Securities Exchange Act of 1934(Amendment (Amendment No. )xþ
Filed by a Party other than the Registrant¨¨oPreliminary Proxy Statement ¨o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)14a-6(e)(2))xþ Definitive Proxy Statement ¨o Definitive Additional Materials ¨o Soliciting Material Pursuant to § 240.14a-12 xþNo fee required. ¨o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. 1. Title of each class of securities to which transaction applies: 2. Aggregate number of securities to which transaction applies: 3. Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): 4. Proposed maximum aggregate value of transaction: 5. Total fee paid: o ¨Fee paid previously with preliminary materials. ¨o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 6.1. Amount Previously Paid: 7.2. Form, Schedule or Registration Statement No.: 8.3. Filing Party: 9.4. Date Filed:
Proxy Statement accompanying this Notice.
95138
Rafael Torres
Bill Roeschlein
In accordance withinternet.
7, 2009.
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To elect
• | Election of our eight nominees as directors to serve until the 2010 Annual Meeting of Stockholders and until their successors are duly elected and qualified; and | |
• | Ratification of the selection by the Audit Committee of the Board of Directors of Deloitte & Touche LLP as the independent registered public accounting firm of Power Integrations, Inc. for its fiscal year ending December 31, 2009. |
To approveproperly brought before the amendment and restatementmeeting, it is the intention of the Power Integrations, Inc. 1997 Outside Directors Stock Option Plan (to be renamed the Power Integrations, Inc. 2008 Outside Directors Stock Option Plan) to increase the number of shares of common stock authorized for issuance under the plan by 300,000 shares, reduce the size of the initial and annual stock option grants, and change the grant date and vesting terms of the initial and annual stock option grants;
To approve the amendment and restatement of the Power Integrations, Inc. 1997 Employee Stock Purchase Plan to increase the number of shares of common stock authorized for issuance under the plan by 1,000,000 shares; and
To ratify the selection by the Audit Committee of Deloitte & Touche LLP as the independent registered public accounting firm of Power Integrations, Inc. for the fiscal year ending December 31, 2008.
Why did I receive a Noticepersons named in the mail regarding the Internet availability ofaccompanying proxy materials this year instead of a full set of proxy materials?
We are pleased to take advantage of new SEC rules that allow companies to furnishvote on those matters in accordance with their proxy materials over the Internet. Accordingly, we have sent to most of our stockholders a Notice regarding Internet availability of proxy materials. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found in the Notice. In addition, stockholders may request to receive proxy materials in printed form electronically by email on an ongoing basis. A stockholder’s election to receive proxy materials by mail or email will remain in effect until the stockholder terminates it.
best judgment.
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the meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the meeting and vote in person if you have already voted by proxy.
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22, 2009.
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compensation for soliciting proxies but The Altman Group will be paid its customary fee of approximately $6,500,$6,000, plus out-of-pocket expenses if it solicits proxies. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.
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“discretionary” “routine” items, but not with respect to “non-discretionary”“non-routine” items. Discretionary items are proposals considered routine underUnder the rules and interpretations of the New York Stock Exchange (“NYSE”) on which your broker, “non-routine” matters are generally those involving a contest or a matter that may vote shares held in street name insubstantially affect the absencerights or privileges of your voting instructions. On non-discretionary items for which you do not give your broker instructions, the shares will be treatedshareholders, such as broker non-votes.
What are “broker non-votes”?
Broker non-votes occur when a beneficial owner of shares held in “street name” does not give instructions to the brokermergers or nominee holding the shares as to how to vote on matters not deemed “discretionary” items. In such cases, the shares are determined to be “present” for purposes of determining whether a quorum is present, but are not counted for purposes of any vote.
shareholder proposals.
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PROPOSAL 1
ELECTION OF DIRECTORS
If a nominee receives more “Withheld” votes than “For” votes, then notwithstanding the election of that nominee, if our Board determines that, based on the fact that the director received more “Withheld” votes than “For” votes, and the other facts the Board may deem relevant, our Board may decide to accept the nominee’s conditional resignation previously submitted as required under our Corporate Governance Guidelines. See “How many votes are needed to elect directors?” on page 5 for a description of these guidelines. If any nominee becomes unavailable for election as a result of an unexpected occurrence, your shares will be voted for the election of a substitute nominee proposed by Power Integrations. Each person nominated for election has agreed to serve if elected. Power Integrations’ management has no reason to believe that any nominee will be unable to serve.
2009:
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R. Scott Brown
R. Scott Brown, age 66, has served as a member of the Board since July 1999. Mr. Brown has been retired since May 1, 1999. From 1985 to May 1999, Mr. Brown served as senior vice president of worldwide salesan electronics, optics and support for Xilinx, Inc., a designer and developer of complete programmable logic solutions for use by electronic equipment manufacturers.
imaging company.
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the Neuropsychiatric Institute at Oregon Health Science University.
The Board Recommends
A VOTE IN FAVOR OF EACH NAMED NOMINEE.Vote In Favor Of Each Named Nominee.
INDEPENDENCEOF THE BOARD
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Name | Audit | Compensation | Nominating and Governance | ||||||
Alan D. Bickell | X | * | X | (2) | |||||
Nicholas E. Brathwaite | X | ||||||||
R. Scott Brown | X | ||||||||
James Fiebiger | X | (1) | X | * | |||||
Balakrishnan S. Iyer | X | X | |||||||
E. Floyd Kvamme | X | (1) | X | * | |||||
Steven J. Sharp(3) | X | (2) | X | ||||||
Total meetings in year 2007 | 7 | 9 | 4 |
Nominating and | ||||||||||||
Name | Audit | Compensation | Governance(3) | |||||||||
Alan D. Bickell | X | * | (1) | |||||||||
Nicholas E. Brathwaite | X | |||||||||||
R. Scott Brown | X | (1) | ||||||||||
James Fiebiger | X | X | * | |||||||||
Balakrishnan S. Iyer | X | X | ||||||||||
E. Floyd Kvamme | X | * | ||||||||||
Steven J. Sharp | X | X | (2) | |||||||||
Total meetings in year 2008 | 7 | 6 | 4 |
* | Committee Chairperson |
(1) |
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(2) | As of January 29, 2008, Mr. Sharp | |
(3) | Dr. George was added to the Nominating and Governance Committee on April 21, 2009. |
• | evaluates the performance of and assesses the qualifications of the independent registered public accounting firm; | |
• | determines and approves the engagement of the independent registered public accounting firm; | |
• | determines whether to retain or terminate the existing independent registered public accounting firm or to appoint and engage a new independent registered public accounting firm; | |
• | reviews and approves the retention of the independent registered public accounting firm to perform any proposed permissible non-audit services; | |
• | monitors the rotation of partners of the independent registered public accounting firm on Power Integrations’ audit engagement team as required by law; | |
• | confers with management and the independent registered public accounting firm regarding the effectiveness of internal controls over financial reporting; | |
• | establishes procedures, as required under applicable law, for the receipt, retention and treatment of complaints received by Power Integrations regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters; | |
• | meets to review Power Integrations’ annual audited financial statements and quarterly financial statements with management and the independent registered public accounting firm; | |
• | reviews and, if it determines appropriate, approves related person transactions; and | |
• | monitors compliance with the Code of Business Conduct and Ethics. |
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evaluates the performance of and assesses the qualifications of the independent registered public accounting firm;
determines and approves the engagement of the independent registered public accounting firm;
determines whether to retain or terminate the existing independent registered public accounting firm or to appoint and engage a new independent registered public accounting firm;
reviews and approves the retention of the independent registered public accounting firm to perform any proposed permissible non-audit services;
monitors the rotation of partners of the independent registered public accounting firm on Power Integrations’ audit engagement team as required by law;
confers with management and the independent registered public accounting firm regarding the effectiveness of internal controls over financial reporting;
establishes procedures, as required under applicable law, for the receipt, retention and treatment of complaints received by Power Integrations regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters;
meets to review Power Integrations’ annual audited financial statements and quarterly financial statements with management and the independent registered public accounting firm;
reviews and, if it determines appropriate, approves related person transactions; and
monitors compliance with the Code of Business Conduct and Ethics.
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with respect to the chief executive officer, reviews and approves all compensation, including incentive-based compensation and equity compensation awards, and develops or reviews annual performance objectives and goals relevant to compensation and awards and evaluates the performance of the chief executive officer in light of these goals and objectives;
• | with respect to the chief executive officer, reviews and approves all compensation, including incentive-based compensation and equity compensation awards, and develops or reviews annual performance objectives and goals relevant to compensation and awards and evaluates the performance of the chief executive officer in light of these goals and objectives; | |
• | reviews incentive-based compensation plans in which our executive officers participate, and determines the salaries, incentive and equity compensation for executive officers, and oversees the evaluation of management; | |
• | approves all employment, severance, orchange-in-control agreements, special or supplemental benefits, or provisions including the same, applicable to executive officers; | |
• | proposes the adoption, amendment, and termination of stock option plans, stock appreciation rights plans, pension and profit sharing plans, stock bonus plans, stock purchase plans, bonus plans, deferred compensation plans, and other similar programs; | |
• | grants rights, participation and interests in our compensation plans to eligible participants; | |
• | approves and periodically reviews the salary, bonus and equity award ranges for non-executive officers and other employees, and authorizes the chief executive officer to approve compensation levels for such non-executive officers and other employees within such ranges; | |
• | reviews and approves such other compensation matters as the Board or the chief executive officer wishes to have the Compensation Committee approve; | |
• | analyzes, considers and recommends to the Board the compensation to be paid to our non-employee directors for their service on the Board and its committees and any changes thereto, other than compensation received pursuant to automatic equity award grants under stockholder approved equity compensation plans; and | |
• | reviews with management the Compensation Discussion and Analysis (included in this proxy statement) and considers whether to recommend that it be included in proxy statements and other filings. |
reviews incentive-based compensation plans in which our executive officers participate, and determines the salaries, incentive and equity compensation for executive officers, and oversees the evaluation of management;
approves all employment, severance, or change-in-control agreements, special or supplemental benefits, or provisions including the same, applicable to executive officers;
proposes the adoption, amendment, and termination of stock option plans, stock appreciation rights plans, pension and profit sharing plans, stock bonus plans, stock purchase plans, bonus plans, deferred compensation plans, and other similar programs;
grants rights, participation and interests in our compensation plans to eligible participants;
approves and periodically reviews the salary and equity award ranges for non-executive officers and our other employees, and authorizes our chief executive officer to approve compensation levels for such non-executive officers and our other employees within such ranges;
reviews and approves such other compensation matters as our Board or our chief executive officer wishes to have the Compensation Committee approve;
analyzes, considers and recommends to the Board the compensation to be paid to our non-employee directors for their service on the Board and its committees and any changes thereto, other than compensation received pursuant to automatic equity award grants under stockholder approved equity compensation plans; and
reviews with management the Compensation Discussion and Analysis (included in this proxy statement) and to consider whether to recommend that it be included in proxy statements and other filings.
As of the date of this proxy statement, three directors comprise the Compensation Committee: Messrs. Sharp, BrownBickell and Kvamme. All members of Power Integrations’ Compensation Committee are independent (as independence is currently defined in Rule 4200(a)(15) of the Nasdaq listing standards). The Board has adopted a written Compensation Committee Charter, which can be found on our website atwww.powerint.com.
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• | evaluates and recommends to the Board director nominees for each election of directors; |
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determines criteria for selecting new directors, including desired board skills and attributes, and identifies and actively seeks individuals qualified to become directors;
considers nominations of director candidates validly made by stockholders;
reviews and makes recommendations to the Board concerning qualifications, appointment and removal of committee members;
develops, recommends for Board approval, and reviews on an ongoing basis the adequacy of, Power Integrations’ corporate governance principles;
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assists the Board in developing criteria for the evaluation of the Board and committee performance; and
considers Board nominees and proposals submitted by stockholders and establishes any policies, processes and procedures, including procedures to facilitate stockholder communication with the Board.
• | determines criteria for selecting new directors, including desired board skills and attributes, and identifies and actively seeks individuals qualified to become directors; | |
• | considers nominations of director candidates validly made by stockholders; | |
• | reviews and makes recommendations to the Board concerning qualifications, appointment and removal of committee members; | |
• | develops, recommends for Board approval, and reviews on an ongoing basis the adequacy of, Power Integrations’ corporate governance principles; | |
• | assists the Board in developing criteria for the evaluation of the Board and committee performance; and | |
• | considers Board nominees and proposals submitted by stockholders and establishes any policies, processes and procedures, including procedures to facilitate stockholder communication with the Board. |
Moreover, pursuant to a litigation settlement, Power Integrations has solicited nominations for an independent director from stockholders of Power Integrations who own a total of 5% or more of the outstanding shares of Power Integrations’ common stock, based onSchedule 13-Ds andSchedule 13-Gs on file with the Securities and Exchange Commission at the time of the solicitation.
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2008.
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PROPOSAL 2
APPROVALOFTHE 2008 OUTSIDE DIRECTORS STOCK OPTION PLAN
Our Board is requesting stockholder approval of an amendment and restatement of the Power Integrations, Inc. 1997 Outside Directors Stock Option Plan (to be renamed the Power Integrations, Inc. 2008 Outside Directors Stock Option Plan), also referred to as the Directors Plan. Under the Directors Plan as currently in effect, each non-employee director is granted an option to purchase 10,000 shares of our common stock (a) on the anniversary date of the initial public offering of our common stock, our IPO, if the director was serving as a director on the date of our IPO, or (b) on the anniversary date of election to the Board if the director was not serving as a director on the date of our IPO. This lack of standardization of grant dates has been difficult to administer and would be remedied by adoption of the Directors Plan by this
The Board is requesting stockholder approval of the Directors Plan to effect the following changes:
Increase the number of shares of common stock issuable under the Directors Plan by 300,000 shares;
Restructure the automatic grants of initial options, granted to each new non-employee director at the time of his or her initial election or appointment to the Board as follows:
Beginning on the date of the annual meeting, the number of options granted to each new non-employee director at the time of his or her initial election or appointment to the Board will be reduced from 30,000 to 20,000 shares of common stock; and
Revise the vesting schedule of initial options, so that such options vest with respect to (a) one sixth of the underlying shares six months after the date of grant, and (b) the balance of the shares in a series of 30 successive equal monthly installments thereafter. Previously, the initial options vested with respect to (a) one third of the underlying shares on the first anniversary of the date of grant, and (b) the balance of the shares in a series of 24 successive equal monthly installments thereafter.
Restructure the automatic grants of annual options to non-employee directors over their period of service on the Board as follows:
From June 13, 2008 until July 1, 2008, non-employee directors who were first elected to the Board after the initial public offering of our common stock will continue to receive an option to purchase 10,000 shares of common stock on the anniversary of the date of their election (if such anniversary date falls within this period);
On July 1, 2008, each continuing non-employee director will receive an option to purchase the number of shares of common stock equal to: 8,000 multiplied by the fraction equal to the fraction of a year between the date of such non-employee director’s most recent annual option (or initial option, if no annual option has been granted) and July 1, 2008;
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Revise the vesting schedule of annual options, so that such options vest with respect to all of the underlying shares six months after the date of grant. Previously, annual options vested over 12 months beginning with the 25th month after the date of grant, which date is the anniversary of a non-employee director’s election to the Board (or the anniversary date of our IPO if the non-employee director was serving on the Board at that time).
The Directors Plan became effective in connection with the initial public offering of our common stock in December 1997. On April 22, 2008, our Board adopted the amendment and restatement being proposed here, subject to stockholder approval. The proposed amendment to increase the number of shares authorized for
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issuance under the Directors Plan by 300,000 shares ensures that we will have a sufficient number of shares available to continue to grant options to our non-employee directors over their service on our Board. The amendment to restructure the grant date of automatic annual option grants will simplify the administration of the Directors Plan. The Directors Plan, as amended and restated, has been filed with the SEC as an appendix to this proxy statement and may be accessed from the SEC’s website atwww.sec.gov.
The Directors Plan remains essential to our continuing efforts to attract and retain qualified and experienced individuals to serve as members of the Board at a time when their responsibilities and obligations have increased as a result of recent changes in the law, and to assure that we will continue to have dedicated, professional, and highly-qualified individuals serving as non-employee directors.
Approval of this proposal requires the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote on this proposal. Abstentions will be counted toward the tabulation of votes cast and will have the same effect as negative votes. Broker non-votes will have no effect on the outcome of this vote. Should our stockholders fail to approve the amendment and restatement of the Directors Plan, the Directors Plan will continue to remain in effect.
THE BOARDOF DIRECTORS RECOMMENDS
A VOTEIN FAVOROF PROPOSAL 2.
The material terms and provisions of the Directors Plan are summarized below. This summary, however, does not purport to be a complete description of the Directors Plan. The Directors Plan has been filed with the SEC as an attachment to this proxy statement and may be accessed from the SEC’s website atwww.sec.gov. The following summary is qualified in its entirety by reference to the complete text of the Directors Plan. Any stockholder that wishes to obtain a copy of the actual plan document may do so by written request to: Secretary, Power Integrations, Inc., 5245 Hellyer Avenue, San Jose, California 95138-1002.
The following is a summary of the material features of the Directors Plan.
General
The Directors Plan provides for the automatic grant of nonstatutory stock options to non-employee directors over their period of service on the Board.
Purpose
Our Board adopted the Directors Plan to provide a means to advance our interests and the interests of our stockholders by providing an incentive to attract and retain highly qualified persons to serve as non-employee directors, and to provide a means by which these eligible individuals may be given an opportunity to benefit from increases in the value of our common stock, and thereby align the long-term interests of those individuals with our stockholders.
Administration
Our Board administers the Directors Plan. All options granted under the Directors Plan are made in strict compliance with its express provisions. Subject to the provisions of the Directors Plan, the Board has the authority to construe and interpret the Directors Plan and options granted thereunder.
Eligibility
Participation in the Directors Plan is limited to non-employee directors. During 2007, we granted options to purchase an aggregate of 70,000 shares of common stock to the seven current non-employee directors under the Directors Plan at exercise prices ranging from $22.68 to $31.46 per share.
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Stock Subject to the Directors Plan
Subject to this Proposal, the maximum number of shares of common stock available for issuance under the Directors Plan is 1,100,000. This share reserve consists of (a) 800,000 shares currently reserved for issuance under the Directors Plan, plus (b) an additional 300,000 shares subject to approval of our stockholders at the annual meeting.
As of April 1, 2008, 615,834 shares of common stock were subject to outstanding options under the Directors Plan, and 36,668 shares of common stock remained available for future issuance. If options granted under the Directors Plan expire or otherwise terminate without being exercised in full, the shares of common stock not acquired pursuant to such options again become available for subsequent issuance under the Directors Plan.
Initial Options
Beginning at the time of the annual meeting, each new non-employee director will receive an option to purchase 20,000 shares of our common stock at the time of his or her initial election or appointment to the Board (a “new initial option”). Prior to the annual meeting, each new non-employee director receives an option to purchase 30,000 shares of our common stock at the time of his or her initial election or appointment to the Board (a “previously scheduled initial option”). Additional changes to the vesting schedule of the initial options are described below.
Annual Options
Previously Scheduled Annual Options. Between the date of the annual meeting and July 1, 2008, each continuing non-employee director will continue to receive an option to purchase 10,000 shares of our common stock on the “anniversary date” for that non-employee director (a “previously scheduled annual option”). The anniversary date for non-employee directors who joined after the initial public offering of our common stock is the date that director was first elected or appointed to our Board. The anniversary date for non-employee directors who were serving at the time of the initial public offering of our common stock in 1997 is the date that the Directors Plan became effective in connection with such initial public offering. After July 1, 2008, continuing non-employee directors will no longer receive an option on his or her anniversary date.
Transitional Annual Options. On July 1, 2008, each continuing non-employee director will receive an option to purchase the number of shares of common stock equal to: 8,000 multiplied by the fraction equal to the fraction of a year between the date of such non-employee director’s most recent annual option (or initial option, if no annual option has been granted) and July 1, 2008. The number of shares of our common stock subject to each such transitional annual option will be rounded down to the next whole share.
New Annual Options. On the first day of July of each year beginning in 2009, continuing non-employee directors will receive an option to purchase 8,000 shares of our common stock, with such numbers of shares reducedpro rata if such non-employee director has served on the Board for less than one year (a “new annual option”). The number of shares of our common stock subject to each such new annual option will be rounded down to the next whole share.
Terms of Initial Options and Annual Options
Options may be granted under the Directors Plan pursuant to stock option agreements adopted by our Board. Our Board retains the discretion to amend the form of such stock option agreements to the extent consistent with the terms of the Directors Plan.
Exercise Price. The exercise price of options is equal to the fair market value of our common stock on the date of grant. The fair market value per share on any particular date under the Directors Plan is the closing sale
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price per share on such date reported on the Nasdaq Global Select Market. As of April 23, 2008, the fair market value determined on such basis was $32.00 per share.
