<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 Rule 14a-11(c) or Rule 14a-12
MARSHALL INDUSTRIES
(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] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] 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:
<PAGE>
MARSHALL INDUSTRIES
9320 TELSTAR AVENUE
EL MONTE, CALIFORNIA 91731-2895
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------
The Annual Meeting of Shareholders (the "Annual Meeting") of Marshall
Industries (the "Company") will be held at the office of the Company, 9320
Telstar Avenue, El Monte, California, on October 20, 1998 at 9:00 a.m., local
time, for the following purposes:
1. To elect directors for the year. Gordon S. Marshall, Robert Rodin,
Richard D. Bentley, Richard C. Colyear, Jean Fribourg, Lathrop Hoffman,
Jose Menendez, Raymond G. Rinehart and Howard C. White have been nominated
for election as directors.
2. To consider and act upon a proposal to ratify the appointment of
Arthur Andersen LLP as the Company's independent auditors for the fiscal
year ending May 31, 1999.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on August 24, 1998 are
entitled to notice of, and to vote at, the Annual Meeting.
If you do not plan to attend personally, please promptly sign and return the
enclosed proxy in the accompanying envelope. Your proxy is solicited on behalf
of the Board of Directors of the Company. It is necessary to have a majority
of all outstanding shares represented at the Annual Meeting in order to
transact official business. A proxy statement is set forth on the following
pages.
By Order of the Board of Directors
GORDON S. MARSHALL
Chairman
August 31, 1998
<PAGE>
MARSHALL INDUSTRIES
9320 TELSTAR AVENUE
EL MONTE, CALIFORNIA 91731-2895
----------------
PROXY STATEMENT
MAILED ON OR ABOUT AUGUST 31, 1998
----------------
The accompanying proxy is solicited on behalf of the Board of Directors of
Marshall Industries (the "Company") for use at the Annual Meeting of
Shareholders on October 20, 1998 (the "Annual Meeting") or any adjournment
thereof, and the expense of such solicitation will be borne by the Company.
Proxies properly executed and received by the Company prior to the Annual
Meeting, and not revoked, will be voted.
A shareholder giving a proxy has the power to revoke it at any time prior to
its use by filing with the Secretary of the Company at the address above a
written revocation or a proxy bearing a later date, or if personally present
at the Annual Meeting, by electing to vote in person.
The holders of Common Stock of record on the books of the Company at the
close of business on August 24, 1998 (the "Record Date") are eligible to vote
at the Annual Meeting. On that date, there were 16,616,364 shares outstanding.
Each shareholder is entitled to one vote for each share owned. A shareholder
is entitled to cumulate votes for the election of directors (that is, cast for
any one or more candidates a number of votes equal to the number of the
shareholder's shares multiplied by the number of directors to be elected).
However, no shareholder may cumulate votes for the election of directors
unless the names of such candidates have been placed in nomination prior to
the voting, and the shareholder has given notice of the shareholder's
intention to cumulate votes at the Annual Meeting prior to the voting. If any
one shareholder has given such notice, each shareholder may cumulate his votes
and give one candidate all of such shareholder's votes or distribute such
shareholder's votes among as many candidates as such shareholder sees fit. If
any shareholder elects cumulative voting, the proxyholders are authorized in
their discretion to vote their proxies cumulatively.
A majority of the outstanding shares of the Company's Common Stock as of the
Record Date, represented in person or by proxy, will constitute a quorum at
the Annual Meeting. In determining the shares present, shares with respect to
which authority to vote is withheld, abstentions and shares held of record by
a broker or its nominee ("broker shares") that are voted on any matter will be
included. Broker shares that are not voted on any matter will not be included
in determining the shares present. The election of each director and the
approval of any other matter submitted to a vote of the shareholders requires
the affirmative vote of a majority of the shares voting. In determining the
number of shares voting on the election of directors, the ratification of the
appointment of the Company's independent auditors, or any other matter
submitted to a vote of the shareholders, shares with respect to which
authority is withheld, abstentions and broker shares that are not voted will
not be included. Any unmarked proxies, including those submitted by brokers or
nominees, will be voted in favor of the proposals and nominees of the Board of
Directors, as indicated in the accompanying proxy card.
The solicitation of proxies for the Annual Meeting will be made primarily by
mail. However, if necessary to ensure satisfactory representation at the
Annual Meeting, additional solicitation may take place by telephone, telegraph
and personal interview by employees of the Company. No such employee will
receive additional compensation for such services. The Company has retained
Corporate Investor Communications, Inc. to assist in the solicitation of
proxies on its behalf for a fee of approximately $5,000, plus out-of-pocket
expenses.
