SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
X_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Kent Electronics Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[x] No fee required.
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
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[_] Fee paid previously with preliminary materials.
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Notes:
KENT ELECTRONICS CORPORATION
7433 HARWIN DRIVE
HOUSTON, TEXAS 77036
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 2, 1997
To the Shareholders of
Kent Electronics Corporation:
Notice is hereby given that the Annual Meeting of Shareholders (the "Annual
Meeting") of Kent Electronics Corporation (the "Company") will be held at the
offices of the Company's wholly-owned subsidiary, K*TEC Electronics
Corporation, 1111 Gillingham Lane, Sugar Land, Texas 77478, at 10:00 a.m.,
local time, on Wednesday, July 2, 1997, for the following purposes:
1. To elect two persons to serve as directors on the classified Board of
Directors until the 2000 annual meeting and until their successors have
been elected and have qualified.
2. To ratify the appointment of Grant Thornton LLP as the Company's
independent public accountants for the fiscal year ending March 28, 1998.
3. To transact such other business as may properly come before the Annual
Meeting, or any adjournment or adjournments thereof.
Shareholders of record at the close of business on May 7, 1997 will be
entitled to notice of and to vote at the Annual Meeting, or any adjournment or
adjournments thereof. Shareholders are cordially invited to attend the Annual
Meeting in person. Those who will not attend and who wish their shares voted
are requested to sign, date and mail promptly the enclosed proxy for which a
stamped return envelope is provided.
By Order of the Board of Directors
Stephen J. Chapko, Secretary
Houston, Texas
May 22, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO SIGN,
DATE AND MAIL PROMPTLY THE ENCLOSED PROXY. IF YOU ATTEND THE ANNUAL MEETING,
YOU CAN VOTE EITHER IN PERSON OR BY YOUR PROXY.
KENT ELECTRONICS CORPORATION
7433 HARWIN DRIVE
HOUSTON, TEXAS 77036
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PROXY STATEMENT
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SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Kent Electronics Corporation, a
Texas corporation (the "Company"), for use at the annual meeting of
shareholders to be held on Wednesday, July 2, 1997, at the offices of the
Company's wholly-owned subsidiary, K*TEC Electronics Corporation, 1111
Gillingham Lane, Sugar Land, Texas 77478, at 10:00 a.m., local time, or at any
adjournment or adjournments thereof (such meeting or adjournment(s) thereof
referred to as the "Annual Meeting"). Copies of the proxy and Notice and Proxy
Statement are being mailed to shareholders on or about May 22, 1997.
In addition to solicitation by mail, solicitation of proxies may be made by
personal interview, special letter, telephone or telecopy by the officers,
directors and employees of the Company. Brokerage firms will be requested to
forward proxy materials to beneficial owners of shares registered in their
names and will be reimbursed for their expenses. In addition, the Company has
retained the services of D.F. King & Co., Inc. to assist in the solicitation
of proxies either in person or by mail, telephone or telecopy, at an estimated
cost of $4,000 plus expenses. The cost of solicitation of proxies will be paid
by the Company.
A proxy received by the Board of Directors of the Company may be revoked by
the shareholder giving the proxy at any time before it is exercised. A
shareholder may revoke a proxy by notification in writing to the Company at
7433 Harwin Drive, Houston, Texas 77036, Attention: Secretary. A proxy may
also be revoked by execution of a proxy bearing a later date or by attendance
at the Annual Meeting and voting by ballot. A proxy in the form accompanying
this Proxy Statement, when properly executed and returned, will be voted in
accordance with the instructions contained therein. A proxy received by
management which does not withhold authority to vote or on which no
specification has been indicated will be voted for the nominees for the Board
of Directors of the Company named in Proposal No. 1 of this Proxy Statement
and in favor of Proposal No. 2 of this Proxy Statement. A majority of the
outstanding shares will constitute a quorum at the Annual Meeting. Abstentions
and broker non-votes are counted for purposes of determining the presence or
absence of a quorum for the transaction of business. Abstentions are counted
in tabulations of the votes cast on proposals presented to shareholders,
whereas broker non-votes are not counted for purposes of determining whether a
proposal has been approved.
At the date of this Proxy Statement, management of the Company does not know
of any business to be presented at the Annual Meeting other than those matters
which are set forth in the Notice accompanying this Proxy Statement. If any
other business should properly come before the Annual Meeting, it is intended
that the shares represented by proxies will be voted with respect to such
business in accordance with the judgment of the persons named in the proxy.
COMMON STOCK OUTSTANDING AND PRINCIPAL HOLDERS THEREOF
The Board of Directors has fixed the close of business on May 7, 1997 as the
record date for the determination of shareholders entitled to notice of and to
vote at the Annual Meeting. At that date there were outstanding 26,251,851
shares of common stock, without par value, of the Company ("Common Stock") and
the holders thereof will be entitled to one vote for each share of Common
Stock held of record by them on that date for each proposal to be presented at
the Annual Meeting.
