Exhibit 10.1
SEVERANCE AGREEMENT AND RELEASE OF CLAIMS
     This Severance Agreement and Release of Claims (“Agreement”) is made and
entered into on August 28, 2008 by and between Hamid R. Shokrgozar (“Executive”)
and White Electronic Designs Corporation and all of its affiliated companies and
divisions (collectively referred to as “Company”) and is intended by the parties
hereto to settle and dispose of all claims and liabilities that exist between
Executive and Company as indicated herein.
RECITALS
     A. Executive and the Company are parties to that certain Executive
Employment Agreement dated December 13, 2007 (the “Employment Agreement”).
     B. Executive’s last day of employment with Company will be August 28, 2008
(the “Termination Date”). Executive will resign from his positions as Chairman
of the Board, Chief Executive Officer, President and Director and any other
positions and offices he holds with the Company and with each of Company’s
subsidiaries and affiliated entities on that date; and
     C. By entering into this Agreement, the parties mutually and voluntarily
agree to be legally bound by the terms set forth below.
COVENANTS
     NOW, THEREFORE, for valuable consideration, the parties agree as follows:
I.
     A. The Company agrees to pay Executive the sum of one million six hundred
thousand dollars ($1,600,000), plus Executive’s accrued and unused vacation pay,
less all lawfully required withholdings. Payment shall be made immediately
following the expiration of the seven (7) day revocation period            set
forth in Section VII, assuming that Executive has not revoked his signature
during that seven (7) day period. The Company will promptly pay Executive all
appropriate expense reimbursement requests properly submitted by Executive in
compliance with Company policy.
     B. If the Executive elects to continue his group health plan coverage
(medical, dental and vision) under Consolidated Omnibus Budget Reconciliation
Act (“COBRA”), the Company shall pay for eighteen (18) months following the
Termination Date the Company’s portion of the Executive’s COBRA premium equal to
the amount paid by the Company before the Executive’s Termination Date.
Following such period, until December 13, 2010, the Company shall pay Executive
an amount equal to the Company’s portion of the Executive’s COBRA premium in
order for Executive to secure health insurance of his choice; provided that such
payments shall

 

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cease if, during the COBRA period or thereafter, Executive is then covered by
reasonably equivalent or superior health insurance provided by any subsequent
employer. In addition, the Company shall continue to provide Executive with up
to $4,000 per year for unreimbursed medical expenses and with the auto allowance
and the disability and life benefits he is receiving from the Company as of the
Termination Date, less any required deductions, until December 13, 2010. The
life benefits and auto allowance received by Executive shall be on an after-tax
basis, such that the Company shall compensate Executive for any federal or state
tax payable with respect to such benefit as well as any such tax payable with
respect to the compensation called for by this sentence. Such gross up payments
shall be made to Executive no later than the last day of the calendar year in
which Executive pays such taxes.
     C. The Company will provide outplacement services to the Executive at the
outplacement provider of his choice for a period not to exceed eighteen
(18) months in the maximum amount of $50,000.
     D. The Company will reimburse Executive for all reasonable attorneys’ fees
incurred in connection with this Agreement in the maximum amount of $50,000 (so
long as such fees are incurred and paid within six months from the date of this
Agreement).
     E. The Company and Executive agree to the following concerning outstanding
grants of stock options, restricted stock units (“RSUs”) and performance shares
to Executive:

  1.   The following vested stock options: (i) 125,000 shares granted on
November 10, 1999; (ii) 125,000 shares granted on November 10, 1999;
(iii) 150,000 shares granted on May 16, 2001 and (iv) 150,000 shares granted on
December 15, 2004 shall terminate, if not exercised, on their respective
expiration dates (i.e. November 10, 2009, November 10, 2009, May 16, 2011, and
December 15, 2014, respectively);

  2.   The vested stock options to acquire 150,000 shares granted on December 3,
1998 shall terminate, if not exercised, on the 90th day following the
Termination Date;

