SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE TO
(Rule 13e-4)
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
INTERNATIONAL RECTIFIER CORPORATION
(Name of Subject Company (Issuer) and Filing Persons (Offeror))
Options to Purchase Common Stock, Par Value $1.00 Per Share
(Title of Class of Securities)
460254-10-5
(CUSIP Number of Class of Securities of Underlying Common Stock)
Donald R. Dancer, Esq.
Vice President, General Counsel and Secretary
International Rectifier Corporation
233 Kansas Street
El Segundo, California 90245
Telephone: (310) 726-8000
Copy to:
Su Lian Lu, Esq.
Sheppard, Mullin, Richter & Hampton, LLP
333 South Hope Street
Los Angeles, California 90071
Telephone: (213) 617-5546
(Name, Address and Telephone Numbers of Person Authorized to Receive Notices
and Communications on Behalf of Filing Persons)
Calculation of Filing Fee
| Transaction Valuation* $114,415,136 |
Amount of Filing Fee $13,467 |
| Amount Previously Paid: | Filing Party: | |||||
| Form or Registration No.: | Date filed: |
Check the appropriate boxes below to designate any transactions to which the statement relates:
Check the following box if the filing is a final amendment reporting the results of the tender offer: o
This Tender Offer Statement on Schedule TO relates to an offer by International Rectifier Corporation, a Delaware corporation ("International Rectifier" or the "Company"), to exchange (the "Option Exchange") certain outstanding options with an exercise price equal to or greater than $40.00 per share, that were granted under our stock option plans (the "Eligible Options") and that are held by eligible employees. These Eligible Options may be exchanged for new options that will be granted under the Company's 2000 Incentive Plan, as amended and restated (the "New Options"), upon the terms and subject to the conditions set forth in the Offer to Exchange, dated January 28, 2005 (the "Offer to Exchange"). This document, as it may be amended or supplemented from time to time, is attached to this Schedule TO as Exhibit (a)(1)(a). An "eligible employee" refers to all employees of International Rectifier or one of its subsidiaries on the date of the Offer to Exchange who live and work in the United States, and remain employees through the date on which the New Options are granted, except (i) members of the Company's Board of Directors and the Company's executive officers, and (ii) any employee who was granted an option by International Rectifier on or after July 27, 2004. Our stock option plans under which the Eligible Options are granted are our 2000 Incentive Plan, as amended and restated, our 1997 Employee Stock Incentive Plan and our Amended and Restated Stock Incentive Plan of 1992.
The information in the Offer to Exchange, including all schedules to the Offer to Exchange, is incorporated by reference in answer to the items required in this Schedule TO.
Item 1. Summary Term Sheet.
The information set forth under the caption "Summary Term Sheet" in the Offer to Exchange is incorporated herein by reference.
Item 2. Subject Company Information.
International Rectifier Corporation is the issuer of the securities subject to the Option Exchange. The address of the Company's principal executive office is 233 Kansas Street, El Segundo, California 90245, and the telephone number at that address is (310) 726-8000. The information set forth in the Offer to Exchange under the caption "The Offer—Information concerning International Rectifier" is incorporated herein by reference.
The subject class of securities consists of the Eligible Options. The actual number of shares of common stock subject to the New Options to be issued in the Option Exchange will depend on the number of shares of common stock subject to the unexercised options tendered by eligible employees and accepted for exchange and cancelled. The information set forth in the Offer to Exchange under the caption "Summary Term Sheet," and the sections under the captions "The Offer—Number of options; expiration date," "The Offer—Acceptance of options for exchange and issuance of new options," "The Offer—Source and amount of consideration; terms of new options" is incorporated herein by reference.
The information set forth in the Offer to Exchange under the caption "The Offer—Price range of shares underlying the options" is incorporated herein by reference.
Item 3. Identity and Background of Filing Person.
The filing person is the issuer. The information set forth under Item 2(a) above is incorporated herein by reference.
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Pursuant to General Instruction C to Schedule TO, the information set forth on Schedule A to the Offer to Exchange is incorporated herein by reference.
Item 4. Terms of the Transaction.
The information set forth in the Offer to Exchange under the captions "Summary Term Sheet," and the information set forth under the captions "The Offer—Eligibility," "The Offer—Number of options; expiration date," "The Offer—Procedures for electing to exchange options," "The Offer—Withdrawal rights and change of election," "The Offer—Acceptance of options for exchange and issuance of new options," "The Offer—Conditions of the offer," "The Offer—Price range of shares underlying the options," "The Offer—Source and amount of consideration; terms of new options," "The Offer—Status of options acquired by us in the offer; accounting consequences of the offer," "The Offer—Legal matters; regulatory approvals," "The Offer—Material U.S. federal income tax consequences," "The Offer—Extension of offer; termination; amendment," and Schedule B is incorporated herein by reference.
The information set forth in the Offer to Exchange under the caption "The Offer—Interests of directors and officers; transactions and arrangements concerning the options" is incorporated herein by reference.
Item 5. Past Contacts, Transactions, Negotiations and Agreements.
The information set forth in the Offer to Exchange under the caption "The Offer—Interests of directors and officers; transactions and arrangements concerning the options" is incorporated herein by reference. The eligible option plans and related option agreements attached hereto as Exhibits (d)(1) to (d)(7) contain information regarding the subject securities.
Item 6. Purposes of the Transaction and Plans or Proposals.
The information set forth in the Offer to Exchange under the captions "Summary Term Sheet" and "The Offer—Purpose of the offer" is incorporated herein by reference.
The information set forth in the Offer to Exchange under the captions "The Offer—Acceptance of options for exchange and issuance of new options" and "The Offer—Status of options acquired by us in the offer; accounting consequences of the offer" is incorporated herein by reference.
The information set forth in the Offer to Exchange under the caption "The Offer—Purpose of the offer" is incorporated herein by reference.
Item 7. Source and Amount of Funds or Other Consideration.
The information set forth in the Offer to Exchange under the caption "The Offer—Source and amount of consideration; terms of new options" is incorporated herein by reference.
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Not applicable.
Not applicable.
Item 8. Interest in Securities of the Subject Company.
The information set forth in the Offer to Exchange under the caption "The Offer—Interests of directors and officers; transactions and arrangements concerning the options" is incorporated herein by reference.
The information set forth in the Offer to Exchange under the caption "The Offer—Interests of directors and officers; transactions and arrangements concerning the options" is incorporated herein by reference.
Item 9. Persons/Assets, Retained, Employed, Compensated or Used.
Not applicable.
Item 10. Financial Statements.
The information set forth in Schedule B to the Offer to Exchange and in the Offer to Exchange under the captions "The Offer—Information concerning International Rectifier," "The Offer—Additional information," and "The Offer—Financial statements" is incorporated herein by reference. The Company's financial information included under Part II, Item 8 on pages 40 to 70 in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2004 and under Part I, Item 1 on pages 3 to 29 in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 is incorporated herein by reference and is available for review on the Securities and Exchange Commission's website at www.sec.gov and on the Company's website at www.irf.com.
Not applicable.
Item 11. Additional Information.
The information set forth in the Offer to Exchange under the caption "The Offer—Legal matters; regulatory approvals" is incorporated herein by reference.
Not applicable.
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Item 12. Exhibits.
| (a)(1)(a)* | Offer to Exchange Certain Outstanding Options for New Options, dated January 28, 2005 | |
(a)(1)(b)** |
Form of cover letter from Alex Lidow, Chief Executive Officer of International Rectifier Corporation |
|
(a)(1)(c)** |
Form of Election Form |
|
(a)(1)(d)** |
Form of Withdrawal Form |
|
(a)(1)(e)** |
Form of Option Summary communication to employees |
|
(a)(1)(f)** |
Form Option Exchange reminder communication to employees |
|
(a)(1)(g)** |
Form of Confirmation to employees who elect to participate in the Option Exchange program |
|
(a)(1)(h)** |
Form of Confirmation to employees who elect not to participate in the Option Exchange program |
|
(a)(1)(i)** |
Form of Promise to Grant Stock Option |
|
(b) |
Not applicable |
|
(d)(1)* |
International Rectifier 2000 Incentive Plan, as amended and restated |
|
(d)(2)* |
Form of stock option agreement for the Eligible Options under the International Rectifier 2000 Incentive Plan, as amended and restated |
|
(d)(3)* |
International Rectifier 1997 Employee Stock Incentive Plan |
|
(d)(4)* |
Form of stock option agreement for the Eligible Options under the Inte rnational Rectifier 1997 Employee Stock Incentive Plan |
|
(d)(5)* |
International Rectifier Amended and Restated Stock Incentive Plan of 1992 |
|
(d)(6)* |
Form of stock option agreement for the Eligible Options under the International Rectifier Amended and Restated Stock Incentive Plan of 1992 |
|
(d)(7)* |
Form of stock option agreement for the New Options under the International Rectifier 2000 Incentive Plan, as amended and restated |
|
(g) |
Not applicable |
|
(h) |
Not applicable |
*Filed herewith
**To be filed by amendment; available upon the SEC staff's request
Item 13. Information Required by Schedule 13E-3.
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After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Schedule TO is true, complete and correct.
| INTERNATIONAL RECTIFIER CORPORATION | ||
| /s/ DONALD R. DANCER Donald R. Dancer Senior Vice President, General Counsel and Secretary |
||
| January 14, 2005 |
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| (a)(1)(a)* | Offer to Exchange Certain Outstanding Options for New Options, dated January 28, 2005 | |
(a)(1)(b)** |
Form of cover letter from Alex Lidow, Chief Executive Officer of International Rectifier Corporation |
|
(a)(1)(c)** |
Form of Election Form |
|
(a)(1)(d)** |
Form of Withdrawal Form |
|
(a)(1)(e)** |
Form of Option Summary communication to employees |
|
(a)(1)(f)** |
Form Option Exchange reminder communication to employees |
|
(a)(1)(g)** |
Form of Confirmation to employees who elect to participate in the Option Exchange program |
|
(a)(1)(h)** |
Form of Confirmation to employees who elect not to participate in the Option Exchange program |
|
(a)(1)(i)** |
Form of Promise to Grant Stock Option |
|
(b) |
Not applicable |
|
(d)(1)* |
International Rectifier 2000 Incentive Plan, as amended and restated |
|
(d)(2)* |
Form of stock option agreement for the Eligible Options under the International Rectifier 2000 Incentive Plan, as amended and restated |
|
(d)(3)* |
International Rectifier 1997 Employee Stock Incentive Plan |
|
(d)(4)* |
Form of stock option agreement for the Eligible Options under the International Rectifier 1997 Employee Stock Incentive Plan |
|
(d)(5)* |
International Rectifier Amended and Restated Stock Incentive Plan of 1992 |
|
(d)(6)* |
Form of stock option agreement for the Eligible Options under the International Rectifier Amended and Restated Stock Incentive Plan of 1992 |
|
(d)(7)* |
Form of stock option agreement for the New Options under the International Rectifier 2000 Incentive Plan, as amended and restated |
|
(g) |
Not applicable |
|
(h) |
Not applicable |
*Filed herewith
**To be filed by amendment; available upon the SEC staff's request
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Exhibit (a)(1)(a)
[THIS OFFER HAS NOT COMMENCED]
INTERNATIONAL RECTIFIER CORPORATION
OFFER TO EXCHANGE
CERTAIN OUTSTANDING OPTIONS
FOR NEW OPTIONS
This document constitutes part of the prospectus relating to the International Rectifier Corporation 2000 Incentive Plan, covering securities that have been registered under the Securities Act of 1933, as amended.
[January 28, 2005]
[THIS OFFER HAS NOT COMMENCED]
INTERNATIONAL RECTIFIER CORPORATION
Offer to Exchange Certain Outstanding Options for New Options
The offer and withdrawal rights will expire at 5:00 p.m., Eastern Time, on
[February 22, 2005], unless we extend the offer.
We are offering you the opportunity to exchange certain outstanding options for new options. Any outstanding option with an exercise price equal to or greater than $40.00 per share, that was granted under our stock option plans is eligible to be exchanged in this offer. The new options will be granted at least six months and one day after the cancellation of the exchanged options. We expect the new options to be granted no earlier than [August 24, 2005]. Participation in the offer is voluntary. To participate in the offer, you must properly tender your options prior to 5:00 p.m., Eastern Time, on [February 22, 2005], unless we extend the period of time the offer is open. Our stock option plans under which the eligible options are granted are our 2000 Incentive Plan, as amended and restated, our 1997 Employee Stock Incentive and our Amended and Restated Stock Incentive Plan of 1992. We are making this offer upon the terms and subject to the conditions described in this offer to exchange.
The following summarizes the principal terms of the exchange offer:
| Exercise Price of the Exchanged Option |
Ratio of Shares Covered by the Exchanged Option to Shares Covered by the New Option |
|
|---|---|---|
| $40.00 - $48.00 | 1.50 : 1.00 | |
| $48.01 -$56.00 | 1.75 : 1.00 | |
| $56.01 and over | 2.00 : 1.00 |
Although our board of directors has approved the offer, neither we nor our board of directors makes any recommendation as to whether you should participate in the offer. You must make your own decision. We cannot guarantee that the new options will have a lower exercise price than the exchanged options.
Our common stock is traded on the New York Stock Exchange under the symbol "IRF." On January 6, 2005, the closing price of our common stock as reported by the New York Stock Exchange was $39.22. You should obtain current market quotations for our common stock before deciding whether to tender any of your eligible options.
See "Risks of Participating in the Offer" beginning on page 11 for a discussion of certain risks that you should consider before tendering any of your eligible options.
You should direct questions about the offer or requests for assistance to a Customer Service Representative at Mellon Investor Services, Monday through Friday between the hours of 9:00 a.m. to 6:00 p.m. Eastern Time, telephone number (888) 261-6784 from within the U.S. and (201) 296-4219 from outside the U.S. (there will be no charge to the caller).
This offer is not conditioned upon a minimum aggregate number of eligible options being tendered for exchange. This offer is subject to the terms and conditions set forth in this offer to exchange. If any of these conditions are not satisfied at any time on or after the date this offer begins, and before the expiration date, we may terminate the exchange offer prior to the expiration date and will not be obligated to accept and exchange any properly tendered eligible options. Prior to the expiration date of the exchange offer, we reserve the right to amend the exchange offer for any reason.
This offer has not been approved or disapproved by the Securities and Exchange Commission or any state securities commission nor has the Securities and Exchange Commission or any state securities commission passed upon the fairness or merits of the offer or upon the accuracy or adequacy of the information contained in this offer to exchange. Any representation to the contrary is a criminal offense.
IMPORTANT
If you wish to tender any of your eligible options for exchange, you must complete and sign the attached election form in accordance with its instructions, and deliver it by mail or overnight courier to the mailing address below. Delivery by electronic mail will not be accepted. We must receive all of the required documents by 5:00 p.m., Eastern Time, on [February 22, 2005], unless we extend the offer. Late forms will not be accepted—no exceptions.
| By Mail: | By Overnight Courier: | |
| Mellon Investor Services LLC Attn: Reorganization Dept. P.O. Box 3308 South Hackensack, NJ 07606 USA |
Mellon Investor Services LLC Attn: Reorganization Dept. 85 Challenger Road Mail Stop—Reorg, Ridgefield Park, NJ 07660 USA |
The decision to participate in the offer is an individual one that should be based on a variety of factors. You should consult with your own personal advisors if you have any questions about your financial or tax situation. We have not authorized any person to make any recommendation on our behalf as to whether you should participate in the offer.
We are not making this offer to, nor will we accept any tender of options from or on behalf of, option holders in any jurisdiction in which the offer or the acceptance of any tender of options would not be in compliance with the laws of, or the rules of any regulatory authority in, such jurisdiction. However, we may, in our sole discretion, take any actions necessary for us to make this offer to option holders in any such jurisdiction.
You should rely only on the information contained in this document or any other document to which we have referred you. We have not authorized anyone to give you any information or to make any representation in connection with this offer other than the information and representations contained in this document or any other document to which we have referred you. If any other person makes any recommendation or representation to you or gives you any information, you must not rely upon that recommendation, representation or information as having been authorized by us.
You should not assume that the information provided in this document is accurate as of any date other than the date of this offer to exchange. This document summarizes various documents and information. These summaries are qualified in their entirety by reference to the documents and information to which they relate.
| |
|
Page |
||
|---|---|---|---|---|
| SUMMARY TERM SHEET | 1 | |||
RISKS OF PARTICIPATING IN THE OFFER |
11 |
|||
THE OFFER |
19 |
|||
1. |
Eligibility |
19 |
||
2. |
Number of options; expiration date |
19 |
||
3. |
Purpose of the offer |
20 |
||
4. |
Procedures for electing to exchange options |
22 |
||
5. |
Withdrawal rights and change of election |
24 |
||
6. |
Acceptance of options for exchange and issuance of new options |
25 |
||
7. |
Conditions of the offer |
26 |
||
8. |
Price range of shares underlying the options |
28 |
||
9. |
Source and amount of consideration; terms of new options |
28 |
||
10. |
Information concerning International Rectifier |
33 |
||
11. |
Interests of directors and officers; transactions and arrangements concerning the options |
34 |
||
12. |
Status of options acquired by us in the offer; accounting consequences of the offer |
37 |
||
13. |
Legal matters; regulatory approvals |
38 |
||
14. |
Material U.S. federal income tax consequences |
38 |
||
15. |
Extension of offer; termination; amendment |
39 |
||
16. |
Fees and expenses |
40 |
||
17. |
Additional information |
40 |
||
18. |
Financial statements |
41 |
||
19. |
Miscellaneous |
41 |
||
Schedule A |
Information concerning the Directors and Executive Officers of International Rectifier Corporation |
A-1 |
||
Schedule B |
Summary Financial Information of International Rectifier Corporation and Subsidiaries |
B-1 |
||
The following are answers to some of the questions that you may have about this offer. We urge you to read carefully the remainder of this offer to exchange because the information in this summary is not complete, and additional important information is contained in the remainder of this offer to exchange. We have included section references to the sections under "The Offer" where you can find a more complete description of the topics in this summary.
General Questions About The Offer
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exchange. If any of these conditions are not satisfied at any time on or after the date this offer begins, and before the expiration date, we may terminate the exchange offer prior to the expiration date and will not be obligated to accept and exchange any properly tendered eligible options. Prior to the expiration date of the exchange offer, we reserve the right to amend the exchange offer for any reason. (See Section 7)
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Specific Questions About The Cancelled Options
5
Specific Questions About The New Options
| Exercise Price of the Exchanged Option |
Ratio of Shares Covered by the Exchanged Option to Shares Covered by the New Option |
|
|---|---|---|
| $40.00 - $48.00 | 1.50 : 1.00 | |
| $48.01 - $56.00 | 1.75 : 1.00 | |
| $56.01 and over | 2.00 : 1.00 |
Example:
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Procedures For Participating In The Offer
| By Mail: | By Overnight Courier: | |
| Mellon Investor Services LLC Attn: Reorganization Dept. P.O. Box 3308 South Hackensack, NJ 07606 USA |
Mellon Investor Services LLC Attn: Reorganization Dept. 85 Challenger Road Mail Stop—Reorg, Ridgefield Park, NJ 07660 USA |
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| By Mail: | By Overnight Courier: | |
| Mellon Investor Services LLC Attn: Reorganization Dept. P.O. Box 3308 South Hackensack, NJ 07606 USA |
Mellon Investor Services LLC Attn: Reorganization Dept. 85 Challenger Road Mail Stop—Reorg, Ridgefield Park, NJ 07660 USA |
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RISKS OF PARTICIPATING IN THE OFFER
Participation in the offer involves a number of potential risks, including those described below. You should carefully consider these risks, and you are encouraged to speak with an investment and tax advisor as necessary before deciding to participate in the offer. In addition, we strongly urge you to read Section 14 of this offer to exchange, which discusses the tax consequences of the offer in the United States of America, as well as the rest of this offer to exchange for a more in-depth discussion of the risks that may apply to you before deciding to participate in the exchange offer.
Further, this offer to exchange and our SEC reports listed under Section 17 include "forward-looking statements." When used in this offer to exchange, the words "anticipate," "believe," "estimate," "expect," "intend" and "plan" as they relate to us are intended to identify these forward-looking statements. All statements by us regarding our expected future financial position and operating results, our business strategy, our financing plans and expected capital requirements, forecasted trends relating to our products and services or the markets in which we operate and similar matters are forward-looking statements, and are dependent upon certain risks and uncertainties, including the factors described below.
The following discussion should be read in conjunction with our summary financial information attached as Schedule B and the financial statements and notes to the financial statements, as well as Management's Discussion and Analysis of Financial Condition and Results of Operations, contained in our most recent Form 10-K and Form 10-Q reports filed with the SEC and listed in Section 17. We caution you not to place undue reliance on the forward-looking statements contained in this offer to exchange or our SEC reports, which speak only as of the date hereof.
If the price of our common stock increases after the date on which your options are cancelled, your cancelled options might have been worth more than the new options that you will receive in exchange.
For example, if you cancel options with an exercise price of $40.00 per share, and the price of our common stock increases to $45.00 per share when the new options are granted, your new option will have a higher exercise price, and will entitle you to purchase fewer shares, than the cancelled options.
If we effect a merger or a similar transaction, you may lose all your eligible options and not receive any new options.
If you choose to participate in the offer, it is possible that we might effect a merger or similar transaction after we cancel your eligible options but before we grant you new options. If our acquiror or successor pursuant to such merger or similar transaction does not assume the obligation to grant you new options, offer you participation in a stock option plan or enter into an individual stock option agreement with you, you will not receive any new options while having lost all your rights under your cancelled options. In addition, in the event of an acquisition of International Rectifier for stock of the acquiring entity, you might receive new options to purchase shares of a different company. While we are not currently in discussions regarding a merger of similar transaction, it is possible that we could commence discussions during the six month and one day period preceding the new option grant date.
If your employment terminates for any reason before we grant the new options, you will not receive a new option and none of your cancelled options will be returned to you.
Once we cancel the options that you elect to exchange, all of your rights under those options terminate. Accordingly, if your employment with us terminates for any reason, including but not limited to, voluntary termination, involuntary termination, death, total and permanent disability, retirement, a reduction-in-force or another company acquiring us, before the grant of the new options, you will not
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receive a grant of new options, the return of your cancelled options or any other consideration or payment for your cancelled options.
Our operating results depend on the health of general economic conditions, including the level of capital spending. If current economic conditions in the United States of America remain stagnant or worsen, or if a global economic slowdown occurs, we may experience a material adverse effect on our business, operating results and financial condition, and may undertake various measures to reduce our operating expenses, including a reduction-in-force. Should your employment be terminated as part of any reduction-in-force, you will not receive a grant of new options, the return of your cancelled options or any other consideration or payment for your cancelled options.
If another company acquires us, that company may, as part of the transaction or otherwise, decide to terminate some or all our employees before the new option grant date. If your employment terminates for this or any other reason before the new option grant date you will not receive a grant of new options, the return of your cancelled options or any other consideration or payment for your cancelled options.
If your employment terminates for any reason before your new options vest, you will not receive any value from your new options.
All new options will be unvested at the time of grant, regardless of whether the options that were cancelled were partially or wholly vested. The new options will vest in three equal annual installments, one-third on each of the first, second and third anniversaries of the new option grant date. Therefore, no portion of your new options will be vested until one year after the new option grant date. If you do not remain an employee through the date your new options first vest, you will not be able to exercise any portion of your new options. Instead, your new options will expire upon your termination in accordance with their terms. As a result, you may receive no value from your new options. Vesting on any date is subject to your continued employment with us through each relevant vesting date.
Tax Related Risks for U.S. Tax Residents
If you elect to participate in the offer, you should consider the tax consequences.
The new option grants will be treated as nonqualified stock options under the U.S. federal income tax laws. The grant of the new options is not a taxable event under current U.S. tax law, and you will not recognize any income for U.S. federal income tax purposes at that time.
When you exercise a nonqualified stock option, you will recognize taxable income for U.S. federal income tax purposes equal to the excess of (i) the fair market value of the purchased shares at the time of exercise over (ii) the exercise price paid for those shares, and you must satisfy the applicable withholding taxes with respect to such income. The subsequent sale of the shares you acquire from the exercise of your nonqualified stock option will give rise to capital gain to the extent the amount you realize upon the sale of the shares exceeds their fair market value at the time you exercised the option. A capital loss will result to the extent the amount realized upon such sale is less than the fair market value of the shares at the time you exercised the option. The gain or loss will be long-term if the shares are held for more than one year prior to the sale.
You should review Section 14 carefully for a more detailed discussion of the potential U.S. federal tax consequences of participation in the offer. You should consult your personal tax or other legal advisor regarding your personal situation before deciding whether or not to participate in the offer.
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Downturns in the highly cyclical semiconductor industry or changes in end market demand could affect our operating results and the value of our business.
The semiconductor industry is highly cyclical and the value of our business may decline during the "down" portion of these cycles. We have experienced these conditions in our business in the recent past, and while we appear to be at the end of a significant and prolonged downturn, we cannot predict when we may experience such downturns in the future. Future downturns in the semiconductor industry, or any failure of the industry to recover fully from its recent downturns could seriously impact our revenues and harm our business, financial condition and results of operations. Although markets for semiconductors appear to be improving, we cannot assure you that they will continue to improve or that our markets will not experience renewed, possibly more severe and prolonged, downturns in the future.