Vesting Generally. Options granted under the Directors Plan vest and become exercisable during the optionee’s continued service with us or our participating company group, whether this service is performed in the capacity of an employee, director, or consultant (collectively, “service”) and regardless of any change in the capacity of the service performed.
Vesting of Initial Options. Initial options vest with respect to (a) one sixth of the underlying shares six months after the date of grant, and (b) the balance of the shares in a series of 30 successive equal monthly installments over the 30-month period measured from six months after the date of grant, so that all shares are vested on the third anniversary of the date of grant. Prior to the amendment and restatement of the Directors Plan, initial options vested with respect to (a) one third of the underlying shares on the first anniversary of the date of grant, and (b) the balance of the shares in a series of 24 successive equal monthly installments over the two year period measured from the first anniversary of the date of grant, with all shares vested on the third anniversary of the date of grant. Essentially, the amendment and restatement of the Directors Plan reduces the “vesting cliff” of initial options from one year to six months.
Vesting of Annual Options. Each previously scheduled annual option vests in a series of 12 successive equal monthly installments beginning in the 25th month after the date of grant, so that all shares vest on the third anniversary of the date of grant. Each transitional annual option and new annual option vests with respect to all of the shares six months after the date of grant.
Consideration. The exercise price of options granted under the Directors Plan may be paid in (a) cash, check, or cash equivalents, (b) by delivery of other shares of our common stock held by the optionee for at least six months, or (c) pursuant to a broker-assisted cashless exercise.
Maximum Exercise Period. The maximum term of options granted under the Directors Plan is 10 years from the date of grant.
Restrictions on Transfer. During the lifetime of our non-employee directors, options are exercisable only by the director or his or her guardian or legal representative. Options are not transferable except by will or by the laws of descent and distribution.
Right to Decline Options. Prior to the day that any non-employee director is scheduled to receive an option under the Directors Plan, such individual may elect not to receive such an option. Any person declining an option will receive no other consideration in lieu of a declined option.
Changes to Capital Structure
In the event any change is made to the outstanding shares of our common stock without our receipt of consideration (whether through a stock split or other specified change in our capital structure), appropriate adjustments will be made to: (a) the maximum number and/or class of securities issuable under the Directors Plan; (b) the number and/or class of securities for which options are subsequently to be granted to new and continuing non-employee directors; and (c) the number and/or class of securities and the price per share in effect under each outstanding option under the Directors Plan.
Changes in Control
In the event of certain change in control transactions, all outstanding options under the Directors Plan will become immediately vested and exercisable effective upon the consummation of such transaction. In addition, the surviving, successor, or acquiring corporation may either assume or substitute for outstanding options.
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Options that are not assumed or substituted by an acquiring corporation will terminate and cease to remain outstanding effective as of the change in control transaction.
A change in control transaction will be deemed to occur if an ownership change event or series of ownership change events occurs in which our stockholders do not retain ownership, in substantially the same proportions, of more than 50% of the voting power of our corporation or the corporations to which our assets are transferred. An ownership change event will be deemed to occur upon: (a) a sale or exchange of more than 50% of our voting stock; (b) a merger or consolidation in which we are a party; (c) a sale or exchange of substantially all of our assets; or (d) our liquidation or dissolution.
Termination and Amendment
The Board may terminate or amend the Directors Plan at any time, subject to any stockholder approval required by applicable law.
Federal Income Tax Information
The following is a summary of the principal United States federal income taxation consequences to optionees and us with respect to participation in the Directors Plan. This summary is not intended to be exhaustive, and does not discuss the income tax laws of any city, state or foreign jurisdiction in which an optionee may reside.
No taxable income is recognized by an optionee upon the grant of a nonstatutory stock option under the Directors Plan. Upon exercise of a nonstatutory stock option, the optionee will recognize ordinary income equal to the excess, if any, of the fair market value of the purchased shares on the exercise date over the exercise price paid for those shares. Generally, we will be entitled to an income tax deduction in the tax year in which such ordinary income is recognized by the optionee.
Upon disposition of the stock, the optionee will recognize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for such stock plus any amount recognized as ordinary income upon acquisition of the stock. Such gain or loss will be long-term or short-term depending on whether the stock was held for more than one year.
New Plan Benefits Under Amendment
No options have been granted under the Directors Plan on the basis of the share increase that forms part of this Proposal. Should our stockholders approve the amendment and restatement of the Directors Plan, our non-employee directors will continue to receive their previously scheduled annual options under the Directors Plan until July 1, 2008, and receive a transitional annual option under the Directors Plan on July 1, 2008. However, should our stockholders fail to approve the amendment and restatement of the Directors Plan, our non-employee directors will continue to receive an annual option to purchase 10,000 shares of our common stock on the anniversary of the date when either (a) such director was first elected or appointed to the Board, if after our IPO, or (b) the Directors Plan became effective in connection with our IPO. The exercise price per share of these options will be equal to the closing sales price of our common stock on the date of grant.
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PROPOSAL 3
APPROVALOFTHE AMENDMENTAND RESTATEMENTOFTHE 1997 EMPLOYEE STOCK PURCHASE PLAN
Our Board is requesting stockholder approval of an amendment and restatement of our 1997 Employee Stock Purchase Plan, also referred to as the Purchase Plan, to increase the maximum number of shares of common stock that may be issued under the Purchase Plan by 1,000,000 shares. The Board approved the amendment and restatement of the Purchase Plan on April 22, 2008, subject to stockholder approval. Our stockholders have previously approved the reservation of 2,000,000 shares of our common stock for purchase by employees under the Purchase Plan. As of December 31, 2007, a total of 390,700 shares remain available for future purchases, without giving effect to the proposed amendment and restatement. The Purchase Plan, as amended and restated, has been filed with the SEC as an appendix to this proxy statement and may be accessed from the SEC’s website atwww.sec.gov.
The Board believes that the Purchase Plan benefits us and our stockholders by providing our employees with an opportunity to purchase shares of common stock through payroll deductions that helps to attract, retain and motivate valued employees. To provide a reasonable reserve of shares to permit us to continue offering this opportunity to our employees, the Board has adopted, subject to stockholder approval, an amendment and restatement to increase the number of shares of common stock reserved for issuance under the Purchase Plan by 1,000,000 shares, to a total of 3,000,000 shares.
Approval of this proposal requires the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote on this proposal. Abstentions will be counted toward the tabulation of votes cast and will have the same effect as negative votes. Broker non-votes will have no effect on the outcome of this vote. Should our stockholders fail to approve the amendment and restatement of the Purchase Plan, the Purchase Plan will continue to remain in effect.
THE BOARDOF DIRECTORS RECOMMENDS
A VOTEIN FAVOROF PROPOSAL 3
The material terms and provisions of the Purchase Plan are summarized below. This summary, however, does not purport to be a complete description of the Purchase Plan. The Purchase Plan has been filed with the SEC as an attachment to this proxy statement and may be accessed from the SEC’s home page atwww.sec.gov. The following summary is qualified in its entirety by reference to the complete text of the Purchase Plan. Any stockholder that wishes to obtain a copy of the actual plan document may do so by written request to: Secretary, Power Integrations, Inc., 5245 Hellyer Avenue, San Jose, California 95138-1002.
The following is a summary of the material features of the Purchase Plan:
General.
At the beginning of each offering under the Purchase Plan (an “Offering”), each participant in the Purchase Plan is granted the right to purchase, through accumulated payroll deductions, up to a number of shares of our common stock determined on the first day of the Offering (a “Purchase Right”). The Purchase Right is automatically exercised on each purchase date during the Offering unless the participant has withdrawn from participation in the Purchase Plan prior to such date. The Purchase Plan is intended to qualify as an “employee stock purchase plan” under section 423 of the Code.
Stock Subject to Purchase Plan.
Subject to approval of this Proposal 3, a maximum of 3,000,000 of our authorized but unissued or reacquired shares of common stock may be issued under the Purchase Plan, subject to appropriate adjustment in the event of any stock dividend, stock split, reverse stock split, recapitalization or similar change in our capital
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structure. Currently, 2,000,000 shares are authorized for issuance under the Purchase Plan, subject to adjustment as described above. If any Purchase Right expires or terminates, the shares subject to the unexercised portion of such Purchase Right will again be available for issuance under the Purchase Plan.
Administration.
The Purchase Plan is administered by the Board or a committee of the Board. (For purposes of this discussion, the term “Board” refers to either the Board or such committee.) Subject to the provisions of the Purchase Plan, the Board determines the terms and conditions of Purchase Rights granted under the Purchase Plan. The Board has the authority to interpret the Purchase Plan and Purchase Rights granted thereunder, and any such interpretation of the Board will be binding.
Eligibility.
Any of our employees or any employees of our parent or subsidiary designated by the Board for inclusion in the Purchase Plan are eligible to participate in an Offering so long as the employee is customarily employed for at least 20 hours per week and more than five months in any calendar year, unless that employee owns or holds options to purchase, or as a result of participation in the Purchase Plan, would own or hold options to purchase, five percent or more of the total combined voting power or value of all classes of our stock or of any parent or subsidiary. As of April 1, 2008, approximately 352 employees, including six executive officers, were eligible to participate in the Purchase Plan.
Offering Periods.
Generally, each Offering under the Purchase Plan is for a period of 24 months (an “Offering Period”). Offering Periods under the Purchase Plan are overlapping, with a new Offering Period beginning every six months. Offering Periods generally commence on February 1 and August 1 of each year (each an “Offering Date”) and end on the last day of January and July, respectively, occurring two years thereafter. Each Offering Period is generally comprised of four six-month purchase periods (each a “Purchase Period”). Shares are purchased on the last day of each Purchase Period (each a “Purchase Date”). The Board may establish a different term for any Offering (not to exceed 27 months) or Purchase Period or different commencement or ending dates for an Offering or a Purchase Period.
Participation and Purchase of Shares.
Participation in an Offering under the Purchase Plan is limited to eligible employees who authorize payroll deductions prior to the first day of an Offering Period (the “Offering Date”). Payroll deductions may not exceed 15% of an employee’s compensation on any payday during the Offering Period, provided that the Board may establish a different limit from time to time. An employee who becomes a participant in the Purchase Plan will automatically participate in each Offering beginning immediately after the last day of the Offering Period in which he or she is a participant until the employee withdraws from the Purchase Plan, becomes ineligible to participate, or terminates employment.
Subject to any uniform limitations or notice requirements imposed by us, a participant may increase or decrease his or her rate of payroll deductions or withdraw from the Purchase Plan at any time during an Offering. Upon withdrawal, we will refund without interest the participant’s accumulated payroll deductions not previously applied to the purchase of shares. Once a participant withdraws from an Offering, that participant may not again participate in the same Offering at any later time. If the fair market value of a share of common stock on the Offering Date of the current Offering in which employees are participating is greater than such fair market value on the Offering Date of a new Offering, then, unless a participant elects otherwise, each participant will be automatically withdrawn from the current Offering after purchasing shares and enrolled in the new Offering.
Subject to certain limitations, each participant in an Offering is granted a Purchase Right consisting of an option to purchase the lesser of (a) that number of whole shares of stock determined by dividing $50,000 by the
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fair market value of a share of our common stock on such Offering Date or (b) 5,000 shares. As a further limitation, no participant may purchase shares of common stock under our Purchase Plan or any other employee stock purchase plan having a fair market value exceeding $25,000 (based on the fair market value of our common stock on the first day of the Offering Period in which the shares are purchased) for each calendar year in which a Purchase Right is outstanding.
On each Purchase Date, we issue to each participant in the Offering the number of shares of our common stock equal to the amount of payroll deductions accumulated for the participant during the Purchase Period divided by the purchase price, limited in any case by the number of shares subject to the participant’s Purchase Right for that Offering. The price at which shares are issued under the Purchase Plan is established by the Board but may not be less than 85% of the lesser of the fair market value per share of common stock on the Offering Date or on the Purchase Date. The fair market value of the common stock on any relevant date generally will be the closing price per share as reported on the Nasdaq Global Select Market. On April 23, 2008, the closing price of our common stock as reported on the Nasdaq Global Select Market on was $32.00 per share. Any payroll deductions under the Purchase Plan not applied to the purchase of shares will be returned to the participant without interest, unless the amount remaining is less than the amount necessary to purchase a whole share of common stock, in which case the remaining amount may be applied to the next Purchase Period.
Effect of Certain Change in Control Transactions.
If a Change in Control occurs, the surviving, continuing, successor or purchasing corporation or parent corporation thereof may assume our rights and obligations under the Purchase Plan. However, if such corporation elects not to assume the outstanding Purchase Rights, the Purchase Date of the then current Offering Period will be accelerated to a date specified by the Board that occurs before the Change in Control. Any Purchase Rights that are not assumed or exercised prior to the Change in Control will terminate. The Purchase Plan defines a “Change in Control” as any of the following events upon which our stockholders immediately before the event do not retain immediately after the event, in substantially the same proportions as their ownership of shares of our voting stock immediately before the event, direct or indirect beneficial ownership of a majority of the total combined voting power of our stock, its successor, or the corporation to which our assets were transferred: (a) a sale or exchange by the stockholders in a single or series of related transactions of more than 50% of our voting stock; (b) a merger or consolidation in which we are a party; (c) the sale, exchange or transfer of all or substantially all of our assets or (d) our liquidation or dissolution.
Termination or Amendment.
The Purchase Plan will continue until terminated by the Board or until all of the shares reserved for issuance under the Purchase Plan have been issued. The Board may amend or terminate the Purchase Plan at any time, except that the approval of our stockholders is required within 12 months of the adoption of any amendment increasing the number of shares authorized for issuance under the Purchase Plan, or changing the categories of corporations that may be designated by the Board as corporations whose employees may participate in the Purchase Plan.
Shares Purchased by Certain Persons
Non-employee directors are not eligible to participate in the Purchase Plan. Since its inception, no shares have been issued under the Purchase Plan to any nominee for election as a non-employee director, or any associate of any such director, nominee and no other person has been issued five percent or more of the total amount of shares issued under the Purchase Plan. None of our employees, including employee directors or officers, purchased stock under the Purchase Plan in the fiscal year ending December 31, 2007.
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Summary of U.S. Federal Income Tax Consequences
The following is a summary of the principal United States federal income taxation consequences to participants and us with respect to participation in the Purchase Plan. This summary is not intended to be exhaustive, and does not discuss the income tax laws of any city, state or foreign jurisdiction in which a participant may reside.
The Purchase Plan is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Code. Under such an arrangement, a participant will be taxed on amounts withheld for the purchase of shares of common stock as if such amounts were paid directly to the participants. However, no taxable income will be recognized by a participant, and no deductions will be allowable to us, upon either the grant or exercise of Purchase Rights. Taxable income is not to be recognized until there is a sale or other disposition of the shares acquired under the Purchase Plan, or in the event the participant should die while still owning the purchased shares.
If a participant sells or otherwise disposes of the purchased shares within two years after the beginning of the Offering Period in which such shares were acquired or within one year after the actual Purchase Date of those shares, then the participant will recognize ordinary income in the year of sale or disposition equal to the amount by which the fair market value of the shares on the Purchase Date exceeded the purchase price paid for those shares, and we will be entitled to an income tax deduction, for the taxable year in which such disposition occurs, equal in amount to such excess. The participant will also recognize a capital gain to the extent the amount realized upon the sale of the shares exceeds the sum of the aggregate purchase price for those shares and the ordinary income recognized in connection with their acquisition.
If the participant sells or disposes of the purchased shares more than two years after the beginning of the Offering Period in which such shares were acquired and more than one year after the actual Purchase Date of those shares, the participant will recognize ordinary income in the year of sale or disposition equal to the lesser of (a) the amount by which the fair market value of the shares on the sale or disposition date exceeded the purchase price paid for those shares, or (b) 15% of the fair market value of the shares at the beginning of that Offering period. Any additional gain upon the disposition will be taxed as a long-term capital gain. We will not be entitled to an income tax deduction with respect to such disposition.
If the participant still owns the purchased shares at the time of death, the lesser of (a) the amount by which the fair market value of the shares on the date of death exceeds the purchase price, or (b) 15% of the fair market value of the shares at the beginning of the Offering Period in which those shares were acquired will constitute ordinary income in the year of death.
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PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has selected Deloitte & Touche LLP as Power Integrations’ independent registered public accounting firm for the fiscal year ending December 31, 2008,2009, and the Board has directed that management submit the selection of Deloitte & Touche LLP as Power Integrations’ independent registered public accounting firm for ratification by the stockholders at the annual meeting. KPMG LLP audited Power Integrations’ financial statements from its inception in 1994 through 2004. Deloitte & Touche LLP has audited Power Integrations’ financial statements since 2005. Representatives of Deloitte & Touche LLP are expected to be present at the annual meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
Fiscal 2007 | Fiscal 2006 | |||||
Audit Fees(1) | $ | 1,425 | $ | 1,200 | ||
Audit-Related Fees(2) | 7 | 625 | ||||
Tax Fees(3) | — | 9 | ||||
All Other Fees | — | — | ||||
Total Fees | $ | 1,432 | $ | 1,834 |
Fiscal 2008 | Fiscal 2007 | |||||||
Audit Fees(1) | $ | 1,603 | $ | 1,425 | ||||
Audit-Related Fees(2) | 8 | 7 | ||||||
Tax Fees | — | — | ||||||
All Other Fees | — | — | ||||||
Total Fees | $ | 1,611 | $ | 1,432 | ||||
(1) | Audit fees consist of fees billed for professional services rendered for the audit of our consolidated annual financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by Deloitte & Touche LLP in connection with statutory and regulatory filings or engagements. Audit fees for |
(2) | Audit-related fees are primarily related to filing the |
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Fiscal 2007 | Fiscal 2006 | |||||||
Audit Fees | — | — | ||||||
Audit—Related Fees | $ | 20 | (1) | $ | 139 | (2) | ||
Tax Fees | — | — | ||||||
All Other Fees | — | — | ||||||
Total Fees | $ | 20 | $ | 139 |
Fiscal 2008 | Fiscal 2007 | |||||||
Audit Fees | — | — | ||||||
Audit-Related Fees | — | $ | 20 | (1) | ||||
Tax Fees | — | — | ||||||
All Other Fees | — | — | ||||||
Total Fees | — | $ | 20 |
(1) | 2007 audit-related fees are primarily related to our 2006 Annual Report onForm 10-K and ourS-8 Registration Statement. |
All fees |
All fees described above were approved by the Audit Committee.
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THE BOARD RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 4.
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REPORTOFTHE AUDIT COMMITTEEOFTHE BOARD*
During 2007, the
the independent accountants the independent accountants’ independence.
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Audit Committee
Alan D. Bickell
Balakrishnan S. Iyer
E. Floyd Kvamme(1)
James Fiebiger(1)
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
each person known by Power Integrations to be the beneficial owner of more than 5% of Power Integrations common stock,
• | each person known by Power Integrations to be the beneficial owner of more than 5% of Power Integrations common stock, | |
• | each executive officer named in the Summary Compensation Table, | |
• | each director and director nominee of Power Integrations, and | |
• | all executive officers and directors of Power Integrations as a group. |
each executive officer named in the Summary Compensation Table,
each director and director nominee of Power Integrations, and
all executive officers and directors of Power Integrations as a group.
The address for each executive officer, director and director nominee named below is Power Integrations principal executive offices located at 5245 Hellyer Avenue, San Jose, California95138-1002.
