EXHIBIT 10.14
FOUNDER STOCK PURCHASE AGREEMENT
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THIS AGREEMENT is made as of the 13TH day of April, 1988, by and between
Power Integrations, Inc., a California corporation (the "Company"), and ▇▇▇▇▇▇
▇. ▇▇▇▇▇ ("Purchaser").
WITNESSETH:
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WHEREAS, the Company desires to issue and the Purchaser desires to acquire
stock of the Company as herein described, on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. Number of Shares and Price Per Share. The Purchaser hereby agrees to
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purchase from the Company and the Company agrees to sell to the Purchaser Three
Hundred Thirty Thousand (330,000) shares of the Company's Common Stock (the
"Stock") for a purchase price of $3,300 (or $0.01 per share). The closing of
such purchase shall occur immediately upon execution of this Agreement. Payment
of the purchase price will be made at the closing by the Purchaser's delivery to
the Company of a check representing the aggregate purchase price.
2. Unvested Share Repurchase Option. In the event the Purchaser's
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employment with the Company is terminated for any reason (other than death or
disability), with or without cause, or if the Purchaser or the Purchaser's legal
representative attempts to sell, exchange, transfer, pledge or otherwise dispose
of any shares purchased pursuant to this Agreement which have not vested in the
Purchaser pursuant to Section 2(a) (the "Unvested Shares"), the Company shall
have the right to reacquire the Unvested Shares under the terms set forth in
this Section 2 (the "Unvested Share Repurchase Option").
(a) Vesting of Shares. All of the Stock will initially be subject to
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the Unvested Share Repurchase Option, which will lapse with respect to 1/12 of
such shares (i.e., 27,500 shares) for each full month of the Purchaser's
continuous employment with the Company from April 1, 1988 through July 31, 1988
with fractional months not counted and thereafter will lapse with respect to
1/30 of such shares (i.e. 11,000 shares) for each full month of Purchaser's
continuous employment with the Company from August 1, 1988 through March 31,
1990, with fractional months not counted. Shares of Stock that are not subject
to the Unvested Share Repurchase Option are "Vested Shares."
1.
(b) Exercise of Unvested Share Repurchase Option. If the
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Purchaser's employment with the Company is terminated for any reason (other than
death or disability), with or without cause, or if the Purchaser or the
Purchaser's legal representative attempts to dispose of any Unvested Shares
other than as allowed in this Agreement, the Company may exercise the Unvested
Share Repurchase Option by written notice to the Escrow Agent (as defined in
Section 10) and to the Purchaser or the Purchaser's legal representative within
sixty (60) days after such termination or after the Company has received notice
of the attempted disposition.
(c) Payment for Shares and Return of Shares. Payment by the Company
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to the Escrow Agent on behalf of the Purchaser or the Purchaser's legal
representative shall be made in cash within sixty (60) days after the date of
the mailing of the written notice of exercise of the Unvested Share Repurchase
Option. For purposes of the foregoing, cancellation of any promissory note of
the Purchaser to the Company shall be treated as payment to the Purchaser in
cash to the extent of the unpaid principal and any accrued interest cancelled.
The purchase price per share being purchased by the Company pursuant to the
Unvested Share Repurchase Option shall be $0.01 per share, adjusted
appropriately to reflect any stock split, stock dividend, recapitalization, etc.
Within thirty (30) days after payment by the Company, the Escrow Agent shall
give the shares which the Company has purchased to the Company and shall give
the payment received from the Company to the Purchaser.
(d) Early Termination of Unvested Share Repurchase Option.
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The other provisions of Section 2 notwithstanding, the Company's Board of
Directors may terminate the Unvested Share Repurchase Option in the event of (1)
a merger in which the Company is not the surviving corporation; (2) a merger or
the sale or exchange by the shareholders of the Company of all or substantially
all of the stock of the Company where the shareholders before such merger or
sale or exchange do not retain, directly or indirectly, at least a majority of
the beneficial interest in the voting stock of the surviving Company; (3) the
sale or exchange of all or substantially all of the Company's assets (other than
a sale or transfer to a subsidiary of the Company as defined in section 425(f)
of the Code); or (4) in such other event as the Company's Board of Directors may
determine to be appropriate. The Unvested Share Repurchase Option will terminate
in the event of Purchaser's death or termination of employment due to permanent
and total disability as defined in Section 72(m) of the Internal Revenue Code of
1986, as amended.
