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EXHIBIT 10.3
AMENDMENT NO. 1 TO CONSULTING AGREEMENT
This Amendment No. 1 to Consulting Agreement (this "Amendment") is
entered into as of March 21, 2001, but effective as of April 1, 2001 by and
among Xxxxxx X. Xxxxxxxx ("Consultant") and Kent Electronics Corporation, a
Texas corporation (the "Company").
WHEREAS, Consultant and the Company entered into the Consulting
Agreement dated effective as of April 1, 2001 (the "Consulting Agreement");
WHEREAS, capitalized terms not otherwise defined herein shall have the
meanings given to them in the Consulting Agreement,
WHEREAS, the Company has been in negotiations with Avnet, Inc.
("Avnet") regarding the possible merger of the Company with Avnet, on
substantially the terms described in the draft Agreement and Plan of Merger (the
"Merger Agreement") among the Company, Avnet, and Avnet Acquisition Corp., a
wholly-owned subsidiary of Avnet ("Sub");
WHEREAS, pursuant to the Merger Agreement, and subject to certain terms
and conditions of the Merger Agreement, Sub is to be merged with and into the
Company, whereby the separate corporate existence of Sub will cease, and the
Company will become a wholly-owned subsidiary of Avnet (the "Merger");
WHEREAS, under the Consulting Agreement, Consultant is entitled to
certain annual payments following termination of his engagement with the Company
(the "Termination Payments"), such payments to be adjusted annually for
inflation;
WHEREAS, pursuant to the Consulting Agreement, Consultant may require
the Company to pay him a lump sum amount sufficient to purchase a fully paid
annuity contract issued by an insurance company acceptable to Consultant,
providing for the payment to Consultant of the Termination Payments;
WHEREAS, the Company has not been able to identify acceptable insurance
products with an appropriate inflation adjustment to provide the Termination
Payments to Consultant;
WHEREAS, at the request of Avnet in conjunction with the proposed
Merger, the Company, after due consideration, deems it appropriate to fix the
annual adjustment for inflation applicable to the Termination Payments; and
WHEREAS, the historic inflation rate for the past 28 years has been
approximately 5%, and the anticipated term of the annuity benefits under the
Consulting Agreement, based on the actuarial life expectancies of Consultant and
Consultant's Spouse, is approximately 28 years, the Company deems it reasonable
and appropriate to amend the Consulting Agreement to reflect a 5% annual rate of
inflation with respect to the Termination Payments, instead of the formula
included therein;
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NOW, THEREFORE, in consideration of Ten Dollars and other good and
valuable consideration and the mutual agreements made herein, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Conditioned on the consummation of the Merger and the transactions
contemplated by the Merger Agreement, Section 3.4 of the Consulting Agreement is
hereby amended to read in its entirety as follows:
3.4 Benefits Following Termination of Engagement.
(a) As additional consideration for Consultant's services
hereunder, upon the termination of Consultant's engagement by the
Company, due to death, Disability, termination by the Consultant
(whether or not for Good Reason), or termination by the Company
(whether or not for Just Cause), the Company shall, commencing on the
first day of the month following the date of the termination of
Consultant's engagement, pay, or cause to be paid, to Consultant in
equal monthly installments, an annual amount equal to $250,000 per year
(the "Additional Annual Amount"), for a period equal to the greater of
(x) 15 years, (y) the life of Consultant, or (z) the life of Xxxxxxx X.
Xxxxxxxx so long as she is married to Consultant at the date of
Consultant's death ("Consultant's Spouse"); and provided further that
Consultant shall not be entitled to any amounts under this Section 3.4
if Consultant's engagement is terminated prior to a Change in Control
for Just Cause or without Good Reason. In addition, the Additional
Annual Amount shall be increased annually to reflect increases in the
cost of living after the date of termination of Consultant's engagement
by the Company, at a rate of five percent (5%) per annum.
(i) If Consultant shall die before Consultant's Spouse and
Consultant's Spouse is married to Consultant at the date of
Consultant's death, whether before or after the payments of the
Additional Annual Amount described above shall have commenced,
then the Additional Annual Amount shall be paid in monthly
installments to Consultant's Spouse. If Consultant's Spouse then
dies before all amounts required to be paid have been paid, then,
upon the death of Consultant's Spouse, any remaining payments of
the Additional Annual Amount shall be made to the personal
representative of the estate of Consultant's Spouse, to pass as a
part thereof.
(ii) If Consultant's Spouse shall die before Consultant,
then any community property interest of Consultant's Spouse in
this Agreement shall vest in Consultant. If Consultant then dies
before all amounts required to be paid have been paid, then, upon
Consultant's death, any remaining payments of the Additional
Annual Amount shall be made to Consultant's beneficiary
designated in writing to the Company by Consultant, or in the
absence thereof, to the personal representative of the estate of
Consultant, to pass as a part thereof.
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(b) Upon the termination of Consultant's engagement by the
Company, whether due to death, Disability, resignation (whether or not
for Good Reason) or discharge (whether or not for Just Cause), the
Company shall secure its obligations under this Section 3.4 as
described below. In the case of a termination of Consultant's
engagement (whether or not after any Change in Control), the Company
shall pay to Consultant cash in an amount sufficient to permit
Consultant to purchase a fully paid annuity contract issued by an
insurance company acceptable to Consultant, in his sole discretion,
providing for the payment to Consultant of the amounts required to be
paid pursuant to this Section 3.4 ("Section 3.4 Payments"), and shall
also pay to Consultant cash in an amount sufficient to pay Consultant's
income taxes (calculated at the highest marginal federal income tax
rate and after taking into account any applicable surtaxes and other
generally applicable taxes which would have the effect of increasing
the marginal federal income tax rate, and, if applicable, at the
highest marginal state income tax rate in effect in the State of Texas)
payable upon receipt of any such annuity contract (which payment of
income taxes and its effect on the taxability of the payments under the
annuity contract shall be taken into account in establishing the
annuity contract, which will be designed to provide Consultant with the
same after-tax benefit that he would have received if the Company
directly made the Section 3.4 Payments assuming the highest federal and
Texas marginal income tax rates in effect at the time of the
establishment of the annuity).
(c) Upon the effective date of this Agreement, on the request
of the Consultant the Company shall establish a "rabbi trust" for the
benefit of Consultant into which there shall be contributed by the
Company cash in an amount sufficient to purchase the annuity contract
and pay the anticipated income taxes contemplated by the preceding
paragraph (b) upon the termination of Consultant's engagement at any
time during the term of this Agreement without any regard as to whether
such termination is for Just Cause or without Good Reason prior to a
Change in Control. Any instruments establishing such rabbi trust shall
in all respects be satisfactory in form and substance to Consultant and
his counsel.
2. Conditioned on the consummation of the Merger and the transactions
contemplated by the Merger Agreement, the parties hereby agree to reduce the
payment that would otherwise be payable pursuant to Section 3.4(b) by
$1,250,000.
3. The parties agree that based on the foregoing proposed amendments, a
payment of $6,092,000, concurrent with the closing of the Merger, would satisfy
in full the Company's obligations under Section 3.4 of the Consulting Agreement;
provided however, that such payment in full shall not impair or otherwise affect
Consultant's entitlement to other compensation and benefits under the Consulting
Agreement, including, without limitation, Bonus Payments to hold Consultant
harmless from the adverse effects of the excise taxes imposed by Section 4999 of
the Internal Revenue Code of 1986, amended.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
/s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
XXXX ELECTRONICS CORPORATION
By: /s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
President and Chief Executive Officer
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