Exhibit 10.1
EXAR CORPORATION
EXECUTIVE OFFICERS’ GROUP
II CHANGE OF CONTROL
SEVERANCE BENEFIT
PLAN
Adopted June 24,
1999
Amended and Restated
June 23, 2004
Amended and Restated
December 10, 2008
Section 1. I
NTRODUCTION
.
This EXAR Corporation Executive
Officers’ Group II Change of Control Severance Benefit Plan
(the “Plan”) was approved by the Compensation Committee
of the Board of Directors of EXAR Corporation (the
“Company”) on June 24, 1999 (the “Effective
Date”) and was amended and restated on June 23, 2004 and
on December 10, 2008. The purpose of the Plan is to
encourage valued officers to work in the Company’s best
interests during and following a Change of Control (as defined
below) by providing for the payment of severance benefits as set
forth herein. This Plan shall supersede any group severance benefit
plan, policy or practice previously maintained by the Company for
the employees described herein. This Plan shall supersede any
agreement between the Eligible Employees (as defined below) for
monetary severance payments, but not for other forms of severance
compensation including (but not limited to) stock or accelerated
vesting of equity awards as set forth in the applicable plan
document or agreement. This Plan document also is the Summary Plan
Description for the Plan.
Section 2. D
EFINITIONS
.
When used herein, the following
terms shall have the following definitions:
(a) “Base Salary” shall mean an
Eligible Employee’s salary from the Company, at the
annualized rate in effect on the date of a Change of Control (or as
increased thereafter), excluding all bonus, commissions and other
incentive compensation, such as, but not by way of limitation,
payments under the Company’s Executive Incentive Compensation
Program, Sales Incentive Compensation Program and Key Employee
Compensation Program.
(b) “Cause” shall mean:
(i) conviction of any felony or conviction of any crime
involving moral turpitude or dishonesty; (ii) participation in
a fraud or act of dishonesty against the Company;
(iii) conduct by an Eligible Employee which, based upon a good
faith and reasonable factual investigation and determination by the
Company, demonstrates gross incompetence; or (iv) intentional,
material violation by an Eligible Employee of any contract between
the Eligible Employee and the Company or any statutory duty of the
Eligible Employee to the Company that is not corrected within
thirty (30) days after written notice to the Eligible Employee
thereof. Physical or mental disability shall not constitute
“Cause.”
1.
(c) “Change of Control” shall
mean (i) a dissolution or liquidation of the Company;
(ii) a merger or consolidation in which the Company is not the
surviving corporation; (iii) a reverse merger in which the
Company is the surviving corporation but the shares of the
Company’s common stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; (iv) any
other capital reorganization in which more than thirty-five percent
(35%) of the shares of the Company entitled to vote are
exchanged, excluding in each case a capital reorganization in which
the sole purpose is to change the state of incorporation of the
Company; (v) a transaction or group of related transactions
involving the sale of all or substantially all of the
Company’s assets; or (vi) the acquisition by any person,
entity or group (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company or any subsidiary of
the Company) of the beneficial ownership, directly or indirectly,
of securities of the Company representing more than thirty-five
percent (35%) of the combined voting power in the election of
directors. For purposes of this paragraph, acquisition of ownership
interests by any Eligible Employee, whether through a
“management buy-out” or otherwise, shall not constitute
a “Change of Control.”
(d) “ Code ” means the U.S.
Internal Revenue Code of 1986, as amended.
(e) “Eligible Employees” shall
mean those executives as may be designated from time to time by the
Board of Directors to participate in the Plan. The Board of
Directors, or the Compensation Committee of the Board of Directors,
may, in its sole discretion, designate additional employees to be
Eligible Employees under the Plan.
(f) “Good Reason” shall mean any
one of the following events which occurs within thirteen
(13) months after the effective date of a Change of Control:
(i) any reduction of the Eligible Employee’s rate of
total compensation (including base salary, bonus, stock, stock
options, etc.); (ii) any reduction in the package of welfare
benefit plans, taken as a whole, provided to the Eligible Employee
(except that employee contributions may be raised to the extent of
any cost increases imposed by third parties) or any action by the
Company which would adversely affect the Eligible Employee’s
participation or reduce the Eligible Employee’s benefits
under any of such plans; (iii) any change in the Eligible
Employee’s responsibilities, duties, authority, title,
reporting relationship or offices resulting in any diminution of
position (including, but not limited to, a change of responsibility
from company-wide responsibility to division-level responsibility);
(iv) request that the Eligible Employee relocate to a worksite
that is more than thirty-five (35) miles from the Eligible
Employee’s prior worksite, unless the Eligible Employee
accepts such relocation opportunity; (v) failure or refusal of
a successor to the Company to assume the Company’s
obligations under the Plan; or (vi) material breach by the
Company or any successor to the Company of any of the material
provisions of the Plan.
