<PAGE>
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
WESTERN MICRO TECHNOLOGY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
WESTERN MICRO TECHNOLOGY, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $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:
----------------------------------------------------------------------
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:
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
[ ] Fee previously paid 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:
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<PAGE>
WESTERN MICRO TECHNOLOGY, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of
WESTERN MICRO TECHNOLOGY, INC.:
The Annual Meeting of Shareholders of Western Micro Technology, Inc. (the
"Company") will be held at 254 East Hacienda Avenue, Campbell, California 95008,
on May 16, 1996 at 10:30 a.m. for the purpose of considering and acting upon the
following proposals:
(1) To elect a Board of six (6) directors to hold office until
the next annual meeting of shareholders or until their respective
successors have been elected and qualified;
(2) To approve the amendment and restatement of the Company's
1994 Stock Option Plan;
(3) To ratify the designation of Coopers & Lybrand L.L.P. as
independent accountants for the period ending December 31, 1996; and
(4) To transact such other business as may properly come before
the meeting.
The Board of Directors has fixed the close of business on March 22, 1996 as
the record date for determination of shareholders entitled to notice of and to
vote at the Annual Meeting and at any postponements or adjournments thereof.
The Company's December 31, 1995 Annual Report to Shareholders accompanies
this Notice of Annual Meeting of Shareholders and Proxy Statement.
By Order of the Board of Directors
P. Scott Munro
Secretary
Campbell, California
April 12, 1996
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN THE ACCOMPANYING PROXY
CARD IN THE ENCLOSED ENVELOPE.
<PAGE>
WESTERN MICRO TECHNOLOGY, INC.
254 EAST HACIENDA AVENUE
CAMPBELL, CA 95008
(408) 379-0177
____________________
PROXY STATEMENT
____________________
ANNUAL MEETING OF SHAREHOLDERS
MAY 16, 1996
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Western Micro Technology, Inc. (the "Company") of
proxies for use at the Annual Meeting of Shareholders of the Company to be held
on May 16, 1996 at 10:30 a.m. at the principal executive offices of the Company
located at 254 East Hacienda Avenue, Campbell, California 95008. This proxy
statement and the accompanying form of proxy are being mailed to shareholders on
or about April 12, 1996.
VOTING RIGHTS
Shareholders of record of the Company as of the close of business on March
22, 1996 have the right to receive notice of and to vote at the Annual Meeting.
On March 22, 1996, the Company had issued and outstanding 4,204,645 shares of
Common Stock, the only class of voting securities outstanding. Each share of
Common Stock is entitled to one vote for as many separate nominees as there are
directors to be elected and for or against all other matters presented. For
action to be taken at the Annual Meeting, the majority of the shares entitled to
vote must be represented at the meeting in person or by proxy. Director
nominees receiving the highest number of affirmative votes up to the number of
directors to be elected will be elected. Votes withheld with respect to
director nominees have no legal effect. Cumulative voting is not available in
the election of directors at the Annual Meeting, as cumulative voting was
eliminated by the vote of the shareholders at the 1994 Annual Meeting. The
affirmative vote of a majority of the shares voting and a majority of the
required quorum is the minimum approval necessary and is required to approve the
amendment and restatement of the Company's 1994 Stock Option Plan and the
ratification of Coopers & Lybrand L.L.P. as independent accountants.
Consequently, abstentions and broker non-votes will generally have no effect.
However, if the number of abstentions is such that the affirmative votes do not
constitute the requisite vote, the proposal will be defeated.
PROXIES
Proxies for use at the Annual Meeting are being solicited by the Board of
Directors of the Company from its shareholders.
Shares represented by properly executed proxies received by the Company
will be voted at the Annual Meeting in accordance with the instructions thereon.
It is intended that shares represented by proxies received by the Company with
no instructions will be voted in favor of all proposals set forth in the Notice
of Meeting and for the nominees as described below.
Any person giving a proxy in the form accompanying this Proxy Statement has
the power to revoke it at any time before its exercise by (i) filing with the
Secretary of the Company a signed written statement revoking his or her proxy or
(ii) submitting an executed proxy bearing a date later than that of the proxy
being revoked. A proxy may also be revoked by attendance at the Annual Meeting
and election to vote in person. Attendance at the Annual Meeting will not by
itself constitute the revocation of a proxy.
-1-
<PAGE>
PROPOSAL NUMBER 1
ELECTION OF DIRECTORS
At the Annual Meeting, a Board of six (6) directors will be elected. The
board of directors currently consists of six (6) directors. Except as set forth
below, unless otherwise instructed, the proxy holders will vote the proxies
received by them for Management's nominees named below. All six (6) of the
nominees are presently directors of the Company. In the event that any
Management nominee shall become unavailable, the proxy holders will vote in
their discretion for a substitute nominee. It is not expected that any nominee
will be unavailable. The term of office of each person elected as a director
will continue until the next Annual Meeting of Shareholders or until a successor
has been elected and qualified.
THE DIRECTORS NOMINATED BY MANAGEMENT ARE:
JAMES J. HEFFERNAN, 54, was elected as a Director of the Company in October
1995. Since January 1996 he has been Chief Financial Officer and a Director of
US Web Corporation, a franchisor of World Wide Web developers. He was Chief
Financial Officer of Interlink Computer Sciences, a software company, from March
1995 to January 1996. Prior to such time, Mr. Heffernan was Chairman of the
Board and Chief Financial Officer of Panoramic, Inc., a software company.
Panoramic filed for Chapter 11 bankruptcy in May 1991 and all of its assets were
sold to Computer Associates, Inc. From June 1994 to June 1995, Mr. Heffernan
was a board member of International Microcomputer Software, Inc. He was Vice
President of Finance and Chief Financial Officer of Software Publishing, Inc., a
position he held from 1987 through 1989.
JEROME A. MARTIN, 55, was elected as a Director of the Company in October
1995 and has been active in the business development of the Company since
December 1, 1994. Mr. Martin was President and Chairman of the Board of First
Computer Corporation, a systems distributor ("FCC") founded by Mr. Martin in
1976. On December 1, 1994, the Company acquired FCC, which became a wholly
owned subsidiary of the Company.
P. SCOTT MUNRO, 39, was appointed as a Director of the Company in July 1995
and has been the President, Chief Executive Officer and Secretary of the Company
since July 1995. From January 1993 to July 1995, Mr. Munro was President,
Computer Systems Division of the Company and from July 1990 to January 1993
Senior Vice President, Computer Systems Division of the Company.
K. WILLIAM SICKLER, 46, was elected as a Director of the Company in July
1993. Currently, Mr. Sickler is Executive Director of Software Business
Development for Seagate Technology, a manufacturer of disk drives and software
developer, with responsibility for analysis of potential software company
acquisitions. Until July 1995, Mr. Sickler was President and Chief Executive
Officer of Network Computing, Inc., a provider of network management software
for local area networks. From 1980 to 1992, he was employed by Ungermann-Bass,
Inc., a provider of networking products and services. His most recent position
was that of Chief Operating Officer. Prior to that, he held the positions of
Vice President of Operations and Vice President of Manufacturing and Quality.
J. LARRY SMART, 48, was elected as a Director of the Company and was
appointed as Chairman of the Board in October 1995. He has been Chairman of the
Board, President and Chief Executive Officer of Micropolis Corporation, a data
storage company, since July 1995. From March 1994 to February 1995, Mr. Smart
was President and Chief Executive Officer of Maxtor Corporation, a data storage
company. From July 1991 to February 1995, Mr. Smart was President and Chief
Executive Officer of Southwall Technologies, Inc., a material science company.
WILLIAM H. WELLING, 62, was appointed a Director of the Company in April
1993. Since September 1989, he has served as Chairman of the Board and Chief
Executive Officer of Xiox Corporation, a
-2-
<PAGE>
telecommunications software company. Since September 1983, he has been Managing
Partner of Venture Growth Associates partnerships, investment partnerships.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES LISTED ABOVE.
COMMITTEES AND MEETINGS
The total number of regular and special meetings of the Board of Directors
held in the last fiscal year was 16. All directors attended at least
seventy-five percent (75%) of the Board meetings and the meetings of the
committees of the Board on which such director served.
The Audit Committee of the Board, which presently consists of Messrs.
Welling and Heffernan, met once during the last fiscal year. The Audit
Committee has the responsibility to review the scope of the annual audit,
recommend to the Board of Directors the appointment of the independent
accountants, and meet with the independent accountants for review and analysis
of the Company's systems, the adequacy of controls and the sufficiency of
financial reporting and legal accounting compliance.
The Executive Compensation Committee of the Board, which presently consists
of Messrs. Heffernan and Sickler, met once during the last fiscal year. The
Executive Compensation Committee has the responsibility for determining the
compensation to be paid to each of the Company's executive officers. During
1995, the Executive Compensation Committee also administered the Company's
Amended and Restated Incentive and Non-Incentive Stock Option Plan and the 1994
Stock Option Plan (collectively, the "Stock Option Plans").
The Stock Option Committee, which presently consists of Messrs. Heffernan
and Smart, was created in January 1996. The Stock Option Committee administers
the Company's Stock Option Plans.
The Nominating Committee, which presently consists of Messrs. Heffernan,
Martin, Munro, Sickler, Smart and Welling met once during 1995. The Nominating
Committee recommends to the Board of Directors persons for nomination to the
Board. The Nominating Committee will consider recommendations from shareholders
which should be addressed to the attention of the Secretary, Western Micro
Technology, Inc., 254 East Hacienda Avenue, Campbell, California 95008.