In addition, we may experience significant changes in our profitability as a result of variations in sales, seasonality, changes in product mix, price competition for orders and the costs associated with the introduction of new products. The markets for our products depend on continued demand in the communications, consumer electronics, information technology, automotive, industrial and government/space markets, and these end markets may experience changes in demand that could adversely affect our operating results and financial condition.
The failure to implement, as well as the completion and impact of, our restructuring programs and cost reductions could adversely affect our business.
In December 2002, we announced a number of restructuring initiatives. Our goal was to reposition our company to better fit the market conditions, de-emphasize our commodity business and accelerate the move to what we categorize as our proprietary products. The restructuring includes consolidating and closing certain manufacturing sites, upgrading equipment and processes in designated facilities and discontinuing production in a number of others that cannot support more advanced technology platforms or products. The restructuring also includes lowering overhead costs across our support organization. We cannot assure you that these restructuring initiatives will achieve their goals or accomplish the cost reductions planned. Additionally, because our restructuring activities involve changes to many aspects of our business, the costs reductions could adversely affect productivity and sales to an extent we have not anticipated. Even if we fully execute and implement these restructuring activities, and they generate the anticipated cost savings, there may be other unforeseen factors that could adversely impact our profitability and business.
If we are unable to implement our business strategy, our revenues and profitability may be adversely affected.
Our future financial performance and success are largely dependent on our ability to successfully implement our business strategy of transforming our business to one led by our proprietary products. We cannot assure you that we will successfully implement our business strategy or that implementing our strategy will sustain or improve our results of operations.
The semiconductor business is highly competitive and increased competition could reduce the value of an investment in our company.
The semiconductor industry, including the sector in which we do business, is highly competitive. Competition is based on price, product performance, product availability, quality, reliability and customer service. Price pressures may emerge as competitors attempt to gain a greater market share by lowering prices. We compete in various markets with companies of various sizes, many of which are larger and have greater financial and other resources than we have, and thus they may be better able to
13
pursue acquisition candidates and to withstand adverse economic or market conditions. In addition, companies not currently in direct competition with us may introduce competing products in the future.
New technologies could result in the development of new products and a decrease in demand for our products, and we may not be able to develop new products to satisfy changes in demand.
Our failure to develop new technologies or react to changes in existing technologies could materially delay our development of new products, which could result in decreased revenues and a loss of market share to our competitors. Rapidly changing technologies and industry standards, along with frequent new product introductions, characterize the semiconductor industry. As a result, we must devote significant resources to research and development. Our financial performance depends on our ability to design, develop, manufacture, assemble, test, market and support new products and enhancements on a timely and cost-effective basis. We cannot assure you that we will successfully identify new product opportunities and develop and bring new products to market in a timely and cost-effective manner, or that products or technologies developed by others will not render our products or technologies obsolete or noncompetitive. A fundamental shift in technologies in our product markets could have a material adverse effect on our competitive position within the industry. In addition, to remain competitive, we must continue to reduce die sizes and improve manufacturing yields. We cannot assure you that we can accomplish these goals.
Our failure to obtain or maintain the right to use certain technologies may negatively affect our financial results.
Our future success and competitive position may depend in part upon our ability to obtain or maintain certain proprietary technologies used in our principal products, which is achieved in part by defending and maintaining the validity of our patents and defending claims by our competitors of intellectual property infringement. We license certain patents owned by others. We have also been notified that certain of our products may infringe the patents of third parties. Although licenses are generally offered in such situations, we cannot eliminate the risk of litigation alleging patent infringement. We are currently a defendant in intellectual property claims and we could become subject to other lawsuits in which it is alleged that we have infringed upon the intellectual property rights of others.
Our involvement in existing and future intellectual property litigation could result in significant expense, adversely affect sales of the challenged product or technologies and divert the efforts of our technical and management personnel, whether or not such litigation is resolved in our favor. If any such infringements exist, arise or are claimed in the future, we may be exposed to substantial liability for damages and may need to obtain licenses from the patent owners, discontinue or change our processes or products or expend significant resources to develop or acquire non-infringing technologies. We cannot assure you that we would be successful in such efforts or that such licenses would be available under reasonable terms. Our failure to develop or acquire non-infringing technologies or to obtain licenses on acceptable terms or the occurrence of related litigation itself could have a material adverse effect on our operating results and financial condition.
Our ongoing protection and reliance on our intellectual property assets expose us to risks.
We have traditionally relied on our patents and proprietary technologies. Patent litigation settlements and royalty income substantially contribute to our financial results. Enforcement of our intellectual property rights is costly, risky and time-consuming. We cannot assure you that we can successfully continue to protect our intellectual property rights, especially in foreign markets. Our key MOSFET patents expire between 2004 and 2010, although our broadest MOSFET patents expire in 2007 and 2008. Our royalty income is largely dependent on the following factors: the remaining terms of our MOSFET patents; the continuing introduction and acceptance of products that are not covered
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by our patents; our products remaining covered under unexpired MOSFET patents; the defensibility and enforceability of our patents; changes in our licensees' unit sales, prices or die sizes; and the terms, if any, upon which expiring license agreements are renegotiated. Market conditions and mix of licensee products, as well as sales of non-infringing devices can significantly affect royalty income. Any decrease in our royalty income could have a material adverse effect on our operating results and financial condition.
Our international operations expose us to material risks.
We expect revenues from foreign markets to continue to represent a significant portion of total revenues. We maintain or contract with significant operations in foreign countries. Among others, the following risks are inherent in doing business internationally: changes in, or impositions of, legislative or regulatory requirements, including tax laws in the United States and in the countries in which we manufacture or sell our products; trade restrictions; transportation delays; work stoppages; economic and political instability; and foreign currency fluctuations.
In addition, it is more difficult in some foreign countries to protect our products or intellectual property rights to the same extent as is possible in the United States. Therefore, the risk of piracy or misuse of our technology and products may be greater in these foreign countries. Although we have not experienced any material adverse effect on our operating results as a result of these and other factors, we cannot assure you that such factors will not have a material adverse effect on our financial condition and operating results in the future.
Delays in initiation of production at new facilities, implementing new production techniques or resolving problems associated with technical equipment malfunctions could adversely affect our manufacturing efficiencies.
Our manufacturing efficiency will be an important factor in our future profitability, and we cannot assure you that we will be able to maintain or increase our manufacturing efficiency to the same extent as our competitors. Our manufacturing processes are highly complex, require advanced and costly equipment and are continuously being modified in an effort to improve yields and product performance. Impurities, defects or other difficulties in the manufacturing process can lower yields.
In addition, as is common in the semiconductor industry, we have from time to time experienced difficulty in beginning production at new facilities or in effecting transitions to new manufacturing processes. As a consequence, we have experienced delays in product deliveries and reduced yields. We may experience manufacturing problems in achieving acceptable yields or experience product delivery delays in the future as a result of, among other things, capacity constraints, construction delays, upgrading or expanding existing facilities or changing our process technologies, any of which could result in a loss of future revenues. Our operating results could also be adversely affected by the increase in fixed costs and operating expenses related to increases in production capacity if revenues do not increase proportionately.
Interruptions, delays or cost increases affecting our materials, parts or equipment may impair our competitive position and our operations.
Our manufacturing operations depend upon obtaining adequate supplies of materials, parts and equipment, including silicon, mold compounds and leadframes, on a timely basis from third parties. Our results of operations could be adversely affected if we were unable to obtain adequate supplies of materials, parts and equipment in a timely manner or if the costs of materials, parts or equipment increase significantly. From time to time, suppliers may extend lead times, limit supplies or increase prices due to capacity constraints or other factors. We have a limited number of suppliers for some materials, parts and equipment, and any interruption could materially impair our operations.
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We manufacture a substantial portion of our wafer product at our Temecula, California and Newport, Wales facilities. Any disruption of operations at those facilities could have a material adverse effect on our business, financial condition and results of operations.
Also, some of our products are assembled and tested by third party subcontractors. We do not have any long-term assembly agreements with these subcontractors. As a result, we do not have immediate control over our product delivery schedules or product quality. Due to the amount of time often required to qualify assemblers and testers and the high cost of qualifying multiple parties for the same products, we could experience delays in the shipment of our products if we are forced to find alternative third parties to assemble or test them. Any product delivery delays in the future could have a material adverse effect on our operating results and financial condition. Our operations and ability to satisfy customer obligations could be adversely affected if our relationships with these subcontractors were disrupted or terminated.
We must commit resources to product manufacturing prior to receipt of purchase commitments and could lose some or all of the associated investment.
We sell products primarily pursuant to purchase orders for current delivery or to forecast, rather than pursuant to long-term supply contracts. Many of these purchase orders or forecasts may be revised or canceled without penalty. As a result, we must commit resources to the manufacturing of products without any advance purchase commitments from customers. Our inability to sell products after we devote significant resources to them could have a material adverse effect on our levels of inventory and our business, financial condition and results of operations.
We receive a significant portion of our revenues from a small number of customers and distributors.
Historically, a significant portion of our revenues has come from a relatively small number of customers and distributors. The loss or financial failure of any significant customer or distributor, any reduction in orders by any of our significant customers or distributors, or the cancellation of a significant order, could materially and adversely affect our business.
We may fail to attract or retain the qualified technical, sales, marketing and managerial personnel required to operate our business successfully.
Our future success depends, in part, upon our ability to attract and retain highly qualified technical, sales, marketing and managerial personnel. Personnel with the necessary semiconductor expertise are scarce and competition for personnel with these skills is intense. We cannot assure you that we will be able to retain existing key technical, sales, marketing and managerial employees or that we will be successful in attracting, assimilating or retaining other highly qualified technical, sales, marketing and managerial personnel in the future. If we are unable to retain existing key employees or are unsuccessful in attracting new highly qualified employees, our business, financial condition and results of operations could be materially and adversely affected.
We are acquiring and may continue to acquire other companies and may be unable to successfully integrate such companies with our operations.
We have acquired several companies over the past three years. We may continue to expand and diversify our operations with additional acquisitions. If we are unsuccessful in integrating these companies with our operations, or if integration is more difficult than anticipated, we may experience disruptions that could have a material adverse effect on our business, financial condition and results of operations.
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Our products may be found to be defective, claims may be asserted against us and we may not have sufficient insurance.
One or more of our products may be found to be defective after we have already shipped the products in volume, requiring a product replacement or recall. We may also be subject to product returns that could impose substantial costs and have a material and adverse effect on our business, financial condition and results of operations.
Product liability or commercial claims may be asserted with respect to our products. Although we currently have product liability or commercial insurance for certain types of losses, we cannot assure you that we have obtained sufficient insurance coverage for all types of commercial or other losses, that we will have sufficient insurance coverage in the future or that we will have sufficient resources to satisfy any claims.
Large potential environmental liabilities, including those relating to a former operating subsidiary, may adversely impact our financial position.
International Rectifier and Rachelle Laboratories, Inc. ("Rachelle"), a former operating subsidiary of ours that discontinued operations in 1986, were each named a potentially responsible party ("PRP") in connection with the investigation by the United States Environmental Protection Agency ("EPA") of the disposal of allegedly hazardous substances at a major superfund site in Monterey Park, California ("OII Site"). Certain PRPs who settled certain claims with the EPA under consent decrees filed suit in Federal Court in May 1992 against a number of other PRPs, including us, for cost recovery and contribution under the provisions of the Comprehensive Environmental Response, Compensation and Liability Act. We have settled all outstanding claims that have arisen against us out of the OII Site. No claims against Rachelle have been settled. We have taken the position that none of the wastes generated by Rachelle were hazardous. We cannot assure you that the potential environmental liabilities of Rachelle could not have a material adverse effect on our operating results and financial condition.
Federal, state, foreign and local laws and regulations impose various restrictions and controls on the discharge of materials, chemicals and gases used in our semiconductor manufacturing processes. In addition, under some laws and regulations, we could be held financially responsible for remedial measures if our properties are contaminated or if we send waste to a landfill or recycling facility that becomes contaminated, even if we did not cause the contamination. Also, we may be subject to common law claims if we release substances that damage or harm third parties. Further, we cannot assure you that changes in environmental laws or regulations will not require additional investments in capital equipment or the implementation of additional compliance programs in the future. Any failure to comply with environmental laws or regulations could subject us to serious liabilities and could have a material adverse effect on our operating results and financial condition.
Some of our facilities are located near major earthquake fault lines.
Our corporate headquarters, one of our manufacturing facilities, one of our research facilities and certain other critical business operations are located near major earthquake fault lines. We could be materially and adversely affected in the event of a major earthquake. Although we maintain earthquake insurance, we can give you no assurance that we have obtained or will maintain sufficient insurance coverage.
There can be no assurance that we will have sufficient capital resources to make necessary investments in manufacturing technology and equipment.
The semiconductor industry is capital intensive. Semiconductor manufacturing requires a constant upgrading of process technology to remain competitive, as new and enhanced semiconductor processes
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are developed which permit smaller, more efficient and more powerful semiconductor devices. We maintain certain of our own manufacturing, assembly and test facilities, which have required and will continue to require significant investments in manufacturing technology and equipment. There can be no assurance that we will have sufficient capital resources to make necessary investments in manufacturing technology and equipment. Although we believe that anticipated cash flows from operations, existing cash reserves and other equity or debt financings that we may obtain will be sufficient to satisfy our future capital expenditure requirements, there can be no assurance that this will be the case or that alternative sources of capital will be available to us on favorable terms or at all.
Final outcomes from the various tax authorities' audits are difficult to predict and an unfavorable finding may negatively impact the financial results.
We are currently under audit by various taxing authorities. It is often difficult to predict the final outcome or the timing of resolution of any particular tax matter. We have provided certain tax reserves which have been included in the determination of our financial results. However, unpredicted unfavorable settlement may require additional cash and negatively impact our financial position and results of operations.
Terrorist attacks, such as those that took place on September 11, 2001, or threats or occurrences of other terrorist activities whether in the United States or internationally may affect the markets in which our common stock trades, the markets in which we operate and our profitability.
Terrorist attacks, such as those that took place on September 11, 2001, or threats or occurrences of other terrorist or related activities, whether in the United States or internationally, may affect the markets in which our common stock trades, the markets in which we operate and our profitability. Future terrorist or related activities could affect our domestic and international sales, disrupt our supply chains and impair our ability to produce and deliver our products. Such activities could affect our physical facilities or those of our suppliers or customers, and make transportation of our supplies and products more difficult or cost prohibitive. Due to the broad and uncertain effects that terrorist attacks have had on financial and economic markets generally, we cannot provide any estimate of how these activities might affect our future results.
Our evaluation of internal controls and remediation of potential problems will be costly and time consuming and could expose weaknesses in our financial reporting.
The regulations implementing Section 404 of the Sarbanes-Oxley Act of 2002 require us to provide our assessment of the effectiveness of our internal control over financial reporting beginning with our Annual Report on Form 10-K for the fiscal year ending June 30, 2005. Our independent auditors will be required to confirm in writing whether our assessment of the effectiveness of our internal control over financial reporting is fairly stated in all material respects, and separately report on whether they believe we maintained, in all material respects, effective internal control over financial reporting as of June 30, 2005.
We believe that we currently have adequate controls over financial reporting, and that any weaknesses identified in our internal controls will not be material. To date, this process has been both expensive and time consuming, and has required significant attention of management. We cannot assure you that we will not discover material weaknesses in our internal controls. We also cannot assure you that we will complete the process of our evaluation and the auditors' attestation on time. If we do discover a material weakness, corrective action may be time consuming, costly and further divert the attention of management. The disclosure of a material weakness, even if quickly remedied, could reduce the market's confidence in our financial statements, result in a delisting of our common stock from the New York Stock Exchange, and harm our stock price, especially if a restatement of financial statements for past periods were to be necessary.
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1. Eligibility.
You are an "eligible employee" if you are an employee of International Rectifier or one of our subsidiaries on the date hereof who lives and works in the United States of America, and you remain employed by us or one of our subsidiaries through the cancellation date. You are not eligible to participate if you have received notice of termination of employment from International Rectifier, or if you have given notice of termination of employment to International Rectifier, prior to the cancellation date. However, you are not eligible to participate in the exchange offer if you were granted an option by International Rectifier on or after [July 27, 2004]. This is required for us to avoid potentially unfavorable accounting treatment. Members of our board of directors and executive officers are not eligible to participate in the offer. Our directors and executive officers are listed on Schedule A to this exchange offer.
To receive a new option, you must remain continuously employed by us or one of our subsidiaries or a successor entity through the new option grant date, which is the date on which the new options are granted, and which generally will be the first business day that is at least six months and one day after the cancellation date. If we do not extend the offer, we presently expect that the new option grant date will be [August 24, 2005]. If, for any reason, you do not remain an employee of International Rectifier or one of our subsidiaries or a successor entity through the new option grant date, you will not receive a grant of new options, the return of your cancelled options or any other consideration or payment for your cancelled options. Your employment with International Rectifier or one of our subsidiaries will remain "at-will" and can be terminated by you or us at any time, with or without cause or notice.
2. Number of options; expiration date.
Subject to the terms and conditions of the offer, we will accept properly tendered outstanding, unexercised options held by eligible employees with exercise prices equal to or greater than $40.00 per share that were granted under our 2000 Incentive Plan, as amended and restated, our 1997 Employee Stock Incentive Plan or our Amended and Restated Stock Incentive Plan of 1992, and exchange them for new options.
You must tender all or none of your eligible options that were granted on a particular date. You may not elect to tender only a portion of your eligible options that were granted on a particular date, but you may tender all of your eligible options granted on one date but none of your eligible options granted on another date.
Each option grant that you elect to exchange must be for the entire portion that is outstanding and unexercised. We are not otherwise accepting partial tenders of options. However, you may elect to exchange the remaining portion of an option that you have partially exercised. As a result, you may elect to exchange one or more of your option grants, but you must elect to exchange all of the unexercised shares subject to each grant, or none of the shares for that particular grant.
For example and except as otherwise described below, if you hold (1) an eligible option granted on January 10, 2002, to purchase 1,000 shares, 700 of which you have already exercised, (2) an eligible option granted on February 20, 2003 to purchase 1,000 shares, and (3) an eligible option granted on March 30, 2004 to purchase 2,000 shares, you may elect to exchange:
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These are your only choices in the above example. You may not, for example, elect to exchange your first option with respect to only 150 shares, or any other partial amount, or to exchange the second and third options with respect to less than all of the shares covered by such option.
Subject to the terms of this exchange offer, and upon our acceptance of your properly tendered options, your old options will be cancelled and we will issue you a promise to grant new options to purchase a new number of shares of International Rectifier common stock for each share of International Rectifier common stock underlying your exchanged options. The number of shares underlying your new options will be based on the exercise price of your exchanged option as follows:
| Exercise Price of the Exchanged Option |
Ratio of Shares Covered by the Exchanged Option to Shares Covered by the New Option |
|
|---|---|---|
| $40.00 - $48.00 | 1.50 : 1.00 | |
| $48.01 - $56.00 | 1.75 : 1.00 | |
| $56.01 and over | 2.00 : 1.00 |
Your new options will be granted on the first business day that is at least six months and one day after the cancellation date. Fractional shares will be rounded up to the nearest whole share on a grant-by-grant basis. The number of new option shares that you receive will also be subject to adjustment for any stock splits, subdivisions, combinations, stock dividends and similar events that occur after the cancellation date but before the new option grant date.
All new options will be granted under and subject to the terms of the 2000 Incentive Plan, and to a new option agreement between you and us. You should note that you may be granted new options under a stock plan which is different from the plan under which the exchanged options were granted and, therefore, the terms of the new options may be different from the terms of the options you exchange. As a result, we urge you to carefully review Section 9 below for a discussion of the terms of the 2000 Incentive Plan.
The form of option agreement for the new options under our 2000 Incentive Plan is filed as an exhibit or incorporated by reference to the Schedule TO with which this offer to exchange has been filed.
Your new options will be granted as nonqualified stock options for U.S. federal income tax purposes. See Section 14 below.
The expiration date for the offer will be 5:00 p.m., Eastern Time, on [February 22, 2005], unless we extend the offer. We may, in our discretion, extend the period of time during which the offer will remain open, in which event the expiration date shall refer to the latest time and date at which the extended offer expires. See Section 15 below for a description of our rights to extend, terminate and amend the offer.
3. Purpose of the offer.
We issued the outstanding options to:
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The offer provides an opportunity for us to offer our eligible employees a valuable incentive to stay with us and continue to work to promote the success of our business. Many of our outstanding options, whether or not they are currently exercisable, have exercise prices that are significantly higher than the current market price of our shares, which options commonly are referred to as being "underwater." By making this offer to exchange outstanding options for new options that will have an exercise price equal to the closing price of our common stock as reported on The New York Stock Exchange on the new option grant date, we intend to provide our eligible employees with the benefit of owning options that over time may have a greater potential to increase in value. We believe this will create better performance incentives for employees and thereby maximize stockholder value. However, because we will not grant new options until the first business day that is at least six months and one day after the date on which we cancel the options accepted for exchange, the new options may have a higher exercise price than some or all of your options exchanged.
We believe that the structure of the offer, including an exchange ratio that is less than one-for-one, strikes a balance between the interests of the employees and the interests of the stockholders of International Rectifier by attempting to minimize the future dilutive impact of our ongoing stock option programs and recognizes the difference between the value of the cancelled options with an exercise price equal to or in excess of $40.00 and the value of the new options with a potentially lower exercise price.
We chose to make this offer instead of simply granting more options for a number of reasons. Because of the large number of underwater options, granting additional options covering the same aggregate number of shares of common stock as the outstanding eligible options could have severe negative and dilutive impact on our stockholders.
Subject to the above, and except as otherwise disclosed in this offer to exchange or in our filings with the SEC, we presently have no plans or proposals that relate to or would result in:
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Neither we nor our board of directors makes any recommendation as to whether you should accept this offer and elect to exchange any of your eligible options, nor have we authorized any person to make any such recommendation. You are urged to evaluate carefully all of the information in this offer to exchange and to consult your own investment, legal and tax advisors. You must make your own decision whether or not to elect to exchange any of your eligible options.
4. Procedures for electing to exchange options.
Proper Election to Exchange Options.
To validly elect to exchange your options, you must, in accordance with the instructions of the attached election form, properly complete, execute and deliver the election form by mail or overnight courier to the mailing address below. Delivery by electronic mail will not be accepted. Mellon Investor Services must receive the properly completed election forms before the expiration date. The expiration date will be 5:00 p.m., Eastern Time, on [February 22, 2005], unless we decide to extend the offer.
| By Mail: | By Overnight Courier: | |
| Mellon Investor Services LLC Attn: Reorganization Dept. P.O. Box 3308 South Hackensack, NJ 07606 USA |
Mellon Investor Services LLC Attn: Reorganization Dept. 85 Challenger Road Mail Stop—Reorg, Ridgefield Park, NJ 07660 USA |
If you submit an election form, and then decide that you would like to elect to exchange additional options, you must submit a new election form to the mailing address above by the expiration date. This new election form must be signed and dated after your original election form and must be properly completed. This new election form must also list all of the options that you wish to tender for exchange, because your original election form will no longer be valid. You may submit new election forms as often as you wish prior to the expiration date, but you will be bound by the last properly submitted election form we receive prior to the expiration date in all cases, except that if you choose to withdraw all your tendered options, you will be bound by the last properly submitted withdrawal form.
The method of delivery of all documents is at your election and risk. If delivery is by mail, we recommend that you use registered mail with return receipt requested. In all cases, you should allow sufficient time to ensure timely delivery. It is your responsibility to ensure that we have received your election form and/or any withdrawal form by contacting a Customer Service Representative at Mellon Investor Services, Monday through Friday, between the hours of 9:00 a.m. to 6:00 p.m. Eastern time, telephone number (888) 261-6784 from within the U.S. and (201) 296-4219 from outside the U.S. (there will be no charge to the caller). Your options will not be considered tendered until we receive them. If we do not receive your election form by 5:00 p.m., Eastern time, or [February 22, 2005], you will be deemed to have elected to reject the offer.
However, our receipt of your election form is not by itself an acceptance of the options tendered for exchange. For purposes of the offer, we will be deemed to have accepted options for exchange that are validly tendered and are not properly withdrawn as of the time when we give written notice to the option holders generally of our acceptance for exchange of the tendered options. We may issue this notice by press release, e-mail or other form of communication. Options accepted for exchange will be cancelled on the cancellation date, which we presently expect to be [February 23, 2005].
Determination of validity; rejection of options; waiver of defects; no obligation to give notice of defects.
We will determine, in our discretion, all questions about the validity, form, eligibility (including time of receipt), and acceptance of any options tendered. Our determination of these matters will be final and binding on all persons. We reserve the right to reject any election form, or any options
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elected to be exchanged, that we determine are not eligible, not in appropriate form or are unlawful to accept. Otherwise, we will accept all properly tendered options that are not validly withdrawn subject to the terms of this offer. We also reserve the right to waive any of the conditions to the offer or any defect or irregularity in any tender of any particular options or for any particular option holder; provided that if we grant any such waiver, it will be granted with respect to all option holders and tendered options. No tender of options will be deemed to have been properly made until all defects or irregularities have been cured by the tendering option holder or waived by us. Neither we nor any other person is obligated to give notice of any defects or irregularities in tenders, nor will anyone incur any liability for failure to give any notice. This is a one-time offer, and we will strictly enforce the election period, subject only to an extension that we may grant in our sole discretion.
Our acceptance constitutes an agreement.
