<PAGE>
INTERNATIONAL RECTIFIER CORPORATION
233 KANSAS STREET, EL SEGUNDO, CA 90245 (310) 726-8000
[LOGO]
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 22, 1999
---------------------
The Annual Meeting of Stockholders of INTERNATIONAL RECTIFIER CORPORATION
will be held on Monday, November 22, 1999, at 10 o'clock a.m. Pacific Standard
Time at the HEXFET America facility of the Company at 41915 Business Park Drive,
Temecula, California.
The meeting will consider and act upon the following business:
1. Election of four Directors.
2. Approval of the 2000 Stock Incentive Plan.
3. Ratification of PricewaterhouseCoopers LLP as independent auditors of
the Company to serve for fiscal year 2000.
4. Such other business as may properly come before the meeting or any
adjournments thereof.
The Board of Directors has fixed the close of business on September 24, 1999
as the record date for determining those Stockholders who will be entitled to
vote at the meeting.
By order of the Board of Directors
L. Michael Russell
Secretary
October 8, 1999
IMPORTANT: PLEASE FILL IN DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY, IN
THE POST-PAID ENVELOPE PROVIDED, TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT
THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH TO DO
SO EVEN THOUGH YOU HAVE SENT IN YOUR PROXY.
<PAGE>
PROXY STATEMENT
GENERAL
The accompanying Proxy is solicited by the Board of Directors of
International Rectifier Corporation ("Company") for use at the Annual Meeting of
Stockholders to be held on November 22, 1999 and any adjournments. The close of
business on September 24, 1999 has been fixed as the record date for determining
Stockholders entitled to notice of and to vote at the meeting. As of September
24, 1999, there were 51,980,480 shares issued and outstanding of $1.00 par value
common stock of the Company ("Common Stock"), the only class of voting
securities outstanding. Each share of Common Stock is entitled to one vote;
there is no cumulative voting. This Proxy Statement and the accompanying Proxy
will be first mailed to Stockholders on or about October 8, 1999.
Any Stockholder who gives a Proxy has the power to revoke it at any time
before it is exercised. Revocation is affected by delivery of written notice of
revocation to the Secretary of the Company prior to commencement of the Annual
Meeting. Stockholders attending the Annual Meeting may vote their shares in
person even if they previously returned a Proxy. The Company will bear the cost
of solicitation of proxies.
Votes cast by proxy or in person at the Annual Meeting will be counted by
the persons appointed by the Company to act as election inspectors for the
meeting. The election inspectors will treat shares represented by Proxies that
reflect abstentions or include "broker non-votes" as shares that are present and
entitled to vote for purposes of determining the presence of a quorum.
Abstentions will be counted toward the tabulation of "votes cast" in determining
the results of voting on the 2000 Stock Incentive Plan but do not constitute
"votes cast" in the election of directors. In any event, they have the same
effect as negative votes. "Broker non-votes" will be counted solely for the
purpose of determining the existence of a quorum. Proxies will be voted as
instructed; executed unmarked Proxies will be voted FOR the applicable item and
WITH AUTHORITY to vote in the election of directors.
2
<PAGE>
SECURITY OWNERSHIP
The following table shows, as of September 24, 1999, the beneficial
ownership of Common Stock by owners of more than five percent of Common Stock,
by each director or nominee, by each Named Executive Officer (as defined in the
"Executive Compensation" Section below), and by all directors and Named
Executive Officers as a group.
<TABLE>
<CAPTION>
AMOUNT
NAME AND ADDRESS BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------------------------------------------------ ------------------ -----------------
<S> <C> <C>
State of Wisconsin Investment Board......................... 5,167,000(1) 9.94%
P. O. Box 7842, Madison, WI 53707
Lazard Freres & Co. LLC..................................... 3,086,765(2) 5.94%
30 Rockefeller Plaza, New York, NY 10020
Eric Lidow(3)............................................... 2,521,153(4) 4.85%
Alexander Lidow(3).......................................... 1,493,420(4) 2.87%
Derek B. Lidow(3)........................................... 1,040,444(4) 2.00%
Donald S. Burns(5).......................................... 56,100(4) *
George Krsek................................................ 42,000(4) *
Minoru Matsuda.............................................. 17,000(4) *
Michael P. McGee............................................ 121,112(4) *
Robert J. Mueller........................................... 129,400(4) *
James D. Plummer............................................ 50,000(4) *
L. Michael Russell.......................................... 34,919(4) *
Jack O. Vance............................................... 86,900(4) *
Rochus E. Vogt.............................................. 78,000(4) *
All Directors and Named Executive Officers
as a Group (12 persons)................................... 5,670,448(4) 10.91%
</TABLE>
- ------------------------
* Less than 1%
(1) Based on Schedule 13G last filed on January 16, 1999.
(2) Based on Schedule 13G last filed on February 13, 1998.
(3) Members of the Lidow family other than Messrs. Eric Lidow, Alexander Lidow
and Derek B. Lidow are the beneficial owners of 230,700 shares. The Messrs.
Lidow disclaim any beneficial ownership in any such shares. The 5,285,717
shares beneficially owned by members of the Lidow family constitute 10.17%
of the shares outstanding. In addition, the Lidow Foundation, of which the
Messrs. Lidow are directors, owns 97,634 shares and the Messrs. Lidow
disclaim any pecuniary interest in any such shares.
(4) Amounts include, in the aggregate, 1,804,200 options exercisable under the
Company's stock option plans by Named Executive Officers and directors
within 60 days of the record date.
(5) A member of the Burns family other than Mr. Burns is the beneficial owner of
1,100 shares. Mr. Burns disclaims any beneficial ownership in any such
shares.
The business address of each director and Named Executive Officer is 233 Kansas
Street, El Segundo, CA 90245.
3
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL 1)
There are ten directors on the Company's Board of Directors. The directors
are divided into three classes, and the directors in each class serve three-year
terms expiring in successive years. At the 1999 Annual Meeting, the term of
office of the directors in Class Two expires. Four directors are to be elected
with terms expiring upon the election and qualification of their successors at
the 2002 Annual Meeting of Stockholders.
The Board of Directors will vote Proxies received for the election of the
nominees for directors named below, unless authority to do so is withheld. Drs.
Rochus E. Vogt and Alexander Lidow, and Messrs. Robert J. Mueller and Minoru
Matsuda, the nominees, are presently directors of the Company. It is not
contemplated that any nominee will be unable to serve as a director, but if that
contingency should occur prior to the Annual Meeting, the holders of Proxies
reserve the right to substitute and vote for another person of their choice.
The affirmative vote of holders of a majority of shares of Common Stock
represented at the meeting in person or by Proxy is required to elect any
nominee for director.
NOMINEES FOR DIRECTORS:
The following persons are nominees for directors with terms expiring in
2002:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- -------------------------------- --- ---------------------------------------------------------------- -----------
<S> <C> <C> <C>
CLASS TWO
TERM ENDING 1999
Rochus E. Vogt.................. 69 R. Stanton Avery Distinguished Service Professor and Professor
of Physics, California Institute of Technology 1984
Robert J. Mueller............... 70 Executive Vice President of the Company for External Affairs and
Business Development 1990
Alexander Lidow(1)(2)........... 44 Chief Executive Officer of the Company 1994
Minoru Matsuda.................. 62 Professor, Kanazawa Institute of Technology
Ishikawa, Japan 1997
- ----------------------------------------------------------------------------------------------------------------------------
CLASS THREE
TERM ENDING 2000
Eric Lidow...................... 86 Chairman of the Board of the Company 1947
Donald S. Burns................. 74 Chairman of the Board, President and Chief Executive Officer,
Prestige Holdings, Ltd., an investment advisory firm 1993
James D. Plummer................ 54 Frederick Emmons Terman Professor of Engineering, Dean of the
School of Engineering, and Director of the Stanford
Nanofabrication Facility, Stanford University 1994
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- -------------------------------- --- ---------------------------------------------------------------- -----------
<S> <C> <C> <C>
CLASS ONE
TERM ENDING 2001
George Krsek.................... 78 President and Chairman of the Board, Konec, Inc., a management
consulting firm 1979
Jack O. Vance(3)................ 74 Managing Director, Management Research, a management consulting
firm 1988
Derek B. Lidow(1)(4)............ 46 President and Chief Executive Officer, Lidow Technologies, Inc.,
a venture capital firm 1994
</TABLE>
- ------------------------
(1) Drs. Alexander Lidow and Derek B. Lidow are sons of Eric Lidow.