Beneficial Ownership | |||||
Beneficial Owners(1) | Number of Shares(2) | Percent of Total(3) | |||
5% Stockholders | |||||
Wasatch Advisors, Inc.(4) 150 Social Hall Avenue Suite 400 Salt Lake City, UT 84111 | 3,611,134 | 11.9 | % | ||
Franklin Resources, Inc. and affiliates(5) One Franklin Parkway San Mateo, CA 94403 | 1,915,057 | 6.3 | % | ||
Lord, Abbett & Co. LLC(6) 90 Hudson Street Jersey City, NJ 07302 | 1,948,642 | 6.4 | % | ||
FMR LLC(7) 82 Devonshire Street Boston, MA 02109 | 3,282,008 | 10.8 | % | ||
Executive officers and directors | |||||
Balu Balakrishnan(8) | 1,605,128 | 5.1 | % | ||
Douglas Bailey(9) | 111,637 | * | |||
Rafael Torres(10) | 29,690 | * | |||
John Tomlin(11) | 234,936 | * | |||
Derek Bell(12) | 279,464 | * | |||
Alan D. Bickell(13) | 95,166 | * | |||
Nicholas E. Brathwaite(14) | 71,666 | * | |||
R. Scott Brown(15) | 107,500 | * | |||
Dr. James Fiebiger(16) | 20,000 | * | |||
Balakrishnan S. Iyer(17) | 41,666 | * | |||
E. Floyd Kvamme(18) | 220,973 | * | |||
Steven J. Sharp(19) | 88,333 | * | |||
All current executive officers and directors as a group (14 persons)(20) | 3,438,066 | 11.1 | % |
Beneficial Ownership | ||||||||
Number of | Percent of | |||||||
Beneficial Owners(1) | Shares(2) | Total(3) | ||||||
5% Stockholders | ||||||||
Wasatch Advisors, Inc.(4) | 2,403,996 | 8.9 | % | |||||
150 Social Hall Avenue Suite 400 Salt Lake City, UT 84111 | ||||||||
FMR LLC(5) | 3,388,408 | 12.6 | % | |||||
82 Devonshire Street Boston, MA 02109 | ||||||||
Lord, Abbett & Co. LLC(6) | 1,725,988 | 6.4 | % | |||||
90 Hudson Street Jersey City, NJ 07302 | ||||||||
Capital World Investors(7) | 1,775,200 | 6.6 | % | |||||
333 South Hope Street, 55th Floor Los Angeles, CA 90071 | ||||||||
Named Executive officers and directors | ||||||||
Balu Balakrishnan(8) | 1,788,045 | 6.3 | % | |||||
Bill Roeschlein(9) | 2,000 | * | ||||||
Rafael Torres(10) | 0 | * | ||||||
Bruce Renouard(11) | 232,242 | * | ||||||
John Tomlin(12) | 68,484 | * | ||||||
Derek Bell(13) | 316,275 | 1.2 | % | |||||
Alan D. Bickell(14) | 90,166 | * | ||||||
Nicholas E. Brathwaite(15) | 85,236 | * | ||||||
R. Scott Brown(16) | 99,166 | * | ||||||
Dr. James Fiebiger(17) | 30,800 | * | ||||||
Dr. William George | 0 | * | ||||||
Balakrishnan S. Iyer(18) | 51,666 | * | ||||||
E. Floyd Kvamme(19) | 260,973 | * | ||||||
Steven J. Sharp(20) | 98,333 | * | ||||||
All directors and current executive officers as a group (16 persons)(21) | 3,577,959 | 11.9 | % |
* | Less than 1%. |
(1) | Power Integrations believes that the persons named in the table have sole voting and dispositive power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws (where applicable) and to the information contained in the footnotes to this table. |
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(2) | A person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days upon the exercise of options to purchase common stock. Generally, options to purchase common stock of Power Integrations held by executive officers are immediately exercisable but are subject to vesting. Options to purchase common stock that are exercised prior to full vesting are subject to repurchase by us until the common stock so purchased becomes fully vested. Options to purchase common stock granted to our directors are not immediately exercisable. |
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(3) | Percentages are based on |
(4) | Based on a |
(5) | Based on a |
(6) | Based on a |
(7) | Based on a |
(8) | Consists of 237,104 shares held by the Balu and Mohini Balakrishnan Family Trust Dated 6-9-1993, of which Mr. Balakrishnan is a trustee, and |
(9) | Mr. Roeschlein commenced employment with Power Integrations on June 30, 2008 and succeeded Mr. Torres as Power Integrations’ chief financial officer. | |
(10) | Mr. Torres, Power Integrations’ former chief financial officer, ceased employment with Power Integrations on July 21, 2008. | |
(11) | Includes |
(12) | Consists of 12,845 shares held by Mr. Tomlin and his spouse in a joint account and 55,639 shares of common stock issuable upon exercise of options exercisable within 60 days after February 17, 2009. | |
(13) | Includes 309,103 shares of common stock issuable upon exercise of options exercisable within 60 days after February 17, 2009. | |
(14) | Includes 89,166 shares of common stock issuable upon exercise of options exercisable within 60 days after February 17, 2009. 5,000 of such shares were subsequently issued upon exercise of an option after February 17, 2009. | |
(15) | Includes 77,500 shares of common stock issuable upon exercise of options exercisable within 60 days after February 17, 2009. | |
(16) | Includes 94,166 shares of common stock issuable upon exercise of options exercisable within 60 days after February 17, 2009. | |
(17) | Includes 30,000 shares of common stock issuable upon exercise of options exercisable within 60 days after February 17, 2009. | |
(18) | Consists solely of shares of common stock issuable upon exercise of options exercisable within 60 days after February |
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Includes 88,333 shares of common stock issuable upon exercise of options exercisable within 60 days after February |
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Includes 88,333 shares of common stock issuable upon exercise of options exercisable within 60 days after February |
(21) | Consists of shares held by each executive officer and director, |
Plan category | Number Of Securities To Be Issued Upon Exercise Of Outstanding Options And Rights (a) | Weighted - Average Exercise Price Of Outstanding Options And Rights (b) | Number Of Securities Remaining Available For Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected In Column (a)) (c) | ||||||
Equity compensation plans approved by security holders | 1997 Stock Option Plan | 7,312,233 | $ | 21.23 | — | ||||
1997 Outside Directors Stock Option Plan | 595,834 | $ | 26.39 | 66,668 | |||||
1997 Employee Stock Purchase Plan | — | $ | — | 390,700 | |||||
2007 Equity Incentive Plan | — | — | 3,431,603 | ||||||
Equity compensation plans not approved by security holders | 1998 Nonstatutory Stock Option Plan | 216,898 | $ | 21.36 | 8,797 | ||||
Total | 8,124,965 | $ | 21.61 | 3,507,068 | |||||
Number of | ||||||||||||||
Securities | ||||||||||||||
Remaining | ||||||||||||||
Number of | Weighted- | Available for | ||||||||||||
Securities to | Average | Future Issuance | ||||||||||||
be Issued | Exercise | Under Equity | ||||||||||||
Upon Exercise | Price of | Compensation | ||||||||||||
of | Outstanding | Plans (Excluding | ||||||||||||
Outstanding | Options | Securities | ||||||||||||
Options and | and Rights | Reflected in | ||||||||||||
Plan Category | Rights (a) | (b) | Column (a))(c) | |||||||||||
Equity compensation plans approved by security holders | 1997 Stock Option Plan 1997 Outside | 4,844,879 | $ | 20.44 | 1,312,982 | |||||||||
Directors Stock Option Plan | 632,502 | 27.03 | — | |||||||||||
1997 Employee Stock | ||||||||||||||
Purchase Plan | — | — | 1,125,560 | |||||||||||
2007 Equity Incentive Plan | 370,655 | 22.09 | 3,079,634 | |||||||||||
Equity compensation plans not approved by security holders | 1998 Nonstatutory Stock Option Plan | 132,954 | 27.55 | — | ||||||||||
Total | 5,980,990 | $ | 21.39 | 5,518,176 | ||||||||||
annual meeting of stockholders.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
2008.
Assuming Proposal 2 is approved by our stockholders, the Annual Option will be made on the first day of July of each year, beginning on July 1, 2009, and a one time transitional award will be granted on July 1, 2008, with the number of shares subject to such grant to each non-employee director equaling 8,000 multiplied by the fraction equal to the fraction of the year from the date of the last Annual Option to July 1, 2008. Subject to an optionee’s continuous service with Power Integrations, and assuming our stockholders approve Proposal 2, the
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Initial Option vests with respect to 1/6 of the shares six months after the date of grant, and the remaining shares vest in a series of 30 successive equal monthly installments thereafter. In addition, the Annual Option vests in full six months after the date of grant. The exercise price per share of all options granted under the Directors Plan is equal to the fair market value of a share of common stock on the date of grant. Options granted under the Directors Plan have a maximum term of ten years after the date of grant, subject to earlier termination upon an optionee’s cessation of service. In the event of certain changes in control of Power Integrations, all options outstanding under the Directors Plan will become immediately vested and exercisable in full.
If Proposal 2 is not approved by our stockholders,
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The terms of
(the “2007 Plan”) as follows (the “Directors Equity Compensation Program”):
• | Under the Directors Equity Compensation Program, each current participant and each individual who would be eligible to participate in the Directors Plan would be a participant in the Directors Equity Compensation Program. | |
• | The Directors Equity Compensation Program does not affect the vesting schedules or exercise prices of outstanding options held by non-employee directors. | |
• | Pursuant to the Directors Equity Compensation Program, on the first trading day of July in each year (the “Regular Grant Date”), if a continuing eligible director (other than a new director) holds options pursuant to which 8,000 or more shares would vest during the period commencing with the 25th month and ending with the 36th month following the Regular Grant Date (the “Third Year”),he/she would not receive a new option grant under the 2007 Plan on that day. | |
• | On the Regular Grant Date of each year, if a continuing eligible director (other than a new director) holds options pursuant to which less than 8,000 shares (or no shares) would vest during the Third Year,he/she would receive an option under the 2007 Plan to purchase 8,000 shares less the number of such shares. Such shares would vest monthly during the Third Year. | |
• | Each of the Company’s outside directors has been granted, effective April 28, 2009, an option to purchase between 1,538 and 3,333 shares, such that the timing of vesting and the number of shares applicable to outside director options will be more uniform over the next three years. | |
• | A new eligible director generally would receive under the 2007 Plan (or, if determined by the Committee, under the Directors Plan): |
(a) | On the first trading day of the month following commencement of service, an option to purchase the number of shares of common stock equal to: the fraction of a year (determined by reference to the number of months) between the date of the director’s appointment to the Board of Directors and the next July 1, multiplied by 8,000 (the number of shares of common stock subject to such option would be rounded down to the next whole share) and such shares would vest on such next July 1; and |
(b) | On the first trading day of July following commencement of service, an option to purchase 24,000 shares vesting monthly over the three year period commencing on the Regular Grant Date. |
• | The exercise price per share for the options to be granted under the Directors Equity Compensation Program is the fair market value of a share of Power Integrations’ Common Stock on the grant date as determined in accordance with the Option Agreements. | |
• | The Directors Equity Compensation Program will remain in effect at the discretion of the Board or the Compensation Committee. |
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Name | Fees Earned(1) | Option Awards(2)(3) | Total | ||||||
Alan D. Bickell | $ | 59,750 | $ | 113,708 | $ | 173,458 | |||
Balakrishnan S. Iyer | $ | 42,250 | $ | 117,584 | $ | 159,834 | |||
R. Scott Brown | $ | 33,500 | $ | 123,246 | $ | 156,746 | |||
Dr. James Fiebiger | $ | 44,500 | $ | 115,616 | $ | 160,116 | |||
Steven J. Sharp | $ | 39,500 | $ | 162,118 | $ | 201,618 | |||
Nicholas E. Brathwaite | $ | 31,750 | $ | 111,581 | $ | 143,331 | |||
E. Floyd Kvamme | $ | 43,000 | $ | 162,118 | $ | 205,118 |
Name | Fees Earned(1) | Option Awards(2)(3) | Total | |||||||||
Alan D. Bickell | $ | 56,250 | $ | 129,882 | $ | 186,132 | ||||||
Balakrishnan S. Iyer | $ | 47,150 | $ | 125,357 | $ | 172,507 | ||||||
R. Scott Brown | $ | 37,500 | $ | 120,098 | $ | 157,598 | ||||||
Dr. James Fiebiger | $ | 50,750 | $ | 202,775 | $ | 253,525 | ||||||
Steven J. Sharp | $ | 112,150 | $ | 156,790 | $ | 268,940 | ||||||
Nicholas E. Brathwaite | $ | 37,150 | $ | 121,361 | $ | 158,511 | ||||||
E. Floyd Kvamme | $ | 47,875 | $ | 156,790 | $ | 204,665 |
(1) | This column represents annual director fees, committee chairman fees and meeting attendance fees earned in |
(2) | The amounts shown in this column represent the dollar amounts recognized for financial statement reporting purposes for the fiscal year ended December 31, |
(3) | The following options were outstanding as of December 31, |
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The following table sets forth each grant of options to Power Integrations’ non-employee directors during 20072008 under the Directors’ Plan (and, with respect to Mr. Sharp, under the 2007 Equity Incentive Plan with respect to a portion of his options), together with the exercise price per share and grant fair value of each award computed in accordance with SFAS No. 123(R) using the Black-Scholes-Merton model. Subject to Dr. Fiebiger’s continued service with Power Integrations, 1/3 of Dr. Fiebiger’s Initial Option will become exercisable one year after the date of grant and 1/36 of his Initial Option will become exercisable monthly thereafter. The Annual Grants to the other directors listed below will become exercisable in twelve equal monthly installments beginning in the 25th month after the date of grant, subject to the optionee’s continued service. The exercise price per share of all options granted under the Directors Plan is equal to the fair market value of a share of common stock on the date of grant. Options granted under the Directors Plan have a maximum term of ten years after the date of grant, subject to earlier termination upon an optionee’s cessation of service. Grant Date Options Exercise Fair Value of Granted in Price per Option 2008 Share Award (#) Grant Date ($) ($) Alan D. Bickell 10,000 04/21/08 32.11 131,761 Nicholas E. Brathwaite 10,000 01/31/08 25.48 108,507 R. Scott Brown 10,000 (1) 07/15/08 31.61 134,048 Dr. James Fiebiger 10,000 03/22/08 28.88 122,986 Balakrishnan S. Iyer 10,000 02/13/08 26.86 114,384 E. Floyd Kvamme 10,000 12/12/08 18.35 84,794 Steven J. Sharp 10,000 (2) 12/12/08 18.35 84,794 (1) As a result of his passing, Mr. Brown’s unvested shares (25,834 shares, including shares from this grant) reverted back to the Directors Plan. (2) Includes 3,332 shares granted under the 2007 Incentive Plan as a result of the exhaustion of shares available for issuance under the Directors Plan.
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Non-employee Director | Options Granted in 2007 (#) | Grant Date | Exercise Price Per Share ($) | Grant Date Fair Value of Option Award ($) | ||||
Alan D. Bickell | 10,000 | 04/20/07 | 23.35 | 113,708 | ||||
Nicholas E. Brathwaite | 10,000 | 01/31/07 | 22.68 | 111,581 | ||||
R. Scott Brown | 10,000 | 07/15/07 | 25.90 | 123,246 | ||||
Dr. James Fiebiger | 10,000 | 03/22/07 | 23.50 | 115,616 | ||||
Balakrishnan S. Iyer | 10,000 | 02/13/07 | 23.90 | 117,584 | ||||
E. Floyd Kvamme | 10,000 | 12/12/07 | 31.46 | 162,118 | ||||
Steven J. Sharp | 10,000 | 12/12/07 | 31.46 | 162,118 |
COMPENSATIONOF EXECUTIVE OFFICERS
manner.
The chief executive officer reviews with the Compensation Committee on a regular basis our compensation philosophy and programs, including with respect to the named executive officers, so that the Compensation Committee can recommend any changes necessary to keep our compensation philosophy and programs aligned with our business objectives. Mr. Balakrishnan, our chief executive officer, makes recommendations to the Compensation Committee with respect to the compensation of the named executive officers. The Compensation Committee also utilizes an outside compensation consultant to provide themit with advice on competitive compensation plans. The Compensation Committee considers, but is not bound to and does not always accept,
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management’s and the outside consultant’s recommendations with respect to executive compensation. The Compensation Committee discusses Mr. Balakrishnan’s compensation with him, but deliberates and makes decisions with respect to Mr. Balakrishnan’s compensation without him present.
Power Integrations aligns both its cash and equity compensation to market comparables. The Compensation Committee selects peer companies on the basis of fiscal and business similarities to Power Integrations. The Compensation Committee analyzes market compensation practices annually using the most directly relevant published survey sources available, including surveys from Radford + Consulting (“Radford”) for the 2006 compensation analysis and Radford and Culpepper and Associates, Inc. which were used for the 2007 and 2008 compensation analyses. For 2006 and 2007, theThe Compensation Committee considered peer companies to be semiconductor companies withusing several screening factors: (1) annual revenues in excess of $75 million; (2) similarities among global scope and complexity of the rangecompany’s business; and (3) inclusion in industry-specific categories of $100 million to $400 million. A totalsemiconductors and related services, integrated circuits, semiconductor solutions and computer communications. The peer group that results from this screening method is large and diverse enough that the addition or elimination of any one company
23
Advanced Analogic Technologies, Inc.
Cirrus Logic, Inc.
Integrated Device Technology, Inc.
Microsemi Corporation
PMC Sierra, Inc.
SiRF Technology, Inc.
Triquint Semiconductor, Inc.
Anadigics, Inc.
Diodes, Inc.
International Rectifier Corporation
Monolithic Power Systems, Inc.
Semtech Corporation
Supertex , Inc.
Applied Micro Circuits Corporation
Company Name | Revenue | |||
(In millions)* | ||||
International Rectifier Corporation | $ | 984.8 | ||
Integrated Device Technology, Inc. | $ | 781.5 | ||
TriQuint Semiconductor, Inc. | $ | 573.4 | ||
PMC Sierra, Inc. | $ | 525.1 | ||
Microsemi Corporation | $ | 514.1 | ||
Zoran Corporation | $ | 438.5 | ||
Diodes, Inc. | $ | 432.8 | ||
Silicon Laboratories, Inc. | $ | 415.6 | ||
Semtech Corporation | $ | 284.8 | ||
Micrel, Inc. | $ | 259.4 | ||
Anadigics, Inc. | $ | 258.2 | ||
Tessera Technologies, Inc. | $ | 248.3 | ||
Applied Micro Circuits Corporation | $ | 246.1 | ||
SiRF Technology Holdings, Inc. | $ | 232.5 | ||
Cirrus Logic, Inc. | $ | 181.9 | ||
O2Micro International Limited | $ | 165.5 | ||
Monolithic Power Systems, Inc. | $ | 160.5 | ||
Echelon Corporation | $ | 137.6 | ||
Advanced Analogic Technologies, Inc. | $ | 90.3 | ||
Supertex, Inc. | $ | 82.6 | ||
Power Integrations, Inc. | $ | 201.7 |
Zoran Corporation
Echelon Corporation
Micrel Inc.
O2Micro International Limited
Silicon Laboratories, Inc.
Tessera
* | Represents revenues reported in fiscal year 2008, except with respect to O2Micro International Limited and Echelon Corporation, which represent revenues reported in 2007. |
Subject to business needs, our policy is to grant option awards to new employees on the first trading day of the month following the date of hire, and annually to grant continuing employees option awards on the third trading day following the earnings release for the first fiscal quarter of each year. Given that we were not current in our SEC filings and our common stock was delisted by The NASDAQ Stock Market until August 13, 2007, we did not grant any option awards in fiscal 2007 until after August 13, 2007. All option grants are set at the closing price on the day of the grant.
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targeted at or
24
For 2006, our executive bonus plan provided that actual cash bonuses would be earned based 100% upon company non-GAAP earnings per share performance compared to target performance. The non-GAAP earnings per share targets excluded the following items: revenue related to a ship and debit settlement related to periods prior to 2006, expenses associated with the restatement of prior years earnings, certain expenses related to legal fees in defending Power Integrations’ intellectual property and related tax effects. These items were excluded because2008, the Compensation Committee reasoned that these items were not indicative of our core operating performance and did not relate to achieving the compensation objectives as discussed above. For 2007, the Compensation Committee reassessed our executive officer bonus plan and determined that actual bonus payments would be based upon revenue, and non-GAAP operating income performance, as described below, rather than non-GAAP earnings per share performance.below. The Compensation Committee made this decision to emphasize revenue growth and to focus management on operating performance by excluding the impact of changes in interest rates, tax rates and share count on income.
The 2008 target bonuses for each of the named executive officers are set forth in the table below entitled “Grants of Plan-Based Awards in 2008.”
Each officer, as described below, was assigned a 20072008 target bonus using the criteria described above. Bonuses were earned based on company performance against the 2007 Executive Officer Bonus Plan’s established revenue targets and non-GAAP operating income targets.targets of the 2008 Executive Officer Bonus Plan (the “2008 Plan”). The operating income targets were based on non-GAAP operating income, which excluded certain expenses, including (a) SFAS 123(R) charges, (b) specified legal fees and settlements, and (c) any settlements with the Internal Revenue Service. These items were excluded because the Compensation Committee reasoned that these items were not indicative of our core operating performance and did not relate to achieving the compensation objectives as discussed above.
Revenue | 25 | % | ||
Non-GAAP Operating Income | 75 | % | ||
Total | 100 | % |
No pay out No pay out would bewas made if our 2007under the 2008 Plan as actual revenue did not exceed $185$210 million, the established minimum amount of revenue as set forth in the 2007 Executive Officer Bonus2008 Plan. If 20072008 actual revenue had increased above the minimum amount of revenue, the actual bonus would increase,have increased, up to 100% of the revenue component of the target bonus when actual revenue equaled target revenue of $190$225 million in the 2007 Executive Officer Bonus2008 Plan, and the bonus would continuehave continued to increase thereafter as actual revenue increased, up to a maximum of 200% of the revenue component of the target bonus when revenues reached $210$240 million.33would bewas made if our 2007under the 2008 Plan as actual non-GAAP operating income did not exceed $34$45.0 million, the established minimum amount of non-GAAP operating income as set forth in the 2007 Executive Officer Bonus2008 Plan. If 20072008 actual non-GAAP operating income had increased above the minimum amount of non-GAAP operating income, the actual bonus would increase,have increased, up to 100% of the non-GAAP operating income component of the target bonus when actual non-GAAP operating income equaled target non-GAAP operating income of $39$53.4 million in the 2007 Executive Officer Bonus2008 Plan, and the bonus would continuehave continued to increase thereafter as actual non-GAAP operating income increased, up to a maximum of 200% of the non-GAAP operating income component of the target bonus when non-GAAP operating income reached $59$61.7 million.
