TRANSITION AGREEMENT
EXECUTION
COPY
This TRANSITION AGREEMENT (“Agreement”) dated April 28,
2010 is made by and between Nu
Horizons Electronics Corp., a Delaware corporation (the “Company” and, together with
its subsidiaries and affiliates, the “Group”), and Xxxxxx Xxxxxx (“Executive”).
RECITALS
WHEREAS, the Company and
Executive are parties to an Employment Agreement dated September 13, 1996 (as
amended from time to time, the “Employment Agreement”) and a
Change of Control Agreement dated September 13, 1996 (the “Change of Control
Agreement”);
WHEREAS, in anticipation of
Executive’s retirement from the Company, the parties wish to ensure an orderly
and smooth transition of Executive’s duties and responsibilities to Executive’s
successor; and
WHEREAS, Executive and the
Company are entering into this Agreement to confirm their mutual understanding
and expectations relating to such transition.
NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Executive and the Company hereby agree as follows:
1. Phased
Transition Periods; Position during Transition Periods.
(a) First Transition
Period. Until May 2, 2010 (“First Transition Period”),
Executive shall continue in his current position as Director, Executive Chairman
of the Board and interim Chief Executive Officer of the Company. At the end of
the First Transition Period, Executive will resign from any and all (i) officer
level positions he holds within the Group (including as Chief Executive Officer)
and (ii) fiduciary positions (including as trustee) Executive holds with respect
to any pension plans or trusts established by the Group. This Agreement shall
serve as Executive’s irrevocable notice to the Board of Directors of the Company
and each member of the Group of such resignations.
(b) Second Transition
Period. Effective May 3, 2010, Executive shall have the position of
Director and serve as its Non-Executive Chairman, provided that such service
remains subject to the determination of the Board, from time to time, consistent
with the Board’s exercise of its fiduciary duties and responsibilities under the
Company’s Articles of Incorporation, By-laws and applicable law. In addition,
from May 3, 2010 through July 28, 2010 (“Second Transition Period”),
Executive shall remain an employee of the Company. At the end of the Second
Transition Period, Executive’s employment with the Company shall
terminate.
(c) Third Transition Period and
Fourth Transition Period. From July 29, 2010 through November 30, 2010
(“Third Transition
Period”) and December 1, 2010 through February 28, 2011 (“Fourth Transition Period”),
Executive shall have the position of Director and serve as its Non-Executive
Chairman, provided that
such service remains subject to the determination of the Board, from time to
time, consistent with the Board’s exercise of its fiduciary duties and
responsibilities under the Company’s Articles of Incorporation, By-laws and
applicable law.
(d) Subsequent Period.
Following the Fourth Transition Period, Executive will continue as a Director
until the date of the Company’s 2011 Annual Meeting of
Stockholders. In connection with such Annual Meeting, the Governance
Committee will recommend the nominees for election by the stockholders, which
may, subject to the determination of the Governance Committee consistent with
the exercise of its fiduciary duties and responsibilities, include
Executive.
2. Duties
and Responsibilities during Transition Periods. During the Transition
Periods, Executive agrees to perform the following services, as requested from
time to time by the Board of Directors of the Company and / or the new Chief
Executive Officer of the Company: (i) advising, orienting and helping integrate
the new Chief Executive Officer into the business and operations of the Group,
(ii) introducing the new Chief Executive Officer to suppliers, customers,
employees and other constituents of the Group, (iii) ensuring a smooth
transition of Executive’s day-to-day responsibilities, professional
relationships and industry know-how to the new Chief Executive Officer, and (iv)
providing such other services as reasonably requested from time to time.
Executive agrees to use good faith efforts to perform the transition services to
the best of his ability, and in a timely and professional manner. Executive
understands and agrees that the transition services may entail a reasonable
amount of business travel. Without limiting the foregoing, Executive
acknowledges his fiduciary duties and responsibilities to the Group during the
Transition Periods and Executive unconditionally agrees to abide by such
fiduciary duties for so long as he owes them.
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3. Remuneration.
