<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 26, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ to _______________________
Commission file number 0-14643
KENT ELECTRONICS CORPORATION
Exact name of registrant as specified in its charter)
Texas 74-1763541
- --------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1111 Gillingham Lane, Sugar Land, Texas 77478
- -------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (281) 243-4000
- ---------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
At February 1, 1999, 27,962,842 shares of common stock, no par value, were
outstanding.
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 26, March 28,
1998 1998
------------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents (including temporary
investments of $198,662 at December 26 and
$174,325 at March 28).......................... $202,211 $179,907
Trading securities, net.......................... --- 29,946
Accounts receivable, less allowance of $1,296
at December 26 and $1,207 at March 28.......... 107,958 106,132
Inventories
Materials and purchased products............... 113,282 112,964
Work in process................................ 5,886 2,128
-------- --------
119,168 115,092
Other............................................ 14,001 5,754
-------- --------
Total current assets......................... 443,338 436,831
PROPERTY AND EQUIPMENT
Land............................................. 8,168 8,761
Buildings........................................ 43,627 42,766
Equipment, furniture and fixtures................ 121,052 109,079
Leasehold improvements........................... 2,664 2,657
-------- --------
175,511 163,263
Less accumulated depreciation and amortization (46,671) (36,577)
-------- --------
128,840 126,686
DEFERRED INCOME TAXES................................. 18 93
OTHER ASSETS.......................................... 12,965 12,193
COST IN EXCESS OF NET ASSETS ACQUIRED,
less accumulated amortization of $3,204 at
December 26 and $2,856 at March 28............... 15,559 15,907
-------- --------
$600,720 $591,710
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
Page 2 of 16
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 26, March 28,
1998 1998
------------- ----------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.................................. $ 44,918 $ 49,178
Accrued compensation.............................. 11,323 11,193
Other accrued liabilities......................... 12,952 7,032
Income taxes...................................... --- 2,946
-------- --------
Total current liabilities..................... 69,193 70,349
LONG-TERM DEBT......................................... 207,000 207,000
LONG-TERM LIABILITIES.................................. 2,394 1,792
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value per share;
authorized 2,000,000 shares; none issued........ --- ---
Common stock, no par value; authorized
60,000,000 shares; 28,012,842 shares issued
and 27,962,842 shares outstanding at
December 26 and 27,230,640 shares issued
and 27,180,640 shares outstanding at March 28 65,131 55,457
Additional paid-in capital........................ 117,431 117,189
Retained earnings................................. 140,548 140,900
-------- --------
323,110 313,546
Less common stock in treasury - at cost,
50,000 shares................................... (977) (977)
-------- --------
322,133 312,569
-------- --------
$600,720 $591,710
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
Page 3 of 16
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited - In thousands, except per share data)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
----------------------------- -----------------------------
December 26, December 27, December 26, December 27,
1998 1997 1998 1997
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net sales....................................... $ 155,424 $ 177,426 $ 459,981 $ 496,993
Cost of sales................................... 131,715 137,276 385,833 384,076
---------- --------- --------- ---------
Gross profit............................... 23,709 40,150 74,148 112,917
Selling, general and administrative expenses.... 25,434 23,875 75,439 67,087
---------- --------- --------- ---------
Operating profit (loss).................... (1,725) 16,275 (1,291) 45,830
Other income (expense)
Interest expense........................... (2,575) (2,559) (7,723) (2,697)
Other - net................................ 2,754 3,032 8,432 3,987
---------- --------- --------- ---------
Earnings (loss) before income taxes...... (1,546) 16,748 (582) 47,120
Income taxes.................................... (607) 6,620 (230) 18,612
---------- --------- --------- ---------
NET EARNINGS (LOSS)...................... $ (939) $ 10,128 $ (352) $ 28,508
========== ========= ========= =========
Earnings (loss) per common share:
Basic...................................... $ (.03) $ .38 $ (.01) $ 1.08
========== ========= ========= =========
Diluted.................................... $ (.03) $ .36 $ (.01) $ 1.01
========== ========= ========= =========
Weighted average shares:
Basic...................................... 27,916 26,664 27,577 26,450
========== ========= ========= =========
Diluted.................................... 27,916 28,374 27,577 28,145
========== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
Page 4 of 16
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - In thousands)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
----------------------------
December 26, December 27,
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings...................................... $ (352) $ 28,508
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation and amortization................... 10,995 8,387
Provision for losses on accounts receivable..... 89 295
(Gain) loss on sale of property and equipment (340) 4
Stock option expense............................ 242 360
Loss on sale of trading securities.............. 327 84
Net sales (purchases) of trading securities..... 29,619 (30,000)
Change in assets and liabilities
Increase in accounts receivable................ (1,915) (34,631)
Increase in inventories........................ (4,076) (15,764)
Increase in other.............................. (8,247) (692)
Decrease in deferred income taxes.............. 75 75
Increase in other assets....................... (772) (7,193)
Increase (decrease) in accounts payable........ (4,260) 19,233
Increase in accrued compensation............... 130 2,397
Increase in other accrued liabilities.......... 5,920 3,694
Decrease in income taxes....................... (2,946) (2,345)
Increase in long-term liabilities.............. 602 545
------- --------
Total adjustments............................. 25,443 (55,551)
------- --------
Net cash provided (used) by operating
activities................................... 25,091 (27,043)
</TABLE>
(Continued)
Page 5 of 16
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - In thousands)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
----------------------------
December 26, December 27,
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures............................... $(14,948) $(36,338)
Proceeds from sale of property and equipment....... 2,487 5
-------- --------
Net cash used by investing activities............ (12,461) (36,333)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term debt......................... --- 207,000
Issuance of common stock........................... 4,148 4,707
Tax effect of common stock issued upon exercise
of employee stock options......................... 5,526 7,218
-------- --------
Net cash provided by financing activities....... 9,674 218,925
-------- --------
NET INCREASE IN CASH................................. 22,304 155,549
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD..... 179,907 25,050
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........... $202,211 $180,599
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for Interest............. $ 4,658 $ ---
Income taxes........................................ $ 5,308 $ 13,857
</TABLE>
The accompanying notes are an integral part of these statements.
Page 6 of 16
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounting Policies
The consolidated balance sheet as of December 26, 1998, and the consolidated
statements of earnings and cash flows for the thirteen and thirty-nine week
periods ended December 26, 1998 and December 27, 1997, have been prepared by the
Company without audit. In the opinion of management, the financial statements
include all adjustments necessary for a fair presentation. All adjustments made
were of a normal recurring nature. Interim results are not necessarily
indications of results for a full year. For further financial information,
refer to the audited financial statements of the Company and notes thereto for
the fiscal year ended March 28, 1998, included in the Company's Form 10-K for
that period.
Earnings Per Share
Basic earnings per common share is computed using the weighted average number of
shares outstanding. Diluted earnings per common share is computed using the
weighted average number of shares outstanding adjusted for the incremental
shares attributed to outstanding options to purchase common stock. Incremental
shares of 1.7 million for both the thirteen and thirty-nine week periods ended
December 27, 1997 were used in the calculation of diluted earnings per common
share. Incremental shares of 0.4 million and 0.5 million were not used in the
calculation of diluted earnings per common share for the thirteen and thirty-
nine week periods ended December 26, 1998, respectively, since the effect of
their inclusion would be antidilutive. The calculation of earnings per share
does not include approximately 4.2 million shares issuable upon conversion of
the 4 1/2% Convertible Subordinated Notes due 2004 because inclusion of such
shares would be antidilutive.
Page 7 of 16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the thirteen and thirty-nine week periods ended December 26, 1998
decreased $22.0 million, or 12.4%, and $37.0 million, or 7.4%, compared to the
same periods a year ago. The decrease reflected a decline in orders in the
Company's contract manufacturing division from computer and semiconductor
capital equipment sectors. For the quarter, net sales increased $7.9 million,
or 5.4% when compared to the second quarter ended September 26, 1998. The
sequential increase resulted primarily from higher sales volume in the Company's
contract manufacturing division than in the second quarter.
Gross profit decreased $16.4 million, or 40.9%, for the thirteen weeks and $38.8
million, or 34.3%, for the thirty-nine weeks compared to the corresponding
periods a year ago. For the thirteen week period, gross profit as a percentage
of sales declined to 15.3% compared to 22.6% in the corresponding period last
year. For the thirty-nine week period, the gross profit percentage was 16.1%,
down from 22.7% reported in the comparable period of the previous year. The
decrease in gross profit was primarily due to plant and equipment under-
utilization in the Company's contract manufacturing facilities, the ramp up of
new contract manufacturing customers, product mix changes and continued pricing
pressures. Gross profit increased $4.4 million, or 22.5%, from the quarter
ended September 26, 1998. In addition, the gross profit percentage increased
from 13.1% in the second fiscal quarter. The sequential increase was a result
of increased plant and equipment utilization and improved operating efficiencies
in the Company's contract manufacturing operations in the third quarter as
compared to the second quarter.
Selling, general and administrative ("SG&A") expenses increased $1.6 million, or
6.5%, and $8.4 million, or 12.4%, for the thirteen and thirty-nine week periods,
respectively, when compared to the same periods last year. As a percentage of
sales, SG&A expenses increased to 16.4% from 13.5% in the thirteen week period
and to 16.4% from 13.5% in the thirty-nine week period,
Page 8 of 16
<PAGE>
compared to the corresponding periods a year ago. The increase in SG&A expenses
was primarily due to costs associated with the ramp-up of new customers in the
contract manufacturing division and expenses necessary to support the Company's
existing operations. The Company continues to focus on cost containment and
expense reduction initiatives, aligning the cost structure with current revenues
that enable the Company to reduce the impact of current business conditions on
profit margins. SG&A expenses as a percentage of sales declined from 17.2% in
the quarter ended September 26, 1998. The sequential decrease as a percentage
of sales was a result of the Company's cost containment efforts.
Interest expense for the thirty-nine week period ended December 26, 1998
increased $5.0 million when compared to the prior year period due to interest on
the 4 1/2% Convertible Subordinated Notes due 2004 (the "Notes") issued in
September and October 1997.
Other-net consists principally of interest and dividend income generated by cash
and cash equivalents and trading securities. The decrease in interest and
dividend income for the thirteen week period compared to the corresponding
period a year ago was primarily due to lower short-term interest rates. The
increase in interest and dividend income for the thirty-nine week period
resulted from investment of the net proceeds from the Notes.
