<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
KENT ELECTRONICS CORPORATION
- --------------------------------------------------------------------------------
(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):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
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:
------------------------------------------------------------------------
/X/ 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>
KENT ELECTRONICS CORPORATION
7433 HARWIN DRIVE
HOUSTON, TEXAS 77036
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 27, 1996
To the Shareholders of
Kent Electronics Corporation:
Notice is hereby given that the Annual Meeting of Shareholders (the "Annual
Meeting") of Kent Electronics Corporation (the "Company") will be held at the
offices of the Company's wholly-owned subsidiary, K*TEC Electronics Corporation,
1111 Gillingham Lane, Sugar Land, Texas 77478, at 10:00 a.m., local time, on
Thursday, June 27, 1996, for the following purposes:
1. To elect two persons to serve as directors on the classified Board
of Directors until the 1999 annual meeting and until their successors have
been elected and have qualified.
2. To amend the Company's Articles of Incorporation to increase the
number of authorized shares of common stock, without par value, from 30
million shares to 100 million shares as more fully set forth under "Proposal
No. 2."
3. To adopt a 1996 Non-Employee Director Stock Option Plan as more
fully set forth under "Proposal No. 3."
4. To adopt a 1996 Employee Incentive Plan as more fully set forth
under "Proposal No. 4."
5. To adopt a Stock Option Plan and Agreement for the Company's Vice
President, Corporate Controller as more fully set forth under "Proposal No.
5."
6. To ratify the appointment of Grant Thornton LLP as the Company's
independent public accountants for the fiscal year ending March 29, 1997.
7. To transact such other business as may properly come before the
Annual Meeting, or any adjournment or adjournments thereof.
Shareholders of record at the close of business on May 7, 1996 will be
entitled to notice of and to vote at the Annual Meeting, or any adjournment or
adjournments thereof. Shareholders are cordially invited to attend the Annual
Meeting in person. Those who will not attend and who wish their shares voted are
requested to sign, date and mail promptly the enclosed proxy for which a stamped
return envelope is provided.
By Order of the Board of Directors
Stephen J. Chapko, SECRETARY
Houston, Texas
May 22, 1996
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING, YOU ARE URGED
TO SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY. IF YOU ATTEND THE ANNUAL
MEETING, YOU CAN VOTE EITHER IN PERSON OR BY YOUR PROXY.
<PAGE>
KENT ELECTRONICS CORPORATION
7433 HARWIN DRIVE
HOUSTON, TEXAS 77036
------------------------
PROXY STATEMENT
---------------------
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Kent Electronics Corporation, a
Texas corporation (the "Company"), for use at the annual meeting of shareholders
to be held on Thursday, June 27, 1996, at the offices of the Company's wholly-
owned subsidiary, K*TEC Electronics Corporation, 1111 Gillingham Lane, Sugar
Land, Texas 77478, at 10:00 a.m., local time, or at any adjournment or
adjournments thereof (such meeting or adjournment(s) thereof referred to as the
"Annual Meeting"). Copies of the Proxy and Notice and Proxy Statement are being
mailed to shareholders on or about May 22, 1996.
In addition to solicitation by mail, solicitation of proxies may be made by
personal interview, special letter, telephone or telegraph by the officers,
directors and employees of the Company. Brokerage firms will be requested to
forward proxy materials to beneficial owners of shares registered in their names
and will be reimbursed for their expenses. In addition, the company has retained
the services of D.F. King & Co., Inc. to assist in the solicitation of proxies
either in person or by mail, telephone or telegram, at an estimated cost of
$4,000 plus expenses. The cost of solicitation of proxies will be paid by the
Company.
A proxy received by the Board of Directors of the Company may be revoked by
the shareholder giving the proxy at any time before it is exercised. A
shareholder may revoke a proxy by notification in writing to the Company at 7433
Harwin Drive, Houston, Texas 77036, Attention: Secretary. A proxy may also be
revoked by execution of a proxy bearing a later date or by attendance at the
Annual Meeting and voting by ballot. A proxy in the form accompanying this Proxy
Statement, when properly executed and returned, will be voted in accordance with
the instructions contained therein. A proxy received by management which does
not withhold authority to vote or on which no specification has been indicated
will be voted in favor of the proposals set forth in this Proxy Statement and
for the nominees for the Board of Directors of the Company named in Proposal No.
1 of this Proxy Statement. A majority of the outstanding shares will constitute
a quorum at the Annual Meeting. Abstentions and broker non-votes are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. Abstentions are counted in tabulations of the votes cast on
proposals presented to shareholders, whereas broker non-votes are not counted
for purposes of determining whether a proposal has been approved.
At the date of this Proxy Statement, management of the Company does not know
of any business to be presented at the Annual Meeting other than those matters
which are set forth in the Notice accompanying this Proxy Statement. If any
other business should properly come before the Annual Meeting, it is intended
that the shares represented by proxies will be voted with respect to such
business in accordance with the judgment of the persons named in the proxy.
COMMON STOCK OUTSTANDING AND PRINCIPAL HOLDERS THEREOF
The Board of Directors has fixed the close of business on May 7, 1996, as
the record date for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting. At that date there were outstanding 23,937,176
shares of common stock, without par value, of the Company ("Common Stock") and
the holders thereof will be entitled to one vote for each share of Common Stock
held of record by them on that date for each proposition to be presented at the
Annual Meeting.
The following table sets forth information with respect to the shares of
Common Stock (the only outstanding class of voting securities of the Company)
owned of record and beneficially as of May 7, 1996,
1
<PAGE>
unless otherwise specified, by (i) all persons who own of record or are known by
the Company to own beneficially more than 5% of the outstanding shares of such
class of stock, (ii) each director and named executive officer, and (iii) all
directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
SHARES OWNED TOTAL STOCK-BASED
BENEFICIALLY(1) HOLDINGS(2)
--------------------------- ---------------------------
NAME AND ADDRESS NUMBER PERCENT NUMBER PERCENT
- ---------------------------------------------------------- --------------- ---------- --------------- ----------
<S> <C> <C> <C> <C>
Morrie K. Abramson........................................ 725,150(3) 3.0% 725,150(3) 3.0%
Randy J. Corporron........................................ 46,900(4) * 216,900(5) *
Rodney J. Corporron....................................... 3,000 * 153,000(6) *
Cathy L. Felts............................................ 20,000(7) * 40,000(8) *
Mark A. Zerbe............................................. 77,000(9) * 182,000(10) *
Max S. Levit.............................................. 6,750(11) * 6,750 *
David Siegel.............................................. 34,250(12) * 34,250 *
Richard C. Webb........................................... 15,000 * 15,000 *
Alvin L. Zimmerman........................................ 44,250(13) * 44,250 *
All executive officers and directors as a group
(16 persons)............................................ 1,162,100(14) 4.7 1,833,600(15) 7.2
</TABLE>
- ------------
* Less than 1%
(1) The persons listed have the sole power to vote and dispose of shares
beneficially owned by them except as otherwise indicated.
(2) The amounts in this column include the equity securities shown in the
"Shares Owned Beneficially" column and options that are not currently
exercisable.
(3) Includes 570,000 shares that may be acquired upon the exercise of
outstanding options and includes 10,000 shares held in trust for Mr.
Abramson's children, as to which shares Mr. Abramson disclaims beneficial
ownership.
(4) Includes 40,000 shares that may be acquired upon the exercise of
outstanding options.
(5) Includes 170,000 shares subject to options that are not currently
exercisable.
(6) Includes 150,000 shares subject to options that are not currently
exercisable.
(7) Includes 20,000 shares that may be acquired upon exercise of outstanding
options.
(8) Includes 20,000 shares subject to options that are not currently
exercisable.
(9) Includes 75,000 shares that may be acquired upon the exercise of
outstanding options.
(10) Includes 105,000 shares subject to options that are not currently
exercisable.
(11) Includes 6,750 shares that may be acquired upon exercise of outstanding
options.
(12) Includes 20,250 shares that may be acquired upon the exercise of
outstanding options, and 6,500 shares that are owned of record by Mr.
Siegel's wife.
(13) Includes 26,250 shares that may be acquired upon the exercise of
outstanding options.
(14) Includes 882,750 shares that may be acquired upon the exercise of
outstanding options.
(15) Includes 661,500 shares subject to options that are not currently
exercisable.
2
<PAGE>
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
GENERAL
Two directors are to be elected at the Annual Meeting. The Company
recommends voting for the election of each of the nominees for director listed
below. The persons named as proxy holders in the accompanying proxy intend to
vote each properly signed and submitted proxy for the election as a director of
each of the persons named as a nominee below under "Nominees for Director"
unless authority to vote in the election of directors is withheld on such proxy.
If, for any reason, at the time of the election one or both of such nominees
should be unable to serve, the proxy will be voted for a substitute nominee or
nominees selected by the Board of Directors. Directors are elected by a
plurality of votes cast at the Annual Meeting. Pursuant to the Company's Bylaws,
any nomination of other persons to be elected as directors at the Annual Meeting
must be received by the Secretary of the Company not later than the close of
business on the tenth day following the date on which notice of the Annual
Meeting is first given.
Unless otherwise specified, all properly executed proxies received by the
Company will be voted for the election of Messrs. Morrie K. Abramson and Alvin
L. Zimmerman to hold office until the 1999 annual meeting of shareholders and
until each of their respective successors is elected and qualified.
THE COMPANY RECOMMENDS VOTING "FOR" THE NOMINEES.
NOMINEES FOR DIRECTOR
The following table sets forth the name and age of each nominee for director
to hold office until the 1999 annual meeting of shareholders, his principal
position with the Company and the year he became a director of the Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE POSITION
- ------------------------------------ --- ----------- ---------------------------------
<S> <C> <C> <C>
Morrie K. Abramson.................. 61 1973 Chairman of the Board, Chief
Executive Officer and President
Alvin L. Zimmerman.................. 52 1986 Director
</TABLE>
Mr. Abramson, a co-founder of the Company, has served as Chief Executive
Officer and a director since 1973, Chairman of the Board since 1977 and as
President since 1995. He has been involved in the electronics distribution
business since 1956. Mr. Abramson has also been Chairman of the Board of K*TEC
Electronics Corporation ("K*TEC"), the Company's wholly-owned manufacturing
subsidiary, since its incorporation in 1983.
Mr. Zimmerman has served as a director of the Company since June 1986. As a
judge he presided over the 309th Family District Court and the 269th Civil
District Court of Harris County, Texas from 1980 to 1984. Since 1984, he has
been a shareholder, officer and director in the law firm of Zimmerman, Axelrad,
Meyer & Wise, P.C. and its predecessor firms.
OTHER DIRECTORS
The following table sets forth the name and age of each director of the
Company not up for election this year, his principal position with the Company,
the year he became a director of the Company and the year that his term as a
director expires.
<TABLE>
<CAPTION>
TERM DIRECTOR
NAME AGE EXPIRES SINCE POSITION
- ------------------------------------------------------------------ --- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Max S. Levit...................................................... 61 1998 1995 Director
David Siegel...................................................... 70 1997 1990 Director
Richard C. Webb................................................... 62 1998 1986 Director
</TABLE>
Mr. Levit, President of Grocers Supply Company, Inc. since January 1992, has
served as a director of the Company since April 1995. Mr. Levit also serves on
the Board of M.D. Anderson Hospital and The University of Texas -- Houston
Health Science Center.
3
<PAGE>
Mr. Siegel has served as a director of the Company since September 1990, and
has been involved in the electronics distribution business since 1954. Mr.
Siegel is Vice President, director and the founder of Great American
Electronics, a distribution company serving industrial distributors. He is also
a director of Nu Horizon Electronics, Micronetics Wireless and Surge Components.
Mr. Webb, a founder of Harris Webb & Garrison, a Houston-based investment
banking and brokerage firm, has served as a director of the Company since June
1986. He has been involved in the investment banking business since 1960, and
was a founder of Lovett Underwood Neuhaus & Webb, Inc., a subsidiary of Kemper
Securities.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the Company's last fiscal year, the Board of Directors held ten
meetings. All directors attended at least 75% of the meetings of the Board of
Directors and the committees on which they served in fiscal 1996.
The Audit Committee, which was composed of Messrs. Levit, Siegel, Webb and
Zimmerman, met on two occasions during the last fiscal year. The Audit Committee
reviews with the Company's independent auditors the plan, scope and results of
the annual audit and the procedures for and results of internal controls.
The Compensation Committee, which was composed of Messrs. Levit, Siegel,
Webb and Zimmerman, met on six occasions during the last fiscal year. The
Compensation Committee is authorized to determine the compensation of Mr.
Abramson. In addition, it is authorized to make recommendations to the Board of
Directors regarding the compensation of other officers and administers the
Company's stock option plans.
DIRECTOR COMPENSATION
Directors who are not employees of the Company receive $1,000 per meeting
for attendance at the meetings of the Board of Directors and $500 per meeting
for attendance at meetings of each committee on which such director serves (in
the case of committee meetings not held before or after Board meetings). In
addition to the above fees, directors who are not employees of the Company
receive an annual retainer in the amount of $15,000 and committee chairmen
receive $2,000 annually, with total compensation not to exceed $25,000 annually.
Beginning in fiscal 1997, the total annual compensation shall not exceed
$35,000.
EXECUTIVE OFFICERS
The following table sets forth the names, ages and positions of the persons
who are not directors and who are executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------- --- ---------------------------------------------
<S> <C> <C>
Barbara Alberto.......................... 49 Vice President
Keith K. Ayers........................... 57 Vice President
Frank M. Billone......................... 51 Vice President
Stephen J. Chapko........................ 42 Vice President, Treasurer and Secretary
Randy J. Corporron....................... 39 Executive Vice President
Rodney J. Corporron...................... 39 Vice President
Cathy L. Felts........................... 44 Vice President
William H. Fountain...................... 39 Vice President
David D. Johnson......................... 31 Vice President
Larry D. Olson........................... 39 Executive Vice President
Mark A. Zerbe............................ 35 Executive Vice President
</TABLE>
Ms. Alberto joined the Company's credit department in 1978. In August 1987,
she was appointed Vice President and she oversees credit administration.
Mr. Ayers joined the Company in 1976 as a purchasing agent. Since then, he
has served in various capacities, including manager of the management
information systems. Mr. Ayers currently serves as Vice President and has
responsibilities for training, special projects and administrative matters.
4
<PAGE>
Mr. Billone has been Vice President since joining the Company in January
1996 and serves as Chief Information Officer. Prior to joining the Company, he
held various Information Systems positions with General Electric since 1967.
Mr. Chapko has been Vice President and Treasurer since July 1989 and
Secretary since June 1993. He joined the Company as Assistant Treasurer in April
1987.
Mr. Randy Corporron has been Executive Vice President of Manufacturing
Services since January 1994, and was previously Vice President of the Company
since August 1987. Since July 1989, he has served as President of K*TEC. He
joined the Company in 1982 as General Manager of K*TEC.
Mr. Rodney Corporron directs and coordinates the multi-plant manufacturing
operations and was appointed Vice President of the Company and General Manager
of K*TEC in July 1989. Prior to such time, he served the Company in a number of
capacities since 1974.
Ms. Felts became a Vice President of the Company in June 1993. She joined
the Company in 1986 as a purchasing manager for K*TEC.
Mr. Fountain has been Vice President since August 1987 and is responsible
for product management in the distribution operations. He joined the Company in
1980 as a purchasing agent.
Mr. Johnson was appointed Vice President, Corporate Controller in January
1996. He joined the Company in 1988 as Accounts Payable Supervisor.
Mr. Olson became Executive Vice President of Sales -- Distribution in
January 1994, and was previously Vice President since January 1992 after the
Company's acquisition of Shelley-Ragon, Inc. Since February 1991, he had been
President of Shelley-Ragon, Inc. Prior to that time he held various positions
with Shelley-Ragon since joining in June 1979.
Mr. Zerbe joined the Company as a sales representative in 1985. In May 1988,
he was appointed Vice President of the Company and in January 1994 he became
Executive Vice President of Operations -- Distribution.
Other than as set forth below under the heading "Certain Agreements," the
executive officers serve at the pleasure of the Board of Directors.
5
<PAGE>
COMPENSATION COMMITTEE REPORT1
The Compensation Committee of the Board of Directors (the "Committee") is
composed entirely of outside directors and is responsible for developing and
making recommendations to the Board with respect to the Company's executive
compensation policies. This Committee Report sets forth the components of the
Company's executive officer compensation and describes the basis on which the
fiscal 1996 compensation determinations were made by the Committee with respect
to the executive officers of the Company.