1
The following table sets forth information with respect to the shares of
Common Stock (the only outstanding class of voting securities of the Company)
owned of record and beneficially as of May 7, 1997, unless otherwise
specified, by (i) all persons who own of record or are known by the Company to
own beneficially more than 5% of the outstanding shares of Common Stock, (ii)
each director and named executive officer (as defined below), and (iii) all
directors and executive officers of the Company as a group:
SHARES OWNED TOTAL STOCK-BASED
BENEFICIALLY(1) HOLDINGS(2)
--------------------- ---------------------
NAME AND ADDRESS NUMBER PERCENT NUMBER PERCENT
---------------- --------- ------- --------- -------
Morrie K. Abramson................. 732,150(3) 2.7% 1,232,150(4) 4.5%
Barbara A. Alberto................. 40,090(5) * 45,090(6) *
Stephen J. Chapko.................. 25,000 * 82,500(7) *
Larry D. Olson..................... 67,600(8) * 162,600(9) *
Mark A. Zerbe...................... 109,500(10) * 204,500(11) *
Terrence M. Hunt................... 618,134(12) 2.4% 618,134(12) 2.4%
Max S. Levit....................... 14,250(13) * 14,250(13) *
David Siegel....................... 41,750(14) * 41,750(14) *
Richard C. Webb.................... 22,500(15) * 22,500(15) *
Alvin L. Zimmerman................. 51,750(16) * 51,750(16) *
All executive officers and
directors as a group
(19 persons)...................... 1,997,298(17) 7.3% 3,182,298(18) 11.2%
Public Employees Retirement
System of Ohio
277 East Town Street
Columbus, OH 43215-4642........... 2,300,000(19) 8.8% 2,300,000(19) 8.8%
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* Less than 1%
(1) The persons listed have the sole power to vote and dispose of shares
beneficially owned by them except as otherwise indicated.
(2) The amounts in this column include the equity securities shown in the
"Shares Owned Beneficially" column and options that are not currently
exercisable.
(3) Includes 570,000 shares that may be acquired upon the exercise of
outstanding options. Also includes 10,000 shares held in trust for Mr.
Abramson's children, as to which shares Mr. Abramson disclaims beneficial
ownership.
(4) Includes 500,000 shares subject to options that are not currently
exercisable.
(5) Includes 25,000 shares that may be acquired upon the exercise of
outstanding options. Also includes 4,090 shares that are owned of record
by Ms. Alberto's husband, as to which shares Ms. Alberto disclaims
beneficial ownership.
(6) Includes 5,000 shares subject to options that are not currently
exercisable.
(7) Includes 57,500 shares subject to options that are not currently
exercisable.
(8) Includes 35,000 shares that may be acquired upon exercise of outstanding
options.
(9) Includes 95,000 shares subject to options that are not currently
exercisable.
(10) Includes 105,000 shares that may be acquired upon the exercise of
outstanding options.
(11) Includes 95,000 shares subject to options that are not currently
exercisable.
(12) Includes 593,134 shares held by THMJH Family Trust, of which Mr. Hunt is
a beneficiary, 5,000 shares held by THMJH Family Partners, Ltd., of which
Mr. Hunt serves as general partner, and 11,850 shares held in trust for
Mr. Hunt's children.
(13) Includes 11,750 shares that may be acquired upon the exercise of
outstanding options.
(14) Includes 25,250 shares that may be acquired upon the exercise of
outstanding options, and 6,500 shares that are owned of record by Mr.
Siegel's wife.
2
(15) Includes 5,000 shares that may be acquired upon the exercise of
outstanding options.
(16) Includes 31,250 shares that may be acquired upon the exercise of
outstanding options.
(17) Includes 985,750 shares that may be acquired upon the exercise of
outstanding options. Also includes 34,114 shares owned of record by the
spouses of, or held in trust for the children of, certain executive
officers and directors.
(18) Includes 1,185,000 shares subject to options that are not currently
exercisable.
(19) As reported in a Schedule 13G filed by the Public Employees Retirement
System of Ohio with the Securities and Exchange Commission on February
12, 1997.
PROPOSAL NO. 1--ELECTION OF DIRECTORS
GENERAL
Two directors are to be elected at the Annual Meeting. The Company
recommends voting for the election of each of the nominees for director listed
below. The persons named as proxy holders in the accompanying proxy intend to
vote each properly signed and submitted proxy for the election as a director
of each of the persons named as a nominee below under "Nominees for Director"
unless authority to vote in the election of directors is withheld on such
proxy. If, for any reason, at the time of the election one or both of such
nominees should be unable to serve, the proxy will be voted for a substitute
nominee or nominees selected by the Board of Directors. Directors are elected
by a plurality of votes cast at the Annual Meeting. Pursuant to the Company's
Bylaws, any nomination of other persons to be elected as directors at the
Annual Meeting must be received by the Secretary of the Company not later than
the close of business on the tenth day following the date on which notice of
the Annual Meeting is first given.
Unless otherwise specified, all properly executed proxies received by the
Company will be voted for the election of Messrs. Terrence M. Hunt and David
Siegel to hold office until the 2000 annual meeting of shareholders and until
each of their respective successors is elected and qualified.
THE COMPANY RECOMMENDS VOTING "FOR" THE NOMINEES.
NOMINEES FOR DIRECTOR
The following table sets forth the name and age of each nominee listed in
the enclosed form of proxy for director to hold office until the 2000 annual
meeting of shareholders, his principal position with the Company and the year
he became a director of the Company.
NAME AGE DIRECTOR SINCE POSITION
---- --- -------------- --------
Terrence M. Hunt...... 49 1997 Director and Executive Vice President
David Siegel.......... 71 1990 Director
Mr. Hunt has served as Executive Vice President and as a director since
January 1997. Mr. Hunt was elected to serve as a director in connection with
the Company's acquisition of Futronix Corporation which became effective
January 17, 1997. Prior to joining the Company, Mr. Hunt served as President
of Futronix Corporation, which he founded in 1991.
Mr. Siegel has served as a director of the Company since September 1990, and
has been in the electronics distribution business since 1954. Mr. Siegel is
Vice President, director and the founder of Great American Electronics, a
distribution company serving industrial distributors. He is also a director of
Micronetics and Surge Components.
3
OTHER DIRECTORS
The following table sets forth the name and age of each director of the
Company not up for election this year, his principal position with the
Company, the year he became a director of the Company and the year that his
term as a director expires.
