QLOGIC CORPORATION
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN
CONTROL SEVERANCE AGREEMENT (this “ Agreement
”) is made and entered into as of December 19, 2008 by
and between QLogic Corporation, a Delaware corporation (the “
Company ”), and H.K. Desai (the “
Executive ”) and amends and restates that certain
Change in Control Agreement by and between the Company and the
Executive dated as of November 10, 2006 (the “ Prior
Change in Control Agreement ”), the purpose of such
amendment and restatement being to incorporate certain provisions
into this Agreement intended to comply with Section 409A of
the U.S. Internal Revenue Code of 1986, as amended (the “
Code ”).
A. The Board
of Directors of the Company has approved the Company entering into
a severance agreement with the Executive.
B. The
Executive is a key executive of the Company.
C. Should the
possibility of a Change in Control of the Company arise, the Board
believes it is imperative that the Company and the Board be able to
rely upon the Executive to continue in his position, and that the
Company should be able to receive and rely upon the
Executive’s advice, if requested, as to the best interests of
the Company and its stockholders without concern that the Executive
might be distracted by the personal uncertainties and risks created
by the possibility of a Change in Control.
D. Should the
possibility of a Change in Control arise, in addition to his
regular duties, the Executive may be called upon to assist in the
assessment of such possible Change in Control, advise management
and the Board as to whether such Change in Control would be in the
best interests of the Company and its stockholders, and to take
such other actions as the Board might determine to be
appropriate.
E. This
Agreement provides the benefits the Executive will be entitled to
receive upon certain terminations of employment in connection with
a Change in Control from and after the Effective Date and
supersedes and negates all previous agreements with respect to such
benefits, including, without limitation, the Prior Change in
Control Agreement.
NOW
THEREFORE , to help assure the Company that it will have the
continued dedication of the Executive and the availability of his
advice and counsel notwithstanding the possibility, threat, or
occurrence of a Change in Control of the Company, and to induce the
Executive to remain in the employ of the Company in the face of
these circumstances and for other good and valuable consideration,
the Company and the Executive agree as follows:
This Agreement
shall be effective as of November 10, 2006 (the “
Effective Date ”). This Agreement will continue in
effect through the second anniversary of the Effective Date.
However, upon the first anniversary of the Effective Date and upon
each subsequent anniversary of the Effective Date, the term of this
Agreement shall be extended automatically for one (1) additional
year (such that upon the first anniversary of the Effective Date
the term of this Agreement shall be extended through the third
anniversary of the Effective Date and so on), unless the Committee
delivers written notice prior to such anniversary of the Effective
Date to the Executive that this Agreement will not be extended or
further extended, as the case may be, and if such notice is given
this Agreement will terminate at the end of the term then in
progress.
Notwithstanding
the foregoing, in the event a Change in Control occurs during the
original or any extended term of this Agreement, this Agreement
will remain in effect for the longer of: (i) twenty-four
(24) months beyond the month in which such Change in Control
occurred; or (ii) until all obligations of the Company
hereunder have been fulfilled, and until all benefits required
hereunder have been paid to the Executive. For purposes of clarity,
subject to Section 3.1, benefits shall be payable to the
Executive under this Agreement only with respect to a single Change
in Control of the Company. Accordingly, no Change in Control after
the first Change in Control shall be considered for purposes of
this Agreement.
Whenever used in
this Agreement, the following terms shall have the meanings set
forth below:
|
|
(a)
|
|
“ Accrued Obligations
” means:
|
|
|
(i)
|
|
any
Base Salary that had accrued but had not been paid (including
accrued and unpaid vacation time) prior to the Severance Date;
and
|
|
|
|
|
|
|
|
(ii)
|
|
any
Annual Bonus earned as of the Severance Date with respect to the
fiscal year preceding the year in which the Severance Date occurs
(if the Executive was employed by the Company on the last day of
that fiscal year) that had not previously been paid.
|
|
|
(b)
|
|
“ Agreement ”
means this Change in Control Severance Agreement.
|
|
|
|
|
|
|
|
(c)
|
|
“ Annual Bonus ”
means the Executive’s annual incentive cash bonus
opportunity.
|
|
|
|
|
|
|
|
(d)
|
|
“ Base Salary ”
means the salary of record paid to the Executive by the Company as
annual salary (whether or not deferred), but excludes amounts
received under incentive or other bonus plans.