Your election to exchange options through the procedures described above constitutes your acceptance of the terms and conditions of the offer. Our acceptance of your options elected to be exchanged by you through the offer will constitute a binding agreement between you and International Rectifier upon the terms and subject to the conditions of the offer.
In order to implement, administer and manage this offer to exchange, we must collect, receive, possess, use, retain and transfer certain personal information regarding you and your option grants in electronic or other form, and may have to pass that information on to third parties who are assisting with the offer to exchange. This information may include, but is not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in International Rectifier and/or any of its subsidiaries and details of all options or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in your favor ("Data"). By submitting an election form, you agree to such collection, receipt, possession, use, retention and transfer of your personal data by and among us, our subsidiaries and the third parties assisting us with the offer to exchange, but only for the purpose of implementing, administering and managing your participation in this offer to exchange. By submitting an election form, you also acknowledge and agree that:
You can withdraw your consent to the collection, receipt, possession, use, retention and transfer of your data by contacting a Customer Service Representative at Mellon Investor Services, Monday through Friday, between the hours of 9:00 a.m. to 6:00 p.m. Eastern Time, telephone number (888) 261-6784 from within the U.S. and (201) 296-4219 from outside the U.S. (there will be no charge to the caller). You should note, however, that if you refuse or withdraw your consent, it may affect your ability to
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participate in the offer to exchange. Please contact a Customer Service Representative at Mellon Investor Services, Monday through Friday, between the hours of 9:00 a.m. to 6:00 p.m. Eastern Time, telephone number (888) 261-6784 from within the U.S. and (201) 296-4219 from outside the U.S. (there will be no charge to the caller), if you have any questions.
5. Withdrawal rights and change of election.
You may withdraw any options that you previously elected to exchange only in accordance with the provisions of this section.
You may withdraw any or all of the options that you previously elected to exchange at any time before 5:00 p.m., Eastern Time, on [February 22, 2005]. If we extend the offer beyond that time, you may withdraw such options at any time until the extended expiration of the offer.
In addition, although we intend to accept all validly tendered options promptly after the expiration of this offer, if we have not accepted your options by 5:00 p.m., Eastern Time, on [March 14, 2005], the 40th business day after the commencement of this offer, you may withdraw your options at any time thereafter.
To validly withdraw some or all of the options that you previously elected to exchange, you must, in accordance with the instructions of the attached withdrawal form, properly complete, execute and deliver the withdrawal form by mail or overnight courier to the mailing address below in accordance with the procedures listed in Section 4 above, while you still have the right to withdraw the options. Delivery by electronic mail will not be accepted.
| By Mail: | By Overnight Courier: | |
| Mellon Investor Services LLC Attn: Reorganization Dept. P.O. Box 3308 South Hackensack, NJ 07606 USA |
Mellon Investor Services LLC Attn: Reorganization Dept. 85 Challenger Road Mail Stop—Reorg, Ridgefield Park, NJ 07660 USA |
You may not rescind any withdrawal, and any options that you withdraw will be deemed not properly tendered for purposes of the offer, unless you properly re-elect to exchange those options before the expiration date. To re-elect to exchange some or all of your withdrawn options, you must submit a new election form to the mailing address above before the expiration date by following the procedures described in Section 4 above. This new election form must be signed and dated after your original election form and any withdrawal form you have submitted. It must be properly completed and it must list all of the options you wish to tender for exchange.
If you choose to withdraw all your tendered options, you only need to submit a withdrawal form withdrawing all your options. However if you choose to withdraw only some of your options, you need to re-submit a new election form listing the eligible options you wish to tender. You may change your mind as many times as you like but unless you withdraw all your eligible options, you will need to re-submit a new election form listing the eligible options you wish to tender. You will be bound by the last properly submitted election form we receive prior to the expiration date in all cases, except that if you choose to withdraw all your tendered options, you will be bound by the last properly submitted withdrawal form.
If you do not wish to withdraw any options from the offer, but would like to elect to tender additional options for exchange, you must submit a new election form to the mailing address above before the expiration date by following the procedures described in Section 4 above. This new election form must be signed and dated after your original election form. It must be properly completed and it must list all of the options you wish to tender for exchange. You will be bound by the last properly
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submitted election form we receive prior to the expiration date in all cases, except that if you choose to withdraw all your tendered options, you will be bound by the last properly submitted withdrawal form.
Neither we nor any other person is obligated to give you notice of any defects or irregularities in any withdrawal form or any new election form, nor will anyone incur any liability for failure to give any notice. We will determine, in our discretion, all questions as to the form and validity, including time of receipt, of withdrawal forms and new election forms. Our determination of these matters will be final and binding.
The method of delivery of all documents is at your election and risk. If delivery is by mail, we recommend that you use registered mail with return receipt requested. In all cases, you should allow sufficient time to ensure timely delivery. It is your responsibility to ensure that we have received your election form and/or any withdrawal form by contacting a Customer Service Representative at Mellon Investor Services, Monday through Friday, between the hours of 9:00 a.m. to 6:00 p.m. Eastern time, telephone number (888) 261-6784 from within the U.S. and (201) 296-4219 from outside the U.S. (there will be no charge to the caller).
6. Acceptance of options for exchange and issuance of new options.
Under the terms and conditions of the offer and promptly following the expiration date, we will accept for exchange and cancel eligible options properly elected for exchange and not validly withdrawn before the expiration date. Once the options are cancelled, you no longer will have any rights with respect to those options. Subject to the terms and conditions of this offer, if your options are properly tendered by you for exchange and accepted by us, these options will be cancelled as of the date of our acceptance, which we anticipate to be [February 23, 2005].
For purposes of the offer, we will be deemed to have accepted options for exchange that are validly tendered and are not properly withdrawn as of the time when we give written notice to the option holders generally of our acceptance for exchange of the tendered options. We may issue this notice by press release or e-mail or other form of communication. Subject to our rights to terminate the offer, discussed in Section 15 below, we currently expect that we will accept promptly after the expiration date all properly tendered options that are not validly withdrawn.
Subject to the terms and conditions of this exchange offer, you will be granted a new option on the new option grant date, which will be the first business day that is at least six months and one day after the date on which we cancel the options accepted for exchange. We expect the new option grant date to be [August 24, 2005].
Subject to the terms and conditions of this offer, if your options are properly elected to be exchanged, and are not validly withdrawn, by 5:00 p.m., Eastern Time, on [February 22, 2005], the scheduled expiration date of the offer, and are accepted for exchange by us and cancelled on [February 23, 2005], you will be granted a new option on [August 24, 2005]. If we accept and cancel options properly tendered for exchange after [February 23, 2005], the date on which the new options will be granted will be similarly delayed. Promptly after we accept and cancel options tendered for exchange, we will issue to you a promise to grant stock options. The promise to grant stock options represents our commitment to grant you a new option on the new option grant date, provided that you remain an employee of International Rectifier or one of our subsidiaries or a successor entity through the new option grant date. This promise to grant stock options will list the number of shares underlying your new options. If you do not receive a promise to grant stock options within fifteen (15) business days after the expiration date, please contact a Customer Service Representative at Mellon Investor Services, Monday through Friday, between the hours of 9:00 a.m. to 6:00 p.m. Eastern Time, telephone number (888) 261-6784 from within the U.S. and (201) 296-4219 from outside the U.S. (there will be no charge to the caller).
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Subject to the terms of the offer and upon our acceptance of your properly tendered options, you will be entitled to receive new options to purchase a new number of shares of International Rectifier common stock for each share of International Rectifier common stock underlying your exchanged options based on the exchange ratios discussed in Section 2. Fractional shares shall be rounded up to the nearest whole share on a grant-by-grant basis. The number of new option shares that you receive will also be subject to adjustments for any stock splits, subdivisions, combinations, stock dividends and similar events that occur after the cancellation date but before the new option grant date.
If, for any reason, you are not an employee of International Rectifier, one of our subsidiaries or a successor entity through the new option grant date, you will not receive a grant of new options, the return of your cancelled options or any other consideration or payment for your cancelled options.
If you elect to exchange options in the offer, we will defer granting to you any other options for which you otherwise may be eligible before the new option grant date. Consequently, if you participate in the exchange offer, we will not grant you any new options until at least six months and one day after any of your options have been cancelled. If you do not participate in the exchange offer you may still receive any options we grant between now and the new option grant date.
Options that you choose not to exchange and are not required to be tendered for exchange, or that we do not accept for exchange, retain their current exercise price and will remain outstanding until they are exercised in full or expire by their terms.
7. Conditions of the offer.
Notwithstanding any other provision of the offer, we will not be required to accept any options tendered for exchange, and we may terminate the offer, or postpone our acceptance and cancellation of any options tendered for exchange (in each case, subject to Rule 13e-4(f)(5) under the Exchange Act, which requires that we must pay the consideration offered or return the options promptly after termination or withdrawal of a tender offer), if at any time on or after the date this offer begins, and before the expiration date, any of the following events has occurred, or has been reasonably determined by us to have occurred:
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If any of the above events occur, we may:
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The conditions to the offer are for our benefit. We may assert them in our reasonable discretion regardless of the circumstances giving rise to them before the expiration date. We may waive any condition, in whole or in part, at any time and from time to time before the expiration date, in our reasonable discretion, whether or not we waive any other condition to the offer. Our failure at any time to exercise any of these rights will not be deemed a waiver of any such rights. The waiver of any of these rights with respect to particular facts and circumstances will not be deemed a waiver with respect to any other facts and circumstances. Any determination we make concerning the events described in this Section 7 will be final and binding upon all persons.
8. Price range of shares underlying the options.
Our common stock is traded on the New York Stock Exchange and the Eastern Exchange under the symbol "IRF." On January 6, 2005, the closing sale price of the common stock on the New York Stock Exchange was $39.22. The quoted market prices are as reported on the New York Stock Exchange Composite.
Price Range of Common Stock
(Closing Prices in Dollars)
| |
First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Fiscal Year |
||||||||||||||||
| High |
Low |
High |
Low |
High |
Low |
High |
Low |
|||||||||
| 2005 (through January 6, 2005) | 41.35 | 31.27 | 44.98 | 34.23 | 44.86 | 39.06 | — | — | ||||||||
| 2004 | 43.98 | 28.00 | 56.25 | 41.00 | 54.50 | 41.59 | 49.11 | 37.66 | ||||||||
| 2003 | 28.36 | 15.33 | 25.69 | 11.12 | 23.26 | 18.46 | 28.53 | 17.09 | ||||||||
| 2002 | 39.00 | 26.25 | 40.00 | 24.75 | 46.50 | 33.69 | 49.69 | 26.19 | ||||||||
We recommend that you evaluate current market quotes for our common stock, among other factors, before deciding whether or not to accept the offer.
9. Source and amount of consideration; terms of new options.
Consideration.
We will issue new options in exchange for eligible outstanding options properly elected to be exchanged, and not validly withdrawn, by you and accepted by us for such exchange. All new options will be subject to a new stock option agreement between you and us and to the terms and conditions of the 2000 Incentive Plan. Subject to any adjustments for stock splits, subdivisions, combinations, stock dividends and similar events that occur after the cancellation date but before the new option grant date, and subject to the other terms and conditions of the offer, upon our acceptance of your properly tendered options, you will be entitled to receive new options to purchase a new number of shares of our common stock for each share of our common stock underlying your old options based on the exercise price of your exchanged options as follows:
| Exercise Price of the Exchanged Option |
Ratio of Shares Covered by the Exchanged Option to Shares Covered by the New Option |
|
|---|---|---|
| $40.00 - $48.00 | 1.50 : 1.00 | |
| $48.01 - $56.00 | 1.75 : 1.00 | |
| $56.01 and over | 2.00 : 1.00 |
If we receive and accept tenders of all options eligible to be tendered, subject to the terms and conditions of this offer, we would be obligated to grant new options to purchase a total of approximately 2,553,641 shares of our common stock, or approximately 3.8% of the total shares of our common stock outstanding as of December 29, 2004.
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General Terms of New Options.
The following description summarizes the terms of our 1997 Employee Stock Incentive Plan and our Amended and Restated Stock Incentive Plan of 1992. Our statements in this offer to exchange concerning the 1997 Employee Stock Incentive Plan and our Amended and Restated Stock Incentive Plan of 1992 are merely summaries and do not purport to be complete. The statements are subject to, and are qualified in their entirety by reference to, all provisions of the plans, and the forms of option agreements under the plans. Please contact a Customer Service Representative at Mellon Investor Services, Monday through Friday, between the hours of 9:00 a.m. to 6:00 p.m. Eastern Time, telephone number (888) 261-6784 from within the U.S. and (201) 296-4219 from outside the U.S. (there will be no charge to the caller), to receive a copy of the 1997 Employee Stock Incentive Plan and our Amended and Restated Stock Incentive Plan of 1992, and the form of option agreements thereunder. We will promptly furnish you copies of these documents at our expense.
1997 Employee Stock Incentive Plan. The purpose of the 1997 Employee Stock Incentive Plan was to enable International Rectifier to attract, motivate and retain employees by providing incentives related to equity interests in and the financial performance of International Rectifier and our subsidiaries. Grants under the 1997 Employee Stock Incentive Plan could be made to any employee, consultant or advisor of International Rectifier or our subsidiaries, other than a director or an executive officer. The Compensation Committee administers the 1997 Employee Stock Incentive Plan and the grants that could be made under the plan include stock bonuses, restricted stock, stock options, stock purchase warrants and other performance awards. Awards expired ten years after the grant date.
1992 Stock Incentive Plan. The purpose of the 1992 Stock Incentive Plan was to enable International Rectifier and our subsidiaries to attract, motivate and retain employees. Any employee, including any of our directors, officers or key employees were eligible under the 1992 Stock Incentive Plan. The Compensation Committee administers the 1992 Stock Incentive Plan and grants that could be made under the plan include the issuance of common shares, options, warrants, stock appreciation rights and other performance awards. The plan also provided for the grant of options to non-employee directors. The non-employee director options expired ten years after the grant date.
The new options will be granted under the 2000 Incentive Plan. Your new option will be a nonqualified stock option for U.S. income tax purposes. Because you may be granted new options under a stock plan which is different from the plan under which the tendered options were granted, the terms of any new options you receive may be different from the terms of the options you exchange. As a result, we urge you to carefully review the discussion of the terms of the 2000 Incentive Plan in this Section 9. All new options will be subject to a new option agreement between you and International Rectifier and to the terms and conditions of the 2000 Incentive Plan except as set forth herein. The terms and conditions of the new options may vary from the terms and conditions of the options exchanged.
Term of Options. The new options granted under the 2000 Incentive Plan will have a term of five years.
Exercise Price. Generally, the administrator determines the exercise price at the time the option is granted. The exercise price per share of the new options will be the closing price reported by the New York Stock Exchange for our common stock on the new option grant date, which is expected to be [August 24, 2005], provided we do not extend the exchange offer. Accordingly, we cannot predict the market price of the new options. Your new options may have a higher exercise price than some or all of the options exchanged.
Vesting and Exercise. Each stock option agreement specifies the term of the option and the date on which the option becomes exercisable. The administrator generally determines the terms of vesting. The new options will be subject to a new vesting schedule, regardless of whether the options exchanged
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were fully or partially vested. The new options will vest in three equal annual installments, one-third on each of the first, second and third anniversaries of the new option grant date. This means that all new options will be unvested at the time of grant, regardless of whether the options exchanged were partially or wholly vested.
General Terms of the 2000 Incentive Plan.
The following description summarizes the material terms of our 2000 Incentive Plan. Our statements in this offer to exchange concerning the 2000 Incentive Plan and the new options are merely summaries and do not purport to be complete. The statements are subject to, and are qualified in their entirety by reference to, all provisions of the plan, and the forms of option agreement under the 2000 Incentive Plan. Please contact a Customer Service Representative at Mellon Investor Services, Monday through Friday, between the hours of 9:00 a.m. to 6:00 p.m. Eastern Time, telephone number (888) 261-6784 from within the U.S. and (201) 296-4219 from outside the U.S. (there will be no charge to the caller), to receive a copy of the 2000 Incentive Plan, and the form of option agreement thereunder. We will promptly furnish you copies of these documents at our expense.
Purpose. The purpose of the 2000 Incentive Plan is to provide stock and other performance-based incentives as a means of promoting the success of the Company by attracting, motivating, rewarding and retaining employees (including officers), directors and consultants and aligning their interests with those of stockholders generally.
Eligible Persons. "Eligible Persons" under the 2000 Incentive Plan generally include directors, officers, employees, or consultants and advisors of the Company and our subsidiaries. Members of the Board who are not employed by us ("NonEmployee Directors") have received and may receive in the future discretionary grants under the 2000 Incentive Plan.
Administration. The Board or one or more committees of directors appointed by the Board (the appropriate acting body is referred to as the "Committee") administers the 2000 Incentive Plan. Currently, the Compensation Committee is the "Committee" under the plan. All awards granted under the plan will be authorized by the Committee.
The Committee has broad authority under the 2000 Incentive Plan:
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In no case will the exercise price of any option be reduced (by amendment, substitution, cancellation and regrant or other means), unless authorized by stockholders. Adjustments resulting from anti-dilution provisions of the 2000 Incentive Plan or a recapitalization, reorganization, or similar transaction affecting the underlying securities are not considered repricing.
Transfer Restrictions. Subject to customary exceptions, awards under the 2000 Incentive Plan are not transferable by the recipient other than by will or the laws of descent and distribution and are generally exercisable only by the recipient. The Committee, however, may permit certain transfers of an award if the transferor presents satisfactory evidence that the transfer is for estate and/or tax planning purposes to certain related persons or entities and without consideration (other than nominal consideration), or in certain other circumstances.
Adjustments. As is customary in incentive plans of this nature, the number and kind of shares available under the 2000 Incentive Plan and the outstanding awards, as well as exercise or purchase prices and other share limits, and, as appropriate, performance targets, are subject to adjustment in the event of certain reorganizations, mergers, combinations, consolidations, recapitalizations, reclassifications, stock splits, stock dividends, asset sales or other similar events, or extraordinary dividends or distributions of property to our stockholders.
Section 162(m) Awards: Business Criteria and Conditions. Options granted "at market" may be designed to satisfy the requirements for "performance-based" compensation under Section 162(m) of the Code and thus preserve the deductibility of such compensation under federal income tax law. These awards will be based on the performance of the Company and/or one or more of our subsidiaries, divisions, segments, units or stations. The applicable period(s) over which performance is measured will be not less than one nor more than 10 fiscal years. The business criteria (with new criteria underscored) upon which performance goals with respect to these awards will be established are:
By way of example, cost containment or reduction may be achieved by, among other objective means, reducing expenses, costs of goods sold, or the length of time receivables remain outstanding. Similarly, the performance of a division, segment or station may include the success of one or more designated product lines.
These types of Section 162(m) eligible awards will be earned and payable only if performance reaches specific, preestablished performance goals approved by the Committee in advance of applicable deadlines under the Code and while the performance relating to the goals remains substantially uncertain. Before any of these awards are paid, the Committee must certify that the applicable performance goals have been satisfied. Performance goals will be adjusted to reflect certain changes,
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including reorganizations, liquidations and capitalization and accounting changes, to the extent permitted by Section 162(m) and subject to the 2000 Incentive Plan. In the event of an award recipient's death or disability, a Change in Control Event, or in such other circumstances as the Committee may determine, the Committee may provide for full or partial credit prior to completion of the performance cycle or the attainment of the performance achievement specified in the performance award.
The Committee has discretion to determine the performance goals and restrictions or other limitations of the individual performance awards and may reserve "negative" discretion to reduce payments below maximum award limits. The Committee has no discretion to increase, above the maximum amount specified at the time of grant, the amount of cash or number of shares to be delivered upon attainment of the performance goals set forth in the individual performance award in the case of Section 162(m) qualified awards.
Change in Control; Acceleration of Awards; Possible Early Termination of Awards. Upon the occurrence of a Change in Control Event, unless the Committee otherwise provides, each option will become immediately exercisable. Under Section 6.1(g) of the 2000 Incentive Plan, a "Change in Control Event" generally includes (subject to certain exceptions):
In certain circumstances awards which are fully accelerated and which are not exercised or settled at or prior to a Change in Control Event may be terminated, subject to any provisions for assumption, substitution or settlement. If the vesting of an award has been accelerated expressly in anticipation of an event or subject to stockholder approval of an event and the Committee or the Board later determines that the event will not occur, the Committee may rescind the effect of the acceleration as to any then outstanding and unexercised or otherwise unvested awards.
If an award is accelerated under the 2000 Incentive Plan in connection with a "change in control" (as this term is used under the Code), the Company may not be permitted to deduct the portion of the compensation attributable to the acceleration ("parachute payments") if it exceeds certain threshold limits under the Code (and certain related excise taxes may be triggered). Furthermore, if compensation attributable to awards is not "performance-based" within the meaning of Section 162(m) of the Code, the Company may not be permitted to deduct the aggregate non-performance-based compensation to the extent it exceeds $1,000,000 in any tax year.
Termination of or Changes to the 2000 Incentive Plan and Awards. The Board may amend or terminate the 2000 Incentive Plan at any time and in any manner, including a manner that increases, within 2000 Incentive Plan aggregate limits, awards to officers and directors. Unless required by applicable law, stockholder approval of amendments will not be required. After the plan terminates, the applicable plan provisions and authority of the Committee will continue as to any then outstanding
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awards. (This authority includes authority to amend outstanding options or other awards, except as to repricing.)
Outstanding options generally speaking may be amended (except as to repricing), but the consent of the holder is required if the amendment materially and adversely affects the rights or benefits of the holder.
Non-Exclusive Plan. The 2000 Incentive Plan does not limit the authority of the Board or any committee to grant awards or authorize any other compensation, with or without reference to our common stock, under any other plan or authority.
Registration of Shares Underlying Options.
All of the shares of common stock issuable under the 2000 Incentive Plan have been or will be registered under the Securities Act of 1933, as amended (the "Securities Act") on registration statements on Form S-8 filed with the SEC. All the shares issuable upon exercise of all new options to be granted pursuant to the offer have been or will be registered under the Securities Act. Unless you are one of our affiliates, you will be able to sell the shares issuable upon exercise of your new options free of any transfer restrictions under applicable U.S. federal securities laws.
U.S. Federal Income Tax Consequences.
You should refer to Section 14 below for a discussion of the U.S. federal income tax consequences of the new options and the options tendered for exchange, as well as the consequences of accepting or rejecting the new options under this offer to exchange. If you are a citizen or resident of the United States of America, but are also subject to the tax laws of another country, you should be aware that there might be other tax and other consequences that may apply to you. We strongly recommend that you consult with your own advisors to discuss the consequences to you of the exchange offer.
10. Information concerning International Rectifier.
We are a leading designer, manufacturer and marketer of power management products and the leading worldwide supplier of a type of power semiconductor called a MOSFET (a metal oxide semiconductor field effect transistor). Power semiconductors process electricity into a form more usable by electrical products. The technology advancements of power semiconductors increase system efficiency, allow more compact end products, improve features and functionality and extend battery life. Our products are used in a range of end-markets, including information technology, automotive, consumer electronics, aerospace/defense and industrial.
International Rectifier Corporation ("IR"®) uses its technology, comprehensive experience in power management, and low-cost manufacturing platforms to offer what we believe is one of the industry's most advanced and competitive lines of power management products. Our products are divided among three broad product categories:
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International Rectifier Corporation was founded as a California corporation in 1947 and reincorporated in Delaware in 1979. Our common stock has traded on the New York Stock Exchange under the symbol "IRF" since 1962. Our principal executive offices are located at 233 Kansas Street, El Segundo, California 90245 and our telephone number is (310) 726-8000. Our internet address is www.irf.com. Information contained on our website does not constitute a part of the offer. For additional information regarding International Rectifier, you should also review the materials that International Rectifier has filed with the SEC and has listed in Section 17.
11. Interests of directors and officers; transactions and arrangements concerning the options.
The table below sets forth the beneficial ownership of each of our executive officers and directors of options outstanding under the 2000 Incentive Plan, as amended and restated, the 1997 Employee Stock Incentive Plan and our Amended and Restated Stock Incentive Plan of 1992 as of December 30, 2004. The percentages in the table below are based on the total number of outstanding options under the 2000 Incentive Plan, the 1997 Employee Stock Incentive Plan and our Amended and Restated Stock Incentive Plan of 1992 to purchase stock, which is 15,428,379 as of December 30, 2004. The
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executive officers and directors noted on the table are not eligible to participate in the offer to exchange.
| Name |
Position and Offices Held |
Number of Shares Covered by Outstanding Options Granted under the Eligible Plans |
Percentage of Total Outstanding Options Under the Eligible Plans % |
|||
|---|---|---|---|---|---|---|
| Eric Lidow | Chairman of the Board of Directors | 1,112,000 | 7.2 | |||
Alexander Lidow |
Chief Executive Officer and Director |
1,229,000 |
8.0 |
|||
Michael P. McGee |
Executive Vice President and Chief Financial Officer |
469,366 |
3.0 |
|||
Robert Grant |
Executive Vice President, Global Sales and Corporate Marketing |
112,000 |
0.7 |
|||
Walter T. Lifsey |
Executive Vice President, Operations |
686,816 |
4.5 |
|||
Donald R. Dancer |
Vice President, Secretary and General Counsel |
349,166 |
2.3 |
|||
Jack O. Vance |
Director |
85,500 |
0.6 |
|||
Rochus E. Vogt |
Director |
85,500 |
0.6 |
|||
James D. Plummer |
Director |
65,500 |
0.4 |
|||
Minoru Matsuda |
Director |
65,500 |
0.4 |
|||
Robert S. Attiyeh |
Director |
45,500 |
0.3 |
Except as described below, neither we, nor, to the best of our knowledge, any of our directors or executive officers, nor any affiliates of ours, engaged in transactions involving options to purchase our common stock under the plans, or in transactions involving our common stock during the past 60 days before and including January 3, 2005:
Eric Lidow, the Chairman of our Board engaged in the following transactions under his Rule 10b5-1 selling plan dated February 3, 2004:
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In addition, on November 19, 2004, Eric Lidow made a gift of an aggregate of 4,470 shares of our common stock, including a gift of 1,528 shares to members of his family, including 510 shares to Alexander Lidow, his son.