In designing its executive compensation programs, the Company follows its
belief that executive compensation should reflect the value created for
shareholders while supporting the Company's strategic goals. The following
objectives have been adopted by the Committee:
1. Executive compensation should be meaningfully related to the value
created for shareholders.
2. Executive compensation programs should support the short-term and
long-term strategic goals and objectives of the Company.
3. Executive compensation programs should reflect and promote the Company's
value and reward individuals for outstanding contributions to the
Company's success.
4. Short-term and long-term executive compensation play a critical role in
attracting and retaining well qualified executives.
The Committee currently implements a compensation program based on three
components: a base salary, a related bonus program tied to Company performance,
and a stock option program. The Committee regularly reviews the various
components of the Company's executive compensation to ensure that they are
consistent with the Company's objectives.
BASE SALARY -- The Committee, in determining the appropriate base salaries
of its executive officers, generally considers the level of executive
compensation in similar companies in the industry. In addition, the Committee
takes into account (i) the performance of the Company and the roles of the
individual executive officers with respect to such performance, and (ii) the
particular executive officer's specific responsibilities and the performance of
such executive officer in those areas of responsibility. From time to time
surveys are undertaken to provide competitive information to the Committee. In
this regard the Committee has conferred with third party compensation and
employee benefit consultants and has reviewed published information which
members of the Committee have obtained.
ANNUAL INCENTIVES -- The bonus program provides direct financial incentives
in the form of an annual cash bonus to executive officers to achieve and exceed
the Company's annual goals. The Company currently maintains for Mr. Abramson an
incentive cash bonus plan (the "Bonus Plan"). Bonuses pursuant to such Bonus
Plan are determined by the Compensation Committee, based upon the Company's
achievement of certain budgeted goals. Ninety percent of such bonus is based on
the Company's pre-tax earnings, 5% is based on the growth of the Company's
earnings per share, and 5% is based on the Company's stock performance.
The Company has developed a bonus program for Messrs. Randy and Rodney
Corporron pursuant to which they receive cash bonuses resulting from the
achievement of certain targeted goals for the operating profit in the
manufacturing operations of the Company and the growth of the Company's earnings
per share.
The Company has also adopted, subject to shareholder approval, the 1996
Employee Incentive Plan, which provides, among other things, for the grant of
performance awards and is intended to replace the Bonus Plan discussed above,
and the bonus program for Messrs. Randy and Rodney Corporron discussed above.
For additional information regarding the 1996 Employee Incentive Plan, see
Proposal No. 4 herein.
- ---------------
1Notwithstanding filings by the Company with the Securities and Exchange
Commission ("SEC") that have incorporated or may incorporate by reference other
SEC filings (including this proxy statement) in their entirety, this
Compensation Committee Report shall not be incorporated by reference into such
filings and shall not be deemed to be "filed" with the SEC except as
specifically provided otherwise or to the extent required by Item 402 of
Regulation S-K.
6
<PAGE>
LONG-TERM INCENTIVES -- The Company currently maintains the Amended and
Restated 1987 Stock Option Plan, a Chief Executive Officer Stock Option Plan and
Agreement, a Chief Operating Officer Stock Option Plan and Agreement, a K*TEC
President Stock Option Plan and Agreement, a K*TEC General Manager Stock Option
Plan and Agreement, an Executive Vice President of Sales-Distribution Stock
Option Plan and Agreement, an Executive Vice President of
Operations-Distribution Stock Option Plan and Agreement and a Vice President,
Secretary and Treasurer Stock Option Plan and Agreement. These stock option
plans align executive officer compensation and shareholder return, and enable
executive officers to develop and maintain a significant, long-term stock
ownership position in the Company's Common Stock. For executive officers
receiving grants of stock options under the Company's Amended and Restated 1987
Stock Option Plan, no stock options can have a term of greater than ten years or
an exercise price of less than 85% of the fair market value of the Common Stock
on the date of grant.
The Committee has also adopted, subject to shareholder approval, the 1996
Employee Incentive Plan, which provides, among other things, for the grant of
stock options to key employees and is intended to replace the Company's Amended
and Restated 1987 Stock Option Plan. Upon shareholder approval of the 1996
Employee Incentive Plan, no future grants of stock options will be allowed under
the Amended and Restated 1987 Stock Option Plan. For additional information
regarding the 1996 Employee Incentive Plan, see Proposal No. 4 herein.
NAMED EXECUTIVE OFFICERS -- Consistent with the Company's compensation
program outlined above, compensation for each of the named executive officers,
as well as other senior executives, consists of a base salary, bonus and stock
options. The base salaries for the named executive officers for fiscal 1996 were
believed to be at levels below competitive amounts paid to executives with
comparable qualifications, experience and responsibilities of other companies
engaged in the same or similar business as the Company. Cash bonuses have been
accrued for payment to all named executive officers of the Company as a result
of the Company achieving its budgeted goals concerning pre-tax earnings, growth
of earnings per share and stock performance of the Company, and the guidance and
performance of such officers in assisting the Company to achieve those goals
during fiscal 1996.
CHIEF EXECUTIVE OFFICER -- In addition to the long-term incentive
components, the Committee believes that the cash compensation of the chief
executive officer ("CEO") should be impacted by Company performance. Mr.
Abramson, who has served as CEO of the Company since 1973, received a base
salary in fiscal 1996 of $391,500, which the Committee believes to be below the
average of the base salary for chief executive officers of other companies
engaged in the same or similar business as the Company with comparable
qualifications, experience and responsibilities. After due consideration of Mr.
Abramson's performance and the achievement by the Company of certain budgeted
goals regarding pre-tax earnings, growth in earnings per share, and stock
performance, based on the Bonus Plan, Mr. Abramson received a bonus of
$1,771,109 in fiscal 1996, resulting in 81.9% of Mr. Abramson's cash
compensation in fiscal 1996 resulting from annual incentives.
During the fall of 1995, the Committee conferred with outside compensation
and benefit consultants in a comprehensive review of the CEO's level of
compensation in light of, among other things, Mr. Abramson's assumption of the
additional duties as President. The Committee desired to enter into an
Employment Agreement (the "Employment Agreement") with Mr. Abramson to secure
his continued leadership of the Company during the remainder of the twentieth
century, which the Committee anticipates will be a period of substantial growth
and change for the Company and the markets in which it operates. The Employment
Agreement provides for the Company's continued employment of Mr. Abramson until
March 31, 2001 for a minimum annual base salary and bonus of $950,000. The
Employment Agreement also provides that if Mr. Abramson continues to serve as
CEO of the Company until March 31, 2001, he will receive a retirement benefit in
the amount of $750,000 per year for the greater of 15 years or his life, which
benefit is subject to acceleration in certain circumstances. The Committee
believes that the Employment Agreement appropriately rewards Mr. Abramson for
the Company's recent superior performance as well as better securing his
commitment to continue leading the Company over the next five years. During the
last fiscal year, the
7
<PAGE>
Company's net income, earnings per share and stock price increased approximately
109%, 85%, and 140%, respectively. In addition, Mr. Abramson was instrumental in
a successful common stock offering by the Company that has better positioned the
Company to take advantage of opportunities for growth.
LIMITATION OF TAX DEDUCTION FOR EXECUTIVE COMPENSATION -- The Committee
desires its compensation policy to be cost and tax effective. In light of
federal tax laws changes that prevent publicly traded companies from receiving a
tax deduction on compensation paid to named executive officers in excess of $1
million annually, the Committee continually reviews all compensation components
to ensure the Company is maximizing corporate tax deductions, when feasible and
consistent with its prior commitments to the Company's executive officers.
The Committee has adopted, subject to shareholder approval, the 1996
Employee Incentive Plan, which authorizes 1,600,000 shares of Common Stock to be
granted to key employees as stock options and which allows cash awards to be
granted based upon the achievement of specific performance measures established
by the Committee. The Company believes that the proposed 1996 Employee Incentive
Plan qualifies for an exception to the $1 million limit. For additional
information regarding the 1996 Employee Incentive Plan, see Proposal No. 4
herein.
Compensation Committee: Max S. Levit, David Siegel, Richard C. Webb, and
Alvin L. Zimmerman.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee of the Board of Directors of the
Company was, during fiscal 1996, an officer or employee of the Company or any of
its subsidiaries, or was formerly an officer of the Company or any of its
subsidiaries or had any relationships requiring disclosure by the Company under
Item 404 of Regulation S-K.
During fiscal 1996, no executive officer of the Company served as (i) a
member of the compensation committee (or other board committee performing
equivalent functions) of another entity, one of whose executive officers served
on the Compensation Committee of the Board of Directors, (ii) a director of
another entity, one of whose executive officers served on the Compensation
Committee of the Board of Directors, or (iii) a member of the compensation
committee (or other board committee performing equivalent functions) of another
entity, one of whose executive officers served as a director of the Company.
8
<PAGE>
COMPENSATION TABLES
The following table sets forth compensation information for the chief
executive officer and the four most highly compensated executive officers (the
"Named Executive Officers") of the Company during the Company's fiscal years
1996, 1995 and 1994, for services rendered during such years to the Company or
any of its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------- ---------------
SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION FISCAL YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION(2)
---------------- ----- -------- --------- --------------- --------------- ---------------
($) ($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C>
Morrie K. Abramson ........... 1996 391,500 1,771,109 9,430 0 29,163
Chairman of the Board, 1995 372,879 674,700 14,891 0 21,945
Chief Executive Officer 1994 366,484 420,000 6,880 0 7,075
and President
Randy J. Corporron ........... 1996 158,722 1,456,571 7,546 0 23,893
Executive Vice President 1995 151,159 628,500 7,440 0 14,080
1994 144,375 358,925 7,505 210,000 7,075
Rodney J. Corporron .......... 1996 126,990 1,218,829 7,770 0 21,157
Vice President 1995 120,913 525,800 7,638 0 12,395
1994 119,231 300,325 7,163 150,000 7,075
Cathy L. Felts ............... 1996 89,191 338,567 6,263 20,000 11,052
Vice President 1995 80,690 110,600 5,419 0 7,306
1994 78,449 60,000 2,316 30,000 4,041
Mark A. Zerbe ................ 1996 160,251 132,908 6,509 75,000 10,557
Executive Vice President 1995 162,263 36,000 3,331 0 7,823
1994 137,573 15,000 670 105,000 4,282
</TABLE>
- ---------------
(1) Includes the amount of auto allowance paid by the Company and the amount of
reimbursement by the Company for medical and dental expenses.
(2) Includes, in 1996, Company matching contributions of $6,537, $4,661,
$5,570, $4,102 and $4,677, respectively, pursuant to the Company's
Tax-Deferred Savings and Retirement Plan and Trust, and Company matching
contributions of $22,626, $19,232, $15,587, $6,950 and $5,880,
respectively, pursuant to the Company's Deferred Compensation Plan.
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL OPTIONS MARKET POTENTIAL REALIZABLE VALUE AT
GRANTED TO EXERCISE PRICE ON ASSUMED STOCK PRICE
OPTIONS EMPLOYEES IN PRICE DATE OF EXPIRATION APPRECIATION FOR
NAME GRANTED FISCAL YEAR (PER SHARE) GRANT DATE OPTION TERMS
----- ------- ----------- --------- ------- --------- -------------------------------
(#) (%) ($) ($) (0%) (5%) (10%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Morrie K. Abramson.... 0 0 0 0 -- 0 0 0
Randy J. Corporron.... 0 0 0 0 -- 0 0 0
Rodney J. Corporron... 0 0 0 0 -- 0 0 0
Cathy L. Felts........ 20,000 2.5 19.19 19.19 08/22/00 $ 0 $ 106,037 $ 234,314
Mark A. Zerbe......... 75,000 9.3 7.25 14.50 05/01/10 $ 543,750 $1,717,084 $3,999,007
</TABLE>
9
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE AT FISCAL YEAR END AT FISCAL YEAR END
NAME EXERCISE REALIZED (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
- -------------------------------- ----------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Morrie K. Abramson.............. 0 $ 0 57,000/513,000 $ 1,802,910/$16,226,190
Randy J. Corporron.............. 53,100 $ 1,349,761 40,000/170,000 $ 1,030,000/$5,285,000
Rodney J. Corporron............. 45,000 $ 1,555,150 0/150,000 $ 0/$4,770,000
Cathy L. Felts.................. 10,000 $ 241,700 10,000/30,000 $ 284,200/$608,000
Mark A. Zerbe................... 0 $ 0 70,000/110,000 $ 1,829,200/$3,024,350
</TABLE>
PERFORMANCE GRAPH
The following performance graph provided by Media General Financial Services
compares the performance of the Company's Common Stock to the New York Stock
Exchange Market Index and a Peer Group Index (as defined below) for the
Company's last five fiscal years. The Peer Group Index is made up of the
companies whose common stock has traded publicly for the last five years and
whose primary four-digit SIC Code is the same as the Company's.
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
KENT ELECTRONICS CORP 100 111.89 150.35 149.65 247.43 593.41
INDUSTRY INDEX 100 133.21 166.85 167.23 186.04 237.76
BROAD MARKET 100 110.02 126.27 131.46 145.82 190.44
</TABLE>
* Assumes $100 invested on March 31, 1991 in Kent Common Stock or Index and that
dividends are reinvested. Fiscal Year Ending March 30, 1996.
- ------------
(1) Includes the following companies:
Airport Systems International, All American Semiconductor, Applied Digital
Access, Arrow Electronics, Avnet, Bell Industries, Bell Microproducts,
Brightpoint, Inc., Cidco, Inc., Communications World International,
Electrocon International, Farmstead Telephone Group, Gentner Communication
Corp., Internet Communications, Jaco Electronics, Kent Electronics
Corporation, Marshall Industries, Milgray Electronics, Norstan, Nu-Horizons
Electronics, PC Services Source, Pioneer Standard Electronics,
10
<PAGE>
Premier Industrial, Rada Electronics, Reptron Electronics, Richardson
Electronics, Richey Electronics, Sterling Electronics, Taitron Components,
Tech Electro Industries, Tessco Technologies, View Tech, Inc., Western
MicroTechnology, Wyle Electronics and Zing Technologies.
CERTAIN AGREEMENTS
The Employment Agreement between Mr. Abramson and the Company expires on
March 31, 2001. The Employment Agreement provides for a minimum annual base
salary and bonus of at least $950,000 and an annual retirement benefit of
$750,000 for the greater of 15 years or his life upon termination of Mr.
Abramson's employment for any reason other than for Just Cause or without Good
Reason (each as defined in the Employment Agreement). If Mr. Abramson dies or
becomes disabled prior to March 31, 2001, the Company shall pay his estate, his
guardian or him, as the case may be, an annual retirement benefit of $950,000
until March 31, 2001, and then $750,000 annually thereafter. The Employment
Agreement provides for termination by the Company for Just Cause or by Mr.
Abramson for Good Reason. Upon a termination for Just Cause or Mr. Abramson's
resignation without Good Reason prior to March 31, 2001, no retirement benefits
would be paid. If prior to a Change in Control (as defined in the Employment
Agreement), Mr. Abramson is discharged without Just Cause or resigns for Good
Reason, or if Mr. Abramson's employment is terminated for any reason after a
Change in Control, Mr. Abramson shall be entitled to receive a cash lump sum
payment equal to all compensation due to him for the remainder of the term of
the Employment Agreement. A Change in Control in the Employment Agreement is
deemed to have occurred on the earliest of the following: (i) if any entity or
person becomes the beneficial owner of 20% or more of the Common Stock of the
Company; (ii) the approval by the shareholders of the Company of a definitive
agreement to sell or otherwise dispose of substantially all of the assets, merge
or consolidate the Company in which the Company is not the surviving
corporation; or (iii) the date upon which, during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors of the Company cease for any reason to constitute at least a majority
thereof.
In January 1993, the Company entered into an Executive Health Care Benefits
and Consulting Agreement with Mr. Abramson pursuant to which he may provide
consulting services to the Company after retirement and will be covered under
the Company's health care plan. Under such agreement, Mr. Abramson will pay all
required premiums and other costs for Medicare coverage. Under the Company's
health care plan, the Company will provide medical, dental and prescription drug
benefits for Mr. Abramson and his spouse for those items and expenses which are
eligible to be covered under the health care plan to the extent not covered by
Medicare.