(2) Dr. Alexander Lidow is on the Board of Overseers for the RAND Corporation
and on the Board of Trustees of the California Institute of Technology.
(3) Dr. Vance is also a director of The Olson Company, King's Seafood Co., First
Consulting Group, Semtech Corporation, Mathers Fund, Inc., and Hankin & Co.
He was formerly a managing director of the Los Angeles office of McKinsey &
Co., Inc., a management consulting firm.
(4) Dr. Derek B. Lidow is a director of iSuppli, Inc., a member of the
Leadership Council of the School of Engineering of Princeton University and
a Trustee of the Los Angeles Philharmonic.
The above named directors have held their respective employment positions
during the past five years except for George Krsek, Minoru Matsuda, Alexander
Lidow and Derek B. Lidow. In August 1994, Dr. Krsek became Managing Member of
Konec L.L.C., a management consulting company; and in December 1997, Konec,
L.L.C. became Konec, Inc. and Dr. Krsek became its President and Chairman of the
Board. Mr. Matsuda was employed by Hitachi Ltd. from 1960 to March, 1997, his
last position being Senior Counsel - Intellectual Property. Since April, 1997,
Mr. Matsuda has been a professor at Kanazawa Institute of Technology in Japan.
Dr. Alexander Lidow was elected Chief Executive Officer on March 6, 1995, after
more than 17 years of service in various managerial positions of increasing
responsibility within the Company. Dr. Derek B. Lidow was Chief Executive
Officer of the Company from March 6, 1995 until June 15, 1999. Prior to that he
served in various managerial positions within the Company. Dr. Derek B. Lidow is
currently the President and Chief Executive Officer of Lidow Technologies, Inc.,
a venture capital firm.
5
<PAGE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company's Board of Directors has Audit, Compensation and Stock Option,
and Executive committees, but not a Nominating Committee. The Board of Directors
met five times during the fiscal year. No director attended fewer than 75% of
the meetings of the Board of Directors and of each committee on which he served
during the fiscal year.
The Audit Committee monitors the Company's basic accounting policies,
reviews audit and management reports, and makes recommendations regarding the
appointment of the independent auditors. It currently consists of Drs. Krsek and
Plummer and Mr. Burns, each of whom is a director, but not an officer or
employee, of the Company ("Non-Employee Director"). The Audit Committee held two
meetings during fiscal year 1999.
The Compensation and Stock Option Committee ("Compensation Committee") has
the responsibility for setting key executive compensation and for granting stock
options to key employees. (See "Compensation Committee Report" below). It
currently consists of Drs. Vance and Vogt and Mr. Matsuda, each of whom is a
Non-Employee Director. The Compensation Committee met five times during the
fiscal year.
The Executive Committee exercises many of the powers of the Board in
managing the business affairs of the Company. It consists of Messrs. E. Lidow
and Mueller and Drs. A. Lidow, Plummer and Vance. The Executive Committee met
four times during the fiscal year.
Non-Employee Directors receive fees of $35,000 per year for participation on
the Board and its Committees. Drs. Plummer and Vance receive an additional
$3,000 for each meeting of the Executive Committee attended. Under the Company's
Amended and Restated Stock Incentive Plan of 1992 ("Plan" or "1992 Plan"),
Non-Employee Directors are automatically granted stock options for 5,000 shares
of Common Stock on each January 1st during the term of the Plan. Each
Non-Employee Director in office on August 9, 1994 was automatically granted an
option to purchase 20,000 shares of Common Stock. Upon initial Stockholder
approval of the Plan, each Non-Employee Director was also granted an option to
purchase 20,000 shares of Common Stock. Each Non-Employee Director initially
elected after the 1994 Annual Meeting of Stockholders is automatically granted
an option to purchase 40,000 shares of Common Stock. However, the aggregate
number of shares for which options may be granted to any Non-Employee Director
under both the 1992 Plan and the Company's Stock Option Plan of 1984 cannot
exceed 120,000 shares. Non-Employee Directors are not eligible to receive any
other options unless the proposed 2000 Plan is adopted. (See "2000 Stock
Incentive Plan" below). Options granted to Non-Employee Directors under the 1992
Plan become exercisable at the rate of 20% per year commencing on the first
anniversary of the grant. Vesting may accelerate upon death, voluntary
resignation after five years of continuous service or decision not to stand for
re-election after five years of continuous service.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table and accompanying notes summarize the aggregate
compensation, and the stock option grants awarded to each of the Chief Executive
Officers and the other four highest paid executive officers of the Company
("Named Executive Officers") for each of the last three fiscal years.
SUMMARY COMPENSATION TABLE--ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION FISCAL YEAR ($)(1) ($) ($) (#) ($)
- ---------------------------------- ----------- ----------- ----------- --------------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eric Lidow(2)..................... 1999 639,700 -- -- 137,000 6,596,663(3)
Chairman of the Board 1998 664,027 -- -- 100,000 1,534,682(4)
1997 639,700 -- -- 123,000 --
Alexander Lidow................... 1999 352,200 100,000 -- 301,000 --
Chief Executive Officer 1998 365,469 -- -- 100,000 --
1997 352,200 -- -- 134,000 --
Derek B. Lidow.................... 1999 338,931 100,000 -- 337,000 3,229,066(5)
Chief Executive Officer 1998 365,469 -- -- 100,000 --
1997 352,200 -- -- 134,000 --
Robert J. Mueller................. 1999 329,400 -- -- 67,000 5,601(6)
Executive Vice President, 1998 324,182 -- -- 40,000 12,912(6)
External Affairs and 1997 315,100 -- -- 40,000 19,546(6)
Business Development
Michael P. McGee.................. 1999 252,354 -- -- 67,000 6,649(6)
Executive Vice President, 1998 234,104 -- -- 120,000 --
Chief Financial Officer 1997 225,700 -- -- 65,000 --
L. Michael Russell................ 1999 234,451 20,000(7) -- 107,000 --
Executive Vice President, 1998 223,941 13,850(7) -- 20,000 --
Secretary and General Counsel 1997 80,069(8) 20,000(7) -- 10,000 --
</TABLE>
- --------------------------
(1) Each year's salary includes an automobile allowance granted to key
employees, except that of Robert J. Mueller who receives a Company car in
lieu of an automobile allowance. Regarding Eric Lidow, Alexander Lidow and
Derek B. Lidow: their individual base salary rate for 1999, 1998 and 1997
was the same. Regarding Robert J. Mueller, Michael P. McGee and L. Michael
Russell: their individual base salary rate for 1998 and 1997 was the same.
Amounts reflect differences in pay periods.
(2) The Company has an executive agreement with Eric Lidow. (See "Executive
Agreement" below).
(3) Pension Trust payout in fiscal 1999 (see "Executive Agreement" below).
(4) Includes Pension Trust payout of $1,500,000 in fiscal 1998 (see "Executive
Agreement" below), and a cash payment of $34,682 for vacation hours that
were accumulated beyond 240 hours at the end of the calendar year, pursuant
to Company vacation policy.