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At the executive level, there is the greatest emphasis on linking pay to performance to align the interests of the executives directly with the stockholders. The level of grants were determined based on peer companies’ equity usage rates and equity compensation attributes. Specifically, the Committee considered the number of shares granted at peer companies, the relative value of other company shares and the value of the shares relative to the total compensation of each executive.
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purchase plan. In addition, the named executive officers may participate in the various employee benefit plans that are generally available to all employees, including medical, vision and dental care plans; flexible spending accounts for healthcare; life, accidental death and dismemberment and disability insurance; and paid time off.
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Benefits.”
plan (the “2009 Bonus Plan”).
Executive Officer | Title | 2008 Salary | 2008 Target Bonus | |||||
Balu Balakrishnan | Chief Executive Officer | $ | 400,000 | $ | 275,000 | |||
Rafael Torres(1) | Chief Financial Officer | $ | 245,000 | $ | 100,000 | |||
Derek Bell | Vice President, Engineering | $ | 275,000 | $ | 110,000 | |||
Doug Bailey | Vice President, Marketing | $ | 240,000 | $ | 90,000 | |||
John Tomlin | Vice President, Operations | $ | 275,000 | $ | 110,000 |
2008 Executive Officer Bonus Plan
Executive Officer | Title | 2009 Salary | 2009 Target Bonus | |||||||
(Restricted stock units) | ||||||||||
Balu Balakrishnan | Chief Executive Officer | $ | 400,000 | 10,000 | ||||||
Bill Roeschlein | Chief Financial Officer | $ | 250,000 | 3,000 | ||||||
John Tomlin | Vice President, Operations | $ | 275,000 | 4,000 | ||||||
Bruce Renouard | Vice President, Sales | $ | 265,000 | 4,000 | ||||||
Derek Bell | Vice President, Engineering | $ | 275,000 | 4,000 |
Revenue Component of Executive’s Bonus:
No pay outstock returned to 2008 levels.
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35
Operating Income Component of Executive’s Bonus:
No pay out will be made if our 2008 actual75% on non-GAAP operating income does not exceed at least an established minimum amount of non-GAAP operating income as set forth in the 2008 Executive Officer Bonus Plan. As 2008 actual non-GAAP operating income increases above the minimum amount of non-GAAP operating income, the actual bonus increases, up to 100% of the non-GAAP operating income component of the target bonus when actual non-GAAP operating income equals target operating income in the 2008 Executive Officer Bonus Plan, and continues increasing thereafter as actual non-GAAP operating income increases, up to a maximum of 200% of the non-GAAP operating income component of the target bonus. income.
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COMPENSATION COMMITTEE:
10-K
for the fiscal year ended December 31, 2008.R. Scott Brown
29
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COMPENSATION TABLES
Name and Principal Position | Year | Salary | Bonus(1) | Option Awards(2) | Non-Equity Incentive Plan Compensation(3) | All Other Compensation | Total | ||||||||||||||
Balu Balakrishnan | 2007 | $ | 380,385 | $ | 3,000 | $ | 1,718,216 | $ | 281,000 | $ | 5,590 | (4) | $ | 2,388,190 | |||||||
President and Chief Executive Officer | 2006 | $ | 362,250 | $ | 1,000 | $ | 2,291,278 | $ | 495,000 | $ | 9,510 | (5) | $ | 3,159,040 | |||||||
Rafael Torres(6) | 2007 | $ | 243,846 | — | $ | 320,544 | $ | 112,400 | $ | 4,683 | (7) | $ | 681,473 | ||||||||
Chief Financial Officer and Vice President, Finance and Administration | 2006 | $ | 104,308 | $ | 50,000 | $ | 144,904 | $ | 90,049 | $ | 4,234 | (8) | $ | 393,495 | |||||||
John Tomlin | 2007 | $ | 262,692 | — | $ | 389,766 | $ | 112,400 | $ | 4,812 | (9) | $ | 769,670 | ||||||||
Vice President, Operations | 2006 | $ | 252,500 | — | $ | 504,663 | $ | 198,000 | $ | 4,748 | (10) | $ | 959,911 | ||||||||
Douglas Bailey | 2007 | $ | 227,692 | — | $ | 437,899 | $ | 89,900 | $ | 8,816 | (11) | $ | 764,308 | ||||||||
Vice President,Marketing | |||||||||||||||||||||
Derek Bell | 2007 | $ | 262,692 | — | $ | 382,087 | $ | 112,400 | $ | 4,813 | (12) | $ | 761,992 | ||||||||
Vice President,Engineering |
Non-Equity | ||||||||||||||||||||||||||||
Option | Incentive Plan | All Other | ||||||||||||||||||||||||||
Name and Principal Position | Year | Salary | Bonus(1) | Awards(2) | Compensation(3) | Compensation | Total | |||||||||||||||||||||
Balu Balakrishnan | 2008 | $ | 393,461 | $ | 19,500 | $ | 3,248,484 | $ | 0 | $ | 2,153 | (4) | $ | 3,663,598 | ||||||||||||||
President and Chief | 2007 | $ | 380,385 | $ | 3,000 | $ | 1,718,216 | $ | 281,000 | $ | 5,590 | (5) | $ | 2,388,191 | ||||||||||||||
Executive Officer | 2006 | $ | 362,250 | $ | 1,000 | $ | 2,291,278 | $ | 495,000 | $ | 9,510 | (6) | $ | 3,159,038 | ||||||||||||||
Bill Roeschlein(7) | 2008 | $ | 123,077 | — | $ | 1,337,090 | $ | 0 | $ | 586 | (8) | $ | 1,460,753 | |||||||||||||||
Chief Financial Officer and Vice President, Finance and Administration | ||||||||||||||||||||||||||||
Rafael Torres(9) | 2008 | $ | 148,203 | — | $ | 321,422 | $ | 0 | $ | 229,238 | (10) | $ | 698,863 | |||||||||||||||
Former Chief Financial | 2007 | $ | 243,846 | — | $ | 320,544 | $ | 112,400 | $ | 4,683 | (11) | $ | 681,473 | |||||||||||||||
Officer and Vice | 2006 | $ | 104,308 | $ | 50,000 | $ | 144,904 | $ | 90,049 | $ | 4,234 | (12) | $ | 393,495 | ||||||||||||||
President, Finance and Administration | ||||||||||||||||||||||||||||
John Tomlin | 2008 | $ | 270,577 | — | $ | 1,098,063 | $ | 0 | $ | 1,565 | (13) | $ | 1,370,205 | |||||||||||||||
Vice President, | 2007 | $ | 262,692 | — | $ | 389,766 | $ | 112,400 | $ | 4,812 | (14) | $ | 769,670 | |||||||||||||||
Operations | 2006 | $ | 252,500 | — | $ | 504,663 | $ | 198,000 | $ | 4,748 | (15) | $ | 959,911 | |||||||||||||||
Bruce Renouard | 2008 | $ | 260,654 | — | $ | 860,567 | $ | 0 | $ | 1,510 | (16) | $ | 1,122,731 | |||||||||||||||
Vice President, Sales | 2007 | $ | 252,692 | — | $ | 382,087 | $ | 112,400 | $ | 4,748 | (17) | $ | 751,927 | |||||||||||||||
2006 | $ | 242,500 | — | $ | 508,490 | $ | 198,000 | $ | 9,517 | (18) | $ | 958,507 | ||||||||||||||||
Derek Bell(21) | 2008 | $ | 270,577 | — | $ | 703,756 | $ | 0 | $ | 1,554 | (19) | $ | 975,887 | |||||||||||||||
Vice President, | 2007 | $ | 262,692 | — | $ | 382,087 | $ | 112,400 | $ | 4,812 | (20) | $ | 761,991 | |||||||||||||||
Engineering |
(1) | With respect to Mr. |
(2) | The dollar amounts in this column reflect the compensation expense reported by |
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of $27.46, and received in exchange $528,000; Mr. Renouard tendered options to purchase an aggregate of 72,000 shares at a weighted average purchase price of $28.71, and received in exchange $288,000; and Mr. Bell tendered options to purchase an aggregate of 32,000 shares at a weighted average purchase price of $31.15, and received in exchange $128,000. See the table immediately below under “Grants of Plan-Based Awards in 2008” for the number of shares subject to options granted to the named executive officers in 2008. | ||
(3) | The dollar amounts in this column reflect the earning of annual incentive bonuses. |
(4) | Represents $2,153 for a life insurance premium. | |
(5) | Represents $3,000 contributed by Power Integrations to Mr. Balakrishnan’s 401(k) account, and $2,590 for a life insurance premium. |
(6) | Represents $3,000 contributed by Power Integrations to Mr. Balakrishnan’s 401(k) account, $2,460 for |
(7) | Mr. |
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date of the option grant. | ||
(8) | Represents $586 for a life insurance premium | |
(9) | Mr. Torres |
(10) | Represents $228,116 paid to Mr. Torres as severance and $1,122 for a life insurance premium. | |
(11) | Represents $3,000 contributed by Power Integrations to Mr. Torres’ 401(k) account and $1,683 for a life insurance premium. |
(12) | Represents $3,000 contributed by Power Integrations to Mr. Torres’ 401(k) account and $1,234 for his life insurance premium. | |
(13) | Represents $1,565 for a life insurance premium. |
(14) | Represents $3,000 contributed by Power Integrations to Mr. Tomlin’s 401(k) account and $1,812 for |
(15) | Represents $3,000 contributed by Power Integrations to Mr. Tomlin’s 401(k) account and $1,748 for his life insurance premium. | |
(16) | Represents $1,510 for a life insurance premium. |
(17) | Represents $3,000 contributed by Power Integrations to Mr. | |
(18) | Represents $3,000 contributed by Power Integrations to Mr. Renouard’s 401(k) account, $1,683 for his life insurance premium and $4,834 for reimbursement of taxes paid to a foreign country. | |
(19) | Represents $1,554 for a life insurance |
(20) | Represents $3,000 contributed by Power Integrations to Mr. Bell’s 401(k) account and $1,812 for | |
(21) | Mr. Bell was not a named executive officer in 2006. |
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Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | All Other Option Awards: Number of Securities Underlying Options (#)(5) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards(6) | |||||||||||||
Threshold(2) | Target(3) | Maximum(4) | ||||||||||||||||
Balu Balakrishnan | 6/5/07 | $ | 0 | $ | 250,000 | $ | 500,000 | — | — | — | ||||||||
8/15/07 | — | — | — | 160,000 | 25.25 | $ | 1,922,448 | |||||||||||
Rafael Torres | 6/5/07 | $ | 0 | $ | 100,000 | $ | 200,000 | — | — | — | ||||||||
John Tomlin | 6/5/07 | $ | 0 | $ | 100,000 | $ | 200,000 | — | — | — | ||||||||
8/15/07 | — | — | — | 35,000 | 25.25 | $ | 420,536 | |||||||||||
Douglas Bailey | 6/5/07 | $ | 0 | $ | 80,000 | $ | 160,000 | — | — | — | ||||||||
8/15/07 | — | — | — | 25,000 | 25.25 | $ | 300,382 | |||||||||||
Derek Bell | 6/5/07 | $ | 0 | $ | 100,000 | $ | 200,000 | — | — | — | ||||||||
8/15/07 | — | — | — | 35,000 | 25.25 | $ | 420,536 |
All Other | ||||||||||||||||||||||||||||||||
Option | ||||||||||||||||||||||||||||||||
Committee | Awards: | Exercise | ||||||||||||||||||||||||||||||
Approval | Number of | or Base | ||||||||||||||||||||||||||||||
Date of | Securities | Price of | Grant Date Fair | |||||||||||||||||||||||||||||
Stock | Estimated Future Payouts Under Non- | Underlying | Option | Value of Stock | ||||||||||||||||||||||||||||
Grant | Option | Equity Incentive Plan Awards(2) | Options | Awards | and Option | |||||||||||||||||||||||||||
Name | Date | Grants(1) | Threshold(3) | Target(4) | Maximum(5) | (#)(6) | ($/Sh) | Awards(7) | ||||||||||||||||||||||||
Balu Balakrishnan | 4/22/08 | $ | 0 | $ | 275,000 | $ | 550,000 | — | — | — | ||||||||||||||||||||||
4/29/08 | 4/22/08 | — | — | — | 150,000 | 31.15 | $ | 1,917,330 | ||||||||||||||||||||||||
Bill Roeschlein | 6/19/08 | $ | 0 | $ | 80,000 | $ | 160,000 | — | — | — | ||||||||||||||||||||||
7/1/08 | 6/19/08 | — | — | — | 100,000 | 31.53 | $ | 1,337,090 | ||||||||||||||||||||||||
Rafael Torres | 4/22/08 | $ | 0 | $ | 100,000 | $ | 200,000 | — | — | — | ||||||||||||||||||||||
— | — | — | — | — | — | — | — | |||||||||||||||||||||||||
John Tomlin | 4/22/08 | $ | 0 | $ | 110,000 | $ | 220,000 | — | — | — | ||||||||||||||||||||||
4/29/08 | 4/22/08 | — | — | — | 32,000 | 31.15 | $ | 409,030 | ||||||||||||||||||||||||
Bruce Renouard | 4/22/08 | $ | 0 | $ | 110,000 | $ | 220,000 | — | — | — | ||||||||||||||||||||||
4/29/08 | 4/22/08 | — | — | — | 32,000 | 31.15 | $ | 409,030 | ||||||||||||||||||||||||
Derek Bell | 4/22/08 | $ | 0 | $ | 110,000 | $ | 220,000 | — | — | — | ||||||||||||||||||||||
4/29/08 | 4/22/08 | — | — | — | 32,000 | 31.15 | $ | 409,030 |
(1) | Reflects the date the Compensation Committee determined to make the grant, such grant to be effective on the grant date designated in the column to the left, at the fair market value on the grant date. Grant dates were designated at the time of the Compensation Committee’s action, which dates were dates on which the company was not in possession of material, non-public information,e.g., the third trading day after release of earnings. | |
(2) | These columns set forth the threshold, target and maximum amounts of each named executive officer’s annual cash bonus award for the year ended December 31, |
(3) | No pay out would be made if |
(4) | Target represents the amount earned if |
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(5) | Maximum represents the maximum payout under the program, which is 200% of target. |
| ||
(6) | Stock options were granted pursuant to the |
(7) | Represents the grant date fair value of such option award as determined in accordance with SFAS No. 123(R). These amounts have been calculated in accordance with SFAS No. 123(R) using the Black-Scholes-Merton valuation model. |
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Option Awards | ||||||||||||||||
Number of | Number of | |||||||||||||||
Securities | Securities | |||||||||||||||
Underlying | Underlying | |||||||||||||||
Unexercised | Unexercised | Option | Option | |||||||||||||
Options | Options | Exercise | Expiration | |||||||||||||
Name | Exercisable(1) | Unexerciseable | Price | Date | ||||||||||||
Balu Balakrishnan | 20,526 | $ | 14.22 | 4/20/2009 | ||||||||||||
6,639 | $ | 15.06 | 4/14/2010 | |||||||||||||
33,361 | $ | 15.06 | 4/14/2010 | |||||||||||||
40,000 | $ | 15.06 | 4/14/2010 | |||||||||||||
7,403 | $ | 12.10 | 5/31/2011 | |||||||||||||
261,346 | $ | 12.10 | 5/31/2011 | |||||||||||||
4,779 | $ | 14.82 | 2/21/2012 | |||||||||||||
86,887 | $ | 14.82 | 2/21/2012 | |||||||||||||
2,699 | $ | 17.75 | 1/8/2013 | |||||||||||||
141,050 | $ | 17.75 | 1/8/2013 | |||||||||||||
3,673 | $ | 27.22 | 2/4/2014 | |||||||||||||
196,327 | $ | 27.22 | 2/4/2014 | |||||||||||||
195,833 | 4,167 | $ | 17.18 | 1/24/2015 | ||||||||||||
127,500 | 52,500 | $ | 26.75 | 2/7/2016 | ||||||||||||
66,666 | 93,334 | $ | 25.25 | 8/15/2017 | ||||||||||||
2,934 | $ | 18.95 | 1/8/2013 | |||||||||||||
153,317 | $ | 18.95 | 1/8/2013 | |||||||||||||
50,000 | $ | 21.20 | 2/21/2012 | |||||||||||||
Bill Roeschlein | — | — | — | — | ||||||||||||
Rafael Torres | — | — | — | — | ||||||||||||
John Tomlin | 35,761 | 938 | $ | 17.18 | 1/24/2015 | |||||||||||
2,473 | $ | 18.95 | 1/8/2013 | |||||||||||||
16,467 | $ | 18.95 | 1/8/2013 | |||||||||||||
Bruce Renouard | 51,471 | $ | 14.82 | 2/21/2012 | ||||||||||||
4,779 | $ | 14.82 | 2/21/2012 | |||||||||||||
2,699 | $ | 17.75 | 1/8/2013 | |||||||||||||
18,863 | $ | 17.75 | 1/8/2013 | |||||||||||||
3,673 | $ | 27.22 | 2/4/2014 | |||||||||||||
41,327 | $ | 27.22 | 2/4/2014 | |||||||||||||
44,062 | 938 | $ | 17.18 | 1/24/2015 | ||||||||||||
14,583 | 20,417 | $ | 25.25 | 8/15/2017 | ||||||||||||
1,968 | (2) | $ | 14.82 | 12/31/2009 | ||||||||||||
2,934 | $ | 18.95 | 1/8/2013 | |||||||||||||
20,504 | $ | 18.95 | 1/8/2013 |
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Option Awards | ||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable(1) | Number of Securities Underlying Unexercised Options Unexerciseable | Option Exercise Price | Option Expiration Date | ||||||
Balu Balakrishnan | 40,020 | $ | 14.22 | 4/20/2009 | ||||||
6,639 | $ | 15.06 | 4/14/2010 | |||||||
33,361 | $ | 15.06 | 4/14/2010 | |||||||
40,000 | $ | 15.06 | 4/14/2010 | |||||||
7,403 | $ | 12.10 | 5/31/2011 | |||||||
261,346 | $ | 12.10 | 5/31/2011 | |||||||
4,779 | $ | 14.82 | 2/21/2012 | |||||||
136,887 | $ | 14.82 | 2/21/2012 | |||||||
2,699 | $ | 17.75 | 1/8/2013 | |||||||
141,050 | $ | 17.75 | 1/8/2013 | |||||||
3,520 | 153 | $ | 27.22 | 2/4/2014 | ||||||
188,146 | 8,181 | $ | 27.22 | 2/4/2014 | ||||||
145,833 | 54,167 | $ | 17.18 | 1/24/2015 | ||||||
82,500 | 97,500 | $ | 26.75 | 2/7/2016 | ||||||
26,666 | 133,334 | $ | 25.25 | 8/15/2017 | ||||||
15,390 | $ | 12.10 | 12/31/08 | (2) | ||||||
31,366 | $ | 14.82 | 12/31/08 | (2) | ||||||
2,934 | $ | 18.95 | 1/8/2013 | |||||||
153,317 | $ | 18.95 | 1/8/2013 | |||||||
Rafael Torres | 20,315 | 96,875 | $ | 16.13 | 07/19/16 |
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Option Awards | ||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable(1) | Number of Securities Underlying Unexercised Options Unexerciseable | Option Exercise Price | Option Expiration Date | ||||||
John Tomlin | 73,050 | $ | 18.60 | 10/10/2011 | ||||||
1,989 | $ | 14.82 | 2/21/2012 | |||||||
1,699 | $ | 17.75 | 1/8/2013 | |||||||
3,520 | 153 | $ | 27.22 | 2/4/2014 | ||||||
44,396 | 1,931 | $ | 27.22 | 2/4/2014 | ||||||
32,812 | 12,188 | $ | 17.18 | 1/24/2015 | ||||||
18,333 | 21,667 | $ | 26.75 | 2/7/2016 | ||||||
5,833 | 29,167 | $ | 25.25 | 8/15/2017 | ||||||
18,000 | $ | 18.60 | 10/10/2011 | (2) | ||||||
2,934 | $ | 18.95 | 1/8/2013 | |||||||
16,467 | $ | 18.95 | 1/8/2013 | |||||||
Doug Bailey | 80,108 | 29,792 | $ | 19.73 | 11/30/14 | |||||
13,750 | 16,250 | $ | 26.75 | 02/07/16 | ||||||
4,166 | 20,834 | $ | 25.25 | 08/15/17 | ||||||
Derek Bell | 66,367 | $ | 12.10 | 5/31/2011 | ||||||
7,403 | $ | 12.10 | 5/31/2011 | |||||||
4,779 | $ | 14.82 | 2/21/2012 | |||||||
23,554 | $ | 14.82 | 2/21/2012 | |||||||
2,699 | $ | 17.75 | 1/8/2013 | |||||||
18,863 | $ | 17.75 | 1/8/2013 | |||||||
3,520 | 153 | $ | 27.22 | 2/4/2014 | ||||||
39,605 | 1,722 | $ | 27.22 | 2/4/2014 | ||||||
32,812 | 12,188 | $ | 17.18 | 1/24/2015 | ||||||
18,333 | 21,667 | $ | 26.75 | 2/7/2016 | ||||||
5,833 | 29,167 | $ | 25.25 | 8/15/2017 | ||||||
8,684 | $ | 12.10 | 5/31/2011 | |||||||
430 | $ | 12.10 | 12/31/2008 | (2) | ||||||
984 | $ | 14.82 | 2/21/2012 | |||||||
4,849 | $ | 14.82 | 2/21/2012 | |||||||
2,934 | $ | 18.95 | 1/8/2013 | |||||||
20,504 | $ | 18.95 | 1/8/2013 |
Option Awards | ||||||||||||||||
Number of | Number of | |||||||||||||||
Securities | Securities | |||||||||||||||
Underlying | Underlying | |||||||||||||||
Unexercised | Unexercised | Option | Option | |||||||||||||
Options | Options | Exercise | Expiration | |||||||||||||
Name | Exercisable(1) | Unexerciseable | Price | Date | ||||||||||||
Derek Bell | 63,367 | $ | 12.10 | 5/31/2011 | ||||||||||||
7,403 | $ | 12.10 | 5/31/2011 | |||||||||||||
4,779 | $ | 14.82 | 2/21/2012 | |||||||||||||
23,554 | $ | 14.82 | 2/21/2012 | |||||||||||||
2,699 | $ | 17.75 | 1/8/2013 | |||||||||||||
18,863 | $ | 17.75 | 1/8/2013 | |||||||||||||
3,673 | $ | 27.22 | 2/4/2014 | |||||||||||||
41,327 | $ | 27.22 | 2/4/2014 | |||||||||||||
44,062 | 938 | $ | 17.18 | 1/24/2015 | ||||||||||||
28,333 | 11,667 | $ | 26.75 | 2/7/2016 | ||||||||||||
14,583 | 20,417 | $ | 25.25 | 8/15/2017 | ||||||||||||
2,934 | $ | 18.95 | 1/8/2013 | |||||||||||||
20,504 | $ | 18.95 | 1/8/2013 | |||||||||||||
(1) | Except as described in footnote (2) below, options in this table were granted from the 1997 Stock Option Plan and are immediately exercisable |
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(2) | In 2006, our named executive officers voluntarily amended a number of the stock options held by them to provide that they were only exercisable during a specified calendar year. This is one of the options that were so |
Name Balu Balakrishnan Rafael Torres John Tomlin Douglas Bailey Derek Bell 3420072008 Option Exercises20072008 for each of the named executive officers. Option Awards Number of
Shares
Acquired on
Exercise Value Realized
on Exercise(1) 54,309 $ 970,502.57 32,810 $ 485,763.93 56,311 $ 735,243.16 20,100 $ 266,881.66 14,950 $ 257,283.52 Option Awards(1) Number of Shares Value Acquired on Realized on Exercise Exercise(2) Balu Balakrishnan 66,250 $ 1,169,788.11 Rafael Torres 42,190 $ 649,251.09 Bill Roeschlein — — John Tomlin 103,500 $ 1,301,467.53 Bruce Renouard 20,000 $ 78,610.00 Derek Bell 17,947 $ 361,570.49 (1) Does not include stock options tendered in our tender offer and accepted for payment on December 31, 2008, which amounts are reflected in the summary compensation table. (2) Represents the difference between the aggregate market price of the common stock acquired on the date of exercise and the aggregate exercise price.