In March 1993, the Company entered into an agreement with Mr. Abramson
pursuant to which the Company, upon a change in control of the Company, will
make a cash payment to him in an amount sufficient to pay all excise taxes
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), so as to place Mr. Abramson in the same after-tax position had there
been no such taxes.
CERTAIN TRANSACTIONS
Mr. Zimmerman, a director of the Company, is a shareholder, officer and
director of the law firm of Zimmerman, Axelrad, Meyer & Wise, P.C., a firm
retained by the Company.
PROPOSAL NO. 2 -- AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has approved and recommended to the Company's
shareholders an amendment (the "Proposed Amendment") to Article IV of the
Company's Articles of Incorporation increasing the number of shares of Common
Stock which the Company has the authority to issue from 30 million shares to 100
million shares. Under Texas law, the affirmative vote of the holders of at least
two-thirds of the outstanding shares of the Company's Common Stock is required
for approval of the Proposed Amendment.
11
<PAGE>
The Proposed Amendment would become effective upon the filing of Articles of
Amendment to the Articles of Incorporation with the Secretary of State of Texas.
Upon the effectiveness of the Proposed Amendment, the first paragraph of Article
IV of the Company's Articles of Incorporation would read in its entirety as
follows:
"The aggregate number of shares which the corporation shall have the
authority to issue is one hundred million (100,000,000) shares of Common
Stock, without par value, and two million (2,000,000) shares of
Preferred Stock, $1.00 par value per share."
As of May 7, 1996, there were 23,937,176 shares of Common Stock outstanding
and an aggregate of 5,982,500 shares of Common Stock reserved for issuance upon
exercise of options granted under the Company's stock option plans, leaving
80,324 shares of Common Stock authorized and available for issuance. However, as
described in Proposal No. 3 below, an aggregate of 100,000 shares of Common
Stock will be required to be reserved for issuance upon exercise of options to
be granted under the 1996 Non-Employee Director Stock Option Plan. An additional
1,600,000 shares will be required to be reserved for issuance upon exercise of
options to be granted under the 1996 Employee Incentive Plan as described in
Proposal No. 4 below; however, if the 1996 Employee Incentive Plan is approved
by the shareholders, no future grants of stock options will be allowed under the
Amended and Restated 1987 Stock Option Plan. Since there are approximately
1,600,000 shares currently subject to option under the Amended and Restated 1987
Stock Option Plan, the net result is no additional shares will be required to be
reserved for issuance upon exercise of options to be granted under the 1996
Employee Incentive Plan.
In addition, management believes that it is important for the Company to
have a sufficient reserve of shares of Common Stock available for the future
needs of the Company. Increasing the number of authorized shares of Common Stock
will facilitate the acquisition of other companies and properties and make
shares of Common Stock available for other corporate purposes, including any
future issuances of Common Stock in public or private financings, payment of
stock dividends, or upon subdivision of outstanding shares through stock splits,
or upon conversion or exercise of any convertible securities, options, warrants
or rights which may hereafter be issued for any desirable corporate purpose.
Having such additional authorized shares of Common Stock available for issuance
in the future will give the Company greater flexibility and will allow such
shares to be issued without the expense and delay of a special shareholders
meeting. The additional shares of Common Stock will be available for issuance
without further action by the shareholders, unless such action is required by
applicable law or the rules of any stock exchange on which the Company's
securities may then be listed. Other than its current stock option plans and the
plans proposed herein for approval by the shareholders, the Company does not
have any plans, agreements, understandings or arrangements that could or will
result in the issuance of any Common Stock.
Under certain circumstances, the shares available for additional issuance
could be used to create voting impediments or to frustrate persons seeking to
effect a merger or otherwise gain control of the Company. Also, any of such
additional shares of Common Stock could be privately placed with purchasers who
might side with management of the Company in opposing a tender offer by a third
party. However, the Proposed Amendment is not being sought in order to frustrate
any attempt to acquire control of the Company and the Company is not aware of
any such attempt.
THE COMPANY RECOMMENDS VOTING "FOR" PROPOSAL NO. 2.
PROPOSAL NO. 3 -- ADOPTION OF 1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Board of Directors of the Company has adopted, subject to approval by
the shareholders, the Kent Electronics Corporation 1996 Non-Employee Director
Stock Option Plan (the "Director Plan"), and has directed that the Director Plan
be submitted to the shareholders for approval. The Director Plan is intended to
replace the Company's 1991 Non-Employee Director Stock Option Plan, which
expired by its terms after the 1995 annual meeting of shareholders. Approval of
the proposed Director Plan will require the majority vote of shareholders voting
in person or by proxy with respect to the Director Plan at the Annual Meeting.
This summary of the material terms of the Director Plan is qualified in its
entirety by reference to the complete text of the Director Plan which is
attached to this Proxy Statement as Appendix A.
12
<PAGE>
PURPOSE -- The purpose of the Director Plan is to provide the independent
directors additional incentive for their service as directors. The Company is
dependent for the successful conduct of its business on the incentive, effort
and judgment of its directors.
TERM -- The Director Plan was adopted effective May 7, 1996, subject to
approval by shareholders at this Annual Meeting. The Director Plan shall expire
and terminate on the earlier of (i) the date ten years from the effective date
of the Director Plan, or (ii) the date on which there have been granted to
eligible directors pursuant to the Director Plan options to purchase an
aggregate of 100,000 shares of Common Stock.
PARTICIPATION -- All non-employee directors are eligible to participate in
the Director Plan. Stock options to purchase 5,000 shares will be automatically
granted upon each eligible director's initial election to the Board, and stock
options to purchase 5,000 shares will be automatically granted effective each
year on the date of the annual meeting of shareholders. During the lifetime of
the option holder, any stock option will be exercisable only by the recipient,
and will be transferable only by will or the laws of descent and distribution,
pursuant to a qualified domestic relations order, or if established by the
Committee, pursuant to intra-family transfers without payment of consideration.
SHARES OF STOCK AVAILABLE FOR OPTIONS -- A total of 100,000 shares of Common
Stock is available for issuance under the Director Plan. The shares may be
treasury shares or authorized but unissued shares. In the event a stock option
lapses unexercised or partially unexercised or is surrendered for cancellation,
the shares of Common Stock allocable to the unexercised stock option may again
be subject to a stock option under the Director Plan.
The Director Plan provides for appropriate adjustment of shares available
under the Director Plan and of shares subject to outstanding stock options in
the event of any changes in the outstanding Common Stock of the Company by
reason of any recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction.
STOCK OPTIONS -- Each stock option shall be evidenced by a stock option
agreement containing terms and conditions not inconsistent with the provisions
of the Director Plan. Each stock option shall have a term of five years from the
grant thereof. Each stock option shall vest immediately; provided, however, that
the sales of shares upon the exercise of such stock option shall not be allowed
until at least six months after the later of (i) the approval of the Director
Plan by the stockholders or (ii) the grant of the stock option. The purchase
price payable upon the exercise of a stock option will be equal to the fair
market value of the Common Stock on the date the stock option is granted. On May
7, 1996, the last reported sales price of the Common Stock was $37.38 per share.
Payment in full for the number of shares purchased upon the exercise of stock
options granted under the Director Plan shall be made in cash, or certified or
cashier's check, or by Common Stock of the Company already owned by and in the
possession of the stock option holder, or any combination thereof, at the same
time the stock option is exercised.
AMENDMENT OF DIRECTOR PLAN -- The Board of Directors may amend, terminate or
suspend the Director Plan at any time, provided that no amendment shall be made
without shareholder approval if such approval is necessary to comply with any
tax or regulatory requirement, including any approval requirement necessary to
maintain qualification of the Director Plan under Section 16(b) of the Exchange
Act if the Board desires to maintain such qualification.
MERGER, CONSOLIDATION OR SALE OF ASSETS -- If (i) the Company is merged into
or consolidated with another corporation and the Company is not the surviving
corporation, (ii) the Company is recapitalized in such a manner that shares of
the Common Stock are converted into or exchanged for other securities of the
Company, (iii) the Company sells or otherwise disposes of substantially all of
its assets, (iv) over 30% of the Common Stock of the Company is acquired by
another person, corporation or entity in exchange for stock or (v) over 30% of
the then outstanding Common Stock is acquired in a single transaction or a
series of related transactions, then each holder of an outstanding stock option
shall be entitled, upon exercise of such stock option, to receive shares of such
stock or other securities of the Company or the surviving or acquiring
corporation as the holders of the Company's Common Stock received pursuant to
the terms of the merger, consolidation, exchange, recapitalization, sale or
acquisition. If the terms of any such transaction provide for
13
<PAGE>
the cancellation of all outstanding stock options, each holder of an outstanding
stock option shall have the right to exercise such stock option in full during a
30-day period preceding the effective date of any such transaction.
FEDERAL TAX CONSEQUENCES -- The grant of a stock option under the Director
Plan will not result in the recognition of any taxable income by the director. A
director will recognize ordinary income on the date of exercise of the option
equal to the excess, if any, of (i) the fair market value of the shares acquired
as of the exercise date, over (ii) the exercise price. The tax basis of the
shares for purposes of a subsequent sale include the exercise price paid and the
ordinary income reported on exercise of the option. The income reportable on
exercise of an option is subject to federal income and employment tax
withholding. Generally, the Company will be entitled to a deduction in the
amount reportable as income by director on the exercise of an option.
FISCAL 1997 AWARDS -- The following table sets forth the stock options that
the group referred to below will receive in fiscal 1997 if the Director Plan is
approved by the Company's shareholders at the Annual Meeting. Executive officers
and employee directors are not eligible to participate in the Director Plan.
NEW PLAN BENEFITS TABLE
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
<TABLE>
<CAPTION>
NAME DOLLAR VALUE ($) NUMBER OF UNITS
- ----------------------------------------------------------- ------------------- ---------------
<S> <C> <C>
Non-Executive Director Group............................... (1) 20,000
</TABLE>
- ------------
(1) Dollar value is dependent upon the future value of Company Common Stock.
THE COMPANY RECOMMENDS VOTING "FOR" PROPOSAL NO. 3.
PROPOSAL NO. 4 -- ADOPTION OF 1996 EMPLOYEE INCENTIVE PLAN
The Board of Directors of the Company has adopted, subject to approval by
the shareholders, the Kent Electronics Corporation 1996 Employee Incentive Plan
(the "Incentive Plan"), and has directed that the Incentive Plan be submitted to
the shareholders for approval. Approval of the proposed Incentive Plan will
require the majority vote of shareholders voting in person or by proxy with
respect to the Incentive Plan at the Annual Meeting. This summary of the
material terms of the Incentive Plan is qualified in its entirety by reference
to the complete text of the Incentive Plan which is attached to this Proxy
Statement as Appendix B.
PURPOSE -- The purpose of the Incentive Plan is to provide a means whereby
certain key employees of the Company and its affiliates may develop a sense of
proprietorship and personal involvement in the development and financial success
of the Company, and to encourage them to remain with, and devote their best
efforts to, the business of the Company, thereby advancing the interests of the
Company and its shareholders. The Company believes that the possibility of
participation in the Incentive Plan through (i) receipt of incentive options
("Incentive Options") or nonqualified options ("Nonqualified Options")
(Incentive Options and Nonqualified Options shall be collectively referred to
herein as "Stock Options"), or (ii) the grant of performance awards
("Performance Grants") based on the achievement of pre-established performance
goals (some or all of which Performance Grants may be paid in Common Stock)
(Stock Options and Performance Grants shall be collectively referred to herein
as "Awards"), will provide key employees an incentive to perform more
effectively and will assist the Company in obtaining and retaining people of
outstanding training and ability.
TERM -- The Incentive Plan was adopted effective May 7, 1996, subject to
approval by shareholders at this Annual Meeting. No Award may be granted under
the Incentive Plan after May 6, 2006.
ADMINISTRATION -- The Incentive Plan is administered by the Committee, which
is comprised solely of at least two members who are disinterested persons and
outside directors (as defined in the Incentive Plan). No member of the Committee
is eligible to participate in the Incentive Plan. All questions of
interpretation and application of the Incentive Plan and Awards shall be
determined by the Committee.
14
<PAGE>
PARTICIPATION -- All employees of the Company and its subsidiaries are
eligible to participate in the Incentive Plan. The Committee shall determine
from time to time the employees of the Company and its subsidiaries (the
"Employees") who shall receive Awards under the Incentive Plan. During the
lifetime of the Employee, Awards shall be exercisable only by the Employee, and
no Award will be transferable otherwise than by will or the laws of descent and
distribution, pursuant to a qualified domestic relations order, or if
established by the Committee, pursuant to intra-family transfers without payment
of consideration.
SHARES OF STOCK AVAILABLE FOR AWARDS -- A total of 1,600,000 shares of
Common Stock is available for issuance under, or in payment of, the Awards. The
shares may be treasury shares or authorized but unissued shares. In the event an
Award expires, or terminates for any reason, or is surrendered, the shares of
Common Stock allocable to the unexercised portion of that Award may again be
subject to an Award under the Incentive Plan.
The Incentive Plan provides that the number of shares subject thereto and
shares covered by Stock Options outstanding are subject to equitable adjustment,
as determined by the Committee, in the event of stock dividends, stock splits,
or other capital readjustments before delivery by the Company of all shares
subject to the Incentive Plan.
Should the shareholders approve the Incentive Plan, the Committee will
terminate the Amended and Restated 1987 Stock Option Plan, pursuant to which
options to acquire an aggregate of 1,616,959 shares may currently be granted,
and the Committee will grant Awards only from the Incentive Plan.
COMPENSATION DEDUCTION LIMITATION -- As discussed above, Section 162(m) of
the Code generally limits to $1 million per year per employee the tax deduction
available to publicly traded companies for certain compensation paid to named
executive officers. There is an exception (Section 162(m)(4)(C)) from this
deduction limitation, for certain "performance-based compensation," if specified
requirements are satisfied, including: (i) the establishment by a compensation
committee comprised of outside directors of performance goals which must be met
for the additional compensation to be earned, (ii) the approval of the material
terms of the performance goals by the shareholders after adequate disclosure,
and (iii) the certification by the compensation committee that the performance
goals have been met. The Incentive Plan is designed to satisfy these statutory
requirements for Incentive Options, Nonqualified Options and Performance Grants.
Therefore, if this Incentive Plan is approved by shareholders, the Company
anticipates being entitled to deduct an amount equal to the ordinary income
reportable by each optionee on exercise of a Nonqualified Option, the Early
Disposition of shares of stock acquired by exercise of an Incentive Option, and
the payment of Performance Grants in Common Stock or in cash.
STOCK OPTIONS -- The Committee may designate a Stock Option as an Incentive
Option or as a Nonqualified Option. The terms of each Stock Option shall be set
out in a written Award Agreement which incorporates the terms of the Incentive
Plan.
The Stock Option price may not be less than 100% of the fair market value of
the Common Stock on the date of grant and may not be exercisable after 10 years
from the date of grant. In the case of an Incentive Option issued to a 10%
Shareholder (as defined in the Incentive Plan) of the Company (i) the Incentive
Option price may not be less than 110% of the fair market value of the Common
Stock on the date of grant, and (ii) the period over which the Incentive Option
is exercisable may not exceed five years. On May 7, 1996, the last reported
sales price of the Common Stock was $37.38 per share.
Stock Options may be exercised by written notice of exercise and payment of
the Stock Option price in cash, by check or in previously owned shares of Common
Stock valued at fair market value on the date of exercise. Special rules apply
which limit the time of exercise of a Stock Option following an Employee's
termination of employment. The Committee may impose restrictions on the exercise
of any Stock Option. In the event of a "Change in Control" (as defined in the
Incentive Plan), all Stock Options then outstanding become immediately
exercisable in full.
PERFORMANCE GRANTS -- The Committee may designate certain Employees who
become eligible to receive a Performance Grant if certain pre-established
performance goals are satisfied. In determining which
15
<PAGE>
Employees shall be eligible for a Performance Grant, the Committee will consider
the nature of the Employee's duties, past and potential contributions to the
success of the Company and its affiliates, and such other factors as the
Committee deems relevant in connection with accomplishing the purposes of the
Incentive Plan.