  3.   The vested stock options to acquire 150,000 shares granted on
November 30, 2000 shall terminate on the date hereof;

  4.   Assuming Executive does not revoke his signature during the seven day
period set forth in Section VII, the Committee shall grant to Executive on the
8th day after the date hereof an option to acquire 150,000 shares of the
Company’s Common Stock at an exercise price of $7.25 per share, an expiration
date of November 30, 2010, and with such other terms as are contained in the
Company’s standard form of option agreement;

  5.   Assuming Executive does not revoke his signature during the seven day

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      period set forth in Section VII, the 50,000 shares of restricted stock
granted to Executive pursuant to that certain Restricted Stock Units Award
Agreement dated December 12, 2007 shall vest on the 8th day after the date
hereof;

  6.   Assuming Executive does not revoke his signature during the seven day
period set forth in Section VII, one-half (50,000 shares) of the performance
shares granted to Executive pursuant to that certain Performance Share Award
Agreement dated December 12, 2007 shall vest on the 8th day after the date
hereof;

  7.   Assuming Executive does not revoke his signature during the seven day
period set forth in Section VII, one-half (50,000 shares) of the performance
shares granted to Executive pursuant to that certain Performance Share Award
Agreement dated December 12, 2007 shall vest if the Company’s EBITDA for the
fiscal year ended in 2009 equals or exceeds $9,960,000; and

  8.   Any other unvested right to receive Company stock shall terminate on the
date hereof.

     F. Executive acknowledges that upon receipt of the above, he is not owed
any further money or any further equity compensation by the Company.
     G. Executive hereby resigns his positions of Chairman of the Board, Chief
Executive Officer, President and Director and any other positions he holds with
the Company and with each of Company’s subsidiaries and affiliated entities and
the Company hereby accepts the resignations. At the request of Company,
Executive agrees to execute any documents reasonably requested to effectuate or
to facilitate his resignations. Executive agrees he did not resign as a result
of a disagreement of the type referred to in Item 5.02(a)(1) of Form 8-K.
     H. By December 31, 2008, Executive’s Employment Agreement must be amended
to either comply with Section 409A of the Internal Revenue Code (“Code”) or to
qualify for an exception to the requirements of Code Section 409A. To qualify
for an exception to the requirements of Code Section 409A, Executive and the
Company hereby amend Executive’s Employment Agreement by the following:
     1. Section 5(f) shall be amended by adding the word “material” between the
words “A decrease” in paragraph (ii) and by adding the following language to the
end thereof: “Executive shall give written notice of his intent to terminate his
employment under this Section 5(f) and the facts underlying his reasons for
termination, and during the 10 days thereafter, the Company shall have an
opportunity to cure the facts giving rise to the Executive’s reasons for
termination of employment.”
     2. Section 6 of the Employment Agreement is amended by adding the following
Section 6(h): “Notwithstanding any provision in this Agreement to the