Alexander Lidow, our Chief Executive Officer and a director engaged in the following transactions under his Rule 10b5-1 selling plan, dated February 3, 2004:
Alexander Lidow also engaged in the following transactions under his Rule 10b5-1 selling plan, dated November 12, 2004:
On November 12, 2004, Michael P. McGee, our Executive Vice President and Chief Financial Officer, engaged in the following transactions:
Robert Grant, our Executive Vice President, Global Sales and Corporate Marketing engaged in the following transactions under his Rule 10b5-1 selling plan, dated November 12, 2004:
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On November 4, 2004, Walter T. Lifsey, our Executive Vice President, Operations, sold 918 shares at $39.48 per share and exercised an option to purchase 3,000 shares of our common stock at an exercise price of $10.25 per share, and sold the following shares acquired from the exercise of such option for the following price per share:
On November 4, 2004, James D. Plummer, one of our non-employee directors exercised an option to purchase 5,000 shares of our common stock at an exercise price of $11.875 per share and an option to purchase 20,000 shares of our common stock at an exercise price of $33.875 per share, and sold the 22,500 shares acquired from the exercise of such options for $39.58. Mr. Plummer has not sold the remaining 2,500 shares acquired from the exercise on the options.
On November 5, 2004, Minoru Matsuda, one of our non-employee directors, exercised an option to purchase 15,000 shares of our common stock at an exercise price of $33.88 per share and sold the 15,000 shares acquired from the exercise of such option at $40.16 per share.
12. Status of options acquired by us in the offer; accounting consequences of the offer.
Options that we acquire through the offer that were granted under the 1997 Employee Stock Incentive Plan or the Amended and Restated Stock Incentive Plan of 1992 will be cancelled and the shares subject to those options will be returned to the pool of shares available for grants of new options under the 2000 Incentive Plan in connection with this exchange offer, but will not be available for grants of any other options under the 2000 Incentive Plan.
If we were to grant the new options under a traditional stock option repricing, in which an employee's current options would be immediately repriced, or on any date that is earlier than six months and one day after the cancellation date, or if we were to allow options that were granted within six months and one day prior to the commencement of the offer to be tendered, we would be required for financial reporting purposes to treat the new options as variable awards. This means that we would be required to record the non-cash accounting impact of increases in our stock price as a compensation expense for the new options issued under this offer. We would have to continue this variable accounting for these new options until they were exercised, forfeited or terminated. The higher the market value of our shares, the greater the compensation expense we would have to record. By deferring the grant of the new options for at least six months and one day, we believe that we will not have to treat the new options as variable awards and will avoid these accounting charges. As a result, we believe that we will not incur any compensation expense solely as a result of the transactions contemplated by the offer.
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13. Legal matters; regulatory approvals.
We are not aware of any license or regulatory permit that appears to be material to our business that might be adversely affected by our exchange of eligible options and issuance of new options as contemplated by the offer, or of any approval or other action by any government or governmental, administrative or regulatory authority or agency, of any New York Stock Exchange listing requirements that would be required for the exchange of options as contemplated herein. Should any additional approval or other action be required, we presently contemplate that we will seek such approval or take such other action. We cannot assure you that any such approval or other action, if needed, could be obtained or what the conditions imposed in connection with such approvals would entail or whether the failure to obtain any such approval or other action would result in adverse consequences to our business. Our obligation under the offer to accept tendered options for exchange and to issue new options for exchanged options is subject to the conditions described in Section 7 of this offer to exchange.
If we are prohibited by applicable laws or regulations from granting new options or required to obtain a license or regulatory permit or make any other filing before granting new options on the new option grant date, which is expected to be [August 24, 2005], we will not grant any new options, unless we obtain the necessary license or make the requisite filing. We are unaware of any such prohibition at this time that cannot be satisfied by obtaining a license or permit or making a filing, and we will use reasonable efforts to effect the grant, but if the grant is prohibited on the new option grant date you will not receive a grant of new options, the return of cancelled options or any other consideration or payment in exchange for your cancelled options.
14. Material U.S. federal income tax consequences.
The following is a general summary of the material U.S. federal income tax consequences of the exchange of options pursuant to the offer for those employees subject to U.S. federal income tax. This discussion is based on the Internal Revenue Code, its legislative history, Treasury Regulations thereunder and administrative and judicial interpretations as of the date of the offer, all of which are subject to change, possibly on a retroactive basis. This summary does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respect to all categories of option holders. If you are a subject to taxation in countries other than the United States, whether by reason of nationality, residence or otherwise, you should be aware that there might be other tax and social insurance consequences that may apply to you. We strongly recommend that you consult with you own advisors to discuss the consequences to you of this transaction.
We believe that if you exchange your eligible options for new options, you should not be required under current law to recognize income for U.S. federal income tax purposes at the time of the exchange or when the new options are granted. We believe that the exchange will be treated as a non-taxable exchange of the existing nonqualified stock options for new nonqualified stock options. "Nonqualified stock options" are stock options that do not satisfy the requirements of Section 422 of the Internal Revenue Code of 1986, as amended, to be considered incentive stock options.
The new stock options will be subject to the same tax treatment upon exercise as would have applied to the exchanged options. Under current law, when you exercise a nonqualified option, the difference between the exercise price of the option and the fair market value of the shares subject to the option on the date of exercise will be treated as compensation income to you. We will be entitled to a deduction equal to the amount of compensation income taxable to you. If you were an employee at the time of the grant of the option, any income recognized upon exercise of the option will constitute wages for which withholding will be required.
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If you exchanged shares in payment of part or all of the exercise price of a nonqualified stock option, no gain or loss will be recognized with respect to the shares exchanged, and you will be treated as receiving an equivalent number of shares pursuant to the exercise of the option in a nontaxable exchange. The tax basis of the shares exchanged will be treated as the substituted basis for an equivalent number of shares received, and the new shares will be treated as having been held for the same holding period as the holding period with respect to the transferred shares. The difference between the aggregate exercise price and the aggregate fair market value of the shares received pursuant to the exercise of the option will be taxed as ordinary income, just as if you have paid the exercise price in cash.
The subsequent sale of the shares acquired pursuant to the exercise of a nonqualified stock option generally will give rise to capital gain or loss equal to the difference between the sales price and the sum of the exercise price paid for the shares plus the ordinary income recognized with respect to the shares, and these capital gains or losses will be treated as long term capital gains or losses if you held the shares (or were treated as holding the shares) for more than one year. Under current law, long-term capital gains are generally taxable at a maximum rate of 15% if certain requirements are satisfied, and short-term capital gains and ordinary income are generally taxable at a maximum rate of 35%.
We recommend that you consult your own tax advisor with respect to the federal, state and local tax consequences of participating in the offer, and any foreign tax laws that may apply to you.
We recommend that you consult your own tax or other legal advisor to discuss the tax, social insurance and other consequences.
15. Extension of offer; termination; amendment.
We expressly reserve the right, in our discretion, at any time and regardless of whether or not any event listed in Section 7 of this offer to exchange has occurred or is deemed by us to have occurred, to extend the period of time during which the offer is open and delay the acceptance for exchange of any options. If we elect to extend the period of time during which the exchange offer is open, we will give you oral or written notice of the extension and delay, as described below. If we extend the expiration date, we will also extend your right to withdraw tenders of eligible options until such extended expiration date. In the case of an extension, we will issue a press release or other public announcement no later than 9:00 a.m., Eastern Time, on the next business day after the previously scheduled expiration date.
We also expressly reserve the right, in our reasonable judgment, before the expiration date to terminate or amend the offer and to postpone our acceptance and cancellation of any options elected to be exchanged if any of the events listed in Section 7 of this offer to exchange occurs, by giving oral or written notice of the termination or postponement to you or by making a public announcement of the termination. Our reservation of the right to delay our acceptance and cancellation of options elected to be exchanged is limited by Rule 13e-4(f)(5) under the Exchange Act which requires that we must pay the consideration offered or return the options promptly after termination or withdrawal of a tender offer.
Subject to compliance with applicable law, we further reserve the right, in our discretion, and regardless of whether any event listed in Section 7 of this offer to exchange has occurred or is deemed by us to have occurred, to amend the offer in any respect, including, without limitation, by decreasing or increasing the consideration offered in the offer to option holders or by decreasing or increasing the number of options being sought in the offer.
The minimum period during which the offer will remain open following material changes in the terms of the offer or in the information concerning the offer, other than a change in the consideration
39
being offered by us, will depend on the facts and circumstances of such change, including the relative materiality of the terms or information changes. If we modify: (i) the number of eligible options being sought in the offer or (ii) the consideration being offered by us for the eligible options in the offer, the offer will remain open for at least ten (10) business days from the date of notice of such modification.
If any term of the offer is amended in a manner that we determine constitutes a material change adversely affecting any holder of eligible options, we will promptly disclose the amendments in a manner reasonably calculated to inform holders of eligible options of such amendment, and we will extend the offer's period so that at least five (5) business days, or such longer period as may be required by the tender offer rules, remain after such change.
For purposes of the offer, a "business day" means any day other than a Saturday, Sunday or a U.S. federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, Eastern Time.
16. Fees and expenses.
We will not pay any fees or commissions to any broker, dealer or other person for soliciting options to be exchanged through this offer.
17. Additional information.
This offer to exchange is part of a Tender Offer Statement on Schedule TO that we have filed with the SEC. This offer to exchange does not contain all of the information contained in the Schedule TO and the exhibits to the Schedule TO. We recommend that you review the Schedule TO, including its exhibits, and the following materials that we have filed with the SEC before making a decision as to whether to elect to exchange your options:
1. Our Annual Report on Form 10-K for our fiscal year ended June 30, 2004, filed with the SEC on September 17, 2004;
2. Our Quarterly Report on Form 10-Q for our fiscal quarter ended September 30, 2004, filed with the SEC on November 12, 2004;
3. Our definitive proxy statement on Schedule 14A for our 2004 annual meeting of stockholders, as amended, filed with the SEC on October 18, 2004 and November 12, 2004;
4. Our Current Reports on Form 8-K dated November 22, 2004 and November 24, 2004;
5. The description of the common stock in our Registration Statement on Form 8-A filed with the SEC on June 17, 1985 under Section 12(g) of the Exchange Act; and
6. The description of the preferred share purchase rights in our Registration on Form 8-A filed with the SEC on August 21, 1996 under Section 12(g) of the Exchange Act.
7. All documents subsequently filed as with the SEC, between the date of this offer to exchange and the expiration date. These include periodic reports, such as quarterly reports on Form 10-Q and current reports on Form 8-K.
The SEC file number for these filings is 001-07935. These filings, our other annual, quarterly and current reports, our proxy statements and our other SEC filings may be examined, and copies may be obtained, at the SEC's public reference room at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. Our SEC filings are also available to the public on the SEC's Internet site at www.sec.gov.
Each person to whom a copy of this offer to exchange is delivered may obtain a copy of any or all of the documents to which we have referred you, other than exhibits to such documents, unless such
40
exhibits are specifically incorporated by reference into such documents, at no cost, by contacting a Customer Service Representative at Mellon Investor Services, Monday through Friday, between the hours of 9:00 a.m. to 6:00 p.m. Eastern Time, telephone number (888) 261-6784 from within the U.S. and (201) 296-4219 from outside the U.S. (there will be no charge to the caller).
As you read the documents listed above, you may find some inconsistencies in information from one document to another. If you find inconsistencies between the documents, or between a document and this offer to exchange, you should rely on the statements made in the most recent document.
The information about us contained in this offer to exchange should be read together with the information contained in the documents to which we have referred you, in making your decision as to whether or not to participate in this offer.
18. Financial statements.
Our summary financial information for the fiscal year ended June 30, 2004 and the fiscal quarter ended September 30, 2004 is attached as Schedule B to this offer to exchange. The financial information included under Part II, Item 8 on pages 40 to 70 in our Annual Report on Form 10-K for the fiscal year ended June 30, 2004 and under Part I, Item 1 on pages 3 to 29 in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 is incorporated herein by reference and is available for review on the SEC's website at www.sec.gov and on our website at www.irf.com. These documents may also be inspected at, and copies may be obtained from, the same places and in the same manner as set forth in Section 17 above.
The book value of each share of common stock of International Rectifier as of September 30, 2004, was $18.61. The ratio of earnings to fixed charges for International Rectifier was 6.87 for the fiscal year ended June 30, 2004, and 9.20 and 5.43 for the three months ended September 30, 2004 and 2003, respectively. Earnings were insufficient to cover fixed charges by $127.2 million for the fiscal year ended June 30, 2003.
19. Miscellaneous.
We are not aware of any jurisdiction where the making of the exchange offer is not in compliance with applicable law. If we become aware of any jurisdiction where the making of the offer is not in compliance with any valid applicable law, we will make a good faith effort to comply with such law. If, after such good faith effort, we cannot comply with such law, the offer will not be made to, nor will options be accepted from the option holders residing in such jurisdiction.
We have not authorized any person to make any recommendation on our behalf as to whether you should elect to exchange your options through the offer. You should rely only on the information in this document or any other document to which we have referred you. We have not authorized anyone to give you any information or to make any representations in connection with the offer other than the information and representations contained in this document or any other document to which we have referred you. If anyone makes any recommendation or representation to you or gives you any information, you must not rely upon that recommendation, representation or information as having been authorized by us.
International Rectifier Corporation
[January 28, 2005]
41
SCHEDULE A
INFORMATION CONCERNING THE EXECUTIVE OFFICERS
AND DIRECTORS OF INTERNATIONAL RECTIFIER CORPORATION
The executive officers and directors of International Rectifier Corporation and their positions and offices as of January 3, 2005, are set forth in the following table:
| Name |
Position and Offices Held |
|
|---|---|---|
| Eric Lidow | Chairman of the Board of Directors | |
Alexander Lidow |
Chief Executive Officer and Director |
|
Michael P. McGee |
Executive Vice President and Chief Financial Officer |
|
Robert Grant |
Executive Vice President, Global Sales and Corporate Marketing |
|
Walter T. Lifsey |
Executive Vice President, Operations |
|
Donald R. Dancer |
Vice President, Secretary and General Counsel |
|
Jack O. Vance |
Director |
|
Rochus E. Vogt |
Director |
|
James D. Plummer |
Director |
|
Minoru Matsuda |
Director |
|
Robert S. Attiyeh |
Director |
The address of each executive officer and director is: c/o International Rectifier Corporation, 233 Kansas Street, El Segundo, California 90245.
The directors and executive officers listed on this Schedule A are not eligible to participate in this option exchange program.
A-1
SCHEDULE B
SUMMARY FINANCIAL INFORMATION
OF INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
The following table sets forth summary historical consolidated financial information of International Rectifier Corporation and subsidiaries. The historical financial information has been derived from our consolidated financial statements included in our Annual Report on Form 10-K and the Quarterly Reports on Form 10-Q for the periods specified:
Summary Financial Information
| |
June 30, 2003 |
June 30, 2004 |
September 30, 2004 |
||||||
|---|---|---|---|---|---|---|---|---|---|
| |
(Amounts in thousands, except per share data) |
||||||||
| |
|
|
(unaudited) |
||||||
| Balance Sheet | |||||||||
| Current assets | $ | 874,839 | $ | 953,210 | $ | 989,485 | |||
| Non-current assets | 947,013 | 1,063,796 | 1,066,809 | ||||||
| Total assets | 1,821,852 | 2,017,006 | 2,056,294 | ||||||
| Current Liabilities | 211,733 | 215,036 | 227,222 | ||||||
| Stockholders' equity | 1,012,239 | 1,204,212 | 1,239,704 | ||||||
| Total liabilities and stockholders' equity | 1,821,852 | 2,017,006 | 2,056,294 | ||||||
| Book value per share | 15.77 | 18.15 | 18.61 | ||||||
Fiscal year ended June 30 |
Three months ended September 30 |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
2003 |
2004 |
2003 |
2004 |
||||||||
| |
(Amounts in thousands, except per share data) |
|||||||||||
| |
|
|
(unaudited) |
|||||||||
| Statement of Operations | ||||||||||||
| Revenues | $ | 864,443 | $ | 1,060,500 | $ | 234,129 | $ | 312,225 | ||||
| Gross Profit | 287,810 | 411,094 | 84,144 | 133,437 | ||||||||
| Income (loss) before income taxes | (126,198 | ) | 118,284 | 22,014 | 51,845 | |||||||
| Net income (loss) | (89,639 | ) | 89,770 | 16,731 | 37,580 | |||||||
| Net income (loss) per share | ||||||||||||
| Basic | (1.40 | ) | 1.37 | 0.26 | 0.56 | |||||||
| Diluted | (1.40 | ) | 1.31 | 0.25 | 0.53 | |||||||
| Ratio of earnings to fixed charges(1) | [ — ] | (2) | 6.87 | 5.43 | 9.20 | |||||||
B-1
INTERNATIONAL RECTIFIER CORPORATION
2000 INCENTIVE PLAN
(As Amended and Restated as of November 22, 2004)
1. THE PLAN.
1.1 Purpose.
The purpose of this Plan is to promote the success of the Company by providing an additional means through the grant of Awards to attract, motivate, retain and reward employees (including officers) and directors of the Company with awards and incentives for individual performance and for financial performance of the Company. "Corporation" means International Rectifier Corporation and "Company" means the Corporation and/or its Subsidiaries, unless the context otherwise requires. These terms and other capitalized terms are defined in Article 6.
1.2 Administration and Authorization; Power and Procedure.
1.2.1 Committee. This Plan shall be administered by and all Awards to Eligible Persons shall be authorized by the Committee. Action of the Committee with respect to the administration of this Plan shall be taken pursuant to a majority vote or by written consent of its members. Awards to a non-employee director shall be subject to approval or ratification by the Board.
1.2.2 Plan Awards; Interpretation; Powers of Committee. Subject to the express provisions of this Plan, the Committee shall have the authority:
(a) to determine eligibility and, from among those persons determined to be eligible, the particular Eligible Persons who will receive an Award;
(b) to grant Awards to Eligible Persons, determine the price at which securities will be offered or awarded and the amount of securities to be offered or awarded to any of such persons, and determine the other specific terms and conditions of such Awards consistent with the express limits of this Plan, and establish the installments (if any) in which such Awards shall become exercisable or shall vest, or determine that no delayed exercisability or vesting is required, and establish the events of termination or reversion of such Awards, provided, however, that any Awards to a non-employee director shall be subject to approval or ratification by the Board;
(c) to approve the forms of Award Agreements (which need not be identical either among types of awards or among Participants) and any amendments thereto;
(d) to construe and interpret this Plan and any agreements defining the rights and obligations of the Company and Participants under this Plan, further define the terms used in this Plan, and prescribe, amend and rescind rules and regulations relating to the administration of this Plan;
(e) to amend, cancel, modify, or waive the Corporation's rights with respect to, or modify, discontinue, suspend, or terminate any or all outstanding Awards held by Participants, subject to any required consent under Section 5.6;
(f) to adjust the exercisability, term (subject to the limits of Section 1.6) or vesting schedule of any or all outstanding Awards, adjust the number of shares subject to any Award, or otherwise change previously imposed terms and conditions as deemed appropriate by the Committee, by amendment, waiver or other legally valid means (which may result, among other changes, in a different number of shares subject to the Award, a different vesting or exercise period, or, except as provided below, a different exercise or purchase price), in each
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case subject to Sections 1.4 and 5.6; provided, however, that in no case shall the exercise price of any Option be reduced (by amendment, substitution, cancellation and regrant or other means) without prior stockholder approval;
(g) to provide for the settlement of an Award in cash, shares or another Award, based upon the intrinsic value of such Award at the time of settlement or such other valuation methodology as the Committee may approve; and
(h) to make all other determinations and take such other action as contemplated by this Plan or as may be necessary or advisable for the administration of this Plan and the effectuation of its purposes.
1.2.3 Binding Determinations/Liability Limitation. Any action taken by, or inaction of, the Corporation, any Subsidiary, the Board or the Committee relating or pursuant to this Plan and within its authority hereunder or under applicable law shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons. Neither the Board nor any Committee, nor any member thereof or person acting at the direction thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with this Plan (or any Award made under this Plan), and all such persons shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, attorneys' fees) arising or resulting therefrom to the fullest extent permitted by law and/or under any directors and officers liability insurance coverage that may be in effect from time to time.
1.2.4 Reliance on Experts. In making any determination or in taking or not taking any action under this Plan, the Committee or the Board, as the case may be, may obtain and may rely upon the advice of experts, including professional advisors to the Corporation. No director, officer or agent of the Company shall be liable for any such action or determination taken or made or omitted in good faith.
1.2.5 Bifurcation of Plan Administration and Delegation. Subject to the limits set forth in the definition of "Committee" in Article 6, the Board may delegate different levels of authority to different committees with administration and grant authority under this Plan, provided that each designated Committee granting any Options hereunder will consist exclusively of a member or members of the Board. A majority of the members of the acting Committee will constitute a quorum. The vote of a majority of a quorum or the unanimous written consent of a Committee will constitute action by the Committee. A Committee may delegate ministerial, non-discretionary functions to individuals who are officers or employees of the Company.
1.3 Participation.
Awards may be granted by the Committee only to those persons that the Committee determines to be Eligible Persons. An Eligible Person who has been granted an Award may, if otherwise eligible, be granted additional Awards, subject to the terms of this Plan.
1.4 Shares Available for Awards; Share Limits.
1.4.1 Shares Available. Subject to the provisions of Section 5.2, the capital stock that may be delivered under this Plan shall be shares of the Corporation's authorized but unissued Common Stock and any shares of its Common Stock held as treasury shares. The shares may be delivered for any lawful consideration.
2
1.4.2 Share Limits. The maximum number of shares of Common Stock that may be delivered pursuant to Awards granted to Eligible Persons under this Plan (the "Share Limit") is equal to the sum of the following:
(a) 12,000,000 shares of Common Stock, plus
(b) the number of shares of Common Stock available for additional award grant purposes under the Corporation's 1997 Employee Stock Incentive Plan (the "1997 Plan") as of the date of stockholder approval of this amended and restated version of the Plan (the "Stockholder Approval Date") and determined immediately prior to the termination of authority to grant new awards under the 1997 Plan as of the Stockholder Approval Date, plus
(c) the number of any shares subject to stock options granted under the 1997 Plan or the Corporation's Amended and Restated Stock Incentive Plan of 1992 (the "1992 Plan") and outstanding on the Stockholder Approval Date which expire, or for any reason are cancelled or terminated, after the Stockholder Approval Date without being exercised; provided, however, that if stockholders approve and the Corporation implements a proposal to permit the Corporation to offer a one-time opportunity to holders of certain outstanding stock options granted under this Plan, the 1997 Plan and the 1992 Plan to exchange such options for a conditional right to receive new Options granted under this Plan (the "Option Exchange") at an exercise price equal to the Fair Market Value of a share of Common Stock on the date such new Option (a "Replacement Option") is granted, the shares subject to any outstanding options granted under the 1997 Plan or the 1992 Plan tendered in the Option Exchange shall be available solely for the purpose of granting Replacement Options pursuant to the Option Exchange and shall not be available for the grant of any new Awards under this Plan.
Shares issued in respect of any Awards granted under this Plan other than Options shall be counted against the Share Limit as two shares for every share actually issued in connection with the Award.
The maximum number of shares of Common Stock that may be delivered pursuant to options qualified as Incentive Stock Options granted under this Plan is 2,250,000. The maximum number of shares subject to options that during any three consecutive calendar years are granted to any individual shall be limited to 1,200,000. The maximum individual limit on the number of shares in the aggregate subject to all Awards that during any three consecutive calendar years are granted under this Plan shall be 1,200,000. Each of these share limits shall be subject to adjustment as contemplated by this Section 1.4 and Section 5.2.
1.4.3 Share Reservation; Replenishment and Reissue of Unvested Awards. No Award may be granted under this Plan unless, on the date of grant, the sum of (1) the maximum number of shares issuable at any time pursuant to such Award, plus (2) the number of shares that have previously been issued pursuant to Awards granted under this Plan, other than reacquired shares available for reissue consistent with any applicable legal limitations as appropriately adjusted, plus (3) the maximum number of shares that may be issued at any time after such date of grant pursuant to Awards that are outstanding on such date, does not exceed the Share Limit. Shares that are subject to or underlie Awards which expire or for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under this Plan, as well as reacquired shares under the Plan, shall again, except to the extent prohibited by law, be available for subsequent Awards under the Plan; provided, however, that shares subject to any Options granted under this Plan tendered in the Option Exchange shall be available solely for the purpose of granting Replacement Options pursuant to the Option Exchange and shall not be available for the grant of any new Awards under this Plan. Except as limited by law, if an Award is or may be settled only in cash, such Award need not be counted against any of the limits under this Section 1.4.
