<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
WYLE ELECTRONICS
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
12,532,669 shares at March 18, 1996
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
N/A
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
-------------------------------------------------------------------------
(5) Total fee paid:
$125
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
[LOGO OF WYLE]
15370 BARRANCA PARKWAY
P.O. BOX 19675
IRVINE, CALIFORNIA 92713-9675
---------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 1996
---------------
The Annual Meeting of Shareholders of Wyle Electronics (the "Company") will
be held on Tuesday, May 14, 1996, at 2:00 p.m., local time, at the Company's
Value-Added Distribution Center, located at 1955 East Sky Harbor Circle North,
Phoenix, Arizona 85034. Please refer to the map on the outside back cover of
the accompanying Proxy Statement for directions to the Annual Meeting
location.
The meeting will consider the following business, which is described in the
accompanying Proxy Statement:
1. To elect three directors to the Board of Directors for a term of three
years. The nominees for election to the Board of Directors are named in
the attached Proxy Statement.
2. To approve amendments to the Company's 1995 Stock Incentive Plan.
3. To ratify the selection of Arthur Andersen LLP as independent public
accountants to audit the financial statements of the Company for the
year ending December 31, 1996.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on March 18, 1996, as
the record date for determining those shareholders who will be entitled to
notice of and to vote at the meeting or at any adjournment thereof.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. YOUR VOTE IS IMPORTANT. PLEASE EXECUTE THE ENCLOSED PROXY AND RETURN
IT IN THE ENCLOSED ENVELOPE REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE
MEETING. YOUR PROMPTNESS IN RETURNING THE PROXY WILL ASSIST IN THE EXPEDITIOUS
AND ORDERLY PROCESSING OF THE PROXIES. IF YOU RETURN YOUR PROXY, YOU MAY
NEVERTHELESS ATTEND THE ANNUAL MEETING AND VOTE YOUR SHARES IN PERSON IF YOU
WISH. YOU MAY ALSO REVOKE YOUR PROXY PRIOR TO THE ANNUAL MEETING BY DELIVERING
A WRITTEN NOTICE OF REVOCATION TO THE SECRETARY OF THE COMPANY AT 15370
BARRANCA PARKWAY, P.O. BOX 19675, IRVINE, CALIFORNIA 92713-9675 OR BY
EXECUTING A SUBSEQUENT PROXY AND DELIVERING THE SUBSEQUENT PROXY TO THE
SECRETARY OF THE COMPANY AT THE ANNUAL MEETING.
By Order of the Board of Directors
[SIGNATURE LOGO]
Stephen D. Natcher
Secretary
Irvine, California
March 29, 1996
<PAGE>
[LOGO OF WYLE]
15370 BARRANCA PARKWAY
P.O. BOX 19675
IRVINE, CALIFORNIA 92713-9675
---------------
PROXY STATEMENT
MARCH 29, 1996
---------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Wyle Electronics (the "Company") of proxies for use at
the Annual Meeting of Shareholders of the Company to be held on Tuesday, May
14, 1996, at 2:00 p.m., local time, at the Company's Value-Added Distribution
Center, located at 1955 East Sky Harbor Circle North, Phoenix, Arizona 85034
(the "Annual Meeting").
If the accompanying proxy is signed properly, dated and returned, the shares
represented thereby will be voted in accordance with the specifications
therein. Your proxy may be revoked at any time before its exercise by filing
with the Secretary of the Company, at 15370 Barranca Parkway, P.O. Box 19675,
Irvine, California 92713-9675, a written notice of revocation or an executed
proxy bearing a later date. The execution of the enclosed proxy will not
affect your right to vote in person should you find it convenient to attend
the Annual Meeting and desire to vote in person.
The expense of soliciting proxies will be borne by the Company. It is
contemplated that proxies of registered shareholders will be solicited
principally through the use of the mails, but directors, officers and regular
employees of the Company may solicit proxies personally or by other
appropriate means. The Company has engaged Corporate Investor Communications,
Inc. to deliver the Company's proxy materials to brokers, nominees,
fiduciaries and other custodians for distribution to their beneficial owners,
and to solicit proxies from brokers, nominees, fiduciaries and other
custodians. The cost of this service is approximately $5,000 plus out-of-
pocket expenses. Although there is no formal agreement to do so, the Company
will also reimburse banks, brokerage houses and other custodians, nominees and
fiduciaries for their reasonable expenses in forwarding proxy materials to
their principals.
This Proxy Statement and the accompanying proxy were first mailed to
shareholders on or about March 29, 1996.
VOTING SECURITIES
On March 18, 1996, the record date for the determination of shareholders
entitled to notice of and to vote at the Annual Meeting, 12,532,669 shares of
the Company's Common Stock were outstanding and entitled to vote.
Votes cast by proxy or in person at the Annual Meeting will be counted by an
appointed inspector of election. The inspector of election will treat shares
represented by proxies that reflect abstentions as shares that are present and
entitled to vote, for purposes of determining the presence of a quorum and for
<PAGE>
purposes of determining the outcome of any matter submitted to the
shareholders for a vote. Abstentions, however, do not constitute a vote "for"
or "against" any matter and thus will be disregarded in the calculation of a
plurality or of "votes cast."
The inspector of election will treat shares referred to as "broker non-
votes" (i.e., shares held by brokers or nominees as to which instructions have
not been received from the beneficial owners or persons entitled to vote or
that the broker or nominee does not have discretionary power to vote on a
particular matter) as shares that are present and entitled to vote for
purposes of determining the presence of a quorum. However, for purposes of
determining the outcome of any matter as to which the broker has physically
indicated on the proxy that it does not have discretionary authority to vote,
those shares will be treated as not present and not entitled to vote with
respect to that matter even though those shares are considered entitled to
vote for quorum purposes and may be entitled to vote on other matters.
In the election of directors, shares present but not voting will be
disregarded (except for quorum purposes) and the candidates for election
receiving the highest number of affirmative votes of the shares entitled to be
voted for them up to the number of directors to be elected by those shares
will be elected and votes cast against a candidate or votes withheld will have
no legal effect. Any unmarked proxies, including those submitted by brokers or
nominees, will be voted as indicated in the accompanying proxy card.
Each shareholder of record is entitled to one vote for each share of Common
Stock held on all matters to come before the Annual Meeting.
2
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL 1)
At the 1995 Annual Meeting of Shareholders, the shareholders approved a
proposal to create a classified Board of Directors, pursuant to which three
directors were elected for a one-year term (Class I directors), three
directors were elected for a two-year term (Class II directors) and three
directors were elected for a three-year term (Class III directors), in each
case until his or her successor is duly elected and qualified. Thereafter,
each class of directors is subject to election every third year and will serve
for a three-year term for so long as the Board remains classified into three
classes, or would be subject to election every second year and would serve a
two-year term in the event the Board were classified into two classes as a
result of a decrease in the number of directors to less than nine.
NOMINEES AS CLASS I DIRECTORS
Three persons have been nominated for election at the Annual Meeting to
serve as Class I directors for a three-year term. All three nominees named are
now serving as directors and have been previously elected by the shareholders.
Unless otherwise specified on the proxy, each proxy will be voted FOR the
Board's nominees. If any nominee becomes unavailable for election for any
reason which is not now foreseen, the proxies may be voted for the election of
some other qualified person. The following table sets forth certain
information with respect to each Class I director nominee:
JACK S. KILBY, 72, has been an independent consultant in
electronic engineering for more than 17 years. From 1958 to
1970, Mr. Kilby was employed by Texas Instruments
Incorporated, where he invented the monolithic integrated
circuit, which, along with his other accomplishments, led to
[PHOTO] his induction into the National Inventors Hall of Fame. Mr.
Kilby is also currently Chairman of the Department of Defense
Advisory Group on Electron Devices. He is a member of the
Audit Committee. Mr. Kilby was first elected a director in
1988 and is a Class I director. He is also a director of
Benchmarq and Tech Electro Industries.
KIRK WEST, 59, is President of the California Chamber of
Commerce and has served in that capacity since 1986. Prior to
1986, he served as Secretary of Business, Transportation and
[PHOTO] Housing of the State of California. He is Chairman of the
Nominating Committee. Mr. West was first elected a director in
1995 and is a Class I director. He is also a director of Blue
Shield of California.
FRANK S. WYLE, 76, is Founder Chairman and has been a
consultant to the Company for more than five years. Formerly,
[PHOTO] he served as Chairman of the Board. He is a member of the
Executive and Executive Compensation Committees. Mr. Wyle was
first elected a director in 1953 and is a Class I director.
3
<PAGE>
CONTINUING DIRECTORS
The remaining six directors were elected at the 1995 Annual Meeting of
Shareholders. The three directors identified as Class II directors will
continue to serve until the 1997 Annual Meeting of Shareholders and the three
directors identified as Class III directors will continue to serve until the
1998 Annual Meeting of Shareholders. At their respective Annual Meetings of
Shareholders, each director class is eligible to be elected to serve a three-
year term.
Class II Directors
MICHAEL R. CORBOY, 65, is President and Chief Executive
Officer of Corboy Investment Company and has served in that
capacity since 1992. He served as Chairman of the Board and
Chief Executive Officer of Amtech Corporation from 1987 to
[PHOTO] 1992. He is Chairman of the Audit Committee and a member of
the Executive Compensation Committee. Mr. Corboy was first
elected a director in 1995 and is a Class II director. He is
also a director of Aquinas Funds, Family Hospice, Inc.,
NetSpeed, Inc. and Zygo Corporation.
EDWARD SANDERS, 73, is a principal in the law firm of Sanders,
Barnet, Goldman, Simons & Mosk, A Professional Corporation. He
is Chairman of the Executive Compensation Committee and a
[PHOTO] member of the Audit Committee. Mr. Sanders was first elected a
director in 1980 and is a Class II director. He is also a
director of City National Corporation and City National Bank.