<PAGE>
ELECTION OF DIRECTORS
At present, the Bylaws of the Company provide that the Board of Directors
will be composed of between seven and thirteen directors, with the exact
number of directors to be set from time to time by the Board of Directors or
the shareholders. The Board of Directors, in October 1994, established the
present number of directors at nine. Unless otherwise instructed, the
proxyholders will vote the proxies received by them for the nine nominees
shown below for a term of one year and until their successors are duly elected
and qualified. All of the nominees have consented to being named in this Proxy
Statement and to serve as directors if elected. Although it is not
contemplated that any of the nominees will subsequently decline or be unable
to serve as a director, in either event, the proxies will be voted by the
proxyholders for such other persons as may be designated by the present Board
of Directors.
The following table sets forth certain information as of July 31, 1998 with
respect to those persons who are nominees for re-election as directors of the
Company, each of whom, if elected, will serve until the next Annual Meeting of
Shareholders and until their successors are duly elected and qualified.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK BENEFICIALLY
OWNED(1)
---------------------
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AGE POSITION OWNERSHIP OF CLASS
---- --- -------- ---------- --------
<C> <C> <S> <C> <C>
Gordon S. Marshall...... 78 Chairman of the Board 284,030 1.7%
Robert Rodin............ 44 Director, President and 123,500(2) *
Chief Executive Officer
Richard D. Bentley...... 58 Director and Executive 17,084 *
Vice President
Richard C. Colyear...... 59 Director 2,000 *
Jean Fribourg........... 53 Director 500 *
Lathrop Hoffman......... 73 Director 4,200(3) *
Jose Menendez........... 61 Director 500 *
Raymond G. Rinehart..... 76 Director 4,300(4) *
Howard C. White......... 57 Director 1,800(5) *
</TABLE>
- --------
* Represents less than 1%.
(1) Except as provided under state community property laws and unless
otherwise indicated, each nominee has sole voting and investment power
with respect to the shares shown as beneficially owned by him.
(2) Includes 95,000 shares which are subject to options that are presently
exercisable or become exercisable within 60 days of July 31, 1998.
(3) Includes 200 shares held by Mr. Hoffman's wife.
(4) Includes 2,700 shares held in a revocable trust for which Mr. Rinehart is
the trustee.
(5) Includes 400 shares which are held in the retirement account of Mr.
White's wife.
Mr. Marshall is the founder of the Company and has been its Chairman of the
Board since October 1954 and was Chief Executive Officer of the Company until
April 1994. Additionally, he served as President of the Company from April
1982 to June 1992. Mr. Marshall is also a member of the Board of Amistar
Corporation.
2
<PAGE>
Mr. Rodin has served as a director of the Company since October 1992. He has
been the President since June 1992 and Chief Executive Officer of the Company
since April 1994. He joined the Company in 1983 and was promoted to Vice
President in October 1988 and Senior Vice President in August 1989.
Mr. Bentley has served as a director of the Company since October, 1992. He
has been Executive Vice President of the Company since August 1989. He joined
the Company in 1978 and was promoted to Vice President in October 1986 and
Senior Vice President in April 1988.
Mr. Colyear has served as a director of the Company since August 1991. Since
1989 Mr. Colyear has been President of Colyear Development Corporation, a
privately held real estate firm which develops and operates both office and
industrial properties. From 1967 to 1989, Mr. Colyear was employed by Security
Pacific National Bank in various capacities, including First Vice President,
in connection with its commercial lending activities.
Mr. Fribourg has served as a director since October 1994 and since 1992 has
been the Chief Executive Officer of Sonepar Electronique International (SEI),
one of the largest electronic components distributors in Europe, and is a
member of the Executive Boards of SEI and Sonepar Distribution. During the
last ten years, Mr. Fribourg has held several management and executive
positions with Sonepar and SEI, including SEI Country Manager (Spain) and
Sonepar Distribution Country Manager (Spain and Portugal).
Mr. Hoffman has served as a director since August 1984. For more than 25
years, Mr. Hoffman, through several corporations, has and continues to own and
operate automobile dealerships in Southern California including Acura, General
Motors, Honda, Isuzu and Saturn. Mr. Hoffman is also Chairman of the Board of
Granite State Bank (formerly The Bank of Monrovia) in Monrovia, California.
Mr. Menendez has served as a director since October 1994 and has been the
Chairman of the Executive Boards of SEI and Sonepar since 1990 and 1991,
respectively. Mr. Menendez also has held the position of Managing Director and
since 1992 has been a member of the Executive Board of Sonepar, S.A. Mr.
Menendez has held management and executive positions with the Sonepar
companies for over twenty years.
Mr. Rinehart has been a director of the Company since 1982. Mr. Rinehart
formerly served as Chairman of the Executive Committee of the Board of
Directors, Chairman of the Board, President and Chief Executive Officer of
Clow Corporation. For more than the last 5 years, Mr. Rinehart has been the
Chairman of the Board of RGR Enterprises, and is a director of Goshen Rubber
Co.
Mr. White has been a director since January 1992. From 1965 to 1991, Mr.