The Committee shall determine the terms of a Performance Grant, if any, for
each performance cycle. The performance goals determined by the Committee may be
based on, among other factors, the following business criteria: net profits,
operating income, stock price, earnings per share, sales and/or return on
equity. Before any Performance Grant may be paid, the Committee must certify in
writing that the performance goal has been satisfied. The maximum amount payable
to any Employee pursuant to one or more Performance Grants may not exceed
$5,000,000 per year.
The Committee intends to establish performance goals in accordance with
Section 162(m) of the Code to enable the Company to deduct in full the total
payment of any Performance Grant as "performance-based compensation."
AMENDMENT OF INCENTIVE PLAN -- The Board of Directors of the Company may
amend, terminate or suspend the Incentive Plan at any time, provided that no
amendment shall be made without shareholder approval if such approval is
necessary to comply with any tax or regulatory requirement, including any
approval or requirement necessary to maintain qualification of the Incentive
Plan under Section 16(b) of the Exchange Act if the Board desires to maintain
such qualification.
CHANGE IN CONTROL -- Upon a Change in Control (as defined in the Incentive
Plan), either (a) each holder of an outstanding Stock Option shall be entitled,
upon exercise of such Stock Option, to receive shares of such stock or other
securities of the Company or the surviving or acquiring corporation at the same
rate per share as the holders of shares of Stock received pursuant to the Change
in Control, or (b) all outstanding Stock Options may be cancelled by the Board
as of the effective date of the Change in Control, provided that notice of such
cancellation shall be given to each holder of a Stock Option and each holder
thereof shall have the right to exercise such Stock Options in full during a
thirty-day period preceding the effective date of the Change in Control. Upon a
Change in Control, all performance grants shall become immediately payable to
the fullest extent of the Award regardless of whether the Performance Cycle (as
defined in the Incentive Plan) upon which it is based has been completed.
FEDERAL TAX CONSEQUENCES -- The grant of Incentive Options to an Employee
does not result in any income tax consequences. The exercise of an Incentive
Option generally does not result in any income tax consequences to the Employee
if the Incentive Option is exercised by the Employee during his employment with
the Company or a subsidiary, or within a specified period after termination of
employment. However, the excess of the fair market value of the shares of Common
Stock as of the date of exercise over the Incentive Option price is a tax
preference item for purposes of determining an Employee's alternative minimum
tax, if applicable. An Employee who sells shares acquired pursuant to the
exercise of an Incentive Option after the expiration of (i) two years from the
date of grant of the Incentive Option, and (ii) one year after the transfer of
the shares to him (the "Waiting Period") will generally recognize a long-term
capital gain or loss on the sale.
An Employee who disposes of his Incentive Option shares prior to the
expiration of the Waiting Period (an "Early Disposition") generally will
recognize ordinary income in the year of sale in an amount equal to the excess,
if any, of (a) the lesser of (i) the fair market value of the shares as of the
date of exercise or (ii) the amount realized on the sale, over (b) the Incentive
Option price. Any additional amount realized on an Early Disposition should be
treated as capital gain to the Employee, short or long term, depending on the
Employee's holding period for the shares. If the shares are sold for less than
the option price, the Employee will not recognize any ordinary income but will
recognize a capital loss, short or long term, depending on the holding period.
16
<PAGE>
The Company will not be entitled to a deduction as a result of the grant of
an Incentive Option, the exercise of an Incentive Option, or the sale of
Incentive Option shares after the Waiting Period. If an Employee disposes of
Incentive Option shares in an Early Disposition, the Company would be entitled
to deduct the amount of ordinary income recognized by the Employee.
The grant of Nonqualified Options under the Incentive Plan will not result
in the recognition of any taxable income by the Employee. An Employee will
recognize ordinary income on the date of exercise of the Nonqualified Option
equal to the excess, if any, of (i) the fair market value of the shares acquired
as of the exercise date, over (ii) the exercise price. The tax basis of these
shares for purposes of a subsequent sale includes the Nonqualified Option price
paid and the ordinary income reported on exercise of the Nonqualified Option.
The income reportable on exercise of a Nonqualified Option is subject to federal
income and employment tax withholding. Generally, the Company will be entitled
to a deduction in the amount reportable as income by the Employee on the
exercise of a Nonqualified Option.
Performance Grants paid in cash generally result in taxable income to the
recipient and a compensation deduction by the Company at the time the cash
payment is made. Performance Grants paid in shares of Common Stock result in
taxable income to the recipient at the fair market value of the Common Stock on
the date of transfer and result in a corresponding compensation deduction for
the Company. Performance Grants are subject to federal income and employment tax
withholding.
FISCAL 1997 AWARDS -- No Awards have been granted under the Incentive Plan.
As indicated above, the Committee has the power to determine, among other
things, the Employees to be granted Awards. As a result, the number of Awards to
be granted in the future to executive officers is not determinable at this time.
THE COMPANY RECOMMENDS VOTING "FOR" PROPOSAL NO. 4.
PROPOSAL NO. 5 - ADOPTION OF STOCK OPTION PLAN AND AGREEMENT FOR THE COMPANY'S
VICE PRESIDENT, CORPORATE CONTROLLER
The Company's Compensation Committee has determined it is in the best
interest of the Company to provide Mr. David D. Johnson with compensation in the
form of additional equity interests in the Company. In view of the foregoing,
the Compensation Committee and the Board of Directors have adopted, subject to
shareholder approval, a stock option plan and agreement for the Company's Vice
President, Corporate Controller (the "Corporate Controller Plan"). This summary
of the material terms of the Corporate Controller Plan is qualified in its
entirety by reference to the complete text of the Corporate Controller Plan
which is attached to this Proxy Statement as Appendix C.
The Corporate Controller Plan for Mr. Johnson (the "Optionee") provides for
the granting of options to purchase an aggregate of up to 25,000 shares of
Common Stock. The options become exercisable as to 2,500 shares on May 1, 2000,
5,000 shares on May 1, 2001, 7,500 shares on May 1, 2002, and the remaining
10,000 shares on May 1, 2003. All options expire, if not exercised, on May 1,
2011. The options are exercisable at a purchase price of $19.31 per share, which
equals one-half the closing price per share of Common Stock on May 9, 1996, the
date the stock option was granted.
Options granted pursuant to the Corporate Controller Plan generally are not
subject to sale, assignment or transfer other than by will or by the laws of
descent and distribution or pursuant to a qualified domestic relations order,
and may be exercised during the Optionee's lifetime only by him or by his legal
representative or, following the Optionee's death, by his executors,
administrators, heirs or devisees. The option price and number of shares subject
to options granted under the Corporate Controller Plan are subject to adjustment
upon a recapitalization, stock split, stock dividend or certain other corporate
transactions. In the event the Optionee's employment is terminated at the
election of the Company or the Optionee terminates his employment for "Good
Reason," as defined in the Corporate Controller Plan, all options will vest and
will become immediately exercisable. In addition, all options held by the
Optionee will vest and become immediately exercisable upon the death or
disability of the Optionee or upon the occurrence of certain events constituting
a "Change in Control," as defined in the Corporate Controller Plan. In the event
the
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Optionee elects to terminate his employment with the Company other than for Good
Reason, for a period of 90 days following such termination he may exercise his
options to the extent they have become exercisable during such time according to
the vesting schedule set forth above.
The Corporate Controller Plan also provides for certain limited stock
appreciation rights, pursuant to which the Optionee can, following a "Change in
Control" as defined in the Corporate Controller Plan, surrender his option to
the Company in return for a cash payment equal to the excess of the "Change in
Control Price" of the shares of Common Stock subject to the option over the
aggregate exercise price payable upon the exercise of the option. The "Change in
Control Price" is defined as the highest market price reported during either (a)
the 30 days prior to either the Optionee's election to exercise the limited
stock appreciation right or (b) the 30 days prior to the occurrence of the
Change in Control; or, in the event of any merger, consolidation or
reorganization in which the Company is not the survivor or shares of Common
Stock are converted into cash or other securities or other property (a
"Termination Merger"), the Change in Control Price is the higher of (i) the fair
market value of the consideration received per share by holders of Common Stock
of the Company in connection with such Termination Merger, or (ii) the highest
price reported for the Company's Common Stock during the 30-day period
immediately preceding the date of the Change in Control. The Company, upon a
Change in Control, will make a cash payment to the Optionee in an amount
sufficient to pay all excise taxes imposed by Section 4999 of the Code with
respect to any compensation received by Optionee pursuant to the Corporate
Controller Plan, so as to place the Optionee in the same after-tax position had
there been no such taxes.
Options granted pursuant to the Corporate Controller Plan are
"non-qualified" stock options and are not intended to qualify as incentive stock
options under Section 422 of the Code. The Optionee will realize no income at
the time he is granted a non-qualified stock option. Ordinary income will be
realized by the Optionee when the non-qualified stock option is exercised. The
amount of such income will be equal to the excess of the fair market value on
the exercise date of the shares of Common Stock issued to the Optionee over the
exercise price of such shares. The Optionee's holding period for federal income
tax purposes with respect to the shares acquired will begin on the date of
exercise. The tax basis of the stock acquired upon the exercise of the option
will be equal to the sum of (i) the exercise price of such option and (ii) the
amount included in income with respect to the exercise of such option. Any gain
or loss on the subsequent sale of the stock will be either a long term or short
term capital gain or loss depending on the Optionee's holding period for the
Common Stock disposed by the Optionee.
The Company will be entitled, subject to the usual rules as to
reasonableness of compensation, to a deduction for federal income tax purposes
in the same amount as the Optionee is considered to have realized ordinary
income upon the exercise of the option. The deduction will be allowed for the
taxable year of the Company in which such ordinary income is recognized by the
Optionee. Any such deductions will be limited to the maximum deduction allowable
pursuant to the Internal Revenue Code, including the limitations on excessive
employee renumeration under Section 162(m) of the Code.
For accounting purposes, the granting of options pursuant to the Corporate
Controller Plan will result in a charge against income equal to the difference
between the option price for the shares subject to the grant and the fair market
value of such shares as of the date the option price is fixed. In this case, the
option price is $19.31, which equals one-half the closing price per share of
Common Stock on May 9, 1996, the date the stock options were granted. The charge
against income, net of the related tax benefit, will be spread over the vesting
period for the options.
The following table sets forth the stock options that the group referred to
below (consisting solely of the Optionee) will receive in fiscal 1997 if the
Corporate Controller Plan is approved by the Company's shareholders at the
Annual Meeting. Neither the Named Executive Officers, the directors, nor the
non-executive officer employees are eligible to participate in the Corporate
Controller Plan.
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NEW PLAN BENEFITS TABLE
VICE PRESIDENT, CORPORATE CONTROLLER STOCK OPTION PLAN AND AGREEMENT
<TABLE>
<CAPTION>
DOLLAR VALUE
NAME ($) NUMBER OF UNITS
- --------------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
Executive Group...................................................... 482,812.50 25,000
</TABLE>
Approval of the proposed Corporate Controller Plan will require the majority
vote of shareholders voting in person or by proxy with respect to the Corporate
Controller Plan at the Annual Meeting. Unless otherwise specified, all properly
executed proxies received by the Company will be voted in favor of the Corporate
Controller Plan.
THE COMPANY RECOMMENDS VOTING "FOR" PROPOSAL NO. 5.
PROPOSAL NO. 6 -- RATIFICATION AND APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected Grant Thornton LLP as its
independent public accountants to audit the accounts of the Company for the
fiscal year ending March 29, 1997. Grant Thornton has advised the Company that
it will have a representative in attendance at the Annual Meeting who will
respond to appropriate questions presented at such meeting.
Management recommends that the appointment of Grant Thornton LLP as
independent public accountants of the Company for the fiscal year ending March
29, 1997, be ratified by the shareholders. Unless otherwise specified, all
properly executed proxies received by the Company will be voted for such
ratification at the meeting or any adjournment thereof.
THE COMPANY RECOMMENDS VOTING "FOR" PROPOSAL NO. 6.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon a review of forms 3 and 4 and amendments thereto furnished
to the Company during its most recent fiscal year, and forms 5 and amendments
thereto furnished to the Company with respect to its most recent fiscal year,
the Company believes that a Form 4 for each of Duane Davis, a former executive
officer of the Company, and Mark Zerbe was filed five days late.
OTHER MATTERS
The Board of Directors knows of no other matters than those described above
which are likely to come before the Annual Meeting. If any other matters
properly come before the meeting, persons named in the accompanying form of
proxy intend to vote such proxy in accordance with their best judgment on such
matters.
PROPOSALS AND NOMINATIONS FOR NEXT ANNUAL MEETING
Any proposals of holders of Common Stock of the Company intended to be
presented at the Annual Meeting of Shareholders of the Company to be held in
1997 must be received by the Company, addressed to the Secretary of the Company,
7433 Harwin Drive, Houston, Texas 77036, no later than January 22, 1997, to be
included in the proxy statement relating to that meeting.
Pursuant to the Company's Bylaws, any nomination of persons to be elected as
directors at the Annual Meeting of Shareholders of the Company to be held in
1997 must be received by the Secretary of the Company not later than the close
of business on the tenth day following the date on which notice of the 1997
annual meeting is first given to shareholders. Such nomination or nominations
must be in writing from a shareholder of record and must attach a written
consent of each person so nominated to serve on the Board of Directors. In
addition, the notice must set forth (i) the name, age, business address and
residence address of each nominee proposed in such notice, (ii) the principal
occupation or employment of each nominee, (iii) the number of shares of stock of
the Company that are beneficially owned by each such nominee and
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(iv) such other information in respect of such nominee as would be required by
the federal securities laws and the rules and regulations promulgated thereunder
in respect of an individual nominated as a director of the Company and for whom
proxies are solicited by the Board of Directors.
By Order of the Board of Directors
Stephen J. Chapko, SECRETARY
May 22, 1996
THE COMPANY WILL FURNISH WITHOUT CHARGE ADDITIONAL COPIES OF ITS ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 30, 1996 TO INTERESTED
SECURITY HOLDERS ON REQUEST. THE COMPANY WILL FURNISH TO ANY SUCH PERSON ANY
EXHIBITS DESCRIBED IN THE LIST ACCOMPANYING SUCH REPORT UPON PAYMENT OF
REASONABLE FEES RELATING TO THE COMPANY'S FURNISHING SUCH EXHIBITS. REQUESTS FOR
COPIES SHOULD BE DIRECTED TO THE SECRETARY AT THE COMPANY'S ADDRESS PREVIOUSLY
SET FORTH.
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APPENDIX A
KENT ELECTRONICS CORPORATION
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
ARTICLE I
PURPOSE
Kent Electronics Corporation, a Texas corporation (the "Company"), is
dependent for the successful conduct of its business on the initiative, effort
and judgment of its directors. This 1996 Non-Employee Director Stock Option Plan
(the "Plan") is intended to provide the independent directors of the Company
additional compensation for their service as directors and an incentive, through
options to acquire stock in the Company, to increase the value of the Company's
common stock, without par value ("Common Stock").
ARTICLE II
ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company (the
"Board"). Subject to the express provisions of the Plan and the policies of each
stock exchange on which any of the Company's stock at any time may be traded,
the Board shall have plenary authority (i) to construe and interpret the Plan,
(ii) to define the terms used therein, (iii) to prescribe, amend and rescind
rules and regulations relating to the Plan, and (iv) to make all other
determinations necessary or advisable for the administration of the Plan. All
determinations and interpretations made by the Board shall be binding and
conclusive on all participants in the Plan and their legal representatives and
beneficiaries. No member of the Board shall be liable for any action, failure to
act, determination or interpretation made in good faith with respect to the Plan
or any transaction under the Plan.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
Under the Plan each director who is not a full-time employee of the Company
or any of its subsidiaries (each, a "Non-Employee Director") shall, effective as
of the date of his initial election to the Board, be granted a stock option to
purchase from the Company 5,000 shares of Common Stock, and effective as of the
date of each annual meeting of shareholders, be granted a stock option to
purchase from the Company 5,000 shares of Common Stock, at a price determined as
set forth in ARTICLE IV below.
