section 6.3(a) above if the Company has not notified the Executive that it intends to contest the underlying claim, (B) the expiration of any period following which no right of appeal exists, (C) the date upon which a closing agreement or
similar agreement with respect to the claim is executed by the Executive and the Taxing Authority (which agreement may be executed only in compliance with this section), (D) the receipt by the Executive of notice from the Company that it no longer seeks to pursue a contest (which shall be deemed received if the Company does not, within 15 days following receipt of a written inquiry from the Executive, affirmatively indicate in writing to Executive that the Company intends to continue to pursue such contest).
6.4. Over- and Under-Payments. As a result of uncertainty in the application of Section 4999 that may exist at the time of any determination that a Gross-Up Payment is due, it may be possible that in making the calculations required to be made hereunder, the parties or their accountants shall determine that a Gross-Up Payment need not be made (or shall make no determination with respect to a Gross-Up Payment) that properly should be made or that Payments should be reduced that should have been made (Underpayment), or that a Gross-Up Payment not properly needed to be made should be made or that Payments be reduced by an amount less than that required pursuant to Section 6.1 (Overpayment). The determination of any Underpayment shall be made using the procedures set forth in Section 6.2 above and shall be paid to Executive as an additional Payment (or Gross-Up Payment, as applicable). The Company shall be entitled to use procedures similar to those available to the Executive in Section 6.2 to determine the amount of any Overpayment (provided that the Company shall bear all costs of the accountants as provided in Section 6.2). In the event of a determination that an Overpayment was made, the Executive shall promptly repay the amount of such Overpayment to the Company together with interest on such amount (at the same rate as is applied to determine the present value of payments under Section 280G or any successor thereto), from the date the reimbursable payment was received by the Executive to the date the same is repaid to the Company; provided, however, that the amount to be repaid by the Executive to the Company shall be subject to reduction to the extent necessary to put the Executive in the same after-tax position as if such Overpayment were never made.
Article 7. The Companys Payment Obligation
7.1. Payment of Obligations Absolute. Except as provided in Sections 4.2(e), 4.7, 5.2 and in Article 6, the Companys 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 Companys 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 Companys tax-qualified pension plan, supplemental retirement plans, nonqualified deferred compensation plans, bonus plans, and any disability, workers compensation or other Company benefit plan distribution that the Executive is entitled to as of his Severance Date. Notwithstanding the foregoing, this Agreement shall not create an inference that any duplicate payments shall be required. No payments made pursuant to this Agreement shall be considered compensation for purposes of any such benefit plan. Payment of the Executives Accrued Obligations shall be deemed to not duplicate any benefit contemplated by this Agreement and shall not result in an offset pursuant to Section 4.2(e).
Article 8. Trade Secrets; Non-Solicitation and Non-Disparagement
By executing this Agreement and again by receiving any benefits provided for by this Agreement, the Executive agrees follows:
(a) In the course of performing his duties for the Company, the Executive will receive, and acknowledges that he or she has received, confidential information, including without limitation, information not available to competitors relating to the Companys 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.
(b) For a period of one year following the termination of the Executives employment with the Company, the Executive shall not, directly or indirectly through, aid, assistance or counsel, on the Executives 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 Executives employment with the Company, employed by any member of the Company Group, or (ii) by any means issue or communicate any private or public statement that may be critical or disparaging of any member of the Company Group, or any of their respective products, services, officers, directors or employees.
(c) The Executive represents that he (i) is familiar with the foregoing covenants, (ii) is fully aware of his obligations hereunder, (iii) agrees to the reasonableness of the length of time, scope and geographic coverage of the foregoing covenants, and (iv) agrees that such covenants are necessary to protect the Companys confidential and proprietary information, good will, stable workforce, and customer relations.
(d) The Executive agrees that a breach of any of the covenants in this Article 8 would cause immediate and irreparable harm to the Company that would be difficult or impossible to measure, and that damages to the Company for any such injury would therefore be an inadequate remedy for any such breach. Accordingly, the Executive agrees that if he breaches any term of this Article 8, the Company shall be entitled, in addition to and without limitation upon all other remedies the Company may have under this Agreement, at law or otherwise, to obtain injunctive or other appropriate equitable relief to restrain any such breach upon a showing by the Company of the legal requirements to obtain such relief.
Article 9. Claims Procedure
9.1. Committee Review. The Executive or, in the event of the Executives death, the Executives Beneficiary (as applicable, the Claimant) may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from this Agreement. Such claim shall be delivered to the Committee care of the Company in accordance with the notice provisions of Section 11.7. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. All other claims must be
made within two hundred and seventy (270) days of the date on which the event that caused the claim to arise occurred (subject to any timing requirements that may apply in the case of a purported termination for Good Reason). The claim must state with particularity the determination desired by the Claimant.
9.2. Notification of Decision. The Committee shall consider a Claimants 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:
(a) that the Claimants requested determination has been made, and that the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimants 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 Claimants claim for benefits; and
(v) a statement of the Claimants 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 Claimants compliance with the foregoing provisions of this Article 9 is a mandatory prerequisite to a Claimants 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.
Notwithstanding the foregoing provisions, the Company and the Executive each may apply to any court of competent jurisdiction in the state of California for a temporary restraining order, preliminary injunction, or other interim or conservatory relief, to ensure that any relief sought in arbitration is not rendered ineffectual through interim harm and as necessary to enforce the provisions of this Agreement, without breach of this arbitration agreement and without abridgement of the powers of the arbitrator.