(5) Derek B. Lidow resigned from the Company effective June 15, 1999, on which
date he received a severance payment of $3,200,000. (See "Management Change"
below). He also received a $29,066 cash payment for vacation hours that were
accumulated beyond 240 hours at the end of the calendar year, pursuant to
Company vacation policy.
(6) Cash payment for vacation hours that were accumulated beyond 240 hours at
the end of the calendar year, pursuant to Company vacation policy.
(7) Reflects bonus agreed to be paid to Mr. Russell upon his joining the
Company.
(8) Mr. Russell joined the Company in January 1997.
7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table and accompanying notes summarize options granted to each
Named Executive Officer of the Company in fiscal 1999 and projects potential
realizable gains at hypothetical assumed annual compound rates of appreciation.
All options granted in fiscal 1999 to each Named Executive Officer were
non-qualified stock options under the 1992 Plan.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PERCENT OF TOTAL PRICE APPRECIATION
OPTIONS OPTIONS GRANTED EXERCISE FOR OPTION TERM(3)
GRANTED TO EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME (#)(1) FISCAL YEAR ($/SH) DATE(2) 5% ($) 10% ($)
- ------------------------------------ --------- ----------------- ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Eric Lidow.......................... 69,000 5% 7.75(4) 8/23/08 139,612 539,059
" 68,000 5% 10.00(5) 8/23/08 (15,411) 378,247
Alexander Lidow..................... 69,000 5% 7.75(4) 8/23/08 139,612 539,059
" 68,000 5% 10.00(5) 8/23/08 (15,411) 378,247
" 164,000 12% 11.375 6/13/09 1,173,203 2,973,127
Derek B. Lidow(6)................... 69,000 5% 7.75(4) 8/23/08 139,612 539,059
" 68,000 5% 10.00(5) 8/23/08 (15,411) 378,247
" 200,000 15% 11.375 6/13/09 1,430,735 3,625,764
Robert J. Mueller................... 67,000 5% 7.75(4) 8/23/08 135,566 523,434
Michael P. McGee.................... 67,000 5% 7.75(4) 8/23/08 135,566 523,434
L. Michael Russell.................. 67,000 5% 7.75(4) 8/23/08 135,566 523,434
" 40,000 4% 9.3125 11/22/08 234,263 593,669
</TABLE>
In addition, 342,050 options were granted to other employees of the Company
under its stock option plans during this period.
- ------------------------
(1) Except as disclosed in Note 6 below, options were granted as ten-year
options at or above market price and become exercisable at a rate of 20% per
year commencing on the first anniversary of the date of grant. Options under
the Plan may be exercised for specified periods of time following the
resignation, retirement or other termination of employment with the Company
or its subsidiaries, or as a result of a change in control of the Company
(as defined in the Plan). The Plan also permits the Compensation Committee,
which administers the Plan, to accelerate, extend or otherwise modify
benefits payable under the applicable awards in various circumstances,
including a termination of employment or certain reorganizations. Under the
Plan, if there is a change in control of the Company, the Compensation
Committee may expressly or by inaction accelerate the receipt of benefits.
(2) Except as disclosed in Note 6 below, subject to earlier termination in
certain events related to termination of employment.
(3) These values are solely the mathematical results of hypothetical assumed
appreciation of the market value of the underlying shares at an annual rate
of 5% and 10% over the full ten-year term of the options, less the exercise
price. Actual gains, if any, will depend on future stock market performance
of the Common Stock, market factors and conditions, and each optionee's
continued employment through the applicable vesting periods. The Company
makes no prediction as to the future value of
8
<PAGE>
these options or of its common stock, and these values are provided solely
as examples required by the proxy reporting rules of the Securities and
Exchange Commission ("SEC").
(4) These options were granted at $1.75 above the market value of $6.00 at close
of market on date of grant.
(5) These options were granted at $4.00 above the market value of $6.00 at close
of market on date of grant.
(6) In connection with his Agreement (see "Management Change" below), Derek B.
Lidow was granted an option to purchase 200,000 shares of Common Stock on
June 14, 1999 at $11.375 (market value at close of market on date of grant).
These shares were fully vested upon grant, expire on June 13, 2009, and
(except in the case of death, disability or a termination of the Agreement
for cause) generally can be exercised during the entire term,
notwithstanding a termination of service. In addition, the vesting of his
options granted August 24, 1998 was accelerated and (with limited exception)
those options may be exercised during their entire term, notwithstanding the
termination of his employment. (See "Management Change" below).
OPTIONS
The following table shows for each of the Named Executive Officers the
shares acquired on exercise of options in fiscal 1999 and certain required
information regarding outstanding options held by them at the end of fiscal
1999.
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END
AT FISCAL YEAR-END (#)(1) ($)(1)(2)
SHARES ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ----------------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eric Lidow................. -- -- 269,200 310,800 817,500 639,063
Alexander Lidow............ -- -- 233,600 481,400 585,000 956,813
Derek B. Lidow............. 64,000 332,000(3) 687,000 -- 1,239,563 --
Robert J. Mueller.......... -- -- 66,000 131,000 174,375 372,688
Michael P. McGee........... -- -- 93,000 216,000 139,875 372,688
L. Michael Russell......... -- -- 8,000 129,000 -- 532,688
</TABLE>
- --------------------------
(1) The exercisability of options may be accelerated upon a Change in Control
(as defined in the Plan). See notes 1 and 6 to "Option Grants in Last Fiscal
Year" above and "Management Change" below for additional information
concerning outstanding options and the special terms of Dr. Derek B. Lidow's
options as a result of the restructuring of the office of Chief Executive
Officer and the terms of his Agreement.
(2) Based on market value of $13.3125 at the end of fiscal 1999, minus the
exercise price of "in-the-money" options. The exercise price of outstanding
options ranges from $7.50 to $23.8125. These options are subject to the same
terms and conditions as options granted to other employees under the
Company's current stock option plans, including 20% annual vesting (except
in the case of Dr. Derek B. Lidow, see "Management Change" below),
adjustments upon change in control or reorganization and expiration at or
following termination of employment.
(3) Based on market value of $12.6875 on the date of exercise.
9
<PAGE>
EXECUTIVE AGREEMENT
The Company entered into an executive agreement with Mr. Eric Lidow, the
Company's Chairman, dated May 15, 1991. The agreement set Mr. Lidow's annual
salary at $500,000, granted the Board discretion to increase his salary and to
pay him bonuses, and established a pension. Mr. Lidow's salary was increased in
May 1992 to $550,000, in August 1994 to $632,500 and in July 1999 to $670,450.
Mr. Lidow was not awarded a bonus in fiscal year 1999. The agreement may be
terminated by either party upon 90 days written notice.
Under the agreement, prior to its amendment described below, Mr. Lidow would
have been entitled to begin receiving the pension payments when his employment
with the Company ceased for any reason (except termination for cause). The
pension would have been payable in annual installments, equal to the sum of 90%
of his then current salary and the average of his prior three years' cash
bonuses, if any. If Mr. Lidow's wife survived him, she would have received, for
the remainder of her life, annual payments in an amount equal to two-thirds of
the amount of the pension payment that would have been payable to Mr. Lidow.
Before the amendments to the agreement described below, if Mr. Lidow had retired
at fiscal 1998 year-end, the pension would have been equal to $821,250 per year
for the remainder of Mr. Lidow's life and $547,500 per year for the remainder of
Mrs. Lidow's life, if she had survived him. The Company had funded a trust to
cover its liability for the pension based on actuarial assumptions established
by PricewaterhouseCoopers LLP. However, the Company's actual liability for the
pension in ensuing years could have been more or less than the funding depending
upon whether actual events mirrored the actuarial assumptions.