STANLEY A. WAINER, 69, has served as Chairman of the Executive
Committee since June 1991 and as a consultant to the Company
from August 1991 to July 1994. From 1988 to 1991, he was
Chairman of the Board and from 1985 to 1988 served as Chairman
of the Board and Chief Executive Officer. He is a member of
[PHOTO] the Audit, Executive, Executive Compensation and Nominating
Committees. Mr. Wainer was first elected a director in 1966
and is a Class II director. He is also a director of Liberty
Mutual Insurance Company; Liberty Mutual Fire Insurance
Company; and Liberty Financial Companies, Inc.
4
<PAGE>
Class III Directors
CHARLES M. CLOUGH, 67, is Chairman of the Board of the
Company. He retired as an employee from the Company effective
March 31, 1995, and continues to serve as Chairman of the
Board. Mr. Clough joined the Company in 1982 as Executive Vice
President of the Company and President of its Electronics
Marketing Group, became President and Chief Operating Officer
of the Company in 1985, was elected President and Chief
[PHOTO] Executive Officer of the Company in June 1988, became
Chairman, President and Chief Executive Officer of the Company
in June 1991, was elected Chairman and Chief Executive Officer
in June 1992 and assumed his current position effective April
1, 1995. He is a member of the Executive and Nominating
Committees. Mr. Clough was first elected a director in 1984
and is a Class III director.
THEODORE M. FREEDMAN, 65, served as a consultant to the
Company from his retirement in January 1992 until December
1995, and served for more than two years prior to his
[PHOTO] retirement as Executive Vice President-Finance and Treasurer,
Chief Financial Officer of the Company. He is a member of the
Audit Committee. Mr. Freedman was first elected a director in
1982 and is a Class III director.
RALPH L. OZORKIEWICZ, 49, is President and Chief Executive
Officer. He joined the Company in March 1985, was named
Executive Vice President of the Electronics Marketing Group in
April 1985, was elected President of the Group and Vice
[PHOTO] President of the Company in September 1985, became Executive
Vice President of the Company in June 1988, was elected
President in June 1992 and assumed his present position
effective March 31, 1995. He is a member of the Executive and
Nominating Committees. Mr. Ozorkiewicz was first elected a
director in 1992 and is a Class III director.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors has established an Executive Committee and three
functional standing committees with responsibilities in specific areas of
Board activity. The Board met ten times during the year ended December 31,
1995; all nominees attended at least 75% of the combined meetings of the Board
and their assigned Board committees.
Audit Committee
The Audit Committee is composed of five non-employee directors. Its purpose
is to review audit and financial reporting matters with representatives of the
Company's financial management and its independent certified public
accountants. The Committee also selects and recommends to the Board of
Directors the independent certified public accountants to audit the Company's
financial statements. The Audit Committee also reviews and monitors the
Company's financial reports and accounting practices to ensure that they are
within acceptable limits of sound practice. To assure complete independence,
the certified public accountants have full and free access to meet with the
Audit Committee, with or without
5
<PAGE>
management representatives present, to discuss the results of their
examinations, the adequacy of internal accounting controls and the quality of
financial management and reporting. The Audit Committee met twice during the
year ended December 31, 1995.
Executive Committee
The Executive Committee is composed of one employee director and three non-
employee directors. This committee has broad authority to carry out the
functions of the Board in the periods between meetings of the Board of
Directors. The Executive Committee did not meet during the year ended December
31, 1995.
Executive Compensation Committee
The Executive Compensation Committee is composed of four non-employee
directors. The Executive Compensation Committee recommends to the Board the
establishment and modification of executive compensation plans and programs.
It considers and recommends to the Board remuneration arrangements for senior
management earning more than $225,000 a year, as well as the compensation for
the executive officers of the Company. The Executive Compensation Committee
also grants awards and administers the various stock option and stock
incentive plans of the Company, and determines the compensation for non-
employee directors. The Executive Compensation Committee met six times during
the year ended December 31, 1995.
Nominating Committee
The Nominating Committee is composed of one employee director and three non-
employee directors. Its purpose is to consider and recommend to the Board its
proposed slate of directors for submission to the shareholders at the
Company's Annual Meeting of Shareholders. The Nominating Committee will
consider shareholder nominations for the 1997 Annual Meeting of Shareholders,
which must be submitted in writing to the Company not earlier than February
13, 1997 and not later than March 14, 1997. The Nominating Committee met once
during the year ended December 31, 1995.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE THREE NOMINEES LISTED
ABOVE. PROXIES RECEIVED WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY OTHERWISE
IN THE PROXY.
6
<PAGE>
SECURITY OWNERSHIP
The following table sets forth certain information with respect to shares of
the Company's outstanding Common Stock which are held by: (i) each director
and executive officer of the Company; (ii) all directors and executive
officers of the Company as a group; and (iii) the only persons known to the
Company to be the beneficial owners of more than five percent of such Common
Stock:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OWNERSHIP(1) OF CLASS
---- ------------ --------
<S> <C> <C>
By Directors:
Charles M. Clough 54,438(2)(3) *
Michael R. Corboy 3,667(5) *
Theodore M. Freedman 4,098 *
Jack S. Kilby 9,001(5) *
Ralph L. Ozorkiewicz 72,636(2)(4) *
Edward Sanders 4,912(5) *
Stanley A. Wainer 5,001(5) *
Kirk West 2,667(5) *
Frank S. Wyle 240,752(5)(6) 1.92%
By Executive Officers: (3)
Joseph A. Adamczyk 52,428(4) *
R. Van Ness Holland, Jr. 74,690(4) *
James N. Smith 33,685(4) *
By All Directors and Executive Officers 590,426(3)(4)(5)(6)(9) 4.71%
as a Group (12 persons)
By Five Percent Holders:
Nicholas-Applegate Capital Management 793,583(7) 6.41%
600 West Broadway
San Diego, California 92101
AIM Management Group, Inc. 723,000(8) 5.80%
11 Greenway Plaza
Houston, Texas 77046
</TABLE>
- --------
* Represents holdings of less than one percent.
(1) Unless otherwise indicated, all shares are owned beneficially by the
specified individual with sole voting and investment power. Shareholdings
of directors and executive officers are shown as of March 18, 1996.
(2) Until his retirement effective March 31, 1995, Mr. Clough was also an
executive officer. Mr. Ozorkiewicz is also an executive officer.
(3) Mr. Clough, a current director and Chief Executive Officer until his
retirement effective March 31, 1995, holds nonqualified stock options
granted under a Company stock incentive plan exercisable within 60 days to
purchase an aggregate of 30,000 shares of the Company's Common Stock.
These shares are shown as beneficially owned and considered to be
outstanding for calculating the percentage of ownership for Mr. Clough and
directors and executive officers as a group.
(4) Messrs. Ozorkiewicz, Adamczyk, Holland and Smith as executive officers
hold stock options granted under the Company's stock option and stock
incentive plans exercisable within 60 days of March 18, 1996 to purchase
an aggregate of 37,775; 31,952; 54,001; and 22,701 shares of the Company's
Common Stock, respectively. Such shares are shown as beneficially owned by
each person named above. These shares have also been considered to be
outstanding for purposes of calculating the percentage of ownership of
each such person and directors and executive officers as a group.
(5) Messrs. Corboy, Kilby, Sanders, Wainer, West and Wyle hold nonqualified
options under the Eligible Director's Stock Option Plan exercisable within
60 days of March 18, 1996 to purchase respectively 1,667, 5,001, 3,334,
5,001, 667 and 5,001 shares of the Company's Common Stock. Such shares are
shown as beneficially owned by each person named above. These shares have
also been considered to be outstanding for purposes of calculating the
percentage of ownership of each such person and directors and executive
officers as a group.
7
<PAGE>
(6) Mr. Frank S. Wyle owns 309 shares outright with sole voting and investment
power. As to 229,934 shares, Mr. Wyle is the grantor and trustee of the
Frank and Edith Wyle 1980 Revocable Trust which holds such shares. The
trust can be revoked at any time by Mr. Wyle. The amount shown also
includes 5,148 shares owned by his wife, Mrs. Edith R. Wyle.
(7) Nicholas-Applegate Capital Management, a California limited partnership
and an investment advisor registered under Section 203 of the Investment
Advisers Act of 1940, filed a Schedule 13G under the Securities Exchange
Act of 1934 (the "'34 Act"), reporting the beneficial ownership of these
shares as of December 31, 1995, with sole power to vote 584,627 shares and
sole power to dispose of 793,583 shares. The total reported reflects the
latest information available to the Company as to share ownership on
behalf of this shareholder.
(8) AIM Management Group, Inc., a parent holding company within the meaning of
the '34 Act, filed a Schedule 13G under the '34 Act reporting the
beneficial ownership, including sole voting and disposition power of all
such shares, as of December 31, 1995, by its subsidiaries, AIM Advisors,
Inc. and AIM Capital Management, Inc., investment advisors registered
under Section 203 of the Investment Advisers Act of 1940. The total
reported reflects the latest information available to the Company as to
share ownership on behalf of this shareholder.
(9) Certain officers of the Company are members of the committee which
administers the Company's pension plan (see below for a description of the
plan) and are trustees of a trust which owns for the benefit of the plan
participants 29,611 shares of the Company's Common Stock, and in such
capacity those officers share voting and investment power over such
shares. These shares have not been included in calculating the amount or
percentage of beneficial ownership of each individual director/executive
officer; however, these shares have been included in the amount and
percentage of beneficial ownership of all directors and executive officers
as a group.
DIRECTOR COMPENSATION
The Executive Compensation Committee is charged with the determination of
compensation for non-employee directors.
Each director who is not an employee of the Company receives compensation
for services as a director at an annual rate of $27,500. Each non-employee
director is also paid $1,000 for each committee of which he is a member,
$2,500 for each committee of which he is the chairman, and a per meeting fee
of $750 for each special board and committee meeting attended.