(g) “ Separation from Service ”
shall mean the date upon which an Eligible Employee dies, retires,
or otherwise has a termination of employment with the Company that
constitutes a “separation from service” within the
meaning of Treasury Regulation
2.
Section 1.409A-1(h)(1), without regard to
the optional alternative definitions available
thereunder.
(h) “ Termination Date ” shall
mean the date upon which an Eligible Employee’s employment
with the Company terminates.
Section 3. E
LIGIBILITY
F OR B ENEFITS .
(a) General Rules. Subject to the
requirements set forth in this Section 3, and subject to
further limitations set forth subsequently in this Plan, the
Company will grant severance benefits to Eligible Employees. As a
condition of receiving severance benefits under the Plan, each
Eligible Employee must execute and deliver to the Company on or
promptly following the Termination Date (and in all events not more
than 45 days after the Termination Date) an effective general
waiver and release, on the appropriate form attached hereto as
Exhibits A and B, which releases the Company from any and all
claims the Eligible Employee may have against the Company, and must
not revoke such waiver and release within any revocation period
provided under applicable law.
(b) Exceptions. An employee who otherwise is
an Eligible Employee will not receive severance benefits under the
Plan in any of the following circumstances:
(i) The employee’s employment with the Company
terminates (w) due to a termination by the Company for Cause,
(x) by the employee for any reason other than for Good Reason,
(y) due to the employee’s death or disability, or
(z) for any reason prior to the effective date of a Change in
Control or more than thirteen (13) months after the effective
date of a Change in Control.
(ii) The employee voluntarily terminates employment
with the Company in order to accept employment with another entity
that is wholly or partly owned (directly or indirectly) by the
Company or a successor to the Company, or is wholly or partly owned
(directly or indirectly) by the parent or other affiliate of the
Company or its successor.
Section 4. A
MOUNT O F S EVERANCE B ENEFITS .
Subject to the terms and conditions
of this Plan (including, without limitation, Sections 3(a) and 5
hereof), Eligible Employees whose employment is terminated by the
Company without Cause or by the Eligible Employee for Good Reason
upon or within thirteen (13) months after the effective date
of a Change of Control will receive as severance pay a lump sum
payment equal to: (a) in the case of Eligible Employees who
begin participating in the Plan prior to December 10, 2008,
the greater of (i) one (1) times the Eligible
Employee’s Base Salary or (ii) one-twelfth
(1/12) of the Eligible Employee’s Base Salary for each
complete year of service with the Company, up to a maximum of two
(2) times the Eligible Employee’s Base Salary; or
(b) in the case of Eligible Employees who begin participating
in the Plan on or after December 10, 2008, an amount equal to
one-fourth (1/4) of the Eligible Employee’s Base Salary
plus one-twelfth (1/12) of the Eligible Employee’s Base
Salary for each complete year of service
3.
with the Company, up to a maximum of one-half
(1/2) the Eligible Employee’s Base Salary. In the event
an Eligible Employee becomes entitled to severance pay hereunder
and dies prior to the receipt of a payment to which he or she is
entitled, such payment shall be made to the Eligible
Employee’s surviving spouse or, if none, to the Eligible
Employee’s estate. The foregoing severance payment shall be
subject to applicable federal, state, local and foreign tax
withholdings.
Section 5. L
IMITATION
O N A MOUNT O F B ENEFIT ; G OLDEN P ARACHUTE T AXES .
(a) Notwithstanding any other provision of the Plan
to the contrary, (i) the severance benefits under this Plan
are in lieu of any other benefit provided under any other group
severance plan of the Company and (ii) severance benefits
under this Plan shall be reduced by the amount of any payment to
which the Eligible Employee is entitled under any individual
severance agreement or other arrangement then in effect between the
Eligible Employee and the Company. The accelerated vesting of
equity awards shall not be subject to this
Section 5(a).