|
|
|
|
|
|
|
|
(e)
|
|
“ Beneficiary ”
means the persons or entities designated or deemed designated by
the Executive pursuant to Section 8.2.
|
|
|
|
|
|
|
|
(f)
|
|
“ Board ” means
the Board of Directors of the Company.
|
|
|
(g)
|
|
“ Cause ” means
the occurrence of any of the following:
|
|
|
(i)
|
|
the
Executive is convicted of, or has pled guilty or nolo
contendere to, a felony (other than traffic related offenses or
as a result of vicarious liability); or
|
|
|
|
|
|
|
|
(ii)
|
|
the
Executive has engaged in acts of fraud, material dishonesty or
other acts of willful misconduct in the course of his duties to the
Company; or
|
|
|
|
|
|
|
|
(iii)
|
|
the
Executive willfully and repeatedly fails to perform or uphold his
duties to the Company; or
|
|
|
|
|
|
|
|
(iv)
|
|
the
Executive willfully fails to comply with reasonable directives of
the Board which are communicated to him in writing;
|
|
|
|
|
provided, however, that no act or
omission by the Executive shall be deemed to be
“willful” if the Executive reasonably believed in good
faith that such acts or omissions were in the best interests of the
Company.
|
|
|
|
|
|
|
|
(h)
|
|
“ Change in Control
” means any of the following:
|
|
|
(i)
|
|
The
acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “
Person ”)) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 30% or
more of either (1) the then-outstanding shares of common stock
of the Company (the “ Outstanding Company Common Stock
”) or (2) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “ Outstanding
Company Voting Securities ”); provided, however, that,
for purposes of this clause (i), the following acquisitions shall
not constitute a Change in Control; (A) any acquisition
directly from the Company, (B) any acquisition by the Company,
(C) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any affiliate of the
Company or a successor, (D) any acquisition by any entity pursuant
to a transaction that complies with clauses (iii)(1), (2) and
(3) below, and (E) any acquisition by a Person who owned
more than 30% of either the Outstanding Company Common Stock or the
Outstanding Company Voting Securities as of the Effective Date or
an Affiliate of any such Person;
|
|
|
|
|
|
|
|
(ii)
|
|
A
change in the Board or its members such that individuals who, as of
the later of the Effective Date or the date that is two
years prior to such change (the later of such two dates is referred
to as the “ Measurement Date ”), constitute the
Board (the “ Incumbent Board ”) cease for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the
Measurement Date whose election, or nomination for election by the
Company’s stockholders, was approved by a vote of at least
two-thirds of the directors
|
|
|
|
|
then comprising the Incumbent Board
(including for these purposes, the new members whose election or
nomination was so approved, without counting the member and his
predecessor twice) shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board;
|
|
|
|
|
|
|
|
(iii)
|
|
Consummation of a reorganization,
merger, statutory share exchange or consolidation or similar
corporate transaction involving the Company or any of its
Subsidiaries, a sale or other disposition of all or substantially
all of the assets of the Company, or the acquisition of assets or
stock of another entity by the Company or any of its Subsidiaries
(each, a “ Business Combination ”), in each case
unless, following such Business Combination, (1) all or
substantially all of the individuals and entities that were the
beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more
than 50% of the then-outstanding shares of common stock and the
combined voting power of the then-outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the entity resulting from such Business Combination
(including, without limitation, an entity that, as a result of such
transaction, owns the Company or all or substantially all of the
Company’s assets directly or through one or more subsidiaries
(a “ Parent ”)) in substantially the same
proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities, as the case may be,
(2) no Person (excluding any entity resulting from such
Business Combination or a Parent or any employee benefit plan (or
related trust) of the Company or such entity resulting from such
Business Combination or Parent) beneficially owns, directly or
indirectly, 30% or more of, respectively, the then-outstanding
shares of common stock of the entity resulting from such Business
Combination or the combined voting power of the then-outstanding
voting securities of such entity, except to the extent that the
ownership in excess of 30% existed prior to the Business
Combination, and (3) at least a majority of the members of the
board of directors or trustees of the entity resulting from such
Business Combination or a Parent were members of the Incumbent
Board (determined pursuant to clause (ii) above using the date
that is the later of the Effective Date or the date that is
two years prior to the Business Combination as the Measurement
Date) at the time of the execution of the initial agreement or of
the action of the Board providing for such Business Combination;
or
|
|
|
(iv)
|
|
Approval by the stockholders of the
Company of a complete liquidation or dissolution of the Company
other than in the context of a transaction that does not constitute
a Change in Control under clause (iii) above.