The Company reported a net loss $0.9 million for the thirteen week period ended
December 26, 1998, compared to net earnings of $10.1 million in the
corresponding period a year ago. For the thirty-nine week period, the net loss
was $0.4 million compared to net earnings of $28.5 million last year. The
decrease in net earnings for both the thirteen and thirty-nine week periods was
primarily due to the decrease in net sales and the decrease in the gross profit
percentage combined with an increase in SG&A expenses.
Page 9 of 16
<PAGE>
Liquidity and Capital Resources
Working capital at December 26, 1998 was $374.1 million, an increase of $7.7
million, or 2.1%, since March 28, 1998. The increase was primarily due to
growth in other current assets that resulted from an income tax receivable.
Included in the Company's working capital at December 26, 1998 are investments
of $198.7 million, a decrease of $5.6 million since March 28, 1998. The
Company's investment strategy is low-risk and short-term, keeping the funds
readily available to meet capital requirements as they arise in the normal
course of business. At December 26, 1998, funds were invested in institutional
money market funds, which are compatible with the Company's stated investment
strategy.
The Company intends to apply its capital resources to expand its business by
establishing or acquiring similar distribution and manufacturing operations in
geographic areas that are attractive to the Company, by acquiring new facilities
and by enlarging or improving existing facilities. In addition to the capital
required to purchase existing businesses or to fund start-up operations, the
expansion of the Company's operations at both new and existing locations will
require greater levels of capital to finance the purchase of additional
equipment, increased levels of inventory and greater accounts receivable. The
Company believes that current resources including funds generated from
operations should be sufficient to meet its current capital requirements.
Year 2000 Statement
The Year 2000 Issue results from computer hardware and software systems that
were not designed to distinguish between centuries and may not accommodate some
or all dates beyond the year 1999. Therefore, computer hardware and software
systems will need to be modified prior to the year 2000 in order to remain
functional.
Page 10 of 16
<PAGE>
State of Readiness and Costs to Address Year 2000 Issues:
The Company has substantially completed a comprehensive inventory of its
systems, equipment and facilities. The Company's business information
technology (IT) systems include business applications, computing hardware and
software and related networking equipment and software. Non-IT systems are
primarily embedded technology such as microcontrollers, used in its facilities
and the manufacture or distribution of the Company's products. As a result of
the Company's strategic migration to new application systems that began in 1995,
substantially all of the Company's IT systems use hardware and software
platforms that the vendors have represented to be Year 2000 compliant. In
addition, the majority of the Company's non-IT systems are Year 2000 compliant.
In general, the Company expects to resolve any remaining Year 2000 Issues
through planned upgrades or replacements of its IT and non-IT systems, equipment
and facilities that have been deemed to be critical to the business operations.
The Company is primarily using internal resources to remediate or upgrade and
test these systems for Year 2000 compliance. Based on the information currently
available, the Company estimates that the costs of planned upgrades or
replacements of facility and equipment systems will not exceed $500 thousand.
This estimate assumes that the Company will not incur significant Year 2000
related costs on behalf of its suppliers, customers or third parties. In
addition, the Company is monitoring Year 2000 compliance efforts of suppliers,
service providers and other entities with which it has a business relationship.
Until the assessments of these third parties are complete, the Company cannot
state with certainty whether it has, or will have, significant Year 2000 Issues.
Furthermore, as the Company is relying, in large measure, on statements made by
such third parties in order to prepare those assessments, the lack of
responsiveness or accuracy in such statements could materially affect those
assessments. As a result, the Company cannot predict the potential consequences
if these or other third parties or their products are not Year 2000 compliant.
Risks of Year 2000 Issues and Contingency Plans:
While the Company believes its efforts to address the Year 2000 Issues will be
successful in avoiding any material adverse effect on the Company's operations
Page 11 of 16
<PAGE>
or financial condition, it recognizes that a most reasonably likely worst case
Year 2000 scenario would be the failure of a third party or a component of the
infrastructure, including national banking systems, electrical power,
transportation facilities, communication systems and governmental activities to
conduct their respective operations after 1999 such that the Company's ability
to obtain, manufacture and distribute its products and services would be limited
for a period of time. If this were to occur, it would likely cause temporary
financial losses and inability to provide products and services to customers.
The Company continues to assess the Year 2000 Issues relating to its physical
plant and equipment, products, suppliers and customers. The Company is starting
its contingency planning for critical operational areas that might be affected
by the Year 2000 Issues if compliance by the Company is delayed and/or if third
parties with which the Company has a business relationship fail to achieve Year
2000 compliance. In certain cases, especially third party infrastructure
failures, there may be no practical alternative course of action available to
the Company.
Risks Relating to Forward-Looking Statements
The Company is including the following cautionary statements to secure the
protection of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 for all forward-looking statements made by the Company in
this Quarterly Report on Form 10-Q. Forward-looking statements include, without
limitation, any statement that may predict, forecast, indicate or imply future
results, performance or trends, and may contain the words "should," "will" or
words or phrases of similar meaning. In addition, the forward-looking
statements speak only of the Company's view as of the date the statement was
made, and the Company disclaims any obligation to update any forward-looking
statements to reflect events or circumstances after the date hereof.
Forward-looking statements involve risks and uncertainties which could cause
actual results, performance or trends to differ materially from those expressed
in the forward-looking statements. The Company believes that all forward-
looking statements made by it have a reasonable basis, but there can
Page 12 of 16
<PAGE>
be no assurance that management's expectations, beliefs or projections as
expressed in the forward-looking statements will actually occur or prove to be
correct. Factors that could cause actual results to differ materially from
those discussed in the forward-looking statements include, but are not limited
to, the factors discussed under the caption "Risks of Year 2000 Issues and
Contingency Plans" above and under the caption "Risks Relating to Forward-
Looking Statements" in the Company's Annual Report on Form 10-K for the fiscal
year ended March 28, 1998.
PART II - OTHER INFORMATION
Items 1, 2, 3, 4 and 5 are not applicable and have been omitted.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10.1 - Amendment No. 2 to Employment Agreement between Kent
Electronics Corporation, Morrie K. Abramson and Rolaine S.
Abramson dated November 10, 1998.
10.2 - Severance Agreement between Kent Electronics Corporation and
Terrence M. Hunt dated November 10, 1998.
10.3 - Severance Agreement between Kent Electronics Corporation and
Larry D. Olson dated November 10, 1998.
10.4 - Severance Agreement between Kent Electronics Corporation and
Frank M. Billone dated November 11, 1998.
10.5 - Severance Agreement between Kent Electronics Corporation and
Stephen J. Chapko dated November 11, 1998.
10.6 - Severance Agreement between Kent Electronics Corporation and
Richard J. Hightower dated November 11, 1998.
10.7 - Severance Agreement between Kent Electronics Corporation and
Mark A. Zerbe dated November 11, 1998.
11 - Statement re computation of per share earnings.
27 - Financial Data Schedule
(b) Reports on Form 8-K:
Not applicable.
Page 13 of 16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KENT ELECTRONICS CORPORATION
---------------------------------
(Registrant)
Date: February 5, 1999 By: /s/ Morrie K. Abramson
----------------------------- --------------------------------
Morrie K. Abramson
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: February 5, 1999 By: /s/ Stephen J. Chapko
----------------------------- ---------------------------------
Stephen J. Chapko
Executive Vice President, Chief
Financial Officer, Treasurer and
Secretary (Principal Financial
Officer)
Date: February 5, 1999 By: /s/ David D. Johnson
---------------------------- ---------------------------------
David D. Johnson
Vice President, Corporate
Controller (Principal Accounting
Officer)
Page 14 of 16
<PAGE>
EXHIBIT INDEX
Exhibit numbers are in accordance with the
Exhibit Table in Item 601 of Regulation S-K
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description Sequential Page No.
- ----------- ---------------------- -------------------
<S> <C> <C>
10.1 Amendment No. 2 to Employment Agreement between Kent Electronics Corporation, --
Morrie K. Abramson and Rolaine S. Abramson dated November 10, 1998.
10.2 Severance Agreement between Kent Electronics Corporation and Terrence M. Hunt --
dated November 10, 1998.
10.3 Severance Agreement between Kent Electronics Corporation and Larry D. Olson --
dated November 10, 1998.
10.4 Severance Agreement between Kent Electronics Corporation and Frank M. Billone --
dated November 11, 1998.
10.5 Severance Agreement between Kent Electronics Corporation and Stephen J. Chapko --
dated November 11, 1998.
10.6 Severance Agreement between Kent Electronics Corporation and Richard J. --
Hightower dated November 11, 1998.
10.7 Severance Agreement between Kent Electronics Corporation and Mark A. Zerbe --
dated November 11, 1998.
11 Statement re computation of per share 16
earnings
27 Financial Data Schedule --
</TABLE>
Page 15 of 16
<PAGE>
EXHIBIT 10.1
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
This Amendment No. 2 to Employment Agreement (this "Amendment") is entered
into by and among Morrie K. Abramson ("Employee"), Rolaine S. Abramson and Kent
Electronics Corporation, a Texas corporation (the "Company"), as of November 10,
1998.
WHEREAS, Employee and the Company entered into the Employment Agreement
dated as of January 3, 1996 (as amended, the "Employment Agreement"),
WHEREAS, pursuant to an Amendment No. 1 to Employment Agreement dated as of
August 18, 1997, the Employment Agreement was amended and Rolaine S. Abramson
was added as a party thereto,
WHEREAS, capitalized terms not otherwise defined herein shall have the
meanings given to them in the Employment Agreement, and
WHEREAS, the parties to the Employment Agreement desire to amend the
Employment Agreement further to provide for certain benefits to Employee upon
the termination of Employee's employment by the Company following a Change in
Control,
NOW, THEREFORE, in order to encourage Employee to remain in the employ of
the Company beyond the minimum Term of Employment under the Employment
Agreement, and in consideration of Employee's past and anticipated future
service to the Company, the mutual agreements set forth herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. The parties hereby amend Section 3 of the Employment Agreement to read
in its entirety as follows:
3. Term. Subject to the provisions for earlier termination provided
herein, the term of this Agreement and the term of Employee's employment by
the Company shall continue uninterrupted until March 31, 2001 and
Employee's employment by the Company shall continue uninterrupted
thereafter on a month to month basis until termination by either party upon
at least thirty days' written notice to the other party ("Term of
Employment").
