1
Exhibit 2.7
AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT
This Amendment No. 3 to Employment Agreement (this "Amendment") is
entered into by and among Xxxxxx X. Xxxxxxxx ("Employee"), Xxxxxxx X. Xxxxxxxx
and Kent Electronics Corporation, a Texas corporation (the "Company"), as of
March 21, 2001.
WHEREAS, Employee and the Company entered into the Employment Agreement
dated as of January 3, 1996, as amended (the "Employment Agreement"), pursuant
to an Amendment No. 1 to Employment Agreement dated as of August 18, 1997, and
Amendment No. 2 to Employment Agreement dated as of November 10, 1998;
WHEREAS, capitalized terms not otherwise defined herein shall have the
meanings given to them in the Employment 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 Employment Agreement, Employee is entitled to
certain annual payments following termination of his employment with the Company
(the "Termination Payments"), such payments to be adjusted annually for
inflation;
WHEREAS, pursuant to the Employment Agreement, Employee 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 Employee, providing for
the payment to Employee 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 Employee;
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
Employment Agreement, based on the actuarial life expectancies of Employee and
Employee's Spouse, is approximately 28 years, the
2
2
Company deems it reasonable and appropriate to amend the Employment Agreement to
reflect a 5% annual rate of inflation with respect to the Termination Payments
after January 1, 2001, instead of the formula included therein;
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 4.4 of the Employment Agreement is
hereby amended to read in its entirety as follows:
4.4 Benefits Following Termination of Employment.
(a) Upon the termination of Employee's employment 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, commencing on the first day of the month following the
date of the termination of Employee's employment, pay, or cause to be
paid, to Employee in equal monthly installments the sum of $750,000 per
year (the "Annual Amount"), for a period equal to the greater of (x) 15
years, (y) the life of Employee, or (z) the life of Xxxxxxx X. Xxxxxxxx
so long as she is married to Employee at the date of Employee's death
("Employee's Spouse"); provided, however, that in the event of the
termination of Employee's employment due to death or Disability prior
to March 31, 2001, the Annual Amount described above shall equal
$950,000 until March 31, 2001, after which time the Annual Amount shall
equal $750,000; and provided further that Employee shall not be
entitled to any amounts under this Section 4.4 if Employee's employment
is terminated prior to a Change in Control for Just Cause or without
Good Reason. In addition, until January 1, 2001, the Annual Amount
shall be adjusted annually to reflect increases in the cost of living
after the date hereof, as measured by the Consumer Price Index ("CPI")
for all urban consumers calculated by the Bureau of Labor Statistics
(or any successor or replacement index), after which time the Annual
Amount shall be increased at a rate of five percent (5%) per annum.
(i) If Employee shall die before Employee's Spouse
and Employee's Spouse is married to Employee at the date of Employee's
death, whether before or after the payments of the Annual Amount
described above shall have commenced, then the Annual Amount shall be
paid in monthly installments to Employee's Spouse. If Employee's Spouse
then dies before all amounts required to be paid have been paid, then,
upon the death of Employee's Spouse, any remaining payments of the
Annual Amount shall be made to the personal representative of the
estate of Employee's Spouse, to pass as a part thereof.
(ii) If Employee's Spouse shall die before Employee,
then any community property interest of Employee's Spouse in this
Agreement shall vest in Employee. If Employee then dies before all
amounts required to be paid have been paid, then, upon Employee's
death, any remaining payments of the Annual Amount shall be
3
3
made to Employee's beneficiary designated in writing to the Company by
Employee, or in the absence thereof, to the personal representative of
the estate of Employee, to pass as a part thereof.
(b) Upon the termination of Employee's employment 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 4.4 as
described below. In the case of a termination of Employee's employment
(whether or not after any Change in Control), the Company shall pay to
Employee cash in an amount sufficient to permit Employee to purchase a
fully paid annuity contract issued by an insurance company acceptable
to Employee, in his sole discretion, providing for the payment to
Employee of the amounts required to be paid pursuant to this Section
4.4 ("Section 4.4 Payments"), and shall also pay to Employee cash in an
amount sufficient to pay Employee'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 Employee with the same after-tax benefit that he
would have received if the Company directly made the Section 4.4
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, 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 purchase the annuity contract and pay the anticipated
income taxes contemplated by the preceding subparagraph (b) upon the
termination of Employee's employment 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 Employee and his counsel.
2. The parties agree that based on the foregoing proposed amendments, a
payment of $25,068,000, concurrent with the closing of the Merger, would satisfy
in full the Company's obligations under Section 4.4 of the Employment Agreement;
provided however, that such payment in full shall not impair or otherwise affect
Employee's entitlement to other compensation and benefits under the Employment
Agreement, including, without limitation, Bonus Payments to hold Employee
harmless from the adverse effects of the excise taxes imposed by Section 4999 of
the Internal Revenue Code of 1986, amended.
4
4
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
/s/ Xxxxxx X. Xxxxxxxx
-----------------------------------------------------
Xxxxxx X. Xxxxxxxx
/s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------------------------
Xxxxxxx X. Xxxxxxxx
XXXX ELECTRONICS CORPORATION
By: /s/ Xxxxx X. Xxxxx
--------------------------------------------------
Xxxxx X. Xxxxx
President and Chief Executive Officer
5