(a) Compensation and Benefits
Continuation through Second Transition Period. During the First
Transition Period and the Second Transition Period, Executive will continue to
receive his current base salary and continue participation in the Company’s
employee benefit programs, on the same basis as of the date hereof (subject to
the terms of the applicable programs).
(b) Compensation during Third
Transition Period. During the Third Transition Period, Executive will
receive $137,500, consisting of a prorated director retainer (i.e., through the
end of the Company’s current fiscal year) and an amount to compensate for the
anticipated quantum and quality of transition services to be rendered by
Executive. This amount will be paid in four equal monthly installments in
August, September, October and November 2010.
(c) Compensation during Fourth
Transition Period. During the Fourth Transition Period, Executive will
receive $37,500, which will be paid in three equal monthly installments in
December 2010, January 2011 and February 2011.
(d) Special Success
Bonus. At the end of the Fourth Transition Period, Executive will be
eligible to receive a special cash bonus of up to $50,000, if the Compensation
Committee, in its sole discretion, determines that Executive has faithfully
supported the successful integration of the new Chief Executive Officer into the
business and operations of the Group.
(e) Compensation after the
Fourth Transition Period. Following the Fourth Transition Period,
Executive will receive $10,000 per month (prorated for any partial months) for
his service as Non-Executive Chairman of the Board until the Company’s 2011
Annual Meeting of Stockholders; if, at said Annual Meeting, Executive is
reelected by the stockholders to the Board, and if, subject to the discretion of
the Board, Executive continues his service as Non-Executive Chairman of the
Board, Executive will receive $10,000 per month (prorated for any partial
months) until (and only until) the Company’s 2012 Annual Meeting of Stockholders
for such service as Non-Executive Chairman of the Board.
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(f) Equity Awards. On the
business day following the execution and delivery of this Agreement, the Board
will grant to Executive options to acquire an aggregate 200,000 shares of the
Company’s common stock (the “Stock Options”) under the 2000 Key
Employee Stock Option Plan and 2002 Key Employee Stock Incentive Plan. The terms
and conditions related to the Stock Options will be determined by the
Compensation Committee and set forth in the stock option agreement granting such
Stock Options.
(g) Director Stock Option
Award. Pursuant to the automatic grant provisions of the 2002 Outside
Directors’ Stock Option Plan, Executive may be eligible to receive an award of
15,000 stock options (with a fair market value exercise price) during the Third
Transition Period.
4. Other
Benefits.
(a) Health Benefits.
During the First and Second Transition Periods, Executive will be eligible to
participate in the Company’s medical benefit plans on the same basis as of the
date hereof. However, beginning with the Third Transition Period, Executive and
his spouse will be eligible to maintain employee health and dental insurance
benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended (“COBRA”), provided that Executive
timely elects COBRA coverage and his spouse timely elects an extension of COBRA
coverage at the time Executive becomes eligible for Medicare benefits. The
Company will reimburse Executive, on an after-tax basis, for the premiums paid
by Executive during the COBRA continuation period until such time Executive and
his spouse become eligible for Medicare benefits (as contemplated by the
Consulting Agreement (defined below)).
(b) Consulting Agreement.
Immediately following the Fourth Transition Period (i.e., March 1, 2011),
Executive and the Company will enter into a Consulting Agreement substantially
in the form attached as Exhibit A to the Third Amendment to the Employment
Agreement of even date herewith (the “Consulting Agreement”).
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(c) Executive Retirement
Plan. Immediately following the Fourth Transition Period (i.e., March 1,
2011), Executive shall be deemed to have effected a “Retirement” pursuant to the
Nu Horizons Electronics Corp. Executive Retirement Plan (the “Retirement Plan”), and shall
be entitled to receive Benefits (as defined in the Retirement Plan) in
accordance with the terms thereof. In this regard, Executive shall be considered
to have experienced a “separation from service” at the end of the Fourth
Transition Period for purposes of Section 409A of the Internal Revenue
Code.
(d) Expense
Reimbursement. During the Transition Periods, the Company agrees to pay,
or reimburse Executive for the out-of-pocket travel expenses and other business
expenses reasonably incurred by Executive in the performance of his duties
hereunder in accordance with the usual procedures of the Company.