2. The parties hereby amend Section 4.1(b) of the Employment Agreement to
read in its entirety as follows:
(b) Upon a Change in Control (as defined below), the Company
shall establish a "rabbi trust" for the benefit of Employee into which
there shall be contributed by the Company cash in an amount sufficient
to satisfy the Company's obligations to pay the Employee the amounts
to which he is entitled under Section
<PAGE>
6.1(d)(iii). Any instruments establishing such rabbi trust shall in
all respects be satisfactory in form and substance to Employee and his
counsel.
3. The parties hereby amend Section 6.1(d)(ii) of the Employment Agreement
to read in its entirety as follows:
(ii) If prior to a Change in Control Employee is discharged
without Just Cause or resigns for Good Reason, Employee, or his spouse,
estate or otherwise designated beneficiary, as the case may be, shall be
entitled to the following:
(1) a cash lump sum payment equal to all compensation and
benefits due Employee pursuant to Section 4.1 as of the date of discharge
or resignation, including the bonus for the period of his employment prior
to the discharge or resignation (all cash compensation to be based on
annual cash compensation of not less than $950,000 per year, irrespective
of the time at which such cash compensation is otherwise payable)
annualized on a reasonable basis acceptable to Employee; however, if at the
end of such year it is determined that Employee's annual compensation would
have been higher than the annualized amount used to calculate this payment,
the Company shall pay Employee an amount in a cash lump sum equal to a
proportionate share in the increase based on his period of employment
during the year in which Employee was discharged or resigned; plus
(2) a cash lump sum payment equal to the compensation pursuant to
Section 4.1 which would be received by Employee for the remainder of the
Term of Employment (using annual compensation of $950,000 per year or, if
higher, the highest annual amount of Employee's compensation or annualized
compensation calculated as described in Section 6(d)(ii)(1) in any year
(including the year in which Employee terminates) during which this
Agreement was in force). The entire lump sum amount shall be paid
concurrent with any discharge or within 3 business days of the date of any
resignation. Employee shall have no duty to mitigate or attempt to mitigate
his damages. Employee's other compensation and benefits under this
Agreement, including without limitation those provided pursuant to Sections
4.4 and 4.5, shall not be impaired or otherwise adversely affected by
termination of Employee's employment.
4. The parties hereby amend Section 6.1(d) of the Employment Agreement to
add the following new subsection 6.1(d)(iii), which shall read in its entirety
as follows:
(iii) If Employee's employment is terminated after a Change in
Control (even if for Just Cause or without Good Reason), Employee, or his
spouse, estate or otherwise designated beneficiary, as the case may be,
shall be entitled to the following:
(1) a cash lump sum payment equal to all the compensation and
benefits due Employee pursuant to Section 4.1 as of the date of discharge
or resignation, including the bonus for the period of his employment prior
to the discharge or resignation
2
<PAGE>
(all cash compensation to be based on annual cash compensation of not less
than $950,000 per year, irrespective of the time at which such cash
compensation is otherwise payable) annualized on a reasonable basis
acceptable to Employee; however, if at the end of such year it is
determined that Employee's annual compensation would have been higher than
the annualized amount used to calculate this payment, the Company shall pay
Employee an amount in a cash lump sum equal to a proportionate share in the
increase based on his period of employment during the year in which
Employee was discharged or resigned; plus
(2) a cash lump sum payment equal to the product of five times
the annual compensation pursuant to Section 4.1 which would be received by
Employee (using annual compensation of $950,000 per year or, if higher, the
highest annual amount of Employee's compensation or annualized compensation
calculated as described in Section 6(d)(iii)(1) in any year (including the
year in which Employee terminates) during which this Agreement was in
force). The entire lump sum amount shall be paid concurrent with any
discharge or within 3 business days of the date of any resignation.
Employee shall have no duty to mitigate or attempt to mitigate his damages.
Employee's other compensation and benefits under this Agreement, including
without limitation those provided pursuant to Sections 4.4 and 4.5, shall
not be impaired or otherwise adversely affected by termination of
Employee's employment.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
/s/ Morrie K. Abramson
-------------------------------------
Morrie K. Abramson
/s/ Rolaine S. Abramson
-------------------------------------
Rolaine S. Abramson
KENT ELECTRONICS CORPORATION
By: /s/ Larry D. Olson
----------------------------------
Larry D. Olson
President and Chief Operating Officer
3
<PAGE>
EXHIBIT 10.2
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (the "Agreement"), is entered into as of November
10, 1998, by and between Kent Electronics Corporation, a Texas corporation (the
"Company"), and Terrence M. Hunt (the "Officer").
WHEREAS, the Compensation Committee (the "Committee") of the Company's
Board of Directors (the "Company Board") has determined that it is in the best
interests of the Company and its stockholders to assure that the Company will
have the continued dedication of the Officer, notwithstanding the possibility,
threat or occurrence of a Change in Control (as defined herein) of the Company;
and
WHEREAS, the Committee believes that it is imperative to diminish the
inevitable distraction of the Officer by virtue of the personal uncertainties
and risks created by a pending or threatened Change in Control, to encourage the
Officer's full attention and dedication to the Company currently and in the
event of any threatened or pending Change in Control, and to provide the Officer
with compensation arrangements upon a Change in Control which provide the
Officer with individual financial security and which are competitive with those
of other corporations.
NOW, THEREFORE, in consideration of the premises and the agreements herein
contained, the receipt and sufficiency of which are hereby acknowledged, the
Company and Officer hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following meanings (the singular includes the plural, unless the context
clearly indicates otherwise):
(a) 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" within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, or
any comparable successor provisions) shall have become the beneficial
owner of, or shall have obtained voting control over, twenty percent
(20%) or more of the then outstanding common shares of the Company;
(ii) (1) The date the stockholders of the Company approve a
definitive agreement to sell or otherwise dispose of substantially all
the assets of the Company, or 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
<PAGE>
after the merger as immediately before, or (2) the date the Company
enters into a binding agreement to sell or otherwise transfer
(including without limitation by merger or consolidation) to one or
more unaffiliated entities or persons not less than a majority of the
outstanding capital stock of the Company; or
(iii) The date upon which, during any period of two consecutive
years, individuals who at the beginning of such period constitute the
Company Board cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by the
Company's stockholders, of each new Company Board member was approved
by a vote of at least three-fourths of the Company Board members then
still in office who were Company Board members at the beginning of
such period.
(a) "Change in Control Date" shall be the date on which a Change in
Control occurs.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Termination Date" shall mean the date on which Officer's
employment with the Company is terminated, by either the Company or the
Officer.
2. BENEFITS UPON CHANGE IN CONTROL. If, at any time after a Change in
Control, Officer's employment with the Company is terminated (for any reason,
including but not limited to death or retirement, and whether with or without
cause and whether by the Officer or the Company), the Company shall be required
to provide the following benefits to Officer:
(a) The Company shall pay to the Officer in a lump sum in cash,
concurrently with the Termination Date if the Company discharges the
Officer and within three (3) business days of the Termination Date if the
Officer resigns, the aggregate of the following amounts:
(i) a cash lump sum payment equal to all the cash compensation
due Officer pursuant to the terms of his employment by the Company as
of the date of discharge or resignation, including the bonus for the
period of his employment prior to the discharge or resignation
annualized on a reasonable basis acceptable to Officer; however, if at
the end of such year it is determined that Officer's annual
compensation for the year in which his discharge resignation falls
would have been higher than the annualized amount used to calculate
this payment, the Company shall pay Officer an amount in a cash lump
sum equal to a proportionate share in the increase based on his period
of employment during the year in which Officer was discharged or
resigned; and
(ii) a cash lump sum payment equal to the highest amount of
Officer's annual cash compensation (including without limitation,
salary, bonus and any
2
<PAGE>
deferrals of salary or bonus) or annualized compensation calculated as
described in Section 2(a)(i) during the five years preceding or the
year of the Change in Control).
(b) In addition to the cash benefits payable pursuant to Section 2(a)
hereof, all stock options, restricted stock awards and similar awards
granted to Officer by the Company shall immediately vest on the Termination
Date, notwithstanding any existing vesting schedule or other terms set
forth in any plan or agreement governing the term of such stock options,
restricted stock awards and similar awards.
3. REQUIREMENT OF BONUS PAYMENT IN CERTAIN CIRCUMSTANCES.
(a) In the event that Officer is deemed to have received an excess
parachute payment (as such term is defined in Section 280G(b) of 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
Officer from the Company pursuant to this Agreement, in whatever form, the
Company shall make the Bonus Payment (as defined below) to Officer promptly
after the date on which Officer received or is deemed to have received any
excess parachute payments.
(b) The term "Bonus Payment" means a cash payment in an amount equal
to the sum of (i) all Excise Taxes payable by Officer, plus (ii) 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 Officer
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, Officer shall be deemed for all purposes to be paying income
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 Officer are subject. 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 40% and that
Officer is not subject to state income taxes. Assume that Officer has
received an excess parachute payment in the amount of $500,000, on which
$100,000 in Excise Taxes are payable. The amount of the required Bonus
Payment would be $250,000. The Bonus Payment of $250,000, less Excise
Taxes of $50,000 (20% of $250,000) and income taxes of $100,000 (40% of
$250,000), leaves the Officer with $100,000, the amount of the Excise Taxes
payable in respect of the excess parachute payment.
(c) Officer 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 Officer contingent on a change described in Section
280G(b)(2)(A)(i) of the Code are reasonable compensation for personal
services actually rendered by Officer before the date of such change or to
be rendered by Officer on or after the date of such change. In the event
that the Company is
3
<PAGE>
able to establish that the amount of the excess parachute payments is less
than originally anticipated by Officer, Officer 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, Officer shall not be
required to take any actions which his tax advisor advises him in writing
(i) is improper or (ii) exposes Officer to material personal liability, and
Officer may require the Company to deliver to Officer an indemnification
agreement in form and substance satisfactory to Officer as a condition to
taking any action required by this Section 3.
(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 Officer's demand therefor shall thereafter be deemed
delinquent, and the Company shall pay to Officer 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 Officer 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.
4. FULL SETTLEMENT. The Company's obligations to perform hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Officer. In no
event shall the Officer be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Officer under any of
the provisions of this Agreement. The Company agrees to pay, to the fullest
extent permitted by law, all legal fees and expenses which the Officer may incur
as a result of any contest by the Company or others of the validity or the
enforceability of, or liability under, any provision of this Agreement.
5. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Officer's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its subsidiaries and for which the Officer may qualify, nor
shall anything herein limit or otherwise affect such rights as the Officer may
have under any stock option, restricted stock or other agreements with the
Company or any of its subsidiaries. Amounts which are vested benefits or which
the Officer is otherwise entitled to receive under any plan, policy, practice or
program of the Company or any of its subsidiaries on the Change in Control Date
shall be payable in accordance with such plan, policy, practice or program.
4
<PAGE>
6. FUNDING. The Company shall pay the benefits under this Agreement out
of its general assets pursuant to the terms of this Agreement. There shall be
no special fund out of which benefits shall be paid, nor shall the Officer be
required to make a contribution as a condition of receiving benefits.
7. TAX WITHHOLDING. The Company may withhold or cause to be withheld from
any benefits payable under this Agreement all federal, state, city or other
taxes that are required by any law or governmental regulation or ruling.
8. NOTICES. Any notice required or desired to be given under this
Agreement or other communications relating to this Agreement shall be in writing
and delivered personally or mailed, return receipt requested, to the party
concerned at the address set forth below:
If to the Company: Kent Electronics Corporation
1111 Gillingham Lane
Sugar Land, Texas 77478
If to Officer: At his residence address as maintained by the
Company in the regular course of its business for
payroll purposes.
9. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties hereto with respect to severance payments and supersedes any prior
agreement, arrangement or understanding, whether oral or written, between the
Company and Officer concerning severance payments.
10. CHOICE OF LAW. This Agreement shall be governed by, and enforced
according to, the laws of the State of Texas. The invalidity of any provision
shall be automatically reformed to the extent permitted by applicable law and
shall not affect the enforceability of the remaining provisions hereof. Officer
hereby waives any objection which he may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this
Agreement brought in the District Court of Harris County, State of Texas, or in
the United States District Court for the Southern District of Texas, and hereby
further waives any claims that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum.
11. ASSIGNMENT. The rights and obligations under this Agreement of the
Company and Officer may not be assigned, except that the Company may, at its
option, assign one or more of its rights or obligations under this Agreement to
any of its subsidiaries or affiliates, or in connection with a transfer of all
or substantially all of the assets or stock of the Company or a merger or
consolidation of the Company with and into another corporation or other entity,
provided that in each case the Company shall remain responsible for its
obligation hereunder.
12. COUNTERPARTS. This Agreement may be executed in several identical
counterparts, and by the parties hereto on separate counterparts, and each
counterpart, when so executed and
5
<PAGE>
delivered, shall constitute an original instrument, and all such separate
counterparts shall constitute but one and the same instrument.
13. MODIFICATION. This Agreement may be modified only by written
agreement signed by Officer and by the President or Secretary of the Company.
The failure to insist upon compliance with any provision hereof shall not be
deemed a waiver of such provision or any other provision hereof.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
effective as of the date first written above.
KENT ELECTRONICS CORPORATION
By: /s/ Morrie K. Abramson
------------------------------------
Morrie K. Abramson
Chairman of the Board and Chief Executive Officer
/s/ Terrence M. Hunt
------------------------------------
Terrence M. Hunt
6
<PAGE>
EXHIBIT 10.3
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (the "Agreement"), is entered into as of November
10, 1998, by and between Kent Electronics Corporation, a Texas corporation (the
"Company"), and Larry D. Olson (the "Officer").
WHEREAS, the Compensation Committee (the "Committee") of the Company's
Board of Directors (the "Company Board") has determined that it is in the best
interests of the Company and its stockholders to assure that the Company will
have the continued dedication of the Officer, notwithstanding the possibility,
threat or occurrence of a Change in Control (as defined herein) of the Company;
and
WHEREAS, the Committee believes that it is imperative to diminish the
inevitable distraction of the Officer by virtue of the personal uncertainties
and risks created by a pending or threatened Change in Control, to encourage the
Officer's full attention and dedication to the Company currently and in the
event of any threatened or pending Change in Control, and to provide the Officer
with compensation arrangements upon a Change in Control which provide the
Officer with individual financial security and which are competitive with those
of other corporations.
NOW, THEREFORE, in consideration of the premises and the agreements herein
contained, the receipt and sufficiency of which are hereby acknowledged, the
Company and Officer hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following meanings (the singular includes the plural, unless the context
clearly indicates otherwise):
(a) 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" within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, or
any comparable successor provisions) shall have become the beneficial
owner of, or shall have obtained voting control over, twenty percent
(20%) or more of the then outstanding common shares of the Company;
(ii) (1) The date the stockholders of the Company approve a
definitive agreement to sell or otherwise dispose of substantially all
the assets of the Company, or 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
<PAGE>
after the merger as immediately before, or (2) the date the Company
enters into a binding agreement to sell or otherwise transfer
(including without limitation by merger or consolidation) to one or
more unaffiliated entities or persons not less than a majority of the
outstanding capital stock of the Company; or
(iii) The date upon which, during any period of two consecutive
years, individuals who at the beginning of such period constitute the
Company Board cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by the
Company's stockholders, of each new Company Board member was approved
by a vote of at least three-fourths of the Company Board members then
still in office who were Company Board members at the beginning of
such period.
(a) "Change in Control Date" shall be the date on which a Change in
Control occurs.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Termination Date" shall mean the date on which Officer's
employment with the Company is terminated, by either the Company or the
Officer.
2. BENEFITS UPON CHANGE IN CONTROL. If, at any time after a Change in
Control, Officer's employment with the Company is terminated (for any reason,
including but not limited to death or retirement, and whether with or without
cause and whether by the Officer or the Company), the Company shall be required
to provide the following benefits to Officer:
(a) The Company shall pay to the Officer in a lump sum in cash,
concurrently with the Termination Date if the Company discharges the
Officer and within three (3) business days of the Termination Date if the
Officer resigns, the aggregate of the following amounts:
(i) a cash lump sum payment equal to all the cash compensation
due Officer pursuant to the terms of his employment by the Company as
of the date of discharge or resignation, including the bonus for the
period of his employment prior to the discharge or resignation
annualized on a reasonable basis acceptable to Officer; however, if at
the end of such year it is determined that Officer's annual
compensation for the year in which his discharge resignation falls
would have been higher than the annualized amount used to calculate
this payment, the Company shall pay Officer an amount in a cash lump
sum equal to a proportionate share in the increase based on his period
of employment during the year in which Officer was discharged or
resigned; and
(ii) a cash lump sum payment equal to the product of two times
the highest amount of Officer's annual cash compensation (including
without limitation,
2
<PAGE>
salary, bonus and any deferrals of salary or bonus) or annualized
compensation calculated as described in Section 2(a)(i) during the
five years preceding or the year of the Change in Control).
(b) In addition to the cash benefits payable pursuant to Section 2(a)
hereof, all stock options, restricted stock awards and similar awards
granted to Officer by the Company shall immediately vest on the Termination
Date, notwithstanding any existing vesting schedule or other terms set
forth in any plan or agreement governing the term of such stock options,
restricted stock awards and similar awards.
3. REQUIREMENT OF BONUS PAYMENT IN CERTAIN CIRCUMSTANCES.
(a) In the event that Officer is deemed to have received an excess
parachute payment (as such term is defined in Section 280G(b) of 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
Officer from the Company pursuant to this Agreement, in whatever form, the
Company shall make the Bonus Payment (as defined below) to Officer promptly
after the date on which Officer received or is deemed to have received any
excess parachute payments.
(b) The term "Bonus Payment" means a cash payment in an amount equal
to the sum of (i) all Excise Taxes payable by Officer, plus (ii) 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 Officer
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, Officer shall be deemed for all purposes to be paying income
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 Officer are subject. 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 40% and that
Officer is not subject to state income taxes. Assume that Officer has
received an excess parachute payment in the amount of $500,000, on which
$100,000 in Excise Taxes are payable. The amount of the required Bonus
Payment would be $250,000. The Bonus Payment of $250,000, less Excise
Taxes of $50,000 (20% of $250,000) and income taxes of $100,000 (40% of
$250,000), leaves the Officer with $100,000, the amount of the Excise Taxes
payable in respect of the excess parachute payment.
(c) Officer 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 Officer contingent on a change described in Section
280G(b)(2)(A)(i) of the Code are reasonable compensation for personal
services actually rendered by Officer before the date of such change or to
be
3
<PAGE>
rendered by Officer 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 Officer, Officer 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, Officer
shall not be required to take any actions which his tax advisor advises him
in writing (i) is improper or (ii) exposes Officer to material personal
liability, and Officer may require the Company to deliver to Officer an
indemnification agreement in form and substance satisfactory to Officer as
a condition to taking any action required by this Section 3.
(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 Officer's demand therefor shall thereafter be deemed
delinquent, and the Company shall pay to Officer 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 Officer 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.
4. FULL SETTLEMENT. The Company's obligations to perform hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Officer. In no
event shall the Officer be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Officer under any of
the provisions of this Agreement. The Company agrees to pay, to the fullest
extent permitted by law, all legal fees and expenses which the Officer may incur
as a result of any contest by the Company or others of the validity or the
enforceability of, or liability under, any provision of this Agreement.
5. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Officer's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its subsidiaries and for which the Officer may qualify, nor
shall anything herein limit or otherwise affect such rights as the Officer may
have under any stock option, restricted stock or other agreements with the
Company or any of its subsidiaries. Amounts which are vested benefits or which
the Officer is otherwise entitled to receive under any plan, policy, practice or
program of the Company or any of its subsidiaries on the Change in Control Date
shall be payable in accordance with such plan, policy, practice or program.
4
<PAGE>
6. FUNDING. The Company shall pay the benefits under this Agreement out
of its general assets pursuant to the terms of this Agreement. There shall be
no special fund out of which benefits shall be paid, nor shall the Officer be
required to make a contribution as a condition of receiving benefits.
7. TAX WITHHOLDING. The Company may withhold or cause to be withheld from
any benefits payable under this Agreement all federal, state, city or other
taxes that are required by any law or governmental regulation or ruling.
8. NOTICES. Any notice required or desired to be given under this
Agreement or other communications relating to this Agreement shall be in writing
and delivered personally or mailed, return receipt requested, to the party
concerned at the address set forth below:
If to the Company: Kent Electronics Corporation
1111 Gillingham Lane
Sugar Land, Texas 77478
If to Officer: At his residence address as maintained by the
Company in the regular course of its business for
payroll purposes.
9. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties hereto with respect to severance payments and supersedes any prior
agreement, arrangement or understanding, whether oral or written, between the
Company and Officer concerning severance payments.
10. CHOICE OF LAW. This Agreement shall be governed by, and enforced
according to, the laws of the State of Texas. The invalidity of any provision
shall be automatically reformed to the extent permitted by applicable law and
shall not affect the enforceability of the remaining provisions hereof. Officer
hereby waives any objection which he may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this
Agreement brought in the District Court of Harris County, State of Texas, or in
the United States District Court for the Southern District of Texas, and hereby
further waives any claims that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum.
11. ASSIGNMENT. The rights and obligations under this Agreement of the
Company and Officer may not be assigned, except that the Company may, at its
option, assign one or more of its rights or obligations under this Agreement to
any of its subsidiaries or affiliates, or in connection with a transfer of all
or substantially all of the assets or stock of the Company or a merger or
consolidation of the Company with and into another corporation or other entity,
provided that in each case the Company shall remain responsible for its
obligation hereunder.
12. COUNTERPARTS. This Agreement may be executed in several identical
counterparts, and by the parties hereto on separate counterparts, and each
counterpart, when so executed and
5
<PAGE>
delivered, shall constitute an original instrument, and all such separate
counterparts shall constitute but one and the same instrument.
13. MODIFICATION. This Agreement may be modified only by written
agreement signed by Officer and by the President or Secretary of the Company.
The failure to insist upon compliance with any provision hereof shall not be
deemed a waiver of such provision or any other provision hereof.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
effective as of the date first written above.
KENT ELECTRONICS CORPORATION
By: /s/ Morrie K. Abramson
-------------------------------------------------
Morrie K. Abramson
Chairman of the Board and Chief Executive Officer
/s/ Larry D. Olson
-------------------------------------------------
Larry D. Olson
6
<PAGE>
EXHIBIT 10.4
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (the "Agreement"), is entered into as of November
11, 1998, by and between Kent Electronics Corporation, a Texas corporation (the
"Company"), and Frank M. Billone (the "Officer").
WHEREAS, the Company's Board of Directors (the "Company Board") and the
Compensation Committee of the Company Board (the "Committee") have determined
that it is in the best interests of the Company and its stockholders to assure
that the Company will have the continued dedication of the Officer,
notwithstanding the possibility, threat or occurrence of a Change in Control (as
defined herein) of the Company; and
WHEREAS, the Company Board believes that it is imperative to diminish the
inevitable distraction of the Officer by virtue of the personal uncertainties
and risks created by a pending or threatened Change in Control, to encourage the
Officer's full attention and dedication to the Company currently and in the
event of any threatened or pending Change in Control, and to provide the Officer
with compensation arrangements upon a Change in Control which provide the
Officer with individual financial security and which are competitive with those
of other corporations.
NOW, THEREFORE, in consideration of the premises and the agreements herein
contained, the receipt and sufficiency of which are hereby acknowledged, the
Company and Officer hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following meanings (the singular includes the plural, unless the context
clearly indicates otherwise):
(a) 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" within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, or
any comparable successor provisions) shall have become the beneficial
owner of, or shall have obtained voting control over, twenty percent
(20%) or more of the then outstanding common shares of the Company;
(ii) (1) The date the stockholders of the Company approve a
definitive agreement to sell or otherwise dispose of substantially all
the assets of the Company, or 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
<PAGE>
after the merger as immediately before, or (2) the date the Company
enters into a binding agreement to sell or otherwise transfer
(including without limitation by merger or consolidation) to one or
more unaffiliated entities or persons not less than a majority of the
outstanding capital stock of the Company; or
(iii) The date upon which, during any period of two consecutive
years, individuals who at the beginning of such period constitute the
Company Board cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by the
Company's stockholders, of each new Company Board member was approved
by a vote of at least three-fourths of the Company Board members then
still in office who were Company Board members at the beginning of
such period.
(a) "Change in Control Date" shall be the date on which a Change in
Control occurs.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Termination Date" shall mean the date on which Officer's
employment with the Company is terminated, by either the Company or the
Officer.
2. BENEFITS UPON CHANGE IN CONTROL. If, at any time after a Change in
Control, Officer's employment with the Company is terminated (for any reason,
including but not limited to death or retirement, and whether with or without
cause and whether by the Officer or the Company), the Company shall be required
to provide the following benefits to Officer:
(a) The Company shall pay to the Officer in a lump sum in cash,
concurrently with the Termination Date if the Company discharges the
Officer and within three (3) business days of the Termination Date if the
Officer resigns, the aggregate of the following amounts:
(i) a cash lump sum payment equal to all the cash compensation
due Officer pursuant to the terms of his employment by the Company as
of the date of discharge or resignation, including the bonus for the
period of his employment prior to the discharge or resignation
annualized on a reasonable basis acceptable to Officer; however, if at
the end of such year it is determined that Officer's annual
compensation for the year in which his discharge resignation falls
would have been higher than the annualized amount used to calculate
this payment, the Company shall pay Officer an amount in a cash lump
sum equal to a proportionate share in the increase based on his period
of employment during the year in which Officer was discharged or
resigned; and
(ii) a cash lump sum payment equal to the highest amount of
Officer's annual cash compensation (including without limitation,
salary, bonus and any
2
<PAGE>
deferrals of salary or bonus) or annualized compensation calculated as
described in Section 2(a)(i) during the five years preceding or the
year of the Change in Control).
(b) In addition to the cash benefits payable pursuant to Section 2(a)
hereof, all stock options, restricted stock awards and similar awards
granted to Officer by the Company shall immediately vest on the Termination
Date, notwithstanding any existing vesting schedule or other terms set
forth in any plan or agreement governing the term of such stock options,
restricted stock awards and similar awards.
3. REQUIREMENT OF BONUS PAYMENT IN CERTAIN CIRCUMSTANCES.
(a) In the event that Officer is deemed to have received an excess
parachute payment (as such term is defined in Section 280G(b) of 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
Officer from the Company pursuant to this Agreement, in whatever form, the
Company shall make the Bonus Payment (as defined below) to Officer promptly
after the date on which Officer received or is deemed to have received any
excess parachute payments.
(b) The term "Bonus Payment" means a cash payment in an amount equal
to the sum of (i) all Excise Taxes payable by Officer, plus (ii) 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 Officer
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, Officer shall be deemed for all purposes to be paying income
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 Officer are subject. 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 40% and that
Officer is not subject to state income taxes. Assume that Officer has
received an excess parachute payment in the amount of $500,000, on which
$100,000 in Excise Taxes are payable. The amount of the required Bonus
Payment would be $250,000. The Bonus Payment of $250,000, less Excise
Taxes of $50,000 (20% of $250,000) and income taxes of $100,000 (40% of
$250,000), leaves the Officer with $100,000, the amount of the Excise Taxes
payable in respect of the excess parachute payment.
(c) Officer 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 Officer contingent on a change described in Section
280G(b)(2)(A)(i) of the Code are reasonable compensation for personal
services actually rendered by Officer before the date of such change or to
be rendered by Officer on or after the date of such change. In the event
that the Company is
3
<PAGE>
able to establish that the amount of the excess parachute payments is less
than originally anticipated by Officer, Officer 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, Officer shall not be
required to take any actions which his tax advisor advises him in writing
(i) is improper or (ii) exposes Officer to material personal liability, and
Officer may require the Company to deliver to Officer an indemnification
agreement in form and substance satisfactory to Officer as a condition to
taking any action required by this Section 3.
(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 Officer's demand therefor shall thereafter be deemed
delinquent, and the Company shall pay to Officer 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 Officer 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.
4. FULL SETTLEMENT. The Company's obligations to perform hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Officer. In no
event shall the Officer be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Officer under any of
the provisions of this Agreement. The Company agrees to pay, to the fullest
extent permitted by law, all legal fees and expenses which the Officer may incur
as a result of any contest by the Company or others of the validity or the
enforceability of, or liability under, any provision of this Agreement.
5. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Officer's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its subsidiaries and for which the Officer may qualify, nor
shall anything herein limit or otherwise affect such rights as the Officer may
have under any stock option, restricted stock or other agreements with the
Company or any of its subsidiaries. Amounts which are vested benefits or which
the Officer is otherwise entitled to receive under any plan, policy, practice or
program of the Company or any of its subsidiaries on the Change in Control Date
shall be payable in accordance with such plan, policy, practice or program.
4
<PAGE>
6. FUNDING. The Company shall pay the benefits under this Agreement out
of its general assets pursuant to the terms of this Agreement. There shall be
no special fund out of which benefits shall be paid, nor shall the Officer be
required to make a contribution as a condition of receiving benefits.
7. TAX WITHHOLDING. The Company may withhold or cause to be withheld from
any benefits payable under this Agreement all federal, state, city or other
taxes that are required by any law or governmental regulation or ruling.
8. NOTICES. Any notice required or desired to be given under this
Agreement or other communications relating to this Agreement shall be in writing
and delivered personally or mailed, return receipt requested, to the party
concerned at the address set forth below:
If to the Company: Kent Electronics Corporation
1111 Gillingham Lane
Sugar Land, Texas 77478
If to Officer: At his residence address as maintained by the
Company in the regular course of its business for
payroll purposes.
9. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties hereto with respect to severance payments and supersedes any prior
agreement, arrangement or understanding, whether oral or written, between the
Company and Officer concerning severance payments.
10. CHOICE OF LAW. This Agreement shall be governed by, and enforced
according to, the laws of the State of Texas. The invalidity of any provision
shall be automatically reformed to the extent permitted by applicable law and
shall not affect the enforceability of the remaining provisions hereof. Officer
hereby waives any objection which he may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this
Agreement brought in the District Court of Harris County, State of Texas, or in
the United States District Court for the Southern District of Texas, and hereby
further waives any claims that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum.
11. ASSIGNMENT. The rights and obligations under this Agreement of the
Company and Officer may not be assigned, except that the Company may, at its
option, assign one or more of its rights or obligations under this Agreement to
any of its subsidiaries or affiliates, or in connection with a transfer of all
or substantially all of the assets or stock of the Company or a merger or
consolidation of the Company with and into another corporation or other entity,
provided that in each case the Company shall remain responsible for its
obligation hereunder.