In fiscal 1998, the Compensation Committee and Mr. Lidow renegotiated his
executive agreement. The Compensation Committee then recommended adoption of the
renegotiated agreement by the Board, which the Board approved. In taking these
actions, the Compensation Committee and the Board considered, among other
things, their and Mr. Lidow's desire to limit the sale of his shares of Common
Stock to meet commitments and their concerns about the uncertainty of the
Company's liability for the pension. In connection with the former
consideration, the Company also made certain loans to Mr. Lidow, which have
since been repaid. (See "Transactions with Management" below). The amendments to
Mr. Lidow's agreement canceled all of the Company's obligations with respect to
the pension. As consideration, the corpus of the trust of $8,096,663 was
distributed to Mr. Lidow in several installments: $6,596,663 and $1,500,000 in
fiscal 1999 and 1998, respectively. Based on actuarial analysis, the
consideration was less than the amount needed to purchase the retirement benefit
from a third-party company. Mr. Lidow and his wife are not entitled to receive
any additional pension payments under the agreement.
The funding of the pension had been expensed in prior years, and the lump
sum distribution did not trigger any further expense. Because Internal Revenue
Code Section 162(m) imposes certain restrictions on the deductibility of
non-performance based compensation in excess of $1,000,000, the Company was not
able to deduct any compensation in excess of $1,000,000 paid to Mr. Lidow in
fiscal 1999 and 1998.
10
<PAGE>
MANAGEMENT CHANGE
In May 1999, after considering the recommendation of the Chairman and Chief
Executive Officers, the Board determined that the Company should implement a
single chief executive officer management structure. To effectuate this
management change, the Company entered into an agreement with Dr. Derek B. Lidow
on May 10, 1999 ("Agreement"), which provided for Dr. Lidow's resignation as
Chief Executive Officer and as an employee of the Company. Under the terms of
the Agreement, Dr. Lidow received a severance payment of $3,200,000 on June 15,
1999, a bonus of $100,000 for fiscal 1999 individual performance on August 13,
1999, and a grant of 200,000 stock options on June 14, 1999, which are vested
and which expire on June 13, 2009 or earlier if the Agreement is terminated for
cause or in certain limited circumstances. The Agreement extended the
post-termination service period during which Dr. Lidow's options that were
either unvested or "out-of-the-money" could be exercised (but not beyond the
original option term) and also provided for the immediate acceleration of the
vesting of all of Dr. Lidow's outstanding unvested stock options. Under the
Agreement, Dr. Lidow will provide non-exclusive consulting services to the
Company until June 14, 2001 for which he will be compensated $100,000 per
quarter plus associated expenses. Upon a termination of the Agreement by the
Company without cause, the benefits under the Agreement are payable in a lump
sum within 30 days. A "Change in Control," as defined in the 1992 Plan, that
occurs prior to June 14, 2001 shall be treated the same as an assignment of the
Agreement by the Company (unless earlier terminated), except that if Dr. Derek
B. Lidow reasonably withholds his consent, then the "Change in Control" shall be
treated as a termination of the Agreement without cause.
TRANSACTIONS WITH MANAGEMENT
In June 1998, after discussing with Mr. Eric Lidow his desire to limit his
sale of shares of Common Stock to meet commitments, the Board approved two
unsecured loans to him aggregating $1,200,000, with interest at the annual rate
of eight and one-half percent (8.5%). The first loan of $600,000 was made in
June 1998 and the second loan, also for $600,000, was made in July 1998. Both
loans were due December 31, 1998. Mr. Lidow repaid them with accrued interest of
$23,497 on September 23, 1998. Contemporaneously with the approval of the loans,
the Company amended his executive agreement. (See "Executive Agreement" above).
In connection with Dr. Derek B. Lidow's exercise of an option on June 23,
1999 to purchase 64,000 shares of Common Stock, the Company had an outstanding
receivable from Dr. Lidow for $597,694, without interest, at June 30, 1999,
which was paid off on July 7, 1999.
During the fiscal year, the Company paid $310,160 to the Law Offices of
Janet K. Hart for legal and negotiation services rendered to the Company. Ms.
Hart is the wife of Dr. Alexander Lidow.
See "Executive Agreement" and "Management Change" above for a discussion of
transactions with Mr. Eric Lidow and Dr. Derek B. Lidow.
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THE FOLLOWING INFORMATION CONTAINED UNDER THE CAPTIONS "COMPENSATION COMMITTEE
REPORT" AND "STOCK PRICE PERFORMANCE" SHALL NOT BE DEEMED "SOLICITING MATERIAL"
OR "FILED" WITH THE SECURITIES AND EXCHANGE COMMISSION AND SHALL NOT BE DEEMED
TO BE INCORPORATED INTO ANY FILING BY INTERNATIONAL RECTIFIER CORPORATION UNDER
THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 IN THE ABSENCE
OF SPECIFIC REFERENCE TO SUCH CAPTIONS AND INFORMATION.
COMPENSATION COMMITTEE REPORT
The Compensation Committee determines the compensation of the Named
Executive Officers, who comprise the top management operating group of the
Company. (See "Executive Compensation" above). The Compensation Committee also
reviews (but does not set) the salaries of all other employees having annual
compensation of $150,000 or more. Salaries for these positions are determined by
the Chief Executive Officer ("CEO").
In August 1998, the Compensation Committee recommended to the Board that it
approve an amendment to Mr. Eric Lidow's executive agreement. (See "Executive
Agreement" above.)
COMPENSATION PROGRAM
The Company's executive compensation program consists of base salaries,
annual bonus opportunity, and long-term incentives in the form of stock options.
The Compensation Committee's policy is to set base salaries generally near the
median of the competitive range for similar positions in high technology
companies, based on information of a broad range of such companies obtained from
an annual independent survey of executive compensation. Award determinations
under the annual bonus plan are not made on a formula basis, but rather are
based on subjective decisions of the Compensation Committee. In making both
annual bonus awards and stock option grants, the Compensation Committee
considers such factors as annual profitability, revenue growth, outstanding
achievements such as new product introductions, improvement in market share and
industry position, as well as its perception of individual performance.
CASH COMPENSATION
Base salaries for fiscal 1999 of the Named Executive Officers, are listed
above under "Executive Compensation." The Committee approved base salary
increases in August, 1998 for Robert J. Mueller, Michael P. McGee and L. Michael
Russell based on individual performance and contribution. The base salary
payable to Eric Lidow is described under "Executive Agreement" above. For fiscal
1999, annual bonuses were paid only to the CEOs, in the amount of $100,000 each.
LONG-TERM INCENTIVES
Long-term incentives are intended to reward for Company performance longer
than one year. The Compensation Committee has determined that stock options are
an effective incentive to reward for sustained long-term growth as reflected in
the Company's stock price. Stock options are granted at exercise prices that are
not less than fair market value on the date of grant. Outstanding options become
exercisable at a rate of 20% per year commencing on the first anniversary of the
date of grant and expire ten years after the date of grant. In fiscal year 1999,
the Compensation Committee, based on Company and individual performance, granted
options at a level below the median of companies in the market survey referred
to above. The Compensation Committee granted some options above the market value
on date of grant. Because of the timing of the CEO restructuring, option grants
to the CEOs with respect to fiscal
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1998 and 1999 performance were clustered in fiscal 1999. (See "Option Grants in
Last Fiscal Year" above). On July 7, 1999, the Compensation Committee granted
stock options at the market value on date of grant to the following Named
Executive Officers; Eric Lidow--130,000; Robert J. Mueller--40,000; Michael P.