EMPLOYMENT, SEVERANCEAND CHANGEOF CONTROL AGREEMENTS
acceleration of vesting upon a change of control of Power Integrations,
severance benefits in the event of termination of employment by Power Integrations without cause or resignation by Mr. Balakrishnan for good reason within 18 months after a change of control,
severance benefits in the event of termination of employment by Power Integrations without cause or resignation by Mr. Balakrishnan for good reason, and
retirement benefits.
A change of control is defined in the CEO Benefits Agreement as an acquisition by any person of a beneficial ownership of 50% or more of Power Integrations’ voting stock or outstanding shares of common stock, certain mergers or other business combinations involving Power Integrations, the sale of more than 50% of Power Integrations’ assets, liquidation of Power Integrations, or a change in the majority of the incumbent members of the Board within a two year period (except changes in the Board’s composition approved by a majority of the directors). “Cause” includes, among other acts, a material act of theft, dishonesty, fraud, falsification of records, improper disclosure of confidential information, or an intentional act by an executive causing harm to the reputation of Power Integrations, and “good reason” includes, among other acts, a material decrease in an executive’s compensation or benefits following a change of control, a demotion or material reduction in responsibility level, or relocation of more than 50 miles from executive’s current work place or a material adverse change in working conditions or established working hours which persist for a period of six months.
Upon a change of control, 50% of Mr. Balakrishnan’s then-unvested shares will vest, but if an acquiring company does not assume the options, 100% of Mr. Balakrishnan’s then-unvested shares will vest.
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Mr. Balakrishnan is entitled to severance benefits in the event that he is terminated without cause or he resigns for good reason within 18 months after a change of control. These severance benefits include a lump-sum cash payment equal to twelve months of his highest annual salary from Power Integrations plus targeted annual incentive bonus, acceleration of 100% of all his then-outstanding stock options, extension of the post-termination stock option exercise period to one year, and continued medical and dental coverage under the Power Integrations health plans for twelve months at Power Integrations’ expense.
In addition, Mr. Balakrishnan is entitled to severance benefits in the event of termination of employment by Power Integrations without cause or resignation by Mr. Balakrishnan for good reason. These severance benefits include a lump-sum cash payment equal to twelve months of his highest annual salary plus targeted annual incentive bonus, acceleration of 50% of all his then-unvested stock options, and continued medical and dental coverage under the Power Integrations health plans for twelve months at Power Integrations’ expense.
Mr. Balakrishnan is entitled to retirement benefits if he is not employed elsewhere full time (other than for an organization described in section 501(c)(3) of the Internal Revenue Code of 1986, as amended), or otherwise engaged in “Competition” (as defined in the CEO Agreement) with Power Integrations, and does not recruit or employ any present or future employee of Power Integrations. Mr. Balakrishnan is entitled to the extension of his post-termination stock option exercise period for vested options for the term of the option and medical and dental benefits for him and his dependents at Power Integrations’ expense until he achieves the age of 65; thereafter, participation in the health plans would be at Mr. Balakrishnan’s expense. Power Integrations will use commercially reasonable efforts to provide that Mr. Balakrishnan will continue to be eligible for coverage under Power Integrations’ medical and dental plans upon retirement. These retirement benefits will also become available if Mr. Balakrishnan’s employment terminates due to death or disability.
If any of the payments and benefits provided under the CEO Benefits Agreement, as amended, in connection with a change of control (the “Payments”) would result in a “parachute payment” under Section 280G of the Internal Revenue Code of 1986, as amended, the amount of such Payments will be either (i) the full amount of the Payments or (ii) a reduced amount which would result in no portion of the Payments being subject to excise tax (as defined in the CEO Benefits Agreement, as amended), whichever amount provides the greatest amount of benefit to Mr. Balakrishnan.
The post-termination exercise period for Mr. Balakrishnan’s vested stock options granted prior to April 26, 2002 will be extended only if such extension does not require Power Integrations to incur a compensation expense for financial statement purposes. The period of extended option exercisability and the payment of benefits (including but not limited to severance, medical, dental and retirement) shall be subject to adjustment to help avoid excise tax under Section 409A of the Internal Revenue Code of 1986, as amended, and the extended option exercise period shall not apply if substantially all options under the relevant plan terminate in connection with a change of control under current stock option plans or in connection with an event or transaction under a future equity incentive plan.
Executive Officer Benefits Agreements. As of April 25, 2002,On August 8, 2007, Power Integrations entered into amended and restated executive officer benefits agreements with its named executive officers Derek Bell, vice president, engineering, and John Tomlin, vice president, operations. The form of the executive officer benefits agreement was approved by the Compensation Committee on April 18, 2002operations and was amended by the Compensation Committee on August 8, 2007.Bruce Renouard, vice president, sales. In addition, as of August 8, 2007, Power Integrations entered into an executive officer benefits agreementsagreement with Rafael Torres, Power Integrations’ then chief financial officer. On November 5, 2008, Power Integrations entered into an executive officer benefits agreement with its current chief financial officer, and Douglas Bailey, vice president, marketing.Bill Roeschlein. The executive officers benefits agreements referenced in this paragraph, including the CEO Benefits Agreement, as amended as the case may be, are referred to as the “Executive Officer Benefits Agreements,” and the executive officers referred to in this paragraph, are referred to as the “Officers.”
acceleration of vesting of stock options upon a change of control of Power Integrations,
• | acceleration of vesting of stock options upon a change of control of Power Integrations, | |
• | severance benefits in the event of termination of employment by Power Integrations without cause or resignation by the Officer for good reason within 18 months after a change of control, | |
• | severance benefits in the event of termination of employment by Power Integrations without cause or resignation by the Officer for good reason, and | |
• | retirement benefits. |
severance benefits in the event of termination of employment by Power Integrations without cause or resignation by the Officer for good reason within 18 months after a change of control,
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severance benefits in the event of termination of employment by Power Integrations without cause or resignation by the Officer for good reason, and
retirement benefits.
A change of control is defined in the Executive Officer Benefits Agreements as an acquisition by any person of a beneficial ownership of 50% or more of Power Integrations’ voting stock or outstanding shares of common stock, certain mergers or other business combinations involving Power Integrations, the sale of more than 50% of Power Integrations’ assets, liquidation of Power Integrations, or a change in the majority of the incumbent members of the Board within a two-year period (except changes in the Board’s composition approved by a majority of the directors). “Cause” includes, among other acts, a material act of theft, dishonesty, fraud, falsification of records, improper disclosure of confidential information, or an intentional act by the Officer causing harm to the reputation of Power Integrations, and “good reason” includes, among other acts, a material decrease in the Officer’s compensation or benefits following a change of control, a demotion or material reduction in responsibility level, or relocation of more than 50 miles from the Officer’s current work place or a material adverse change in working conditions or established working hours which persist for a period of six months.
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In addition, Mr. Balakrishnan is entitled to vesting acceleration of 50% of all his then-unvested stock options.
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that the Officer will continue to be eligible for coverage under Power Integration’sIntegrations’ medical and dental plans upon retirement. These retirement benefits will also become available if an Officer was eligible for such benefits and his employment terminates due to death or disability.
A new executive will be first eligible for benefits under an Executive Officer Benefits Agreement, as amended, upon completion of one year of continuous service as an executive officer unless the Board or the Compensation Committee determines otherwise.
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The period
bonus.
Pension Benefits
Name | Number of Years Credited Service | Present Value of Accumulated Benefit | |||
Balu Balakrishnan | 19 | $ | 19,860 | ||
Rafael Torres | 1 | $ | 1,041 | ||
John Tomlin | 6 | $ | 5,478 | ||
Douglas Bailey | 3 | $ | 2,952 | ||
Derek Bell | 7 | $ | 1,863 |
2008 for each named executive officer.
Number of Years | Present Value of | |||||||
Name | Credited Service | Accumulated Benefit | ||||||
Balu Balakrishnan | 20 | $ | 19,911 | |||||
Bill Roeschlein(1) | — | — | ||||||
Rafael Torres(2) | — | — | ||||||
John Tomlin | 7 | $ | 8,495 | |||||
Bruce Renouard | 7 | $ | 11,823 | |||||
Derek Bell | 8 | $ | 1,409 |
(1) | Mr. Roeschlein is not eligible for any benefits under his Executive Officer Benefits Agreement other than those relating to change of control until completion of one year of continuous service at Power Integrations. | |
(2) | Mr. Torres left employment of Power Integrations in July 2008, and was not eligible for pension benefits at December 31, 2008. |
The amounts determined in the above/followingabove table are associated with the provision of health care coverage after retirement. The valuation method is pursuant to the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions. The Projected Unit Credit attribution method was used; the attribution of the obligation is over the period from hire to benefit eligibility (the earlier of age 50 with 15 years of service or age 55 with 10 years of service). Other than for eligibility purposes, service is not considered in the calculation. The benefit consists of
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health care coverage from retirement until age 65. The basis for the benefit is premiums paid by the employer to a third-party insurer, without additional subsidy imputed. The obligations were calculated using the following assumptions:
• | The discount rate for future payments was 5.50% as of12/31/2008. | |
• | The assumed annual increase in health care costs is 10% as of12/31/2008, with the annual increase lessening by 1/2% per year, to an ultimate rate of 5% in 2019. | |
• | 25% of active participants are assumed to become eligible and elect coverage at retirement. | |
• | Retirement is assumed to take place at age 62, or at first eligibility if older. | |
• | 2/3 of active employees are assumed to have eligible spouses who, at the employee’s retirement, will be covered by the plan. Husbands are assumed to be three years older than their wives. |
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The discount rate for future payments was 5.75% for fiscal 2007 through 8/7/2007 and 6.26% for fiscal 2007 from 8/8/2007 (and 5.50% as of 12/31/2007).
The assumed annual increase in health care costs is 11% as of 12/31/2007, with the annual increase lessening by 1/2% per year, to an ultimate rate of 5% in 2019.
25% of active participants are assumed to become eligible and elect coverage at retirement.
Retirement is assumed to take place at age 62, or at first eligibility if older.
2/3 of active employees are assumed to have eligible spouses who, at the employee’s retirement, will be covered by the plan. Husbands are assumed to be three years older than their wives.
Potential Payments Upon | Continuation of | |||||||||||||||||||
Involuntary Termination Other | Service Without | |||||||||||||||||||
Than for Cause or Voluntary | Termination After Change of Control | |||||||||||||||||||
Termination for Good Reason | Acquiring | |||||||||||||||||||
Not within | Within | Acquiring | Company | |||||||||||||||||
18 Months | 18 Months | Company | Does not | |||||||||||||||||
Retirement | of a Change of | of a Change of | Assumes | Assume | ||||||||||||||||
Name/Type of Benefit | Benefits | Control(1) | Control(2) | Options(3) | Options(4) | |||||||||||||||
Balu Balakrishnan | ||||||||||||||||||||
Cash Severance — Base Salary | — | $ | 400,000 | $ | 400,000 | — | — | |||||||||||||
Cash Severance — Bonus | — | $ | 275,000 | $ | 275,000 | — | — | |||||||||||||
Vesting Acceleration(5) | — | $ | 5,625 | $ | 11,251 | $ | 5,625 | $ | 11,251 | |||||||||||
Extension of Option Term(6) | $ | 6,423,797 | — | $ | 1,742,177 | — | — | |||||||||||||
Continued Coverage of Employee | ||||||||||||||||||||
Benefits(7) | $ | 199,068 | $ | 18,250 | $ | 18,250 | — | — | ||||||||||||
Total Termination Benefits:(8) | $ | 6,622,865 | $ | 698,875 | $ | 2,446,678 | $ | 5,625 | $ | 11,251 | ||||||||||
Bill Roeschlein | ||||||||||||||||||||
Cash Severance — Base Salary | — | — | $ | 250,000 | — | — | ||||||||||||||
Cash Severance — Bonus | — | — | $ | 80,000 | — | — | ||||||||||||||
Vesting Acceleration | — | — | — | — | — | |||||||||||||||
Continued Coverage of Employee Benefits | — | — | — | — | — | |||||||||||||||
Total Termination Benefits(8) | — | — | $ | 330,000 | — | — | ||||||||||||||
John Tomlin | ||||||||||||||||||||
Cash Severance — Base Salary | — | $ | 137,500 | $ | 275,000 | — | — | |||||||||||||
Cash Severance — Bonus | — | $ | 55,000 | $ | 110,000 | — | — | |||||||||||||
Vesting Acceleration(5) | — | — | $ | 2,533 | $ | 633 | $ | 2,533 | ||||||||||||
Extension of Option Term(6) | — | — | $ | 107,510 | — | — | ||||||||||||||
Continued Coverage of Employee | ||||||||||||||||||||
Benefits(7) | — | $ | 7,710 | $ | 15,420 | — | — | |||||||||||||
Total Termination Benefits:(8) | — | $ | 200,210 | $ | 510,463 | $ | 633 | $ | 2,533 |
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Retirement | Potential Payments Upon Involuntary Termination Other Than for Cause or Voluntary Termination for Good Reason | Continuation of Service Without Termination After Change of Control | |||||||||||||
Name/Type of Benefit | Benefits | Not within 18 months of a Change of Control(1) | Within 18 months of a Change of Control(2) | Acquiring Company Assumes Options(3) | Acquiring Company Does Not Assume Options(4) | ||||||||||
Balu Balakrishnan | |||||||||||||||
Cash Severance—Base Salary | — | $ | 385,000 | $ | 385,000 | — | — | ||||||||
Cash Severance—Bonus | — | $ | 250,000 | $ | 250,000 | — | — | ||||||||
Vesting Acceleration(5) | — | $ | 1,483,638 | $ | 2,967,275 | $ | 1,483,638 | $ | 2,967,275 | ||||||
Continued Coverage of Employee Benefits(6) | $ | 190,781 | $ | 15,898 | $ | 15,898 | — | — | |||||||
Total Termination Benefits:(7) | $ | 190,781 | $ | 2,134,536 | $ | 3,618,173 | $ | 1,483,638 | $ | 2,967,275 | |||||
Rafael Torres | |||||||||||||||
Cash Severance—Base Salary | — | $ | 122,500 | $ | 122,500 | — | — | ||||||||
Cash Severance—Bonus | — | $ | 50,000 | $ | 50,000 | — | — | ||||||||
Vesting Acceleration(5) | — | — | $ | 886,406 | $ | 443,203 | $ | 886,406 | |||||||
Continued Coverage of Employee Benefits(6) | — | $ | 3,190 | $ | 3,190 | — | — | ||||||||
Total Termination Benefits(7) | $ | — | $ | 175,690 | $ | 1,062,096 | $ | 443,203 | $ | 886,406 | |||||
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Retirement | Potential Payments Upon Involuntary Termination Other Than for Cause or Voluntary Termination for Good Reason | Continuation of Service Without Termination After Change of Control | ||||||||||||
Name/Type of Benefit | Benefits | Not within 18 months of a Change of Control(1) | Within 18 months of a Change of Control(2) | Acquiring Company Assumes Options(3) | Acquiring Company Does Not Assume Options(4) | |||||||||
John Tomlin | ||||||||||||||
Cash Severance—Base Salary | — | $ | 132,500 | $ | 265,000 | — | — | |||||||
Cash Severance—Bonus | — | $ | 50,000 | $ | 100,000 | — | — | |||||||
Vesting Acceleration(5) | — | — | $ | 659,424 | $ | 164,856 | $ | 659,424 | ||||||
Continued Coverage of Employee Benefits(6) | — | $ | 6,611 | $ | 13,222 | — | — | |||||||
Total Termination Benefits:(7) | — | $ | 189,111 | $ | 1,037,646 | $ | 164,856 | $ | 659,424 | |||||
Douglas Bailey | ||||||||||||||
Cash Severance—Base Salary | — | $ | 115,000 | $ | 115,000 | — | — | |||||||
Cash Severance—Bonus | — | $ | 40,000 | $ | 40,000 | — | — | |||||||
Vesting Acceleration(5) | — | — | $ | 376,999 | $ | 188,500 | $ | 376,999 | ||||||
Continued Coverage of Employee Benefits(6) | — | $ | 9,571 | $ | 9,571 | — | — | |||||||
Total Termination Benefits(7) | — | $ | 164,571 | $ | 541,570 | $ | 188,500 | $ | 376,999 | |||||
Derek Bell | ||||||||||||||
Cash Severance—Base Salary | — | $ | 132,500 | $ | 265,000 | — | — | |||||||
Cash Severance—Bonus | — | $ | 50,000 | $ | 100,000 | — | — | |||||||
Vesting Acceleration(5) | — | — | $ | 657,917 | $ | 164,479 | $ | 657,917 | ||||||
Continued Coverage of Employee Benefits(6) | — | $ | 6,611 | $ | 13,222 | — | — | |||||||
Total Termination Benefits:(7) | — | $ | 189,111 | $ | 1,036,139 | $ | 164,479 | $ | 657,917 | |||||
Potential Payments Upon | Continuation of | |||||||||||||||||||
Involuntary Termination Other | Service Without | |||||||||||||||||||
Than for Cause or Voluntary | Termination After Change of Control | |||||||||||||||||||
Termination for Good Reason | Acquiring | |||||||||||||||||||
Not within | Within | Acquiring | Company | |||||||||||||||||
18 Months | 18 Months | Company | Does not | |||||||||||||||||
Retirement | of a Change of | of a Change of | Assumes | Assume | ||||||||||||||||
Name/Type of Benefit | Benefits | Control(1) | Control(2) | Options(3) | Options(4) | |||||||||||||||
Bruce Renouard | ||||||||||||||||||||
Cash Severance — Base Salary | — | $ | 132,500 | $ | 265,000 | — | — | |||||||||||||
Cash Severance — Bonus | — | $ | 55,000 | $ | 110,000 | — | — | |||||||||||||
Vesting Acceleration(5) | — | — | $ | 2,533 | $ | 633 | $ | 2,533 | ||||||||||||
Extension of Option Term(6) | — | — | $ | 287,378 | — | — | ||||||||||||||
Continued Coverage of Employee | ||||||||||||||||||||
Benefits(7) | — | $ | 3,690 | $ | 7,380 | — | — | |||||||||||||
Total Termination Benefits(8) | — | $ | 191,190 | $ | 672,291 | $ | 633 | $ | 2,533 | |||||||||||
Derek Bell | ||||||||||||||||||||
Cash Severance — Base Salary | — | $ | 137,500 | $ | 275,000 | — | — | |||||||||||||
Cash Severance — Bonus | — | $ | 55,000 | $ | 110,000 | — | — | |||||||||||||
Vesting Acceleration(5) | — | — | $ | 2,533 | $ | 633 | $ | 2,533 | ||||||||||||
Extension of Option Term(6) | — | — | $ | 340,751 | — | — | ||||||||||||||
Continued Coverage of Employee | ||||||||||||||||||||
Benefits(7) | — | $ | 7,710 | $ | 15,420 | — | — | |||||||||||||
Total Termination Benefits:(8) | $ | 200,210 | $ | 743,704 | $ | 633 | $ | 2,533 |
(1) | Reflects benefits in the event of involuntary termination other than for cause or voluntary termination for good reason: with respect to Mr. Balakrishnan twelve months salary plus his targeted annual bonus plus 50% of all his then-unvested options plus twelve months medical and dental coverage; and with respect to all other named executive officers six months of salary plus 50% of targeted bonus plus six months of medical and dental coverage. |
(2) | For termination within 18 months of a change in control (which, for these purposes for executive officers other than Mr. Balakrishnan, includes Mr. Balakrishnan ceasing to be our chief executive officer) other than for cause or voluntary termination for good reason: with respect to Mr. Balakrishnan twelve months salary plus his targeted annual bonus, 100% acceleration of all his then-unvested options, and twelve months medical and dental coverage; for all others, six months salary plus 50% of targeted bonus, 100% of unvested options would vest upon a change of control for senior executives and 50% of unvested options would vest upon change of control for new executives, and 12 months medical and dental coverage for senior executives and six months medical and dental coverage for new executives. If executive is a senior executive, payment up to an additional six months salary and 50% bonus will be paid in ratable monthly installments until the executive secures new employment. The amounts set forth in the table assume that the senior executives will not secure new employment. |
(3) | Reflects benefits in the event of a change of control in which the acquiring company assumes outstanding options. With respect to Mr. Balakrishnan 50% of all his then-unvested options would vest; for all others, 25% of the unvested options would vest. |
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(4) | Reflects benefits in the event of a change of control in which the acquiring company did not assume outstanding options. With respect to Mr. Balakrishnan 100% of all his then-unvested options would vest; for all others, 50% of the unvested options would vest for a new executive and 100% for a senior executive. |
(5) | Reflects the aggregate market value of unvested option grants. For unvested option grants, aggregate market value is computed by multiplying (i) the difference between |
39
Global Select Market at December 31, |
(6) | Reflects the aggregate market value of extensions of stock option exercise periods. The post-termination exercise period for an Officer’s vested stock options granted prior to April 26, 2002 will be extended only if such extension does not require Power Integrations to incur a compensation expense for financial statement purposes. Mr. Balakrishnan is eligible for an extension of his stock option exercise period for vested options to one year upon termination within 18 months of a change in control, or for the term of the option in the case of retirement. Officers, other than Mr. Balakrishnan, are eligible for an extension of their stock option exercise periods to one year upon a termination within 18 months of a change of control, and up to five years upon retirement (assuming such Officers are eligible to receive retirement benefits). The values of the extensions of the stock option exercise periods are computed by using the Black-Scholes-Merton model in accordance with SFAS No. 123(R) and calculating the difference between (i) the fair value of each applicable option with the extended option expiration date minus (ii) the fair value of each applicable option with the original option expiration date. | |
(7) | For retirement, upon completion of service and age requirements, health coverage is paid until the age of 65. For severance, reflects the cost of health coverage (COBRA) to maintain the benefits currently provided. Calculated based upon the rates at December 31, |
The total termination |
From January 1, 2007 to July 29, 2007,
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We did not conduct any transactions with related persons in fiscal 20072008 that would require disclosure in this proxy or approval by the Audit Committee or another independent body of the Board.