SECTION 16 REPORTS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors and certain shareholders to file reports of
ownership and changes in ownership of the Company's Common Stock with the
Securities and Exchange Commission. Mr. Sickler, a Director of the Company,
filed a Form 4 in September 1995 approximately six days late, relating to the
purchase by an entity related to Mr. Sickler of 4,900 shares of Common Stock.
Mr. Smart, Chairman of the Board, filed a Form 4 in February 1996 approximately
one month late, relating to the purchase of 4,500 shares of Common Stock.
-3-
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND CERTAIN SHAREHOLDERS
The following table sets forth information as to the beneficial ownership
of the Company's Common Stock as of March 31, 1996 (unless otherwise indicated),
of each person known to the Company to be the beneficial owner of more than five
percent (5%) of its Common Stock, no par value, and the number of shares owned
by each director, each executive officer named in the Summary Compensation Table
and all executive officers and directors as a group.
<TABLE>
<CAPTION>
Shares
Beneficially
Name of Beneficial Owner(1) Owned Percent
------------------------ ------------- -------
<S> <C> <C>
Bernard T. Marren 371,400 8.8%
20823 Stevens Creek Blvd., Ste. 400
Cupertino, CA 95014
ROI Capital Management, Inc. ("ROI") 323,600 7.7%
and affiliates(2)
One Bush Street, Ste. 1150
San Francisco, CA 94104
John H. Ashbaugh 0 *
Donald A. Cochrane 21,250(3) *
James W. Dorst 15,000 *
James J. Heffernan 0 *
Ronald H. Mabry 0 *
Jerome A. Martin 73,717 1.8%
P. Scott Munro 44,218(3) 1.0%
K. William Sickler 12,500(3) *
J. Larry Smart 14,000 *
William H. Welling 53,426(3)(4) 1.3%
All Executive Officers and Directors as a Group 234,111(5) 5.5%
(8 persons)
</TABLE>
__________
* Less than one percent (1%).
(1) Unless otherwise indicated, the beneficial owner has sole voting and
dispositive power over the shares reported in the table.
(2) Based on a Schedule 13D dated January 26, 1996 filed jointly by ROI, ROI
Partners, L.P. ("PTRS"), ROI & Lane, L.P. ("R&L"), Mark T. Boyer and
Mitchell J. Soboleski reporting beneficial ownership as follows:
Shares Shared Voting and
Beneficially Owned Dispositive Power
------------------ -----------------
ROI 323,600 323,600
PTRS 201,000 201,000
-4-
<PAGE>
Shares Shared Voting and
Beneficially Owned Dispositive Power
------------------ -----------------
R&L 24,000 24,000
Mr. Boyer 201,000 201,000
Mr. Soboleski 201,000 201,000
Messrs. Boyer and Soboleski are the sole shareholders of ROI and
respectively, President and Secretary. Messrs. Boyer and Soboleski and ROI
are the general partners of PTRS, which is an investment limited
partnership. ROI is the managing general partner of R&L, which is an
investment partnership.
(3) Includes shares purchasable under the Company's Stock Option Plans, as of
March 31, 1996 or within sixty (60) days thereafter as set forth below.
See also "Change in Control" at page 8 below.
P. Scott Munro: 2,968 shares at $2.13
5,000 shares at $2.25
5,000 shares at $2.75
7,500 shares at $3.63
18,750 shares at $6.00
K. William Sickler: 5,000 shares at $8.25
2,500 shares at $5.00
William H. Welling: 5,000 shares at $8.25
2,500 shares at $5.00
Donald A. Cochrane: 11,250 shares at $6.00
(4) Of the shares attributed to William H. Welling, 45,926 are shares held
of record by Venture Growth Associates II, the general partner of which
is BW Partners, of which Mr. Welling is a general partner. Mr. Welling
disclaims beneficial ownership of such shares except to the extent of
his proportionate interest in Venture Growth Associates II.
(5) Includes 65,468 shares subject to outstanding options held by executive
officers and directors.
-5-
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning
compensation paid to the Company's Chief Executive Officer, certain of the
Company's other executive officers, the Company's former Chief Executive Officer
and the Company's former Senior Vice President, Marketing (the "named executive
officers"), for the fiscal years ended December 31, 1995, 1994 and 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensa-
tion Awards
-----------
Annual Compensation
------------------------------- Securities
Name and Fiscal Other Annual Underlying All Other
Principal Position Year Salary Bonus Compensation Options Compensation
- ---------------------------- ------ ------ ----- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
P. Scott Munro 1995 $183,660 $152,530 0 60,000 -
President, Chief Executive 1994 $171,234 $75,550 0 100,000(1) $3,414(2)
Officer and Secretary 1993 $146,853 $60,670 0 0 $4,199
James W. Dorst(3) 1995 $106,750 $30,640 $20,833 50,000 -
Chief Financial Officer
Donald A. Cochrane(4) 1995 $112,980 $82,629 0 37,500 -
Senior Vice President, Sales
and Marketing
Ronald H. Mabry(5) 1995 $113,760 $74,820 0 0 $75,000(7)
Former Chairman of the Board, 1994 $150,000 $75,000 $37,811(6) 300,000(1) -
Chief Executive Officer,
President and Secretary
John H. Ashbaugh(8) 1995 $97,956 0 0 0 $65,433(8)
Former Senior Vice President, 1994 $86,140 $10,000 0 50,000(1) -
Marketing
</TABLE>
__________
(1) Certain of the Company's executive officers received stock options in 1994,
which options were subsequently repriced later in the year. The rules of
the Securities and Exchange Commission require that both the original
option grant and the repriced option be reported as separate grants of
stock options. However, since the original options received in 1994 were
canceled at the time of repricing, the grantees were entitled only to the
amount of the shares covered by the repriced options. See also "Change in
Control" at page 8.
(2) Consists of medical costs covered by the Company's medical reimbursement
plan.
(3) Mr. Dorst served as a consultant to the Company until he was hired, in May
1995. During his consultancy with the Company he was paid $20,833.
(4) Mr. Cochrane became an executive officer in July 1995.
(5) Mr. Mabry was hired in April 1994. Mr. Mabry resigned from the Company
effective July 26, 1995. See "Employment Agreements" on page 8.
(6) Includes costs of relocating Mr. Mabry from Southern California, including
a housing allowance, an allowance for weekly round trips to Southern
California and the costs associated with leasing and maintaining a company
car. Mr. Mabry's 1994 other annual compensation includes $5,000 which
represents imputed interest on an interest-free loan.
(7) This amount represents a severance payment, of which $50,000 was used to
discharge a debt Mr. Mabry had outstanding to the Company.
(8) Mr. Ashbaugh was hired in June 1994 and resigned from the Company effective
June 30, 1995. Mr. Ashbaugh received the $65,433 as severance.
-6-
<PAGE>
The following table sets forth certain information regarding options
granted during the fiscal year ended December 31, 1995 to the Company's named
executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Percent of Potential Realized Value
Number of Total at Assumed Annual Rates
Securities Options of Stock Price Appreciation
Underlying Granted to for Option Term
Options Employees in Exercise or Base Expiration ---------------------------
Granted Fiscal Year Price ($/Share) Date 5% 10%
----------- ---------------- ---------------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
P. Scott Munro 60,000(1) 18.6% $2.25 6/21/09 $132,291 $377,662
James W. Dorst 50,000(1) 15.5% $2.25 6/21/09 110,242 314,718
Donald A. Cochrane 37,500(1) 11.6% $2.25 6/21/09 82,682 236,038
Ronald H. Mabry 0 -- -- -- -- --
John H. Ashbaugh 0 -- -- -- -- --
</TABLE>
__________
(1) These options vest twenty-five percent (25%) over a four (4) year period.
See also "Change in Control" at page 8.
The following table shows the number of shares of Common Stock represented
by outstanding stock options held by each of the named executive officers as of
December 31, 1995. The Company's Common Stock price as at close of business on
December 29, 1995 was $5.25.
FY-END OPTION VALUES(1)
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at FY-End Options at FY-End
# #
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
<S> <C> <C>
P. Scott Munro 39,218 / 122,500 $48,963 / $193,593
James W. Dorst 0 / 50,000 $0 / $150,000
Donald A. Cochrane 8,750 / 53,750 $0 / $112,500
Ronald H. Mabry 0 / 0 $0 / $0
John H. Ashbaugh 0 / 0 $0 / $0
</TABLE>
COMPENSATION OF DIRECTORS
Outside directors (i.e., those who are not employees of the Company)
receive an annual retainer of $20,000, plus $750 for each board meeting
attended. The Company pays for directors' liability insurance and has entered
into indemnification agreements with each of the directors.
At the 1994 Annual Meeting, the Company approved the adoption of the
Company's 1994 Stock Option Plan. Among many other benefits, the 1994 Stock
Option Plan provides for the grant of an option of
- --------------------
(1) None of the Company's named executive officers exercised options
during 1995.