White was associated with the international accounting and consulting firm of
Andersen Worldwide. Until his retirement in 1991, Mr. White was Managing
Director of Finance for Arthur Andersen's worldwide business unit and had also
served as Managing Partner, Accounting, Audit and Financial Consulting
Practice, Los Angeles/Southern California, Hawaii and Nevada. Mr. White is
currently President of White & White LLC, a financial and business consulting
services company.
COMMITTEES
Among the committees created by the Board of Directors are an Audit
Committee and a Stock Option and Compensation Committee (the "Compensation
Committee"). The Board has not designated a nominating committee. The members
of the Audit Committee are Richard C. Colyear, Lathrop Hoffman, Raymond G.
Rinehart and Howard C. White. The Audit Committee reviews and makes
recommendations to the Board of Directors with respect to (i) the engagement
or re-engagement of an independent accounting firm to audit the
3
<PAGE>
Company's financial statements for the then current fiscal year, and the terms
of such engagement; (ii) the Company's policies and procedures for maintaining
the Company's books and records and furnishing information to the independent
auditors; (iii) the procedures to encourage access to the Audit Committee and
to facilitate the timely reporting during the year of the Company's
independent auditors' recommendations and advice to the Audit Committee; (iv)
the implementation by management of the independent auditors' recommendations
and advice; (v) the implementation by management of the recommendations made
by the independent auditors in its annual management letter; (vi) the adequacy
and implementation of the Company's internal accounting controls and the
adequacy and competency of the related personnel; and (vii) such other matters
relating to the Company's financial affairs and accounts as the Audit
Committee may in its own discretion deem desirable. One Audit Committee
meeting was held during the last fiscal year.
The Compensation Committee members are Richard C. Colyear, Lathrop Hoffman,
Raymond G. Rinehart and Howard C. White. The Compensation Committee recommends
changes in employees' salaries, incentives, pensions, savings plans and other
fringe benefits to the Board, and administers the Company's stock option
plans. As administrator of the stock option plans, the Committee determines
which employees are eligible for participation in the plans, designates the
optionees and, within the restrictions of each particular plan, determines the
terms of the grant and exercise of options under the plans. The Compensation
Committee also makes recommendations from time to time to the Board of
Directors regarding possible modifications or amendments of the Company's
stock options plans. The Compensation Committee held four meetings during the
last fiscal year.
The Board of Directors held a total of eight meetings during the last fiscal
year. Each director attended all of the meetings of the Board and the
Committees on which he served, except for Mr. Menendez who attended all but
three Board of Directors meetings, and Mr. Rinehart who attended all but one
Board of Directors meetings and all but one Compensation Committee meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on its review of copies of Forms 3, 4 and 5 filed by the officers and
directors of the Company with the Securities and Exchange Commission, the
Company believes that all such Forms required to be filed with respect to the
fiscal year ended May 31, 1998 were timely filed pursuant to Section 16 of the
Securities Exchange Act.
REMUNERATION OF DIRECTORS
Directors who are employees receive no additional compensation for servicing
as directors. Except for Mr. White, all non-employee directors receive monthly
retainers of $1,500. As Chairman of the Compensation Committee, Mr. White
receives a monthly retainer of $2,000. In addition, all non-employee directors
received $1,500, increased to $3,000 as of January 1998, for each of the four
basic meetings per year requiring attendance. Additional meetings are not
compensated. During fiscal year 1998, all directors who are neither employees
of the Company or its strategic business partners, Messrs. Colyear, Hoffman,
Rinehart and White were each granted an option to purchase 5,000 shares of
Common Stock at an exercise price of $29.75. The options are exercisable in
four equal and successive annual installments, with the first such installment
to become exercisable one year after the grant date of January 20, 1998, and
expire 10 years from the date of grant.
4
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of July 31, 1998 with
respect to each shareholder known by the Company to be the beneficial owner of
more than 5% of its outstanding Common Stock, and share ownership by all
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) CLASS
------------------------------------ ----------------- ----------
<S> <C> <C>
The Prudential Insurance Company of America.. 1,606,750(2) 9.7%
751 Broad Street
Newark, New Jersey 07102
Strong Capital Management, Inc............... 1,383,383(3) 8.3%
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
First Pacific Advisors, Inc.................. 1,324,800(4) 8.0%
11400 West Olympic Blvd
Suite 1200
Los Angeles, California 90064
Royce & Associates, Inc. .................... 1,068,300(5) 6.4%
1414 Avenue of the Americas
New York, NY 10019
Pioneering Management Corporation............ 920,600(6) 5.5%
60 State Street
Boston, MA 02109
All executive officers and directors
as a group (10 persons)..................... 482,664(7) 2.9%
</TABLE>
- --------
(1) Except as provided under state community property laws and unless
otherwise indicated, each shareholder has sole voting and investment power
with respect to the shares shown as beneficially owned by that
shareholder.
(2) Pursuant to a Schedule 13G dated February 10, 1998 and filed with the
Securities and Exchange Commission, The Prudential Insurance Company of
America reported beneficial ownership of over 5% of the Company's Common
Stock. Based on information subsequently obtained from The Prudential
Insurance Company of America, the Company believes that on July 31, 1998,
it had sole voting and dispositive power with respect to 1,071,000 shares
and shared voting and dispositive power with respect to 535,750 additional
shares.