5. Subsequent
Discoveries. Executive represents and warrants that he has not knowingly
participated in any violation of law or regulation in the course of performing
services for the Group. In the event that the Group discovers that, in the
course of Executive’s performance of services for the Group, he committed or
participated in any violation of law or regulation, Executive agrees that the
Company may, at its sole discretion, rescind any payments or benefits made under
this Agreement. Executive further waives and forfeits any claim for any
compensation or benefits still due and payable under this Agreement. In the
event that the U.S. Securities and Exchange Commission (the “SEC”), the U.S. Department of
Justice or any other United States or foreign criminal or regulatory authority
files criminal, civil, administrative or other regulatory proceedings against
Executive for any reason related to Executive’s performance of services for the
Group, Executive acknowledges and agrees that such action will suspend and toll
any further obligations that the Company may have under this Agreement. Such
suspension or tolling shall remain in effect pending final resolution, including
final exhaustion of any appellate remedies in such proceedings. In the event
that Executive is convicted of or pleads nolo contendere to a crime or subject
to a finding by a regulatory authority or a court that he violated U.S. laws or
regulations or the laws or regulations of a foreign country in the course of
Executive’s performance of services for the Group, then: (1) the Company shall
be relieved of all of its obligations under Section 3 of this Agreement; (2)
Executive agrees and undertakes to forfeit any grant of equity awards made by
the Company under this Agreement; and (3) Executive further waives and forfeits
any claim for any compensation or benefits still due and payable and any
benefits to be provided under this Agreement. This Section 5 shall survive
termination of this Agreement.
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6. Cooperation.
During the Transition Periods and thereafter, Executive agrees to make himself
reasonably available and cooperate with reasonable requests from the Company for
information concerning any legal or regulatory matters involving facts or events
relating to the Group that may be within his knowledge and he agrees to
cooperate with reasonable requests by the Company in connection with any
litigation, regulatory proceeding or investigation that may be brought by or
against any member of the Group, including, but not limited to, the SEC’s
investigation entitled “In the Matter of Vitesse Semiconductor Corp.” and the
Company’s related internal investigation. The Company will pay or reimburse any
reasonable incidental expenses Executive incurs as a result of complying with
this Section 6.
7. Termination
of this Agreement. This Agreement will terminate on the earliest to occur
of (i) February 28, 2011, (ii) Executive’s death, (iii) Executive’s “disability”
(as defined in the Consulting Agreement), (iv) the date as of which Executive is
terminated for Cause (as defined in the Employment Agreement), or (v) the date
as of which Executive terminates his services under this Agreement. Upon
termination, the Company shall only be liable for payment to Executive (or his
estate) of amounts that are earned but unpaid as of the date of termination.
Sections 1(d), 3(e), 4(b), 4(c), 8, 9, 10 and 11 shall survive any termination
of this Agreement.
8. Continuing
Obligations to the Company. Executive acknowledges and affirms his
continuing obligations under Section 8 (Confidential Information) and Section 9
(Non-Competition) of the Employment Agreement and hereby agrees that,
notwithstanding anything to contrary, those obligations shall continue in full
force and effect during the Transition Periods and, thereafter, for as long as
Executive remains a member of the Board.
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9. Effect on
Other Agreements; Entire Agreement. This Agreement is the entire
agreement between the Company and Executive with respect to the subject matter
hereunder and supersedes any earlier agreement, written or oral, with respect to
the subject matter of this Agreement, but this Agreement shall not supersede the
Company’s obligations to Executive under the Executive Retirement Plan, which
shall survive and remain in full force and effect. Executive and the Company
agree that as of the last day of the First Transition Period, all of the
provisions of the Change of Control Agreement and the Employment Agreement are
terminated other than
as specifically contemplated by this Agreement, and other than the provisions of
Paragraph 10(e), subsection (iii) thereof, of the Employment Agreement. In
entering into this Agreement, no party has relied on or made any representation,
warranty, inducement, promise or understanding that is not in this
Agreement.