|
|
|
|
|
Notwithstanding the foregoing, in no
event shall a transaction or other event that occurred prior to the
Effective Date constitute a Change in Control.
|
|
|
|
|
|
|
|
(i)
|
|
“ Code ” means
the United States Internal Revenue Code of 1986, as
amended.
|
|
|
|
|
|
|
|
(j)
|
|
“ Committee ”
means the Compensation Committee of the Board.
|
|
|
|
|
|
|
|
(k)
|
|
“ Company ” means
QLogic Corporation, a Delaware corporation, or any successor
thereto as provided in Article 7.
|
|
|
|
|
|
|
|
(l)
|
|
“ Disability ”
means disability as defined in the Company’s long-term
disability plan in which the Executive participates at the relevant
time or, if the Executive does not participate in a Company
long-term disability plan at the relevant time, such term shall
mean a “permanent and total disability” within the
meaning of Section 22(e)(3) of the Code.
|
|
|
|
|
|
|
|
(m)
|
|
“ Effective Date
” has the meaning given to such term in Article 1
hereof.
|
|
|
|
|
|
|
|
(n)
|
|
“ Exchange Act ”
means the United States Securities Exchange Act of 1934, as
amended.
|
|
|
|
|
|
|
|
(o)
|
|
“ Executive ”
means the individual identified in the first sentence, and on the
signature page, of this Agreement.
|
|
|
|
|
|
|
|
(p)
|
|
“ Good Reason ”
means, without the Executive’s express written consent, the
occurrence of any one or more of the following:
|
|
|
(i)
|
|
A
material reduction in the nature or status of the Executive’s
authorities, duties, and/or responsibilities, (when such
authorities, duties, and/or responsibilities are viewed in the
aggregate) from their level in effect on the day immediately prior
to the start of the Protected Period, other than an insubstantial
and inadvertent act that is remedied by the Company promptly after
receipt of notice thereof given by the Executive. The change in
status of the Company from a publicly-traded company to a company
the securities of which are not publicly-traded (including any
related termination of the Company’s reporting obligations
under the Exchange Act) shall not, in and of itself, constitute
Good Reason or a material reduction in the nature or status of the
Executive’s authorities, duties, and/or
responsibilities.
|
|
|
|
|
|
|
|
(ii)
|
|
A
reduction by the Company in either the Executive’s Base
Salary or the Executive’s Annual Bonus opportunity as in
effect immediately prior to the start of the Protected Period or as
the same shall be increased from time to time.
|
|
|
(iii)
|
|
A
material reduction in the Executive’s relative level of
coverage and accruals under the Company’s employee benefit
and/or retirement plans, policies, practices, or arrangements in
which the Executive participates immediately prior to the start of
the Protected Period, both in terms of the amount of benefits
provided, and amounts accrued. For this purpose, the Company may
eliminate and/or modify existing programs and coverage levels;
provided , however , that the Executive’s level
of coverage under all such programs must be at least as great as is
provided to other senior executives of the Company.
|
|
|
|
|
|
|
|
(iv)
|
|
The
failure of the Company to obtain a satisfactory agreement from any
successor to the Company to assume and agree to perform this
Agreement, as contemplated in Article 7.
|
|
|
|
|
|
|
|
(v)
|
|
The
Executive is informed by the Company that his principal place of
employment for the Company will be relocated to a location that is
more than fifty (50) miles from his principal place of
employment for the Company at the start of the corresponding
Protected Period.
|
|
|
|
|
|
|
|
(vi)
|
|
A
repudiation or breach by the Company or any successor company of
any of the provisions of this Agreement.