(3) Pursuant to a Schedule 13G dated February 16, 1998 and filed with the
Securities and Exchange Commission, Strong Capital Management, Inc.
reported beneficial ownership of over 5% of the Company's Common Stock.
Based on information subsequently obtained from Strong Capital Management,
Inc., the Company believes that on July 31, 1998, it had sole voting power
with respect to 1,216,550 shares and sole dispositive power with respect
to 1,383,383 shares.
(4) Pursuant to a Schedule 13G dated February 10, 1998 and filed with the
Securities and Exchange Commission, First Pacific Advisors, Inc. reported
beneficial ownership of over 5% of the Company's Common Stock. Based on
information subsequently obtained from First Pacific Advisors, Inc. the
Company believes that on July 31, 1998, it had shared voting power with
respect to 364,700 shares and shared dispositive power with respect to
1,324,800 shares.
(5) Pursuant to a Schedule 13G dated February 5, 1998 and filed with the
Securities and Exchange Commission, Royce & Associates, Inc. reported
beneficial ownership of over 5% of the Company's Common Stock.
5
<PAGE>
Based on information subsequently obtained from Royce & Associates, Inc.,
the Company believes that on July 31, 1998, it had sole voting and
dispositive power with respect to 1,068,300 shares.
(6) Pursuant to a Schedule 13G dated March 25, 1998 and filed with the
Securities and Exchange Commission, the Pioneering Management Corporation
reported beneficial ownership of over 5% of the Company's Common Stock.
Based on information subsequently obtained from Pioneering Management
Corporation, the Company believes that on July 31, 1998, it had sole
voting and dispositive power with respect to 920,600 shares.
(7) Includes 133,750 shares which are subject to options that are presently
exercisable or become exercisable within 60 days of July 31, 1998.
6
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth certain information as of July 31, 1998 with
respect to those persons who are executive officers of the Company.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK BENEFICIALLY
OWNED(1)
---------------------
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AGE POSITION OWNERSHIP OF CLASS
---- --- -------- ---------- --------
<C> <C> <S> <C> <C>
Gordon S. Marshall...... 78 Chairman of the Board 284,030 1.7%
Robert Rodin............ 44 President and Chief 123,500(2) *
Executive Officer
Richard D. Bentley...... 58 Executive Vice President 17,084 *
Henry W. Chin........... 51 Vice President, Finance, 44,750(3) *
Chief Financial Officer
and Secretary
</TABLE>
- --------
* Represents less than 1%.
(1) Except as provided under state community property laws and unless
otherwise indicated, each executive officer has sole voting and investment
power with respect to the shares shown as beneficially owned by him.
(2) Includes 95,000 shares which are subject to options that are presently
exercisable or become exercisable within 60 days of July 31, 1998.
(3) Includes 38,750 shares which are subject to options that are presently
exercisable or become exercisable within 60 days of July 31, 1998.
Mr. Marshall is the founder of the Company and has been its Chairman of the
Board since October 1954, and was Chief Executive Officer of the Company until
April 1994. Additionally, he served as President of the Company from April
1982 to June 1992. Mr. Marshall is also a member of the Board of Amistar
Corporation.
Mr. Rodin has been the President since June 1992 and Chief Executive Officer
of the Company since April 1994. He joined the Company in 1983 and was
promoted to Vice President in October, 1988 and Senior Vice President in
August, 1989.
Mr. Bentley has been Executive Vice President of the Company since August
1989. He joined the Company in 1978 and was promoted to Vice President in
October 1986 and Senior Vice President in April 1988.
Mr. Chin has served as the Vice President and Chief Financial Officer of the
Company since October 1991. He joined the Company as Corporate Controller in
November 1984 and was promoted to Vice President in August 1989. Mr. Chin is a
Certified Public Accountant.
Each officer serves at the pleasure of the Board and, unless earlier
removed, is elected annually for a one year term.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning the
compensation for the last three fiscal years of the Chief Executive Officer
and each of the other executive officers of the Company (the "named executive
officers").
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION(1) COMPENSATION(2)
-------------------- -------------------
NAME AND PRINCIPAL FISCAL INCENTIVE STOCK OPTIONS ALL OTHER
POSITION YEAR SALARY PAYMENTS(3) (NO. OF OPTIONS)(4) COMPENSATION(5)(6)
------------------ ------ -------- ----------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
Gordon S. Marshall(7).. 1998 $555,000 $ 84,816 -- $ 4,800
Chairman of the Board 1997 542,500 153,630 -- 4,750
1996 525,000 240,698 -- 3,731
Robert Rodin(7)........ 1998 837,503 222,872(8) 65,000 5,930
President and Chief 1997 750,000 313,846(8) -- 58,784(9)
Executive Officer 1996 645,833 279,747 50,000 5,642
Richard D. Bentley .... 1998 361,000 55,169 -- 9,720
Executive Vice 1997 361,000 102,932 -- 29,374(9)
President 1996 361,000 165,504 -- 9,058
Henry W. Chin.......... 1998 253,702 87,845(8) 15,000 5,657
Vice President, 1997 239,000 93,144(8) 15,000 22,315(9)
Finance, Chief 1996 225,000 101,625 -- 5,756
Financial Officer and
Secretary
</TABLE>
- --------
(1) The amounts included in this column for each of the named executive
officers do not include the value of certain perquisites which in the
aggregate did not exceed the lower of $50,000 or 10% of each named
executive's aggregate fiscal 1996, 1997 or 1998 salary and bonus
compensation.