12. COUNTERPARTS. This Agreement may be executed in several identical
counterparts, and by the parties hereto on separate counterparts, and each
counterpart, when so executed and
5
<PAGE>
delivered, shall constitute an original instrument, and all such separate
counterparts shall constitute but one and the same instrument.
13. MODIFICATION. This Agreement may be modified only by written
agreement signed by Officer and by the President or Secretary of the Company.
The failure to insist upon compliance with any provision hereof shall not be
deemed a waiver of such provision or any other provision hereof.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
effective as of the date first written above.
KENT ELECTRONICS CORPORATION
By: /s/ Morrie K. Abramson
---------------------------------------
Morrie K. Abramson
Chairman of the Board and Chief Executive Officer
/s/ Frank M. Billone
---------------------------------------
Frank M. Billone
6
<PAGE>
EXHIBIT 10.5
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (the "Agreement"), is entered into as of November
11, 1998, by and between Kent Electronics Corporation, a Texas corporation (the
"Company"), and Stephen J. Chapko (the "Officer").
WHEREAS, the Company's Board of Directors (the "Company Board") and the
Compensation Committee of the Company Board (the "Committee") have determined
that it is in the best interests of the Company and its stockholders to assure
that the Company will have the continued dedication of the Officer,
notwithstanding the possibility, threat or occurrence of a Change in Control (as
defined herein) of the Company; and
WHEREAS, the Company Board believes that it is imperative to diminish the
inevitable distraction of the Officer by virtue of the personal uncertainties
and risks created by a pending or threatened Change in Control, to encourage the
Officer's full attention and dedication to the Company currently and in the
event of any threatened or pending Change in Control, and to provide the Officer
with compensation arrangements upon a Change in Control which provide the
Officer with individual financial security and which are competitive with those
of other corporations.
NOW, THEREFORE, in consideration of the premises and the agreements herein
contained, the receipt and sufficiency of which are hereby acknowledged, the
Company and Officer hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following meanings (the singular includes the plural, unless the context
clearly indicates otherwise):
(a) 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" within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, or
any comparable successor provisions) shall have become the beneficial
owner of, or shall have obtained voting control over, twenty percent
(20%) or more of the then outstanding common shares of the Company;
(ii) (1) The date the stockholders of the Company approve a
definitive agreement to sell or otherwise dispose of substantially all
the assets of the Company, or 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
<PAGE>
after the merger as immediately before, or (2) the date the Company
enters into a binding agreement to sell or otherwise transfer
(including without limitation by merger or consolidation) to one or
more unaffiliated entities or persons not less than a majority of the
outstanding capital stock of the Company; or
(iii) The date upon which, during any period of two consecutive
years, individuals who at the beginning of such period constitute the
Company Board cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by the
Company's stockholders, of each new Company Board member was approved
by a vote of at least three-fourths of the Company Board members then
still in office who were Company Board members at the beginning of
such period.
(a) "Change in Control Date" shall be the date on which a Change in
Control occurs.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Termination Date" shall mean the date on which Officer's
employment with the Company is terminated, by either the Company or the
Officer.
2. BENEFITS UPON CHANGE IN CONTROL. If, at any time after a Change in
Control, Officer's employment with the Company is terminated (for any reason,
including but not limited to death or retirement, and whether with or without
cause and whether by the Officer or the Company), the Company shall be required
to provide the following benefits to Officer:
(a) The Company shall pay to the Officer in a lump sum in cash,
concurrently with the Termination Date if the Company discharges the
Officer and within three (3) business days of the Termination Date if the
Officer resigns, the aggregate of the following amounts:
(i) a cash lump sum payment equal to all the cash compensation
due Officer pursuant to the terms of his employment by the Company as
of the date of discharge or resignation, including the bonus for the
period of his employment prior to the discharge or resignation
annualized on a reasonable basis acceptable to Officer; however, if at
the end of such year it is determined that Officer's annual
compensation for the year in which his discharge resignation falls
would have been higher than the annualized amount used to calculate
this payment, the Company shall pay Officer an amount in a cash lump
sum equal to a proportionate share in the increase based on his period
of employment during the year in which Officer was discharged or
resigned; and
(ii) a cash lump sum payment equal to the highest amount of
Officer's annual cash compensation (including without limitation,
salary, bonus and any
2
<PAGE>
deferrals of salary or bonus) or annualized compensation calculated as
described in Section 2(a)(i) during the five years preceding or the
year of the Change in Control).
(b) In addition to the cash benefits payable pursuant to Section 2(a)
hereof, all stock options, restricted stock awards and similar awards
granted to Officer by the Company shall immediately vest on the Termination
Date, notwithstanding any existing vesting schedule or other terms set
forth in any plan or agreement governing the term of such stock options,
restricted stock awards and similar awards.
3. REQUIREMENT OF BONUS PAYMENT IN CERTAIN CIRCUMSTANCES.
(a) In the event that Officer is deemed to have received an excess
parachute payment (as such term is defined in Section 280G(b) of 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
Officer from the Company pursuant to this Agreement, in whatever form, the
Company shall make the Bonus Payment (as defined below) to Officer promptly
after the date on which Officer received or is deemed to have received any
excess parachute payments.
(b) The term "Bonus Payment" means a cash payment in an amount equal
to the sum of (i) all Excise Taxes payable by Officer, plus (ii) 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 Officer
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, Officer shall be deemed for all purposes to be paying income
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 Officer are subject. 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 40% and that
Officer is not subject to state income taxes. Assume that Officer has
received an excess parachute payment in the amount of $500,000, on which
$100,000 in Excise Taxes are payable. The amount of the required Bonus
Payment would be $250,000. The Bonus Payment of $250,000, less Excise
Taxes of $50,000 (20% of $250,000) and income taxes of $100,000 (40% of
$250,000), leaves the Officer with $100,000, the amount of the Excise Taxes
payable in respect of the excess parachute payment.
(c) Officer 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 Officer contingent on a change described in Section
280G(b)(2)(A)(i) of the Code are reasonable compensation for personal
services actually rendered by Officer before the date of such change or to
be rendered by Officer on or after the date of such change. In the event
that the Company is
3
<PAGE>
able to establish that the amount of the excess parachute payments is less
than originally anticipated by Officer, Officer 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, Officer shall not be
required to take any actions which his tax advisor advises him in writing
(i) is improper or (ii) exposes Officer to material personal liability, and
Officer may require the Company to deliver to Officer an indemnification
agreement in form and substance satisfactory to Officer as a condition to
taking any action required by this Section 3.
(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 Officer's demand therefor shall thereafter be deemed
delinquent, and the Company shall pay to Officer 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 Officer 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.
4. FULL SETTLEMENT. The Company's obligations to perform hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Officer. In no
event shall the Officer be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Officer under any of
the provisions of this Agreement. The Company agrees to pay, to the fullest
extent permitted by law, all legal fees and expenses which the Officer may incur
as a result of any contest by the Company or others of the validity or the
enforceability of, or liability under, any provision of this Agreement.
5. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Officer's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its subsidiaries and for which the Officer may qualify, nor
shall anything herein limit or otherwise affect such rights as the Officer may
have under any stock option, restricted stock or other agreements with the
Company or any of its subsidiaries. Amounts which are vested benefits or which
the Officer is otherwise entitled to receive under any plan, policy, practice or
program of the Company or any of its subsidiaries on the Change in Control Date
shall be payable in accordance with such plan, policy, practice or program.
4
<PAGE>
6. FUNDING. The Company shall pay the benefits under this Agreement out
of its general assets pursuant to the terms of this Agreement. There shall be
no special fund out of which benefits shall be paid, nor shall the Officer be
required to make a contribution as a condition of receiving benefits.
7. TAX WITHHOLDING. The Company may withhold or cause to be withheld from
any benefits payable under this Agreement all federal, state, city or other
taxes that are required by any law or governmental regulation or ruling.
8. NOTICES. Any notice required or desired to be given under this
Agreement or other communications relating to this Agreement shall be in writing
and delivered personally or mailed, return receipt requested, to the party
concerned at the address set forth below:
If to the Company: Kent Electronics Corporation
1111 Gillingham Lane
Sugar Land, Texas 77478
If to Officer: At his residence address as maintained by the
Company in the regular course of its business for
payroll purposes.
9. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties hereto with respect to severance payments and supersedes any prior
agreement, arrangement or understanding, whether oral or written, between the
Company and Officer concerning severance payments.
10. CHOICE OF LAW. This Agreement shall be governed by, and enforced
according to, the laws of the State of Texas. The invalidity of any provision
shall be automatically reformed to the extent permitted by applicable law and
shall not affect the enforceability of the remaining provisions hereof. Officer
hereby waives any objection which he may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this
Agreement brought in the District Court of Harris County, State of Texas, or in
the United States District Court for the Southern District of Texas, and hereby
further waives any claims that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum.
11. ASSIGNMENT. The rights and obligations under this Agreement of the
Company and Officer may not be assigned, except that the Company may, at its
option, assign one or more of its rights or obligations under this Agreement to
any of its subsidiaries or affiliates, or in connection with a transfer of all
or substantially all of the assets or stock of the Company or a merger or
consolidation of the Company with and into another corporation or other entity,
provided that in each case the Company shall remain responsible for its
obligation hereunder.
12. COUNTERPARTS. This Agreement may be executed in several identical
counterparts, and by the parties hereto on separate counterparts, and each
counterpart, when so executed and
5
<PAGE>
delivered, shall constitute an original instrument, and all such separate
counterparts shall constitute but one and the same instrument.
13. MODIFICATION. This Agreement may be modified only by written
agreement signed by Officer and by the President or Secretary of the Company.
The failure to insist upon compliance with any provision hereof shall not be
deemed a waiver of such provision or any other provision hereof.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
effective as of the date first written above.
KENT ELECTRONICS CORPORATION
By: /s/ Morrie K. Abramson
----------------------------------------
Morrie K. Abramson
Chairman of the Board and Chief Executive Officer
/s/ Stephen J. Chapko
----------------------------------------
Stephen J. Chapko
6
<PAGE>
EXHIBIT 10.6
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (the "Agreement"), is entered into as of November
11, 1998, by and between Kent Electronics Corporation, a Texas corporation (the
"Company"), and Richard J. Hightower (the "Officer").