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1.5 Grant of Awards.
Subject to the express provisions of this Plan, the Committee shall determine the number of shares of Common Stock subject to each Award, the price (if any) to be paid for the shares or the Award and, in the case of performance share awards, in addition to matters addressed in Subsection 1.2.2, the specific objectives, goals and performance criteria (such as an increase in sales, market value, earnings or book value over a base period, the years of service before vesting, the relevant job classification or level of responsibility or other factors) that further define the terms of the performance share award. Each Award shall be evidenced by an Award Agreement signed by the Corporation and, if required by the Committee, by the Participant. The Award Agreement shall set forth the material terms and conditions of the Award established by the Committee consistent with the specific provisions of this Plan.
1.6 Award Period.
Each Award and all executory rights or obligations under the related Award Agreement shall expire on such date (if any) as shall be determined by the Committee, but not later than five (5) years after the Award Date in the case of Options or other rights to acquire Common Stock; provided, however, that any payment of cash or delivery of shares pursuant to an Award may be delayed until a further date if specifically authorized by the Committee pursuant to Article 3 or otherwise, by resolution, written consent or other writing.
1.7 Limitations on Exercise and Vesting of Awards.
1.7.1 Provisions for Exercise. Unless the Committee otherwise expressly provides, no Award shall be exercisable or shall vest until at least six months after the Award Date, and once exercisable an Award shall remain exercisable until the expiration or earlier termination of the Award.
1.7.2 Procedure. Any exercisable Award shall be deemed to be exercised when the Secretary of the Corporation receives written notice of such exercise from the Participant, together with any required payment made in accordance with Section 2.2.
1.7.3 Fractional Shares/Minimum Issue. Fractional share interests shall be disregarded, but may be accumulated for future exercises. The Committee, however, may determine in the case of Eligible Persons that cash, other securities, or other property will be paid or transferred in lieu of any fractional share interests. No fewer than 100 shares may be purchased on exercise of any Award at one time unless the number purchased is the total number at the time available for purchase under the Award.
1.8 Acceptance of Notes to Finance Exercise.
The Corporation may, with the Committee's approval, accept one or more notes from any Eligible Person in connection with the exercise or receipt of any outstanding Award; provided that any such note shall be subject to the following terms and conditions:
(a) The principal of the note shall not exceed the amount required to be paid to the Corporation upon the exercise or receipt of one or more Awards under the Plan and the note shall be delivered directly to the Corporation in consideration of such exercise or receipt.
(b) The initial term of the note shall be determined by the Committee; provided that the term of the note, including extensions, shall not exceed a period of five years.
(c) The note shall provide for full recourse to the Participant and shall bear interest at a rate determined by the Committee but not less than the interest rate necessary to avoid the imputation of interest under the Code.
4
(d) If the Participant retires or the Participant's employment or service otherwise terminates, the unpaid principal balance of the note shall become due and payable on the 30th business day after such event; provided, however, that if a sale of such shares would cause such Participant to incur liability under Section 16(b) of the Exchange Act, the unpaid balance shall become due and payable on the 10th business day after the first day on which a sale of such shares could have been made without incurring such liability assuming for these purposes that there are no other transactions (or deemed transactions in securities of this Corporation) by the Participant subsequent to such event.
(e) If required by the Committee or by applicable law, the note shall be secured by a pledge of any shares or rights financed thereby in compliance with applicable law.
(f) The terms, repayment provisions, and collateral release provisions of the note and the pledge securing the note shall conform with applicable rules and regulations of the Federal Reserve Board as then in effect.
1.9 No Transferability; Limited Exception to Transfer Restrictions.
1.9.1 Limit on Exercise and Transfer. Unless otherwise expressly provided in (or pursuant to) this Section 1.9, by applicable law and by the Award Agreement, as the same may be amended, (1) all Awards are non-transferable and shall not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge; Awards shall be exercised only by the Participant; and (2) amounts payable or shares issuable pursuant to an Award shall be delivered only to (or for the account of) the Participant.
1.9.2 Exceptions. The Committee may permit Awards to be exercised by and paid to the Participant's "family members" (as defined below), charitable institutions, or other persons as may be approved by the Committee, pursuant to such conditions and procedures as the Committee may establish. Any permitted transfer shall be subject to the condition that the Committee receive evidence satisfactory to it that the transfer is being made by the Participant for estate planning, tax planning, or essentially donative purposes and that no consideration (other than nominal consideration or an exchange for an interest in the family related entity) is received by the Participant or in settlement of marital property or similar rights or interests. Notwithstanding the foregoing, Incentive Stock Options and Restricted Stock Awards shall be subject to any and all additional transfer restrictions under the Code.
For purposes hereof, a "family member" shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Participant's household (other than a tenant or an employee), a trust in which these persons (including the Participant) have more than fifty percent (50%) of the beneficial interest, a foundation in which those persons (including the Participant) control the management of assets, and any other entity in which these persons (including the Participant) own more than fifty percent (50%) of the voting interests.
1.9.3 Further Exceptions to Limits on Transfer. The exercise and transfer restrictions in Subsection 1.9.1 shall not apply to:
(a) transfers to the Corporation,
(b) the designation of a beneficiary to receive benefits in the event of the Participant's death or, if the Participant has died, transfers to or exercise by the Participant's beneficiary, or, in the absence of a validly designated beneficiary, transfers by will or the laws of descent and distribution,
5
(c) if the Participant has suffered a disability, permitted transfers or exercises on behalf of the Participant by his or her legal representative, or
(d) the authorization by the Committee of "cashless exercise" procedures with third parties who provide financing for the purpose of (or who otherwise facilitate) the exercise of Awards consistent with applicable laws and the express authorization of the Committee.
2. OPTIONS.
2.1 Grants.
One or more Options may be granted under this Article to any Eligible Person. Each Option granted shall be designated in the applicable Award Agreement, by the Committee, as either an Incentive Stock Option, subject to Section 2.3, or a Nonqualified Stock Option.
2.1.1 Special International Grants. One or more Options or other Awards may be granted to Eligible Employees who provide services to the Corporation outside of the United States. Options or other Awards granted to such Eligible Employees may be granted pursuant to the terms and conditions of any applicable sub-plans, if any, appended to the Plan and approved by the Board.
2.2 Option Price.
2.2.1 Pricing Limits. The purchase price per share of the Common Stock covered by each Option shall be determined by the Committee at the time of the Award, but shall not be less than 100% (110% in the case of an Incentive Stock Option granted to a Participant described in Section 2.4) of the Fair Market Value per share of the Common Stock on the date of grant, except as provided in Section 2.6 and subject to adjustments provided by Section 5.2.
2.2.2 Payment Provisions. The purchase price of any shares purchased on exercise of an Option granted under this Article shall be paid in full at the time of each purchase in one or a combination of the following methods: (a) in cash or by electronic funds transfer; (b) by check payable to the order of the Corporation; (c) if authorized by the Committee or specified in the applicable Award Agreement, by a promissory note of the Participant consistent with the requirements of Section 1.8; (d) by notice and third party payment in such manner as may be authorized by the Committee; or (e) by the delivery of shares of Common Stock of the Corporation already owned by the Participant, provided, however, that the Committee may in its absolute discretion limit the Participant's ability to exercise an Award by delivering such shares, and provided further that any shares delivered which were initially acquired upon exercise of a stock option must have been owned by the Participant at least six months as of the date of delivery. Shares of Common Stock used to satisfy the exercise price of an Option shall be valued at their Fair Market Value on the date of exercise.
2.3 Limitations on Grant and Terms of Incentive Stock Options.
2.3.1 $100,000 Limit. To the extent that the aggregate "Fair Market Value" of stock with respect to which incentive stock options first become exercisable by a Participant in any calendar year exceeds $100,000, taking into account both Common Stock subject to Incentive Stock Options under this Plan and stock subject to Incentive Stock Options under all other plans of the Company, such options shall be treated as Nonqualified Stock Options. For this purpose, the "Fair Market Value" of the stock subject to options shall be determined as of the date the options were awarded. In reducing the number of options treated as Incentive Stock Options to meet the $100,000 limit, the most recently granted options shall be reduced first. To the extent a reduction of simultaneously granted options is necessary to meet the $100,000 limit, the Committee may, in the manner and to the extent permitted by law, designate which shares of Common Stock are to be treated as shares acquired pursuant to the exercise of an Incentive Stock Option.
6
2.3.2 Option Period. Each Option and all rights thereunder shall expire no later than five (5) years after the Award Date, but may be subject to early termination pursuant to Section 5.2 and/or deferred pay-out elections, as the Committee may provide.
2.3.3 Other Code Limits. Incentive Stock Options may only be granted to Eligible Employees of the Corporation or of a Subsidiary that satisfies the other eligibility requirements of the Code. There shall be imposed in any Award Agreement relating to Incentive Stock Options such other terms and conditions as from time to time are required in order that the Option be an "incentive stock option" as that term is defined in Section 422 of the Code.
2.4 Limits on 10% Holders.
No Incentive Stock Option may be granted to any person who, at the time the Option is granted, owns (or is deemed to own under Section 424(d) of the Code) shares of outstanding Common Stock possessing more than 10% of the total combined voting power of all classes of stock of the Corporation, unless the exercise price of such Option is at least 110% of the Fair Market Value of the stock subject to the Option and such Option by its terms is not exercisable after the expiration of five years from the date such Option is granted.
2.5 Effects of Termination of Service (Including Retirement).
Subject to earlier termination pursuant to or as contemplated by Section 1.6 or 5.2:
2.5.1 Options. Any Option outstanding at the time of a Retirement or other termination of employment (or other service specified in the Award Agreement) for any reason shall remain exercisable for such period of time thereafter as shall be determined by the Committee and set forth in the Award Agreement, but no such Option shall be exercisable after the final expiration date of the Option.
2.5.2 Other Awards. The Committee shall establish in respect of each other Award granted hereunder the Participant's rights and benefits (if any) in the event of a Retirement or other termination of employment or service and in so doing may make distinctions based upon the cause of termination and the nature of the Award. Unless otherwise provided in the applicable Award Agreement and subject to the other provisions of this Plan, Restricted Stock Awards and Performance Share Awards, to the extent such Awards have not become vested as of the date of a Retirement or other termination of employment or services with the Company, shall be terminated upon such date.
2.6 Options and Rights in Substitution for Stock Options Granted by Other Corporations.
Options may be granted to Eligible Persons under this Plan in substitution for employee stock options granted by other entities to persons who are or who will become Eligible Persons in respect of the Company, in connection with a distribution, merger or reorganization by or with the granting entity or an affiliated entity, or the acquisition by the Company, directly or indirectly, of all or a substantial part of the stock or assets of the other entity, on terms necessary to preserve the intrinsic value of prior outstanding options.
3. RESTRICTED STOCK OR UNIT AWARDS.
3.1 Grants.
3.1.1 General. The Committee may, in its discretion, grant one or more Restricted Stock or Restricted Stock Unit Awards to any Eligible Person. Each Restricted Stock Award Agreement shall specify the number of shares of Common Stock to be issued to the Participant, the date of such issuance, the consideration for such shares (but not less than the minimum lawful consideration under applicable state law) by the Participant, the extent (if any) to which and the
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time (if ever) at which the Participant shall be entitled to dividends, voting and other rights in respect of the shares prior to vesting, and the restrictions (which may be based on performance criteria, passage of time or other factors or any combination thereof) imposed on such shares and the conditions of release or lapse of such restrictions. Such restrictions shall not lapse earlier than six months after the Award Date, except to the extent the Committee may otherwise provide. Any stock certificates evidencing shares of Restricted Stock pending the lapse of the restrictions ("Restricted Shares") shall bear a legend making appropriate reference to the restrictions imposed hereunder and shall be held by the Corporation or by a third party designated by the Committee until the restrictions on such shares shall have lapsed and the shares shall have vested in accordance with the provisions of the Award and Section 1.7. Upon issuance of the Restricted Stock Award, the Participant may be required to provide such further assurance and documents as the Committee may require to enforce the restrictions.
3.1.2 Special Provisions for Stock Units. Subject to such rules and procedures as the Committee may establish from time to time, the Committee may, in its discretion, authorize a Stock Unit Award or the crediting of Stock Units pursuant to the terms of this Plan and any applicable deferred compensation plan maintained by the Company, permit an Eligible Person to irrevocably elect to defer or receive in Stock Units all or a portion of any Award hereunder, or may grant Stock Units in lieu of, in exchange for, in respect of, or in addition to any other Award under this Plan or any other stock option plan or deferred compensation plan of the Company. The specific terms, conditions and provisions relating to each Stock Unit grant or election, including the form of payment to be made at or following the vesting thereof, shall be set forth in or pursuant to the applicable agreement or Award and the relevant Company deferred compensation plan, in form substantially as approved by the Committee.
3.1.3 Stock Unit Payouts. The Committee shall determine, among other terms of a Stock Unit Award, the form of payment of Stock Units, whether in cash, Common Stock, or other consideration (including any other Award) or any combination thereof, and the applicable vesting and payout provisions of the Stock Units. The Committee in the applicable Award Agreement or the relevant Company deferred compensation plan may permit the Participant to elect the form and time of payout of vested Stock Units on such conditions or subject to such procedures as the Committee may impose, and may permit Stock Unit offsets or other provision for payment of any applicable taxes that may be due on the crediting, vesting or payment in respect of the Stock Units.
3.2 Restrictions.
3.2.1 Pre-Vesting Restraints. Except as provided in Section 3.1 and 1.9, restricted shares comprising any Restricted Stock Award may not be sold, assigned, transferred, pledged or otherwise disposed of or encumbered, either voluntarily or involuntarily, until the restrictions on such shares have lapsed and the shares have become vested.
3.2.2 Dividend and Voting Rights. Unless otherwise provided in the applicable Award Agreement, a Participant receiving a Restricted Stock Award shall be entitled to vote such shares but shall not be entitled to dividends on any of the shares until the shares have vested. Such dividends shall be retained in a restricted account until the shares have vested and shall revert to the Corporation if they fail to vest.
3.2.3 Cash Payments. If the Participant shall have paid or received cash (including any dividends) in connection with the Restricted Stock Award, the Award Agreement shall specify the provisions for return of the cash (with or without an earnings factor) as to any restricted shares which cease to vest or be eligible for vesting.
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3.3 Return to the Corporation.
Unless the Committee otherwise expressly provides, Restricted Shares that remain subject to restrictions at the time of a Retirement or other termination of employment or other service or are subject to other conditions to vesting that have not been satisfied by the time specified in the applicable Award Agreement shall not vest and shall be returned to the Corporation in such manner and on such terms as the Committee shall therein provide.
4. PERFORMANCE SHARE AWARDS, STOCK BONUSES AND DEFERRED PAYMENT OPPORTUNITIES.
4.1 Grants of Performance Share Awards.
The Committee may, in its discretion, grant Performance Share Awards to Eligible Persons based upon such factors as the Committee shall deem relevant in light of the specific type and terms of the award. An Award Agreement shall specify the maximum number of shares of Common Stock (if any) subject to the Performance Share Award, the consideration (but not less than the minimum lawful consideration) to be paid for any such shares as may be issuable to the Participant, the duration of the Award and the conditions upon which delivery of any shares or cash to the Participant shall be based. The amount of cash or shares or other property that may be deliverable pursuant to such Award shall be based upon the degree of attainment over a specified period of not more than 10 fiscal years (a "performance cycle") as may be established by the Committee of such measure(s) of the performance of the Company (or any part thereof) or the Participant as may be established by the Committee. The Committee may provide for full or partial credit, prior to completion of such performance cycle or the attainment of the performance achievement specified in the Award, in the event of the Participant's death, Retirement, or Total Disability, a Change in Control Event or in such other circumstances as the Committee, consistent with Subsection 5.10.3(b), if applicable, may determine.
4.2 Special Performance-Based Awards.
Without limiting the generality of the foregoing, and in addition to options granted under other provisions of this Article 4, other performance-based awards within the meaning of Section 162(m) of the Code ("Performance-Based Awards"), whether in the form of restricted stock, performance stock, phantom stock or other rights, payable in cash or shares any combination thereof, the vesting of which depends on the performance of the Company on a consolidated, segment, subsidiary, division, unit, or station basis with reference to revenue growth, gross profit, earnings (before or after taxes; or before or after taxes, interest, depreciation, and/or amortization), cash flow (from operating, investing or financing activities or any combination thereof), working capital, stock performance, stock price appreciation, return on equity or on assets or on net investment, or cost containment or reduction, or any combination thereof (the "business criteria") relative to preestablished performance goals, may be granted under this Plan. The applicable business criteria and the specific performance goals must be approved by the Committee in advance of applicable deadlines under the Code and while the performance relating to such goals remains substantially uncertain. The applicable performance measurement period may be not less than one fiscal quarter nor more than 10 fiscal years. Performance targets shall be adjusted to mitigate the unbudgeted impact of material, unusual or nonrecurring gains and losses, accounting changes or other extraordinary events not foreseen at the time the targets were set. Other types of performance and non-performance awards may also be granted under the other provisions of this Plan.
4.2.1 Eligible Class. The eligible class of persons for Awards under this Section shall be employees (including officers) of the Corporation.
4.2.2 Maximum Award. In no event shall stock-based grants to a Participant under this Section 4.2 exceed the individual share limits of Subsection 1.4.2 or cash-based grants be paid in
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an amount of more than $3,000,000 with respect to a Participant's performance during any consecutive three fiscal year period.
4.2.3 Committee Certification. Before any Performance-Based Award under this Section 4.2 is paid and to the extent required by Section 162(m) of the Code, the Committee must certify that the material terms of the Performance-Based Award were satisfied.
4.2.4 Terms and Conditions of Awards. The Committee will have discretion to determine the restrictions or other limitations of the individual Awards under this Section 4.2 (including the authority to reduce Awards, payouts or vesting or to pay no Awards, in its sole discretion, if the Committee preserves such authority at the time of grant by language to this effect in its authorizing resolutions or otherwise).
4.2.5 Stock Payout Features. In lieu of cash payment of an Award, the Committee may require or allow all or a portion of the Award to be paid in the form of stock, Restricted Shares or an Option.
4.3 Grants of Stock Bonuses.
The Committee may grant a Stock Bonus to any Eligible Person to reward exceptional or special services, contributions or achievements in the manner and on such terms and conditions (including any restrictions on such shares) as determined from time to time by the Committee. The number of shares so awarded shall be determined by the Committee. The Award may be granted independently or in lieu of a cash bonus.
4.4 Deferred Payments Opportunities.
The Committee may authorize for the benefit of any Eligible Person the deferral of any payment of cash or shares that may become due or of cash otherwise payable under this Plan, and provide for accredited benefits thereon based upon such deferment, at the election or at the request of such Participant, subject to the other terms of this Plan. Such deferral opportunities shall be subject to such further conditions, restrictions or requirements as the Committee may impose, subject to any then vested rights of Participants, and may take the form of one or more types of Awards authorized under this Plan.
5. OTHER PROVISIONS.
5.1 Rights of Eligible Persons, Participants and Beneficiaries.
5.1.1 Employment Status. Status as an Eligible Person shall not be construed as a commitment that any Award will be made under this Plan to an Eligible Person or to Eligible Persons generally.
5.1.2 No Employment Contract. Nothing contained in this Plan (or in any other documents under this Plan or in any Award) shall confer upon any Eligible Person or Participant any right to continue in the employ or other service of the Company, constitute any contract or agreement of employment or other service or affect an employee's status as an employee at will, nor shall interfere in any way with the right of the Company to change a person's compensation or other benefits, or to terminate his or her employment or other service, with or without cause. Nothing in this Section, however, is intended to adversely affect any express independent right of such person under a separate employment or service contract other than an Award Agreement. Service between specified vesting dates shall provide no basis for partial vesting or pro rata benefits unless an Award Agreement expressly otherwise provides.
5.1.3 Plan Not Funded. Awards payable under this Plan shall be payable in shares or from the general assets of the Company, and (except as provided in Subsection 1.4.4) no special or
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separate reserve, fund or deposit shall be made to assure payment of such Awards. No Participant, Beneficiary or other person shall have any right, title or interest in any fund or in any specific asset (including shares of Common Stock, except as expressly otherwise provided) of the Company by reason of any Award hereunder. Neither the provisions of this Plan (or of any related documents), nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this Plan shall create, or be construed to create, a trust of any kind or a fiduciary relationship between the Company and any Participant, Beneficiary or other person. To the extent that a Participant, Beneficiary or other person acquires a right to receive payment pursuant to any Award hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company.
5.2 Adjustments; Acceleration.
5.2.1 Adjustments. Upon or in contemplation of any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend) or reverse stock split; any merger, combination, consolidation, or other reorganization; any spin-off, split-up, or similar extraordinary dividend distribution ("spin-off") in respect of the Common Stock (whether in the form of securities or property); any exchange of Common Stock or other securities of the Corporation, or any similar, unusual or extraordinary corporate transaction in respect of the Common Stock; or a sale of all or substantially all the assets of the Company as an entirety ("asset sale"); then the Committee shall, in such manner, to such extent (if any) and at such time as it deems appropriate and equitable in the circumstances:
(a) in any of such events, proportionately adjust any or all of (i) the number and type of shares of Common Stock (or other securities) that thereafter may be made the subject of Awards (including the specific maximum and numbers of shares set forth elsewhere in this Plan), (ii) the number, amount and type of shares of Common Stock (or other securities or property) subject to any or all outstanding Awards, (iii) the grant, purchase, or exercise price of any or all outstanding Awards, (iv) the securities, cash or other property deliverable upon exercise of any outstanding Awards, or (v) (subject to limitations under Subsection 5.10.3) the performance standards appropriate to any outstanding Awards, or
(b) in the case of a reclassification, recapitalization, merger, consolidation, combination, or other reorganization, spin-off or asset sale, make provision for a cash payment or for the assumption, substitution or exchange of any or all outstanding share-based Awards or the cash, securities or property deliverable to the holder of any or all outstanding share-based Awards, based upon the distribution or consideration payable to holders of the Common Stock upon or in respect of such event.
The Committee may adopt such valuation methodologies for outstanding Options as it deems reasonable in the event of a cash or property settlement or, in the case of Options or similar rights, may base such settlement solely upon the excess (if any) of the price of the underlying shares payable in the transaction over the exercise or strike price of the Award.
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In each case, with respect to Awards of Incentive Stock Options, no adjustment shall be made in a manner that would cause the Plan to violate Section 422 or 424(a) of the Code or any successor provisions without the written consent of holders materially adversely affected thereby.
In any of such events, the Committee may take such action prior to such event to the extent that the Committee deems the action necessary to permit the Participant to realize the benefits intended to be conveyed with respect to the underlying shares in the same manner as is or will be available to stockholders generally.
5.2.2 Acceleration of Awards Upon Change in Control. Unless prior to a Change in Control Event the Committee determines that, upon its occurrence, benefits under any or all Awards shall not be accelerated or determines that only certain or limited benefits under any or all Awards shall be accelerated and the extent to which they shall be accelerated, and/or establishes a different time in respect of such Change in Control Event for such acceleration, then upon the occurrence of a Change in Control Event:
(a) each Option shall become immediately exercisable,
(b) Restricted Stock shall immediately vest free of restrictions, and
(c) each Performance Share Award shall become payable to the Participant.
Any discretion with respect to these events shall be limited to the extent required by applicable accounting requirements in the case of a transaction intended to be accounted for as a pooling of interests transaction.
The Committee may override the limitations on acceleration in this Subsection 5.2.2 by express provision in the Award Agreement and may accord any Eligible Person a right to refuse any acceleration, whether pursuant to the Award Agreement or otherwise, in such circumstances as the Committee may approve. Any acceleration of Awards shall comply with applicable legal requirements and, if necessary to accomplish the purposes of the acceleration or if the circumstances require, may be deemed by the Committee to occur (subject to Subsection 5.2.4) a limited period of time not greater than 30 days before the event. Without limiting the generality of the foregoing, the Committee may deem an acceleration to occur immediately prior to the applicable event and/or reinstate the original terms of an Award if an event giving rise to an acceleration does not occur.
5.2.3 Possible Early Termination of Awards. Upon the occurrence of either of the following:
(a) any Option or other right to acquire Common Stock under this Plan has been fully accelerated as required or permitted by Subsection 5.2.2 but is not exercised prior to (1) a dissolution of the Company, or (2) an event described in Subsection 5.2.1 that the Company does not survive, or
(b) the Board or the Committee has provided for settlement at the price paid in a Change in Control Event in respect of at least the vested portion of an outstanding Option or other right upon or in anticipation of a Change in Control Event approved by the Board,
such Option or right shall terminate, subject to any provision that has been expressly made by the Board, the Committee through a plan of reorganization approved by the Board or the Committee, or otherwise, for the survival, substitution, assumption, exchange or other settlement of such Option or right.
5.2.4 Possible Rescission of Acceleration. If the vesting of an Award has been accelerated expressly in anticipation of an event or subject to stockholder approval of an event and the Committee or the Board later determines that the event will not occur, the Committee may
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rescind the effect of the acceleration as to any then outstanding and unexercised or otherwise unvested Awards.
5.2.5 Acceleration Upon Termination of Service in Anticipation of, or Following a Change In Control. The Committee may, either at the time the Award is granted or at any time while the Award remains outstanding, provide that the Award shall accelerate in the event the Participant's employment or other service is terminated by the Company, or the surviving entity, for any reason other than Dismissal for Cause within a designated period (not to exceed eighteen (18) months) following the announcement of any Change in Control with respect to which the Award does not otherwise accelerate. Any Award so accelerated shall remain exercisable until the expiration or earlier termination of the Award.
