Exhibit 10.3
POWER INTEGRATIONS,
INC.
1997 OUTSIDE DIRECTORS STOCK
OPTION PLAN
1. E STABLISHMENT , P URPOSE AND T ERM OF P LAN .
1.1 Establishment
. The Power Integrations, Inc. 1997
Outside Directors Stock Option Plan (the “ Plan
”) is hereby established effective as of the effective date
of the initial registration by the Company of its Stock under
Section 12 of the Exchange Act (the “ Effective
Date ”).
1.2 Purpose
. The purpose of the Plan is to
advance the interests of the Participating Company Group and its
stockholders by providing an incentive to attract and retain highly
qualified persons to serve as Outside Directors of the Company and
by creating additional incentive for Outside Directors to promote
the growth and profitability of the Participating Company
Group.
1.3 Term of Plan
. The Plan shall continue in effect
until the earlier of its termination by the Board or the date on
which all of the shares of Stock available for issuance under the
Plan have been issued and all restrictions on such shares under the
terms of the Plan and the agreements evidencing Options granted
under the Plan have lapsed.
2. D EFINITIONS AND C ONSTRUCTION .
2.1 Definitions
. Whenever used herein, the
following terms shall have their respective meanings set forth
below:
(a) “ Board ” means the
Board of Directors of the Company. If one or more Committees have
been appointed by the Board to administer the Plan,
“Board” also means such Committee(s).
(b) “ Code ” means the
Internal Revenue Code of 1986, as amended, and any applicable
regulations promulgated thereunder.
(c) “ Committee ” means a
committee of the Board duly appointed to administer the Plan and
having such powers as shall be specified by the Board. Unless the
powers of the Committee have been specifically limited, the
Committee shall have all of the powers of the Board granted herein,
including, without limitation, the power to amend or terminate the
Plan at any time, subject to the terms of the Plan and any
applicable limitations imposed by law.
(d) “ Company ” means
Power Integrations, Inc., a Delaware corporation, or any successor
corporation thereto.
(e) “ Consultant ” means
any person, including an advisor, engaged by a Participating
Company to render services other than as an Employee or a
Director.
1.
(f) “ Director ” means a
member of the Board or the board of directors of any other
Participating Company.
(g) “ Employee ” means any
person treated as an employee (including an officer or a Director
who is also treated as an employee) in the records of a
Participating Company; provided, however, that neither service as a
Director nor payment of a director’s fee shall be sufficient
to constitute employment for purposes of the Plan.
(h) “ Exchange Act ” means
the Securities Exchange Act of 1934, as amended.
(i) “ Fair Market Value ”
means, as of any date, the value of a share of Stock or other
property as determined by the Board, in its sole discretion, or by
the Company, in its sole discretion, if such determination is
expressly allocated to the Company herein, subject to the
following:
(i) If, on such date, there is a public market for
the Stock, the Fair Market Value of a share of Stock shall be the
closing sale price of a share of Stock (or the mean of the closing
bid and asked prices of a share of Stock if the Stock is so quoted
instead) as quoted on the Nasdaq National Market, the Nasdaq
Small-Cap Market or such other national or regional securities
exchange or market system constituting the primary market for the
Stock, as reported in the Wall Street Journal or such other source
as the Company deems reliable. If the relevant date does not fall
on a day on which the Stock has traded on such securities exchange
or market system, the date on which the Fair Market Value shall be
established shall be the last day on which the Stock was so traded
prior to the relevant date, or such other appropriate day as shall
be determined by the Board, in its sole discretion.
(ii) If, on such date, there is no public market for
the Stock, the Fair Market Value of a share of Stock shall be as
determined by the Board without regard to any restriction other
than a restriction which, by its terms, will never lapse
.
(j) “ Option ” means a
right to purchase Stock (subject to adjustment as provided in
Section 4.2) pursuant to the terms and conditions of the
Plan.
(k) “ Optionee ” means a
person who has been granted one or more Options.
(l) “ Option Agreement ”
means a written agreement between the Company and an Optionee
setting forth the terms, conditions and restrictions of the Option
granted to the Optionee.
(m) “ Outside Director ”
means a Director of the Company who is not an Employee.
(n) “ Parent Corporation ”
means any present or future “parent corporation” of the
Company, as defined in Section 424(e) of the Code.
2.
(o) “ Participating Company
” means the Company or any Parent Corporation or Subsidiary
Corporation.
(p) “ Participating Company
Group ” means, at any point in time, all corporations
collectively which are then Participating Companies.