The Company provides a Deferred Compensation Plan for its non-employee
directors. The plan provides that the directors may elect, prior to December
31st of each year, to defer all or a part of their compensation for the
following year, which deferral will continue until the election is revoked.
The compensation deferred accrues interest at the Bank of America prime rate.
The compensation deferred and any accrued interest will be paid to each
participant in 120 equal monthly installments commencing on the 15th day of
the month following the month the person ceases to be a director, absent a
prior election to receive benefits in another manner. The plan also provides
for various payment terms to beneficiaries in the event of death. The Company
has entered into agreements to secure funding of these benefits under certain
circumstances.
The Company provides an Outside Directors Retirement Plan for its non-
employee directors. Participation is automatic, and benefits become payable
upon a director's serving at least five consecutive years as an outside
director. The plan provides for benefit payments after a director's retirement
in an amount representing 100% of the annual director retainer in effect at
the time of his or her retirement for the number of years equal to the
director's service as an outside director, with a maximum benefit of ten
years. Payments are made only during a director's lifetime, with no survivor
benefits being paid after death. The plan provides for the acceleration of
benefits upon the occurrence of certain involuntary changes of control of the
Company.
8
<PAGE>
The Company established with shareholder approval the 1993 Eligible
Directors' Stock Option Plan covering 125,000 shares of the Company's Common
Stock, pursuant to which eligible non-employee directors may each receive
nonqualified stock options covering a maximum of 10,000 shares of the
Company's Common Stock in 5,000 share increments effective October 1, 1993 and
every October 1st thereafter at an exercise price equal to the fair market
value on the date of award.
On July 31, 1984, Mr. Frank S. Wyle retired from full-time employment with
the Company and currently serves under contract as a consultant to the
Company. For his consulting services, Mr. Wyle is entitled to compensation of
$250,000 for each twelve-month period, which amount is adjusted upward
annually for any increase in the consumer price index after December 31, 1980
(an adjusted base of $421,750 for the year ended December 31, 1995), less the
sum of any amounts received pursuant to social security and amounts received
under the Company's pension plan. During the year ended December 31, 1995, the
amount paid by the Company under this agreement was $341,865. The agreement
also provides that in the event of certain involuntary changes of control of
the Company, Mr. Wyle may be entitled to an acceleration of a portion of the
payments due under his contract. The agreement further provides, among other
things, for medical and life insurance coverages, disability benefits, office
space for his use and secretarial services. Please see also "Certain
Transactions" herein.
Mr. Freedman retired from full-time employment with the Company on January
31, 1992, and served as a consultant to the Company until December 13, 1995
and he received no further payments after that date. For his consulting
services, Mr. Freedman was paid at an annual rate of $175,000. The agreement
with Mr. Freedman provided, among other things, for the continuation of group
life and other insurance coverages and part-time use of office space and
secretarial services until December 31, 1995.
Effective January 1, 1995, Mr. Clough and the Company entered into an
agreement (the "Agreement") which superceded his employment agreement dated
February 1, 1989, as amended. Pursuant to the Agreement, Mr. Clough served as
Chairman of the Board and Chief Executive Officer until he retired as an
employee effective March 31, 1995, at which time he continued to serve as
Chairman of the Board and will serve as Chairman until the later of the 1998
Annual Meeting of Shareholders or June 30, 1998. From January 1, 1995 through
March 31, 1995, Mr. Clough received a salary of $75,000 per month and,
effective April 1, 1995, he receives an annual fee of $250,000 payable monthly
to be inclusive of all director and committee fees. The Agreement provides
further that he is entitled to outside director benefits as may be in effect
from time to time, office space, secretarial services and the transfer of
title to his Company-provided car at the time he retired.
9
<PAGE>
EXECUTIVE OFFICERS' COMPENSATION AND OTHER INFORMATION
COMPENSATION AND RELATED MATTERS
The following table sets forth for the fiscal years ended December 31, 1995,
December 31, 1994 and December 31, 1993, a summary of all annual and long term
compensation for the Chief Executive Officers and the three executive officers
(other than the Chief Executive Officers) who were serving as executive
officers at the end of the fiscal year ended December 31, 1995. In November
1993, the Company changed its fiscal year end from January 31 to December 31;
accordingly, fiscal year December 31, 1993 is an eleven-month fiscal year.
SUMMARY COMPENSATION TABLE (A)
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------- ------------
(A) RESTRICTED (G) (I)
NAME AND (B) (C) (D) STOCK OPTIONS/ ALL OTHER
PRINCIPAL FISCAL SALARY BONUS(B) AWARDS SARS(D) COMPENSATION(E)
POSITION YEAR ($) ($) ($)(B)(C) (#) ($)
--------- -------- -------- -------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Charles M. Clough 12/31/95 $225,000 $ -0- $ -0- -0- $ -0-
Chairman and Chief 12/31/94 435,000 467,712 -0- -0- -0-
Executive Officer 12/31/93 398,750 293,480 -0- 50,000 -0-
to March 31, 1995;
Chairman of the Board
thereafter
Ralph L. Ozorkiewicz 12/31/95 400,000 280,000 536,355 30,000 43,549
President and Chief 12/31/94 300,000 210,000 72,226 45,000 43,549
Operating Officer 12/31/93 275,000 164,450 -0- 20,000 42,498
to March 31, 1995;
President and Chief
Executive Officer
thereafter
Joseph A. Adamczyk 12/31/95 260,000 169,000 319,116 20,000 23,453
Executive Vice Presi- 12/31/94 240,000 156,000 53,658 15,000 23,453
dent and Chief 12/31/93 201,667 122,815 -0- 15,000 23,153
Operating Officer
R. Van Ness Holland, Jr. 12/31/95 250,000 150,000 178,571 8,500 12,601
Executive Vice 12/31/94 230,000 149,500 69,164 10,000 139,961
President-Finance and 12/31/93 210,833 116,380 -0- 15,000 12,251
Treasurer, Chief
Financial Officer
James N. Smith 12/31/95 225,000 112,500 235,207 12,000 17,340
President of Liberty 12/31/94 180,000 102,850 -0- 10,000 14,281
Contract Services 12/31/93 137,500 89,003 -0- 15,000 43,372
</TABLE>
- --------
(A) Columns (e) "Other Annual Compensation" and (h) "LTIP Payouts" are omitted
from the table as there was no such compensation awarded to, earned by, or
paid to any of the named executive officers in any fiscal year covered by
the table.
(B) The Company has an executive incentive compensation program for executive
officers based on the Company's financial performance as well as the
personal performance of the individual. Total incentive targets for each
person are set at the beginning of each year. For Messrs. Ozorkiewicz,
Adamczyk and Holland, in 1995 and 1994, and for Mr. Smith in 1995, actual
incentive amounts earned in excess of their respective total incentive
targets were paid in shares of restricted stock in
10
<PAGE>
lieu of cash. These shares vest in equal annual installments over three
years from date of award. Please see footnote (C) for restricted stock
award detail. For the year ended December 31, 1993, salary and cash bonus
awards were adjusted to reflect the shorter eleven-month period. Please
also see "Report of the Executive Compensation Committee" herein.
(C) Dollar amounts shown equal the number of shares of restricted stock
multiplied by the stock price on the award date or at year-end as shown
below and do not take into account diminution of value attributable to
restrictions applicable to the shares. Awards for 1995 and 1994 represent
earned incentive compensation, including that for personal performance, in
excess of the individual's total incentive target and was paid in shares
of restricted stock in lieu of cash.
1995 RESTRICTED STOCK AWARDS
<TABLE>
<CAPTION>
AWARDED ON
AWARDED ON 11/27/95
1/17/96 @ $28.75 @ $37.875
---------------- -----------------
NAME $ VALUE # SHARES $ VALUE # SHARES
---- ------- -------- -------- --------
<S> <C> <C> <C> <C>
R. L. Ozorkiewicz...................... $81,363 2,830 $454,992 12,013
J. A. Adamczyk......................... 49,105 1,708 270,011 7,129
R. V. Holland, Jr. .................... 43,585 1,516 134,986 3,564
J. N. Smith............................ 32,689 1,137 202,518 5,347
1994 RESTRICTED STOCK AWARDS
<CAPTION>
AWARDED ON
1/26/95
@ $22.00
----------------
$ VALUE # SHARES
------- --------
<S> <C> <C>
R. L. Ozorkiewicz...................... $72,226 3,283
J. A. Adamczyk......................... 53,658 2,439
R. V. Holland, Jr. .................... 69,164 2,337
J. N. Smith............................ -0- -0-
</TABLE>
The number and dollar value of shares of restricted stock held on December
31, 1995, based upon the closing price of the Common Stock of $35.125 at
year-end were: Mr. Clough--0 shares; Mr. Ozorkiewicz--15,296 shares
($537,272); Mr. Adamczyk--9,568 shares ($336,076); Mr. Holland--6,901
shares ($242,398); and Mr. Smith--5,347 shares ($187,813). Year-end data
exclude shares awarded on January 17, 1996 at $28.75 per share reflected in
the 1995 Restricted Stock Awards table above. Recipients of restricted
stock awards are entitled to dividend and voting rights.
(D) The amounts reflected in this column represent grants of stock options
only.
(E) The amounts shown in this column for the last three fiscal years
represent, for Messrs. Ozorkiewicz and Adamczyk, Company paid split-dollar
insurance premiums; represent for Mr. Holland in 1995 and 1993 split-
dollar insurance premiums and for 1994 split-dollar insurance premiums of
$12,301 and Company paid relocation expenses of $127,360 (consisting of
$69,630 in reimbursed expenses and $57,730 in related income taxes
payable); and represent for Mr. Smith in 1995 split-dollar insurance
premiums and in 1994 and 1993 Company paid relocation expenses of $13,981
(consisting of $10,860 in reimbursed expenses and $3,121 in related income
taxes payable) and $43,372 (consisting of $32,288 in reimbursed expenses
and $11,084 in related income taxes payable), respectively. See "Insurance
Benefits" herein. The amounts for 1995 and 1994 also include Company
matching contributions of $300 under the Capital Accumulation Plan for
each person named in the table.