5.3 Effect of Termination of Service on Awards.
5.3.1 General. The Committee shall establish the effect of a Retirement or other termination of employment or service on the rights and benefits under each Award under this Plan and in so doing may make distinctions based upon the cause of termination.
5.3.2 Termination of Consulting or Affiliate Services. If the Participant is not an Eligible Employee or director and provides services as an Other Eligible Person, the Committee shall be the sole judge of whether the Participant continues to render services to the Company, unless a contract or the Award otherwise provides. If in these circumstances the Committee notifies the Participant in writing that a termination of services of the Participant for purposes of this Plan has occurred, then (unless the contract or Award otherwise expressly provides), the Participant's termination of services for purposes of Section 2.6, 3.3 or 4 shall be the date which is 10 days after the Committee's mailing of the notice or, in the case of a Termination For Cause, the date of the mailing of the notice.
5.3.3 Events Not Deemed Terminations of Service. Subject to the requirements of applicable law, the Committee shall establish the effect of a leave of absence on the employment or service relationship and the rights and benefits under each Award under this Plan. In no event shall an Award be exercised after the expiration of the term set forth in the Award Agreement.
5.3.4 Effect of Change of Subsidiary Status. For purposes of this Plan and any Award, if an entity ceases to be a Subsidiary, a termination of employment or service shall be deemed to have occurred immediately upon such cessation of Subsidiary status with respect to each Eligible Person in respect of the Subsidiary who does not continue as an Eligible Person in respect of another entity within the Company.
5.4 Compliance with Laws.
This Plan, the granting and vesting of Awards under this Plan, the offer, issuance and delivery of shares of Common Stock, the acceptance of promissory notes and/or the payment of money under this Plan or under Awards are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law, federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. In addition, any securities delivered under this Plan may be subject to any special restrictions that the Committee may require to preserve a pooling of interests under generally accepted accounting principles. The person acquiring any securities under this Plan will, if requested by the Company, provide such assurances and representations to the Company as the Committee may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements.
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5.5 Tax Matters.
5.5.1 Provision for Tax Withholding or Offset. Upon any exercise, vesting, or payment of any Award or upon the disposition of shares of Common Stock acquired pursuant to the exercise of an Incentive Stock Option prior to satisfaction of the holding period requirements of Section 422 of the Code, the Corporation shall have the right at its option to (i) require the Participant (or Personal Representative or Beneficiary, as the case may be) to pay or provide for payment of the minimum amount of any taxes which the Corporation may be required to withhold with respect to such Award event or payment or (ii) deduct from any amount payable in cash the minimum amount of any taxes which the Corporation may be required to withhold with respect to such cash payment. In any case where a tax is required to be withheld in connection with the delivery of shares of Common Stock under this Plan, the Committee may in its sole discretion (subject to Section 5.4) grant (either at the time of the Award or thereafter) to the Participant the right to elect, pursuant to such rules and subject to such conditions as the Committee may establish, to have the Corporation reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of shares valued at their Fair Market Value, to satisfy such minimum withholding obligation, determined in each case as of the trading day next preceding the applicable date of exercise, vesting or payment.
5.5.2 Tax Loans. If so provided in the Award Agreement, the Corporation may, to the extent permitted by law, authorize a short-term loan of not more than six (6) months to an Eligible Person in the amount of any taxes that the Corporation may be required to withhold with respect to shares of Common Stock received (or disposed of, as the case may be) pursuant to a transaction described in Subsection 5.5.1. Such a loan shall be for a term, at a rate of interest and pursuant to such other terms and conditions as the Committee, under applicable law, may establish and such loan need not comply with the other provisions of Section 1.8.
5.6 Plan Amendment, Termination and Suspension.
5.6.1 Board or Committee Authorization. The Board may, at any time, terminate or, from time to time, amend, modify or suspend this Plan, in whole or in part; provided, however, that neither Section 1.2 nor any other provision of this Plan shall be amended to permit the reduction (by amendment, substitution, cancellation and regrant, or other means) of the exercise price of any Option without prior stockholder approval. No Awards may be granted during any suspension of this Plan or after termination of this Plan, but the Committee shall retain jurisdiction as to Awards then outstanding or payments deferred in accordance with the terms of this Plan.
5.6.2 Stockholder Approval. To the extent then required under Sections 162, 422 or 424 of the Code, Section 5.6.1 hereof, or any other applicable law, or deemed necessary or advisable by the Board, any amendment to this Plan shall be subject to stockholder approval.
5.6.3 Amendments to Awards. Without limiting any other express authority of the Committee under (but subject to) the express limits of this Plan, the Committee by agreement or resolution may waive conditions of or limitations on Awards to Participants that the Committee in the prior exercise of its discretion has imposed, without the consent of a Participant, and (subject to any requirements of Section 2.5) may make other changes to the terms and conditions of Awards that do not affect in any manner materially adverse to the Participant, the Participant's rights and benefits under an Award.
5.6.4 Limitations on Amendments to Plan and Awards. No amendment, suspension or termination of this Plan or change of or affecting any outstanding Award shall, without written consent of the Participant, affect in any manner materially adverse to the Participant any rights or benefits of the Participant or obligations of the Company under any Award granted under this Plan
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prior to the effective date of such change. Changes contemplated by Section 5.2 shall not be deemed to constitute changes or amendments for purposes of this Section 5.6.
5.7 Privileges of Stock Ownership.
Except as otherwise expressly authorized by the Committee or this Plan, a Participant shall not be entitled to any privilege of stock ownership as to any shares of Common Stock not actually delivered to and held of record by the Participant. No adjustment will be made for dividends or other rights as a stockholder for which a record date is prior to such date of delivery.
5.8 Effective Date of the Plan.
This Plan was effective as of January 1, 2000, and last amended as of November 22, 2004.
5.9 Term of the Plan.
No Award will be granted under this Plan after August 24, 2014 (the "termination date"). Unless otherwise expressly provided in this Plan or in an applicable Award Agreement, any Award granted prior to the termination date may extend beyond such date, and all authority of the Committee with respect to Awards hereunder, including the authority to amend an Award, shall continue during any suspension of this Plan and in respect of Awards outstanding on the termination date.
5.10 Governing Law/Construction/Severability.
5.10.1 Choice of Law. This Plan, the Awards, all documents evidencing Awards and all other related documents shall be governed by, and construed in accordance with the laws of the state of incorporation of the Company or such other state as may be expressly stated in an Award Agreement in a form approved by the Committee.
5.10.2 Severability. If a court of competent jurisdiction holds any provision invalid and unenforceable, the remaining provisions of this Plan shall continue in effect.
5.10.3 Plan Construction.
(a) Rule 16b-3. It is the intent of the Corporation that the Awards and transactions permitted by Awards generally satisfy and be interpreted in a manner that, in the case of Participants who are or may be subject to Section 16 of the Exchange Act, satisfies the applicable requirements of Rule 16b-3 so that such persons (unless they otherwise agree) will be entitled to the benefits of Rule 16b-3 or other exemptive rules under Section 16 of the Exchange Act in respect of those transactions and will not be subjected to avoidable liability.
(b) Section 162(m). It is the further intent of the Company that (to the extent the Company or Awards under this Plan may be or become subject to limitations on deductibility under Section 162(m) of the Code), Options granted with an exercise or base price not less than Fair Market Value on the date of grant and performance-based awards under Section 4.2 of this Plan that are granted to or held by a person subject to Section 162(m) of the Code will qualify as performance-based compensation or otherwise be exempt from deductibility limitations under Section 162(m) of the Code, to the extent that the Committee authorizing the Award (or the payment thereof, as the case may be) satisfies any applicable administrative requirements thereof.
5.11 Captions.
Captions and headings are given to the sections and subsections of this Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of this Plan or any provision thereof.
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5.12 Effect of Change of Subsidiary Status.
For purposes of this Plan and any Award hereunder, if an entity ceases to be a subsidiary, a termination of employment and service shall be deemed to have occurred with respect to each Eligible Person in respect of such Subsidiary who does not continue as an Eligible Person in respect of another entity within the Company.
5.13 Stock-Based Awards in Substitution for Stock Options or Awards Granted by Other Corporation.
Awards may be granted to Eligible Persons under this Plan in substitution for employee stock options, stock appreciation rights, restricted stock or other stock-based awards granted by other entities to persons who are or who will become Eligible Persons in respect of the Company, in connection with a distribution, merger or other reorganization by or with the granting entity or an affiliated entity, or the acquisition by the Company, directly or indirectly, or all or a substantial part of the stock or assets of the employing entity.
5.14 Non-Exclusivity of Plan.
Nothing in this Plan shall limit or be deemed to limit the authority of the Board or the Committee to grant awards or authorize any other compensation, with or without reference to the Common Stock, under any other plan or authority.
5.15 No Corporate Action Restriction.
The existence of the Plan, the Award Agreements and the Awards granted hereunder shall not limit, affect or restrict in any way the right or power of the Board or the stockholders of the Corporation to make or authorize: (a) any adjustment, recapitalization, reorganization or other change in the Corporation's or any Subsidiary's capital structure or its business, (b) any merger, amalgamation, consolidation or change in the ownership of the Corporation or any subsidiary, (c) any issue of bonds, debentures, capital, preferred or prior preference stock ahead of or affecting the Corporation's or any Subsidiary's capital stock or the rights thereof, (d) any dissolution or liquidation of the Corporation or any Subsidiary, (e) any sale or transfer of all or any part of the Corporation or any Subsidiary's assets or business, or (f) any other corporate act or proceeding by the Corporation or any Subsidiary. No Participant, Beneficiary or any other person shall have any claim under any Award or Award Agreement against any member of the Board or the Committee, or the Corporation or any employees, officers or agents of the Corporation or any Subsidiary, as a result of any such action.
5.16 Other Company Benefit and Compensation Program.
Payments and other benefits received by a Participant under an Award made pursuant to this Plan shall not be deemed a part of a Participant's compensation for purposes of the determination of benefits under any other employee welfare or benefit plans or arrangements, if any, provided by the Corporation or any Subsidiary, except where the Committee or the Board expressly otherwise provides or authorizes in writing. Awards under this Plan may be made in addition to, in combination with, as alternatives to or in payment of grants, awards or commitments under any other plans or arrangements of the Company or the Subsidiaries.
6. DEFINITIONS.
6.1 Definitions.
(a) "Award" means an award of any Option, Restricted Stock, Stock Bonus, Stock Unit, Performance Share Award, dividend equivalent or deferred payment right or other right or security, or any combination thereof, whether alternative or cumulative, authorized by and granted under this Plan.
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(b) "Award Agreement" means any writing setting forth the terms of an Award that has been authorized by the Committee.
(c) "Award Date" means the date upon which the Committee took the action granting an Award or such later date as the Committee designates as the Award Date at the time of the Award.
(d) "Award Period" means the period beginning on an Award Date and ending on the expiration date of such Award.
(e) "Beneficiary" means the person, persons, trust or trusts designated by a Participant or, in the absence of a designation, entitled by will or the laws of descent and distribution, to receive the benefits specified in the Award Agreement and under this Plan in the event of a Participant's death, and shall mean the Participant's executor or administrator if no other Beneficiary is designated and able to act under the circumstances.
(f) "Board" means the Board of Directors of the Corporation.
(g) "Change in Control Event" means any of the following:
(1) Approval by the stockholders of the Corporation of the dissolution or liquidation of the Corporation, except to the extent the dissolution is in connection with a sale of assets which would not constitute a Change in Control Event under subsection (2) below.
(2) Approval by the stockholders of the Corporation of an agreement to merge, consolidate or otherwise reorganize, with or into, sell or transfer substantially all of the Corporation's business and/or assets as an entirety to one or more entities that are not Subsidiaries, as a result of which 50% or less of the outstanding voting securities of the surviving or resulting entities immediately after the reorganization are, or are to be, owned by former stockholders of the Corporation immediately before such reorganization (assuming for purposes of such determination that there is no change in the record ownership of the Corporation's securities from the record date for such approval until such reorganization, but including in such determination any securities of the other parties to such reorganization held by such affiliates of the Corporation).
(3) The occurrence of any of the following:
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(h) "Code" means the Internal Revenue Code of 1986, as amended from time to time.
(i) "Commission" means the Securities and Exchange Commission.
(j) "Committee" means the Board or any one or more committees of directors appointed by the Board to administer this Plan. At least one committee shall be comprised only of two or more directors or such greater number of directors as may be required under applicable law, each of whom, in respect of his or her participation in any decision at a time when the Participant affected by the decision may be subject to Section 162(m) of the Code, shall be Disinterested; provided, however, that the failure to satisfy the requisite standard of being Disinterested shall not affect the validity of the action of any committee otherwise duly authorized and acting in the matter.
(k) "Common Stock" means the Common Stock of the Corporation and such other securities or property as may become the subject of Awards, or become subject to Awards, pursuant to an adjustment made under Section 5.2 of this Plan.
(l) "Company" means, collectively, the Corporation and its Subsidiaries.
(m) "Corporation" means International Rectifier Corporation, a Delaware corporation, and its successors.
(n) "Disinterested" means a disinterested director or an "outside director" within the meaning of any applicable mandatory legal or regulatory requirements, including Section 162(m) of the Code as to Awards intended as performance based awards under that section.
(o) "Dismissal for Cause" means the Corporation or a Subsidiary has terminated an Eligible Person's employment or service because of any of the following:
(1) Any act that has resulted in the Eligible Person's personal gain at the expense of the Corporation or a Subsidiary.
(2) An Eligible Person's refusal to perform assigned duties.
(3) An Eligible Person's incompetence, insubordination, gross negligence, willful misconduct, breach of fiduciary duty, or conviction of a crime (other than minor traffic violations or similar offenses).
(4) Any conduct that results in a substantial detriment to the business or reputation of the Corporation or its Subsidiaries.
(p) "Eligible Employee" means an officer (whether or not a director) or employee of the Company.
(q) "Eligible Person" means an Eligible Employee, non-employee director or any Other Eligible Person, as determined by the Committee in its discretion.
(r) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time.
(s) "Fair Market Value" on any date means (1) if the stock is listed or admitted to trade on a national securities exchange, the closing price of the stock on the Composite Tape, as published in the Western Edition of The Wall Street Journal, of the principal national securities exchange on which the stock is so listed or admitted to trade, on such date, or, if there is no trading of the stock on such date, then the closing price of the stock as quoted on such Composite Tape on the next preceding date on which there was trading in such shares; or (2) if the stock is not listed on a national securities exchange, the value as established by the Committee or as reported by such other referenced market as the Committee may designate, at such time for purposes of this Plan.
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(t) "Incentive Stock Option" means an Option which is intended, as evidenced by its designation, as an incentive stock option within the meaning of Section 422 of the Code, the award of which contains such provisions (including but not limited to the receipt of stockholder approval of this Plan, if the Award is made prior to such approval) and is made under such circumstances and to such persons as may be necessary to comply with that section.
(u) "Nonqualified Stock Option" means an Option that is designated as a Nonqualified Stock Option and shall include any Option intended as an Incentive Stock Option that fails to meet the applicable legal requirements thereof. Any Option granted hereunder that is not designated as an incentive stock option shall be deemed to be designated a nonqualified stock option under this Plan and not an incentive stock option under the Code.
(v) "Option" means an option to purchase Common Stock granted under this Plan. The Committee shall designate any Option granted to an Eligible Person as a Nonqualified Stock Option or an Incentive Stock Option.
(w) "Other Eligible Person" means any individual consultant or advisor who renders or has rendered bona fide services (other than services in connection with the offering or sale of securities of the Company in a capital raising transaction or as a market maker or promoter of the Corporation's securities) to the Company, and who is selected to participate in this Plan by the Committee. An advisor or consultant may be selected as an Other Eligible Person only if such person's participation in this Plan would not adversely affect (1) the Corporation's eligibility to use Form S-8 to register under the Securities Act of 1933, as amended, the offering of shares issuable under this Plan by the Company or (2) the Corporation's compliance with any other applicable laws.
(x) "Participant" means an Eligible Person who has been granted an Award under this Plan.
(y) "Performance Share Award" means an Award of a right to receive shares of Common Stock under Section 4.1, or to receive shares of Common Stock or other compensation (including cash) under Section 4.2, the issuance or payment of which is contingent upon, among other conditions, the attainment of performance objectives specified by the Committee.
(z) "Personal Representative" means the person or persons who, upon the disability or incompetence of a Participant, shall have acquired on behalf of the Participant, by legal proceeding or otherwise, the power to exercise the rights or receive benefits under this Plan and who shall have become the legal representative of the Participant.
(aa) "Plan" means this International Rectifier Corporation 2000 Incentive Plan, as amended from time to time.
(bb) "Restricted Shares" or "Restricted Stock" means shares of Common Stock awarded to a Participant under this Plan, subject to payment of such consideration, if any, and such conditions on vesting (which may include, among others, the passage of time, specified performance objectives or other factors) and such transfer and other restrictions as are established in or pursuant to this Plan and the related Award Agreement, for so long as such shares remain unvested under the terms of the applicable Award Agreement.
(cc) "Retirement" means retirement with the consent of the Company or, in the case of a non-employee director, a retirement or resignation as a director after at least 5 consecutive years of service as a director.
(dd) "Rule 16b-3" means Rule 16b-3 as promulgated by the Commission pursuant to the Exchange Act, as amended from time to time.
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(ee) "Section 16 Person" means a person subject to Section 16(a) of the Exchange Act.
(ff) "Securities Act" means the Securities Act of 1933, as amended from time to time.
(gg) "Stock Bonus" means an Award of shares of Common Stock granted under this Plan for no consideration other than past services and without restriction other than such transfer or other restrictions as the Committee may deem advisable to assure compliance with law.
(hh) "Stock Unit" means a bookkeeping entry which serves as a unit of measurement relative to a share of Common Stock for purposes of determining the payment, in Common Stock or cash, of a grant or deferred benefit or right under this Plan. Stock Units carry no dividend, voting, or other rights of a holder of Common Stock. Stock Units may, however, by express provision in the related Award Agreement, carry related dividend equivalent rights.
(ii) "Stock Unit Account" means the bookkeeping account maintained by the Company on behalf of each Participant who is granted a Stock Unit award, which Stock Unit Account is credited with Stock Units in accordance with the terms of the applicable Award.
(jj) "Subsidiary" means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Corporation.
(kk) "Total Disability" means a "permanent and total disability" within the meaning of Section 22(e)(3) of the Code and such other disabilities, infirmities, afflictions or conditions as the Committee by rule may include.
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INTERNATIONAL RECTIFIER CORPORATION
2000 INCENTIVE PLAN
(Amended and Restated as of September 28, 2000)
NONQUALIFIED STOCK OPTION AGREEMENT
THIS OPTION AGREEMENT is between INTERNATIONAL RECTIFIER CORPORATION, a Delaware corporation (the "Company"), and (the "Optionee"). Pursuant to the International Rectifier Corporation 2000 Incentive Plan (Amended and Restated as of September 28, 2000) (the "Plan"), the Company grants a nonqualified stock option to purchase authorized but unissued or treasury shares of Common Stock, $1.00 par value, of the Company on the Terms and Conditions attached and in the Plan:
| Grant Date: | ||
Number of Shares: |
1 |
|
Exercise Price per Share: |
1 |
|
Vesting Schedule: |
% per year on each of the first anniversary dates of Grant Date2 |
|
Expiration Date: |
2 |
| INTERNATIONAL RECTIFIER CORPORATION (a Delaware Corporation) |
OPTIONEE | ||||
By: |
(Signature) |
||||
Its: |
(Address) |
||||
(City, State, Zip Code) |
|||||
TERMS AND CONDITIONS
1. Exercisability of Option. The Option shall vest and become exercisable in installments of % of the aggregate number of shares set forth on the facing page (subject to adjustment). Subject to earlier termination of the Option as provided in this Agreement or the Plan and changes and adjustments contemplated by the Plan, the first installment shall vest on the 1st anniversary of the Grant Date, and thereafter, installments of % of the shares shall vest on each of the nd, rd, and th anniversaries of the Grant Date. The Option may be exercised only to the extent the Option is exercisable.
| • | Cumulative Exercisability. | To the extent the Optionee does not in any year purchase all the shares that the Optionee may then exercise, the Optionee has the right cumulatively thereafter to purchase any shares not so purchased until the Option terminates or expires. | |
• |
No Fractional Shares. |
Fractional share interests shall be disregarded, but may be cumulated. |
|
• |
Minimum Exercise. |
No fewer than 100 shares may be purchased at any one time, unless the number purchased is the total number at the time exercisable under the Option. |
2. Method of Exercise of Option. To the extent exercisable, the Option may be exercised by the delivery to the Company of a written notice stating the number of shares to be purchased pursuant to the Option and payment made in cash or by check payable to the order of the Company in the full amount of the purchase price of the shares and amounts required to satisfy applicable withholding taxes. Other payment methods may be permitted only if expressly authorized by the Administrator with respect to this Option or all options under the Plan.
3. Continuance of Employment Required. The vesting schedule requires continued service through each applicable vesting date as a condition to the vesting of the applicable installment and rights and benefits under this Agreement. Partial service, even if substantial, during any vesting period will not entitle the Optionee to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment or service as provided in Section 4 below or under the Plan.
4. Effect of Termination of Employment or Death; Change in Subsidiary Status. If the Optionee's employment with the Company or any Subsidiary terminates, the Option and all other rights and benefits under this Agreement terminate, except that the Optionee may at any time within the following periods after termination exercise the Option to the extent the Option was exercisable at the date of termination of employment and has not otherwise expired. If the termination was the result of:
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5. Change in Subsidiary's Status; Leaves of Absence. If the Optionee is employed by an entity that ceases to be a Subsidiary and does not remain employed by the Company or another Subsidiary, this event is deemed for purposes of this Agreement to be a termination of the Optionee's employment by the Company other than pursuant to a Dismissal for Cause. Absence from work caused by military service, authorized sick leave or other leave approved in writing by the Committee shall not be considered a termination of employment by the Company for purposes of Section 4, subject to such conditions as may be imposed in connection with the approval of the leave of absence.
6. Notices. Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Company at its principal office, to the attention of the Corporate Secretary and to the Optionee at the address given beneath the Optionee's signature, or at such other address as either party may hereafter designate in writing to the other.
7. Optionee not a Stockholder. Neither the Optionee nor any other person entitled to exercise the Option shall have any of the rights or privileges of a stockholder of the Company as to any shares of Common Stock not actually issued and delivered to Optionee prior to delivery of the exercise price and satisfaction of all other conditions precedent to the due exercise of the Option and delivery of shares.
8. No Employment Commitment by Company. Nothing contained in this Agreement or the Plan constitutes an employment commitment by the Company, affects Optionee's status as an employee at will who is subject to termination without cause, confers upon Optionee any right to remain employed by the Company or any subsidiary, interferes in any way with the right of the Company or any subsidiary at any time to terminate such employment, or affects the right of the Company or any subsidiary to increase or decrease Optionee's other compensation.
9. Effect of Award Agreement. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company except to the extent the Committee determines otherwise.
10. Choice of Law. The constructive interpretation, performance and enforcement of the Option and this Agreement shall be governed by the laws of the State of California.
11. Defined Terms. Capitalized terms used herein and not otherwise defined herein shall have the meaning assigned to such terms in the Plan.
12. Plan. The Option and all rights of Optionee thereunder are subject to, and the Optionee agrees to be bound by, all of the terms and conditions of the provisions of the Plan, including, but not limited to Section 5.2 (Adjustments; Acceleration) and Section 5.10 (Governing Law/Construction/Severability). The Optionee acknowledges receipt of a copy of the Plan, which is made a part hereof by this reference, and agrees to be bound by the terms thereof. Unless otherwise expressly provided in other Sections of this Agreement, provisions of the Plan that confer discretionary authority on the Committee do not (and shall not be deemed to) create any additional rights in the Optionee not expressly set forth above.
3
INTERNATIONAL RECTIFIER CORPORATION
1997 EMPLOYEE STOCK INCENTIVE PLAN
1. Purpose of Plan
The purpose of this 1997 Employee Stock Incentive Plan (the "Plan") of International Rectifier Corporation, a Delaware corporation (the "Company") is to enable the Company and its subsidiaries to attract, motivate and retain their employees and certain other individuals by providing incentives related to equity interests in and the financial performance of the Company.
2. "Eligible Persons" Under the Plan
Any employee, consultant or advisor of the Company or any of its subsidiaries, other than a director or an executive officer of the Company, shall be eligible to be considered for the grant of an Award (as defined in Section 5 below) or Awards under this Plan.
3. Stock Subject to Plan
(a)(i) Aggregate Share Limit; Individual Limits. Subject to adjustments contemplated hereby, the maximum number of shares of Company Common Stock, $1 par value per share ("Common Shares"), that may be issued, is 850,000 shares (the "Share Limit"). Common Shares that are issued pursuant to Awards and subsequently reacquired by the Company pursuant to the terms and conditions of Awards ("Reacquired Common Shares") shall be available for reissue within the Share Limit. Notwithstanding anything contained herein to the contrary, the aggregate number of Common Shares subject to options and stock appreciation rights granted during any calendar year to any individual shall be limited to 100,000 and the maximum individual limit on the number of shares in the aggregate subject to all Awards under this Plan granted during any calendar year shall be 200,000.