ARTICLE IV
TERMS AND CONDITIONS OF STOCK OPTIONS; STOCK OPTION PRICE; TRANSFERABILITY
(a) Each stock option granted under the Plan shall be evidenced by a Stock
Option Agreement (the "Agreement") in such form as may be hereafter approved by
the Board on the advice of counsel to the Company. The Agreement shall be
executed by the Company and the optionee. The sale of the shares issued on the
exercise of a stock option by any person subject to Section 16 of the 1934 Act
shall not be allowed until at least six months after the later of (i) the
approval of this Plan by the stockholders of the Company in accordance with
ARTICLE IX hereof or (ii) the grant of the stock option. Such determination for
each stock option is to be made prior to or at the time that stock option is
granted. Each stock option granted hereunder shall expire if not exercised
within five years of the date of grant.
(b) The per share stock option price shall be an amount equal to the Fair
Market Value (as defined below) of the Common Stock on the date of grant of the
stock option. In no event shall the stock option price be less than the par
value of the Company's Common Stock.
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(c) Except as set forth below, the stock options granted hereunder shall not
be transferable otherwise than by will or operation of the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined in
the Internal Revenue Code of 1986, as amended (the "Code"), or Title I of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the
rules thereunder. During the lifetime of the optionee, stock options granted
hereunder shall be exercisable only by the optionee, the optionee's guardian or
legal representative. In addition to non-transferable stock options, the Board
may allow stock options to be granted that are transferable, without payment of
consideration, to immediate family members of the optionee or to trusts or
partnerships for such family members; the Board may also amend outstanding stock
options to provide for such transferability.
(d) No stock option granted hereunder shall be exercisable unless the Plan
and all shares issuable on the exercise thereof have been registered under the
Securities Act of 1933, as amended (the "1933 Act") and all other applicable
securities laws, and there is available for delivery a prospectus meeting the
requirements of Section 10 of the 1933 Act, or the Company shall have first
received the opinion of its counsel that registration under the 1933 Act and all
other applicable securities laws is not required in connection with such
issuance. At the time of exercise, if the shares with respect to which the stock
option is being exercised have not been registered under the 1933 Act and all
other applicable securities laws, the Company may require the optionee to
provide the Company whatever written assurance counsel for the Company may
require that the shares are being acquired for investment and not with a view to
the distribution thereof, and that the shares will not be disposed of without
the written opinion of such counsel that registration under the 1933 Act and all
other applicable securities laws is not required. Share certificates issued to
the optionee upon exercise of the stock option shall bear a legend to the
foregoing effect to the extent counsel for the Company deems it advisable.
(e) For all purposes under the Plan, the Fair Market Value of a share of
Common Stock on a particular date, or on the most recent prior date on which
Common Stock was traded, shall be equal to the reported closing price per share
as reported by the New York Stock Exchange, Inc. or other principal exchange or
market on which the Common Stock is traded. In the event Common Stock is not
publicly traded at the time a determination of its value is required to be made
hereunder, the determination of its Fair Market Value shall be made by the Board
of Directors in such manner as it deems appropriate.
(f) A stock option shall lapse in the following situations:
(1) If the directorship of a Non-Employee Director terminates for any
reason other than death, all unexercised stock options theretofore granted
shall expire ten days after the date of such termination of directorship,
unless such stock options shall have terminated earlier under the terms or
under other provisions of the Plan.
(2) If the directorship of a Non-Employee Director terminates by reason
of death, all unexercised stock options, if any, shall become immediately
exercisable and may be exercised until the expiration of one year from the
date of death of the Non-Employee Director or until the expiration of the
term of the stock option, whichever is earlier. Such stock option may be
exercised by any designated beneficiary of the Non-Employee Director,
subject to all other provisions of the Plan.
ARTICLE V
SHARES SUBJECT TO PLAN AND DURATION OF PLAN
The Plan shall expire and terminate on the earlier of (i) the date ten years
from the effective date of this Plan, or (ii) the date on which there have been
granted to Non-Employee Directors pursuant to the Plan stock options to purchase
an aggregate of 100,000 shares of the Common Stock. Shares subject to stock
options under the Plan may be either authorized and unissued shares or issued
shares that have been acquired by the Company and held in its treasury, in the
sole discretion of the Board. When stock options have been granted under the
Plan and have lapsed unexercised or partially unexercised or have been
surrendered for cancellation by the optionee thereof, the unexercised shares
which were subject thereto may be reoptioned under the Plan.
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ARTICLE VI
ADJUSTMENTS
(a) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Subject to any required
action by the Company's directors and stockholders, the number of shares
provided for in each outstanding stock option and the price per share thereof,
and the number of shares provided for in the Plan, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of the
Company's Common Stock resulting from a subdivision or consolidation of shares
or the payment of a stock dividend (but only on the Common Stock), a stock
split, a reverse stock split, or any other increase or decrease in the number of
such shares effected without receipt of consideration by the Company, and shall
also be proportionately adjusted in the event of a spin-off, spin-out, or other
distribution of assets to stockholders of the Company, to the extent necessary
to prevent dilution of the interests of grantees pursuant to the Plan or of the
other stockholders of the Company, as applicable. If the Company shall engage in
a merger, consolidation, reorganization or recapitalization, each outstanding
stock option (or if such transaction involves less than all of the shares of the
Company's Common Stock, then a number of stock options proportionate to the
number of such involved shares), shall become exercisable for the securities and
other consideration to which a holder of the number of shares of the Company's
Common Stock subject to each such stock option would have been entitled to
receive in any such merger, consolidation, reorganization or recapitalization.
(b) If, while unexercised stock options remain outstanding under the Plan,
(i) the Company is merged into or consolidated with another corporation under
circumstances where the Company is not the surviving corporation or where the
Common Stock is converted into other securities, cash or other property in
connection with such merger or consolidation, (ii) the Company is recapitalized
in such a manner that shares of the Common Stock are converted into or exchanged
for other securities of the Company, (iii) the Company sells or otherwise
disposes of substantially all of its assets to another person, corporation or
entity, (iv) over 30% of the Common Stock of the Company is acquired by another
person, corporation or entity in exchange for stock (or stock and securities) of
such corporation or (v) over 30% of the then outstanding Common Stock is
acquired in a single transaction or a series of related transactions, then,
unless the terms of the transaction described in clauses (i), (ii), (iii), (iv)
or (v) above provide that after the effective date of such merger,
consolidation, recapitalization, exchange, sale or acquisition, as the case may
be, each holder of an outstanding stock option shall be entitled, upon exercise
of such stock option to receive, in lieu of shares of the Company's Common
Stock, shares of such stock or other securities of the Company or the surviving
or acquiring corporation or such other property at the same rate per share as
the holders of shares of the Company's Common Stock received pursuant to the
terms of the merger, consolidation, exchange, recapitalization, sale or
acquisition, all outstanding stock options shall be cancelled as of the
effective date of any such merger, consolidation, recapitalization, exchange,
sale or acquisition. At least 30 days notice of such cancellation shall be given
to each holder of a stock option and each holder of a stock option shall have
the right to exercise such stock options in full during a 30-day period
preceding the effective date of such merger, consolidation, recapitalization,
exchange, sale or acquisition.
(c) CHANGE OF PAR VALUE. In the event of a change in the Company's Common
Stock which is limited to a change of all of its authorized shares without par
value into the same number of shares with a par value, the shares resulting from
any such change shall be deemed to be Common Stock within the meaning of the
Plan.
(d) MISCELLANEOUS. The adjustments provided for in this Article shall be
made by the Board whose determination in that respect shall be final, binding
and conclusive. Except as hereinbefore expressly provided in this Article, the
holder of a stock option shall not be entitled to the privilege of stock
ownership as to any shares of Common Stock or other stock not actually issued
and delivered to the holder, and any issue by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
not affect and no adjustment by reason thereof shall be made with respect to the
number or price of shares of the Company's Common Stock subject to any stock
option. The grant of a stock option pursuant to
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the Plan shall not affect in any way the right or power of the Company to, among
other things, make adjustments, reclassifications, reorganizations or changes of
its capital or business structure or to merge or to consolidate or to dissolve
or liquidate or sell or transfer all or any part of its business or assets.
ARTICLE VII
POWER TO AMEND
The Board of Directors may amend, terminate or suspend this Plan at any time
and from time to time; provided, however, that the Plan shall not be amended
more than once every six months, other than to comport with changes in the Code,
ERISA, or the regulations thereunder, or the regulations thereunder; and
provided, further, that to the extent the Board desires for any amendment to the
Plan to maintain qualification of the Plan under Rule 16b-3 of the Exchange Act,
no amendment shall (i) materially increase the benefits accruing to participants
under the Plan; (ii) change the aggregate number of Shares which may be issued
under Options pursuant to the provisions of the Plan; (iii) reduce the Option
price at which Options have been granted; or (iv) change the class of persons
eligible to receive Options. However, no termination or amendment of the Plan
may, without the consent of the holder of any Option then outstanding, adversely
affect the rights of such holder under the Options.
ARTICLE VIII
EFFECTIVE DATE; STOCKHOLDER APPROVAL
The Plan shall be effective as of May 7, 1996, the date on which it received
the approval of a majority of the disinterested members of the Board. However,
the Plan and all stock options granted under the Plan shall be void if the Plan
is not approved by the stockholders within 12 months from the date the Plan is
approved by the Board. The Plan shall be deemed approved by the holders of the
outstanding voting stock of the Company by the affirmative votes of the holders
of a majority of the outstanding voting stock of the Company present, or
represented, and entitled to vote at a meeting of such stockholders duly held in
accordance with the applicable laws of the state or other jurisdiction in which
the Company is incorporated. No stock option granted under the Plan shall be
exercisable in whole or in part unless and until such stockholder approval is
obtained.
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APPENDIX B
KENT ELECTRONICS CORPORATION
1996 EMPLOYEE INCENTIVE PLAN
ARTICLE I
PLAN
1.1 PURPOSE. The Kent Electronics Corporation 1996 Employee Incentive Plan
is intended to provide a means whereby certain Employees of Kent Electronics
Corporation, a Texas corporation, and its Affiliates may develop a sense of
proprietorship and personal involvement in the development and financial success
of the Company, and to encourage them to remain with and devote their best
efforts to the business of the Company, thereby advancing the interests of the
Company and its shareholders. Accordingly, the Company may grant Awards to
certain Employees in the form of Incentive Stock Options, Nonqualified Stock
Options and Performance Grants, subject to the terms of the Plan.
1.2 EFFECTIVE DATE OF PLAN. The Plan is effective May 7, 1996, if within
12 months of such date, it shall have been approved by the vote of the holders
of a majority of the shares of Stock of the Company present in person or by
proxy and represented at a duly held shareholders' meeting. No Award shall be
granted pursuant to the Plan after May 6, 2006.
ARTICLE II
DEFINITIONS
The words and phrases defined in this Article shall have the meaning set out
in these definitions throughout the Plan, unless the context in which any such
word or phrase appears reasonably requires a broader, narrower, or different
meaning.
2.1 "AFFILIATE" means any parent corporation and any subsidiary corporation.
The term "parent corporation" means any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company if, at the time of the
action or transaction, each of the corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in the chain. The term "subsidiary
corporation" means any corporation (other than the Company) in an unbroken chain
of corporations beginning with the Company if, at the time of the action or
transaction, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the chain.
2.2 "AWARD" means an award or grant made to an Employee under Articles V
through IX herein.
2.3 "AWARD AGREEMENT" means the written agreement provided in connection
with an Award setting forth the terms and conditions of the Award. Such
Agreement may contain any other provisions that the Committee, in its sole
discretion, shall deem advisable which are not inconsistent with the terms of
the Plan.
2.4 "BOARD OF DIRECTORS" or "Board" means the board of directors of the
Company.
2.5 "CHANGE OF CONTROL" means the happening of any of the following events:
(i) the Company is merged into or consolidated with another corporation
under circumstances where the Company is not the surviving corporation or
the Stock is converted into other securities, cash or other property in
connection with such merger or consolidation;
(ii) the Company is recapitalized in such a manner that shares of Stock
are converted into or exchanged for other securities of the Company;
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(iii) the Company sells or otherwise disposes of substantially all its
assets to another person, corporation or entity;
(iv) over 30% of the then outstanding Stock is acquired by another
corporation in exchange for stock (or stock and securities) of such
corporation; or
(v) over 30% of the then outstanding Stock is acquired in a single
transaction or a series of related transactions.
2.6 "CODE" means the Internal Revenue Code of 1986, as amended.
2.7 "COMMITTEE" means the Compensation Committee of the Board of Directors
or such other committee designated by the Board of Directors. The Committee
shall at all times consist solely of two or more members of the Board of
Directors, and all members of the Committee shall be both Disinterested Persons
and Outside Directors. Any member who no longer qualifies as a Disinterested
Person or an Outside Director shall automatically be removed from the Committee.
2.8 "COMPANY" means Kent Electronics Corporation, a Texas corporation.
2.9 "DISINTERESTED PERSON" means a "disinterested person" as that term is
defined in Rule 16b-3 under the Exchange Act.
2.10 "EMPLOYEE" means a key employee employed by the Company or any
Affiliate to whom an Award is granted.
2.11 "FAIR MARKET VALUE" means, on a particular date or on the most recent
prior date on which Stock was traded, the reported closing price per share of
the Stock of the Company as reported by the New York Stock Exchange, Inc. or
other principal exchange or market on which the Stock is traded; in the event
the Stock of the Company is not publicly traded at the time a determination of
its value is required to be made hereunder, the determination of its Fair Market
Value shall be made by the Committee in such manner as it deems appropriate.
2.12 "INCENTIVE OPTION" means an option granted under the Plan which is
designated as an "Incentive Option" and satisfies the requirements of Section
422 of the Code.
2.13 "NONQUALIFIED OPTION" means an option granted under the Plan other than
an Incentive Option.
2.14 "OPTION" means an Incentive Option or a Nonqualified Option granted
under the Plan to purchase shares of Stock.
2.15 "OUTSIDE DIRECTOR" means a member of the Board of Directors serving on
the Committee who satisfies the requirements of Section 162(m) of the Code.
2.16 "PERFORMANCE GRANT" means an Award, denominated in cash or in Stock,
made to an Employee under Article VI which is intended to qualify as performance
based compensation as defined in Section 162(m) of the Code and regulations
issued thereunder.
2.17 "PLAN" means the Kent Electronics Corporation 1996 Employee Incentive
Plan, as set out in this document and as it may be amended from time to time.
2.18 "STOCK" means the voting common stock of the Company, without par
value, or in the event that the outstanding shares of voting common stock are
later changed into or exchanged for a different class of stock or securities of
the Company or another corporation, that other stock or security.
2.19 "10% SHAREHOLDER" means an individual who, at the time the Option is
granted, owns stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or of any Affiliate. An individual shall
be considered as owning the stock owned, directly or indirectly, by or for his
brothers and sisters (whether by whole or half blood), spouse, ancestors, and
lineal descendants; and stock owned, directly or indirectly, by or for a
corporation, partnership, estate, or trust, shall be considered as being owned
proportionately by or for its shareholders, partners or beneficiaries.
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ARTICLE III
ELIGIBILITY
The individuals who shall be eligible to receive Awards shall be those
Employees as the Committee shall determine from time to time. However, no
non-Employee director shall be eligible to receive any Award or to receive
stock, stock options, or stock appreciation rights under any other plan of the
Company or any of its Affiliates, if receipt of it would cause the individual
not to be a Disinterested Person or Outside Director.
ARTICLE IV
GENERAL PROVISIONS RELATING TO AWARDS
4.1 AUTHORITY TO GRANT AWARDS. The Committee may grant Awards to those
Employees as it shall determine from time to time under the terms and conditions
of the Plan. Subject only to any applicable limitations set out in the Plan, the
amount of any Award and the number of shares of Stock to be covered by any Award
to be granted to an Employee shall be as determined by the Committee. Each Award
shall be evidenced by an Award Agreement which shall set forth the terms and
conditions of the Award. Except as otherwise provided herein, no Award granted
pursuant to the Plan shall vest in whole or in part in less than six months
after the date the Award is granted. An Employee who has received an Award in
any year may receive an additional Award or Awards in the same year or in
subsequent years. The Committee may, in its discretion, waive or accelerate any
restrictions to which the Awards may be subject; provided, however, that the
Committee may not alter, amend or modify pre-established performance based
criteria to which any Award may be subject.
4.2 DEDICATED SHARES. The total number of shares of Stock with respect to
which Awards may be granted under the Plan shall be 1,600,000 shares. The shares
of Stock may be treasury shares or authorized but unissued shares. The numbers
of shares of Stock stated in this Section 4.2 shall be subject to adjustment in
accordance with the provisions of Section 4.5.