TERM DIRECTOR
NAME AGE EXPIRES SINCE POSITION
---- --- ------- -------- --------
Morrie K. Abramson........ 62 1999 1973 Chairman of the Board, Chief
Executive Officer and President
Max S. Levit.............. 62 1998 1995 Director
Richard C. Webb........... 63 1998 1986 Director
Alvin L. Zimmerman........ 53 1999 1986 Director
Mr. Abramson, a co-founder of the Company, has served as Chief Executive
Officer and a director since 1973 and Chairman of the Board since 1977. He has
been in the electronics distribution business since 1956. Mr. Abramson has
also been Chairman of the Board of K*TEC Electronics Corporation ("K*TEC"),
the Company's wholly-owned manufacturing subsidiary, since its incorporation
in 1983.
Mr. Levit, President of Grocers Supply Company, Inc. since January 1992, has
served as a director of the Company since April 1995. Mr. Levit also serves on
the Board of M.D. Anderson Hospital and The University of Texas--Houston
Health Science Center.
Mr. Webb, a founder of Harris Webb & Garrison, a Houston-based investment
banking and brokerage firm, has served as a director of the Company since June
1986. He has been involved in the investment banking business since 1960, and
was a founder of Lovett Underwood Neuhaus & Webb, Inc., a subsidiary of Kemper
Securities.
Mr. Zimmerman has served as a director of the Company since June 1986. As a
judge he presided over the 309th Family District Court and the 269th Civil
District Court of Harris County, Texas from 1980 to 1984. Since 1984, he has
been a shareholder, officer and director in the law firm of Zimmerman,
Axelrad, Meyer, Stern & Wise, P.C. and its predecessor firms.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the Company's last fiscal year, the Board of Directors held eight
meetings. All directors attended all of the meetings of the Board of Directors
and the committees on which they served in fiscal 1997.
The Audit Committee, which was composed of Messrs. Levit, Siegel, Webb and
Zimmerman, met on two occasions during the last fiscal year. The Audit
Committee reviews with the Company's independent auditors the plan, scope and
results of the annual audit and the procedures for and results of internal
controls.
The Compensation Committee, which was composed of Messrs. Levit, Siegel,
Webb and Zimmerman, met on six occasions during the last fiscal year. The
Compensation Committee is authorized to determine the compensation of Mr.
Abramson. In addition, it is authorized to make recommendations to the Board
of Directors regarding the compensation of other officers and administers the
Company's stock option plans.
DIRECTOR COMPENSATION
Directors who are not employees of the Company receive $1,000 per meeting
for attendance at the meetings of the Board of Directors and $500 per meeting
for attendance at meetings of each committee on which such director serves (in
the case of committee meetings not held before or after Board meetings). In
addition to the above fees, directors who are not employees of the Company
receive an annual retainer in the amount of $15,000 and committee chairmen
receive $2,000 annually, with total compensation not to exceed $35,000
annually.
4
EXECUTIVE OFFICERS
The following table sets forth the names, ages and positions of the persons
who are not directors and who are executive officers of the Company:
NAME AGE POSITION
---- --- --------
Barbara A. Alberto................ 50 Vice President
Keith K. Ayers.................... 58 Vice President
Frank M. Billone.................. 52 Vice President
Stephen J. Chapko................. 43 Executive Vice President, Chief Financial
Officer, Treasurer and Secretary
Randy J. Corporron................ 40 Executive Vice President
Rodney J. Corporron............... 40 Vice President
Carolyn S. Davis.................. 49 Vice President
William H. Fountain............... 40 Vice President
Pamela P. Huffman................. 38 Vice President
David D. Johnson.................. 32 Vice President, Corporate Controller
Cathy L. O'Leary.................. 45 Vice President
Larry D. Olson.................... 40 Executive Vice President
Mark A. Zerbe..................... 36 Executive Vice President
Ms. Alberto joined the Company's credit department in 1978. In 1987, she was
appointed Vice President and she oversees credit administration.
Mr. Ayers joined the Company in 1976 as a purchasing agent. Since then, he
has served in various capacities, including manager of the management
information systems. Mr. Ayers currently serves as Vice President and has
responsibilities for training, special projects and administrative matters.
Mr. Billone has been Vice President of Information Services--Distribution
since joining the Company in January 1996. Prior to joining the Company, he
held various Information Systems positions with General Electric since 1967.
Mr. Chapko was appointed Executive Vice President, Chief Financial Officer
in January 1997. He was previously Vice President and Treasurer of the Company
since 1989, and he was appointed Secretary in 1993. He joined the Company as
Assistant Treasurer in 1987.
Mr. Randy Corporron has been Executive Vice President of Manufacturing
Services since 1994, and was previously Vice President of the Company since
1987. Since 1989, he has served as President of K*TEC. He joined the Company
in 1982 as General Manager of K*TEC.
Mr. Rodney Corporron directs and coordinates the multi-plant manufacturing
operations and was appointed Vice President of the Company and General Manager
of K*TEC in 1989. Prior to such time, he served the Company in a number of
capacities since 1974.
Ms. Davis joined the Company in February 1995 as Information Services
Manager for K*TEC. She was appointed Vice President of Information Services--
Manufacturing in January 1997. Prior to joining the Company, Ms. Davis served
as Director of Information Systems at Anderson Greenwood & Co. since 1992.
Mr. Fountain has been Vice President since 1987 and is responsible for
product management in the distribution operations. He joined the Company in
1980 as a purchasing agent.
Ms. Huffman joined the Company as K*TEC Human Resources Manager in 1988 and
in 1989 was appointed Corporate Human Resources Manager. In January 1997, she
was appointed Vice President of Human Resources.