-7-
<PAGE>
10,000 shares of the Company's Common Stock to certain directors who are not
employees following their initial election and at every fourth regular annual
meeting thereafter while they serve on the Board of Directors. Subject to
shareholder approval of the amendment and restatement of the 1994 Stock Option
Plan, current non-employee directors will receive an option for 10,000 shares
upon their initial appointment or election and an option for 2,500 shares at
every regular annual meeting thereafter at which they are elected. The exercise
price will be the fair market value of the shares on the date of each respective
grant. The Board of Directors has approved the amendment and restatement of the
1994 Stock Option Plan, subject to shareholder approval, in order to institute
the foregoing grants to certain directors who are not employees. See "Proposal
Number 2, Amendment and Restatement of the Company's 1994 Stock Option Plan -
Participants".
CHANGE IN CONTROL
Stock options held by certain of the Company named executive officers under
the Company's Stock Option Plans will become fully vested and exercisable
following a change in control of the Company, unless such acceleration of
vesting would, in the sole judgment of the Board of Directors, based on advice
of the Company's independent accountants, be an impediment to accounting for
such a transaction as a pooling of interests, in which case the options will not
become fully vested and immediately exercisable. Stock options outstanding
under the Stock Options Plans granted to Mr. Dorst will become fully vested and
exercisable if Mr. Dorst's employment is actually or constructively terminated
within twelve (12) months, following a change in control of the Company. A
change in control means the occurrence of any of the following events: (1)
shareholder approval of a merger or consolidation of the Company with any other
corporation resulting in a change in fifty percent (50%) or more of the total
voting power of the Company; (2) shareholder approval of a plan of complete
liquidation of the Company or an agreement for the sale or disposition of all or
substantially all of the Company's assets; or (3) any person becomes the
beneficial owner of more than fifty percent (50%) of the Company's total
outstanding securities.
EMPLOYMENT AGREEMENTS
The Company entered into an Employment Agreement with P. Scott Munro dated
June 1, 1994. Pursuant to the terms of the Agreement, Mr. Munro was entitled to
a base salary of $175,000 per year and was eligible to receive a bonus of up to
$75,000 ($18,750 of which was guaranteed and paid in the first three months of
Mr. Munro's employment in installments of $6,250, and the remainder of which was
to be based on criteria to be determined by September 1, 1994). If Mr. Munro
was terminated for cause, he was entitled to receive his base salary and bonus
due through the date of his termination. If Mr. Munro was terminated without
cause, he was entitled to receive his base salary and employee benefits due at
the time of his termination, plus his bonus (payable at a rate equal to that of
the bonuses received during the six months prior to such termination) for twelve
(12) months following his termination. If Mr. Munro's responsibilities were
reduced following a change in control and such reduction in responsibilities was
not for cause, any resignation of employment by Mr. Munro as a consequence of
such reduction in responsibilities would have been treated as a termination of
employment without cause. See "Change in Control" above for the definition of
Change in Control.
The Company entered into an Employment Agreement with P. Scott Munro dated
January 1, 1996. Pursuant to the terms of the Agreement, Mr. Munro is entitled
to a base salary of $203,000 per year and is eligible to receive a bonus of up
to $125,000 a year (up to $25,000 of which will be payable quarterly pursuant to
certain quarterly performance goals and $25,000 of which will be paid annually
pursuant to certain annual performance goals). Mr. Munro was also granted an
option, subject to shareholder approval, to purchase 40,000 shares, which vests
over a five (5) year period at the rate of twenty-five percent (25%) per year
beginning on the second anniversary of the grant. If Mr. Munro is terminated
for cause, he will be entitled to receive his base salary and bonus due through
the date of his termination. If Mr. Munro is terminated without cause, he will
be entitled to receive his base salary for twelve (12) months following his
termination. If Mr. Munro's responsibilities are reduced within twelve (12)
months following a change in control and such reduction in responsibilities is
not for cause, any resignation of employment by Mr. Munro as a consequence of
such reduction in responsibilities will be treated as a termination of
employment without cause.
-8-
<PAGE>
The Company entered into an Employment Agreement with Mr. Dorst dated June
12, 1995. Pursuant to the terms of the Agreement, Mr. Dorst is entitled to a
base salary of $150,000 per year and is eligible to receive a bonus of up to
$50,000 per year, subject to certain performance goals. Mr. Dorst was granted
an option to purchase 50,000 shares, which vests at the rate of twenty-five
percent (25%) per year (subject to cliff-vesting in the first year). If Mr.
Dorst is terminated for cause, he will be entitled to receive his base salary
and bonus due through the date of his termination. If Mr. Dorst is terminated
without cause, he will be entitled to receive his base salary for nine (9)
months following his termination in accordance with the Company's severance
policy. If Mr. Dorst's responsibilities are reduced within twelve (12) months
following a change in control, and such reduction in responsibilities is not for
cause, any resignation of employment by Mr. Dorst as a consequence of such
reduction in responsibilities will be treated as a termination of employment
without cause.
The Company entered into an Employment Agreement with Donald A. Cochrane
dated January 1, 1996. Pursuant to the terms of the Agreement, Mr. Cochrane is
entitled to a base salary of $150,000 per year and is eligible to receive a
bonus of up to $70,000 a year, (up to $15,000 of which will be paid quarterly
pursuant to certain quarterly performance goals and up to $10,000 of which will
be paid annually based on the achievement of certain annual performance goals).
Mr. Cochrane was also granted an option, subject to shareholder approval, to
purchase 20,000 shares, which vests over a five (5) year period at the rate of
twenty-five percent (25%) per year beginning on the second anniversary of the
grant. If Mr. Cochrane is terminated for cause, he will be entitled to receive
his base salary and bonus due through the date of his termination. If Mr.
Cochrane is terminated without cause, he will be entitled to receive his base
salary for nine (9) months following his termination. If Mr. Cochrane's
responsibilities are reduced within twelve (12) months following a change in
control and such reduction in responsibilities is not for cause, any resignation
of employment by Mr. Cochrane as a consequence of such reduction in
responsibilities will be treated as a termination of employment without cause.
The Company entered into a two year Employment Agreement with Ronald H.
Mabry dated April 1, 1994. Pursuant to the terms of the Agreement, Mr. Mabry
was paid a base salary of $200,000 per year and was eligible to receive a bonus
of up to $100,000 a year ($50,000 of which was guaranteed and the other $50,000
of which was subject to the achievement of certain performance goals). Mr.
Mabry resigned all of his positions with the Company effective July 26, 1995.
In connection with such resignation, Mr. Mabry received a cash severance in the
amount of $75,000, of which $50,000 was used to discharge Mr. Mabry's
outstanding loan obligations and $25,000 was paid to Mr. Mabry in cash at the
closing of the Company's sale of certain assets to Reptron Electronics, Inc.
("Reptron"). Mr. Mabry also was granted the right to receive up to an
additional $120,000 in incentive payments.
The Company entered into a one year Employment Agreement with John Ashbaugh
dated July 29, 1994. Pursuant to the terms of the Agreement, Mr. Ashbaugh was
paid a base salary of $160,000 per year and was eligible to receive a bonus of
up to $40,000 a year ($20,000 of which was guaranteed and the other $20,000 was
subject to the achievement of certain performance goals.) Mr. Ashbaugh was also
granted an option to purchase 50,000 shares, which was scheduled to vest at the
rate of twenty-five percent (25%) per year (subject to cliff-vesting in the
first year) and was entitled to a company car. Mr. Ashbaugh resigned all
positions with the Company on June 30, 1995. In connection with such
termination, Mr. Ashbaugh received a severance payment equal to $65,433. Mr.
Ashbaugh forfeited his stock option.
-9-
<PAGE>
EXECUTIVE COMMITTEE REPORT ON COMPENSATION
The compensation of the Company's executive officers is determined by the
Executive Compensation Committee of the Board of Directors (the "Compensation
Committee") on an annual basis. The Chief Executive Officer's recommendations
of compensation to be paid to other executive officers of the Company are
considered by the Compensation Committee in its decision-making process. The
Compensation Committee is currently composed of two (2) non-employee directors.
The Stock Option Committee of the Board of Directors administers the
Company's Stock Option Plans and determines grants to executive officers. The
Stock Option Committee is composed of two "disinterested" directors, as defined
by Rule 16b-3 under the Securities Exchange Act of 1934, as amended.
The Compensation Committee's policy on executive compensation is to attract
and retain highly qualified personnel while tying compensation to performance.
Consequently, the Compensation Committee seeks to establish compensation that
will reward individuals for Company performance as well as individual
performance and motivate and reward executives for achievement of strategic
business objectives.
The primary factors used by the Compensation Committee in determining the
compensation of the Company's executive officers are as follows:
1. The executive officer's individual performance and contributions to
the Company;
2. The financial results of the Company, including return on assets; and
3. The compensation of executive officers employed by companies in
similar industries with similar revenue levels.
EXECUTIVE COMPENSATION GENERALLY
- --------------------------------
In May 1995, the Company entered into an Asset Sale Agreement with Reptron,
pursuant to which Reptron agreed to acquire the Company's electronics components
distribution assets. The transaction closed on July 26, 1995. The sale
signaled a change in the direction of the Company's business to systems
distribution. On May 12, 1995, contemplating that Mr. Mabry, the Company's
former Chief Executive Officer, and Mr. Ashbaugh, the Company's former Senior
Vice President, Marketing, would join Reptron to head the electronics
distribution business being acquired, the Board formed a new management team,
promoting P. Scott Munro to the position of President and Chief Executive
Officer, promoting Donald A. Cochrane to Senior Vice President, Sales and
Marketing, and hiring James W. Dorst as Chief Financial Officer. At such time,
the Board, upon recommendation of the Compensation Committee, established the
compensation of the executive officers comprising the new management team.