WHEREAS, the Company's Board of Directors (the "Company Board") and the
Compensation Committee of the Company Board (the "Committee") have determined
that it is in the best interests of the Company and its stockholders to assure
that the Company will have the continued dedication of the Officer,
notwithstanding the possibility, threat or occurrence of a Change in Control (as
defined herein) of the Company; and
WHEREAS, the Company Board believes that it is imperative to diminish the
inevitable distraction of the Officer by virtue of the personal uncertainties
and risks created by a pending or threatened Change in Control, to encourage the
Officer's full attention and dedication to the Company currently and in the
event of any threatened or pending Change in Control, and to provide the Officer
with compensation arrangements upon a Change in Control which provide the
Officer with individual financial security and which are competitive with those
of other corporations.
NOW, THEREFORE, in consideration of the premises and the agreements herein
contained, the receipt and sufficiency of which are hereby acknowledged, the
Company and Officer hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following meanings (the singular includes the plural, unless the context
clearly indicates otherwise):
(a) 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" within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, or
any comparable successor provisions) shall have become the beneficial
owner of, or shall have obtained voting control over, twenty percent
(20%) or more of the then outstanding common shares of the Company;
(ii) (1) The date the stockholders of the Company approve a
definitive agreement to sell or otherwise dispose of substantially all
the assets of the Company, or 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
<PAGE>
after the merger as immediately before, or (2) the date the Company
enters into a binding agreement to sell or otherwise transfer
(including without limitation by merger or consolidation) to one or
more unaffiliated entities or persons not less than a majority of the
outstanding capital stock of the Company; or
(iii) The date upon which, during any period of two consecutive
years, individuals who at the beginning of such period constitute the
Company Board cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by the
Company's stockholders, of each new Company Board member was approved
by a vote of at least three-fourths of the Company Board members then
still in office who were Company Board members at the beginning of
such period.
(a) "Change in Control Date" shall be the date on which a Change in
Control occurs.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Termination Date" shall mean the date on which Officer's
employment with the Company is terminated, by either the Company or the
Officer.
2. BENEFITS UPON CHANGE IN CONTROL. If, at any time after a Change in
Control, Officer's employment with the Company is terminated (for any reason,
including but not limited to death or retirement, and whether with or without
cause and whether by the Officer or the Company), the Company shall be required
to provide the following benefits to Officer:
(a) The Company shall pay to the Officer in a lump sum in cash,
concurrently with the Termination Date if the Company discharges the
Officer and within three (3) business days of the Termination Date if the
Officer resigns, the aggregate of the following amounts:
(i) a cash lump sum payment equal to all the cash compensation
due Officer pursuant to the terms of his employment by the Company as
of the date of discharge or resignation, including the bonus for the
period of his employment prior to the discharge or resignation
annualized on a reasonable basis acceptable to Officer; however, if at
the end of such year it is determined that Officer's annual
compensation for the year in which his discharge resignation falls
would have been higher than the annualized amount used to calculate
this payment, the Company shall pay Officer an amount in a cash lump
sum equal to a proportionate share in the increase based on his period
of employment during the year in which Officer was discharged or
resigned; and
(ii) a cash lump sum payment equal to the highest amount of
Officer's annual cash compensation (including without limitation,
salary, bonus and any
2
<PAGE>
deferrals of salary or bonus) or annualized compensation calculated as
described in Section 2(a)(i) during the five years preceding or the
year of the Change in Control).
(b) In addition to the cash benefits payable pursuant to Section 2(a)
hereof, all stock options, restricted stock awards and similar awards
granted to Officer by the Company shall immediately vest on the Termination
Date, notwithstanding any existing vesting schedule or other terms set
forth in any plan or agreement governing the term of such stock options,
restricted stock awards and similar awards.
3. REQUIREMENT OF BONUS PAYMENT IN CERTAIN CIRCUMSTANCES.
(a) In the event that Officer is deemed to have received an excess
parachute payment (as such term is defined in Section 280G(b) of 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
Officer from the Company pursuant to this Agreement, in whatever form, the
Company shall make the Bonus Payment (as defined below) to Officer promptly
after the date on which Officer received or is deemed to have received any
excess parachute payments.
(b) The term "Bonus Payment" means a cash payment in an amount equal
to the sum of (i) all Excise Taxes payable by Officer, plus (ii) 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 Officer
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, Officer shall be deemed for all purposes to be paying income
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 Officer are subject. 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 40% and that
Officer is not subject to state income taxes. Assume that Officer has
received an excess parachute payment in the amount of $500,000, on which
$100,000 in Excise Taxes are payable. The amount of the required Bonus
Payment would be $250,000. The Bonus Payment of $250,000, less Excise
Taxes of $50,000 (20% of $250,000) and income taxes of $100,000 (40% of
$250,000), leaves the Officer with $100,000, the amount of the Excise Taxes
payable in respect of the excess parachute payment.
(c) Officer 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 Officer contingent on a change described in Section
280G(b)(2)(A)(i) of the Code are reasonable compensation for personal
services actually rendered by Officer before the date of such change or to
be rendered by Officer on or after the date of such change. In the event
that the Company is
3
<PAGE>
able to establish that the amount of the excess parachute payments is less
than originally anticipated by Officer, Officer 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, Officer shall not be
required to take any actions which his tax advisor advises him in writing
(i) is improper or (ii) exposes Officer to material personal liability, and
Officer may require the Company to deliver to Officer an indemnification
agreement in form and substance satisfactory to Officer as a condition to
taking any action required by this Section 3.
(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 Officer's demand therefor shall thereafter be deemed
delinquent, and the Company shall pay to Officer 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 Officer 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.
4. FULL SETTLEMENT. The Company's obligations to perform hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Officer. In no
event shall the Officer be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Officer under any of
the provisions of this Agreement. The Company agrees to pay, to the fullest
extent permitted by law, all legal fees and expenses which the Officer may incur
as a result of any contest by the Company or others of the validity or the
enforceability of, or liability under, any provision of this Agreement.
5. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Officer's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its subsidiaries and for which the Officer may qualify, nor
shall anything herein limit or otherwise affect such rights as the Officer may
have under any stock option, restricted stock or other agreements with the
Company or any of its subsidiaries. Amounts which are vested benefits or which
the Officer is otherwise entitled to receive under any plan, policy, practice or
program of the Company or any of its subsidiaries on the Change in Control Date
shall be payable in accordance with such plan, policy, practice or program.
4
<PAGE>
6. FUNDING. The Company shall pay the benefits under this Agreement out
of its general assets pursuant to the terms of this Agreement. There shall be
no special fund out of which benefits shall be paid, nor shall the Officer be
required to make a contribution as a condition of receiving benefits.
7. TAX WITHHOLDING. The Company may withhold or cause to be withheld from
any benefits payable under this Agreement all federal, state, city or other
taxes that are required by any law or governmental regulation or ruling.
8. NOTICES. Any notice required or desired to be given under this
Agreement or other communications relating to this Agreement shall be in writing
and delivered personally or mailed, return receipt requested, to the party
concerned at the address set forth below:
If to the Company: Kent Electronics Corporation
1111 Gillingham Lane
Sugar Land, Texas 77478
If to Officer: At his residence address as maintained by the
Company in the regular course of its business
for payroll purposes.
9. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties hereto with respect to severance payments and supersedes any prior
agreement, arrangement or understanding, whether oral or written, between the
Company and Officer concerning severance payments.
10. CHOICE OF LAW. This Agreement shall be governed by, and enforced
according to, the laws of the State of Texas. The invalidity of any provision
shall be automatically reformed to the extent permitted by applicable law and
shall not affect the enforceability of the remaining provisions hereof. Officer
hereby waives any objection which he may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this
Agreement brought in the District Court of Harris County, State of Texas, or in
the United States District Court for the Southern District of Texas, and hereby
further waives any claims that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum.
11. ASSIGNMENT. The rights and obligations under this Agreement of the
Company and Officer may not be assigned, except that the Company may, at its
option, assign one or more of its rights or obligations under this Agreement to
any of its subsidiaries or affiliates, or in connection with a transfer of all
or substantially all of the assets or stock of the Company or a merger or
consolidation of the Company with and into another corporation or other entity,
provided that in each case the Company shall remain responsible for its
obligation hereunder.
12. COUNTERPARTS. This Agreement may be executed in several identical
counterparts, and by the parties hereto on separate counterparts, and each
counterpart, when so executed and
5
<PAGE>
delivered, shall constitute an original instrument, and all such separate
counterparts shall constitute but one and the same instrument.
13. MODIFICATION. This Agreement may be modified only by written
agreement signed by Officer and by the President or Secretary of the Company.
The failure to insist upon compliance with any provision hereof shall not be
deemed a waiver of such provision or any other provision hereof.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
effective as of the date first written above.
KENT ELECTRONICS CORPORATION
By: /s/ Morrie K. Abramson
------------------------------------------
Morrie K. Abramson
Chairman of the Board and Chief Executive
Officer
/s/ Richard J. Hightower
--------------------------------------------
Richard J. Hightower
6
<PAGE>
EXHIBIT 10.7
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (the "Agreement"), is entered into as of November
11, 1998, by and between Kent Electronics Corporation, a Texas corporation (the
"Company"), and Mark A. Zerbe (the "Officer").
WHEREAS, the Company's Board of Directors (the "Company Board") and the
Compensation Committee of the Company Board (the "Committee") have determined
that it is in the best interests of the Company and its stockholders to assure
that the Company will have the continued dedication of the Officer,
notwithstanding the possibility, threat or occurrence of a Change in Control (as
defined herein) of the Company; and
WHEREAS, the Company Board believes that it is imperative to diminish the
inevitable distraction of the Officer by virtue of the personal uncertainties
and risks created by a pending or threatened Change in Control, to encourage the
Officer's full attention and dedication to the Company currently and in the
event of any threatened or pending Change in Control, and to provide the Officer
with compensation arrangements upon a Change in Control which provide the
Officer with individual financial security and which are competitive with those
of other corporations.
NOW, THEREFORE, in consideration of the premises and the agreements herein
contained, the receipt and sufficiency of which are hereby acknowledged, the
Company and Officer hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following meanings (the singular includes the plural, unless the context
clearly indicates otherwise):
(a) 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" within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, or
any comparable successor provisions) shall have become the beneficial
owner of, or shall have obtained voting control over, twenty percent
(20%) or more of the then outstanding common shares of the Company;
(ii) (1) The date the stockholders of the Company approve a
definitive agreement to sell or otherwise dispose of substantially all
the assets of the Company, or 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
<PAGE>
after the merger as immediately before, or (2) the date the Company
enters into a binding agreement to sell or otherwise transfer
(including without limitation by merger or consolidation) to one or
more unaffiliated entities or persons not less than a majority of the
outstanding capital stock of the Company; or
(iii) The date upon which, during any period of two consecutive
years, individuals who at the beginning of such period constitute the
Company Board cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by the
Company's stockholders, of each new Company Board member was approved
by a vote of at least three-fourths of the Company Board members then
still in office who were Company Board members at the beginning of
such period.