(2) The Company did not make any payments or awards that would be classifiable
under the "Restricted Stock Award" and "LTIP Payout" columns otherwise
required to be included in the table by the applicable Securities and
Exchange Commission ("SEC") disclosure rules.
(3) The Company has a profit sharing plan in which all full-time employees are
participants and is based on the Company's pre-tax profits. Under this
profit sharing plan, the Company's officers can earn up to 80% of their
base salaries as incentive compensation.
(4) Represents shares of stock underlying options granted under the Marshall
Industries 1992 Stock Option Plan (the "1992 Stock Option Plan"). There
were no individual grants of stock options in tandem with stock
appreciation rights ("SAR's") or freestanding SAR's made during the fiscal
years ended May 31, 1996, 1997 or 1998 to the above-named executive
officers.
(5) Includes amounts contributed by the Company under the Marshall Industries
Tax Deferred Profit Sharing Plan which provides for participation by any
employee of Marshall who has completed six months of employment. Each
participant may defer from 2% to 12% of his earnings each payroll period,
the amount of which is placed by the Company in a nonforfeitable, fully
vested account on the employee's behalf. Under the tax laws, the maximum
amount which can be deferred for calendar years 1996, 1997 and 1998 were
$9,500, $9,500 and $10,000, respectively. The Company contributes
quarterly an amount equal to 50% of the employee's contributions in the
quarter up to a maximum amount equal to 3% of the employee's earnings in
the quarter. The vesting for the Company's contributions is at 20% for
each year of service with the Company. The employer contributions for
fiscal 1998 for Messrs. Marshall, Rodin, Bentley and Chin were $4,800,
$4,800, $5,000 and $4,637, respectively.
8
<PAGE>
(6) In 1992, the Board authorized increased amounts of life insurance for
Messrs. Rodin, Bentley and Chin at a total annual premium cost of
approximately $7,000. In addition, because the annual premium for a
$1,000,000 insurance policy on Mr. Marshall's life would be $70,000 to
$80,000, it was deemed preferable to provide a widow's benefit of $200,000
per year to Mrs. Marshall if she survives Mr. Marshall. The present value
of that benefit on an actuarial basis is less than $400,000.
(7) See Certain Relationships and Related Transactions.
(8) In addition to his participation in the Company's profit sharing plan, the
Board of Directors awarded Mr. Rodin discretionary bonuses of $100,000 for
fiscal years 1997 and 1998. Mr. Rodin's bonuses were paid in the fiscal
year awarded. In addition, Mr. Chin was awarded a $25,000 and $50,000
discretionary bonus for fiscal years 1997 and 1998, respectively. The
amount listed for fiscal 1997 reflects the $25,000 bonus earned but not
paid until fiscal 1998. The amount listed for fiscal 1998 reflects the
$50,000 bonus awarded and paid in fiscal 1998.
(9) During fiscal 1997 the Company amended its vacation policy. In connection
with the change in policy, all employees with vacation accrued in excess
of the maximum were given a one time excess vacation payment. Messrs.
Rodin, Bentley and Chin received $52,904, $19,904, and $17,124,
respectively.
STOCK OPTION PLANS
Under the outstanding option agreements under the Company's stock option
plans, if there is a change in control of the Company (as defined in the
plans), all options become immediately exercisable.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information with respect to the stock option
grants made during the 1998 fiscal year under the Company's stock option plans
to the named executive officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM
OPTIONS IN FISCAL OR BASE EXPIRATION ----------------------
GRANTED(1)(2) YEAR PRICE(3) DATE 5%(4) 10%(4)
------------- ---------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert Rodin............ 65,000 26% $35.0625 11/25/17 $3,767,887 $13,052,650
Henry W. Chin........... 15,000 6% 35.625 10/21/07 335,925 851,625
</TABLE>
- --------
(1) Represents options to purchase shares of Common Stock granted under the
1992 Stock Option Plan. The grant date for Messrs. Rodin and Chin was
November 25, 1997 and October 21, 1997, respectively. Mr. Chin's options
will become exercisable in four equal and successive annual installments,
with the first such installment to become exercisable one year after the
grant date. Mr. Rodin's stock option grant will become exercisable ten
years after the grant date with a twenty-year option period. The vesting
of Mr. Rodin's options will be accelerated upon the successful staffing of
certain senior management positions to the satisfaction of the Committee
and the Chairman of the Board.