11
<PAGE>
STOCK OPTIONS
The following table reflects information as to stock options granted for
those named individuals above in the Summary Compensation Table, during the
year ended December 31, 1995, and other information relating thereto:
OPTION/SAR GRANTS TABLE
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
- ------------------------------------------------------------------- ----------
(A) (B) (C) (D) (E) (F)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE GRANT DATE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE VALUE ($)
- -------------------- ------------ ------------ -------- ---------- ----------
(A),(B) (C) (D)
<S> <C> <C> <C> <C> <C>
Charles M. Clough -0- -0-% $ -0- -- $ -0-
Ralph L. Ozorkiewicz 30,000 31% 37.88 11/27/05 418,500
Joseph A. Adamczyk 20,000 21% 37.88 11/27/05 279,000
R. Van Ness Holland,
Jr. 8,500 9% 37.88 11/27/05 118,575
James N. Smith 12,000 12% 37.88 11/27/05 167,400
</TABLE>
- --------
(A) Options were granted in the year ended December 31, 1995 under the
Company's 1995 Stock Incentive Plan (the "1995 Plan"), and become
exercisable in increments of 20% per year beginning one year after the
date of grant until fully vested on the fifth anniversary date. No stock
appreciation rights ("SARs") were granted. Table excludes nonqualified
option grant of 5,000 shares to Mr. Clough under the 1993 Eligible
Directors Stock Option Plan
(B) The options were granted for a term of 10 years, subject to earlier
termination in certain events related to termination of employment, in the
Committee's discretion, and acceleration upon the occurrence of certain
changes in control of the Company.
(C) The exercise price and tax withholding obligations related to exercise may
be paid by delivery of already owned shares or by offset of the underlying
shares, subject to certain conditions.
(D) The estimated grant date present value reflected in the above table is
determined using the modified Black-Scholes model. The material
assumptions and adjustments incorporated in the Black-Scholes model in
estimating the value of the options reflected in the above table include
the following: an exercise price on the option of $37.88, equal to the
fair market value of the underlying stock on the date of grant; an option
term of ten years; an interest rate of 5.93% that represents the interest
rate on a U.S. Treasury security with a maturity date corresponding to
that of the option term; volatility of 32.59% calculated using daily stock
prices for the one-year period prior to the grant date; dividends at the
rate of $0.28 per share representing the annualized dividends paid with
respect to a share of Common Stock at the date of grant; and a reduction
of approximately 11.38% to reflect the probability of forfeiture due to
termination prior to vesting, and 16.68% to reflect the probability of a
shortened option term due to termination of employment prior to the option
expiration date. The Company does not advocate or agree necessarily that
the Black-Scholes model can determine properly the value of an option. The
ultimate values of the options will depend on the future market price of
the Company's Common Stock, which cannot be forecast with reasonable
accuracy. The actual value, if any, an optionee will realize upon exercise
of an option will depend on the excess of the market value of the
Company's Common Stock over the exercise price on the date the option is
exercised.
12
<PAGE>
The following table reflects stock option information for those individuals
named in the tables above relating to option exercises during the year ended
December 31, 1995, and number and value of exercisable options at year end:
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUE
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END AT FY-END (B)
(A)(#) ($)
------------- --------------------
SHARES ACQUIRED VALUE
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- -------- ------------- --------------------
<S> <C> <C> <C> <C>
Charles M. Clough 24,000 $489,238 30,000/0 $ 543,750/0
Ralph L.
Ozorkiewicz 12,226 127,626 31,775/95,999 554,921/1,119,733
Joseph A. Adamczyk 8,000 235,500 27,952/53,798 551,229/574,990
R. Van Ness
Holland, Jr. 4,250 58,181 50,001/37,499 1,103,767/486,608
James N. Smith -0- -0- 25,801/34,199 557,693/390,306
</TABLE>
- --------
(A) Table excludes nonqualified option grant of 5,000 shares to Mr. Clough
under the 1993 Eligible Directors' Stock Option Plan.
(B) Calculated by subtracting actual option exercise price from market price
at exercise date or at year-end ($35.125 per share), as the case may be,
and multiplying the difference by number of shares in each category.
INSURANCE BENEFITS
The Company provides all executive officers with additional life insurance
benefits funded with "split dollar" insurance contracts pursuant to which the
covered persons contribute a portion of the premium. Each covered person
receives from the Company the amount necessary to fund his portion of the
premium. The policies are collaterally assigned to the Company as security for
the payments made by the Company. The Company will receive its total premium
contributions from the policy's cash value at the time of a participant's
retirement or from the proceeds payable in the event of death. Each
participant designates his own beneficiaries for the balance of the proceeds.
EMPLOYMENT AGREEMENTS
Mr. Clough and the Company entered into an agreement dated January 1, 1995
(the "Agreement"). Please see the material under the heading "Director
Compensation" above. Messrs. Ozorkiewicz, Adamczyk, Holland and Smith also
have employment agreements with the Company which expire on December 31, 1999,
and provide that as of January 1, 1995, their annual compensation will not be
less than $550,000, $335,000, $312,000 and $262,000, respectively. All
agreements (other than Mr. Clough) provide that the executive will be
considered in the Company's annual compensation review and incentive
compensation program. All agreements provide for termination for cause or in
case of death, illness or extended periods during which the individual cannot
perform his duties.
13
<PAGE>
The Agreement with Mr. Clough and the employment agreements with Messrs.
Ozorkiewicz, Adamczyk, Holland and Smith provide that each may be entitled to
compensation if he is discharged without "Just Cause" or resigns for "Good
Reason" prior to or following a "Change in Control", as those terms are
defined in the agreements. A "Change in Control" in these agreements and
elsewhere is deemed to have occurred if any "person" (as such term is used in
Sections 13(d) and 14(d) of the '34 Act), is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the '34 Act), directly or indirectly, of
securities of the Company representing 35% or more of the combined voting
power of the Company's then outstanding securities; or during any period of
two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority thereof, unless the election, or the nomination
for election by the Company's shareholders, of each new Board member was
approved by a vote of at least three-fourths of the Board members then still
in office who were Board members at the beginning of such period.
In the event of a discharge without "Just Cause" or a resignation for "Good
Reason", Mr. Clough and the executive officers are entitled to receive: (i)
all compensation benefits and bonuses due prior to the date of discharge or
resignation; and (ii) a lump sum payment equal to the present value of the
compensation which would be received by each through the term of the agreement
had the resignation or discharge not occurred. Payments which constitute
"parachute payments" as defined in Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code") shall be limited to one dollar less than the
amount which would cause payments to be subject to the excise tax imposed by
Section 4999 of the Code.
PENSION PLAN AND RELATED RETIREMENT BENEFITS
The Company maintains currently a non-contributory defined benefit pension
plan in which each regular employee not covered by a collective bargaining
agreement participates, commencing on the first day of the month next
following the date of hire. Benefits are fully vested at the completion of
five years of service. The normal retirement age is 65 or five years of
service, whichever is later, and the annual retirement benefit is based upon
the participant's average of the 5 highest years of compensation over the last
10 years of employment with the Company. Remuneration used in the computation
of net annual retirement benefits for executive officers is substantially the
same as that reported in the salary and bonus columns in the "Summary
Compensation Table," except that the total amount of compensation which may be
taken into account in computing benefits earned after January 1, 1994 is
limited to $150,000. The plan also provides for early retirement and includes
an automatic 50% joint and survivor benefit for married employees at no cost
to them for the preretirement survivor protection.
14
<PAGE>
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------------
FIVE YEAR AVERAGE
REMUNERATION 10 15 20 25 30
- ----------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000..................... $ 17,000 $ 25,000 $ 33,000 $ 42,000 $ 50,000
150,000..................... 25,000 38,000 50,000 63,000 75,000
200,000*.................... 33,000 50,000 67,000 83,000 100,000
250,000*.................... 42,000 63,000 83,000 104,000 125,000*
300,000*.................... 50,000 75,000 100,000 125,000* 150,000*
350,000*.................... 58,000 88,000 117,000 146,000* 175,000*
400,000*.................... 67,000 100,000 133,000* 167,000* 200,000*
450,000*.................... 75,000 113,000 150,000* 188,000* 225,000*
500,000*.................... 83,000 125,000* 167,000* 208,000* 250,000*
550,000*.................... 92,000 138,000* 183,000* 229,000* 275,000*
600,000*.................... 100,000 150,000* 200,000* 250,000* 300,000*
650,000*.................... 108,000 163,000* 217,000* 271,000* 325,000*
700,000*.................... 117,000 175,000* 233,000* 292,000* 350,000*
750,000*.................... 125,000* 188,000* 250,000* 313,000* 375,000*
800,000*.................... 133,000* 200,000* 267,000* 333,000* 400,000*
850,000*.................... 142,000* 213,000* 283,000* 354,000* 425,000*
900,000*.................... 150,000* 225,000* 300,000* 375,000* 450,000*
</TABLE>
- --------
* Defined benefit plan portion subject to maximums under the Code.
The table above sets forth the estimated annual benefits payable upon normal
retirement, which include benefits payable from the defined benefit plan and
the supplementary executive retirement plan to persons in specified
remuneration and years-of-benefit service classifications. The accumulated
full years of service of Messrs. Clough, Ozorkiewicz, Adamczyk, Holland and
Smith are 13, 10, 16, 16 and 8 years, respectively. The benefits presented in
the table above are currently subject to a deduction equal to 50% of social
security benefits pro-rated for less than 30 years of service at retirement.
Amounts presented in the table are straight life annuity benefits. As of
January 1, 1996, the maximum annual pension benefit permitted under the Code
is the greater of $120,000 or the accrued benefit as of January 31, 1983.