(a) "Change in Control Date" shall be the date on which a Change in
Control occurs.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Termination Date" shall mean the date on which Officer's
employment with the Company is terminated, by either the Company or the
Officer.
2. BENEFITS UPON CHANGE IN CONTROL. If, at any time after a Change in
Control, Officer's employment with the Company is terminated (for any reason,
including but not limited to death or retirement, and whether with or without
cause and whether by the Officer or the Company), the Company shall be required
to provide the following benefits to Officer:
(a) The Company shall pay to the Officer in a lump sum in cash,
concurrently with the Termination Date if the Company discharges the
Officer and within three (3) business days of the Termination Date if the
Officer resigns, the aggregate of the following amounts:
(i) a cash lump sum payment equal to all the cash compensation
due Officer pursuant to the terms of his employment by the Company as
of the date of discharge or resignation, including the bonus for the
period of his employment prior to the discharge or resignation
annualized on a reasonable basis acceptable to Officer; however, if at
the end of such year it is determined that Officer's annual
compensation for the year in which his discharge resignation falls
would have been higher than the annualized amount used to calculate
this payment, the Company shall pay Officer an amount in a cash lump
sum equal to a proportionate share in the increase based on his period
of employment during the year in which Officer was discharged or
resigned; and
(ii) a cash lump sum payment equal to the highest amount of
Officer's annual cash compensation (including without limitation,
salary, bonus and any
2
<PAGE>
deferrals of salary or bonus) or annualized compensation calculated as
described in Section 2(a)(i) during the five years preceding or the
year of the Change in Control).
(b) In addition to the cash benefits payable pursuant to Section 2(a)
hereof, all stock options, restricted stock awards and similar awards
granted to Officer by the Company shall immediately vest on the Termination
Date, notwithstanding any existing vesting schedule or other terms set
forth in any plan or agreement governing the term of such stock options,
restricted stock awards and similar awards.
3. REQUIREMENT OF BONUS PAYMENT IN CERTAIN CIRCUMSTANCES.
(a) In the event that Officer is deemed to have received an excess
parachute payment (as such term is defined in Section 280G(b) of 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
Officer from the Company pursuant to this Agreement, in whatever form, the
Company shall make the Bonus Payment (as defined below) to Officer promptly
after the date on which Officer received or is deemed to have received any
excess parachute payments.
(b) The term "Bonus Payment" means a cash payment in an amount equal
to the sum of (i) all Excise Taxes payable by Officer, plus (ii) 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 Officer
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, Officer shall be deemed for all purposes to be paying income
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 Officer are subject. 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 40% and that
Officer is not subject to state income taxes. Assume that Officer has
received an excess parachute payment in the amount of $500,000, on which
$100,000 in Excise Taxes are payable. The amount of the required Bonus
Payment would be $250,000. The Bonus Payment of $250,000, less Excise
Taxes of $50,000 (20% of $250,000) and income taxes of $100,000 (40% of
$250,000), leaves the Officer with $100,000, the amount of the Excise Taxes
payable in respect of the excess parachute payment.
(c) Officer 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 Officer contingent on a change described in Section
280G(b)(2)(A)(i) of the Code are reasonable compensation for personal
services actually rendered by Officer before the date of such change or to
be rendered by Officer on or after the date of such change. In the event
that the Company is
3
<PAGE>
able to establish that the amount of the excess parachute payments is less
than originally anticipated by Officer, Officer 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, Officer shall not be
required to take any actions which his tax advisor advises him in writing
(i) is improper or (ii) exposes Officer to material personal liability, and
Officer may require the Company to deliver to Officer an indemnification
agreement in form and substance satisfactory to Officer as a condition to
taking any action required by this Section 3.
(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 Officer's demand therefor shall thereafter be deemed
delinquent, and the Company shall pay to Officer 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 Officer 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.
4. FULL SETTLEMENT. The Company's obligations to perform hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Officer. In no
event shall the Officer be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Officer under any of
the provisions of this Agreement. The Company agrees to pay, to the fullest
extent permitted by law, all legal fees and expenses which the Officer may incur
as a result of any contest by the Company or others of the validity or the
enforceability of, or liability under, any provision of this Agreement.
5. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Officer's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its subsidiaries and for which the Officer may qualify, nor
shall anything herein limit or otherwise affect such rights as the Officer may
have under any stock option, restricted stock or other agreements with the
Company or any of its subsidiaries. Amounts which are vested benefits or which
the Officer is otherwise entitled to receive under any plan, policy, practice or
program of the Company or any of its subsidiaries on the Change in Control Date
shall be payable in accordance with such plan, policy, practice or program.
4
<PAGE>
6. FUNDING. The Company shall pay the benefits under this Agreement out
of its general assets pursuant to the terms of this Agreement. There shall be
no special fund out of which benefits shall be paid, nor shall the Officer be
required to make a contribution as a condition of receiving benefits.
7. TAX WITHHOLDING. The Company may withhold or cause to be withheld from
any benefits payable under this Agreement all federal, state, city or other
taxes that are required by any law or governmental regulation or ruling.
8. NOTICES. Any notice required or desired to be given under this
Agreement or other communications relating to this Agreement shall be in writing
and delivered personally or mailed, return receipt requested, to the party
concerned at the address set forth below:
If to the Company: Kent Electronics Corporation
1111 Gillingham Lane
Sugar Land, Texas 77478
If to Officer: At his residence address as maintained by the
Company in the regular course of its business for
payroll purposes.
9. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties hereto with respect to severance payments and supersedes any prior
agreement, arrangement or understanding, whether oral or written, between the
Company and Officer concerning severance payments.
10. CHOICE OF LAW. This Agreement shall be governed by, and enforced
according to, the laws of the State of Texas. The invalidity of any provision
shall be automatically reformed to the extent permitted by applicable law and
shall not affect the enforceability of the remaining provisions hereof. Officer
hereby waives any objection which he may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this
Agreement brought in the District Court of Harris County, State of Texas, or in
the United States District Court for the Southern District of Texas, and hereby
further waives any claims that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum.
11. ASSIGNMENT. The rights and obligations under this Agreement of the
Company and Officer may not be assigned, except that the Company may, at its
option, assign one or more of its rights or obligations under this Agreement to
any of its subsidiaries or affiliates, or in connection with a transfer of all
or substantially all of the assets or stock of the Company or a merger or
consolidation of the Company with and into another corporation or other entity,
provided that in each case the Company shall remain responsible for its
obligation hereunder.
12. COUNTERPARTS. This Agreement may be executed in several identical
counterparts, and by the parties hereto on separate counterparts, and each
counterpart, when so executed and
5
<PAGE>
delivered, shall constitute an original instrument, and all such separate
counterparts shall constitute but one and the same instrument.
13. MODIFICATION. This Agreement may be modified only by written
agreement signed by Officer and by the President or Secretary of the Company.
The failure to insist upon compliance with any provision hereof shall not be
deemed a waiver of such provision or any other provision hereof.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
effective as of the date first written above.
KENT ELECTRONICS CORPORATION
By: /s/ Morrie K. Abramson
----------------------------
Morrie K. Abramson
Chairman of the Board and Chief Executive Officer
/s/ Mark A. Zerbe
----------------------------
Mark A. Zerbe
6
<PAGE>
<TABLE>
<CAPTION>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
EXHIBIT 11
(In thousands, except per share data)
For the Thirteen Weeks Ended For the Thirteen Weeks Ended
December 26, 1998 December 27, 1997
-------------------------------- ---------------------------------
Earnings Per-Share Per-Share
(Loss) Shares Amount Earnings Shares Amount
-------- ------ --------- -------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Net earnings (loss) $ (939) 27,916 $ (0.03) $ 10,128 26,664 $ 0.38
======= ======
EFFECT OF DILUTIVE SECURITIES
Excess of shares issuable upon
exercise of stock options over
shares deemed retired utilizing
the treasury stock method - - - 1,710
------ ------ -------- ------
DILUTED EARNINGS PER SHARE
Net earnings (loss) plus assumed
conversions $ (939) 27,916 $ (0.03) $ 10,128 28,374 $ 0.36
====== ====== ======== ======== ====== ======
For the Thirty-Nine Weeks Ended For the Thirty-Nine Weeks Ended
December 26, 1998 December 27, 1997
-------------------------------- ---------------------------------
Per-Share Per-Share
Earnings Shares Amount Earnings Shares Amount
-------- ------ --------- -------- ------ ---------
BASIC EARNINGS PER SHARE
Net earnings (loss) $ (352) 27,577 $ (0.01) $ 28,508 26,450 $ 1.08
======= ======
EFFECT OF DILUTIVE SECURITIES
Excess of shares issuable upon
exercise of stock options over
shares deemed retired utilizing
the treasury stock method - - - 1,695
------ ------ -------- ------
DILUTED EARNINGS PER SHARE
Net earnings (loss) plus assumed $ (352) 27,577 $ (0.01) $ 28,508 28,145 $ 1.01
conversions ====== ====== ======== ======== ====== ======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-03-1999
<PERIOD-END> DEC-26-1998
<CASH> 202,211
<SECURITIES> 0
<RECEIVABLES> 109,254
<ALLOWANCES> 1,296
<INVENTORY> 119,168
<CURRENT-ASSETS> 443,338
<PP&E> 175,511
<DEPRECIATION> 46,671
<TOTAL-ASSETS> 600,720
<CURRENT-LIABILITIES> 69,193
<BONDS> 207,000
0
0
<COMMON> 64,154
<OTHER-SE> 257,979
<TOTAL-LIABILITY-AND-EQUITY> 600,720
<SALES> 459,981
<TOTAL-REVENUES> 459,981
<CGS> 385,833
<TOTAL-COSTS> 385,833
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 89
<INTEREST-EXPENSE> 7,723
<INCOME-PRETAX> (582)
<INCOME-TAX> (230)
<INCOME-CONTINUING> (352)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (352)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