McGee--65,000; and L. Michael Russell--50,000. The CEOs were granted options on
June 14, 1999, as shown in "Option Grants in Last Fiscal Year" above as a part
of the CEO restructuring settlement.
CEO COMPENSATION
Dr. Alexander Lidow and Dr. Derek B. Lidow were elected Directors in 1994,
and were elected Chief Executive Officers in March 1995, after more than 17
years of service in various managerial positions of increasing responsibility
within the Company. The base compensation of these officers is between the 25th
percentile and median for chief executive officers in comparable high technology
companies based on information obtained from an annual independent survey.
Before Derek B. Lidow's resignation as CEO of the Company, the compensation of
the two CEOs was maintained at the same level as a matter of policy, and their
base salary rate was constant for 1997, 1998 and 1999. A substantial part of
their total compensation package is made up of stock options, the value of which
can only be realized if the Company's stock price increases. During fiscal 1999,
Alexander Lidow and Derek B. Lidow were each granted options for 301,000 shares
of Common Stock with respect to fiscal years 1998 and 1999. In addition, Derek
B. Lidow was granted an option to purchase 36,000 shares in connection with his
Agreement (see "Management Change" and "Option Grants in Last Fiscal Year"
above), bringing Derek B. Lidow's 1999 calendar year stock option grant total to
the Plan limit of 200,000 shares. As noted above, a $100,000 cash bonus was paid
to each of the CEOs on August 13, 1999 based on subjective factors and
individual performance considerations.
SINGLE INCUMBENT CEO STRUCTURE
The Board determined that the Company is now at a stage where it would be
best served by having a single CEO management structure. On May 10, 1999 the
Company entered into an agreement with Derek B. Lidow which provided for Dr.
Lidow's resignation as Chief Executive Officer and as an employee of the Company
effective June 15, 1999. (See "Management Change" above.) Dr. Derek B. Lidow
remains on the Company's Board of Directors and will provide consulting services
to the Company. The Company believes that a single CEO structure will help
achieve its long-range objectives by, among other things, streamlining decision
making, more tightly linking the Company's activities, and allowing further
operating efficiencies. Dr. Alexander Lidow continues to serve the Company as
CEO and as a member of the Board of Directors.
The Company does not have an employment contract with Alexander Lidow.
POLICY ON 162(m)
Because the amount of cash compensation paid to any executive officer does
not ordinarily exceed $1,000,000, the Company has not adopted any policy with
respect to Section 162(m) of the Internal Revenue Code of 1986. However,
whenever practicable and consistent with objectives, the Compensation Committee
structures compensation to be deductible and carefully considers cost and value
to the Company in making compensation decisions. The Company was not able to
deduct any compensation in excess of $1,000,000 paid to Eric Lidow in fiscal
1999 and 1998. The Compensation Committee believes that these payments were
appropriate and in the best interests of the Company.
Jack O. Vance
Rochus E. Vogt
Minoru Matsuda
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STOCK PRICE PERFORMANCE
The following graph compares the Company's cumulative stockholder return on
its Common Stock (i.e. change in stock price plus reinvestment of dividends)
measured against the cumulative total return of the Standard and Poor's 500
Stock Index and Standard and Poor's High Technology Composite Index peer group.
The stock price performance shown in this graph, which assumes $100 was invested
on June 30, 1994, is not necessarily indicative of and not intended to suggest
future stock price performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FISCAL YEARS
<S> <C> <C> <C>
The Company S&P 500 S&P High Tech
06.30.94 $100.00 $100.00 $100.00
06.30.95 $216.67 $126.07 $162.70
06.30.96 $215.00 $158.85 $193.86
06.30.97 $248.33 $213.97 $294.72
06.30.98 $113.33 $278.51 $395.97
06.30.99 $177.51 $341.88 $653.31
</TABLE>
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2000 STOCK INCENTIVE PLAN
(PROPOSAL 2)
The Board of Directors, having concluded that the Company's ability to
attract, motivate, retain and reward highly skilled employees (including
officers) and directors would be strengthened by the greater use of stock-based
awards and incentives for individual performance and for financial performance
of the Company, has approved the submission to the stockholders of the 2000
Stock Incentive Plan ("2000 Plan"). The full text of the 2000 Plan is set forth
in the Exhibit to this Proxy Statement. The following summary of the 2000 Plan
is qualified by this reference to that text.
SUMMARY DESCRIPTION OF THE PLAN.
PURPOSE. The purpose of the 2000 Plan is to provide stock-based incentives
as a means of promoting the success of the Company by attracting, motivating,
rewarding, retaining and aligning the interests of employees (including
officers), directors and consultants with those of stockholders generally.
ELIGIBLE PERSONS. Eligible Persons under the 2000 Plan generally include
the Company's and its Subsidiary's:
- employees,
- officers,
- directors, or
- consultants and advisors
Members of the Board who are not executive officers of the Company
("Non-Employee Directors") may receive discretionary grants under the 2000 Plan
and will continue to receive formula grants under the 1992 Plan through 2002.
Awards also may be granted in connection with, or to facilitate, an acquisition
by the Company of another entity. Such Awards may include such terms necessary
to preserve the intrinsic value of prior outstanding awards issued by the other
entity, or on other terms authorized by the 2000 Plan.
As of June 30, 1999, there were approximately 4,495 employees and officers
of the Company and seven Non-Employee Directors, all of whom are Eligible
Persons under the 2000 Plan. The Board retains the power to determine the
particular eligible persons to whom discretionary Awards will be granted.
ADMINISTRATION. The Board of Directors or one or more committees of
directors appointed by the Board (the appropriate acting body is referred to as
the "Committee") will administer the 2000 Plan. All Awards to Eligible Persons
will be authorized by the Board or the Committee. See "Committees and Meetings
of the Board of Directors" above. The Committee will have broad authority under
the 2000 Plan, including, for example, the authority:
- to select the Participants, although grants to Non-Employee Directors
would require Board approval or ratification;
- to determine the number of shares that are to be subject to Awards and the
terms and conditions of such Awards, including the price (if any) to be
paid for the shares or the Award;
- to permit the recipient of any Award to pay the exercise or purchase price
of the Common Stock or Award in cash, by the delivery of previously owned
shares of Common Stock or by offset (withholding shares otherwise to be
delivered on exercise, valued at their fair market value as of the date of
exercise in respect of withholding taxes and/or the exercise price), by
notice and third party payment, or by a promissory note meeting the
requirements contained in the 2000 Plan;
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- to amend option terms other than to reprice them, to accelerate the
receipt or vesting of benefits and to extend or enhance benefits under an
Award; and
- to make certain adjustments to an outstanding Award and authorize the
conversion, succession or substitution of an Award in connection with
certain reorganizations or Change in Control Events (as generally
described below under "Acceleration of Awards; Possible Early Termination
of Awards").
IN NO CASE WILL OPTIONS BE REPRICED (BY AMENDMENT, SUBSTITUTION, CANCELLATION
AND REGRANT OR OTHER MEANS), UNLESS AUTHORIZED BY STOCKHOLDERS. ADJUSTMENTS
RESULTING FROM ANTIDILUTION PROVISIONS OF THE 2000 PLAN OR A RECAPITALIZATION,
REORGANIZATION, OR SIMILAR TRANSACTION AFFECTING THE UNDERLYING SECURITIES ARE
NOT CONSIDERED REPRICING.
SHARE LIMITS. Various share limits are imposed. Under the 2000 Plan, a
maximum of:
- 4,500,000 shares may be issued, of which no more than:
- 2,250,000 shares may be subject to Incentive Stock Options granted;
- 225,000 shares may be granted as Restricted Stock Awards or equivalents
if their vesting is based solely on the passage of time and/or
continued service;
- 1,200,000 shares may be issued subject to Options and to all
share-based Awards granted to an individual in any three consecutive
calendar years;
- $3,000,000 may be payable pursuant to performance-based awards payable
solely in cash that are granted under the 2000 Plan to an individual in
any three consecutive calendar years.