2.
(e) Transfers Not Subject to the Unvested Share Repurchase Option.
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The Unvested Share Repurchase Option shall not apply to a transfer to the
Purchaser's ancestors, descendants or spouse or to a trustee for their benefit
or the benefit of the Purchaser, provided that such transferee shall agree in
writing (in a form satisfactory to the Company) to take the stock subject to all
the terms and conditions of this Section 2.
(f) Legends. The Company may at any time place a legend or
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legends referencing the Unvested Share Repurchase Option on any shares subject
to the Unvested Share Repurchase Option.
(g) Assignment of Unvested Share Repurchase Option. The Company may
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assign the Unvested Share Repurchase Option to one or more persons, who shall
have the right to exercise the Unvested Share Repurchase Option in his or her
own name for his or her own account.
3. Stock Dividends, etc. If, from time to time, there is any stock
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dividend, stock split or other change in the character or amount of any of the
outstanding stock of the Company, then in such event any and all new substituted
or additional securities to which Purchaser is entitled by reason of Purchaser's
ownership of Unvested Shares shall be immediately subject to the Unvested Share
Repurchase Option with the same force and effect as the Unvested Shares.
4. Right of First Refusal. The Purchaser cannot transfer, assign or
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otherwise dispose of, voluntarily or involuntarily, any Unvested Shares or any
interest in those shares. Before any Vested Shares registered in the name of
Purchaser may be sold or transferred (including transfer by operation of law)
other than to Purchaser's spouse, descendants, ancestors, or trusts for their
benefit or the benefit of the Purchaser, such shares shall first be offered to
the Company, which will have the right to purchase all or any part of the
Vested Shares proposed to be transferred ("Right of First Refusal"), in the
following manner:
(a) Transfer Notice. The Purchaser or his or her legal
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representative shall first give written notice (the "Transfer Notice") of any
proposed transfer to the Company. The Transfer Notice shall name the proposed
transferee, state the number of shares of Stock to be transferred, the price per
share and all other terms of the offer. The Transfer Notice shall be signed by
the Purchaser or his or her representative and the prospective transferee and
must constitute a binding agreement for the transfer of the Stock subject only
to the Right of First Refusal.
3.
(b) Bona Fide Determination. Within thirty (30) days of delivery of
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the Purchaser's notice of a proposed transfer, the Company's Board of Directors
shall determine the bona fide nature of the proposed transfer and give the
Purchaser written notice of its determination. If the proposed transfer is
deemed to be bona fide, the remaining subsections of this section shall apply to
the sale. If the proposed transfer is deemed not to be bona fide, the Purchaser
will be responsible for providing additional information to the Board to show
the bona fide nature of the proposed transfer and no Stock will be transferred
on the books of the Company until the Board has approved the proposed transfer
as bona fide.
(c) Failure to Exercise. If the Company elects not to or fails to
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exercise in full the Right of First Refusal within thirty (30) days from the
later of the date the Transfer Notice is delivered to the Company or thirty (30)
days after the date the transfer is determined to be bona fide (if the Purchaser
is required to provide additional information as provided in Section 4(b)), the
Purchaser may, by the later of sixty (60) days after the delivery of the
Transfer Notice to the Company or thirty (30) days after the date the transfer
is determined to be bona fide (if the Purchaser is required to provide
additional information as provided in Section 4(b)), conclude a transfer of the
shares of Stock subject to the Transfer Notice which have not been purchased by
the Company pursuant to exercise of the Right of First Refusal on the terms and
conditions described in the Transfer Notice. Any proposed transfer on terms and
conditions different from those described in the Transfer Notice, as well as any
subsequent proposed transfer by the Purchaser, shall again be subject to the
Right of First Refusal and shall require compliance by the Purchaser with the
procedure described in this Section 4. If the Company exercises the Right of
First Refusal, the parties shall consummate the sale of shares of Stock on the
terms set forth in the Transfer Notice by the later of sixty (60) days after the
delivery of the Transfer Notice to the Company or thirty (30) days after the
date the transfer is determined to be bona fide (if the Purchaser is required to
provide additional information as provided in Section 4(b)); provided, however,
in the event the Transfer Notice provides for the payment for the shares of
Stock other than in cash, the Company shall have the option of paying for the
shares of Stock by the discounted cash equivalent of the consideration described
in the Transfer Notice as reasonably determined by the Company.