During 1995, the compensation of executive officers was generally composed
of (i) base salary, (ii) a cash bonus and (iii) stock options.
Base Salary. The base salaries of the Company's former executive officers,
-----------
Messrs. Mabry and Ashbaugh, were based on the employment agreements negotiated
by each such officer in 1994. See "Employment Agreements" at page 8. Prior to
the close of the Reptron transaction, the base salaries of two of the Company's
current executive officer, Messrs. Munro and Cochrane, were based on their prior
performance and achievements and an assessment of salaries paid to executive
officers of companies in similar industries with similar revenue levels based on
the American Electronics Association's ("AEA") Executive Compensation in the
Electronics Industry Report dated April 1, 1991 (which salaries were increased
to compensate for average wage increases through 1995). The AEA Report
consisted of a survey of approximately 879 companies in the electronics
industry, some of which companies are included in the Company's Self-
Determined Peer Group Index. Both such executives received an increase in
salary upon the closing of the
-10-
<PAGE>
Reptron transaction to reflect their added responsibilities. The base salary of
Mr. Dorst was determined based on an arm's length negotiation which occurred at
the time he was hired.
Bonus. All of the executive officers were eligible to receive a cash
-----
bonus. For Messrs. Munro, Cochrane and Dorst, the bonus amount was based on the
degree to which specific performance goals, e.g., return on assets, were
achieved in relation to targeted goals. The target bonus amounts for these
executive officers was designed to represent between 33% (for Mr. Dorst) and 52%
(for Mr. Munro) of annual base salary. As a result of the Company's performance
in 1995, these executive officers received cash bonuses in the aggregate amount
of $265,799.
Mr. Mabry was eligible to receive a bonus of up to $120,000 based on the
sale of certain designated inventory and collection of certain accounts
receivables related to the Reptron transaction. Mr. Mabry was paid a bonus of
$45,654.
Stock Options. In June 1995, the Company's current executive officers
-------------
received stock options which are set forth in the Summary Compensation Table.
Messrs. Mabry and Ashbaugh did not receive a stock option grant in 1995. Stock
options were granted to the Company's current executive officers on the basis of
each such executive's anticipated future performance and contributions to the
Company and are designed to align more closely the interests of the executive
with the interests of the shareholders and to provide the executives with an
incentive by granting them financial participation in the success of the
Company. The Committee approved the stock option grants because, with the new
management team, the Committee felt it was important to provide this added
incentive to motivate the new team to maximize shareholder value.
CHIEF EXECUTIVE OFFICER COMPENSATION
- ------------------------------------
Mr. Munro's base salary for 1995 was $175,000, which was negotiated as part
of his employment agreement in 1994. Effective upon the close of the Reptron
transaction, Mr. Munro's salary was increased to $190,000 to reflect his added
responsibilities. Effective January 1, 1996, Mr. Munro's base salary was
further increased to $203,000 based on a compensation survey conducted by
Alexander & Alexander Consulting Group and Radford Associates of fourteen public
companies, of which four such companies are included in the Company's
Self-Determined Peer Group. The other ten companies were of a similar size, in
a similar location and bear other characteristics similar to the Company. At
such time, the Company entered into a new employment agreement with Mr. Munro,
which supersedes his employment agreement. See "Employment Agreements" on page
8.
During the latter half of 1995, Mr. Munro was eligible to receive a bonus
of up to $100,000 upon the achievement of certain return on asset goals. This
represented approximately 52% of Mr. Munro's base salary of $190,000. Based on
the Company's 1995 performance, Mr. Munro was paid a bonus of $152,530, which
includes an amount for the period prior to his becoming the Chief Executive
Officer. Effective January, 1, 1996, Mr. Munro's annual incentive maximum bonus
has been increased to $125,000. Mr. Munro was also granted stock options to
purchase 60,000 shares at the time he became the Chief Executive Officer.
On July 26, 1995, in connection with the sale of the Company's electronic
component semiconductor business to Reptron, Mr. Mabry, the Company's former
Chief Executive Officer, resigned from the Company. In connection with such
resignation, Mr. Mabry received a cash severance in the amount of $75,000, of
which $50,000 was used to discharge Mr. Mabry's outstanding loan obligations and
$25,000 was paid to Mr. Mabry at the closing of the Reptron transaction. Mr.
Mabry also had the right to receive up to an additional $120,000 in incentive
payments, of which Mr. Mabry was paid $45,654. Mr. Mabry's option for 150,000
shares was forfeited.
-11-
<PAGE>
OTHER
- -----
Since the compensation of the Company's executive officers does not exceed
$1,000,000 for any single officer, the Company does not have a policy regarding
qualifying compensation under Section 162(m) of the Internal Revenue Code of
1986, as amended.
April 4, 1996
EXECUTIVE COMPENSATION COMMITTEE
K. WILLIAM SICKLER
JAMES J. HEFFERNAN
-12-
<PAGE>
PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Company include in
this proxy statement a line-graph presentation comparing cumulative, five (5)
year shareholder returns on an indexed basis with (i) a broad equity market
index and (ii) an industry index or peer group. Set forth below is a line graph
comparing cumulative total shareholder return on the Company's Common Stock
against the Center for Research in Security Prices ("CRSP") Index for the Nasdaq
Stock Market (U.S. companies) and a Self-Determined Peer Group. "Total return,"
for the purpose of this graph, assumes reinvestment of all dividends.
[LINE-GRAPH]
<TABLE>
<CAPTION>
LEGEND
SYMBOL INDEX DESCRIPTION 12/31/90 12/31/91 12/31/92 12/31/93 12/30/94 12/29/95
<S> <C> <C> <C> <C> <C> <C>
_____ WESTERN MICRO TECHNOLOGY, INC. 100.0 120.0 165.0 370.0 255.0 210.0
..-.. CRSP Index for Nasdaq Stock Market (US Companies) 100.0 160.5 186.9 214.5 209.7 296.5
- ----- Self-Determined Peer Group 100.0 136.2 343.9 478.1 483.7 640.7
Companies in Self-Determined Peer Group
Bell Microproducts, Inc. Hall Mark Electronics Corp.
Jaco Electronics, Inc. Milgray Electronics, Inc.
Nu Horizon Electronics Corp. Pioneer Standard Electronics, Inc.
Southern Electronics Corp. Zing Technologies, Inc.
Notes:
A. The lines represent monthly index levels
derived from compounding daily returns that
include all dividends.
B. The indexes are reweighted daily, using the
market capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal
year end, is not a trading day, the preceding
trading day is used.
D. The index level for all series was set to
100.00 on 12/31/90.
-13-
<PAGE>
PROPOSAL NUMBER 2
AMENDMENT AND RESTATEMENT OF THE
COMPANY'S 1994 STOCK OPTION PLAN
The 1994 Stock Option Plan of Western Micro Technology, Inc. was adopted by
the Company's Board of Directors on April 22, 1994 and approved by the
shareholders at the 1994 Annual Meeting. On January 18, 1996, the Board of
Directors amended and restated the 1994 Stock Option Plan (the "1994 Plan"),
subject to approval by the shareholders to: (1) increase the number of shares
available for grant thereunder by 200,000 shares, (2) change the amount of
non-statutory stock options granted to non-employee directors from (a) 10,000
shares for every fourth annual meeting at which they are elected after their
election or appointment to the Board; to (b) 2,500 shares for every annual
meeting at which they are elected after their election or appointment to the
Board; and (3) add a new Internal Revenue Code section 162(m) grant limit for
optionees who are newly hired.
The text of the 1994 Plan is set forth in Exhibit A to this Proxy
Statement. The following summary of the 1994 Plan's principal features does not
purport to be complete. It is subject to and qualified in its entirety by
reference to Exhibit A.
SHARES SUBJECT TO THE 1994 PLAN
Prior to the proposed amendment and restatement of the 1994 Plan, there are
621,802 shares of Common Stock authorized for option grants. Upon approval of
this amendment by the shareholders, there will be a total of 821,801 shares
authorized under the Plan. The authorized shares issuable in connection with
the 1994 Plan are subject to adjustment in the event of stock splits, stock
dividends and other situations.
As of March 31, 1996, the Company had options outstanding under the 1994
Plan to purchase an aggregate of 604,488 shares of Common Stock, at exercise
prices ranging from $2.25 to $8.75 per share, or a weighted average per share
exercise price of $4.14. If any option granted under the 1994 Plan expires or
terminates for any reason without having been exercised in full, then the
unpurchased shares subject to that option will once again be available for
additional option grants. As of March 31, 1996, a total of 17,314 shares of
Common Stock were available for future issuance under the 1994 Plan.
PARTICIPANTS
Any person who is an employee of the Company is eligible to receive options
under the 1994 Plan. Optionees will be selected by the Stock Option Committee.
Options granted to an optionee in the calendar year in which he or she is newly
hired shall in no event cover more than 300,000 shares, subject to certain
adjustments.
The 1994 Plan also provides for formula grants for non-employee directors
that are designed to comply with the provisions of Rule 16b-3 under the Exchange
Act of 1934, as amended. Non-employee directors will automatically receive
nonstatutory options to purchase 10,000 shares of the Company's Common Stock
upon their initial appointment or election as a non-employee director and will
receive nonstatutory options to purchase 2,500 shares of the Company's Common
Stock for every regular annual meeting thereafter at which they are elected.