(q) “ Service ” means the
Optionee’s service with the Participating Company Group,
whether in the capacity of an Employee, a Director or a Consultant.
The Optionee’s Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Optionee
renders Service to the Participating Company Group or a change in
the Participating Company for which the Optionee renders such
Service, provided that there is no interruption or termination of
the Optionee’s Service. The Optionee’s Service shall be
deemed to have terminated either upon an actual termination of
Service or upon the corporation for which the Optionee performs
Service ceasing to be a Participating Company.
(r) “ Stock ” means the
common stock of the Company, as adjusted from time to time in
accordance with Section 4.2.
(s) “ Subsidiary Corporation
” means any present or future “subsidiary
corporation” of the Company, as defined in
Section 424(f) of the Code.
2.2 Construction
. Captions and titles contained
herein are for convenience only and shall not affect the meaning or
interpretation of any provision of the Plan. Except when otherwise
indicated by the context, the singular shall include the plural,
the plural shall include the singular, and use of the term
“or” shall include the conjunctive as well as the
disjunctive.
3. A DMINISTRATION . The Plan shall be administered by the Board.
All questions of interpretation of the Plan or of any Option shall
be determined by the Board, and such determinations shall be final
and binding upon all persons having an interest in the Plan or such
Option. Any officer of a Participating Company shall have the
authority to act on behalf of the Company with respect to any
matter, right, obligation, determination or election which is the
responsibility of or which is allocated to the Company herein,
provided the officer has apparent authority with respect to such
matter, right, obligation, determination or election.
4. S HARES S UBJECT TO P LAN .
4.1 Maximum Number of Shares
Issuable . Subject to
adjustment as provided in Section 4.2, the maximum aggregate
number of shares of Stock that may be issued under the Plan shall
be eight hundred thousand (800,000) and shall consist of
authorized but unissued shares or reacquired shares of Stock or any
combination thereof. If an outstanding Option for any reason
expires or is terminated or canceled or shares of Stock acquired,
subject to repurchase, upon the exercise of an Option are
repurchased by the Company, the shares of Stock allocable to the
unexercised portion of such Option, or such repurchased shares of
Stock, shall again be available for issuance under the
Plan.
4.2 Adjustments for Changes in
Capital Structure . In
the event of any stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification or similar change
in the capital structure of the Company, appropriate adjustments
shall be made in the number and class of shares subject to the
Plan, to the “Initial Option” and “Annual
Option” (as defined in Section 6.1),
3.
and to any outstanding Options, and in the
exercise price of any outstanding Options. If a majority of the
shares which are of the same class as the shares that are subject
to outstanding Options are exchanged for, converted into, or
otherwise become (whether or not pursuant to an “Ownership
Change Event” as defined in Section 8.1) shares of
another corporation (the “ New Shares ”),
the Board may unilaterally amend the outstanding Options to provide
that such Options are exercisable for New Shares. In the event of
any such amendment, the number of shares subject to, and the
exercise price of, the outstanding Options shall be adjusted in a
fair and equitable manner as determined by the Board, in its sole
discretion. Notwithstanding the foregoing, any fractional share
resulting from an adjustment pursuant to this Section 4.2
shall be rounded down to the nearest whole number, and in no event
may the exercise price of any Option be decreased to an amount less
than the par value, if any, of the stock subject to the
Option.
4.3 Repricing and Repurchase of
Options. Notwithstanding
anything to the contrary set forth herein, except in connection
with a corporate transaction involving the Company (including,
without limitation, any stock dividend, stock split, reverse stock
split, extraordinary cash dividend, recapitalization,
reorganization, Ownership Change Event, split-up, spin-off,
combination, reclassification or exchange of shares), outstanding
Options may not be amended to reduce the exercise price of such
outstanding Options or canceled in exchange for cash, other awards
or Options with an exercise price that is less than the exercise
price of the original Options without stockholder
approval.
5. E LIGIBILITY AND T YPE OF O PTIONS .
5.1 Persons Eligible for
Options . An Option shall
be granted only to a person who, at the time of grant, is an
Outside Director.
5.2 Options Authorized
. Options shall be nonstatutory
stock options; that is, options which are not treated as incentive
stock options within the meaning of Section 422(b) of the
Code.
6. T ERMS AND C ONDITIONS OF O PTIONS . Options shall be evidenced by Option
Agreements specifying the number of shares of Stock covered
thereby, in such form as the Board shall from time to time
establish. Option Agreements may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject
to the following terms and conditions:
6.1 Automatic Grant of
Options . Sub