5
Mr. Johnson was appointed Vice President, Corporate Controller in January
1996. He joined the Company in 1988 as Accounts Payable Supervisor.
Ms. O'Leary became a Vice President of the Company in 1993. She joined the
Company in 1986 as a purchasing manager for K*TEC.
Mr. Olson serves as Executive Vice President of the Company and became
President of Kent Components in January 1997. He previously served as
Executive Vice President of Sales--Distribution since 1994. He served as Vice
President since 1992, after the Company's acquisition of Shelley-Ragon, Inc.
Since 1991, he had been President of Shelley-Ragon, Inc.
Mr. Zerbe serves as Executive Vice President of the Company and became
President of Kent Datacomm in January 1997. He previously served as Executive
Vice President of Operations--Distribution since 1994. He served as Vice
President since 1988. Mr. Zerbe joined the Company as a sales representative
in 1985.
Other than as set forth below under the heading "Executive Agreements," the
executive officers serve at the pleasure of the Board of Directors.
COMPENSATION COMMITTEE REPORT(1)
The Compensation Committee of the Board of Directors (the "Committee") is
composed entirely of outside directors and is responsible for developing and
making recommendations to the Board with respect to the Company's executive
compensation policies. This Committee Report sets forth the components of the
Company's executive officer compensation and describes the basis on which the
fiscal 1997 compensation determinations were made by the Committee with
respect to the executive officers of the Company.
In designing its executive compensation programs, the Company follows its
belief that executive compensation should reflect the value created for
shareholders while supporting the Company's strategic goals. The following
objectives have been adopted by the Committee:
1. Executive compensation should be meaningfully related to the value
created for shareholders.
2. Executive compensation programs should support the short-term and
long-term strategic goals and objectives of the Company.
3. Executive compensation programs should reflect and promote the
Company's value and reward individuals for outstanding contributions to the
Company's success.
4. Short-term and long-term executive compensation play a critical role
in attracting and retaining well qualified executives.
The Committee currently implements a compensation program based on three
components: a base salary, a related bonus program tied to Company
performance, and a stock option program. The Committee regularly reviews the
various components of the Company's executive compensation to ensure that they
are consistent with the Company's objectives.
- --------
1 Notwithstanding filings by the Company with the Securities and Exchange
Commission ("SEC") that have incorporated or may incorporate by reference
other SEC filings (including this proxy statement) in their entirety, this
Compensation Committee Report shall not be incorporated by reference into
such filings and shall not be deemed to be "filed" with the SEC except as
specifically provided otherwise or to the extent required by Item 402 of
Regulation S-K.
6
Base Salary--The Committee, in determining the appropriate base salaries of
its executive officers, generally considers the level of executive
compensation in similar companies in the industry. In addition, the Committee
takes into account (i) the performance of the Company and the roles of the
individual executive officers with respect to such performance, and (ii) the
particular executive officer's specific responsibilities and the performance
of such executive officer in those areas of responsibility. From time to time
surveys are undertaken to provide competitive information to the Committee. In
this regard the Committee has conferred with third party compensation and
employee benefit consultants and has reviewed published information which
members of the Committee have obtained.
Annual Incentives--The bonus program provides direct financial incentives in
the form of an annual cash bonus to executive officers to achieve and exceed
the Company's annual goals. The Company currently maintains for Mr. Abramson
an incentive cash bonus plan (the "CEO Bonus Plan"). Bonuses pursuant to the
CEO Bonus Plan are determined by the Compensation Committee, based upon the
Company's achievement of certain budgeted goals. Ninety percent of such bonus
is based on the Company's pre-tax earnings, 5% is based on the growth of the
Company's earnings per share, and 5% is based on the Company's stock
performance.
The Company has developed bonus programs in which the named executive
officers participate, pursuant to which they receive cash bonuses resulting
from the achievement of certain targeted goals for the Company as a whole or
for certain divisions of the Company.
Long-Term Incentives--The Company currently maintains the 1996 Employee
Incentive Plan (the "Incentive Plan"), the Amended and Restated 1987 Stock
Option Plan, a Chief Executive Officer Stock Option Plan and Agreement, a
Chief Operating Officer Stock Option Plan and Agreement, a K*TEC President
Stock Option Plan and Agreement, a K*TEC General Manager Stock Option Plan and
Agreement, an Executive Vice President of Sales--Distribution Stock Option
Plan and Agreement, an Executive Vice President of Operations--Distribution
Stock Option Plan and Agreement, a Vice President, Secretary and Treasurer
Stock Option Plan and Agreement and a Vice President, Corporate Controller
Stock Option Plan and Agreement. These stock option plans align executive
officer compensation and shareholder return, and enable executive officers to
develop and maintain a significant, long-term stock ownership position in the
Company's Common Stock. Since adoption of the Incentive Plan by the Company's
shareholders at the 1996 annual meeting of shareholders, no further grants of
stock options have been, or will be, made under the Amended and Restated 1987
Stock Option Plan. All grants of stock options under the Amended and Restated
1987 Stock Option Plan, however, remain outstanding and continue to be
governed by the terms of such plan.
Named Executive Officers--Consistent with the Company's compensation program
outlined above, compensation for each of the named executive officers, as well
as other senior executives, consists of a base salary, bonus and stock
options. The base salaries for the named executive officers for fiscal 1997
were believed to be at levels below competitive amounts paid to executives
with comparable qualifications, experience and responsibilities of other
companies engaged in the same or similar business as the Company. Cash bonuses
have been accrued for payment to all named executive officers of the Company
as a result of the Company achieving its targeted goals, and the guidance and
performance of such officers in assisting the Company to achieve those goals
during fiscal 1997.