(b) Notwithstanding any other provision of the Plan
to the contrary, in the event it shall be determined, either by the
Company or by a final determination of the Internal Revenue
Service, that any payment, distribution or benefit by or from the
Company to or for the benefit of an Eligible Employee, whether paid
or payable or distributed or distributable pursuant to the terms of
the Plan or otherwise, including (but not limited to) accelerated
vesting of equity awards (collectively, the
“Payments”), would cause the Eligible Employee to
become subject to the excise tax imposed by Section 4999 of
the Code (the “Excise Tax”), then the Company shall pay
to or for the benefit of the Eligible Employee, within the later of
ninety (90) days of the Eligible Employee’s Separation
from Service or ninety (90) days of the date of determination
referred to above, and in all events not later than the end of the
Eligible Employee’s taxable year following the Eligible
Employee’s taxable year in which the Eligible Employee remits
the related taxes, an additional amount (the “Gross-Up
Payment”) in an amount that shall fund the payment by the
Eligible Employee of any Excise Tax on the Payments, as well as any
income taxes imposed on the Gross-Up Payment, any Excise Tax
imposed on the Gross-Up Payment and any interest or penalties
imposed with respect to taxes on the Gross-Up Payment or any Excise
Tax. For purposes of determining the amount of the Gross-Up
Payment, the Eligible Employee shall be deemed to pay federal,
state and local income taxes at the highest nominal marginal rate
of such federal, state and local income taxation in the calendar
year in which the Gross-Up Payment is due, net of the maximum
reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount
taken into account to determine the amount of the Gross-Up Payment,
then the Eligible Employee shall repay to the Company at that time
the portion of the Gross-Up Payment attributable to such reduction
(plus an amount equal to any tax reduction, whether of the Excise
Tax, any applicable income tax, or any applicable employment tax,
which the Eligible Employee has received as a result of such
initial repayment). In the event that the Excise Tax is
subsequently determined, whether by the Company or by a final
determination of the Internal Revenue Service, to be more than the
amount taken into account to determine the amount of the
Gross-Up
4.
Payment, then the Company shall pay to the
Eligible Employee an additional amount, which shall be determined
using the same methods as were used for calculating the Gross-Up
Payment, with respect to such excess. For purposes of this
Section 5(b), a determination of the Internal Revenue Service
as to the amount of Excise Tax for which an Eligible Employee is
liable shall not be treated as final until the time that either
(i) the Company agrees to acquiesce to the determination of
the Internal Revenue Service or (ii) the determination of the
Internal Revenue Service has been upheld in a court of competent
jurisdiction and the Company decides not to appeal such judicial
decision or such decision is not appealable. If the Company chooses
to contest the determination of the Internal Revenue Service, then
all costs, attorneys’ fees, charges assessed and other
expenses shall be borne and paid when due by the
Company.
Section 6. N
OTICE O F T ERMINATION .
Any termination by the Company,
whether or not for Cause, or by the Eligible Employee for Good
Reason, shall be communicated by a Notice of Termination to the
other party hereto given by hand delivery or by registered or
certified mail, return receipt requested, postage prepaid, if to
the Eligible Employee, then to the Eligible Employee at the
Eligible Employee’s address as set forth in the
Company’s records, and, if to the Company, to EXAR
Corporation, 48720 Kato Road, Fremont, California 94538 Attention:
Law Department. For purposes of the Plan, a Notice of Termination
means a written notice which (i) indicates the specific
termination provision in the Plan relied upon and (ii) if the
Termination Date is other than the date of receipt of such notice,
specifies the Termination Date (which date shall be not more than
fifteen (15) days after the giving of such notice). The
failure by the Company or the Eligible Employee to set forth in the
Notice of Termination any fact or circumstance which contributes to
a showing of Cause or of Good Reason shall not waive any right of
the Company or of the Eligible Employee, respectively, or preclude
the Company or the Eligible Employee, respectively, from asserting
such fact or circumstance in enforcing its, his or her rights
hereunder.
Section 7. T
IME O F P AYMENT .
(a) The Company will pay the severance payments
described in Section 4 above no later than sixty
(60) days following the date on which the Eligible
Employee’s Separation from Service occurs, subject to the
release requirement set forth in Section 3(a).
(b) Notwithstanding Section 7(a) or any other
provision of the Plan to the contrary, if the Eligible Employee is
a “specified employee” within the meaning of Treasury
Regulation Section 1.409A-1(i) as of the date of the Eligible
Employee’s Separation from Service, the Eligible Employee
shall not be entitled to any severance payments hereunder until the
earlier of (i) the date which is six (6) months after the
Eligible Employee’s Separation from Service for any reason
other than death, or (ii) the date of the Eligible
Employee’s death. Any amounts otherwise payable to the
Eligible Employee upon or in the six (6) month period
following the Eligible Employee’s Separation from Service
that are not so paid by reason of this Section 7(b) shall be
paid
5.
(without interest) as soon as practicable (and
in all events within thirty (30) days) after the date that is
six (6) months after the Eligible Employee’s Separation
from Service (or, if earlier, as soon as practicable, and in all
events within thirty (30) days, after the date of the Eligible
Employee’s death). The provisions of this Section 7(b)
shall only apply if, and to the extent, required to avoid the
imputation of any tax, penalty or interest pursuant to
Section 409A of the Code.
Section 8. M
ITIGATION
.
The Eligible Employee shall not be
required to mitigate the amount of the severance benefits payable
under this Plan by seeking other employment or otherwise, and any
amount earned by the Eligible Employee after the Termination Date
shall not reduce or otherwise affect the amount o