10. General
Release of All Claims. In exchange for the payments and benefits set
forth herein, Executive RELEASES the Company, its affiliates, officers,
directors, board members, employees or agents from ANY AND ALL CLAIMS he may
have, known or unknown, RELATED TO HIS EMPLOYMENT WITH THE COMPANY OR OTHERWISE,
from the beginning of time through the date that this general release of claims
becomes effective (the “Effective Date”), but
excluding claims arising out of the enforcement of this Agreement.
Executive
understands and agrees that he is RELEASING the Company, its affiliates,
officers, directors, board members, employees and agents from any and all claims
for breach of contract, personal injury, wages, benefits, defamation, slander
and wrongful discharge, and any and all claims based on any oral or written
agreements or promises, including, but not limited to, claims arising under the
Family and Medical Leave Act, the Fair Labor Standards Act, the Worker
Adjustment Retraining and Notification Act, the Employee Retirement Income
Security Act of 1974, the New York State Labor Law and the New York
Whistleblower statute from the beginning of time through the Effective
Date.
Executive
understands and agrees that he is also RELEASING the Company, its affiliates,
officers, directors, board members, employees or agents from any and all claims
for discrimination or harassment in employment on the basis of race, color,
creed, religion, age, national origin, alienage or citizenship, gender, sexual
orientation, disability, marital status, veteran’s status and any other
protected grounds, including, but not limited to, any and all rights and claims
he may have arising under Title VII of the Civil Rights Act of 1964, the
Americans with Disabilities Act, the Age Discrimination in Employment Act of
1967, the New York State Human Rights Law, and any other federal, state or local
laws or regulations, from the beginning of time through the Effective
Date.
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Executive
affirms that, prior to the execution of the foregoing RELEASE, he consulted with
an attorney of his choice concerning the terms and conditions of the Release and
that he has been given up to 21 days to consider signing this Release. Executive
understands that he has seven days following his signing to revoke and cancel
this Release, and the terms and conditions of this Release will not become
effective or enforceable until the revocation period has expired. If Executive
revokes this Release on or prior to the expiration of the revocation period,
this Agreement will automatically terminate.
11. General
Provisions.
(a) Applicable Law. The provisions of this Agreement are
to be construed, administered and enforced in accordance with the laws of New
York without regard to principles of conflict of laws.
(b) Severability. The
invalidity or unenforceability of any provision of this Agreement shall in no
event affect the validity or enforceability of any other provision. It is the
parties’ intention that this Agreement not be construed more strictly with
regard to Executive or the Company.
(c) Amendments. Any
modifications altering the terms and conditions of this Agreement must be in
writing and signed by all parties hereto.
(d) Successors &
Assigns. This Agreement and any rights herein granted are personal to the
parties hereto and will not be assigned, sublicensed, encumbered, pledge or
otherwise transferred by either party without the prior written consent of the
other party, and any attempt at violative assignment, sublicense, encumbrance or
any other transfer, whether voluntary or by operation of law, will be void and
of no force and effect, except that this Agreement will be binding upon any
successor or assignee of the Company, and any reference herein to the Company
shall be deemed to include any such successor.
(e) Consolidation, Merger, or
Sale. In the event of any consolidation or merger of the Company into or
with any other corporation during the term of this Agreement, or the sale of all
or substantially all of the assets of the Company to another corporation, person
or entity during the term of this Agreement, such successor corporation shall
assume this Agreement and become obligated to perform all of the terms and
provisions hereof applicable to the Company, and Executive’s obligations
hereunder shall continue in favor of such successor
corporation.
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(f) Captions and
Headings. The captions and headings are for convenience of reference only
and shall not be used to construe the terms or meaning of any provisions of this
Agreement.
(g) Taxes. The Company
may withhold from any amounts payable under this Agreement such Federal, state,
local or foreign taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(h) Counterparts. This
Agreement may be executed in several counterparts, each of which shall be deemed
an original and all of which shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, the
parties have executed this Agreement as of the day and year first above
written.
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By:
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/s/
Xxxx Xxxxxxxxxxx
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Name:
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Xxxx Xxxxxxxxxxx
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Title:
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Executive Vice
President
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and Chief Financial Officer
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/s/
Xxxxxx Xxxxxx
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| Xxxxxx Xxxxxx | |||
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