|
|
|
|
|
The
Executive’s right to terminate employment for Good Reason
shall not be affected by the Executive’s incapacity due to
physical or mental illness. The Executive’s continued
employment shall not constitute a consent to, or a waiver of rights
with respect to, any circumstances constituting Good Reason herein;
provided , however , that if the Executive does not
terminate employment and claim Good Reason for such termination
within ninety (90) days after the Executive has knowledge of
an event or circumstance that would constitute Good Reason, then
the Executive shall be deemed to have waived his right to claim
Good Reason as to that specific fact or circumstance (except that
the event or circumstance may be considered for purposes of
determining whether any subsequent, separate, event or circumstance
constitutes Good Reason; for example, and without limitation, a
reduction in the Executive’s authorities that is deemed
waived by operation of this clause may be considered for purposes
of determining whether any subsequent reduction in the
Executive’s authorities (when taken into consideration with
the first reduction) constitutes a “material reduction”
in the nature or status of the Executive’s authorities from
their level in effect on the day immediately prior to the start of
the Protected Period).
|
|
|
|
|
|
|
|
(q)
|
|
“ Protected Period
” with respect to a Change in Control of the Company shall
mean the period commencing on the date that is six (6) months
prior to the date of such Change in Control and ending on the date
of such Change in Control.
|
|
|
|
|
|
|
|
(r)
|
|
“ Qualifying
Termination ” has the meaning given to such term in
Section 3.2(a).
|
|
|
(s)
|
|
As
used herein, a “ Separation from Service ”
occurs when the Executive dies, retires, or otherwise has a
termination of employment with the Company that constitutes a
“separation from service” within the meaning of
Treasury Regulation Section 1.409A-1(h)(1), without regard to
the optional alternative definitions available
thereunder.
|
|
|
|
|
|
|
|
(t)
|
|
“ Severance Benefits
” means the payments and/or benefits provided in
Section 3.3.
|
|
|
|
|
|
|
|
(u)
|
|
“ Severance Date
” means the date on which the Executive’s employment
with the Company and its subsidiaries terminates for any reason
(whether or not as a result of a Qualifying
Termination).
|
|
|
|
|
|
|
|
(v)
|
|
“ 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 Company.
|
Article 3. Severance
Benefits
3.1. Right to
Severance Benefits . The Executive shall be entitled to receive
from the Company the Severance Benefits described in
Section 3.3 if the Executive has incurred a Qualifying
Termination and satisfies the release requirements set forth in
Section 3.7.
The Executive
shall not be entitled to receive Severance Benefits if his
employment terminates (regardless of the reason) before the
Protected Period corresponding to a Change in Control of the
Company or more than twenty-four (24) months after the date of
a Change in Control of the Company.
3.2.
Qualifying Termination .
|
|
(a)
|
|
Subject to Sections 3.2(c),
3.4, and 3.5, the occurrence of any one or more of the following
events within the Protected Period corresponding to a Change in
Control of the Company, or within twenty-four (24) calendar
months following the date of a Change in Control of the Company
shall constitute a “ Qualifying Termination
”:
|
|
|
(i)
|
|
An
involuntary termination of the Executive’s employment by the
Company for reasons other than Cause; or
|
|
|
|
|
|
|
|
(ii)
|
|
A
voluntary termination of employment by the Executive for Good
Reason.
|
|
|
(b)
|
|
Notwithstanding anything else
contained herein to the contrary, the Executive’s termination
of employment on account of reaching mandatory retirement age, as
such age may be defined from time to time in policies adopted by
the Company prior to the commencement of the Protected Period, and
consistent with applicable law, shall not be a Qualifying
Termination.
|
|
|
(c)
|
|
Notwithstanding anything else
contained herein to the contrary, the Executive’s Severance
Benefits under this Agreement shall be reduced by the severance
benefits (including, without limitation, any other
change-in-control severance benefits and any other severance
benefits generally) that the Executive may be entitled to under any
other plan, program, agreement or other arrangement with the
Company (including, without limitation, any such benefits provided
for by an employment agreement). For purposes of the foregoing, any
cash severance benefits payable to the Executive under any other
plan, program, agreement or other arrangement with the Company
shall offset the cash severance benefits otherwise payable to the
Executive under this Agreement on a dollar-for-dollar basis. For
purposes of the foregoing, non-cash severance benefits to be
provided to the Executive under any other plan, program, agreement
or other arrangement with the Company shall offset any
corresponding benefits otherwise to be provided to the Executive
under this Agreement or, if there are no corresponding benefits
otherwise to be provided to the Executive under this Agreement, the
value of such benefits shall offset the cash severance benefits
otherwise payable to the Executive under this Agreement on a
dollar-for-dollar basis. If the amount of other benefits to be
offset against the cash severance benefits otherwise payable to the
Executive under this Agreement in accordance with the preceding two
sentences exceeds the amount of cash severance benefits otherwise
payable to the Executive under this Agreement, then the excess may
be used to offset other non-cash severance benefits otherwise to be
provided to the Executive under this Agreement on a
dollar-for-dollar basis. For purposes of this paragraph, the
Committee shall reasonably determine the value of any non-cash
benefits.