The non-employee director options will have ten (10) year terms and will be
exercisable ratably at twenty-five percent (25%) a year from the date of the
annual meeting of shareholders on which date the options are granted. Such
options will become one hundred percent (100%) vested upon death, disability or
a change in control of the Company. If a non-employee director dies or becomes
disabled, his or her option shall be fully exercisable during the twelve (12)
months following the date of his or her death or disablement. If a non-employee
director voluntarily retires from service as a director at or after age 60, his
or her options that are vested shall be exercisable for a period of twelve (12)
months following retirement. In all other cases, a non-employee director's
options that are vested upon termination of service shall remain exercisable for
ninety (90) days following the date of his or her termination of service.
-14-
<PAGE>
ADMINISTRATION
The 1994 Plan is administered by the Stock Option Committee. The Stock
Option Committee consists of two directors appointed by the Board of Directors
and has the power and authority to grant options to participants in the 1994
Plan. The Stock Option Committee may delegate certain of its responsibilities
to other persons; provided, however, the Stock Option Committee may not delegate
matters relating to the Company's Section 16 officers. The members of the Stock
Option Committee are disinterested persons as defined in Rule 16b-3. The Board
of Directors may fill vacancies on the Stock Option Committee and may from time
to time remove or add members.
The Stock Option Committee may periodically adopt rules and regulations for
carrying out the 1994 Plan. The Board of Directors may amend the 1994 Plan as
desired without further action by the Company's shareholders except as required
by applicable law. The portion of the 1994 Plan that relates to non-employee
directors may not be amended more frequently than once every six (6) months
except as may be required by the Internal Revenue Code.
TERMS OF STOCK OPTIONS
Awards under the 1994 Plan consist of nonstatutory stock options ("NSOs")
and incentive stock options ("ISOs"). Except with respect to options granted to
non-employee directors, options granted pursuant to the 1994 Plan need not be
identical.
The purchase price under each option is established by the Stock Option
Committee but in no event can the option price for ISOs and non-employee
director options be less than one hundred percent (100%) of the fair market
value of the stock on the date of grant. The last sale price per share of the
Company's Common Stock as reported on the Nasdaq National Market on March 29,
1996 was $6.125. The option price must be paid in full at the time of exercise.
The price may be paid in cash or, if permitted by the Stock Option Agreement, by
delivery of an irrevocable direction to a securities broker to sell shares and
to deliver part of the sale proceeds to the Company, by the surrender of shares
of the Company owned by the participant exercising the option and having a fair
market value on the date of exercise equal to the option price, or by any
combination of the foregoing.
Except with respect to options for non-employee directors, options have
such terms and are exercisable in such manner and at such times as the Stock
Option Committee may determine. In addition, no optionee may be granted options
in any calendar year in excess of 150,000 shares of the Company's Common Stock;
provided, however, that options granted to an optionee in the calendar year in
which he or she is newly hired shall in no event cover more than 300,000 shares
of the Company's Common Stock, subject to certain adjustments. However, each
option must expire within a period of not more than ten (10) years from the
grant date.
Each option is transferable only by will or the law of descent and
distribution and shall only be exercisable by the participant during his or her
lifetime.
The Stock Option Committee may modify, extend or renew outstanding options
or may accept the cancellation of outstanding options in return for the grant of
new options at the same or a different price, except the optionee must consent
to any modification, extension or renewal which impairs his or her rights or
increases his or her obligations under such option.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences of the 1994
Plan is intended to be a summary of applicable federal law. State and local tax
consequences may differ. Because the federal income tax rules governing options
and related payments are complex and subject to frequent change, optionees are
advised to consult their tax advisors prior to exercise of options or
dispositions of stock acquired pursuant to option exercise.
-15-
<PAGE>
ISOs and NSOs are treated differently for federal income tax purposes.
ISOs are intended to comply with the requirements of Section 422 of the Internal
Revenue Code. NSOs need not comply with such requirements.
An employee is not taxed on the grant or exercise of an ISO. The
difference between the exercise price and the fair market value on the exercise
date of the shares acquired under an ISO will, however, be a preference item for
purposes of the alternative minimum tax. If an optionee holds the shares
acquired upon exercise of an ISO for at least two (2) years following grant and
at least one (1) year following exercise, the optionee's gain, if any, upon a
subsequent disposition of such shares is long-term capital gain. The measure of
the gain is the difference between the proceeds received on disposition and the
optionee's basis in the shares (which generally equals the exercise price). If
an optionee disposes of stock acquired pursuant to exercise of an ISO before
satisfying the one (1) and two (2) year holding periods described above, the
optionee may recognize both ordinary income and capital gain in the year of
disposition. The amount of the ordinary income will be the lesser of (i) the
amount realized on disposition less the optionee's adjusted basis in the stock
(usually the option exercise price) or (ii) the difference between the fair
market value of the stock on the exercise date and the option exercise price.
The balance of the consideration received on such a disposition will be capital
gain (long-term capital gain if the stock had been held for at least one (1)
year following exercise of the ISO). The Company is not entitled to an income
tax deduction on the grant or exercise of an ISO or on the optionee's disposi-
tion of the shares after satisfying the holding period requirement described
above. If the holding periods are not satisfied, the Company will be entitled
to a deduction in the year the optionee disposes of the shares, in an amount
equal to the ordinary income recognized by the optionee.
An employee is not taxed on the grant of an NSO. On exercise, however, the
optionee recognizes ordinary income equal to the difference between the option
price and the fair market value of the shares on the date of exercise. The
Company is entitled to an income tax deduction in the year of exercise in the
amount recognized by the optionee as ordinary income. Any gain on subsequent
disposition of the shares is long-term capital gain if the shares are held for
at least one (1) year following exercise. The Company does not receive a
deduction for this gain.
NEW PLAN BENEFITS
Options to acquire 40,000 and 20,000 shares have been granted to Messrs.
Munro and Cochrane, respectively, subject to shareholder approval of the
amendment and restatement of the 1994 Plan. With respect to all future grants,
the Stock Option Committee has full discretion to determine the number and
amount of options to be granted to employees under the 1994 Plan, subject to an
annual limitation on the total number of options that may be granted to any key
employee. Therefore, other than as described in this paragraph, the benefits
and amounts that will be received by each of the officers named in the Summary
Compensation Table above, the executive officers as a group and all other
employees under the 1994 Plan are not presently determinable.
The number of options to be received by each non-employee director is fixed
under the 1994 Plan and may not be amended more frequently than once every six
(6) months. See "Compensation of Directors."
REQUIRED APPROVAL
The affirmative vote of the holders of a majority of shares of Common Stock
represented and voting at a duly held meeting at which a quorum is present is
required to approve the amendment and restatement of the 1994 Plan. Unless
marked to the contrary, proxies received will be voted "FOR" approval of the
amendment and restatement of the Company's 1994 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT AND RESTATEMENT OF THE COMPANY'S 1994 PLAN.
-16-
<PAGE>
PROPOSAL NUMBER 3
DESIGNATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has approved the retention of Coopers & Lybrand
L.L.P. as independent accountants for the Company until revoked by further
action. Coopers & Lybrand L.L.P. has been the Company's independent accountants
since 1977.
The shareholders are asked to ratify the designation of Coopers & Lybrand
L.L.P. as independent accountants for the Company for the fiscal year ending
December 31, 1996. A representative of Coopers & Lybrand L.L.P. is expected to
be present at the Annual Meeting to make a statement if he or she desires to do
so, and such representative is expected to be available to respond to
appropriate questions.
Should the shareholders fail to ratify the designation of Coopers & Lybrand
L.L.P. as independent accountants, retention of the firm for the fiscal year
ending December 31, 1996 will be reconsidered by the Board of Directors.
Unless marked to the contrary, proxies received will be voted "FOR"
ratification of the designation of Coopers & Lybrand L.L.P. as independent
accountants for the Company's fiscal year ending December 31, 1996.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION OF
THE COMPANY'S INDEPENDENT ACCOUNTANTS.
OTHER MATTERS
Management knows of no business that will be presented for consideration at
the Annual Meeting other than as stated in the Notice of Meeting. If, however,
other matters are properly brought before the meeting, it is the intention of
the persons named in the accompanying form of proxy to vote the shares
represented thereby on such matters in accordance with their best judgment.
The expense of solicitation of proxies will be borne by the Company. In
addition to solicitation of proxies by mail, certain officers, directors and
Company employees who will receive no additional compensation for their services
may solicit proxies by telephone, telegraph or personal interview. The Company
may retain a proxy solicitation firm and, if it does so, would pay approximately
$6,000 in fees plus a reasonable amount to cover expenses. The Company is
required to request brokers and nominees who hold stock in their name to furnish
this proxy material to beneficial owners of the stock and will reimburse such
brokers and nominees for their reasonable out-of-pocket expenses in so doing.
ANNUAL REPORT
The Company will provide a copy of its 1995 Annual Report to Shareholders,
without charge, to any shareholder who makes written request to Mr. P. Scott
Munro, Secretary, Western Micro Technology, Inc., 254 East Hacienda Avenue,
Campbell, California 95008.