(d) Condition to Transfer. All transferees of shares of Stock or
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any interest therein other than the Company shall be required as a condition of
such transfer to agree in writing (in a form satisfactory to the Company) that
4.
they will receive and hold such shares of Stock or interests subject to the
provisions of this Agreement, including the Right of First Refusal.
(e) Termination. The Right of First Refusal will terminate at such
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time as a public market exists for the Company's Common Stock (or any other
stock issued by the Company, or any successor, in exchange for the Stock). For
the purpose of this Agreement, a "public market" shall be deemed to exist if (i)
such stock is listed on a national securities exchange (as that term is used in
the Securities Exchange Act of 1934) or (ii) such stock is traded on the over-
the-counter market and prices therefore are published daily on business days in
a recognized financial journal.
(f) Permitted Transfers. The Right of First Refusal shall not apply
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to a transfer (inter vivos or upon death) to the Purchaser's ancestors or
descendants or spouse or to a trustee for their benefit provided that such
transferee shall agree in writing (in a form satisfactory to the Company) to
take the Stock subject to all the terms of the Plan, including the Right of
First Refusal.
5. Piggyback Registration Rights.
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(a) The terms "register", "registered" and registration"
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refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act of 1933, as amended, and the
declaration or ordering of the effectiveness of such registration statement.
(b) If the Company shall determine to register any of its
securities either for its own account or the account of a stockholder(s)
exercising demand registration rights, other than a registration relating solely
to employee benefit plans, or a registration relating solely to a transaction
within the scope of Rule 145 promulgated under the Securities Act of 1933, or a
registration on any registration form which does not permit secondary sales or
does not include substantially the same information as would be required to be
included in a registration statement covering the sale of the Stock, the Company
will promptly give to the Purchaser written notice thereof and include in such
registration (and any related qualification under blue sky laws), and in any
underwriting involved therein, the number of Vested Shares specified in a
written request made by the Purchaser within fifteen (15) days after receipt of
such written notice from the Company, except as set forth in Section 5(b) below.
(c) If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the right of any
Purchaser to registration
5.
shall be conditioned upon the Purchaser's participation in such underwriting and
the inclusion of such Purchaser's Stock in the underwriting pursuant to an
underwriting agreement in customary form with the underwriter or underwriters
selected by the Company. Notwithstanding any other provision of this Section 5,
if the underwriter reasonably determines that marketing factors require a
limitation on the number of shares to be underwritten the underwriter may
exclude some or all of the Stock, as follows: with respect to stockholders
exercising demand registration rights or exercising piggyback rights superior,
as to inclusion of shares in a registration, to those of the Purchaser (for
example, the rights under the Registration Rights Agreement to be entered into
in or around April 1988 by the Company and purchasers of the Company's Series A
Preferred Stock, amendments to those rights that may occur from time to time,
and similar rights that may be granted in the future), the number of shares that
may be included by the Purchaser shall be cut back entirely before any
limitation on the number of shares that may be included by such stockholders.
With respect to stockholders exercising other registration rights (i.e., rights
on a parity with the Purchaser's rights), the number of shares that may be
included in the registration and underwriting will be allocated in proportion,
as nearly as practicable, to the respective amounts of securities of the Company
owned by each.
(d) All expenses of the registration shall be borne by the
Company, except underwriting discounts and selling commissions applicable to the
sale of any Stock and any other securities of the Company being sold in the same
registration by other stockholders, which shall be borne by the Purchaser and
such other stockholders pro rata on the basis of the number of their shares
registered.
6. Dissolution of Marriage.
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(a) In the event of the dissolution of Purchaser's marriage,
Purchaser shall have the right and option to purchase from his or her spouse all
or any portion of shares of Stock (i) awarded to the spouse pursuant to a decree
of dissolution of marriage or any other order by any court of competent
jurisdiction and/or by any property settlement agreement (whether or not
incorporated by reference in any such decree), or (ii) gifted to the spouse by
Purchaser prior to the dissolution, at the fair market value of said Stock at
the time of such decree, other order or property settlement as determined by the
Company's Board of Directors, upon the terms set forth below. If either
Purchaser or Purchaser's spouse disputes the fair market valuation of the Stock
by the Board of Directors, such fair market value shall be determined by
arbitration in accordance with the rules of the
6.