In the event that any Award shall expire or terminate for any reason or any
Award is surrendered, the shares of Stock allocable to that Award may again be
subject to an Award under the Plan. Upon approval by the shareholders of the
Plan, the Committee will not issue any additional stock options under the
Company's Amended and Restated 1987 Stock Option Plan.
4.3 NON-TRANSFERABILITY. Except as set forth below, the Awards granted
hereunder shall not be transferable by the Employee otherwise than by will or
operation of the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined in the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder.
During the Employee's lifetime, Awards granted hereunder shall be exercisable
only by the Employee. The Committee may grant Awards that are transferable,
without payment of consideration, to immediate family members of the Employee or
to trusts or partnerships for such family members; the Committee may also amend
outstanding Awards to provide for such transferability.
4.4 REQUIREMENTS OF LAW. The Company shall not be required to sell or
issue any Stock under any Award if issuing that Stock would constitute or result
in a violation by the Employee or the Company of any provision of any law,
statute, or regulation of any governmental authority. Specifically, in
connection with any applicable statute or regulation relating to the
registration of securities, the Company shall not be required to issue any Stock
unless the Committee has received evidence satisfactory to it to the effect that
the holder of that Award will not transfer the Stock except in accordance with
applicable law, including receipt of an opinion of counsel satisfactory to the
Company to the effect that any proposed transfer complies with applicable law.
The determination by the Committee on this matter shall be final, binding and
conclusive. The Company may, but shall in no event be obligated to, register any
Stock covered by the Plan pursuant to applicable securities laws of any country
or any political subdivision. In the event the Stock issuable pursuant to an
Award is not registered, the Company may imprint on the certificate evidencing
the Stock any legend that counsel for the Company considers necessary or
advisable to comply with applicable
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law. The Company shall not be obligated to take any other affirmative action in
order to cause the exercise of, or the issuance of shares under, an Award to
comply with any law or regulation of any governmental authority.
4.5 CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of the Plan
and the Awards granted hereunder shall not affect or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of bonds, debentures, preferred or prior preference stocks ahead of or affecting
the Stock or the rights thereof, the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of similar character or otherwise.
In the event of any change in the outstanding shares of Stock of the Company
by reason of any stock split, stock dividend, split-up, split-off, spin-off,
recapitalization, merger, consolidation, liquidation, rights offering, share
offering, reorganization, combination or exchange of shares, a sale by the
Company of all or part of its assets, any distribution to shareholders other
than a normal cash dividend, or other extraordinary or unusual event, if the
Committee shall determine, in its discretion, that such change equitably
requires an adjustment in the terms of any Award or the number of shares of
Stock available for Awards, such adjustment may be made by the Committee subject
to Section 162(m) of the Code, and shall be final, conclusive and binding for
all purposes of the Plan.
4.6 TERMINATION OF EMPLOYMENT. Except as specifically provided herein, the
Committee shall set forth in the Award Agreement the status of any Award or
shares of Stock underlying any Award upon the termination of the Employee's
employment for any reason.
4.7 ELECTION UNDER SECTION 83(B) OF THE CODE. No Employee shall exercise
the election permitted under Section 83(b) of the Code without written approval
of the Committee. Any Employee doing so shall forfeit all Awards issued to the
Employee under the Plan.
ARTICLE V
OPTIONS
5.1 TYPE OF OPTION. The Committee shall specify whether a given option
shall constitute an Incentive Option or a Nonqualified Option.
5.2 OPTION PRICE. The price per share at which shares of Stock may be
purchased under an Incentive Option shall not be less than the greater of: (a)
100% of the Fair Market Value per share of Stock on the date the Option is
granted or (b) the per share par value of the Stock on the date the Option is
granted. The Committee in its discretion may provide that the price per share at
which shares of Stock may be purchased shall be more than 100% of Fair Market
Value per share. In the case of any 10% Shareholder, the price per share at
which shares of Stock may be purchased under an Incentive Option shall not be
less than the greater of: (a) 110% of the Fair Market Value per share of Stock
on the date the Incentive Option is granted or (b) the per share par value of
the Stock on the date the Incentive Option is granted.
The price per share at which shares of Stock may be purchased under a
Nonqualified Option shall not be less than the greater of: (a) 100% of the Fair
Market Value per share of Stock on the date the Option is granted or (b) the per
share par value of the Stock on the date the Option is granted. The Committee in
its discretion may provide that the price per share at which shares of Stock may
be purchased shall be more than 100% of Fair Market Value per share.
5.3 DURATION OF OPTIONS. No Option shall be exercisable after the
expiration of ten years from the date the Option is granted. In the case of a
10% Shareholder, no Incentive Option shall be exercisable after the expiration
of five years from the date the Incentive Option is granted.
5.4 AMOUNT EXERCISABLE. Each Option may be exercised from time to time, in
whole or in part, in the manner and subject to the conditions the Committee, in
its discretion, may provide in the Award Agreement, as long as the Option is
valid and outstanding. To the extent that the aggregate Fair Market Value
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(determined as of the time an Incentive Option is granted) of the Stock with
respect to which Incentive Options first become exercisable by the optionee
during any calendar year (under the Plan and any other incentive stock option
plan(s) of the Company or any Affiliate) exceeds $100,000, the Incentive Options
shall be treated as Nonqualified Options. In making this determination,
Incentive Options shall be taken into account in the order in which they were
granted.
5.5 EXERCISE OF OPTIONS. Subject to the tax withholding requirements set
forth in Section 9.3 herein, options shall be exercised by the delivery of
written notice to the Company setting forth the number of shares with respect to
which the Option is to be exercised and the address to which the certificates
representing shares of Stock issuable upon the exercise of such Option shall be
mailed, together with: (a) cash, check, certified check, bank draft, or postal
or express money order payable to the order of the Company for an amount equal
to the Option Price of the shares, (b) Stock at its Fair Market Value equal to
the Option Price of the shares on the date of exercise, and/or (c) any other
form of payment which is acceptable to the Committee. In order to enable an
Employee to have sufficient funds to pay the Option Price, the Committee may, to
the extent permitted by law, cause the Company to loan funds to the Employee, to
guarantee a loan by a third party to the Employee or to take such other action
as the Committee deems appropriate. The proceeds of the sale of shares subject
to the Options are to be added to the general funds of the Company and used for
its corporate purposes. No fractional shares shall be issued under the Plan.
Subject to the tax withholding requirements set forth in Section 9.3 herein,
as promptly as practicable after receipt of written notification and payment,
the Company or a stock transfer agent of the Company shall deliver to the
Employee certificates for the number of shares with respect to which the Option
has been exercised, issued in the Employee's name. If shares of Stock are used
in payment, the Fair Market Value of the shares of Stock tendered must be less
than the Option Price of the shares being purchased, and the difference must be
paid by check. Delivery shall be deemed effected for all purposes when the
Company or a stock transfer agent of the Company shall have deposited the
certificates in the United States mail, addressed to the optionee, at the
address specified by the Employee.
Whenever an Option is exercised by exchanging shares of Stock owned by the
Employee, the Employee shall deliver to the Company certificates registered in
the name of the Employee representing a number of shares of Stock legally and
beneficially owned by the Employee, free of all liens, claims, and encumbrances
of every kind, accompanied by stock powers duly endorsed in blank by the record
holder of the shares represented by the certificates (with signature guaranteed
by the Company or a commercial bank or trust company or by a brokerage firm
having a membership on a registered national stock exchange). The delivery of
certificates upon the exercise of Options is subject to the condition that the
person exercising the Option provide the Company with the information the
Company might reasonably request pertaining to exercise, sale or other
disposition.
5.6 SUBSTITUTION OPTIONS. Options may be granted under the Plan from time
to time in substitution for stock options held by employees of other
corporations who are about to become employees of or affiliated with the Company
or any Affiliate as the result of a merger or consolidation of the employing
corporation with the Company or any Affiliate, or the acquisition by the Company
or any Affiliate of the assets of the employing corporation, or the acquisition
by the Company or any Affiliate of stock of the employing corporation as the
result of which it becomes an Affiliate of the Company. The terms and conditions
of the substitute Options granted may vary from the terms and conditions set out
in the Plan to the extent the Committee, at the time of grant, may deem
appropriate to conform, in whole or in part, to the provisions of the stock
options in substitution for which they are granted.
5.7 NO RIGHTS AS STOCKHOLDER. No Employee shall have any rights as a
stockholder with respect to Stock covered by an Option until the date a stock
certificate is issued for the Stock.
5.8 LIMITATIONS. The maximum number of Options which may be awarded under
this Article V during the term of the Plan shall be 1,600,000 shares, and the
maximum number of Options which may be awarded to any Employee under this
Article V during the term of the Plan shall be 1,600,000 shares.
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5.9 CHANGE IN CONTROL. On a date at least 30 days prior to the effective
date of a Change in Control, any limitations as to the amount exercisable each
year may be modified at the discretion of the Committee so that all Options from
and after such date shall, if the Committee in its discretion so determines, be
exercisable in full. In addition, with respect to any event described in clauses
(i) through (v) of the definition of Change in Control, either (a) after the
effective date of such Change in Control, each holder of an outstanding Option
shall be entitled, upon exercise of such Option, to receive, in lieu of shares
of Stock, shares of such stock or other securities of the Company or the
surviving or acquiring corporation or such other property at the same rate per
share as the holders of shares of Stock received pursuant to the Change in
Control, or (b) all outstanding Options may be canceled by the Board as of the
effective date of the Change in Control, provided that notice of such
cancellation shall be given to each holder of an Option and each holder of an
Option shall have the right to exercise such Options in full (without regard to
any limitations that might be set forth in the Award Agreement) during a 30-day
period preceding the effective date of the Change in Control.
ARTICLE VI
PERFORMANCE GRANTS
6.1 PERFORMANCE GRANTS AND ELIGIBILITY. The Committee, in its sole
discretion, may designate certain key Employees of the Company who are eligible
to receive a Performance Grant if certain pre-established performance goals are
met. In determining which Employees shall be eligible for a Performance Grant,
the Committee may, in its discretion, consider the nature of the Employee's
duties, past and potential contributions to the success of the Company and its
Affiliates, and such other factors as the Committee deems relevant in connection
with accomplishing the purposes of the Plan.
6.2 ESTABLISHMENT OF PERFORMANCE GRANT. The Committee shall determine the
terms of the Performance Grant, if any, to be made to an Employee for such
period designated by the Committee (the "Performance Cycle").
6.3 CRITERIA FOR PERFORMANCE GOALS. The performance goals shall be
pre-established by the Committee in accordance with Section 162(m) of the Code
and regulations issued thereunder. Performance goals determined by the Committee
may be based upon, but are not limited to, net profits, operating income, Stock
price, earnings per share, sales and/or return on equity.
6.4 COMMITTEE CERTIFICATION. The Committee must certify in writing that a
performance goal has been met prior to payment to any Employee of the
Performance Grant by issuance of a certificate for Stock or payment in cash. If
the Committee certifies the entitlement of an Employee to the performance based
Performance Grant, the payment shall be made to the Employee subject to other
applicable provisions of the Plan, including but not limited to, all legal
requirements and tax withholding.
6.5 PAYMENT AND LIMITATIONS. Performance Grants shall be paid on or before
the 30th day following both (a) the end of the Performance Cycle and (b)
certification by the Committee that the performance goals and any other material
terms of the Performance Grant and the Plan have been satisfied, or as soon
thereafter as is reasonably practicable. The Performance Grant may be paid in
Stock, cash, or a combination of Stock and cash, in the sole discretion of the
Committee. If paid in whole or in part in Stock, the Stock shall be valued at
Fair Market Value as of the date the Committee directs payments to be made in
whole or in part in Stock. However, no fractional shares of Stock shall be
issued, and the balance due, if any, shall be paid in cash.
The maximum amount which may be paid to any Employee pursuant to one or more
Performance Grants under this Article VI shall not exceed $5 million per year.
6.6 TERMINATION OF EMPLOYMENT DURING PERFORMANCE CYCLE. Unless the terms
of an employment agreement, severance agreement or the Award Agreement provide
otherwise, if an Employee's employment
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with the Company and all Affiliates terminates during a Performance Cycle (other
than in connection with or within one year after a Change of Control), he shall
not be entitled to any payment under this Article VI for that Performance Cycle.
6.7 CHANGE IN CONTROL. Upon a Change in Control, all Performance Grants
shall become immediately payable to the fullest extent of the Award regardless
of whether the Performance Cycle (hereinafter defined) upon which it is based
has been completed.
ARTICLE VII
ADMINISTRATION
The Plan shall be administered by the Committee. All questions of
interpretation and application of the Plan and Awards granted thereunder shall
be subject to the determination of the Committee. A majority of the members of
the Committee shall constitute a quorum. All determinations of the Committee
shall be made by a majority of its members. Any decision or determination
reduced to writing and signed by a majority of the members shall be as effective
as if it had been made by a majority vote at a meeting properly called and held.
The Plan shall be administered in such a manner as to permit the Options granted
under it which are designated to be Incentive Options to qualify as Incentive
Options. In carrying out its authority under the Plan, the Committee shall have
full and final authority and discretion, including but not limited to the
following rights, powers and authorities, to:
(a) determine the Employees to whom and the time or times at which
Awards will be made,
(b) determine the number of shares and the purchase price of Stock or
dollar amount of cash covered in each Award, subject to the terms of the
Plan,
(c) determine the terms, provisions and conditions of each Award, which
need not be identical,
(d) define the effect, if any, on an Award of the death, disability,
retirement, or termination of employment of the Employee,
(e) proscribe, amend and rescind rules and regulations relating to
administration of the Plan, and
(f) make all other determinations and take all other actions deemed
necessary, appropriate, or advisable for the proper administration of the
Plan.
The actions of the Committee in exercising all of the rights, powers, and
authorities set out in this Article and all other Articles of the Plan, when
performed in good faith and in its sole judgment, shall be final, conclusive and
binding on all parties.
ARTICLE VIII
AMENDMENT OR TERMINATION OF PLAN
The Board may amend, terminate or suspend the Plan at any time, in its sole
and absolute discretion; provided, however, that to the extent the Board desires
for any amendment to the Plan to maintain qualification of the Plan under Rule
16b-3 promulgated under the Exchange Act, no amendment that would (a) materially
increase the number of shares of Stock that may be issued under the Plan, (b)
materially modify the requirements as to eligibility for participation in the
Plan, or (c) otherwise materially increase the benefits accruing to participants
under the Plan, shall be made without the approval of the Company's
shareholders; provided further, however, that to the extent required to maintain
the status of any Incentive Option under the Code, no amendment that would (a)
change the aggregate number of shares of Stock which may be issued under
Incentive Options, (b) change the class of employees eligible to receive
Incentive Options, or (c) decrease the Option price for Incentive Options below
the Fair Market Value of the Stock at the time it is granted, shall be made
without the approval of the Company's shareholders. Subject to the preceding
sentence, the Board shall have the power to make any changes in the Plan and in
the regulations and administrative provisions under it or in any outstanding
Incentive Option as in the opinion of counsel for
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the Company may be necessary or appropriate from time to time to enable any
Incentive Option granted under the Plan to continue to qualify as an incentive
stock option or such other stock option as may be defined under the Code so as
to receive preferential federal income tax treatment.
ARTICLE IX
MISCELLANEOUS
9.1 NO ESTABLISHMENT OF A TRUST FUND. No property shall be set aside nor
shall a trust fund of any kind be established to secure the rights of any
Employee under the Plan. All Employees shall at all times rely solely upon the
general credit of the Company for the payment of any benefit which becomes
payable under the Plan.
9.2 NO EMPLOYMENT OBLIGATION. The granting of any Award shall not
constitute an employment contract, express or implied, nor impose upon the
Company or any Affiliate any obligation to employ or continue to employ any
Employee. The right of the Company or any Affiliate to terminate the employment
of any person shall not be diminished or affected by reason of the fact that an
Award has been granted to him.