-17-
<PAGE>
PROPOSALS INTENDED TO BE PRESENTED AT NEXT ANNUAL MEETING
Proposals of security holders intended to be presented at the Company's
1997 Annual Meeting of Shareholders must be received by the Company for
inclusion in the Company's proxy statement and form of proxy no later than
December 16, 1996.
By Order of the Board of Directors,
P. Scott Munro
Secretary
Campbell, California
April 12, 1996
-18-
<PAGE>
EXHIBIT A
---------
1994 STOCK OPTION PLAN
OF
WESTERN MICRO TECHNOLOGY, INC.
(As Amended and Restated Effective as of January 18, 1996)
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. ESTABLISHMENT AND PURPOSE. . . . . . . . . . . . . . . . . . 1
SECTION 2. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) Board of Directors . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Change in Control . . . . . . . . . . . . . . . . . . . . . . . . 1
(c) Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(d) Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(e) Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(f) Consultant . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(g) Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(h) Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(i) Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . 2
(j) Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . 2
(k) ISO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(l) Nonstatutory Option . . . . . . . . . . . . . . . . . . . . . . . 2
(m) Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(n) Optionee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(o) Outside Director . . . . . . . . . . . . . . . . . . . . . . . . 2
(p) Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(q) Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(r) Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(s) Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(t) Stock Option Agreement . . . . . . . . . . . . . . . . . . . . . 3
(u) Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(v) Total and Permanent Disability . . . . . . . . . . . . . . . . . 3
SECTION 3. ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . 3
(a) Committee Procedures . . . . . . . . . . . . . . . . . . . . . . 3
(b) Committee Responsibilities . . . . . . . . . . . . . . . . . . . 3
SECTION 4. ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) General Rule . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Outside Directors . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Ten-Percent Shareholders . . . . . . . . . . . . . . . . . . . . 5
SECTION 5. STOCK SUBJECT TO PLAN . . . . . . . . . . . . . . . . . . . 5
(a) Basic Limitation . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Additional Shares . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 6. TERMS AND CONDITIONS OF OPTIONS . . . . . . . . . . . . . . 5
(a) Stock Option Agreement . . . . . . . . . . . . . . . . . . . . . 5
(b) Number of Shares . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . 6
(d) Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . 6
(e) Exercisability and Term . . . . . . . . . . . . . . . . . . . . . 6
(f) Nontransferability . . . . . . . . . . . . . . . . . . . . . . . 6
(g) Exercise of Options Upon Termination of Service . . . . . . . . . 6
(h) Leaves of Absence . . . . . . . . . . . . . . . . . . . . . . . . 6
(i) No Rights as a Shareholder . . . . . . . . . . . . . . . . . . . 6
(j) Modification, Extension and Renewal of Options . . . . . . . . . 6
-i-
<PAGE>
Page
----
(k) Restrictions on Transfer of Shares . . . . . . . . . . . . . . . 7
SECTION 7. PAYMENT FOR SHARES . . . . . . . . . . . . . . . . . . . . . 7
(a) General Rule . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Surrender of Stock . . . . . . . . . . . . . . . . . . . . . . . 7
(c) Cashless Exercise . . . . . . . . . . . . . . . . . . . . . . . . 7
(d) Other Forms of Payment . . . . . . . . . . . . . . . . . . . . . 7
SECTION 8. ADJUSTMENT OF SHARES . . . . . . . . . . . . . . . . . . . . 7
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Reorganizations . . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) Reservation of Rights . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 9. LEGAL AND REGULATORY REQUIREMENTS . . . . . . . . . . . . . 8
SECTION 10. NO EMPLOYMENT RIGHTS . . . . . . . . . . . . . . . . . . . . 8
SECTION 11. DURATION AND AMENDMENTS . . . . . . . . . . . . . . . . . . 8
(a) Term of the Plan . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) Right to Amend or Terminate the Plan . . . . . . . . . . . . . . 8
(c) Effect of Amendment or Termination . . . . . . . . . . . . . . . 8
-ii-
<PAGE>
1994 STOCK OPTION PLAN
OF
WESTERN MICRO TECHNOLOGY, INC.
(As Amended and Restated Effective as of January 18, 1996)
SECTION 1. ESTABLISHMENT AND PURPOSE.
- --------- -------------------------
The Plan was established in 1994 to offer selected employees,
consultants and non-employee directors an opportunity to acquire a proprietary
interest in the success of the Company, or to increase such interest through the
grant of Options to purchase Shares. Options granted under the Plan may include
Nonstatutory Options as well as ISOs intended to qualify under Code section 422.
This amendment and restatement (i) revises the formula for granting
Options to Outside Directors, (ii) increases the number of Shares subject to the
Plan and (iii) adds a new Code section 162(m) individual Option grant limit for
Optionees who are newly hired.
SECTION 2. DEFINITIONS.
- --------- -----------
(a) "Board of Directors" shall mean the Board of Directors of the
------------------
Company, as constituted from time to time.
(b) "Change in Control" means the occurrence of any of the following
-----------------
events:
(i) The shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity)
at least 50% of the total voting power represented by the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or
(ii) The shareholders of the Company approve (i) a plan of
complete liquidation of the Company or (ii) an agreement for the
sale or disposition by the Company of all or substantially all of
the Company's assets; or
(iii) Any "person" (as defined below) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company
representing 50% or more of the total voting power represented by
the Company's then outstanding voting securities.
For purposes of Subsection (iii) above, the term "person" shall
have the same meaning as when used in sections 13(d) and 14(d) of the
Exchange Act, but shall exclude (i) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or of
a parent or Subsidiary of the Company and (ii) a corporation owned
directly or indirectly by the shareholders of the Company in
substantially the same proportions as their ownership of the common
stock of the Company.
Any other provision of this Section 2(b) notwithstanding, the
term "Change in Control" shall not include either of the following
events, if undertaken at the election of the Company:
-1-
<PAGE>
(i) A transaction, the sole purpose of which is to change the
state of the Company's incorporation; or
(ii) A transaction, the result of which is to sell all or
substantially all of the assets of the Company to another
corporation (the "surviving corporation"); provided that the
surviving corporation is owned directly or indirectly by the
shareholders of the Company immediately following such transac-
tion in substantially the same proportions as their ownership of
the Company's common stock immediately preceding such
transaction; and provided, further, that the surviving corpo-
ration expressly assumes this Plan and all outstanding options.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(d) "Committee" shall mean the committee designated by the Board of
---------
Directors, which is authorized to administer the Plan under Section 3 hereof.
The Committee's membership shall enable the Plan to qualify under Rule 16b-3
with regard to the grant of Options under the Plan to persons who are subject to
section 16 of the Exchange Act. If the Compensation Committee of the Board of
Directors determines to qualify compensation attributable to Options for
exemption from the deduction limit of section 162(m) of the Code, then the
Committee membership shall satisfy such requirements as may be necessary to
ensure that income attributable to Options qualifies for such exemption.
(e) "Company" shall mean Western Micro Technology, Inc., a California
-------
corporation.
(f) "Consultant" shall mean an individual who provides services to
----------
the Company or any Subsidiary other than as a common-law employee.
(g) "Employee" shall mean any individual who is (i) a common-law
--------
employee of the Company or of a Subsidiary, (ii) a Consultant or (iii) an
Outside Director.
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
(i) "Exercise Price" shall mean the amount for which one Share may be
--------------
purchased upon exercise of an Option, as specified by the Committee in the
applicable Stock Option Agreement.
(j) "Fair Market Value" shall mean (i) the closing price of a Share
-----------------
on the principal exchange which the Shares are trading, on the first trading day
immediately preceding the date on which the Fair Market Value is determined, or
(ii) if the Shares are not traded on an exchange but are quoted on the Nasdaq
National Market or a successor quotation system, the closing price on the first
trading day immediately preceding the date on which the Fair Market Value is
determined, or (iii) if the Shares are not traded on an exchange or quoted on
the Nasdaq National Market or a successor quotation system, the fair market
value of a Share, as determined by the Committee in good faith. Such
determination shall be conclusive and binding on all persons.
(k) "ISO" shall mean an employee incentive stock option described in
---
Code section 422.
(l) "Nonstatutory Option" shall mean an employee stock option that is
-------------------
not an ISO.
(m) "Option" shall mean an ISO or Nonstatutory Option granted under
------
the Plan and entitling the holder to purchase Shares.
(n) "Optionee" shall mean an individual who holds an Option.
--------
(o) "Outside Director" shall mean a member of the Board of Directors
----------------
who is not a common-law employee of the Company or of a Subsidiary.
-2-
<PAGE>
(p) "Plan" shall mean this 1994 Stock Option Plan of Western Micro
----
Technology, Inc., as amended from time to time.
(q) "Service" shall mean service as an Employee.
-------
(r) "Share" shall mean one share of Stock.
-----
(s) "Stock" shall mean the Common Stock of the Company.
-----
(t) "Stock Option Agreement" shall mean the agreement between the
----------------------
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to his or her Option.
(u) "Subsidiary" shall mean any corporation, if the Company and/or
----------
one or more other Subsidiaries own not less than 50 percent of the total
combined voting power of all classes of outstanding stock of such corporation.
A corporation that attains the status of a Subsidiary on a date after the
adoption of the Plan shall be considered a Subsidiary commencing as of such
date.
(v) "Total and Permanent Disability" shall mean that the Optionee is
------------------------------
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted, or can be expected to last, for a continuous period
of not less than 12 months, as determined by the Committee.
SECTION 3. ADMINISTRATION.