Our policy, included in our Code of Business Conduct and Ethics, is that all directors, officers, and employees must avoid any activity that is or appears to conflict with the interests of Power Integrations. Our directors, officers, and employees are aware of the applicable provisions of our Code of Business Conduct and Ethics, and we become aware of related party transactions through periodic reviews by, and notifications to, management, including the completion of an annual Director and Officer questionnaire. We conduct a review of all related party transactions for potential conflict of interest. Any potential conflicts of interest must be reviewed and ratified, if applicable, by the Audit Committee and or another independent body of our Board. During fiscal 2007,2008, we did not have any related party transactions requiring review, nor did we have any transactions where the policy and procedure were not followed.
We have
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48
brokers.
of Directors
Rafael Torres
Bill Roeschlein
27, 2009
41
49
APPENDIX A
POWER INTEGRATIONS, INC.
2008 OUTSIDE DIRECTORS STOCK OPTION PLAN
(AS AMENDED THROUGH JUNE 6, 2000)
(AS APPROVEDBYTHE BOARDON APRIL 22, 2008)
(SUBJECTTO APPROVAL BYTHE STOCKHOLDERSON JUNE 13, 2008)
1.ESTABLISHMENT, PURPOSEAND TERMOF PLAN.
1.1Establishment. The Power Integrations, Inc. 1997 Outside Directors Stock Option Plan (the “Original Plan”) was established effective as of the effective date of the initial registration by the Company of its Stock under Section 12 of the Exchange Act (the “Effective Date”). The Power Integrations, Inc. 2008 Outside Directors Stock Option Plan (the “Plan”), as an amendment and restatement of the Original Plan, will become effective upon its approval at the 2008 Annual Meeting of Stockholders.
1.2Purpose. The purpose of the Plan is to advance the interests of the Participating Company Group and its stockholders by providing an incentive to attract and retain highly qualified persons to serve as Outside Directors of the Company and by creating additional incentive for Outside Directors to promote the growth and profitability of the Participating Company Group.
1.3Term of Plan. The Plan shall continue in effect until the earlier of its termination by the Board or the date on which all of the shares of Stock available for issuance under the Plan have been issued and all restrictions on such shares under the terms of the Plan and the agreements evidencing Options granted under the Plan have lapsed.
2.DEFINITIONSAND CONSTRUCTION.
2.1Definitions. Whenever used herein, the following terms shall have their respective meanings set forth below:
(a)“Annual Option” means an Option granted pursuant to Section 6.1(b), whether a Previously Scheduled Annual Option, a Transitional Annual Option, or a New Annual Option.
(b)“Board” means the Board of Directors of the Company. If one or more Committees have been appointed by the Board to administer the Plan, “Board” also means such Committee(s).
(c)“Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated thereunder.
(d)“Committee” means a committee of the Board duly appointed to administer the Plan and having such powers as shall be specified by the Board. Unless the powers of the Committee have been specifically limited, the Committee shall have all of the powers of the Board granted herein, including, without limitation, the power to amend or terminate the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law.
(e)“Company” means Power Integrations, Inc., a Delaware corporation, or any successor corporation thereto.
(f)“Consultant” means any person, including an advisor, engaged by a Participating Company to render services other than as an Employee or a Director.
(g)“Director” means a member of the Board or the board of directors of any other Participating Company.
(h)“Employee” means any person treated as an employee (including an officer or a Director who is also treated as an employee) in the records of a Participating Company; provided, however, that neither service as a Director nor payment of a director’s fee shall be sufficient to constitute employment for purposes of the Plan.
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(i)“Exchange Act” means the Securities Exchange Act of 1934, as amended.
(j)“Fair Market Value” means, as of any date, the value of a share of Stock or other property as determined by the Board, in its sole discretion, or by the Company, in its sole discretion, if such determination is expressly allocated to the Company herein, subject to the following:
(i) If, on such date, there is a public market for the Stock, the Fair Market Value of a share of Stock shall be the closing sale price of a share of Stock (or the mean of the closing bid and asked prices of a share of Stock if the Stock is so quoted instead) as quoted on the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market or such other national or regional securities exchange or market system constituting the primary market for the Stock, as reported in theWall Street Journal or such other source as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or market system, the date on which the Fair Market Value shall be established shall be the last day on which the Stock was so traded prior to the relevant date, or such other appropriate day as shall be determined by the Board, in its sole discretion.
(ii) If, on such date, there is no public market for the Stock, the Fair Market Value of a share of Stock shall be as determined by the Board without regard to any restriction other than a restriction which, by its terms, will never lapse.
(k)“Initial Option” means an Option granted pursuant to Section 6.1(a), whether a Previously Scheduled Initial Option or a New Initial Option.
(l)“Option” means a right to purchase Stock (subject to adjustment as provided in Section 4.2) pursuant to the terms and conditions of the Plan.
(m)“Optionee” means a person who has been granted one or more Options.
(n)“Option Agreement” means a written agreement between the Company and an Optionee setting forth the terms, conditions and restrictions of the Option granted to the Optionee.
(o)“Outside Director” means a Director of the Company who is not an Employee.
(p)“Parent Corporation” means any present or future “parent corporation” of the Company, as defined in Section 424(e) of the Code.
(q)“Participating Company” means the Company or any Parent Corporation or Subsidiary Corporation.
(r)“Participating Company Group” means, at any point in time, all corporations collectively which are then Participating Companies.
(s)“Service” means the Optionee’s service with the Participating Company Group, whether in the capacity of an Employee, a Director or a Consultant. The Optionee’s Service shall not be deemed to have terminated merely because of a change in the capacity in which the Optionee renders Service to the Participating Company Group or a change in the Participating Company for which the Optionee renders such Service, provided that there is no interruption or termination of the Optionee’s Service. The Optionee’s Service shall be deemed to have terminated either upon an actual termination of Service or upon the corporation for which the Optionee performs Service ceasing to be a Participating Company.
(t)“Stock” means the common stock of the Company, as adjusted from time to time in accordance with Section 4.2.
(u)“Subsidiary Corporation” means any present or future “subsidiary corporation” of the Company, as defined in Section 424(f) of the Code.
2.2Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural, the plural shall include the singular, and use of the term “or” shall include the conjunctive as well as the disjunctive.
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3. ADMINISTRATION. The Plan shall be administered by the Board. All questions of interpretation of the Plan or of any Option shall be determined by the Board, and such determinations shall be final and binding upon all persons having an interest in the Plan or such Option. Any officer of a Participating Company shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election which is the responsibility of or which is allocated to the Company herein, provided the officer has apparent authority with respect to such matter, right, obligation, determination or election.
4. SHARES SUBJECTTO PLAN.
4.1Maximum Number of Shares Issuable. Subject to adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be one million one hundred thousand (1,100,000) shares. Such share reserve consists of (i) eight hundred thousand (800,000) shares of Stock, plus (ii) an additional three hundred thousand (300,000) shares of Stock subject to stockholder approval at the 2008 annual meeting. Such share reserve may consist of authorized but unissued shares or reacquired shares of Stock or any combination thereof. If an outstanding Option for any reason expires or is terminated or canceled or shares of Stock acquired, subject to repurchase, upon the exercise of an Option are repurchased by the Company, the shares of Stock allocable to the unexercised portion of such Option, or such repurchased shares of Stock, shall again be available for issuance under the Plan.
4.2Adjustments for Changes in Capital Structure. In the event of any stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification or similar change in the capital structure of the Company, appropriate and proportionate adjustments shall be made in the number and class of shares subject to the Plan, to each Initial Option and Annual Option, and to any outstanding Options, and in the exercise price of any outstanding Options. If a majority of the shares which are of the same class as the shares that are subject to outstanding Options are exchanged for, converted into, or otherwise become (whether or not pursuant to an “Ownership Change Event” as defined in Section 8.1) shares of another corporation (the “New Shares”), the Board may unilaterally amend the outstanding Options to provide that such Options are exercisable for New Shares. In the event of any such amendment, the number of shares subject to, and the exercise price of, the outstanding Options shall be adjusted in a fair and equitable manner as determined by the Board, in its sole discretion. Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 4.2 shall be rounded down to the nearest whole number, and in no event may the exercise price of any Option be decreased to an amount less than the par value, if any, of the stock subject to the Option.
5. ELIGIBILITYAND TYPEOF OPTIONS.
5.1Persons Eligible for Options. An Option shall be granted only to a person who, at the time of grant, is an Outside Director.
5.2Options Authorized. Options shall be nonstatutory stock options; that is, options which are not treated as incentive stock options within the meaning of Section 422(b) of the Code.
6.Terms and Conditions of Options. Options shall be evidenced by Option Agreements specifying the number of shares of Stock covered thereby, in such form as the Board shall from time to time establish. Option Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
6.1Automatic Grant of Options. Subject to execution by an Outside Director of the appropriate Option Agreement, Options shall be granted automatically and without further action of the Board, as follows:
(a)Initial Options.
(i)Previously Scheduled Initial Options. Prior to June 13, 2008, each person who is (i) serving as an Outside Director on the Effective Date, or (ii) first elected or appointed as an Outside Director after the Effective Date shall be granted an Option to purchase thirty thousand (30,000) shares of Stock on the Effective Date or the date of such initial election or appointment, respectively (a “Previously Scheduled Initial Option”).
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(ii)New Initial Options. Beginning on June 13, 2008, each person who is first elected or appointed as an Outside Director shall be granted an Option to purchase twenty thousand (20,000) shares of Stock on the date of such initial election or appointment (a “New Initial Option”).
(iii)No Initial Option Grants to Former Employees. Notwithstanding anything herein to the contrary, neither a Previously Scheduled Initial Option nor a New Initial Option shall be granted to a Director of the Company who previously did not qualify as an Outside Director but subsequently becomes an Outside Director as a result of the termination of his or her status as an Employee.
(b)Annual Options.
(i)Previously Scheduled Annual Options. Prior to July 1, 2008, each Outside Director (including any Director who previously did not qualify as an Outside Director but who subsequently becomes an Outside Director) shall be granted an Option to purchase ten thousand (10,000) shares of Stock on each of his or her “Anniversary Dates”, provided such person remains an Outside Director on such Anniversary Date (a “Previously Scheduled Annual Option”). The Anniversary Date for an Outside Director who was serving on the Board on the Effective Date shall be the date which is twelve (12) months after the Effective Date and successive anniversaries thereof. The Anniversary Date for an Outside Director who is elected or appointed to the Board after the Effective Date shall be the date which is twelve (12) months after such election or appointment and successive anniversaries thereof.
(ii)Transitional Annual Options. On July 1, 2008, each Outside Director (including any Director who previously did not qualify as an Outside Director but who subsequently becomes an Outside Director) who remains an Outside Director on such date shall be granted an Option (a “Transitional Annual Option”) to purchase that number of shares of Stock equal to the product of: (a) eight thousand (8,000), and (b) the quotient obtained by dividing (A) the number of days between July 1, 2008 and the most recent preceding “Anniversary Date” for that Outside Director, by (B) three hundred sixty-five (365). The number of shares of Stock subject to each such Transitional Annual Option shall be rounded down to the next whole share. The Anniversary Date for an Outside Director who was serving on the Board on the Effective Date shall be the anniversary date of the Effective Date. The Anniversary Date for an Outside Director who is elected or appointed to the Board after the Effective Date shall be the anniversary date of such election or appointment.
(iii)New Annual Options. On the first day in July of each year beginning in 2009, each Outside Director (including any Director who previously did not qualify as an Outside Director but who subsequently becomes an Outside Director) who remains an Outside Director on such date shall be granted an Option to purchase eight thousand (8,000) shares of Stock, provided such person remains an Outside Director on such date (a “New Annual Option”). If an Outside Director has served as an Outside Director for less than one year prior to the first day in July of any year, then the number of shares subject to the New Annual Option shall be reduced to that number of shares of Stock equal to the product of: (a) eight thousand (8,000), and (b) the quotient obtained by dividing (A) the number of days between the first day in July of that year and the date that such individual began serving as an Outside Director, by (B) three hundred sixty-five (365). The number of shares of Stock subject to each such New Annual Option shall be rounded down to the next whole share.
(c)Right to Decline Option. Notwithstanding the foregoing, any person may elect not to receive an Option by delivering written notice of such election to the Board no later than the day prior to the date such Option would otherwise be granted. A person so declining an Option shall receive no payment or other consideration in lieu of such declined Option. A person who has declined an Option may revoke such election by delivering written notice of such revocation to the Board no later than the day prior to the date such Option would be granted pursuant to Section 6.1(a) or (b), as the case may be.
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6.2Exercise Price. The exercise price per share of Stock subject to an Option shall be the Fair Market Value of a share of Stock on the date the Option is granted.
6.3Exercise Period. Each Option shall terminate and cease to be exercisable on the date ten (10) years after the date of grant of the Option unless earlier terminated pursuant to the terms of the Plan or the Option Agreement.
6.4Right to Exercise Options.
(a)Initial Options.
(i)Previously Scheduled Initial Options. Prior to June 13, 2008, except as otherwise provided in the Plan or in the Option Agreement, a Previously Scheduled Initial Option shall (i) first become exercisable on the date which is one (1) year after the date on which the Previously Scheduled Initial Option was granted (the “Previously Scheduled Initial Option Vesting Date”); and (ii) be exercisable on and after such Previously Scheduled Initial Option Vesting Date and prior to the termination thereof in an amount equal to the number of shares of Stock initially subject to such Previously Scheduled Initial Option multiplied by the Vested Ratio as set forth below, less the number of shares previously acquired upon exercise thereof. The Vested Ratio described in the preceding sentence shall be determined as follows:
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(ii)New Initial Options. Beginning on June 13, 2008, except as otherwise provided in the Plan or in the Option Agreement, a New Initial Option shall (i) first become exercisable on the date which is six (6) months after the date on which the New Initial Option was granted (the “New Initial Option Vesting Date”); and (ii) be exercisable on and after such New Initial Option Vesting Date and prior to the termination thereof in an amount equal to the number of shares of Stock initially subject to such New Initial Option multiplied by the Vested Ratio as set forth below, less the number of shares previously acquired upon exercise thereof. The Vested Ratio described in the preceding sentence shall be determined as follows:
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(b)Annual Options.
(i)Previously Scheduled Annual Options. Except as otherwise provided in the Plan or in the Option Agreement, a Previously Scheduled Annual Option shall (i) first become exercisable on the date which is twenty-five (25) months after the date on which the Previously Scheduled Annual Option was granted (the “Previously Scheduled Annual Option Vesting Date”); and (ii) be exercisable on and after the Previously Scheduled Annual Option Vesting Date and prior to the termination thereof in an amount equal to the number of shares of Stock initially subject to the Previously Scheduled Annual Option multiplied by the Vested Ratio as set forth below, less the number of shares previously acquired upon exercise thereof. The Vested Ratio described in the preceding sentence shall be determined as follows:
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(ii)Transitional Annual Options. Except as otherwise provided in the Plan or in the Option Agreement, a Transitional Annual Option shall become fully vested and exercisable on the date which is six (6) months after the date on which the Transitional Annual Option was granted.
(iii)New Annual Options. Except as otherwise provided in the Plan or in the Option Agreement, a New Annual Option shall become fully vested and exercisable on the date which is six (6) months after the date on which the New Annual Option was granted.
6.5Payment of Exercise Price.
(a)Forms of Consideration Authorized. Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the Company of shares of Stock owned by the Optionee having a Fair Market Value not less than the exercise price, (iii) by the assignment of the proceeds of a sale or loan with respect to some or all of the shares being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System) (a “Cashless Exercise”), or (iv) by any combination thereof.
(b)Tender of Stock. Notwithstanding the foregoing, an Option may not be exercised by tender to the Company of shares of Stock to the extent such tender of Stock would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock. Unless otherwise provided by the Board, an Option may not be exercised by tender to the Company of shares of Stock unless such shares either have been owned by the Optionee for more than six (6) months or were not acquired, directly or indirectly, from the Company.