|
3.3.
Description of Severance Benefits . In the event that the
Executive becomes entitled to receive Severance Benefits, as
provided in Sections 3.1, 3.2 and 3.8, the Company shall pay
and provide to the Executive (in addition to the Accrued
Obligations) the following:
|
|
(a)
|
|
The
Company will pay to the Executive an amount equal to two
(2) times the sum of (i) the Executive’s Base
Salary, and (ii) the Executive’s Annual Bonus. For
purposes of this Section 3.3(a), the Executive’s
“Base Salary” shall be deemed to be the
Executive’s highest annualized rate of Base Salary in effect
at any time after the commencement of the Protected Period and on
or before the Executive’s Severance Date, and the
Executive’s “Annual Bonus” shall be the
greater of (x) the Executive’s maximum Annual
Bonus opportunity for the fiscal year in which the
Executive’s Severance Date occurs, and (y) the highest
aggregate bonus(es) paid by the Company to the Executive for any
one of the three (3) full fiscal years of the Company
immediately preceding the Executive’s Severance Date.
Notwithstanding the foregoing provisions, if the Executive would be
entitled to a greater cash severance payment in the circumstances
under the terms of any employment agreement then in effect than the
amount determined under the first sentence of this
Section 3.3(a), the Executive shall be entitled to such
greater cash severance payment only and no additional payment shall
be made under this Section 3.3(a).
|
|
|
(b)
|
|
The
Company will pay or reimburse the Executive for his premiums
charged to continue medical coverage pursuant to the Consolidated
Omnibus Budget Reconciliation Act (“ COBRA ”),
at the same or reasonably equivalent medical coverage for the
Executive (and, if applicable, the Executive’s eligible
dependents) as in effect immediately prior to the Severance Date,
to the extent that the Executive elects such continued coverage;
provided that the Company’s obligation to make any payment or
reimbursement pursuant to this clause (ii) shall cease upon
the first to occur of (a) the second anniversary of the Severance
Date; (b) the Executive’s death; (c) the date the
Executive becomes eligible for coverage under the health plan of a
future employer; or (d) the date the Company or its affiliates
ceases to offer any group medical coverage to its active executive
employees or the Company is otherwise under no obligation to offer
COBRA continuation coverage to the Executive. To the extent that
the payment of any COBRA premiums pursuant to this
Section 3.3(b) is taxable to the Executive, such payment shall
be made on or before the last day of the Executive’s taxable
year following the taxable year in which the related expense was
incurred. The Executive’s right to payment of such premiums
is not subject to liquidation or exchange for another benefit and
the amount of such benefits that the Executive receives in one
taxable year shall not affect the amount of such benefits that the
Executive receives in any other taxable year.
|
|
|
|
|
|
|
|
(c)
|
|
Notwithstanding any other provision
herein or in any other document, any stock option or other
equity-based award granted by the Company to the Executive, to the
extent such award is outstanding and has not vested as of the
Executive’s Severance Date, shall automatically become fully
vested as of the Severance Date. In the event that the Executive
has a Qualifying Termination during the Protected Period related to
a Change in Control, any stock option or other equity-based award
granted by the Company to the Executive, to the extent such award
had not vested and was cancelled or otherwise terminated upon or
prior to the date of the related Change in Control solely as a
result of such Qualifying Termination, shall be reinstated and
shall automatically become fully vested, and, in the case of stock
options or similar awards, the Executive shall be given a
reasonable opportunity to exercise such accelerated portion of the
option or other award before it terminates.
|
3.4.
Termination Due to Disability or Death . Termination of the
Executive’s emplo
|