- --------- --------------
(a) Committee Procedures. The Board of Directors shall designate one
--------------------
of the members of the Committee as chairperson. The Committee may hold meetings
at such times and places as it shall determine. The acts of a majority of the
Committee members present at meetings at which a quorum exists, or acts reduced
to or approved in writing by all Committee members, shall be valid acts of the
Committee.
(b) Committee Responsibilities. Subject to the provisions of the
--------------------------
Plan, the Committee shall have full authority and discretion to take the
following actions:
(i) To interpret the Plan and to apply its provisions;
(ii) To adopt, amend or rescind rules, procedures and forms relating
to the Plan;
(iii) To authorize any person to execute, on behalf of the Company,
any instrument required to carry out the purposes of the Plan;
(iv) To determine when Options are to be granted under the Plan;
(v) To select Optionees;
(vi) To determine the number of Shares to be made subject to each
Option;
(vii) To prescribe the terms and conditions of each Option, including
(without limitation) the Exercise Price, the vesting or duration of the
Option (including accelerating the vesting of the Option), to determine
whether such Option is to be classified as an ISO or as a Nonstatutory
Option, and to specify the provisions of the Stock Option Agreement
relating to such Option;
(viii) To amend any outstanding Stock Option Agreement, subject to
applicable legal restrictions;
-3-
<PAGE>
(ix) To prescribe the consideration for the grant of each Option
under the Plan and to determine the sufficiency of such consideration;
(x) To determine the disposition of each Option under the Plan in the
event of an Optionee's divorce or dissolution of marriage;
(xi) To determine whether Options under the Plan will be granted in
replacement of other grants under an incentive or other compensation plan
of an acquired business;
(xii) To correct any defect, supply any omission, or reconcile any
inconsistency in the Plan or any Stock Option Agreement; and
(xiii) To take any other actions deemed necessary or advisable for
the administration of the Plan.
Subject to the requirements of applicable law, the Committee may designate
persons other than members of the Committee to carry out its responsibilities
and may prescribe such conditions and limitations as it may deem appropriate,
except that the Committee may not delegate its authority with regard to the
selection for participation of or the granting of Options under the Plan to
persons subject to Section 16 of the Exchange Act. All decisions,
interpretations and other actions of the Committee shall be final and binding on
all Optionees and all persons deriving their rights from an Optionee. No member
of the Committee shall be liable for any action that he has taken or has failed
to take in good faith with respect to the Plan or any Option.
SECTION 4. ELIGIBILITY.
- --------- -----------
(a) General Rule. Only Employees shall be eligible for designation
------------
as Optionees by the Committee. In addition, only individuals who are employed
as common-law employees by the Company or a Subsidiary shall be eligible for the
grant of ISOs.
(b) Outside Directors. Any other provision of the Plan
-----------------
notwithstanding, the participation of Outside Directors in the Plan shall be
subject to the following restrictions:
(i) Outside Directors shall only be eligible for the grant of
Nonstatutory Options as described in this Section 4(b).
(ii) Each Outside Director shall automatically be granted a
Nonstatutory Option to purchase 10,000 Shares (subject to adjustment
under Section 8) as a result of his or her initial appointment as an
Outside Director at or after the 1996 Annual Meeting of Shareholders.
Effective for the 1996 Annual Meeting, and upon the conclusion of
every regular annual meeting of the Company's shareholders following
the annual meeting at which an Outside Director was appointed, each
such Outside Director who will continue serving as a member of the
Board thereafter shall receive a Nonstatutory Option to purchase 2,500
Shares (subject to adjustment under Section 8). All such Nonstatutory
Options shall vest and become exercisable at the rate of 25% upon each
one-year anniversary of the date the option is granted to the Outside
Director.
(iii) All Nonstatutory Options granted to an Outside Director
under this Section 4(b) shall also become exercisable in full in the
event of (A) the termination of such Outside Director's service
because of death or Total and Permanent Disability or (B) a Change in
Control of the Company.
(iv) The Exercise Price of any Nonstatutory Option granted to an
Outside Director under this Section 4(b) shall be equal to the number
of Shares covered by such Option
-4-
<PAGE>
multiplied by 100% of the Fair Market Value of a Share on the date of
grant, and shall be payable in a form described in Section 7.
(v) All Nonstatutory Options granted to an Outside Director
under this Section 4(b) shall terminate on the earliest of (A) the
10th anniversary of the date of grant of such Nonstatutory Options,
(B) the date 90 days after the termination of such Outside Director's
service for any reason other than death, Total and Permanent
Disability or voluntary retirement as an Outside Director at or after
the age of 60, or (C) the date 12 months after the termination of such
Outside Director's service because of death, Total and Permanent
Disability or voluntary retirement as an Outside Director at or after
the age of 60.
(c) Ten-Percent Shareholders. An Employee who owns more than 10
------------------------
percent of the total combined voting power of all classes of outstanding stock
of the Company or any of its Subsidiaries shall not be eligible for the grant of
an ISO unless such grant satisfies the requirements of Code section 422(c)(5).
For purposes of this Subsection, in determining stock ownership, an Employee
shall be deemed to own the stock owned, directly or indirectly, by or for his or
her brothers, sisters, spouse, ancestors and lineal descendants. Stock owned,
directly or indirectly, by or for a corporation, partnership, estate or trust
shall be deemed to be owned proportionately by or for its shareholders, partners
or beneficiaries. For purposes of this Subsection, "outstanding stock" shall
include all stock actually issued and outstanding immediately after the grant.
"Outstanding stock" shall not include shares authorized for issuance under
outstanding options held by the Employee or by any other person.
SECTION 5. STOCK SUBJECT TO PLAN.
- --------- ---------------------
(a) Basic Limitation. Shares offered under the Plan shall be
----------------
authorized but unissued Shares or Shares acquired on the open market. The
aggregate number of Shares which may be issued under the Plan upon the exercise
of Options shall not exceed 821,801 plus the shares that remained available for
grant under the Western Micro Technology, Inc. Amended and Restated Incentive
and Non-Incentive Stock Option Plan as of June 15, 1994, including any shares
subject to any option granted under such plan and outstanding on such date that
is terminated prior to exercise. The aggregate number of Shares which may be
issued under the Plan shall at all times be subject to adjustment pursuant to
Section 8. The number of Shares which are subject to Options outstanding at any
time under the Plan shall not exceed the number of Shares which are available
for issuance under the Plan. The Company, during the term of the Plan, shall at
all times reserve and keep available sufficient Shares to satisfy the
requirements of the Plan.
(b) Additional Shares. In the event that any outstanding Option for
-----------------
any reason expires or is canceled or otherwise terminated, the Shares allocable
to the unexercised portion of such Option shall again be available for the
purposes of the Plan.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.
- --------- -------------------------------
(a) Stock Option Agreement. Each grant of an Option under the Plan
----------------------
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms and conditions of
the Plan and may be subject to any other terms and conditions which are not
inconsistent with the Plan and which the Committee deems appropriate for
inclusion in a Stock Option Agreement. Except for options granted pursuant to
Section 4(b), the provisions of the various Stock Option Agreements entered into
under the Plan need not be identical.
(b) Number of Shares. Each Stock Option Agreement shall specify the
----------------
number of Shares that are subject to the Option and shall provide for the
adjustment of such number in accordance with Section 8. The Stock Option Agree-
ment shall also specify whether the Option is an ISO or a Nonstatutory Option.
Options granted to any Optionee in a single calendar year shall in no event
cover
-5-
<PAGE>
more than 150,000 Shares, subject to adjustment in accordance with Section 8;
provided, however, options granted to an Optionee in the calendar year in which
he or she is newly hired shall in no event cover more than 300,000 Shares,
subject to adjustment in accordance with Section 8.
(c) Exercise Price. Each Stock Option Agreement shall specify the
--------------
Exercise Price. The Exercise Price of an ISO shall not be less than 100 percent
of the Fair Market Value of a Share on the date of grant, except as otherwise
provided in Section 4(b). Subject to the preceding sentence and Section 4(b),
the Exercise Price under any Option shall be determined by the Committee at its
sole discretion. The Exercise Price shall be payable in a form described in
Section 7. The Exercise Price of an Option that is intended to qualify under
Code section 162(m) shall not be less than 100 percent of the Fair Market Value
of a share on the date of grant.
(d) Withholding Taxes. As a condition to the exercise of an Option,
-----------------
the Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state or local withholding tax obligations that may
arise in connection with such exercise. The Optionee shall also make such
arrangements as the Committee may require for the satisfaction of any federal,
state or local withholding tax obligations that may arise in connection with the
disposition of Shares acquired by exercising an Option.
(e) Exercisability and Term. Subject to Section 4(b), each Stock
-----------------------
Option Agreement shall specify the date when all or any installment of the
Option is to become exercisable. The Stock Option Agreement shall also specify
the term of the Option. The term shall not exceed 10 years from the date of
grant, except as otherwise provided in Section 4(b). Subject to the preceding
three sentences, the Committee at its sole discretion shall determine when all
or any installment of an Option is to become exercisable and when an Option is
to expire.
(f) Nontransferability. During an Optionee's lifetime, his or her
------------------
Option(s) shall be exercisable only by him and shall not be transferable. In
the event of an Optionee's death, his or her Option(s) shall not be transferable
other than by will or by the laws of descent and distribution.