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contrary, any severance payment paid to you under this Section 6 shall be paid
in a lump sum within 30 days following the date of your termination of
employment.”
     I. For a period of six (6) months following the Termination Date, Executive
agrees to provide consultation and advice, on an as needed and as requested
basis, as an independent contractor, to assist in the transition of Executive’s
duties to other Company employees. Executive shall be paid based on an hourly
rate of $250 for any such services.
II.
     In consideration of the covenants set forth in Paragraph I above and the
covenants herein:
     A. Executive, on behalf of himself, his marital community if any, and his
heirs or assigns, expressly releases Company and its subsidiaries, affiliated
companies, directors, officers, all of their agents, employees, and attorneys;
and all their predecessors and successors (collectively the “Released Entities”)
from ANY AND ALL RIGHTS, CLAIMS, DEMANDS, CAUSES OF ACTION, OBLIGATIONS,
DAMAGES, PENALTIES, FEES, COSTS, EXPENSES, AND LIABILITIES OF ANY NATURE
WHATSOEVER WHICH EXECUTIVE HAS, HAD, OR MAY HAVE HAD AGAINST COMPANY OR ANY OR
ALL OF THE RELEASED ENTITIES IN CONNECTION WITH ANY CAUSE OR MATTER WHATSOEVER,
WHETHER KNOWN OR UNKNOWN TO THE PARTIES AT THE TIME OF EXECUTION OF THIS
AGREEMENT AND EXISTING FROM THE BEGINNING OF TIME TO THE DATE OF THE EXECUTION
OF THIS AGREEMENT AND INCLUDING, WITHOUT LIMITATION, ALL MATTERS RELATED TO
EXECUTIVE’S EMPLOYMENT WITH THE COMPANY, THE EMPLOYMENT AGREEMENT AND THE
TERMINATION OF HIS EMPLOYMENT.
     By signing this Agreement, Executive agrees to FULLY WAIVE AND RELEASE ALL
CLAIMS without limitation, such as attorneys’ fees, and all rights and claims
arising out of, or relating to, his employment or termination from employment,
with the Company including, BUT NOT LIMITED TO, any claim or other proceeding
arising under:

•   The Civil Rights Act of 1866 (“Section 1981”);

•   Title VII of the Civil Rights Act of 1964 as amended by the Civil Rights Act
of 1991;

•   The Americans with Disabilities Act (“ADA”);

•   The Age Discrimination in Employment Act (“ADEA”);

•   The Labor Management Relations Act (“LMRA”);

•   The National Labor Relations Act (“NLRA”);

•   The Fair Labor Standards Act (“FLSA”);

•   The Family and Medical Leave Act of 1993 (“FMLA”);

•   The Arizona Civil Rights Act;

•   The Arizona Employment Protection Act;

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•   The Employee Retirement Income Security Act of 1974 (“ERISA”); and/or

•   Any common law or statutory cause of action arising out of Executive’s
employment or termination of employment with the Company.

     This Agreement may be used to completely bar any action or suit before any
court, arbitral, or administrative body with respect to any claim under federal,
state, local or other law relating to this Agreement or to Executive’s
employment and/or termination of employment with Company or its subsidiaries,
affiliates, related entities, predecessors, parents or divisions. Furthermore,
Executive specifically agrees that he will not be entitled to any further
payment of any kind following any future “Change in Control” as defined in the
Employment Agreement. Notwithstanding any provision hereof to the contrary,
however, Executive does not release his rights to indemnification under
provisions of the Company’s articles of incorporation, bylaws or applicable law.
     B. Executive shall deliver to Company any Company property, including any
documents, materials, files, or computer files, or copies, reproductions,
duplicates, transcriptions, or replicas thereof, relating to Company’s business
or affairs, which are in Executive’s possession or control, or of which
Executive is aware.
     C. Executive hereby agrees to comply with the all of the restrictions and
requirements in Sections 4, 7 and 14 of his Employment Agreement.
III.
     The provisions of this Agreement are severable. This means that if any
provision is invalid, it will not affect the validity of the other provision. If
the scope of any restrictions of this Agreement should ever be deemed to exceed
that permitted by applicable law or be otherwise overbroad, Executive agrees
that a court of competent jurisdiction shall enforce that restriction to the
maximum scope permitted by law under the circumstances.
IV.
     Executive agrees that he will not seek nor accept employment in the future
with the Company or any of its subsidiaries, affiliates, successors, or
divisions.
V.
     By his signature below, Executive affirms that he has been given at least
21 days during which to consider this Agreement. Executive has been advised to
seek legal counsel prior to signing this Agreement.
VI.
     The Company and Executive mutually agree not to disparage the other, either
directly or indirectly. However, nothing in this Section precludes either party
from testifying or participating in any legal proceeding in which the party is
required by law to provide information about the other party. The Company agrees
to issue a press