(c)Cashless Exercise. The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of Options by means of a Cashless Exercise.
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6.6Tax Withholding. The Company shall have the right, but not the obligation, to deduct from the shares of Stock issuable upon the exercise of an Option, or to accept from the Optionee the tender of, a number of whole shares of Stock having a Fair Market Value equal to all or any part of the federal, state, local and foreign taxes, if any, required by law to be withheld by the Participating Company Group with respect to such Option or the shares acquired upon exercise thereof; provided, however, that no shares of Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classification of an Option as a liability for financial accounting purposes. Alternatively or in addition, in its sole discretion, the Company shall have the right to require the Optionee to make adequate provision for any such tax withholding obligations of the Participating Company Group arising in connection with the Option or the shares acquired upon exercise thereof. The Company shall have no obligation to deliver shares of Stock until the Participating Company Group’s tax withholding obligations have been satisfied.
7. STANDARD FORMOF OPTION AGREEMENT.
7.1General. Each Option shall comply with and be subject to the terms and conditions set forth in the appropriate form of Nonstatutory Stock Option Agreement adopted by the Board concurrently with its adoption of the Plan and as amended from time to time.
7.2Authority to Vary Terms. The Board shall have the authority from time to time to vary the terms of any of the standard forms of Option Agreement described in this Section 7 either in connection with the grant or amendment of an individual Option or in connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of any such new, revised or amended standard form or forms of Option Agreement are not inconsistent with the terms of the Plan.
8. CHANGEIN CONTROL.
8.1Definitions.
(a) An“Ownership Change Event” shall be deemed to have occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company is a party;
(iii) the sale, exchange, or change in all or substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A“Change in Control” shall mean an Ownership Change Event or a series of related Ownership Change Events (collectively, the“Transaction”) wherein the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting stock of the Company or the corporation or corporations to which the assets of the Company were transferred (the“Transferee Corporation(s)”), as the case may be. For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting stock of one or more corporations which, as a result of the Transaction, own the Company or the Transferee Corporation(s), as the case may be, either directly or through one or more subsidiary corporations. The Board shall have the right to determine whether multiple sales or exchanges of the voting stock of the Company or multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive.
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8.2Effect of Change in Control on Options. In the event of a Change in Control, any unexercisable or unvested portion of the outstanding Options shall be immediately exercisable and vested in full as of the date ten (10) days prior to the date of the Change in Control. The exercise or vesting of any Option that was permissible solely by reason of this Section 8.2 shall be conditioned upon the consummation of the Change in Control. In addition, the surviving, continuing, successor, or purchasing corporation or parent corporation thereof, as the case may be (the “Acquiring Corporation”), may either assume the Company’s rights and obligations under outstanding Options or substitute for outstanding Options substantially equivalent options for the Acquiring Corporation’s stock. For purposes of this Section 8.2, an Option shall be deemed assumed if, following the Change in Control, the Option confers the right to purchase in accordance with its terms and conditions, for each share of Stock subject to the Option immediately prior to the Change in Control, the consideration (whether stock, cash or other securities or property) to which a holder of a share of Stock on the effective date of the Change in Control was entitled. Any Options which are neither assumed or substituted for by the Acquiring Corporation in connection with the Change in Control nor exercised as of the date of the Change in Control shall terminate and cease to be outstanding effective as of the date of the Change in Control. Notwithstanding the foregoing, shares acquired upon exercise of an Option prior to the Change in Control and any consideration received pursuant to the Change in Control with respect to such shares shall continue to be subject to all applicable provisions of the Option Agreement evidencing such Option except as otherwise provided in such Option Agreement. Furthermore, notwithstanding the foregoing, if the corporation the stock of which is subject to the outstanding Options immediately prior to an Ownership Change Event described in Section 8.1(a)(i) constituting a Change in Control is the surviving or continuing corporation and immediately after such Ownership Change Event less than fifty percent (50%) of the total combined voting power of its voting stock is held by another corporation or by other corporations that are members of an affiliated group within the meaning of Section 1504(a) of the Code without regard to the provisions of Section 1504(b) of the Code, the outstanding Options shall not terminate.
9. NONTRANSFERABILITYOF OPTIONS. During the lifetime of the Optionee, an Option shall be exercisable only by the Optionee or the Optionee’s guardian or legal representative. No Option shall be assignable or transferable by the Optionee, except by will or by the laws of descent and distribution.
10. INDEMNIFICATION. In addition to such other rights of indemnification as they may have as members of the Board or officers or employees of the Participating Company Group, members of the Board and any officers or employees of the Participating Company Group to whom authority to act for the Board is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same.
11. TERMINATIONOR AMENDMENTOF PLAN. The Board may terminate or amend the Plan at any time. However, subject to changes in applicable law, regulations or rules that would permit otherwise, without the approval of the Company’s stockholders, there shall be (a) no increase in the total number of shares of Stock that may be issued under the Plan (except by operation of the provisions of Section 4.2), and (b) no other amendment of the Plan that would require approval of the Company’s stockholders under any applicable law, regulation or rule. In any event, no termination or amendment of the Plan may adversely affect any then outstanding Option, or any unexercised portion thereof, without the consent of the Optionee, unless such termination or amendment is necessary to comply with any applicable law, regulation or rule.
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PLAN HISTORY
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APPENDIX B
POWER INTEGRATIONS, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED THROUGH JUNE 6, 2000)
(AS APPROVED BYTHE BOARDON APRIL 22, 2008)
(SUBJECTTO APPROVAL BYTHE STOCKHOLDERSON JUNE 13, 2008)
1. ESTABLISHMENT, PURPOSEAND TERMOF PLAN.
1.1 Establishment. The Power Integrations, Inc. 1997 Employee Stock Purchase Plan (the “Plan”) is hereby established effective as of the effective date of the initial registration by the Company of its Stock under Section 12 of the Securities Exchange Act of 1934, as amended (the “Effective Date”).
1.2 Purpose. The purpose of the Plan is to advance the interests of Company and its stockholders by providing an incentive to attract, retain and reward Eligible Employees of the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group. The Plan provides such Eligible Employees with an opportunity to acquire a proprietary interest in the Company through the purchase of Stock. The Company intends that the Plan qualify as an “employee stock purchase plan” under Section 423 of the Code (including any amendments or replacements of such section), and the Plan shall be so construed.
1.3 Term of Plan. The Plan shall continue in effect until the earlier of its termination by the Board or the date on which all of the shares of Stock available for issuance under the Plan have been issued.
2. DEFINITIONSAND CONSTRUCTION.
2.1 Definitions. Any term not expressly defined in the Plan but defined for purposes of Section 423 of the Code shall have the same definition herein. Whenever used herein, the following terms shall have their respective meanings set forth below:
(a)“Board” means the Board of Directors of the Company. If one or more Committees have been appointed by the Board to administer the Plan, “Board” also means such Committee(s).
(b)“Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated thereunder.
(c)“Committee” means a committee of the Board duly appointed to administer the Plan and having such powers as shall be specified by the Board. Unless the powers of the Committee have been specifically limited, the Committee shall have all of the powers of the Board granted herein, including, without limitation, the power to amend or terminate the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law.
(d)“Company” means Power Integrations, Inc., a Delaware corporation, or any successor corporation thereto.
(e)“Compensation” means, with respect to any Offering Period, base wages or salary, commissions, overtime, bonuses, annual awards, other incentive payments, shift premiums, and all other compensation paid in cash during such Offering Period before deduction for any contributions to any plan maintained by a Participating Company and described in Section 401(k) or Section 125 of the Code. Compensation shall not include reimbursements of expenses, allowances, long-term disability, workers’ compensation or any amount deemed received without the actual transfer of cash or any amounts directly or indirectly paid pursuant to the Plan or any other stock purchase or stock option plan, or any other compensation not included above.
(f)“Eligible Employee” means an Employee who meets the requirements set forth in Section 5 for eligibility to participate in the Plan.
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(g)“Employee” means a person treated as an employee of a Participating Company for purposes of Section 423 of the Code. A Participant shall be deemed to have ceased to be an Employee either upon an actual termination of employment or upon the corporation employing the Participant ceasing to be a Participating Company. For purposes of the Plan, an individual shall not be deemed to have ceased to be an Employee while such individual is on any military leave, sick leave, or other bona fide leave of absence approved by the Company of three (3) months or less. In the event an individual’s leave of absence exceeds three (3) months, the individual shall be deemed to have ceased to be an Employee on the first day following the three (3)-month anniversary of such leave unless the individual’s right to reemployment with the Participating Company Group is guaranteed either by statute or by contract. The Company shall determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such individual’s employment or termination of employment, as the case may be. For purposes of an individual’s participation in or other rights, if any, under the Plan as of the time of the Company’s determination, all such determinations by the Company shall be final, binding and conclusive, notwithstanding that the Company or any governmental agency subsequently makes a contrary determination.
(h)“Fair Market Value” means, as of any date, if there is then a public market for the Stock, the closing price of a share of Stock (or the mean of the closing bid and asked prices if the Stock is so quoted instead) as quoted on the Nasdaq Global Select Market, Nasdaq Global Market, the Nasdaq Capital Market or such other national or regional securities exchange or market system constituting the primary market for the Stock, as reported inThe Wall Street Journal or such other source as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or market system, the date on which the Fair Market Value shall be established shall be the last day on which the Stock was so traded prior to the relevant date, or such other appropriate day as shall be determined by the Board, in its sole discretion. If there is then no public market for the Stock, the Fair Market Value on any relevant date shall be as determined by the Board. Notwithstanding the foregoing, the Fair Market Value per share of Stock on the Effective Date shall be deemed to be the public offering price set forth in the final prospectus filed with the Securities and Exchange Commission in connection with the initial public offering of the Stock.
(i)“Offering” means an offering of Stock as provided in Section 6.
(j)“Offering Date” means, for any Offering, the first day of the Offering Period with respect to such Offering.
(k)“Offering Period” means a period established in accordance with Section 6.1.
(l)“Parent Corporation” means any present or future “parent corporation” of the Company, as defined in Section 424(e) of the Code.
(m)“Participant” means an Eligible Employee who has become a participant in an Offering Period in accordance with Section 7 and remains a participant in accordance with the Plan.
(n)“Participating Company” means the Company or any Parent Corporation or Subsidiary Corporation designated by the Board as a corporation the Employees of which may, if Eligible Employees, participate in the Plan. The Board shall have the sole and absolute discretion to determine from time to time which Parent Corporations or Subsidiary Corporations shall be Participating Companies.
(o)“Participating Company Group” means, at any point in time, the Company and all other corporations collectively which are then Participating Companies.
(p)“Purchase Date” means, for any Purchase Period, the last day of such period.
(q)“Purchase Period” means a period established in accordance with Section 6.2.
(r)“Purchase Price” means the price at which a share of Stock may be purchased under the Plan, as determined in accordance with Section 9.
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(s)“Purchase Right” means an option granted to a Participant pursuant to the Plan to purchase such shares of Stock as provided in Section 8, which the Participant may or may not exercise during the Offering Period in which such option is outstanding. Such option arises from the right of a Participant to withdraw any accumulated payroll deductions of the Participant not previously applied to the purchase of Stock under the Plan and to terminate participation in the Plan at any time during an Offering Period.
(t)“Stock” means the common stock of the Company, as adjusted from time to time in accordance with Section 4.2.
(u)“Subscription Agreement” means a written agreement in such form as specified by the Company, stating an Employee’s election to participate in the Plan and authorizing payroll deductions under the Plan from the Employee’s Compensation.
(v)“Subscription Date” means the last business day prior to the Offering Date of an Offering Period or such earlier date as the Company shall establish.
(w)“Subsidiary Corporation” means any present or future “subsidiary corporation” of the Company, as defined in Section 424(f) of the Code.
2.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
3. ADMINISTRATION.
3.1 Administration by the Board. The Plan shall be administered by the Board. All questions of interpretation of the Plan, of any form of agreement or other document employed by the Company in the administration of the Plan, or of any Purchase Right shall be determined by the Board and shall be final and binding upon all persons having an interest in the Plan or the Purchase Right. Subject to the provisions of the Plan, the Board shall determine all of the relevant terms and conditions of Purchase Rights granted pursuant to the Plan; provided, however, that all Participants granted Purchase Rights pursuant to the Plan shall have the same rights and privileges within the meaning of Section 423(b)(5) of the Code. All expenses incurred in connection with the administration of the Plan shall be paid by the Company.
3.2 Authority of Officers. Any officer of the Company shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election that is the responsibility of or that is allocated to the Company herein, provided that the officer has apparent authority with respect to such matter, right, obligation, determination or election.
3.3 Policies and Procedures Established by the Company. The Company may, from time to time, consistent with the Plan and the requirements of Section 423 of the Code, establish, change or terminate such rules, guidelines, policies, procedures, limitations, or adjustments as deemed advisable by the Company, in its sole discretion, for the proper administration of the Plan, including, without limitation, (a) a minimum payroll deduction amount required for participation in an Offering, (b) a limitation on the frequency or number of changes permitted in the rate of payroll deduction during an Offering, (c) an exchange ratio applicable to amounts withheld in a currency other than United States dollars, (d) a payroll deduction greater than or less than the amount designated by a Participant in order to adjust for the Company’s delay or mistake in processing a Subscription Agreement or in otherwise effecting a Participant’s election under the Plan or as advisable to comply with the requirements of Section 423 of the Code, and (e) determination of the date and manner by which the Fair Market Value of a share of Stock is determined for purposes of administration of the Plan.
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4. SHARES SUBJECTTO PLAN.
4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be three million (3,000,000) and shall consist of authorized but unissued or reacquired shares of Stock, or any combination thereof. If an outstanding Purchase Right for any reason expires or is terminated or canceled, the shares of Stock allocable to the unexercised portion of such Purchase Right shall again be available for issuance under the Plan.
4.2 Adjustments for Changes in Capital Structure. In the event of any stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification or similar change in the capital structure of the Company, or in the event of any merger (including a merger effected for the purpose of changing the Company’s domicile), sale of assets or other reorganization in which the Company is a party, appropriate and proportionate adjustments shall be made in the number and class of shares subject to the Plan and each Purchase Right and in the Purchase Price. If a majority of the shares which are of the same class as the shares that are subject to outstanding Purchase Rights are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares of another corporation (the “New Shares”), the Board may unilaterally amend the outstanding Purchase Rights to provide that such Purchase Rights are exercisable for New Shares. In the event of any such amendment, the number of shares subject to, and the Purchase Price of, the outstanding Purchase Rights shall be adjusted in a fair and equitable manner, as determined by the Board, in its sole discretion. Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 4.2 shall be rounded down to the nearest whole number, and in no event may the Purchase Price be decreased to an amount less than the par value, if any, of the stock subject to the Purchase Right. The adjustments determined by the Board pursuant to this Section 4.2 shall be final, binding and conclusive.
5. ELIGIBILITY.
5.1 Employees Eligible to Participate. Each Employee of a Participating Company is eligible to participate in the Plan and shall be deemed an Eligible Employee, except the following:
(a)Any Employee who is customarily employed by the Participating Company Group for less than twenty (20) hours per week; or
(b)Any Employee who is customarily employed by the Participating Company Group for not more than five (5) months in any calendar year.
5.2 Exclusion of Certain Stockholders. Notwithstanding any provision of the Plan to the contrary, no Employee shall be granted a Purchase Right under the Plan if, immediately after such grant, such Employee would own or hold options to purchase stock of the Company or of any Parent Corporation or Subsidiary Corporation possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of such corporation, as determined in accordance with Section 423(b)(3) of the Code. For purposes of this Section 5.2, the attribution rules of Section 424(d) of the Code shall apply in determining the stock ownership of such Employee.
6. OFFERINGS.
6.1 Offering Periods. Except as otherwise set forth below, the Plan shall be implemented by sequential Offerings of approximately twenty-four (24) months duration (an “Offering Period”); provided, however, that the first Offering Period shall commence on the Effective Date and end on January 31, 2000 (the “Initial Offering Period”). Subsequent Offerings shall commence on the first day of February and August of each year and end on the last day of the second January and July, respectively, occurring thereafter. Notwithstanding the foregoing, the Board may establish a different duration for one or more future Offering Periods or different commencing or ending dates for such Offering Periods; provided, however, that no Offering Period may have a duration exceeding twenty-seven (27) months. If the first or last day of an Offering Period is not a day on which the national securities exchanges or Nasdaq Stock Market are open for trading, the Company shall specify the trading day that will be deemed the first or last day, as the case may be, of the Offering Period.
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6.2 Purchase Periods. Each Offering Period shall consist of four (4) consecutive Purchase Periods of approximately six (6) months duration, or such other number or duration as the Board shall determine. The Purchase Period commencing on the Offering Date of the Initial Offering Period shall end on July 31, 1998. A Purchase Period commencing on or about February 1 shall end on or about the next July 31. A Purchase Period commencing on or about August 1 shall end on or about the next January 31. Notwithstanding the foregoing, the Board may establish a different duration for one or more future Purchase Periods or different commencing or ending dates for such Purchase Periods. If the first or last day of a Purchase Period is not a day on which the national securities exchanges or Nasdaq Stock Market are open for trading, the Company shall specify the trading day that will be deemed the first or last day, as the case may be, of the Purchase Period.
7. PARTICIPATIONINTHE PLAN.
7.1 Initial Participation. An Eligible Employee may become a Participant in an Offering Period by delivering a properly completed Subscription Agreement to the office designated by the Company not later than the close of business for such office on the Subscription Date established by the Company for such Offering Period. An Eligible Employee who does not deliver a properly completed Subscription Agreement to the Company’s designated office on or before the Subscription Date for an Offering Period shall not participate in the Plan for that Offering Period or for any subsequent Offering Period unless such Eligible Employee subsequently delivers a properly completed Subscription Agreement to the appropriate office of the Company on or before the Subscription Date for such subsequent Offering Period. An Employee who becomes an Eligible Employee after the Offering Date of an Offering Period shall not be eligible to participate in such Offering Period but may participate in any subsequent Offering Period provided such Employee is still an Eligible Employee as of the Offering Date of such subsequent Offering Period.
7.2 Continued Participation. A Participant shall automatically participate in the next Offering Period commencing immediately after the final Purchase Date of each Offering Period in which the Participant participates provided that such Participant remains an Eligible Employee on the Offering Date of the new Offering Period and has not either (a) withdrawn from the Plan pursuant to Section 12.1 or (b) terminated employment as provided in Section 13. A Participant who may automatically participate in a subsequent Offering Period, as provided in this Section, is not required to deliver any additional Subscription Agreement for the subsequent Offering Period in order to continue participation in the Plan. However, a Participant may deliver a new Subscription Agreement for a subsequent Offering Period in accordance with the procedures set forth in Section 7.1 if the Participant desires to change any of the elections contained in the Participant’s then effective Subscription Agreement. Eligible Employees may not participate simultaneously in more than one Offering.
8. RIGHTTO PURCHASE SHARES.
8.1 Grant of Purchase Right. Except as set forth below, on the Offering Date of each Offering Period, each Participant in such Offering Period shall be granted automatically a Purchase Right consisting of an option to purchase the lesser of (a) that number of whole shares of Stock determined by dividing Fifty Thousand Dollars ($50,000) by the Fair Market Value of a share of Stock on such Offering Date or (b) five thousand (5,000) shares of Stock. No Purchase Right shall be granted on an Offering Date to any person who is not, on such Offering Date, an Eligible Employee.
8.2 Pro Rata Adjustment of Purchase Right. Notwithstanding the provisions of Section 8.1, if the Board establishes an Offering Period of any duration other than twenty-four months, then (a) the dollar amount in Section 8.1 shall be determined by multiplying $2,083.33 by the number of months (rounded to the nearest whole month) in the Offering Period and rounding to the nearest whole dollar, and (b) the share amount in Section 8.1 shall be determined by multiplying 208.33 shares by the number of months (rounded to the nearest whole month) in the Offering Period and rounding to the nearest whole share.
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8.3 Calendar Year Purchase Limitation. Notwithstanding any provision of the Plan to the contrary, no Participant shall be granted a Purchase Right which permits his or her right to purchase shares of Stock under the Plan to accrue at a rate which, when aggregated with such Participant’s rights to purchase shares under all other employee stock purchase plans of a Participating Company intended to meet the requirements of Section 423 of the Code, exceeds Twenty-Five Thousand Dollars ($25,000) in Fair Market Value (or such other limit, if any, as may be imposed by the Code) for each calendar year in which such Purchase Right is outstanding at any time. For purposes of the preceding sentence, the Fair Market Value of shares purchased during a given Offering Period shall be determined as of the Offering Date for such Offering Period. The limitation described in this Section 8.3 shall be applied in conformance with applicable regulations under Section 423(b)(8) of the Code.