The Company also has adopted a Supplemental Executive Retirement Plan
("SERP"). Those employees (or beneficiaries) specified by the Employee
Benefits Committee for inclusion in the SERP are provided with benefits equal
to the retirement benefit which would be provided under the Company's pension
plan if certain limitations imposed under the Code were not applicable.
Messrs. Clough, Ozorkiewicz, Adamczyk, Holland and Smith are participants. The
SERP provides for acceleration of benefits upon the occurrence of certain
involuntary changes of control of the Company. The Company has also entered
into agreements to secure funding of these benefits under certain
circumstances.
The Company has entered into Supplemental Executive Retirement Agreements,
as amended, for the benefit of Messrs. Clough and Freedman. Mr. Clough is a
participant in two separate agreements, each of which provides for payments of
$50,000 a year for 15 years to him (or his beneficiaries), which payments
commenced December 1994. The agreement with Mr. Freedman provides for payments
of $50,000 a year for 15 years to him (or his beneficiaries), which payments
commenced January 1996. These agreements provide for acceleration of benefits
upon the occurrence of certain involuntary changes of control of the Company.
The Company has also entered into agreements to secure funding of these
benefits under certain circumstances.
The Company maintains currently a Capital Accumulation Plan ("CAP") for the
benefit of all regular employees who either were employed by the Company on
July 1, 1985, or have completed one year of service with the Company. The CAP
is designed as a tax-qualified retirement plan under Section
15
<PAGE>
401(k) of the Code. CAP participants, at their discretion, may contribute 1%
to 15% of their pay, subject to certain limitations, which contributions are
invested in one or more of four funds as directed by the participants.
Effective January 1, 1994, the Company provided a matching contribution which
cannot exceed $300 per year per participant.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The following report is designed to assist shareholders in understanding the
Executive Compensation Committee philosophy on executive compensation and how
this philosophy was applied to the compensation for the year ended December
31, 1995, of Mr. Clough, Chairman and Chief Executive Officer of the Company
(until March 31, 1995), Mr. Ozorkiewicz, President and Chief Executive Officer
(after March 31, 1995), and the executive officers of the Company, Messrs.
Adamczyk, Holland and Smith.
The charter of the Executive Compensation Committee (the "Committee") is to
determine base salary levels, establish and administer the Company's various
incentive plans, including the stock incentive and option plans and approve
other fringe benefits. In this connection, the Committee reviews annually
compensation levels and evaluates the performance of executive officers and
certain members of senior management. The Committee reviews with, and makes
detailed recommendations to, the Board of Directors concerning all aspects of
executive officer compensation, other than stock-based incentives which are
within the sole purview of the Committee.
The Committee has retained as its independent compensation consultant the
nationally recognized actuarial and compensation consulting firm of Towers
Perrin. During 1995, Towers Perrin met on several occasions with the Committee
to review the Company's compensation philosophy, plans and structure, and
conducted compensation surveys based on national and competitor data. Towers
Perrin prepared and distributed its report and met again with the Committee to
discuss its report and recommendations with respect to the executive
compensation program elements and appropriateness of compensation levels for
each element for each executive officer.
COMPENSATION PHILOSOPHY
The Company's overall compensation philosophy, which is endorsed by the
Committee, is to provide compensation that will attract and retain superior
executives to maximize shareholder value. Competitive base salaries are one
component consistent with the philosophy. The Committee also believes that a
substantial portion of total annual compensation should be "at risk" through
short-term incentives relating to measured financial performance and
individual achievement. The Committee believes that disclosure of specific
performance targets or criteria would place the Company at a competitive
disadvantage and may be misleading to shareholders. In addition, the Committee
believes that by utilizing the vehicle of stock ownership through the
Company's various stock incentive and option plans, alignment of the interests
of management with those of its shareholders will occur.
COMPENSATION PROGRAM ELEMENTS
The Company's executive compensation program consists of three elements:
. Base salary
. Short-term incentive compensation
. Long-term incentive compensation
16
<PAGE>
Base Salary
Each executive's base salary is reviewed annually. Salary increases are
determined by a number of factors including promotion, performance, inflation,
internal equity and increases in levels of responsibility. All salaries are
based on sustained individual performance toward the Company's goals and
objectives.
Short-Term Incentive Compensation
The Company's short-term incentive compensation program for the year ended
December 31, 1995 provided annual executive officer compensation opportunities
based on the following factors: (i) the Company's return on net assets
("RONA") and earnings per share ("EPS") performance measured against RONA and
EPS targets established prior to the beginning of the fiscal year by the
Committee and approved by the Board of Directors; and (ii) executive officer
personal performance during the year determined in the discretion of the
President and Chief Executive Officer and approved by the Committee and the
Board of Directors. In the case of the President and Chief Executive Officer,
such personal performance is determined in the discretion of the Committee and
approved by the Board of Directors. The short-term incentive compensation
opportunity for 1995 for the executive officers was weighted two-thirds for
financial performance achievement and one-third for discretionary personal
performance. For the year ended December 31, 1995, short-term incentive
compensation earned in excess of predetermined target levels for each
executive officer was paid in shares of restricted stock which vests over a
three-year period. Please see "Long-Term Incentive Compensation" below for a
description of the Committee's policy on restricted stock.
Long-Term Incentive Compensation
The Committee believes that awards of stock options promote the interest of
the Company by providing performance incentives to executive officers and key
employees who are responsible for the management, growth and financial success
of the Company. Options are priced at 100% of the market value on the date of
grant. Since stock options have no economic value to recipients until the
price of the Company's stock exceeds the grant price, and since the option
grants require that the executive serve for a period of time before all or a
portion of the option may be exercised, the Committee believes that executives
are motivated to manage their businesses in ways that over the long term will
benefit shareholders through an increased stock price.
As a general rule, the Committee considers the level of the optionee's job
responsibility and his or her potential impact on the Company's performance in
arriving at the number of shares to be granted under the stock option plans,
as well as the frequency and amount of prior option grants. Neither the
Company nor the Committee has established a target ownership level for equity
holding in the Company by executive officers and key employees.
Since adoption of the 1992 Stock Incentive Plan, the Committee has utilized
restricted stock principally to reward selectively key employees, other than
executive officers and senior management, for exceptional achievement and to
serve as a retention device. Commencing with the year ended December 31, 1994,
the Committee determined that short-term incentive compensation which exceeds
predetermined target levels would be paid in shares of restricted stock
vesting over a three-year period as replacement for cash compensation to
executive officers. These awards also serve as a retention device. The
Committee believes that the restricted stock awards also promote the interest
of the Company by providing performance incentives and motivating award
recipients to manage their business to benefit shareholders over the long term
through an increased stock price.
17
<PAGE>
FISCAL 1995 CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Clough's base salary of $75,000 per month through March 31, 1995
approximated his base salary and short-term incentive compensation for 1994.
During 1994, the Board of Directors, upon the recommendation of the Committee,
agreed to Mr. Clough's request to retire as Chief Executive Officer and as an
employee effective March 31, 1995, requested that Mr. Clough continue as
Chairman of the Board until the 1998 Meeting of Shareholders and authorized an
agreement dated January 1, 1995 memorializing these understandings. Please see
the material under the heading "Director Compensation" herein. Mr. Clough
received no long-term incentive compensation in the fiscal year ended December
31, 1995, due to his retirement effective March 31, 1995.
Mr. Ozorkiewicz' base salary of $400,000 in effect for 1995 was 33% greater
than in the two previous fiscal years, reflecting his increased
responsibilities as President and Chief Executive Officer effective March 31,
1995.
Mr. Ozorkiewicz' incentive compensation for 1995 totalled $816,355,
consisting of both financial performance and personal performance incentives.
Of this amount, $280,000 was paid in cash and $536,355 was paid in shares of
restricted stock in lieu of cash in accordance with the Company's executive
incentive compensation program. Mr. Ozorkiewicz' total incentive compensation
for 1995 represents a 290% increase over the amount paid in fiscal 1994 and
approximately 200% of his base salary in effect for 1995. In assessing the
personal performance of Mr. Ozorkiewicz, the Committee considered the
Company's all-time record financial results in the fiscal year ended December
31, 1995. The Company recorded its best financial performance ever, in which
annual sales surpassed the $1 billion level and earnings per share from
continuing operations more than doubled. Such record performance generated an
above target incentive for Mr. Ozorkiewicz based upon exceeding by a
significant margin the financial goals set at the beginning of the year. The
Committee also considered Mr. Ozorkiewicz' leadership of the Company,
particularly executing the successful national and international expansion
strategy and expanding the Company's value-added services.
RECENT INTERNAL REVENUE CODE AMENDMENTS
The Committee has considered the anticipated tax treatment to the Company
regarding the compensation and benefits paid to the Chief Executive Officer
and the four other most highly compensated executive officers of the Company
in light of the enactment of Section 162(m) of the Internal Revenue Code of
1986, as amended ("Section 162(m)"). Given that the proposed Treasury
Regulations interpreting Section 162(m) have been adopted in final form, the
Company at this time will adopt appropriate changes to the Company's
compensation structure or compensation or existing stock incentive option and
plans, including the 1995 Stock Incentive Plan, to meet the Section 162(m)
requirements, to generally preserve the deductibility of all compensation paid
by the Company which is subject to Section 162(m). Please see Proposal 2
entitled "APPROVAL OF PROPOSED AMENDMENTS TO THE 1995 STOCK INCENTIVE PLAN."