(ii) Restricted Stock awards granted under this Plan shall not exceed five percent (5%) of the Share Limit.
(b) Share Reservation. No award may be granted under this Plan unless, on the date of grant, the sum of (i) the maximum number of Common Shares issuable at any time pursuant to such award, plus (ii) the number of Common Shares that have previously been issued pursuant to Awards granted under this Plan, other than Reacquired Common Shares available for reissue consistent with Section 3(a)(i) above or 3(c) below, plus (iii) the maximum number of Common Shares that may be issued at any time after such date of grant pursuant to Awards that are outstanding on such date, does not exceed the Share Limit.
(c) Reissue of Awards and Shares. Awards payable in cash or payable in cash or Common Shares that are forfeited or for any reason are not paid under this Plan, and Common Shares subject to Awards that expire or for any reason are terminated and are not issued, as well as Reacquired Common Shares, shall be available for subsequent Awards under the Plan. If an Award is or may be settled only in cash such Award need not be counted against any of the Share Limits under this Section 3.
4. Administration of Plan
(a) The Administrator. This Plan shall be interpreted and administered by the Board of Directors of the Company (the "Board") or by a committee (the "Committee") consisting of one or more directors. The Board or Committee, as the case may be, is referred to hereinafter as the Administrator.
1
(b) Powers of the Administrator. Subject to the express provisions of this Plan, the Administrator shall be authorized and empowered to do all things necessary or desirable in connection with the administration of this Plan, including, without limitation, the following:
(i) adopt, amend and rescind rules, regulations and procedures relating to this Plan and its administration or the Awards granted under this Plan;
(ii) determine which persons meet the requirements of Section 2 hereof for eligibility under this Plan and to which of such persons, if any, Awards will be granted under this Plan;
(iii) grant Awards to persons determined to be Eligible Persons and determine the terms and conditions of such Awards, including but not limited to the number of Common Shares issuable pursuant thereto, the times (not more than 10 years after the initial Award) at which and conditions upon which Awards become exercisable or vest or shall expire or terminate, the fair market value of the Common Shares or Awards from time to time and/or the manner in which it will be determined, and (subject to applicable law) the consideration, if any, to be paid upon receipt, exercise or vesting of Awards; provided, that the fair market value of each non-qualified stock option granted shall not be less than the closing sale price of the Company's Common Shares reported for any applicable date on the New York Stock Exchange-Composite Tape or, if there is no sale on such date, for the preceding date upon which such a sale took place;
(iv) determine whether, and the extent to which, adjustments are required pursuant to Section 8 hereof;
(v) interpret and construe this Plan and the terms and conditions of any Award granted hereunder, whether before or after the date set forth in Section 9; and
(vi) determine the circumstances under which, consistent with the provisions of Sections 9, 10 and 12, any outstanding Award may be amended;
which authority (except as to clause (ii) above) shall remain in effect so long as any Award remains outstanding under this Plan.
(c) Specific Administrator Responsibility and Discretion Regarding Awards. Subject to the express provisions of this Plan, the Administrator, in its sole and absolute discretion, shall determine all of the terms and conditions of each Award granted under this Plan, which terms and conditions may include, subject to such limitations as the Administrator may from time to time impose, among other things, provisions that:
(i) permit the recipient of such Award, including but not limited to any recipient who is a director or officer of the Company, to pay the purchase price of the Common Shares or other property issuable pursuant to such Award, (or any applicable tax withholding obligation upon such issuance or in respect of such Award or Shares), in whole or in part, by any one or more of the following:
(A) the delivery of previously owned shares of capital stock of the Company (including shares acquired as or pursuant to Awards) or other property; and/or
(B) a reduction in the amount of Common Shares or other property otherwise issuable pursuant to the Award;
(ii) accelerate the receipt of benefits pursuant to the Award upon the occurrence of specified events including, without limitation, a change of control of the Company, an acquisition of a specified percentage of the voting power of the Company, the dissolution or liquidation of the Company, a sale of substantially all of the property and assets of the Company or an event of the type described in Section 8 hereof, or in other circumstances or
2
upon the occurrence of other events (including events of a personal nature) as deemed appropriate by the Administrator;
(iii) provide for automatic grants or Awards or successive Awards.
(iv) extend the exercisability, term or vesting schedule of any or all outstanding Awards, change the price of any or all outstanding Awards or otherwise change previously imposed terms and conditions, in the specified events described in clause (ii) above or in other circumstances or upon the occurrence of other events (including events of a personal nature) as deemed appropriate by the Administrator, in each case subject to Section 10; and/or
(v) authorize the conversion, succession or substitution of outstanding Awards upon the occurrence of an event of the type described in Section 8, or in other circumstances or upon the occurrence of other events as deemed appropriate by the Administrator.
(d) Binding Determinations. Any action taken by, or inaction of, the Company, the Board or the Administrator relating or pursuant to this Plan shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons. No member of the Board or of any Committee nor any officer of the Company shall be liable for any such action or inaction of the entity or body, of another person or, except in circumstances involving bad faith, of himself or herself.
(e) Reliance on Experts. In making any determination or in taking or not taking any action under this Plan, the Board and the Administrator may obtain and may rely upon the advice of experts, including professional advisors to the Company. No director, officer or agent of the Company shall be liable for any such action or determination taken or made or omitted in good faith.
(f) Delegation. The Administrator may delegate ministerial, non-discretionary functions to individuals who are officers or employees of the Company.
5. Awards
(a) Types of Awards. The Administrator, on behalf of the Company, is authorized under this Plan to enter into any type of arrangement with an Eligible Person that is not inconsistent with the provisions of this Plan and that by its terms, involves or might involve the issuance of (i) Common Shares, (ii) an option, warrant, convertible security, stock appreciation right (including limited stock appreciation right) or similar right with an exercise or conversion privilege at a fixed or variable price related to the Common Shares or other equity securities of the Company and/or the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions, or (iii) any similar security with a value derived from the value of the Common Shares or other equity securities of the Company. The authorization of any such arrangement (including any benefits described in Section 5(d)) is referred to herein as the "grant" of an "Award." The Administrator may authorize any officer (other than the particular recipient) to execute any or all agreements memorializing any grant of an Award by the Administrator under this Plan. All Awards shall be evidenced by a writing memorializing the Award and containing all the terms and conditions of the Award, executed on behalf of the Company and by the recipient of the Award.
(b) Form of Awards. Awards are not restricted to any specified form or structure and may include, without limitation, sales or bonuses of stock, restricted stock, stock options, reload stock options, stock purchase warrants, other rights to acquire stock, securities convertible into or redeemable for stock, stock appreciation rights, limited stock appreciation rights, phantom stock, dividend equivalents, performance units or performance shares, and an Award may consist of one such security or benefit, or two or more of them in any combination or alternative.
3
(c) Price; Consideration. Except as provided in the concluding proviso to Section 4(b)(iii), Common Shares may be issued pursuant to an Award for any lawful consideration as determined by the Administrator, including, without limitation, services rendered by the recipient of such Award, but shall not be issued for less than the minimum lawful consideration.
(d) Cash Awards. The Administrator shall have the express authority to create, add or include a cash payment or benefit under this Plan, whether in lieu of, in addition to, or as an Award or as a component of another type of Award.
(e) Transfer Restrictions. Unless the Administrator otherwise expressly provides, an Award shall be exercisable only by the recipient and shall be nontransferable, except in the event of the death or incapacity of the recipient. In the case of the recipient's death, the Award may be exercised by or transferred to the person or persons designated or entitled by laws of descent and distribution to succeed to rights of the decedent, and, in the case of the recipient's incapacity, by the legal representative of the recipient. The designation of a beneficiary to receive benefits or exercise rights in the case of a recipient's death consistent with applicable law and the terms hereof shall not constitute a transfer.
(f) Tax Withholding. Upon any exercise, vesting, or payment of any Award, the Company shall have the right at its option to (i) require the recipient (or his or her heirs, personal representatives or beneficiaries, as the case may be) to pay or provide for payment of the amounts of any taxes which the Company or any subsidiary may be required to withhold with respect to such transaction or (ii) deduct from any amount payable in case the amount of any taxes which the Company or any subsidiary may be required to withhold with respect to such cash amount. In any case where a tax is required to be withheld in connection with the delivery of Common Shares under this Plan, the Administrator may grant (either at the time of the Award or thereafter) to the participant the right to elect, pursuant to such rules and subject to such conditions as the Administrator may establish, to have the Company reduce the numbers of shares to be delivered by (or otherwise reacquire) the appropriate number of shares valued at their then fair market value, to satisfy such withholding obligation.
6. [This Section is Intentionally Omitted]
7. No Right to Employment
Neither the existence of this Plan nor the grant of any Award under this Plan shall create any right to continue to be employed by or to otherwise provide service to the Company or a subsidiary, affect a participant's status as an employee at will who is subject to termination without cause, interfere in any way with the right of the Company or of any subsidiary at any time to terminate such employment, or affect the Company's right to increase or decrease the participant's other compensation.
8. Adjustments; Acceleration and Settlement of Awards
If:
(a) the outstanding securities of the class then subject to this Plan (the "outstanding shares") (1) are increased, decreased, exchanged or converted as a result of a stock split (including a split in the form of a stock dividend), reverse stock split, or the like or (2) are exchanged for or converted into cash, property or a different number or kind of securities (or if cash, property or securities are distributed in respect of the outstanding shares), as a result of a reorganization, merger, consolidation, recapitalization, restructuring, or reclassification; or
(b) all or substantially all of the property and assets of the Company are sold; or
4
(c) the holders of the outstanding shares receive an extraordinary dividend (other than a regular cash dividend or a stock dividend of an amount not greater than 10% of the previously outstanding shares) or other extraordinary distribution in cash, property or securities;
then, unless the terms of such transaction shall otherwise provide, the Administrator shall make equitable, appropriate and proportionate adjustments in:
(d) the number and type of shares or other securities or cash or other property that may be acquired pursuant to nonqualified stock options and other Awards previously granted under this Plan; and
(e) the maximum number and type of shares or other securities that may be issued pursuant to nonqualified stock options and other Awards thereafter granted under this Plan, and
(f) such other terms of Awards (including the exercise price of any options) as necessarily are affected by such event or adjustment.
9. Term of Plan
No Award shall be granted under this Plan after December 31, 2009. Although Common Shares and/or cash may be issued after that date pursuant to Awards granted prior to such date, no Common Shares or cash shall be otherwise issued under this Plan after such date. Notwithstanding the foregoing, any Award granted prior to such date may be amended after such date in any manner that would have been permitted prior to such date, except that no such amendment shall increase the number of shares subject to, comprising or referenced in such Award, or extend the final expiration date of the Award, or reduce (below the fair market value of the date of the amendment) the exercise price of an Award.
10. Amendment and Termination of Plan and Awards
The Board may amend or terminate this Plan at any time and in any manner, subject only to any stockholder approval that may be required under applicable law. No amendment or termination of the Plan or change in or affecting any outstanding Award shall deprive, in any material respect, the recipient, without the consent of such recipient, of any of his or her rights or benefits under or with respect to the Award. Adjustments contemplated by Section 8 shall not be deemed to constitute a change requiring such consent.
11. Effective Date of Plan
This Plan shall be effective as of the date it is approved by the Board.
12. Legal Issues
(a) Compliance and Choice of Law; Severability. This Plan, the granting, vesting and exercise of Awards under this Plan and the issuance and delivery of shares of Common Shares and/or the payment of money under this Plan or under Awards granted hereunder are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under this Plan shall be subject to such restrictions as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. This Plan, the Awards, all documents evidencing Awards and all other related documents shall be governed by, and construed in accordance with the laws of the state of incorporation of the Company or such other state as may be expressly stated in an award agreement in a form approved by the Committee. If any provision shall be held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions of this Plan shall continue in effect.
(b) Non-Exclusivity of Plan. Nothing in this Plan shall limit or be deemed to limit the authority of the Board or the Administrator to grant awards or authorize any other compensation, with or without reference to the Common Shares, under any other plan or authority.
5
INTERNATIONAL RECTIFIER CORPORATION
EMPLOYEE NONQUALIFIED STOCK OPTION AGREEMENT
THIS OPTION AGREEMENT is between INTERNATIONAL RECTIFIER CORPORATION, a Delaware corporation (the "Company"), and «FullName»(the "Optionee"). Pursuant to the International Rectifier Corporation Stock Incentive Plan identified below (the "Plan"),* the Company grants a nonqualified stock option to purchase authorized but unissued or treasury shares of Common Stock, $1 par value, of the Company on the Terms and Conditions attached and in the Plan:
| Plan*: | «PlanName» | |
Grant Date: |
«GrantDate» |
|
Number of Shares: |
«Number»1 |
|
Exercise Price per Share: |
$«Price»1 |
|
Vesting Schedule: |
% per year on each of the first anniversary dates of Grant Date2 |
|
Expiration Date: |
«ExpDate»2 |
| INTERNATIONAL RECTIFIER CORPORATION (a Delaware Corporation) |
OPTIONEE OPTIONEE | ||||
By: |
«FullName» (Signature) |
||||
Its: |
(Address) |
||||
(City, State, Zip Code) |
|||||
1
TERMS AND CONDITIONS
1. Exercisability of Option. The Option shall vest and become exercisable in installments of % of the aggregate number of shares set forth on the facing page (subject to adjustment). Subject to earlier termination of the Option as provided in this Agreement or the Plan, the first installment shall vest on the 1st anniversary of the Grant Date, and thereafter, installments of % of the shares shall vest on each of the nd, rd, and th anniversaries of the Grant Date. The Option may be exercised only to the extent the Option is exercisable.
2. Method of Exercise of Option. To the extent exercisable, the Option may be exercised by the delivery to the Company of a written notice stating the number of shares to be purchased pursuant to the Option and accompanied by payment made in cash or by check payable to the order of the Company in the full amount of the purchase price of the shares and amounts required to satisfy applicable withholding taxes. Other payment methods may be permitted only if expressly authorized by the Administrator with respect to this Option or all options under the Plan.
3. Continuance of Employment Required. The vesting schedule requires continued service through each applicable vesting date as a condition to the vesting of the applicable installment and rights and benefits under this Agreement. Partial service, even if substantial, during any vesting period will not entitle the Optionee to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment or service as provided in Section 4 below or under the Plan.
4. Effect of Termination of Employment or Death; Change in Subsidiary Status. If the Optionee's employment by either the Company or any subsidiary terminates, the Option and all other rights and benefits under this Agreement terminate except that the Optionee may at any time within the following periods after termination exercise the Option to the extent the Option was exercisable at the date of termination of employment and has not otherwise expired.
5. Change in Subsidiary's Status; Leaves of Absence. If the Optionee is employed by an entity that ceases to be a subsidiary, this event is deemed for purposes of this Agreement to be a termination of the Optionee's employment by the Company other than a Dismissal for Cause. Absence from work caused by military service, authorized sick leave or other leave approved in writing by the Committee shall not be considered a termination of employment by the Company for purposes of Section 4.
6. Adjustment and/or Termination of Option Under Certain Circumstances. In addition to adjustments contemplated by Section 8 of the Plan, upon the occurrence or in contemplation of an Event (as defined in Section 13 below), the Company may provide for the assumption, substitution, conversion, exchange, or other settlement and/or adjustment of the Option, whether exercisable or not,
2
or may terminate the Option. If the Company terminates an Option, the Company shall make provision for a cash payment for the Option or shall provide for the assumption, conversion or substitution of other options or rights, in either case based on the distribution or consideration payable to holders of the Common Stock of the Company or the difference between the exercise price and the fair market value of the shares on the applicable measurement date in respect of the Event. In such circumstances, the Company may but is not required to make provision for the unexercisable portion of the Option.
7. Possible Acceleration and Termination of Awards Upon Change in Control. Without limiting the generality of Section 6 or the authority of the Administrator under the Plan, upon the occurrence of (or, as the circumstances may require, immediately prior to) a Change in Control, the Option will become immediately exercisable, unless prior to the Change in Control the Administrator determines that benefits under this or all Options will not accelerate upon occurrence of the Change in Control or determines that only certain or limited benefits under any or all Options will be accelerated and the extent to which they will be accelerated, and/or establishes a different time in respect of such Event for such acceleration. The Administrator may accord the Optionee a right to refuse any acceleration pursuant to this Agreement, in such circumstances as the Administrator may approve.
If any Option has been fully accelerated as contemplated by this Section, but is not exercised prior to an Event (as defined in Section 13) involving a Change of Control approved by the Board, the Administrator acting prior to the Event may provide that the Option terminates, subject to any provision by the Administrator, in its sole discretion through a plan of reorganization approved by the Board or otherwise, for the survival, substitution, assumption, exchange or other reasonable settlement of the Option.
8. Notices. Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Company at its principal office, to the attention of the Corporate Secretary and to the Optionee at the address given beneath the Optionee's signature, or at such other address as either party may hereafter designate in writing to the other.
9. Optionee not a Stockholder. Neither the Optionee nor any other person entitled to exercise the Option shall have any of the rights or privileges of a stockholder of the Company as to any shares of Common Stock not actually issued and delivered to Optionee prior to delivery of the exercise price and satisfaction of all other conditions precedent to the due exercise of the Option and delivery of shares.
10. No Employment Commitment by Company. Nothing contained in this Agreement or the Plan constitutes an employment commitment by the Company, affects Optionee's status as an employee at will who is subject to termination without cause, confers upon Optionee any right to remain employed by the Company or any subsidiary, interferes in any way with the right of the Company or any subsidiary at any time to terminate such employment, or affects the right of the Company or any subsidiary to increase or decrease Optionee's other compensation.
11. Effect of Award Agreement. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company except to the extent the Committee determines otherwise.
12. Choice of Law. The constructive interpretation, performance and enforcement of the Option and this Agreement shall be governed by the laws of the State of California.
13. Defined Terms. Capitalized terms used herein and not otherwise defined herein shall have the meaning assigned to such terms in the Plan.
"Change in Control" means any of the following:
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"Dismissal for Cause" means the Company or a subsidiary has terminated Optionee's employment because of any of the following:
Each case shall be determined by the Committee in its sole discretion, whether before or after the date of termination of employment.
"Event" means a liquidation, dissolution, Change in Control, merger, consolidation, or other combination or reorganization, or a recapitalization, reclassification, extraordinary dividend or other distribution (including a split up or a spin off of the Company or any significant subsidiary), or a sale or other distribution of substantially all the assets of the Company as an entirety.
14. Plan. The Option and all rights of Optionee thereunder are subject to, and the Optionee agrees to be bound by, all of the terms and conditions of the provisions of the Plan, including, but not limited to Section 8 (Adjustments and Settlement of Awards) and Section 12 (Legal Issues). The Optionee acknowledges receipt of a copy of the Plan, which is made a part hereof by this reference, and agrees to be bound by the terms thereof. Unless otherwise expressly provided in other Sections of this Agreement, provisions of the Plan that confer discretionary authority on the Committee do not (and shall not be deemed to) create any additional rights in the Optionee not expressly set forth above.
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INTERNATIONAL RECTIFIER CORPORATION
AMENDED AND RESTATED STOCK INCENTIVE PLAN OF 1992
1. Purpose of Plan
The purpose of this Amended and Restated Stock Incentive Plan (the "Plan") of International Rectifier Corporation, a Delaware corporation (the "Company") is to enable the Company and its subsidiaries to attract, motivate and retain their employees and certain other individuals by providing incentives related to equity interests in and the financial performance of the Company.
2. Persons Eligible Under Plan
Any person, including any director of the Company, who is an officer or key employee of the Company or any of its subsidiaries (an "Eligible Person") shall be eligible to be considered for the grant of an Award (as defined in Section 5 below) or Awards under this Plan.
3. Stock Subject to Plan
(a)(i) Aggregate Share Limit; Individual Limits. The maximum number of shares of Company Common Stock, $1 par value per share ("Common Shares") including ISOs that may be issued, is equal to one and one-half percent (11?2%) of the number of shares of Common Shares outstanding on January 1, 1993, provided, however, that on each January 1 thereafter, such maximum number shall be increased by the number of shares equal to one and one-half percent (11?2%) of the number of shares issued and outstanding on each such date, and such maximum number, as so adjusted, shall constitute and be referred to as the "Share Limit". Common Shares that are issued pursuant to Awards and subsequently reacquired by the Company pursuant to the terms and conditions of such Awards ("Reacquired Common Shares") shall be available for reissue within the Share Limit. Notwithstanding anything contained herein to the contrary, the aggregate number of Common Shares subject to options and stock appreciation rights granted during any calendar year to any individual shall be limited to 200,000 and the maximum individual limit on the number of shares in the aggregate subject to all Awards under this Plan granted during any calendar year shall be 400,000.
(ii) Restricted Stock awards granted under this Plan shall not exceed five percent (5%) of the maximum number of Common Shares that may be issued pursuant to all awards granted under this Plan.
(b) Share Reservation. No award may be granted under this Plan unless, on the date of grant, the sum of (i) the maximum number of Common Shares issuable at any time pursuant to such award, plus (ii) the number of Common Shares that have previously been issued pursuant to Awards granted under this Plan, other than Reacquired Common Shares available for reissue consistent with Section 3(a)(i) above or 3(c) below, plus (iii) the maximum number of Common Shares that may be issued at any time after such date of grant pursuant to Awards that are outstanding on such date, does not exceed the Share Limit.
(c) Reissue of Awards and Shares. Awards payable in cash or payable in cash or Common Shares that are forfeited or for any reason are not paid under this Plan, and Common Shares subject to Awards that expire or for any reason are terminated and are not issued, as well as Reacquired Common Shares, shall be available for subsequent Awards under the Plan. If an Award is or may be settled only in cash such Award need not be counted against any of the Share Limits under this Section 3.
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4. Administration of Plan
(a) The Committee. With respect to Awards intended to satisfy the requirements for performance-based compensation under Section 162(m) of the Internal Revenue Code and regulations thereunder ("Section 162(m)"), this Plan shall be administered by a committee (the "Committee") of the Board of Directors of the Company (the "Board") consisting of two or more "outside directors" (as this term is defined in Section 162(m)). As to other Awards, this Plan may be administered by the Board or by a duly authorized committee of directors. Transactions in or involving Awards intended to be exempt under Rule 16b-3 under Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act"), as amended from time to time ("Rule 16b-3"), may be duly authorized by the Board, a committee of Non-Employee Directors (as defined in Section 6(a) below and meeting the requirements for disinterested director of Rule 16b-3), or as otherwise required or permitted under Rule 16b-3. Awards to Non-Employee Directors can be made only pursuant to Section 6 below.
(b) Powers of the Committee. Subject to the express provisions of this Plan, the Committee shall be authorized and empowered to do all things necessary or desirable in connection with the administration of this Plan, including, without limitation, the following:
(i) adopt, amend and rescind rules, regulations and procedures relating to this Plan and its administration or the Awards granted under this Plan;
(ii) determine which persons (other than Non-Employee Directors) meet the requirements of Section 2 hereof for eligibility under this Plan and to which of such persons, if any, Awards will be granted under this Plan;
(iii) grant Awards to persons determined to be Eligible Persons and determine the terms and conditions of such Awards, including but not limited to the number of Common Shares issuable pursuant thereto, the times (not more than 10 years after the initial Award) at which and conditions upon which Awards become exercisable or vest or shall expire or terminate, the fair market value of the Common Shares or Awards from time to time and/or the manner in which it will be determined, and (subject to applicable law) the consideration, if any, to be paid upon receipt, exercise or vesting of Awards; provided, that the fair market value of each non-qualified option or ISO granted shall not be less than the closing sale price of the Company's Common Shares reported for any applicable date on the New York Stock Exchange-Composite Tape or, if there is no sale or such date, for the preceding date upon which such a sale took place;
(iv) determine whether, and the extent to which, adjustments are required pursuant to Section 8 hereof;
(v) interpret and construe this Plan and the terms and conditions of any Award granted hereunder, whether before or after the date set forth in Section 9; and
(vi) determine the circumstances under which, consistent with the provisions of Section 9, any outstanding Award may be amended;
which authority (except as to clause (ii) above) shall remain in effect so long as any Award remains outstanding under this Plan.
(c) Specific Committee Responsibility and Discretion Regarding Awards. Subject to the express provisions of this Plan, the Committee, in its sole and absolute discretion, shall determine all of the terms and conditions of each Award granted under this Plan, which terms and conditions may
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include, subject to such limitations as the Committee may from time to time impose, among other things, provisions that:
(i) permit the recipient of such Award, including but not limited to any recipient who is a director or officer of the Company, to pay the purchase price of the Common Shares or other property issuable pursuant to such Award, (or any applicable tax withholding obligation upon such issuance or in respect of such Award or Shares), in whole or in part, by any one or more of the following:
(A) the delivery of previously owned shares of capital stock of the Company (including shares acquired as or pursuant to Awards) or other property; and/or
(B) a reduction in the amount of Common Shares or other property otherwise issuable pursuant to such Award;
(ii) accelerate the receipt of benefits pursuant to such Award upon the occurrence of specified events including, without limitation, a change of control of the Company, an acquisition of a specified percentage of the voting power of the Company, the dissolution or liquidation of the Company, a sale of substantially all of the property and assets of the Company or an event of the type described in Section 8 hereof, or in other circumstances or upon the occurrence of other events (including events of a personal nature) as deemed appropriate by the Committee;
(iii) qualify such Award as an Incentive Stock Option;
(iv) extend the exercisability, term or vesting schedule of any or all outstanding Awards, change the price of any or all outstanding Awards or otherwise change previously imposed terms and conditions, in the specified events described in clause (ii) above or in other circumstances or upon the occurrence of other events (including events of a personal nature) as deemed appropriate by the Committee, in each case subject to Section 10;
(v) authorize the conversion, succession or substitution of outstanding Awards upon the occurrence of an event of the type described in Section 8, or in other circumstances or upon the occurrence of other events as deemed appropriate by the Committee; and/or
(vi) provide for automatic grants of Awards or successive Awards.