Each share limit and Award under the 2000 Plan is subject to adjustment for
certain changes in the Company's capital structure, reorganizations and other
extraordinary events. Shares subject to Awards that are not paid or exercised
before they expire or are terminated are available for future grants under the
2000 Plan. The 1992 Plan and the 1997 Plan have their own limits on awards and
are in addition to this authority under the 2000 Plan.
TYPES OF AWARDS. The 2000 Plan authorizes the grant of Options, Restricted
Stock, Stock Bonuses, Stock Units, Performance Awards and dividend equivalent
rights, on a current or deferred basis, collectively "Awards." Generally
speaking, an Option will expire, and any other Award will vest or be forfeited,
not more than 10 years after the date of grant, subject to certain deferral
opportunities that may be provided to participants. The Committee determines the
applicable vesting schedule for each Award. The Company may authorize settlement
of Awards in cash or shares of the Company's Common Stock or other Awards,
subject to preexisting rights of participants or commitments evidenced by an
Award agreement.
TRANSFER RESTRICTIONS. Subject to customary exceptions, Awards under the
2000 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 Plan and the outstanding Awards, as
well as exercise or purchase prices and other share limits, 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 the Company's stockholders.
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<PAGE>
The 2000 Plan does not limit the authority of the Board or other Committee
to grant Awards or authorize any other compensation, with or without reference
to the Common Stock, under any other plan or authority.
STOCK OPTIONS. An Option is the right to purchase shares of Common Stock at
a future date at a fixed or variable exercise price ("Option Price") during a
specified term not to exceed 10 years. The Committee must designate each Option
granted as either an Incentive Stock Option ("ISO") or a Nonqualified Stock
Option ("NQSO").
The Option Price per share will be determined by the Committee at the time
of grant, but will not be less than 100% of the fair market value of a share of
Common Stock on the date of grant (110% in the case of an ISO granted to a
beneficial holder of more than 10% of the total combined voting power of all
classes of stock of the Company), except in the context of an acquisition of
another entity, as referred to above. ISO tax consequences differ, and ISOs are
subject to more restrictive terms by the Code and the 2000 Plan. Full payment
for shares purchased on the exercise of any Option and any related taxes must be
made at the time of such exercise, in cash, shares already owned or by offset of
shares otherwise issuable, or other lawful consideration, including payment
through authorized third party payment procedures.
The Committee may grant one or more Options to any employee, officer,
director, consultant or advisor of the Company or any of its subsidiaries. If
the optionee ceases to be employed by the Company, the Committee may determine
the effect of a termination of service (including retirement) on the rights and
benefits under the Options and in so doing may make distinctions based upon
cause of termination.
RESTRICTED STOCK AWARD. A Restricted Stock Award is an award typically for
a fixed number of shares of Common Stock that are subject to restrictions
("Restricted Stock"). The Committee specifies the price, if any, or services the
recipient must provide for the shares of Restricted Stock, the conditions on
vesting (which may include, among others, the passage of time or specified
performance objectives or both) and any other restrictions (for example,
restrictions on transfer) imposed on the shares. A Restricted Stock Award
confers voting but not necessarily any dividend rights prior to vesting.
STOCK UNIT. A Stock Unit represents 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 deferred benefit or
right. A Stock Unit typically will be payable only in the equivalent number of
shares of Common Stock and can accrue dividend equivalent rights in cash or
additional shares under the 2000 Plan. Other types of Stock Unit awards can be
made, including Stock Units that are fully vested at the time of grant (either
in lieu of cash compensation or as cash or option gain deferrals) or Stock Units
payable in cash. The Committee may permit any Eligible Person to defer any
payment of cash or shares that may become due or payable under the 2000 Plan, by
and through Stock Units and dividend or other accretions thereon, or otherwise,
under and in accordance with the specific terms of any other non-qualified
deferred compensation plan or program sponsored by the Company. The Committee
may impose additional conditions, restrictions, or requirements on such
deferrals, although the number of shares payable with respect to Stock Units so
used as deferred compensation are not limited by the Restricted Stock limits
above.
PERFORMANCE AWARDS. The Committee also may grant Performance Awards to
Eligible Persons. The vesting and/or payment of Performance Awards may be based
on the attainment of one or more performance measures established by the
Committee with respect to the award at the time of grant. The amount of cash or
shares or other property deliverable pursuant to such an award may be based (in
whole
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or in part) upon the degree of attainment of the performance of the Company as
may be established by the Committee for a specified period of not more than 10
years (a "performance cycle") to be established by the Committee as to each
Performance Award.
SECTION 162(m) AWARDS: BUSINESS CRITERIA AND CONDITIONS. In addition to
Options granted "at market," other Performance Awards may be designed to satisfy
the requirements for "performance-based" compensation under Section 162(m).
These awards will be based on the performance of the Company and/or one or more
of its subsidiaries, divisions, segments, or units. The applicable period(s)
over which performance is measured will be not less than one nor more than 10
years.
With respect to these awards, the business criteria upon which performance
goals will be established are:
- revenue growth;
- gross profit;
- earnings (before or after taxes; or before or after taxes, interest,
depreciation, and/or amortization);
- cash flow;
- stock price appreciation or return on equity, assets or on net investment;
- cost containment or reduction; or
- any combination of the foregoing criteria.
These 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 shall be adjusted to reflect certain changes,
including reorganizations, liquidations and capitalization and accounting
changes, to the extent permitted by Section 162(m) and subject to the 2000 Plan.
In the event of death, 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.
Performance Awards may be stock-based (payable in stock only or cash or
stock) or may be cash-only awards (in either case, subject to the limits
described above under the heading "Share Limits"). The Committee will have
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 will
have no discretion to increase the amount of cash or number of shares to be
delivered upon attainment of the performance goals set forth in the individual
performance award agreement in the case of Section 162(m) qualified awards.
STOCK BONUSES. A Stock Bonus represents a bonus in Shares for services
rendered. The Committee may grant Stock Bonuses to any or all Eligible Persons
to reward special services, contributions or achievements, or to further share
ownership objectives, in such 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 will be determined by the Committee
and may be granted independently of or in lieu of cash bonuses or other awards.
PROMISSORY NOTES TO PURCHASE SHARES. The 2000 Plan allows the Committee to
authorize acceptance of one or more promissory notes from any Eligible Person to
finance or facilitate the exercise or receipt of Awards. The principal of the
note must not exceed the exercise or purchase price and applicable
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withholding taxes. The note must be full recourse and secured by the stock
purchased, if required by the Committee or by applicable law, but may include
favorable (below market) terms as to interest rates or other provisions;
however, the interest rate cannot be less than the interest rate necessary to
avoid the imputation of interest under the Code. The term of any note under the
2000 Plan may not exceed 5 years. The unpaid principal balance of the note will
become due and payable no later than the 30th business day after termination of
service (including retirement), unless the Committee otherwise provides.
Short-term tax loans to cover the taxes associated with Awards are also
authorized; these loans may be on any terms the Committee approves.