Respectfully submitted,
Executive Compensation Committee of
the Board of Directors
Edward Sanders, Chairman
Michael R. Corboy
Stanley A. Wainer
Frank S. Wyle
18
<PAGE>
PERFORMANCE GRAPH
COMPARISON OF 59-MONTH CUMULATIVE TOTAL RETURN*
AMONG WYLE ELECTRONICS, THE S&P 500 INDEX
AND THE S&P HIGH TECH COMPOSITE INDEX
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period WYLE S&P S&P HIGH
(Fiscal Year Covered) ELECTRONICS 500 INDEX TECH COMPOSITE
- ------------------- ----------- --------- --------------
<S> <C> <C> <C>
Measurement Pt- / / $100 $100 $100
FYE 1/91 $108 $123 $107
FYE 1/92 $148 $136 $112
FYE 1/93 $153 $148 $131
FYE 1/94 $156 $150 $153
FYE 1/95 $285 $206 $220
</TABLE>
IT SHOULD BE NOTED THAT THIS GRAPH REPRESENTS HISTORICAL STOCK PRICE
PERFORMANCE AND IS NOT NECESSARILY INDICATIVE OF ANY FUTURE STOCK PRICE
PERFORMANCE.
THE FOREGOING REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS REGARDING COMPENSATION AND THE PERFORMANCE GRAPH THAT APPEARS
IMMEDIATELY AFTER SUCH REPORT SHALL NOT BE DEEMED TO BE SOLICITING MATERIAL OR
TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES
ACT OF 1933 OR THE 34 ACT OR INCORPORATED BY REFERENCE IN ANY DOCUMENTS SO
FILED.
19
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During the year ended December 31, 1995, Messrs. Sanders, Corboy, Freedman,
Wainer and Wyle served as members of the Executive Compensation Committee.
Messrs. Freedman, Wainer and Wyle were formerly officers of the Company.
Messrs. Wainer and Freedman served as consultants to the Company through July
1994 and December 1995, respectively. Mr. Wyle serves currently as a
consultant to the Company.
CERTAIN TRANSACTIONS
On December 23, 1994, the Company completed the sale of its Scientific
Services & Systems ("SS&S") business to WESS Investment Corp., a buy-out group
led by William E. Simon & Sons and certain members of the SS&S management
("WESS"). The Company has been advised that Frank S. Wyle, a director of the
Company, serves also as a director of WESS, which changed its name in 1995 to
Wyle Laboratories, Inc.
WESS acquired certain assets and liabilities of SS&S, including receivables,
inventory, property, plant and equipment, accounts payable and accrued
expenses for a negotiated purchase price of $30 million in cash, subject to
adjustment, plus additional amounts that may be paid to the Company under an
earnout provision. The Company is performing certain administrative services
for WESS pursuant to an administrative services agreement effective for a five
year period.
APPROVAL OF PROPOSED AMENDMENTS TO THE 1995 STOCK INCENTIVE PLAN
(PROPOSAL 2)
At the Annual Meeting, shareholders will be asked to approve amendments to
the Company's 1995 Stock Incentive Plan (the "1995 Incentive Plan" or "Plan"),
adopted by the Board of Directors on March 7, 1996, which would modify the
performance goals used in connection with Performance-Based Awards intended to
qualify as "performance-based" compensation under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code").
This summary of the 1995 Incentive Plan, as modified to reflect the proposed
amendments described in this Proxy Statement, is qualified in its entirety by
the full text of the 1995 Incentive Plan. A copy of the 1995 Incentive Plan is
available for review at the principal executive offices of the Company and
will be furnished to shareholders without charge upon written request directed
to Stephen D. Natcher, Secretary, 15370 Barranca Parkway, Irvine, California
92718. Capitalized terms not otherwise defined herein shall have the meanings
set forth in the Plan. FOR CERTAIN INFORMATION REGARDING OPTIONS AND
RESTRICTED STOCK AWARDS GRANTED TO EXECUTIVE OFFICERS OF THE COMPANY, PLEASE
SEE THE MATERIAL UNDER THE HEADING "EXECUTIVE OFFICERS' COMPENSATION AND OTHER
INFORMATION."
PROPOSED AMENDMENTS TO THE 1995 INCENTIVE PLAN
The Company's 1995 Incentive Plan was adopted by the Board of Directors on
February 23, 1995 and approved by the shareholders on May 9, 1995. The Plan
was subsequently amended by the Board to: (i) delete the provisions of the
Plan which would have allowed participants to obtain loans from the Company to
exercise their awards; (ii) impose a minimum three-year vesting schedule on
shares of restricted stock of the Company awarded under the Plan; (iii)
clarify that the Company may not reprice outstanding stock options and stock
appreciation rights without prior shareholder approval; (iv) delete the
provisions of the Plan which would have permitted the discretionary grant of
awards to certain directors; and (v) to make certain other clarifying
amendments.
The Plan permits the grant of various types of share-based incentive awards
or cash-based incentive awards, including certain types of "Performance-Based
Awards" which are intended to qualify as "performance-based compensation"
under Section 162(m) of the Code. Under Section 162(m), the Company may not
deduct certain compensation of over $1,000,000 in any year to the Chief
Executive
20
<PAGE>
Officer or one of the four other most highly compensated executive officers of
the Company ("Executive Officers") unless, among other things, this
compensation qualifies as performance-based compensation under Section 162(m),
and the material terms of the plan for such compensation are shareholder
approved.
The Plan currently provides that the performance goals for Performance-Based
Awards are any one or a combination of Earnings Per Share, Return on Equity,
Total Shareholder Return and Cash Flow (each as defined in the Plan). The
Board of Directors has determined that it would be in the best interest of the
Company and its shareholders to modify the performance goals for Performance-
Based Awards. Specifically, the proposed amendments would modify the Plan to
add Return on Net Assets ("RONA") and Earnings Growth as performance goals.
The Company believes that RONA will serve as a useful performance measure
because it is not subject to the variations caused by changes in capital
structure, secondary offerings, and other balance sheet variables. In
addition, the Company believes that it is in the best interest of shareholders
for the Company to continue to grow its earnings. As a result Earnings Growth
will serve as a useful performance indicator because it will measure the
growth in the Company's earnings. Accordingly, the Board of Directors has
adopted the following proposed amendments to Article 7 of the Plan:
The definition of "Performance Goal" contained in Section 7.1 of the Plan
shall be amended to read as follows:
"(ab) "Performance Goal" shall mean EPS or ROE or Cash Flow or Total
----------------
Shareholder Return or RONA or Earnings Growth, and "Performance Goals"
means any combination thereof."
Section 7.1 of the Plan shall be amended to add the following definition
of "RONA" (Return on Net Assets):
"(aj) "RONA" shall mean the operating earnings before interest,
----
income taxes and goodwill amortization of the Corporation, divided by
the average consolidated net assets of the Corporation, which
represents total assets less current liabilities, excluding cash and
equivalents, debt, deferred income taxes and amounts relating to
discontinued operations."
Section 7.1 of the Plan shall be further amended to add the following
definition of "Earnings Growth":
"(q) "Earnings Growth" shall mean a factor determined by the
---------------
Committee which is based on a percentage change in the consolidated net
income of the Corporation (less preferred dividends) over a stated
period of time."
SUMMARY DESCRIPTION OF 1995 INCENTIVE PLAN
Administration. The Plan is administered by the Executive Compensation
Committee (the "Committee") consisting of two or more members, each of whom is
"disinterested" as such term is defined for purposes of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
"outside" as such term is defined for purposes of Section 162(m) of the Code.
The Committee has the authority to determine the employees to be granted
awards under the Plan and to determine the specific terms and conditions of
such awards, including, without limitation, the number of shares subject to
each award, the price to be paid for the shares and, subject to the
requirements of applicable law, any performance or other vesting criteria. The
Committee makes all other determinations necessary or advisable for the
administration of the Plan.
Eligibility. Any officer (whether or not a director) or key employee of the
Company or its Subsidiaries, as determined in the sole discretion of the
Committee, is eligible to be granted awards under the Plan.
21
<PAGE>
Shares Available for Awards. The maximum aggregate number of shares of
Common Stock that may be issued under the Plan is 500,000, subject to
adjustment as described below. Subject to adjustments described below, the
maximum number of shares of Common Stock which may be delivered pursuant to
options and stock appreciation rights granted during any calendar year to any
participant may not exceed 75,000 shares.
The number and kind of shares available under the Plan are subject to
adjustment in the event of (i) certain reorganizations, mergers, combinations,
recapitalization, stock splits, stock dividends, or other similar events which
change the number or kind of shares outstanding; or (ii) extraordinary
dividends or distributions of property to the shareholders. Shares relating to
options or stock appreciation rights which are not exercised, restricted stock
awards which do not vest, performance share awards which are not issued and
any award which is not exercised or which expires or is cancelled will again
become available for regrant and award purposes under the Plan to the extent
permitted by law.
The Company estimates that all officers of the Company will be among those
eligible to receive awards, subject to the discretion of the Committee to
determine the particular individuals who, from time to time, will be selected
to receive awards. The number of key employees of the Company and its
Subsidiaries who will be eligible to receive awards has not been determined.
In addition, other than the awards made heretofore under the 1995 Plan,
neither the individuals who are to receive awards, the number of awards that
will be granted to any individual or group of individuals, nor the amounts to
be payable with respect to awards, have been determined at this time.
Vesting and Award Periods. Except as may be provided in an applicable Award
Agreement, no award made under the Plan may be exercisable or may vest until
at least six months after the initial Award Date, and once exercisable an
award shall remain exercisable until the expiration or earlier termination of
the award. Each restricted stock award granted under the Plan is subject to
either a minimum three-year "cliff" vesting schedule or a three-year
installment vesting schedule. Each award shall expire on such date as is
determined by the Committee, but in the case of options, not later than ten
years after the Award Date.
Transferability. The Plan provides, with limited exceptions, that rights or
benefits under any award are not assignable or transferable except by will or
the laws of descent and distribution, and that only the participant, subject
to such exception (consistent with applicable legal considerations), may
exercise the award during the participant's lifetime.
AWARDS THAT MAY BE GRANTED UNDER THE PLAN.