9.3 TAX WITHHOLDING. The Company or any Affiliate shall be entitled to
deduct from other compensation payable to each Employee any sums required by
federal, state, or local tax law to be withheld with respect to the grant or
exercise of an Option, the cash payment of a Performance Grant, or issuance of
Stock in payment of a Performance Grant. In the alternative, the Company may
require the Employee (or other person exercising the Option or receiving Stock)
to pay the sum directly to the employer corporation. If the Employee (or other
person exercising the Option or receiving the Stock) is required to pay the sum
directly, payment in cash or by check of such sums for taxes shall be delivered
(a) on the date of exercise, or (b) on the date of payment of all or part of a
Performance Grant in Stock, whichever is applicable. The Company shall have no
obligation upon exercise of any Option, or notice of the Committee's decision to
pay all or part of the Performance Grant in Stock, until payment has been
received, unless withholding (or offset against a cash payment) as of or prior
to the date of exercise or issuance of Stock is sufficient to cover all sums due
with respect to that exercise or issuance of Stock. The Company and its
Affiliates shall not be obligated to advise an Employee of the existence of the
tax or the amount which the employer corporation will be required to withhold.
9.4 FORFEITURE FOR DISHONESTY. Notwithstanding anything to the contrary in
the Plan, if the Committee finds, after full consideration of the facts
presented on behalf of both the Company and the Employee, that the Employee has
been engaged in fraud, embezzlement, theft, commission of a felony or dishonesty
in the course of his employment by the Company which damaged the Company or an
Affiliate, or for disclosing trade secrets of the Company or an Affiliate, the
Employee shall forfeit all unexercised Options and all exercised Options under
which the Company has not yet delivered the certificates. The decision of the
Committee shall be final. No decision of the Committee, however, shall affect
the finality of the discharge of such Employee by the Company in any manner.
9.5 INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS. With
respect to administration of the Plan, the Company shall indemnify each present
and future member of the Committee and the Board of Directors, and each member
of the Committee and the Board of Directors shall be entitled without further
act on his part to indemnity from the Company to the fullest extent allowed
under the Texas Business Corporation Act.
9.6 GENDER. If the context requires, words of one gender when used in the
Plan shall include the others and words used in the singular or plural shall
include the other.
9.7 HEADINGS. Headings of Articles and Sections are included for
convenience of reference only and do not constitute part of the Plan and shall
not be used in construing the terms of the Plan.
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9.8 OTHER COMPENSATION PLANS. The adoption of the Plan shall not preclude
the Company from establishing any other forms of incentive or other compensation
for employees of the Company or any Affiliate.
9.9 OTHER AWARDS. The grant of an Award shall not confer upon the Employee
the right to receive any future or other Awards under the Plan, whether or not
Awards may be granted to similarly situated Employees, or the right to receive
future Awards upon the same terms or conditions as previously granted.
9.10 GOVERNING LAW. The provisions of the Plan shall be construed,
administered, and governed under the laws of the State of Texas.
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APPENDIX C
KENT ELECTRONICS CORPORATION
STOCK OPTION PLAN AND AGREEMENT
FOR VICE PRESIDENT, CORPORATE CONTROLLER
1. GRANT. Under the terms, provisions, and conditions of this Stock Option
Plan and Agreement by and between Kent Electronics Corporation (the "Company"),
and David D. Johnson (the "Optionee"), the Company hereby grants to Optionee the
option to purchase 25,000 shares of the Company's Common Stock, without par
value (the "Stock"), at the option price specified herein, subject to adjustment
as provided herein (the "Option"). The Option is not an "incentive stock option"
as described in Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").
2. DURATION OF OPTION AND OPTION PRICE. The Option shall be for a term
commencing on the date hereof and ending fifteen (15) years from the date
hereof. The option price payable by the Optionee upon exercise of the Option as
to each share subject to the Option will be $19.31, which equals one-half of the
closing price of one share of the Stock, as reported by the New York Stock
Exchange, on the date hereof.
3. AMOUNT EXERCISABLE AND SCHEDULE OF EXERCISABILITY. Except as otherwise
provided herein, this Option may be exercised as to 2,500 shares, on and after
May 1, 2000; as to an additional 5,000 shares, on and after May 1, 2001; as to
an additional 7,500 shares, on and after May 1, 2002; and as to all remaining
shares, on and after May 1, 2003. This Option shall immediately become fully
vested and exercisable as to all shares subject hereto upon the death or
Disability (as hereinafter defined) of Optionee, or upon the occurrence of a
"Change in Control" (as hereinafter defined), or upon the Company's termination
of its employment of Optionee at the election of the Company, or upon Optionee's
termination of his employment by the Company for "Good Reason" (as defined
herein at Section 11), or such earlier date as set forth in Section 9 hereof.
The Option may be exercised, so long as it is valid and outstanding, from time
to time in whole (as to shares then exercisable) or in part; provided, however,
no fractional shares of Stock shall be issued. The Option is cumulative, and may
be exercised as to any or all shares of Stock covered hereby from and after the
time it becomes exercisable as to such shares through the date of termination of
the Option.
4. EXERCISE OF OPTIONS. The Option shall be exercisable, in whole or in
part, by the delivery of written notice to the Company setting forth the number
of shares of Stock with respect to which the Option is to be exercised. In order
to be effective, such written notice shall be accompanied at the time of its
delivery to the Company by payment of the option price for such shares of Stock,
which payment shall be made (a) in cash or by personal check, cashier's check,
certified check, or postal or express money order payable to the order of the
Company in an amount (in United States dollars) equal to the option price
multiplied by the number of shares of Stock with respect to which the Option is
exercised or (b) in shares of Stock as set forth in this Section 4. Such notice
may be delivered in person or by messenger or courier service to the Secretary
of the Company, or shall be sent by registered mail, return receipt requested,
to the Secretary of the Company, and in all such cases delivery shall be deemed
to have been made on the date such notice is received.
At the time when the Optionee (or other holder of the Option pursuant to
Section 5) makes payment to the Company for the shares of Stock issuable upon
the exercise of the Option, the Company may require the Optionee to pay to the
Company an additional amount equal to any federal, state or local taxes (which
the Company deems necessary or appropriate to be withheld in connection with the
exercise of such Option) in such forms of payment as are described in the first
paragraph of this Section 4. In the event that Optionee does not pay to the
Company any such amount required for withholding taxes, to the extent
applicable, the employer (for payroll tax purposes) of Optionee shall have the
right to withhold such required amount from any sum payable, or to become
payable, to Optionee, upon such terms and conditions as the Company in its
discretion shall prescribe.
Payment of the option price may be made, in whole or in part, in shares of
Stock previously held by the Optionee (or other holder of the Option pursuant to
Section 5). If payment is made in whole or in part in shares of Stock, then the
Optionee (or other holder of the Option pursuant to Section 5) shall deliver to
the Company, in payment of the option price of the shares of Stock with respect
to which such Option is
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exercised, (i) certificates registered in the name of such Optionee (or other
holder of the Option pursuant to Section 5) representing a number of shares of
Stock legally and beneficially owned by such Optionee (or other holder of the
Option pursuant to Section 5), free of all liens, claims and encumbrances of
every kind, such certificates to be accompanied by stock powers duly endorsed in
blank by the record holder of the shares represented by such certificates; and
(ii), if the option price of the shares of Stock with respect to which such
Option is to be exercised exceeds the fair market value of such shares of Stock,
cash or a personal check, cashier's check, certified check, or postal or express
money order payable to the order of the Company in an amount (in United States
dollars) equal to the amount of such excess. If the fair market value of such
Shares of Stock delivered to the Company exceeds the option price of the shares
of Stock with respect to which such Option is to be exercised, the Company shall
promptly deliver, or cause to be delivered, to Optionee a replacement share
certificate representing the number of shares of Stock in excess of those
surrendered in payment of the option price.
As promptly as practicable after the receipt by the Company of (i) such
written notice from the Optionee (or other holder of the Option pursuant to
Section 5) setting forth the number of shares of Stock with respect to which
such Option is to be exercised, (ii) payment of the option price of such shares
in the form required by the foregoing provisions of this Section 4, and (iii) an
amount equal to any federal, state or local taxes which the Company deems
necessary or appropriate to be withheld incident to the exercise of the Option,
the Company shall cause to be delivered to such Optionee (or other holder of the
Option pursuant to Section 5) certificates representing the number of shares of
Stock with respect to which such Option has been so exercised.
All proceeds received pursuant to the exercise of the Option shall be added
to the general funds of the Company to be used for any corporate purpose.
For purposes of determining the value of shares of Stock delivered in
payment of all or any portion of the option price pursuant to this Section 4,
the "fair market value" of such shares shall equal the average of the daily
averages of the high and low sales price per share of the Stock as reported by
the New York Stock Exchange (or such other principal exchange or market on which
the Stock is traded as of the applicable dates) on each day on which such trades
are reported of the five trading days prior to Optionee's exercise of the
Option.
5. TRANSFERABILITY OF OPTION. The Option shall not be subject to sale,
assignment or transfer, other than by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined in
the Code. The designation of a beneficiary by Optionee shall not constitute a
transfer. The Option shall be exercisable (i) during Optionee's lifetime, only
by Optionee (or in the event of his incapacity, by his legal representative) or
(ii) following Optionee's death, by such persons as set forth in Section 6.
6. TERMINATION OF OPTIONS IN CERTAIN CASES. In the event of the death of
the Optionee while in the employ of the Company (or while affiliated with the
Company in the discretion of the Board), the Option shall become fully vested
and shall terminate on the earlier of (i) the date of expiration of the Option,
or (ii) twelve (12) months following the date of Optionee's death. After the
death of the Optionee, his executors, administrators or any person(s) to whom
the Option was transferred by will or by the laws of descent and distribution,
shall have the right, at any time prior to the expiration of the period
described in the first sentence of this paragraph, to exercise the Option.
If, before the date of expiration of the Option, the Optionee shall be
retired in good standing from the employ of the Company (or from another
affiliation with the Company in the discretion of the Board) including
retirement for reasons of Disability, the Option shall terminate on the earlier
of (i) the date of expiration of the Option, or (ii) three (3) years following
the date of such retirement. As used herein, the term "Disability" shall mean a
total and permanent disability resulting from a mental or physical incapacity
which prevents Optionee from performing the full scope of his duties for the
Company (as such duties exist on the date immediately prior to the occurrence of
such incapacity) and lasting or expected to last for a period of at least 180
days. Disability shall be determined in good faith by the Board of Directors of
the Company based on the opinion of a licensed physician. In the event of such
retirement, the Optionee (or, in the event of his incapacity, his legal
representative) shall have the right, at any time prior to the expiration of
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the period described in the first sentence of this paragraph, to exercise the
Option to the same extent to which he was entitled to exercise it immediately
prior to such retirement (and, in the case of retirement for Disability or under
circumstances constituting a termination of Optionee's employment by the Company
at the Company's election, the Option shall fully vest and become exercisable,
as set forth herein).
If, before the date of expiration of the Option, the Optionee's employment
by the Company shall be terminated by the Company at its election, or shall be
terminated by Optionee for Good Reason, this Option shall immediately vest fully
and become exercisable as to all shares covered hereby. In such event, Optionee
shall have the right to exercise the Option at any time prior to the earlier of
(i) the date of expiration of the Option or (ii) twelve (12) months following
the date of such termination of employment.
If, before the date of expiration of the Option, the Optionee's employment
or other affiliation with the Company terminates at the election of Optionee for
any reason other than Good Reason (other than in connection with Optionee's
retirement in accordance with the second paragraph of this Section 6), the
Option shall terminate on the earlier of (i) the date of expiration of such
Option, or (ii) ninety (90) days after the date of termination of the Optionee's
employment or other affiliation with the Company. In such event, the Option
shall be exercisable and shall vest as to all shares that, pursuant to the
schedule set forth in Section 3 hereof, become exercisable on or prior to the
date of termination of the Option.
For purposes of this Stock Option Plan and Agreement, employment by the
Company shall include employment by any subsidiary of the Company.
7. NO RIGHTS AS SHAREHOLDER. No holder of the Option shall have any rights
as a shareholder with respect to shares covered by the Option until the date of
exercise of the Option as to such shares; and, except as otherwise provided in
Section 9 hereof, no adjustment for dividends, or otherwise, shall be made if
the record date therefor is prior to the date of such exercise.
8. EMPLOYMENT OR AFFILIATION OBLIGATION. The grant of this Option shall
not impose upon the Company any obligation to employ or to continue any
employment or other affiliation with the Optionee. The right of the Company to
terminate its employment or affiliate relationship with any person, including
the Optionee, shall not be diminished or affected by reason of the fact that
this Option has been granted.
9. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of the Option
shall not affect in any way the right or power of the Company or its
shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stock ahead of, or affecting,the Stock
or the rights thereof, or the dissolution or liquidation of the Company, or any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
The number of shares covered by this Option and the price per share thereof
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Stock resulting from the subdivision or consolidation of shares
or any other capital adjustment, the payment of a stock dividend or any other
increase in such shares effected without receipt of consideration by the Company
or any other decrease therein effected without a distribution of cash, property,
or other securities in connection therewith.
If (i) the Company is merged into or consolidated with another corporation
under circumstances where the Company is not the surviving corporation or where
the Stock is converted into other securities, cash or other property in
connection with such merger or consolidation, (ii) the Company is recapitalized
in such a manner that shares of Stock are converted into or exchanged for other
securities of the Company, (iii) the Company sells or otherwise disposes of
substantially all its assets to another person, corporation or entity, or (iv) a
tender offer is announced that, if successfully completed, would result in a
Change in Control, then in any such case, on a date at least 30 days prior to
the effective date of any such merger, consolidation, recapitalization,
exchange, sale or acquisition or tender offer (or, in the case of such tender
offer, on such later date as is practicable, but in any such case at least ten
days prior to the termination of such tender offer), as the case may be, any
limitations as to amount exercisable each year shall be modified so that Option
from and after such date shall be exercisable in full. In addition, with respect
to any event described
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in the preceding sentence, after the effective date of such merger,
consolidation, recapitalization, exchange, sale or acquisition, as the case may
be, Optionee shall be entitled, upon exercise of such Option to receive in lieu
of shares of Stock, shares of such stock or other securities of the Company or
the surviving or acquiring corporation or such other property at the rate per
share as the holders of shares of Stock received pursuant to the terms of the
merger, consolidation, exchange, recapitalization, sale or acquisition.
Except as hereinbefore expressly provided, the issue by the Company of
shares of stock of any class or securities convertible into shares of stock of
any class for cash or property or for labor or services, either upon direct sale
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number, class or price of shares of Stock then
subject to the Option.
10. CHANGE IN CONTROL. A "Change in Control" shall be deemed to have
occurred on the earliest of the following dates:
(i) The date any entity or person (including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934) shall have
become the beneficial owner of, or shall have obtained voting control over,
thirty percent (30%) or more of the outstanding common shares of the
Company;
(ii)The date the shareholders of the Company approve a definitive
agreement (A) to merge or consolidate the Company with or into
another corporation, in which the Company is not the continuing or surviving
corporation or pursuant to which any common shares of the Company would be
converted into cash, securities or other property of another corporation,
other than a merger of the Company in which holders of common shares
immediately prior to the merger have the same proportionate ownership of
common stock of the surviving corporation immediately after the merger as
immediately before, or (B) to sell or otherwise dispose of substantially all
the assets of the Company; or
(iii)
The first date as of which Continuing Directors (as defined in
Article IX of the Company's Articles of Incorporation) fail to
constitute a majority of the members of the Company's Board of Directors.
11. TERMINATION OF EMPLOYMENT BY OPTIONEE FOR GOOD REASON. For purposes of
this Stock Option Plan and Agreement a termination of Optionee's employment for
"Good Reason" shall be deemed to occur if Optionee tenders his resignation to
the Board of Directors after there has been a significant and material
diminishment in the nature and scope of the authority, power, function and duty
attached to Optionee's management position with the Company as of the effective
date of this Agreement (which shall include, but not be limited to, the
appointment of any officer to whom Optionee shall report other than the Chairman
of the Board and Chief Executive Officer, the President and Chief Operating
Officer or the Chief Financial Officer), and such diminishment lasts for at
least thirty (30) consecutive days and is not cured or corrected by the Company
within ten (10) days after Optionee provides notice of same to the Company
pursuant to the notice provisions hereof. Executive's termination of his
employment with the Company for Good Reason may take place at any time after the
events set forth in the preceding sentence have occurred, and such termination
need not be effected within any specified time period after the occurrence of
such events. Such termination for Good Reason shall result in the Option
immediately becoming fully vested and exercisable as to all shares covered
hereby.