Chief Executive Officer--In addition to the long-term incentive components,
the Committee believes that the cash compensation of the chief executive
officer ("CEO") should be impacted by Company performance. Mr. Abramson, who
has served as CEO of the Company since 1973, earned a base salary in fiscal
1997 of $390,250, which the Committee believes to be below the average of the
base salary for chief executive officers of other companies engaged in the
same or similar business as the Company with comparable qualifications,
experience and responsibilities. Moreover, after due consideration of Mr.
Abramson's performance, the Committee awarded Mr. Abramson a bonus of
$1,767,268 in fiscal 1997, of which $1,396,560 was earned under the CEO Bonus
Plan. In determining the discretionary component of Mr. Abramson's bonus, the
Committee considered his (i) strong leadership of the Company through a
difficult economic environment for the Company's industry, (ii) implementation
of strict cost control initiatives, (iii) development of a sound strategy to
increase
7
the price of the Company's Common Stock, (iv) efforts to improve the Company's
Common Stock status on lists published by analysts who follow the Company and
its industry, (v) successful completion of the acquisition of EMC
Distribution, Futronix Corporation and Wire & Cable Specialities Corporation
by the Company and (vi) successful recruitment of Mr. Hunt to serve on the
Company's Board of Directors.
The Company maintains an employment agreement with Mr. Abramson (the
"Employment Agreement"), which provides for the Company's continued employment
of Mr. Abramson until March 31, 2001 for a minimum annual base salary and
bonus of $950,000. The Employment Agreement also provides that if Mr. Abramson
continues to serve as CEO of the Company until March 31, 2001, he will receive
a retirement benefit in the amount of $750,000 per year for the greater of 15
years or his life, which benefit is subject to acceleration in certain
circumstances. The Committee believes that the Employment Agreement secures
Mr. Abramson's commitment to continue leading the Company over the next four
years.
In the spring of 1996, the Compensation Committee conferred with the
Management Consulting Division of Grant Thornton LLP with respect to the total
compensation package provided to the CEO with a focus on a proposed CEO stock
option grant with vesting provisions intended to further secure Mr. Abramson's
commitment to continue leading the Company. In light of the fact that the
Company had not made an option grant to the CEO since 1991, and that most
comparable organizations provide stock option grants annually, the Committee
determined to grant a stock option to the CEO for 500,000 shares with a 5 1/2
year expiration date that vests in five equal annual installments. The
Committee believes that this grant properly incentivizes the CEO and aligns
his personal goals with the goals of the shareholders of the Company.
Limitation of Tax Deduction for Executive Compensation--The Committee
desires its compensation policy to be cost and tax effective. In light of
federal tax laws that prohibit publicly traded companies from receiving a tax
deduction on compensation paid to named executive officers in excess of $1
million annually, the Committee continually reviews all compensation
components to ensure the Company is maximizing corporate tax deductions, when
feasible and consistent with its prior commitments to the Company's named
executive officers.
Compensation Committee: Max S. Levit, David Siegel, Richard C. Webb, and
Alvin L. Zimmerman.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee of the Board of Directors of the
Company was, during fiscal 1997, an officer or employee of the Company or any
of its subsidiaries, or was formerly an officer of the Company or any of its
subsidiaries or had any relationships requiring disclosure by the Company.
During fiscal 1997, no executive officer of the Company served as (i) a
member of the compensation committee (or other board committee performing
equivalent functions) of another entity, one of whose executive officers
served on the Compensation Committee of the Board of Directors, (ii) a
director of another entity, one of whose executive officers served on the
Compensation Committee of the Board of Directors, or (iii) a member of the
compensation committee (or other board committee performing equivalent
functions) of another entity, one of whose executive officers served as a
director of the Company.
8
COMPENSATION TABLES
The following table sets forth compensation information for the chief
executive officer and the four most highly compensated executive officers of
the Company for the Company's fiscal year 1997, for services rendered to the
Company or any of its subsidiaries during the Company's fiscal years 1997,
1996, and 1995.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------------
SECURITIES ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS UNDERLYING OPTIONS COMPENSATION(1)
POSITION YEAR ($) ($) (#) ($)
------------------ ------ ------------------- ------------------ ---------------
Morrie K. Abramson...... 1997 390,250 1,767,268 500,000 69,000
Chairman of the Board, 1996 391,500 1,771,109 0 29,163
Chief Executive Officer 1995 372,879 674,700 0 21,945
and President
Larry D. Olson.......... 1997 164,602 110,138 20,000 16,102
Executive Vice 1996 160,385 132,908 75,000 4,661
President 1995 140,466 43,754 0 4,500
Mark A. Zerbe........... 1997 164,602 110,138 20,000 13,425
Executive Vice 1996 160,251 132,908 75,000 10,557
President 1995 162,263 36,000 0 7,823
Stephen J. Chapko....... 1997 99,523 100,000 20,000 9,804
Executive Vice 1996 91,032 75,000 37,500 4,110
President, 1995 86,335 52,000 0 3,487
Chief Financial
Officer,
Treasurer and Secretary
Barbara A. Alberto...... 1997 72,080 100,000 5,000 8,392
Vice President 1996 66,892 65,000 10,000 3,205
1995 63,684 40,000 0 2,809
- --------
(1) Includes, in fiscal 1997, Company matching contributions of $4,355,
$4,487, $4,487, $4,573 and $4,066, respectively, pursuant to the Company's
Tax-Deferred Savings and Retirement Plan and Trust, and Company matching
contributions of $64,646, $11,615, $8,937, $5,230 and $4,326,
respectively, pursuant to the Company's Deferred Compensation Plan.