CHANGE IN CONTROL; ACCELERATION OF AWARDS; POSSIBLE EARLY TERMINATION OF
AWARDS. Upon the occurrence of a Change in Control Event, each Option will
become immediately exercisable, Restricted Stock may immediately vest free of
restrictions, and Performance Awards and Stock Units may become payable, unless
the Committee otherwise provides. Under Section 6.1(g) of the 2000 Plan, a
Change in Control Event generally includes (subject to certain exceptions):
- an acquisition by any Person of beneficial ownership or a pecuniary
interest in more than 50% of the Common Stock or voting securities then
entitled to vote generally in the election of directors of the Company
("Voting Stock"), other than an acquisition by one or more of the
following persons or entities: the Company, a subsidiary of the Company,
any employee benefit plan or employee stock option plan of the Company or
any member or group affiliated with the Lidow family;
- certain changes in a majority of the Board;
- stockholder approval of certain dissolutions or liquidations of the
Company; or
- stockholder approval of certain mergers or consolidations or sales of all
or substantially all of the Company's assets, in any case involving more
than a 50% change in ownership.
In certain circumstances, Awards that are fully accelerated and that 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.
TERMINATION OF OR CHANGES TO THE 2000 PLAN AND AWARDS. The Board may amend
or terminate the 2000 Plan at any time and in any manner, including a manner
that increases, within 2000 Plan aggregate limits, awards to officers and
directors. Unless required by applicable law, stockholder approval of amendments
will not be required. No new Awards may be granted under the 2000 Plan after
December 31, 2009, although as is the case under the Existing Plans, the
applicable plan provisions and authority of the Committee will continue as to
any then outstanding Awards. (This authority under the 2000 Plan includes
authority to amend outstanding Options or other Awards, except as to repricing.)
Outstanding Options and other Awards 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 holder.
SECURITIES UNDERLYING AWARDS. The closing price of the Common Stock as of
September 24, 1999 was $15.3125 per share. The Company plans to register under
the Securities Act of 1933, as amended, the Common Stock available under the
2000 Plan, prior to the time that any shares are issued thereunder.
As of September 24, 1999, no Awards have been granted subject to stockholder
approval of the 2000 Plan.
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<PAGE>
NON-EXCLUSIVE PLAN. The 2000 Plan will not limit the authority of the Board
or other Committee to grant Awards or authorize any other compensation, with or
without reference to the Common Stock, under any other authority.
The Company also maintains the Amended and Restated Stock Incentive Plan of
1992 ("1992 Plan") and the 1997 Employee Stock Incentive Plan ("1997 Plan"),
together the "Existing Plans". As of September 20, 1999, approximately 6,218,900
shares are subject to currently outstanding options granted under the Existing
Plans, and approximately 413,450 shares (plus shares underlying outstanding
options that expire or terminate in the future) are available for future grants.
The 1992 Plan has an evergreen feature that will increase the amount of shares
available for future grants under the 1992 Plan by 1 1/2% of the number of
shares issued or outstanding as of the beginning of each calendar year, through
January 1, 2002. Future awards may be granted under the Existing Plans, as well
as under the 2000 Plan if approved.
OTHER SPECIFIC BENEFITS. The grant of Awards under the 2000 Plan and the
nature of any such Awards are subject to the Committee's discretion.
Accordingly, the number, amount and type of Awards to be received by or
allocated to Eligible Persons under the 2000 Plan in the future cannot be
determined.
FEDERAL INCOME TAX TREATMENT OF AWARDS UNDER THE PLAN.
The federal income tax consequences of the 2000 Plan under current federal
law are summarized in the following discussion of general tax principles
applicable to the 2000 Plan. This summary is not intended to be exhaustive and
does not describe state or local tax consequences.
The Company is generally entitled to deduct and the optionee recognizes
taxable income in an amount equal to the difference between the Option Price and
the fair market value of the shares at the time of exercise of a Non-Qualified
Stock Option. With respect to Incentive Stock Options, the Company is generally
not entitled to a deduction nor does the participant recognize income, either at
the time of grant or exercise or (provided the participant holds the shares at
least two years after grant and one year after exercise) at any later time.
Rather, the participant receives capital gains treatment on the difference
between his basis and the ultimate sales price.
The current federal income tax consequences of other Awards authorized under
the 2000 Plan generally follow certain basic patterns: restricted stock is taxed
at the time of vesting (unless effectively deferred through units) (although
employees may elect earlier taxation and convert future gains to capital gains);
bonuses and stock units are generally subject to tax at the time of payment; and
compensation otherwise effectively deferred is taxed when paid. In each of the
foregoing cases, the Company will generally have a corresponding deduction at
the time the participant recognizes income.
If an Award is accelerated under the 2000 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 payment") in excess of average annual base salary if
the parachute payments exceeds certain threshold limits under the Code; certain
related excise taxes also 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 aggregate
compensation to certain executive officers that is not performance-based, to the
extent it exceeds $1,000,000 in any tax year.
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VOTE REQUIRED.
The Board has approved the 2000 Plan and believes it to be in the best
interest of the Company and its stockholders. All members of the Board are
eligible to receive Awards under the 2000 Plan and thus have a personal interest
in its approval.
Approval of the 2000 Plan requires the affirmative vote of the holders of a
majority of the shares represented in person or by proxy and entitled to vote at
the Annual Meeting, provided the votes cast with respect to Proposal 2
(including abstentions) constitute at least a majority of the outstanding
shares. An "ABSTAIN" with respect to the matter is treated as a vote cast for
these purposes, thus having the effect of a negative vote. Broker non-votes on
the matter (see "General" above) are not treated as entitled to vote and thus do
not count at all except to determine whether there is a quorum.
The Board of Directors recommends a vote FOR this proposal.
INDEPENDENT ACCOUNTANTS
(PROPOSAL 3)
The Board of Directors, on the recommendation of the Audit Committee,
proposes that PricewaterhouseCoopers LLP, independent auditors, be appointed as
independent auditors of the Company to serve for fiscal year 2000. A
representative of PricewaterhouseCoopers LLP is expected to be present at the
Annual Meeting, will be given the opportunity to make a statement if he so
desires, and will be available to respond to appropriate questions. This firm
has been auditors of the Company for many years.
Although this appointment is not required to be submitted to a vote of the
Stockholders, the Board believes it is appropriate as a matter of policy to
request that the Stockholders ratify the appointment. If the Stockholders do not
ratify the appointment by the affirmative vote of a majority of the shares
represented either in person or by proxy at the Annual Meeting, the Board will
consider the selection of another independent auditor.
The Board of Directors recommends a vote FOR this proposal.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires that executive
officers, directors, and holders of more than 10% of a company's registered
class of securities file reports of their ownership of a company's securities
with the SEC. Based on a review of these reports, the Company believes that its
reporting persons complied with all applicable filing requirements during the
fiscal year except one report concerning the purchase of 500 shares by Bettye
Geurin Burns, wife of Donald S. Burns, a director, which inadvertently was filed
subsequent to the applicable due date. Mr. Burns disclaims any beneficial
ownership in any of such shares.
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STOCKHOLDER PROPOSALS FOR 2000
The 2000 Annual Meeting of Stockholders is presently expected to be held on
or about November 27, 2000. To be considered for inclusion in the Company's
Proxy Statement for the 2000 Annual Meeting, proposals of stockholders intended
to be presented at the meeting must be received by the Corporate Secretary at
the Company's office at 233 Kansas Street, El Segundo, California 90245 no later
than June 10, 2000.
A stockholder may wish to have a proposal presented at the 2000 Annual
Meeting of Stockholders, but not to have such proposal included in the Company's
Proxy Statement for the meeting. If notice of the proposal is not received by
the Company at the address above by August 24, 2000 (or the date specified by an
advance notice provision), then the proposal will be deemed untimely under Rule
14a-4(c) under the Securities Exchange Act of 1934, and the persons entitled to
vote proxies solicited by the Board for that meeting generally will have the
right to exercise discretionary voting authority with respect to the proposal.