12. LIMITED STOCK APPRECIATION RIGHTS. Notwithstanding any other
provisions in this Stock Option Plan and Agreement, upon the occurrence of any
Change in Control, and thereafter so long as this Option is in effect, Optionee
shall have the right to require the Company (or if the Company is not the
survivor of a merger, consolidation or reorganization, such survivor) to
purchase from him any or all unexercised options granted under this Stock Option
Plan and Agreement at a purchase price equal to (i) the excess of the Change in
Control Price (as hereinafter defined) per share over the option price per share
multiplied by (ii) the number of shares subject to the Option specified by the
Optionee for purchase in a written notice to the Company or such survivor,
addressed to the attention of the Corporate Secretary.
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For purposes of this Stock Option Plan and Agreement, the term "Change in
Control Price" of shares of Stock shall mean (a) except in the case of a Change
in Control that results from a merger, consolidation or reorganization in which
the Company is not the survivor or shares of Stock are converted into cash or
other securities or other assets (a "Termination Merger"), the higher of (I) the
highest sales price per share of the Stock on the New York Stock Exchange (or if
the Company's Stock is not then traded on the New York Stock Exchange, on the
principal exchange or market where such Stock is actively traded) on the trading
days during the thirty (30) days immediately preceding the date the Optionee so
notified the Company of his election pursuant to the preceding paragraph or (II)
the highest sales price per share of the Stock on the New York Stock Exchange
(or if the Company's Stock is not then traded on the New York Stock Exchange, on
the principal exchange or market where such stock is actively traded) on the
trading days during the thirty (30) days immediately preceding the date of the
Change in Control; and (b) in the case of a Change in Control that results from
a Termination Merger, the higher of (I) the fair market value of the
consideration receivable per share by holders of Stock of the Company in such
Termination Merger (which fair market value as to any securities included in
such consideration shall be the highest sales price per unit of such security on
the principal exchange or market where such security is actively traded on the
trading days during the thirty (30) days immediately preceding the date of the
Termination Merger, and as to any such security not actively traded in any
market, and as to all other property included in such consideration, shall be
the fair market value determined by the Committee (hereinafter defined) in good
faith exercised in a reasonable manner) or (II) the amount determined pursuant
to clause (a)(II) of this Section 12. The amount payable to Optionee by the
Company or the survivor in a Termination Merger, as the case may be, shall be
paid in cash or by certified check, and shall be reduced by the amount of any
taxes required to be withheld.
13. ADMINISTRATION. This Stock Option Plan and Agreement shall be
administered by a committee of at least two persons to be appointed by the Board
of Directors of the Company (the "Committee"). All members of the Committee
shall be persons who are "disinterested persons," as set forth in Rule 16b-3
under the Securities Exchange Act of 1934, as amended, or any successor rule
thereto ("Rule 16b-3"). Meetings shall be held at such times and places as shall
be determined by the Committee. A majority of the members of the Committee shall
constitute a quorum for the transaction of business, and the vote of a majority
of those members present at any meeting shall decide any question brought before
the meeting. No member of the Committee shall be liable for any act or omission
of any other member of the Committee or for any act or omission on his own part,
including but not limited to the exercise of any power or discretion given to
him under this Stock Option Plan and Agreement, except those resulting from his
own gross negligence or willful misconduct.
14. NOTICES. Any notice, consent, request or other communication
("Notice") required or permitted to be given hereunder shall be in writing. Such
Notice shall be (a) personally delivered or delivered by messenger, or (b)
mailed by certified mail, return receipt requested, postage prepaid, or (c) sent
by telecopy or the equivalent (provided, however, that the original Notice of
which a facsimile has been transmitted shall in all cases be delivered to the
addressee within two (2) business days following such transmission). Notices
given hereunder shall be addressed as follows:
<TABLE>
<S> <C>
If to Company: If to Optionee:
Kent Electronics Corporation David D. Johnson
7433 Harwin Drive c/o Kent Electronics Corporation
Houston, Texas 77036 7433 Harwin Drive
Attention: Secretary Houston, Texas 77036
</TABLE>
Any Notice given in accordance herewith shall be deemed effective and to
have been received by the party to whom such Notice is directed (a) upon
delivery, if delivered personally or by messenger or sent by telecopy or the
equivalent, or (b) three (3) days after the date of deposit in the U.S. Mail, if
sent by mail and the return receipt is received by the sender, or upon actual
receipt by the party receiving Notice in the event that such return receipt is
not received by the sender.
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15. AMENDMENT. This Stock Option Plan and Agreement may be modified or
amended only by a written instrument executed by Company and Optionee, and any
such modification or amendment may be authorized on behalf of the Company by the
Committee; provided, however, that so long as Optionee and the Company desire
that this Stock Option Plan and Agreement comply with Rule 16b-3, or any
successor or similar provisions thereto, any such amendment that would require
the vote or approval of a specified percentage of the Company's shareholders in
order to assure that this Stock Option Plan and Agreement complies with Rule
16b-3, or any successor or similar provisions thereto, shall only be made upon
obtaining such required shareholder vote, or taking such other action in
connection with such amendment as the Board of Directors or such authorized
Committee deems advisable to operate this Stock Option Plan and Agreement in
accordance with Rule 16b-3 or such successor or similar rule. However, no
termination or amendment of this Stock Option Plan and Agreement may, without
the consent of the Optionee, adversely affect the rights of Optionee as to any
portion of the Option then outstanding.
16. SEVERABILITY. In the event that any provision of this Stock Option
Plan and Agreement shall be held illegal, invalid, or unenforceable for any
reason, such provision shall be fully severable, but shall not affect the
remaining provisions hereof, and this Stock Option Plan and Agreement shall be
construed and enforced as if the illegal, invalid, or unenforceable provision
had not been included herein.
17. GENDER, TENSE AND HEADINGS. Whenever the context so requires, words of
the masculine gender used herein shall include the feminine and neuter, and
words used in the singular shall include the plural. Section headings as used
herein are inserted solely for convenience and reference and are not to be
interpreted as part of the construction of this Stock Option Plan and Agreement.
18. GOVERNING LAW. The provisions of this Stock Option Plan and Agreement
shall be construed according to the laws of the State of Texas, except as
superseded by federal law. This Agreement is performable in Harris County,
Texas. In the event that any dispute arises under this Agreement, the Optionee
shall have the right, in addition to all other rights and remedies provided by
law, at his election to seek arbitration in Houston, Texas under the rules of
the American Arbitration Association by serving a notice to arbitrate upon the
Company, or to institute a judicial proceeding in a court of competent
jurisdiction located in Harris County, Texas. In the event that the Company
institutes any legal proceeding against the Optionee to resolve a dispute under
this Agreement, the Optionee shall have the right either to seek arbitration in
Houston, Texas or to institute a judicial proceeding in a court located in
Harris County, Texas, as provided in the preceding sentence, and the Company
shall dismiss its proceeding or take such other action as may be reasonably
requested by the Optionee in order for such proceeding to be brought in the
forum selected by the Optionee in accordance with the preceding sentence.
19. SHAREHOLDER APPROVAL. This Stock Option Plan and Agreement is subject
to approval and ratification by the vote of the holders of a majority of shares
of Stock present in person or by proxy and entitled to vote at a meeting of
shareholders of the Company. If such shareholder approval is not received on or
before December 31, 1996, the Option shall be null and void.
20. REQUIREMENT OF BONUS PAYMENT IN CERTAIN CIRCUMSTANCES. (a) In the
event that the Optionee is deemed to have received an excess parachute payment
(as such term is defined in Section 280G(b) of the Internal Revenue Code of
1986, as amended (the "Code")) which is subject to the excise taxes (the "Excise
Taxes") imposed by Section 4999 of the Code in respect of any payment of
compensation to the Optionee from the Company pursuant to this Stock Option Plan
and Agreement, whether in the form of cash, property, stock, stock options,
securities or otherwise, the Company shall make the Bonus Payment to the
Optionee promptly after the date on which the Optionee received or is deemed to
have received any excess parachute payments.
(b) (i) The term "Bonus Payment" means a cash payment in an amount equal
to the sum of (A) all Excise Taxes payable by the Optionee, plus (B)
all additional Excise Taxes and federal or state income taxes to the extent
such taxes are imposed in respect of the Bonus Payment, such that the
Optionee shall be in the same after-tax position and shall have received the
same benefits that he would have received if the Excise Taxes had not been
imposed. For purposes of calculating any income taxes attributable to the
Bonus Payment, the Optionee shall be deemed for all purposes to be paying
income
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taxes at the highest marginal federal income tax rate, taking into account
any applicable surtaxes and other generally applicable taxes which have the
effect of increasing the marginal federal income tax rate and, if
applicable, at the highest marginal state income tax rate to which the Bonus
Payment and the Optionee are subject.
(ii)An example of the calculation of the Bonus Payment is set forth
below: Assume that the Excise Tax rate is 20%, that the highest
federal marginal income tax rate is 36% and that the Optionee is not subject
to state income taxes. Assume that the Optionee has received an excess
parachute payment in the amount of $1,000,000, on which $200,000 in Excise
Taxes are payable. The amount of the required Bonus Payment is $454,545.45.
The Bonus Payment, less Excise Taxes of $90,909.09 and income taxes of
$163,636.36, yields $200,000.00, the amount of the Excise Taxes payable in
respect of the excess parachute payment.
(c)The Optionee agrees to cooperate reasonably with the Company to minimize
the amount of the excess parachute payments, including without limitation
assisting the Company in establishing that some or all of the payments received
by the Optionee contingent on a change described in Section 280G(b)(2)(A)(i) of
the Code are reasonable compensation for personal services actually rendered by
the Optionee before the date of such change or to be rendered by the Optionee on
or after the date of such change. In the event that the Company is able to
establish that the amount of the excess parachute payments is less than
originally anticipated by the Optionee, the Optionee shall refund to the Company
any excess Bonus Payment to the extent not required to pay Excise Taxes or
income taxes (including those incurred in respect of the payment of the Bonus
Payment). Notwithstanding the foregoing, the Optionee shall not be required to
take any actions which his tax advisor advises him in writing (i) is improper or
(ii) exposes the Optionee to material personal liability, and the Optionee may
require the Company to deliver to the Optionee an indemnification agreement in
form and substance satisfactory to the Optionee as a condition to taking any
action required by this Section 20.
(d)The Company shall make any payment required to be made under this
Agreement in cash and on demand. Any payment required to be paid by the
Company under this Agreement which is not paid within five days of receipt by
the Company of the Optionee's demand therefor shall thereafter be deemed
delinquent, and the Company shall pay to the Optionee immediately upon demand
interest at the highest nonusurious rate per annum allowed by applicable law
from the date such payment becomes delinquent to the date of payment of such
delinquent sum.
(e)In the event that there is any change to the Code which results in the
recodification of Section 280G or Section 4999 of the Code, or in the
event that either such section of the Code is amended, replaced or supplemented
by other provisions of the Code of similar import ("Successor Provisions"), then
this Agreement shall be applied and enforced with respect to such new Code
provisions in a manner consistent with the intent of the parties as expressed
herein, which is to assure that the Optionee is in the same after-tax position
and has received the same benefits that he would have been in and received if
any taxes imposed by Section 4999 or any Successor Provisions had not been
imposed.
(f)There shall be no right of set-off or counterclaim, in respect of any
claim, debt or obligation, against any payments required under this
Section 20 to the Optionee provided for in this Agreement. No right or interest
to or in any payments required under this Section 20 shall be assignable by the
Optionee; provided, however, that this provision shall not preclude him from
designating one or more beneficiaries to receive any amount that may be payable
after his death and shall not preclude the legal representative of his estate
from assigning any right hereunder to the person or persons entitled thereto
under his will or, in the case of intestacy, to the person or persons entitled
thereto under the laws of intestacy applicable to his estate. The term
"beneficiary" as used in this Agreement shall mean a beneficiary or
beneficiaries so designated to receive any such amount or, if no beneficiary has
been so designated, the legal representative of the Optionee's estate. No right,
benefit or interest under this Section 20 shall be subject to anticipation,
alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or
set-off in respect of any claim,
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debt or obligation, or to execution, attachment, levy or similar process, or
assignment by operation of law. Any attempt, voluntary or involuntary, to effect
any action specified in the immediately preceding sentence shall, to the full
extent permitted by law, be null, void and of no effect.
21. SUCCESSORS TO THE COMPANY. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the Company and any
successor of the Company, including, without limitation, any corporation or
other entity acquiring directly or indirectly all or substantially all of the
assets of the Company whether by merger, consolidation, sale or otherwise (and
such successor shall thereafter be deemed "the Company" for the purposes of this
Agreement), but shall not otherwise be assignable by the Company.
IN WITNESS WHEREOF, this Stock Option Plan and Agreement is executed,
subject to shareholder approval as set forth herein, effective as of the 9th day
of May, 1996.
KENT ELECTRONICS CORPORATION
By: ______/s/_Morrie K. Abramson______
Morrie K. Abramson,
CHAIRMAN, CHIEF EXECUTIVE OFFICER
AND PRESIDENT
OPTIONEE
_________/s/_David D. Johnson_________
David D. Johnson
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<PAGE>
(Meeting Location Map)
Kent Electronics Corporation
1996 Annual Meeting of Shareholders
June 27, 1996, 10:00 a.m.
Meeting to be held at our wholly-owned subsidiary, K*TEC Electronics
1111 Gillingham Lane, Sugar Land, TX 77478 (713) 243-5000
[LOGO]
[LOGO]
Printed on Recycled Paper
<PAGE>
P KENT ELECTRONICS CORPORATION
R 7433 Harwin Drive
O Houston, Texas 77036
X ANNUAL MEETING OF SHAREHOLDERS JUNE 27, 1996
Y THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder(s) of Kent Electronics Corporation (the
"Company") hereby appoint MORRIE K. ABRAMSON and STEPHEN J. CHAPKO, and each
of them, attorneys-in-fact and proxies of the undersigned, with full power of
substitution, to vote in respect of the undersigned's shares of the Company's
Common Stock at the Annual Meeting of Shareholders of the Company to be held
on June 27, 1996, at 10:00 a.m., local time, at the offices of the Company's
wholly-owned subsidiary, K*TEC Electronics Corporation, 1111 Gillingham Lane,
Sugar Land, Texas 77478 and at any adjournment(s) thereof, the number of
shares the undersigned would be entitled to cast if personally present.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES SET FORTH ON THE
REVERSE SIDE AND FOR EACH OF PROPOSALS 2, 3, 4, 5 AND 6.
PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY THE PROXY CARD
USING THE ENCLOSED ENVELOPE.
----------------
SEE REVERSE SIDE
----------------
- --- PLEASE MARK YOUR
X VOTES AS IN THIS
- --- EXAMPLE.
SHARES IN YOUR NAME
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE DIRECTOR NOMINEES LISTED BELOW AND EACH OF PROPOSALS
2, 3, 4, 5 AND 6. ALL PRIOR PROXIES ARE HEREBY REVOKED.
1. Election / / FOR
of Directors, / / WITHHOLD AUTHORITY
Nominees:
Morrie K. Abramson
Alvin L. Zimmerman
For, except vote withheld from the following nominee(s):
- ---------------------------------------
2. To amend the Company's / / FOR
Articles of Incorporation to / / AGAINST
increase the number of / / ABSTAIN
authorized shares of Common
Stock from 30 million to
100 million.
3. To adopt the 1996 / / FOR
Non-Employee Director / / AGAINST
Stock Option Plan. / / ABSTAIN
4. To adopt a 1996 / / FOR
Employee Incentive Plan. / / AGAINST
/ / ABSTAIN
5. To adopt a Stock Option Plan / / FOR
and Agreement for the / / AGAINST
Company's Vice President, / / ABSTAIN
Corporate Controller
6. To ratify the appointment / / FOR
of Grant Thornton LLP as / / AGAINST
the Company's Independent / / ABSTAIN
Public Accountants for the
fiscal year ending
March 29, 1997.
7. In their discretion, on such other matters as may properly come before the
1996 Annual Meeting of Shareholders or any adjournment(s) thereof; all as
more particularly described in the Proxy Statemtent, receipt of which is
hereby acknowledged.
Signature(s) ___________________________________ Dated ________________, 1996
Signature(s) ___________________________________ Dated ________________, 1996
(Please sign exactly as your name appears hereon. When signing as attorney,
executor, administrator, trustee, guardian, etc., give full title as
such. For joint accounts, each joint owner should sign.)