(2) Under the terms of the Company's stock option plans, the Compensation
Committee retains discretion, subject to plan limits, to modify the terms
of outstanding options and to reprice options.
(3) At fair market value at date of grant.
(4) Represents gain that would be realized assuming the options were held for
the entire twenty-year option period with respect to Mr. Rodin's stock
option grant and the entire ten-year option period with respect to Mr.
Chin's stock option grant and the stock price increased at annual
compounded rates of 5% and 10%.
9
<PAGE>
Actual gains, if any, on stock option exercises and Common Stock holdings
will be dependent on overall market conditions and on the future
performance of the Company and its Common Stock. There can be no assurance
that the amounts reflected in this table will be achieved.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information concerning the exercise of stock
options during the 1998 fiscal year by each of the named executive officers
and the fiscal year-end value of their unexercised options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTIONS AT
SHARES AGGREGATE END FISCAL YEAR END(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gordon S. Marshall...... -- -- 0 0 $ 0 $ 0
Robert Rodin............ -- -- 95,000 210,000 787,625 2,032,500
Richard D. Bentley...... -- -- 0 120,000 0 2,032,500
Henry W. Chin........... -- -- 38,750 31,250 427,109 37,579
</TABLE>
- --------
(1) Based on the fair market value of the shares or $30.9375 per share on the
last day of the fiscal year less the exercise price payable for such
shares.
EMPLOYEE AGREEMENTS
The Company has entered into Change In Control Agreements with its executive
officers, Messrs. Marshall, Rodin, Bentley and Chin. Each of these agreements
provides that should there be a "change in control" (as defined), and the
officer's employment is terminated within twenty four months of any change in
control either (i) involuntarily, without just cause, or (ii) voluntarily, if
the officer has determined in good faith that his duties have been altered in
a material respect or there has been a material reduction in, or shift in the
composition of, his compensation or the officer is required to be based at any
office or location more than thirty miles from the Company's corporate
headquarters immediately preceding the change in control, then upon
termination, the officer would be entitled to receive cash compensation
subject to a non-compete provision. Mr. Marshall's agreement provides for a
one-time cash payment equal to the product of five times the greater of the
compensation for the last full calendar year or $750,000. The agreements with
Messrs. Rodin and Chin provide for a one time payment equal to the product of
36 times for Mr. Rodin and 24 times for Mr. Chin the highest monthly base
salary paid or payable during the 12 month period immediately preceding the
month of termination. In addition, Messrs. Rodin and Chin would receive a one-
time cash payment equal to the product of three times for Mr. Rodin and two
times for Mr. Chin the average annual bonus for the last three and two full
fiscal years, respectively, before the change in control date. Mr. Bentley's
agreement provides for a one-time cash payment equal to the product of 2 times
the greater of base salary, bonuses and other compensation for the last full
calendar year before Mr. Bentley's termination or $500,000. The agreement with
Mr. Bentley also provides for him to elect retirement from the Company at age
59 and become a consultant to the Company at a monthly amount equal to one-
twenty fourth of the payment that would have been paid under a change in
control, as described above, up to a twenty four month period. This consulting
arrangement with Mr. Bentley would terminate in the event of Mr. Bentley's
death or disability. Following such terminations under these agreements, the
officers and their families will be entitled to all benefits that are
generally applicable to an executive of the Company up to three years for
Messrs. Marshall and Rodin and two years for Messrs. Bentley and Chin.
Pursuant to each of the agreements, upon a change in control, the Company
shall cause the vesting of any stock options held to be accelerated to the
change in control date and in the case of Mr. Bentley's agreement, the Company
shall cause the vesting of any stock options to be accelerated upon his
retirement date. The total payments
10
<PAGE>
payable under these agreements could be reduced in the event that all or a
portion of such payments would be subject to the parachute provisions of
Section 280G (limiting deductibility) and Section 4999 (providing for an
excise tax on the recipient) of the Internal Revenue Code. Such reduction is
designed to produce the maximum after-tax benefit to the recipient of the
payments. A "change of control" of the Company is generally defined as (i) any
approval by the shareholders of any consolidation, merger, reorganization or
sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), other than a Business Combination in which
the holders of the Company's common stock immediately prior to the Business
Combination have at least seventy percent (70%) ownership of the voting
capital stock of the surviving corporation immediately after the Business
Combination, no person beneficially owns 30 percent or more of the Company's
outstanding common stock and at least a majority of the Board of Directors
remains in place, (ii) shareholder approval of any plan for the liquidation or
dissolution of the Company, (iii) any person becoming the beneficial owner of
thirty percent (30%) or more of the Company's outstanding common stock or
voting securities and the conditions of clause (iv) below are satisfied within
six months thereafter, or (iv) individuals who, as of the date of the
agreement, constitute the entire Board of Directors shall cease for any reason
to constitute a majority thereof unless the election, or the nomination for
election by the Company's shareholders, of each new director was approved by a
vote of at least a majority of the directors who were on the Board as of the
date of the agreement. Under the terms of the agreements, an officer may be
terminated without liability to the Company due to disability or for "cause",
defined generally as (i) the willful and continued failure to perform his or
her duties, or (ii) the willful engagement in misconduct which is materially
injurious to the Company.