OPTIONS GRANTED IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
PERCENTAGE OF VALUE
TOTAL OPTIONS MARKET AT ASSUMED STOCK
GRANTED TO EXERCISE PRICE ON PRICE APPRECIATION
OPTIONS EMPLOYEES IN PRICE (PER DATE OF FOR OPTION TERMS
GRANTED FISCAL YEAR SHARE) GRANT EXPIRATION ---------------------
NAME (#) % ($) ($) DATE (5%) (10%)
---- ------- ------------- ---------- -------- ---------- ---- ----------
Morrie K. Abramson...... 500,000 44.5% 19.63 19.63 01/23/02 $3,024,871 $6,782,513
Larry D. Olson.......... 20,000 1.8% 17.13 17.13 09/09/01 $ 94,654 $ 209,161
Mark A. Zerbe........... 20,000 1.8% 17.13 17.13 09/09/01 $ 94,654 $ 209,161
Stephen J. Chapko....... 20,000 1.8% 17.13 17.13 09/09/01 $ 94,654 $ 209,161
Barbara A. Alberto...... 5,000 0.4% 17.13 17.13 09/09/01 $ 23,664 $ 52,290
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR END AT FISCAL YEAR END
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
---- ----------- -------- --------------------------- ---------------------------
Morrie K. Abramson...... 0 $ 0 570,000/500,000 $11,400,000/$2,060,000
Larry D. Olson.......... 40,000 $950,475 35,000/95,000 $494,200/$1,369,900
Mark A. Zerbe........... 0 $ 0 105,000/95,000 $1,522,650/$1,369,900
Stephen J. Chapko....... 15,000 $329,475 0/57,500 $0/$751,150
Barbara A. Alberto...... 0 $ 0 25,000/5,000 $297,450/$33,100
9
PERFORMANCE GRAPH
The following performance graph provided by Media General Financial Services
compares the performance of the Company's Common Stock to a Peer Group Index
(as defined below) and the New York Stock Exchange Market Index (the "NYSE
Market Index") for the Company's last five fiscal years. The Peer Group Index
is made up of the companies whose common stock has traded publicly for the last
five years and whose primary four-digit SIC Code is the same as the Company's.
[GRAPH APPEARS HERE]
FISCAL YEAR
1992 1993 1994 1995 1996 1997
Kent Electronics Corporation............ 100 134.37 133.75 221.14 530.36 356.07
Peer Group Index(1)..................... 100 125.25 125.54 139.67 178.49 193.40
NYSE Market Index....................... 100 114.77 119.48 132.53 173.09 202.12
Assumes $100 invested on March 29, 1992 in Kent Common Stock or Index and that
dividends, if any, are reinvested.
- --------
(1) Includes the following companies:
All American Semiconductor, Arrow Electronics, Avnet, Bell Industries, Bell
Microproducts, Brightpoint, Cellstar, Communications World International,
Electrocon International, Farmstead Telephone Group, Gentner
Communications, Highwaymaster Communications, Intellicell, Internet
Communications, Jaco Electronics, Kent Electronics, Marshall Industries,
Norstan, Nu-Horizons Electronics, Pioneer-Standard Electronics, Premier
Farnell, Rada Electronics Industries, Reptron Electronics, Richardson
Electronics, Richey Electronics, Sterling Electronics, Taitron Components,
Tech Electro Industries, Tessco Technologies, Universal Security
Instruments, Video Display, View Tech, Western Micro Technology and Wyle
Electronics.
EXECUTIVE AGREEMENTS
Abramson Agreements
The Employment Agreement between Mr. Abramson and the Company expires on
March 31, 2001. As stated in the Compensation Committee's report, the
Employment Agreement provides for a minimum annual base salary and bonus of at
least $950,000 and an annual retirement benefit of $750,000 for the greater of
15 years or his life upon termination of Mr. Abramson's employment for any
reason other than for Just Cause or without Good Reason (each as defined in the
Employment Agreement). If Mr. Abramson dies or becomes disabled prior to March
31, 2001, the Company shall pay his estate, his guardian or him, as the case
may be, an annual retirement benefit of $950,000 until March 31, 2001, and then
$750,000 annually thereafter. The
10
Employment Agreement provides for termination by the Company for Just Cause or
by Mr. Abramson for Good Reason. Upon a termination for Just Cause or Mr.
Abramson's resignation without Good Reason prior to March 31, 2001, no
retirement benefits would be paid. If prior to a Change in Control (as defined
in the Employment Agreement), Mr. Abramson is discharged without Just Cause or
resigns for Good Reason, or if Mr. Abramson's employment is terminated for any
reason after a Change in Control, Mr. Abramson shall be entitled to receive a
cash lump sum payment equal to all compensation due to him for the remainder
of the term of the Employment Agreement. A Change in Control in the Employment
Agreement is deemed to have occurred on the earliest of the following: (i) if
any entity or person becomes the beneficial owner of 20% or more of the Common
Stock of the Company; (ii) the approval by the shareholders of the Company of
a definitive agreement to sell or otherwise dispose of substantially all of
the assets, merge or consolidate the Company in which the Company is not the
surviving corporation; or (iii) the date upon which, during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company cease for any reason to constitute at
least a majority thereof.
In January 1993, the Company entered into an Executive Health Care Benefits
and Consulting Agreement with Mr. Abramson pursuant to which he may provide
consulting services to the Company after retirement and will be covered under
the Company's health care plan. Under such agreement, Mr. Abramson will pay
all required premiums and other costs for Medicare coverage. Under the
Company's health care plan, the Company will provide medical, dental and
prescription drug benefits for Mr. Abramson and his spouse for those items and
expenses which are eligible to be covered under the health care plan to the
extent not covered by Medicare.