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release in the form attached hereto as Exhibit A to announce this Agreement.
VII.
     Executive may revoke this Agreement at any time within seven (7) days
following his execution of the Agreement. Such revocation must be provided in
writing and received during the seven (7) day revocation period. To be
effective, the revocation must be received by the following individual:
Roger A. Derse
Chief Financial Officer
White Electronic Designs Corporation
3601 East University Drive, Suite 475
Phoenix AZ 85034
     This Agreement shall not become effective or enforceable until the
foregoing revocation period has expired.
VIII.
     Executive agrees that all requests for employment verification with the
Company be directed to the Company’s Chief Financial Officer. The Company agrees
that it will provide only Executive’s position, dates of employment and the fact
that he resigned, in response to such employment verification requests.
IX.
     This Agreement supersedes and replaces all prior discussions,
understandings, and oral agreements between the parties except as noted herein,
and contains the entire agreement between them on the matters herein contained.
This Agreement may not be changed orally, but only by a written agreement signed
by Executive and Company.
X.
     The laws of the State of Arizona will apply to this Agreement.
XI.
     The Company intends that the payments to which Executive is entitled under
this Agreement comply with the short-term deferral exception to the requirements
of Code Section 409A as defined in Treasury Regulation Section 1.409A-1(b)(4).
In order to meet the requirements of the short-term deferral exception, despite
any other provision of this Agreement to the contrary, such payment shall be
paid at the time stated in Section 6(h) of the Employment Agreement and in no
event later than March 15, 2009. In addition, the Company intends that the
payment of COBRA premiums pursuant to Section I.B., the payment of certain
outplacement expenses pursuant to Section I.C. and the payment of certain legal
fees pursuant to Section I.D., fit within the exception to Section 409A for
certain reimbursements as defined in Treasury
Regulation Section 1.409A-1(b)(9)(v).

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XII.
     Except as otherwise provided herein, the Company, on behalf of itself and
its subsidiaries, affiliated companies, and all their predecessors and
successors hereby release Executive and his heirs or assigns, (collectively the
“Released Parties”) from ANY AND ALL RIGHTS, CLAIMS, DEMANDS, CAUSES OF ACTION,
OBLIGATIONS, DAMAGES, PENALTIES, FEES, COSTS, EXPENSES, AND LIABILITIES OF ANY
NATURE WHATSOEVER WHICH THE COMPANY HAS, HAD, OR MAY HAVE HAD AGAINST THE
RELEASED PARTIES OR ANY OR ALL OF THE RELEASED PARTIES IN CONNECTION WITH ANY
CAUSE OR MATTER WHATSOEVER, WHETHER KNOWN OR UNKNOWN TO THE PARTIES AT THE TIME
OF EXECUTION OF THIS AGREEMENT AND EXISTING FROM THE BEGINNING OF TIME TO THE
DATE OF THE EXECUTION OF THIS AGREEMENT AND INCLUDING, WITHOUT LIMITATION, ALL
MATTERS RELATED TO EXECUTIVE’S EMPLOYMENT WITH THE COMPANY, THE EMPLOYMENT
AGREEMENT AND THE TERMINATION OF HIS EMPLOYMENT.
     By signing this Agreement, the Company agrees to FULLY WAIVE AND RELEASE
ALL CLAIMS.
     This Agreement may be used to completely bar any action or suit before any
court, arbitral, or administrative body with respect to any claim under federal,
state, local or other law relating to this Agreement or to Executive’s
employment and/or termination of employment with Company or its subsidiaries,
affiliates, related entities, predecessors, parents or divisions.

             
/s/ Hamid R. Shokrgozar
  Date:        
 
     
 
   
Hamid R. Shokrgozar
           
 
           
WHITE ELECTRONIC DESIGNS CORPORATION
           
 
           
/s/ Edward A. White
  Date:        
 
     
 
   
Edward A. White
           

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