Performance Share Awards and Performance-Based Awards. The Committee may, in
its discretion, grant one or more performance share awards to any participant
based upon such factors (including the contributions, responsibilities and
other compensation of the person) as the Committee shall deem relevant in
light of the specific type and terms of the award. The amount of cash or
shares or other property that may be deliverable pursuant to such an award is
based upon the degree of attainment over a specified period of such measure(s)
of performance of the Company (or any part thereof) or the participant as may
be established by the Committee. An Award Agreement shall specify the maximum
number of shares (if any) subject to the performance share award, the
consideration (but not less than the minimum lawful consideration) to be paid
for any such shares as may be issuable to the participant, the duration of the
award and the conditions upon which delivery of any shares or cash to the
participant shall be based.
Without limiting the generality of the foregoing and as described above (see
"PROPOSED AMENDMENTS TO THE 1995 INCENTIVE PLAN"), the Plan permits the
Committee to grant certain other types of awards ("Performance-Based Awards")
which are intended to qualify as "performance-based compensation" under
Section 162(m) of the Code. Stock options and stock appreciation rights that
are
22
<PAGE>
granted under the Plan at a fair market value exercise price are intended to
qualify as performance-based compensation. In addition, other share-based
awards (such as restricted stock or performance awards) may be granted under
the Plan and are intended to qualify as performance-based compensation under
Section 162(m). The Plan also provides for the grant of Performance-Based
Awards that are not denominated nor payable in and do not have a value derived
from the value of or a price related to shares of Common Stock and are payable
only in cash ("Cash-Based Awards") that are intended to satisfy the
requirements for performance-based compensation under Section 162(m). With
reference to the Performance-Based Awards, the material terms of the Plan
include the eligible class of participants, the performance goal or goals and
the maximum number of shares or amount deliverable or payable thereunder to
any individual participant.
The eligible class of persons for Performance-Based Awards under the Plan is
all officers and key employees of the Company and its Subsidiaries.
Performance-Based Awards granted to Executive Officers thereunder may be
granted only in accordance with the requirements of Section 162(m), as set
forth below.
The performance goals for Performance-Based Awards under the Plan are
described above (see "PROPOSED AMENDMENTS TO THE 1995 INCENTIVE PLAN"). These
goals will be applied over either consecutive or rolling cycles of more than
one but not more than five fiscal years. Specific cycles, weightings of more
than one performance goal and target levels of performance upon which actual
payments will be based, as well as the award levels payable upon achievement
of specified levels of performance, will be determined by the Committee not
later than the applicable deadline under Section 162(m) of the Code and in any
event at a time when achievement of such targets is substantially uncertain.
These variables may change from cycle to cycle. Appropriate adjustments to the
performance goals and targets in respect of Performance-Based Awards may be
made by the Committee based upon objective criteria in the case of certain
events that in any case were not anticipated (or the effects of which were not
anticipated) at the time goals were established, in order to neutralize the
effect of such events on the Performance-Based Awards. The Company believes
that specific performance targets (when established) are likely to constitute
confidential business information, the disclosure of which may adversely
affect the Company or mislead the public.
The Committee must certify the achievement of the applicable performance
goals and the actual amount payable to each participant under the Performance-
Based Awards prior to payment. Performance-Based Awards generally will be paid
following the completion of each cycle. The Committee may retain discretion to
reduce, but not increase, the amount payable under a Performance-Based Award
to any participant, notwithstanding the achievement of targeted performance
goals. Performance-Based Awards may be accelerated in the event of a Change in
Control Event (as defined in the Plan).
The maximum amount payable to any participant under all Cash-Based Awards
which are intended to be Performance-Based Awards during any calendar year
under the Plan is $1,000,000. The maximum number of shares of the Company's
Common Stock that may be subject to all Performance-Based Awards, including
stock options and stock appreciation rights, that are granted to any
participant during any calendar year cannot exceed 75,000 shares, either
individually or in the aggregate.
Other Types of Awards. In addition to the performance share awards and
Performance-Based Awards described above, the Plan permits the Committee to
grant the following types of awards: stock options (nonqualified and
incentive), stock appreciation rights, and restricted stock awards. In
general, the exercise price for such awards, if applicable, is generally the
closing price for a share of Common Stock reported on the New York Stock
Exchange on the date of grant. On March 18, 1996, the closing price for a
share of Common Stock reported on the New York Stock Exchange was $32.50.
Termination of Employment. Absent provisions to the contrary in the Award
Agreement or Committee action, no stock option or stock appreciation right
will be exercisable, no restricted stock award will vest and no performance
share award will be paid after an employee's termination of
23
<PAGE>
employment. Nevertheless, in the case of stock options and stock appreciation
rights, if such termination is due to the option holder's normal retirement,
the exercise period will be extended for three months after termination. In
addition, if such termination is due to death or permanent disability, the
exercise period will be extended for one year after such event. Moreover, in
the event of any termination of employment for any reason, the Committee or
the terms of the Award Agreement may extend the exercise period up to any
later date. In no case, however, will the exercise period extend beyond the
original expiration date of the option or stock appreciation right. The
Committee or the terms of an Award Agreement may also provide for additional
vesting upon termination in the case of restricted stock and performance share
awards.
Acceleration of Awards. Upon the approval by the shareholders of a
dissolution or liquidation, certain agreements to merge or consolidate, sale
of substantially all of the Company's assets or certain other "Change in
Control Events" (as defined in the Plan), each option and related stock
appreciation right will become immediately exercisable, each restricted stock
award shall immediately vest and each performance share award or Performance-
Based Award shall immediately become payable provided that awards shall in no
event be accelerated to a date less than six months after the Award Date. Such
acceleration will automatically occur unless the Committee, prior to any such
event, determines otherwise.
Termination of or Changes to the Plan. The authority to grant new awards
under the Plan will terminate on February 23, 2005, unless the Plan is
terminated prior to that time by the Board of Directors. Such termination
typically will not affect rights of participants which accrued prior to such
termination. The Board may, without shareholder approval, suspend or amend the
Plan at any time, and the Committee may, with the consent of a holder,
substitute awards or modify the terms and conditions of an outstanding award,
to, among other changes, extend the term (subject to maximum term limits),
accelerate exercisability or vesting or preserve benefits of the award.
However, the Committee may not, without prior shareholder approval, reprice
outstanding stock options and stock appreciation rights. In addition, without
shareholder approval, the Board may not increase the maximum number of shares
which may be delivered pursuant to awards granted under the Plan, materially
increase the benefits accruing to participants under the Plan or materially
change the requirements as to the eligibility to participate in the Plan.
FEDERAL INCOME TAX CONSEQUENCES OF AWARDS UNDER THE PLAN
The federal income tax consequences of the Plan under current federal law,
which is subject to change, are summarized in the following discussion which
deals with the general tax principles applicable to the Plan. State and local
tax consequences are beyond the scope of this summary.
Nonqualified Stock Options. No taxable income will be realized by an option
holder upon the grant of a nonqualified stock option under the Plan. When the
holder exercises the nonqualified stock option, however, he or she will
generally recognize ordinary income equal to the difference between the option
price and the fair market value of the shares at the time of exercise. The
Company is generally entitled to a corresponding deduction at the same time
and in the same amounts as the income recognized by the option holder. Upon a
subsequent disposition of the Common Stock, the holder will realize short-term
or long-term capital gain or loss, depending on how long the Common Stock is
held. The Company will not be entitled to any further deduction at that time.
Incentive Stock Options. An employee who is granted an incentive stock
option under the Plan does not recognize taxable income either on the date of
its grant or on the date of its exercise, provided that, in general, the
exercise occurs during employment or within three months after termination of
employment. However, any appreciation in value of the Common Stock after the
date of the grant will be includable in the participant's federal alternative
minimum taxable income at the time of exercise in determining liability for
the alternative minimum tax. If Common Stock acquired pursuant to an incentive
24
<PAGE>
stock option is not sold or otherwise disposed of within two years from the
date of grant of the option nor within one year after the date of exercise,
any gain or loss resulting from disposition of the Common Stock will be
treated as long-term capital gain or loss. If stock acquired upon the exercise
of an incentive stock option is disposed of prior to the expiration of such
holding periods (a "Disqualifying Disposition"), he or she will generally
recognize ordinary income at the time of such Disqualifying Disposition equal
to the difference between the exercise price and the fair market value of the
Common Stock on the date the incentive stock option is exercised or, if less,
the excess of the amount realized on the Disqualifying Disposition over the
exercise price. Any remaining gain or net loss is treated as a short-term or
long-term capital gain or loss, depending upon how long the Common Stock is
held. Unlike the case in which a nonqualified stock option is exercised, the
Company is not entitled to a tax deduction upon either the grant or exercise
of an incentive stock option or upon disposition of the Common Stock acquired
pursuant to such exercise, except to the extent that the employee recognizes
ordinary income in a Disqualifying Disposition.
Stock Appreciation Rights. The recipient of a stock appreciation right is
not taxed upon the grant of the stock appreciation right. Likewise, the
Company will not be entitled to a deduction for the stock appreciation right.
Upon the exercise of a stock appreciation right, the recipient generally will
be taxed at ordinary income tax rates on the amount of cash received and the
fair market value of any Common Stock received. The amount of ordinary income
recognized by the recipient is deductible by the Company in the year that the
income is recognized. The recipient's basis in any shares acquired is equal to
the amount of ordinary income recognized with respect to such shares, and,
upon subsequent disposition, any further gain or loss is taxable either as
short-term capital gain or loss, depending on how long the shares are held.
The holding period for such shares commences as of the date ordinary income is
recognized.
Restricted Stock Awards. In general, no income is recognized by the
recipient upon the grant of a restricted stock award. Unless the recipient
makes an election described below, the recipient will recognize ordinary
income when the restrictions lapse equal to the excess of the fair market
value of the restricted stock at the time the restrictions lapse over the
amount which the recipient paid for the restricted stock, if any. The Company
may deduct an amount equal to the income recognized by the recipient at the
time the recipient recognizes the income.