In March 1993, the Company entered into an agreement with Mr. Abramson
pursuant to which the Company, upon a change in control of the Company, will
make a cash payment to him in an amount sufficient to pay all excise taxes
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), so as to place such executive officer in the same after-tax position
had there been no such taxes.
Hunt Agreements
The Company entered into an Employment Agreement with Mr. Hunt (the "Hunt
Employment Agreement") that became effective upon the acquisition by the
Company of Futronix Corporation and Wire & Cable Specialties Corporation,
which formed the Futronix Systems division ("Futronix"). The Hunt Employment
Agreement expires April 1, 2000 (the "Employment Term"). Under the Hunt
Employment Agreement, Mr. Hunt will receive an annual salary of $150,000 that
may be adjusted upward on an annual basis by the Company's Board of Directors,
but the salary cannot be decreased (such amount, as adjusted, is referred to
as "Salary"), and Mr. Hunt is entitled to fringe benefits comparable to those
provided to other officers of the Company and its subsidiaries in comparable
executive positions (the "Fringe Benefits"). In addition, Mr. Hunt is entitled
to receive a bonus (the "Bonus") as may be determined from time to time by the
Company's Board of Directors, provided that for the 1998 fiscal year, Mr. Hunt
will receive a bonus based upon the income from operations of Futronix
exceeding certain targeted levels. After the 1998 fiscal year, Mr. Hunt will
participate in the Company's bonus plans on the same basis as other officers
of the Company and its subsidiaries in comparable executive positions. Upon
the resignation of Mr. Hunt or the termination of the Hunt Employment
Agreement for "cause", Mr. Hunt will receive any unpaid Salary and Fringe
Benefits that have accrued through the date of termination. If Mr. Hunt
becomes totally disabled, Futronix may terminate the Hunt Employment
Agreement, and upon such termination, Mr. Hunt would be entitled to (i) any
unpaid Salary and Fringe Benefits that have accrued through the date of
termination; (ii) any benefits that he may be entitled to receive under any
then existing disability benefit plans of Futronix (including plans included
in the Fringe Benefits), and (iii) in the fiscal year immediately following
the fiscal year of termination, the Bonus to which Mr. Hunt would have been
entitled if he had been employed for the full period to which the Bonus
relates, but reduced proportionately to correspond to the portion of the
period for which Mr. Hunt was actually employed (a "Proportionate Bonus").
Upon Mr. Hunt's death, the Company must pay to Mr. Hunt's estate any unpaid
Salary and Fringe Benefits that have accrued through the date of death and a
Proportionate Bonus. If the Hunt Employment Agreement is terminated without
cause, Mr. Hunt would be entitled to an amount equal to (i) the Salary for the
remainder of the
11
Employment Term plus (ii) an amount equal to (a) the Bonus paid to Mr. Hunt
for the fiscal year immediately preceding the fiscal year of termination
divided by 12, multiplied by (b) the number of months from the end of the last
fiscal year for which a Bonus was paid through the end of the Employment Term;
provided, however, that in the case of a termination without cause prior to
April 1, 1998, the Bonus shall be deemed to be $150,000, and the Bonus for the
1998 fiscal year shall equal 80% of the Bonus earned for the fifteen month
period ending on the last day of the Company's 1998 fiscal year; and provided
further that if the aggregate amount payable to Mr. Hunt upon termination
without cause is not at least equal to one year's Salary, then the Company may
either increase the amount to be paid to Mr. Hunt to one year's Salary or
release Mr. Hunt from the covenants not to compete to which he is subject.
The distribution center of Futronix in Houston, Texas is leased from a trust
of which Mr. Hunt is the trustee. The base annual rent of Futronix for the
property is based on the sales of Futronix for the preceding calendar year and
is calculated each December 31 for the following year's rent. The base annual
rent is $156,072 when annual sales are equal to or less than $4 million,
$180,000 when annual sales are greater than $4 million, $210,000 when annual
sales are greater than $9 million, $240,000 when annual sales are greater than
$15 million and $300,000 when annual sales are greater than $20 million.
Futronix is currently at a sales level requiring it to pay an annual rent of
$300,000, the maximum annual rent permitted under the lease. In addition to
the base amount of rent, Futronix is responsible for all expenses related to
the operation of the property including maintenance, utilities, taxes and
insurance. The term of the lease expires on December 31, 2003, and Futronix
has an option to renew the lease for an additional five-year term. The Company
believes that the terms of the lease, including the annual rent, are on terms
no less favorable than those that could be obtained from an unrelated third
party.
CERTAIN TRANSACTIONS
Mr. Zimmerman, a director of the Company, is a shareholder, officer and
director of the law firm of Zimmerman, Axelrad, Meyer, Stern & Wise, P.C., a
firm retained by the Company.
During fiscal 1997, the Company made loans to certain officers and directors
of the Company to finance their purchase of Company Common Stock. The Company
had outstanding loans of $60,000 or more to officers and directors as set
forth in the table below.
LARGEST LOAN BALANCE
IN FISCAL 1997
AND LOAN BALANCE AT
NAME MARCH 29, 1997 INTEREST RATE
---- -------------------- -------------
Morrie K. Abramson..................... $210,500.00 6.74%
Frank M. Billone....................... $ 98,787.50 6.74%
Randy J. Corporron..................... $213,000.00 6.84%
Rodney J. Corporron.................... $215,500.00 6.84%
William H. Fountain.................... $210,500.00 6.74%
David D. Johnson....................... $209,250.00 6.74%
Cathy L. O'Leary....................... $105,250.00 6.84%
Larry D. Olson......................... $101,587.50 6.74%
Richard C. Webb........................ $209,163.00 6.84%
PROPOSAL NO. 2--RATIFICATION AND APPOINTMENT OF
INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected Grant Thornton LLP as its
independent public accountants to audit the accounts of the Company for the
fiscal year ending March 28, 1998. Grant Thornton has advised the Company that
it will have a representative in attendance at the Annual Meeting who will
respond to appropriate questions presented at such meeting.