(g) Exercise of Options Upon Termination of Service. Each Stock
-----------------------------------------------
Option Agreement shall set forth the extent to which the Optionee shall have the
right to exercise the Option following termination of the Optionee's Service
with the Company and its Subsidiaries, and the right to exercise the Option of
any executors or administrators of the Optionee's estate or any person who has
acquired such Option(s) directly from the Optionee by bequest or inheritance.
Subject to Section 4(b), such provisions shall be determined in the sole
discretion of the Committee, need not be uniform among all Options issued
pursuant to the Plan, and may reflect distinctions based on the reasons for
termination of Service.
(h) Leaves of Absence. An Optionee's Service shall be deemed to
-----------------
continue while the Optionee is on military leave, sick leave or other bona fide
leave of absence (as determined by the Committee); provided, however, that the
Committee may determine, consistent with applicable law, that Service shall
continue during a leave of absence only if the Optionee returns to employment
with the Company or a Subsidiary at the expiration of the leave. The foregoing
notwithstanding, in the case of an ISO granted under the Plan, Service shall not
be deemed to continue beyond the first 90 days of such leave, unless the Option-
ee's reemployment rights are guaranteed by statute or by contract.
(i) No Rights as a Shareholder. An Optionee, or a transferee of an
--------------------------
Optionee, shall have no rights as a shareholder with respect to any Shares
covered by his or her Option until the date of the issuance of a stock
certificate for such Shares. No adjustments shall be made, except as provided
in Section 8.
(j) Modification, Extension and Renewal of Options. Within the
----------------------------------------------
limitations of the Plan, the Committee may modify, extend or renew outstanding
Options or may accept the cancellation of outstanding Options (to the extent not
previously exercised) in return for the grant of new Options at the same or a
different price. The foregoing notwithstanding, no modification, extension or
renewal of an
-6-
<PAGE>
Option shall, without the consent of the Optionee, impair his or her rights or
increase his or her obligations under such Option.
(k) Restrictions on Transfer of Shares. Any Shares issued upon
----------------------------------
exercise of an Option shall be subject to such special forfeiture conditions,
rights of repurchase, rights of first refusal and other transfer restrictions as
the Committee may determine. Such restrictions shall be set forth in the appli-
cable Stock Option Agreement and shall apply in addition to any general
restrictions that may apply to all holders of Shares.
SECTION 7. PAYMENT FOR SHARES.
- --------- ------------------
(a) General Rule. The entire Exercise Price for Shares issued under
------------
the Plan shall be payable in lawful money of the United States of America at the
time when such Shares are purchased, except as provided in Subsections (b), (c)
and (d) below.
(b) Surrender of Stock. To the extent that a Stock Option Agreement
------------------
so provides, payment may be made all or in part with Shares which have already
been owned by the Optionee or his or her representative for more than six months
and which are surrendered to the Company in good form for transfer. Such Shares
shall be valued at their Fair Market Value on the date when the new Shares are
purchased under the Plan.
(c) Cashless Exercise. To the extent that a Stock Option Agreement
-----------------
so provides, payment may be made all or in part by delivery (on a form
prescribed by the Committee) of an irrevocable direction to a securities broker
to sell Shares and to deliver all or part of the sale proceeds to the Company in
payment of the aggregate Exercise Price.
(d) Other Forms of Payment. To the extent that a Stock Option
----------------------
Agreement so provides, payment may be made in any other form that is consistent
with applicable laws, regulations and rules.
SECTION 8. ADJUSTMENT OF SHARES.
- --------- --------------------
(a) General. In the event of a subdivision of the outstanding Stock,
-------
a declaration of a dividend payable in Shares, a declaration of a dividend
payable in a form other than Shares in an amount that has a material effect on
the value of Shares, a combination or consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of Shares, a
recapitalization or a similar occurrence, the Committee shall make appropriate
adjustments in one or more of (i) the number of Shares available for future
grants under Section 5, (ii) the number of Shares covered by each outstanding
Option or (iii) the Exercise Price under each outstanding Option.
(b) Reorganizations. In the event that the Company is a party to a
---------------
merger or other reorganization, outstanding Options shall be subject to the
agreement of merger or reorganization. Such agreement may provide for the
assumption of outstanding Options by the surviving corporation or its parent or
for their continuation by the Company (if the Company is a surviving corpora-
tion); provided, however, that if assumption or continuation of the outstanding
Options is not provided by such agreement then the Committee shall have the
option of offering the payment of a cash settlement equal to the difference
between the amount to be paid for one Share under such agreement and the
Exercise Price, in all cases without the Optionees' consent.
(c) Reservation of Rights. Except as provided in this Section 8, an
---------------------
Optionee shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class, the payment of any dividend or any other increase
or decrease in the number of shares of stock of any class. Any issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any
-7-
<PAGE>
class, shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number or Exercise Price of Shares subject to an Option. The
grant of an Option pursuant to the Plan shall not affect in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure, to merge or consolidate or to
dissolve, liquidate, sell or transfer all or any part of its business or assets.
SECTION 9. LEGAL AND REGULATORY REQUIREMENTS.
- --------- ---------------------------------
Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares complies with (or is exempt from) all applicable re-
quirements of law, including (without limitation) the Securities Act of 1933, as
amended, the rules and regulations promulgated thereunder, state securities laws
and regulations and the regulations of any stock exchange on which the Company's
securities may then be listed, and the Company has obtained the approval or
favorable ruling from any governmental agency which the Company determines is
necessary or advisable.
SECTION 10. NO EMPLOYMENT RIGHTS.
- ---------- --------------------
No provision of the Plan, nor any Option granted under the Plan, shall be
construed to give any person any right to become, to be treated as, or to remain
an Employee. The Company and its Subsidiaries reserve the right to terminate
any person's Service at any time and for any reason.
SECTION 11. DURATION AND AMENDMENTS.
- ---------- -----------------------
(a) Term of the Plan. The Plan shall become effective on January 18,
----------------
1996, subject to the approval of the Company's shareholders. In the event that
the shareholders fail to approve this Plan within 12 months of its adoption by
the Board of Directors, any Option grants already made shall be null and void,
and no additional Option grants shall be made after such date. The Plan shall
terminate automatically 10 years after its adoption by the Board of Directors
and may be terminated on any earlier date pursuant to Subsection (b) below.
(b) Right to Amend or Terminate the Plan. The Board of Directors may
------------------------------------
amend the Plan at any time and from time to time except that the provisions of
Section 4(b) relating to the amount, price and timing of the Option grants to
Outside Directors shall not be amended more than once in any six-month period
after the Plan becomes effective, except as may be required by the Code. Rights
and obligations under any Option granted before amendment of the Plan shall not
be materially altered, or impaired adversely, by such amendment, except with
consent of the person to whom the Option was granted. An amendment of the Plan
shall be subject to the approval of the Company's shareholders only to the
extent required by applicable laws, regulations or rules.
(c) Effect of Amendment or Termination. No Shares shall be issued or
----------------------------------
sold under the Plan after the termination thereof, except upon exercise of an
Option granted prior to such termination. The termination of the Plan, or any
amendment thereof, shall not affect any Option previously granted under the
Plan.
<PAGE>
PROXY WESTERN MICRO TECHNOLOGY, INC. PROXY
254 EAST HACIENDA AVENUE
CAMPBELL, CALIFORNIA 95008
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING--MAY
16, 1996
The undersigned hereby appoints JAMES W. DORST, P. SCOTT MUNRO and DONALD
A. COCHRANE, or each of them, proxies, each with the power of substitution, to
vote the shares of the undersigned at the Annual Meeting of Shareholders of
WESTERN MICRO TECHNOLOGY, INC. on May 16, 1996, and any adjournments or
postponements thereof, upon all matters that may properly come before the
meeting. Without otherwise limiting the foregoing general authorization, the
proxies are instructed to vote as indicated herein.
This proxy, which is solicited on behalf of the Board of Directors, will be
voted FOR the matters described in paragraphs 1, 2 and 3 unless the shareholder
specifies otherwise, in which case it will be voted as specified. If you wish
to vote in accordance with Board of Directors' recommendations, please sign the
proxy. You need not mark any boxes. In their discretion, the proxies are
authorized to vote upon such other business as may properly come before the
meeting.
(CONTINUED, AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
</TABLE>
<TABLE>
Please Mark
/X/ your votes
as this
WITHHOLD
FOR* FOR ALL FOR AGAINST ABSTAIN
<C> <S> <C> <S>
1. To elect a Board of six directors: 2. To approve the amendment and restatement
NOMINEES: James J. Heffernan, / / / / of the Company's 1994 Stock Option Plan. / / / / / /
Jerome A. Martin, P. Scott Munro,
K. William Sickler, J. Larry Smart 3. To ratify the designation of Coopers &
and William H. Welling Lybrand L.L.P. as independent accountants
INSTRUCTION: To withhold authority (*Except as marked for the year ending December 31, 1996. / / / / / /
to vote for any individual nominee, to the contrary
write name or names here. below.)
---------------------------------------------------
</TABLE>
I PLAN TO ATTEND THE MEETING / /
Signature(s) Date , 1996
------------------------------------- -------------------
Signature(s) of Shareholder or Shareholders, (Executors, Administrators,
Trustees, etc. should give full title.)
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO MARK,
SIGN, DATE AND PROMPTLY RETURN THIS PROXY, USING THE ENCLOSED ENVELOPE.