American Arbitration Association. Purchaser shall exercise his or her right, if
at all, within thirty (30) days of the entry of any such decree or property
settlement agreement by delivery to Purchaser's former spouse of written notice
of exercise, specifying the number of shares of Stock Purchaser elects to
purchase. The purchase price for the Stock shall be paid by delivery of a
promissory note for the purchase price bearing interest at the rate of ten
percent (10%) per annum payable in four (4) equal annual installments of
principal and interest, commencing on the anniversary date of the exercise of
the option; provided, however that if, subsequent to the date any or all
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of the Stock is awarded to Purchaser's former spouse as provided above, the
Company exercises its Unvested Share Repurchase Option with respect to any or
all of the Stock so awarded, the amount remaining due under such promissory note
shall be reduced by the difference between the fair market value of such Stock
determined as set forth above and the amount received by Purchaser for such
Stock upon exercise by the Company of the Unvested Share Repurchase Option.
(b) In the event Purchaser does not exercise his right to purchase
all of the Stock awarded to Purchaser's former spouse, Purchaser shall provide
written notice to the Company of the number of shares of Stock available for
purchase within thirty (30) days of the entry of the decree. The Company shall
then have the right for the next thirty (30) days to purchase any of the Stock
not acquired by Purchaser directly from Purchaser's former spouse in the manner
provided in Section 6(a) at the same price and on the same terms that were
available to Purchaser.
(c) Nothing contained in this Section 6 shall affect or impair the
Unvested Share Repurchase Option in favor of the Company as set forth in Section
2 above.
7. Consent of Spouse. If the Purchaser is married on the date of this
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Agreement, the Purchaser's spouse shall execute a Consent of Spouse in the form
of Exhibit A hereto, effective on the date hereof. Such consent shall not be
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deemed to confer or convey to the spouse any rights in the Stock that do not
otherwise exist by operation of law or the agreement of the parties. If the
Purchaser should marry or remarry subsequent to the date of this Agreement, the
Purchaser shall within thirty (30) days thereafter obtain his or her new
spouse's acknowledgment of and consent to the existence and binding effect of
all restrictions contained in this Agreement by signing an additional Consent of
Spouse in the form of Exhibit A.
7.
8. Legends. All certificates representing any shares of Stock subject to
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the provisions of this Agreement shall have endorsed thereon the following
legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
REPURCHASE OPTION AND A RIGHT OF FIRST REFUSAL IN FAVOR OF THE CORPORATION OR
ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE
REGISTERED HOLDER, OR HIS OR HER PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON
FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION."
(b) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
(c) Any legend required to be placed thereon by the California
Commissioner of Corporations.
9. Warranties and Representations. In connection with the proposed
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purchase of the Stock, the Purchaser hereby agrees, represents and warrants as
follows:
(a) The Purchaser is purchasing the Stock solely for his or her own
account for investment and not with a view to, or for resale in connection with,
any distribution thereof within the meaning of the Securities Act of 1933 as
amended (the "Act"). The Purchaser further represents that he or she does not
have any present intention of selling, offering to sell or otherwise disposing
of or distributing the Stock or any portion thereof; and that the entire legal
and beneficial interest of the Stock he or she is purchasing is being purchased
for, and will be held for the account of, the Purchaser only and neither in
whole nor in part for any other person.
(b) The Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Stock. The Purchaser
further represents and warrants that he or she has discussed the Company and its
plans, operations and financial condition with its officers, has received all
such information as he or she deems necessary and appropriate to enable him or
her to evaluate the financial risk inherent in
8.
making an investment in the Stock and has received satisfactory and complete
information concerning the business and financial condition of the Company in
response to all inquiries in respect thereof.
(c) The Purchaser realizes that his or her purchase of the Stock will
be a highly speculative investment, and he or she is able, without impairing his
financial condition, to hold the Stock for an indefinite period of time and to
suffer a complete loss on his or her investment.