The Company's Bylaws currently provide that for business to be properly
brought before any annual meeting by a stockholder of record entitled to vote,
the stockholder must give notice in writing to the Corporate Secretary. The
notice must be delivered to or mailed and received at the principal executive
office of the Company not less than 30 days nor more than 90 days before the
meeting. The Company's Bylaws require that the notice include:
- a brief description of the business desired to be brought before the
meeting, and, as to a proposed charter or bylaw amendment, the language of
the proposed amendment,
- the name and address of the stockholder proposing such business, and the
class and number of shares of stock of the Company owned by the
stockholder, and
- any material personal interest of the stockholder in such business.
If these advance notice provisions are amended, the amended provisions will be
filed with the next Form 10-Q or 10-K filed.
In addition, the Bylaws include provisions for submitting director
nominations. To properly nominate a candidate, a stockholder generally must give
notice in writing as provided above not less than 30 days nor more than 90 days
prior to the meeting. The stockholder's notice must set forth:
as to each proposed nominee:
- the name, age, business address and residence address, and the
principal occupation of employment,
- the class and number of shares of stock of the Company beneficially
owned, and
- any other information that would be required to be disclosed in a
solicitation of proxies for election of directors pursuant to Rule 14a
under the Securities Exchange Act of 1934, and
as to the stockholder giving the notice:
- the name and address of such stockholder,
- the class and number of shares of stock of the Company beneficially
owned, and
- such other information as may be reasonably necessary to determine the
eligibility of such proposed nominee to serve as a director of the
Company.
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MISCELLANEOUS
Management does not know of any business to be presented other than the
matters set forth in the Notice of Meeting. However, if other matters properly
come before the meeting, the Board, as proxies, intend to vote in accordance
with their best judgment on such matters.
The expense of preparing, assembling, printing and mailing the Proxies and
the material used in the solicitation of Proxies will be borne by the Company.
The Company contemplates that Proxies will be solicited principally through the
use of the mails, but the officers and regular employees of the Company (who
receive no additional compensation) may solicit Proxies personally, by
telephone, facsimile or by special letter. The Company has retained Morrow &
Co., Inc. ("Morrow") to assist in the solicitation of proxies. Morrow will be
paid approximately $5,000, plus out-of-pocket expenses, for its services. The
Company will reimburse banks, brokerage houses, and other custodians, nominees
and fiduciaries for their reasonable expenses in forwarding proxy material to
their principals.
A copy of the Annual Report of the Company for the year ended June 30, 1999,
including financial statements for the year then ended, is transmitted herewith.
The Annual Report is enclosed for the convenience of stockholders only and
should not be viewed as part of the proxy solicitation material. Stockholders
may obtain without charge copies of the Company's Annual Report and Form 10-K by
writing to: International Rectifier Corporation, Corporate Finance Department,
233 Kansas Street, El Segundo, CA 90245
By Order of the Board of Directors
L. Michael Russell
Secretary
October 8, 1999
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EXHIBIT
INTERNATIONAL RECTIFIER CORPORATION
2000 STOCK INCENTIVE PLAN
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
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shares subject to the Award, a different vesting or exercise period, or,
except as provided below, a different exercise or purchase price), in each
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);
(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.
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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
shall not exceed 4,500,000 (the "SHARE LIMIT"). 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 RESTRICTED STOCK LIMIT. The maximum number of shares that may be
delivered under Restricted Stock or Stock Unit Awards that are issued only for
services rendered (or for services and nominal consideration), as distinguished
from an Award in payment or settlement of other rights, deferred compensation or
otherwise expressly in lieu of cash compensation, shall not exceed 225,000
shares, subject to adjustments under or contemplated by Section 1.4 or 5.2.
1.4.4 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.
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.
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 ten (10) 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.
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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.
(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,
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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,
(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.
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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.
2.3.2 OPTION PERIOD. Each Option and all rights thereunder shall
expire no later than 10 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
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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 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.
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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.
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.
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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
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 SHARE 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, 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,
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 nor more than 10 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 awarded which shall be payable in an
amount of more than $3,000,000 with respect to a Participant's performance
during any consecutive three-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.
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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 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,
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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.
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
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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 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.
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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.
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
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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. 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 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 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.
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5.8 EFFECTIVE DATE OF THE PLAN.
This Plan is effective as of January 1, 2000. The Plan shall be submitted
for and subject to stockholder approval.
5.9 TERM OF THE PLAN.
No Award will be granted under this Plan after December 31, 2009 (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.
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
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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:
- Any "person," alone or with "affiliates" and "associates" of
such person, without the prior approval of the Board, becomes
the "beneficial owner" of more than 50% of the outstanding
voting securities of the Corporation (the terms "person,"
"affiliates," "associates" and "beneficial owner" are used as
such terms are used in the Securities and Exchange Act of 1934
and the General Rules and Regulations thereunder); provided,
however, that a "Change in Control Event" shall not be deemed
to have occurred if such "person" is (A) the Corporation, (B)
any Subsidiary, (C) any employee benefit plan or employee stock
plan of the Corporation, or any trust or other entity
organized, established or holding shares of such voting
securities by, for, or pursuant to the terms of any such plan,
or (D) any member of or entity or group affiliated with the
Lidow family; or
- individuals who at the beginning of any period of two
consecutive calendar years constitute a majority of the Board
cease for any reason, during such period, to constitute at
least a majority thereof, unless the election, or the
nomination for election by the Corporation's stockholders, of
each new Board member was approved
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by a vote of at least two-thirds of the Board members then
still in office who were Board members at the beginning of such
period.
(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,
E-18
<PAGE>
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.
(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 2000 Stock Incentive Plan, as it may be 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.
E-19
<PAGE>
(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.
(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.
E-20
<PAGE>
[MAP]
<PAGE>
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INTERNATIONAL RECTIFIER CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING NOVEMBER 22, 1999
The undersigned hereby constitutes and appoints Eric Lidow and L. Michael
Russell, and each of them, his true and lawful agents and proxies with full
power of substitution in each, to represent the undersigned at the Annual
Meeting of Stockholders of International Rectifier Corporation to be held at
the HEXFET America facility of the Company, 41915 Business Park Drive,
Temecula, California, at 10:00 a.m., Pacific Standard Time, on the 22nd day
of November, 1999, and at any adjournment thereof, on all matters coming
before said meeting.
- -------------------------------------------------------------------------------
-TRIANGLE- FOLD AND DETACH HERE -TRIANGLE-
<PAGE>
- -------------------------------------------------------------------------------
Please mark your votes /X/
as indicated in this example
VOTE FOR all NOTE WITHHELD
nominees listed below from all nominees
1. Election of Directors / / / /
Nominees: Rochus E. Vogt,
Robert J. Mueller, Alexander
Lidow, Minoru Matsuda
VOTE WITHHELD from the following nominee(s)
- ----------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of the 2000 Stock Incentive Plan. / / / / / /
FOR AGAINST ABSTAIN
3. Ratification of PricewaterhouseCoopers as / / / / / /
independent auditors of the Company to
serve for fiscal year 2000.
THIS PROXY WHEN PROPERLY EXECUTED
WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED
STOCKHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2 AND 3.
PLEASE MARK, SIGN, DATE, AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Signature of Stockholder Dated , 1999
------------------------------ -------------
This Proxy Must be Signed Exactly as Name Appears Hereon, Executors,
administrators, trustees, etc. should give full title as such. If signer is a
corporation, please sign full corporate name by duly authorized officer.
- -------------------------------------------------------------------------------
-TRIANGLE- FOLD AND DETACH HERE -TRIANGLE-
YOUR VOTE IS IMPORTANT TO THE COMPANY
PLEASE SIGN AND RETURN YOUR PROXY BY
TEARING OFF THE TOP PORTION OF THIS SHEET
AND RETURNING IT IN THE ENCLOSED POSTPAID ENVELOPE