The agreements will automatically be extended for one additional year at
their expiration dates unless terminated earlier due to termination of the
officer, death or disability of the officer or both parties agree to terminate
the Agreements with six months' written notice prior to the expiration dates.
The Company's Articles of Incorporation limit the liability of the Company's
directors, officers, and other agents to the extent permitted under California
law. On October 22, 1996, the Company entered into indemnification agreements
with each of its directors and officers: Gordon S. Marshall, Robert Rodin,
Richard D. Bentley, Henry W. Chin, Richard C. Colyear, Jean Fribourg, Lathrop
Hoffman, Jose Menendez, Raymond G. Rinehart and Howard C. White (each an
"Indemnitee"). Pursuant to the indemnification agreements, the Company has
agreed to indemnify each Indemnitee to the fullest extent permitted by law
against expenses (including attorneys' fees), judgements, fines and/or amounts
paid in settlement actually and reasonably incurred by the Indemnitee in
connection with actions, suits or proceedings involving the Indemnitee and
relating to the Indemnitee's service to the Company.
11
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In addition to the distribution of component parts, the Company provides a
variety of value-added services to its customers. Through the use of third
party contractors, the Company provides cable assembling and manufacturing
capabilities. One of the third party contract manufacturing arrangements is
with Amistar, a company of which Mr. Marshall is a director and a substantial
shareholder. Under this arrangement, Marshall accepts orders from its
customers and provides the necessary components, which Amistar then "mounts"
on circuit boards. Marshall pays Amistar for its services and invoices the
customers for the completed product. The Company believes that the amounts
paid to Amistar are not in excess of the amounts that would be charged by
unaffiliated manufacturers for the same services. During the fiscal years
ended May 31, 1996, 1997 and 1998 the Company paid Amistar approximately
$655,000, $941,000 and $1,393,000, respectively, under this arrangement.
Mr. Rodin is currently writing a biography of the Company. All of the
expenses, including $129,000 paid to an independent writer, associated with
the project will be borne by the Company. Any royalties related to future book
sales will accrue to the Company, and the authorship rights to the book will
be retained by Mr. Rodin. The Company has received $60,000 to date as advances
from the publisher.
In 1997 the Company's Board of Directors approved the sale of the Company's
condominium to Mr. Bentley for $165,000. The sales price was based on an
independent appraisal of the condominium. The Company does not own any other
such properties.
12
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished the
following report on employee compensation. Such report will not be deemed to
be incorporated by reference by any general statement incorporating this Proxy
Statement into any filing by the Company under the Securities Act of 1933 or
under the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed soliciting material or be deemed filed under such Acts.
The Compensation Committee consists entirely of independent outside
directors and has responsibility for administering the Company's stock option
plans and setting the senior executives' annual salaries.
The Company's executive compensation programs are intended to enable it to
attract and retain talented executives and to reward them appropriately. The
Compensation Committee attempts to determine the appropriate total levels of
compensation, as well as the appropriate mix of basic salary, short-term
incentives and long-term incentives.
All of the Company's executive officers, as well as all of its full-time
employees, participate in the Company's profit sharing plan. The plan is based
on pre-tax profits of the Company. The Company's officers can earn up to 80%
of their base salaries as profit sharing compensation.
In making its salary, bonus and stock option decisions, the Compensation
Committee considers a number of factors. The Compensation Committee also
considers the tax deductibility of compensation to the Company in making
compensation decisions, however, such deductibility is only one factor.
However, its ultimate determination is a subjective one and is based on the
total mix of information. The Compensation Committee reviews the compensation
practices of four of the Company's competitors as reported in their public
filings. Those competitors are Arrow Electronics, Inc., Avnet, Inc., Bell
Industries, and Pioneer-Standard Electronics, Inc. These companies are
included in the peer group comparisons elsewhere in this Proxy Statement. The
Compensation Committee also compares the Company's short and long-term results
with the performance of those same competitors, the industry in general and
various other related data, to ensure a pay-for-performance linkage. The
primary performance measures examined are earnings results, total shareholder
return and the strength of the Company's strategic position. By these
measures, the Compensation Committee believes that the Company achieves above
average to superior results.
The Compensation Committee meets without the CEO to evaluate his
performance, and with the CEO to evaluate the performance of other executive
officers. During the fiscal year, the Compensation Committee awarded Messrs.