(d) The Company has disclosed to the Purchaser that:
(i) the sale of the Stock has not been registered under the
Act, and the Stock must be held indefinitely unless a transfer of it is
subsequently registered under the Act or an exemption from such registration is
available, and that the Company is under no obligation to register the Stock;
(ii) the Company will make a notation in its records of the
aforementioned restrictions on transfer and legends.
(e) The Purchaser is aware of the provisions of Rule 144,
promulgated under the Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or an affiliate of such issuer), in a non-public offering subject to
the satisfaction of certain conditions, including among other things: the resale
occurring not less than two years from the date the Purchaser has purchased and
paid for the Stock; the availability of certain public information concerning
the Company; the sale being through a broker in an unsolicited "broker's
transaction" or in a transaction directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934); and that any sale of the
Stock may be made by him or her only in limited amounts during any three-month
period not exceeding specified limitations. The Purchaser further represents
that he or she understands that at the time he or she wishes to sell the Stock
there may be no public market upon which to make such a sale, and that, even if
such a public market then exists, the Company may not be satisfying the current
public information requirements of Rule 144, and that, in such event, he or she
would be precluded from selling the Stock under Rule 144 even if the two-year
minimum holding period had been satisfied. The Purchaser represents that he or
she understands that in the event all of the requirements of Rule 144 are not
satisfied, registration under the Act or compliance with an
9.
exemption from registration will be required; and that, notwithstanding the fact
that Rule 144 is not exclusive, the staff of the SEC has expressed its opinion
that persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own risk.
(f) Without in any way limiting the Purchaser's representations and
warranties set forth above, the Purchaser further agrees that he or she shall in
no event make any disposition of all or any portion of the Stock which he or she
is purchasing unless and until:
(i) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with said Registration Statement; or
(ii) The Purchaser shall have (1) notified the Company of the
proposed disposition and furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and (2) furnished the
Company with an opinion of his or her own counsel to the effect that such
disposition will not require registration of such shares under the Act, and such
opinion of his or her counsel shall have been concurred in by counsel for the
Company and the Company shall have advised the Purchaser of such concurrence.
10. Escrow. As security for his or her faithful performance of the terms
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of this Agreement and to insure the availability for delivery of the Stock upon
exercise of the Purchase Option herein provided for, the Purchaser agrees to
deliver to and deposit with ▇▇▇▇ & Freidenrich, A Professional Company, counsel
to the Company (the "Escrow Agent"), as Escrow Agent in this transaction, two
Stock Assignments duly endorsed (with date and number of shares blank) in the
form attached hereto as Exhibit B, together with the certificate or
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certificates evidencing the Stock; such documents are to be held by the Escrow
Agent pursuant to the Joint Escrow Instructions of the Company and the
Purchaser set forth in Exhibit C attached hereto and incorporated by this
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reference, which instruction shall also be delivered to the Escrow Agent at the
closing hereunder.
11. Transfers in Violation of Agreement. The Company shall not be
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required (i) to transfer on its books any shares of Stock of the Company which
shall have been sold or transferred in violation of any of the provisions set
forth in this Agreement or (ii) to treat as owner of such shares or
10.
to accord the right to vote as such owner or to pay dividends to any transferee
to whom such shares shall have been so transferred.
12. Rights as Stockholder. Subject to the provisions of this Agreement,
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the Purchaser shall exercise all rights and privileges of a stockholder of the
Company with respect to the Stock deposited in escrow.
13. Further Instruments. The parties agree to execute such further
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instruments and to take such further action as may reasonably be necessary to
carry out the intent of this Agreement.
14. Notice. Any notice required or permitted hereunder shall be given
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in writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail with
postage and fees prepaid, addressed to the other party at the address
hereinafter shown below his or her signature or at such other address as such
party may designate by ten (10) days' advance written notice to the other party.
15. Successors and Assigns. This Agreement shall inure to the benefit of
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the successors and assigns of the Company and, subject to the restrictions on
transfer herein set forth, be binding upon the Purchaser, his or her heirs,
executors, administrators, successors and assigns.
16. Entire Agreement; Amendments. This Agreement, together with the
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Exhibits hereto, shall be construed under the laws of the State of California
(as it applies to agreements between California residents, entered into and to
be performed entirely within California), and constitutes the entire agreement
of the parties with respect to the subject matter hereof superseding all prior
written or oral agreements, and no amendment or addition hereto shall be deemed
effective unless agreed to in writing by the parties.