Management recommends that the appointment of Grant Thornton LLP as
independent public accountants of the Company for the fiscal year ending March
28, 1998, be ratified by the shareholders. Unless otherwise
12
specified, all properly executed proxies received by the Company will be voted
for such ratification at the meeting or any adjournment thereof.
THE COMPANY RECOMMENDS VOTING "FOR" PROPOSAL NO. 2.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished
to the Company during its most recent fiscal year, and Forms 5 and amendments
thereto furnished to the Company with respect to its most recent fiscal year,
the Company believes that a Form 4 for Keith K. Ayers was filed two days late.
OTHER MATTERS
The Board of Directors knows of no matters other than those described above
which are likely to come before the Annual Meeting. If any other matters
properly come before the meeting, persons named in the accompanying form of
proxy intend to vote such proxy in accordance with their best judgment on such
matters.
PROPOSALS AND NOMINATIONS FOR NEXT ANNUAL MEETING
Any proposals of holders of Common Stock of the Company intended to be
presented at the Annual Meeting of Shareholders of the Company to be held in
1998 must be received by the Company, addressed to the Secretary of the
Company, 7433 Harwin Drive, Houston, Texas 77036, no later than January 22,
1998, to be included in the proxy statement relating to that meeting.
Pursuant to the Company's Bylaws, any nomination of persons to be elected as
directors at the Annual Meeting of Shareholders of the Company to be held in
1998 must be received by the Secretary of the Company not later than the close
of business on the tenth day following the date on which notice of the 1998
annual meeting is first given to shareholders. Such nomination or nominations
must be in writing from a shareholder of record and must attach a written
consent of each person so nominated to serve on the Board of Directors. In
addition, the notice must set forth (i) the name, age, business address and
residence address of each nominee proposed in such notice, (ii) the principal
occupation or employment of each nominee, (iii) the number of shares of stock
of the Company that are beneficially owned by each such nominee and (iv) such
other information in respect of such nominee as would be required by the
federal securities laws and the rules and regulations promulgated thereunder
in respect of an individual nominated as a director of the Company and for
whom proxies are solicited by the Board of Directors.
By Order of the Board of Directors
Stephen J. Chapko, Secretary
May 22, 1997
THE COMPANY WILL FURNISH WITHOUT CHARGE ADDITIONAL COPIES OF ITS ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 29, 1997 TO INTERESTED
SECURITY HOLDERS ON REQUEST. THE COMPANY WILL FURNISH TO ANY SUCH PERSON ANY
EXHIBITS DESCRIBED IN THE LIST ACCOMPANYING SUCH REPORT UPON PAYMENT OF
REASONABLE FEES RELATING TO THE COMPANY'S FURNISHING SUCH EXHIBITS. REQUESTS
FOR COPIES SHOULD BE DIRECTED TO THE SECRETARY AT THE COMPANY'S ADDRESS
PREVIOUSLY SET FORTH.
13
[MAP SHOWING MEETING LOCATION APPEARS HERE]
Kent Electronics Corporation
1997 Annual Meeting of Shareholders
July 2, 1997, 10:00 a.m.
Meeting to be held at the Company's wholly-owned subsidiary, K*TEC Electronics
1111 Gillingham Lane, Sugar Land, TX 77478 (281) 243-5000
LOGO
LOGO
KENT ELECTRONICS CORPORATION
7433 HARWIN DRIVE
HOUSTON, TEXAS 77036
ANNUAL MEETING OF SHAREHOLDERS JULY 2, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder(s) of Kent Electronics Corporation (the
"Company") hereby appoint MORRIE K. ABRAMSON and STEPHEN J. CHAPKO, and each of
them, attorneys-in-fact and proxies of the undersigned, with full power of
substitution, to vote in respect of the undersigned's shares of the Company's
Common Stock at the Annual Meeting of Shareholders of the Company to be held on
July 2, 1997, at 10:00 a.m., local time, at the offices of the Company's
wholly-owned subsidiary, K*TEC Electronics Corporation, 1111 Gillingham Lane,
Sugar Land, Texas 77478 and at any adjournment(s) thereof, the number of shares
the undersigned would be entitled to cast if personally present.
1. Election of Directors, Nominees: FOR [_] WITHHOLD AUTHORITY [_]
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------------------------------
Nominees: Terrence M. Hunt, David Siegel
2. To ratify the appointment of Grant Thornton LLP as the Company's Independent
Public Accountants for the fiscal year ending March 28, 1998.
FOR [_] AGAINST [_] ABSTAIN [_]
3. In their discretion, on such other matters as may properly come before the
1997 Annual Meeting of Shareholders or any adjournment(s) thereof; all as
more particularly described in the Proxy Statement, receipt of which is
hereby acknowledged.
FOR [_] AGAINST [_] ABSTAIN [_]
(SEE REVERSE SIDE)
The Board of Directors recommends a vote FOR the nominees set forth on the
reverse side and FOR Proposal 2.
PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY THE PROXY CARD USING THE
ENCLOSED ENVELOPE.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder(s). If no direction is made, this proxy will be
voted "for" the director nominees listed below and proposal 2. All prior
proxies are hereby revoked.
Signature(s) __________________________
Dated _____, 1997
Signature(s) __________________________
Dated _____, 1997
(Please sign exactly as your name
appears hereon. When signing as
attorney, executor, administrator,
trustee, guardian, etc., give full
title as such. For joint accounts,
each joint owner should sign.)