9.5. Claims Expenses; Legal Fees and Expenses of Executive. The Company shall advance and bear all reasonable expenses of any arbitration conducted under this Article 9 and all reasonable legal fees and expenses incurred by Claimant in pursuing a claim at and through any stage of review or dispute resolution pursuant to this Article 9; provided, however, that if it is finally determined that the Claimant did not pursue the claim or commence the arbitration in good faith and had no reasonable basis therefore, the Claimant shall repay all of Claimants 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 arbitrators 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 Companys obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform them if such succession had not taken place. Failure of the Company to obtain such assumption and agreement in a written instrument prior to the effective date of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if he had terminated his employment with the Company voluntarily for Good Reason. Except for the purpose of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Executives Severance Date if the Executive so elects, but any delay or failure by the Executive to so elect shall not be a waiver or release of any rights hereunder which may be asserted at any time.
10.2. Assignment by the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executives personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees.
Article 11. Miscellaneous
11.1. Employment Status. Except as may be provided under any other written agreement between the Executive and the Company, the employment of the Executive by
the Company is at will, and, prior to the effective date of a Change in Control, may be terminated by either the Executive or the Company at any time, subject to applicable law.
11.2. Beneficiaries. The Executive may designate one or more persons or entities as the primary and/or contingent Beneficiaries of any Severance Benefits owing to the Executive under this Agreement. If the Executive dies while any amount would still be payable to him hereunder had he continued to live, all such amounts, unless otherwise provided herein, shall be paid to the Executives 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 Executives devisee, legatee, or other designee, or if there is no such designee, to the Executives estate. The Executive may make or change such designation at any time, provided that any designation or change thereto must be in the form of a signed writing acceptable to and received by the Committee.
11.3. Gender and Number; Section Headings. Where the context requires herein, the singular shall include the plural, the plural shall include the singular, and any gender shall include all other genders. The section headings of, and titles of paragraphs and subparagraphs contained in, this Agreement are for the purpose of convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation thereof.
11.4. Severability. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Agreement, and this Agreement shall be construed and enforced as if the illegal or invalid provision had not been included.
11.5. Entire Agreement. This Agreement, together with any employment agreement and any written agreement evidencing any stock option or other equity-based incentive award previously granted by the Company, embodies the entire agreement of the parties hereto respecting the matters within its scope. As of the Effective Date, this Agreement shall supersede all other agreements of the parties hereto that are prior to or contemporaneous with the Effective Date and that directly or indirectly bear upon the subject matter hereof (including, without limitation, any Prior Change in Control Agreement), other than any prior agreement relating to any right to indemnification the Executive may have from the Company or the Executives right to be covered under any applicable insurance policy, with respect to any liability the Executive incurred or may incur as an employee, officer or director of the Company or its affiliates. Any negotiations, correspondence, agreements, proposals or understandings prior to the Effective Date relating to the subject matter hereof shall be deemed to have been merged into this Agreement, and to the extent inconsistent herewith, such negotiations, correspondence, agreements, proposals, or understandings shall be deemed to be of no force or effect. There are no representations, warranties, or agreements, whether express or implied, or oral or written, with respect to the subject matter hereof, except as expressly set forth herein. This Agreement is an integrated agreement.
11.6. Modification. Except as expressly provided in the definition of Good Reason in Section 3 with respect to certain waivers of circumstances that would
otherwise constitute Good Reason, no provision of this Agreement may be modified, waived, or discharged unless such modification, waiver, or discharge is agreed to in writing and signed by the Executive and by an authorized member of the Committee or its designee, or by the respective parties legal representatives and successors.
11.7. Notice. For purposes of this Agreement, notices, including a Notice of Termination, and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or on the date stamped as received by the U.S. Postal Service for delivery by certified or registered mail, postage prepaid and addressed: (i) if to the Executive, to his latest address as reflected on the records of the Company, and (ii) if to the Company: Power-One, Inc., 740 Calle Plano, Camarillo, California 93012, Attn: Corporate Secretary, or to such other address as the Company may furnish to the Executive in writing with specific reference to this Agreement and the importance of the notice, except that notice of change of address shall be effective only upon receipt.
11.8. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties hereto reflected hereon as the signatories. Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.
11.9. Applicable Law. To the extent not preempted by the laws of the United States, the laws of the State of California shall be the controlling law in all matters relating to this Agreement (notwithstanding any California or other conflict of law provision to the contrary). Any statutory reference in this Agreement shall also be deemed to refer to all applicable final rules and final regulations promulgated under or with respect to the referenced statutory provision.
11.10. Section 409A.
(a) Notwithstanding any provision of this Agreement to the contrary, if the Executive is a specified employee as defined in Section 409A of the Code (Section 409A), the Executive shall not be entitled to any payments in connection with a separation from service of the Executive (within the meaning of Section 409A) until the earlier of (i) the date which is six (6) months after his separation from service for any reason other than death, or (ii) the date of the Executives death. Furthermore, with regard to any benefit to be provided upon a termination of employment, to the extent required to avoid the imputation of any tax, penalty or interest under Section 409A, the Executive shall pay the premium for such benefit during the aforesaid period and be reimbursed by the Company therefor promptly after the end of such period. The provisions of this Section 11.10 shall only apply if, and to the extent, required to avoid the imputation of any tax, penalty or interest under Section 409A.
(b) To the extent that this Agreement or any plan, program or award of the Company in which the Executive participates or which has been or is granted by the Company to the Executive, as applicable, is subject to Section 409A, the Company and the Executive agree that the terms and conditions of this Agreement and such other plan, program or award shall be construed and interpreted to the maximum extent reasonably possible, without altering the fundamental intent of the agreement, to avoid the imputation of any tax, penalty or interest under Section 409A.
IN WITNESS WHEREOF, the parties have executed this Agreement on this day of , .