17. Right to Specific Performance. The Purchaser agrees that the
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Company shall be entitled to a decree of specific performance of the terms
hereof or an injunction restraining violation of this Agreement, said right to
be in addition to any other remedies available to the Company.
18. Separability. If any provision of this Agreement is held by a court
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of competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions shall nevertheless continue in full force and effect without being
impaired or invalidated in any way and shall be construed in accordance with the
purposes and tenor and effect of this Agreement.
11.
19. Tax Consequences and Tax Election Notification.
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(a) The Purchaser understands that the Stock has been valued
by the Board of Directors and that the Company believes this valuation is a fair
attempt to appraise it. The Purchaser understands, however, that the Company can
give no assurances that the purchase price will be accepted as the fair market
value of the Stock by the Internal Revenue Service (the "IRS"), and that the IRS
could assert that the value of the Stock on the date of purchase was
substantially greater than the purchase price.
If the IRS were to successfully argue in a tax determination that the
Stock had value greater than the price paid by the Purchaser, the additional
value would constitute ordinary income as of the date of its receipt. The
additional taxes (and interest) due would be payable by the Purchaser. There is
no provision for the Company to reimburse the Purchaser for any potential tax
liability, and the Purchaser assumes all responsibility for it. If the
additional value attributed to the Stock were more than 25 percent of the
Purchaser's gross income for the year in which that value was taxable, the IRS
would have six years from the due date for filing the return (or the actual
filing date of the return if filed thereafter) within which to assess the
additional tax and interest.
(b) The Purchaser understands that Section 83 of the Internal
Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income the
difference between the amount paid for the Stock and the fair market value of
the Stock as of the date any restrictions on the Stock lapse. In this context,
"restriction" means the right of the Company to buy back the stock pursuant to
the Unvested Share Repurchase Option. The Purchaser understands that he may
elect to be taxed at the time the Stock is purchased rather than when and as the
Unvested Share Repurchase Option expires by filing an election under Section
83(b) of the Code with the IRS within 30 days from the date of purchase. Even if
the fair market value of the Stock equals the amount paid for the Stock, the
election must be made to avoid adverse tax consequences in the future. The
Purchaser understands that failure to make this filing timely will result in the
recognition of ordinary income by the Purchaser, as the Unvested Share
Repurchase Option lapses, on the difference between the purchase price and the
fair market value of the Stock at the time such restriction lapses.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY
AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF
THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
THE PURCHASER'S BEHALF.
12.
(c) The Purchaser shall notify the Company in writing if Purchaser
files an election pursuant to Section 83(b) of the Code. The Company intends, in
the event it does not receive from Purchaser evidence of such filing, to claim a
tax deduction for any amount which would be taxable to Purchaser in the absence
of such an election.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"PURCHASER" "COMPANY"
POWER INTEGRATIONS, INC.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. Fury
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(Signature) Title: Director
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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(Print Name) Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
Address: ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇. ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
13.
EXHIBIT A
CONSENT OF SPOUSE
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I, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, spouse of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, acknowledge that I have
read the Founder Stock Purchase Agreement dated as of April 13, 1988 to which
this Consent is attached as Exhibit A (the "Agreement") and that I know its
contents. I am aware that by its provisions (a) my spouse and Power
Integrations, Inc. ("Company") have the option to purchase all of the Stock of
the Company of which I may become possessed as a result of a gift from my spouse
or a court decree and/or any property settlement in any domestic litigation, (b)
the Company has the option to purchase certain shares of Stock of the Company
which my spouse owns pursuant to the Agreement including any interest I might
have therein, upon termination of his employment under circumstances set forth
in the Agreement, and (c) certain other restrictions are imposed upon the sale
or other disposition of the Stock during my spouse's lifetime and in the event
of his death.
I agree that my interest, if any, in the Stock subject to the Agreement
shall be bound by the Agreement and further understand and agree that any
community property interest I may have in the Stock shall be similarly bound by
the Agreement.
