Business Context and Reporting Period
This Form 8-K Current Report was filed by Avnet, Inc. on December 19, 2008. The filing discloses the execution of amended and restated employment and change of control agreements with the Company's Chief Executive Officer, Roy Vallee, and other Named Executive Officers (NEOs). The primary purpose of these amendments is to ensure compliance with Section 409A of the Internal Revenue Code of 1986.
Key Financial Metrics
This filing does not contain financial performance data such as revenue, profit, cash flow, margins, debt, or liquidity metrics. The document focuses exclusively on executive compensation arrangements.
Specific compensation figures disclosed include:
- CEO Base Salary: Roy Vallee's annual base compensation is set at $1,050,000 for fiscal 2009.
- Disability Benefit: In the event of disability, Mr. Vallee is entitled to an annual benefit of $300,000.
- Change of Control Severance (CEO): Upon a qualifying termination within 24 months of a change in control, Mr. Vallee is eligible for accrued salary, pro-rata incentives, and a lump sum equal to 2.99 times the sum of his current annual base salary and the average incentive compensation of the highest two of the last five fiscal years.
Material Changes Versus Prior Period
The filing details the replacement of prior employment and change of control agreements dated June 29, 2002, with new agreements effective as of June 29, 2008. Key changes include:
- Restructuring of compensation terms to comply with Section 409A tax regulations.
- Establishment of a one-year initial term for the CEO agreement with automatic annual renewals.
- Definition of specific severance triggers, including "constructive termination" (e.g., material diminution of responsibilities or reduction in compensation).
- Acceleration of unvested stock options and delivery of equity awards upon a change in control.
Guidance, Outlook, and Risks
Management Commentary: The Compensation Committee is mandated to review Mr. Vallee's total compensation arrangements annually and make recommendations to the Board for approval. Cash incentive compensation for the CEO is tied to performance goals set by the Board.
Risks and Contingencies: The agreements outline significant financial contingencies triggered by a "Change of Control," defined as the acquisition of 50% or more of voting power, a majority change in the Board of Directors, or shareholder approval of liquidation or asset sales. The filing notes that the description of agreements is qualified by reference to attached exhibits (10.1, 10.2, and 10.3).
Investor Verification Checklist
- Verify the specific terms of the "Change of Control" definition in Exhibit 10.3 to understand the threshold for triggering severance.
- Review the full text of Exhibit 10.1 to confirm the exact calculation methodology for the 2.99x severance multiplier.
- Confirm the status of unvested stock options and equity awards for all NEOs to assess potential dilution or payout acceleration.
- Check subsequent filings to determine if the Compensation Committee has adjusted the CEO's base salary or incentive targets for fiscal years following 2009.