The recipient may elect, within 30 days after the date of receipt of the
award, to recognize ordinary income arising from the award as of the award
date. If such election is made, the recipient will recognize ordinary income
in an amount equal to the excess of the fair market value of the stock over
the amount paid, if any, at the time of receipt.
The tax treatment of restricted stock which is disposed of will depend upon
whether the recipient made an election to include the value of the stock in
income when awarded. If the recipient made such an election, any disposition
after the restrictions lapse will result in a long-term or short-term capital
gain or loss depending upon the period the restricted stock is held. If,
however, such election is made and for any reason the restrictions imposed on
the restricted stock fail to lapse, the individual will not be entitled to a
deduction. If an election is not made, disposition after the lapse of
restrictions will result in short-term or long-term capital gain or loss
(depending on the period of time the stock is held after the restrictions
lapse) equal to the difference between the amount received on disposition and
the greater of the amount paid for the stock by the recipient or its fair
market value at the date the restrictions lapsed.
Performance Share Awards. A participant who has been granted a performance
share award will generally not realize taxable income at the time of grant,
and the Company will not be entitled to a deduction at that time. When an
award is paid, whether in cash or shares, the participant will have ordinary
income, and the Company will have a corresponding deduction. The measure of
such income and deduction will be the amount of cash and the fair market value
of the shares at the time the award is paid.
25
<PAGE>
Special Rules Governing Persons Subject to Section 16(b). Under the federal
tax law, special rules may apply to participants in the Plan who are subject
to the restrictions on resale of the Company's Common Stock under Section
16(b) of the Exchange Act. These rules, which effectively take into account
the Section 16(b) restrictions, apply in limited circumstances and may impact
the timing and/or amount of income recognized by these persons with respect to
certain stock-based awards under the Plan.
Accelerated Payments. If as a result of certain changes in control of the
Company, a participant's options or stock appreciation rights become
immediately exercisable, or if restrictions immediately lapse on restricted
stock, or if shares covered by a performance share award are immediately
issued or a cash payment under an award is accelerated, the additional
economic value, if any, attributable to the acceleration may be deemed a
"parachute payment." The additional value will generally be deemed a parachute
payment if such value, when combined with the value of other payments which
are deemed to result from the change in control, equals or exceeds a threshold
amount equal to 300% of the participant's average annual taxable compensation
over the five calendar years preceding the year in which the change in control
occurs. In such case, the excess of the total parachute payments over such
participant's average annual taxable compensation will be subject to a 20%
non-deductible excise tax in addition to any income tax payable. The Company
will not be entitled to a deduction for that portion of any parachute payment
which is subject to the excise tax.
Section 162(m) Limits. Notwithstanding the foregoing discussion with respect
to the deductibility of compensation under the Plan by the Company, Section
162(m) of the Code would render nondeductible to the Company certain
compensation paid to certain employees required to be named in the Summary
Compensation Table (i.e., the Chief Executive Officer or one of the four other
most highly compensated executive officers of the Company, the "Executive
Officers") in excess of $1,000,000 in any year unless such excess compensation
is "performance-based" (as defined in the Code) or is otherwise exempt from
these limits on deductibility. The applicable conditions of an exemption for
performance-based compensation plans include, among others, a requirement that
the shareholders approve the material terms of the plan. Stock options, stock
appreciation rights and certain (but not all) other types of awards that may
be granted to Executive Officers as contemplated by the Plan are intended to
qualify for the exemption for performance-based compensation under Section
162(m). However, in light of uncertainties regarding its ultimate
interpretation, no assurances can be given that all compensation intended to
so qualify will in fact be deductible if the non-qualifying amount should,
together with other non-exempt compensation, paid to an Executive Officer,
exceed $1,000,000.
VOTE REQUIRED FOR APPROVAL OF PROPOSED AMENDMENTS TO THE PLAN
Approval of the proposed amendments to the Plan requires the affirmative
vote of the holders of a majority of the Common Stock present, or represented,
and entitled to vote at the Annual Meeting assuming the presence of a quorum.
Each share of Common Stock is entitled to one vote.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND RECOMMENDS A VOTE FOR
THE APPROVAL OF THE PROPOSED AMENDMENTS TO THE 1995 INCENTIVE PLAN AS
DESCRIBED ABOVE. PROXIES RECEIVED WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY
OTHERWISE IN THE PROXY.
26
<PAGE>
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL 3)
The Board of Directors of the Company, upon the recommendation of the Audit
Committee, has unanimously appointed the firm of Arthur Andersen LLP as
independent public accountants to examine the consolidated financial
statements of the Company for the year ending December 31, 1996, and a
resolution will be presented at the Annual Meeting to ratify such appointment.
Arthur Andersen LLP has acted as independent public accountants of the Company
since 1961. No member of that firm or any of its associates has any financial
interest in the Company or any of its subsidiaries or affiliates. A
representative of Arthur Andersen LLP will be present at the Annual Meeting
with the opportunity to make a statement and is expected to be available to
respond to appropriate questions from the shareholders.
Although this appointment is not required to be submitted to a vote of the
shareholders, the Board believes it is appropriate as a matter of policy to
request that shareholders ratify the appointment. If the shareholders, by the
affirmative vote of the holders of shares representing a majority of votes
cast (in person or by proxy) on the resolution at the Annual Meeting, do not
ratify the selection of Arthur Andersen LLP, then the selection of independent
public accountants will be reconsidered by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT
OF THE FIRM OF ARTHUR ANDERSEN LLP AS DESCRIBED ABOVE. PROXIES RECEIVED WILL
BE SO VOTED UNLESS SHAREHOLDERS SPECIFY OTHERWISE IN THE PROXY.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the 34 Act requires the Company's directors and executive
officers, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file with the Securities and Exchange
Commission (the "SEC") and the New York Stock Exchange initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Executive officers, directors and greater than ten-
percent shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1994, all
Section 16(a) filing requirements applicable to its executive officers,
directors and greater than ten-percent beneficial owners were complied with,
other than Mr. Adamczyk, who inadvertently failed to file a report in 1995
reflecting a change in common stock ownership, and Messrs. Clough, Corboy and
West, who inadvertently filed late reports reflecting automatic stock option
grants under the 1993 Eligible Directors' Stock Option Plan. All deficiencies
were corrected promptly upon discovery.
OTHER MATTERS
The Board is not aware of any other matters to be presented for action at
the Annual Meeting. However, if any other matter is properly presented, it is
the intention of the persons named in the enclosed form of Proxy to vote in
accordance with their best judgment on such matter.
27
<PAGE>
SUBMISSION OF SHAREHOLDER PROPOSALS
Proposals intended for inclusion in the Company's Proxy Statement for the
1997 Annual Meeting of Shareholders should be sent to the attention of the
Secretary of the Company at 15370 Barranca Parkway, P.O. Box 19765, Irvine,
California 92713-9675 and must be received by November 28, 1996.
By Order of the Board of Directors
[SIGNATURE LOGO]
Stephen D. Natcher
Secretary
Irvine, California
March 29, 1996
28
<PAGE>
MAP TO
WYLE ELECTRONICS'
ANNUAL SHAREHOLDERS MEETING
[WYLE ELECTRONICS MAP]
<PAGE>
WYLE ELECTRONICS
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY FOR ANNUAL MEETING MAY 14, 1996
The undersigned, a shareholder of WYLE ELECTRONICS, a California
corporation, acknowledges receipt of a Notice of Annual Meeting of
Shareholders, the accompanying Proxy Statement and the Annual Report to
Shareholders for the year ended December 31, 1995; and, revoking any proxy
previously given, hereby constitutes and appoints R. Van Ness Holland, Jr. and
Stephen D. Natcher, and each of them, the true and lawful agents and proxies
of the undersigned with full power of substitution in each, to vote the shares
of Common Stock of WYLE ELECTRONICS standing in the name of the undersigned at
the Annual Meeting of Shareholders of WYLE ELECTRONICS, on Tuesday, May 14,
1996 at 2:00 p.m. local time, and at any adjournment or postponement thereof
with respect to the proposals listed on the reverse side.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREBY BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE NOMINEES LISTED ON THE REVERSE (PROPOSAL 1); AND FOR
PROPOSAL 2 AND FOR PROPOSAL 3.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
Please mark
your votes as
indicated in
this example
X
THIS PROXY WILL BE VOTED AS DIRECTED. UNLESS OTHERWISE DIRECTED, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE THREE NAMED NOMINEES IN PROPOSAL 1; AND
FOR PROPOSALS 2 AND 3. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
THREE NAMED NOMINEES IN PROPOSAL 1; AND FOR PROPOSALS 2 AND 3.
FOR
WITHHELD FOR ALL
FOR
AGAINST
ABSTAIN
FOR
AGAINST
ABSTAIN
1. Election of Directors: Jack S. Kilby, Kirk West and Frank S. Wyle
2. Approval of Amendments to 1995 Stock Incentive Plan.
3. Ratification of the appointment of Arthur Andersen LLP as auditors for
1996.
WITHHELD FOR: (Write that nominee's name in the space provided below).
- -------------------------------------------------------------------------------
4. In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the meeting and any and all
postponements or adjournments thereof.
Signature(s) __________________________ Date _______________________________
NOTE: Please sign as name appears hereon. Joint owners should each sign.
Executors, administrators, trustees, guardians and attorneys should so
indicate when signing. Corporations and partnerships should sign in the
corporate or partnership name by an authorized officer.
<PAGE>
YOUR VOTE IS IMPORTANT TO THE COMPANY
PLEASE SIGN AND RETURN YOUR PROXY BY
TEARING OFF THE TOP PORTION OF THIS SHEET
AND RETURNING IT IN THE ENCLOSED POSTPAID ENVELOPE