(d) Binding Determinations. Any action taken by, or inaction of, the Company, the Board or the Committee relating or pursuant to this Plan shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons. No member of the Board or officer of the Company shall be liable for any such action or inaction of the entity or body, of another person or, except in circumstances involving bad faith, of himself or herself.
(e) Reliance on Experts. In making any determination or in taking or not taking any action under this Plan, the Board and the Committee may obtain and may rely upon the advice of experts, including professional advisors to the Company. No director, officer or agent of the Company shall be liable for any such action or determination taken or made or omitted in good faith.
(f) Delegation. The Committee may delegate ministerial, non-discretionary functions to individuals who are officers or employees of the Company.
5. Awards
(a) Types of Awards. The Committee, on behalf of the Company, is authorized under this Plan to enter into any type of arrangement with an Eligible Person that is not inconsistent with the provisions of this Plan and that by its terms, involves or might involve the issuance of (i) Common
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Shares, (ii) an option, warrant, convertible security, stock appreciation right (including limited stock appreciation right) or similar right with an exercise or conversion privilege at a fixed or variable price related to the Common Shares or other equity securities of the Company and/or the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions, or (iii) any similar security with a value derived from the value of the Common Shares or other equity securities of the Company. The authorization of any such arrangement (including any benefits described in Section 5(d)) is referred to herein as the "grant" of an "Award." The Committee may authorize any officer (other than the particular recipient) to execute any or all agreements memorializing any grant of an Award by the Committee under this Plan. All Awards shall be evidenced by a writing memorializing the Award and containing all the terms and conditions of the Award, executed on behalf of the Company and by the recipient of the Award.
(b) Form of Awards. Awards are not restricted to any specified form or structure and may include, without limitation, sales or bonuses of stock, restricted stock, stock options, reload stock options, stock purchase warrants, other rights to acquire stock, securities convertible into or redeemable for stock, stock appreciation rights, limited stock appreciation rights, phantom stock, dividend equivalents, performance units or performance shares, and an Award may consist of one such security or benefit, or two or more of them in any combination or alternative.
(c) Price; Consideration. Except as provided in the concluding proviso to Section 4(b)(iii), Common Shares may be issued pursuant to an Award for any lawful consideration as determined by the Committee, including, without limitation, services rendered by the recipient of such Award, but shall not be issued for less than the minimum lawful consideration.
(d) Cash Awards. The Committee shall have the express authority to create, add or include a cash payment or benefit under this Plan, whether in lieu of, in addition to, or as an Award or as a component of another type of Award.
(e) Transfer Restrictions. Unless the Committee otherwise expressly provides, an Award shall be exercisable only by the recipient and shall be nontransferable, except in the event of the death or incapacity of the recipient. In the case of the recipient's death, the Award may be exercised by or transferred to the person or persons designated or entitled by laws of descent and distribution to succeed to rights of the decedent, and, in the case of the recipient's incapacity, by the legal representative of the recipient. The designation of a beneficiary to receive benefits or exercise rights in the case of a recipient's death consistent with applicable law and the terms hereof shall not constitute a transfer.
(f) Tax Withholding. Upon any exercise, vesting, or payment of any Award, the Company shall have the right at its option to (i) require the recipient (or his or her heirs, personal representatives or beneficiaries, as the case may be) to pay or provide for payment of the amounts of any taxes which the Company or any subsidiary may be required to withhold with respect to such transaction or (ii) deduct from any amount payable in case the amount of any taxes which the Company or any subsidiary may be required to withhold with respect to such cash amount. In any case where a tax is required to be withheld in connection with the delivery of Common Shares under this Plan, the Committee may grant (either at the time of the Award or thereafter) to the Participant the right to elect, pursuant to such rules and subject to such conditions as the Committee may establish, to have the Company reduce the numbers of shares to be delivered by (or otherwise reacquire) the appropriate number of shares valued at their then fair market value, to satisfy such withholding obligation.
(g) Special Performance-Based Share Awards. Without limiting the generality of the foregoing, and in addition to options granted under other provisions of this Section 5, other performance-based awards within the meaning of Section 162(m) ("Performance-Based Awards"),
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whether in the form of restricted stock, performance stock, phantom stock or other rights, the vesting of which depends on the performance of the Company on a consolidated, segment, subsidiary, division, or station basis with reference to revenues, net earnings (before or after taxes or before or after taxes, interest, depreciation, and/or amortization), cash flow, return on equity or on assets or on net investment, or cost containment or reduction, or any combination thereof (the "business criteria") relative to preestablished targeted levels of performance (the "performance goals"), may be granted under this Plan. The specific performance goals must be approved by the Committee in advance of applicable deadlines under the Code and while the performance relating to those goals remains substantially uncertain. Performance goals may be adjusted to mitigate the unbudgeted impact of material, unusual or nonrecurring gains and losses, accounting changes or other extraordinary events not foreseen at the time the goals were set. Other types of performance and non-performance awards may also be granted under the other provisions of this Plan.
(i) Maximum Award. In no event shall grants in any calendar year to a participant under this Section 5 (g) relate to more than 200,000 shares.
(ii) Committee Certification. Before any Performance-Based Award under this Section 5(g) is paid, the Committee must certify that the material terms of the Performance-Based Award were satisfied.
(iii) Terms and Conditions of Awards. The Committee will have discretion to determine the restrictions or other limitations of the individual Awards under this Section 5(g).
6. Non-Employee Director Options
(a) Options Granted to Non-Employee Directors. There shall be granted on each January 1 during the term of this Plan (without any action by the Board or Compensation Committee) to each Non-Employee Director then in office who is not an officer or employee of the Company or a subsidiary of the Company (a "Non-Employee Director") an Option to purchase 5,000 shares of Common Shares. In addition, each Non-Employee Director elected after the 1992 Annual Meeting of Stockholders has been or will be automatically granted, upon initial election, an option to purchase 40,000 shares. Notwithstanding the foregoing and subject to the adjustments provided by Section 8 of this Plan and Section 12 of the Company's Stock Option Plan of 1984 (the "1984 Plan"), the aggregate number of shares for which options may be granted to any Non-Employee Director under both this Plan and the 1984 Plan shall not exceed 120,000 shares. Non-Employee Directors will not be eligible to receive any other options under this Plan.
(b) Option Price. The Option Price of each Non-Employee Director Option shall be 100% of the fair market value of a share of Common Shares on the date of grant. The option price must be paid in full in cash upon exercise of the Option.
(c) Exercisability. Each Option granted under this Section 6 and all rights and obligations thereunder shall expire ten (10) years after the date of grant and shall be subject to earlier termination as provided below. Each Option granted under this Section 6 shall become exercisable at the rate of 20% per annum commencing on the first anniversary of the date of grant and each subsequent anniversary through the fifth anniversary.
(d) Effect of Termination of Directorship. In the event of a Non-Employee Director's death, an Option granted pursuant to this Section 6 held by such Non-Employee Director for at least six months shall immediately become fully vested and remain fully exercisable for three years after the date of death or until the expiration of the stated term of such Option, whichever first occurs. If, after at least five consecutive years of service on the Board, a Non-Employee Director voluntarily resigns, is disabled, or decides not to stand for re-election, then an Option granted under this Section 6 held by such Non-Employee Director for at least six months from the date of grant shall immediately become and shall remain fully exercisable for three years from the date of termination
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of services as a Non-Employee Director or until the expiration of the stated term of such Option, whichever occurs first, and shall thereafter terminate. If a Non-Employee Director's services as a member of the Board terminate for any reason other than voluntary resignation, disability, death or a decision not to stand for reelection after five consecutive years of service on the Board with such option held at least six months, resignation or decision to step down, any portion of an Option granted pursuant to this Section 6 which is not then exercisable shall terminate and any portion of such Option which is then exercisable may be exercised for three months after the date of such termination or until the expiration of the stated term of the Option, whichever first occurs. Notwithstanding anything to the contrary in this Plan, no Options granted under this Section 6 shall be accelerated to a date less than six months after the Date of Grant of such Option.
7. No Right to Employment
Neither the existence of this Plan nor the grant of any Award under this Plan shall create in any grantee the right to continue to be employed by or to otherwise provide service to the Company or a subsidiary.
8. Adjustments
If (a) the outstanding securities of the class then subject to this Plan (the "outstanding shares") (1) are increased, decreased, exchanged or converted as a result of a stock split (including a split in the form of a stock dividend), reverse stock split, or the like or (2) are exchanged for or converted into cash, property or a different number or kind of securities (or if cash, property or securities are distributed in respect of the outstanding shares), as a result of a reorganization, merger, consolidation, recapitalization, restructuring, or reclassification, or (b) substantially all of the property and assets of the Company are sold, or (c) the holders of the outstanding shares receive an extraordinary dividend (other than a regular cash dividend or a stock dividend of an amount not greater than 10% of the previously outstanding shares) or other extraordinary distribution in cash, property or securities, then, unless the terms of such transaction shall otherwise provide, the Committee shall make equitable, appropriate and proportionate adjustments in (x) the number and type of shares or other securities or cash or other property that may be acquired pursuant to Incentive Stock Options and other Awards previously granted under this Plan, and (y) the maximum number and type of shares or other securities that may be issued pursuant to Incentive Stock Options and other Awards thereafter granted under this Plan, and (z) such other terms of Awards as necessarily are affected by such event.
9. Term of Plan
No Award shall be granted under this Plan after December 31, 2002. Although Common Shares and/or cash may be issued after that date pursuant to Awards granted prior to such date, no Common Shares or cash shall be otherwise issued under this Plan after such date. Notwithstanding the foregoing, any Award granted prior to such date may be amended after such date in any manner that would have been permitted prior to such date, except that no such amendment shall increase the number of shares subject to, comprising or referenced in such Award, or extend the final expiration date of the Award, or reduce (below the fair market value of the date of the amendment) the exercise price of an Award.
10. Amendment and Termination of Plan and Awards
The Board may amend or terminate this Plan at any time and in any manner, subject only to any stockholder approval that may be required under applicable law. No amendment or termination of the Plan or change in or affecting any outstanding Award shall deprive, in any material respect, the recipient, without the consent of such recipient, of any of his or her rights or benefits under or with respect to the Award. Adjustments contemplated by Section 8 shall not be deemed to constitute a change requiring such consent.
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11. Effective Date of Plan
This Plan shall be effective as of the date it has been approved by the affirmative votes of the holders of at least a majority of the Common Shares of the Company present, or represented, and entitled to vote at a meeting duly held in accordance with applicable law.
12. Legal Issues
(a) Compliance and Choice of Law; Severability. This Plan, the granting and vesting of Awards under this Plan and the issuance and delivery of shares of Common Shares and/or the payment of money under this Plan or under Awards granted hereunder are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under this Plan shall be subject to such restrictions as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. This Plan, the Awards, all documents evidencing Awards and all other related documents shall be governed by, and construed in accordance with the laws of the state of incorporation of the Company or such other state as may be expressly stated in an award agreement in a form approved by the Committee. If any provision shall be held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions of this Plan (subject to Section 12(b)) shall continue in effect.
(b) Plan Construction.
(i) Rule 16b-3. It is the intent of the Company that this Plan and Awards hereunder satisfy and be interpreted in a manner that in the case of recipients who are or may be subject to Section 16 of the Exchange Act ("Section 16 Persons") satisfies the applicable requirements of Rule 16b-3 so that Awards (or transactions under Awards) to such persons that are intended to be exempt thereunder will be entitled to the benefits of Rule 16b-3 and will not be subjected to avoidable liability thereunder. If any provisions of this Plan or of any Award would otherwise frustrate or conflict with the intent expressed above, that provision to the extent possible shall be interpreted and deemed amended so as to avoid such conflict, but to the extent of any remaining irreconcilable conflict with such intent as to such Section 16 Persons in the circumstances, the Committee may disregard such provision.
(ii) Section 162(m). It is further the intent of the Company that Options or SARs or other performance- based Awards under this Plan granted to persons who are executive officers or who become executive officers qualify as performance-based compensation under Section 162(m) of the Code, and this Plan shall be interpreted consistent with such intent. Any provision, application or interpretation of this Plan inconsistent with this intent to satisfy the standards in Section 162(m) of the Code shall be disregarded.
(c) Non-Exclusivity of Plan. Nothing in this Plan shall limit or be deemed to limit the authority of the Board or the Committee to grant awards or authorize any other compensation, with or without reference to the Common Shares, under any other plan or authority.
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INTERNATIONAL RECTIFIER CORPORATION
EMPLOYEE NONQUALIFIED STOCK OPTION AGREEMENT
THIS OPTION AGREEMENT is between INTERNATIONAL RECTIFIER CORPORATION, a Delaware corporation (the "Company"), and «FullName»(the "Optionee"). Pursuant to the International Rectifier Corporation Stock Incentive Plan identified below (the "Plan"),* the Company grants a nonqualified stock option to purchase authorized but unissued or treasury shares of Common Stock, $1 par value, of the Company on the Terms and Conditions attached and in the Plan:
| Plan*: | «PlanName» | |
Grant Date: |
«GrantDate» |
|
Number of Shares: |
«Number»1 |
|
Exercise Price per Share: |
$«Price»1 |
|
Vesting Schedule: |
% per year on each of the first anniversary dates of Grant Date2 |
|
Expiration Date: |
«ExpDate»2 |
| INTERNATIONAL RECTIFIER CORPORATION (a Delaware Corporation) |
OPTIONEE OPTIONEE | ||||
By: |
«FullName» (Signature) |
||||
Its: |
(Address) |
||||
(City, State, Zip Code) |
|||||
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TERMS AND CONDITIONS
1. Exercisability of Option. The Option shall vest and become exercisable in installments of % of the aggregate number of shares set forth on the facing page (subject to adjustment). Subject to earlier termination of the Option as provided in this Agreement or the Plan, the first installment shall vest on the 1st anniversary of the Grant Date, and thereafter, installments of % of the shares shall vest on each of the nd, rd, and th anniversaries of the Grant Date. The Option may be exercised only to the extent the Option is exercisable.
2. Method of Exercise of Option. To the extent exercisable, the Option may be exercised by the delivery to the Company of a written notice stating the number of shares to be purchased pursuant to the Option and accompanied by payment made in cash or by check payable to the order of the Company in the full amount of the purchase price of the shares and amounts required to satisfy applicable withholding taxes. Other payment methods may be permitted only if expressly authorized by the Administrator with respect to this Option or all options under the Plan.
3. Continuance of Employment Required. The vesting schedule requires continued service through each applicable vesting date as a condition to the vesting of the applicable installment and rights and benefits under this Agreement. Partial service, even if substantial, during any vesting period will not entitle the Optionee to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment or service as provided in Section 4 below or under the Plan.
4. Effect of Termination of Employment or Death; Change in Subsidiary Status. If the Optionee's employment by either the Company or any subsidiary terminates, the Option and all other rights and benefits under this Agreement terminate except that the Optionee may at any time within the following periods after termination exercise the Option to the extent the Option was exercisable at the date of termination of employment and has not otherwise expired.
5. Change in Subsidiary's Status; Leaves of Absence. If the Optionee is employed by an entity that ceases to be a subsidiary, this event is deemed for purposes of this Agreement to be a termination of the Optionee's employment by the Company other than a Dismissal for Cause. Absence from work caused by military service, authorized sick leave or other leave approved in writing by the Committee shall not be considered a termination of employment by the Company for purposes of Section 4.
6. Adjustment and/or Termination of Option Under Certain Circumstances. In addition to adjustments contemplated by Section 8 of the Plan, upon the occurrence or in contemplation of an Event (as defined in Section 13 below), the Company may provide for the assumption, substitution, conversion, exchange, or other settlement and/or adjustment of the Option, whether exercisable or not,
2
or may terminate the Option. If the Company terminates an Option, the Company shall make provision for a cash payment for the Option or shall provide for the assumption, conversion or substitution of other options or rights, in either case based on the distribution or consideration payable to holders of the Common Stock of the Company or the difference between the exercise price and the fair market value of the shares on the applicable measurement date in respect of the Event. In such circumstances, the Company may but is not required to make provision for the unexercisable portion of the Option.
7. Possible Acceleration and Termination of Awards Upon Change in Control. Without limiting the generality of Section 6 or the authority of the Administrator under the Plan, upon the occurrence of (or, as the circumstances may require, immediately prior to) a Change in Control, the Option will become immediately exercisable, unless prior to the Change in Control the Administrator determines that benefits under this or all Options will not accelerate upon occurrence of the Change in Control or determines that only certain or limited benefits under any or all Options will be accelerated and the extent to which they will be accelerated, and/or establishes a different time in respect of such Event for such acceleration. The Administrator may accord the Optionee a right to refuse any acceleration pursuant to this Agreement, in such circumstances as the Administrator may approve.
If any Option has been fully accelerated as contemplated by this Section, but is not exercised prior to an Event (as defined in Section 13) involving a Change of Control approved by the Board, the Administrator acting prior to the Event may provide that the Option terminates, subject to any provision by the Administrator, in its sole discretion through a plan of reorganization approved by the Board or otherwise, for the survival, substitution, assumption, exchange or other reasonable settlement of the Option.
8. Notices. Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Company at its principal office, to the attention of the Corporate Secretary and to the Optionee at the address given beneath the Optionee's signature, or at such other address as either party may hereafter designate in writing to the other.
9. Optionee not a Stockholder. Neither the Optionee nor any other person entitled to exercise the Option shall have any of the rights or privileges of a stockholder of the Company as to any shares of Common Stock not actually issued and delivered to Optionee prior to delivery of the exercise price and satisfaction of all other conditions precedent to the due exercise of the Option and delivery of shares.
10. No Employment Commitment by Company. Nothing contained in this Agreement or the Plan constitutes an employment commitment by the Company, affects Optionee's status as an employee at will who is subject to termination without cause, confers upon Optionee any right to remain employed by the Company or any subsidiary, interferes in any way with the right of the Company or any subsidiary at any time to terminate such employment, or affects the right of the Company or any subsidiary to increase or decrease Optionee's other compensation.
11. Effect of Award Agreement. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company except to the extent the Committee determines otherwise.
12. Choice of Law. The constructive interpretation, performance and enforcement of the Option and this Agreement shall be governed by the laws of the State of California.
13. Defined Terms. Capitalized terms used herein and not otherwise defined herein shall have the meaning assigned to such terms in the Plan.
"Change in Control" means any of the following:
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"Dismissal for Cause" means the Company or a subsidiary has terminated Optionee's employment because of any of the following:
Each case shall be determined by the Committee in its sole discretion, whether before or after the date of termination of employment.
"Event" means a liquidation, dissolution, Change in Control, merger, consolidation, or other combination or reorganization, or a recapitalization, reclassification, extraordinary dividend or other distribution (including a split up or a spin off of the Company or any significant subsidiary), or a sale or other distribution of substantially all the assets of the Company as an entirety.
14. Plan. The Option and all rights of Optionee thereunder are subject to, and the Optionee agrees to be bound by, all of the terms and conditions of the provisions of the Plan, including, but not limited to Section 8 (Adjustments and Settlement of Awards) and Section 12 (Legal Issues). The Optionee acknowledges receipt of a copy of the Plan, which is made a part hereof by this reference, and agrees to be bound by the terms thereof. Unless otherwise expressly provided in other Sections of this Agreement, provisions of the Plan that confer discretionary authority on the Committee do not (and shall not be deemed to) create any additional rights in the Optionee not expressly set forth above.
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INTERNATIONAL RECTIFIER CORPORATION
2000 INCENTIVE PLAN
(Amended and Restated as of November 22, 2004)
NONQUALIFIED STOCK OPTION AGREEMENT
THIS OPTION AGREEMENT is between INTERNATIONAL RECTIFIER CORPORATION, a Delaware corporation (the "Company"), and (the "Optionee"). Pursuant to the International Rectifier Corporation 2000 Incentive Plan (Amended and Restated as of November 22, 2004) (the "Plan"), the Company grants a nonqualified stock option to purchase authorized but unissued or treasury shares of Common Stock, $1.00 par value, of the Company on the Terms and Conditions attached and in the Plan:
| Grant Date: | ||
Number of Shares: |
1 |
|
Exercise Price per Share: |
1 |
|
Vesting Schedule: |
331/3% per year on each of the first three anniversary dates of Grant Date2 |
|
Expiration Date: |
2 |
| INTERNATIONAL RECTIFIER CORPORATION (a Delaware Corporation) |
OPTIONEE | ||||
By: |
Donald R. Dancer |
(Signature) |
|||
Its: |
General Counsel |
(Address) |
|||
(City, State, Zip Code) |
|||||
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TERMS AND CONDITIONS
1. Exercisability of Option. The Option shall vest and become exercisable in installments of 331/3% of the aggregate number of shares set forth on the facing page (subject to adjustment). Subject to earlier termination of the Option as provided in this Agreement or the Plan and changes and adjustments contemplated by the Plan, the first installment shall vest on the 1st anniversary of the Grant Date, and thereafter, installments of 331/3% of the shares shall vest on each of the 2nd, and 3rd anniversaries of the Grant Date. The Option may be exercised only to the extent the Option is exercisable.
| • | Cumulative Exercisability. | To the extent the Optionee does not in any year purchase all the shares that the Optionee may then exercise, the Optionee has the right cumulatively thereafter to purchase any shares not so purchased until the Option terminates or expires. | |
• |
No Fractional Shares. |
Fractional share interests shall be disregarded, but may be cumulated. |
|
• |
Minimum Exercise. |
No fewer than 100 shares may be purchased at any one time, unless the number purchased is the total number at the time exercisable under the Option. |
2. Method of Exercise of Option. To the extent exercisable, the Option may be exercised by the delivery to the Company of a written notice stating the number of shares to be purchased pursuant to the Option and payment made in cash or by check payable to the order of the Company in the full amount of the purchase price of the shares and amounts required to satisfy applicable withholding taxes. Other payment methods may be permitted only if expressly authorized by the Administrator with respect to this Option or all options under the Plan.
3. Continuance of Employment Required. The vesting schedule requires continued service through each applicable vesting date as a condition to the vesting of the applicable installment and rights and benefits under this Agreement. Partial service, even if substantial, during any vesting period will not entitle the Optionee to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment or service as provided in Section 4 below or under the Plan.
4. Effect of Termination of Employment or Death; Change in Subsidiary Status. If the Optionee's employment with the Company or any Subsidiary terminates, the Option and all other rights and benefits under this Agreement terminate, except that the Optionee may at any time within the following periods after termination exercise the Option to the extent the Option was exercisable at the date of termination of employment and has not otherwise expired. If the termination was the result of:
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In each case, the Option remains subject to earlier termination on the first to occur of the Expiration Date of the Option or the termination of the Option pursuant to Section 5.2 of the Plan.
5. Change in Subsidiary's Status; Leaves of Absence. If the Optionee is employed by an entity that ceases to be a Subsidiary and does not remain employed by the Company or another Subsidiary, this event is deemed for purposes of this Agreement to be a termination of the Optionee's employment by the Company other than pursuant to a Dismissal for Cause. Absence from work caused by military service, authorized sick leave or other leave approved in writing by the Committee shall not be considered a termination of employment by the Company for purposes of Section 4, subject to such conditions as may be imposed in connection with the approval of the leave of absence.
6. Notices. Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Company at its principal office, to the attention of the Corporate Secretary and to the Optionee at the address given beneath the Optionee's signature, or at such other address as either party may hereafter designate in writing to the other.
7. Optionee not a Stockholder. Neither the Optionee nor any other person entitled to exercise the Option shall have any of the rights or privileges of a stockholder of the Company as to any shares of Common Stock not actually issued and delivered to Optionee prior to delivery of the exercise price and satisfaction of all other conditions precedent to the due exercise of the Option and delivery of shares.
8. No Employment Commitment by Company. Nothing contained in this Agreement or the Plan constitutes an employment commitment by the Company, affects Optionee's status as an employee at will who is subject to termination without cause, confers upon Optionee any right to remain employed by the Company or any subsidiary, interferes in any way with the right of the Company or any subsidiary at any time to terminate such employment, or affects the right of the Company or any subsidiary to increase or decrease Optionee's other compensation.
9. Effect of Award Agreement. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company except to the extent the Committee determines otherwise.
10. Choice of Law. The constructive interpretation, performance and enforcement of the Option and this Agreement shall be governed by the laws of the State of California.
11. Defined Terms. Capitalized terms used herein and not otherwise defined herein shall have the meaning assigned to such terms in the Plan.
12. Plan. The Option and all rights of Optionee thereunder are subject to, and the Optionee agrees to be bound by, all of the terms and conditions of the provisions of the Plan, including, but not limited to Section 5.2 (Adjustments; Acceleration) and Section 5.10 (Governing Law/Construction/Severability). The Optionee acknowledges receipt of a copy of the Plan, which is made a part hereof by this reference, and agrees to be bound by the terms thereof. Unless otherwise expressly provided in other Sections of this Agreement, provisions of the Plan that confer discretionary authority on the Committee do not (and shall not be deemed to) create any additional rights in the Optionee not expressly set forth above.
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