9. PURCHASE PRICE.
The Purchase Price at which each share of Stock may be acquired in an Offering Period upon the exercise of all or any portion of a Purchase Right shall be established by the Board; provided, however, that the Purchase Price shall not be less than eighty-five percent (85%) of the lesser of (a) the Fair Market Value of a share of Stock on the Offering Date of the Offering Period or (b) the Fair Market Value of a share of Stock on the Purchase Date. Unless otherwise provided by the Board prior to the commencement of an Offering Period, the Purchase Price for that Offering Period shall be eighty-five percent (85%) of the lesser of (a) the Fair Market Value of a share of Stock on the Offering Date of the Offering Period, or (b) the Fair Market Value of a share of Stock on the Purchase Date.
10. ACCUMULATIONOF PURCHASE PRICETHROUGH PAYROLL DEDUCTION.
Shares of Stock acquired pursuant to the exercise of all or any portion of a Purchase Right may be paid for only by means of payroll deductions from the Participant’s Compensation accumulated during the Offering Period for which such Purchase Right was granted, subject to the following:
10.1 Amount of Payroll Deductions. Except as otherwise provided herein, the amount to be deducted under the Plan from a Participant’s Compensation on each payday during an Offering Period shall be determined by the Participant’s Subscription Agreement. The Subscription Agreement shall set forth the percentage of the Participant’s Compensation to be deducted on each payday during an Offering Period in whole percentages of not less than one percent (1%) (except as a result of an election pursuant to Section 10.3 to stop payroll deductions made effective following the first payday during an Offering) or more than fifteen percent (15%). Notwithstanding the foregoing, the Board may change the limits on payroll deductions effective as of any future Offering Date.
10.2 Commencement of Payroll Deductions. Payroll deductions shall commence on the first payday following the Offering Date and shall continue to the end of the Offering Period unless sooner altered or terminated as provided herein.
10.3 Election to Change or Stop Payroll Deductions. During an Offering Period, a Participant may elect to increase or decrease the rate of or to stop deductions from his or her Compensation by delivering to the Company’s designated office an amended Subscription Agreement authorizing such change on or before the “Change Notice Date.” The “Change Notice Date” shall be a date prior to the beginning of the first pay period for which such election is to be effective as established by the Company from time to time and announced to the Participants. A Participant who elects to decrease the rate of his or her payroll deductions to zero percent (0%) shall nevertheless remain a Participant in the current Offering Period unless such Participant withdraws from the Plan as provided in Section 12.1.
10.4 Administrative Suspension of Payroll Deductions. The Company may, in its sole discretion, suspend a Participant’s payroll deductions under the Plan as the Company deems advisable to avoid accumulating payroll deductions in excess of the amount that could reasonably be anticipated to purchase the maximum number of
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shares of Stock permitted during a calendar year under the limit set forth in Section 8.3. Payroll deductions shall be resumed at the rate specified in the Participant’s then effective Subscription Agreement at the beginning of the next Purchase Period the Purchase Date of which falls in the following calendar year.
10.5 Participant Accounts. Individual bookkeeping accounts shall be maintained for each Participant. All payroll deductions from a Participant’s Compensation shall be credited to such Participant’s Plan account and shall be deposited with the general funds of the Company. All payroll deductions received or held by the Company may be used by the Company for any corporate purpose.
10.6 No Interest Paid. Interest shall not be paid on sums deducted from a Participant’s Compensation pursuant to the Plan.
10.7 Voluntary Withdrawal from Plan Account. A Participant may withdraw all or any portion of the payroll deductions credited to his or her Plan account and not previously applied toward the purchase of Stock by delivering to the Company’s designated office a written notice on a form provided by the Company for such purpose. A Participant who withdraws the entire remaining balance credited to his or her Plan account shall be deemed to have withdrawn from the Plan in accordance with Section 12.1. Amounts withdrawn shall be returned to the Participant as soon as practicable after the withdrawal and may not be applied to the purchase of shares in any Offering under the Plan. The Company may from time to time establish or change limitations on the frequency of withdrawals permitted under this Section, establish a minimum dollar amount that must be retained in the Participant’s Plan account, or terminate the withdrawal right provided by this Section.
11. PURCHASEOF SHARES.
11.1 Exercise of Purchase Right. On each Purchase Date of an Offering Period, each Participant who has not withdrawn from the Plan and whose participation in the Offering has not terminated before such Purchase Date shall automatically acquire pursuant to the exercise of the Participant’s Purchase Right the number of whole shares of Stock determined by dividing (a) the total amount of the Participant’s payroll deductions accumulated in the Participant’s Plan account during the Offering Period and not previously applied toward the purchase of Stock by (b) the Purchase Price. However, in no event shall the number of shares purchased by the Participant during an Offering Period exceed the number of shares subject to the Participant’s Purchase Right. No shares of Stock shall be purchased on a Purchase Date on behalf of a Participant whose participation in the Offering or the Plan has terminated before such Purchase Date.
11.2 Pro Rata Allocation of Shares. In the event that the number of shares of Stock which might be purchased by all Participants in the Plan on a Purchase Date exceeds the number of shares of Stock available in the Plan as provided in Section 4.1, the Company shall make a pro rata allocation of the remaining shares in as uniform a manner as shall be practicable and as the Company shall determine to be equitable. Any fractional share resulting from such pro rata allocation to any Participant shall be disregarded.
11.3 Delivery of Certificates. As soon as practicable after each Purchase Date, the Company shall arrange the delivery to each Participant, as appropriate, of a certificate representing the shares acquired by the Participant on such Purchase Date; provided that the Company may deliver such shares to a broker that holds such shares in street name for the benefit of the Participant. Shares to be delivered to a Participant under the Plan shall be registered in the name of the Participant, or, if requested by the Participant, in the name of the Participant and his or her spouse, or, if applicable, in the names of the heirs of the Participant.
11.4 Return of Cash Balance. Any cash balance remaining in a Participant’s Plan account following any Purchase Date shall be refunded to the Participant as soon as practicable after such Purchase Date. However, if the cash to be returned to a Participant pursuant to the preceding sentence is an amount less than the amount that would have been necessary to purchase an additional whole share of Stock on such Purchase Date, the Company may retain such amount in the Participant’s Plan account to be applied toward the purchase of shares of Stock in the subsequent Purchase Period or Offering Period, as the case may be.
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11.5 Tax Withholding. At the time a Participant’s Purchase Right is exercised, in whole or in part, or at the time a Participant disposes of some or all of the shares of Stock he or she acquires under the Plan, the Participant shall make adequate provision for the foreign, federal, state and local tax withholding obligations of the Participating Company Group, if any, which arise upon exercise of the Purchase Right or upon such disposition of shares, respectively. The Participating Company Group may, but shall not be obligated to, withhold from the Participant’s compensation the amount necessary to meet such withholding obligations.
11.6 Expiration of Purchase Right. Any portion of a Participant’s Purchase Right remaining unexercised after the end of the Offering Period to which the Purchase Right relates shall expire immediately upon the end of the Offering Period.
11.7 Reports to Participants. Each Participant who has exercised all or part of his or her Purchase Right shall receive, as soon as practicable after the Purchase Date, a report of such Participant’s Plan account setting forth the total payroll deductions accumulated prior to such exercise, the number of shares of Stock purchased, the Purchase Price for such shares, the date of purchase and the cash balance, if any, remaining immediately after such purchase that is to be refunded or retained in the Participant’s Plan account pursuant to Section 11.4. The report required by this Section may be delivered in such form and by such means, including by electronic transmission, as the Company may determine.
12. WITHDRAWALFROM OFFERINGOR PLAN.
12.1 Voluntary Withdrawal from the Plan. A Participant may withdraw from the Plan by signing and delivering to the Company’s designated office a written notice of withdrawal on a form provided by the Company for such purpose. Such withdrawal may be elected at any time prior to the end of an Offering Period; provided, however, that if a Participant withdraws from the Plan after the Purchase Date of a Purchase Period, the withdrawal shall not affect shares of Stock acquired by the Participant on such Purchase Date. A Participant who voluntarily withdraws from the Plan is prohibited from resuming participation in the Plan in the same Offering from which he or she withdrew, but may participate in any subsequent Offering by again satisfying the requirements of Sections 5 and 7.1. The Company may impose, from time to time, a requirement that the notice of withdrawal from the Plan be on file with the Company’s designated office for a reasonable period prior to the effectiveness of the Participant’s withdrawal.
12.2 Automatic Withdrawal from an Offering. If the Fair Market Value of a share of Stock on a Purchase Date of an Offering Period (other than the final Purchase Date of such offering) is less than the Fair Market Value of a share of Stock on the Offering Date for such Offering Period, then every Participant shall automatically be (a) withdrawn from such Offering Period after the acquisition of shares of Stock on the Purchase Date and (b) enrolled in the new Offering Period effective on its Offering Date. A Participant may elect not to be automatically withdrawn from an Offering Period pursuant to this Section 12.2 by delivering to the Company’s designated office not later than the close of business on Offering Date new Offering Period a written notice indicating such election.
12.3 Return of Payroll Deductions. Upon a Participant’s voluntary withdrawal from the Plan pursuant to Sections 12.1 or automatic withdrawal from an Offering pursuant to Section 12.2, the Participant’s accumulated payroll deductions which have not been applied toward the purchase of shares of Stock (except, in the case of an automatic withdrawal pursuant to Section 12.2, for an amount necessary to purchase an additional whole share as provided in Section 11.4) shall be refunded to the Participant as soon as practicable after the withdrawal, without the payment of any interest, and the Participant’s interest in the Plan or the Offering, as applicable, shall terminate. Such accumulated payroll deductions to be refunded in accordance with this Section may not be applied to any other Offering under the Plan.
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13. TERMINATIONOF EMPLOYMENTOR ELIGIBILITY.
Upon a Participant’s ceasing, prior to a Purchase Date, to be an Employee of the Participating Company Group for any reason, including retirement, disability or death, or the failure of a Participant to remain an Eligible Employee, the Participant’s participation in the Plan shall terminate immediately. In such event, the payroll deductions credited to the Participant’s Plan account since the last Purchase Date shall, as soon as practicable, be returned to the Participant or, in the case of the Participant’s death, to the Participant’s legal representative, and all of the Participant’s rights under the Plan shall terminate. Interest shall not be paid on sums returned pursuant to this Section 13. A Participant whose participation has been so terminated may again become eligible to participate in the Plan by again satisfying the requirements of Sections 5 and 7.1.
14. CHANGEIN CONTROL.
14.1 Definitions.
(a)An “Ownership Change Event” shall be deemed to have occurred if any of the following occurs with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company; or (iv) a liquidation or dissolution of the Company.
(b)A “Change in Control” shall mean an Ownership Change Event or a series of related Ownership Change Events (collectively, the “Transaction”) wherein the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting stock of the Company or the corporation or corporations to which the assets of the Company were transferred (the “Transferee Corporation(s)”), as the case may be. For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting stock of one or more corporations which, as a result of the Transaction, own the Company or the Transferee Corporation(s), as the case may be, either directly or through one or more subsidiary corporations. The Board shall have the right to determine whether multiple sales or exchanges of the voting stock of the Company or multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive.
14.2 Effect of Change in Control on Purchase Rights. In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or parent corporation thereof, as the case may be (the “Acquiring Corporation”), may assume the Company’s rights and obligations under the Plan. If the Acquiring Corporation elects not to assume the Company’s rights and obligations under outstanding Purchase Rights, the Purchase Date of the then current Purchase Period shall be accelerated to a date before the date of the Change in Control specified by the Board, but the number of shares of Stock subject to outstanding Purchase Rights shall not be adjusted. All Purchase Rights which are neither assumed by the Acquiring Corporation in connection with the Change in Control nor exercised as of the date of the Change in Control shall terminate and cease to be outstanding effective as of the date of the Change in Control.
15. NONTRANSFERABILITYOF PURCHASE RIGHTS.
A Purchase Right may not be transferred in any manner otherwise than by will or the laws of descent and distribution and shall be exercisable during the lifetime of the Participant only by the Participant.
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16. COMPLIANCEWITH SECURITIES LAW.
The issuance of shares under the Plan shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities. A Purchase Right may not be exercised if the issuance of shares upon such exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any securities exchange or market system upon which the Stock may then be listed. In addition, no Purchase Right may be exercised unless (a) a registration statement under the Securities Act of 1933, as amended, shall at the time of exercise of the Purchase Right be in effect with respect to the shares issuable upon exercise of the Purchase Right, or (b) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Purchase Right may be issued in accordance with the terms of an applicable exemption from the registration requirements of said Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares under the Plan shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of a Purchase Right, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation, and to make any representation or warranty with respect thereto as may be requested by the Company.
17. RIGHTSASA STOCKHOLDERAND EMPLOYEE.
A Participant shall have no rights as a stockholder by virtue of the Participant’s participation in the Plan until the date of the issuance of a certificate for the shares purchased pursuant to the exercise of the Participant’s Purchase Right (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such certificate is issued, except as provided in Section 4.2. Nothing herein shall confer upon a Participant any right to continue in the employ of the Participating Company Group or interfere in any way with any right of the Participating Company Group to terminate the Participant’s employment at any time.
18. LEGENDS.
The Company may at any time place legends or other identifying symbols referencing any applicable federal, state or foreign securities law restrictions or any provision convenient in the administration of the Plan on some or all of the certificates representing shares of Stock issued under the Plan. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to a Purchase Right in the possession of the Participant in order to carry out the provisions of this Section. Unless otherwise specified by the Company, legends placed on such certificates may include but shall not be limited to the following:
“THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER AN EMPLOYEE STOCK PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY SHALL NOTIFY THE CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE REGISTERED HOLDER HEREOF. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE PLAN IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE NAME OF ANY NOMINEE).”
19. NOTIFICATIONOF SALEOF SHARES.
The Company may require the Participant to give the Company prompt notice of any disposition of shares acquired by exercise of a Purchase Right within two years from the date of granting such Purchase Right or one year from the date of exercise of such Purchase Right. The Company may require that until such time as a
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Participant disposes of shares acquired upon exercise of a Purchase Right, the Participant shall hold all such shares in the Participant’s name (or, if elected by the Participant, in the name of the Participant and his or her spouse but not in the name of any nominee) until the lapse of the time periods with respect to such Purchase Right referred to in the preceding sentence. The Company may direct that the certificates evidencing shares acquired by exercise of a Purchase Right refer to such requirement to give prompt notice of disposition.
20. NOTICES.
All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
21. INDEMNIFICATION.
In addition to such other rights of indemnification as they may have as members of the Board or officers or employees of the Participating Company Group, members of the Board and any officers or employees of the Participating Company Group to whom authority to act for the Board or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same.
22. AMENDMENTOR TERMINATIONOFTHE PLAN.
The Board may at any time amend or terminate the Plan, except that (a) such termination shall not affect Purchase Rights previously granted under the Plan, except as permitted under the Plan, and (b) no amendment may adversely affect a Purchase Right previously granted under the Plan (except to the extent permitted by the Plan or as may be necessary to qualify the Plan as an employee stock purchase plan pursuant to Section 423 of the Code or to obtain qualification or registration of the shares of Stock under applicable federal, state or foreign securities laws). In addition, an amendment to the Plan must be approved by the stockholders of the Company within twelve (12) months of the adoption of such amendment if such amendment would authorize the sale of more shares than are authorized for issuance under the Plan or would change the definition of the corporations that may be designated by the Board as Participating Companies.
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POWER INTEGRATIONS, INC.
1997 EMPLOYEE STOCK PURCHASE
PLAN NOTICE OF WITHDRAWAL
I hereby elect to withdraw from the Offering under Power Integrations, Inc. 1997 Employee Stock Purchase Plan (the “Plan”) which began on , 19 and in which I am currently participating (the “Current Offering”).
Elect either A or B below:
I understand that by making this election I am terminating my interest in the Plan and that no further payroll deductions will be made (provided that I have given sufficient notice prior to the next payday) unless I elect in accordance with the Plan to become a participant in another Offering under the Plan by filing a new Subscription Agreement with the Company.
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C123456789 |
000004 |
000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext |
MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 |
Electronic Voting Instructions |
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Annual Meeting Proxy Card |
123456 C0123456789 12345 |
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. |
A Proposals — The Board of Directors recommends a vote FOR all the nominees listed and FOR Proposal 2. |
1. Election of Directors: Each to be elected to hold office until the 2010 Annual Meeting of Stockholders and until their successors are elected and qualified. |
For Withhold For Withhold For Withhold |
01 — Balu Balakrishnan 02 — Alan D. Bickell 03 — Nicholas E. Brathwaite |
04 — James Fiebiger 05 — William George 06 — Balakrishnan S. Iyer |
07 — E. Floyd Kvamme 08 — Steven J. Sharp |
For Against Abstain |
2. To ratify the selection by the Audit Committee of Deloitte & Touche LLP as the independent registered public accounting firm of Power Integrations, Inc. for the fiscal year ending December 31, 2009. |
B Non-Voting Items |
Change of Address — Please print new address below. |
C Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
Please sign exactly as your name appears hereon. If the stock is registered in the names of two or more persons, each should sign. Executors, administrators, trustees, guardians and attorneys-in-fact should add their titles. If signer is a corporation, please give full corporate name and have a duly authorized officer sign, stating title. If signer is a partnership, please sign in partnership name by authorized person. |
Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. |
C 1234567890 J N T |
MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND |
1 U P X 0 2 1 9 7 6 1 MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND |
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. |
5245 Hellyer Avenue, San Jose, CA 95138 on Monday, June 8, 2009 at 10:00 a.m. (local time), and at any and all postponements, continuations and adjournments thereof, with all powers that the undersigned would possess if personally present, upon and in respect of the following matters and in accordance with the following instructions, with discretionary authority as to any and all other matters that may properly come before the meeting. |
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH. |
Please vote, date and promptly return this proxy in the enclosed return envelope which is postage prepaid if mailed in the United States. |
If you vote by telephone or the Internet, please DO NOT mail back this proxy card. |
POWERR INTEGRATIONS
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MR A SAMPLE
DESIGNATION (IF ANY)
ADD 1
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Electronic Voting Instructions
You can vote by Internet or telephone!
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Time, on June 13, 2008.
Vote by Internet
Log on to the Internet and go to www.envisionreports.com/POWI
Follow the steps outlined on the secured website.
Vote by telephone
Call toll free 1-800-652-VOTE (8683) within the United States, Canada & Puerto Rico any time on a touch tone telephone. There is NO CHARGE to you for the call.
Follow the instructions provided by the recorded message.
Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. X
Annual Meeting Proxy Card 123456 C0123456789 12345
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
A Proposals — The Board of Directors recommends a vote FOR all the nominees listed and FOR Proposals 2 – 4.
1. Election of Directors: Each to be elected to hold office until the 2009 Annual Meeting of Stockholders and until their successors are elected and qualified.
01 - Balu Balakrishnan
04 - R. Scott Brown
07 - E. Floyd Kvamme
For Withhold
02 - Alan D. Bickell
05 - James Fiebiger
08 - Steven J. Sharp
For Withhold
03 - Nicholas E. Brathwaite
06 - Balakrishnan S. Iyer
For Withhold +
2. To approve an amendment and restatement of the Power Integrations 1997 Outside Directors Stock Option Plan, as described in the proxy statement.
4. To ratify the selection by the Audit Committee of Deloitte & Touche LLP as the independent registered public accounting firm of Power Integrations, Inc. for the fiscal year ending December 31, 2008.
For Against Abstain
3. To approve an amendment and restatement of the Power Integrations 1997 Employee Stock Option Purchase Plan, as described in the proxy statement.
For Against Abstain
B Non-Voting Items
Change of Address — Please print new address below.
C Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below
Please sign exactly as your name appears hereon. If the stock is registered in the names of two or more persons, each should sign. Executors, administrators, trustees, guardians and attorneys-in-fact should add their titles. If signer is a corporation, please give full corporate name and have a duly authorized officer sign, stating title. If signer is a partnership, please sign in partnership name by authorized person.
Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box.
C 1234567890 J N T
1 U P X 0 1 7 7 4 2 1
MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND +
<STOCK#> 00VYFB
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
POWERR INTEGRATIONS
Proxy — Power Integrations
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 13, 2008
The undersigned hereby appoints Balu Balakrishnan and Rafael Torres, with full power of substitution, to vote all of the shares of stock of Power Integrations, Inc. which the undersigned may be entitled to vote at the Annual Meeting of Stockholders of Power Integrations, Inc. to be held at 5245 Hellyer Avenue, San Jose, CA 95138 on Friday, June 13, 2008 at 1:00 p.m. (local time), and at any and all postponements, continuations and adjournments thereof, with all powers that the undersigned would possess if personally present, upon and in respect of the following matters and in accordance with the following instructions, with discretionary authority as to any and all other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3 AND 4, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
Please vote, date and promptly return this proxy in the enclosed return envelope which is postage prepaid if mailed in the United States.
If you vote by telephone or the Internet, please DO NOT mail back this proxy card.