Rodin and Chin discretionary bonuses of $100,000 and $50,000,
respectively. Mr. Rodin was also awarded an additional $100,000 bonus to be
paid upon the achievement of certain cost synergies associated with the
acquisition of Sterling Electronics. In addition, a $175,000 salary increase
for Mr. Rodin was approved during the October 21, 1997 Compensation Committee
meeting. The Committee believes that the total compensation of its executives
is competitive and appropriately rewards their achievements.
Howard C. White, Chairman
Richard C. Colyear
Lathrop Hoffman
Raymond G. Rinehart
13
<PAGE>
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN AMONG
MARSHALL INDUSTRIES, S&P 500 INDEX AND PEER GROUP INDEX
The following graph compares cumulative total shareholder return on the
Company's Common Stock for the periods indicated with the cumulative total
return of companies on the Standard & Poor's 500 Stock Index and a group
consisting of the Company's peer corporations. The corporations making up the
peer companies group are the 34 electronic component distributor companies
included in SIC Code 5065--Electronic Parts & Equipment, N.E.C. The information
for the graph was provided by Media General Financial Services. This graph
assumes that $100 was invested on June 1, 1993 in the Company and each of the
two indices, and that dividends were reinvested. It should be noted that the
Company has not paid dividends on its Common Stock, and no dividends are
included in the representation of the Company's performance.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN AMONG
MARSHALL INDUSTRIES, S&P 500 INDEX AND SIC CODE INDEX
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period MARSHALL S&P
(Fiscal Year Covered) INDUSTRIES 500 INDEX Peer Group
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt- 5/31/1993 $100.00 $100.00 $100.00
FYE 5/31/1994 $117.37 $104.26 $ 97.35
FYE 5/31/1995 $129.34 $125.31 $120.30
FYE 5/31/1996 $150.30 $160.95 $152.54
FYE 5/31/1997 $174.25 $208.29 $170.11
FYE 5/31/1998 $148.20 $272.20 $159.36
</TABLE>
ASSUMES $100 INVESTED ON JUNE 1, 1993
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDED MAY 31, 1998
The stock price performance depicted in the above graph is not necessarily
indicative of future price performance. The performance graph will not be
deemed to be incorporated by reference by any general statement incorporating
this proxy statement into any filing by the Company under the Securities Act of
1933 or under the Securities Exchange Act of 1934, except to the extent that
the Company specifically incorporates this information by reference, and shall
not otherwise be deemed soliciting material or be deemed filed under such acts.
14
<PAGE>
PROPOSAL--SELECTION OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed Arthur Andersen LLP as
independent accountants for the Company for the fiscal year ending May 31,
1999. Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting and will have an opportunity to make a statement if they desire
to do so and are expected to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND THAT THE SHAREHOLDERS VOTE
FOR THE PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Copies of resolutions proposed by shareholders to be presented at the 1999
Annual Meeting of Shareholders must be received by the Company at its
corporate headquarters, 9320 Telstar Avenue, El Monte, California 91731-2895
on or before May 1, 1999 to have such resolutions included in the proxy
statement and form of proxy for such Annual Meeting.
OTHER MATTERS
The management does not know of any other matters to be acted upon at the
Annual Meeting. If any other matters should properly come before the Annual
Meeting, or an adjournment thereof, the proxies will be voted with respect
thereto in accordance with the discretion of the proxyholders.
GORDON S. MARSHALL
Chairman
FORM 10-K
The Company's Annual Report to Shareholders for the fiscal year ended May
31, 1998 includes a copy of its Annual Report on Form 10-K, including the
financial statements and schedules thereto, filed with the Securities and
Exchange Commission.
15
<PAGE>
MARSHALL INDUSTRIES/PROXY 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
I hereby appoint Gordon S. Marshall and Henry W. Chin, and each of them or
either of them with full power to act without the other and with full power of
substitution, my true and lawful attorneys and proxies, to vote all the shares
of stock of Marshall Industries held of record by me on August 24, 1998 and to
act for me and in my name, place and stead at the Annual Meeting of
Shareholders to be held on Tuesday, October 20, 1998 or any adjournment
thereof, for the purpose of considering and voting upon the following:
1. ELECTION OF DIRECTORS.
[_] For ALL Nominees listed below
[_] Withhold authority to vote ALL Nominees listed below
(Instruction: To withhold authority to vote for any individual Nominee,
strike a line through the Nominee's name in the list below.)
<TABLE>
<S> <C> <C> <C> <C>
Gordon S. Marshall Richard D. Bentley Jean Fribourg Jose Menendez Howard C. White
Robert Rodin Richard C. Colyear Lathrop Hoffman Raymond G. Rinehart
</TABLE>
2. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING MAY 31, 1999
[_] FOR [_] AGAINST [_] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and to vote the proxies
cumulatively in their discretion if cumulative voting is in effect at the
meeting.
(Please sign and date the reverse side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2.
Please sign exactly as name appears below. This Proxy
should be dated, signed by the shareholder as name
appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity
should so indicate.
-----------------------------------------------------
Signature
-----------------------------------------------------
Signature if held jointly
DATED: ________________________________________, 1998