I agree to the sale and purchase described in Section 6 of the Agreement,
and I hereby consent to the sale of the Stock by my spouse or his legal
representative in accordance with the provisions of the Agreement. Further, as
part of the consideration for the Agreement, I agree that at my death, if I have
not disposed of any interest of mine in the Stock by an outright bequest of said
shares to my spouse, then my spouse and the Company shall have the same rights
against my legal representative to purchase any interest of mine in the Stock as
they would have had pursuant to Section 6 of the Agreement if I had acquired the
Stock pursuant to a court decree in domestic litigation.
I am aware that the legal, financial and related matters contained in the
Agreement are complex and that I am free to seek independent professional
guidance or counsel with respect to this Consent. I have either sought such
guidance or counsel or determined after reviewing the Agreement carefully that I
will waive such right.
Dated as of the l3th day of April, 1988.
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
EXHIBIT B
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED,___________________________________ hereby
sells, assigns and transfers unto ______________________________________
_______________ (_______________) shares of the Common Stock of Power
Integrations, Inc., a California corporation, standing in the undersigned's name
on the books of said corporation represented by Certificate No. __________
herewith, and do hereby irrevocably constitute and appoint
______________________________ attorney to transfer the said stock on the books
of the said corporation with full power of substitution in the premises.
Dated: ________________, 198_ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
EXHIBIT C
JOINT ESCROW INSTRUCTIONS
-------------------------
April 13, 1985
▇▇▇▇ & Freidenrich
A Professional Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
As Escrow Agent for both Power Integrations, Inc., a California corporation
("Company"), and the undersigned purchaser of stock (the "Stock") of the Company
("Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Founder Stock Purchase
Agreement ("Agreement"), dated as of the date hereof, to which a copy of these
Joint Escrow Instructions is attached as Exhibit C, in accordance with the
following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") shall elect to exercise
the Unvested Share Repurchase Option set forth in the Agreement the Company
shall give to Purchaser and you a written notice specifying the number of shares
of Stock to be repurchased, the purchase price, and the time for closing the
repurchase. Purchaser and the Company hereby irrevocably authorize and direct
you to close the transaction contemplated by such notice in accordance with the
terms of the notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares of
Stock being transferred, and (c) to deliver same, together with the certificates
evidencing the shares of Stock to be transferred, to the Company against the
simultaneous delivery to you of the purchase price (by check) or cancellation of
indebtedness for the number of shares of Stock being purchased pursuant to the
exercise of the Unvested Share Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of Stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you
1.
as his or her attorney-in-fact and agent for the term of this escrow to execute
with respect to such securities all stock certificates, stock assignments, or
other documents necessary or appropriate to make such securities negotiable and
complete any transaction herein contemplated, including, but not limited to, the
filing with the Department of Corporations of the State of California of an
Application for Consent to Transfer Securities Subject to Legend or Escrow
Condition Pursuant to Section 25151 of the California Corporate Securities Law
of 1968 as presently in existence or any successor form. Subject to the
provisions of this paragraph 3, Purchaser shall exercise all rights and
privileges of a stockholder of the Company while the Stock is held by you.
4. This escrow shall terminate at such time as there are no longer any
shares of stock subject to the Unvested Share Repurchase Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in
good faith and in the exercise of your own good judgment, and any act done or
omitted by you pursuant to the advice of your own attorneys shall be conclusive
evidence to such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree of any court,
you shall not be liable to any of the parties hereto or to any other person,
firm or corporation by reason of such compliance, notwithstanding any such
order, judgment or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.
2.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary or proper to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be counsel to the Company or if you shall resign by written
notice to each party. In the event of any such termination, the Company shall
appoint a successor Escrow Agent.
13. If you reasonably require other or further instructions in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or rights of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to any one all or any part of said securities until such
dispute shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree, or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal deliver or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses, or at such other addresses as a party may designate by ten
(10) days' advance written notice to each of the other parties hereto.
CORPORATION: Power Integrations, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
3.
PURCHASER: ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
ESCROW AGENT: ▇▇▇▇ & Freidenrich
A Professional Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ 0. ▇▇▇▇▇▇▇▇
▇▇. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
Very truly yours,
Power Integrations, Inc.
a California corporation
By: /s/ ▇▇▇▇▇▇ ▇. Fury
-------------------------------
Title: ___________________________
PURCHASER:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Agreed to and accepted as of
the date set forth above.
ESCROW AGENT:
▇▇▇▇ & FREIDENRICH
A Professional Company
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
4.